How to Research Your Market

Do your homework before opening your doors to avoid business-busting mistakes.

1. Is the market saturated? Does your city really need another hardware store or flower shop? How much money is spent in your industry each year in your area? Is there room in the market for one more business?


2. Does the market want what you’re offering? If you’re thinking of providing day care for dogs or a facility where people can cook a week’s worth of meals in a group setting, will anyone care? Or if you’re developing a new online service for day traders, is it something they can’t live without?


3. What’s the competition doing? What do they do well? What do they do poorly? What’s unique about them? Can you offer something different that'll encourage customers to patronize you instead of more established businesses?


4. Can you reach your target audience? If you’re selling inline skates, are you opening in an area with a population of the right age and disposable income?


5. Local universities. Sometimes professors at business schools are interested in having their graduate students do a market feasibility study for course credit.


6. Potential customers. Run your idea up the flagpole with informal focus groups. Talk with friends of friends--but not your own friends or family, since they may not tell you the truth--and old customers or existing customers if you’re already in business. This is the acid test to see if your plan is ready for prime time or needs tweaking.

good luck!

~entrepreneur resource

Starting a Business With Your Spouse

5 things to consider before making your business a family affair :

1. Divide your roles and responsibilities. Even though both of you may possess the skills to do the work and serve your clients, it's important to divvy up your company's roles and responsibilities so that you don't step on each other's toes. In many small businesses, one partner is the "front of the house," handling sales and business development and preparing proposals and job estimates. The other partner acts as the "back of the house," handling the day-to-day operations and taking care of the bookkeeping, payroll and general office duties. While big decisions such as investing money in a new computer system or hiring an employee should be made together, this can be an excellent way to share power and minimize arguments.


2. Develop an effective way of airing differences and resolving disputes. While good communication is essential to any marriage, it's just as important in a business relationship. A couple who can't compromise on minor issues such as what kind of printer to buy is going to have difficulty resolving the many problems that will inevitably crop up as the business grows. One way to clear the air is to hold weekly management meetings-on Monday morning, for example-to review the company's performance during the previous week and to put in place plans for improvement. If disputes erupt during the week, you and your spouse can either address them on the spot or wait until the next weekly meeting. It doesn't matter which approach you choose, as long as you and your spouse agree to it.


3. Put a child-care plan in place. Just because you'll be working from home now doesn't mean that you don't need daycare or babysitting-quite the opposite! If kids are running through your home office demanding attention, you're not going to be able to get much work done. One option is for you and your spouse to switch off child-care responsibilities (every other day or mornings and afternoons) so that the other spouse can focus on the business. Another option is to find a part-time or full-time babysitter or child-care program so you can run your business while taking breaks to read to your children, help them with their homework or take them to the park.


4. Make sure both of you have enough room to work. While some people have no problem working in a noisy office with lots of commotion, others need quiet and privacy in order to concentrate. For example, if you're going to be on the phone pitching clients while your spouse is writing code and troubleshooting clients' networks, you may need two separate rooms to work. While this isn't always possible in a home office with limited space, you can turn one room-say, the dining room-into the "sales and marketing" office while reserving the den or spare bedroom as the "tech room" where your spouse can focus on writing software and documentation.


5. Agree on an exit strategy before you begin. While it's hard to think about the company's future before you've even launched it, it's important to sit down with your spouse and decide where you want the business to go. If you're content with a kitchen-table business that puts food on the table for your family and your husband wants to be the next Bill Gates and dominate every desktop, you're heading for trouble down the road. You could also run into problems if you want to bet the house and the kids' college fund on building the business and your spouse feels uncomfortable taking even the smallest financial risk. While it may not be necessary to have a lawyer draft a formal shareholders' agreement with buyout provisions and the like, it's a good idea for you and your spouse to agree on an annual budget for your business and to make a list of common goals and objectives.

good luck!

~entrepreneur resource

Short-Term Loan Solutions

Securing a succession of small loans can help you cover expenses while building revenues .

Can a business borrow some money for the short-term to help cover expenses while building revenues? Yes, and the way to do this type of deal is to secure three or four investors to lend your business funds as part of an overall one-year to 18-month plan. The big picture is that this format is really a series of short-term loans perfectly sequenced to fit end to end.

There are many companies who have used this successfully to keep cash flow flowing while they build and implement the firm's sales and marketing plan. The first four or five monthly payments can actually be made from the proceeds of the loan, provided there is a successor loan set to kick in on the back-end of each credit extension. And owners should understand that each successive round of funding should be an increased level compared to the prior level. There are significant risks involved in pursuing this kind of a deal, but there are also some very attractive potential benefits that buy your company some time to get established in the market.

