Minding your own business - business owners answer questions about starting your own company

MINDING YOUR OWN BUSINESS

Starting a business can be a wondrous dream come true. No more depending on managers to recognize your skills for you to get ahead. You decide your fate. You decide how valuable your abilities and products are in the marketplace. As a Black woman entrepreneur, I have gone through the many highs and lows associated with becoming a business owner. Like me, many Black women have successfully started and maintained their own companies.

Eunice M. King began King's Transportation 16 years ago with only one station wagon. Today her 18 school buses serve the handicapped and other children in Baltimore. Jerrily Kress, owner of KressCox Associates, P.C., started her architectural firm nine years ago. Last year her firm won Washington, D.C.'s top three architectural awards. T.J. Robinson brought her dream of a Gingerbread House to life in 1972. Her restaurant of that name in Oakland, California, features Louisiana fancy fine food (Cajun and creole), handcrafted dolls and her own line of spices. M. Pearl-Lee now runs Frontier Bag Company, Inc., the business her mom and dad started in 1946. She joined the company six years ago as an employee and began her own expansion of the product line into plastics.

These savvy businesswomen join me in answering the most frequently asked questions about starting a new business.

What's the real secret to starting a successful business? Careful business planning is a common thread woven through successful new businesses. A good business plan will describe in detail your product or service and target customers, marketing plans and proposed suppliers. It will reveal your financial expenses, profit potential and the amount of start-up capital required. It should project the resources required to start your business and keep it operational. When you go to a bank to get financing, your business plan must be neatly outlined.

While planning, ask yourself, Will this new product or service sell? Are there enough people who will buy it to justify the investment required to make it available, and why?

T.J. Robinson planned and dreamed about opening The Gingerbread House from the time she was 4. "Don't hurry," she advises. "And don't let anyone tell you it's impossible. When you really care about something and put yourself into it, then you learn [what you need to make it work]."

Another consideration in starting a business is time. Launching your own company takes more energy than any job you've ever had, except maybe mothering! "If you're doing this as a hobby, don't do it," says Jerrily Kress. "You must keep hands on" - at least until the business can run without your constant involvement.

How can I get funding? You will need enough money to cover start-up costs and at least six months of your operating expenses. Many entrepreneurs also save enough money to cover personal expenses for about six months. Private and federal sources of financing can help you get your business off the ground. Private funding includes family and friends who may be willing to enter a partnership with you or simply invest for ownership or equity. Banks, credit unions, insurance companies and investment clubs are also good sources of capital. When borrowing from a bank, present statements of your company's financial potential and your own net worth. At some banks you'll be required to cite your qualifications for running the company. Also project your business growth over three to five years. Show how you have personally covered some part of the initial investment.

If bankers don't see your dream as a good risk, don't despair: Try a federal source of funding. For example, the U.S. Small Business Administration (SBA) recently launched a new small-loan program for entrepreneurs seeking loans of $50,000 or less. Also investigate Small Business Investment Companies (SBICs). These are privately organized investment firms, licensed by the SBA, that provide venture capital to small businesses nationwide. Write to the SBA Office of Finance & Investments, 1441 L St., N.W., Washington, D.C. 20416 for an SBIC directory. Another funding source is the Department of Commerce's Economic Development Commission. For information, contact the Department of Commerce in your state and ask for the Economic Development Commission.

What legal advice do I need? Legal needs of new businesses vary widely. Your lawyer should understand your business and be your legal advocate. Ask her to help you review any contractual agreements you make with your customers or suppliers. If you are creating a product or service, talk with your lawyer to determine the advantages and disadvantages of acquiring a patent, registered trademark or copyright. These instruments are designed to protect you from having your business or product names, the actual product you manufacture or your written materials used for profit by others.

How do I structure my business? There are five basic business structures: sole proprietorship, general partnership, limited partnership, open corporation and closed corporation. Ask an attorney to recommend the best structure for your business. Here are some of the advantages and disadvantages of each type.

A sole proprietorship is the easiest to start. The owner reports business profits as income. She has full and direct control. The chief disadvantage is that liabilities resulting from the business can affect her personal assets.

In a general partnership, nonmanaging partners are only liable for business losses to the extent of their investment. Otherwise the liability for a partnership is similar to that of a sole proprietorship. A limited partner is a person who has invested money in the business but has no involvement in running the company.

A corporation must keep its own records and pay taxes on its income. Owners must also pay taxes on income distributed to them. Usually the owners are not liable for the debts of the corporation. A corporation is more difficult to form and requires considerable paperwork. In an open corporation, the stock is made available to any investor. This can increase your funds significantly. In a closed corporation, all stock is held by the principals in the business - you and your partners, perhaps. The S corporation is a popular example of the closed corporation. It offers the limited liability of a corporation and the single taxation of a sole proprietorship.

What about marketing and advertising? When starting a company, blowing your own horn is vital. Equally important is knowing the difference between promotion, advertising, and public relations.

Promotion is making sure potential customers hear about you. Your company letterhead, business cards, phone-book listings, signs and slogans are all ways you promote your business. Handing out fliers and participating in panels, seminars and trade events also help make your name visible.

Advertising involves conveying your sales message to the public by means of a paid medium. Newspaper, magazine, TV or radio ads are investments in your business.

Public relations involves conveying legitimate news to the public about your company, such as stories in the news media about your business. You might do this by sending out news releases announcing a new product or service or a new store opening.

You, like T.J. Robinson, may choose a different approach to attracting customers. She says her method was giving her customers love, greeting them individually each time they walked into The Gingerbread House, making a point to meet everyone. Her advertising method is word of mouth.

What kinds of groups offer contacts, support and education for entrepreneurs? To establish contacts, look for associations and organizations within your industry. Join your local chamber of commerce or board of trade. Jerrily Kress's vehicle for meeting people was working in a volunteer capacity with the board of trade. The SBA provides training for new and existing small businesses. The Women's Business Ownership program offered by the SBA provides counseling programs to address the particular problems we experience as women entrepreneurs. The SBA Office of Minority Small Business provides financial, management and technical assistance to minority business owners. For information on these, check your local telephone directory under U.S. Government and contact the SBA office nearest you. Or call the SBA Answer Desk at (800) 368-5855 (Washington, D.C., residents - (202) 653-7561). The American Woman's Economic Development (AWED) Corporation provides literature, training programs and networking conferences to help you build your business. For membership information, write to AWED at 60 E. 42nd St., New York, N.Y. 10165.

Lorraine H. Richardson is president of Yacht Sharing, Inc., and vice-president of Growth Development Associates, a sales, marketing and personal-development consulting firm in Annapolis, Maryland

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