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rticles - Fall 2006 - return to index
Jim Lindly directs the Lane Community College Business Development Center and Employee Training (BizCenter) and Workforce Development department.
For the past 10 years he has provided assistance to countless Lane County startups and established businesses.
Here, he answers four important questions for small business entrepreneurs:
Q: How can people get into business for themselves?
A: There are three main ways to become a business owner:
- Start a business
- Buy an existing business
- Buy into a franchise arrangement.
In the last 10 to 15 years, multilevel marketing (MLM) companies have become more prominent, and they also offer opportunities to become a business owner. These are businesses where the owners recruit others to start a similar business and are paid more money as more people are involved and as more overall sales are made under them.
Each method of entry into business ownership has advantages and disadvantages and should be carefully analyzed before making the leap. We always recommend getting an outside, objective opinion.
Q: What’s the most important factor in operating a successful business?
A: A business must make money to survive and operate, and this should be the number one goal for any business. To do this, a business owner needs a profitable business model that demonstrates a high probability for making money in the near future. A business plan and corresponding financial projections can help determine if the business can be profitable, and how long it will take the business to show positive cash flow.
Q: Why do businesses fail?
A: The main reason is depleted cash reserves. For a startup this can be due to running out of money while waiting for sales and revenues to grow. For an existing business it can be due to a number of factors, such as having too many customers leading to rapid growth that can cause cash shortages in the business. Projected income statements (profit and loss statements) and cash flow statements can help businesses avoid a cash short position in which they are unable to pay employees, vendors, taxes, creditors and others. The second biggest reason for business failure is failure to plan (which we know is planning to fail), and operating without a business plan and projected financial statements.
Q: Why is a team of professional advisors important for a small business owner?
A: A team of professionals can give a business owner specialized and technical advice in a number of key operational areas. This team might include a business/tax accountant, a business attorney, an insurance agent, a business banker, a commercial real estate agent, website designer, business advisor and others with specific expertise. These experts help business owners avoid costly mistakes. It’s also useful if a business owner can be involved in formal business development programs with other entrepreneurs, where they can get formal instruction and one-to-one business advising, and where they can share in the experience and expertise of their business peers.
