Friday, February 8, 2013

10 Great Business Ideas

What is one single thing every business must have? A business idea! Without an idea about what to do you can't do anything.
Therefore I have searched near and far in order to try and present 10 great business ideas that just could be the next great thing.
Here comes the list.
1. App development - apps are still the craze. Whether we are talking about Android apps or iPhone apps it doesn't matter really. The potential is great just get there and make the new Angry birds!

2. Online selling - the business is moving to the web, or should I say "into the Cloud" :) Anyway the online shopping is increasing by leaps and bounds. Why not turn your focus on online shop instead of the classic store? The costs are definitively lower, the potential market is bigger, so what are you waiting for?

3. Online booking/travel agency - people like to travel but are usually lazy to walk from door to door in order to get all the information (sort of a paradox). Give it to them all - from the comfort of their couch.

4. Translations - world is getting smaller but still we are not all speaking a same language. Brazil, Russia, India and China are getting stronger and stronger but most of the business is still performed in English. Translations from and to those languages are high in demand!

5. Bike rental - many cities worldwide don't have any kind of bike rental. On the other hand people are more and more environmentally conscious. Let them use a bike for a fee! So instead of buying a bike and worrying whether it gets stolen they just rent it and drive it!

6. Children's clothing - I'm talking handmade. One of my teachers told me long ago - when you start a business make children your target market. People will always buy stuff for their kids. So in order to be different from the mass manufactured items start a small production of handmade kids clothes.

7. Instructions - If you have extensive knowledge in a certain field why not teach people? It is a great and rewarding job.

8. Property management - once again back to traveling. More and more people are looking for apartments they can rent for a couple of days when traveling. Why not organize people who have empty apartments, offer them revenue, and you take care of cleaning and guest, for a fee of course!  

9. Blogging - yes that's exactly what I am doing, blogging. Don't be fooled that it is an easy job. You can make money from blogging but you have to be innovative and interesting and proactive.

10. Farming - no I am not talking about acres and acres of wheat. Find a vegetable (or a fruit) for which there is a demand and it pays good. Also take care how much crops will yield, when and how often. Start small with couple of plants and grow organically (pun intended) as you gain revenue.

That's all folks! Those are my ideas. And just so you don't think that I'm all talk I'll let you in on little secret. Of these ten ideas I am actually working on 4. Trying and believing in success. So there you have. 10 great business ideas you have to try.

Lawyers and attorneys

Yep, when you are running a business sooner or later you will have to cope with some kind of a legal problem. Lawyers will rip you off no matter what side you are on. The one suing somebody or being sued by somebody. Lets face it - it is a fact of life. Now you can try and do your best to avoid such situations but just remember some stupid lawsuits. For instance do you remember the woman who spills coffee on herself and went on to sue McDonalds for millions in damages? And now McDonalds puts a warning sign on every coffee cup so it wouldn't happen again. But who is to say that you won't forget such a small thing and end up getting sued for something similar. On the other side what happens when somebody doesn't pay you for products or services provided to you? You will sue them of course. And once again lose money for lawyers, for court expenses for misses income, for your time etc. You can't escape it you can just take care.
I have a friend who writes about lawyers so for more things on that topic visit his site:

Thursday, February 7, 2013

TOP 5 Mistakes

Businesses make mistakes. That is a part of everything we do in life in general. We make mistakes. That is true. Many times I have heard the saying: "Smart people learn from their own mistakes, but wise people learn from other people's mistakes". So in accordance with that saying I have found an interesting video that will help you to learn from other people's mistakes and become therefore much wiser.

Running a successful business

When running a business there are some factors you need to have in mind in order to run it successfully.
First of all you have to have a vision. Having a clear vision of what you want your business to be like is a crucial thing. What do you want known for? What do you want to provide to the market? What is your target market? Will you settle for second place or are you going to the top? Try and answer these questions and you will be able to define which way you should take.

Now you have to develop a plan that will fulfill your vision. After defining what your vision is you have to have a plan for it to come true. Many, many people know what they want their business to be but never develop a plan they can follow. Take your time and do it!

Get to know your market. That is one of the most important aspects of running any type of business. You can't cater to everyone, you have to know your target market. If you try to please everybody you will please nobody!

Visibility, visibility, visibility! Focus on your target market. Just knowing what and who it is is not enough. You have to approach your target market and get them to know about you. You can try e-mails, advertisement, newsletters, direct marketing and what not. But you have to make sure people know about you!

If you have more people involved in your business you have to do just that. Involve them! Let you staff know what you are doing, why are you doing it and for whom you are doing it. Encourage them to express their ideas. Sometimes they might have a different perspective on things and that could help you a lot. Also if you want your staff to follow your vision talk to them about it. Let them know what you are trying to do. Make them understand it and see that you need them and that they need you.

It is important to note that running and promoting your business never ends. It is an ongoing process. People usually make a mistake is that they try once and expect instant success. It doesn't work that way. You have to keep on going and keep on pushing forward.

You also have to realize one thing. The most important things. Your business is out there to change peoples lives! Sounds like exaggerating? Well I wasn't talking about changing the world or abolishing world hunger and realizing world peace. Bear with me for a second. Whatever you do, no matter how small or insignificant it might seem, it does influence other people. Whatever product or service you provide people who purchase it from you have their lives changed. For instance if you open a local grocery store and make it part of your vision to always greet customers with a smile and a kind word will make those people feel happier. Isn't that changing lives?

