Business Start-Up Essentials
What entrepreneurs need to know and do to succeed
When Debra Lindsay-Hudgins, fifty-eight, decided to purchase Artworks Gallery & Glass Studio in 2015, it was a bold move. She had been a part-time employee of the downtown Eagle River shop for about eight years and loved working there. But she had never operated a business before and would need help taking the leap into business ownership.
The transition went smoothly, thanks to the assistance provided by the Alaska Small Business Development Center (SBDC). The center coached Lindsay-Hudgins through the process of developing a marketing strategy, preparing a business plan, and even building a new website. “They have a wonderful staff,” she says. “They’re super helpful and are so willing to share their expertise.”
Because of the hands-on guidance and resources of the Alaska SBDC, Lindsay-Hudgins is doing well in her role as a business owner. Her “funky” art gallery—which features the work of about thirty different artists and offers a variety of handcrafted items, supplies, and even classes—is thriving. And Lindsay-Hudgins is steadily adding new offerings to appeal to customers and further enhance the business.
Becoming a business owner like Lindsay-Hudgins is a basic element of the American dream. But there are numerous aspects of operating a business that entrepreneurs need to know to be successful in Alaska’s economy. There are also many pitfalls and problems that would-be business owners can avoid with the right knowledge and preplanning. This article covers some of the most common information entrepreneurs should have before they start or purchase a business.
Research and Planning Essential
Unfortunately, starting a new business is a challenge that a significant number of entrepreneurs fail to overcome. Statistically, from 2010 to 2015, Alaska had between 75 to 80 percent one-year survival rates for new businesses, according to the federal Bureau of Labor Statistics. The national average for the same time period was around 79 percent.
That’s why Britteny Cioni-Haywood, the director of the Alaska Division of Economic Development, urges prospective business owners to take the steps to do proper due diligence and preplanning before launching a new venture. There are five basic steps that entrepreneurs should take—before they start a business—to increase their chance for success, according to Cioni-Haywood. The steps are: examine ones motivation for business ownership, select a suitable business, evaluate the feasibility of the chosen business, consider start-up requirements, and develop a business plan.
The five steps are the building blocks for success. And skipping basic steps, such as creating a business and marketing plan, increases the risk of failure, Cioni-Haywood says. “Entrepreneurs should have developed a strong business plan and be comfortable discussing their proposal,” she says. “They need to understand their market, including current market share, advantages of the product/service over competition, demand for the product/service, and potential market disruptions. An analysis of assets, including management skills, should be performed.”
For business expert Bill Popp, one of the most critical things entrepreneurs can do to improve their chances of succeeding in Alaska’s economy is research, research, and more research. Popp, president and CEO of Anchorage Economic Development Corporation (AEDC), says entrepreneurs must have a good understanding of the marketplace, the need that they are trying to meet, the competition, and the cost of the service (or goods) being delivered.
Another fundamental element for success is networking. “Too often great ideas go undeveloped due to a lack of networking to find the resources and investments you will need to get your idea off the ground,” Popp says. “More often than not the person with a great idea is not a great CEO or accountant. You need to find that talent to be able to come up with the resources you need to develop your business.”
There is also some specific information people should be aware of before they start a business in the Anchorage market. One of the things they have to realize, Popp says, is that the Anchorage Bowl is the hub of the state. It’s where all the goods and services flow through to support the state, and that offers significant opportunities to business people in terms of being able to provide new products and services. They also need to know that Alaska and Anchorage are high-cost markets to do business in, and this factor should be taken into account when entrepreneurs create their business plan.
Popp also emphasizes that there is no free pot of money to help individuals start a business. “What there is are opportunities for attracting investment through a good business plan,” he says. “It’s critical to do your full homework and go through the evolution of an idea to have a successfully launched business.”
Avoiding Pitfalls and Problems
There are manifold challenges and inherent risks with starting a new business. According to the Alaska Division of Economic Development, the most common pitfalls that cause businesses to fail are insufficient start-up capital, poor business planning, poor business performance, lack of management skills, cash flow problems, and inadequate cost controls.
More specifically, Cioni-Haywood says that one of the more common mistakes relates to long-range visioning and planning, which happens at all stages of business. “In startups, people get so bogged down with operations that they can forget to look up at the horizon sometimes,” she says. “When they’ve obtained their most immediate goal, they can easily not have the time to strategize about where they are headed to next. For more mature businesses, the same can be said about succession planning, where an entrepreneur can be so wrapped up in the day-to-day operation that they don’t have a solid vision for the next step.”
This is why having a business plan is so critical, Cioni-Haywood adds. “Think big, look forward, and be strategic about planning and implementing the steps that you outline for yourself and your business,” she says.
Cioni-Haywood’s best suggestion to new business owners or those planning on starting a business in Alaska is don’t go it alone. She says: “There is an incredible support system for entrepreneurs here in Alaska, everything from marketing assistance, business plan writing, and feasibility studies to financing. Reach out to those who make it their mission to help new businesses succeed. The resources are there—and are usually low-cost or no-cost. Utilize them and increase your chance for success.”
She also advocates tapping into the considerable resources that are available to entrepreneurs and new businesses. “There are more than you know, and chances are you’re likely not the only one to have ever faced the challenges that you do,” she says. “There are professional-level folks involved with these programs who have seen it all and can provide you with sound, proven information about how to make your business successful.”
