1.  The Plan describes a marketable idea.

Lenders and investors want to see proof that customers want your product or service and are willing to buy it for a price that gains you a consistent profit.

2.  The Plan must show good profit potential in a short period of time.

Because new business ventures are so risky, they are expected to earn at least a 25% annual return, and preferably more.

3.  The Plan targets a clearly defined market with enough size and purchasing power to produce a profit.

 Lenders and investors look for businesses whose target markets are clearly defined. They also prefer large markets with high growth potential, but avoid businesses that try to be “everything to everybody.”

4.  The Plan explains clearly the “competitive edge” your product or service has in the marketplace.

The more unique your product or service is, the better.   Show how you offer the customer something the competitor doesn’t or can’t.

 5.  The Plan shows the company’s ability to control both the quality of the product or service and its delivery.

Dependence upon outside contractors and sales representatives can be considered a potential weakness when quality of delivery, installation, and service of the product is primary to the company’s success.

6.  The Plan shows that managers and employees have the skills and the experience to make the company a success.

Lenders and investors don’t put their money into a business; they put it into its people.  Skilled, experienced managers and employees can make a business work even when resources are stretched thin and conditions are tough.  Lenders and investors also know that experienced managers and employees will improve their chances of getting their money back.

7.  The Business Plan idea is not overly complex.

Trying to do too much too fast—and/or having to educate the consumer about a product’s or service’s benefits–can put a company under before it can even get started.  This applies to expansion plans as well as start-ups.

8.  The Plan shows a personal investment in the business.

If you don’t believe in your own venture enough to invest at least some of your own money into it, no one else will want to either.  “Sweat equity”–unpaid personal time and hard work–can be important, but lenders and investors prefer to see an entrepreneur motivated by a substantial financial stake in the business.

Next week in our Part III conclusion, we will summarize 9-11 and answer the question:   “BUT – What if you aren’t able to secure funding?”

 Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

Third Party Lenders are often a good source when banks decline your loan request. When you can show you have a healthy company they are usually able to be more creative than a bank. The criteria still includes showing a history for the business, and that it is capable of making a profit.

Potential lenders or investors are keenly aware of the risk and want a return matching that risk:  the greater the risk involved in the venture, the greater the return demanded.  There are a number of factors they will take into consideration when reviewing your Business Plan, however if you have a solid plan, your chances are greatly improved.  Some of those factors will be discussed next week.

Compliments of Lew West Business Consultants 

 www.lewwest.com  Blog  www.MyNext30.com

 10 Things That Build Business Value!!

 1. Establish your brand in the marketplace.

 2. Develop your operations manual. Put systems into place that will let your business maintain or grow in your absence.  

3. Be vigil in keeping your books current; showing accurate, clearly identified and consistent records.  (Remember, besides it ultimately making you more successful, a potential buyer or auditor might be looking at them any day.)

 4. Expand your individual client lists, your networking sources, and especially protect your reputation. Your reputation and your company’s reputation are identified as being the same.

 5. Take care of your intellectual property: trademarks, patents, etc.

 6. If you have any outstanding tax issues, take care of them ASAP.

 7. Give a good first impression – the business should always look clean, businesslike, and attractive when anyone walks in.  Specific maintenance duties should be included in every job description, e.g. keeping trash emptied, personal items out of sight, etc.

 8. At least quarterly, review that your legal paperwork is being maintained.

9. Update your business plan weekly or monthly as well as your expected future projections.  Maintain your business plan as if a buyer might walk in the door any day with an outrageously large offer – IF you can hand it over your current business plan and books for review Right Then. 

 10. Obtain a realistic picture of the value* of your company, noting that specific actions you take with the above can increase its value. Despite all of the things you hear, there are no set formulas in determining your company’s value.

 *Determining the value of a business will depend upon several things including, but not limited to, company assets; net profits the business is showing now and in the past; feasibility of further growth or expansion of the business; location.   If the goal is to sell – the recent sold price other area businesses in that industry will need to be taken into account, but only as one variable.

 Compliments of Lew West Business Consultants
http://www.lewwest.com/   Blog – http://www.mynext30.com/

 2.  Be aware of the difference between what a client “perceives” as the product value and its “actual” value.  Once you determine the break-even cost (actual value) of your product, you have established a base price. Now you need to focus on establishing the “perceived” value of the product to the client. The client usually knows the market price range of the product, so your job is to show the client your enhanced attributes of the product.  You want your client to begin to “feel” that you are offering a product of greater value than what is on the general market.  If you have developed a strong list of benefits and advantages to serve their need, they will “perceive” your product as worth more, and will be willing to pay more for your enhanced version. These unique attributes could possibly be an improvement you’ve added, or something your competitors have failed to point out, or even showing them how to more efficiently use your product to better fill their need.

