Business Launch Blueprint: Chapter 5

This entry is part 6 of 11 in the series Business Launch Blueprint

Chapter 5: Financing

Identify potential sources of funding if needed

It may be that you will be financing the startup yourself. If so, that will simplify your life immensely.

If you do not have funds required to finance your startup, other options include:

• Personal loan from family or friends

This is an area in which you will want to tread lightly, if at all. Many relationships have been soured by misunderstandings and broken promises when friends and relatives borrow money. If you decide to go this route, keep the transaction as businesslike as possible.

Don’t assume that anyone must loan you money just because they are your friend, father, brother, what have you. Remember, the money they possess, they have probably worked very hard to earn it. Whatever you do, don’t adopt the “entitlement” mentality. They don’t “owe” it to you.

Have an agreement written. It doesn’t have to be as detailed as a bank loan agreement, just state how much you are borrowing and what the terms are, including penalties for late payments.

• Investment by family member or friend

A similar option is for a family or friend to invest in your business. Give them a percentage of your company. I wouldn’t recommend this option for most people, again due to the potential for misunderstanding. There may be differences of opinion as to how much involvement the investor should have in your business. Be aware of those pitfalls before proceeding.

You will also want to ensure that the business you select will be amenable to this arrangement, especially if you will be allocating expenses, revenues, and profits on percentage other than the shares in the company.

• Bank loan

Of course, a bank loan is always an option too. If you have done a good job with your business plan, it will make the process much smoother.

For many small businesses, what we are talking about is an SBA loan. What is an SBA loan?

An SBA Loan is a business loan that is made by a local bank. The loan is guaranteed by the United States Small Business Administration. If the borrower doesn’t pay the loan, the SBA steps up and pays back the bank for a portion of the loss. The SBA guarantee encourages the bank to make loans that is would not make, if the guarantee were not in place. As you might expect, there’s a number of qualifications and hoops you must jump through.

The positive side of programs like this is it gets experienced professionals to look at your business or business plans, whether that makes you comfortable or not.

Whatever option you choose to finance the startup of your business, any funds of your own that you can include will induce confidence in your business. If others can see that you believe enough in yourself to risk your own money, they will be more likely to do so too.

There are numerous examples of people who have borrowed money for their business startup and had it backfire, whether borrowing from more traditional sources such as banks or from family or friends.

One positive example is Debbi Fields, the creator of Mrs. Fields’ cookies. When looking for startup funds for her business, she was discouraged from even trying by her family, and almost all of the bankers she approached wouldn’t touch her business. This was in the late 70’s. One banker did finally agree to loan her the money, at 21% interest.

That was clearly a gamble, and in her case, as we all know, it paid off. She is probably a multi-millionaire today due to her tenacity in doing whatever it took to get her business off the ground and running successfully. Today, she could have started an internet-based business, for very little money and used the funds from her business to finance her cookie business.

I want to be clear: I think the best scenario is not to have to borrow money at all. If you must borrow, negotiate the best terms you can, and do whatever you must to pay it back.

Business Launch Blueprint: Chapter 4

This entry is part 5 of 11 in the series Business Launch Blueprint

Chapter 4: Mission Statement/Planning

A. Mission Statement

Here’s a helpful definition of a mission statement:

A Mission Statement defines the organization’s purpose and primary objectives. Its prime function is internal – to define the key measure or measures of the organization’s success – and its prime audience is the leadership team and stockholders.

A mission statement is what you place on your wall, to remind you of what you are doing and why.

B. Business plan, including costs

A business plan is often required if you go to a bank for financing, and we’ll be talking about that in a later section, but in reality it should be completed for any business…whether financing is required or not. All of the research you conducted and the decisions you made will be reflected in your business plan. There are many guides available to help you with your business. One resource for U.S. residents is your local SCORE chapter, where you can get help with your business plan if necessary.

In essence you are putting to paper what your business is, or will be, what it will be doing, what are the challenges you will probably face, and what will be the result of your operations? It doesn’t have to be long, convoluted document.

A well written business plan can help you stay on track if you lose track of what you’re supposed to be doing. If you bring on employees for key positions or even joint venture partners, your business plan can help to communicate what your business is trying to achieve.

Business Launch Blueprint: Chapter 3

This entry is part 4 of 11 in the series Business Launch Blueprint

Chapter 3: Decision Time

A. Target Market

In the chapter, I suggested that you pick 3 or more markets to study in depth…now select one that seems to be the best bet for you and has the most viable market. You may need to narrow the market down. Especially if you are marketing online you may need to focus on a narrower niche. As an example, if you chose bicycling, you should look at mountain biking, or biking over 50, or bike racing and the reason is that the tighter the marketing niche, the more clearly you’ll be able to understand their needs and desires.

