Starting a Business? Some Survival Tips
ALEX CHADWICK, host:
From NPR News, it's DAY TO DAY.
Have you thought, dear listeners, about quitting your job and going into business for yourself? Well here are some numbers: According to the Small Business Administration, in 2005 there were almost 26 million small businesses operating in this country.
The hard fact is that just a quarter of small businesses, though, survive for ten years. That's according to the Census Bureau. Still wishing you could run your own business? Here to talk about starting a small business, Michelle Singletary, regular DAY TO DAY contributor on personal finance.
Michelle, the first thing to consider when starting a small business, what is it?
MICHELLE SINGLETARY: Ask yourself: Why am I starting this small business? Do I have something to offer that another small business does not? If you are great at baking, you also have to be great at selling. So you want to look at your strengths first so that you are sure that you're starting a business that is going to survive.
CHADWICK: Is it a better idea to buy someone else's small business rather than just start your own from scratch?
SINGLETARY: You know, I think it depends. there are some advantages and disadvantages to buying a business. The advantage is that you're buying an existing business, which means there is less start up costs; you have some cash flow, because I'm assuming your going to buy a business that is doing well. You've got a built in customer base. So that's all great things, that's a good reason to buy an existing business.
The disadvantage for a lot of people is that you can't afford it. If your resources are low, but you've got the skills, you know how to manage, you know how to plan and you're a good salesperson, then it maybe better for you to start it own your own.
CHADWICK: But isn't it a matter of just borrowing, because you'd have to borrow anyway to start up your own business, wouldn't you? Or how do people do it?
SINGLETARY: Well that's why - that's one of the number one reasons why small businesses go out of business, because they don't have enough financing. Listen, small business people start with credit cards, believe it or not. They borrow equity from their homes. If you're lucky enough and you have a solid business plan, experience in the area in which you want to start your business, you could get a small business loan from a bank. There are banks - many banks across the country who specialize in giving loans to small businesses.
CHADWICK: Give me an idea of a small business, Michelle. When you say small business, do you mean like an accounting firm or would that be a professional service and that wouldn't really be a business? Would a business be more something like, say, a pet store or a gardening center?
SINGLETARY: A pet store could be a small business. If you are an attorney and a sole practitioner, that's a small business. It could be defined as having, you know, 10 or fewer employees or it could be defined by the revenues that you have, $5 million to $10 million or less.
CHADWICK: But whatever the dollar amount, you are responsible come payday. You're not going to get a check; you're going to write a check.
SINGLETARY: That's right, that's right. And also realize that most small businesses it takes about 6 months to a year before you start to become profitable. So you need to have some savings to cover you during those times when you are not profitable.
CHADWICK: Michelle Singletary, regular DAY TO DAY contributor on subjects of personal finance. If you have questions for Michelle, she will answer them here on DAY TO DAY. Write us; go to npr.org, click on the Contact Us link and write Michelle in the subject line. Michelle, thanks again.
SINGLETARY: You're welcome.
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CHADWICK: And there is more to come on DAY TO DAY.