Pop-Up Shops as Opportunities

Pop-up shop

Photo (CC 2.0) by USDA, on Flickr

Are you looking to start a business? Or maybe you work with someone who desires to have a small business?  One of the common questions is how to start?

A pop-up shop may be a good way to give business ownership a try. It also is a way to see how the market responds to your product or service.

What is a pop-up shop?  It’s a temporary place of doing business, i.e., think carts in the mall as an idea. You can find more on the topic here. 

Pop-up shops come in many forms, from the carts just mentioned to a temporary shop in a vacant space to a portable building brought in to a tent along the road. Each of these methods allow you to test your idea and yourself as a business owner/manager.

Becky McCray, of Small Biz Survival, has posted several articles on pop-up shops. She writes on how they can be beneficial in encouraging business owners in small towns. Some of her articles include:

Pam Schallhorn, of the University of Illinois Extension, has also done a blog post on the idea of pop-up shops.  Her articles looks at how they helped rebuild a downtown.

And the Des Moines Register just published a story on a man who has started a business making store fronts for pop-up shops.

Pop-up shops, or similar models, can offer economic development growth and opportunities for local communities.  And communities can be very helpful in making such alternative ideas possible and even helping to market them and encourage their development.

Thinking of starting your own business? Working to develop your community’s economic sector? Try pop-ups!!

Could I be an Entrepreneur?

lemonade stand

Photo (CC 2.0) by Steven Depolo, on Flickr

Lots of people have a desire to start their own business.

At the same time, communities and economic development agencies encourage this as these businesses help build the local economy.

The interest for starting from the owner’s perspective come from a desire for control, to show their creativity and to make money. Communities see them as adding new jobs as well as providing a substantial amount of US sales and GDP (Gross Domestic Product).

Yet often people just don’t take the plunge.

One thing holding them back is the fear they don’t have the right stuff to develop a successful business.  It is the myth that entrepreneurs are born and not made.

Kay Cummings, Michigan State University Extension, examines that myth. She outlines what qualities are helpful to the entrepreneur and defines what business skills one should have, either before starting or soon thereafter. Read her article here.

Kay also outlines some of the resources found he her state that can help the aspiring entrepreneur. And she outlines some national efforts as well.

While your state may not have these specific resources, nearly every state has some type of support services for the new business owner.  You just need to go out and find them.  I would suggest you start with your Extension office. They can define the resources available in your state.

Good luck.

Where are the Entrepreneurs?

Photo (CC) Bruce Berrien, on Flickr

Photo (CC) Bruce Berrien, on Flickr

Thanks to Connie Hancock and Becky Vogt of the University of Nebraska, Lincoln for the idea and background material for this blog post. 

If you have been paying attention to the news over the last year or more, there has been a ongoing discussion of how there is a decreasing number of small business start-ups.  This trend may be seeing some signs of change, but the trend is concerning given how small businesses are the lynch pin in our economic engine. Just think of how many key businesses in your life are small businesses. This is true in urban areas and even more correct as you move to rural areas.

A Gallop study found several reasons for why people are not starting businesses. Forty-nine percent indicated that they didn’t know where to start. Prospective owners also feared that their lack of knowledge in running a business would be a hurdle

Survey respondents, 84%, also indicated that they liked the security of a steady income, and although not shown in this study, other work has shown people shy away from business ownership because of the loss of fringe benefits.

Other indicated that they did not have the savings necessary to start a business. It does take money to get started. And it takes even more money to make it through the lean first years. It is often said that you estimate your cash needs and then you should double or triple that number to get to an amount you actually will need.

And there is another group worried about the odds of success, 49%, and the competition, 28%.

Yet as you examine the list, there is a clear theme that runs through it. None of these items are insurmountable. The skills of being a business owner can be acquired by the owner (plus the owner can also hire needed skills). In terms of business financing, history is full of stories on how businesses have started using very few dollars being very frugal or bootstrapping instead.

Regarding the risk, potential business owners can minimize the risk by careful planning. Admittedly you can’t eliminate the risk. And the odds may be against you, but individuals who have the passion will start. It’s understanding what drives you and then looking for how that drive can fill a niche in the market.

Potential business owners can decrease their risk and eliminate some of their questions about how to start and run a business by accessing the vast variety of resources available to help small business owners. PowerofBusiness is one such effort. We are focused on small, often rural, business owners.

There are also resources such as the Small Business Administration, SCORE, and Small Business Development Centers. Plus most states have some type of program as do many colleges and universities.

