Starting a Business A L L - I N - O N E

2nd Edition

by Kathleen R. Allen, PhD; Peter Economy; Paul and Sarah Edwards; Lita Epstein;

Alexander Hiam; Greg Holden; Peter Jaret; Jeanette Maw McMurtry, MBA;

Joyce Mazero; Jim Muehlhausen, JD; Bob Nelson, PhD; Steven D. Peterson; Jim Schell; Barbara Findlay Schenck; Michael H. Seid; John A. Tracy, CPA;

Tage C. Tracy, CPA; and Eric Tyson, MBA

Starting a Business All-in-One For Dummies®, 2nd EditionPublished by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com

Copyright © 2019 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.

Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and may not be used without written permission. All other trademarks are the property of their respective owners. John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.

For general information on our other products and services, please contact our Customer Care Department within the U.S. at 877-762-2974, outside the U.S. at 317-572-3993, or fax 317-572-4002. For technical support, please visit https://hub.wiley.com/community/support/dummies.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Control Number: 2019939297

ISBN 978-1-119-56521-5 (pbk); ISBN 978-1-119-56524-6 (ebk); ISBN 978-1-119-56520-8 (ebk)

Manufactured in the United States of America

10 9 8 7 6 5 4 3 2 1

Contents at a GlanceIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Book 1: Moving from Idea to Reality . . . . . . . . . . . . . . . . . . . . . . . . . . . 5CHAPTER 1: Your Business in Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7CHAPTER 2: RefiningandDefiningYourBusinessIdea . . . . . . . . . . . . . . . . . . . . . . . . . 27CHAPTER 3: CreatingaBusinessModel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45CHAPTER 4: FindingYourTargetMarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63CHAPTER 5: ConsideringaFranchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Book 2: Planning for Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . 101CHAPTER 1: WritingaBusinessPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103CHAPTER 2: FindingtheFunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117CHAPTER 3: SettingYourFranchise’sWheelsinMotion . . . . . . . . . . . . . . . . . . . . . . . 137CHAPTER 4: StartingaHome-BasedBusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169CHAPTER 5: CreatinganOnlinePresenceforYourBusiness . . . . . . . . . . . . . . . . . . . 195CHAPTER 6: StartingwiththeRightLegalStructure . . . . . . . . . . . . . . . . . . . . . . . . . . . 221

Book 3: Handling Your Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235CHAPTER 1: SettingUptheBooks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237CHAPTER 2: ReportingProfitorLossintheIncomeStatement . . . . . . . . . . . . . . . . . 263CHAPTER 3: ShowingFinancialConditionintheBalance Sheet . . . . . . . . . . . . . . . . . 287CHAPTER 4: ReportingCashSourcesandUsesin theStatement

of CashFlows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311CHAPTER 5: ControllingCostsand Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331CHAPTER 6: SatisfyingtheTaxMan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367

Book 4: Managing Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385CHAPTER 1: TacklingtheHiringProcess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387CHAPTER 2: SettingGoals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405CHAPTER 3: EmbracingCorporateSocialResponsibility . . . . . . . . . . . . . . . . . . . . . . . 419CHAPTER 4: ManagingwithTechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429CHAPTER 5: DelegatingtoGetThingsDone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439

Book 5: Marketing and Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . 451CHAPTER 1: OptimizingYourMarketingProgram . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453CHAPTER 2: LayingaFoundationfor Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471CHAPTER 3: TakingStockofYourBusinessImage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

Starting a Business All-in-One

CHAPTER 4: ForgingYourBrand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505CHAPTER 5: CreatingMarketingCommunicationsThatWork . . . . . . . . . . . . . . . . . . 521CHAPTER 6: SocialMarketing:Facebook,Twitter,Instagram,

LinkedIn,and Pinterest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541

Book 6: Staying in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555CHAPTER 1: DevelopingEmployeesThroughCoachingandMentoring . . . . . . . . . 557CHAPTER 2: KeepingYourCustomers Loyal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573CHAPTER 3: CultivatingaGrowing Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603

Table of Contents v

Table of ContentsINTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

AboutThisBook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1FoolishAssumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2IconsUsedinThisBook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3WheretoGofromHere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

BOOK 1: MOVING FROM IDEA TO REALITY . . . . . . . . . . . . . . . . . . . 5

CHAPTER 1: Your Business in Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7AnOverviewofFeasibilityAnalysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Executivesummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Businessconcept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Industryanalysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Market/customeranalysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Genesisorfoundingteamanalysis . . . . . . . . . . . . . . . . . . . . . . . . . . .10Product/servicedevelopmentanalysis . . . . . . . . . . . . . . . . . . . . . . .10Financialanalysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Feasibilitydecision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Timelinetolaunch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

UnderstandingYourIndustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Usingaframeworkofindustrystructure . . . . . . . . . . . . . . . . . . . . . .12Decidingonanentrystrategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

ResearchinganIndustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Checkingoutthestatusofyourindustry . . . . . . . . . . . . . . . . . . . . . .16Competitiveintelligence:Checkingoutthecompetition . . . . . . . . .18

DefiningYourMarketNiche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Narrowingyourmarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21Developinganichestrategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

ZeroingInonaBrand-NewProduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Becomeaninventor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Teamupwithaninventor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Licenseaninvention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

CHAPTER 2: RefiningandDefiningYourBusinessIdea . . . . . . . . . . 27RecognizingthePowerofaGoodIdea . . . . . . . . . . . . . . . . . . . . . . . . . .28

Knowingthedifferencebetweenpassion andprofitability . . . . . .28Turningasidegigintoabusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . .29Planningahead:Greatideastaketime . . . . . . . . . . . . . . . . . . . . . . .30Checkingoutthecompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

vi Starting a Business All-in-One For Dummies

BrainstormingNewBusinessIdeas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32Reimaginingyourbusinessenvironment . . . . . . . . . . . . . . . . . . . . .32Inspiringteamcreativity(withorwithoutdonutsorbagels) . . . . .34

IdentifyingBusinessOpportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36Tuningintowhatcustomershavetosay . . . . . . . . . . . . . . . . . . . . .36Pursuingchangesthatopenupnewopportunities . . . . . . . . . . . . .37Narrowingyourchoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

PuttingaPromisingIdeatotheTest . . . . . . . . . . . . . . . . . . . . . . . . . . . .39Doingyourfirstrealitycheck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40Anticipatingdisruptiveinnovations:Opportunities andcautions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40Gettingasecondopinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Conductingaself-appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42

