Tips on starting a business after you have lost your job.

How to Construct Financial Projections for Entrepreneurs

Posted on February 4, 2010, 10:50 am, by Feargal and received No Comments ».

Here is a slidecast on how to build financial projections. It’s a good starting point that lays out some useful tips that can be applied to most business plans. It helps entrepreneurs from a non financial background to get a firm understanding of their financial structure. The purpose is to help entrepreneurs construct a basic financial model around their initial idea that they can use as an initial reference point during the start-up process.

Business Plan Financial Projections For Entrepreneurs

View more presentations from Feargal Byrne.

Tags: business angels, business plan, financial projections, how to guide, new business, start-up, venture capital

Interview With Jeff Frutkin founder SmarterLeap.com and IdeaArchitectsOnline.com

Posted on January 25, 2010, 8:31 am, by Feargal and received No Comments ».

The idea is probably the most important part of entrepreneurship. It’s akin to the big bang at the start of the universe. It’s the foundation on which to build a business. How many times have you said to yourself “if only I thought of that”? Idea management from creation to communication to action has moved to center stage. Particularly, in the current economic situation where innovation is required to create jobs and help the global economy recover.

Jeff Frutkin understands the importance of ideas and has taken action to help entrepreneurs along the path to success. He has set up IdeaArchitectsOnline.com and SmarterLeap.com to facilitate idea sharing among the entrepreneurial community. I had the chance to talk with Jeff about his websites.

Q: Why is the idea central to the success of a new business?

A great idea will immediately give you a competitive advantage in a growing market, making it significantly easier to build a long-term business. When successfully executed, a great business idea will produce stunning results!

We believe that the best business ideas represent solutions to problems that make things better, easier, faster, or more efficient for the everyday consumer. And, the bigger the nagging, aching customer need, the better – where the gap of dissatisfaction is so huge that the customer will do almost anything to obtain the solution!!

Q: Recently, a large number of highly skilled people have lost their job. Do you see entrepreneurship as a viable move for them?

Absolutely. In fact, many people that recently lost their job are flocking to entrepreneurship as a viable alternative to regular employment. For many of these new-found entrepreneurs, starting a business was always a far-off dream, but with the perfect storm of a layoff and a weak job market, they’ve have decided to take the plunge.

There are many advantages to entrepreneurship including:

• Being your own boss. You make the decisions and choose who to do business with. You also decide your hours, compensation and time off.

• Entrepreneurship offers a greater possibility of achieving significant financial rewards than working for others, especially in a down economy.

• Entrepreneurship provides the ability to “wear many hats” and to be involved in the total operation of the business.

Q: A lot of people look at franchising when they are initially thinking about starting up a business. Is there another option that they should investigate before they spend tens of thousands of dollars on a franchise?

We recommend visiting the website www.SmarterLeap.com before spending thousands of dollars on a franchise. SmarterLeap.com provides aspiring entrepreneurs with original business ideas that have the potential to become multi-million dollar companies.

SmarterLeap taps into a network of really smart and creative people (we call them Idea Architects) to generate ideas that have yet to be imagined in the world of business. Our proprietary process screens each idea for things like revenue potential, level of investment and uniqueness, among other criteria.

If a SmarterLeap member finds a business idea that matches their vision and talents, they are free to run with it and develop it as far as they wish without any obligation.

In addition to providing an extensive database of novel start-up ideas, SmarterLeap also offers business planning services. These services are designed to give you a clear road map for launching a SmarterLeap idea, and to help you get funding from friends, family and angel investors, if needed.

Q: Specifically, what are the services available on SmarterLeap.com?

Our core service is providing entrepreneurs with new-to-the-world business ideas that have the potential to be successful businesses with relatively low start-up costs. The ideas range from original web 2.0 sites and unique service businesses to new product innovations and compelling retail concepts.

The cost to join SmarterLeap.com is only $9. For this small fee, you get:

Unlimited access to search SmarterLeap’s idea bank, with in-depth descriptions of each innovative concept
30+ new business ideas are added to the site monthly
Free reign to begin building your business using an original SmarterLeap concept
Eligible to utilize Premium Member services

If you are an aspiring entrepreneur, and you don’t have a viable business idea, SmarterLeap is the perfect resource for you.

