By: Lisa Stevens, Wells Fargo’s Head of Small Business -
As the year comes to an end, it’s a good time to recognize and reflect the many contributions of Hispanic small business owners. According to the U.S. Small Business Administration, there are 3.2 million Hispanic-owned businesses in the U.S., contributing more than $468 billion to our economy each year.
We know many of these businesses are relatively new. In a Wells Fargo/Gallup national study, Hispanic-owned businesses were more likely than their counterparts in the general population to be in the start-up phase (18 percent compared to 10 percent).
Starting a business is no easy feat. It involves careful planning, making key financial decisions and above all, strong commitment. While the statistics surrounding start-up success are sobering – only half of new businesses survive five years – careful planning can help set aspiring entrepreneurs on the path to success.
From our experience working with successful Hispanic business owners, here are five tips for starting a business:
Develop a business plan
Developing a business plan is a key step for business success. An effective plan can help you prioritize how to spend your time and money, and set measureable goals. It also can help you identify current or future obstacles so you can better anticipate and avoid potential risks. A business plan also may help you obtain business financing. For example, for an SBA loan and some larger business loans and lines of credit, lenders may require a formal written business plan before extending credit. Plus, according to a Wells Fargo survey conducted earlier this year, business owners with formal plans were more likely to report that in the next 12 months they expect to add jobs, increase revenues, increase their capital spending and apply for new credit.
Set up your finances
Financing is the fuel that can help your business run. That’s why it’s good for businesses to start building a strong credit history, which is essential for future borrowing. To begin, a business owner should establish dedicated business accounts separate from personal accounts. Some other financial tools new businesses should consider include:
- Checking account. A dedicated business checking account is the foundation of your business finances and makes it easier to monitor cash flow.
- Savings account. Don’t overlook a business savings account, which can be used for ongoing, recurring and future expenses.
- Business credit card. A designated business credit card for everyday expenses helps you separate business and personal expenses easily at tax time.
- Payment processing. Offering customers convenient payment options with a merchant services account can help bring in more revenue and improve cash flow.
- Online banking. Take full advantage of online tools offered by your financial institution for managing cash and tracking spending.
One of the most important things you can do before pursuing financing for your business is to get credit ready. It’s important to work with a bank that offers tools and resources that make financing easier to understand, and a banker who shows you what your business needs to get approved for a loan. Before applying for a small business loan or line of credit, your bank will want to see that your business generates steady cash flow, has low levels of debt, and is in a strong financial position in order to manage debt payments. The more you know about what bankers want to see in a credit application, the more prepared you will be to pursue credit for your business.
Seek support from experts
Seek guidance from experienced peers and professionals as you start your business, such as a certified public accountant, an attorney, and a marketing expert. Your accountant can advise you about tax requirements or exemptions that you could qualify for, as well as how to keep detailed financial records that can help you streamline the bookkeeping process. An attorney can help you determine the legal protections you may need, and help you decide what legal entity is best for your business. A marketing expert can provide support on how to create a tailored marketing plan that fits your business goals, as well as help you build your business brand online with your social media presence. You also may want to consider working with a business banker for support in getting your business up and running.
Take advantage of networking and free resources
There are numerous free resources available that can offer advice, training and assistance. The SBA.gov website is a great place to start. It even offers a version of its site in Spanish. Additionally, Minority Business Development Centers (MBDCs) connect Hispanic business owners with training courses, one-on-one assistance and other services to help them succeed. Last, the U.S. Hispanic Chamber of Commerce (USHCC) has more than 200 local chapters designed to support ambitious Hispanic business owners.
With the right tools and guidance, more Hispanic-owned businesses can achieve success.
To help more small businesses achieve financial success, Wells Fargo introduced Wells Fargo Works for Small BusinessSM– a broad initiative to deliver resources, guidance and services for business owners. For more information about Wells Fargo Works for Small Business, visit: WellsFargoWorks.com. Follow us on Twitter @WellsFargoWorks.