By Lawrence King
Being your own boss has its advantages. You answer to no one and you make all the decisions.
1. Businesses in Harlem are struggling in this economy, what would be one of the first things you would suggest they do?
Yes, that’s very true. For many of Harlem’s small businesses it’s been very hard. In tough times like these the one of the first things I suggest to struggling small businesses and entrepreneurs is to reassess their total operations. Here are some other suggestions:
- Control costs by reviewing all expenses and eliminate waste. Now, more than ever, this is the time to eliminate inefficiencies.
- Reduce inventory by moving old stock out. Purchase inventory in smaller quantities so you won’t tie up funds with overstock.
- Look for new opportunities to sharpen your business model. Keep an eye on market trends with customers, competitors and suppliers.
- When an issue arises that impacts your cash flow, be proactive. Talk to your banker early and often. A good way to avoid serious financial problems is to identify and resolve them ear
2. Is it different for start-ups as opposed to mid to mature businesses advice?
It depends. There are different strategies for a start-up business and an established business, but I wouldn’t tell a start-up business to walk out the room while taking to the established business. There are some tips that common to both worlds. However I’d also want to know:
- Do you have a business plan? If you’re thinking of starting a business a plan will help you avoid sinking your time and money into starting a business that will not succeed
- What are you start-up costs? Lack of adequate amounts of money is one of the main reasons why most small businesses do not succeed. And often the reason for that was lack of thinking out costs. When starting a business you need to figure how much stuff is going to cost.
- How much management experience does the ownership have? A start-up business it important you need to become an expert on your industry, products and services
- Do they know their customers and if they will really buy their products? Market research helps the ownership and entrepreneurs in assessing the risk of startup ideas. A financial institution and most investors would like to fund startups only after extensive market research.
For a mature business I’d want to consider their current operating status and what are the particular issues affecting the business like pricing, marketing or even how well they are keeping detailed records. By keeping detailed records you’ll know where the business stands financially and what potential challenges the business could be facing.
3. What do you suggest when it comes to social networking, should all business be online with social networking platform?
Without question if your business has a presence online (and it should) there should be a social networking platform linked to it. In fact a small business should outline how it will integrate social media marketing into existing marketing strategies. Some social media-specific issues you will need to think about include:
- Avoid wasting valuable time and money; put together a social media marketing plan. Think about what you hope to achieve from social media and steps to get there. Determine the how much time and resources you are willing to devote to the program.
- Conduct research to determine which platforms best fit your business goals. What sites are your competitors and customers on? Pick one or two communities that are important in your market. You might want to cconsider starting with a platform you are familiar with and that you already have established network on.
- Don’t measure success by follower counts get caught up in the numbers game Growing your community is important, but you should zero in on who’s engaging with you and at what levels. In the long run it’s more important to have a devoted, enthusiastic community who will spread the word.
It is important to remember that social media marketing without right preparation and execution will be a total waste of time and may even ruin your small business.
4. How do you feel about partnerships, is it a good idea? If so, what should be asked and expected?
Operating a business on your own can be at times overwhelming. Often requires ownership to change hats on the fly. Partnerships offer the advantage sharing some of the responsibilities as well as draw on the resources and expertise of the co-partners. I always strongly encourage individuals forming partnerships to seek proper legal counseling before finalizing anything.
Not having a signed partnership agreement is often the down fall of this type of business structure. A partnership should have every detail spelled out and signed by all parties. Far too many friends, and even family members, have made the mistake of not putting everything in writing and ending up with strained relationships. Here are some tips to follow before forming a partnership:
- Including a way out in partnership agreements is a good way to define an exit strategy that allows either party to walk away or buy each other out, without destroying the business.
- Take some time to find out each partners strengths and weakness. One partner may good at marketing and the other good with negotiating. One of the advantages of a partnership is using the skills and strengths of each individual partner.
- Too many partnerships are put together in the enthusiasm of the moment, without a thoughtful business plan. Each partner’s time commitment should be clearly understood at the beginning. You must stop and review the positives and negatives before rushing into such a commitment.
- Make sure you consider your potential partner’s manner of doing business, his or her personality, and the business goals prior to starting a partnership. Often, individuals find that they have partnered with someone who has a different set of goals or a very different manner of conducting business.
