Center answers questions for small business owners
Just because someone has a good idea doesn’t mean they can make it a successful business, said Frank Prante, director of Logan’s Small Business Development Center (SBDC).
“Usually single products, unless they are quite significant, are not a large enough base to start a business on. I would suggest that if someone wants a business, they have a good variety of product or service offerings,” Prante said.
Prante said someone called him recently wanting to start a soap-making business.
“There is a quote, ‘Any fool can make soap, but it takes a smart person to sell it,'” Prante said. “That was my reaction, you probably make very good soap, but that doesn’t necessarily make a business.”
For those who are starting a small business or already own one in Utah, feedback and entrepreneurial education is just a step away at the SBDC, and the service is free. Established in 1980, the center at Utah State University was one of the first regional centers established, according to the USU/SBDC website.
Prante said the center sees about 160 people a year. The center is funded by the federal government under the Small Business Administration (SBA), the state of Utah, and USU, according to the website. Utah’s SBDC has a network of 11 regional centers throughout the state.
The Logan center serves Cache and Rich Counties, as well as clients within a reasonable proximity in southern Idaho, and areas of Box Elder County. The center is especially dedicated to minorities and disadvantaged people, according to the Utah SBDC pamphlet.
Prante said the SBA defines a small business as less than 500 employees. He said the types of businesses they help are manufacturers, retailers and services.
The center provides business plan consulting, cash flow projections, financial analysis, and problem solving, according to the website.
Prante said while they can help improve advertising, they are not advertising experts. He said they don’t help set up websites, but they can help a site come up higher in online rankings. Also, the SBDC does not provide legal or tax services, according to the website.
Why should small business owners or those thinking of starting one visit the SBDC? Prante said the SBA has found a failure rate of 35 percent in businesses in their first four years. To try to help small business people overcome this, the center tries to teach flexibility.
“I think one of the biggest problems is someone who is not flexible. They don’t adapt and change according to their environment,” Prante said. “For example, people should realize the money doesn’t always come in right away, even if you make the sale.”
Prante said while it usually takes 30 to 60 days to collect the money, it could take 120 days.
“They don’t have to be good business people in terms of knowing a lot about business, they have to just be willing to learn and be flexible,” Prante said.
He also said a Stanford University study showed if a person had five or more years of business experience, not necessarily all in the same industry, they had a 92 percent success rate in starting a small business.
Prante said these people understand they need three perspectives to be successful: that of a technician, the person doing the job; that of an entrepreneur, to know where the business is going; and that of a business manager.
An example of a woman who had only the skills of a technician came to the SBDC “practically dead,” Prante said.
“She’d get up at four in the morning and bake bread all day, and then go to the store all day and work until late. She was not getting much sleep, and she did not have a manager. She was killing herself,” Prante said.
What this business owner didn’t know, Prante said, is if a business has employees, they are more likely to succeed. It can be complicated to have employees because there is more paperwork, including taxes, he said.
“Having employees frees up their time to focus on business aspects they should, like improvement,” Prante said.
This topic recently came up for Prante when an owner came in after his manager said he should file for bankruptcy for his manufacturing company. Prante said the center did a financial analysis of his business, even though it had already been done, but did it differently. Prante said they did it by product line and not just overall sales and variable costs.
“We could see that by reducing his costs by a few pennies and raising some prices he didn’t think he could, he could see that his business was solvent with just a few changes,” Prante said. “We wrote up a summary of what was happening and why it was good, and brought it to SBA, who was foreclosing on him, and they let him refinance his business under another name.”
One of the biggest mistakes people make when they are starting a business, Prante said, is they don’t realize they need personal investment in the business.
They may try to start a business without enough capital, so they can’t overcome the ups and downs that occur that they don’t expect, and there is always something unexpected that happens, Prante said.
He said a personal investment should be 30 percent of the business loan needed as well as collateral, like a home.
“If you don’t have that, you won’t get a loan. You have to have your own neck on the line. Different banks and credit unions are different, some will consider a startup and some won’t,” Prante said. “Those who consider it want to know it is a secure thing to invest in. The SBDC can help work with people on loans because we are aware of lots of different sources.”
“People love our work, and we get very high marks from the SBA. I love this job because I get to work with the people,” Prante said.
The center offers a business success course held in September and May that goes for eight sessions on Tuesdays and Thursdays, Prante said.
Th SBDC is located at the East Campus Office Building. For more information on the Logan SBDC, visit the USU/SBDC website.
– storee.powell@aggiemail.usu.edu