Myths Myths 90% Small startup fall into a financial crises and 90% Small startup fall into a financial crises and fail in the first 3 years fail in the first 3 years In S’pore when I was involved with EDB for small and In S’pore when I was involved with EDB for small and medium size (SME) business survey—all, repeat all had medium size (SME) business survey—all, repeat all had closed in the first 3 years of startup because of owners closed in the first 3 years of startup because of owners ill-health or some personal reason like a family issue. ill-health or some personal reason like a family issue. Not financial crises. Not financial crises. A great idea combined with a strong surge of wanting A great idea combined with a strong surge of wanting to start a company are the key success factors to start a company are the key success factors Passion is great. Love for your business is good. But Passion is great. Love for your business is good. But you must have customers to start with. This is what will you must have customers to start with. This is what will make you survive. make you survive. Jobs are more secured than your business. Jobs are more secured than your business. The answer is perhaps a shade more than your own The answer is perhaps a shade more than your own business. There are other aspects for consideration! business. There are other aspects for consideration! Being shunted to a lousy role which you don’t enjoy. Being shunted to a lousy role which you don’t enjoy. Dragging yourself each morning to go to work and to face a Dragging yourself each morning to go to work and to face a boss you dislike to such an extent that you wish he gets a boss you dislike to such an extent that you wish he gets a heart attack and stays home for a year. heart attack and stays home for a year.
Transcript
MythsMyths 90% Small startup fall into a financial crises and fail in the first 3 90% Small startup fall into a financial crises and fail in the first 3
yearsyears In S’pore when I was involved with EDB for small and medium size (SME) In S’pore when I was involved with EDB for small and medium size (SME)
business survey—all, repeat all had closed in the first 3 years of startup business survey—all, repeat all had closed in the first 3 years of startup because of owners ill-health or some personal reason like a family issue. because of owners ill-health or some personal reason like a family issue. Not financial crises.Not financial crises.
A great idea combined with a strong surge of wanting to start a A great idea combined with a strong surge of wanting to start a company are the key success factorscompany are the key success factors
Passion is great. Love for your business is good. But you must have Passion is great. Love for your business is good. But you must have customers to start with. This is what will make you survive.customers to start with. This is what will make you survive.
Jobs are more secured than your business.Jobs are more secured than your business. The answer is perhaps a shade more than your own business. There are The answer is perhaps a shade more than your own business. There are
other aspects for consideration!other aspects for consideration! Being shunted to a lousy role which you don’t enjoy. Dragging yourself each Being shunted to a lousy role which you don’t enjoy. Dragging yourself each
morning to go to work and to face a boss you dislike to such an extent that morning to go to work and to face a boss you dislike to such an extent that you wish he gets a heart attack and stays home for a year. you wish he gets a heart attack and stays home for a year.
Just Do ItJust Do It
Biggest problem for a budding entrepreneur is Biggest problem for a budding entrepreneur is Negative Advise. By and large the Parsis of my Negative Advise. By and large the Parsis of my generation were risk averse. Happy to do a bank generation were risk averse. Happy to do a bank job or steady secured job So your elders who job or steady secured job So your elders who come from my generation type are the wrong come from my generation type are the wrong people to go to for any inspiration. They can only people to go to for any inspiration. They can only get worried that you wish to risk so much.get worried that you wish to risk so much.
Most entrepreneurs I know do it because they Most entrepreneurs I know do it because they want to, not just to get rich. want to, not just to get rich.
Planning Your BusinessPlanning Your Business
Who Needs Business PlanWho Needs Business Plan
About the only person who doesn't need a About the only person who doesn't need a business plan is one who's not going into business plan is one who's not going into
business. business.
You don't need a plan to start a hobby or You don't need a plan to start a hobby or to moonlight from your regular job.to moonlight from your regular job.
Who?Who?
Startups.Startups. The classic business plan writer The classic business plan writer is an entrepreneur seeking funds to help is an entrepreneur seeking funds to help start a new venture. Many great start a new venture. Many great companies had their starts on paper, in the companies had their starts on paper, in the form of a plan that was used to convince form of a plan that was used to convince investors to put up the capital necessary to investors to put up the capital necessary to get them goingget them going
Old Companies too !Old Companies too !
