Business Start Up:
Ten Things Every Small Town
Business Owner Should Know


by Tom Egelhoff

When I wrote my book and started this web site it was with the idea of helping the small town business owners of the United States. I had no idea that business owners from over 100 foreign countries were going to show up and use the tips and advice offered here.
But, that's exactly what has happened. At the present I sell more books in Australia and England than I do in Nebraska or Wyoming. So if you're in Nebraska or Wyoming...buy a book.

The point I'm trying to make here is that this site is not really a "how to" site. I don't have all the answers for every type of business on the planet. The purpose of these articles and tips is to simply force you to think about some things. Have you considered this?

What will you do about that? And I think that's the reason the site is so popular both here and overseas. So perhaps the title of this article should be "Ten Things Every Small Town Business Owner Should Think About" instead.



The Power Of Small Business

According to the SBA (Small Business Administration) small businesses are responsible for 58% of the private work force and 40% of the gross national product. Small businesses also get the credit for more inventions and innovations of products than their big business counterparts. Women owned businesses generate over $65 billion each year. Seventy-eight percent of all small businesses are 10 employees or less.



The Downside of Small Business

Only 50% of small businesses survive the first year of operation. Eighty to ninety percent fail by the end of the tenth year. Most of these failures could have been prevented by if the business owners had been more conscious of the points we will cover in this article. Ignore these and your business may wind up in trouble. Once again I stress that these are not how-to's but things to thinks about and ponder.



1. Who Are You. Really.

There is an old saying, "Many are called, few are chosen." Nothing could be more truthful in small business. Business owners are cut from a very special cloth. Not everyone has what it takes to start and run a small business. Do you have what it takes?

If you are thinking of starting your own business here are some quick things to think about. You probably have a current job working for someone else. Someone else makes decisions for you every day.

Oh you may make some minor ones in your position but someone else makes the major ones and that's probably why you want to strike out on your own. But this is one of the pitfalls of business start-ups. All of a sudden, you are in charge. You make all the decisions big and small.

This can be a very scary process when someone else has been doing it most of your life. First your parents made all the decisions, then teachers, then perhaps the military, then bosses in the work force. Now all of a sudden you are the person in charge. Can you handle it?

The next area to consider is what are you willing to give up to make your business happen. There are only 24 hours in a day and so far you are working eight of them for someone else. One hour each way to work and I'll allow you six hours of sleep that will leave you eight hours a day. Three hours of family time and you still have five full hours a day to work on your business.

How you spend it is one of the keys to success. I would suggest that you spend at least 20 minutes of the five hours reading something each day about your business or industry. At the end of a year you'll know more than 75% of the people in your industry. What do you do with the rest of the time? Simple the other nine things we're going to talk about.



2. The Business Plan

According to a study at Harvard University businesses that spent six months or less in the planning of their business had an 80% failure rate. Those that planned for a year or more had an 80% success rate. Most potential business owners know the product or procedures in producing what will be sold but very little about the day to day operation of the business. See: My favorite business plan links here.

A good business plan will put you on the right track and force you to focus on the points you might otherwise miss. You will also need it if you plan to request financial aid from banks or investors. They are going to want to know how you plan to make the business a success.

Even if you've been in business for a few months or a few years I can't stress strongly enough the importance of revising your business plan on a regular basis. At least yearly for the first five years of business. Where can you find help developing and writing your business plan? S.C.O.R.E. (Service Corps Of Retired Executives) can help. You can contact them through your local Chamber of Commerce.



3. Funds To Run Your Business

I said above that only 50% of businesses survive the first year. The toughest period for most businesses is actually the first two years because of the monetary demands of the business. It's that second year that the business usually starts it's downhill slide to failure. Why? Inadequate start-up financing. The money runs out before the business is able to sustain itself on it's own. It is typical for most businesses not to see any real cash flow into the business for at least three to six months. Often longer. And it may be two or three years before the business may actually produce enough for the owners salary.

