2Welcome and Introduction Welcome the staff members to the sessionState the subject of the sessionDescribe the overall goals of the session
3Course OverviewSession 1 Preparing for Success Session 2 Researching Your Business Idea Session 3 Business Planning Session 4 The Marketing Plan Session 5 Laws, Regulations and Taxes Session 6 Managing Your Microbusiness Session 7 Analyzing Your Market Session 8 Product and Price Session 9 Placement and Promotion Session 10 E-Commerce Session 11 Selling Success Session 12 Cash Flow Management Session 13 Keeping Books and Records Session 14 Financial Tips and Tools Session 15 Bringing It All Together
4Participant Materials Session OutlinesSession-by-session course outlineTextBusiness Plan Basics: NxLeveL® Guide for Micro-EntrepreneursWorksheetsNxLeveL® Micro-Entrepreneur Business Plan WorksheetsResource GuideNxLeveL® Business Resource GuideOtherClass handouts, supplemental materials
5Class Agenda Class Opener Instructor Topics and Worksheet Time Worksheet Activities and DiscussionBusiness Plan SectionsGuest SpeakerBreakRefreshmentsNetworking ActivityWriting and Reading Assignments
6Expectations and Ground Rules AttendanceAssignmentsAbsenteeismReadingPunctualityWorksheetsWritten business plan sectionsParticipationFormatDiscussionConfidentialityGeneralListeningSafe environment to test ideasAsk questionsAdd ground rules as needed
7Traits of Successful Entrepreneurs Passion. Enjoying what you do is a big part of doing it well!Risk-taking. Entrepreneurs take calculated risks to reach worthwhile goals.Persistence. Entrepreneurs don’t give up when facing challenges.Willingness to work hard. Entrepreneurs are achievement- oriented people who take pride in overcoming obstacles.Self-confidence. Entrepreneurs have confidence in themselves.Optimism. Entrepreneurs believe their hard work and planning are likely to pay off.Cooperation. Smart entrepreneurs know when to seek help.Communication skills. Marketing your business is an ongoing process of communicating the things that make it special.Critical thinking. Smart entrepreneurs look at situations as they are, not as they want or imagine them to be.Fairness. Successful entrepreneurs earn a good reputation through fair dealing and personal integrity.Creativity. This is the main factor that determines whether an entrepreneur will succeed or fail.Staying healthy. Entrepreneurs know that taking care of business requires taking care of themselves.
8Risks of Business Ownership Stress. Starting a business is stressful at the best of times. The more you have at stake, the more stressful it is.Failure. The emotional effects of business failure can be hard to handle, especially if you don’t have strong support from friends and family.Financial hardship. You may have your own money or other assets at risk. Also, your income may be irregular during the first year.Long hours. You may have to work 50 hours or more per week. This could mean giving up activities you currently enjoy.Debt. If your business fails, you may end up with serious debt, credit problems and other financial troubles that make it hard to get back on your feet.Family problems. If your family members don’t understand and accept the risks of your new business— including long hours and new financial stress—serious conflicts are likely.
9Rewards of Business Ownership Independence. You’re in charge of your own life and work.Helping your community. Successful businesses help communities grow and thrive.Job security. These days, a microbusiness may offer more stability than a traditional job would.Learning new skills. Launching a business is a powerful learning experience that can transform many areas of your life. No matter what happens, you’ll gain new valuable skills and experience.Money. The financial rewards of running a microbusiness can go far beyond what you would earn at a normal job.Excitement. Running your own business offers opportunities for excitement, creativity and recognition that most traditional jobs can’t match.Pride. Running a successful business can earn recognition and build pride and self-respect.
10Personal and Business Goals Common personal goalsUse your creativity or talent.Move to a bigger home.Put money aside for your child’s education.Get off welfare or Section 8.Sponsor community events (concerts, lectures, afterschool programs).Spend plenty of time with your family.Help to solve a social or environmental problem.Common business goalsGrow your business by 10 to 15 percent each year.Grow the business to a certain size and sell it.Grow the business and open a second location.Hire two employees in your first year.Be the greenest business in your industry.Capture a certain percentage of your market.Revitalize a struggling community or neighborhood.
11Why Do Microbusinesses Fail? Lack of a well-researched business planFailing to plan ahead and prepare for contingencies, including: natural disasters, theft, illness and growthNot identifying their target customersPoor accounting practicesPoor inventory managementNot understanding what their target customers need and wantPoor cash flow managementNot setting the right price for products and servicesOwner’s salary is too highFailing to comply with laws, regulations and taxesChoosing the wrong distribution methodPoor customer serviceFailing to seek help from mentors and other small- business experts
12Why Do Microbusinesses Succeed? Careful research and planning at every business stageTaking steps to minimize or avoid problems that affect business operationsA clear understanding of who their customers are, where they live and what they needGood accounting and bookkeepingGood inventory managementA unique product that meets customer needs, offered at the right place, the right time and the right priceCareful budgetingEffective promotionsGood organization and management skillsExcellent service based on an ongoing dialogue with customersAsking for help when necessary
13Bootstrapping IdeasEase yourself into business by selling at flea markets, farmers’ markets, street fairs and “pop-up retail” options.Share a rental space with another business.Hire workers for one-time tasks through a website like Craigslist.Look for Local Exchange Trading Systems (LETS) whose members trade goods and services.Participate in a small-business incubator.Barter to procure supplies, or trade expertise you have for expertise you need.Look for a local nonprofit that provides microbusiness owners with free or low-cost computers.Use free or low-cost online faxing, database and accounting programs.Look for free supplies on Freecycle.org and similar sites.Get funding through online tools like Kickstarter.Find an existing business that will let you rent equipment or facilities.Increase your visibility and reach with Twitter, Facebook and other social networking sites.Test-market your product online with sites like Etsy or eBay.Send marketing materials and catalogs electronically instead of printing and mailing them.
14Networking TipsThink ahead! List all the people you know, and think about how they could help you launch your business. Consider family, friends, neighbors, work contacts, school contacts, online contacts and interest groups.Be sincere! Most business people are good at spotting insincere networking attempts.Stand out in a crowd! Wear something unusual to spur conversation (e.g., a unique pin, watch or ring).Keep your network warm! Set up a system to stay in touch with your contacts.Be clear! Come up with a simple, compelling way to introduce yourself and your business idea.Be reliable! Always follow through on your promises.Be prepared! Always carry business cards.Be helpful! Networking is a two-way street. The more you give, the more you get!Be confident! Learn and practice positive body language and conversation skills. If necessary, get help from a pro.
15Professionalism in Business ALWAYS be on time for meetings and other appointments.ALWAYS dress appropriately.ALWAYS speak and act politely and respectfully.ALWAYS respond promptly to phone calls and s.ALWAYS maintain a clean, orderly workspace or office.ALWAYS do your best to exceed expectations.NEVER make promises you can’t keep.NEVER hire employees who don’t meet your standards for professionalism.NEVER argue with customers.
16Verbal Communication Tips Speak at a clear, comfortable pace—not too fast, and not too slow.Listen! Good communication requires careful listening.Don’t use jargon or technical terms without defining them.Speak at a moderate volume—not too loud, and not too quiet.Stay positive and steer clear of controversy.Use business terms correctly and appropriately.Avoid vulgarity, slang and swear words.Never interrupt people.Record yourself speaking and listen back to identify areas for improvement.
17Listening SkillsStop whatever you’re doing. When other people speak, give them your full attention.Be engaged. Look alert and maintain eye contact.Show interest. Encourage the speaker to continue by nodding, laughing where appropriate and showing other signs of interest and attention.Prove that you’re listening. Summarize points and ask questions to make sure you understand what’s being said.Think before you respond. Listen carefully, judge calmly and then react.
18What Are Your Time Wasters? Watching TVOther people make too many demands on your timeTalking on the telephoneFeeling overwhelmed; not knowing where to startSpending time onlineDisorganizationLack of clear goalsLooking for informationWorryingProcrastinationFrequent interruptionsFailure to prioritizeLong linesOversleepingUnreliable transportationNegative attitudeMisplacing things
19Time Saver Tips Use a calendar or planner every day Always put tools and equipment awayPrioritize your tasksLook for online alternatives (e.g., buying postage online instead of waiting in line at the post office)Ask family for more help with household choresSet clear boundaries between family time and business timeUse timers or clocks to manage your timeComplete difficult tasks when you’re at your daily peakSchedule regular breaksPlan shopping trips carefully to avoid making multiple runsLearn to say noKeep all business papers filed neatlyGet help with tasks you’re not good at
20Coping With StressTake a break! Getting some distance clears your head and helps you make better decisions.Find support! No matter what you’re going through, someone can help you cope.Slow down! Set aside some quiet time every day to reflect and relax.Get some exercise! Research shows that exercise reduces stress and eases depression and anxiety.Stay motivated! Carry an inspirational quote.Eat well! A microbusiness is only as healthy as its owner.Get help! If you have a hard time overcoming negative thoughts and worry, cognitive behavior therapy (CBT) is proven to reduce anxiety and depression.Get enough sleep! The combination of high stress and little sleep is very dangerous!Think positively! You may not have control over stressful events, but you can control how you react to them.
