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Benefits of using the business model canvas

 

The Business Model Canvas is an entrepreneurial tool that enables you to visualize, design, and reinvent your business model. Swiss business theorist and author Alexander Osterwalder developed it. For many startups, using the tool can help them develop a clear view of their value proposition, operations, customers, and finances. As a small business owner, you can use it to identify how the different components of your business relate to each other. That’s powerful when deciding where you need to focus your time and attention as you start and grow your business.

“Many start up entrepreneurs and small businesses are so busy trying to get started and survive that they spend little time planning. When they do try to plan, they are often confused and don’t know where to start,” explains Bruce Gitlin, SCORE mentor and business development expert. “This tool sets an overarching framework for developing a business strategy, a detailed business plan, and/or a prioritized action plan.”

According to Gitlin, the Business Model Canvas can help move entrepreneurs to address specific risks and acquire more information (about competitors or a market niche, for example).

The Business Model Canvas has nine different areas of focus that make up building blocks in a visual representation of your business. 

  • Key Partners—Who are the buyers and suppliers you need to form relationships with? What other alliances will help you accomplish core business activities and fulfill your value proposition to customers?
  • Key Activities—What are the most important activities you must engage in to fulfill your value propositions, to secure distribution channels, to strengthen customer relationships, to optimize revenue streams, etc.?
  • Key Resources—What resources do you need to create value for your customers and sustain your business?
  • Value Propositions—What products and services will you offer to meet the needs of your customers? How will your business be different from your competition? What challenges will you solve for your customers?
  • Customer Relationships—What types of relationships will you forge with your customer segments? What are the relationship expectations of each customer segment? How are they entwined with the rest of your business model?
  • Customer Segments—What sets of customers will you serve? Which are most important to your business?
  • Channels—Through what means will you reach your targeted customers and deliver your products and services to them? Which are most cost effective? How are the channels integrated?
  • Cost Structure—What are the key costs your business will face? Which resources will cost the most? Which activities will cost the most?
  • Revenue Streams—How much will you charge for your products and services? What are customers willing to pay for? How will customers pay? How much will each revenue stream contribute to your overall revenue?

According to Gitlin, gaps in planning stand out when using the tool, making it effective for entrepreneurs who are new to starting and running a business. 

“The Business Model Canvas helps visualize what is important and forces users to address key areas. It can also be used by a team (employees and/or advisors) to understand relationships and reach agreements.” 

Further advice on the Business Model Canvas is available from SCORE, a nonprofit association offering a wealth of information resources, training, and free counseling designed to help entrepreneurs nationwide build productive, profitable businesses. 

A SCORE Counselor can serve as a sounding board and will provide valuable unbiased feedback on how to improve things. The SCORE Counselor can also look at the business from the perspective of a bank or other investor, and raise questions you may have overlooked.

All SCORE counseling is offered as a free and confidential community service. There are 30 counselors in the Grand Rapids office of SCORE. Call 616-771-0305 for an appointment with a knowledgeable counselor or e-mail us at score@grandrapids.org.  

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What you must know before buying a business

Rather than building a small business from the ground up, buying an existing company offers the opportunity to move along the path to entrepreneurship more quickly. With all of the startup tasks already taken care of, a staff in place, an established customer base, existing vendor relationships, and processes and procedures laid out, you have a head start. 

But that doesn’t diminish the importance of doing your research before making the decision to buy a business. Acquiring an existing small business requires substantial examination so you avoid the many pitfalls that befall eager entrepreneurs who leap before they look.

According to William Comiskey, a SCORE Mentor at the Southwest Florida SCORE Chapter, “Investing in a business is the same as investing your savings in a mutual fund or stock portfolio to secure both your future and possibly your retirement. You study and review the past performance and the current condition and seek help and advice from professionals on the prospects for the future.” 

