Sunday, December 17, 2006
If You're Making Money, Do You Need a Business Plan?
From AllBusiness.com *
Tom Sherburne
FounderShred Ready
Auburn, Alabama
Sherburne quickly found that he couldn't take the service concept of the kayaking school and apply it to the manufacturing-based operations of Shred Ready. Cash-flow problems were a recurring issue: During the company's first year of business, Sherburne dipped into his personal checking account more than once to help his fledgling company through rough spots.
So in Shred Ready's second year of operations, Sherburne, despite his doubts about the usefulness of or need for a business plan, sat down and wrote one. The plan helped Sherburne immensely, and he has stuck with it ever since. Sherburne says by putting everything in writing he pays closer attention to the company coffers and doesn't have to worry as much about whether he'll have enough money to purchase supplies or complete production.
With a business plan under his belt, Sherburne doesn't have to fly by the seat of his pants that much these days. By doing the numbers, Sherburne says, he's almost eliminated cash-flow problems. He also says he has a much better grasp of what needs to be done when: "I just feel like I know what's going on now.
Tom Sherburne
FounderShred Ready
Auburn, Alabama
When Tom Sherburne started manufacturing composite kayaking helmets, he didn't think he needed a business plan. His Auburn, Alabama-based helmet business, Shred Ready, began as an offshoot of his kayaking school, the Southern Outdoors Center, which had done just fine without a business plan since opening its doors in the summer of 1996.
When it came to writing a business plan, "I didn't really feel like I knew what I was doing," Sherburne says. "I thought if we were making money and the checkbook was fine, then we didn't need one."
Sherburne quickly found that he couldn't take the service concept of the kayaking school and apply it to the manufacturing-based operations of Shred Ready. Cash-flow problems were a recurring issue: During the company's first year of business, Sherburne dipped into his personal checking account more than once to help his fledgling company through rough spots.
So in Shred Ready's second year of operations, Sherburne, despite his doubts about the usefulness of or need for a business plan, sat down and wrote one. The plan helped Sherburne immensely, and he has stuck with it ever since. Sherburne says by putting everything in writing he pays closer attention to the company coffers and doesn't have to worry as much about whether he'll have enough money to purchase supplies or complete production.
Now Sherburne says he's not 100 percent sure why Shred Ready didn't have a plan from the start. One possibility: numbers. Sherburne has always avoided running the numbers, even when he was finally sitting down to write the plan. "I avoided the budget parts," he says.
"Things are always changing," he says. "That's the really frustrating thing about a business plan." To address the constant change inherent in running a business, Sherburne said he updates Shred Ready's business plan almost on a weekly basis. While he doesn't change the structure or mission of the company, he tweaks the numbers frequently to adjust for things such as late customer payments or unexpected manufacturing delays.
With a business plan under his belt, Sherburne doesn't have to fly by the seat of his pants that much these days. By doing the numbers, Sherburne says, he's almost eliminated cash-flow problems. He also says he has a much better grasp of what needs to be done when: "I just feel like I know what's going on now.
"-- Kevin Casey
What to Consider Before Choosing a Location
Choosing the right location for your small business is an important step for success. Here are some things to keep in mind when selecting your spot:
• Find out if local zoning laws permit your kind of business at the site that you desire.
• Make sure the site has adequate public services—such as water and sewer services, trash collection, sufficient drainage, and police and fire protection.
• Determine if there's enough affordable transportation available. Can your employees get to work? If you're a manufacturer, are trucking services available?
• Consider the surrounding community. If you're a high-end retailer, for example, are there sufficient high-income households nearby to support your business?
• Look at the other businesses in the area. Decide whether or not having direct competitors will be helpful.
Ken Yancey
CEOSCORE
Washington, D.C.
Saturday, December 09, 2006
Traction: The First Goal When Getting Started
When starting a new business, the entrepreneur's excitement and energy are often aimed at grand and lofty goals. Often the siren of starting a new company is the potential riches of an IPO or an M&A as well as the independence these potential successes bring to the founders.
This thinking, while bold, is a bit like asking a mountain climber on what part of the summit he intends to plant his flag. I think a better question might be where he intends to start his assault on the mountain and why.
That same practical approach holds true for an entrepreneur starting a new business. New small-business owners should take their product or service and focus on getting traction. So many things start to become clearer when customers actually begin pulling out their wallets.
When that begins to happen, your confidence in yourself and your business begin to take hold and the mountain doesn't seem quite so high anymore.
