Information on Starting a Small Business

So many issues come to mind when thinking about starting a small business: “What form should the business be in?”, “Will I have partners?”, “How will I market?”, and so on. We’ll address these issues in a systematic manner, but first we should take a step back and think about what a business is. A business, in the general sense, is a for-profit organization providing goods or services. A business is going to have a value proposition, a target market, processes that develop value, ways to generate revenue, and a strategy to survive in the competitive marketplace. At the initial stages, we want to focus on the business model conceptually before moving on the how that model will be implemented or executed.Value PropositionStarting a small business first means to come up with the answer to:• Who is my target market?
• What service/good am I offering them?
• How does my offering add value to the market? (Benefits)
• What is my response to existing competition – why would people buy from me?This should not seem like either a daunting task, or simply an academic exercise. The answers to these questions will help define your strategy for marketing and revenue generation.Business PlanThe answers to the previously listed questions can help you create your business plan. Why do you need a business plan? The answer is both for people within the business, and people outside the business. For outsiders, the business plan gives a summary of the objectives, history, and strategy of the business. This is important for investors, partners and any credit suppliers. Internally, the business plan is important because it forces discipline and focus in defining a vision for the company. Ultimately, business is about planning and execution. The reason this is important is that entrepreneurship requires personal characteristics of focus, fortitude, and conviction to succeed; the plan can help you stay the course. The plan creation forces you to consider, deeply, how you intend to generate and sustain the business.There is no “right answer” when it comes to a business plan, and that can make some people feel uneasy. Below is a sample template that you can use to get started though (based on the SBA template):Statement of business purpose and executive summaryTable of ContentsDescription of businessMarketing (target segment, means to reach market)Distribution and PartnershipsCompetition AnalysisOperating ProcedurePersonnel InsuranceFinancial dataLoans and CapitalCapital Equipment ListBalance SheetBreak-even AnalysisProfit/Loss statementsHistorical SummaryAssumptions Supporting and Legal DocumentsTax Return/financial summary of business partnersRental or Real Estate ContractsBusiness License and StructureResumes of PartnersSupplier DataPersonal Skills Need to Succeed at BusinessThe entrepreneurial mindset is elusive, and there is no agreement as to what traits will lead to success in business. However, there are some characteristics which appear again and again when business analysts talk about success in business.These are:• Focus – doing one thing and perfecting it. Doing it better and cheaper than others
• Fortitude – continuing to work in the face of adversity
• Accepting Responsibility – owning the business and owning resolution of problems
• Learning from mistakes – continuous improvement
• Internal motivation – being motivated by internal factors (not by quick successes which may not appear)Starting a small business is easy. Being successful in business is more difficult; like any other difficult human endeavor. The reason why so much emphasis is given to planning and personal characteristics is because of these difficulties. A very common question people who are starting a business are asked is: “Why do you want to start a business?” I think that the underlying question is, “Are you internally motivated to succeed at your business?”Structure of the Business After resolving the “what and why” of business formation, the next question is “how?” This is where the structure of the business comes in. There are five common forms of business in the United States.• Sole Proprietorships
• Partnerships
• Limited Liability Companies (LLC)
• S Corporations
• C CorporationsThe factors that you should use to decide which type of business you need are the type of liability you are able to accept, the taxation implications, and finally, your record keeping sophistication. Each of the business structures are possible to create by yourself, but if you find that you get lost in paperwork, you may need to hire a professional to get started with a corporation or LLC.Sole ProprietorshipA sole proprietorship is the most common and simple form of business. Simply put, the owner is the business; the business profits and losses are considered personal, and business liability is personal liability. This type of business is the quickest to start, and the business lifetime will end at the end of the person’s lifetime.PartnershipA partnership business consists of two or more people working jointly; each contributing some skills, capital, labor, etc… to contribute to the running of the business. The share of the partnership does not have to be even, and the distribution of profits is reported on the personal 1040.LLCAn LLC (C stands for company, not corporation) is a blend of partnership and corporation. It offers liability protection to partners in the company. An LLC is a pass-through entity for taxation, though optionally it can be treated as a corporation via form IRS 8832. An LLC is considered less complex than a corporation in terms of record keeping.C CorporationA