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Funding Your Own Business

Say you are planning to have a business and, furthermore, you know the know-how to bring it into development.  The only thing you are losing is the cold money to get started.  What are your options?

Suppose you do not have a ready line of credit, an extensive bank administrator, rich family members or a significant store of retirement savings you are willing to risk, you are going to have to do some serious preparation and hard work.  Luckily, there are a number of sources of finance for the Business startup owner, at least one of which may be right for you.

SBA LOANS

Available only to U.S.-based businesses (but if you are outside the US you can look for something that has a similar program), the SBA (the U.S. Small Business Administration) has served a large number of business owners begin their own Business.  The SBA does not issue resources (money you do not have to pay back) or create financial loans straight, rather, it assures financial loans made by personal loan organizations thereby decreasing or removing the danger natural in new organizations and making loan organizations more willing to offer.

The main concern for the SBA is reimbursement ability from the income of the company as well as “good personality, control ability, security and owner’s equity”.  You will be expected to individually assure your mortgage.  This implies your personal belongings are at risk.

As for the types of organizations qualified for SBA financial loans, the SBA enforces the following criteria: the company must be “for-profit” (it only indicates that your company has a revenue reason, not that it has actually produced a revenue yet), ), be engaged in business in the United States, there must be “reasonable” owner equity (what’s reasonable will depend on the circumstances) and you are expected to use alternative financial resources first, including your own personal belongings.

The SBA also enforces restrictions on the use of loan proceeds. For example, although the proceeds can be used for most company requirements (the cases given by the SBA include “the purchase of real estate to house the company operations; development, remodelling or leasehold improvements; getting furniture, furnishings, equipment; buy of inventory; and operating capital”), you cannot use the loan proceeds for financing floor-plan needs, to pay current financial debt, to create expenses to the business owners or to pay past due taxes etc.

As a common concept, loans for working capital must be repaid within seven years and loans for fixed assets must be paid for by the end of the economic life of the assets (but not to exceed 25years).

ANGEL INVESTORS

Angel Investors are good spirits with a healthy sense of self-interest. Determining they can get a higher come back if they are ready to take a bit of a risk, they are also often effective business owners themselves and want to give other a hand up. Think of financing from angel investors as a link or gap-filler between being a start-up and preparing for venture capital.  The kinds of money we’re referring to here are between about$150,000 and $1.5million.  Beyond this point you are in low venture-capital area. The SBA reports that there are around 250,000 angels in the U.S., financing about 30,000 organizations a year.  So, how do you connect with one?  Not a easy task, unfortunately.  It comes down to networking.  Begin by speaking with professional and business associates – they will often know someone who knows someone etc..  However, we at funded.com can help you in this.

VENTURE CAPITAL

You’re in the big teams now.  Usually you are in the ballpark of millions (of money that is) rather than a thousand.  Venture Capital organizations look for their return on investment from capital appreciation rather than interest (unlike banks, for example).  They’re generally looking for a return of 500-1,000% on exit. It will not shock you to learn that vc’s are particularly hesitant of internet-based organizations right about now and not surprising.  It also provides them right.  But if you have a powerful Business Plan and powerful development potential, this could be an option for you longer term.

One of the common issues about this form of financing, however, is that you have a limited control over your business. Venture Capital usually wants to have control on your business, in return for their risk. A venture capitalist will have to seat as a board member, for example. Always remember, that it’s in the vc’s best passions for your company to be successful, so providing up some control in return for outside skills may well be something worth thinking about.

For this, your best bet would be to begin out by analyzing the various loan program provided via the SBA (or your local equivalent).  But do not ignore, close to home sources first.  If you have household resources at your convenience (for example) and you are assured that your business will be effective (and unless you’re assured about that, don’t get into financial debt with *anyone*, let alone household members), better to begin out slowly and convenience into outside sources of financing as your company (and, furthermore, your company’s cashflow) can support it.  After all, Uncle Jack is much more likely to know about the temporary income meltdown than Uncle Sam.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Business Plans Need to Incorporate Best Practices

In a sense, ‘best practices’ is a euphemism for business plans. Developing business plans is critical to success because it is focused on what makes a business successful. The term best practices is tossed about quite a bit, but what does it specifically mean for a business plan?

The business plan best practices means building a convincing case that your company is an excellent proposition that efficiently and effectively serves the market by providing products and services that the market will embrace. The primary way the business case is built is by differentiating the business in some manner. The business plan must leave no doubt as to why the company is selling particular items and how those items will appeal to the target market.

