Thursday, March 7, 2013

Overview - What Is Entrepreneurship?

“Entrepreneurship is a global phenomenon. The future to an even greater degree than the past, will be driven by innovation and entrepreneurship,” World Economic Forum. Additionally, Angel Cabrera, Chair of the Global Agenda Council on Entrepreneurship, notes “only by letting thousands and millions of entrepreneurs try new ideas, to innovate, to create businesses that put those ideas to work in a competitive and open way, only by doing those things are we going to be able to tackle some of the world’s big problems.”
 Entrepreneurship has been a foundation to the American dream since the country was born. However, entrepreneurship gave way to the Agriculture and Industrial Revolutions that defined the American career to encompass a 40 hour work week and developing skills around a specific job in a specific company that operated in a specific market.
 In the late 1970’s an economic shift began to occur in the U.S. as other countries began to produce products at a lower cost than known before. During the 1980’s the economic shift began to grow as communities started seeing manufacturing plants close and state’s fought each other over attracting new manufacturing plants. By the mid-1990 a new wave of economic development began to emerge through the use of technology. Entrepreneurship started becoming an idea again, and many young businesses started to replace many of the traditional businesses on the Forbes 500 list.
By 2001, entrepreneurship began to show promise in the U.S. economy. However, many economists and political leaders remained skeptical about the impact of small business. After the studies from the 2001 recession recovery were completed, the data showed that small businesses were the cause of all the net new jobs during that time frame. Entrepreneurship is the reason for the 2001 recession recovery, yet skepticism still existed as to the long term sustainability of entrepreneurship activity on the economy.
Since 2001, additional studies from various sources have uncovered the critical need for innovation and entrepreneurship in any economy (especially in today’s global marketplace). Technology has changed the rules in business, and entrepreneurship has proven its flexibility is

