Archive for the ‘Start a Business’ category

Small Business Guide – Personal Evaluation Part I

July 6, 2010

You see things; and say, “Why?” But I dream things that never were; and I say “Why not?” – George Bernard Shaw

Although there is no exact profile for a successful business-owner, the following evaluation will assist you in determining if you have the inherent aptitude and skill sets to be a successful entrepreneur.

WHO AM I? (In terms of self-employment)

In each question, check the answer that says what you feel comes closest to describing you. Be honest! This is for YOU!

1.    Am I a self-starter?
* I like to do things on my own. Nobody has to tell me to get going.
* Once someone gets me started, I can keep things going OK.
* Usually, people have to keep after me to get me moving.

2.    How do I feel about other people?
* I like other people. I can get along with just about anyone.
* I have a group of friends, and no one else matters.
* Most people bug me.

3.    How do I act as a leader?
* Usually I can get others to go along with me on things.
* I can give people orders.
* I like for others to get things going. Then I decide whether I want to join in.

4.    Do I take responsibility well?
* I like to take charge of things and see them through to the end.
* I’ll take over if necessary, but I’d rather someone else did.
* I usually try to get someone else to do the work.

5.    How good of a worker am I?
* I can keep going as long as I want. I don’t mind working hard.
* I work hard for a while, but when I’ve had enough, that’s it.
* I don’t think hard work necessarily gets you anywhere.

6.    Can people trust what I say?
* I don’t say things I don’t mean.
* I try to be on the level most of the time. Sometimes, though, I say whatever is easiest.
* If the other person doesn’t know the difference, why sweat it?

7.    Can I stick with it?
* If I make up my mind to do something, nothing stops me.
* I usually finish what I start – if it doesn’t gel fouled up.
* If it doesn’t go right, why beat your head against a wall? Give up.

8.    How do I usually handle an emergency?
* I step in and take charge.
* I help where l can.
* I panic and let someone else take over.

9.    How do I feel about asking for payment for my product?
* I feel comfortable, because I know my product is worth.
* I am uncomfortable asking, but I do it.
* I prefer to wait for the person to offer to pay.

10.   How good of an organizer am I with a new task?
* I prefer to plan it from beginning to end.
* I look at the general issues and start.
* I go for it and plan as I go.

11.   How do I react to new tasks?
* I love to brainstorm, create and implement something new.
* Once the brainstorming and creative part is done, I’m bored and have trouble following through.
* I like to implement something that has already been designed.

12.   How do I usually make decisions?
* I identify alternatives and research each one.
* I research the decision, but have difficulty making up my mind.
* I avoid making decisions whenever possible.

13.   Can I make good decisions?
* I can makeup my own quickly if I have the right information. It usually turns out OK.
* I can if I have plenty of time. If I have to decide fast, I later doubt my decision.
* I usually make spur-of-the-moment decisions and follow my gut level feeling at the moment.

14.   How do feel about competition?
* I work best when there is competition. It keeps me motivated.
* I prefer team efforts and want everyone to come out ahead.
* I don’t like competitive situations. They make me nervous.

15.   Can I influence other people?
* When I am right I can usually convince others.
* Sometimes I can influence others.
* Be reasonable; you can’t change someone else’s mind.

16.   What is my attitude toward success?
* If I work hard and plan well, I can succeed
* My success depends largely on others.
* Success is a matter of luck.

17.   What do I usually do when given a new task?
* I usually dig right in and get started.
* I do a little at a time.
* I procrastinate until the very last minute.

18.   What do I do when faced with failure?
* I usually try to come up with a new approach or angle.
* It shows me that I should stick to what works.
* I realize that I never should have tried in the first place and abandon the idea.

19.   How do I feel about failure?
* It’s a good learning experience.
* I avoid dealing with it at all costs.
* I take it as a personal rejection and retreat.

20.   How do I feel about meeting new people?
* I like being around new acquaintances and usually can get along well with people I’ve just met.
* I am uncomfortable if I am not with my friends.
* I hate meeting new people; usually I just don’t say anything when in a new group.

21.   How do I react to pressure?
* I work well under pressure; it keeps me moving.
* I don’t like pressure, but deal with it if I have to.
* I crumble under pressure.

22.   How good is my health?
* Great
* I have the energy to do most of the things I want to do.
* I tend to run out of juice.

Now count the checks you mode:
* How many are beside the first answer to the question?
* How many are beside the second answer?
* How many are beside the third?

