Welcome and Introduction Welcome the staff members to
Welcome and Introduction �Welcome the staff members to the session �State the subject of the session �Describe the overall goals of the session
Course Overview Session 1 Session 2 Session 3 Session 4 Session 5 Session 6 Session 7 Session 8 Session 9 Session 10 Session 11 Session 12 Session 13 Session 14 Session 15 Preparing for Success Researching Your Business Idea Business Planning The Marketing Plan Laws, Regulations and Taxes Managing Your Microbusiness Analyzing Your Market Product and Price Placement and Promotion E-Commerce Selling Success Cash Flow Management Keeping Books and Records Financial Tips and Tools Bringing It All Together
Participant Materials Session Outlines ◦ Session-by-session course outline Text ◦ Business Plan Basics: Nx. Leve. L® Guide for Micro-Entrepreneurs Worksheets ◦ Nx. Leve. L® Micro-Entrepreneur Business Plan Worksheets Resource Guide ◦ Nx. Leve. L® Business Resource Guide Other ◦ Class handouts, supplemental materials
Class Agenda Class Opener Instructor Topics and Worksheet Time ◦ Worksheet Activities and Discussion ◦ Business Plan Sections Guest Speaker Break ◦ Refreshments ◦ Networking Activity Instructor Topics and Worksheet Time ◦ Worksheet Activities and Discussion ◦ Business Plan Sections ◦ Writing and Reading Assignments
Expectations and Ground Rules Attendance Assignments ◦ Absenteeism ◦ Reading ◦ Punctuality ◦ Worksheets Participation ◦ Discussion ◦ Confidentiality ◦ Listening ◦ Written business plan sections ◦ Format General ◦ Safe environment to test ideas ◦ Ask questions ◦ Add ground rules as needed
Traits of Successful Entrepreneurs � Passion. Enjoying what you do is a big part of doing it well! � Persistence. Entrepreneurs don’t give up when facing challenges. � Risk-taking. Entrepreneurs take calculated risks to reach worthwhile goals. � Willingness to work hard. Entrepreneurs are achievementoriented people who take pride in overcoming obstacles. � Self-confidence. Entrepreneurs have confidence in themselves. � Optimism. Entrepreneurs believe their hard work and planning are likely to pay off. � Critical thinking. Smart entrepreneurs look at situations as they are, not as they want or imagine them to be. � Creativity. This is the main factor that determines whether an entrepreneur will succeed or fail. � Cooperation. Smart entrepreneurs know when to seek help. � Communication skills. Marketing your business is an ongoing process of communicating the things that make it special. � Fairness. Successful entrepreneurs earn a good reputation through fair dealing and personal integrity. � Staying healthy. Entrepreneurs know that taking care of business requires taking care of themselves.
Risks of Business Ownership � Stress. Starting a business � Failure. The emotional is stressful at the best of times. The more you have at stake, the more stressful it is. � Financial hardship. You effects of business failure can be hard to handle, especially if you don’t have strong support from friends and family. may have your own money � Long hours. You may have or other assets at risk. Also, to work 50 hours or more per week. This could mean your income may be giving up activities you irregular during the first currently enjoy. year. � Debt. If your business fails, � Family problems. If your you may end up with serious debt, credit problems and other financial troubles that make it hard to get back on your feet. family members don’t understand accept the risks of your new business— including long hours and new financial stress—serious conflicts are likely.
Rewards of Business Ownership � Independence. You’re in charge of your own life and work. � Helping your community. Successful businesses help communities grow and thrive. Job security. These days, a � Learning new skills. microbusiness may offer more Launching a business is a stability than a traditional job powerful learning experience would. that can transform many areas of your life. No matter what � Money. The financial rewards happens, you’ll gain new of running a microbusiness can valuable skills and experience. go far beyond what you would earn at a normal job. � Excitement. Running your own business offers opportunities � Pride. Running a successful for excitement, creativity and business can earn recognition that most and build pride and selftraditional jobs can’t match. respect. �
Personal and Business Goals Common personal goals � Use your creativity or talent. � Move to a bigger home. � Common business goals � Grow your business by 10 to 15 percent each year. Put money aside for your child’s education. � Grow the business to a certain size and sell it. � Get off welfare or Section 8. � Grow the business and open a second location. � Sponsor community events (concerts, lectures, afterschool programs). � Hire two employees in your first year. � Spend plenty of time with your family. � Be the greenest business in your industry. � Help to solve a social or environmental problem. � Capture a certain percentage of your market. � Revitalize a struggling community or neighborhood.
Why Do Microbusinesses Fail? � Lack of a well-researched business plan � Not identifying their target customers � Not understanding what their target customers need and want natural disasters, theft, illness and growth � Poor accounting practices � Poor inventory management � Poor cash flow management � Not setting the right price � Owner’s salary is too high for products and services � Choosing the wrong distribution method � Poor customer service � Failing to comply with laws, regulations and taxes � Failing to seek help from mentors and other smallprepare for contingencies, business experts including: � Failing to plan ahead and
Why Do Microbusinesses Succeed? � Careful research and planning at every business stage � Taking steps to minimize or avoid problems that affect business operations � A clear understanding of � Good accounting and who their customers are, bookkeeping where they live and what � Good inventory they need management � A unique product that meets customer needs, � Careful budgeting offered at the right place, � Effective promotions the right time and the � Good organization and right price management skills � Excellent service based on an ongoing dialogue � Asking for help when necessary with customers
Bootstrapping Ideas � Share a rental space with another business. � Hire workers for one-time tasks through a website like Craigslist. � Participate in a small-business incubator. � � � markets, street fairs and “pop-up retail” options. � Look for Local Exchange Trading Systems (LETS) whose members trade goods and services. � Barter to procure supplies, or trade expertise you have for expertise you need. Look for a local nonprofit that provides microbusiness owners with � Use free or low-cost online faxing, free or low-cost computers. database and accounting programs. Look for free supplies on � Get funding through online tools Freecycle. org and similar sites. like Kickstarter. Find an existing business that will let you rent equipment or facilities. � Increase your visibility and reach with Twitter, Facebook and other Test-market your product online social networking sites. with sites like Etsy or e. Bay. � Send marketing materials and Ease yourself into business by catalogs electronically instead of selling at flea markets, farmers’ printing and mailing them.
Networking Tips � � Think ahead! List all the � people you know, and think about how they could help you launch your business. Consider family, friends, neighbors, work � contacts, school contacts, online contacts and interest groups. Be sincere! Most business people are good at spotting insincere networking attempts. Be clear! Come up with a simple, compelling way to introduce yourself and your business idea. � Keep your network warm! Set up a system to stay in touch with your contacts. � Be reliable! Always follow through on your promises. � Be helpful! Networking is a two-way street. The more you give, the more you get! Be prepared! Always carry business cards. Be confident! Learn and practice positive body language and conversation skills. If necessary, get help from a pro. Stand out in a crowd! Wear something unusual to spur conversation (e. g. , a unique pin, watch or ring).
Professionalism in Business ALWAYS be on time for meetings and other appointments. ALWAYS dress appropriately. ALWAYS speak and act politely and respectfully. ALWAYS respond promptly to phone calls and emails. ALWAYS maintain a clean, orderly workspace or office. ALWAYS do your best to exceed expectations. NEVER make promises you can’t keep. NEVER hire employees who don’t meet your standards for professionalism. NEVER argue with customers.
Verbal Communication Tips � Speak at a clear, � Don’t use jargon or comfortable pace—not technical terms without defining them. too fast, and not too slow. � Stay positive and steer clear of controversy. � Speak at a moderate volume—not too loud, � Use business terms and not too quiet. correctly and � Avoid vulgarity, slang appropriately. and swear words. � Record yourself � Never interrupt people. speaking and listen back to identify areas � Listen! Good communication requires for improvement. careful listening.
Listening Skills �Stop whatever you’re doing. When other people speak, give them your full attention. �Be engaged. Look alert and maintain eye contact. �Show interest. Encourage the speaker to continue by nodding, laughing where appropriate and showing other signs of interest and attention. �Prove that you’re listening. Summarize points and ask questions to make sure you understand what’s being said. �Think before you respond. Listen carefully, judge calmly and then react.
What Are Your Time Wasters? � Watching TV � Other people make too many demands on your time telephone � Feeling overwhelmed; � Spending time online not knowing where to start � Disorganization � Looking for information � Lack of clear goals � Procrastination � Worrying � Frequent interruptions � Failure to prioritize � Oversleeping � Long lines � Negative attitude � Unreliable transportation � Misplacing things � Talking on the
Time Saver Tips � Use a calendar or planner � Always put tools and every day � Prioritize your tasks � Ask family for more help with household chores � Set clear boundaries equipment away � Look for online alternatives (e. g. , buying postage online instead of waiting in line at the post office) between family time and � Use timers or clocks to business time manage your time � Complete difficult tasks � Schedule regular breaks when you’re at your daily � Plan shopping trips peak carefully to avoid making � Learn to say no multiple runs � Keep all business papers � Get help with tasks you’re filed neatly not good at
Coping With Stress � � � Take a break! Getting some � Find support! No matter what distance clears your head and you’re going through, someone helps you make better can help you cope. decisions. � Slow down! Set aside some Get some exercise! Research quiet time every day to reflect and relax. shows that exercise reduces stress and eases depression � Stay motivated! Carry an and anxiety. inspirational quote. Eat well! A microbusiness is � Get help! If you have a hard only as healthy as its owner. time overcoming negative thoughts and worry, cognitive Get enough sleep! The combination of high stress and behavior therapy (CBT) is proven to reduce anxiety and little sleep is very dangerous! depression. Think positively! You may not have control over stressful events, but you can control how you react to them.
