Small Business School
Getting started with your own Small Business
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  1. Should I start a business from scratch?
  2. Should I buy an existing business?
  3. Should I buy a franchise? An evaluation.
  4. Writing a Business Plan.
  5. Four types of legal incorporation.
  6. Finding Money: Part I
    Finding Money: Part II
  7. Marketing Techniques.
  8. Doing Business with the Government.
  9. Staying on Track.
  10. The People Part of Business.
  11. The Family Business.
  12. Networking.
A little guidance from other small business owners to help you with your small business today!

1. On starting a business: from scratch or acquisition?

Should I start a business from scratch?

Not everybody can start a business from scratch. Before you try, you should answer "yes" to the following questions:

  • Do you need to say, "I started my own business with no help from anyone?"
  • Do you believe your idea is unique?
  • Do you believe you have a unique spin on an existing idea?
  • Are you so sold on your idea that you're willing to invest your own money in it?
  • Are you willing to develop your own systems?
  • Are you willing to live with uncertainty long enough for the public to recognize a need for your idea?

Topic for discussion: As a class, make a list of businesses which are less than five years old and are doing well. Now, make a list of businesses you think could be started today and succeed.
For more study on this aspect of starting. Read the sections in the opening chapter of Hattie's book, Beating the Odds, and read these particular transcripts from the shows or this general discussion, especially Step 1, Step 2 and Step 3.

2. You can be a business owner by buying an existing business.
You can find businesses for sale just like you find houses for sale. There are business brokers just as there are real estate brokers, and they are listed in the phone book. An advantage of buying an existing business over a start up or franchise is that you don't need as much cash up front because the owner will usually "owner-finance" the deal. Before you buy a business, you should say "yes" to the following questions:

  • Do you understand why this business is for sale?
  • Do you have ideas to improve the business beyond where it is now?
  • Have you determined if the business can make money with you as the owner?
  • Can you afford the down payment?
  • Is this the kind of business you really want, or, do you just think it will make you money?

Actions:

  • Find a business broker listed in the phone book. Call him or her and tell them you are doing research and would like to learn how to go about buying a business. Be careful; this is only the research phase. Don't be too quick to jump into anything that your heart does not tell you, "This is it!"
  • Read these study guides and transcripts from episodes of the show that we have done about businesses that were bought and turned around. Particularly note the way each of these people financed that business.

3. Should I buy a franchise?  An Evaluation Process.

a. Buy a franchise if you want to be in business for yourself, but not by yourself.

Owning your own business can be lonely. Even when you are surrounded by employees you may feel alone because you shoulder the weight of the business by yourself. If you own a franchise, you have access to other owners. You can contact people across the country who share and understand your business problems. There is always "a shoulder to cry on." And of course, the corporate staff is there for you. The franchise system provides psychological support which can be very comforting.

Topic for discussion: What is the difference between being "alone" in business and being "lonely" in your own business? (Being alone does not necessarily mean you are "lonely." Being "alone" is being by yourself. Being "lonely" is being by yourself and feeling a sense of "incompleteness" that feels like it can only be remedied by a partner. To be a leader and make the best decisions for your business, you must be willing to stand alone. Other people can support you, but they cannot complete you.)

b. Say "Yes" to these questions before you buy a franchise.

  • Do you want to be part of something big?
  • Can you afford the price?
  • Are you teachable?
  • Do you want access to advice?
  • Is a proven system important?

Topic for discussion: What value does associating with a franchiser whose name is recognized by much of the marketplace offer you? (Tapping into the advertising and marketing of the franchiser's name is a big bonus. Business will probably come your way more easily, as least in the beginning. For example, at first people may be more likely to list their house with you if you are the local franchise of "Century 21" than they will if you are "John Smith Realty." )

For More: Go to these stories about successful franchises of the '90s. Two very successful franchises are Auntie Anne's Hand-Rolled Pretzels and FastSigns.

For further evaluation, be sure to study the references on the home page of the International Franchise Association.

4.Writing a Business Plan.

