Money Coach : business startup

A Business Plan

moneycoach — Sun, 30 May 2010 11:38:00 GMT

A business plan can be one of the most effective tools that you have as a small business owner

A business plan has three main purposes – communication, management and planning.

As a communication tool, an effective and complete plan can be used to attract investment capital, obtain a loan and pitch the business to potential employees or business partners. Many business owners share their business plans with their employees to give them a broader understanding of where the business is going. As a management tool, your business plan can help you monitor and evaluate your progress. By using your business plan to establish and evaluate goals, you can easily check your business' progress and compare projections to actual accomplishments. As a planning tool, a well-written business plan can help identify obstacles so that you can avoid them or establish alternative plans when you face a setback.

The development of a comprehensive business plan requires a realistic look at every phase of your business and allows you to identify potential problems before they occur and and help decide on alternatives

Although there is no single formula for developing a business plan, your plan can be sub-divided into eight distinct parts:

The Executive Summary: The purpose of the executive summary is to capture the interest of lenders, stakeholders and potential partners. This section summarize the information contained within the business plan and be no longer than 2 – 3 pages. The executive summary is usually written last, after the rest of the plan is completed.

Business Description: This section provides a detailed overview of the company, giving a clear “Mission Statement,” the history behind the idea or current business concept, a description of the company's current legal form (sole proprietorship, corporation, LLC, etc.) and a description of the product or service offered.

Market Analysis: No business plan is complete without an analysis of the environment that the business operates in – its target customers and competition. The main objective of this section of your plan is to convince your reader that an opportunity exists. You can do this by addressing the following areas:

Description of the industry
Targeted markets
Marketing research
Competition
Barriers to entry

The Management Team: You should provide an overview of the background and strengths of yourself and your team. The strength of the management team can play a key role in an investor's or lender's decision to fund a venture.

Operations: Provide an overview of your strategy for implementing the plan. You need to demonstrate that you have a complete understanding of how your business plan will be implemented. This section should also focus on any relevant costs associated with implementing the business plan.

Critical Risks: You need to identity and address any potential problems that could have a significant adverse affect on your operations. By disclosing such possibilities, you are letting everyone know that there are risks associated with the business up front. Make sure that the following are covered:

External Risks
Internal Risks
Insurance Provisions
Contingency Plan

Financial Projections: The purpose of the financial section of your business plan is to translate your idea into a plausible set of financial projections which address the purchase of merchandise and equipment, the efficient allocation of financial and other resources, return on investment and cash management. The financial section should include actual performance data for 3 to 5 years if available. If the company is a start-up, then this section will deal only with financial projections. For both existing and new businesses, be sure to include:

Financial Performance (historical data)
First year financial projections (monthly and quarterly)
Three to Five year forecast
Analysis of “break-even” point

Appendix: The appendix is where you should provide information referenced in other sections, as well as any additional supporting documents, such as copies of patents, trademarks or copyrights that have been completed, reviews by independent firms, publications, or outside agencies, reference letters, marketing questionnaires, agreements signed with other firms, tenants or suppliers, resumes of key management personnel and any advisors or corporate directors and promotional brochures or advertisements that describe your product or service.

Writing a business plan can be a HUGE undertaking, but if you are applying for a loan or looking for investors or partners it is a necessary job. Even if you are just going to use the business plan to better understand your market and operations, it can be an invaluable tool.

Good luck!

The Profitability Hurdle

moneycoach — Mon, 15 Mar 2010 11:49:00 GMT

One measure of small business success: how long does it take to “break even” - and reach profitability?

The biggest hurdle that one faces when starting a small business is the profitability hurdle: the time it takes between opening for business and the day that the operation “breaks even.”

Typically, one spends (invests) money on inventory, marketing and advertising, rent and building utilities, and sometimes the salaries of employees before the business starts generating enough cash flow to cover those expenses. In a retail operation, one must cover the cost of purchasing, installing or constructing the walls, shelving, display area, etc., that make the store look the way it is supposed to look. Sometimes, reaching the “break even” point can take months or even years – depending on the type of business and the amount of investment it takes on a weekly basis to keep the operation going.

