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Monthly Archives: October 2016

New Business Plan Format is Concise and Personal

The 20-page business plan that is heavy on the financials and short on passion is so ’80s. Today, experts encourage entrepreneurs to keep it short and sweet — one page or even just a paragraph — and put a lot of themselves into their business plans .

“Things have certainly changed in terms of what constitutes a business plan,” said Chris Libis, CEO of Executive Recruiting Consultants, a national executive search firm based in Dell Rapids, S.D. “In today’s environment, the traditional business plan will bankrupt you.”

Keep it simple

Libis said business plans, including the one he developed for his own business, should be concise and to the point. The plan should cover five elements: a description of the product/service, how that product/service will be provided, how the company will generate immediate revenue and who the primary clients are for the product/service.

Unlike traditional business plans, modern business roadmaps should embrace new media, he said.

“Consider a three- to five-minute video that you can post on YouTube,” he said. “You have to have some sizzle.”

A YouTube video is just one way an entrepreneur can put technology to work for your business plan.

“Today’s interactive internet makes it much easier and cheaper to test ‘proof of concept,'” said Patrick Schwerdtfeger, speaker and author of several business books, including “Marketing Shortcuts for the Self-Employed” (Wiley, 2011). “That allows entrepreneurs to plan a given test long before worrying about larger business development strategies.”

But even for more highly detailed business plans that are often needed to attract investors, owners should concentrate on the table of contents to keep the document focused.

“The TOC is effectively your outline for the plan,” said Mike Samson, co-founder of crowdSPRING, a Chicago-based online marketplace. “Take your time with it; make sure you are including all of the relevant topics. At a minimum, your plan should include sections on the company you are forming, your marketing plan, financial information and your growth strategy.”

He also said business owners should include a brief executive summary at the beginning of their business plans.

“Many of the people you hope will read your business plan are ridiculously busy,” he said. “Lots of folks will read only the summary and flip through the rest of the plan. It makes for both a challenge and an opportunity; the stronger and better-written your summary, the better chance you have of a follow-on meeting to make your pitch in person.”

It is also important to keep your audience in mind when developing your business plan.

“Who will be reading your plan?” Samson said. “Investors? Potential partners or board members? Industry advisors? As you draft your plan, understand their capacity for detail and their reason for reading your plan. Anticipate the kinds of questions these readers will want answered and answer those for them.”

Customer focused

In today’s environment, the customer is king, so the business plan should explain how the new venture will find and attract customers .

“Make the case very clear from the beginning how you have solved a problem for a specific customer segment at a price they are willing to pay, and in a way that is better than the next best alternative,” said John Torrens, assistant professor of entrepreneurial practice at the Whitman School of Managementat Syracuse University.

Primary market research is critical.

“A well-written plan with nicely tied financials is great, but unless you can prove that you have spoken to potential customers and incorporated their feedback into your product or service offering, you won’t likely generate investor interest,” Torrens said. “This is crucial and often forgotten because it takes time and requires contact with potential customers. Results from electronic surveys, focus groups, interviews and other research should be included in an appendix.”

He said raising money through a business plan is still somewhat of a beauty contest.

“The founder must demonstrate that they are flexible, play nice with others, recognize the need for speed in reaching the market, and above all are willing to take advice from an equity holder. The business plan should not be all about the founder though. “

7 Things to Do Before Opening a Salon

“A business plan is key to starting a salon. The plan offers a road map for salon owners to follow and helps entrepreneurs consider all areas of the business. A business plan makes sure you set up a metric for success and consider the financials before you invest huge amounts of time and money in a new salon.”

“With salons on every corner, even in small towns, entering into the market with a specialty or service niche can dramatically increase buzz and press about your opening. Most salons try to please everyone, offering a huge menu of services. But this does nothing to differentiate you in the market. Even if you do offer many services, promoting a niche or specialty service will help you attract not only a very loyal client base, but will [also] instantly lend credibility to your salon as the experts in your niche space.”

