Q&A: Helping Businesses Is Her Business

By Angela Pittenger
The Arizona Daily Star, Tucson.

Ellen Kirton, director of MAC Small Business Development Center in Tucson, received the 2014 Arizona Small Business Development Center of Excellence award this month from the U.S. Small Business Association.

Under Kirton’s leadership, the center provided more than 1,500 hours of counseling, helped 27 new businesses to start and helped area small businesses raise $7.5 million in new capital last year.

We asked Kirton for advice for small businesses:

Q: What are some of the top challenges small businesses in Tucson face?

A: Many companies are still coming to terms with the many challenges that the recession caused with reduced sales, continuing expense control and having sufficient capital to remain in business. In areas such as construction, which is slowly coming back, finding a quality labor force is challenging because many skilled laborers left the area.

inding access to capital when historical cash flows, which traditional lenders rely on, has diminished. A perfect example are all those retailers who were impacted by the massive construction in regard to the street car.

Staying relevant to the many changes in how to do business. For example, using social media when the younger demographic buys far different than the boomer generation.

Many waited too long to lay off staff. It was well-intended, but in so many cases, letting a few employees go could have saved a number of employees’ jobs during the downturn in the economy.

Q: What is the outlook for small businesses in Tucson?

A: While I’m not an economist, I can tell you from my firsthand experience that the economy is turning, albeit slowly. That may not be a bad thing in that many businesses learned to be lean and mean during the recession and the longer they hold onto that philosophy, the better their chances to fully recover and even flourish.

At the Small Business Development Center, we are seeing a large increase in the number of new businesses, expansions of current businesses and more companies reaching out cautiously to again grow. The Women’s Business Center, which is part of our host organization (MAC), has been filling business planning courses to the tune of at least 100 new companies in this past year.

That shows that there is the desire for many who were displaced or see opportunities to extend themselves to look at starting new businesses. This is a healthy sign in an environment where small businesses represent the majority of Tucson’s business community.

Q: MAC SBDC helped area small businesses raise $7.5 million in new capital under your direction in 2013. How did your company do that?

A: We are very proud of this accomplishment and I can definitely say it started with our vision and strategic plan. We had, according to focus groups I held when I first took this position in 2012, been viewed as only working with start-ups.

While this is definitely an area we address, what it missed is that we work with companies of all sizes that fit within the SBA criteria. In its broadest sense, although there are exceptions, that means we work with companies up to 500 employees. This represents the majority of companies within the communities we serve. So we purposely set out, in an aggressive outreach campaign, to work with the banking community who could best assist with access to capital.

Through this effort, we refer clients to lenders and lenders now actively refer clients to us. This means that we assist businesses from the very start up, as well as midsize and many multimillion-dollar companies, by helping them assemble lender-ready loan request packages. … Last year, the $7.5 million in capital included loans as little as $200 to over $1 million dollars in mixed capital, and everything in between.

The many lenders we work with, whether traditional or second-tier lenders such as Accion, feel more inclined to work with clients who work with the SBDC. That is because we continue the relationship to help ensure the clients find success after obtaining capital and work with them on ongoing profitability, exactly what the lenders want to see.

Q: What are some of the most common mistakes small businesses make when it comes to money?

A: The No. 1 thing I can say is that profit is not the same as cash. Business owners, first of all, tend to focus on the top line, revenues. They should be concentrating on the bottom line, profit. And it doesn’t stop there. A company can have profit and not have cash.

For example, if a company takes credit and accrues a large accounts receivable, they could be very profitable. However, if a lot of their profit is sitting in accounts receivable, they don’t have cash. What we’ve seen a lot is that this can then handcuff their cash and oftentimes they can’t meet payroll. Having money owed and money in the bank are two very different things.

Also, companies that have more than one product or service often look at the combined financial statements and see a profit, when in fact, often one or more of those products or services is a loss. So it is important that they set up their QuickBooks or accounting system in such a manner to be able to view the profitability of each and every revenue stream.

I mentioned earlier about having the right size staff. It’s interesting that this can work in two ways. If sales are down, not downsizing soon enough can put other staff at risk.

The reverse would be when someone who can bill out at say $100 per hour does all their own data entry, scheduling, and other administrative tasks. If they were to hire someone at say $10 to $15 per hour to handle the administrative functions, that would free them up to do more of the $100 per hour activities, thus increasing revenues and decreasing expense. I like to refer to this as the small business owner doing what is their “highest and best use”.

Q: What are three tips you’d give to somebody starting a small business?

A: You have to have a business plan. I tell every aspiring business owner, you always do this first. That is because a business plan will show the feasibility of the new business. The prospective new business owner will be contributing valuable time, talent and resources such as their savings and other assets to make a go of this potential business. A business plan helps vet the idea.

Find a strong mentor or counselor. Many do not know of the SBDC and that we provide no cost, one-on-one counseling so folks are not alone. There are resources available. Take advantage of these resources to have someone help you vet your project. Their expertise and experience will help you challenge your idea to be sure it has merit.

Surround yourself with experts. I can’t express this strongly enough. You build a team just like Bill Gates did. He was an idea man. He didn’t want to or have the interest in handling marketing or finance, so he engaged the right people to handle those and always stayed true to this philosophy. So an accountant, an attorney, marketing support and insurance agents are all important components of a strong team. Remember, you’re as strong as your team.

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