7 biggest mistakes of business startups

Still, if you keep an open mind and heed voices of experience, you can dodge many of the more common missteps. Here are the seven most frequent mistakes that newbies make with business startups, and some advice about how to jump the potholes.

Mistake 1: Driving a fire engine without a route. You always hear how entrepreneurs need "passion" to succeed, the so-called fire in the belly. Well, enthusiasm can be overrated. To fan startup flames, you need more than high energy. You need a plan.

Take the time to thoroughly investigate your market and target customers, the competition and other basics, with a sound business model. Focus on answering one deceptively simple question: How will you make money?

As a case study in errors, Tim Berry, president of Palo Alto Software, points to the ubiquitous DVD and video rental store on the corner, the one we've all seen open and shutter in record time. Typically, some starry-eyed owner rents the space upfront. Now he's got fixed monthly overhead well before opening. He then spends his capital on snazzy design, forgetting about the cost of cash registers, business software and store signage.

When it's time to stock the shop, the owner is tapped out. The shop opens with trendy decor and lousy inventory. There's not one penny for marketing.

Before the year is out, the store "is picked up by a chain that knows what it's doing," says Berry.

Lesson: Don't quit your day job without a plan.

Mistake 2: Selling way too cheap. Ask a child to choose between 12 rhinestones and one diamond and she'll go for the rhinestones every time. Startup owners are just like that. They fall for the fallacy of quantity over quality. They figure rock bottom prices will fuel skyrocketing sales and they'll become millionaires. But it doesn't work that way.

"New entrepreneurs are notorious for pricing their goods and services too low," says Linda Hollander, author of "Bags to Riches," a small-business handbook for women. "This dooms them to a life of always worrying about money. Heck, even when they get orders, they aren't happy because they aren't making enough profit on their sales."

Before pricing products, do the math. Calculate fixed and variable costs. Research market and competitive price points. Develop your distinct marketing edge (some call it "USP," for unique selling proposition). Figure the margin you need to walk away with dollars in your pocket.

Lesson: Don't sell diamonds for the price of a rhinestone.

Mistake 3: Starting a business just for the thrill of it. Entrepreneurs tend to be big-picture types — visionaries, risk-takers, thrill seekers. The longer they must sweat the details, the jumpier they get. So they often engineer a crisis, just to get back in the game and feel the rush of adventure.

"Entrepreneurial boredom is the stealthy killer of seemingly healthy small businesses," says Ralph Warner, author of "How to Run a Thriving Business." The purpose of a business is to make money. If you come alive only by jumping off a cliff, take up bungee jumping.

Lesson: Don't start a business to find life on the edge.

Mistake 4: Clueless about marketing. Startups rarely plan or budget for marketing because new owners think marketing is an unnecessary expense. Or, compounding the error, they confuse marketing with sales.

"Marketing worries about sales tomorrow. Sales closes sales today," explains Rob Gelphman, who runs a marketing communications company in San Jose, Calif. "You cannot go from engineering to sales and skip the marketing step."

Underlying this mistake is a lack of experience about the drawn-out process of a typical sales cycle. Entrepreneurs usually hire salespeople first. But the initial hire, whether contracted or project help, should be a marketing expert to get out the word. Then it's time to send out the sales force.

Lesson: Don't try to close deals before getting out your message.

Mistake 5: Being a pal instead of a boss. At the opening of a new business, everyone works three or four jobs, seven days a week. There seems little reason to pull rank or worry greatly over management procedures.

"When people first start a business, processes are created by accident or in an ad hoc manner," says Jay Arthur, author of "Six Sigma Simplified Training." "Problems are fixed by using common sense and trial-and-error as the business grows. But at some point, the ability of these two methods to solve more mysterious and complex problems begins to fall off. Eventually, they stop working altogether."

You're the one in charge. It's up to you to set expectations and develop procedures or appoint someone to do it.

Without defined policies for job performance, hiring and firing, vacations, sick leave, benefits, compensation, promotions and the rest, your fledging company is vulnerable to legal problems and low morale. Ultimately, business will suffer. A company handbook can be as simple as a one-page memo.

Lesson: Don't abdicate authority.

Mistake 6: Blowing through your capital. "New business owners grossly underestimate their financial needs," says Isidore Kharasch, president of Hospitality Works, a food-service consulting firm based in Deerfield, Ill. Typically, inexperienced owners overspend at the outset, buying more furniture, technology and office supplies or hiring way too many executives or experts than they really need to get up and going.

New owners also don't realize that few customers pay promptly. So even when sales are immediate, cash is often tight. When managing cash flow, it helps to have an analytic accounting program.

After developing personal and business budgets that can sustain the company for the time you think it'll take to get to break even, add at least 50%, suggests John Reddish, a management consultant who specializes in growth. "That's managing your risk."

Lesson: Don't be rash with cash.

