Business plans are worth the work

A business plan is not only important for starting your business, it's also an indispensable tool for helping you manage and grow your business.

Your business plan is your road map for operating your company, and it's essential if you intend to seek funding from outside sources.

A plan spells out specific details related to your business concept, marketplace, and financials. The length of your business plan can depend on the complexity and scale of your business. Even short one-page business plans have purpose and can affect success.





If you are intimidated by the thought of writing, know that the benefits are well worth the effort. The value of a business plan isn't so much in the document you create, but the discovery process you embark upon to create it. As you work on the plan, you answer key questions about your business that you may not otherwise have considered. That can help you recognize risks and opportunities - and better position you for success.


There are several ways to make writing your business plan less intimidating. First, don't try to do it all at once. If you tackle it in smaller bits and pieces, the project will be more manageable.
Schedule time to work on it. You'll feel less stressed if you reserve time for it on your calendar.




Get feedback along the way. As you work on the different sections of your business plan, ask a SCORE mentor or other unbiased business professional to review it and provide suggestions for improvement and clarity. SCORE mentors are experienced and provide free and confidential mentoring.


Even though writing a business plan will require effort, it doesn't have to be a harrowing experience. With a business plan, you'll be better able to move your business in the right direction from the start and navigate changes more easily in the future.

Crowdfunding - An Alterantive Source of Capital

Over the last several years crowdfunding has become an increasingly popular option for both entrepreneurs and investors trying to raise capital—and public awareness—when launching or growing a small business.

Rather than approaching a single lender to make a significant loan to your business (which you will most likely need to personally guaranty), crowdfunding platforms give you a way to leverage your network of friends, family, social media connections, and the public at large to obtain significant capital in small increments.

It’s a collective online effort that can expand your professional network and introduce your business to potential customers. 

Crowdfunding for businesses presently comes in three primary forms:

·         Rewards-based crowdfunding (such as via Kickstarter and Indiegogo)

·         Equity crowdfunding (such as via CircleUp)

·         Peer-to-peer lending (such as via Lending Club)

With rewards-based crowdfunding, you are only promising your backers some sort of token incentive and the risks are more limited. Whereas with equity crowdfunding, you are giving up equity and the risks can be substantial. With peer-to-peer lending, the business is taking on debt that it is legally obligated to pay back.

Equity crowdfunding and peer-to-peer lending are governed by a complicated web of federal and state securities laws, while rewards-based crowdfunding is generally exempt from those laws.

According to SCORE mentor and Houston entrepreneur Nick Tarte, rewards-based crowdfunding has rapidly become an accepted way to raise capital for small businesses.

“Traditionally, companies raised capital by issuing debt or equity,” says Tarte. “Rewards-based crowdfunding introduced a completely new alternative. The model has shown that the public is willing to contribute capital to worthy projects without any expectation of future profit, which is quite revolutionary.” But be sure to pick the right platform for your rewards-based campaign. Remember, crowdfunding is a form of marketing, and you want to be where your customers are.

Tarte advises to make sure you follow through on your promises. Watchdog groups and state and federal consumer protection bureaus have begun to shift their attention to deceptive crowdfunding campaigns.

Don’t forget about taxes. Proceeds raised from rewards-based crowdfunding campaigns are usually treated as taxable income to the business. For this reason, Tarte advises businesses to consult with their tax advisors before embarking on a crowdfunding campaign.

Nick Tarte will present the details of this increasingly popular but often misunderstood funding option at the SCORE workshop “Crowdfunding – An Alternative Source of Funding” on December 5. To learn more and register for this workshop, go to www.houston.score.org/localworkshops.

____________________________________________________________________________ SCORE is a nonprofit association whose volunteers help start and improve small businesses. Send questions or volunteer inquiries to scorehouston@gmail.com.

How to Leave Work at Work

Q: I’m burning out and it’s effecting my business. Any suggestions?

A: Running a small business can be the most exciting, challenging, and perhaps even exhilarating experience of one’s life. Amid all the headaches, deadlines, and responsibilities that only you can fulfill, there’s something satisfying about knowing that, at the end of the workday, you did a lot of good work.