CHAPTER 3: Creating a Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45IdentifyingWhoNeedsaBusinessModel . . . . . . . . . . . . . . . . . . . . . . . .46CommonAspectsofAllBusinessModels . . . . . . . . . . . . . . . . . . . . . . . .47BusinessModelsinTheirSimplestForm . . . . . . . . . . . . . . . . . . . . . . . . .49ExamplesofBusinessModels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50FindingSuccesswithaBusinessModel . . . . . . . . . . . . . . . . . . . . . . . . . .52

Yoursecretsauceformakingmoney . . . . . . . . . . . . . . . . . . . . . . . . .53Sameindustry,differentbusinessmodels . . . . . . . . . . . . . . . . . . . .56Howyourbusinessmodelsetsyouapartfrom thecompetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57Consideringyourcompetitiveadvantage . . . . . . . . . . . . . . . . . . . . .58Obtainingyourcompetitiveadvantage . . . . . . . . . . . . . . . . . . . . . . .58Enhancingyourcompetitiveadvantage . . . . . . . . . . . . . . . . . . . . . . .60

CHAPTER 4: Finding Your Target Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 63GaugingtheTargetMarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63DeterminingIndustryAttractiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

Findingthebestindustry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67Workinginunservedorunderservedmarkets . . . . . . . . . . . . . . . . .67

LookingforNicheAttractiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68Knowthepowerofagoodniche . . . . . . . . . . . . . . . . . . . . . . . . . . . .68Unlimitednichesexist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69Marketshaveahabitofsplitting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70Findunservedorunderservedmarkets . . . . . . . . . . . . . . . . . . . . . . .72

CheckingOutCustomerAttractiveness . . . . . . . . . . . . . . . . . . . . . . . . . .73FindingYourPlaceontheIndustryValueChain . . . . . . . . . . . . . . . . . . .75

CHAPTER 5: Considering a Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79UnderstandingWhataFranchiseIs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

Playingbybrandstandardstocreate consistency . . . . . . . . . . . . . .80Settingyoursightsonsuccess . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

Table of Contents vii

RecognizingtheImportanceofBrandsin Franchising . . . . . . . . . . . . .81IdentifyingtheThreeTypesofFranchising . . . . . . . . . . . . . . . . . . . . . . .82

Traditionalfranchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82Business-formatfranchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83Socialfranchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84

BeingAwareoftheRolesandGoalsofFranchisors andFranchisees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85

Theworldthroughfranchisorlenses . . . . . . . . . . . . . . . . . . . . . . . . .85Thefranchisee’sendofthebargain . . . . . . . . . . . . . . . . . . . . . . . . . .86

ReviewingFranchiseRelationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88Flyingsolo:Single-unitfranchises . . . . . . . . . . . . . . . . . . . . . . . . . . . .88Growingafamilyonefranchiseatatime . . . . . . . . . . . . . . . . . . . . .88Multi-unitdevelopers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89Masterfranchising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92Thehiredgun:Arearepresentatives . . . . . . . . . . . . . . . . . . . . . . . . .92

NuancesoftheFranchisor/FranchiseeRelationship . . . . . . . . . . . . . . .93ConsideringtheProsandConsofFranchising . . . . . . . . . . . . . . . . . . . .95

Theadvantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95Thedisadvantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97

BOOK 2: PLANNING FOR YOUR BUSINESS . . . . . . . . . . . . . . . . . 101

CHAPTER 1: Writing a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103SellingYourselfontheImportanceofBusinessPlanning . . . . . . . . . .103

Tallyingupthebenefitsofabusinessplan . . . . . . . . . . . . . . . . . . .104Knowingwhatcangowrongwithoutaplan . . . . . . . . . . . . . . . . . .105

TheAnatomyofaBusinessPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105Businessplancontentsfrombeginningtoend . . . . . . . . . . . . . . .105BusinessplanFAQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106

SettingOutYourPlanningObjectives . . . . . . . . . . . . . . . . . . . . . . . . . . .107Planningforanewbusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108Planningforasolobusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108Planningtoaddresschangingconditions . . . . . . . . . . . . . . . . . . . .108Planningforgrowth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109

IdentifyingYourBusinessPlanAudiencesandKeyMessages . . . . . .109Youraudience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110Yourmessage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111

EstablishingYourPlan’sTimeFrame . . . . . . . . . . . . . . . . . . . . . . . . . . .112Settingyourschedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112Definingmilestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .112

PreparingfortheRealWorld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113Locatinginformativeresources . . . . . . . . . . . . . . . . . . . . . . . . . . . . .113Seekingexpertadvice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .114

viii Starting a Business All-in-One For Dummies

CHAPTER 2: Finding the Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117StartingwithaPlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118

Whenyou’refinancingatraditional business . . . . . . . . . . . . . . . . .118Whenyou’refinancingfore-commerce . . . . . . . . . . . . . . . . . . . . . .119

TappingFriendsandFamily . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121FindinganAngel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122

Howtospotanangel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122Howtodealwithangels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .123

DaringtoUseVentureCapital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124Calculatingtherealcostofmoney . . . . . . . . . . . . . . . . . . . . . . . . . .125Trackingtheventurecapitalprocess . . . . . . . . . . . . . . . . . . . . . . . .126

SellingStocktothePublic:AnIPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128Consideringtheprosandconsofgoingpublic . . . . . . . . . . . . . . . .129Decidingtogoforit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130

FindingOtherWaystoFinanceGrowth . . . . . . . . . . . . . . . . . . . . . . . . .132GuardingYourInterests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134

Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134Nondisclosureagreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135

CHAPTER 3: Setting Your Franchise’s Wheels in Motion . . . . . . . . 137SurveyingYourOptionsforLocale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138

Consideringcommonsiteoptions . . . . . . . . . . . . . . . . . . . . . . . . . .138Dualbranding:Sharingyourspace . . . . . . . . . . . . . . . . . . . . . . . . . .142

FindingYourFranchise’sHabitat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142Findingoutwhatconstitutesagoodsite . . . . . . . . . . . . . . . . . . . . .143Usingthefranchisorasyourcompass . . . . . . . . . . . . . . . . . . . . . . .144Crunchingdatatoevaluateasiteonyourown . . . . . . . . . . . . . . .146

ProtectedAreas,ExclusiveAreas,and EncroachmentPolicies . . . . . .147SigningtheLease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149MeetingYourFranchise’sRequirements . . . . . . . . . . . . . . . . . . . . . . . .150

