STARTING YOUR OWN BUSINESS

Stand out from the crowd…

 OUTLINE
• What is a Business?
• Do I really want to start a business?
• Characteristics of Successful Entrepreneurs
• Identifying Business opportunities
• Business Planning
• Value Proposition
• Sources of Finance
• Next Steps
 WHAT IS A BUSINESS?

▪ HOBBY
- Motivation is interest and/or
enjoyment

▪ INVESTMENT
- Motivated by long term
financial plan

▪ BUSINESS
- Intent to make money
- Can be part-time
- Doesn’t have to be primary
source of income
What is a Business?
❑ Hobby
- Makes no profit in three
to five years

❑Business
- affairs are conducted in
a businesslike manner
- keeps proper accounts
and records
- separated from
personal affairs
 What is a Small Business?

o Independently owned and managed

o Does not dominate its market

o Employs less than fifty staff

o Has revenues less than N200million

Do I really want to run a business?

20 Questions to ask yourself

 20 Questions to ask yourself

1. Am I prepared to spend 4. Why am I starting a

the time, money and business?
resources to get my
business started? 5. What is my target
market?
2. What kind of business do
I want? 6. Who is my competition?

3. What products or 7. What is unique about my

services will my business business idea and the
provide? products/services I will
provide?
 20 questions contd…
8. How soon will my products/ 12. How will I manage my
services be available? business?

9. How much money do I 13. How will I market my

need to start my business? business?

10. Where will I get the money 14. How will I price my
to start my business? product/service
compared to
11. Where will my business competition?
be?
15. Will I need a loan?
 20 questions contd…
16. Do I need other staff for my
business?

17. How many employees will I need for

my business?

18. What types of suppliers do I need to

contact?

19. Will I be able to grow my business?

20. Do I have what it takes to run a

business?
CHARACTERISTICS OF
SUCCESSFUL ENTREPRENEURS
CONFIDENCE
DETERMINATION
Yes you can!!
PERSISTENCE
GOAL ORIENTED
PROBLEM SOLVER
LEADER
CREATIVITY
 The Successful Entrepreneur
Passion for Product/customer
the Business focus

The Successful
Entrepreneur

Tenacity Despite Execution

Failure Intelligence
 “BUILD ON YOUR
STRENGTHS AND INVEST IN
YOUR WEAKNESSES”
CHOOSING THE RIGHT BUSINESS
 Sources of Business Ideas
• Past work experience
• Hobbies and interests
• Strengths and abilities
• Friends and family
• Distribution channels
• Travel
• Books and magazines
• Current trends
• Research organizations
• The web
 Where Entrepreneurs Get the Ideas for their New Ventures

1. Prior business 5. Hobby/personal

experience interest
2. Business 6. Inventor and Trade
associates shows
3. Saw a similar 7. Saw something in a
business magazine/
elsewhere
newspaper
4. Suggestion by
friends or relatives 8. Radio/television
9. Creative Thinking
 QUESTIONS
• What are your interests, profession, hobbies etc?

• What business ideas can be derived from these

interests?

• How can you generate good business ideas based on

local resources and activities?

• What gaps do you see in the community that you can fill?
 Create an Ideas List

S/N IDEA BRIEF DESCRIPTION

 Evaluating Ideas

1. What do others think of the

idea?
2. Has the idea been tried before?
3. If not, why?
4. If so, what success did it have?
Can you improve on that?
 Evaluating Ideas …

5. What information was used to

generate the idea? Was it
accurate, dependable and
reliable? Was it sufficient?
6. How confident do you feel about
the idea?
7. What are the risks associated with
the idea? Are they controllable?
 Evaluating Ideas …

8. Is the idea directly related to an

opportunity? Specifically define the
opportunity.
9. Is there a “user market” for the idea?
Define it. How large is it?
10.Will there be much resistance to the
idea? From where? Why? Can such
resistance be overcome?
 Evaluating Ideas …

