Monday, May 18, 2015

Questions to ask before starting a business

Last week we listed a series of  14 questions an entrepreneur should ask and answer before starting a new business.  This week we will tackle the first and most important question: do you have what it takes to be a business owner?

1. Can you make decisions in a decisive and timely manner?
2. Can you take responsibility for the mistakes and bad decisions which every business owner makes?
3. Will you be doing something you are passionate and knowledgeable about?
4. Are you and organized person?  There is no getting around the paperwork and bookkeeping for a small business owner!
5. Do you finish what you start?
6. Do you have family, friends and mentors to support you?
7. Can you handle new things, unfamiliar things, scary things?
8. Can you take advice? Are you open to new ideas, others' ideas?

The typical small business owner wears most, if not all. the hats during the start up phase, but he/she cannot go it alone.  Every successful entrepreneur has a support system and taps into it for advice and strength.  The small business owners who succeed are the ones that have a plan, follow it, adapt it as needed, ask for help as needed and recognize their mistakes, learn from those mistakes and moves on from them. They are knowledgeable about core elements of the business, find and listen to experts in the areas they are unfamiliar with. The ones who fail jump into business without a plan, don't listen to the experts, blame everyone else for their problems and don't learn from their mistakes.

What other characteristics do you think a successful small business owner needs?

Wednesday, May 13, 2015

Questions to ask before starting a business

Here is a list of questions every entrepreneur should ask before starting a business:

1. Do I have what it takes to be a successful small business owner?
2. What are the keys to succeeding in business?
3. Do I need a business plan?
4. How much money do I need?
5. What legal issues should I worry about?
6. Should I have a partner?
7. How should I handle the bookkeeping and accounting?
8. How do I finance my start-up?
9. What do I need to get a bank loan?
10. How do I become a successful employer?
11. Should I hire friends and family to work for me?
12. How do I handle marketing and advertising?
13. Do I need an accountant?
14. Do I need a lawyer?

We will tackle each question over the next 14 weeks which should keep us busy!  Stay tuned and let us know if you have any other questions we should add to the list.

Wednesday, May 6, 2015

How to lose a client by not telling the whole story

My husband and I just purchased a new home and the process of getting the loan ended up being a nightmare.  We talked to the lender on the phone initially as the new home is two hours away from our existing home.  We walked him through our income, assets and liabilities and he told us this was a "no-brainer" which we knew.  We are conservative people and while our income and assets have grown, our debt has shrunk.  He said he would make this even easier as my husband's salary was sufficient to get the loan, so they wouldn't need to use my income.   Since I am self-employed as one of the owners of E&S Entrepreneur Advisors, LLC, a great deal more paperwork would be required to verify my income.

This all sounded great.  We got an initial checklist of items the lender would need to process the loan and it was the usual things: two years tax returns, copies of bank statements, copies of pay stubs for my husband, copies of investment summaries and details on our current home mortgage.  We were able to supply all this and that part was painless.  A week later, we got another list from the loan processor.  It had several items which were duplicates of the information we had already supplied as well as requests for explanations for some of the transactions on our bank statements.  We didn't find that to be difficult as they were just reimbursement checks my husband gets for this business travel and the monthly check I get from E&S Entrepreneur Advisors.

The loan processor them wanted copies of the checks for these deposits.  In the good old days, a person would just have to go to a desk drawer and pull out the bank statement for that month to get the checks.  Today, you have to go to the bank to get the check copies.  My husband stopped at the bank and got the requested check copies.  A month past and we got another list of items needed which included the current month's bank statement and investment summary.  We sent those off and then received another email asking for explanations for the deposits in the current checking statement which were again travel expense reimbursements and my business check.  Once again, they wanted check copies.  They also wanted a copy of my partner's K1 from the last tax year.  I called the lender to inform him he would not be getting Beth's K1 since she was not part of the family and would have no ownership in our home.  The lender we were using (referred to us by the realtor) packages and sells all their mortgages and must have a very detailed internal audit staff as the amount of detail and verification they required was staggering.

I was an internal auditor for a bank holding company at one point in my career so I completely respect the need for proper paperwork and I do admire the lender's willingness to follow protocol.  What I found frustrating was his lack of understanding as to what each item was to verify and what level of detail was acceptable.  We reached a point where we were going to start the process over at a different lender, even though that meant delaying the closing, as we just didn't want to deal with the loan processing requests any further.  That finally got the lender's attention and the requests for back up stopped.  We closed on the loan today, and that process was painless as the title company was very efficient.

Why do I describe this process as a nightmare?  The lender set it up the process as one that would be easy, painless and it was anything but that.  He over-promised and under performed which resulted in an unpleasant experience for everyone.  The loan processor was incompetent and appeared to just re-send the same request without striking off the items we had provided.  Had the lender set us up to expect that they would need a lot of back up information and we would need to send check copies and other paperwork, we would have been annoyed, but not surprised.

Be realistic with your customers about the process and the paperwork involved.  Sometimes a process is tedious and it cannot be avoided, but if you let a customer know ahead of time the work involved and the reason behind it, they will be prepared.  It is like a well trained hostess at a restaurant: tell a diner that it will take 40 minutes to get a table even if you think it will take 30.  They will be happy when you seat them early.  If it does take longer than you expected, you will still seat them when you promised and they will be fine with that!