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Business Start Up

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Title: Business Start Up


1
  • Business Start Up
  • And
  • Expansion
  • Presentation

2
  • Comparatively, Jamaica is considered to be very
    entrepreneurial. Approximately 17 of the
    population had an interest in conducting some
    form of business according to a Global
    Entrepreneurship Monitoring (GEM) report. The
    report further highlighted that, Jamaicas
    overall rate of entrepreneurial activity compares
    favorably with countries such as New Zealand,
    (2005 28.26) considered among the worlds
    most entrepreneurial countries. Further
    comparison with nations with similar economic
    structure, showed Jamaica ahead of nations like
    Argentina, Chile, Mexico, South Africa, and
    Venezuela based on the number of nascent
    entrepreneurs who continued on to operate
    sustainable enterprises 1.

3
  • Entrepreneurship is one of the core pillars of
    developed economies, particularly due to the fact
    that it enables positive contribution to economic
    growth and is essential in driving community
    sustainable livelihood.
  • Studies have pointed to the fact that the
    establishment of new and small business is an
    engine for job creation and not necessarily the
    mega-corporations. Comparatively, countries with
    greater entrepreneurship impetus experience
    significant reduction in unemployment rates 5.
    Therefore, it is important that Jamaica take the
    corrective actions to nurture this great
    potential to creating culture of entrepreneurs.
  • When one considering the Jamaican scenario, it
    becomes more crucial to focus on the development
    of a culture where young people are enthusiastic
    about creating wealth and their own employment.
    It is evident that young people are faced with
    several challenges. The rate of unemployment for
    young persons is three times higher than that of
    adults 6. Skill levels among youth entering the
    labour force are significantly low over 70, 7.
    Additionally, the youth cohort dominates those
    most affected by poverty 8.

4
  • Create trust fund and finance programs for young
    entrepreneurs
  • One of the greatest challenges for young people
    in their quest to start a business is the
    deprived access to start-up funds. That is one of
    the primary reasons saving is a positive behavior
    which should be vigorously promoted. However, if
    Jamaican youth are to excel in the field of
    entrepreneurship, access to start-up capital is a
    fundamental prerequisite. With the risks and high
    failure rate in business, it is being proposed
    that special funds be put in place that reduce
    the requirement to access loans and also provide
    grants for solid business ideas.

5
  • Simple Business Ethics and Research
  • Decide if you really want to be in business
  • You will be putting some (not all, hopefully) of
    your net worth at risk. You will run the
    risk of becoming eccentric, meaning creating a
    life that is out of balance, with working hours
    taking
  • away from other family or pleasurable activities.
    There may be levels of stress you have not
    experienced as an employee.
  • Decide what business and where
  • Once you have decided you have the
    characteristics of a successful entrepreneur and
    that you definitely want to be in business, then
    you must decide which business is best for you
    and where to locate that business.
  • Decide whether to start full-time or moonlight
  • There are some interesting advantages and some
    pitfalls in starting as a moonlight business.
    (That is, a business you start in your off hours
    while still working at your current job.) More
    often than not, the advantages of starting as a
    moonlighter outweigh the risks
  • You avoid burning your bridges of earnings,
    including retirement, health and fringe benefits
    and vacations.
  • Your full-time job won't suffer if you maintain
    certain conflict of interest disciplines,
    including

6
  • compartmentalizing your job and business into
    completely separate worlds.
  • You can avoid conflict of interest with your job
    by choosing a business that is appropriate for
    moonlighting, such as single products, real
    estate, specialized food, e-commerce, direct
    marketing or family-run operations.
  • There are great advantages for operating a family
    business. The family can run the business while
    you are at work. You have a built-in
    organizational structure. You can teach your kids
    the benefits of being in business.
  • But there are also some pitfalls to consider in
    starting a moonlight business
  • There is a temptation to spend time at your job
    working on your moonlight business. That is
    unfair to your employer and should not be done
    under any circumstances. (You may need a family
    member or some trusted person to cover
    emergencies when you are at your job.)
  • Another problem may be competing with your
    employer, which, again, is not right. Think of
    how you would feel or handle this employee if you
    were the boss.
  • Any kind of conflict with your regular work can
    jeopardize your job and your moonlight business.
  • Overwork and mental and physical exhaustion can
    also become a very real problem for moonlight
    entrepreneurs.

