Important Articles For Small Business Entrepreneurs

Three Actions an Entrepreneur Should Take Before spending any money on a new idea

Entrepreneurs are by their very nature enthusiastic people, especially when they have a new idea they want to take to market. Over the past eight years and 700-800 clients I have counseled with at SCORE there have been dozens who come in with a great idea that they want to take to market on the fastest possible timetable. This enthusiasm is great and is absolutely essential to the success of any new venture, but it can also have dire circumstances if the proper thinking is not included in the very earliest steps of the process. It is much easier to lose significant money than make it with a new venture, and the objective of this piece is to increase the chances that this great idea will achieve the entrepreneurs goal of making money. Therefore before a dime is spent on the new idea, it is important to fully understand the following:

1. What is the profit structure of the new idea.? Specifically, what does it cost to make the product or in the case of a service, bring it to market. Is there adequate profit per unit sold so that the venture can work. In the case of a product, what is the production cost and what is a reasonable price you can sell it to the customer for? Does this margin between production cost and selling price leave room to cover marketing, selling an administrative costs and still have enough left over for profits for you.

These are not difficult things to learn if you understand your marketplace and the competitive environment into which you are entering. Clearly your SCORE counselor could lead you through the analytical process.

In the case of services, the same type of analysis is essential. I have many people come to me with interesting ideas for services which clearly would have consumer appeal, but when asked how they can make money with the idea they can not come up with an answer.

2. Ensure that you have a good idea. Just because an idea makes financial sense does not mean it will have an appeal in the marketplace. Therefore it is vital to conduct significant “shoestring” market research to test the idea with potential customers. Your SCORE mentor could lead you through the various types of no cost research you can do to determine if your idea has basic consumer appeal.

3. Develop a basic pro-forma p&l for a three year period to see if enough money could be made to make the effort ,time and money necessary to market this new idea is worthwhile risking. This is a vital part of the process and is the one fewest people actually take the time to develop. This is because it is difficult to do as it requires the entrepreneur to spend considerable time studying the market they will be entering, and then making key assumptions about the inputs to the revenues and expenses they will include. While your SCORE counselor will be able to guide you in the development of the pro-forma , it is essentially a projection of the revenues and expenses for the venture with the first 12 months shown by month, and the two out years by 12 month periods.

In summary, it is essential that all ventures do at least these three things before money is spent on the idea. This will give the entrepreneur the assurance that they are moving forward on a product or service venture that has the chance of producing a profitable venture

Small Business , Business Plan

Business planning is an essential part of all types of organizations whether the multi billion size or the start-up seeking to be a major factor in the economic world.   However, it is naive to thing that the same type of business plan would be appropriate for Apple as it would for the local consulting firm or retail establishment.

The purpose of this piece is to provide an outline to the most essential elements that should be included in a business plan for a small or start up company.   This is a vital document for the planning process, and one that should be written upon beginning the company, but updated every six months to one year throughout the life of the organization.

The essence of a business plan is for the entrepreneur is to develop a brief document that represents a thorough assessment of the business so that there is both a roadmap to success and a document that might be use to raise money from banks or investors.

The following are the key sections of this document which are essential for a small business plan:

SECTION ONE:  Business definition.   This consists of a succinct description of what the business is so that an uninvolved party would have no difficulty understanding what the organization is offering in terms of products or services.

SECTION TWO:  Market Environment.  -  This section is intended to provide a framework for the environment into which the business is entering.   It is NOT intended to contain grow statistics about national or regional market size and growth as one might include in a business plan for a large company, but rather a discussion of the general market the company is entering.  For example if the entrepreneur is going to open a ladies shoe store, the discussion should talk about the number of competitors in the area and the relative importance of them as potential threats to the desire to develop a local ladies shoe franchise.   If the entrepreneur is opening a human relations consulting firm, the discussion would focus on the number of other similar types of organizations that exist with the regional market, and what is perceived to be the demand for this type of consulting services. 

SECTION THREE:  Target Market- This is a discussion of the primary target market for the product or service from the perspective of the buyers of the offering.  For example, if the company is making a new type of toy, the target market is not the children who will play with the toy, but the retail outlets or wholesalers who will carry the toy.   This does NOT suggest that the marketing will not be directed at the end users (ie: children or parents) but the primary target is the buyers, because without the distribution you would never get to the children.

SECTION FOUR:  Product/Service Positioning or “Reason Why”   -  This section should briefly indicate the unique point of difference of the product or service that will be offered, so that the target audience has a reason to buy.  Said differently, it is what you would like your customers to think about your company when the name is raised.  One commonly used example is BMW cars.  They have long had the positioning as the Ultimate Driving Machine.   TD Bank has positioned it self as the convenient bank, with more locations, better hours etc.