That is assuming, of course, your workday ends at all.

Small business owners can and should take their enterprises seriously, leaving no detail to chance or simply assuming something will get done, especially when there’s a deadline involved.

But one can also be over-committed to a small business, to the point of obsession that can damage one’s physical and even mental health, family relationships, and the business itself. It’s one thing to burn the midnight oil when necessary. But done too often, the only thing that gets burned is you.

What an entrepreneur needs is balance—the ability to give 100 percent to the business, and then leave it to give 100 percent to his or her personal life. That’s not always easy to do, especially when you’re starting out or tackling a huge workload. But it can be done. And more importantly, it has to be done.

Here are some tips for leaving work at work—literally and figuratively:

Plan your workday. Make a weekly to-do list of administrative, routine, and project-specific tasks, and prioritize them accordingly on a day-to-day basis. Make sure there’s some flexibility for unexpected calls or emails. When you’ve done everything on your list, consider yourself done for the day.

Plan your away time. Set aside several evenings, weekends or brief “mini-vacations” for family or personal activities, and give them your full attention. Make this time sacred; stow the cellphone, and keep away from email. It’s OK to be responsive to customers, but not at their beck and call.

Share the load. Delegate responsibilities to employees, even when the workload is relatively normal. If you’re a one-person shop, identify qualified colleagues for outsourcing extra work. You may miss out on some revenue, but you won’t be compromising the quality you’ve promised your customers.

Cultivate an outside interest. Do something that’s fun—a hobby, sport, community activity, a favorite book or TV series. You’ll feel and think better and you’ll be refreshed to return to the work side of your life.

Firing worker requires honesty, documentation

October 4, 2015

Q: What do I need to know about how to go about firing an employee?

A: Among the many enjoyable aspects of running a small business, there are some less desirable responsibilities. Most owners probably would agree that having to fire an employee ranks among the most difficult.

Many things may justify termination - poor performance, abusive or disruptive behavior, excessive tardiness and absences, among others. While a warning, coaching or change in responsibilities may solve the problem, an owner can't always afford to take a wait-and-see approach. Employees who don't measure up to expectations can be a drain on the business's growth, reputation and working environment.

In most states including Texas, an employee may be fired at any time for any reason, or no reason at all, but there are limits. For example, federal law prohibits employees from being terminated for reasons of age, race, gender, religion or disability. It's also illegal to fire employees for complaining about illegal activities, health and safety violations, or discrimination and harassment in the workplace. Employees also have the right to take family or medical leave, military leave and time off to vote or serve jury duty.

Should you have legal grounds to fire an employee, be sure to document all the reasons and when they occurred, plus any disciplinary measures taken and the results (or lack of them). Along with justifying your action to the employee, this will help protect you against any subsequent claims that the firing was discriminatory.
 
Now for the tough part - actually firing the employee. You should do this in a private setting, with another person present to witness how the conversation unfolds. If you're concerned that the employee may become violent, it may be helpful to have security personnel close by.
 
Be open and honest with the employee, explaining from the outset the reason for the meeting, including measures taken to correct problems and their outcome. Give the employee some time to collect any personal belongings, but also make sure he or she is promptly escorted off the premises.
 
You are required by law to notify the employee about eligibility for unemployment insurance, and any benefits such as a continuation of health insurance, if applicable. This can be done at the meeting or in a follow-up letter.
 
The employee also may be entitled to receive accrued vacation pay or sick leave in the final paycheck, as well as commissions, bonuses and unfulfilled company expenses.

Consider hiring lawyer to look over lease

September 20, 2015

Q: I have found space to lease for my new washateria, and the landlord has given me her standard lease contract. Should I just sign it?

A: Before you sign anything, make sure you understand and agree with all the terms of the contract.

"There is no such thing as a 'standard lease,' and landlords almost always negotiate," says Benjamin Miller, a Houston real estate attorney with Sponsel Miller Greenberg. "Don't lose sight of the fact that the 'Standard Form Lease' represents the landlord's wish list and, if not appropriately modified, may not serve your interests when issues arise."

