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three years old. I recognized that I would face a challenge being a woman and owning a business. That did factor [for instance] into the name of the company. I decided that I wanted a name that was generic, a name that seemed to have a quality of branding.
I chose ‘Harrison Edwards’ because they’re family names, and I put them together to overcome that idea that ‘maybe this firm
is not going to be taken seriously enough because it is owned by a woman.’ But that was twenty-five years ago, and I think times have changed. And, in fact, the firm has expanded, and we have men and women working in the firm.
RS: What about when it comes to the money, Joe? What do they need to do to be taken seriously and how can entrepreneurs maximize their chances of being approved for financing?
JM: A lot of what has been discussed here: We like to see, obviously, a business plan in place, having the right type of advisors help- ing you along the way, having work experi- ence in the past within the business you are
trying to create, looking at a lot of different avenues of trying to get financing other than just banking. Obviously the [Small Business Association] (SBA) is a great resource, and certainly for a start-up, a bank like ours—a commercial bank—would be looking for SBA support to help with some of the financing, because traditionally commercial banks are looking for past business-operating experi- ence and collateral. And a start-up business obviously doesn’t have a lot of those things, so the SBA can help bridge that gap. The SBA doesn’t necessarily come in directly from a loan perspective, but they may be able to provide a guarantee.
LS: The interest rate on SBA’s now is 2.75 percent plus Wall Street Journal prime and variable quarterly or monthly. That would be the 7A loan, which is the primary SBA vehicle for lending. [Today that translates] to 6 percent.
JG: That is not expensive capital!
JM: No, it’s not at all. I also believe in get- ting involved in local organizations like the Westchester County Association [WCA] and the Business Council [of Westchester (BCW)]. They provide great resources and can really help you contact the people that might be able to provide you with financ- ing. Because there are alternatives out there to the SBA and commercial financing too.
LS: Also it should be noted, as they say, you have got to have a ‘dog in the fight.’ There are no one-hundred-percent financers. You are the first financer of your business.
JM: And if you cannot go the SBA route, the bank is going to look for a lien on your home, personal-cash collateral, personal assets that you can pledge that are going to give the bank a certain level of comfort.
JG: That is a tough row to hoe—to pledge your house or whatever—seeing how many fail.
JM: ‘How many fail’ is also why the bank is looking to take those kind of assets.
LS: I also think it is very important to discuss with entrepreneurs that, you know, a lot of businesses don’t start with a two-million- dollar loan from a bank. Be realistic.
RS: Let’s say Harry keeps plugging along for many months and is not yet profitable. He is still in the red. He is draining his sav- ings or he is using his line of credit. At what point does he conclude that it is time to throw in the towel and cut his losses?
RW: I would say that the most important thing you can do is get somebody that you respect to take a look at your numbers and plans and tell you what they think. You’re so into it that you’re likely to be looking through rose-colored glasses, and it never looks like you’re not going to make it. So get somebody who you really respect—who is going to keep whatever information you give them totally confidential—to look and see if you could sell them that this is still a viable business. If you can’t, it is perhaps time to fold your tent.
JG: It’s important that you collect the nec- essary metrics on your business. That will
help you create a dashboard that will help you to see where you are going, how fast, how much traction you have, how much customer acquisition.
BB: In an alternate universe, Harry has suc- cessfully gotten through his first year. What would you tell him about the switch from start-up to growth?
RW: Is there a [customer-] continuity con- cept? The classic example is a frequent-flyer program. You want to figure a way to have people come back again and again. It is a
lot easier to keep a customer, generally, than it is to go out and get a new one. Know the ‘Eighty-Twenty Rule’: Eighty percent of your profits come from twenty percent of your customers. And you better know who those twenty are and you better see to it that the service that you give to them is superb.
SC: You have to make sure that your employ- ees, likewise, feel that they are valuable.
RW: And to keep the people on your staff motivated by knowing that they are going to share in your success, so they feel that they
are in effect, partners—even if they are not legally partners—in terms of the profits, that they are going to get a share that is commen- surate with their importance to you because you recognize that, without them, you don’t have those profits.
SC: Although I would be careful about that because you don’t want to create expecta- tions that you may not be able to fulfill, and those employees may not necessarily still be there in a year from now if you don’t meet your financial goals.
JG: As your company begins to transition, you need to start paying more attention to cash flow through tax savings and if there are ways in which you can accelerate expenses to offset some of your income or ways in which you can arbitrage your rate to get a capital- gains rate and so on. What you save in taxes you are then able to reinvest in your business.
CM: I would say that the thing to keep in mind are that everything changes, that you should keep abreast of the change within your own industry. Even though the prod- uct may be more or less the same in three years, the marketplace may change. We grew up with tap water, right? Somewhere along the line, somebody got the idea: ‘Gee, let’s bottle it and sell it for two bucks.’ So this, to me, is the perfect example of change in a very short period of time.
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Louis Scamardella
I think that many startup businesses think of themselves as defeating the competition. But they should ask, ‘What is my
niche in this competition?’ And also, ‘How is the competition at delivering those goods and services? What can we learn from that?’
Q1 2013