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Spark
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Coomon budgeting mistakes |
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Written by Alice Nicholls
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Q: What are the most common mistakes new business owners make when budgeting, and how can I avoid them?
A: If the past five years have taught us anything, it's that flashy business and marketing plans mean nothing if they are unaccompanied by a sensible long-term financial strategy. Numbers can lie in the short-term, but the truth almost always comes out in the end. So as we prepare for the real New Economy, how can entrepreneurs learn from the mistakes of their predecessors? Avoiding these five common mistakes will help keep your million-dollar idea from becoming a million-dollar nightmare:
1. Overstating projections. Enron was not the first company to over-promise and under-deliver, and, unfortunately, it won't be the last. Investors are occasionally fooled by numbers in the short term, but in the end the funded company almost always gets hurt. Realistic budgets and projections may lengthen your search for funding, but when the money does arrive, it will be honest money, and you should then have a profitable plan to follow for several years to come.
2. Ignoring your immediate budgetary needs. On the other hand, if your plan shows that you need $50,000 to take a product to market, don't ask for only $30,000. Potential investors and bankers will only wonder why they should give you money for a project that will fail without additional funding. This was the sad lesson of the dotcom bubble. Companies burned through their initial seed money without coming close to profitability and then gave up. Investors have become more savvy and would rather spend $50,000 in a smart fashion than throw $30,000 out the window.
3. Assuming that the existence of revenue is indicative of being cash-flow positive. In virtually every transaction, there is a lag time between the finalization of the deal and the completed cash collection. This is a fact of business and should not be a problem, assuming you are prepared. Unfortunately, many businesses aren't and run into serious cash-flow problems because they spend money they don't yet have. Perhaps what's most troubling is many of these purchases could easily have been delayed for 30 days, when the available money is finally in the bank. A little wisdom, discretion and foresight can go a long way toward corporate survival.
4. Forgetting about Uncle Sam. End-of-the-day balances can often appear larger than they really are. Sales tax on revenues and employee withholdings may sit in your account temporarily but will ultimately be owed to the government. Your balance sheets should not count these finances as holdings, otherwise you run the risk of budgeting for future projects and costs that you will not be able to afford.
5. Mismanaging the advertising timeline. It seems so elementary: Advertising leads to sales. However, many budgets show advertising costs as a percentage of sales in the same period. To be truly effective, an advertising/marketing campaign will have to be initiated at least one period before sales can be expected. When the additional out-of-pocket costs are taken into account, a healthy advertising budget is needed before any revenue can be assumed. Failure to budget the appropriate items in a strategic time frame will under-utilize finances needed to achieve these sales goals and can lead to overspending in later months.
Formulating a vision is the hard part. Crunching the numbers is far more simple, yet it is where many dreams are shattered. Entrepreneurs who treat their budgets with the same meticulous care as their other components are the ones who survive.
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Improving your networking |
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Written by Alice Nicholls
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After two decades of running the world’s largest networking organization, I've certainly seen a lot of networking faux pas. I’ve put together a few of the most glaring blunders in networking etiquette I’ve seen over the years that you should avoid.
Faux Pas #1: Not responding quickly to referral partners
This one really troubles me. I can't imagine getting a call from a networking partner and not responding immediately, but unfortunately, this seems to happen with some regularity. Not long ago, someone I know had a referral to give a gentleman in his networking group. He called the associate and left a message at his office as soon as he knew the referral was viable. A day went by without a return call, so he called again, saying it was important to connect.
He was finally able to speak to his networking associate at their next meeting. He asked him why he didn't return his call and the associate said, "If I knew you had a referral for me, I would've called you back immediately." He still gave the referral at the meeting, and, to no one's surprise, the person referred ended up working with another vendor because no one got back to him in a timely manner.
Treating each of your networking partners as one of your best clients is critical. Return phone calls from them immediately, as it speaks to your credibility and reliability as a professional.
There are countless examples of people receiving referrals at networking groups and then contacting the referral a few days later. The old phrase, "If you snooze, you lose," is apropos here. If the referral knows you had her name and number on Monday and took your time calling, that sends a negative message about your business.
Faux Pas #2:Confusing networking with direct selling
One of my company's directors struck up a conversation with a woman business owner at a networking function. When the business owner asked our director what she did, she said she helps owners build their businesses through networking and referrals. The business owner smiled and said, "I’m really good at networking. I’ve been doing it for a long, long time."
Curious, our director asked her, "So what’s your secret?" She stood up straight and said, "Well, a friend and I enter a room together. We imagine drawing a line down the middle. She takes the left side; I take the right side. We agree to meet at a certain time to see who collected the most cards. The loser buys the other one lunch."
