Category Archives: Owning a Business

Owning a Business

Are You Starving Your New Business?

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If you’re thinking about starting a business, you will need to ensure your basic living expenses are paid while the fledgling business takes root and grows to where it can support you.

In a perfect world, your business would support you while you work to make it successful. Unfortunately, most start-up businesses do not earn enough for the owners to pay themselves. For most, this means planning to pay your personal expenses some other way until your business can afford you.

The first step toward solving this dilemma is to determine your basic personal financial needs. Make a list of all personal and household expenses that need to be paid each month for the first year the business will operate.

Next, scan your financial horizon to determine how the personal expenses will be paid for at least the first year in the life of your business. Here are some possible sources of funding for your personal expenses:

1. A part or full-time job. Many businesses are started while the owner works for someone else.

2. Support by a spouse or parent. The perfect time to start a business might be while someone is paying all or part of your household expenses.

3. Buy-out or severance package. People are continually displaced from the workforce as a result of business closures, changes in corporate policies, downsizing, rightsizing or early retirement. Regardless of the reason for the layoff, a buyout package can provide the cash you need to jumpstart that little enterprise you’ve been thinking about.

4. Self Employment Benefits (SEB) Program. Bless the Feds and the distant planet they inhabit. The SEB is a wonderful federally funded program that grants EI eligible entrepreneurs enough money to pay personal expenses for up to the first year of a new business.

5. Secure a long-term major client or two. New businesses are often brought into the world when someone falls into an opportunity in the form of a lucrative contract.

6. Sell assets. For those with the good fortune to have assets to sell, doing so can inject the funds needed to nurse a new business through the start-up phase.

7. Pension. More and more it seems, aging baby boomers use their pension as a base from which to launch a new venture. This can be driven by necessity or by a desire to create a certain lifestyle.

Those unfamiliar with business often have an unrealistic expectation that a new business should instantly be able to pay its owner a handsome salary. The reality is that most new enterprises are allowed to take root because the owner is able to leave cash in the business until it grows.

Any other ideas to offer?

How did or how will you avoid starving your business?

Entrepreneurship, Owning a Business, Starting a Business

Ten Points to Consider When Choosing a Business Location

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LocationThere’s an aged saying in the business world, “There are three rules of marketing—location, location, location.” If you want to catch fish, you need to position yourself where there’s fish. If the fish can’t find your bait, if customers can’t find your shop, you’re out of luck and probably out of business. No customers, no sales, no go.

Selecting the right location means different things to different businesses. Here are a few things to consider when choosing the right location for your business.

  1. Clarify Your Business Vision. Determine what you see for your business in 1, 3 and 5 years. Envision what size it will be, what sort of traffic you want and who you want for neighbours.
  2. Identify Your Target Customer. You need to know who your customers are in order to pinpoint your business location. High foot traffic doesn’t automatically convert to lots of customers. Ensure the foot traffic is comprised of folks who match your customer profile and who will stop by to throw money into your cash drawer.
  3. Determine Where The Customer Traffic Is. And then place your business there. This is as true for physical locations as it is for virtual positioning. Whether you’re hoping for foot or click traffic, your business has to be visible to customers. Fish where the fish are.
  4. Locations Can Change. If you position your retail store between a major bank and a Starbucks because of the high foot traffic numbers—the game can change if either business closes, possibly triggering moving or upgrading costs for you.
  5. Consider Delivery Accessibility. While locating near customers is critical, accessibility to offload or pick up goods can be equally important. Is there a loading dock, and is it covered?
  6. Speak With Other Small Business Owners. Once you’ve narrowed your search to a few locations, check in with neighbouring leaseholders. They may have insights to help guide your decision.
  7. Assess the Location’s Impact on Your Marketing Costs. The less visible your location, the more it will cost to get customers to your site. While a highly visible mall location will have higher lease payments, a remote, free-standing location with lower rent payments is sure to have higher marketing costs.
  8. Check Your Neighbours. Determine whether the neighbouring businesses will be complimentary to yours and assess whether they will have an effect on your business once you’re set up. Will the anchor businesses attract the right traffic for your business?
  9. Assess Other Costs and Concerns. Will you be responsible for paying for signage and leasehold improvements? Make sure the location is zoned for your type of business, and that you’ll have access to washroom facilities, parking and sanitation services. As well, check out the crime rate in the area and familiarize yourself with any restrictions on hours of operation.
  10. Scrutinize Lease Agreements. Lease agreements are usually thick and thorny enough to warrant having your lawyer review them to ensure your interests are covered.

Setting up in a new location is not an inexpensive endeavor. It is sure to take a bite of your time, money and energy. The points above will help ensure you make the right choice and get your business on the path to success.

Entrepreneurship, Owning a Business, Starting a Business

What Business Planning Is Not

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Carved-in-StoneAfter reading an avalanche of articles on what a business plan should be, I’ve decided it might be helpful to write one about what a business plan should not be. The topic of business planning is sure to incite a lot of rhetoric and passion, whether or not you believe it to be a useful endeavor.

Even with all the hype there are misconceptions about what a business plan should or shouldn’t be. The poor old business plan is expected to do a lot for business owners. It’s little wonder that some people doubt the validity of the exercise. Here is what a business plan is not:

1. A Business Plan is Not a Tome. I’ve seen business plans ranging from a couple pages to over 200. Rarely should a business plan be more than 20 pages plus attachments; shorter is even better. If lifting the printed version of your business plan leads to a herniated disc in your lower lumbar region, or if it takes any more than 4 guys to carry it into your banker’s office, you’re probably overachieving. Wordy tomes are never read. The people who have to read the plans and make decisions are usually very busy. They will appreciate your efforts to keep the plan clear, simple and succinct.

