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NATIONAL SERVICES ALLOWANCE INCREASED FROM GH₵350 TO GH₵559

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NATIONAL SERVICES ALLOWANCE INCREASED FROM GH₵350 TO GH₵559

Government has approved an increment in the allowances of National Service personnel, taking effect from April 1, 2017. The allowances were reviewed upward from the current GH¢350 to GH¢559.04. “While thanking the government for its positive response to Management’s request for the increment, Management wishes also to express its gratitude to national service personnel for their patience and fruitful periodic engagements and discussions with Managemtnon the subject matter,” a press release signed by Acting Executive Director Ussif Mustapha said. The allowances were increased by the John Mahama-led government but its implementation was stalled as a result of change in government. The situation put personnel on a collision course with government. With the latest announcement, management of the Scheme is urging personnel “to reciprocate this gesture by further committing themselves to working even harder to support the government’s effort at improving the economy”.

SHS Graduate Making Ghana Proud as Ghana Top WAEC Awards Again

A student of St James Seminary in the Brong Ahafo region of Ghana Master Puis Kyere has emerged the overall best student in West Africa by the West African Examination Council (WAEC).

Master Kyere is the fifth successive Ghanaian student to win the West African Examinations Council (WAEC) awards.

He came tops in the 2016 West African Senior School Certificate Examination (WASSCE) for school candidates and was presented with his prize at the annual WAEC Excellence Awards at the Sakyi Asare Menako Hall in Accra Wednesday.

He was honoured along with two senior high school (SHS) graduates — Master Benjamin Bortey Sango, formerly of Accra Academy, and Master Richmond Kwame Mensah, formerly of the St James Seminary, Sunyani — who were adjudged the third best in West Africa and Ghana respectively.

All the three awardees, who are pursuing courses in the various tertiary institutions, were presented with cash prizes, plaques and certificates.

The WASSCE is written by students from Ghana, Nigeria, Liberia, The Gambia and Sierra Leone.

Last year, Ghana swept all the three topmost prizes at the WAEC Excellence Awards, with all the three awardees being former students of the Wesley Girls’ High School, Cape Coast.

Apart from citations and plaques for their schools, the awardees had cash prizes of $600, $500 and $400, respectively.

Challenges & Problems of Starting a Business

Chinese Proverb: “He that is prepared has half won the battle.”

“The biggest challenge you have is to challenge your own self doubt and your laziness. It is your self doubt and your laziness that defines and limit who you are.” – Rich Dad

1. Developing the Vision and Business Idea

“To have a great idea, have a lot of them.” – Thomas Edison

Developing a business idea is usually the first challenge faced by every entrepreneur when starting a business from scratch. Finding the right business opportunity or creatively developing an idea is certainly not an easy task. I call “Envisioning the idea” the first true task of an entrepreneur. As an entrepreneur, you must possess the ability to see what others cannot see. While others see problems, you must see opportunities.

“There is far more opportunity than there is ability.” – Thomas Edison

But seeing opportunities is just the beginning. The main business challenge is going to be your ability to forge that opportunity into a business idea. I see this as a business challenge because the process of transforming problems into business opportunities is like trying to turn lead into gold. I call it the entrepreneurial process of “Creating Value out of nothing”; a process that brings innovative products into existence. Below is an illustration of how the process goes.

  • Identifying a problem > Seeing an opportunity in the problem > Coming up with a solution > Forging the opportunity into a business idea > Integrating your solution into a business plan

“A good businessman must have nose for business the same way a journalist has nose for news. Once your eyes, ears, nose, heart and brain are trained on business, you sniff business opportunities everywhere. In places where people see a lot of obstacles, I see a lot of opportunities. At times, there is something instinctive in me that tell me a business opportunity exist even at a place where others see nothing. That is what makes me different, maybe unique. A good businessman sees where others don’t see. What I see, you may not see. You cannot see because that is the secret of the business… the entire world is a big market waiting for anybody who knows the rules of the game.” – Orji Uzor Kalu

Developing a vision is definitely a business challenge because an entrepreneur must sometimes assume the role of a sorcerer. Let me explain in detail. Most individuals are comfortable with the present way of doing things but it is the duty of an entrepreneur to envision and forecast the future. An entrepreneur must always be ahead of his time or else he will lose his relevance. It is the duty of an entrepreneur to bring into present what is yet to be. It is also the duty of an entrepreneur to bring solutions to other people’s problems. Let me give you some practical illustrations:

“If you want to be rich, you need to develop your vision. You must be standing on the edge of time gazing into the future.” – Rich Dad

a)  In the late 70s and early 80s, while IBM saw increase in demand for their mainframe computers, Steve Jobs envisioned a personal computer in every home and Bill Gates envisioned the need for easy to use software for personal computers. That single vision made Bill Gates the richest man in the world and Steve Jobs the most famous business person of the 21st century.

“Business is going to change in the next ten years than it has in the last fifty years.” – Bill Gates

b)  The Wright brothers envisioned a flying machine but they were massively opposed because the thought of humans flying was perceived as impossible. Today, the Airplane is a reality.

c)  Back in those days when cars were custom made and exclusively for the rich, Henry Ford envisioned affordable cars for the masses. That single vision made Henry Ford one of the richest men in history.

“You are nuts and you should be proud of it. Stick with what you believe in.” – Trip Hawkins

I believe with these few examples, my point is clear. Developing the vision and idea is the first true task and challenge of being an entrepreneur.

2. Raising Capital for your Startup

After developing your idea, the next challenge you are going to face when starting a business from scratch is that of raising capital. As an entrepreneur, you are the only one that knows business your idea to the core. You are the only one that knows the story of your future.

“Capital can do nothing without brains to direct it.” – J. Ogden Armour

Trying to convince investors about something that doesn’t exist is definitely a challenge. Trying to make them understand that you are trustworthy and equal to the task is not child’s play especially when you are building your first business.

