Career Intensity by David V. Lorenzo, Business Coach and Advisor

July 25, 2007

Home Business to Big Business

Posted by Dave Lorenzo - Business Coach

Start-up Journal has 9 Tips for a successful Home Business Start-up. Here they are with my comments (in green):

Start with research. Explore business structures on Web sites such as SBA.gov from the Small Business Administration. Seek feedback on your business plan from seasoned volunteers at SCORE, Counselors to America’s Small Business. This is good advice. Decide on a business structure and make sure it is sound. Get some feedback on your business plan. Here’s the tough part – take the feedback you receive with a grain of salt. Don’t let ANYTHING deter you in the pursuit of your dream. Do your homework but don’t get discouraged.
Do a detailed analysis of costs to figure out how much money you’ll need. Forecast three scenarios: a best-case, realistic and worst-case financial picture. This is an area where I don’t think you should spend a lot of time. Do some rough estimates but keep in mind that everything is going to take twice as long as you think and it will probably cost three times as much. With that said, move forward. Beware paralysis by analysis.
Overcome distractions and designate a space in the house for business activity.“Carve out a space where you actually go,” said Charles Matthews, executive director of the University of Cincinnati’s Center for Entrepreneurship in Ohio. The kitchen table doesn’t cut it, he said. “Select a location that’s exclusively devoted to your business. It doesn’t have to be huge but it has to be effective and efficient, especially if you have clients visit your office.” I agree 100%. I work from home and for a long time I tried working from the couch. Not good. Set yourself up in an office. Believe me – it makes a big difference.
Be your first investor and keep funding sources close to home at first.Start with family, friends and home equity before seeking angel investors or venture capital, Monosoff said. “You have to believe in what you’re doing with conviction, and you have to invest in yourself with education and time and money before you can expect other people to support what you’re doing.” This advice is garbage. Only use your own money if you can’t get any money from someone else. If you use all of your own money and the business fails you have no job and no money. If you use someone else’s money and the business fails you need to find a job and somebody is angry with you, but at least you can eat. Also keep in mind that many successful entrepreneurs have survived – even thrived–after financial setbacks – even bankruptcy. Its not the end of the world. Your credit rating will improve even if it is badly damaged – I know from experience. Seriously, if you can get someone else to put up the cash without giving up too much equity, do it. If that doesn’t work, borrow as much as possible – unsecured. After that, move to family and friends. As a last resort use your own money and be very, very careful and think long and hard before you bet the house.
Consider entering contests and business-plan competitions that can help fund and guide your business. Sure, if you’ve got nothing better to do.
If you have trouble securing a bank loan, consider applying to the SBA or microlending organizations. Monosoff recommends sites such as MicroenterpriseWorks.org, and CountMeIn.org, which are run by nonprofit organizations that offer loans up to $25,000, plus coaching, she said. “To have that combination of the funding to give you the seed money and the mentoring is just invaluable.” Now they’re talking. Do this first – before you call your family and friends.
Outsource high-level business functions such as accounting if you don’t have the background or time to do a competent job. “A lot of accountants and attorneys will give you a consultation for free,” Monosoff said. “Be sure to ask that before you go.” Ask for and check references before turning over the bookkeeping, Nemeth added. Good advice. Get an attorney, an accountant and an insurance agent – and check references.
Ask family for support or consider hiring someone to do the domestic work if you feel overwhelmed. Relinquishing tasks such as child care, housecleaning, cooking and grocery shopping can help you carve out time to focus on the business. If you can’t afford to pay for help, look for programs offering free activities for kids in your area. Contact your local Chamber of Commerce. This is also an area that many people overlook. You can’t change diapers and make sales calls at the same time. Believe me, in the end both tasks will stink.
Have an exit strategy.Can you sell the business, pieces of it, or license the product if you no longer want or can afford to continue? It is good to think about this in the beginning because it will help you focus on building equity in the business. I see too many entrepreneurs who start a business and just end up buying themselves a job. They work hard and they don’t build a valuable asset. If you think about your exit strategy from the beginning you will always be focused on building a saleable asset.

So here’s my take on this list. Numbers 1, 3, 8 and 9 are good tips that you may not have thought about. I disagree with Number 4. Number 5 is just foolish unless you’re a college student. Numbers 2,6 and 7should be common sense.

Filed under: Entrepreneurship - Start-up
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