Winning Ideas for Small Business Success

8/2/2019 Winning Ideas for Small Business Success

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Winning Ideas For Small Business Success

Editor note: The following exhaustive article is presented by the Small Business Administration. While some of it may not apply to the video business you are contemplating, it

is excellent advice that you should study before starting any business.

Everyone at one time or another fantasizes about going into business and being his or her own boss. Now a growing number of Americans are making that fantasy a reality. In an economic

climate that encourages and nurtures entrepreneurship, hundreds of thousands of corporateexecutives, MBAs, retirees and individuals interested in a career change are striking off ontheir own. And as owners of small businesses, they are creating a dynamic force that isrevolutionizing business as we have known it in this country.

According to the latest Internal Revenue Service projected figures, there are 18.6 millionsmall businesses in the United States. And the U.S. Small Business Administration reportsthat small businesses (including the self-employed) account for 58 percent of the U.S.workforce and 40 percent of the gross national product. Moreover, a National Science

Foundation analysis reveals that small business has been a more prolific source of innovation per research and development dollar than large business.

This new age of the entrepreneur is also an age of opportunity. For example, a substantialnumber of today's small business operators are women. They own 3.74 million small

businesses and generate more than $65 billion annually in gross receipts. Between 1977 and1983, women-owned businesses increased at twice the rate of businesses owned by men.

But success isn't automatic. It isn't based on luck, although a little luck never hurts. What itdoes depend on is how you play the game; in other words, making all the right moves. Aneven then, there are no guarantees.

Starting a small business is risky business, and the odds of succeeding are poor. According tothe U.S. Small Business Administration, the majority of small businesses fail in their firstyear and 95 out of 100 fail within their first five years.

These figures aren't to scare you; just prepare you for the sometimes rocky path ahead.

Underestimating the difficulty of business is one of the biggest obstacles entrepreneurs face.

However, success can be yours if you are patient, willing to work hard and take all thenecessary steps. What follows are 10 tips to small business success. The information wasgathered from a variety of experts and sources. While we make no promises with thisinformation, we can say that if you heed this advice, your chances for success will be greatly

increased.

1. KNOW YOURSELF

Not everyone is cut out to be an entrepreneur. It takes a special talent. Some owners of small businesses have it and some don't. Before you invest time, energy, money and a piece of your heart, it's important to do some serious self-analysis. To answer such questions as: Am I

prepared to work hard and make sacrifices? Am I self-disciplined? Do I have management



ability? Am I experienced enough in this field? What do I want out of life? Are my goalsrealistic and attainable?

Studies have shown that entrepreneurs are persevering and not easily defeated. They thrive ina challenging environment and have a tremendous need to be in control. They turn diversity

into opportunity. They are risk takers. They welcome responsibility, and they are willing and

able to make decisions.

Moreover, successful entrepreneurs are patient and able to wait out the sometimes slow beginnings of a business. They also are able to learn from their mistakes, trust their own judgment and have an optimistic outlook.

Take a good look. Do those traits describe you? "Know yourself and be willing to work 60hours a week. Starting a business is one of life's biggest commitments," advises Roy

Nordman, director of Emerging Business Services Practice for the San Francisco office of Coopers & Lybrand.

Small business owner Nancy Wansick, of Wansick Graphics, echoes those sentiments: "My

business has become my whole life. Day becomes night and work has become play."

It's obvious: you have to love you work. And if you choose a business that meshes with your personality (the answers to the above questions should tell you about your personality), thoseextra hours spent won't be as difficult. The key is to identify what you enjoy doing the mostand then find a business opportunity that makes use of your skills and interests.

2. PLAN YOUR BUSINESS

The importance of a comprehensive, well thought out business plan cannot beoveremphasized. Much hinges on it: outside funding, credit from suppliers, management of

both your operation and finances, promotion and marketing of your business, andachievement of your goals and objectives.

"The business plan is a necessity, if the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of FirstBusiness Bank in Los Angeles.

Despite the critical nature of a business plan, many owners and managers drag their feet whenit comes to preparing a written document. They argue that their marketplace changes too fastfor a business plan to be useful or that they just don't have enough time-they are too busyrunning the business. But just as a builder won't begin construction without a blueprint, eager

business owners shouldn't rush into new ventures without a business plan. For without a

business plan, you will end up going from crisis to crisis, putting out fires, never looking atyour operation in the long term.

According to business plan experts, an effective document answers these questions: Who are

you? What do you do? What resources do you have? Where are you going? What do you needto get there? How will you measure performance? Your plan should contain:

- A resume of the background of all the business principals;- A thorough description of your product or service;



- An analysis of the current marketplace situation;- Problems and opportunities facing the company;- A market analysis showing the segment of customers you have targeted; -Realistic objectives and goals relating to sales, market share and profits;

- An explicit statement of marketing strategy (implementation policies are impossible without

explicit strategy plans);- A detailing of action programs or tactical plans for carrying out strategies and accomplishinggoals;

- Preliminary budgets and projected profit and loss statements;- Integration of manufacturing and financial plans with the marketing plans; and- Intended controls that measure actual versus planned performance.

In other words, the key is not the cost or size of your plan but the content. It is an importantmanagement tool for planning your business, setting goals and a time frame, and measuringyour business's performance. All business plans are not the same. They vary depending on thetype and size of your business. However, all plans should be organized into distinct sections:an executive summary, a description of product or service, a marketing analysis and plan, a

description of the management team, a financial strategy and an appendix.