4a. Writing a business plan will force you to focus your ideas. In several shows, we focus on business plans. In almost every show, the owners talk about the importance of a business plan. Rhonda Abrams, the author of "The Successful Business Plan: Secrets and Strategies," talks about the power of putting a business plan in writing. She suggests that we are afraid to write down our ideas because we believe our dream might evaporate under scrutiny. Actually, the opposite should happen. The more you write about your ideas, the clearer the path to their achievement becomes.

Topic for discussion: What are some other reasons a person might not want to put a plan in writing? (Examples: Doesn't think he has time; thinks he can keep everything straight in his head; or, feels unable to write well. Remember, a written plan is not going to be graded, so, don't worry about spelling and punctuation-- just write.)

Action for the class: Go to the business plan section of this website or go to the library and look at all the books you can find about writing a business plan. There are many. Notice the similarities and differences between authors. When you're ready to write a plan for yourself, you now know where to find a guide.

4b. A written plan can help you obtain financing. By presenting realistic projections in your business plan, you will show a lender that you have your feet on the ground.

4c. A written plan helps you stay on track. It's been said, you can get where you want to go more quickly with a map. The same is true of a written mission statement. It will keep you on track, simplify decisions, and offer inspiration. A good example is Two Hands Inc.'s mission statement, "You make a living by what you get, you make a life by what you give." The written plan can also help you attract the kind of employees you need. When you can show another person your plan and how they will fit into it, you have a good chance of winning them as an employee.

Topic for discussion: Together, write several mission statements for businesses you might want to start. (Examples: "to provide my customers with fast, healthy food made from the freshest ingredients available;" "to 'do it right the first time' and deliver ahead of the customer's expectation;" "to design with distinction.")

4d. A written plan is never complete because business evolves continually. Just as Rosen & Chadick have changed through the years, all businesses change. The written plan is really a continuing process.

We did a stories with references to outstanding business plans:

  • Lori Davis got an SBA-backed, first-time loan from a bank primarily based on her business plan.
  • Paul and Margaret Quenemoen of Jagged Edge Mountain Gear use their business plan to raise money and as an operations guide with all the staff.
  • The business plan of Cross Timbers Oil & Gas eventually became the basis of their prospectus for an IPO.

5. Four types of legal incorporation by attorney, John Patrick Dolan.

#1. Sole Proprietorship

As a sole proprietor, you can have a business name, other than your own name but you are liable personally for all of the business' obligations. Establishing a sole proprietorship is simple. All profits pass through to you personally and are reported as income on your personal tax return. The drawback is: you are the business. Therefore, if someone sues you, the court can "go after" your personal assets.

#2. Partnership

You and one or more people form a business. It's like a marriage. Unless decided differently, each partner owns an equal share of the assets and shares equal responsibility for all debt. This means that if your partner smashes the company truck, you are responsible for your portion of the damages. Hopefully, no partner would make you pay for his or her accident, but, legally you are responsible. Some say that the only reason to take a partner is for the cash contribution he or she can invest. Why? If the partnership goes sour, it can be difficult to "unwind." Setting up a partnership is simple, however, you should have at least a letter of agreement so everyone knows "who's on first," that is, who is responsible for what.

#3. Corporation

Most attorneys believe that this is the best way to organize a business. The corporation becomes a separate tax paying entity, so, you must file a separate tax return. However, if someone sues the business, they can't get to your personal assets. You can do all of the paperwork yourself, however, it is best to use a service or an attorney to set up your corporation.

Additionally, if you decide to "go public" you must incorporate because there is no other legal form which allows an unlimited number of shareholders.

There's a special type of corporation called a "subchapter S." This form offers you the personal asset protection of the corporation and the income pass-though opportunity of the sole proprietorship.

#4. Limited Liability Company

This is rather new and not available in all states yet. However, it is like a corporation in that you are protected from personal liability. It is similar to the subchapter S because you can pass-through the profits on your personal tax return, but, you can include more than 35 shareholders which is the limit on the subchapter S. This is a hybrid which can be useful to some, but not all businesses.