Mistake 7: Overlooking your loved ones. Startups demand 80- to 100-hour workweeks and serious support systems. They also "require significant time commitments and financial sacrifices, both of which can strain a relationship," says Victor Sim, a lawyer at Squire, Sanders & Dempsey in Los Angeles.

That commitment isn't yours alone. You need ongoing buy-in from family and friends. Make sure your time and money also is spent on family or a significant other.

Lesson: Don't let a launch cause lifelong regrets.

In the end, many missteps occur because new owners insist on doing everything themselves. Instead, review what you do best and try to delegate or outsource the expertise you lack. And when the inevitable errors do arise, remember the old adage: Learn from your mistakes.

Article Resource: http://www.microsoft.com/smallbusiness/

Best and worst states to run a small business

But in one important respect, the two are peas from the same pod or, if you prefer, cards cut from the same deck. South Dakota and Nevada love small businesses.

So it is that for the past several years these states have been swapping the top two spots in the Small Business Survival Committee's (SBSC) ranking of the best places in America to do business. South Dakota takes top honors for 2003, the eighth year the Washington, D.C.-based advocacy group has done its survey.

Called the Small Business Survival Index, and available as a PDF file on the SBSC's Web site (www.sbsc.org), the latest ranking identifies 21 different ways in which government imposes costs on business and then measures the performance of the 50 states and the District of Columbia in each area.

Nine areas of analysis

The factors being analyzed include:

1.	Health-care costs. Ask small-business operators to name their most pressing concern, and providing health-care coverage to employees consistently is at the head of the list. Health-care costs vary significantly from state to state, and the SBSC index accounts for those differences.
2.	Taxes. Fully 13 of the 21 criteria involve taxes of one sort or another. In addition to taxes on personal income, capital gains, sales, property and estates, the index also weighs taxes on Internet access and gasoline, unemployment and health-insurance tax rates and whether states require super-majority votes in order to impose or increase taxes. Individual and corporate alternative minimum taxes also are considered.
3.	Electricity costs. Every business uses electricity, and how it is regulated or taxed by a state can have a significant impact on a business' bottom line.
4.	Workers' compensation costs. The higher a state's workers' comp rates, the less friendly it is to labor-intensive business. Premiums have reached crisis levels in California, and lowering them is a top priority of Gov. Arnold Schwarzenegger.
5.	Total crime rate. Businesses have a powerful disincentive to establish themselves or expand in states that cannot adequately protect life and property.
6.	Right to work. Right-to-work laws generally mean freedom from interference by labor unions.
7.	Number of bureaucrats. Most people agree that more bureaucrats mean more burdensome regulations.
8.	State minimum wage. The minimum wage set by some states actually is higher than the federal minimum.
9.	Legal and liability costs. The costs of litigation, whether frivolous or not, has become an increasing burden on U.S businesses of all sizes.

The best and the worst

Each state is assigned a numerical score in each category, and then an aggregate score.

The lower a state's total score, the friendlier it is to small business.

The 10 friendliest in 2003
1.	South Dakota
2.	Nevada
3.	Wyoming
4.	New Hampshire
5.	Florida
6.	Texas
7.	Tennessee
8.	Washington
9.	Michigan
10.	Mississippi

And, at the opposite end of the scale, the 10 least friendly:

The 10 least friendly in 2003
51.	District of Columbia
50.	Hawaii
49.	Minnesota
48.	Maine
47.	Rhode Island
46.	California
45.	New York
44.	Vermont
43.	New Mexico
42.	Oregon

Gains and losses by individual states

While there generally are not dramatic shifts in the rankings from year to year, the adoption of policies that are more or less friendly to business definitely have an impact.

In 2003, for example, New York, Connecticut and Oregon all lost ground in terms of their desirability to small business — six spots in the rankings in Oregon's case — because they raised a variety of taxes. On the other hand, though Nevada raised imposed a payroll tax, it performed so strongly in the other categories that its overall ranking essentially was unaffected.

Happily, improvement by states is not unheard of.

The single most pro-growth policy change for 2003 occurred in New Mexico, where newly elected Gov. Bill Richardson pushed for and won a multi-year cut in the state's top personal income and top capital gains tax rates.

By 2007, New Mexico's top personal income tax rate will have fallen from 8.2% to 4.9%, and the comparable capital gains rate from 8.2% to 2.45%. Unless the other states make comparable reductions, New Mexico will go from one of the worst states to one of the best in both categories.

The initial tax cuts New Mexico made were sufficient to improve its overall ranking from 47 in 2002 to 43 in 2003.

Other factors to consider

So if you're stuck in a state with a bad regulatory environment, should you pull up stakes and relocate to a friendlier locale? If that's your sole criterion, probably not.

But if you're about to start a business and haven't yet decided where you want to base it, the SBSC rankings are definitely something you should consider. Ditto if you're already in business but considering expansion outside your home state.

Of course, there are a host of other factors to consider. Schools, cultural amenities, recreational opportunities and climate are more or less important depending on the individual.