The “break-even” point is big milestone.

We have opened a retail store. As the accountant of our small business adventure, I had a number in mind – a goal – of exactly what sales target to aim for so that would know when the store reached that magic goal – self sufficiency. I hoped that it would not take more than a few months, as getting everything ready took most of the money that we had set aside from the tax refund.

The small town where the shop is located specializes in antique stores – it is a browser's paradise! When the weather is nice, there are often crowds of people wandering in and out of the unique and eclectic stores that line the main street of the town. Friendly people, warm country folk … and tourists: our target customers were potentially plentiful.

The week we opened was slow – every other business owner that we knew in town let us know that it was much slower than usual for the time of year – things would get better. Customers came into the store in a trickle – but we seemed to do OK. The weekend was sunny, but cold for this time of year – there were more customers than during the week, but not as many as I expected …

I ran the reports – and added up our sales for the first week …

We exceeded our break even number by $14.57 in the very first week!

The second week was even better … and still other business owners are telling us it is abnormally slow due to the weather …

Definitely a positive sign – the operation is paying its bills from the start. Next goal – reaching positive cash flow ...

Open for Business

moneycoach — Tue, 23 Feb 2010 09:36:00 GMT

Our small business start up adventure continues …

It really is quite amazing (everyone tells us so) just how much we've accomplished in the 21 days since we took the frightening step of signing a 6-month lease on a 1200-foot retail sales space and committed the majority of our tax refund money to starting a small business! Our plan was to set everything up and hope to be open for business by March 1st.

In the past three weeks, we have managed to purchase, paint and set up all of the seven-foot tall, double sided shelving units that we purchased used – giving us lots of space to display the various items we have for sale. We obtained the necessary business license and sales tax number. A glass display cabinet was found, which needed some repair to serve as our cash register counter and bought a clearance cash register (and figured out how to work it!), found places for the eight tables we have! We met our neighbors, small shop owners that sell everything from antiques to eclectic, vintage clothing, one who sells beads and the materials to make your own jewelry and many others. Oh yes – we took out an ad in the local merchants' newspaper as well – now it really seems official!

Several hundred cases of accumulated inventory was trucked in, sorted, priced (mostly) and placed on display and we opened for business four days ago (February 20)! Certainly not the GRAND opening we envisioned, with boxes cluttering the back of the store and about 40 boxes of inventory that remains stacked on tables in our back room, unopened. We don't yet have our window sign, the telephone service is waiting to be installed and we can't yet take credit card payments … but the store is OPEN FOR BUSINESS!

What a relief! We decided, after being told by several of our small business neighbors, that we should stick an open sign in the window whenever we were in the store, even as we are organizing and setting up, since the shop “browsers” (especially on the weekends) would then come in search of bargains! The store generated sales of $200 in two days on a weekend that we are told was unusually slow!

We still have a few things to accomplish … I have to finish the web page for the store, paint and hang a sign in the window, get the telephone and credit card services working … and clean, sort and organize a lot more!

But it feels like success …

We opened for business, and the customers came in ...

And bought things …

(I'll keep you posted on our small business adventure as it continues!)

Opening A Small Business: Its All In The details!

moneycoach — Wed, 10 Feb 2010 09:40:00 GMT

Our small business adventure continues this week ...

I have discovered that there are a huge number of things to accomplish when starting out in business. We are knocking them off, one at a time … and hoping we haven't forgotten anything. Projected (hopeful) opening day: March 1st.

This week we have inhaled paint fumes, strained muscles, swept and mopped and driven our minivan all over Leon and Gadsden counties in search of bargains while spending as little (of our limited budget) as possible. Its amazing to me just how easily the money gets spent when starting a new business! We have stretched our “tax refund financing plan” to the fullest extent possible without becoming completely broke, and we still haven't put a single item out on a shelf or table for sale yet!

