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Dayton
Business Journal
Know
when
to start your own business
by Robyn
Davis Sekula, DBJ Contributor
Friday, May
4, 2012
For Michael
Bridges, the decision to start his own business came at a crossroads in
his
career when his employer looked to make some changes at the company.
That
spurred him to quit his job and pursue a dream he had since college.
“I was 40
and always had the desire to start and run my own business, and I
viewed it as
a once in a lifetime opportunity,” he said.
More than a
decade ago, Peerless Technologies Corp. was born. It began as a one-man
consulting shop in downtown Dayton’s technology incubator, the
Entrepreneurs
Center and it has grown to a nearly 200-employee company doing business
with
some of the largest companies in the nation.
Fairborn-based
Peerless provides systems engineering, IT, human performance and
medical, and
innovation and research services to federal clients including the Air
Force,
U.S. Department of Energy
and U.S.
Department of Homeland Security
.
But it
wasn’t easy. Bridges quickly realized, as the axiom goes, the more he
knew, the
less he knew.
“One of my
biggest challenges was not knowing what I didn’t know, and not fully
understanding the challenges that lie ahead,” he said. “Like anyone, I
thought
I understood a lot.”
His best
advice for new entrepreneurs is to do the research, ask questions and
utilize
all available resources for small-business owners.
“Get as
much information as you can and surround yourself with people who have
done it
before,” Bridges said.
Starting
off
If you’ve
always wanted to start your own business, it can be difficult to wait
for the
right time. You’re mentally ready to go, but success depends at least
partially
on timing.
Research is
crucial and should be the first step in determining the right time to
start
your own business, says Dr. Bill Dunkelberg, chief economist for the
National
Federation of Independent Business
.
First,
observe the competition. If it is a retail business, visit and count
the number
of customers going in and out.
Prospective
entrepreneurs also can talk to others in the same field, perhaps
someone in a
neighboring town who won’t compete directly with them, and ask them how
business is, specifically looking for signs of trouble.
National
trade organizations are good places to connect with other business
owners in
similar-sized communities who might have more experience and sometimes
are
willing to discuss how their own businesses are doing to help a
fledging entrepreneur,
Dunkelberg says.
Dunkelberg
notes that the best time to start a business is the day before a
recession ends
— which is nearly impossible to read, he says. Dunkelberg is an
economist
himself and says that the most recent recession has been difficult to
predict.
Those who start businesses during a recession need to have more capital
on hand
and might take longer to reach a break-even point or profitability.
A business
plan can be a strong guide to when to start a business, Dunkelberg
said. Writing
the business plan helps a prospective business owner identify weak
spots and
might help answer questions and solve problems.
“You won’t
execute it perfectly,” Dunkelberg said.
The first
number to nail down is expenses, he says, which should be somewhat easy
to
predict. Rent, utilities, labor and materials costs all should be part
of that.
Second, create a sales forecast. Comparing the two will help show how
long it
will take to ramp to profitability.
One mistake
that new business owners often make, he says, is underestimating the
time it
takes to deal with local, state and national government regulations.
“Check that
out carefully,” Dunkelberg said, as it can delay the opening of a
business and
cost time to profitability. Signage is one matter that often trips up a
new
business owner, as many don’t know going into it that it might have to
be
approved by historic preservation boards, city zoning officials or
other
similar groups.
In some
cases, an opportunity to buy a business sounds like reason enough to go
out on
your own, said Giovanni Coratolo, vice president of small business
policy for
the U.S. Chamber of Commerce
, a
Washington, D.C.-based trade group that represents small businesses.
But that’s
not always reason enough. Opportunities need to be evaluated just as
carefully
as starting your own business from scratch.
Coratolo
recalls one business owner who cornered the market on pagers — just as
pagers
were going out of style and being replaced by cell phones.
The pager
company owner bought out many smaller companies and thought he was
getting
great deals and good opportunities to grow his business, but what he
didn’t
realize was that the time had come and gone for pagers. “Technology was
creating a whole new niche,” Coratolo said.
Coratolo
recommends asking five crucial questions before you decide whether it’s
the
right time to launch a small business or buy into an existing business.
First, is
this an unfulfilled demand or need in the marketplace?
“It’s not
only the need as it exists today, but the need as it exists in the
future,”
Coratolo says.
Second,
what’s your competitive advantage? If you don’t have one, then it’s not
the
right time, he says. Decide what you will do better than the
competition and
how exactly you will do it.
The third
and fourth questions concern finances, Coratolo says, and are crucial.
Will you
make a return on your investment, and can you sustain the business
financially
going forward?
“A lot of
times, people have done all of their homework and research, but they
don’t have
the money,” Coratolo said.
And last:
Do you have the time to really build the business?
“Elbow
grease is a form of capital,” Coratolo said.
If you’re
finishing coursework for a degree, caring for small children or working
another
job, it will be difficult to put in the time it will take to make it
work.
“You do not
have unlimited time during your week,” Coratolo said. “If you do not
have that,
you will not be successful.”
Read this
and other articles at Dayton Business Journal
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