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Dave Olson, Published December 20 2013

Small business savvy: Experts say expect long hours, delayed reward

FARGO - Angela Breckel’s plans to open her own photography studio began taking shape in 2007.

Back then, she knew zip about starting a business.

But she had a strong feeling she would need more money than what she had, so for more than a year she worked 80 hours a week at two jobs while devoting another 30 hours a week to doing photography out of her south Fargo home.

When she decided she had saved enough, Breckel used her own money to build a photography studio in her backyard.

“Looking back, I don’t know how I did it,” said Breckel, who after several years of operating her ab images studio is still reluctant to slow down.

“I never turn away business, that’s for sure,” Breckel said, maintaining that one reason her business has survived was her aversion to debt.

“I literally pay a lease to myself. That has kept my head above water the entire time,” she said.

Delayed reward

Frugality, extreme hard work and a passion for the job are key ingredients for entrepreneurial success, say those who counsel would-be business owners.

And don’t forget patience, Mike Hahn said.

“In most cases, it can take up to two years before a business is established and showing profitability,” said Hahn, president and CEO of the Downtown Community Partnership in Fargo.

Hahn, who at one time was director of a small-business development center at the University of Northern Iowa in Cedar Falls, said owners of startups can feel overwhelmed when they discover the amount of time and money required to get a business off the ground.

“With small startups I’ve worked with, they (business owners) basically do it all, putting in anywhere from 60, sometimes 80 hours a week to get the business up and going,” he said.

Steve Revland knows something about that.

Revland opened the Uptown Gallery in downtown Fargo this fall and said the business is doing so well he’s expanding into space adjacent to the existing gallery at 72 Broadway.

With four decades of experience as a furniture builder, Revland, 60, is doing most of the demolition and retrofitting himself.

Having operated an earlier art gallery in Fargo – The Art Connection – 20 years ago, Revland said he’s learned a thing or two about what to do and what not to do when starting up.

“I don’t think I would undertake anything unless the timing was perfect,” he said. “I’ve been thinking about this for a number of years, just kind of waiting for the downtown renaissance to come to fruition.”

Revland said his decision to start a new art gallery was made easier by knowing he had his furniture building to fall back on and the fact he’s able to do much of the heavy lifting himself.

“I set up that space we’re in right now on a shoestring,” Revland said. “On one hand, it (the labor) is enjoyable. On the other hand, it’s saving money.”

Game plan crucial

When it comes to keeping costs down and keeping a business afloat, the first step on the path to success is coming up with a good business plan, said Donovan Wadholm, regional director for the North Dakota Small Business Development Center in Fargo.

“They can come to us from the minute they say, ‘I have an idea,’ ’’ said Wadholm, whose agency helps with everything from business plan development and financial projections to helping register a business and identifying tax and licensing requirements.

Wadholm said sometimes the most valuable thing they do for a client is help them see that an idea they thought was a sure thing is actually a non-starter.

“Typically, they’re pledging collateral that includes significant personal assets. They’re investing a lifetime’s worth of savings, sometimes retirement accounts,’’ Wadholm said.

“If it’s an idea that’s not well fleshed out, that they haven’t done the research on … being able to say the risk/reward is not sufficient for me to do this, that is a success,” said Wadholm, who pointed to information from the Small Business Administration that shows half of all startups end in failure within the first five years.

“The No. 1 reason businesses fail is they run out of money,” Wadholm said. “They’re undercapitalized because they have optimistic sales projections.”

Tami Dowers learned that lesson the hard way.

She opened her Sweet Haven Bakery in Fargo last February and closed her doors in October.

Dowers said she knew going into it she might have a problem with cash flow, but she said a change in her job status prompted her to follow her lifelong dream of owning her own business a bit sooner than she planned.

“Every banker I talked to, we knew I was undercapitalized,” she said. “I didn’t have enough working capital to float me through the first year.”

Still, she has few regrets.

“It’s totally fine to take a chance. You never know exactly what is going to happen,” said Dowers, who landed a marketing job after closing her bakery.

Dower’s advice for others starting a small business?

“Make sure you can survive on your own, without any income from the business.”

Healthy realism

Having a solid business plan can go far in avoiding startup pitfalls like the one Dowers encountered, say area members of SCORE, a nationwide group of retired executives who volunteer time to help fledgling businesses find their wings.

SCORE members can offer advice and guidance on a broad range of business topics, including business plans and how to take an existing enterprise to the next level.

Whether it’s someone looking to start a consulting business or expand a home cleaning service, SCORE volunteers try to be supportive, said John Postovit, a Fargo SCORE volunteer.

“We might think to ourselves, ‘Boy, this (idea) is pretty far-fetched,’ while on another occasion we might think, ‘This has got a real opportunity to succeed.’ We have to treat them from the same standpoint of encouragement,” Postovit said.

Jim Stenerson, a fellow SCORE volunteer, agreed.

“We don’t throw cold water on anything – unless we can see they’re going to lose their shirt,” Stenerson said. “Then, we’re careful about encouraging them too much.”

Brittany Sickler, an economic development specialist with the SBA in Fargo, said one of the things SCORE volunteers can provide is a healthy dose of realism.

“You have a dream, which is great, but to actually make it happen you’re going to have to be paying taxes, you’re going to have to do all this paperwork and you might have to hire employees,” Sickler said.

“Some entrepreneurs are able to wear all of these hats at once and others aren’t. When I see people meet with SCORE, I see them kind of delicately bring that awareness,” she added.

Get it in writing

Breckel said SCORE was a big help in the early planning of her business.

Casey Steele said the same was true for her and her husband, Matt, as they worked to set up Square One Kitchen at 1407 1st Ave. N. in Fargo.

Square One, which opened about a year ago, is a “culinary incubator” that rents out kitchen space by the hour, Casey Steele said. Renters include people hosting cooking classes and those working on their own food-related businesses.

The kitchen space is also home to a baking business Steele operates called Love In The Oven.

Ask Steele what she has learned about making a business work and she’ll tell you, “Nothing will go according to a schedule and nothing will go according to a budget.”

Susanne Williams, executive director and artist at the Uptown Gallery, offered some tips of her own for newbie entrepreneurs.

“Be prepared to work countless hours. Be prepared to have the financial reward come later,” said Williams, who sells her Willi Nilli line of handbag and apparel goods out of the Uptown Gallery.

Given the risks, one question might be: Why start a business?

“You look at it more in terms of a challenge, rather than what could go wrong,” Williams said.

“It’s more of an invigorating challenge that I think is so attractive for a lot of small-business owners.

“If you make it or you don’t, it’s all on your shoulders,” she said.

In addition to working hard and accepting a long wait before seeing a profit, Williams said people starting a business should know something else:

“Get everything in writing.

“Use contracts when you work with other people. I cannot emphasize that enough,” Williams said.

Thinking about starting a small business?

Here are some do’s and don’ts from those who have been there:

• Do prepare a thorough business plan that includes market research on your target market.

• Do consider “bootstrapping,” which essentially means starting small with perhaps a pop-up store, or other inexpensive means of testing the waters for your product or service.

• Do understand it can sometimes take years and substantial amounts of resources before a new business starts showing a meaningful return financially.

• Don’t overestimate anticipated revenue from sales. The most common factor in small-business failure is inadequate funding, meaning enterprises simply run out of money.

• Don’t wait to seek help and/or advice if you encounter difficulty. Small losses can grow into big ones quickly. Sometimes getting out sooner rather than later is the smartest business decision of all.

Readers can reach Forum reporter Dave Olson at (701) 241-5555