Your business plan should be thoroughly prepared, because a sloppy, poorly thought out planminimizes your chances for outside funding. Moreover, the U.S. Small BusinessAdministration and most private lenders require a business plan when making a fundingdecision. It demonstrates that you have carefully thought about the basics of your businessand that you can realistically plan for the future.

In addition, it's a good exercise for you. Putting your thoughts down on paper helps you toclarify why you are in business, who your customers and competition are, your strengths andweaknesses and your plans for the future. Plus, it helps you to set realistic goals and guideyour operation toward meeting those goals.

There are two suggested ways to prepare your business plan. You may obtain free andconfidential assistance from the Service Corps of Retired Executives (SCORE), anorganization of skilled professionals who can counsel you in your preparation. Or you maydecide to hire a consultant to help you prepare the plan. Even if you turn to outside help, youshould be completely familiar with every detail of your plan, because at some point you willhave to meet with prospective lenders. Your knowledge and understanding of the plan willinfluence their decision.

One final word of advice: Before submitting your plan, have at least two other individualsreview it. They should understand lending and investments and be able to give you

constructive suggestions. That way, if your plan needs work, you can revise it before yousubmit it to lenders.

3. FINANCE FOR THE LONG TERM

One of the major causes of small business failure is inadequate start-up financing. Admittedly,it is more difficult for small businesses to obtain financing than their larger competitors.However, the owner who borrows too little up-front money may quickly see the businessclose down because of lack of capital to keep the operation running.



"The most hazardous period for a new business is the first two years due to insufficientworking capital," says Bernard Schnitzer, a counselor at SCORE. Many over-eager entrepreneurs open their doors without the necessary funds to keep the business going untilthe profits begin to roll in. They have only enough for a couple of months' rent, some fixturesand minimum inventory.

Before you open for business, it is critical to plan how much cash you will need. That amountdepends on the type of business you are opening (sales and manufacturing need more; service

businesses need less) and the type of person you are.

You also should ask yourself what you need the money for; how much you need; does theamount allow for unexpected developments; how and when you will repay the money; canyou afford the cost of borrowing; and what is the outlook for business in general and your

business in particular? By carefully planning your financial projections, you can avoid someof the financial crises that arise from a future shortage of funds. Hinden/Owen/Engelke,specialists in financing for small businesses, recommend the following "Ten Commandmentsof Smart Corporate Financing";

- Stay in contact with several lenders.- Anticipate financing needs and make arrangements well ahead of opening your doors.- Borrow as much as you can.- Get all commitments in writing.- Never assume silence is approval of a loan request.- Don't make the interest rate the major consideration in evaluating financing.- Don't surrender or assume that if one lender says "no," they all will.- Watch for turning points in the operation of your company.- Tight money doesn't mean no money.- Don't limit your sources just to banks.

There are a number of sources of financing available to the small business owner (besidesfamily and friends): private sector financing-- banks, savings and loans and other financialservices institutions; government financing--the U.S. Small Business Administration and localcommunity groups like the Small Business Investment Companies and the MinorityEnterprise Small Business Investment Companies; and venture capitalists--wealthy

individuals and firms who make their money as investors.

Before you fill out your loan request--no matter who the prospective lender is--find out whatdocumentation you will need. For example, banks and the U.S. Small BusinessAdministration require a resume of the applicant's education and work experience withemphasis on experience related to the particular business; a personal financial statementdetailing net worth and income tax statements for at least the two previous years; the

aforementioned business plan; and credit references. Finally, borrow carefully. "Havingfinancing is critical at the growth phases," says one small business owner; "But be careful notto overextend yourself."

4. BALANCE YOUR BOOKS

One small business owner realized that vision, optimism and a willingness to work hard werevital to the success of her new venture, but the key requirement was attention to the balancesheets. "It took me a while to learn it, but you really have to run a business by the numbers."



And you can't run a business by the numbers without an adequate accounting system to use asa management tool. Incomplete records are one of the most serious errors a small businessowner can make. Very few operators enjoy the number crunching segment of running a

business. However, if you keep your system simple, it can be done with a minimum amountof time and energy. Besides, accurate and complete financial records will help you chart the

growth of your business and make plans for the future.

To begin with, your books should include accurate and thorough statements of sales and

operating results, fixed and variable costs, profit and loss, inventory levels, and credit andcollection totals; tax returns and reports to regulatory agencies; and comparisons of currentdata with prior years' operating results and budgeted goals.

In addition, you should also track daily cash receipts and credit sales, expenses and inventoryreceived, plus employee expenses including pay and deductions.

A good recordkeeping system should be easy to understand, reliable, accurate, consistent anddesigned to provide information on a timely basis.

There are two methods of accounting: cash and accrual. Using the cash method, income isrecorded when the cash is received and expenses are recorded when paid. With accrualaccounting, you record all income and expenses whether paid or not. Both cash and credittransactions are recorded when paid. Whether you use the cash or accrual method, bothrequire four basic types of records:

- Sales records;- Cash records;- Cash disbursements;- Accounts receivable.

To determine which system is best for you, consult with a financial advisor or publicaccountant.

