April 9, 2009

Congratulations, you’re fired!
How to go from laid off to entrepreneur
By Jeff Mucciarone jmucciarone@hippopress.com

The economy is putting plenty of people out of work nationally and in New Hampshire. The latest numbers say state unemployment is more than 5 percent, compared with the national rate a month ago of 8.1 percent. There’s no telling when the economy will pick itself up again.

In the meantime, those who are out of work need to make a living, but finding jobs in their field in New Hampshire — and anywhere else for that matter — may be proving difficult if not impossible. For people losing their jobs due to downsizing and poor profit margins, the options can be limited.

Business resource officials say more and more people — many of whom have never considered doing so before — are looking to open their own businesses. After all, no one likely missed every politician in America explaining how small business is the backbone of the country this past fall.

“There are a lot of people who have a great deal of ability and skill, and they do feel there is no opportunity for them at this time,” said Frances Allain, layoff aversion project manager with the New Hampshire Business Resource Center. “They’re looking to put their skills to best use. One decision is to start their own.”

Make a plan
When times are tough, said Christine Davis, executive director of the Women’s Business Center in New Hampshire, people should focus on what they can do to better the situation, rather than wallow in all the bad news.

“Forge ahead,” Allain added. She suggested doing some market research. People need a solid business plan and financial backing. She pointed folks to places like the Small Business Administration and the New Hampshire Small Business Development Center, places that provide guidance and consultation at low or no cost.

Getting some guidance is key, because while Davis said she has seen an increase in people looking to start a business, she’s also noticed plenty of people seemingly lacking business knowledge.

“They’re trying to start a business without proper preparations,” Davis said. “They need to have a business plan before they just jump into it.”

Julie Gustafson, executive director of the Amoskeag Business Incubator in Manchester, also stressed putting together a business plan, spending time researching the industry and making sure there’s a demand or a need for the product or service.

“If there’s a lot of competition, we need to make sure there’s a competitive edge,” Gustafson said.

Something that could be intriguing to new business owners is a “low-cost incubation” option provided by the Amoskeag Business Incubator. Gustafson said eight people have signed up just in the last month or so. She has noticed interest in her organization rising with the plunging economy, much of it due to layoffs, she figures. One of the biggest reasons businesses fail is cash flow, causing counselors and consultants at the Incubator to work with prospective owners to make sure they have sufficient funds, whether a loan or their own money, in place ahead of time, she said.

Randy Roody, Manchester chapter chairman of SCORE, a business counseling service, said the organization’s workshops have been busy, including the one on starting your own business and two on developing successful business Web sites. The most recent business plan workshop saw three times the usual attendance. Not every attendee is out of work, but Roody said many are preparing to be jobless.

Roody said SCORE’s concern is the business success rate, which isn’t all that high. About 50 percent of new businesses will still be in operation five years from now, he said.

“And that’s optimistic,” Roody said. “That’s the data. There’s many reasons for that. Sometimes it’s a lot more than people think it’s going to be and it can be a little overwhelming for them.”

Making that plan can be a little overwhelming itself, but the rewards are easy for business owners to see.

“The most terrifying thing can be jumping off that cliff,” said Mark Berthiaume, who started his first business, MJB Technology Solutions, two years ago. Berthiaume went through the Amoskeag Business Incubator for business counseling and support for his business, which specializes in technology support. “There are a lot of things, when you work for other people, that you don’t have to worry about. When you work for yourself, you have to wear all the hats. Do your homework. Try to understand as much as possible about what you’re getting into. And forget about holidays and vacations for a while.”

Get some skills
As SCORE counselors go through the different things new business owners need to consider, some withdraw. Roody said the goal is to get people organized ahead of time so they can be successful. Business counseling at SCORE is free and workshops cost $25 per person.

Just because people might not have a strong business sense now, that doesn’t mean they can’t acquire the necessary knowledge, Davis said, but it’s not going to happen overnight. She suggested taking a business plan development course, such as the one they offer with Sheila Kabat of the Women’s Business Center — “It’s a great first step to get the ball rolling,” Davis said.

Kabat works with people in a variety of business situations to help them develop constructive business plans — some people have owned businesses for many years and never created a plan. It’s never too late.

“It’s a discipline,” Kabat said. “It’s a discovery process.”

