Archive for

Startup Essentials – The 5 Best Ways to Spend Money When Starting a Business

Finding ways to spend startup capital is easy, but there are a few things that should be included in every new business’s startup budget. The top five are:

Startup Essential #1 — Protecting Your Business

Setting up your legal obligations and protections correctly from the start is critical to building a successful company. It can be tempting to put off registering your entity (LLC or Corp) or paying for a business license until you start making money, but delaying is not the best option. Not only do those expenses keep you out of potential trouble, they also protect your personal assets from the liabilities of the business. Business insurance is another critical protection for any startup. Even home-based, one-person businesses should look in to small business insurance. The premiums should be pretty reasonable, and the protection can be invaluable if something goes wrong. Starting without setting up the right protections can also be a slippery slope…if you are okay for a month without paying those expenses, why not two? Or six? The longer you delay, the more you put your business at risk. Do your homework so you know exactly what is required for your business, and get it all squared away before opening day.

The total cost of registering your business depends on the state you are in. Entity registration ranges from a couple hundred dollars total to around one thousand, if your state (like California) includes exorbitant franchise fees. Business licenses and tax certificates are generally pretty cheap, under $100 in most areas. Business insurance varies greatly depending on your industry and coverage limits.

Startup Essential #2 — Small Business Software

Every modern business must have computers and the right software tools to minimize risk and maximize profitability. Without question, every small business should use a reputable accounting system. Peachtree is the best on the market for those who plan to grow the business. Don’t rely on the freebie downloadable versions any longer than absolutely necessary as they do not include the accounting tools that help to track and analyze profitability. In addition, your business should have an office suite, such as Microsoft Office, that includes a word processor, spreadsheet, and other programs. Contact management software is also important — your best marketing returns will come from the customer list you build yourself. ACT! is the best choice and is relatively easy to use. Other useful programs include office form templates, employee management software, and point-of-sale software that works with your Accounting system if you run a brick-and-mortar store.

Budget at least $500 to $1000 for the software you will need. Peachtree’s basic small business program is around $200, ACT! around $230.

Startup Essential #3 — Marketing Tools

Every business should plan to invest in at least two key marketing tools prior to startup — business cards and an internet presence. Business cards are still the primary means of networking…even employees of the largest online businesses all have business cards. You can get a couple of hundred for free through several print shops, but they will go fast. Select a high-quality paper and be sure the design and logo impart the image you are trying to develop. A web presence is an absolute necessity. You will need to purchase a domain name and web hosting service, as well as select software to build your web pages. The website software has come a long way — if you have basic computer skills, you can build a good website. This is not a place to scrimp and save. There are “free” web hosting services, but they are unreliable and flash built-in ads on your web pages. On the other hand, most businesses do not need a professional web designer to come up with a good site. Try the software and talk to the people you know…one entrepreneur we know mowed his web-savvy neighbor’s lawn for him while the neighbor put together a basic website using the entrepreneur’s software. Fair trade and everybody was happy.

Altogether, expect to spend at least $250 on just these marketing materials. Most businesses need to spend far more to market successfully, but business cards and a website are a good start.

Startup Essentials #4 — Time-Management and Organization Tools

Every entrepreneur needs a system for managing time and staying organized. Your time will be divided randomly among 582 different things every day, so the more organized you are, the better. Start with a daily planner. Look for one that is customizable (like the Uncalendar) so that you can develop the best time-management system for you. Develop a system for listing and prioritizing tasks and setting aside blocks of time to work on important elements of your business such as the marketing plan and managing the finances. Your planner should also include space to collect information about your business and competitors, your networking contacts, and any other critical data. A full-size (8 1/12 x 11) planner is far more effective than the smaller ones. Get started using your planner as soon as possible so that the habit is ingrained by the time you are buried under business responsibilities! Also include tools for keeping paperwork, supplies, and product organized…you will have too much to do to waste time searching for what you need!

A good time-management system should run about $50 to $100, organizational tools will vary (file cabinets, etc.).