“If you want to know the value of money, go and try to borrow some.” – Benjamin Franklin

There is more to raising capital than just simply asking for money. Most investors want to invest in already established businesses with minimal risk and they want to be sure that they get returns for the risk they took. Most brilliant business ideas never scale through the venture capital stage because the entrepreneur is either not prepared or lacks what it takes to raise the needed capital. Just as my mentor, Robert Kiyosaki says:

“The world is filled with brilliant ideas and excellent products but the world lacks seasoned entrepreneurs.” – Robert Kiyosaki

To overcome the challenge of raising capital, you must develop the ability to sell your idea and vision to potential investors. When I say “sell your ideas“, I mean improving your communication skill and your manner of presentation. In the game of raising capital, you must have a good story to tell; backed by a strong business plan and good persuasion skills. You must know how to pitch angel investors and venture capitalists alike.

“The ability to sell is the number one skill in business. If you cannot sell, don’t bother thinking about becoming a business owner.” – Rich Dad

3. Assembling a Business Team

“Eagles don’t flock, you have to find them one at a time.” – Henry Ross Perot

The third business challenge you will face in the course of starting a small business from scratch is assembling the right business management team. When I talk about a team, I am not talking about regular employees. I am talking about a “strategic round table business team” that will meet regularly to brainstorm on ways to grow your business.

“Individuals don’t win in business, teams do.” – Sam Walton

The process of building a business team starts even before the issue of raising initial start-up capital arises. Remember I said that most brilliant ideas never scale through the phase of raising venture capital. Well; this is where most budding entrepreneurs miss it. Most brilliant ideas and products never get funded because the entrepreneur is trying to raise capital as an individual. A business team is a vital, yet often ignored key to raising venture capital successfully.

“Business and investing are team sports.” – Rich Dad

As an entrepreneur, you are bound to have strengths and weaknesses. That is the more reason you need a business team to cover up or compliment your weaknesses. A team is a necessity for building a successful business. Now finding a business team is just the second hurdle, transferring your passion and vision to your team is the next piece of cake.

“Teams should be able to act with the same unity of purpose and focus as a well motivated individual.” – Bill Gates

It’s your duty as an entrepreneur to make sure your team sees the future you see. They must believe in your possibilities and must also be passionate about making that possibility a reality. If they can’t grasp your vision, if they can’t see the future with you, then they are not worthy being your team.

“My model for business is the Beatles. They were four guys that kept each other’s negative tendencies in check; they balanced each other. And the total was greater than the sum of the parts. Great things in business are not done by one person; they are done by a team of people.” – Steve Jobs

Your strategic business team should comprise your banker, financial adviser, accountant, attorney or legal adviser and any other specialist that will be of tremendous impact to your business. A question on your mind right now might be “how am I going to pay this team” My answer is I don’t know. You will have to figure it out yourself or better still, you can consider bringing them on board as partners.

“Go to the wolf, consider its ways and be wise. A wolf will never hunt alone; it hunts in packs because it knows the power of team work.” – Ajaero Tony Martins

4. Finding the Right Business Location

Is finding a good location a business challenge? I don’t know but what I do know is that finding a good business location at the right price is definitely not easy. How do you get a location that has a rapidly growing population, good road network and other amenities at a good price? Well, you will have to figure out yourself.

5. Finding Good Employees

“If you own a butcher shop, don’t hire vegetarians. To hire the right people, you have to let the wrong people go.” – Rich Dad

Most writers and managers crank up the process of finding good employees as an easy task. They define the process of finding an employee as simply presenting the job description and the right employee will surface. But I think it’s more than that.

“The competition to hire the best will increase in the years ahead. Companies that give extra flexibility to their employees will have the edge in this area.” – Bill Gates

Business owners know how difficult it is to find a hardworking, trustworthy employee. Most employees want to work less and get paid more. Finding a good employee who will be passionate about delivering his or her services is quite difficult. Finding good employees is a minor task compared to the business challenge of forging your hired employees into a team.

You may have great employees but if they can’t act as a team, they are worthless and will yield nothing but stagnation. A football team may have great skillful players but if they fail to play as a team, their possessed skill is useless.

“Bringing together the right information with the right people will dramatically improve a company’s ability to develop and act on strategic business opportunities.” – Bill Gates

Employees are your representatives to your customers and the outside world. They are a reflection of your business culture and ethics. If an employee of yours is bad or rude to your customers, it is going to portray a bad image for your company. So you must be careful when hiring employees. Remember the golden rule of business; “Hire slow and fire fast.

6. Finding Good Customers

The sixth challenge you will face in the process of starting a small business from scratch is finding good customers. Note the keyword “good customers.” In the process of building a business, you will come to find out that there are good customers as well as bad customers. You must be on guard for bad customers. Good customers are really hard to find. A good customer will be loyal to your company and will be willing to forgive you if you make a mistake and apologize. A good customer will try to do the right thing that will benefit both himself and your company mutually.

“Thank God for my customers. They buy my products before they are perfected.” – Henry Ford

Bad customers will always look for loopholes in the company’s policy to exploit and make a few gains. Bad customers will always try to exploit the company’s goodwill and look for ways to rip off the company. Bad customers are responsible for bad debts. Good customers build your business and bad customers will always try to liquidate your business. Just as you fire employees, you must also be prepared to fire bad customers without hesitation. Remember the story of the customer that sued McDonald’s claiming the coffee was too hot.

“You must fire bad customers just as you would fire a bad employee. If you do not get rid of your bad employees, the good employees will leave. If I do not fire bad customers, not only will my good customers leave but many of my good employees will leave as well.” – Rich Dad

7. Dealing with Competition

“In business, the competition will bite you if you keep running. If you stand still, they will swallow you.” – Victor Kiam

Competition is the next challenge you will face when starting a business. Most individuals see competition as a plague but I see competition as a good challenge. I see competition as a benchmark for creativity, the main engine that stimulates innovation and production of quality products at great prices. Without competition, there will be no innovation and without innovation, the world will be stagnant.

