The Beauty of Entrepreneurship
Each year hundreds of people get bitten by the bug and decide to start on the road to business ownership. Armed with an idea and a lot of hope, several businesses begin and end within the year. The picture is a lot rosier when it is still in our heads.
The one thing that separates those who succeed from those who don’t is proper planning. It is more fun to dream of big success but planning for our lifelong business will bring the success we crave. Owning a business means more independence, more control, and more time for family and friends. The latter is the biggest benefit.
In this report we will be discussing the things that are essential when starting a business. These are the small things that we often forget in our dreams of grandeur. Taking care of the little things at the beginning gets us started off on the correct foot.
You will learn about:
* Writing a business plan
* Raising capital
* Deciding on an accounting structure
* Working with a website
* Developing a logo and signage
* Advertising methods
That seems like a lot but it is all necessary to structure the business that you want to last.
THE ESSENTIAL THINGS
A Business Plan
What is a business plan? A business plan states what and how your business will be structured. A business plan is essential for getting any type of funding from banks or investors.
The basics of a business plan center around what we hope to accomplish with the business and how we plan to do so. First, what problem will be solved by your business? For instance, a lawn maintenance business solves the problem of grass that is too tall and lawns that are unsightly due to bald patches or crab grass. The lawn service will do much more, but basically it will solve the need to have the grass stay below a certain height.
The business plan also states how you plan to make money. By listing what services will be offered, how often they will be offered, the plan is clearly stated as to the basis of the business venture. Demographic data will give the chances of the business being successful in the area in which you live. This is where niche markets are defined that will set your business apart from others of its kind.
A business plan identifies the name of the business. A name seems like a trivial thing but it is the way that people will recognize you in a crowd. This is also the name you will register with city government and on the Internet should you choose to go that route.
When choosing a name, let it conjure up visions of your business. A lawn cutting business won’t be called Joe’s Joint. An appropriate name rolls off the tongue and sticks in the mind.
As with the name, choose a logo that is uncomplicated but not overdone. Let’s go back to the lawn care business. The logo could consist of a man walking behind a lawn mower or a lawnmower with racing stripes taking off across a lawn. This conveys a concept and is fun to look at.
Depending on the size of your business, you may not be required to register with the city officials. Most home businesses that are run as Internet businesses don’t need to register. Registration is important for businesses that work with customers all around the world, operate machinery, and are basically a bigger operation than a computer and a place to put it. The lawn care business we are using as an example would register its name with the city.
A business plan includes a marketing plan. There are many ways to market a business and we will discuss that in an upcoming section. Suffice it to say, the strategy that will bring in business for you is detailed here. The more information about how the marketing plan will be carried out, the better the chances of securing a loan from a banking institution.
Determine your business structure. For most small businesses, the structure is a simple sole proprietorship. Here, the business and the owner are one. You are the person responsible for all decisions related to the business.
Partnerships involve two people agreeing to share liability in the business relationship. Profits and responsibility are split right down the middle.
Limited liability partnerships and corporations involve a more complicated structure. In essence, the business is considered to be an entity separate from the owners. Your personal assets can’t be leveraged to pay company debts.
An important part of the business plan is the numbers. How will the business do in the first six months? How about the first year? How about the next two years?
A lawyer or accountant can help you create a profit and loss analysis and a cash flow spreadsheet. The profit and loss analysis forecasts how long it will take for you to break even and then make a profit. The cash flow spreadsheet lists all monthly expenses, cash on hand to begin, and when to expect the first income to come rolling in.
Along with this goes the statement of personal finance. Don’t sugarcoat anything. If your financial picture is not the best, it is okay to say so. This statement lists personal expenses, any debt, and any savings and investments. This income does not have to back up the business, but you and your family will be able to survive while the business is getting off the ground.
Do you have any professional qualifications? List those in the business plan as well. Join professional organizations, take courses, and get certifications if they are available. Credentials show certain seriousness about the business that will impress potential investors.
Lastly, summarize all of the above. Put everything you have said into a coherent paragraph or two explaining the reason that this business is worth a shot.
