­Hudson, Perry tout the risks, benefits of small businesses
by DAVID DAVIS, Managing Editor
May 12, 2013 | 590 views | 0 0 comments | 4 4 recommendations | email to a friend | print
Small Business Month
Walter Perry
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The Small Business Development Center on the Cleveland State Community College campus and Cleveland/Bradley Chamber of Commerce staffs are celebrating May as Small Business Month.

Small Business Development Center Director David Hudson said small business owners come in all sizes and flavors, but all of them have a willingness to accept some amount of risk.

Taking out a home equity loan on the family home to invest in a business could be risky, “but you’ve got to be willing to do it. You’ve got to be willing to work, work, work and work some more. You’ve got to be willing to lead people. You’ve got to be willing to find the people to do the things you are not good at doing.

“If I’ve got a business and I can’t stand to call Joe on the phone and tell him he’s 90 days late on his bill, you’ve got to have someone for that.

“No one is good at everything, so you have to put a team together,” he said.

The celebration of those risk-takers who provide livelihoods for themselves and others began May 6 with the Chamber’s small business luncheon with the help of Walter Perry III, district director for the Small Business Administration for Tennessee.

He presented an overview of the purposes of the Small Business Administration and the local Small Business Development Center on the campus of Cleveland State Community College. The SBA provides counseling and training on how to start and expand small businesses, how to contract with the federal government and business loans.

There are 14 development centers in Tennessee. Most of them are located on college campuses. While anyone can go to any center, business centers cannot solicit outside of their service areas.

The Cleveland State service area is comprised of Bradley, Polk, McMinn, Meigs and Monroe counties. Residents of other states with an existing or potential business anywhere in Tennessee may also go to any of the 14 centers.

Perry said the SBA set up its Government Contracting Program to help both government contracting officials as well as small business owners do business with the government. The Small Business Administration’s Office of Government Contracting and Business Development works with federal agencies to award at least 23 percent of all prime government contract dollars to small businesses and help federal agencies meet specific statutory goals for small disadvantaged businesses, women-owned small businesses, service-disabled small-business owners and small businesses located in historically underutilized business zones.

He said the Cherokee National Forest, headquartered in Cleveland, participates in the small business purchasing program that buys goods and services for all of the national forests from Virginia and Georgia.

The SBA does not provide federal grants, but works hand-in-hand with local banks. SBA loans range from $5,000 to $5 million for startup or expansion. A company qualifies as a small business if it has fewer than 500 employees.

“An SBA loan is kind of like an FHA or VA loan where you have a government guarantee the lender’s note that is put forth to you, to enable you to have that working capital,” he said. “In the last year and a half, $10 million have been approved for SBA loans for businesses in Bradley County.”

Hudson said Wednesday in a separate interview that people have the erroneous idea the SBA is only about small startups or someone looking for an SBA loan.

“Not true,” he said. “We probably work with more businesses that are ongoing and have been working for awhile than we do startups. We get half of our funding from SBA and the other half, roughly, from Cleveland State. When we take a client to a commercial bank, it is up to the commercial bank to decide if they want to look for an SBA guarantee or not.”

There is a misconception that SBA loans are cumbersome and slow in approval.

“Not so at all. I’ve had SBA loans in clients’ hands in 15 days,” Hudson said.

The local SBDC saw 340 clients in 2012. Some of those clients represented existing businesses and some were startups. Those clients created 154 new jobs and injected $12.8 million into the five counties serviced by Cleveland State.

Hudson said the center exists to help people start a business, grow their business and improve their business through a series of workshops, including QuickBooks on beginning, intermediate and advanced levels.

Hudson leads a workshop called “Small Business Fundamentals” in which he speaks about running a business.

“Not the dry financial stuff, though that’s part of it, but the things you need to think about when you decide to go from a salaried job to running your own business,” Hudson said.

“We do classes in social media, business plans, financial projections and getting ready to go to the bank so you will have typically everything a bank is going to look at in order to save you and him time.”

Hudson and his staff know of what they speak. He has owned 11 companies in five different countries. He operated outside the United States for 27 years. He has three former career bankers, a master’s in marketing and Alicia Rice, who is the secretary and information processing specialist.

Staff includes Alicia Rice, Robert Hotchkiss, Lisa James, Lynn Chestnutt and Chapin Miller.

The SBDC works hand-in-hand with the business incubator.

“Quite a few of our clients are in the incubator,” he said. “All of our services are free and confidential. We can’t share anyone’s personal information anywhere.”

“We are here to help business because if you are in business, you’re going to make money. You’re going to pay taxes. Taxes go to Washington and Washington always wants you to pay taxes,” he said.

Not everyone who starts a business is successful. However, businesses started with SBDC assistance and a continued ongoing relationship probably have an 85 to 90 percent success rate.

“If a business is still alive and making money after a couple of years, we’ll call that a success,” he said.

The ones who have never asked for assistance have a less than 50 percent chance of succeeding and possibly as low as 65 percent failure rate depending on the type of business.

“Restaurants typically run about 60 to 80 percent failure,” he said. “They’re fairly easy to get into. Everybody likes to eat and everybody thinks they can cook.”

Restaurants usually fail within the first six months. But, the SBDC offers a variety of services to help new businesses avoid the pitfalls staff members have seen in their careers.

“One of the things we bring to the table is, our staff has probably seen just about every error that can be made in small business,” Hudson said. “We are really big on business plans. We put a lot of emphasis on business plans. That’s one of the major factors of success because you can’t just jump into something.”

Someone who takes out a small business loan incurs a debt, “and that’s one of the reasons we like to work with business plans. That’s why we do the financial projections. That’s why we and the bankers who work with us take a real critical look at what your projections are to see if they are realistic and make sense.”