SBA Screed

How the U.S. Government Spawned a Cult that Rots our Brains.

What if the Small Business Administration, the SBA, cranked out a press release saying that they believe almost one hundred percent of new businesses fail unless they have $100,000 of funding or more? What if it was big news – with every news station, paper, blog, government agency and consumer group repeating the “new wisdom” that only well-funded start-ups make it in America today? What effect would that have on American entrepreneurialism?[inset side="right" title=""]The SBA has the power to screw with our brains and the stuff the SBA says and does has a big impact on how we think and feel about small business.[/inset]

It would jack us up. For sure. The number of new business startups would plummet. The SBA has the power to screw with our brains and the stuff the SBA says and does has a big impact on how we think and feel about small business.

In this grotesquely-opinionated series of blog-posts*, I’m going to kick over the buckets of well-meaning crap the SBA has been peddling as truth. This is about how the SBA is like a ignorant business Kremlin, spouting well-meaning lies THAT ARE KEEPING PEOPLE LIKE YOU AND ME FROM STARTING OUR OWN BUSINESS.

*The far-too-many opinions expressed in this series of blog posts are the personal blatherings of Jayson Orvis and are not necessarily shared by Jesus, Buddha or Captain America. The contents of this screed apply only to MICRO-businesses – i.e. startups or businesses with fewer than five employees.  I have no clue if the crappy-conventional wisdom spread on bread by the SBA is any more or less damning to small or mid-size companies.

Number One:

They're all about the Loans 

I’ve seen nearly a hundred successful micro-businesses up-close -- thirty of them were my own. A few had outside funding, but most did not. Of course, most of those businesses failed.  That’s to be expected.

 But, were the businesses with funding different than the ones without? Yep. Way different. Every one of them failed. Every micro-business I’ve ever seen up-close that had outside funding bit the dust. The ones that survive, in my experience, are the micro-businesses that grow from their own revenues. In my experience, getting a loan is like getting walloped by the stupid-stick. Forcing yourself to launch and grow on very small doses of cash – almost all pulled from the revenues of the business – keeps it sharp.SBA_Guy

Except for being a constant distraction to gullible entrepreneurs, getting a business loan isn’t that much of a threat. Luckily, it’s ridiculously difficult to get a business loan. Without funding, an entrepreneur becomes biz-smart AT EXACTLY THE SAME RATE AS HIS COMPANY PROGRESSES.  This isn’t magic. It’s simple math. The smarter, wiser and more experienced the m-bizzer becomes, the better her decisions are and the more money the company makes. Everything’s in perfect equilibrium.

The m-bizzer can’t screw up too much because there aren’t many resources to blow. Mistakes are cheap because there isn’t enough money around for them to become expensive. The money doesn’t start rolling in until the m-bizzer gets smarter. By then, she’s not inclined to pull bone-headed moves. She’s become too smart. Plus, she has big-time respect for how hard it was to make that money. There’s no way she’s going to spend it unless she knows it’s going to rock her world.

But, that whole, natural cycle of smartening-up gets completely screwed when a government agency gets a bank to plunk down a bunch of never-earned cash. The moment the loan check hits the bank account of the micro-business, the m-bizzer loses thirty or forty IQ points. It’s hard to make it in business when you wake up one day half as smart as you were the day before.

Providing funding is like giving an addict more meth. Nothing good is going to happen until the drug runs out.

The only reason anyone gives a crap about the SBA is because they’re the gatekeepers of the SBA loan, and we think we need those loans. We gotta have ‘em. Come on, man.  Just one little loan. Just to tide me over, man.

On the front page of the SCORE website (SCORE’s the SBA’s business mentoring program,) we find a testimonial from a “happy customer,” Erbin Fernandez of Fernandez Construction.

"My SCORE counselor helped me understand how to structure my business and start a business plan that would be the first step toward getting an SBA-backed loan.”

I’m going to lambaste the whole f-ed up notions of business structure and a business plan later, but the story of dear, sweet Erbin proves illuminating. Erbin started out righteous. He built a patio for a co-worker and started getting referrals for remodeling projects. Fernandez Construction was born. Erbin kept his day job, but the number of jobs coming to him from word-of-mouth was putting pressure on him to go bigger. Then, he turned to the dark side.