Topic for discussion: Once you organize your business legally, can you change your mind? (Yes, and most do. Many businesses are organized initially as a sole proprietorship or a partnership then as the business grows, re-organize as a corporation.) If a business owner moves from a sole proprietorship to a corporation, what is the first thing the owner should do on the way home from the lawyer's office? (Go to the bank. Any business loans that are in the name of the owner should be reissued in the name of the business. Why? To protect your personal assets.)

6. Finding Money, Part I.

6a. Bankers are reluctant to loan money for a start-up venture. We visit with Abe Bernstein who tells us that bankers base decisions on facts and ratios. Their national trade association is called the Risk Management Association. This group annually compiles the results of over 150,000 loan documents shared by over 3000 banks.

They know who has the greatest probability for success.

If you have never owned a business before, they have no way to evaluate your potential for success. Therefore, if you secure a loan for a start-up venture from a bank, it will not be a business loan, it will be a personal loan. To interest a banker, you must be able to explain both the opportunity and the risk involved in your idea.

Most entrepreneurs are enthusiastic about the opportunity, but unrealistic about the risks. If you present the risks openly and honestly to the banker, then explain how you plan to manage those risks, your chances of getting a "yes" will increase dramatically.

Topic for discussion: What kind of risks does an entrepreneur need to think about? (Examples include: product obsolescence, management stability, insurance adequacy, warranty liability, pending or potential litigation, product liability, environmental liability, customer concentrations, property lease renewals, management health, labor contract renewals, credit.) With all of this risk, why would anyone start a business? (Because the entrepreneur believes the opportunity is so great he or she can manage all of these risks and ultimately create a great business.)

6b. For start-up cash, find a bank designated by the Small Business Administration as a "preferred bank." This kind of bank focuses on small business and is more savvy about assessing risk and opportunity.

Topic for discussion: How do you find a preferred bank? (Call the closest Small Business Administration office an ask which banks in your area are "preferred." For the office in your area, see the blue pages in your phone book.)

6c. Venture capital is an option for many start-ups. Venture capital companies look for investments that will return high yields. To invest in you, they will take an ownership position in your business and often will be involved in decision-making. Most venture capital firms specialize, so, begin by finding the firms which focus on your industry. You must have a written business plan, however, it doesn't have to be hundreds of pages. It should describe what you want to do and how you expect to do it. If you need to hire an attorney and a CPA to guide you, do so. This is money well-spent.

Topic for discussion: When is venture capital the best way to fund your idea? (When your idea has outstanding growth potential. For example, venture capitalists are not interested in a mom and pop shop unless they believe you can duplicate this in hundreds of locations.) What is the upside of venture capital over a bank loan? (Venture capitalist tend to be more entrepreneurial in their thinking that do bankers. They will likely give you more money than you request because they are envisioning a very big company taking shape.) What is the downside to venture capital? (You give up ownership. The venture capitalist may want 49% of your business in exchange for his investment.)

6d. You can raise equity capital yourself. If you ask your friends to invest in your idea, in a way you are raising your own venture capital. If you are lucky enough to get money from more than 35 individuals, the law requires you to do some paperwork. The easiest mechanism is to use the Small Corporate Offering Registration.

Topic for discussion: Why would anyone want to raise their own venture capital when they can do a SCOR and keep more of their equity?

For more: A section of the site that is all about money, our first show about money, When the Banker Says, No and our second show, a discussion about the risks of using Other People's Money.

Part II: Finding Money.

Doug Carleton offers 12 creative ways to raise money/preserve cash flow.

#1. Buy an existing business.

In most cases, the owner of a business knows that in order to sell it, he or she must carry the financing. This is a win-win situation because the buyer only needs a down-payment, doesn't have to go to a bank, and can structure the payments so that he can draw a salary to keep him going.

#2. Borrow from suppliers and vendors.

Once upon a time there was a young man named Bill Gates who had a simple operating system idea, but he needed money to develop it. He didn't go to a bank, he went to a company who would benefit from the product being developed. He went to IBM and they funded his start-up which is now called, Microsoft.