No factor is more important than the cost of housing. If you can't afford to live in a state, it doesn't matter how pro-business its business climate is.

Anyone considering a relocation can get a quick read of housing markets across the country by using the National Association of Home Builders' Home Opportunity Index (www.nahb.org), which ranks metro areas according to the percentage of homes that are affordable for families at the median income.

At 50%, housing costs and income are in balance. If more than 50% are affordable for median income people, then housing in the market can be had at a relative discount. Below 50% and a premium must be paid.

The best moves reflect business, family and personal concerns.

Article Resource: http://www.microsoft.com/smallbusiness/

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Businesswomen: Get a winning streak

A Harvard business professor, best-selling author and internationally-acclaimed strategic consultant (among the "50 most influential business thinkers in the world," according to the "Times of London"), Kanter explores company decisions, policies and performance that lead to success or failure in her most recent book, "Confidence: How Winning Streaks and Losing Streaks Begin and End."

Here, in an exclusive interview, Kanter analyzes the factors that build and restore business confidence, and how you can create a company environment that fosters success.



Q: What exactly do you mean by having confidence?
A: Confidence is not a mood or a feeling of pessimism or optimism. It is the expectation of positive outcomes. It's the belief that your ideas, work and efforts will become successful. Even when things are tough and there are bumps in the road, you have the confidence to hang in there and keep trying. You expect a favorable outcome.

Q: What is a winning streak in business?
A: It's easy to define that in sports, of course, because of tangible score results. In business, a winning streak is a set of continued successes, a series of unbroken wins. Even when there are minor setbacks, you bounce back and are continuing to achieve your goals. By contrast, a losing streak is going into a decline. Some losing streaks can accelerate so fast they become a death spiral.

Q: Are there differences in the confidence that men and women business owners have?
A: Women have just as much drive in business as men do, and women now believe in themselves more, which in itself is a confidence builder. There are growing numbers of organizations that mentor women in business, which is also helping.

If there is a difference, I think it's been the expectation of success. Men expect to succeed more readily than women do, which of course, has been the reality. That's now changing. In the past, men had natural access to cheerleaders, contacts and colleagues they could call on to help them. We are now seeing an acceleration of those networks and personal confidence for women. To build confidence, women need to surround themselves with other women who are interested in their success and with people who offer encouragement.

Q: What else can women do to build their confidence?
A: Often, women wait until they have the perfect plan and their punishment for failure is a lot more severe than it should be. They become discouraged by the first fumble and are then defined by that — that they keep losing. Women need to be tougher about difficult setbacks. They need to connect themselves to successful people and ignore discouraging voices around them. They need to learn to put in the effort, keep going and have the will and drive to succeed. Showing up is the first rule of success.

Q: How can women demonstrate their confidence to the outside world of financial backers and customers?
A: There are three things women entrepreneurs can do to overcome the residue of discrimination and prejudice they face. First, they need some early successes, so they can show bankers and venture capitalists that their business proposition will pay off. Next, they need to have big ambitions and not settle for a small niche. They should think in the largest possible terms, not just locally. Then they need to overcome the historical bias that women will drop out. They need to show they're in it for the long haul.

Q: How does a leader build confidence within her organization?
A: You need accountability. That means you have full command of the facts, and you face them squarely. You must take responsibility for promises you make and you must make only those promises you know you can keep. You need to include other people in the dialog so your staff and advisors are standing on firm ground, also facing facts and reinforcing responsibility without humiliation.

One of the difficulties women have is in micromanaging. They don't allow their people to be accountable. Certainly, you need to work to improve the details, just as athletes are always working on specific parts of their performance and practicing all the time. But you still must have honest feedback so you can look in the mirror and assess situations accurately.

Q: What else builds a climate for success?
A: The second part is collaboration. Everyone in the company must be pulling toward the same goal. You need a definition of success that everyone agrees with. And you need respect for each other. That means people's strengths are shared and known, not just their defects. Many enterprises are highly critical of people, but that's not the same thing as giving accurate feedback. You want to learn each other strengths, count on the each other and create teamwork. Small businesses especially need to pick people who have chemistry with each other, so you don't have to do it all yourself.

Q: How do you turn around a losing situation into a win?
A: Besides accountability and collaboration, you need initiative and innovation. For instance, Nelson Mandela created a culture of confidence in South Africa by not taking revenge when he came to power. South Africa went in a new direction because of his innovation.

You need to extend permission to speak up and create an environment where opinions are valued. There's always something you can do to feel like you're making progress, no matter how small. When everything's stacked against you and feeling negative, you need to take small steps. That allows you to go from feeling passive to feeling active.

Q: What's your best advice to business owners who are struggling with the insecurities of business, day to day?
A: Everything can look like failure in the middle. Assuming your original idea still makes sense out there in the world, and the environment, thought changes, still has a market for what you're doing, you need to keep up your efforts. Believing in it will make it possible

Creating a mood in which success is possible does make a difference.