A lease is much like any business agreement in that it sets out the parameters of a business relationship. You cannot easily break or change a commercial lease. It is a legally binding contract, and a good deal of money is usually at stake.

Hiccups in relationship

When everything goes as planned, most any lease will serve the parties well. The true test occurs when there are hiccups in the relationship. If the lease has not been drafted carefully, a hiccup can become a major problem without a clear solution.

There are, in general, three types of commercial leases. With a gross lease, the renter pays the landlord a fixed monthly rent. It is then up to the landlord to pay all the expenses of operating the building. In a triple net, or NNN, lease, the tenant not only pays base rent, but also part of the building's operating costs. These costs include property taxes, insurance and common area maintenance. Hybrid leases have features of both gross and triple net leases.

Triple net costs are shared according to the percentage of the tenant's square footage to the building's total square footage. So, Miller advises, "Pay attention to what is included in NNN costs and get the right to audit the landlord's cost records."

Maintain the areas

Common area maintenance is generally the amount of additional rent charged to the tenant to maintain the areas of the property shared by all the tenants and from which all tenants benefit. These include repairs, cleaning, janitorial and trash services, as well as personnel costs associated with the property. Most often, common area maintenance doesn't include capital improvements, tenant build-out expenses, legal fees, costs for services to other tenants, commissions to brokers, or costs arising from a landlord's negligence.

You should seriously consider having your lease contract reviewed by an experienced attorney.

Seller financing can help sale of small business!

September 6, 2015
Q: I'm trying to sell my small business, but I'm finding it difficult to do so at the price I need in order to retire. Other than dropping my price, what can I do?

A: Others in your situation have found that offering some seller financing facilitated the sale of their businesses.

The reason is obvious: Many buyers don't have and can't borrow all of the money necessary to purchase the business outright. And those who do may prefer to leverage the purchase to increase the return on their investment. And of course most lenders do not offer anything close to 100 percent financing on a business sale loan.

Seller financing can be a win for both parties. For you, it makes selling the business easier. By helping to finance the sale, you can get a better price and a faster sale. Other benefits include getting an ongoing interest payment that is typically more than you could get from another investment.

If there are any problems with the business, the seller can negotiate an "as-is" provision, which would be hard to do with more conventional financing. If the buyer defaults on the note, the seller gets the business back and keeps all the payments made up to the default. 

Of course, there are risks involved. The main one is that if the buyer defaults on the loan, you may be forced to repossess a business you no longer want that may have been damaged by the buyer. But a seller can diminish the likelihood of that happening by reviewing the buyer's credit history, statements from financial institutions, employment history and other references before the purchase.

For the buyer, the fact that an owner is willing to finance some or all of the sale is evidence that the business is sound; otherwise the seller would not finance it.

Beyond offering to finance part of the sale, other things you can do to help promote the sale of your business include hiring an experienced business broker who has access to more qualified buyers, thereby saving you time, money and headaches. The broker will help you to value your business accurately.

And while dropping the price is not something you want to hear, you will know the price is finally right when the phone starts to ring. There is a sweet-spot price for your business where it will sell, though that may be less than you want.
 

Focus on others when you network!

August 23, 2015

Q: I've been told I need to network more in order to grow my service business. How does one go about it?

A: The most effective form of marketing is word of mouth. But people can't spread the word about you and your small business if they don't know you.

That's where networking comes in. Whether it's through a professional association for your industry, a chamber of commerce or another local business group, networking offers a valuable forum for prospective customers and colleagues to learn about you and the services or products you provide.

Successful networking is more than simply exchanging introductions and business cards, then waiting for someone to call. In fact, Nelson Farmer, a marketing expert and SCORE mentor, says people waste the few precious moments they have with new and existing contacts by focusing on themselves.

"It's better to spend most of that time asking questions and collecting information," he says. "Then you can make quick assessments as to whether they would have any interest in the solutions your business provides."