3.  Peer image often influences product purchase.  The “in thing” has a great deal of emotional appeal. Know your target market and strive for an innovative way to tap into that perceived need.

4.  Competing on price. Be sure you know what the pricing for your product, or similar product, is within the general market. If you undercut the going rate too much, not only are you undermining your own marketplace by diminishing the going price, but the backlash from your competitors might trigger a price war.  No one ever wins a price war, and the one that ultimately comes out on top will be the larger company(s) with the deepest pockets. A idea is to not open that Pandora’s box at all.

5.  Play fair.  Many times we get so involved in breaking our services into multiple “options” we lose sight of how the client may respond. Yes, many times more can be collected by doing it this way, but keep it to a minimum. No one likes to be “nickel and dimed” so be careful not to over-do the options and their escalating costs. 

Even though options can give you leverage as to what you will or won’t do without additional payment, if the client ultimately feels you aren’t playing fair, and not showing proper empathy for their needs, it will hurt you in the long run.  You may consider it fair pricing, but if the client doesn’t – you lose.

Compliments of Lew West Business Consultants
http://www.lewwest.com/   Blog – http://www.mynext30.com/

You have a new “Concept” or “Idea”.  Congratulations!  Now what do you do?

If the acquisition of capital is your primary goal for your business, then let’s take a step back and see what you need to do.

Many entrepreneurs become so excited with their New Concept they mentally start banking their money – but oops, they don’t have any money.  No problem. They’ll shop their great new concept to the highest bidder, get enough to pay-off their debts, hire the necessary personnel to run the new piece of business and still have a healthy operating budget.  Sounds doable, right?   

And Why Not?  It seems you read about these kinds of successes all the time, don’t you!? 

While you should “never say never”, the reality of the odds playing out, as described above, are right up there with winning the national lottery.  The good news is there are ways to better those odds.

1. Specifically, know who you are going to approach to request funding.  Gather all of the contact information and as much background knowledge as possible about the company and/or the contact person you will be approaching.

To keep rejection to a minimum, search out those investors who have an interest in your industry and specifically your niche focus.  Just because an individual or group has money to invest doesn’t mean your particular niche is of interest to them.  e.g. – if their passion is to build a station on the moon, don’t ask them to fund your fishing rod conversion system.  You will only suffer an unnecessary rejection.  It isn’t personal; the Investor just isn’t interested in your concept no matter how well you have developed your concept and financial information.

Generally the funding options are:

• Banks
• Third Party Investors (includes Angel Investors and industry Investors)
• Venture Capitalists  (be very clear on what they want in return from you)
• Private Lenders  (usually family or friends)

2. Some of the Basics you will need to have ready:

If your “concept” or “idea” is to be taken seriously by any of these investors it must be verified with a well developed business model/plan.  This plan includes how much capital you are going to need and specifically how you are going to use it.  

When you are able to catch an Investor’s interest in your business proposition, the first thing they will do is to review your supporting financials in order to understand if this business proposition supports a sustainable and scalable investment opportunity (on-going profitable growth curve).  If your numbers pass their scrutiny, they will then – and only then – want to:

• better understand the product offering,
• investigate the potential investment opportunity more fully, and
• review your management team. i.e. -do you and your key personnel have the ability and expertise to make it happen?

Your well developed business model/plan will be a major key in the investor’s decision as to whether your concept is worth pursuing.

If you have shown the Investor realistic financials with verifiable backup information, they will then want to review a well developed Business Model/Business Plan.   If they are going to invest their money into your concept, they want an in-depth understanding of the business.

Remember, their business is funding companies with the expectation of receiving a profitable return as soon as possible. They aren’t interested in dreams and they don’t like surprises.  

Great things can happen if you put your concentrated effort, energy and diligence into the development of your business plan.  Pick the Investor with the most empathy and appreciation of your concept, and present realistic financials knowledgeably. 

Build the odds in your favor.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com

I am often amused when someone claims they don’t need a BP (Business Plan) because they “fly by the seat of their pants”, or “a BP is a waste of time”; then smugly point out they have never had a BP and they are so busy they can’t keep up.  To me, that’s a sign they are in the middle of a wild fire instead of a controlled burn. One day they are going to burn out.