Personal Budgeting Worksheet
Understanding Net Worth ASSETS (What you own) LIABILITIES (What you owe) = NET WORTH (What’s left)
Personal Financial Statement Worksheet
What You Must Know About Credit � Whenever you buy � Creditors and lenders use something on credit or apply credit scores to make decisions about your for credit, it’s reported to national credit bureaus that application. track your credit and � Your personal credit score payment history. affects your startup business’s ability to get � The main three credit. bureaus are Equifax, Trans. Union and Experian. � If you are denied credit, you are entitled to a free copy of � When you apply for credit, your credit report. credit bureaus generate a credit report based on your name and Social Security � You can get a free credit report annually from each of number. the three credit bureaus by � A credit score is assigned to visiting you based on your credit Annual. Credit. Report. com. history.
How to Protect Your Credit � Get copies of your � Create or sign up for Equifax, Trans. Union payment reminders to and Experian credit avoid late payments. reports annually. For � Protect your Social best results, order a Security number, credit free copy from one of the bureaus every four card number and other private information to months. avoid identity theft and � Note any incorrect other forms of fraud. information on your credit reports, and alert � Check your monthly credit card bill for the credit bureaus in unauthorized or writing. incorrect charges. � Don’t apply for credit accounts unless absolutely necessary.
Overcoming Credit Problems � Create a personal budget and stick to it. � Do not apply for more credit or incur more debt. � Contact creditors and them. Make the largest payments toward the debt with the highest interest rate while maintaining minimum payments on other credit accounts. Once the most expensive account is paid off, move on to the next. make arrangements to pay back old debt. Try to get monthly payments reduced, if possible. � Beware of ads and emails that promise quick fixes. � Fix any errors on your Credit repair is possible, credit report. but it takes time and � Pay your bills on time! patience. � If you are making � Get help from a reputable payments on multiple credit counseling or debt credit accounts, prioritize management service.
Nx. Leve. L® Micro. Entrepreneur Business Plan Outline - 1 Section Worksheet Pages Cover Page 14 -8 Table of Contents 14 -9 Section I. Executive Summary 14 -6 Section II. Business Concept A. General Description of the Business 3 -3 to 3 -6 B. Business Goals and Objectives 3 -1 and 3 -2 C. Industry Information Industry Background 4 -5 Current and Future Trends 4 -6 and 4 -7 Business Fit in the Industry 4 -8 Section III. Business Organization & Operations A. Business Structure, Management and Personnel Business Structure 5 -1 Personal Background Information 1 -8 and 1 -9 Management Team 6 -1 to 6 -3 Outside Services and Advisors 6 -4 and 6 -5 Personnel 6 -6 to 6 -11 B. Operations Plan Site and Equipment 6 -12 to 6 -14 Purchasing and Inventory 6 -15 Risk Management 6 -16 to 6 -19 Laws, Regulations and Taxes 5 -2 to 5 -4 Contracts and Leases 5 -5 and 5 -6 C. Managing Books and Records 13 -1 to 13 -6
Nx. Leve. L® Micro. Entrepreneur Business Plan Outline - 2 Section Worksheet Pages Section IV. Marketing Plan A. Products and Services Product Description 7 -1 to 7 -3 Features and Benefits 7 -4 B. Market Analysis Customer Analysis 7 -5 to 7 -7 Competitive Analysis 7 -8 to 7 -11 Market Potential 7 -12 and 7 -13 C. Marketing Objectives, Strategies and Tactics Product Strategy 8 -1 to 8 -5 Pricing Strategy 8 -6 and 8 -7 Placement Strategy 9 -1 Promotional Strategy 9 -2 to 9 -8 D. Sales and Customer Service Sales Strategy 11 -1 to 11 -5 Customer Service Strategy 11 -6 to 11 -8 Section V. Financial Plan A. Capital Requirements Startup Costs 12 -2 Loans, Grants and Self-Financing 14 -1 to 14 -3 B. Sales Forecasts 12 -7 C. Cash Flow Projections Monthly Cash Flow Projections–Year 1 12 -1 to 12 -9 Notes to Cash Flow Projections 12 -10 Annual Cash Flow Projections—Years 2 & 3 12 -11 and 12 -12 D. Financial Statements Sources and Uses Statement 14 -1 to 14 -3 Personal Financial Statement 1 -14 to 1 -16 Income Statement [Optional] Balance Sheet [Optional] Attachments 14 -10 to 14 -11
Where Do Business Ideas Come From? Prior job 56% Hobbies and interests 18% Chance 10% Someone else’s suggestion 8% Education 6% Other 2%
Comparison of Manufacturing Service and Retail Businesses
How to Identify Business Opportunities � Take stock of your skills and � Find new uses for old things. experience. What are your strengths? What can you offer? � Keep an eye out for unmet or underserved needs identified by friends and relatives. � Meet temporary needs. There are hundreds of potential uses for old and discarded goods and materials. � Find a new way to deliver an old product. Many entrepreneurs make their fortunes by changing where and how people buy an existing product. Rental businesses are springing up for tools, college textbooks and even � Stay informed! Stay on top of business ideas and trends baby clothes! by reading newspapers, � Look for green opportunities. trade journals and Can you make an existing magazines. product better for the environment?
Evaluating Your Business Idea � Is my business idea safe and legal? � Is there enough customer demand to support my business? Can I meet this demand? � Is anyone else offering my product? If so, can I do it better? If not, why not? � How often will they buy? How much will they pay? � How many competitors do I have locally, regionally, nationally and internationally? � Where will I get the capital I need to start this business? � Can I run this business by myself? What � What is my maximum possible financial kind of workspace do I need? Can I work from home? � Where will I get the materials and equipment I need? How much will they cost? � Who are my customers? Where are they? � Where will my customers buy? At a store? Online? � Why will they buy? Why do they need my product? loss? � When will I start earning a profit? How will I cover my personal expenses and debts until then? � How do I know my business will become profitable? Will the profit be enough to cover my personal expenses and debts? � How and when will I grow my business?
What to Look For in a Niche Market � Clearly defined and measurable (skateboarders in your area, aged 12 to 25). � Growth rate (stable or expanding). � Presence and strength of competition, locally and � Accessibility (how will you online. communicate with them? � Percentage of the market How will you deliver you can realistically products? ). target, given your � Worthwhile size and sales budget, capabilities and competitors. potential (how many customers are there, and how much do they spend � Percentage of the market each year on skateboard you must capture to earn a profit. parts? ). � Unmet needs (no parts shop in the area).
Segmenting Your Customers Demographic segmentation Geographic segmentation ◦ Age ◦ Country, state, city ◦ Gender ◦ Rural, urban, suburban ◦ Income level ◦ Population density ◦ Marital status ◦ Climate / weather ◦ Occupation ◦ Terrain (coast, prairie) ◦ Education level ◦ Access to Internet ◦ Kids at home? ◦ Infrastructure (roads, rail) ◦ Ethnicity ◦ Natural hazards Psychographic segmentation ◦ Lifestyle ◦ Needs and values ◦ Attitudes ◦ Beliefs / opinions ◦ Buying styles ◦ Interests / hobbies ◦ Recreational choices ◦ Entertainment choices
What Makes Your Business Idea Unique? � New invention or service � Personal story (a family � One-of-a-kind product (e. g. , arts and crafts) � Benefits other products lack tradition; your skills or accomplishments; a personal or social commitment) (comfort, ease of use, color, � Faster and better customer shape, durability) service � Special materials or processes (handmade, recycled, green, organic, local) � Location (convenient for � Customization or personalization � Unique distribution channel (house calls, online service) � Special add-ons or extras customers; near a local attraction; region has historical or social interest) � Supports a cause or philosophy (community redevelopment, social justice, green living)
Sources of Business Information � U. S. Census Bureau � Small Business Development Centers � Local or state office of economic development (SBDC) � Small Business Administration (SBA) � Local credit union or community bank � Women’s Business Centers (WBCs) � Magazines and newspapers � Minority Business Centers (MBCs) � Business websites and expert blogs � University and community libraries � Talking with potential customers � SCORE � Talking with competitors � Association for Enterprise Opportunity (AEO) � Microlenders � Business Information Center (BIC) � Trade associations � Suppliers and vendors � Local business mentoring groups � Local chamber of commerce � Local nonprofit foundations
Questions About Business Planning � Is a business plan really necessary for a tiny microbusiness like mine? � How will planning affect my bottom line? � What’s the connection between a business plan and management skills? � Why do lenders and investors care about business plans? � How can I make plans when everything’s so uncertain? � Do I have to get everything right the first time? What happens if I learn new things or change my business idea? � Can’t I just start my business now, and deal with management issues as they come up? � How often is planning necessary? � Who can help me complete my plan? � What if I don’t complete my plan?
The Benefits of Planning � Seeing the big picture. � Planning helps you sort through your business issues and identify the ones that cause most of your problems. Continuous improvement. Comparing planned to actual results is a terrific way to improve your business operations. Clear communication. A good � Being prepared. A business plan helps you avoid, minimize business plan clearly explains or recover from disasters. your goals to employees, partners, lenders and investors. � Assessing financial performance. Preparing a � New opportunities. Change financial plan helps you brings opportunities. Careful measure and improve your planning helps you make the business’s financial most of them. performance. � Surviving economic downturns. Microbusinesses are vulnerable to changes in the economy. Owners who plan are more likely to stay in business. �
The Planning Cycle
Keys to Successful Planning �As the owner, you must take the lead role. �Everyone in your family and your business should have input. �The plan should include contingency plans for worst-case scenarios. �The plan should be flexible. �Review your plan �Goals and objectives must be clear, realistic and include a deadline. often and revise it as necessary.
Business Goals and Objectives Goals are things you want your business to accomplish over a specific time period. ◦ Short-term goals are things you want to accomplish within one year. ◦ Long-term goals are things you want to accomplish within two to three years. Objectives are specific steps you will take to reach your goals.
