As an economic developer, I get approached with hundreds of great ideas every year from people who love their community and have innovative input about new businesses and quality of life enhancements. In fact, it is one of the most exciting parts of my job! Getting to dream about creative new concepts and then help people draft a plan for realizing those ideas is much more interesting than spending hours sifting through data to determine market trends and evaluate local economic gaps. It is within these ideas brought forward, that imagination and excitement are born and begin to stir.
I believe fully that the individuals within a community who have big ideas and the dedication to see them through are the change-makers who create unique and thriving cities. It is because of these dedicated people who embrace their city that a true community- a living, breathing, and robust community that people want to call home- is made. My favorite book to read when I need to rekindle my creative place-making spark, is, For the Love of Cities: The Love Affair Between People and Their Places
, by Peter Kageyama. I’m notorious for lending my copy out to anyone I come in contact with, so if you’d like to partake of this short-but-revitalizing read, just let me know and I’ll put you in the rotation!
The book calls attention to the value of those people within a community who are the innovative, creative, artistic drivers of place-making; people who Peter refers to as co-creators. “We experience cities emotionally, yet we talk about them technically,” the book reads. “Instead of merely livable, let’s start thinking about how we can make our cities more lovable. When we have an emotional connection to our place, we are more likely to fight for it. Each of us makes, or breaks, our cities in small ways every day as we lead our lives.”
Yes! Co-creators are the community members who give us the ideas that fuel that emotional connection to our city. They are also the ones who must be the catalytic leaders of those ideas, because government’s role must be limited in private markets and can often dilute or complicate innovation. Why? Because governments are the policy-makers and enforcers. Public perception spotlights government as bureaucratic, stuffy, and ever-ready with the red tape; so you can see why it is hard then for government to be the leader of the charge in many of these matters. What we can do, however, is provide information and guidance, be responsive to the desires of the public, and help with the strategic planning needed to make things happen.
Saginaw is an exceptional place for creativity. We are large enough to be able to take some risks, but small enough that the community can really enjoy and embrace new initiatives; especially when it comes to new business ideas. But a lot of work has to be done to take a good idea
for a new business concept and turn it into an actual
new business. Let’s break it down:
1. Determine who will lead the effort.
Maybe I think a cute little bodega grocery-store on the south end of Saginaw Boulevard would be a fantastic idea. It could sell fresh vegetables and fruits, basic grocery goods, herbs and seasonings, and even some specialty items- wouldn’t that be great?
But who will own it? Will it be me or someone else? Am I prepared to be a business owner? If I don’t want to take the business on and I don’t have a bodega grocery owner who is experienced, prepared to own and manage it long-term, and wants to be in Saginaw, I won’t be able to get very far with my idea. Business initiatives must begin and be lead, first-and-foremost, by the owners, entrepreneurs, and/or experienced business leaders who are willing to take ownership and responsibility (financially) for these ideas. This is why business recruitment (bringing in experienced leaders) and programs to engage and support local entrepreneurs and small business is so important to a dynamic and thriving local economic ecosystem. These are the people who are ready and able to make things happen.
2. Turn your idea into a Business Plan.
Not only is having a Business Plan required for most forms of acquiring commercial lending to finance a business, going through the process of creating one is incredibly important to understanding where the pitfalls to a good idea might be found later down the line. Business Plans should include the following sections:
- Executive Summary – Think of this as a snapshot of your business
- Company Description – Gives details a bout what, exactly, your business will do
- Market Analysis – Research on your industry market and competitors
- Organization & Management – Outlines your organizational structure
- Service or Product – Describes the products or services you plan to offer
- Marketing & Sales – Outlines how you plan to promote your business and secure steady income flows over time
- Funding Request – Explains how much money you anticipate you will need for initial costs and the critical first 3 to 5-year period in operation
- Financial Projections – Supply information from Balance Sheets
- A Balance Sheet is an accounting of how much money you anticipate your business will bring in, as well as how much money you expect to spend in capital expenses (your building mortgage or lease rate, machinery and equipment costs, etc.), inventory, and for personnel. If your incoming dollars (what you earn) are more than your outflowing dollars (what you spend), then the resulting amount is your company’s profit. Knowing how profits will be allocated is also critical for structuring company ownership (equity) with initial business partners.
- Appendix – This is an optional section that usually provides detailed information on special certifications and permits that may be required, resumes of business partners, assumptive factors, and more
Business Plan templates can be found online through the U.S. Small Business Administration (SBA)
website. For personal assistance and mentorship in creating your Business Plan, the Fort Worth Chapter of the Service Corps of Retired Executives (SCORE)
is free and comparable to none other! Needing help with your market analysis and understanding local competition? The Tarrant County Small Business Development Center (SBDC)
has you covered with their free online SizeUp tool
. Stop by Accounting Coach online
for overviews and examples of Balance Sheets, Income Statements, Cash Flow Summaries, and much more. Marketing Plans can be complex, but check out Entrepreneur.com
for a simplified summary of what you’ll need included therein. If you’re looking for a solid, holistic reference guide to creating a Business Plan, I’d recommend checking out Roger Rule’s Book of Business Plans for Startups
, as well.