Implementingafranchisor’sdesigns . . . . . . . . . . . . . . . . . . . . . . . .151Gettingapprovals,permits,andlicenses . . . . . . . . . . . . . . . . . . . . .151Beginningconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152Gettinghelpwiththeopening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152

GettingtheGoods:MerchandiseandSupplies . . . . . . . . . . . . . . . . . . .153Thefranchisorasthesolesupplier . . . . . . . . . . . . . . . . . . . . . . . . . .154Suppliersapprovedbythefranchisor . . . . . . . . . . . . . . . . . . . . . . .154Rebatesandupcharges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .155Findingyourownsuppliersandrequestingapproval . . . . . . . . . .157

ReceivingMerchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .158Consideringkeydropdelivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .158Receivingdeliveriesatanykindoffranchise . . . . . . . . . . . . . . . . . .159Checkingthegoodsaftertheyareinyourlocation . . . . . . . . . . . .159Verifyinginvoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160

Table of Contents ix

MaintainingInventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161Backofthehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161Frontofthehouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162

GettingGoodTrainingforYourselfandYourManagement . . . . . . . .164Undergoinggoodinitialtraining . . . . . . . . . . . . . . . . . . . . . . . . . . . .164Receivingeffectiveongoingtraining . . . . . . . . . . . . . . . . . . . . . . . . .166

CHAPTER 4: Starting a Home-Based Business . . . . . . . . . . . . . . . . . . . . 169LookingattheBasicsofHome-BasedBusiness . . . . . . . . . . . . . . . . . .170

Determiningthekindofbusinessyouwanttohave . . . . . . . . . . .170Managingyourmoney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .172Avoidingproblems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173Movingahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173Leavingyourfull-timejobforyourpart-timebusiness . . . . . . . . .174

ExaminingtheGoodNewsandtheBad . . . . . . . . . . . . . . . . . . . . . . . .175Goodreasonstostartahome-basedbusiness . . . . . . . . . . . . . . .175Thepitfallsofowningyourownhome-basedbusiness . . . . . . . .177

TakingtheHome-BasedBusinessQuiz . . . . . . . . . . . . . . . . . . . . . . . . .178StartingSomethingfromScratch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .181

Doingwhatyou’vebeendoinginajob . . . . . . . . . . . . . . . . . . . . . .181Doingsomethingnewanddifferent . . . . . . . . . . . . . . . . . . . . . . . . .182

TransitioningintoYourHome-BasedBusiness . . . . . . . . . . . . . . . . . . .182Knowingwhattodobeforeleavingyourdayjob . . . . . . . . . . . . . .184Understandingwhatyouhavetodotostartyour ownhome-basedbusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .186

CHAPTER 5: Creating an Online Presence for Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195FengShui-ingYourWebsite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .196CreatingContentThatAttractsCustomers . . . . . . . . . . . . . . . . . . . . . .199

FollowingtheKISSprinciple:Keepitsimple,sir(orsister) . . . . . .200Strikingtherighttonewithyourtext . . . . . . . . . . . . . . . . . . . . . . . .201Makingyoursiteeasytonavigate . . . . . . . . . . . . . . . . . . . . . . . . . . .202Pointingthewaywithheadings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203Becominganexpertlistmaker . . . . . . . . . . . . . . . . . . . . . . . . . . . . .204Leadingyourreadersonwithlinks . . . . . . . . . . . . . . . . . . . . . . . . . .205Enhancingyourtextwithwell-placedimages . . . . . . . . . . . . . . . . .206Makingyoursitesearchable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206

NipandTuck:EstablishingaVisualIdentity . . . . . . . . . . . . . . . . . . . . .208Choosingwallpaperthatwon’tmakeyouawallflower . . . . . . . . .209Usingwebtypefaceslikeapro . . . . . . . . . . . . . . . . . . . . . . . . . . . . .210Usingclipartisfreeandfun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .211Apictureisworthathousandwords . . . . . . . . . . . . . . . . . . . . . . . .212Creatingalogo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214

x Starting a Business All-in-One For Dummies

InvitingCommentsfromCustomers . . . . . . . . . . . . . . . . . . . . . . . . . . .214Gettingpositiveemailfeedback . . . . . . . . . . . . . . . . . . . . . . . . . . . .215Webpageformsthataren’toff-putting . . . . . . . . . . . . . . . . . . . . . .216Blogsthatpromotediscussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217Chit-chatthatcounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .218

MovingfromWebsitetoWebPresence . . . . . . . . . . . . . . . . . . . . . . . . .219

CHAPTER 6: Starting with the Right Legal Structure . . . . . . . . . . . . 221IntroducingtheLegalBusinessClassifications . . . . . . . . . . . . . . . . . . .222GoingItAlone:TheSoleProprietorship . . . . . . . . . . . . . . . . . . . . . . . . .224

Advantagesofsoleproprietorships . . . . . . . . . . . . . . . . . . . . . . . . .225Disadvantagesofsoleproprietorships . . . . . . . . . . . . . . . . . . . . . .225

ChoosingaPartner:ThePartnership . . . . . . . . . . . . . . . . . . . . . . . . . . .226Formingapartnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .226Thepartnershipagreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .227

GoingfortheGold:TheCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . .228Enjoyingthebenefitsofacorporation . . . . . . . . . . . . . . . . . . . . . . .229Weighingtherisks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230Whereandhowtoincorporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .230

OfferingFlexibility:TheSCorporation,theLLC,and theNonprofitCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .231

SizinguptheSCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .231ComparingtheSCorporationtotheLLC . . . . . . . . . . . . . . . . . . . . .232Makingprofitsinanonprofitorganization . . . . . . . . . . . . . . . . . . .233

BenchmarkingYourBestChoice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .234

BOOK 3: HANDLING YOUR FINANCES . . . . . . . . . . . . . . . . . . . . . . 235

CHAPTER 1: Setting Up the Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237Bookkeepers:TheRecordKeepersofthe BusinessWorld . . . . . . . . .238WadingthroughBasicBookkeepingLingo . . . . . . . . . . . . . . . . . . . . . .239

Accountsforthebalancesheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . .239Accountsfortheincomestatement . . . . . . . . . . . . . . . . . . . . . . . . .240Othercommonterms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .240

PedalingthroughtheAccountingCycle . . . . . . . . . . . . . . . . . . . . . . . . .241TacklingtheBigDecision:Cash-BasisorAccrualAccounting . . . . . . .243