You can do the same thing. Think of who will benefit directly from your business. Go to those companies with your plan and you may be as successful as Bill Gates. Suppliers and vendors can become your best friends because, if you succeed, they succeed.

#3. Offer an investor revenue sharing.

A revenue sharing note is a royalty on your sales. An investor may like your idea and decide to loan you money if you agree to compensate him with a percentage of your sales. Rather than bet on the profits, this way the investor shares in the sales. In this relationship the investor would not receive any ownership, just cash payback on the loan plus the interest rate you are able to negotiate. This financing tool is complicated so it is critical to have an attorney prepare the document.

#4. Subcontracting.

Instead of hiring employees, subcontract the work needed to fulfill your customers requests. A general building contractor is a classic example, but the concept can be adapted to any business. If you can't buy a warehouse and hire people to ship your products, find an existing warehouse that does shipping that will ship your product on a contract basis. This is a great way to keep your expenses low and find specialists who can work for you cheaper than you could ever do it yourself. A good example is a direct mailer. He has invested money in specialized equipment that you would not want to purchase, but by serving many businesses, he can amortize his costs and offer competitive prices to each customer. You get quality work at a reasonable price.

#5. Third-party Guarantee or collateral.

Here we're back to the potential investor who doesn't have the cash right now. The investor goes to the bank with you and guarantees the loan, or supplies the collateral for you. In most cases, the investor takes a flat fee and does not share in the growth of the company or become a partner of any kind. The classic example of this arrangement is when parents do this for their children. Parents are one of the major sources of funding for business start-ups.

#6. Joint ventures.

A joint venture is a specific legal entity to pursue a particular project. As a financing tool, two, three or four small businesses can form a joint venture to pursue a contract they could not win on their own. For example: a graphic artist, a copy writer, and a photographer make a joint presentation for a certain piece of work. This is not the traditional "financing" mechanism, however, it is a way to win work to create cash flow. This helps all the businesses grow, which in turn helps them secure future financing.

#7. Leasing.

Leasing is simply a way to save cash. Instead of a large up front cast investment, most leases require the first and last month's payment.

#8. Barter.

You trade, or barter, your service or product for the service or product you need, so be creative. For example, the owner of a specialty ketchup company never writes a check to her accountant, she sends him a case of ketchup.

#9. Tenant-sharing.

Tenant-sharing is a way to give the business owner credibility in the eyes of a lender. You can get together with two or three others in related businesses and share space. This creates the image of a larger organization which implies stability to a lender. Home-based businesses generally are not perceived by lenders as serious as a business in a commercial location. If you have a location outside your home you may be given more consideration by a banker or lender. This is not fair, but that's the way it is.

#10. Contract Financing.

If you have a contract for work, there are some lenders who will use that contract as collateral to give you a loan. It will be above the prime rate, but if you need cash, you may be able to get it this way.

A great deal of money has been raised from the promise of future business. A signed contract from a credible customer is considered collateral by a bank. If you can't find a bank to give you a loan on your contract, start knocking on the doors of private investors. They're difficult to find but they are out there. Some are individuals who like to lend to small business owners and there are small pension and profit sharing firms who will consider this type of investment.

#11. Future Commitment.

You can obtain a letter of intent to do business with your firm from a potential customer. This letter is not as good as a contract and banks will not loan you money on this type of arrangement. However, private lenders may consider this. The larger and more credible your potential customer is, the better are your chances to obtain a loan.

#12. Credit Cards.

Credit cards can provide a revolving line of credit for the owner where a bank may be unwilling to offer him or her a line of credit. For example, if you have 10 credit cards, and each carries a $5,000 credit limit you have $50,000 worth of credit available to you. You must make the payments on time and when cash comes in, you must pay off the cards. If you fail to do this, you can find yourself in debt with no more credit available to you. This can be a life-saving technique for companies that have a 3-6 month gap between the time they purchase materials and the time they can collect on their own finished work.

