Business Jump School

I feel compelled to say that right at the outset. So you have to be ready. I’m not going to coddle you and tell you that everything will go smoothly if you only do a few affirmations and write down your goals. You’ll need to do more than just visualize the intended outcomes. Meditation and visualization have their place, but starting a business takes work. Hard work. And it doesn’t get any easier just because you’ve started other businesses. This will be one of the most difficult things you’ve ever done in your life: more difficult than academics, more difficult than buying or building a house, even more difficult than having children, if you’re a woman. There will be times when you will wonder why you chose to start a business. There will be times when you will go to your room and cry like a baby because nothing seems to be going right in your business: your marketing efforts won’t work; you won’t have enough money; your suppliers will seem to be incompetent and your family will start asking about all those big profits you promised.

If you’ve already started a business, don’t you wish someone would have told you?

It’s a commonly accepted fact that approximately 50% of newly formed small businesses fail within the first five years of start up. Another bit of research often discussed is the number one reason most new companies fail: lack of sufficient funding. These often-quoted statistics have caused many would-be entrepreneurs to shy away from starting a business. “I don’t have an angel investor”, you might say. “And I certainly don’t want to be just another statistic.” But why do these businesses REALLY fail?

Most of them failed because they didn’t know what they were doing. They failed because it’s easy to start a business by filing paper work in a county clerk’s office somewhere and “putting the shingle out”. Largely, they failed because they didn’t get the proper guidance. Let me say this, you don’t need to write a business plan right now. You don’t need to seek funding sources. You don’t need to file paper work with the local jurisdiction to create a business entity. You will need to do all of those things eventually, but first you need some training. And you need it BEFORE you start your business, not afterward. That’s where Business Jump School comes in.

This school will train you how to recognize business opportunities. Your business needs to be based on sound principles and observation of what’s happening in the market place as well as being something you love to do. This school will train you how to deal with rejection; how to handle uncertainty, fear and doubt and how to deal with disappointment. In other words, you’ll learn how to become mentally tough. Why? Because you’re going to need it. This school will train you to how to analyze financial statements. I know you may think that figures are boring and that’s what accountants are for, but at any given time you need to know for yourself whether your business is profitable. This school will train you how to approach potential investors. You’ll learn what to say, how to say it and when to say it. You’ll learn things in this school and develop skills that will serve you throughout the life of your business.

And yes, you WILL sweat – literally. This process may not be comfortable, but it is necessary. These drills will make you stronger and help you to develop “entrepreneurial muscles”. The skills and habits that you develop will help you to start your business confidently AND competently. And you need to continue them throughout the life of your business. The principles set forth in this book and in this school are based on observation, participation and repetition. In this way, the concepts will be embedded in your psyche and will become second nature. You won’t be surprised when you encounter difficulty or competition.

You need to start a business BEFORE you actually start your business so that you know what you’re doing and are comfortable doing it. Architects and many other professionals need to “practice” before they are licensed. Doctors and nurses need to practice before they get start working with patients. Hell, even teenagers have to practice driving for a certain amount of time before they get their driver’s permit. Entrepreneurs/ business owners should be required to do the same before jumping behind the conference table of a new business and taking it out into the fast-moving economy!

The Business Jump School will give you drills and exercises that allow you to practice taking the leap into entrepreneurship, so you’ll hit the ground and dominate your market.

How to Get Cheap Professional Help

Numerous statistics have shown that having a business plan can be very helpful for those planning to start or grow their business. Putting together a business plan can be illuminating to those who have very limited understanding of business management skills and how the process works in practice. Whilst there are numerous text books and templates available on how to put together a business plan, I have found that this is not always helpful for the novice who still need a hand holding. Getting support from an expert can be helpful but the financial investment can be a stumbling block. One way to overcome the investment challenge is to source experts with flexible approach in supporting clients with their business planning. For instance, how about utilising a seminar or a workshop where you can get all the support you need on the day from a qualified expert working in a group. Many small businesses have used this approach to circumvent the barrier of consultancy fees. Another option is to undertake a distance learning course with some online support from an expert incorporated within the process, which will ensure you complete your business plan as a core outcome of the course.

