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Welcome to SCORE!
Greetings!
SCORE, Service Corp Of Retired
(and Working) Executives, Counselors to America's Small Business offers
free counseling to St. Louis area small businesses.
For more
information contact us at 314-539-6600 Ext. 242 or www.stlscore.org to learn more about what SCORE offers.
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MO
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636-447-5000
St. Charles Economic Development Center
5988 Mid Rivers Mall Drive
St. Charles, MO 63304
Kirkwood Office
314-800-1527
Inside National City Bank
333 S. Kirkwood Rd
Kirkwood, MO 63122
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An economic downturn
is a great time to start a business!
It sounds
paradoxical, but think about it. Costs are lower, and more talent is available,
thanks to layoffs. Prospective clients are more likely to try a new supplier
who can help them cut costs or increase their competitiveness. Established
players, too, are focused on cutting costs instead of increasing market share.
All of this helps
clear the way for the next venture with the better mousetrap -- but only if the
entrepreneur can write a clear and convincing business plan. Anything less is
heading straight for the bin. Because, let's face it, the intended recipients
of such business plans -- investors and lenders, family and friends, anyone
with capital to invest in the project -- are all much more wary of risk now in
these turbulent times.
Truth be told, most
business plans fail to make much impression on potential investors. Most aren't
even read in full. Their shortcomings tend to be obvious even in a two-page
executive summary.
In what follows, read about the deal-killers found in the five most commonly rejected types of
business plans
HERE I AM, NEVER MIND
THE PROBLEM
In this kind of plan,
the writer is smitten with the elegance of his or her technology. The plan
begins not with the identification of a customer problem to resolve, but with a
detailed explanation of how the technology works, why it is cutting-edge or
state-of-the-art, and how it is better, faster and cheaper than current
solutions.
Such a plan is
typically readable only by those already in-the-know in its particular
technical realm.
What matters more
than great technology or a great idea is the problem or pain that the new
solution or technology resolves.
There is a better
way. A good business plan starts with a clearly defined problem -- something
that's really troubling or compelling -- supported by evidence from marketing
research, testimonials, letters of intent, or whatever, that the pain is real.
If you can convince
your readers that this problem is real, they'll be hooked, at least for a
while, as they read on to see whether you've found a solution that can resolve
the pain.
Next, identify
exactly which customer group has that pain, even if the initial target market
is a small one. Investors know that, if a sustainable beachhead can be
established in an initial target market, success in a niche market can serve as
a platform for taking the solution to other market segments as the business
grows.
A COKE FOR EVERY KID
IN CHINA
This gambit rests its
case on a plethora of secondary data to show how large and fast-growing a
market is. The plan then makes a heroic leap and assumes that the new venture
will grab X percent of that market -- it could be 1%, 10%, 30% or whatever.
"Surely," the plan argues, "with the large number of customers
in our market, we'll easily get enough. We only need a small fraction to have a
very nice business."
Plans like this
reveal that the writer isn't sure what the initial target market is. It's much
easier to win a large share of a carefully targeted but narrow market than it is to win a small share of a very large market.
Further, penetrating
a new market requires customers who are aware of the new product, and
distribution systems that allow them to buy it. Coke-for-Every-Kid plans gloss
over these details. They ignore the difficult work -- not to mention the
expense -- of crafting a strategy to gain market awareness, persuade customers,
and set up distribution.
This kind of plan
also often signals that the writer is reluctant to get out from behind his or
her Internet connection and actually talk to prospective customers. Talking to
customers is harder work, but brings all kinds of benefits and insights, not
only to the business plan, but also to the business itself. Such conversations
can reveal what customers really want -- and help tailor the offering to meet
those needs.
You can probably find
secondary data that support such things as the size of your market and trends
that suggest your market will or won't grow. All such evidence should be cited,
with its source, to show that the data are reliable and credible, and that you
are, too. But that's just the start. You'll need primary data, too, from
interviews you carry out or a survey you conduct, to demonstrate the likelihood
that customers will buy what you have to offer.