3. Choose a business location.
The Texas Department of Economic Development in the Office of the Governor
states that “Choosing a business location will depend on the type of business you operate, and is perhaps the most important decision a business owner will make. It requires precise planning and research.” It is not just enough to ‘think’ a concept will work in a community, or to ‘feel’ like it would be successful – commercial lenders and investors are going to want to know facts. Information you will need to know to make a business location decision include:
- Area demographics – Who are the people within the community and are they your target consumer? Median household income is an important measure of the demographic viability of a community for business sales because it tells you how many existing dollars are churning in a local economy and what kind of disposable income may be available for capture.
- Daytime population counts – Demographics tell a story about who lives in a community, but if your business is going to be impacted by daytime sales, you need to know how many people are gone all day at work in other cities and won’t be available to partake in your goods or services.
- Traffic counts & thoroughfares – How many people are driving past your potential business location daily? Is the location on a commuter transportation route that has the opportunity to draw in consumers who are just passing through? Is there good access for vehicles and/or pedestrians to get to the location?
- Space availability and lease rates – Unless you plan to build and own your own building (which is a whole different topic in and of itself), you will be leasing space from a property owner or property management firm. Lease rates are most often determined on a square-footage basis and depend on the type of use your business will need (does it require a kitchen or just space for an office, etc.) as well as communal amenities that can be shared by tenants (such as a parking lot or garage, reception area, conference room space, etc.). They can span a wide range from one block to the next, so shopping around for a lease rate that fits your budget.
Don’t be fooled by confusing commercial lease rates. The difference between $20N/SF and $20NNN/SF can be massive. Just like with any type of property, ongoing maintenance costs, building repairs, annual property tax assessments, property insurance, etc. are the responsibility of the property owner; however, who pays for this typical upkeep can vary. In a single net lease (expressed as N), these maintenance costs are primarily paid for by the property owner. In a double net (NN) lease, these costs are split between the tenant(s) and property owner and in a triple net (NNN) lease, almost all of these upkeep costs are going to be handed down to tenants. In Texas, double and triple net leases are the norm but stay aware of what you are signing up for: leasing 100 SF of commercial space at $30N might look like a $3,000 per month payment, whereas a $20NNN rate for the same square footage could cost in excess of $3,500 per month, depending on the quality of the building, needed repairs, and upkeep expenses.
4. Finance your business.
- Aesthetics – Is the site you are considering in a location that people will want to come to shop? Is it inviting? Is it quality? Does it fit with the goals and objectives of your business concept
- Proximity to suppliers – This is one of the least thought-through parts of determining the right business location. People often assume they can always stock up on special inventory or have it mailed to them as they’d like; but stocking up on inventory can be hugely expensive and detrimental to a Cash Flow Statement. If the inventory needs to be stored in specific climates or with specific care, there is a cost associated with that. If the product has a limited useful life, lenders will want to see a monetary buffer to account for expired or ruined inventory. Shipping costs for mailed inventory can be debilitating if not carefully planned, and with any type of inventory inflow or use, a detailed schedule of accounting is paramount to have. Also important is understanding how the cost shifts from inventory, to production, to priced goods, to profits, and back into inventory; taking into account net losses. A good guide for understanding inventory costing methods and how proximity to suppliers can significantly affect these costs can be found at Principles of Accounting online.
- Workforce – Does the location you are considering offer a local labor pool that will fulfill your needs? I may want to open a French bakery in the middle of a country town in East Texas but if the closest qualified assistant baker I can find is two hours away, I’m going to need to change my business strategy.
- Competition – Competition in the marketplace is a cornerstone of a successful economy; but not when it moves into being an oversaturated market. A couple of good, local donut stores can offer variety for all, maintain quality product and service delivery, and keep consumers happy and money flowing. Having a donut shop of every corner, however, becomes a drain. Not only is there only so much donut-spending money to be spread around in a community, but consumer fatigue actually creates recessed spending trends with time when an industry becomes old hat. Make sure you know how many businesses similar to yours are in an area and know their pricing and offerings.