“If you don’t have a competitive advantage, don’t compete.” – Jack Welch

I see competition as a welcomed challenge and I want you to do the same. Competition keeps us on our toes and drives us to constantly improve our products and services. But you must be warned. Competition can make your business lose its relevance in the eye of your customers so you must always be on guard.

“The competitor to be feared is one who never bothers about you at all but goes on making his own business better all the time.” – Henry Ford

8. Unforeseen Business Challenges and Expenses

“Smooth seas seldom make good sailors.” – Anonymous

Just as a sailor prepares for unexpected storm, just as a pilot is always on the watch for unpredictable bad weather and thunderstorms, so must an entrepreneur prepared for whatever comes. Unexpected challenges can come in the form of:

  • Unexpected law suits
  • Inconsistent government policy
  • Not being able to make payroll
  • Unpaid bills and taxes
  • Unexpected resignation of staff from sensitive office
  • Bad debts from customers
  • Loss of market share
  • Dwindling working capital
  • Inadequate stock or inventory

“A company’s ability to respond to an unplanned event, good or bad is a prime indicator of its ability to compete.” – Bill Gates

These business challenges, if not handled properly can ruin your plan to build a successful business. Another challenge you must expect is an unforeseen increase in business expenses. If not handled properly, it might result in constant negative cash flow and eventually; business failure.

9. Keeping Up With Industrial Changes and Trends

“In three years, every product my company makes will be obsolete. The only question is whether we will make them obsolete or somebody else will.” – Bill Gates

Change in trends is a challenge you must be prepared for when starting a small business. Trends have made and broken lot of businesses. I know a lot of profitable businesses that have been wiped out by slight industrial changes and trends. A typical example is the Dot com trend, where many established industrial based businesses were wiped out by new web based dot com companies.

“How fast a company can respond in an emergency is a measure of its corporate reflexes.” – Bill Gates

When the Dot com era began, business owners were left with only two options. Either they join the dot com train or they get crushed by the dot com train. Seasoned entrepreneurs know that trend is a friend and are always willing to swiftly adjust their business to the current trend. Keeping your eyes open to spot trends is really a challenge but the big task will be your ability to quickly use the trend to your advantage.

10. Exiting the Business

“In the world of business and investing, your exit is more important than your entry. A good thumb of rule is this; exit before you enter.” – Robert Kiyosaki

When building a business from scratch, you are going to face the challenge of determining your exit strategy. Just as the quote above states, you have to plan your exit strategy before you even start the business. Most entrepreneurs run their business without any plans to exit and even if they have an exit strategy, they find it difficult to implement it.

“Always start at the end before you begin. Professional investors always have an exit strategy before they invest. Knowing your exit strategy is an important investment fundamental.” – Rich Dad

Before starting a business, it is advisable to plan an exit. Lack of an exit plan is the primary reason why most businesses crumble after the death of the founder. An exit strategy is very important to the long term survival of a business. now how do you plan an exit strategy? There are benchmarks you can use to determine your exit from any business. Most smart entrepreneurs will use a certain benchmark as a target and once this specific target is reached, they exit the business. Examples of such benchmarks are:

  • Annual sales
  • Annual Turnover
  • Asset Base
  • Market Saturation
  • Customer base, subscribers or number of users

 

Reasons For Starting Your Own Business Today

Becoming an entrepreneur easier than ever before—technology is shrinking the world, opening markets, and making it possible for many people to strike out on their own in the field of their dreams.

Yet, many who feel the tug of inspiration are afraid to take the leap.  Don’t be one of those people who look back and regrets not starting their own business.  Take control of your life, and your dreams.  There are countless great reasons for starting your own business, and I’ve gathered information’s compelling here—but whatever your reasons, don’t hold back.  It’s time to start taking steps to take control of your own life, and there’s absolutely no better way to do that than to take ultimate control of your career, through starting your own business.

Across the country and around the world, legions of people are abandoning their dependence on big business and seeking independence through their own enterprises. Every month, about 1 million Americans go through some type of job change or loss, and increasingly they are deciding to start their own businesses.

In a report titled Work, Entrepreneurship and Opportunity in 21st Century America, the U.S. Chamber of Commerce said, “Millions of Americans are embracing entrepreneurship by running their own small businesses, through independent contracting or direct selling.” The report also cited a recent Gallup poll finding that 61 percent of Americans now say they prefer to be their own bosses.

 

6 Benefits of Entrepreneurship

1. Job Security. Only a generation or two ago, going into business for yourself was considered risky, and the safest route was to get a good job in a large firm. Now, working for a traditional corporation has become the risky option. Working for yourself has become the new job security. “If I’m working for someone else, I’m trading time for money, but I’m not building any equity,” says Duncan MacPherson, co-founder and co-CEO of Pareto Systems, a consulting firm. “As an entrepreneur, I’m the master of my own destiny.

2. Freedom. People love the benefits of working for themselves and enjoy the freedom they gain from designing their own prosperity. You get to choose when you work, how you work and with whom you work. Best of all, you don’t have to make the agonizing choice between time for family and time for business.

3. Flexibility. It doesn’t matter if you’re in a big city or small town. Entrepreneurship is an equal-opportunity employer. E-mail, cheap teleconferencing and a new generation of Web tools make it possible to run a fully competitive business from a home desktop. As a home-based businessperson, you can expand your business to Chicago, San Francisco, Hong Kong and London—and still make the soccer game.

