How To Start a Business
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- The Entrepreneurial Process to Starting a Business from Scratch
- How to Start a New Business: It Takes More than Just an Idea
- 8 Effective Small Business Marketing Strategies for Overcoming Competition
- How to Raise Startup Seed Capital from Family and Friends
- 10 Causes Of Small Business Failure You Must Watch Out For
- How to Influence Customer’s Psychology and Sell Your Products Fast
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Posted: 16 Feb 2012 02:16 AM PST
 
Today, I will be sharing with you the step by step process every entrepreneur must undergo when starting a business from scratch. This process is called the “Entrepreneurial process.” This is the same process that brings into being; both great and small businesses.
"In the game of entrepreneurship, the process is more important than the goal. When you start building a business, you begin a journey, a process. This process has a beginning and an ending and between the beginning and end lays a lot of challenges. You will win only if you remain faithful to the process." – Rich Dad
Entrepreneurship is a process; a journey, not a destination. You can never build a successful business without undergoing the entrepreneurial process and there's no exemption to this rule. Bill Gates, Warren Buffett, Larry Ellison, Steve Jobs, Mike Adenuga, Oprah Winfrey and Aliko Dangote; the richest black man in the world all went through this process.
"The most important thing is to enjoy yourself and continue to work. Life is a journey, not a destination. That's also true in business; your objectives keep moving." – Thomas J. Burrell
Before I proceed to highlight the phases of the entrepreneurial process, I think it's worthwhile I let you know that not all who start this process will end it. There's no big deal about it; it's the norm. Such is life. Many will quit along the way so it’s up to you to decide if you will be one of the losers or winners.
The Entrepreneurial Process to Building a Business from scratch1. Experience the entrepreneurial seizure
The entrepreneurial process usually begins with the entrepreneurial seizure. I think I first heard the term “entrepreneurial seizure” from the book “E-Myth Revisited.” Every entrepreneur experiences this seizure and you can know you’ve been affected by it when you begin to ask yourself any of these questions:
Why can’t I be my own boss?
I am tired of this 9-5 job?
I work so hard but my boss doesn’t recognize me.
Why am I working for my boss when I can go out on my own?
I am gifted, why can’t I make money with my gift?
"It's within everybody's grasp to be a CEO." – Martha Stewart
Once you begin to nurture these perceptions, the entrepreneurial process has begun. It’s in this phase that you will begin to question conventional wisdom. During this stage, the primary keywords on your lips would be: Why, how, what, when, who and where.
2. Plan the business
Any entrepreneur who makes it through the first stage usually begins to draw up a plan of a proposed business venture. In your spare time, you will fantasize, scheme and plot. You will imagine yourself being at the helm of affairs. You will begin to analyze the possibilities of going ahead with your business idea; once you have drawn a business plan, know that you’ve just completed the phase two of the entrepreneurial process.
"A plan is a bridge to your dreams. Your job is to make the plan or bridge real, so that your dreams will become real. If all you do is stand on the side of the bank and dream of the other side, your dreams will forever be just dreams. First make your plans real and then your dreams will come true." – Rich Dad
3. Make mistakes and learn
In the process of planning your business, you are bound to make some mistakes. Your mind will begin to show you reasons why building a business is not for you. You will begin to see reasons why you need your job more than ever. You will also experience some disappointments that will make you almost quit.
"The size of your success is measured by the strength of your desire, the size of your dream and how you handle disappointment along the way." – Rich Dad
The sad truth is that many entrepreneurs don’t go beyond this phase of the process; their dreams die in the planning phase. I have seen entrepreneurs with solid business plan; back out of the process simply because no one wants to invest in their idea. I have seen entrepreneurs rewrite their business plan, year in year out; because they are held back by the fear of failure.
"The biggest challenge you have is to challenge your own self doubt and your laziness. It is your self doubt and your laziness that defines and limit who you are." – Rich Dad
That’s why this third phase is all about making mistakes and learning. Even if no one wants to invest in your idea, keep learning and improving on your plan. You might make a couple of mistakes but don’t quit. If you can boldly forge ahead despite disappointments, you will move on to the next phase of the process.
"Underneath every mistake in business is a valuable lesson. Unfortunately, many entrepreneurs miss these lessons because they lament and blame others over the mistakes." – Ajaero Tony Martins
"Like success, failure is many things to many people. With positive mental attitude, failure is a learning experience, a rung on the ladder, and a plateau at which to get your thoughts in order to prepare to try again." – W. Clement Stone
4. Start a Business
"Start small and dream big." – Rich Dad
Many come up with bright ideas and write powerful business plans but only few ever dare to start a business. If you have gotten to this phase of the entrepreneurial process, I say congratulations.
"Starting a business is like building a ship and embarking on a voyage, armed with a plan, a map and a team. You will have to sail against storms, unpredictable weather and uncertainty. If your ship sinks, it’s either you quit or you swim back to shore, build a new ship and sail again." – Ajaero Tony Martins
5. Sustain the business
Starting a business just the beginning of the game; sustaining that business is where the real challenge lies. This is where you fight to keep the business you have started afloat. You will have to handle competition, find customers, deal with critical business challenges, pay bills upon bills, deal with employees and so on. This is where the stress of running a business gets worst.