Here's how it can work. A company sets up a three-month line of credit for, say, $35,000 (must be repaid in full in 90 days). The annual equivalent interest at 7 percent is around $2,400, so it costs about $200 per month "interest-only" for the first three months the $35,000 is accessed. The company sets aside $5,000 to make a 90-day principal payment that could trigger a 30- or 60-day extension of the original terms. This serves as a fallback position in case the subsequent second loan is not ready for some reason on the 91st day.

The company can now use more than $29,000 for operations over the next 90 days, and even without revenue, it can make the $200 interest-only payments each month and have $5,000 set aside to make a principal reduction payment in case they need to keep this line open for another one to two months.

At the 91st day, a second lender steps in with perhaps a $50,000 working capital credit line for another 120 days. This loan is fully amortized over the four months and requires monthly payments of $12,682 (principal and interest) to stay in good standing. The first month's payment is held in a money market account for that initial payment due in 30 days. Now the company has use of around $25,000 (half the loan) for 60 days until payment number two is due, and another $12,000 for the following 30 days out to the end of the third month. By then, the firm will have secured a few early sales on its marketing plan, and a few of these will have already been collected and can be used to pay for some operations items.

good luck!

~entrepreneur resource

Choosing a Financial Advisor

8 important questions to ask when deciding which personal finance advisor to hire for your business .

Smart business owners are always looking for sound financial advice--informed entrepreneurs recognize the value of the advice they can get from a trusted financial advisor. Working with an advisor is a smart move because they can help you set financial goals and take the necessary steps to accomplish them.

From helping you set up employee and employer retirement benefits and accounts to developing cash management strategies, an advisor can help you achieve financial success in a world where many business owners are “financially lost.”

But there are hundreds of financial experts in the market who are ready and willing to manage your money and investments for you--how do you find one you can trust? When it comes to financial planning, finding the right fit is really your first and most essential step. Here are 9 areas you’ll want to investigate to find the right financial advisor for your business’s needs:

1. Referrals & Recommendations-In order to track down a reputable advisor, ask your family, friends and work colleagues if they have any suggestions--then follow-up with their recommendations. Another source to ask would be your CPA or attorney. These professionals regularly work with financial advisors and can typically offer strong referrals. Recommendations can help you develop a sense of what kind of value these candidates provide, as well as their work style and client satisfaction levels.
   
2. Qualifications-During your research, it’s a good idea to look for advisors with professional training. Many professionals will use the term “Financial Planner” or “Certified Financial Planner Professional.” Ask what makes them qualified to practice. In addition, finding someone with at least five years of experience helping business owners and individuals in your industry and community is an important quality. Researching their background thoroughly will make you more comfortable giving them your money.


3. Experience-At the initial meeting with your potential future advisor, find out how long the planner’s been in practice as well as the number and types of individuals and companies with which he or she has been associated. Also ask the planner to briefly describe his or her work experience. Asking how much experience they have in financial consulting isn’t insulting, and a reputable planner will usually provide you with the necessary information.


4. Services Offered-Not all financial planners offer the same services. Usually, the services they offer depend on their credentials, licenses and areas of expertise. Financial planners generally can’t sell insurance or securities on products such as mutual funds or stocks without certain licenses. They also can’t give financial advice unless registered with state or federal authorities.


5. Approach-Make sure you ask your prospective planner about the type of client and financial situations he or she typically likes to work with. Some financial planners will develop one plan by assessing all your financial goals, while others will be more specific. You need to feel comfortable with your financial planner’s approach--whether it’s conservative or aggressive. You’ll also want to determine if the planner will carry out the financial recommendations developed for you or refer you to others who will do so.


6. Team Players-It’s important to determine just who your contact at the firm will be. Will you be working only with one primary advisor, or will multiple people be working on your account? If the consultant works with professionals outside the practice, such as attorneys or estate planners, it’s important to check their backgrounds as well.


7. Costs for Payments and Services-The fees will depend on your particular needs. However, the planner should be able to provide you with an estimate of possible costs based on the work to be done. Ask whether the fees will be based on the planner’s hourly rates, a flat fee or a percentage they’ll receive as a commission. The financial planner should spell out for you in writing how they’ll be paid for the services they’ll provide.


8. Public Disciplining-There are several government and professional regulatory organizations, such as the National Association of Securities Dealers, your state insurance and securities departments and CEP Board, that keep records of the disciplinary history of financial advisors and planners. Contact these groups, and have them perform a background check on your potential advisor or planner.

good luck!

~entrepreneur resource