Entrepreneurship Defined

The World Economic Forum defines entrepreneurship in the following ways:
  • Entrepreneurs are those persons (business owners) who seek to generate value
through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets.
  • Entrepreneurial activity is enterprising human action in pursuit of the generation
of value through the creation or expansion of a business by generating economic activity.
  • Entrepreneurship is the phenomenon associated with entrepreneurial activity.
Meanwhile, others define entrepreneurship as “the process through which ventures are created” (Deb Markley, Center for Rural Entrepreneurship) and entrepreneurs as “a person who creates and grows a venture” (Jay Kayne, Miami University).
As an entrepreneur, you will face different challenges and different needs at each phase of the business development process. Local and state agencies and organizations provide support throughout the business development cycle. It can be helpful to think of the business lifecycle as proceeding through three main phases: Idea, Start-up and Growth phases.
Entrepreneurs, of all shapes and sizes, will quickly learn that resources of all varieties are essential to the survival of the business. In taking the business from the idea phase to the growth phase, capturing an understanding the changing dynamics within the company to utilizing the locally available resources will foster entrepreneurial success.
Types of Entrepreneurs
Aspiring – a person interested and curious about entrepreneurship who hasn’t started a business.
Start-up – someone who has an idea and is actively working towards or has recently started a business.
Lifestyle – a small business owner who has started a business with no intention of growing much past providing jobs/income for that person/family.
Growth – someone who is interested in growing a company quickly. Sometimes growth entrepreneurs are referred to as Gazelles as they are distinguished by their ability to double the size of their company either by number of employees or in gross profit every two to four years.
Serial – an entrepreneur who has the passion to start one company after another. The serial entrepreneur may start a company, work towards making the company profitable, sell it, then start their next business. Others may start a business, realize they need to close it, then try again.
Civic/Social – this type of entrepreneur is someone who is passionate about civic or social causes and works towards starting and growing a non-profit or civic minded organization focused on serving a social sector.
Intrapreneur – is a person who works for a company, but uses entrepreneurial skills to develop new products, services or programs to benefit the employing company.
State of Company Development
According to Sue Hansen in the “7 Stages of Business Growth," a concept developed by James Fischer who founded the Origin Institute, the growth stages of a company can and often dramatically change the dynamics of the business. Ms. Hansen summarizes the seven stages according to key challenges and by number of employees.
  • Stage 1: Start Up with 1-10 employees. The key challenges noted in this phase may be obvious, but include managing cash flow, obtaining capital to start and grow, unstable finances, few customers, managing of expanding sales, getting products/services to market and work/life balance.
In Stage 1, “sales have been great and you begin to hire your first employees, get ready…Your company will be CEO centric until you get to Stage 2. You are the key here, you are the star! That means that 50% of your time should be spent as the technician or specialist while only 10% of your time will be spent as a manager.” To get to stage 2, the entrepreneur will need to start envisioning who the next hires will be and who will begin to manage various company functions.
  • Stage 2: Ramp up, with 11-19 employees. The key challenges in Stage 2 include limited capital to grow, continued tight cash flow, hiring the right and qualified staff, leadership to staff communications, leadership letting go of former job responsibilities and expanding sales.
Hansen notes in stage 2, “generating cash is important but at the same time, managing expenses and cash flow is crucial.” Businesses are hiring more staff, which requires sales to increase to maintain positive cash flow. As roles begin to shift with a growing staff, internal communications becomes increasingly critical as well to ensure everyone is on the same page and moving in the same direction with the company.
  • Stage 3: Delegation, with 20-34 employees. Key challenges include a weak business design, getting staff buy-in, internal communications, having and sharing company core values and managing a staff that may become resistant to changes.
Beware, stage 3 brings significant changes within the company to the point where this stage sees the highest occurrence of CEO burnout. “When you add employee 20 a shift occurs. You are just a few months away from a staff revolution. You’ve felt the subtle change – your employees are a bit harder to manage, they push back more often, their attitude hits you in the face when you least expect it…When you move into Stage 3, it becomes Enterprise-centric.”
  • Stage 4: Profession, with 35 – 57 employees. Stage 4’s key challenges include project management, employee turnover, projecting problems, implementing “systems” and keeping the company abreast of growth information.
Ms. Hansen notes that stage 4 is about internal focus and processes. By now the CEO should have let go of the day to day control to managers so that the focus can now go towards keeping the right managers in place and providing the tools needed to assist the managers. “Successful CEOs surround themselves with knowledgeable, experienced people – they want to be challenged on decisions, knowing that the more diversity of ideas and even attitude they bring on board, the more depth they create in their organization.”
  • Stage 5: Integration, with 58-95 employees. Improving sales, forecasting problems, cost of lost expertise and staff training are the key challenges in this stage.
This stage ushers in a time of being proactive within the business rather than reactive or scattered. Now is the time for the CEO move from growth management to visionary as the company moves into a more competitive environment. Now is the time to focus on developing new opportunities or markets while converting initial customers into brand loyalists for the business.