11.Is much money necessary for the

idea? Where will the money come
from? Why?
12.Have you made any questionable
assumptions in formulating your
idea?
13.Is there a better idea?
What Led To Your Business Idea?
PLANNING YOUR BUSINESS
The Business Plan
• A “business plan” is a roadmap that
describes where you’re going and
how you’re going to get there
• A guide to achieving your goals
• A tool to spark investor interest
• A document that helps employees
understand the company mission
 Key Elements of the Business Plan

• Description of your products and services

• Market and industry analysis that
demonstrates the need for your business
• List of competitors, including their
strengths and weaknesses
• Marketing strategy (sales approach)
• Management team and operations plan
• Financial analysis: the investment needed
 Effective Marketing
• A “marketing plan” serves as a blueprint
for you to follow to get your products and
services known and recognized. It has:
– Competitor and issue analysis: challenges
and opportunities facing the business
– Objectives: What do you want to achieve?
– Action program: A “to-do” list
– Budget: Detail expenses
– Strategy: The Four “P’s”
The Four P’s of Marketing
• Product: Describes features and
benefits
• Price: Lists prices and pricing strategy
• Promotion: Tools or tactics to achieve
marketing objectives
• Placement: Sales philosophies and
methods
 Financial Plan
• THE PRIMARY EVALUATING TOOL
– Support all information
– Make conservative projections
• Start-up Budget: amount needed to
open
• Operating Budget: ongoing expenses
once open
• Sources and Uses Sheet
 Financial Plan: Startup Budget
• Personnel (costs prior to opening)
• Occupancy (lease, rent, or mortgage)
• Legal/ Professional Fees
• Equipment
• Supplies
• Salary/ Wages
• Utilities
• Payroll Expenses
• Internet
• Licenses/ Permits
• Insurance
• Advertising/ Promotions
 Financial Plan: Operating Budget

• Personnel • Insurance
• Lease/ Rent/ Mortgage • Advertising/
• Loan Payments Promotions
• Legal Fees • Depreciation
• Accounting • Payroll Expenses
• Supplies • Internet
• Salaries/ Wages • Payroll Taxes
• Dues/ Subscriptions/ • Travel/ Entertainment
Fees • Miscellaneous
• Repairs/ Maintenance • 3-6 Months of
Operating Capital
 Financial Plan: Sources and Uses

• Sources of funds
• Details of requested financing
– Amount
– Use
– Terms
SOURCES & USES OF FUNDS
SOURCES OF FUNDS

INVESTMENT CAPITAL
Cash on Hand
Investment by Founder
Investment by Others
Incentives and Grants

DEBT CAPITAL
Bank Business Loan
Bank Personal Loan
SBA Guaranteed Loan
Other Loans

TOTAL

APPLICATION OF FUNDS
Rent & Security Deposits
Equipment/ Fixtures
Leasehold Improvements
Initial Inventory
Working Capital
Insurance
Professional Fees
Advertising
Signage
Contingency Reserve

TOTAL
CASH FLOW PROJECTION Year One
Month 1 2 3 4 5 6 7 8 9 10 11 12 Total
Cash In-Flows
Sales
Other Income

Total In-Flows

Cash Out-Flows
Cost of Goods Sold
Rent/ Mortgage
Owner's Salary
Other Salaries
Advertising/ Promotion
Utilities
Loan Payments (current)
Loan Payments (previous)
Telephone
Office Expense
Dues/ Subscriptions
Accounting
Insurance
Professional Fees
Internet
Repairs/ Maintenance
Licenses/ Permits
Travel/ Entertainment
Legal Fees
Bank Charges
Miscellaneous

Total Out-Flows

Beginning Cash Balance

Ending Cash Balance

Pro-Forma Income Statement
Year 1 2 3

Sales
Less: Cost of Goods Sold

Gross Profit

Operating Expenses
Rent/ Mortgage
Owner's Salary
Other Salaries
Payroll Taxes
Advertising & Promotion
Telephone
Office Expense
Dues and Subscriptions
Accounting
Insurance
Professional Fees
Internet
Repairs & Maintenance
Licenses & Permits
Travel & Entertainment
Legal Fees
Bank Charges
Miscellaneous
Depreciation
Amortization
Interest

