CHAPTER 7: INTRODUCTION TO BUSINESS TECHNIQUES

A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit or state-owned. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning.

Business Ownership Deciding to start a business can be one of the most exciting decisions you make in your life. But there are a lot of moving parts and many different elements to consider. ere are !" steps that provide an overview of the basic steps re#uired to start a business successfully. $ake one step at a time, and you will be on your way to business ownership. !. Get Inspired % all businesses start from a common point &an idea'. (ou may have dreamed of starting your own business for years, or inspiration may have hit you unexpectedly. )egardless of the source, the first step of starting your own business is coming up with a business idea. *. Do our Rese!r"h % you have identified your big idea, now it is time to balance it with a little reality. +n order for a business to be successful, it must solve a problem, fulfil a need or offer something the market wants. ,. #!$e ! P%!n % you need a plan in order to make your business idea a reality. +f you intend to seek financial support from an investor or financial institution, a formal written business plan is a must. -ven if you do not anticipate seeking financial support, a simple business plan can give you clarity about what you hope to achieve and how you plan to do it. +n general, your business plan should outline your business goals and the motivation behind them, as well as your plan for reaching your goals in terms of marketing and funding. .. P%!n our &in!n"es % starting a business does not have to re#uire a lot of money, but it will involve some initial investment. /. Choose ! Business Stru"ture % your business can be a sole proprietorship, a partnership, a limited liability company or a corporation. $he business structure you choose will impact many factors from your business name, to your liability, to how you file your taxes. (ou may choose an initial business structure, and then reevaluate and change your structure as your business grows and needs change. 0. Pi"$ !nd Re'ister our Business N!(e % your business name plays a role in almost every aspect of your business, so you want it to be a good one. 1ake sure you think through all of the potential implications as you explore your options and choose your business name. 2nce you have chosen a name for your business, you will need to check if it is trademarked or currently in use. $hen, you will need to register it. Do not forget to register your domain name once you have selected your business name. 3. Get )i"enses !nd Per(its % paperwork is a part of the process when you start your own business. $here are a variety of business licenses and permits that may apply to your situation, depending on the type of business you are starting and where you are

located. (ou will need to research what licenses and permits apply to your business during the start-up process. 4. Set Up our Business )o"!tion % setting up your place of business is important for the operation of your business, whether you will have a home office, a shared or private office space, or a retail location. (ou will need to think about your location, e#uipment, and overall setup, and make sure your business location works for the type of business you will be doing. 5. Choose our A""ountin' S*ste( % businesses run most effectively when there are systems in place. 2ne of the most important systems for a business is an accounting system. (our accounting system is necessary in order to create and manage your budget, set your rates, conduct business with others, and file your taxes. (ou can set up your accounting system yourself, or hire an accountant to take away some of the guesswork. !". Pro(ote our S(!%% Business % once your business is up and running, you need to start attracting clients and customers. (ou will want to start with the basics by writing a uni#ue selling proposition and creating a marketing plan. $hen, explore as many business marketing ideas as possible so you can decide how to promote your business most effectively. 2nce you have completed these business start-up activities, you will have all of the most important business bases covered, and be ready for business success.

Business N!(e 2ne of the most important and potentially challenging steps of starting a business is choosing a business name. 6or some, choosing a business name is the first step tackled because it is simple, #uick and obvious to the business owner. 6or others, it is a struggle to identify a business name that truly encompasses the business and everything it stands for. $he right business name will help distinguish you from a sea of bland competitors, provide your customers with a reason to hire you, and aid in the branding of your company. A business name won7t make up for serious deficiency in your business operations or help you avoid selling. Apply these !" commandments when choosing a name for your business. !. T!$e N!(in' Serious%* % naming your business or products is a serious matter. $he name you choose can play an important part in the marketing of your company. (our name pro8ects your image, brand, and position in the marketplace. *. A+oid ,ord P%!* D!n'ers % taking the word play strategy will add to the difficulty in having customers remember and find you. Being cute can backfire. ,. Do Not -e !n IB# % it is tempting to shorten your business name to make communications and correspondence easier. owever, as a business owner you do not have the resources and marketing muscle to educate your market on what your acronym means. .. Be &o"used % forget tagging your business name with the nickname such as global or enterprise. Any start-up founder has big visions for their company. (ou might one day envision marketing to diverse markets and having a wide range of products. 9uccessful start-ups have limited time and money: it is more likely your success in