 SECTION FIVE:  Marketing Plan   - This consists of a one year program that outlines in detail how you will come to market with your product or service, in terms of developing awareness of the item/service, generating trial/purchase, generating distribution, etc.  It should also include a point of view on the type of customer service you plan to provide to build and maintain a good reputation for your company.

 SECTION SIX:   Financial Analysis   -  This is the principal section that an investor will study, to determine whether they will want to become involved in the organization.  It should include the following sub-sections:

a.       Start up costs -  What funds are required to begin the business before the first dollar of revenue is generated.

b.      Sources and Uses of Funds Generated -  This is a brief section that identifies the total financial needs and where the money will come from and then how it will be used to get the company launched

c.       Financial Projections (proforma P&L) -  This is a document that will outline the first three year projection of revenues and expenses for the business, and indicate the projected profit or loss will be during each of those years.

There are many other parts of a business plan that could be added to provide more depth to the planning process, but this represents the primary building blocks that all small businesses should complete.  It need not be a long,  wordy document but rather a succinct explanation of the major goals and actions that would outline the approach to starting a business.  It should be sufficient for any investor in a small business to determine whether they want to be involved, and it certainly provides the key direction for the entrepreneur to appropriately plan the start up of the organization.

6 Tips for Successful Focus Group Research

Focus groups are the most commonly used market research tools in use today. Unfortunately, some groups turn out to be very disappointing to the clients as they did not achieve the objectives for which they were conceived. This is particularly concerning in that focus groups can cost $6,000 to $10,000 per two hour session depending on the target audience included in the research.

Having conducted over 3000 groups in my lifetime, I believe it is relative easy to ensure a successful result if a few basic guidelines are followed. Here are a few that I feel are most important.

1. Ensure that their has been adequate planning before the groups occur. Specifically, this involves the selection of the criteria for the participants, the number of groups to be conducted, and the very clear objectives of the sessions.

2. Hire a very experienced moderator who can guide you through the process and help to refine the objectives of the sessions to ensure they are realistic. An experienced focus group moderator should have conducted several hundred groups for a variety of different organizations, and also should have a marketing background so they can help to interpret the output of the groups in such a way that the information is most useful for the client.

3. Be sure that focus groups are the right methodology to address the question you are trying to research. Focus groups are a great marketing research technique, but they can not do everything. Sometimes you need to utilize other types of research such as quantitative methodologies, ethnography or perhaps no research at all.

4. Develop a detailed discussion guide with the moderator that provides an excellent outline of the topics to be covered in the research, the techniques the moderator will use to elicit the information, and an estimate of the timing that each section of the guide is anticipated to occupy.

Importantly remember that the moderator guide is only a “guide”, and an experienced leader will understand when to deviate from the guide, when to eliminate some parts that are included, and when it is important to spend more or less time than planned on specific section.

Further, the guide should be modified after each day, to reflect the learning from the first few groups, so the follow up sessions will be more productive.

5. Provide an in-depth briefing to the client observers who attend the session to view the proceedings from the back room. It is likely that people come to groups that were not included in the development of the guide, or even the establishment of the objectives of the sessions, and it is essential that they are brought up to speed as to what the research they are observing is intended to accomplish.

6. Finally, pay what is required for the moderator to develop a full report from the sessions. If you have selected a qualified moderator you should benefit significantly from the conclusions and recommendations provided by this individual. It is one thing to summarize the “findings” (facts) from the groups, but the really good moderators are able to provide “conclusions”, which are interpretations of what the facts mean in light of the objectives of the research, and also “recommendations”, which are the most appropriate next action steps that are indicated in light of the conclusions.

In summary, focus groups are a really important type of market research. They can do many things for a product or service marketing effort, but you must have the right moderator, do the appropriate planning and leverage the experience and skill of the moderator to help interpret the results.

Are You Meant to be An Entrepreneur?

Since the start of this country one of the most powerful sayings that has motivated people to come to the United States has been “The American Dream”. The belief that you can start a business and have great financial success for your family. Unfortunately, while the American Dream is a reality, it is not for everyone. Some people are meant to work for others, because they do not have what it takes to be an entrepreneur and get to live this wonderful dream.

The purpose of this blog is to identify the characteristics of successful entrepreneurs with the hope that aspiring business people will take stock of themselves and determine whether independent business ownership is really for them. There are lots of routes to success in this country but entrepreneurship, following the paths of such well known people as Bill Gates, Steve Jobs and others requires a particular type of individual.

Let’s explore the most obvious characteristics of those people who are most likely to succeed as entrepreneurs:

The first is PASSION. Without a very strong passion for your idea, it is virtually impossible for you to be successful. You must love your idea like a lifelong spouse and be willing to sacrifice almost anything to make it successful.