Tuesday, February 5, 2013

Stock exchange

I have realized that I haven't explain thoroughly to you what the stock exchange is. I found a good article on Wikipedia that actually covers it to the letter. I won't quote the whole article since you can look it up yourself but I will just take the important parts.
A stock exchange is a form of exchange which provides services for stock exchange and traders to trade stocks, bonds and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.
To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only.
The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors that, as in all free markets, affect the price of stocks.
There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

Business Plan part 7

12. Refining the Plan
The generic business plan presented above should be modified to suit your specific type of business and the audience for which the plan is written.
For Raising Capital
For Bankers

•    Bankers want assurance of orderly repayment. If you intend using this plan to present to lenders, include:
o    Amount of loan
o    How the funds will be used
o    What this will accomplish—how will it make the business stronger?
o    Requested repayment terms (number of years to repay). You will probably not have much negotiating room on interest rate but may be able to negotiate a longer repayment term, which will help cash flow.
o    Collateral offered, and a list of all existing liens against collateral
For Investors
•    Investors have a different perspective. They are looking for dramatic growth, and they expect to share in the rewards:
o    Funds needed short-term
o    Funds needed in two to five years
o    How the company will use the funds, and what this will accomplish for growth.
o    Estimated return on investment
o    Exit strategy for investors (buyback, sale, or IPO)
o    Percent of ownership that you will give up to investors
o    Milestones or conditions that you will accept
o    Financial reporting to be provided
o    Involvement of investors on the board or in management
For Type of Business

•    Planned production levels
•    Anticipated levels of direct production costs and indirect (overhead) costs—how do these compare to industry averages (if available)?
•    Prices per product line
•    Gross profit margin, overall and for each product line
•    Production/capacity limits of planned physical plant
•    Production/capacity limits of equipment
•    Purchasing and inventory management procedures
•    New products under development or anticipated to come online after startup
Service Businesses
•    Service businesses sell intangible products. They are usually more flexible than other types of businesses, but they also have higher labor costs and generally very little in fixed assets.
•    What are the key competitive factors in this industry?
•    Your prices
•    Methods used to set prices
•    System of production management
•    Quality control procedures. Standard or accepted industry quality standards.
•    How will you measure labor productivity?
•    Percent of work subcontracted to other firms. Will you make a profit on subcontracting?
•    Credit, payment, and collections policies and procedures
•    Strategy for keeping client base
High Technology Companies
•    Economic outlook for the industry
•    Will the company have information systems in place to manage rapidly changing prices, costs, and markets?
•    Will you be on the cutting edge with your products and services?
•    What is the status of research and development? And what is required to:
o    Bring product/service to market?
o    Keep the company competitive?
•    How does the company:
o    Protect intellectual property?
o    Avoid technological obsolescence?
o    Supply necessary capital?
o    Retain key personnel?
High-tech companies sometimes have to operate for a long time without profits and sometimes even without sales. If this fits your situation, a banker probably will not want to lend to you. Venture capitalists may invest, but your story must be very good. You must do longer-term financial forecasts to show when profit take-off is expected to occur. And your assumptions must be well documented and well argued.
Retail Business
•    Company image
•    Pricing:
o    Explain markup policies.
o    Prices should be profitable, competitive, and in accordance with company image.
•    Inventory:
o    Selection and price should be consistent with company image.
o    Inventory level: Find industry average numbers for annual inventory turnover rate. Multiply your initial inventory investment by the average turnover rate. The result should be at least equal to your projected first year's cost of goods sold. If it is not, you may not have enough budgeted for startup inventory.
•    Customer service policies: These should be competitive and in accord with company image.
•    Location: Does it give the exposure that you need? Is it convenient for customers? Is it consistent with company image?
•    Promotion: Methods used, cost. Does it project a consistent company image?
•    Credit: Do you extend credit to customers? If yes, do you really need to, and do you factor the cost into prices?

Basically in these 7 lessons you have everything you need to know about writing a business plan. Good luck with that!

