Here is the link: http://ezinearticles.com/?Partnering-With-Other-Entrepreneurs—Pros-and-Cons&id=9794145
Thank you,
Mary
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ENT 650 Week 8 Blog by Mary Schuler Expectations for entrepreneurs and does it feel right?
I learned a big lesson when reaching out to outside lenders and investors for my future business. After meeting and talking with some banks, it felt like what I saw on Shark Tank. I truly feel like there are more challenges await.
To help the road of finding money less rough and clearer, lets prepare for what the lenders and investors expect from entrepreneur:
- They don’t lend or invest as a charity. They want to make money just like any other business.
- They want entrepreneur to succeed so they can get paid back.
- They want to make sure that if your business fails, there is guaranteed way to get paid back. So, no surprise why there are many mandatories and requires and conditions on process.
- They will look at your business plan; financial projection; personal guarantee the loan; collateral to secure the loan; compare with other businesses in the area regarding financial and business projections to see how you performed.
- They want to know how much you can invest in the business; they may require the entrepreneur to put in at least 30% of the project cost in equity; how much you want to borrow and why; is your cash flow makes sense and if you can afford a loan.
- They want all information related to your “5 C’s of Credit”:
Character: do you have proper experience, skills needed to run the business? Does your credit history show that you paid your debts?
Capacity: does your business have sufficient cash flow to pay the loan payment?
Capital: what is your business and personal’s net worth? How much your own money in hand?
Collateral: what assets do you have to secure the debt?
Conditions: what is the state of the economy? Are there other issues that may impact the success of your business?
You may ask yourself “why I have to borrow money? I don’t want to be in debt”. In another hand, your business surely needs capital to operate and if your business grows, you probably going to need more than one loan or a future investment. That why knowing your business and its potential success is so critical, same as finding answers for “what if” questions are not easy. But chasing your dream takes risks and remember that in this world “there is no free money”. The good news is there are government agencies and some non-profits organizations that support start-up businesses. Borrowing is an opportunity and just becomes a part of business as a regular customer/partner with your lenders/investors. Don’t get discourage for searching them.
PS: When getting a loan or an investment for your business, make sure to consider all the terms, read the fine print carefully. Interest rates on loans are important, but a low interest rate paired with high fees and a prepayment penalty may be more expensive than another loan with a slightly higher rate but lower fees. If you get a loan with an adjustable rate, make sure you will be able to pay the loan after the interest rate adjusts. Never sign any paperwork if it makes you uncomfortable, it could be a sign that the loan terms are not right for you.
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
ENT 650 Week 7 Blog by Mary Schuler Assessment before taking outside investments
Following with the previous blog about How much money do you need and how helpful it is when reducing unnecessary expenses. This week’s blog we continue to discuss about the business finance assessment options after developing a good, strong business concept. Experienced entrepreneurs and research show that “The best source of funds are the cash that you already have on hand”. Are you ready to spend your own money? How much money do you have? Well, it sounds real and serious doesn’t it, especially when you must use your own personal savings, or money borrowed from family and friends. It is true that if any angel investors see you, they surly want to see if you are willing to spend your own money too on your business. If you are not willing to risk your money to your business, why should they?
Between “needs and have” there is a little gap. Business needing more money to operate is just a normal fact. Prepare always to make sure your business does not run into trouble due to lack of cash. How to fill this gap? There are some options to think about:
- Collateral: is a security for a loan – something the lender can sell if they need to. Collateral is often real estate (including your home or business or other properties that you own), your cash in banks or credits unions, equipment and other items that will have a re-sale value. According to thebalance.com, “Any asset that your lender accepts as collateral (and which is allowed by law) can serve as collateral.” When you pledge collateral, the lender takes less risk, which means you are more likely to get a good rate.
It is very important to make the realistic and right decision about what you offer up as collateral to the bank. You must consider the risks of defaulting on a loan which could hurt your business and also your personal life. I personally prefer choosing other assets (but not my home) to use as collateral for a loan.
- Credit report: helps in securing an unsecured loan. Make sure to clean up all your bad credit, show a good payment history on all accounts. There are many online credit report agencies that you can get a free copy of your credit report once a year.