Article Resource: http://www.microsoft.com/smallbusiness/

Want to start a business? 7 ways to follow the money

The answer to both questions is as simple as that catchphrase from the Watergate days: Follow the money.



Golden years, golden years, whop whop whop
By paying attention to broad demographic shifts, it's not all that difficult to pinpoint who has the cash and how they're likely to spend it. Then you can decide whether you possess the knowledge and talents to capture a slice of that market.

The most attractive market segment to target, in terms of both numbers of people and dollars, is baby boomers.

During the 2002-2012 period, the U.S. Bureau of Labor Statistics reports, the number of Americans aged 55 to 64 will increase by a whopping 43.4%. By contrast, those in the 35-to-44 age group actually will decrease in number, while the number of youngsters between 16 and 24 will increase by 7% during the same period.

The aging of the U.S. population, combined with an overall slowing in population growth, will lead to a relative shortage of labor and heightened competition among businesses for employees. This, too, creates entrepreneurial opportunities.


So, without further ado, here are seven market niches that, while not foolproof, should offer an entrepreneur a better-than-average chance of success.

Where the baby boomer money will go
The needs of an affluent and aging baby boom population are so predictable as to be nearly self-evident: Boomers need help investing their money and time, and as they grow older, will need help in meeting their physical needs.

Businesses that cater to the boomer market might include, but are not limited to:

• Real estate sales and services. Properties in temperate climates, particularly those within easy striking distance of the coast, are appreciating rapidly, in some case at a pace that almost amounts to hyper-inflation. Selling retirement real estate, or providing services to firms that do, is a growth industry.

• Financial services. Collectively boomers constitute the most affluent generation in the history of the world. Managing their assets will provide plenty of work for accountants, investment advisers, insurance agents, lawyers specializing in trusts and estates, and everyone in between. The government will do its part by keeping the tax code so indecipherable that that professional advice is always needed.

• Anti-aging and personal enrichment products. Boomers are suckers for the illusion of perpetual youth and already they're spending millions, if not billions, on products and programs that promise to slow the biological clock. Purveyors of such rejuvenators as nutritional counseling, the latest exercise fads and beauty treatments --- think Botox injections --- will suffer no shortage of clients.

• Retirement recreation. They can't really thwart the aging process, but by making the effort boomers will be able to remain active at an age when most members of previous generations were either pushing up daisies or confined to old folks homes. Few will be as extreme in their pursuits as former President Bush, who went skydiving at 80, but plently will be casting fly lines, swinging golf clubs and bicycling well into their golden years. Someone has to sell them those golf clubs, fly rods and bikes, and then teach them how to use them.

• Home health care. Inevitably, even baby boomers will slow down, and that too will create opportunities. Some boomers will be able to live independently but will require such support services as grocery shopping, chauffeuring, and physical therapy. Others, because of temporary or permanent disability, will require in-home nursing care, either part time or around the clock. Agencies that provide competent and honest help will be in demand. In fact, a significant market already exists caring for the parents of boomers, who themselves are living longer lives and possess plenty of disposable income.

Opportunities in helping ease the labor crunch
As America gets grayer, employers across the economy will have to scramble to find competent help. This will be especially true in industries requiring well-educated technologically oriented workers.

There are a couple of ways employers can get around the labor shortage without hiring new workers: Throw work to outsourcing firms and consultants, and/or use technology to increase work force productivity so that it takes fewer employees to do the job.

With this in mind, anyone bent on starting a business might consider:

• Outsourcing for businesses. You can either do the work yourself, if you have the required expertise in such areas as accounting, law or human resources, or you can supply temporary workers who can get the job done. Like an individual consultant, a temp agency with a particular "hook" --- in other words, the ability to provide competent workers a demonstrated, sought-after skill --- figures to do well in the current and future business environment.

• Information technology consulting. Think about it: A company can't find the skilled workers it needs to operate to capacity, and then you step in and tell them how to make up the shortfall using the latest technology. Enough said. No wonder the Bureau of Labor Statistics projects that, from 2000 to 2010, the 10-fastest growing jobs will involve computer technology. Clearly, the world is becoming more wired, and consultants who can help users adopt new hardware and software products and resolve problems will not have a difficult time finding work.



Article Resource: http://www.microsoft.com/smallbusiness/

Top 3 businesses to start now

No matter how much you learn about starting a business, there's really only one factor that will make or break the enterprise: Your passion to do it. You need to love what you do.

Next, be realistic. "Whatever your pro forma business plan says, everything will take longer and cost more than you thought," says entrepreneur Adrian Grundy, in the pure voice of experience (you'll hear more about that below).

You must be clear-eyed about how you will get money, how you will spend money and how you will sustain the business plan.



