Monday, December 1, 2014

Hair stylist sees vision through with aid from SBDC Advisor

By Hope Belli Tinney, Washington SBDC

SPOKANE, Wash.–There are plenty of places to get a haircut, if that’s all you want. But, after 25 years styling hair in other people’s salons, Kelly Dawson wanted to provide her clients with a more personalized experience. 

Kelly Dawson, owner
SalonAvant
To do that, she said, she needed to open her own salon. Salon Avant is a 320-square-foot oasis at 1212 North Stevens, just north of downtown Spokane, where Dawson offers clients a full range of hair styling services. 

Clients can book their own appointments by going to her website, Salonavant.com, and clicking on the Book Now button. The online booking system also allows clients to leave reviews and since 2014 she’s receive more than 125 reviews and a five-star rating. “I wanted to create a tranquil, beautiful space where both women and men could feel completely relaxed and cared for,” she said. “I couldn’t find that kind of space so I had to create it.” 

In early 2012 Dawson attended a workshop for entrepreneurs sponsored by the Small Business Administration and then was referred to Tammy Everts, a certified business advisor with the Washington Small Business Development Center (SBDC). The transition from leasing a chair in another salon to owning her own salon has been fairly smooth, Dawson said. Together she and Everts worked on a business plan, financial projections, marketing and inventory control. 

Perhaps the biggest difference between renting a chair and owning a salon is that Dawson had to negotiate her own lease and manage the build-out of the space. “Kelly loved the space,” Everts said, which was important because her vision for Salon Avant required finding a great location. But, Everts said, when business owners fall in love with a property it can blind them to potential complications or hidden costs in the lease. 

Together Everts and Dawson went through the lease line by line to make sure Dawson understood what was covered and what was not covered in the lease agreement. In the end, Dawson was able to negotiate a lease that she felt was fair and affordable for her fledgling business. “The SBDC and Tammy Everts has been instrumental in my success,” Dawson said. “Tammy took the time to really pay attention to the small details and had a understanding of what my business needed.” 

With the expertise of the SBDC to help her build business systems that keep her finances in order, Dawson has more time and energy for what she enjoys—helping her clients feel good and look great. Salon Avant opened in March 2013, but Dawson has expanded her vision since then. 

She recently earned her certification as a yoga instructor and is making plans to open a yoga studio. As it is, she said, she brings the balance or centeredness of yoga into her salon. “It’s more than cutting hair,” she said. Listening to people and helping them present their best self to the world can be a transformative experience. “It’s empowering people to love themselves and enjoy their lives,” she said.


Monday, November 3, 2014

Aberdeen SBDC advisor helps new pub owner set sail

By Hope Belli Tinney, Small Business Development Center

OCEAN SHORES, Wash. – James Edwards loved the Pirate’s Cove Pub & Grill in Ocean Shores from the moment he first stepped inside. “You know,” he said, to no one in particular, “I want this place.” “Well,” said the woman working the bar, “it’s for sale.”

Edwards, 62, a U.S. Coast Guard veteran, had retired from Boeing in 2010, had never owned a business and lived nearly three hours away. But over the next week he kept thinking about the possibilities.

When he mentioned to his wife that he’d found a pub he really liked, she said, “That’s nice.” The third time he mentioned, in a phone call, that he really liked the pub – and it was for sale – his wife said, “Do I need to come home?”

SBDC offers no-cost advising

Small business owner Edwards, left, and
SBDC advisor Stewart outside the Pirate’s Cove.

With his wife on board, things moved fast because the business was struggling and the owner wanted out. Edwards had to negotiate a purchase price and then write a business plan so he could get approved to assume the two existing loans on the place.

Scrambling to pull everything together quickly, he followed up on a friend’s recommendation and called Erik Stewart, a certified business advisor with the Washington Small Business Development Center (SBDC) in Aberdeen, Wash.

The Washington SBDC (http://www.wsbdc.org) receives support from Washington State University, the U.S. Small Business Administration and other institutions of economic development and higher education. SBDC certified business advisors provide no-cost, one-to-one confidential advising to small business owners who want to start, grow or transition a business.

What Edwards expected might be a 10-minute conversation leading nowhere instead lasted nearly two hours, he said.
At the end of the call, Stewart told him, “It sounds like you’ve got a good start, but it seems like something might be missing. Do you mind sending me your business plan and letting me take a look at it?’”

Two days later, Edwards said, he got an email response with feedback and suggestions. Over the next two weeks, they had at least eight more conversations.

