Posts Tagged ‘business plan’

6 Myths About Starting a Business

July 17th, 2013

Lots of people decide to take the entrepreneurial path and start their own business. The idea of being your own boss, making it big, and having a company that you can point to as your life’s work is very appealing. But the realities of starting up a small business are sometimes overshadowed by myths which make it difficult to deal with the real challenges that arise in those first few years, resulting in unreasonable expectations, frustrated entrepreneurs and potentially a failed business.

Here are some small business startup myths that might keep you from realizing your vision:

1. You should spend a lot of time preparing a detailed business plan
A client of mine in Gardena believed, as many business owners believe, that they should spend a lot of time preparing a detailed business plan, and that the business plan needs to include lots of what-ifs and elaborate financial projections. A grain of truth obscures a much larger point here. Yes, it’s smart to have an overall strategy in mind before diving into a business of any kind.  However, it’s very possible that by the time you finish your do-all-end-all business plan, the market will have changed so much that it will be about time to start on a new one. Business plans are especially important in the initial phases, as it is essential your businesses road map includes your goals. It is also important that you refer back to your plan every few months, check these goals, and add or change them accordingly.

The problem is that detailed plans work best when you are pursuing a fixed goal, such as losing weight or sticking to a budget. In these cases, a planned sequence of steps will best accomplish the goal. In business however, the goal is meeting consumer demand, which is often a moving target. Look at all the businesses (like Google) that are now doing something radically different from their original plan. So create your business plan, and then get busy developing a product and trying to sell it. Then resolve to be open-minded and react to opportunities as you see them emerge.

2. You have to develop the coolest, most innovative product
Many entrepreneurs think they have to develop the coolest, most innovative product. Entrepreneurs are often creative-types, dreamers and inventors, and they get so caught up in the coolness of their product that they forget that they need see if anyone will actually pay money for it.

What you do need to do is get your product to market as soon as possible, to start generating revenue and gain customer feedback. All companies, large or small, need to be more customer-oriented than engineer-oriented. You have to take into account customer demand, and develop products based on that feedback. Too many entrepreneurs so endlessly improve their products before starting to sell them that by the time they finally do, they’ve run out of capital and have to shut down.

Get a workable product out the door and fix the bugs as you go along. That way you also get valuable feedback about its strengths and weaknesses, for the market doesn’t necessarily agree with you about what’s perfect.

3. You’ll have more time to do what you want
Yes, you do own your time. By, ironically, you will find yourself using more and more of this time to run your business. Whether this hoped-for scenario actually pans out, is largely a function the business you are in and how much time you devote to it up front. Early on, you will almost definitely not have more time on your hands.

As a client of mine in Manhattan Beach found, there are many benefits (personal and financial) to having your own business, but plenty of free time is not one of them. You will probably have a little more flexibility, as many small business owners choose to work late at night so that they can spend time during the day with their families; but there are still some major sacrifices, such as sleep. Starting up a small business requires that you work until the work is done, without exception. Those fantasies of taking long vacations while your business grows itself are just that, fantasies.

None of this is to say that you will not ultimately have more freedom as a result of running your business. However, to expect a lot of it in the early days would be an exercise in self-delusion. So prepare yourself for immense demands on your time.

4. You’ll be able to write everything off
Absolutely not, unless of course, you have a desire to get audited. I can’t tell you how many clients have come to me over the years for help getting their books in order only to have to be told that even with a complete set of transactions and reconciliations, their books won’t be clean until we remove all the personal expenses they’ve burdened their profit picture with. Personal expenses should not be expensed to your company, and the business expenses you do incur should be clearly connected to the business you’re running. While it’s true that business owners can write off more than employees can, there is great risk in taking this too far.

Typical real expenses can include your computer and business operating and account management software, rent, employee salaries, money paid to independent contractors, advertising costs, and your business phone bills. You probably will not get away with deducting 100% of your car payments, nor gas and repairs. You can write off the portion of auto expenses that you can document as being essential to your operations. The key word here is “document”. Keeping good records is critical. Basically, if you cannot document it and cite a clear connection between the write-off and the operation of your business, your attempt at a write-off could trigger audits, fines or worse.