  • Stage 6: Strategic, with 90-100 employees. The key challenges in stage six include staff satisfaction, staff buy-in, new staff orientation and hiring or maintaining quality staff.
The ground work conducted in stage 5 to envision the future of the company now demands strategic planning to bring the company into an even larger competitive environment. Annual plans are tied in to multi-year strategic plans to lead the company both in growth and in finances.
  • Stage 7: Visionary, with 161+ employees. This final growth stage for the young company includes the challenges of differentiating products/services, slower processes especially in moving new products to market, marketplace changes too quickly and balancing revenues with profits.
While the CEO should be proud of such a high growth company, the growing number of employees also means less of an entrepreneurial spirit within the company. This can affect the strength of the company with new innovations and product introductions. In this stage the CEO will need visionary skills to engage and energize the company to maintain its competitive advantage.
  • Sole Proprietor – This is the simplest way to start a business by you. There are no forms other than obtaining a Federal Employee Identification Number, a local privilege license and opening a business bank account. However, there are no personal legal protections from your business nor are there any tax benefits.
  • Partnership – Similar to sole proprietorship, except the partnership involves more than one person.
  • Limited Liability Corporations – According to Nolo.com, a LLC is a business that offers the legal protection of a corporation with the pass-through taxation of a partnership. While the business owners continue to process the business taxes on their personal returns, the owners receive limited personal legal protection from running the business.
  • Corporation – The corporation business structure is more complicated to start than other forms of business, but the main benefits include a limited legal liability from the business and different tax filing options for the business from the founder’s personal taxes. Starting a corporation can be complex, therefore advice and assistance from an accountant or legal advisor is suggested. Additional information about corporations and the different corporate structures can be found at http://www.nolo.com/legal-encyclopedia/article-29867.html.
  • Nonprofit – Starting a nonprofit requires the same steps in starting a corporation with the additional step of applying for a nonprofit tax status with the IRS. The most known tax exempt status is the 501(c)3. Additional information about becoming a nonprofit can be found at http://www.irs.gov/charities/index.html.
Taking Risks
Many non-entrepreneurs want to believe that those who are entrepreneurs are also big risk takers. However, that is a myth. Entrepreneurs take the risk of moving from a job with a predictable paycheck to working a new lifestyle whose pay checks are a variable during the start-up phase. In fact, entrepreneurs are in the business of mitigating risks in order to achieve success.
In starting a business, there are many areas that involve degrees of risk, however the entrepreneur’s job is to utilize strategies to avoid or overcome known risks. In its simplest terms, risks are the threats to a business in achieving the organization’s business objectives. The following highlights the obvious risk areas, but other areas of risk may exist depending on the type of business and market place.
Business Function
 Risk Opportunities
 Risk Sources
Finance
 Not enough start-up funding, negative cash flow, theft, improper accounting, taxes, investments, weak market
 Accounting, management, customers, employees, the economy, poor corporate structure
Technology
 Unsecured corporate data, unsecured customer data, theft, knowledge loss, hardware theft, software theft, viruses/malware/spyware, data loss, hardware productivity loss
 Computers, lack of data protection, lack of data back-up, lack of technology maintenance, employees, identity thieves
Marketing
 Lack of viable market research to support sales projections, lack of a market for product/service, economic conditions, sales capabilities, poor market strategies
 Lack of a marketing plan, lack of market research, the economy, poor sales strategy or sales execution, poor product/service positioning, lack of planning
Management
 Poor leadership, no clear direction, employee discord, lackluster sales, theft, business failure, business growth
 CEO, board of directors, advisory board, employees, market, economy
Employees
 Theft, “brain drain,” missed deadlines, product flaws, vendor relationships, information leaks, lost productivity
 Employees, employee buy-in, employee representation
Disasters (natural or economic)
 Inventory loss, facility loss, data loss, man power loss, market decline, economic recession/depression
 Natural disaster (flood, tornado, hurricane, fire), Economic recession/depression, manmade disaster
 Business Risk can be categorized in the following manner as well:
  • Financial – protecting monetary funds
  • Strategic – goals of the organizations
  • Operational – processes that operationalize the goals
  • Compliance – laws and regulations
  • Reputational – public image
Risk Mitigation
Risks in business can be eliminated, accepted, transferred or mitigated. Every business must address risk management at some point early in the planning and start-up phase of the business. Risk management is the “identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.”(Wikipedia, http://en.wikipedia.org/wiki/Risk_management)
Method - For the most part, these methods consist of the following elements, performed, more or less, in the following order.
  1. identify, characterize, and assess threats
  2. assess the vulnerability of critical assets to specific threats
  3. determine the risk (i.e. the expected consequences of specific types of attacks on specific assets)
  4. identify ways to reduce those risks
  5. prioritize risk reduction measures based on a strategy
Principles of risk management - The International Organization for Standardization (ISO) identifies the following principles of risk management:
Risk management should:
  • create value
  • be an integral part of organizational processes
  • be part of decision making
  • explicitly address uncertainty
  • be systematic and structured
  • be based on the best available information
  • be tailored
  • take into account human factors
  • be transparent and inclusive
  • be dynamic, iterative and responsive to change
  • be capable of continual improvement and enhancement