Business Plan part 6

10. Financial Plan
The financial plan consists of a 12-month profit and loss projection, a four-year profit and loss projection (optional), a cash-flow projection, a projected balance sheet, and a break-even calculation. Together they constitute a reasonable estimate of your company's financial future. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company.
12-Month Profit and Loss Projection
Many business owners think of the 12-month profit and loss projection as the centerpiece of their plan. This is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful.
Your sales projections will come from a sales forecast in which you forecast sales, cost of goods sold, expenses, and profit month-by-month for one year.
Profit projections should be accompanied by a narrative explaining the major assumptions used to estimate company income and expenses.
Research Notes: Keep careful notes on your research and assumptions, so that you can explain them later if necessary, and also so that you can go back to your sources when it’s time to revise your plan.
Three-Year Profit Projection
The 12-month projection is the heart of your financial plan. The Three-Year Profit projection is for those who want to carry their forecasts beyond the first year.
Of course, keep notes of your key assumptions, especially about things that you expect will change dramatically after the first year.
Projected Cash Flow
If the profit projection is the heart of your business plan, cash flow is the blood. Businesses fail because they cannot pay their bills. Every part of your business plan is important, but none of it means a thing if you run out of cash.
The point of this worksheet is to plan how much you need before startup, for preliminary expenses, operating expenses, and reserves. You should keep updating it and using it afterward. It will enable you to foresee shortages in time to do something about them—perhaps cut expenses, or perhaps negotiate a loan. But foremost, you shouldn’t be taken by surprise.
There is no great trick to preparing it:  The cash-flow projection is just a forward look at your checking account.
For each item, determine when you actually expect to receive cash (for sales) or when you will actually have to write a check (for expense items).
You should track essential operating data, which is not necessarily part of cash flow but allows you to track items that have a heavy impact on cash flow, such as sales and inventory purchases.
You should also track cash outlays prior to opening in a pre-startup column. You should have already researched those for your startup expenses plan.
Your cash flow will show you whether your working capital is adequate. Clearly, if your projected cash balance ever goes negative, you will need more start-up capital. This plan will also predict just when and how much you will need to borrow.
Explain your major assumptions; especially those that make the cash flow differ from the Profit and Loss Projection. For example, if you make a sale in month one, when do you actually collect the cash? When you buy inventory or materials, do you pay in advance, upon delivery, or much later? How will this affect cash flow?
Are some expenses payable in advance? When?
Are there irregular expenses, such as quarterly tax payments, maintenance and repairs, or seasonal inventory buildup that should be budgeted?
Loan payments, equipment purchases, and owner's draws usually do not show on profit and loss statements but definitely do take cash out. Be sure to include them.
And of course, depreciation does not appear in the cash flow at all because you never write a check for it.
Opening Day Balance Sheet
A balance sheet is one of the fundamental financial reports that any business needs for reporting and financial management.  A balance sheet shows what items of value are held by the company (assets), and what its debts are (liabilities). When liabilities are subtracted from assets, the remainder is owners’ equity.
Use a startup expenses and capitalization spreadsheet as a guide to preparing a balance sheet as of opening day. Then detail how you calculated the account balances on your opening day balance sheet.
Optional:  Some people want to add a projected balance sheet showing the estimated financial position of the company at the end of the first year. This is especially useful when selling your proposal to investors.
Break-Even Analysis
A break-even analysis predicts the sales volume, at a given price, required to recover total costs. In other words, it’s the sales level that is the dividing line between operating at a loss and operating at a profit.
Expressed as a formula, break-even is:
Break-Even Sales          =    Fixed Costs
    1- Variable Costs

(Where fixed costs are expressed in dollars, but variable costs are expressed as a percent of total sales.)
Include all assumptions upon which your break-even calculation is based.

11. Appendices
Include details and studies used in your business plan; for example:
•    Brochures and advertising materials
•    Industry studies
•    Blueprints and plans
•    Maps and photos of location
•    Magazine or other articles
•    Detailed lists of equipment owned or to be purchased
•    Copies of leases and contracts
•    Letters of support from future customers
•    Any other materials needed to support the assumptions in this plan
•    Market research studies
•    List of assets available as collateral for a loan

Business Plan part 5

8. Operational Plan
Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment.
How and where are your products or services produced?
Explain your methods of:
•    Production techniques and costs
•    Quality control
•    Customer service
•    Inventory control
•    Product development
What qualities do you need in a location? Describe the type of location you’ll have.
Physical requirements:
•    Amount of space
•    Type of building
•    Zoning
•    Power and other utilities
Is it important that your location be convenient to transportation or to suppliers?
Do you need easy walk-in access?
What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers?
Include a drawing or layout of your proposed facility if it is important, as it might be for a manufacturer.
Construction? Most new companies should not sink capital into construction, but if you are planning to build, costs and specifications will be a big part of your plan.
Cost: Estimate your occupation expenses, including rent, but also including maintenance, utilities, insurance, and initial remodeling costs to make the space suit your needs. These numbers will become part of your financial plan.
What will be your business hours?
Legal Environment
Describe the following:
•    Licensing and bonding requirements
•    Permits
•    Health, workplace, or environmental regulations
•    Special regulations covering your industry or profession
•    Zoning or building code requirements
•    Insurance coverage
•    Trademarks, copyrights, or patents (pending, existing, or purchased)
•    Number of employees
•    Type of labor (skilled, unskilled, and professional)
•    Where and how will you find the right employees?
•    Quality of existing staff
•    Pay structure
•    Training methods and requirements
•    Who does which tasks?
•    Do you have schedules and written procedures prepared?
•    Have you drafted job descriptions for employees? If not, take time to write some. They really help internal communications with employees.
•    For certain functions, will you use contract workers in addition to employees?
•    What kind of inventory will you keep: raw materials, supplies, finished goods?
•    Average value in stock (i.e., what is your inventory investment)?
•    Rate of turnover and how this compares to the industry averages?
•    Seasonal buildups?
•    Lead-time for ordering?
Identify key suppliers:
•    Names and addresses
•    Type and amount of inventory furnished
•    Credit and delivery policies
•    History and reliability
Should you have more than one supplier for critical items (as a backup)?
Do you expect shortages or short-term delivery problems?
Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs?
Credit Policies
•    Do you plan to sell on credit?
•    Do you really need to sell on credit? Is it customary in your industry and expected by your clientele?
•    If yes, what policies will you have about who gets credit and how much?
•    How will you check the creditworthiness of new applicants?
•    What terms will you offer your customers; that is, how much credit and when is payment due?
•    Will you offer prompt payment discounts? (Hint: Do this only if it is usual and customary in your industry.)
•    Do you know what it will cost you to extend credit? Have you built the costs into your prices?
Managing Your Accounts Receivable
If you do extend credit, you should do an aging at least monthly to track how much of your money is tied up in credit given to customers and to alert you to slow payment problems.
You will need a policy for dealing with slow-paying customers:
•    When do you make a phone call?
•    When do you send a letter?
•    When do you get your attorney to threaten?
Managing Your Accounts Payable
You should also age your accounts payable, what you owe to your suppliers. This helps you plan whom to pay and when. Paying too early depletes your cash, but paying late can cost you valuable discounts and can damage your credit. (Hint: If you know you will be late making a payment, call the creditor before the due date.)
Do your proposed vendors offer prompt payment discounts?