Before purchasing an existing business, you need to get answers to some critical questions:

Why is the current owner selling the business? Seek the truth. If the business is in a declining neighborhood or the owner has caught wind of an upcoming market change that will negatively affect revenues or cost structure, you might put yourself at risk of failure from circumstances beyond your control. Uncovering the real reasons for a sale may be difficult. Be wary and realize that smart business owners don’t often walk away from profitable endeavors unless they have strong personal reasons (illness, retirement, etc.), or they have received offers that are too good to refuse.

How is the business doing financially? If it has been losing money or hasn’t been generating a satisfactory profit, you’ll want to dig deeper into the reasons why. Unless you’re confident you can operate it more profitably than the current owner, you might end up with a sinking ship on your hands.

What sort of reputation does the business have? When you buy an existing business, you’re getting the brand reputation along with it. That will either work for or against you. Turning around an existing business’s poor reputation will be difficult and could take years—and it might even be impossible depending on how negatively the company is perceived by customers, suppliers, and the public. 

If the business has a favorable reputation, find out what has made it so. A strong reputation based on personal relationships between the owner and customers might not easily transfer to you. Be particularly cautious of this if the business relies primarily on a few key customers or suppliers. 

Are you getting everything you need to seamlessly take over running the business? Find out if the purchase will include essentials such as: leases and contracts; customer lists; patents, trademarks, service marks, and trade names; key employees who are vital to the business; and other important components. 

As Comiskey suggests, you don’t have to embark on the process alone. Consider tapping the expertise of professionals (such as SCORE mentors) who can help you assess the opportunities and risks of buying an existing business. 

Further advice on the purchase of an existing business is available from SCORE, a nonprofit association offering a wealth of information resources, training, and free counseling designed to help entrepreneurs nationwide build productive, profitable businesses. 

A SCORE Counselor can serve as a sounding board and will provide valuable unbiased feedback on how to improve things. The SCORE Counselor can also look at the business from the perspective of a bank or other investor, and raise questions you may have overlooked.

All SCORE counseling is offered as a free and confidential community service. There are 30 counselors in the Grand Rapids office of SCORE. Call 616-771-0305 for an appointment with a knowledgeable counselor or e-mail us at score@grandrapids.org.  

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Positive attitudes generate positive results

 

SCORE, Counselors to America’s Small Business

Free Business Counseling

 

Everybody has a bad day at work at least now and then. If you’re not careful, those bad days can become the norm rather than the exception for your small business. Without a positive attitude among everyone involved with your business (including yourself), a business suffers in tangible and intangible ways. Employees with poor attitudes affect customers negatively, discourage other workers from doing their best, and fail to perform to their own level of capability. Customers can sense when the person helping them is indifferent about their work, and they may wonder if it extends through the entire company.

When examining employee attitudes, start with your own. Be genuinely interested in the other people you work with-not only employees but also customers and suppliers. Respect your employees’ dignity. Let them know that they are important to your and your business and that high performance will be rewarded. Help employees identify realistic approaches to making them feel fulfilled by their jobs. While you want to be sensitive to the emotions of employees, do not ignore poor performance.  When an employee does not perform up to standards or has made a mistake, meet with him or her in private to discuss the issue.

Include your employees as team members. Ask for their suggestions and respect their ideas-even if you do not always agree with them. When you implement an idea contributed by an employee, remember to give the employee credit. This practice helps all employees see their value to the company the way you see it.

Allow employees input into the business operation when you can reasonably do so. For example, if your small business were to conduct an employee survey, would you then be willing to respond by making changes in the business? If left unaddressed, the problem areas that surface within companies and can lead to employee dissent and hinder productivity in subtle and not-so-subtle ways.

If you would like to discuss employee surveys and team-building, contact SCORE “Counselors to America’s Small Business.” SCORE is a nonprofit organization of volunteer counselors providing free, confidential advice to entrepreneurs. For the Grand Rapids SCORE chapter, call 1-616/771-0305, or find a counselor online at www.scoregrandrapids.org.

