new ventures business development provides resources for starting and growing businesses
So, you have a great idea?
There are only three kinds of business ideas:
- An idea that addresses an existing need that has previously gone unsatisfied.
- An idea that addresses an existing need better than the alternatives.
- An idea that is so revolutionary that it creates its own demand.
If you believe you have a great idea, into which category does it fall? Depending on the category there will be unique opportunities, advantages, and challenges to consider.
In the first category, the key is to determine if there really is a need. Simply inventing something or creating an idea isn't enough; someone has to want to buy it. And enough people have to want to buy it to allow you to stay in business. Inventing an electric dog polisher is an interesting concept, but the market would be extremely limited.
In the second category, ideas that address needs don't have to be original. If you can develop a way to make a product or deliver a service faster, cheaper, bigger, smaller, prettier, tastier, sleeker, better, than the current alternatives, you may have a winner. There is absolutely nothing wrong with elaborating on or improving someone else's idea. Remember, Ray Kroc, the founder of the McDonald's Corporation, did not invent the McDonald's hamburger or the process of speedy service. However, he created the clean, all-American atmosphere of McDonald's and the system of franchising that is the basis of the company's success.
Finally, some ideas are so revolutionary that they create their own need. Fifteen years ago computers were a rarity in the workplace. Today it is hard to find a business or a home that doesn't depend on a personal computer. Unfortunately, few entrepreneurs reap the benefits of the revolutionary idea. In order to create need, enormous expenditures, advertising, and marketing are necessary before any revenues are realized.
The great thing about ideas is that they are available to anyone. Almost any reasonably intelligent person who is aware of what is going on in their society, community, and industry, and is willing to immerse themselves in study, thought, and contemplation can generate a workable idea.
Getting started
Approximately 80 percent of new businesses fail in the first three (3) years due primarily to the lack of a thorough business plan and sufficient capital., Getting started in a new business, therefore, requires long-term planning and good decision-making, including choosing a location, developing a business plan, finding financing, and marketing the product. A good resource for this planning stage is the U.S. Small Business Administration.
Getting help from the experts
Because starting a business is an overwhelming process, there are a number of outside professionals with whom a business owner will want to establish a relationship in order to guarantee success. Some of these professionals include
- An accountant to help set up a good bookkeeping system for the business;
- An attorney to assist in choosing the legal structure, drawing up agreements and contracts, and providing information on legal rights and obligations;
- A banker to help obtain financing and financial information;
- An insurance agent or broker to advise about the type and amount of coverage that is best for the business; and
- A consultant to assist in areas such as management, marketing, promotion, and financial planning.
Choosing a location
The following are some of the factors that should be considered when choosing a business location:
- Specific needs of the business — space, special installations, etc.;
- Zoning requirements (check with the local planning office);
- Customer base of the area;
- Traffic patterns, accessibility, and parking;
- Nature of the competition; and
- Cost and lease terms.
The business plan
Every business begins with an idea, and a business plan is the blueprint to following through on this idea. Writing a business plan helps business owners consider all the parts of the business in detail, including the industry, competition, customers, goals, and potential for success.
The business plan will act as a guide to help allocate resources properly, handle unforeseen complications, and make the best decisions based on the business’ goals.
The business plan should include:
- An introduction describing the business, its goals, and the advantages the business has over its competitors;
- A product description identifying competitors and the position of the product in the market;
- A marketing plan defining the products or services offered and identifying the customer demand, target market, pricing strategy, and advertising;
- Financial information, including financial sources, the amount of initial capital, a monthly operating budget, expected return on investment, and monthly cash flow for the first year;
- Operating information accounting for how the business will be managed on a daily basis, the equipment necessary to produce the products or services, and production and delivery of products or services; and
- A concluding statement summarizing business goals and objectives and expressing the commitment to the success of the business.
Financing the business
Sufficient capital is essential for both the start-up and continuation of a business. Ideally, a new business should have a 12-month cushion to handle all of the expenses without counting on revenue from the business.
The majority of new small businesses are capitalized by their owners' savings and salaries, loans from families and friends, and loans using automobiles, homes or other assets as collateral.
In most cases, a business needs a well-developed and convincing business plan that contains both short- and long-term projections based on realistic figures covering at least two to three years. Lenders usually will require profit and loss statements, tax returns, and a current balance sheet; a good business plan is, therefore, a crucial part of any loan package.