4. Make More Money. There is far greater opportunity to make money by building your own business than by working for someone else’s. “Everyone has heard the phrase, ‘The American Dream.’ I look at it as ‘The American Reality,’ ” says Jeffrey Gitomer, best-selling author of the Little Red Book of Selling and the Little Gold Book of YES! Attitude. “When you’re in business for yourself, you write your own history, you write your own success story, you write your own legacy and most important, you write your own paycheck. Being in business for yourself gives you the opportunity to work your heart out for something you love.”

5. A Life of Greater Impact. In the Decipher study, 84 percent of respondents said they would be more passionate about their work if they owned their own business. The No. 1 reason they gave for wanting to work for themselves: “to be more passionate about my work life.”

6. A Second Career. The nation’s 78 million baby boomers are just starting to reach retirement age, yet they’re realizing that they can’t afford to retire. What’s more, they don’t want to. Dr. Mary Furlong, author of Turning Silver into Gold, says, “Boomers are looking for ways to give back. They are taking the reins of their own futures and redefining their lives. They want work that reflects their values and identity; they want to make a difference.” A landmark study by MetLife Foundation and Civic Ventures found that 50 percent of Americans in their 50s and 60s want to do work “that matters.”

 

Taking the Plunge

“Leaving the rat race is not as daunting as it may seem,” says author Dan Clements in his guide to worklife balance, Escape 101. “You’ll look back in later years and marvel at how easy it was and how much you gained for so little cost.”

So what does it take? First, let’s look at what it doesn’t take. You don’t need an MBA or high-powered business background, and you don’t need to be rich or to take a second mortgage on your home. Some self-owned business opportunities require expertise, such as consulting, or can take significant capital investment and possibly training, such as real estate investing and franchises; some can be started on a shoestring and prove quite lucrative, including direct selling and online opportunities. Many of the greatest entrepreneurs of our time began with no advanced degrees and hardly any startup capital.

But make no mistake about it: What you save in cash capital you will make up for in sweat equity and passion. The major investment in most self-owned businesses is investment of one’s self in the form of time, focus and persistence. You don’t need to be a genius at negotiation or a whiz at numbers. You need a burning desire and determination fueled by a strong dose of passion!

TALENT MANAGEMENT

What is Talent Management?

Talent management is a systematic process designed for better utilizing employee skills for the benefit of the organization as a whole. Talent management is a valuable asset, especially when done properly. Usually, small to medium-sized firms struggle with managing talent due to factors related to business expansion. Ironically, missing the opportunity to recognize and utilize talent effectively is a perplexing issue for many organizations.

Although many companies define their own set of rules in identifying the factors associated with talent management, most talent management programs incorporate the following functions:

  • Identification
  • Engagement
  • Retention
  • Development
  • Deployment

The idea is to identify the talent in each employee and work to improve it for the benefit of the organization. Furthermore, it’s important to keep in mind both the present and future talent needs of the business. As a part of the talent management process, each company recognizes potentially talented individuals that are potentially valuable to the organization, both now and in the future.

As an employee, you may have experienced this phenomenon. The top issue is to prioritize the need for employees with their potential set of skills to complete a particular task. For example, if your company needs experienced salespeople, the smart organization will assess their Behaviors, Motivators, and Emotional Intelligence prior to hiring them.

Similarly, each company should look into the level of talent (skills or attributes) each employee and/or applicant has, and analyzes them before making a final decision. The problem occurs when companies overlook employee talent at the expense of experience.

Talent Management Tools

As a manager, you need tools to identify, develop and deploy talent. At Clutch Consulting, that’s one area where we can help you. By partnering with us, you ultimately reduce the time, cost, and learning curve that come with identifying potential employees that are the right fit for the right job.

As a manager, you should know that employee talent is often wrongly recognized without the right assessment tools. In fact, many organizations suffer loses simply due to misidentifying employee talent. To reduce such mishaps, as a manager, you have the responsibility to identify the right talent of each individual.

At the end of the day, talent management is a vital component for any organization, and it isn’t only effective in the hiring process. For example, as a leader, you can give targeted training to employees who, in your view, may need it more than others based upon their individual skill levels. Trough the use of this strategy, you polish their skills and increase their performance in your organization both now and in the future.

HOW TO DISCOVER YOUR TALENT

WHAT IS TALENT?

A Talent (or gift, or aptitude) is the skill that someone naturally has to do something that is hard. It is an ability that someone is born with. People say they are “born with a talent”. It is a high degree of ability or of aptitude. Someone who has talent is able to do something without trying as hard as someone who does not have a talent. Someone who has talent is called talented. Talented people as rule have many talents, for music, dancing, acting, sports, or other skills, but often only in single direction or genre, unlike genius.

Even if someone has talent they still have to work very hard if they want to be very good at something. Some people become quite good at something even if they do not have much talent, but if they are willing to work very hard at the skill.

HOW TO DISCOVER TALENT

Do I have any talents?’ ’What if I’m not doing what’s right for me?’ ’What if I’m calling in life is completely different?’ questions of this kind run through the minds of thousands of people around the world regardless of their age.

If you’re one of those people, maybe it’s time to take a break and work out who it is you really are. It might sound difficult — and it is — but think about it logically and you’ll realize that the more you put it off, the longer you’ll be stuck in the same cycle of doubt and confusion about where you’re going in life.

To help you, here is a step-by-step guide to help you discover where your true talents lie.

Step 1: Recall all of your dreams

The first thing which you need to do is recall all of the real dreams you’ve had throughout your life — right back to childhood through to your school and college years, and finally as an adult. Write them down.

Step 2: Separate ’to have’ and ’to be’

Now that you’ve written down all your dreams, you need to separate them into two categories:

’To have’ dreams: those which involve you gaining possession of something you don’t have right now.

’To be’ dreams: those which involve you taking on some new role in life.

Now write out the ’to be’ dreams separately — we’re only going to work with them.

Step 3: What provoked a reaction in you?