By the time he went back to the bank, Edwards had a business plan that made sense and was supportable. And when the banker asked for specific information, he knew where to find it and why it was important.

His banker was amazed that he’d been able to put together such a strong financial package, he said.

“I just smiled because I figured I had a secret,” he said, and that secret was the SBDC.

Ongoing, understandable counsel

Edwards first set foot in the Pirate’s Cove on March 8, 2013. A little more than three months later he was the new owner of a full-service bar with 10 employees, including crackerjack manager Maria Walters.

At that point, Edwards said, he figured the SBDC had helped him launch his business and he’d be sailing alone, but he was wrong.

“That was just the start,” he said. Over the next nine months he continued to talk with Stewart about various issues from planning for the winter months when cash flow is tight, to controlling costs, to hiring and firing employees.

“I don’t have to go home and look things up in the dictionary,” Edwards said. “He talks to me in my terms.”

No, they don’t talk like pirates. Not all the time, anyway, though Edwards is a pirate – a member of the Seafair Pirates.

That’s a group of goodwill ambassadors for the city of Seattle who dress like pirates, talk like pirates, sing like pirates and generally have a good time while engaging the public in their revelry and raising money for charity.

The camaraderie that he experiences as a Seafair Pirate is what he wants to create at the Pirate’s Cove, Edwards said.
“My primary responsibility is customer service,” he said. “I hug the women, shake hands with the men and make sure everyone has a good time.”

For now he is dividing his time between Kirkland, where he lives with his wife, Wendy, and Ocean Shores, where he spends most Thursday, Friday and Saturday nights working at the pub. A 20-year veteran of the Coast Guard, he is looking forward to getting back to the coast.

Civic involvement a benefit

Despite the commute, Edwards has already become active in Ocean Shores business and civic activities, including supporting local athletics, the food bank and other worthy causes.

“I’ve always been civic minded,” he said, “but now as a small business owner I have the opportunity to be more involved.”
The Pirate’s Cove was struggling when Edwards took it over, Stewart said, but his commitment to service and “doing things the right way” is winning over both locals in this coastal community and tourists.

“He’s making a difference in the community and he’s making a profit,” Stewart said. “We like that combination.”

The SBDC makes a difference, too, Edwards said: “I credit all the success I’ve had so far to the SBDC.”

For more information about Pirate’s Cove Pub and Grill, see the Facebook page athttps://www.facebook.com/piratescovepub?rf=107112322717085.

Thursday, October 30, 2014

A Conversation with the FDIC

To my surprise, I was contacted recently by a representative from the FDIC, Federal Deposit Insurance Corporation, who was conducting a review of a local bank in Spokane. I had heard of the FDIC, (mostly when hearing or reading a bank advertisement, such as Member FDIC) but had never interacted with a representative before. 

The gentleman stated that he was performing a Community Reinvestment Act review of a bank and asked if I could participate in a short survey.  He said that part of the evaluation requirements are to interview a member of the community in which the bank is located, and he often chose to talk with SBDC business advisors since we have a variety of business clients, relationships with banks, and an overall impression of economic indicators and performance.


According to its mission, the Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.

The interviewer asked numerous questions about community economic development and banking conditions, general bank regulations, local credit unions and small business lending.  I don't remember the entire dialogue, but here are some of his questions and my replies, paraphrased:

Q:  What is your impression of the small business lending climate and general economic conditions?

A:  Some of the companies that made it through the recession are finally starting to breakthe easier.  Lending is still not easy for many small businesses, especially those start ups seeking small loans (under 100,000).  We know that banks are lending, yet we still have clients that are not able to get bank loans.  


Q:  Do you think bank lending requirements are clear?

A:  Yes, the requirements are usually pretty straightforward. There are a couple of challenges however.  First, a new business owner often does not understand the loan process or requirements or even how to apply for a business loan or line of credit.  A second challenge is that many small business owners have a hard time coming up with the owner cash contribution and in some cases, my clients have been given inconsistent information from lenders.  For example, I have had clients that were told they would need anywhere from 15-50% cash down from different lenders, or not informed of the capital requirements up front and were turned down for a loan.

Q:  Do you think the Spokane area banks are active in economic development and driving community and capital investment?

A:  Yes!  Not only are the local banks and credit unions active in the community, they are very strong supporters of community activities and small business.  There are some neighborhoods that are undergoing great re-development, such as the Perry Street District, and while a bank may not be opening a branch in that particular neighborhood, I know that they are lending to business owners to build and start new businesses.  The City also has made a dedicated effort to emphasize development in certain sections of town and has seen some success with that strategy.

