Whether you’re ready to start a business or you’ve been steering your own ship for 20 years, there’s nothing like a good reality check to ensure that you’re on the right track. San Francisco–based financial advisor Kathryn Amenta—who has worked with small-business owners, individuals, and couples for 25-plus years—has earned degrees in psychology, business, and finance. She understands that money matters are emotionally charged and delivers tough-love advice in a calming voice.
“My first question to people is always, ‘Why are you starting this business?’ Is it because you don’t play well with others? You hate working at a firm? Are you doing it because you want to make a lot of money? Do you think you’re going to spend loads of time with your family and make your own hours? Wrong. It’s all wrong,” she says.
Does that mean you have no business running a business? Not necessarily. What helps: a realistic outlook, positive attitude, drive, determination, patience, and stamina (considering that working in a private practice could require 16-hour days for the first two to three years).
Amenta also asks hopeful business owners things like: “’Do you have a passion for what you’re doing, and do you believe that your products and services are going to have a niche in this economy and marketplace? Do you thrive on independence? Do you love creative or intellectual challenges? Are you solution oriented? Can you stand the uncertainty of no paycheck?’ I’ve seen so many architects over the years, and I watch them starve all the time.”
Amenta may be half-kidding, but take her advice and don’t let it happen to you. Here are her four tips to ensure better success for your small business.
1. For Those at the Beginning of the Road. Most businesses don’t turn a profit immediately, so you need enough capital to get you through the growing pains. “I think a business plan—and an action plan, which requires financial statistics for doing a business plan—is essential before you do anything else,” Amenta says. “Even people who aren’t looking for outside funding, who are self-funding or getting funding from their family, need to create a business plan because every startup has to be able to self-fund for around 36 months.”
One place to start is Nolo.com, a legal resource site, which sells books such as How to Write a Business Plan.
Next, Amenta suggests you ask yourself whether your service or product offers something unique to what’s currently out in the market. “I would have said different things five years ago, but we’re in a new economic landscape,” she says. “So people need to have a much better widget, a much funnier joke. Whatever it is, it’s gotta be better, and it’s really gotta have a place because you can just go on the Internet and get a million of anything.”
2. Understand Every Occupation in Your Business. You may be the best contractor in the tri-state area, but running your own construction company requires doing a lot more than building houses. Amenta suggests taking classes in subjects such as accounting, sales, marketing, and social media before quitting your day job.
“I always say to people, ‘You’ve got to know exactly how to do the different jobs within your company, whether it’s scrubbing the toilets or cashing out every night,’” Amenta says. “You’ve got to know the procedure yourself before you assign it to someone else. A lot of new business owners lack relevant business, management, finance, purchasing, and production expertise.”
But don’t worry: there’s help out there. “Here in the Bay Area, we’re blessed with this fantastic organization called the Renaissance Entrepreneurship Center,” Amenta says. “They’re like an incubator: They have space for startups, and they have all of the expertise to back up a startup and teach an owner. But the cool thing is that you can do so much of it online.”
3. Demystify Topics That Make Your Head Swim. Another reference on Nolo.com is The Small Business Start-Up Kit. “It has a two-page spread with all the [business-structure] entities and the pros and the cons of each,” Amenta says. “So you could say, ‘Hmm, I don’t really have any assets right now, so I may start out as a sole proprietor, but if I bought a house, I might decide to change the corporate structure.’ Corporate structures have annual fees associated with them, and some of them can be really pricey, and they also require that you have a board and record minutes. That Nolo press book will give you all of that in a very quick overview.”
4. Specialize and Partner Up. One way to give your business a boost is to change strategy and specialize rather than try to be everything to everyone. If you’re an architect, you might hone in on a specific area of architecture—such as restoration or library design—and promote it as your specialty.
Another way to add some projects to your plate is by partnering with outside firms. “Go into partnership with name architects [if architecture is what you do], and look for opportunities at a larger firm to work on special projects that would look good in your portfolio,” Amenta says.