HOW TO CHOOSE A BUSINESS (AND SUCCEED!) Power HomeBiz Guides e-Book Series

Transcription

HOW TO CHOOSE A BUSINESS
(AND SUCCEED!)
Power HomeBiz Guides
e-Book Series
Edited by:
Isabel M. Isidro
Power HomeBiz Guides (http://www.powerhomebiz.com)
1
Table of Contents
Knowing What It Takes
Choosing Self-employment?
1
The Entrepreneurial Personality
4
Worksheet 1: The Entrepreneurial Personality
5
Evaluating Your Skills & Experiences
6
Critical Aspects of a Business
10
Starting a Business with Zero Knowledge
14
Adopting the Right Attitude
16
Multiple Roles of an Entrepreneur
19
Choosing Your Business
Selecting the Right Business
Worksheet 2: Choosing Your Business
23
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Making the Decision in Selecting a Business
27
Methods in Choosing a Business
29
Considering Personality & Tastes
32
Considering the Emerging Social Trends
33
Common Mistakes to Avoid
35
Case Study: Michael Reagan, SBA Entrepreneur of the Year
37
Checking Your Idea
Does it satisfy or create a market need?
40
Is your idea something the market wants?
41
What niche will your business fill?
42
What services or products will you sell?
45
Who are your competitors?
46
Can you deliver a better quality service?
48
Table of Contents
Can you create a demand for your business?
49
Will the product maintain market appeal?
50
How unique is your product?
50
How useful is your product?
50
Have you priced your product competitively?
51
What is the level of difficulty in the creation of product?
51
What are the growth possibilities?
51
Can I get backend sales?
51
Is the product safe?
52
Can your product be promoted with strong advertising?
52
Will you be left with an inventory?
52
Conclusion
How to Learn from Experience
54
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HOW TO CHOOSE YOUR BUSINESS (AND SUCCEED!)
Starting and managing a business takes motivation, desire and talent. It also takes a lot of
research and planning. Some even hire experts to flesh out their business concepts. Try as you
might, it may not be possible to know everything at the very beginning.
Research and planning will help you minimize the unknowns and help you become better
prepared. Always remember that lack of planning is one of the leading causes of business
failures. When you start a business, your goal is to see it succeed. You can only succeed if you
are able to control all the variables and if not, at least turn them into your favor.
We have prepared a checklist to help you see what awaits you as an entrepreneur. Your answers
to these questions will help you conceptualize, formulate and understand your planned business
– and whether this business fits your personality and that you really want to do and have the
capability to do. We will take you through every single step that you need to do.
Choosing Self-Employment
Every day, we hear more and more about people starting their own businesses, and opting to
take more control of their lives and income. However, a greater number of people who dream
of owning their own business don't believe it will ever happen to them. Majority of these folks
see the benefits of working for themselves, but alas, lacks the drive and determination to hurdle
the transition from employee to employer.
The world of self-employment is one of the most challenging, demanding and even harrowing
things that you can do. But for the right individual, it can also be personally and financially
rewarding. Self-employment is the ticket to higher earnings without limit and the right to
control and work your own schedule.
But it's not easy work. A lot of self-employed people are working longer hours and weeks than
ever. The difference is that they are doing work they truly enjoy, and are getting paid for it!
People who go into self-employment set varying goals for themselves as a result of different
expectations and desires. Some people take the entrepreneurial path to achieve their economic,
personal and retirement goals.
Power HomeBiz Guides http://www.powerhomebiz.com
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Your goal for starting your own business will factor significantly in just about every decision
that you will make along the way. Every decision will be measured against one thing: Will this
course of action help me reach my goal? The kind of business that you start, its structure and
legal form, marketing strategy for your products and services, aggressiveness in securing
financing, and just about every step will be dependent on your overarching goals.
Your Economic Goals
Many people go into self-employment for one thing: to increase their income and earn more
money. They regard entrepreneurship as the only path for them to earn the kind of salaries and
income they can only dream of as a corporate player. One economist traded her $35,000 per
annum job working for a public policy organization in Washington D.C. to become a freelance
technical writer earning $75,000 annually. "If I hadn't taken the chance to become a freelancer,
I would have needed a PhD degree just to earn the kind of income that I am enjoying now," said
Jennifer van Helmond.
Basically, people take the self-employment route in order to:
Increase income. Like Jennifer, a number of people feel that working in an organization
as an employee limits their earning potential. While they may be enjoying a regular and
steady paycheck, they feel that they can do more and earn more if they devote the same
eight hours that they work for their bosses to their own businesses. There may be more
risk, but they know that the payout is worth all the pain.
Replace earnings. Some people jump into self-employment when they lose their jobs or
are downsized, and they need to replace their lost income. Barbara Cash, the 2000
winner of the Small Business Person of the Year Award for Alaska, started her own
interior-decorating firm when she found herself jobless after the company that she was
working with moved out of Alaska.
Augment family income. Other people decide to start their own business to supplement
family income as a result of changed circumstances in their households. A housewife,
for example, may opt to start a home-based business after the birth of a baby to help her
husband provide for their growing family.
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Your Retirement Goals
Corollary to your economic goals, some people start entrepreneurial ventures specifically to
provide a comfortable nest egg for their retirement. They believe that they can do a better job of
ensuring their future and making sure that they have money for retirement if they are in charge
of their own income.
Retirees nowadays are also prolonging their career by opting to start their own businesses.
More people in their 50s, or even in their 70s, are trading sedentary lifestyle of the retirees to
the active entrepreneurial world. Barbara Miller of Texas started her paper distribution
business, Miller Paper Company, at 62 years old - proving to all that it is never too late to start
a business!
Your Personal Goals
For some people, money is not the sole attraction of self-employment. These people are driven
by their own personal agenda that only the process of starting a business can provide. While
grateful for any income that a business can provide, there are people who put more value in
being able to do things by themselves and for themselves. They need to have the freedom to
make their own decisions, and being a subordinate to a bureaucracy simply isn't the deal for
them. These people are the type who makes poor employees, as their heart is not set out in
elbowing their way up the corporate ladder. They simply want to be at the top of the ladder!
There are also some people who feel that their employers do not properly value their ideas, and
starting a business is their chance to do things "the right way." Barry Edwards of Louisiana
started his firm Creative Presentations when his boss did not agree to his suggestion to add a
line of visual presentation equipment to their computer dealership business. After ten years
selling presentation equipment, Barry's own company now earns $11 million.
Others, on the other hand, opt to start their own businesses to find the kind of work that they
really want. Some of these people have been trapped for years in fields that they are not really
interested in. Lisa Hudson, a former teacher in Maryland, left her teaching post to become a
full-time caterer. Certainly a 360-degrees change from teaching Shakespeare and Elizabethan
drama, but for Lisa, "the move was extremely liberating as I love to cook more than anything
else."
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Flexibility is also a primary factor for some people in choosing to work for themselves. They
want the kind of work that will allow them to pursue their interests and time schedules. A home
business, for example, is perfect for a mother as it allows her to work while overseeing her
household and taking care of her children. There are also some people who find the 9-to-5
schedules too rigid and wants more freedom to decide when to work.
The Entrepreneurial Personality
Not everyone is cut out to be an entrepreneur.
A person who decides to start his or her own business face a long, winding road that is
tumultuous on occasion and blocked by obstacles. While some people may have the motivation
and desire for business ownership, they may not have taken the time to properly investigate and
research their abilities and their business ideas. As a result, while thousands of new businesses
are started each year, many more either fail or discontinue, and others transfer ownership or
control. If the business fails – and it could – it may not only wreak havoc with your personal
savings and other assets, but it could give your ego a tremendous blow.
Before committing yourself to the extraordinary investment of time, energy and money that
starting a business requires, you need to engage in some personal soul-searching. You need to
review your pluses and minuses, your strengths and weaknesses to determine if you are a
suitable match for the challenge. Remember, the entrepreneur IS the business – its originator,
its motivating force, and its energy. Without the needed ingredients, the business can fail as
quickly as it started.
There is no “ideal” entrepreneurial personality – successful entrepreneurs can be analytical or
intuitive, risk-averse or thrill seeking, or gregarious and taciturn. However, experts have
documented research that indicates that successful small business entrepreneurs, whether male
or female, have some common characteristics.
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WORKSHEET 1: The Entrepreneurial Personality
Below is a checklist to help you determine if you have what it takes to make a success of your
own business. On this checklist, write a "Y" if you believe the statement describes you; an "N"
if it does not; and a "U" if you cannot decide. Do this exercise before you quit your job, invest
your money, or spend your time in starting the new business:
_________
I have a strong desire to be independent and be my own boss, not taking
orders from others and relying on my own talents. I can move on my own
without waiting for someone to push me.
_________
Win, lose or draw, I want to be master of my own financial destiny. I want
the chance to work at something I enjoy, because of a desire for security in
the form of steady income.
_________
I have significant specialized business ability based on both my education and
my experience. I also love the challenge of pitting my resources and skills
against the environment.
_________
I am willing to take reasonable risks and handle the pressure that results from
a degree of insecurity
_________
I have an ability to conceptualize the whole of a business; not just its
individual parts, but how they relate to each other. I am an individual who
always comes up with new ideas.
_________
I develop an inherent sense of what is "right" for a business and have the
courage to pursue it. I believe in giving priority to getting the job done
_________
One or both of my parents were entrepreneurs; calculated risk-taking runs in
the family
_________
My life is characterized by a willingness and capacity to persevere. I welcome
the responsibility that goes to owning a business.
_________
I recognize that much of my success will depend on how well I deal with
people
_________
I possess a high level of energy, sustainable over long hours to make the
business successful.
_________
A powerful drive to accumulate wealth, and the opportunity to earn far more
than I ever could while working for others.
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Not every successful business owner starts with a "Y" answer to all of these questions, because
there is no such thing as the “perfect” entrepreneur! Many proprietors who sense
entrepreneurial deficiencies seek support from a skilled team of business advisors such as
accountants, bankers and attorneys. Others seek advice and assistance from business coaches
and mentors. Still some others go out and enroll in classes or lectures to improve the skills,
knowledge and aptitude they would need to successfully run their businesses.