We find people who check the first answers most frequently have many of the personality traits useful to entrepreneurs. If you have checked several third choices, you should consider developing new skills, or finding a business partner whose skills complement yours. You may even want to consider whether being in business for yourself is the right choice for you.

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Starting a Business – Entrepreneurship 101 – Winning Strategy

April 2, 2010

 

Lessons in Entrepreneurship

When we pursue our dreams, we feel empowered. This power, in turn, connects us to others who share the same dreams. It gives us the strength to overcome great challenges. It inspires us to spread the joy of our dreams to other people. Ultimately, the power borne of a dream is a creative force, capable of producing revolutionary ideas. – Honda

  1. Managing Growth for SMBs
  2. Starting a business: Steps to Financial Freedom & Self Employment
  3. Are you Startup, Small Business, an Entrepreneur – Ready for Success?
  4. Integrated Approach for SMB, Small Business, Startups, Entrepreneurs
  5. Small Business Funding, How to fund a startup, Due Diligence (I)
  6. Small Business Funding, How to fund a startup, Due Diligence (II)
  7. Small Business Funding, How to fund a startup, Due Diligence (III)
  8. Writing a Business Plan
  9. What is an Executive Summary?
  10. Executive Plan Synopsis
  11. The Shark Tank – Funding a Startup –  Angel Investors
  12. The Shark Tank – Funding Strategy – VC; Venture Capital
  13. The Shark Tank – Other Sources of Raising Capital

The Shark Tank – Funding a Startup – Other Sources of Raising Capital

April 1, 2010

Let us say for argument sake that you have already exhausted the Angel & VC route other options to raise capital are available.  

Debt Instruments

If the business opportunity you are pursuing is the purchase/ expansion of an existing business; you may want to consider various debt instruments. Advantages include retaining equity, fixed interest payments and flexible payment/payback terms. Convertible debt is useful for companies that have a high degree of risk but do not want to give up a large portion of equity. The conversion feature of convertible debt is attractive to investors or banks that typically make loans but require equity for their added risk.

 

Joint Ventures

These have become increasingly popular for medical/biotechnology companies in the past few years, but any company can benefit from having a strong corporate partner. Joint venture agreements must be carefully structured to avoid relinquishing major shares of royalties or marketing rights to the partner. Expectations for both sides should be carefully documented.

Corporate Venture Capital

Many public companies have either a venture fund or business development group for strategic alliances and acquisitions, or both. Generally the venture arm of a public company will only invest “behind” a venture capitalist, leaving the due diligence and active management involvement to the venture capital investor. As noted earlier, your networks of advisors are an important referral source to venture financing. Contacts you make with corporate venture professionals are another means to identify the “right” venture firms to approach and could lead to direct referrals. While there are no comprehensive guides to locate corporate investors, most participate actively in venture conferences and local industry organizations and associations.

Happy Hunting.

Shark Tank – How to fund a Startup; VC – Venture Capital

March 21, 2010

How to Raise Capital for a Startup?  Aquiring Funding.

Raising capital is no small task; in fact, it can be likened to the process of climbing a ladder. At each rung, you achieve new goals for your company and the height of your ascent represents the value of the business. Initial financing are often the first or second rungs.

What happens when the stakes go up and you require additional capital?  That is the time to contact a Venture Capitalist. You’ve been rehearsing your pitch; startup story, PowerPoint presentation; you’re tired, but ready for anything. Then, the venture capitalist walks into the room. What then? Relax! The hard part is over; you have already arranged the meeting.  In other words, someone they know and trust referred you (often the best approach) or your idea has captured their attention on its own merit from an early communication. Now, you’ve got to fight to get to the top of their investment prospect lists.  Deliver a great startup story.  What happens once the story is over? It is imperative that the lines of communication stay open so that you can get to the top of that list. Keep the following points in mind.

Understand your business fully. This is obviously first and foremost. Not only should you be completely comfortable with your idea, you must know it inside and out, in terms of business. What is your value proposition to the customer? What is your target market and its expected growth? Be comfortable with your financial model–show that you’ve done your homework, because VCs will probe deeply. And, under no circumstances will you try to fake out an investor if he or she asks a tough question. If you become stumped, openly acknowledge that you need to look into it further. Whether or not they can sniff fakers out, they still probably prefer those who honestly recognize any gaps in their knowledge, and who will seek to rectify it, to those who act like they know it all, already.