Topic for discussion: With all of these alternatives for financing a business, why would anyone use money as an excuse not to get started? (Fear of failure.)

For more: The episode of the show from which this information came (with links to Doug Carleton) are a click away. A section of the site that is all about money, our first show about money, When the Banker Says, No and our second show, a discussion about the risks of using Other People's Money.

7. Marketing Techniques.

Jeff Slutsky develops a three-month marketing plan that costs almost nothing to implement. Jeff's philosophy is, the less money you have to spend, the more you need to focus your marketing efforts. He describes how to saturate your neighborhood (any community of interest) by letting other people advertise for you.

Goal: To dominate the neighborhood.

7a. Use cross promotions. This idea is to partner with another local business and advertise for each other. One way is to print inexpensive certificates offering a "free" item from your business that your partner will hand out to his/her customers. You reciprocate by handing out his/her certificates to your customers. This way you share customers.

Topic for discussion: Create a business for you and one for your "partner." Develop two cross promotions -- one for each business.

7b. Use community involvement. The idea is to give money to the community in exchange for free advertising. An example. You agree to donate a percentage of your sales during a certain period of time to the community project. For your donation, community volunteers agree to advertise and promote your business. You make money that you would not have made, and the publicity costs you nothing.

Topic for discussion: Develop a community project involving your business that will cost you no more than $200 to implement. What will you offer? How will you make your offer (e.g. flyers, coupons, etc.)? Who will let people know of your offer?

7c. Develop an up-sell contest. The one who sells the most in a specific time period wins a prize. A variation might be to create a contest where they pass out certificates in the community designed to bring customers to your business, much like the cross promotion. The one with the most certificates redeemed wins the prize.

For more: Read through the many segments focused on streetfighter marketing as well as the more traditional marketing techniques.

8. Doing Business With the Government

8a. The federal government wants small business owners to succeed: $34B in loans per year. The Small Business Administration was formed to assist small business, and its primary service is to guarantee loans made to small business owners by traditional banks. The SBA does not lend money, it serves as a third party guarantor on loans which meet certain criteria. The SBA has a relationship with hundreds of banks throughout the country who will make loans to small business owners. Those that produce a large volume of these small business loans are called "preferred" banks by the SBA.

Topic for discussion: If the SBA will act as the guarantor on loans, why is it still so hard for small business owners to secure funding? (In the past, the typical SBA loan was $250,000, however, most small businesses are started with under $10,000 (a micro loan). These "small" loans were not worth the administrative costs incurred by the bank and the SBA. Today, that is different. There is a new program called a "low-doc" loan which does consider the smaller amounts.)

In addition to assisting with capital formation, the Small Business Administration offers two programs which feature one-on-one assistance to small business owners or individuals who want to start a business.

The Small Business Development Centers are located in over 1000 colleges and universities throughout the country and the Counselor's to America's Small Business has over 300 locations. To find the services nearest you, call 1-800-8-ASK-SBA, or, check the blue pages in your local phone book.

Topic for discussion: What are the advantages of one-on-one counseling? (There are over 5,000 books in the library of congress under the category of "small business." There are video tapes, audio tapes, software programs and classes taught everywhere about how to start a business. However, there's nothing better than sitting down with someone who can help you think through your own idea.)

8b. The United States Government is the world's largest customer and is required by law to purchase goods and services from small business owners.

One way to learn how to do business with the government is to work for a company which does exactly that. Another way is to order two publications from the Superintendent of Documents, US Government Printing Office, Washington DC 20402. First, either go on line to ProNet or order the US Government Purchasing and Sales Directory then order the Commerce Business Daily. The directory tells you who buys what and the Commerce Business Daily notifies the public of procurements valued at over $25,000.

Topic for discussion: Why do business with the government? (Because it is profitable. Be prepared, however, because the potential for making profit means stiff competition among providers. Secondly, the government might be one of the very few customers for your product. For example, research in food packaging safety. Third, the government is a "solid" customer.) With the downsizing of government, should you attempt to go after this type of business? (Yes, in fact, now could be the perfect time. If you are very small, you may be able to underbid the existing providers.)

