We need startups, and startups need business plan
The subject of my last column was the fact that since the first of the year, it seems our nation is experiencing a renewal of faith in our economy. Looking at the stock market’s rapid rise and the recent activity in private business, it is obvious there is willingness on the part of corporate America to invest or reinvest.
I also stated that this is very apparent regionally, shown by the activity experienced within the two loan pools administered by the Chamber — the Amsterdam Downtown Association for Business (DAB), and the Gloversville Economic Development Corporation (GEDC).
We have had more activity and application requests in the past three months than in the entire two years prior. And, what is more amazing, three more requests came forth since that last article in the paper.
I know it seems that I’m going in that direction, but my intention is not to rewrite my last article, just to give a little background for my current subject matter.
What is happening today is surely a great sign for our economy. According to CNN Money, new startup businesses were at a 40-year low in 2014, at only 452,835. While this may seem like a lot, it must also be noted that according to Bloomberg, eight out of 10, or an astounding 80 percent, of startups, crash and burn within the first 18 months, and that has been a fairly consistent statistic over the years.
Start-ups are essential to America’s economic health, and the reason is quite simple; fewer new startups mean fewer new jobs. There has been a slight uptick in startups since 2014, and maybe this year will be a boom. But the number of failures needs to be reduced.
From my own observations from interviewing loan applicants, I have found almost all are excited about the prospect of operating their own business. All seem quite knowledgeable about the product or service they envision providing, and virtually every one of them is completely confident in the business’ potential to succeed.
But what I also find is that, unfortunately, so many have no business plan. Not enough people understand the basic rule that failing to plan is planning to fail.
When an individual applies for a business loan, we ask for some basic information which includes a business plan, and if currently in business, a history of the business. This information, along with an interview, helps us to determine the applicant’s ability to succeed and pay back the loan.
But more importantly, it shows that they have put enough time into the research that will determine whether the need for the service or product will equate to enough revenue for success. This plan should include a demographic study of the business’ region, the desire for the product, existing competition within the market area, the potential for growth, and potential dangers to the success of the business. It should also include a pro-forma profit and loss, ideally going out five years. Understanding the ability to financially grow and succeed is as important to the borrower as it is to the lender. There are also other possible issues to consider such as the need for certain licenses, regulations and what type of business is best for the situation (sole proprietor DBA, LLC, Corporation, etc.). From the 1970s through the mid-2000s, new business growth was booming with the creation of 500,000 to 600,000 startup businesses created annually, and then the great recession hit, stalling that process.
Entrepreneurship is paramount to America’s economic vitality and extension.
The mission of the Fulton Montgomery Regional Chamber of Commerce is to support our region’s economic growth. If you’re considering starting a business, or growing your current one, contact us at (518) 725-0641 or via email at firstname.lastname@example.org. We will certainly do our very best to guide you in the right direction. Your success is our success.
Mark Kilmer is the President and CEO of the Fulton-Montgomery
Regional Chamber of Commerce.