the world of commerce will come from being highly focused in one narrow area. A company is a specialist: it is why your customer wants you. /. St!* Out o. Court % do not use, borrow, or modify an existing famous brand name. 0. Thin$ Be*ond )o"!% % the bulk of businesses operate in local markets. $his does not mean your name should be geographically based. +f you are marketing to customers in a local market, they will know you operate locally. Adding your town name to your business name 8ust ensures you will be stuck in a long directory list of other local companies with similar names. +f you want a local name, add it to your marketing such as ;-xclusively 9erving the &town' Area;. 3. A+oid #E In" % it is a common tendency for a business to be named after the original founder. +f you are planning to one day sell your company, a company owner named business is less attractive to a perspective buyer7s than a brand built on a company. 4. As$ Others to Spe%% It % put your business name through the spelling test and ask others to spell it. 5. Be ,e- &riend%* % consumers are bombarded with business names and advertising on a daily basis. (our 8ob as a successful business is to make customers remember you. (our website web address should be the same as your business name. Avoid the hyphenated web address names. +t is hard enough to remember a web site address without the hyphens. !". Che"$ A+!i%!-i%it* % when you have developed a great business name, spend the time to determine if another business is not using it. (ou can use a similar name for your business if another company uses it in an unrelated market or industry. 2nce you have your name, protect it by registering the business name with your county or 9tate office.

Business P%!n Out%ine Business plans are an important business start-up step for many business owners, especially those who are pitching their business ideas to investors or credit institutions for funding. Because of the vastness of information to be included, business plans can also be one of the most overwhelming parts of starting a business. ere is a business plan outline that walks you through each section of a basic business plan in the order they typically appear. !. -xecutive 9ummary $he executive summary is the first section of your business plan that is typically written last. +t provides an overview of all of the other sections in the business plan. $he length of the executive summary does not need to be overwhelmingly long. +n fact, it should be as brief as it can be while still conveying the most important parts of your business plan. +t should be easy to read and be written in non-technical language. +n general, your executive summary should highlight at least one important statement from each of the other sections in your business plan. $hink in terms of giving the recipient what they need in order to make a decision about whether or not to invest in

your business. +f the reader only reads the executive summary, he or she should have a very clear idea about your business, your goals and your strategic plan for accomplishing your goals. $he executive summary should also include basic information about your business such as your business name and location, description of your business and its products and<or services, your management team and mission statement. *. =ompany Description $he company description section of your business plan is typically the second section, coming after the executive summary. $he company description outlines vital details about your company, such as where you are located, how large the company is, what you do and what you hope to accomplish. $he company description of your business plan describes the vision and direction of the company so potential lenders and partners can develop an accurate impression about who you are. $he exact elements included in your company description can vary, but here is a list of some of the most important parts to consider> =ompany ?ame % the official name of your business as registered in the state where you do business. $ype of Business 9tructure % sole proprietorship, @@=, partnership or corporation. 2wnership<1anagement $eam % names of the key people behind the company. @ocation % where is the company head#uarteredA =ompany istory % when was the business started, what inspired you to start the business, what need does your company fulfilA 1ission 9tatement % a clear statement that represents the purpose of your company. Broducts<9ervices and $arget 1arket % a brief overview of what you plan to sell and to whom. 2b8ectives % an outline of what you want to accomplish in the immediate future based on the data in the rest of the business plan as well future growth goals. Cision statement % a statement about how you envision the future of the company.

,. Broducts or 9ervices $he products or services section of your business plan should clearly describe what products and<or services you are selling with emphasis on the value you are providing to your customers or clients. $he products or services section should include an in-depth look at all of the elements related to the products or services you are selling. $his section can be broken down into the following parts> Description of the products or services.