Before even thinking of starting a business you need to make a commitment to at least five years before quitting. This commitment will keep you focused through the bad times during the early start-up months. And trust me there will be some bad times. You either need a loan or money from your day job to sustain the business for at least the first year. Longer if possible but 12 months is the bare minimum.

Once again S.C.O.R.E. or the Small Business Administration can help you with preparing the financial statements you'll need before contacting banks or investors.



4. Keeping The Books

No successful business I know of keeps a bad set of books. They know where the money is coming from and where it's going. Good bookkeeping can alert you to a whole host of potential business failures that might go unnoticed in the day to day operation of the business.

Fortunately in today's world the computer makes it easier than ever for the average person to maintain the business records necessary for a successful business. Products like QuickBooks® or Quicken® can produce all the records you need to evaluate and adjust your business for a strong financial position.

Good accountants are worth their weight in gold. They can help you set up your initial bookkeeping system and they can show you the red flags to look for each month. I would suggest checking with them before buying a software package and see what they use so you can just take them a disc from time to time. It will also save you a ton on your taxes in the time they have to spend preparing your return. For more on this see: "How To Read Your Business Condition" and "Financial Statements: How To Read And Profit From Them".



5. The Most Common Cause Of Business Failure

That would be poor management. When you're a one person business you are the only one you have to please. Here are the most common mistakes small town business owners make when it comes to management.

They hire the wrong people - Inexperienced owners often hire people they like or have a "good feeling" about rather than the most qualified applicants for the position.

Poor training - Even the most dedicated employee can't perform to their highest level if they are poorly trained.

Trying to do too much - As you move from a one employee shop (you being the one employee) to having more people you still feel the need to do too much. Sooner or later you must delegate some of your responsibilities to others.

Poor use of time - Organization is always a sign of a good manager. It's not difficult to juggle several business problems if you have an organized plan for doing it.

Not being there to run the business - Absentee ownership is a tough way to run a business. You aren't there to see the day to day problems. A good manager for this type of ownership is essential but they can't make the major decisions and you may not have all the information you need when the time comes to make those decisions.

If you feel you are not a good manager perhaps that position should be filled by someone who has the personality to handle that task. The best player is not always the best candidate to be your leader. If you follow professional basketball you probably have heard of Phil Jackson.

As coach of the Chicago Bulls he and Michael Jordan led the Bulls to six NBA championships. As a player Jackson was a second string bench warmer. He has no records and one NBA championship as a player. He also took the LA Lakers to their first championship in his first year with the team.

Contrast Phil Jackson with "Magic" Johnson. Arguably one of the greatest players of all time. Johnson was a horrible coach; lasting only half a year before getting out. Great player but lacked the motivational and people skills to bring out the best in others.



6. Knowing Your Customers

Or as we like to call it.. marketing. Who are the people most likely to want to buy your products or services? Here again, planning is key. About a third of your business plan will be devoted to marketing. Your marketing plan will be the road map to success for your business.

You will create goals and marketing and advertising strategies to meet those goals. Your plan will assist you in identifying your target market and the message they want to hear that will make them buy. How to price your product. The strengths and weaknesses of your product or service. What adverting and promotions to try. How to identify your target market.

For more on target marketing see: "Target Marketing: Who They Are And How To Find Them."



7. Location, Location, Location

This used to be thought of as one of the most critical criteria for opening a new business. If you had a bad location that was usually the main reason for failure. As stated above, running out of money and poor management are the key causes. Location is not as critical as once believed.

Don't misunderstand, location is important but it's not the most important thing. What are the most important things to consider when selecting a good location?

  • Visibility - Do you need a visible storefront like a shoe store or dry cleaner?

  • Traffic - Is it a high or low traffic area?

  • Is there adequate parking for your customers?

  • Is your target market there?

  • Condition of the property - Will it need any repairs now or in the near future?
    Is the location in a growing or decaying part of town?

  • Can you expand if necessary?

  • How healthy is the local business climate?

  • Are there other "draws" nearby that will help attract your customers? Movies? Food Stores?

  • Level of crime in the area?

  • Zoning restrictions?