Characteristics of a Good Mission Statement �Reflects the core purpose and direction of the company �Embodies the basic values of the owners and employees �Short, specific and focused �Written in plain English, without trendy jargon and buzzwords
Setting Exit Limits Exit limits are a safety net If my business experiences the following, I will call it against personal and professional loss. Your exit quits: limits might look something ◦ Overdue bills exceeding like this: $10, 000 If my business experiences ◦ Annual sales below $20, 000 the following, I will seriously ◦ More than $75, 000 in longconsider calling it quits: ◦ Overdue bills exceeding $5, 000 ◦ Annual sales below $30, 000 ◦ More than $50, 000 in longterm debt ◦ Profit margins below 12 percent over four consecutive quarters ◦ A buyout offer of $50, 000 or more term debt ◦ Profit margins below 10 percent over six consecutive quarters ◦ A buyout offer of $75, 000 or more
Elements of Marketing Market Research ◦ Gather primary and secondary data about your industry. ◦ Gather primary and secondary data about your customer, competition and market potential. Market Analysis ◦ Analyze the data you gathered about your industry, customer, competition and market potential. ◦ Identify your target customer. ◦ Identify your competitive advantage. Marketing Objectives, Strategies and Tactics ◦ Determine the best methods of getting your goods and services to your customers, based on your market analysis. ◦ Create a marketing mix using the Four Ps: Product, Price, Placement, Promotion.
Contents of the Marketing Plan A. Products and Services ◦ Product Description. What is your product? What needs does it meet? ◦ Features and Benefits. What are your product’s features and benefits? B. Market Analysis ◦ Customer Analysis. Who and where are your target customers? ◦ Pricing Strategy. What is your pricing strategy? How have you calculated costs and profitability? ◦ Placement Strategy. How will you get your products to your customers? Why is the right choice for them and for you? ◦ Promotional Strategy. How will you promote your business? What media will you use? How much will this cost? How will you measure success? ◦ Competitive Analysis. Who and where are your competitors? What are their D. Sales and Customer Service strengths and weaknesses? ◦ Sales strategy. How will you sell to ◦ Market Potential. How big is your target customers? Why did you target market? What percentage can choose this method? you capture? What trends affect it? What barriers to entry exist? ◦ Customer service strategy. What are your quality control policies? How will you track and measure customer C. Marketing Objectives, Strategies satisfaction? What is your refund and Tactics return policy? How will you communicate with customers, and what ◦ Product Strategy. What is your steps will you take to resolve problems? product line? What is your product positioning strategy? What is your brand identity?
Sales Forecasting Methods Breakdown Forecasting ◦ Start with the largest population and break it down to estimate sales from target customers. Buildup Forecasting ◦ Estimate the size of each market segment, and add them to get a total. Indirect Forecasting ◦ Find possible indications of demand sales when specific market data are missing.
Sources of Industry Data � Federal, state and local government offices and websites � U. S. Census Bureau Economic Stats (http: //www. census. gov/econ/) � Economic. Indicators. gov � � through library) � Standard & Poor’s Statistical Service (available through library) � Encyclopedia of American Industries (available through library) Fed. Stats. gov � International Trade Administration’s Office of Industry Analysis (http: //www. trade. gov/mas/ian/index. asp) Encyclopedia of Emerging Industries (available through library) � Pro. Quest Statistical Insight (available through library) Small Business Administration’s Business Data and � Statistics page (accessible from http: //www. sba. gov) � Join online industry forums and sites � Small Business Development Centers (SBDCs) Professional research firms � Women’s and Minority Business Centers (WBCs and � MBCs) � Business Information Centers (BICs) � � � Follow industry leaders and experts on social media Follow competitors on social media � U. S. Business Reporter Industry Research (http: //www. activemedia-guide. com/) Local, state and national trade and industry associations � Conduct your own interviews and surveys with key industry contacts and experts � Business and industry magazines and websites � � Local, state and national nonprofit foundations National Association of Manufacturers: Manufacturing & Trade Data By State (http: //www. nam. org/) � Local newspapers and magazines � Chambers of commerce � Standard & Poor’s Industry Surveys (available
Ways to Gather Primary Data �Face-to-face interviews �Phone interviews �Email or mail surveys �Phone surveys �Online surveys �Post research questions on social media (e. g. , blogs, Twitter, Facebook)
Drawing Industry Conclusions �How has the industry �What niche markets developed? are hot? �How does microbusinesses international trade operate within this affect the industry? �How will new and �What are the emerging technology affect the industry? industry’s current growth patterns? �How will current and �What is the industry’s new regulations affect the industry? current size? Is it expected to grow or shrink over the next three years?
Sole Proprietorship Pros Cons � The simplest way of doing � You are personally business. Easy to form and dissolve. � You have complete control over the business and receive all its income. � Filing income taxes is relatively easy. responsible for every act and debt of the business, so creditors can legally come after your house, car and personal savings. � You can’t expand your business through new owners and their capital. � Sole proprietorships end when the owner dies or is unable to work. This can cause serious problems for the owner’s family.
General Partnership Pros � Fairly simple to set up. � Partners may bring new expertise or additional funding to the business. � Business profit and loss pass through to each partner’s personal income tax return. Cons � Partners are jointly and individually liable for business debts. Creditors will go after whoever has enough assets to cover the debt. � Each partner usually has the right to sign contracts that are binding on the other partners. � General partnerships usually end if one partner dies or withdraws. � Partners pay tax on their share of profit even if they don’t withdraw it from the business.
Limited Partnership Pros Cons � Limited partners are only � More expensive to form. liable for debts to the extent of their investment. � Partners can provide additional funding for the business. � General partners are jointly and severally liable for debts. � If limited partners get too involved in the business, they can also be held liable for losses that exceed their investment. � It may be hard to find a partner who’s willing to invest without having the authority to make decisions.
Corporation Pros Cons � A corporation can shield � If corporate rules aren’t owners from debts and liabilities. � You can raise money by selling stock. � The business continues even if the owner dies or sells to a new owner. � You may be able to deduct employee health insurance and benefits. followed, the owners can be held responsible for debts and liabilities. � Time-consuming and expensive to form. More regulations, paperwork and recordkeeping. � Risk of double taxation. The corporation pays tax on its income, and you pay tax on any dividends you receive as a shareholder. (An accountant can help you avoid this problem. )
S Corporation Pros Cons: �Profit or loss is �Limited number of passed back to the shareholders like a partnership. shareholders. �Limited to one class of stock. �Must file their tax return on a calendar year basis.
Limited Liability Company (LLC) Pros Cons �Limited liability, like �Can be expensive a corporation. �No double taxation, like a partnership. �If one partner can utilize tax losses better than another, the LLC allows beneficial allocation of that tax benefit. and complicated to form, depending on where you live. �Some states don’t allow LLCs to have only one owner.
Low-Profit Limited Liability Company (L 3 C) Pros Cons �Limited liability, like �Can only be formed an LLC. �Operating as an L 3 C makes you eligible for investment and grant money from nonprofits. for charitable purposes. �Many states don’t have L 3 C laws, so you have to form it in a state that does.
Cooperative Pros � Members own and control the business. � Potential for collective efforts to improve marketing and add value to products. � Shared expertise in operation is a potential benefit. Cons � Lengthy process by members to set up (bylaws, major policy issues, direction, board). � Effectiveness depends on members’ longterm dedication. � Group decisionmaking and shared ownership may be cumbersome.
Government Regulations Business Registry ◦ Business licenses ◦ Filing requirements ◦ Business name registration Zoning Laws ◦ Signage restrictions ◦ Parking restrictions ◦ No manufacturing or sales ◦ No deliveries or storage ◦ No noise or pollution Business Taxation ◦ State income tax ◦ Sales tax ◦ Property tax ◦ Federal income tax Employee Regulations ◦ Payroll taxes / withholding ◦ Independent contractors ◦ Wage and hour regulations ◦ Equal Pay Act ◦ Immigration laws ◦ OSHA regulations ◦ Civil rights laws ◦ Child labor laws Consumer Protection Laws ◦ Consumer privacy laws ◦ Do-Not-Call Act ◦ Direct emails (CAN-SPAM) ◦ FTC mail or phone order rule ◦ Refunds and returns ◦ False advertising ◦ Labeling laws ◦ Public health and food safety Shipping Regulations ◦ Certification and licenses ◦ Hazardous materials laws ◦ Export controls and customs Environmental Regulations ◦ Hazardous materials storage ◦ Clean Water Act / Clean Air Act ◦ Waste disposal ◦ Underground storage tanks Bankruptcy Laws ◦ Filing requirements ◦ Limitations on protection
IRS 20 -Point Checklist: Independent Contractor or Employee? Primary Factors 1. Does the service recipient have the right to require compliance with significant instructions? 2. Does the service recipient have the right to set the hours of work? 3. Does the service recipient have the right to set the order or sequence of services to be performed? 4. Does the service recipient have the right to discharge the service provider? 5. Does the service provider have the right to hire, pay and supervise assistants as the nature of the work requires? 6. Does the service provider have no ability to realize a profit or loss? 7. Does the service provider have no investment in significant tools, materials and other equipment when such items are necessary to accomplish the task and are customarily provided by the service provider? 8. Does the service provider have no significant investment in facilities when they are necessary to accomplish the task and they are customarily provided? YES suggests employee status. NO suggests independent contractor status. Secondary Factors 9. Does the service recipient train the service provider? 10. Does the service recipient have the right to require oral or written reports? 11. Does the service recipient pay by the hour, week or month? 12. Does the service recipient pay for business and/or travel expenses? 13. Does the service recipient have the right to require personal service? 14. Does the service provider usually not work for more than one firm at a time? 15. Does the service provider maintain a continuing relationship with the service recipient? 16. Does the service provider devote substantially full time to the service recipient? 17. Does the service provider have the right to terminate the relationship at any time without incurring liability? 18. Is the service provider integrated into the service recipient’s business? 19. Does the service provider not make his or her services available to the public on a regular and consistent basis? 20. Does the service provider work only on the service recipient’s property or designated location?
Basic Contract Terms Performance ◦ What actions must you complete? Price ◦ How much, in what currency? Place of delivery ◦ Where, by what method? ◦ Who’s liable while goods are in transit? Time to perform ◦ When are the goods or services due? ◦ When is payment due? Quality ◦ What quality standards must be met? Legal remedies ◦ How will the contract be enforced?
