The biggest lesson I’ve learnt from business is that no matter how good your product or service is, if people don’t know about it, then you’re in big trouble. You could have the best product in the world but you’ll only find success if enough people know about it to buy it. Marketing is king and if you can’t advertise effectively, then be prepared to fail.
So how do you get people to know you and your business? Shouldn’t be too hard right? But ask any business owner and they’ll tell you that advertising effectively is one of the hardest things to do. So where do you begin? Well, here are a few key tips to start you off. (1) Define your target market and break your ideal consumers down into different segments. This allows you to create custom marketing messages for different customer segments. (2) Once you know who you’re targeting and what message you want to send, research different advertising methods. Find the best ways to reach these consumers and discuss the pros and cons of each method. (3) Don’t be afraid to spend money on advertising. Free forms of marketing such as blogging and setting up Facebook and Twitter accounts are fine and can play an important role in your entire marketing strategy, but you also need to advertise in the “real world.”
Put time and effort into building a solid marketing plan and focus on generating awareness for your company. I recommend reading Duct Tape Marketing by John Jantsch. It gives you practical advice on how to reach your ideal consumers and discover what works for your business. Remember, if they don’t know you, they can’t buy from you.
The term “entrepreneur” gets thrown around a lot these days. I think it’s important to clarify what the term means. Merriam-Webster defines “entrepreneur” as:
one who organizes, manages, and assumes the risks of a business or enterprise
The dictionary definition is helpful but I think the types of entrepreneurs as defined by entrepreneur and Stanford professor Steve Blank are much more useful for practical purposes.
- Small Business Entrepreneur
- Scalable Startup Entrepreneur
- Large Company Entrepreneur
- Social Entrepreneur
The Small Business Entrepreneur is looking to start a business that will provide for a comfortable living for his or her family. The business is funded from personal savings, loans from friends or family and bank loans. This business, if successful, will experience steady growth over a long period of time. This type of business can grow quite large but the majority don’t. The business transitions from a startup to a small business. This is the category that 95% of people who are starting a business fall into.
The Scaleable Startup Entrepreneur is trying to launch the next Google or Amgen. The business is funded by investments from angel investors, venture capitalists, private equity and potentually, public markets. The business, if successful, will experience a period of exponential growth before becoming a mature company. Successful companies of this type grow to Fortune 500 scale. This type of business goes from a scaleable startup trying to establish a business model, to a transitional business focused on growth, to a mature business with stable cash flows and profits. Only about 5% or fewer of entrepreneurs are trying to start this kind of business.
The Large Company Entrepreneur takes a team from a large company and starts a new division of the company, focused around a new product. This is usually done because the parent company is too bound by bureaucracy and culture to innovate under its existing structure. Funding comes from the parent company and the goal is to grow the new product into a large business. This happens quite rarely.
The Social Entrepreneur is looking for a new an innovative way to solve a societal problem. Funding comes from governments and donations. Profits aren’t the main motive, but the entrepreneur is focused on achieving results and using capital as efficiently as possible. Goals are set and outcomes are measured in an effort to continually improve performance.
So, what’s the point of all this? Don’t get distracted by the issues of other types of businesses. The strategy and execution needed to be a successful Small Business Entrepreneur are different than that of a Scalable Startup Entrepreneur. Much of what is written in blogs and websites is addressed towards the Scalable Startup Entrepreneur. It’s big money, high growth and it pulls in readers.
If you are starting a small business, much of this isn’t appropriate for what you are doing. For example, venture capital is not in the cards for you and it makes no sense to spend time worrying about it. Learn from blogs and other entrepreneurs in your space and focus on building your business.
Business accounts basically come in three flavours; operating accounts, savings accounts and U.S. dollar accounts. There are many variations of these three types as banks and credit unions add features to try to gain competitive advantage but ultimately beneath the window dressing, it’s just these three basic accounts.
Operating accounts are for the day to day activities of the businesses. Business owners can write cheques on these accounts or use a debit card to make purchases, much like a personal bank account. Business accounts are quite different though when it comes to fees charged to the account holder.
These accounts will have often have a flat month fee plus fees for each transaction. Business accounts are charged for deposits based on the content of the deposit. For example, one bank is charging $1.80 for every $1,000 in paper cash deposited and $1.80 for every $100 in coins deposited. There is also an approximately $0.16 fee for each cheque contained in a deposit. Cheques & deposit books are more expensive than those for personal accounts. Night deposit will cost extra as will the disposable plastic bags for the drop. Some institutions may offer a bundled price monthly price for a certain level of transactions.
Business savings accounts generally don’t have chequing privileges but most institutions allow a couple of free transfers to an operating account each month. The rate of interest paid on these accounts is usually tiered so that larger balances earn more interest. For example, it might take a $100,000 balance to earn 1%. As a rule, these accounts aren’t worthwhile and surplus cash should be used to buy short term investments instead.
