I had seen and spoke with Justin a number of times before, back when he worked at a local big box store where we’ve bought most of our computers and printers. This time he came to the house with his young wife, both as students of a local college, to conduct the “interview”.

Justin is a computer whiz and actually works full time as a computer network technician at the college he attends. But he’s really studying business, and he was assigned to interview a local small business owner, an entrepreneur, I suppose.

He chose me because he knew me, and was a friend of my son, Slade, also a local college student and former employee of the same electronics store. But, I wondered if he had the right guy, and if I could shed enough light on the subject of starting one’s own small business and making a go of it in our American economic system.

As he sat down and got out his pad, I worried that with only a junior college education, and none of that in “business”, my insights wouldn’t be very scholarly. But, there was little time for worry, for his questions soon began.

“When you started your business, did you have a well developed business plan in place?” Justin asked. And what could I say about that?

“No, not really,” I confessed. “I kind of backed into starting a commercial sign shop, since I had found I could make extra money while I was going to school doing that type of work. It was fun, and for my age the income seemed pretty good. Before long, it just appeared to be the best thing to do… at least for a while. The ‘while’ has been 34 years.”

“No business plan in the beginning?” he continued.

“No, Justin, but I believe in one now, and have been working and improving on one for several years. Every business owner needs to regularly step back and seriously evaluate where his business is, what direction it needs to go in, and how in the world he’s going to get it there. This is because one’s business, or one’s clients, at least in the commercial sign business, will pull the enterprise in every direction you can think of, and at least half those trails are dead ends. So you have to develop a plan, even though it must be somewhat flexible and evolving.” (As I said this, I realized that I really did believe it.)

After a few notes were scribbled, Justin asked, “What are the biggest pitfalls to a small business and small business owner just starting out?”

“Taxes, under capitalization and cash flow,” I replied. “Taxes, paid in quarterly gulps, are usually more than you expect, everything costs more than you expect, and customers, especially large corporate clients, take longer to pay for their work than you expect. Perhaps these problems can be defined as having to become realistic about our unrealistic small business expectations,” I reflected.

Justin seemed surprised to hear that a self employed person pays both halves of his social security taxes, 15.3%, with no personal deductions (as compared to income taxes), which adds up in a heck of a hurry. Why, you’d think they would learn that the first day of business school. And if income taxes are, well, a bit taxing, just get behind on your sales tax payments.

The idea that being successful can be hazardous to one’s cash flow stream seemed a bit of a revelation to Justin as well. While one’s sales are getting bigger, more seed money will be needed to keep the business in the black as it grows. And this curve always seems to be a hard one to get even with. Well, so it has seemed to me, anyway.

“How about competition, how does that influence your small business?” Justin continued with his questions.

“Competition influences a small business every day, in every way. You may say, I need to make more profit on this and that, or charge 40% more on everything we do. But, you can very quickly improve your profit margins right into bankruptcy. The American free market works, and each business has to operate in an environment of competition. This is not necessarily bad, but one soon finds out that the parameters that control your business are not always defined by you.”

Justin, looked up, and then asked, “In your opinion, is there still enough opportunity out there today for those wanting to start and run their own small business?”

“Absolutely. Lack of opportunity is usually not the concern at all. It is what you do with that opportunity that matters. There is plenty of opportunity,” I insisted.

And there is, of course. Justin and I talked quite a bit more than I can record here, and he seemed to have plenty of notes to deal with when it was over. He is where I was 30 years ago, but with a better education. I’ll bet he makes it.

But it won’t be easy, and things will certainly not go exactly as scheduled, even with a good business plan. That’s just the way it is, once you’re down here “in the trenches”. Well, maybe not for many of you, who are a heck of a lot smarter than me. I hope you’ll share your insights with any young person who’s willing to listen, and even with some of us old guys who still need all the help we can get. I’ll look forward to hearing from you.

Have a great month,

—Rick