9. Startup Expenses and Capitalization
You will have many startup expenses before you even begin operating your business. It’s important to estimate these expenses accurately and then to plan where you will get sufficient capital. This is a research project, and the more thorough your research efforts, the less chance that you will leave out important expenses or underestimate them.
Even with the best of research, however, opening a new business has a way of costing more than you anticipate. There are two ways to make allowances for surprise expenses. The first is to add a little “padding” to each item in the budget. The problem with that approach, however, is that it destroys the accuracy of your carefully wrought plan. The second approach is to add a separate line item, called contingencies, to account for the unforeseeable. This is the approach we recommend.
Talk to others who have started similar businesses to get a good idea of how much to allow for contingencies. If you cannot get good information, we recommend a rule of thumb that contingencies should equal at least 20 percent of the total of all other start-up expenses.
Explain your research and how you arrived at your forecasts of expenses. Give sources, amounts, and terms of proposed loans. Also explain in detail how much will be contributed by each investor and what percent ownership each will have.

Business Plan part 4

7. Marketing Plan
Describe in depth your products or services (technical specifications, drawings, photos, sales brochures, and other bulky items belong in Appendices).
What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary features.
List all of your major products or services.
For each product or service:
•    Describe the most important features. What is special about it?
•    Describe the benefits. That is, what will the product do for the customer?
Note the difference between features and benefits, and think about them. For example, a house that gives shelter and lasts a long time is made with certain materials and to a certain design; those are its features. Its benefits include pride of ownership, financial security, providing for the family, and inclusion in a neighborhood. You build features into your product so that you can sell the benefits.
What after-sale services will you give? Some examples are delivery, warranty, service contracts, support, follow-up, and refund policy.
What are the pricing, fee, or leasing structures of your products or services?
Explain your method or methods of setting prices. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under price you anyway. Usually you will do better to have average prices and compete on quality and service.
Does your pricing strategy fit with what was revealed in your competitive analysis?
Compare your prices with those of the competition. Are they higher, lower, the same? Why?
How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?
What will be your customer service and credit policies?
How will you get the word out to customers?
Advertising: What media, why, and how often? Why this mix and not some other?
Have you identified low-cost methods to get the most out of your promotional budget?
Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), and network of friends or professionals?
What image do you want to project? How do you want customers to see you?
In addition to advertising, what plans do you have for graphic image support? This includes things like logo design, cards and letterhead, brochures, signage, and interior design (if customers come to your place of business).
Should you have a system to identify repeat customers and then systematically contact them?
Promotional Budget
How much will you spend on the items listed above?
Before startup? (These numbers will go into your startup budget.)
Ongoing? (These numbers will go into your operating plan budget.)
Proposed Location
Describe what you want and need in a location. Many startups run successfully from home for a while.
You will describe your physical needs later, in the Operational Plan section. Here, analyze your location criteria as they will affect your customers.
Is your location important to your customers? If yes, how?
If customers come to your place of business:
Is it convenient? Parking? Interior spaces? Not out of the way?
Is it consistent with your image?
Is it what customers want and expect?
Where is the competition located? Is it better for you to be near them (like car dealers or fast food restaurants) or distant (like convenience food stores)?
Distribution Channels
How do you sell your products or services?
Direct (mail order, Web, catalog)
Your own sales force
Independent representatives
Bid on contracts 
Sales Forecact
Now that you have described your concept, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Use a sales forecast spreadsheet to prepare a month-by-month projection. The forecast should be based on your historical sales, the marketing strategies that you have just described, your market research, and industry data, if available.
You may want to do two forecasts: 1) a "best guess", which is what you really expect, and 2) a "worst case" low estimate that you are confident you can reach no matter what happens.
Remember to keep notes on your research and your assumptions as you build this sales forecast and all subsequent spreadsheets in the plan. This is critical if you are going to present it to funding sources.

Business Plan part 3

4. Strategy
Describe where you plan for the business to operate i.e. where will you play?
•    Geographic location?
•    Customer niche or mass market?
Describe how you plan to win in this market i.e. how will you create unique and valuable position, involving a different set of activities
•    What is unique about the business i.e. how is the offering different from that of competitors?
•    What is the value for the customers? Describe the value proposition for the customer?

5. Business Model
Revenue sources
What are the sources of revenue for the business?
o    Single or multiple revenue streams?
o    Payment terms – upfront, over a period of time or post delivery?
Cost drivers
What are the cost drivers for the new business?
o    Major costs incurred to generate revenue?
o    Nature of costs – fixed, variable or semi-variable?
o    Payment terms – upfront, over a period of time or post delivery?
Capital investment
What size capital investment is required to launch and sustain the business?
o    To sustain a positive cash balance?
o    To make profit?
Critical success factors
What are the critical success factors for this business?
o    Identify the issues that will determine the success or failure of the business?
6. Team - Management and Organization
Who is behind this business? List the founders including their qualifications and experience.
Who will manage the business on a day-to-day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated?
If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions.
Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees.
Professional and Advisory Support
List the following:
•    Board of directors
•    Management advisory board
•    Attorney
•    Accountant
•    Insurance agent
•    Banker
•    Consultant or consultants
•    Mentors and key advisors

Business Plan part 2

In the last post we have written down the general overview of the business plan. Now we will elaborate further.
  1. Executive Summary
Write this section last.
We suggest that you make it two pages or fewer.
Include everything that you would cover in a five-minute interview.
Explain the fundamentals of the proposed business:  What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?
Make it enthusiastic, professional, complete, and concise.
If applying for a loan, state clearly how much you want, precisely how you are going to use it, and how the money will make your business more profitable, thereby ensuring repayment.

