Small Business, Big FutureHow to Start Your Own Small Business Seminar Series Sponsored by: Peace Corps FPDL Moreni 28 – 29 October, 2005 Targoviste, Romania
Agenda for Day 1 09:00 – 09:30 : Welcome and Introductions 09:30 – 10:00 : “Business Brainstorming!” 10:00 – 10:45 : Developing the Business Plan: The What’s, Why’s, and How’s 10:45 – 11:00 : Coffee Break 11:00 – 12:30 : Practical Marketing Strategies for the Small Business 12:30 – 13:30 : Lunch Break 13:30 – 14:15 : Micro-lending for Small Businesses – BCR 14:15 – 15:00 : What about all the Paperwork? – Chamber of Commerce 15:00 – 15:45 : Human Resources Management for Small Business 15:45 – 16:00 : Afternoon Break 16:00 – 17:00 : Financial Management for Small Businesses 17:00 – 17:15 : Conclusion and Preview of Day 2!
Welcome! Who are we? Kylie Dore & Forest Ratchford United States Peace Corps Volunteers Community Economic Development Sector Who are you? And why are you here?
Small Business, Big FutureHow to Start Your Own Small Business “Business Brainstorming!” 09:30 – 10:00
“Business Brainstorming” • What do we mean by this? • Basically, it means attempting to identify potential business opportunities in one’s own community. • BUT…There’s more to it than that! • This is the time to begin pondering 4 basic questions: • What type of business should I start? • What are the benefits of starting my own business? • What are the risks of starting my own business? • Is my small business idea a good fit for me?
1. What type of business should I start? • Choose something you enjoy doing.It’s much more difficult (and less fun!) to build a successful small business if that business doesn’t interest you. • Choose a business you know intimately.Trying to learn a new industry or skill at while also attempting to get your business running adds much unnecessary stress to your venture and could lower your chance for success. • Choose a business that has a chance of turning a profit.The best way to determine your business’s profit potential is to prepare a “break-even analysis” which will help you to estimate how easy or difficult it will be to turn a profit. We will get into this in much more detail later in the seminar. You may have to start smaller than you would like to fit your financial resources.
2. What are the benefits of starting my own business? • Independence and Flexibility. You will have more freedom and flexibility working for yourself. And when you firmly establish your business, you will find that you will have more flexibility to enjoy the moments in life which matter to you the most. • Personal Fulfillment. Owning and running your own business can often be much more fulfilling that working everyday for someone else. Successful small business owners often cite the respect they receive from peers as a major motivating factor.
2. What are the benefits of starting my own business? • Power. When you are the boss you can have your employees do things your way. BUT, if power is important to you, find a way to use it constructively. • Money. While risky, foregoing a steady paycheck can pay off when you own your own small business. It is possible to get rich in a small business, or at least do well financially. Most entrepreneurs do not get wealthy although it is certainly a possibility and if successful you most certainly will be able to attain financial security.
3. What are the risks of starting my own business? • Losing Money. You WILL need money to get your small business started. Whether you tap into family savings, borrow from friends and relatives, or take out a loan from a bank or other financial institution, there is the very real possibility that your business will not succeed and this money will be gone forever. If your business idea is risky – are you willing to gamble your retirement, friends, family, and good credit on this business idea?
3. What are the risks of starting my own business? • Personal Sacrifice. Success in business can come at a high personal cost. Starting a small business can consume most of your time and energy – maybe even evenings and weekends. You may find yourself short on time for friends and family or short on money to take a vacation. Before taking the step into your new small business make sure you (and your family) are prepared for the personal sacrifices which come with it.
4. Is your business a good fit? • Try it out. Before you embark on a small business, try to gain some experience in the industry or profession you plan to enter. Learn all that you can about every facet of the business. Talk to other entrepreneurs in the same field! If you are not familiar with the business and cannot gain practical experience, talk to others who are currently providing the product or service which is of interest to you. • Evaluate whether you enjoy the work and excel at it. If not, then try something else! As mentioned previously, it is hard to be successful in a business which you don’t like and its unlikely you will like a business which you are not good at.
4. Is your business a good fit? • Judge your ability and desire to handle every aspect of the business. If you do not want to or cannot help out whenever and wherever help is needed – whether it involves manufacturing, finance/accounting, or customer service – then you should reconsider starting that type of business. It’s also during the planning phase that you have the opportunity to learn those skills which you may be lacking! • Determine whether the business has a solid chance of turning a profit. After working in the field or discussing the business with other entrepreneurs for a few months you should be able to realize whether the business has a chance at profit. Research and analyze your market and conduct the “break-even analysis” to be sure.