Concept Analysis

Before jumping into any business, entrepreneurs need to engage in risk mitigation by researching the availability of their target market and the willingness of consumers to purchase from the aspiring business.
Defining the Market
All businesses need to sell products in order to generate revenues that sustain the business over time. Each business sells a product or service that attracts a select group of customers. This segment is a market. Once a business knows what market(s) the product(s) or service(s) attracts, the entrepreneur can learn a lot about that business’ ability to make sales and generate revenues.
  • Market – is a set of all actual and potential customers of a product or service.
  • Industry – is an independent economic producing sector that supports a sub-set of markets.
  • Customer – user or purchaser of products and services.
  • Competitors – other businesses within the market, that can be direct by offering the same products/services or secondary in nature in that they offer similar products/services.
Conducting Market Research- Market research provides businesses with key information to help make critical decisions. The more you know about your business, the market, the economy, customers and competitors the better. Market research information allows the business to understand how to position themselves, how to reach out to competitors, how to price products or services and so forth.
Market Research is conducted in a variety of ways from speaking to customers, obtaining consumer data from one of the major business databases, researching information on the internet to seeking economic data from various sources. The deeper the business digs, the more information can be found, that information turns ideas into key decisions.
Value Proposition
According to Investopedia, a value proposition is a “business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings.”
There are many ways for a business to create their value proposition; however, this statement should be the result of the company’s market research. In learning about what the company’s customers want and what the company’s core value is to the market, then the company can proclaim how they are the best solution for their customers.
Testing the Business Concept
According to Wikipedia, “Concept testing is the process of using quantitative methods and qualitative methods to evaluate consumer response to a product idea prior to the introduction of a product to the market.”  There are numerous ways to obtain feedback from the market about a product or services, which include; customer testing, consumer surveys, conducting focus groups, introducing the product to a test market, as well as other creative methods. The results of the product or service testing should result in reviewing the feasibility of the business.
Key Business Feasibility Studies
  • Product or Service Feasibility – this is a process through which the entrepreneur obtains data on the products/services. Will the idea work? Key questions to ask include: Does the product/service work? Does it function as designed or intended? Does the product/service fill its intended need? Additional templates and resources regarding product feasibility can be found at http://www.technologystudent.com/vocat/feas1.htm.
  • Market Feasibility – this is where the entrepreneur assesses the probability of a market space willing to support the business offerings. Key questions include: What is the market? How large is the market? Are there customers willing to buy the product or service? What is the economic state of the market? Is this a growing market? What is the competitive landscape of the market? Who are my competitors? Additional information can be found at http://en.wikipedia.org/wiki/Feasibility_study.
  • Financial Feasibility – the entrepreneur needs to consider many different factors within the financial feasibility assessment. Key questions include: How much money does the product or service cost to deliver? How much will the market pay for the product/service? What is the profit margin the business could anticipate? Can the business be profitable, if so how long will it take to get there? How much is needed to start the business, and/or grow the business? For additional resources go to http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex3486
Technology Feasibility – this assessment has two directions for the business owner to consider. The first is for the business itself in that what technology is needed within the business to start? Secondly, if the business is a technology oriented business, is the technology product needed in the market? Is the market ready for the technology? Does the business have a competitive advantage with the technology? How is the technology property protected?
Prototyping
For new products, companies are encouraged to create a “test dummy” of sorts by creating a prototype of the product. This is version 1.0 of the product that can be used as a testing model to ensure that the product idea can actually be produced. Once the prototype has been produced, the entrepreneur can use it to test with target market consumers, gain a better understanding of how the “widget” will be mass produced and how much per unit will cost to be produced.
The prototype offers the entrepreneur a live version of their idea to see if any further revisions or changes will be needed prior to engaging in mass production. Finally, the prototype is also a necessary step for the entrepreneur seeking early stage equity investment capital.

