Arm Yourself with Knowledge

The internet has provided access to entrepreneurial experts from across the globe. Information on opening, expanding or harvesting your business is readily available. However, entrepreneurs need to be willing to take the time to access the information and learn from what is available.

This may seem like an easy task, yet many business owners do not take advantage of the information available to help their businesses survive, thrive and grow. Knowledge is a competitive advantage, and the business owner who learns about the market place, how to capture that market place and maintain market share will win.

Market research and competitive intelligence is an ongoing research task for any business. The information is critical in maintaining an edge in the market, especially in this time of more aggressive business and global competition. Market research is an ongoing task, because markets are changing very rapidly and the pace of business has increased dramatically in the past few years. The danger for many entrepreneurs comes from feeling overwhelmed and overloaded by the amount of information one can obtain.

To help the entrepreneur with their market research, there are a few key questions to ask. Before you start, ask what decision will be made and how the information will be used. When engaging in internet research, give yourself a time limit for searching the internet. There may be times where you waste more time than you gain by searching for answers on the internet.

Once you begin to engage in research, look at the source being viewed. Who wrote the article, what is their authority or affiliation? How accurate or relevant is the information, what is the intent of the information and how reliable is the information?

While engaging in market research, 50% of the information should be sought from people. Interview or call your competition’s suppliers, any associations for your industry, merchant associations, customers or local reporters. Get a feel for what is happening in your industry, what changes are taking place and what are some of the needs in the industry. Be persistent in contacting and talking with industry informants.

The next 50% of the research can be done on the internet or the library. Begin by using a variety of search engines for the same topic. Some search engines to try are www.google.com, www.yahoo.com, www.ask.com, www.search.msn.com, www.clusty.com and www.vivisimo.com. You can search blogs, local clubs, chambers of commerce, economic development organizations and more. Additionally, a lot of information can be found on GIS Maps. Fort Smith has an excellent GIS department, and they can be found at www.gis.fsark.com. Lastly, if you are in search of regulatory information, you can go to www.Thomas.loc.gov, www.usa.gov or http://asbdc.ualr.edu/.

Other search options include: your competitor’s website, news sites, sites your competitors link to, blogs, patent applications, podcasts, Wikipedia or advanced search engine requests. While the amount of information is overwhelming, entrepreneurs need to equip themselves with information that will help the business win customers. In this information age, anyone can access the information they need for business. The challenge is being disciplined enough to seek out the information that is needed.

NO FREE GRANT FUNDS

Opening a business and being one’s own boss is as much a part of the American dream as owning a home. In fact, being self employed or an entrepreneur is gaining a great amount of attention in this country’s economy. Citizens of this country are blessed with the freedom to start a business and enter an endless number of markets.

However, opening and running a business is not as easy as many make it seem. If you have flipped channels in the middle of the night, a funny looking man with question marks on his clothes lure others into the idea that there are numerous funds available for people to start their own businesses or that you can earn thousands working from home. This gentleman along with other copy cats are selling you untruths in order to sell their own books or services.

Business service providers, like the Innovation and Entrepreneurship Center or the Small Business Development Centers, wish there were easier ways to finance a business like the infomercials suggest. However, the reality is there are no free grant funds for people to start or grow their businesses. There are a small number of technology grants available to companies willing to engage in research and development for departments of the Federal government. These grant funds are highly competitive and come with many strings attached to the funding.

Moving forward on a business, the entrepreneur needs to be prepared to address the financial needs for the business. He/she needs to be able to sustain their personal finances first before moving toward opening the business. Rarely is a business profitable as quickly as the entrepreneur may think. Planning to sustain personal finances is the first step in starting the business.

In the planning process of opening the business, the entrepreneur should prepare conservative financial statements. These financial statements should identify how much capital is needed to start the business. If the company requires more funds than the entrepreneur has, then he needs to seek outside financing to help open the doors. Usually, a business will seek out a business loan to help pay for the materials, inventory or equipment needed to operate the business.

The first place an entrepreneur should look for additional capital in starting their business is through what is commonly called “friends, family and fools (fff).” This form of capital is the easiest to find and obtain. After seeking support from friends or family, bank loans are then sought out for the business. If your business is entering a fast growth industry and your capital requirements are great, then venture or angel funding may be necessary.

