bizthreads.net: Business Information for Entrepreneurs by an Entrepreneur

To be successful, a small business must have a clear plan and well-defined goals. Even if you are running your business from home, you need to set goals and work to achieve them.

Below are a few tips for setting goals for your home business:

Separate Your Home and Office Life

Once your children and your spouse understand the importance of your business, you should establish a routine that works for you - and them - so that you aren't distracted by chores and family demands on your time while you are working. Your office and home should be seen as two distinct components, even if they are under the same roof.

Make it clear that you are not to be disturbed during certain times of the day, by anyone. It may be necessary to have a separate entrance for your home and office, so that there are no interruptions when you are with a client
or on the phone.

Write Down Your Goals and Match With Your Plan Accordingly

Put your thoughts in writing. If you are working to purchase a company car or a new home, then write these goals down along with a concrete plan as to how you plan to achieve them. Match all your goals up with real statistics
from your business, so they will be accurate and reliable.

Profit margins, expenses, and savings should be included in your goal-setting. This will give you an idea as to when you will be able to achieve them.

Put Your Plans into Action

If you have a goal of increasing your sales by 10% in the current year, then try different methods of marketing and see which one works for you. Go the extra mile to achieve your goals if necessary. Simply writing your goals down on paper is not enough. They will only happen if you make them happen.

Running a small business from home has obvious advantages and disadvantages. However, if you concentrate on achieving your goals, then you will achieve them faster than you had imagined.

Direct mailing is an efficient, albeit somewhat cumbersome, method of advertising. However, it can be effective in increasing your presence in your neighborhood and it can give a more personal touch to your business than other kinds of advertising.

Here are some helpful tips to get the most out of your direct mailers:

• Giving freebies always works, so give out a free product to anyone who responds and brings one of your
  flyers along. This method will also help you measure the effectiveness of your campaign.
• Hire professional designers and copywriters to create your mailers. A professional touch increases response. In addition, professionally-designed materials are usually easier to understand and have a better track record of responses.
• Conduct market research on your target neighborhood and plan your mailer accordingly. Also, send out mailers with special offers and discounts ahead of holidays so more people will read them and respond.
• Cite regular and satisfied customers as references (with their permission, of course) along with their names and titles to improve response.
• Print more flyers and target a wider area. You should also conduct market research of areas where you are getting better response, as well as areas where you getting poorer response. You can then use that information to make the necessary changes to your approach.
• Test different themes, fonts, and styles. Get feedback from customers as to which mailer was the most eye-catching - and use that information in future direct mail planning.
• Make special offers and highlight any product or service guarantees in your mailer. You can also cluster products and make package offers to prospective customers.
• Last but not least, try sending mailers over the Internet. It's free, so any additional business generated is a bonus.

Don't be afraid to try different approaches to gain insight into what works for your small business. Maintain a regular schedule of mailers to sustain your results.

Small businesses need a constant amount of cash flow to pay off day-to-day expenses. Therefore, you need stringent billing practices in place to ensure that more money keeps flowing in than out.

Use the following billing practices to keep your small business healthy:

Ask For a Deposit

This method normally works if you are making something exclusive for customers, like an industrial product or clothes. You could ask for 50% to 60% as an advance, so that if the customer backs off after placing an order, you don't end up with dead inventory.

However, this strategy will not work if you are offering off the shelf products or if you are in a high competition market.

Shorten Credit Periods

If a high credit period is leaving you cash-strapped, then reduce the credit period so that you free up much-needed income.

For new customers, quote lower credit periods. Over a period of time, slowly lower credit periods for existing customers so as to reduce the chances of bad debt.

Get Your Invoices Factored

Invoice factoring is where factoring companies buy off your invoices and collect the invoice amount from you for a nominal fee. They will pay you almost the entire amount immediately, thereby immediately improving your cash flow.

Research a good factoring company's services to find out if this financial tool is suitable for your business.

Use Good Accounting Software

Nowadays, a variety of reasonably-priced software is available to help you in keeping track of your receivables once you have sent out an invoice. Use them to keep track of your customer's payments, and nip any late paying customers in the bud. These software applications can also useful in sending out billing reminders.

Use the above billing practices to maintain a constant cash flow - and watch your small business flourish.

If you want to start your own business, but are unable to procure a bank loan because you do not have any collateral or guarantor, or for any other reason, then you could approach a venture capitalist.

Venture capitalists will invest in your business if they see future potential in your small business and will take a share of your profit margin.

Develop a Professional Business Plan

Venture capitalists will not invest money if you just stand in front of them and narrate your plan. You will have to provide them with business facts and figures. You will have to give them a detailed plan as to your product details, how you plan to attract customers, your projected sales and projected margins. Your targets should be physically achievable and should not simply be written from your imagination.