5. PRACTICE GOOD MANAGEMENT

"Poor management is the greatest single cause of business failure," warns Steve Muhlhauser,California Assistant Regional Administrator for Business Development for the U.S. SmallBusiness Administration.

Management of a business encompasses a number of activities: planning, organizing,controlling, directing and communicating. Most business failures aren't a result of bad

economic times; rather, they stem from improper management. The cardinal rule of small business management is to know exactly where you stand at all times.

Some of the more common mistakes managers make include:

- Hiring the wrong people;- Inadequate employee training;- Trying to do too much;- Misuse of time;



- Absentee ownership.

In a big company, a bad month in one division can be offset by other divisions. In a smallcompany, there's nothing else to fall back on, so a bad week can be fatal. Managing a smallcompany means staying on top of the business so that you can react instantly and decisivelywhen problems arise.

Bad management isn't limited to poor economic times; it can happen even during the best of times. Some management consultants say their experiences with small businesses confirm that

over expanding, hiring weak personnel and being over confident are frequent managementmistakes that occur when times are good.

Along with those is the inability to handle growth. "If the business is successful, it takes on alife of its own," says one owner. You become a "situation manager" rather than just a peopleor business manager. Suddenly, you are balancing opportunities, investments and energy.

Whether the times are good or bad, the successful manager is the one who remains calm andconfident and who turns adversity into opportunity.

And as a successful manager you must also be a good leader. Many experts believe thatleadership is a form of behavior: of persuading and inducing, of guiding and motivating. They

believe that a well-rounded leader is a master of certain skills, creates a climate thatencourages productivity and directs and controls employees' activities.

Very often, leadership style reflects an individual's personality. However, you should keep inmind that what works well with one group or individual; may not work as well with the next.As a result, good leadership requires a flexible approach, one that is based on the peopleinvolved and the situation at hand.

Advises one small business owner, "Surround yourself with competent people, then train themand learn to delegate." And when you do delegate, keep the following tips in mind:

- Don't constantly check up on employees while they're working;- Believe what they say;- Avoid having to know every single detail at all times; and- Be sure you know enough to stay on top of things.

"Delegation is an issue of trust," says another owner. "But it cuts both ways. You can't getsomeone to trust you unless you trust them, too."

6. KNOW YOUR MARKET

A sound marketing plan is key to the success of your business. It should include your marketyour market research, your location, the customer group you have targeted, your competition,

positioning, the product or service you are selling, pricing, advertising and promotion.

"You're in business to serve a customer need," says Derek Hansen, founder of American

Capital Access. "If you're not sensitive to customers, don't know who your customers are,how to reach them and, most of all, what will convince them to buy your product or service,

get help."



Before developing your plan, you must do your homework. Effective marketing, planning and promotion begins with factual information about the marketplace. Visit your local library, talk to customers, study the advertising of other businesses in your community (including that of your competition) and consult with any related industry associations.

Once you have all the necessary information, it is time to put your plan down on paper. It

should accomplish the following:

1. Define your business

- Your product or service;- Your geographic marketing area--neighborhood, regional or national;- Your competition;- How you differ from the competition--what makes you special;- Your price;- The competition's promotion methods;- Your promotion methods;- Your distribution methods or business location.

2. Define your customers

- Your current customer base: age, sex, income, neighborhood;- How your customers learn about your product or service--advertising, direct mail, word of mouth, Yellow Pages;- Patterns or habits your customers and potential customers share--where they shop, what they

read, watch, listen to;- Qualities your customers value most about your product or service-- selection, convenience,service, reliability, availability, affordability;- Qualities your customers like least about your product or service--can they be adjusted toserve your customers better?- Prospective customers like least about your product or service but whom you aren't currentlyreaching.

3. Define your plan and budget

- Previous marketing methods you have used to communicate to your customers;- Methods that have been most effective;- Cost compared to sales;- Cost per customer;- Possible future marketing methods to attract new customers;- Percentage of profits you can allocate to your marketing campaign;- Marketing tools you can implement within your budget--newspaper, magazine or YellowPages advertising; radio or television advertising; direct mail; tele-marketing; public relationsactivities such as community involvement, sponsorship or press releases;



- Methods of testing your marketing ideas;- Methods for measuring results of your marketing campaign;- The marketing tool you can implement immediately.

The final component in your marketing plan should be your overall promotional objectives: tocommunicate your message, create an awareness of your product or service, motivate

customers to buy and increase sales. Objectives make it easier to design an effective campaignand help you keep that campaign on the right track. Plus, once you have defined your objectives, it is easier to choose the method that will be most effective.

The essential idea is targeted marketing--making sure your message reaches the people youwant to persuade. Today's marketplace is too fragmented and diffused to reach everyonewithout the expenditure of vast sums of money. This makes the formulation of a specificcustomer profile all the more important. "Before, we always tried to get everybody and their

brother to buy from us. Need-less to say, that approach didn't work. Then we started amarketing plan that targeted a specific geographic area." says one long-time business owner,"and it brought in all the business we hope for."

7. DELIVER QUALITY

The quality of your product is vital to the continued success of your business. A terrificmarketing strategy might bring a customer to your door, but if the product you deliver fails tosatisfy, they will never return. And worse, the best advertising of all, word-of-mouth, will turnagainst you.

"Understand your weaknesses and strengths, your product and the market," urges PaulKirschner, Regional Representative, SCORE.