How do we find business ideas? • LOOK AROUND YOU! Do you notice a particular product or service which is lacking in your community? Is there a hole in the market which your small business can fill? • DEMOGRAPHICS! What does the population of your community look like? Older, younger, richer, poorer, educated, etc. ? Is there a certain demographic in your community whose needs are not being met?
How do we find business ideas? • ECONOMIC REPORTS! From local, regional, and national government sources. These reports can provide insight into how your community has been developing and is projected to develop in the future. • VISIT OTHER SIMILAR COMMUNITIES! By visiting communities which are similar to your own you may find successful business which are not currently operating in your own community.
How do we find business ideas? • BUSINESS-TO-BUSINESS SERVICES! Ask businessmen in your community about their needs. Is there anything that business community needs that is not being provided? • DON’T ALWAYS LOOK AT PRODUCTS! Look for new ways to sell or market existing products. Look at retail in different ways. Don’t be afraid to visit larger cities and steal good ideas you see and bring them back to your community.
“Business Brainstorming” - Activity Lets take 10 minutes to go around the room and brainstorm business ideas which you think could be successful in you community. We will come back to these ideas throughout the course of the seminar.
Small Business, Big FutureHow to Start Your Own Small Business Developing the Business Plan 10:00 – 10:45
Business Plan Basics • What is a Business Plan? • A business plan: • Precisely defines your business, identifies your goals, and serves as your firm’s resume (CV) • Helps you allocate resources properly, handle unforeseen complications, and make good business decisions • Informs sales personnel, suppliers, and others about your operations and goals
Business Plan Basics • The importance of a business plan cannot be over emphasized! • The following are dependent upon it: • Outside financing • Credit from suppliers • Management of your operation and finances • Promotion and marketing of your business • Achievement of your goals and objectives
Business Plan Basics • Before writing your business plan consider these 4 questions: • What product or service does your business provide and what need does it fill? • Who are the potential customers for your product or service and why will they purchase it from you? • How will you reach your potential customers? • Where will you get the financial resources to start your business?
Business Plan Basics • What goes into a business plan? • Description of business • Marketing • Finances • Management • Addenda should include an executive summary, supporting documents, and financial projections.
How does one USE a business plan? • A business plan is a tool with 3 purposes: • A Communication Tool • A Management Tool • A Planning Tool
How does one USE a business plan? • As a communication tool, the business plan is used to: • Attract investment capital • Secure loans • Convince workers to hire on • Assist in attracting strategic business partners • The development of a comprehensive business plan shows whether or not a business has the potential to make a profit.
How does one USE a business plan? As a management tool, the business plan helps you to track, monitor, and evaluate your progress. The business plan is a living document that you will modify as you gain experience and knowledge. By using your business plan as a management tool you can gauge your progress and compare actual results to your projections.
How does one USE a business plan? As a planning tool, the business plan guides you through the various stages of your business. A well thought-out plan will help to anticipate potential obstacles so that you may avoid them. Many business owners will share the business plan with their employees in order to foster a better understanding of where the owners envision the business to go.
THE BUSINESS PLAN • Table of Contents • Executive Summary • General Company Description • Products and Services • Marketing Plan • Operational Plan • Management and Organization • Personal Financial Statement • Startup Expenses and Capitalization • Financial Plan • Appendices
Executive Summary • Write this section last! • The executive summary serves as the face of your business plan. It is the first thing which will be read by potential investors, partners, suppliers, etc. • Include here the fundamentals of the proposed business: • What will your product be? • Who will your customers be? • Who are the owners? • What do you think the future holds for your business and your industry?
General Company Description • What business will you be in? What will you do? • Include here the following items: • Mission Statement: Explains your company’s reason for being and its guiding principles • Company Goals and Objectives: Where do you want your business to be (Goals) and how will you measure your progress along this path (Objectives) • Business Philosophy: What is important to you in business? • Describe your industry: How is your business positioned within the industry? • Most important company strengths and competencies: What will make the company succeed? What are your competitive strengths? What skills do you bring which will help the success of your company?
Products and Services Describe in as detailed a manner as possible your products and services. NOTE: Technical specifications, drawings, brochures, etc. should be placed in the appendix. Describe the competitive factors which will give you an advantage or disadvantage in your market. Also include the detailed pricing structure and strategy of your products and services.