corporation is like a fictitious person. It is an entity which handles the affairs of the business. Ownership of the entity is via shareholders, who receive a share of profits. The entity is also taxed separately than the shareholders (who are also taxed). Corporate structure is on a state-by-state basis.S CorporationA subchapter S corporation is a variation of the corporate entity where the profit/loss of the corporation is passed through to the shareholders. S corporations are legal entities and generally allow for limited liability for shareholders.Registering a BusinessAfter deciding the type of legal structure your business has and creating it, you will likely need to obtain permits to operate the business. This may include a business license and other licenses if your industry requires it. A city or county office will have the business license registration form available. If you are using a sole proprietorship business structure, you may want to do business under a fictitious name. This is called a DBA and is the name under which you are operating your business. To file a DBA, you generally will fill out a County form, and also post an advertisement in a local newspaper for one to two months to make sure the name has not already been registered.Next StepsAt this point, your checklist for starting a small business is not complete. You will need a business bank account, a line of credit, or some funding. These are operational concerns of the business. If you are able to market or find customers at this stage, you should because your business will be legally allowed to operate. Starting a small business is not a small endeavor; however the rewards for success will be worthwhile.

How Can a Business Grow in Today’s Economy?

When I visit local businesses as a customer and ask, “How’s business?” The answer I hear a lot is, “It’s slow. But what are ya gonna do? How can a business grow in this economy?”It’s a fair question because these are indeed tough, scary times. The economy is unpredictable, seemingly unstable and mostly unfriendly when it comes to owning and operating a small or medium-sized business.Honestly though, I’m utterly shocked at just how unpredictable, seemingly unstable and mostly unfriendly MANY business owners are to their customers, clients and patients. It’s one of the few things in this world that leaves me completely speechless.During the past 12 months, I have driven over 15,000 miles on various cross-country road trips across the United States. I’ve spent weeks in Seattle, Washington, D.C., Vermont, Philadelphia, New York City, and everywhere in between. All along the way I’ve stopped at a bazillion different businesses.To my amazement, the thing 80% of those businesses had in common was that they proved to me just how little they cared about me as a customer. As far as they knew, I was a local resident who was a potential, life-long customer of theirs. It didn’t matter. They just didn’t care about me. The more the business appeared to rely upon location and foot traffic, the more they seemed to treat their customers with disdain and contempt.Think about it…you’ve had similar experiences in your own community…perhaps even today. Sadly, those kinds of businesses are the norm these days.In many cases, I left without purchasing anything…even though I’d gone with the intent (and money!) to buy.As a business growth strategist who has dedicated myself to helping to grow businesses, obviously I’m more hyper-vigilant and sensitive as a customer. Regardless, behavior and attitudes that are blatant and obvious to me still register with your customers…at least at an unconscious level.”To him that watches, everything is revealed.” (Italian proverb) Start watching more closely when you’re visiting another business as a customer. You’ll see what I’m talking about.But, if you’re really brave, you’ll look just as closely at your own business. Watch your staff as they interact with your customers (and each other). Notice any subtle “attitude” or general unhelpfulness. Notice any laziness in their lack of resourcefulness and lack of proactivity. Count how many times they say “no” or “sorry, we can’t/don’t do that” during a day and a week. Try to witness it all as your customers would. You’ll learn tons!Amusingly, these businesses all shared one other thing in common. When asked how their business was doing…almost all of them blamed the economy for how bad things were. I guess they also blame the economy for their hostility, rudeness and stinginess towards their customers. They can’t expect to grow their business when their attitude towards their customers drives those customers away.The lesson here is…until you are willing to do the very best with what little you have now (especially in the way you treat your customers), anything and everything else you do to grow your business is just going to accelerate the rate at which you drive your business into the ground.In a culture where people blame everyone and everything for their troubles (sometimes warranted, but very often NOT), those business owners who take responsibility for themselves and do the most and best with what they have stick out like a sore thumb. In a good way!So, how can a business grow in today’s economy?Here are a few things business owners can do immediately to turn things around (without spending one dime):1) Make it super easy to do business with you.Don’t miss the power and simplicity of this step.This week alone…while in NYC…I’ve had several encounters with business owners (as a customer) where I left determined NEVER to return. They just made it way too hard to do business with them!
