For many, this is a dream—striking out on their own, controlling their destiny and being their own boss. Here are success stories from those who made their dream business a reality!
For each of the 3.7 million jobs available today there are more than 6 people competing according to Department of Labor statistics. Without enough jobs to go around, the solution to the current job crisis depends on people starting their own small businesses, continuing a major economic trend of the past decade. Nearly all new job growth during the last ten years came from new small businesses, the majority of which had no employees.
The challenges are many, but the rewards of owning your own business can be great. What follows is a roadmap to help people get there.
The U.S. Census Bureau reports that franchises accounted for 10.5 percent of businesses with paid em[...]
Stage 1: The Big Idea
People often say that the hardest part of starting a small business is coming up with a good idea. Start by solving a real problem; identify a product or service that is needed, has a potentially large market, and is sustainable. How many times have you thought or said out loud, “I wish there was a better way to (fill in the blank)” or, “Why hasn’t anyone created (fill in the blank)?” This is the genesis of a new and potentially successful business. photo credit: Cayusa via photo pin cc
Product or Service? New biz? Franchise?
If you don’t already have an idea, one approach is to brainstorm a particular category and outline what is working and not working. Check out Popplet for a fun (and productive!) online alternative to traditional mind-maps and brainstorming. Finding a good strategy for coming up with a good (or even great!) idea will help form the basis for a new business. Once you have identified a business idea, you will need to vet that idea to determine if it is marketable. A SWOT analysis is a tried and true technique for this analysis. Much of what goes into the SWOT analysis will be necessary for a business plan. The strengths and opportunities need to be compelling, while the weaknesses and challenges should not be insurmountable. No business is without obstacles. The challenge is to avoid being blindsided by them. Anticipating the challenges and designing a business that mitigates them is the goal.
For some, buying a franchise is a more direct and comfortable way to be your own boss. To get started, here is a list of the top 100 global franchises. photo credit: Life Mental Health via photopin cc
Assuming you are starting a small business from scratch, the name of your company is a key part of your branding, so give this a lot of thought. Create a list of several possible names and then go here to see if the domain name, Twitter handle and Facebook URL are available. Another option is Panabee. On one site, the user is able to put in keywords or the business name and see what is available for domain names while brainstorming alternatives, “See many ideas with one click — translations, phonetic variations, related terms, and more.”
Even if yours is not a web-based business, you will want a website as part of your marketing plan. If the name is already taken but available for sale, this company can help with a possible purchase. Once you have selected a name and you have purchased the domain rights to it, consider trademarking the name. It gives you protection against others using your name and it becomes an asset of the business. Trademarking also avoids the possibility of incurring expenses at a later point to change your company name and promotional materials if the rightful owner of your company name legally challenges your company. For an overview of trademarks, patents and copyrights, here is a “Simple Guide”. To pursue a trademark for your small business, you can check out listings on Rocket Lawyer or use another online firm.
Don’t forget to get creative- bring your company name to life by creating a logo. A design you love, or 100% of your money back at 99designs.com. Also, Slogan Slingers is a website that uses a competitive format to deliver taglines and slogans quickly and on the cheap.
At some point you may want to consider a patent for your product. As of March 2013, the U.S. adopted a first-to-file system and under this system the first inventor to file an application (not to invent), gets the patent. Prior to that date, inventors could document the building and testing process to prove an earlier date of invention. Under the new law that is not possible. An inventor can still file a patent application and mark the invention with a “patent pending” label before shopping it around. If you are considering filing a patent, we recommend either this “turnkey approach” or this do-it-yourself provisional patent guide.
Business Plan/Investor Summary
Some people think that a business plan is “old school” and that today you should just dive right in and do it, rather than getting bogged down in weeks or months of analysis and writing. The decision is up to you, but we recommend that you consider a business plan. Developing such a plan may prove necessary if you need investors, and it can save you a lot of time and money if it reveals solid reasons not to pursue your idea.
Think of the plan as a go-to market blueprint for your small business. By spending the time upfront–before you launch–to think through the strategy, competitive factors, marketing, operational needs and costs, as well as the projected P & L, you will be in a better position to execute once funded. A business plan can also help you avoid cash-flow shortages.
Many investors, including banks, will require a business plan as part of the process. For you, the plan offers some protection from launching a bad business idea before you get too far down the road, and it also sharpens your knowledge of the business overall.
A business plan does not need to be long, it just needs to be well analyzed and presented. In many ways, a shorter plan is better because it may reflect very clear thinking. If you are meeting with investors, you will want to create a PowerPoint presentation of the key elements.
There is no one way to write a plan, but key sections often include:
*Executive Summary (write this last as it pulls the key info from each section)
*Business Idea (Google example: make it easy to get answers to anything)
*Description of Business (what problem are you solving and how)
*Demo (if applicable and if you have one)
*Target Market (category, demographics, behavioral characteristics, etc.)