Building a Business

Entering/Capturing the Market
  • Sales Channels (“Choosing your Sales Channel”) A sales channel is the process in which a company gets its’ products or services to the market to sell. From raw materials to production to distributors on to the market, understanding how your product will get to the customer is an important step. Understanding the sales channel grows the business’s understanding of the cost as well as steps needed between the company and the actual customer.
  • Marketing Methods (“New School vs Old School Marketing Methods”) Marketing methods are often confused with advertising methods. While advertising is the means by which a business publicly provides information to sway customers into purchasing the product or service, marketing methods are the means through which the advertising is delivered. Through marketing methods, the business target audiences in which to convert into customers.
  • Sales Lifecycle (“Sales Lifecycle”) The sales lifecycle is a process through which the marketing and advertising efforts prospect potential customers. Those potential customers who show interest in the product or service turn into leads. Once leads are identified, the sales staff then works one-on-one with the lead to produce a sale and convert the lead into a customer. This process of turning the target audience into customers is the sales cycle.
  • Pricing (“Pricing Strategies”) Pricing a product or service can be a complicated process that involves both hard facts about the cost to produce the product, what the competition is charging, what is expected in terms of price from the target market and what price can the market sustain. Pricing products and services is both an art and a science. Standing by the price the company sets also takes courage and the right sales and marketing strategies to support.
Building the Team
Building the right team(s) for the business is another important step in a successful start-up. While each business is different, the teams needed during the start-up often include the board of directors, advisory team and the start-up team. Putting the right people in the right places is not easy, yet the right people in the right positions working toward the common mission for the company will make the start-up lifecycle much easier for the business.
  • Management Roles – While assembling the management team for the young start-up company, the business plan should define the roles that are needed and supply the qualifications and expectations of that person on the team. If the management team has been identified, then the business plan should note the role that person will play in the start-up and what their qualifications are for that role.
  • Board of Directors – Companies appoint or elect a group of individuals who jointly oversee the business’s activities. While there are no rules on how many individuals can serve on a board of directors or what role the board plays in an organization, the board of directors often plays an important role in providing oversight to the company. A company is required to have a board of directors if the organization has been incorporated. Plus, the board must maintain adequate notes from meetings and discussions for public record. (“Wikipedia - Board of Directors”)
  • Advisory Board – An advisory board is a group of individuals who volunteer their time to assist the business with advice, connections, leads, or industry expertise. An advisory board differs from a board of directors in that the advisory board is not responsible for the oversight of the business. The advisory board acts as a coach to the business to provide assistance.
  • Employees – Beyond finding finances, writing the business plan or building sales, hiring the right start-up employees can be a daunting task. However, the entrepreneur needs to make the selection of employee #2+ very carefully. The business will not be able to offer fancy benefits packages or the assurance that the business will be open a month or year later. However, the entrepreneur does have some assets to provide early employees. Taking advantage of those assets and ensuring the employees share the same vision, the entrepreneur’s leadership during this early stage is critical to managing early human resources.
  • Outsourcing – Many start-up businesses are not able to hire a full staff to manage the various aspects of the business; therefore outsourcing is a viable option for a variety of business services. The areas in which businesses outsource functions include the following and more:
          Legal - Intellectual property protection, general business representation, contracts,
          establishing form of business, stock issues, partnership agreements, and more.
          Accounting - Book keeping, filing taxes, monthly or quarterly reports, and more.
          Marketing - Market research, market planning, market strategy, advertising, designers, web
          development, SEO and social media strategy, channel development, and more.
          Business Development - Sales strategy, lead generation, lead follow-up, and sales.
          Other - Manufacturing, raw material supply, additional business services, etc.
Intellectual Property
Intellectual Property defines the property rights of owners of intangible assets (products of the human mind) that federal statutes govern. Intellectual property laws attempt to balance the rights of the property owners with the rights of other people, and those rights are for a given duration. Intellectual Property provides the competitive advantage necessary to generate commercial success.
  • Types of Intellectual Property – The three core areas of Intellectual Property are Patent, Copyright and Trademark Law.
    • Patent – According to Gina T. Constant with Rodey Law Firm, “a patent is a government –granted monopoly over an intangible asset for a certain number of years.” During the 20 year duration of the patent, the owner has a the right to exclude others from making, using, offering for sale, selling or importing the invention into the U.S. There are three types of patents:
      • Utility – “Everything under the sun made by man, except natural phenomenon, laws of nature and abstract ideas.”
      • Design – “New, original and ornamental appearance of an article of manufacture.”
      • Plant – A reproducible new species of a plant.
  • Trademarks – A trademark is a signal to the consumer as to the source of the good or service. This mark has been created to protect the goodwill of the company and prevent consumer confusion. A trademark is good for as long at the mark is used and if the company renews the trademark registration every 10 years. Trademarks protect letters, words, logos, pictures, drawings, slogans, colors, product shapes, sounds and artwork.
  • Copyrights – This federal protection prevents the copying of an expression of an idea typically found in literary works, songs, journals, computer code, choreographic works, graphics and so forth. The copy right duration is for the life of the originator plus 70 years. Copyright protection begins the moment an original work of authorship becomes fixed, but registering the work with the copyright office will allow legal protection of the copyright more plausible.
  • Additional information about intellectual property can be found at Nolo.com or consult legal guidance from a lawyer specifically practicing intellectual property law.
  • Protection Enforcement - Unfortunately, the U.S. government does not have enough resources to police all the intellectual property infringements that occur within the country as well as globally. That means each business is in charge of overseeing and policing the protection of their intellectual property.