The important thing is that you have a realistic understanding of your strengths and
weaknesses. However, four or five "N"'s and "U"'s should be sufficient reason for you to stop
and rethink your decision to pursue an entrepreneurial journey.
If you are lucky enough to possess a higher-than-average level of self-confidence; if you can
think positively about (and are not turned off by) the prospect of hard work, long hours, and
onerous responsibility; if each new problem challenges you to tackle it with everything at your
command, then owning your own business may be your proper road to success.
Evaluating Your Skills & Experiences
If you are undecided as to the kind of business to start, the first step is to list potential areas of
personal background, special training, educational and job experience, and special interests that
could be developed into a business. The personal capabilities that you will bring into the
business are very important in shaping the direction of how you will operate.
As you begin planning how to start your own business, you need to begin listing down what
you want to do and what you can do. You tell yourself that you love to do a little bit of
everything - you can do research, Web design, write, with a 10 years experience in legal and
administrative support. But then, you ask yourself, “What skills do I really need to have to
succeed as an entrepreneur operating the business that I want?”
If you want to start an accounting business, the accounting and auditing skills that you have
accumulated through your education and past work experiences are essential in the success of
your business. Clients need to know that you are capable with what you say you can do. A
powerhouse resume that proves to them that you have the skills to perform the service that you
provide will go a long way in attracting clients.
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Given that entrepreneurship demands multiple skills, you can then find ways to improve and
develop those skills that you don’t have. If you lack the skills to market your business, you can
decide either to seek training or go back to school. Or you can hire a person who possesses the
skills and knowledge that you do not have in order to complement your operations.
You will need a broad array of entrepreneurial skills to succeed in today's competitive market,
particularly if you have limited resources and no staff support. You must possess basic skills
necessary to enable you to start, develop, finance, and market your own home business
enterprises. There are a number of qualities and skills you need to have, including personal
attributes, business skills and management capability. While you may not have all of them right
now, there are five basic skills you really must have to run any kind of business.
These must-have five skills are:
Sales and marketing skills. Sales and marketing are the two most important skills you
must have when you plan to start your own business. A business is nothing if it has no
customers. You may have a high-tech computer with the latest graphics software, but if
no one is knocking at your door to hire you as a graphic designer, then you better
rethink why you are in business in the first place. Maybe you are better off employed
by a firm. To have revenues and profits, you first need to have customers. To get
customers, you must be able to market your business and possess the skills to close the
sale.
As you plan your business, you must begin to think how to reach your target audience
and the people who may need your products or service. This entails understanding the
concept of marketing, and using the tools that your budget permits. You must have a
knack for understanding what people wants, listening to their needs, and interact well
with other people.
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It would be extremely helpful if you possess excellent written and oral communication
skills to help you sell your products and services (more so if you are a solo
entrepreneur who will be doing everything by yourself). You need to create buzz about
your business by talking to people and making presentations to them about your
business. You need to write ads, press releases and story ideas about your business.
Starting a business is a time to get out of your timid self and begin to aggressively
market your venture. That’s the only way you can succeed.
Financial know-how. You are in business to make money. Therefore, the most
important skills you must have are the abilities to find opportunities to make money
and handle money well. These include knowing how to stretch the limited start-up
capital that you have, spending only when needed and making do with the equipment
and supplies that you currently have. You also need to identify the best pricing
structure for your business in order to get the best kind of return for your products or
services.
Success in business is not limited to those who have tons of capital in the beginning.
Look at the failed dot-coms with funding of as much as $100 million. Even if they are
awash with cash, they still ended up as a failure because they were not able to manage
their money well. They lavished themselves with high-tech office furniture and gave
their CEOs fancy jets to fly, only to have their cash flow depleted in less than a year.
If you are able to manage your cash flow well when the business starts to run, you will
be able to survive the ups and downs of self-employment. The important thing is to
always focus on the bottomline. For every spending, always ask yourself: “How much
will this contribute to my bottom line?” If it will not give your business anything in
return financially, better think twice before opening your wallet.
Self-motivation skills. As an entrepreneur, you do not have the luxury of bosses and
bureaucracy to tell you what needs to be done. Everything rests on your shoulder - from
thinking where to get the money to fund the business, to developing the product, to
determining how to reach the customer, and so on. Only you will create the plans, and
change them should the situation shifts. You need to be smart enough to know when
you need to go ahead, and when to stop.
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To succeed in business, you must be a self-starter with a clear desired goal in mind.
You must have the confidence in yourself, and in your ideas (how can you sell your
ideas to others if you yourself do not believe in them?). More importantly, you must be
willing to focus your energy and work hard towards each and every step that will make
your enterprise a success. Especially if you work at home, it is doubly hard to get into
the work mindset: sometimes, the television is just too tempting that it is hard to get out
of your pajamas and begin typing in your computer. You therefore must have that extra
drive and commitment to make sure that you are taking the necessary steps to make
your dream of a successful business a reality.
Time management skills. The ability to plan your day and manage time is particularly
important for a home business. When you wake up in the morning, you must have a
clear idea of the things you must do for the day. Especially if you are running a oneperson operation, you must have the ability to multi-task - be the secretary at the start
of the day typing all correspondences and emails, become the marketing man writing
press releases before noon, make sales call in the afternoon, and become a bookkeeper
before your closing hours. Imagine if you are selling products and you still have to
create the products, deliver and fulfill the orders, rush to the bank to cash the checks.
Lots of job for a simple home-based business! No, you don’t have to be a superman (or
superwoman). You simply have to know how to manage time and prioritize your tasks.
One difficulty of working from home is that you can never seem to stop. There are
simply too many things to do, as if work never stops (and it doesn’t!). Part of having
good time management skills is knowing when to stop and when to leave work, and
begin doing your other roles in your family - as the husband, wife, mother or father.
You must be able to know how to keep your home life separate from your work life,
and ensure that there exists a balance between the two.
Administration skills. If you can afford to hire an assistant who will organize your
office space and file your papers and mails, lucky you! However, most start-up
entrepreneurs cannot afford such luxuries. Over and above the tasks of managing,
marketing and planning your business, you also need to possess a great deal of
administration skills. You need to file your receipts so tax time will not be a trip to
Hades. You need to do all the work in terms of billing, printing invoices, collecting
payments, and managing your receivables.
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Starting a business is never easy, even if you have the perfect background and possess all the
above skills. Having all the needed skills and qualities will not even ensure your success. But
having these basic skills will, at least, lessen the pain of the start-up process, giving you greater
chance in seeing your business grow and prosper.
Critical Aspects of a Business
Successfully starting a home business requires two things: leap of faith and reasoned analysis.
You must have the guts to launch a new business, but you must know what you are getting into.
Many entrepreneurs make the mistake of just jumping in their excitement without putting a
strong foundation in place. If you get started without thinking through what you are going to
do-- how you are going to do it, how you will finance it, how you will make money doing it -your chances for success are quite slim.
There are a million and one details that you need to look into, and all that you need to know can
easily overwhelm you. A key point to remember is that you do not have to be an expert in all
these areas - just reasonably knowledgeable. Otherwise, being seriously deficient in one area
could ruin your chances.
What are the things that you should know if you want to start a business? Below are the various
aspects of a business that you need to know.
Technical aspects of the business. Know everything there is to know about the business
that you are entering. The more you know about how things are done in the business,
the better you can serve your clients and manage your business. Plus, the knowledge
will protect you from scam artists out to fleece newbies like you.
For example, the technical aspects of a bed and breakfast business include such things
as room management, food preparation, and serving. It would also include knowing
about bed settings and guest management as well as potential suppliers for supplies,
food and equipment.
A web business, on the other hand, includes the selection of the right domain name,
creation and design of web sites, hosting considerations, and setting up of all the
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software needed (e.g. shopping cart, discussion forum, etc.). You also need to know the
fine points of a site’s usability and understand the measurement of various web metrics.
It also involves knowing the process of optimizing the site for search engines, and
knowing the basics of banner advertising.
As a start-up entrepreneur, you may find yourself asking, “What are the things that I
should know in my business?” Your first resource should be a profile book. There are a
number of book publishers (e.g. Globe Pequot Press) and authors that write profiles of
particular type of business - from How to Start a Home-Based Travel Business, How to
Start a Day Care Business from Home, or How to Start a Home-Based Carpentry
Business, and more. These books will give you all the information that you need on
starting a particular business. Borrow these books from your library or buy them from
your nearest bookstore or online store.
There are also books that profile multiple types of ventures. Paul and Sara Edward’s
The Best Home Businesses for the 21st Century provides step-by-step guidelines for
more than 100 business ventures. From these types of books, you'll glean essential
information on start-up costs and requirements, self-evaluation, financial projections
and management, marketing and contact listings to people in the trade.
Financial management and Record Keeping. Whether you are comfortable with
numbers or not, you must have the basic understanding of the financial aspects of
running a business. Having a strong grasp of the financial requirements of your
business can bring you a long way. These includes record keeping, cash flow
management, account receivables management, debt collection, and tax management.
You must be familiar with the concepts of budgets, accounting and profit margins. You
need to know the flow of money in your business, ways to improve your bottom line,
tips to lessen your taxes, and stretch out your resources during a dry spell. You also
need to have a good idea of how much money you actually need before you start
looking for money.
If you need help in setting up your books, you can avail of the free programs and
resources offered by Uncle Sam. Request a copy of its latest offering, Small Business
Resource Guide-CD 2000 (publication 3207), by calling (800) 829-3676.
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Legal and Regulatory requirements of your business. When you are decided on starting
a business, your first stop should be the business information center of your city or
county. A first-stop office can provide you with information packages about licensing,
permits, zoning requirements, your particular business type and running a business in
your state in general. The packages are usually free, and information very invaluable in
terms of starting your business in the right foot. You do not want to start a home
business, only to find out after you have bought so much equipment and supplies that
your business is not allowed in your residential area.
You also need to determine the legal structure of your business, and how to set that up.
Your business information center can provide you with the information on how to go
about the steps in business registration and setting up of your business. If you will be
working solo in your business, you can register your business as a sole proprietorship.
