When Teresa Alexander lost her job as a human resources professional last year, it gave her the jolt she said she needed to pursue a business of her own.
“When you’re in a comfortable situation, you don’t think about stepping out and doing something that’s a bit of a risk,” Alexander said. “After I got laid off, I was around some family members over the holidays and they planted the idea that, with my skills and expertise, I should start my own business.”
People who have started a business from scratch know that it takes more than a dream and a general road map to bring an idea to life. Enter the Kansas Small Business Development Center in Wichita, a resource supported by the state, U.S. Small Business Administration and Wichita State University.
A team of several quick-thinking, battle-tested business consultants staff the center, waiting for opportunities to help launch business ideas — or to say, “Hey, let’s think about this before you tap your savings and try to borrow $100,000.”
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“Part of what we offer is access to a lot of research information,” said Steve Nussbaum, a consultant for the center. “We can get information on demographics, industry trends, financial benchmarking — we have access to information on pretty much any industry out there.
“When a person goes to the bank and says, ‘I need this much because I’m going to do a million dollars in my first year,’ the bank wants to know how. You have to have the data to back it up.”
The three M’s
Earlier this month, Alexander was one of about a half-dozen potential entrepreneurs who attended a 90-minute course on marketing, management and money, which essentially serves as a window into the types of topics would-be business owners should be thinking about.
“When people come here, they’ve generally been so consumed with their business idea, they may have overlooked some things,” said Natalie Santonil, a center consultant who teaches the course. “We ask a lot of questions that start with, ‘Have you thought of this?’ ”
Nussbaum said his first order of business when consulting with a client is to break their idea into various steps, looking at the feasibility of them all. This would include money on hand to contribute, sources of income besides the venture, personal credit score and level of expertise on the subject of the business idea.
One of Alexander’s classmates was a plumber looking to hang out his own shingle, while another recently moved to the U.S. from abroad and was interested in starting his own energy efficiency business. Another said he didn’t know exactly what he might start, but that he was interested in learning about the process.
“There is no typical client that we see,” said Alan Badgley, the center’s assistant director. “If you did put the clients that come here into a majority category, it would be that they have an idea — likely a good idea. They know it’s a good idea, but the question is whether or not it would be a good opportunity.
“Exercising through all the steps, that’s what makes the difference in the business plan.”
There’s no typical client that we see.
Alan Badgley, KSBDC assistant director
Badgley said many people think a business plan is judged on number of pages, though he said that’s a false premise.
“You write a 10-, 20-, 30-page business plan, I bet there’s not one person who will read the entire thing,” Badgley said. “The vast majority of people I’ve seen in my nine years here do not want to write their business plan.
“They think it’s an incredibly difficult process, but it doesn’t have to be. All they have to do is go through the discovery process and answer some questions. With us, everything is free and confidential, so it’s a no-pressure environment.”
Those who seek assistance from the center are given a basic business plan outline, a three-page document that asks for information about type of business, permits and regulations, organizational structure, market analysis, balance sheet projections, and a host of other questions.
Nussbaum said there’s no reason why a good business plan can’t be as little as two or three pages, though he added that there isn’t really a good average size because each potential business can be unique. Badgley agreed.
“Some of the best business plans out there are ones that are genuine and real, misspellings and all,” Badgley said. “The key is that the information needed is there, and I would say the business plans that are the most real are the plans that people keep reading.”
The Small Business Development Center, which serves an 11-county area in south-central Kansas, typically will assist with up to 80 start-ups that actually open for business per year, said regional director Marcia Stevens. A total of 14 such offices are located throughout Kansas, Stevens said.
While that means one or two businesses start every week after receiving consultation, Stevens said about two-thirds of the people seen in Wichita represent businesses that are already open and are either looking to expand or looking for a “health check.”
Wichita center serves 11 counties in south-central Kansas
One such business owner is Andrew Gough, who opened Reverie Coffee Roasters on East Douglas three years ago.
“When I started my business, I had enough income to cover the liability on what I was asking to borrow, which wasn’t a lot of money,” Gough said. “I was working another job at that time, but about two years later, I was trying to figure out how to move on from my job and do my business full time.”
After enjoying some initial success with his coffee shop business, Gough said he wanted to begin to draw capital for himself from his business, thereby allowing him to quit his day job at a bank. Gough then went to a potential lender looking for guidance and was steered to the center.
Following a couple of meetings with Nussbaum, and some number-crunching, Gough said he was much more prepared to go to a lender and confidently ask for a loan to expand his business and pay himself a salary. Today, Gough no longer works outside his business.
“I’ve recommended their services to so many people,” Gough said. “I was able to focus on Reverie full time because of the business development center.
“I literally went from being depressed, thinking it wasn’t going to work, to seeing that it was going to be a possibility. There was someone who helped me tie up all these loose ends, stuff that I just didn’t have time to do or think about.”
By the numbers
As Santonil pointed out in the “3M’s” workshop, the more detailed package of paperwork for potential entrepreneurs is the financial package, which can get lengthy.
Lenders will want information on sources of capital, how much the borrower is willing to put up, monthly operating expenses of the business, and three years of cash flow projections. Oh, and there’s also that pesky page known as the “break-even analysis statement.”
Whether the entrepreneur is receiving money from a well-to-do relative, going for a small business loan or hitting the proverbial jackpot with an angel investor, every center employee interviewed said people have a tendency to underestimate how much of their own money they will have to contribute to their project.
When applying for a loan, that number is usually somewhere in the neighborhood of 20 or 30 percent — closer to 50 percent or more for ventures like restaurants or retail stores, Santonil said.
“If we help a client who decides not to pursue a project, that’s a success, too,” Nussbaum said. “We don’t tell people what to do, but we can go over the numbers and maybe help stop somebody from making a huge financial mistake.”
We can go over the numbers and maybe help stop somebody from making a huge financial mistake.
Steve Nussbaum, KSBDC consultant
The idea behind the center, of course, is to help promote entrepreneurship and business development in communities, though center employees aren’t judged on the number of businesses that clients actually start or expand. As Stevens put it, the center is focused on helping entrepreneurs and business owners find their “next best step.”
For Alexander, a lot of work needs to be done, though she said she hopes to have her business — HR Consulting of Kansas — up and running in the next year or two. Because the center’s services are basically free (some courses cost up to $30), she said she plans to sign up to meet with a consultant.
“I’m extremely excited to be learning about some of these things that I don’t have knowledge about, like tax planning and bookkeeping,” Alexander said. “I’m really good at HR, but I don’t know anything about starting my own business.
“They give you the resources and, I would say, confidence so you can go out and make your idea happen.”
Entrepreneur start-up and small business expansion resources
Kansas Small Business Development Center
Services: Free consulting, workshops (fees possible), business plan outlining
Location: WSU Hughes Metropolitan Complex, 5015 E. 29th St. North
Services: Low-cost workshops, general business counseling
Location: 220 W. Douglas, Suite 450
What do banks look for when considering small business loans?
1. Personal financial statements
2. Financial projections for business
3. Expertise/knowledge of owner(s)
4. Detailed plan for “lean” first months of operation
5. Honesty about any issues
6. Return banker calls (even if it’s bad news)
7. If not sure about a question, get info and return promptly
8. Capital is your best friend
Source: Jane Deterding, owner of Citizens Bank of Kansas