Archive for category Starting A Business
Myths Of Owning A Small Business
Posted by admin in Small Business Credit, Starting A Business, Surviving Today's Economy on November 24th, 2009
Entrepreneurs
Myths Of Owning A Small Business
Miriam Marcus, Maureen Farrell and Melanie Lindner 11.12.09, 11:00 AM ET
In 2007, Anand Sanwal was managing a $50 million innovation fund for American Express. His job: to identify and incubate new business ideas–and that meant doing gobs of market research, much of it on small, closely held companies. One problem: Public information on private companies was scarce, and the data that did exist wasn’t in much of a structured, useful format.
Sanwal knew he wasn’t the only one looking for that kind of information. So he and some partners launched Manhattan-based CB Information Systems to do just that. The company’s Web-based software, marketed under the name ChubbyBrain (www.chubbybrain.com), trolls the Web for data on private companies–what they do, who is buying and selling them and for how much. “We are all engineers who went to business school, so we thought we had what was an elegant, logical and robust plan,” says Sanwal, 35. “We were pretty happy with ourselves.”
But no matter what the textbooks say, having a great idea and a solid business plan often aren’t enough. To fund the software development, Sanwal was banking on income from a few consulting gigs inspired by a book he had written on corporate-resource allocation. Sanwal had gotten roughly $2 million in verbal agreements from CEOs or CFOs at three large financial-service companies. Then the stock market tanked and the deals were put on hold.
With no backup plan, Sanwal dipped into his savings and cobbled a bunch of smaller consulting engagements to keep his dream alive. Larger deals (the paying kind) followed. Now ChubbyBrain competes with Dow Jones and Thomson in tracking venture activity, and plans to roll out a line of new private-company data products in 2010. While stronger for the experience, Sanwal says the hard lesson still lingers: “A deal is not closed until the ink dries, no matter how many assurances you have from the other party.”
Eye Openers: 11 Myths Of Owning A Small Business
If only you knew then what you know now. … There are plenty of reasons that statement rings true for battle-tested small-business owners. We asked a bunch of them to share the most commonly misplaced assumptions about entrepreneurship. They just might spare you that familiar lament. For the full list, check out our slideshow.
Myth: Entrepreneurs are risk-taking visionaries.
Truth. Despite what some in the media would have you believe, you don’t have to be a swashbuckling risk taker to run your own show. “These glamorous stories serve to make entrepreneurship appear to be an exclusive art that’s relegated to a few people who exhibit a variety of specific traits,” says Len Schlesinger, president of Babson College in Babson Park, Mass. “Entrepreneurs are actually very good at avoiding risk rather than taking it on.”
Myth: The idea is more important than the details.
Truth: Whiz-bang new technologies and business models are sexy, but they aren’t a requirement. “A well-executed, decent idea is better than a poorly-executed, excellent idea,” says Gerald Shreiber, founder and chief executive of J&J Snack Foods. Shreiber’s secret to minding the details: a healthy dose of paranoia. “I have 2,600 people to worry about,” he says. “Somewhere, God or my parents and grandparents are watching over me.”
Myth: Jealously guard your idea, lest someone might steal it.
Truth: You may be onto something, but you surely don’t have all the answers (if you even knew to ask all the right questions). “While you don’t want to put your entire business plan on the Internet, entrepreneurs who do their homework look to a relatively large but select number of people to talk through their ideas,” says Reid Hoffman, founder and chief executive of LinkedIn.com.
Myth: Your business plan must be rock solid from the get-go.
Truth: Building a company is an iterative process, says Hoffman, and entrepreneurs must be willing to adapt–to changes in customer demand or the competitive landscape. “It’s not like chess where you have a pre-formulated, deterministic strategy and must get all the moves in exactly the right sequence,” he says. There should be a principal plan in place–see Ten Things All Good Business Plans Must Have–but it should be flexible and updated constantly. Says Hoffman: “No battle plan survives impact with the enemy.”
Myth: Passion will get you there.