Popp advises potential entrepreneurs to do a reality check before venturing into the realm of business ownership. If entrepreneurs require outside investments, they need to be willing to give up some ownership of their idea—or risk the possibility of not realizing their dream. “One hundred percent of nothing is nothing,” Popp says. “The landscape is littered with hundreds of thousands of great ideas because the person didn’t want to share a part of that idea to make it happen.”
Entrepreneurs also must be willing to tolerate failure, which is common in business. Business owners often fail four, five, or even eight times before they are successful, Popp says.
Failure is not always a negative event, according to Popp. In some places in the country, failure is celebrated and valued as a learning experience. But that’s generally not the case in Alaska. “In Alaska, we tend not to give as much breathing room to those who fail in business,” he says. “If you fail once, you tend to be looked down upon. I think that’s a mistake. Entrepreneurs have to go through several different attempts. It’s failure that teaches value lessons.”
“But you can’t be disheartened by failure,” Popp adds. “You have to have that passion and willingness to overcome it.”
In an effort to help entrepreneurs achieve success in Alaska’s business landscape, AEDC offers a range of resources to support potential businesses. AEDC is a private nonprofit corporation that exists to encourage growth and diversity in the Anchorage economy, promote a favorable business climate, and improve the standard of living of Anchorage residents. Funding sources for AEDC, which has been operating since 1987, include private contributions, municipal and state grants, and contracts.
One of the key resources that AEDC offers is research. The organization has tools to help individuals research everything from the available commercial land for sale to demographic data to market research about consumer spending trends.
In addition to assisting with general business intelligence, AEDC can offer preliminary review of business plans and business plan concepts. It can also connect start-up business to resources they may not be aware of as well as promote new businesses to the market place through its social media following and E-News newsletter. “We have several thousand people who follow us through our social medical platform and E-News subscription service,” Popp says. “We have a very well vetted list of contacts that we send out news to.”
Recently, AEDC launched a Where to Startup video series at Aedcweb.com. The series, which includes about twenty videos that are accessible through the Business section of the website, cover various topics about entrepreneurship. The videos address what entrepreneurs need to know to start a business anywhere in Alaska, from how to conduct market research and how to legally structure a business to how to build a website. “These videos are germane no matter where you are from it the state,” Popp says.
In the videos, seasoned business owners and other experts speak on a personal level and share the lessons they have learned. “It’s a great primer for would-be entrepreneurs,” Popp says.
Aside from AEDC’s resources, Popp also highly recommends the Alaska SBDC as an essential resource for start-up businesses. The center is also a helpful resource for individuals who are buying existing enterprises like Lindsay-Hudgins, who purchased Artworks Gallery & Glass Studio.
The Alaska SBDC provides no-cost advising services and low-cost educational programs to entrepreneurs who are looking to start or grow their small business. SBDC business advisors work with entrepreneurs in confidential, one-to-one sessions in the areas of management, marketing, sales, finance, accounting, and other disciplines required for small business growth, expansion, and innovation.
The Alaska SBDC is a statewide program hosted by UAA and partially funded by the US Small Business Administration, matching funds from the state, and contributions from various partners.
Staff members of SBDC are highly qualified, experienced business professionals, many of whom have business ownership experience, and/or advanced degrees in business. All of the center’s business advisors are certified through the Alaska SBDC’s Professional Certification program.
Another valuable source of information for entrepreneurs is the University of Alaska Center for Economic Development (UACED). The center, which leverages the resources of the university system to support economic growth, provides technical assistance in the form of information and data. UACED’s workshops, advising, and tools can take entrepreneurs from developing their initial project idea all the way through project implementation. Specific services of UACED include local and regional plans, strategic planning (organizational and community), feasibility analysis, business planning, market and economic research, and financial analysis.
UACED is a program of the UAA Business Enterprise Institute, and it is one of fifty-two University Centers designated by the US Economic Development Administration.
Popp also recommends The Boardroom as a “tremendous” resource for entrepreneurs to meet each other. The Boardroom is a coworking space with an open floor plan, dedicated desks, private offices, and meeting rooms. The flexible space in downtown Anchorage provides a hub for a growing number of entrepreneurs, independent workers, small businesses, freelancers, and consultants.
But The Boardroom is more than just a workspace. According to its website, “members enjoy a constantly expanding network of contacts and potential clients, the synergy of being super-connected to a powerful community, and all the advantages of working in an environment that supports mutual growth and collaboration.”
The Alaska Division of Economic Development also offers a variety of resources to help budding entrepreneurs get their new business off to a good start. A helpful option is the division’s web-based Small Business Assistance Center, which contains helpful information on everything from financing to marketing. The division also manages a revolving loan program that provides business loans to specialized areas of new or existing small business.
In addition, the division maintains close working relationships with various organizations around the state that provide small business assistance. In fact, many of these resources are featured on its website. “We have the tools and the contacts to point entrepreneurs in the right direction for success,” Cioni-Haywood says.
FREELANCE WRITER TRACY BARBOUR IS A FORMER ALASKAN
In This Issue
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There are thousands of financial institutions in Alaska, providing everything from checking and savings accounts to loans and investment solutions. Banks and credit unions are among the most prominent financial services companies serving Alaskans.