    2.  General Company Description
What business will you be in? What will you do?
Mission Statement: Many companies have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan, followed by:
Company Goals and Objectives: Goals are destinations—where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.
Business Philosophy: What is important to you in business?
To whom will you market your products? (State it briefly here—you will do a more thorough explanation in the Marketing Plan section).
Briefly describe your industry.  Is it a growth industry? What changes do you foresee in the industry, short term and long term? How will your company be poised to take advantage of them? (Note – you will do an in-depth industry and market analysis in the next section)
Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?
Legal form of ownership: Sole proprietor, Partnership, Closed Corporation, Pty (Ltd), Section 21 Co.?  Why have you selected this form?

   3.  The Industry, Market and the Opportunity

Describing the opportunity
Describe the gap that exists in the market. What has given rise to this gap and how can it be filled?
Describing the industry and the market
A deeper understanding an opportunity involves systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and ensure that there is a realistic gap in the market for your product or service and that you can be competitive in providing that product or service. Your time will be well spent.
Market research
There are two kinds of market research: primary and secondary.
Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies.
Start with your local library. Most librarians are pleased to guide you through their business data collection. You will be amazed at what is there. There are more online sources than you could possibly use. Your chamber of commerce has good information on the local area. Trade associations and trade publications often have excellent industry-specific data.
Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus-group interviews to learn about consumer preferences.  Professional market research can be very costly, but there are many books that show small business owners how to do effective research themselves.
In your market analysis, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis, later on, of the all-important sales projection.
Facts to communicate about the about the market:
•    What is the total size of your market?
•    What percent share of the market will you have? (This is important only if you think you will be a major factor in the market.)
•    Current demand in target market.
•    Trends in target market—growth trends, trends in consumer preferences, and trends in product development.
•    Growth potential and opportunity for a business of your size.
Industry Analysis
Analysis of barriers to entry:
    What barriers to entry do you (and others) face in entering this market? Some typical barriers are:
  • High capital costs
  • High production costs
  • High marketing costs
  • Consumer acceptance and brand recognition
  • Training and skills
  • Unique technology and patents
  • Unions
  • Shipping costs
  • Tariff barriers and quotas
   How will you overcome the barriers?

Analysis of buyer power:
   Who are the buyers and do they have significant power or influence over the prices they pay?
   Do they have significant choice when buying the product or service?
Analysis of supplier power
   Who are the suppliers and do they have significant power or influence over the prices they charge.
   Are there a limited number of suppliers
Analysis of substitutes
   Are there substitute offerings for the product or service? What is the likelihood that customers will switch to the substitute? i.e. will you have important indirect competitors? (For example, video rental stores compete with theaters, although they are different types of businesses.)
Analysis of competitive rivalry
   What products and companies will compete with you?
List your major competitors:
Will they compete with you across the board, or just for certain products, certain customers, or in certain locations?
How will your products or services compare with the competition?
Use the Competitive Analysis table below to compare your company with your two most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors.
In the column labeled Me, state how you honestly think you will stack up in customers' minds. Then check whether you think this factor will be a strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because efforts become scattered and diluted. You want an honest assessment of your firm's strong and weak points.
Now analyze each major competitor. In a few words, state how you think they compare.
In the final column, estimate the importance of each competitive factor to the customer.  1 = critical; 5 = not very important.
Now, write a short paragraph stating your competitive advantages and disadvantages.
Changes affecting the industry
How could the following affect your company?
  • Change in technology
  • Change in government regulations
  • Change in the economy
  • Change in your industry

Business plan for a Startup part 1

The business plan consists of a narrative and several financial worksheets. The narrative template is the body of the business plan. It contains more than 150 questions divided into several sections. Work through the sections in any order that you like, except for the Executive Summary, which should be done last. Skip any questions that do not apply to your type of business. When you are finished writing your first draft, you’ll have a collection of small essays on the various topics of the business plan. Then you’ll want to edit them into a smooth-flowing narrative.
The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching, thinking about and discussing your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research.  It enables you to look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.
This business plan is a generic model suitable for all types of businesses. However, you should modify it to suit your particular circumstances. Before you begin, review the section titled Refining the Plan, found at the end. It suggests emphasizing certain areas depending upon your type of business (manufacturing, retail, service, etc.). It also has tips for fine-tuning your plan to make an effective presentation to investors or bankers. If this is why you’re creating your plan, pay particular attention to your writing style. You will be judged by the quality and appearance of your work as well as by your ideas.
It typically takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. But then, that’s the value of the process. So make time to do the job properly. Those who do never regret the effort. And finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data.
The table of contents should have the following topics:
  • Excecutive summary
  • General company description
  • The Industry, Market and Opportunity
  • Strategy
  • Business Model
  • Team - Management and Organization
  • Marketing Plan
  • Operational Plan
  • Startup Expenses and Capitalization
  • Financial Plan
  • Appendices
  • Refining the Plan

What is recession?

Recession is described as a period of reduced economic activity of a certain country followed by a decline in general economic climate (decline in real income, increase in unemployment, low production capacity infill...). Recession is less severe than depression. It repeats in cycles every couple of years, usually beginning in one country and requires a period of several months or quarters to transfer to other countries.

There are three basic predictors: duration, depth and diffusion. Consumers respond to recession by changing their shopping habits, they spend more carefully and for a competitive marketing activity during economic recession a business subject needs to take all three predictors into consideration.

Definition courtesy of Limun


Founding an ltd in Croatia

Another post published at Product of Croatia

Of course I am the author of that article.