Foreign currency accounts are available from most institutions. The most common is the U.S. dollar account because of the large number of Canadian companies that export down south. These accounts work much like operating accounts but the fee structure might be slightly higher. Financial institutions will take a commission whenever one currency is changed to another. This means that the exchange rate you see on the news won’t be the rate you will be getting at the bank. The commission varies according to the amount of money being exchanged. A transfer between an U.S. dollar account and an normal operating account will trigger these commissions. If you are consistently exchanging large amounts of money from one currency to another, it’s probably worth a conversation with your bank to see if setting up a specialized foreign exchange trading account makes sense for you.
With all of the options available, business accounts can be confusing but it you remember these basic account types it will be easier to choose the one that is right for you and your business.
So what’s the deal with business plans? Are they actually useful or are they just formal documents needed to satisfy loan or investor requirements?
I’ll start of by saying that a business plan does not guarantee you success. I’ll go even further by saying that if you don’t write a business plan your business can still succeed. Okay, so why invest so much time and effort into writing a comprehensive business plan? Well, simply put, chances are that you’re better prepared with a professionally written business plan than without one. Here’s an analogy that might put things in perspective. A trainer cannot guarantee an Olympic athlete a gold medal. An athlete can even win gold without the help of a professional trainer. But, I think its fair to say that an athlete’s probability of succeeding are higher with a professional trainer than without one. Why? Chances are that the athlete is better prepared with the help of a trainer.
So what does a business plan entail? What is it actually supposed to do? Well, for starters, a good business plan should serve as a blueprint for every aspect of your business. It should guide you with your business and help you establish targets, goals and objectives that otherwise might not be thought out carefully. Business plans reduce the time spent making decisions. What are your monthly cash-flow requirements? What price mark-up is needed to earn a sufficient profit? What will you do if your competitors lower prices? These are the types of things you need to be prepared for so you can knowledgably make decisions for your business. Business plans should help improve communication between all members of the business by creating a common sense of purpose for the people involved. It should get you thinking about strategy and how you can succeed when others don’t.
The majority of businesses fail in its first 5 years so starting a business isn’t easy. But knowing this, why wouldn’t you take the time and effort to write a comprehensive business plan to better prepare yourself? Why just “wing it” when a business plan can help guide you in the right direction and prepare you to face business obstacles.
And to those who still maintain that business plans are useless; you need to understand this. Most successful entrepreneurs go through a process in which they uncover key questions about their business. So whether or not they actually write-out a formal business plan, these entrepreneurs essentially go through a thought process that prepares them the same as a business plan would. The difference is that most people don’t have the experience or knowledge to do this on their own, so a business plan can be an important document to help guide them in the right direction.
Planning and preparing can be helpful for almost anything you do in life. Whether you’re training for a sports event, studying for an exam, or managing a company project, you have a higher chance of succeeding and reaching your goals if you have a strategic plan of attack. A business is a major investment, so be smart and write that business plan. It might be the best business decision you ever make.
At its meeting today, the Bank of Canada decided to leave interest rates unchanged. While the Canadian economy remains strong with annualized growth of 3.9% in the first quarter, a strong dollar has kept inflation in check. The Bank has indicated that it will start raising rates as the recovery continues. Experts predict that we could start to see rate increases this fall.
Business transactions should always be kept separate from your personal transactions. For this reason, every business owner should have a separate bank account for the business. Banks have business bank account products that are different than personal chequing accounts. Running your business out of a separate personal chequing account may violate the terms of service with your bank. I recommend that you open a business bank account from the beginning to avoid the hassle of switching accounts later as your business grows.
It’s best to make an appointment to open a business account. It can be a bit of a lengthy process so you want to make sure that you can set aside an hour of your time. If you are operating your business as a sole proprietor or a partnership, you will need to have documentation showing that you have registered the name that your business is operating under. The process for registering your business’s name varies from province to province so you’ll have to check with your provincial government. If you have a partnership agreement, you should bring a copy of it. If your business is incorporated, you’ll have to bring along your certificate and articles of incorporation. If you have a stamp with your corporate seal, you should bring a copy of that as well.
You will have to make a decision about signing cheques. As a control mechanism, some businesses choose to have all cheques signed by two people. This can add a layer of security but it will also be less convenient and it will limit the scope of what you can do with the bank’s online banking services. An account that requires two signatures will not be able to pay bills online because there is no way to verify that two signatories consent to the transaction. It will be impossible to issue debt cards for purchases for the same reason. I’ve seen many businesses where two partners decide to have cheques require two signatures only to have one partner pre-sign a bunch of blank cheques so the partner can pay bills. This effectively negates the safeguard that was originally intended. Think carefully about requiring two signatures and make sure you are doing it for the right reasons because the hassle involved is considerable. Everyone who will sign cheques on the account, either alone or as part of a dual signature system, should come with you to the appointment as the bank will want samples of their signatures on file.
Opening a business bank is a relatively straightforward process but you can save yourself a lot of time and hassle if you decide how you want the account set up beforehand and bring all the necessary paperwork and people to the appointment.