What do I mean? Well, they only take credit cards if you order a certain amount; they only deliver up to the street directly adjacent to mine; they only give a fortune cookie when you order an entrée; they treat you like dirt when you try to redeem your Groupon purchase; they take 5 days to reply to your urgent email and then don’t even answer the specific and clear questions you asked; they charge your credit card and then take 13 days to ship your package (and never reply to your inquiries); etc.Do you see how ridiculously simple and easy every single one of these would be to fix? Yet this happens in every industry, all the time. Some of these infractions seem small and petty. But, all of them are meaningful to prospects and customers.Why turn down a customer who would likely order from you three times a week just because he’s one block outside of your arbitrary delivery zone…especially when you already charge a delivery fee?Why allow customers to think you are the cheapest restaurant in town for refusing to give a $.03 fortune cookie because you ordered an app instead of an entrée? Why put an offer on Groupon and then allow your staff to treat everyone who responds to it with contempt…ensuring they NEVER return…and ensuring that they tell everyone they know about their horrible experience? Why knowingly wait forever to reply to an urgent email and then fail to even answer the questions (or apologize!)?This kind of behavior occurs EVERY day in way too many businesses. It really is baffling. Get this area under control and you’re way ahead of the curve!2) Do the math before you try to save money in ways that drive away business.An Asian restaurant near my apartment has the very best cold sesame noodles on the planet. I walk by there 2-3 times every day. They have a credit card minimum of $10. The noodles are $5. I don’t like to carry cash and prefer to pay with credit. I currently stop by whenever I happen to have cash on me and get the $5 noodles to go. (I rarely make a special trip to the ATM for such a purchase.) They’ve seen me enough times that they start punching in my order as soon as I cross the threshold. I’ve explained that I would likely stop by 3-5 times per week (instead of 1 or 2) if they would let me use my credit card. They refuse because it’s “restaurant policy”. It’s insane.The problem is that they haven’t done the math. Now I hear many business owners protest, “But, you don’t understand! The banks get a cut of every purchase and that cuts into our margins!”
I understand completely. What they fail to consider is that if I spend $5 on each of 4 separate visits…and the bank charges 5% per transaction…95% of $20 is more in their pocket than getting 100% of the $5 or $10 I’ve been spending due to their restrictions. In other words, in order to save a little on their margins, they keep customers like me from buying more often. They make it harder to do business with them.Worse, they send me away to do business with their competitors. If given a choice between an independent coffee shop which has a $10 minimum (where I’d have to get cash every morning) and a chain (like Starbucks or Dunkin Donuts) who gleefully accepts my credit card for even a single donut…guess which one I (and most of their customers) will choose every time?I detest jumping through hoops to give them MY money. Other customers do too!Now, they can continue to make excuses about how their business is different because they’re not a chain. Blah, blah, blah. Or, they can ask their customers what they want and then sit down and do the math. In most cases, doing the math will prove that both the business owner AND their customers will benefit. More transactions (no matter how small) that come in because of ease of doing business with them…adds up over time.Side note: I know this is one area where business owners think they’re so savvy and smart. They think it’s a clever way to force customers to buy more than they would have in order to meet the cc minimum. “If I can get them to spend $11 instead of $4, then I’ve made an extra $7!!” And there may be a few fools who fall for this regularly. But, for the most part, these kinds of policies hurt a business. Customers see it as equivalent to the utter pettiness involved in being forced to buy a pack of gum or a newspaper at the 7-Eleven just to get change for $1 for the parking meter. It’s not a smart move. Everything matters.If they’re convinced that they can’t survive without a $10 minimum…they should empower their staff to be accommodating to someone like me who OBVIOUSLY likes something they have to offer. Until they do…I assure you that their customers are walking a very fine line between loyalty to them…and