Bow Rodgers
President and CEOSquareHit TennisPalo Alto, Calif.
When Selling Abroad, Start Slowly
American companies are aggressive—sometimes too aggressive. Meetings are often brief, to the point, and focused on a particular problem or agenda item.
While this approach may work well back at home, we've found that it is not the way to do business when you go abroad. In places like China and Eastern Europe, expect several dinner meetings before you even begin to start talking about business. People there want to know about you, your family, and your business. They are evaluating you, just as much as your product, to see how trustworthy you are.
Expect sales cycles that are about 50% to 100% longer than what Western companies are accustomed to. I've seen many American companies fall short of their goals because they get disgruntled by the time and money they are putting into making a deal and end up dropping out of the process altogether. Take your time and be patient!
The most important thing to remember is that each country is different. Don't go abroad looking for a one-and-done or a quick sell—it's all about developing long-term relationships. If you stay open-minded, patient, and flexible, you won't be labeled the "ugly Westerner" but the successful one!
Xavier Herve
PresidentMechtronix SystemsMontreal
Saturday, December 02, 2006
Family Business Indecision
Families often put off business decisions such as leadership succession and sale or transfer of ownership. Even when decisions are made, implementation is often slow. But the costs of indecision are enormous: Businesses fail and opportunities are forever lost. Below are five factors that lead to family business indecision to be aware of and address.
1. Families are emotional. People avoid situations that make them feel anxious. Scheduling regular family meetings, using an agenda, and reviewing the undecided issues in a businesslike manner will create a calmer atmosphere.
2. Families are closed systems. Closed systems do not like change. Here are strategies that may invite change: First, ask many questions because questions introduce new information. Second, expand the number of people involved in a decision process because new points of view challenge family members to take action.
3. Families lack clearly defined roles and responsibilities. Specific roles and responsibilities, with tasks spread across generations and feedback required through regular family meetings, help minimize "diffusion of responsibility," where, in the presence of others, people do not feel they must make a decision.
4. Families have emotional imperatives. Decisions may be delayed or abandoned because family loyalties and commitments can hopelessly complicate the task. An effective strategy is to put alternative choices on the table, clarify priorities, and to address costs and benefits one step at a time.
5. Family leaders can have education/skill deficits. Many business owners are faced with important decisions without adequate preparation or education. The final strategy, then, is to ensure that all parties have the information and education necessary to make a decision.
David Lansky, PhD
FounderFamily Business InnovationsHighland Park, Ill.
Five Small Business Grant Resources
Five Small Business Grant Resources
From AllBusiness.com *
Sometimes even the best business concepts don't come to fruition due to lack of funding. Lending sources may refuse funding for multiple reasons. For example, you could have a strong business plan but can't qualify for traditional bank financing because you lack sufficient collateral. Or maybe you can't come up with a sizable down payment, or your business doesn't have a long enough track record. See How Can You Increase Your Chances of Getting a Business Loan? for more information.
Sometimes even the best business concepts don't come to fruition due to lack of funding. Lending sources may refuse funding for multiple reasons. For example, you could have a strong business plan but can't qualify for traditional bank financing because you lack sufficient collateral. Or maybe you can't come up with a sizable down payment, or your business doesn't have a long enough track record. See How Can You Increase Your Chances of Getting a Business Loan? for more information.
Fortunately, there are grant programs available through government agencies and private organizations. Here are five of the top sources of small business grants:
1. The Small Business Administration. While the SBA does not offer grants to start or expand small businesses, it can help connect you with government resources for business grants. Visit its Federal Grant Resources page for more information.
2. Grants.gov. You can find and apply for more than 900 different grants from 26 government agencies.
3. State economic development agencies. Each state has an agency that administers business grants. Agency names vary by state, but usually the Department of Commerce or Economic Development Agency is responsible for disbursing business grants. About.com has assembled a list of links to these agencies’ Web sites here. Find out about Minority Business Loan Programs.
4. Economic Development Directory. This site hosts an extensive directory of more than 2,000 economic development agencies, consultants, and associations worldwide. Links are constantly being updated, providing access to economic development information for business people, real estate departments, consultants, and brokers.
5. The Foundation Center. This subscription service also offers an extensive amount of free information. It also offers a helpful online orientation to grant seeking, which will take you through the funding research process step by step. The subscription fee entitles you to access its directory of more than 80,000 grant makers.
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