The phrase that comes to my mind when I think of how to begin this section is a verse my husband likes to use: “If wishes and buts, were candy and nuts, we’d all have a merry Christmas.” To adapt it for my needs here, I’d say, “If wishes and buts, were reliable commercial financial guarantees, you’d be in business.” Hmm… doesn’t flow quite so well, but the point is there: having a fantastic, amazing, incredible, perfect idea alone, won’t get you the funding you need to turn that idea into reality. Even small business owners and entrepreneurs typically have:
- Business partners to share the financial and management burdens with
- Investors who believe in the business owner’s vision and are willing to take reasonable and metered equity positions (ownership in the business) and/or collateral (guaranteed return) risk to back some of the initial costs
- Personal financial investment in their business endeavors; too often to the point of being grossly risky to the individual and their family
- Commercial loans with strict repayment schedules, overly-scrutinized agreement terms, and specific thresholds for compliance
- Unrelenting passion, enthusiasm, loyalty, and dedication to their business mission
Obtaining financing is even harder for startups, trendustries, or emerging fields, since lenders don’t have many comparables in order to determine the potential investment risk. When deciding how to finance your business idea, there are different options available to consider. The analysts at NerdWallet online
and the U.S. Small Business Administration provide detailed information on each funding type
, but some of these are, in summary:
5. Set up the business structure and registration.
- Self- funding – Also called bootstrapping, you put the money up yourself
- Venture capital – Investors are people, or groups, with money that they specifically use on new business ideas (ventures) with the hopes of getting a sizeable return for their investment in the future. Think of it like reasoned gambling, or what you see on Shark Tank.
- Crowdfunding – This mechanism, where a group of people who invest a small amount into an idea, thus creating a large enough pot of money to realize that idea, has been made more popular with the rise of online resources such as GoFundMe.com. The reality: crowdfunding has been a financing staple since the creation of wealth systems.
- Small business loans – Local banks often offer commercial loans in varying amounts, depending on the size of the bank and the type of business you are wanting to start. Some banks offer SBA-Guaranteed Loans, which are backed by the U.S. Small Business Administration and essentially offer local banks the opportunity to act as the broker of funds the federal government has set aside for business development. Larger banks will also often have their own pool of commercial loan dollars to circulate. A Revolving Loan Fund (RLF) is a pot of money that can be loaned out, recouped, and then loaned again without the intention of producing profits over time. Some RLFs do charge interest on the loan, while others do not, but the interest earnings are used to grow the fund so it can take on larger or a higher quantity of loans. Micro loans are small, short-term loans meant to be used and repaid quickly for investments requiring minimal financial backing.
Before your new business can do anything, you have to determine the legal structure of the company and file the business name with the county of operation. If the business will be incorporated, you will have to file with the Secretary of State’s Office
One of the key steps to take toward business ownership, is to determine a name for your company. This is known as an Assumed Name, or DBA (Doing Business As). Sometimes this is the same name as what you plan to put on your business cards and signage, but it doesn’t have to be. Your legal entity name must be unique, so when you file to register the business name, the clerk will typically ask you to do a thorough search through the county records to ensure that no one else has already registered your requested Assumed Name. Sound strange? I agree! Clerks aren’t able to give anyone legal advice, and determining your business ownership status is considered just that. But don’t fret, most counties will have a searchable database available online for this purpose. If you try to file an Assumed Name that has already been registered in your county, you will receive notice that your request has been denied- but this can take a few weeks to come to light. Do you research beforehand so you know that completing your application request, and paying the required fee, won’t be in vain. DBA filing forms and more information for Tarrant County
can be found online.
Even the smallest mom and pop shop must choose a legal business structure in the State of Texas. Which kind you decide on will influence ownership and operations, personal financial liability, and future tax burdens, so know which one is right for you and seek legal counsel before determining a final course of action. The SBA offers a good overview of the different types of company structures online. These include:
6. Determine your business tax responsibilities.
- Sole proprietorship – One person owns the business and that person’s personal assets (wealth owned) and liabilities (debts) become merged with all business gains and losses.
- Limited Partnership (LP) – Multiple people own the business, but only one partner is personally liable for business gains and losses. Usually, the partners with less invested personal liability, also have less control over business operations and will receive less return from profit margins.
- Limited Liability Partnership (LLP) – Multiple people own the business and all of them have protection against their personal assets being merged with business finances. The business is considered a completely independent entity. These types of legal structures are the safest route for individuals to take; however, be warned that when multiple people own a business and no one has their personal financial stake supporting the endeavor, it can be difficult to obtain a loan because there isn’t collateral in place that lenders need to guarantee start-up and small business loan packages.
- Corporations – There are a number of different types of corporations that can be established, but the basic principle behind each one is the same; a corporation is a separately-existing entity from the people who run it. They are typically owned by a pool of people known as stakeholders and receive guidance from a board of directors who employ a Chief Executive of Operations (CEO). Stakeholders have differing amounts of equity (ownership) that is often called “shares” or “stock.” The amount of stock a stakeholder has in a company translates into the value of return they will realize from profit margins. Not to get too into the weeds, but non-profits are also corporations; however, their profits are typically returned into operations to grow service offerings.