eventual patronage and loyalty to their competitors. The very second I find another restaurant with yummy cold sesame noodles (and they don’t even have to be as good), who will accept credit card without a fuss, the restaurant I frequent now will NEVER see me again. Think about it.You can apply this principle to a hundred different areas in your business immediately. We all have to watch our margins. Just don’t cut them in ways that drive your business away. Do the math!3) Ask customers what you can do to get them to come in more often, give them a better experience, etc.It costs you nothing to ask and it makes customers feel good to be asked. The feedback you’ll get could transform your business.But, be warned…it will do tremendous harm to your business to ask…but then fail to listen to and act upon the feedback.If 5 out of 10 of your customers mention that they wish you had lunch specials or flavored coffee…and you don’t create some lunch specials or offer flavored coffee…go ahead and pick out a tombstone for your business because it’s just a matter of time. If you aren’t listening in obvious areas, I assure you that you’re guilty of not listening in many other areas as well. But, you can be sure that your customers are listening!Time to Act!Ok, now you know some answers to “how can a business grow?” And these strategies won’t cost you a single dime. If you’re honest about your business…you know that the steps above amount to doing the minimum of your job as a business owner. Do that and I promise you’ll be way, way, way ahead of 80% of the businesses in your market.Just like we’ve all experienced unbelievably horrible customer service from other business owners, we’ve also experienced wonderful customer service. Customers don’t forget great experiences. They return and give you more business.You have a choice each and every time a customer enters your establishment. Will they leave having had a great experience with you and your staff…or will they walk away (with their money still in their wallet) determined to never return…or even worse, regretting they gave you their money? That power is something that economic changes can NEVER take away from you.I hope you take this to heart because if you become one of the few businesses in your area who demonstrates how much you care for your customers, then you’re bound to get noticed!You’re now ready for some “next level” marketing strategies (which are also inexpensive and often free to implement). In a future article, I’ll go into more detail. Until then, visit my website (see bio section) for more articles and free training.Now go and grow your business by doing the most with what you already have!!!

5 Valuable Ways Business Funding Will Scale Your Business

Most businesses think that business funding is something that you need when your business is short on cash or times are hard. A lot of businesses go out looking for business funding when the business is not good. The time to get business funding is not when your business is doing horrible or you are strapped for cash.If your business is doing great, there is no better time to go out and get business funding. Why?1) It’s easier to qualify
2) You can get better rates and terms
3) It’s easier to grow your revenues with a capital infusion
4) It’s easy to utilize the simple formulas that we have in here to scale your growth.DON’T WAIT FOR THINGS TO GO BAD; IF YOU ARE DOING GOOD – BUSINESS FUNDING CAN SCALE YOUR BUSINESS TO THE NEXT LEVEL.This is how you can determine if business funding can help your business grow. There are 5 simple steps which will show you the value of business funding.Step 1: What Do You Need To Grow Your Business?While this may sound like a stupid question, it is a very important question.The FIRST STEP you need to take is determining what your business needs to grow sales. Most businesses need one or more of the following?• Inventory and More Products
• Expanding Existing Line of Products
• Adding Additional Services
• Marketing and Advertising
• Sales People or Personnel
• Machinery, Equipment, Software or Hardware
• Expanding into other Territories or Adding Another LocationStep 2: How Much Money Do You Need to Achieve That?How much money do you need to achieve that? Again, another simple question and it may sound stupid. But you need to start off with basic questions.How much would you like to invest into your business or how much do you need to grow your business?$10,000, $20,000, $40,000, $50,000, $100,000 +Step 3: Where will the come from?There are only three forms of cash that flow into a business:REVENUES FROM SALES