“Do your research. Ensure that you are complying with the state laws and regulations. If you have to make some adjustments to your plan because of regulations and laws, do so early so that you can avoid potentially having to stop your operation later or [having to pay] a fine. This will save you time and money.”Talk to distributors

“Get in touch with major product distributors like Redken, Paul Mitchell, etc. Some of them offer support services such as training [and] consultants to salon owners and staff. “

“My number-one tip for aspiring entrepreneurs before they open up a salon is to have a number of professional clients of your own that will cover your overhead. Salon employees have an independent mind-set and will try to make power plays. With a solid client base of your own, you’ll be in a better position to call the shots.”

“Secure a solid location with plenty of parking. If you make it convenient for clients to visit your salon, you’ll have more customers, which in turn means more revenue to pay off your initial loan and to put toward growth expenses.”

“I would advise any new salons to invest time in the training and motivation of the staff. Now, any technician is going to know their trade. However, they might need help with the selling and customer-retention side. Your salon will be built around your stylists and technicians, [so] ensuring they are comfortable with up-selling products and other treatments across the brand is the difference between success and failure. Spending time before launch training your key staff to learn these key skills and learn how to teach them to new employees will pay dividends once the salon is running, and will go a long way to help with the smooth operation of a successful business.”

7 Small Business Loan Myths Busted

Obtaining a loan for your small business is no easy feat, but it doesn’t have to be an insurmountable challenge. Small business lending experts agree that the best way to avoid trouble is to prepare for the challenges that the application process may present.

“A lot of the frustration around obtaining small business financing can be eased by doing your due diligence,” said Michael Adam, founder and CEO of Bankmybiz, a site that connects business owners with business funders. “Be prepared, and have all your documents ready to present to lenders.”

Although low credit scores might have precluded you from getting a loan in years past, today’s lending environment is more open to subpar credit ratings.

“While traditional banks may be restrictive when it comes to obtaining credit, there are alternative options,” said Michael Kevitch, president and founder of Small Business Funding.

Alternative lending sites such as Small Business Funding tend to base lending decisions on the financial realities of a business rather than the financial history of business owners. Specifically, Kevitch said, alternative lenders take a close look at business performance, industry type, time in business and cash flow before handing out a loan.

Traditional lending institutions have been a mainstay of small business funding for many decades, and still are in some industries. But they are not the only sources of financing.

For business owners looking to borrow a relatively small sum (between $5,000 and $250,000), getting a bank loan is likely to be more trouble than it’s worth, Kevitch said. However, he noted that bank loans may still be appropriate for business owners who need to borrow a large amount of cash, over a long period, and still get a low interest rate. Kevitch advised business owners to make sure they fall under those categories before applying through a bank.

Kevitch noted that alternative lending sources often provide faster approvals; sometimes, businesses can obtain access to the funds in as little as seven days, he said.

Bank loans may not be the best option for every small business, but they’re far from the worst funding option out there. In fact, for established businesses looking to grow at a moderate rate, traditional bank funding is generally a great option, Adam said. It’s when a business doesn’t fit those criteria that business owners should consider shopping around.

“If you are a younger company, pre-revenue or low revenue — but plan to grow very quickly due to the industry that you’re in (e.g., health care, IT or software consulting) — then a traditional bank loan may actually limit your growth,” Adam said.

To decide whether a bank loan is right for your business, research both traditional loans and alternative funding sources. It’s also important to know your business inside and out.

“If you anticipate steady growth over the next few years, then a traditional bank may be best,” Adam said. “If you are growing like crazy and you know you will need to keep increasing your loan size by large increments each quarter, then entertain a nonbank lending partner, as banks may not be able to keep up with your needs.”

You may find this myth floating around online forums and perhaps even hear it from well-meaning friends and family members. It’s all right to ask for money, nonexperts will tell you; just don’t ask for too much. While this might be reasonable advice in personal circumstances, there’s not much truth to it in the business world.

According to Jess Harris, content and social manager of business lender Kabbage, a working paper from Harvard Business School revealed that banks actually prefer lending larger amounts because they make more profit from large loans in the long run. In turn, banks are cutting back on smaller loans.

