Starting A Business in Lincoln, NE – 2019
Starting a business has its fair share of risks and rewards. For some, the risks are great and the rewards don’t seem to balance the scale. This is frustrating for some, but a true entrepreneur knows that overcoming the risks in order to start a business of their own is a reward in itself.
Jethro Hopkins, the managing partner at No Coast Business Advisors, believes that starting a business is the most challenging and potentially rewarding things anyone can do in their life. According to Jethro, the starting point for any entrepreneur looking to start their own business is to have a good dose of common sense. Do you have any experience in the industry? Have you done some work there? These are the types of questions Jethro asks his clients when they come to him with a business idea. “If you’ve never worked in retail, don’t start a retail business. If you’ve never worked on cars, don’t start a car mechanic business.” Jethro stated. “It seems like common sense, but I’ve seen so many people mess this up.”
A specific advantage Jethro sees in the Lincoln area is the ability to network. “Lincoln is a big, small town, and networking is critical,” Jethro commented. “Since people do business with other people, not businesses, every business owner should look into networking groups like Center Sphere or BNI. Your family and friends will not be able to support you the way your network will.”
At No Coast Business Advisors, they specialize in educating new businesses. “There is a lot of information that people don’t know…and don’t even know that they need to know this information.” Jethro revealed. “Information about taxes, corporations, different legal entities…we can educate you on these topics. Depending on budgets, we can also provide things like lead generation, advertising, and exit planning.”
Jethro admitted that he has seen new businesses make a few common mistakes, including not having enough liquidity and not being prepared for the time commitment.
“Being a business owner is the only profession in which you have to work 80 hours in order to not have to work 40 hours for someone else. It’s going to become the most important part of your life. Make sure your family is on board. If you are going to get into the market, you are going to have to understand both the business and local market in general. People will not just come to you just because you opened your doors. If you can’t get out there and sell it constantly, it’s not going to work. If you can’t sell, you’re going to fail.”
Jethro went on to say that you should always go into a business with an end in mind. “If you’re in your late 20s, you shouldn’t go into the business thinking, ‘This is going to be what I will do for the next 40 years.’ You should have an end point in mind,” Jethro advised.
We heard similar counsel from Max Larsen with Max D. Larsen and Associates. If anyone knows anything about starting a business, it’s he. You may have heard his name before, as he was one of the key people involved in developing Gallup. He helped with building its infrastructure, staffing, and even created Gallup’s government services division from scratch. He then went on to manage the Gallup office in Washington D.C., consulting government agencies to improve performance. Prior to Gallup, Max was a math professor at the University of Nebraska–Lincoln before becoming the Dean of the College of Arts and Sciences. His experience and knowledge makes him a valuable resource for business owners who are looking for direction. When we talked to Max, he shared two crucial pieces of advice. The first was getting the right people in the right place in the company.
“Whoever you hire will likely be there in 3–5 years…at least, that is the hope,” Max said. “Business owners need to hire people with the skills and knowledge to grow with the company. Some things are hard to train later. Turnover can be crippling to a new business. With the University here in Lincoln, we have a lot of talent in our community and a lot of them are under employed. There are some concerning stereotypes associated with hiring millennials, specifically that they tend to hop from job to job quickly, but I’m a believer in the philosophy that if you give someone the space to use their talents while challenging them to reach their full potential, they will stay.”
Max went on to say that his second piece of advice is to have a plan for success. “This is where I come in,” he exclaimed. “I can help businesses plan for their future, creating specific goals, strategies, and tools to measure success. Furthermore, I will help the business hold itself accountable. Every business owner should have a five-year plan. If you don’t know where you want to go tomorrow, you won’t be able to make the best decisions today.”
A part of coming up with a plan for your business is researching the market beforehand. First, ask yourself what product or service you plan to provide. Then, ask if there is a demand for it in the marketplace you are looking to enter. Marc Hausmann, an associate broker for NAI FMA Realty, believes that the most vital step is: research, research, research.
“Know your target market, main competitors, and master your business,” Marc said. “Make sure there is room for your business in the market. If any competition is present, be prepared to provide a superior service or product.”