Marketing Plan • The Marketing Plan consists of the following items which we will discuss in more detail in the following session. • Market Research • Economics of your market • Marketing of your products or services • Information about your customers • Analysis of your competition • Your “niche” • Your marketing strategy • A sales forecast
Production Location Legal Environment Personnel Inventory Suppliers Credit Policies Operational Plan This section outlines the day-to-day operations of your business and includes details in the following areas:
Management and Organization • This section of the business plan answers the following questions: • Who will manage the business on a day-today basis? • What experience or competencies does that person(s) bring to the business? • Is there a plan in place to continue operations of the business should this person(s) be unable perform his/her duties?
Management and Organization • It is also to list other key players in the business in this section, including (not all need be relevant): • Board of Directors • Management Advisory Board • Attorney • Accountant • Insurance Agent • Banker • Consultant(s) • Mentors and other key advisors
Personal Financial Statement • In this section you should provide a personal financial statement for each owner and/or major stakeholder in the business. A personal financial statement includes the following: • Assets and liabilities held outside the business • Personal net worth • Owners sometimes need to use personal assets to finance their business and these statements provide transparency as to what is available. Banks or other lenders also require this information.
Start-up Expenses and Capitalization • There WILL be expenses incurred prior beginning operation of you business. • Expenses must be accurately estimated • Conduct thorough research • Be sure to include a line item for “contingencies” which will allow you to account for unforeseeable expenses. • “Contingencies” should equal 20% of the total of all other start-up expenses.
Financial Plan • The Financial Plan consists of the following items which will be discussed in greater detail in the session on financial management. • 12-month profit & loss projection • 4 year profit & loss projection (optional) • Cash-flow projection • Projected balance sheet • Break-even calculation
Brochures and Advertising Materials Industry studies Blueprints and plans Maps and photos of location Magazine or other articles Market research studies List of assets available as collateral for a loan Detailed lists of equipment owned or to be purchased Copies of leases and contracts Letters of support from future customers Any other materials needed to support the assumptions in this plan Appendices should include:
Small Business, Big FutureHow to Start Your Own Small Business Coffee Break 10:45 – 11:00
Small Business, Big FutureHow to Start Your Own Small Business Practical Marketing Strategies for Small Businesses 11:00 – 12:30
The 4 P’s of Marketing • PRODUCT: The good or service that your business is trying to sell to its customers. • PRICE: What and how the customer pays for your product or service. • PROMOTION: The means of telling your customers about the positive aspect of your product or service, and of finding out what your customers want. • PLACE: Making your products or services available where and when your customers want them
Marketing vs. Advertising MARKETING is the commercial processes involved in promoting and selling and distributing a product or service. Marketing is the process while… ADVERTISING is the activityof attracting public attention to a product, service, or business, as by paid announcements in the print, broadcast, or electronic media
Why Make a Marketing Plan? • Optimize Profitability • Have an overall picture of your company’s activities • Get more customers • Discover new opportunities for your company • Spend time and money more efficiently • Be informed
How to Develop a Marketing Plan • Establish your company’s marketing goals: What do you want your business to achieve? • BE AS SPECIFIC AS POSSIBLE! • 2. Make an internal and external analysis of your business.
Internal & External Analysis • Internal Analysis: What are your company’s strengths and weaknesses? • External Analysis: What are the opportunities and obstacles outside of your company that will help or impede its marketing goals?
How to Develop a Marketing Plan 3. Establish your company’s marketing strategy. • What/Who is your target market? • How will you achieve your company’s marketing goals?
How to Develop a Marketing Plan • 4. Define your marketing operations. • What will be the role of each element of the marketing mix (4 P’s) within your company’s overall marketing plan?
How to Develop a Marketing Plan • 5. Costing your marketing operations and comparing it to your budget: • How much money will your company need to spend for its marketing operations? • Is this reasonable and possible considering the overall budget?
How to Develop a Marketing Plan • 6. Programming: • How will your company schedule the necessary marketing activities to ensure that they are undertaken in the right sequence, and at the right time?
Market Research: Why is it Important? For your business to be successful, you must know about the market in which you will operate. Market research is simply an organized and orderly way to find out about the people who might buy your products or services
Market Research Shows You: • Alternative approaches to your market • Provides more accurate profit predictions • Aids in the creation of your marketing plan Market research helps your company find out what products or services will be bought by your potential customers in a certain area.