Forward Thinking

To determine the best practices for marketing, the competition must be thoroughly analyzed. The analysis is not just a case of listing competitors selling similar products or services. The competition must be assessed as to what it is doing now to succeed and how it plans on succeeding in the future. In other words, best practices are forward thinking, and the plan preparer does not get mired down by focusing only on the past. In addition, businesses that can easily become competitors need to be considered also.

A best practice in business plan development is to develop a thorough understanding of competitor specifics. Exactly what sets your competitors apart? Each company has something unique about its products, marketing strategies, management, customer service practices, or product and service delivery. You need to understand these differences in detail to position your company correctly.

It can be fatal to underestimate the competition as many businesses have learned. Even seasoned companies like RIM and Blockbuster found themselves struggling to survive because they failed to understand what the competition was offering the niche market. Your goal in the business plan is prove the competition is not addressing a problem you are able to solve, and then develop a strategic marketing plan to implement your particular solution.

Honesty Counts

In addition, best practices in business plans dictates establishing realistic financial goals. A new business will need to make a profit with a couple of years in most cases in order to remain viable. Projecting unreasonable sales or underestimating expenses will be detected by experienced angel investors, banks, venture capitalists and equity funders. There must be evidence or documentation that the business plan marketing and financial goals make sense based on industry performance. You can project sales and expenses for brand new products and services, but they still need to be based on market research.

There are many other best practices that include developing a flexible business plan and analyzing best case/worst case scenarios. Ultimately, the business plan is about honesty – honest descriptions, honest research, honest analysis and honest assumptions.

Browse www.funded.com for more advice about getting your business funded.

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Business Plans and Benchmarking

Benchmarking can be an important concept in business plans. Benchmarking comparisons can be used to compare your business goals to the domestic or foreign competition. The comparisons can show how your business idea is viable in comparison to other successful businesses. The benchmarking can make your business plan more credible and prove that you have identified the best practices for marketing products and services.

The benchmarking process has one ultimate goal which is to evaluate your current competitive position. It is a method for taking your focus on the internal business to the external environment. How does your business fit in the industry? Are you competing locally, nationally or internationally? How have other businesses achieved success, and what will you do the same or differently to achieve excellent performance? If performance gaps are apparent between your business and the competition, what are the plans to close the gap? How will you measure success?

There are different ways to perform benchmarking analysis. You can review the marketing strategies other companies have used to succeed, compare products or services, complete a functional analysis to identify where you are innovative, and so on. In reality, you can benchmark in any way that makes sense for your particular business in terms of market performance.  Business success requires serving a niche market more efficiently and innovatively than the competition. If you don’t understand how successful competitors have performed, then you have no comparative information for competitive assessment.

Benchmarking is an important step in business plans. Before starting the analysis, the first step is to identify the most logical type of benchmarking. From that point on, it’s a matter of research and then identifying the best practices that suit your business.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Spin Out with a Business Plan

Business plans are a bit like tornados. There is a core that is tightly woven and concentrated and from that core there are a number of spin-offs even as the tornado keeps moving. An effective business plan is always concentrated on the ultimate mission, in constant motion, and ready to spin-off whatever is needed for a long-term successful business.

The power of tornadoes has been witnessed by thousands of folks over the last couple of years. They can wreak incredible damage if anyone or anything in its path is not prepared. The business plan can be a powerful tool for business success but can also cause a lot of damage if it is never amended to take into account what blocks its path. For example, a new competitor enters the marketplace and your business fails to respond because it’s not in the business plan.

High quality business plans are never really completed because they need to keep moving with the market, the customers, the competitors and the economy. One of the reasons so many companies failed during the Great Recession was due to inertia. They insisted on doing business according to the business plan that was not updated to accommodate the new economic conditions. There are also thousands of business that have failed or are failing because they did not respond to changing consumer buyer habits.

Right now there is national big box company relying on showroom floors that is struggling to survive in a market where customers have changed from buying computers and equipment locally to buying online. If the company had stay tuned to the marketplace, and revisited and adapted its business plan, there is a good chance that management would have developed alternative selling strategies that improved its competitive position.

The business plan is the core plan and from it you need to spin out changes, market responses, new opportunities and so on. The core of the business plan does not change from its inception, but the details will change with the competitive environment. The business plan should not be like a tornado wreaking savage damage because it refuses to change course. The path should always be well-defined and obstacles removed through strategic planning.

Browse www.funded.com for more advice about getting your business funded.

