The Entrepreneur’s Guide to Building a Successful Business

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The Entrepreneur's Guide to Building a Successful Business

Experience and advice from hundreds of small business owners /operators in fourteen countries

by Jonathan T. Scott

A PRACTITIONER'S GUIDE TO ACHIEVING LONG-TERM PROFITABILITY AND COMPETITIVENESS

2ND EDITION Taking the First Steps Toward Understanding, Implementing and Managing Sustainability from a Cost/Profit Perspective

Jonathan T. Scott

by the author of The Sustainable Business

The Entrepreneur's Guide to Building a Successful Business

By Jonathan T Scott

Published by: EFMD aisbl Rue Gachard 88 ? Box 3 1050 Brussels, Belgium T +32 (0)2 629 08 10 F +32 (0)2 629 08 11 E info@

EFMD is an international not-for-profit association (aisbl)

Copyright 2017 by Jonathan T. Scott and EFMD. All rights reserved. The moral rights of the author have been asserted. No part of this work may be reproduced, offered for sale, sold, traded, or utilized in any form by any means, electronic or mechanical, including photocopying, microfilm, and recording, or by any information storage or retrieval system with the expressed written approval of the author and publisher. Cover design: Jebens Design Library of Congress Cataloging-in-Publication Data Scott, Jonathan (Jonathan T.) The Entrepreneur's Guide to Building a Successful Business (2nd Edition): with Collective Advice from Seasoned Practitioners / Jonathan T. Scott Includes bibliographical references and index ISBN: 978-0-9818-260-1-1 1. Entrepreneurship ? handbooks, manuals, study guides 2. Entrepreneurship, small business ownership, starting a business ? handbooks, manuals, study guides 3. Business - handbooks, manuals, study guides etc. I. Title

Contents

1

10

Part I: Preparation

11

1. Do You Have What It Takes?

12

Stage I: The Right Attitude

12

Stage II: Implementation (Putting Plans into Action)

12

Stage III: Diligence (Going the Distance)

12

The Four Main Fears of Entrepreneurship

15

The Top Ten Myths of Entrepreneurship

16

Overcoming Negativity

16

Developing a Healthy Definition of Success

17

The Other End of the Scale: Overconfidence

17

Advice from the Pros

18 2. Starting Your New Business: Why, When, and Where Should You Do It?

18

Starting a New Business

19

Good Reasons for Starting a New Business

19

Poor Reasons for Starting a Business

20

When is the Best Time to Start a New Business Venture?

20

Where is the Best Place to Start a Business?

20

Advice from the Pros

22

3. Finding a Good Business Idea

26

How Stupid is a Stupid Idea?

27

The Need for New Ideas Never Ends

28

Advice from the Pros

29

4. Setting Up Your New Business: The Options

30

Part-Time Businesses

30

Full-Time Businesses

30

The Start-Up Business

30

Buying an Existing Business

31

Franchising

32

Advice from the Pros

33 5. An Introduction to the Importance of Business Research

33

Step Number 1: Building a Strong Foundation

34

Defining Market Research

35

The Objectives of Market Research

35

Tools for Conducting Market Research

36

Sources of Secondary Data Collection

37

Sources of Primary Data Collection

39 Don't Walk Away from the Hard Work and Time Research Demands

39

Advice from the Pros

40

6. Suggestions for Conducting Business Research

40

Conducting External Research

42

Making Adjustments

42

Conducting Internal Research

42

Researching the Cost of Overheads

43

SWOT Analysis

44

Advice from the Pros

2 Contents -- The Entrepreneur's Guide to Building a Successful Business

45

7.Choosing a Location

45

Questions to Ask When Choosing a Business Location

47

Learning about Leases

48

Advice from the Pros

49

8.Finding a Manufacturer or Supplier...