Brief comparison to similar products or services in the market. @ist of your price points. -xplanation of how product orders will be fulfilled. 2verview of any special software, e#uipment, supplies or technology that is re#uired to provide your product or service. 2utline of future products or services anticipated. .. 1arket Analysis $he market analysis section of your business plan comes after the products and services section and should provide a detailed overview of the industry you intend to sell your product or service in, including statistics to support your claims. +n general, the market analysis section should include information about the industry, your target market, your competition and how you intend to make a place for your own product and service. -xtensive data for this section should be added to the end of the business plan as appendices, with only the most important statistics included in the market analysis section itself. $he market analysis section of your small business plan should include the following parts> +ndustry Description and 2utlook % detailed statistics that define the industry including size, growth rate, trends and outlook. $arget 1arket % who is your ideal client<customerA $his data should include demographics on the group you are targeting including age, gender, income level and lifestyle preferences. $his section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market. 1arket $est )esults % this is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix. @ead $ime % the amount of time it takes for an order to be fulfilled once a customer makes a purchase. $his is where you provide information on the research you have completed on how long it will take to handle individual orders and large volume purchases, if applicable. =ompetitive Analysis % who is your competitionA Dhat are the strengths and weaknesses of the competitionA Dhat are the potential roadblocks preventing you from entering the marketA

/. 1arketing 9trategy $he marketing strategy section of your business plan builds upon the market analysis section. $his section outlines where your business fits into the market and how you will price, promote and sell your product or service. $here is a lot of marketing information provided in the marketing strategy section that not only gives potential vendors important information to review in their analysis of your business, but it can also be used as a blueprint for all of your marketing activities. ere is a look at how to break down the key information in the marketing strategy section of a business plan using the . Bs of marketing concept.

Broduct % refers to either a physical product or services you plan on offering. Bromotion % the various aspects of how you plan on marketing your product or service. Brice % addresses the way you plan on pricing your product or service. Blace % the delivery of your product or service to your customer. Bromotion Advertising, 1arketing budget, Bromotional strategy, Bublicity and public relations, 9ales force, 9ales promotion Brice Bundling, Bricing flexibility, Bricing strategy, )etail price, 9easonal Brice &if applicable', Dholesale &volume' price Blace Distribution centers, Distribution channels, +nventory management, @ogistics, 2rder processing, $ransportation, $ype of distribution, Darehousing

Broduct Brand name, )elated products or services, 6unctionality, Backaging, Euality, Darranty

0. 1anagement 9ummary $he management summary section of your business plan describes how your business is structured, introduces who is involved, outlines external resources and explains how the business is managed. $his section backs up all of the data you have included elsewhere in the business plan by demonstrating the expertise of the team and resources behind your company. $he management summary section covers all of the relevant information about personnel, anticipated growth and how the company is organized. $his section can be broken down into the following parts> Business 9tructure % what business structure will your company take, a sole proprietorship, a limited liability company, a partnership or a corporationA $his determination will form the basis for the rest of the areas in this section. 1anagement $eam % who will oversee the companyA +f you are forming a corporation, who will make up the Board of DirectorsA An organizational chart can be a good visual to use to illustrate this element. 1anagement $eam Faps % what are your anticipated personnel needsA ow will each role, once filled, contribute to the success of your companyA 2ther Bersonnel % aside from your Board and employees, what external support will help the business functionA $his could include attorneys, accountants, public relations professionals, administrative support and even an external advisory board. Bersonnel Frowth Blan % what are the salaries of each person to be involved with the company for the next three yearsA $his should provide a bottom line cost for personnel expenditures.

3. 6inancial Analysis

$he financial analysis section of your business plan should contain the data for financing your business now, what will be needed for future growth, and an estimation of your operating expenses. Because of the structured, in-depth financial data re#uired for this section, you should consult your accountant or other trusted and #ualified financial professional before writing this section. $he financial analysis section should include the following and be based on estimates for new businesses or recent data for established businesses> Balance 9heet % this should include your assumed and anticipated business financials, including assets, liabilities and e#uity. =ash 6low Analysis % an overview of the cash you anticipate will be coming into your business based on sales forecasts, minus the anticipated cash expenses of running the business. Brofit and @oss Analysis % your income statement that subtracts the costs of the business from the earnings over a specific period of time, typically a #uarter or a year. Break--ven Analysis % this analysis demonstrates the point where the cost of doing business is fully covered by sales. Bersonnel -xpense 6orecast % the expenses of your team.

4. Appendices and 9upporting +nformation $he appendix of your business plan includes information that supports your statements, assumptions and reasoning used in the other sections of your business plan. $his may include graphs, charts, statistics, photos, marketing materials, research and other relevant data.