Archive | October 2015

Business plan explained

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Did you know that creating a business plan should be the first step when launching your business idea? Unfortunately, many of us start a business without having a clear picture of what exactly we want our business to be in future. That’s why creating business plan is prudent. The plan outlines the route the business intends to take so as to achieve its yearly milestones such as revenue projections.
Developing a business plan serves as a roadmap that outlines the step needed for business success. As an entrepreneur, creating a business plan helps you make future projections of about 3-5 years on how the company or business is expected to grow.
Business plan comprises of different sections stipulating essential components of business success. The following are the major sections of a good business plan.
Executive summary
This section is the most important section of your business plan. Why? The section represents a summary description of your business idea. Under this section, you are supposed to inform the reader about your company, its mission statement and why you also think that your business idea is viable. Proper presentation of the executive summary helps to grab the attention of potential investors who can provide the needed finances for startup.
If you already have an established business, the following parts should be highlighted;
The mission statement
• Company/ business information
• Products/ services the company is dealing with
• Growth highlights and future projections
• Current financial position/information
• Outline of expected future company plans
Note that this section should be written as the last section of your business plan. This is because it gives a summary strength of your plan. Nevertheless, it should always appear first on your business plan documentation.

Company Description
Under this section, your business or company goals/objectives must be clearly stipulated. The reader of your business plan must quickly comprehend your business idea and its uniqueness. When developing you company description, make sure to include;
The nature of your company/business as well as the market need/demand that you want to respond to.
• Clearly stipulate how your products/services will meet the market demand
• Why you think your business will do well despite existence of other competitors
• Specify your target market or segment that your company is targeting

Market Analysis
This section helps you to illustrate your knowledge and experience in your target market. It should include your research findings as well as your conclusions.
The following are the essential components that you should include in your market analysis.
Market/industry description
• Details about your target market segment
• Uniqueness about your target market
• Business regulations in that market segment
• Market competition analysis
• Prices and gross margin targets
Organization and management
Under this section, you are expected to stipulate clearly the company organizational structure. Other important details are;
Information pertaining the ownership of the company
• Details about qualifications and experience of your board of directors
• Management team profiles
The above details increase potential investors’ confidence to have trust on your business idea.
Service or Product Line
This section is where you get an opportunity to describe your business product/service. You should be able to convince the reader about the benefits that the product or service is providing to the target market segment.
The main focus should be to depict how your product or services are customized to fulfill the market need of your target customers.
Funding Request
This section is necessary only if you are planning to seek funding for your business idea.
When making a funding request, make sure to include the following details;
Your current financial requirement status
• Projected financial funding requirements
• Breakdown of the funding needs and how you are planning to spend the money
• Your future financing strategy if any
Financial Projections
Formulate your financial projections when you are through with making market analysis and setting your business objectives. This helps you in making effective resource allocations.
Be sure to include historical financial data or statements if you already have an established business. It’s also important to include the prospective financial data. Whether you are operating a startup business or a growing one, investors will be eager to know your future financial projections.

The bottom line;
Creating a business plan creates a roadmap of your company’s future growth. Therefore, it should be embraced by every entrepreneur who wants to accomplish great business ideas. The essential of a good business plan are;
It should clearly state the objectives
• Outlined strategy on the exact product/ service you want to deliver to the market
• Clearly specify your market niche

Equity or Debt Financing; Which is better for you?

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For every entrepreneur, capital is a major component of business success. Despite the existence of a wide variety of sources of finance, developing a good financing strategy is core. Sources of financing in the business world are broadly categorized into equity and debt financing.
Therefore, this article will examine each of them and provide you with the necessary insights so that you can make informed decisions when doing your startup or developing your existing business projects.

1. Equity Financing;

Equity financing simply means the issuance of shares of common stocks to investors. The main players in this segment are the venture capitalist and angel investors (they fund the small startups). With equity financing, you will be forced to offer some shares of your business or company. This percentage of ownership goes to the financing parties that may include; family, friends or real investors.

Pros of equity financing
Investors take all the business risk and in case the business fails, you will not be required to repay the money.
Investors focus on long-term returns; therefore, you are given enough time to grow your business.
The profit earned is ploughed back into the business instead of loan repayment.
It gives small and growing business an opportunity to tap into new and existing investors networks thus, improving their reputation.

