The Business Startup Kit
©
By
Steven D. Strauss
Senior Small Business Columnist, USATODAY
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www.TheSelfEmployed.com
TABLE OF CONTENTS
i.
About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ii.
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PART I: BUSINESS STARTUP OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Small Business Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. Planning Your (Ad)Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3. Calculating Your Startup Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. The Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5. Buying Franchises and Other Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6. Choosing Great Names and Locations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.
Licenses, Permits, and Business Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8. Get Your Business Funded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. Assembling a Great Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
PART II: THE SELF-EMPLOYED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10. The Self-Employed Revolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11. The Home-Based Business Advantage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
12. Almost 100 Small Businesses You Can Start for Little or No Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
PART III: OPENING UP SHOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
13. Money Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
14. Creating a Great Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
15. Law, Taxes, and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
PART IV: BUSINESS ON A SHOESTRING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
16. Setting Up Shop On a Shoestring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
17 Growing Your Business Without Big Bucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
PART V: GROWING YOUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101
18. Advertising Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102
19. Marketing Made Easy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106
20. Caring for Customers and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110
PART VI: TECHNOLOGY, THE WEB, & SOCIAL MEDIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
21. Creating Your Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116
22. E-Commerce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121
23. E-Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .125
24. Social Media Demystified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
PART VII: SUCCESS STRATEGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138
25. Small Business Success Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139
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About the Author
Steve Strauss is often called “the country’s leading small business expert.” The senior USATODAY small business columnist and bestselling author, Steve’s latest physical book is the all-new, 3rd edition of The Small Business Bible.
A lawyer, author, and public speaker, Steve is also a frequent guest on TV and radio. He sits on the board of the World Entrepreneurship
Forum and regularly speaks across the globe about small business strategies and global trends in business. His company, The Strauss
Group, creates cutting-edge business content for everyone from Fortune 100 companies to small chambers of commerce.
If you would like Steve to speak to your group, help your business grow, or if you would like to sign up for his free newsletter, “Small
Business Success Secrets!” please visit his new website for the self-employed, TheSelfEmployed or his personal site, MrAllBiz.com.
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Introduction
Your own successful business can be many things. It can be your meal ticket; ensuring the economic health of you and your family. It
can be your source of creativity; giving you an outlet for all of those ideas you have. It can be your security; the comfort that comes from
knowing that there is no boss who can fire you. It can even be your pride and joy; that accomplishment that you point to with satisfaction,
knowing that you alone created it out of whole cloth.
But more than anything else, I think that owning your own business, that being an entrepreneur, is about freedom. Yes, the money that
comes from a successful business is great. And yes, being energized and enthused about your day is special. Being free is priceless. If
you do it right, you are free to start whatever sort of business you want. You are free to start it where you want, and free to work the hours
you choose. You are free to make as much money as you are capable of, without yearly limits or performance reviews.
But you will notice that all this only comes about if you do it right. When you choose to become an entrepreneur, there are no guarantees.
Whether you succeed or fail, in large part, is up to you. So, how do you do it right? Read this book. It is dedicated to helping you succeed.
And, unlike other ‘start-you-own-business’ books on the market, what sets this book apart is that it offers a model of business success,
a simple model that is easily duplicated.
It might help to think of your business as having two aspects. The first part is choosing and doing something that you eally want to do.
That is the “technical” aspect of the business. The florist makes bouquets, the photographer takes the pictures. Practically every business
is set up to allow the owner to make money doing some sort of work that he or she loves. That is covered in the first part of this book.
The second part of your business is everything else; the actual running of the business itself. That is found in the rest of this book. The
florist must create a website, network, and bring in new clients. The photographer must get referrals, post to social media, bill customers,
and generate leads. There are a myriad of things that go into running the actual business, aside from doing the “thing” that you love to
do. When I talk about a model of business success, it is all of these other things that I am referring to.
The vast majority of this book is dedicated to helping you with this second part of business. If the florist follows the model laid out in this
book, if the photographer follow the model, they will be free to spend more time doing what it is they want, rather than worrying about
the business. Do it right, and the business will take care of itself, and you in turn will be free.
The model is neither complicated nor complex. It is simple, easy, and fun. Learn it and free yourself up to grow, to make more money, and
do what it is you love, whether you will be self-employed or will hire a staff of 10. For, when you learn how to run your business properly,
you then get to a point where the world will be paying you to do what you love most. And that, as Alan Ginsberg once observed, is the
real trick of life.
Thanks for taking me along with you on your entrepreneurial adventure!
– Steve Strauss
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PART I
BUSINESS STARTUP OVERVIEW
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Chapter 1– Small Business Overview
1
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Congratulations! The decision to start your own business can be one of the best you will ever make in your life. Owning your own business
should be an exhilarating, inspiring, grand adventure; one full of new sights and experiences, delicious highs and occasional lows, tricky
paths and hopefully, big, open skies. But to ensure that your business journey will be a fruitful one, it is important to understand all that
becoming an entrepreneur entails.
Pros and cons
Many people start their business adventure dreaming of riches and freedom. And while both are certainly possible, the very first thing
to understand is that there are tradeoffs once you decide to start a business. Difficult bosses, annoying co-workers, peculiar policies,
demands upon your time, and limits on how much money you can make are traded for independence, creativity, opportunity and power.
But by the same token, you also swap a regular paycheck and benefits for no paycheck at all and no benefits. A life of security, comfort
and regularity is traded for one of uncertainty.
So there are definitely pros and cons to starting your own business. To be more precise, the benefits of starting a business are these:
Control: Even if you like your boss and your job, the possibility still remains that you can be laid off at any time. That boss you like so
much can be transferred. Your company can go bankrupt. So one advantage is that starting your own business puts you more in control
of your work and career.
And while that may be comforting, you should also realize that with that control will come increased responsibility and a new set of
demands. As the boss, the buck must stop with you. You are the one who has to meet payroll. You are the one who has to make sure
that clients and customers are happy. You are the one who must hire and fire the employees. It is not always easy, and you can bet that
there will certainly be times when you will look fondly back on your days as an employee, when you had far less responsibility and control.
Money: Many people choose to start their own business for the simple reason that they think that they are worth more than they are
making or that they want the chance to provide a better life for their family. There is usually a limit as to how much money you can make
when you are an employee. The good news is that when you are the employer, the entrepreneur, the boss, there are far less limits. And,
as with the control issue above, that can be a good and bad thing; you may make a fortune, or you may go bust. If that kind of uncertainty
appeals to you, that’s good, because that is what you will be getting if you start your own business.
Creativity and independence: If you feel stagnant in your current job, you won’t feel stagnant for long if you start a business. Running
your own business may require that you be the marketing wizard, salesman, bookkeeper, secretary, and president all rolled into one. It is
a hectic life.
But you may not mind that. It’s kind of like that old Calvin and Hobbes cartoon: In it, Calvin’s mother tells him to make his bed. Calvin
decides to build a robot to make the bed for him. When Hobbes asks, “Isn’t making the robot more work than making the bed?” Calvin
answers, “its only work if someone makes you do it!” The same holds true when the business is yours – it often doesn’t feel like work
because no one is making you do it but you.
Freedom: Working at your own business gives you the flexibility to decide when and where you will work. You decide your hours and
place of business. The freedom that comes with being your own boss, where no one can tell you what to do or how to do it, may be the
best thing about being an entrepreneur.
But there are also downsides to starting your own business:
Uncertainty: As indicated, the life of an entrepreneur is not necessarily an easy one. Is it fun? Yes. Is it challenging, exciting and
spontaneous? You bet. But it is not easy. The hardest part of being in business for yourself is that there is no steady source of income;
a paycheck does not come every two weeks.
Risk: What is an entrepreneur? It is someone who is willing to take a risk with money to make money. Not all entrepreneurial ventures
are successful. It is the willingness to take a smart, calculated risk that is the hallmark of a smart entrepreneur. But even calculated risks
are still a risk. You could make a million or you could go bankrupt.
Lack of structure: Many people like the structure of working for someone else. They know what is expected of them and how things
will look most days. That simply is not true when you work for yourself. It’s very unpredictable.
You need to consider carefully both the risks and rewards of entrepreneurship before deciding to jump in. It is easy to become infatuated
with the idea of owning your own business. But if you are going to do it right, if you are going to be successful, you need to take the
emotion out of the equation. You have to begin to think like a businessman, consider the risks, and make an informed, intelligent,
calculated decision.
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Do you have what it takes?
Considering the pros and cons of this venture is not enough. Making the decision to leave your job and start a business is monumental.
Even if starting a business seems like a great idea, despite the drawbacks, the question remains: How do you know if you are cut out
for being an entrepreneur? Do you have what it takes? In order to assist you, answer the following quiz. It will help you evaluate your
qualifications.
As you answer the questions, be sure to be perfectly honest. There is no need to get every question “right.” Entrepreneurs come in all
shapes, sizes, temperaments and skill levels. Thus this test is more informative than rigorous - that is, it should help you realize some of
the skills necessary to start your own business. It does you no good to pretend to answer the questions correctly.
1.
a)
b)
c)
Are you a self-starter?
Yes, I like to do things on my own.
If someone helps me get started, I will definitely follow through.
Most of the time, I would rather follow than lead.
2.
a)
b)
c)
How do you feel about taking risks?
I really like the feeling of being on the edge a bit.
Calculated risks are acceptable at times.
I like the tried and true.
3.
a)
b)
c)
Are you a leader?
I usually get people to go along when I initiate something.
I can give the orders if I have to.
I let someone else get things moving, then I take part if I feel like it.
4.
a)
b)
c)
Do you like to assume responsibility?
Yes, I enjoy taking charge of things and seeing them through.
I’ll take over if I have to, but would rather let someone else be responsible.
There’s always some eager beaver around wanting to show how smart he is. I say let him.
5.
a)
b)
c)
How organized are you?
I like to have a plan before I start.
Being well organized isn’t my strongest suit, but I can do it when necessary.
I just like to take things as they come.
6.
a)
b)
c)
How hard are you willing to work?
I can stay motivated as long as necessary.
I’ll work hard for a while, but when I’ve had enough, that’s it.
I think many other things are more important than work.
7.
a)
b)
c)
Are you decisive?
I can make up my mind in a hurry if I have to.
If I have to make up my mind quickly, I do, but I don’t like it.
I don’t like to be the one to decide things.
8.
a)
b)
c)
Can you live with uncertainty?
Yes.
If I have to, but I don’t like it.
No, I like knowing what to expect.
9.
a)
b)
c)
Can you stick with it?
If I make up my mind to do something, I don’t let anything get in the way.
Usually.
If things don’t go right, I may just quit.
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10. How good is your health?
a) I never run down!
b) I have enough energy for most of the things I want to do.
c) I run out of energy sooner than most of my friends.
11. Are you competitive?
a) You bet.
b) When I need to be, I can be.
c) Not really, my nature is more laid-back.
12. Do you have a lot of willpower and self-discipline?
a) Yes.
b) I am disciplined when I need to be.
c) Not really.
13. Do you plan ahead?
a) Failure to plan is planning to fail in my book.
b) Planning is important, but so is spontaneity.
c) I take one day at a time and let life take me where it will.
14. Are you creative?
a) Yes I am. I am always thinking up new ideas.
b) I have an occasional brainstorm.
c) No, not really.
15. Can you live without structure?
a) Yes.
b) Actually, the idea of living without a regular job or paycheck makes me nervous.
c) No, I like routine and structure in my life.
Total the number of checks you have next to the first, second and third answers. If more than half of your checks are beside the first
answer, you have the personality needed to run your own business. If most of your answers fall into the (b) category, you’re likely to
encounter more trouble than you may want. If many of your checks are beside the third answer, then you are not quite ready to start your
own business, but that does not mean that you can’t get ready. While certain aspects of entrepreneurship are innate (the willingness to
take a risk, for example), almost as many are learned (knowing how to conduct market research, for example.) If this quiz tells you to slow
down, that is good. You can always take business classes, read more books, or listen to business tapes in order to learn more. Another
option would be to get a partner who has the skills you lack. There are many ways to start your own business, and just because you are
not ready yet does not mean you will never be ready.
Real Life Example
During World War II, a rubber shortage in the United States necessitated that the U.S. War productions Board request that American
companies try to create a synthetic rubber. In one of its experiments in support of this request, General Electric ended up with a
guppy goo that, while not rubber, sure was interesting. Not knowing what to do with the stuff, GE sent it to academics all over the
world, looking for suggestions. No one could think of any scientific use for the gupp.
A few years after the war, a Harvard professor who had received some of the stuff earlier brought it out to a cocktail party he was
having as a conversation piece. It was there that a broke entrepreneur named Peter Hodgson saw the adults pulling and playing with
the stuff. Despite being deeply in debt, despite the fact that no one else saw any use for the stuff, Hodgson nevertheless borrowed
$150, and bought 21 pounds of the stuff, along with the patent rights from GE. He started his own business, stuck small amounts
in little eggs, and named the stuff Silly Putty.
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7 Steps to Starting a Business
Once you have decided that starting a business is right for you, despite the risks, the question becomes – what’s next? People often love
the idea of starting a business but get bogged down in the actual nitty gritty of just how to do it. It might help to know that no matter
what type of business you decide to start, the essential steps are the same. Yes, different businesses will certainly have a slightly different
path, but generally speaking, most businesses follow a formulaic path. While this formula be discussed in much more detail throughout
this book, it should be helpful to have a roadmap of just where you are headed:
Step 1: Personal evaluation: You need to begin by taking stock of yourself and your situation in order to figure out which sort of business
is best for you. Why do you want to start a business? Is it money, freedom, creativity, or some other reason? What do you bring to the
table? What skills do you have? What industries do you know best? Would you want to provide a service or a product? What do you like
to do? How much capital do you have to risk? Will it be a full-time or a part-time venture? Will you have employees or be self-employed?
The answer to these types of questions will help you narrow your focus and pick a business. This chapter will help with that.
Step 2: Analyze the industry: Once you decide on a business that fits your goals and lifestyle, you will need to evaluate your idea. Who
will buy your product or service? Who will be your competitors?
Step 3: Draft a business plan: If you will be seeking outside financing, a business plan is a necessity. But even if you are going to finance
the venture yourself, a business plan will help you figure out how much money you will need to get started, what needs to get done when,
and where you are headed. Check out LivePlan.com.
Step 4: Make it legal. There are several ways to form your business – it could be a sole proprietorship, a partnership, or a corporation.
Although incorporating can be expensive, it is usually well worth the money. A corporation becomes a separate legal entity that is legally
responsible for the business. If something goes wrong, you cannot be held personally liable.
At this stage, you also need to get the proper business licenses and permits. Depending upon the business, there may be city, county
or state regulations, permits and licenses to deal with. This would also be the time to check into any insurance you may need for the
business and to find a good accountant.
Step 5: Get financed. Depending on the size of your venture, you may need to seek financing from an “angel”. Most small businesses
begin with private financing from credit cards, personal loans, help from the family, second mortgages, savings, etc. As a rule of thumb,
besides your start-up costs, you should also have at least six months worth of your family’s budget in the bank.
Step 6: Set up shop: Create a website. Launch your social media. Find a location. Negotiate leases. Buy inventory. Get the phones
installed. Hire staff. Set your prices. Throw a “Grand Opening” party.
Step 7: Trial and error: It will take awhile to figure out what works and what does not. Follow your business plan, but be open and creative.
Advertise! Don’t be afraid to make a mistake. And above all, have a ball – running your own business is one of the great joys in life!
Review for Starting Your Own Business
Personal evaluation
Analyze the industry
Make it legal
Draft a business plan
Get financed
Set up shop
Trial and error
Picking the right business
It may be that you already know which type of business you want to start. If
so, you get to pass Go and collect $200 – skip this section. But if you are not
yet sure exactly which sort of business is right for you, then read on.
There really are few times in life where the stars align themselves just right
to allow you to not only go into business for yourself, but pick the exact sort
of business you want. Usually, either money is tight, the time is wrong, a wife
is pregnant, or some other reason may prevent such a choice. So consider
this a rare, golden opportunity and pick with care.
How do you go about picking a business? There are many ways. Some
people look to something they know well, and that’s usually a fine idea. The main consideration for others is that their business have a
high profit margin; again, not a bad idea at all. And still others want a business that is hot and trendy. This is not such a great idea.
Certainly there are always businesses that you can start that are on the cusp of a wave, but the problem with that is that waves crash;
starting a business based upon a trend can be a recipe for disaster. Instead, anyone who wants to start a business should ask themselves
the following five questions. These will be much more helpful than any list of hot businesses:
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1. What is something that you do well that you like to do? As in the rest of life, we tend to succeed and do well when we are
engaged in something that we really enjoy. Your business should be no different. Richard Branson started Virgin Music, not because he
thought music would be “hot,” but because he loved it. Steve Jobs started Apple because he loved working with computers. As the book
says, “do what you love, the money will follow.”
2. Is there a market for that business? Lets say that your answer to question Number 1 is that you love gardening. Well, there are
no shortage of businesses that you could start that revolve around that concept; nurseries and landscaping to name just two. Now, what
if your answer is that what you love most is 19th century Danish architecture? However interesting that may be to you, if there are not
people willing to pay you for your expertise, you don’t have a business. So you have to be realistic — there must be a market willing to
buy what you want to offer.
3. Can you afford to start this business? Some businesses are very inexpensive to start, most notably, home-based businesses.
But others can be quite expensive. A nursery can easily cost $75,000 to create and stock. Buying into a well-known franchise can cost
over $1 million. So, in addition to picking a business that you like and have a market for, you must make sure that whatever business you
decide upon is one you can afford to start. This is discussed in detail below.
4. What will distinguish your business? Your business must offer something unique if you are to attract customers. After all, they
already shop somewhere else. Why will they choose to buy from you? You must offer better quality, cheaper prices, a more convenient
location, better service, a unique product — something that makes you stand out from the crowd.
5. Can you make a profit? Whatever business you start, whatever product or service you sell, you have to be able to sell it at a price
high enough to make a profit, but low enough that people will buy it. It is not always an easy task. Why do so many stores in expensive
malls go out of business? Because, even if they have a great concept, their overhead is often too high. So before jumping into a business,
crunch some numbers.
Real Life Example
The following questions should help guide you to an appropriate answer:
I am happiest when I: ________________________________________________________________________________________
I feel excited when I: ________________________________________________________________________________________
If money were not an issue, I would: ____________________________________________________________________________
The best advice I ever received was: ___________________________________________________________________________
The best thing I ever did was: _________________________________________________________________________________
Work is best when: _________________________________________________________________________________________
A market need I notice is: ____________________________________________________________________________________
My hidden talent is: _________________________________________________________________________________________
My purpose is: _____________________________________________________________________________________________
I have the most fun at work when I: ____________________________________________________________________________
What skills I most like using at work are: ________________________________________________________________________
What people admire about me is: ______________________________________________________________________________
What am I best at is: ________________________________________________________________________________________
Training I had that can help me is: _____________________________________________________________________________
Although all of these issues are important, they should lead towards one direction, namely, doing something you are truly excited about.
As you well know, working with passion is one of the great joys in life. This is even more true when choosing a business. This business is
going to become your baby. You will love it, care for it, nurse it along, and obsess over it. You will also be putting an extraordinary number
of hours into it. You will be working at it all day, every day, hopefully for many years. Unless you love it, and love it deeply, unless you are
passionate about it, working so hard will be difficult.
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Making the Decision
Deciding upon an area that you love is only the first step when choosing a business to start. The rest of the required analysis is much
more left-brained, more analytical. It consists of two steps:
1. Looking at how much you have to invest.
2. Conducting market research.
1. Analyzing your start-up costs. As important as it is to choose a business you will love, the business you pick must be one you
can afford. And, while Chapter 8 discusses many ways to get the money you will need to start your business, you probably already have
a fairly good idea about how much you will have to get started. Needless to say, whichever business you choose must fit within those
parameters.
Essentially, there are two types of businesses: service-based business and product-based businesses. Of the two, service businesses are
far less expensive to start. If you open an accounting firm for example, basically, all you need to get started is letterhead, an office and a
computer. If, on the other hand, you want to start a computer store, you will need to buy:
s
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&IXTURES
$ISPLAYCASESETC
So one of the very first things you must do is analyze your startup costs and see if you can even afford to start the business that you love.
Chapter 3 will walk you through the process of determining how much money you will need to get started, but suffice it to say here that
as you go about deciding what sort of business to start, be sure to keep in mind financial considerations.
2. Conducting Market Research. The other aspect of choosing the right business is making sure that there is a need for the business
you want to start. There are few things worse in life than putting a lot of money, time and effort into creating a new business, only to
find that there is no market for what it is you are selling. The important thing is that you choose a business that fits your personality, is
something you love, and can be successfully implemented with whatever resources you have available. If that means scaling your idea
back a bit in the beginning, that’s fine. Once you get your baby off the ground, you can grow as much as you are able.
Overcoming Fear
No one ever said taking the leap was easy. Fun, exciting, inspiring and maybe even a little nauseating? Yes. But easy? No. Starting your
own business is a big change and is worthy of a second look. Whether you succeed or fail, every aspect of your life — from bank accounts
to friendships — is affected. So, although fear can be debilitating, avoidance is not the answer. Here are seven tips to overcome fear and
get started on living the dream:
1. Remember that you can start slowly. Quitting a 9-to-5 job one day and starting a business the next would give anyone nightmares.
You don’t have to do it that way if you don’t want to. Making a gradual transition gives you time to think, plan and work on potential
problems, which should help lessen your anxiety.
2. Help is available. Help is available and much of it is free. The Small Business Administration, SCORE, TheSelfEmployed, LivePlan,
other websites, your local Chamber of Commerce, friends, and business associates will be available to help you along the way.
3. Plan. Nothing beats preparation to quell the panicky feelings that can keep entrepreneurs awake at night. A well-thought-out
business plan can go a long way toward helping alleviate start-up fears.
4. Expect the unexpected. Unless you are blessed with unlimited monetary resources, starting a business means taking a financial
risk. Although you may not be able to keep all problems at bay, you can accept the reality that being in business brings risks, and rewards.
That’s the name of the game.
5. Put fear to work. Why view fear as a negative when it can be a powerful motivator? Fear of forfeiting a home to the bank has
launched more than one laid-off employee on the road to self-employment, and fear of failure pushes many entrepreneurs to work
around the clock to get their businesses up and running. Remember that most successful entrepreneurs have been afraid at one time
or another.
6. Build a support network. Talking to fellow entrepreneurs who have walked the same path you’re about to embark upon can help
assuage your fears. Attend conferences, join associations, join a LinkedIn group, network on Facebook, and talk with others who started
as you are, but who have moved on to the next step.
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7. Remember that you may have more assets than you realize. For example, you might have money in the bank, friends in the
industry, a supportive family, a good attitude, a great idea, an awesome partner, chutzpah, or a good education.
The Bottom Line: It is easy to get caught-up in the romance of starting your own business. You need to avoid that trap. Before anything,
you need to consider carefully both the pros and cons of entrepreneurship. Above all, starting a business is a calculated risk. So be sure
to pick a business that you love, but also one that you can afford and that there is a need for.
Resources You Can Use
The United States Small Business Association
www.SBA.gov
SCORE
www.SCORE.org
Entrepreneur Magazine
www.entrepreneur.com
Inc. Magazine
www.Inc.com
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Chapter 2 – Planning Your (Ad)Venture
2
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Planning Your (Ad)Venture
The biggest mistake you can make right now is to start your business. What you need to do instead is sit back, take a breath, and think. It
may be that your idea for that new business is a winner, but maybe not. What you need to do instead is to analyze your idea, analyze the
industry, make sure others think you have a great idea, and make sure there is a market for your product or service. A hunch will simply
not do. You need facts to back up your plan.
Of course, the thought of quitting your job, taking a risk, and making some big bucks is pretty darn exciting; that’s the whole idea. Starting
a business is a grand adventure. But just like any adventure, before you ship off, you want to have a pretty good idea of where you are
going, how you will get there, and what you will do once you are there. So beginning in this chapter, and continuing for the next few
chapters, I want to help you put together a solid foundation for your business (ad)venture. This consists of conducting some market
research, drafting a business plan, structuring the business, and finally, securing your financing. Then you can start your business.
Slow down there, cowboy!
Of course there are many businesses that begin and fly by the seat of their pants, but yours shouldn’t be one of them. It is easy to get
excited about a new business that people often want to just jump in without putting this foundation in place. But the fact is that if you do
get started without thinking through what you are going to do, how you are going to do it, how you will finance it, and how you will make
money doing it, your chances of success are much less than if you did think about those things.
Real Life Example
In the late 1970s, board games were old news. Monopoly was 50 years old, and Scrabble was even older. So, when Chris Haney
and Scott Abbot got together to play a board game one night, they chose one of the very few available – Scrabble. As they pulled
out Chris’ Scrabble game, the two friends discovered that some of the tiles were missing. As they went out to buy another Scrabble
game, Chris got to thinking: This was the sixth game of Scrabble he’d bought in his life. The two friends decided then and there to
start a business and invent a board game.
To say they were novices would be generous; they knew next to nothing about business or toys. They were journalists. Yet in their
case, ignorance was not such a bad thing; they knew what they didn’t know. They did what you are being coached to do – they
began to research and analyze their industry. In January 1980, armed with an expired press pass and a camera without any film, the
two buddies visited the Canadian Toy and Decoration Fair in Montreal posing as reporter and photographer. There, they pumped toy
manufacturers about the strategies of marketing a game and, according to Scott, “collected about $10,000 worth of information in
one afternoon.”
Their research convinced them that they were on to something, that even though there had been few new board games invented
over the previous half century, there was nevertheless a market for their new product and business. And they were right. After almost
going broke in the process, within three years, the two friends sold more than 20 million copies of Trivial Pursuit.
Market research is critical. Before you put your hard earned money and precious time into an untried business concept, a little effort up
front will tell you if your idea makes sense. And you need to be prepared to go in a different direction if your research indicates that that
is what is necessary. Facts trump hunches.
Is your idea feasible?
So, before you jump in, indeed before you do anything, you first must figure out if there is a market for your proposed business because
the first law of business is (or at least should be): You Must Fulfill A Market Need. If there is no one around who wants, or is willing to pay,
for your proposed product or service, your business will fail, it is as simple as that. So before you name the business, or get a business
license, or take out an advance on your credit card, it is time to do some market research.
Is there a market for a woman-oriented bookstore in your neighborhood? Market research will help you find out. Analyzing the market
and industry is a way to gather facts about potential customers and to determine the demand for your product or service. The more
information you gather the greater your chances of capturing a segment of the market. That is why you need to know your potential
market before investing your time and money in any business venture, so you don’t waste that time or money in an ultimately bad idea.
In essence, you must ask yourself whether anyone wants or needs your proposed business. Not only do you need to know that, but it is
equally important to research your potential competition, and the industry generally, so you can have a pretty good idea about what you
are getting into. By figuring out who your potential market is, and who your likely competition will be, and how you will stand out from the
crowd, you greatly increase your chances of success.
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Understanding You Market
These questions will help you collect your thoughts and begin to flesh out your idea.
1. Who are your customers going to be? _______________________________________________________________________
2. Are there enough customers to support your business? ________________________________________________________
3. What is it that they need? _________________________________________________________________________________
4. How are these needs not being serviced by existing businesses? ________________________________________________
5. How is it that you will service those needs? ___________________________________________________________________
6. Who is the competition? __________________________________________________________________________________
7. What are they doing right, and wrong? _______________________________________________________________________
8. How will your business be different than that of your competitors? ________________________________________________
9. Why would these customers leave your competitor and come to you?______________________________________________
10. What are the trends in your industry? ________________________________________________________________________
There are several methods you can use to find out what you need to know. The most common are these:
Paid research: Here, a firm you hire surveys the public regarding your proposed business. There are basically two ways that they
conduct this research:
1. Personal interviews: Interviews can be done individually or in a group. Group interviews are good because you get many responses
at once.
2. Telemarketing and phone research: Telephone research is less expensive, costing about one-third less than personal interviews.
Hiring a firm to do your primary research is obviously expensive, but it does yield valuable results. Here are a few more, and far more
affordable, methods:
Do it yourself in person: Go out and speak with some business owners on your own. Go to a town other than your own (so that you
aren’t viewed as the competition), find a business similar to the one you want to start, and ask the owner about the business. Find out
who their customers are, what they like and dislike about the business, what they would do differently, and what the competition is doing.
Do this several times, and you will learn much about your potential business.
Outside research: There are many organizations and related sources out there with plenty of information that will help you make some
informed decisions about your potential business. Government departments, websites, public libraries, your local chamber of commerce,
business departments at universities, and the Small Business Association all will have information that could help you.
A particularly helpful tool is trade organizations and associations. Almost any industry you can think of has a trade association
and trade publication associated with it. If anyone knows your potential industry, it is them. Most trade associations have regional
chapters that usually are very helpful.
The Web and social media: Join a LinkedIn group and get the group’s opinion. Post a survey on your website. Check in with folks via
Facebook. Get some honest online feedback about your idea.
And here are several sites that can give you industry specific market research:
s w
ww.hoovers.com – Hoover’s offers company, industry, and market intelligence, as well as sales, marketing, business development,
and other intelligence on public and private companies worldwide. It is a great business information resource.
s w
ww.marketresearch.com – This great site offers Search the largest database of market research publications. Over 50,000 titles
from more than 350 leading publishers.
s w
ww.marketresearch.org.uk – The Market Research Society is the one of the largest international organizations for those
interested in market, social and opinion research. This site can help you head in the right direction.
s w
ww.marketingpower.com – This is the site of the American Marketing Association. A great site for an overview of marketing
generally, and market research specifically.
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Is it worth the risk?
I said previously that entrepreneurs are folks willing to take a risk with money to make money. And that then begs the question: If you do
in fact have an idea for a business, and all of the research above seems to indicate that it is a feasible idea, the question then becomes
is it a risk really worth taking? Because the fact is, not every risk pans out. And if yours doesn’t, then what?
So, while risk is indeed part of the game, the best entrepreneurs are risk savvy. They know that the best business risks are often prudent,
thoughtful ones. Wild, crazy risks are the exception and not the rule. So, how do you tell the difference?
One way is viscerally — you can feel it. In the book “Blink,” Malcolm Gladwell says that gut reactions are to be trusted because your
subconscious takes in all available information and registers reliable instant responses.
But what about the left side of your brain? After all, you cannot just decide to start a business based upon a gut feeling (or can you?)
You have to analyze the risk. Being risk savvy means taking in all possible information before deciding to go for it. That includes a cold
analysis. When doing so, consider:
s The good news: What is the best that can happen? How much fun might you have and money can you make?
s T
he bad news: What can go wrong? What is the worst-case scenario? Remember this too – the best laid plans of mice and men
often go awry.
s T
he likely outcome: You are smart – if you were not, you would not be considering entrepreneurship. As such, put your best
thinking cap on, consider everything, and decide what is the likely outcome of your plan? Then ask yourself – Is that outcome
worth the risk in money and reputation and emotions? If so, then it is a risk likely worth taking.
Finally, it should also help to understand that there are ways that experienced entrepreneurs reduce their risk overall, no matter the
particulars. These include:
s Getting Insurance. The point of insurance is to reduce risk after all.
s )ncorporating. Any small-business person who wants to be risk savvy needs to create a corporation for his or her business. The
corporate shield protects your personal assets.
s Getting it in writing. As Samuel Goldwyn famously said, “An oral contract is not worth the paper it is written on.”
The Bottom Line: By making sure there is a market for your proposed business and that it is a risk really worth taking, you ensure that
your (ad)venture will be a fruitful, happy, exciting one.
Resources You Can Use
Blink
Blink
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Chapter 3 – Calculating Your Startup Costs
3
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Calculating Your Startup Costs
Finding the funds to start your business is usually one of the most challenging things the budding entrepreneur will face. Whether yours
is a small, home-based business or a large venture that requires six or seven figure funding, the good news is that money is available.
The bad news is that it is sometimes harder to secure than you may anticipate.
But look around. Every one of those businesses that you see as you drive down the street began as someone’s dream, and somehow,
those entrepreneurs found the money to open their doors. If they did, so can you.
Money and the new business
The very first thing required of you if you want to get your business funded is to accurately estimate the amount of money you need to
get started. Talking a cold, hard look at your money requirements will help you know your business better and help ensure your success.
Once you know how much capital your business will require, then it will be incumbent upon you to get it. Having a cash crunch from the
start is a sure way to go out of business fast.
Moreover, a realistic budget will help convince a lender or investor that you understand your business and are worth a risk. The first thing
any investor will want to know is how much money you will need and how you plan to spend it. They will want specific details on how the
money will be spent, and how you plan to repay the money.
How much money do you need?
In the next chapter we look at how to create a business plan, and this chapter will help you get a jump on that by analyzing how much
money you will need to get started. The money you will need can be divided into three categories: One time costs, working capital, and
ongoing costs.
One-time costs are things that you will need to spend money on to start your business but will unlikely see again, such as:
s ,EGALANDACCOUNTINGCOSTS9OUMAYNEEDTOHIREALAWYERTOHELPYOUNEGOTIATECONTRACTSINCORPORATEORPERFORMOTHERLEGAL
services. An accountant may be needed to set up your books
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Working capital is the money you will need to keep your business going until you start to make a profit. The old adage “it takes money to
make money” is true and real. It is critical to have enough working capital on hand to cover the following sorts of items:
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spend large sums in this area.
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So how much do you actually need to have? A rule of thumb is that you have enough money in the bank as you get started to initially
get things going and then enough to feed, clothe and house you and your family for six months. But a rule of thumb is only that. You can
come up with some actual numbers by answering the following three questions and doing the accompanying exercises:
1. How much money do you have?
2. How much money will you need to start your business?
3. How much money will you need to stay in business?
As you calculate these numbers, remember that one of the smartest things you can do is to keep your overhead low. Don’t by brand new
office furniture if you do not need to. If you have a computer that works, use that. When you start to turn a profit, then you can indulge a
bit. But right now, be conservative. You will be glad you did.
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How much money do you have?
Assets
Liabilities
Cash on hand
$ ____________
Accounts payable
$ _____________
Savings accounts
$ ____________
Notes payable
$ _____________
Stocks, bonds
$ ____________
Contracts
$ _____________
Securities
$ ____________
Taxes
$ _____________
Accounts receivable
$ ____________
Student loans
$ _____________
Real estate
$ ____________
Real estate loans
$ _____________
Life insurance (cash value)
$ ____________
Credit cards
$ _____________
Automobiles
$ ____________
Auto loans
$ _____________
Other assets
$ ____________
Other liabilities
$ _____________
Total Assets
$ ____________
Total Liabilities
$ _____________
Net Worth
(Assets minus Liabilities)
$ ____________
The next worksheet will help you answer the second question: How much money will you need to start your business?
Start-Up Cost Estimates
Furniture
$ ___________________
Computer hardware and software
$ ___________________
Services, supplies
$ ___________________
Equipment
$ ___________________
Beginning inventory cost
$ ___________________
Real estate improvements
$ ___________________
Legal and accounting fees
$ ___________________
Other professional services
$ ___________________
Licenses, permits
$ ___________________
Telephone, utility deposits
$ ___________________
Insurance
$ ___________________
Signs
$ ___________________
Marketing
$ ___________________
Advertising
$ ___________________
Labor
$ ___________________
Website
$ ___________________
Emergency fund
$ ___________________
Other
$ ___________________
Total Start-up costs:
$ ___________________
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The next worksheet will help you project your how much money will you need to stay in business.
Expenses, per month
Your personal living expenses
$ ___________________
Advertising
$ ___________________
Marketing
$ ___________________
Inventory
$ ___________________
Supplies
$ ___________________
Utilities
$ ___________________
Telephone, Internet
$ ___________________
Insurance
$ ___________________
Taxes
$ ___________________
Maintenance, upkeep
$ ___________________
Delivery/transportation
$ ___________________
Lease payments
$ ___________________
Dues and subscriptions
$ ___________________
Debt repayment
$ ___________________
Payroll, other than owner
$ ___________________
Sales tax
$ ___________________
Rent or mortgage
$ ___________________
Storage and shipping
$ ___________________
Transportation and delivery
$ ___________________
Miscellaneous
$ ___________________
Total Expenses:
$ ___________________
What do you do with all of this information? Begin by multiplying the last number by six. This is the amount of cash you will need to cover
operating expenses for six months, and six months is the minimum amount you will need to get started. You absolutely must have this
amount available before opening your business. This money will ensure that you will be able to continue in business during the crucial
early stages.
Next, you must add this number to the total in the second worksheet, “Estimated Start-Up Costs.” By adding the total start-up costs to the
total expenses for six months you can learn what the estimated costs will be to start and operate your business for six months. And, by
subtracting this total from your cash available (the first worksheet) you can determine the amount of additional financing you will need.
The Bottom Line: You must realistically and accurately analyze your startup costs so that 1) you know how much money you really
need (see next chapter), and 2) will be able to stay in business at the start long enough to get some traction and begin to make a profit.
Resources You Can Use
LivePlan
www.LivePlan.com
TheSelfEmployed
http://theselfemployed.com/category/start_ups/
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Chapter 4 – The Business Plan
4
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The Business Plan
I bet you don’t want to draft a business plan. Maybe you are thinking that you know what you are going to do and think of it as a waste of
time. Possibly you have your funding in place so you figure that no one but you is ever going to read it, so why bother. I don’t blame you.
Business plans are a lot of work, and you may in fact be the only person who ever reads it. But it is still an important exercise nonetheless.
