Posts Tagged ‘Startup’

Start-up business classes offered

Start-up business classes offered
MELFA — If your business is still struggling in this economic downturn, your business now requires a good business plan to be successful. Here is a way to put your ideas into action.

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Foursquare + Groupon = “It” Startup GroupTabs

Foursquare + Groupon = “It” Startup GroupTabs
This post is part of Mashable’s Spark of Genius series, which highlights a unique feature of startups. The series is made possible by Microsoft BizSpark. . If you would like to have your startup considered for inclusion, please see …

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10 Things to Do Before You Start Your Start-Up

10 Things to Do Before You Start Your Start-Up
Is your great idea good enough? Can it grow in this slow economy? Can it become profitable, and return on any investments it requires? Well, there’s no way to know until you try, right? Hardly. There are some ways to prepare yourself, test your idea, and improve it before you actually found a company around it. We’ve compiled the best examples from recent Inc. articles and Inc.com guides of tips …

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5 Tips for Estimating your Start-up Costs

Have a Solid Plan — Then Change It

Most business start-up stories say that you have to have a business plan. And you do. But that’s not the beginning and end of figuring out your start-up costs.

Jeff Shuman, who directs entrepreneurial studies at Bentley College, says, “The conventional wisdom is that an entrepreneur sees an opportunity, comes up with a Small business plan to capitalise on it, determines the capital that needs to be raised, raises the capital and then applies it to building the business described in the business plan.”

There’s one major problem with that model, says Shuman. It all hinges on getting the business right the first time, and that doesn’t often happen. “In reality, it’s likely that some of your initial assumptions are pretty good and others aren’t going to be worth the paper they’re written on,” he says.

Shuman and others say that figuring out your small business startup costs means regularly reviewing your assumptions and changing your initial model. Writing a plan is good because it forces you to write down everything you are going to need to start your business.

But that initial plan is likely to change repeatedly as you learn new things and incorporate them into the plan.

Be Willing to Pull Back

It’s tempting to add up everything you need for the full-fledged business you imagine, and decide it’s what you need to start out.

But pulling back and looking for a smaller model can give you a way to get started while also saving money. Shuman uses the example of someone who calculates the total cost of starting a retail business in a local shopping centre.

“You could start that way and write a business plan based on that amount,” he says. “But maybe you’d be better off renting a stand and testing what the demand is for your products at that location.”

This consumer testing reduces your initial start-up costs. The result is that the initial cycle of your business is dedicated not so much to generating profits as to generating information. “With this, you can fund your business on a cycle-by-cycle basis,” Shuman says. “When you go for the second cycle and for expanding your business, the numbers are now based not on focus groups or surveys but on real-world experience.”

Calculate Prices and Time Correctly

Calculating your initial cash flow is part of figuring out your start-up costs. It’s an area where businesses are sometimes less optimistic than they should be. “Small business owners may under-price their product or service, thinking they have to come in at the lowest price point to compete,” says Barbara Bird, who chairs the business management program at an American university. “They don’t necessarily need to do that.”

Correctly Estimate Your Start-up Time

Yes, when beginning a business, time can be money. Let’s say you’re going to have fixed costs such as a monthly lease. If you have to make improvements to a space before you can actually open for business, those fixed costs are going to be additional start-up costs until you can actually open for business. I’ve watched many entrepreneurs draw up a timeline for their ventures and get tripped up on the safety and inspection requirements imposed by local agencies.

For that reason, I think one of the first places a prospective new business owner should go is to the local government planning or license department. Construction permits and inspections can push a prospective opening date back by months. If you fail to take into account the cost of this time, you could be short of working capital right at the start.

Be Realistic About the Cost of Money

Many small business entrepreneur finance their ventures by running up big balances on their personal credit cards. Others tap the equity in their homes.

But self-financing isn’t a practical option for larger ventures. Tom Emerson, who directs the entrepreneurship centre at Carnegie Mellon University in Pittsburgh, says start-ups should figure in the cost of capital when determining initial expenses and cash flow. “The cost is usually based on what the interest would be, were that cash invested in something with similar risk on the market” Emerson says. “It’s usually a figure that is a few percentage points or more above the prime rate.”

Financing a Start-Up or Growing Small Business

Financing Strategies

There are several alternative strategies used by business owners (often more than one is used).  The attraction and viability of different methods will depend on the individual circumstances, such as the type of business, the owner’s history and financial standing, the business vision and expectations among them.

Bootstrapping & Personal finance or lower level debt
Operational funding and debt (usually shorter term in nature)
Longer term debt (usually used for acquisition of larger assets)
External equity

Bootstrapping & Personal Finance

This is a way to finance the business without substantial borrowings or external equity.  As such it also incorporates a substantial proportion of personal finance and lower level debt.  Many successful companies including Dell Computers were started this way.

The most common form of bootstrapping is owner financing – the use of personal savings and credit cards as well as re-investing any profits back into the company. Family loans are also common to help get the business started.

Cash flow management by delayed payments of accounts payable while collecting from customers as quickly as possible is also a commonly used strategy.  Some tactics include discounts for cash payments and use of debt collection agencies.

Overhead and expense minimization is also important. The first part of this is having a miserly approach to expenses. Sharing office production or storage space, supplies and equipment with others is a common start-up method of keeping overheads down. The same principle applies to using part-time employees and commission sales people, keeping inventory levels to a minimum.

Accessing government grants and subsidies can also be useful.