5. If you build it, they will come
Despite the Field of Dreams reference, setting up shop and getting your startup ready for business, doesn’t mean that the world will beat a path to your door. A former client in Torrance found out the hard way that today’s consumers have an endless array of choices, meaning simply “building it” will not cause customers to walk through your doors and snap up your products. No matter what type of small business you choose to start, it will rarely, if ever, be sufficient to open up shop and idly wait for business to start pouring in.

You still need to market and advertise your business strategically. That means having a plan and a budget.  It also means researching the most effective methods for marketing and advertising. There is no shortage of ways to waste money in advertising, as a client in Lawndale discovered, and it can end up being a huge financial drain on a fledgling company. No matter how good you are, there is lots of competition and your small business has to establish a presence and reputation to go along with your talent.

Consider your number one priority after opening your doors to be spreading the word about your product to your target market as much as possible.

6. Starting a Small Business is Rewarding
One other common myth about starting a small business is that it can be an incredibly rewarding experience. But unlike the myths presented above, this one has great potential to become true.

The independence and the satisfaction of turning a business idea into a successful enterprise are probably what most small business owners find the most rewarding. And there are all kinds of other satisfactions, including creating a successful new product or service as a result of solving unforeseen problems, or from customer feedback. So don’t let the myths of starting a small business put you off; the reality is so much better.

Small business is one of the most exciting arenas for earning a living.  There is plenty of creative potential, and a chance to really make something tangible for yourself and your family. But doing so requires more than just the vision and determination of a bold risk-taker. You need to be intelligent about how your business is framed in the marketplace, and what obstacles there are to overcome. You also need to be aware of the tools and support that you have at your disposal. Staying focused on these realities, and avoiding the myths that many fall prey to will only increase the chances of success and longevity in your small business.

 

A Successful Business is a Well-Oiled Machine

January 21st, 2013

 

Since you want more clients or customers, more income, and more time off, you’ll need to make your business run like a well-oiled machine. If you are like most entrepreneurs you’re handling almost everything yourself, and so your business is probably running YOU, instead of you running your business. That means a lot of things are being left undone, opportunities are being lost, and consequently fewer clients and are coming in.

Consistency is crucial and chaos is costly, both financially and time-wise. When things run like a well-oiled machine, when everything’s organized, chaos is reduced. Ideally, you want things run on their own, or by the efforts of someone else, so you can focus on growing your business, while having more time off to enjoy yourself. For this to happen, you’ll need to systemize the processes involved in operating your business.

If you haven’t identified the one best way to perform each repeatable task or process (such as answering the phone in a consistent manner, managing your sales process, etc.) then you’re in big trouble. You need to create some systems and procedures.

Even if you don’t have help from staff, you can still make your business run smoothly.

Begin by documenting everything you do:
Start by tracking your time. Take a note pad and document the time it takes you to do the tasks you do every day. In a week you will have a good picture of where you are spending your time. It also allows you to see what can be removed from your day, and what can be delegated to your team. By keeping an awareness of your time and where you spend it, you will be much more productive. You’ll see a pattern of where you are spending too much or too little time, and which things you are doing that aren’t essential to your business. By keeping track of this, it will help you realize how you can use your time better.

Next, you want to document the process associated with each task:
Write clear instructions on how to complete each task. This will eliminate, or at least improve, chaotic situations. Increased levels of organization will enable a better work ethic and will help keep you on task generating better production throughout the day. It can be eye opening to see what you need to put into place. Once you realize what needs to be done, and fix it, your business will run more smoothly. You may also detect areas of your business that are under, or over staffed. By recognizing this you are attacking an issue before it becomes a bigger problem. You are now also able to better delegate what you need to, so that you can focus on what is the most important use of your own time. Make certain that all task instructions include the locations of all support material so that if you are unavailable your staff can easily find what they need to keep things going smoothly.

The end result should be an instruction manual for your business:
An instruction manual, or operations manual, for your business is a huge asset. It will help you and your staff to keep on track and know where to go to find the information need. It will clearly define the rules and regulations, work ethics and processes clearly. This will help you keep your employees in line, and help employees know their proper role, and what they need to do to fulfill that role. Everyone’s job is easier when the processes and procedures are clearly stated. There won’t be any gray areas when everything is right there in black and white. As you add to your team over time, having your systems documented will allow new people to integrate better, faster and more efficiently with your current team.