For more: Review the appropriate episodes of the show that we did about the people who have benefited from programs from the SBA.

9: Staying on Track

Track expenses and keep a current balance sheet.

Categorize expenses so that you can see if you are spending what you thought you were going to spend on what you thought you were going to spend. Keep a balance sheet so that you know what liabilities as well as what revenues are in front of you. Check these items at least quarterly.

Topic for discussion: Why do so many business owners avoid accounting and accountants? (Many small business owners aren't interested in the process, so they procrastinate. Also, they may think it is too expensive to hire a bookkeeper or accountant and that they will do the books themselves. Often total panic sets in on April 14 because the good intentions of doing the record keeping are lost amid the daily pressure of running a business.)

If you decide to use your computer to keep track, you must choose accounting software carefully. Select a software program that you can understand and feel comfortable using. If your program is too difficult, you won't use it. Determine what you need to track, then look for a software package that will do what you need. If you are not sure which software package is right for you, consult your CPA for recommendations.

Topic for discussion: Should you decide that you cannot or do not wish to handle your own accounting, what are your options? (According to Craig, many small business owners tend to avoid the process altogether, which can be disastrous. the best option is to "out source" your accounting. In other words, hire an independent accountant to keep track for you.)

For more: Review the show that focuses on Staying Power and focus on the chapter, Indepth Understanding of the Financials.

10. The People Part of Business

Marty Edelston runs one of the most productive companies in America. His philosophy regarding employees is unique.

10a. Ask every employee to give you two good ideas per week about how they can operate more effectively or how their department can operate more effectively.

Topic for discussion: Why would asking people for ideas increase their productivity? (People whose opinion is sought feel more valued than those who are just told what to do. Ideas are heard by the owner encourage more ideas. In Marty's company, if these ideas save money or increase sales, the employee who offered the idea is rewarded both financially and emotionally.)

10b. There are no managers at Boardroom who just manage. Editorial managers also edit, design managers also design.

Topic for discussion: Is a "working manager" more respected by his employees than one manager who only manages? (Yes. The working manager understands the difficulties the workers face. The working manager sets quality standards by example. Remember Jim McEachern?)

10c. Ask anyone you interview what they are currently reading.

Topic for discussion: What does Marty learn with this question? (He gains insight into a person's lifestyle. Since Boardroom is in the publishing business, undoubtedly Marty would be reluctant to hire a person who does not read. But really, it doesn't matter what business you're in: an employee who reads is a better employee than one who does not read.) How do you find people who read? (Be a reader yourself. Mark Moore, in Series 100, thinks small business owners should read as much as possible. Philadelphia business owner Jim Coane buys books for his managers. Everyone reads the same book then they discuss how the ideas learned from the book apply to their business.)

10d. Fire slowly. We have heard just the opposite as well, "Hire slowly, fire fast." But here, Marty relates from refreshing attitudes about the dignity of every person. There are three ways to get fired at Boardroom: dishonesty, impoliteness or incompetence. The first two are "cut-and-dry." When it comes to incompetence, Marty assumes first that the person is in the wrong job and he tries to find a position in which the person can succeed.

Topic for discussion: Why does Marty take so much time to find the right place for a person? (To achieve the goals of Boardroom, Marty knows that he must have great people. Most of his employees are the age of his children, and he takes a "fatherly" approach. As a result, he tends to nurture his employees and is patient with their efforts. Heliodoro Valadez, in Series 100, talked much about his employees being his family.)

10e. Compensate above the market. Marty pays people more than they could earn in similar positions at other publishing companies. He supplements people who have specific short-term money problems, he pays bonuses, and he includes employees in the profit-sharing.

