Explore, Dream and Discover

Explore, Dream and Discover: Growing Your Business“Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover.” — Mark Twain

As a small business owner, you spend a lot of time running your business or perhaps even performing the services yourself. So much of your time is spent doing, but do you ever dream of expanding or of having your business work for you instead of you working for it?

Explore Your Options

Mark Lowenstein, a small business advisor with SCORE, suggests that you write a business plan each year. “I know it’s a pain,” admits Lowenstein, “but it’s worth it to see how your business is doing and how you can make it better.” Sometimes, you may identify areas where you can increase efficiency just through some minor tweaks.

“For example,” says Lowenstein, “if you are a septic pumper, do you contact old customers on a regular basis? A postcard or a nice call to say that it looks like it might be time for their system to be pumped again may gain you additional business. You may get one person out of 20, but that’s one more than you had.”

Lowenstein admits that he hasn’t thought about his septic system until the interview reminded him that he should probably have it pumped. “It’s an out-of-sight, out-of-mind system for the homeowner.”

Anticipating your customer’s needs and knowing who your customer really is, can give you an advantage over the competition. Who is writing that check? Is it the wife or the husband? Marketing yourself to your specific audience can mean big dividends.

If you perform septic inspections, meeting local real estate agents and home inspectors can help you grow your business through referrals. Likewise, if you are a septic pumper, getting to know septic inspectors as well as real estate agents, can help you make those connections that send business your way without additional expenses or work.

If you feel you have done all of the things you can to maximize your business, you may have considered growing. Beyond pumping grease traps and selling it for biofuel or converting your trucks for the shale drilling business, there are many ways to expand your business.

Dream of Success

Figure out what success looks like for you. What are your goals both short-term and long-term? Write them down. Writing down your goals and breaking them down into manageable chunks will help you to develop your plan to success.

There are several things a small business owner wants to ask before diversifying. What are the needs of my current customers? How can I help meet those needs? Do I have the knowledge and experience in that area? Do I know someone who does? Is it the right time to expand? Do I have the funds to expand or will I need to borrow?

“Expanding is like a bull’s-eye,” says Lowenstein. “If you are the circle in the middle, you don’t want to expand more than a couple of rings out. You don’t want to overreach and get yourself into trouble. You don’t want to cannibalize your current business.”

Some owners have expanded to include the whole enchilada. They provide septic design, installation, inspection, repair and pumping— some even provide portable restrooms for rent. You will have to determine your knowledge base and comfort level.

There are several ways of expanding your business. You can purchase an existing business, which will include an existing customer base. For example, if you are interested in getting into the portable restroom business, they may already have a good client base as well as equipment.

You can partner with someone who is already an expert in that field. You may want to expand and offer your customers septic design. Partnering with an engineer who is looking for customers, can be mutually beneficial.

You can also acquire the skills, knowledge or equipment on your own.

Discover the Possibilities

There are a few good resources for all of those options. SCORE is a free resource for small business owners and a partner with the Small Business Administration. The volunteers at SCORE are often retired business professionals. They have offices across the nation. However, if you aren’t near one, they also offer an online mentor. Since it’s free, Lowenstein recommends starting there.

Most major state universities also offer a small business development center. Both of these organizations can help you to write a business plan and offer advice specifically tailored to your business.

Lowenstein also advises on finding a good CPA and attorney. “A good CPA will help you with your taxes and bookkeeping as well as give you advice,” says Lowenstein. “An attorney will help you write up a good contract or business agreement.”

He also advises, “If you are buying a business, you want to keep the previous owner on the payroll for at least six months to complete all knowledge transfer and make sure that the customers know that he or she supports you. If you are forming a partnership, then you want to state the terms and agreements up front.”

After you know how you want to expand your business, you may decide that you need a loan for either working capital or equipment.

By working through your local SBA office, you can find loans to help fund working capital, which would typically include loans to cover additional trucks, porta potties and operating costs. The SBA typically works with small businesses that don’t normally qualify for a conventional loan. If you have strong balance sheets and lots of assets, then you may have more options. The SBA guarantees the loans and your local office will have a list of lenders.

“A lot of lenders will not even finance a business acquisition without backing from the SBA,” says SBA Director of the Office of Financial Assistance Grady Hedgespeth. “The quickest way to diversify is to buy rather than build. You may find someone who is leaving the business. They already have an established name and customers. So, you’ll want to work with an appraiser to purchase the business. The key is to get a good business evaluation by a fair third party. A businessman selling his business always thinks it’s worth more. A third party can help determine how much that customer list, and well-known name, may be worth.”

There is another loan program, called the 504 loan program, that only requires the small business owner to put down 10 percent equity. “If a small business owner identifies a property worth $1 million, then he would need only $100,000 in equity,” says Hedgespeth. Some banks allow assets used as collateral for the 10 percent. “The lender provides a loan for 50 percent and then another company supplies the second mortgage of 40 percent. This ties the savvy of Wall Street to Main Street by using the full faith of government credit to help provide financing for that 40 percent. Right now, borrowers are able to get long-term fixed rates at around 5 percent.”

CAPLINES is another program that allows lenders to finance a small business’s accounts receivables. “If you go out and get a lot of contracts, but need additional resources to fulfill those contracts, you can use those contracts as collateral. The contracts go to the lender, who provides you the loan. After
the debt is retired, the contracts return to the small business owner. It’s a way that small businesses can take advantage of new opportunities and get the funds they need.”

Hedgespeth also suggests getting advice from either SCORE or a small business development center. “The business owner that is acquiring the other business generally knows less than the lender and seller,” says Hedgespeth. “You want to get as much background info and advice from people who have seen these transactions.”

“SCORE and other allies that work along with small businesses are invaluable to help develop a business plan and provide strategic planning on where to take your business,” adds Hedgespeth. “This is critical to any business thinking of diversifying. It’s better to be deliberate and take your time rather than be impulsive.”

For more information on the SBA, go to www.sba.gov.

The SBA also offers an online community for help at www.sba.gov/community.

For more information on SCORE, go to www.score.org.

“Grease Hauling is the Word” July 2011, http://www.americanliquidwaste.com/magazine/2011-2/july-2011/

Story by Jennifer Taylor

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