Above all, never underestimate the importance of your customers. Design your product or

service based on what they want. Develop your own standards for quality and constantlyreinforce those values. Once quality slips, customers notice and the competition inches ever closer.

"Supplying your customers with a desired, needed and valued product or service will helpensure their satisfaction and your repeat business and success," says the owner of a televisionand radio dealership. "In short, always give clients what they want and need."

Still other owners say, "Never lower your standards. Ask for feedback and make it a way of

life. Build it into everything you do so you know if your quality is as good as it should be."

To measure how well you are doing, it is critical that you keep an eye on the competition,

consultants say. This means matching what the competition delivers and then bettering it tohold your ground.

Asking the question, "Are we doing a good job; the best that we can?" is key to the success of your business. By doing that you will please your customers and you will set your businessapart from competition.

8. HIRE THE RIGHT PEOPLE



Many consultants agree that good employees can play a major role in your business's success.Very often the image and reputation of your company depend on how customers view your employees. An employee's attitude, appearance and skills can make or break your business.

"One of the toughest parts of starting my furniture sales business," says one owner, "was

finding good, trustworthy employees. The other tough part was managing them. Although

good employees are one of a company's greatest assets, all employees need to be motivated."

The hiring process should not be haphazard. Before you begin, you need to define the job, theexperience or education level required and what you are willing to pay--salary and benefits. If you haven't formulated a personnel policy, now is the time. You need to consider the number of hours to be worked each week, the number of days per week, holiday work and the timeand method for overtime pay; fringe benefits; vacation and sick leave; time off for personalneeds; training; retirement; a grievance procedure; performance review and promotion; andtermination.

Employment and training procedures should be established so that you have a better chance of hiring the right employee for the right job and that you hire employees to fill in on those areas

where you may be weak.

There are a number of sources to which you can turn for job candidates: classified advertising,employment agencies, temporary agencies, state employment agencies, unions, schools,community organizations, former employees or friends and family.

Rather than making your selection based on intuition, you need to follow a process thatenables you to determine the candidate's worthiness for the position. Review the candidate'sresume, application and work samples; test the applicant if appropriate for the position;interview the candidate; and check his or her work references.

When interviewing, don't make the common mistake of asking what the candidate has done;rather, ask how the candidate did it. Interview the candidate, not his or her resume. Moreover,

don't neglect to assess three essential factors you won't find on anyone's resume: intellect,interpersonal skills and motivation level.

When interviewing, it is also important to know the laws related to job discrimination.According to one expert, there are two simple rules to test whether or not to ask a question:(1) Is it job related? If it isn't, don't ask. (2) Is the question presented only to a specific type of candidate? If it is, don't ask.

When it comes time for the hiring decision, undoubtedly your sense of people will come into play; your ability to separate "good" employees from "bad" one. However, a few words of

warning: All too often, consultants say, employers hire people they believe will turn around,only to find a difficult battle on their hands. Time is too precious to waste on anyone whocannot contribute 100 percent.

Once you have carefully selected your new employee, it is important to create a good working

relationship. Open-mindedness, patience, communication skills, willingness to listen andother human relations skills play a vital role in the development of such relationships. "Be

aware of individual personalities," says Ed Lohlein, owner of Budget Copy. "We maintain an'open door' policy by talking to our employees as human beings."



Says another owner, "Hiring good people, developing appropriate relationships and makingthem part of the operation are the keys to a successful business.

And although you have been careful to hire the right person for the job and are working hardto form rewarding relationships with your employees, you can still be subject to problems.

That is the nature of business. Very often the problems you experience mirror those of society

in general.

Currently, employers are faced with the problem of drug abuse and drug testing and withadhering to the new regulations set down by the 1986 immigration law.

Substance abuse costs American business about $100 billion a year in lost production,according to the federal government. In 1980, a government-sponsored study revealed thatabout 10 percent of the nation's workforce was impaired by alcohol abuse.

While many large businesses have set up substance abuse programs, such programs are tooexpensive for the small business owner. One consultant recommends writing out a policystatement concerning drug and alcohol use at work and coming to work in a drug or alcohol-

induced state. He advises that the policy should state that the use of drugs or alcohol on the job are unacceptable and grounds for disciplinary action, including dismissal.

Another consultant suggests that the small business owner investigate outside employeeassistance programs as a way of offering help to troubled employees at a relatively low cost.If no such provider is available in the area, you may want to join with other local companiesto create an employee assistance program together.

The other major societal issue--hiring illegal immigrants--can have significant impact on the

operation of a small business. Under the Immigration Reform and Control Act of 1986,employers must hire only U.S. citizens and aliens authorized to work in the United States.

Violators can face stiff fines. The Immigration and Naturalization Service (INS) requires thatyou ask each new person hired the following questions: Are you a U.S. citizen? Or, are you an

alien lawfully authorized to work in the United States? Their answers should be noted on your employment records.

The employer must attest under penalty of perjury--on a form provided by the U.S. AttorneyGeneral--that he or she has verified by examining the documents specified in the law, thateach new person hired is authorized to work in this country.

Documents that satisfy the verification requirements include a U.S. passport, certificate of U.S. citizenship, certificate of naturalization and certain foreign pass-ports and resident aliencards. Documents such as a Social Security card or birth certificate also are acceptable if

examined together with approved identification such as a driver's license.