Once you have your business registration, you can then set-up your business bank
account. Setting up of partnerships, LLC or corporation may require that you seek the
help of a lawyer.
If you are starting a business that uses an innovative technology or process - and the
success of your venture depends on you keeping that knowledge - your first stop should
be to a lawyer who can help protect your business idea. Imagine seeing your idea
brought to life by a competitor, who now prohibits you from profiting on your very
creation simply because your competitor was able to secure the patent for your product!
Such horror stories abound, and you need to know how to protect your business
interests. The drawside, of course, is that getting a lawyer costs money.
Operational requirements of running your business. When your business is off the
ground and ready to open, you are in an “operational mode.” You need to know and
identify elements that can affect the smooth running of your business. Part of this
process includes knowing and getting the right insurance for your business.
You also need to look for the professionals who could provide you with support and
advice (accountant, lawyer, etc.). If you cannot afford to pay for professional services,
you can pick the brain of business veterans through free e-mail counseling offered by
the Service Corps of Retired Executives (http://www.score.org) and through the SBA
Answer Desk (http://www.sba.gov).
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Take advantage of industry freebies. Before you dip into your piggybank, make sure
you're not about to pay for something you can get free. Take advantage of free
computer access to databases and software at your local Business Information Center
(http://www.sba.gov/BI/bics/index.html).
You also need to have your marketing and image arsenal, which includes business
cards and stationery. There are a number of manufacturers that provide sample
packages of office products, software working demos and stationery or paper samples
direct from manufacturers. Avery Dennison (800-252-8379), offers labels you can
sample for free. Simply Accounting offers their full-featured accounting software for
free (http://www.accpac.com/products/finance/simply/free).
Marketing the Business. You need to ensure that money continues to flow in your
business by getting a steady stream of customers. Before anything else, research to
make sure that a market for your business exists. If there are already 20 pet sitters in a
community of 100 people, do you think your pet sitting business can still stand a
chance in this overcrowded market?
Make sure you understand who your typical customers are, and how best to reach them.
Does your market respond well to classified ads; or should you embark on a high
profile direct marketing campaign? Can you simply show them your product and
expect them to immediately buy them; or do they need know and trust you before
giving their accounts to you? Are they impulse buyers; or are they the types who
carefully evaluate the product or service before purchasing?
Once you’ve clearly identified them, take steps to ensure that your potential customers will
know about your business. Map out a simple plan spelling out in writing the steps you need to
take to get more clients or customers for your products or services.
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Starting a Business with Zero Knowledge
Every business guru will tell you: start with what you know. You will have a greater chance of
success if you know what you are getting into. But what if you want to try out something new
that is drastically different from your present career or your realm of experience? Should
having no knowledge of the business stop you from pursuing it?
The answer is a resounding 'No!" You can start cold turkey - and succeed.
When trying to make a decision about starting your own business, you will find yourself asking
either of these questions:
"How much experience do I need to start this business?"
"Do I have enough experience to start this business?"
There is no textbook answer to these questions. You can either go ahead and wish for the best,
or go slowly studying every single step.
You can jump from being a Wall Street analyst to become a full-time personal chef if you want
to. There are 15-year-old kids who, without even completing high school, stumbled on a bright
idea and become entrepreneurial successes.
Sean Lundren and Todd Livdahl were both computer programmers at Disney, with no
entrepreneurial background whatsoever, when they decided to venture into selling DVDs,
videos and games online. A year after starting Sneetch.com, they posted sales of $1.2 million.
Not bad for two guys with zero knowledge in e-tailing.
A growing number of stay-at-home moms like Kim Michaux of OneofAKindKid.com have
gone out of their comfort zones to explore the world of business that they have never tried
before. As Kim said, "Nothing has prepared me to enter retailing. I absolutely had no
knowledge in handling inventory and such. But here I am." It is all a matter of your willingness
to take risks and to learn.
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Tamara Carlisle had no knowledge at all of the video distribution industry when she started
BigKidsVideo.com to distribute independently produced children's videos. Yet she persevered,
and now loves every minute of it.
One of the important personal traits of an entrepreneur is the willingness to explore new
horizons and accept risks. You need to have self-motivation, or the characteristic that gets you
going and keep you moving when you are in business for yourself. It is the trait that will push
you to continue despite drawbacks, such as minimal capital, lack of education or limited
experience.
Don't get me wrong: knowledge and experience are important. In fact, studies show that lack of
business experience is one of the primary reasons for the failure of a business. The Small
Business Administration estimates that only 66.0 percent of businesses remained open at last 2
years, 49.6 percent at least 4 years, and 39.5 percent at least 6 years.
If you are the type of person who prefers to analyze your options, weigh all factors, and make
decisions slowly, then that is what you must do. Mike Reagan, Arizona-based franchisee of
sign maker FastSigns, Inc. took about six months doing a systematic analysis of the right
business for him.
If you feel that you lack the necessary business experience, you can take several avenues to
help you gain the skills and knowledge you will need for your venture. You can enroll in small
business classes through your local community college's continuing education program, or even
return to school to get a degree.
You can also opt to get an on-the-job training to give you some hands-on experience in the field
you are interested in. The advantages of working for someone else in your industry for someone
else are numerous. You "earn while you learn," and you'll become known in the industry,
making it easier when you're on your own.
You should see the greatest obstacles, such as learning a new aspect of business management,
as an exciting challenge that must be met head-on. Like some of the successful entrepreneurs
who started their ventures without fully understanding the mechanics involved in performing
the task, you must steel yourself to go on and learn whatever is needed to accomplish their
goals.
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Through your own initiative, you can learn about business basics, the product or service that
you will sell, the industry you are entering, your competition and market. You can do your
homework. Most of all, you need to have a lot of common sense.
If you have the tenacity to learn new skills, the willingness to take risks, the confidence to
venture into the unknown, and the perseverance to continue - you may be able to conquer your
lack of knowledge and experience and succeed in your own business. Your decision will be
partly made on faith and the determination to have your own business and a 30-second
commute.
As Eleanor Roosevelt said, "You have to accept whatever comes, and the important thing is that
you meet it with courage and with the best you have to give."
Adopting the Right Attitude
Many small business owners make the grievous mistake of setting up roadblocks between them
and their customers. While they may offer great products, they unknowingly sabotage their
businesses with poor customer service and failure to make it easy for people to deal with them.
And some just have plain bad attitude. No wonder their businesses go nowhere.
Habits and attitudes can make you or break you. Many a hapless business has been broken by
the habits and attitudes of its owners.
As you think about starting your own business, avoid the mistake of adopting the following
attitudes that are sure to drive customers away and hamper the growth of your business:
"This is my business; I'll do what I want to do with it." This is the anti-customer
thinking that should be purged from the minds of every entrepreneur. You put your
needs first instead of finding out what your customers want. You operate your business
in a way that is convenient for you. Sure, you are the lord and master of your own
business. After all, this business started with your blood, sweat and tears.
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However, your business is not about your ego. Customers do not patronize your
business to pay homage to you and what you have produced and accomplished. Rather,
they buy your products or service because you provide for their needs.
"I can't say 'no.'" The ability to say "no" is crucial to your success as an entrepreneur.
However, many entrepreneurs find that saying "no" to somebody, whether a client,
supplier, or business associate, can be very difficult. However, saying "no" is often
needed to help protect the interests of your business.
When sales people approach you, no matter how nice or convincing they are, hold
steadfast and buy only what you need. If a client asks you to extend them credit and
your policy is cash upfront, stick to your guns unless there is a strong justification for
changing your policies for this client.
Customers will demand the lowest possible price, even baiting you by saying that your
competitors are offering lower prices. If you follow your customer's request without
determining the impact to your bottom line and overall financial health of your
business, you might find yourself in the throes of bankruptcy. Other customers will
demand a million and one concessions: from free samples, free delivery, free
installation, free service, and any other free stuff that they could get from you.
Remember, though: customer service is not the same as giving away the store. Learn to
say "no" if the request is not in the best interests of your business.
"My way or the highway." In business, inflexibility can be fatal. Some entrepreneurs
want to do their business through one way alone: their way. They do not listen to their
customers' needs and wants. They ignore customers' repeated suggestions - whether
they want to see new ways to improve the product's packaging or additional service that
can be provided. These entrepreneurs see these suggestions as nuisance at best, even
interference. What they fail to realize is that these suggestions can be a golden
opportunity for their businesses. A business can thrive if it gives customers what they
want. Fail this basic business principle and their business will close faster than they can
say to their customers "Wait!"
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"I want to take it reeeeaaaaal slow." The slow-but-sure strategy for small businesses is
good, but not if you are missing out on almost every opportunity that comes your way.
You resist growth, and you hide in your little corner of the world. You may be afraid of
taking risks, or simply do not know what to do. You have self-created doubt and an,
"oh, it'll never work," or "oh, it won't happen to me," attitude.
Or you want to know everything first before you act. Well here's reality for you: you
will never know everything you wished you knew before undertaking anything. You
will not know how your new business will go if you don't launch it. You will not know
if you can get that financing if you don't apply for it. You will not know how putting up
a web site can contribute to your bottom line if you don't create it. You just can't know
these things, so don't make knowing all the answers a criteria for taking action.
How do you know if you are dragging your feet to the detriment of your business? You
may have a great offering, yet you remain passive about marketing your business and
wait for customers to drop like manna from heaven. You reject any publicity efforts;
even if media people contact you to share your story with their audience because you
think you are not yet ready for the "big time." In the end, you'll lose out because more
aggressive entrepreneurs can beat you to the punches.
"Playing not to lose." This is the antithesis of "playing to win" attitude. Instead of
moving boldly forward, you adopt a defensive stance about your business. You adopt a
reactionary mindset when times begin to get tough. You stop taking risks and cut back
on costs including (erroneously) sales, marketing, and advertising. You even make the
classic error of cutting prices, at the time when you need most to maintain your profits
given the difficulty of achieving a greater volume of gross sales.