  • Are there compatible businesses nearby. For example a video store would benefit from a pizza shop and vice versa.

  • Rent costs

  • Last but not least.. How close are your competitors? How do they compare in appearance to your business? Do they look more or less prosperous?

    Before beginning the search for that perfect location create an outline of what your current and future needs will be for the property. Associations and industry magazines can help you determine the amounts of traffic you'll need. You can find a listing of these people at your local library. Ask for "The Small Business Source Book", " The Encyclopedia of Associations", "The Rand-McNally Commercial Atlas and Marketing Guide" and "The Encyclopedia of Periodicals".



8. Customer Service

My idea of customer service probably differs with most you have read until now. I don't believe in customer service above and beyond the call of duty. Why? Because it's almost impossible to maintain and it will create an economical hardship.

For example, if you buy my book from Amazon.com they will ship the book in 3-4 business days. Why don't they overnight the book to you? Wouldn't that be superior customer service? Certainly better than Barnes & Noble right? The reason is the overnight cost would be almost as much as the book. It would be economically irresponsible to do that.

So, as you can see, knock your socks off service is not always the best way to run a business. What I recommend instead is steady consistent service. Every time the customer enters your business they know the level of service that they are going to receive.

Could McDonald's service be better? Possibly but you know whether you walk into one in Maine or California the service is going to be consistent. McDonalds has found a level of service that is acceptable to their customers and they can provide that service day in and day out.. consistently. For more on my thoughts on this see: "How To Find What Your Customers Are Really Looking For."



9. Don't Be Afraid To Ask For Directions

There is an old joke that men refuse to stop and ask for directions when lost. We would rather drive around aimlessly knowing that eventually we will find the right road. Unfortunately in business this can be a disaster. But there is good news.

You don't have to spend a fortune on a consultant to give you direction. In most cases the information is free or at least reasonable. Go back to the last paragraph in #7 above and ask industry associations and trade magazines to recommend someone who is successfully doing what you want to do.

Head back to the library and check out phone books from towns similar in size to yours. Call business owners there and ask how they do the things you're having trouble with. Most will be happy to help you out.

For more references to help you out go to: "How And Where to Find Small Business Information."



10. Technology - Are You Ready?

I spent eight years selling furniture in a family owned furniture store in Alton, Illinois. I left that company in 1977 and they were using a manual bookkeeping system. Every sales was manually entered into two big ledger books. The way books were kept for hundreds of years before.

I had the opportunity to go back for a visit in 1989 and was curious to see what type of computer system they had ended up with. The answer.. none. They were still using the old ledger method of keeping the books.

The question I had to ask myself was, "Could they have benefited by using a computer system and software designed for the furniture industry". My answer had to be YES... they could. The computer could have told them so much that the normal bookkeeping system couldn't.

For example: Rate of sale of certain styles and colors. What items sold as groups. Hourly sales for staffing. Sales comparisons among vendors. These are just a few items that would have made the store more efficient with the knowledge the computer could have provided.

Does every business need a computer? No, of course not. There are many successful businesses that continue to operate with pen and paper. The point here is to find out. Contact your industry gurus and find out what the pros and cons of computer systems in your industry are. Maybe they can help maybe they can't. But at least investigate.



The Last Word On What Every Small Town
Business Owner Should Know

So, which of the above do I think is the most important. Easy the first two. Without those two the others will never happen. Number one you must have the entrepreneurial spirit. A self starter who will not be denied. And second...the business plan. No business can be successful for long without a plan for success.

Without a business plan you are simply reacting to the economic climate of the marketplace. Sooner or later your reactions may trip you up. The business plan will take into account and make you focus on how you will tackle the eventual adversity that every business must face.

As I said in the beginning this is not really a how-to article but an article to give you some things that you must think about if you expect to have a long and prosperous business. If you are just starting your business I wish you all the luck in the world. If you're an old timer then you're in a very enviable position because we are poised for the greatest business times in history. Take advantage of it.


Return to the "How to Start a Business" Directory


Top : Home









Top : Home




Quick Links
Tom's Self Help Books