"Business, more than any other occupation, is a continual calculation, an instinctive exercise in foresight." – Henry R. Luce
6. Make mistakes and learn
This is the phase where many new businesses go down. This phase is the reason why 99% of all small business startup fail in their first five years. At this point, silly business mistakes will be made that will result to loss of cash, customers or crucial employees. This is the point where you begin to regret why you ever started a business. If you are not strong hearted, you will let go the dream of building a business.
"Sometimes when you innovate, you make mistakes. It’s best to admit them quickly and get on with improving your other innovations." – Steve Jobs
"A mistake is a signal that it is time to learn something new, something you don’t know before." – Rich Dad
What smart entrepreneurs do at this phase is to seek new answers. They assess themselves to see the necessary entrepreneurial skills that is lacking. They attend seminars, read books on business and entrepreneurship, find a business mentor or form strategic alliances.
"One of the great things about being willing to try new things and make mistakes is that making mistakes keeps you humble. People who are humble learn more than people who are arrogant." – Rich Dad
"There are no mistakes in life, just learning opportunities.” – Rich Dad
7. Stick to the process
"You can always quit, so why quit now." – Rich Dad
After seeking new answers, this is the phase where you implement the answers found on your business. It’s the phase where you take the bull by the horn and refuse to call it quit. Only few entrepreneurs ever get to this phase because it takes a lot of time, resources and commitment to stay on this phase. Getting to this phase might take about three to ten years from the point of starting the business.
"I built a conglomerate and emerged the richest black man in the world in 2008 but it didn’t happen overnight. It took me thirty years to get to where I am today. Youths of today aspire to be like me but they want to achieve it overnight. It’s not going to work. To build a successful business, you must start small and dream big. In the journey of entrepreneurship, tenacity of purpose is supreme." – Aliko Dangote
8. Build a successful business
If you stick to the process without quitting, you will finally have the business of your dreams right in your hands. This is the phase where your business needs you no more because your presence or absence will have little impact on its growth. This is the phase where you celebrate your achievement. At this point, you can choose to either exit the business or stick with it. But regardless of the choice made, the money will keep flowing.
9. Count your wins or losses
Every successful entrepreneur usually comes to this phase. This is the phase where you reflect over the process of building a business; the business challenges you overcame, the games you won or lost and the business failures you have experienced. This is where you share your story of success or failure with others; it’s the phase where you decide if the entrepreneurial process was really worth undergoing.
10. Retire or repeat the process
This is the final phase of the entrepreneurial process. Less than 20% of all entrepreneurs that started the process get to this phase. At this phase, you are self made and you can choose to either retire or repeat the process. I said retire or repeat the process because I have seen entrepreneurs who start the process all over again even after building a successful business. Others will retire but come back to repeat the process because of the challenges and excitement it offers. So whatsoever choice you make is left for you to decide.
"I’m not afraid of turning 80 and I have lots of things to do. I don’t have time for dying." – Ingvar Kamprad
These are the ten phases that make up the entrepreneurial process. Remember, not all who started this process makes it to the end. Will you make it to the end of the process? Only you can decide your fate.
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Posted: 16 Feb 2012 02:15 AM PST
I have got a brilliant idea that going to make me a lot of money! That’s the pitch I usually get from budding enthusiastic entrepreneurs. My questions now are:
"Is a brilliant idea all it takes to start a business? Does a smart business idea guarantee success when starting a business from scratch? Is a business idea the minimum, most important requisite for starting a business? Will a million dollar idea; see you through the entrepreneurial process of starting a business from scratch." Well, you will find out further down this article.
Sometime ago, I went into a fast food outlet to honor an appointment and I met some youths in the lobby. From my observation, they were waiting to be interviewed for a job at the fast food. Just immediately, an idea cropped in my mind and I joined these young lads waiting to be employed. While in the waiting line, I started a conversation with a young man who should be in his mid 20s.
The young man, who turned out to be a graduate told me he had a passion for cooking. He told me he had a plan to set up a restaurant and based on the detailed plan he gave me; I knew this guy has something innovative up his sleeves and I loved it. He even had a name for his dream restaurant. I asked him what’s holding back the dream of starting a business from being made real and he said he has been trying to raise capital from his wealthy relations.
"There are fast ideas and slow ideas, just as there are fast trains and slow trains. When it comes to money, most people are on the slow train looking out the window watching the fast train pass them by. If you want to become rich quickly, your plan must include fast ideas." – Robert Kiyosaki
In as much as I loved the young man’s idea; I nodded my head, shook his hand and bid him good luck. On my way to honor the appointment, I kept thinking about this young man. He was cool, smart, enthusiastic and had a brilliant idea backed by a university degree. I really loved the guy and his idea but it’s a pity; the world is filled with brilliant business ideas and I just wish I had told him that. But how would he take it? I am not writing this to discourage budding entrepreneurs from coming up with creative ideas. In fact, I am writing this to encourage you to think and come up with good business ideas. But most importantly, I want you to think beyond the idea because a business idea is just the starting point to starting a business.
"Dream more than others. Think practical." – Howard Schultz
The world is filled with budding entrepreneurs carrying business plans and seeking investment capital. The sad news is that 85% of these entrepreneurs are never going to go beyond the initial planning stage and that’s the hard truth.
Now what does it takes to start a new business?