49

Beginning the Search

51

Keeping Manufacturers and Suppliers

51

Selecting an Overseas Manufacturer or Supplier

52

Advice from the Pros

53

9.Business Models

53 What's Good for the Goose is not always Good for the Gander

53

Sales Volume vs. Profit Margins

53

Trying to Get It Right: The Paradox of Business Models

54

Profit Margins vs. Sales Volume

54

High Prices vs. Low Prices

54

Market Share vs. Profitability

55

Less Choice vs. More Choice

55

Competition vs. Cooperation

55

Lean Thinking vs. Business as Usual

56

Selling vs. Sales and Service

56 Persistence vs. Stubbornness (or Knowing When to Stop and Change)

57

There are No Guarantees in Business

58

Advice from the Pros

59 10. The Thirteen Main Reasons Why New Businesses Fail (and How to Prevent Them)

59

Inadequate Planning

59

Underestimating the Commitment it Takes to Succeed

60

Cash Flow Problems

61

Poor Management

61

Not Understanding the Importance of Customers

61

Staffing Problems

62

Inflexibility

63

Poor Marketing and/or an Inability to Sell

63

Not Enough Capital

63

Pricing Problems

64

Lack of a Competitive Edge

64

Going It Alone

64

Growing too Fast

65

Advice from the Pros

66

Part II: Laying the Foundation

67

11. Writing a Business Plan

67

Why Write a Business Plan?

67

The Essentials of Good Planning

68

A Sample Business Plan Layout

69 The Most Common Mistakes Made When Writing a Business Plan

69

Additional Tips for Writing a Solid Business Plan

70

Advice from the Pros

70

Examples of Numerical Data

73

12. Finding Finance

73

Sources of Finance

? Jonathan T. Scott and EFMD

3

Contents -- The Entrepreneur's Guide to Building a Successful Business

73

Banks

74

Corporate Venturing

74

Equipment Loans

74

Crowdfunding

74

Family and Friends

74

Government Help

75

Grants

75

Issuing Shares

75

Small Business Administration Loans

75

Soft Loans

75

Trade Credit

75

Venture Capitalists

76

Mixing up the Options

76

Advice from the Pros

77 13. A Brief Look at Bookkeeping, Numbers, Taxes, and Formulas

77

The Importance of Numbers

78

Audits

78

Balance Sheets

78

Basic Bookkeeping

79

Break-Even Point

79

Cash Register Sales

79

Cost of Goods Sold

80

Inventory

80

Ledger Books

80

Monthly Net Profit

81

Profits

81

Taxes

81

Advice from the Pros

82 14. Naming Your Business (or Product) and Other Tasks Before Getting Started

82

Naming the Business (or Product)

83

Choosing a Logo

83 Obtaining a Business Mailing Address and Phone Number

83

Opening a Separate Bank Account

83

Setting Up a Website

84

Ordering Business Cards and Stationary

84

Establishing a Separate Work Space and Work Time

85

Insurance

85

Advice from the Pros

86

15. Making Your Business Legal

86

The Sole Proprietorship (or Sole Trader)

87

Partnerships

87

Limited Liability Companies

88

Incorporation

89

Subchapter S Corporations

89

Staying Legal (or, Keeping Abreast of the Law)

90

Advice from the Pros

91 16. Protecting Your Business with Copyrights, Trademarks, Patents, and UPC Codes

91

Copyright

? Jonathan T. Scott and EFMD

4 Contents -- The Entrepreneur's Guide to Building a Successful Business

92

Trademarks

92

Patents

92

Three Do's and Don'ts Regarding Patents

93

Playing It Safe

93

Obtaining a UPC Number and Bar Code for a Product

94

Advice from the Pros

95

17. Re-Energizing

95 Feeling Overwhelmed and Its Relation to Time Management

96

The Warning Signs of Stress and/or Overwork

97

Suggestions for Eliminating Stress

98

Advice from the Pros

99

18. Announcing the Existence of Your Business

99

Preparing to Advertise

100

Getting the Word Out

101

Grand Openings

102

Advice from the Pros

103

19. A Front-Line Marketing and Promotion Checklist

103

In-House Marketing

103

Point-of-Sale Areas

103

In-Store Promotion

104

In-Store Advertising

104

Internal Public Relations

104

Out-of-House Marketing

104

Unique Selling Points

104

Community Relations

105

Direct Sales Campaigns

105

Indirect Sales Campaigns

105 Suggestions for Ensuring that Marketing Attempts Obtain Results

106

Advice from the Pros

108

20. Developing Internal and External Customers

109

Evaluating Customers and Employees

109

Establishing a Customer Data Base

110 Developing and Enhancing Employees (or, Training Employees)

111

Monitoring Employees (Job Evaluations)

111

Dealing with Consistently Poor Performance

111

Dealing with Consistently Poor Performance

111

Work evaluations should avoid

112

Nothing Recedes Like Success

112

Advice from the Pros

113

Part III: Business & Managerial Basics

114

21. Management

115

The Two Choices of Management

115

The Two Choices of Management: A Case Study

116

The Biggest Obstacle of All: Ego

117

Common Management Styles

117

So Which Style is Best... And When Should it Be Used?

