Lessons Learned the Hard Way Microenterprise in Murfreesboro

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Lessons Learned the Hard Way Microenterprise
in Murfreesboro
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(No Transcript)
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Lessons Learned the Hard Way

• A very good start

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Lessons Learned the Hard Way

• Remember, you dont have to re-invent the wheel.

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Lessons Learned the Hard Way

• POLICY DECISIONS

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Lessons Learned the Hard Way
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Lessons Learned the Hard Way
Two months after opening its doors for business,
Recess Playroom has a list of over 100 clients,
recently had 28 children on a Saturday, more than
20 on a Tuesday usually a slow day and
Jennifer has had to hire two employees with a
third expected to be needed within 60 days
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Lessons Learned the Hard Way

• and she has been making her loan payments on
  time.

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Lessons Learned the Hard Way

• Whoops!!!!

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Lessons Learned the Hard Way

• Five loans in first full year of program
• Within 18 months only one of the microenterprises
  was still in business.

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Lessons Learned the Hard Way

• What happened?

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Lessons Learned the Hard Way
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Lessons Learned the Hard Way

• The Issue Administrative Buy-In
• Small businesses fail more often than they
  succeed. Loans will stop performing.

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Lessons Learned the Hard Way

• The Lesson
• You must have the Risk Conversation with
  Administration early and there must be agreement
  on the front end about what happens on the back
  end.

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Lessons Learned the Hard Way

• The Issue Collateral
• do your due diligence on the front end and if
  the loan goes south, it goes south.

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Lessons Learned the Hard Way

• The Lesson
• Everyone concerned must be on board with how much
  risk you are willing to accept and how you handle
  the downside of risk.

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Lessons Learned the Hard Way

• The Issue Partners
• You and your partner may have different agendas.
  What does each expect from the other?

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Lessons Learned the Hard Way

• The Lesson
• Make sure you and your partner have the same
  expectations going in and get them in writing.

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Lessons Learned the Hard Way

• The Issue Zoning
• Does the client understand that what the business
  does may restrict where the business can be?

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Lessons Learned the Hard Way

• The Lesson
• Require a visit to the Planning Department before
  leases are signed and loans closed.

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Lessons Learned the Hard Way

• The Issue Codes
• Does the client understand that a leased space
  that meets codes for one use may not meet codes
  for their use and they will probably be
  responsible for any expenses incurred in meeting
  codes?

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Lessons Learned the Hard Way

• The Lesson
• Require the client to engage with codes and fire
  departments before leases are signed and loans
  closed.

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Lessons Learned the Hard Way

• The Issue Leases
• Leases are complex contracts but apparently none
  of our clients had their leases reviewed by legal
  counsel or our partner.

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Lessons Learned the Hard Way

• The Lesson
• Someone knowledgeable must review every lease
  before the client signs to avoid expensive
  mistakes.

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Lessons Learned the Hard Way

• The Issue Location, Location, Location
• Its only natural to want your business in a new
  building in a high traffic location. But can a
  new business operating on a shoestring afford it?

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Lessons Learned the Hard Way

• The Lesson
• Picking a sustainable location must be a point of
  emphasis in putting together the business plan.

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Lessons Learned the Hard Way

• The Issue Accounting
• Inattention to accounting and tax matters is a
  recipe for failure. No charge access to
  accounting services was part of the program. Only
  one business chose to use it.

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Lessons Learned the Hard Way

• The Issue Accounting
• The plan was for our partner to arrange for these
  services with a third-party vendor with the bill
  to be sent to Community Development. In only one
  case did that happen.

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Lessons Learned the Hard Way

• The Lesson
• Dont depend on others to do what needs to be
  done. Do an RFP for accounting services and make
  participation a contractual requirement.

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Lessons Learned the Hard Way

• If we had it to do over

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Lessons Learned the Hard Way

• Engage Administration in the Risk Conversation
  early on. There is risk, small businesses fail,
  loans go south. When the inevitable happens, do
  we forge ahead because of the successes or pull
  the plug because of the failures?

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Lessons Learned the Hard Way

• Do a better job of working with our partner to
  define its role in the program with emphasis on
  post-loan expectations.

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Lessons Learned the Hard Way

• Do an RFP for accounting services and make
  participation for at least the first year a
  contractual obligation.

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Lessons Learned the Hard Way

• Establish a one-stop shop point of contact at
  City Hall to help prospective clients navigate
  through planning, codes, the fire marshal and the
  legal department.

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Lessons Learned the Hard Way

• Have the Citys Legal Department review all
  leases for potentially onerous consequences. We
  cant tell anyone not to sign a lease, but we can
  decline to do a loan if we see red flags.

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Lessons Learned the Hard Way

• Dont reinvent the wheel. Microenterprise can be
  an important part of your program. Learn from the
  people who are doing it well and learn from the
  mistakes of those who didnt.