As part of NJBIZ’s latest virtual discussion, financial experts spoke on the various challenges that small business owners in New Jersey are up against.
Moderated by NJBIZ Editor Jeffrey Kanige, the Feb. 28 panel featured:
During the 90-minute roundtable discussion, panelists dove into topics such as what to consider when starting a business, growth strategies, accessing capital, seeking out non-traditional funding sources, the importance of implementing cybersecurity measures, investing in technology that will add value to day-to-day operations and preparing for a possible recession.
Small businesses can falter for various reasons, such as financial constraints, workforce issues, lack of market need, not researching the competition, incorrect business model, regulatory or legal hurdles, or bad timing.
Additionally, the success – or lack thereof can vary widely based on the state or industry, a May 2022 analysis from LendingTree found.
In New Jersey, 20.4% of businesses fail within the first year. After five years, 50.3% of private sector businesses will falter and within 10 years, 69.4% have ceased operations. Nationally, about 1 in 5 small businesses never reach their one-year anniversary, while 49.7% shut by the five-year mark and 65.5% are gone in 10 years.
Despite the failure rate, there are steps that both new and existing entrepreneurs can take to boost their chances of surviving and thriving, panelists said.
“Conventional wisdom will tell you that now is not such a great time to start your own business because of inflation, recession looming and interest rates,” said Leary. “But, you know you could say during the pandemic that it was a bad time to start a business and yet so many successful businesses were launched during that time.”
“But, it’s got to be disciplined, strategic and well thought out,” he said. “I think that’s really the key.”
At Pursuit Lending, which offers more than 15 types of business loan programs and provides financing for up to $5.5 million, the company works with both seasoned businesses owners and new entrepreneurs to help them grow.
Levy agreed with Leary, saying, “One of the things that is really important to us when we’re looking at financing and a small business startup that’s coming in and doesn’t have that operational history … is we’re looking for that business plan. We’re looking for a set of financial projections. It’s incredibly important that that’s on paper, it’s well thought out and that the numbers kind of back up the idea that’s in somebody’s head. So, taking the time and actually codifying what the plan is, I think is really helpful.”
In New Jersey, one of the best places to start that process is with NJSBDC, a public-private partnership that links up its consultants with those who are looking to launch – or grow – their ventures.
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Brozyna said, “We sit with an individual and say ‘OK, what do you want to do? Do you need help with your research on doing a competitive analysis and a feasibility analysis? Is there a demand for this? Is this going to work? What is your client base? What does this look like? What is your demographics and psychographics of the audience that you’re trying to sell a product to or do a service for?”
From there, the NJSBDC’s statewide capital team matches business owners with the best potential resources for funding.
“We want to set you up for success before you take that leap of faith and put everything into it,” she said. “… It can be very exciting and very rewarding, but it can also be very scary and painful if you don’t do it the right way.”
Financial institutions have noted some hesitancy about borrowing, mainly because business owners want to avoid drawing on lines of credit when interest rates are high. However, there are non-bank alternatives to explore, such as funding through the U.S. Small Business Administration.
Levy said, “It’s a perfect opportunity to take advantage of some of these government programs. I think historically people have shied away from SBA because they thought ‘I don’t need government assistance.’ I think we all saw during the pandemic with the Paycheck Protection Program just how robust SBA lending is in general.”
Brozyna said, “Not everybody is aware of the resources that are available. We like to think of the NJSBDC as a hub and spoke model. Let us be the hub and resources and we’ll connect you to the right one. We don’t claim to be the ‘end all, be all,’ but we’ll just make sure that we get you seamlessly to the right resource into what opportunities are out there.”
She went on to say, “Women, minority and veterans are a huge target for us to make sure that we help them … because they have been distressed, and they have been affected probably harder than some of the other industries and the communities that are affected. So, we really want to make sure that we are putting those resources that can be made available to them for success.”
When it comes to New Jersey’s fastest-growing industries, panelists said they’re noting a lot of opportunities in green technology, real estate, fintech and hospitality.
Levy said, “Those are some sectors where we’re seeing a lot of new and innovative ideas that are coming out there and they’re an area where they’re gonna be long standing businesses for our future. So I think, as lenders we’re trying to open up our eyes to see how do we help these businesses that may be something not traditional that we’ve never heard of before, because it’s a new and evolving industry.”
“We’re trying to gain knowledge and understanding of these industries, and making sure that we’re putting together financial products that suit them. Whether that’s a line of credit or whether that’s investments in equipment and R&D,” he said.
Economic uncertainty continues to be top of mind for businesses in 2023, making it all the more important to be proactive.
“I think the Federal Reserve views inflation as the greatest concern and they view recession as the lesser of two evils and they’re going to continue to aggressively increase rates,” said Leary, who went on to say, “I’m already seeing businesses that are starting to adjust their model and make adjustments to staffing, assess vendor contracts and sharpen their pencils to make those changes in advance so they’re prepared.”
“If you wait until it’s affected your bottom line, you’ve waited too long,” said Leary, who urged business owners to take action now.
“If a recession doesn’t happen, then you’ll be in good shape,” he added. “If it does happen, you’ll be prepared.”
A full recap of the panel will be available in the March 6 issue of NJBIZ.n