Do you remember if you ever felt a quiver excitement when you looked on at someone else fulfilling a certain role in life? Do you want to be in their place? If so, write it down.

Step 4: What did you enjoy doing?

Note down any activities or hobbies which you have enjoyed doing in the past. What did you like doing when you were a child, or a teenager, and as an adult? What do you enjoy doing now?

Step 5: Get rid of what you don’t need

Look through all that you’ve written down so far. Think hard about each of your ’to be’ dreams, and see which ones still cause an emotional reaction in you — that feeling of excitement discussed in step 3. Now imagine yourself in those roles. What would you be doing at this moment if you were in that role? How do you feel?

Pay attention to how strong your emotional reaction is to imagining yourself in the various roles. Evaluate the strength of your reaction for each on a scale of 1 to 10.

Step 6: Strike out the worst

Now cross out all those ’to be’ dreams which you gave the lowest evaluation to in the previous step. These are dreams which you can afford to give up on right now — it’s clear that they no longer mean as much to you as they did in the past and you don’t need them any longer.

Step 7: Group things together

So, now you have a list of your real, innate goals for life. At the moment they’re all jumbled together in a list. Look at the list carefully and ask yourself — which of my dreams can I group together? Which ones are interconnected or in essence very similar?

Step 8: Name each group

Look closely at each group you’ve put together and give a name to each one. Each name should say something about one of your innate talents which led to a number of interconnected dreams.

Step 9: Look for connections between the groups

We’re almost there! Now you just need to find out what it is that connects the different groups together. Write down the names of the groups in a list. Think about how the existence of one group supports the existence of another. This exercise nearly always shows that there are connections between the groups.

Step 10: Search for an outlet for your talents

Think about and then write down all of the possibilities for realizing your dreams in real life. What area of professional or your personal life are we talking about here? What kind of activities does it involve? Do your dreams and talents have a bearing on more than one area of activity or profession? The more ideas you come up with here the better.

Step 11: Define your life’s purpose

So, now that you’ve got your list of potential outlets for your dreams and talents, evaluate each scenario on a scale of 1 to 10 — from the least to the most attractive idea.

Now it should be clear what concrete direction you need to go in to achieve what really interests you. If you can get there, you can be certain that the achievement of this dream will bring you real happiness in life. Because of course, when you know where your true talents lie and you have the opportunity to realize them, you’ll feel more confident and enthusiastic.

 

WRITING A BUSINESS PLAN

Now that you understand why you need a business plan and you’ve spent some time doing your homework gathering the information you need to create one, it’s time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn’t include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.

Executive Summary

Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you’re asking for in the summary.

Business Description

The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business.

Market Strategies

Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.

Competitive Analysis

The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.

Design & Development Plan

The purpose of the design and development plan section is to provide investors with a description of the product’s design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.

Operations & Management Plan

The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Factors

Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the business concept and the management team.

FINANCIAL FACTORS

Financial Statements to Include

Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the business concept and the management team. Astute investors look carefully at the charts, tables, formulas and spreadsheets in the financial section, because they know that this information is like the pulse, respiration rate and blood pressure in a human–it shows whether the patient is alive and what the odds are for continued survival.

Financial statements, like bad news, come in threes. The news in financial statements isn’t always bad, of course, but taken together it provides an accurate picture of a company’s current value, plus its ability to pay its bills today and earn a profit going forward.

The three common statements are a cash flow statement, an income statement and a balance sheet. Most entrepreneurs should provide them and leave it at that. But not all do. But this is a case of the more, the less merry. As a rule, stick with the big three: income, balance sheet and cash flow statements.

These three statements are interlinked, with changes in one necessarily altering the others, but they measure quite different aspects of a company’s financial health. It’s hard to say that one of these is more important than another. But of the three, the income statement may be the best place to start.

Income Statement

The income statement is a simple and straightforward report on the proposed business’s cash-generating ability. It’s a score card on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result–which is either a profit or a loss.

For a business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second, and annually for each year thereafter. It’s formed by listing your financial projections in the following manner:

  1. Income. Includes all the income generated by the business and its sources.
  2. Cost of goods. Includes all the costs related to the sale of products in inventory.
  3. Gross profit margin. The difference between revenue and cost of goods. Gross profit margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated as a percentage of revenue.
  4. Operating expenses. Includes all overhead and labor expenses associated with the operations of the business.
  5. Total expenses. The sum of all overhead and labor expenses required to operate the business.
  6. Net profit. The difference between gross profit margin and total expenses, the net income depicts the business’s debt and capital capabilities.
  7. Depreciation. Reflects the decrease in value of capital assets used to generate income. Also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
  8. Net profit before interest. The difference between net profit and depreciation.
  9. Interest. Includes all interest derived from debts, both short-term and long-term. Interest is determined by the amount of investment within the company.
  10. Net profit before taxes. The difference between net profit before interest and interest.
  11. Taxes. Includes all taxes on the business.
  12. Profit after taxes. The difference between net profit before taxes and the taxes accrued. Profit after taxes is the bottom line for any company.

Following the income statement is a short note analyzing the statement. The analysis statement should be very short, emphasizing key points within the income statement.

Cash Flow Statement

The cash-flow statement is one of the most critical information tools for your business, showing how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. It shows a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year. In a cash-flow statement, both profits and losses are carried over to the next column to show the cumulative amount. Keep in mind that if you run a loss on your cash-flow statement, it is a strong indicator that you will need additional cash in order to meet expenses.

Like the income statement, the cash-flow statement takes advantage of previous financial tables developed during the course of the business plan. The cash-flow statement begins with cash on hand and the revenue sources. The next item it lists is expenses, including those accumulated during the manufacture of a product. The capital requirements are then logged as a negative after expenses. The cash-flow statement ends with the net cash flow.