Typically, investors look for three basics:

1. What is your product? Is it viable? Does it exist? Can you sell it?

2. What's your management team? Do you have serious and relevant authority?

3. Is the plan convincing? Can the financial results be achieved?

With that in mind, here's a trio of opportunities sparked by current trends and markets. Take inspiration from the fast-growing businesses profiled here or cherry-pick among these economic trends to form your own plan.

1. Touch customers where they live

In recent years, as telemarketing and cheap e-mail marketing skyrocketed, direct mail suffered something of a dinosaur reputation. But lately, e-mail spam blocks, the Can-Spam Act and Do Not Call registries, as well as consumer worry about online privacy, have re-focused attention on direct mail outlets. As advertisers revert to the tried-and-true, the $55 billion direct mail marketing industry is seeing a growth spurt.

That's certainly the case at Money Mailer. Headquartered in Garden Grove, Calif., and founded in 1979, Money Mailer franchise operations send out large-sized envelopes filled with local retail, restaurant and professional services ads and offers to consumer homes, mostly in suburban areas. "We now have 300 franchises in 35 states," says Jeffrey Loudin, Money Mailer's eastern regional manager. "A typical franchise has five zones with 10,000 homes each or a reach of 50,000 residences."

Now in his mid-40s, Loudin began as a franchisee in the Philadelphia area at age 30. In 2003, he joined the corporate staff, selling his several Money Mailer franchises for, he says, a whopping 800% return. "It's a great business because you have no overhead, no inventory, no storefront. It also gave me a great lifestyle," he continues. "I never missed any of my son or daughter's activities while they were growing up."

Money Mailer says you need an initial capital investment of $55,000. It supports owners with sales training and production services. "If you work hard, average income can reach about $115,000 a year," says Loudin.

If direct mail interests you, mailer franchising is only one option. Consider opportunities all along the route from concept to consumer mailbox, including design services, market research, copywriting, selling, printing, distribution and so on. To help you focus, try a marketing course at a community college or business school or set up a free appointment with an advisor at one of the SBA's Small Business Development Centers.

2. Feed the need for health and nutrition

Why eat only to ease hunger when you can multi-task? Now, you can choose "functional foods" that also keep you healthy.

These are foods and drinks fortified with vitamins, minerals or other nutritional components to provide proven health benefits or reduced risks of chronic diseases. Old examples were "calcium-enriched" bread. Nouveau versions are way more fashion forward. For example, New York company Glaceau, founded in 1995, has racked up millions selling flavored fitness waters.

Increased awareness of the link between health and good nutrition, plus the aging population and frightful rise in healthcare costs are driving explosive growth in healthy foods and beverages. Functional foods and "nutraceuticals," or nutritional components in dosage form, now account for $72 billion of the global $192 billion nutrition industry, according to the "Nutrition Business Journal," a trade publication.

At Woodstock Water Buffalo, based in Vermont, Adrian Grundy began by making domestic buffalo milk mozzarella. Buffalo milk has higher calcium and protein as well as lower cholesterol than cow milk and has traditionally been used by Italian cheese makers. So from the start, at least by American standards, Grundy was producing a "functional food." Along the way, he and majority partner David Muller also began producing buffalo milk yogurt. The company marketed its products by touting the milk's special benefits via word of mouth and boutique advertising and media stories.

Woodstock Water Buffalo really got on the map after the Whole Foods chain began stocking its yogurt. "With food distribution, you need to get into a well recognized and well respected retailer early," says Grundy, citing triple digit annual growth for the yogurt. "Whole Foods was our springboard to national distribution." After two years of planning and negotiations, national distribution of Woodstock yogurt began in 2006.

The newest innovation is a buffalo milk yogurt fortified with Omega-3, a nutrient shown to enhance health at every age, including for babies, pregnant women and seniors. "The uptake of our Omega yogurt is 50% higher than our other products," says Grundy. "It's part of the trend in grab-it-and-go breakfasts that are still healthy."

If you want to get into the healthy food market, Grundy advises:

• Make sure your product has a high degree of value. You need a good margin of profit on such products.

• Reliable, speedy supply chains are critical. If your products don't move off the shelves, distributors will give their refrigerated space to other vendors.

• You must jump through a lot of hoops to get national distribution in place. Be prepared.

• Don't underestimate funding. This is a capital intensive business.

To learn more about the market, check out industry publications, including "Functional Foods & Nutraceuticals" magazine and "Nutritional Business Journal."

3. Advise parents about educating their kids

A tutor broker since 2001, Laurie Hurley is founder of Bright Apple Tutoring Service, based in Ventura County in southern California. She matches qualified tutors with students of any grade or age. By now, she has personally matched over 1,000 students and tutors. Hurley has also launched a consulting business to advise people about how to start their own tutor brokerages.

If you're dismissing this niche as too narrow, better go back to school.