To see your business grow and prosper, you need to adopt a "go for it" attitude at all
times. Whether you are operating in a good or bad economy, you should always be
prepared to adopt any changes in your business, restructure it if needed to gain greater
productivity, develop new products and services, find ways to serve their customers
better, and sell more aggressively. Your attitude will spell the difference between your
success and failure.
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Multiple Roles of an Entrepreneur
What does being a small business owner really mean? If you think it is merely putting an
“Open for Business” sign on your doorstep, think again.
As a small business owner, particularly if you are a home business entrepreneur, you should be
prepared to take on multiple responsibilities and tasks at the same time. You have to wear more
than two hats at any one time – the business owner, accountant, bill collector, and others. Here's
a look at some of the roles that you have to play when you are running your own business:
Strategic Planner – you need to set the vision, mission and goals of your company to
determine where your business will be both in the short-term and long-term. This
entails the preparation of the business plan – crafting the operation plan, marketing and
sales plan, financial plan, and contingencies. You will also be responsible for planning
and executing any changes, whether you will expand the business or change its product
line.
Market Researcher – unless you have money to burn, you need to do some form of
research to determine your market prior to starting your business. You need to know
who your customers are, where they are located, and their purchasing habits. You also
need to know the level of saturation of the market, and your competitors' strengths and
characteristics.
Bookkeeper and Accountant – you need to be responsible for what records to keep and
how to keep them, even if you are hiring an accountant to help you out. If you do not
have an accountant, you will need to handle your tax and financial statements
preparation. In such case, you need to have some knowledge of accounting and
interpreting your financial statements.
Bill Collector – you need to set up payment mechanisms that will be easy for your
customers to pay and easy for you to collect. However, in the event that customers are
unable to pay, you will have to take on the task of collecting overdue payments. You
need to know what you can and can't do in terms of collecting the payment, and when
to give up and write off the debt.
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Technology Expert – with the critical role played by computers and technology in
business nowadays, the task of choosing the equipment to use will lay on your
shoulders. You also need to know how to install software programs, troubleshoot
breakdowns and failures, and load upgrades. You also should be aware of new
technology that could improve the efficiency and performance of your business.
Clerk and Secretary – you also need to be your own typist, clerk, receptionist, and
secretary, particularly if you are a solo business operator. You need to manage and
organize your files, do your mailing, answer your telephones, and make your
appointments.
Sales and Marketing Executive – you will be responsible for planning and executing
your marketing and advertising plan. To some extent, you also need to be craft your
own marketing materials – from your press/media kits, advertising copy, to classified
ads, press and news releases, even article contributions to publicize your business. You
will spend a considerable amount of time in a day marketing your business and
networking with potential buyers, suppliers, or advisers.
Customer Service Representative – in addition to marketing your products, you are
your business' sole link to your customers. You will handle customer feedback, act on
their complaints, and make sure that their requests are taken care of.
Being a small business owner is a tough job, but someone's gotta do it!
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HOW TO CHOOSE A BUSINESS (and succeed!)
Choosing Your
Business
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The thought of starting a business can be daunting and frightening - even for those who
eventually succeed. Self-doubt, insecurities, and fear often serve as stumbling blocks. You may
feel that you are not good enough, not creative enough, or not smart enough to run a business -more so if you do not know what business to start.
Many would-be entrepreneurs are at a loss as to what kind of business to start. They daydream
of becoming their own boss and controlling their financial destiny, but don't know what
business will get them there.
Their greatest fear is that their business ideas may not be brilliant or acceptable enough. They
are afraid that their products and services will not have enough market to sustain the business.
They are afraid that chasing after their dream of becoming their own boss would only lead to
failure.
Is this fear justified? Of course! But then again, there are many good ideas out there. Believe it
or not, clever product and service are dime a dozen. Most of us have at least one good idea, but
these ideas often never get implemented.
Studies in fact show that lack of good idea is not the primary cause of the failure of many small
businesses. Businesses fail because of the entrepreneur's lack of preparedness. Many
entrepreneurs start a business, not because they have a business idea that can be profitable;
rather, they are dissatisfied with their present state of affairs. They may be frustrated with their
current job, or have an urgent need for additional money - that they'll jump into any business
venture without first checking it out. Without carefully investigating the business, it would
seem like "jumping from the frying pan straight to the fire."
Where can you get good business ideas? Searching for new ideas and concepts is a formidable
task. Some ideas spring forth, fully formed. Others simmer for years, waiting for the opportune
moment.
The business idea for you may lie in your previous work experience or your familiarity with the
daily operations of a business. It may be a result of your side activities, hobbies or other
interests. Many entrepreneurs consider business ideas that will provide the greatest likelihood
of meeting their desire for personal fulfillment.
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Business ideas can come, not from your interest level or experience, but from after a thorough
analytical search. You can look at the potential profitability of the business, and determine the
comparability of the business with both your investment and income goals. Or you can study
the projected growth of the industry to see if the business can commensurate for the level of
risk it require.
Starting a business from scratch is not something that can be done on a whim. But there is
nothing better or more fulfilling than starting a business from your own idea, and seeing it grow
into a success.
Selecting the Right Business
Are you one of those who want to be an entrepreneur, but has no idea as to what business to
start? Millions of people feel and know that they need to become an entrepreneur to achieve
their goals; yet are plagued with uncertainty as to what kind of business venture to go into.
Where can you find a business idea that will really pay off; one that will make you rich (as
quickly as possible)? Or what business will make you powerful and famous? What are the best
ventures to pursue today?
In starting a business, one of the most difficult decisions will be to select a business that is right
for you.
Ideas for new businesses come from many sources. A logical first step for the undecided is to
list potential areas of personal background, special training, educational and job experience,
and special interests that could be developed into a business. Look at your hobbies, volunteer
experience and leisure activities.
You can develop a line of gourmet foods, do wedding planning, give scuba diving lessons,
create intricate crafts, or develop an antique locating and refinishing service. You can also sell
what you know, by developing a syndicated newspaper column, write a book, or conduct
seminars or workshops in your area of expertise. Others also start their own businesses using
existing skills from their salaried jobs – accountants, technical writers, trading specialists,
writers and others have marketable skills that can be developed into service businesses.
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With the proliferation of the Internet, new business opportunities in designing, monitoring and
updating web sites have emerged. In addition to computer and programming skills, content
developers or those who write solely for the Web have become highly marketable. You can also
prepare demographic studies, databases, market surveys, and information resource lists.
One thing is clear though: only you can know what business is best for you -- one that you will
enjoy doing, while at the same time makes money.
If you are still at a loss as to what business to go into, review the following list of activities that
have proven marketable for others. The idea is to identify potential businesses, then reducing its
number as you determine your interests and potentials of the business, until you arrive at your
final selection.
WORKSHEET 2: Choosing the Right Business
On a scale of "0" (no interest or strength) to 10 (maximum interest or strength) indicate the
potential for you and a total score for each activity:
My Level of
Personal
Market
Interest
Strength
Strength
Total Points
Household Services
-- house cleaning
_________
_________
_________
_________
-- self-storage center
_________
_________
_________
_________
-- grocery shopper
_________
_________
_________
_________
-- home decorating
_________
_________
_________
_________
-- landscaper
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
Handicrafts
-- silk flower arranger
_________
-- ceramics
_________
-- jewelry design
_________
-- collectibles broker
_________
-- gift basket
_________
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Travel/Entertainment
-- bed & breakfast inn
_________
_________
_________
_________
-- limousine service
_________
_________
_________
_________
-- party planner
_________
_________
_________
_________
-- videographer
_________
_________
_________
_________
-- tour operator
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
_________
Personal Services
-- beauty salon
-- dating service
-- image consultant
-- financial planner
-- genealogical service
Computers
-- computer consultant
-- maintenance service
-- graphic design
-- Web site developer
-- database consultant
Healthcare & Fitness
-- aerobics instructor
-- medical transcription
-- daycare for seniors
-- diet clinic
-- home healthcare
Wholesale and Retail
-- antiques dealer
-- children's clothing
-- catalog retailer
-- florist
-- pushcart
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_________
_________
_________
_________
-- meeting planner
_________
_________
_________
_________
-- turnkey office
_________
_________
_________
_________
-- public relations
_________
_________
_________
_________
-- incorporation service
_________
_________
_________
_________
-- ________________
_________
_________
_________
_________
-- ________________
_________
_________
_________
_________
-- ________________
_________
_________
_________
_________
-- ________________
_________
_________
_________
_________
-- ________________
_________
_________
_________
_________
Business Services
-- temp service
Your Own Service
Scoring:
0 to 10
Almost a sure loser
11 to 15 Reconsider, but proceed with caution
16 to 20 Some potential here, worth further study
21 to 25 Probably a winner, if you answered correctly
26 to 30 How can you lose?
Ultimately, your choice will be influenced by a variety of factors, including the size of your
bank account, the potential pay-off, the nature of work activities involved, your past work
experiences, your objectives, your attitudes and opinions, your personality, knowledge and
skills. The business you choose should fulfill a need if you expect to generate any long-term
market demand and possibly achieve seven-figure sales in the future.
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Making the Decision in Selecting a Business
You have decided that you want your own business for a variety of reasons: maybe you want to
be financially independent, or be your own boss, work at your own time, and maybe, just
maybe, retire as a multi-millionaire at the age of 35! But do you know what business you
should start?
Selecting the right kind of business is a difficult process for any starting entrepreneur. Many
dream of starting their own businesses, but remain frozen in status quo mainly because they do
not know what business to engage in. Good ideas seem to be a dime-a-dozen, with newspapers
filled with stories of how teens are reaching financial nirvana on very simple business concepts.
Unfortunately, the next big business model perfectly eludes you!
Here are ten tips on selecting the business most suited for you.
Instead of choosing the first business that comes to mind, take time to explore
various options. Check out other business ideas! Read books providing ideas for
possible home-based or small business, and trade magazine articles on trends and
market demands. With the phenomenal growth of the Internet, information is now
literally at the tip of your fingertips.
