In Good Company
Starting your own small business
In Good CompanyStarting your own small business
It is no secret that more people are opting to start their own businesses rather than work for existing companies. In fact, the US Business Formation Statistics (BFS) has found the number of new business applications has increased every year since 2012. Given this fact and Mellwood’s position as a small business incubator, we spoke with Coral of Willow Tree Imaging and Rita of Ignite Your Extraordinary: CEO Coaching, as well as few of our tenants operating small businesses here at Mellwood, about starting a small business.
Gathering all the information you can is critical; it is what separates successful businesses from failed businesses. As Investopedia highlights, business owners you do not address their business needs in a thorough plan beforehand will face serious difficulties. Doing as much research as possible and learning the essentials for your business is the first step in this process.
Do you need any kind of specialized equipment? Is licensing or certification required? Will you need a space to run your business out of? If so, what size should it be and what requirements must it meet? You must know the answers to these questions before you can proceed any further. If you know anyone who has started their own business in the field or industry you want to go into, pick their brains. Gather their insights and learn from their mistakes and successes.
It is easy to be overly focused on the core part of your company, the product you produce or service you provide, that you may forget about the other parts of running a business. If you cannot speak with a small business owner in your industry, speaking with small business owners outside it can yield helpful information in this regard. It is especially important to get advice from professionals well versed in areas outside of your trade or craft. There are three specific experts you will want to speak to and get advice from before starting your own business: a business coach, a branding expert, and a financial planner. According to Investopedia, the most common reasons small businesses fail are lack of capital, poor management, inadequate business planning, and overblowing marketing budgets. Additionally, a CBInsights analysis also highlighted lacking a business model, ignoring customers, and poor marketing as fairly common reasons small businesses fail. Speaking with each of the aforementioned experts and gaining their insight will help you develop a roadmap to guide your business and avoid the most common pitfalls. While each expert will help you in developing your plan, it is the financial planner who will be most instrumental in shaping the early stages.
“Be really strategic about, if you need that money, how you are going to get it . . . Look at the different ways of getting investment and decide what are the pros and cons of that . . . Really think through the details from the financial point of view.” – Meaghan, Pinch Spice Market
Some businesses will require an investment prior to starting, others will not. Some business will require space, equipment, and licenses or certifications, which in turn require financing, while others only require the skill or knowledge of the business owner to get started. Once you understand the financial needs of a business in your field, speaking with a financial planner can help you determine the best way to acquire the capital you need to get started and develop a budget to cover recurring costs, something roughly 29% of business fail to do according to the CBInsights analysis. This this may mean keeping your current job while your business first starts out. Reba from Reba Renee Design Studio spent years saving up while working as a graphic designer for an advertising agency before going off on her own. Being a graphic designer, her start-up costs were fairly low as her business relies on her skills and equipment she already possessed.
For Tina from Massage on Mellwood, having another source of income was incredibly helpful. “There’s a lot to it. How you’re going to get customers? You have to have a plan. I think it’s helpful to have another income stream while that’s building.” She further noted, “You really have to look at what you’re going to do in the meantime while you build your business. How would you pay your bills? How is that going to affect your life?” A financial planner can also help you ensure your personal costs are covered, things like rent or mortgage payments, bills, and health care costs to name a few.
“If you don’t have money to gamble, you’ve got to do the work to make sure you understand the economics of your business before you jump, otherwise it’s going to be extremely stressful and painful.” – Rita, Ignite Your Extraordinary: CEO Coaching
Financial strains, from both business and personal expenses, is a common source of stress for small business owners, especially when first starting out. “Even if you have the best idea. Even if you have it all worked out. Even if you have this plan and projected numbers and it makes total sense. Even if you have all that, have a safety net of at least a year so you don’t have to worry about that money,” Meaghan from Pinch Spice Market suggested. When Karli made the leap to starting Massage on Mellwood with Tina and Billy, she did see her income drop. While she knew it was going to happen, it was still a source of anxiety for her, one that would have been likely worse without any preparation. Knowing that your personal and business expenses are covered will enable you to focus more on starting and growing your business and less on how to pay for everything.
“Which statistic do you want to be? Do you want to be in the statistic with all the people who start their own thing and they don’t work out or do you want to be in the statistic of the businesses who start and they more than survive, they thrive?” – Coral, Willow Tree Imaging
With a clear picture of the financial needs of both you and your proposed business, you can begin outlining a roadmap. This will outline how you will acquire the funds you need, when you will attain any necessary licensing or certification, and the acquisition of any equipment and/or space you will need to operate. It will also keep your business within its budget, being mindful of any and all operational costs, including rent and utilities, subscriptions for any necessary services, marketing, paying any outside vendors, and payroll to name a few.
The massage therapists of Massage on Mellwood credit their ongoing success to their roadmap. After independently collecting information, the three massage therapists met regularly prior to starting their business. Together they would determine what the business needs were and how to best structure the company. They also discussed what each person’s personal needs were and what they could bring to the business outside of their abilities as massage therapists. For instance, Tina had taken a course on tax preparation so she could manage the taxes for her, her husband, and their business. As such, this was knowledge and experience related to running a business Tina could bring to the new company.
Your roadmap will also incorporate the advice you receive from your business coach and branding expert. This includes developing your branding (logo, colors, etc.), determining your target audience, setting up your methods for reaching your audience (e.g. social media, website, and client database), and the stages in which these things unfold. Your business plan should do more than describe your business and account for its financial needs, but according to Investopedia a good plan should also include current and projected employee and management needs, projected cash flow and various budgets, marketing initiatives, an analysis of your competition, and should identify opportunities and threats within the broader market. The goal of your roadmap is twofold: to keep your business within its budget and grow beyond merely making ends meet. As Coral noted, “If you design for just enough, you’ll get just enough.”
“I think one of the biggest things, I would say, is you if you want to open and run a small business you have to be willing to recognize when things need to change, and to be able to pivot and evolve as the business does.” – Thomas, Pinch Spice Market
When formulating your plans, it is important they provide enough structure to help guide you and your business, but they should not be too rigid that it does not allow for change in light of unforeseen circumstance, both positive and negative, which will inevitably arise. Investopedia notes that a business which fails to review its business plan and is not prepared to adapt to changes in the market or industry will possibly face challenges they cannot overcome. Both Massage on Mellwood and Pinch Spice Market can personally attest to the importance of adaptability.
Beginning as a brick and mortar shop in an up-and-coming part of Chicago, Pinch struggled. Overhead was high and, despite it’s location, the store wasn’t seeing enough foot traffic. Even when the business was making money, rent for the space increased. Seeing the need to change how the business operated, Thomas and Meaghan gradually shifted to being a primarily online retailer offering customers pickup or delivery options. Today, the only in-person shopping offered is their one-of-a-kind spice vending machine located just outside their studio.
When Massage on Mellwood first started, they were located in a smaller studio space here at Mellwood. In their initial roadmap, they planned on growing their business and transitioning to a larger space in a few years. When the pandemic hit and a larger space opened up, they decided to adjust their timeline and seize upon the opportunity before them. In doing so, as life returns to normal, they have been able to see more clients than they would if they had stayed in their original space as previously planned. In turn, they are making up for losses incurred during the shutdowns.
No one we spoke with would ever make the claim that starting your own business is easy. The words stressful, scary, and risky have all been used to describe the experience. However, it is an experience that none of them would trade away. For those considering starting their own business, you are not alone. The Mellwood community is brimming with businesses of varying sizes, working in different fields, and each owner with their own goals and vision for their business. If you take the time to gather information, talk with experts, and plan carefully, your small business dreams be reality.