24What You Must Know About Credit Whenever you buy something on credit or apply for credit, it’s reported to national credit bureaus that track your credit and payment history.Creditors and lenders use credit scores to make decisions about your application.Your personal credit score affects your startup business’s ability to get credit.The main three credit bureaus are Equifax, TransUnion and Experian.If you are denied credit, you are entitled to a free copy of your credit report.When you apply for credit, credit bureaus generate a credit report based on your name and Social Security number.You can get a free credit report annually from each of the three credit bureaus by visiting AnnualCreditReport.com.A credit score is assigned to you based on your credit history.
25How to Protect Your Credit Get copies of your Equifax, TransUnion and Experian credit reports annually. For best results, order a free copy from one of the bureaus every four months.Create or sign up for payment reminders to avoid late payments.Protect your Social Security number, credit card number and other private information to avoid identity theft and other forms of fraud.Note any incorrect information on your credit reports, and alert the credit bureaus in writing.Check your monthly credit card bill for unauthorized or incorrect charges.Don’t apply for credit accounts unless absolutely necessary.
26Overcoming Credit Problems Create a personal budget and stick to it.If you are making payments on multiple credit accounts, prioritize them. Make the largest payments toward the debt with the highest interest rate while maintaining minimum payments on other credit accounts. Once the most expensive account is paid off, move on to the next.Do not apply for more credit or incur more debt.Contact creditors and make arrangements to pay back old debt. Try to get monthly payments reduced, if possible.Beware of ads and s that promise quick fixes. Credit repair is possible, but it takes time and patience.Fix any errors on your credit report.Pay your bills on time!Get help from a reputable credit counseling or debt management service.
27NxLeveL® Micro-Entrepreneur Business Plan Outline - 1 Section Worksheet PagesCover PageTable of Contents 14-9Section I. Executive SummarySection II. Business ConceptA. General Description of the Business to 3-6B. Business Goals and Objectives and 3-2C. Industry InformationIndustry Background 4-5Current and Future Trends and 4-7Business Fit in the Industry 4-8Section III. Business Organization & OperationsA. Business Structure, Management and PersonnelBusiness Structure 5-1Personal Background Information and 1-9Management Team to 6-3Outside Services and Advisors and 6-5Personnel to 6-11B. Operations PlanSite and Equipment to 6-14Purchasing and InventoryRisk Management to 6-19Laws, Regulations and Taxes to 5-4Contracts and Leases and 5-6C. Managing Books and Records to 13-6NxLeveL® Micro-Entrepreneur Business Plan Outline - 1
28NxLeveL® Micro-Entrepreneur Business Plan Outline - 2 Section Worksheet PagesSection IV. Marketing PlanA. Products and ServicesProduct Description to 7-3Features and BenefitsB. Market AnalysisCustomer Analysis to 7-7Competitive Analysis to 7-11Market Potential and 7-13C. Marketing Objectives, Strategies and TacticsProduct Strategy to 8-5Pricing Strategy and 8-7Placement StrategyPromotional Strategy to 9-8D. Sales and Customer ServiceSales Strategy to 11-5Customer Service Strategy to 11-8Section V. Financial PlanA. Capital RequirementsStartup CostsLoans, Grants and Self-Financing to 14-3B. Sales ForecastsC. Cash Flow ProjectionsMonthly Cash Flow Projections–Year to 12-9Notes to Cash Flow ProjectionsAnnual Cash Flow Projections—Years 2 & and 12-12D. Financial StatementsSources and Uses Statement to 14-3Personal Financial Statement to 1-16Income Statement [Optional]Balance Sheet [Optional]Attachments to 14-11NxLeveL® Micro-Entrepreneur Business Plan Outline - 2
29Where Do Business Ideas Come From? Prior job 56%Hobbies and interests 18%Chance 10%Someone else’s suggestion 8%Education 6%Other 2%
30Comparison of ManufacturingService and Retail Businesses
31How to Identify Business Opportunities Take stock of your skills and experience. What are your strengths? What can you offer?Find new uses for old things. There are hundreds of potential uses for old and discarded goods and materials.Keep an eye out for unmet or underserved needs identified by friends and relatives.Find a new way to deliver an old product. Many entrepreneurs make their fortunes by changing where and how people buy an existing product.Meet temporary needs. Rental businesses are springing up for tools, college textbooks and even baby clothes!Stay informed! Stay on top of business ideas and trends by reading newspapers, trade journals and magazines.Look for green opportunities. Can you make an existing product better for the environment?
32Evaluating Your Business Idea Is my business idea safe and legal?How often will they buy? How much will they buy? How much will they pay?Is there enough customer demand to support my business? Can I meet this demand?How many competitors do I have locally, regionally, nationally and internationally?Is anyone else offering my product? If so, can I do it better? If not, why not?Where will I get the capital I need to start this business?Can I run this business by myself? What kind of workspace do I need? Can I work from home?What is my maximum possible financial loss?When will I start earning a profit? How will I cover my personal expenses and debts until then?Where will I get the materials and equipment I need? How much will they cost?How do I know my business will become profitable? Will the profit be enough to cover my personal expenses and debts?Who are my customers? Where are they?Where will my customers buy? At a store? Online?How and when will I grow my business?Why will they buy? Why do they need my product?
33What to Look For in a Niche Market Clearly defined and measurable (skateboarders in your area, aged 12 to 25).Growth rate (stable or expanding).Presence and strength of competition, locally and online.Accessibility (how will you communicate with them? How will you deliver products?).Percentage of the market you can realistically target, given your budget, capabilities and competitors.Worthwhile size and sales potential (how many customers are there, and how much do they spend each year on skateboard parts?).Percentage of the market you must capture to earn a profit.Unmet needs (no parts shop in the area).
34Segmenting Your Customers Demographic segmentationAgeGenderIncome levelMarital statusOccupationEducation levelKids at home?EthnicityPsychographic segmentationLifestyleNeeds and valuesAttitudesBeliefs / opinionsBuying stylesInterests / hobbiesRecreational choicesEntertainment choicesGeographic segmentationCountry, state, cityRural, urban, suburbanPopulation densityClimate / weatherTerrain (coast, prairie)Access to InternetInfrastructure (roads, rail)Natural hazards
35What Makes Your Business Idea Unique? New invention or servicePersonal story (a family tradition; your skills or accomplishments; a personal or social commitment)One-of-a-kind product (e.g., arts and crafts)Benefits other products lack (comfort, ease of use, color, shape, durability)Faster and better customer serviceSpecial materials or processes (handmade, recycled, green, organic, local)Customization or personalizationUnique distribution channel (house calls, online service)Location (convenient for customers; near a local attraction; region has historical or social interest)Special add-ons or extrasSupports a cause or philosophy (community redevelopment, social justice, green living)
36Sources of Business Information U.S. Census BureauLocal nonprofit foundationsSmall Business Development Centers (SBDC)Local or state office of economic developmentSmall Business Administration (SBA)Local credit union or community bankWomen’s Business Centers (WBCs)Magazines and newspapersMinority Business Centers (MBCs)Business websites and expert blogsUniversity and community librariesTalking with potential customersSCORETalking with competitorsAssociation for Enterprise Opportunity (AEO)MicrolendersBusiness Information Center (BIC)Trade associationsSuppliers and vendorsLocal business mentoring groupsLocal chamber of commerce
37Questions About Business Planning Is a business plan really necessary for a tiny microbusiness like mine?Do I have to get everything right the first time? What happens if I learn new things or change my business idea?How will planning affect my bottom line?Can’t I just start my business now, and deal with management issues as they come up?What’s the connection between a business plan and management skills?How often is planning necessary?Why do lenders and investors care about business plans?Who can help me complete my plan?How can I make plans when everything’s so uncertain?What if I don’t complete my plan?
38The Benefits of Planning Seeing the big picture. Planning helps you sort through your business issues and identify the ones that cause most of your problems.Continuous improvement. Comparing planned to actual results is a terrific way to improve your business operations.Clear communication. A good business plan clearly explains your goals to employees, partners, lenders and investors.Being prepared. A business plan helps you avoid, minimize or recover from disasters.Assessing financial performance. Preparing a financial plan helps you measure and improve your business’s financial performance.New opportunities. Change brings opportunities. Careful planning helps you make the most of them.Surviving economic downturns. Microbusinesses are vulnerable to changes in the economy. Owners who plan are more likely to stay in business.
40Keys to Successful Planning As the owner, you must take the lead role.The plan should include contingency plans for worst-case scenarios.Everyone in your family and your business should have input.The plan should be flexible.Review your plan often and revise it as necessary.Goals and objectives must be clear, realistic and include a deadline.
41Business Goals and Objectives Goals are things you want your business to accomplish over a specific time period.Short-term goals are things you want to accomplish within one year.Long-term goals are things you want to accomplish within two to three years.Objectives are specific steps you will take to reach your goals.