These ASK SCORE articles are submitted by the Grand Rapids Chapter of SCORE where there are 35 SCORE counselors ready to serve you and your business needs. To reach the Grand Rapids office call 1-616/771-0305, or find a counselor online at www.scoregrandrapids.org.

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Set realistic goals for your web site

 

SCORE, Counselors to America’s Small Business

 

The advantages of having a business website have been well documented. For some customers, your site is the first place they will gain awareness of your company. From there, the opportunities appear endless.

An effective website is one that is meeting both your business’s needs and the informational needs of visitors to the site. Assuming that you already have established a Web site, how do you think it’s doing on both fronts? Clearly, an unproductive Web site will be a waste of your money and your visitors’ time.

Here are some factors for objectively evaluating your site-to see it not only through the lens of your business goals but also through the eyes of a prospective customer. It should:

• be current. Making regular changes to the home page is vital to sustain the interest of regular visitors.

• be located easily using the major search engines. ·

• have working hyperlinks to other relevant sites, such as a trade or professional association whose members are potential purchasers.

• be easy to navigate. The files and graphics should be small enough that most visitors can download them quickly. Links within the site should make it easy for a visitor to get back to your home page.

• offer customers and prospects relevant information-that is, material that will help them understand  your products and services and their potential value to them.

• be a secure site, if you are conducting e-commerce on it.

• personalize or customize information for different segments of your market.

• use cookies or other features to capture information about your site visitors and their buying habits without costing them significant time.

• offer customers an easy way to contact you with questions or feedback without their having to leave the site. (And you should be able to respond promptly.)

To sum up, you want your Web site to work for your visitors if your larger goal is to maximize your business potential. So every now and then, step back and become the person you’d like to visit your site.

To learn more about the many dimensions of marketing on the World Wide Web, contact SCORE. SCORE counselors  donate their time to consult with and mentor entrepreneurs  providing free and confidential business counseling to America’s small business owners. Call the Grand Rapids SCORE chapter at1-616/771-0305, or find an online counselor at www.scoregrandrapids.org.

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Manage your home office the right way

 

SCORE, Counselors to America’s Small Business – Free Business Counseling

 

Sooner or later, in a moment of frustration, any home-based entrepreneur will ask, How in the world did I get myself into this business? You did your research, found your niche, worked out the start-up money and household logistics. Self-employment was a dream that one day became a reality. Some days, though, it seems impossible to manage. You’re not alone. ·

Perhaps your number-one goal has been to survive your first year of entrepreneurship. Consider these tips for sustaining a mind-set of success:

  Don’t go it alone. A sense of isolation is a common hazard of being in a home-based environment. You may have fond memories of comparing notes with coworkers at your last job when a problem needed solving and miss that camaraderie.  Consider creating an advisory board of knowledgeable allies: trusted colleagues with some business acumen of their own who want to help you succeed.

• Reward yourself. You’re the boss. Now and then, give yourself the rest of the day off, or at least take extra time away from your office for a family project or an overdue lunch with a good friend. Let them know what you have to celebrate and a little about how you have succeeded so they can share your sense of accomplishment. Small victories add up.

• Stay focused on your primary goals for your business. Your long-term goals can affect the decisions you make in your first year. The reverse is also true. If necessary, revisit your business plan. This is the best way to make the tough decisions about how to spend your valuable time and avoid feeling overwhelmed. Not every task demands perfection.

• Lastly, keep your perspective. Every entrepreneur has bad days, difficult customers and unfortunate setbacks. Don’t let them snowball, sapping your energy and productivity and leaving you totally discouraged. Remembering why you’re in business for yourself will do wonders to restore your faith in tomorrow.

Contact SCORE “Counselors to America’s Small Business” for guidance on how to make the most of your home-based business. SCORE is a nonprofit organization of volunteer business counselors who provide free and confidential business mentoring to small business owners. Call 1-800/634-0245  for the SCORE chapter nearest you, or find a counselor online at www.score.org. You may also call the Grand Rapids Chapter of SCORE at 1-616-771-0305 or find a counselor online at www.scoregrandrapids.org.