The cash-flow statement should be prepared on a monthly basis during the first year, on a quarterly basis during the second year, and on an annual basis thereafter. Items that you’ll need to include in the cash-flow statement and the order in which they should appear are as follows:

  1. Cash sales. Income derived from sales paid for by cash.
  2. Receivables. Income derived from the collection of receivables.
  3. Other income. Income derived from investments, interest on loans that have been extended, and the liquidation of any assets.
  4. Total income. The sum of total cash, cash sales, receivables, and other income.
  5. Material/merchandise. The raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service.
  6. Production labor. The labor required to manufacture a product (for manufacturing operations only) or to perform a service.
  7. Overhead. All fixed and variable expenses required for the production of the product and the operations of the business.
  8. Marketing/sales. All salaries, commissions, and other direct costs associated with the marketing and sales departments.
  9. R&D. All the labor expenses required to support the research and development operations of the business.
  10. G&A. All the labor expenses required to support the administrative functions of the business.
  11. Taxes. All taxes, except payroll, paid to the appropriate government institutions.
  12. Capital. The capital required to obtain any equipment elements that are needed for the generation of income.
  13. Loan payment. The total of all payments made to reduce any long-term debts.
  14. Total expenses. The sum of material, direct labor, overhead expenses, marketing, sales, G&A, taxes, capital and loan payments.
  15. Cash flow. The difference between total income and total expenses. This amount is carried over to the next period as beginning cash.
  16. Cumulative cash flow. The difference between current cash flow and cash flow from the previous period.

As with the income statement, you will need to analyze the cash-flow statement in a short summary in the business plan. Once again, the analysis statement doesn’t have to be long and should cover only key points derived from the cash-flow statement.

The Balance Sheet

The last financial statement you’ll need to develop is the balance sheet. Like the income and cash-flow statements, the balance sheet uses information from all of the financial models developed in earlier sections of the business plan; however, unlike the previous statements, the balance sheet is generated solely on an annual basis for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas:

1. Assets
2. Liabilities
3. Equity

To obtain financing for a new business, you may need to provide a projection of the balance sheet over the period of time the business plan covers. More importantly, you’ll need to include a personal financial statement or balance sheet instead of one that describes the business. A personal balance sheet is generated in the same manner as one for a business.

As mentioned, the balance sheet is divided into three sections. The top portion of the balance sheet lists your company’s assets. Assets are classified as current assets and long-term or fixed assets. Current assets are assets that will be converted to cash or will be used by the business in a year or less. Current assets include:

  • Cash. The cash on hand at the time books are closed at the end of the fiscal year.
  • Accounts receivable. The income derived from credit accounts. For the balance sheet, it’s the total amount of income to be received that is logged into the books at the close of the fiscal year.
  • Inventory. This is derived from the cost of goods table. It’s the inventory of material used to manufacture a product not yet sold.
  • Total current assets. The sum of cash, accounts receivable, inventory, and supplies.

Other assets that appear in the balance sheet are called long-term or fixed assets. They are called long-term because they are durable and will last more than one year. Examples of this type of asset include:

  • Capital and plant. The book value of all capital equipment and property (if you own the land and building), less depreciation.
  • Investment. All investments by the company that cannot be converted to cash in less than one year. For the most part, companies just starting out have not accumulated long-term investments.
  • Miscellaneous assets. All other long-term assets that are not “capital and plant” or “investments.”
  • Total long-term assets. The sum of capital and plant, investments, and miscellaneous assets.
  • Total assets. The sum of total current assets and total long-term assets.

After the assets are listed, you need to account for the liabilities of your business. Like assets, liabilities are classified as current or long-term. If the debts are due in one year or less, they are classified as a current liabilities. If they are due in more than one year, they are long-term liabilities. Examples of current liabilities are as follows:

  • Accounts payable. All expenses derived from purchasing items from regular creditors on an open account, which are due and payable.
  • Accrued liabilities. All expenses incurred by the business which are required for operation but have not been paid at the time the books are closed. These expenses are usually the company’s overhead and salaries.
  • Taxes. These are taxes that are still due and payable at the time the books are closed.
  • Total current liabilities. The sum of accounts payable, accrued liabilities, and taxes.

Long-term liabilities include:

  • Bonds payable. The total of all bonds at the end of the year that are due and payable over a period exceeding one year.
  • Mortgage payable. Loans taken out for the purchase of real property that are repaid over a long-term period. The mortgage payable is that amount still due at the close of books for the year.
  • Notes payable. The amount still owed on any long-term debts that will not be repaid during the current fiscal year.
  • Total long-term liabilities. The sum of bonds payable, mortgage payable, and notes payable.
  • Total liabilities. The sum of total current and long-term liabilities.

Once the liabilities have been listed, the final portion of the balance sheet-owner’s equity-needs to be calculated. The amount attributed to owner’s equity is the difference between total assets and total liabilities. The amount of equity the owner has in the business is an important yardstick used by investors when evaluating the company. Many times it determines the amount of capital they feel they can safely invest in the business.

In the business plan, you’ll need to create an analysis statement for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points about the company.

OPERATION AND MANAGEMENT PLAN

The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business. In fact, within the operations plan you’ll develop the next set of financial tables that will supply the foundation for the “Financial Components” section.

The financial tables that you’ll develop within the operations plan include:

  • The operating expense table
  • The capital requirements table
  • The cost of goods table

There are two areas that need to be accounted for when planning the operations of your company. The first area is the organizational structure of the company, and the second is the expense and capital requirements associated with its operation.

Organizational Structure

The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. This is critical to the formation of financial statements, which are heavily scrutinized by investors; therefore, the organizational structure has to be well-defined and based within a realistic framework given the parameters of the business.