Q:  Have you heard of any instances of minority or underserved populations being treated unfairly due to race, gender or other circumstances?

A:  No, I have not had clients that felt they were treated unfavorably due to race, gender or other minority standing.  Start-ups face an additional challenge in seeking financing and that can be sometimes an uphill battle; some banks will not fund a start-up or new business at all due to the riskiness. 

Final comments:  We also talked about the evaluation process and the interviewer mentioned that in some communities where there have been Community Reinvestment Act funds, he also speaks with representatives to identify housing needs and trends to get a comprehensive economic snapshot.

It was very interesting from my end to take part in the interview.  The FDIC site has a lot of informative articles, industry statistics and tools for borrowers, creditors and depositors. You can read more about the FDIC bank examination process on the agency website.

Wednesday, October 29, 2014

3 Simple Reasons to Write a Business Plan

I recently got invited to speak to an entrepreneurship class at Washington State University in Pullman to discuss reasons why I am in favor of business plans.  The students were engaged and had a lot of great questions and even more exciting, many had plans to start a business someday and a few already had.

Instead of just giving an explanation of why I think business plans are important, I kept it to three short reasons, and added four red flags that I frequently see in business plans.  One question we often get is, "How many pages does it have to be?".  There is no right answer; it depends on the complexity of the business and purpose of the plan.  I have read over 100 business plans and would rather read a well-written succinct plan than one written to fill a certain number of pages.

Here are three simple reasons that I encourage my start-up clients to prepare a business plan:

1.  Credibility
In preparing a business plan, the writer needs to tell a story and clearly describe what the business does, who the owners are, what problem it solves or need it fills, the market opportunity and financing requests.  Putting a plan into writing adds a level of credibility and shows that the writer is serious about moving forward, rather than just thinking about it.


2.  Research
Developing a business plan is a great exercise for business owners to think through all phases of their business.  The exercise of writing a business plan is often times more valuable to use as a feasibility study than the plan itself.  For people that are thinking about starting a business, starting with financial projections can be an excellent way to evaluate the feasibility of going forward with a business idea.


3.  Funding
If you will be seeking any sort of outside financing, a lender or investor will want to see a business plan, or at least an executive summary.  A bank wants to see the strength of the team, what kind of market opportunities exist and most importantly, financial projections that show how the loan will be repaid.

There are numerous online free classes and templates on writing a business plan.  One other peice of advice is that business plans should be fluid documents, meaning I suggest using it as a strategic plan once the business is up and running.  Owners can use it to revise internal sales goals, plan for growth or look at new markets like exporting or government contracting.  SBA.gov offers an easy-to-use online portal where one can write a plan online.

Here is an excellent infographic created by the Washington State University Online MBA Program on business plan essentials.

Thursday, October 23, 2014

Eight Ways to Improve your Relationship with your Banker

We recently attended our State SBDC network training and received professional development training on a number of items to help our clients such as crowdfunding, web tools and succession planning. One session by my colleague, Linda Johnson, out of the Yakima center addressed tips for small business owners to maintain a good relationship with his or her banker.

If you will be seeking a loan, line of credit or negotiating terms with your banker, here are eight ways to improve or maintain a good relationship with your business banker.

What's the bottom line?

1.  Understand your financials.

This may sound simple, but is a fundamental factor in managing or owning a business.  If you do not understand your balance sheet, profit & loss statement and cash flow, it is time to learn.  Set aside time with your business advisor to go through your statements or schedule extra time with your CPA or bookkeeper.

If you have a business loan, you may have an annual review with your banker.  It is imperative that you are able to discuss your financial situation and explain what or why the numbers are a certain way.

2.  Make a profit.

Banks lend against profits and cash flow, not collateral.  Some business owners try to reduce taxable income and as a result, the business does not appear profitable.  This can be a big concern if you need to borrow money or if you plan to sell the business in the future.  A buyer doesn't want to buy a business that is not profitable and likewise a bank wants to make sure it will get its money back.

3.  Prepare a plan.

You hear a lot about the need for business plans, and I firmly believe in the value of preparing a business plan.  In this case, the suggestion is to prepare a business financial plan that addresses the short term goals and needs, contingency plan and a long-term plan.  Having a Plan B or contingency plan can reassure your banker that, in the event of an emergency, you will be able to repay the loan.

4.  Do not shop for a new banker unless you have done 1-3.

It may be tempting to avoid your banker and just start over.  You will be better in the long run if you take the time to work on the business rather than shopping around for a new banker.