As you can see that while there seem to be many hurdles, there are ways of removing them or, at least, minimizing them.

Starting a business can be a scary thing, no doubt. But ask most business owners and they will tell you they are glad they made the decision. Make your plans and then take the leap. As Shia LaBeouf once said, “Don’t let your dreams be dreams.”

A Business Closes Each Minute

startup business Scrabble tiles

Photo (CC) by Dennis Skley, on Flickr

Does that headline surprise you?  Actually it may be higher than that depending on the statistics you use.

But about that same number of businesses also open each minute (right now those opening might be slightly higher).

So with those kind of numbers is starting a business something you want to do? The reality is that those are just averages. They don’t represent you and your business.  And understand that some of these businesses shut down because the owner sees a better opportunity elsewhere. We don’t use the term failure, instead we just use the term closure.

Other reasons that a business may close include financing, lack of planning, inadequate marketing, an owner retires, or the owner just is tired of the strain of running a small business and being responsible for most or all of the duties.

So why bring up all of this?  It is not meant to scare you from opening. The idea is to let you know what you are facing. You need to have a passion to keep going and have done everything you can to plan for different scenarios. Talk with current or past business owners and they will often say they enjoyed their time in business.

So consider the opportunities of owning a small business? Then do your homework. It can be a rewarding decision.

Get more information on small businesses at:

Power of Business

SBA – https://www.sba.gov/content/small-business-facts

State of Small Business

Forbes Small Business Statistics

Food as a Business Idea

Food truck competition

Competition (CC) Bob B. Brown (bit.ly1o2905w), on Flickr

If asked, many business advisors would say starting a business around food is probably the most common request they get.

Why is it so popular? One reason is that friends and relatives often comment on how much they enjoy a certain item and encourage that person to start a business. It may come from a long-standing family recipe or something the person spent hours working on. Food reminds us of our heritage and our years growing up. It also can take us to new places. We can be easily engaged as a consumer in our food and beverage experiences, yet we can also look at it as something we can grab quickly that will keep us going until we can take a longer break. Today we hear about local food, slow food, and all sorts of suggestions on how to change our diets for more energy and better health.

Yet making it in the food business is difficult. In grocery stores along some 20,000 new items hit the shelves every year. That number does not take into account the new restaurants opening each year, the recent trend of food trucks, and more and more farmers markets and consumer trade shows where food booths are plentiful in numbers.

So can you make it as a food entrepreneur? Yes.  Will it be easy? No. One of the first things such small business owners need to realize is that making a batch of something at home is nothing like doing it on a commercial basis. For one thing, doing as a business means needing a commercial kitchen or having a co-packer produce it for you.

You can find resources to help you get started. The Cooperative Extension Service in many states has materials on starting a business. If you have been a regular attendee of our Power of Business First Friday chats, you will have heard from several food based businesses. (past chats are archived here.)  At North Dakota State University Extension Service, we have:  Food Entrepreneur: Your Resource Guide to the Food Industry. Oklahoma State University, through its Food and Agricultural Products Center, and Penn State offer regular trainings for startup companies.

Selling online is one approach that many food entrepreneurs consider. If that interests you, check out these two resources from University of Nebraska Extension and NDSU Extension:

You also can find bloggers and other online sources of information. One blogger I follow is Jennifer Lewis, Small Food Business. Two recent articles that I enjoyed looked at convenience store food sales and where people go to buy specialty foods.

The challenges are great. Remember though there are resources available.

It won’t be easy. On many days you will want to give up. Planning, passion and persistence plus knowing your market and getting your product in front of that targeted group of people are keys to making your food idea a business success.

Selecting a Business Structure

A startup question for business owners is deciding on the legal form of the business. Will the business be a simple sole proprietorship or will another form be used?

Selecting a business structure should be done based on aspects such as control, ease in business transfer, taxes, etc. The question should be answered with input from legal and tax advisors.

One possible structure is a “cooperative.” In this chat, held on Dec. 5th, Heidi Demars, Marketing Director, discusses cooperatives and how it fits with the goals of the BisMan Food Coop.

To learn more about cooperatives, check out: Basic Cooperative Principles from eXtension and Chose Your Business Structure from the Small Business Administration.

Financial Literacy Basics for Prospective Small Business Owners

I came across this article in Prairie Business Magazine the other day. The author, Matt Varilek, does a great job of identifying some major pieces of information that nascent entrepreneurs should consider before they fully commit to starting a business.  Great insight. Take the time to think about these issues before you commit your time and money. I want to thank Matt, our guest blogger, and David for approving the reprint.

