Starting a Business Now: How to Plan and Adapt (Sponsored Content)

In the first six months of the year, the 607 Springfield business licenses issued represent a 10-year low, signaling new business has slowed with slipping economic confidence. The sluggish activity was punctuated in May, when only 61 licenses were issued – roughly one-third the number issued the same month a year ago.

That’s no surprise based on data from Springfield Business Journal’s 2020 Economic Growth Survey conducted in April. Compared with the 2019 survey, 66.8% of respondents reported their confidence in the economy had declined from one year prior. Only 4.2% said their confidence had increased, with 29% saying it hadn’t changed. In addition, 98.3% report they are concerned or very concerned about the economic impact of COVID-19 on the U.S. and local economies.

It’s not all gloom for new business though. While still lower than nine of the last 10 years, the number of licenses issued in June climbed to 94. In fact, Titus Williams, president of Prosperiti Partners LLC, says for some entrepreneurs, now may be the best time to start a new business or at least to prepare for potential opportunities resulting from the COVID-related downturn.

“Entrepreneurs have a really good opportunity if they want to stick their neck out there and have a little bit of risk. They have the chance to really make something successful,” he says.

Those opportunities could be threefold: Market share for a startup may widen as some current businesses close; startup costs may be reduced by the availability of real estate and gently used equipment; and there may be more opportunities to buy an existing business.

For a business that needs real estate, space once used by a similar enterprise, especially those that require specific configurations like restaurants, barber shops and fitness centers startup costs can be reduced.

“At this time, they’re going to have an opportunity to come in and negotiate, potentially, with a landlord,” Williams says. “It’s possible that they could come in and say, ‘Hey, if I rent this space, would you leave the equipment and let part of my payments go toward acquiring these items over a period of time?’”

Another approach is to request graduated lease agreements, where a landlord accepts a lower price per square foot initially as the business gets off the ground, gradually increasing that price with rising revenue.

“Don’t be scared to negotiate,” Williams says. “Don’t be scared to ask for a discount.”

As longstanding companies go out of business, good used equipment can be purchased at a lower cost. Williams says, “Don’t be so enamored by having to have everything perfect, like brand new appliances, or a shiny new desk or what have you. More than likely, there are going to be opportunities for business entrepreneurs to buy things at a discount and reduce their startup capital because there is inventory that people will be sitting on.”

When it comes to capital, look into U.S. Small Business Administration backed loans. One result of the pandemic economy, Williams predicts, is that the SBA “is going to roll out the red carpet for starting-up businesses and entrepreneurs.”

To take advantage of that, he cautions business owners to seek guidance from experts who understand SBA loans.

“Make sure you have a really good team around you,” Williams says.

That may include an accountant, attorney, business counselor and loan officer looking out for your best interests. Rely on your team to ensure you understand 
risks of any financial decisions.

That’s especially important if buying an existing business. While there may be some great opportunities as longtime business owners sell, it’s vital to understand the company’s true value and whether a sale would be complicated if the business obtained a CARES Act Paycheck Protection Program loan.

Scott Tennison, director of guaranteed lending and an SBA specialist at Legacy Bank and Trust says one positive aspect of pandemic-related lending is that it’s also brought attention to SBA’s flagship 7(a) loan program, which offers longer payback periods and lower terms, depending on the type of business.

Historically, customers have eschewed SBA loans as being complicated. Not so with proper guidance, more people are finding.

“They are out there to help small businesses grow and flourish,” says Tennison, who has worked for years with SBA loans. “They understand that, in times like these, (business owners) need help.”

In fact, people have so focused on the PPP loans, says John Everett, president and CEO at Legacy Bank and Trust, they may miss another CARES Act benefit.

“What most people didn’t notice – the subtle part – was that if you had an existing SBA loan, the SBA made your next six regular payments for you. What a huge relief to a bunch of existing SBA customers,” Everett says.

Not only that, new loan applicants approved for traditional 7(a) SBA loans through Sept. 27 will also benefit from that six-month break.

To launch a new business in 2020, Williams says, be patient and do your homework. If you understand your industry, customer base, fixed costs versus transitional and your revenue stream, you’re ready to take advantage of new opportunities.

“There’s going to be some great deals,” Williams says. “There’s going to be some great opportunities to buy some businesses or buy equipment that you wouldn’t have been able to buy at the same price six months ago.”

This content brought to you by Prosperiti Partners.