Small Business Administration
SBA – helps entrepreneurs starting a small business in USA. SBA advocates the case for small business in the US and provides guidance and support in the following areas:
- Planning a small business,
- Financing your small business, and
- Training in starting a small business and running it successfully.
It is business skills rather than money that helps an entrepreneur to succeed in business. SBA has set up online and offline facilities to impart business know-how and training to entrepreneurs.
Log on to SBA Web site to have a look at the extensive range of information available.
The SBA Web Site
The Web site provides information about the following issues:
- Starting Your Business
- Financing Your Business
- Managing Your Business
- Business Opportunities
- Disaster Recovery
The site also has links to current highlights (like Business Plan, Forms, Business Law,…), SBA Programs (like Entreprenuer Development, Financial Assistance and Disaster Recovery), top news, policy news and a map of US states that you can click to find your nearest SBA office.
As this page is about starting a small business we focus on that topic. The relevant page at SBA points you to the following topics:
- Are you ready?
- Finding a Niche
- Buying a business
- Buying a franchise
- Checklist for starting a business
- Free ONLINE business planning course
- Protecting your ideas
- Product basics
- Startup guide
- Forms of ownership
There are additional links to the key issues of Business Planning, Financing, Marketing, Employees, Taxes, Legal Aspects and Special Interests (Women Entrepreneurs, Minorities, …).
Personal Requirements for Success
SBA starts the topic of Starting a Small Business by asking you to look at yourself. Certain personal qualities are essential for entrepreneurial success and SBA wants you to check first whether entrepreneurship is for you.
Are you a self-starter? Can you work effectively with different kinds of persons? Do you have the habit of sitting down and working out your action program before jumping in? And the skill to organize what you have planned? Can you persist long enough against frustrations and disappointments? Do you have the health and energy to put in long hours of work? Would your family support your move to self-employment?
This kind of self-assessment makes you aware of the implications of starting on your own. According to SBA, one of the prime causes for small business failure is starting a small business without such an understanding. Self-awareness would also help you decide whether you should coopt a partner in the business. This partner should be able to bring in skills and work habits that you lack.
SBA asks you to think through your goals – personal and business. Then start on developing a business plan that meets these goals.
A good business plan helps you:
- Think through important issues,
- Raise money for starting the business, and
- Provide milestones for checking progress during startup and operational stages
The starting point of your business plan is selecting the right business. Try to select a business that
- Involves doing what you like to do
- Utilizes any technical skills that you possess
- Could be carried out during the time you can spare for the business
Consider whether any of your hobbies or interests could be marketed. The key criterion for business selection is marketability. Is there a need for the product or service? What would be the competition and how will you compete?
Once you have zeroed in on the right business choice, start thinking about the practical matters – like location, equipment needs, supplies needed, skill and personnel requirements, legal aspects and your resources versus needs of the business. Carefully examine how you will meet your living expenses during the time the business is getting established.
You would have to decide in what legal form you will do the business. Sole proprietor, partnership and corporation are the forms available. Each has implications for tax, personal liability, legal formalities and cost.
After researching and clarifying your ideas, write your business plan introducing your business idea and explaining:
- The business operations involved,
- Background and contact details of the team that will manage the business,
- The market, competition and your competitive strategy,
- Projected profitability estimates and balance sheets for two years,
- A breakeven analysis showing the level of sales at which you will begin to make profits,
- Physical facilities and working capital needed for the business, their costs and how you will finance these, and
- How the business will be managed once it is operational – staffing, selling arrangements, control systems and administration.
Attach relevant documents such as production process charts, lists of equipment, financial projections and copies of agreements.
We discuss Small Business Planning in more detail elsewhere. Once the plan is completed, you could review it with one of the following agencies:
- SCORE – Service Corps of Retired Executives
- SBDC – Small Business Development Center
You could find the nearest office of the above agencies at SBA Web site.
Financing Your Small Business
Financing involves identifying sources of finance and negotiating with prospective lenders.
Sources of finance:
- Your personal savings
- Borrowings from friends and relatives
- Banks and credit unions and
- Venture capital firms
Negotiating a loan for starting a small business involves detailed preparation. You must be able to explain convincingly to the lenders:
- How much money you need
- How the money will be utilized and
- How it will be repaid
SBA usually insists that loans be repaid within a maximum of:
- 25 years if the loan is for real estate
- 10 years if the loan is for equipment and
- 7 years for working capital loans
There are also short term loans for less than a year for accounts receivable and other short term working capital needs. These may also be in the form of lines of credit where you can deposit and withdraw funds upto the credit limit. You would pay interest only on the outstanding borrowings.
Read the separate articles on Small Business Funding and US Government Small Business Loans for more detailed general and US specific funding issues. You will learn how loan proposals are prepared and how lenders evaluate these.
Licenses and Government Regulations
You can also go to the SBA Web site page Business Laws for current information.
SCORE – Service Corps or Retired Executives – is a 13000 strong force of experts who could provide counseling service to persons starting a small business. SCORE has chapters in 800 locations and could provide business management and technical assistance in numerous areas. SCORE also organizes business workshops and seminars on various topics in addition to providing individual and team counseling.
SBDCs – Small Business Development Centers – aim to provide business education through one-one-one counseling and training seminars. SBDCs help development of backward regions and minorities not only through business education but also by identifying business opportunities. For example, minority entrepreneurs are provided assistance for participating in government contracts.
BICs – Business Information Centers – have well equipped reference facilities with books, videos and computers. BICs also offer seminars, workshops and counseling. You could collect necessary information yourself using the facilities available or participate in the seminars and workshops.
WBCs – Read the separate article ob Women’s Small Business Support to learn about Women’s Business Centers – both online and offline.
Contact your local SBA office to locate the nearest SCORE chapter, SBDC or BIC.
Small Business Size Standards
To be eligible for SBA assistance, you must be a Small Business falling within the size standards applicable to your industry. Size standards are specified in terms of number of employees in your business, or its gross turnover. The criteria could vary for different industries, say between manufacturing and service industries. Read the separate article Small Business Size Standards for fuller details.