Deborah Marinuzzi needs to liberate her dream.
Today Deborah works as a freelancer, helping to sell other designers' clothing and products at design shows. But she dreams of owning her own design business.
She wants to create several clothing lines, using artists to embellish the apparel. She wants to design jewelry, handbags and other items, and import finished goods. But somehow she can't get started.
"There are so many different things to think about with a business,'' Deborah says. "I don't like to think in fear. I like to stay positive."
But to stay positive, she's going to have to face her personal debt.
Her situation
Years ago, Deborah got a credit card, thinking she would use it only to fund the business she so badly wanted to start. But shortly thereafter, she found herself out of work and used the card to buy food and pay the rent. She racked up $5,500 in charges, then missed or was late on several payments. As increased interest charges and late fees kicked in, the balance on the card ballooned to $9,000, and Deborah couldn't stay current with even the minimum payment.
How I got into debt
Additionally, Deborah borrowed $10,000 from a generous friend, with plans to use the money to open a design studio. Those plans fell through, and Deborah spent the loan on living expenses. She's paid back some of the money, but she still owes the friend $6,500.
"I'm still trying to pay it back"
Finally, Deborah has a $2,000 balance at her dentist's office.
Fixing her finances
If she wants her business to get off the ground, Deborah must clean up her credit and begin paying back the money she owes in earnest.
Afraid to ask for a loan?
To get started, she needs to have a full understanding of her credit reports, which will list her creditors and her payment history. She is entitled to one free credit report from each of the three major credit bureaus -- Equifax, Experian and TransUnion -- once a year. To get her reports, Deborah should contact AnnualCreditReport.com, a joint service offered by the credit bureaus.
Once she grasps where her finances are, she needs to set up a strict payment plan to settle her debts.
Her priority should be her credit card, as the outstanding balance and late payments will have the
biggest impact on her credit reports. Next should come the dental bill and, finally, the loan from her friend.
Of course, Deborah doesn't want to leave her friend high and dry, but the reality is that the status of her friend's loan won't affect Deborah's ability to borrow, unless her friend takes her to court.
Now that the dimensions of the problem are in focus, Deborah needs to create a strict budget.
And she should look for a part-time job. Obviously, a design job is ideal, but Deborah should consider anything, from a retail job to pumping gas, to help pay off her bills.
Get organized
Once she's paid down her debts, Deborah can turn to her business dream. To achieve it, she needs to get organized. She has a wealth of potentially marketable ideas but no action plan.
Here are five steps she should take:
Choose one idea to start. Deborah should narrow her focus to the most marketable of her design ideas for a product line.
Choose one store. Rather than try to sell her designs on a large scale to start, Deborah should try one store. She should keep trying until she finds a partner. Other stores will be more likely to give her designs a try if Deborah can show that they have sold in a similar store.
Broaden her market. Once she identifies the products she wants to sell and the type of store that can sell them, she needs to make a list of similar boutiques that might be interested. She should broaden the geographic area so she can hit similar stores in different markets. That will allow her to expand the potential customer base.
Create a business plan. If things go well, Deborah will need a business plan, a document that details the process a business will use to make money. A solid, thoroughly thought-out business plan is her best shot at selling her business to potential lenders and investors. A business plan typically includes:
• Promotional and marketing plans.
• Information about the products.
• A report on the competition.
• A rundown on the organization's structure and employees.
• Information about possible expansion in the future.
• Funding requirements and possible sources of money.
• Possible problems or complications, and fallback plans.
• Milestones and timelines for the business.
To enlist free help on devising a business plan, Deborah should contact SCORE, the Service Corps of Retired Executives.
Investigate financing. With a business plan in hand, Deborah could investigate loans for the business. She could look into a loan backed by the federal government's Small Business Administration. By guaranteeing repayment of a portion of the loan, the SBA lowers the risk taken by the lender and makes it easier for a new entrepreneur to get credit.
Of course, all of that lies down the road. Until Deborah cleans up her credit and gets organized to go after that dream, it's impossible to know what sort of support she might get. She needs to approach the process of positive change one step at a time. If she does, you may see Deborah's designs lining the racks at a boutique near you.
Producer's note: Do you have a financial emergency that you’d like help with? If so, e-mail your story to MSN Money’s Karin Mueller at money911help@hotmail.com.
Published August 12, 2008
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