Self-Starters Often Stop Short of Taking Advice--a Big Mistake

The caller phoning The Times sounded plaintive and desperate.

“I have a small business, and I really need some help,” she said. “I’ve tried to get a loan, but no one will listen to me.”

The suggestion to try a couple of agencies that give micro-loans and counseling prompted only a sigh.

“I’ve tried them,” she said, “but they want me to take classes.”

That short phone conversation demonstrated an all-too-common attitude held by small-business owners and fledgling entrepreneurs. Simply put, many are too hardheaded to take advice.

Such business owners will plow thousands of dollars into a business without ever making a profit or, if they’re trying to get a business going, they’ll insist that their untested idea is a cinch to make a million. So, why won’t anyone work for them for free or hand over $500,000 to finance their sure-fire idea?

Ask people who counsel or work with start-ups or small-business owners, and they’ll reel off similar stories.

“If a large business, corporate management, wants to start up a new business, they gather in resources, and they don’t move an inch until then,” said Sheila Washington, president of the San Diego nonprofit California Business Incubation Network.

“A small-business person doesn’t start that way,” Washington said. “They jump into it when they get that idea.”

Good cooks whose friends tell them they should open a restaurant too often immediately begin scouting locations instead of looking into business basics, Washington said. That enthusiasm may be laudable, but without taking time to prepare, many small-business owners put themselves at risk of wasting time and money, she said.

For example, a veteran construction-industry businessman who attended a recent business forum had launched a board game for adults. But he hadn’t applied any business principles learned in construction and was struggling with the fledgling company.

“He was just now getting around to writing a business plan for the game company after having spent $400,000,” Washington said.

Many businesses in similar predicaments end up seeking help at the Women’s Enterprise Development Corp., a micro-loan and training program in Long Beach.

“I get calls from people saying, ‘I need $10,000,’ ” said WED Corp. director Philip Borden.

Typically, their businesses aren’t performing, Borden said. They are stalled at $250,000 in sales, don’t seem to be going anywhere and are faced with a cash crisis. They may have been initially successful with a good idea but didn’t plan ahead. So, there’s no follow-up product when customers tire of the first, no marketing and no idea of cash flow or pricing.

For example, one woman who operated a window-blinds cleaning and sales company brought in $500,000 a year and still lost money, Borden said. But after analyzing her business, she realized she was spending money-losing hours of staff time on interior designing for clients. Reducing those hours helped straighten out the company, he said.

The problem is not limited to mom-and-pop operations, said Philip Lelyveld, whose Whitehorse Consultants in Culver City counsels high-technology companies.

His hardest task is getting software, hardware and Internet developers to focus or work out a long-term plan for what they want to do, Lelyveld said. Even more obstinately opposed to planning can be those in the start-up phase who come up with what the industry calls “vaporware,” ideas without concrete proof that they can be produced and sold.

“Anybody can think of an idea. The critical point is have they done something that shows it will work?” Lelyveld said.

One hardheaded engineer who approached consultant Washington with his great idea had not done any market research, had not created or tested a prototype, expected his sales force to sell the imaginary product before he produced it, refused to license the idea to large corporations better able to create the product, and, fearing his idea would be stolen, didn’t explain it to others or create a network of advisors.

“You could spend all day on the phone with someone like that,” Washington said.

She blames the myth of entrepreneurial success for keeping business owners stubbornly closed to advice and opposed to training. Tales of entrepreneurs starting successful businesses on their kitchen tables with $5 in their pockets mask the reality that those same entrepreneurs also probably had a decade of industry-related experience and got a second mortgage on their houses or substantial loans from parents, Washington said.

Small-business training itself is a fairly recent phenomenon. The numerous nonprofit agencies and colleges offering classes did not exist until the mid-1980s. The federal Small Business Administration was just about the only provider of small-business training, and even that agency had to contend with resistance.

One SBA pamphlet asked, “Why don’t you want to attend classes?” and the answer they had to argue against was, “I already know more than anyone can tell me,” Washington said.

But close-minded attitudes like these are changing. In the mid-1980s, eight out of 10 entrepreneurs refused training, Washington estimated from her own experience. Now, less than half venture into business without preparation.

Weeks of classes, long-term planning and research and hours of homework can be difficult for a business owner already putting in 16-hour days, consultants admit.

But without it, Lelyveld said, “you’ve just got a job instead of a growing business.”

For more information on resources and training, go to The Times’ Small Business Web site at https://www.latimes.com/smallbiz

*

Times staff writer Vicki Torres can be reached at (213) 237-6553 or at vicki.torres@latimes.com