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Can An Underfunded Small Business Startup Be Successful?

A main reason many small businesses fail is that they were started without enough operating capital.  So, is it possible to start a small business with insufficient cash up front and still be successful?

Yes, says a former newspaper journalist who opened a business-writing service in St. Petersburg, Florida, in 1981 and operated it profitably for 10 years before he decided to sell it and retire.  He not only overcame the problem of being underfunded, but he also beat the odds of small business survival.  According to a recent report by the Small Business Administration (SBA), seven out of 10 new small businesses make it through at least two years and only 51% are still going after five years.

Many startups that do fail suffer from poor management.  New business owners frequently lack expertise in finance, purchasing, selling, production, and hiring and managing employees.  Yet for this former journalist, most of those shortcomings weren’t issues. He understood print journalism and had been employed as a mid-level manager at several metropolitan newspapers.

He did find, however, that he lacked expertise on the financial side of running a business.  He solved that by taking college courses in accounting, economics, and finance.  He then was able to create a business model for his writing service, and he also prepared a business plan that he presented to his bank, which then extended him a $50,000 line of credit.  “I got lucky, though, and never had to use the line of credit,” he says.

How was that possible?

“I have a very wonderful wife who is 100% supportive of me,” he says.  “She said when I opened the business that she would work and support me financially while I got our home-based business off the ground.

“After two years of living on her weekly paychecks as an administrative assistant at a manufacturing plant, I was finally able to tell her to quit her job and work with me.  It was the second smartest thing I ever did.  The first was marrying her.

“Using her office skills, she rearranged my daily work schedule in a manner that gave me much more time to write articles for business and trade magazines, which were the primary targets of my writing service.

“After one year of working with my wife, I doubled my income and had to move the business to a storefront office, where I hired a writer to help me.  After one year at that location, we had to move into a suite of offices in a corporate office park.

“There, we hired two more employees and began a wonderful ride through the joys of self-employment.  I like having to depend on myself for a living.  I couldn’t do it, of course, without my wife.

“I also got lucky again.  A friend told me that the local electric utility needed outside writing services.  He introduced me to the man who was heading up a new spin-off business for the utility.”

After intense study, the journalist was able to write with a degree of expertise about a whole new world:  the business of generating and transmitting electrical power to the entire West Central Florida area.

To write for an investor-owned business meant, however, that the journalist had to reorganize his writing company.  He always had observed ethical journalistic tenets when writing for trade magazines but he now had made a decision to write for a for-profit company, which incidentally led to a raft of writing offers by other electric utilities and utility-related companies, greatly increasing his revenue stream.

He solved his ethical dilemma by dividing his company, a sole proprietorship, into two parts: corporate writing services, and trade writing.  Such a move can prove to be a managerial nightmare but he avoided violating ethical journalistic standards by hiring a trusted former newspaper cohort as a contract employee to run the trade-writing side of the business.

“I knew him as a competent journalist who could be trusted,” the owner says of his trade writer.  “I gave him total control of all trade writing.  I never looked at his work product; that was his end of the business.  I got excellent feedback concerning his work from the editors for whom he worked.

“I did, of course, provide him with a contract that made it profitable for him, and for me.  He more than repaid me for my trust in him. Trust can go a long way in the business world.

“When I retired, I sold the business to him, far below market value.” 