The director curiously inquired, "So what do you do with all those cards?" Again, proudly, the business owner said, "I enter them into my distribution list and begin to send them information about my services. Since I have all their information, they’re all good prospects, right?"
This is a classic example of an entrepreneur not understanding that networking isn't about simply gathering contact information and following up on it later. That's nothing more than glorified cold calling. It gives me the chills. I used to teach cold calling techniques to business people. And I did it enough to know that I didn’t want to ever do it again. I've devoted my entire professional life to teaching the business community that there's a better way to build long-term business.
Faux Pas #3: Abusing the relationship
There are many ways I’ve seen networking partners abuse relationships, but the following story is one of the most glaring examples.
A woman I know was invited to attend a 50th birthday party of an associate who used to belong to a networking group in which she also participated. They once had a long-term working relationship, and, out of respect, she decided to attend. When she got to the door, she looked through the window and noticed people were arranged in a semicircle, listening to a presenter in front of an easel board. When she stepped in, it was very obvious the partygoers were being recruited for a business opportunity. As resentful as the woman felt, she and other mutual friends found it difficult to remove themselves from the "birthday party," despite the fact that the only refreshment being served was the company’s diet shake!
Never mislead your networking partners. For that matter, never mislead anyone. Trust is everything when you're talking about relationship networking. Inviting people to a "birthday party" that turns out to be a business opportunity pitch isn't being honest with the very people with whom you want to build a trusting relationship.
All these faux pas directly relate to good people skills. The prevailing theme of all three is to treat your referral partners and potential referral partners with professionalism and care. Use networking opportunities to meet people and begin the process of developing a genuine relationship and treat your referral partner like you would a top client. Lastly, always network in a way that builds credibility and trust--be candid in telling your referral partners what you need and what you’re asking of them. Do these things and you’ll avoid some serious mistakes in relationship networking.
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Internet as a marketing tool |
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Written by Alice Nicholls
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Q: I recently started a business building Web sites for small and midsized businesses. I haven't been successful generating business by cold-calling. How can I use the Internet to reach potential clients that may be interested in establishing a Web presence?
A: Selling a service, like Web design, online is not as different from selling a product as you might think. In fact, almost all the traffic techniques used to drive visitors to product-based Web sites can also be applied to service-based sites.
However, there are some specific online techniques you should definitely use to your advantage. Let's take a look at some of the strategies you can use to generate a steady stream of potential clients for your online Web design business:
1. Take advantage of freelance sites. Professional services marketplaces like Elanceand Rent A Coderare great sources of clients. Post your qualifications and bid on posted jobs, using your Web site to help "close the deal" once you've entered into a one-on-one discussion with a potential client.
2. Joint venture with other online services. Since you sell a service that is typically needed at the same time as various other purchases (domain name, Web hosting and so on), you're in a great position to take advantage of joint ventures to reach your target market at the time when they need your service most.
Starting with the services you already use yourself, contact ISPs, Web hosts and domain name registrars to propose joint venture relationships. Position yourself as someone who can provide a great resource for their customers, while also ensuring that their customers continue to use their services. It's a win-win situation for everyone.
3. Encourage referrals and repeat customers. You may not have a ton of clients yet, but once you do start to generate some business, make sure you have a follow-up plan in place. Ask your clients if they are happy with the job you did. Is there anything else you can do for them? Do they know anyone else who might benefit from your service?
If you've done a good job for someone, they'll likely be more than happy to refer their friends and business associates to you. And since the business owners who use your service likely have lots of connections (through business associations, local Chambers of Commerce and so on), even one satisfied client can result in lots of new business. But if you don't ask your clients to pass your name on to their contacts, they'll rarely think to do it themselves. Don't leave this to chance.
4. Close the deal. Of course, getting visitors to your Web site is just the first step. You'll also need to establish your credibility so that your visitors become comfortable with hiring you as their Web site designer. Make it extremely easy for them to contact you about your service. Here are some simple ways to establish your credibility and quickly increase your client base:
- Include a good, professional picture of yourself. Giving visitors a professional image to associate with your business will go a long way.
- Provide evidence that other clients have been satisfied with your services. Testimonials from clients are a great way to establish your credibility. An online portfolio of your work is also a great option. And, of course, make sure your own site design is spectacular.
- Make it easy for leads to contact you. Provide an online form, your e-mail address, your phone and fax numbers, your mailing address and any other relevant information (like the best times to call you). Make sure this information is highly visible and easily accessible from every page of your site.
