Before You Start Checklist

Starting and managing a business takes motivation, desire and talent. It also takes research and planning.

Like a chess game, success in small business starts with decisive and correct opening moves. And although initial mistakes are not fatal, it takes skill, discipline and hard work to regain the advantage.

To increase your chance for success, take the time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well-thought-out business plan that will help you reach these goals.

The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you set out to raise money for your business.

It should also provide milestones to gauge your success.

Getting Started

Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

*You want to be your own boss.
*You want financial independence.
*You want creative freedom.
*You want to fully use your skills and knowledge.

Financial Planning

Other important ratios, often referred to as Management Ratios, are also derived from Balance Sheet and Statement of Income information.

Return on Investment (ROI) Ratio

The ROI is perhaps the most important ratio of all.

It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile.

If the ROI is less than the rate of return on an alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell the company, put the money in such a savings instrument, and avoid the daily struggles of small business management.

The ROI is calculated as follows:

These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources.

The owner may thus determine the business's relative strengths and weaknesses.

Highly Effective Marketing Tactics

Never advertise without including an offer. An irresistible offer is the number one reason why people buy something.

To substantially increase the response to your advertising, substantially improve your offer.

Many small businesses advertise without including an offer. This is a costly mistake because it doesn't provide a reason for prospective customers to respond.

The best way to get a big response from your advertising is to make an offer your prospects can't refuse.

THE BUZZ

From: Al DiGuido:

A "keeping up with the Joneses" mentality is part of society. Role models abound: the rich and famous, the wildly successful, leaders, athletes. That morning look in the mirror reminds us we're more than a stone's throw from reaching that level of distinction.

For too long, I settled for the status quo. Extra middle-age pounds are a part of growing older. Sit back, no need to run. Leave it to others.

Then it hit me. I'd advise companies to constantly assess every aspect of their businesses. "Settling" into old age spells doom for business.

Successful companies scrutinize the competitive arena and marketplace. No time to be tired or "overweight." Wins go to companies in shape.

I championed the virtues of organizational fitness while my own lifestyle and weight were anything but lean and powerful. Something had to change.

No one would do it for me. Result: Over six months, I lost nearly 55 pounds. I'm in the best shape of my life. Progress was slow at times, and my resolve was tested. Determined to succeed, I left my comfort zone and embraced change...

'Managing Your Business' 'This section offers guidance in starting a business. But you are not ready to start your own business until you have given some thought to managing it. A business is an ongoing activity that doesn't run itself. As the manager you will have to set goals, determine how to reach those goals and make all the necessary decisions.' Personnel Supervision Supervision is the third essential of personnel control. Good supervision will reduce the cost of operating your business by cutting down on the number of employee errors. If errors are corrected early, employees will get more satisfaction from their jobs and perform better. Motivating Employees Small businesses sometimes face special problems in motivating employees. In a large company, a good employee can see an opportunity to advance into management. In a small company, you are the management. One thing you may wish to consider is to give good employees a small share of the profits, either through part ownership or a profit-sharing plan. Someone who has a "share of the action" is going to be more concerned about helping to make a success of the business. Financial Planning *An ongoing series.* 'There is one simple reason to understand and observe financial planning in your business - to avoid failure. Eight of ten new businesses fail primarily because of the lack of good financial planning.' Management Ratios Other important ratios, often referred to as Management Ratios, are also derived from Balance Sheet and Statement of Income information. Return on Assets Ratio This measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. A low ratio in comparison with industry averages indicates an inefficient use of business assets. The Return on Assets Ratio is calculated as follows:
		Net Profit Before Tax
	Return on Assets =
		Total Assets

Highly Effective Marketing Tactics Focus on the headline. Always include a headline with your ad, sales letter or Web page. Include your biggest benefit in the headline to grab your prospect's attention. Otherwise, many prospective customers won't read your promotional material. When you develop a new promotion, test different headlines to find the most effective one BEFORE you test anything else. After you find the headline that attracts the most readers you can test to find the most motivating copy for them to read. "You Can Also Build Your Small Business Fast With Simple Postcards".

Personnel Selection

Screening Prospective Employees:

Selecting the right person is extremely important. Ask your questions carefully to find out everything about the applicant that is pertinent to the job.

References

References are a must, and should be checked before making a final decision.

Check through a personal visit or a phone call directly to the applicant's immediate former supervisor, if possible.

Verify that the information given you is correct.

Consider, with judgment, any negative comments you hear and what is not said.

Checking references can bring to light significant information which may save you money and future inconvenience.

Financial Planning

An ongoing series.

'There is one simple reason to understand and observe financial planning in your business - to avoid failure. Eight of ten new businesses fail primarily because of the lack of good financial planning.'

Financial Ratio Analysis

The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business.

Income Statement Ratio Analysis:

The following important State of Income Ratios measure profitability:

Net Profit Margin Ratio

This ratio is the percentage of sales Rands left after subtracting the Cost of Goods sold and all expenses, except income taxes.

It provides a good opportunity to compare your company's "return on sales" with the performance of other companies in your industry.

It is calculated before income tax because tax rates and tax liabilities vary from company to company for a wide variety of reasons, making comparisons after taxes much more difficult.

The Net Profit Margin Ratio is calculated as follows:

An ongoing series.

Remember 'How To Increase Sales'?

Here is a series of significant, highly effective marketing tactics many business owners overlook when developing their marketing programme.

Trivialize your price

Demonstrate a low cost for your product or service by breaking down the price to its lowest time increment.

"R325 per year" frightens many customers away.

"Enjoy all of this for less than 90 cents a day" attracts them to the low cost.

An ongoing series.

'There is one simple reason to understand and observe financial planning in your business - to avoid failure. Eight of ten new businesses fail primarily because of the lack of good financial planning.'

Financial Ratio Analysis

Liquidity Ratios:

These ratios indicate the ease of turning assets into cash. They include the Current Ratio, Quick Ratio, (see previous E-Zines) and Working Capital.

Working Capital.

Working Capital is more a measure of cash flow than a ratio.

The result of this calculation must be a positive number.

It is calculated as shown below:

Working Capital = Total Current Assets - Total Current Liabilities

Bankers look at Net Working Capital over time to determine a company's ability to weather financial crises.

Loans are often tied to minimum working capital requirements.

In Conclusion:

A general observation about these three Liquidity Ratios (Current Ratios, Quick Ratio, and Working Capital ) is that the higher they are the better, especially if you are relying to any significant extent on creditor money to finance assets.

Be unique

The best way to beat your competition is to promote a distinct advantage your customers cannot get from a competitor.

This is often called your USP (short for Unique Selling Proposition).

If you don't already have a distinct advantage, create one. Add something to your business you're not already doing.

One network marketer doubled her sign-up ratio by providing free sales leads to her new distributors for their first 4 months.