Business owners find plans useful at all stagesBusiness owners find plans useful at all stages
There's been a significant market changeThere's been a significant market change Your firm develops a new product, Your firm develops a new product,
technology, service or skilltechnology, service or skill Your company has crossed a thresholdYour company has crossed a threshold You have had a change in managementYou have had a change in management Raising money or persuading new Raising money or persuading new
partner to join the firmpartner to join the firm
Types of Business PlanTypes of Business Plan
B.P. depends on type of businessB.P. depends on type of business Details of contentDetails of content Emphasis on different aspects of businessEmphasis on different aspects of business
Mini Version--to test a business conceptMini Version--to test a business concept Working Plan-- a tool to be used to Working Plan-- a tool to be used to
operate your business operate your business
A Mini PlanA Mini Plan
Business concept Business concept Financing needsFinancing needs Marketing plan Marketing plan Financial statements--- cash flow, income Financial statements--- cash flow, income
projection and balance sheet projection and balance sheet
Business DesciptionBusiness Desciption
Sole proprietorship, Partnership or ListedSole proprietorship, Partnership or Listed Type of business-wholesale, retail, food Type of business-wholesale, retail, food service, manufacturing or service-orientedservice, manufacturing or service-oriented Describe the products or servicesDescribe the products or services Present industry outlook Present industry outlook Future industry possibilities Future industry possibilities Whom will sell to, how the product will beWhom will sell to, how the product will be distributed distributed
Success FactorsSuccess Factors
Explain factors you think will make it Explain factors you think will make it successful, like the following: it's a well-successful, like the following: it's a well-organized business, it will have state-of-organized business, it will have state-of-the-art equipment, its location is the-art equipment, its location is exceptional, the market is ready for it, and exceptional, the market is ready for it, and it's a dynamite product at a fair price. it's a dynamite product at a fair price.
Market StrategiesMarket Strategies
Market Strategies results from a meticulous Market Strategies results from a meticulous market analyses. This helps to-market analyses. This helps to-
define target market define target market establish target pricing establish target pricing sales and promotional strategies sales and promotional strategies growth potential within the industrygrowth potential within the industry develop your estimates for future of develop your estimates for future of
businessbusiness
Market AnalysesMarket Analyses
total available markettotal available market size, structure, growth prospects, trends size, structure, growth prospects, trends
and sales potential and sales potential
Market ShareMarket Share
Projecting the market share is a subjective Projecting the market share is a subjective estimate. It's based on not only an analysis of estimate. It's based on not only an analysis of the market but on highly targeted distribution, the market but on highly targeted distribution, pricing and promotional strategies pricing and promotional strategies
In order to project market share over 3 years, In order to project market share over 3 years, consider two factors:consider two factors:
1. 1. Industry growth which will increase the total Industry growth which will increase the total number of users.number of users. 2. Conversion of users from the total feasible 2. Conversion of users from the total feasible marketmarket
Positioning Your Business Positioning Your Business
Positioning strategy is affected by the Positioning strategy is affected by the motivations and requirements of target motivations and requirements of target customers as well as actions of competitors.customers as well as actions of competitors.
You need to answer several strategic questions :You need to answer several strategic questions : How are your competitors positioning How are your competitors positioning
themselves? themselves? What specific attributes does your product have What specific attributes does your product have
that your competitors' don't? that your competitors' don't? What customer needs does yourWhat customer needs does your product fulfill?product fulfill?
Depending upon the industry and the size Depending upon the industry and the size of the marketof the market
Direct salesDirect sales OEM (original equipment manufacturer)OEM (original equipment manufacturer) salessales Wholesale distributorsWholesale distributors Retail distributorsRetail distributors Direct mailDirect mail
Promotion/Communication PlanPromotion/Communication Plan
AdvertisingAdvertising PackagingPackaging Public relationsPublic relations Sales promotionSales promotion
Identify and Analyze Your CompetitionIdentify and Analyze Your Competition Competitive AnalysesCompetitive Analyses
Determine strengths and weaknesses of Determine strengths and weaknesses of
the competitorsthe competitors Think of strategies that will provide you Think of strategies that will provide you
with a distinct advantage, with a distinct advantage, What barriers can be developed in order What barriers can be developed in order
to prevent more entries into your market to prevent more entries into your market What weaknesses that can be exploited What weaknesses that can be exploited
Competitive EdgeCompetitive Edge
What do you need to provide enduring What do you need to provide enduring competitive advantage. competitive advantage.