42Characteristics of a Good Mission Statement Reflects the core purpose and direction of the companyEmbodies the basic values of the owners and employeesShort, specific and focusedWritten in plain English, without trendy jargon and buzzwords
43Setting Exit LimitsExit limits are a safety net against personal and professional loss. Your exit limits might look something like this:If my business experiences the following, I will call it quits:Overdue bills exceeding $10,000If my business experiences the following, I will seriously consider calling it quits:Annual sales below $20,000More than $75,000 in long- term debtOverdue bills exceeding $5,000Profit margins below 10 percent over six consecutive quartersAnnual sales below $30,000More than $50,000 in long- term debtA buyout offer of $75,000 or moreProfit margins below 12 percent over four consecutive quartersA buyout offer of $50,000 or more
44Elements of Marketing Market Research Market Analysis Gather primary and secondary data about your industry.Gather primary and secondary data about your customer, competition and market potential.Market AnalysisAnalyze the data you gathered about your industry, customer, competition and market potential.Identify your target customer.Identify your competitive advantage.Marketing Objectives, Strategies and TacticsDetermine the best methods of getting your goods and services to your customers, based on your market analysis.Create a marketing mix using the Four Ps: Product, Price, Placement, Promotion.
45Contents of the Marketing Plan A. Products and ServicesPricing Strategy. What is your pricing strategy? How have you calculated costs and profitability?Product Description. What is your product? What needs does it meet?Placement Strategy. How will you get your products to your customers? Why is this the right choice for them and for you?Features and Benefits. What are your product’s features and benefits?B. Market AnalysisPromotional Strategy. How will you promote your business? What media will you use? How much will this cost? How will you measure success?Customer Analysis. Who and where are your target customers?Competitive Analysis. Who and where are your competitors? What are their strengths and weaknesses?D. Sales and Customer ServiceSales strategy. How will you sell to your target customers? Why did you choose this method?Market Potential. How big is your target market? What percentage can you capture? What trends affect it? What barriers to entry exist?Customer service strategy. What are your quality control policies? How will you track and measure customer satisfaction? What is your refund and return policy? How will you communicate with customers, and what steps will you take to resolve problems?C. Marketing Objectives, Strategies and TacticsProduct Strategy. What is your product line? What is your product positioning strategy? What is your brand identity?
46Sales Forecasting Methods Breakdown ForecastingStart with the largest population and break it down to estimate sales from target customers.Buildup ForecastingEstimate the size of each market segment, and add them to get a total.Indirect ForecastingFind possible indications of demand and sales when specific market data are missing.
47Sources of Industry Data Federal, state and local government offices and websitesStandard & Poor’s Industry Surveys (available through library)U.S. Census Bureau Economic Stats (http://www.census.gov/econ/)Standard & Poor’s Statistical Service (available through library)EconomicIndicators.govEncyclopedia of American Industries (available through library)FedStats.govEncyclopedia of Emerging Industries (available through library)International Trade Administration’s Office of Industry Analysis (http://www.trade.gov/mas/ian/index.asp)ProQuest Statistical Insight (available through library)Small Business Administration’s Business Data and Statistics page (accessible fromJoin online industry forums and sitesFollow industry leaders and experts on social mediaSmall Business Development Centers (SBDCs)Professional research firmsWomen’s and Minority Business Centers (WBCs and MBCs)Follow competitors on social mediaBusiness Information Centers (BICs)U.S. Business Reporter Industry Research (http://www.activemedia-guide.com/)Local, state and national trade and industry associationsConduct your own interviews and surveys with key industry contacts and expertsBusiness and industry magazines and websitesNational Association of Manufacturers: Manufacturing & Trade Data By State (http://www.nam.org/)Local, state and national nonprofit foundationsLocal newspapers and magazinesChambers of commerce
48Ways to Gather Primary Data Face-to-face interviewsPhone interviewsor mail interviewsor mail surveysPhone surveysOnline surveysPost research questions on social media (e.g., blogs, Twitter, Facebook)
49Drawing Industry Conclusions How has the industry developed?What niche markets are hot?How do microbusinesses operate within this industry?How does international trade affect the industry?How will new and emerging technology affect the industry?What are the industry’s current growth patterns?How will current and new regulations affect the industry?What is the industry’s current size? Is it expected to grow or shrink over the next three years?
50Sole Proprietorship Pros The simplest way of doing business. Easy to form and dissolve.You have complete control over the business and receive all its income.Filing income taxes is relatively easy.ConsYou are personally responsible for every act and debt of the business, so creditors can legally come after your house, car and personal savings.You can’t expand your business through new owners and their capital.Sole proprietorships end when the owner dies or is unable to work. This can cause serious problems for the owner’s family.
51General Partnership Pros Fairly simple to set up. Partners may bring new expertise or additional funding to the business.Business profit and loss pass through to each partner’s personal income tax return.ConsPartners are jointly and individually liable for business debts. Creditors will go after whoever has enough assets to cover the debt.Each partner usually has the right to sign contracts that are binding on the other partners.General partnerships usually end if one partner dies or withdraws.Partners pay tax on their share of profit even if they don’t withdraw it from the business.
52Limited Partnership Pros Limited partners are only liable for debts to the extent of their investment.Partners can provide additional funding for the business.ConsMore expensive to form.General partners are jointly and severally liable for debts.If limited partners get too involved in the business, they can also be held liable for losses that exceed their investment.It may be hard to find a partner who’s willing to invest without having the authority to make decisions.
53CorporationProsA corporation can shield owners from debts and liabilities.You can raise money by selling stock.The business continues even if the owner dies or sells to a new owner.You may be able to deduct employee health insurance and benefits.ConsIf corporate rules aren’t followed, the owners can be held responsible for debts and liabilities.Time-consuming and expensive to form. More regulations, paperwork and recordkeeping.Risk of double taxation. The corporation pays tax on its income, and you pay tax on any dividends you receive as a shareholder. (An accountant can help you avoid this problem.)
54S CorporationProsProfit or loss is passed back to the shareholders like a partnership.Cons:Limited number of shareholders.Limited to one class of stock.Must file their tax return on a calendar year basis.
55Limited Liability Company (LLC) ProsLimited liability, like a corporation.No double taxation, like a partnership.If one partner can utilize tax losses better than another, the LLC allows beneficial allocation of that tax benefit.ConsCan be expensive and complicated to form, depending on where you live.Some states don’t allow LLCs to have only one owner.
56Low-Profit Limited Liability Company (L3C) ProsLimited liability, like an LLC.Operating as an L3C makes you eligible for investment and grant money from nonprofits.ConsCan only be formed for charitable purposes.Many states don’t have L3C laws, so you have to form it in a state that does.
57Cooperative Pros Members own and control the business. Potential for collective efforts to improve marketing and add value to products.Shared expertise in operation is a potential benefit.ConsLengthy process by members to set up (bylaws, major policy issues, direction, board).Effectiveness depends on members’ long-term dedication.Group decision- making and shared ownership may be cumbersome.
58Government Regulations Business RegistryConsumer Protection LawsBusiness licensesConsumer privacy lawsFiling requirementsDo-Not-Call ActBusiness name registrationDirect s (CAN-SPAM)Zoning LawsFTC mail or phone order ruleSignage restrictionsRefunds and returnsParking restrictionsFalse advertisingNo manufacturing or salesLabeling lawsNo deliveries or storagePublic health and food safetyNo noise or pollutionShipping RegulationsBusiness TaxationCertification and licensesState income taxHazardous materials lawsSales taxExport controls and customsProperty taxEnvironmental RegulationsFederal income taxHazardous materials storageEmployee RegulationsClean Water Act / Clean Air ActPayroll taxes / withholdingWaste disposalIndependent contractorsUnderground storage tanksWage and hour regulationsBankruptcy LawsEqual Pay ActImmigration lawsLimitations on protectionOSHA regulationsCivil rights lawsChild labor laws
59IRS 20-Point Checklist: Independent Contractor or Employee? Primary FactorsDoes the service recipient have the right to require compliance with significant instructions?Does the service recipient have the right to set the hours of work?Does the service recipient have the right to set the order or sequence of services to be performed?Does the service recipient have the right to discharge the service provider?Does the service provider have the right to hire, pay and supervise assistants as the nature of the work requires?Does the service provider have no ability to realize a profit or loss?Does the service provider have no investment in significant tools, materials and other equipment when such items are necessary to accomplish the task and are customarily provided by the service provider?Does the service provider have no significant investment in facilities when they are necessary to accomplish the task and they are customarily provided?Secondary FactorsDoes the service recipient train the service provider?Does the service recipient have the right to require oral or written reports?Does the service recipient pay by the hour, week or month?Does the service recipient pay for business and/or travel expenses?Does the service recipient have the right to require personal service?Does the service provider usually not work for more than one firm at a time?Does the service provider maintain a continuing relationship with the service recipient?Does the service provider devote substantially full time to the service recipient?Does the service provider have the right to terminate the relationship at any time without incurring liability?Is the service provider integrated into the service recipient’s business?Does the service provider not make his or her services available to the public on a regular and consistent basis?Does the service provider work only on the service recipient’s property or designated location?YES suggests employee status.NO suggests independent contractor status.
60Basic Contract Terms Performance Price Place of delivery What actions must you complete?PriceHow much, in what currency?Place of deliveryWhere, by what method?Who’s liable while goods are in transit?Time to performWhen are the goods or services due?When is payment due?QualityWhat quality standards must be met?Legal remediesHow will the contract be enforced?
61What’s in a Lease? What are you leasing? Exclusivity Triple Net Lease (tenant pays taxes, insurance, utilities, maintenance in addition to rent)True cost of the leasePayment escalatorsPermitted usesCommon Area Maintenance (often added to the lease in malls or shopping centers)Tenant rightsRenewal optionsPurchase rightsRight of first refusal
62Protecting Intellectual Property Trademarks protect your business and product name and logo.Patents protect eligible new processes, designs and inventions.Trade secret laws protect private business information, methods and processes.Copyright protects creative work in tangible form (e.g., writing, music, art, photographs, recipes, patterns, etc.).