She says entrepreneurs need to do their market research: “Is there anyone else out there doing it?”

In the class, which is typically six sessions of two hours each, students work through a template for launching small businesses. “You’re taking that discovery and putting it into a document,” Kabat said.

People must think about what makes their business unique, and about pricing, vendors, services, products and funding.

“It’s really a mindful exploration,” said Kabat, who often meets with students prior to class and with students individually as needed.

Other business resource groups also provide guidance for developing a plan. Business support groups can help people research the industry and the market. It would also be important for people to have their financial situation in order, hopefully with enough money saved to live on for a while, Davis said.

“There’s a lot that goes into it,” Davis said.

But there are some simple things people can do to get things started, many of which simply involve asking for help.

As soon as someone has an idea, he or she can swing by SCORE, the Amoskeag Business Incubator, the Small Business Development Center or one of the state’s other business resource groups. Professionals can provide an experienced business mind to give guidance in fleshing out a new idea. Counselors can help people develop a revenue plan, Roody said.

“We will work over several meetings to kind of interview the client,” Roody said, adding they’ll make sure the person understands the competition and how he will differentiate his business and market services.

For smaller businesses, SCORE offers a simplified business plan worksheet that’s about two pages long. Bigger businesses — say, businesses looking to borrow $500,000 to get started — will have a more in-depth, 27-page outline of a business plan. The simpler business plan template is targeted for very small businesses, such as prospective hairdressers or landscapers, Roody said.

“That was a very enlightening process,” Berthiaume said of developing his business plan, which took him six to nine months to complete. “It makes you think about sales and marketing and identifying demographics. I definitely recommend it. It helps you see that whole picture.”

Berthiaume added that the Small Business Administration, which is where he obtained a start-up loan, requires prospective business owners to have a business plan before granting loans. Since he had a business plan, Berthiaume said he was probably more prepared for any surprises than he would have been without one. The business plan also forced him to consider how he would differentiate his company from other similar businesses.

Davis advised against selecting a business solely on the basis that you might think it’s going to be successful.

“You have to do something that you love,” she said. “Really successful people are doing what they love. Go with what you’re passionate about.”

When Davis first opened her personal training business, she met with people in the industry. She took them out for coffee. She asked them questions about challenges in the profession, benefits, what to look for and how it was changing. The more educated a prospective business owner can become, the better, she said.

With the construction industry nearly at a standstill right now, Roody has seen many tradesmen look to open their own contracting business. The times make it tough to break in “unless you’ve got something very different,” Roody said. The manufacturing industry in New Hampshire has also been hit hard.

Find some start-up cash
Regardless of the industry, Roody said he’s always encouraged when someone can get started without having to invest much money initially. “I’ll encourage that to go along,” he said, but added that if someone has to spend $15,000 to $20,000 or more initially, he’s going to scrutinize that plan more.

Davis said people need to investigate their marketplace and their region. Find out what’s in need and see if it matches with peoples’ business interests. If someone has always wanted to open a coffee shop and his or her town doesn’t have one, it could be a good match. If a community has several coffee shops already, the entrepreneur may want to tweak the plan to offer something unique.

Getting the money to open the business can be difficult. While banks and lenders may help get people started, there are currently no grants available for new businesses, Roody said.

“Banks will help, but they are often going to require some personal collateral for you to get a loan,” Roody said. “People who start a business and borrow money often borrow against their house or some other asset they have.”

That doesn’t mean Roody is trying to dissuade anyone from jumping into the business world; he just wants people to think it through.

One option for prospective business owners is to obtain a business loan from MicroCredit-NH, which is a non-profit program of the New Hampshire Community Loan Fund. Tara Bishop, who handles marketing and communications for MicroCredit, said she has seen more people looking to start businesses since the economy dipped.

The organization, which specializes in working with businesses with one to five employees, provides three main services to businesses: networking; education, and loans of up to $15,000. For loans less than $5,000 there usually is no credit check or collateral required, making it a solid option for people in need of small-dollar loans to get things moving. Bishop said people might need $250 to $500 to buy some supplies. Such loans “can be good stepping stones,” Bishop said.

MicroCredit also offers a variety of educational resources, such as tutorials describing how to create cash flow statements or a business plan. The organization connects prospective owners with a group of business peers to help them develop their business. Bishop said MicroCredit, which has three membership levels, is the only place offering loans and education together.