Total Operating Expenses

Net Profit Before Taxes

Pro-Forma Balance Sheet
(Opening Day of Business)
CURRENT ASSETS
Cash
Accounts Receivable
Inventories
Prepaid Expenses
Other Current Assets
TOTAL CURRENT ASSETS

FIXED ASSETS
Land
Leasehold Improvements
Equipment
Vehicles
Other Fixed Assets

Subtotal Fixed Assets

Less: Accumulated Depreciation

TOTAL FIXED ASSETS

TOTAL ASSETS

CURRENT LIABILITIES
Accounts Payable
Short-Term Debt
Accrued Expenses
Other Current Liabilities

TOTAL CURRENT LIABILITIES

LONG-TERM DEBT

OWNER'S EQUITY
Paid-In Capital
Retained Earnings

TOTAL OWNER'S EQUITY

TOTAL LIABILITIES & OWNER'S EQUITY

SOURCES OF FINANCE
 Financing Your New Business

• Start up loans are very

difficult to obtain
• Chances are you have to
rely on the funds you can
personally raise
• Grants?! Sidebar here
– Matthew Lesko, NGC
 Methods of Financing

• Personal funds
• Family/ friend loans and gifts
• Angel investor
• Venture capital
• Grants
• Personal loan
• Business loan
 WAYS TO RAISE CAPITAL
1. Save up your own money – necessary
although you don’t have to have all the
money at the beginning

2. Borrow from Friends and Family – try to

win them over with your great business
idea. Ensure a written agreement
stating terms and details of the loan
 WAYS TO RAISE CAPITAL…

3. Find a Business Partner – Look for

someone with funds to support your
idea, and partner with them.

4. Supplier Credit – look for suppliers who

are willing to sell to you on credit. This
may be very difficult though
 WAYS TO RAISE CAPITAL ..
5. Find a Venture Capitalist – this is not
very common around here, but you just
might be lucky

6. Get a Small Business Loan – Be aware

there are many factors and variables
surrounding this…
 The Five “C’s” of Credit
• How banks determine whether to loan you
money:
– Character: Credit history is very important!
– Capacity: What is your track record of debt
repayment?
– Capital: How long will personal resources support
both you and the business?
– Conditions: Current economic conditions
– Collateral: Assets the company pledges as a
source of repayment for the loan
 SUCCESS FACTORS
• A product/service that customers want
• A product/service that you can sell at a
price customers can afford and earn a
reasonable profit
• The knowledge and skill that you have
or can get
• The resources and money you are able
to invest
 ARE YOU READY?
• To take full responsibility for the
management and success of the
business?
• To work long hours?
• To acquire the necessary skills to make
the business a success?
• To be determined and focused?
NEXT STEPS
 How do you proceed?
1. Create an ideas list

2. Analyze each idea and select the one which

best suits you
a) WHICH needs will my product/service meet?
b) WHAT quality of the product/service do
customers want?
c) WHO are my competitors?
d) HOW does running this sort of business suit my
personality?
 How to proceed…
3. Define your business idea
- what product/service will I sell?
- who will I sell to?
- how will I sell my product/service?
- which need will my business fulfill?
4. Develop your business idea
- conduct market research
- speak to professionals
- acquire necessary skills
 How to proceed…
5. Prepare a Business Plan
- with your audience in mind
- seek professional help
- keep it simple and straight

6. Register your business

- Sole Proprietorship
- Partnership
- Limited Liability Company
 How to proceed…
7. Draw up your timelines
- Highlight the steps you need to take before
your business becomes a living entity i.e. look
for a shop, pay rent, recruit staff, open an
account etc.

8. See next page…..

Final Thoughts

• Build on every success

• Learn from your mistakes

• Take time to relax and reduce stress!

 Ibadan Small Business Network

Benefits:
• Business Referrals
• Networking
• Business Management Training
• Subsidized Business Development
Services
• Cooperative lending to Micro Enterprises
• Crowd funding