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THINKING OUTSIDE THE BOX: The tough market may be more challenging for new businesses, but it also presents opportunities [Albuquerque Journal, N.M.](Albuquerque Journal (NM) Via Acquire Media NewsEdge) Apr. 5--Raymond Barratt was chief information officer for Eclipse Aviation when it shut down this year. He hopes that was the last time he worked for someone else. "I've been CIO for three global companies for the past 20 years," Barratt said. "I've reached the point where I would like to be master of my own destiny." Despite the global recession and the credit drought, Barratt plans to take as many as 30 or 40 of his old Eclipse employees with him into a new company that will provide information technology consulting and services to manufacturers. "The timing is either the worst it could be or the best it could be," he said. Local lenders and investors say that in tough times, people who have lost jobs, or who fear they might, often start to consider working for the one boss who can't fire them: themselves. That's true even among New Mexicans whose jobs have traditionally been among the most secure. Venture capitalist Thomas J. Stephenson of the Verge Fund did a presentation about starting new technology companies at Los Alamos National Laboratory recently and had 20 researchers attend, a surprisingly large number, he said. Usually, national laboratory researchers feel safe in a bad economy. "This time around, there are some real threats about making changes to lab spending," he said. "We definitely see an increase in entrepreneurship when we have times like these," said John C. Woosley, director of the Small Business Administration New Mexico district office. These bad times, however, are not like other bad times. Financing is scarce and risks are high. Woosley said the increase in activity during this recession isn't as much as he'd expect. "There is a general concern among people who might be interested in starting a small business that the economic situation is so difficult right now they are sort of scared to do it." Because risks are so much higher, experts say that it is more important than ever to have a good business plan that pays special attention to financial considerations. The entrepreneur not only has to survive financially; he or she has to come up with the capital in an especially inhospitable environment. Larger amounts of capital are very hard to get, said Sherman McCorkle, president of Technology Ventures Corp., which helps entrepreneurs launch new technology businesses. "If you're going to start your own business and it's going to take a half-million to 3 million dollars, right now and in the last few months there has been essentially no private equity money," McCorkle said. "Without private equity money, it's very difficult for anybody to start a business. You can't legitimately borrow 100 percent of your needs, because commercial banks cannot justify a loan like that." At the lower end of the capital-needs scale, things are more active. ACCION New Mexico, which specializes in microlending, is starting to see a number of new loan applicants, driven to ACCION by job market uncertainties. ACCION has money to lend and is ready to lend it, said Leslie Hoffman, vice president for lending. Vince Dawson, a driver for a charter bus company, wants to get financing to publish a magazine for the bus industry. On a recent Saturday, he visited ACCION's booth at an Albuquerque job fair when he was supposed to be driving a charter tour in southern New Mexico. The tour canceled, so Dawson was without a paycheck that day. Jesus Ticona also visited the ACCION booth. He works for Wal-Mart and thinks his job is safe, but, he said, "I think with the skills I have, I can do better." He hopes to open a small restaurant. "Whenever you have a really dynamic environment, and this is certainly a dynamic economy, there can be opportunity," Hoffman said. "Entrepreneurs tend to be savvy and cognizant of where those opportunities come from. Closure of one business can create a pool of customers for another business. A shift in the economy can create a new need a business can serve." Hoffman advises would-be entrepreneurs to think about money first. "I find that sometimes people tend to start looking forward," she said. "They do goal-setting and budgeting based on what may happen next. The important step comes before that. Take a hard look at where you're starting from. Make sure you understand what assets and liabilities you have in starting your entrepreneurial journey. Get a sense of what income you may already have that you can help use to start that business, making sure not to put all your eggs in one basket." Hoffman discourages new business people from relying entirely on their startups for income. "If folks can look at finding new ways, at least at the beginning of the process, to patchwork their income, they can set themselves up for more success." To patchwork income, she said, keep some savings in reserve and pick up a part-time job to keep cash flowing. Count on contributing your own money to the business, Hoffman said. "If you need to borrow additional funds, it can be a more attractive opportunity for lenders who will see that the prospective borrower is so committed to the business he or she has put some of their own savings into the business. It can also minimize the amount of borrowing you need to do so you don't get into too much hot water too soon with debt." Before even going to the bank, make sure your personal debt is under control, said Ray Garcia, director of the Albuquerque Small Business Development Center. "Banks are being much more careful about who they lend to," he said. Too much personal debt will scare banks off. The new economic stimulus package recently enacted by the federal government should help small borrowers get new money, Woosley said. The Small Business Administration, which co-signs for bank loans taken by small-business owners, used to be able to guarantee 75 percent to 85 percent of the loan. The new law raised that limit to 90 percent. "That should allow banks to make loans that would be more challenging for them," Woosley said. |