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Entrepreneurship 101: How to get started

Entrepreneurship 101: How to get started

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One person's trash is another person's treasure, and Allison Carmen hopes to make a fortune by getting the two together.

She is founder of MaterialMix, a startup that hopes to become the eBay of recyclable business waste.

Carmen, 28, got bit by the entrepreneurial bug while a student at St. Louis University's MBA program. Lots of people in St. Louis feel the same bite, although most don't have a passel of business professors to guide them along.

On their success hangs part of the economic future of St. Louis. The region needs innovators to create tomorrow's jobs and grow the economy.

So it's worth following Carmen's path to see how an idea can become a business, and land a rich investor to boot.

Carmen has a habit of brainstorming. "I had these crazy ideas and I kept them in a notebook," said Carmen.

One of them became a project for a class. Then she took a class in entrepreneurship, and the idea grew bigger.

Her idea was simple: Say an electronics company finds itself with a stack of old monitors and circuit boards that time forgot. Post it on MaterialMix and hope to find a recycling company that wants to salvage the metals, which might include gold and silver.

Waste in one industry can be raw material for another, but the owners have to find each other. It also helps if they're close by.

"By the time I graduated, I had a business plan and a feasibility study that had been peer reviewed into the ground. I thought, if I don't do this I'm crazy."

Still, it was a scary leap. "It's a big risk," she says.

Indeed it is. Entrepreneurs often lose their shirts. There are no good recent statistics on small business life expectancies. But in Missouri, 20,349 small businesses started up in 2010, and 21,733 closed, according to the Small Business Administration.

"You've got to have the entrepreneurial drive. It's not nine-to-five," says Ed Kent, a retired marketing man who helps coach would-be entrepreneurs. "Do you like what you'll be doing? If you don't, you won't be successful."

Kent works with SCORE, (www.score.org) formerly known as the Service Corps of Retired Executives. It offers free coaching for small business owners, along with a $50 all-day class for would-be entrepreneurs.

New business people need wise, neutral advice, and that's where SCORE's volunteers come in.

"You need an advisory board, people who look at an individual from a distance. That's not his brother or his mom," says Larry Ross, president of the St. Louis SCORE chapter.

Carmen had another advantage - she understood her customers.

Carmen studied biology and the environment at San Diego State University. She landed a job enforcing the environmental policies for San Diego, where she learned about business waste and recycling.

Kent sees too many would-be entrepreneurs without such experience. "People tell me, 'I like to cook, therefore, I'll open a restaurant,' " he says. That's not enough.

Next, get a business plan. "Get it down on paper and make sure it makes sense," Kent says. "Doing things by the seat or your pants doesn't work."

Who will your customers be? How will you reach them? How much will you charge? Where will you find materials? What will your start up costs be? When will you break even?

"They usually underestimate costs and overestimate their revenue," says Ross. 

Scope out the competition. "You've got to have something a little different or a little better," says Kent.

Or cheaper. Otherwise, customers won't come.

Newbie entrepreneurs often get things backwards.

"We find people getting leases on space and they have no idea how they're going to market themselves. The lease is the last thing you're supposed to do," says Ross.

Marketing is actually getting easier, says Jerome Katz, professor of entrepreneurship at St. Louis University and a mentor to Carmen. Websites are cheap, and social media helps you subtly lure in customers. Engage customers by answering their questions posted on-line, then link to your website, he says.

Now comes the hardest part: raising money. Banks won't finance start-up businesses directly, although you may be able to swing a home equity loan, and there are always the credit cards.

So, most investors turn to "family, friends and folks," also known as "family, friends and fools."

Carmen found the holy grail of venture capital: angel financing. She was one of six applicants chosen by Capital Innovators to receive a $50,000 investment each. The St. Louis venture capital company will also provide intensive mentoring and free office space. More than 100 entrepreneurs applied.

"Now it's kind of the fun part, where I can make things happen," says Carmen.

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