63Pros and Cons of Working at Home AdvantagesFlexibility in schedulingLower startup costs and overheadMore time with familyIncreased job satisfactionTax advantagesNo commuteDisadvantagesIsolationLoss of privacyCredibility issuesZoning problemsSpace
64Home-Based Business Tips Set clear boundaries between work and personal lifeMake time for family!Set up a functional officeProject a professional business imageUnderstand zoning regulations and taxesUnderstand insurance needsStay connected!
65Managing Business Communications Written communicationBe reliable! Smart business owners never say anything they wouldn’t be willing to put in writing.Be clear and concise.Always type your business letters.Be organized! Set an agenda, and be clear and brief.Check spelling and grammar carefully.Phone etiquetteAnswer with a friendly greeting that identifies yourself and your business.Keep duplicates or backups of all communication.Develop a secure and effective filing system.Sound confident and enthusiastic!Remember that putting things in writing may form a contract.Always keep a duplicate message pad handy.Verbal communicationSay thank you!Be honest! Always stick to the facts, and never make promises you can’t keep.
68Key Management Goals Learn to delegate Develop your internal team and your external teamDevelop management goals and strategiesCreate efficient processes and structuresAssign responsibilities and authorityEnsure clear communicationLead by exampleGet advice when neededAccept constructive criticismHave fun!
69Guidelines for Successful Outsourcing Understand your core competenciesWhat expertise do you have in-house? What expertise must you seek elsewhere?Figure out what you do best, and consider delegating the rest.Can you manage the new relationships that outsourcing will involve?Are there structures in place to make it work?What matters to customers? Will outsourcing affect their perception of your business, or your core competencies?Look at long-term viability, not short-term savingsDon’t assume that decreasing labor costs will always provide big savings!Weigh efficiency against effectiveness. Seeking greater efficiency is a bad idea if it lowers your ability to meet customer service and quality standards!
70Basic Employee Management Practices Identifying policies, tasks and job descriptionsInterviewing, selecting and hiring, and trainingSetting performance goalsEvaluating and measuring performanceCreating compensation and incentive strategiesFacilitating communication and continuous learning
71Expanding Your Network Join a formal networking group. Local chambers of commerce and similar groups usually offer regular networking sessions and business seminars.On behalf of your business, get involved with a local charity. As you give to the organization, you’ll also have an opportunity to let others know about your business.Add contacts to a mailing list you can use to advertise your products.Become active in local business organizations, and get to know people with similar interests.Use social networking tools like Twitter and LinkedIn to increase your visibility and grow your network.Start an informal support group. Meet with other microbusiness owners to discuss common business issues.Remember that networking is a two-way street. You must give in order to receive!
72Types of Insurance Property and liability insurance General liabilityBusiness propertyBusiness interruptionBusiness crimeFire and floodKey personCommercial autoElectronic data processingWebsiteHome officeLife and health insuranceWorkers’ compensationLife insuranceHealth insuranceSelf-insuranceSocial SecurityPension plans
73Tips for Lowering Insurance Costs Secure all doors and windows!Adequate lighting, barred windows and secure doors greatly reduce the risk of theft.Fire safety is one of the biggest factors in insurance costs!Install smoke alarms and test them every month.Avoid dangerous electrical connections.Keep the perimeter and interior of your building free of debris and clutter.Store hazardous chemical properly.Keep fire extinguishers fully charged.Keep your business site safe for visitors!Walkways should be clean and dry, and steps should be sturdy and well maintained.Keep your office area free of clutter.Keep your business safe for employees!Provide adequate safety gear, and avoid unsafe working conditions.Replace hazardous chemicals with safer alternatives wherever possible.Create a written safety policy and hold regular safety meetings.
74Business Continuity Planning List all necessary business functions, who performs them, and what equipment and supplies they require.Distribute the finished plan to employees. Every member of your team should have a copy of the plan at work and at home.Compile contact information for key employees and assign recovery tasks.Revise the plan as necessary. When things change, your plan needs to change with them.Identify threats, and the business functions they threaten. Try to minimize the damage they can do to infrastructure, equipment and data.Test the plan regularly. It’s better to learn about mistakes during a practice run than during a crisis!Get contact information for all essential outside partners (lawyers, suppliers, etc.).Identify and make copies of essential documents. Create duplicates of all the documents you need to run your business.Designate a secondary work site to use until your primary site is restored or replaced.Get employee input. Seek employee comments before finalizing the plan.
75Requirements for Successful Business Growth A profitable business modelA stable or growing market demand for your productsProven operating procedures that have been set down in writingThe ability to provide additional training to your employees, if neededA clear understanding of your current and future customersOpenness to changeAccess to growth capital
76Surviving Economic Downturns Revisit your budget and your business plan. Expenses that aren’t crucial may need to be cut, scaled back or postponed.Form partnerships and alliances. Other struggling businesses may be looking for ways to weather the storm. Work together to find win-win solutions!Don’t stop advertising. In tough times, the last thing you want to do is reduce your visibility.Offer incentives. Special offers, free services and added value can attract customers who are worried about their finances.Innovate. Consumers may welcome new tactics and offerings.Don’t ignore payroll taxes and other payments that are due to the government. These agencies can impose fines, place a lien on your property, or even shut down your business altogether.Reduce inventory. This can free up space, time and money!Keep employees informed and inspired. They may have good ideas for cutting costs or boosting sales. If they stand by you, reward their loyalty when things get better.Keep your creditors informed. If you’re having trouble paying your bills, stay in contact with your creditors and vendors, and offer them a realistic payment schedule.Keep an eye on your supply chain. If vendors, customers or partners are having financial problems, it may affect your ability to fill orders or get paid.
77The Purpose of Market Research Your goal is to identify:Customers. Who will buy your product?Market niche. Who’s your competition, and where do you fit into the market?Price. What price will make your product competitive?Competitive edge. What makes you better than or different from the competition?Location. Where will you sell your product to reach your target customer?
78Market Research TipsIdentify your research problem. Set clear objectives for data gathering.Always document your sources thoroughly (e.g., book title, author, year of publication, page number).Create a budget and a timetable. Placing limits on the research process will keep it from spiraling out of control.If you create a survey, include a space for open-ended comments.Prioritize your research tasks. Identify the most and least important research questions.Ask permission to record interviews to ensure that you don’t miss any important details.Prioritize your data sources. Which ones are most likely to have the information you need?Keep your surveys and interviews short, clear and neutral.Keep an open mind and seek viewpoints that differ from your own. Don’t let wishful thinking or beliefs affect how you gather or interpret data.Organize and analyze the data. Make sure it addresses the research problem you identified.
79Where to Find Market Data Surveys. Interview groups or individuals by mail, online, in person or on the telephone.Government publications and statisticsFedStats (http://www.fedstats.gov)Economics and Statistics Administration’s Economic Indicators (http://www.economicindicators.gov)State government websitesLibraries. Information from libraries is usually free, except for the cost of printing or copying documents.Internet. Most public libraries offer free Internet access to subscription-based industry sites and journals.Universities, technical schools and Small Business Development Centers may provide free or low-cost information.Census banks. These “banks” store information rather than money. To find them, check at the library or visitChambers of commerce and trade associations and publications. Industry and business groups offer information and support.Competitors. Visit them, review their advertising and customer reviews, buy and test their products.
80The Product Life Cycle Introduction Maturity Growth Decline The product is new and entering the market for the first time.Many competing products are on the market.Businesses increasingly vie for market share though branding, redesign, packaging improvements, new colors or flavors and other marketing strategies.Customers are generally unaware of the product.Sales are low and there is little competition.GrowthSales and prices tend to peak or decline.Sales and profits begin to increase as public awareness increases.DeclineThe market is saturated. Sales, profits and prices are low enough that many businesses are forced to discontinue the product.New competitors take note of the product’s growing popularity and enter the market.
81People buy benefits, not features! Features vs. BenefitsFeaturesSize, color and shapeQualityVarietiesTypesMaterialsBenefitsTime savingsConvenienceStatusSecuritySafetyFunPeople buy benefits, not features!
82Goals of Market Analysis Identify your customer profile (demographics, psychographics, access to and attitudes toward technology).Identify your trade area (geographic boundaries and size).Determine the number of people (or businesses) in your trade area who potentially match your customer profile.Determine the market potential for your business in your trade area.
83Demographics Gender. Men and women have different buying habits. Marital status. Customers’ needs and desires vary based on whether they’re single or married.Age. Different age ranges have different buying habits.Children. Households with children have different buying habits than those with no children.Income. This tells you whether a customer or household can afford your product, especially if it’s a nonessential item (e.g., jewelry).Education. Education may be an indicator of reading comprehension, use of technology, income, etc.Occupation. This relates to age, income and education, and may indicate ability to buy.Ethnic origin. People from different cultures may have different values and needs that influence buying habits.Location. This includes how near the customer is to your business, as well as regional or national location, geography, climate and weather.
