Starting your own business after being laid off may seem like a smart step toward job security, but experts and entrepreneurs advise caution.
“It’s not all shiny and glittery,” said Phil French of Orland, who started his own garage this year after being laid off. “The biggest thing I was used to for so many years was getting a paycheck on Friday. Now, you aren’t sure of a payday. You have to go do the work. When you’ve actually got your feet in the water, and you know what’s going on, it’s a little nerve-wracking.”
French said that people who have worked for someone else for their careers have always had someone pushing them, a foreman or the like providing the needed motivation on the job. When you own your own business, that motivation must come from within. And not everybody has it, said French.
“They’ve really got to have a heart-to-heart with themselves,” he said.
Tom Gallant, director of the Small Business Development Center in Bangor, had several pieces of advice to would-be entrepreneurs.
First, said Gallant, don’t start a business just to get yourself a job. You need to have a reasonable risk that you can live with if the business doesn’t work, said Gallant. And that risk should be something your spouse can live with, too, should you have one.
Don’t use all of your money to get into the business, suggested Gallant. One of the main reasons businesses fail is that people underestimate the capital needed to get started. And the money never comes in fast enough, and business expenses are always higher. If a new business owner sunk all their money into the operation, that can be a problem.
“If they don’t have any money to fall back on, enough money to weather the storm, they not only go out of business, but they put their family in a terrible situation,” said Gallant. “Not everybody’s in the financial situation to be able to go into business for themselves.”
Gallant advised that anyone who wants to start a business should check out their credit report through www.annualcreditreport.com. Something like 78 percent of people in the United States have errors on their reports, he said, and it’s best to get them squared away before approaching a bank for a business loan.
Get guidance from someone who isn’t a friend or a family member, said Gallant – essentially, a reality check. Gallant suggested working with the Small Business Development Centers around the state.
“Everything we do is free and confidential. They can talk to us about their dreams, where they are and what they want to accomplish,” he said. “We can have very serious conversations with them, not giving them the answers but asking questions.”
Writing a business plan, really laying out what a new venture will entail, is part of that process, said Gallant.
And last, said Gallant, a business owner needs skills in three areas to survive: operations, finance and marketing. Most entrepreneurs have the operations piece down – that’s why they’re getting into business for themselves. They can learn the financing or hire an accountant. But many tend to avoid the sales and marketing piece. And that’s an important piece of the three-legged business stool, said Gallant. A business owner needs to know what the market is, and how they’ll sell their goods or services to it.
Chuck Pelletier, who started KLC Lakeside Rentals in Madawaska after being laid off from his teaching job, had some basic advice: Be patient, and observe what’s going on around you. That may give you an idea of what business you may be able to start.
“Don’t rule anything out – anything is possible,” he said.