In addition to identifying good sites for business locations, entrepreneurs also have to weigh the pros and cons of leasing vs. owning, hopefully with the help of their realtor. “While most entrepreneurs want to own, the investment needed for purchase could be used elsewhere,” Marc noted. “The entrepreneur also needs to take the possibility of expansion into consideration. Is there space to expand if needed? We can help with these questions,” Marc assured us.
While it’s easy to assume that any and all growth is good, Marc pointed out that growth alone can’t protect a business from the consequences of poor long-term decisions. “If you are not prepared, quick growth can be worse than no growth,” Marc noted. “Rapid growth can lead to quick, unprepared decisions. These preparations, along with a knowledgeable real estate agent, can be the key to success. Proper negotiations, site selection, and general understanding are key elements that we can help with,” he offers.
When looking into what commercial space is available, John Linscott with Greenleaf Properties suggested that one of the most important services a real estate agent can provide a client is representing the tenant’s interests during lease negotiations. “Because of the intricacies of leasing a space, you certainly have to understand what you are getting into,” John cautioned. “A commercial real estate agent will represent the tenant and help them with site selection and lease negotiation.”
Real estate agents can help locate the best options available on the market, and by comparing properties, they can ensure they are being leased at a fair market rate. “One of the most important things is the details of the lease concerning maintenance and repairs,” John informed us. “This is the kind of thing, unless you deal with leases all the time, you might not pay attention to. For example, you may not realize when you sign up that you are responsible for equipment replacement, which can be a $5,000 to $6,000 bill.”
After narrowing down the best options available, agents will often perform site visits, help their client write a letter of intent, and enter lease negotiations. A lot of people don’t negotiate leases, so they don’t know what to look out for or what’s a good deal and what’s a bad deal. For most business owners, unknown expenses are something to be wary of.
Because researching the market is a crucial pillar for new businesses, Matthew Biggs, vice president and relationship manager for Cornhusker Bank, advises entrepreneurs to explore institutions that provide networking opportunities and business resources. “Surrounding yourself with a team of professionals and listening to their advice can help you avoid some of the common pitfalls of starting a new business,” Matthew told us. “There are several sources of information available to startup businesses and many of them are free! The Nebraska Business Development Center (NBDC) and SCC Entrepreneurship Center are great resources, and sba.gov has several articles and templates available as well. The ultimate goal of this research is to formulate a business strategy. Take advantage of any training or counseling services that can help you understand your market, both customers and competitors. Use this information to formulate a comprehensive business plan and include two to three years of financial projections.”
When a bank or loan agency lends money to a business, the bank then becomes invested in that business’ success. Matthew explained that different options are available for startup companies, including small businesses. “Cornhusker Bank offers a wide range of business loan products and will analyze each startup company independently to determine which solution best meets the owner’s goals and maximizes the financial relationship,” Matthew stated. “Oftentimes, a startup company will not have access to the equity required for conventional loan options, in which case SBA (Small Business Administration) Loans are an excellent option. The bank will make a loan to the business using guidelines set by SBA, and, in return, the bank receives a partial guarantee on monies lent to the business. SBA Loans benefit business owners as they require lower down payments and provide longer financing terms than other conventional loan options. SBA Loans typically require additional paperwork and have a longer approval process, yet because they reduce the risk to the Bank, the likelihood of the startup receiving financing is historically increased.”
Matthew went on to explain what he considers to be the four key mistakes for new businesses, and he offered suggestions to avoid these problems:
- Maintain cash reserves. Whether unexpected expenses occur or projected sales aren’t met, there often comes a time where cash outflows exceed cash inflows. Keep cash available in reserve in order to make necessary monthly and fixed cost obligations.
- Manage receivables. Establish procedures for getting billings out quickly and follow up with your customers to ensure timely payment.
- Manage payables. Take advantage of payment terms offered by creditors. If a payment is due in 30 days, consider managing cash flow by utilizing those terms when needed.
- Anticipate future needs. Prepare financial projections on a regular basis as they can alert you of potential shortages before they occur.