Although every company will differ in its organizational structure, most can be divided into several broad areas that include:

  • Marketing and sales (includes customer relations and service)
  • Production (including quality assurance)
  • Research and development
  • Administration

These are very broad classifications and it’s important to keep in mind that not every business can be divided in this manner. In fact, every business is different, and each one must be structured according to its own requirements and goals.

The four stages for organizing a business are:

1. Establish a list of the tasks using the broadest of classifications possible.
2. Organize these tasks into departments that produce an efficient line of communications between staff and management.
3. Determine the type of personnel required to perform each task.
4. Establish the function of each task and how it will relate to the generation of revenue within the company.

Calculate Your Personnel Numbers

Once you’ve structured your business, however, you need to consider your overall goals and the number of personnel required to reach those goals. In order to determine the number of employees you’ll need to meet the goals you’ve set for your business, you’ll need to apply the following equation to each department listed in your organizational structure: C / S = P

In this equation, C represents the total number of customers, S represents the total number of customers that can be served by each employee, and P represents the personnel requirements. For instance, if the number of customers for first year sales is projected at 10,110 and one marketing employee is required for every 200 customers, you would need 51 employees within the marketing department: 10,110 / 200 = 51

Once you calculate the number of employees that you’ll need for your organization, you’ll need to determine the labor expense. The factors that need to be considered when calculating labor expense (LE) are the personnel requirements (P) for each department multiplied by the employee salary level (SL). Therefore, the equation would be: P * SL = LE

Using the marketing example from above, the labor expense for that department would be: 51 * $40,000 = $2,040,000

Calculate Overhead Expenses

Once the organization’s operations have been planned, the expenses associated with the operation of the business can be developed. These are usually referred to as overhead expenses. Overhead expenses refer to all non-labor expenses required to operate the business. Expenses can be divided into fixed (those that must be paid, usually at the same rate, regardless of the volume of business) and variable or semivariable (those which change according to the amount of business).

Overhead expenses usually include the following:

  • Travel
  • Maintenance and repair
  • Equipment leases
  • Rent
  • Advertising & promotion
  • Supplies
  • Utilities
  • Packaging & shipping
  • Payroll taxes and benefits
  • Uncollectible receivables
  • Professional services
  • Insurance
  • Loan payments
  • Depreciation

In order to develop the overhead expenses for the expense table used in this portion of the business plan, you need to multiply the number of employees by the expenses associated with each employee. Therefore, if NE represents the number of employees and EE is the expense per employee, the following equation can be used to calculate the sum of each overhead (OH) expense: OH = NE * EE

Develop a Capital Requirements Table

In addition to the expense table, you’ll also need to develop a capital requirements table that depicts the amount of money necessary to purchase the equipment you’ll use to establish and continue operations. It also illustrates the amount of depreciation your company will incur based on all equipment elements purchased with a lifetime of more than one year.

In order to generate the capital requirements table, you first have to establish the various elements within the business that will require capital investment. For service businesses, capital is usually tied to the various pieces of equipment used to service customers.

Capital for manufacturing companies, on the other hand, is based on the equipment required in order to produce the product. Manufacturing equipment usually falls into three categories: testing equipment, assembly equipment and packaging equipment.

With these capital elements in mind, you need to determine the number of units or customers, in terms of sales, that each equipment item can adequately handle. This is important because capital requirements are a product of income, which is produced through unit sales. In order to meet sales projections, a business usually has to invest money to increase production or supply better service. In the business plan, capital requirements are tied to projected sales as illustrated in the revenue model shown earlier in this chapter.

For instance, if the capital equipment required is capable of handling the needs of 10,000 customers at an average sale of $10 each, that would be $100,000 in sales, at which point additional capital will be required in order to purchase more equipment should the company grow beyond this point. This leads us to another factor within the capital requirements equation, and that is equipment cost.

If you multiply the cost of equipment by the number of customers it can support in terms of sales, it would result in the capital requirements for that particular equipment element. Therefore, you can use an equation in which capital requirements (CR) equals sales (S) divided by number of customers (NC) supported by each equipment element, multiplied by the average sale (AS), which is then multiplied by the capital cost (CC) of the equipment element. Given these parameters, your equation would look like the following: CR = [(S / NC) * AS] * CC

The capital requirements table is formed by adding all your equipment elements to generate the total new capital for that year. During the first year, total new capital is also the total capital required. For each successive year thereafter, total capital (TC) required is the sum of total new capital (NC) plus total capital (PC) from the previous year, less depreciation (D), once again, from the previous year. Therefore, your equation to arrive at total capital for each year portrayed in the capital requirements model would be: TC = NC + PC – D

Keep in mind that depreciation is an expense that shows the decrease in value of the equipment throughout its effective lifetime. For many businesses, depreciation is based upon schedules that are tied to the lifetime of the equipment. Be careful when choosing the schedule that best fits your business. Depreciation is also the basis for a tax deduction as well as the flow of money for new capital. You may need to seek consultation from an expert in this area.

Create a Cost of Goods Table

The last table that needs to be generated in the operations and management section of your business plan is the cost of goods table. This table is used only for businesses where the product is placed into inventory. For a retail or wholesale business, cost of goods sold–or cost of sales–refers to the purchase of products for resale, i.e. the inventory. The products that are sold are logged into cost of goods as an expense of the sale, while those that aren’t sold remain in inventory.

For a manufacturing firm, cost of goods is the cost incurred by the company to manufacture its product. This usually consists of three elements:

1. Material
2. Labor
3. Overhead

As in retail, the merchandise that is sold is expensed as a cost of goods, while merchandise that isn’t sold is placed in inventory. Cost of goods has to be accounted for in the operations of a business. It is an important yardstick for measuring the firm’s profitability for the cash-flow statement and income statement.

In the income statement, the last stage of the manufacturing process is the item expensed as cost of goods, but it is important to document the inventory still in various stages of the manufacturing process because it represents assets to the company. This is important to determining cash flow and to generating the balance sheet.