What’s in a Lease? �What are you leasing? �True cost of the lease �Payment escalators �Permitted uses �Tenant rights �Renewal options �Purchase rights �Right of first refusal �Exclusivity �Triple Net Lease (tenant pays taxes, insurance, utilities, maintenance in addition to rent) �Common Area Maintenance (often added to the lease in malls or shopping centers)
Protecting Intellectual Property �Trademarks �Patents protect your eligible new business and processes, designs product name and inventions. logo. �Trade secret laws �Copyright protects protect private creative work in business tangible form (e. g. , information, writing, music, art, methods and processes. photographs, recipes, patterns, etc. ).
Pros and Cons of Working at Home Advantages Disadvantages �Flexibility in �Isolation scheduling �Lower startup costs and overhead �More time with family �Increased job satisfaction �Tax advantages �No commute �Loss of privacy �Credibility issues �Zoning problems �Space
Home-Based Business Tips �Set clear boundaries between work and personal life �Make time for family! �Set up a functional office �Project a professional business image �Understand zoning regulations and taxes �Understand insurance needs �Stay connected!
Managing Business Communications Written communication owners never say anything they wouldn’t be willing to put in writing. ◦ Be clear and concise. ◦ Always type your business letters. ◦ Check spelling and grammar carefully. ◦ Be organized! Set an agenda, and be clear and brief. Phone etiquette ◦ Keep duplicates or backups of all communication. ◦ Answer with a friendly greeting that identifies yourself and your business. ◦ Develop a secure and effective filing system. ◦ Sound confident and enthusiastic! ◦ Remember that putting things in writing may form a contract. ◦ Always keep a duplicate message pad handy. Verbal communication ◦ Be honest! Always stick to the facts, and never make promises you can’t keep. ◦ Be reliable! Smart business ◦ Say thank you!
Traditional Organizational Chart
Optional Organizational Chart
Key Management Goals �Learn to delegate �Develop your internal team and your external team �Develop management goals and strategies �Create efficient processes and structures �Assign responsibilities and authority �Ensure clear communication �Lead by example �Get advice when needed �Accept constructive criticism �Have fun!
Guidelines for Successful Outsourcing Understand your core competencies ◦ What expertise do you have in-house? What expertise must you seek elsewhere? ◦ Figure out what you do best, and consider delegating the rest. ◦ Can you manage the new relationships that outsourcing will involve? ◦ Are there structures in place to make it work? ◦ What matters to customers? Will outsourcing affect their perception of your business, or your core competencies? Look at long-term viability, not short-term savings ◦ Don’t assume that decreasing labor costs will always provide big savings! ◦ Weigh efficiency against effectiveness. Seeking greater efficiency is a bad idea if it lowers your ability to meet customer service and quality standards!
Basic Employee Management Practices �Identifying policies, tasks and job descriptions �Interviewing, selecting and hiring, and training �Setting performance goals �Evaluating and measuring performance �Creating compensation and incentive strategies �Facilitating communication and continuous learning
Expanding Your Network � Join a formal networking organization, you’ll also have an opportunity to let others know about your business. group. Local chambers of commerce and similar groups usually offer regular networking sessions and � Add contacts to a mailing list business seminars. you can use to advertise your products. � Become active in local business organizations, and � Use social networking tools get to know people with like Twitter and Linked. In to similar interests. increase your visibility and grow your network. � Start an informal support group. Meet with other � Remember that networking microbusiness owners to is a two-way street. You discuss common business must give in order to issues. receive! � On behalf of your business, get involved with a local charity. As you give to the
Types of Insurance Property and liability insurance Life and health insurance ◦ General liability ◦ Workers’ compensation ◦ Business property ◦ Life insurance ◦ Business interruption ◦ Health insurance ◦ Business crime ◦ Self-insurance ◦ Fire and flood ◦ Social Security ◦ Key person ◦ Pension plans ◦ Commercial auto ◦ Electronic data processing ◦ Website ◦ Home office
Tips for Lowering Insurance Costs Secure all doors and windows! ◦ Adequate lighting, barred windows and secure doors greatly reduce the risk of theft. Fire safety is one of the biggest factors in insurance costs! ◦ Install smoke alarms and test them every month. ◦ Avoid dangerous electrical connections. ◦ Keep the perimeter and interior of your building free of debris and clutter. ◦ Store hazardous chemical properly. ◦ Keep fire extinguishers fully charged. Keep your business site safe for visitors! ◦ Walkways should be clean and dry, and steps should be sturdy and well maintained. ◦ Keep your office area free of clutter. Keep your business safe for employees! ◦ Provide adequate safety gear, and avoid unsafe working conditions. ◦ Replace hazardous chemicals with safer alternatives wherever possible. ◦ Create a written safety policy and hold regular safety meetings.
Business Continuity Planning List all necessary business functions, � Distribute the finished plan to who performs them, and what employees. Every member of your team should have a copy of the plan equipment and supplies they require. at work and at home. � Compile contact information for key employees and assign recovery tasks. � Revise the plan as necessary. When things change, your plan needs to � Identify threats, and the business change with them. functions they threaten. Try to minimize the damage they can do to � Test the plan regularly. It’s better to learn about mistakes during a practice infrastructure, equipment and data. run than during a crisis! � Get contact information for all essential outside partners (lawyers, suppliers, etc. ). � � Identify and make copies of essential documents. Create duplicates of all the documents you need to run your business. � Designate a secondary work site to use until your primary site is restored or replaced. � Get employee input. Seek employee comments before finalizing the plan.
Requirements for Successful Business Growth �A profitable business model �Proven operating �A stable or growing market demand for your products procedures that �The ability to have been set down provide additional in writing training to your employees, if �A clear needed understanding of your current and future customers �Openness to change �Access to growth capital
Surviving Economic Downturns � Revisit your budget and your � business plan. Expenses that aren’t crucial may need to be cut, scaled back or postponed. � Don’t stop advertising. In tough times, the last thing you want to do is � Offer incentives. Special offers, free services and added value can attract reduce your visibility. customers who are worried about Innovate. Consumers may welcome their finances. new tactics and offerings. � Don’t ignore payroll taxes and Reduce inventory. This can free up other payments that are due to space, time and money! the government. These agencies can impose fines, place a lien on your Keep employees informed and property, or even shut down your inspired. They may have good ideas business altogether. for cutting costs or boosting sales. If they stand by you, reward their � Keep your creditors informed. If loyalty when things get better. you’re having trouble paying your bills, stay in contact with your Keep an eye on your supply chain. creditors and vendors, and offer them If vendors, customers or partners are a realistic payment schedule. having financial problems, it may affect your ability to fill orders or get paid. � � Form partnerships and alliances. Other struggling businesses may be looking for ways to weather the storm. Work together to find win-win solutions!
The Purpose of Market Research Your goal is to identify: ◦ Customers. Who will buy your product? ◦ Market niche. Who’s your competition, and where do you fit into the market? ◦ Price. What price will make your product competitive? ◦ Competitive edge. What makes you better than or different from the competition? ◦ Location. Where will you sell your product to reach your target customer?
Market Research Tips Identify your research problem. � Always document your sources Set clear objectives for data thoroughly (e. g. , book title, gathering. author, year of publication, page number). � Create a budget and a timetable. Placing limits on the � If you create a survey, include a space for open-ended research process will keep it comments. from spiraling out of control. � Prioritize your research tasks. � Ask permission to record interviews to ensure that you Identify the most and least don’t miss any important research questions. details. � Prioritize your data sources. Which ones are most likely to � Keep your surveys and have the information you need? interviews short, clear and neutral. � Keep an open mind and seek viewpoints that differ from your � Organize and analyze the data. Make sure it addresses the own. Don’t let wishful thinking or beliefs affect how you gather research problem you identified. or interpret data. �
Where to Find Market Data � Surveys. Interview groups or individuals by mail, online, in person or on the telephone. � Government publications and statistics ◦ Fed. Stats (http: //www. fedstats. gov) ◦ Economics and Statistics Administration’s Economic Indicators (http: //www. economicindicators. gov) ◦ State government websites � Libraries. Information from libraries is usually free, except for the cost of printing or copying documents. � Internet. Most public libraries offer free Internet access to subscription-based industry sites and journals. � Universities, technical schools and Small Business Development Centers may provide free or low-cost information. � Census banks. These “banks” store information rather than money. To find them, check at the library or visit http: //www. census. gov. � Chambers of commerce and trade associations and publications. Industry and business groups offer information and support. � Competitors. Visit them, review their advertising and customer reviews, buy and test their products.
The Product Life Cycle Introduction Maturity ◦ The product is new and entering the market for the first time. ◦ Customers are generally unaware of the product. ◦ Sales are low and there is little competition. Growth ◦ Many competing products are on the market. ◦ Businesses increasingly vie for market share though branding, redesign, packaging improvements, new colors or flavors and other marketing strategies. ◦ Sales and prices tend to peak or decline. ◦ Sales and profits begin to increase as public Decline awareness increases. ◦ The market is saturated. ◦ New competitors take note Sales, profits and prices are of the product’s growing low enough that many popularity and enter the businesses are forced to market. discontinue the product.
Features vs. Benefits Features Benefits �Size, color and �Time savings shape �Quality �Varieties �Types �Materials �Convenience �Status �Security �Safety �Fun People buy benefits, not features!
Goals of Market Analysis �Identify your customer profile (demographics, psychographics, access to and attitudes toward technology). �Identify your trade area (geographic boundaries and size). �Determine the number of people (or businesses) in your trade area who potentially match your customer profile. �Determine the market potential for your business in your trade area.