That may be the question on your mind. While I believe there is no conventional answer to this question; I will try to provide street smart answer but before I do, I suggest you ponder on the following questions:
Did the successful entrepreneurs and richest school dropout billionaires become ultimately rich because of their ideas? Did Rachael Ray start a restaurant business before harnessing her cooking potential? Did Debbi Field's wait to raise millions of dollars in capital before starting her cookie business? Of the entire social networking platforms available; why did Facebook emerge the most popular thus, making its founder Mark Zuckerberg, the youngest billionaire in the world?
"A business idea is just another idea. But an idea backed by a strong feasibility, a thorough business plan and a smart team is no longer an idea. It’s now a solid business opportunity worth pursuing." – Ajaero Tony Martins
In answer to the illustrations and questions asked above, I want you to know that Rachael Ray didn't start a restaurant business before she began making millions from her cooking recipe. She simply took her business idea, struck a deal with a local television network and became a self made millionaire. No restaurant, no external funding and no million dollar infrastructure. All she had was just her cooking recipe and a television network joint venture; that was all.
Debbi Field's did not wait for some investors or Venture Capitalists to invest in her passion for baking cookies. She simply looked for a good business location, baked some cookies with her own money and walked around her vicinity giving away free cookies.
Facebook was not the only social networking platform available online; in fact, MySpace has already been in business long before Facebook came on board. Was it Mark Zuckerberg's idea that led to Facebook's success? I don't think so.
These three selected entrepreneurs all possessed average business ideas but they had something which other entrepreneurs lack. In this article, I am going to reveal to you five things you need to start a business and become successful other just than an idea. This write up will help reduce your over concentration on the business idea and shift it to developing the most necessary requirements to starting a business. Building a business around an idea requires everything you’ve got. You are the ultimate key to the realization and utilization of that business idea. To start a business and build the business of your dreams, you need a little of the following:
Five Things You Need to Start a New Business from Scratch1. You need guts to start a business
"The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week, but today. The true entrepreneur is a doer, not a dreamer." – Nolan Bushnell
Launching a business out of the planning board require guts; quitting your job to start your own business require guts, believing in your business idea even when everyone says you are nuts requires guts and facing business challenges also require guts. That’s why I listed guts as number one. Guts, chutzpa, boldness, brevity, courage; they all mean the same thing. Without entrepreneurial guts, just forget about starting a business.
"You are nuts and you should be proud of it. Stick with what you believe in." – Trip Hawkins
2. You need business skills to start a business
The next thing you need to make your business idea a reality is skills. What are you bringing to the table? This is the question you must answer when seeking joint ventures and business partnerships. Your possessed entrepreneurial skills are very important to the realization of your ideas because your skills can be a strength or competitive advantage for your business. Skills are a necessity when searching for a business team.
"The ability to sell is the number one skill in business. If you cannot sell, don’t bother thinking about becoming a business owner." – Rich Dad
Have you heard the phrase that "entrepreneurs are generalists." I think there is an atom of truth in that statement. Entrepreneurs are generalist, they need to know a little of everything that pertains to business. That's where your business skills come in. As an entrepreneur, you need to know a little of accounting, investing, sales, marketing, operations and business management in general.
Before ever starting a business; be sure to hone your sales skills, marketing skills, communication skills, negotiation skills, accounting skills, leadership skills, people skills and every other entrepreneurial skills that's required to succeed in business.
"Skills make you rich, not theories." – Rich Dad
3. You need the right mindset to start a business
You probably must have heard this over and over again but I think it's worth repeating. You can't build a business if you lack the right mindset. Entrepreneurship is not really about starting or building a business.
"Starting a business is like building a ship and embarking on a voyage, armed with a plan, a map and a team. You will have to sail against storms, unpredictable weather and uncertainty. If your ship sinks, it’s either you quit or you swim back to shore, build a new ship and sail again." – Ajaero Tony Martins
Entrepreneurship is simply a change in perception or core value. It's the process of developing your mindset from being job dependent to being financially independent. It's a shift from being handicapped in the face of challenges to being a problem solver. In all, entrepreneurship is simply a change of mindset.
4. You need capital to start a business
I believe you know that no business idea is worth a pinch of salt without capital. I don't want to stress much on this because I believe you know the significance of capital to any business. But in retrospect, I always advice my protégés not to be deterred by lack of capital. I encourage them to get creative when it comes to financing their small business startups; where there is a will, there will surely be a way.
"There are three components to starting a business. One is the right plan; two is the right team and three is the money. Rarely do these three components come together when starting a business. It's the duty of an entrepreneur to grab one piece and start the business, the remaining two pieces will be found along the way. Finding the remaining two components may take a year or more than 10 years; the point is, start with what you have." – Robert Kiyosaki
5. You need the right business management team
"Individuals don't win in business, teams do." – Sam Walton
Finally, you need the right business management team in place to build a business around your idea. For your business idea to leave the planning phase, it’s going to require the right business team. If you can assemble the right team to deliver on your plans, I bet you will find the venture capital because a strong business team is an essential ingredient to the process of raising capital from Venture capitalists.
Now how do you find the right team? I don't know. How do you know you've found the right business team? Once again, I don't know but what I do know is that the right team is a team that complements your weakness and adds value to your business. A good way to know you have the right team in place is that your business will take off like wild fire and gain grounds seamlessly with little or no effort on your part.
As a final note, these are the five things I believe are fundamental to either starting a business from scratch or building a successful business. So don't get too excited because you feel you've got a creative idea up your sleeves; instead, start strategizing on ways to assemble the five elements listed above for your business. Remember, the world is filled with brilliant million dollar ideas waiting to be funded but the world lacks seasoned entrepreneurs. Take this lesson to heart and I will see you at the top.