Private tutoring services now generate about $2 billion in annual revenue, according to Eduventures, a Boston researcher that tracks education businesses. That figure doesn't even include the entire test preparation industry. In addition, the No Child Left Behind Act, signed into law in 2002, has earmarked millions of dollars for tutoring services to help states meet the guidelines. So tutoring services can tap into both private and public funding.

Traditional learning centers like Sylvan and Huntington are growing as well, of course. But often, says Hurley, "parents don't want to waste time taking their children back and forth somewhere after school." Plus, learning centers often rely on their own curriculum rather than a student's particular schoolwork or textbooks.

All of that makes in-home tutoring, while more expensive, presumably more time- and cost-effective. "Tutoring in the student's home provides freedom from peer pressure and allows a dedicated, professional tutor to work one-on-one," says Hurley.

"A tutor broker screens all tutors, conducts extensive background and reference checks and can feel comfortable that the tutor selected for their child will be just the right match," says Hurley. She typically charges a commission that's 50% of the tutoring fee. You're also responsible for recruiting clients, marketing the services and keeping on top of paperwork and finances.

Like Hurley, you can recruit a network of in-home tutors among local teachers looking to supplement their income. With so many educational systems shrinking and cutting back, most areas offer a good choice. Or, you can research and then buy one of the home-tutoring franchises that are springing up. Make sure to check out the firms carefully before putting down your dollars.

If you're ready to run your own show, there are lots of funding and advisory services just waiting to help. Just don't forget — love what you do.



Article Resource: http://www.microsoft.com/smallbusiness/

My worst small business mistakes

Like everyone else, I've made mistakes. I've learned from them, both about how to run a small business and more than a little about myself. My most serious mistakes have always involved trust — trusting the wrong people or not trusting my employees enough. This column is about trusting the wrong people.

It is easy, in the early days of the relationship with a big new customer to think everything is going to work out just fine for everyone. So how did I end up with a client owing me $150,000 they had no intention of paying — and later couldn't pay if they wanted to?



It happened because I trusted them and didn't appreciate the inequity that exists between a tiny business (mine) and a $20-million-a-year business (them). When the relationship ended, I had a contract that specified what I'd be paid for specific work I did, when I would be vested with stock options, and what fees and ownership rights each party was entitled to if the relationship ended. I was also supposed to receive a share of future profits from specific projects.

Nearly a year and $20,000 in lawyer fees later, my attorney stopped returning my calls. Two additional months passed before my lawyer told me he'd left private practice and that I needed to find someone else to represent me. At that same moment, a major investor foreclosed on the company that owed me the $150,000 and that was that. Did I mention I had about a million dollars in stock options in the dead company?

While $150,000 is a lot of money, it was a payment for work I'd already done and had no ongoing expenses tied to it. I got over it. (That is, until I start thinking about it again and fly into another rage over the CEO who stole my money!)

My loss was nothing compared to some of the company's other vendors, at least one of whom was owed so much money that he ended up losing his house when he didn't get paid.

In retrospect, I realized my relationship with the company soured when they started having serious cash-flow issues and decided, wrongly as it turned out, that they could do what my company did for less money in-house. When that failed, the money problems grew worse and the downward spiral accelerated.

What mistakes did I make and what did I learn from them?

1. I let the customer get too far behind on payments. The termination fee and future percentages were lost, but there was $25,000 already owed me when the break occurred.

2. I trusted two people at the company that I shouldn't have. One I knew about and went into the deal with my eyes open. What I learned was that as long as the other guy needed my company everything was fine, but things turned quickly after he decided he didn't need me any longer.

3. I didn't take legal action quickly enough. When things are going well, a contract can spell out the day-to-day rules of the relationship between the two parties. But, when things go bad, the contract may not be worth a thing. If legal action is needed, take it quickly. Don't delay.

4. I realize my small business' limitations. I'm now more aware of potential inequities between my business and the businesses I am working with. As a small business, I may not have the resources necessary to fight for my rights — even when they are fully described in a signed agreement. If the other company is much larger, they have legal resources I can't afford.

5. Sometimes it's best to just walk away. As it turned out, I could have saved $20,000 and a considerable amount of time and trouble by realizing the money was a lost cause at the beginning.

6. Recommendations for attorneys should be scrutinized. My attorney came highly recommended by someone I trust who had used him in the past. I was too trusting in his assurances, which strung me along until the guy disappeared. In a similar situation, I'd never put up with the delays this guy used to increase his billable hours and keep me hanging until it was too late.

7. Big companies mostly pay, small companies may not. Big, successful companies may be difficult to do business with, something that needs to be factored into what you charge them. But they usually pay their bills. Eventually. The client who cost me so much money was relatively small, and relatively new, and I did not understand how shaky their finances were.

Obviously, this was an expensive learning experience and one I hope you never experience. In some ways it couldn't be helped, but there were still things I could have done to reduce my losses and the pain associated with them. And, thanks to what I've learned, I've not had similar problems in the years since. Hopefully, you can learn from my experience, or at least take a little comfort from someone who's had the same sorts of problems you've had.