Startup Essentials #5 — Information

As the owner, you will need to know all the details of what you are doing. From the legal setup to your target market, from your product specs to your store or website’s traffic patterns. First-time entrepreneurs tend to underestimate how much time and effort it will take to get up to speed on all of the aspects of business ownership. But, taking control by attending to the details yourself will reduce your risk and increase your chances of great success. Once your venture is up and running, the learning should continue. Stay on top of news and innovations in your industry, read biographies of successful entrepreneurs, read up on the latest marketing opportunities. While it is easy to answer a specific question through the free content available on the web, most entrepreneurs will need to spend some cash for tools (books, trade associations) to ensure the business gets off to the right start by covering every critical aspect of a successful startup.

Include at least a few hundred dollars into your startup budget, but the amount will vary depending on the type of business you are starting and the depth of planning you will do. Remember that the better you plan, the lower your risk. Add a monthly budget amount for continuing education such as books, industry magazines, and the like.

Simple Business Tools That Will Enhance Operational and Financial Performance of Your Business

Smaller companies are often unaware of simple tools that can be used to improve business performance. They are relatively cheap and easy to use. So what are they and what exactly do they do?

Some smaller businesses believe that business tools are only for larger companies. This could not be further from the truth. Proper use of a number of simple business tools can seriously affect business performance by increasing both operational efficiency and profitability. I would recommend 4 different tools, which collectively cost about $500. They are intuitive and easy to use. So what are they?

1. Mind Maps
2. Business Health Check
3. Business Planning Tools
4. Microsoft Visio

Mind maps are computer based programs that you can purchase and download over the internet. They are a terrific management tool in that they allow you to summarize an enormous amount of detail on a single page. Consider all of the tasks you need to undertake in a week or a month and you will find that there is no way to keep on top of everything if you list them in a traditional linear fashion in a notebook or on several sheets of paper. Mind maps allow you to keep track of all of the important issues including key assignments for staff, performance measurement, key account management, strategic development, milestone management, to mention just a few. They also allow you to record details of meetings in a coherent and ordered way which facilitates excellent follow up. You may also use them to brainstorm ideas with your team.

A business health check tool allows you to step back from your business and to analyze it in detail using several hundred well targeted questions. A good one will focus on every aspect of your business including leadership, management style and capability, operational competence, financial management, management and use of information, IT infrastructure, quality and effectiveness of staff, business planning and many more key measures. It is similar to getting a management consultant to come into your business and look underneath the hood, except you can do the diagnosis yourself and it is much more cost effective. The advantage is that it gives you a deep insight into the here and now so that you can then plan your business’s future more coherently.

Business planning is often overlooked in small businesses. This can be a costly mistake. It makes little sense to allow your business to drift on a day-to-day basis and for you to be simply reacting to situations rather than anticipating and actively managing them. Every business needs a road map to keep it on track. A business plan allows you to build a strong team culture with a shared vision of the future. If the whole team has clarity of purpose and is pulling well together, then the business is going to perform substantially better. There are many business planning tools available on the internet and some are even free. The ones you pay for tend to offer you more.

Microsoft Visio is a simple drawing tool that anyone can learn with as little as half an hour on the computer. There are a multitude of uses it can be put to in your business from building marketing brochures and flyers to designing standard forms and stationery. My personal favourite use of Visio is for drawing business process workflows. It is amazing to see with clarity how we go about doing things in our businesses when it is shown in a visual way on a piece of paper. All of a sudden you notice the redundancy in the way that even the most simple activities are carried out. This facilitates changing your business processes and streamlining them to be more efficient. It also allows you to coherently document your processes so that is no ambiguity about the way in which your staff executes them. This can save you a lot of wasted time and money.

Is Your Online Business Making This Mistake?

You have a good website, you are focused on your product, you work hard at the business and yet your website is not delivering the expected… What went wrong?

Mike Carlson (name changed) had a website that was perfectly in all aspects- it was running well, looked good and it was even on page one for some keywords. Yet he was getting practically no traffic and his conversions were abysmal.

Mike is no exception. There are plenty of entrepreneurs with online businesses who are unsuccessful in attracting traffic.

Mike just failed to plan well.

What Mike planned was that “I will sell this product, target this keyword and have an online shopping cart for 24 hour accessibility”

Mike failed to plan a strategy. He did not plan how to achieve his targets. He just planned what he wanted to do.

