The first thing anyone and everyone will tell you about funding a new business is that you have to start with friends and family. This is of course after you’ve depleted your own resources. Depending on the crowd you hang with, this could be easy or hard. But, either way, it must be a business transaction.
Start by making a list of the people who have the ability to invest. Just like an investment in the stock market, these folks should be able to lose their investment and still be okay.
By approaching friends and family as business investors first, they will view you as an entrepreneur, not a relative or friend. And if they turn you down (and many will), try to find out why and continue to hone your business plan and presentation to address those concerns.
If your first list of potential investors does not yield you the necessary amount you need, ask them for introductions to their friends. You cannot be shy about asking for money. If you think this group is tough, wait until your business takes off and you need institutional money. This whole process will seem like a cakewalk.
If you or someone you know is looking to fund a new business, a business purchase, a pivot or an expansion, join us! The Profitable Idea online course and coaching will be offered in October, 2022.
All the Best,
Long ago, my boss was reorganizing the marketing department at a big company and asked me what I wanted to do. Out of the blue, I blurted out, “I want to have my own business.” That was the first time I had ever said those words. He smiled and said, “well, then, you should be a product manager.” Product managers run the business for their specific products, and that provides a great foundation for starting a business. I became a product manager and later went on to have my own businesses. Sage advice!
Very recently, I worked with a young man, getting his MBA, who had gone through a long, unproductive job search. When I asked him what he wanted to do, he blurted out, “I want to have my own business.” Based on his interests, I responded, “think about a plumbing or electrical business.”
While technology changes the job market in almost every industry, every few years or so, plumbing and electrical work is here for the long term. Faucets will leak, freezing temperatures will burst pipes, old electrical wires will need replacing, and new buildings will need new plumbing and electrical work for many, many decades to come. The brands will change, but the plumbers and electricians will be essential, most likely, forever.
Simply put, what the world needs now is more plumbers and electricians! Owners of those businesses are retiring and no one is stepping in to take their places. Companies have been struggling for over a decade to find, hire and train new plumbers and electricians. “The Trades,” have been suffering from lack of trainees, even though plumbers and electricians can make six-figure salaries by the time they are in their 30’s. And even though plumbing and electrical work continued throughout the pandemic.
Why are young people resistant? Perhaps its because trades require physical labor and you have to get your hands dirty. The job may not seen as glamorous as technology or other product and services-based businesses. People have been raised without learning how to use power tools, so these jobs seem over their heads. You can’t work from home all of the time. Hours can be irregular.
On the other hand, many plumbing and electrical businesses provide paid internships, paying $15 or more per hour to learn the trade. Once fully trained, plumbers can earn $75 to $90 an hour. You can’t earn that much as a barista and chances are very high you won’t earn that much as a blogger. Just as importantly, successful owners of plumbing and electrical companies are looking to retire and they want to sell their businesses. That provides an opportunity to own a long term, profitable business, to build that asset, and to sell it for your retirement.
The young man I was speaking with found a plumbing business for sale by an owner who would stay for a year to train the next owner. He would also accept favorable terms. As the young man said, “if this goes through, I won’t ever have to look for a job again!”
If you or someone you know is looking to start a business, buy a business, pivot or expand a business, get some help! Join Cindy and me and our guest speakers for the Profitable Idea Coaching Program and evaluate your business ideas!
All the Best,
I’ve been fortunate enough to participate in the 100 Entrepreneurs Project, a program that provides valuable information from real business owners to wounded veterans, caregivers and spouses who want to start their own businesses. Bank financing is always part of the conversation!
Participants anticipate they'll get a bank loan. When I present funding options, I hate to be the bearer of bad news, but the reality is that it’s really hard, actually nearly impossible, to get a bank loan for a startup. Here’s what banks like to see:
· 2- 3 years of financial statements. Specifically, they need 2-3 years of operating profits. So the first thing you want to make sure you do is create your monthly profit and loss statement and balance sheet. Don’t know how? Outsource it, but don’t wait until you need the money to pull together invoices and re-create the wheel. You may think, “Who would do that?” I’ve seen it too many times to count. And don’t do this once a year at the end of the year. The bank will want to see any interim statements and accounts receivable agings or inventory reports.
· 2-3 years of tax returns. Again, you might be surprised at how many entrepreneurs fail to file all the appropriate tax returns, filing fees, payroll taxes, etc. The bank will order a certificate of good standing to make sure you have filed everything correctly and on time. Tax returns are especially critical for most new companies, as it’s likely you don’t have accountant prepared statements or you only have compiled statements. Bankers take comfort in the fact that if you told the IRS you made $X, you probably did.
· Personal Financial Statement. You will be required to personally guaranty the loan. Have a listing of all the assets you own by yourself and those you own with a spouse or others. If you have joint liabilities, you have to include all of them. The reality is that if your spouse doesn’t own any of the business, the banks can’t require your spouse to guaranty. BUT, if the assets you claim alone fail to give the bank the comfort they need, they can ask you to provide some enhancement, which is a round about way of adding your spouse.