5.  Be realistic about banker requests for collateral.

If you are seeking a loan for a start-up business, the banks will likely require some form of collateral in addition to the owner contribution.  I have had clients say that they do not want to put up their house for collateral, but that was the only way the bank would sign off on the loan.

6.  Establish and maintain trust with your banker.

Communication opportunities can help establish trust, discuss expectations and voice concerns.  If you are going to be late on a payment, be up front with your banker and keep him in the loop. Building trust (and credit) takes time and sharing good and bad news allows for open discussion and the opportunity to work together on solutions.  Be mindful of sharing too much; there is a difference between sharing relevant information and oversharing.

7.  Consolidate banking relationships.

You may be able to negotiate a better deal by consolidating banking services.  Ask around, get information on what your bank can offer. Banks want its customers to be profitable - it is a win-win!

8.  Keep a banker in reserve.

While not actively shopping for a new banker, it is not a bad idea to foster existing banking connections. She could be in your service club, an acquaintance or someone that you have worked with in the past.  Banks have been bought and sold, personnel change and if you are looking for a new relationship it might help to have some options.

Maintaining positive business banking relationships can benefit your business.  I have had a client get a loan for a new building by calling the banker and not having to jump through a lot of hoops, simply due to the longstanding association.  Your banker is a key part of your team and it is a good business practice to establish and keep positive connections.

Wednesday, October 22, 2014

WSU Internship Program Recognized for National Honor

Small Business Development Center's Research Intern Program Nominated for National Award

September 29, 2014
Written by: Alyssa Patrick, Economic Development and External Affairs, WSU

SPOKANE, Wash. – The Washington State University Small Business Development Center’s research intern program recently was named a finalist for an award from the nationwide University Economic Development Association. Award recipients will be announced this week at the UEDA Annual Summit in Santa Fe, N.M.
Tim Taylor, right, and Intern Derek Ball
“The internship is an opportunity for college students to become better prepared for the workplace while also helping Washington businesses make critical decisions,” said Tim Taylor, SBDC’s internship coordinator.
The internship was started to support a state economic revitalization grant the SBDC received in 2011 to grow new exports via a statewide export readiness program. Facing the daunting task of creating a program for businesses that had never exported before, the SBDC set up the research internship so students could help.
Interns gathered data on world markets specified by clients and answered in-depth questions specific to those markets. It was a natural move for the SBDC, which runs a variety of internship opportunities throughout the state.
In the first year, SBDC hired eight WSU interns who had strong research capabilities but lacked specific experience using proprietary databases and writing research reports for a business audience. The advisors wanted to provide their clients with the highest quality documents and their interns with rich skill development, so they developed a 2- to 3-week training and mentoring program. Students come from universities around the state to participate in the internships.
“More than just learning how to collect data, we learned how to filter out the important information,” said Craig Murchison, an intern for two years. “We were encouraged to focus on delivering actionable, relevant research in a timely manner.”
SBDC’s clients have directly benefited from that focus. Since its launch, the export readiness program has worked with 590 clients, and the interns have provided over 200 high quality, in-depth market intelligence research reports to help those Washington businesses launch or grow their exports.
Clients have reported more than $107 million in export sales and have created 373 export-related jobs since the program was started in early 2011. Clients routinely tell Taylor how beneficial they found the market intelligence reports the students did for their companies.
Rachael Barrett was an intern for 1½ years while earning her degrees in agriculture and food systems and economics from WSU.
“The internship gave me a lot of new perspectives,” she said. “Working with small businesses gave me a window into the real world, and working with other interns gave me insight into different disciplines I may work with.”
Barrett is pursuing a master’s degree in agriculture, food and environment at Tufts University, and she said the research she did for SBDC helped her realize her interest in trade and policy.
Taylor often receives emails from former interns about how the program helped them in an interview or in their jobs.
UEDA is a national association of higher education, private sector and community economic development stakeholders. The intern program was nominated for the UEDA award in the talent development category.
For more information about the Washington SBDC, go to http://wsbdc.org.

Friday, September 26, 2014

Hot Business Trends to Watch

Bill Rancic, winner of the first Apprentice
Earlier this month, I was able to join over 1,500 of my peers at the Annual Conference for America's Small Business Development Centers in Grapevine, Texas.  Conference highlights included a keynote address by entrepreneur and television personallity, Bill Rancic, hundreds of workshops and a special appearance by Maria Contreras-Sweet, the Administrator of the Small Business Administration (SBA), and of course some Texas barbecue!