To have a successful business it is necessary to keep track of income; cost of goods; general expenses; payroll; commissions, principal’s draw – in other words;

• finances;
• how a larger segment of the marketplace can be gained and maintained;
• employee management;
• distribution – to name a few. 

Whether they are keeping this information in their head, or delegated to trusted employees, they are working a rough version of a BP.  Unfortunately without a clear vision of what their company will look like at maturity, they will never get there.  The entrepreneur will never know when to step back or how to set up the company to flourish on its own.  Instead, the entrepreneur is establishing a guaranteed, forever Job.

Every active company has some kind of a BP, even if they don’t have it in an organized format. It is also a fact that without a tangible interactive plan they never realize the full potential of their business. There will always be some aspect of the business being neglected because the owner becomes so engrossed in just one or two areas that the overall health of the company is forgotten.

The same holds true for someone with a great business idea.  Even though owner can’t imagine how it could possibly fail, now is the time to check that concept with real numbers from the marketplace.  Even if they are convinced it will be profitable, until the marketplace is surveyed and the numbers are run, they are only projecting hope, not reality.    

A great deal of money can be saved by developing an informational BP that lays out an outline of the business, including costs and income.  Caution should be taken here.  Often an entrepreneur is so eager for it to work, there is a tendency to skew the numbers.   Now is the time that it is imperative to be objective and honest.  Make the business show You how it can be profitable.  If you can’t see a profit on paper now, how do you expect it to be profitable in the future? Better to spend a little money now in finding if the company can be profitable than for you to invest your life’s savings only to lose it all – including the capital seed to start a different business.

Entrepreneurs are not gamblers; true entrepreneurs only take calculated risks.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com

In case you hadn’t noticed, many articles, experts, textbooks, etc. tell you that you are “confused” if you don’t subscribe to their particular definition of business terms.  I too have my set of definitions, and because this is my Blog you will find them listed below.

Please understand that my definitions, along with everybody else’s, are only words.  To each of us, in our attempt to convey those illusive, intangible concepts of business success, believe our words best describe them. 

The important thing, however, is that You are able to grasp the basic key concepts necessary to drive your business to its greatest potential.   

My favorite quote is, “If you don’t know where you are going, then you are probably already there.”  Becoming as clear as possible as to “Where You are Going” is often the difference between success and failure. 

I’m for success – by any definition.

 #1. Strategy or Action augmentation:

Here you utilize your “big picture” goal and begin enhancing that picture with the information accumulated in #1 & #5. From this collection of information, you can initially set the course

• for your business,
• its marketing direction and
• define the milestones to “make it happen”! 

 Bonus: Ultimately you want your strategies implemented in a way that your company is making money without you even being there – the quicker the better.

 #2. Financial Tracking: 

All income needs to be tracked daily – e.g. cash-flow and expenditures, sales, distribution, payroll and benefits, assets, inventory – in other words anything to do with what is happening to your company’s money.

 Bonus: Whenever funding is needed, you can create the requested documentation from your operation and financial summaries. 

 #3. A Marketing Plan is only one piece of your Grand Plan – albeit a very important and visible piece.  A Marketing Plan promotes your product to a specific segment of the marketplace.  By generating excitement and recognition for your product or service, Marketing’s role is to drive customers in your door. Once in the door, you close the sale, deliver their order and collect your money. 

 #4. Sales:

While Marketing creates the customer excitement and desire for the product or service, Sales does the actual close of the sale and collects the payment.  Although Marketing and Sales work closely together, their purpose and execution is very different.  Marketing creates a positive marketplace enabling Sales to utilize Marketing’s materials and created “need” to close the sale with individual clients.

 Bonus: Marketing generates interested prospects, Sales convert prospects into clients.

 Customer Service and Customer Retention are an important part of Marketing and Sales.  Questions and problems must be handled promptly and cheerfully along with scheduled on-going customer follow-up.

 #5. Operations:

Orders need to be filled quickly and efficiently so customers will be happy to reorder again, and become long-term clients. Quality of service while keeping costs in line is a major responsibility of Operations.  Depending upon the company structure,  employees are usually accountable to Operations.

 Bonus: Operations implements systems/procedures building toward company maturity while maintaining a unified and coordinated staff to achieve the company’s goals and purpose. 