According to Entrepreneurial Finance of Steven Rogers on raising capitals, and some online research about funding sources:
- If you need less than $25,000:
- The best option is start with your own saving, family and or friends.
- Consider an equity loan. Equity is money or other assets that you own. In real estate, equity is the amount of the property that you own (the difference between the market value of the property and the mortgage you still own). Home equity loans are often easier to get and usually have low interest rates than commercial loans.
- Other option is credit cards: If you keep paying the bills in full each month. That may help you get a business loan but the interest rates may be higher.
- Seeking for non-bank lenders where provide business microloan (with an average of about $13,000). Keep in mind that this is to business that does not qualified for bank loans.
- 2. If you need more than $25,000:
- You would still need to put in some of your own money, often 30%+ of the total project expenses.
- You still consider a down payment or a home equity loan.
- Last option is keep seeking loan from banks and non-bank lenders.
- It does not hurt to search for business grants but research shows most start-up businesses do not qualified for grants, plus the grant process is extremely competitive.
It is important to understand and identify what source of financing is right for your business and whether you will be able to repay them. Only borrow what your business needs. Pay the loan on time will help build good credit for next round and next stage of your business.
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
https://www.inc.com/guides/201101/5-tips-using-collateral-to-secure-a-small-business-loan.html
https://www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs/microloan-program
ENT 650 Week 6 Blog
Reduce The “Demand for Funding”
At this stage of the M.E class, you might realize that this is one of the most challenging and critical to figure out how to finance a business. While you feel overwhelming and confused by too much information and needs for a start-up business, a step can brighten or doom your business since it comes to question on how to reduce the demand for funding? How to stretch the initial expenses? How much is the magic cash amount? etc., You needs to think creatively because every dollar you avoid borrowing and spending is a dollar you won’t have to pay back and a dollar’s worth of interest that you avoided.
Here are some solutions:
Before checking out the resources provided, make sure you have done everything you can to reduce the demand for capitals of your project. You may see yourself at a starting or expanding phases that does not really require funding or requires less funding.
Analyze your entire business plan prior to approaching a bank and or investors. Talk to your accountant or business advisor to set a more realistic financial perspective.
Naturally, any entrepreneur might think that there will be nice to have the latest office equipment, new of everything. Keep in mind, start-up entrepreneur can suffer until later for those business luxuries. To reduce initial expenses by cutting back, it is recommended to consider short-term solution like renting the building and necessary equipment; purchasing used equipment rather than new one; sharing office space and hire part-time employees till you can afford a private office and hire full-time employees. In other words, think about what your budget can allow. You can invest in small items such as furniture that does not cost you a lot but they can produce meaningful intangible value because creating a great office environment will improve productivity. It’s worth to spend little money to create a nice environment.
There is exception that going inexpensive or cheap will not work. For example, if you absolutely need software to operate the business, it is recommended to consider spending extra money on a quality program. Take advantage of any available discount (most software companies offer discount for start-up and small business). Try not go for free or lowest-priced tool, because it means also the lowest quality and that does not look very professional. It is better go with a good quality option in the first place than to replace cheap tool multiple times later that will cause more costs.
If your business already set up and operating, look closer to profit and loss weekly or monthly to adjust the business budget and goal. You may be able to stretch your dollars a little farther by increasing the time before you have to pay for inventories and supplies through vendors. Decreasing the time before your customers pay you through credit terms. These are two of many key actions of accounts payables and accounts receivables management mentioned in the book Entrepreneurial Finance of Steven Rogers.
It is important to estimate the expenses accurately. Plan where you will get sufficient capital. Put this into your research project because a new business may cost more than you anticipated. Remember as you think of ways to reduce the demand for capital do so without increasing the risk of your business.
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
ENT 650 Week 5 Blog Assignment by Mary Schuler
Understanding Your Product(s)
I came across this subject that I think is important and would like to share it here. I once took some business classes a long time ago, it made more sense now to me when combining it with what I have learned so far at M.E class. Hope you find it useful also on your journey.
