From the December 1996 issue of Startups

When John Ringwald and his son, Mike, of Coopersburg, Pennsylvania, decided to buy a Postal Annex franchise, they weren't much different than most entrepreneurs.

They didn't know how to write a business plan. They didn't really comprehend the cost of carrying inventory such as envelopes, stationery and packing materials. Nor did they know how to plan for seasonal changes in business volume.

A one-day seminar, "The Keys to Business Success," offered by the Service Corps of Retired Executives (SCORE), was just what these entrepreneurs needed.

SCORE seminars, offered monthly or quarterly in major cities across the country, provide entrepreneurs with the basics of owning and operating a business. The topics covered include everything from cash flow and marketing to the legal aspects of business ownership and how to write a business plan, says Jack Cleek of the Philadelphia office of the Small Business Administration (SBA), which funds SCORE.

In February 1994, three months after attending the seminar, the Ringwalds opened a franchise of Postal Annex, a retail outlet offering packing, shipping, copying services and business supplies.

The assistance from SCORE the Ringwalds and other entrepreneurs receive is very affordable. "I think the attendance fee is only about $10 for the pre-business workshop," says Cleek.

In addition to answering the Ringwalds' questions about business plans, inventory and seasonal cycles, the seminar made them more informed participants in lease negotiations and financing, they say.

The Ringwalds also utilized SBA information booklets on a variety of topics including budgeting, record keeping, evaluating franchises, choosing a location, cash flow, advertising, business law and additional government resources. "It really opened my eyes," John says, "as far as all the information that's available."

Though SCORE seminars teach the basics, they're not designed to get every attendee into business. "I think SCORE's attitude is very cautious," says John. "They want you to really do your homework on the franchise you're looking at, your demographics and your finances."

"We really don't encourage people who have a great idea but no experience," says Cleek, "because of the poor track record of those who go into business without experience." Someone who lacks experience but has a good idea will be encouraged to team up with someone who has experience but lacks a good idea. Sometimes SCORE can even put an aspiring entrepreneur in touch with a potential business partner. As Cleek says, "Then they make a dynamic duo and are successful."

Entrepreneurs can get further assistance from local Small Business Development Centers (SBDCs), also funded by the SBA. For instance, an entrepreneur seeking assistance from the SBDC at Lehigh University in Bethlehem, Pennsylvania, can team up with an MBA student who will do research related to the entrepreneur's business. The businessperson gets the assistance for free, while the student earns credits toward his or her master's degree, says Kathryn Frazier Remillard of the Lehigh SBDC.

The Lehigh SBDC also employs full-time MBA students as staff consultants to assist entrepreneurs. "All of our MBA students must have full-time work experience before they come here," says Remillard. Staff consultants at Lehigh have an average of seven to eight years of work experience.

Staff consultants work with entrepreneurs interested in finding out how to get work from the government or market their services and products overseas, or who need assistance with management issues such as financial analysis, growth or hiring.

"If we look into some kind of expansion down the road," John says, "I'd go to the SBDC."

In addition to offering seminars and instruction, the SBA guarantees small-business loans of up to $750,000 (made by commercial lenders), thereby making it easier for entrepreneurs to get financing. Borrowers have as long as 25 years to repay, Cleek says, though most loan terms are less than 10 years.

Borrowers are advised to go to their community bank first. The exception is female borrowers, who can go directly to the SBA through the Women's Prequalification Loan Program, which assists them in developing a business plan. The SBA then provides qualified women with a letter guaranteeing SBA backing on a loan obtained through a commercial bank.

"Women historically have had a tough time getting past the loan officer at the bank," says Cleek, explaining the reason for the distinction in procedure. "Of course, women can still go through normal channels." Male borrowers should take a polished business plan to the bank. However, male entrepreneurs are reminded that the SBDC can assist them with their business plans.

Regardless of gender, borrowers must have experience in their chosen field and a clear idea of how they will repay the loan. If a borrower qualifies for financing backed by the SBA, the bank will generally contact the SBA on the entrepreneur's behalf.

"We have such a good relationship with the loan officers at the banks that they know what we'll accept," Cleek says.

If a borrower defaults, the SBA will pay off the bank and then try to work with the borrower to get caught up on payments. If the borrower cannot pay, however, the SBA will go after any property the borrower has put up as collateral. Overall, the SBA has a loss rate of only 2 percent on its loans, which Cleek says is better than the loss rates of some banks.

Because the Ringwalds opened a franchise, they were also able to utilize resources offered by their new parent corporation. For instance, Postal Annex offers newcomers a multitude of tips for success from franchisees who generate as much as $1 million in gross sales annually. The input of these successful business owners is used by the corporation to develop instructional forms and booklets. The "Monthly Operating Expenses Work Sheet," for example, forces start-up business owners to consider such specific details as the cost of using an accounting service, maintenance contracts on equipment, and postage.

Additionally, the corporation encourages cooperation among locations. The elder Ringwald, who says his weaknesses are sales and marketing, relies on assistance from Diane McDonald, owner of a Postal Annex in Trexlertown, Pennsylvania, about 30 miles from his store. His son, whom he describes as much more outgoing, has also worked with McDonald to land corporate accounts.

The Ringwalds initially considered different franchises, but the others seemed to offer less support than the one they eventually chose. "I think if we had gone with another franchise, we might have had to use the SBDC a little more," John says.

Trade associations can also serve as valuable sources of information and assistance. To find one in your field, contact your local chamber of commerce or visit your local library.

Despite all the help available, the Ringwalds say they still experienced a "learning curve," as actual hands-on experience taught them what texts and seminars couldn't--and their skills in networking, making contacts, and impressing customers have improved as their business has grown.

Still, the information available through the SBA made the process of starting a business easier than it would have been otherwise.

Remember: Starting a business is not easy. Fortunately, plenty of help is available. By utilizing resources available through the SBA, SCORE and local SBDCs, your success as an entrepreneur is that much more attainable.