- How do I determine whether I am capable of starting a business?
- How can I obtain help in setting up my business via online mentoring?
- How do I obtain funding or a loan for my business from the U.S. Small Business Administration (SBA)?
- What do I have to do to get a loan from a bank?
- What is a business plan and why do I need one?
- What do I need to know about financial statements in order to start and manage my small business?
- Why should I care about competition? I trust in the merits of my product/service to be successful.
- Do I need a computer?
- How can I do business on the Internet?
- Should I hire family members to work for me?
- What kind of security measures must I take?
- How can I obtain counseling from a SCORE volunteer with specific expertise in the area(s) in which I need help?
Compare your skills and expertise with those who are successful in similar business pursuits. Analyze what particular attributes and operational capabilities made other businesses profitable and viable in the marketplace. Can you duplicate and surpass the capabilities that other successful businesses possess? What unique skills or edge do you possess to obtain a sufficient share of the total market in the area you plan to serve?
Review business journals and other comparative studies that identify the requirements necessary to operate such a business. Based on your findings, develop a strategy for what should be incorporated into business operations. If possible, do a small scale sample survey of market competition to test the waters in terms of business vulnerability.
Visit the SCORE Web site (www.score.org) and click on “Mentoring.” You can search for a mentor by keyword or expertise. Review the list of SCORE volunteers (with short biographies) that match your needs. Select a mentor and submit a business question. A free, confidential email response will be sent within 48 hours.
The U.S. Small Business Administration (SBA) does not provide funding for direct loans nor does it provide grants/low interest rate loans for business start-up or expansion. The SBA does, however, enable its lending partners to provide financing to small businesses (when funding is otherwise unavailable on reasonable terms) by guaranteeing major portions of loans made to small businesses.
The eligibility requirements and credit criteria of the program are very broad in order to accommodate a wide range of financing needs. When a small business applies to a lending partner for a loan, the lender reviews the application and decides if it merits a loan on its own or if it requires the additional support of an SBA guaranty. SBA backing on the loan is then requested by the lender.
In guaranteeing a loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lending partner for a portion of its loss. By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year to get financing they would not otherwise obtain.
To qualify for an SBA guaranty, a small business must meet the SBA’s criteria, and the lender must certify that funding could not be offered on reasonable terms without the SBA guaranty. For additional information, visit the SBA’s Web site.
Initially, the lender will ask three questions: How will you use the loan? How much do you need to borrow? How will you repay the loan?
When you apply for the loan, you must provide projected financial statements and a cohesive, clear business plan that supplies the name of the firm, location, production facilities, legal structure and business goals.
Additionally, you will need to provide a clear description of your experience and management capabilities, as well as the expertise of other key personnel. If your loan application is declined by at least two banks, you may ask the banker to make the loan under SBA’s Loan Guarantee Plan or Immediate Participation Plan.
A business plan precisely defines the business, identifies goals and serves as the company’s resume. It illustrates the operational and financial aspects of a business. It assists in resource allocation, minimizing unpredicted complications and allowing owners to make good decisions. Because it provides specific and organized information about the company and how borrowed money will be repaid, a good business plan is a crucial part of any loan package. Additionally, it tells personnel, suppliers and others about company operations and goals.
Business plan formats are fairly standard; someone who wants to start an electronics firm might use the same format as someone seeking to start a day care center. SCORE provides comprehensive business plan templates for new and established businesses in the Template Gallery on the national SCORE Web site.
First, you need to know which financial statements are important. Important financial statements include a balance sheet, which shows the financial condition of your business at a given point in time; a statement of operations (sometimes referred to as a profit and loss statement), which shows whether or not you made a profit during a particular period of time; and a cash flow statement, which shows what happened to your cash position during a specific period of time.
You should have a basic understanding of each of these statements in order to compare them with statements from the prior period and determine whether something is happening in your business that needs your special attention. Your accountant can prepare these statements for you from data that you supply. Also there are a number of computer software programs that will help generate these statements from your input of regular transactions such as sales, collections, purchases, payments and payroll.
Very few businesses operate in isolation without market competition. Direct and non-direct competitors are trying to convince customers to buy their product rather than yours. There may also be indirect factors impacting customer choice. It is in your best interest to learn more about the companies that are trying to reduce your take-home pay. Knowing the competition enables you to get a competitive advantage.
List the strengths and weaknesses of each of your competitors. Talk with friends, visit your competition, call for information about their products and analyze how they advertise. Next, take a sheet of paper and list each of the major competitors and give each a rating on a scale of 1 to 10, for product quality, process, advertising and customer satisfaction. You can add other ratings that you feel are important.
You can now use the competitive analysis to make decisions relevant to your strategic marketing plan (an integral part of your business plan). Your marketing plan will guide you toward the right decisions in the areas of pricing and advertising. It will also help you to increase your company’s customer satisfaction rate (which usually shows up as a weakness in many firms). Finally, it can help you make the right decision on customer and product segmentation.
In summary, it is impossible to produce a realistic marketing plan and business plan without knowing your competition.
Small business today faces growing inventory requirements, increased customer expectations, rising costs and intense competition. Computers can manage the information that leads to a better return on investment. At the same time, computers help you cope with the many other pressures of your business.
You can set up your own Web site, if you are adept at using a computer and are familiar with how the Internet works. Most of the major Internet service providers (ISPs) and software companies have basic “build-your-own Web site” tools. Two full-service Web developers geared toward small businesses are Bigstep.com and Web site Pros Inc. If you want a Web site with a complex format and interactivity, you may want to hire a professional Web site designer. Also consider obtaining your own domain name (the address of your Web site or URL). There are several services that provide registration, including VeriSign (formerly Network Solutions). For more information on this subject, consult SCORE's free workbook, How To Really Market on the Internet.
Frequently, family members “help out with the business.” For some small business owners it is a rewarding experience; for others it can cause irreparable damage. Carefully consider their loyalty and respect for you as the owner-manager. Can you keep your family and business decisions separate? Think about the delicate balance in your relationship and try to determine the pros and cons.
Crimes ranging from armed robbery to embezzlement can destroy even the best businesses. You should install a good physical security system. Just as important, you must establish policies and safeguards to ensure awareness and honesty among your employees.
Because computer systems can be used to defraud as well as to keep records, you should check into a computer security program. Consider taking seminars on how to spot and deter shoplifting and how to handle cash and merchandise; it is time and money well spent. Finally, careful screening when hiring can be your best ally against crime.
Contact your local SCORE chapter to verify if there is a local volunteer mentor experienced in the area(s) in which you require assistance. If a mentor cannot be located in your area, log onto the SCORE Web site (www.score.org) and look under Mentoring for a complete listing of available email mentors with short biographies for each.
If you have questions you feel should be added to this list, contact firstname.lastname@example.org.