2. A Business Plan is Not a Business. Delusional folks tend to believe that writing a big fat business plan will get them customers and sell products. Only the greenest of newbies could think the work is done once the plan is written and printed. That’s when the real work begins.

3.  A Business Plan is Not a Guarantee of Success. A beautifully fashioned business plan is no assurance of business success whatsoever. No matter how cleverly crafted the narrative is, or how gorgeous the graphs are, or how dazzling the charts; nor does it make a difference how mouth-watering the financial projections are.

4. A Business Plan is Not a Substitute for a Bad Business Model. If you’re business model can’t deliver the goods to customers in a cost-effective, timely way, the business can’t succeed. No amount of business planning will compensate for a faulty business model.

5. A Business Plan is Not a Substitute for Street Smarts. Great business owners think on their feet. A business plan is a plan, not to be confused with the actions that fill a business owner’s day. Planning done right should result in setting strategy and avoiding some of the obvious traps along the way, but it won’t protect idiots from the impact of bad decisions in day to day operations. Your business plan will not protect you from bad business practices or pathetic personal conduct.

6. A Business Plan is Not a Complex, Time Sucking Activity. If you can’t blaze your way through a business plan in 2 to 4 weeks, you’re probably drilling too deep. In fact, many business plans can be blasted together much more quickly. Of course, the amount of time needed will vary according to the size and scope of the business, the type of business, the owner’s availability to work on the plan, how long it takes to build and test a prototype, and a whole lot of other factors. If your business plan eats up more than a couple months of your life, you’re probably getting way too deep, worrying too much, and procrastinating. Get it done and get yourself in front of customers.

7. A Business Plan is Not a Fix for Abysmal Personal Conduct. Planning won’t compensate for bad judgment. Forecasting is a powerful planning tool that can reveal whether or not your business has a chance of surviving or being profitable. No forecast can counteract the devastation that occurs when the owner continually removes too much money.

8. A Business Plan is Not Just for Owners Who Need Money.

A business plan can open the door to a loan or help attract an investor, but by far the biggest benefit of business planning is the knowledge an owner will gain from the researching and planning. The least understood benefit of business planning is the liberating and illuminating effects of writing about your business. You can’t help but strengthen your understanding and resolve when you dispel your assumptions; write your business description; write your vision, strategy, and goals; and remove the mystique from your revenues and expenses. The power of writing has more to offer the business owner than simply attracting a loan or investor.

9. A Business Plan is Not Etched in Stone. You’ll base your plan on a number of assumptions and you’ll build in buffers and safety factors. Your business plan will help you set parameters, but it won’t enable you to pin-point a precise path to success. In fact, many elements of your business plan will change the second you step into business. A business plan is a roadmap to your envisioned success. A map will not get you to a target; it’s the actions you take and the adjustments you make along the way that get you from your starting point to your cherished destination.

A business plan is just a plan. It’s not to be feared or revered. It certainly shouldn’t be put on a pedestal or parked on a shelf and ignored. A business plan is a living document that should be reviewed and revised as the business weaves and bobs its way through the marketplace. A business plan, providing you do it yourself, is the least expensive, most powerful tool available for taking control of your business and your financial future.

 

Entrepreneurship, Owning a Business, Pricing

Ways to Put the Spurs To Your One-Legged Pony

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Businesses with just one revenue stream, sometimes called one-legged ponies, tend to drop off the radar when the single revenue source dries up.

The one-legged pony business killer seems like a kind stranger when starting out. For example, after you’ve driven Uncle Joe’s truck for a couple years, he offers you a contract and helps get you set up to buy your own equipment. Who in their right mind would turn down a lucrative, long-term bread and butter contract offered by a friend or family member? These special deals sometimes work very well, but the dependence on a lone client can become more of a problem than an asset.

The time to deal with the one-legged pony issue is long before it becomes a problem, as early as the first business plan. Here are a few actions to help diversify your business to avoid falling prey to the one-legged pony.

  1. If A Good Deal Falls On Your Desk, Take It. By all means, take advantage of the amazing evergreen contract when the opportunity comes along. A bread-and-butter contract gives any business a solid base from which to build a great business. Plan from the start to use the stability as a benchmark from which to diversify and build a broader base.
  2. Develop Efficiencies. Get the business running and become proficient at providing top-notch service for your customer. Fine-tune the business to ensure you can provide a high level of service with every engagement. More importantly, become competitive.
  3. Research Similar Businesses. Learn about other businesses similar to yours, how they are surviving, what additional services they provide, and what other clients they attract in order to broaden their base.
  4. Add Revenue Streams. After an appropriate amount of research and comparison of different opportunities, make a plan to diversify your business and increase your sources of revenue. Here are a few examples:
  • A log hauling trucking business could buy a gravel box and start competing for gravel-hauling contracts to fill in the cracks whenever logging gets slow.
  • A service station selling only gas could add a mechanic, incorporate a car wash, or begin selling high-margin trinkets to entice its customers to spend more while on-site.
  • A web designer who builds websites for small businesses could partner with a search engine optimization specialist to sell a broader range of services to its customers.

5. Keep An Eye On your Financials. Your financial reports will tell you if you’re adequately diversified. A one-legged pony’s cash flow rises or falls each time the lone customer hiccups, whereas a suitably diversified offering brings financial stability to the business.

As you work to diversify your business, make sure you look after Uncle Joe. Assuming it was your Uncle Joe that helped you get into business, it’s important to keep him happy as you seek opportunities to branch out. Keep your original customer happy. The one thing less enviable than a pony with one leg is one with no legs.