Farmer recommends that every entrepreneur have a succinct "elevator speech" - a 30-second description of the problems the business solves. After that, the focus of the networking conversations should be entirely on other people: their primary business concerns, problems they want solved and unmet business needs. As the conversations unfold, you may find areas that overlap with the solutions you provide.

"If not, you can still make an impression by referring them to other people in your network who can help," Farmer says. "They'll see you as a problem solver, and be more likely to provide you with referrals in return."

Networking also doesn't end with the conversation. Farmer recommends maintaining a data file of networking information and updating it as soon as possible after every contact.

"Make note of their interests, what you've shared with them, and when to contact them next," he says, adding that regular follow-ups are essential. "People have short memories and may forget that you exist and more importantly, that you're the best person to help them with their business needs and problems."

Finally, while valuable business contacts can happen anytime and anywhere; don't leave your strategy to chance.

"Identify the people you want to make contact with, whether prospects or potential marketing alliance partners, and make carefully researched efforts to build relationships," Farmer says. "This approach takes more time on your part, but it gets results."

Take time to see the big picture

August 9, 2015

Q: I was recently surprised to learn that a competitor is using new technology enabling her to provide faster service than I can. How can I keep from being caught off guard again?

A: Owners of small businesses sometimes get so bogged down in day-to-day operations that they don't find the time to see the big picture. They need to make the time to continue the kind of planning and research they did before they started up their business - so they see the new technology coming along that might impact their business.

Planning is an ongoing necessity because the environment in which your small business operates continually changes. New opportunities and challenges will arise that are different from those assessed during the startup stage.

How do you find the time to plan? Work more efficiently by prioritizing your activities, eliminating the low-value or unnecessary tasks, and delegating work to others.

Then watch your industry. In today's interconnected global economy, any change anywhere can have a ripple effect on any small business. The influences may be as far-reaching as a shift in demand, or as local as a new stoplight near your store, or as subtle as an emerging technology that could affect your business. Stay current with world and community events, and communicate with customers, suppliers and colleagues. You'll be less susceptible to surprises and better prepared to anticipate and capitalize on these changes.

Watch those numbers. Financial statements provide a window into the health of your business. Monitor and analyze trends. Your initial financial projections may be trending in an unexpected direction. Are current and projected cash flows in line with your industry and local environment? By comparing actual cash flows to projections, you can spot opportunities to improve performance.

Revisit your business plan. Your business plan shouldn't become a "trophy" of your startup success. Refer to it frequently to compare plans and estimates with current realities. Reassess your customer base, competition and marketing strategy, and adjust if necessary. Seek objective input from your key advisers like your CPA, attorney and SCORE mentor. It will improve the plan and speed up the process.

Make continuing your business education a priority. Attend topical workshops, webinars and chamber of commerce learning events to stay up-to-date and learn new skills. Monitor the SCORE workshop schedule at www.scorehouston.org to identify important educational opportunities.

Clear Goals Pave Way for Results

Q: In order to grow our business I need to set some goals. What advice can you provide on the goal-setting process?

A: Goals are important to all businesses. They help focus your employees on achieving results important to the business. Careers and compensation are often linked to the level of goal achievement. But, if goal- setting is not done right, it can undermine the best companies.

The first step is to collect and analyze key data that relates directly to your customers. Learn from your past performance. Do your market research. Clearly state your needs and ensure everyone agrees that these really are needs. For instance, your need might be to fill some key, specific, open positions in your sales group.

Goals should inspire and guide action. If they are not clear and accurate, their purpose becomes blurred and they cease to be something you want to accomplish. Define them so well that employees know where the start and finish lines are located.

The specifics must be measurable. If not, you will not know where you are or whether you have finished. Your goal might be to hire 10 experienced sales employees between now and the end of the year.

Are your goals doable? They can be a stretch but employees need to know the reasons a goal is achievable.

The building blocks of goal-setting need to be logical and understandable.

Business owners should realize that not everyone may share their level of extreme commitment. Sure, top performers are often inspired by stretch goals. But goals that are clearly beyond a reasonable expectation of success are even worse than too-easy goals - they can actually damage your company's energy.

