The Salem, Oregon Statesman Journal ran an article recently by Maria Bagnali, the Director of Chemekta Community College’s Small Business Development Center.
The article was aimed at advising those considering opening a small business on how to do it smartly and safely. Consider it required reading for all of Slinde Nelson‘s Portland and Seattle business law clients.
By way of summary, Bagnali offers the following tips:
1. Try to save a year’s worth of living expenses. Even the best business ideas often take time to generate cash flow. You need to live in the meantime, and preferably in a way that allows you to focus on building the business, instead of where your next meal will come from.
2. Get a copy of your credit report. Make sure your credit rating is solid. Many aspects of the business will require credit and many vendors and contract counterparties may require personal credit assurances (which, of course, should only be given upon the advice of counsel).
3. Carefully map out start up costs. They’re always more than you think, and if you can’t cover them your business will be doomed before its even started.
4. Keep your day job for a while. This is especially true if you haven’t stockpiled an adequate cash reserve. If you can build the business at night while working for pay during the day, you can better your likelihood of survival.
5. Remember the needs of your family. Factor in the time and resource needs of your dependents. Bagnali urges entrepreneurs to ask the critical question: Is now the time to do this?
6. Think about borrowing needs and sources. How much money will the business need to borrow or be able to borrow? Where will you borrow from? Bagnali strongly (and wisely) urges against borrowing from retirement to fund an business.
7. Remember Health Insurance. If you’ve been covered on an employer’s policy for many years, you’re likely to be startled by the cost of health coverage. Still, it’s better than a monster hospital bill that you can’t pay.
8. Plan, plan, plan. Starting a business is likely to be one of the most exciting and rewarding things you ever do. Only proper planning can help it be the most profitable.