I have been monitoring the founding of on limited liability company and the costs it has incurred. Due to the details of the founding and the inexperience in the real world, I have chosen an entrepreneur beginner and the business of the family home. Total costs of the founding and registration are around 25.200,00 kunas.
Everyone of you sometimes have an idea of starting their own business. But idea can’t be realized without a solid form of doing business, like a company, crafts, cooperative, family agricultural estate or freelancing. Once you put everything down and see what would be the best form for the realization of your idea then you have to decide what to register.
I wanted to show on a practical example how a limited liability company can be registered, for working at home.
That’s why I have chosen an entrepreneur beginner and went through all the phases of founding a ltd for work at home, of course marking all the expenses.
Now when we have been through all those phases we can tell you: “Nothing is hard if you have a goal, if you are persistent and if you have experts helping you.”
Founding the ltd can be divided into a couple of steps:

*Gathering the basic data
You have to know that there are many ways to gather info on founding a ltd. but the simplest way is to go to HITRO.HR – service available within a Financial agency (FINA). You can get all the info in one place and do most of the steps there.
Our entrepreneur went to Osijek HITRO.HR (phone 031/222 285, info phone 0800 0080) where she got all the necessary data. First step is choosing a name. we arrived at the HITRO.HR counter with a couple of names and the kind clerk checked them for us to see if they are valid for a ltd. Our entrepreneur was able to see all the fees and costs for founding a company and received a form of warrant that has to be ratified at the notary.
Couple of names didn’t check, and only the third one got the green light. Since it was a name of a person later on she had to give an explanation why she wants that name (in our case it was the name of our entrepreneurs grandmother).

**Auditor and notary

When founding a company the founder has to invest minimum base capital in amount of 20.000 kunas. Entrepreneur decided on that minimum amount and invested 10.000 kunas cash and 10.000 kunas in equipment.
Due to the decision to invest half in equipment entrepreneur had to ask, via a written request, from the Trade court in Osijek to name a auditing company. The day after submitting a request Trade court named a auditing company that soon afterwards in a very professional way did a audit of the company founding (Audit report).
With two Audit reports, copies of identification cards of the founder and member of board and warranty for HITRO.HR entrepreneur goes to the notary office to file the needed documentation. At the notary office entrepreneur named her need for doing the business of the future firm for which it has been registered.
After a couple of days, when called, she goes to the notary and validates Application for registering into a Court register (form Po), founding act – Statement o founding a company, Statement of the members accredited to represent the company that they accept the responsibility, Decision on naming the members of the Board, directors and Board members signature, and the Agreement of investing equipment as part of the base capital.
At the same time entrepreneur had to give a Statement to explain the naming of the company since the name was after her grandmother.
With the Application for registering into a Court register and other annexes founder and a Board member go to HITRO.HR where they file the documents at the HITRO.HR counter at FINA. Shortly the clerks of HITRO.HR service gave the needed directions and we had a couple of days to wait for the Trade court decision. At the FINA counter founder did all the payments.

***Trade court decision
Entrepreneur wanted to open a family home for at most 20 users in form of permanent accommodation which lengthened the process somewhat.
Law on social care permits doing this service only in form of ltd. company. She had to go to the notary once again to sign a arraignment on naming the director by the company assembly and the statement of the functioning of the family home outside of the social care network which enables her to file a request for making a decision on fulfilling regulated conditions, according to the law, without filling a request for giving out a permission.
Very soon a call from HITRO.HR followed that called her to come for the Decision of registering at the court register as well as a Notification of categorization of the business subject according to the National classification of services by the Central bureau of statistics.
The whole procedure lasted for 15 days.

**** Seal and opening an account
The whole job is not over until you make a seal and open an account. Seal can be made at , for that registered, entrepreneurs, and it was done in two days.
With the decision of registering at the court register (attach a copy, original bring for checking), Notification of categorization of the business subject by the Central bureau of statistics, seal and ID card of the persons that will be cosigners of the account where the entrepreneur opened an account for regular business transactions.
Account has been opened with the beforehand filling a request for opening a business account and signing a Contract on opening and running a business account.
Account can be opened at the HITRO.HR counter for the bank for which FINA does the job of opening an account or intermediates in doing those jobs or in a bank of your choice.
Next we had to register the firm at the tax office, competent for the area where the base of the company is because it has to be registered in the register of the profit tax payers (you have to show them Decision of registering at the court register, Notification of categorization and signature card).
You still have 15 days since you start doing business to register at the Croatian pension fund and Croatian health insurance. You can do that also at the HITRO.HR counter.

***** Costs of founding and registering ltd.
You can make all the payments at HITRO.HR counter.
We have counted all the costs whose structure and amounts are as follows:
- judicial fee for naming an auditor 250,00 kn
- audit of the company founding 732,00 kn
- making and validating act for the Trade court, notary 2.804,00 kn
- founding capital, money 10.000,00 kn
- founding capital, equipment 10.000,00 kn
- receipt on the paying the founding capital 23,79 kn
- judicial fees 400,00 kn
- costs of the announcement in the Official Gazette 810,00 kn
- Central bureau of statistics fee 55,00 kn
- seal 140,00 kn

TOTAL: 25,214,79 kn

Pricing the product

Once again for your convenience I republish the materials I have written for the portal Product of Croatia