Think of it this way: An experienced pilot would not fly anywhere without a detailed, well-researched flight plan. The plan helps him
understand where he is going and how he will get there. Just as you wouldn’t trust a new pilot to fly you and your family to an unknown
destination without some assurances that he planned the trip, knew where he was going, and knew how to get there, and so should be
with your new business.
A business plan is your flight plan, your game plan. It is your blueprint. Creating one forces you to carefully think through this entire
enterprise – from products, prices and income projections to advertising, marketing, and sales forecasts. By analyzing some things that
you are probably unfamiliar and uncomfortable with, you are forced to really understand what you are getting into and how much money
you can realistically expect to make. If you don’t create a plan, your entire enterprise will be a shot in the dark and you are going to be
investing too much of your time, money, reputation, and ego to wander around in the dark, hoping your business will work. That is why
you need a plan.
Business plan overview
A business plan is a written summary of what you hope to accomplish by being in business and how you intend to organize your
resources to meet your goals. In it, you define your business, your income objectives, your management team, you competition and your
specific operating procedures. It details the what, when, where, why, and how, of your business. It explains what your objectives are, why
your business will be unique, and the steps you will take to achieve those objectives. In essence, it is the road map for operating your
business and measuring progress along the way.
The practical advantages of a business plan are these:
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s )TENABLESALENDERORINVESTORTOASSESSYOURlNANCINGPROPOSALANDTOASSESSYOUASABUSINESSMANAGER
s "YCOMMITTINGYOURPLANSTOPAPERYOUROVERALLABILITYTOMANAGETHEBUSINESSWILLIMPROVE9OUWILLKNOWYOURBUSINESSBETTER
s9OUWILLBEABLETOLOOKAHEADANDHOPEFULLYAVOIDPROBLEMSBEFORETHEYARISE
s !BUSINESSPLANFORCESYOUTOBEREALISTICANDAVOIDPIEINTHESKYPROJECTIONS
s )THELPSYOUTOIDENTIFYYOURCUSTOMERSYOURMARKETYOURPRICINGSTRATEGYANDYOURCOMPETITION
You don’t want your business plan to be either too short or too long, otherwise, you will have to spend a lot of time rewriting it. A
normal business plan runs anywhere from 30 pages to 50 pages. Not more, not less.
Elements of a business plan
While every business plan is of necessity different because every business is different, they are all generally alike. Your business plan
should include the following (And if you go to LivePlan.com, you will get help with all of this):
Executive Summary: The document starts with an executive summary describing the highlights of the business plan. Even though
your entire business is well described later on, a crisp, three or four page introduction helps to capture the immediate attention of the
potential investor or lender. The executive summary, is just that: a compact summary of the whole plan. In it, you should explain:
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s 7HOTHEMANAGEMENTTEAMISAND
s (OWMUCHMONEYDOYOUNEEDINWHATSTAGESANDHOWYOUWILLUSEIT
It is important that this summary be your best. Remember, it this may be the only chance you have to attract attention. Some people say
that busy lenders read only the executive summary; if it doesn’t grab them by the lapels, they move on to the next plan. Make sure yours
sells your idea so the reader will retain interest and continue reading. Because the executive summary is so important, you might want
to write it last, after you have thought through the entire plan.
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Table of contents: Right after the executive summary will be a table of contents that lists the section titles and page numbers for easy
reference.
Description of Business Venture: This is the heart of your plan. In it, you will describe exactly what your business is going to be and
how you envision it proceeding. This section will contain:
s !
DESCRIPTIONOFYOURPRODUCTORSERVICE7HATISIT(OWISITDIFFERENT7HYWILLPEOPLEWANTIT7HYISNTSOMEONEELSEDOINGIT
What kind of equipment will you need? Do you have, or can you get, a patent? The thing you must do is put yourself in a potential
investor’s place and ask yourself what he would need to know before investing in your business.
s )STHISAWHOLESALEBUSINESSRETAILPROFESSIONALORWHAT
Market Analysis: This is where all of that research comes in handy. Here, you will identify your target market, who will be your typical
customers. You will also explain present buying patterns. Offer trends, projected growth, customer behavior, complementary products or
services, barriers to entry into the marketplace, and so on.
Next, define your target market. If your business is going to be confined to your specific locale, the you need to explain what the market
in your area is. After this, you must narrow your market down even more, you must analyze what your total feasible market is. Finally, you
must determine what your share of that feasible market will be. This is called your market share.
How will you capture that market share? That is what you need to know, and what you need to convey. How will you position your goods
or services in the market? What will your pricing strategy be? How will you promote yourself/business? So you should include in this
section your sales strategy (sales objectives, target customers, sales tools, sales support), distribution plan (direct to public, wholesale,
retail), pricing structure (mark-ups, margins, break-even), and promotion plan (media, advertising, promotions, publicity.)
Description of the Industry: This section that will include statistics and information about your chosen industry. You will want to
include the following in this section:
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s -ARKETSANDCUSTOMERS,ISTTHESIZEOFTHETOTALMARKETANDMARKETTRENDS
s .ATIONALANDECONOMICTRENDS$ISCUSSPOPULATIONSHIFTSCONSUMERTRENDSANDRELEVANTECONOMICINDICATORS
Researching and writing this section will enable you to understand the industry you are getting involved in much better.
Business goals: Explain here where you see your company in one year, in two years and so on up until the fifth year. Explain
specifically how you will reach these goals. what will happen in different economic environments.
Do you want to get your business funded? Then write you business plan in plain English. Nothing turns off a reader more than lots
of technical jargon that he cannot understand.
Competition: This section of your business plan should include all pertinent information about your competition, including the length of
time they have been in business, where they are located what their average annual sales are. You will want to analyze
s 4HEREASONSBEHINDTHEIRSUCCESS
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s (OWTHOSENEEDSAREBEINGMETBYYOURCOMPETITORS
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The websites listed previously can help you fill in this section. Getting some good, solid data about your competitors will impress investors
and teach you plenty in the process.
In addition, you should explain how you perceive your business will compete in terms of strengths and weaknesses in comparison to
the strengths and weaknesses of these competitors. Explain how you intend to overcome your competition and your expectations of
the impact your company will have on their business. Consider how well your competition satisfies the needs of potential customers.
Determine how you fit into this picture and what niche you plan to fill. Will you offer a better location, convenience, a better price, later
hours, better quality, better service?
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Management team: What are your qualifications and that of your team? Do not underestimate just how much importance an investor
puts in the management team. Banks, angels, and venture capital firms will want to see that you have a a team with a record of
entrepreneurial success. Proven business leadership, people with legal and finance skills, marketing experts, etc. will help prove the
viability of your business and can make all the difference between funding and no funding. The resumes of all key personnel should be
included in this section as well.
The quality of your team often dictates whether you get funded or not.
Sales forecast: The next part of the business plan covers sales, operations, and finances. These sections deal with hard numbers and
forecasts of sales, operating expenses, profits and the like. You need to include
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s !NNUALFORECASTFORTHEFOLLOWINGTWOTOFOURYEARSSALESVOLUMEINDOLLARS
s !SSUMPTIONSFROMWHICHYOUBASETHESEFORECASTS
By this point, your research on the competition is vital. Analyze the location, customer volumes, traffic patterns, hours of operation, busy
periods, prices, quality of their goods and services, product lines carried, promotional techniques, positioning, product catalogues and
other handouts. If feasible, talk to customers and sales staff.
Use this research to estimate your sales on a monthly basis for your first year. The basis for your sales forecast can be the average
monthly sales of a similar-sized competitor’s operations that is operating in a similar market.
Financial Analysis: A business plan is not just words; it is words and numbers. You need to understand and explain how much it will
cost to get your business up and running, and how much it will cost to keep it going on a monthly basis. The financial needs of the
plan depend greatly on your marketing and sales strategies. They all must fit together. Remember though that while projections are
projections, they must show an understanding of how all of the variables of the business plan fit together. In the end, you must really
understand the numbers, because investors will grill you on them.
In this section you are also going to explain how much money you are asking for and how you will be spending it. This section will include
a spreadsheet that analyzes income and expenses for the next few years, including:
s Profit & Loss Statement: This is a summary of your projected business transactions over a period of time. It explains the
difference between your income and expenses. An income statement is the same as the Profit and Loss statement. You P& L
Statement will include analyses of sales by month, gross profit and profit margin, overhead, depreciation, interest payable on any
loans, and finally, net profit.
s C
ash-Flow Statement: This statement shows how much cash your business will need, when it will be needed, and where it
will come from. Do you need to buy inventory? How much will that cost every month? What are your receipts, bills, wages paid,
etc.? That is what you will be discussing here. The cash-flow statement is important because it forces to realistically look at the
bottom-line and see if you are making (or going to make) enough money to service your debts. A cash-flow statement is a great
tool that you should use throughout your business career as it is a mirror of where things are.
s B
alance Sheet: The balance sheet forecasts your assets and liabilities. It shows your financial position at a fixed point in time,
usually at the end of the year. It helps you to understand where all the money coming into the business has come from and where
it has gone. Balance sheet information is extracted mostly from the P & L and cash flow statements.
This section is often the most difficult part of a business plan for many entrepreneurs. It’s easy to wax poetic about your fantastic
business idea and how it will make you all rich. But actually putting hard numbers to those projections is not always easy. But you have
to do it. You have to crunch some realistic numbers to go along with your realistic (and hopefully enthusiastic) plan.
Where do you get this information? There are many sources of information to assist. Some key sources are competitors, trade suppliers,
business associations, trade associations, trade publications, and trade directories. Once you have this information, you will need to
provide in your financial statement.
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Ray’s Computer Repair
Projected Profit & Loss Statement
Projected Income
Projected Expenses
Bank fees
Conference
Equipment
Insurance
Marketing
Postage
Phone
Printing
Supplies
Taxes
Auto
Labor
$94,590
$250
$490
$1,020
$2,800
$6,200
$400
$1,900
$900
$14,900
$6,800
$1,500
$10,000
Projected Total Expenses
Projected Net Profit:
The financial section of your business plan will also analyze the use of
any loan proceeds you are seeking, including the amount of the loan,
the term, and when required. Finally, you need to disclose your financial
situation and how much you will personally be contributing to the venture.
The appendix of your plan should include the last three years income tax
returns. Also include a current credit report.
Action Plan: This section will contain specific steps you take to
accomplish goals and checkpoints for measuring results. Identify
significant dates, sales levels, production levels as decision points.
$46,760
$47,830
Appendix: This section will contain:
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support)
Mistakes to be avoided
Preparing a business plan will generate a lot of thought and a lot of paper. You will need to write it and re-write it. But the process should
do you a lot of good. In the end, you will have a much better idea about how your business will run, what it will take to succeed, and what
risks will be involved in the process.
As you write it, try and avoid making common mistakes, such as off-the-mark projections for net profit and other economic numbers. You
cannot simply pull numbers out of the air. You have to do your homework and locate numbers that realistically project your expenses and
profits. Other common mistakes include income projections that are inconsistent with the industry norm or that don’t generate enough
cash flow to service the debt.
The Bottom Line: In the end, all this work will all be worth it. Either you will be able to get funding because you clearly know what you
are doing as demonstrated in the plan, or you will have learned a great deal about how to make your business fly. Either way, you are a
winner.
Resources You Can Use
Small Business Development Centers
SBDC
www.asbdc-us.org
LivePlan
www.LivePlan.com
Palo Alto Software
www.paloalto.com
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Chapter 5 – Buying Franchises and Other Businesses
5
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Buying Franchises and Other Businesses
One of the best ways to start a new business, if you do it right, is to buy a franchise or other established business. While people typically
think of McDonald’s, KFC, Dunkin Donuts, or Baskin Robbins when they think of franchises, the fact is that franchises come in almost
every industry. The same is true for an already established business, they can be found for sale in every industry and take a lot of the
risk out of the entrepreneurship equation.
Franchises
Franchising is a method of distributing services or products. With a franchise system, the franchisor (the company selling the franchise)
offers his trademark and business system to the buyer, or franchisee, who pays a fee for the right to do business under the franchisor’s
name and brand using the franchisor’s methods. Ideally, the franchisee is given instructions on how to run the business as the franchisor
does using the franchisor’s name and the franchisor supports the franchisee with expertise, training, advertising, and a proven system.
That last point, a proven system, is important. Those franchises that work best are those where the franchisor has worked out the kinks
and translated its business into a systematic procedure that franchisee follows. Do what they did, and you should get the results that
they got; that’s the idea. As franchisors are wont to say – when you buy a franchise, you are in business for yourself, but not by yourself.
The reason then that a franchise can be a smart business decision is that in the right franchise system, the franchisor has already made
the mistakes, mistakes you do not have to make now. Franchising should reduce the risk. You need not reinvent the wheel. In exchange
for their expertise, training, and help however, you will be required to give up some independence and do things the franchisor’s way.
Are you cut out to be a franchisee?
The Franchise Times once conducted a survey of the “average franchisee.” What they discovered was that the typical franchisee is a
man, 48 years old, who owns 3.5 franchises, works 52 hours a week, and attended college. But if that does not describe you, don’t worry.
Franchisees come in all shapes and sizes and from all walks of life. Franchisees are people who usually want a career change; people
who may be fed up with corporate life and who dream of owning their own business. And yet, while that’s a start, there is more to being
cut out for the franchise world than a strong desire. From the franchisor’s point of view, a good franchisee should be:
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Quiz: Are You a Franchisee?
To help you decide whether you have the necessary qualities to be a successful franchisee, take the following quiz. As you do, be
totally honest with yourself; a franchise is a major commitment of time and money. Circle yes or no:
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
YES
NO
I do not have to make all decisions for myself. I am willing to let others make some too.
I could fill in for an absent busboy if I needed to
I do not need a lot of supervision.
I am willing to put long hours into the business.
I am willing to do what the franchisor suggests, even if I don’t agree.
I am highly organized.
I have at least 5 years management or experience.
I have hired and fired employees.
I have trained personnel.
I am a good salesperson.
I have sufficient capital to buy into the franchise of my choice (critical).
I am willing to take a risk with my money to make money.
My spouse and family support my choice to start a franchise.
I am a self-starter.
I am willing to be a follower.
If you answered at least 10 of the questions in the affirmative, then it is likely that you have what it takes to make a franchise work.
While all of these traits are important, realize that you must be highly motivated, persistent, willing to listen to the franchisor, and sales
oriented to be a successful franchisee.
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If you think that a franchise is for you, then next step is to thoroughly check out possible franchisors. Not all franchises are created equal.
Some franchisors give a lot of support and training, others give little. Some are easy to work with, some are not. The important thing is
that you do your homework and learn about out the franchise before buying.
Finding the right franchise
With so many franchise systems to choose from, the options can be dizzying. So it is best to start with a global perspective. In the universe
of franchising, which industries seem to match your interests? Narrow the choices down to a few industries that you are most interested
in, and then analyze your geographic area to see if there is a market for that type of business.
Once you have decided which industry interests you most, and seems to have growth potential in your area, contact all the franchise
companies in that field and ask them for information. Any reputable company will be happy to send you information at no cost.
A great place to learn about all of your options is at a franchise trade show. They are a terrific way to gather a lot of preliminary
information and survey the field in a short period of time, and you can find them in most good-sized cities. When attending a franchise
trade show, keep a few thoughts in mind. First, remember the companies exhibiting at the show by no means make up all of the franchise
opportunities available. Indeed, these events showcase only a small selection of the available franchise programs.
Second, when you do go, you should take full advantage of the information available. Pass by the sellers who are out of your price range
or do not meet your personal goals. Be sure when you go to the show to dress conservatively, carry a briefcase, leave the kids at home,
and take business cards if you have them. Show the representatives you meet that you are a serious prospect.
Have a short list of questions ready to ask them:
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Of course, you cannot rely solely on promotional materials to make your decision; you also need to do your own research. The most
important thing you can do is talk to current and former franchisees. They can tell you what the franchisor is like to work with, how much
money you can really expect to make, and what to be on the lookout for.
It also can be very helpful to visit your library or go online and look up all the various articles you can find about the franchisors you are
considering. Is the company depicted favorably? Is it growing? Check with the consumer or franchise regulators in your state to see if
there are any complaints lodged against the companies you are looking at. Be sure too to check with the Federal Trade Commission, the
Better Business Bureau, and your local Chamber of Commerce.
Analyzing the costs
Obviously, one of the most important things you must look at when deciding upon a franchise are the costs involved. There are three
fees associated with buying a franchise. The first is the franchise fee. This is the amount you will pay the franchisor for the right to use
its system and trademark. Typically in, say, a well-known food franchise, these fees run between $15,000 and $50,000. The second
fee is the royalty payment. This is an ongoing monthly fee paid to the franchisor. Usually, it runs between three and six percent of gross
monthly sales.
The final fee is the large one – the cost of buying the actual physical business. There are many related costs associated with this. These
things include:
Real estate fees: You may need to pay for a realtor to help you find a location. You will also have to put down a security deposit and
utility deposits.
Architecture fees: You may need either an architect or a civil engineer to make plans to modify (or design) your location. Again, this is
where a good franchisor may come in handy as they may have a set of standard architecture plans that you can use.
Contractor fees: This is a big-ticket item. This can include everything from landscaping to major construction overhauls.
Equipment and fixtures: You may need to buy everything from tables, chairs, telephone systems, kitchen equipment and display
counters to computer systems, software and cash registers.
Décor: This will include things like signs, pictures, lights, and interior design.
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Inventory: Your opening inventory includes many things, such as ingredients, raw materials, product, paper goods, office supplies, and
janitorial supplies.
Insurance: You will need to buy workman’s compensation insurance (required by law), as well as liability, property, auto and other
insurance.
Labor costs: You will likely need to hire staff and managers, and they made need to get training with the franchisor.
Professional fees: You may need to hire a lawyer and an accountant before you open your doors.
Working capital: This is the amount of money you will need to keep the business going until it begins to turn a consistent profit. You
probably need to have at least six-months worth of working capital before planning your grand opening party.
Needless to say, you shouldn’t underestimate these costs. Nothing is worse than spending a lot of money to start your new business but
not budgeting enough to keep it going long enough to become a success. So, how much do you need? Let’s examine some of the costs
of various franchises in order to get an idea:
McDonald’s: Estimates are that new restaurant costs anywhere from a half a million to a million dollars and up. The size of the
restaurant, the area of the country it will be located in, inventory, equipment, signs, decor and landscaping all play a part. You must have in
liquid cash a minimum of $175,000 for a conventional purchase or $100,000 for a lease. The rest can be financed, although McDonald’s
itself does not finance franchises.
Subway: A Subway franchise is less expensive, from $100,000 on up. The real costs are in building the restaurant – leasehold
improvements, signs, equipment, etc. You also need to have funds to operate the business for three months, above and beyond any other
capital requirements.
With thousands of franchise choices available, and costs that vary greatly, it is incumbent upon you to do your research and find a
franchise system that fits both your personality and your pocketbook. It is out there. Typically, a good franchisor will provide the following
sorts of services on an ongoing basis:
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up-to-date.
What to Ask the Franchisor
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s
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s
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s
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The important thing is that you get very clear about the cost of purchasing the franchise, both initially, as well as understanding any
ongoing costs. Once you have gathered all of this information, then you will be able to make an informed decision. Carefully examine
everything with your attorney, accountant or business advisor. You want to be sure that every item of importance be addressed in the
franchise contract.
Location, location, location
Not all franchises need to pick a dynamite location. For example, janitorial services really don’t need to worry about their location since
drop-in business is not their business model. But a restaurant needs a good location. Typically, if you are looking at a retail establishment,
location usually is a priority.
The first thing to do is speak with the potential franchisor. One of the best aspects of buying into a good franchise operation is that you
should get plenty of advice and help from the franchisor. So start there and see what they say. The franchisor will know what you should
look for, what works best, and what locations are available in your area. In fact, in some cases, site location may not even be up to you;
the franchisor may make this decision. So, you need to find out who chooses your location, and if it is you, you want to make sure that
the franchisor will be helping you in the site selection process.
Additionally, you need to find out about territorial exclusivity. Does the franchisor offer it, and if so, what is the size of the territory? Territorial
exclusivity has been the subject of many lawsuits between franchisees and franchisors, so make sure that you really understand this
issue and have any agreements put in writing.
As ever, one of the best ways to know what to expect from a franchisor on this (or any) subject, is to talk to the current franchisees. They
will tell you if the franchisor plays fair, if territorial limits are respected, if site locations analysis is accurate, that sort of thing.
Analyzing how much money you can reasonably expect to make
All of this research begs the question: How much can you really make buying a franchise? Basically, if a franchise does want to provide
this information, it must put it in its disclosure document, called the Franchise Disclosure Document (FDD).
Most franchisors opt not to disclose this information. Why? There are three reasons.
1.
First, it is not so easy to put together a universal, accurate, reflective, earnings estimate.
2.
Second, the results may simply not be attractive enough entice new franchisees to join.
3.
Finally, once it’s in writing, the estimates may be seen as a benchmark, and if a franchisee fails to hit that mark, they just might
sue the franchisor for making false “promises.” Because they don’t want to get sued, many franchisors simply refuse to divulge
this critical information.
When a franchise does not provide an earnings claim in its FDD, it is still possible to get this information. The best way to find out how
much money you can make is by asking existing franchisees. Make sure to select enough franchisees so as to get a clear picture of the
ranges for earnings within the franchise system.
Buying an Existing Business
As a general rule, buying a business can be a very good idea, but as with everything else in business, to make sure it will be a successful
venture, you have to proceed with caution and do your due diligence. And yes, there are pros and cons.
First the pros: With a pre-existing business, you should have a pretty good idea of what you are getting. The business makes X number of
dollars in profit a year, has Y number of customers, and so on. The kinks should mostly be ironed out and the brand already established.
All good, that. There are two potential pitfalls as I see it:
1. First, you have to make sure that the success of the business is not due to the current owner. If the customers, for instance, are
his personally and not really those of the business, that is a red flag.
2.
Similarly, you need to be extra certain, given the economic times we are in, that the business will remain as profitable as it has
been in the last few years.
When it comes to buying a business, there are few people more knowledgably about the process — selecting, financing, etc. — than
the folks over at BizBuySell.com. The site is one of the top marketplaces for businesses and franchises for sale. It lists everything from
inexpensive home-based businesses to gas stations, large ventures, franchises, and more.
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So I spoke withup Mike Handelsman, the general manager of BizBuySell.com and spoke with him. Like any good business coach,
he thinks you need to begin with the basics: “Start with a self analysis, decide what you are good at, figure out whether you are an
entrepreneur and then start thinking about the sort of business that fits your interests and affords you the right type of income.”
Once you pass that self-analysis test, then it’s time to start digging in. BizBuySell.com for instance, allows you to find all sorts of
businesses for sale in your area. You can see how much they are going for and what other requirements may be needed. Once you start
to really get serious, Handlesman suggests that you check into hiring a business broker, for several reasons.
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s 4HEYWILLHELPYOUWITHLOANOPTIONS!NDlNALLYANDIMPORTANTLY
s 4HEYAREPAIDBYTHESELLERNOTTHEBUYER
Other places to look: If you would rather do it yourself, then another great place to look for businesses for sale is Craigslist.
Additionally, the back of business and trade magazines list businesses for sale in their classifieds.
Buying a Business With No Money Down
Can you really buy a business with no money down? Yes, you can. It’s not easy, but it can be done.
When I asked Mike Handlesman if it really is possible to buy a small business with no money down, that is, with 100% seller financing,
he answered that is possible, but it won’t be easy, noting, “Most sellers have been waiting for 20 years to retire and won’t want to wait
longer to cash out.” But you never know; you just might find someone willing to help you get started if they see that you will be able to
pay them off in a few years.
So that is the key to buying a business with 100% seller financing — finding a seller who really needs to sell. Look for a business that
has been on the market for a long time; in that sense, it’s not unlike getting a good deal on a house that has been on the market too
long. Check Craigslist under Businesses for Sale, as well as BizBuySell.
If you do find a what looks to be a viable business for sale, then the next step is to speak with your attorney. Have him or her do a
background check on the business and the owner. Do your due diligence. But also, don’t expect to get a great deal – a seller who
finances the sale will not negotiate beyond that in all likelihood.
“But remember” said Handlesman, “the danger of finding a seller willing to do 100% financing is that the business may not be very
viable.” Rather, he noted, partial seller financing is far more commonplace, and likely to happen. In fact, Handlesman noted, “if you have
some money, or some financing lined up, it’s a buyer’s market. There are distress sales out there.”
If you want full or partial seller financing, the expert gave these final tips:
s h3HOWTHATYOUHAVEAHIGHLIKELIHOODOFSUCCESSvnYOUHAVEEXPERIENCECONTACTSETC
s h/FFERAGGRESSIVETERMSvnAYEARNOTETHATSORTOFTHING
s h7ORKWITHABROKERv
s h%NGAGETHESELLERASACONSULTANTFORSIXTOMONTHSvnTHATWAYYOUUPTHEIRINCOME
So yes, buying a business is a good idea, and no money down, 100% seller financing, is a possibility.
Resources You Can Use
The International Franchise Association
www.IFA.com
BizBuySell
www.BizBuySell.com
CraigsList
www.Craigslist.com
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Chapter 6 – Choosing Great Names and Locations
6
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Choosing Great Names and Locations
Now that you have a good idea about what your business is going to be and where you are headed with it, it is time to begin to put your
foundation in place. You will need to structure the business legally, get the necessary licenses and permits, and get funding. But before
you can do any of those things, it is time to have some fun. You need to name your business and, in all likelihood, find a location for it.
What’s in a name?
Naming your business should be enjoyable, but for some people, it is stressful. What if you pick the wrong name? What if the name you
pick has already been taken? While it is smart to be cautious, it is nothing to get overly concerned about. The important thing to realize is
that your business name will become your alter ego, so be sure to pick a name that reflects upon you and your business well.
How do you pick a name? You have three options.
The first is to pick a name that says exactly what your business is. Begin with what your business is going to do and the image you want
to express. Both must either be in the actual name of the business or at least reflected in the name, so that when people hear it, they
know what you are offering. Using this method, you want a name that says what you do and expresses the benefits that people will get
by patronizing the business – think Jiffy Lube or Quickee Mart. Here’s a great one that utilizes both image and benefits – Baja Fresh.
Picking a Name
What sort of business is it? ___________________________________________________________________________________
What will be the distinguishing characteristics of the business? ______________________________________________________
What benefits will people get by coming to the business? __________________________________________________________
List five adjectives that will describe the business: ________________________________________________________________
How will it be different than similar businesses? __________________________________________________________________
What are the names of similar businesses? ______________________________________________________________________
What are the good and bad things about those names? ___________________________________________________________
Based on the above, come up with five possible names for you business:
1. ________________________________________________________________________________________________________
2. ________________________________________________________________________________________________________
3. ________________________________________________________________________________________________________
4. ________________________________________________________________________________________________________
5. ________________________________________________________________________________________________________
Be sure the name is not already in local use and it is not too similar to that of a competitor. Try and pick one that is catchy and memorable;
alliteration often works well. Be sure too to pick a name that is not difficult to pronounce or spell. When people Google it, you want them
to be able to find you. When Nolan Bushnell invented the first popular video game ever – Pong – he wanted to name his company Syzygy.
Luckily for him, that name was already taken, so he settled on Atari instead (a word used in the Japanese game GO to warn opponents
that they are about to be conquered.)
Real Life Example
Walt Disney’s first business was an animation studio called Laugh-O-Grams, a company that would go bankrupt after only one year,
in 1923. After the bankruptcy of Laugh-O-Grams, Walt moved to California to be closer to his brother Roy, who was recuperating
from tuberculosis. Undeterred by Walt’s recent failure, Roy and Walt formed Disney Brothers Studios and set up their first animation
studio in their garage. Although they quickly got a contract to create an animated character called “Oswald the Lucky Rabbit“ this
business too was soon in trouble after Walt unknowingly sold the rights to Oswald to the distributor. Walt Disney was on the verge
of bankruptcy again.
Desperate, on a train trip from New York back to Los Angeles, Walt decided to create a new character, one he would own, one with a more
memorable name than “Oswald,” a character he hoped would save his troubled studio. That character was, of course, Mickey Mouse.
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After you come up with five names that you really like, get some feedback from people you trust; they may not think your name is as good
as you think it is. Remember, your business has to serve a market need, and so finding out what the market thinks about your proposed
business name, even in a small and informal way, is smart.
The second method of business name creation is to pick a name that is totally unique and has nothing to do with your business at all –
think Amazon.com or Xerox. These names are great because they are in fact so unique, and therefore, memorable. The risk here is that
while yours may be memorable too, if you can’t afford to get people to remember it, it may just be an odd, obscure name. One reason
Amazon and Xerox are memorable names is because those companies had the wherewithal to get people to remember them, and in
the process, brand their name. If you do not have a sizable marketing budget, picking an obscure name can be more of a curse than a
blessing.
Branding is not the same this as a business name. A brand incorporates much more than that. In essence, a brand is a company’s image,
logo, products and name all rolled into one. What do you think of when you think of Nike? Probably athletic shoes, the swoosh, athletes,
exercise, and “Just do it.” Your brand is what customers think of when they think of your business. Branding is a process that builds awareness
of your name via advertising and marketing.
For the self-employed or other small business, the name of the business is the first, and probably best, way to create a memorable brand.
It is, after all, what people first know about your business.
The last method for creating a winning business name is to hire a business to name it for you. There are companies whose business is
to come up with business names and who are often fond of coining new words for names. They usually do a great job of coming up with
a unique, memorable name, and get paid handsomely for their efforts. For the right business, it may be a smart marketing move and a
worthwhile investment. For others, the cost is not worth whatever results you get. It’s a balancing act between budgetary restraints and
need.
Trademark concerns
While making your final decision regarding your name, it is important to do a trademark search to see if the name already has been
trademarked, because if it has, you may not be able to use it. Different names are given different degrees of trademark protection. A
trademark is a distinctive word, phrase, or logo that is used to identify a business. So “Nike,” and its unique swoosh symbol, are protected
under trademark law because they are distinctive.
Other words are given far less protection. Common or ordinary words that are not inherently distinctive get much less, or no, trademark
protection, even if someone does try to trademark them. Examples of such common, non-distinctive business names would include:
s3AMS!UTO
s7ESTERN$AIRY
s1UICK#OMPUTERS
If you think there is a chance someone may usurp your company name, catch phrase, symbol or design, then you need a trademark.
Trademarks are used to identify and protect your product or brand.
Don’t make the mistake of thinking you don’t need trademark protection. Any growing business usually does. Consider the case of
Spencer, who opened a furniture store in 1970 with his sons joining him in the early 80s. By 1990, their enterprise, Spencer’s Furniture
Galleria, had grown to 14 stores in three states. In 2003, Spencer and his sons tried to register a trademark the name only to find that the
name “Spencer’s Furniture Galleria” had been trademarked nine years earlier by someone else. When asked what that meant, Spencer’s
lawyer explained that Spencer actually had no right to use the name “Spencer’s Furniture Galleria” because it constituted trademark
infringement.
The name was valuable enough to Spencer and his sons that they asked their lawyer to straighten out the mess. After doing some
research, the lawyer found out that the owner of the trademark never used the mark and was willing to sell it for $10,000. It was an
expensive lesson. The lesson is that federal registration provides a number of significant benefits, including:
s .ATIONWIDENOTICEOFTRADEMARKOWNERSHIP
s %VIDENCEOFANDAPRESUMPTIONOFOWNERSHIPOFTHENAMEORSYMBOL
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So the answer is yes; you most certainly do want to register your name and logo, and the good news is that doing so shouldn’t be difficult
or expensive. It is now easier than ever to register a trademark without an attorney; practically everything can be done online. Most of
the information you need can be obtained at the U.S. Patent and Trademark Office Web site – USPTO.gov. The USPTO site answers
your basic questions and enables you to do an online trademark search. You also can access forms and submit the application online.
In the end, the lesson for any entrepreneur naming a business is to be smart, pick well, but do your homework.
Location
As mentioned in the franchising chapter, not all businesses need a great location. Retail businesses need to be in an area where there
is a lot of walk-by or drive-by traffic, but not all businesses have such requirements. The Old Spaghetti Factory always seems to have its
locations near a railroad, and you can bet one reason is because they pay much less for those properties. So there are many things to
consider.
When selecting a location, you must first determine how important foot and car traffic will be to your business. A high profile location
is important when impulse buying is part of your plan. Thus, a gas station needs a great location with a lot of traffic; a dentist does not.
Indeed, an out-of-the-way location can be a great choice for certain businesses. Opening in a redeveloping urban area, for example,
may allow you to benefit from tax breaks, or a grateful consumer base. Generally, if you are selling commonplace items (food, groceries,
clothes, etc.) location is probably more important to you. If you are selling services, or specialized products, location should probably be
less of a concern.
Location Checklist
The things you want to consider when looking at a location are:
Population and Demographics: Will there be enough people to support the business? What has been the reaction and fate
of similar businesses in the area?
Traffic: You want the site to be near some centers of activity. My father owned a chain of carpet stores when I was growing
up, and he loved to be across the street from malls. He figured that he got the benefit of the mall’s advertising and traffic, but
without the high rent of actually being in the mall. Is there public transportation nearby?
Competition: Where is your competition located? Fast-food restaurants often like being bunched together, but print shops
usually like to be the only one in the neighborhood. Are there too many competitors nearby?
Visibility: Make sure your potential location is visible from major roads.
Signs: You need to be sure that there are no restrictions in the lease or the law that will limit your ability to post adequate signs
for your new business.
Zoning: The spot, obliviously, needs to be zoned for your type of business (see below.)
Appearance: Is there adequate parking? Is there a bathroom for the public? Make sure the place is landscaped well, has
adequate outdoor lighting, and has appropriate businesses nearby.
History: Some locations seem to be jinxed. You know the ones – no matter what business moves into that location, it seems to
last for six months before closing up shop. Avoid these locations, as, no matter what you do, the local clientele will already have
preconceived notions about your business.
Rent: Needless to say, you want to be sure that you can afford the location you want. This is where your business plan will
become invaluable. If you avoided pie-in-the-sky projections, then you know exactly how much rent you can afford. Avoid picking
a location simply because the rent is cheap; that should not be your main consideration. While keeping your overhead low is
indeed a key to success in business, a cheap, bad location is similarly a key to failure.
Brand: Your storefront is your window to the world. Make sure yours represents the image you want people to have, the brand
you are trying to create.
There are many different sorts of locations that may have all of these questions already answered, such as shopping centers. While a
shopping center or mall can be a great spot for many businesses, you must weigh the benefits against the high cost of doing business
in that location. Make sure you will be able to make a profit.
An entrepreneur who is starting a manufacturing or wholesale business will have different considerations. While such a business may be
set up in more remote locations, you will want to be sure that you are close enough to town that transportation hubs and services within
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fairly easy access. Be sure that the place is zoned for your type of business. Make sure also you there is adequate cell phone coverage
in the area and that you have access to other necessary services. Other things you might want to consider are:
s $OESTHEBUILDINGHAVERESTROOMFACILITIESANDBREAKROOMS
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s $OESTHEFACILITYCOMPLYWITHTHE!MERICANSWITH$ISABILITIES!CT
s )STHEREROOMTOEXPAND
What if yours is going to be a professional office? Either you can rent space in a professional office building, or go to an executive suite.
Executive suites are small office spaces in office buildings that individuals or small companies can rent. Typically, each tenant has an
individual office and shares the services of the executive suite’s receptionist and use of the suite’s joint conference room, copier, postage
machine and other office equipment.
All you do is move in, and everything you need to conduct business is already in place. Your company is guaranteed a professional image
from the start because executive suites are usually located in high-profile office buildings. You also will have a receptionist to answer
your company’s phone professionally. All in all, it’s a pretty good deal.
Understanding Square Feet
Most commercial office or retail space is quoted by square foot per year. So a 1,000 square foot retail space with an asking price of
$15 per square foot would cost $15,000 per year, or $1,250 per month. This price may or may not include taxes, insurance, utilities,
water, and other related expenses, so be sure to find out what the quote entails.
Locations and legal considerations
Whatever location you choose, you must never sign the lease, or purchase the property, without being absolutely certain that it will be
legal for you to operate the business you want in that location there. There are several different things to consider:
s Z
oning: Cities usually zone buildings and areas into residential, commercial, industrial, and mixed-use areas. You must be sure
that the location you want is zoned appropriately for the business you want to start. Check with your city before signing any
contract. Luckily, even if it’s not zoned as you want, it is possible to get a “variance” from the city. A variance is as the name
suggests, a change in the normal rules. Your lawyer can help with this.
s O
ther legal issues: Find out if there are other legal restrictions that may affect your business. For example, some municipalities
limit the number of certain types of business, such as cafes or fast food franchises, to certain areas. Other restrictions may include
that your business provide off-street parking, or close at a certain time, or limit the size and type of signs you may have, etc. Your
city should have a business development offices that can answer these sorts of questions.
s C
ontract restrictions: In malls and other retail complexes, the lease or CC&Rs may limit what you can do. For example, in a
certain shopping centers, there may be a limit of no more than one news kiosk, or two burger joints.
s H
ome Office restrictions: If you are starting a home-based business, contact your city to see what sort of occupational and
other licenses you may need. Zoning regulations may limit the number of customers you might have, or the signs you can erect,
or even the type of business you can start.