You can write your business plan with help from software packages available on the Internet. Or better still - get it done by a professional.

Conduct Thorough Market Research

As a small business owner, you have to know who your customers are and where they will come from. If you fail to do the proper market research, your business plan will only end up in the trash. Simply assuming that there is a market for your products can be a costly error in judgment on your part — you need cold, hard facts.

Give the results in writing to your proposed financers.

Present and Follow Up

Prepare 7 to 10 copies and submit them to different venture capitalists. Call them up and ask them if they have any questions regarding your report. Show them that you are serious about your proposed business. Then wait for their response.

Be aware that venture capitalists can take over your business if they have a major share of it. But if you are successful in running your business and you have a good venture capitalist backing you up, then not only will you obtain the financing you need, but your business will be a success, making your investors very happy.

If you are interested in buying an already-established business, there are a number of ways that you can arrange for financing to keep your new business running smoothly.

Pay Cash

You can pay the entire amount upfront and purchase the business. However, this method will work only if you have the cash available.

Bank Loans

You can apply for a bank loan. You will normally be required to submit the previous 3 years' financial statements and perhaps some sort of collateral. You could contact the SBA (i.e. Small Business Administration), which is appointed by the Federal Government, to help you in securing a loan. The SBA would stand as guarantors for your loan.

However, getting a bank loan can be difficult without the proper documentation and collateral or guarantors.

Friends & Family

You could approach your friends and family for a loan. The interest rate will be reasonable and you would also not need any collateral or guarantor. However, paying off that loan is very important - if you want to continue to have good relationships with them.

Venture Capital

Venture Capitalists are people who will invest in your business if they see a potential for earning money out of it. However, they could take control of your small business if they become major shareholders.

Choosing a good venture capitalist is important - or you could end up with a ‘Vulture Capitalist', who will only try to take advantage of the fact that you are a new business owner.

Angel Investors

These are wealthy businesspeople or other individuals who have money and are willing to finance your business. They are similar to venture capitalists, but they usually give you a lower rate of interest and give you financing for a longer period of time.

Whichever way you get your business financed, ensure that your documentation is complete and you fully understand the terms and conditions of any papers that you are required to sign.

Just as a small child needs a playground fence to keep them safe and happy, your small business needs a budget so that you can be financially safe.

Once you have set a budget, here are a few things to consider when implementing it in your business:

Follow Through

Keep an eye on your budget. Compare it regularly with your actual figures, be it sales or expenses. This way, you can get an idea as to how close your projected and actual figures are. You might go off track in some of your estimates, but as long as you manage to stay near your projected figures, that should be good enough.

Experience will make your future budgets more in tune with your actual figures.

Keep an Open Mind

Be flexible when following your budget. Be prepared to lower your expenses if your income doesn't match up with your budget. This might not be easy, but in a small business, you may not have any other way out. You can defer your expenses to a later month if your current month is not going well.

Keep a sharp eye on your cash flow. Staying in the black will keep your business out of financial trouble.

Budget for the Worst, Work for the Best

Develop your budget so that you show slightly higher expenses and slightly lower income. That way, if your expenses are low and sales are good, you can safely stay within the guidelines of your budget. However, it is important to always have a backup plan ready as far as cash is concerned.

Most small businesses fail because they do not have spare cash to bail them out when they get into trouble. Save up your money during the first years of your business, just in case something unexpected happens that is beyond your control.

So, whatever line of business you are in, you should set up a budget first, and then follow it regularly so that you can operate safely inside your financial playground.

Improving business communication is an ongoing process. You will meet different people in the business world, with a variety of communication styles. You have to adjust while communicating with others in business to be successful.

Here are a few tips to improve your business communication skills:

Active Listening

The most important thing to improve your communication is to be a good listener. It seems elementary, but very few people have been able to master this skill. It is important to concentrate on the speaker's message without being distracted. You should be open to the ideas and not have preconceived notions about the person.

Keep an eye on non-verbal indicators, such as the responses or reactions to your ideas, eye contact and tone of voice.

Take Advantage of Communication Resources

Studies show that leaders in the small business community know their limitations and seek out opportunities to improve their communication skills.

Developing public speaking skills by joining organizations like Toastmasters. Always try to improve your other communication skills through business counseling and training.

Consistency

Be consistent when communicating. This does not mean being monotonous, but it does mean being consistent with your eye contact, honesty and reliability.

Common Interests

To start with, establishing a common interest is one of the best strategies when it comes to positive communication. For example, if you live in a sports town, you can start a conversation about a favorite hometown football team.