Really try to distinguish yourself. How have your experiences, business-related or not, put you on track for success? Show your passion for it. Show them your commitment to the idea, your investments, financial and personal, as well as the abandonment of any alternatives to the starting of the business. Make yourself an example as to why this is such a compelling opportunity and why its pursuit is impossible to pass by.

Make a connection with the Venture Capitalists. If there are any links to the prospective investor, don’t be shy about discussing them. The easiest thing to do is to look at their past investments. Explore their relevance to your idea. Demonstrate any correlations with their portfolio companies’ fundamentals.

Remain prudently open with them. If your speech is unnecessarily circumspect, a negative atmosphere will permeate an otherwise fine meeting. That does not mean that you should forego verification of your trust, however. Don’t be afraid to ask for a commitment to confidentiality (again, verbal is sufficient). It won’t hurt to save any sensitive details until you and the investor have developed a comfortable rapport based on mutual interest. Remember: reveal enough to get a second meeting!

Always try to work on banishing skepticism. Openly and honestly discuss the risks involved in the business. Discuss the upside potential as well as the risks involved. Clearly identify the proverbial land mines and the competition.  Nothing says “credibility” like a comprehensive assessment of the competition.

Speaking of competition, a little competition between investors couldn’t hurt. Granted, orchestrating all this is like an artistic balancing act. One good practice is to approach a few potential investors at once. You never know–comparisons between firms can prove quite illuminating. In addition,  seeing as how valuation is typically very subjective, some competition should help the process along.

As with the initial round of Angels, you want to seek a true partnership. In essence, you are really buying more than selling. Will this VC make a good partner? How does he/she listen? Does he/she have keen instincts? Is he/she respectful, helpful, and positive? The realization of your idea is a daunting challenge, so you want to surround yourself with strong supports. Follow your instincts on this one. You two will need good chemistry for the long haul.

Finally, don’t think that it is uncouth to check investor’s credentials after meeting with them. There’s nothing like getting it straight from the horse’s mouth–go to entrepreneurs who have worked with this investor and ask tough questions. Was the investor very constructive and easy to get a hold of during tough times? How did their involvement directly affect the success or failure of the company? Remember that a good venture partner will make a difference, and startup equity is very dear, so make sure you’ll be getting your money’s worth.

 

Shark Tank – Funding a Startup? – Angel Investors

March 14, 2010

Raising capital is no small task; in fact, it can be likened to the process of climbing a ladder. At each rung, you achieve new goals for your company and the height of your ascent represents the value of the business. Initial financing are often the first or second rungs. Now, before you try to get all the media’s attention by charging into a VC’s office you should first consider Angel Investment.

Angels are wealthy individuals who will attempt to help finance your business with personal checks for anywhere from $20,000 to $1 million. Choose your Angel investor very carefully. The initial funding of a few hundred thousand dollars may allow you to quit your day job, and enable you to focus more time on the setting up of the business. Also, this construction capital should be adequate while not diluting the company’s ownership significantly.

Don’t be shy about Angels! Start looking early, and tell everyone about what you’re doing. Don’t worry about giving away too much of your idea nearly as much as not getting early funding soon enough. A good start is to talk to friends, family, lawyers, PR firms, accountants, and marketing consultants–anyone who’s had dealings with Internet Startups. It is very important to keep in mind, however, that we’re looking for more than just money here. We want an honest commitment from Angels: we want them to make the venture a success.  They should assist in developing contacts, recommending potential employees, identifying a good public relations firm, negotiating licenses as well as supplying however much capital is needed. Ask them to take an active role in the company, and tell them outright that you will expect them to make the startup a success. Even offer a position such as formal advisor or director of the company.

When beginning your pitch, keep your purposes in mind: you want to entice them to call you for a more extensive conversation. But keep you plans to yourself at first. Your initial goal is not to get them to invest on the first communication. You may want to put together an abridged business plan: essentially, a document version of the startup story we discussed in the previous Blogged entry. Keep your business plan concise; remember there is no substitute for fundamentals.

 The size of the investment should depend how high you are on the ladder. Are you in grad school and armed only with your idea? Or are you actually in business and have a product and revenue? Don’t worry too much about the exact numbers, as Angels are probably more aware of the ladder than most entrepreneurs. And they realize their place in the grand scheme of things: they give you a little now, so that eventually, you will ask for millions later from a VC firm. In terms of equity, it is not unreasonable to give 20 percent of your company to a first round Angel.  Just remember that initial investors will be heavily diluted in following rounds of funding. By the time an IPO rolls around, they may only account for a few percentage points.