Employers must keep the verification forms on file for three years from the date of hire or for

one year following the employee's separation from service, whichever is later.

For further information on the new law, the INS has produced a "Handbook for Employers,"document number M274. Contact your local INS office to receive a copy.

9. CHOOSE THE RIGHT LOCATION



Just as your product or service and your employees are crucial to your business's success, sois your location. Where you want to set up shop is a decision that should be made early. Andwhen making that decision, you should select your site based on the type of goods or servicesto be sold and your target market, rather than on personal convenience.

If your business is retail, you will want a location that provides a lot of local traffic, both

pedestrian and vehicular. You will also want to consider parking availability, publictransportation, the compatibility of neighboring businesses and the building itself. If you arerenting, try to talk to former tenants and ask why they moved. Talk to other shopkeepers in

the area and learn as much as you can about the area and its customers. Be careful if you seeseveral unoccupied buildings for rent. It could mean the area is undergoing an economicdownturn, or a redevelopment renaissance.

Manufacturing and service businesses have different needs. They must be close to their suppliers and customers, accessible to transportation, in compliance with local zoningregulations and have space for future expansion.

No matter what business you are in, there are certain basic considerations that must be taken

into account. To begin with, the style, construction and overall exterior appearance of your building play a vital role in the development of your company image. And inside, be sureyour layout is open and simple and facilitates the flow of people, supplies and merchandise. Inaddition, don't neglect to check the plumbing, air conditioning and sanitary facilities andwhether the building meets fire and earthquake codes.

Before you sign a lease, you should have your lawyer and insurance agent review it. Both youand they will want to know:

- How the rent is determined;- Is the rent high or low compared to other rents in the area;- Who is responsible for alterations--the tenant or landlord;- Who owns any improvements made by the tenant;- The amount of insurance held by the landlord and the degree of coverage required of thetenant;- Lease renewal provisions;- The tenant's right to sublet;- Options for expansion;- Property use restrictions (zoning).

A final consideration in choosing a location is whether you should rent or buy the facility youare considering. Your decision should be based on these factors:

- Are your requirements going to change rapidly over the next few years? If they are, youshould probably think about renting.- Is capital in short supply? Can you use your available money better if it is not tied up in a

building? What return can you expect from your funds if they are invested elsewhere? If your capital is tight, renting may be preferable.- Can you secure a favorable lease from the building owner with an option to purchase?

- How will renting or purchasing affect your financial picture?- Will the building be easy to resell?- What kind of tax forgiveness and other kinds of assistance are available from the state or the



local community?

Before embarking on a search for the perfect location, you should outline your needs, presentand future, and then find a site that meets those needs. If you need assistance, a business realestate broker can often be helpful in finding the right location. In addition, your local chamber of commerce can answer any questions you may have about the community.

10. DON'T BE AFRAID TO ASK FOR HELP

When considering the assistance of professional consultants, many owners of small business

ask themselves: Is it necessary? Can I afford one? Can I afford not to get the help of outsideexperts?

The problem that faces many owners of new small businesses is how to afford professionalhelp at the point when they will probably need it the most: usually when it is most difficult to

pay for. But professional advice need not be expensive. Businesses can find assistancethrough local attorneys, consultants, accountants, bankers, the U.S. Small Business

Administration, the Service Corps of Retired Executives, chambers of commerce, tradeassociations, and business libraries, to name a few.

Most important, consultants say, is knowing what kind of help you need, and then getting itearly enough.

"It's a shame more small businesses don't tap into the resources of a professional to help themrealize their full potential," notes Howard Cohen, economist and chartered accountant in

Tiburon, CA.Urges Dale Morseman, owner of Industrial Graphic Arts in Concord, CA, "Gather advice

from all available sources, particularly business and trade associations. When you havequestions or problems outside your area of expertise, seek professional help."

The owner of a small business consulting firm recommends the appointment of a board of directors with whom you meet regularly. Your board should be made up of experienced

business professionals who can offer practical advice and help you solve the kinds of problems new owners face.

You needn't only turn to professional consultants for assistance. Newspapers, trade

publications, specialty newsletters and magazines, and business libraries can point you towardthe answers you need. Moreover, your local chamber of commerce and many financial

institutions publish how- to books for a small fee or just for the asking.

The resources don't end there. Free counseling is available through the SBA and SCORE, the

volunteer organization it supports. SCORE is staffed by experts who have had successfulcareers as business owners, chief executives, manufacturing chiefs, bankers, economists,attorneys, engineers, and sales and marketing managers. In addition to one-on-one counseling,they run "Entrepreneur Training" workshops and publish a number of practical guides andhandbooks. SCORE counselors are experts who appreciate what small business means andwho want to share their experiences and knowledge with any small business owner who needshelp.

Do you have what it takes?



Starting a business is risky at best; but your chances of making it will be better if youunderstand the problems you'll encounter and have those problems worked out before youstart. The first question you need to answer is about you: do you have what it takes? Beloware some questions to help you evaluate whether you do.

1. Are you a self-starter?

( ) I do things on my own. Nobody has to tell me to get going.( ) If someone gets me started, I keep going all right.

( ) Easy does it. I don't put myself out until I have to.

2. How do you feel about other people?( ) I like people. I can get along with just about anyone.( ) I have plenty of friends; I don't need anyone else.( ) Most people irritate me.

