Stay Out of Personal Debt and Other Tips for Small Business Owners Just Starting Out

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Stay Out of Personal Debt and Other Tips for Small Business Owners Just Starting Out

The United States is in the midst of a small business boom. In 2022, about 1.7 million people filed to start a new business, according to the U.S. Census Bureau. That’s up more than 28% from pre-pandemic levels in 2019.

Including businesses that are unlikely to hire others, the number of new business applications was 5.1 million.

Two years ago I published a book with Seth Levin. The new builders, which looked at the next generation of American business owners. They are more likely to be women and people of color and to own businesses in the service, retail, and restaurant sectors. Today’s small business owners navigate an environment where the biggest obstacles are a lack of access to capital and an uneven competitive environment where big business dominates. But today it’s cheaper to open a business, mostly because you can test your ideas on an online platform for a few thousand dollars. And there are new sources of funding and assistance to help.

Here are seven lessons from The new builders and other small business owners on how to be successful while starting out.

It’s okay to start small, but have a vision for bigger growth.

Your company will probably need to grow from revenue; less than 15% of companies manage to find a bank loan or venture capital to get started. This means you’ll need to start small and price your products high enough that you can take what’s left over to reinvest in the business. By definition, this means you’ll be starting small and probably using your savings to get you started. But have a vision of what your company looks like as it grows. If you see yourself in three to five years running a company with, say, five or 10 employees and multiple locations, you’ll be more likely to develop the plan that helps you get there.

Don’t go all-in on one idea or even all-in on your business.

There’s a funny myth that perpetuates the business world that success is about your persistence or “going all in.” You must persevere, but a more valuable quality is your ability to turn around. If an idea doesn’t work, move on. One of the business owners we interviewed was Fred Sachs, an entrepreneur from Alexandria, Virginia who had founded two successful companies, a hardware company and a lumber company, and in his later years produced organic flour for restaurant supply and bakeries.

“Sometimes you have to create a solution to a particular problem, and in other situations you have to innovate to get around a particular obstacle,” Sachs said. “And if you’re not going to deal with the problem, you’re going to be left behind. You have to keep changing.”

Don’t go into personal debt

Your first idea might be to get a bank loan. But business bank loans are surprisingly hard to come by because banks are unlikely to approve a business for a loan until it can show it has enough revenue to make the payments (community development financial institutions, which are not-for-profit organizations, can to be a little easier ).

Sometimes entrepreneurs turn to loans against their personal assets. But in today’s fast-paced economy, taking out a loan against your home or with a credit card puts you at significant financial risk. Don’t borrow your startup capital. Make sure you know if your company is a going concern – with customers, revenue and profits – before taking out a loan. Test your ideas, launch and look for other sources of funding.

Your most important driver is your customer

When you’re tempted to stick with your great idea, remember that entrepreneurship is often a service industry. You are there to make life easier or better for your clients and customers. If they’re not buying what you’re selling, it’s time to change.

Don’t spend money on marketing

In the early days of your business, as you refine your product or service, one of the best uses of your time and money will be to test the market. But don’t confuse market testing with marketing, which comes later.

Find the cheapest possible way to present your product or service to potential customers. If you use a big tech platform like Amazon, Etsy or Instagram to test a product, remember that they usually charge hidden fees and tend to increase them without warning. You may want to explore other avenues for reaching potential customers. Many of the big technology platforms are facing new competition from smaller, more niche or locally owned versions.

After develop a profitable business model, then you can invest money in marketing.

Be professional in your accounting

• Set up a bank account in your business name, not your own.

• Hire an accountant. Unless you have the love and talent to keep track of finances, you’re better off finding an accountant or an online version for a few hundred dollars a month. You may not do this right away, but do it as quickly as possible. It will also help you at tax time.

• Spend at least one day a month (or week) catching up on your paperwork: checking your bank accounts, paying invoices and issuing your own bills.

Is there a local version of DoorDash in your area or a retail platform that sells goods and services in your city?

Likewise, companies that provide services to small businesses, such as accounting platforms or finance

Know what kind of financing options are available

Your own savings, friends and family capital are the best and cheapest way to start. Community Development Financial Institutions (look for ones in your area here: and nonprofit lenders can provide small loans or working capital. Bank loans are for when you’re already in business and can show income and profits; your best chance for approval is probably at a community bank, who are also a great source of small business advice. In Nike founder Phil Knight’s biography of his entrepreneurial journey, Shoe Dog, he talks about the benefits of being able to cross the street to talk face to face with a banker and ask for a loan.

Many other entrepreneurs tell similar stories.

Venture capital funds only high-growth businesses (typically those whose business models show revenues in the millions in the first five years). Also, venture capital is usually only available to the well-connected. Don’t waste your time unless you have an “in” or technology business model.

If you want to develop a venture-fundable model, it might be worth looking into an accelerator like TechStars, Camelback Ventures, Y Combinator or Ad Astra Ventures that can help you prepare to pitch to venture capitalists. EforAll is an incubator that helps entrepreneurs connect with banks and other lenders.

Search for free information

There are many influencers and other types of marketers offering insights and training courses – if you pay. But first, check out the free information available.

SCORE (Service Corps of Retired Executives) is a great resource.

Verizon and the Association of Women’s Business Centers are offering a free program to help small business owners learn more about digital tools.

And check out the resources available at local colleges and universities.

Rebecca Brady, the founder of Top Seedz, based in Buffalo, New York, started her cracker company by going to Buffalo State University’s Small Business Development Center, which gave her some basics on how to start a food business. Investing $5,000 of her own money, she rented space in a shared kitchen and began selling at farmers’ markets. This year, just four years later, it’s aiming for $4.5 million in revenue. Her advice?

Don’t waste energy looking at what your competitors are doing or looking over your shoulder at the past. Keep your eyes on the goal ahead and stay focused on what you want to be.

Follow me at Twitter or LinkedIn. Take a look my website or some of my other works here.

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