Finding Capital
The one thing that any potential business owner needs is money. The amount of money differs from business to business, but some startup capital plays a part in every business. Look at what assets you can tap to get started without having to rely on banks and loans.
Many people that provide freelance work or an Internet based business have limited starting costs. They are already outfitted with a computer, printer, and a telephone, so there is no need to buy extra items. Now, if a tax deduction is what you are after, buying a computer that is totally dedicated to business will be worth the expense. The price of computers is lower than ever these days.
Before you decide on how much capital you need, consider the following: equipment, location, and living expenses. Equipment includes everything that will be needed to run the business. Some equipment can be suspended until later on in the business process, but things like work tables, storage containers, computers, software, and printers are needed to get started.
Do you still have a full-time job or have you quit a job to start the business? You and/or the family will need to know that they are secure and will not lose their home while the business struggles to get started. Experts say that even without a business, a household needs to have six months of emergency income set aside in case problems should arise. This way, paying bills is not a concern while you are trying to attend to other matters.
Extra cushion is good for the business end of things as well. Until the first income reaches you, things will get dry for awhile. Leave something for unforeseen expenses after the equipment is purchased.
Where will the business be housed? If the answer is in the garage or the den, you are dodging a big bullet. Larger businesses that have to house vehicles or machinery will use an outside office. That means rent and utilities in addition to household bills.
The cost of renting versus buying a building determines how much extra capital is needed. When the business is getting started, renting for a year or two keeps options open for scouting a better more upscale location when the business grows.
Each one of these points adds to the amount of starter money. With a business plan in hand, approach the bank or credit union you belong to for discussions about business loans. The credit union offers lower interest rates than banks and, as a member, there are other benefits.
This is a point where your personal financial picture has a bearing on whether you get a loan for your business. That is actually a good thing. Someone who is in debt up to their eyeballs may want to wait to begin the bumpy road of business ownership.
The best financial position to be in when starting a business is one that is free of unnecessary debt. Pay off credit cards, pay down car loans, and avoid buying anything unnecessary like a new washer and dryer when the current one still has more miles to go. Being as close to debt free (except for utilities and mortgage) as possible means nothing to interfere with business. Your credit is better, so qualifying for that big loan will seem like less of a problem.
Examine the option of investors or partners. Ask a family member or friend to go into the business with you. To do so will mean changing the business structure, but if can also be another source of capital. Maybe the person will be a silent partner in exchange for a personal loan.
Accounting Structure
Don’t forget the books. Plenty of businesses fail not because of the lack of expertise on the part of the business owner but a lack of business know-how. Avoid that by dealing with the issue of accounting before going any further.
There are two systems of accounting used today. One is cash accounting and the other is accrual accounting. Both systems have merit but the decision is up to you.
Accrual accounting goes something like this. Let’s say that your business purchased a refrigerator. The refrigerator was bought on credit. The refrigerator was delivered in May. But payments begin in July and will run each month until the balance is paid off.
With the accrual method, the expense of the refrigerator is recorded in the month in which it is delivered even though it has not been paid for. For accounts receivable, money for services are recorded when the items are delivered not when payment is finally received.
The cash accounting system is more literal. For the same refrigerator, the expense would be recorded in the month when the first payment is made in the amount of the payment. For accounts receivable, payments from customers are recorded when the money is received in hand.
There are pros and cons to both systems. For instance, the accrual accounting method let’s you see at a glance how your expenses stack up and what kind of business outlook you can predict. Unfortunately, profitability can be an unsecure road. While the books say that you did $5,000 worth of business in June, the coffers are quite low because no one has put the money in your hand as yet.
With cash accounting, you will see how much money you have brought in for a healthy bottom line. Although you were paid in the summer months, this is misleading because the work orders came in during the winter and spring. If customers paid within thirty days of service, you would see better that business needs to be beefed up in the summer.
There are only a few stipulations when choosing one system or another. Any business with profits in the millions has to use the accrual method of accounting. Businesses storing inventory for sale also use the accrual method to account for the items on the shelves.