Waitingforfundswithcash-basisaccounting . . . . . . . . . . . . . . . . .243Makingtheswitchtoaccrualaccounting . . . . . . . . . . . . . . . . . . . . .244Recordingrightawaywithaccrualaccounting . . . . . . . . . . . . . . . .245

SeeingDoublewithDouble-EntryBookkeeping . . . . . . . . . . . . . . . . . .246DifferentiatingDebitsandCredits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .248OutliningYourFinancialRoadMapwithaChartofAccounts . . . . . .248

Table of Contents xi

StartingwiththeBalanceSheetAccounts . . . . . . . . . . . . . . . . . . . . . . .250Tacklingassets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .250Layingoutyourliabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .254Eyeingtheequity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .256

TrackingtheIncomeStatementAccounts . . . . . . . . . . . . . . . . . . . . . . .256Recordingthemoneyyoumake . . . . . . . . . . . . . . . . . . . . . . . . . . . .257TrackingtheCostofGoodsSold . . . . . . . . . . . . . . . . . . . . . . . . . . . .258Acknowledgingthemoneyyouspend . . . . . . . . . . . . . . . . . . . . . . .258

SettingUpYourChartofAccounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .260

CHAPTER 2: ReportingProfitorLossinthe Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263PresentingTypicalIncomeStatements . . . . . . . . . . . . . . . . . . . . . . . . .264

Lookingatbusinessesthatsellproducts . . . . . . . . . . . . . . . . . . . . .264Lookingatbusinessesthatsellservices . . . . . . . . . . . . . . . . . . . . . .266Lookingatinvestmentbusinesses . . . . . . . . . . . . . . . . . . . . . . . . . .267

TakingCareofHousekeepingDetails . . . . . . . . . . . . . . . . . . . . . . . . . . .268BeinganActiveReader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .271DeconstructingProfit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .273

Revenueandexpenseeffectsonassetsandliabilities . . . . . . . . .273Comparingthreescenariosofprofit . . . . . . . . . . . . . . . . . . . . . . . .274Foldingprofitintoretainedearnings . . . . . . . . . . . . . . . . . . . . . . . .276

PinpointingtheAssetsandLiabilitiesUsedtoRecord RevenueandExpenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .278

Makingsales:Accountsreceivableand deferredrevenue . . . . . .278Sellingproducts:Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .279Prepayingoperatingcosts:Prepaid expenses . . . . . . . . . . . . . . . .280Fixedassets:Depreciationexpenses . . . . . . . . . . . . . . . . . . . . . . . .280Unpaidexpenses:Accountspayable,accrued expensespayable,andincometaxpayable . . . . . . . . . . . . . . . . . .281

ReportingUnusualGainsandLosses . . . . . . . . . . . . . . . . . . . . . . . . . . .282WatchingforMisconceptionsand MisleadingReports . . . . . . . . . . . .284

CHAPTER 3: Showing Financial Condition in theBalance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287ExpandingtheAccountingEquation . . . . . . . . . . . . . . . . . . . . . . . . . . . .288PresentingaProperBalanceSheet . . . . . . . . . . . . . . . . . . . . . . . . . . . .289

Doinganinitialreadingofthebalancesheet . . . . . . . . . . . . . . . . .291Kickingbalancesheetsoutintotherealworld . . . . . . . . . . . . . . . .292

JudgingLiquidityandSolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293Currentassetsandliabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .294Currentandquickratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .295

xii Starting a Business All-in-One For Dummies

UnderstandingThatTransactionsDrive theBalanceSheet . . . . . . . .297SizingUpAssetsandLiabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300

Salesrevenueandaccountsreceivable . . . . . . . . . . . . . . . . . . . . . .301Costofgoodssoldexpenseandinventory . . . . . . . . . . . . . . . . . . .301Fixedassetsanddepreciationexpense . . . . . . . . . . . . . . . . . . . . . .302Operatingexpensesandtheirbalance sheetaccounts . . . . . . . . .303Intangibleassetsandamortizationexpense . . . . . . . . . . . . . . . . . .304Debtandinterestexpense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .305Incometaxexpenseandincometaxpayable . . . . . . . . . . . . . . . . .306Netincomeandcashdividends(ifany) . . . . . . . . . . . . . . . . . . . . . .306

FinancingaBusiness:SourcesofCashandCapital . . . . . . . . . . . . . . .307RecognizingtheHodgepodgeofValuesReported inaBalanceSheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .309

CHAPTER 4: ReportingCashSourcesandUsesin  theStatementof CashFlows . . . . . . . . . . . . . . . . . . . . . . . . . 311MeetingtheStatementofCashFlows . . . . . . . . . . . . . . . . . . . . . . . . . .312

Presentingthedirectmethod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .313Optingfortheindirectmethod . . . . . . . . . . . . . . . . . . . . . . . . . . . . .315

ExplainingtheVariancebetweenCash FlowandNetIncome . . . . . .316Accountsreceivablechange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .318Inventorychange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .319Prepaidexpenseschange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .319Depreciation:Realbutnoncashexpense . . . . . . . . . . . . . . . . . . . .320Changesinoperatingliabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .321Puttingthecashflowpiecestogether . . . . . . . . . . . . . . . . . . . . . . .322

SailingthroughtheRestoftheStatement ofCashFlows . . . . . . . . . .322Understandinginvestingactivities . . . . . . . . . . . . . . . . . . . . . . . . . .323Lookingatfinancingactivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .324Readingactively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .325

PinningDown“FreeCashFlow” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .326LookingatLimitationsoftheStatement of CashFlows . . . . . . . . . . . .328

CHAPTER 5: ControllingCostsand Budgeting . . . . . . . . . . . . . . . . . . . . . 331GettingintheRightFrameofMind . . . . . . . . . . . . . . . . . . . . . . . . . . . . .332GettingDowntoBusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .332

Puttingcostcontrolinitspropercontext . . . . . . . . . . . . . . . . . . . .333Beginningwithsalesrevenuechange . . . . . . . . . . . . . . . . . . . . . . .335Focusingoncostofgoodssoldandgrossmargin . . . . . . . . . . . . .336Analyzingemployeecost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .338Analyzingadvertisingandsalespromotioncosts . . . . . . . . . . . . . .338Appreciatingdepreciationexpense . . . . . . . . . . . . . . . . . . . . . . . . .339

Table of Contents xiii

Lookingatfacilitiesexpense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .341Lookingoverorlookingintootherexpenses . . . . . . . . . . . . . . . . .342Runningthenumbersoninterestexpense . . . . . . . . . . . . . . . . . . .343ComparingyourP&Lnumberswith your balancesheet . . . . . . . .344