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Location Analysis
Answer these questions:
1. For population information on this area, check with:
Real Estate Agents
Websites
Local planning and zoning boards
Chamber of Commerce
2. The population is:
Steady
Growing
Declining
3. The residents in the area are:
College aged / Young adults
Young families
Middle-aged
Elderly
4. The income levels in this area are:
Lower
Middle
Upper
5. The three major types of businesses in the area are: _____________________________________________________________
6. The number of new businesses opened during the past year: _____________________________________________________
7. “Anchor” tenants and other major draws to the area: _____________________________________________________________
8. Proximity of each competitor: ________________________________________________________________________________
9. For each potential location, answer the following:
High or
low traffic area?
Easy access to
Transportation hubs and freeways
Bus lines
Pedestrians
Adequate signage?
Safe from crime and other hazards?
Condition of the building:
Sufficient:
Office space
Display areas
Storage
Poor
Fair
Fixtures
Restrooms
Good
Infrastructure
Break areas
Excellent
Work areas
Shipping and receiving
Parking
Room to grow
Other features which make this location attractive:_____________________________________________________________
Length of lease: ________________________________________________________________________________________
Total cost per month (including utilities, security, insurance, etc.): _________________________________________________
Negotiating the lease
Negotiating a lease with a landlord is not all that different than negotiating the purchase of a car. The important thing is to know what you
want going into the deal and to remember the rule: Everything is negotiable. The lease you are given is simply a starting point.
Indeed, if you are at the stage where you are negotiating over lease terms, then you have become a valuable commodity to the landlord.
Finding qualified businesses that are willing and able to take on a commercial lease payment is not so simple. Accordingly, you may be
in the power position when negotiating a lease and can ask the landlord for concessions and changes to the lease, as necessary.
You do so by doing your homework first. Find out how much similar spaces are renting for. Is the vacancy rate high or low in this area?
(If it’s high, you can negotiate a great deal because the landlord needs you.) If the space is vacant, find out how long it has been vacant
(the longer the better for you). The more you know, the better equipped you will be to negotiate a good deal.
Once you are presented with the lease, read it carefully, and then give it to your lawyer for review. If you find some part of the lease that
you or your lawyers don’t like, negotiate that point. Remember that the lease was drawn up by your potential landlord’s lawyer and will
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certainly favor your landlord. Remember too that although you might be presented with a pre-printed lease, and that it may seem difficult
to change, it is nothing more than a contract, and the essence of contract law is that both sides must agree to all conditions. That, in fact,
is why a contract is also called an agreement. If you don’t agree, it can be changed.
Negotiating the Lease
The important things to understand and agree to are:
The length of the lease: You want it long enough to establish your business, but not so long that you are locked in if your venture
doesn’t work out. A year or two, with an option or two for a renewal is a good idea.
The lease payments: Getting a month or three free is not unheard of when signing a long-term lease.
Gross or net? Determine whether the lease will be gross or net. A gross lease is one where the landlord pays for taxes, insurance,
janitors, and utilities.
Cap increases: Be sure that your lease limits the amount your landlord can increase your rent. Five percent a year is typical. What
are the terms of the renewal?
Bail-out clause: Especially in a retail lease, make sure that the agreement allows you to get out of it if your sales do not reach a
pre-determined level. Similarly, a co-tenancy clause allows you out of the contract if an anchor tenant nearby leaves.
Other obligations: Make sure you understand all of your obligations under the lease.
DO NOT sign any commercial lease without having it reviewed by an attorney, period.
Above all, try and cultivate a good working relationship with your landlord. That will go farther towards working out problems than a dozen
letters from your lawyer.
The Bottom Line: Both choosing a name and picking a location are double-edged swords. Sure its fun, but a mistake in either area can
doom your business. Your name should reflect your business and be memorable. Your location must be chosen with care, be affordable,
be zoned properly, and be accessible to your customers.
Resources You Can Use
The United States Patent and Trademark Office
Crystal Plaza 3, Room 2C02
Washington, DC 20231
www.uspto.gov
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Chapter 7 – Licenses, Permits and Business Formation
7
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Licenses, Permits, and Business Formation
While deciding what legal form your business should take is not the most scintillating of topics, it may be one of the most important
decisions you will make. The form your business takes can determine how big it may grow, who can invest in it, and whom is responsible
should it get in trouble. It is a critical decision. Once decided, it is then important to handle some other legal issues, namely getting the
requisite licenses and permits required by your city, county, or state.
Business formation
There are three forms your business can take. It can be a sole proprietorship, a partnership, or a corporation, and each of the last two
have subsets. When deciding which of these is best for you, it would behoove you to speak with both your lawyer and your account,
because each choice has different legal and financial considerations to weigh. Below is an overview that you can use as a launching pad
for discussions with your own advisors.
Sole proprietorships and general partnerships
A sole proprietorship is the cheapest and easiest form of business you can start. Simply decide upon a name for your business, get a
business license, file and publish a fictitious business name statement, hang your shingle, and voila! You are in business. Creating a sole
proprietorship shouldn’t cost more than $100.
The downside to sole proprietorship is significant: You and the business are legally the same thing. If something goes wrong, say that
you are a chiropractor and accidentally injure someone, not only is your business at risk, but so are your personal assets. Your home,
cars, bank accounts, everything is at risk when you are a sole proprietor. Another problem with this form of business is that you have no
partners around to work with or bounce ideas off of. It is a dangerous way to do business.
Therefore, having a teammate is why operating a business as a partnership is attractive. Essentially, a business partnership is a lot like
a marriage. You need to pick a good partner because you will be spending a lot of time together and trusting each other. And, as with
a sole proprietorship, in a general partnership, both you and your partner are personally liable for the debts of the business. The danger
is that your partner can make some dumb decisions, get the partnership into debt, and you will be personally responsible for that debt.
So, as you can see, while there are many good aspects to having a partner, partnerships are fraught with danger. You have to weigh the
benefits against the burdens and decide if bringing in a partner is right for you.
Another thing to be wary of is the emotional aspect of having a partner. One advantage to being a sole proprietor, and thus the only boss,
is you have no one to answer to except yourself. That’s one of the definite perks of being a solo entrepreneur. Bringing in a partner means
you will have to consider another point of view before any major decision is made. Also, partnerships do not work out - best friends who
become partners do not always stay best friends.
On the other side of the ledger, there are many things to be said for having a business partner. One is that it enables you to have
someone to brainstorm with. That great idea you have may not be such a great idea after all, and a partner you trust can tell you why.
A partner also gives you another pair of hands to do the work. It is difficult to be the one who has to do everything when you are solo.
Partners alleviate that. Last, and certainly not least, having a business partner gives you someone to share the financial responsibilities
of the business. That is not insignificant.
Having considered the pros and cons, having possibly concluded that a partner can help more than it might hurt, and maybe even
knowing someone you would like to partner with, it is still a good idea before jumping in that you “date” first. Find a project or two and
work together. See how you get along, how your styles mesh (or don’t), how you deal with deadlines, and if the union enhances your
work. Remember, you will be spending a lot of time with your partner, so you need to be sure that you work well together, have a good
time, and have skills that complement one another.
Finally, get some work references and make some phone calls. Deciding to partner with someone is one of the most important decisions you
can make in your small business, so don’t skimp on the homework. As far as the costs go, the licensing and permits are fairly insignificant. The
one cost is in hiring a business lawyer to draft that partnership agreement. That can run anywhere from $1,000 to $2,500.
Limited Partnerships
There are two classes of partnerships - general partnerships (discussed above) and limited partnerships. In a general partnership, all
partners are equal. Each partner has equal power to incur obligations on behalf of the partnership, and each partner has unlimited liability
for the debts of that partnership. Because each partner in a general partnership is equal vis-à-vis power and liabilities, some partnerships
decide to form as a limited partnership instead.
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In a limited partnership, there is usually only one general partner (although there could be more.) The other partners are called limited
partners, hence the name limited partnership. In a limited partnership, the general partner or partners have full management responsibility
and control of the partnership business on a day-to-day basis. The general partner runs the show and makes the decisions. A limited
partner cannot incur obligations on behalf of the partnership and does not participate in the daily operations and management of the
partnership. In fact, the participation of a limited partner in the partnership is usually nothing more than initially contributing capital and
hopefully later receiving a proportionate share of the profits. A limited partner is essentially a passive investor.
Yet, while the general partner has all of the power, he or she also has the lion’s share of the liability. A limited partner’s liability is capped
at the amount of his or her financial contribution to the partnership. Should the truck of a limited partnership kill someone accidentally,
the damaged party could go after the general partner’s personal assets, but would be limited to the limited partner’s capital contribution.
Thus the main advantage to this business entity is that it allows the general partner the freedom to run the business without interference,
and gives the limited partners diminished liability if things go wrong. Although a limited partner may seek to be more involved in the dayto-day operations of the partnership, he or she does so at some risk. If he does participate more, it is altogether possible that he or she
may viewed as general partner in the eyes of the law, with its attendant liability risks.
Another key benefit of the limited partnership, aside from the diminished liability of the limited partners and freedom of the general
partner, is that it pays no income tax. Income and losses are attributed proportionally to each partner and accounted for on their
respective tax returns. Because of this flow-through tax treatment, a limited partnership is often the structure of choice for real estate
ventures and investment securities groups.
If you do decide to start your business as a partnership, have your partnership agreement drafted by an attorney. Again, the costs will
likely run from $1,000 to $2,500 or so.
Incorporating
The best thing about forming your business as a corporation is that it limits your personal liability, which is not true for partnerships and
sole proprietorships. For example, say that you owned a tire shop, that one of your employees negligently installed a tire, and that the tire
fell off the car and caused a three-car accident, including several personal injuries. If your tire store was not a corporation, the injured
parties could come after you personally for money damages. This means that you could lose your business, your house - everything. That
would not be true if you incorporated. Creditors are limited to the assets of the corporation only for payment and may not collect directly
from the shareholders.
Pros and Cons of Incorporating
Pros
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and apart from the owners.
s 3OLEPROPRIETORSHIPSANDPARTNERSHIPSNORMALLYENDUPONDEATHDISABILITYBANKRUPTCYORRETIREMENTOFTHEPROPRIETOROFAPARTNER
Corporations, being a separate legal entity, do not cease to exist when one of the founding members leaves.
s !STHECORPORATIONGROWSMANAGEMENTANDOWNERSHIPCANBESEPARATED3OTHATTHEBUSINESSCANCONTINUEANDTHEOWNERSCAN
still reap benefits, but they need not run the corporation if they don’t want to.
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(see below.)
Cons
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)TCANBEEXPENSIVETOCREATEANDPOSSIBLYDEPENDINGUPONTHESITUATIONTOMAINTAIN9OUCANALSODOITYOURSELFAT,EGAL:OOMCOM
-AJORITYSHAREHOLDERSCANOVERPOWERMINORITYSHAREHOLDERS
4HESHAREHOLDERSASOWNERSHAVELITTLESAYINDAYTODAYOPERATIONS
!CORPORATIONISSUBJECTTOGREATERGOVERNMENTALREGULATIONANDCONTROLTHANOTHERSORTSOFBUSINESSENTITIES
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There are several types of corporations:
Limited Liability Companies (LLC)
Limited liability companies (or LLCs) combine many of the advantages of a corporation and a partnership without the disadvantages. The
LLC is a fairly recent business entity that may offer greater business and tax advantages than a regular corporation, while also offering
better business and structuring advantages than a partnership.
Like a corporation, an LLC provides the limited personal liability that is so attractive in corporations, along with being a separate legal
entity that can sue and be sued as well as buy and own property. Similar to a corporation, a sort of “articles of incorporation” must be filed
with the state, and a registered agent must be named for service of process. Like a partnership, shares in the LLC cannot be transferred
without the approval of all other members of the LLC.
The death, retirement, expulsion or bankruptcy of one member does not end the LLC. If all of the remaining members agree, the LLC
can continue, and in a few states the law allows the business to continue with the consent of fewer than all the remaining members.
Closely held corporations
Allowed in some states, a close corporation is one whose shares are owned by only a few shareholders. Although there is no specific
number, Delaware corporate law states that a close corporation cannot have more than thirty shareholders. Less than 15 is more typical.
The purpose of a closed corporation is to keep ownership and control within a small group of shareholders who have the same goals.
In a close corporation, distinctions between directors, officers, and shareholders are normally absent as the few owners own and operate
the corporation without formalities. Unlike publicly held corporations, a closely held corporation’s shares are not traded on the open
market. The advantage to doing business this way is that;
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The downside is that a few shareholders who disagree with the majority are generally out of luck as they cannot freely sell their shares.
Professional Corporations
This is a certain type of corporation that is designed for professionally licensed entrepreneurs only, and that professional can be the
only shareholder. The type of professional that can take part in this plan varies by state, but usually includes doctors, lawyers, dentists,
psychologists, and accountants. Note though that a corporation cannot normally shield you from a malpractice award.
S and C Corporations
S corporations are intended for smaller enterprises and are a very common form of business for many small businesses. Like an LLC,
S corporation are informal enough to allow you to run your business like a sole proprietorship or partnership, while still giving you the
protection of the corporate shield. That is, limited personal liability.
A big disadvantage of regular corporations (or C corporations as they are legally known, see below) is that they are taxed twice: Once
when profits are realized, and a second time when those profits are passed onto the shareholders. The advantage of the S corporation is
that it avoids this double taxation and profits are only taxed once. In fact, S corps do not pay a corporate tax at all, instead its shareholders
report profits and losses on their personal tax returns. So the advantages of S corporations are obvious.
To create an S corporation, you must first file the necessary articles of incorporation with your Secretary of State’s office. You then need
to file a Form 2553 with the IRS. This is a fairly complicated matter so it may be best to hire qualified legal counsel.
A C corporation (S and C are tax code names) is your basic, standard variety, large corporation. GM and Exxon are C corporations. The
distinguishing characteristic, and the reason you might want to pick this entity, is that its shares are easily transferable.
So which is best for you? If you plan on creating a large company (one that is publicly traded) you choose a C Corp because shares
of stock are most easily bought or sold. While you might want an S corporation for tax reasons, they are limited to no more than 100
shareholders, all of who must be individuals, and that is sometimes a problem. LLC’s trump S Corps since they have no limit on the
number of shareholders, and those shareholders can be corporations and partnerships. Generally speaking, LLCs and S Corps are best
for smaller start-ups and C corps are best for larger ones.
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Comparing Business Entities
Limited
Liability
Perpetual
Existence
Separate
Legal Entity
Cost
Sole
Proprietorship
Easy
Transferability
Of Ownership
No
No
No
No
Low
General
Partnership
No
No
No
No
Low
LLC
Yes
Yes
Yes
Yes
High
Close
Corporation
Yes
Yes
No
Yes
High
S Corporation
Yes
Yes
Yes
Yes
High
Professional
Corporation
Yes
No
No
Yes
High
C Corporation
Yes
Yes
Yes
Yes
High
Licenses and Permits
There are some bureaucratic hoops still to jump through before you open your business. If you are going to operate a sole proprietorship
or partnership using a name different from your personal name, you are probably required by your city, county, or state to register your
fictitious business name, also known as a dba (doing business as.) Registering your dba with the proper authorities puts the public on
notice that you are the owner of the business. Corporations are not normally required to file a fictitious business name statement, unless
they too are operating under a different name. Also, know that some banks require such a statement before opening a business bank
account.
Requirements for filing the fictitious business name statement vary according to locale. Some places require that you file a form and
pay a fee to the county, others require that you do so with the city. The process usually just requires that you go to the proper office, fill
out a fictitious business name statement, and pay a registration fee (usually less than $100.) Some places require that the statement
be published in a local newspaper too.
You will also need to get a business license from your city or county. Other permits and requirements to be aware of:
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environmental regulations.
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lawyers, doctors, nurses, cosmetologists, real estate brokers and agents, mechanics, plumbers, electricians, contractors, and
insurance agents.
You can begin your journey down the permit path by visiting your city’s business planning office. It should have a packet that explains
exactly what licenses and permits you need, where to get them, and what they cost.
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The Bottom Line: No, dealing with the legalities of your business is not much fun, but that doesn’t mean it can be overlooked. Working
with your lawyer and accountant will help you make the right decision. In most cases, forming some sort of corporation is in your best
interests.
Resources You Can Use
LegalZoom
www.LegalZoom.com
TheSelfEmployed
TheSelfEmployed Legal Center
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Chapter 8 – Get Your Business Funded
8
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Get Your Business Funded
As indicated, because the new business presents a risk to banks, conventional loans are not always easy to get. The United States
government knows this, and yet it wants to encourage entrepreneurship. The result is that the U.S. Small Business Administration can
be one of the best friends your new business can have.
Although the SBA does not make loans, it guarantees them. So, whereas a bank might be a bit hesitant to loan your new business
money, they might be far more inclined to do so if the SBA guarantees the loan. The SBA works with about 150 approved lenders
nationwide that actually make the loan. The SBA’s intermediary lenders have experience making and servicing loans and providing
technical assistance to the borrowers. That means that not only can a new business get a loan, but the lenders also can offer business
guidance in the process.
The SBA has many different sorts of loans that it has created and offers through its member banks. For example, the SBA Microloan
Program lends a maximum of $35,000 to entrepreneurs in any stage of business. Other loans go up to a million. To learn more about
SBA loans, and to find a list of intermediary lenders in your area, go to www.sba.gov.
The “Four Cs”
Whether you work with an SBA lender or not, you will still need to qualify for the loan. While it is basically true that a loan is a loan, lenders
have different criteria for making a small business loan. You must understand what the bank is looking for so that you can meet those
conditions.
Because an element of risk is involved in every loan a bank makes, your job is to make your bank feel your loan’s risk is low. You can do
so if you understand the “Four Cs” of business banking. When a banker considers a business loan, it will analyze your loan application
through the filter of these “Four Cs.”
Character: What is the character and integrity of the borrower? Because your character is so important in the loan approval process,
its importance cannot be overestimated. Character is determined by your past credit history, payment history, letters of reference, etc.
Capacity: What is the ability of your business to repay the loan? When it comes to lending, banks are most concerned with cash flow.
Many bankers feel that a small business’ cash flow statement is the single most important financial document when considering a loan
request because in it the bank can see if the borrower has the capacity to repay the loan. Make sure you can show your banker that your
cash flow picture will work, even with the principal and interest payments included.
Capital: How much money are you asking for and is the dollar amount requested justified by your supporting documentation? The more
money you ask for, the more people who will review your loan and the more scrutiny your request will get. Smaller loans are easier to
get. If you are unsure about how your capital requirement fits with your proposal and with your banker, then it is a good idea to have a
preliminary meeting to talk about this in order to make sure that your request fits all requirements.
Collateral: Do you have something to pledge to the bank as a security? A small business can offer many different types of collateral — a
mortgage on realty or inventory and accounts receivable for example. Collateral makes bankers’ job easier, helps them sleep and allows
them to say ‘yes’ to loan requests.
So, if you need capital, think like a banker and understand these four concepts before you apply.
Other loan options
If a conventional loan is out of the question, it might help to know that banks make other sorts of loans as well. This is especially true if
your business is already generating some money, or if you already have clients or assets:
Accounts receivable financing: This revolving line of credit is based upon your accounts receivable. A typical program enables you
to borrow a predetermined percentage of accounts receivable, usually 80%.
Purchase order financing: Say that you have a purchase order for $50,000 worth of widgets, or sign a $50,000 contract, using this
method of financing can obtain advances on contracts that can be repaid directly by your customer.
Fixed asset loans: These loans are based upon fixed assets (such as machinery you own).
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Angels
If a bank loan is simply not possible then consider the angel option. An “angel” is as the name implies – someone who has extra money
and who is willing to take a risk on a new venture. But they do so for a price. What price, you ask? Ah, well that’s the rub. You will be asked,
in all likelihood, to not only give up a big piece of the pie, but also some control if you are to attract an angel. It is not uncommon to give
up 30% of your business to an angel, as well as a say in how things are run. Angels want to make a big profit on their investments and
understand the high risk of a start-up business. Accordingly, they will ask to see tight budgets and realistic sales goals.
Angels are out there, but you have to look for them. Ask around. Meet with some stockbrokers, real estate firms and the like to get
some names of possible investors. If you are willing to give up some power, equity and decision-making, angels can provide an excellent
funding source for the new business.
If finding an angel investor is part of your plan, then follow these four steps:
1. Prepare your pitch: An “elevator pitch” is business lingo for a proposal that can be explained in the length of time you might be in
an elevator with the investor. Let’s say you found your angel, and for whatever reason, you both got in an elevator on the 29th floor of
a building. You would have about 30 seconds of uninterrupted time to pitch you, the business, the idea. So your elevator pitch must be
intriguing, make sense, be short and powerful, and should motivate someone into wanting to schedule a meeting or learn more. Even if
you are never in an elevator with a potential investor, a quick pitch will still be necessary when the time comes.
The “pitch” aspect also requires two written components:
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may be the first thing the angel will read about your business and why he should invest in it. The Executive Summary should state
clearly how much seed capital you are looking for.
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2. Do your research: You need to come up with a list of potential angels and the narrow down your list to a few of the most likely. Once
you do that, you need to learn about that person:
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3. Contact the angel: This is when your pitch, both oral and written, will be needed. The important thing is to pique their interest and
find some common ground. If you were referred to them by someone you both know, tell him. If you are starting a business like the one he
started, let him know. Do you go like the same ballclub? By creating a sense of common ground with a prospective angel, you increase
the chances that your funding proposal will be taken seriously.
Remember that many angels like being advisors and mentors, and also may be willing to use their own contacts to help you find additional
funding or other assistance. All you have to do is ask.
4. Research the deal: If you are offered money, have your lawyer review all agreements. Also, get some references from the angel for
other deals he has done. Call them up and make sure the angel is good to work with and legitimate.
Creative Funding
In my book, Get Your Business Funded: Creative Ways to Get the Money You Need, I share almost 25 various, creative, and new ways to
fund a business, everything from friends and family to crowdfunding is covered. You likely should check it out as well.
The fact is, for many new businesses, loans and angels are simply not an option. What then? Funding a business – whether it is small or
big, freelance or not, full-time or part-time, a start-up or for growth – is always challenging, and is especially so when the economy has
been less than stellar. But that doesn’t mean that the money is not out there. It is. You just have to know where to look.
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Here are some great options:
1. Crowdfunding: Crowdfunding is one of those cool ideas that really only is possible because of the Internet.
Here’s how it works: With traditional business funding, you either take on some debt and agree to pay it back, or share some equity and
take on some partners. Crowdfunding is different. On a crowdfunding site like IndieGoGo or Kickstarter, you list your business or project
and ask people to invest in it. Then, instead of paying them back with money or equity, you agree to pay them back with some “perk”
from your business. Although the crowd invests small amounts of money (typically in the range of hundreds each, or less), by appealing
to the masses, you can raise thousands.
Example: Say you want to open a food cart. You could create a crowdfunding campaign whereby you might agree to name various
sandwiches after your crowdfunding investors. I heard of a campaign where a woman wanted to travel around the world and offered
people a postcard from her various stops in exchange for small donations. It worked.
There is an explosion in business plan competitions right now.
2. Business plan competitions: There is an explosion in business plan competitions right now. Communities see them as a way
to attract and reward successful business ventures that can boost the economy, and universities use them to reward the best and the
brightest. Winners win assistance, in-kind contributions, and yes, funding.
For example, the Rice University business plan competition “has grown from nine teams competing for $10,000 in prize money in 2001,
to 42 teams from around the world competing for more than $1.3 million in cash and prizes” (alliance.rice.edu).
3. Business incubators: How great is this idea: Business incubators are, generally, public-private partnerships that also reward great
businesses and startups with financial assistance. And the reason is similar to business plan competitions: The incubators want to foster
entrepreneurship and boost their local economy.
While some business incubators offer funding, more typical is the incubator that offers its participants in-kind assistance and steep
discounts, such as:
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Google “business incubators” and the name of your city or region and you will find some.
4. Microfinance: Microfinance is usually thought of in terms of the third world. But today, it has come to the U.S. You can get small micro
loans from a variety of local, community institutions called Community Development Financial Institutions (CDFIs). Loans are typically for
$10,000 or less, and loan underwriting is much easier than with a conventional bank loan.
Google “Microfinance loans” and the name of your city to learn more.
The Bottom Line: To get the money you want, you first need to know how much you will need. After that, you can target various
sources, including friends and family, banks, angels, and VCs. No matter who you look to tap to fund your venture, they will want to see
that you have a plan for making a profit and paying them back in a timely fashion.
Resources You Can Use
Get Your Business Funded
Get Your Business Funded: Creative Ways to Get the Money You Need
Kickstarter
www.Kickstarter.com
IndieGogo
www.IndieGoGo.com
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Chapter 9 – Assembling a Great Team
9
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Assembling a Great Team
Entrepreneurs often say that their employees are their most valuable asset. And they do that because it’s true. So let’s look at how to
assemble and keep a team that gets you to where you want to go.
Hiring
Hiring employees should be a fairly enjoyable process. (In fact, most of your small business should be fairly enjoyable—that is a big
reason why we are in business for ourselves. But I digress.) Finding and hiring the right people is a chance to implement your vision
for your business. You get to locate the types of people you would like to work with and the types you think your customers would like
dealing with.
As much as you look at background, education, skills, and intelligence when hiring, you should equally consider personality and
compatibility. You spend plenty of time with your employees, and you want to make sure that yours will be an enjoyable place to work.
Finding and hiring good employees, therefore, is one of the most important things that you can do as a small business owner. Employees
help set the tone, employees do the work, employees deal with customers, and employees are the ones on the front lines. If they blow it,
they give you and your business a bad name, and conversely, if they do things properly, you all win.
Preparation
Before hiring anyone, you need to have a very clear idea of what the position will entail. Write a job description that includes duties, hours,
responsibilities, and so on. This will help you focus on the qualities that you want in an employee. Based on the job description, consider
how much schooling and experience the person should have, what sort of people skills are necessary, what you want from the employee,
and so on. Some of this can be gleaned from an employment application.
Sample Employment Application
PERSONAL INFORMATION
Name: ____________________________________________________________________________________________________
Address: __________________________________________________________________________________________________
Phone number: _____________________________
Social Security number: __________________________________________
Position applying for: ________________________ When are you available to start: ____________________________________
EMPLOYMENT INFORMATION
Please list your employment for the past three years: ______________________________________________________________
Date: _____________________________________ Employer/Supervisor: ____________________________________________
Employer/Supervisor: ________________________ Address/Phone #: ______________________________________________
Duties: ____________________________________________________________________________________________________
Special skills and qualifications: ________________________________________________________________________________
Other:_____________________________________________________________________________________________________
EDUCATION
School:____________________________________________________________________________________________________
Years of attendance: _________________________ Did you graduate? ______________________________________________
REFERENCES
Please list three references
Name _____________________________________ Relationship _____________________________ Years Acquainted ____
Address/Phone #: __________________________________________________________________________________________
Name _____________________________________ Relationship _____________________________ Years Acquainted ____
Address/Phone #: __________________________________________________________________________________________
Name _____________________________________ Relationship _____________________________ Years Acquainted ____
Address/Phone #: __________________________________________________________________________________________
Dated: ____________________________________ Signed: _______________________________________________________
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After receiving the application and weeding out the undesirables, you should prepare an interview questionnaire that you can use as a
guide for the interview. You will need to explore the candidate’s background, experience, qualifications, ideas, intelligence, and references.
Be sure to include open-ended questions that require the applicant to explain things. You should have several questions ready regarding
each important attribute for the position.
Finding Qualified Applicants
Once you know what you want from an employee, you need to find a stable of potential candidates to interview for the position(s). Of
course, a help wanted ad in the classifieds, in your window, or on a site such as Monster.com can draw a pool of applicants, but don’t
overlook other options:
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listing on state job boards but also may prescreen applicants for you.
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Interviewing
With all interviewees, you need to discover whether they are responsible, why they left their previous jobs, whether they can take
direction, if they have ever been fired, why they want this job, and their qualifications for the position. Also, as mentioned, as much as you
want someone who meets your qualifications, do not overlook the applicant’s personality and how well you may or may not get along. Be
sure to get references and a resume.
“Always choose attitude over experience. When I hire people I make a habit of never looking at their resume because
most people spend most of their life in the wrong job. I never hire complainers or excuse makers because they’ll
find a way within my company to do more of the same. People with a can-do attitude are a pleasure to work with.”
—Real estate millionaire Barbara Corcoran
Your interview should be straightforward, but not predictable. Be sure to ask some questions that (1) the applicant is not ready for and
(2) will force thinking on the fly. To the extent you can also get into a conversation and not just a Q and A session, do so; it should reveal
some interesting information.
Coachability
It is hard to underestimate just how important the employee-hiring process is. A good employee may be a new profit center or simply
another pair of valuable hands—selling, helping, assisting clients, and boosting morale. On the other hand, the wrong person can steal,
create havoc, anger customers, and hurt sales. Worse, if fired, an unscrupulous employee might even sue for wrongful termination (that
is, illegal termination), even though you were legally and morally correct in letting him go.
Therefore, you cannot be too careful when interviewing potential employees. Of course, honesty, intelligence, skill, and affability are
important. You can garner much of that information from resumes, references, and interviews. Knowing what people did in the past is a
pretty good indication of what they will do in the future. Really, that is rather standard stuff. Most small business owners have a pretty
good sense of what they are looking for in an employee. You know about checking references.
However, one area that is often overlooked is something I call coachability, and it is vital to making a smart hire. Coachability is an
employee’s ability to take direction and make changes, to listen and adjust, to think and respond. Just as not everyone is cut out to be
an entrepreneur, not everyone is cut out to be an employee.
Running a small business and hiring the right employees is not unlike running a sports franchise. There are good teammates and
bad teammates. There are employees who make everyone around them better and those who hog the ball. As in sports, uncoachable
employees can ruin your team. You have to stock your business with employees who are willing to do things your way, who listen, who
can take constructive criticism, who are willing to try new things, who are adaptable and positive—who are coachable.
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So, when interviewing prospective employees, be sure to find out what kind of teammate they have been and will be. As much as skill
and smarts, their coachability can make or break your season.
New Employee Agreements
Whenever you hire new employees, there are several agreements that you may want to consider having them sign.
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You should also have an employment contract, as it is a good way to memorialize your agreement with the employee. It is critical that the
contract state clearly and boldly that “nothing in this agreement is intended to guarantee employment or alter the fact that [name of the
employee] is an at-will employee.” This document helps clarify your relationship with the employee, but it is also an important defense in
any future litigation. The agreement should cover the following:
s Compensation: This section details the employee’s base salary and benchmarks for bonuses or commissions.
s J ob description: Explain in detail what is expected of the employee, including hours, duties, sales quotas, everything.
Be expansive and explain that other responsibilities may be added later on.
s Benefits: Your benefits package should be explained. You should reserve the right to change the benefit plan.
s S
tock options: If you offer stock options as part of your benefits or incentive program, the process by which they are attained
and exercised needs to be explained.
s Arbitration: Litigation is expensive, and many employers have mandatory arbitration clauses in their employment agreements.
s Immigration status: Employees must verify that they are citizens of the United States or have the proper work visa.
Both you and your employee need to sign the contract, and you should keep a signed copy in a safe and secure place.
You may also consider having an employee handbook that explains important policies and procedures, such as workplace safety,
antidiscrimination policies, handling of complaints, discipline, sick leave, and vacation policies. This handbook should also reiterate that
workers are considered at-will employees.
The New Employee
People work for many reasons, and compensation is just one of those reasons. To create and sustain a successful small business, you
need to take into account the many benefits that people derive from work. From the noble (the desire to make a difference) to the
mundane (the need for health insurance), work means different things to different people. Although pay is the main way you compensate
employees for a job well done, it is by no means the only way. What you want is to create the conditions that foster a happy, productive
workplace:
That requires creating a place where people like to work – a great culture – and giving them pay and benefits commensurate with their
experience and expectations. By law, you are required to give employees only certain benefits, although they are probably not the ones
you might think. You must:
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You are not required to give employees benefits such as;
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Of course, although you are not required to offer such benefits, if you want to create a place where people want to work, a place that is
special, a place that engenders loyalty, you will want to provide some or all of these benefits.
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The quality of your benefits package is something that employees will look at when deciding whether your business is a place they want
to work. And because the quality of the employees you attract has a direct impact on the quality of your business (and the quality of your
bottom line), offering a full benefits package is an important criterion to consider, albeit an expensive one.
The Bottom Line: Hiring your team is just about the most important thing you will do. Choose wisely, grasshopper.
Resources You Can Use
IRS
IRS New Employee Hiring Center
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PART II
THE SELF-EMPLOYED
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Chapter 10 – The Self-Employed Revolution
10
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The Self-Employed Revolution
Pull up a chair and let me tell you a little story: I know of a guy who used to have a real cushy job on Wall Street back in the ‘90s. He
analyzed other companies for a living, made the big bucks, had the sweet lifestyle — the whole enchilada.
Then one day his boss gave him the assignment to research a new industry and report back on what opportunities may lay there. He did,
and found that the nascent industry was actually growing at something like 2,600% a year— some amazing number. So yes, he reported
back to his boss, but also could not get that number out of his head.
Not long after, with an understanding mate and a big dream, he quit his job to become self-employed in this new industry. They packed
up the car, and as his wife drove west, he pounded out a business plan on his computer. When they got to Seattle, they rented a little
place, and he started his business in the garage.
The guy? Jeff Bezos. The Industry? The Internet. The business? Amazon.com.
Self-employment allows you to chase the dream.
Beyond that, there are all sorts of other reasons to go the self-employment route, and more and more people are opting to do so, but
first, what do I mean exactly by “self-employment?”
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essentially anyone who earns their income from the operation of a business.
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occasion.
A woman in a startup with $1 million in venture capital funding and eight employees is not self-employed per se, but the lawyer who left
the firm to go solo is, as is your independent plumber, bookkeeper and Web designer.
There are many, many very good reasons to become self-employed, but let me begin with this one, this ironic one: Self-employment
offers greater job security than working for someone else.
As we all know only too well, bosses can fire you. But when you are self-employed, hopefully you have a pretty good boss, and he won’t
fire you. (Yes, he may work you too hard, but that’s a different issue.) Sure, you may lose a client — heck, you will lose a client — but when
you are self-employed, you can go get another one, and likely, you already have other ones. When you are an employee, you have one
“client,” and when that client lets you go, you are up a river without a paddle.
Other benefits of becoming self-employed:
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s #REATIVEWORKˆYOUWEARMANYHATS
s !BILITYTOMAKEMOREMONEY
s #HANCETODOSOMETHINGYOULOVE
s /PPORTUNITIES
On that last point, I know of a Gen Y woman who, like many people in her generation, has chosen to go the self-employment route rather
than the traditional employee route, even though she is as smart as a whip, responsible and competent, has mad skills, and would make
a great employee.
How many self-employed people are there in the United States? According to the Bureau of Labor Statistics, the number is about 15 million.
Other estimates peg it over 20 million. Either way, the self-employed are by far the biggest category of small business in the country.
Instead, she freelances between two or three big clients at a time. This allows her to spend time with her young ones and sharpen her
skills along the way. And just last week, one of her clients offered her a great new gig, one that will use her skills in new ways, and she
couldn’t be happier. (And she gets to work after 8 p.m., when the kids go to bed.)
But it’s not just Gen Y that sees the genius of this type of work. Increasingly, Baby Boomers do, too. Whether its starting a new gig
because retirement was a bore, or to build up their nest egg that was swallowed-up by the stock market meltdown, or because they
were let go and face age discrimination and cannot find another job again, older Americans are increasingly joining the ranks of the
self-employed.
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Digging Deeper Into Self-Employment
I have a question for you: Let’s say that you have been out of work for many, many months and your unemployment benefits are about
to expire and you have no real prospects of finding a job? What do you do? Or what if you are a single mom and need the flexibility of
making your own hours but your boss doesn’t quite see things that way? Or what if you have had it working for someone else and what
you really long for is to be your own boss? What do you do?
You join the ranks of the self-employed, that’s what. And even better, you can do it on the cheap.
It is no secret that the nature of work is changing rapidly right now. More people are working outside of an office and outside the
traditional 9 to 5 job. Companies are finding that they can get by hiring freelancers instead of employees. And a whole new generation
of workers are similarly discovering that they don’t need that job that they once thought was so indispensable.
It’s a revolution, a self-employment revolution.
There are many things that have coalesced to create this self-employment revolution, and not the least of which has been the challenging
economy the past few years which has forced more than a few people to become entrepreneurs — whether they wanted to or not.
For more information, check out TheSelfEmployed.
And fortunately, technology has made that doable. Not long ago, becoming self-employed may have seemed daunting —where would
you find the work, how would you do the work, did you have the resources to do a good job?
All that has changed in the blink of an eye.
Today, it’s all possible. Whether it’s computers and software, smartphones and apps, websites and searches, or what have you, the fact
is, being successfully self-employed today is quite possible.
More and more people are headed down this path. Jobs are in scarce supply, and underemployment is a serious problem. Things look
bleak. But, truth be told, there has never been a better time for individuals to start new businesses. Taking up entrepreneurship is a way
to overcome unemployment and underemployment, and perhaps even get rich. Where a traditional office or retail space was a necessity
less than a decade ago, today, thanks to the rise of virtual office services and co-working spaces, working from home or Starbucks is
the new norm.
