Small and medium-sized businesses are focused on solving a problem for their customer by providing a service or product of the highest quality. While most businesses are focused on growing their sales, too many are not prepared for how an immediate disaster like a hurricane, earthquake, unseasonably cold weather or a pandemic can adversely impact their operations. A new document shows how these risks could disrupt business operations and planning for them will enable owners to rebound quicker and avoid a recurrence.
In announcing the launch of its Business Resilience Guide, the U.S. Small Business Administration (SBA) says its publication serves as "a comprehensive resource for small business owners who may not be familiar with disaster preparation." The government agency whose mission is to help power the American dream of business ownership, adds that its "guide, which has six sections to plan and recover from disasters, includes best practices and template forms to help mitigate disasters for America's entrepreneurs and help them build back stronger."
The SBA's Guide correctly points out that "[w]hen disaster strikes, even the best run businesses can be impacted. According to the Federal Emergency Management Agency, about 25 percent of businesses do not reopen after disasters. Some businesses can cope with adversity better than others – they are less disrupted by an event, resume operations sooner, recover faster, and adjust for the future based on their experience. These businesses are described as resilient."
What is more, "For a small business, being resilient involves understanding risks, planning for them, identifying employee needs and responsibilities, and ensuring back-ups and redundancies are in place. This Guide can help small businesses determine how to anticipate the impacts of a disaster on operations so disruptions can be minimized."
SBA's publication leads business owners through creating a robust resilience plan, covering crucial areas such as:
Understanding their current landscape: This involves documenting essential operations and identifying dependencies.
Identifying key partnerships: It is crucial for seamless business continuity to recognize and nurture relationships with important vendors, suppliers, and collaborators.
Safeguarding vital resources: The guide emphasizes the importance of data backup, cybersecurity measures, and infrastructure protection.
Strengthening financial readiness: Strategies for managing cash flow, securing emergency funding, and minimizing financial losses.
Embracing proactive mitigation: This section delves into strategies for minimizing the impact of potential disruptions through risk assessment and mitigation tactics.
The last section on embracing proactive mitigation also includes an overview of the SBA's post-disaster lending programs that can help business owners mitigate the effects should their business be impacted by a disaster. "SBA loans can assist with expenses related to the repair or replacement of property and can provide support for essential business operations in the aftermath of a declared disaster. These low-interest subsidized 30-year loans have 0 percent interest for the first year as well as deferred payments for the first year after the loans are disbursed."
The Guide also mentions how the SBA "offers a mitigation option as part of the post-disaster loan program that enables a property owner to increase their physical disaster loan by up to 20 percent of the verified loss (or a maximum of $500,000) to pay for interventions that will make a property more resilient in the future. Mitigation reduces a property's risk of damage from future events so people can return to their home or business more quickly after a disaster. The section on embracing proactive mitigation also includes multiple examples of hazard mitigation efforts at different price-points."
Do you find SBA's Guide useful to help your business plan and recover from disasters? What would you add?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
While researching material for the previous post on this forum about a publication produced by the Export-Import Bank of the United States (EXIM) that helps empower American small businesses to succeed in global markets, I discovered an infographic that presents three ways to finance international transactions:
Option 1: Traditional Transaction
Exporter sells to buyer and arranges for either cash-in-advance (the safe choice) or open account credit terms, which is an effective sales tool but one that carries some risk.
Option 2: Transaction with a Factor
The Factor buys invoices from the exporter at a fee and pays the exporter immediately. The foreign buyer is instructed to pay the Factor by the due date on the invoice.
Step one: Exporter contracts with Factor
Step two: Exporter ships to foreign buyer
Step three: Factor pays exporter upon shipment
Step four: Foreign buyer pays Factor for goods by invoice due date
Pros of this transaction include the elimination of risk of nonpayment by foreign buyer, payment to the exporter is fast, generally fewer than 10 days, and it maximizes cash flow. More costly than export credit insurance and generally applicable for sales with terms of fewer than 90 days are two of the key risks of transaction with a Factor.
