Free Yourself From the Corporate Plantation by Starting a Business

Speaking at Santa Cruz Workforce Commission in Watsonville, CA

For the past 4 years I have traveled around the country encouraging youth to become self reliant by starting businesses.  Not only is this is the way to create new jobs in our downtrodden economy, it is also the path to mental, physical, and emotional freedom.  Echo Boomers like myself do not buy slaving 50 years for Corporate America while our true desires and goals remain caged, dormant ambitions.

Despite this train of thought, many of us find the task of starting our own business daunting.  I meet people with incredible talent and ideas who don’t have the faintest idea of how to get started on their own path to success.  Like me (at one point in my life), they feel trapped in the confines of Corporate America.  Bound by the shackles of a consistent paycheck, they begrudgingly stumble into offices and waste away brain cells while secretly wishing to be their own boss.

Should they rebel, tell their manager where he or she can go shove it, and triumphantly run from their plantation?  Not exactly.  Before quitting your day job you must have a solid exit strategy.  With a good plan, you may even master collecting a consistent paycheck while secretly building an enterprise, right under Massa’s nose. In fact, this is the approach I advocate for most budding entrepreneurs.  Truth be told, it is the only plan I can reliably endorse from personal experience.  Therefore, if you would like to sit in your cubicle knowing that your intelligence and ambition have an outlet beyond the mind numbing and degrading tasks you succumb to at your 9-5, I advise taking a few simple steps.  The first is to purchase The 4 Hour Workweek by Timothy Ferriss…. RIGHT NOW.  The second is to read the subsequent paragraphs of this blog entry.

Required Steps to Forming a Small Business

Starting a business requires a series of formal and informal actions.  The first, and most critical step, is identifying a problem or a need in society that can be addressed for a profit.  Basically ask yourself “what would people pay me to slang [legally].”  For example, residents of a particular neighborhood may complain that there is no convenient place to get a morning cup of coffee before they embark on their commute to work.  Seeing an opportunity to eliminate this issue, an entrepreneur may decide conditions are ideal to open a coffee shop to serve residents who desperately desire their java.  With both a problem and a solution identified, you’re in business.

Writing a solid business plan ensures that a small business owner has a solid grasp of market conditions, competition, necessary resources, financial capacity, and marketing needs.  The U.S. Small Business Administration reveals that at the very least a “plan should include an executive summary, a description of the business, a plan for how you will market and manage your business, financial projections and the appropriate supporting documents” (US Small Business Administration 2011).  There are countless templates available online as well as packaged solutions like Palo Alto Sofware’s Business Plan Pro.  Get to writing my friend…

Once a business plan has been written and refined with the help of mentors, an entrepreneur should legally establish a business identity.  An appropriate attorney can typically provide solid advice on whether a business should be established as a sole proprietorship, LLC, S-Corporation, Corporation, Partnership, or the newly crafted L3C.  But if you’re playing Frugal McDougal like me, you may opt not to use an attorney for this step.  Businesses can be legally established by either going to a state’s government site and downloading the proper forms, or using services like LegalZoom.com or SmallBiz.com.   Depending on the type of business, an entrepreneur should also look into required state licenses and certificates to ensure compliance with the law (so you don’t show up on the intro of COPS while we sing “Bad Boys, Bad Boys…” to you hopping over dumpsters in an alley).

And now for the meat and potatoes… EVERY BUSINESS NEEDS A WEBSITE TODAY.  I cannot stress this enough.  Even if you operate a local barber shop and you think neighborhood advertising is sufficient, you’re doing yourself a disservice.  Without a website your company is virtually invisible to the billions of inhabitants of the world wide web.  Do you know how many fades and faux hawks you’re not cutting because dudes in your area googled ‘dope barbershop’ and Kenny’s Kut Hut showed up?  Please go to GoDaddy or Google and purchase your domain name…. this is the best $5-$10 you could ever spend as an entrepreneur.

Raising Funds

These days, many businesses can be started for relatively low out of pocket expenses.  The internet allows entrepreneurs to setup virtual operations through the simple costs of a web domain and site hosting.  Despite these facts, it’s sometimes necessary to seek outside financial assistance from angel investors, venture capitalists, banks, or the federal government.  When considering which avenue to navigate in raising funds, the Small Business Administration advises “if your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds” (US Small Business Administration 2011).  An entrepreneur can obtain equity financing from personal sources like family, friends, mentors, and associates (aka your homies).  When these informal resources cannot provide the necessary financial assistance, a business may look to eager opportunists like angel investors or venture capitalists.  In this instance, a small business should be well prepared to make a solid pitch for funding by kicking Game (with a capital G).  According to Mike Levinson, co-founder of DreamIt Ventures, “an angel investor or early stage venture capitalist will look at 1) is the business idea simple enough for me to understand and buy into, 2) does it solve a problem or meet a need, 3) is it a big enough market and customer base for the idea, and 4) does the entrepreneur have the right people on the team to pull it off” (Brown 2010).

If a business decides to opt for debt financing, there are also several sources to tap.  Once again, friends, family, and other associates may be willing to provide funds to entrepreneurs via loans.  But you know as well as I do, how it feels to lend or borrow money from your homies.  It can be a headache.  Luckily, banks offer credit lines in addition to loans, which may be beneficial to small business owners.  Though it is usually difficult for small businesses to receive long term loans from banks and other sources, “the SBA’s guaranteed lending programs encourage banks and non-bank lenders to make long-term loans to small firms by reducing their risk and leveraging the funds they have available” (US Small Business Administration 2011). Entrepreneurs should be aware that they must have excellent credit and a demonstrated ability to pay back any loan offered in order to qualify for debt financing in most instances.  So if your credit is to’ up from the flo’ up you’ll have to seek alternative means.

If costs associated with debt financing seem too high, small businesses may attempt to qualify for government grants (depending on the scope of the organization).  Companies involved in science, research and development, or tourism typically qualify for grants.  For most other businesses, it’s rare to qualify for grants but it doesn’t hurt to check Grants.gov to see if your organization is eligible.

The final sources a small business may look to for much needed funds are business plan competitions.  Several universities and corporations host annual business plan competitions where entrepreneurs are evaluated on the strength of their organization’s vision.  For example, the Miller-Coors Brewing Company hosts an urban entrepreneur competition every spring in Chicago, with a top prize of $100,000.  These unrestricted funds are desirable because they are not required to be repaid through debt or equity by a small business.   Whether soliciting equity financing, debt financing, grants, or business plan funds, small businesses must surely demonstrate mastery of business objectives, as well as sound financial statements that indicate where the organization is headed. For the former, it’s advised that a business engage a CPA to eliminate any concerns an investor, bank, or sponsor may have in funding the operation.  People want to make sure you won’t go MC Hammer with their cash.

Conclusion

Overall, there are a myriad of resources available to small business owners from a financial and a consulting standpoint.  The Small Business Administration provides an excellent framework for starting or enhancing an organization.  Other websites, books, and software are also available to assist entrepreneurs in writing effective business plans, securing funds, and growing their businesses.  Use Google to your advantage in finding them.  In the 21^st Century, small businesses must leverage each of these tools to make effective decisions that will determine the paths of their companies.  Don’t say I never put you up on Game…. Peace!

References

Brown, C. M. (2010, October 4). How to pitch to angel investors. Inc. Magazine. Retrieved from

http://www.inc.com/guides/2010/10/how-to-pitch-to-angel-investors.html

U.S. Small Business Administration . (2011). Starting & managing a business. Retrieved from

http://www.sba.gov/category/navigation-structure/starting-managing-business