84PsychographicsBeliefs and values. Cultural, religious and political beliefs and values can have a strong influence on buying decisions.Behavior. What are your target customers’ spending patterns and buying behavior?Interests. How do your customers’ hobbies, pastimes and social causes affect buying behavior?Media choices. These provide a clue to buying decisions, income and education, as well as what promotions are most likely to succeed.Recreation. People who like outdoor activities such as camping or hiking may have different needs than people who prefer indoor activities such as videogames or scrapbooking.Transportation. People who have a car, bicycle, motorcycle, RV or boat may have very different buying patterns.Entertainment choices. Music, movie, book and art preferences tell marketers a lot about lifestyles and attitudes.
85Gathering Customer Data If you sell something to eat, ask people to taste it.If you offer a service, ask people to use it.If you sell something to wear, ask people to try it on.−THEN−If people hate it, ask them WHY.If people love it, ask them WHY.Ask them questions about themselves (demographics, psychographics, needs, wants, motivations).
86Things You Should Know About Your Competition Who are they? List current competitors and research any that may enter the market over the next year.Location. Are they local, regional, national or international? Is their location convenient for their customers? Is it convenient for yours? Can you offer greater convenience?Where are they? Are they in your city, county, region, state? Are they national or international?Company image. What’s their reputation? What are people saying about them online? Do they have lots of goodwill, or are people looking for an alternative?Customers. Who are their customers? Don’t assume they’re the same as yours. Two companies selling the same basic product can have very different target markets.Weaknesses and strengths. What things do they do best? In what ways are they weak? Compare the way they represent their service to the service you actually get as a customer. How will you take advantage of their weaknesses? How will you compete with their strengths?Product. What do they really sell? What features and benefits make their product unique? What’s their niche? How do they back the product up with customer service?Price. Is their price in line with customer expectations? How do they compare with competing brands?Goals. What are their stated goals? What are their long-term plans? What strategies and tactics are they using to achieve those goals? Online “About Us” and “FAQ” pages can be good sources for this information, as can interviews, articles and annual reports.Placement. Where and how do they sell their product? Do they sell online, offline or both?Differentiators. What features, benefits and messages make the competitor stand out in the marketplace? What aspects of their business do they emphasize most strongly?Promotion. What type of promotions do they run? In what media, and to what audience? Are they effective?
87The Four Ps vs. SIVA FOUR Ps SIVA Product is what you offer your customers.Your product is a solution for your customers’ problem.Promotion is how you tell customers about your product.Promotion gives customers information about your solution.Price is the amount you charge customers to buy your product.Customers buy based on how much they value your solution.Placement is how you deliver your product to your customer.Placement gives customers access to your solution.
88Product Strategies Understand your features and benefits! Consider how each stage of the product life cycle affects marketing strategiesDefine product lines (depth and width)Define your product’s position in the marketplaceWrite a positioning statementDefine your brand identityWrite a branding statementPlan for brand managementMake packaging decisions that reinforce your positioning and brandDefine service enhancements
89Product Life Cycle Introduction Maturity Growth Decline High startup and marketing costs.Widespread competition and slower sales.Poor distribution and sluggish sales.Competitive pressure to lower prices.Competition is usually at a minimum.Features, benefits and branding become more important as consumers look for reasons to choose your product.Product strategy focuses on raising awareness.GrowthImprovements to product may be necessary to attract new customers, recapture old ones and outflank competitors.Product is accepted by target market.More sales, but also more competition.DeclineMarket is saturated. Competition is high; prices and sales are low.Product strategies: Expand distribution; defeat new competitors by building brand.Product strategies include discontinuing the product, cutting production levels, or selling or leasing it.
90Positioning Statement Tips State real, lasting benefits. Vague benefits like “great taste,” and variable ones like “low prices,” aren’t adequate. Lots of businesses can legitimately offer “great taste,” and lots of businesses with low prices are forced to raise them. Your positioning statement must get at the heart of your product’s specific value to customers. As a rule of thumb, try putting your competitor’s product name into your positioning statement. If it’s just as accurate, your statement needs more work. Pinpoint your differentiator. Businesses often throw terms like “unique” around, but these words don’t mean anything unless there’s a real difference. And if there is a real difference, you should describe it clearly instead of using buzzwords. In other words, don’t say you’re unique; explain why you’re unique.Keep your customers’ needs in mind. If your statement doesn’t give them a strong, obvious reason to buy from you instead of a competitor, you need to go back to the drawing board.
91What Makes a Good Brand Name? Establishes or reinforces your brand identityEligible for trademark protectionSuggests product benefits (e.g., Mr. Clean, Krispy Kreme or Beautyrest mattresses)Suggests product benefitsEasy to pronounce, recognize and rememberFits the brand identity and attitudeSets you apart from your competitorsDoesn’t limit your ability to grow, change or sell your businessNo double or hidden meaningsReflects the scope of your business (local, national, international)Creative, but not too cute or weird
92Brand Management Basics Make sure your brand promises something customers want.Be consistent. Remember that every interaction with a customer or client is an opportunity to communicate your brand identity.Involve your employees. Get them excited about your brand, and they’ll communicate that excitement to others.Keep it simple! Focus on communicating a few basic points.Whatever your brand promises, exceed it!
93Basic Pricing Terms Cost is what you spend to produce your product. Price is the amount you charge customers for the product.Value is what your customer believes the product is worth.Revenue is the amount of money your business receives from sales over a specific period.Profit is what’s left over after you subtract costs from revenue.
94Pricing Considerations What are your costs?What will your customer pay?What brand identity do you want to convey?What does the competition charge?What will the market bear?How will your price affect demand?How does a service provider determine price?What other pricing challenges does your business face?
95The Four Cs of PricingCustomers. Knowing your target customers’ income level, lifestyle and concept of value is central to setting a realistic price.Competition. In the last session, you identified your direct and indirect competition, and you compared their prices, features, benefits, strengths and weaknesses to yours. You must take all these things into account when setting your price.Company position. If you provide better service and higher quality than your competitors, that means you offer greater value. This appeals to customers who place a higher importance on service and quality.Costs. To set a price that will earn a profit, you must know your total variable and fixed costs (including taxes).
96Understanding Your Costs - 1 Variable expenses are costs that go up or down in relation to sales volume. Example: Suppose you sell custom T-shirts for $10.00 each.Selling Price$10.00Variable ExpensesRaw material (T-shirt)3.00Hourly labor1.00Sales commission (10%)Shipping charge0.50Total Variable Expenses$ 5.50Price – Variable Expenses$ 4.50The $4.50 is called the contribution margin, because it represents how much each unit of sales “contributes” toward paying for fixed costs and profits.
97Understanding Your Costs - 2 Fixed expenses are costs that don’t change, regardless of sales volume. Example: Fixed expenses (per month)Rent$ 800Telephone100Insurance50BookkeepingLoan payments300Total fixed expenses$1,350QUESTION:How many T-shirts do you have to sell each month to pay for your variable and fixed expenses?
99Your Break-Even PointHow many T-shirts must you sell each month to pay for your variable and fixed expenses and start making a profit?Break-Even Units Volume =Fixed CostsPrice - Variable CostsExample:Selling Price$10.00 per unitVariable Costs$ 5.50 per unitContribution Margin$ 4.50 per unitFixed Costs$1, per mont hBreak-Even Point In Units: $1,350 ÷ $4.50 = 300 T-shirtsWhen you sell your 301st T-shirt, you will start making a profit for that month:300 T-shirts x $10 = $3,000
100Can you sell 500 T-shirts per month? Planning for ProfitCan you sell 300 T-shirts per month?How much profit do you want to make?If it takes 300 T-shirts per month to break even, how many more shirts must you sell to earn the amount of profit you want?ExampleYou want to make $900 in profit per month. How many more T- shirts do you need to sell?It took 300 T-shirts just to break even.After the first 300 shirts sell, $4.50 per T-shirt contributes to profits.$ ÷ $4.50 = 200 more shirts must sell to earn desired profit of $900.Can you sell 500 T-shirts per month?
101Pricing StrategiesLoss leader pricing offers a low price on one product to attract customers who will then buy additional products at the normal price.Cost-plus pricing means totaling your fixed and variable costs and adding a target return percentage to arrive at your sale price.Competitor-based pricing involves basing your price on your competitors’ price for a similar product.Multiple pricing offers a discount for buying more than one of an item.Penetration pricing sets an artificially low price in order to enter a new market and encourage customers to try your wares.Value-based pricing. The goal is to charge an above-average price while leaving customers with the feeling that they’ve gotten a good deal.Premium pricing usually indicates high quality, customization, rarity or a one-of-a-kind item.Retail pricing. To get a retail price, you multiply the wholesale price by a certain percentage (called a markup), and add that to the wholesale price.Price skimming sets a higher price in the short term. As demand drops, prices are gradually reduced.
