Every week as SmallBizLady, I conduct interviews with experts on my Twitter talk show #SmallBizChat. The show takes place every Wed. on Twitter from 8-9pm ET. This is excerpted from my recent interview with @Colleendebaise She is the author of The Wall Street Journal Complete Small Business Guidebook is small business editor at The Wall Street Journal. Prior to that, Colleen was deputy editor at BusinessWeek SmallBiz and has also been editor at SmartMoney magazine’s small business site, where she reported on the financial, personal, and management issues facing entrepreneurs. For more information on her book http://www.colleendebaise.com
SmallBizLady: Is now a bad time to start your own business?
Colleen Debaise: No. In fact, an economic downturn is often considered the best time to start a business. Rent is cheaper. Top-notch talent is easier to come by. Equipment and machinery can be picked up at low rates. Plus, if you start now, you can get a leg up on the competition. When the economy recovers, you’ll already be growing your business.
Smallbizlady: How long do you think people should plan before they start their business?
Colleen Debaise: There are no shortcuts – you really need to do your research, figure out your market, size up the competition, determine your start-up costs, craft a sales/marketing strategy, and so forth before starting your business. That can take some time (it all depends) but it will only help you in the long run. That said, a lot of people fail to plan before starting up, choosing instead the “sink or swim” approach. I don’t recommend that. The odds, in many ways, are stacked against you. The more you can do to prepare, the better.
Smallbizlady: Do start-up entrepreneurs need a business plan?
Colleen Debaise: Yes, for those same reasons above. Most importantly, a business plan gives you direction; it can be your roadmap to success. It’s a way to get that great idea out of your head and onto paper. Also, if you are looking for money, a banker — and certainly any professional investor — will expect you to have a business plan. If you are looking to rent a space, a landlord might demand to see one. And if you are looking for a business partner, you’ll want to show them your business plan so you can communicate your vision and so you can both be on the same page.
SmallBizLady: How do small businesses typically fund their ventures?
Colleen Debaise: Most small businesses are self-funded, meaning the entrepreneur has to come up with the cash, usually through personal savings or contributions from friends and families. Once you’ve got a track record, it’s possible to secure SBA-guaranteed loans or traditional bank loans. Entrepreneurs who want to start high-growth companies with the goal of selling or going public can seek angel or venture capital, although that generally means giving up an ownership stake in your company.
SmallBizLady: Do you need to change your lifestyle in order to start a business?
Colleen Debaise: Starting a business is a lot like becoming a parent — get ready to lose some sleep! Especially in the early days, you’ll need to devote a significant chunk of time and energy to getting your business off the ground. As you start to build your brand, develop market share and hire employees, you’ll be able to delegate responsibilities more — but that may take several years. While you’ll need to dedicate a lot of time to your start-up, it’s also critical to learn good work/life balance strategies so you don’t burn out.
SmallBizLady: How much money do you need to start a small business?
Colleen Debaise: The cost varies widely, depending on the size and scope of your business. A solo home-based entrepreneur might only need a shoestring budget, whereas a small manufacturer may need considerably more to lease commercial property, buy equipment and train staff. But here’s something to keep in mind: entrepreneurs chronically underestimate the amount of start-up capital they’ll need while overestimating initial revenues. Lack of capital is one of the top reasons why businesses struggle or close during the first year. The best thing you can do is figure out all your start-up costs — everything you’ll need to get your doors open — and then develop an operating budget for your first six months or year in business.
SmallBizLady: What are some of the financial challenges a new small business owner faces?
Colleen Debaise: The biggest financial challenge for many newbie entrepreneurs is learning the numbers side of the business. Many people start a business because they want to follow their passion and do something they love. That’s great, but you’ve got to learn the math, too. In The Wall Street Journal Complete Small Business Guidebook, I dedicate a chapter to managing the finances of your business — learning to read a balance sheet, a profit-and-loss statement and a cash-flow statement. As a business owner, you can always get advice from an accountant or a bookkeeper, but you need to understand the numbers yourself so you can make strategic decisions for your company.
Smallbizlady: What are some strategies for marketing a business?
Colleen Debaise: The methods of marketing a business have changed greatly. In years past, people relied almost exclusively on traditional (and expensive) forms of advertising such as newspaper ads, billboards and television commercials. Nowadays, there are far cheaper options, such as social media sites, although it’s harder to stand out because everyone is using these tools. While the methods have changed, people still need to follow the marketing basics. Know your customers. Figure out how your company differentiates itself from its competitors. And tell your story — people want to do business with people they know, like and trust.
Smallbizlady: What are the top reasons why small businesses fail?
Colleen Debaise: The number one reason is undercapitalization. Most small-business owners UNDERestimate how much it will cost to get started — and they also OVERestimate how fast initial revenues will come in.
Smallbizlady: Has social media revolutionized the way start-up business should market themselves?
Colleen Debaise: I wouldn’t say revolutionize – it’s simply provided another tool in the arsenal. Social media is best in conjunction with a mix of traditional advertising, marketing, promotional methods. But small businesses need to remember that–unlike other forms of marketing — social media is a two-way conversation. In other words, don’t just put up a Facebook page and never update or respond to comments. Social media, although free, can take more time and energy than other forms of marketing.
Smallbizlady: How many jobs should entrepreneurs expect to do when they start out in business?
Colleen Debaise: Ha – all of them! Be prepared for the demands on your skill set that starting a business will require. Think about it: if you currently work for a large corporation, you probably perform one specific function, and there are people or departments that take care of the rest. Especially in the start-up phase, when money is tight and you might not have any employees, you’ll need to be everything: CEO, chief marketer, chief salesperson, maybe even the cleaning person.
Smallbizlady: A lot of start-up entrepreneurs talk about finding their passion to build a business, what do you think?
Colleen Debaise: You must have passion to start a business. Everything else you can learn. But you need to have that enthusiasm, love, and enjoyment for what you do. It’s passion that will keep you going, especially when times are tough and naysayers are plenty. And it’s passion for your product or services that will help you ultimately win clients, customers, investors or partners.
If you found this interview helpful, join us on Wednesdays 8-9pm ET and follow @SmallBizChat on Twitter.
Melinda Emerson @Smallbizlady is a seasoned entrepreneur, professional speaker, and small business coach. Her areas of expertise include small business start-up, business development and social media strategy. Melinda publishes a blog about running a successful small business www.succeedasyourownboss.com. She also hosts #Smallbizchat, a weekly talk show on Twitter for emerging small business owners to discuss everything they need to know about launching and running a profitable small business. Her first book Become Your Own Boss in 12 months was released in March 2010 from Adams Media.