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Posted: 16 Feb 2012 02:05 AM PST
"You are in a war. You must plan to take the other guy down first and do it. Winning is not the best thing; it’s the only thing. If it were not, no one would keep score. To win the war, you must take charge. You must set the organization’s objectives, establish a chain of control, delegate, appraise performance, adjust and act." – The Mafia Manager
In a previous article I wrote, I explained that competition is one of the business challenges faced by entrepreneurs when building a successful business from scratch. Business is a war; so also is marketing. A case of dog eat dog; and a game where winner takes all. Just like stated in the quotes above; winning is not the best thing, it's the only thing. You must plan to take your competitors out before they do the same.
“In business, the competition will bite you if you keep running. If you stand still, they will swallow you.” – Victor Kiam
In this article, I am going to share with you eight effective small business marketing strategies and tactics that will help your business gain undue advantage and ultimately overcome competition. I am not sharing this guerrilla marketing tactics with you just to thrill you; I believe in action and corresponding results. These are not the regular marketing tactics you come across everyday; these guerrilla marketing tactics have been tested and proven.
“If you don’t have a competitive advantage, don’t compete.” – Jack Welch
I am an entrepreneur and I face stiff competition everyday; from the first day I launched, it's been war. But I survived and my businesses are thriving and growing at an exponential rate. How did I survive competition? I didn't survive by rolling dice and praying for luck; I survived competition by being tough and strategic in my marketing approach. It's this same small business marketing strategies I used that I want to share with you today.
"Luck is not a factor. Hope is not a strategy and failure is not an option." – Anonymous
“We have always had a pretty competitive ferocious battle with British Airways. It lasted about 14 years and we are very pleased to have survived it.” – Richard Branson
Now what gives me the confidence that these marketing tactics will work on your business? Sincerely, I can't really guarantee these marketing tactics will work on your business but it was these same business marketing strategies that Richard Branson used to position Virgin Atlantic against British Airways. It was these same marketing tactics that Jeff Bezos implemented to position Amazon.com to compete favorably with Barnes and Noble. These same marketing tactics helped Facebook stay in the game against Google. So if this guerilla marketing tactics worked for these successful entrepreneurs when their businesses were in the startup phase, I believe it will work for you. If you are ready to outperform your competitor, then below are eight underground marketing tactics you can implement to stay ahead of competition.
“The competitor to be feared is one who never bothers about you at all but goes on making his own business better all the time.” – Henry Ford
8 Effective Small Business Marketing Strategies for Overcoming Competition1. Develop a competitive strategy
Your mission to survive or stay ahead of competition begins with strategic planning. You must identify your competitor; spot out the competitor's strengths and weaknesses, and plan your strategy based on the information gathered. Concentrate all your attacking effort on your competitor's weaknesses while avoiding and defending against the strengths.
"The best thing to invest in your business is your time. To schedule, plan and use time effectively, know your turf and know your objectives. Assess the obstacles and opportunities, then devise your strategies." – The Mafia Manager
When developing a competitive strategy, don't do it alone, do it together with your business team. Your competitive strategy must not only include plans to defeat competition; it must also include plans that will strengthen the business from the inside as well as on the outside.
2. Focus on a niche
"Don’t try to be all things to all people. Concentrate on selling something unique that you know there is a need for, offer competitive pricing and good customer service." – Lilian Vernon
Most businesses try to be everything to everyone; don't join them. Find a niche market and serve that niche to the best of your effort. In every industry, there's an under served, abandoned niche that the big corporations considers too small to be served. It's up to you to find such niche and focus your entire marketing effort on it. Don't spread your effort, concentrate and don't try to be everything to everyone; be something to someone.
"And here is the prime condition of success, the great secret. Concentrate your energy, thoughts and capital exclusively upon the business in which you are engaged in. Having begun in one line, resolve to fight it out on that line; to lead in it. Adopt every improvement, have the best machinery and know the most about it." – Andrew Carnegie
Richard Branson's Virgin Atlantic was able to breakthrough because it focused on business men and students while British Airways strives to serve everyone. Facebook was able to breakthrough because it focused on youths. So if you are going to stay ahead of competition; then get focus.
3. Strive to be unique
What sets your business apart from the competition? What does your business name or product stand for in the heart of your customers? What's your unique selling proposition? If you haven't given these questions a thought, then I think you are making a grave mistake because creating a unique selling proposition begins with you answering these questions. To outsmart your competitors, you need to be unique. You need to find your strength, work on it and broadcast it to the world.
As an illustration, Aliko Dangote set his company apart with speedy delivery and uniform price. Wal-Mart became a brand with its unique pricing strategy; Apple became a brand with innovation and Virgin Atlantic grew because it offered first class service to an ignored niche; "business people and students." So if your business is going to stay relevant in the marketplace; then you need to be unique.
4. Build a brand for your business
The fourth small business marketing strategies to outsmarting your competition is to build a brand for your business. You may say you don't have the huge marketing budget of the big corporations but you can build a brand in your own little way.
“If you are not a brand, you are a commodity.” – Robert Kiyosaki
By emphasizing on quality, striving to fulfill your brand promise and working on your overall brand image; you can build a strong brand image for your business. Most of the popular brands in the world today were smaller brands of yesterday. If you consistently invest in building a brand for your business; you'll stay ahead of competition.