*Competition (companies, strengths and weaknesses, voids)
*Road to customers/Business model/Primary revenue sources
*Stages of Development (factors that will lower risk)
*Management Team (why they are qualified to make the business successful)
*Financial Projections (3 years, full P & L including cash flow, ideally monthly)
*How will the money be used/Next steps
There are a lot of products available to help you. We are not big fans of business plan software because no two businesses are alike. Plus, using some of these software packages can be more frustrating than helpful. The one product that we DO recommend is LivePlan. The cost is minimal ($19.99/month) and your finalized business plan can be downloaded prior to cancelling your subscription.
We recommend writing your answers to the above section questions. When you get to financial projections, try using the government’s templates. Once you click on the site, we suggest the template “Cash Flow Statements (3 years)”, but feel free to use any of the templates suggested. If you need help visualizing what goes into each of the sections, you can find a number of winning business plans created by MBA students here.
When organizing information and writing your business plan, keep in mind that developing an elevator pitch will be another key aspect of presenting your business to possible investors and/or clients. Click here for an interactive Elevator Pitch Builder, from the Harvard Business School. Once you have entered the site and have opted to begin crafting your pitch, note the options at the bottom of the hint panel– by clicking on the “X” you are then able to begin entering your text. This is a more interactive opportunity to design a pitch than it first appears to be, so we suggest taking a minute to look through the 5 steps. photo credit: internetsense via photo pin cc
If you are considering a technology business, Crunchbase and Quora can be invaluable resource tools for research on your industry and the competitors. To connect with other entrepreneurs in your area and take advantage of training, StartupDigest is worth checking out. This is a free service that will connect you to your local startup community and upcoming events taking place in all major U.S. cities, select smaller U.S. cities and in numerous international locations.
SCORE is a free mentoring service available to anyone interested in becoming an entrepreneur. Retired company executives volunteer their time to help you with everything from writing the business plan to networking.
Finally, there are new incubators and accelerators cropping up every day to help a lucky few nurture their small business ideas in a formal program. It is estimated that about 1% of people who apply to any of these programs are accepted, but it can be an invaluable asset given the access to smart and highly connected people. Very recently a common application was created to apply to one or more of the best known accelerators. A comprehensive list of accelerators can be found in this blog. Most of these programs require a fee and/or equity, but this is a low ($1K) to no cost virtual accelerator, recently pioneered by a socially minded Silicon Valley entrepreneur.
The kitchen table or the garage is where many an entrepreneur got their start. But, today many co-working spaces have emerged to provide a quasi office and access to other startups. Hive at 55 is a great coworking space in New York City, specifically. photo credit: Maarten Takens via photopin cc
Stage 2: How To Finance It?
You have the big idea. Now you need money. This is the next big hurdle you need to get over to bring your company to fruition. Raising money to launch your small business is a full-time job and usually takes much longer than you think it will. Even after you have successfully obtained funding, you will still need to allot some time each month to raising more money because many businesses need more than one round of capital to keep the doors open.
It usually starts with you–your savings, credit cards and second mortgages (not all of which are recommended). From here the typical entrepreneur turns to family and friends, with whom you should be clear whether the money is considered a loan or a small equity position. High net worth investors like angels and venture capitalists, who invest for what is usually a large equity stake, are the next potential source of capital. You may also consider a bank loan, but this tends to be more suitable for existing businesses that are looking to expand. This video is an excellent primer on the different avenues to fund your business. photo credit: Roger Smith via photo pin cc
Crowdfunding & Alternative Investments
A new source of funding for startups and/or small businesses, known as crowdfunding, is “coming of age.” For several years, companies such as KickStarter, Indiegogo, and RocketHub have offered organizations, individuals or businesses web-based platforms on which to raise money. Founded in 2009, Kapipal is a small, international crowdfunding platform that does not charge a fee (although Paypal will) for campaigns. Most crowdfunding projects are geared towards raising money for non-profits, community projects and the like because companies are limited to incentives like free product, tee-shirts and karma. Until recently, for-profit companies have not generally used crowdfunding, as SEC guidelines currently prevent startups from offering equity on these sites, meaning that donors have less incentive to contribute to for-profit enterprises. However, 2012 has seen several tech companies raise millions of dollars for the promise of a product. Examples include the Pebble Watch and Double Fine Adventure.
Here is TerraCycle Founder Tom Szaky. This video gives you the lowdown about why crowdfunding matters and how you may be able to use it to fund your small business.