LookingintoCostofGoodsSoldExpense . . . . . . . . . . . . . . . . . . . . . . .346Selectingacostofgoodssoldexpense method . . . . . . . . . . . . . . .346Dealingwithinventoryshrinkageand inventorywrite-downs . . .348

FocusingonProfitCenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .349ReducingYourCosts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .351DecidingWheretheBudgetingProcessStarts . . . . . . . . . . . . . . . . . . .351HomingInonBudgetingTools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .353

CART:Complete,Accurate,Reliable,and Timely . . . . . . . . . . . . . . .353SWOT:Strengths,Weaknesses,Opportunities,andThreats . . . .354Flashreports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .355

PreparinganActualBudgetorForecast . . . . . . . . . . . . . . . . . . . . . . . .357UnderstandingInternalversusExternal Budgets . . . . . . . . . . . . . . . . .360CreatingaLivingBudget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .361UsingtheBudgetasaBusiness-ManagementTool . . . . . . . . . . . . . . .364UsingBudgetsinOtherWays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .365

CHAPTER 6: Satisfying the Tax Man . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367TaxReportingforSoleProprietors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .367FilingTaxFormsforPartnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .368PayingCorporateTaxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .369

ReportingforanSCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .369ReportingforaCCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .370ReportingforLimitedLiabilityCompanies (LLC) . . . . . . . . . . . . . . .370

TakingCareofSalesTaxesObligations . . . . . . . . . . . . . . . . . . . . . . . . .370KeepingUpwithandResearchingTaxStrategiesandRules . . . . . . .371

UsingIRSpublications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .372Buyingsoftware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .373AccessingInternettaxresources . . . . . . . . . . . . . . . . . . . . . . . . . . .373

PayingforTaxHelp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .375Decidingtohiretaxhelp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .376Findingtaxadvisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .379Interviewingprospectivetaxadvisors . . . . . . . . . . . . . . . . . . . . . . .380

BOOK 4: MANAGING YOUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . 385

CHAPTER 1: Tackling the Hiring Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 387StartingwithaClearJobDescription . . . . . . . . . . . . . . . . . . . . . . . . . . .387DefiningtheCharacteristicsofDesirableCandidates . . . . . . . . . . . . .388

xiv Starting a Business All-in-One For Dummies

FindingGoodPeople . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .390Goingthroughtraditionalrecruiting channels . . . . . . . . . . . . . . . .391LeveragingthepoweroftheInternet . . . . . . . . . . . . . . . . . . . . . . . .392

BecomingaGreatInterviewer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .394Askingtherightquestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .394Followinginterviewingdo’s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .395Avoidinginterviewingdon’ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .397

EvaluatingYourCandidates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .398Checkingreferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .398Reviewingyournotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .399Conductingasecond(orthird)round . . . . . . . . . . . . . . . . . . . . . . .400Checkingemploymenteligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . .401

HiringtheBest(andLeavingtheRest) . . . . . . . . . . . . . . . . . . . . . . . . . .401Beingobjective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .402Trustingyourgut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .402Revisitingthecandidatepool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .403

CHAPTER 2: Setting Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405KnowingWhereYou’reGoing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .406

Whyshouldyousetgoals? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .407Whatmakesgoalseffective? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .408

IdentifyingSMARTGoals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .408BreakingdownthemeaningofSMART . . . . . . . . . . . . . . . . . . . . . .408DevelopingSMARTgoals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .409

SettingGoals:LessIsMore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .410CommunicatingYourVisionandGoalstoYourTeam . . . . . . . . . . . . .412

Announcingyourvision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .412Communicatinggoals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .413

JugglingPriorities:KeepingYourEyeontheBall . . . . . . . . . . . . . . . . .413Fallingintotheactivitytrap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .414Gettingoutoftheactivitytrap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .415

UsingYourPowerforGood:MakingYourGoalsReality . . . . . . . . . . .415

CHAPTER 3: Embracing Corporate Social Responsibility . . . . . . . . 419UnderstandingSociallyResponsible Practices . . . . . . . . . . . . . . . . . . .420

FiguringouthowyoucanemployCSR . . . . . . . . . . . . . . . . . . . . . . .420Enjoyingthenetbenefitsofsociallyresponsiblepractices . . . . . .421

DevelopingaCSRStrategyfor Implementation . . . . . . . . . . . . . . . . . .422DoingtheRightThing:EthicsandYou . . . . . . . . . . . . . . . . . . . . . . . . . .424

Definingethicsonthejob . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .424Creatingacodeofethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .425Makingethicalchoiceseveryday . . . . . . . . . . . . . . . . . . . . . . . . . . .427

Table of Contents xv

CHAPTER 4: Managing with Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 429WeighingtheBenefitsandDrawbacksof  TechnologyintheWorkplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .430

Makingadvances,thankstoautomation . . . . . . . . . . . . . . . . . . . . .430Improvingefficiencyandproductivity . . . . . . . . . . . . . . . . . . . . . . .431Takingstepstoneutralizethenegatives . . . . . . . . . . . . . . . . . . . . .432

UsingTechnologytoYourAdvantage . . . . . . . . . . . . . . . . . . . . . . . . . . .433Knowyourbusiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .433Createatechnology-competitiveadvantage . . . . . . . . . . . . . . . . . .434Developaplan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .434Getsomehelp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .436

GettingtheMostOutofCompany Networks . . . . . . . . . . . . . . . . . . . .437

CHAPTER 5: Delegating to Get Things Done . . . . . . . . . . . . . . . . . . . . . . . 439Delegating:TheManager’sBestTool . . . . . . . . . . . . . . . . . . . . . . . . . . .440DebunkingMythsaboutDelegation . . . . . . . . . . . . . . . . . . . . . . . . . . . .441

Youcan’ttrustyouremployeestoberesponsible . . . . . . . . . . . . .442You’lllosecontrolofataskanditsoutcome . . . . . . . . . . . . . . . . . .442You’retheonlyonewithalltheanswers . . . . . . . . . . . . . . . . . . . . .443Youcandotheworkfasterbyyourself . . . . . . . . . . . . . . . . . . . . . .443Delegationdilutesyourauthority . . . . . . . . . . . . . . . . . . . . . . . . . . .443Yourelinquishthecreditfordoingagoodjob . . . . . . . . . . . . . . . .444Delegationdecreasesyourflexibility . . . . . . . . . . . . . . . . . . . . . . . .444

