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." 

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.


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!

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