Every great business starts with an idea, but actually growing that idea into a viable company has its challenges—such as getting the financial support you need. No matter what kind of business you want to scale, access to advisers and experienced business owners can be a valuable tool.
When Logan Shinholser, owner and CEO of the Contractor Growth Network in Charlotte, North Carolina, graduated from college in 2014, he started providing marketing services for his father’s pond construction, repair and cleaning business in Maryland.
“I moved to San Francisco to work at Indeed and was doing digital marketing on the side for my dad,” Shinholser says. “When my father’s friends saw how much the marketing campaign was doing for his business, they asked me to do digital marketing for their businesses.”
Like many entrepreneurs, Shinholser didn’t expect to be a business owner, especially a few years out of college. Eventually, he quit his job with Indeed and became a full-time digital marketer.
“I saved up six months’ of expenses and built up a pipeline of clients before quitting my full-time job,” Shinholser says. “Now I have 15 employees and have worked with more than 400 clients on marketing strategies, website design, videos and content marketing.”
Write a business plan
While Shinholser didn’t need investors or to borrow money to fund his business, his savings were an important element of his success.
“Every business has different startup costs, but they all have one thing in common: having a financial cushion,” says Bob Marshall, the business growth and strategy executive for the Small Business Development Group at Wells Fargo Bank. “First, you need to understand what service or product you want to sell and figure out who your customers are. You need to know what your costs will be and whether your business is scalable.”
A written business plan is crucial to clarify your plans and your finances, Marshall says.
“You need to know the cost of your business, how money will move through your business and how you’ll become profitable,” Marshall says. “Wells Fargo offers a free business planning resource on our website, but you can also contact a CDFI [Community Development Financial Institution] in your area. Colleges and universities often have free business planning resources, or you can ask your chamber of commerce.”
Shinholser wrote a business plan before quitting his full-time job.
“My father-in-law told me to write a business plan just so a bank wouldn’t laugh at me if I needed a loan, which was great advice because it made me think through my market and highlighted what I didn’t know about my business,” Shinholser says.
Build your support network
Shinholser says his business is thriving because of the support of mentors and Mastermind groups. Mastermind groups, which are also sometimes called an “advisory board” are small groups of business owners that provide each other with support and the expertise they’ve gained.
While Shinholser was fortunate enough to have his father and father-in-law give him advice about starting a business as well as his Mastermind groups, not everyone gets that support—or finds success. Nearly 20% of businesses typically fail in their first year, according to LendingTree’s analysis of data from the Bureau of Labor Statistics, and almost 50% fail in their fifth year.
“To manage the challenges of running your own business, you need a relationship with a lawyer, an accountant and any other professionals specific to your business,” Marshall says. “It’s also smart to get to know other entrepreneurs through the Chamber of Commerce or other business networking groups.”
Marshall recommends establishing a “kitchen cabinet” or advisory board of three to five people you trust to support you and provide advice.
“Some may be business owners, but they don’t have to be,” Marshall says. “These should be people who will give you feedback on your business plan and help you define it.”
Don’t scale your business too quickly
Your advisory board can help you clarify your business strategy and adapt as your business changes and grows. They can also connect you to other resources within their network and provide feedback to help you manage mistakes.
The biggest mistake Shinholser felt he made was just “going with his gut” to scale as quickly as possible. He joined a Mastermind group that focused on coaches and consulting, but that pushed him to scale too quickly. Now he belongs to a Mastermind group of marketing agencies that help him focus on growing a healthy business.
“It was too much of a strain on my business and we lost money because of it,” he says. “We learned that the right way was to go slower and take our time to learn what our customers really needed.”
Secure financing to scale your business
Many early-stage entrepreneurs need financial support for supplies, marketing or to hire employees to scale their business.
“The Small Business Administration offers grants and loans, including microloans of less than $50,000, to help entrepreneurs get started,” says Mark Madrid, associate administrator for the Office of Entrepreneurial Development at the U.S. Small Business Administration (SBA). “The most important thing is to know the difference between loan products and what you may be eligible for depending on your business.”
SBA programs such as SCORE, which provides mentors to entrepreneurs, and Small Business Development Centers, which provide technical support to business owners, can connect people to funding sources including lenders and investors in their region, Madrid says.
Know what the different types of funding are
“Whether you choose to borrow money or fund your business with investment capital depends in some way how you feel about debt,” Marshall says. “A loan has the advantage of having terms that you can match to your needs. Once you’ve repaid it, you’re done. But the payments have to be made no matter how your business is doing. And in many cases, you need to pledge your personal assets as collateral, which could mean you would face personal losses and damage to your credit score if you default.”
If you choose to have investors to help scale your business, you don’t have to pay them dividends immediately and can avoid time-bound obligations, Marshall says.
“You can gain insight from your investors if they have experience with other businesses,” Marshall says. “On the other hand, you’re giving up some equity in your business and possibly some control over how you manage it. Equity costs more than debt because investors assume more risk.”
Marshall says business owners shouldn’t relinquish control lightly.
“What you pay back to your investors may be more than they put into your business,” Marshall says.
Connecting with a business banker and an accountant are crucial steps for any entrepreneur to build a strong financial foundation.
“You may want to think about building your business in stages if you can,” Marshall says. “Once you bring on employees, you have responsibilities to them, too. You’ll need to think about things like health insurance for yourself and any employees, along with retirement plans and other benefits.”
Plenty of guidance is available for these decisions through financial institutions, government agencies and nonprofit organizations for every stage of business planning.
More resources to help you scale your business
- The SBA’s 10 Steps to Start a Business summarizes the decisions that need to be made and where to get support.
- The SBA’s Funding Your Business section on their website explains the various financing options for entrepreneurs.
- The SBA’s Women’s Business Centers focus on supporting female entrepreneurs and addressing challenges they face such as child care.
- The SBA’s Veterans Business Outreach program addresses the unique challenges of veterans who want to start a business and helps them with education and advice.
- Wells Fargo’s Small Business Resource Center provides resources for small business owners to help start, manage and grow their business.
- Healthcare Practices | Wells Fargo helps health care practitioners to get practice-specific tips for managing their business.
- Women-Owned Business Resources | Wells Fargo provides resources for women business owners to help them run their business, manage their money and build their network.
- Diverse Small Business Resources provides guidance, resources and tools to help diverse small business owners thrive.
- The Opportunity Finance Network provides a searchable database to find Community Development Financial Institutions, which support small businesses in low-wealth communities with financial support, coaching and advice.
- Mastermind groups can be found by Googling “Mastermind groups near me,” starting your own group of business owners or checking with local business organizations.
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