Find out what type of business appeals to you most. Determine your goals, interests,
wants and capabilities. You can turn your fascination for miniature shoes into a
business; or your skill and expertise in designing graphics into a fledging business
enterprise. The important thing is that you must enjoy your business. The most
successful entrepreneurs feel passionate about what they are doing. You cannot feel
passionate (and hence more driven) about your business if you do not like it!
Choose a business that will be personally satisfying as well as profitable. While you
may have passion for your hobby or craft, always consider its business potentials. Do
you think there is a demand for it? Will it bring you recurring income? How saturated
is the market? Are there barriers to entry? Will you have economies of scale? Start a
business that you think has a solid potential to be profitable. You will need to do a lot
of pencil pushing and calculating to determine the financial viability of a business. This
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will entail analyzing your market and conducting a break-even analysis, a preliminary
financial projection that shows you the amount of revenue you'll need to bring in to
cover your expenses. It may sound like a lot of hard work, particularly if you’re not a
financial whiz, but this is one of the important steps in assessing whether the business
you’ve selected can make you money.
Think whether you can and want to handle every aspect of the business. When you
start your new small business, you may not have the luxury of a full-time staff
complement to help out in some aspects of the business. Instead of simply focusing on
the strategic direction of the business, you may be required to collect receivables, track
expenses, cold call customers, and do thousands of other tasks. Be aware of the other
tasks that you have to do in your business.
Draw a layout of your intended work area to see how it will fit into its allotted
space into your home. Remember, you are starting a business at home to save on
overhead costs, so make use of every possible nook and cranny that you can use in your
house. If you want to start a cake decorating business, you need to have a large kitchen.
Forget about starting a dance instruction class if you live in a studio apartment!
Make sure the business meets high safety standards, esp. if you have children at
home. This is particularly essential if your business deals and uses chemicals and other
harmful substances. For instance, keep all the chemicals used for a carpet or upholstery
cleaning business in a safe place in the garage beyond the reach of children.
Check with an insurance agent to determine the kind of insurance coverage the
business is going to need. It is good planning to determine what insurance is necessary
to minimize your risks and protect your business. General categories of insurance
include property, licensing, liability, health, disability, workers' compensation, and life
insurance.
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Ensure compliance with zoning laws and ordinances in your area. Visit your city
hall or the planning office to see whether zoning regulations would prevent you from
selecting a specific location. Carefully note the regulations governing business signs
and types of businesses that are allowed at different locations. You do not want the city
hall folks to come knocking down at your door asking you to cease operations after you
have spent thousands decorating and equipping your business!
Select a business whose organizational characteristics are compatible with
yourself or your family. You should select a business that fits well with the schedule
of your family. If you have a newborn baby in the house and your husband works full
time, you should look for a business that would allow you to take care of your baby.
Businesses that would compel you to actively seek clients out like a real estate
endeavor may not be suited for you at this point.
Get your family members involved in the business and have fun together working
for its success! Every telecommuter dreams of merging home and office, career and
family into a symbiotic blend of harmonious bliss. It is not always easy, but one way
will be to involve your family in your home business. During summer, you can ask
your kids to help in the packing of your product. Or your teen son can help design your
Web site. Your spouse can help in negotiating with your clients. The most important
thing, though, is that everyone in your family enjoys working in your business.
Methods in Choosing a Business
Choosing the right business is the first step to entrepreneurial success. According to studies
made by the U.S. Small Business Administration, only 66.0 percent of small businesses survive
its first two years, and survival rate lowers to 39.5 percent in at least 6 years. In 2000, it is
estimated that 550,000 small businesses closed, and business failure for one-person businesses
is about 38.2 percent.
Your goal as an entrepreneur is to find the business that stands a greater chance of success. You
will need to determine what you can and cannot do, research on the potential market and how
29
other similar businesses are doing, and what works well in your area or selected business
medium.
Dr. Irving Burstiner, in his book, "How to Start and Run Your Own Retail Business" offers
various approaches in choosing the best type of business. While he focuses mainly on the retail
business, the methods he suggests are applicable across various types and business medium,
even the Internet.
Less Money Out. The first school of thought focuses on the amount of resources that
you have. The kind of business that you start depends on the amount of capital you can
raise. If you have deep pockets, you can go all out with your business - getting first-rate
equipment and furnishings, hiring employees, launching the business in grand style,
and buying loads of inventory. However, if you have little capital, all you can do is to
stretch what you have and start the business on a much smaller scale.
You may have a wonderful concept for a children's bookstore with play and storytelling
sections for kids, and a coffee shop for the adults. That kind of vision requires vast
amounts of capital - from inventory, lease, furnishings and store décor. If you cannot
finance your vision, you may need to downscale your business and instead find ways to
start on this route but without the expense. One way is to start an e-commerce site
where you will not have to pay for furnishings, expensive rent and other overhead that
a retail store will need.
Novelty and Excitement. Another strategy for selecting a business is to start one that is
currently hot, hip and new. In the Philippines, for example, pearl shakes - an innovative
cool beverage drink in natural flavors mixed with "pearls," or dark, spherical, chewy
balls made from yam and tapioca -- became the hottest craze in town. Mom and pop
stalls and cafes offering this new drink popped up all over the metropolitan Manila.
You can join in the fray, and start a business that has already proven itself to be a
moneymaker for others. However, there is danger in adopting a start-up strategy on
prior demand--demand already created by others. What if the business runs out of
steam, and the novelty and excitement that pushed it initially wears thin? You may be
faced with cutthroat competition, with price-cutting as the ultimate marketing weapon
of choice.
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Safety in Numbers. As a new entrepreneur, you may also consider a business that has
already proven popular, dependable with consistent demand, and can be found
everywhere. Common businesses include eating places, groceries, used merchandise
stores, gift and novelty stores. If these businesses have staying power and are
frequently found, then they must be profitable, right?
Well, not always. There is such thing called "market over saturation." A small town
may be able to accommodate only one gift shop. Add another one and you may be
stretching the market too thin, and end up in the dustbin.
The Fewer, the Better. On the other side of the spectrum from those who believe in
safety in numbers are those who think that they are better off in a business with fewer
competitors. This is the idea behind the strategy of focusing on a market niche, which
has proven to be apt, even a lifesaver, for many small and home-based businesses.
Niche entails offering unique products or services to a few concentrated markets.
Rapid Growth. You may also want to start a business that has enjoyed fast growth in
the past years. A rapidly growing business sector, where many new businesses continue
to operate, shows that there is great demand for the product; the market can absorb new
entrants; and if by looking at the size of businesses operating, the market may be
profitable even for one-person businesses.
Using data from the Bureau of Census, you will find that the sectors that enjoyed the
most rapid growth from 1972 to 1987 include the following: Gift, novelty and souvenir
stores (up 216%); Hobby, toy and game shops (up 180%); book stores (up 137%);
Sporting good stores and bicycle shops (up 127%); and florists (up by 108%).
The sectors that saw a decrease include: Drinking places (down 17%); Household
appliance stores (down 15%); and variety stores (down 5%). The reasons for the
shrinking number of businesses in these sectors include overcrowding and declining
customer interest and demand.
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Failure Rate Method. You may check the businesses with the greatest number of failure
record. Dun and Bradstreet (http://www.dnb.com) publishes a yearly Business Failure
Record report. This report is not merely an estimate; but represent complete tallies of
business failures. D&B defines business failures as those that "ceased operations
following assignment or bankruptcy; ceased operations with losses to creditors after
such actions as foreclosure or attachment; voluntarily withdrew leaving unpaid debts;
were involved in court actions such as receivership, reorganization or arrangement; or
voluntarily compromised with creditors."
In 1997, the businesses with the lowest failure rates (per 1,000 listed concerns) include
drug and proprietary stores (33); fuel dealers (37); sewing, needlework and piece goods
(41), used merchandise stores (47); and liquor store (52). On the other hand, non-store
retailers (216); trucking and warehousing (208); fishing, hunting and trapping (273) are
the businesses with the highest failure records.
Biggest Payoff. Another logical choice for choosing a business is to look for those that
yields the best return-on-investment. This approach involves "checking through the
operating results for different business types to find those with high percentages of
operating profit."
The best source of data that would allow you to determine an industry's operating profit
is the Risk Management Association’s (http://www.rmahq.org) Annual Statement
Studies. This report offers financial statement ratios of small and medium-sized
businesses on about 600 industries. The book costs $145 for non-members, but check
with your local library if they carry the publication.
Considering Personality and Tastes
The business you choose is one that you feel good about and fires your imagination.
Enthusiasm is a priceless ingredient in the formula for success! Ask any entrepreneur the secret
to his or her success, and you will hear a common response: having fun, and lots of it.
32
The type of work that you will do for your business must be something that you truly enjoy. It
is very easy to work at a job that you don’t really like. After all, even though you do not like
what you are doing, you still get a paycheck regularly.
A business is a different thing altogether. If you don’t love what you are doing, you will not
work as hard. And if you don’t work as hard, your income will also be less. Given the amount
of resources, time, energy and effort that you need to put in, you should enter into it only if you
think that it is something that you enjoy. Your passion for your work will be the only thing that
will tide you over rough periods of your business.
You also need to have the right stamina for your business. Oftentimes, a start-up entrepreneur
works for 12 hours a day or even more. Unless your business is already on a solid footing, you
cannot treat it like office work where you work only from 9-to-5. Some entrepreneurs,
particularly those who work at home, find that they are working all the time.
In addition to financial gain, your business must also provide you with the challenge, family
fulfillment, community service, fame or a combination of factors that your sense of self-worth
needs.
In choosing a business, you also need to consider the kind of lifestyle that your business will
bring. If you are a mother raising kids, you may want to start a business that allows you to earn
income while working at home to take care of the children. If you are a travel buff, you may
start a business that involves a lot of travelling.
The level of risk is also important. A higher-risk business offers a greater profit potential.
However, you need to ask yourself, “What type of risk is acceptable to me?” You can either
choose a slower growth, lower risk business; or a fast growth, high-risk business.
Considering the Emerging Social Trends
One great way to find market opportunities for your product or service is to study social and
business trends. New social trends transform how goods are built and sold. Business
opportunities grow out of the changes in the social order.