Truth: Passion can ease the pain of 15-hour days. It can galvanize employees and win over customers. In some cases, it can even enthrall deep-pocketed investors. But it is no silver bullet. The most effective entrepreneurs learn to modulate their emotions, says Rich Gelfond, chief executive of IMAX. His mantra: “It’s never as good as it looks, or as bad as it seems.”
Myth: You can set your own schedule.
Truth: “I thought I’d be the boss and sit back and put my feet up,” says Mike Zaya, chief executive of Printrunner, an online printing and ink-cartridge company. Reality looked a bit different, including a several-night stretch of sleeping but two hours a night at the office. “You end up being the goalie of the company, and the goalie has to sacrifice their body,” adds Zaya. “You have to be the first man in and last man out on any given day.”
Myth: There’s glory in it.
Truth: For all its rewards, entrepreneurship can also feel like a thankless job. “No one tells me that I did really well, it’s always me telling everyone else that,” says Amir Korangy, owner of the Real Deal, a real-estate focused publishing company in New York City. Korangy says entrepreneurs need internal motivation and reassurance because it rarely comes from outside. “After a few years, you want someone to say you’re doing good work,” he adds. “But the only way to tell yourself you’re doing a good job is to see an increase in revenues.”
Geithner Calls on US Banks to Boost Lending
Posted by admin in Small Business Credit, Starting A Business on November 20th, 2009
Geithner Calls on US Banks to Boost Lending
U.S. Treasury Secretary Timothy Geithner on Wednesday called on banks that received government aid during the financial crisis to boost lending, saying limitations on credit availability for small businesses may slow the nation’s recovery.
“We need banks to be working with us, not against recovery,” he said, kicking off a day long Obama administration summit aimed at devising ways to strengthen the flow of credit to small businesses.
Associated Press
Treasury Secretary Timothy Geithner at the Small Business Financing Forum, with SBA Administrator Karen Mills, left, and Kevin Watters of JP Morgan.
“The recovery in earnings across the banking system . . . is not because the surviving banks are particularly smart and clever,” Geithner said. “It’s because the taxpayers of the United States and their elected representatives decided that to save the economy, we had to save the financial system.”
Geithner, however, defended the rebound in bank earnings, suggesting the more positive figures are necessary for the economy to rebound. Meanwhile, Federal Deposit Insurance Corp. Chairman Sheila Bair said she expects “credit losses will continue to hold down” earnings in the banking sector.
Geithner said banks bear at least some responsibility for the financial crisis and, therefore, are obligated to help communities recover. He said the Obama administration is committed to doing more to help small businesses access the credit they need and would move as quickly as possible.
“We cannot wait until next year to see these aggressive actions,” Sen. Mark Warner (D., Va.) said.
Small businesses are typically more reliant on bank financing than their larger counterparts. “When banks pull back, small businesses take the hardest hit,” Geithner said.
Treasury’s latest monthly survey of bank lending shows the 22 largest banks receiving government capital during the crisis tightened lending for the fifth time in the past six months, with total outstanding loan balances falling 1% in September.
Small business lending also dipped 1%, as did originations of new small business loans. Small business loans outstanding have slid by $10 billion since April, down to $259 billion in September, the report showed.
“This credit crunch is not over,” Geithner said. “It may feel dramatically better for a large business, but it is not over for small businesses across the country.”
Write to Meena Thiruvengadam at meena.thiruvengadam@dowjones.com
Small Business Success ~ 10 Rules
Posted by admin in Starting A Business on March 9th, 2009
Every day, new business ventures are created. Some of these businesses will succeed, but many will fall by the wayside. Others will be able to take-off to a great start, given their ample resources and capital, but will falter along the way. Some ventures may be on a shaky ground at the start, but with perseverance and careful planning will prevail in the end.
