Christopher Black, a certified sommelier, knows his Chianti from his cabernet. He's less certain how to turn Grape Geeks, the consulting, writing, and special events business he started in October, into a thriving company. "My goal is to make people feel smart about wine, not intimidated," says the 32-year-old. But difficult financial periods have left Black with what he considers a subpar credit history, which may make it hard for him to get financing for his Austin startup.
Goal: Get off the ground
Game plan: To help Black build his company, BusinessWeek Small Biz turned to William Spitz, a mentor and business coach affiliated with Silver Fox Advisors, a Houston nonprofit organization of ex-CEOs, and John Henry McDonald, chief executive, and Greg Van Wyk, manager of financial planning, of Austin Asset Management Co., a fee-only wealth management company in Austin.
Black's first move, says Spitz, should be to do some basic market research, including identifying potential revenue sources and estimating total sales for the year. Black should ask his business contacts how much they would pay for specific services, such as consulting on wine purchases or wine courses. Says Spitz: "If Black finds he has a talent for doing things that people will buy, he has a business."
Black expects first-quarter revenues to be about $4,000. Spitz cautions that he'll need at least $15,000 a month, because expenses, including his salary, printing, and telephone, will run at least $10,000 a month. Black can get a handle on his cash flow with a business plan, says McDonald. "The best thing he can do is spend a few dollars for Business Plans for Dummies," he says, referring to the book by Paul Tiffany and Steven D. Peterson.
Grape Geeks' assets of $4,000 are far too little to land Black conventional bank financing. Business contacts, such as restaurateurs and wine merchants, might be better bets. "These people understand starting with nothing," says McDonald. Still, McDonald stresses, they will want to know how Black intends to make money. Spitz suggests Black find a business contact willing to co-sign a bank line of credit. In return, Black should always give this backer a better deal than he gives other customers. McDonald suggests he consider selling a minority stake. If, say, he needs $49,000 in financing, he could consider selling 49% of his company for $100 a share.
Finally, McDonald says, Black should improve his credit rating so he can get a separate business credit card, which will make tracking expenses easier. He can start by getting a free copy of his credit report from AnnualCreditReport.com, disputing and fixing any inaccuracies in the report, and settling any outstanding disputes. Black should then keep balances to less than 25% of his credit limit and pay his bills on time for the next year. Austin Asset Management's Van Wyk warns Black not to close any old accounts that have good payment histories, as that could lower his credit score by eliminating the credit available to him—something that would cause his ratio of debt to credit to rise.
For his part, Black is keen on surveying his business associates. "Not only are you doing critical market research, but you're implicitly selling," says Black. But he thinks revenues of $15,000 a month aren't necessary, as his cost of living is low and he thinks his expenses should run less than $4,000 a quarter. Already, he has someone in mind to ask to be an angel. "I don't like the idea of giving up control; I would prefer having one or two people involved vs. lining up a large group," Black says. He hopes to land a job at a wine bar or high-end wine retailer while improving his finances. And Business Plans for Dummies is now at the top of his reading list. Says Black: "I always recommend Wine for Dummies."
By Virginia Munger Kahn