Demographics � Gender. Men and women have different buying habits. on whether they’re single or married. Age. Different age ranges have � Children. Households with different buying habits. children have different buying habits than those with no � Income. This tells you whether children. a customer or household can afford your product, especially � Education may be if it’s a nonessential item (e. g. , an indicator of reading comprehension, use of jewelry). technology, income, etc. � Occupation. This relates to age, income and education, and � Ethnic origin. People from different cultures may have may indicate ability to buy. different values and needs that � Location. This includes how influence buying habits. near the customer is to your business, as well as regional or national location, geography, climate and weather. � � Marital status. Customers’ needs and desires vary based
Psychographics � Beliefs and values. Cultural, religious and political beliefs and values can have a strong influence on buying decisions. � Behavior. What are your target customers’ spending patterns and buying behavior? � Interests. How do your customers’ hobbies, pastimes and social causes affect buying behavior? � Media choices. These provide a clue to buying decisions, income and education, as well as what promotions are most likely to succeed. � Recreation. People who like outdoor activities such as camping or hiking may have different needs than people who prefer indoor activities such as videogames or scrapbooking. � Transportation. People who have a car, bicycle, motorcycle, RV or boat may have very different buying patterns. � Entertainment choices. Music, movie, book and art preferences tell marketers a lot about lifestyles and attitudes.
Gathering Customer Data �If you sell something to eat, ask people to taste it. �If you offer a service, ask people to use it. �If you sell something to wear, ask people to try it on. −THEN− �If people hate it, ask them WHY. �If people love it, ask them WHY. �Ask them questions about themselves (demographics, psychographics, needs, wants, motivations).
Things You Should Know About Your Competition � Who are they? List current competitors and research any that may enter the market over the next year. � Where are they? Are they in your city, � � � Location. Are they local, regional, national or international? Is their location convenient for their customers? Is it convenient for yours? Can you offer greater convenience? county, region, state? Are they national or � Company image. What’s their reputation? What are people saying about them online? international? Do they have lots of goodwill, or are people Customers. Who are their customers? looking for an alternative? Don’t assume they’re the same as yours. � Weaknesses and strengths. What things Two companies selling the same basic do they do best? In what ways are they product can have very different target weak? Compare the way they represent markets. their service to the service you actually get Product. What do they really sell? What as a customer. How will you take advantage features and benefits make their product of their weaknesses? How will you compete unique? What’s their niche? How do they with their strengths? back the product up with customer service? � Goals. What are their stated goals? What Price. Is their price in line with customer are their long-term plans? What strategies expectations? How do they compare with and tactics are they using to achieve those competing brands? goals? Online “About Us” and “FAQ” pages can be good sources for this information, as Placement. Where and how do they sell can interviews, articles and annual reports. their product? Do they sell online, offline or both? � Differentiators. What features, benefits and messages make the competitor stand Promotion. What type of promotions do out in the marketplace? What aspects of they run? In what media, and to what their business do they emphasize most audience? Are they effective? strongly?
The Four Ps vs. SIVA FOUR Ps SIVA Product is what you offer your Your product is a solution for customers. your customers’ problem. Promotion is how you tell Promotion gives customers about your product. information about your solution. Price is the amount you Customers buy based on how charge customers to buy your much they value your product. solution. Placement is how you deliver Placement gives customers your product to your access to your solution. customer.
Product Strategies � Understand your features and benefits! � Consider how each stage of the product life cycle affects marketing strategies � Define product lines (depth and width) � Define your product’s position in the marketplace � Write a positioning statement � Define your brand identity � Write a branding statement � Plan for brand management � Make packaging decisions that reinforce your positioning and brand � Define service enhancements
Product Life Cycle Introduction Maturity ◦ High startup and marketing costs. ◦ Poor distribution and sluggish sales. ◦ Competition is usually at a minimum. ◦ Product strategy focuses on raising awareness. Growth ◦ Product is accepted by target market. ◦ More sales, but also more competition. ◦ Product strategies: Expand distribution; defeat new competitors by building brand. ◦ Widespread competition and slower sales. ◦ Competitive pressure to lower prices. ◦ Features, benefits and branding become more important as consumers look for reasons to choose your product. ◦ Improvements to product may be necessary to attract new customers, recapture old ones and outflank competitors. Decline ◦ Market is saturated. Competition is high; prices and sales are low. ◦ Product strategies include discontinuing the product, cutting production levels, or selling or leasing it.
Positioning Statement Tips � State real, lasting benefits. Vague benefits like “great taste, ” and variable ones like “low prices, ” aren’t adequate. Lots of businesses can legitimately offer “great taste, ” and lots of businesses with low prices are forced to raise them. Your positioning statement must get at the heart of your product’s specific value to customers. As a rule of thumb, try putting your competitor’s product name into your positioning statement. If it’s just as accurate, your statement needs more work. � Pinpoint your differentiator. Businesses often throw terms like “unique” around, but these words don’t mean anything unless there’s a real difference. And if there is a real difference, you should describe it clearly instead of using buzzwords. In other words, don’t say you’re unique; explain why you’re unique. � Keep your customers’ needs in mind. If your statement doesn’t give them a strong, obvious reason to buy from you instead of a competitor, you need to go back to the drawing board.
What Makes a Good Brand Name? � Establishes or reinforces your brand identity � Suggests product benefits � Easy to pronounce, recognize and remember � Sets you apart from your competitors � No double or hidden meanings � Creative, but not too cute or weird � Eligible for trademark protection � Suggests product benefits (e. g. , Mr. Clean, Krispy Kreme or Beautyrest mattresses) � Fits the brand identity and attitude � Doesn’t limit your ability to grow, change or sell your business � Reflects the scope of your business (local, national, international)
Brand Management Basics �Make sure your brand communicate your brand identity. promises something customers want. �Involve your �Keep it simple! Focus employees. Get them on communicating a excited about your brand, and they’ll few basic points. communicate that �Be consistent. Remember that every excitement to others. �Whatever your brand interaction with a customer or client is promises, exceed it! an opportunity to
Basic Pricing Terms �Cost is what you spend to produce your product. �Price is the amount you charge customers for the product. �Value is what your customer believes the product is worth. �Revenue is the amount of money your business receives from sales over a specific period. �Profit is what’s left over after you subtract costs from revenue.
Pricing Considerations �What are your costs? �What will your customer pay? �What brand identity do you want to convey? �What does the competition charge? �What will the market bear? �How will your price affect demand? �How does a service provider determine price? �What other pricing challenges does your business face?
The Four Cs of Pricing � Customers. Knowing your target customers’ income level, lifestyle and concept of value is central to setting a realistic price. � Competition. In the last session, you identified your direct and indirect competition, and you compared their prices, features, benefits, strengths and weaknesses to yours. You must take all these things into account when setting your price. � Company position. If you provide better service and higher quality than your competitors, that means you offer greater value. This appeals to customers who place a higher importance on service and quality. � Costs. To set a price that will earn a profit, you must know your total variable and fixed costs (including taxes).
Understanding Your Costs - 1 Variable expenses are costs that go up or down in relation to sales volume. Example: Suppose you sell custom T-shirts for $10. 00 each. Selling Price $10. 00 Variable Expenses Raw material (T-shirt) 3. 00 Hourly labor 1. 00 Sales commission (10%) 1. 00 Shipping charge 0. 50 Total Variable Expenses $ 5. 50 Price – Variable Expenses $ 4. 50 The $4. 50 is called the contribution margin, because it represents how much each unit of sales “contributes” toward paying for fixed costs and profits.
Understanding Your Costs - 2 Fixed expenses are costs that don’t change, regardless of sales volume. Example: Fixed expenses (per month) Rent Telephone Insurance $ 800 100 50 Bookkeeping 100 Loan payments 300 Total fixed expenses $1, 350 QUESTION: How many T-shirts do you have to sell each month to pay for your variable and fixed expenses?
Break-Even Analysis
Your Break-Even Point How many T-shirts must you sell each month to pay for your variable and fixed expenses and start making a profit? Break-Even Units Volume = Fixed Costs Price - Variable Costs Example: Selling Price $10. 00 per unit Variable Costs $ 5. 50 per unit Contribution Margin $ 4. 50 per unit Fixed Costs $1, 350. 00 per mont h Break-Even Point In Units: $1, 350 ÷ $4. 50 = 300 T-shirts When you sell your 301 st T-shirt, you will start making a profit for that month: 300 T-shirts x $10 = $3, 000
Planning for Profit � Can you sell 300 T-shirts per month? � How much profit do you want to make? � If it takes 300 T-shirts per month to break even, how many more shirts must you sell to earn the amount of profit you want? Example You want to make $900 in profit per month. How many more Tshirts do you need to sell? � It took 300 T-shirts just to break even. � After the first 300 shirts sell, $4. 50 per T-shirt contributes to profits. � $900. 00 ÷ $4. 50 = 200 more shirts must sell to earn desired profit of $900. Can you sell 500 T-shirts per month?
Pricing Strategies � Cost-plus pricing means totaling your fixed and variable costs and adding a target return percentage to arrive at your sale price. � � Multiple pricing offers a discount for buying more than one of an item. Competitor-based pricing involves basing your price on your competitors’ price for a similar product. � � Penetration pricing sets an artificially low price in order to enter a new market and encourage customers to try your wares. Value-based pricing. The goal is to charge an above-average price while leaving customers with the feeling that they’ve gotten a good deal. � Loss leader pricing offers a low price on one product to attract customers who will then buy additional products at the normal price. Premium pricing usually indicates high quality, customization, rarity � Retail pricing. To get a retail or a one-of-a-kind item. price, you multiply the wholesale price by a certain percentage � Price skimming sets a higher (called a markup), and add that to price in the short term. As demand the wholesale price. drops, prices are gradually reduced. �
Things to Consider When Choosing a Location �Proximity to �Size/floor plan customers requirements �Neighborhood �Lease or own �Convenience �Zoning restrictions �Safety (lighting, off- �Landlord restrictions street parking, etc. ) �Costs (property, �Accessibility (ADA) amenities, required improvements, �Visibility common area �Foot traffic, vehicle maintenance) traffic �Other complementary businesses nearby
Distribution Basics Questions you need to answer: Where will I distribute my product? ◦ Retail location ◦ Personal delivery ◦ My home or office ◦ Their home or office ◦ Online ◦ Wholesalers Will I need someone to help me sell? ◦ Customer’s site ◦ In-house sales team ◦ Online ◦ Sales representatives How will I deliver my product? ◦ Agents ◦ UPS, express mail services, USPS ◦ Distributors
Distribution Considerations Product ◦ Perishable or fragile products may require direct sales to avoid spoilage or breakage. ◦ How and where do your competitors sell? Will your products be handled by the same stores, wholesalers, distributors or agents? ◦ There may be shipping restrictions on certain products, based on weight, size, materials, destination or purpose. ◦ If an online retailer offers lower prices and free shipping, what can you offer to outweigh those advantages? Profit Confidence ◦ The more intermediaries you have, the more units you must sell. ◦ Selling direct may distract you from core business tasks. Customers ◦ Distribution strategies must reflect customer lifestyle. Competition ◦ Can you trust your intermediaries? ◦ Can you afford to have all your eggs in one basket? Technology ◦ Your distribution methods must reflect your customers’ access to and attitude toward current technology.