But this begs the question - how exactly do you do it? When someone goes the self-employment route, they usually know a lot about the
sort of business they may want to start (the gardener knows plants, the graphic artist knows how to design a website). But they usually
do not know a lot about the other two-thirds of a business: How to get customers, advertising and marketing, law and taxes, how to buy
their own health insurance, and on and on.
Of course, the rest of this book can help with those things.
And, if you would allow me a shameless plug, I would like to suggest that a new site that I created is a worthy addition to your
self-employment research: TheSelfEmployed.com is a Web portal for all things self-employed. Working with corporate partners like
EHealthInsurance and others to offer special deals and opportunities, the site has a ton of valuable content, ideas, strategies, and tools
for the self-employed: articles, how-to videos, podcasts, forums, and more, all intended to make your self-employment journey a fun,
successful, and profitable one.
When is It Safe to Quit Your Day Job?
The way most people become self-employed is this: They start out part-time, at home, while keeping their full-time job. It is no easy feat
running two enterprises at once, be it a job and a home-based business or a business and a family. Yes, we live in the age of the multitasker, where gadgets like smartphones and tablets make such endeavors easier, but easier is not the same as easy.
Indeed, taking an idea, executing on it, making a profit, and then keeping it going takes a lot of mental, emotional, physical, and financial
bandwidth. It demands total commitment, dedication, and attention. But if you can’t give it the full attention that it deserves because of
life circumstances, either family or another job or some other commitment or circumstance, while, not fatal, it is not good either.
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The nature of a startup is that the sooner you can give it 100% attention, the better, because that is how you give it the best chance of
success; just as a baby requires your full attention, so too does your startup baby.
But this caveat is also important to keep in mind: The timing has to be right. If you started a business with the coffers flush, bully for you
and you get to go forward at full speed. But for everyone else – for the part-timer, the weekend warrior, the bootstrap entrepreneur – the
question becomes: When I can I in fact make this my full-time occupation?
Top 5 Signs That You Can Quit Your Day Job
5. You are headed in the right direction: Starting your own business at home, at night, or on weekends requires that you not only keep
up with your regular job, and your home or family commitments, but that you also dedicate the bulk of the rest of your hours to the gig.
As such, it will take a while to get off the ground, gain altitude, and fly in the right direction. But once you do get past that initial startup
phase, once you have a tailwind and are headed in the right direction, then you know that you are on the verge of safely letting go of the
safety net that is your job.
4. You know what you are doing: A correlation to the previous sign is that you know you can make it a full-time endeavor once you
get past the novice stage and actually know what the heck you are doing. Sure, you can fly earlier, but if you aren’t ready, if you don’t
know really what works and what does not, you will more likely fall from the nest rather then soar with the eagles.
3. You have reliable customers: Notice I did not just say that you have customers, but that you have reliable customers. They are not
the same thing. Customers come and go. They stay, buy, and fly. (And okay, I’m done, having clearly beaten this flying metaphor to death!)
Reliable customers are different. They found you and like you and like working with you or shopping from you. Reliable customers give
you both the confidence and the financial wherewithal to do it on your own without the safety of the every-two-week paycheck, benefits,
and healthcare.
2. You make enough money to (almost) live on: Again, notice the “almost.” If your part-time business gives you enough of an
income that you are thinking you can do even better if you go full-time, you are probably right.
One of the great things about a job is that you do in fact get that scheduled paycheck. But if your part-time business is bringing in enough
income such that you are contemplating flying the coop (okay, sorry, I’m not done), then you are probably ready. But this should also
mean that you have saved up some money. Quitting will hit your wallet, as will making less, as will ramping up, as will buying your own
health insurance and more. That money you are making in your extra endeavor now should become the nest egg of its full-time version.
And the #1 sign you are ready to quit your day job . . .
1. You can’t not do it: When you get to the point when the business is going so well, when opportunities are presenting themselves,
when it’s so fun and profitable that you miss it and think about it when you are not doing it, when not doing it more costs you money, then
you are ready to do fly like the wind, my friend.
4 Self-Employed Startup Mistakes to Avoid
It is never fun to make a mistake in business, even if they are inevitable. And yet, even so, mistakes are both more prevalent and more
dangerous during the start-up phase of your business because your idea has yet to be fully cooked; the start-up period is, unfortunately,
usually the ‘error’ part of a ‘trial and error’ phase for you business.
And no, not all mistakes are bad mistakes when you’re self-employed.
That said, even though mistakes are to be expected, they need not be crippling, or even negative. Not a few entrepreneurs have stumbled
into success when they discover ways to make money in their business that they didn’t know were possible. For instance, Dr. Spencer
Silver was trying to create a super sticky glue for his employer, 3M, when he mistakenly came up with an adhesive that was instead sortof sticky. What to do with somewhat sticky glue? 3M created the Post-it note, that’s what.
And yet, while some mistakes are happy accidents, many are not. Here are the ones you really need to avoid if you are going the
solopreneur route:
1. Taking on too much debt: Most entrepreneurs have to take on some debt to fund the dream. That is expected and is fine. But you
simply must 1) keep that indebtedness to a minimum, and 2) have a plan for paying it back from the get-go.
It will take a while for that new business to begin to generate revenue, and while that happens, your debt load will increase due to interest.
And the bigger it grows, the more it threatens the lifeblood of your business, your cash flow. Keep your debt low and get out from under
as soon as possible.
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2. Having no marketing strategy: As I am wont to say, starting a new business is like being alone in a dark room – you know you are
there but no one else does. The only way to turn on the light, the only way to get people to know you are out there, is through marketing
and advertising.
It need not be expensive. There are scores of ways to get the word out without breaking the bank – everything from tweeting to flyers
to creating a viral video can work. A shoestring marketing chapter comes later in the book actually, but whatever the case, market and
advertise your business, and then do it some more.
3. Not choosing well: The next chapter will help with this, but suffice it to say here that it is important to look before you leap. For
instance, some people get so excited about a business idea that they don’t really stand back and give it the proper, objective analysis
they should…and then, for instance, they are surprised that the rent at their shop makes turning a profit quite challenging, or that their
franchisor is hell to work with.
Choose wisely, grasshopper.
4. Not having a team: There are 20 million businesses in this country that are one-person endeavors – the self-employed, the
solopreneur, freelancer, and independent contractor. But being alone does not mean that you have to be totally on your own, and
you shouldn’t be. The good news is that there is a lot of help available, even when you are self-employed: SCORE, the SBA, and
TheSelfEmployed.
Mistakes may be inevitable, but these four are not.
So let me offer you congratulations if you are joining the ranks of the self-employed. You are fueling the new economy, creating a work
revolution, and I bet, having a great time in the process. Bravo.
Resources You Can Use
TheSelfEmployed
TheSelfEmployed
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Chapter 11 — The Home-Based Business Advantage
11
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The Home-Based Business Advantage
Don’t make the mistake of already deciding that your solopreneur gig is not going to be a home-based business. It may not be, and yet,
it may. The important thing to understand is that there are two types of home-based businesses, and yours might fall into either category.
The first is the one that is intended to start and remain a home-based business. Many people start their business at home for the simple
reason that it is an easy, convenient, and inexpensive option. They intend to keep their business there.
But maybe just as many people start their business out of their home with the idea of moving it out as soon as feasible. These folks
understand that in the early, critical, start-up phase of their business, money is vital, and starting from home affords them the luxury of
spending their capital on needs other than rent. Smart thinking, that. It may not be surprising then that many businesses you know started
out as a home-based business, such as:
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Success leaves clues. These are some of the best businesses of all time. One thing they share is an understanding that a small, homebased business can turn into a big business. By saving their money and utilizing resources already available, the entrepreneurs who
started these businesses were able to turn their attention, efforts, and capital towards their business. It’s a valuable clue.
Real Life Example
In the 1950’s, Bette Naismith was a single mom who worked at a bank as a secretary. Although she was not a great secretary, and made
a lot of typos, she did happen to be a very good artist. So every year, the bank had her paint the Christmas scene for the bank’s windows.
One year, she made a mistake while painting the holiday scene and just painted right over it, as artists are wont to do. She thought to herself,
“I wish I could do that when I was typing . . . ” Her big idea came when she realized that she could.
So she snuck some Tempura paint into work and began to paint over her typos. She soon realized that this was a great idea and would
make a great business. Working out of her house at night after she got home from work, Ms. Naismith began to experiment with different
permutations of paint. By setting up her business at home, Bette Naismith was able to start the Liquid Paper Corporation, and revolutionize
the office supply industry in the process.
The Self-Employment Home Business Revolution
You are not alone should you decide to start a business from home. More than ever, working from home has become an accepted
method of conducting business.
Whereas working from home used to be a secret to be kept, today there is in fact a certain cache to working from home. It’s hip. And yet
the ironic thing is that while working from home is indeed common, there is usually no need to tell anyone that you do work from home
as the new entrepreneurial economy and its attendant information age has made it practically impossible to tell where someone works.
This is good news for the would-be self-employed entrepreneur. Since one of the advantages of setting up shop at home, either initially,
or even in the long-term, is that working from home drastically cuts down on overhead. This in turn makes it much more affordable and
possible to start a business, and as a result the potential for success is greater.
Maybe your dream is to be a multi-millionaire. That’s fine. But so too is a dream to create a business that makes only enough money to
allow you to stay home, play with the kids when they get home from school, and shoot a round of golf on Friday afternoons. That’s fine
too. That you are the boss and can do what you want is one of the best things about starting your own home-based business. Doing
what you want, that’s the whole idea.
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Risks and Rewards of Working from Home
Working from home, while sometimes necessary and other times by design, is not always an easy thing to do. There are definite
distractions and other issues to contend with that one doesn’t face when working in an outside office. But by the same token, there are
also benefits that other locales do not offer.
First the bad news. Working from home can be challenging. There are three common problems of which to be wary:
1. It’s easy to get distracted: One of the best things about working from outside the house is that it forces you to give work the
attention and rigor it deserves. When you go to work every day to an office full of people dressed well and who are (theoretically)
committed to achieving the same goal, it forces you to take work seriously.
That is simply not true when you work for yourself at home. If you want to sleep in, you can. There is no one to report to but you. If you
want to work in your pajamas, you can. It’s pretty easy to find yourself watching too much TV, or wandering into the kitchen too often, or
playing a round of golf too many. It’s really very easy to goof off when you work at home alone.
Another aspect of this is that some people find it difficult to distinguish their personal from their business life when they work at home.
Just as its easy to get swept up in the novelty of working from home and thus goof off too much, so too is it easy for others to work too
much. Workaholics need self-discipline too, lest they find themselves working at all hours of the day and night, letting their personal life
become nonexistent.
Having worked from home myself for a while, I always say that the good news is that you see your kids a lot. The bad news is that . . .
you see your kids a lot!
2. It’s easy to feel alone: If it is easy to get distracted working from home, it is equally easy to feel isolated. Another good thing about
going to a regular office every day is the social aspect of work. Work is a great place to meet people, exchange ideas, share a joke and
do all of those things that we all like to do.
You will be giving that up when you open your own home-based business. While it is certainly true that you may take on employees down
the road, at the beginning of your venture, you are likely going to be working alone. And at the start is when you are most likely to see
this issue crop up. One way that some home-based entrepreneurs handle this is by making sure to schedule meetings and business
lunches with associates outside of the home, to maintain that social aspect of work.
A related issue is that instead of feeling alone, you may feel as if you lack privacy. Working at home allows your spouse to see what
you do, your kids to enter your workspace and visitors an opportunity to peek in on your office. Having a separate space that everyone
respects then is a key element to successfully operating a home-based enterprise.
Post your business hours on the door of your home office. People will be much less inclined to poke in when they know that you take your
work schedule seriously.
3. You may not be taken seriously: It used to be that working from home was a bit of an oddity and the person who did so was
considered to be an iconoclast at best. Things have certainly changed. With so many people working from homes these days, it is far
more acceptable and understood.
Nevertheless, studies indicate that roughly 25% of home based businesspeople still feel that they are not taken as seriously as their
building-bound brethren. That is, customers, clients, business associates, former co-workers, and even family members may not appreciate
that you are as professional as anyone working from a “normal” office. This perception is best dealt with by creating a professional image,
a professional workspace, and by doing top-notch work.
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Real Life Example
Lillian Vernon was born in Leipzig, Germany, and escaped to New York with her family during World War II. Newly married and pregnant in
1951, Ms. Vernon used the $2,000 that she had received as wedding gift money and started a mail order business in an effort to help pay
household bills.
Her office was the kitchen table in their apartment. Ms. Vernon placed a sixth-of-a-page ad for a “personalized handbags and belts” in
Seventeen magazine and waited. The ad was a huge hit, bringing in more than $32,000 in orders. With success like that, the Lillian Vernon
Company outgrew her home office in three short years.
Today, Lillian Vernon has sales of over $287.1 million, introduces more than 3,000 new products, and accepts 4.4 million orders.
Yet despite these three problems, the rewards of working from home are numerous too. From a practical standpoint, succeeding in
business is more likely with a home-based business than an outside business because it is much less expensive to run. Not only do you
save on rent and related overhead, but also there is less mileage on your car, and less need to wear and wear out expensive clothes, and
substantial tax deductions are available. Thus, your gross profit margin is greater than in a “regular” business.
Secondly, on a personal level, people who work at home tend to be a fairly happy lot. A survey conducted by Prevention magazine found
that people who work at home say that they eat healthier, have more free time, exercise more often, and have a better sex life than
when they were employees. In comparison, 45% of regular employees worry about their job, and 49% find their job to be very stressful,
according to the Prevention study. People who work at home report that they have more time to spend with family members, also upping
the happiness quotient.
That last point is important. Many people love working from home because it keeps them closer to the family. That hour or more that you
commute every day is reduced to a 30 second walk, and the time saved can be spent as you wish, with whom you wish.
“Millions have found their productivity actually increases when they work nearer the people they are really working for – their families.”
— Former President George Herbert Walker Bush
Parents of young children also appreciate the chance to create a work schedule that allows them to be home and free when the kids
are home from school. You can make your own schedule and work when it works for you, which may not necessarily be 9-5. Indeed,
one of the greatest things about working from home is the ability to work at odd hours. You may decide that your hours should be from
7:00 a.m. to noon, and then again from 3:00 to 6:00, or from 6:00 a.m. to 2:00 p.m. Making work work for you is what this is all about.
Home-Based Business Tips
There are plenty of great reasons to set up a home office. It’s convenient, inexpensive, and for many virtual workers, a home office is
really just a place to connect to their digital worksite.
Whether you own a home-based business, manage an e-commerce site, or simply need a place to handle the managerial duties of your
off-site business, establishing a home office not only cuts your commute down to zero, it can help you balance your personal life and
your work obligations.
But as your business expands, you might begin to feel a little cramped in your home office. If, for instance, your “office” is little more than
a desk packed into one corner of your living room, then it won’t be long before your freelance life—printers, paperwork, contracts, and file
cabinets—begins to invade your personal space.
In the end, it is important to remember that your home is just that: it’s where you live, not an office, and it’s set up to accommodate your
personal life. You need to protect your private life and professional life by maintaining a healthy distance between the two. Here are some
tips to help guide you as you grow:
1. Designate an Office Space and Stick to it
Clear out the guest room, clean up the basement, empty the garage — when you work from home, you need a dedicated office space, not
just a desk in the den. Wherever you set up your office, make sure that you erect a mental divider: Inside the office zone, you are “at work.”
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If you want to waste time on the Internet, or make a personal phone call, then get up and leave the office. This will help you distinguish
between your personal life and your professional life, and it will prevent you from getting distracted during your workday.
2. Establish a Meeting Place Outside of Your Office: Choose a second location, such as a Starbucks, library, or an executive suite
that rents offices by the hour, to use for meeting with clients. There is nothing wrong with working from home, but a client might feel
uncomfortable discussing business in your living room—it’s a little too personal.
A dedicated satellite space should feel comfortable, but professional. Make sure to go there a few times by yourself so that you know
what to expect when you take a client there.
3. Establish a Separate Phone Number and Email Address for Your Business: Sometimes, making your home office more
efficient is just a matter of keeping your personal life out of it. By setting up a separate telephone number and email contact for your
business, you can more or less ensure that when you are “at work,” you will only need to think about your business.
Many smartphones allow you to host multiple numbers on a single device, just make sure that you set your phone to “ignore” calls on
your personal line during working hours.
4. When in Doubt, Move Out: If working from home ever become a burden, then it might be time to think about moving out and
setting up a dedicated office space. A lot of freelancers set up shop at Starbucks, but there are other options for business owners who
prefer to have more peace and quiet.
Get online and see if there are co-working spaces available in your area. For many solopreneurs a co-working space offers an ideal
solution: you get privacy, a kick in the pants (everybody else is working, shouldn’t you?), inspiration, and convenience. Co-working
spaces typically provide a kitchen, conference rooms, Internet, printing facilities, and parking as part of your rent, so you can have all the
amenities of an office without the hassle of co-workers and bosses bearing down on you.
If you plan ahead, then it may be possible to work from home indefinitely. But if you do need to get out of the house, then there are plenty
of affordable options available to freelancers.
Setting Up Shop in an Apartment
The apartment entrepreneur: If you aren’t one, you probably know one. Starting a business out of an apartment is smart and very doable.
Everybody has a friend writing a screenplay or music, consulting, or trying to turn a hobby into a moneymaker…all from the comfort of
residential rental property. This is not to mention the boom of tech start-ups begun out of living rooms and garages not only in Silicon
Valley, but all across the United States.
Operating your home-based business under the thumb of a landlord is not always a good thing, however. And on top of possible
restrictions in the lease, there may be actual zoning laws that forbid your endeavor. Be careful. Running afoul of your lease or local laws
could shut your growing business down for months while you try to break your lease.
If you haven’t started yet, there are some resources you can tap to see if your business will be on the up-and-up before you spend a lot
of time and effort just to see it go to waste.
First, check your lease: Every lease sets out the dos and don’ts for the lessee. That’s you. Sometimes these restrictions are set out
in general rules that pertain to the building (often called “Rules and Regulations”). If your lease is silent, that doesn’t mean you are in the
clear. If your business has the potential to be disturbing to other tenants (teaching drum lessons comes to mind…), it may violate other
aspects of the lease.
Another thing: If you are renting a condo unit from the owner, condominium CCRs (Covenants, Codes and Restrictions) are often more
restrictive on home-based businesses than apartments.
To be safe, talk to your landlord or the building owner and see if you can get him or her to be reasonable. Provide assurances that once it
gets to a certain size or profitability, you will rent separate space. Note that if the property is managed by a conglomerate–which is often
the case in larger properties–it will be difficult to get them to waive this restriction.
Next, check all the codes: There are generally three areas where your business plans might get into in trouble: Zoning laws, homebased business ordinances, and business licensing.
The stated purpose of zoning is to separate incompatible land uses like commercial, residential, agricultural and industrial. In reality,
zoning is a permitting system designed to prevent new development from causing harming existing adjacent land use. You can check
with your local land use department to see what your property is zoned as and what that means for you. Residential, commercial, and
mixed-uses are common and can take many forms. If you have the time and want to put in the effort, you can request a waiver–often
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called a “variance”–to allow for an exception to a zoning restriction. Dealing with local government can often be time-consuming and
difficult. Many find that it’s easier to move to an area that has pre-approval for mixed or commercial uses.
If your local area has an ordinance that covers home-based businesses, take a look at it to make sure that your plans are acceptable.
These ordinances can vary widely, but most are logical and prevent you from running a commercial enterprise that would be damaging to
the area where you live. For instance, a business that sees a lot of foot or car traffic is not likely to fly on a quiet cul-de-sac. Also, these
ordinances often limit the number of employees a home-based business can have.
You should take a trip to your City Hall and check out what business licenses you need, if any. Failing to get a license can result in fines
and penalties. Even if you aren’t required to get a license, many municipalities require registration, which is less of an onerous process
but equally advised.
Then, if all else fails, think about a move: The last thing you want is to get your business shut down just when it is getting good. If
you are truly worried that you will be breaking the law and just can’t fix it, look into breaking your lease and moving on. This isn’t always
easy (or cheap), since an apartment lease is a formal contract. Breaking it without consent can carry heavy consequences, from the loss
of your security deposit to a judgment that requires you to pay for a year of rent–even if you have already moved out!
Legislatures are pretty pro-renter in general, but you still need to know your rights and obligations before you decide to break your lease
and start your business in a more favorable area. Again, check the terms: how much time is left on the lease, what are the penalties and
is there any way you can mitigate them by finding a new renter?
So how do you break your current apartment lease so you can move forward with your life? If you find yourself in this situation, there are
a few important things to consider if you want to minimize the potential penalties associated:
s H
ave you been a model tenant? If you pay your rent on time and have not been a huge hassle, it is a lot easier to get the ear
of a landlord–whether to shorten or break your lease or to allow an exception for your home–based business.
s A
re you close to the end? If you are close to the end of your term (at least nine months into a one-year lease), it’s more likely
that the landlord will let you out early–especially if there are other prospects looking at your place.
s C
an you line up a replacement? If you do some of the legwork (take out an ad or talk to friends and co-workers), going to
the landlord with a ready-made replacement renter can get you off the hook. Whether it is a sublet or an outright replacement of
the lease, just be sure you know what your continuing obligations are, if any.
s A
re you willing to lose your deposit? If you don’t mind losing your security, you might be able to talk to landlord into letting
you out of your lease after agreeing to pay a little for the right. If the landlord is confident about re-renting, this can be an attractive
option.
You might even be tempted to take your chances and just leave. Don’t do it! You can be on the hook not only for the lease value, but
also attorney fees if the landlord sues you. This can also have a negative effect on your credit and ability to rent in the future!
Of course, if you haven’t taken the step of starting your apartment-based business yet, then you are in a much better position. Taking
the steps above can go a long way to ensure that once you start your company, you won’t be interrupted with distractions that could shut
you down on a technicality.”
The Bottom Line: Starting a business from home can be one of the best decisions you may make. By drastically reducing your
overhead, you correspondingly increase your chances of success. The important thing is to treat a home-business as you would any other
business. When you act like a professional, no matter where your office is located, you will be treated as one.
Resources You Can Use
Home Business Magazine
www.homebusinessmag.com
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Chapter 12 — Almost 100 Small Businesses You Can Start
for Little or No Money
12
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Almost 100 Small Businesses You Can Start for Little or No Money
As indicated, this is really a fantastic time to join the ranks of the self-employed, and start your own business. And we don’t mean that
in a Pollyannaish, “Rah-rah, you can do it!” way, but rather, as a very serious business proposition. Below we list many sorts of microbusinesses you can start today, but first, here are 6 tips to helping you make the right choice
1. Passion Is Good, But Business Skills Pay The Bills: This may seem obvious, but I don’t think so. One of the most distinguishing
characteristics of any entrepreneur is their passion. It is passion that leads any solopreneur to start their own enterprise in the middle of
an economic slowdown. Anyone who takes the time and energy to start up their own business is passionate about the process — and
they better be! But passion alone is not enough.
One error far too many small business owners make is mistaking passion for business acumen or a good choice. If you want to stick
around for the long haul, be passionate, yes, but also pick a business with a high chance of success. Fill a market need.
2. Look for Vacuums and Waves: To succeed in your new business, you must strike a balance between being relevant and being
different. With so much competition out there, it is important to find vacuums — areas where your competition is not as strong. For
example, I recently met a businessperson who started using posters and flyers to advertise; his thinking was that few people do that
anymore, so he stands out.
Similarly, catch a wave when possible. If everyone is tweeting, there may be a very good reason for that. Stay relevant.
3. When You’re Self-Employed, You Must Have a Great Online Presence: People today now spend as much time online as
they do in front of a television. You have to go where the eyeballs are, and if they are online, then you have to be there in a big way. That
establishing and maintaining a robust online presence is so affordable makes it even smarter.
And notice I didn’t say you need a “good” online presence. You need a great one: A great website, a great social media presence, a great
e-marketing strategy — the whole great enchilada.
4. Take Advantage of the Available Technology: Technology can be your competitive advantage. Whether it is software, properly
outfitting your mobile computing needs, or some cool gadget, technology can make the difference. So, for instance, don’t just buy some
program and learn the basics, but really figure out how it can be used to your advantage … because it can.
5. Don’t Lead: Especially in the beginning of your enterprise, especially as you are just learning the ropes, following can beat leading.
You don’t have to invent the Next Big Thing, or create some brand new scheme. It may work, but it may not, and in the beginning there
is little room for error. So learn about business, learn about your business, learn what works, and do that. Later on you can go for your
big idea, but probably not yet.
6. Market and advertise: And then do it some more: Become a marketing expert. Period. And good luck!
For more indeas check out TheSelfEmployed.
About 100 Businesses You Can Start for About $100
If you are looking to start a business for not a lot of money, then the first rule is this: Start the business out of your home.
1. Service with a smile
There is no shortage of possible service businesses that you can start from scratch. The list below is by no means exhaustive. If you don’t
find something you like, think expansively and come up with a new idea.
ALTERATIONS If you have a talent for sewing, then consider being a seamstress from your home. To make a decent living, you will
need a lot of business, as the price per job is usually under $50. But you should also know that it could be a lucrative living since most
jobs are quick to do for the expert seamstress. Where do you find clients? Local dry cleaning and clothing stores are good sources for
leads. Also, try advertising try advertising on Craigslist, or posting flyers in your neighborhood.
ANTIQUE DEALER Many antique dealers find bargains at garage sales, auctions, flea markets, etc. and then sell those goods for a
fine profit.
APARTMENT RENEWAL Apartments and rental homes are always being vacated, and as such, there is a need for someone to
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clean, paint, and repair them after the renters leave. You can get started by leaving flyers at apartment houses, with rental management
agencies, and real estate brokers. Fees should be about $25 to $50 an hour.
AQUARIUM CARE Mobile aquarium care is a rapidly expanding business. Many businesses enjoy the esthetic beauty of aquariums,
but have a difficult time keeping them clean, especially salt-water aquariums. If you know how to do this, great, if not, learning it is not
difficult.
AUTO WORK With over a hundred million automobiles on the road today, there is plenty of work for the auto enthusiast. For one, auto
detailers are in ever-increasing demand. Today there are more than 11,000 auto detail services in the U.S. Auto detailing is a lucrative
business opportunity because of its steady and repeat clientele and low overhead costs. Other customers can include auto dealerships,
boat owners and dealers, and RV owners and dealers.
By the same token, mobile auto repair is a business that is ever growing in popularity. Mechanics who can bring their tools and expertise
to the customer have a distinct advantage over their brick-and-mortar brethren.
Finally, if you have a knack for installing car alarms or car stereos, these too could be the basis for a lucrative home-based business.
Charges can run from $100 and up.
BLIND AND SHADE CLEANING Many homes, and especially businesses, have mini blinds and other shades that get dirty over time,
even with periodic dusting. That is where you come in. Professional cleaners can make $25 an hour, and all you need is soap, a mild
cleaning brush called a Tricket (available at hardware stores), a tool kit and some towels.
BOAT BOTTOM CLEANING If you like to swim, there is a fortune to be made in cleaning the bottoms of boats in the marina. Divers
usually charge about $500 for this service, and all it takes is a few hours of work. Supplies are minimal, and advertising can be done by
putting a flyer together and leaving it on every boat in the marina.
BOOKKEEPER Bookkeepers maintain their clients’ financial records and usually handle their taxes. This business fits if you have
strong financial background. Home bookkeepers can make $75,000 a year.
CARPENTRY AND CABINET MAKING Carpenters work both in new home construction, as well as remodels. You can get business
from general contractors (you become the subcontractor), homeowners, and businesses. If you have woodworking skills, great, if not,
you can always learn.
CARPET CLEANING Almost all homes and office buildings have some wall-to-wall carpeting. Buy or rent a steam carpet cleaner, some
carpet shampoo, a few brushes, and a great vacuum cleaner, and you are set.
CATERING IN OFFICE BUILDINGS Rather than go out for the same boring lunch every day, many office workers appreciate the
convenience of having a fresh alternative brought to them. Offer muffins, sandwiches, enchiladas, veggie plates, Cokes, chips, etc. Take
orders, and then pack up your car each day and deliver.
CHILD CARE PROVIDER Opening a day care facility is ideal for mothers who want to stay home with their children. To become a
childcare provider, you must take courses in first aid, get bonded, and obtain a license. A childcare center that has, say, 10 full-time
children, can easily gross about $8,000 a month.
CHILDRENS PARTIES This is a fun business if you like kids. Putting on theme parties, such as Barbie, cowboys, or princesses, is a
great way to make some money for a few hours work over the weekend. It helps if you know magic or are willing to be a clown, but it’s
not necessary. Party givers can charge about $100 per hour for a 2-hour party.
CHIMNEY SWEEP There are more than 5,000 chimney sweeps in the United States today. Yes, it’s a dirty job, but it’s also lucrative; a
busy chimney sweep can make upwards of $50,000 a year.
CLEANING SERVICES There are now more than 30,000 janitorial service businesses catering to both residential and commercial
clients. Customers can be found by walking door to door and beating the competition on price, running Craigslist ads, tweeting, posting
on your website and distributing flyers throughout the neighborhood. But by far, the best way to get clients will be the word of mouth
advertising that will come when you do a great job for a fair price.
CONSULTANT You can consult in any industry that you are proficient in. The great thing about consulting is that the work is usually
assigned a project at a time, and projects can range anywhere from a month to a year. While you have the stability of working with a big
organization, you also get the luxury of working at your own pace and at home.
DELIVERY DRIVER/HAULER If you have a car you can start an airport shuttle service for instance. If you have a truck, you can haul
away old junk.
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ERRAND/DELIVERY SERVICE If you have a vehicle (preferable a small truck or van, but not necessarily), are trustworthy, and
don’t mind a hectic schedule, you can create a lucrative business dropping off and picking up packages and running errands. To locate
clients, check with local businesses. Fees usually combine an hourly rate of about $20 plus a per mile fee ranging from 30 to 50 cents.
Emergencies cost more.
EVENT PLANNER It is certainly possible to earn good money by organizing birthdays, wedding receptions, bar mitzvahs, and other
events. Wedding planner’s alone number more than 8,000 in the United States, so there is definitely a market for this service. Your job
would be to organize the entertainment, prepare (or arrange for) the food, bring in the decorations and the music, and provide the clean
up. An added advantage of this business is that start-up costs are low and profits are high. For example, flat fees for wedding planners
run from $500 to $2,000.
EXOTIC FOODS PREPARATION If you have a green thumb, you can sell herbs and other “exotic” foods to small restaurants,
specialty shops, health-food stores, or even your friends and neighbors. One enterprising old hippie, for example, has made a fortune
growing tomatoes, drying them outside, and then packaging and selling his “sun dried tomatoes.”
FIX-IT SHOP Having a knack for fixing household items like appliances, vacuum cleaners, VCRs’, etc., means you might have a valuable
business at hand. There are many low-cost ways to advertise your services — flyers, Google ads, Craigslist, and Facebook posts are a few.
FUND RAISER This business allows you to help groups raise money for their causes, and you take a percentage of the amount for
your fee. This requires good organizational and people skills. Fees vary depending upon how much money you raise.
HANDYMAN SERVICE If you have a general knowledge of home repair, then a handyman service may be a great business for you.
You will need a good set of tools and a truck. Check to see what sort of licensing is required for this business.
HOUSE INSPECTOR Whenever someone buys a home, they need a home inspection to finish escrow and to make sure the building
is in compliance with housing codes. You also can check for termites, dry rot, etc. You may need a license from the state.
HOUSE PAINTING Professional painters charge many thousands of dollars to paint a house. If your prices are reasonable, and your
work is good, you should be able to get plenty of referral business.
KENNEL When people leave town, they need a place to bring their pets, that’s where you come in. If you live in an area where zoning
permits it, boarding dogs and cats can be a great business. You will need space, a fenced area, and a love of animals.
MASONRY Wherever you look, you will likely see brickwork. The people who install them are masons, and masons can make $50,000
a year. This is a business that requires a lot of skill, so you must know what you are doing. Customers will be contractors, building owners,
and homeowners.
MASSAGE THERAPIST Once you are licensed, you can work out of your home, go to client’s homes, work for a concierge at a hotel,
or at an athletic club. The best part is that you can make at least $60 an hour, and its almost all-pure profit.
MEDICAL TRANSCRIPTION Medical transcriptions take dictated medical records and produce an accurate hard copy for the medical
practitioner. There is a high demand for this business. Check out www.mtuniverse.com for more.
NOTARY PUBLIC/MOBILE NOTARY A Notary Public is someone authorized by the state to legally witness the signing of creating
documents like wills, trusts, insurance policies, deeds, bills of sale, and contracts, among others. A traveling Notary is a business with high
demand. Fees usually range around $50 per event.
PARTY PREPARTION Many people don’t want to deal with the setup – getting the chairs, the balloons, etc., and even more don’t want
to deal with the breakdown – the dishes and the mess.
PERSONAL COMPANION Often invalid, many elderly people need help with errands, paying bills, taking medication and the like.
Clients can be found by going to nursing homes, social service agencies, hospitals, insurance companies, and care management services.
PERSONAL FITNESS TRAINER Fitness buffs can create a lucrative business by helping others reach their fitness goals. The work
can be done at your own home, at your client’s home, or at the gym. As always, advertising in a periodical that caters to your clientele
will also bring in business.
PERSONAL SHOPPER Demand for personal shoppers is surprisingly high. People who work full time, senior citizens, and the
disabled are all in need of shopping assistance. The best part of this business is that there are few start-up costs, but the bad news is
that the fees are pretty small.
PERMIT FILING SERVICE Architects and other similar professionals need to get permits filed all the time. Visit your city building
office and you will see. Clients would also include contractors and engineers. Charge $25 an hour and 25 cents a mile.
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PET CARE There are more than 25,000 pet grooming businesses in the U.S., and many of those are run from homes. This is a business
that would allow you to combine your love of animals with an entrepreneurial spirit by taking dogs and cats in and washing, trimming, and
grooming them. If you have room in the house to do this, great! But even if you do not, this can also be a mobile business. Customers can
be found by joining different animal groups, advertising in the paper, and leaving flyers with vets and pet stores.
PLANT CARE Mobile plant care is a service that is easy to start and many people need. Customers would include banks, hotels, malls,
and office buildings. You would need a sprayer, watering cans, plant food, potting soil, a ladder, clippers, and a broom.
POOL AND SPA CLEANING You will need to buy some chemicals, nets, and skimmers, and it helps to have a small truck. The good
news is that many pool and spa owners would rather not clean them themselves, and so this is a huge market. Making $50,000 a year
is also typical.
RAIN GUTTER CLEANING Rain gutters are those “pipes” abutting roofs that allows the rain to flow down to the drainage pipe. They
periodically get clogged full of leaves and dirt and many homeowners do not want to get up on their roof and clean out them out. With a
ladder and some gloves, you can do this for them.
REAL ESTATE APPRAISER You can certainly expect to make more than $50,000 a year by assessing the value of residential and
commercial property. Obviously, you must have the background and expertise to do so, but even the novice can get in by taking courses
in real estate appraisal and obtaining the proper licenses from your state. Local banks, lawyers, realty offices, buyers and sellers, and tax
collectors all use real estate appraisers.
RENTAL MANAGER Many apartment owners don’t like dealing with rent, tenants, or repairs and if you handle these things for them,
you have a business. You can live on premises for free rent, or you can be independent and charge a percentage of the rents collected.
Making $2,500 a month with several clients is common.
RESUME SERVICES People who haven’t realized that working for themselves beats working for an employer need resumes in order
to find that ever-elusive perfect job (you know, the one you are now creating!) Thus your potential client base is quite large as it includes
anyone looking for, or even thinking about looking for, a new job. Be sure that you are up on the latest resume styles as they do change
over time. Rates range from $30 to $50 per hour. Since overhead is minimal, you can expect to make more than $40,000 per year.
SALES REPRESENTATIVE / MANUFACTURERS REP Ready for a surprise? This is the most popular home-based business in
the country. Sales reps act as wholesale sellers of various product lines to retail establishments. There is no inventory to handle, almost
no overhead, so what you make is almost pure profit. Sales reps usually get paid on a commission-only basis. A good sales rep can make
$50,000 a year or more, although in the Silicon Valley for example, sales reps can make more than $250,000 a year. To learn more,
check THIS RESOURCE.
SHOESHINE STAND Shoeshine stands are making a big comeback. If you can get in the right location, a large office building for
example, you can easily make a few hundred dollars a day. Supplies are minimal.
TUTOR/TEACHER People like to learn, and they want their children to learn. If you can play an instrument, or otherwise understand
a difficult subject, being a tutor can be a great business. Your customers will likely be high school or college students, and you can
find them (or their parents) by advertising in college newspapers, by distributing flyers throughout the neighborhood, and by running a
classified ad within the local newspaper.
TOUR GUIDE When you live in a large urban area, there are many tourists who come to town. Starting your own tour business taps this
vast market. For example, Kenny Kramer, the real life “Kramer” created “Kramer’s Reality Tour” in NY for Seinfeld fans. Your job would be
to research, plan, and promote the tours. This works especially well with historic districts or other niche areas. Do your homework and
know your area well. Charging $50 an hour is typical. Work with travel agents to promote your tours.
TRANSLATOR If you are fluent in another language, then this is a great business for you. You would translate documents and
conversations from one language to another. Customers are internationals companies, students, businesses, and publishers.
WINDOW WASHING The need for window washing services exists from the smallest of cities to the largest of metropolitan areas. A
window washing business can easily gross $4,000 or more per month within the first year.