SmarterLeap will also provide members with a comprehensive business plan for a SmarterLeap business idea. Along with the standard business planning elements, we include a specific go-to-market strategy, a detailed project plan for launch and identification of the right vendors for your business. This document serves as a blueprint to launch a SmarterLeap business concept.

Q: IdeaArchitectsOnline.com is another fantastic site where people can channel their creativity and submit business ideas that are then reviewed, and if approved, can be used by entrepreneurs with the resources to build a business based on the original idea. How did you come up with the concept for it?

I’d been looking for a unique idea for a business for the last several years. I came across dozens of websites that claimed to have “new business ideas”, however, these sites simply published existing small businesses or reported on ideas that were started by other entrepreneurs. Further, many of the ideas were recycled from site to site and offered limited revenue potential and competitive advantage, especially to an entrepreneur looking for an invaluable idea to call his own.

I founded IdeaArchitectsOnline.com to bridge the gap in the marketplace. Our goal is to generate thousands of innovative ideas to give aspiring entrepreneurs inspiration for new businesses.

Q: If someone has an Idea for a new business and would like to use IdeaArchitectsOnline.com. What are the steps that they need follow?

IdeaArchitectsOnline.com believes in keeping the process simple, fun and rewarding for people to share their compelling business ideas. In a nutshell, here’s how it works:

1. Using your creativity and intellect, dream up original business ideas.

2. Go to our Submit an Idea page and enter your business idea.

3. If the Review Team approves your idea, we will compensate you for it.

You can track the status and compensation for each submitted idea by logging in to your account profile.

Q: How do you see the role of entrepreneurs in helping the economy get back on track?

Most experts believe that entrepreneurs and business owners are playing a critical role in helping turn around the national and global economy. Entrepreneurs create employment, pay taxes, and often offer new products and services which stimulate the economy. Entrepreneurs also tend to take risks where big companies won’t, which can lead to substantial job creation in the future.

Thanks very much Jeff. I’m sure the readers of this blog can benefit from the services on both SmarterLeap.com and IdeaArchitectsOnline.com.

Tags: business plan, business strategy, idea, ideaarchitectsonline, jeff frutkin, market research, smarterleap, start-up, starting a new business

Becoming Part-Time is an Opportunity

Posted on January 21, 2010, 10:44 am, by Feargal and received 2 Comments ».

In almost every industry we are seeing two things happen. 1) people are losing their job and 2) people are being asked to go from full-time employment to part-time employment. In the case of number 2) this can present an ideal opportunity for people to make the transition from employee to entrepreneur.

For example, in the UK more than one million people are forced to work part-time. For many wannabe entrepreneurs this presents a fantastic opportunity.

There are a number of issues people have to face when leaving employment and entering the world of entrepreneurship. The first is the cultural transition. This is often the hardest. Entrepreneurship is a completely different game. The typical employee mentality just doesn’t work. As an Entrepreneur you are on 24/7. You eat, drink and breathe your business. But the main thing is that you actually enjoy it. It’s fun.

As an entrepreneur, you have to be a million times more assertive. You can’t hide behind a large organization. Another issue is the “right first time” mentality that stifles creativity in established organizations. You need to ditch that as an entrepreneur, and work using a more experimental approach. Okay, I’ll admit it, a more “trial and error approach” (based on your best guess, of course).

The second issue is lack of resources. Bootstrapping is a skill. By working part time you are still receiving an income while you are getting your business off the ground. It also gives you time to get to grips with running a business on a small budget.

You can make the transition from employee to entrepreneur gradually. You won’t suffer the initial shock that many people who enter the entrepreneurial world straight from employment feel.

Working part time will help you with time management. You will be forced to fit your new business activities into the time outside your part-time job. Also, the income from your part-time work gives you a certain amount of space to focus on the medium to long term of your new business. Without the part-time job you may be in a situation to make “short term gain” decisions that may be detrimental in the medium to long term.