Distribution Strategies �Direct marketing (to customers or to other businesses) �Manufacturer to retailers through intermediaries (sales reps, agents, brokers, wholesalers) �Consignment �Mail-order catalogs �Classified ads �Home shopping networks �Piggyback with other products �Internet
Elements of Effective Advertising WHO? Right Audience WHY? Right Benefits WHAT? Right Message WHEN? Right Time WHERE? Right Place HOW MUCH? Right Budget
Common Promotional Tools Print ◦ Newspapers ◦ Magazines ◦ Catalogs / brochures ◦ Newsletters ◦ Fliers ◦ Business cards ◦ Classified ads ◦ Yellow Pages Other ◦ Direct mail / email ◦ Telemarketing ◦ Signage ◦ Word of mouth ◦ Networking ◦ Novelty advertising (e. g. , pens, hats) ◦ Sign spinners Online ◦ Paid ads ◦ Web directories ◦ Business directories ◦ Craigslist ◦ Online Yellow Pages ◦ Social media ◦ You. Tube videos ◦ SEO Broadcast ◦ Radio ◦ Internet radio ◦ Broadcast TV ◦ Cable TV
The ABCs of Signage Attracting new customers Because a certain number of your customers will move out of the area, change their buying habits or switch to competitors, your business must constantly restock its customers, just like it restocks its inventory. Branding your business A sign that’s visible every day may do more to communicate your brand identity than all your other marketing efforts combined. Creating impulse sales Studies show that 68 percent of all U. S. sales are impulse sales. Your job is to attract your share of these impulse buyers and turn them into regular customers.
Public Relations Ideas � � � Donate money or time to clean association. up highways, parks or beaches. � Write or contribute to a blog or Help improve a piece of local industry-related website. land. � Use Twitter, Facebook or You. Tube to attract a Get involved in historic community of followers for your preservation efforts. company. Install a new, cleaner energy system and offer public tours. � Donate prizes or time to local fundraisers. Cosponsor local sporting, arts or charity events. Be sure to � Join service organizations or clubs. put up posters or banners announcing your support. � Attend trade shows as an exhibitor or observer. Hold contests and giveaways. � Give lectures to trade organizations or chambers of commerce. � Send your business story to your local newspaper or trade � Offer to be a guest speaker on a radio show to discuss elements of your business, or offer how-to advice that relates to your business.
Benefits of Being Online � Provides business and � Gives prospective product info to global customers one more markets way to contact you � Increases consumer � Helps you keep track of awareness of your what your competitors product (note that even are doing if your target customers aren’t online, people � Online interaction with customers can build who are may your brand or improve recommend your products product) � Networking, partnering � Improves customer and bootstrapping service by providing opportunities online product tips, instructions and links
Online vs. Offline Buying Why people buy online � Speed and convenience � Vast product selection � Special deals and coupons � It’s easy to compare prices and save money � Search capabilities � No driving, parking or crowds Why people don’t buy online � Product is easily available locally � Shipping costs are too high � Security, fraud and privacy issues (trust) � Inability to sample, try on, taste, or test the product (trust) � Return and warranty issues (trust)
Building Your Own Website: Pros and Cons Advantages Disadvantages � You may be able to get a � Time spent learning skills site online quickly � You learn site-building skills � You can update your site as needed � Site maintenance costs may be lower distracts from core business tasks � Time spent maintaining site distracts from core business tasks � Site-building tools may lack features you need � The appearance and function of the site may be limited by your design and tech skills � Site may not be able to grow with your business
Selling Through an E-Commerce Host: Pros and Cons Advantages Disadvantages � Setup is usually very easy � Higher charges (per and fast � E-commerce functions already in place, usually with appropriate security � Some hosts may have consumer trust, and offer problem-resolution services � Professional look and function � Host may include useful promotional tools, social media capabilities, etc. month, per transaction, by traffic volume, etc. ) � Hosts may have uniform look and few or no opportunities for building your brand � “One size fits all” format may not suit your business
Hiring a Web Designer: Pros and Cons Advantages Disadvantages � You don’t have to � You must rely on waste time on sitebuilding � You have more control over features, appearance and function � Costs are upfront and known � Professional look and function outside help � Updating and maintaining the site may be slow, difficult or expensive if you don’t have adequate tech skills � Higher cost � Site maintenance costs may be higher in the long run
Issues to Address When Planning Your Site �What business tasks do you need to do online? �Do your customers buy online? creation and maintenance? �How will you market your site? �Are you prepared to sell internationally, or your customers need? will you only sell in the USA? �How quickly do you �How often will you need a functioning need to update your site? �How much can you �What information do budget for site
Website Design Tips � Avoid site features that are distracting, irritating or hard to use, such as animation, soundtrack music or horizontal scrolling. � Don’t clutter your site with slow-loading images. Every second your customer must wait for content increases the likelihood that she will give up and go elsewhere. � Display your contact information clearly on every page. � Answer questions and concerns. properly. � Support your promotional messaging with facts anyone can understand verify, like reviews and awards from credible sources. � Ensure consumer privacy with secure socket layer (SSL) protection. � Use professional, high-resolution photography to display products. � Use a cross-selling application to suggest products that go with whatever product the customer is looking at. Features that build customer trust include a “Frequently Asked Questions” � Include helpful tools where needed (e. g. , rulers and calculators). page, video explanations or tutorials, and a clearly stated return policy. � Include all relevant product information (e. g. , height, weight, color, size, � Don’t ask users for personal information ingredients, sourcing). unless you’re making a sale or giving them something in return. � Check your site regularly to ensure that links and other site features work � Include customer reviews and recommendations. Consumers trust other consumers more than they trust businesses!
Site Organization
Social Media Basics � They feature user-generated content. � They allow networking and collaboration between friends, family, associates, clubs, product users and interest groups. � They are based on dialogue, rather than monologue. Users can give and receive feedback on information, content and ideas. � They are increasingly integrated (e. g. , you can tweet about the podcast available on your blog). � They are usually free, and easy to set up and maintain. � Social media account for 22 percent of all time spent online, according to the Nielsen Company.
Types of Social Media � Blogs are online journals � Social bookmarking containing text, graphics, photos, audio and video content. This category also includes microblogging formats like Twitter and Tumblr. sites allow users to gather, rate and recommend websites, news stories and other content. Examples include Stumble. Upon and Reddit. � Social networking sites � Multimedia sites like You. Tube and Slide. Share like Facebook create allow users to share connections and build trust-based communities. multimedia content like videos and slideshows. Geosocial networks like Foursquare allow � Consumer review sites interaction with like Yelp and Epinions individuals and allow users to find, rate businesses in a specific and review businesses location and products.
Rules for Social Media � DO YOUR HOMEWORK. Different social media have different demographics. Research sites to make sure they reach your target customers. � BE HELPFUL. Answer questions, provide advice, seek out and link to worthwhile content. � BE RESPECTFUL. Don’t spam users or sites with marketing messages, or use social media as a vehicle for shameless self-promotion. Help yourself by helping others. � BE ENGAGED. Keep your content fresh and current. Post regularly, even if it’s just a link to someone else’s article. Respond promptly and courteously to comments and requests. � HAVE FUN! The more you enjoy what you’re doing, the more likely you are to earn friends and followers! � TAKE YOUR TIME. Get to know the format, the site and the community before participating. � BE HONEST. Don’t pretend to be someone you’re not. � BE CONSISTENT. Whenever possible, use the same name, colors, images and other elements in each account. � BE PREPARED. Don’t launch a specific channel until you’ve prepared content and created a posting schedule. � BE RELIABLE. Don’t make promises you can’t keep. Don’t promote upcoming content and features unless they’re actually ready to launch.
Search Engine Optimization Features � A domain name that describes your brand, products or business (e. g. , nxlevel. org, fireworks. com). � Flat site architecture. � Descriptive keywords in your site headlines, body copy and links. � Alternative text tags for graphics. This is descriptive text that appears if an image doesn’t display. The fewer clicks a visitor has to make, the more likely you are to convert � Fast loading time. that visit to a sale. Pages that load slowly or � A descriptive title for incorrectly are hard for each page of your site. search engines to index, The title tag for each and frustrating for human page should be unique to users, so they tend to get that page; using the a lower page rank. same title on multiple pages will undercut your efforts.
Tips for Writing Online Content � Write about what you know. The Internet is full of ill-informed speculation and opinion. Sticking to practical, helpful facts will make your content stand out. � Stay focused. Your content should flow logically from one paragraph to the next. Don’t try to cover too much ground at once. If content doesn’t seem to fit, use it for another article. � Quality is more important than quantity. It’s better to have less content than to fill space with material that lacks usefulness, credibility or interest. � Format text carefully. Short paragraphs, clear punctuation and informative headings are usually best for online text. � Don’t use quotes unless you’re quoting someone. Many inexperienced writers put quotes around everything from “figures of speech” to “product names. ” This is “unnecessary” and “distracting. ” � Don’t overuse exclamation points!!!!! Use them only when absolutely necessary, and never use more than one at a time. Multiple exclamation points communicate inexperience and desperation. � Avoid clichés and buzzwords. Don’t try to promote innovation or originality with worn-out phrases like out of the box or pushing the envelope. And don’t use business or industry jargon that your readers may not understand.
