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© 2011 Idaho Press-Tribune
TREASURE VALLEY — New business startups are springing up across Canyon County this year, a recent Colliers International report said.
Unfortunately, some of these companies have already failed in their first six months.
“The majority of businesses that do fail, fail within the first year,” said Dan Long, a business consultant and president of Sandbox Group.
What causes young, hopeful entrepreneurs to close up shop so quickly?
It comes down to poor planning, Long said.
“Probably the number one reason why businesses fail is because the entrepreneur is trying to do too many things,” Long said. “They don’t know their skill sets.”
A person may be passionate, but that doesn’t mean he or she could start a successful business from their hobby, said business founder Greg Mayes, a financial adviser with Premier Alliance.
First year tough for new businesses
NAMPA — The excitement of starting a business can lead entrepreneurs to overestimate how profitable the business will be. As a result, they’re not always financially prepared to keep the business running after the first few months.
Owners should ask themselves, “How much money will I need to survive my first year with 50 percent of the results I expect?” said business consultant Ron Price, president of Price Associates.
“We recommend new startups have at least six months of cash needs before they start,” he said. “Even at this level of funding, first-year entrepreneurs often have to forgo a salary.”
Shawn and Cassidy McKinley are experiencing the tight budget of new business owners.
“We are definitely not making bank,” Cassidy said, smiling. “But we are able to pay our bills, which is all that we ask for and all that we hope for.”
Having never owned or managed a company, the couple opened Messenger Pizza & Brewery in downtown Nampa 10 months ago. They’ve had to get creative in overcoming unexpected financial obstacles.
“We didn’t have a stash of money or anything,” she said. “We got a lot of our things … like tables and chairs ... through donations.”
The McKinleys are passionate about making pizza and saw a need for a pizza-by-the-slice restaurant in Nampa, Cassidy said.
But on the financial and business side of things, they’ve had to face obstacles they didn’t foresee — such as the pizza ovens breaking down after four months.
“It’s definitely taken a lot more work than we thought,” Cassidy said. “We have 10 employees to manage, so that’s like a whole ‘nother world.”
What gets the McKinleys through the difficulties is having more experienced business owners as mentors, she said — a strategy that Dan Long, president of Sandbox Group, and Price recommend.
The McKinleys often meet with the Flying M and Brick 29 owners.
“I’ll (ask), ‘How do you guys handle this? Who do you go through for payroll stuff?’ Stuff that we really didn’t consider, especially not at the beginning,” Cassidy said.
To avoid downfalls, nothing is more important for a new business owner than to meet with a mentor, Long said.
“Even if it’s for a cup of coffee, find a mentor,” he said. “Find someone (who) can help you with that vision and that plan, and make sure it’s realistic.”
Greg Mayes, CFS, CLTC, Premier Alliance Financial Companies, emphasizes keeping it “realistic.”
“The need for capital is greater than the supply of capital,” Mayes said. “Right now very few banks will lend you the money that you need to make a profit, so you have to go about it very slow.”
Entrepreneurs also have to take a slow approach to earning clients’ trust, Mayes said.
“I did it the old-fashioned way. I just did one day at a time,” he said. “Build references one referral at a time.”
Advice to entrepreneurs:
- Put clients first – even if it doesn’t immediately earn your company money.
“I think it’s very, very rare when someone will put effort in and give the money away because it’s what’s best for the clients. But there has never been a time when I’ve suffered from that. And that’s the reason I’m still around and will always be around.” — Greg Mayes, CFS, CLTC, Premier Alliance Financial Companies
- Don’t overwork yourself.
“Shawn and I have set ourselves a set schedule, so we really try not to overwork ourselves. Because before we were both working 60 hours a week each, and now we really limit ourselves to just 40 hours. … Then we can step back and see more of the full picture.” — Cassidy McKinley, co-owner of Messenger Pizza & Brewery
- Don’t mimic larger competitors.
“Instead, use their size against them by building more personal, response relationships with customers and potential customers. Know your ideal customers, what is really important to them, and design what you do around these customers.” — Ron Price, president of Price Associates
- Stay flexible.
“I wouldn’t get into a 10-year lease. I really recommend a month-to-month arrangement, or no more than a year, because your business model is going to change, and your location may need to change.” — Dan Long, president of Sandbox Group
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