102Things to Consider When Choosing a Location Proximity to customersSize/floor plan requirementsNeighborhoodLease or ownConvenienceZoning restrictionsSafety (lighting, off- street parking, etc.)Landlord restrictionsCosts (property, amenities, required improvements, common area maintenance)Accessibility (ADA)VisibilityFoot traffic, vehicle trafficOther complementary businesses nearby
103Distribution Basics Questions you need to answer: Personal delivery My home or officeWhere will I distribute my product?Their home or officeRetail locationWill I need someone to help me sell?WholesalersCustomer’s siteIn-house sales teamOnlineSales representativesHow will I deliver my product?AgentsDistributorsUPS, express mail services, USPS
104Distribution Considerations ProductCompetitionPerishable or fragile products may require direct sales to avoid spoilage or breakage.How and where do your competitors sell? Will your products be handled by the same stores, wholesalers, distributors or agents?There may be shipping restrictions on certain products, based on weight, size, materials, destination or purpose.If an online retailer offers lower prices and free shipping, what can you offer to outweigh those advantages?ProfitThe more intermediaries you have, the more units you must sell.ConfidenceCan you trust your intermediaries?Selling direct may distract you from core business tasks.Can you afford to have all your eggs in one basket?CustomersTechnologyDistribution strategies must reflect customer lifestyle.Your distribution methods must reflect your customers’ access to and attitude toward current technology.
105Distribution Strategies Direct marketing (to customers or to other businesses)Manufacturer to retailers through intermediaries (sales reps, agents, brokers, wholesalers)ConsignmentMail-order catalogsClassified adsHome shopping networksPiggyback with other productsInternet
107Common Promotional Tools PrintNewspapersMagazinesCatalogs / brochuresNewslettersFliersBusiness cardsClassified adsYellow PagesOtherDirect mail /TelemarketingSignageWord of mouthNetworkingNovelty advertising (e.g., pens, hats)Sign spinnersOnlinePaid adsWeb directoriesBusiness directoriesCraigslistOnline Yellow PagesSocial mediaYouTube videosSEOBroadcastRadioInternet radioBroadcast TVCable TV
108The ABCs of Signage Attracting new customers Branding your business Because a certain number of your customers will move out of the area, change their buying habits or switch to competitors, your business must constantly restock its customers, just like it restocks its inventory.Branding your businessA sign that’s visible every day may do more to communicate your brand identity than all your other marketing efforts combined.Creating impulse salesStudies show that 68 percent of all U.S. sales are impulse sales. Your job is to attract your share of these impulse buyers and turn them into regular customers.
109Public Relations Ideas Send your business story to your local newspaper or trade association.Donate money or time to clean up highways, parks or beaches.Help improve a piece of local land.Write or contribute to a blog or industry-related website.Get involved in historic preservation efforts.Use Twitter, Facebook or YouTube to attract a community of followers for your company.Install a new, cleaner energy system and offer public tours.Donate prizes or time to local fundraisers.Cosponsor local sporting, arts or charity events. Be sure to put up posters or banners announcing your support.Join service organizations or clubs.Attend trade shows as an exhibitor or observer.Hold contests and giveaways.Give lectures to trade organizations or chambers of commerce.Offer to be a guest speaker on a radio show to discuss elements of your business, or offer how-to advice that relates to your business.
110Benefits of Being Online Provides business and product info to global marketsGives prospective customers one more way to contact youIncreases consumer awareness of your product (note that even if your target customers aren’t online, people who are may recommend your product)Helps you keep track of what your competitors are doingOnline interaction with customers can build your brand or improve your productsNetworking, partnering and bootstrapping opportunitiesImproves customer service by providing online product tips, instructions and links
111Online vs. Offline Buying Why people buy onlineSpeed and convenienceVast product selectionSpecial deals and couponsIt’s easy to compare prices and save moneySearch capabilitiesNo driving, parking or crowdsWhy people don’t buy onlineProduct is easily available locallyShipping costs are too highSecurity, fraud and privacy issues (trust)Inability to sample, try on, taste, or test the product (trust)Return and warranty issues (trust)
112Building Your Own Website: Pros and Cons AdvantagesYou may be able to get a site online quicklyYou learn site-building skillsYou can update your site as neededSite maintenance costs may be lowerDisadvantagesTime spent learning skills distracts from core business tasksTime spent maintaining site distracts from core business tasksSite-building tools may lack features you needThe appearance and function of the site may be limited by your design and tech skillsSite may not be able to grow with your business
113Selling Through an E-Commerce Host: Pros and Cons AdvantagesSetup is usually very easy and fastE-commerce functions already in place, usually with appropriate securitySome hosts may have consumer trust, and offer problem-resolution servicesProfessional look and functionHost may include useful promotional tools, social media capabilities, etc.DisadvantagesHigher charges (per month, per transaction, by traffic volume, etc.)Hosts may have uniform look and few or no opportunities for building your brand“One size fits all” format may not suit your business
114Hiring a Web Designer: Pros and Cons AdvantagesYou don’t have to waste time on site- buildingYou have more control over features, appearance and functionCosts are upfront and knownProfessional look and functionDisadvantagesYou must rely on outside helpUpdating and maintaining the site may be slow, difficult or expensive if you don’t have adequate tech skillsHigher costSite maintenance costs may be higher in the long run
115Issues to Address When Planning Your Site What business tasks do you need to do online?How much can you budget for site creation and maintenance?How will you market your site?Do your customers buy online?Are you prepared to sell internationally, or will you only sell in the USA?What information do your customers need?How quickly do you need a functioning site?How often will you need to update your site?
116Website Design TipsAvoid site features that are distracting, irritating or hard to use, such as animation, soundtrack music or horizontal scrolling.Support your promotional messaging with facts anyone can understand and verify, like reviews and awards from credible sources.Don’t clutter your site with slow-loading images. Every second your customer must wait for content increases the likelihood that she will give up and go elsewhere.Ensure consumer privacy with secure socket layer (SSL) protection.Use professional, high-resolution photography to display products.Use a cross-selling application to suggest products that go with whatever product the customer is looking at.Display your contact information clearly on every page.Answer questions and concerns. Features that build customer trust include a “Frequently Asked Questions” page, video explanations or tutorials, and a clearly stated return policy.Include helpful tools where needed (e.g., rulers and calculators).Include all relevant product information (e.g., height, weight, color, size, ingredients, sourcing).Don’t ask users for personal information unless you’re making a sale or giving them something in return.Include customer reviews and recommendations. Consumers trust other consumers more than they trust businesses!Check your site regularly to ensure that links and other site features work properly.
118Social Media Basics They feature user-generated content. They allow networking and collaboration between friends, family, associates, clubs, product users and interest groups.They are based on dialogue, rather than monologue. Users can give and receive feedback on information, content and ideas.They are increasingly integrated (e.g., you can tweet about the podcast available on your blog).They are usually free, and easy to set up and maintain.Social media account for 22 percent of all time spent online, according to the Nielsen Company.
119Types of Social MediaBlogs are online journals containing text, graphics, photos, audio and video content. This category also includes microblogging formats like Twitter and Tumblr.Social bookmarking sites allow users to gather, rate and recommend websites, news stories and other content. Examples include StumbleUpon and Reddit.Social networking sites like Facebook create connections and build trust-based communities. Geosocial networks like Foursquare allow interaction with individuals and businesses in a specific locationMultimedia sites like YouTube and SlideShare allow users to share multimedia content like videos and slideshows.Consumer review sites like Yelp and Epinions allow users to find, rate and review businesses and products.
120Rules for Social MediaDO YOUR HOMEWORK. Different social media have different demographics. Research sites to make sure they reach your target customers.BE HELPFUL. Answer questions, provide advice, seek out and link to worthwhile content.BE RESPECTFUL. Don’t spam users or sites with marketing messages, or use social media as a vehicle for shameless self-promotion. Help yourself by helping others.TAKE YOUR TIME. Get to know the format, the site and the community before participating.BE HONEST. Don’t pretend to be someone you’re not.BE ENGAGED. Keep your content fresh and current. Post regularly, even if it’s just a link to someone else’s article. Respond promptly and courteously to comments and requests.BE CONSISTENT. Whenever possible, use the same name, colors, images and other elements in each account.HAVE FUN! The more you enjoy what you’re doing, the more likely you are to earn friends and followers!BE PREPARED. Don’t launch a specific channel until you’ve prepared content and created a posting schedule.BE RELIABLE. Don’t make promises you can’t keep. Don’t promote upcoming content and features unless they’re actually ready to launch.
121Search Engine Optimization Features A domain name that describes your brand, products or business (e.g., nxlevel.org, fireworks.com).Descriptive keywords in your site headlines, body copy and links.Alternative text tags for graphics. This is descriptive text that appears if an image doesn’t display.Flat site architecture. The fewer clicks a visitor has to make, the more likely you are to convert that visit to a sale.Fast loading time. Pages that load slowly or incorrectly are hard for search engines to index, and frustrating for human users, so they tend to get a lower page rank.A descriptive title for each page of your site. The title tag for each page should be unique to that page; using the same title on multiple pages will undercut your efforts.
122Tips for Writing Online Content Write about what you know. The Internet is full of ill-informed speculation and opinion. Sticking to practical, helpful facts will make your content stand out.Stay focused. Your content should flow logically from one paragraph to the next. Don’t try to cover too much ground at once. If content doesn’t seem to fit, use it for another article.Quality is more important than quantity. It’s better to have less content than to fill space with material that lacks usefulness, credibility or interest.Format text carefully. Short paragraphs, clear punctuation and informative headings are usually best for online text.Don’t use quotes unless you’re quoting someone. Many inexperienced writers put quotes around everything from “figures of speech” to “product names.” This is “unnecessary” and “distracting.” Don’t overuse exclamation points!!!!! Use them only when absolutely necessary, and never use more than one at a time. Multiple exclamation points communicate inexperience and desperation. Avoid clichés and buzzwords. Don’t try to promote innovation or originality with worn-out phrases like out of the box or pushing the envelope. And don’t use business or industry jargon that your readers may not understand.