This is important because your goal should be to become a trusted advisor for your customers. The more directly you can speak to their real or perceived wants and needs, the more they will trust you. This task is much easier to accomplish if you narrow your niche.

B. Develop your USP

USP stands for “Unique Selling Proposition”.

What makes you unique, standing out from everyone else? The average person is hit with thousands of marketing messages every day, through the various media they encounter. But your prospect only cares about his or her wants and desires.

That is how it should be!

The best way to get and hold their attention is to communicate exactly how you will benefit your prospects, in terms that make sense and matter to them.

There’s a lot of helpful material available on the issue of crafting your USP. Jay Abraham teaches extensively on the subject, as does Mark Joyner in his book The Irresistible Offer.

C. Company name

When choosing your company name you should look at the following criteria:

1. Do you want your own name in the company? If you plan to sell the company later, probably not.

2. If you want your domain name to be the same as your company name, then you will have to check to see if the domain name is available. If so, then buy it before you register your company name with your state, or your domain name may be gone.

3. Try to convey some benefit to the prospective customer in your company name (try using your USP in the name). A good example of this is the company Guaranteed Resumes. From the name, I can tell they provide a resume service, and in some sense offer a guarantee for their service.

D. Domain Name

You should have at least one website, describing what your company does and giving customers and prospects a way to connect with you on the web. A domain name can be purchased for about $10, and once you have found the one you want, you should buy it even if you’re not ready to put up your website. Otherwise, someone else may buy it in the interim.

If you already have one or more domain names picked out and are comfortable with the process of selecting a domain name, great? If not, I’ve included some pointers to guide you.

These are some tips that I have picked up by experience. None of them is unique to me but I think it’s helpful to review them because if you’re just starting out, you might not be aware of all of them.

First, in almost all cases, you will want to choose the .com name. There are three reasons for this.
A. Some browsers will automatically put in the .com if the person types a domain without the extension.
B. Many people put in the .com unconsciously, so if you choose a different extension, you will be sending traffic to someone else’s site.
C. Some experts argue that the .com has a slight search engine benefit.

There are some exceptions, the main one being if you are doing business in another country and you primarily sell to people in that country, then you will likely want to choose that country’s extension. For example, in the United Kingdom, the extension is .co.uk. In Australia, it’s com.au, and so forth.

Now why are people sometimes tempted to use something other than the .com? Well, the reason is that many of the good .com names are taken, and so people look at the .net, .org, or other extension. While that might be acceptable for an informational type site or if you’re not a commercial enterprise, for your company’s main web site you should go with the .com.

The second factor in choosing a domain name is you want it to be easy to spell. In other words, you will want to avoid words which have multiple ways of spelling, or are easily confused with other words. Examples of these words would include the word, “to”. Is the word “t-o”, “t-o-o”, or “t-w-o”? If someone types in your domain name but gets even one character wrong, the traffic will not go to your site and may even end up at another person’s site. So you can see that selecting a name with easy to spell words is a must.

The third factor in choosing a domain name is you want it to be easy to say over the phone. If you’re talking with someone on the phone, or you have a radio ad, or a recorded interview and you mention your domain name, the person will have to write it down or remember it later if they are going to visit your site. Therefore, easy to spell words are important, as I just mentioned, but also consider things like having words that end in the same letter that the next word begins with, like SamsSports.com. This can be confusing for the end user, is there one “s” after “Sam” or two? Also avoid the use of dashes for the same reason. It’s difficult to convey to someone unless in print.

The fourth factor, and this is a little harder to get a handle on, is the domain should be memorable. If you can include some alliteration, anything to make is stand out, it will be to your advantage. A great example is Ralph Wilson’s site WilsonWeb.com.

And that is also why domain names that are too long can be a mistake; they are often simply too difficult to remember.

Now I’ve spent a lot of time on domain names, and it’s important because the domain name is your real estate on the internet. It’s where you are located. It’s been often stated for a brick and mortar business that the three most important factors are location, location, location, in other words the actual real estate where you are located. And on the internet it is no different.

There are many tools available to help you select a domain name, and one that I like is domaintools.com.