WINSHIELD REPAIR Mobile windshield repairmen are a new, and much needed service. Cracked windshields don’t always need
replacing, and these days, repair kits are affordable.
VIRTUAL ASSISTANT/SECRETARIAL Secretarial services number over 10,000 in this country and do a variety of things – email
processing, filing, errands, etc. Anything a full-time assistant does, you will do. Virtual and real assistants usually charge between $20 and
$50 an hour. Start a website, put out an ad on Google, drop off flyers at businesses, and even try running an ad on Craigslist.
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VIDEOGRAPHER Videotaping weddings, bar mitzvahs, parties and other important events can be a great business. Rates are $50 to
$150 an hour. Get customers through advertising, and working with churches, wedding halls, and event planners.
2. Creative Businesses
Creative people often feel that they may have to “sell out” if they want to get ahead in the world, but the life of a home-based entrepreneur
demands no such sacrifice. In fact, the opposite is true. Many an artist has found fulfillment using their art to make money from home.
You can too.
ARTIST The best way to do make money through your art is to offer it to commercial businesses. For instance, advertising and marketing
companies hire artists to do artwork for ads. You can also develop and draw ads and flyers for small shops that need publicity. Offer your
goods at consignment shops. Art and crafts can also be sold at fairs, galleries, gift shops, museum stores, flea markets, craft shows, and
even through mail order. Fees vary widely, so it is difficult to say exactly how much money you might make.
And, if you would like to learn how to commercially license your art, go here.
CATERING You will need cooking skills, appliances, utensils a portable kitchen, and a truck. You will also need to check local and state
health regulations and obtain any necessary permits. Customers can be found through advertising, and by sending out flyers to grocery
stores, and wine/gourmet shops. Fees are usually calculated per meal, depending upon the occasion and the complexity of the job. Is
this a good business? Consider that Martha Stewart’s first business was a catering business.
EDITOR/PROOFREADER If you can read and write well, and know your grammar, this is a great business. Customers will be book
publishers, websites, businesses, and magazines, many of which hire independent contractors for these tasks. Rates run from $25 to
$60 an hour. Contact publishers and find out how you can get on their list of editors. You may have to take a test.
GIFT BASKETS Gift baskets are those beautiful, cellophane-wrapped baskets full of wine, cheese, gifts, flowers, plants, and other
thematic gifts. You will need a shrink-wrap machine and a good eye. Your business tends to come from women or corporate clients.
GRAPHIC DESIGN Graphic designers create and produce ads, brochures, other business documents, and web sites. Fees range
by the job and they vary widely. One job might be $500 and another might be $10,000. Customers can be found through Google
advertising and word of mouth.
INTERIOR DECORATOR If you have an eye for furniture and decorating, this could be the business for you. It’s lucrative, interesting,
and takes you to interesting places. What you are selling is your expertise and style, so you might need to do a few jobs for free in order
to create a portfolio. Customers will be individuals, business offices, and other building owners. Interior decorators are often paid as a
percentage of the job, and thus, for example, a $10,000 job may net the decorator $1,000. Fees can also be paid by suppliers whose
products you purchase for your clients. As with most of these businesses, you will need the proper permits and business licenses. Add
a good brochure, some recommendations and a portfolio, and you’re on your way.
PHOTOGRAPHER As a professional photographer, you can work for commercial clients, individuals, take portraits, sell your art in
galleries, or to magazines, calendar companies, and web sites. 20,000 strong in the U.S. today, commercial photographers charge by
the job. A busy photographer can make upwards of $50,000 a year, although its important to realize that overhead is quite high for this
business, considering the cost of equipment and supplies.
POND CONSTRUCTION Ornamental ponds are actually a big business. You will need some tools (get that shovel out!) and a truck.
You can either create an original design, or buy prefabricated liners at the nursery. If you are strong, and know a little plumbing, this can
be a fine business.
WALLPAPERING SERVICE Anyone who has ever tried to wallpaper a room knows how difficult it is. If you have this skill, you can
put it to work for yourself and make a good living. There are few start-up costs associated with this business. Customers will be interior
decorators, contractors, other businesses, and homeowners. A fulltime wallpaper hanger can make upwards of $1,000 a week.
WRITER Getting published the first time is no easy thing, but once it happens, it’s fairly easy to keep getting published. It’s like getting a
pickle out of a jar: Getting the first one out is difficult, but every one after is easy. You can write articles for newspapers, magazines, and
websites. You can also write ad copy, newsletters, and brochures.
3. Computer Related Businesses
APP PROGRAMMER Freelance app programmers are in high demands now and can earn a sizable income.
BLOGGER Bloggers who have a great following make big bucks. The key is to find a hot topic, have a take, blog and blog some more,
comment on other blogs, get attention, and then, finally, sell ads on your popular blog.
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COMPUTER CONSULTANT Businesses often hire outside computer consultants to solve their networking problems. They make
upwards of $50 an hour and there is growing demand for their services.
COMPUTER REPAIR There is a growing need for qualified individuals who can fix the ever-growing number of computers. Between
businesses and individuals there will be no shortage of work. You can expect to make at least $50,000 a year.
Another way to make money with this avocation is by buying, fixing and selling used computers. You can usually buy old machines at
cheap prices, rebuild them with newer parts, and sell them for a tidy profit.
EBAY SALES We once had a pal who spent every weekend at garage sales buying old motorcycle parts, which he then sold during the
week on eBay. He made several thousand dollars a month. His motto? It’s all in the buying. Think of something you know well, hunt it
out, and resell it on eBay. Buy low, sell high.
WEBMASTER / WEB DESIGNER Internet illiteracy is still rampant in many small and medium-sized businesses. For this reason,
many are willing to pay good money for assistance.
E-COMMERCE WEBSITE There are essentially five steps to setting up a store in cyberspace.
1. You need a domain name. Preferably, you need a .com name.
2. You need a site. You can design it yourself, hire someone to do it for you, create a Wordpress site, or find an online point and click
solution.
3. You need to be able to take credit cards and transact business online. This is called getting a “merchant account.” Try also Paypal.
com.
4. You will need something to sell.
5. You will need to make money.
4. Multi-Level Marketing
Confession: This is our least favorite way to start a business on this entire list.
The idea behind multi-level marketing is that people join with the idea of not only selling products, but getting other people to join too,
“below” them. Those people then get more people to join, and thus a sort of pyramid is created. Can you make money at multi-level
marketing? Sure, just witness those pink Mary Kay Cosmetics Cadillacs you see now and then. But also witness all of the damaged
friendships from people who have been sold to once too often. And lets not lose sight of the fact that millions have indeed been made
selling for various companies like:
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PART III
OPENING UP SHOP
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Chapter 13 – Money Matters
13
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Money Matters
Business and money are practically one in the same. How much should you charge for your goods or services? Should you extend
credit? How do you go about accepting credit cards? Whatever the issue, understanding the financial aspect of business is vital.
Making a profit
Just how important is selecting the right price? It could mean the difference between success and failure. One of the most important
financial concepts you will need to learn in your new business then is the computation of profit and how it relates to your pricing structure.
The gross profit on a product sold, or service rendered, is computed as the money you brought in from the sale, less the cost of the goods
sold. The key is to compute accurately the cost of goods sold, which can be deceptive.
Let’s say you are going to run a childcare center. To compute your gross profit, you have to be able to figure out what it costs you to take
care of each child. The way you do that is by computing all of your costs and then dividing by the number of kids you have. Costs in this
sort of business might include:
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Let’s say that it costs you $5,000 a month to run the show, and that you bring in $8,000 a month. If you have 10 children, then your
expenses would be $5,000 divided 10, or $500 per child. Now you know the minimum amount you must charge to make a profit. Since
you are charging $800 per child ($800 x 10 children = $8,000), your gross profit, per child, is $300. Your total gross profit is $3,000.
While your gross profit is a dollar amount, your gross profit margin is expressed as a percentage. It is an equally important number to
track since it allows you to keep an eye on profitability trends. The gross profit margin is computed as follows: Gross profit divided by
sales = gross profit margin. In the example above, your gross profit would be $3,000/$8,000, or 37 percent. That’s pretty darn good.
Any business that makes 37 percent profit is doing something right.
Pricing your goods or service
It should be clear by now that the wrong price can put you out of business fast. Finding that magic number requires careful thought and
planning. In the example above, we know that you must charge at least $500 per child to break even. The trick is to come up with a price
that that gives you a good profit while still attracting customers.
Real Life Example
Jeff Hawkins is the inventor of the Palm Pilot, the revolutionary product that invented the PDA market. It was his second try. His first attempt
was something called the “Zoomer.” Priced at $700, the devise was far too expensive for a mass-market consumer product. Moreover,
Zoomer had a tiny keyboard, and its handwriting-recognition software didn’t work right. To make matters even worse, the Zoomer had drivers
for printers and fax machines, making it both big and slow. Says Hawkins, “It was the slowest computer ever made by man. It was too big
and too expensive.” The Zoomer bombed.
Knowing that he had to have a more reasonably priced product if Palm was to succeed, Hawkins went back to the proverbial drawing board.
His new product had to be small, simple, quick, and cheap. Tinkering again and again, Hawkins kept refining his ideas, and with each revision,
the new PDA kept getting smaller, and less expensive to produce. Finally, less than three months after Hawkins began rethinking the PDA,
Palm had a mockup of its new device that would fit in a shirt pocket, run on AAA batteries, and its four core functions were a calendar, an
address book, a to-do list, and a memo. At the time it was a revolution and eventually, the Palm Pilot begat the iPhone.
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When first opening their doors, many businesspeople have a hard time knowing what to charge for their product or service. But actually,
it’s not that hard to figure out. If you sell a product, you begin with your wholesale cost and calculate your retail price based on that. If
your base cost for a widget is $5, start there, then account for your overhead, and you are off.
The real trick is figuring out what to charge when you have a service business. One reason it is hard to figure out is that new businesspeople
mistakenly assume that their value is the same as when they were an employee getting paid for 40 hours of work a week. If your boss
paid you $20 an hour, maybe that is what you should charge. But that’s not right.
First, you simply cannot bill eight hours for your services every day because, even if your business is going well, you still have to hunt for
business, handle administrative issues, plan, and so on. This is why you should probably charge your clients more than your last employer
paid you.
For example, if you earned $25 an hour as an employee, you probably should charge $50 an hour once you are self employed. When I
worked for a big law firm, they routinely charged the client double what they paid me. That is how they made a profit, and that is how you
can too. This might seem hard to do at first, but you can’t let your lack of confidence cause you to under-price your services. If the client
could do what you do, he wouldn’t need you.
Think of it this way: If a car rents for $50 a day, which works out to $1,500 a month. Yet you still rent one at times because you have a
need, and the rental company fulfills that need. This is the same when someone hires you. So, when you price your personal services,
think like a rental car company, and charge for the real value of your services.
Cheaper isn’t always better
It is equally important to understand that being the cheapest isn’t always smart. When you use price as the only barometer for your
services, then other, maybe more important things, get left out of the equation — thing like quality, personal service, or promptness.
McDonald’s can emphasize low prices because that is one of its trademarks. But if you are not a McDonald’s type outfit, constantly
discounting fees and prices is probably a mistake.
The price of a product tells consumers what kind of value and quality to expect before they buy it. A person who can afford a Mercedes
or Jaguar doesn’t mind the high price because they associate quality and value with the prices of these cars. Often, in a consumer’s mind,
a higher price often connotes high quality, and a low price means poor quality.
You need to ask yourself whether you are trying to increase profit margins or market share. If you are mostly interested in boosting profits
rapidly, then you need to go with a higher price. However, if your goal is to build a big company and capture market share, a lower price
will help you sell more, longer. Volkswagen sells far more cars than Mercedes, but Mercedes makes more money, per car. If you are going
for a broad customer base, then you need to figure out, often by trial and error, what price people will consider a bargain, and which still
allows you to make a profit.
Pricing Your Service
1. Identify your customers. Are they upscale or middle class? Are they looking for a bargain, or is quality more important than price?
2. Determine your gross profit threshold. Use the formula above to calculate how much money you need to charge per item to break even,
and go up from there.
3. Be flexible. Trial and error is the key. Maybe you want to offer a volume discount to a potentially lucrative customer. See what works.
4. What is your service worth? Value is critical. If a customer thinks your product delivers benefits worth $15, you can’t sell it for $25.
5. Look at the competition. What you charge also must be measured in comparison to the product the customer is already buying. Thus, what
your competition charges is vitally important to consider as well.
Increasing your profit margin
There are two ways for you to improve your profit margin. First, you can increase your prices. Second, you can lower your overhead. Price
increases require a careful reading of the competition, your business model, and supply and demand for the product you are producing.
It has to be done with testing, and care.
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The second way to increase your gross profit margin is to lower your costs. Decreasing the costs of materials or producing the product
more efficiently can accomplish this. Look for a less costly supplier. Maybe our childcare center could shop for food and supplies at a
discount warehouse market instead of the grocery store. Keeping your overhead low will keep you in business.
Whether you are starting a solo service business, a wholesaling venture, or a retailing gig, you should always strive to deliver your product
or service more efficiently, with less cost, and at a price that gives you the best profit. The name of the game is, after all, making a profit.
Let the numbers do the talking
If you don’t understand the finances of business, and many entrepreneurs actually do not, you are in trouble. Business decisions that are not
based, at least in part, on a cold and hard financial analysis are decisions that can too easily go wrong.
For example, assume that your business is looking to add a new product line. How do you know if it will work? Such an important decision
should not be based on guesswork or hunches. Instead, you have to let the numbers do the talking. Knowing how to crunch the numbers
– figuring out what it will cost you to launch the new line, how much you can expect to make, and how quickly you can reasonably expect to
make it – will make the decision easy for you. Can you afford a new product line? Well, will your cash flow allow you afford it? What kind of
return on this investment of capital and time can you expect? Let the numbers do the talking.
Can you afford that new product line? Well, what do the numbers say? If the numbers are not there, your brainstorm could be a huge mistake.
And, if you don’t know what the numbers are saying, it is time to learn.
Extending credit
The final piece of minutiae you need to deal with at this point has to do with money : The creation of a credit policy, and the acceptance
of checks and credit cards. If you do decide to extend credit to customers, be picky. There are two important aspects to a successful
customer credit policy:
1. Limit you risk, and
2. Investigate each customer’s credit-worthiness.
Your credit application might look like this:
CREDIT APPLICATION
Business Name ________________________________________________________________ Date ______________________
Other names of the business __________________________________________________________________________________
Name of owner _______________________________________
Type of business ____________________________________
Legal structure of the business _______________________________________________________________________________
Business Address ___________________________
City _____________________ State__________________ Zip ________
Tel.No. ____________________________________ Cell. __________________________________________________________
Email ________________________________________________
Social Security No. __________________________________
How long in business ___________________________________
Dun and Bradstreet Rated ____________________________
Trade References:
Name ___________________________________
Address _____________________________
Ph _____________________
Name ___________________________________
Address _____________________________
Ph _____________________
Name ___________________________________
Address _____________________________
Ph _____________________
Bank References:
Name ___________________________________
Address _____________________________
Ph _____________________
Name ___________________________________
Address _____________________________
Ph _____________________
Credit line requested $_________________________________.
The undersigned authorizes inquiry as to credit information. We further acknowledge that credit privileges, if granted, may be
withdrawn at any time.
(Your credit application might also specify the credit terms, consequences of failing to meet them, late fees, and that the customer
is responsible for any attorney fees or collection costs incurred at any time.)
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Once a potential customer has completed the application, you need to verify the facts and assess the company’s credit worthiness. You
do so by calling references and by using a credit-reporting agency, or a business-consulting firm such as Dun & Bradstreet. Also, most
industries have associations that trade credit information. Finally, even if the client seems worthy, and even if he checks out, trust your gut.
Accepting credit cards
Recent research shows that accepting credit cards increases the probability that someone will buy, as well as increasing how quickly and
how much they purchase. Accepting credit cards then is smart business. It gives you the chance to increase sales by enabling customers
to make impulse buys even when they don’t have cash in their wallets or sufficient funds in their checking accounts. Accepting credit
cards can improve your cash flow because in most cases you receive the money within a few days instead of when an invoice comes
due. Credit cards also provide a guarantee that you will be paid, without the risks involved in accepting personal checks.
While that is the good news, the bad news is that accepting credit cards is not cheap. Some fees you can expect to pay are:
s 4HEDISCOUNTRATEWHICHISTHEACTUALPERCENTAGEYOUARECHARGEDPERTRANSACTION4HEPERCENTAGERANGESFROMPERCENTTO
percent. The higher your sales, the lower your rate.
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s -ONTHLYFEES
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statements, and a supply fee for charge slips.
To accept major credit cards from customers, your business must establish merchant status with each of the credit card companies
whose cards you want to accept. The best place to get merchant status is the bank that already has your business. If your bank turns
you down (because of poor credit, or because of a lack of credit history) do an online search and also speak with other business owners
who accept plastic.
Once your business has been approved for credit, you will receive a start-up kit and instructions on how to use the system. Or, of course,
these days you can also always use your smart phone to swipe and take electronic payments.
Accepting checks
Bounced checks can cut heavily into your profit, and yet, you might need to accept them to conduct business. How can you avoid bad
checks? Follow these five rules, and bad checks should be a very rare occurrence.
Rule No. 1. Get Identification. Always ask to see the customer’s driver’s license or identification card; one with a photograph.
Rule No. 2. Be Aware. Evaluate the check carefully. Smudge marks are a red flag of a forged check, as are smooth edges; real checks
are perforated either on the top or left side of the check.
Rule No. 3. Do Not Accept New Checks. A large majority of bad checks are written on new accounts. Do not accept a check that does
not have the customer’s name preprinted on it.
Rule No. 4. Wait Before Refunding Money. Require a five business day waiting period to allow checks to clear before cash refunds are
paid.
Rule No. 5. Call In The Pros. You might benefit from the services of a check-verification company. By paying a monthly fee you can tap
into a database of individuals who write bad, stolen or forged checks.
The Bottom Line: By setting up some policies with regard to credit cards and checks, and by buying the equipment and tools needed
to run your business properly, you will free yourself up to concentrate on sales and growth, rather than issues and problems.
Resources You Can Use
Dun & Bradstreet
www.dnb.com
Forbes magazine
www.Forbes.com
Bank of America Small Business
http://smallbusinessonlinecommunity.bankofamerica.com
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Chapter 14 – Creating a Great Brand
14
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Creating a Great Brand
At the height of the e-commerce boom, an executive from a well-established “old-economy” company was hired to be the new CEO of
a young, brash, well-financed Internet startup. For his first day at his new company, the CEO decided to look his best. He dressed in an
expensive suit and his favorite tie. That day, he was to address the company’s 100-odd employees. As he tells the story, he “felt sharp,
and looked great.” The new CEO gave an enthusiastic, short introductory speech and then opened the floor to questions. The room was
utterly and completely silent. Seconds seemed like hours as people refused to participate. “Come on,” he implored, “ask me a question.”
Finally, someone yelled out, “Why are you wearing a tie?”
As in life, first impressions are awfully important in business too. After someone encounters you and your business for the first time, they
will leave with an impression. It may be positive, it may be negative. They may think yours is a well-run, professional enterprise that will
provide them with a great service, or not. One thing you can bank on though – that impression will very likely be the lens that they use
to view your company for ever more.
Think about it in your own life: If you meet someone for the first time, and he or she acts like a real jerk, don’t you label him a jerk? It
doesn’t matter that he might have been having a bad day, he becomes “the jerk.” When you go to a business for the first time and get
bad service, don’t you usually conclude that their business doesn’t deserve your continued patronage? That is why they say that you only
have one chance to make a great first impression.
The importance of a great image
Although image isn’t everything, it is not insignificant. Your website, social media, signs, business cards, letterhead, logo, and store/office
say much about who you are. Combined, these things constitute your business identity. A professional business brand says that, even
though you are new, you nevertheless are to be taken seriously.
Of course, you will have to back up that great image with great products, services, and service. But to get people to understand that yours
is a business worth sticking with, you have to open the door by having a sharper image. That is the task before you.
Branding overview
The good news is that you don’t need a huge budget to create an excellent brand. You simply need inspiration, creativity and follow
through. But before we delve into that, let’s look at the big picture.
Just what is a brand? When you think of BMW, what do you think of? Maybe you recall their slogan, the ultimate driving machine, the
sleek look and feel of their cars or the expensive price tag. All are part of BMW’s brand, and all work to reinforce the image BMW wants
you to remember: That theirs is a superior, expensive, top-of-the-line automobile.
Your brand is your promise to your customers.
BMW promises great cars. McDonald’s promises affordable, predictable food. You want to do something similar. You need to create an
intentional thought and feeling in the mind of consumers when they think about your business. That is your brand. So what is the promise
of your business?
There are three distinguishing characteristics of great brands:
s F
irst, brands are unique: The whole idea behind branding is that you distinguish yourself in a crowded marketplace. If you try
and be everything to everyone, you will be nothing to no one. Your brand has to be unique to your business, and different than
other things out there. And it must also be something at which you are great. You could be the affordable consultant, or the exotic
travel writer, or the childcare lady for kids with disabilities. Be different.
s Second, brands deliver on their promise: Your brand must be based in reality. That is, it must be linked to the culture, style,
product and service of your business. Take Whole Foods Markets for example. What is their promise, their brand? Essentially
Whole Foods promises that you will get fresh, healthy, quality, organic food in a cool atmosphere. The chain (growing at a record
clip, by the way) bets that you will be willing to pay a premium price for that sort of product and experience, and they are right.
Now what if Whole Foods actually sold inferior food? They would be out of business, pronto, because not only would no one pay
higher prices for lesser food, but the entire brand and name would feel like a fraud.
s Third, brands are integrated: A quality brand is reinforced by everything you do: Where your business is located, your prices,
your customer service, everything.
Your brand has to be organic. That is, there must be integrity in your brand. What you promise must be a close approximation of what you
deliver. I am the friendly, easy- to- understand small business expert; that’s my brand—or I hope so.
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Based on all of the above, the next step is to decide what your promise will be. As indicated, this must be based upon something real in
your business, something you value and hold dear and are willing to hang your hat on. It could be almost anything:
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s .ORDSTROMSOFFERSTOPNOTCHCUSTOMERSERVICE
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What is it you can promise, and deliver on, better than anyone else, that will set you apart, and will bring the people in? That’s the ticket
and that is your brand. Now let’s look at the elements that go into getting that brand identity out there:
Your name
As mentioned in a previous chapter, the name of your business probably does more to create its brand than anything else. So choose
that name carefully. Maria’s Antique Shop is way different than Maria’s Casa de Artes.
Your logo
A logo is one of the first things that you need to create as it will be used on your site, letterhead, business cards, and other documents.
It is used to distinguish your company, set a tone, and foster your desired image. A logo can be a symbol (the golden arches), a graphic
interpretation of your business name (Yahoo!), or both. Either way, it needs to convey the tone of your business. In that sense, it is not
unlike naming your business: You want a logo that exemplifies who you are and what it is you do.
When creating a logo, you have two options, you can do it online (For instance, you can find a great, free logo generator at www.cooltext.
com) or hire someone to do it for you. If you can afford to hire someone to create a logo for you, do it. Prices vary widely; you can expect to
pay anywhere from $100 for a graphics student to $10,000 for a seasoned pro. While such high fees can be scary, remember this too –
a good logo can last for up to twenty years (or, if you are lucky, more), which makes a good logo a bargain. Personal recommendation: The
person who designed this book and my logo is exceptionally talented – and affordable! Check him out at http://jonathanmulcare.com/
Consider also making a slogan or tagline part of your logo. A good business motto should tell people quickly and memorably what the
essence of your business is. And, like your logo, your business slogan should be kept simple and should personify your business. For
example:
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Creating a Business Tagline
1. What are the three most distinguishing features of your business?
2. What are the three best benefits customers get by patronizing your business?
3. Make a master list of your best features and benefits.
4. Narrow that list down to the top three features or benefits of your business.
5. Incorporate those into different short, quippy sayings. Be creative. Be wild. Come up with ten different possible mottos based upon your
features and benefits.
6. Pick the best one.
Once you have your logo (or logo and catch phrase), it is time to start putting it on your marketing items – your brochure, website,
business cards, stationary.
Website
There are very few, if any, places where your desired brand counts more than on your website. Your site has to be an online extension
of your offline business and it must be an accurate representation of the brand you are trying to create. We talk about websites in much
more detail later in the book, but for now the important thing to know is that you must have a website, you must have a great website,
and that great website does more to build your brand than almost anything else, so do it right.
Oh, and you have to have a corresponding social media presence as well.
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Letterhead and stationary
For many new businesses, their stationary can be an important marketing tool. Your stationary is one of your basic links to the outside
world (along with your website.) It is how people will perceive your business. Thus, if you fail to get professional stationary printed
and instead simply copy your letterhead and logo onto the top of every document, you will look to the outside world to be an amateur.
Especially as a new business, you can ill afford that.
Begin with your letterhead. It is as integral to your business identity as your logo and name. What you are looking for is an overall theme
for your business that conveys the image you are hoping to create in the mind of consumers. This is done by creating graphic materials
that are simpatico with one another, that reinforce each other and your corporate identity. You letterhead may be the first thing people
ever see when looking at your business, so be sure that it professional. It might include include your:
s .AME
s ,OGO
s !DDRESS
s 0HONENUMBER#ELLNUMBER
s &AXNUMBER
s %MAILADDRESS
s 7EBSITE
s 3OCIALMEDIAHANDLES
The card stock, font, and color of your stationary are equally important. An off-white linen paper gives a professional image, whereas a
fluorescent yellow one gives off a festive one. It all depends on what you are looking for and what theme you are trying to create. The
graphic artist who helps with a logo can certainly give some good advice here as well.
Elements of your Image
These items need to be coordinated and thematic in order to create a dynamic business identity and image:
BusinessName
Logo
Tagline
Website
Social media
Stationary
Business Cards
Brochure
Signs
Business cards
The same font and stock that you used for your stationary should be used for your business cards as well. In some places in the world,
Asia for example, a business card is given out at almost every meeting and is the single most important marketing tool people use.
Although you certainly cannot expect to say lot on that little piece of card stock, how you say it says a lot in any case.
The key to creating a successful card is to have it reinforce your image without being too busy. Keep it simple, use you logo, make sure
it is legible, and include only the most important, relevant information. If you want your card to stand out from the crowd, consider:
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s %MBOSSINGYOUCARDS
Your brochure
Not every business will need or use a brochure. Even if a brochure is not traditionally part of businesses like yours, they still might be a
great way to create a professional image and bring in business. Ask yourself: What is the purpose of your brochure? Is it an introduction
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to your business, a selling tool, both, or more? Whatever your answer, your brochure needs to reflect the same values, tone, and theme
that will be found in your other image-creating materials. Use your logo. Use your tagline. Use your colors. Reinforce your desired image
with text and graphics that reflect your business image.
Signs
A big, bold, visible sign in the right location(s) can be one of the best tools available for creating an image, as well as new business. Signs
are obviously most used in retail businesses, especially when drop-in traffic is a key element to your business model.
Signs come in many forms, from cheap wood ones to expensive electrical and glass models. The same considerations that are used
in your other materials apply here as well. Not to beat a dead horse, but if you can get each image item in this chapter to reinforce an
overall theme, busy people who don’t yet know of your business will far more quickly understand what it is you are about if they are met
with consistency.
Choosing the right sign is especially an area where professional expertise is useful. How big should the sign be? What should it say?
How big should the letters be? Are there zoning restrictions for the type of sign you want? A sign company will help you figure this all out.
The Bottom Line: Creating a brand that people remember is a matter of consistently applying a thematic design to your front-line
marketing materials. Everything from your website to your business card to your social media sites need to reinforce the brand you want
to create.
Resources You Can Use
Guerrilla Marketing: Secrets for Making Big Profits from Your Small Business
by Jay Conrad Levinson
www.gmarketing.com
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Chapter 15 – Law, Taxes, and Insurance
15
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Law, Taxes, and Insurance
By setting up your business properly from the outset, you are putting in place a foundation that will help ensure your success. Finding a
good lawyer and accountant, ones whose opinions you can trust, insuring yourself correctly, learning how to hire and fire employees, and
getting properly insured are all part of that solid foundation.
Finding attorneys and accountants
Lawyers and accountants are critical business advisors for your new business. They can help steer you away from trouble, and get you
out of trouble if need be. Lawyers can help with contracts, leases, hiring and firing employees, and a host of other issues. Accountants
will help prepare your taxes and can give other helpful financial advice. Combined, these two professionals can become vital advisors.
But this begs the questions: Where do you find a good accountant who knows his stuff, or a lawyer whom you can trust? The best way is
through a satisfied customer. A referral will tell you far more about a professional than a dozen television ads. So, if you know someone
(or know someone who knows someone) who has a business similar to yours, find out how they like their lawyer or CPA. You need to
discover the following:
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are what count.
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should be returned within 24 hours. That is what you should insist upon.
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thing to be concerned about. As in the rest of life, with attorneys and accountants, you often get what you pay for; the cheapest
is probably not the best.
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associates. While this helps keep their fees down, you want to make sure that the person you hire is the one doing the work when
it counts.
If you can get a referral for a professional who meets these criteria, call him or her and schedule a meeting. As you are looking to start
an important long-term relationship, expect to spend a few hours with the lawyer and accountant. Get a feel for his or her personality.
Make sure he understands your needs. Find out about his background. Get some referrals. Certainly, you should not expect to be billed
for this meeting, and if you are, it’s a bad omen.
How to Find Exceptional Professional Advice
Barring a referral from a friend or business associate, here are some more ways to find good advisors:
Call your Local Bar Association. Almost all cities have an association of local lawyers called a “bar association.” The lawyers are
listed by their areas of specialty and the bar can usually give you the names of some of its members who have a good reputation.
As bar associations are non-partisan, you can rest assured that the recommendation will be pretty trustworthy.
Contact the AICPA: The American Institute of Certified Public Accountants is the premier national association for CPAs in the
United States (AICPA.org.)
You want to find a professional whose judgment you trust, who is smart and sharp, who seems more concerned about helping you than
billing you, and with whom you get along. A tall order for sure, but doable.
Your business and the law
You don’t have to be a lawyer to write a contract. If you can afford to have a lawyer write yours, you should. But if you can’t, then you are
going to write your own contracts anyway. So as long as you are probably going to play lawyer, do so correctly.
So, how do you write your own contract? There are two ways:
1. Draft it yourself. Although not the best idea, it can be done. The key is to avoid fancy language and just be as clear and concise
as you can. “ABC Corp. will sell 5,000 pens to Bob’s Home Business. Bob’s will pay $1 per pen and the pens will be delivered no later
than May 1.”
2. Use an online service. For instance, you can do a lot of do-it-yourself law on a great site like LegalZoom.com.
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Far more than a contract dispute, when in business, you need to be concerned about being accused of negligence (in the legal sense.)
All businesspeople are obliged to perform their duties as a reasonable, prudent person doing the same job would. This is called the
“standard of care.” If a plumber did a repair poorly, that is, below the standard of care, and if that mistake caused someone harm, then
that plumber would be said to be legally negligent.
This is true for any business – you must do your job competently. If you don’t, and it causes harm, you can be held liable for all resulting
injuries. Another example: An accounting firm is hired to do an audit, but mistakenly fails to see that a VP has been embezzling funds, and
so the VP continues to do so. The firm probably would be liable for all embezzlements after the audit since their mistake (not catching it)
caused further harm (more money embezzled.) If an electrician improperly puts in a new electrical box, causing a fire and burning down
the house, it’s his fault.
So the rule is: You must do your job in a manner that a reasonable and prudent person in the same position would do the job. If you don’t
and it causes harm, you are liable.
Legal mistakes to avoid
Businesses make legal mistakes all the time, and while some are fairly benign, others can be disastrous. Knowing which pitfalls to watch
out for can make all the difference between business success and business failure. Here then are the five most common legal mistakes
that small businesses make:
1. Not documenting rights and responsibilities: With the excitement and all of the things to do, it is easy when starting a business
to not clearly delineate who will do what. Yet that can be a big mistake. Just imagine what can happen when you think that you are in
charge of day-to-day operations — and your partner thinks the same thing. Therefore, founding shareholders or partners should have a
written agreement that addresses the following questions:
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2. Ignorance of the law: An old legal maxim is, “Ignorance of the law is no excuse,” and it’s true. Not knowing your legal rights and
responsibilities can get you into a heap of hot water. So, here is what you need to learn:
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3. Not having it in writing: All of your important business agreements should be in writing for several reasons. First, oral agreements
are difficult to enforce and sometimes are not enforceable at all. More importantly, memories fade over time, people change their stories
and people “remember” the agreement differently. Putting it in writing avoids these problems.
4. Starting the business as a sole proprietorship or partnership instead of a corporate entity: Partners are jointly liable for
all debts and obligations in general partnerships, as are sole proprietors. If you start the business as one of those two kinds of entities,
and the business encounters a legal problem, your personal assets will be at risk. If instead of a sole proprietorship or partnership, you
start the business as a corporation, LLC or limited partnership, you avoid that possibility and thereby greatly reduce your risk.
5. Getting involved in litigation: Litigation fees can actually bankrupt you. Beware the lawsuit!
Taxes
Here are four tax rules all small businesses should know:
1. Deductions: You can deduct all “ordinary and necessary” business expenses from your revenues to reduce your taxable income.
Some deductions such as business travel, equipment, salaries and rent are obvious. Others are not. Don’t overlook these potential
deductions:
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well as other business-related expenses.
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s 0
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next year. You can also deduct the interest on the loans themselves.
“The IRS spends God knows how much of your tax money on these toll-free information hot lines staffed by IRS employees, whose
idea of a dynamite tax tip is that you should print neatly. If you ask them a real tax question, such as how you can cheat, they’re useless.”
– Dave Barry
2. Employee Taxes: If you hire employees, you need to pay, or withhold from their salaries, a variety of taxes, including:
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If you need help with your 1099s or W-2s, check out Greatland.com. They have everything you need.
3. Quarterly Estimated Taxes: This area trips up many an entrepreneur. Failure to keep up with your estimated tax bill can create
a slew of IRS penalties. You should pay quarterly estimated taxes if you expect your total tax bill in a given year to exceed $500. How
much should you pay? By the end of the year, you must pay either 90 percent of the tax you will owe or 100 percent of last year’s tax.
4. Sales Taxes: Most services are exempt from sales tax, but most products are not. If you do sell a product or service that is subject
to sales tax, you must register with your state’s tax department. Then you must track your taxable and nontaxable sales and include that
information on your sales tax return.
Important Tax Consideration
As you begin to create some procedures for dealing with money and taxes, keep these tips in mind:
You need a separate business checking account, and you need to deposit all money from the business into that account. Money
can then be transferred to your personal account. This helps maintain an accurate record of business income for tax purposes.
Designate one credit card as a business card and use it only for this purpose. The card does not need to be in the business’
name. Business credit card interest is 100% deductible. Keep all receipts.
Keep your Outlook calendar archived. Notations can provide back up information for things like business mileage, telephone
expenses, and business trips.
Keep every receipt related to your business.
Keep all cancelled checks. In the event of an audit, you will be asked to provide them.
If you have inventory, you need to physically count what is left at least once a year. Inventory removed for personal use cannot
be deducted as a business expense.
Audits
Small businesses are audited more often than individuals, and the results are not usually good. In most cases after an audit, the audited
business has to pay additional taxes. Although the IRS audits the same number of people as ten years ago, they are recovering more
than four times as much money now thanks to superior software.
How then do you avoid an audit? First of all, don’t over-deduct. Be careful of listing every single receipt you have, no matter how
tangential, as a deduction. Studies have shown that taxpayers who deduct expenses more than 65% of their gross income are often
audited. Taxpayers who deduct 50% and less of their income as expenses are audited far less often.
Also, be sure to prepare a proper return. Moreover, you should try to avoid showing a loss. Now, losses do happen and they must be
reported. But a business that shows a loss for several years in a row is a business that should be out of business. If it’s not, something’s
fishy. Finally, be prepared to back up anything you do say in your tax return just in case you are audited. Keep every receipt. They can go
a long way to getting you out of a jam should an audit arise.
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The Home Office Deduction
Before you can deduct expenses for using part of your home in a business, you must meet three stringent requirements.
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business on a continuing, rather than haphazard, basis, you qualify.
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for example, you would not qualify for the home office deduction. Any personal, non-business, use would disqualify you.
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a separate structure on your property exclusively for business purposes.
Insurance
Instead of assuming you know what sort of insurance you need, what you should do instead is meet with an insurance broker to evaluate
your newfound business needs. Brokers represent more than one insurance company, so they can check various policies and companies
to find what is right for you.
Here are the major types of coverage that you should consider and discuss with your broker:
Health: One of the big eye-openers when you start your own business is just how expensive personal health insurance is. There are
several ways around this. One is by utilizing a federal law called COBRA (the Consolidated Omnibus Budget Reconciliation Act of 1985.)
This law allows you to personally continue your employer-sponsored group medical insurance, dental and prescription drug coverage on
an individual basis after you leave. Another way to lower your health care costs is simply by shopping around.
Your best bet is ehealthinsurance.com.
Business Property: You should seriously consider obtaining business insurance that covers damage or loss to business equipment.
You can also obtain more extensive coverage for damage or loss to business inventory and equipment, including loss of earning, and
errors and omissions.