Conduct some
experiments, even a market test. The more hypotheses you can test before
writing your business plan, the more convincing you'll be. One caveat, though:
If you wait for all of the evidence before you get started -- analysis paralysis
-- the opportunity may well be lost, as someone else may beat you to market.
Every assertion in
your plan should be backed up by evidence. If it's not, take it out, or stop
writing while you gather the evidence you need.
JUST LOOK AT OUR
(PAPER) PROFITS
Of our five
fundamentally flawed business plans, this one is perhaps the most difficult to
spot.
The archetype is the
failed Internet business Pets.com, which offered pet supplies via the Internet.
Simply put, the economics of delivering large, heavy bags of dog food one at a
time could not compete with the economics of putting pallet-loads of the same
bags of dog food on supermarket or discount-store shelves and letting the
customers do the delivery.
Such business plans
often contain detailed spreadsheets showing why the numbers would work. That's
why these kinds of plans are difficult to spot -- the numbers look like they
work. As one entrepreneur told me, "With a couple of beers and an Excel
spreadsheet, you can make a lot of money in no time," or so it will seem.
While consumers certainly liked the idea of having Fido's dog food delivered,
they were not prepared to pay a price that would enable the economics to work.
Savvy investors not
only tear apart the spreadsheets but ask fundamental questions. Does the
revenue model depend on making a large number of small transactions (think
Amazon.com) or a small number of large ones (automobile manufacturing)? Do its
profit margins depend on high gross margins to cover high product-development
costs (think Microsoft), or lower margins to cover slimmer operating costs
(Costco)? Is a large investment in development or other fixed assets required
(a manufacturing facility, for example)? Is the working capital cycle favorable
or unfavorable (do you expect to be paid in advance), or will you have to carry
inventory and receivables that can tie up scarce cash (manufacturing and
distribution businesses)? Some combinations of these factors are clearly
attractive. Others are obviously flawed from the start.
To Be Continued.... See our August Newsletter
---
Dr. Mullins is an
associate professor of management practice at London Business School and holds
the David and Elaine Potter Foundation term chair in marketing and
entrepreneurship. He can be reached at reports@wsj.com.
---
For Further Reading
These related
articles from MIT Sloan Management Review can be accessed online at
sloanreview.mit.edu/wsj
Closing the Gap
Between Strategy and Execution
By Donald N. Sull
(Summer 2007)
To
learn more about Business Plans contact a SCORE Counselor. A SCORE Counselor can help you solve problems
and plan for the future. Contact SCORE at 314-539-6600 Ext. 242, M-F 10 am to
3 pm or go to www.stlscore.org.
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IRS's Top Seven Tax Tips for Taxpayers
Who Have Started or Are
Thinking of Starting a New Business
Anyone
starting or thinking of starting a new business should be aware of their
federal tax responsibilities. Here are the top seven things the IRS wants you
to know if you plan on opening a new business this year.
1. First,
you must decide what type of business entity you are going to establish. The
type your business takes will determine which tax form you have to file. The
most common types of business are the sole proprietorship, partnership,
corporation and S corporation.
2. The type
of business you operate determines what taxes you must pay and how you pay
them. The four general types of business taxes are income tax, self-employment
tax, employment tax and excise tax.
3. An
Employer Identification Number is used to identify a business entity.
Generally, businesses need an EIN. Visit IRS.gov for more information about
whether you will need an EIN. You can also apply for an EIN online at IRS.gov.
4. Good
records will help you ensure successful operation of your new business. You may
choose any recordkeeping system suited to your business that clearly shows your
income and expenses. Except in a few cases, the law does not require any
special kind of records. However, the business you are in affects the type of
records you need to keep for federal tax purposes.
5. Every
business taxpayer must figure taxable income on an annual accounting period
called a tax year. The calendar year and the fiscal year are the most common
tax years used.
6. Each
taxpayer must also use a consistent accounting method, which is a set of rules
for determining when to report income and expenses. The most commonly used
accounting methods are the cash method and an accrual method. Under the cash
method, you generally report income in the tax year you receive it and deduct
expenses in the tax year you pay them. Under an accrual method, you generally
report income in the tax year you earn it and deduct expenses in the tax year
you incur them.