******************************

startup business Scrabble tiles

Photo (CC) by Dennis Skley, on Flickr

What to Know Before You Take the Plunge

by Matt Varilek, SBA Region VIII Administrator

What should entrepreneurs be aware of before they decide to devote a considerable amount of time, effort and resources to a small business start-up?  Here are ten financial literacy ‘hot buttons’ for new entrepreneurs and prospective small business owners to consider:

Know Your Own (and Your Family’s) Tolerance for Financial Risk.  There are no assurances there will be either short or long-term financial stability, so everyone involved in the start-up should have the emotional and financial capacity for a high level of uncertainty.  Also, using personal savings, a 401(k) or other retirement plan monies is a serious decision that one must carefully consider if there’s a potential for loss of funds.

Learn How a Legal Business Structure Can Impact Your Future Tax Liability.  There are different tax advantages associated with formal corporate structures that accrue to both the company and the owners, and tax law changes nearly every year.  Discussing the available business structure options with a qualified accounting or legal professional can help determine the best course of action when forming the business.

Understand How Much Money it REALLY Takes to Start Your Business.  Unfortunately, most all start-up projections for revenue growth are too optimistic, expenses are underestimated, and anticipated breakeven timeframes are too short.  A good plan is to double the projected cost to get to breakeven, and triple the timeframes.  Being prepared for a possible worst case scenario is good financial insurance against running out of time and money on the cusp of success.

Understand What Start-up Expenses are Crucial versus Questionable.  Focusing on expenses that directly relate to revenue generation is one of the keys to financially managing a start-up.   Every start-up expense should answer the question: “How does this contribute to the bottom line and get me closer to breakeven?”

Learn When it Makes Sense to Use Business Credit.  Business credit should be considered only when the money received can be used for either of two purposes: increase revenues, or reduce the costs of doing business.  Business credit should not be used to maintain a desired lifestyle, provide for the owner’s salary, or for anything that cannot be directly tied to bottom-line results.  In some cases, scaling back a start-up is a wiser choice than incurring business debt.

Understand the Relationship Between Your Credit History and Business Lending.  Lenders are literally ‘banking’ on the owner’s prospects for success, and how an owner has managed their own personal finances to that point is an important indicator.  Even a compelling business plan may not overcome an owner’s poor or marginal credit history.  After a year or two, availability of a business loan is more likely to be based on the company’s credit and operational histories.

Learn How to Record and Track Business Income and Expenses.  First, accountants can only work with what they see.  If it’s not recorded, it didn’t happen.  Second, accurate records enable a business owner to gauge the financial health of the business through the use of ratios and other financial measurements.  Having at least a basic computer-based financial system (i.e. like QuickBooks or equivalent) and keeping up with regular data input is a must.

Learn How to Read, Interpret and Use Business Financial Statements.  The Income Statement, Balance Sheet and Cash Flow Statement each tell a different part of the story about the company’s financial condition. Together, they can be used to find company weaknesses and strengths.  Ratios derived from various sections of the financial statements provide clues to where a business owner needs to implement corrective actions before a situation becomes serious.

Understand How Cash Flow Keeps a Business Alive.  A business can be profitable on paper, yet fail from a lack of cash flow.  Important aspects of cash flow include the timing of accounts payable and receivable, inventory turnover, fixed expense loads and other areas.  Without a solid foundational knowledge of such areas, a business owner is handicapped in terms of actually managing the company’s cash.

Understand the Financial Implications of a New Hire.  Two major questions should be answered before anyone is hired: “How will they enable the business to increase revenues, or How will they enable the business to be more efficient?” (i.e. more productive).  Quantifying these areas will help determine if a potential new hire is really worth what you will pay them in wages, benefits and training time.  Avoiding the temptation to hire too soon is one of a business owner’s major challenges.

 

As the economy continues to recover from the recent Recession, a business owner’s financial literacy is as crucial to the prospects of a business as it would be to any one of us in managing our personal financial affairs.

(Business financial literacy is part of the curriculum provided by one or more of SBA’s major Resource Partners…SCORE, Small Business Development Centers and Women’s Business Centers.  All can be found through the sba.gov website.)

Reprint approved by:

David D. Leavitt Jr.,

Regional Communications Director, Region VIII

U.S. Small Business Administration