Comprehensive General Liability: CGL insurance can be critical to your financial health. It does two things. First, it covers you for
personal injury damage suffered by visitors to your property for business purposes, i.e., they trip and break their leg going up the stairs
to your business. CGL insurance can also provide special liability coverage to protect against claims and damages that result from the
rendering of services or sale or products. And, should you get sued, CGL is supposed to cover the cost of your legal defense. If you have
ever been sued, you do not need to be told that this could save you tens of thousands of dollars.
Business Interruption: This covers losses from an inability to conduct business due to fire, flood or disaster. It also covers reductions
in business revenue while you recover from the disaster by providing funding to meet cash flow obligations such as payroll and loan
payments.
Malpractice: This is used by professionals such as doctors and lawyers to cover for damage resulting from substandard work. This can
also include errors and omissions and product liability insurance.
Workers Compensation: If you are going to have employees, you will be required by your state to carry workman’s compensation
insurance for work-related injuries to employees.
Disability: Disability insurance covers you when you can’t work because you are disabled due to injury.
Life: Why are you going into business for yourself? One reason is because you want to provide a better life for your spouse and children.
Well, what happens to that dream if you die? The dream will likely die too. Life insurance keeps the dream alive.
You need not get all of this insurance all at once. Especially in the start-up phase, that is probably impracticable. Instead, you can phase
your insurance needs in as your business grows. Here is how you might want to proceed:
Business Start-up: As capital is needed to get things going and cash flow is minimal, this is a good time to maximize the use of existing
policies. Riders to existing policies may cover equipment. Floaters and endorsements to homeowner and auto policies can provide limited
protection for business activities in the home or vehicle. You should also consider declaring one of your vehicles as a business car and
adjust its policy to cover business activities. You will have to get health insurance right now, and the sooner you buy life insurance the
better, so start that now too if you can. You can always increase the amount of coverage as your business grows.
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Growth Phase: This is when your business begins to expand and cash flow starts to increase. This might occur in six months, a year,
or later. When it does happen, you may want to consider obtaining separate policies for business property and general liability.
Long-term stability: This is when your business is established and successful and you have a pretty good idea what comes in every
month and what goes out. Future growth will be more predictable. This is the time to make a long-term assessment of your insurance
needs.
The Bottom Line: Few entrepreneurs like to think about the boring aspects of business like law, taxes and insurance. However, failure
to address these things may make your life much more difficult down the road. Insurance, good accountants and lawyers, and knowing
a thing or two about the law and taxes can sometimes save you from a heap of hot water.
Resources You Can Use
LegalZoom
www.LegalZoom.com
Greatland
www.Greatland.com
EHealthInsurance
EHealthInsurance
IRS
www.IRS.gov
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PART IV
BUSINESS ON A SHOESTRING
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Chapter 16 – Setting Up Shop On a Shoestring
16
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Setting Up Shop On a Shoestring
It may be that you want to start a business but do not have enough money to do so. Are you out of luck? Nope. Actually, it is safe to
say that most businesses start with less than optimum funding. But what it will take is hard work, pluck, and a tad of luck. Creating a
shoestring business begins with finding the necessary funding ands then requires setting up shop and stocking the store for less. In this
chapter, we show you how to do both.
Top 10 rules for bootstrapping a business
If you are going to bootstrap a business, then there are some rules of the road you should know about, and as you go about getting the
money you need to get started, it will help enormously to keep these tips in mind.
Rule No. 1: You Don’t Need a Fortune To Get Started. It would be great if you had enough money, but just because you don’t, it
does not follow that you can’t start a business. Real estate is one of a great example of this principle. By using a 10% FHA loan, you
could buy a $100,000 duplex apartment house for $10,000 down. Think about that. Even without 90% of the money needed, you could
start a real estate business.
Arnold Goldstein, author of Starting on a Shoestring (John Wiley and Sons) started his first business “Discount City” with $120,000 of
merchandise, $20,000 of fixtures, and three months of deferred rent, using only $2,600 of his own money.
Rule 2: Not All Debt is Bad Debt. This is an adjunct to Rule No. 1. If you don’t have enough money, then it is possible that you may
have to incur debt to get going. But not all debt is bad debt. Some debt is good debt when it enables you to get ahead in life - start a
business, buy a home, finance college, etc. Most millionaires start out in debt to finance their dream. Is it ideal? Of course not. But if you
can take on some debt and see a way to pay it back through your business, it’s not a bad option at all.
Rule No. 3: Be Frugal. As an employee, you can waste supplies, use FedEx, make too many copies, and spend your management
budget without a second thought. But as a businessperson on a budget, you will have to learn to be lean and mean.
Rule No. 4: Invest in Only Your Best Ideas. Remember that no business survives unless it is serving a market need. You may have
many ideas, but faced with less money than ideal, you cannot afford to make mistakes. You must invest your time, money and energy in
only your best, most likely profitable, ideas.
Rule No. 5: Do What It Takes. If you are going to have say, 25 percent of the money that you would prefer to have, then you must be
willing to put the other 75 percent in, in the form of time and effort. You will have to work harder and smarter than your competitors. You
have to be willing to go the extra mile as a bootstrapper.
Rule No. 6: Look Big. You may be starting a business out of your garage with no funds, but no one but you needs to know that. It is
critical to your success that you project the image of a big, professional business. Until you do get big and have some money, remember
these two important words – fake it!
Rule No. 7: Be Creative. No money to hire that great web designer? Better buy a book and learn a web design program then. Another
option: Barter. Another option: Hire a student. As a bootstrapper, you have to constantly be on guard for new ideas and new ways to
bring in the buck.
Rule No. 8: You Gotta Believe! Northwestern University conducted a study of successful shoestring entrepreneurs and discovered
that they typically never owned a business before, had no business education, and of course, didn’t have enough money to start, but did
anyway. In short, they didn’t know enough to be afraid.
Rule No. 9: Have a passion. Wayne Huzienga started very small, and eventually he created Blockbuster Video, among many other
businesses. Says Huzienga, “I don’t think we are unique, we’re certainly not smarter than the next guy. So the only thing I can think of
that we might do a little differently than some people is we work harder and when we focus in on something we are consumed by it. It
becomes a passion.”
Rule No. 10: If You Take Care of Your Customers, Your Customers Will Take Care of You. You may not have as much money
as the next guy. You may not have ads as big or a fleet of salesmen, but that does not mean you cannot be the best, and one of the best
ways to be the best is to offer personal, superior service to your customers.
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Providing Great Customer Service
Ask your customers what they want, and then give it to them: Survey your clients and customers. Find out what you
are doing right and wrong. Change what needs to be changed.
Train them: Your employees will not know what is expected of them until you teach them.
Empower them: Give employees the room to solve problems on their own. For instance, at Outback Steakhouse, the wait staff
can offer patrons free drinks, appetizers, or meals when something goes wrong, without asking a manger.
Reward them: Employees who make customers happy are making you money. If they are rewarded for a job well done, that
behavior will be reinforced.
Do more than expected: Going above and beyond the call of duty endears you to clients. Do so consistently and your
business will take off.
OPM
So, while it is difficult to start without enough money, and you will have to start small, it can be done. Check out the chapter on 100
businesses you can start for $100 for starters. A far better solution when you don’t have enough to start a business is to get enough
money, using OPM – other people’s money.
Finding people who will be willing to invest in you will take determination; it usually isn’t easy. Without collateral, perseverance will be
essential. Why? Because investors are skeptics, and they should be. Too many startups fail, and so, accordingly, investors usually would
rather put their capital into successful businesses that want to expand or startups that have already been partially funded. The unfunded
startup is the riskiest investment of them all.
But it is also, potentially, the most lucrative, and you can use that fact to your advantage. If you are willing to share your pie, and you have
a plan that makes economic sense, and you are willing to look long and hard, the right investor can be found. It is that very possibility of
a big return on their investment, coupled with the ability to write off a loss on their taxes, that makes the rich investor a viable alternative
for the cash-strapped entrepreneur.
The key will be your ability to entice the right person with the right deal. Investors want a high return. Ask them what they want, and give
them what they want. Most investors will want to know what you are putting into the venture, aside from your sweat equity. Be honest.
If you are donating equipment or material, say so. If you are tapping credit cards, fess up. Your commitment can only help your cause.
The key to winning over an investor or other lender is to look like a pro. Talking big without backup facts will make you look the fool.
Rather, you have to come in looking like a businessman who understands business. You need facts, data, and hard figures that back up
your rosy rhetoric. You must know:
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If you can answer these sort of questions confidently, then it is time to see what your many options are, because the answer is yes, there
are ways to finance your business using OPM.
OPM Option 1: Find a partner: Often, the best businesses are those that are started by two people of different backgrounds and
with different skills sets. You may be a marketing genius, but know nothing about finances, and you might have a friend who is financially
literate but knows nothing about business. Together, you may make a great team. Martha Stewart has a woman she works with named
Sharon Patrick, a steady woman who helps run the empire. Martha likes to compare Ms. Patrick to Jeep – solid and dependable. Many
entrepreneurs need their own Jeep, yours just happens to be one who has money, that’s all.
Real Life Example
In 1930, Chester Carlson landed a job in the New York City patent offices of a small electronics company, where his job was to
assemble patent applications.by hand; a very boring and tedious process. Frustrated by his day job, and already prone to inventing,
Carlson decided that there must be a better way.
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He began to study photography, the physics of light, paper treatment, and printing. His research paid off when he stumbled upon
photoconductivity – the method in which light affects the electrical conductivity of materials, thereby allowing him to reproduce
documents electronically. Hoping to find a corporate sponsor for his invention, or even someone to sell it to, Carlson then spent the
next few years meeting with, and getting turned down by, the likes of GE, RCA, and IBM. He had no luck; he was a genius, but not
a marketer.
The break Carlson had been hoping for came in 1947 when Joe Wilson, the president of a small photographic company called
Haloid, and a marketing wiz, came to see the electrophotography machine he had read about. After seeing a demonstration, Wilson
exclaimed, “Of course it’s got a million miles to go before it will be marketable. But when it does become marketable, we’ve got to
be in the picture!” Wilson and his company eventually pumped $100 million and 10 years into the invention before finally turning
Carlson’s idea into a workable machine. Deciding that “electron photography” and “Haloid” weren’t snazzy enough names, the
marketing wizard decided to rename the process and the company to – Xerox.
Business partners can take many forms. You may be able to find a “silent” partner who merely wants to invest in return for a share of the
company, or you might find someone who is interested in becoming an active participant. However, as discussed previously, partnerships
are fraught with danger, so be careful.
How to Find a Partner with Money
Networking is essential. Put the word out to your lawyer, accountant, and banker that you are looking for a business partner.
Speak with friends, family, colleagues, and people where you worship. Word of mouth has found many a partner.
People in your line of work who have retired may be interested in being either a working or silent partner.
Look online. Try BusinessPartners.com.
The important thing to remember when looking for a partner is that you will get the money you desire only if the partner gets what he or
she wants. Does he want to be involved in day-to-day operations? If so, you better be sure that this is someone you can work with. Does
she just want a return on her investment? Then you better have a solid financial plan. OPM Option 2: Distributor and supplier
financing: Distributors and suppliers want your business. They want you to become a lucrative, repeat customer. As such, they know
that one way to do that is to help you get started. If you seem solid and credit-worthy, getting a start-up loan from a distributor or supplier
is not out of the question. Your best bet is to focus in on the largest suppliers in your field and make a sophisticated, professional pitch
to them. Yet, who knows? It may be that a newer, smaller distributor may be more anxious to earn your business and will thus be more
amenable to the pitch. When you are a bootstrapper, you have to be willing to fall down to succeed.
How Supplier Financing Works
Before a supplier helps finance your business, it usually will visit your site, research your reputation, contact your bank, and call your
references. They will want to be sure you are someone of honesty and integrity. Again, the key to success is preparation. An idea
is not enough. Have a solid presentation ready that explains how your great business plan can benefit their bottom line. Show the
need for your service or product. One of the best things you can do is to get some pre-orders and then go back to the supplier and
explain that you need financing to fill those orders.
OPM Option 3: Seller financing: A final option for starting a business on a shoestring is to buy an established business and have the
seller finance all or part of the purchase. Seller financing is is more common than you think in the sale of small businesses. While there
are many reasons for this, including lack of bank financing, seller financing is an option because it offers benefits for both the buyer and
the seller. For the buyer, owner financing reduces the risk the business is successful only because of the present owner’s contacts or
specialized knowledge.
The key to seller financing is finding a business that has not been sold in a timely fashion via normal means – it is sort of like a house
that has been on the market too long with an owner desperate to sell. The business equivalent is to find a business where the owner
really wants out and is willing to at least finance part, if not all, of the purchase. The seller becomes the bank.
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It is likely that a seller will want the buyer to secure the purchase with some collateral. Just as when a bank lends you money to buy a
home, but has the right to foreclose if you default, business owners usually want to be able to “foreclose” on the business if you default.
That is a small price to pay though for the chance to buy into an established business. The upshot is that owner financing may cost you
a bit more, but overall, it can help both sides, and should work out fine as long as both parties do their homework and delivers what is
promised.
Setting Up Shop at Bargain Prices
Aside from financing the venture, the other aspect of starting a business on a shoestring is being able to outfit the business on a budget.
There is much to buy when starting a business: fixtures, equipment, supplies and inventory to name just a few. All of these things cost
money; money which you may not have. Even so, using some creative tricks, you too can set up a business on a shoestring.
The story of Johnny’s Antiques
It might help to know the story of John, an antiques lover who started what would become a very successful antique and collectibles
shop without a lot of money. John’s motto, right from the start, was, “It’s all in the buying.” John knew that the trick to a successful
bootstrapping business was to pay as little as possible for what he needed.
His first “store” (if you could call it that), was merely some space that he sublet above a friend’s established antique dealership. When
people would come into the main store, a large sign would encourage them to continue browsing upstairs at Johnny’s Antiques.
He scoured flea markets and garage sales every weekend, looking for bargains. “It’s all in the buying,” he would always tell me. If
he could buy a good piece at a bargain, he knew he would be able to sell it for a profit. He bartered for fixtures and shelving. He
took almost anything he could on consignment, thereby stocking his shelves almost instantly. He advertised in inexpensive, offbeat
publications.
Most of all, John had the attitude – he refused to pay too much, was frugal with his money, and always shopped for better bargains.
If you are going to bootstrap your business, you must do the same. Be stingy, don’t blow your money on high rent and fixtures, and
overall, keep your overhead low. Adopt the attitude.
Don’t blow your dough on rent: In order to start your business on a budget, every dollar you do have must be preserved and spent
on only the most necessary of items. As rent is often one of the biggest expenses a business has, it follows then that you will be better
able to start your business if you don’t spend a lot of money on rent. If you do not need a high profile location, don’t get one. Start small,
pick an inexpensive location, and move on to better digs after you are established.
Fixtures and equipment: You do not need new fixtures nor new equipment. Sure, it may look a bit nicer and cleaner, but when you
are on a budget (and often, even when you are not), it simply is not worth the extra expense. Buying used can save you a lot of money.
Even if you can’t find what you need used, many new fixture manufacturers these days will finance up to 90 percent of your purchase,
which again preserves your capital. Consider too the option of leasing any fixtures or equipment you might need.
Stocking the shelves: If you are starting a retail store on a shoestring, you need to understand two things. First, your shelves must
be full of enough inventory to turn a profit from the moment you open your doors; nothing looks worse, or is a better recipe for disaster,
than a store without enough merchandise. Secondly, it is possible to stock those shelves with plenty of products without paying for it all
up front.
How much merchandise is enough? Well, it depends upon how much product you need to move every day to turn a profit. Your business
plan should be the place where you can turn to find this critical number.
Here’s another example: In his great book, Starting on a Shoestring (where several of the ideas in this section come from), author Arnold
Goldstein explains how he opened his first store, Discount City, with $120,000 worth of merchandise. Goldstein writes that that number
did not come out of thin air. He let the numbers do the talking. Here’s how he came to that conclusion:
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Goldstein concluded that they would have to sell $900,000 the first year.
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whole year.
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would have to be $120,000.
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s
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would bring in retail sales of $900,000, and retail sales of $900,000 would mean he paid everybody what he promised and make
25 percent profit.
So where do you get this merchandise when you don’t have a big budget? You have to be willing to look, often long and hard, for
suppliers who will give you their products on credit. There are tens of thousands of wholesale product suppliers and distributors vying for
a chance to sell their wares in your store. You mission is to find those that will stock your shelves without requiring an upfront payment
for the goods. You do so by having them extend you the goods on credit.
It is also not impossible to get one large supplier to supply a great percentage of your initial stock, and sometimes even 100 percent
of your initial inventory. Hardware suppliers do it for hardware stores, Liquor wholesalers do it, as do food wholesalers and clothing
manufacturers.
This entire process – from getting initial suppliers to agree to get extended you credit to getting the inventory to getting additional
inventory to paying back the original inventory - will definitely be a balancing act for a few years, but it does work.
Finding a Supplier
1. Begin by speaking with people already in the line of business you want to start and find out who their suppliers are. Also, look
online and in trade publications to get additional names. Make a list of the every possible prospect.
2. Put together a great package that will woo them. It should include your business plan, a picture of the location, letters of reference,
contact names for your professional advisors, even tax returns. Explain in your proposal exactly what it is you need, how much credit
you are asking for, the terms you want, and how you will be paying it back. You need a package that will make a reasonable supplier
conclude that you are likely to become a potential new client who will be buying their goods for many years to come.
3. Call them up and make appointments with the salesperson in your area. Present the package to him or her. Ask to have this
person set up an appointment with the company’s credit manager or regional sales manager.
4. To sweeten the pot, explain that you will agree to continue to buy from them for the term of the loan (but do not agree to use
them exclusively), and agree that the supplier will have a “security interest” in the merchandise. This means that if you default or go
bankrupt, they will have first dibs on the property.
Other options: Aside from supplier-financed inventory, there are other ways to stock your shelves for less:
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s "ECREATIVE/NCEYOUADOPTTHE@CANDOATTITUDETHATDISCOUNTEDSTOCKISAVAILABLEFORTHOSEWHOGOLOOKINGFORITTHEREWILLARISE
countless ideas that could possibly work.
The Bottom Line: If you have the nerve to start a business on a shoestring, you also have enough to get shoestring funding and stock
the store without paying retail. Buying used, buying in bulk, buying out of the classifieds, buying at garage sales – whatever works is
what you have to do. It’s all in the buying.
Resources You Can Use
Starting on a Shoestring by Arnold Goldstein
Starting on a Shoestring
Ebay
www.eBay.com
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Chapter 17 – Growing Your Business Without Big Bucks
17
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Growing Your Business Without Big Bucks
Not advertising and marketing is like being alone in a dark room – you know you are there, but no one else does. The whole idea of
almost all advertising then is to turn on the light and let people know you are out there. You have to get the phone to ring or get people
to come in the store. Advertising will do that. In this chapter we look at the basics of bootstrap marketing. Tough, yes, but it can be done.
Then, in the remainder of the book, we examine many other ways to grow your business.
Advertising on a budget
Advertising is the lifeblood for many businesses, but to be effective, it must be done correctly. This is even truer when yours is a
bootstrapped business. There is no room for error. Accordingly, the first thing you must do is to analyze whom your customers are, or who
they are likely to be, because if you don’t know who you are selling to, you won’t know where to advertise in order to reach them. How
old are they? Where do they come from? What are they looking for?
You find this information in the research you completed for your business plan and by speaking with people. Conduct a poll on your
website. Have a poll in the store. Where do your people go online? What social media sites do they frequent? What do they watch, read,
and listen to? Wherever they are is where you have to be too.
Once you have a good idea as to whom you are looking to attract with you advertising, you can earmark your ad money much more wisely
and specifically. The trick is to find the right media source, that is, the one most frequented by your potential customers.
Here are some of my favorite shoestring advertising vehicles:
Buy unused time or space: If you check in with a website, newspaper, radio or television outlet near their ad deadline, you may find
that they have space they have not yet sold. This is called “remnant” space (for print media) or time (for the electronic media.) Remnant
buys are often available at a great discount.
Advertise in less traditional media outlets, or at odd times: If your business will cater to teens, for example, buying an ad in a
local alternative newspaper is much cheaper than your local daily. This is also true for the electronic media. Buying an ad on television or
radio is much less expensive if you advertise on smaller stations or in the middle of the night. A radio ad that may cost $250 per minute
during peak drive times can be had for $25 late at night, and that just may be when your audience is listening. Similarly, your television
dollar can go much further if you advertise on cable stations.
E-newsletter advertising rocks! Find some big websites with e-newsletters that cater to your demographic/customer base and
advertise in those e-newsletters. It should cost you almost nothing but you will be getting in front of the very eyeballs most likely to
buy from you because they have self-selected themselves as being interested in this topic and wanting to read this e-newsletter.
And even then, no matter which media outlet you choose, the trick to getting your ad heard for less is to never agree to buy their going
“rate card.” Find out what they are asking, and offer less. Remember the rule: Everything is negotiable. It is quite possible to pay less than
the going rate if you walk in with cash, and a commitment to pay less.
Get you ad produced more cheaply: You do not need to hire an expensive ad agency to create your ad. Be creative. Find a graphic
artist who moonlights, or approach a student at an art school to create an ad for you. Be willing to barter.
Use flyers: Flyers can advertise specials, offer discounts, grab attention, and best of all, they can be created very inexpensively on your
computer.
Go crazy on Craigslist: Who reads the classified ads on Craigslist? People are ready to buy something, that’s who. Even better: Many
Craigslist ads are free. Go for it.
Craigslist Tip: Refresh and redo you ad daily, or every other day. And be sure to add in keywords. That way it stays near the top
of the daily listings.
Barter: It is sometimes possible to barter your services for ads in various small media outlets.
Have a great website and then get people to opt-in to your e-newsletter: First, you site has to be great. Next, you need to have
a compelling e-newsletter such that people want to opt-in. That then gives you permission to market to them down the road.
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“Permission-based marketing” is the best.
Use co-op advertising: Here is a great option that you may not know about. It’s called cooperative (co-op) advertising. Co-op
advertising is a cost-sharing arrangement between a manufacturer and a retailer wherein the retailer places an ad that is partially paid
for by the manufacturer in exchange for the manufacturer’s product being mentioned in the ad.
For example, when a convenience store advertises a certain beer, you can bet that that Beer Company helped pay for the ad. That is
co-op advertising. Co-op opportunities are available in every medium, online to print to radio and TV spots. Collectively, manufacturers
earmark approximately $25 billion dollars annually to help small businesses stretch their advertising dollars. However, much of the money
goes unused.
To start using co-op advertising, ask your suppliers what co-op programs they offer. Follow their rules carefully to be sure you get
reimbursed. Some suppliers require that ads feature only their products, not any other supplier’s; others ask that no competing products
be included.
Normally, you will need to pay for the ad, and then present proof to the supplier that you mentioned their products. For print ads, just a
copy of the ad exactly as it was printed will work. If you buy TV or radio ads, you’ll need a copy of the script with station affidavits of dates
and times aired. You also will need to document the cost of the advertising, usually with copies of applicable invoices from the publication
or station where you ran the ad. Finally, you will need to submit a claim and your documentation.
Getting the Most from Co-op Advertising
Read and follow exactly the co-op rules your supplier has, if they have any. That is the key to getting the reimbursement.
If you’re preparing your own ads, work with the free advertising professionals available at the media outlet you are using to
prepare an ad you think will appeal to the manufacturer. Keep in mind the image the manufacturer presents in its own ads.
Make sure your company’s name stands out in the ad. Your goal is not so much to sell the supplier’s product but to get
customers into your store.
If there’s no established co-op program, pitch your ad campaign to the vendor anyway.
Expect the vendor to help out. After all, you’re bringing them business.
For more information about co-op opportunities, http://www.co-opsourcebook.com/.
Tracking your ads
When you are on a tight budget, there is no room for error. There are many things that can affect the outcome of an ad campaign – the
weather, the economy, even the news. Ads get stale. Neighborhoods change. Customers’ tastes and buying habits change. Given all of
that volatility, it is important to keep a close eye on the effectiveness of your advertising. So, when you do advertise, follow these hints to
see if you ads are working:
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pulling.
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discount, and see which ones do best.
Marketing on a budget
Less than 50% of all businesses in the United States rely on advertising to bring in customers. What do they use instead? Marketing.
Marketing is a strategy to get your name known by the public, so that when they need a product or service, they think of your business.
The great thing about marketing is that there are plenty of cheap ways of getting business without spending a lot of money.
The following cost-effective ideas can definitely increase sales and they need not cost a fortune. The key is to try several methods out,
test, see what works, and go with those:
Gift cards and certificates: Gift certificates allow present customers to introduce you to new customers. Even better: Because you
get paid up front, they help your cash flow. Even better: Let people redeem them after the expiration date and they will love you forever.
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Final bonus: At least 30% of all gift cards are bought but never used. That equals that rarest of rare things: Free money.
Packaging: The plastic bags that customers may leave your store with can be great, cost-effective signs. With your name, address,
phone number and logo on the side, bags can be a valuable marketing tool. The same goes for your mailing labels.
Coupons: This is one of the least expensive ways to develop new business. Offering a discount via a coupon is historically a great way
to grab attention and get business. They can be put in invoices or church bulletins, can be sent using direct mail, or can simply be handed
out or placed on windshields.
Don’t Forget the Loss leader: I recently went to the Coca-Cola world headquarters in Atlanta. I had a few hours to kill and so
I took the tour. And what did I leave with? A free Coke. How did Coke become Coke? Partially by giving away the new concoction
for free to anyone, anywhere it was sold. Freebies work, even now for the greatest brand on the planet. They probably could work
for you too, eh?
Speeches: Depending on your topic and your market, you might want to speak before chambers of commerce, trade associations,
parent groups, senior citizens or other local organizations.
Blogs: Blogging positions you as an expert, and is a particularly good way to promote a consulting business.
Word of mouth advertising: The best source of repeat business is through happy customers. Make sure that your current customers
know how valuable they are to you. Send them a flyer or brochure offering a discount for sending in new business.
And remember this too, in the 21st century, word of mouth has gone digital too. When your e-newsletter is forwarded on, that’s word of
mouth. So too is having your tweets re-tweeted or having people Like your Facebook page. Word of mouth looks different today – don’t
forget that.
Seminars and Webinars: Free seminars and webinars (and tweetchats) also give you an air of authority, and allow you to sell without
seeming to be a huckster. If you do hold one, be sure to:
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attending.
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Donate: Donating your product or service to a charitable cause often results in positive exposure.
Samples: Giving potential customers a free sample is an excellent way to attract attention and make a positive impression. Hey, if it
works for Costco, it could work for you too.
PR: Getting a writer or columnist or reporter to do a story about you and your business that can not only be used for sales, but can be
reproduced and used again and again to create credibility. And it costs nothing.
The Bottom Line: There are many ways of increasing sales without spending a fortune. Everything from e-newsletter ads to co-op
advertising is available. To succeed, you will need to experiment. Try out a few different options and discover which ones work best for
your business. After that, turn it into a successful recipe and do it again and again.
Resources You Can Use
Guerilla Marketing
www.gmarketing.com
PART V
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GROWING YOUR BUSINESS
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Chapter 18 – Advertising Basics
18
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Advertising Basics
Ok, so whether you did it on a shoestring or not, whether you got a conventional loan or called a friendly uncle, and whether you started
at home or rented some space – whatever the case – congratulations are in order.
You started a business.
It is no small feat. But we are just getting started. Now comes the hard part. It’s sort of like losing weight (not that I have any experience in
that or anything!) In my case the question is: How do I keep the weight off? In your case the question is: How do you keep the business
open?
You need customers. Lots and lots of customers.
So for much of the remainder of this book, that is what we are going to be examining, looking at everything from traditional marketing
and advertising to e-marketing and e-advertising, to technology and social media and a whole lot more.
Advertising generally
Too often, small business advertising is wasted on a scattershot approach that fails to focus on a company’s best prospects - the people
who are ready, willing and able to purchase its product or service. Instead of targeting their advertising to a specific audience, these
entrepreneurs instead target a mass audience in an attempt to reach everybody. Often, they reach nobody.
The way to avoid this unenviable fate is really quite simple. You must, before anything else, define your target market. You have to decide
things such as:
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Once you have answered these sorts of questions, picking the vehicle to deliver your message to that market becomes much easier.
If, for example, you are going to open an Interior Design office, advertising in the Sports Page of the paper makes no sense, while
advertising in Atlanta Monthly (or the equivalent of course) is smart.
Advertising Options
sWebsites: You can either contact the site directly or buy Google, Yahoo, or Bing ads that will place your message on the right
sites.
sS
ocial media: Advertising on Facebook for instance can be very lucrative because 1) you can micro-target your intended
audience, 2) limit your budget to a daily amount, and 3) revise ads on the fly as needed, depending upon what works.
sOutbrain: A great site to advertise your content for your website.
sN
ewspapers Can still be a viable choice in the right circumstance. They can be used to promote a sale, grab attention, or offer
specials on your product or service. The downside is that newspapers carry lots of ads, so yours can get lost.
sMagazine ads are not inexpensive, but magazines stay in the house a while, so the price may be worth it. Magazines are especially
good for promoting your image and building your brand. Trade magazines are useful for business-to-business advertising.
sRadio can be an inexpensive, high-impact way to reach a specific market. Repetition is essential with radio advertising as studies
show that it often takes someone hearing your ad six times before it sinks in. Repetition is the key. Repetition is the key. What is
the key? See?
sTelevision advertising is very effective, but is correspondingly expensive. Car companies know more about how to sell their
product than almost anyone, and where do they advertise most? Television. Television advertising works, bottom line. Cable
channels are more affordable, but are seen by far fewer people and you can get lost.
sOutdoor advertising offers high visibility, and the cost per viewer is relatively low.
Let’s look at these main advertising options in more detail:
Websites: Online advertising can take many different forms. Most common, and probably most effective, is the cost-per-click (CPC)
campaign. This is where you place an ad on Google or some other search engine and have your ad show up in the results and you only
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pay if someone clicks on your ads. That is why it is also called a PPC program – pay per click. Other similar options allow you to place
your ads on relevant websites. Because this is such an important subject, we tackle it in depth in the next section, Technology, The Web,
and Social Media.
Newspapers: Not every home receives a newspaper anymore so caution is required. For those homes that do, know that the
demographic skews older, but the paper is consumed daily, so that is great. For those homes (and hotels) that do take the paper, there
is something in it for everybody: sports, comics, news, food, home and garden, etc. Because of that, you are able to reach your target
market fairly specifically by advertising in the right section, and that’s the whole idea.
There are many advantages to advertising in the newspaper. Newspaper reading can be deliberate, and as such, ads can be examined
closely. Your newspaper ad can contain details that electronic ads miss – things like prices, phone numbers, addresses, and coupons.
Another advantage is the large variety of ad sizes newspaper advertising offers. Even though you may have a small advertising budget,
you can still place a small ad without taking a huge financial risk.
Yet, while advertising in the newspaper can be great, it is not without some significant disadvantages. First, newspaper reading is down.
Additionally, newspapers are read only once and are then thrown away. Because a newspaper page is fairly large, small ads can look
tiny, and your ad has to compete with other ads and hard news articles for attention. Probably worst of all, you are not even assured that
every person who gets the newspaper will see your ad. They may not read the section you advertised in, they may skip your page or they
may just gloss over your ad.
The hardest question usually is how big of an ad to run, how often to run it and how much to spend. I suggest starting slow and small,
and “test” the ad. Once you see that a small ad works and when it works best, then you can roll it out, make it bigger and legitimately
expect bigger results.
Advertising is sold by column and inch, and you can easily determine the size and cost of your ad by looking in the newspaper. For
example, an ad that measures 3 columns across and 5 inches down would be a 15-inch ad. If the inch rate is $50, your ad would
cost $650 ($50 x 15 inches.)
Keep in mind:
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but it is also often worth it.
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Magazines: The great thing about magazines is that they target your market fairly specifically. If your business caters to car enthusiasts
for example, advertising in Car & Driver might make a lot of sense. Magazines are also good in that, unlike newspapers, they are usually
kept around for a week or a month, and thus the chance for many people to see your ad increases dramatically. The downside is that
magazine advertising is usually fairly expensive, and ads often have to be in color to be noticed, increasing the cost even more. Yet even
so, the right ad in the right magazine has launched many a business.
Radio: Radio can be a very cost-effective way to advertise your business. As with magazines, it is fairly easy to target your market by
advertising on the appropriate show. As there are dozens of stations in most areas catering to dozens of different tastes, your job is to
find the station and the show that best attracts your desired demographic.
Once you do that, call the station and make an appointment with a sales representative. They will be glad to help you write and ad, and
will even produce it for you for little or no cost. The trick with radio advertising is to be clever and grab their attention. Humor, music, and
sound effects can all be used to great effect on the radio. Notice which ads grab your attention and model your own ad after that. There
is no need to reinvent the wheel.
And overnight radio is a steal.
Television: Television is the 800 lb. gorilla of high-impact advertising. Companies don’t spend more than $1 million a minute for ads on
the Super bowl for no reason. They know that television advertising works. It combines visuals with sound and a fairly captive audience.
Of course, the expense can be daunting. Advertising on a network station is expensive and only makes sense if your business has
regional appeal. Cable advertising may be good, again because you can pick the stations that appeal to your audience. As in radio, call
up the stations and speak with a sales rep to get an idea about costs and benefits.
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Outdoor: Outdoor ads, billboards, bus stop ads, and transit ads can be a good way to attract attention and get the phone to ring as they
can be seen by hundreds of thousands of people a month. According to Market Vision Research for example, the Florida Lottery found
that its most effective way to advertise its product was through the use of billboards. Similarly, according to the U.S. Travel Data Center,
nine out of ten automobile travelers in the U.S. rely on billboards to find gas, food, lodging, and tourist attractions.
Creating a winning ad
No matter which option you choose, you still need to create an ad that pulls. Interestingly, all ads, no matter the media, are fairly similar
in structure. They all must grab attention and make an offer. One simple way to create a successful ad, whatever the media, is through
the tried-and-true AIDA method. This stands for Attention, Interest, Desire, and Action. The AIDA formula serves as a good blueprint for
creating a winning ad — any type of winning ad, in a newspaper, magazine, on radio or television.
Attention: THE FIRST THING YOU HAVE TO DO IS GRAB THEIR ATTENTION! See? Once you do that, you can get potential
customers interested in what you are selling, but if you don’t get their attention, they will never hear a thing above the din of headline
news, sports stories, and full-page ads. So you must first hit your prospect between the eyes with a powerful headline. A good headline
will grab a customer by the throat, show them the benefit of hearing more, and do so in two or three seconds. When writing your ad, keep
in mind the benefits most likely to get attention are saving money, saving time, making money, and better health.
Beyond the headline, the other way to capture their attention is to use a great visual or photograph. One’s eye is naturally drawn to
pictures, and so incorporating one into your headline can really make a difference.
Interest and Desire: After you have the prospect’s attention, you have to sell them, in the body of the ad. You do that by making the
customer a compelling offer and describing as many benefits as possible in simple and interesting terms. Since the product or service,
to be successful, must fill a market need, you must explain how it does that — what it does to fulfill some need the consumer has. Your
ad must be well written, clearly explain the benefits to the customer, and keep their attention.
Action: Finally, you must ask for the order. Give reasons for the customer to buy now, and make it easy for him or her to do so. This
will involve a coupon for mail orders, a toll-free order line, an e-mail address, an on-line order form, a fax order line, or any other means
to make it easy and simple to order. Be sure to take the fear out of the purchase as much as possible by giving guarantees, offering
testimonials, and showing how the customer is going to lose if he doesn’t order NOW!
If you follow the AIDA formula, you should find that your ad will work, no matter what medium it is in.
The Bottom Line: Advertising is usually one of the best things you can do for your new business, and you have all sorts of options
with which you can advertise your business: The Web, newspapers, magazines, radio, television, social media, and outdoor ads. In most
of these, using the AIDA formula works: Attention, Interest, Desire, and Action.
Resources You Can Use
Advertising Age Magazine
www.adage.com
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Chapter 19 – Marketing Made Easy
19
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Marketing Made Easy
Customers do not appear out of nowhere. They must hear of you before they can ever call you, and that is the purpose of advertising and
marketing. What is marketing? Essentially, it is anything you do to promote your business, get your name remembered, and generate sales.
It encompasses promotions, giveaways, publicity, customer relations, public speaking, signs; really anything that keeps your business in
the public eye and brings them in the door. (Note, again, e-marketing is covered in the next section.)
A cautionary tale
When Sarah was in law school, she took a class on How to Start a Law Practice. One day, her instructor invited a local lawyer to come
speak to the class. One of the very first questions he got from the class was the same as the one you may be asking yourself – ‘where
do we get clients and customers?’ “Take out a sheet of paper,” he said, “If you are going to make it on your own, you will need at least 10
sources of business. Make a list of your 10 sources.” So they did. Most had a list that said something like:
1. Dad
2. Friends of dad
3. Friends and relatives
4. Work associates, etc.
After looking the lists over, the attorney exclaimed “Wrong! You have to think bigger if you’re going to make it in your own business.”
He explained that number one on their list should read something like “1. Everyone I know.” Whereas most of the class had friends and
associates accounting for the bulk of their list, the successful lawyer showed them that tapping everyone they knew was but one of at
least ten different things they would need to do if they wanted to generate business. Advertising would be another. Networking would
be another.