Topic for discussion: Is Marty generous? (He says, "No, I'm not generous -- I'm fair." In this interview he seems generous. Rather than accumulate personal wealth, he chooses to share the prosperity with the people at Boardroom so that they "live in dignity.") Marty says, "I want people to be happy." How does an employee's happiness affect their productivity? (Attitude affects all performance. The writers, editors, designers and even the shipping clerk at Boardroom have jobs to do which require technical skills. However, they also need to solve problems and think creatively. When a person is unhappy they can probably perform technical tasks. But, when it comes to thinking, generating solutions and taking care of customers, they produce a much more elegant result when they are happy.)

For more: Review the show specially focused on The People Part of business

11. The Family Business
(Click here, to go to a link with more case studies about family business.)

Dr. Nancy Upton of the Baylor Institute for Family Business in Waco, Texas leads the discussion.

11a. A family-owned business has both advantages and disadvantages.

Advantages include:

  • A fun place to work because you know the players so well and have a relationship with them already.
  • A good chance to earn a better than average salary, especially if you are a woman.

Disadvantages include:

  • A great potential for family conflict.
  • Little productivity from family members who view working for the family as a "free ride."

Topic for discussion: Nancy recommends that before children work in the family business, they first work for someone else. Why? The children will individuate, that is, become their own person, and, while working outside, they will learn fresh ideas that they can bring back to the family business.

11b. To be successful in a family-owned business, you must separate family and business.

To do this, set aside times with the family for business meetings and for dealing with conflict. Conversely, set aside special times for dealing with family issues.

Topic for discussion: According to Nancy, what are the most common areas of conflict?

Compensation, succession, and ownership issues.

If more than one sibling is involved in the family business, you must determine who will do what job. To determine which responsibilities each sibling will handle, Nancy suggests gathering all of the siblings and allowing them to develop a strategic plan to show what their roles will be. They will often work out this problem among themselves. If spouses are involved in the business, you must set ground rules for how they behave (e.g. not bringing family issues to work). Spouses not in the business must be included in family meetings and retreats so that they stay informed of the situations affecting their family.

Topic for discussion: Because of the challenges that face a family-owned business, statistics show that less than one-third of these businesses make it to a second generation, and less than one-half of those make it to a third generation. According to Nancy, what are the three greatest challenges a family-owned business faces?

Communication, lack of planning, and lack of vision.

More from Dr. Nancy Upton: Baylor's Institute for Family Business was established in 1987 to research and understand the key factors for a healthy family business.

12: Networking

12a. Join your local Chamber of Commerce. Chamber executive Laurie Winsor believes that chambers are the best way for business owners to give voice to important business issues. Chambers are also a great way to network, make contacts, gather business leads, learn new information about business, and develop a presence in your community as a business person.

Topic for discussion: Where can you find out about local organizations that might be of interest to you? (Call your local chamber of commerce for a list of organizations that meet in your area. Call other people in your industry for advice about what groups and organizations are important for you to join.)

12b. Join your trade association. Trade associations are made up of people in the same or similar business or industry. They share the same issues and problems. No matter what your situation, someone in your trade association has already faced that issue and can offer you advice. Additionally, many trade associations form a political voice to lobby for or against issues affecting their particular business or industry. Finally, you can become friends with people in your business all over the country whom you can call when you need help.

Topic for discussion: Why would a business owner not want to join associations and groups? (Membership takes too much time. On the other hand, membership can save you time. When you need help on a problem, you know people who either know the answer or can help you find an answer.) How do I know if the association membership is really benefiting me? (That's probably the wrong question to ask in the beginning. Join a group with like interest, volunteer to serve on committees or help the organization achieve its goals. In a couple of years, you will know if the group is helpful. If you don't put something into the group, you will get nothing out of it.) Is Young Entrepreneurs Organization a trade association? (No. It is a group of business owners with similar traits. Members must be under 35 years of age and their business must have a minimum of 2 million in sales. This type of group does not replace membership in a trade association, it augments it.)

Quote: Your involvement in even one established business network could make the difference between success and failure. Involvement could double, triple or even quadruple your chances for success.

-- Barbara Brabek, Homemade Money

For more: Review the study guides and transcripts of these episodes of the show about family business.We invite your questions or comments.


Small Business School
Small Business School
Small Business School

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