Article Resource: http://www.microsoft.com/smallbusiness/

Is your Web site 'usable'?

You try one company's Web site. It's plain, but it lists pricing information, the models it services, and its contact information. Then you try another company's site. It makes you sit through a three-minute Flash presentation before letting you explore the site. (There's a "skip this intro" button at the top right, but the button is camouflaged.) And, instead of getting pricing information, you have to fill out a form and wait for a salesperson to call.

You're probably going to call the first company, right?

As you might infer by our second example, a Web site's elegance is simply not going to win over users. If your site is not easily navigable and doesn't contain relevant and up-to-date information, you're driving customers away.



That's where Web site "usability" comes into play. According to Jakob Nielsen of the Nielsen Norman Group, an internationally recognized expert in this area, "Usability is a quality attribute that assesses how easy user interfaces are to use."

Here are six things you need to do to make your Web site "usable."

1. Help your customers find their way. How easy is it to get around your Web site? When customers look at the home page, do they see a clearly marked navigation system? Or do they have to roam around clicking things until something happens?

Think hard about whether you really need to be a navigation trailblazer. If your navigation system is radically different than others, you'll confuse your users. A simple drop-down or tabbed menu using words is fine. It may not look as cool or trendy, but your users will be able to find what they need.

Let's consider a small bookstore's Web site as an example.

Imagine using pictures of books on the left-hand side of the page. When you mouse over the picture, the book opens and tells you the genre. It's clever but impractical.

Your customers don't want to remember that the third book down is the home-improvement section and the sixth book takes you to romance novels. And they don't want to wait three seconds for the book to open to find where that link will lead.

2. Say what you mean, and say it clearly. It's so easy to get caught up in marketing lingo and buzzwords. But they may well confuse the customer. If you are selling a product or offering a service, state it clearly.

There are countless Web sites filled with warm and fuzzy slogans that never get to the point. What exactly does "providing solutions to problems" mean? What are the problems? How are they solved?

And a user shouldn't have to click on the About Us page (you do have one, right?) to figure out what your business does. That information should be on your home page.

3. Keep it simple. A splash page — which is a special landing page for product offers, sale items or special features, often with lots of graphics and color — may be a great way for Web designers to show their talent. But for many customers, it can be an annoyance. I say, dump it. But if you must have a splash page, consider giving your customers a "Skip this" link (if you have the same basic information on another page).

Keep pictures, large text, flashing banners and the like to a minimum. Those types of gimmicks generally cheapen a site. They also make the Web pages take longer to download.

For example, I have reviewed many products from one particular company (that shall remain nameless). The products offered are of high quality, but the company's Web site is a flashing, gaudy mess. It makes the company look like it's peddling junk.

Your Web site doesn't have to be barebones. But it shouldn't be obnoxious, either.

4. Provide information, not marketing-speak. Think about why people visit your Web site. They go there to get information or to buy a product. Make it as easy as possible to find the information they want — not just what you want to provide. I personally dislike lots of advertising puffery and grinning people. Please, just tell me what you do.

One sure irritant is pricing secrecy. Don't make a customer fill out a form to find out how much something will cost. You'd be annoyed if you walked into a grocery store and had to fill out a form to get the price of milk.

Obviously, if you sell insurance, you can't publish a price list. But you can set up a page that calculates several variables and provides free ballpark quotes. Customers want instant information. Give it to them.

It's also important to update your site regularly. It does you no good if the contact information for sales is for someone who left the company months ago. Unfortunately, many companies throw up a Web site and then forget about it.

5.Test your site — again and again. There is one simple way to attain good usability. Testing, testing and more testing. But you have to test with the right people.

Your customers and readers are the best people to test a site. They are the ones who use your site.

Unless your core audience is Web designers and tech-savvy users, avoid using these people as your guinea pigs. What's obvious to them could leave the true users scratching their heads.

If possible, be in the same room as the tester(s). And test individually. That way you can observe and write notes as questions and problems arise. Don't answer questions. If something isn't obvious to users, you'll have to tweak the design.

It may sound like testing takes a ton of time and money, but it doesn't. For a small site, it should take about 20 minutes or so per user. Four or five users is a good sample to get sufficient feedback. After testing, changes should only take a day or two. You can always offer a free product or service — or perhaps a gift certificate to a restaurant — for the tester's time.

6. Be a usability advocate; it can pay off. Having a Web site with strong usability could boost your bottom line.

The Nielsen Norman Group (www.nngroup.com) conducted a study on the return on investment of 42 redesigned Web sites. Owners of those sites spent an average of 10% of their Web budget on usability. After redesigning the sites, site usability increased by 135%, the sales-conversion rate increased 100% and traffic increased 150%, according to the study.

Yes, it's easy to see why you need usability. But I will be the first to tell you that it's also difficult to attain over time, especially if you have a Web site that changes, grows and evolves. This is something that I struggle with on my own site. I am continually updating it based on user feedback.