One other point about selecting names, and this refers both to domain names and business names, there are professional naming companies. There really is a science to it and while I wouldn’t recommend this step for everyone, it may be worth consideration if you’re willing to pay the fee.

E. Location (If Physical Business)

If you will a brick and mortar business, obviously it needs to be housed somewhere. Even if you will only be operating virtually–on the internet or via mail order– your office will need to be located somewhere.

Will it be in a spare bedroom, or dedicated office space in your home? I can tell you from experience that this is a challenge with young children in the home.

One way around that challenge is to discipline yourself to get up early–before the kids do– and get as much work done as you can before the kids get up.

F. Business Entity

Your choice of business entity is an important one, and has at least three aspects: legal, tax, and image.

The legal aspects mainly have to do with liability management. You want to have liability protection to counteract the effect of someone suing you unjustly. A properly structured business entity will protect your personal assets even if you business loses everything.

The tax aspects refer to reducing your taxes to their absolute minimum. I have in mind here Federal taxes, though you will also probably have state and local taxes you must pay.

I recommend doing some research on your own, and then going to an attorney and CPA or Enrolled Agent for advice on your choice of business entity.

An attorney will be more interested in the legal aspects of your choice, unless they also specialize in taxation, and many do. The CPA or Enrolled Agent will be more in tune with taxation issues. Some attorneys are also CPAs so bear that in mind as well.

I’m going to recommend that you get several recommendations before seeing professionals on this issue, and then try and get some sense of how much they are going to charge to give you the advice, and whether they are amenable to having you file the documents yourself if you choose.

Another strategy is to decide which tax preparer you are going to use, and ask for their recommendation on a local attorney to advise you on the entity issue.

The third aspect, image, may or may not be important to you. The prestige of a corporation is important in some markets, and in others it doesn’t matter.

Business Launch Blueprint: Chapter 2

This entry is part 3 of 11 in the series Business Launch Blueprint

Chapter 2: Market Research

Knowing Your Market

A. General Economic Conditions

Be aware of the economic cycle we are in right now. In periods of economic downturns, as we have experienced for a few years now, people’s spending habits are different than when the economy is booming. Unnecessary purchases are cut back. That doesn’t mean you should rule out any particular market based on the economy, but you may have to work a lot harder to get the same sales you could if things were brighter. Marketing and positioning come into play here.

B. Specific Market Research

By now you should have some idea of potential market that you want to explore, based on your work history and other interests.

If you are not sure, you want to be in a market where people spend money. Makes sense, doesn’t it? Don’t get caught up in the trap of trying to “create” new markets; i.e. manufacture demand where people are willing to spend money where they were not before.

One easy test is to check a local magazine rack to see if there are one or more magazines on the topic. OR if you want to start a brick and mortar business…just look around and see if there are other people doing what you want to do.

Come up with at least 3-4 potential markets and get an understanding of who the market is and their demographics. How often do they buy, how much do they spend… and ultimately, what motivates them to buy in this market? This knowledge will help you later when crafting your sales messages and may also be a guide to joint venture projects to join and create.

If you get stuck in the research phase, there are numerous places online to do market research… eBay, Amazon, other book sellers, Google trends, and many other places that are in most cases free.

Once you narrow down your choice to a handful of markets, consider actually participating in that market as a consumer, if you have not already. Buy a product and take note of the sales process, and learn all you can.

C. Competition

Competition is another form of market research. You can learn a great deal from what other people are doing to serve the same market.

If there are no competitors, then you may want to consider that your marketing idea is not the best because there are very few untapped markets today. In other words, there may not be enough business in that market.

It is not a hard and fast rule, but especially if you are starting out, you should work where you know people are buying.

When you find competitors in your niche, you should study your competitors carefully and look at how they communicate, and observe the sales process… if they do upsells and down sells, and related services, coaching and extended programs. What they do and how they do it will teach you about what works, if they are successful.

Ideally, you will find a market with lots of demand and you then identify some segment that is underserved. For example, there are thousands of people every day that are looking for dog training information, and many sellers of that information. What you could do is serve a segment of that market and be the best at doing so. You might focus on a certain breed of dog or a certain type of training.

Business Launch Blueprint: Chapter 1

This entry is part 2 of 11 in the series Business Launch Blueprint

Chapter 1: Self Assessment

Knowing Your Situation

A. Examine your life.

Take stock of where you are in life. Part of this has to do with your age, which I’ll be discussing later, but what I’m asking you to focus on now is your responsibilities, both current and future.

B. Take inventory of your commitments.

1. Financial Commitments.

Are you behind on your bills?