The Business Plan

In this section you will explain the fundamentals of the proposed business:  What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry? The Executive Summary is a summary of the whole business plan in one page or less, and it is often easier to complete this section last.
The Executive Summary should be realistic, professional, accurate, complete and concise. Utilize the information gathered in the following business plan sections to create this general business summary. The Executive Summary will allow your readers to quickly understand the overall plan and purpose for the proposed business.
Company Description This is a section in the business plan where you work out the details of what your business will look like, how it will behave, what it will value and how it will be set up legally. In this section, you will answer questions like: What business will you be in? What will you do?
Mission Statement: This is a component of the overall Company Description as it is used as a guiding principal for the organization as well as a means to describe the business in one or two sentences. Many companies have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan.
Company Goals and Objectives: Goals are destinations—where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.
Industry: In this component, describe what industry/market you are trying to enter. Is it a growth industry? What changes do you foresee in the industry, short term and long term? How will your company be poised to take advantage of them? Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?
Legal Form of Ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)?  Why have you selected this form? For more information about the Company Description and Business Planning, go to:
www.score.org
www.openforum.com
www.sba.gov
http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html
www.inc.com/guides/start_biz/20660.html
www.cbsc.org/ibp/doc/intro_bp.cfm.
Product/Service Description Here is where you give detailed information about the products or services your company is offering to your market. Here is the place to answer the following:
  1. Describe in depth your products or services.
  2. What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary features.
  3. What are the pricing, fee, or leasing structures of your products or services?
Businesses do not run themselves, and businesses often need others for guidance and input. This section is necessary to help the entrepreneur develop strategic plan of talent to engage in starting and growing the business. SCORE offers the following advice for this section: Ask yourself who will manage the business on a day-to-day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated? If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees. List the following for Professional and Advisory Support:
  • Board of directors
  • Management advisory board
  • Attorney
  • Accountant
  • Insurance agent
  • Banker
  • Consultant(s)
  • Mentors and key advisors
Operations
This section of the business plan asks for an explanation of the daily operations of the business, its location, equipment, people, processes, and surrounding environment. This section allows the entrepreneur the opportunity to plan and work out areas of the business that will have a large impact on the vitality of the business. Consider the following start-up concerns:
  • Location: What qualities do you need in a location? Describe the type of location you’ll have. You will also want to note how much space (square feet) you will need and what type of building (office, warehouse, etc.).
    Access: Is it important that your location be convenient to transportation or to suppliers? Do you
    need easy walk-in access? What are your requirements for parking and proximity to freeway,
    airports, railroads, and shipping centers?
    Cost: Estimate your occupation expenses, including rent, but also including maintenance, utilities,
    insurance, and initial remodeling costs to make the space suit your needs. These numbers will
    become part of your financial plan.
  • Legal: Businesses have a wide variety of legal needs, which varies amongst the different types of businesses. Businesses also need to be aware of legal parameters that may restrict their businesses. Areas that businesses need to be aware of in regards to the legal environment include licensing and bonding requirements, permits, workplace regulations, employee manuals, industry regulations, zoning and building code requirements and intellectual property protection. Legal council may be needed with the following: incorporation papers, contracts, employee manuals, nondisclosure agreements, patents and more.
  • Personnel: What are the current and future personnel needs for the company? What would an organizational chart look like? Will job descriptions be created and what sort of talent will be needed for the company. How will the company manage compensation and fringe benefits?
  • Production: If you are manufacturing a product, can you provide a flow chart of how the product will proceed through the manufacturing process? What sorts of machines are needed for production? What are the production techniques and costs? How will quality control be maintained? How will the company engage in new product development?
  • Inventory: What kind of inventory will be kept? Where will pre-production and post-production inventory be stored? What is the projected rate of inventory turnaround? Is seasonal inventory needed? What lead time does the vendor need in replenishing inventory?
  • Supplies: Who are your suppliers? What are their payment/credit terms? What do they supply? Do the suppliers have references or a record of performance?
  • Credit Policies: Will the business sell on credit? If so, what kind of credit will be offered and at what terms?
For more information about Operations, go to:
Market & Competitive Analysis
No matter how good your product service may appear, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts.
There are two kinds of market research: primary and secondary. Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies.
Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus-group interviews to learn about consumer preferences.
In your marketing plan, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis of sales projections. While engaging in market research and competitive analysis consider the following topics:
  • Economics (facts about the industry): What is the total size of the market/industry you wish to enter? What percentage of the market do you wish to capture (is it locally, nationally, internationally)? What is the current demand for your product/service in the market? What are the barriers to entry into the market (what would keep you from starting your business)?
  • Products/Services: Please describe your product/service from the eyes of your targeted customers. What are the features/benefits? What is special about your product/service? What will the product/service do for the customer? Will you provide any after-sale services? What makes you different from the competition?
  • Customers: Who are your targeted customers? What are their key characteristics? Where are they located? What is their annual income? What are some of the related products that they buy? The more you know about your customers (income, gender, age, social class, education, type of business, size of firm, industry etc.), the better equipped you will be to make advertising and sales decisions for the company. You will need to do this research for each customer group your business will have.
Competition: Who are the companies that will compete against you? What products/services will compete against you? What secondary items will compete against you for your customer’s money? Where are your competitors located? How will your product/service compare to the competition?
Using the Competitive Analysis table by SCORE (below) to compare your company with your two most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors.
In the column labeled “Me”, state how you honestly think you will stack up in customers' minds. Then check whether you think this factor will be a strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You want an honest assessment of your firm's strong and weak points. In the final column, estimate the importance of each competitive factor to the customer.  1 = critical; 5 = not very important.
Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world.
Now a marketing, advertising and sales plan (M&A) needs to be developed that will reach your intended market. The M & A plan need to be tailored to your business and industry that will achieve projected sales and growth goals.
Marketing is a wide range of activities that is focused on the continual need to meet the demands of customers while getting an appropriate value in return. Marketing involves research and outreach; customer information and customer opinion; strategic planning and company messaging; as well as product pricing and product promotion. Meanwhile, advertising and sales are different disciplines that grow from marketing activities. Advertising (or promotions) is utilized in sending messages to customers about the business. A sale is a process of capturing the attention of the customers to complete sales of the product/service.
  • Advertising: In developing advertising/promotion plans, seek to answer how will you get the information out to the customers? What media, why and how often? Will you engage in traditional or social media advertising? Will a mixed media or tiered advertising approach be planned, why or why not? How will you track progress/success with your advertising efforts? What is the image you want to project?  Will you need to hire a marketing/graphic design firm? When will your website be launched? What other graphic elements do you need (business cards, stationary, etc.)?
    What technologies will you utilize in advertising? What type of website do you need? Who will
    develop your website? When will you launch your website? What is the mission of your website, and how will you track success?
  • Advertising Budget: How much will you or can you spend on advertising? What are your priorities with your advertising plan?
  • Pricing: Explain your method or methods of setting prices. Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why? How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?
  • Sales Forecast: Now that you have described your products, services, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Prepare a month-by-month sales projection for the first 12 months, then project year two sales. The forecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available. You may want to do a “best guess” forecast as well as a “worst case scenario” projection as this will give you a realistic picture of what can happen both good or bad. Remember to keep notes on your research and your assumptions as you build this sales forecast.
For more information about Marketing, Advertising & Sales, go to:
www.score.org
www.openforum.com
www.sba.gov
http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html
www.inc.com/guides/start_biz/20660.html
www.cbsc.org/ibp/doc/intro_bp.cfm
Strategic Plans
According to the Free Management Library, strategic planning determines where an organization is going over the next year or more and how it's going to get there. Typically, the process is organization-wide, or focused on a major function such as a division, department or other major function. Organizations use strategic planning as a business plan supplement, a means to develop departmental or new product plans, or as an organizational reflective tool.
Strategic planning often involves the use of the SWOT analysis. SWOT analysis refers to strengths, weaknesses, opportunities and threats. SWOT analysis allows businesses a quick snapshot into where the business is and where it can grow. Companies brainstorm and list all their strengths, weaknesses, opportunities and threats. Through the exercise of creating all four lists, ideas or patterns emerge to help create business roadmaps.
Finances
You will have many startup expenses before you even begin operating your business. It’s important to estimate these expenses accurately and then to plan where you will get sufficient capital. Like your marketing plan, your financial plan will require thorough research.
Talk to others who have started similar businesses to get a good idea of how much to allow for your budget and contingencies. Contingencies are expenses that are often not planned on yet are budgeted in a line item “just in case.” If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20 percent of the total of all other start-up expenses.
Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed loans. Also explain in detail how much will be contributed by each investor and what percent ownership each will have.
Financial Plan: According to SCORE, the financial plan consists of a 12-month profit and loss projection, a four-year profit and loss projection (optional), a cash-flow projection, a projected balance sheet, and a break-even calculation. Together they constitute a reasonable estimate of your company's financial future. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company.
12-Month Profit and Loss Projection: The 12-month profit and loss projection (P&L) is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful. However, most business owners fear engaging in or understanding the P&L statement.
The basic building blocks of a P&L statement includes:
     Revenue                                                              $100.00
     Less Cost of Goods Sold                           $ 50.00
     Gross Profit                                             $ 50.00
     Expenses
          Research & Development                  $ 10.00
          Marketing & Sales                              $ 15.00
          General & Administrative                  $ 15.00
     Gross Income                                                        $ 10.00
     Taxes/Interest                                                       $   5.00
     Net Income                                             $   5.00
Your sales projections will come from a sales forecast in which you forecast sales, cost of goods sold, expenses, and profit month-by-month for one year. Profit projections should be accompanied by a narrative explaining the major assumptions used to estimate company income and expenses.