One mistake potential businesses owners might make is only approaching one or two banks for information on a business loan. As the Lincoln market president of First National Bank, Jack Weeks firmly advises exploring all the options. “First off, do not be shy,” Jack encouraged. “Do not rely on or consider only one financing option…seek them all out. This will help you understand more and make a better long-term decision for you and your startup. The easy money is not always the best money. To help facilitate this process, network and network again. Talk to anyone who will listen. Do not be afraid to ask for advice, comments, or concerns. For those who will listen, ask them who they know that you should talk to and if they would make an introduction. Next, be prepared! Do your homework, as nothing will shut down a deal faster than lack of information. Finally, you are probably going to hear a lot of ‘no’s,’ so keep your pride in check—learn from it and stay after it.”
Jack also explained that their services focus on helping new business owner with keeping the books. “One service in particular that First National Bank offers is Treasury Management Services, which can help you do payroll, collect credit payments, and even help with accounts receivable and payable,” Jack said.
A costly mistake to avoid is going into business with the wrong people. Take the time to find good partners, whether they are business, financial, or even technology partners. Asking questions and doing research is free upfront, and not doing it could be very costly in the end.
As a financial advisor for Edward Jones, Bethany Arnold can attest to the importance of asking questions and having a thought out plan from the get-go. The planning stage is a crucial point where success or failure of a future business can be determined. “Have a plan and have a support system,” Bethany advised. “Make sure you don’t have a plan B because when the going gets tough, that will be very easy to fall back onto…and the ‘going’ is going to get tough. Get out and meet people, tell them who you are and what you are doing! You can’t be afraid to meet people and ‘ask for the order.’ Many people have started businesses before you and have great ideas, so listen and always take something from it that you can use.”
Bethany’s goal as a financial advisor is to work through the practical problems associated with funding a new business. “Here at Edward Jones, we will sit down with you and find out what’s important to you in order to help you reach your goals, whether it be cash flow, taking advantage of the gifts and opportunities the government has to offer you for being a business owner, or simply being a sounding board for you,” explained Bethany. “We want to help you achieve those goals, watch you grow, and celebrate when you succeed!”
When preparing to enter business, having a good product/service and a clear vision are important, but they can’t always make up for failing to be prepared for the unexpected. “I often see people who don’t have a plan,” Bethany shared. “They have great ideas and great products, but no plan. It’s important to know that you will hit hurdles and there will be days you don’t want to move forward, but if you have a plan and stick with it, you will prosper and you will make it to your goal. One piece of advice I give to all entrepreneurs is: Some will, some won’t…who cares, who’s next?”
Small businesses will have different considerations than large businesses. As the vice president of small business banking for Union Bank & Trust, Stephanie Dinger agrees that putting financial projections on paper is crucial, even for the smallest business venture. “Even if a new business is not in need of a loan to get started, I would encourage the owner to create a business plan to include revenue and expense projections,” Stephanie advised. “Having these items on paper helps serve as a road map and can often hold someone more accountable to accomplish them if these items are not solely stored in the business owner’s head.”
Along with her husband, Stephanie is a business owner herself and she believes that Lincoln has a very supportive environment. According to her, there is a wonderful business community here in Lincoln, filled with people who will take time to meet with aspiring or new business owners, and share what worked for them and what they struggled with.”
Stephanie told us that one of Union Bank & Trust’s unique offerings, in addition to standard banking services, is their Catalyst program for businesses. “We offer speaker series on relevant and current topics, a free lab for customers to hold offsite meetings or presentations at, and a network of professionals to help support the business owner from day one,” Stephanie explained. “I believe all business owners should have, at minimum, an accountant, attorney, and banker on their team—ones who understand their goals and are committed to helping them get their business started off on the right foot.”
There were two pieces of advice that Stephanie gave us when we asked her about the common mistakes new business owners make:
- It is important for business owners to pay personal creditors on time and utilize credit cautiously. Personal credit history plays into the loan decision when a business is working to obtain business credit. Many business owners assume the business entity’s credit is all that is reviewed.
- If you are requesting financial support from a bank or investor, generally speaking, it is good to have 20% or more of your personal money invested in getting the business up and running. Many business owners have not prepared for starting a business and look to a bank to take all of the risk.