- Build an opt-in list. Some of your visitors may not be ready to hire you right away. But if you provide a great opt-in offer--like a newsletter that features weekly Web design tips--you'll be able to collect their e-mail addresses so you can continue to establish your credibility long after they've left your site. When they are ready to hire a Web designer, you'll be the one they'll call.
Once you put these strategies into place, you should start seeing much more qualified traffic to your site. Then you just need to establish your credibility so your visitors understand you're the best Web designer for the job. Follow up with opt-in leads and previous customers by e-mail, and you'll be well on your way to establishing a great client base!
Corey Rudl, president and founder of the Internet Marketing Center, is the author of the best-selling course Insider Secrets to Marketing Your Business on the Internet. An internationally sought-after Internet business consultant and speaker, Corey focuses his energy on the research and development of practical, cost-effective Internet marketing strategies and software for the small and homebased business owner.
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Written by Alice Nicholls
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The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as Nancy's Nail Salon. The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner.
The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. A sole proprietor need only register his or her name and secure local licenses, and the sole proprietor is ready for business. A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the owner will have to pay the business debts with his or her own money.
The owner of a sole proprietorship typically signs contracts in his or her own name, because the sole proprietorship has no separate identity under the law. The sole proprietor owner will typically have customers write checks in the owner's name, even if the business uses a fictitious name. Sole proprietor owners can, and often do, commingle personal and business property and funds, something that partnerships, LLCs and corporations cannot do. Sole proprietorships often have their bank accounts in the name of the owner. Sole proprietors need not observe formalities such as voting and meetings associated with the more complex business forms. Sole proprietorships can bring lawsuits (and can be sued) using the name of the sole proprietor owner. Many businesses begin as sole proprietorships and graduate to more complex business forms as the business develops.
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Written by Alice Nicholls
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To succeed as an entrepreneur, you must develop the ability to select and offer the right products or services to your customers in a competitive market. More than any other factor, your ability to make this choice will determine your success or failure.
Fully 80 percent of the products and services being consumed today are different from those that were being consumed five years ago. And five years from today, fully 80 percent of the products being used will be new and different from those being used today.
There are thousands of products and services available to consumers today. And there are unlimited opportunities for you to enter the marketplace and compete effectively with a new product or service that's better in some way than what's already being offered by your competitors. Remember, your skill at choosing that product or service is critical to your success.
The most important thing you can do before deciding what to sell is to think. And the more you think about a product or service before you bring it to market, the better your decisions will be.
So how do you start? To make a product successful, you must be personally and emotionally committed to its success. Once you've got a product or service in mind, you need to begin with a self-analysis:
- What kinds of products do you like, enjoy, consume and benefit from?
- Do you like the product or service you're planning to sell?
- Can you see yourself getting excited about this product or service?
- Would you buy it and use it yourself?
- Would you sell it to your mother, your best friend, your next-door neighbor?
- Can you see yourself selling this product or service for the next five to 10 years?
- Is this a product or service that you intensely desire to bring to the marketplace?
Then analyze the product or service from the customer's point of view:
- What does the product achieve, avoid or preserve for the customer?
- How does the product improve your customer's life or work?
- What kind of customers will you be selling the product to?
- Do you personally like the customers who'll be buying this product or service?
Imagine that you've hired a management consultant to get advice on introducing this new product or service. They're going to cut right to the chase and ask you these very objective, bottom-line questions about the product:
- Is there a real demand for the product at the price you'll have to charge?
- Is the demand large enough for you to make a profit?
- Is the demand concentrated enough so you can advertise, sell and deliver the product at a reasonable expense?
Dig even deeper into the potential success of your product or service by determining the answer to the following critical questions:
- What is to be sold, exactly? Describe the product in terms of what it does for the customer.
- To whom is the product going to be sold? Describe your ideal customer.
- What price will you have to charge for the product for it to be profitable?
- Who's going to sell the product?
- How is the product to be sold? What method of sales, or process of promotion, will you use?
- How is the product or service to be manufactured or produced?
- How is the product going to be paid for and by whom?
- How is the product or service going to be delivered to the customer?
- How is it going to be serviced, repaired, guaranteed or replaced?
And you're not done yet. There are a series of additional questions you need to ask before you make a final decision on a new product or service offering.
- Is there a real need for the product or service in today's market?
- Is your new product or service better than anything else currently available?
- What are the three ways that your product is superior to your competition?
- Is your product lower priced or of better quality than anything else that is available?
- Do you think you could become the number-one supplier in the market for this product or service?
For a product or service to succeed, it must be the right product, being sold at the right time, to the right customer, in the right market. It must be produced and sold by the right company, and the right people. What you have to decide is this: Is this product right for you?
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