Since Cesare Mainardi and I published
Strategy That Works: How Winning Companies Close the Strategy-to-Execution Gap (Harvard Business Press, 2016), a lot of businesspeople have told us that they feel too far removed from the companies we heralded in the book. After all, our examples of highly distinctive and successful companies focused on iconic brands like Apple, Amazon, Frito-Lay, IKEA, Lego, Natura, and Starbucks. Each of the companies we profiled had succeeded in building capabilities that gave them a winning edge. And they were coherent: They applied those capabilities to every product and service and to the overall way they created value. This gave the companies powerful identities that no one else could copy.
While it may feel daunting to follow their example, we believe that any company can do the same. The five acts highlighted in the book — commit to an identity, translate the strategic into the everyday, put your culture to work, cut costs to grow stronger, and shape your future — add up to a path of development that a growing number of businesses have
Initial startup costs are some of the biggest expenses a new business owner will have to encounter. Before you turn a profit, there are many parts of the business that need to be covered up front, and entrepreneurs don’t always anticipate some of these expenses. To reduce your startup costs and stretch your dollars a little farther, follow these tips. Have a budget, and stick to it A simple way to save money as a new business owner is to set spending and expense limits. However, a surprising number of business owners don’t have a formal budget, said Carissa Reiniger, founder of small business support community Thank You Small Business. – See more at: http://www.businessnewsdaily.com/5358-startup-budget-tips.html#sthash.WL7pT0l2.dpuf
“There is so much power in knowing what is going on in your business, for better or for worse,” Reiniger told Business News Daily. “Managing the finances of my business is not something I naturally enjoy, so I’ve put rules in place to help me stay on track. I advise setting up a standard time every week or month for reviewing and managing your budget.” Angie Segal, an ActionCOACH
Starbucks has an angel on one shoulder and a devil on the other.
The angel works to guide Starbucks toward its better instincts: to retain the vision that impresario Howard Schultz had of re-creating a European café for an American (and now a worldwide) clientele, a “third place” that’s neither work nor home, where you can take your time, and where you pay more for coffee than you would at the deli down the street.
On the other shoulder, a devil whispers of the temptations of growth. The desire to grow pulls Starbucks, and all companies, toward the logic of scale — repeatability, robust processes, efficiency, speed. Growth in and of itself is a good thing; but it can go wrong if growth and scale come at the expense of vision, identity, or customer experience.
Few companies have resolved the tension between identity and growth as successfully as Starbucks. So as Schultz prepares to leaves the CEO post to head up the company’s new, ultra-upscale Starbucks Reserve venture, it’s worth reflecting on what he has accomplished — not
Starting a business requires capital, and a lot of it. Many small business owners get that capital from small business loans, investors and perhaps most frequently, their own wallets, which can lead to a lot of debt. An alternative to these methods of financing is Rollovers as Business Start-Ups (ROBS).
ROBS allows you to invest up to 100 percent of your retirement fund, without distribution tax, to start your business, according to David Nilssen, co-founder and CEO of small business and franchise financing company Guidant Financial. Nilssen explained that, with ROBS, you’re investing in your own business and your 401(k) becomes a shareholder in your business, and it will profit if you’re successful.
So how does it work? You have to create a corporation for your business, using a C corporation structure, and then you can roll your existing 401(k) plan into a new 401(k) plan under the corporation. That investment then goes into a corporate checking account, making you the majority owner in your business, Nilssen said.
With other methods of financing, a significant amount of your initial profits usually goes to paying off your debts. ROBS is a great alternative, especially for franchisers,
Getting someone to invest in your new business takes more than a great idea.
While the idea is critical, investors take much more into consideration when deciding whether or not to hand over some of their cash to a budding entrepreneur.
Michael Mocatta, an entrepreneur mentor in residence at the London Business School and a partner at Neta Ventures, said entrepreneurs need to know what to ask for and how to ask for it when trying to pitch investors on their plan. This includes knowing how to entice investors with their idea and asking for only as much money as is truly needed.
To help entrepreneurs get the most out of their pitch meetings and ensure the relationship is a win-win for both parties, Mocatta offers five tips:
- Don’t put your idea first — the team is most important. Your team is what makes your idea happen. Potential investors are looking at the people behind the idea. Do you have a rock-solid founding team? A common mistake is a team presenting itself to a potential investor with a missing link, such as one that’s still looking for the tech guru. It’s also good to note that a
As a startup entrepreneur who’s worked hard to find a great business idea, you likely can’t wait to tell investors all about your awesome product or service. Before you do, though, you may want to refocus your pitch: The product or service you’re selling won’t get investors interested in financing your startup. Instead, the ingredients that will really make them believe in your business are your customers, their profitable problems, a rock-solid pitch — and you.