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Polishing Business Plans

Developing business plans takes time, effort and patience. It is a plan for success, no matter how you define success. The business plan can be used to find funding for a start-up or expansion, or to guide an existing business. Some people think the business plan is only needed when searching for financing, but that is faulty thinking. The business plan forces business owners and managers to define goals and then make plans to meet them within a set of circumstances that include competition.

Following are some tips for refining your business plan. The business plan template is the best guide available to ensure that all elements are completed. These tips will simply add a bit of polish to the plan.

 

  1. Do the Executive Summary last and not first. The summary needs to concisely state the nature of your business. The best way to ensure the important information is included despite the brevity of the summary is to develop the plan details first. In that way, the Executive Summary is much easier to develop.
  2. Market strategies are more than just numbers and some statements defining the market. It should also define what makes your selling proposition different from that of your competitors.  What does your business bring to the marketplace that is different in terms of products or services, customer services, selling approach and so on? A polished business plan emphasizes uniqueness.
  3. In the competitive analysis, don’t simply describe the competition. You need to explain the distinct advantage your business has over the competition. Once again, the polished business plan makes differences and not sameness clear.
  4. In the operations plan, don’t forget to discuss the benefits that your business will bring to the community. This has become especially important in light of the current economic condition. Will your business opportunity create new jobs or support economic growth?

 

In the final analysis, polishing business plans means adding the information that turns a paper business into a real business for the readers.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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When Opportunity Knocks, the Business Plan Can Answer

Business plans can be viewed in a lot of ways, but in some cases they represent a plan to answer an opportunity. A business opportunity is basically a packaged business that you can start but is not necessarily a franchise. Unlike a franchise, a packaged business is fully controlled by you, and the seller has no say in how you operate your business. Once the business sale is completed, the buyer is on his or her own. The business purchase includes buying equipment or specialized materials and then establishing whatever type of operations you want.

When a business opportunity comes along, it is important to thoroughly evaluate it, of course. There are unfortunately a lot of scam artists who promise big returns if you will only make the initial investment. A good example is a cabinet company that promised business owners enormous returns for redoing cabinet faces. An investment basically bought you a manual and a half day of training. That may be enough for some people, but for others it was a plan for failure. The company was taking advantage of people desperate to get a side business started.

Review From All Angles

The business plan template can be used to ensure you evaluate the business opportunity from every angle. Naturally, you want to ensure the business is legitimate, follows state laws and regulations, and can support its claims with a list of others who have bought the opportunity. If it passes the first review, then use the business plan template as a guide for further evaluation.

For example, in the market strategies section you would be guided towards doing research on the niche market the business opportunity would target, the type of strategies that would be most successful, and the competition. The template can help you make sure that you consider all the important business factors before investing.

Evaluating a business opportunity after it has been purchased is not a good idea. The evaluation needs to be thorough before the opportunity is purchased. The business plan template is the best guide you can use.

Browse www.funded.com for more advice about getting your business funded.

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Business Plans Begin With a Mission to Thrive

Business plans are meant to be adaptable plans for thriving, not just surviving, as a company. Yet, according to famed Harvard professor John Kotter, 70 percent of business initiatives meant to bring organizational change will fail. That is an impressive number because it means efforts to adapt to a changing marketplace are failing. There is a disconnect between the business plan founded on a mission and the real world.

The problem is often one of losing sight of the company mission and failing to plan. The mission statement represents the starting point for the direction of the business plan and captures the essence of business purpose. It has a philosophy underlying it that does not change. Philosophies are encompassing, so the mission statement is a reflection of the nature of products or services sold, potential for growth, pricing strategy, customer service, role in the community, competition and much more.

On a Mission to Fulfill a Mission

The business plan needs to be developed so that each and every section drives the business towards fulfillment of the mission. A change initiative is merely a strategy for keeping the business on track to fulfill the mission. Leading change requires first turning to the mission statement and the business plan. A business that needs to change must be able to communicate a sense of urgency throughout the organization because staying true to the mission statement is necessary to thrive. If a change initiative is needed, it means the business has gotten off course from its mission and its vision.

The business plan goals and strategies may need to be revised, but that should always be a step in the change process. In fact, business plans can serve as the guide for change as each section, from the Executive Summary to the Financial Statements, are reviewed in light of the need for change. Leadership will identify specific strategies for incorporating change and then communicate the revisions on an organization-wide basis. The change process must be empowering and encompassing, meaning employees at all levels should be embraced as change agents.