7
  • Selection
    Strategy
  • Selecting the wrong business is the most frequent
    mistake that start-up entrepreneurs make. Here is
    a checklist to help you select a successful one
  • Take your time and wait for the business that is
    just right for you. You will not be penalized for
    missing opportunities. The selection process
    takes a lot of planning and your experience and
    complete knowledge is vital for your success.
  • Don't tackle businesses that may be too
    challenging. It is better to identify a one-foot
    hurdle than try to jump a seven-footer.
  • Try to identify a business that has long-term
    economic potential. Follow Wayne Gretzky's
    advice, "Go to where the puck is going, not to
    where it is."
  • A big mistake can be an error of omission. This
    means you may fail to see an opportunity that is
    right in front of you.
  • Look for a business that will grow in today's and
    tomorrow's markets. Many small retail stores are
    no longer in business because huge stores provide
    more choices to the customer and often at a
    cheaper price.
  • Businesses to avoid are "commodity" businesses
    where you must compete entirely on price and in
    which you must have the lowest cost to survive.
    As Mr. Buffett has said, "In a commodity type
    business you're only as smart as your dumbest
    competitor."
  • Most service businesses have pricing power.

8
  • If you intend to manufacture a product, consider
    the pros and cons of contracting out production
    to a low-cost supplier. In other words, operate a
    "hollow corporation." A "hollow corporation" is a
    company that subcontracts manufacturing and
    packaging.
  • Things to Watch Out For
  •  
  • Impatience
  • Do not let overconfidence short-circuit you from
    analyzing your selection of businesses carefully.
    You must not fear of hearing the negative
    aspects it is much better to be aware of them
    and face them early on.
  • Be realistic. Do not become lured by high
    rewards. They will come if you choose the right
    business and if you understand every aspect of
    the business before you open its doors.
  • Required Activities
  • It is worth repeating again The most common
    mistake and the most costly one is not picking
    the right business to begin with. This is the
    time for soul searching.
  • How to Evaluate a Specific Business you have in
    mind.
  • Here are some questions to help clarify your
    thoughts

9
  • Is it something I will enjoy doing?My favorite
    activities are __________________________I like
    to serve people by ______________________________
    __
  • Will it serve an expanding need for which there
    is no close substitute?
  • Can I be so good at a specialized, targeted need
    that customers will think there is no close
    substitute?
  • Can I handle the capital requirements?
  • Can I learn the business by working for someone
    else first?
  • Could I operate as a hollow corporation, without
    a factory and with a minimum number of employees?
    ("Hollow corporation" refers to a business where
    everything is "outsourced," meaning you would
    subcontract manufacturing and packaging to
    outside sources. )

10
  • Is this a product or service that I can test
    first?
  • Should I consider a partner who has complementary
    skills to mine or who could help finance the
    business?
  • Before you start, get completely qualified
  • The best way to become qualified is to go to work
    for someone in the same business.
  • Attend all classes you can on the subjects you
    need, for example accounting, computer and
    selling.
  • Read all the appropriate "how-to" books you can.
  • Don't be afraid to ask questions or seek help
    from the most successful people in your intended
    business.
  • FOUR AREAS OF INTEREST IN STARTING A BUSINESS
  • Research
  • Investment/startup
  • Marketing
  • Savings/expansion

11
  • Research ideas when Starting a
    business
  • What service or product does my business provide
    and what needs does it fill?
  • Who are the potential customers for my product or
    service and why will they purchase it from me?
  • How will I reach my potential customers?
  • Where will I get the financial resources to start
    my business?
  • Self-ConfidenceEntrepreneurs are self-confident
    when they are in control of what they're doing
    and working alone. They tackle problems
    immediately with confidence and are persistent in
    their pursuit of their objectives. Most are at
    their best in the face of adversity, since they
    thrive on their own self-confidence.
  • Sense of UrgencyEntrepreneurs have a
    never-ending sense of urgency to develop their
    ideas. Inactivity makes them impatient, tense,
    and uneasy. They thrive on activity and are not
    likely to be found sitting on a bank fishing
    unless the fish are biting. When they are in the
    entrepreneurial mode, they are more likely to be
    found getting things done instead of fishing.