Cons of equity financing

Investors will own part of your business or company. This means that they are entitled to enjoy the profits of your business.
The time taken for you to secure able and trusted investor might be long
Investors must be consulted in case you want to make a major decision concerning the company
Investors may demand higher returns that may be more than the bank loan rates
In the case of dispute or misunderstanding between you and the investors, you may be required to transfer ownership of your business or company.

2. Debt financing

Debt financing means taking a personal or business loan from friends, family or banks and pledging to repay it back together with the agreed interest at the end of the loan period. With debt financing, the bank or other lenders are not entitled to ownership of your business.
In most cases, a loan guarantee is required before you qualify for debt financing. This puts the lenders on the safe side in the event the borrower fails to repay the money back.

Pros of debt financing

The lender of the loan has no ownership rights to your business or company
You will enjoy tax deductions when repaying the loan interest
Lenders relationship ends immediately after loan repayment
It’s easier to forecast expenses since the interest on loans does not fluctuate
They are of wide variety, and one can choose either short-term or loan term loans

Cons of debt financing

Loan security is required to guarantee the loan.

The loan must be repaid within a specific period failure to which you business becomes at risk.
Reliance on debt financing over a long period can make potential investors lose confidence in you business. Therefore, you will not be able to secure equity financing in future.
Debt financing can put your business or company at risk in case of economic down-times. Reduced cash flows can make it difficult for you to repay the loan.
The growth rate is minimal as part of the profit earned is used towards loan repayment.

The bottom line;

In conclusion, as an entrepreneur, there is always a challenge when making a decision to either go for equity or debt financing. Whether you need cash to grow and expand your business or initiate your startup, look at pros and cons of each source of financing to determine the best choice for your business.

Most business owners go for both of them although it all dependents on the stage of your business, business type as well as the expected cash flows.

5 tips on how to grow your business startup

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In today’s business world, growing your business idea into a reputable business or company remains the primary objective of every entrepreneur. This can only be achieved if proper startup strategies are put in place. Most business startups are faced with challenges such as finances, intellectual property, marketing and understanding the market environment.
That’s why most of them end up taking years before they get off the ground. Therefore, the following tips will provide more insight to any entrepreneur who is climbing the business startup ladder to help them run as well as expand their startup business with ease.

 
1. Create a financing strategy
Capital is a major component drive of business success. Creating or identifying a reliable capital source for your startup will guarantee you a continuous business operation. There are many ways of raising capital for startups ranging from loans, grants and savings. Look for venture capitalists that have the potential to finance your business in the growth and expansion stage.
Creating a financing for a startup strategy will increase the pace of your business growth. It’s also advisable that you carry out due diligence when selecting your financing sources to avoid starting with huge debts when pitching your business idea.
I will shed more light about equity financing versus debt financing in my next article.

 

2. Develop your marketing strategy

Creating a marketing plan is vital for your startup business venture. This can be achieved if you come up with your target market segment then you develop your own brand. Developing your own distinctive brand ensures that customers get to know your unique, innovative ideas and the technology used. Conducting a marketing research help you identify;
The products or services that are on demand
Strategize on how to be competitive
Reduce market risks
Identify upcoming sales opportunities
Therefore, you should develop your marketing strategy prior to your startup venture.

 
3. Look for a business mentor
As they say, “No man is an island”. If you don’t want to learn it through the hard way, go for a business mentor for training. Training will help you avoid the common mistakes and, therefore, give your business startup a competitive edge over the others. Business mentors will help by provision of step to step guidelines towards the achievement of your business success.

 

4.  Spread your wings
What do I mean? This refers to enlarging your target customer basket. New business ventures tend to rely only on few loyal customers for their survival. For any entrepreneur who wishes to grow and develop his business idea, new customer target is the secret.
Research more about the new group of customers you can target by meeting their needs. This will help you fill the gap of royal customers who may drop off as time goes by as well as increase your market segment. In order to achieve this, give regular preliminary offers and then set your new sales targets.

 
5. Increase your sales channels
Having a couple of sales channels is likely to increase your monthly sales targets by 50%. Many entrepreneurs have the tendency of using at-most two sales channels. Focusing on new sales and distribution channels such as online selling, can have a tremendous impact on your business growth. This will help you target a wide range of customers by selling your products and services globally.

 
Use of social media platforms such as Face book, Twitter and Google+ can also play a very important role in marketing your business online.