Kara McGuire: To be the boss, plan

  • Article by: KARA MCGUIRE , Star Tribune
  • Updated: May 24, 2007 - 5:24 PM

Want to be your own boss but need some bucks to start a business? There are ways to make it happen. Here are some strategies.

Good news for recent college grads looking for work: Employers surveyed by the National Association of Colleges and Employers said they're planning to hire 20 percent more new graduates in 2006-07 than they did in 2005-06.

But not all diploma-carrying young adults want to find an employer. Some aim to be the employer.

Trouble is, with few assets, a relatively thin credit history and student loans to pay back, it's tough for many young people to get the financing to pursue their business dreams. But that's often true for older folks hoping to start a business, as well. And being young and in business has its benefits.

"There's no better time to fail and screw up," said Alec Johnson, an associate professor of entrepreneurship at the University of St. Thomas. "If they blow it, they go get a job."

Generally, with age comes obligations, such as a mortgage, mouths to feed and retirement to fund. At that point, a business failure takes a larger toll.

So how can aspiring business owners prepare themselves for the financing challenge?

Recognize that getting cash takes more than simply asking for it. A thorough, well-researched business plan is a must, said Elyse Cossais, branch manager at Associated Bank in Maple Grove. Cossais sends walk-ins with a great idea -- but no plan to back it up -- away without a loan and with work to do. Trade groups, industry associations and the Small Business Administration are great resources. Use them.

Johnson tells the young entrepreneurs he works with at St. Thomas to get as much on-the-job training as possible. "If somebody's prepared the way they ought to be, the money will show up from friends, family and believers," he said.

Want to own a dog kennel? Go work at one. Even if you aren't paid in cash, you'll find value in the experience and the contacts. Networking can lead to financing.

Angela Jaskowiak, one of Johnson's former students, received seed money from the Norris Institute at St. Thomas and raised start-up capital for her Virtuosos Music Academy by selling blocks of equity to family and friends. Many young business owners rely on family and friends to lend them money, co-sign a loan, or provide a basement bedroom or workspace.

Jaskowiak and her husband, Eric Mueller, who also works for the business, refinanced their Crystal home to take out a lump sum for the business and have also tapped credit cards in a cash-flow crunch. Cossais, the banker, said these are common avenues for financing. She's also helped young people access money using a paid-off car as collateral.

Jaskowiak, 29, said they had to come to grips with the idea that "if this goes wrong, we'll probably go bankrupt." But she said the Plymouth-based business is seeing 100 percent growth and the benefits greatly outweigh the immediate financial stress.

Family helped David Price buy a Lincoln Town Car in order to start Mr. Nice Guy Limousine Service earlier this year. He also employed a common strategy young business-starters use: Working a paycheck-producing second job. His gig as a Chambers Hotel valet provides him with the connections and cash needed to slowly grow his venture.

Jesse Bergland, a 25-year-old financial representative for Northwestern Mutual, managed to secure a $10,000 business line of credit despite having short-term debts from college, little revenue and few assets. His secret? Having a good relationship with a business banker willing to take a chance, a resource not to be taken for granted.

Although those entrepreneurs took different avenues to find funding, they all have one thing in common: Their finances look nothing like those of their office-working peers.

Now that he's in business, there's "no more fun money," Price said. Jaskowiak said their friends are buying new cars and going on vacation, while they're driving 10-year-old cars and spending their time at work. "We're just getting by," she said, but it's "exactly what we wanted."

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