Traits of Successful Sellers � Empathy. Good sellers can relate to � each customer’s unique situation. They don’t try to force a one-size-fitsall solution on them, or pressure them to spend more than they can afford. � Technical knowledge. Sellers should understand everything about their product. Good communication skills. The best sellers make their points clearly, briefly and respectfully. Personal drive. Good sellers have a strong personal desire to make the � Respect for the customer. sale and satisfy customers’ needs. Remember: Without customers, you have no business! � Persistence. Good sellers don’t get discouraged by rejection. � � Confidence. Good sellers believe in their products and know how to get other people excited about them. � Flexibility. Customers vary, so the ability to adapt to different buying styles is essential. � Quick thinking. Sellers need to be able to think on their feet to answer objections and assess counteroffers. � Excellent listening skills. Smart sellers ask relevant questions and listen respectfully while customers answer.
Understanding Buyers Most buyers respond to stories. Instead of describing features, explain how those features solved a problem for a previous customer. Be prepared to back up your stories with references. Most buyers like to talk about themselves Being a curious, engaged listener is vital to building a relationship, and building a relationship is vital to earning loyal customers. Business buyers are usually more cautious than everyday consumers. Business buyers usually want to see strong evidence of value, technical expertise, reliability and professionalism. Behind every buying decision, there’s a desire or a fear. What are you really selling? Fun? Beauty? Youth? Security? Status? Unless you understand the hidden motivations that guide buying decisions, you’ll find it hard to get customers to buy in.
Eight Steps to Selling Success Step 1: Prioritize Prospects Step 2: Prepare to Sell Step 3: First Contact Step 4: Make the Presentation Step 5: Overcome Objections Step 6: Close the Deal Step 7: Reflect and Adapt Step 8: Follow Up
Common Closing Techniques Basic close by using a sales form. Begin by asking the customer a question from the form. Write in the answer. Proceed to the next item. If the customer doesn’t stop you, you’ve made a sale. Close by offering choices. “Do you prefer green or blue? ” When a prospect makes a minor decision, the major decision is near. Close by making a balance sheet. Take a sheet of paper, draw a line down the center and help the prospect list the reasons for and against buying. Close by asking clarifying questions. If you have a prospect who seems interested but won’t commit, ask questions: “Is there anything I didn’t make clear? ” Close with a confirming question. If a prospect asks whether it’s possible to get what you’re selling in a particular size, format or color, ask the prospect if that’s the way he wants it. If the answer is “yes, ” the prospect has bought. Close by setting a date to do the work. If you run a lawn care business, for example, you might offer to cut their lawn and trim their hedges next Thursday.
Selling Tips � Be honest. Tell the truth valuable resource. about your product. Don’t hype attributes or downplay � Stay in touch. Check in with customers regularly problems. and always bring something � Don’t procrastinate. Take of value to the conversation. on tough clients now, not � Study your competitors. later. Knowing their strengths and weakness will help your � Practice active listening. sales presentation. Work to improve listening skills and develop interactive � Referrals build sales presentations. Always ask for referrals. Satisfied customers will � Be patient. Building longusually be happy to help. term relationships takes time and care. � Be positive and have fun! � Keep learning. Become an A positive attitude will carry expert in your field so that you through times. customers see you as a
What Customers Want � Availability. Customers want you to be available, responsive and engaged at every stage of the selling process. � Consistency. Customers want the same level of service and quality every time they deal with you. � Confidence. Customers want to feel that you are listening to them and making an effort to understand satisfy their needs. � Attention. Customers want to feel that you’re alert, interested and ready to help. They want to feel that you’re willing to do what it takes to meet their needs. want to feel they can trust you. They don’t necessarily � Comfort. Customers want to feel comfortable, welcome expect perfection, but they and secure. They don’t want do expect you to make things right when they go to feel rushed or pressured. wrong. They prefer businesses to be clean, attractive and organized. � Understanding. Customers
Why Businesses Lose Customers 1% die 3% move away 4% drift to another business 5% change on a friend’s recommendation 9% buy it cheaper somewhere else 10% have a service problem that is not resolved 68% leave because they feel they’re not getting good service
The Benefits of Customer Loyalty Loyal customers: ◦ Show less sensitivity to price changes ◦ Generate referrals and word of mouth ◦ Buy add-ons more often ◦ Make it harder for competitors to enter your market ◦ Need less handling, education and selling time ◦ Are easier and more cost-effective to sell to than new customers
Your Customer Service Plan Every business should have a customer service plan within its marketing plan. This should include: ◦ Customer service goals ◦ Customer service benchmarks (how you’ll measure success or failure) ◦ How you will gather, store and use customer data ◦ After-sales service practices ◦ Return, exchange and customer complaint policies ◦ Special order or custom service policies ◦ How different areas of your business deliver service ◦ A formal system for customer feedback (e. g. , questionnaires, report cards, online surveys or forums, complaint forms)
Resolving Customer Complaints Step 1: Listen! Step 2: Recognize the customer’s feelings. Step 3: Apologize! Step 4: Thank the customer for bringing the problem to your attention. Step 5: Explain your solution.
Customer Service Essentials � Greet customers immediately and pleasantly. � Memorize the names of frequent customers. � Always answer the phone within three rings. Don’t automatically dump effort to help customers on hold. If you find what they need. must, ask if you can put � When you make a them on hold, or call mistake, fix it! them back within five � Follow up on all customer minutes. contacts. Always record � Answer emails promptly, the customer’s name, and proofread them phone number and order before you hit “send. ” type. After customers call for product information or service assistance, follow up within two days to check on satisfaction. � Always make an extra
Cash Flow Projection Worksheet Sections (A) (B) (C) Beginning Cash Balance Cash In From Operations Operating Cash Out (C 1) Variable Expenses (Cost of Goods Sold) (C 2) Operating Expenses (D) (E) Net Operating Cash (B - C 1 - C 2) Cash From Investment or Loan Activities (E 1) Other Cash In (E 2) Other Cash Out (F) (G) Net Monthly Cash (D + E 1 - E 2) Ending Cash Balance (A + F)
Sample Chart of Accounts - 1 Account Asset accounts: Capital accounts: 100 Cash on Hand 300 Owner’s Equity 101 Cash in the Bank 310 Owner’s Draw 102 Petty Cash Revenue accounts: 105 Inventory 400 Sales 110 Equipment (Net) 401 Product 1 Sales 111 Accum. Depreciation - Equipment 402 Product 2 Sales Liability accounts: 403 Service 1 Sales 200 Accounts Payable 410 Interest Income 210 Payroll Taxes Payable 420 Other Income
Sample Chart of Accounts - 2 Account Expense accounts: 500 Inventory 670 Miscellaneous 600 Advertising 700 Payroll Taxes 610 Auto 710 Professional Services 620 Bank Charges 720 Rent 630 Dues and Subscriptions 730 Supplies 640 Insurance 740 Telephone 650 Licenses 750 Travel 660 Office Expense 760 Utilities
Startup Expenses Worksheet
Operating Cash Out Worksheet
Operating Cash In Worksheet
Michele’s Photo Studio− Blank Worksheet
Michele’s Photo Studio — Startup Expenses
Michele’s Photo Studio− Completed Worksheet
Michele’s Photo Studio — What If I Borrow $2, 000?
Michele’s Photo Studio — What If No Wedding Sales?
Sample Income Statement
Sample Balance Sheet
Developing a Professional Mindset �Set clear, achievable goals �Do business on the books �Keep personal and business accounts separate �Develop a code of ethics for your business, and stick to it �Make tax payments on time �Commit to making budgets and comparing them to your actual expenses �Keep accurate books and records
Why Separate Business and Personal Finances? � Taxes. The IRS lets you business loan, you normally must show your financial records. Mixing funds makes it hard for lenders to know how profitable your business is. deduct expenses for a business, but not for a hobby. If you mix business and personal income, the IRS is more likely to decide that your microbusiness is a hobby. � Professionalism. Having But even if it doesn’t, separate accounts shows mixing funds will make customers, suppliers and your taxes harder to clients that you’re serious calculate and pay. The cost and effort of keeping about your business. your accounts separate is � Management. If you minimal compared to the don’t separate your problems sloppy funds, it’s harder to make accounting can cause. good business decisions. � Loans. If you need a
Why Do You Need Records? �Producing financial �Managing cash flow statements �Setting and �Preparing tax returns measuring progress (including deductions) toward business goals �Providing information �Tracking and to lenders and managing costs investors �Preventing theft �Paying and collecting �Providing compliance bills when due with laws �Budgeting and �Supporting your case planning in a lawsuit �Applying for loans
Record Retention Guidelines Type of Record Retention Period Bank statements 7 years Business licenses Until expired Cash register tapes 3 years Check registers Permanent Canceled checks 3 years Financial statements Permanent General ledger Permanent Inventory records Invoices (A/P) 7 years 3 years Invoices (A/R) 3 years Phone/utility bills 3 -6 years Property/plant records Purchase orders Receiving reports Tax returns Permanent 3 years 10 years minimum Time cards or tickets 3 years Travel expense records 7 years Property deeds/titles Keep while you own
Common Business Forms
Computerized Accounting Systems Before buying a program, do some research! ◦ Compatibility. Will your computer be able to run this program? What are its hardware requirements? ◦ Ease of use. Can you figure out how to use the program out without getting a Ph. D. in math? Always factor learning and training costs into the price of the system! ◦ Range. What modules or tools does it offer? Do you actually need them? ◦ Flexibility. Can you easily customize the program? Does it mesh with other business applications, as well as email and word processing programs? ◦ Security. Is it secure? Does it prevent unauthorized access to your data? ◦ Add-ons. Will you have to make multiple upgrades as you grow? If you’re planning for a certain level of growth within a year or two, will the system still meet your needs? ◦ Help. What type of training is available? Does the program have a reliable help utility or online user forum? Is the manufacturer popular enough that it’s likely to stay in business?