“These are people that are in the trenches with you,” Bishop said, adding MicroCredit also offers a variety of workshops. “If you can teach people these skills, they’re more likely to succeed.”

For loans less than $5,000 it’s solely the peer business group, of which there about 60 statewide, that makes the decision on whether or not to grant the loan, said David Hamel, MicroCredit-NH director.

“They are there to learn and support one another in a variety of ways,” Hamel said. “They have accountability and responsibility to the group.”

The peer business groups tend to include diverse business owners. 

“The benefit is that you have a different set of eyes and ears that are not ingrained into the industry that you are in,” Hamel said. “All the other components and elements of doing business are the same for everyone.”

MicroCredit is part of an informal collection of microbusiness resource partners that share programs and refer people back and forth among themselves, including the Small Business Administration, the Small Business Development Center and New Hampshire Made.

“We realize we all have to be on the same page in order to provide the best services,” Hamel said.

“People really don’t know what’s out there,” Bishop said, adding that MicroCredit holds at least six networking sessions each quarter statewide. “There’s such a variety of groups...”

“If somebody just has this idea, or if they want to take a hobby to the next level ... [MicroCredit has] some of the resources and tools they can use,” Hamel said.

Davis agreed with the importance of networking and pointed out that businesses need to be visible. If someone calls a business the “best-kept secret,” that business owner isn’t networking enough, she said.

Is your business idea a winner?
Things to consider when you make your business plan

Market research and analysis:
• Is there a need for your product or service?

• Are there other similar businesses in the area? If so, what’s your competitive edge?

Marketing plan:
• How will you promote your product? (i.e. advertisements, Facebook, social networking)

• How will you sell your product or service?

Operations and management:
• Do you have a management team in place or do you have a plan for creating a management team? (Or, if you are a business of one, is this work you can realistically handle on your own? Are there people with whom you can contract for work you can’t do yourself?)

• What will the company look like? How will it operate?

The financials:
• What are your initial expenses (equipment, employees, a storefront or office, licenses, etc.)?

• What kind of money (loans, savings) is available to you? What kind of monthly payments will be required for loans?

• How does your pricing compare with similar businesses in the area? Will you be able to make a substantial enough profit on each sale?

• After covering your expenses (including loan payments and a salary for yourself), is your business able to bring in a profit?

• How much business will be required to become profitable? Will you be able to support yourself (possibly with little or no salary) until you reach that point?

The fire in your belly:
• Do you have the time (both on a day-to-day basis and over the next year or so) to dedicate to a business that will require more attention than the usual 8 a.m. to 6 p.m. job?

• Do you have the skills and experience to handle all parts of your business?

• Do you have the organizational skills, energy and patience to handle the unexpected?

— Information came from several business officials, most notably Sheila Kabat, who runs a business plan development course through the Women’s Business Center, and Julie Gustafson, executive director of the Amoskeag Business Incubator.

Characteristics of a businessperson
Especially for small businesses, new owners have got to be prepared to multi-task, said Julie Gustafson, executive director of the Amoskeag Business Incubator.

“That’s a real key to me,” Gustafson said. “Sometimes you’ve just got to be willing to do everything.”

People should be comfortable communicating with others or they should have someone on their team who can successfully communicate and network.

“The owner doesn’t necessarily need to be a good people person, but somebody in the management team needs to be,” Gustafson said.

Looking at her experience, Sheila Kabat, who teaches a business plan development course with the Women’s Business Center, said successful businesspeople can vary greatly.

Success can simply mean adjusting the way someone does things. She mentioned a friend who spent more than 20 years in the financial world only to become bored by it. She opted to stay in the field but to begin helping senior citizens with their financial issues. Now she loves it, Kabat said, even though it’s essentially the same type of work.

“The application makes all the difference,” Kabat said. “Every story is different.”

Gustafson notes the importance of simply treating people well, and that includes employees, vendors, business connections and anyone else along the way. Strong time management skills and resilience were other characteristics Gustafson highlighted.

If the owner doesn’t meet all the criteria, he or she can find someone who possesses a necessary skill or characteristic to round out the business, Gustafson said.