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Back in the 1920s, who would have thought that bottled water will be big business? With the
growing consciousness for cleaner and healthier living, smart marketers correctly predicted that
people would want to drink bottled water as against water straight from the tap. And who
would have guessed that the Internet would be a big thing that it is today, changing everything
that we know about doing business.
The challenge for you as a small business owner will be to see if you can find business
opportunities in any of these trends:
Retirement of the Baby Boomers -- The baby boomers, or those born between 1946 and
1964, are reaching the age of retirement. Sociologists, economists and demographers
all agree that this demographic shift will significantly affect how we do business. As a
large cohort of baby boomers are entering their 50s, new opportunities in finance,
travel, housing, recreation, vocation and clothing will come about. For one, they have
greater disposable income relative to the past generations. As such, they are driving
growth in many areas, including services, general retailing and recreation.
Increasing Power of Women - a recent Business Week article reported that women are
beginning to close the pay gap. In 1999, the weekly pay of American women with fulltime job was 76.5 percent of the men's wages, an increase from only 61 percent in
1974. The increased purchasing power of women is also evident on the Internet, with
women forming a significant block in making purchasing decisions online. Cable
channels such as Oxygen and Lifeline are targeted to women, so with the myriad
shopping channels on TV.
Changing Face of the Population - The influx of immigrants is slowly changing the
face of America. According to the Bureau of Census projections, Hispanics will make
up nearly a quarter of the population by 2050. Non-Hispanic whites will become a slim
majority of the US population, from 73.6 percent in 1995 to only 52.8 percent of the
population in 2050. Consider how your products will be marketed to reach the
burgeoning Latino market.
Increasing globalization of business - the companies that will excel in the 21st century
will be the ones that build down the global barriers. Spurred by the growing acceptance
of the Internet, globalization is one of the biggest trends today and will continue to
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accelerate in the coming years. Consider what that means for opportunities in emerging
world markets, particularly in China, the old Soviet Union and Southeast Asia.
Mass customization - Huge conglomerates are beginning to offer products that could be
customized by potential buyers based on his or her preferences. Dell, for example, has
brought this concept to their interactive online systems that allow customers to design a
computer system. Customers can choose from a menu of attributes, prices and delivery
options. Hence, the customers get what they want at prices acceptable to them.
Consider what that means for opportunities in businesses providing products or
services individually tailored to each customer.
Reinvention of religion -- As people continue to cast off traditional beliefs and services,
others return to them even more vigorously. Even Hollywood learned the power of
religion with Mel Gibson’s mammoth hit “The Passion.” Consider what that means for
opportunities in books, tapes and online services.
Yearning for high-touch products and services - This includes the nostalgia induced by hightech solutions to everything. Consider what that means for opportunities in antiques, older
homes, home delivery and pickup businesses, and any business owned by friendly serviceminded proprietors.
Common Mistakes to Avoid
Although there are many reasons why small businesses fail, one of the most common mistakes
occur right from the very beginning -- choosing the business idea. A lot of people simply make
the wrong choice. To help you avoid that error, here's a look at four of the top reasons why
wrong choices are made:
Failing to verify market demand. Success comes more easily if you do what you love.
However, passion for a particular activity or product is not enough basis to start a
business. You need to examine the market potential, competition, resources required to
enter the market, and uniqueness of the idea. Most importantly, you need to consider
the potential demand of your market. Turning your hobby or interest into a small
business, for example, without first finding out if there is sufficient demand for the
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product or service is a sure way to fail. While there are exceptions to this rule, many
hobby-based businesses have narrow and extremely segmented market that may not be
able to support the business. Determining the potential demand and size of the market
for your product is the first factor in choosing a business.
Starting the business without adequate planning. Starting a business is not something
that you plunge head-on without stopping to think. You need to plan every step, every
action, and every little decision that you make. Your success is not guaranteed because
you have found a market opportunity that takes advantage of your skills and
experience. Many home business owners are guilty of taking the process of business
planning for granted. A well-written business plan provides the strategy map of your
business. Following a good, distinctive strategy will ensure that the business follows a
consistent direction towards your goals.
Resisting the urge to ask for help. Most people do not usually ask for advice in
choosing a business, either because they are too proud, afraid someone else will steal
their idea, or simply don't know help is available. Help is out there; you just need to
look for it. The non-profit organization, SCORE, in cooperation with the Small
Business Administration, has chapters and offices all over the country and provides
advice to budding entrepreneurs for free. Other small business entrepreneurs are all too
willing to tell you the lessons that they have learned in starting a business - provided of
course that you are not a direct competitor or asking for trade secrets. If you cannot find
a knowledgeable person willing to give you information about the business, you can
always work as an employee or an intern in a similar business. Not only will you be
receiving compensation, but also you are getting on-the-job training and valuable
insights on the business that you want. One word of caution: good advice is always
helpful, but don't let other people tell you how to run your business.
Trying to start a business with too little money. You may have the passion for the business that
you are planning to start, but can you afford the business? Is the cost of your business within
your reach? Where will you secure funding to support your production, marketing and
operations? If you do not have the cash to support your venture, there is a high likelihood that
your business will end up as a failed start-up.
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CASE STUDY: Michael Reagan, President, Power Signs & Graphics (Arizona)
How an Award Winning Entrepreneur Chose His Business
Finding a business that will provide you with a moneymaking venture requires strategy and
skill. While some are lucky enough to have business ventures fall on their lap, others have to
undergo a careful process of research and self-analysis before finding out what business is
best for them. Research has been an important process in determining the entrepreneurial
venture of Michael Reagan, President of Power Signs and Graphics in Arizona. In fact, the
choice to get into the sign business was a result of his extensive research coupled with a close
self-examination of what he really wants to do in life.
Like many start-up entrepreneurs, he didn’t have a realistic and clear picture of what he can
feasibly sell to make money. Instead of simply following the age-old rule of going for what
you know, “I spent about six months researching what it is that I wanted to do for the rest of
my life,” he said.
“Every time a thought came to me about the characteristics of a business I would like to have,
I wrote it down in a piece of paper.” He took a close look at his capabilities to gain insights
into the kind of business worth starting for him. The process entailed knowing the sum total of
his experience, knowledge and skills. He had to understand the kind of expertise that he had
gained from his education, his past jobs, from previous management experiences. Aside from
knowing his strengths and weaknesses, he had to be sure what kind of business suits him
most. At the end of the day, “I had about 103 characteristics of business that I want.”
What he found out guided him in his choice of business. “I didn’t want consumer goods with
inventory stacked on the shelf. I didn’t want anything that was perishable. I don’t want
anything that people could get sick from. I wanted something that is not just limited to a
neighborhood, like dry cleaner or a pizza shop. I wanted something that was a part of service
that will be purchased by business executives. I wanted something that was technology
driven.” And the list goes on and on.
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Case study continued …
The next step was to match the characteristics he identified with existing business ideas and
opportunities. “I categorized everything, looking at different types of businesses that matched
many of those criteria as possible,” he recalled. “Then I began looking at categories of
businesses to see how they match my criteria. As I continued to go through the list of
possibilities, it started to narrow down into this opportunity of joining a FASTSIGNS network.”
Once he figured out that the sign business possesses most of the criteria that he want in a
business, his next step was to decide on his take-off point in the industry. “I had to make
decisions on ‘Do I start out as independent? Do I find and buy a small existing sign company?
Or do I buy a franchise?”
When he decided to buy a franchise, his next question was “which one, because there were
about seven different companies at that time to choose from, and a lot of them has since failed.”
Reagan’s business selection was “a 3-step process: find the industry; find out how I could get
into the industry; and when I decided to go into franchising, decide on what franchisor I was
going to go with.” Finally, he settled on FASTSIGNS, and there has been no turning back since.
His advice to would-be entrepreneurs? “Learn a lot about yourself as a person as far as what you
really should be doing as a profession for the rest of your life. And don’t just get into something
because somebody tells you that it is a hot opportunity, or it is a great deal; or you can make a
lot of money. There are a lot people who go into business for themselves, and the first couple of
years, about 80 percent of them fail. Because you do not have the make-up - the overall skills,
talents and mental and personality make-up to survive as a business owner.”
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Checking Your
Idea
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HOW TO CHOOSE YOUR BUSINESS (and succeed!)
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Starting a business is easy. Deciding on what business to engage in is the difficult part. There
are literally hundreds of ideas you might think of that could bring in extra income. How do you
know which of these business ideas will bring you success?
Many small & home business entrepreneurs start-up with very little money and a strong belief
that success will come to them if they work hard enough and offer a quality product or service.
While this positive attitude is essential, it is not enough to guarantee financial success. A lot
hinges on your management and marketing skills - and your product or service.
You can either choose a product-oriented or a service-oriented home business. A productoriented business allows you to either create or manufacture the product yourself, or resell
products that are made by others on a direct sales or drop-ship basis. On the other hand, you
can opt to engage in a service-oriented business where you perform services at your home
(work generally performed at home after sale of service) or perform services from home (some
or all work performed away from home after sale of service).
Before you begin to develop your business idea, you need to determine its strength and
viability. Below is a checklist of criteria to help in evaluating ideas that is particularly well
suited for you and your goals. Ask yourself the following questions when evaluating an idea for
a business or product:
Does it satisfy or create a market need?
Introducing a new product without first testing the market is like jumping off a cliff
blindfolded. In fact, many businesses fail because there is no adequate market for their products
or services.
Before you risk your resources on a new venture, it is necessary to get an objective picture of
your prospective market. Although accurately determining the customer reaction to a new
product is difficult, a new business owner must try to get hold of as much information on the
market as he or she can either through a formal market research or through secondary research.
The rule is: find a need and fill it. To the extent possible, do not offer a product or service so
new or unusual that people cannot understand why they should buy it - unless you want to
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spend most of your time and resources educating the public. Big companies, with their deep
pockets, can afford to launch a massive educational campaign for breakthrough products. Home
businesses, given their size and nature, often do not have the resources (capital, personnel,
technology) to mobilize such campaigns. Also, do not offer a product you love to make but
whose market potential is weak at best.
Is your idea something the market wants?