Let’s say, suppose the entrepreneur could obtain a source of capital that they need and are ready to launch a business. Excited to pursue the dream! Along with learning and understanding finance statements, measuring cash flow etc., anything relates to finance management to build and maintain a steady profitability and business longevity (Steven Rogers, Entrepreneurial Finance), there are so many key factors in marketing to make a whole and this week’s blog will discuss about “product” that without it the business does not exist. In other word, the business would not “exist” if I failed to deliver product or services that satisfy the customers.
Product is the item or service an organization is asking the public to pay money for in order to receive the product or service. Product is one of other components (price, place, people and promotion) that make the heart of a business.
Every product has a life cycle. Product life cycle is the stages through which a product or its category passes from its introduction into the marketplace until its devolution or discontinuation.
As a consumer, we buy many products but probably not aware of the product life cycle. And For example, we make our conscious decision to switch from one to another product based on personal tastes, or just want to buy the latest product. However, as an entrepreneur, especially the manufacturer, it is important to understanding the limited lifespan of their product so they may have solutions to make sure stay in business and continue growing.
In order to identify where are you based on the following phases analysis, ask some critical and realistic questions such as is your product new, different or better than what is already on the market… Let’s take a look at the product’s phases:
- INTRODUCTION phase: this is the phase in which the product is initially promoted and public awareness is created. There are two different strategies usually accompany this phase:
- Penetration strategy: involves setting price very HIGH initially and then gradually lowering then over time. This is good strategy to use if there are few competitors for your product.
+ Profits are high initially with this approach
+ Great deal of risk, because if people do not want to pay high prices, you may lose out for the first hand.
- Skimming strategy: involves setting prices very LOW at the beginning and then gradually increasing them. This is a good strategy to use if there are many competitors who control large portion of the market. Therefore:
+ Profits are not a concert under this strategy.
+ The most important thing is to get your product known and worry about making money later.
- GROWTH phase:
- Products surviving the introductory phase usually enter a growth period when they increase their sales and markets.
- This is also when advertising becomes very important and the costs of marketing increase.
- Organizations that do not invest in marketing at this phase usually don’t maintain their edge in sales, nor do they increase their market-share against their competitors.
- MATURITY phase:
- If a product survives the growth stage, with continuous improvement and advertising, it is likely to spend a great deal of time in the maturity phase.
- During this phase, sales grow at a very fast rate and then gradually begin to stabilize.
- The key you surviving this stage is to differentiate your products from similar products offers by your competitor.
- This is also when your competitors or new entrants will begin to copy your successes.
- DECLINE phase:
- This is the phase when sales of your product begin to fall.
- Either everyone that wants to have bought your product or new, more innovative products have been created that replace yours.
- Many companies decide to withdraw their products from the market due to the downturn.
- The only way to increase sales during this period is to cut your costs and reduce your spending. Typically, companies tend to blame labor or input costs for their decline. To stay out of the decline phase, it is best to continuously innovate.
Understanding that consumers play a big part of the product’s life cycle. Depending what stages your products are at in the cycle, entrepreneur needs to apply the appropriate resources, sales, and marketing strategies in order to make profits.
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
https://www.youtube.com/watch?v=_26E6QR_hmU
ENT 650 Week 4 Blog Assignment
From Vision to Reality
You have an excited idea! Believe in its potential and you want to get it off the ground. The question is (I ask myself this too, a lot) how and when exactly to get started and be on the right foot? Research shows most people get hung up on the transition from vision to reality. It is obviously scary. I also heard from many entrepreneurs that they enjoyed working for themselves, that the beauty of being entrepreneur is challenging and taking risks. So, if you are ready, start some baby steps with strategic actions to make amazing progress quickly:
- Know what you can do on your own and within your network:
“Sweat equity is the best equity,” said Mark Cuban-a billionaire serial entrepreneur and on Shark Tank TV show. It makes sense for me to save and learn what to do rather than to pay someone else.
According to Steven Rogers, author of Entrepreneurial Finance, for his students and entrepreneurs that, passion and motivation for energy are not enough. They need to know the fundamental of finance that ultimately leads ideal wealth for themselves. The important key is learning all the fundamentals (finance, marketing, human resource…) to grow the company.