Special investor rights are a common form of deal that angels may want to try to cut. Here’s where hiring that great lawyer will come in quite handy. But keep in mind; you’re negotiating in the spirit of partnership. After all, your very first employees are somewhat like founders. Similarly, initial investors deserve a special place. Don’t try to bully an Angel the way you would approach a VC, but also, don’t waste your time with someone who acts like his $50,000 check is a term sheet. You want to conduct yourself in a professional manner, reasonable and attentive. Find someone with whom you relate well, because once the dotted line is signed, the knot is tied.

Keep the faith, just remember, if it was that easy everybody would be doing it.

Writing a Biz Plan – Synopsis

February 15, 2010

Executive Summary

  • Business idea, mission statement.
  • Business opportunity being pursued.

 Customer Need or Market Requirements

  • Define problem statement.

 Value Proposition

  • What is your solution to the problem, using existing or new technology, product development etc?  Describe the solution that resolves the customer need.

 Product

  • Describe product & technology; provide terminology and key terms for reader.

 Ownership & Management

  • Identify Key Personnel
  • Gather resumes
  • Discuss the incentives and benefits to be offered to potential employees.
  • Develop corporate organization chart.
  • Roles and responsibilities.
  • Finalize staffing needs by: skill level, job description and utilization.

 Key Initiatives and Objectives

  • Define business strategy.
  • Milestones to be achieved  – plot revenue, operating expenses, EBIT and headcount at each milestone.
  • Proposed funding  – sources and uses.

 Competitive Advantage

  • Research the direct and indirect competition.
  • Identify the strengths and weaknesses of the business model.
  • Explain why your business will have a competitive edge or advantage over the competition.

 Marketing Strategy

  • How do you plan to promote the product?
  • Understand the client’s requirements.
  • Create a sales forecast.
  • List all alliances, advertising mediums and distribution channels to bring product to market.

 Operations

  • Product development — research, design and manufacture.
  • Infrastructure set up — technology, administration, facilities etc.
  • Business operations set up.

 Business Model or Economic Model

Five-year summary of:

  • The Balance Sheet
  • Sources and uses of funds
  • Income Statement
  • Staffing I headcount projections
  • Financial assumptions

The Devil is in the Details: Drill Down into Executive Summary

January 24, 2010

Body of the plan:

Business Description or Company Overview

You should describe your motivation for starting the business as well as the nature of the business. Emphasize the uniqueness of your product or service offering and briefly describe why you believe this concept will be successful.  Demonstrate how a real, profitable business can be built using this plan.

Customer Need/ Problem Statement

Next, the plan must show how your company and product fill a concrete, unmet need in the marketplace. This can be accomplished by illustrating all the characteristics that set your company, as well as the service or commodity you offer, apart from competition. With this, provide a full investigation of end-users and key potential product applications (do your homework!). Describe any patents, copyrights, or trade secrets, as well as barriers to entry – show how your advantages are defensible. Much like the startup story, you should list all the major accomplishments you have achieved to date and any remaining milestones. This shows that you are not only clever, but also diligent and committed. Definitely mention alpha or beta tests (describe how future ones will be conducted, as well as previous results) and ideas or plans for offering upgrades (investors tend to shy away from potentially stagnant single product offerings).

Market Analysis

This is often what separates inventors from entrepreneurs. Investors who fail to understand the market and/or assemble the appropriate management team needed to make good on the opportunity—no matter how good that opportunity is—can hinder successful product commercialization. Take extreme care with this section. As this section will be especially scrutinized, be as specific as possible, and focus on rigorous, verifiable data. Include a thorough analysis of the industry and your potential customers. This should incorporate growth rates, market size, recent technical advances, relevant governmental regulations, and future trends. Research your customer base: give the number of potential customers, purchasing rate per customer, and decision-maker profiles. All this data should lead inevitably to your sales forecast and strategies for pricing, sales, and distribution. End by mentioning the percentage of the target market you plan to capture.

Management & Ownership

Keep in mind; you want your audience to invest in you and your team, not just your idea and your company plan. Investors will look closely at your management team’s experience and talents in areas such as technology development, marketing, sales, manufacturing, and finance. You must therefore introduce your team and describe in detail what they bring to the company in a management and ownership section (members’ detailed résumés should be appended to the plan). The typical startup management team consists of no more that a few founders with varied backgrounds and an idea. Again, you should point out any gaps in the team and discuss how you will fill them. If you avoid this step, you risk making crafty investors even more apprehensive. Also, many VCs have access to networks of proven management talent that can fill any crucial positions. You should list your board of directors, advisors, or any other key outside industry professionals or technology experts who lend your company guidance or credibility (here, you can potentially take further advantage of your investor’s networks).