Its been an exciting and stressful ten days since we signed our lease and officially became small business owners. We have, I believe, been judiciously economical in our purchases. We acquired thirteen seven-foot tall double-sided metal shelving units for $22.50 apiece, a lighted display cabinet for only $60 and purchased six folding plastic tables for about $40 each. The cash register came new from Office Depot for only $50 (we found a closeout model). Since we already owned four folding tables and two large shelving units, and since our landlord left the two (very, very large) antique display cabinets (approximately 8 feet wide, 5 feet tall and 3 feet deep) in the store (I suspect that it was more from avoidance of muscle strain on his part than as a gift to us!) we have a fully furnished shop for about $1,000 after buying the paint and lumber needed to clean up the space, set the shelving units in place and paint away the rust spots! Not bad, as I'd only budgeted $1,500 for the project.

That part is done … the fun part starts now.

Over the next five days the three or four hundred boxes of accumulated inventory will be trucked via rental truck (another $150) to the store to be opened, sorted and placed in some (hopefully) organized way on the shelves and tables. After that, we have to take care of the business license ($15), place an ad in the local paper (about $100) and spend whatever we have left over on signs, flyers and business cards.

Only 18 days left until opening day.

Starting A Small Business

moneycoach — Mon, 01 Feb 2010 04:45:00 GMT

I recently completed writing an article about creating a small business and the pros and cons of working for yourself. I was proud of the final product – it was, I believe a fairly complete exposition of the potential rewards and common pitfalls of striking out on one's own and joining the ranks of the self-employed. When the article was complete, it offered many helpful suggestions for, not only evaluating the choice between traditional employment and self-employment, but also listed suggestions and resources that can be used to help make your small business venture a success. I was pleased with the final product and, since my wife and I are opening a small store next month, looking forward to using some of my own advice!

That is, until yesterday.

Yesterday, my wife asked one simple question: “When should I start feeling scared?”

You see, yesterday we made an appointment with the fellow who will be the landlord of the business space we are leasing. Up until now, all of the planning and deciding has been mainly theoretical – when we keep the appointment we made, we will have actually spent money, signed a year lease and set a target for opening the store. Now I have a name for that niggling, uncomfortable feeling I have had for the past month.

Fear.

When writing that well written, carefully researched, impeccably crafted article – chock full of advice and suggested resources and internet links to help the novice entrepreneur succeed, I neglected one obvious aspect of the problem. Fear. When jumping into the unknown, it is not at all uncommon to feel nervous about the future. Starting your own business can be a great risk, but one with great rewards if successful. I know this – in my head, intellectually.

So, here are a few things I didn't even realize that I left out of that earlier article. Five steps you (and I) can take to combat the fear inherent in starting a new business venture:

Write down your goals. Remember why you are starting a business of your own. Business owners who write down their goals are far more likely to achieve them. Writing down your goals forces you to visualize them, and prepares you for the hard work ahead.
Make a list of the tasks you need to accomplish. Give yourself reasonable time to accomplish each, then, cross them out as you get each done. The tangible progress toward your ultimate goal will help build your confidence and self-belief.
Educate yourself. For every issue regarding entrepreneurship and business, check out books, read articles from magazines and on the Internet and interview others that have started their own business. Having answers is always better than questions.
Manage your stress. What do you do to relax? Make time for that weekly tennis game, chess match, day at the park with your kids, or whatever … don't allow the stress to take over and eliminate your ability to cope with it. Give yourself an end time each day – when its time to stop, stop. Once you leave, go home and be with your family and friends.
Planning, planning, planning. Make a budget and stick to it – but update it weekly so you take into account anything that changes as you work toward your startup date.

So – the real answer to her question: Now. Now is a good time to start feeling scared.

Now the plans are real. Actual money is being spent. Feeling scared is certainly appropriate. Fear however, is not an impediment to business success. Fear, properly managed can motivate, so long as it does not paralyze. Use that fear – use it to keep focused on your goals … and you will almost certainly meet them.