3. Can you lead others?

( ) I can get most people to go along when I start something.( ) I can give the orders if someone tells me what we should do. ( ) I let someone else get things moving; then I go along if I feel like it.

4. Can you take responsibility?

( ) I like to take charge of things and see them through.( ) I'll take over if I have to, but I'd rather let someone else be responsible.( ) There's always some eager beaver around wanting to show how smart he is. I say let him.

5. How good an organizer are you?

( ) I like to have a plan before I start. I'm usually the one to get things lined up when the groupwants to do something.( ) I do all right unless things get too confused; then I quit.( ) I get all set and then something comes along and presents too many problems. So I justtake things as they come.

6. How good a worker are you?

( ) I can keep going as long as I need to. I don't mind working hard for something I want.( ) I'll work hard for a while, but when I've had enough, that's it.( ) I can't see that hard work gets you anywhere.

7. Can you make decisions?

( ) I can make up my mind in a hurry if I have to. It usually turns out okay, too.( ) I can if I have plenty of time. If I have to make up my mind fast, I think later that I shouldhave decided the other way.( ) I don't like to be the one to decide things.

8. Can people trust what you say?



( ) You bet they can. I don't say things I don't mean.( ) I try to be on the level most of the time, but sometimes I just say what is easiest.( ) Why bother if the other person doesn't know the difference?

9. Can you stick with it?

( ) If I make up my mind to do something, I don't let anything stop me.( ) I usually finish what I start-if it goes well.( ) If it doesn't go right immediately, I quit. Why beat my brains out?

10. How good is your health?

( ) I never run down!( ) I have enough energy for most things I want to do.( ) I run out of energy sooner than most of my friends.

Now total the number of checks you have next to the first, second and third answers. If most

of your checks are beside the first answers, you probably have what it takes to run a business.If not, you're likely to have more trouble than you can handle by yourself. Better find a

partner who is strong on the points on which you are weak. If many of your checks are next tothird answers, even a good partner will not be able to shore you up.

Business Plan Checklist

A well prepared business plan serves several purposes:

- It helps the owner of a new business determine the feasibility and desirability of pursuingthe steps necessary to start a business.- It is an important sales tool for raising capital from outside investors.- It forms the basis of a more detailed operational plan and becomes an importantmanagement tool for monitoring the growth of the firm and charting future directions.

Following is a general approach that you can use as a foundation. However, you should tailor your plan to meet the specific circumstances of your business, emphasizing its strengths andaddressing the potential problems and challenges to be faced.

SummaryThe summary should concisely describe the key elements of the business plan. For the firmseeking financing, the summary should convince the lender or venture capitalist that it isworthwhile to review the plan in detail. The summary should briefly cover at least the

following:

- Name of the business;- Business location and floor plan description;- Discussion of the product, market and competition;- Expertise of the management team;- Summary of financial projections;- Amount of financial assistance requested (if applicable);- Form of and purpose for the financial assistance (if applicable);



- Purpose for undertaking the project (if financial assistance is sought);- Business goals.

The Company

This section provides background information on the company and usually includes:

* A general description of the business, including the product or service;

* Historical development of the business, including:

-Name date and place (state) of formation;-Legal structure (proprietorship, partnership, corporation);-Significant changes, including dates, in ownership, structure, new products or lines,acquisitions;-Subsidiaries and degree of ownership, including minority interests;-Principals and the roles they played in the formation of the company.

The Product or Service

Describe the present or planned product or service lines, including:

* Relative importance of each product or service including sales projections, if possible;* Product evaluation (use, quality, performance);* Comparison to competitors' products or services and competitive advantages over other

producers;* Demand for product or service and factors affecting demand other than price.

The Project

If financing is sought for a specific project, describe the project, the purpose for which it isundertaken, its cost and the amount, form and use of the financial assistance.

Management

* Organizational chart;* Key individuals (include supervisory personnel with special value to the organization);

-Responsibilities;-Personnel resumes (describing skills and experience as they relate to activities of the

business);

-Present salaries (include other compensation such as stock options, bonuses);-Planned staff additions.

* Other employees:

-Number of employees at year end, total payroll expenses for each of previous five years (if applicable) broken down by wages, benefits;-Method of compensation;-Departmental/divisional breakdown of work force.



* Planned staff additions.

Ownership

* Names, addresses, business affiliations of principal holders of subject's common stock andother types of equity securities (include details on holdings);

* Degree to which principal holders are involved in management;* Principal non-management holders;* Names of board of directors, areas of expertise and role of board when business isoperational;* Amount of stock currently authorized and issued.

Marketing Strategy/Market Analysis

* Description of the industry. Include:

-Current description of industry;-Industry outlook;

-Principal markets (commercial/industrial, consumer, government, international);-Industry size--current as well as anticipated in the next 10 years (explain sources of

projection);-Major characteristics of the industry. Effects of major social, economic, technological or regulatory trends on the industry.

* Description of major customers. Include:

-Names, locations, products or services sold to each;-Percentage of annual sales volume for each customer over previous five years (if applicable);-Duration and condition of contracts in place.

* Description of market and its major segments. Include:

-Principal market participants and their performance;-Target market;-Customer requirements and ways for filling those requirements;-Buying habits of customers and impact on customers using your product or service.

* Description of competition: Companies with which your business competes and how your business compares with these companies. This section is a more detailed narrative than themaintained in the description of the product or service, above.

