Avoid common pitfalls in starting your own business

So you want to open your own business.

You are attracted to thoughts of being your own boss, controlling your own working hours and fulfilling a lifelong dream.

Sounds glamorous and exciting. But you read about so many new ventures failing because of poor planning, lack of financial resources and poor management. But you have a great idea and are confident you can beat the odds.

Let's do a reality check and get some perspective from three local entrepreneurs and a banker on how to overcome some of the obstacles and successfully launch a new enterprise.

Planning ahead

Mike Scanes, owner of Printer Ink Source Inc. in Everett, recommends making sure there is a sustainable market for your product or service. "Just because you build it doesn't mean people will buy it," he said. "You need to make sure you spend time and energy researching the market you're entering."

Pat Doud, a business banker with Frontier Bank in Arlington, agreed.

He suggests potential entrepreneurs spend time developing a well-thought out marketing plan with real expenses and tons of detail. The plan should be "spot-on with your target market. You need to prove that you have customers for your product or service," he said.

Planning ahead is especially essential when it comes to balancing work and family, said Joel Starr, owner of the Tailgater Joe's in Everett.

"If it weren't for my wife, Kerri, I would not be able to do what I do. We have to be on the same page. Sometimes I don't see my kids for a couple of days due to schedules, so you need the support of your family, especially in the food and beverage industry. Kerri and I complement and counterbalance our strengths and weaknesses as business owners, parents and a married couple," he said.

Financial hurdles

Too often, Doud says, he sees business plans with overly optimistic sales projections and too little start-up cash. He recommends enough working capital to cover six months of expenses.

"Plan for the worst case and assume you won't sell any items during that first six months," he said.

Starr agrees. "You need to be conservative with your income projections and brutal with your costs," he warns would-be entrepreneurs, adding, "Cash flow would have put us out of business in one year if we had not had money in the bank and a good plan in place. I defined how much of my retirement money I was willing to invest if our opening capital was not enough."

Tom Hoban, CEO of Coast Real Estate Services in Everett, was a banker before he started his business.

"I watched a lot of businesses struggle because of cash problems. The business was profitable on paper, but they couldn't pay the bills," he says. "You learn very quickly that in any small business, cash is king."

Some businesses take longer to become profitable than others, Scanes says.

"Do your research and make sure you understand how long new businesses in your industry typically take to become profitable," he says.

Managing the business

Doud is surprised at the number of business owners he sees who don't understand the pulse of their businesses.

"They know they were busy, but they don't have a basic understanding of where the cash goes each month," he says, recommending that new business owners spend time learning the cash flow of their business -- where the cash comes from and where it goes out.

Hoban believes successful entrepreneurs must have the ability to run a profitable business, no matter what it produces or sells.

He says, "They get into the businesses they're in because they're good salespeople or real­ly like the industry. As growth comes, they find out they need to just run their business. Work on it, not in it."

Starr says he's still learning how to market his new place, Tailgater Joe's, after many successful years as owner of the Flying Pig Restaurant.

"From a marketing standpoint I've done what I felt would be most effective, but we need to do more," he says.

He's asking tough questions to ensure his business is successful.

"Is it too 'old' of a bar? Is it not hip enough? Are we not doing the right things or looking the right way?" he wondered. "I'm not sure, so I asked my crew for help."

They're working on their own marketing plan and bringing their ideas to Starr.

They agreed that it's a great place to work, and has fun music and they've even added a MySpace page about Tailgater Joe's.

They also plan to take the menu to all of the businesses in downtown Everett.

"The crew is excited about having a say, and they're making themselves money," Starr says. "It's foolish not to empower your crew -- they're the front line."

Preparation is key

Although starting a business involves many challenges, all the entrepreneurs say the hard work is worth the effort. Preparation and planning can make it easier, but remember Starr's advice.

"You're making a lifestyle choice when you take on ownership of a business," he says.

Pat Sisneros is the dean of Everett Community College's Business and Applied Technology Division. Lynne Munoz is the director of EvCC's School of Business Design. Send comments and questions to economy@heraldnet.com.