Here are four important things to keep in mind when you’re pitching to an investor.
If you think your potential investors care most about what your new business sells, you’re dead wrong, said Randy Thompson, award-winning founder and CEO of angel investor firm VA Angels.
“Customers are the coolest way to validate that you are onto something,” Thompson said. “This is true for all industries.”
Thompson said the most important thing to him as a potential investor is the customer, and he pays close attention to the information the startup founders have on why customers will want this particular product or service.
“Ideally, they know exactly why the customer is dying to have [the product or service], and
Looking for a way to get some cash for your small business? A loan isn’t your only option: Many government organizations offer grants to local businesses that meet certain eligibility requirements and qualifications.
“Each state and county has access to funds to help small business owners obtain the capital needed to add [things like] jobs, equipment or real estate,” said Kyle Dixon, CFO of snack food company Cosmos Creations.
In addition to government grants, entrepreneurs can also apply for grant offers from certain banks, companies and nonprofits. Some programs even offer special grants for small businesses that are engaged in research and development.
However, don’t confuse a business grant with a loan.
“It is important to keep in mind the difference between grants and small business loans,” said Bill Drewes, a New York-based attorney and grant writer. “Grants generally don’t require any major portion to be paid back, and are very few and far between.”
Loans, while much more readily available, have to be paid back with interest, and often require personal guarantees on the part of the business owner, Drewes said.
Because grants are generally not expected to be repaid, they
There are a lot of different ways to finance a startup. You could save up your own money and bootstrap the business. You could borrow money from family and friends. You could even invest some funds from your 401(k) account. But for many businesses, the choice comes down to taking out a loan or raising investor capital.
The financial path you choose will affect how you run your business in some way, so you should not make this decision lightly. Borrowing and fundraising both have their pros and cons, and the best option for you depends heavily on the type of business you run and what you need the money for.
Finance and business experts shared the advantages and disadvantages of loans versus fundraising, and weighed in how to make the right choice for your business.
Options: traditional bank loan, SBA loan, alternative loan
A loan is one of the most cost-effective ways to fund your business, said Jay DesMarteau, head of small business banking at TD Bank. If you obtain your loan through a bank or SBA (Small Business Administration) lender, you’ll usually have a lower interest rate
Funding is one of the biggest challenges most entrepreneurs face. Whether they take out loans, crowdfund or accept investments, startup founders often find that they need some kind of outside financing to make their business dreams a reality.
But some entrepreneurs choose to self-fund their operations, investing their own money into the business. This is known as bootstrapping, and if you have the resources to do it, you will benefit from complete financial and creative control over your business. There are no equity stakeholders demanding that you move in a certain direction, or lenders looking for their loan payments each month.
The downside, of course, is that your business budget is dictated by your own personal finances. Bootstrappers are on the hook for every last cent invested in the business, and without the right financial-management skills, you could end up driving yourself into serious debt.
Any financing path comes with pros and cons, and bootstrapping is no exception. It’s true that this method will put severe constraints on your budget and increase your personal liability, but there are also plenty of advantages to self-funding. Our expert sources weighed in
At one point or another, most business owners have to think about how they will finance their operations. Whether you borrow money, draw from your own savings or choose another option, it’s important to choose the one that makes the most sense for you. But how are other entrepreneurs faring on the various paths to business financing? Here’s what is happening in three of the biggest areas of funding right now. Bootstrapping Funding your business out of your own pocket — commonly known as bootstrapping — is the simplest, but potentially most difficult, financing route. On the one hand, you are in total control of your finances: You don’t have to make any payments to lenders or share equity with investors. On the other hand, you’re on the hook for every penny you sink into the company, and if it fails, your personal funds are going down with it.
That doesn’t stop the majority of U.S. entrepreneurs from exploring bootstrapping as an option. A recent study by invoice factoring company BlueVine found that 75 percent of American small business owners rely on personal finances as their primary source of business funding, and 83 percent overall have put their
Financing has always been a big challenge for new startups. But as evidenced by the growing number of Kickstarter success stories, the business world is learning how effective it can be to raise money through small contributions from a large number of people.