 Congratulations! You now have a Working Business Plan!  All of the Steps listed #1-#5, are only segments of your total “Business Plan”.  Together the segments lay out a coordinated, tangible picture of your business, adjustable to the changing needs of the marketplace.

 Bonus: During this process, you have run various scenarios illustrating what will work and what won’t, and what would have only cost you time and m

By taking these preliminary planning steps,  

Your business will be set-up for long-term success.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com

The first business owner fully understands the numbers required to run a company. He knows to the penny the start-up and general expenses, cost of goods, and the break-even point. He sees the trends and how the customers are responding to the company’s marketing and the employee efforts.

This financially focused business owner can explain and justify any numbers to the bank when additional funding is needed. He knows what is going on in the marketplace, how his business fits within his market niche and can readily adjust to keep the focus on that market. That’s a good thing, right?

The second business owner considers his primary need is to get his name and his brand out there. In his grand plan, exposure is the difference between success and failure. This marketing business owner is constantly on the street, or on the road, publicizing his business and making contacts. Where most of us encounter him is at every networking event, ribbon cutting, open house, committee, street corner ….. He seems to be everywhere. His potential customers are becoming familiar and comfortable with him and his business.

This marketing business owner’s logic is profound. Without customers, you don’t have a business. Obviously this marketing business owner has put together a well developed marketing strategy, thus he is going to be bringing in an increasing number of customers. That is good thing, right?

Both business owners are applying a winning strategy to their business – BUT ….

Let’s go back to the Numbers business owner. As knowledgeable as he is, his viewpoint is from the inside of the business. Basing everything on numbers, he does not quickly or easily implement new ideas. Even with the fluctuations in the marketplace, he continues to improve his current structure, but not make any major adjustments. It is more comfortable to stay with variations of the “tried and true” actions of the past.

Numbers are very necessary in the building and maintenance of a profitable company, but people and vision are also critical for long-term growth and success.
With that said, does that mean the marketing business owner has the right formula? Not necessarily.

The problem with the Marketing business owner is he is spending all of his time, energy, and focus outside of his business. Again, assuming this marketing business owner has put together a well developed marketing strategy, he is going to be bringing in an increasing number of customers. So what happens when his great marketing starts turning into larger and multiple orders?

Without competent order processing, fast and efficient distribution, inventory management, excellent customer service, and policies for repair and return in place, all of his time, effort, energy and expense with have been for naught.

Customers are not forgiving. If they have problems with submitting their order, receiving delivery in a timely manner (their concept of “timely”), or poor customer service, they won’t spend the time to order again.

Best advice for both owners is to closely examine the other’s procedures and duplicate them as much as possible into their own business. If they can’t do it themselves, this is a signal to carefully select an individual or company to develop that part of the business for them.

Both business owners are to be commended in utilizing their greatest strengths, but no one is perfect at everything. Recognizing this fact is what gives life to an exceptionally successful business.

Compliments of Lew West Business Consultants
http://www.lewwest.com   Blog – http://www.mynext30.com/

During our original discussion of “Identify your Target Market” we narrowed it to 4 main points:

1.  Become a specialist!  One of the first things you need to do is refine your product or service so you are NOT trying to be ‘all things to all people.’

2.  Next, you need to understand that Individuals and Businesses purchase products or services for different reasons. 

• Individuals purchase products or services for three basic reasons:
  • To satisfy basic needs.
  • To solve problems.
  • To make themselves feel good
• Businesses buy products or services for three additional reasons:
• • To increase revenue
  • To maintain the status quo
  • To decrease expenses.

3.  Once you have determined how your product or service fulfills the specific need of those in your target market, you can then laser-focus your marketing strategy.

4.  The next step in creating an effective marketing strategy zeroing in on your target market by way of Market Segmentation.

After reviewing the purchase motivations of the individual customer and the purchase motivation of businesses listed above you should be starting to visualize who you think your ‘ideal’ customer should be … or at least who you want it to be. Depending upon the nature of your business, (product or service), begin writing a description of this distinct customer.  Once that customer is clearly identified, you will be able to automatically screen everyone as to whether or not they are a potential customer.  This ability saves untold time and expense.

Based on the numbers you already have in your research, you even know approximately how many of those potential customers are in your area! Even subtracting the number of those you know are already loyal to some of the competitors, it is relatively simple to see who are available to be converted, or who have not yet purchased your product or service. 

