Here are answers to the most Frequently Asked Questions we hear from clients.
Do I have what it takes to own/manage a small business?
Only you can answer that question. An honest review of your strengths and weaknesses is essential. To determine if you have what it takes, you need to answer some questions about yourself: Am I a self-starter? How well do I get along with a variety of personalities? How good am I at making decisions? Do I have the physical and emotional stamina to run a business? How well do I plan and organize? Are my attitudes and drive strong enough to maintain motivation? How will the business affect my family?
What business should I choose?
Usually, the best business for you is the one in which you are most skilled and interested. For example, if you are trained as a chef, you may want to consider starting a restaurant. As you review your options, it is a good idea to consult with Business Development Services staff and business persons about opportunities in your area. Matching your background with the needs of the market will increase your chance of success.
I want to start a small business – where do I begin?
This can certainly be a daunting question. First, make an appointment to get business counseling, free of charge, from Business Development Services. Among other talents, our advisors are adept at helping you write a business plan, the “roadmap” for your venture. Assistance from Business Development Services is available to Native Americans interested in beginning a small business or improving/expanding an existing small business.
What is a business plan and why do I need one?
A business plan defines your business, identifies your goals, and serves as your company’s resume. It helps you refine your ideas and test the viability of your business concept. A good plan will also enable you to allocate resources properly, handle unforeseen complications, and make informed decisions. The major sections of a business plan include a business description, management and operations plan, description of products/services, marketing plan, and financial plan. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a critical part of any loan application.
Why do I need to define my business in detail?
It may seem silly to ask yourself, “What business am I really in?” Many business owners have gone broke because they never answered that question. One watch store owner realized that most of his time was spent repairing watches while most of his money was spent selling them. He finally decided he was in the repair business and discontinued the sales operations. His profits improved dramatically. Clearly defining your business or your purpose will give a true sense of direction as your business develops.
What legal aspects do I need to consider?
Licenses, permits, zoning laws and other regulations vary from business to business and from location to location. Many resources may need to be contacted including the tribal planning department, Oregon Secretary of State Corporation Division, local government(s), and Internal Revenue Service. You will need to consult an attorney, accountant, and/or business counselor for advice specific to your business and area. You also must decide about your legal form of business (corporation, partnership or sole proprietorship).
How much money do I need to get started?
Once you have taken care of your building and equipment needs you also must have enough money on hand to cover operating expenses (fixed and variable costs) for at least one year. One of the leading causes of business failure is not having enough start-up capital. Consequently, you should work closely with your accountant or business counselor to estimate your cash needs. Writing a business plan will help you determine your capital (money) needs.
What are the alternatives in financing a business?
Committing your own funds is often the first financing step. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence to others who may invest in your business.
There are two basic types of business financing – debt and equity. Debt is a loan; equity is using investors’ money or other assets to fund the start-up and operations of a business. You may want to consider family members or a partner for additional financing. Banks are an obvious source of funds. Other loan sources include commercial finance companies, venture capital firms, and local development companies. Great Eastern Oregon Development Corporation (GEODC) has a Native American Entrepreneur Revolving Loan Fund, in addition to a variety of other loan programs: http://www.geodc.net
What do I have to do to get a loan?
Initially, you need to be prepared to answer three questions:
How will you use the loan proceeds?
How much do you need to borrow?
How will you repay the loan?
When you apply for a loan, you will be asked to provide projected financial statements along with a solid business plan. The lender will also examine your credit history. A banker will often decide to loan an individual money based on the “C”s of Credit:
Credit – borrower’s credit history
Character – the characteristics of the individual that make the banker feel comfortable that he/she will do whatever is necessary to repay the loan and continue a positive relationship with the bank
Capacity – the ability of the business to generate enough cash and profits to make money and repay the loan
Conditions – competition, industry trends, the economy
Capital – the owner’s contribution (cash or collateral) to the loan package
I’ve heard of grant money being available for my business – how can I find out more about it?
There exist several fine websites – such as Grants.gov and the Catalog of Federal Domestic Assistance – on which you can search for available grant monies. Keep in mind, however, that our experience shows that grant money is rarely – if ever – made available to for-profit business ventures.
If grants are rare, how can I obtain financing?
Typically, financing for small businesses comes from traditional lenders. The ability to obtain financing will be based on: the strength of the business idea, a complete and comprehensive business plan, collateral, down payment (equity), clean personal credit history and positive financial net worth, management ability and sufficient cash flow to meet expenses and repay the debt.
Business Development Services is not a lending institution. However, we partnered with Greater Eastern Oregon Development Corporation (GEODC) to establish a Native American Entrepreneurial Revolving Loan Fund. While there is no guarantee that your loan will be approved, seeking assistance from our staff might better position your company to get the funds you need.
Under certain circumstances, the Small Business Administration will guarantee a percentage of business loans for qualified small businesses. Information regarding their loan programs can be found here
What does marketing involve?
Marketing is your most important operational concern. There are four basic aspects of marketing, often called the four “P”s:
Product: a description of the item or service you sell
Price: the amount you charge for your product or service
Promotion: the ways you let your market know who, what and where you are
Place: the distribution channels you use to offer the product to the customer
As you can see, marketing includes much more than just advertising or selling. For example, a major part of marketing involves researching your customers: What do they want? What can they afford? What do they think? Your understanding of the answers to such questions and how you utilize the information in your operation plays a major role in the success or failure of your business.
What is my market/customer potential?
First, determine a customer profile (who) and the geographic size of the market (how many). This is the general market potential. Knowing the number and strength of your competitors (and then estimating the share of business you will take from them) will give you the market potential specific to your business.
Are some locations better than others?
Time and effort devoted to selecting where to locate your business can mean the difference between success and failure. The kind of business you are in, the potential market, availability of employees, the number of competitors and customer accessibility all determine where you should put your business.
Location is critical to small retailers where traffic flow spells the difference between success and failure. Home-based businesses initially operate out of the founder’s home and, as they grow, the issue of location becomes vital to their continued success.
How do I find out about suppliers/manufacturers/ distributors?
Most suppliers want new accounts. A prime source for finding suppliers is the Thomas Register of Manufacturers, which lists manufacturers by categories and geographic area. Most libraries have a directory of manufacturers listed by state. If you know the product-line manufacturers, a phone call to the companies will get you the local distributor-wholesaler. In some product lines, trade shows are good sources of getting suppliers and looking over competing products.
Where can I find information on Oregon State permits and licenses?
Your first visit should be Oregon Business Express: http://www.oregon.gov/business
Where can I obtain a Federal ID number?
Also called a “Federal Tax Number” or “Employer Identification Number,” it is granted upon completing IRS Form SS-4. You can obtain this form in Portable Document Format (PDF) at the IRS web site, or by calling 1-800-829-1040.
Sources: Business Development Services, Association of Specialized and Cooperative Library Agencies and the Small Business Administration
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