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Business Q & A

Business Q& A -- Rhonda Abrams

Q: How important is working capital and cash flow in a business start-up?

Time is money and the reverse is also true. Money is time in that the more money you have to start with, the more time you have to get the business up and running and get through the ups and downs of starting. Every company has some false starts, customers that don't pay, products or services that don't turn out to be profitable and marketing approaches that don't pay off. Having more money enables you to stay in business as you work that out. Obviously, having enough money when you start makes a big difference

As for cash flow, one of Rhonda's rules is that cash counts, so always count your cash. New entrepreneurs often look at income and expense and try to project profit. But that's not the way real money works.

Money goes out before money comes in. Cash flow is what most businesses really depend on. Will you have the cash to pay bills when they're due? My first client as a management consultant was a small florist. They were profitable, but had trouble every month paying bills.

Q: If an entrepreneur lacks the necessary capital to get off the ground, what do you suggest?

Look for businesses that take very little start-up capital, such as consulting, sales or certain types of brokerages. Others take a lot of start-up capital, like retail, where you have rent and inventory, or manufacturing. If you're short of start-up capital, try to find a business that's not going to take a lot of cash; cash-intensive businesses, might have to be the second business. Yes, you might have a product you are dying to make or dream of a little store. But it's very hard to raise money. You can't depend on other people's money. There are lots of opportunities, and good ones, you can start out of your home. If you have a computer and an Internet connection and phone line, you can be in business.

The other trick is to get customers before you go into business. There are a lot of businesses you can start lining up customers even before you start full-time. If you do some consulting or construction, see if you can start some of that on weekends and evenings and start building up a customer base. Yes, it means still having a day job and you're going to be tired.

Q: Who is a new business person's best friend?

First of all, my books - because they are honest and objective and they're not going to hit you up for a bigger fee next month. A short meeting with an attorney can save thousands of dollars in the long run as will a trip to the accountant to figure out some of the tax considerations.

Some other best friends cam be your supplier - a good honest supplier can help you figure out what you want to do, can help you design your kitchen and introduce you to people in the trade. I'm a big believer in joining trade and entrepreneur associations. You can learn from others in the industry.

In the long run, your best friend is a continuing customer. A satisfied customer can help bring business your way. If they're an ongoing customer, then they give you an ongoing cash flow. If I've got a client on monthly retainer, they're my best friend, they're helping to pay my monthly bills.

Q: Why are there so many quasi-governmental agencies, receiving grants or other federal money, to assist small business

entrepreneurs these days?

There is a huge interest in entrepreneurship right now and it will continue to grow. Small business and self-employment are the economic engine that drive this country and will continue to be so. A Gallup poll noted a third of the American public says it owns or will own a business in 10 years.

While every politician says they're the friend of small business, the bucks don't always follow. Relatively little money goes to small business from government sources, especially compared to incentives for big business.

The funds for small business development centers have barely increased and that's a program that returns five to nine tax dollars for every dollar spent.

Q: Something like 85 percent of the work force hates going to work. Do malcontents make good entrepreneurs?

It's a qualified yes. I often say one of the factors that determines someone likely to succeed in business, is someone that hates having a boss. You know you could do it better and are willing to try. But if you're a malcontent because you can never be happy, you are not going to make it. But if someone is willing to take on responsibility and work hard to make things work out, then you're going to make a good entrepreneur.

The thing you have to keep in mind is that you still have to please people. You've got customers, clients, suppliers, distributors and employees. You just can't be a grouch.

This is a wonderful time to start a business. Both in 1980-81 and 1990-91 new businesses exploded and there are lot of excellent opportunities in difficult economic times.

To suggest a subject for this column, please contact business reporter Greg Stiles at 776-4463 or e-mail