“Because [my next big] project wouldn’t get underway for a few months, I decided to use the time to formalize my business. I also wanted to get some financing so that I wouldn’t be running everything out of my pocket.”[inset side="left" title=""]An SBA loan is like sexy time with Angelina Jolie.  When you watch her movies, you start believing that tons of dudes are hooking up with the hot mama. But, in reality, it’s just one dude she’s hooking up with. And he’s way cooler than you or me. SBA loans are not as rare as Brad Pitt, but they’re pretty scarce.[/inset]

NO! Erbin! Stay away from the light! The light is dangerous! Don’t even look at the light! Dude, what’s wrong with running everything out of your pocket?! It’s the honest and accountable way to run a business.  And, while we’re at it, what makes you think you need to “formalize” anything.  Keep it real, hermano!

But it’s not to be.  Erbin plummeted into the light, taking his “first step toward an SBA loan.” A well-meaning SCORE volunteer SmartGeezer ™ got his clutches on Erbin and “gave him tips for refining his business card and publicity materials.” Erbin was already so slammed with word-of-mouth referrals that he turned down paying work. Good thing he has a sharp business card and publicity materials, though. Couldn’t actually make money without THAT crap.

Alas, the story will almost certainly have a happy ending.  Erbin will probably get turned down for his loan. An SBA loan is like sexy time with Angelina Jolie.  When you watch her movies, you start believing that tons of dudes are hooking up with the hot mama. But, in reality, it’s just one dude she’s hooking up with. And he’s way cooler than you or me. SBA loans are not as rare as Brad Pitt, but they’re pretty scarce.

So Erbin’s probably gonna come out of this all right, despite his brush with the SBA.

[tbanner color="green" title="Biz Fu Scroll of Wisdom #38:" style="3"]The money of another man makes a man foolish as the wandering ant. The money from good, hard work makes a man wise as the coyote.[/tbanner]

[tbanner color="green" title="Biz Fu Scroll of Wisdom #129:" style="3"]Unless manna falls from the sky, nature will ensure that a man has no more manna than he knows what to do with.[/tbanner]


SBA Screed

Number Two:


They're all about scaring the dookie out of would-be entrepreneurs

I’m sure they think they’re doing us all a favor and saving us from ourselves when they try to make starting a business sound like getting on the wrong side of the Spanish Inquisition.

How fun. Another government agency trying to save us from our own foolishness. 

In the SBA “Readiness Assessment Guide” or RAG, as I call it, the SBA grills the prospective entrepreneur:

[list class="bullet-3"][li]“Are you prepared to lose a portion of your savings?”[/li][li]“Are you aware that running your own business may require working more than 12 hours a day, six days a week and maybe Sundays and holidays?”[/li][li]“If you discover you do not have the basic skills needed for your business, will you be willing to delay your plans until you have acquired the necessary skills.”[/li][li]“Are you prepared to sell your mother to an Eastern European slavery ring in order to raise seed capital?”[/li][/list]

(I made the last one up.)

The entire RAG, and a good chunk of the SBA entrepreneurship courses, are designed to scare the bejeepers out of anyone so bold as to consider starting their own company.[inset side="left" title=""]SBA used to stand for the Small Business Administration.  In May of 1994, in a little-know shift that nonetheless completely transformed the mission of the SBA, the acronym was changed to "Scare Businesspeople Away."[/inset]

So, are they right? Is it in our best interest to be frightened away from starting our own business unless we have just “the right stuff?” Should a government agency be in the business of putting hopeful entrepreneurs through some kind of Navy Seal boot camp designed to make them quit?

In this entrepreneur’s opinion, there’s only as much risk in starting a company as you want there to be.  Anyone can start their own micro-business with ZERO risk if that’s what they prefer.  In fact, it’s almost always better to start a new business with low risk. The only time that risk arises is when the m-bizzer gets bigger than their britches – which is actually something the SBA encourages by backing small business loans. If you don’t want risk in starting a new business, then DON’T:

[list class="bullet-3"][li]Invest a bunch of money,[/li][li]Borrow a bunch of money,[/li][li]Quit your ever-loving job, or[/li][li]Invest months or years of your life in planning.[/li][/list] 

 In short, if you start your business small (tiny small) and start it today – without bailing on your day job – there’s nothing to fear.  The most you have to lose is some of your time.