We are starting some serious stuff now. We have everything we need for our business. We have a perfect idea, we have the money, we have the knowledge and we are off. Full steam ahead. We are ready to make big bucks. Our product/service is perfect and everybody will want it. Everybody will… wait a second. We have to determine the price. Now that is a problem.
Let us start from the beginning.
First we have to use an accounting method to determine the cost of the product. What is the cost of the product? Simply put the cost of the product is direct costs of that product to which we add some indirect costs. Sounds complicated? I'll try to simplify it. Direct costs are those costs for which we certainly know that they influence the price. In case of production those would be equipment expenses, people who work there, space where the work is done etc.
Indirect costs are little bit more complicated. As the name itself says they influence the total price of the product but not as much as direct costs. For instance indirect costs would be the services of the security staff. We can't say it directly affects the product, but we have to cover those expenses somehow. That is why there are various methods of allocating indirect costs in order for us to know how much they affect the total cost of the product.
The simplest division is in case you have only one product and you simply divide the indirect costs with the number of units and allocate it that way. In case you have many different products it gets harder to do it. I suggest you ask an expert if you are not sure how to do it. That much about finding out the cost of the product.
But there are other factors that affect the price of the product. The price also depends on the market. Maybe there is already similar on the market and then you won't be able to go with the higher price. If you are first on the market you have to know how much the market is willing to pay for your product.
Of course there are always problems with determining the price. For instance if the competitors product costs 100 kunas, and your costs are 110 kunas you can't sell below 115 kunas. A who will buy your product then if they a cheaper option. Here you can work on some other factors. If your product is of better quality maybe a higher price can go. Or you'll have to cut costs. In that case you have to work on the efficiency of your company. But more on that some other time.

Stock market part 2

So dear all I give my best effort in order to provide you with up to date information and helpful tips. While browsing the web I found something that might interest some of you who feel like trying their luck at stock market. At USA Today pages you can find The Portfolio Tracker.

It seems like a useful tool if you are doing some stock trading. With help of this little application you will be able to see all your investments in one place and therefore see how well (or how bad) you are doing. It looks cool so feel free to try it out. And definitely let me know how you are doing!

Who is an entrepreneur?

This is also an article I have published on portal Product of Croatia.

In order for us to start our enterprise first of all we have to know who is an entrepreneur.
Richard Cantillon, a French economist, once said that an entrepreneur is a person who moves his capital into a venture with a high return.
Vedran Šošić, one of Croatian more famous economists, once said that an entrepreneur is a person who invests his property into some venture.
Peter Drucker, one of the Americas’ leading economists on the field of entrepreneurship, once said that an entrepreneur is a person who creatively changes the conditions of a economy.
All three of them are right. Entrepreneur is a person that takes risks, seeks profit and must be creative in order to succeed.
According to some modern theories of entrepreneurship it is divided into a three dimensions:
  • profit, as an economical dimension,
  • risk, as a governing dimension and
  • creativity, as innovative dimension.
An entrepreneur is a person that uses all three dimensions and copes with them. An entrepreneur uses capital (his own or borrowed), land, work and information to succeed. Of course, we could say that an entrepreneur is someone who is not innovative, but you have to ask yourself: “Isn’t he really?” I mean, creativity is not just innovations, inventions, new way of using the phone for instance, or new kind of fuel. Quite the contrary it is hard for an entrepreneur who works in pharmacy to be creative. He just doesn’t have the resources necessary for research. But that is not the only definition of innovativeness. An entrepreneur can be innovative in million other ways. He can show his innovativeness through his way of running his firm or his organizational structure, or his approach to his employees. In short, we could define innovativeness in entrepreneurship as using the inventions, but also the new processes, making new relations, encouraging the associates.
In the world many economies are based on small entrepreneurs. Maybe you are one of them. Have you recognized yourself in this text? You believe that you have what it takes? Maybe you really should start your own firm and take a step into the world of entrepreneurship!

Human resources

This is one article that I have written ages ago for the portal Product of Croatia. I believe it is quite good and interesting for people who are starting their own business so that they would know how to manage people. I bring it you unchanged as it was published there.

We've been through a lot so far. But we mustn't forget the most important thing – people. Our employees are the main investment of our business. If the employee is satisfied, he works good. If he works good, the quality grows. If the quality grows, customers are satisfied. You see what I am getting at?

But how to make your employees happy? Well the options are numerous. But lets start from the easier and more obvious ones.

Every employee, excuse me, every man wants to earn money in order to provide himself a better life. Well there are differences. Even with a little bit higher wage in comparison to the similar positions in the other firms can make employee happy. But let's not get carried away. You as an entrepreneur want to make some money, not just give it away. So there are some limits here. But don't worry – there's more.

Ask your people in what kind of place would they feel comfortable working in. And of course forget about those that start talking about leather couches with mini bars at the side and plasma TV on which there is a great view of the game. Those are probably not too interested in work anyway. But if people tell you that they like having comfy chairs, that won't make them sore after 8 hours of work – listen to them. Lightning is also important. Bad lightning make people sleepy. Also the color of the walls is important, or so it is said. I wouldn't take that too serious. Imagine walking into somebody's office and seeing sky blue walls. True, it probably is relaxing and reduces stress, but also looks a bit childish. What I wanted to say is that people are more motivated if the conditions are fine. And during the summer don't save on the air conditioning – your employees will be eternally grateful.

Working atmosphere
Uuuu this is veeery sensitive area. No boss can please all his employees since no man is same. Yes you read it right, boss should please his employees. In the end it's not him doing the work, he just supervises. The boss should use every opportunity to commend his employee and so raise his moral and make him wish to try even harder. Of course he should do it so that everyone hears. In case he wants to admonish him he should do it in private. Why? Well if the word gets out through the firm (gossip travels fast) then the employee could get into trouble with his colleagues teasing him. Maybe even insulting him. And then he will loose the concentration. Personally i believe that the boss should have some understanding for employees personal needs. For instance if employees child is sick he shouldn't make him work overtime or make a fuss about him being late for work. Employee will be really grateful if boos lets him deviate somewhat in his work hours and will pay thousandfold through his work after the crisis is over. That is, as one of my professors Saša Petar used to say and even the published a book of the same name, a human side of managing people. Those are just people and they have their good and their bad times. Try and understand them. Because employee will return it thousandfold.

