Shaking the money tree 101: Local banking officials offer tips for securing start-up funds
FARGO - Becky Zastrow and Randy Westcott's business dream involves chopping out the middleman.
And cutting out fat - so to speak.
Some nice fruits and vegetables may also be involved.
That's provided the friends can get well-balanced financing for a combination butcher shop and year-round greenhouse they want to open in Hillsboro, N.D.
The friends and business partners were among about 30 entrepreneurs looking for pointers Wednesday, Aug. 1, on how to connect with state and local bankers at the "Inside Banking" seminar at North Dakota State University's alumni center.
Zastrow and Westcott already raise bulls and calves and have other people do the butchering.
Now they're eyeing the butcher's slice of potential profit.
Westcott will spend most of his time as a butcher, and Zastrow said she'll "do most of the front of the house stuff" and aid in cutting meat, too.
The greenhouse is for growing fruits and vegetables, Zastrow said. (They already feed their animals some produce.)
They also want an orchard and a kitchen to make jams and breads. And they're putting up a building, she said.
"Somehow, it just morphed into this," Zastrow said. Now, it's down "to finding the money."
The presentations at the seminar, put together by the NDSU Research and Technology Park, helped the pair fill gaps in their banking knowledge.
"Mainly, what the bankers are looking for," Westcott said. "Who do I talk to first?"
Over four hours, area entrepreneurs, some looking to be first-time bosses, others with a couple of businesses already on their resumes, soaked up tips on where to find the best money trees for their businesses, and how to successfully shake them.
A bevy of local, state and federal business and banking experts ran through what would be a good syllabus for a Financing 101 class.
Tips started with the basic:
• How to choose a good bank or banker.
• How to present a business proposal, including being prepared to offer comprehensive business and personal financial information.
• Banking terms to master.
• Financing and structuring debt.
• Credit worthiness, including the importance of managing your personal credit.
To the more advanced:
• How to build a team for a business, including finding an attorney, accountant, bookkeeper, insurance firm and banker.
• What are the things bankers want to see in a business plan.
• The loan and grant programs available.
• And an overview on selling ownership in a company, such as stock or membership interests.
Al Haut, North Dakota district director of the Small Business Administration, said planning, saving cash and putting finances in order are huge parts of the process often neglected by people taking the plunge into becoming a business owner.
"So many people get this business idea Friday and (they think it will) get started Monday."
But it can take weeks or months to get financing and start a business.
"There's a learning process, a development process. It takes time to do that. Be patient. Be patient," Haut said.
For example, if you miss your target market, you can lose a lot of money getting reoriented. Or, if you don't plan to have enough money to pay the bills early on, you can run out of cash "before your business takes off and you can become self-sufficient," Haut said.
"Unfortunately, "a lot of entrepreneurs are doers" and not planners. "It doesn't always make for good success," Haut said.
He suggests beginning entrepreneurs tap resources like the Small Business Development Center or the Service Corps Of Retired Executives (SCORE).
Sara Hanstad of Bremer Bank has been a financial consultant for a number of successful start-ups. She's a big proponent of learning everything you can about the field you want to enter before knocking on bankers' doors.
"There's never a dumb question. Everyone has a different level of knowledge," Hanstad said. "We don't know what you don't know. You might not even know what you don't know."
Entrepreneurs are "the creators. We're the numbers people," she said, and bankers don't want you to fail.
"You can have the best idea in the world," Hanstad said. But if you don't plan thoroughly, "you can fail and fail deeply."
Nathan Hoffman, a friend of Zastrow and Westcott, said he wants to start "a music-based business" in Fargo, though he's reluctant to share his idea yet.
Hoffman came prepared to Inside Banking to find the holes, if any, in his plans.
"I just wanted to come down and see if there was anything that I missed," Hoffman said.
If Hoffman's learned anything, it's something Haut and other Inside Banking presenters preach: patience is a virtue worth cultivating.
Hoffman had hoped to start his business by the NDSU campus in September,"but it's now looking like November or December" at the earliest.
Chuck Hoge, executive director of the Research and Technology Park, said this year's focus was on helping entrepreneurs establish banking relationships.
During breaks, attendees of this year's event were able to visit with bankers, who arrayed themselves around the atrium of the alumni center.
Hoge said it's important for everyone to have a common knowledge base and vocabulary to communicate effectively.
"Don't wait until you need the money to start. Get started a little earlier. Establish some relationships. Get up to speed on the vocabulary and the different products (loans, grants and other financial instruments), so that when you do need money, you know what type you need, and what's best for your business," Hoge said.
Running your own business is fun and can be very rewarding, but it can be very challenging, too, Haut said.
He adds that persistence is important when dealing with the banking world. After all, not every bank has the same appetite for loans in certain fields.
One banker may also like a particular business plan more than another.
"You just have to keep trying, keep pitching," Haut said.
At the same time, "take your time. Make sure you're doing it right. Look twice and leap once," Haut said.
"Nowadays there's a lot of talk about failing fast and then you learn from your mistakes so you don't fail the next time. You scale your business," he said.
"I kind of think if we step back a little bit, and take a more cautious, planned approach, that maybe we won't have to fail fast to begin with. They can be successful right off the bat."
Take some extra time to do your planning and "make it work right the first time," Haut said.