“Failing to plan is planning to fail”,you’ve heard this before. This is particularly true for businesses and no prizes for guessing; this applies to online business too. If you have decided to do business online and you have no plan, you are doomed to fail. Online business plans must be focused on all business activities which will lead you to your goal, help you to reallocate your resources to optimum use, analyze and make corrections & adjustments to get back on track if you ever deviate from your goals.

In the world of e-commerce you need specific planning

- What ecommerce business do you want to start?
- Is there a demand for the product?
- Is it too niche to generate revenue?
- How much revenue do you plan to target in the first year of business?

The above questions will help you decide the selling price and the number of people who must purchase your product for you to achieve the target. Your conversion rate will more or less depend on the conversion rates of your industry.

Once you get an approximate figure you can calculate the number of visitors you wish to browse your site. Then to need a workable plan which will get the required number of people to your website. This means that you much finalize what phrases are being used to search for the product and target the ones relevant to your product and traffic estimations.

A proper business plan will establish your business goals and eliminate unrelated unnecessary activities. After asking yourself the above questions you have a clear view of what you want from your online business in a given timeframe.

Online business plans may differ but there are a few broad guidelines which all such plans should include. They are knowledge of your market, content management and integrating your website design with SEO. Once you have the idea of a niche item you want to deal in you need to find the market for it. Then you need to refresh your website content periodically for search engines to fall in love with you. Your website planning, development, management and marketing strategies should be integrated with your business model for perfect harmony between each other.

An analysis of Mike’s business was that he just started selling products outright, targeting low traffic keywords and not finding the right people or the right market. In fact he was selling niche products to a generic audience. He did not research and did not plan long term He just focused on the present.

Know your customers

Here is some basic information that is needed before you launch your online business:

1. Who is my prospect?

- Demographic information

a. Where do they live?
b. What is their income group?
c. What is their age group?
d. What is their family size?
e. What is their profession?
f. Psychographic information
g. What is their lifestyle?
h. What are their beliefs?
I. What are their radio/TV watching habits?

2. Product usage information

- What is their hot button issue that your products or services address?
- How do they use your products/services

a. How much?
b. How much money do they spend?
c. What are their expectations from the products/services that you offer?

3. What is my prospects internet usage behavior?

a. What percent of your prospects look for your product/service on the internet vs. Yellow Pages?
b. What keywords or key phrases do they use to search products or services that you offer?
c. What percent of your prospects purchase your product/service over the internet?
d. What makes them decide to buy on the web vs. in store?

The plan for online business is very different from the plan for normal brick and mortar business. This business runs 24×7 non stop and closes as and when you, the business owner wants.

Focus on the customer

- What benefits do my products give my customers?
- How can I maintain their satisfaction levels?
- Why will the customers buy my products?
- How do I reach my target customers?

These are some questions which should be answered by your online business plan. Traffic generation is very important for this business and you may opt for free (article, blog, forum marketing) or paid (solo ad, Pay-per-click marketing, SEO) methods to generate more and more traffic.

The goals in your plan should be realistic, measurable and appropriate to your skill level and time scale. Your plan should include the details such as start-up costs, labor needs product quality, competition, the size of your potential market, profitability, necessary product support, legal issues and regulatory concerns, associated costs like shipping, inventory and repeat business potential and cross-selling potential.

Keep asking yourself these questions…

- How many visitors are coming to the site?
- How many visitors are new vs. old?
- How long does each visitor stay on your site?
- What does each visitor look at?
- What graphics, words, pictures, etc are generating the most responses?
- Which search engines are getting you the best prospects?
- Where else are your customers coming from?
- How many pages does the visitor look at?
- What are your website rankings?
- How much money have you made from the average visitor?
- Who are your biggest money-making customers?
- If you use PPC is it working and paying for itself?
- Which links are bringing your visitors and are they converting to customers?

Last but not the least, online business should invariably be related to something you love to do. The product or business should have an attraction value for you which will help you to not get bored while the time flies. A majority of businesses fail during the first two years after inception, mostly because its owners are no longer willing to put in the work needed to make it grow. By picking an area in which you have a natural affection and aptitude in, you will increase the chances of making your online business more than just passing fancy.

So get going and don’t forget to fail to plan a complete strategy.

Copyright (c) 2009 Ajay Prasad