123Traits of Successful Sellers Empathy. Good sellers can relate to each customer’s unique situation. They don’t try to force a one-size-fits- all solution on them, or pressure them to spend more than they can afford.Technical knowledge. Sellers should understand everything about their product.Good communication skills. The best sellers make their points clearly, briefly and respectfully.Personal drive. Good sellers have a strong personal desire to make the sale and satisfy customers’ needs.Respect for the customer. Remember: Without customers, you have no business!Persistence. Good sellers don’t get discouraged by rejection.Confidence. Good sellers believe in their products and know how to get other people excited about them.Flexibility. Customers vary, so the ability to adapt to different buying styles is essential.Quick thinking. Sellers need to be able to think on their feet to answer objections and assess counteroffers.Excellent listening skills. Smart sellers ask relevant questions and listen respectfully while customers answer.
124Understanding Buyers Most buyers respond to stories. Instead of describing features, explain how those features solved a problem for a previous customer. Be prepared to back up your stories with references.Most buyers like to talk about themselvesBeing a curious, engaged listener is vital to building a relationship, and building a relationship is vital to earning loyal customers.Business buyers are usually more cautious than everyday consumers.Business buyers usually want to see strong evidence of value, technical expertise, reliability and professionalism.Behind every buying decision, there’s a desire or a fear.What are you really selling? Fun? Beauty? Youth? Security? Status? Unless you understand the hidden motivations that guide buying decisions, you’ll find it hard to get customers to buy in.
125Eight Steps to Selling Success Step 1: Prioritize Prospects Step 2: Prepare to Sell Step 3: First Contact Step 4: Make the Presentation Step 5: Overcome Objections Step 6: Close the Deal Step 7: Reflect and Adapt Step 8: Follow Up
126Common Closing Techniques Basic close by using a sales form. Begin by asking the customer a question from the form. Write in the answer. Proceed to the next item. If the customer doesn’t stop you, you’ve made a sale. Close by offering choices. “Do you prefer green or blue?” When a prospect makes a minor decision, the major decision is near. Close by making a balance sheet. Take a sheet of paper, draw a line down the center and help the prospect list the reasons for and against buying. Close by asking clarifying questions. If you have a prospect who seems interested but won’t commit, ask questions: “Is there anything I didn’t make clear?” Close with a confirming question. If a prospect asks whether it’s possible to get what you’re selling in a particular size, format or color, ask the prospect if that’s the way he wants it. If the answer is “yes,” the prospect has bought. Close by setting a date to do the work. If you run a lawn care business, for example, you might offer to cut their lawn and trim their hedges next Thursday.
127Selling TipsBe honest. Tell the truth about your product. Don’t hype attributes or downplay problems.Keep learning. Become an expert in your field so that customers see you as a valuable resource.Stay in touch. Check in with customers regularly and always bring something of value to the conversation.Don’t procrastinate. Take on tough clients now, not later.Study your competitors. Knowing their strengths and weakness will help your sales presentation.Practice active listening. Work to improve listening skills and develop interactive sales presentations.Referrals build sales. Always ask for referrals. Satisfied customers will usually be happy to help.Be patient. Building long- term relationships takes time and care.Be positive and have fun! A positive attitude will carry you through tough times.
128What Customers WantAvailability. Customers want you to be available, responsive and engaged at every stage of the selling process.Understanding. Customers want to feel that you are listening to them and making an effort to understand and satisfy their needs.Consistency. Customers want the same level of service and quality every time they deal with you.Attention. Customers want to feel that you’re alert, interested and ready to help. They want to feel that you’re willing to do what it takes to meet their needs.Confidence. Customers want to feel they can trust you. They don’t necessarily expect perfection, but they do expect you to make things right when they go wrong.Comfort. Customers want to feel comfortable, welcome and secure. They don’t want to feel rushed or pressured. They prefer businesses to be clean, attractive and organized.
129Why Businesses Lose Customers 1% die 3% move away 4% drift to another business 5% change on a friend’s recommendation 9% buy it cheaper somewhere else 10% have a service problem that is not resolved 68% leave because they feel they’re not getting good service
130The Benefits of Customer Loyalty Loyal customers:Show less sensitivity to price changesGenerate referrals and word of mouthBuy add-ons more oftenMake it harder for competitors to enter your marketNeed less handling, education and selling timeAre easier and more cost-effective to sell to than new customers
131Your Customer Service Plan Every business should have a customer service plan within its marketing plan. This should include:Customer service goalsCustomer service benchmarks (how you’ll measure success or failure)How you will gather, store and use customer dataAfter-sales service practicesReturn, exchange and customer complaint policiesSpecial order or custom service policiesHow different areas of your business deliver serviceA formal system for customer feedback (e.g., questionnaires, report cards, online surveys or forums, complaint forms)
132Resolving Customer Complaints Step 1: Listen! Step 2: Recognize the customer’s feelings. Step 3: Apologize! Step 4: Thank the customer for bringing the problem to your attention. Step 5: Explain your solution.
133Customer Service Essentials Greet customers immediately and pleasantly.Memorize the names of frequent customers.Always answer the phone within three rings. Don’t automatically dump customers on hold. If you must, ask if you can put them on hold, or call them back within five minutes.Always make an extra effort to help customers find what they need.When you make a mistake, fix it!Follow up on all customer contacts. Always record the customer’s name, phone number and order type. After customers call for product information or service assistance, follow up within two days to check on satisfaction. Answer s promptly, and proofread them before you hit “send.”
134Cash Flow Projection Worksheet Sections (A) Beginning Cash Balance(B) Cash In From Operations(C) Operating Cash Out(C1) Variable Expenses (Cost of Goods Sold)(C2) Operating Expenses(D) Net Operating Cash (B - C1 - C2)(E) Cash From Investment or Loan Activities(E1) Other Cash In(E2) Other Cash Out(F) Net Monthly Cash (D + E1 - E2)(G) Ending Cash Balance (A + F)
135Sample Chart of Accounts - 1 Asset accounts:Capital accounts:100Cash on Hand300Owner’s Equity101Cash in the Bank310Owner’s Draw102Petty CashRevenue accounts:105Inventory400Sales110Equipment (Net)401Product 1 Sales111Accum. Depreciation - Equipment402Product 2 SalesLiability accounts:403Service 1 Sales200Accounts Payable410Interest Income210Payroll Taxes Payable420Other Income
136Sample Chart of Accounts - 2 Expense accounts:500Inventory670Miscellaneous600Advertising700Payroll Taxes610Auto710Professional Services620Bank Charges720Rent630Dues and Subscriptions730Supplies640Insurance740Telephone650Licenses750Travel660Office Expense760Utilities
147Developing a Professional Mindset Set clear, achievable goalsDo business on the booksKeep personal and business accounts separateDevelop a code of ethics for your business, and stick to itMake tax payments on timeCommit to making budgets and comparing them to your actual expensesKeep accurate books and records
148Why Separate Business and Personal Finances? Taxes. The IRS lets you deduct expenses for a business, but not for a hobby. If you mix business and personal income, the IRS is more likely to decide that your microbusiness is a hobby. But even if it doesn’t, mixing funds will make your taxes harder to calculate and pay. The cost and effort of keeping your accounts separate is minimal compared to the problems sloppy accounting can cause. Loans. If you need a business loan, you normally must show your financial records. Mixing funds makes it hard for lenders to know how profitable your business is. Professionalism. Having separate accounts shows customers, suppliers and clients that you’re serious about your business. Management. If you don’t separate your funds, it’s harder to make good business decisions.
149Why Do You Need Records? Producing financial statements Managing cash flowSetting and measuring progress toward business goalsPreparing tax returns (including deductions)Tracking and managing costsProviding information to lenders and investorsPreventing theftProviding compliance with lawsPaying and collecting bills when dueSupporting your case in a lawsuitBudgeting and planningApplying for loans
150Record Retention Guidelines Type of RecordRetention PeriodBank statements7 yearsBusiness licensesUntil expiredCash register tapes3 yearsCheck registersPermanentCanceled checksFinancial statementsGeneral ledgerInventory recordsInvoices (A/P)Invoices (A/R)Phone/utility bills3-6 yearsProperty/plant recordsPurchase ordersReceiving reportsTax returns10 years minimumTime cards or ticketsTravel expense recordsProperty deeds/titlesKeep while you own
152Computerized Accounting Systems Before buying a program, do some research!Security. Is it secure? Does it prevent unauthorized access to your data?Compatibility. Will your computer be able to run this program? What are its hardware requirements?Add-ons. Will you have to make multiple upgrades as you grow? If you’re planning for a certain level of growth within a year or two, will the system still meet your needs?Ease of use. Can you figure out how to use the program out without getting a Ph.D. in math? Always factor learning and training costs into the price of the system!Help. What type of training is available? Does the program have a reliable help utility or online user forum? Is the manufacturer popular enough that it’s likely to stay in business?Range. What modules or tools does it offer? Do you actually need them?Flexibility. Can you easily customize the program? Does it mesh with other business applications, as well as and word processing programs?