Web usability does take time, money and attention. But it pays off in the long run.



Article Resource: http://www.microsoft.com/smallbusiness/

Top 10 Starting Up tips

Launching your own business is tough and the line between success and failure can be fine; smallbusiness.co.uk's Top Ten Starting Up Tips help you make the right decisions from the outset.



1. Involve your family
If you have a husband or wife or children, involving them in the decision to go it alone is important. Your home atmosphere should be very supportive, particularly in the early stages. Your family could also be useful as a sounding board, helping out with the odd task or providing feedback or finance.

2. Analyse your personality
You need to ask yourself if you are the right person to start a business. Compile a checklist with the help of the following questions: Can you work long hours? Can you take criticism? Will you be able to cope with financial insecurity? If your business struggled in the early stages, would you continue? Write down the reasons why you are starting a business

3. Make sure your product is a must-have not a nice-have
Once you’ve got an idea you need to know that people will need it enough to want to buy it. Many people opt to begin a business by using a skill that they have acquired in their spare time as a hobby, such as jewellery-making.

4. Your idea doesn’t have to be new
Trying to sell a product that is new can be an uphill struggle. Being first is not always best, as you have to educate a market and convince them of the need for your product. So don’t be put off if your idea has been done before – think about how you can do it differently, by including an additional feature or benefit.

5. Know your market better than your competitors
Carry out as much market research as possible. Find out about your market place, concentrating on areas such as the demand, your competitors and the size of the market. Talk to potential customers, suppliers, competitors, distributors and ex-employees of competitors.

6. Toe-dip
Everyone has different motivations for starting a business, and toe-dipping means you can test your idea out without risking everything. You can carry on earning money from your job while you are starting up. Use your spare time to carry out your market research.

7. Be honest about your weaknesses
Identify what you do well and what you do badly, dividing it into areas such as financial, marketing, operational and general management. Be honest with yourself, but also be realistic. Try and get someone else to evaluate your answers – another person’s perspective can be very valuable. Identifying your weakness will help you to recognise what you are good at, and which areas you will need to find someone who can do a better job than you.

8. Get a good mentor on board
Remember – two heads are better than one. Seek out the advice of a family friend who has the experience of being in business, or someone who is recommended to you, or someone you are close to. Consider giving them a share of the profits or equity in your company in return for advice.

9. Justify every assumption in your business plan
But remember that whatever you write down is not set in stone. Your business plan should have longer-term objectives, estimates and forecasts – try to make as many of your goals as possible measurable. The two most important reasons for having a plan are to show to outsiders if you need to raise money, and to help you keep your business on a planned course, so you can spot when things are not going to plan.

10. Keep it your business plan succinct
An ideal format for your plan, if you intend it to be for outside use, is to have between three and ten pages of text that draw out the important points, plus a series of financial figures. Excessive detail should be confined to appendices.



Article Resource: http://www.smallbusiness.co.uk/

Develop A Business Plan

You will need to develop a business plan before starting or acquiring your business. A more detailed description and discussion of business plans can be found in the Business plan entry of Smallbusiness.com The following outline of a typical business plan can serve as a guide. You can adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.



Introduction

* Give a detailed description of the business and its goals.
* Discuss the ownership of the business and the legal structure.
* List the skills and experience you bring to the business.
* Discuss the advantages you and your business have over your competitors.

In-depth help on developing a sound business plan can be found on the SBA Web site in the Starting Area.

Marketing

* Discuss the products/services offered.
* Identify the customer demand for your product/service.
* Identify your market, its size and locations.
* Explain how your product/service will be advertised and marketed.
* Explain the pricing strategy.

Financial Management

* Explain your source and the amount of initial equity capital.
* Develop a monthly operating budget for the first year.
* Develop an expected return on investment and monthly cash flow for the first year.
* Provide projected income statements and balance sheets for a two�year period.
* Discuss your break-even point.
* Explain your personal balance sheet and method of compensation.
* Discuss who will maintain your accounting records and how they will be kept.
* Provide "what if" statements that address alternative approaches to any problem that may develop.

Operations

* Explain how the business will be managed on a day-to-day basis.
* Discuss hiring and personnel procedures.
* Discuss insurance, lease or rent agreements, and issues pertinent to your business.
* Account for the equipment necessary to produce your products or services.
* Account for production and delivery of products and services.

Concluding Statement

* Summarize your business goals and objectives and express your commitment to the success of your business.
* Once you have completed your business plan, review it with a friend or business associate or a Service Corps of Retired Executives (SCORE) or Small Business Development Center (SBDC) counselor. (See SCORE and SBDC listings in this guide).
* When you feel comfortable with the content and structure make an appointment to review and discuss it with your lender. The business plan is flexible document that should change as your business grows.



Article Resource: http://www.smallbusiness.com/