TakingtheSixStepstoDelegate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .445SortingOutWhattoDelegateandWhattoDoYourself . . . . . . . . . . .446

Pointingoutappropriatetasksfordelegation . . . . . . . . . . . . . . . .446Knowingwhattasksshouldstaywithyou . . . . . . . . . . . . . . . . . . . .448

BOOK 5: MARKETING AND PROMOTION . . . . . . . . . . . . . . . . . . . 451

CHAPTER 1: Optimizing Your Marketing Program . . . . . . . . . . . . . . . 453KnowYourself,KnowYourCustomer . . . . . . . . . . . . . . . . . . . . . . . . . . .454

Askingtherightquestion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .454Fillingtheawarenessgap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .456Focusingonyourtargetcustomer . . . . . . . . . . . . . . . . . . . . . . . . . .457Identifyingandplayingupyourstrengths . . . . . . . . . . . . . . . . . . . .460Discoveringthebestwaytofindcustomers . . . . . . . . . . . . . . . . . .461

FindingYourMarketingFormula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .463AnalyzingyourfourPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .463Refiningyourlistofpossibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .465Avoidingthepricingtrap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .466

ControllingYourMarketingProgram . . . . . . . . . . . . . . . . . . . . . . . . . . .466

xvi Starting a Business All-in-One For Dummies

RefiningYourMarketingExpectations . . . . . . . . . . . . . . . . . . . . . . . . . .467Projectingimprovementsabovebasesales . . . . . . . . . . . . . . . . . .468Preparingfor(ultimatelysuccessful)failures . . . . . . . . . . . . . . . . .468

RevealingMoreWaystoMaximizeYour MarketingImpact . . . . . . . .469

CHAPTER 2: LayingaFoundationfor Growth . . . . . . . . . . . . . . . . . . . . . 471MeasuringtheGrowthRateofYourMarket . . . . . . . . . . . . . . . . . . . . .472RespondingtoaFlatorShrinkingMarket . . . . . . . . . . . . . . . . . . . . . . .473FindingYourBestGrowthStrategies . . . . . . . . . . . . . . . . . . . . . . . . . . .475

Gotomarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .475Growwhatyouhaveforhigherprofitability . . . . . . . . . . . . . . . . . .477

GrowingaMarketSegmentationStrategy . . . . . . . . . . . . . . . . . . . . . . .481Customersegments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .481Nichemarketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .482

DevelopingaMarketShareStrategy . . . . . . . . . . . . . . . . . . . . . . . . . . .483Defineyourmetrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .483Establishabenchmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .483Dothemath . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .485

DesigningaPositioningStrategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .485Envisioningyourposition:Anexercisein observation andcreativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .486Aligningyourpositioningstrategywith growthinitiatives . . . . . .486

GrowthHackingtoBuildLeadsand MarketShare . . . . . . . . . . . . . . . .487Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .487Buildlinks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .488Fishforemails . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .488Trytripwires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .488Hireagrowthhacker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .489

SellingInnovativeProducts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .489

CHAPTER 3: Taking Stock of Your Business Image . . . . . . . . . . . . . . . 491MakingFirstImpressions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .492

Encounteringyourbusinessthroughonlinesearches . . . . . . . . .492Arrivingatyourwebsite . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .493Managingemailimpressions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .494Arrivingbytelephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .495Approachingyourbusinessinperson . . . . . . . . . . . . . . . . . . . . . . .497

AuditingtheImpressionsYourBusinessMakes . . . . . . . . . . . . . . . . . .500Surveyingyourmarketingmaterialsand communications . . . . .500Creatinganimpressioninventory . . . . . . . . . . . . . . . . . . . . . . . . . . .502Improvingtheimpressionsyou’remaking . . . . . . . . . . . . . . . . . . .503

Table of Contents xvii

CHAPTER 4: Forging Your Brand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505RecognizingWhatBrandsAreandWhatTheyDo . . . . . . . . . . . . . . . .506

Unlockingthepowerandvalueofabrand . . . . . . . . . . . . . . . . . . .506Tippingthebalanceonline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .507

BuildingaPowerfulBrand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .508Beingconsistenttopoweryourbrand . . . . . . . . . . . . . . . . . . . . . . .508Takingsixbrand-managementsteps . . . . . . . . . . . . . . . . . . . . . . . .509

YourMarketPosition:TheBirthplaceof YourBrand . . . . . . . . . . . . . .510Seeinghowpositioninghappens . . . . . . . . . . . . . . . . . . . . . . . . . . .510Determiningyourpositioningstrategy . . . . . . . . . . . . . . . . . . . . . .511

ConveyingYourPositionandBrand throughTaglines . . . . . . . . . . . .513BalancingPersonalandBusinessBrands . . . . . . . . . . . . . . . . . . . . . . .514MaintainingandProtectingYourBrand . . . . . . . . . . . . . . . . . . . . . . . . .516

Stayingconsistentwithyourbrandmessageand creativestrategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .516Controllingyourbrandpresentation . . . . . . . . . . . . . . . . . . . . . . . .517

CHAPTER 5: Creating Marketing Communications That Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521StartingwithGoodObjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .522

Definingwhatyouwanttoaccomplish . . . . . . . . . . . . . . . . . . . . . .522Puttingcreativedirectionsinwriting . . . . . . . . . . . . . . . . . . . . . . . .523

DevelopingEffectiveMarketingCommunications . . . . . . . . . . . . . . . .529Steeringthecreativeprocesstowarda“bigidea” . . . . . . . . . . . . .529Brainstormingideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .531Followingsimpleadvertisingrules . . . . . . . . . . . . . . . . . . . . . . . . . .532

MakingMediaSelections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .532Selectingfromthemediamenu . . . . . . . . . . . . . . . . . . . . . . . . . . . .533Decidingwhichmediavehiclestouseandwhen . . . . . . . . . . . . . .533

TheMakingofaMassMediaSchedule . . . . . . . . . . . . . . . . . . . . . . . . .535Balancingreachandfrequency . . . . . . . . . . . . . . . . . . . . . . . . . . . . .536Timingyourads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .537

EvaluatingYourEfforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .538

CHAPTER 6: Social Marketing: Facebook, Twitter, Instagram,LinkedIn,and Pinterest . . . . . . . . . . . . . . . . . 541UsingFacebookforEngagementThat BuildsSales . . . . . . . . . . . . . . .543