“To succeed in business, you must build a brand and never destroy it. One competitive advantage I had when I ventured into manufacturing was my brand “Dangote,” which I diligently built in the course of my trading commodities.” – Aliko Dangote
5. Focus on the Customer
“A business absolutely devoted to service will have one worry about profits. They will be embarrassingly large.” – Henry Ford
In guerrilla marketing key point number two, I emphasized the need to focus on a niche. Now what's that niche made up of? A niche is a group of people with a common interest. Most businesses are so obsessed with keeping an eye on the competition that they ignore the main asset of their business which is the customer.
“Business is not just doing deals; business is having great products, doing great engineering and providing tremendous service to customers. Finally, business is a cobweb of human relationship.” – Henry Ross Perot
Now does that mean you should take your eye off competition? My answer is no but do it with moderation. You focus should rather be how to serve the customers more efficiently; your utmost focus should be to give the customer maximum satisfaction.
"What is good for our customers is also in the long run good for us." – Ingvar Kamprad
6. Connect with customers emotionally
All businesses try to communicate with the customers but not all connect with the customers. Your guerrilla marketing tactic here should be to discover your customer's soft spot and touch them right on that spot. One question on the mind of all your potential customers is "Wii-FM," meaning "what is in for me."
"Stop talking about your products and services. Customers don't care about products and services, they care about themselves." – David Meerman Scott
The answer to the "Wii-FM" question is the key to successfully connecting with your customers emotionally. Connecting with your customers entails knowing your customer's need and touching them at the point of that need. If you can successfully do this; you have nothing to fear about competition.
“Spend a lot of time talking to customers face to face .You will be amazed at how many companies don’t listen to their customers.” – Henry Ross Perot
7. Strive to achieve quality
The seventh guerrilla marketing to outsmarting competition is to give your customers the best of service. You must insist on quality and make quality a standard in your business. Insistence on quality at an affordable rate can set you apart from competition.
“Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.” – Steve Jobs
Never trade quantity and cheapness over quality because it's going to back fire. Debbi Fields, Henry Ford and Michael Dell are successful entrepreneurs that carved a niche for themselves because of their insistence on quality. Debbi Fields extraordinary insistence on quality led to the initiation of their company's motto "Good enough never is."
"Good enough never is. Set your standards so high that even the flaws are considered excellent." – Debbi Fields
8. Concentrate on innovation
“Innovation distinguishes between a leader and a follower.” – Steve Jobs
How did Apple become one of the most respected companies in the world? They made it through innovation. Concentrating on innovation was Apple's overall strategy to stay competitive in the market place. Apple's strategy was to stay competitive by providing the customers with constant innovative products that solves basic problems and all Apple's guerrilla marketing tactics revolved around that strategy. So if constant innovation helped Apple stay in the game; why shouldn't it do the same for your business?
“Pretty much, Apple and Dell are the only ones in this industry making money. They make it by being Wal-Mart, we make it by innovation.” – Steve Jobs
Being innovative doesn't mean spending millions of dollars in research and inventions; being innovative simply means being willing to try out new products and techniques to improve the value of your offered services. Being innovative is simply searching outside the box for faster solutions to people's problems so you can choose to compete with innovation or not, but know that a company driven by innovation will always stay ahead of the pack.
As a final note, these are eight effective marketing tactics you can apply to stay ahead of competition in your industry. I will like to emphasize that implementing the eight marketing tactics listed above is not advisable; rather, you will achieve more if you stick with one or combine at most three of the eight guerrilla marketing tactics.
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Posted: 16 Feb 2012 12:16 AM PST
Raising capital is one of the major business challenges faced by entrepreneurs; especially when it comes to starting a business from scratch. It's much easier to raise capital as an established entrepreneur than to raise capital as a first time startup entrepreneur.
Since the need for capital is a business challenge that stress entrepreneurs the most; I am commencing a series dedicated to helping you raise seed capital for your new business startup. This series will address the issue and challenges of raising capital and today; I will be tackling the challenge of raising seed capital from family and friends because one of the very first places entrepreneurs turn to when seeking startup capital is their family and friends.
The importance of family and friends in the life of an entrepreneur can never be over emphasized; so this article will be dedicated to teaching you how to leverage your family and friends to launch your business successfully.
Now how do you leverage your family and friends to successfully start a business?
How do you raise seed capital from your family and friends?
Well, I will advice you read on because I am going to tear this subject apart. This year, my team and I decided to directly attack the issues pressing entrepreneurs the most and our starting point will be the issue of raising capital. There are many creative ways to raise seed capital for your startup business venture but I want to take it from the grass root which is raising capital from family and friends.
Raising startup seed capital from family and friends happens to be one of the easiest avenues of raising capital that entrepreneurs can exploit but if wrongly done; you can get your fingers burnt and the process may even end up destroying the existing relationship you have with your family and friends.
Raising seed capital from family and friends is quite easy if you do things the right way. After all, most successful entrepreneurs and drop out billionaires started business with capital sourced from family and friends. Example of successful entrepreneurs that raised startup capital from family and friends include Richard Branson, Bill Gates, Berry Gordy, John Johnson, Ingvar Kamprad, Orji Uzor Kalu, Aliko Dangote, Li Ka Shing, Howard Hughes, etc.
Now if these famous entrepreneurs can successfully start a business from scratch with seed capital raised from family and friends; I don't see any reason why you can't do it. Now how do you raise seed capital from family and friends?