Option 3: Export Credit Insurance
The exporter wins sale to foreign buyer by offering open account credit terms. The Exporter uses an Export Credit Insurance (ECI) policy to insure the receivables against nonpayment by the foreign buyer.
With ECI, receivables are covered up to 95% of the invoice amount. Costing pennies on the dollar, ECI is a more affordable. This post that I published in this forum provides a thorough overview of ECI.
Trade Finance Guide
Exporters may also find value in the Trade Finance Guide: A Quick Reference for U.S. Exporters, which is produced by the U.S. Department of Commerce's (DoC) International Trade Administration (ITA) that explains the basics of trade finance so that U.S. companies can evaluate appropriate financing options to ensure they get paid for their sales.
Export Solutions Guide
In addition, trade professionals at the U.S. Commercial Service, part of the ITA, produced the Export Solutions Guide: 12 Steps to Exporting Success, which was developed to assist American exporters create successful international sales strategies. The twelve steps include:
Which resources do you find useful in financing international transactions or achieving exporting success?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
While I am proud of my three decades of doing business in all corners of the world, I always appreciate the opportunity to learn more about how to seize the opportunities and mitigate the risks of global business. Therefore, it was with great interest to learn about a document produced by the Export-Import Bank of the United States (EXIM), an independent government agency that assists in financing and facilitating U.S. exports of goods and services, that helps empower American small businesses to succeed in global markets.
The document begins with presenting the services provided by the U.S. Export Assistance Centers (USEACs) as one-stop shops that equip American businesses to compete on a global scale. Specifically, USEACs bring multiple exporting resources together in one convenient location. These centers are situated throughout the country to offer support directly to businesses currently exporting or thinking about exporting. USEAC offices are staffed with three of the federal agencies engaged in assisting export businesses: (1) the U.S. Department of Commerce (DoC), (2) the U.S. Small Business Administration (SBA), and (3) EXIM.
The DoC helps business owners learn how to export, connect with foreign buyers, and expand operations in new foreign markets. The SBA supports small businesses that are exporting or interested in learning more about exporting. Moreover, with the help of its partners, the SBA provides counseling and training, helps businesses find buyers with the State Trade Expansion Program, and has loan guarantee programs available specifically for exporters. One way that EXIM assists companies is by providing Export Credit Insurance. An Export Credit Insurance policy covers the accounts receivable generated by international sales, protecting your company against nonpayment by foreign buyers. The insurance policy mitigates risk while empowering companies to meet or beat their competitors. Business owners can use open account credit terms to win new customers and increase sales to existing buyers. Many posts on entrepreneurship in this forum provide additional details about some of the programs offered by these government agencies.
Addressing financing tools from EXIM, the document notes that running a small business comes with risks but getting paid does not need to be one of them. EXIM's Export Credit Insurance empowers business owners to grow sales while mitigating the risk of selling internationally. Using Export Credit Insurance empowers businesses to offer open account credit terms to compete more aggressively, protect their foreign receivables from nonpayment, expand their borrowing base and improve cash flow.
EXIM's Working Capital Loan Guarantee provides exporters with access to the cash needed to fulfill sales and take on new business abroad. Exporters can use a working capital loan to cover the costs of labor, materials, overhead, and supplies required to fulfill a foreign sale. A business can use their Working Capital to pay for materials, equipment, supplies, labor, and other expenses to fulfill export orders, post standby letters of credit serving as bid bonds, performance bonds, or payment guarantees, and purchase products for export.
The document correctly notes that "Locating new buyers overseas can be time consuming, expensive, and frustrating." It points out that the DoC is available to help by matching American exporters with foreign buyers. There are two programs that can businesses can utilize to grow their operations overseas:
DoC's Gold Key Matching Service arranges meetings with interested partners in international markets. The Gold Key team first identifies foreign buyers, assesses them, and provides profiles of the best matches. When it comes time for a meeting with a matching foreign company a member of the Gold Key team can accompany business owners and managers and provide support.
Through the Single Company Promotion, the DoC can organize a variety of promotional events to increase awareness of a company's products and services in a specific international market. These promotional events may include targeted email campaigns, seminars, webinars, direct mail campaigns, and receptions all designed to reach an audience of potential clients. The DoC handles all the logistics, project management, and provides a post-promotion review to discuss next steps.
While not mentioned in the document, it is worth mentioning Export.gov, which is managed by the DoC and International Trade Administration to assist businesses plan their international sales strategies and succeed in today's global marketplace.
Regarding the Small Business Administration, the SBA Learning Center gives businesses access to courses on all of these topics and more:
Planning and strategy to develop an international business plan
Legal and regulatory to help you navigate regulations and legal issues
Documentation and product requirements
Pricing development and strategy
Marketing and social media
The SBA also works with lenders to guarantee loans in support of international trade. These include the Export Express Loan, the International Trade Loan, and the Export Working Capital Loan. The SBA also has a grant program called the State Trade Expansion Program (STEP) that provides funding to state and territory governments. These STEP funds are exclusively available to help small businesses with export development.
I possess extensive experience working with these three government agencies and can attest to the value each one provides for businesses looking to succeed in global markets. Feel free to contact me if I can be of service to you.
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
"As of 2017, there are 11,684,549 women-owned businesses in the United States accounting for 37.6% of all businesses," according to a report published by the National Women's Business Council (NWBC). "Revenue for all women-owned businesses in 2017 was $1,776.4 billion. The U.S. Census Bureau (Census Bureau) defines majority women-owned businesses as having more than 50% of the stock or equity in the business."
The NWBC, a non-partisan federal advisory committee created to serve as an independent source of advice and policy recommendations to the President, Congress, and the U.S. Small Business Administration (SBA) on economic issues of importance to women business owners, says approximately 38% of all businesses in the U.S. are women-owned and 80% of women business owners are over the age of 35. While there are over nine million women-owned businesses in urban areas accounting
for 77% of all women-owned businesses and 38% of all urban businesses, there are 1.6 million women-owned businesses in rural areas accounting
for 13% of all businesses and 35% of all rural businesses.
The report also presents policy recommendations on a different segments starting with improving access to capital and opportunity such as spotlighting successful venture funds investing in diverse women-founded enterprises, building back a better pipeline of women entrepreneurs, reassessing and strengthening SBA’s microloan program to better serve women entrepreneurs
in emerging markets, and narrowing the wealth gap for women entrepreneurs by ensuring parity for the SBA’s women-owned small business (WOSB) and economically
disadvantaged women-owned small businesses
(EDWOSB) federal contracting programs.
With respect to rural women's entrepreneurship, the NWBC provides policy recommendations to improve promoting succession planning among rural women entrepreneurs, providing relief for women inheriting rural family businesses and farms, evaluating gaps in data for rural women business owners and farm operators, addressing family and child care concerns as barriers to women entrepreneurship, and advancing diversity, equity and inclusion to support rural minority women business owners.
On the topic of women in science, technology, engineering, and mathematics (STEM), the report outlines policy recommendations for advancing gender equity in STEM business and innovation and promoting commercialization
of new technologies, increasing STEM business mentorship and education opportunities, supporting STEM accelerator programs partnering with minority serving institutions (MSIs) and historically black colleges or universities (HBCUs), and improving demographic data collection
on minority women inventor patentees.
Having served as an advisor to women-owned enterprises, I have witnessed the exorbitant long time it takes for the SBA to review applications to receive a WOSB/EDWOSB certification. Therefore, I support the recommendation that the "SBA should improve the turnaround time for obtaining a WOSB/EDWOSB certification, and
both Congress and SBA should work to ensure parity of the program by leveraging the same or
greater contracting expectations, authority and penalties as other certification and
contracting programs."
Moreover, the NWBC recommends that SBA's Ascent platform highlight and include relevant, existing
federal resources uniquely tailored for women STEM entrepreneurs including links to existing Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) program online tutorials, U.S. Patent and Trademark Office (USPTO) video trainings, and other relevant federal resources
customized for women innovators. (More information about SBA's Ascent program may be found in a post entitled "SBA Launches Its 'Ascent for Women' Online Platform Geared to Help Women Entrepreneurs Grow and Expand Their Businesses.")
Do you agree with NWBC's policy recommendations to better support women-owned businesses in the United States?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
Through my experience working in Haïti, a country that shares the Caribbean island of Hispaniola with the Dominican Republic, I witnessed how some businesses remained operational despite the destruction caused by natural disasters such as hurricanes or earthquakes, or humanitarian disasters resulting from political or economic crises. Building resilience against all potential hazards or disruptions is an underlining reason for the enterprises' survival.
While Puerto Rico, a U.S. territory located just over 400 miles east of Haïti, is more developed with a 2019 gross domestic product (GDP) per capita (PPP) of $36,054 compared to to latter's per capita GDP of $3,034, according to The World Bank, the former faces the same natural disaster vulnerabilities. Now the coronavirus pandemic has ravaged the economies of all Caribbean nations and territories. I recently watched an informative discussion entitled "Be Prepared to Bounce Forward Better: Building Sustainability and Community Resilience Through Local Businesses: A Puerto Rico Case Study," which presents many useful points on understanding resilience and how a business can utilize it to withstand disruption.
Leading the discussion, Linton Wells II, Ph.D., an Executive Advisor at George Mason University's Center for Resilient and Sustainable Communities (C-RASC), explained that "resilience is the ability to have coping capacity plus the ability to adapt, which in the long-term may be referred as the ability to anticipate something, to withstand a disaster, to recover from it, which is coping capacity, and then the ability to adapt." There are three kinds of resiliency, according to Dr. Wells: resilience for cultural (is the organization willing to stand up and keep fighting when its under stress?), operational resilience (networks and communication sufficient for transmitting key messages, internally and externally), and infrastructural (understanding the dependencies among communication, power, and water, and how those affect a business). "Resilience is not just bouncing back to the pre-crisis status quo. What you want to do is leverage the stresses and shocks so that you actually wind up stronger. Be prepared to bounce forward better and that's what we are trying to build through resilience."
Dr. Wells also points out some people combine or confuse security and resilience. "They are really quite different. Security is how you lock things up and hunker down to keep bad things from happening. Resilience says I know bad things are going to happen, so how do we achieve the organization's goals under any level of shocks and stress, how do we fight back, how do we emerge stronger."
According to Dr. Wells, resilient capacity, which should not be confused for a program or strategy, is "actually a capacity of an organization" and "a function of leadership and has to be build at all levels. You have encourage resilience among your people from the board of directors to the people on the shop floor. It needs to be nurtured. It needs to be made sustainable. And treat it as a positive business asset that should be resourced." I appreciate his assertion that a more resilient business will be a stronger one. And as a result, it will be more likely to withstand disruption.
How do you learn from when bad things that happen? "Learning only happens when behavior changes," said Dr. Wells. "It's not enough to write a report. It's not enough to write an after-action review, You actually have to cause people to change behavior if you're going to truly learn the lessons. And this means you have to be able analyze shocks and see what's going on."
During his remarks, Dr. Wells referenced "The Business Disaster Resilience 101 Workbook," a tool jointly produced by the U.S. Chamber of Commerce Foundation and The UPS Foundation. The 101 Workbook provides more detailed business readiness guidance, tips, and resources to assist companies by addressing their own assets before a disaster occurs. I will publish a future post on this forum focusing on this useful tool.
In responding to Dr. Wells' question on how she is using education and mentoring to build a more resilient, sustainable commonwealth, Annie Mustafá-Ramos, who manages the Puerto Rico Science, Technology & Research Trust's Resiliency and Business Innovation Program (RBI), said the courses and training sessions are helping Puerto Rican businesses to not just continue with their previous activities, but to pivot and adapt to other disasters they may encounter in the future. The program was created in 2017 as a result of disaster (Hurricane Maria) that devastated Puerto Rico.
According to the RBI's website, the program's mission and vision is "To foster a Resilient Business Community on the Island. Enhance the innovations that create business resiliency from entrepreneur development and SBIR (Small Business Innovation Research) program applicants." Administered by the U.S. Small Business Administration, SBIR and the Small Business Technology Transfer (STTR) are programs to support scientific excellence and technological innovation through the investment of Federal research funds in critical American priorities to build a strong national economy.
Among the work during the covid-19 pandemic, Ms. Mustafá-Ramos noted that over 1,500 individuals experienced the courses. Senior executives and lower-level employees alike, from represent businesses of all sizes, were able to create a resilience plan. In addition, the courses provided the opportunity to train professors, civic leaders, and nonprofit organizations and provide them with the tools to help businesses create a resilience plan.
As a result of the restrictions imposed by the Puerto Rican government to prevent the spread of covid-19, Ms. Mustafá-Ramos explained that service businesses such as hotels, restaurants, and retail shops were greatly impacted financially. However, the operational restrictions created an opportunity for businesses to adapt and pivot. Prohibited from serving customers in their establishment, restaurants pivoted to become a "ghost kitchen," which is a professional food preparation and cooking facility set up for the preparation of delivery-only meals. Brick-and-mortar retailers entered the world of e-commerce. Originally delivering in-person courses only, Ms. Mustafá-Ramos pointed out that people throughout the world were able to attend the resilience courses online.
Looking into the future, she said that investors should consider investing in Puerto Rico, which will generate much-needed jobs and stimulate economic development for the commonwealth." Puerto Rico "is a place to do business and this is the moment." I appreciate her enthusiasm.
Have you created a resilience plan to protect your business before disaster strikes?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
"Women entrepreneurs start and own nearly half of all businesses in the United States, employ 9.4 million workers, generate $1.9 trillion in revenue and represent all industries," the U.S. Small Business Administration (SBA) said in a press release announcing the launch of its new initiative for women interested in starting or growing their small businesses. According to the Jan. 11th, 2021 announcement, Ascent for Women is "a first-of-its-kind, free digital e-learning platform geared to help women entrepreneurs grow and expand their businesses. Ascent has valuable content such as tips on preparing and recovering from disasters, strategic marketing and business financial strategy development."
A joint initiative between the White House, the SBA, the U.S. Department of Labor's Women's Bureau and the U.S. Department of the Treasury, Ascent is "designed to support women entrepreneurs looking to remain resilient in their operations" and the platform "is packed with content and resources from each agency and backed by academic research," the press statement explained.
Developed by experts in women's entrepreneurship, the platform is divided into major topics called Journeys. Within each Journey, users will find Excursions with the tools they need to master a topic. Each excursion includes a time estimate for completion. Below is a list of items users can explore within Excursions:
Exercises & Tools: Learn and apply growth practices to your business;
Fireside Chats: Learn from experts about how women grow their businesses;
Infographics: Gain a snapshot view of growth concepts;
Success Stories: Be inspired by stories from real-world entrepreneurs;
Discussion Guides: Use questions to stimulate thinking for you, your advisors or team;
Videos: Grasp key concepts in just minutes;
Key Insights: Understand key topics to support your business growth; and
Self-Assessments: Benchmark your current practices through self-focused inventories.
The aforementioned press release noted that "Ascent offers several key journeys to assist women business owners with strategies towards growth and success, including Disaster & Economic Recovery, Strategic Marketing, Your People, Your Business Financial Strategy and Access to Capital. Each journey contains content and tools needed to grow your business. Additional topics will be added over time."
This initiative is one of two learning platforms created by the SBA designed to empower and educate small business owners, The previous post on this blog focuses on the SBA's Learning Center, which is aimed to help small business owners start, pivot, or grow their business.
SBA Launches Largest Expansion of Women's Business Centers in 30 Years
Prior to announcing the launch of the Ascent for Women platform, the SBA issued a press release on Jan. 4th, 2021 saying "grant funding and the historic launch of 20 new Women’s Business Centers (WBC) across America to serve rural, urban and underserved communities alike. The opening of the 20 new WBCs is the largest single expansion of WBCs across America in its 30-year tenure, and these centers will be pivotal to the success of women-owned businesses as they continue to recover during this time. The WBCs will be hosted in rural and underserved markets and widen the footprint and partnership with Historically Black Colleges and Universities (HBCUs)."
The press statement added that "SBA's WBCs are a national network of 136 centers that offer one-on-one counseling, training, networking, workshops, technical assistance, and mentoring to women entrepreneurs on numerous business development topics, including business startup, financial management, marketing, and procurement."
What are your thoughts about the SBA's initiatives to help women entrepreneurs? Are there additional resources you recommend?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
In my post "Your Business Plan Is Your Business's Roadmap," I include numerous online resources entrepreneurs and small business owners should utilize in building their business plan. One resource is a business guide the U.S. Small Business Administration (SBA) created to help small business owners through the process of launching their business. A comprehensive business plan serves as a roadmap for how to structure, run, and grow a business.
In addition to its business guide, the SBA created an online learning platform, which include two learning programs designed to empower and educate small business owners every step of the way. One program is SBA's Ascent for Women, which is the topic of the following post on this blog, is a free online learning platform for women interested in starting or growing their small businesses. This post focuses on the SBA Learning Center, which consists of 17 courses covering 236 objectives. The objectives address a wide array of topics including how to estimate startup costs, strategies for employee recruiting, understanding customer intent, and how pricing relates to marketing. The videos and worksheets, which are accessible for free, are segmented into the following five groups:
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
In a post previously published on this blog, I discuss strategies on how to choose an export market for your business. That post references how the Export-Import Bank of the United States (EXIM), an independent, self-sustaining Executive Branch agency with a mission of supporting American jobs by facilitating the export of U.S. goods and services, is one of a number of government agencies that produce useful resources for exporting businesses. One such document presents ten questions, segmented in three sections, every U.S. exporter should ask:
Consider the Basics
1. Am I maximizing my current
export revenue?
2. Do I know my current
market’s cultural factors and
infrastructure limitations?
3. Am I currently reaching all of
the markets I've targeted?
4. Do I know how to leverage
conditions in this market to
add new customers & increase
sales with existing ones?
Examine Potential Global Markets
5. Have I located a complimentary market opportunity in a geographic region I am already serving?
6. Have I studied the competition in my targeted market?
7. Do I know how to penetrate this new market effectively and efficiently?
8. Do I have a partner or distributor to help me expand into this market?
Develop Trade Connections
9. Do I know what resources I need to succeed in growing my export base, and where I can acquire them?
10. Do I have a plan for financial obstacles that may arise while I am trying to grow my export sales?
To facilitate in responding to the checklist's initial four questions, the U.S. Small Business Administration (SBA) published the Export Business Planner For Your Small Business, which the SBA explains is an innovative tool "designed to serve as your roadmap for creating your Export Business Plan,
exploring foreign markets, developing a Marketing Plan, exploring financing, costing your product,
and more."
To help business owners answer the second group of questions on examining potential global markets, Country Commercial Guides prepared by International Trade Administration (ITA) trade professionals at U.S. embassies worldwide provide valuable information on a variety of topics such as market conditions, opportunities, regulations, and business customs for more than 70 major markets. Furthermore, the State Department Partner Posts produces Country Commercial Guides in over 60 markets.
Regarding the third group of questions on developing trade connections, EXIM's Multi-Buyer Credit Insurance is a policy that protects an exporter's accounts receivable and has significant benefits.
While these ten questions are intended for U.S. exporters, any business, irrespective of their home country, will also benefit from this list.
What resources do you recommend for creating an export plan?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
Whether it is based on my experience of launching my own ventures or serving as an advisor to my clients, I strongly agree with the U.S. Small Business Administration (SBA) that "A good business plan guides you through each stage of starting and managing your business. You'll use your business plan as a roadmap for how to structure, run, and grow your new business. It's a way to think through the key elements of your business."
What is more, according to the SBA, "Business plans can help you get funding or bring on new business partners. Investors want to feel confident they'll see a return on their investment. Your business plan is the tool you'll use to convince people that working with you — or investing in your company — is a smart choice."
Some entrepreneurs feel a business plan is unnecessary. "It's too hard" is what I hear most often when I ask why a plan has not been prepared. Launching a new venture and following its "Path to Success" (transitioning from idea/concept to demo to revenue to profitability to sustainable profitability) is stressful with little room for error. In other words, business is hard.
And as discussed in previous posts on this blog, most new businesses will fail within the first few years of existence. If preparing a business plan is too hard, then how will you handle the difficulties most founders encounter almost daily in trying to grow their business?
Although some investors wrongly advise founders not to prepare the formal business plan, I refuse to consider financially supporting any enterprise that does not have one. A comprehensive business plan is essential to providing investors, advisors, and employees with the opportunity to comprehend the company's mission, vision, goals and financial targets as well as its product, sales and marketing strategy, management team, risk factors, key performance indicators and financial data.
I recognize, however, that creating a roadmap for your business can be an intimidating process. While there are thousands of books, webinars, and websites that provide information about drafting a business plan, I find the SBA to be a useful resource for entrepreneurs.
The quotation above comes from a website the SBA created to help entrepreneurs through the process of launching their business. The four sections of the business guide are listed below with links to other pages containing additional information that is essential to building a successful (profitable) business:
Plan your business ("You've got a great idea. Now, make a plan to turn it into a great business.")
Conduct market research: "Market research will tell you if there's an opportunity to turn your idea into a successful business. It's a way to gather information about potential customers and businesses already operating in your area. Use that information to find a competitive advantage for your business."
Write your business plan: "Your business plan is the foundation of your business. It's a roadmap for how to structure, run, and grow your new business. You'll use it to convince people that working with you — or investing in your company — is a smart choice."
Fund your business: "Your business plan will help you figure out how much money you'll need to start your business. If you don't have that amount on hand, you'll need to either raise or borrow the capital. Fortunately, there are more ways than ever to find the capital you need."
Pick your business location: "Your business location is one of the most important decisions you'll make. Whether you're setting up a brick-and-mortar business or launching an online store, the choices you make could affect your taxes, legal requirements, and revenue."
Choose a business structure: "The legal structure you choose for your business will impact your business registration requirements, how much you pay in taxes, and your personal liability."
Choose your business name: "It's not easy to pick the perfect name. You'll want one that reflects your brand and captures your spirit. You'll also want to make sure your business name isn't already being used by someone else."
Register your business: "Once you've picked the perfect business name, it's time to make it legal and protect your brand. If you're doing business under a name different than your own, you'll need to register with the federal government, and maybe your state government, too."
Get federal and state tax IDs: "You'll use your employer identification number (EIN) for important steps to start and grow your business, like opening a bank account and paying taxes. It's like a social security number for your business. Some — but not all — states require you to get a tax ID as well."
Apply for licenses and permits: "Keep your business running smoothly by staying legally compliant. The licenses and permits you need for your business will vary by industry, state, location, and other factors."
Open a business bank account: "A small business checking account can help you handle legal, tax, and day-to-day issues. The good news is it's easy to set one up if you have the right registrations and paperwork ready."
Similar to hiring an experienced accountant and becoming familiar with the rules and regulations of the IRS, you should retain the services of an attorney who is familiar with the specific state and local laws of where you plan to launch your business.
Lastly, I created a document that presents questions on a variety of topics founders should consider when drafting their business plan.
What are your recommendations for preparing a business plan?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.
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