The second characteristic is the ability to take RISK. One of the common characteristics of virtually all entrepreneurs is that they involved a considerable amount of risk to become successful. The risk could come in a variety of different forms, including such things as financial sacrifices, fear of failure, depreciation in relationships due to the lack of time one can spend to make the idea realize it full potential.

The third characteristic of a successful entrepreneur is ENERGY. You must have the energy to work more hours in a week than you ever did before, and for extended periods of time to be a successful entrepreneur.

The fourth characteristic of a successful entrepreneur is FINANCIAL RESOURCES. It is very unusual for an entrepreneur to make money quickly with the project to which they have committed. Many people trying to start their own businesses run out of money before they can give their project time to return profits. It is not unusual for a new project to go 24-36 months without providing a positive cash flow to the entrepreneur….and often there is also a considerable upfront investment (fixed costs) get the project started.

The fifth characteristic of a successful entrepreneur is the need for a RISK TAKING PERSONALITY. Unless you have a quick cure for cancer, almost any venture requires significant risk both from a financial and personal perspective. Specifically, you must be willing to spend and possibly lose considerable money if the effort is not successful. Further, the risk of failure represents a real threat to some people’s “sense of self” and it is very important that an entrepreneur be able to deal with this possibility or they risk going into a deep depression if things do not go exactly as planned throughout the process.

A sixth characteristic of of a successful entrepreneur is the KNOWLEDGE OF THE BUSINESS in which you are planning to enter. The single most important reason that new businesses fail is the lack of knowledge of the product category in which they are entering. It is essential that an individual do whatever research is necessary to fully understand the business they want to enter or they dramatically reduce their chances for success.

Finally a successful entrepreneur will create a network of advisors to whom he or she can talk during the development process, so the idea can be evaluated and reevaluated to ensure that you are on the right path to success. The SCORE organization is an excellent resource for entrepreneurs, and it is strongly recommended that you get a SCORE counselor who can be your mentor, cheerleader and advisor throughout the development process. Go to to find a chapter near you, and then register for counseling. It might be the best thing you ever do.

Seven Ways to Conduct Marketing Research on A Shoestring

So you are considering introducing a new product and you want to do some research to learn about the market and the possible receptiveness to your idea. The problem is that you have no money allocated in the budget for any type of market research. What can you do to get information that will be helpful, without incurring any costs? The following are five key actions you can take that will result in useful information about your market and the reaction of your buyers to your product….all at no cost to you.

1. Take advantage of the services of a good business library. With the rise of the Internet many of us forget how important the public library can be to provide us with information that can be extremely useful. For example, some of the larger business libraries such as SIBL (Science, Industry & Business Library) in New York City have very knowledgeable reference librarians that can help you research your product category extensively. SIBL also retains copies of business plans for hundreds of different product categories, so you can see what others have written about similar product categories.

2. Take full advantage of what is available on the Internet. One obvious way to do this is to utilize Google to learn as much as possible about your product or service. The wealth of information you can get is extensive if you are willing to dig into the data that comes up from your searches. In addition on the Internet you can research the websites of your potential competitors to see what they are doing, and importantly how they are promoting their product or service.

3. Utilize the resources available from industry trade organizations. Most product and service categories have some type of trade association and/or trade magazine. Often these resources can be very useful if approached correctly, as they like to promote their industry and are very interested in new members. Further it is very common for trade magazines to run helpful articles or conduct surveys that might be very useful. Also, many industries have trade shows you might be able to attend to gather still more information.

4. Talk to your people in your planned product or service area in non competitive markets. Most small businesses expect to remain relatively local, so if you contact a similar business in another area of the country, often they will give you lots of good information. For example , if you are going to open a consulting business for NY City clients, talking to a similar consultant in San Francisco would not be competitive and you could learn some very helpful information.

5. Go into your local market and learn what you can from existing similar businesses. For example if you are planning to open a pizza parlor and need information about how much space you require, what type of ovens you need or how many employees you would require, you could learn much of this simply by observing how other places operate.

6. Utilize free survey tools to gather information. There is a research tool called Survey Monkey in which you can gather some basic market research information at no cost to you. It is a very useful tool for obtaining quantitative data from the marketplace at no cost to you.

7. Utilize “Man on the Street” interviews to obtain inputs about your product or service. Occasionally you can gain some insights about a product or idea by simply asking others in the community who do not know you ( and thus are more likely to be honest with an answer) about their reactions to the idea. This is not a very reliable source of inputs but it sometimes will result in some useful information.

In summary there are many things the small business person can do to conduct research about their product or service. This blog provides an overview of only a few of them. The totality of tools available to conduct Marketing Research on a Shoestring are limited only by the imagination of the entrepreneur.