Will your business thrive, or will it join thousands of others that have faltered along the way? Here are ten rules to make sure your business grows and prospers:
1. Find a Niche. For small businessesit is best to find a niche. A small company with limited resources can efficiently serve niche markets. Concentrate your efforts on a fairly narrow market offering. This entails sticking to what you do best, and becoming an expert in that field. Realize that it is not possible to be good at everything. By concentrating on a fairly narrow market niche, you may be able to avoid head-on collision with bigger competitors. If you are a hardware store selling everything from paints to lumber, the entry of giant retailers like Home Depot in your area can spell the end for your business. However, you can try to limit your offering, for example, to construction of porches and decks and be the best retailer for this segment.
2. Be small, yet think big. The most common question of small businesses start-ups is “How can I compete with my big competitors?“
have inherent advantages over big businesses, including flexibility, ability to respond quickly, able to provide a more personalized service. Make sure that your business takes maximum advantage of those areas that represent the strengths of small companies.
3. Differentiate your products. Present the benefits of your products and services to your customers, highlighting the unique solutions it offers to their problems. Avoid being a copycat; rarely do imitators succeed in the market. Study, but do not copy your competitors, and package your products distinctly.
4. First impression counts. Strive for accuracy and quality the first time around. You often do not have a second chance to make a good first impression. This entails a well-laid out store, courteous staff, and personable voice over the phone, etc. However, if you are a one-person business working in a home office, remember that you are the center of your business and marketing efforts. Everyone you come in touch with is potentially a client or a referral to another client because they are either impressed with you as a person, impressed with your skill at providing a certain service or product. Make sure that you are always presentable, professional in your ways and knowledgeable about your business.
5. Good reputation. Your business hinges on its reputation. It is imperative that you build a good reputation for the quality of your products and support services. Remember that two things guarantee success: high quality goods and superior service. Always aim for quality. If you are a tax consultant, strive to prepare a totally accurate, perfectly done tax returns for your clients.
6. Constant improvement. Entrepreneurs know that they should not be rigid in their ways of thinking in their quest to improve their best products and services. You risk being left behind by the fast-paced competition if you cling to the “this is how we’ve always done it” kind of thinking. The business environment today demands that you need to come up with new solutions fast!
7. Listen to your customers. Be market driven: listen and react to your customer’s needs. Customers need to feel that they are important to you because they are! When you focus on your customers and gain their trust, they will not only recommend you but they will also remain loyal to you. Remember, personal recommendation and word-of-mouth are the least costly yet most effective marketing strategy for your business.
8. Plan for success. An entrepreneur should understand the power of planning. A good plan helps you increase your chances of succeeding and can help you define your business concepts, estimate costs, predict sales and control your risks. It tells you where you are going and how to get there. Going into business without a plan is like driving into a foreign land without a road map.
9. Be innovative. Innovate your offerings constantly, keeping pace with technological changes. Use change as a springboard to improve your products, procedures or reputation. Innovation should also cover your operations from pricing, promotion, customer service, distribution, etc. Keep your eyes for new ways of doing things, and apply those that can improve the quality of your products and efficiency of your operations.
10. Work smart. As an entrepreneur, you need to possess self-confidence, plus a never-ending sense of urgency to develop your ideas. Studies have shown that the individuals who succeed in entrepreneurship are far-sighted and can accept things as they are and deal with them accordingly. They know how to manage their time, realizing the importance of leisure in as much as work. These people are oftentimes quick to change directions when they see their plans are not working. More importantly, they recognize their weak points and move on to nurture alliances and acquire the skills they need to put their business on the right track. They realize the importance of working smart, knowing that it is not the quantity of work you do, but what you do and how well you do it.
FORMS OF BUSINESS OWNERSHIP
Posted by admin in Starting A Business on March 9th, 2009
FORMS OF BUSINESS OWNERSHIP
One of the first decisions you will need to make is how you want to organize your
business. This is an important decision with long-term implications. Consult with an
accountant or attorney to help determine what form is best for you. In making your
decision, you should consider the following:
Your vision for the nature and size of your business.
The level of control you want to have.
Your business’s susceptibility to lawsuits.
Tax implications of various structures.
Need for reinvesting earnings into business.
The level of structure you want to have.