People will be more open to what you have to say if you have something in common with them.

Be Careful With Email

You have to be very careful when writing business correspondence, especially email. You should be aware of the message that you are sending via e-mail. Never write an email when you are irritated, annoyed or angry, as these emotions will almost always come across in your writing.

When drafting an email, your language should be positive, simple, sincere and straightforward for the other person to understand.

Feedback

Giving feedback is as important as getting it from the other person. Be attentive and open to feedback on what you have said. At the same time, don't forget to give positive feedback to your employees or peers, which will ensure that there is participation and interest in further communication.

Why You Need a Budget

Like any other company, you need to review the performance of your small business towards the end of each fiscal year to assess how well it has performed over the past year.

If the results appear dismal, there is a distinct possibility that it is the result of bad planning and lack of a budget.

The Reason for Preparing a Budget

As a small business owner, having a budget will equip you with the ability to monitor the financial trends of your company over a fixed period of time. You will be able to measure your cash flow, growth, assets and liabilities using the budget as a resource for forecasting.

A Budget Is No Guarantee of Success

You shouldn't treat your budget as something rigid; rather, it is meant to ensure accountability and financial integrity. It should also not be used as an absolute guideline for spending.

You should understand that simply having or following your budget will not guarantee business or financial success.

When You Should Start Working On A Budget

You need to start working on a budget at least one to two months before the arrival of the next fiscal year. Your budget should serve as a guideline for key company employees to see what your company is aiming for.

Your budget should be in line with your strategic plan and should reflect the direction that your small business is heading.

A Budget Needs To Be Realistic

The budget that you develop should present a realistic picture of your spending needs; it should not project unrealistically high revenues, or it may be a cause for fiscal failure.

A budget is meant to map your business' financial trends, in order to forecast your financial needs.

If you don't have a budget, you should develop one now. The financial health of your small business depends on it.

To ensure that your small business grows steadily, you may require funds to cover expenses and make new investments.

Here are a few ways to get a loan using the income from your business.

Get a Bank Loan

You could apply for a bank loan against your business profits. The rate of interest is usually around 6% to 9%, but you will have to put up some collateral against this type of loan. Collateral could be in the form of your business or residential property or even your business' stock.

The documentation required by banks is extensive, and even if you can arrange a loan through the SBA, you will still be required to submit detailed documents about your business and its income prospects.

Contact a Factoring Company

If your sales are mostly to credit customers, then contact a factoring company. They will pay you the invoice amount minus their fee almost immediately, and they'll also take over your collections headache.

This will improve your cash flow immediately and help your business grow faster. The documentation required is also not very extensive, compared with the banks.

Use Your Credit Card

You could use your credit card to get an instant loan without any documentation, but the interest rate will probably be extremely high. In addition, failure to pay the outstanding amount will result in you paying more in interest.

It could also negatively affect your credit rating, which will have a direct effect on your ability to secure financing in the future.

Venture Capitalists

If your business shows great potential, then venture capitalists can help you by investing in your business in exchange for a share in your profit margin.

However, they can become co-owners of your business and can even take over your business, depending on how many shares they own.

Nowadays, customers are always looking for the best deals. This does not necessarily mean products that are the cheapest, but those that give them maximum value for their money.

Customer loyalty is no longer a given — just because someone bought something from you once doesn't automatically mean that they will come back for seconds. To ensure repeat sales you have to keep a few things in mind.

Nurture Positive Relationships

If a customer has a positive experience with your small business, then there is a good possibility that they will develop an emotional bond with your products and services.

Unless there is an emotional bond, the possibility of repeat sales is bleak.

Give Incentives to Buy

If you give gift coupons, store credits and other bonuses to your customers, then you are giving them an incentive to continue doing business with you. Although using this strategy isn't guaranteed to work, a majority of the time it works very well and ensures repeat sales.

Provide High Value

Your customers will continue their relationship with your small business if you provide them with higher value products and services. Some companies develop a strategy to sell products in such a way that they become dependent on the product operationally or emotionally; this is an integrated relationship. For example, it is easier for customers to purchase a newer version of the same software rather than learn an entirely new program.

Customer Loyalty Tips

• In the first sale, make sure that you give customers what they ask for and that products are of good quality. That way, you help to foster brand loyalty.
• Keep customers informed about pricing issues and shipping delays. If problems arise, be honest and solve them promptly.
• Create goodwill for your products and services by sending a ‘thank you' letter. This will ensure that customers remember the good treatment that you gave them. You should also introduce exclusive offers for existing customers.

Developing integrated relationships with your customers is the key to guaranteeing repeat business.