Ideally you will want to define your systems and document your processes and procedures before your company grows to full capacity. Then, as you approach full capacity status, you will avoid the breakdowns that cause so many businesses to fail. At the same time, you’ll make more time for marketing and for the ability to service the resulting larger client list.

A prime reason that franchises are so successful is that the operations manual eliminates all the guesswork on how to do things. It tells you “one best way”, and documents everything in a step-by-step manner.

But remember, just because the process is documented, it does not necessarily mean it’s always going to be the “one best way” to perform that task. You should challenge your employees to improve on how things are done to increase productivity and the quality of the results. That said, your operations manual should be a living document.

There are many things in any business that can be systematized. For example, each of your different marketing methods that you use to attract new clients should be well defined and documented, as should your client management, your schedule, your calendar, your email, etc. While you’re at it, your personal life could also benefit from establishing specific procedures. You can systematize your food shopping, your doctor appointments, your personal email, your dry-cleaning, your errands, your banking. You name it, and it can probably be systematized to your benefit.

You’ll be amazed to see how much of a problem-free zone your business becomes. You will have a lot more time to focus on building the business, a lot more room for new clients, and more time to simply enjoy yourself. You’ll have more time for vacations, for self-care, and for spending quality time with friends and family. And that’s what being self-employed is really about.

Short is Sweet for Today’s Business Plans

October 22nd, 2012

It’s not just entrepreneurs who have come to the realization that exhaustive business plans may be overrated. Venture capitalists, angel investors and bankers are also in favor of stripping down such documents. Many say they simply have no time to read a 100-page plan, even if they were so inclined, and that there is little value after the first few pages.

The modern business plan is a dramatically distilled version of those from five or ten years ago. The best ones today address market opportunities and how the venture will pursue them, in a few well-written paragraphs. That’s it.

It’s not that people shouldn’t incorporate planning into the process of starting or growing a business, it’s that the process and final output has changed. No entrepreneur should spend 6-8 months writing 100+ page business plans. Instead, they should write down some notes to define the following:

1. The problem they are solving

2. Their solution to the problem

3. Who the target customer is and the size of the addressable market

4. Current competition or alternative solutions to the problem

5. Estimated costs and revenue

6. Key partners & resources needed to run the business

7. Sales channels and planned marketing activities

This first pass at a plan should be no more than 1-2 pages. Entrepreneurs should then set out to validate their assumptions: Do potential customers really have the problem the entrepreneur thinks they have? Do potential customers think the solution is a good idea? Are they willing to pay? Etc.

Based on this early customer feedback, the plan can be revised and expanded. It’s much more of a “plan as you go” approach where the entrepreneur keeps the plan alive and is constantly refining it as they learn more about their customers and their business.

Those longer plans, that used to be the standard, may signal hesitancy or doubt about a concept’s viability. A shorter plan, on the other hand, signals a bias toward action and away from planning. This is not to say that planning is unimportant, but a lot of people get stuck in the paralysis of planning and never actually do anything.

6 Mistakes to Avoid as You Build a Profitable Business

September 18th, 2012

Where do small business owners go wrong when trying to build a profitable business? Many mistakes can be traced back to such things as not being consistent in preforming some of the most crucial tasks required for a business to function. But there are also mistakes made by not taking a task to completion, trying to take too many tasks to completion, spending time on the wrong tasks, not having procedures in place for the most crucial tasks, and hiring the wrong people for the tasks you expect them to accomplish.

Avoiding these 6 mistakes can save you time, money and a lot of frustration. So as you move your business toward your goals of profit and growth, here are some mistakes you may want to avoid or fix.

1. An Inconsistent Marketing Effort
Marketing may well be the most important task a business must perform. For many, marketing efforts are like a roller coaster ride, up and down based on how busy you are or how sales are doing. If your marketing is sporadic, it’s likely your results will be the same. The key to attracting and retaining customers is consistency. It is better to do 3 or 4 lead generation strategies well and consistently than doing a dozen of them periodically.