Internet Business
Will you use a website to enhance your business? Many small businesses are Internet based. This “location” cuts down on overhead and staff. Any business that needs delegating can be outsourced to contractors who are responsible for their own taxes and benefits.
Websites have many advantages. First, your products and services take on global appeal. Local advertising corners that area of the market. On the Internet, the market is much larger. Your target audience may be the same abut you are reaching more of them.
The Internet has been the downfall of many businesses. Remember the dot com era? Growing by leaps and bounds overnight is not the best thing always. The production couldn’t keep up with the demand so they went out of business because of too much business.
Understanding the potential of the Internet allows a business owner to plan for contingencies to avoid failure. Start off slowly with an online store. Sell products on eBay where you can control the flow and manage interest. When you are ready, open the floodgates and see what happens.
Website design is not something that many people are versed in. Start with a blog such as WordPress that is easy to set up and manage. When you are ready convert to a website of your own and hire a designer to handle the technical aspects.
Much of what you will need to manage the day to day operations can be learned as you go along like on the job training. Leave the harder stuff to the professionals. It will be money well spent.
Graphics
The business needs a look. This is your opportunity to put your best foot forward. Using desktop publishing software designs a logo and unique style for the name of your business.
The logo can be a trademark like the name of your business. Before getting comfortable with the name, check to see that it is also available as a domain name for your website. Even if the website is not for some time, buy up the rights to the domain name and others like it to avoid competition. Domain names are only yours as long as you pay for them. Each year you will have to pay again to keep the name.
Once the business name is registered and the logo is created, set to putting it on everything. It is now your name and people need to know it. Create professional T-shirts with the logo, letterhead, envelopes, mugs, keychains, and other items. Check with zoning commission to see if running a business from your home is allowed. If so, proceed with the signage.
Using keychains, mugs, and banners are a good way to advertise your business. Give them away to customers on completion of the first service or order. Sponsor a little league team by buying uniforms for them with your logo and business name on the front. This type of thing will come later, but the smaller items are a good way to inspire customer loyalty.
Advertising
This is how you will get the word out that there is a new game in town. Part of the marketing plan outlined in the business plan consists of advertising strategy. Several types of advertising exist but not all have to be utilized at once. Start off with the one or two that will work best and add others as business needs grow.
Viral marketing – Work of mouth advertising is a type of viral marketing. Encourage customers to spread the word with discounts for each person who they get to place an order or sign up for service. Use friends and family members to start the ball rolling.
Email marketing – Most people have email accounts these days. Using a campaign targeted at a certain demographic, send an email stating what your business is about and how it can help enhance their lives. Create links in the email that lead back to your blog or website.
Niche marketing – Every business needs a unique selling proposition. There is nothing new under the sun and that includes business ideas. The way that so many businesses with the same basic idea stay in business is through specialized marketing.
Your niche may be to offer an extra service. Market that service as the reason to buy all of the others. Your niche will tighten the marketing strategy to only include those who fall into the niche category. Concentrate on marketing the niche and then expand once the business is underway.
Affiliate marketing – There are other websites that complement your business. Get in tune with them through affiliate programs. Advertise on their sites to bring traffic to yours.
Content marketing – The Internet is filled with useful information. If you have expertise in the area of your business, use it to reach people all over the globe. Create keyword optimized content that is ranked in the search engines. Most people don’t look at results beyond the first page, so work to get your content where people will see it.
Social networking – Sites like Facebook, YouTube, and MySpace are used by thousands of people from teens to professionals. Create profiles with links to your website or blog. Develop a circle of contacts with similar interests who can help you professionally to promote your business.
CONCLUSION
Starting a business begins with an idea. But, this is just the tip of the iceberg. A lot of time and effort goes into being ready to take that idea live to the public.
The big thing is the grand opening. The first real customer and the idea of the first check fill our heads but that is the culmination of several little things like the ones mentioned in this report. What is the saying? Those who fail to plan, plan to fail.
That is not what we want for you. Using the guidelines in this special report, cover all the bases before embarking on the ship of entrepreneurial success. Plant yourself in the best position possible to reap success.