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Venture Capital can finance a new business

 

SCORE, Counselors to America’s Small Business

Free Business Counseling

 

In assessing options for financing a new small business, many entrepreneurs  look to venture capital. This approach can benefit a relatively unproven enterprise that appears to have a promising  future. Securing this type of funding is not easy, however. Venture capital firms expect a business to return their investment with interest plus a large profit. And after the disappointments  with many tech-sector companies in recent years, venture capital providers are particularly wary about where they invest.

Many venture capital firms are affiliated with banks, insurance companies, other financial institutions and large corporations. Some are owned by individuals or private groups of investors; others are publicly held. The minimum investment is generally from $50,000 to $500,000, but investment ceilings are almost unlimited.

The interest of a venture capital firm in a small business usually depends on the stage of the new firm’s development.  An investor may be interested only after the new firm has established itself and has a working organizational  structure, a viable business plan and start-up arrangement. However, some firms prefer to come in at a later stage-perhaps when the new company is in its second or third round growth stage and needs more capital either to carry out expansion plans or to tide it over until a merger or public offering takes place.

A company’s business plan serves as the primary analytical tool for the interested venture capital investor. In analyzing the plan, investors have three specific concerns:

1.  The product or service. Investors seek product or service innovations that give the company a strong competitive advantage. A new idea, backed by market surveys (measuring  the appeal of the product or service and its potential market), may be appealing to investors.

2.   Management capability. No matter how good the product or how innovative the service, the quality and experience  of the management are key factors in the success of the business. The astute investor looks for solid evidence of such management skill.

3.   The industry’s  growth. Investors also want to be sure that the product or service is in a growth field. A significant or revolutionary product improvement  may nevertheless lack luster in a declining product or service category.

Most venture capital investors purchase common or convertible stock rather than burden the fledgling enterprise with interest payments on debt or debentures. They may want more than 50 percent ownership. Additionally, while investors may insist on a position on the board of directors or expect to give management and technical advice, they are rarely interested in day-to-day management issues unless the survival of the business and their investment are at stake.

Before taking the next step for obtaining venture capital, get outside advice. Talk with your accountant and tax advisor. You should also contact SCORE “Counselors to America’s Small Business.” SCORE is a nonprofit organization with more than 35 volunteer counselors in the Grand Rapids office, who provide free and confidential advice to veteran entrepreneurs and those just starting out, or find a counselor online at www.scoregr.org.

Free and Confidential Counseling

SCORE, 111 Pearl Street NW

Grand Rapids, MI 49503

(616) 771-0305   www.scoregr.org

E-mail:  score@grandrapids.org

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Make time for marketing

If you operate a home-based business, there are more demands on your time than time to go around. But there’s one business activity you can’t afford to defer if you want to stay in business: marketing.

For any small business, marketing has many facets, and it’s a more complex proposition than just selling what you’re already offering customers. Marketing is the set of activities that attracts customers to your product. In a home-based business, that’s not going to be signs in front of your house and a parade of customers coming through your doors every day. The challenge is to adapt sound marketing techniques to your business’s unique circumstances and offerings. And that takes time.

Here are six tips for making time for marketing:

1.   Convince yourself that marketing is worth the time. When you don’t think a task will contribute to your bottom line, it’s easy to go on to the next item on your to-do list. If marketing is outside your so-called comfort zone, examine why you feel that way.

2.   Have a marketing plan. Invariably, a good plan is at the heart of personal productivity. Examine your business goals and determine how marketing can help fulfill them. As a new business owner, you may need a crash course in marketing. If so, that becomes part of your plan.

3.   Be open to new ideas. How are competing businesses getting noticed by customers? If they’re using techniques or media you never considered, take time to study and learn about new approaches. Experiment with marketing ideas that are low cost and low risk.