Here is what bankers look for when you approach them to finance a startup business:
- Track Record
- As a startup, you must convince your banker by your business plan that your business will be successful.
- Business Credit
- Since your business is new, the bank will look closely at how you've repaid personal debt. Get a copy of your credit report. Address any problems up front.
- Personal Investment
- A bank doesn't want to provide all the money to start your business. The amount you invest from your personal assets shows how confident you are in your ability to manage a profitable business.
- Collateral
- The bank needs to have something with which to secure the loan. You can provide information on this in your financial statements. This will show assets, liabilities, and owner's equity.
- Repayment
- Shows how you'll repay the loan with a monthly cash flow projection. Include details about the assumptions you used.
- Business Plan
- This helps the banker understand your vision, critical to your financing request. It also helps you focus ideas and strategies and measure their effectiveness down the road.
- Experience
- You should have experience and expertise to succeed in your industry. Prepare a professional resumé or biography that demonstrates this.
Marketing the business
In order to market the product or service effectively, a business should develop a marketing plan to determine its customers, competition, and how to reach its target market. The first step in developing the marketing plan is to define the product or service and its features and benefits. It is also important to explain how the product is different and better than the competition. This step enables the company to place the product competitively in the market place. After defining the product and its competition, you can define the target market. Target markets can be described by demographic and lifestyle characteristics. Once the target market is pinpointed, it is time to create a communications strategy. It is important to know what forms of advertising will reach the target customer most effectively (radio, TV, magazine ads, mail, Internet, etc.). In addition, a good marketing plan should include a pricing strategy, sales forecast, and distribution plan.
One way to develop a successful marketing plan is by conducting market research. This will help in defining the target customer. Market research helps to clearly define the target group by demographic characteristics such as age, gender, economic status, lifestyle, geography, and other parameters. In addition, it helps to assess the competition and forecast industry trends. This information can come from existing sources (secondary research) or by gathering it yourself (primary research). Most businesses need both to effectively develop a successful marketing strategy.
Primary research provides information such as where customers live; how they learned about the business; and whether they are satisfied with the product selection, prices, and store appearance. Information can also be gathered about the strengths and weaknesses of the competition by shopping in and observing their businesses directly, buying and evaluating their products or services, and asking customers their impressions.
Secondary research comes from many resources that provide demographic characteristics of customers or trends in the industry. This information is available at the library or on the Internet. In addition, market research professionals are available for hire to do this research.
The following are some of the many government and private resources available to help with the market research and business plan:
- U.S. Small Business Administration,
- U.S. Department of Labor Bureau of Labor Statistics,
- STAT-USA/Internet.
Marketing on the Internet
Marketing on the Internet is a new option that is quickly becoming popular with small businesses. This method offers the chance to reach large numbers of people easily without printing and mailing costs. In addition, it provides an opportunity for customer feedback through online surveys and e-mail, and it evens the playing field between small and larger businesses. The New Ventures Business Development was created to assist businesses with leveraging the Internet into its operations.
Entering the global marketplace
Many small businesses are finding new markets in countries around the world. Exporting is potentially very profitable, but it takes planning and commitment. There is help available to those businesses interested in exploring this option.
One such program is available through the International Trade Division at the North Carolina Department of Commerce. This group assists North Carolina companies in finding new customers in overseas markets. The state understands that locating quality foreign prospects is the number one ingredient in a company's success in international trade. The available services include buyer/supplier networking, on-site sales representation, dissemination of trade leads, and coordination of trade shows and missions.
Insuring the business
It is important for any business to purchase a number of basic types of insurance. The types of insurance listed below are some of the most commonly used and are a good starting point for evaluating the businesses' insurance needs.
- Liability
- Property
- Basic Fire
- Extended Coverage
- Theft Coverage
- Vehicle
- Product Liability
- Health
- Business Interruption
- Office and Director
- Workers' Compensation
- Home Office
- Professional and/or Malpractice
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Other guides
Other getting started guides are available online.
U.S. Small Business Administration
N.C. Department of Commerce Business ServiCenter
N.C. Small Business and Technology Development Center
South Piedmont Community College Small Business Center
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