Five-Year Profit Projection (Optional): The 12-month projection is the heart of your financial plan. The Five-Year Profit projection is for those who want to carry their forecasts beyond the first year. Of course, keep notes of your key assumptions, especially about things that you expect will change dramatically after the first year.

Projected Cash Flow: If the profit projection is the heart of your business plan, cash flow is the blood. Businesses fail because they cannot pay their bills. Every part of your business plan is important, but none of it means a thing if you run out of cash.
Cash flow will enable you to foresee shortages in time to do something about them—perhaps cut expenses, or perhaps negotiate a loan. But foremost, you shouldn’t be taken by surprise. For each item, determine when you actually expect to receive cash (for sales) or when you will actually have to write a check (for expense items). You should track essential operating data, which is not necessarily part of cash flow but allows you to track items that have a heavy impact on cash flow, such as sales and inventory purchases.
Opening Day Balance Sheet: A balance sheet is one of the fundamental financial reports that any business needs for reporting and financial management. A balance sheet shows what items of value are held by the company (assets), and what its debts are (liabilities). When liabilities are subtracted from assets, the remainder is owners’ equity.

Break-Even Analysis: A break-even analysis predicts the sales volume, at a given price, required to recover total costs. In other words, it’s the sales level that is the dividing line between operating at a loss and operating at a profit.
Expressed as a formula, break-even is:
Break-even Sales =   Fixed Costs
                                Variable Costs
(Where fixed costs are expressed in dollars, but variable costs are expressed as a percent of total sales.)

For more information about Business Finance, go to
http://www.score.org/template_gallery.html
www.OPENforum.com
http://businessfinancemag.com/
www.entrepreneur.com
www.inc.com
www.sba.gov
http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html

Financials

Identifying Funding Sources
  • Bootstrapping – is the primary way that most entrepreneurs fund their start-up business. Bootstrapping includes providing personal funds, obtaining credit lines or credit cards, being frugal in business purchases (i.e., buying used furniture or equipment, etc.) and obtaining start-up funds from family and friends.
  • Governmental SBIR/STTR – The Small Business Innovation Research Grant program and the Small Technology Transfer Research program are government funded grants that small innovative businesses may apply for through each branch of government when that branch solicits Requests for Proposals. These grants are highly competitive and difficult to obtain, and they focus on targeted areas of research of interest to the governmental agency.
  • Debt – For many small businesses who are in need of obtaining physical assets for the business, taking a business loan is a great option. Business debt is typically taken out by the entrepreneur in the name of the business in the form of a loan that will have a payback schedule over a number of years. Debt payback includes interest attached to the debt and can take anywhere from five to 20 years to pay back.
While a business loan sounds simple, there are many different types of loans and different requirements for each loan. Entrepreneurs need to be aware of the different loan program requirements, and they need to be ready to provide their financial background as well as some form of collateral to secure the loan.
Equity Capital
Equity Capital is the most difficult form of money a business can try to secure. Equity Capital is an investment made by another person or entity into the business that typically requires the business to provide a higher rate of return to the investor than other forms of business finance. BusinessDictionary.com defines equity capital as “invested money that, in contract to debt capital, is not repaid to the investors in the normal course of business. It represents the risk capital staked by the owners through the purchase of the firm’s common stock (ordinary shares). Its value is computed by estimating the current market value of everything owned by the firm from which the total of all liabilities is subtracted. On the balance sheet of the firm, equity capital is listed as stockholders’ equity.”
Planning for Financial Success
  • Financial Projections – is the planning for and estimating the costs of doing business versus the opportunity to bring in revenues to support business operations. Projections are typically calculated for three to five years. Some projections can go further than five years; however long term projections should be reviewed in timely increments.
  • Financial Statements – In essence, a financial statement is a summary report that shows how the company used funds over a given period of time. BusinessDictionary.com notes that there are three basic financial statements, including the P&L statement, balance sheet and cash flow statement. All three financial statements will provide enough information for the business to assess the financial health of the organization.
P&L – The Profit and Loss statement can be a simple accounting form that shows how the net income of the organization is arrived at over a stated period. The P&L statement includes
gross revenues – cost of goods sold = gross profit. Gross profit – general and administrative –
Marketing and advertising – research and overhead = Net profit. Net Profit – taxes = total
profit.
       Gross Revenues                        Gross Profit                            Net Profit
-Cost of Goods Sold                           -Expenses                                  -Taxes
            =Gross Profit                           =Net Profit                       =Total Profit


"Profit & Loss Statement Example" www.google.com
Balance Sheet - The Balance Sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

"Balance Sheet Example" www.dummies.com
Cash Flow - Cash flow is the movement of cash into and out of the company. A cash flow statement helps the business track where the funds are being spent and/or track how much has been spent by category. All businesses need cash flowing into and out of the business to survive, and the cash flow statement is a tool to track the money.