Evan Singer, general manager at online Small Business Administration loan program SmartBiz Loans, said a business should apply for the amount it needs — no more and no less. He recommends considering both how much money you really need to grow your business, and how much money you can afford to pay back every month.

“Make sure that you have cash flow to make your loan payments,” Singer said. “That’s the biggest thing that a [lender] is going to check — that [the business owner] can actually afford to make their loan payments.”

There are multiple perspectives on whether a traditional business plan still has a place in the loan application process. Some funding experts believe that the method of using a business plan to measure the likely success and fundability of a business is a bit outdated. Singer said that although traditional banks might still require business plans during the loan application process, online lenders typically don’t look for it.

And although Adam agrees that most lenders won’t require a full-fledged business plan, he does think that having a plan at the ready is always a good idea.

“Every business should have some sort of business plan,” Adam said. “It’s just a good practice to anticipate growth, set milestones and keep yourself accountable. If you don’t have one, create one. You’ll be glad you did in the long run.”

Although interest rates are an important aspect to consider when choosing a lender, there are many other factors to keep in mind. Harris suggested asking how much it will cost, what the terms of the loan are, how soon you need to repay the money, and what you can use the loan for.

6 Alternative Financing Methods for Startups

 Many aspiring entrepreneurs have an idea for their business but lack the capital to actually start it. Brand-new businesses are often turned down for bank loans, and even if your business is established, funds can still be tough to secure. Loans funded by the Small Business Administration are usually more accessible, but they are becoming increasingly competitive.

So what options are left for someone aspiring to be a small business owner? Here are six options beyond bank loans for financing your startup.

Online lenders have become a popular alternative to traditional business loans. These platforms have the advantage of speed, as an application takes only about an hour to complete, and the decision and accompanying funds can be issued within days. Because of the ease and quickness of online lending, economist and former U.S. Treasury Secretary Larry Summers said at the 2015 Lend It conference that he expects online lenders to eventually reach more than 70 percent of small businesses.

Angel investors invest in early-stage or startup companies in exchange for a 20 to 25 percent return on their investment. They have helped to start up many prominent companies, including Google and Costco. Mark DiSalvo, CEO of private equity fund provider Semaphore said, “You are likely to get an investor who has strategic experience, so they can provide tactical benefit to the company they are investing in.”

Find out what makes angel investors fund a business here.

Venture capital is money that is given to help build new startups that are considered to have both high-growth and high-risk potential. Fast-growth companies with an exit strategy already in place can gain up to tens of millions of dollars that can be used to invest, network and grow their company frequently.

Brian Haughey, assistant professor of finance and director of the investment center at Marist College, said that because venture capitalists focus on specific industries, they can generally offer advice to entrepreneurs on whether the product will be successful or what they need to do to bring it to market. However, venture capitalists have a short leash when it comes to company loyalty and often look to recover their investment within a three- to five-year time window, he said.

Learn more about venture capital here.

Through this process, a service provider will front you the money on invoices that have been billed out, which you then pay back once the customer has settled the bill. This way, the business can grow by providing the funds necessary to keep it going while waiting for customers to pay for outstanding invoices.

Eyal Shinar, CEO of small business cash flow management company Fundbox, says these advances allow companies to close the pay gap between billed work and payments to suppliers and contractors.

“By closing the pay gap, companies can accept new projects more quickly,” Shinar told Business News Daily. “Our goal is to help business owners grow their businesses and hire new workers by ensuring steady cash flow.”

Visit BND’s guide to choosing a factoring service here.

Crowdfunding on sites such as Kickstarter and Indiegogo can give a boost to financing a small business. These sites allow businesses to pool small investments from a number of investors instead of having to look for a single investment.

Make sure to read the fine print of different crowdfunding sites before making your choice, as some sites have payment-processing fees, or require businesses to raise their full stated goal in order to keep any of the money raised.

Check out some emerging trends in crowdfunding here.

Businesses focused on science or research may be able to get grants from the government. The SBA offers grants through the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Recipients of these grants are required to meet federal research-and-development goals, and have a high potential for commercialization.