5 Business Financing Tips from a Philly Burger & Cheesesteak King

Many entrepreneurs need business financing to grow their enterprises. But relatively few experience success in getting it. In fact, 31% of small business owners say they can’t access adequate financing. Why? I called up Josh Kim, Owner of SpOt Gourmet Burgers, to get his opinion.

Josh and I met when I worked at The Enterprise Center (TEC) in Philadelphia, a nonprofit organization that provides financing to local minority-owned businesses. After firing out burgers and steaks from a closet-sized food cart for several years, Josh had built a loyal following and was ready to expand to a brick and mortar restaurant. Well, except for one minor detail. Money!

Did you know the average cost to open a restaurant in the U.S. is nearly $500,000?!  Even a food truck easily can cost at least $30,000. Meanwhile, the average American has less than $1,000 in savings.

Josh once earned a tantalizing six-figure income as the owner of an ATM company, but his happiness and quality of life suffered. So he quit to pursue his passion as a restaurant owner— investing all but $500 of cash savings into his business. Inevitably, fully realizing his dream meant he had to find financial assistance.

Business Financing Tips

While passion is essential, it’s only one piece of Josh’s success story. Growing up in a South Philly project as the son of sidewalk vendors, Josh has always had the entrepreneurship hustle in his blood. But he’s learned that lasting success takes more than just hustle.

Managing SpOt Burger has taught Josh the importance of financial savvy and discipline for building a business that can afford him and his family a good life. Hopefully his tips can help you do the same!

  1. Build Your Dream Team

Build a team of people who are strong where you are not. With an art degree and culinary background, Josh loves cooking. He doesn’t love numbers. So he found a trusted teammate who does.

Nevertheless, Josh is still the boss. So he’s educated himself to understand his business’s financial statements and make informed decisions alongside his team.

  1. Invest in Accounting Software

Invest in solid accounting and point-of-sale software. When I asked Josh what his most popular burger is, without hesitation, he named the SpOt burger, along with sales figures. If you can’t confidently report basic financials about your bestselling product, investors probably will see red flags.

In addition to a historical paper trail, funders often require financial projections for your expected growth— up to 5 years in some cases. Having accurate financial records as a basis for projections will make this exercise substantially easier. And if you’re a startup business without a track record, review tip #1! Ensure your team is equipped to formulate sound financial projections.

  1. Keep It Above Board

Here’s what not to do. Don’t skip your personal or business taxes or underreport income. Put all your employees on the books. And don’t co-mingle personal and business finances.

Difficult? Yes. But necessary for sustainable business growth? Also yes. SpOt Burger’s $15,000 in payroll taxes each month is cringe-worthy. But its 27% net profit margin and $650,000 in gross sales last year make it well worth it! Did we lose you here? If so, reread tip #1!

  1. Do You Really Need Business Financing?

A bad weather day can kill a restaurant. Then out of desperation, the owner falls prey to an inordinately expensive merchant loan and is stuck in a debt trap. Alternatively, a business in control of its cash flow can make adjustments to free up capital and negate the need for external financing.

Rephrasing a quote from late management expert Peter Drucker, Josh says “if you can measure it, you can manage it.” When SpOt Burger found itself in a recent jam, Josh’s team forecasted various scenarios to determine how to cut staff hours without letting anyone go.

Successful financial analysis was also vital to their decision to partner with third party delivery companies, even though at surface level working with these services appeared to be a zero-sum game.

  1. Find Alternative Funding Sources

Josh experienced limited success with funding from traditional banks, which consider restaurants a high-risk industry. Forced to find alternatives, he discovered TEC which offers the smaller loans that banks generally don’t want to do, along with other types of business financing specifically tailored toward food-based enterprises.

Many specialized funding sources like TEC exist. Consult your local government, other business owners, and the internet about other affordable and trustworthy funding sources that can serve your specific needs. Just beware of predatory lenders! 

