Not All Money Is the Same
While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second
Financing Basics
Not All Money Is the Same
While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second. Whether you”re starting a business or expanding one, sufficient ready capital is essential. But it is not enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that entrepreneurs avoid common mistakes like securing the wrong type of financing, miscalculating the amount required, or underestimating the cost of borrowing money.

Business Plan BasicsA business plan precisely defines your business, identifies your goals, and serves as your firm”s resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
Plan Your Work
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives. ‘The business plan is a necessity. If the person who wants to start a small business can”t put a business plan together, he or she is in trouble,’ says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles. Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don”t have enough time. But just as a builder won”t begin construction without a blueprint, eager business owners shouldn”t rush into new ventures without a business plan. Before you begin writing your business plan, consider four core questions: What service or product does your business provide and what needs does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start your business?

Important tips for start-ups concerning venture capital, business plans, partners and potential legal issues. Presented by attorney Roman R. Fichman.

Randy Komisar, the “virtual CEO” and venture capitalist at Kleiner Perkins Caufield and Byers talks to Matt and Julio from iinnovate about entrepreneurship and venture capital. In this segment Randy talks about some hot startups and some exciting areas for investment. For more of this interview and others, check out www.iinnovatecast.com

FUNCTION: Serves as the SBAs primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels
PROGRAM: Basic 7(a) Loan Guaranty
FUNCTION: Serves as the SBAs primary business loan program to help qualified small businesses obtain financing when they might not be eligible for business loans through normal lending channels. It is also the agencys most flexible business loan program, since financing under this program can be guaranteed for a variety of general business purposes.
Loan proceeds can be used for most sound business purposes including working capital, machinery and equipment, furniture and fixtures, land and building (including purchase, renovation and new construction), leasehold improvements, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets.
CUSTOMER: Start-up and existing small businesses, commercial lending institutions
DELIVERED THROUGH: Commercial lending institutions
SBA offers multiple variations of the basic 7(a) loan program to accommodate targeted needs.
PROGRAM: Certified Development Company (CDC), a 504 Loan Program
FUNCTION: Provides long-term, fixed-rate financing to small businesses to acquire real estate or machinery or equipment for expansion or modernization. Typically a 504 project includes a loan secured from a private-sector lender with a senior lien, a loan secured from a CDC (funded by a 100 percent SBA-guaranteed debenture) with a junior lien covering up to 40 percent of the total cost, and a contribution of at least 10 percent equity from the borrower.
CUSTOMER: Small businesses requiring brick and mortar financing
DELIVERED THROUGH: Certified development companies (private, nonprofit
corporations set up to contribute to the economic development of their communities or regions)
PROGRAM: Microloan, a 7(m) Loan Program
FUNCTION: Provides short-term loans of up to $35,000 to small businesses and not-for-profit child-care centers for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment. Proceeds cannot be used to pay existing debts or to purchase real estate. The SBA makes or guarantees a loan to an intermediary, who in turn, makes the microloan to the applicant. These organizations also provide management and technical assistance. The loans are not guaranteed by the SBA. The microloan program is available in selected locations in most states.
CUSTOMER: Small businesses and not-for-profit child-care centers needing small-scale financing and technical assistance for start-up or expansion
DELIVERED THROUGH: Specially designated intermediary lenders (nonprofit organizations with experience in lending and in technical assistance)
PROGRAM: Loan Prequalification
FUNCTION: Allows business applicants to have their loan applications for $250,000 or less analyzed and potentially sanctioned by the SBA before they are taken to lenders for consideration. The program focuses on the applicants character, credit, experience and reliability rather than assets. An SBA-designated intermediary works with the business owner to review and strengthen the loan application. The review is based on key financial ratios, credit and business history, and the loan-request terms. The program is administered by the SBAs Office of Field Operations and SBA district offices.
CUSTOMER: Designated small businesses
DELIVERED THROUGH: Intermediaries operating in specific geographic areas.

Owners of small businesses usually have limited resources to spend on marketing. Concentrating their efforts on one or a few key market segments - target marketing - gets the most return from small investments. There are two methods used to segment a market:
1. Geographical segmentation - Specializing in serving the needs of customers in a particular geographical area. For example, a neighborhood convenience store may send advertisements only to people living within one-half mile of the store.
2. Customer segmentation - Identifying those people most likely to buy the product or service and targeting those groups.
Managing the Market Mix
Every marketing program contains four key components:
Products and Services
Promotion
Distribution
Pricing
These are combined into an overall marketing program.
Products and Services - Product strategies may include concentrating on a narrow product line, developing a highly specialized product or service, or providing a product-service package containing unusually high-quality service.
Promotion - Promotion strategies include advertising and direct customer interaction. Good salesmanship is essential for small businesses because of their limited ability to spend on advertising. Good telphone book advertising is also important. Direct mail is an effective, low-cost medium available to small business.
Price - The right price is crucial for maximizing total revenue. Generally, higher prices mean lower volume and vice-versa; however, small businesses can often command higher prices because of their personalized service.
Distribution - The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers” agents generally is easiest for small manufacturers. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal: A low-cost, low-traffic location means spending more on advertising to build traffic.
The nature of the product or service is also important in siting decisions. If purchases are based largely on impulse, then high traffic and visibility are critical. On the other hand, location is less a concern for products or services that customers are willing to go out of their way to find. The recent availability of highly segmented mailing lists, purchased from list brokers, magazines, or other companies, has enabled certain small businesses to operate from any location yet serve national or international markets.

tvat - TV@ Interview von Tobias Worzyk/Hamburg-Startups mit Monte A. Miersch ber Mikestar.com

Another amazing startup by Dario from businesshackers.com

You may contact these investors directly, although they typically make their investments through referrals. The SBA also licenses Small Business Investment Companies (SBICs) and Minority Enterprise Small Business Investment companies (MSBIs), which offer equity financing. Apple Computer, Federal Express and Nike Shoes received financing from SBICs at critical stages of their growth.

Randy Komisar, the “virtual CEO” and venture capitalist at Kleiner Perkins Caufield and Byers talks to Matt and Julio from iinnovate about entrepreneurship and venture capital. In this segment Randy talks about some hot startups and some exciting areas for investment. For more of this interview and others, check out www.iinnovatecast.com