The StartUp Blog at PartnerUp

This is the time of year when business owners should start planning for the year ahead. That means establishing a budget. Whether they’re in the early phases of starting their businesses or just hate taking the time to make accurate financial projections, many small business owners have never tackled the budgeting process. But budgeting should be a priority, a high priority in fact. It is a part of your financial road map and guides your saving and spending habits.

Budgets are important for many reasons. They serve as a reference point to guide your business management strategies. They lend a sense of reality to your conceptual business ideas. They also help you set realistic goals for the future. One reason why budgets are especially important, however, is their appeal to potential investors and lenders. Budgets tell them three things:

1. How you plan to carry out your business plan.
2. How the loan will be repaid.
3. What type of return can be expected on the investment.

Well-planned budgets greatly improve your chances of getting funding because they also show credibility. In this financial climate businesses should be doing everything they can to increase their chances of receiving financing.

Starting a business is risky. Some people can handle leaving their safe, secure 9-to-5 jobs to pursue their own ventures; others can’t (especially in this economy), which is why many people opt for the best of both worlds—starting their businesses while keeping their jobs.

It’s a great idea for those who like to test the waters before they jump in. The problem is that in order to really grow a profitable business, this arrangement can’t be more than temporary. If you’re willing to put the time and energy into starting a business while still holding down a full-time job, then you need to be willing to see it through to the end. That means at some point leaving the comfort of full-time employment and quitting your job.

Just as you shouldn’t quit your job until you have a new one, I also wouldn’t suggest that you quit your job until you have a pretty solid start on your new business. You should at least have a business plan that is on its way to implementation. Beyond that, the timing is up to you, just don’t wait too long. As I said before, in order for your business to reach its full potential, you have to give it your full attention, which won’t happen if you’re working for another company.

It’s kind of like that “jump off the cliff” moment. It’s risky and emotional, but exhilarating and worthwhile at the same time. So wait for the right moment and jump in.

Do you run a startup or a small business? Are you an entrepreneur or a small business owner? Are these terms just a matter of semantics, or are there distinctions between them?

I sometimes struggle with classifying businesses and business owners along such lines. I’ll be honest, sometimes I’m careless and I use the terms interchangeably. I’ll throw “small business” out there when it really should have been “startup.” The same goes for “entrepreneur” and “small business owner.” I was never really sure where the lines should be drawn. So I did a little research.

So when does a startup become a small business? Some people base this on size or age, but I think it has more to do with progress. I also think there’s an in between stage that deserves some attention. Here’s how I see it.

Startup: a fledgling company working on proving its concept
Early-Stage Small Business: has proven its concept and is working on building revenue
Small Business: has built revenue and achieved profitability

When it comes to the difference between being an entrepreneur or a small business owner, I think it’s mostly in the approach.

Entrepreneurs:
-focus on innovation, creativity and high-level growth
-look to create a value in the marketplace
-are always thinking of the next big thing

Small Business Owners:
-only think of growth until they are able to comfortably support themselves and their families
-are in it for the long haul
-have settled in to the day-to-day of running a business
-take fewer risks

I read a great post the other day on The Entrepreneurial Mind about maintaining focus. Many small business owners, particularly newer ones, tend to be fickle and impulsive. They see a business opportunity and they’re compelled to pursue it, not really taking into account how it fits into the bigger picture of their businesses. In his post, Dr. Jeff Cornwall offers a solution–mission statements.

“A good mission is a short statement that clearly defines what we do (our product or service), whom we do it for (our market) and how we do it (our business model, such as retail, manufacturing, Web-based etc.),” he writes.

Sure mission statements are important for communicating the basics of your business to others, but by writing and memorizing their mission statement, small business owners can better maintain their focus. According to Cornwall, mission statements are the single most important tool to help you get focused. So if you don’t already have one, get one, and always keep it in the back of your mind.

I’ve heard people talk many times about what they think is a good predictor for success, but it’s usually the same old thing. Ambition, intelligence, the list goes on. But this is one that I’ve never heard before. Investor Peter Thiel (PayPal, Facebook, Slide) looks at how much a startup CEO pays himself to help him decide, according to TechCrunch.

At first I thought that was kind of an odd variable to focus on, but after thinking about it for a while it started to make perfect sense. A startup CEO who’s rolling in riches will develop a false sense of security in his or her company. When the money is flowing in freely, it’s easy to feel like your business is already a success, but the reality of it is quite different. Low pay drives that hunger to do more to make your business a success.

I’m not advocating for the type of pay that results in a hungry, homeless entrepreneur; I mean, come on, these people may have families to take care of. But what I think is a bit ridiculous is a startup CEO making more that $100-150k a year running a company that has yet to show signs of success or longevity. Couldn’t some of that excess money be put toward growing the business?

What Thiel is saying is that “it goes to whether the mission of the company is to build something new or just collect paychecks.”

Business ownership and adequate sleep do NOT go hand-in-hand, at least not for most people. Entrepreneurs spend most nights wide awake and worried with their minds racing, contemplating the many issues facing their businesses. Because of the current economic slump, small business owners are beginning to work even longer hours and worry more, according to a recent NFIB poll, which makes sleep deprivation all the more prevalent.

There are many entrepreneurs out there who like to boast about the minimal amount of sleep they need each night, but for the vast majority of people, research shows that seven to eight hours of sleep is optimal. Those who don’t get it tend to operate at a disadvantage.

This is all pretty widely-known, but what I found kind of interesting the other day is that 84 percent of entrepreneurs say they have developed business ideas or solved business-related problems WHILE they were sleeping, not as they lay awake in bed at night, according to the Wall Street Journal’s small business blog Independent Street. Knowing that you’re potentially doing some business-related problem solving while simultaneously giving your body some much needed R&R might make full nights of sleep a little more bearable for you worrisome entrepreneurs.

A great way to make the most of your sleep-working is to keep a pen and pad of paper next to your bed. When you wake up and your mind is flooding with ideas, start jotting some of them down right away. If you don’t, you will likely forget them soon after you get out of bed.

Who says you have to go to college to be an entrepreneur? No one is going to look at your resume and tell you that you’re not eligible to start your own business if you don’t. So is college really necessary? Matthew Bandyk, who writes the U.S. News and World Report entrepreneurship blog Risky Business, recently contemplated that exact question.

According to one side of the debate, there isn’t much that a standard four-year bachelor’s degree can do for you in terms of giving you the practical skills that will aid you in running your business day-to-day. On top of that, college is expensive, as is starting a business. Why not save yourself the tuition money and put it toward your upcoming business? Basically the argument is that if you are truly smart and have entrepreneurial blood running through your veins, then college is unnecessary.

The other side of the debate, however, has “undeniable evidence” to back it up, according to Bandyk’s post. The evidence shows that “entrepreneurs who go to college are more successful than those who don’t.”  Apparently writing useless papers on subjects that mean nothing to you isn’t so useless after all. “Doing so imparts skills such as how to synthesize, analyze and present reams of information in a clear and concise manner—abilities that are crucial for any number of jobs.” In addition, there is a multitude of networking opportunities available within the college scene.

I’m a huge proponent of higher education, so I fall more within the pro-college side of the debate. I think that Bandyk nailed it in an earlier post when he talked about studying entrepreneurship while also studying an outside niche. “While successful company builders have a natural inclination to be entrepreneurs, sometimes it takes education to bring that inclination to full bloom, he writes.” Studying an outside niche allows you to have a specialty and a more in-depth knowledge of a subject you are interested in.

What side of the debate do you fall into? In terms of entrepreneurship, do you think college is a waste of time or a worthwhile investment?