Nevada County Picayune and Gurdon Times Newspaper Archive

Small Businesses Are Successful

It's a fact 99 percent of all businesses in the state are classified as small businesses.

Successful small business, according to Chandler Russ, the executive director of the Prescott-Nevada County Economic Development Office, expansions and new startups lead the way in creating new markets, innovations and jobs fueling economic growth and prosperity. "Remember," he said, "your success in business depends on what you know and how well you can apply what you have learned."

Most of the people wanting to go into business are not adequately prepared. "I did not say they are not qualified," Russ said. While they have the motivation, desire and talent, many have not taken the time to properly investigate and research the business they are interested in starting.

Like the game of chess, success in small business starts with decisive and correct opening moves; and, although initial mistakes are survivable, it usually requires skill, discipline and hard work, not "luck", to regain the advantage.

"I am sure you have heard successful entrepreneurs mention the word "luck" when talking about his or her success," Russ said. "But what you did not hear is how hard and long that entrepreneur worked to reach their so-called luck -- or better known objectives and goals.

"Luck in business is `laboring under the correct knowledge.' F.L. Emerson once said, `I am a great believer in luck, the harder I work the more of it I seem to have.' Do not count on luck bringing you business success."

He said it will take long hours, hard work, smart work, being aggressive and money smart to be a successful entrepreneur in the marketplace.

It is also said small business people have a difficult time borrowing money from banks. This is not always true. Banks, and this includes all local banks, are in business to make money. The way they make money is by lending money.

However, it is sometimes the inexperience of small business owners in financial matters that prompts many small loan requests to be turned down. To increase success in obtaining loans, the borrower needs to be prepared and organized. They must know exactly how much they need, why it is needed and how it will be paid back. The borrower also needs to convince the lender they are a good credit risk and are of good character.

Requesting a loan when not properly prepared makes a statement to the lender -- high risk.

Remember, a bank is not an investor -- it is a lender lending its depositors' money, not its own. Banks are not risk takers.

The following illustration, Russ said, may help explain bankers' caution on loans:

Suppose you had only $100,000 to invest and the very most you could make on your investment is 3 percent. How much risk would you be willing to take making the investment?

Banks work on a very close margin of profit. Large metropolitan banks, "big banks" work on a 3 percent gross margin, while smaller independent banks seek 4 to 5 percent, hoping to get no less than 3 percent.

Accepting this as fact, if the bank makes the right decision 97 percent of the time, it can expect to break even. If the bank makes the right decision only 96 percent of the time, it will slowly go broke. If it makes the right decision 98 percent of the time, it will make money.

In future articles, Russ will discuss other reasons banks go to the extreme being cautious and conservative when lending money to small business startups.

Other topics will include business tidbits, business pitfalls, family owned business, as well as services offered by area, state and local governmental agencies, such as the Arkansas Industrial Development Commission, Small Business Development Center or Southwest Arkansas Planning and Development District.

Any comments or questions about this article should be addressed to:

"Let's Talk Business"

Chandler Russ, Executive Director Prescott-Nevada County Economic Development Office P.O. Box 307 Prescott, AR 71857.