"Cash Flow Example," US Department of Treasury

Presenting the Business

Elevator Pitch
The “elevator pitch” is a short introduction about yourself and your business to people you meet through networking, business connections, or just about anywhere. Most professionals utilize the usual 30 seconds to simply state their name, position and company they represent. While this is a common format, this approach is not the most effective.
The elevator pitch is an opportunity to not only make a memorable first impression, but it is also an opportunity to engage the listener and possibly win a new customer. Carmine Gallo wrote “Mastering the 30-Second Pitch” for Newsweek in 2005 and notes, “...how you pitch the story behind your small-business’s services, products or companies means the difference between making a sale and being shown the door.” Likewise, if you want a new network connection to set-up lunch for additional information next week, how you introduce yourself makes a big difference.
Gallo, a corporate presentation coach, suggests turning your bland introduction into a 30 second story. To do this, ask and answer four questions to yourself: What is my service, product, company or cause? What problem do I solve (or what demand do I meet)? How am I different? Why should you care?
Once you have answered the four questions, combine the condensed answers together into your elevator pitch. This story should leave the listener to wanting more information about what you do rather than an excuse to get away from you. Once you have crafted your elevator pitch, practice it until you have the 30 seconds memorized.
Examples:
“Language Line Services is the world’s largest provider of phone interpretation services for companies who want to connect with their non-English-speaking customers. Every 23 seconds, someone who doesn’t speak English enters the country. When that person calls a hospital, a bank, an insurance company or 911, it’s likely that a Language Line interpreter is on the other end. We help you talk to your customers, patients or sales prospects in 150 languages.
While there are a lot of jokes and humor portrayed to the public about the fears associated with public speaking, many professionals are forced to overcome their fears in order to conduct business. Entrepreneurs pushed further into public speaking when engaged in raising money for the company, securing partners or winning new customers. However, there are many forms of communications business leaders need to be prepared to engage in throughout the cycle of business.
In business, you will have the opportunity to lead meetings, give sales presentations, present your company to investors, present your company to the public, speak at company events or community events, and provide informational or motivational speeches. Each speaking situation requires different behaviors and preparation.
To prepare for your business presentation, know your audience. What kind of information is your audience looking to learn about? How many will be in attendance? How old are they and how long will their attention span last? What time of day will the presentation be given, will the audience have eaten right before? The more you know about the audience, the better you will be able to tailor your presentation to their needs.
Understand where your presentation will be given and how much time you will have to give your presentation. Know the environment you will speak in, and ask if it will be in large conference room or a small meeting room? Will it be warm or cool in the room? Where is the presentation going to take place, and do you know how to get there? Will there be a projector available? If not, do you need one or do you need to bring one? How much time should be left for the audience to ask questions?
The presentation should not consume the full speaking time as time should be set aside for questions during the full presentation. Memorize your opening and closing statements, but use notes to guide you through the body of the presentation. Either keep a watch or have a timer assist you in keeping your presentation to the allotted time.
PowerPoint has become a standard tool in delivering business presentations, but PowerPoint can be overdone easily. In creating the PowerPoint slides for your presentation, utilize a clean template that does not interfere with the information you wish to portray. Utilize information on your slides that will grab the audience’s attention that is not redundant with your speech. Use PowerPoint to enhance and enforce your words rather than repeat what you are saying. Limit the special effects and animations on the slides as much as possible, these effects are more distracting than enhancing. Lastly, utilize “eye” words within the slides. Charts, graphics, bullet points and more are visuals that speak to the “eye.”
Delivering a presentation takes practice and the ability to overcome the fears associated with speaking in front of others will subside over time. Most people will engage in a nervous habit while they are speaking, so practice will allow you to become aware of your habits and work towards overcoming those (such as twirling hair, rocking back and forth, stuttering, knuckle cracking and so forth).
When giving a presentation to a large audience, practice standing in one place with good posture and keeping your arms and hands in a comfortable position where they are not touching anything else on your body. If there is a podium available, utilize it to keep you in one place and avoiding nervous body movements. You will also want to be aware of your clothes, are they appropriate for the environment? Make sure your clothes will not hinder your presentation in any way (avoid “wardrobe malfunctions”).
Once you have mastered your body position, practice utilizing your voice in an appropriate manner. Knowing your audience will help you know what tone of voice to use, how loud a voice to use and what vocal pitch to use. Too monotone sends a very clear picture to an audience just as a cheerleader voice would. Depending upon your audience, you will want to utilize a variety of vocal cues to emphasis key components to your presentation. 
For more information about Business Presentations, go to www.toastmasters.org.


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