It takes a good idea and capital to launch a new company. In today’s tight lending environment, finding the money can be the biggest challenge.
Small Business Association lending hit $22 billion in 2010, up from $17 billion in 2009, but it was still far lower than pre-recession levels.
Looking ahead to his retirement from Colgate-Palmolive Co. in 2013, Mark McNitt opened a Once Upon a Child franchise store in Marietta last fall. The store buys and sells gently used children’s clothing.
“Would I open a restaurant today? No,” said McNitt. “You need a business concept that plays to a fairly large audience. People need children’s clothes, and they always want value.”
He had watched his brother grow a Once Upon a Child store in Knoxville for eight years, so he knew the concept worked in good and bad times. With his wife’s retail experience, a good business plan and an excellent credit rating, he was able to secure a $175,000 SBA line of credit for his first business. The franchiser said he’d need $225,000 to start, but McNitt budgeted $250,000 to $300,000 and spent most of that. The balance came from his own resources.
“Many companies get into trouble because they underestimate startup expenses. Unexpected things always come up,” he said. “There are a lot of moving parts to ramping up a business. You have to secure financing, negotiate leases, build out the space, find and train employees. Writing the checks when it’s your money makes you nervous.”
His cash flow is meeting business projections, but McNitt won’t draw a salary for at least two years. “Having enough funds to operate without needing to take anything out would be a challenge for most people,” he said. Starting a business, while still working, helped him make the numbers work.
Lee Hicks did it by sharing his idea and company. His advanced collaboration technology division at Steelcase was let go in 2008. With 20-plus years in technology communications, Hicks saw the need for a single platform that would mobilize, converge and simplify video, audio and Web-based conferencing and whiteboard solutions.
“There needed to be a port for all forms of communication, something that would merge Cisco with HP and Adobe with Apple,” said Hicks, founder and CEO of C Port Solutions.
He envisioned a mobile platform that would help global companies be more productive and cut travel expenses while allowing workers to achieve better work/life balance. Yet, he wanted it simple and affordable enough for independent consultants or health care practitioners to use it to share expertise.
When traditional investors turned down the idea as too complicated or ill-timed, Hicks launched C Port Solutions in Atlanta with his own funds and colleagues who had the complementary manufacturing, marketing, technology and sales skills needed to build the infrastructure. Everyone worked long hours for no salary for a share of the company.
“In 2010, we made over $2 million in revenue and spent over $1 million in Georgia. When dollars stay in the local economy, their impact is multiplied by about seven times, so we made a difference,” said Hicks. “We could have reduced our costs by 25 to 35 percent by manufacturing in Korea or China, but our vision was to do something bigger than our business plan. We knew we were creating a solution that was needed, and we wanted to do it by living our values of serving others and doing the right thing.”
They chose to work with local companies to develop and make their systems, knowing it would allow those companies to retain workers during the recession.
C Port Solutions now has 11 employees and a global client list. Last year, it moved into health care applications through the capital infusion of client and strategic partner Newell Rubbermaid.
This year, Hicks has been talking to investors in other cities around the country. “You have to be able to look for money in more than one place. It used to be the person with the biggest idea had the edge. Now it’s the team that can execute it the fastest,” he said. That takes capital.
“No matter what people say, capital is not as available as it has been reported, and many small companies have had to go to nontraditional funding sources,” said Hicks. “A few new startups are making it, but not as many as should.
“Small business means innovation. It’s our hope for the future, but it can’t operate without resources. We need for commercial banks and investors to start putting money in good small businesses again.”