How to Raise Startup Seed Capital from Family and Friends1. Be in the Right Mindset
If you are not in the right mindset, forget about trying to raise seed capital from your family and friends. Now why do I emphasize you be in the right mindset before trying to raise capital from your family and friends? You need to be in the right mindset because you will still go through the entrepreneurial process of raising capital. The fact that you are trying to source capital from family and friends doesn't eliminate the odds of disappointment.
What if your trusted friend turns you down? What if your most loved one says no to your business plan? How will you feel if you get laughed at by your loved ones? The answer to these questions is the reason I emphasize you be in the right mindset. Before trying to raise capital from family and friends; you must be prepared to face rejection. In fact, expect disappointment from even the person you love most. The reason I emphasize you be in the right mindset is because disappointment from your family and friends can strain the good relationship shared.
I think I have had a personal experience with respect to this case. I remember vividly when I caught the entrepreneurial bug some years ago and began nursing the desire of running my own business. I had some excellent business ideas which I was excited about and my determination to scale through kept my head buried in books while my mates were partying. I even attended seminars to sharpen my entrepreneurial skills and learn how to build a business.
With a feeling of confidence and excitement about starting a business, I shared my business plan with my parents. But instead of getting a word of encouragement; all I got was a hard stare from my dad and a detailed explanation of how incompetent i am with respect to starting a business. My dad told me to my face that I was still a kid and advised me to face my studies.
To be sincere with you, I was very disappointed. In fact, I was annoyed with my dad back then. After all my effort and time spent developing a business idea, drawing up a business plan and honing my business skills; my dad had the effrontery to call me a (incompetent) kid despite the fact that I had spent reasonable time running his own business. I felt like giving my dad a punch in the face for challenging my competence; and if not for the encouraging words from my mom, I don't know what would have become of the sweet relationship between me and my dad.
As I lay on my bed and recalled this particular experience; it occurred to me that young entrepreneurs all over the world may also be going through this same experience and that was why I wrote this article. No matter where you are sourcing your startup capital from; always respect the odds that you can get turned down. Don't take rejection personal; it's the norm in the business world.
2. Build up your Credibility
Now since the odds of raising seed capital for your startup company remains the same despite the source you are exploiting; then how do you increase your chances of getting the financial support you need? The answer to that question is "credibility."
What are you known for in your family? What's your level of relationship with family and friends? Can you be trusted? How well did your past dealings with family and friends go? Have you handled any project on behalf of the family? How do you live your life? Are you an asset to the family or a liability? Are there any habits that could be a hindrance to your aspirations?
These are the questions you must answer before trying to raise capital from family and friends. Nobody wants to give money to a scumbag or an incompetent friend or relative and neither would I. I once told my immediate younger brother that I would never invest a dime in any of his projects if he doesn't gain a stronger control over his life and finances. I made this statement to help my brother have a greater sense of responsibility.
If you haven't got control over your life and the way you spend money; then it's high time you change and reconsider you life's pattern because a single bad habit can reduce your chances of raising money from family and friends. Remember that these two groups know you to the core; they know your strengths and weaknesses. In fact, they know personal things about you that even Venture capitalists and angel investors may never find out.
3. Have a Good Plan
Don't walk up to your members of your family or friends and try to raise money without a good business plan. No matter how much they love you, they will still want to know what you need the money for. Even if you are not going to share the intricacies of your business plan with them; at least they deserve to get an overview. Understand your plans like back of your hands especially when you are coming from a family of intellects or trying to raise capital from learned friends. If your plan sounds too shallow or incomprehensive; you may be denied the financial support you need. But before sharing your business plan with your family and friend; make sure the step one and two above are sufficiently taken care of.
4. Have a Good Story to Tell
Do you have a good story backing your business plan and intentions? If your answer is no; then you better reconsider your approach because your proposal and request may be thrown back at you. The fact that you are trying to raise capital from family and friends don't mean you should take them for granted. Threat them professionally with a touch of informality and back your business plan with a good story.
How did you develop your business idea? What are your chances of success? How viable is your idea? Try sharing the answers to these questions with your family and friends because it has been proven that humans listen to stories more than anything else. So share a story worth telling about your business plan.
5. Select your Targets
A good rule of thumb when raising seed capital from family and friends is this; "don't go telling every dick and harry in your family about your plans." Select a few prospects among your family and friends that have the potential to provide the capital you need and prepare a pitch tailored to their life pattern.
For instance, when I was trying to pitch my dad to invest in my business idea; I prepared myself properly because my dad was a strict individual who knows the fundamental intricacies of business. He doesn't believe in throwing money around; and when it comes to money issues, he is strict about it with his children.
So knowing my dad was a no-nonsense person; I had to be straight and clear while pitching my ideas to him. Though, I still got turned down; I left his presence with some lessons about the challenges involved in raising capital.
The lesson I am trying to extract here is this; "the way you pitch a family member of high intellect will be very different from the one used to pitch a friend who is an entrepreneur; or a family member who is stingy when it comes to money." Different pitch for different people and situations; never use the same words for people with different core values. What may attract a professional investor may turn off an scholar.
6. Sell Yourself
The next key to successfully raising seed capital from family and friends is your ability to sell yourself. Why should your family and friends give you their hard earned money? How are they sure the money will be used judiciously? How are they sure you are not trying to con them? You have failed on a previous project, why should they trust you on this one?