Many times, of course, prospective customers don’t know about your company, or can’t tell the difference between your company and others. The good news is, once you know who fits into your defined criteria, you are able to ‘target’ that specific group.  Even if they are currently with the competition, you can help them understand the desirability of your product, or service, and its unique place in the marketplace.

As you become better established, you may decide that you would like to extend your target market outside of your local area. Going back to the basic reasons why people purchase goods or services, you will find new ways to channel your efforts toward your designated market.  Implementing the updated formula will make it possible for you to successfully continue capturing larger market shares.

On the other hand, if you ‘specialized’ your product or service but, following your local target market research, you discover that your actual market share is much less than first anticipated, what do you do? 

First of all, if the local target market customers will consistently spend enough on your product or service annually to keep you in the black, then you have nothing to fear.  While closely following your strategy plan, you will be able to increase your profitability as you are expanding your range of exposure.

BUT if that local market niche is only going to spend a minimum amount sporadically on your product or service – then you need to go ‘back to the drawing board’. 

Fortunately, as a result of your initial research and planning, you were able to discover this “short-fall” before investing too much time and money.  It is always disappointing to find it wasn’t the profitable niche you had anticipated, but the good news is, your research and fundamental planning will supply you with all the information needed to restructure your plan. 

When all of the pieces and parts are arranged to accommodate the needs of the customer, the result can be a thriving company.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com

Take a good, objective look at your product and service – then ask yourself…

   “Who are, or who will be, my customers?”  

 In otherwords, Who will buy your products or services?

 Often a business person has

1) no idea who might buy the product or service, or

2) assumes that ‘Everyone’ will.  

 Either assumption can lead to wrong decisions, incorrect pricing, poor or no marketing strategy – and ultimately to business failure!

The most successful businesses understand that only a limited number of people will buy their product or service. The big question then is to determine (as closely as possible), who those potential people are.  It isn’t until those potential buyers are clearly defined, (targeted), that budgeting, marketing strategy, and promotional implementation can begin.  

By filling a defined need, of a clearly identified niche of potential customers, your reward will be a stronger and more profitable business.  It is also increases your marketing dollar efficiency and lowers your frustration level.

One of the first things you need to do is to refine your product or service so that you are NOT trying to be ‘all things to all people.’ Become a specialist!

This could include offering exceptional support programs to make life simpler for them.

Other focus could be the exceptional quality of the product or service, and/or have the best customer service possible … further enhancing the customer’s loyalty and making it more difficult for the competition to steal them away.  

A possible negative is that this decision could potentially eliminate a percentage of your current market – but it also gives you a ‘niche’ that can be expanded in a way that other distributors are much less apt to be able to take advantage of.

Next, you need to understand that individuals purchase products or services for different reasons than businesses. 

Individuals purchase products or services for three basic reasons:

• To satisfy basic needs.
• To solve problems.
• To make themselves feel good.

Businesses buy products or services for three additional reasons:

• To increase revenue
• To maintain the status quo
• To decrease expenses.

If you fill one or more of these needs, you have found a target market.

Once you have determined how your product or service fulfills the specific need of those in your target market, you can then laser-focus your marketing strategy.

Some of the questions and issues you will be addressing while developing your Marketing program will be:

• Presenting a professional image while still controlling costs  
• How to save time and money?
• How can we maximize our image?
• How do we increase our customer base?
• How do we achieve our greatest customer retention/loyalty?”

By answering the above, you further differentiate your company from the crowd.

The next step in creating an effective marketing strategy is to zero in on your target market using Market Segmentation.

Determine how large you want to develop your company

Where do you want to sell your products or services

Is the customer appeal for your product or services best suited to be sold -

• Internationally
• Nationally
• Regionally
• Locally

It is advisable to begin with your local market as a learning/training ground.  Once you have all of your systems/procedures in place and running smoothly, you may then decide what your next step of expansion will be.

Assuming that your primary market is local business, you’ll need to identify the market segments that best fit your target market criteria:

• Company size (Small, Medium or Large companies)
• Single or multiple locations
• HQ or branch
• Number of employees
• Type of company/industry (corporate, green, non-profit etc)
• Each company’s potential need for your product or service
• When applicable, it is advantageous to know how they purchase: seasonally, locally, custom orders or volume, as well as who makes the decisions

Part II of this topic will be on my Blog www.MyNext30.com next week.

Compliments of Lew West Business Consultants
www.lewwest.com   Blog – www.MyNext30.com