12
  • Comprehensive AwarenessSuccessful entrepreneurs
    can comprehend complex situations that may
    include planning, making strategic decisions, and
    working on multiple business ideas
    simultaneously. They are farsighted and aware of
    important details, and they will continuously
    review all possibilities to achieve their
    business objectives. At the same time, they
    devote their energy to completing the tasks
    immediately before them.
  • Status RequirementsEntrepreneurs find
    satisfaction in symbols of success that are
    external to themselves. They like the business
    they have built to be praised, but they are often
    embarrassed by praise directed at them
    personally. Their egos do not prevent them from
    seeking facts, data, and guidance. When they need
    help, they will not hesitate to admit it
    especially in areas that are outside of their
    expertise. During tough business periods,
    entrepreneurs will concentrate their resources
    and energies on essential business operations.
    They want to be where the action is and will not
    stay in the office for extended periods of time.
  • Symbols of achievement such as position have
    little relevance to them. Successful
    entrepreneurs find their satisfaction of status
    needs in the performance of their business, not
    in the appearance they present to their peers and
    to the public. They will postpone acquiring
    status items like a luxury car until they are
    certain that their business is stable.
  • Interpersonal RelationshipsEntrepreneurs are
    more concerned with people's accomplishments than
    with their feelings. They generally avoid
    becoming personally involved and will not
    hesitate to sever relationships that could hinder
    the progress of their business. During the
    business-building period, when resources are
    scarce, they seldom devote time to dealing with
    satisfying people's feelings beyond what is
    essential to achieving their goals.

13
  • General Start-Up Activities
  • Determine the business you want to start and
    determine
  • Your qualifications for the business.
  • The feasibility of making that business
    profitable.
  • Conduct research on your industry, target market
    and
  • competition.
  • Select a location and analyze it for traffic,
    parking, and customer
  • and delivery access.
  • Investigate all start-up procedures specific to
    your industry.
  • There is a lot to think about when you are
    starting your own business.
  • The following checklist will help guide you on
  • Checklist for Business Start-Up
  • 1
  • www.paopen4business.state.pa.us
  • Write a business plan that includes your
    strategies for
  • management, marketing, production and financial
    contingencies.
  • Develop a list of all potential monthly expenses.
  • Determine potential sources of financing for your
    type of
  • business.

14
  • Business
    Start-Up Costs
  • Business start-up costs are the expenses you
    incur before you
  • actually begin business operations. Your business
    start-up costs
  • will depend on the type of business you are
    starting. They may
  • include advertising, travel, surveys, and
    training. These costs
  • are capital expenses, which are expenses you
    deduct over a
  • number of years. However, if you never begin
    business operations,
  • you cannot deduct start-up costs.

15
A business plan is a tool with three essential
purposes planning, communication and management.
Use the advice here to create or update your
business plan. Gather additional advice from
fellow entrepreneurs and experienced business
owners on our business Forums.Planning. The
business plan guides you through the various
phases of your business. Preparing a business
plan requires that you look realistically at
almost every phase of business because you must
show that you have worked out all the problems
and decided on potential alternatives before
actually launching your business. A thoughtful
plan will help identify roadblocks and obstacles
to avoid and help you to establish alternatives.

16
  • Communication. As a tool for communication, the
    business plan is used to attract investment
    capital, secure loans, convince workers to hire
    on and assist in attracting strategic business
    partners. A comprehensive, clearly-written
    business plan shows whether or not a business has
    the potential to make a profit. Many business
    owners share their business plans with their
    employees to foster a broader understanding of
    where the business is going.
  • Management. As a management tool, the business
    plan helps you track, monitor and evaluate your
    progress. It is a living document that you will
    modify as you gain knowledge and experience. By
    using your business plan to establish timelines
    and milestones, you can gauge your progress and
    compare your projections to actual
    accomplishments.