As the popularity of crowdfunding continues to skyrocket, more startups and small businesses are taking advantage of the various trends that emerge in this space in the coming years. Here are three big ones to watch.
In years past, crowdfunding for businesses was a novelty, a rare exception to the traditional methods of bank loans, venture capital and borrowing money. Today, announcing your crowdfunding campaign is just as common as any of these other options, if not more so. In fact, Forbes reported that in 2016 crowdfunding is expected to surpass venture capital as a means of financing.
“Many major news organizations are now highlighting noteworthy campaigns,” said Bill Clerico, co-founder and CEO of WePay, a payment service provider for crowdfunding, marketplace and small business platforms. “That’s not just good for the campaigns, but it also normalizes the behavior and leads to more
Depending on where you are in your life and your career, you might be facing a little — or a lot — of personal debt. Many would-be entrepreneurs owe money on credit cards, student loans, mortgages, cars or all of the above, and these heavy outstanding balances could put their dreams of business ownership on hold.
Quitting your day job to start a business when you’re thousands of dollars in the red is probably ill-advised, but carrying debt shouldn’t prevent you from getting your business going. Although it’s not an easy path, it is certainly possible to become an entrepreneur under tough financial circumstances.
If you’re looking to start a business while you’re in debt, here are a few smart steps to help you minimize startup expenses and keep your cash flow steady.
If you’re carrying a lot of personal debt, your monthly cash flow is probably not optimal for funding a business. There are a lot of options for business owners in your position — crowdfunding, alternative lenders, credit-card financing, etc. — but each choice comes with pros and cons, and you should be thoroughly understand what’s involved
If you’re thinking about launching a new business, you may not know where to start with your finances. Of course, you’ll need a decent amount of cash flow to maintain your company. However, if you are organized and thorough, you can plan out your financing and keep your startup budget on track.
Here’s how to figure out approximately how much you’ll need to launch your business.
You most likely have high expectations for your company. However, blind optimism may cause you to invest too much money too quickly. At the very beginning, it’s smart to keep an open mind and prepare for issues that may arise, experts say.
Cynthia McCahon, founder and CEO of business-plan software company Enloop, said business owners should start with a bit of healthy skepticism.
“A prospective business owner should start planning a small business by simply understanding the potential of the business idea,” McCahon told Business News Daily. “What this means is not assuming your idea will be successful.”
The best approach is to test your idea in a small, inexpensive way that gives you a good indication of whether customers actually need your
You may be intimidated by the idea of obtaining a small-business loan. In fact, you may have heard that it’s nearly impossible to get approved for one. But you shouldn’t believe everything you hear.
Business News Daily spoke with finance experts to debunk seven common myths about getting a business loan.
Obtaining a loan for your small business is no easy feat, but it doesn’t have to be an insurmountable challenge. Small business lending experts agree that the best way to avoid trouble is to prepare for the challenges that the application process may present.
“A lot of the frustration around obtaining small business financing can be eased by doing your due diligence,” said Michael Adam, founder and CEO of Bankmybiz, a site that connects business owners with business funders. “Be prepared, and have all your documents ready to present to lenders.”
Although low credit scores might have precluded you from getting a loan in years past, today’s
While success or failure in crowdfunding campaigns hinges on a variety of factors, the most important aspect is the level of confidence backers have about the campaign’s outcome, according to a study by the University of Michigan, University of Toronto and Google.
“Pledging is not costless, and hence consumers would prefer not to pledge if they think the campaign will not succeed,” the study’s authors wrote. “This can lead to cascades where a campaign fails to raise the required amount even though there are enough consumers who want the product.”
When deciding whether to back an entrepreneur’s crowdfunding campaign, backers examine multiple factors, including the price of the product, how much has been raised, the funding target and how long the campaign lasts.
“The absence of early pledges makes those who arrive later pessimistic about the chances of campaign success, and therefore discourages them from pledging,” Mohamed Mostagir, one of the study’s authors and an assistant professor at the University of Michigan, said in a statement. “This can create a vicious cycle where even good products can fail.”
The opposite can hold true as well, according to Mostagir. He said early funding on a campaign
If loans are your go-to choice for financing, you’ll need to decide between a traditional bank loan and an alternative lender. For the latter, peer-to-peer (P2P) lending might be a smart option if you’re looking for a smoother, faster borrowing process.