Tips for Keeping Books and Records Keep your records daily. ◦ Deal with your bookkeeping on a regular basis, and it could take as little as 20 minutes a day. Create an audit trail. ◦ Keep checks in numeric order. Never skip a number, and always record voided checks. ◦ Keep invoices filed sequentially and/or alphabetically. ◦ Make everything easy to find and track. Request a bank statement with a “month-end” cut-off date. ◦ It’s easier to reconcile your records when they all end at the same time. Keep withholding taxes withheld. ◦ Don’t spend this money−it’s not yours! Don’t panic if you find a mistake. ◦ Everything can be fixed, as long as you’ve kept up with your recordkeeping chores.
Twelve Check-Writing Tips 1. Always write checks in ink, or type them. 2. Always write clearly and check your spelling. 3. Date the check correctly. 4. Write the payee’s name after the printed words “Pay to the order of. ” 5. Write the amount of the check in numbers close to the printed dollar sign ($), so that other numbers can’t be inserted. 6. Write the amount of the check in words starting as far to the left as possible, leaving no room for the amount to be changed. 7. Draw a wavy line to fill any blank space left after you write the amount. 8. Do not sign a blank or partially complete check. 9. Always sign your checks just as you signed your bank’s signature card. 10. Use the memo line to help keep records of your spending. 11. Record each check you write— and each deposit you make— immediately in your check register. 12. Don’t forget to record automatic deposits and withdrawals in your check register.
Sources of Capital Self-Financing. Most lenders and investors want to see that you’ve committed personal funds to your business. ◦ Personal funds ◦ Not a debt (unless you agree to pay the money back even if the business fails) Angel Money ◦ Savings or investments ◦ Outside salary ◦ Home equity Debt Capital ◦ Money that you borrow ◦ Interest is usually charged for use of the loan Equity Capital ◦ Money provided by an investor ◦ Investor shares in profits or losses ◦ Money received from family, friends or interested third party ◦ Can be debt or equity financing ◦ Always formally document angel money as you would traditional debt or equity financing
Fitting the Loan to the Need Short-Term Debt ◦ Used to meet short-term needs, such as seasonal inventory or short-term liquidity problems. ◦ Repayment time: One year. Intermediate Debt ◦ Used for permanent working capital or equipment acquisition. ◦ Repayment time: Three to seven years. Long-Term Debt ◦ Used for real-estate purchases or the initial purchase of a business. ◦ Repayment time: Seven years or more.
Debt or Equity Financing Considerations �Change in ownership �Obligation to repay �Tax considerations �Capital structure �Time required �Cost of obtaining the funds �Personal factors/preferences �Lender and investor reactions
Debt Financing Sources �Banks �SBA programs �Credit unions �State and local loan �Microlenders programs �Business incubators �Peer-to-peer lending / crowdfunding �Leasing �Consumer finance companies �Commercial finance companies
Leasing vs. Purchasing Advantages � Usually no down payment � Often over a longer time period than a loan � May allow upgrade to current equipment models � May allow “off balance sheet” financing � Increases possible sources of financing Disadvantages � May cost more if tax advantages lost � May not own asset at end of the lease � Is still a long-term legal obligation � Terms and conditions may limit flexibility of use
Other Financing Sources �Suppliers �Customers �Factoring �Grants �Credit cards
Financing Factors 1. The growth potential of your business 2. The riskiness of your business 3. The length of time you need the money 4. The kind of money you need (debt or equity) 5. The amount of interest you can afford to pay (debt) or the amount of ownership you’re willing to give up (equity) 6. The profit potential of your business
Preparing for the Loan Process Before you apply for a loan: Find a lending institution that regularly lends to microbusinesses ◦ What size businesses do they normally lend to? ◦ Do they avoid making loans within certain industries? Check your credit history ◦ Are there credit problems you need to clear up? ◦ Do you know how to repair your credit? ◦ Are there credit problems you don’t know about? Get your business records in order ◦ Have your business plan ready. ◦ Be able to describe your recordkeeping procedures and accounting system. ◦ Find out what books and records the lender will want to see, and gather them.
What Lenders Require �Business loan �Personal tax returns �Complete business �Other documentation application form plan �Cash flow projections (monthly for 12 months, quarterly or annual for years 2 and 3) �Personal financial statement (2 to 3 years) (optional) ◦ Accounts payable aging ◦ Accounts receivable aging ◦ Inventory status reports ◦ Appraisals
The Cs of Credit �Credit history �Character �Capacity �Collateral �Conditions
Tips for Working with Your Banker �Deal with a local bank �Develop a long-term when possible relationship �Make an appointment �Know your needs �Select a banker you �Present a complete trust proposal �Select a banker �Explain uses of the loan familiar with your type of business �Be flexible �Dress appropriately �Be patient �Ask for advice or �Tell the truth clarification of anything you do not �Recommend your banker to others understand
Ratio Analysis: Understanding the Financial Health of Your Business Current Ratio = current assets ÷ current liabilities Example: $1, 000 ÷ $500 = 2 (or 2: 1) Debt to Equity Ratio = long-term liabilities ÷ owner’s equity Example: $5, 000 ÷ $10, 000 =. 5 (or 1: 2) Net Profit Margin = net profit ÷ gross revenue from sales Example: $1, 000 ÷ $10, 000 =. 10 or 10% � What do ratios tell you about the health of your business? � How are ratios used by lending institutions?
Warning Signs of Credit Card Fraud If an order shows two or more of these warning signs, take extra steps to confirm that the buyer is for real before you ship! � Vague contact information, � Orders for multiple � Large orders from expensive items or large amounts of cheaper items. � Multiple large orders within a short time frame, especially from buyers in Russia, Eastern Europe or Southeast Asia. � Overnight shipping, especially to foreign countries. such as a private box address, an unlisted phone number or a free, Webbased email address. “businesses” that don’t appear when you search for their names online. � A shipping address that doesn’t match the credit card billing address. � Asking the delivery person to leave the package at the door. To avoid fraud, require the person who receives the package to sign for it.
Check Acceptance Guidelines � Call the bank that issued � Use a company that the check and ask if there are sufficient funds in the account to cover it. � Ask for personal verifies checks. The verifying company assumes the risk if a check doesn’t clear the bank. identification, such as a � Never accept a check written for more than driver’s license. Look your selling price. Some closely at the picture and crooks will write bad checks signature on the license, for more than the selling and jot down the license price of an item, and then number on the check. ask the merchant to return � Decide what checks you the amount they overpaid. will take beforehand. The SBA recommends never � Never issue a refund accepting checks that are before the check clears. If undated, postdated or more you refund money you than 30 days old. You haven’t actually gotten yet, should also avoid third-party you run the risk of an even checks. bigger loss!
Smart Credit Policies � Base your credit decisions on the individual customer’s creditworthiness. make some errors about who’s a good credit risk and who isn’t. Consider your policy in relation � Realize that the credit terms to your cash flow. Your policy you offer might differ from one should not endanger the cash customer to the next. Your best flow you need to operate your business. customers deserve more generous terms. (The reverse is also true: Your worst customers � Remember that your credit policy will change over time, deserve less generous credit along with your business’s terms. ) growth and economic conditions. Reevaluate it at � If a customer is late on least once a year to make sure payments, you may have to it still meets your needs. reduce or eliminate the credit terms you offer that customer until he or she re-establishes a good payment record. � Expect to achieve your ideal credit policy only through trial and error. You’re bound to �
Five Basics of Negotiation 1. There would be no negotiation unless both sides expected a benefit. 2. The goal of negotiation is to create a new situation that’s better than the old one. 3. Unfair deals last only while one party feels weaker than the other. 4. Win-win negotiation delivers the best, most enduring deals. 5. Like any other skill, negotiation can be learned and practiced.
Negotiation Strategies Soft Negotiators ◦ Avoid conflict at any cost ◦ Usually don’t stand up for their best interests Hard Negotiators ◦ Aggressive and competitive ◦ May use threats or bluffs ◦ Not trusting or trustworthy Win-Win Negotiators ◦ Work toward the best outcome for all ◦ Flexible, but can be firm when it’s appropriate ◦ Attack problems, not people
Stages of Negotiation Setting an Agenda ◦ Why are you negotiating? ◦ What are the issues? What are the goals? Voicing Demands and Offers ◦ What are your interests and positions? ◦ What do you want, and what are you willing to give in return? Working to Minimize Differences ◦ Where do interests overlap? ◦ Where is the common ground? � Closing the Deal ◦ “Win-win” means both sides are better off than when they started.
Traits of Effective Negotiators Good negotiators: ◦ Understand their counterparts’ interests and perspectives ◦ Understand the difference between positions and interests ◦ Understand the difference between real power and perceived power ◦ Know their settlement range ◦ Know their BATNA (Best Alternative To a Negotiated Agreement) ◦ Know when to walk away from negotiations
Overcoming Negotiation Problems � Recognize manipulative tactics such as stonewalling, bullying and deception. � Open your ears and listen. Being a careful listener is the best advantage you can have. � Get in the other person’s shoes. Understanding your counterpart’s point of view will help you find common ground. � Slow down and regroup. When things get stressful, taking time out will clear your head. � Get off the hot seat! Don’t make important decisions on the spot. Go to a safe location to consider your options. � Know when to walk away. Knowing your limits ahead of time gives you more control over the situation.
Key Contract Management Tasks �Create processes and practices �Review timeframe �Evaluate benchmarks and measures �Define the responsibilities of each partner �Identify contingency plans �Establish regular meeting times �Resolve conflicts and problems �Review performance and improve where necessary
Dangers of Unmanaged Growth Failing to manage growth can affect every area of your business’s performance. Major pitfalls include: ◦ Inability to maintain consistent performance standards ◦ Low employee morale, and high employee turnover ◦ Loss of profitability ◦ Loss of customer loyalty ◦ Lower quality and professionalism ◦ Slowdown in business learning and competitiveness ◦ Inability of overworked leadership to provide direction ◦ Cash flow problems ◦ Inefficient use of resources ◦ Stress and burnout ◦ Loss of focus on core objectives ◦ Poor communication among employees
Moving to the Next Level �Celebrate what you’ve accomplished! �Organize what you’ve learned! �Fill in the blanks! �Ask for help! �Finish your business plan! �Check and double-check! �Polish your presentation! �Don’t stop planning! �Take advantage of the Nx. Leve. L® Training Network!
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