Before you actually launch or expand a business, conduct a thorough market examination and
market analysis. Check out the market for your product or service. It is important to get an
objective picture of your prospective market before committing time, resources and energy on a
new venture.
It is easier to sell a product or service for which a need already exists. Look for problems that
are presently not being addressed, and then challenge yourself to provide it. David Marcks,
started Geese Police (http://www.geesepoliceinc.com), a service that uses Border collie dogs to
drive away geese, after learning that golf courses, corporate properties and parks are looking
for a humane way to control the geese on their properties.
Conduct market research to find out if there is a need for your product or service. Take the
time to identify your customers and find the means to get your products or services to them.
Avoid the fate of businesses that fail due to inadequate market for their products or services. Do
not enter a market that is contracting or changing so quickly that your business cannot achieve
a sufficient volume or a sufficient share of the market. Take for example the business of drycleaning. The growing popularity of at-home dry cleaning systems like Febreze and Dryel are
threatening existing businesses. If you choose to operate this type of business, you must have
something extra to offer to the clients to keep them using your service and coming back again
and again.
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What niche will your business fill?
Small business, often plagued with a shortage of start-up funds, must use exceptional strategies
to get the business running without draining much needed capital. Most especially if competing
head-on with a big company is imminent. Unless millions of dollars is readily available to
launch the business, the only chance at winning against a big competitor is to focus on niche
possibilities.
Niches offer the best opportunities for small businesses throughout any marketplace. No
industry or type of business is an immediate gold mine. It depends on what is not being
adequately supplied or services in a particular area. Your goal is to identify a particular
segment where you can fulfill an unsatisfied need.
Niche entails offering unique products or services to a few concentrated markets. It is a less
risky strategy and provides the best opportunities for small businesses throughout any
marketplace. By focusing on a small segment of your market, you can specialize in a way that
you become irresistible to your buyers.
Instead of selling gifts, sell candles. Instead of selling books, sell cookbooks. Instead of selling
household decor, sell wall frames. Instead of opening a small grocery store, sell spices,
condiments and hot sauce. Instead of selling baby clothes, you focus on offering the best
quality, widest range of selection and most affordable clothes for baby boys. When people
think of buying clothes for their baby boys, they would first come to you.
Niche marketing is the best strategy your small business can use when a large business moves
into your market and territory. For example, let us say, you own an accounting service and a
national accounting and auditing chain moves into your area. You may be better off changing
your entire strategy and focusing on serving small businesses.
It is happening everywhere: small companies are folding up when the big guys start moving
into their territories and flexing its muscles. Remember Meg Ryan and Tom Hank's sappy film,
"You've Got Mail?" Meg's character owns a small bookstore that has been in their
neighborhood since, well, time immemorial. Until Tom's mammoth bookstore moves into the
street, and forced Meg to close her business.
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Your business stands a greater chance at success if you offer something different to a small
group or segment of consumers that have unmet preferences. You must identify the target
market and meet their needs with your product to be successful in providing a product for a
niche market.
The key is to focus, focus and focus until you become irresistible to your buyers. You stand a
better chance at success, if you concentrate your entire business on one or few specific niches.
The drawback of niche marketing, though, is that you may have a smaller volume, which often
results to higher operating costs. Nonetheless, the lessened competitions will more than make
up for it.
If the market niche or niches you are considering have very small markets, you may want to
retain some products and services that appeal to a wider range of customers but have
exceptional product depth in a few niche areas.
Tony Roeder applied this strategy for RedWagons.com (http://www.redwagons.com), the main
distributor of Red Flyer toy wagons on the Internet. He knew that there is no way he can
compete with the likes of Amazon.com and eToys.com, which all carry Red Flyer wagons in
their huge toy inventory. Instead, he decided to focus on Red Flyer wagons and offer the entire
product line. While his big competitors carry only 3-4 models, he has the entire collection to
please any avid Red Flyer wagon enthusiasts. The strategy paid off, and he now makes more
than a million dollar a year in his online business. (For our story on Tony Roeder, click here)
To help you identify and meet the needs of your niche market, below are some things you need
to consider:
Aim for a specific target and allocate resources just for that target. When looking at a
business to start, look for a highly targeted market. Cover only a small, but profitable,
base of customers. You cannot be everything to all customers. Yet make sure that you
have the best product or are the best service provider in that narrow market.
If you are looking at the home décor market in North America, think of an area that is
currently not being serviced well. Maybe you can provide the market with rare, one-ofa-kind decorative items from far-flung countries like Uzbekistan, the Philippines,
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Thailand, etc -- items that are not commonly found in shops like Pier 1 Imports or
World Trade.
Talk to potential customers one at a time. As soon as you have narrowed your target
market, find a person that you think would be your ideal customer. Find a solution for
that customer and then determine how others may be interested in that solution.
For exotic home decors, your customer probably is middle-to-upper class, who has
traveled a lot and developed a taste for other cultures. Ask your potential customer
what kind of products he or she would like to see; or if the customer would be
interested in the type of product you are considering. Perhaps the customer may want
one-of-a-kind framed art or conversational centerpieces that will not be in his or her
neighbor's house.
Do some market research to verify your findings. Information is the key to a successful
marketing strategy. Before launching your product, get hold of as much information as
you can about your potential customers, costs of production, and competitors' products.
Market research need not be expensive. You can do some informal talking with
potential customers. You can browse through home decorating magazines to find out
about other suppliers in the business. You can run a query on the search engines to
determine how many other dot-coms serve the same market.
Find out the kind of product characteristics that your potential customers value. Do
they want high quality, low price, convenience features, reliability or any other product
characteristics you are interested in learning about. If you are selling exotic home décor
products, for example, what influences a customer: is it the price range, the history or
context of a piece, texture, colors, design or functionality?
Keep in mind that no industry or type of business is an immediate gold mine. It
depends on what is not being adequately supplied or services in a particular area. To
succeed in your business, your goal is to identify a particular segment where you can
fulfill an unsatisfied need.
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What services or products will you sell?
Ideas for businesses come from many sources. The business idea for you may lie in your
previous work experience or your familiarity with the daily operations of a business. It may be
a result of your side activities, hobbies or other interests. Many entrepreneurs consider business
ideas that will provide the greatest likelihood of meeting their desire for personal fulfillment.
You can also sell what you know, and put to work technology and equipment that you already
have.
Business ideas can also come, not from your interest level or experience, but from after a
thorough analytical search. You can look at the potential profitability of the business, and
determine the comparability of the business with both your investment and income goals. Or
you can study the projected growth of the industry to see if the business can commensurate for
the level of risk that it requires.
If you are going to start an online business, remember that not all products can be sold in this
commercial medium. Some products simply will not work on the Internet. According to an
Ernst and Young study, the most popular online purchases are computer related products
(40%), books (20%), travel (16%), clothing (10%), recorded music (6%), subscriptions (6%),
gifts (5%) and investments (4%).
The kinds of products and services that sell best on the web are those that take advantage of the
convenience brought about by the Internet. Remember that convenience is the primary reason
why consumers flock on the Internet in the first place. People can shop any hour of the day at
any site. They can avoid crowded stores, irritating sales clerks, and even avoid pickpockets.
The success of any business starts with the right choice of product or service. There is nothing
better or more fulfilling than starting a business from your own idea, and seeing it grow into a
success.
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Who are your competitors?
Remember, there is never a "no competition" situation. Don’t ever deluge yourself into thinking
that you don’t have competition, because you do. There are two kinds of competition: direct or
indirect. Direct competition is a business offering the same product or service to the same
market; while indirect competition is a company with the same product or service but a
different market.
You product will always have its competition. Determine the kind of competition you will have
- locally, regionally, and nationally. Look for heavy or moderate competition - the fact that
competition exists in that market proves a demand, or at least a need for what you offer.
Test for market saturation. Unless you are offering a groundbreaking product, stay away from
market with extremely few competitors. Lack of competition could mean that your business
idea is not profitable to begin with, or that your idea is so new and unique that no one has
thought of it yet. Few players in the market could also imply that the market may be controlled
by a monopoly or a cartel, the barriers to entry are too high for a small firm, or that the demand
is too limited to sustain another entrant in the market
In order to be successful, you must know your market, and this includes the competition. You
need to know who your competition are, what they are doing and how are they operating their
business. You need to know as much as possible – from their values and goals, their logo, their
customer service ideal and how they reach their buyers.
Getting information about your competitors can give you the leading edge, as it can show you
ways in which your company can be unique and can benefit the customer. Your competition
has a lot to teach you and that knowledge can make you more powerful.
First and foremost, identify who they are. You can use the Internet and telephone directory to
help you find competing businesses. Determine the services offered by your competitors, and
find out what are those that you don't offer. Are you and your employees (if any) as well
qualified to serve as specialists or customer problem-solvers as your competitor? Visit their
web sites (if any) and study their business models and how they operate.
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Make a list of every single aspect you can discover about your competition. How does your
competitor treat their customers? Is their service prompt and efficient? Do your competitors
accept credit cards or charge cards for their services that you do not accept? How does your
company image compare to your competitors? Can you answer questions about your
competitor's products and services knowledgeably and objectively?
To help gauge your level of competitiveness with other market players, compare your business
with your competitor. Here are some important questions you should find answers to know
your competitors:
What are they doing better than you? How can you improve on this aspect?
What are you doing that is better than they are?
How can you shift your niche market so that it isn't exactly the same?
What are their prices? How do those prices compare with your own?
What equipment does your competitor use that is better than yours?
As you watch the product display of your competitor, do the products seem to be
moving? How soon are they marked down or moved to the sale table?
Figure out how your competitors market their business. How many times has your
competitor' had his name in newspapers in the past three months? Count only the times
for free publicity such as announcements, promotions, seminars, sponsorships,
donations, speeches, etc. How many times has your name been published for these
reasons? How much advertising (number and size/time) does your competitor do each
month? How much do you do?
What services do your competitors offer that you don't have?
Are you and your employees (if any) as well qualified to serve as specialists or
customer problem-solvers as your competitor?
How does your competitor treat their customers? Is their service prompt and efficient?
Do your competitors accept credit cards or charge cards for their services that you do
not accept?