4.   Dedicate the time. By reserving the time, you’re less likely to procrastinate. Once you’re committed to marketing, block out time for it just as you would any other important task. Whether the task is market research or cold calling, know what you want to accomplish-in that period of time, and anticipate the distractions that are most likely to interfere.

5.   Stay connected. Take time to be at meetings and other gatherings of your professional and community groups. Yes, this presence takes time away from other business  activities, but it keeps you in front of prospective customers and creates opportunities for you to sell yourself as well as your business. A home-based business is especially likely to benefit from this exposure.

6.   Celebrate your marketing successes. Pay attention to when your marketing pays off. You’ll discover that as effective marketing leads to better exposure and more sales, it becomes easier to justify the time you spend to promote your services.

“Work smarter, not harder” is an expression that applies to marketing as well as other facets of entrepreneurship. Make time for marketing, use that time wisely, and you’ll hone your competitive edge. 

For more insights on making a home-based business succeed, contact SCORE “Counselors to America’s Small Business.” For the SCORE chapter nearest you, call 1-800-634-0245, or find a counselor online at www.score.org.

All SCORE counseling is offered as a free and confidential community service. There are 389 SCORE chapters around the country assisting entrepreneurs. While counseling is always free-of-charge, local SCORE chapters also offer small business workshops and seminars for modest fees.

To learn more about SCORE and its counseling services, call 1-616-771-0305, or email your questions to the Grand Rapids Chapter of SCORE  at www.scoregr.org.

These articles are provided by:

Free and Confidential Counseling

SCORE, 111 Pearl Street NW

Grand Rapids, MI 49503

(616) 771-0305   www.scoregrandrapids.org

E-mail:  score@grandrapids.org

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Read between the lines of your balance sheet

ASK SCORE

 

For newcomers to business, a balance sheet may appear at first to be a complex and confusing collection of numbers. However, this financial statement contains valuable information for assessing the health of your company and making decisions on which direction to take.

A balance sheet is like a snapshot of your company at a single moment in time. The balance sheet shows how the capital within your business is distributed over the various accounts. A surplus of assets over liabilities indicates profitability. If the statement shows more liabilities than assets, however, your company is at a loss position—not necessarily cause for alarm, depending on the longer trend. For example, a business may have a month with high expenses and a net loss that may be more than offset by five months of profitability. On the other hand, three consecutive losing months should prompt the owner to make serious decisions about how to overcome the negative cash position.

Compare balance sheets over a period of time for the big picture of your assets and liabilities. By comparing these on an item-by-item basis, you can spot trends that will affect your firm’s overall financial health. For example, larger quantities of merchandise on hand from one period to another may reflect a decision to buy ahead because of continuing inflation. Receivables may show a continuing upward trend when collection of outstanding accounts exceeds 30 days. Debts may run higher when the firm expands or makes capital improvements.

Much like the balance sheet, the profit and loss statement (or operating statement) totals the result of operations over a selected time period. This statement will show sales volume, cost incurred and the amount of profit or loss. Comparing the monthly or quarterly profit and loss statements can be revealing. Why was there a lower gross profit for several quarters? Did price cuts decrease per sale profitability? Was a higher proportion of sales spent on operating costs such as personnel, rent or insurance?  Are overhead costs increasing routinely?

Do not rely solely on your accountant for advice and guidance in understanding your balance sheet. As the decision-maker for your company, you need a clear understanding of how to read, interpret and act on financial information. For assistance, contact SCORE, “Counselors to America’s Small Business.” 

SCORE is a nonprofit organization having more than 35 volunteer counselors in Grand Rapids who provide free and confidential  business  advice to veteran entrepreneurs and those just starting out. For the Grand Rapids Chapter office of SCORE, call 1-616/771-0305, or find a counselor online at www.scoregr.org. Rockford Chamber of Commerce 1-616/866-2000.

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