2. No Follow Up
Investing resources to generate leads for your company without a proven method to convert them to paying customers is costly. No matter how potential customers come to you, a system for consistent and timely follow up is a key to sales growth. Take the time to develop a procedure for turning prospects into customers. Take advantage of technology, templates and scripts for efficiency and effectiveness. If you are not consistently following up on your marketing, you are not completing the marketing task. Be consistent and watch your sales soar.

3. Doing it all Yourself
Most small business owners became entrepreneurs because they are experts or skilled at something and believed they could do it better than others. But building a successful business requires more than technical know-how. No one is an expert at every task, so supplement yourself with other experts to fill in the gaps. Whether you hire employees, sub-contract work, create joint ventures, work with coaches, consultants or develop strategic alliances, the support you need is available. Don’t try to do it all yourself.

4. Not Identifying Your Customer Profile
The best products or services will go unsold if you are talking to the wrong people, those who will likely never buy. If you invest your time and money promoting your products or services to people who don’t have the resources, authority or need, today or in the near future, you will have spent your time on costly frustration. Who are the ideal customers for YOUR products and services? Do your research, find out who and where they are, how to reach them, and then apply your resources to pull them in.

5. No Procedures
Documented procedures for all your company’s critical tasks and operations is a key to efficiency, consistency, continuous improvement and profitability. Defining the important tasks crucial to a business is often ignored. This mistake becomes obvious when you hire and train new people, only to start losing customers due to poor service or missed deadlines. Don’t expect your employees to have your clarity of vision. They will need to know exactly how to do their work if they are to do that work successfully. Take it one at a time, but make written procedures a priority in your business. The results will surprise you

6. Hiring on the Fly
Are you quick to hire and slow to fire? That phrase describes many small businesses. A strong team of people to support your operations is certainly important, but only if they are the right people. There are proven hiring systems and tools, including a job description and clear goals, to help small businesses attract and retain quality people. Always hire with a purpose, invest in training, commit to developing your team and be willing to let go of those who don’t fit.

Which of these mistakes are impacting your profit and growth? Make it a priority to fix them, one at a time if necessary. The sooner you do, the sooner your sales and profit will grow.

4 Reasons Why Small Businesses Fail

July 16th, 2012

It is no longer news that 99% of all new business ventures fail in the first ten years. Since the dream of every entrepreneur is to build a successful business, here are, tactfully highlighted, 4 major reasons why small businesses fail and how you can bulletproof your business against them. Join me as I expose these business killers:

1. Poor Attention to Generating Sales:
If a business cannot attract customers, then it will fail. Closing sales is the core mission of all for-profit businesses, and yet it is the most common reason for business failures. A company’s business plan must specify the sales process. Will customers be attracted by advertising and promotion alone, or will it require salespeople to obtain business? Is the nature of the business that it will need inside or outside salespeople, or both? Will the owner or partners be the salespeople? Will salespeople need to be hired, or will the sales function be contracted out to a marketing representative company? If this basic need is not addresses and implemented successfully, the business will not be successful and will most likely fail

2. Lack Of Managerial Skill:
When a small business owner lacks the managerial skills required to drive the business to greater heights, the business is bound to fail. An entrepreneur that wants to succeed must be able to effectively handle the employees, cash flow, production line and so on, or the business owner must be able to hire a good manager to run the business.

3. Wrong Business Decisions:
This is common to everyone irrespective of your field. There are many instances where, after carrying out critical analysis on a particular situation, the entrepreneur comes up with a decision considered favorable. But on implementing that decision it backfires, and at the end of the day it results in anything from unwanted tax audits, regulatory agency compliance issues, employee resistance, unexpected customer reactions or even lawsuits.

So whenever you decide on an action to be implemented on your business, consider asking friends, business partners and professionals for advice. It is going to save you the stress of cleaning up the mess resulting from wrong business decision taken.

4. Harsh Government Economic, Fiscal And Monetary Policy:
This is a problem for both large and small businesses. As an entrepreneur, you must be on guard to bulletproof your business against the ever-changing government fiscal and monetary policies.

Since you cannot influence or alter the government’s decisions, you must be prepared to swiftly adjust your small business to align with the government rules. This will help prevent it from being hit by the adverse effect of unfavorable government policies. Instances of such government policies and effects you must keep an eye on are tax reporting and compliance matters, double taxation, duties and levies, exchange rates, policies that effect inflation, and so on.