Goals need to be consistent with other current or envisioned goals. If not, retool before setting your goals in concrete. For instance, you might have a goal of increasing sales by 25 percent, and that's why you need the goal of increasing your sales staff.

Make goals your servants and not your master. It's important to strive to reach your company's goals, but if obstacles occur, treat them as learning opportunities and then make adjustments. Expect learning to be a major benefit of working to achieve goals.

Advice for setting your prices

Advice for setting your prices
Published in the July 5, 2015  in  

Q: My prices don't seem to be competitive. What should I do?
 
A: Setting prices for products and services should be simple - cover costs, make a profit and appeal to customers. But there are more variables to the pricing formula than many small-business owners may realize.

"When you're starting out, you may not have a good handle on all the costs you'll incur," observes Janet Attard, founder and owner of BusinessKnowhow.com. "Unless you have previous experience estimating jobs in the same industry, you may have difficulty making accurate estimates of the time and/or materials needed to complete jobs. You also may not account for non-billable hours - the time you spend marketing and Other costs of doing business may also be overlooked, until you have to pay them. These include payroll and self-employment taxes, fees for accepting credit cards, health insurance and other benefits, and a variety of overhead expenses.

Yet even after all those costs are accounted for, a seemingly fair price may not gain traction with customers.

"Prices are market-driven, not cost-driven," former executive and veteran SCORE Houston mentor Raj Mashruwala explains. "It doesn't matter what your costs are because the market doesn't care. What matters is if you can make a profit at a price the market will bear."

Mashruwala also recommends researching online industry benchmarks for gross profit margins. He also cautions new entrepreneurs to avoid the frequent mistake of underpricing their products and services in order to lure customers.

"Rather than getting a toehold in your business, you're actually giving competitors an advantage, because there's no way you can survive for the long term and meet your clients' expectations by pricing under the market," he says.

Attard also says, "Discounting can lower the perceived value of the product or service, or make the customer think you lack the experience or resources to do the job. If you underestimate costs, or overestimate sales volume, the outcome will be reduced profits or a loss."

Once you do establish a reasonable pricing structure, make it a point to review it several times a year. Customers and competitors are watching pricing trends, so don't risk being left behind.

A good place to go for more information on product and service pricing is www.score.org, click on the Marketing tab and then Price Strategy, where you will find online webinars presented by SCORE volunteers with expertise in this area..

Engage employees to keep them creative

Q: How can I get my employees to be more creative in improving our business?

A: To ensure success, a small business needs to have its employees fully engaged and committed to the owner's vision from the beginning. The whole really is greater than the sum of its parts, and one employee's creativity is sure to stimulate new ideas among others. It's a self-sustaining cycle that only gets better and adds value with time.

Creative environments are particularly important to millennials, the 80 million people born between 1980 and 1995 who soon will dominate the workforce. Millennials already have an edge over their elders in terms of their savviness with technology, cultural trends and connecting with their peers (who are your current and future customers). There are ways you can foster a creative environment to get the most from your employees, regardless of age.

Be flexible. Not all people do their best work between 9 a.m. and 5 p.m. Whenever possible, allow employees some leeway in their work hours. This also includes allowing them to work from home or elsewhere during the week. They also must be willing to show flexibility, however, such as being available for meetings when necessary.

Communicate early and often. Employees are more willing to give 100 percent when they know and believe in the reason for doing it. Regularly share what's going on in the business and the market. You can't always tell employees everything, but honesty from the boss goes a long way toward building trust. Encourage employees to contribute ideas and insights. If an idea sounds promising, let the employee who offered it take the lead if possible - or at least explain why not gently, and ask the worker to keep those ideas coming.

Be a coach, not a supervisor. This is particularly important for younger workers, who are experiencing many aspects of the working world for the first time. Give them the training they need to feel comfortable about doing their jobs and confident in taking the initiative. Sure, they'll make mistakes. By fostering a regular dialogue with your employees, you'll know better what happened and why, and what they can do to improve.