Of course under this toping we should also include relations between the employees. Here we come upon a relatively new term Team building, that we de facto had before just didn't call him that. When employees socialize outside of the working hours it promotes their sense of companionship and belonging. If you take your employees somewhere for instance to the countryside and then you play some football, after that have some nice barbecued meat, some music on the side and lots of laughter and joy, employee start feeling companionship. You are bonding. You stop being director, boss or however you call yourself. You are one of them. They are with you. Company becomes a family for which it's worth making effort to succeed.

I hope I have given you a couple of ideas that will help you with your business. At least I hope I sparked some interest and made you think. It was worth a shot.

Stock market

Stock market is really an interesting field. I could write essays on this topic (any many have been written). But I don't want to go that far.
Basically stock exchange is place where commodities and stocks are bought and sold. Simple as that. Well not that much.
Brokers are people who can buy and sell on the stock market. Of course they do it not for themselves (well for themselves as well) but for other people. You hire a broker and through him you can be present at the stock market. You can buy and sell, win and lose.
You can get rich on the stock market but then again you can go broke as well. Whats the secret? There is none. If you want to get rich quick you can theoretically do it on the stock market but you would be better off going to casino. Unless you are doing something illegal which once again is irrelevant to the real stock exchange. The point of making money on the stock exchange is simple. Listen to the market. Observe whats happening and try to predict the demand for certain company. For instance if the company is about to launch a new products and there is a huge hype going on about it the odds are the value of that company stock is going to rise. Then again if in the end they deliver faulty product the stock will drop in an instant. Once again it can be a quick win but it can also be disaster. The main question is do you feel brave enough to participate? Do you think you everything about that company and its competitors in order to predict who will be better or worse? If you do - go ahead. If you don't and believe in your blind luck - as I have already said you might as well go to casino and waste all your money there.

Monday, February 4, 2013


Loans are widespread as they come. Easy to come by? Not so much. That is why we are in such a bad situation with this economic crisis. Everyone is indebted to someone, usually a bank. That in itself is not such a problem. As long as you can pay it back. As long as you have a job. As long as you can live with paying someone a certain amount of money a month in order to buy yourself something extra. But what happens when you can't pay it back? The bank usually forecloses on what you had put down as a collateral. And what then? For instance if you bought a house by loaning money from the bank. You have been repaying that debt for some years and suddenly you find yourself in a situation where you can't pay for it anymore. Bank repossesses your house and puts it up for auction. You are left without your house and the money you have already paid for it. Usually when the house is up for the auction it sells for much less than it is really worth. In rare cases when it goes for more then you own to the bank you actually get some money bank but that is chicken feed compared to what you have already paid for it.
Some people risk even more. They don't take loans from the bank because they don't qualify for them anymore. They take money from loan sharks. And dig themselves into an even bigger hole. It is practically impossible to pay back to the loan shark. There are various way in which they scam you in order to take your money and your collateral. I actually found a nice article about scams when it comes to loans. You can read it here: Loan scams

Interesting article

I have read an interesting article on Bloomberg. You can read it here: Bloomberg article
Basically Mercedes had a rise in sales of 11% in January, and the article mentions that it got a jump start on BMW. I find that really peculiar. USA is still recovering from the economic crisis. The Mercedes (and BMW) are both premium brands, and as such are quite expensive. I was always wondering how much money do people make who have enough money to buy such cars. Obviously more than I expected. Considering that in USA there are many people who are homeless, starving and such this news is quite shocking. People keep on spending on luxury items. I know what some of you are going to say: "Who has money can spend it". But I can't keep not wondering who are those people? Bankers who get huge bonuses despite their banks being deep in red? Not ordinary people at any rate. People who are struggling for living are definitely not thinking about buying a luxury car. Or they still try to get a second (or third!) mortgage on their under appreciated house in order to show of their brand new Mercedes!

What are we all about?

Well here we are. Our very own first blog post. The theme?
Finances. Everything about finances. Everything about doing business and how to run it successfully. Just for you out there who are wondering who am I and why do I feel competent to write about finances here is a little introduction.
I am an economist with dual masters degree in Entrepreneurial management and Lobbying.  For years now I have been working as an analyst. So I believe my qualifications speak for themselves.

Now let's get to the point. Today the finances are at the core of everything. Every little thing is based on some sort of transaction no matter if we are talking about buying bread at your local bakery or if you are in the middle of multimillion company takeover - money is behind all that.

It is true that the economical crisis is still under way. When will it end? Who knows. Many are to blame, but in the end - we are all to blame.

People like spending money. They like to have every bit of commodity available to them. Do we need a new TV? Well.... Yes. Do we need the premium brand of pasta or the home brand one? Well... Yes. That is just that. If we can we will buy the more expensive stuff. If we can't... well there are credit cards, loans etc. That is the reason the shit literally hit the fan. We were spending more then we were earning. We are all to blame. The banks are also to blame beacuse they were giving out loans although they knew we will have trouble returning them. The government is also to blame because they didn't proscribe a law that forbids going over the certain limit in debt. But in the end - we are all to blame, and we did it to ourselves. What is the way out? I'll try and talk about it some other time. (ZY5BHPEMPAWZ)