How does your company image compare to your competitors?
Can you answer questions about your competitor's products and services
knowledgeably and objectively?
Who keeps more complete records on each customer, you or your competitor? What
information does your competitor ask when dealing with a customer (e.g. zip code,
contact details, etc.)
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Do you mail a thank-you letter or send an email after each sales call, whether or not a
sale was made? Does your competitor?
Answer every conceivable question you can possibly think of about your competition. Based on
what you learn from your competitor, try to improve your own business parlaying your
competitors’ weakness into your strength.
Always keep your competition in your peripheral vision. Don't forget they are there. Continue
to monitor their business methods. It's your best defense to out shining them.
Can you deliver a better quality service?
Businesses are born with a product, but die without customers. There is one simple truth to
entrepreneurship: your business will die if you run out of customers. Customers provide the
revenues needed to achieve profitability. Delight the customer and you can be sure that he or
she will come back to you. Customer experience should be overarching strategy of your
business.
In addition to the revenue from the customer's purchases, satisfied customers provide free
word-of-mouth exposure that increases your market. Satisfied customers will always be quick
to tell others about good books they've read, handy products they've discovered and helpful
services that saved them time, money or aggravation. A happy customer can bring more loyal,
buying customers, which in turn bring in more loyal, buying customers. In addition, they can
provide you with feedback to improve your product or services.
Connect with your customers and give them a reason to come back. It takes more than a good
deal to make a satisfied customer. You'll find that your most loyal customers keep coming back
not because of your competitive price but because they like doing business with you. They
won’t even mind that you are working from your home! Create a positive customer experience,
and you will go a low way.
So how do you increase your stock of customer goodwill? Simple, make it easier for your
customer to buy from you! This can be achieved by getting to know your customers. Gather as
much information as you can about your customers. Learn their demographics, then analyze the
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buying practices and habits in the markets that you selected. Get to know them better and find
out what they like and don't like, their needs and motivations, perceptions and attitudes.
Incorporate their likes into the way you do business, and avoid their dislikes. Try to identify the
things that make life difficult for the person making the buying decision and then do everything
to remove those obstacles.
If you're a dot-com, bridge the gap between what customers want and what they get. Customers
want simplicity, service, and to accomplish their goals. The Web, on the other hand, provides
complexity, technology and compelling features. If your site is overly burdened by unnecessary
technology whose sole purpose is to let your web designers flex their creativity but does not
offer the experience that the customers want, then say goodbye to that customer.
The key is to make them value their relationship with you. Call them with tips that will save
them money. Tell them about unadvertised specials that you are about to announce and about
any seasonal discounts you offer.
Can you create a demand for your business?
There is one vital tool that stands between success and failure with your business: the
marketing plan. Many businesses blindly grope their way to sales while others strategically
locate their buyers. It isn't hard to see which will work better. The plan of marketing your
business is far more powerful than it seems. It leads you in a definite direction backed with
specific research.
Regardless of the nature of your business, marketing will demand more creativity and more
astute judgment than any other single phase of the business. The end purpose of all the activity
– e.g. inventory accumulation and production – is the accomplishment of those exchange
transactions called “sales.”
Have no fear, though. Many small and home businesses have proven that lack of resources is
not necessarily a hindrance in developing innovative ideas to market their products and
services. In fact, knowing that you do not enjoy the level of resources others have will force
you to be creative and come up with ways to get around the usual channel of distribution, the
traditional advertising media, and the expensive outside agencies.
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Online, there are several avenues of reaching your buyers. You can use permission-based
marketing, discussion groups and mailing lists, newsletter marketing, search engine
optimization, strategic alliances, and others.
Will the product maintain market appeal?
Beware of fads and fleeting trends as these markets change quickly that your business cannot
achieve a sufficient volume or a sufficient share of the market. If your product, however, is a
fad, make sure that you can move fast enough to capitalize on it before it dies. Also determine
if your product or service can be used nationally, or is it simply limited to your geographical
area. With the increasing globalization of business, you may need to look at the international
market and see if there is significant foreign competition.
How unique is your product?
The goal is to be able to differentiate your product from your competitor. You need to show
why your products and services are unique, distinct, or of considerably superior than your
competitors. Every product in the world can be sold or presented in a new way. If you seriously
intend to capture a significant market share, your potential customers must find more value
from your product.
How useful is your product?
Many new ideas and products are successful because their creators identified an unmet need in
the market. Identify at the onset how your product or service will be used, and determine the
frequency of product use. Some business ideas fill a real need, but in some cases the need have
to be created through promotional advertising and promotions. This information can help build
your marketing strategy.
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Have you priced your product competitively?
The right price for a product or service is one of the essential elements in a solid business
model. Don't do yourself injustice; the wrong price tag is like a ticket to disaster. Economic
survival is the primary consideration underlying all pricing decisions. Ideally, a price should
meet three requirements: it should match the competition; it should be attractive to your
potential customers; and it should earn a profit for you. Set your prices, not by competition, but
based on the needs of your business. Depending on your products, consider pricing yourself on
the higher side: the higher you price yourself, the higher you position yourself.
What is the level of difficulty in the creation or
implementation of the product?
You need to consider the economic factors in the execution of the product, such as time, capital
investment required, and marketing costs, personnel needed, among others. Also determine if
you have the engineering, production, sales, and distribution facilities adequate for the product's
implementation. You may have an excellent business idea, but if you do not have the
economies of scale to produce it, then you might be better off to consider other products (or at
least a scaled down version).
What are the growth possibilities?
Your business model stands to succeed if the demand for your products or services can be
expected to grow with a change in the economy. Check if your product can survive a major
technological surge or obsolescence.
Can I get backend sales?
Back-end sales are all the products or services you sell and resell to customers or clients after
they have made their initial purchasing transaction with you. Determine if your product or
service will warrant repeat sales. There is real business value in building a pool of repeat
51
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customers. The bulk of the sales, cash flow and current profit comes from utilizing and then
better utilizing a back end.
Is the product safe?
The safety of a product use is an important consideration for many consumers, particularly for
manufactured products. If you are in the service business, you need to make sure that your
personnel are properly trained with the goal of satisfying your customers foremost in their
minds. Educate your consumers on how best to use the product and include clear instructions to
avoid costly legal entanglements. Make sure that your business is insured against various forms
of liabilities that may arise.
Can your product be promoted with strong advertising copy?
Emotion sells. People are often motivated to buy a product or service because of some emotion,
whether it is greed, fear or want. Response to advertisements often increases whenever you
inject these elements into your ad. Sit down before you write the ad and ask yourself what you
want to feel. Then translate these feelings to written words for your advertising copy. Stress
what people can gain from ordering your product or service (financial reward, becoming the
envy of others, knowledge to get ahead in life) or tell them what they lose if they do not order
(loss of time and convenience, discounts for ordering before a deadline).
Will you be left with an inventory?
Avoid inventory risk; make sure that even you will buy the product. If you have inventory and
you are storing your inventory at home, consider getting homeowner's or renter's insurance
policy to protect your business against all possible disasters, be it fire, tornado, hurricane or
earthquake.
52
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Conclusion
____________________________________________________________________________________________
53
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How to Learn From Experience
Various studies on entrepreneurial characteristics point to a common trait of successful
entrepreneurs: they are often disappointed but not discouraged by failure. Instead of giving up,
they look at what they can learn from their failures. They try to analyze what went wrong and
what they did to fail. By understanding the reasons for their failure, they can avoid similar
problems in the future.
Whether you are running a one-person or a small business, you need to learn from experience both your own and that of others. You need to be an information seeker: someone open to new
ideas and always on the lookout for ways to improve. The key to success in business is to
analyze, reflect, observe, interact with others, and learn from these encounters. You need to
seek and use feedback on your performance in order that you may improve and correct your
errors.
You can learn from experience in several ways:
First, learn from the experiences of other business owners with similar needs or problems.
You can do this by reading the stories of other entrepreneurs, and knowing the adversities that
they went through before they attained success. More importantly, you can network and talk
with other entrepreneurs to benefit from their experience. Networking is researching, finding
answers, recruiting and discovering opportunities. You can benefit from organizations that offer
a strong network of entrepreneurs and managers that you could draw on for advice and support.
Clubs, associations, and conventions are a good place to start and provide excellent
opportunities for shared experience.
Second, seek out people who can give you good advice. Not knowing how to do something
should never be an obstacle - you should find someone who can teach you. Particularly during
the start-up phase, the first thing to do is to find people who could answer your questions -- or
at least help you figure out what the questions are. Professional advisors such as your lawyer
and your accountant can teach you a lot about your business. By listening to their advises, they
can help develop your skill in planning and managing. In the United States, you can avail of the
free services of the Service Corps of Retired Executives (http://www.score.org), an
organization that provides small business mentoring and advice on the full range of business
topics.
54
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Third, continue to educate yourself about all areas of business operations, whether
formally or through self-study. The goal is to keep you abreast of new ideas that could
improve your bottomline. You may also want to improve your knowledge regarding your
weakest aspect in business. You can take courses in your local colleges, attend seminars and
skill workshops, or even enroll in an online course.
Fourth, learn from your customers. Customers, through their interaction with you and your
company, can teach you about themselves, what they want and what they need. Be attuned to
what your customers are saying, and make the effort to get their opinion and feedback. What
you learn from your customers can increase your profitability by making their lives easier.
After all, your ability to give customers what they want depends on your ability to learn from
customers' experiences.
For more information on starting a business, visit Power HomeBiz Guides at
http://www.powerhomebiz.com.
This ebook is copyrighted and any reproduction or resale for commercial purposes is strictly
prohibited. The author, the publisher, and the vendor of this ebook makes no representations
or warranties regarding the outcome or the use to which this ebook is put and are not
assuming any liability for any claims, losses, or damages arising out of the use of this ebook.
The user of this ebook should not rely on the author or publisher of this ebooklet for any
professional advice.
http://www.powerhomebiz.com
55

HOW TO CHOOSE A BUSINESS (AND SUCCEED!) Power HomeBiz Guides e-Book Series

Transcription

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