117 Management is about Doing What is Best for the Business

118

One Last Time: Management is about Service

118

Advice from the Pros

120

22. Understanding the Importance of Customers

? Jonathan T. Scott and EFMD

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Contents -- The Entrepreneur's Guide to Building a Successful Business

120 121 121 121 122 122 122 123 123 123 124 124 125 125 125

126

126 127 128 128 129 129 129

131

131 131 132 133 133 133 134 134 135

136

136 137 137 138 138 138 138

140

140 141 141 142 142 143 143

144

144

Same Theme, Different Story Getting Back to Basics Business 101 Lip Service vs. Customer Service How Important are Personalized Customer Relationships? Elementary Customer Mathematics (or, Penny Wise and Pound Foolish) What is Good Customer Service? What Do Customers Want? Two Examples of Good Customer Service The Ten Commandments of Business Success The Customer Paradox (or, Customer Wants vs. Customer Needs) Dealing with Difficult Customers Thinking in the Long Term The Final Word Advice from the Pros

23. The Basic Levels of Every Product

How Well Do You Know Your Product? Which Product Level Attracts the Most Customers? What to Do When a Major Competitor Moves Into Town Which Product Element Results in the Most Sales? Sometimes What Customers Want is Just So Simple Once Again Advice from the Pros

24. The Importance of Marketing

A Definition of Marketing The Marketing Mix The Promotion Mix Product Life-Cycle Increasing a Product's Life Don't Go It Alone Marketing Doesn't Require Fancy Schemes or Costly Expenses The False Illusion Inherent in `Digital' Advice from the Pros

25. Competitive Advantage Strategy

Types of Strategies Sometimes a Good Strategy is so Obvious it's Difficult to See Small Business Advantages Which Strategy is Best? The Ten Commandments of Business Strategy Matching Strategy to the Business Advice from the Pros

26. Quality

W. Edwards Deming's Points for Achieving Quality Condensing the Master The Eight Dimensions of Quality Benchmarking Putting Quality into Action The Mother of All Battles Advice from the Pros

27. Pricing

Facts about Pricing

? Jonathan T. Scott and EFMD

6 Contents -- The Entrepreneur's Guide to Building a Successful Business

144

Common Mistakes in Pricing

145

Starting the Pricing Process

145

Internal and External Factors that Affect Pricing

146

Pricing in Action

147

Summing up Pricing

148

Advice from the Pros

149

149 149 149 150 150 151 151 152 152

28. Selling

The Art and Science of Selling Selling 101: Understanding Customer Motivation Doing Your Homework (or, Knowing Where Your Customers Are) What Every Good Salesperson Learns Two Basic Sales Approaches Sales Calls The Do's of Making a Sales Call The Don'ts of Making a Sales Call Advice from the Pros

154

29. Closing a Sale

154

When the Customer has an Objection

155

When the Customer Displays Buying Signals

155

When the Customer Says No

156

When the Customer Says Yes

156 Issues that Should be Pondered Towards the Close of a Sale

156

Closing the Sale

156

What to Do When the Customer Balks

157

Advice from the Pros

158

158 158 158 159 159 159 160 160 161 162 162 162 163 163 163 164 164 165 165 166

30. Getting the Most from Employees

Motivating Employees: Four Separate Theories Maslow's Pyramid McClelland's Theory of Three Essential Motivations Herzberg's Two-Factor Theory Alderfer's Existence-Related-Growth Theory Which Theory is Best? Getting to the Top of the Pyramid Taking the Fear out of Delegation Making Delegation Work for You Taking the Next Step Employee Empowerment Empowerment in Action Making Empowerment Work for You Another Example of Empowerment in Action For managers, empowerment involves: The Importance of Feedback Reprimands and Punishment Modifying Unacceptable Behavior The End Desire Advice from the Pros

167

31. Ethics and Social Responsibility

167

An Introduction to Social Responsibility

167

Doing Good is Good for Business

168 More Examples of Social Responsibility Leading to Increased Profits

169

Learning Right from Wrong

? Jonathan T. Scott and EFMD

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