I guess some of you may never have thought about this. Remember there is always a solution to every perceived problem. In my company, we offer flexible support to all who are in need of putting together their business plan. We do group coaching, seminars, consultancy and distance learning course. You can even download free business plan template from our website or purchase one of the best books you can ever find in business planning titled ‘My Business Is My Business’ Learn How To Earn A Fortune – endorsed by the Co-Writer of Chicken Soup For The Soul and International Bestselling author Mark Victor Hansen.

Typically, business plans are needed for:

1. Business startup – when you are planning to start a business

2. Business development and growth- when you are planning to penetrate new and existing market with new products or existing products

3. Raising business finance- when you are planning to raise finance for a new or existing business

Here is a summary of how to prepare a financial plan linked directly to a business plan:

To calculate sales income /turnover forecast:

A. Make an assumption on the total number of goods and services the business expects to sell each month over the next 12 months. Remember to be realistic as new businesses very rarely start off with a high sales volume. In the case of a new business, you will need to set sales volume very low at the initial stage of the business to reflect the time spent advertising and promoting the services or products in an effort to generate leads and sales.

B. Make an assumption on the selling prices of goods and services. Again, ensure that the selling prices reflect what the market will be willing and able to pay. This is most likely going to be a reflection of market competition (the number of suppliers against the demand for the goods and services) as well as the purchasing power of the market (i.e. how much money consumers have to spend on goods and services).

C. Multiply the selling prices of goods and services, by the expected sales volume estimated to determine the monetary value of each month’s sales. Remember that where a business provides multiple types of goods and services, the value of sales must be determined for each of them.

D. In the case of voluntary sector organisations that rely on grants, donations and fundraising income, you will need to make an assumption on the type of grants expected and the value of grants in monetary terms based on your market knowledge. In the same vein, you will need to make an assumption on the number of fundraising events the business expects to undertake and the amount expected to be generated from each event. The assumption for donations can either be informed from historical trends or best estimates based on the strategy that will be used to generate them. Whatever approach is used, it is important that the assumptions are realistic to minimise the risk of overstating income. Remember that factors such as: government policy (taxation rate, regulation, public sector spending priority), the health of the economy (unemployment, interest rates, inflation rate etc), and the business’ relationship with its sponsors /wider community will ultimately influence many aspects of the income generated- so keep a watch on these factors.

To calculate expenditure forecast:

E. Make an assumption on the type of resources required to produce the sales income specified in “C” above. Resources in this case may include: staff (type), building (size, location etc), office furniture and equipment (computers, fax, telephone, heating, insurance etc) etc. It is for you to determine clearly what types of resources are required.

F. Make an assumption on the level of resources required as stated in “E” above to deliver the plan based on the assumptions on sales volume. For instance, you need to state what type of staff you need and how many, what type of computers or machines you need and how many etc.

G. Make an assumption for the prices of the resources (stated in “F” above) required to deliver the sales volume. Remember that the prices of the resources must be realistic and evidence based. An unrealistic price level will undermine the quality of the financial plan in that it will not be feasible (i.e. not achievable). Also remember that the prices of some resources tend to increase in line with the general inflation, whereas others increase at a rate below or above the general inflation index. You are therefore advised to desist from making generalised inflation assumptions (i.e. price assumptions).