Once the decision is made to enter into the business world, there are continual financial considerations beyond the initial loan. As a CPA for SP Group, P.C., Rachel Clymer specializes in proper financial management. “You’ve found your passion, a unique idea, an interesting opportunity, and now it’s time to turn it into a fledgling business. It’s normal to get antsy and want to rush to the thrilling parts of owning a company. Take a minute to develop a plan and get a good idea of how you’re realistically going to execute this business. For some, that starts by surrounding themselves with a trustworthy team of experts both internally and externally. Once you have your passion, a plan, and a team in place you can get to the thrilling parts of being a business owner.”
Lack of focus can be deadly for a young business. “A common mistake we see new business owners make is doing too much, specifically too much outside of their area of expertise,” Rachel noted. “Don’t force yourself to reconcile your bank accounts if it gives you a headache before you even start.”
At SP Group, they work to support business at both the beginning of their life and during their best years. “When you’re in the exciting phase of entity creation, we can help you beyond the traditional accounting you might envision,” said Rachel. “The first item we can consult on is the selection of the right business entity type depending on your overall goals and our combined goal of minimizing your tax liability. If you need bank financing, we can prepare financial statements or complete a business evaluation of any companies you’re interested in purchasing.”
For businesses that are up and running, SP Group can also assist with payroll management. “For most, payroll can be a daunting task, but turning that over to a professional has real benefits associated with it, as the penalties for non-compliance or errors can be significant,” warned Rachel. “Of course, as accountants, we specialize in handling taxes for business. With constantly changing regulations, having a CPA in your back pocket is a smart choice to set your business up for success.”
A few other things to consider when starting a business are staffing and marketing. No matter how big your team grows to be, finding the right people for the tasks at hand can be a challenge. Even with unemployment at one of the best rates it’s been at in the past decade, every time you hire a new person, you’re making a bet that this person will drive the growth of your company. That is why Talent Plus® offers scientifically validated assessments that substantially improve your odds of getting it right when it comes to hiring, and they provide the insights necessary to engage and develop that person. Once you’ve got your team assembled, make sure you are leading them in a way that creates a positive work culture.
A fun way to do this is by getting each team member a t-shirt with your company logo on it. This is a great way to market your brand in the community as well. At Moonlight Custom Screenprint & Embroidery, you can get great deals on a large quantity order of shirts. They have more than just shirts though! You can purchase sweatshirts, polos, jackets, team uniforms, hats, posters, bumper stickers, window lettering, vehicle lettering, and other swag with your logo on it. Moonlight takes care of everything, from design to delivery. The best way to check out all they offer is by visiting their website. Plus, it’s always nice to support another local business through your efforts to grow your own.
Another thing for new business owners to consider, especially small business owners, is healthcare. Small businesses (like us!) need ways to provide affordable healthcare for their employees in order to help current employees stay healthy and to compete with larger organizations looking to attract new employees. That’s why we go to Access Family Medicine. As a direct primary care physician, they offer membership-based healthcare plans, forgoing the insurance payments in order to save their patients from the arbitrary, intrusive decisions that inevitably follow with third-party payers. Access Family Medicine works with the industry leaders in health insurance who build custom plans that remove much of the waste and inefficiency from a typical, bloated policy. They’ve been able to save many businesses up to 50%, while still providing a higher level of personal care.
Finally, one of the best investments a business can make is in their community and their Chamber of Commerce. According to Jaime Henning, senior director of membership at the Lincoln Chamber of Commerce, Chamber membership helps your business gain new clients and referrals, provides networking and advocacy opportunities and lends credibility to your business. Henning notes that according to the Shapiro study, consumers are 80% more likely to purchase goods or services from a company that is a Chamber member.
“We want to help you thrive and provide networking opportunities with connections that count,” Henning added. “With over 1,700 businesses as Chamber members, we will go to work to help you grow your business!
Winston Churchill said it best: “Success is not final, failure is not fatal. It is the courage to continue that counts.” Every business owner has had to overcome challenges to get their business to where it is today. Similarly, there isn’t a single business owner who would have been able to turn their business plan into a reality without a little help along the way. Whether it was in the form of financing, staffing, marketing, securing a commercial property, getting insured, etc… Starting a business is not something you can do alone. Don’t be afraid to turn to the trusted professionals in these areas. They are right here in Lincoln to help you!