Steps in Developing a Business

1. Steps in Developing a Business Basic Business Concepts

2. Step 1 • Develop Idea • Find out if there is a market for it. • What is a market? Customers for your product • Idea + Market = $ opportunity

3. Step 2 • Develop a business plan • What is a business plan? • A detailed plan that explains your idea to your investors and also explains how much money will be needed to have your idea become a reality. • This plan also helps you as the entrepreneur to understand the commitment that will be needed to get your business off the ground and for it to be successful for years to come.

4. How do you get financing? Step 2 • Personal Savings • Loans from banking institutions- it is easier today to get loans from smaller community banks than from larger mega banks. For business loans, you usually must come up with at least 20% of what you will need. For example, if you expect you need $50,000 to open a business, the bank will require that you put in a minimum of $10,000.00. • Small Business Administration • Personal investors (family and friends) this can be a difficult situation

5. Step 3 • Once you acquire the financing. • Start implementing your business plan. Analyze your plan to be sure it does not need to be adjusted before you start the ball rolling. Economic conditions may warrant a change of plan. • Start the process of acquiring a location. • Buying product, equipment, and supplies • Developing your management team (include any outsourcing needs) • Hiring employees • Merchandising product (bringing your product) • Marketing your business (advertising) • Opening Day

6. Step 4 • As your business progresses, it is necessary to constantly evaluate your situation. You may need to adjust your sales + or – which will necessitate a change in your expense structure. • Sales drives a business! Without sales a business dies! • Make sure you always have plenty of money in the bank to fund your day to day expenses. Business is not always good. You need to have a minimum of 2 years of operating capital in the bank before you think about opening a business. You find out what this number is by developing your business plan.

7. Why Businesses Fail? • There are risks involved in all business ventures. • 1/3 of all new businesses are profitable • 1/3 are unprofitable but continue to operate • 1/3 lose money • Over a 10 year period, 50% of all new businesses are closed.

8. Primary Reasons for Failure • Lack of adequate capital • Low sales • Higher than expected expenses and the owner does not adjust their expenditures down fast enough • Competition • Unprepared to manage a growing business • Requiring more time than an owner wants to commit • Not paying attention to what is going on in the business • Lack of management experience • Poor location for business • Failure to manage credit to customers • Too many government regulations

9. How can government cause a business to fail? • Over regulating with rules and taxes • There are regulations covering how to build your building, what equipment you can buy, who you can hire, what type of products you can sell, what benefits you can offer to your employees, and how much tax and fees you must pay on various things such as income, property, sales, imports, benefits, licenses, and permits. • If you are not familiar with government involvement in the running of your business, you need to find out the rules before you open a business.