Are you responsible to support others (spouse, children, parents)?

It may be that you need to adjust your time-frame, don’t abandon your business plans but maybe you’ll need to continue working your job for a while, or find a job so you’ll have some income to pay your bills.

Can you find a job that would further your business plans, for example work as an assistant with someone already in your field?

2. Time Commitments.

A new business will consume your time, at least in the launch stages.

Are you prepared to go the distance? Do your current responsibilities have any “wiggle” room in them in terms of how much time you need to give them?

For all the talk about the four hour work week –espoused by Tim Ferris in his book by the same name– when I look around at most business owners, online and offline, most of them appear to be working 10+ hour days, five or six days a week.

And while what you do is ultimately up to you, also consider that most businesses take more time than their owners initially thought they would.

That means a couple of things to me: first, if I’m going to have a different experience than the norm, I’m going to put some concerted effort into doing some things differently structurally than most: checklists and so forth and constantly be analyzing my businesses processes, and second, it’s going to behoove me to choose my business wisely.

It doesn’t have to be something I’m in love with, but it has to be something I can learn to love because I’ll likely be spending a great deal of time in it.

If you have children, consider getting them to work with you in your business. Up until very recently, this was how most children learned to work: either from their parents or by apprenticing to a professional chosen by their parents. We have gotten away from this model but I think it has much to commend it.

The family business model is an excellent one and if the particular business is chosen wisely, the children will receive experience in a variety of tasks. And this may take some of the sting out the time required to run the business.

C. Future Plans.

Of course, even if you don’t have big responsibilities right now, what is on the horizon for the near future? Will you be getting married? Having a child? Factor those realities into your plans as well.

We can’t plan for every single contingency, but by thinking about the big potential conflicts ahead of time, you will be less likely to give up when the inevitable problems arise.

Knowing Yourself

A. Your Age.

Are you 18, 48, or 68?

Youth has the advantage of more time available. You have more time to make mistakes and take it slow if you want to. I think many young people should consider the apprenticeship model, as I alluded to earlier. You can literally have someone pay you to learn by working as an assistant to someone else.

And today, you can even do this from anywhere, as a Virtual Assistant or VA. And you can be making connections all along the way.

Another benefit is that you will essentially be in business for yourself, so you can take many of the tax advantages available to business owners.

Of course, anyone can work as a VA so I didn’t mean to single out younger people, but I do want to impress upon you that you age should factor into your plans. Exactly how will depend upon you and your outlook.

B. Your Past Experiences.

Here is where the not-so-young have an advantage. We have simply lived longer and have seen and experienced more. Presumably we are wiser because of it.

Do you have some unique set of experiences in your background that can be capitalized on in the marketplace?

People tend to discount their own background, experiences, and skills. Not everyone has seen and experienced what you have. And that makes you unique.

C. Your Education.

Frankly, formal education is becoming less and less important in today’s economy, though it should be considered. Take stock of your formal education, informal education such as conferences and seminars, and self education.

D. Your Work History (if any).

It almost goes without saying that you should examine your own work history when assessing a business to start. Many of us have gained some unique set of skills in one or more jobs, and we tend to discount them.

“Everyone knows how to do what I can do”, we think. Well, the reality is just the opposite. There are many people right now who want to know what you know, and will pay to get that information.

People pay for all kinds of information, including specialized information that will save them time or just satisfy some need they have to learn more.

People pay for information about baseball cards, for information on bird watching, for all types of self improvement information and, of course, for business-related information.

E. Your Natural Strengths and Weaknesses

This one is a little harder for most people to discover on their own. What you may want to consider is asking several close friends to list four or five things you are really good at doing. And prepare one of your own too. When you have several lists completed, compare them and see what keeps appearing on most of the lists.

You want to capitalize on your strengths, and find ways to overcome your weaknesses. By overcome them, I mean that you should do whatever you can to make sure they don’t make for your undoing. For example, if you’re not a detail person, get someone else to do your accounting.

F. Consider Taking a Formal Test.

There are many books and tests available that will walk you through the process of understanding yourself, and I have been through many of them myself.

If I were to pick just one, I would say to take the KOLBE test. The KOLBE test was recommended to me by my mentor and I’m so glad that he did.

You can find it at KOLBE.com. The last time I checked, it was $50. I took it as did my wife, and there is a youth version that my older children took as well.

Phew!

This chapter is a little longer than most of the lessons will be, but it is a lot of foundational material that you should get out of the way early.

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