In summary, it’s a bit like going off drugs. Changing from an employee to entrepreneur can be quite difficult. By working part-time you don’t have to leave the world of employment cold turkey style. You can gradually make the transition into your new business as revenues begin to increase.

Ultimately, being told by your boss that you will have to work part-time could be the biggest opportunity of your working life.

Tags: employment, guide, how to start a business, new business, part-time, small business, start-up

Entrepreneurs and Warren Buffett

Posted on January 15, 2010, 8:22 am, by Feargal and received No Comments ».

Warren Buffett loves reading annual reports. He looks at a company’s business model in detail. He applies a simple and straight forward approach. In many ways, Buffett acts like a super business angel. His methods have been proven right in the long term. Entrepreneurs can learn a lot from Buffett’s investment strategy. The difference is, that instead of reading reports and doing research on the company, entrepreneurs are at the forge and are writing the annual reports by their actions.

There are many distractions that all too many times lead entrepreneurs down the path of failure. It’s important to have one eye on the money engine at all times. The trap of “high-tech escapism” is very easy to fall into.

Having a clear understanding of what fundamentally makes a good company is invaluable for entrepreneurs. It’s the framework on which you hang your core business strategy. It’s the compass point that will get you to your destination. Once you have this established in relation to your business everything must focus towards it.

Ultimately, three common sense questions sum this up.

1) How much will the business make?

2) How much will it cost to run the business?

3) Will your income stream and cost structure be sustainable into the future?

As an entrepreneur your goals and ambitions set the criteria for your business. How much do you want to make? How hard do you want to work?

Now what you are looking for is a convergence of what makes sense for you to start a business and what a potential investor is looking for.If your criteria meets their criteria then you have a real chance of making a deal. However, if you don’t focus on the money engine from day one it’s very unlikely that your start-up will be positioned for investment to scale.

A vast majority of investors are looking for historical data that indicates future potential. You must get this traction. The higher up the traction ladder you are the better chance you have of getting investment.

There is plenty of information on Warren Buffett’s investment strategy. Try and build a business that Warren would invest in and I’m sure you won’t have any problem finding others who will believe in you.

Tags: business, Business Angel, business plan, financial projections, funding, how to start a business, investment, pitch, start-up, venture capital, warren buffett

Meeting With a Potential Investor

Posted on January 11, 2010, 10:17 am, by Feargal and received 1 Comment ».

The Entrepreneur has just finished their presentation. They are feeling good. It came off without a flaw. They think the hard part is over – or is it?

Investor: Ok, nice presentation you didn’t bore me as much as I was expecting when I saw you walking in the door. You seem to have a natural flair for presenting things. That’s well and good, but now let’s get down to business. I have a few questions.

Entrepreneur: Fire away.

Investor: How do I know that your product is as awesome as you suggest? Are there users that I can call up to get their opinion?

Entrepreneur: Well we have an Alpha version. There’s a few bugs but if you use it and can see past the bugs I’m sure you will see how this product can be a success.

Investor: I’m not your target market. I would like to hear what your target market has to say about your product. If you had some reviews or testimonials I would have a much better idea about your product.

Entrepreneur: I understand. Unfortunately we are not at that stage just yet.

Investor: Moving on, are you sure that you looked at your competition hard enough? It seems hard to believe that only two other businesses are currently involved in what you believe is a lucrative niche. It makes me think that either you haven’t done enough research or your niche isn’t as lucrative as you believe.

Entrepreneur: We searched Google for the main keywords of the niche. Those two companies are all that showed up.

Investor: Hmmmm. I have another meeting in 25 minutes so I am going to move quickly on. Let’s take a look at your financial projections, they seem a bit far fetched to me. How did you come up with your sales figures?

Entrepreneur: We looked at the overall market and estimated that it was worth a total of $200 million per year. We estimate that we can get 1% of this market in year 2. We have used this as a base for out sales assumptions.

Investor: Do you know how many businesses I have seen that project a 1% market share by year two or three? Let’s move on.

Entrepreneur: Okay.