Competition

We’re getting there. The next step is a discussion of competition. Even if you manage to be the first-to-market company, you still have to explain how the market’s need was previously met and why your offering is necessary to compete against this pre-existing solution. As for concrete adversaries, investors will, of course, be very interested in how you intend to succeed. So, you must mention all forms of competition, listing product-relative strengths and weaknesses. You must present projections of what you anticipate the competition will do in response to your offering. Also, if possible, include any direct comparisons, such as price, quality, warranties, product updates, features, or distribution strategies (don’t forget to document your sources, too).

Marketing Plan or Market Strategy

Begin to get into the concrete details of what you have in store with your market plan. This is needed primarily to show that your target market can be developed and penetrated (not just how). Your projections will drive the rest of the plan by estimating rates of operations and required financing growth. First, we deal with pricing. The intended strategy behind service/commodity pricing is to provide the investor with an idea of how to evaluate your overall strategy. So, explain your decisions about image, competition, gross margins, and discount structure for each of your distribution channels or means of promotion; and, again, be sure to include consideration of future development.

Next, we deal with the distribution channels. These should be very clearly defined and must identify either how the product will reach the end user (in the case of commodities), or how the end user can access the service. For commodities, direct sales (including mail order, direct contact salespeople, and telemarketing), original equipment manufacturers (OEM) in the case of integrating the product into other manufacturers’ products or distributors /wholesalers /retailers can be used. The strategic and financial advantages or disadvantages of each of these methods and, potentially, their compatibility must be explored thoroughly in the plan. Include a projected schedule of prices, with the appropriate discounts and commissions as part of sales estimates; remember these estimates must provide support for your decisions.

Lastly, we must deal with promotion. This section should include product sheets, potential advertising plans, Internet strategy, tradeshow schedules, and any other possible promotional venues. You have to convince the audience that you have the expertise to get your product to market. A rigorous promotional strategy will set you apart from the competition, and you should not be afraid of explaining the thought processes behind your decisions.

Business Economic Model

Finally, we come to the operations section of the plan. In this section you should describe the location and size of your facilities. As always, explain your decisions—include factors such as availability of labor, accessibility of materials, proximity to distribution channels, and tax considerations. Discuss your equipment and facilities. If you anticipate increases in production demand, include your plans for financing and expansion. Will your operations facility provide the necessary support for, say, international distribution? Also, address any outsourcing you plan to do in order to eliminate the need for expansion. Remember, your audience will be scrutinizing your plan for any inconsistencies. So, include budgets and timetables for product development. You will need to keep your plans as flexible as they are efficient. Address any and all of the big questions like how your facility plans allow for expansion in accordance with your sales growth projections, how you can supply necessary materials, and whether there is an educated workforce available. And whatever you do, make sure everything here is in accordance with your market strategy! Most investors would like to see detailed financial statements with five-year projections. Your business must show a steady growth and positive trends. It may not be a bad idea to hire a professional accountant to build the business financial analysis for you which basically includes the income statement, balance sheet, cash flow estimates, graphs and charts that visually depict the companies growth as well as a list of financial assumptions that you have made to arrive at the economic model. Investors can identify the inconsistencies in your financial projections and it also enables them to notice the amount of research you have conducted.

Things to remember

Keep it brief! Try to keep the executive summary fewer than three pages and the body of the plan under ten pages. Include all the key business and financing issues and decisions, while saving all the thick financial information for internal plans or later meetings. Mention early what type of business the company is and what your objectives are (though this may seem obvious, many entrepreneurs assume too much and fail to mention these things until far into the plan). Also, state concisely the strategy and tactics you intend to employ in order to reach your goals. With this, cite how much money the company will need over time, and what the funds will be used for. Provide a clear explanation of investors’ exit strategy. Avoid overly technical jargon in descriptions of product, processes, operations, etc.   Be realistic in your estimates of the market, your company, and other potentials; use concrete and specific terms, numbers, and details, and cite the sources of your information. Don’t be afraid of discussing risks – avoiding potential gaps can damage your credibility. Your internal budgets should be clearly summarized and properly structured for the benefit of outside party audiences. Lastly, be prepared with extra copies and enclose your documents in simple, but stylish covers.