DevelopingasuccessfulFacebookplan . . . . . . . . . . . . . . . . . . . . . .543Creatingcontentthatgetsaresponse,dialogue,andleads . . . . .547AdvertisingonFacebook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .548

BuildingYourTwitterPresence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .548IgnitingYourSocialPresenceonInstagram . . . . . . . . . . . . . . . . . . . . .549

xviii Starting a Business All-in-One For Dummies

ExpandingYourNetworkthroughLinkedIn . . . . . . . . . . . . . . . . . . . . .550Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .551Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .551

PromotingYourBrandwithPinterest . . . . . . . . . . . . . . . . . . . . . . . . . .552

BOOK 6: STAYING IN BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555

CHAPTER 1: Developing Employees Through Coaching and Mentoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557UnderstandingWhyEmployeeDevelopmentIsImportant . . . . . . . .558GettingDowntoEmployeeDevelopment . . . . . . . . . . . . . . . . . . . . . . .560

Takingastep-by-stepapproach . . . . . . . . . . . . . . . . . . . . . . . . . . . .561Creatingcareerdevelopmentplans . . . . . . . . . . . . . . . . . . . . . . . . .562

CoachingEmployeestoCareerGrowthandSuccess . . . . . . . . . . . . . .564Servingasbothmanagerandcoach . . . . . . . . . . . . . . . . . . . . . . . .564Identifyingacoach’stools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .566Teachingthroughshow-and-tellcoaching . . . . . . . . . . . . . . . . . . . .568Makingturningpointsbigsuccesses . . . . . . . . . . . . . . . . . . . . . . . .568Incorporatingcoachingintoyourday-to-dayinteractions . . . . . .569

FindingaMentor,BeingaMentor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .570

CHAPTER 2: KeepingYourCustomers Loyal . . . . . . . . . . . . . . . . . . . . . . . 573RetainingYourCustomerBase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .574

Gettingitrightthefirsttime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .574Continuingtooffermorevalue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .575Knowingthatcompanypolicyismeanttobebent . . . . . . . . . . . .575Takingawaylessonsfromcustomerdefections . . . . . . . . . . . . . . .576Recognizingandpracticingcustomer service . . . . . . . . . . . . . . . . .578Showingthatyoucare —theold-fashionedway . . . . . . . . . . . . . .581

DealingwithDissatisfiedCustomers . . . . . . . . . . . . . . . . . . . . . . . . . . .582Listen,listen,listen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .582Developasolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .583

CHAPTER 3: CultivatingaGrowing Business . . . . . . . . . . . . . . . . . . . . . . 585RecognizingGrowthStages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .586

Thestart-upyears . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .586Thegrowthyears . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .587Thetransitionstage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .587

ResolvingHumanResourcesIssues . . . . . . . . . . . . . . . . . . . . . . . . . . . .589IdentifyingimportantHRconcerns . . . . . . . . . . . . . . . . . . . . . . . . . .589DealingwithHRissuesinthreestages . . . . . . . . . . . . . . . . . . . . . . .590

AddressingTime-ManagementIssues . . . . . . . . . . . . . . . . . . . . . . . . . .591

Table of Contents xix

ChoosingYourManagementTools . . . . . . . . . . . . . . . . . . . . . . . . . . . . .593Managementbyobjective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .595Participatorymanagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .595Employeeownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .595Qualitycircles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .596Open-bookmanagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .596

TroubleshootingYourBusinessChallenges . . . . . . . . . . . . . . . . . . . . .596Fillingoutatroubleshootingchecklist . . . . . . . . . . . . . . . . . . . . . . .597Takingthefive-minuteappearancetest . . . . . . . . . . . . . . . . . . . . .597

RedefiningYourRoleinanEvolving Business . . . . . . . . . . . . . . . . . . . .599Makingthetransitiontomanager . . . . . . . . . . . . . . . . . . . . . . . . . .599Implementingstrategicchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . .600

INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603

Introduction 1

Introduction

W elcome to Starting a Business All-in-One For Dummies, Second Edition!

It’s a good bet that you share the popular dream of starting your own business and being your own boss. Increasingly, this dream is becoming more relevant to the challenges of the economy that has emerged. It’s not just a pie-in-the-sky dream anymore; starting a business is a reality that has created opportunity and satis-faction for many people who decided to take the plunge — just as it can for you.

This book presents and explains a wide variety of information, all aimed at enlightening you on what you need to know and ensuring your success. Whether you need know-how and advice on turning your idea into reality, creating a busi-ness plan and business model, finding funding, picking a legal structure, setting up your books, marketing and promoting, or staying in business for the long haul, you’ll find the help you need here. Most of this book is applicable to you whether your business is a local business, a start-up corporation, a franchise, or based out of your home.

The aim of this book is to provide you with the very best ideas, concepts, and tools for starting and successfully operating your business. Using the info here, you should be able to create exactly the kind of business you’ve always dreamed of and find exactly the level of success you’ve always wanted.

About This BookThis book is a generous conglomeration of material from a number of For Dummies business books, carefully selected with an eye toward getting the new business owner/entrepreneur up and running. Your current level of business experience (or lack thereof) doesn’t matter. Don’t worry about not having years of management experience under your belt or about not knowing the difference between a balance sheet and an income statement.

2 Starting a Business All-in-One For Dummies

For a fraction of the amount you’d pay to get an MBA, this book provides you with an easily understandable road map to today’s most innovative and effec-tive business techniques and strategies. The information you find here is firmly grounded in the real world. This book isn’t an abstract collection of theoretical mumbo-jumbo that sounds good but doesn’t work when you put it to the test. Instead, you’ll find only the best information, the best strategies, and the best techniques — the same ones that top business schools teach today.

This book is also meant to be at least a little fun — running a business doesn’t have to be a bore! In fact, maintaining a sense of humor can be vital when facing the challenges that all new business owners face from time to time.

Within this book, you may note that some web addresses (URLs) break across two lines of text. If you’re reading this book in print and want to visit one of these web pages, simply key in the web address exactly as it’s noted in the text, pretending as though the line break doesn’t exist. If you’re reading this as an e-book, you’ve got it easy — just tap the web address to be taken directly to the web page.

Foolish AssumptionsThis book makes a few assumptions about you. For example, you have at least a passing interest in starting your own business. (Duh.) Maybe you’ve already started a business and are looking for tips to refine the techniques you’re already developing. Or perhaps it’s something you think you may want to try and are looking to read up on it before you make your move. In any case, you’ve come to the right place.