Investor: Looking at your expenses. It seems to me that you have completely missed the mark on how much you need to spend on marketing. Those sales figures are unobtainable based on your marketing spend. Look, I’ve been in this game a long time and you are trying to get water from a stone with these projections.

Entrepreneur: Thanks for the advice. We thought that our marketing expenses were okay. Our Accountant produced the figures and that’s what he believed would be sufficient to generate the sales in the plan.
Investor: I’ll tell you straight up. I don’t like your founding team. You guy’s don’t have the level of experience that can take your idea and turn it into a business that I would be prepared to invest in. Right now, I’m not going to invest. You need to work on your business more.

Entrepreneur: Wow, err, well thanks for your time

This scenario plays out countless times all over the world. First time entrepreneurs do not realize what they need to do in order to construct a viable investment proposal to Business Angels and Venture Capitalists. If entrepreneurs understood what was required to get investment from the very start, they would be able to structure their business model in such a way that would make it easier for them to get funding to scale.

It’s not complicated. In fact, it’s much simpler than many first time entrepreneurs believe. Get traction, become cash flow positive and make profits. Experienced investors will be able to judge the benefits of their investment to your business and get a more realistic appraisal of the potential returns.

Sadly, many entrepreneurs don’t put themselves in an investor’s shoes. However, if they investigate what makes a good investment for a Business Angel or Venture Capitalist they will be able to fit their business model into this criteria. It’s like looking down the sight instead of just firing wildly from the hip.

In order to avoid the above scenario, entrepreneurs need to focus on creating a sustainable business model that will generate returns for investors. There is no need for window dressing. Remember, investors don’t invest in an idea they invest in a business. So, build a business.

Check out this free Ebook called “Target Series A: From Idea to Investment” that shows first time entrepreneurs how to position their business for investment.

Tags: business angels, how to start a new business, investment, new business, small business, start-up, venture capital

How to Formulate the Sales Figures in Your Business Plan

Posted on January 7, 2010, 1:11 pm, by Feargal and received No Comments ».

Ok, many entrepreneurs get this very wrong. Some do not apply any methodology to obtaining their sales figures. In the vast majority of business plans, the sales assumptions are simply plucked out of thin air. As a result, the vast majority of business pans are worthless and are a waste of time, energy and natural resources.

Would you build a house on quick sand? Then why would you build a business plan on unvalidated sales assumptions?

There are many different ways to estimate your sales figures. One way is to use key performance indicators for your industry sector. That’s what most accountants would suggest. However, this in unrealistic for a new business. Firstly, these figures are an average of the industry. So therefore, they naturally reflect businesses that have spent years building a client base and solidifying their market position. As a start-up, you have none of the above. Also, in start-up mode your business model will most likely be different to established businesses in your sector. As a result, I believe that Key Performance Indicators are a lazy way to compile your financial projections.

The best way to build your sales assumptions is to use a bottom up approach. This does not require any financial wizardry. It only requires a cold hard dose of common sense. In order to do this, you must understand your business model. In particular, you need to understand each step of your sales funnel.

What will the conversion rates be for each stage of your sale funnel? However, all of this is still speculation until you actually start selling. The reality is that nobody is going to believe your estimates, especially hardened business angels or VCs, without real world evidence of them being achieved.

This leads us to what could seem like a chicken and egg situation. However, it’s not. As an entrepreneur, you need to bootstrap to early stage sales and then use your results as back up to advocate your future projections when you are looking for funding to scale your business.

At the very start, you need to make assumptions for your own use. Once you start selling, monitor your conversion rates. Refine your assumptions then show them to potential investors. When they start asking questions, you will be in a great position because your assumptions are backed up by conversion rates that you are actually achieving.

Another point is that you should show each stage of your sales funnel in your projections. Have a separate assumptions page where each figure is broken down into it component parts. It’s like a story laid out in figures. The story is about how somebody is going to buy from you. Remember, when trying to get investment it’s not about science fiction it’s about science fact.

If you are looking to produce financial projections for your start-up you may find this template and how to guide useful.

Tags: business plan, excel, finance, financial projections, how to start a business, start-up, venture capital

It’s a Marathon

Posted on January 5, 2010, 10:18 pm, by Feargal and received No Comments ».