One of the most popular sessions each year is an annual update of business trends by Rieva Lesonsky, owner of GrowBiz Media and a nationally recognized speaker and small business expert.  


SBDC Trend Watchers
Ms. Lesonsky encouraged the crowd to "Be a trend-watcher" and gave a rundown of current and forecasted business trends, and also described rising industries to watch.  She looked at three rising and emerging trends that impact small business:
1.  Global
2.  Mobile
3.  Demographics and marketing


Global



Global business, global commerce and international trade opportunities continue to be on an upward trajectory. According to the U.S. Commercial Service, "Exporting can be profitable for businesses of all sizes. The United States is known throughout the world for high quality goods and services.  U.S. companies that export not only grow faster, but are nearly 8.5% less likely to go out of business than non-exporting companies."  Nearly two-thirds of the word's purchasing power in in foreign countries.  (Export.gov)

Mobile

Location based mobile
Mobile continues to be changing the way businesses and consumers operate.  Use of mobile devices, E-commerce websites and mobile responsive sites are just a few items to consider for small businesses, in addition to being aware of how its customers are shopping and searching for information.  

Levonsky notes, "Mobile is the one thing that consumers adopted faster than businesses". In a January 2014 Pew Research report, it states that 90% of Americans own a cell phone; 58% have a smartphone.  Mobile devices have transformed consumer spending habits, the way we use our time and how we collect information.  


Demographics, Business and Marketing


Levonsky gave an excellent snapshot of the different generations and why paying attention to the commonalities and also the differences are so important to small business owners.  "The key is marketing the right products to the right market", she notes.  She adds that commonalities are shrinking, so within a generation such as the baby boomers, there can be subsets.  

Some examples of demographic trends that are driving consumer spending:

  • Teens have a lot of disposable income and spend it on fashion, beauty, food and entertainment.  There are 74 million Americans under the age of 18.  Generation Z not only has $44 billion in disposable income, it is estimated $500 billion in "Pester Power".
  • Kids are a major influence in the restaurant and food industry.  Children pull a lot of weight in deciding where a family will dine out for dinner.  If you have children, you know this is absolutely true whether it is the menu, age appropriate amenities like coloring pages, free ice cream or gaming tablets. 
  • Boomers and seniors consider 50 the new 30.  Businesses have to change its marketing mindset when marketing to seniors; older people do not want to think they are old.  

HOT Trends

Levonsky also spotlighted some HOT businesses and industries to watch, including:
Image courtesy of artur84
at FreeDigitalPhotos.net

  • Weddings
    • Millennials are waiting until almost thirty to marry.  This demographic starts in 1988 and population-wise, it is larger than earlier Generations (Boomers and X). Read more about why young adults are waiting to marry in Pew Social Trends.  
    • With the legalization of gay marriage, a whole new market has opened up.  Lesonsky commented that gay marriages tend to have fewer attendees, but the couples will spend more on the wedding and honeymoons.
  • Pets as People
    • Crazy as it sounds, this is big business, to the tune of $73 Billion annually.  There are huge opportunities in areas such as designer pet supplies, supplements, pet spas, innovative products and services and even gluten-free snacks.
  • Clean Technology
    • Solar jobs are projected to increase, and the tax increase is set to expire in 2016 leading to a potential boom next year.  In addition, watch for ancillary type businesses such as online applications, home energy management and usage monitoring by smart phone applications.
  • Men's Grooming
    • Formerly called Metrosexuals, Young Urban Males (YUM), ages 18-34 that treat themselves to beauty services such as manicures, facials and body waxing are part of an expanding movement. There is a lot of opportunity in men's spa services and grooming products.  According to Levonsky, men typically spend more than women and will partake of services more frequently.  
    • For example, a man will spend $37 for a facial and have one weekly, whereas a woman will spend around $23 and get one every six months. This is a $3 billion industry and is expected to double by 2017.
  • Food Bites
    • Artisanal food and beverage will remain popular.  The local food movement and locally sourced ingredients could present a big opportunity for suppliers.  
    • Food halls are making a comeback. 
    • Fancy food reinvented.  For example, tator tots with truffle oil.  (Yes, they are a thing and they are delicious!)
    • Gluten Free continues to buck trends.  "This industry showed 28% growth during the recession" added Levonsky.  "35% of consumers think it's healthier."
    • Hemp.  Commercial cultivation is still banned in the United States, but with the legalization of Marijuana in Washington and Colorado, she suggests this industry is one to watch.
    • Death of cupcakes?  Are cupcakes out?  What is coming next?  
  • Food Trucks aren't just for food anymore
    • Mobile is growing and it just is not for cell phones.  Food trucks are becoming more accepted and there is a growing popularity with the convenience for mobile services.  The Spokane community has seen a big increase in food trucks at local pubs and events, as well as other mobile units like a portable fashion truck, mobile pet grooming and personal training studio.