DEBT: A LOAN OR LOANSWhere will the money come from to help your business grow?If you have an existing business and you want to invest in your business you either sell more or you have great close out balances and have enough reserves to re-invest. If you plan on selling more; most sales and marketing strategies require some sort of cash infusion. If that is not the case you only have two options: an investor or a loan.Step 4: If you had the amount of money you need to do what you want in your business – there are two key questions: If you know the answers to these two basic questions; you will know immediately how to increase your sales fast.1. How much money will you make with that money?In technical financial terms – What will be the ROI (Return on Investment)?2. In what time frame will you make that money back?In what time frame will you achieve the anticipated or projected ROI (Return on Investment)?EXAMPLE (CASE STUDY): (Simple Version)If someone gave you $100,000 – what would you do and how would that impact your business.Example:I (YOUR NAME) would take $100,000 and allocate that money into marketing and increase personnel. (NEED AND WANT)I (YOUR NAME) would take $100,000 and make 50% return in 5 months. The equivalent of 10% return per month…Based on this information, you are clear on how you would use the money, what type of return you would make and in what time frame.The next step; is to determine if you can?• Increase sales to $100,000 and have the extra money to do this.• If you obtained an investor how much would they want? Most investors will either charge you anywhere from 10% to 30% in interest or they will want 20% to 50% of net earnings. You have to figure out the cost of capital versus your return.• If you obtain a loan the interest rate may range from 7% to 30%. You need to factor in the cost of capital versus your return.EXAMPLE (CASE STUDY) – Crunching Numbers:For Existing and Operational BusinessesFood Distributors of America currently generates $50,000 per month on an average. At the end of the month they close out $5,000 positive which is about 10% net. Currently, there cost of inventory is $20,000. This means every month they purchase $20,000 to make $50,000 Gross. The question you need to address is: How much are my costs to generate gross earnings? Once you know that, you know how much you need to increase gross earnings by 10%, 30%, or even 100%. In this example, we can increase earnings by 100% by making a capital infusion of $20,000.We know that $20,000 generates $50,000 per month. We know that $20,000 and $50,000 of gross sales generates $5,000 per month net; which is 10%. They want more inventory because they have prospective buyers.Conclusions:• An additional $20,000 would generate an additional $50,000 in gross sales; increasing earnings to $100,000. This is a 100% increase in gross sales.• An additional $20,000 would generate an additional $5,000 in net margins; increasing earnings by another 10% monthly = 20% monthly.• If this business can do this every single month, they would increase net earnings by 10% x 12 months = 120%.Not all businesses can do this. Even if you increase your net earnings by 2% per month = 24% increase in 1 year.Businesses that carry inventory have an easier time achieving this.Businesses that sell every day; such as restaurants, hair salons, and anyone who sells consumer products; have an easier time achieving this.Seasonal businesses can also achieve these types of returns.Step 5: Calculating Cost of Capital versus Return on Investment (ROI).If you don’t have the extra money; you will need an investor or some sort of business funding or a loan.There is nothing wrong with taking on investors or a loan. Most successful businesses have grown with capital infusion. Think of this way. Would the New York Stock Exchange or would the Chicago Board of Trade exists if businesses did not take on investors or debt? All businesses on major stock and debt exchanges have investors or debt.How do you calculate ROI and Cost of Capital? Easy as 1, 2. 3.Let’s assume you are able to obtain a loan for $50,000 to invest in your business. You project that you will make 5% return per month for the next 5 months = 25% return. Let’s assume you get a loan with a 12% annual rate = the same as 1% per month.5% per month (your return) minus 1% = 4% your new return
4% x 5 months = 20% (after cost of capital)The interest rate on a loan is important. However, if you know how to make a Return on Investment with a loan you will WIN in the end. More important, this is known as OPM (Other People’s Money). Making money with other people’s money! Read the Art of the Come Back, by Donald Trump. Do you think Donald Trump, Warren Buffet, and others utilize their own money to make money? The answer is NO.