According to Investopedia, P2P lending lets individuals borrow and lend money without an official financial institution as the intermediary. Lenders collect income from interest, usually at a higher cost than with traditional loans, while borrowers access financing they may not have been approved for elsewhere.
“P2P loans can often offer higher approval rates and competitive interest rates — a stellar combination,” said Emily Bartz, a writer at NextAdvisor.com, which provides independent research and comparison tools for financial, tech and business products. “The beauty of P2P lending is that it offers borrowers a more personal experience by avoiding big banks and financial institutions. Plus, borrowers can rest easy knowing that their lender is accredited and provides legitimate loan support.”
Another upside, according to Bartz, is that P2P lending is flexible, allowing borrowers to complete the process in pieces.
So how can you determine if P2P lending is right for
It’s been a four full months since the Title III equity crowdfunding provision of the Jumpstart Our Businesses (JOBS) Act went into effect, allowing small businesses and startups to raise up to $1 million annually in crowdfunded securities investments from both accredited and nonaccredited investors. As of Sept. 15, businesses had raised more than $7 million in capital investments using Title III.
Although Title III is a particularly young section of the JOBS Act, it’s been hailed as a potential game changer for small-scale financing. Whether a company’s projected growth is too flat to interest venture capitalists or an owner simply doesn’t want to end up beholden to one highly powerful investor, Title III is seen as a way to raise growth capital without sacrificing independence. Moreover, campaigns can be targeted at locals within a business’s community, helping to build a loyal customer base that maintains a stake in the company’s success.
“I think Title III will change financing. If you look at how the industry evolved in Great Britain when they did it, we’re already growing faster than they were,” Mike Norman, CEO of equity crowdfunding platform WeFunder, said. “It will take a little time,
Many aspiring entrepreneurs have an idea for their business but lack the capital to actually start it. Brand-new businesses are often turned down for bank loans, and even if your business is established, funds can still be tough to secure. Loans funded by the Small Business Administration are usually more accessible, but they are becoming increasingly competitive.
So what options are left for someone aspiring to be a small business owner? Here are six options beyond bank loans for financing your startup.
Online lenders have become a popular alternative to traditional business loans. These platforms have the advantage of speed, as an application takes only about an hour to complete, and the decision and accompanying funds can be issued within days. Because of the ease and quickness of online lending, economist and former U.S. Treasury Secretary Larry Summers said at the 2015 Lend It conference that he expects online lenders to eventually reach more than 70 percent of small businesses.
Angel investors invest in early-stage or startup companies in exchange for a 20 to 25 percent return on their investment. They have helped to start up many
For the second year in a row, cities in the South give entrepreneurs the best chances to keep their startup costs low, while big cities remain among the most expensive places to start a new business, new research finds.
The study from SmartAsset revealed that nine of the 10 cheapest cities to start a new business in are in southern states, including three in Tennessee.
To find the cities with the lowest startup costs, SmartAsset collected data on the typical costs of starting and running a business in 80 of the largest cities in the United States. They calculated the total expected startup costs over the first year of operation for a company based on five factors:
- 1,000 square feet of office space.
- The cost of gas and electricity for a 1,000-square-foot office.
- The average cost of filing fees for either incorporation or filing as an LLC.
- Legal and accounting fees.
- Payroll costs for five full-time employees, earning the city’s median annual salary.
Topping this year’s rankings of the most affordable cities for startups is Chattanooga, Tennessee. The city is attractive for entrepreneurs looking to save money because of its relatively low costs for office space and employee payroll.
Like all startups, young tech businesses need to find adequate sources of financing to ensure they can get off the ground. But how can you tell which source of financing best positions your new enterprise for success? Recently published research from the University at Buffalo School of Management suggest that tech entrepreneurs might be better off partnering with venture capitalists than angel investors. While researchers note that both angels and VCs are important, they found that VC-backed companies enjoyed several advantages. Tech startups backed by VCs were more likely to issue stocks sooner and often found buyers sooner than those backed by angels, according to the research published in the Journal. The difference, researchers posit, is that venture capital comes along with a larger network, giving them a greater reach when looking for additional investors. “Angels and venture capitalists are both critical to innovation in business,” said study co-author Supradeep Dutta, assistant professor of operations management and strategy in the UB School of Management. “But it’s not enough to just get a patent. You need a strong network to shape the impact of the innovation, and venture capitalists have that network.” – See more at: http://www.businessnewsdaily.com/109-small-business-venture-capital-investing.html#sthash.34OIAgub.dpuf