Ready for what's next?
Staying on top of trends and influencers can help businesss maintain an advantage over the competition.  

Taking some time to develop a marketing plan, key messages or new direction can help business owners strategically plan for new markets and opportunities, rather than a shotgun approach, and will pay off in the long run.  


Friday, August 22, 2014

10 Start-Up Lessons from an SBDC Client's Experience

My colleague, Allan Peterson, in Moses Lake shared some excellent startup advice from one of his clients. Timely and relevant!  Great example of our SBDC network collaboration and learning from our peers.

Business Model Canvas
Moses Lake, August 21, 2014
"My client and I were discussing things and we developed a list of thinking points for start-up entrepreneurs.  
As always, this is not developed based upon some empirical study but from lessons learned serving entrepreneurs in all phases of a business lifecycle. 
So here it goes:
  1. Business Model Versus Business Plan – I have blogged on this point in the past; you have to focus on the why (model) versus the how (plan)
  2. Vision Versus Passion – another subject of a recent blog.  You have to be convinced of the concept and have sufficient passion to breathe enthusiasm into the team without getting blinded along the way.
  3. Ownership Versus Reward – using your stock book as a checkbook is an easy way to invite long-term trouble.  Remember, you can’t get that genie back in the bottle.
  4. Short-Term Approach Versus a Long-Term Plan – people look for sustainability and not quick hits.  Trying to recruit team members or investors when you have something that may not last is a sure path towards failure.
  5. Collaboration Versus Lone Wolf – people invest in teams and not a genius.  Keep your ego in check and surround yourself with good people. Don’t go it alone.
  6. Mistakes Can Be the Key to Success – keep in mind, Churchill said that in order to succeed, one must fail 10,000 times.  “The Outliers” had a similar message.
  7. Team Versus You – always have an honest assessment of the capabilities of all team members including yourself.  Understand who is growing and who is not and be prepared to step aside at the right time.
  8. Talk to Smart People – more importantly, listen to them.
  9. Take smart money over the best deal – currency is fungible; great advice is not.  Always look to maximize your return, not only with economics, but with intellectual capital.
  10. Hire a Smart Advisory Team – follow and work with mentors and advisors who “get you” and make sure they are adding value and not just riding your coattails.  Smart advisors help keep you out of trouble.
So, there you have it; just some thinking points which, hopefully, will help you complete your successful journey.  Keep it posted somewhere to remind you and don’t be surprised if, when you get off the rails a bit, you don’t look back at this and see exactly where you went wrong."

Thursday, August 14, 2014

Three pointers before you apply for a bank loan

Small business owners may be considering a bank loan to start a new business or expand an existing company.  You may have heard of the 5 C's of credit:  Credit, Collateral, Capacity, Character and Conditions - believe it or not, these are still what banks consider when evaluating a loan application.  While you should consider all five elements, there are three that are critical to consider before you meet with your banker.

Here are three things you will need to know before you make an appointment with your lender.

  1. Know your numbers

Know exactly how much you need and what it will be used for. It is not advisable to start the conversation with, "How much can I get?"  This indicates to the banker that you are not fully prepared and have not done a business plan or your homework.

How much do you have to put down?  Banks want to see anywhere from 15 to 50%, depending on if you are applying for a government guaranteed loan, the industry and your experience.  Typically a borrower needs more than collateral, meaning cash.

New businesses and start-ups should be prepared to have closer to 30-40% cash to put down, especially if the owners do not have industry experience or collateral.
  • Plan to put some 'skin in the game' with cash and/or collateral.
  • Start-ups and first time business owners are seen as risky from the bank's perspective.  
Part of preparing a business plan is developing some financial benchmarks or being able to provide past financial history.  You should have a complete grasp of your financials and key financial statements including sales and cash flow projections, Income Statement (also called profit & loss) and a Balance sheet.

You also need to prove that your personal finances are in order and that you have enough savings to invest in the business, live on and make the loan payments.