7. Visit the
Business section of IRS.gov for resources to assist entrepreneurs with starting
and operating a new business.
To get
the latest IRS news and products and services, subscribe to e-News for Small Businesses on IRS.gov
click "Subscribe Now" at the bottom of the page and enter your e-mail address.
The IRS Small Business and Self-employed Tax Center at http://www.irs.gov/businesses/small/index.html
has more information about starting and operating a new business.
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SCORE WORKSHOPS
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SCORE Chapter 21 Monthly Seminars
Improve Your Business!
REGISTER NOW
"How to Start and Manage Your Own Business"
Saturday, August 15, 2009
8:15 A.M. to 3 P.M
Fee - $50.00
St. Louis Community College - Rm SO-105
Meramec Campus
Register Now!
Upcoming SCORE Seminars
"How to Start and Manage Your Own Business"
Sept. 12, 2009
St. Louis C.C. @Meramec
Rm SO-105
SCORE Workshops
" Internet Marketing"
Friday, Aug. 28, 2009
Time: 2 pm to 4:30 pm
Fee: $30.00
Be successful and recession-proof
online
Learn - - Why Online Marketing is a Must
- How to Make Google Your
Best Friend
- Hidden Lead Generation
Techniques
- How to Capture More Business
in 30 days
- Why You May Be Losing 30% of
Potential Sales and What to Do About It
- E-Mail Follow-up That Works
(Even Better In a Down
Market)
- How to use Twitter,
Blogs and Social Networking Sites for Low Cost Marketing
Speaker is
Chad Weber, The Legendary Marketer
Attendee Limit: 20
St. Louis Enterprise Center
743 Spirit Park Drive
Chesterfield, MO 63005
To learn more about any of these courses and dates, times and how to register -
CLICK HERE
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Fictitious Business Name Registration and Expiration
Change in Law
-Missouri changes the law regulating the registration of fictitious business names
by Jeffrey H. Pass
June 9, 2009
Missouri law requires any person or business entity conducting business
in the state under a name other than its own "true name" to register
that business name with the Secretary of State. Until recently, these
fictitious names did not expire. A recent change in Missouri law,
however, has placed an expiration date on these fictitious name
registrations.
Any fictitious name registration filed on or before August 28, 2004,
must be renewed by August 28, 2009, or the registration will
expire. Fictitious name registrations filed after August 28, 2004, will
expire five (5) years after the date in which they were filed.
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Resources For You
St. Louis Fed Launches New Online Financial Regulatory Reform
Timeline
The
"Reforming the Nation's
Financial System: A Timeline" is a new online feature designed
to help the public keep track of major financial regulatory developments. It's
a companion to "The
Financial Crisis: A Timeline of Events and Policy Actions"
site that was launched in December 2008.
The
regulatory reform timeline site is available at:
http://www.stlouisfed.org/regtimeline/
The
financial crisis timeline site is available at:
http://timeline.stlouisfed.org/
Courtesy of the St. Louis Fed web team  SCORE Social Media
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3 New Tenants, 2 Expansions & 2 Graduations at EDC Business Incubators
ST. CHARLES COUNTY, MO --- Three new business tenants, two
business expansions and two graduations from the small
business incubator facilities operated by the Economic
Development Center of St. Charles County are being announced
by EDC officials.
"The resources and opportunities for entrepreneurs to launch
their business dreams have never been better than they are right
now," said Craig Frahm, the EDC's chief financial officer and
incubator manager.
For more information about EDC incubators or tenants, contact Craig
Frahm at 636-441-6880 ext. 228.
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Brought to you by SCORE "Counselors to America's Small Business," a nonprofit association and resourc e partner with the U.S. Small Business Administration. SCORE is dedicated to entrepreneurship and the formation, growth and success of small businesses nationwide. Since 1964, SCORE has helped more than 8 million entrepreneurs.
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