Category Archives: Articles

Owning a Business Without Being on Your Own

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Roberta Scott, Director, NMSBDC at UNM-Valencia

Roberta Scott, Director, NMSBDC at UNM-Valencia

Now might seem a risky time to start a business, but there may be good reasons to do so. Prospective business owners might be among the millions who have lost jobs as a direct result of the faltering economy and see little hope of finding another job anytime soon. They might be retirees eager to supplement their incomes or people with novel ideas or products they believe can find buyers even in today’s market.

Whatever the impetus, no one starts a business to lose money or to fail.

Be prepared!

Opening a new business can be exciting and stimulating at the same time it’s frustrating and frightening. To increase the chances for success, planning and preparation are essential. A prospective owner should identify each step involved in starting a business, avoid shortcuts and consider getting advice from the experts at one of the state’s 19 Small Business Development Centers.

Small Business Development Centers offer one-on-one counseling at no direct cost to the client. All centers are connected with a local community college. (The program exists in all states but actual funding differs state by state. In New Mexico, centers get most of their funding from the state Legislature and some money from the federal Small Business Administration.)

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Managing Money Amid the Madness

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Gena Wilimitis, Investor Education Coordinator, NM Securities Division

Gena Wilimitis, Investor Education Coordinator, NM Securities Division

New Mexico Lt. Gov. Diane Denish’s comments at the second annual Summit on Financial Education in April 2008 were prophetic: “As we head into an uncertain national economy, it’s more important than ever that people learn to be wise consumers. Knowing how to save and spend wisely, not to mention avoiding lending scams and outright cons, can help people get ahead rather than just get by.”

Nearly a year later, the economy has spiraled downward, and the skills that Denish talked about — knowing how to manage credit prudently and how to save and invest for the future — have become a matter of survival.

In an effort to help the state’s residents protect themselves from fraud and improve their financial literacy in such challenging times, the state Securities Division is teaming up with AARP New Mexico, the New Mexico Coalition for Financial Education and the Focus Foundation to sponsor the third annual daylong Summit on Financial Education on April 10 at Hotel Albuquerque.

The conference will feature a variety of workshops and seminars designed to improve the money-management skills of New Mexico residents. Its target audience includes new investors, workers nearing retirement, college students, employers and seniors.

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Debunking the Myths That Hobble Business Growth

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Sandra Taylor Sawyer, Director, NMSBDC at Clovis Community College

Sandra Taylor Sawyer, Director, NMSBDC at Clovis Community College

Many myths and misconceptions masquerade as truths in the business world, and people trying to start or expand a business are often misled by them. Realistic expectations are critical to business success, and getting real begins with separating fact from fiction. Some examples:

“The lack of a product or service in an area is the most important indicator of a need for it.” The absence of a product or service might suggest an unmet need, but the savvy entrepreneur will want to eliminate other possibilities. Perhaps the product or service is obsolete or other products offer the same benefit. The cost of the product or service might be prohibitive, or the product might be offered online or nearby at more competitive rates.

“If I attend a tax-education seminar, the Internal Revenue Service will audit my return.” The IRS does not audit people on the basis of who attends tax-education seminars. The IRS uses a computer program called Discriminant Inventory Function System to identify returns that might warrant a closer look. All individual and corporate returns are sent through this system after processing; a score is assigned to the return and those with high scores are flagged for possible audits. High scores can be generated, for instance, by returns that that don’t show or match a Form 1099 that was reported to the IRS.

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Staying Balanced in a Rocky Economy

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Sandra Taylor Sawyer, Director, NMSBDC at Clovis Community College

Sandra Taylor Sawyer, Director, NMSBDC at Clovis Community College

One of the documents commanding lots of a business owner’s attention in these anxious days of recession is the balance sheet, which provides a snapshot of a business’s financial health on any given day. Regular review and analysis of the business’s balance sheet and other financial data allows an owner to avoid being blindsided and offers him or her an opportunity to change course before a business is in danger of failure.

Anatomy of a balance sheet

Every balance sheet has three major parts: assets, liabilities, and owner’s equity. The sum of liabilities plus the owner’s equity must always balance with the assets — thus the origin of the term “balance sheet.”

Assets break down into two categories: current assets and fixed assets. Current assets are those that will convert to cash in a year or less; they include cash, accounts receivable, supplies and inventory. Fixed assets consist of the business’s property, including buildings, equipment and fixtures. These assets have a life expectancy of longer than one year.

The second balance-sheet category, total liabilities, is defined as debt the business owes. Liabilities are broken down the same way total assets are: current liabilities are those to be paid off in a year or less; long-term liabilities are debts that will take more than a year to pay. Current liabilities include accounts, taxes and notes payable. Business loans and mortgages on property are classified as long-term liabilities.

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Minimize Risk and Maximize Success With a Business Plan

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Darrell V. Arne

Darrell V. Arne, Consultant

Running a business without a management plan is like embarking on a long road trip without a map: You might reach your destination eventually, but not without wasting time and money on unnecessary detours, dead-ends and delays.

Planning and controlling are the two legs on which a well-managed company stands. Planning involves setting goals, determining how to reach them and, finally, doing what’s necessary to attain those goals. Controlling involves putting the plan in motion and monitoring its progress over time.