2.  Check your credit

WRONG!  Bad Credit is
a BIG Problem!
Personal credit scores can make a big difference in applying for a business loan. You can get a free credit score online - be sure to visit a credible free source, and you are eligible for one free credit check a year.

If you are purchasing an existing business, the bank will likely review the business credit score as well.

"Not only do business owners need to ensure that the people they're borrowing from are reputable and honest, they also need to make sure their own personal credentials are in order before approaching potential lenders." BusinessNewsDaily.com 

3.  Recognize Your Capacity

One thing that is becoming more important in evaluating loan proposals is the business owner's capacity, or ability to run the business.  Lenders are looking for at least two years' experience in the industry and ideally, business ownership.  Your business plan will help show prepared you are and if you are capable of starting the business.

Business experience can make a difference in loan requirements; for example, a client was informed that he would need to provide at least 40% cash contribution to buy an established business since he did not have a history of business ownership.  If you looking to buy or start a business in an industry that you have never worked, I recommend volunteering or working for a while to gain industry knowledge.

Summary

There are numerous other factors business owners should consider before applying for a loan.  Here are a few:
  • Find out what your loan options are or what type of loan you will be seeking.  There are different loan programs that might apply depending on what you will be using the money for.  If you are purchasing land or equipment, the SBA 504 program might be a good fit.
  • Find out about the loan requirements and process.  Follow the instructions - incomplete loan applications can be dismissed for being incomplete.
  • Before you apply, you should interview the banker.  Some banks will not lend to certain types of businesses or industry.  For example, certain institutions will not lend to any new business or start-up. Loan applications can be time consuming so it will save time in the long run to find out if a bank will even loan for the use you are seeking.
  • If you are new to the industry, gain experience by volunteering, finding a mentor, working in the business.  Banks typically want to see at least two years' field and management experience.
Your business advisor can assist in preparing to apply for a loan.  Keep in mind that when you first meet with a banker, it is a mutual interview.  You want a banker that is going to be on your side and part of your team, and they want a borrower that is going to repay the loan and contribute to a successful portfolio.  With online accessibility, many banks have its loan application checklist and additional requirements and forms to sign online.


Wednesday, August 13, 2014

New Fabric Store to Open on South Hill

Fabric and gift store will be a “Quilter’s Quilt Shop”.


Irene Fransk, owner, is pleased to announce the opening of Regal Fabrics and Gifts, LLC a new retail fabric and gift store on S. Regal St. on the South Hill of Spokane.  The grand opening is set for August 15th and 16th.  The store will have high quality quilt fabrics and notions, custom sewing products, and offer a variety of quilt and sewing workshops.  The business is located at 5620 South Regal Street,  #8, Spokane. 

Fransk has been an avid quilter and seamstress for over 40 years and has operated an online custom sewing business for the past seven years.  Opening a retail store grew out of her love for quilting, finding high quality quilting fabric and filling a need for the quilt and sewing community on the South Hill and area south west of Spokane.  

In addition, she grew tired of driving 30-40 minutes from the South Hill when she needed quality products or supplies. “There is a growing trend of younger people that are learning to sew and quilt, and design their own clothing and home décor, commented Irene.  “We will be offering classes for all levels of quilting, purse construction, home décor, exercise wear, and children’s apparel, as well as some fun sessions pairing wine with basic sewing techniques”. 

The store will also feature hand crafted gifts and collectibles from local artisans.  The store will employ 5-7 part-time employees, all passionate about sewing. 

Regal Fabrics and Gifts will be open Monday through Saturday from 9 a.m. to 6 p.m. and closed Sundays.  

Wine and sew nights will be held Thursday evenings from 6:30 p.m. to 8:30 p.m.  One Thursday a month will be coffee, tea, and dessert night.



Congratulations Irene!

Contact: 
Irene Fransk, Owner, Regal Fabrics and Gifts, LLC.  509.242-3731


Tuesday, August 12, 2014

SBDC Client Featured on Seattle Times' Front Page

WSBDC Advisor, Rich Shockley works out of Highline Community Client.  His client, KuKuRuZa, was featured in the Seattle Times (complete with a mention of the article on the front page!). The article (in referring to the owner) says  "....he met with an adviser from the Washington Small Business Development Center, a free service funded by the U.S. Small Business Administration, Washington State, and Washington State University."  So proud of my colleague and our current Washington State Star.  Each year, a State Star award is presented to an advisor and Rich happens to be the recipient this year.

WSU News, Dec. 6, 2012
Read the full Seattle Times article on KuKuRuZa Popcorn chain.