- Limited Liability Company (LLC) – An LLC is a combination of an LLP and a Corporation and are probably the most commonly formed entities. They are entities created separate-and-apart from individual personal financial liabilities, but usually are structured more like an LP with a small pool of people who steer and lead the organizational operations.
Just like when you are buying a home, knowing what to anticipate in the way of taxes is critical to establishing a reasonable and sustainable budget. Businesses are taxed at differing rates by multiple agencies, depending on their location, size, type of business, imports and exports, number of employees, if it is a franchise, and more. Do your homework and use a professional tax consultant to get tax estimates prepared from the very start or you may find yourself struggling to make ends meet before you even get through your first year of operation. Federal tax obligations are filed through the Internal Revenue Service (IRS)
, State taxes through the Comptroller of Public Accounts
office, and the Tarrant County Appraisal District
provides assessments and enforces collections locally.
7. Know business employment requirements.
If you plan to hire even one employee for your business idea, you are going to need to know the gauntlet of labor laws and legal requirements imposed on employers in the U.S. and Texas. A basic summary of these can be found at the Employment Law Handbook online
website. For more detailed information and to find statewide resources, go directly to the Texas Workforce Commission website
or reach out to Workforce Solutions of Tarrant County
8. Don’t forget licenses and permits!
Depending on your business type, you may likely need special certifications, licenses, or permits in order to open shop. These can be required at a local, state, and federal level and can have substantial costs associated with both establishing, and maintaining, over time. Governmental entities will audit your permits regularly and you will be held accountable for any that you don’t have or that have lapsed, so be diligent! Violation fees can cause huge financial burden or even immediately cause a business to shut down until remedied. Start your search by contacting the Building & Permits Office in the City you plan to operate in (for Saginaw, go online here
or call 817-230-0500). Next, head over online to the Texas Economic Development Office’s Business Permit Office and download their Comprehensive Permit Guide
Not all Health Departments are created equal. If you work with any type of consumable food product, you will need to keep up with very specific health permits assigned by the qualifying agency in the city of operation. Larger cities, like Fort Worth, have their own health and safety standards, while smaller cities can opt to contract under larger city Health Department regulations, or assign that authority to the county in which they operate. In Saginaw, we use the Tarrant County Office of Public Health which offers step-by-step instructions for filing a number of different food safety permits on their website
. Some Health Departments have varying requirements and you will need appropriate permits for each city you operate in, so be sure to look closely when completing these forms.
9. Now you can begin your business idea!
Once you’ve laid the groundwork for starting a new business and completed the above steps, you can sign a lease agreement, complete interior renovations to the space (known as the “finish-out” of a building) and get appropriate permits, determine a company logo, seek approval for building signage, set up contracts with suppliers, hire and train staff, stock inventory and equipment, launch your initial wave of marketing, obtain a Certificate of Occupancy (CO) from the city in which you are operating, and open for business. Planning a ribbon cutting, opening day event, and/or noticeable entrance into the community on your first few weeks of operation can significantly broaden and deepen your consumer base, so consider how you will invest in these initiatives.
Starting a business is hard work and can be a risky endeavor- Looking at average rates of small businesses in the U.S., across all industries
- Will be in operation for more than 1 year: 80%
- For more than 2 years: 70%
- For more than 3 years: 62%
- For more than 4 years: 56%
- Will be profitable over the life of the business: 40%
- Will break even: 30%
- Will lose money: 30%
- Will fail due to cash flow problems: 82%
- Are unable to get the financing they need: 27%
But it can also be very successful, if done right. Texas leads the charge when it comes to supporting and boosting new and small business initiatives. Take a look at a few of these Statewide numbers
- Number of small businesses in operation: 2.6 million
- Percentage of ALL business that are small businesses: 99.8%
- Number of small business employees: 4.6 million
- Percentage of ALL employees that are with small business: 45.9%
- Percentage of ALL Texas exports coming from small business: 93.1%
- Number of small business loans under $100k issued in 2014: 421,245
- Median income for self-employed individuals in 2015: $51,859
For more information on industry statistics in the State of Texas, go to Go Big In Texas online
As you can see, there is some heavy lifting that has to be done before a great idea can become something real. Some of these steps, the City of Saginaw Department of Economic Development can help you with; such as finding available space that may suit your business needs, providing demographic and analytical data on the community, connecting you to business resources that can help you flesh out your idea, providing guidance on finding local commercial lenders, architects, engineers, designers, suppliers, etc., provide details on local and county permits and ordinances, and even help you walk through the concept so you are best prepared to evaluate the strengths and weaknesses of your plan. I may not be able to start your business for you, but I am always a resource to help empower community co-creators to help make the City of Saginaw a unique, fun, engaging, lovable place to call home.
So give me a call at 817-230-0331 (office), 703-489-3324 (cell), or send me an email at AloraW@saginawtx.org
and lets start talking about how we can turn your great ideas into a reality!