Starting a business is on the minds of literally over a million people. Don’t believe me – check for yourself. I just did the research and discovered that last month alone 1,500,000 searched for information on how to start a business. If you have been reading my blog, you know I frequently talk about that here. Today I want to talk about the reality of starting a small business. The word to pay attention to in that sentence is “starting”. So let me be clear, this does not apply to taking over a successful business, that is totally different.
By definition, begin is the term used to explain start. Begin is defined as “to proceed to perform the first or earliest part of some action”. Let’s take a look at that. When you are at the beginning and planning part of anything, most of us see a best case scenario. After all, who wants to go to all the trouble starting a business with disappointing returns.
The reality of it is that in the first year, you are at the earliest part of your business. Very few business are over night successes. It simply takes time to build a successful business. There is a lot of competition out there, and you can be sure that others are competing with you for the same customers. Your business is going to have to earn the loyalty of customers, and we all know it takes time to build trust.
Your Business Has Competition
It is true. You are going to have to convince customers of your competitor to give you a try. You will have to have a great product paired with even better customer service to make your customer to want to do business with you instead of their other options. I am not saying these things to discourage you, but to put you in touch with reality. It is simply part of your job to build a relationship with customers so that you win their trust. It will take time, but it is a critical part of a business built on a solid foundation.
Are you beginning to see what I am trying to get at here. I want you to start a business, but I want you to be glad that you did five years down the road. I want you to be successful, and not have a lot of regrets and a mountain of debt staring you in the face. It is so important for you to realize that only looking at your business as a “pie in the sky” (how appropriate) success can set you up for failure.
I often hear about people who are buying into the idea of borrowing a lot of money to start a business because they think that as soon as you hang out your sign, people are going to stand in line just waiting to do business with you. It just does not usually happen that way. Think about it, how often do you switch from someone you are accustomed to doing business to an unknown entity. I think a lot of us are waiting for others to be the guinea pig, and if they are impressed , we are more likely to give it a try.
That process takes time. A few curious adventurous people discover our business and bravely give us a try. If they are happy, they tell their friends. Based on a positive recommendation from a friend, others trickle in. They in turn report their opinion to their friends and the ball starts rolling. In the beginning, I have heard starting a business described as trying to roll a snowball up hill. It picks up snow a little at a time and gets bigger slowly. As it accumulates mass and nears the pinnacle, things gain momentum. Once you reach the pinnacle, it starts to roll downhill on its own and then you are really making money. It takes patience, hard work and time.
Reality of Small Business Loans
Do you have what it takes to start a business? A lot of people are want to start a business because they need money. They buy into the idea that if you simply take out a big business loan, you are all set. Unfortunately, many believe that if things don’t work out and the business fails, the loan goes way when the business does. That is usually not at true. If your name is on the line for the loan for your new business, you are going to be responsible for repayment. That means that your assets probably will be used as collateral for that loan.
Do you see where I am going with this? For many of us, it means that our homes are the collateral for that loan. If you started a business because you thought it would be the way you make money, and it does not do that, paying that loan will be a big strain on your budget. That means a lot of stress. Why do it that way?
Instead, I want you to consider another path. I have told you I am a big Dave Ramsey fan. My husband and I went through Financial Peace University because we did not take the advice I am giving you here. If you don’t know who Dave is or what Financial Peace University is, you need to. We took out a big business loan, and it was really just a loan backed by our home. When we ran into problems with the brick and mortar storefront, (a very long and almost unbelievable story) our home was at risk. Believe me, that situation is not one I want for any of you. We were stressed to the max.
Fortunately, we were able to recover, but it took a lot of hard work. That experience is part of what inspired this website. I want to help others avoid the mistakes I made. I don’t want others to experience that stress. It is not a fun way to go. Instead, I would recommend that you build slowly without getting into a lot of debt.
Cottage Laws Help You Start Small
Basically, when you can start a business under cottage laws, it is probably not going to be the only source of income for you. In many states the income you can earn is capped. If you are wanting to make a full time income, you can use some of the income you earn under cottage laws to either fund commercial kitchen rental, an in-home commercial kitchen or a brick and mortar storefront.
I know, all of us would love to see our bank accounts swell quickly as soon as we open our business. The truth of the matter is that promises of overnight success we often hear are simply false. In the beginning, business start ups that are not our only source of income is a solid plan that won’t leave us with huge regrets.