17
  • A business must have a business plan. If there is
    no plan, then there is no business.".
  • The importance of a comprehensive, thoughtful
    business plan cannot be overemphasized. Much
    hinges on it outside funding, credit from
    suppliers, effective management of your operation
    and finances, promotion and marketing of your
    business, and achievement of your goals and
    objectives.

18
  • to persuade someone to buy them. When you write
    your business plan, consider yourself a
    salesperson. The product you're trying to sell is
    your business idea. Your customers are potential
    investors and employees. Since you want your
    customers to believe in you, you must be able to
    convince them that you know what you are talking
    about when it comes to your business.
  • Before you begin writing your business plan,
    consider four core questions
  • What service or product does my business provide
    and what needs does it fill?
  • Who are the potential customers for my product or
    service and why will they purchase it from me?
  • How will I reach my potential customers?
  • Where will I get the financial resources to start
    my business?

19
  • In order to answer these questions, you must
    become an expert about your own business (or to
    fine-tune your knowledge if you already believe
    you are one). You must be willing to roll up your
    sleeves and begin digging through information.
    Since not all information that you gather will be
    relevant to the development of your business
    plan, it will help you to know what you are
    looking for before you get started.
  • What part does you business plan play?
  • The business plan often is called the blueprint
    for success.  Without a good business plan, you
    will find it nearly impossible to obtain
    capital.  The business plan starkly exposes your
    business knowledge (or lack of it) to lenders or
    investors.  Preparing a business plan forces you
    to think through your ideas and helps you
    communicate

20
  • them clearly.  Not only does this help you obtain
    financing, it is vital for successfully
    establishing your goals and managing your
    business and employees.Much of the information
    requested in other portions of this booklet is
    necessary for completing the business plan.  The
    business plan ties together this and much more
    information into a document explaining most
    things an investor or lender would want to know
    about your business.Preparing a business plan
    isn't easy.  It takes time and money to collect
    the necessary information, to analyze that
    information, and to properly communicate your
    findings.  This cannot be done overnight. 
    Successful entrepreneurs usually spend six to 10
    months researching and preparing their ventures. 
    Ninety percent of them utilize professional
    advisers, such as lawyers or accountants, while
    almost 70 percent attend business seminars and
    regularly read business material.

21
  • Business Plan Outline
  • Executive summary (to be completed last) A
    broad overview of your company's activities,
    management and objectives Distinguishing
    features of your products/services
    Attractiveness of your market Summary of
    historical financial results and financial
    projections Amount of money you seek, in what
    form and for what specific purposesDescription
    of your business and industry Your business
    The industry, its history and its anticipated
    futureFeatures and advantages of your
    products/services Description Competitive
    advantage and market niche

22
  • Proprietary position Future potential
  • You should consider including some products or
    sales literature as exhibits. Market research
    and analysis Existing and potential customers
    and markets Critical customers (over 10 of
    sales) Market size and trends Competition
    and strategy for competingEstimated market
    share and sales Marketing plan Marketing
    strategy Pricing Sales tactics Service and
    warranty policies Advertising, public relations
    and promotionProduct design and development
    plans Development status and tasks
    Difficulties and risks Costs

23
  • Operations plans Production or service delivery
    process (flow charts may be helpful)
    Geographic location Existing facilities and
    projected improvements for future needs
    Strategy and plans Labor force
    Product/service distribution Availability of
    material and supplies Dependence on critical
    suppliers Unique or novel processes
    usedManagement team Organization and
    ownership (charts are helpful) Key management
    personnel (credentials) Management strengths
    and weaknesses Management compensation Board
    of directors Key business advisers
    Professionals retained (accountant and attorney)
  • Include personal financial statements of
    principal owners as exhibits.