Define the elements that will set your product or Define the elements that will set your product or
service apart from your competitors service apart from your competitors
(You will be better because you will supply full (You will be better because you will supply full line of products; You're going to provide unique line of products; You're going to provide unique service after the sale; You'll give a money-back service after the sale; You'll give a money-back guarantee )guarantee )
Design and Development PlanDesign and Development Plan
Product development Product development CostsCosts that should be included in the development budget include: that should be included in the development budget include: MaterialMaterial. All raw materials used in the development of the product. . All raw materials used in the development of the product. Direct laborDirect labor. All labor costs associated with the development of the . All labor costs associated with the development of the
product. product. OverheadOverhead. . G&A costsG&A costs. The salaries of executive and administrative personnel. The salaries of executive and administrative personnel Professional servicesProfessional services. Those costs associated with the consultation . Those costs associated with the consultation
of outside experts such as accountants, lawyers, and business of outside experts such as accountants, lawyers, and business consultants. consultants.
Capital equipmentCapital equipment. .
Risk MitigationRisk Mitigation
Assessing RisksAssessing Risks
Risks involved should be assessed and a Risks involved should be assessed and a plan developed to address (mitigate) each plan developed to address (mitigate) each one.one.
Financing Start upFinancing Start up
There are two areas that need to be There are two areas that need to be accounted for when planning a start upaccounted for when planning a start up
the organization structure the organization structure the start up expense and capital the start up expense and capital
requirements requirements
Overhead expensesOverhead expenses
Travel Travel Maintenance and repair Maintenance and repair Equipment leases Equipment leases Rent Rent Advertising & promotion Advertising & promotion Utilities Utilities Packaging & shipping Packaging & shipping Payroll taxes and benefits Payroll taxes and benefits Uncollectible receivables Uncollectible receivables Professional services Professional services Insurance Insurance Loan payments Loan payments Depreciation Depreciation
P&LP&L
Sales RevenueSales Revenue Raw Material CostRaw Material Cost Gross profit marginGross profit margin. . Operating expensesOperating expenses. Includes all overhead and labor expenses . Includes all overhead and labor expenses
associated with the operations of the business. associated with the operations of the business. Total expensesTotal expenses. The sum of all overhead and labor expenses . The sum of all overhead and labor expenses
required to operate the business. required to operate the business. Net profit Net profit (PBIDT)(PBIDT) DepreciationDepreciation.. Net profit before interest (PBIT)Net profit before interest (PBIT) InterestInterest. . Net profit before taxes (PBT)Net profit before taxes (PBT) TaxesTaxes Profit after taxes (PAT)Profit after taxes (PAT)
Cash Flow StatementCash Flow Statement
The cash-flow statement is one of the most critical information tools for your The cash-flow statement is one of the most critical information tools for your business, showing how much cash will be needed to meet obligations, when business, showing how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. It shows a schedule it is going to be required, and from where it will come. It shows a schedule of the money coming into the business and expenses that need to be paidof the money coming into the business and expenses that need to be paid
Total PAT + DepreciationTotal PAT + Depreciation This amount is carried over to the next period as beginning cashThis amount is carried over to the next period as beginning cash
Cumulative cash flowCumulative cash flow. The difference between current cash flow and . The difference between current cash flow and cash flow from the previous period.cash flow from the previous period.
AssetsAssets Fixed—machine,land building (long term)Fixed—machine,land building (long term) Current—cash, inventory, receivablesCurrent—cash, inventory, receivables
LiabilitiesLiabilities Long Term—debt of over a yearLong Term—debt of over a year Current—loans of less than year,payableCurrent—loans of less than year,payable
Owners Equity—total assets less total Owners Equity—total assets less total liabilitiesliabilities
Classic Problems with new business—Classic Problems with new business—valley of death (3years)valley of death (3years)
inadequate market knowledgeinadequate market knowledge ineffective marketing or sales approachineffective marketing or sales approach inadequate knowledge of competitive pressuresinadequate knowledge of competitive pressures
poor timing for the start of a new businesspoor timing for the start of a new business - under capitalization - under capitalization - unforeseen expenses - unforeseen expenses