H. Quantify the resources required to produce the goods and services by multiplying the prices of the resources by the volume of the resources as set out in “F” and “G” above. At this stage you have determined the value of the different types of expenditure you expect to incur to deliver the business plan. However, it is worth noting that the expenditure will differ in nature and so it is important that steps are taken to carefully categorise expenditure into “Revenue and Capital Expenditure” to ensure correct accounting treatment when producing the “Income and Expenditure Forecast (Profit and Loss Statement), “Balance Sheet Forecast” and “Cash Flow Forecast”. This will become clearer when we look at a worked example. For now, let us briefly define “Revenue and Capital Expenditure”. Capital Expenditures are expenditures that result in the acquisition of tangible items such as buildings, computers or furniture. At the initial purchase of capital items, almost the entire purchased price is shown in the balance sheet with only a proportion of the expense shown in the profit and loss statement to reflect the reduction in value of the items or the value of the capital item consumed during the financial year. Revenue Expenditures are expenditures that do not result in the acquisition of tangible items. They are usually consumed in the financial year they are purchased and will be shown in full as expenditure in the profit and loss statement or income and expenditure statement. If you need to know more about this, please read our booklet titled “Introduction to Financial Statement”. This booklet is packed with lots of practical examples and explanations specially written for non- finance experts.

Four Sources to Properly Fund Your Business

Proper business funding/capitalization are an issue to all small businesses at all stages of the business cycle. Those businesses that are organized as corporations and LLC’s are required by the state granting the business charter to be adequately capitalized. The challenge here is there is really no clear definition of adequate capitalization.

The purpose of requiring adequate capitalization is to ensure that the business entity has the ability to carry out its business operations without subjecting those working with that business, including employees, to financial loss. Proper protection against financial loss also requires a business to address potential liability issues.

Funding requirements will differ significantly from one business to another as well as what stage in the business cycle the business occupies. One of the most difficult stages to fund is typically found with start-up small business ventures. New business ventures may have great ideas and potential for success but have no history of success nor have they produced financial results. These realities make securing funding difficult. Funding challenges, however real, do not relieve the business owner from the responsibility of providing adequate capitalization for their business enterprise.

There are many sources of funding available in the market place for small businesses and LLC’s, each with unique advantages and disadvantages. The best source for funding will depend on the particular circumstances of the business seeking the funding and may include using a combination of several different sources. Start-up funding in particular is a very specialized world and seeking experienced and competent help is strongly advised.

Here are the four most common sources of funding for businesses:

1. Cash investment from the founders of the business – Typically the easiest to obtain and the least expensive of all forms of capitalization.

2. Income from business operations – This is perhaps the best source and usually the least expensive, after the founder’s investment, source of funding and capitalizing a business. This is typically more readily available to businesses that have been operational for some time whereas a start up business may find this source difficult or even impossible.

3 Bank Loans – If available to the business bank loans are relative inexpensive in today’s environment but may be difficult to obtain. This is especially true for start up businesses and those who are not financially strong with good positive cash flow.

4. Venture Capitalist and Angel Investors – These sources of funding can be good and are available to those businesses that able to demonstrate a strong business and product that also has excellent potential for high returns. The trade off with these sources is that often they require a large percentage of ownership in the company to induce them to invest. This is not necessarily bad, just be aware of that fact when you start. Also, in many cases they may require a business they fund to go public within a specified time period. Again, not necessarily a bad requirement.

As with all funding sources, it is a financial necessity to carefully examine the conditions and structure of the funding.

Lack of adequate capitalization/funding has caused many promising business to fail before they have a chance to get started. In addition improperly structured funding has been the cause of both new and mature business operations to struggle financially and in many cases fail.

One of the often overlooked factors in adequate capitalization of a business operation is proper and adequate insurance coverage. If inadequate insurance exists in a business, a damaged claimant could potentially pierce the corporate veil due to under-funding. Most business owners will have property and casualty insurance for buildings, vehicles, equipment but do you have general liability insurance sufficient to cover claims not otherwise covered by property and causality policies. In addition, Directors and Officers insurance, as well as Errors and Omissions insurance, are an important part of those businesses that require these policies and qualify for them. The important key here is to seek advice from a highly qualified insurance/ risk management specialists for your small business or LLC.