- There are many details in a partnership agreement, and a qualified attorney will know what must be included. Make sure to find an attorney with whom you feel both comfortable and confident.
5. What are some good ways to grow your business in Harlem?
One of the first ways to growing your business is by expanding your customer base. Expanding does not only mean getting new customers but also nurturing the ones you already have. The key to successfully increasing your sales in an existing market is to know your customers’ buying histories. It’s easier and more cost-effective to get people who are already buying from you to buy more than to find new customers and persuade them to buy from you.
Another way to grow your business is through Innovation. Create and promote new uses for your products or services is a great way to get existing customers to buy more and attract new customers.
Extend your market reach by making your product or service available to a new pool of customers. Opening physical and virtual new locations can be a way to find new customers. Extend your reach through an effective marketing strategy.
Participation in trade shows can also be an excellent way of growing your business. Industry trade shows and fairs draw people who are already interested in the type of product or service you offer.
6. Are there Harlem grants and/or funding that small businesses can take advantage of?
Again, before approaching any financial institution for financing your business endeavor you must have a solid business plan. There is no way around this and no shortcuts, and anyone who might seriously consider giving you small business funding will want to see one. With that said there are a number of financial alternatives that one can consider. Since the credit market tightening of recent years more entrepreneurs have been learned that funding does not necessarily have to come from large banks. In fact, several non-bank sources of funding are gaining in popularity.
Micro lenders help people start small business ventures by offering small loans usually as low $25,000 and sometimes much less than that. There a good number of local micro lenders that are considered ccommunity-based that are focused on local economic and small business development and familiar with the issues related to low personal and business credit scores within their communities.
The popularity of micro-lending has spread to the U.S. entrepreneurs looked to start business ventures with less than $50,000 business loan (to reduce their debt risk and to have a better chance of securing capital).
Whereas the bigger banks are more automated and less flexible with regards to credit scores, credit unions are local in nature and are more connected with the small businesses in their areas and do more manual underwriting. Credit Unions are also considered ccommunity-based lenders that are more sensitive to the issues related to low personal and business credit scores and are usually less rigid in their funding parameters. As smaller lenders credit unions decision-making tends to be quicker and they are often more willing to provide more money as a business grows. Many times, credit unions can give better lending rates than the bigger banks.
Crowdfunding or Crowdsourcing
Crowdfunding or crowdsourcing has been popularized by the website Kickstarter.com. Crowdsourcing means a group of people working to fund a project through a cluster of small donations. Kick starter launched the idea by providing financial help to struggling artists. In return for their financial support, donors receive get goods or services and/or equity stakes and interest payments. This idea is becoming popular in business ventures, but it is not advisable for companies that need larger amounts of money to get started. Because it is social networking-based, it may also be difficult to raise capital for businesses that are not appealing to younger donors
Venture capital is money given to companies by investment firms or individual investors known as venture capitalists. Venture capitalists are highly selective about where they plant their money, so only a small percentage of start-up companies with high growth potential receive this type of funding. Venture capitalists want to see their investments grow, so they may expect to sit on the company’s board or share ownership in the company to have a say in the business’s financial decisions. The average investment from a venture capitalist is between $500,000 and $10 million.
The advantages of having an Angel Investors are they prefer to fund High risk businesses. They want to invest huge amount money and would understandably require you to give up huge portion of the ownership and profits. Business angels make investments in virtually all industry sectors. Sector aside, however, it should be noted that what most attracts angels to an investment is high growth potential. Some Angels are also more flexible in their financial decisions than venture capitalists and they have different investment criteria, longer investment horizons, shorter investment processes, and lower targeted rates of return. The disadvantage of Angels Investors is less likely to make follow-on investments in the same firm. Unlike, venture capitalists spend around two-thirds of their funds on expansion funding of their existing portfolio firms. Angels also prefer to have a say in the running of the firm, which may force the entrepreneur to give up some degree of control.
There are very few small business grants out there and most of the grants that do exist are targeted to specific technology groups, scientific and specialized activities or specific areas of the country. The federal government does NOT provide grants for starting and expanding a business. Government grants are funded by your tax dollars.
Lawrence King has over 25 years of experience in the economic and small business development fields. He is currently Small Business Advisor at both the Columbia-Harlem SBDC and the Harlem Business Alliance where he is responsible for providing one-on-one counseling and technical assistance to business owners and emerging entrepreneurs.