A return to basics: Entrepreneurial reality in the post meltdown economy

A return to basics: Entrepreneurial reality in the post meltdown economy
(Same Reality It Always Was …)

By Phil Scruton, Small Business Development Center

Phil Scruton Many small business people are feeling the pinch of the economic meltdown that has reshaped the face of capitalism in the United States and the world. Without a thorough understanding of the stimulus aimed by the current administration at small business owners and the often dissonant response by banks responsible for lending, it is easy for entrepreneurs to fall into a victim’s mentality.

Yes, small business is the victim of the greed and a lax regulatory structure that brought Wall Street to its knees. And yes, there seems to be a systemic underestimation of the roll small businesses must play in the recovery. But in another sense, this economic dustup has simply brought into bolder relief fundamental truths and the steps small business owners must take in any economy to survive and thrive.

Let’s remind ourselves of some of those truths and steps, and their increased relevance in the eventually-recovering economy. And let’s stop being victims!

The fact that you want to sell it does not mean people will want to buy it. Choose your products and services with an eye to consumers’ needs.

Business counselors are seeing far too many people with aspirations to become mortgage brokers and real estate moguls. Is the news being blacked out in some neighborhoods? Turn it on! Watch and listen! There will always be business for good folks in the real estate industry, but not for amateurs. We’re also seeing far too many people interested in dealing only with “upscale” clients. Listen up: So many people that thought they were “upscale” weren’t, in fact. Often their “up-scaleness” was based on real estate fantasies.

The run-up to the economic meltdown was filled with hints that real estate was not the cash cow some folks claimed it was. Thus, many in the “upscale” population were “class tourists,” whose “visas” to run with the rich and famous expired with the value of their over-valued homes. Even the rich have changed their buying habits. Make decisions about what you will sell based on a realization that we’re not going back to an illusory economy where people’s net worth increased every day with the values of their homes.

If you need vast amounts of money to start your business and you don’t have investors or deep pockets, now may not be the time to start that particular business. Structure your small business start-up with an eye to making money, not spending it.

No one, not the government, not the banks, not your Uncle Joe, is obligated to finance your desire to be an entrepreneur. There are still loans for small business, but not nearly as many. And the cure-all for any financial challenge for the last few years – the home equity-secured line of credit – is really becoming hard to obtain.

These days, you actually have to qualify for credit based on your credit history, and you need a viable plan for succeeding. Even then it’s tough. You may have to actually SAVE to go into business. This is an option folks have not considered over the last few years. Too many late night television hucksters have convinced them they can get rich with other people’s money. Forget that approach. And if you do qualify for a loan, have a plan for paying it back based in your reality-based observations of the market.

Projections showing that you won’t be profitable for more than three months? Something may be wrong with your plan. Can you afford to “pay out” without “taking in” for that period? Small business loan payments come due every month whether you’re doing well or not. Keep that in mind. And let’s all shelve that “Where’s my grant?” thinking. There never was much in the way of grants for entrepreneurs. Now there are even fewer.

Abandoning your day job to commit yourself 100 percent to a start-up effort may not be the best course of action in today’s economy. Look for ways to augment your current income stream, not substitute for it.

The immediate future will belong to people who find multiple revenue streams, within their main occupation or business and outside it. Review your skill sets constantly to see if any can be harnessed to make money. Review your business assets with the same approach. Is a piece of machinery or a vehicle sitting idle part of the day? Not good. Look for ways – even unusual ways – to put your assets to work.

Were there things you used to do for money that you’ve abandoned? Revisit them to see if there’s new revenue in reviving them. And, again, if your day job is bearable, keep it as long as you can. There is nothing sadder for a business analyst than coaching someone who literally does not know where their next mortgage payment is coming from and is depending on a business loan to bail them out.

Remember: business loans are for business. Paying personal expenses with business loans is a species of fraud. Saying that you need to eat while you build your business is true, but it does not justify misapplying a Small Business Administration guaranteed loan to a grocery bill.

In conclusion, the hallmarks of entrepreneurs have always been courage, resourcefulness, planning, and more courage. There probably won’t be as many small business as there were in the near future. In the long run, there may be more because “big business” has lost its cachet with consumers. I’m betting on the latter. But common sense and a determination to work within your means are as indispensible now as they ever were. The economic meltdown has not changed that.

Phil Scruton is a Certified Business Analyst at the Small Business Development Center at Palm Beach Community College. His areas of specialization are marketing, financing and accounting. Phil also operates an accounting business for personal and small business accounting. Phil graduated from New York University. He then spent several years as a professional musician before beginning a stint with Knight Ridder newspapers as a reporter and assistant city editor. He resides in Boca Raton. He may be reached by email.

The Small Business Development Center at Palm Beach Community College is part of a national network that has more than 1,100 business development centers nationwide and is a member of the Florida SBDC Network and ASBDC. The SBDC offers one-stop assistance to individuals and small business by providing a wide variety of information and guidance. To find out more, visit its website or call 561.862.4725.