SOLE PROPRIETORSHIPS
The majority of small businesses start as sole proprietorships. Sole proprietorships are
owned by a single person, who is usually also the person responsible for running the
business. All assets are owned by the sole proprietor and also all profits earned. Sole
proprietors are also responsible for all liabilities and debts. To the law, and for tax
purposes, the owner and the company are the same.
Advantages of a Sole Proprietorship
Easy and inexpensive to organize.
Owner is in complete control.
Owners decide whether to keep profits earned or reinvest them in the company.
Profits go directly to the owner’s personal tax return.
Easily dissolved.
Disadvantages of a Sole Proprietorship
Owners have unlimited liability and are solely responsible for debts and liabilities.
This means that their business and personal assets are at risk.
Sole proprietorships are at a disadvantage in raising funds and are usually limited to
using consumer loans or personal savings.
Potential employees may be discouraged by the fact that they cannot own part of
the business.
Some employee benefits are only partially deductible from business income.
PARTNERSHIPS
A partnership is a company owned by two or more partners. Like a sole proprietorship,
the law does not distinguish between the owners and the business. Partners should set
forth legal agreements as to how decisions will be made, how profits will be shared, etc.
There are also three types of partnerships that can be formed:
1. General Partnership
Management responsibilities, profits and/or losses, and liability are shared equally
among partners according to an internal agreement.
2. Limited Partnership/Partnership with Limited Liability
Some partners have limited liability (equal to their investment) and limited input to
management decisions. More complex and formal than a general partnership.
3. Joint Venture
Acts like a partnership for a limited time period or a single project.
Advantages of a Partnership
Easy to establish.
Multiple owners mean that partners can be found with complimenting skills.
Employees may be attracted to the idea of joining a company in which they can
become a partner.
Profits go directly to partners’ personal tax returns.
The ability to raise funds may increase with multiple owners.
Disadvantages of a Partnership
Partners are liable for not only their own decisions, but also those of their partners.
Profits are shared between partners.
Disagreements may arise between partners when making decisions.
Partnership may end at the withdrawal or death of a partner.
Some employee benefits are not tax deductible.
CORPORATIONS
A corporation is filed in the state in which it is headquartered and is recognized as a
legal entity separate from its owners. The owners of a corporation are shareholders and
elect a board of directors to make decisions for the company. A corporation can be
taxed, sued, and enter into contracts. A corporation does not dissolve when its
ownership changes and has an unlimited life.
Advantages of a Corporation
Shareholders have limited liability for the corporation’s debt or in the case of legal
judgments made against the corporation.
Can raise money by selling stock.
Benefits offered to employees are tax deductible.
Disadvantages of a Corporation
Requires more time and money to organize.
May result in higher overall taxes.
Monitored by government agencies and may have to complete paperwork to
comply with regulations.
LIMITED LIABILITY COMPANY (LLC)
A limited liability company, or LLC, is a new form of business ownership unlike a
partnership or corporation. LLCs combine the corporate advantages of limited liability
with the tax efficiencies of a partnership. Thus, formation of an LLC is more complex
than that of a general partnership. An LLC is owned by members whose ownership is
represented by their “interests”. “Interest” in an LLC is similar to “interest” in a
partnership or stock ownership in a corporation. Depending on how an LLC is managed,
its members may resemble partners in a partnership or shareholders in a corporation. If
members choose to have managers manage their company, they will act more like
shareholders. If they manage their company, they will be similar to partners.
Advantages of a Limited Liability Company
LLCs allow pass-through taxation, meaning that earnings are taxed only once.
The LLC owner’s liability is limited to what they have invested in the LLC.
LLCs are allowed to establish any organizational structure, allowing them to
separate profit and voting interests.
Disadvantages of a Limited Liability Company
More paperwork is required to form an LLC and documents must be filed at the
state level.
Some states require a dissolution date to be included in the articles of organization.
Unlike a corporation, which has unlimited life, certain events can be dissolution
events for an LLC, such as death of a partner or bankruptcy.
LLCs are a relatively new form of ownership and thus less familiar.
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