This is a good exercise for anyone starting or running a business, and you should do it now. Make a list of 10 sources of business. If
you are going to make your business a success, you will need to be creative and come up with many different ways to generate sales.
Marketing must play a major role in that plan.
The need for a marketing plan
The lawyer’s tale above is illustrative because it indicates just how few people really have any sort of comprehensive, methodical, wellthought-out plan for generating sales. And make no mistake about it – whether you are opening a dentist’s office, a real estate office, or
a bakery, you will be in sales. How are you going to generate those sales? Which media sources will you advertise in and which marketing
options will you utilize?
A marketing plan will tell you. A marketing plan is nothing more than your plan of action for bringing in business. It need not be long or
complicated, it simply needs to be a blueprint that you believe will work for you and which you are committed to following.
Your assignment then for the rest of this chapter is to look at the various marketing tools available to you, decide upon a few that make
sense to you and for your business, and commit those to paper, along with any advertising strategies that you have decided upon.
Committing to a marketing and advertising plan of action will keep you focused and on target.
Marketing and Advertising Plan Analysis
1. Whom are you trying to attract?
2. What are their needs?
3. What is it you want to sell them?
4. What do you offer that the competition does not?
5. What are the goals of the campaign?
6. How long will it last?
7. Who will be in charge?
8. What is the budget for the campaign?
9. Which marketing and advertising options can you use?
10. How will you be able to measure success?
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Marketing tools
There are many different methods that you can use to promote your business as part of your overall marketing plan. Below are many
different ones to choose from. Pick a few that seem to match your style and business and add those to your plan.
Newsletters: Physical and virtual newsletters are a great way to share information with potential and actual clients alike. Aside from
positioning you as the expert, they are inexpensive to create, allow you to contact people without looking like a salesman, and they get
forwarded-on.
Tap into the magic words: The two greatest advertising words ever invented for business are FREE! and SALE! People love to get
something for less, almost as much as they love to get something for nothing. If you utilize these two words in your promotion, marketing,
and advertising materials, people are sure to notice you.
Contests: A contest can generate interest and free publicity for your business. By giving away your goods or services, you simultaneously
present yourself as an expert in this area while drawing people to your business because they love free stuff.
Signs: A big, bold sign in the right location can be a very effective way to bring in new business. Retail businesses swear by good
signage. A number of different factors need to be considered when choosing a sign:
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first need to get a variance from the city.
Direct mail: Direct mail merchants generate some very specific lists, which you can use to send potential customers a flyer or other info.
Direct mail is also a great way to stay in touch with current and former customers. Here are some tips for making direct mail effective:
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campaign will be.
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letter (that contains a pen or doodad) is almost always opened as well.
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s$ONTEXPECTMIRACLES!GOODDIRECTMAILCAMPAIGNGENERATESABOUTAlVEPERCENTRESPONSE4HATMEANSTHATPERCENTOFYOUR
mailings will be useless.
Commissioned salespeople: Another way to increase business better known is by having commissioned salespeople sell your wares
to different retail stores. The obvious advantage here is that you don’t have to pay the salesperson anything until he or she gets a sale,
and even then, it will be the proceeds of the sale that you will use to pay the salesperson.
Magnets: All refrigerators are covered with pictures and magnets these days. If you want people to see the name of your business
several times a day, give away free refrigerator magnets. This idea works especially well for neighborhood services and restaurants.
Testimonials: Satisfied customers can be one of your best sales tools as they lend credibility to your business. Post their testimonials
on your site. Tape them to the store window.
Excellence: It costs five times more to create a new client than to retain an existing one. Studies show that each satisfied customer will
spread the good word about your business to at least one other person, while an unhappy customer will likely complain to many more
than that. Doing great work and offering superior customer service then can go a long way then towards creating continuing revenue.
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Networking: Networking begins with your friends and family. Make sure that they know how much you value new business and
appreciate referrals. But don’t stop there. Join a networking group. For instance, Chambers of Commerce sponsors networking events
where you can meet and mingle with other business owners, who are in fact potential customers. Le Tip International is another great
group that usually meets weekly and creates a lot of business opportunities for its members.
Publicity and public relations: Another important aspect of marketing is the ability to get good press for your company. An article,
blog post, or radio/television news story about your business is like getting a free commercial and an endorsement all in one. Even better:
You can copy the article or make tapes of the story and use them later on in other promotions.
Writer, editors, and producers have to come up with stories to fill their pages and airwaves, day after day, week after week, and it is not
always easy to fill all that space. Therefore, your business, along with your ability to publicize it properly and work cooperatively with the
media, can become one of the stories, if you do it right.
So just how do you get the press to pay attention to your business? Begin by reading the site or watching your local news closely and
noticing which reporters do stories about small businesses. Then you need to think of a “hook,” or angle for the story. “Local boy makes
good” is but one example. If you sponsor a charity event, or have invented something new, or are a community leader, or if you just opened
a new store in a needy neighborhood, the press might just become interested in your story. Come up with a hook.
There are two ways to get a media outlet to pay attention to you: by sending out a press email, or by sending out a press kit. A press
email (as opposed to a press release) is a short, snappy blast that has a hook, is intriguing, and doesn’t waste the reporter’s time. One
or two page pre-written article that explains the who, what, where, when, and how of your “news.” If an editor or producer agrees that the
contents of the press release are indeed newsworthy, they will either assign a reporter to interview you about the story, or possibly just
print the press release outright in the paper.
Get your press email read: Find out the name of the reporter who covers your area and email that specific person. Do not send
it to “newsroom,” or “editor.” Create a catchy subject line. Be newsworthy – why would a reader want to read your story? Have an
angle that works, that fulfills a need. Keep it short.
A press kit is a collection of information about you and your business. It could contain a press release, previous stories about you,
background information about your business, frequently asked questions, a resume, or almost anything else you think would pique an
editor’s interest. The purpose of a press kit is to inspire enough interest in you and your business that media types want to know more.
Tips:
s
s
s
s
s
)NSIDEFOCUSONSUBSTANCENOTmASH!FANCYPRESSKITWONTFOOLANYBODYIFYOUREALLHATANDNOCATTLE
"UTAGIMMICKONTHEOUTSIDETOGETITOPENEDISAlNEIDEA
4ELLASTORY.EWSPEOPLEREPORTSTORIESANDTHEIRAUDIENCEREMEMBERSSTORIES
2EMEMBERLESSISMORE&OCUSONTHESTORYTHEPRODUCTORSERVICEOREVENTYOUWANTTOHIGHLIGHT
/FFERTESTIMONIALS!FEWGOODTESTIMONIALSLENDCREDIBILITYTOYOURPRESSKIT
An editor’s job is to report the news. So your job is to become newsworthy. Always remember that news people are in the news business,
not the promotion business, so you must offer yourself, via your press kit or press release, as a community asset, not a huckster capitalist.
The Bottom Line: Create a marketing and advertising plan and follow it. The choice of methods available to use to grow your business
is almost inexhaustible, and many are not that expensive to try out. And, by using the power of the press, you can gain business and
credibility in one full swoop.
Resources You Can Use
The Direct Marketing Association
www.the-dma.org
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Chapter 20 – Caring for Customers and Employees
20
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Caring for Customers and Employees
Advertising and marketing have the same goal in mind - to make the phone ring, get people to visit your site, or to email you, or otherwise
bring customers in the door. After that, what happens is up to you. If they like what they see, if they find great products or service, if they
are treated well, they will return. When that happens, you have the most prized of all things: a valued, loyal, returning customer.
It is often said that it costs five times as much to create a new customer than it does to retain a present one. Similarly, there is a rule of
thumb that says that 80 percent of your business comes from 20 percent of your customers (The 80/20 Rule.) The best thing you can
do is to stay successful in business is make new customers consistent customers by treating them well, giving them exceptional service,
and doing what you say you will do when you said you will do it.
By the same token, the other constituency that you need to care for are your employees. Employees are the backbone of your business.
If they are happy, your business runs well, and if they are not, well, you know. So your job now (among your many other jobs), is to care
for these two constituencies. Take care of your customers and employees, and they will take care of you.
The three stages of customers
Almost every business will have three different sorts of customers: New customers, existing customers, and exiting customers. You need
all three, and to handle all three correctly, if you want to succeed in business.
Creating new customers is an ongoing process, and is one of the fun aspects of business. Many an entrepreneur enjoys spending his
time figuring out ways to lure in new business. Where many drop the ball however is after the initial sale. Flush with success, the new
entrepreneur often neglects the new customer after that sale, inadvertently failing to realize that that new customer may become one
of the valued 20 percent if treated properly. You turn that new customer into a returning customer by treating them well from the start. If
you don’t, then it’s the business equivalent of having a one night stand.
Existing customers are one of your most valuable business assets and so cannot be taken for granted. They usually make up the bulk of
your business and so it is incumbent upon you to nurture that relationship and let that customer know how important they are. Existing
customers should be given special services and discounts when appropriate, and otherwise shown appreciation for their patronage.
Finally, all business will have customers who are ending their relationship for one reason or another, and even this customer needs
special treatment. It may be that the relationship is ending as that is the natural course of the relationship, for example, a chiropractic
patient who is ending his care, or the customer who is moving away. As you never know whom they talk to, or whom they may refer to
you, this customer needs to be cared for just as well as the others.
Why do customers leave? Consider these statistics from a recent survey:
s OFCUSTOMERSLEAVEABUSINESSBECAUSETHEYHAVEMOVEDAWAY
s CHANGETHEIRPURCHASINGHABITS
s DECIDETHATTHEYLIKETHECOMPETITIONBETTER
s LEAVEBECAUSETHEYBECOMEDISENCHANTEDWITHACOMPANYSOVERALLSERVICE
s &ULLYSTOPDOINGBUSINESSWITHACOMPANYBECAUSETHEYFEELUNAPPRECIATED
The lesson is clear: Unless you want to lose the bulk of your hard-earned customers then, you better make sure they know that you
appreciate your patronage.
As old customers leave, you need to constantly be bringing in new customers to take their place, and as you do that, you need to be
converting your new customers into existing, loyal customers. This important cycle of your business cannot be ignored. Old customers
will leave (because they do), and if there are no new customers coming in to pick up the slack, you will soon be out of business.
At Carpet World, in Long Beach California, a huge sign said, “Our Word of Mouth Advertising Starts With You!” That is the attitude.
Taking care of your customers, all of your customers, and letting them know how much you respect and appreciate them, will go far
towards keeping your business on top.
Just what is great customer service?
While “great customer service” is a mantra we all hear about, few businesses actually incorporate it into their modus operendi. It may be
because they have never given it much thought, or because it is simply not a priority, or that the culture of the company may be so hectic
that employees feel stressed. Unless you want to be on a never-ending quest for new customers, because you have no returning, loyal
ones, you better make customer service a priority.
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Furthermore, serving your customers well is also a great way to distinguish your business from the competition. You have to give people
a reason to patronize your business – better prices, a better location, more fun, better products, or yes, better service can be one of those
reasons.
Great Customer Service
1. Be attentive: Think like a customer. What do they want from you? What are their needs? The better you can meet those needs,
the better your customer service.
2. Make it personal: Endeavor generally to anticipate the needs of particularly special customers – offer recommendations and
ideas that they might be able to use. Become their partner. Send them handwritten thank you or other token of your appreciation.
They won’t forget it.
3. Give them a discount: A discount on future purchases is a great way to make customers feel special (and remain loyal.)
4. Keep them informed: Costco sends its all-important small business customers a special newsletter every month, loaded with
information, business tips, ads, and discounts. Can you do something similar?
5. Take personal responsibility: Make sure customer service representatives act promptly, keep their promises, and follow up.
The idea is to have one person accept responsibility for fixing a problem, have them do more than the client expected, and so in
a positive, helpful way.
6. Go the extra mile: Infusing your troops with the power to solve basic customer problems without seeking extra authority will
not only increase the level of your customer service, but it will simultaneously show your employees how important it is to the
company.
The essence of superb customer service is that service be one of the guiding principles of your business. You need to put pen to paper,
create a policy, and then see that every employee gets it and knows it. Also, make sure that it is made part of the employee manual. But
even more, for employees to realize how important you take customer service, it must be stressed every day, in many ways.
Helping employees help customers
The California Chamber of Commerce once conducted a survey of 100 of the most successful small businesses in that state. One of
the questions it asked was this: “The real key to business success is:
A. Hard work and perseverance
B. Fine products and service
C. Advertising
D. Knowing the fundamentals of business
E. Employees”
The overwhelming answer was “E,” employees.
It is not hard to understand why. Employees do the work. Employees make decisions. Employees are on the front lines. Employees please
or displease customers. It follows then that if you want to offer great customer service, you have to infuse your employees with that
desire, because for many businesses, it is the front-line employees who deal with customers on a daily basis. As such, if you want to be
known for having great customer relations, your staff needs to know what is expected of them.
Helping Your Employees Help Your Customers
sSupport employees who deal with customers every day. Make their jobs easier. If they have what they need, they will be
happier and that will translate to the customer.
sTrain all employees in customer service. One CEO takes training so seriously that he often teaches the customer service
class given to new hires himself. This training should also include phone-courtesy training, which is the first contact many people
have with your business.
sS
tress communication. Again, those who deal with customer complaints need to know how to solve the problem, and need to
tell the customer that they will solve it. Make sure they keep the customer up-to-date, and then offer a solution in a timely manner.
s2EWARDAJOBWELLDONE
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s(AVEAhNOTOLERANCEvPOLICYNever tolerate in your company people who give poor customer service, no matter how bright
they may be. If you begin to stress the importance of increasing the quality of your customer relations and back it up with actions,
the message will be received.
s0OLLCUSTOMERSFREQUENTLY to get feedback on how you’re doing. Not only do most customers not mind giving feedback, but
also they feel important when they do.
s5SE4WITTER Many large companies have come to use the social media platform as a powerful and immediate way to resolve
customer disputes. If you see some negative tweets about your business on Twitter, then be proactive, tweet back, and propose
a resolution.
s3TRESSMANNERS Customer like hearing “Thank you” or “We’re so sorry” or other considerate words, when appropriate.
When problems do arise, the company motto should be: “This will be fixed.” Always acknowledge when you receive a customer complaint
as soon as possible. Let the customer know you are sufficiently concerned about the problem and your team is on the job to resolve it.
Take Nordstrom’s for example. The department store has an enviable reputation for superb customer service, and one reason is that
customer service is stressed, even as early as the initial hiring interviews. One interviewee tells the story of how she was told by a Nordstrom’s
executive that if a customer brought in a used pair of shoes, six months after the sale, Nordstrom’s would gladly take the shoes back.
Complaints are your friend
Indeed, all feedback from your customers, whether positive or negative, is one of the most valuable things your business can get.
According to the Small Business Administration, most business owners get one to five complaints a week, and most are about billing and
pricing. Interestingly, the SBA survey also says 95% of dissatisfied customers would do business again with a company if their problems
were solved quickly and satisfactorily. So solving the customer’s problem is your job, even if you disagree with his or her complaint.
Here’s what to do: Listen. You win back dissatisfied customers by not being defensive, by being a good listener, and by your willingness
to hear them out. Even better, you can placate angry customers when you let them know you are more than happy to correct the problem
to their satisfaction. So, after listening:
s !SKTHECUSTOMERHOWHEORSHEWOULDPREFERTHEPROBLEMBERESOLVEDANDRESOLVEITTHATWAYIFYOUCAN
s )FACUSTOMERWANTSAREFUNDGIVEITTOHIMORHERIFPOSSIBLE)FYOUDOYOUWILLLIKELYKEEPACUSTOMER
s )FTHEPROBLEMHASTODOWITHEMPLOYEESTHEIMPORTANTTHINGISTODISCOVERWHETHERTHEPROBLEMISENDEMICANDIFSOROOTITOUT
s %VENIFYOUARECONVINCEDTHATYOURBUSINESSISTOBLAMEBEHUMBLEEXPRESSYOURREGRETTHATTHECUSTOMERHADABADEXPERIENCE
with your company, and offer some other goody to mollify him.
Complaints are good because they help you learn what your business is doing wrong. But feedback need not be negative to be helpful.
Soliciting feedback is a valuable way to find out what customers like and dislike about your business, as well as a way to discover what
they would change and keep.
How to get feedback: Offer a small gift certificate for participating in a survey, either online, offline, or both. You can glean a lot
of valuable information from your clients, while also getting their e-mail address, so as to add it to your list. Another benefit of using
questionnaires on customers is that you can get testimonials from them. Once you get their permission, those testimonials can be
used on your site and in other marketing and promotions materials.
Customer feedback can be one of the best friends your business has.
Caring for employees
Not only must your customers know they are appreciated, but so too should your employees. There are any sorts of ways you can run
your business. You can be a dictator, a jerk, a facilitator, a cheerleader, or any number of other styles. The important thing to realize is that
the style you choose to use will, in large part, determine the kind of business you create. If your employees learn to loathe you, you can
bet it will effect the bottom line, just as if they learn to love you.
A trait common to many highly successful businesses is that the owners and managers put a lot of effort into communicating with
employees, making sure they are happy and motivated. So a simple, but highly effective, thing you can do to create a positive work
environment is to be a great communicator. Good communication could be a quarterly “state of the company” report to employees,
encouraging them to give suggestions or ask questions, or it could be one-on-one meetings devoted to career goals.
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Another thing you can do to create a great work environment is to be sure to properly reward your employees. Of course, course, a large
part of making employees happy has to do with money. Compensation comes many forms, but the most obvious are paychecks, bonuses,
profit sharing, and stock options.
While the thought of sharing profits with employees may nauseate you, consider that doing so becomes an incentive to do well, it improves
productivity, and all while showing your appreciation for a job well done. Less evident rewards can also make a difference too. A gift
certificate, a luncheon to honor employees who have made outstanding contributions, or a great parking spot can all help boost morale.
There are many measures for employee satisfaction beyond money. Employees want to be appreciated, and want a life outside the office.
Knowing that a happy employee makes for a happy workplace, and thus, usually, a more productive and profitable workplace too, it is not
a bad idea then to take the pulse of your staff once or twice a year and see how you are doing.
Among the things that you might want to find out, via a feedback form, private meeting, or some other method, are:
s 7HETHEREMPLOYEESFEELTHATTHEYARECAREDABOUTASPEOPLEANDNOTJUSTACOGINTHEMACHINE
s 7HETHERYOUREMPLOYEESFEELTHATTHEIRWORKISINTERESTINGANDAPPRECIATED
s 7HETHERTHEYFEELTHATPEOPLECAREWHATTHEYHAVETOSAY
s 7HETHERTHEYLIKETHEIRJOBANDWHATTHEYWOULDCHANGEABOUTIT
s 7HATTHEYNEEDTODOABETTERJOB
You will be spending a lot of time at your new business and with your employees. Being a good boss is one of the easiest, and least
expensive, ways to ensure the success of your business.
Liven up your meetings
The purpose of a meeting is to share information, brainstorm and work towards accomplishing a goal. But that’s not what happens at
most meetings, and employees tend to tune out when meetings are confusing, lack focused, or are boring. Bad meetings result in more
meetings, lower morale and business suffers.
It need not be so. These tips should produce both better meetings and thus a more efficient business:
1. Keep it short and sweet: Meetings run into trouble when they are allowed to continue ad naseum. Of course some meetings need
to be long, but those should be the exception. Most meetings, if they stick to a well-thought-out agenda, can be finished in 30 minutes
or less, and a good facilitator should keep the meeting on track and moving forward.
2. Speak English: Jargon and mumbo-jumbo waste time and make the meeting pointless.
3. Offer Recognition: Recognize the winners on your team. Take a few minutes to congratulate and thank them for meeting goals,
closing deals and making money. Praise reinforces positive behavior and encourages everyone to do well.
4. Open up your circle: Bring in people from the real world. Have a customer attend a sales or staff meeting and explain why he or
she buys from you. This is a powerful dose of reality.
5. Take action: It is a good idea to create an “action plan” at the end of every meeting. The plan will list each task that needs to get done,
who will do it and when it will be completed. The action plan should be distributed to everyone who attended.
If your meeting is more than a rote rendition of the last meeting, and instead becomes a way to help your staff make more money, then
you just might find that the once-dreaded sales or staff meeting is no longer an unwelcome chore.
The Bottom Line: Customer service must be your mantra. Customers are hard to get and hard to keep, but you can do so by making
exceptional customer service a priority. Exceed their expectations. Offer personal service. Fix problems quickly. And, by the same token,
it is important to treat employees well. Whether you like it or not, benefits and profit sharing motivate people to do better work. Finally, a
mission statement can guide all of these endeavors.
Resources You Can Use
301 Great Customer Service Ideas: From America’s Most Innovative Small Companies by Nancy Artz
1001 Ways to Reward Employees by Bob Nelson, (Workman Publishing Company)
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PART VI
TECHNOLOGY, THE WEB, & SOCIAL MEDIA
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Chapter 21 – Creating Your Website
21
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Creating Your Website
Do you need a website? That may seem like an odd question, but recent studies have shown that almost half of all businesses still do not
have a website, and yes, that is a shocking number. At a time when it is easier than ever to market your business online, when getting a
site has never been cheaper or easier, and when having a site is as essential as having a business card or phone number, not having a
web website equals business malpractice.
Why, then, do some businesses insist on not having a site, or, if they do have one, not having a good site? The usual answer is that it is
too expensive, too time-consuming, or unnecessary. All are faulty assumptions. As you will see in this chapter, these days it is very easy
to create a great, professional web website, and often it is free. And as for whether it is necessary or not, just consider this statistic: 8 in
10 Americans now spend as much time online as they do watching television.
You gotta have a website. A great website.
Or consider this anecdotal experience: Recently, my wife called and asked me to pick up dinner on the way home from the office. She
mentioned a restaurant we like, so I jumped online to look at its site and check out the menu. But I couldn’t find the menu because
I couldn’t find the site—because there was no website. I ended up going to a different restaurant. Multiply that experience by many
customers, and you can see why even the smallest of businesses must have a web presence.
You gotta have a website. A great one.
These days, a website has become a basic way, and in some cases the way, for people to learn more about your business and get in
touch with you. It is the twenty-first-century equivalent of putting up a sign.
Websites 101
One of the best things about the Internet, from a small business perspective, is that it levels the playing field. Offline, small businesses
look, well, small. People can see how big (or small) your business really is, how many employees it has, and so on. But the Internet is the
great equalizer. Online, there is no reason whatsoever to look small. Your site can be every bit as powerful and professional as that of any
huge conglomerate. On the Web, you can have a great-looking site that impresses all who see it, and no one ever needs to know that
you run your business out of your spare bedroom. The Internet is the great equalizer.
That creating a nice site is increasingly easy means that there is simply no excuse for not having a site or, maybe worse, for having a bad
one. You don’t want one of those sites that looks as if your younger cousin created it. You know the ones I am talking about: The home
page scrolls on forever, the graphics are jarring, and it seems as if no one has visited the place since 2007. No, you don’t want that. What
you want is an elegant, professional, aesthetically pleasing site that impresses customers—would-be and actual customers alike.
Having such a site offers multiple benefits for your business:
s It creates credibility: People will think more of your business if you have a professional site.
s It fosters legitimacy: More and more, people check out business websites before ever becoming a customer—as part of the
decision-making process—or right after—to confirm that they made the right decision. Conversely, like the restaurant I chose not to
go to because I couldn’t find its site, bad sites or no site create the exact opposite effect—people may assume that your business
is not professional, or at least not the type of business they want to frequent.
s It is a marketing bonanza: Everything is trending online, and if you are not there, you are going to miss out on the action. Recall
the statistic I mentioned at the beginning of this chapter—most people spend as much time online as they do watching television.
And as such, the opportunity to market your business to the world through your website is one you cannot miss out on.
s It is a potential new profit center: Your site can easily become a 24/7 source of new business.
Getting Started
As you go about getting ready to build your site, there are a few decisions you must make up front:
What type of site will it be? There basically three different types of websites you can have:
1. Informational: An informational site is the most basic type of website. It tells the world what your business is and does. This
sort of site has a home page and a few inner pages: “About us,” your location, contact information, and so on. It is your e–Yellow
Pages ad. It is a fine, if limited, choice.
2. Marketing: A marketing site is more robust. It offers content that engages the visitor. It is interesting and sticky (that is, it
makes people want to stick around). Marketing sites use e-marketing tools to drive customers to the site, and once people
get there, the site endeavors to inform them, entertain them, engage them, and/or sell them a product or service. My site,
TheSelfEmployed, is this type of site.
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3.
E-commerce: Think Amazon.com, a site devoted to selling to you. Your e-commerce site, although smaller, would essentially
do the same thing. E-commerce sites are profit centers unto themselves.
Sticky defined: The term sticky comes from Malcolm Gladwell’s book The Tipping Point. What does he mean by that term?
According to Gladwell, the term was used to describe television shows such as “Sesame Street and Blues Clues… [which] started
epidemics of learning among preschoolers by creating ‘sticky’ programming—programming engineered in such a way that children
were able to remember and understand what they saw on the screen.”
How much time, money, and effort are you willing to put into the site? Of course, a smaller site requires less effort and
almost no money. On the other hand, elaborate sites can require a lot of your resources. Most small business sites will fall somewhere
in-between. As you begin to plan your site, keep in mind that it is pretty easy these days to get a beautiful, simple informational-type site
up and running in less than an hour. Marketing and e-commerce sites take more bandwidth, both financially and time-wise.
So, which is right for you? Begin by looking at sites that you like. Make a list of what you like and dislike. And what do you need? What
is the content like? What products are sold? What about the aesthetics of the site—what can be improved and what can be borrowed?
(Legally, of course.) You do not need to reinvent the wheel. Figure out what you like and think will be attractive to your customers and
start there.
Coastal Tool and Supply was a small local hardware store in Hartford, Connecticut, when it opened in 1980. After going online in
1995, it became one of the largest discount tool outlets in the country. Check it out at www.coastaltool.com.
Keep in mind that in this era of Web 2.0, what people expect from and like in a site has changed. Passive reading is out, and interactive
participation is in. Internet users today want to read, watch, listen, chat, comment, post, and play. The more interactive tools you have on
your site, the greater the likelihood that people will stick around for a while and even come back. So if you are getting the feeling that I
am suggesting that you need more than just an informational e-billboard sort of site, you are correct sir. Sticky is where it’s at.
Among the sticky tools to consider are:
s !RTICLESANDOTHERCONTENT
s "LOGS
s 6IDEOS
s 0OLLSANDQUIZZES
s %XCERPTSANDREVIEWS
s 7EBINARS
s %NEWSLETTERS
s 0RODUCTSANDSERVICES
s 0ODCASTS
s &ORUMSANDMESSAGEBOARDS
Creating your Site
Once you know what you need, what your site will do and what you want it to look like, the next steps are to get a web address (URL)
for it and a host; often this is done at the same place and time. Your website will eventually sit on the host’s computers—its servers—so
you will need a reliable host with a lot of bandwidth and great customer support. You can search for and register a web address by going
to sites such as:
s HostGator
s NetworkSolutions
s GoDaddy
s 1and1
Note: It is challenging these days to find a .com address that has not already been taken, so you will probably have to be very creative if
you want to go that route. But if you can find a workable .com, take it. A .com address is still considered more legitimate for businesses,
so even though it will be far easier to find a good .biz URL, for example, it is far less attractive.
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Next up, getting the site built. You have three choices, but by far the second and third choices are usually best for most small businesses.
1. Hire a Web Developer: If yours is going to be a fairly complicated site or needs special attention, then one way to go is to hire a web
designer, which can be a very smart move if you get the right one. You can find web developers by doing an online search of course, but
also check out Craigslist as well as Elance.com, both of which are sites that allow you to post your project and get bids from freelancers.
Find some developers you like and check them out—I mean really check them out. There are plenty of irresponsible ones out there. Look at:
s 4HEIRBACKGROUND
s 4HEIRTRACKRECORDˆGETREFERENCESANDCALLTHEM
s 4HEIRPORTFOLIO
s 7HATSORTOFPROGRAMTHEYWILLBEUSINGTOCREATEYOURSITE
s 7HETHERYOUWILLOWNTHECOPYRIGHTAND
s 7HETHERYOUWILLBEABLETOTAKEWHATTHEYCREATEANDEASILYUPDATEYOURSITE
I cannot stress enough how important it is to find a reliable web designer with a solid track record. Dropping thousands into a site that
does not work or, worse, never gets finished is not a pleasant experience.
So, what should you expect to pay to have a site designed for you? For TheSelfEmployed, I received bids that ranged from $2,500 to
$75,000. $15,000 is probably reasonable. So it really helps to shop your project around. And consider this: Web design is one of those
things that can easily be done remotely, so you’re are not stuck hiring someone in your area. In fact, you will probably find that you can
locate qualified people at a lower price if you open your search nationwide, or even worldwide.
2. Do It Yourself Online: One of the best website creation solutions for many small businesses can be found in the suites of do-ityourself tools offered by various online services. These point-and-click options are easy to use and offer superior results. Typically, this
is how these services work:
s &IRSTYOUCANREGISTERAWEBADDRESS
s .EXTYOUCANEASILYANDQUICKLYPOINTCLICKANDDESIGNANELEGANTPROFESSIONALWEBSITE4HESESERVICESEVENOFFERTEMPLATESFOR
different professions to give you a head start (e.g. real estate, law, restaurants, and so on)
s 4HESITEALSOSERVESASYOURWEBHOST
s !LSOYOUGETHELPWITHYOUREMARKETINGSUCHASENEWSLETTERSANDEMAILSTHATMATCHTHELOOKOFYOURSITE
s 4HESERVICEHELPSYOUWITHYOURSEARCHENGINEOPTIMIZATIONASWELLASYOURSEARCHENGINEADVERTISING
s &INALLYFORASMALLFEEANECOMMERCESERVICECANHELPYOUSELLONYOUROWNSITEORONE"AY!MAZONETC
Design tip: When creating your website, keep your design simple and uncluttered. If you are going to have content, update it
frequently so that the site doesn’t get stale. To establish credibility, use testimonial letters and guarantees, and let people know how
to get in touch with you.
3. A word (or two!) about Wordpress: The savvy entrepreneur knows that their website is not a ‘have to’ or a backburner issue, but
rather it needs to be central to their plans. Indeed, a business website should be a window to the world, a profit center, an e-billboard, a
marketing brochure, and a sales tool all rolled into one. But for too many small business owners, it is not that because doing that seems
like too much work or will cost too much.
But it need not be either. Creating a site with Wordpress can change all that. Wordpress is a popular program that many people use to
blog but increasingly, it is also being used for website design. Creating a website with Wordpress is surprisingly easy. There are hundreds
of themes to choose from, and most are free. These themes can be completely customized and installed quickly. You can see some of
the best themes here.
The advantages of using Wordpress for your business website are many:
The design: Finding the right template that fits your business is easy. That it will be Web 2.0 enabled, and have the look and feel of
something very contemporary makes it all the more attractive.
The cost: As indicated, most Wordpress themes are free, and those that are very affordable (less than $100.) , generally.
Content management: A CMS, or Content Management System, is what most small business people need but don’t have; that is why
they need to go to their webmaster whenever their site needs updating. Not with Wordpress. The Wordpress CMS is simple and intuitive.
It is designed to make adding or changing content to a site easy.
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Search Engine Optimization (SEO): SEO is built into the Wordpress dashboard so that you can easily assign keywords, tags,
excerpts, and so on to your content.
Comments: With Wordpress, visitor participation and comments are integrated throughout.
Assistance: There is a very large community of Wordpress people out there who can help you.
Ease: Installing a standard Wordpress site is quick and easy.
The most common mistakes of business websites
So what we have above are the basics of getting a business website built. As you go about this process, be sure to avoid these common
pifalls:
4HESITELACKSAGREATh!BOUTvPAGE Because your website is your virtual version of your store or office, it must serve that function
well, and you do that by having a robust “About Us” page. The About page tells people who you are, what you are about and why they
should trust you. It is one of the most-clicked-on pages on any website. People want to know who you are, your history and story, so
a well-written, jargon-free, interesting About Us page is essential. Putting a short video there (more on that later) may even be better.
The site contains mistakes: Dead links, 404 Error pages and typos are the sort of sloppy errors that can turn a prospective client off.
After all, if your site contains mistakes, what does that say about the sort of work you may do for the client?
The site lacks ways to further connect online: Does your site have a blog and can people get to it within one click from your home
page? They should be able to. Can site visitors surf over to your Facebook page from your site? Can people easily follow you on Twitter?
The site is not SEO friendly: People should be able to find your site in a variety of ways: From seeing your URL in your ads, business
card, or store. By finding you via forums, articles you have written, or social-media sites. From online ads if you use those. And, probably
most importantly, by locating you in a search engine result.
That last one comes from, of course, SEO. An SEO-friendly site is one where there is plenty of content (updated regularly), where the
content is full of key words and phrases, and where there are plenty of incoming links. We discuss SEO in detail in chapter 23.
The site lacks video: This is the YouTube age. People like and watch video online. Your site visitors will click on the videos you post,
so you better have some video.
The Bottom Line: You gotta have a website. A great one.
Resources You Can Use
Elance
www.Elance.com
Wordpress
www.Wordpress.org
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Chapter 22 – E-Commerce
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E-Commerce
Why are you creating that great website? Either you want to be able to impress people and let the world know you are out there, or you
want to use it to make money. Or both. If you want to make money on your website, there are basically three ways to do that:
1. Sell yourself
2. Sell advertising
3. Sell products
In the rest of this section of the book, we look at numbers 1 and 2. In this chapter, we look at No. 3, how to sell products online. Now,
needless to say, this can only be a broad overview to help you get started, but that is the point – let’s help you get started.
The process of getting people to buy from you online is not all that different than when customers purchase something from a shop
offline. They enter the store, see products, pick what they like, put it in a shopping cart, proceed to the checkout, and then pay with a
credit card. The only difference online is that it all happens virtually. But the idea is exactly the same.
That is e-commerce. It should follow then that to conduct business over the Internet, your website will need to be equipped with a few things:
s !
SHOPPINGCARTANDRELATEDSOFTWARETOALLOWYOUTODISPLAYYOURPRODUCTSUSINGFORMATTEDTEMPLATESASWELLASMANAGEYOUR
inventory, take orders, and make shipping arrangements
s #REDITCARDPROCESSINGTOALLOWSYOUTOPROCESSPAYMENTSONLINE
s 0RODUCTS
s !WEBHOSTCAPABLEOFFURNISHINGBACKENDSUPPORT
A good turnkey, e-commerce web-hosting solution should offer you a package that includes all of these features. In addition, 24/7 live
customer support should be a priority. Again, the web-hosting solutions discussed in the previous chapter all offer these e-commerce
options.
The actual logistics of conducting e-commerce are as follows:
Products: If you are selling your own products from your offline store, each one has to be photographed digitally so as to be displayed
online. Your shopping cart software will allow you to create an online catalog of thumbnail photos of your products.
Credit card processing: Almost all Internet purchases are made with credit cards, so you must have the capacity to accept them, or,
at a minimum, use PayPal on the site. Accepting credit cards online requires having a merchant account with a financial institution. A
Google search will turn up many merchant account providers.
Shipping charges: Do not underestimate the cost of shipping products. It may not be insignificant.
Security: Customers want to know that their transactions are secure, so you will need some sort of encrypted security solution. This,
too, should come with your e-commerce shopping cart.
Drop Shipping
Many small businesses would like to take their store online but worry about the hassle of stocking and shipping enough product. But
they need not worry, there is an alternate solution and it is a pretty cool, one, called “drop shipping.” With drop shipping, you do not have
to buy or store a single product, but still can have a full load of products to offer on your online store. Drop shipping means that you do
not have to actually physically have any stock at all to sell online. How cool is that?
Here’s how it works: Drop shipping is an arrangement between you and a wholesaler or distributor whereby you virtually stock your online
store with their products and you take the orders. When a sale clicks through, both you and the wholesaler or distributor are notified of
the sale. The wholesaler ships the product, you get the payment, and the wholesaler sends you a bill. (Note that in some systems, you
need to notify the distributor directly, via email, forwarding the order.)
Either way, you simply act as the middleman (though no one knows that, it looks to the entire world as if the merchandise is stocked and
sold by you.) Via drop shipment, you can sell first-rate merchandise on your site and make a healthy profit, but without actually having to
stock and ship product.
Here is an example: Say that your shoe site carries a product called “The Best Athletic Sock in the World,” and a package of 10 sells for
$44, plus $6 for shipping and handling. When a visitor clicks and purchases this item, you and the wholesaler get an email notification.
The wholesaler ships the package off - using your label - and sends you a bill for its cost, say $35. PayPal (or whomever your merchant
account is with) takes your money and deposits it into your account. You make $15 on every purchase, and all you had to do was take
the order.
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You are right if you are thinking this is a pretty great business model, because it is. You do not have the labor expense for shipping and
handling, you can stock name brand items, you can easily add and delete items on your e-store, and you do not have to buy inventory.
You start this process by doing your research and deciding what online products you want to carry. According to Shopify.com,
“The 3 Ways to Use Google to Find Wholesalers are:
1. Search Extensively: Wholesalers and drop shippers are notoriously bad at SEO and marketing, and usually aren’t going to pop
up on the first page of Google for a term like “handbag wholesaler.” Instead, you’ll need to dig deep into the search results, often going
through 10 or 20 pages of listings.
2. Don’t Judge by the Cover: Suppliers also tend to have outdated, late ‘90s-era websites. So don’t be scared away by abysmal design
and layout. While a sleek, modern site could signal a great supplier, a low-quality one doesn’t necessarily indicate a bad one.