That is what the cost of goods table does. It’s one of the most complicated tables you’ll have to develop for your business plan, but it’s an integral part of portraying the flow of inventory through your operations, the placement of assets within the company, and the rate at which your inventory turns.

In order to generate the cost of goods table, you need a little more information in addition to what your labor and material cost is per unit. You also need to know the total number of units sold for the year, the percentage of units which will be fully assembled, the percentage which will be partially assembled, and the percentage which will be in unassembled inventory. Much of these figures will depend on the capacity of your equipment as well as on the inventory control system you develop. Along with these factors, you also need to know at what stage the majority of the labor is performed.

DESIGN AND DEVELOPMENT PLAN

What You’ll Cover in This Section

The purpose of the design and development plan section is to provide investors with a description of the product’s design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.

There are generally three areas you’ll cover in the development plan section:

  • Product development
  • Market development
  • Organizational development

Each of these elements needs to be examined from the funding of the plan to the point where the business begins to experience a continuous income. Although these elements will differ in nature concerning their content, each will be based on structure and goals.

The first step in the development process is setting goals for the overall development plan. From your analysis of the market and competition, most of the product, market and organizational development goals will be readily apparent. Each goal you define should have certain characteristics. Your goals should be quantifiable in order to set up time lines, directed so they relate to the success of the business, consequential so they have impact upon the company, and feasible so that they aren’t beyond the bounds of actual completion.

Goals For Product Development

Goals for product development should center on the technical as well as the marketing aspects of the product so that you have a focused outline from which the development team can work. For example, a goal for product development of a microbrewed beer might be “Produce recipe for premium lager beer” or “Create packaging for premium lager beer.” In terms of market development, a goal might be, “Develop collateral marketing material.” Organizational goals would center on the acquisition of expertise in order to attain your product and market-development goals. This expertise usually needs to be present in areas of key assets that provide a competitive advantage. Without the necessary expertise, the chances of bringing a product successfully to market diminish.

Procedures

With your goals set and expertise in place, you need to form a set of procedural tasks or work assignments for each area of the development plan. Procedures will have to be developed for product development, market development, and organization development. In some cases, product and organization can be combined if the list of procedures is short enough.

Procedures should include how resources will be allocated, who is in charge of accomplishing each goal, and how everything will interact. For example, to produce a recipe for a premium lager beer, you would need to do the following:

  • Gather ingredients.
  • Determine optimum malting process.
  • Gauge mashing temperature.
  • Boil wort and evaluate which hops provide the best flavor.
  • Determine yeast amounts and fermentation period.
  • Determine aging period.
  • Carbonate the beer.
  • Decide whether or not to pasteurize the beer.

The development of procedures provides a list of work assignments that need to be accomplished, but one thing it doesn’t provide are the stages of development that coordinate the work assignments within the overall development plan. To do this, you first need to amend the work assignments created in the procedures section so that all the individual work elements are accounted for in the development plan. The next stage involves setting deliverable dates for components as well as the finished product for testing purposes. There are primarily three steps you need to go through before the product is ready for final delivery:

  1. Preliminary product review. All the product’s features and specifications are checked.
  2. Critical product review. All the key elements of the product are checked and gauged against the development schedule to make sure everything is going according to plan.
  3. Final product review. All elements of the product are checked against goals to assure the integrity of the prototype.

Scheduling and Costs

This is one of the most important elements in the development plan. Scheduling includes all of the key work elements as well as the stages the product must pass through before customer delivery. It should also be tied to the development budget so that expenses can be tracked. But its main purpose is to establish time frames for completion of all work assignments and juxtapose them within the stages through which the product must pass. When producing the schedule, provide a column for each procedural task, how long it takes, start date and stop date. If you want to provide a number for each task, include a column in the schedule for the task number.

Development Budget

That leads us into a discussion of the development budget. When forming your development budget, you need to take into account all the expenses required to design the product and to take it from prototype to production.

Costs that should be included in the development budget include:

  • Material. All raw materials used in the development of the product.
  • Direct labor. All labor costs associated with the development of the product.
  • Overhead. All overhead expenses required to operate the business during the development phase such as taxes, rent, phone, utilities, office supplies, etc.
  • G&A costs. The salaries of executive and administrative personnel along with any other office support functions.
  • Marketing & sales. The salaries of marketing personnel required to develop pre-promotional materials and plan the marketing campaign that should begin prior to delivery of the product.
  • Professional services. Those costs associated with the consultation of outside experts such as accountants, lawyers, and business consultants.
  • Miscellaneous Costs. Costs that are related to product development.
  • Capital equipment. To determine the capital requirements for the development budget, you first have to establish what type of equipment you will need, whether you will acquire the equipment or use outside contractors, and finally, if you decide to acquire the equipment, whether you will lease or purchase it.

Personnel

As we mentioned already, the company has to have the proper expertise in key areas to succeed; however, not every company will start a business with the expertise required in every key area. Therefore, the proper personnel have to be recruited, integrated into the development process, and managed so that everyone forms a team focused on the achievement of the development goals.

Before you begin recruiting, however, you should determine which areas within the development process will require the addition of personnel. This can be done by reviewing the goals of your development plan to establish key areas that need attention. After you have an idea of the positions that need to be filled, you should produce a job description and job specification.

Once you’ve hired the proper personnel, you need to integrate them into the development process by assigning tasks from the work assignments you’ve developed. Finally, the whole team needs to know what their role is within the company and how each interrelates with every position within the development team. In order to do this, you should develop an organizational chart for your development team.

Assessing Risks

Finally, the risks involved in developing the product should be assessed and a plan developed to address each one. The risks during the development stage will usually center on technical development of the product, marketing, personnel requirements, and financial problems. By identifying and addressing each of the perceived risks during the development period, you will allay some of your major fears concerning the project and those of investors as well.