· Projections. Depending on what you need the money for, the bank may require that you prepare some financial projections. If so, prepare at least two scenarios, most likely and worst case. The bank will be impressed that you are recognizing that things may not go as planned and that you’ve prepared for the possibility of a hiccup.
The list above is very basic and if you’re a start up with venture or angel money, you may not need to guaranty the loan. But I’m often surprised at how many people think they can get a bank loan with a great idea and a purchase order. It just doesn’t work that way.
If you need help making reasonable projections for your business idea, the Profitable Idea Coaching Program will not only show you how, but provide you with a model you can use to project all your business ideas and their impact on your financial outlook. We can also help you understand funding alternatives. Contact us to find out how.
All the best,
It’s Monday and we are out of bread. The bakeries in our town are closed on Monday. Not only that, on other days of the week, they are frequently out of bread!
Bread is the number one food eaten by humans on earth, just above rice, and it can be both nutritious and feel like a splurge, especially when it’s fresh. It can be made from wheat, corn, and a wide variety of grains.
Bread isn’t seasonal, for the most part. People need bread for sandwiches, toast, tacos, hummus, curry or just butter and jam. But in our town, you can only buy fresh western-style bread some days of the week, and only when they haven’t run out. The market is ripe for more competition!
Here is an opportunity for a baker who wants to start a new business near the end of a pandemic: a bakery in a town that doesn’t have enough fresh bread, nor enough diverse types of fresh bread. Maybe this is true in your town. Or a town you’ve always wanted to live in!
You don’t even need a retail store. You can make and bake the bread in commercial kitchens that rent space by the hour or day. You can sell at farmers markets and online, take orders and deliver within a certain radius. You can specialize at first and then branch out.
Bread’s ingredients are, in general, inexpensive. The work to make bread delicious is difficult. But the price for fresh bread is higher, making it a profitable opportunity for an intrepid entrepreneur. Bakers don’t generally make millions, but they do make a living wage doing what they love to do.
Not into bread? How about pies? There’s a new pie shop in our town, our first one, and it keeps running out of $30 pies! There’s the sign that it’s time for a competitor to show up….
Now may be the time to test out your new business idea! Join Cindy and me and our guest speakers for the Profitable Idea Business Coaching Program and test your business ideas!
All the best,
Here’s an interesting statistic: over 6 million new businesses get started every year,(Forbes). But even more telling is that after 5 years, only half of those businesses survive. As a commercial banker, I worked with a variety of companies for over 25 years. I've witnessed lots of reasons some of them failed, but when it comes to the smaller, more entrepreneurial ventures there are a few common denominators:
I believe the restaurant industry is great. Cindy, my Partner at The Profitable Idea LLC says the restaurant industry is one of the worst. Note, her background is banking, finance, and leadership coaching, mine is marketing, entrepreneurship, and small business coaching. She has seen many restaurants close and banks shy away from making loans to new ones. I have chefs and restauranteurs in my family who have worked at some of the finest and most successful restaurants in the world. We come from two different viewpoints, but we generally meet in the middle: where the numbers are.
The National Restaurant Association says the pandemic killed about 110,000 eateries, or 1 in 6 establishments. Dataessentials, a research company, says more than 10% of all restaurant locations in the US have closed during the pandemic, including all types of restaurants, from fine dining to cafes, from independent restaurants to chains. So much changed during the pandemic. Most people haven’t gone to restaurants to eat and most haven’t commuted to work. Restaurants with high rents, dependence on indoor seating, and those that depended on commuter traffic were hit hardest. Examples: Michelin starred restaurants like Trois Mec in LA, historic spots like The Paris Café in NYC, and dive bars like The Post Pub in DC are closed for good, while chains including Dunkin’, MacDonald’s and Burger King are down by hundreds, and in some cases thousands of locations. The industry lost $120 billion during the pandemic, according to the National Restaurant Association.
Not all of the news was bad, however. Restaurants with drive-throughs did well. Some food trucks did really well, especially if they were serving people outside hospitals, barbershops, and bars. Some trucks report they had too much business. And since vaccines have been deployed at above expected levels across the country, new food businesses are starting to open. Yelp reports that in the first 3 months of 2021, 18,000 new food businesses have opened, which is about the same number as opened in the first quarter of 2020. In the first two months of this year, Americans filed applications for 50,000 new food businesses, nearly double the 10-year average! Mobile food businesses are expanding across the country. Laid off chefs are creating new locations from the vast amount of available real estate, already built out and ready for a new concept, with lower rent since the pandemic began. ‘Ghost kitchens’, or businesses that have delivery only, are also popping up – 700 new ones on yelp in the last quarter of 2020. And the number of food businesses by mail are growing.
One thing we know is that Americans like to eat out, or have someone else do the cooking. As they get back to work, in some cases, back to the office, they will be looking for easy solutions for good food to eat.
Do you have a food concept on your mind? Join us in September for the Profitable Idea Business Coaching Program to learn how to make your business delicious, exciting and profitable!
All the best,
Amanda Weathersby, and Cynthia Flanders are Co-Leaders for the Profitable Idea LLC, which is now online!
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