24
  • Overall schedule Timing of critical activities
    before opening (obtaining funds, incorporating
    the company, selecting the location, ordering
    supplies, hiring employees, starting operations)
    Timing of critical activities after opening
    (expansion, product/service extension)Response
    to critical risks and problems Working capital
    shortage Price cutting by competitors
    Unfavorable industry-wide trends
    Design/operating costs over estimates Low
    sales Difficulty obtaining supplies, raw
    materials Difficulty obtaining credit High
    inflation Lack of trained labor
    RecessionFinancial statements and projections
    Five years of annual historical financial
    statements (or from the period the business has
    been  in operation, whichever is shorter)
    Profit and loss forecasts for each month of the
    first full year and for each of the first three
    years of operation

25
  • Cash flow projections and an operating budget for
    each month of the first full year and for each of
    the first three years of operation Pro forma
    balance sheet at start-up, monthly balance sheets
    for the first year and at the end of each of the
    first three years Financial controls to be
    implemented Person responsible for finance and
    accounting matters Outside accountant or
    bookkeeper who will audit, review or compile the
    company's financial statements
  • Ownership structure Owners and how much they
    are investing Shareholder agreements Which
    owners are making personal guaranteesProposed
    company financing sought Desired amount and
    terms of financing and form (equity, grant or
    loan) Timing of required financing Proposed
    use of funds, scheduling

26
  • Simpler Outline
  • ??Executive Summary - summarizing key
  • points of the plan in one or two pages.
  • ??Overview - introducing the reader to your
  • company and the industry.
  • ??Description of products and services.
  • ??Analysis of the market in which your
  • business will compete.
  • ??Marketing strategy - summarizing the
  • product, promotion, pricing, and distribution
  • strategies of the business.
  • ??Operations plan.
  • ??Description of the experience, training,
  • and talent of your staff.
  • ??Schedule of activities outlining your
  • timeline.
  • ??Analysis of critical risks and problems.
  • ??Financial plan - including pro-forma
  • balance sheets, income statements and cash

27
  • Once you have worked through your business plan
    and have a good product, you should work on your
    personal presentation.  Remember, your ability to
    effectively manage is being judged, as is your
    business plan itself.  Preparing key visual aids,
    developing responses for likely questions and
    repeated practice are good strategies.
  • What are some sources of investment capital?
  • Many people interested in starting a business
    immediately look to commercial banks for
    financing. This is understandable because of the
    important financial role banks play in our
    society.  However, banks are only one source of
    possible financing often a business combines
    several sources.  The following list of potential
    financing sources is presented for your
    consideration. YourselfIn addition to
    contributing your own sweat equity, you have to
    be willing to put up a good share of the money. 
    No lender will give you money if you are not at
    personal financial risk.  You may be asked to
    personally guarantee repayment of any loans made
    to your business. As well as indicating your
    commitment to the business, personal investment
    is one of your easiest sells.  If you can't
    convince yourself to invest, who can you
    convince? Savings, mortgages, personal
    possessions and life insurance policies are just
    a few sources of money that can get you started.
    Relatives and friendsAgain, these are people
    you should have a good chance of

28
  • convincing to loan you money.  They know you
    better than any potential outside lender. 
    However, be careful.  Make sure your relatives
    and friends know the risk involved and formalize
    the lending arrangement with a promissory note or
    loan agreement.  Many personal relationships have
    been ruined by small business failure.

29
  • Government-sponsored financing programsState and
    local governments offer financing options for
    your company, as well.  Many have subsidized loan
    pools that provide fixed-rate, below-market
    business loans or grant programs.  JBDC.
  • Small business investment companies are private
    companies that offer financing JNBS.  Licensed by
    the Small Business Administration, they provide
    debt and equity capital to many small
    businesses.  They will undertake more risks but
    also demand greater rewards through either higher
    interest rates or equity positions. Commercial
    banksBanks operate on a small margin of error
    and are extremely wary of investing in a risky
    business.  Collateral to more than fully secure
    the loan - including personal guarantees - is
    necessary to convince a bank to lend you money.

30
  • THE END
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