Finessing Financing (Summer Retreat)

One of the most honest and popular workshops at the WIN Summer Retreat was Finessing Financing.

After all, most entrepreneurs start a new business out of necessity, generally not because they have extra money laying around. Alison Clemens of Clemens Enterprises, Inc. and Fernanda Hopkins of KBBC, LLC shared tips on how to finance our businesses, including one’s own cash, lines of credit, home equity loans and fundraising.

KBBC LLC provides organizational development and management consulting firm to structure and manage your organizational systems. Clemens Enterprises, Inc. provides mailing services since 1996 and is expanding to Virtual Assistant services, e-Blasts, Facebook posting and additional services to promote one’s business. Both businesses were self-funded as startups, one with a severance package and another from an inheritance.

Fernanda cautioned us to be realistic when starting out, and only invest the bare minimum in your equipment and business resources until you have a viable operation. “Budget and forecast is key.  Only invest in the necessities of what you need to run your business for the first year. Then do a realistic assessment of how you came in on your budget and your forecast,” Fernanda said.

“I’ve had to become a better steward
of what resources I have. …
How can I streamline further?”
~ Fernanda Hopkins

Alison echoes that minimizing overhead costs, and having realistic financial expectations is key to staying in business.“I’m still glad I always worked out of my home,” Alison said.

Alison emphasized that a diverse client base is key to recession-proofing one’s business. “I would diversify more from the start,” she said. “Have different types of businesses (as clients) so hat you’re not reliant on one niche market.”

“Have different price points: 
high, medium and low.”
~ Fernanda Hopkins

Fernanda said varying pricing models are another form of diversification. “Initially I told myself I would only work for a certain hourly rate,” Fernanda said. “Then reality set in and I said, not everybody can pay me (that rate), so I took on small project work.”

Neither had made use of the new crowdfunding tools such as Kickstarter. Fernanda cautioned that any fund-raising can come with strings attached: “Be clear that when you ask people to invest in you that you can provide to their expectations, especially in a  service business.”

“If you want to grow your business,
if you have money, invest in a CD
and use it as collateral against
a line of business credit
to establish your credit history.”
~ Alison Clemens

Alison was approached by a bank about a line of credit at the peak of her business, but management changes created a flux sometimes. Keeping communication lines open at all times is crucial.

Alison recommends comparing rates and fees when shopping for credit and banks. Using equity and asking for fee waivers can do wonders.

“It is a competitive world.
There is financing especially if you are growing.”
~ Alison Clemens

Fernanda agrees that communicating and being personable is key to a good banking relationship: “I treat my banker just like my WIN sisters, you have to know them and build friendships. Chicago is a city of patronage, you have to know the people or you won’t stay in business.”

Both insist that good bookkeeping is a habit to implement from the start. Keep personal and business finances separated and ensure you have a good accountant and business lawyer to rely on when you incorporate.

“Be a good steward over whatever you have.”
~ Fernanda Hopkins

Fernanda advises that using an intern over a paid subcontractor can save  funds. Several Chicago business schools require that students complete a number of practice hours, which is a win-win opportunity for both the student and the business.

Meanwhile, Alison recommends assessing the value of one’s own time over the expertise of someone else: “If you can make more money using someone, then use someone.”

Alison’s business was extremely profitable in 2007, but since the recession has had to let staff go and lost a significant number of clients. Her advice during this period of reassessment is to: “be positive, things will get better over time.”

Fernanda is encouraged that since incorporating in 2005, her income has increased every year.

“Even if you’re moving forward by an inch,
you’re still moving forward.”
~ Fernanda Hopkins

You can tap into additional creative business ideas on October 2 during the Women’s Innovation Network’s Creativity for Business day.

ADDENDUM: As of March 10, 2013, I no longer support the WIN Board and its actions. However, I do support small business, women-owned businesses, and the gracious hosts of past WIN events.