Thoughts for the Budding Entrepreneur

by Mike Grandfield, VP, Commercial Lending, Hampden Bank

Over the past 20 years I’ve met many entrepreneurs looking to start a business. It’s a commendable aspiration as small businesses employ just over half of all private sector employees. Here are just a few observations:

Capital Many entrepreneurs assume a bank will help with finances once they hear their great business idea. Banks can help, but be prepared to fund yourself initially. Get a couple of years under your belt, after which lenders will fund your growth, but early on it’s up to you. Often family and friends can help, but you better be confident in your plan, to avoid hard feelings down the road.

Partnerships It happens often that friends start a business, something goes wrong, and they no longer share a friendship or a business. I know: it happened to me. It often makes sense to go into business with a friend, but sometimes each partner has a different perception of how the business will run and who will be responsible for each task. This is where a business plan and partnership agreement really help. After discussing the details, get an attorney to help put it in writing.

Time Be prepared to put in more time and hard work than if you worked for others. The good news: working for yourself may not feel like hard work. Bad news: leisure time and vacations come later, possibly much later.

Keep business and personal finances separate Often, in the initial struggle to start the business, entrepreneurs use personal credit cards as a funding source. In the short term this may be necessary, but for record keeping and peace of mind, allocate certain cards just for business and others for personal.

Financial knowledge Often small business owners have valuable skills related to their product or service but are unable to understand the company’s overall performance. They may operate by intuition rather than an understanding of the numbers. You may not need a degree in finance, but a general understanding of their profit and loss statement and balance sheet will improve the bottom line over the long term.

Useful Links:

Small Business Planner: extensive information for new businesses.www.sba.gov

Counseling, training, access to capital. www.msbdc.org/wmass

By Michael Grandfield, VP of Commercial Lending at Hampden Bank, a Corporate Partner of the UMass Family Business Center