Who in your network can help you? Trusted personal connections, professional connections, and other resources are priceless. For example, share your idea and ask them questions such as “Do you think this idea has potential?”, “Would you buy this product or service at that price?” etc.
2. Describe your ideal customers:
As we learned in previous class about define and describe your ideal customers whom your business is targeting. Research the market. Who will buy your products or service? Be honest and specific as possible. If you know your customers, you can figure out where and how to reach them.
3. Start a Business plan and figure out your run way:
This is a vital step. It allows you to get real details into your core business before launching. How many resources must you have? Your run way is how many days, weeks, or months before business will be able to continue based on actual resources at hand.
It is good to be optimistic but, assume it will take twice as long and cost three times as much as you think.
4. Create milestones from little to big:
Where do you want business to be a year from now? It could be a simple milestone, like “I have five paid customers at the end of day 30.” By having little achievable milestones, you will be able to make steady progress while minimizing frustration.
Talk is always easier than to do what you say. Being an entrepreneur is not easy and can be overwhelming. Entrepreneur is a hero because he/she creates jobs for the people and helps give back to the society, said Steven Rogers. So, don’t give up!
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
ENT 650 Week 3 Blog Assignment
Focus on Sales but Think Customers
Focusing on customers is an essential factor and as important if not more so than other factors. Either you are in the selling of products or services business. There was a slogan that I remember when I was a little girl in Vietnam “Customer is King!” I did not understand then what this meant but it made full sense to me later when I became emerged in the business world. Without customers, the business cannot survive. The same as “Cash flow is King or Queen!”, said Steven Rogers in Entrepreneurial Finance. Without cash, the business cannot keep going and grow.
I believe in “your business is successful because you create and maintain happy customers.” Most customers may not expect your customer service to be perfect but they do expect you to care. For example, if they complain or bring up an issue and see you help them to resolve problem quickly and effectively. These customers may end up more loyal to your company than they were before. Take this opportunity to build your business from these “problematic or very difficult customers.” They will sing your praises if you show them the respect that they hoped for.
Research shows that most companies after they settled down, tends not to look out for the customer’s best interest. They focus more on sales and listen less to the customers. This can be a downfall or a large setback for some businesses.
With Social Media, any unhappy customers can give your business a bad review. Think about when your competitor that is offering the same product but delivered a better customer service experience. The consumer base can all change no matter how big your company is. If you don’t take care of your customers, you will lose them.
Only the customers and prospective customers can help you understand how to improve the product and service in what matter most to them, and they can explain why they made the choice to buy your product or service.
So, how to create a connection and to improve your business? How to make them share the experience with your company? You may try some strategies below:
- Using customer satisfaction surveys: It is not easy to ask directly if they are happy with your product or service. However, you can get their feedback though customer satisfaction surveys. These surveys can help reveal the needed attentions and at the same time can illuminate the positives.
- Speaking with customers one-on-one or as a group: Personal engagement helps us better understand the survey’s results and to comprehend the emotion behind the answers. Take advantage of this approach to strengthen the relationship. Building customer trust through caring.
- Comment/survey cards at the stores: Encourage customers directly and boost participation by offering discounts or prizes. Let customers know their opinion maters to help you better serve their needs in the future.
Notes:
- Make sure the survey should take less than 5 minutes to fill out.
- Respect customer’s time. Should have ONLY questions that directly tie with your company’s objective to be able to produce productive feedback. Some questions such as “Rate how you feel about the quality of services” or “Which of the following services do you value most?” etc.
- Follow up and take action. Make positive changes to some strategies or individuals. Customers want to see their feedback is valued and implemented. On the other hand, employees are more likely to accept a change if they understand why customers are suggesting a change.
Remember, your customer’s loyalty is a choice. If they come back for repeating business is because they want to, not because they have to.
Resources:
Rogers, Stevenson (2014). Entrepreneurial Finance, Third Edition: Finance and Business Strategies for the Serious Entrepreneur. McGraw-Hill Education.