On April 5, 2012 when the JOBS Act was signed into law, a new source of raising capital was created with crowdfunding for equity. The basic idea is that entrepreneurs will be able to offer equity in exchange for investments in their startup or small business—something that was illegal before this new law. Although the JOBS Act has been signed, the Securities and Exchange Commission (SEC) has until the end of 2012 to create the necessary regulations. Startups cannot use this new fundraising tool until the SEC completes the regulations. Sign this petition to let the SEC know how important this is and that you are counting on them to complete the laws on time.
Another means of accessing personal capital to launch a small business involves converting some of your retirement assets into Rollover for Business Funding (ROBS). It allows you to use your retirement savings, tax deferred and penalty free, to fund a startup. This funding mechanism can include a rollover 401(K), IRA, or SEP (if the SEP is open for more than 2 years) or any combination of the 3 acceptable types. ROBS works by creating a corporation with its own retirement plan. The 401(K), IRA or SEP funds are rolled into the new entity’s retirement program. Stock is purchased in the new company using these funds. Capital is now available to buy a business, start a business, use as collateral for an SBA loan, etc. Basically, you are up and running and have cash flow to manage your business. This is one of the companies that offers this service. photo credit: alexkess via photo pin cc
Microfinancing is another exciting option for people whose investment needs are relatively small. This is particularly suitable for the person who needs to buy a sewing machine to run a tailoring business or start a food truck. Accíon, Grameen, Seedco and Kiva are several of the largest companies that offer microfinancing. Grameen, started by an economist who went on to win the Nobel Peace Prize for his programs, helps companies in the Northeast and South and does not maintain a minimum credit threshold, arguing that credit history isn’t predictive of small business success. photo credit: Merrick Brown via photo pin cc
Sometimes the best investor is what is called a strategic partner. This could be a vendor or compatible business that has a vested interest in your company’s success. One example is a new television advertising technology cooperatively backed by Comcast, owner of NBC and several cable networks. Such partnerships require a lot of thought but may prove very effective given the targeted nature of your time. If you are a web or mobile company and need technical expertise, there are new companies that provide labor in exchange for equity. This can be a great way to fill out your team if it lacks programming/technical talent. photo credit: baggyjumper via photo pin cc
The SBA (Small Business Administration) may be familiar to you as a source of government loans to small businesses. While this is part of the SBA’s job, it doesn’t typically offer such services to startups. SBA loans are administered by banks as part of the commercial loan process. Take a quick look to see if you may qualify. photo credit: kenteegardin via photo pin cc
Right now small grant money ($1K) is available with this foundation and there are no strings. For non-profit entities, Grants.gov is a clearing for information on over 1,000 grant programs. Also, BizPlanCompetitions.com has a fantastic list (albeit not complete) of entrepreneurial contests and business plan competitions. photo credit: Kaptain Kobold via photo pin cc
As mentioned earlier in this section, angels can be a helpful source of investment in the $50-250K investment level. AngelList is a one-stop shopping platform that instantly exposes your business opportunity to thousands of angel investors. Another option, Gust is a platform designed to connect investors to entrepreneurs. The Angel Capital Association offers an Angel List, organized by geographic region. photo credit: Perrimoon via photo pin cc
Most small businesses never need investor money. Some, however, require millions of dollars to create and/or scale. Venture capital (VC) is the most likely investment for this type of company. Right now, VCs expect most startups to have at least a prototype and market success before they will consider investing. The road to meeting with venture capitalists is through networking. They are most receptive when you have been introduced to them by someone they trust. This process is a long, delicate, and frustrating one, requiring a lot of homework and ideally a mentor. Steve Blank, a successful entrepreneur turned professor at Stanford and UC Berkeley, has created a fantastic list of all the best articles, blogs (our personal favorites include Both Sides of the Table, Fred Wilson—A VC, and Startup Lessons Learned), pitch suggestions, term sheet and valuation guidance, legal issues, etc. Scroll to the end for the good stuff.
If finance is not your thing and you need to raise money from angels or VCs, this short video series about venture capital from Khan academy will help give you the confidence to meet with investors. photo credit: paul goyette via photopin cc
Stage 3: Make It Happen
Now comes the fun part—execution. Believe it or not, a huge percentage of small businesses that make it this far still fail because the managers couldn’t run the company well enough. You will be pulled in a million directions once you’re in operational mode, and as you add employees and contractors you’ll be relying on the abilities of other people more than ever before. Hiring the right people, leading them, inspiring and motivating them are now make-or-break factors for your small business. Choosing the best technology for your business will also be key. The Wirecutter has taken the work out of finding just the things you need.
Operations– From a purely operational standpoint, your small business will need legal, HR, accounting, insurance and payroll, to name a few support resources. For web-based B2B services, we would recommend an online payroll option. Generally speaking, you will probably want many of them to be local, which means that your social network is key to helping you make good choices. Joining Meetup.com can be a great way to find good, local resources. Local LinkedIn groups, alumnae organizations, etc., are also useful for suggestions.