It’s also safe to assume that you can — or believe you can — produce and deliver products or services that people will be willing to pay you for. These products and services can be most anything. You’re limited only by your imagination (and, of course, your bank account, about which you’ll soon be reading quite a bit).

Finally, this book assumes that you’re eager to scoop up and implement new tips and tricks and that you’re willing to acquire some new perspectives on the topic.

Introduction 3

Icons Used in This BookIcons are handy little graphic images that are meant to point out particularly important information about starting your own business. Throughout this book, you find the following icons, conveniently located along the left margins:

Remember the important points of information that follow this icon, and your business will be all the better for it.

This one points out slightly advanced material that you can safely skip if you’re in a hurry. But by all means, read these if you want to stretch yourself a bit.

This icon directs you to tips and shortcuts you can follow to save time and do things the right way the first time.

Danger! Ignore the advice next to this icon at your own risk!

Where to Go from HereIf you’re new to starting a business, you may want to start at the beginning of this book and work your way through to the end. A wealth of information and practi-cal advice awaits you. Simply turn the page and you’re on your way! But you can start anywhere. If you already own and operate a business and are short of time (and who isn’t?), feel free to use the table of contents and the index to zero in on particular topics of interest to you right now.

Regardless of how you find your way around this book, the sincere hope of this endeavor is that you’ll enjoy the journey.

For answers and helpful tips online, go to www.dummies.com and search for “Starting a Business All-in-One For Dummies Cheat Sheet” in the Search box.

1Moving from Idea to Reality

Contents at a GlanceCHAPTER 1: Your Business in Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

An Overview of Feasibility Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Understanding Your Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Researching an Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Defining Your Market Niche . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Zeroing In on a Brand-New Product . . . . . . . . . . . . . . . . . . . . . . . . . . 24

CHAPTER 2: RefiningandDefiningYourBusinessIdea . . . . . . . 27Recognizing the Power of a Good Idea . . . . . . . . . . . . . . . . . . . . . . . 28Brainstorming New Business Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . 32Identifying Business Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . 36Putting a Promising Idea to the Test . . . . . . . . . . . . . . . . . . . . . . . . . 39

CHAPTER 3: Creating a Business Model . . . . . . . . . . . . . . . . . . . . . . . . . 45Identifying Who Needs a Business Model . . . . . . . . . . . . . . . . . . . . . 46Common Aspects of All Business Models . . . . . . . . . . . . . . . . . . . . . 47Business Models in Their Simplest Form . . . . . . . . . . . . . . . . . . . . . . 49Examples of Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Finding Success with a Business Model . . . . . . . . . . . . . . . . . . . . . . . 52

CHAPTER 4: Finding Your Target Market . . . . . . . . . . . . . . . . . . . . . . . . 63Gauging the Target Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63Determining Industry Attractiveness . . . . . . . . . . . . . . . . . . . . . . . . . 64Looking for Niche Attractiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Checking Out Customer Attractiveness . . . . . . . . . . . . . . . . . . . . . . . 73Finding Your Place on the Industry Value Chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

CHAPTER 5: Considering a Franchise . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79Understanding What a Franchise Is . . . . . . . . . . . . . . . . . . . . . . . . . . 79Recognizing the Importance of Brands in Franchising . . . . . . . . . . 81Identifying the Three Types of Franchising . . . . . . . . . . . . . . . . . . . . 82Being Aware of the Roles and Goals of Franchisors and Franchisees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85Reviewing Franchise Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Nuances of the Franchisor/Franchisee Relationship . . . . . . . . . . . . 93Considering the Pros and Cons of Franchising . . . . . . . . . . . . . . . . . 95

CHAPTER 1 Your Business in Context 7

Your Business in Context

This chapter starts at the very beginning, looking at how to step back and see a potential start-up business in the context within which it operates. If you’ve already started your business and are committed to it, or if you

know exactly what kind of business you want to run and nothing will change your mind, or if your idea is to start rather small, with a modest idea that doesn’t require finding much funding to get you going, you can skip this chapter. Good luck to you.

But it could be to your advantage to stick around anyway, because the fact is, not every business is a good idea at the time and place where it is born. You could save yourself some heartache by examining the external factors that will affect your business whether you like it or not. If you choose the right business at the right time and the right place, your chances of success are much higher.

Every successful business operates inside an environment that affects everything it does. The environment includes the industry in which the business operates, the market the business serves, the state of the economy, and the various people and businesses the business interacts with. Your business doesn’t exist in a vacuum. Now, more than ever before, understanding your industry is a critical component of your business venture’s success.

Chapter 1

IN THIS CHAPTER

» Analyzing the feasibility of your business idea

» Figuring out your industry

» Doing research on your industry

» Determining where you fit in

» Targeting a new product for the market

8 BOOK 1 Moving from Idea to Reality

If you position your company well inside a growing, healthy industry, you have a better chance of building a successful venture. By contrast, if your business niche is a weak position in a hostile, mature industry, your fledgling business may be doomed. Conducting a feasibility analysis can be a good way to get a clear picture of the landscape. The first section of this chapter provides an overview of this process.

An Overview of Feasibility AnalysisA feasibility analysis consists of a series of tests that you conduct as you discover more and more about your opportunity. After each test, you ask yourself whether you still want to go forward. Is there anything here that prevents you from going forward with this business? Feasibility is a process of discovery, and during that process you will probably modify your original concept several times until you get it right. That’s the real value of feasibility — the way that it helps you refine your concept so that you have the highest potential for success when you launch your business.

Today, you can often go for financing on the strength of a feasibility study alone. Certainly in the case of Internet businesses, speed is of the essence. Many an online business has gotten first-round financing on its proof of concept alone and then done a business plan before going for bigger dollars in the form of venture capital. But even if your business is a traditional one, feasibility can help you avoid big early mistakes.

Executive summaryThe executive summary is probably the most important piece of a feasibility analysis because, in two pages, it presents the most important and persuasive points from every test you did during your analysis. An effective executive summary captures the reader’s attention immediately with the excitement of the concept. It doesn’t let the reader get away; it draws the reader deeper and deeper into the concept as it proves your claim that the concept is feasible and will be a market success.

The most important information to emphasize in the executive summary is your proof that customers want what you have to offer. This proof comes from the primary research you do with the customers to find out what they think of your concept and how much demand there is. The other key piece to emphasize is your description of your founding team. Even the greatest ideas can’t happen without a great team, and investors put a lot of stock in a founding team’s expertise and experience.