Operational Funding & Debt

Shorter term funding is commonly called working capital. The distinction I make here is that these strategies involve formally negotiated contracts rather than the looser, more ad hoc arrangements typical in bootstrapping or personal finance arrangements.

These include:

Bank overdraft as a floating safety net. Whilst this is flexible and convenient, you should not use this for longer term financing as the interest rates will typically be a bit higher, and it is generally repayable on demand;
Commercial bill – to cover seasonal fluctuations or for specific one-off needs, usually for a term of between 30 to 180 days. Interest is often payable in advance;
Debtor finance such as factoring. Availability may be an issue as usually only offered to businesses with proven sales history over a certain limit; and
Trade credit – either standard terms such as 30 days or individually negotiated terms.

Sources of such funding includes banks, building societies or credit unions, finance companies and brokers. The same sources apply to longer term debt instruments.  It always pays to shop around as the competitiveness of varying instruments and credit providers can change daily.

Longer Term Debt

These forms of borrowing arrangements are usually put in place for financing the purchase of equipmet or other assets, business expansion or the development of new products.  It includes:

Term loans – usually used for acquisition of productive assets such as land & buildings, plant & equipment or business acquisition.  Many business owners will extend their home mortgage as a funding strategy as this usually carries lower interest and bank fees than commercial loans (between 1% and 2% interest differential is common).  The funds are then “lent” by the owner to the business;
Personal loans or hire purchase – generally used for purchase of motor vehicles and other equipment;
Leasing finance – also used for plant, equipment and motor vehicles, with the advantage that no deposit is required as the equipment being financed becomes the security in most cases. Leasing is generally more expensive than term loans, but is the most readily available form of small business finance.

External Equity

In the same way that a publicly listed company can raise additional capital by issuing shares, so can a small enterprise.  The Corporations Act places many restrictions as to how the business can go about this, and this is beyond the scope of this article.

Many business owners are protective of their ownership, thinking that they somehow lose if they include others in the business. This is a limiting mind-set, as it is better to have share of something larger than 100% of soemthing small. Bill gates owns less than 8% of Microsoft, yet is one of the richest men in the world!

There are three types of investors who might contribute capital to a growing enterprise:

Venture capital and/or private equity funds – these generally invest later in the business development stage as they look for returns from commercialisation of the business;
Angel investors – so called because they nurture their investment and the company by an active participation (typically through management guidance and assistance); and
Individual investors – the Corporations Act imposes several restrictions on how these investors can be found and how they may invest in a business. It is advisable to use the services of a professional investment matching service such as Transition Capital – www.trtansitioncapital.com.au or the Australian Small Scale Offerings Board (ASSOB)  - www.assob.com.au in pursuiing this strategy.

New entrepreneurs can keep startup costs down

New entrepreneurs can keep startup costs down
NEW YORK (AP) — Starting a business can be expensive, as people find when they become entrepreneurs after losing their jobs. But many of these brand-new company owners have also found ways to keep those costs down.

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Exchange Rate & Startup Business Ideas in Africa, United States of Africa

I want to give you a quick tutorial about the condition of the economic system over there. I will also go into exchange rate and retirement strategies.

Business Startup Loans and Small Business Funding for the Self Employed

New business startup loans and small business funding can be very difficult to acquire unless you find a funding source that will be creative. There are many different ways a home based business can get various types of funding as well.. What most self employed individuals forget is that they may be sitting on untapped credit lines and assets that can help them get the financing necessary for their small business.

Many commercial banks will not even look at the new business startup or small businesses unless they have plenty of money sitting in a bank account, a long business tract record and a fat balance sheet. Unfortunately, most of us may not have much cash laying around. That is why most small businesses are looking for additional capital and need funding sources that will think outside the box and look at many different types of financing to fit their business needs.

Here are just a sampling of the types of small businesses that can get financing:

Retail
Restaurant
Doctors
Dentists
Lawyers
Manufacturing
Industrial
Wholesale
Construction
Retail Apparel
Service Contracts
Contractors
Sub Contractors

Even if your business does not fit into the above categories there may be funding for you. In my article; Small Business Funding and Business Startup Loans I explain the many different types of small business financing programs available. There is even a contact form to get additional information for your small business funding needs.

I was amazed at how difficult it was for new business startups to get financing. You either have to give half the business away to private investors or you would have to use your own money and risk everything that you worked so hard to get. However there are sources that will not suck the blood out of your great small business idea.

Some types of financing which are most overlooked or difficult to get:

New Business or Startup Loans
Equipment Leasing
Working Capital
Purchase Order Funding
Contract Funding
Accounts Receivable Factoring
Medical and Health Industry Loans
Debt Settlement and Restructuring
Commercial Mortgages

Bottom Line:

There are many ways for the small business owner to get more working capital, new equipment and extra lines of business credit without tapping into personal lines of credit. You do not always have to have stellar credit either. Do not over look the seen and unseen assets your business already has and the potential for future growth. When you know and understand the types of financing available to you then better business decisions can be made regarding your specific funding needs.

Business Startup – Question 4 of the Top 20 Questions About Fast Business Startups

www.innoventum.com Learn how to start a small business FAST! In this series, Attorneys Denise Gosnell and Jynell Berkshire cover the basics of business startups.

Business Startup – Question 2 of the Top 20 Questions About Fast Business Startups

www.innoventum.com Learn how to start a small business FAST! In this series, Attorneys Denise Gosnell and Jynell Berkshire cover the basics of business startups.