Seattle popcorn chain sees exploding overseas demand

KuKuRuZa owner Grant Jones is still trying to expand his gourmet popcorn empire around Seattle, but persistent requests from Middle Eastern investors to franchise led to opening its seventh and eighth international locations in July.
By Brandon Brown
Seattle Times business reporter
A Seattle snack store is popping up in locations around the world.
KuKuRuZa owner Grant Jones said he is still trying to expand his gourmet popcorn empire around Seattle, but persistent requests from Middle Eastern investors to franchise led to opening its seventh and eighth international locations in July.
In addition to stores in downtown Seattle, Ballard and Bellevue, KuKuRuZa added a second franchise in Tokyo, and a third in Cairo. It also has three locations in Riyadh, Saudi Arabia.
Jones is the chain’s second owner. In 2008, George Marema opened KuKuRuZa near Pike Place Market. Maremareportedly did well in the stock market and retired to open up a popcorn shop with a variety of new flavors.
Around this same time, Jones and his wife started thinking about opening a similar business.
Before popcorn, Jones ran a gardening company in Seattle, but he wanted to start a more scalable business. He and his wife saw Garrett Popcorn in Chicago, and even though they had no experience, he thought they could start their own retail operation.
After testing flavors in their garage, Jones said, they leased space at Bellevue Square in 2009 and received a loan from the U.S. Small Business Administration to open Popcorn Pavilion.
Even though they were competitors, Jones said he and Marema would drop by each other’s stores and talk about the Seattle market.
In 2011, Marema offered to sell KuKuRuZa to Jones. Initially Jones ran KuKuRuZa and Popcorn Pavilion as separate companies. But once he found KuKuRuZa’s brand was doing better, Jones said he stuck with KuKuRuZa, changing the name of the Bellevue store in 2013.
KuKuRuZa employs 35 but can balloon up to 90 people during November and December, said marketing manager Claire Mueller.
During his first day as owner of KuKuRuZa, Jones said he got a phone call from a Saudi Arabian businessman asking about franchising. One of the businessman’s partners had been to KuKuRuZa in Seattle, and had been calling Marema for a couple weeks.
Jones remembers telling him at first, “Sorry, we’re not interested.”
But the phone calls and emails kept coming. Jones said he knew nothing about international franchising, so he met with an adviser from the Washington Small Business Development Center, a free service funded by U.S. Small Business Administration, Washington state and Washington State University.
The center introduced him to franchise experts and lawyers, who coached him on doing business internationally.
Later in 2011, KuKuRuZa signed its first master franchising agreement with Global Investment Trading, a Saudi company that also sells Apple computers in Saudi Arabia. In 2012, the first store in Riyadh opened. A master agreement lets companies expand in a certain territory, such as a country.
“If we can choose the right partner, this is going to work. This is a great model for us,” Jones said. “If we don’t know how to choose the right partner, this is going to blow up in our face.”
Garrett Popcorn from Chicago and Doc Popcorn from Boulder, Colo., offer similar gourmet popcorn and both do master franchise agreements for foreign locations.
The cost of opening a Doc Popcorn internationally depends on the country, but Doc requires franchisees to have at least $500,000 in available assets. Doc Popcorn has 80 franchises in the U.S., a location in Mexico and stores planned for in Japan.
Large companies buy and operate American franchises abroad.
Alshaya, headquartered in Kuwait, runs the two Garrett Popcorn franchises in that country. Alshaya manages more than 70 brands in the Middle East, Northern Africa and Eastern Europe, including Starbucks and Victoria Secret.
Jones said he works closely with his franchisees to develop new ideas.
The Japanese partner came up with the cloth bag the company uses for its gift packaging. The Cairo franchisee helped develop an Egyptian Mango flavor that is only sold there.
“All of our stores are test stores,” Jones said. “We are all working on the core concept together.”
An international operation has some challenges, such as consistent quality, shipping costs and different business practices.
“You should be buying a well-oiled machine — a set of business systems that has been proven to be successful,” advised Kent Cravens, franchise expert and consultant at FranNet, a company that matches franchises with people interested in being a franchisee.
Cravens does not have direct knowledge of KuKuRuZa, but said it is risky to buy into a franchise that has not yet been perfected.
But KuKuRuZa’s management thinks the international demand for its product is high enough to operate this way.
Mueller points to its international online sales.
“Shipping from here to Norway is around $180,” she said.
Nonetheless, “We get seven orders a year from Norway.”
Brandon Brown: 206-464-2164 or brbrown@seattletimes.com