INDEX
  • Now Is A Perfect Time To Open A New Business
  • Do You Know If Your Business Really Is Small?
  • 4 Estate Issues For Business Owners
  • Self-Employed? Map Out Tax Details
  • 10 Easy Steps To Take If Opening A New Business
  • To Buy Or Not To Buy: That Is The Business Franchise Question
  • Ever Considered Helping Your Adult Child Open A Business?
  • Do You Know What Kind Of Business Not To Open?
  • Do You Plan To Move Your Business To A New State?
  • Dispel These 7 Popular Myths About Retirement
  • 4 Retirement Plan Options For Your Small Business
  • Are Stocks Overpriced And Forming A Bubble?
  • 4 Steps To Creating A Dynamic Business Budget
  • Can An Underfunded Small Business Startup Be Successful?
  • What Happens If You Have Excess Capital Losses?
  • This Is Not Granddad's 'Defined Benefit Plan'
  • Despite Much Pessimism, Slow Growth Persists
  • How To Take Your Section 179 Deduction To The Max
  • Squeeze More Out Of Bonus Depreciation Deductions
  • A Common Error In Powers Of Attorney
  • For The Self-Employed: 4 Retirement Plan Choices
  • Which States Are The Most Friendly To Businesses?
  • How Economic Myths Distort Investment Outlook
  • Don't Forget About Roth 401(k)
  • REITs: A Great Diversification Investment
  • Shopping For A Bank Account That Pays The Highest Possible Rate Of Interest
  • The Twenty Top Tax Breaks In The New 2010 Tax Act
  • Investing Defensivley Does Not Mean Deserting Stocks
  • 401(k) Alternatives For Business Owners
  • Tax Court Okays Deducting Cost Of MBA
  • Employers Find Ways To Mitigate Liability On 401(k)s
  • Working Longer: What's A Post-Retirement Job Worth?
  • Slash Taxes By Swapping Like-Kind Assets
  • Transferring The Family Business To Your Heirs
  • Business Owners Get Big Tax Cuts In Recovery Act
  • Move Fast To Corral Emergency SBA Loans
  • Risk Management
  • Estate Taxes And The Obama Administration
  • Gifting A Business Can Cut Estate Taxes
  • A Little Bond Logic Yields Insights
  • Avoiding The IRA Rollover Crackdown
  • Ruling Cites Business Owner Responsibility to 401 (k) Plans
  • Ruling Cites Business Owner Responsibility to 401(k) Plans
  • How Much Is Your Business Worth?
  • Managing Cash Flow In Tight Times
  • When Times Are So Scary, Opportunities Emerge
  • Avoid Being Accused Of Insider Trading
  • Lifecycle Funds May Pose A Hidden Danger
  • Funding A Friend's Business Venture
  • Beware Of Social Security Identity Theft
  • Regulatory Guidelines Update
  • Small Business And Work Opportunity Tax Act
  • The Oil Patch Profit Squeeze
  • Free Credit Reports Available Online
  • Understanding the Importance of a Fiduciary Standard
  • Energy Systems Scale and Timeline
  • Timber As A Liquid Investment
  • Timber Facts
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • Bank Loan Funds - A Primer
  • Ethanol: Salvation or Panacea?
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • A Primer On Managed Futures
  • Identity Theft: What Documents Should You Shred Or Store?
  • The Case For Industrial Metals
  • Total Credit Market Debt (All Sectors) As % Of U.S. GDP
  • Know The Score
  • REITS: A Very Good Portfolio Diversifier, But Should You Invest In Them?
  • Does Investing Internationally Still Diversify Your Portfolio
  • Another Way To View The Current Valuation Of REIT Sector
  • Understanding Risk-Preparing For The Unseen
  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • What Is Shorting Expense?
  • How Dangerous Is A Dollar Crash?
  • How Volatile Can The Stock Market Be?
  • GMO 7-Year Asset Class Return Forecast Is Bleak
  • Too Many ''Phish'' In The Sea
  • Identity Theft In The New Year
  • Ways To Improve The Score
  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
  • Risk-Controlled Investing
  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Identity Theft: Everyday Prevention
  • Identity Theft : Help Is On Its Way
  • Identity Theft: Tips To Protect Yourself
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • Identity Theft: A Note About Social Security Numbers
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
  • A Tale Of Two Hedges
  • IRS Refuses Change Of Section 179 Election To Expense Depreciable Property
  • Small Businesses Need To Be Aggressive On Costs
  • Your Medical File Report May Need A Check-Up
  • Do It Yourself Tax Preparers Watch Out: Tax Answers From IRS Centers Oftentimes Are Incorrect And/Or Insufficient
  • Home Office Deductions: Hoops To Jump Through
  • Property Tax Challenges Should Not Be Overlooked
  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Year-End Tax Defferal Planning
  • How To Find A Great Financial Advisor
  • Is It Time To Find A New Financial Advisor?
  • What Is Risk?
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
  • Traditional Investing May Decrease Your Retirement Lifestyle
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • Businesses Receive Temporary Depreciation Bonus
  • Understanding Deflation
  • Is Your 401(k) Plan A Failure?
  • Succession Planning: Developing A Plan For Your Business
  • The ERISA Retirement Plan Law Spells Out Fiduciary Issues
  • Evaluating The Quality Of A Company's Earnings
  • Investing In Times Of Uncertainty And Risk: The Importance Of Diversification
  • Tax Issues To Consider When Buying A Long-Term Care Policy
  • Yesterday's Great Companies
  • Businesses Should Be Aware Of States' Use Taxes
  • Expanded Retirement Plan Contribution Limits Create New Opportunities For Business Owners
  • Succession Planning: Developing A Plan For Your Business



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