Oh, and if you think it “takes money to make money,” keep reading.  We’ll address that fallacy in NUMBER FIVE. In a nutshell:  no it doesn’t. You can make tons of money with no money.  Many, if not most, really successful entrepreneurs have done just that and you can too.SBA_Guy3

I wouldn’t go so far as to say starting a business is “easy.” But it’s the good kind of hard – like working out or spending time with your kids at Chuck-e-cheese. There’s no reason on Earth for the dipthongs at the SBA to try and scare us off.

We can handle it.  And, now that we’re over eighteen, we’re brushing our own teeth without a reminder and even deciding what clothes we should wear every single day, it’s probably a good time to let us decide for ourselves if we want to start our own business or not.  Granted, the bureaucrats wandering the halls of the SBA probably have stunningly-large IQs, but I think we can handle this decision on our own.

Go scare Al Queda. We’re perfectly capable of scaring ourselves.

  [tbanner color="green" title="Biz Fu Scroll of Wisdom #14:" style="3"]He who can does. He who cannot, goes to work for some huge, soulless bureaucracy and tries to scare the crap out of those who might so that he can sleep just a little better imagining that he’s not a total whimp for never trying.[/tbanner]

 

 


SBA Screed

Number Three:

They're all about the Business Plan

 

Trying to plan a start-up business is like trying to plan sex. Only the sex is taking place in the back of a pickup truck barreling down a washerboarded dirt road and there are fourteen other people in the back, half of whom are trying to have sex too and your partner wants to fantasize about youSBA_Guy_in_Box1 being a lair (but you’re not absolutely sure whether he/she said “liar” or “lawyer”) and you have no idea how to pretend to be either and you also have no idea where the truck is going and you’re worried that someone’s going to turn the cargo light on and reveal the whole sordid mess. That’s exactly what it’s like. Trying to plan a business, I mean. 

In my experience, business planning equals a futile attempt on behalf of the human ego to limit the risk of failure by spending buckets of time taking zero risk and delaying the day when the businessperson and the business idea will have to prove itself.[inset side="left" title=""]business planning: a futile attempt on behalf of the human ego to limit the risk of failure by spending buckets of time taking zero risk and delaying the day when the businessperson and the business idea will have to prove itself."[/inset]

But we try to control a process that’s almost entirely uncontrollable. From my experience -- thirty businesses of my own plus about another 100 that I’ve seen up-close and personal – there is a perfect NEGATIVE correlation between business planning and successful businesses.  Mind you, I’m talking about a business launch. I’m not talking about quarterly or annual planning for an established business.  Biz planning may actually make some sense in that situation.  But when I see a startup business with a complete business plan, I’m looking at a casket.  When I see a startup business that’s just cranking its guts out without a clue what’s going to happen, that business has a chance.  I’ve never seen a single startup with a business plan survive the first year.

You’ve gotta be nuts to think you can plan a startup business. Either;  

1. you’re doing something EXACTLY like it’s been done before, in which case you don’t need a plan since you know EXACTLY what to do (copy the last guy,) or  

2. you’re doing something new or with a new twist, in which case you don’t have a friggin clue how that’s going to work, what it’s going to cost and what awesome new ideas you’re going to run into along the way. In which case, why the hell waste your time planning the un-plan-able?

There’s just one reason to write a business plan and this one reason accounts for about ninety percent of all business plans written: to get a loan or funding, most often a loan backed by the SBA. If you’ve read Number One, then you know how I feel about business loans. They’re much more dangerous than a business plan.

So, next time you’re hauling ass down a dirt road in the back of a pickup truck with your honey, plan some sexy time and see how you do.  Unlike business planning, it could be fun.

[tbanner color="green" title="Biz Fu Scroll of Wisdom #72:" style="3"]He who plans to be surprised will never be mistaken.[/tbanner][tbanner color="green" title="Biz Fu Scroll of Wisdom #28:" style="3"]To plan the course of an endeavor is to plan the path of a leaf as it falls from the oak. Except, a business endeavor may not even land upon the ground.[/tbanner]

  

SBA Screed