Starting up is like running a marathon. It’s not a sprint. The success of your new business depends on what happens in the long term. This is critically important to how you make decisions. It’s always tempting to sprint. To take the shortest route. To make choices that will benefit you now but have negative repercussions the future. Sustainability is key. Investors will recognize if your decisions can be sustained into the future and therefore keep producing worthwhile returns.

Look, the value of your business is what it can achieve in the future. This potential is an asset. By making decisions that benefit your business in the long term you are building this asset. If you make decisions that only benefit in the short term, then when it comes to company valuation you are not going to gain.

Remember, be sensible and avoid temptation. Don’t corrupt your start-up’s business model for short term gain.

Tags: how to start a small business, investment, Marketing, new business, start-up, strategy

What is Your Objective?

Posted on December 28, 2009, 11:03 pm, by Feargal and received 1 Comment ».

Why have you decided to start-up? What is the underlying reason? What inspires you and gives you motivation? Before you think about your business model, before you draft the founders agreement, before you imagine what your product will look like finished, try to answer those questions.

See, the answers are the light at the end of the tunnel. They will point you in the right direction. Your path will become clear. It’s important to be honest with yourself. Be greedy with your dreams. Don’t dilute them. Remember, there is only one you. Other peoples expectations of you do not matter. However, your expectations of you matters immensely. It’s like cracking a safe. When you find the right combination the door will open.

Look, entrepreneurship is difficult. But having a good understanding about why you are in the game will help you stay in the game long enough to make a difference.

Tags: entrepreneurship, focus, how to start a small business, motivation, new business, start-up

Outlook for Venture Capital in 2010

Posted on December 28, 2009, 12:51 pm, by Feargal and received No Comments ».

Lets face it, 2009 was a bad year for start-ups. This has been reflected in the capitulation of the number of IPOs in 2009. When exits are down it makes it harder for new businesses to attract VC investment. Look, when it comes to Venture Capital and Business Angel investment it’s all about the exit. That’s life, so entrepreneurs like us must deal with it.

NVCA president Mark Heesen is concerned about the lack of early stage investments. However, it is predicted that there will be a slight increase in overall VC investment. The NVCA predicts between $21 billion and $25 billion will be invested in 2010. Clean tech and e-commerce are predicted to receive the most money. Forty eight percent of the 325 venture capitalists surveyed by the NVCA believe that more foreign limited partners will invest in US firms. However, the semi-conductor and wireless sectors are flagged as possibly seeing the biggest decline in investment.

Although an increase on 2009. These figures show that the bootstrapping skill is still an extremely important ability for entrepreneurs. However, there is always opportunity. Get your fundamentals right and you will get the funding you need. When it comes to Venture Capital and start-ups the US leads the world by a long way. Those of us outside the US should pay attention because a recovery in US start-up funding will spread across the globe.

Tags: how to start a business, IPO, new business, start-up funding, venture capital

Praise the Early Adopters

Posted on December 18, 2009, 1:05 pm, by Feargal and received No Comments ».

Everybody knows that the early adopter is a start-ups best friend. The relationship between an early adopter and a new start-up is possibly the most important relationship that business will ever have. Like in Bushcraft, the early adopters are the tinder to the fire. Without it there is no fire.

Think about this, how many times has someone told you that your idea would never work. That they couldn’t see themselves ever using it. If they do not have a record of being an early adopter then there advice is irrelevant. They are followers, they base their decisions on being socially acceptable. The objective is to fit in. Unfortunately, this does not lend itself to trying new things. The reality is that the average person will not attempt to truly understand your product until they see others use it. Here’s where the early adopters come in.

They are the opposite of the average person. They like trying new things. In many cases, they want you to succeed. Also, they are the type of person to blog about things. They are they ones that their friends always ask before buying something. More importantly for you, they are the ones that could embrace and advocate your product.

The more advocates you have, the more you will succeed. It’s that simple. So remember, treat your early adopters well and they may hang in there long enough for you to make something remarkable.

Tags: entrepreneurship, Marketing, promoting, research, selling, start-up