“It depends on each person,” Kabat said. “I’m not talking about setting the world on fire; I mean creating an environment where you can earn a living and do something that you love.”

Women’s Business Center
The Women’s Business Center is a non-profit organization serving female entrepreneurs in any stage of business development. It conducts regular networking sessions, offers counseling, education and peer support. Non-members at the Women’s Business Center receive a free business counseling session. Members receive two more free counseling sessions. Visit www.womenbiz.org. The office in Portsmouth is located at 1555 Lafayette Road, 2nd floor, 430-2892. The Manchester office is located at 83 Hanover St., 623-7383. Send e-mail to info@womenbiz.org.

MicroCredit-NH
MicroCredit-NH, a non-profit program of the New Hampshire Community Loan Fund that deals primarily with businesses with one to five employees, provides lending and resources to new and established businesses. It is the only organization providing lending and education together. MicroCredit-NH is offering a free orientation in Manchester, Tuesday, April 21, from 4 to 6 p.m. at the Amoskeag Business Incubator, 33 South Commercial St. People can learn about MicroCredit’s programs, including education, loan capital up to $15,000, its individual development account, which is a matched savings account, and networking opportunities. Register for the event by calling Regional Manager Peggy O’Keefe at 620-1269. Visit www.microcreditnh.org.

SCORE
SCORE is a business resource organization offering free business counseling, low-cost workshops and a business library, while also providing links to other business resource groups. Counseling is free and workshops cost $25. Once someone applies for counseling, they typically hear from one of the Manchester district’s 65 counselors within one week to set up a meeting. The Manchester office is located in the Norris Cotton Federal Building at 275 Chestnut St. Suite 133. The Nashua office is located in the Chamber of Commerce at 151 Main St. Call 666-7561. Visit www.score-manchester.org.

United States Small Business Administration
The Small Business Administration provides a variety of resources, such as financial assistance, online courses and business counseling. Many of its services are administered through other business development organizations. The state district office is located in the JC Cleveland Federal Building, 55 Pleasant St. Suite 3101 in Concord. Call 225-1400. Visit www.sba.gov.

New Hampshire Small Business Development Center
The Small Business Development Center is a collaborative effort by the state’s university system, the state and the Small Business Administration. It provides online courses, free business counseling and one-on-one consultation with certified consultants. The Manchester office is located at 22 South Commercial St., 624-2000. The Nashua office is located in Daniel Webster College, 20 University Drive, 546-1551. Visit www.nhsbdc.org.

Amoskeag Business Incubator
Along with providing temporary space to businesses just getting off the ground, the Incubator provides one-on-one counseling and business support specifically to new or transitioning businesses, said Executive Director Julie Gustafson.

When someone comes to the Incubator, staff will either critique their business plan or provide help in creating one. They used to require people to have a business plan, but Gustafson said that scared some people off who had great ideas. Now they require business owners to create a plan within six months.

Staff members run through a resource assessment to see what people have in place. A prospective owner might not have everything at first, but by the time they leave they should have all the pieces in place, Gustafson said. Maybe they have an attorney and an accountant but they need some help with human resources or finding a lender. The Incubator and other business resource groups can help with that.

The Incubator has staff members or members of its business support committee that can provide key areas of support, such as financing, legal, marketing or information technology.

When Gustafson sees a business plan for the first time, she’s looking to make sure the person has the key pieces in place and that the prospective owner has expertise in the area of service or that his or her management team does. She wants to make sure the product is in demand. She wants to see realistic financing and she wants to make sure all expenses are accounted for. In the financial information, she’s looking for profit-and-loss statements and cash flow information.

“We try to make sure it all matches,” Gustafson said.

Gustafson said staff want to see operation details, information on how the business will be marketed and research on the competition. The Incubator uses a template to go through plans.

Some people aren’t going to know how to get that information, so staff provides guidance and assistance in filling out a plan.

“If people have good ideas, we’re going to give them the chance to work up a business plan,” Gustafson said.

The Incubator can also hook businesses up with student interns from area colleges and universities. About 1,500 students served as interns through the Incubator in the last year.

The Amoskeag Business Incubator provides support to new businesses, including helping them get into commercial space. They also provide technical assistance, resources and consultation to area businesses. It is located at 33 South Commercial St. in Manchester. Call 629-9511. Visit www.abi-nh.com.