This is where selling yourself comes in. This is where you sell your potentials and competence to members of your family and friends; this is where you prove that you know your onions. If you successfully carry out step one to five and you miss it here; all your effort will be in vain. You will never get the needed capital.
7. Ask for the Money
If step one to six goes successfully; then you have to take the next action step which is asking for the money. Before asking for the money; you must be definite on your plans, you must know how much you need and the terms involved. Nothing annoys me more than an entrepreneur pitching me with his business plan and when I ask how much in capital he wants to raise; he or she becomes speechless or uncertain. So when raising capital from family and friends; it's advisable you know your business plan like the palm of your hands, sell yourself excellently and ask for the money.
As a final note, these are my seven strategic action step plan to raising seed capital from family and friends. Remember, the key secret to raising startup capital from any source is creativity; thorough understanding of the business fundamentals and a good presentation. Once these three keys are locked in synergy with the seven action steps listed above; you will be able to raise any amount of startup capital you need.
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Posted: 15 Feb 2012 10:54 AM PST
If you visit a construction site or a chemical plant, you might see some warning signs. These signs are called "red flags" and they alert you of impending danger. Just as there are red flags in life, so are they also in business. In business, red flags are there to save us but most of the time we ignore it.
"Failure is an opportunity to begin again more intelligently." – Henry Ford
In the process of starting a business, there are signs of business failure you must watch out for. I am going to reveal this signs to you. Whenever you see these danger signs in your business, you must act fast.
10 Cause of Small Business Failures You Must Watch Out For1. High Debt Ratio
The first cause of business failures you must watch out for is high debt ratio. If your business is being owed much, maybe by giving too much credit to customers, then your business is at risk. Also, if your business is heavily indebted, then it's at risk of folding up. An antidote to this is for you as an entrepreneur to always carry out an acid test ratio and keep a keen eye on the debt to equity ratio.
"There is one paradoxical characteristic every entrepreneur must possess to succeed. An entrepreneur must be able to persuade his debtors to pay their debts promptly and at the same, must tactically delay payments to his creditors." – Ajaero Tony Martins
2. High level of mismanagement
The second cause of business failures is high level of mismanagement. If your key staff lacks professionalism, then your business is in trouble. Since your staff are in charge of running the day to day affairs of your business, their professionalism should not be compromised for anything.
"There will be times when you will have to be abrasive, even brutal to members of your staff. Don’t worry that your people will say bad things about you because of this. They already have. But in general, try to be pleasant and accommodating. Try to please the greatest number who work for you that you can; antagonize the fewest. Blow smoke." – The Mafia Manager
3. Unexpected resignation of staff
The third to watch out for is the unexpected resignation of staff from sensitive position. This can really pose a threat to your business so you must be prepared for it. In business, poaching is really a factor to deal with. Big companies are always poaching good employees away from other companies by enticing them with improved salaries and incentives.
"The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area." – Bill Gates
4. Inadequate Inventory
Another factor that leads to small business failures is inadequate stock or inventory. I don’t need to emphasize much on this because the point is clear. If you have inadequate stock either for production or for your customers, your business is bound for failure. Also; if you stock too much inventory, you are still bound to fail because you are tying down working capital.
"Inventories can be managed but people must be led." – Henry Ross Perot
5. Selling products below cost price
The fifth cause of business failures is the sales of goods and services below cost price. Sometimes in business, cash crunch, fierce competition or economic factor make businesses sell their goods below cost price and this can ruin your business.
6. Dwindling working capital
Dwindling working capital also cause of business failures and you must watch out for. Depreciating working capital may be as a result of unnecessary expenditure, too much inventory and weak cash flow management on the part of the entrepreneur.
7. Consistent negative cash flow
The seventh factor that could lead to business failure is consistent negative cash flow. Cash flow is to business what blood is to humans. No business can survive without strong cash flow management. A solution to negative cash flow is to hire a professional accountant to keep a keen eye on the cash flow.
"The most important word in the world of money is cash flow. The second most important word is leverage." – Rich Dad
8. Declining Profit
Declining Profit, if not handled properly can cause business failure. If there is a down turn in profit margins due to competition or deflation, your business could be negatively affected. A solution to declining profit is to increase your sales volume so you can make more profit on turnover or better still; diversify.
9. Loss of market share
Loss of market share is the ninth cause of most business failures. If you observe you are losing your market share due to either competition, new technology, innovation or trend, then this is a sign that your business is on the verge of been liquidated.
"Your greatest and most powerful business survival strategy is going to be the speed at which you handle the speed of change. That speed of change is trend." – Ajaero Tony Martins
The only prevention to loss of market share is to keep your ears to the ground for any new industrial trend, technology or innovation. You must also keep an eye on your competitor and be quick to act and adapt to any positive or negative industrial change or once again; you can diversify.
10. Inability to secure operational capital
Lastly, your inability to secure funds from financial institutions could lead to business failure. I really don’t know what to say on this one because raising capital is one of the most difficult tasks in business. But it is often said that "where there is a will, there is a way." If financial institutions refuse to assist you financially, you have to turn to other sources of funds.
In conclusion, the overall cause of business failure is lack of control on the part of the entrepreneur. Never leave total control of your business to your employees even if they are professionals. Remember, professionals are only there to advise you on what to do. The final decision lies in your hand as the entrepreneur and business owner.
"Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do." – The Mafia Manager
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Posted: 15 Feb 2012 10:28 AM PST
"Stop talking about your products and services. People don't care about products and services; they care about themselves." – David Meerman Scott
The whole concept of marketing and sales is to positively toy with the psychology of your customers with the aim of selling more products. Influencing your customer's psychology and selling your products fast begins with knowing your customer's soft spot and your product's selling edge. When developing a marketing campaign around a product, attempts should be made to make it highly influential, so that the decision making of the customer will totally be in favor of your company.
Everyone loves to receive something for free especially when there's no condition attached to it. When it comes to marketing, the word "free" is a very powerful term. So in this article, I will be sharing with you tips and tricks you can utilize to influence the mind of your customers. I will be telling you how to practically make your customers fall in love and stick with your company even in the face of stiff competition. Ultimately, I will be teaching you how to use the word "free" to increase brand awareness and customer's loyalty. These strategies are not only applied by the super successful salespeople but also by larger companies.
One of the aims of an organization is to outperform the competition not just by increasing sales but by selling more products than the competition in less time. Without wasting much of your time, below are strategic steps to influencing your customer's psychology and selling your products fast.
"We want to be able to sell you anything, anywhere, anytime you want it." – Barry Diller
Please before attempting to apply any of these strategies, ensure that you have a quality product that satisfies a need or solves a problem. If your product doesn't fulfill the three criteria's above, don't bother promoting it because it will be a waste of resources.
How to Influence Your Customer’s Psychology and Sell Your Products Fast1. Offer Your Customers Something Valuable for free
Call it the mutual exchange principle or anything you deem fit and you won't be wrong. Your company can start off on a good note by giving away something valuable for free to the customer. Whether it’s a free gift or anything valuable, your aim here is to allow the customer have a taste of your company's product or services risk free. Your customer is bound to take your offer the first time, but when next you repeat the offer but this time with a price tag; he/she will feel obliged and try to return the favor. If the customer finds satisfaction with your product, he/she will definitely buy it next time.
Sales professionals sometimes get confused with this principle. For instance, they claim it is ineffective and wrong to promote a product according to this principle. So they use the "Spend over $25 and get a free T-shirt" approach. But in retrospect, the offer is not totally free. The customer has to spend to get the free product.
The principle of mutual exchange states that products to be used as incentives must be given totally free without any condition to be fulfilled. For example, "Get the latest lipstick shade absolutely free" will do the trick. If the shade is really good, they will buy it when next they need it and might even end up buying other shades of lipstick.
Software companies use this tactic a lot. They produce quality software and give them away for free with the hope of building brand trust. Afterwards, they sell upgrades to the same customers that downloaded their free software. Giving customers your products initially for free helps to build trust; It gives customers the opportunity to feel your company's standard and most importantly, it gives them the confidence to patronize your company and refer others.
Another trick is to come up with something of high value, while making sure that your company incurs only small or no cost in producing it. A good example of such is information products. I personally use this tactic a lot. For instance, my company provides you advice on how to start a business through this blog for free without obliging you to buy anything from us.
Another tactic to employ while giving your customers free gift is to influence your customer into making a commitment; this can prove profitable for your business in the long run. The trick is to make the customer take small steps toward the goal, without them realizing it. For instance, when a customer requests for some information, provide them with relevant information for free and make them fill a form or give you their contact information. This is like getting them to make a commitment to get offers and information about your products in future.
You can also tempt the customer by saying that the information made available to them is a big time secret and is not known to anyone at all but please, make sure your information is truly valuable. Some marketers mess this strategy up, by claiming they are providing very valuable information. But in the end, it turns out to be another piece of advertisement.
2. Give out Free Samples to Targeted Customers
"I use nothing but the best ingredient. My cookies are always baked fresh. I price cookies so that you cannot make them at home for any less and I still give cookies away." – Debbi Fields
Giving away free samples of your products to your targeted customers is an effective targeted marketing strategy. Most companies find it difficult to give something away and those who dare to give away something make the mistake of distributing samples of poor quality or rejected products. This certainly will hurt your credibility and reduce the customer's trust towards your company and your product. They will assume that the product you are selling is actually of poor value and won't go ahead to buy it.
Mrs. Fields Cookies, a company that does millions of dollars in sales annually started out using free samples as a marketing strategy. When Debbi Fields launched Mrs. Fields Cookies, she had no marketing budget, no sales experience and no business skills. All she had was her baking skill. So how did she breakthrough? She simply loaded her tray with some cookies and resorted to giving away the cookies to pedestrians. Today, her company still gives away cookies whenever they penetrate a new territory because the founder has discovered a strategy that works; the strategy of giving away free samples. At this stage, let's look at another strategy that can help you influence your customer's psychology and sell your product fast.
3. Create Artificial Scarcity
Direct mail marketers are excellent at using this strategy; they have mastered the art of causing a buying frenzy by creating artificial scarcity. When developing or sending out a marketing campaign, be sure to use words which stimulate immediate action. Words such as "Limited time offer" or "Offer ending soon" or "Offer open while stock lasts" are really motivating.
The trick here is to create artificial scarcity in the mindset of your customers; that's why I titled this article influencing your customer's psychology. The customer is left with the impression that the offer will end soon, so they will buy it at the very first chance. This trick works well especially with customers who have an interest in antiques, collectibles, information products and anything which is not easily available.
As a final note, I challenge you to implement these strategies on your business today and I will see you at the top.
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