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Hard Times Are Here, but Survival Is Possible

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Paul F. Goblet, Financial Advisor, NMSBIC

Paul F. Goblet, Financial Advisor, NMSBIC

When free markets are in free fall, the federal government can intervene and keep the country and economy running by simply printing more money and running a deficit. That’s what lawmakers chose to do last fall to shore up collapsing financial markets.

Small businesses don’t enjoy such powers. They can’t print their own money, and most realize that running a business in the red is risky even in the short term.

Businesses owners face unprecedented challenges in today’s far-reaching recession. Many are being forced to reevaluate where they stand and where they hope to be in the future, and some are being forced to ask for help from consultants or lenders, even though the prospect is embarrassing to them.

Grim reapings

Most businesses in New Mexico have fewer than 25 employees, and most of these are owned and financed by the founder and family members. Their growth depends on the business’s success and financial stability; when one or both of these are threatened, the business often loses its ability to get credit at affordable terms.

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Doing the Right Thing – Even When No One Is Watching

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Julianna Barbee, Director, NMSBDC at Northern NM College

Julianna Barbee, Director, NMSBDC at Northern NM College

It took a collapsing economy to expose the moral bankruptcy of entrepreneurs like Wall Street investor Bernard Madoff, who was arrested recently on suspicion of defrauding clients of $50 billion in a Ponzi scheme. If such practices were part of the business landscape at a time of relative prosperity, even greater lapses of ethical behavior and judgment may be likely now as many businesses struggle to remain solvent during what is expected to be a protracted and painful recovery.

While hard times drive some people to criminal and amoral extremes, others remain faithful to core principles or values that determine their conduct regardless of external circumstances. These principles, or ethics, are what separate people of integrity from people who disregard any law or agreement or courtesy that interferes with making a buck.

Ethical business practices bring their own rewards by raising the performance and reputation of those who practice them. Businesses that set ethical guidelines and promote ethical behavior are demonstrating that honesty, respect and safety aren’t expendable when times are tough. Businesses that are willing to go beyond the minimum legal requirements of the market and to hold themselves and their employees to a high standard of moral behavior are bright spots in a gloomy economy.

Here’s how a business can start building an ethical foundation:

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Finding the Fuel to Keep Going in a Stalling Economy

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Paul F. Goblet, Investment Advisor, NMSBIC

Paul F. Goblet, Investment Advisor, NMSBIC

New Mexicans who hoped that the Treasury Department’s Troubled Asset Relief Program would benefit small businesses by making it easier and cheaper to obtain credit are finding that only a few of the nation’s largest banks received infusions of taxpayer-financed capital — and the ones that did seem reluctant to part with it.

Instead, the state’s businesses are finding lenders reducing or withdrawing credit lines in reaction to the nationwide economic slowdown and to fears that local businesses will suffer from reductions in retail and government spending.

Web of woes

When the word recession is used frequently enough, everyone begins to believe it. Workers assume their jobs are in jeopardy so their families spend less and save more, and this has a dramatic impact on the economy. State and local governments cut programs as tax revenues fall, and banks tighten credit standards, reduce credit availability, and sometimes stop lending.

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Going to Work by Staying at Home

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Roberta Scott, Director, NM Small Business Development Center at UNM-Valencia

Roberta Scott, Director, NM Small Business Development Center at UNM-Valencia

Frequent reports of massive nationwide layoffs and ongoing anxiety about the economy are making more people wonder if this is the year to start controlling their own financial destinies by starting a business that’s compact enough to run from home, especially since cell phones, computers, the Internet and faxes make it easy to conduct business with potential clients and suppliers.

Advances in communications and office technology and the ongoing shift from a manufacturing to a service economy are among the many forces remaking Americans’ assumptions about work. Many workers are weary of the congestion, road rage, weather-related dangers and time loss that make commuting such a grind. Working parents often want more time with their children than they have when employed outside the home for someone else.

And while many workers are grateful just to have a job in a time of growing unemployment, others want more from work than just a steady paycheck and benefits — especially those who have lived through past downturns and are tired of forgoing raises and watching benefits erode as their employers struggle to survive. They want work that is challenging, interesting and fulfilling, and they want control over their time, their work and their health.

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Recession Makes Business-Plan Revisions Imperative

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J. Roy Miller, State Director, NM SBDC Network

J. Roy Miller, State Director, NM SBDC Network

It’s a safe assumption that most of the companies doing business today didn’t include recession-survival tactics in their plans for 2008-2009. This means that the assumptions underlying their business plans are probably outdated, even for companies launched just a few months ago.

That’s how quickly things can change in a global economy buffeted by unstable financial markets, tightened credit and faltering consumer confidence. And that’s why forward-thinking companies maintain their advantage by having and progressively updating a written business plan.

For some businesses, the dramatic scenery change of a deepening recession means that the sales assumptions in their original business plans are now overstated and unrealistic. Other businesses — the lucky ones that stand to profit in a slow economy — have business plans that understate their possibilities for expansion and revenue growth. Either approach — over-reaching or under-reaching, based on an invalid business plan — could endanger the unwary business owner.

To increase the chances of surviving this financial winter, companies should revisit the long-term and short-term portions of their business plans and adjust in light of changing circumstances. Those in charge should consider the following:

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