3. Use Lots of Modifiers: As you hunt for suppliers, don’t stop with a search for “wholesale” - make sure to use other modifier terms,
including “distributor”, “reseller”, “bulk”, “warehouse” and “supplier.””
Drop shipping is an easy, affordable way to sell online. Be sure to choose quality products that reinforce your brand, and which afford
you a healthy profit margin.
Ebay
If you already have products to sell and do not need a drop shipper, one of the best, easiest, least expensive ways to create another
profit center is to begin an eBay business. Moreover, if you have old stuff that you have not been able to sell, you might be surprised to
find a ready market for it on eBay. Selling online through eBay costs very little; if it works, great, and if not, all you have lost is some time.
One secret to selling on eBay is the motto of our antiques dealer friend Johnny, “It’s all in the buying.” He knew that if he could buy items
at a cheap price, reselling them for a healthy profit would not be difficult. That is especially true on eBay.
There are several things you can do to increase the likelihood of eBay success. First, be sure to set a proper, hidden “reserve price” for
your auctions. The reserve price is the lowest fee that your auction will accept for your product, thereby assuring that you will make a
profit on the sale (if you sell it). Second, focus on customer service. Potential customers will e-mail you questions, and those questions
need to be answered promptly. Similarly, once you make a sale, stand behind your product, and be sure to ship it promptly.
Here are a few other things you can do to make sure your foray into eBay is successful:
s Use photos. People want to see what they are buying
s Write a great headline. Redundant but true: headlines grab people’s attention
s Be thorough. Giving a full description of the product can make a big difference
s Accurately estimate your shipping costs. Even though eBay buyers usually pay for shipping, you will eat into your margin if your
actual shipping fees are more than what you are charging your buyers.
Learning how to sell on eBay is not difficult. Visit eBay to get a full tour of how the process works, or check your local bookstore—there
are several good books on the process. All in all, eBay is a smart, low-risk way to start an e-business with very little money.
Be like Amazon
There are many ways to have your website take off and make money. For instance, you need to buy low and sell high, you need to have
a great looking site, you need to offer things people want. But in addition, in this brave new e-world, I think that there should be one more
business rule: Be like Amazon. If you do what Amazon.com does, you can’t go wrong. Of all online merchants, Amazon is the site and the
business that does it right.
Here’s how:
Value the customer: Amazon.com founder and CEO Jeff Bezos has repeatedly stated that he endeavors to make Amazon the most
customer-centric business in the world, and a visit to the site confirms this. Amazon offers great customer service.
It is important to realize that ordering online is different than purchasing something in a store, where you see the actual goods and get
to take them with you after your purchase. Online, you can’t touch the actual products and you don’t talk to a real salesperson. You just
give up your credit card number, make your purchase, and send your order off into cyberspace.
So the first secret to getting customers to order from you, as Amazon has proven, is to convince them that you won’t let them down.
Amazon first does so by immediately sending you an email confirming your order and telling you when they expect to ship it. Then, when
your order does ship, they send you another e-mail with your tracking number.
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You should do the same; it creates confidence in your store. (Some e-commerce software builds this function right into the software.)
Like Amazon too, you should try and ship quickly and offer returns and refunds.
Make shopping easy and pleasant: Amazon has a “three-click” policy that dictates that if a customer can’t accomplish what they
want to within three clicks, then the system isn’t working right. Imitate Amazon and make shopping at your store simple too.
By the same token, Amazon’s pages are clean and professional. Their use of images is prudent: never too many, nor too big, so the
pages don’t take long to load. They know that their job is to give you the chance to find what you want quickly and easily and to be able
to purchase it without a hassle.
Offer plenty: What is Amazon? It seems to be earth’s biggest store. When you too have a big inventory it tells your customers that you
are here to stay and that they will be able to find what they want if they go to you first. And again, online, you can offer a lot. You don’t
think that Amazon actually stocks all of that stuff in its warehouses do you?
Offer great prices: A big reason that people shop online is because they think they will find prices that can’t be beat. That is certainly
true at Amazon, and it should be true for your store as well.
While few of us have the resources to totally imitate Amazon, the spirit of the site is one to emulate. You might not become a billionaire,
if you remember to Imitate Amazon, you will at least be on you way.
Resources You Can Use
Ebay
www.ebay.com/education
Amazon.com
www.Amazon.com
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Chapter 23 – E-Marketing
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E-Marketing
Throughout this book, you have heard me harp on the fact that you need to market your business, and then market it some more. The
good news is that these days, there are so many affordable, powerful ways to market your business that it makes your job that much
easier. So in this chapter and the next, we are going to examine some of the newer options for small business marketing that are out
there in the e-marketing universe. In the next chapter, we will look at social media marketing specifically, and in this one, we examine
some of the best ways to can market your business and website online.
Let’s begin by looking at what is now a basic tenant of e-marketing: Blogging.
Blogging for dollars
Not that I really want to let you know how old I am in Internet years, suffice it to say that I was once offered a gig to create a blog for a
major NBA franchise and the conversation went something like this:
Editor: “We would like you to start a blog about the team.”
Steve: “What’s a blog?”
Editor: “It is a Web Log, or blog. Basically it is an online journal about any given subject, with links built in.”
Steve: “Can you show me an example of one?”
So yes, I have been creating content online since the Internet Paleozoic Era. And the truth is, I didn’t come kindly to the idea of blogging.
I did not like that anyone could decide to create one and go online and get “published.” It had taken me years to get an editor to say yes
to me, so the idea that there was no need for that anymore upset my delicate sensibilities.
So when my assistant kept telling me that I needed to start a blog for my website, I resisted. But she persisted and gave me many valid
reasons, and finally I relented. Do you know what? She was right and I was wrong. In fact, I was so wrong that here, now, I am telling you
what she told me:
You need to have a blog. Even if you are not a writer. Even if you are not sure what to say. The reason is that blogs
Strengthen relationships: Online it is far harder to get your personality across than it is in the real world. But because a blog allows
you to wax poetic about subjects of your choice in your voice, it allows customers and potential customers to get to know you, as they
say, up close and personal. That in turn creates rapport, and rapport creates loyalty.
Furthermore because blogs can also be used to solicit feedback from customers (not just talk to them), it can be a valuable way to
increase interactions. For instance, asking for feedback via your blog may be a great way to get immediate reactions to your business, a
sale, a promotion, or whatever.
Build your brand: Your blog is your voice and your words. It allows you to directly convey the image you want people to have of your
business without having to go through the cost and diffusion that advertising requires. The values that define your business and brand
can, and should, be incorporated into your business blog.
Improve customer service: You can use your blog to keep customers informed of important events, sales, deadlines, promotions, and
so forth. You can answer customers’ questions or provide valuable links to related products and services
Build your personal reputation: Blogging is an inexpensive marketing tool that permits you to position yourself as an expert in your
field. If your blog provides cutting-edge analysis or information for people in your industry, your reputation grows in direct proportion to that.
Bump your search engine rankings: This one surprised me. My assistant kept insisting that blogging would increase traffic to my
website. She was right. That blog did indeed boost website traffic to my personal site, MrAllBiz.com. Why? Because, by their very nature,
blogs are chock-full of keywords and links, and the comments that follow are as well. This in turn can increase your search engine rankings.
Let’s see. Is that it? No? Oh, right. There is one more benefit to blogging:
Make money: You could sell ad space next to your blog. You could tap into affiliate programs and get paid for that. You could use
Google AdSense.
To get started, all you need to do is choose a blogging service and get typing. There are several to choose from: Blogger and
Wordpress are the most popular.
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E-newsletters
E-newsletters are a valuable e-marketing strategy for plenty of reasons:
s 4HEYAREAPOWERFULWAYTOSTAYINTOUCHWITHYOURCUSTOMERS
s "ECAUSEPEOPLEHAVETOOPTINITISPERMISSIONBASEDMARKETING#USTOMERSAREALLOWINGYOUTOCONTACTTHEM
s 0EOPLEWHODOOPTINLIKEGETTINGTHEM
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s 4HEYAREEASYANDAFFORDABLETOCREATE
Not only are e-newsletters an easy way to capture email addresses and build a list, but they actually build your business in a variety of
other ways as well:
s 4HEYHELPYOUCOMMUNICATEWITHANDCONVERTPROSPECTSINTOCUSTOMERS
s 4HEYDEVELOPCREDIBILITY
s 4HEYBUILDAWARENESSOFYOURBRAND
s !NDTHEYCANBEAMONEYMAKERˆIFYOURENEWSLETTERBECOMESPOPULARENOUGHYOUCANSELLADSINIT
There are two requirements for creating a great e-newsletter. First, you must offer excellent content. Either it needs to contain insightful
articles by you or your staff, or articles by others which you have permission to use, or it could contain articles and tips submitted by
people who take the e-newsletter.
The second requirement for creating an e-newsletter is having a system such as Vertical Response to manage the names of the people
who sign up for the newsletter. A good system will also give you templates to use for the e-newsletter. So with a little elbow grease, some
great content, and a good system, away you go!
Search Engine Optimization (SEO)
SEO is vital to not only your site’s success, but your business’ success as well because search is the primary way that people find new
information these days. If your SEO is good, you will get ranked high and if it is not, you won’t. And if you are not ranked high – in the
first few pages – you wont be found via a search engine query.
That begs the question: Just how do search engines like Google rank websites? The Google algorithm is of course a closely guarded
secret, and it often changes, but the basic process is this:
Search engines rank websites by sending out automated “spiders” that analyze sites. The spider visits a site and reads the webpages.
This information then goes into the master index, which catalogs the site; this is why search results are so fast—the sites have already
been spidered, analyzed, indexed, and cataloged. So the trick is to have the spiders look at your site, find it relevant to some topic,
categorize it appropriately, and thereby have it ranked high.
To some degree or another, each search engine (Google, Bing, etc.) uses a different set of complex algorithms that analyze the keywords
and phrases used most on your site and homepage. They also take into consideration the number and quality of the links going to a page
to figure out what you offer. They also look at how many people comment on and share the content.
Getting Links: How do you get good links to your site? Search for sites similar to yours which are ranked high. Send an e-mail to
the sites and find out whether they are interested in a link exchange.
Keywords are key: The keywords that appear in the title of a page (the specific page URL) are vitally important. The frequency with
which keywords appear in relation to other words is also an important factor. So pick your keywords carefully. The words that you think
people will use to find your site are your keywords. For me it might be “small business success” or “small business writer” or “selfemployed.” What about you? Each page on your site will be spidered and indexed, so you need specific keywords to reflect each page’s
specific content.
Additionally, have URLs that reflect the keywords on the page. If you have a page about surfing in Belize then the URL might be www.
YOURBUSINESS.com/surfing-in-Belize. Then, when someone does a search for those specific words, they will find your site. Specific
pages and URLs are key.
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It should also go without saying that you also need great content if your site is going to be interesting to anyone besides yourself. That
content could be articles by you and your staff, or your blog, or videos . . . you know what constitutes great content. The important thing
is that you have some of it on your own site; otherwise all of your fancy keyword analysis and linking strategies will be for naught.
SEO for Beginners
We asked SEO expert Yasir Khan of Quantum SEO Labs to share some SEO ideas with you. Here is what he has to say:
The right SEO strategies place your website near the top of the search results page and increase the chances of conversions and
sales. Here are four powerful SEO tips for beginners:
1. Identification of the Right Keywords: Your keyword is the search term that you want people to use to find you. Some
keyword research tools you can use for this are:
s Google’s Search based Keyword Tool.
s Google.com/sktool
s Tools.seobook.com/general/keyword
s Copyblogger.com/keyword-research-tools
Choose keywords that have low competition and high search volume. (Yes, that is a tough combination; hence intensive research is
called for). One way to get around this problem is to choose long tail keywords or niche terms that are specific to your product or
industry. Click here to know the benefits of long tail keywords.
2. Create Content: Your content needs to appeal to both search engines and readers. The former, so that your website is found by
searchers and the latter so that your searchers find what they want and buy from or sign up for your membership or take an action
you want them to. The challenge is therefore to integrate the two parameters seamlessly by creating content that:
s #ONTAINSKEYWORDSINTHETITLEFORSEARCHENGINESWHICHTHETITLEINTURNISATTENTIONGRABBINGFORYOURREADERSAND
s /FFERSSOMETHINGOFVALUETOTHEREADERSSOTHATTHEYKEEPCOMINGBACK
3. Build Links: Search engines consider the links to your website as ‘votes’ by others and links are therefore an important factor
for SEO. But here is the catch – the number of links is not as important as the quality and relevance of links. 5 links from relevant,
authoritative websites will have more impact than 50 random links.
Some link building strategies that you can follow:
s 3OCIALMEDIAPRESENCECANINCREASEYOURCHANCESOFGETTINGLINKEDTO
s 'UESTBLOGGINGONSITESMOREESTABLISHEDTHANYOUROWNWILLEARNAVALUABLEBACKLINKFROMTHERE
s 'ETLISTEDONpopular directories – both industry specific and others.
Click here for some other simple link building tips.
4. Site Optimization: You also need to make sure all your internal pages are linked to each other and to the home page. Broken
links cannot be crawled by search engine bots and can lower your rankings.
This post by no means is complete or comprehensive, but is hopefully a helpful SEO guide for beginners. I recommend the SEOMoz
Beginners Guide to SEO for further reading.
Pay-per-click
No, you cannot buy a high Google ranking, but you can do something that is pretty close. Think about Bing or Google for a second. When
you get your query results, what do you also see? Small ads to the right, or above the search results. Thus, if you are willing to pay, you
can buy exceptional placement. This is called Pay-per-click.
Pay-per-click search engine ads are also great because, aside from the top of results placement, you pay for them only when someone
clicks on them. With pay per click, you bid on search term results. You might pay 25 cents or $2 for every person who sees your ad and
clicks on it. The important thing is that by agreeing to pay, you can be assured that, although you may not be ranked the highest in the
“organic” results, you can still end up on the first page people see when they type in the keywords that you paid for.
In Google, pay-per-click is called AdWords. In the Bing universe, it is Bing Ads.
Mobile Marketing
Every January over at my USA TODAY column, I list the Top 10 Trends in Small Business, and few the past few years, mobile marketing
has been near the top of the list. Think about it: Almost all of your customers use a mobile device that keeps them connected to the web
at all times and so if you want to keep your business top of mind, then you need to consider a mobile marketing strategy.
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Example: In Los Angeles the street cart culture has taken a decidedly mobile, Angelino twist: “Food trucks” (as they are called there)
can be found all over the city, but usually they are not in the same place twice. So if you want to find, for instance, the great Kogi Korean
Barbecue trucks, what do you do?
Follow Kogi on Twitter, that’s what. Every day, Kogi tweets where the trucks will be that day.
How smart is that? Not only does that mobile marketing strategy get people to follow Kogi, but it also engages their audience daily.
Maybe best of all, it does this by tapping into the tool that most of us increasingly use most every day – the smart phone.
When Dunkin Donuts wanted to increase the sales of lattes among high school and college kids, they got them to opt-in. The
resulting text ad campaign increased sales by 21%.
It makes sense of course, doesn’t it? The way people get their information has gone from wired computer desktops to wireless laptops
to now small smartphones. So it should be no surprise that small businesses are getting in on the mobile marketing act. Whether it is a
restaurant texting specials or a gym tweeting coupons, small businesses of all sorts are testing how mobile marketing can make them
more money.
Here’s how you can join the party:
1. Analyze the audience: Although texting a special is an especially effective tool for reaching younger people, it is by no means
exclusive to them. The key thing to keep in mind is that a successful text or tweet campaign will capture people’s attention while they
are on the go, so dial into that.
2. Create a good list: There are basically two types of mobile text campaigns: Push and pull. A push campaign is one where you send
unsolicited text messages to people who have not requested that you contact them. That’s spam, and that can be both annoying to
recipients, and expensive for you. A pull ad is where people opt-in and give you permission to text them. That’s the ticket.
The best way to create your opt-in list is simply by letting people know that if they sign up for your text campaign they will get exclusive
offers that others won’t get. You can get the word out:
s )NYOURSTORE
s /NYOURWEBSITE
s 6IAEMAIL
s )NYOURADVERTISING
s /N&ACEBOOKANDVIATWEETS
Simply say something like, “Sign up now for our text alerts and get 10% off on your next purchase.” Creating your own opt-in list is far
more effective than buying someone else’s stale list.
3. Choose the right service: There are inexpensive text message service providers and expensive ones with all the bells and whistles.
As with most things, you get more when you are willing to pay a little more. Another factor to consider is whether you want to have your
own short code, i.e., “Text in SurvivorBahamas to vote for your favorite Survivor.” You do this by applying for a short code.
And there you have it. Time to go create your own campaign. Contests, polls, sweepstakes, discounts, coupons, games, and promotions
work best.
The Bottom Line: E-Marketing is all the rage because it works, is affordable, and engages people where they spend their time – online
and on their phone. Time to hop on the e-bus, Gus.
Resources You Can Use
AdSense
AdSense
E-mail Marketing
Vertical Response
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Chapter 24 – Social Media Demystified
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Social Media Demystified
Should you tweet? Do you need a Facebook page for your business? What the heck is Pinterest anyway? All are valid questions for the
new entrepreneur, especially because social media in your personal life is a far different deal than social media for business. So in this
chapter, let’s de-fang the animal that is social media for business.
Social media and your new business
While social media has become a significant force in the small business world and is not going anywhere, recent statistics indicate that
only about half of all small businesses use it as part of their marketing plan. That is too bad too because the fact is, social media offers
small business owners a multitude of benefits, including the ability to build their brand, to become a thought leader, and to find leads. But
more than anything, let me suggest that social media is the word of mouth advertising of the 21st century, and we all know that word
of mouth advertising is the best, right?
Here’s what I mean: When you tweet something and one of your followers retweets it to their followers, that is word of mouth gold. When
your fan page is liked and new people see that their friends like your page, that is social media magic. And when someone forwards your
blog post on to their network, that is word of mouth today.
Social media is the word of mouth advertising of the 21st century.
So if that is true, and it is, the next obvious question is – how do you get started, business wise?
The first step is to decide which site is best for your business. And the answer is: Follow your customers. If the majority of your customers
use LinkedIn, then Link In. If they are on Twitter, tweet. If they watch YouTube, then you better create some videos. Follow your customers.
As a general rule, it is best to dive in deep with one site, rather than being over-extended on many. Your basic choices are (of course):
s Facebook. As you know, Facebook is a great place to connect with people and informally share updates. Because it is in fact so
informal and easy to connect there, and since so many people are on the site, it is the first choice for many small business people.
s 4HINKOFTwitter as an ongoing conversation that you can join at any time. The connections and interactions are different than
Facebook since tweets are shorter and have a shorter shelf-life than a Facebook status update.
s LinkedIn is, of course, a fantastic site to grow your network of colleagues.
After you pick a site to master for business purposes, the next step is to build a business profile on that site. Again, this will be different
than your personal profile. After that, it is a matter of getting your feet wet and really learning and using the platform.
Getting started
According to a Hubspot report, social media has a 100% higher lead-to-close rate than outbound marketing. But, as with most things,
the tricky part is the execution. It is one thing to say you want to use social media to get attention and generate some leads for your new
business, and it is quite another to actually do it. So here are three ways to start smart:
1. Have the right mindset going in: Many people would like to have someone (an intern, a spouse) do their social media for them.
But especially for a new enterprise, this can be a mistake. You can’t hire someone to be you. To best leverage these platforms, you have
to be authentic, engage and interact with people, and avoid being an outsider spamming your message over and over again, hoping for
a few clicks and likes.
2. Use social media wisely: Chris Brogan, social media expert and author of Social Media 101 gives the best advice on what to post:
“Things that help others get the most shares.” When you are giving advice or being helpful, people listen. When someone is searching
for something, they are typically looking for help in that area. They don’t want to be sold something – they want answers. The person
who provides those answers is going to be someone they will trust as a recognized resource in that area. When you keep this in mind
with your social media following great things can happen. Not only will you be helping others, you will be increasing the strength of your
brand image and creating a loyal fan.
3. Be prolific: The more involved you become, the more your following will grow. People have a short attention spans, especially online,
and even with the best of intentions they forget about brands they like. It’s your job to keep yourself top of mind.
People are out there waiting to follow someone, now it’s just up to you to make sure you are the one they choose.
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The age of content
What all of this means is that if you want to succeed with social media, you nee to understand that this is The Age of Content; a new
age, that’s for sure. Not only must entrepreneurs today know their stuff business-wise, and be techno-geeks too, but now it seems that
we all must be content generators and aggregators, as well.
Of course, some business owners long for the days when all they had to do was run their business and not worry about their computers,
mobile technology, and their social media presence. Too bad. The fact is, you can’t simply logon to Facebook, post your special of the day,
and think that is going to garner you much traction, because it’s not.
The phrase is not Content is Prince or Content is Duke. It is Content is King.
All of this requires generating content that people like and find interesting or valuable. Notice I said, “generating” not “creating” content.
The other piece of good news (and a long-winded way to get to my point here), is that you do not have to be a gifted writer, or vlogger,
or whatever, to generate good content. But you do have to be a good aggregator. By blogging interesting blogs, by posting quirky videos,
by linking to valuable articles, you can make yourself a conduit in your area of expertise/interest.
Good content can be any number of things, but what it is not is some self-serving piece that is boring, or lame, or useless, or all of the
above. The old 80-20 rule applies here as well: 80% of your social media content should be about/for your audience and customers,
and only 20% should be about you or your business. The first mistake many people make is when they get that ratio backwards.
Instead, what you need to do is offer your audience content that either
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None of that requires that you be a great writer. What it does require is that you know who your intended audience is, know what they like,
and offer them that. If your blog is written in an authentic style and has good insights, no one will care that you didn’t use an apostrophe.
If you take out the camcorder and create some interesting instructional videos, again, no one will care that they were not cut in a studio.
And if you tweet links to good articles, no one cares that you didn’t write them.
And just consider all of the options available to you now when it comes to content:
s Articles and blogs: They need not be more than 400 words or so. That is not hard to do
s Videos: People love videos and they are so easy to make and edit these days
s Podcasts: Podcasting software is free, and podcasts are downloaded plenty
s Links: This is the easiest of them all – simply link to articles and other content you find valuable
Social media for lead generation
So, you say, all of this relationship building and content creation and branding stuff is all well and good, but what about making money
with social media? Valid point my friend, valid point indeed. So let’s look at that. How do you do that? By using social media to generate
leads. As opposed to the time it takes to build your brand or attract a ton of Twitter followers, using social media to create good leads
can happen right now.
There are two basic ways to do this:
The first is to use the search function within each of the main social media sites to search for and locate people who have a high
likelihood of being interested in what it is your business offers. You can use these search tools to create a list of possible leads:
s /N&ACEBOOKgo here and simply type in your query (like, say, “home builders, Cincinnati”);
s /N,INKED)NCHECKOUTTHEhADVANCEDSEARCHvFUNCTION"YUSINGTHISTOOLYOUCANlNDPEOPLEWITHASPECIlCJOBTITLEORWHOWORK
for a certain company. You can also search locations, professions, businesses, industries, and so on.
s /N4WITTERUSEHASHTAGSTOlNDDISCUSSIONSONCERTAINTOPICSORSIMPLYsearch Twitter.
Then, once you have your list of potential leads from these three sites, whittle it down, and away you go.
The second method takes a little more time but is equally useful. Join groups on the various social media sites and meet some new
people. That’s really the ticket. New people equals new possibilities and potential new business.
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Social media marketing
If you want to take a more long-term approach to social media, and that is probably a wise idea, then you also have to look at it as a
marketing matter to be mastered. If you are not careful, as you probably know only too well, social media can gobble up a whole lot of
time in a hurry, and as a new entrepreneur, time is a valuable commodity that cannot be wasted.
So what do you do?
Let me direct your attention to a book entitled 30-Minute Social Media Marketing by Susan Gunelius. Only 30 minutes a day? Can she
really be serious? Yes. Gunelius breaks down the social media marketing process into four steps, each of which can become part of your
daily 30-minute marketing process:
1. Research: “A successful social media campaign starts with research and the research must be ongoing.” Look at websites, read
industry periodicals, and consume blogs, e-books, etc. 10 minutes.
2. Create: Content is king. “The cornerstone of any social media marketing strategy is creating amazing content. Amazing content
truly adds value to the audience and online conversation.” 10 minutes.
3. Share: Share the best content you find during your research, and share the great content you create. 5 minutes.
4. Discuss: The point of all of this is to create a loyal following and to meet new people with whom you can do business who you
would not otherwise normally meet. 5 minutes.
30 minutes a day is all it takes. (And allow me to do my own social media marketing: Please follow me on Twitter: @SteveStrauss.)
Calculating the ROI on your social media efforts
Here are 5 ways to know if all of these social media efforts are paying off:
1. The bottom line: How do you know if all of your tweeting and updates and blogs and new videos are making a difference? Because
you are making more money, that’s how. The real danger with social media is that it is very easy to get sucked into it, to find yourself
spending a lot of time with it because it’s fun and engrossing, and then telling yourself that it’s necessary, when really maybe it is not
because it’s not paying off financially.
Yes, social networking can be a great, affordable way to build a brand and meet new people (see below), but if you are not making more
money as a result, you are doing something wrong.
2. Increased analytics: Consider this quote from the Mobile Marketing Association — they say that measuring the success of a new
marketing campaign requires a new sort of analysis, which includes:
“The number of eyeballs, shakes and finger swipes. The number of blogs, articles, tweets and diggs. The number of acquisitions,
conversions, calls, responses or purchases. Total basket size, consumer recall, loyalty and recommendations. Check-ins on
foursquare and check-outs on Amazon.”
3. More traffic: Here is another quantifiable way to judge your results: An uptick in traffic. Of course, traffic can mean all sorts of things:
It can be more people reading your blog, more hits on your website, more people shopping in your e-store, or more people coming into
the physical store.
Here are a few ways to measure your online traffic:
s Google Analytics: Google Analytics is the standard for tracking traffic, keywords, incoming links, sites, etc.
s Wordpress: If you use Wordpress for your blog or site, there are a lot of plugins that can measure your numbers.
s TweetMeme: If you have re-tweet button on your site, TweetMeme is very helpful.
4. More relationships: There are plenty of benefits to getting a lot of new friends and followers, not the least of which is that it can
look really impressive. But the real value of social media is that you can actually meet and get to do business with new people; people
you would not otherwise normally meet. The people who make money with social media and who have figured out how to use it to grow
their business in fact use it to meet and create new relationships.
After all, it’s not just called social media, it’s also called social networking for a reason. Use it to network.
5. Better brand awareness: While real relationships are a valuable way to measure your social media ROI, it is nevertheless also true
that another valuable benefit is that more people will learn of your business. Having a lot of fans and followers increases brand equity.
Social networking, when done right, builds your brand.
The Bottom Line: Social media is here to stay and is only going to grow in importance to small business. As such, it is better to learn
it and tame it rather than have it run you.
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Resources You Can Use
30 Minute Social Media Marketing
30 Minute Social Media Marketing
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PART VII
SUCCESS STRATEGIES
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Chapter 25 – Small Business Success Secrets
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Small Business Success Secrets
At my website, TheSelfEmployed, there is a free newsletter that we send out every other week called Small Business Success Secrets!
In it, entrepreneurs like you share what they believe to be their best ideas for succeeding in business. Many of those ideas have been
interspersed throughout this book. What follows are some of the most important.
Create a winning recipe.
After some trial and error in your business, you will figure out what works best. Once that happens, you will want to do the same thing
over and over again. This is your “recipe for success.” Just like a good bread recipe for instance, a business recipe can be followed time
and again to make some dough (groan, sorry!)
In your business, your business dough recipe could be :
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s !STALLATTHE3ATURDAYMARKET
s !BILLBOARD
s 'REATLOCATIONS
s !LMOSTANYTHINGTHATWORKSANDCANBEDUPLICATED
If you think about it, repeating a successful formula is the hallmark of any well-run business. Budweiser sponsors sporting events
because it knows that it will sell more beer if it does. Sponsoring sporting events is a tried and true business recipe. It works time and
time and time again. Apple has a recipe; we might call it “tweak the iPhone and put out a new edition every few years.” Apple knows that
if it does so, it will be able to predictably count on those sales. Hollywood does the same thing. Whereas no one knows for sure what
movie people will like, Hollywood also knows that it reduces the risk of failure if a big name stars in a movie. That too is a business recipe.
If your business is going to be a long-term success, you will need to do the same thing. What will your recipe be? You need to experiment
and figure out what works best. After you do, long-term success will be much more likely if you reduce that thing, whatever it is, to a
formula that you can do over and over and over again.
Finding and creating a business success formula, which is all a recipe really is, reduces your risk, makes the business far more predictable,
allows you to concentrate on finding new recipes, frees you up to do what you love, and altogether makes being an entrepreneur a more
fun, less scary, endeavor.
Creating a Winning Recipe
1. Experiment. Try several different ways to bring in business and quantifiably measure the success of each.
2. Which one can be reduced to a tried and true formula? Pick that one, and write down the recipe.
3. Try the recipe and see if the results are consistent.
4. If so, stick with it, if not, go back to Step 1.
Create multiple profit centers
The problem for most small businesses is that they learn one good recipe, stick with it, run it into the ground, and never bother to figure
out another one. The owner has learned only one method of making a buck. The problem with having just a single moneymaking formula
is that it will inevitably be hit when the dreaded business cycle turns south.
Just like the economy, all businesses have a business cycle. The ice cream store sees sales spike in the summer and drop in the winter.
Starbucks sees coffee sales rise in the winter and drop in the summer. While experience will teach you, often the hard way, what your
business cycle is, you can learn it much easier by speaking with people in your own line of work who have been around for a while.
Once you know what your business cycle is, either through research or the school of hard knocks, you will want to minimize its effects
on your business. One of the best ways to do that is to create multiple profit centers, a term coined by my now-friend Barbara Winter in
her fantastic book, Making a Living Without a Job. The theory is essentially this: To succeed long-term in business, you need several
recipes. You need to diversify your income.
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A smart stock investor does just that. He knows not to buy just one stock. That stock may go up, but it may go down. Having more than
one stock ensures that when one stock does go down, the likelihood of taking a big financial hit is remote. His income is diversified. Your
business must diversify as well if you are going to last.
Your new profit center could either be another “division” of your business, or simply a new product:
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businesses is slow, it is unlikely that another will be as well. Instead of the business suffering a cash crunch, the money continues
to roll in.
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drinks. And then food. And then music. Each are different profit centers aside from hot coffee, and that reduces the impact of its
traditional seasonal business cycle.
Creating Multiple Profit Centers
1. What is your main profit center? _____________________________________________________________________________
2. Name 10 possible offshoots from that profit center that you could start: ____________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
3. Reduce that list to the five most likely successes: _______________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
4. Which of those would be the easiest to start? __________________________________________________________________
__________________________________________________________________________________________________________
5. Implement the best idea, and then go on to the next. Create several recipes, several profit centers.
The lawyer may want to add a divorce practice to his wills and estates practice. The florist might want to do catered events in addition to
retail sales. The photographer can add portraits to his wedding portfolio. The important thing is that you create several recipes, so that
you have a few different ways to bring in money.
Give them what they want
“Ask them what they want and then give them what they want” is a philosophy mentioned earlier in the book that bears repeating. Think
about the best businesses around, that is, those businesses that provide a great service, where people want to work, and which make
money for the owners, investors, and employees, and you will find one thing they share: They serve the market.
A business that does not fulfill a market need is a business that will not succeed, period.
Whether you are self-employed, or a larger business with employees, the lesson is the same. You must know to whom you are selling and
what it is they want. Finding that out can be as simple as posting a poll on your website, or chatting with the people who come in your
store, or as complicated as hiring a market research firm to survey potential customers. Whatever your method, you must know what it is
your customers are looking for, and then give it to them. It’s almost too simple, and that’s the beauty of it.
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Get help
Franchisors like to say that while a franchisee might be in business for himself, he is not in business by himself; the franchisor is behind
him, helping him succeed. But in reality, that is true for anyone starting a business. There are many people who are ready and willing to
help you grow your business:
The Small Business Administration: The U.S. Small Business Administration provides assistance to help Americans start, run, and grow
their businesses. Each year, the SBA offers financial, technical and management assistance to more than one million business owners.
Small Business Development Centers are an offshoot of the SBA. SBDCs are found in most communities. They offer individual counseling,
conduct seminars and training sessions, sponsor conferences, and, in general, assist anyone seeking advice about operating a business.
SCORE: SCORE is an amazing nonprofit association dedicated to entrepreneurship education, and assisting in the creation, growth and
success of small businesses. The organization consists of both working and retired executives and business owners who volunteer their
time and expertise as business counselors. Their mentoring is free of charge, online and off.
Women’s Business Centers: WBCs are another non-profit organization funded by the SBA. According to the WBC, “The U.S. Small
Business Administration is doing more than ever to help level the playing field for women entrepreneurs, and the SBA’s Office of
Women’s Business Ownership is leading the way.”
LivePlan: “With expert advice, built-in help, online access, and more than 500 complete sample business plans, LivePlan makes it easy
for you to create a professional plan that will impress any audience.”
What this means is that you are not alone. When you have a question, when you need a friend, when times are tough, when you want to
expand, there are people around ready to help you. You might be in business for yourself, but you need not be in business by yourself.
Help is out there.
Six secrets of the great entrepreneurs
While the idea of being an entrepreneur may start with a flicker, it often grows very bright. Yet even so, the question remains: Why are
some entrepreneurs more successful than others? Usually, it is because they know some things other entrepreneurs do not. Here then
the Six Secrets of the Great Entrepreneurs:
Secret No. 1: Be willing to take a risk. Entrepreneurship is, as we have discussed, a risk. When you quit your job to start a new
business, there is no guarantee it will succeed, let alone succeed wildly. If you are going to succeed widely in your own business (and
that is the idea), you too will need to take a risk. An intelligent, calculated gamble has the chance to hit big. Of course, it can also backfire,
but that’s why we play the game.
Secret No. 2: Be bold. In the early 1950s, a young engineer named Douglas Englebart decided that rather than work for “5-1/2
million minutes” for someone else (the amount of time that would elapse before he would turn 65), he would rather use his career to
“benefit mankind.” He wanted to help people solve problems; that was the need he thought he could fill.
Englebart had an epiphany. At a time when computers were machines the size of a room that were used primarily for number crunching
and had no screens at all, and despite the fact that he knew next to nothing about them, Englebart saw a future where the computer
could be an interactive tool, operated by “any kind of a lever or knob, or buttons, or switches, you wanted.” That vision so engrossed
Douglas Englebart that he spent the next decade chasing that dream, before eventually becoming known as the father of the computer
mouse.
No one will give you permission to be bold, but boldness is a requirement of this gig. As W.H. Murray wrote in The Scottish Himalayan
Expedition:
“ Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and
creation) there is one elementary truth, the ignorance that kills countless ideas and splendid plans: that the moment one definitely
commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred.
A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and
material assistance, which no man could have dreamed would have come his way. I have learned a deep respect for one of Goethe’s
couplets: ‘Whatever you can do, or dream you can, begin it. Boldness has genius, power, and magic in it.’”
Secret No. 3: Take care of your people. This includes your employees, your investors, your family, your staff, your customers, and
your stockholders. In 1913, Henry Ford said, “The wages we pay are too small in comparison with our profits. I think we should raise our
minimum pay rate.” Moreover, eight years later Ford introduced the first 5-day work week, stating, “Every man needs more than one day
for rest and recreation.”
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Secret No. 4: Persevere. If it is true that entrepreneurship is a risk, then it follows that failure happens.. Many entrepreneurs go
bankrupt before they hit it big, but they stick with it anyway. In 1975, Microsoft revenues were $16,000 and it had 3 employees. In 1976,
revenues were $22,000 with 7 employees. Both years the company posted losses. Many companies would have quit after 2 years, but
most companies are not Microsoft.
Secret No. 5: Believe in yourself. Buckminster Fuller, inventor of the geodesic dome and countless other tools, was an unknown,
unhappy man when he decided to end it all. But before he could, he realized his problem had always been that he listened to others
instead of himself. Then and there, he decided to trust his own intuition. In the ensuing 60 years, Fuller ended up with more entries in
Who’s Who than any person ever and had revolutionized such disparate fields as architecture, mathematics, housing, and automobiles.
Secret No. 6: Have a passion. A trait common to all great entrepreneurs is that they are passionate about what they do. Legendary
investor and entrepreneur Charles Schwab put it this way, “The person who does not work for the love of work but only for money is not
likely to make money nor to find much fun in life.” Similarly, Anita Roddick, founder and managing director of Body Shop International
once said, “I want to work for a company that contributes to and is part of the community. I want something not just to invest in, I want
something to believe in.” In the end, maybe writer Joseph Campbell said it best, “If you follow your bliss, doors will open for you that
wouldn’t have opened for anyone else.”
The good news is that you need not be a world famous entrepreneur to think and act like one, and you need not reinvent the wheel
either. Take the ideas here that you like, discard those you don’t, become a great entrepreneur in your own right, and go conquer your
part of the globe. Good luck!.
The Bottom Line: Creating multiple porofit centers is one of the smartest things you can do to ensure the long-term viability of your
new business, as is giving people what they want. And yes, help is always nearby.
Finally, remember to be bold, for boldness has genius, power and magic in it.
Resources You Can Use
The Business Startup Kit
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