Business plans begin with a mission statement and then serve as a living breathing document. Leading organizational change is not always easy, but it can be impossible unless there is buy-in to the mission and the business plan. The strategies used to get that buy-in can vary, but staying on message cannot.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Business Plan Writing When the Economy is Less Than Desirable

Writing a business plan for a new business to secure funding in a weak economy may seem like an impossible task. That’s the wrong attitude to have though because it’s actually quite the opposite. In a weak economy funders are looking for innovative and creative ideas that give them an opportunity to make a profitable investment when other financial vehicles are experiencing low returns.

Investors have trouble making money when the Federal Reserve is keeping the federal funds rate at 0 to one-quarter percent. In fact, the U.S. Central Bank Open Market Committee just reiterated on April 25, 2012 that it’s holding interest rates to near zero levels through the end of next year. That means investors must turn to alternative investments to compensate for lack of opportunity in the traditional financial markets.

Writing a business plan in a less than desirable economy should be viewed as an opportunity rather than an impossible task. As an entrepreneur, you are presenting the opportunity to increase investor cash flow and earnings. The business plan can also prove that a weak economy offers unique competitive conditions that increase the odds of success.

For example, the high unemployment rate means specialized labor is available at affordable wage rates. Another business advantage is the fact many potential competitors have already gone out of business which creates market opportunities. Also, the marketplace is ready for innovation in an economy that demands high performance levels. Your business plan can present strategies that take advantage of these opportunities, and that’s just the kind of thinking that gets the attention of funders.

So don’t think of the weak economy with discouragement. Think of it as opportunity for innovation, and then present those opportunities in your business plan with confidence.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Crowdfunding Facilitated with New Legislation

Smaller investors can now be solicited via the internet to pool resources in a practice called crowdfunding. The recently passed Jumpstart Our Business Startup Act (JOBS Act) sent to President Obama for signing is designed to make it easier for small businesses to raise capital. The main foundation of the legislation rests in giving businesses the ability to raise a limited amount of seed money or growth capital by encouraging investors to visit an SEC registered website where projects are listed.

The SEC registered websites will be used by entrepreneurs to list their businesses and present their funding needs. To drive potential investors to the website, the business will notify family, friends, customers and other individual investors that the business is listed by using social media tools like Twitter, Facebook and other internet based communication systems. The potential investors can visit the website, read about the business idea and then operate as a community to analyze and pick apart the business idea, investment opportunity, business model and so on. Once the business idea is accepted, investment money is sent by individual investors, accumulated and eventually transferred once the funding target is met. There are a number of other requirements, rules and limitations associated with this legislation, and this is only a brief summary of the law.

Legislating crowdfunding is considered by many to be an important step towards making it easier for people to become investors in small businesses. With tight capital markets, this new form of business funding can become an important source of money for startups and small businesses having difficulty accessing traditional funding sources. Professionals who connect businesses with investors can provide more information about the new legislation, and other sources of funding, and provide critical assistance with developing a successful business plan that attracts funding.

Browse www.funded.com for more advice about getting your business funded.

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Is Your Elevator Pitch Ready for Investors?

Getting the attention of investors takes finesse and a quality business plan. It also takes an “elevator pitch” that can be pulled out at a moment’s notice. If you haven’t heard of the elevator pitch then there’s a good chance you are a young entrepreneur who has a great business idea but are not immersed in the business lingo. All you know is that you need start up funding.

The elevator pitch is a short speech that summarizes your business plan. When we say short, we mean very short. The elevator pitch is prepared for those moments when you have a chance to tell someone about your business idea and have the time equivalent to a short elevator ride. In other words, the elevator pitch should be no more than a minute long. It’s a summary of the summary of a business plan. You can use it during a conversation or online when potential investors ask you to quickly describe your idea.

It can be intimidating to think about compressing an entire business plan into 200 to 300 words. Yet having a well written elevator pitch ready proves two things. First, you are prepared in advance for an unexpected opportunity to sell your business idea and investors appreciate people who are prepared. Second, having a prepared concise statement about your business shows that your business idea is focused. The elevator pitch is the equivalent of a first impression, and you only get one chance to make it.

The best way to approach developing an elevator pitch for investors is to draw from the information in the Executive Summary in the business plan. The Executive Summary concisely highlights the important information in the business plan. Using it as the source document, you can pick the information that will articulate your message in a way that piques the interest of investors. It’s merely an overview designed to start a conversation between an investor and you. Obviously, you cannot include a lot of detailed information in a minute long description, so you need to pick and choose the most compelling information about your business.

The elevator pitch may be short, but it’s a powerful sales tool whether you speak it, email it, or post it on a website.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.