When you launch your website, you will want to make sure it looks fantastic! For a quick (and free) spell check, use CheckDog- the first five checks are free, using the trial package.
Ultimately, starting a small business means creating and sustaining relationships with customers. Join.me is a terrific (and free!) way to demonstrate a product via screen sharing, including an option for conference calls. When you are presenting, we suggest Slideshare for slideshows. For a web-based conference call service, AnyMeeting is free for calls with fewer than 200 attendees. The service includes audio, video, screen sharing, recording, chat and social features! Skitch is an app for collaborating on projects and communicating through annotation, shapes and sketches- very handy for pointing out particular bits of info or suggesting changes! For keeping track of and analyzing time spent on projects– as well as creating invoices for billing– we recommend Harvest for your small business. For the 1-3 user option the cost is only $12/month, after the initial free trial period. For credit card transactions made in person (travelling dog groomers, craft fairs, tutors), here is a great on-the-go option that enables payment on various smartphone operating systems. If your business manages recurring payments, Chargify will make the processing painless!
Useful for both internal sharing and project management, Evernote is a fantastic resource. You have the option of a free app, syncing information between mobile devices and your desktop. For $5/month, Evernote allows not only sharing, but joint editing privileges. Another option we recommend for project management is Trello. When it comes to managing customer relations, check out Salesforce.
Great for organizing your “stuff”, Found is an app that enables the user to search across multiple platforms– your email, dropbox, Evernote account can all be searched with one click of a button! At the moment, it’s only available for Mac users.
Thinking its time for an event? Eventbrite has our vote! Whether you are looking to attend an event in your area or want to create your own event listing, give ‘em a look-see!
Marketing– As a part of your small business marketing plan you will need to maintain an active presence in social media, given its importance in today’s world. According to Sitepoint.com, over 4 billion searches are conducted daily worldwide and 95% of website traffic comes from the first page of search results. Here is an introduction to optimizing your small business website. For an introduction to These figures suggest that you can’t just hope that people stumble upon your website. For a 30-minute primer, check out ColderIce’s take on social media for the small business. Now that you have the overview, The Noob Guide to Online Marketing will teach you everything and more that you want to know about effectively executing a social media plan. Be warned, it will scare you, so be selective. Start small and build up to many of the site’s suggestions. You may want to hire a social media professional or agency to help you craft a plan. Try placing an ad on Craigslist and see what you get. Many web developers offer social media services as well.
Browstein and Egusa recently published The Beginner’s Guide to PR, giving the small business owner everything they need to know in one spot, including an introduction to PR terminology, how to approach reporters, how to write a press release, etc! For PR options, sign-up here or here to publish your release to the press. Although a free service is available on either site, we recommend you consider spending the money for premium services, as the additional impressions gained will boost your company’s Search Engine Optimization (SEO). Publicity is still among the most efficient and effective marketing tools to build awareness and usage. Developing a strong presence for your small business on social media platforms like Twitter, Facebook and LinkedIn can help get you noticed by reporters and lead to an article.
If you and/or your company appear to be a thought leader in your category, you are more likely to be noticed. Help a Reporter Out is a resource that connects reporters to sources. Participating in current discussions in your field by “Helping a Reporter Out” is a free way to begin developing your presence. Actively blogging and speaking at industry meetings is another way to get noticed as a leader in your field.
For email marketing, MailChimp helps you design email newsletters, share them on social networks, integrate with services you already use, and track your results. It’s like your own personal publishing platform… and the basic package is FREE!
Legal–At some point, you will need to legally protect your small business by establishing a business entity such as an LLC. If you are a startup with a social purpose, there are some new legal entities that you may want to investigate. As an online open source for legal documentation you need to get your business off the ground, Docracy offers a number of options including sale & purchase documentation, non-disclosure agreements, etc. photo credit: s_falkow via photo pin cc
Reading is a critical part of small business success. Reading keeps you current, networking makes you efficient, and hustle gets it done. There are no shortage of books that can be helpful. Good to Great by Jim Collins is considered to be the gold standard on how to run a company successfully. Delivering Happiness by Tony Hsieh is a more recent book about the success of Zappos. Reid Hoffman, founder and CEO of LinkedIn, has written a list of 10 rules for entrepreneurs to build massive companies. It’s a quick and worthwhile read. Also, check out Think and Grow Rich by Napoleon Hill. For mobile options, check out this terrific list of the top 10 audio books for entrepreneurs- even your commute can be inspirational!
Newsletters are also valuable reads. We recommend:
*Techcrunch (tech industry bible)
*Mashable (social media download)
*Venture Hacks (VC industry perspective)
*Business Insider (top biz news and analysis)
*Startup OneStop (startup news, resources and NY area events)
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