* Description of prospective customers. Include reaction to your firm and any of its productsor services they have seen or tested.

* Description of firm's marketing activities. Include:

-Overall marketing strategy;-Pricing policy;-Method of selling, distributing and servicing the product;-Geographic penetration, field/product support, advertising, public relations and promotion



and priorities among these activities.

* Description of selling activities. Include method for identifying prospective customers andhow and in what order you will contact the relevant decision-makers. Also describe your saleseffort--sales channels and terms, number of salespersons, number of sales contacts,anticipated time, initial order size--and estimated sales and market share.

Technology

* Describe technical status of your product--idea stage, development stage, prototype--and therelevant activities, milestones and other steps necessary to bring the product into production.

* Present patent or copyright position (if applicable). Include how much is patented and howmuch can be patented (how comprehensive and effective the patents or copyrights will be).Include a list of patents, copyrights, licenses or statements of proprietary interest in the

product or product line.

* Describe new technologies that may become practical in the next five years that may affect

the product.

* Describe new products (derived from first generation products) the firm plans to develop tomeet changing needs.

* Describe regulatory or approved requirements and status, and discuss any other technicaland legal considerations that may be relevant to the technological development of the product.

* Describe research and development efforts and future plans for research and development.

Production/Operating Plan

* Explain how the firm will perform production or delivery of service. Describe in terms of:* Physical facilities-owned or leased, size and location, expansion capabilities, types andquantities of equipment needed. Include a facilities plan and description of planned capitalimprovements (if any) and time-table for those improvements.

* Suppliers: name and location, length of lead time required, usual terms of purchase,contracts (amounts, duration and condition) and subcontractors.

* Labor supply (current and planned): number of employees, unionization, stability (seasonalor cyclical) and fringe benefits.

* Technologies/skills required to develop and manufacture the products.

* Cost breakdown for materials, labor and manufacturing overhead for each product, plus costversus volume curves for each product or service.

* Manufacturing process.

* Describe production or operating advantages of the firm; discuss whether they are expectedto continue.



* Specify standard product costs at different volume levels.

* Present a schedule of work for the next one to two years.

Financial

* Auditor: name, address;* Legal counsel: name, address;* Banker: name, location, contact officer;* Controls: cost system used and budgets used;* Describe cash requirements, now and over next five years, and how these funds will beused;* Amount to be raised from debt and amount from equity;* Plans to "go public"--relate this to future value and liquidity of investments;* Financial statements and projections for next five years:* Profit and loss of income statements by month until break even, and then by quarter;* Balance sheets as of the end of each year;

* Cash budgets and cash flow projections;* Capital budgets for equipment and other capital acquisitions;* Manufacturing/shipping plan.

If financing is sought, most lenders and venture capitalists will require:* A funding request indicating the desired financing, capitalization, use of funds and futurefinancing;* Financial statements for the past three years, if applicable;* Current financial statements;* Monthly cash flow financial projection including the proposed financing, for two years;* Projected balance sheets, income statement and statement of changes in financial positionfor two years including, the proposed financing.

How Much Money Do You Need?

To help you estimate the amount of financing you will need to get your business off theground, use the following checklist. For each item, estimate a monthly amount needed.

Monthly Expenses:Salary of owner-manager (if applicable)All other salaries and wagesRentAdvertising

Delivery expenseSuppliesTelephoneUtilitiesInsuranceTaxes, including Social SecurityInterestMaintenanceLegal and other professional fees



Miscellaneous

One-Time Start-Up Costs:

Fixtures and equipmentDecorating and remodeling

Installation of fixtures and equipmentStarting inventoryDeposits with public utilitiesLegal and other professional feesLicenses and permitsAdvertising and promotion for openingAccounts receivableCashOther

TOTAL

Your total will depend on how many months of preparation you want to allow for.

Small Business Financial Status Checklist

What an owner/manager should know:Daily

1. Cash on hand.2. Bank balance (keep business and personal funds separate).3. Daily summary of sales and cash receipts.4. Errors corrected in recording collections on accounts.5. Record of all monies paid out, by cash or check.

Weekly

1. Accounts receivable (take action on slow payers).2. Accounts payable (take advantage of discounts).3. Payroll (records should include name and address of employee, Social Security number,number of exemptions, date ending the pay period, hours worked, rate of pay, total wages,deductions, net pay, check number).4. Taxes and reports to state and federal government (sales, withholding, Social Security).

Monthly

1. That all journal entries are classified according to appropriate account numbers (theseshould be generally accepted and standardized for both income and expense) and posted togeneral ledger.

2. That a profit and loss statement for the month is available within a reasonable time, usually10 to 15 days following the close of the month. This shows the income for the business for the



month, the expense incurred in obtaining the income, and the profit or loss resulting. Fromthis, take action to eliminate future loss (adjust mark-up? reduce overhead expense? pilferage?incorrect tax reporting? failure to take advantage of cash discounts?).

3. That a balance sheet accompanies the profit and loss statement. This shows assets (what the business has), liabilities (what the business owes), and the investment of the owner.

4. The bank statement is reconciles. (That is, the owner's books are in agreement with the bank's record of the cash balance).

5. The petty cash account is in balance. (The actual cash in the petty cash box plus the total of the paid out slips that have not been charged to expense should total the amount set aside as

petty cash.