153Tips for Keeping Books and Records Keep your records daily. Deal with your bookkeeping on a regular basis, and it could take as little as 20 minutes a day. Create an audit trail.Keep checks in numeric order. Never skip a number, and always record voided checks. Keep invoices filed sequentially and/or alphabetically. Make everything easy to find and track. Request a bank statement with a “month-end” cut-off date. It’s easier to reconcile your records when they all end at the same time. Keep withholding taxes withheld. Don’t spend this money−it’s not yours!Don’t panic if you find a mistake. Everything can be fixed, as long as you’ve kept up with your recordkeeping chores.
154Twelve Check-Writing Tips Always write checks in ink, or type them.Always write clearly and check your spelling.Date the check correctly.Write the payee’s name after the printed words “Pay to the order of.”Write the amount of the check in numbers close to the printed dollar sign ($), so that other numbers can’t be inserted.Write the amount of the check in words starting as far to the left as possible, leaving no room for the amount to be changed.Draw a wavy line to fill any blank space left after you write the amount.Do not sign a blank or partially complete check.Always sign your checks just as you signed your bank’s signature card.Use the memo line to help keep records of your spending.Record each check you write— and each deposit you make— immediately in your check register.Don’t forget to record automatic deposits and withdrawals in your check register.
155Sources of CapitalSelf-Financing. Most lenders and investors want to see that you’ve committed personal funds to your business.Investor shares in profits or lossesNot a debt (unless you agree to pay the money back even if the business fails)Personal fundsAngel MoneySavings or investmentsMoney received from family, friends or interested third partyOutside salaryHome equityCan be debt or equity financingDebt CapitalAlways formally document angel money as you would traditional debt or equity financingMoney that you borrowInterest is usually charged for use of the loanEquity CapitalMoney provided by an investor
156Fitting the Loan to the Need Short-Term DebtUsed to meet short-term needs, such as seasonal inventory or short-term liquidity problems.Repayment time: One year.Intermediate DebtUsed for permanent working capital or equipment acquisition.Repayment time: Three to seven years.Long-Term DebtUsed for real-estate purchases or the initial purchase of a business.Repayment time: Seven years or more.
157Debt or Equity Financing Considerations Change in ownershipPersonal factors/preferencesLender and investor reactionsObligation to repayTax considerationsCapital structureTime requiredCost of obtaining the funds
158Debt Financing Sources BanksSBA programsCredit unionsState and local loan programsMicrolendersBusiness incubatorsPeer-to-peer lending / crowdfundingLeasingConsumer finance companiesCommercial finance companies
159Leasing vs. Purchasing Advantages Usually no down payment Often over a longer time period than a loanMay allow upgrade to current equipment modelsMay allow “off balance sheet” financingIncreases possible sources of financingDisadvantagesMay cost more if tax advantages lostMay not own asset at end of the leaseIs still a long-term legal obligationTerms and conditions may limit flexibility of use
161Financing Factors The growth potential of your business The amount of interest you can afford to pay (debt) or the amount of ownership you’re willing to give up (equity)The riskiness of your businessThe length of time you need the moneyThe profit potential of your businessThe kind of money you need (debt or equity)
162Preparing for the Loan Process Before you apply for a loan:Find a lending institution that regularly lends to microbusinessesWhat size businesses do they normally lend to?Do they avoid making loans within certain industries?Check your credit historyAre there credit problems you need to clear up?Do you know how to repair your credit?Are there credit problems you don’t know about?Get your business records in orderHave your business plan ready.Be able to describe your recordkeeping procedures and accounting system.Find out what books and records the lender will want to see, and gather them.
163What Lenders Require Business loan application form Personal tax returns (2 to 3 years)Complete business planOther documentation (optional)Cash flow projections (monthly for 12 months, quarterly or annual for years 2 and 3)Accounts payable agingAccounts receivable agingInventory status reportsPersonal financial statementAppraisals
164The Cs of Credit Credit history Character Capacity Collateral Conditions
165Tips for Working with Your Banker Deal with a local bank when possibleDevelop a long-term relationshipMake an appointmentKnow your needsSelect a banker you trustPresent a complete proposalSelect a banker familiar with your type of businessExplain uses of the loanBe flexibleDress appropriatelyBe patientAsk for advice or clarification of anything you do not understandTell the truthRecommend your banker to others
166Ratio Analysis: Understanding the Financial Health of Your Business Current Ratio = current assets ÷ current liabilities Example: $1,000 ÷ $500 = 2 (or 2:1) Debt to Equity Ratio = long-term liabilities ÷ owner’s equity Example: $5,000 ÷ $10,000 = .5 (or 1:2) Net Profit Margin = net profit ÷ gross revenue from sales Example: $1,000 ÷ $10,000 = .10 or 10% What do ratios tell you about the health of your business? How are ratios used by lending institutions?
167Warning Signs of Credit Card Fraud If an order shows two or more of these warning signs, take extra steps to confirm that the buyer is for real before you ship!Vague contact information, such as a private box address, an unlisted phone number or a free, Web- based address.Orders for multiple expensive items or large amounts of cheaper items.Large orders from “businesses” that don’t appear when you search for their names online.Multiple large orders within a short time frame, especially from buyers in Russia, Eastern Europe or Southeast Asia.A shipping address that doesn’t match the credit card billing address.Asking the delivery person to leave the package at the door. To avoid fraud, require the person who receives the package to sign for it.Overnight shipping, especially to foreign countries.
168Check Acceptance Guidelines Call the bank that issued the check and ask if there are sufficient funds in the account to cover it.Use a company that verifies checks. The verifying company assumes the risk if a check doesn’t clear the bank.Ask for personal identification, such as a driver’s license. Look closely at the picture and signature on the license, and jot down the license number on the check.Never accept a check written for more than your selling price. Some crooks will write bad checks for more than the selling price of an item, and then ask the merchant to return the amount they overpaid.Decide what checks you will take beforehand. The SBA recommends never accepting checks that are undated, postdated or more than 30 days old. You should also avoid third-party checks.Never issue a refund before the check clears. If you refund money you haven’t actually gotten yet, you run the risk of an even bigger loss!
169Smart Credit PoliciesExpect to achieve your ideal credit policy only through trial and error. You’re bound to make some errors about who’s a good credit risk and who isn’t.Base your credit decisions on the individual customer’s creditworthiness.Realize that the credit terms you offer might differ from one customer to the next. Your best customers deserve more generous terms. (The reverse is also true: Your worst customers deserve less generous credit terms.)Consider your policy in relation to your cash flow. Your policy should not endanger the cash flow you need to operate your business.Remember that your credit policy will change over time, along with your business’s growth and economic conditions. Reevaluate it at least once a year to make sure it still meets your needs.If a customer is late on payments, you may have to reduce or eliminate the credit terms you offer that customer until he or she re-establishes a good payment record.
170Five Basics of Negotiation There would be no negotiation unless both sides expected a benefit.The goal of negotiation is to create a new situation that’s better than the old one.Unfair deals last only while one party feels weaker than the other.Win-win negotiation delivers the best, most enduring deals.Like any other skill, negotiation can be learned and practiced.
171Negotiation Strategies Soft NegotiatorsAvoid conflict at any costUsually don’t stand up for their best interestsHard NegotiatorsAggressive and competitiveMay use threats or bluffsNot trusting or trustworthyWin-Win NegotiatorsWork toward the best outcome for allFlexible, but can be firm when it’s appropriateAttack problems, not people
172Stages of Negotiation Setting an Agenda Voicing Demands and Offers Why are you negotiating?What are the issues? What are the goals?Voicing Demands and OffersWhat are your interests and positions?What do you want, and what are you willing to give in return?Working to Minimize DifferencesWhere do interests overlap?Where is the common ground?Closing the Deal“Win-win” means both sides are better off than when they started.
173Traits of Effective Negotiators Good negotiators:Understand their counterparts’ interests and perspectivesUnderstand the difference between positions and interestsUnderstand the difference between real power and perceived powerKnow their settlement rangeKnow their BATNA (Best Alternative To a Negotiated Agreement)Know when to walk away from negotiations
174Overcoming Negotiation Problems Recognize manipulative tactics such as stonewalling, bullying and deception.Open your ears and listen. Being a careful listener is the best advantage you can have.Get in the other person’s shoes. Understanding your counterpart’s point of view will help you find common ground.Slow down and regroup. When things get stressful, taking time out will clear your head.Get off the hot seat! Don’t make important decisions on the spot. Go to a safe location to consider your options.Know when to walk away. Knowing your limits ahead of time gives you more control over the situation.
175Key Contract Management Tasks Create processes and practicesReview timeframeEvaluate benchmarks and measuresDefine the responsibilities of each partnerIdentify contingency plansEstablish regular meeting timesResolve conflicts and problemsReview performance and improve where necessary
176Dangers of Unmanaged Growth Failing to manage growth can affect every area of your business’s performance. Major pitfalls include: Inability to maintain consistent performance standardsLow employee morale, and high employee turnoverLoss of profitabilityLoss of customer loyaltyLower quality and professionalismSlowdown in business learning and competitivenessInability of overworked leadership to provide directionCash flow problemsInefficient use of resourcesStress and burnoutLoss of focus on core objectivesPoor communication among employees
177Moving to the Next Level Celebrate what you’ve accomplished!Organize what you’ve learned!Fill in the blanks!Ask for help!Finish your business plan!Check and double-check!Polish your presentation!Don’t stop planning!Take advantage of the NxLeveL® Training Network!