In his 1931 book, The Epic of America, James Truslow Adams defined the American dream as, "that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.”
There is no better personification of the American dream than the entrepreneur, but running your own business can be tricky. Here are four financial considerations before you go chasing your own American dream:
There are plenty of programs set up by government and economic development organizations to offer needed capital to new businesses. But very rarely will you find free money. Most programs are designed to assist people with good credit and/or sufficient collateral access needed funds with low interest loans.
TIP: Check out federal loan programs on the US Small Business Administration (SBA) website, and also local collaboratives such as the Small Business and Technology Development Center (SBTDC) of North Carolina.
In addition to good credit and available collateral, the cash you have on hand will be considered in your loan applications. Can family and friends help? Do you have an IRA or mortgage to borrow against? These are sometimes the only funds entrepreneurs can access, and further proff that entrepreneurial pursuits aren't for the faint of heart or for the risk averse.
TIP: Have accurate and updated personal financial documents in order before you approach a lender.
Many entrepreneurs focus on their new product or service, dreaming of solving the world’s problems while enjoying great personal wealth. But running your own business requires careful, logical planning upfront.
Have you done your competition and market reviews? What do your startup financials look like? What capital do you need now and why? Lenders want to see the full vision for the business side, not just the vision of the product or service.
TIP: Discuss your business plan with your local economic development professional (EDP). An EDP can help refine your plan, uncover resources, and find commercial property before and after your business is operational.
How accurate is your cash flow projection? Are you sure about your sales volume? When will your projected revenues come in, and does that jibe with business expenses? Have you properly calibrated your inventory to ensure enough, but not too much product is on-hand or accessible? What is your commercial real estate commitment, and is it appropriate for the size and scope of your business today and into the future? What does your staffing plan look like? Do you have enough workers throughout all seasons?
TIP: Research your planned location. What regulations are in effect? What are the population trends? What are the real estate options?
American history is ripe with stories of successful entrepreneurs. From Henry Ford to Bill Gates, Americans who started businesses have advanced our technology, strengthened our economy, fortified our safety, improved our environment, and transformed our quality of life. But running your own business takes not just a vision for the future, but careful planning as well.