How Investors Can Help Underserved Entrepreneurs

Josh says minority entrepreneurs, particularly first generation immigrants, struggle with getting business financing due to lack of proper accounting paperwork. They’re often already behind the 8-ball when it comes to applying for financing, and they’re forced to bootstrap perpetually.

In addition, many don’t know how to make tweaks to expand their bottom line, which can make a world of difference for a small business operating without much room for error.

Josh thinks we would see more minority-owned businesses thriving if funders held more workshops covering topics like the Schedule K tax form, profit and loss statements, and COGS (cost of goods sold). He also would like to see more coordination among funders and streamlining of financing applications.

And lastly, he’d like to see you at SpOt Burger next time you find yourself in Philly! But in the meantime, follow SpOt Burger on social media!

Instagram – Twitter – Facebook 

Entrepreneur Life Demystified. Is It Really for You?

Ever go on a date with a self-proclaimed entrepreneur? The ring of “entrepreneur” on his or her social media profile sounded sexy and exciting right? It showed ambition. And it meant he or she would soon be raking in millions. Over the past few years, entrepreneurship has become a fad for people of all ages, and in particular for millennials.

TV shows and other media have made entrepreneurship seem like the most enviable of professions, and a guaranteed way to impress your peers. Colleges all over the world continue to invest millions of dollars to launch entrepreneurship programs and construct buildings exclusively for these programs. The allure of entrepreneurship is still thriving. But is entrepreneurship as glamorous as it appears from the outside?

To get some behind the scenes insight into entrepreneur life, I spoke with Dominique Broadway, personal finance expert and millennial entrepreneur based in Washington D.C.

Finding the Path of Least Resistance

While the stories of successful entrepreneurs often get romanticized, entrepreneurship is far from a quick or easy road to riches for most people. Building a successful business requires major sacrifice, patience and diligent financial planning. And it also requires willingness to be broke in order to get rich. It can take years before entrepreneurs bring in enough business income to pay themselves at all, let alone a decent salary.

But with some strategic decision-making, it’s possible to make the roller coaster ride a lot smoother. If you have the resources you need, Dominique says don’t wait to get started on your dream. Otherwise, she recommends starting your business on the side before calling it quits on your day job. Wait to leave your job until your business starts bringing in enough income to support you. And make major financial decisions prior to setting out on your own.

Also consider the industry of your business. Certain industries inherently have lower startup costs, such as service-based businesses like Dominique’s where all she needed to get started was a computer. In contrast, brick and mortar businesses like restaurants and boutiques require significant startup capital for equipment, inventory, leases etc. While there’s a wide variety of business financing options out there, requirements can be restrictive and application processes tedious. So, be prepared to self-fund your business.

Dominique also emphasizes starting a business based on passion and experience. Since Dominique had been a stockbroker and was already a licensed financial services professional, starting a personal finance consulting business made sense. Many won’t find success if they pursue entrepreneurship just because it’s trendy. The reality of entrepreneurship is long hours, lots of pressure and ups and downs, and potential financial hardship particularly in the beginning. So, be sure you really, really love your business’s mission and the industry it’s in.

It’s Ok Not to Be an Entrepreneur

Entrepreneurship isn’t for everyone. And that’s ok. But what if you still want the satisfaction of creating something that’s yours, of building a legacy, of having a positive impact in the world, of controlling your moneymaking destiny and of being your own boss? Dominique reminds us that it’s ok to excel at a job you love, even if you don’t own the business. She also says that being your own boss isn’t often the reality. As an entrepreneur, your clients become your boss, as well as any investors you may have.

If you aren’t cut out to be an entrepreneur, maybe intrapreneurship is for you. This means innovating at the company where you work. Develop a new product. Launch a new initiative. Use the resources that are already at your disposal. And don’t forget about side hustles. Instead of venturing out fulltime as an entrepreneur, you can always make your hobby into a profitable micro-business.

As long as you’re fully aware of the realities of being an entrepreneur, Dominique says go for it! Otherwise, it’s not worth risking your sanity and your bank account. Don’t worry, the people who matter in your life will think you’re sexy and exciting no matter what you do!

Learn more about Dominique: