Entrepreneur Resources

Common Mistakes

By Steve Densley, president, Provo/Orem Chamber of Commerce

J. Willard Marriott once told me that if I wanted to start a business, I should find the best business in that industry and go to work for them. Once I had learned everything that I could, I should then start my own. What he was suggesting was that I should have a great knowledge about the industry I was about to enter.

The following are the most common mistakes that people make when starting a business:

· Inadequate front end planning (no business plan, feasibility study, or cash flow projections). You need sufficient capital for both the startup and the backup.

· Thinking that you can achieve instant success without spending the time and having the long commitment.

· Failure to research the market. Know the market and your competition before you start.

· Underestimating the competition. Whether they're big or small, understand that your competition sees you as another company trying to take money out of their pockets.

· Trying to do everything alone. Work with a banker, accountant and a lawyer.

· Hiring inexperienced people to save money particularly in the area of marketing and sales.

· Inadequate records, financial knowledge and not watching cash flow. Just because you're making a profit doesn't mean you can pay all the bills.

· The false idea that the world will come to you. Your product is not going to sell itself. Never underestimate the power of advertising.

· Assuming that all you need is just a good idea. You need fortitude, financial and moral backing, as well as timing, organization and a bit of luck to be successful.

Small business dominates the nation and certainly is the driving force of the economy in Utah Valley. I love to see people take on the challenge of business ownership and independence. I hate to see people take on that challenge ill prepared to succeed. Don't get caught saying to yourself, "if I had only known."

Steve Densley can be reached by email at: info@thechamber.org

Business Start-Up Checklist

The following checklist shows the steps which should be taken when starting a new business. It is only a guide. No final conclusions should be reached by completing it without further review and consultation.

Before Start-Up

· Choose management advisors: accountant, attorney, and banker.

· Develop a business plan, including cash flow projections.

· Using the business plan, establish a relationship with a banker. Possible bank services include:

o Credit card merchant account

o Business checking account

o Working capital loan

o Equipment loan

o Lock-box services

· Select the legal entity at yearend.

· Find a location for the business.

· Negotiate a lease.

· Design the layout of the facility.

· Prepare all the necessary legal documents, as applicable:

· Partnership agreement

· Articles of incorporation and first organizational minutes

· Bylaws

· Federal identification number (SS-4)

· State and local license application

· Sales tax identification number

· State unemployment number

· Industry-specific issue

· Obtain quotes for and then order office furnishings and equipment.

· Order office supplies.

· Order business cards and business stationary.

· Order office telephone number.

· Purchase adequate insurance:

· Health

· Malpractice

· Liability

· Worker's compensation

· Life

· Fidelity bond

· Computer and equipment

· Umbrella

· Employee dishonesty

· Register the business with local and state authorities.

Start-Up

· Establish prices for your goods and services.

· Promote the business' opening through:

· Press releases to local and national media

· Advertising

· Direct-mail announcement

· Other

(This depends on the target market defined in the business plan. For example, a restaurant or store might send special coupons for discounts to local residents or present a grand opening event and send invitations to prospective customers, or a manufacturer or supplier of office supplies might offer special discounts to local businesses)

· Seek, interview and make offers to job candidates

· Select and implement a financial recordkeeping system

(While this can be either manual or computerized, it must be implemented consistently. If the business records a particular type of transaction one way at the start, such transactions must continue to be recorded in a similar manner to avoid confusion.) Aspects of recordkeeping include:

1. Accounts payable

2. Accounts receivable

3. Inventory tracking

4. Order entry

Ongoing Operations

· Develop personnel policies and procedures

· Prepare quarterly payroll returns and verify timely tax deposits

· Prepare quarterly or monthly financial statements

· Perform yearend tax planning, at least one month before the yearend

· Prepare annual federal, state and payroll returns

· Develop employee job descriptions

· Review existing insurance coverage at least once a year

· Prepare and maintain personnel files

· Establish a petty cash fund and policy

· Establish answering mechanism for after hours

· Join industry associations and groups

· Verify listing in the yellow pages of area phone directories

· Register trademarks (word, name, symbol or device) that indicate a unique identity on which your business is building

Source: Grabush, Newman & Co, Baltimore, Journal of Accountancy, May 1995

Business Start-Up Costs

1. Rent

2. Telephones: Installation, equipment, services, long distance, etc.

3. Fax:Equipment and long distance

4. Furniture: Desks, tables, chairs, filing cabinets, etc.

5. Incorporation Fees

6. Employees: Payroll (wages & commission), taxes (benefits?)

7. Travel: Conventions, meetings, appointments, interviews, moving, etc.

8. Legal (make sure you have a relative who's an attorney)

9. Account

10. Credit card processing, merchant, and banking fees

11. Taxes: Company, employee, personal

12. Office Supplies: Paper, ink cartridges, pens, etc.

13. Food: Business lunches

14. Printing/copying expenses (fax, computer, brochures)

15. Mailings: FedEx, post office, pre-paid envelopes, etc.

16. Internet: Web design, hosting, registration (InterNIC), updates, etc.

17. Toll-free number (Who says it's free?)

18. Advertising expenses

19. Training materials: For yourself and employees

20. Computer: Hardware, software, networking, etc.

21. Subscriptions: Books, magazines, newsletters, etc.

22. Court fees (hopefully not too many of these)

23. Key duplication

24. Office building (in addition to rent): Cleanup/garbage removal, parking fees, utilities, etc.

25. Newspaper ads: Hiring, selling, advertising

26. Signs/banners, custom T-shirts (for conventions)

27. Building assets

28. And more and more and more!

21 QUESTIONS

Evaluation

1. Briefly describe your opportunity concept.

2. Who will purchase your product or service?

3. What problem for the consumer or industry will your product or service solve?

4. How will your customers hear about your product or service? (word of mouth is not an acceptable answer.)

5. How will you distribute the product or service to the customer?

6. Why will the customer buy from you rather than a competitor?

7. How many competitors are offering a similar service?

8. How will competitor's pricing compare with yours?

9. How will your service or product be differentiated from competitors? (Better is not an answer)

10. What major costs are involved in producing this product or service?

11. What legal form of organization will you have?

12. What are the barriers to entry?

13. Will you have an entrepreneurial team or be a solo?

14. Where will the money come from for start-up costs?

15. What preliminary research have you done thus far about your product or service?

16. Is there any element in the introduction of your product or service that motivates you to start now?

17. Outline, as best you understand them, the steps that are necessary for you to take to change your idea into a specific product or service.

18. As you have reviewed the process, list the strengths you have to "pull off" the introduction of your product or service.

19. Also, list the weaknesses you feel you have to overcome to accomplish the above.

20. How do you propose to make up for the weaknesses?

21. What do you hope I can do for you?

Opportunity Identification

1. Repeat business, not one-time sell.

2. Prefer rental or leasing business.

3. Built-in sense of urgency. Health or financial loss from lack of action on customers’ part is ideal. I prefer automatic shipping, for example having a book-of-the-month, so that customer needs to:
a. Make a new decision to stop
b. Action required from customer to stop automatic shipping from happening.

4. Business instead of a practice. Not built on a person’s talent, but on an organization’s.

5. Regional or national potential, rather than local.

6. The less labor intensive, the better; however, labor is better than capital expenditures.

7. Already a market – other companies doing it.

8. Demographics or lifestyle changes creating the need, and thus, the market.

9. Emotionally appealing to the customer – there’s got to be sizzle.

10. The numbers need to work so there is real money to be made.

11. The more unregulated, the better.

12. Odds of success are stacked in your favor, not against you.

13. A proven team, not an untried idea. A great team is more important than a good idea.

14. Recession proof.

15. Success is not built on one client, one product, or customer.

16. Payment at time of service or before, to eliminate large accounts receivable, accounts receivable aging, collection problems, or costs of bad debt.

Good Idea?

Analyze and evaluate the following:

1. The Idea -- How Do You Get It?

· Problems - yours or others

· "Talk it into being"

· Brainstorm with friends

· Mentors can help

· Ask others if they heard of any good ideas

· From your travels

· Be enthusiastic and positive

· The engineering and other universities, schools (BYU-- WordPerfect, Novell, Dynix)

· A great idea does not guarantee success

2. How the founders of the Inc. 500 got their ideas: (Source: Carl Vesper's book -- Chapter by Jeff Timmons)

· While working in the same industry -- 43%

· Hobby or advocation -- 16%

· Saw somebody else do it -- 15%

· Saw an unfiled niche -- 11%

· Did a systematic search -- 7%

· Don't know -- 5%

3. The Difference Between an Idea and a Business Opportunity (For Me)

· Propriety position

o What is the hill your competition will have to climb?

o Market position, copyright, patient, strategic relationship, etc.

· Expanding (growing) market -- Why important?

o Easier to sell new customers than take from competition.

o More likely to survive

· High margins

· Can be implemented on a bootstrapping basis

· "If it is a good idea, it is too late" (e.g. Fred Smith -- Federal Express)

· One you can be committed to, believe in

· One with a big potential but can be broken down into bit size parts

· One that does not have a high customer education cost -- does not require changing habits of the customer

· One that can exceed the competition's offering

· One that can be targeted and reached

· Is the window open? Leonardo de Vinci -- Great ideas, airships, submarines

Entrepreneurial Thoughts

Joe Olliviers thoughts and insights.

1.	It has to be a business that gives you an emotional high.
2.	Try not to go into anything that is labor inventory or accounts receivable intensive.
3.	Have independent market research done on feasibility of your ideas.
4.	Don't think someone is waiting to steal your idea, it's paranoia.
5.	Don't get started on a real business until you have someone (spouse, family member) who will listen to your dreams, sympathize with your failures and applaud your successes.
6.	Never involve yourself in any service or product that requires a consumer attitude change.
7.	Don't invest your money or time in home run schemes—invest in what you like and know.
8.	Find a lifelong mentor as soon as possible. Have him continually play devil's advocate with all of your projects.
9.	Make sure you are not just buying yourself a job. Have an exit point or harvest plan to cash out.
10.	Do self-awareness training. Find out who you are.
11.	Pick a charity (other than a religious one) or a charitable activity where you have nothing to gain, and work at it every year.
12.	Do some charitable acts each year in secret (spouse doesn't know).
13.	Keep a notepad next to your bed at night—some of your best thoughts will come while you are asleep.
14.	Get a week-at-a-glance planner. Each weekend make out a 3x5 notecard of activities you want to accomplish.
15.	You don't need to keep 51% to control your company.
16.	Find an aggressive banker, lawyer, and CPA, and send them referrals and Christmas presents.
17.	Be willing to take major risks, but be aware of risk versus reward. Don't ever even think about taking out Bankruptcy.
18.	Have someone else do all your serious negotiating for you—you care too much about yourself.
19.	Take 5 years + to get through college—take six months or a year and investigate what you really want to do with your entrepreneurial skills.
20.	Remember that you will learn much more from your mistakes and failures than your successes.
21.	Trust everyone, but be aware that most people shade the facts and lie part of the time.
22.	Live in the nicest, most expensive house you can. It will alter your view of yourself and the way others view you.
23.	Expect to be sued—it's normal. Have the attitude that it's the person who's suing that has the problem.
24.	Never sue unless there is real estate that can be attached.
25.	Expect to become financially independent—do a financial statement on yourself each quarter.
26.	Realize that money is power and can be used for great good.