6. That all federal tax deposits, withheld income and FICA taxes (form 501) and state taxesare made.

7. That accounts receivable are dated, i.e., 30, 60, 90 days, etc., past due. (Work all bad and

slow accounts.)

8. That inventory control is worked to remove dead stock and order new stock. (What movesslowly? Reduce. What moves quickly? Increase.)

Common Communication Traps

Open communication is critical if you are going to manage well. Following is a partial list of communication roadblocks, examples of how they are used and the problem-solving detoursthat can result.

1. Ordering: "You must . . ." "You have to . . ."--Make an employee feel resentful of themanager's power. Put down or frustrated, the employee responds with anger, refusal or dissent.

2. Warning: "You'd better . . ." "If you don't, then . . ."--Place a threat on the future and makethe employee feel humiliated or embarrassed.

3. Moralizing: "You should . . ." "It's your responsibility . . ."--Attempt to make employee feelguilty and communicate lack of trust in his or her judgment.

4. Advising: "What I would do is . . ." "It would be best for you if . . ."--Imply superiority andcan make a person feel inadequate and encourage dependency. If the manager's suggestion

turns out to be wrong, the employee can duck responsibility.

5. Persuading with logic: "Here's why you are wrong . . ." "The facts are . . ." -- Label another person as "wrong" and foster defensiveness as well as feelings of inadequacy.

6. Judging: "You are acting foolishly . . ." "You aren't thinking straight . . ."--Make anemployee feel incompetent and stupid and if used often enough may become incorporated intothe employee's self-image. A defensive reaction in the future may be to decide not to tell amanager about a problem.



Serve Your Customers Well

Quality doesn't only apply to merchandise. It also means good service and caring about your customers wants and needs. Here are five specific steps for taking better care of your customers.

1. Conduct your own survey. Profit from the ideas, suggestions and complaints of your present and former customers. Solicit their ideas for new products and better service.

2. Meet your customers in person. if your business has grown to the point where you spendmost of your time in the office or traveling, take the time to talk to the customers who buy and

browse. Observe and ask questions. Think like a customer.

3. Check telephone handling. Bad handling can undermine efforts to build a profitableenterprise. Rules of good handling, such as prompt answering and a cheerful attitude of helpfulness, are of critical importance. Check on telephone manners periodically by havingsomeone whose voice is unfamiliar play the role of a customer, perhaps a difficult one.

4. Make it a team. Continually drive home the crucial message that everyone is part of thesuccess machine. Build customer consciousness throughout your organization. When youhold group meetings, invite ideas from everyone and discuss those ideas.

5. Take advantage of after-hours influence. This is the time when you build, in an informalway, the friendly feeling that draws people to you and your business. Turn friends intocustomers and reinforce customer loyalty. Take advantage of the relaxed atmosphere of a golf game or cocktail party or just a neighborly chat.

Follow Fair Employment Practices

Current state and federal human rights legislation concerning discrimination in hiring places burden of proof on the employer. In other words, if questions asked in a pre-employmentinterview are perceived as discriminatory, it is up to the employer to prove they are not.Following are some examples of questions that are acceptable and some that may lead tocharges of discrimination.

Acceptable to Ask

Why are you interested in this job?Describe your education.What experience have you had that qualifies you for this job?

Do you have other abilities that will help you perform the job?Do you have all the necessary licenses and certification?Are you willing to travel? (Depending on your job relatedness)What, if any, are your concerns about the job?What are your salary expectations?May we inquire of your present employer?

You may also discuss job duties and responsibilities, the organization, its programs andachievements, career and growth potential, opportunities for advancement and facilities



available.

Unacceptable Questions

How old are you or what is your date of birth?Have you ever been arrested or convicted of a crime?

How many children do you have? What are their ages? Have you made child carearrangements? What is your national origin?What is your credit record?What is your maiden name?What is your marital status?What is your spouse's name or work?Do you have any handicaps?

Evaluating Prospective Sites

When choosing a location, a method for evaluating each potential site is crucial. By usingsome form of scoresheet, you will be able to carefully consider a site's strengths and

weaknesses and eliminate the factors that may be equal in all sites. In addition, as you makeyour tally, be aware that some factors may be more important because of your line of

business. Be sure you assign the proper weight to those factors.

Below is a basic checklist to help you rate each site. First, read through the criteria and weighthem on a scale of 1 to 5 according to their importance to the success of your business (1 islow, 5 is high). For each site you are evaluating, make a copy of this list with the weightsfilled in. Go through each criterion again and grade it on a scale of 1 to 10 based on how wellthe site you are rating meets the need. Multiply the grade times the weight for your site's

points on each factor. Add up the points to get a total score for the site. Repeat this process for each site and compare the total scores. The highest one will be the site that best meets your most important requirements. Happy hunting!

Factors

1. Centrally located to my market2. Raw materials readily available3. Quantity of available labor 4. Transportation availability5. Vehicular and pedestrian traffic (important in retail and small service operations)6. Parking availability7. Labor rates of pay/estimated productivity8. Adequacy of utilities (sewer, water, power, gas)

9. Local business climate10. Provision for future expansion11. Tax burden12. Topography of site (slop, foundation)13. Quality of police and fire protection14. Housing availability for employees15. Environmental factors (community atmosphere)16. Estimate of quality of this site in future



17. Estimate of this site in relation to that of my major competitor