Co-Written by: Melissa Yackley, Stockman Bank of Montana
You’ve done your research, created a business plan, formulated financial projections, and are on your way to visit with your lender about financing options
You believe this new startup idea or expansion opportunity has the potential for success and are ready to take the next step forward. That’s when it happens: the lender asks you about the one thing you didn’t think about. You walk out of the office feeling defeated…with more work to do.
It’s important to note that lenders and other business partners do not ask these questions because they do not believe in your business or want to see you fail. In fact, they want just the opposite. The hope is that these questions will help you avoid some of the future obstacles you may come across or be prepared to face them with confidence (and a plan!).
To help us share this reality, we sat down with Melissa Yackley from Stockman Bank of Montana and discussed some of these difficult (yet critical) questions and why they are important.
Q. Why the tough questions???
The short answer? We want to see you succeed!
There are so many things to think about as a business owner that it can feel impossible to cover them all. We want to help them fill in any important gaps. We see it as critical, both for us and the business owner, to have these heart-to-heart conversations and make sure that it is the right move and that you can be successful.
Q. What are some of the most common “tough” questions that you find yourself asking business owners?
Some of the most important questions for business owners to consider are:
- Is now a good time? Just because it appears to be a good time for other businesses does not mean it is a good time for you. Is your market ready for your business? Does the current economic climate support your venture? Do you have the need to expand, or just the opportunity? Does your personal life allow for this change?
- What are your financing needs? What type of loan are you looking for? Are you in need of long-term or short-term financing? What will the money be used for? How much do you actually need? What if reaching your projections takes longer than expected – do you have the financial ability to cover operational and living expenses? It sounds simple, but these questions catch a lot of entrepreneurs off guard.
- Have you done your market research? Do you know your customer base? What are their demographics and behaviors? Who is your competition? What is their competitive advantage? How are they pricing their products or services and how will yours compare? Without doing this research, you risk entering a market or focusing on a target audience that cannot support your business.
- How did you formulate your financial projections? It’s important to know how you arrived at your numbers. Where did they come from? Was it from market research or based off your own knowledge of the industry? Can you find evidence to support your assumptions?
- What is your staffing strategy? Staffing is a MAJOR challenge for many businesses across the nation. How many employees will you need and how will you find them? Are there enough ideal employees in the area? How will you handle staffing shortages? What is your plan if you are unable to find the personnel you need?
- What about worst-case scenario? No one wants to say it, but things happen and it’s best to be prepared. Do you have a backup plan if your business fails? How will you pay your mortgage and your bills? If you are the sole owner of a business, do you have someone who can pick up your pieces in the event of a tragedy?
Q. Where can I go for help?
There are many free resource partners available to help you address some of these questions and answer any more that you may have. Your local Small Business Development Center (ND or MT), Women’s Business Center (ND or MT), or Veterans Business Outreach Center (ND or MT) assist with financial projections, market research, succession plans, etc. SCORE is also a great program that connects you with other like-minded business owners who have real world experience working through questions like these.
The next time someone asks you a difficult question about your business, remember that they are asking because they want to see you succeed
Asking the right (and tough) questions makes you and your business better and you will be thankful for it in the long run.