Straight-talkin’ finance guru Suze Orman will be in Columbus next week to promote her latest book, The Money Class. And, oh, what a class it is.
In the book, Orman, who has written eight consecutive New York Times bestsellers, asserts that the American Dream as we knew it “is dead,” points out the obstacles and opportunities today’s economic climate brings, and plots a path toward financial security.
Orman does this over nine chapters that touch on every aspect of the American dream: family, home, career, and retirement. Metropreneur readers will likely find “Class 5, Lesson 3: Starting (and Running) Your Own Business” particularly interesting.
Despite the spate of recent news stories about unemployeds becoming their own boss, Orman does not think starting a business as a Plan B is a good idea. In fact, this concept is the first thing she tackles in “Lesson 3” and it came up again during my interview with her (which I’ll get to shortly).
“You better have a passion, an entrepreneurial talent, and a seriously careful financial plan,” she writes.
How one finances their business also is important to Orman, who advises against tapping retirement savings or college funds and instructs wannabe entrepreneurs to have separate savings that can cover up to one year of operating expenses.
When I spoke with Orman by phone on Tuesday, one of my first questions to her was “Why one year of operating expenses?” (And let me tell you: the candid advice she hurls at rapid-fire speed is not reserved for TV.)
“Because it takes about a year to get any business off the ground,” she replies, adding that unless you’re Wolfgang Puck, whose admirers wait with bated breath for the opening of his next eatery, you need time to establish yourself.
When I ask how to determine those expenses, Orman rattles off a list of considerations: rent, utilities, insurance, employees’ pay and their benefits if you offer any, your salary, the cost of the goods you’re selling.
Knowing your way around a simple profit-and-loss financial statement is critical, she says.
“If you don’t know what that is, do not start a business.”
As many first-time entrepreneurs know, obtaining a bank or credit union loan can be difficult for startups, as lenders usually prefer a company be up and running for a year or two and have positive cash flow. Business owners also need a strong credit score and proof that they’ve invested their own money in the company.
Let’s say all the above criteria are met; the business owner needs collateral. What should they use?
“Not your home,” Orman says emphatically. “It is one thing to lose your business, but do you really want to lose your home at the same time?”
Other topics pertinent to entrepreneurs include when to expand your business, warning signs you can’t afford to keep a business going, and closing down a business responsibly.
“Obviously, all the advice you give aspiring entrepreneurs in The Money Class is helpful,” I say to Orman. “But is there anything in the section about starting and running a business that you think is particularly important to keep in mind?”
“I think it all is,” she replies, perhaps predictably.
Then she mentions a passion for whatever business you start− the same thing she covers in the beginning of “Lesson 3.”
Your business idea should be “a dream you had while you were working, not an idea you came up with because you’re out of work or tired of working for someone else.”
Pretty hard to argue with that, right?
Thurber House is bringing Orman to COSI to talk about The Money Class on March 16.
The event, “A Special Evening with Suze Orman,” kicks off at 7 p.m. The cost to attend is $35 and covers the cost of parking in COSI’s parking lot.
COSI is located at 333 W. Broad St. in downtown Columbus.