Myths About Entrepreneurs

Myth	ENTREPRENEURS ARE BORN, NOT MADE
Reality	While entrepreneurs are born with certain native intelligence, a flair for creating, and energy, these talents by themselves are like unmolded clay or an unpainted canvas. The making of an entrepreneur occurs by accumulation the relevant skills, know-how experiences, and contacts over a period of years and includes large doses of self-development. The creative capacity to envision and then pursue an opportunity is a direct descendent of at least 10 or more years of experience that lead to pattern recognition.
Myth	ANYONE CAN START A BUSINESS
Reality	Entrepreneurs who recognize the difference between an idea and an opportunity, who think big enough, start businesses that have a better chance of succeeding. Luck, to the extent it is involved, requires good preparation. And the easiest part is starting up. What is hardest is surviving, sustaining, and building a venture so its founders can realize a harvest. Perhaps only one in 10 to 20 new businesses that survive five years or more result in a capital gain for the founders.
Myth	ENTREPRENEURS ARE GAMBLERS
Reality	Successful entrepreneurs take very careful, calculated risks. They try to influence the odds, often by getting others to share risk with them and by avoiding or minimizing risks if they have the choice. Often they slice up the risk into smaller, quite digestible pieces; only then do they commit the time or resources to determine if that piece will work. They do not deliberately seek to take more risk or to take an unnecessary risk, nor do they shy away from unavoidable risk.
Myth	ENTREPRENEURS WANT THE WHOLE SHOW TO THEMSELVES
Reality	Owning and running the whole show effectively puts a ceiling on growth. Solo entrepreneurs usually make a living. It is extremely difficult to grow a higher potential venture by working single-handedly. Higher potential entrepreneurs build a team, an organization, a company. Besides, 100 percent of nothing is nothing, so rather than taking a larger piece of the pie, they work to make the pie bigger.
Myth	ENTREPRENEURS ARE THEIR OWN BOSSES AND COMPLETELY INDEPENDENT
Reality	Entrepreneurs are far from independent and have to serve many masters and constituencies, including partners, investors, customers, suppliers, creditors, employees, families, and those involved in social and community obligations. Entrepreneurs, however, can make free choices of whether, when, and what they care to respond to. Moreover, it is extremely difficult, and rare, to build a business beyond $1 million to $2 million in sales single-handedly.
Myth	ENTREPRENEURS WORK LONGER & HARDER THAN MANAGERS IN BIG COMPANIES
Reality	There is no evidence that all entrepreneurs work more than their corporate counterparts. Some do, some do not. Some actually report they work less.
Myth	ENTREPRENEURS EXPERIENCE A GREAT DEAL OF STRESS & PAY A HIGH PRICE
Reality	No doubt about it: Being an entrepreneur is stressful and demanding. But there is no evidence that it is any more stressful than numerous other highly demanding professional roles, and entrepreneurs find their jobs very satisfying. They have a high sense of accomplishment, are healthier, and are much less likely to retire than those who work for others. Three times as many entrepreneurs as corporate managers say they plan never to retire.
Myth	STARTING A BUSINESS IS RISKY AND OFTEN ENDS IN FAILURE
Reality	Talented and experienced entrepreneurs--because they pursue attractive opportunities and are able to attract the right people and necessary financial and other resources to make the venture work--often head successful ventures. Further, businesses fail, but entrepreneurs do not. Failure is often the fire that tempers the steel of an entrepreneur's learning experience and street savvy.
Myth	MONEY IS THE MOST IMPORTANT START-UP INGREDIENT
Reality	If the other pieces and talents are there, the money will follow, but it doesn't follow that an entrepreneur will succeed if he or she has enough money. Money is one of the least important ingredients in new venture success. Money is to the entrepreneur what the paint and brush are to the artist--an inert tool which, in the right hands, can create marvels. Money is also a way of keeping score, rather than just an end in itself. Entrepreneurs thrive on the thrill of the chase; and, time and again, even after an entrepreneur has made a few million dollars or more, he or she will work incessantly on a new vision to build another company.
Myth	ENTREPRENEURS SHOULD BE YOUNG AND ENERGETIC
Reality	While these qualities may help, age is no barrier. The average age of entrepreneurs starting high potential businesses is in the mid-30s, and there are numerous examples of entrepreneurs starting businesses in their 60s. What is critical is possessing the relevant know-how, experience, and contacts that greatly facilitate recognizing and pursuing an opportunity.
Myth	ENTREPRENEURS ARE MOTIVATED SOLELY BY THE QUEST FOR THE ALMIGHTY DOLLAR
Reality	Entrepreneurs seeking high potential ventures are more driven by building enterprises and realizing long-term capital gains than by instant gratification through high salaries and perks. A sense of personal achievement and accomplishment, feeling in control of their own destinies, and realizing their vision and dreams are also powerful motivators. Money is viewed as a tool and way of keeping score.
Myth	ENTREPRENEURS SEEK POWER AND CONTROL OVER OTHERS
Reality	Successful entrepreneurs are driven by the quest for responsibility, achievement, and results, rather than for power for its own sake. They thrive on a sense of accomplishment and of outperforming the competition, rather than a personal need for power expressed by dominating and controlling others. By virtue of their accomplishments, they may be powerful and influential, but these are more the by-products of the entrepreneurial process than a driving force behind it.
Myth	IF AN ENTREPRENEUR IS TALENTED, SUCCESS WILL HAPPEN IN A YEAR OR TWO
Reality	An old maxim among venture capitalists says it all: The lemon ripens in two and a half years, but the pearl take seven or eight. Rarely is a new business established solidly in less than three or four years.
Myth	ANY ENTREPRENEUR WITH A GOOD IDEA CAN RAISE VENTURE
Reality	Of the ventures of entrepreneurs with good ideas who seek out venture capital, only 1 to 3 out of 100 are funded.
Myth	IF AN ENTREPRENEUR HAS ENOUGH START-UP CAPITAL, HE OR SHE CAN'T MISS
Reality	The opposite is often true; that is, too much money at the outset often creates euphoria and spoiled-child syndrome. The accompanying lack of discipline and impulsive spending usually lead to serious problems and failures.

Qualities and Traits

en'tre - pre - neur

n. A person who organizes, operates, and assumes the risk for a business venture.

· Confident

· Risk taker

· Hard working

· Creative

· Flexible

· Busy, time consuming, long hours

· Dedication

· Effort

· Believer

· Enjoys what he/she does

· Driven, has a reason

· Great sacrifices

· Passion/love for what they do

· Committed

· Never quit

· Don't know how to relax

· Impersonal, task oriented

· Don't stay within lines company sets.

· Unorganized

· C or D student, have their own ideas.

· Visionary

· Courageous

· Head strong/stubborn

· Idealistic

· Self-motivated

· Innovative

· Problem solvers

· Won't take no for an answer

· Stressful

· Able to overcome challenges/negatives

· Jack of all trades, good at a lot of things

· Perfectionist

· Knows where he/she is going & where they want to be.

Can you think of others? E-mail them to the Center for Entrepreneurship at: cfewebmaster@byu.edu.

5 Stages of Growth

There are five distinctive stages of growth in the business creation and development cycle. The Center for Entrepreneurship aids students in learning about these stages through entrepreneurial internships, classes, activities, competitions, speakers, etc.