Regardless of the type of capital source the business seeks, the entrepreneur needs to prepare a business plan, sound financial statements, and form a solid management team for the business. In addition to preparing the business for capital, the business owner must prepare their own financial worthiness. A good credit score or a cleaned-up credit report will be needed for the business.

Before jumping into a business idea, the first step towards understanding business capital comes with learning as much as possible about the options, opportunities and the requirements of money and one’s business. Utilizing resources like the Small Business Development Center or the Innovation and Entrepreneurship Center are good places to start.

The Business Plan

For many eager entrepreneurs, the business plan is a dreaded burden. Many see it as an obstacle to starting their business, yet others simply don’t see a reason to take the time to create such a document. Unfortunately, many entrepreneurs simply skip the process of writing a business plan to jump right into their business. While some businesses may survive with this renegade spirit, many more start struggling to survive. The business plan may seem complex to newcomers, however it is an exercise to assist the entrepreneur prepare and plan for the business. Essentially, it is a road map with the route mapped out for the business. It is an opportunity to see if the business is worth the time and investment before the business opens.

While time to do the necessary research, writing and financial planning are essential, the effort is well spent seeing if the idea is feasible. The business plan is intended to help start the process of researching, planning and preparing for operations. However, businesses are ever changing, and entrepreneurs need to incorporate ongoing research and planning into their business in an effort to adapt to changing markets.

The business plan acts as the first sales and marketing piece produced for a business, because the document is needed to communicate to potential investors. This one document allows investors to learn about the business, the market the business wishes to enter, how much capital is needed to start the business and what goals the business intends to reach. The business plan allows an investor to understand the risks involved with the business and what steps are being taken to minimize those risks. Most importantly, investors are looking for indicators for a good return on their investment (ROI) as well as how long it may take for the business to deliver that ROI.

While the business owner should give careful consideration to the whole business plan, the two critical sections others will review first are the executive summary and the pro formas (financial statements). The executive summary should be the last piece written in the business plan. This section summarizes the whole business plan into a few paragraphs. The executive summary should express what the business is, what the product or service is, describe the company vision, summarize the financials and capital needs as well as summarize the goals and management team.

In addition to the executive summary, the pro forma statements are vital to creating a sound business plan. This section allows readers to quickly find how much capital the company is seeking as well as learn about how long it will take the company to earn profits.

The pro forma section includes several documents that should paint a picture of what is needed to keep the company alive. To start, new business owners often need to prepare personal financial statements to include in this section, depending on the type of business, how much capital he/she is seeking and the requirements of the capital source. (Note: Entrepreneurs who are unable to show a sound personal financial background may need to take steps to clean up their finances first before seeking business capital.)

Next, all business plans should engage in research to get a realistic grasp of what sort of startup expenses the business will have. Talking to other business owners in similar industries, researching product expenses and other research should yield realistic figures to use in your projections. With startup expenses in hand, the business plan will need to include a 12-month profit and loss projection (or estimate). This needs to include how much in sales this new company needs to make. After the 12-month projection is complete, the business owner will need to create a profit and loss projection for a 4-5 year period.

After the profit and loss statements, an estimated cash flow statement is the next step. This will allow the business owner to plan for how much money will be needed before the doors open as well as see how much cash is needed to keep the doors open. In conjunction to the cash flow statement is the balance sheet. A balance sheet shows what items of value are owned by the company and how much the company owes in debts. The balance sheet is a key document to show the health of the company at any given moment, and it gives investors a quick glimpse into the “bottom line.”

Some entrepreneurs may include a break-even analysis in their business plans. This tool allows business owners to predict sales volume at their chosen price to recover the total costs in running the business. This calculation allows business owners see how much sales they need in order to run the business with a profit.

The marketing component to the business plan is a key aspect for the business owner to understand. Knowing who the customer is, what the spending habits of the customer are, who are the direct and indirect competitors for those customer dollars and where to find the customers are critical components to help the business plan its entry into the market. The marketing plan is far more comprehensive than simply creating an advertising plan. This section is where your research data will help you make even the smallest decision about your business. Your decisions need to be entirely about your customers, since they are the reason why you have a business.

Business planning can seem overwhelming to the new entrepreneur. However, the time and effort spent on researching and carefully planning a business will allow the business owner to start on a solid foundation. We all know what happened to the three little pigs, starting a business requires the same time and attention. Additional resources to help you with your business plan include the Small Business Development Center (http://asbdc.ualr.edu/), SCORE (www.score.org) or the IEC (www.iecfs.org).