Keep resources up to date. Without investing in every technology, stay as current as possible so that employees will have the best tools available to do their jobs. Your millennial employees may be ideally suited to investigate new technologies and help determine whether it's better to upgrade or wait for something better.

Business plan can boost odds of success

Q: Why prepare a business plan? I'm very experienced in my field and don't need financing. My uncle says I have a good idea and should just get started before somebody else beats me to it.

A: The need for business planning is all about managing risk. The greater the risk, the greater the need to investigate, research and think through all relevant aspects of starting or operating a business.

Some business ventures or situations carry little risk. Maybe your business gives you a nice, stable income, you don't particularly want or need to grow, or you and your employees could survive if your business suddenly shut down. In those cases, you may not need a formal business plan, and need only keep your eye on your market and on others who could affect your business.

But the more you are risking, in terms of dollar investment, time spent deferring something else you need or want to do, or maybe forgoing income for your family, the more you need to formalize your plan.

Veteran SCORE counselor and small-business owner Matt Fitzgerald says: "The value lies in the process of researching and thinking about your business in a systematic and critical way … not in producing a finished document."

Avoiding mistakes

You'll need a document, though, to share your ideas and plan with others. The plan is not only important for starting up, but for running the business as well. It takes time now, but can avoid costly, perhaps disastrous, mistakes later.

For startups, it gives you an indication of how successful you might be. For existing businesses, it tells you the condition of your operation. Can you take advantage of opportunities that may arise or deal effectively with challenges that may occur?

You can start or run a successful business without a business plan, and you can fail with a good one. An appropriate plan just increases your chances of success.

SCORE counselor

Fitzgerald suggests a thorough review of a business plan from someone like a SCORE counselor. "Getting a third party to serve as a sounding board will provide valuable, unbiased feedback on how to improve things, look at the plan from a lender's or investor's perspective, and raise questions you may have overlooked," he says.

Fitzgerald will teach a SCORE workshop on business planning on June 16. Learn more and register at www.scorehouston.org.

SCORE seeks volunteers to help small business

Published in the May 22, 2015

Q: How can I volunteer some of my time to help small business owners start and grow their businesses?

A: SCORE is a nonprofit association where you can volunteer to share your business experience, give back to your community, gain satisfaction from seeing others succeed, and connect with like-minded people. Each year, SCORE volunteers touch thousands of lives, sharing their knowledge and experience so that entrepreneurs can realize their dreams of business success. 

Nationwide more than 11,000 men and women in 320 SCORE chapters donate their time and talent to assist America's small businesses. At SCORE Houston, volunteers provide free, confidential one-to-one and team business mentoring and low-cost training workshops and seminars. We now counsel aspiring entrepreneurs at 12 locations and we teach about 130 workshops each year in 16 locations around the Houston area.

Whether you have owned your own small business, come from a large company, are retired, are a college student, or just have a sincere commitment to helping small businesses or volunteering, there is a place for you as a SCORE Houston volunteer.

Whatever their background, SCORE counselors share a belief that small business owners are more likely to succeed if they have business mentors to guide them. We are seeking new volunteers of diverse backgrounds and experiences to complement and grow our team of 105 volunteers in the Houston area. 

SCORE volunteers can contribute their time in different ways. 

Many are business mentors who meet with our clients to help them with business plans, apply for financing, and grow their businesses. But, being a large service organization, we require administrative, technical, and management functions so we can provide our client services. 

Much of our work can be done in the evenings or weekends from anywhere. 

So, there are lots of ways a volunteer can help SCORE help other people.

New members go through an orientation program to get familiar with SCORE and comfortable with the counseling process. All members stay up-to-date by attending regular monthly training sessions.

In Houston, we share offices and work closely with the U.S. Small Business Administration. We have twelve satellite locations throughout the city and are looking to establish more. Visit our website, www.Houston.SCORE.org. 

If you have questions or would like to volunteer to help people achieve business success, please e-mail us at scorehouston@gmail.com, or, call our office at 713-487-6565.