Starting a Business and Business Planning

Sajjad Hamid

Opportunity Entrepreneurs, like prospectors, are looking for the golden idea. This is called the business idea. New and innovative thoughts or ideas are key to entrepreneurs.

What do you need to know to start a business?

The traditional admonition of one generation to the next 'Get a Job' has been replaced with the more complex and bewildering mandate, 'Go out and create a job for yourself.'
"A review of 'Job Shift', by William Bridges by Cathy Ashmore,
The Consortium for Entrepreneurship Education, Columbus, OH."

. . . in the beginning there was an idea
Aspiring entrepreneurs face the 'what-type-of-business-can-I-start' hurdle. They need an idea to start their business. But where do they start? The short answer is to have a creative mind. A creative mind produces lots of ideas and hopefully some solid business ideas. Creativity is also a stepping stone to innovation. According to Theodore Levitt professor at Harvard Business School, 'creativity is thinking new things'. Entrepreneurs need to be creative and innovative since they face much larger competitors who possess more resources and out thinking them is the way to a competitive edge.

How to get creative juices flowing?
Train your mind to be creative and tap into as many creative sources as you can and you are bound to discover that million dollar idea.
Here are some ideas.

Attitude: A positive attitude makes a big difference as it frees the mind to think. If you think you are not, you will not be creative.
Adapt It: Sometimes a product is born in one culture and can be adapted to another, such as the 'caribbeanising' of the American (McDonald) hamburger to Trinidad’s culture. This was done using green seasonings (instead of powdered ones), cooked vegetables (cabbage and carrots instead of lettuce and tomato) and served on the pattie.
Missing in the Market: Have you ever wondered about a product you need that is not on the store shelves? You think well I can’t be the only person in the world who want it! In marketing terms, this would be called latent demand. Latent demand means untapped opportunity for the entrepreneur. Why aren’t there organically grown local vegetables at the supermarkets? One would think that with so many health conscious consumers, this would have good potential.
One Man’s Trash Is Another’s….: If something is tossed out it does not mean it is no good. Bad can mean good. Discarded oil drums meant the only musical instrument (steel pan) invented in the 20th century! We are a throwaway society. With so much going to the dumps, maybe you can use it to innovate something useful. Think about how much grass and branches those public cleaners throw away everyday. Can you start a compost making business with this?
Work Your Hobbies and Strengths: If you are strong in a particular area or have a hobby that is admired by many, it might a good place to begin. Pay attention to what your friends like about the things you make. Think how I can capitalize on this strength. Can I train people to become as good as me? If I make the best cassava pone, can I start a business based on it?
Do Something Stimulating: The brain likes a challenge and a challenged one can produce wonderful ideas. Try doing puzzles, try hiking, playing a game of chess, learn a new language or read a good work of fiction. These are likely to put your brain on steroids.

And if all else fails- - -
- - -then

Take It and Run: Taking someone’s idea might not be the honourable thing to do. But if they are sitting on it and bringing no value to society why let it go to waste? Take it before someone else does.
Relax It Might Just Work: The brain can think actively and passively. If you tire the brain its creative power diminishes with increased effort. The brain works quietly when you are not consciously thinking of generating an idea. This means if you take time off, the brain might give you that eureka moment.

The ability to think new things and innovate is what separates entrepreneurs from ordinary people. They are always generating ideas and experimenting with new things. Having generated enough ideas, entrepreneurs have to find a way to sift through them and select the best one to move with.

While thinking is good, transforming this idea into something real (product or service) is important. A new thought/idea is not enough to start business. Theodore Levitt professor at Harvard Business School also said that 'innovation is doing new things'.

. . . and the idea became a business
How can you convert an idea into a business?
Here are some questions you should ask:

Is there a need for this product or service idea? You might be all excited about your idea. It is unique? But do not let your emotions cloud the harsh reality of whether there is a market for it. If nobody wants it then do not make it. Will any body want frozen guavas? Products and services must fill a need.
Can it create value for the potential customer? There might be a need for it but are prospective customers willing to pay for it. Customers want value for money. They will pay for benefits but will not pay for less than they get in return. In a world of almost limitless choice, your idea must clear the performance bar.
What is exciting about this product or service? If you dream up a 'me-too' product or a service offered by many, how can yours stand out? In other words, you bring nothing new and therefore can expect little enthusiasm. The sizzle may well sell the steak.
Can the idea be modified easily if the intended design flops? If things don’t go as planned, as they seldom do, what is your contingency plan to salvage the project?
How quickly can it be a reality? Time is money as they say but time is also a clock that measures how much advantage your company has (or hasn’t) over competitors. The early company gets the profit. Fast execution can mean first mover or qualify as a pioneer.
What resistance will it face? People don’t like change. If you go against the grain, expect resistance. Consumers must be offered some advantage over their current preference. What will they have to give up and what will they gain?
Can your product stand the test of the market place? Even though it is a big universe, you are not alone out there. Consumers face a long list of substitutes and again what can you deliver. Perform, or your idea will not take off.
Does the idea have any weaknesses or unresolved issues? If you have an idea to sell a bottled food item but have no idea how long it will last on the shelves, you better find a way to establish its life span. This is a key success factor for processed food products.
How expensive will it be to change the idea to reality? If it cost the same as putting a man on the moon then drop it. Ever wondered why no local entrepreneur has successfully put coconut chutney on the supermarket shelves. Possible reason: coconut is a very challenging item to work with.
How will it be made? You have to work out how to produce your widget. Is the equipment available? Can I produce a quality product in sufficient quantities? Is my product difficult to make? Are the raw materials easily available?
Will it meet your financial expectations? If you are to make a profit you must crunch the numbers. How much will it cost? Can I add a sufficient mark-up to make it financially worthwhile?
Does it meet my personal goals? Do you want to end up being in a business that does not make you happy or does not challenge you? Or do you want to build a business which makes work fun and also leave a legacy behind.

If you have dream to start a business, start with a plan. A business plan is a document that outlines the entrepreneur’s proposed business venture. It should describe its current situation, expected needs and projected results of the new business. The goal of a business plan is to create a competitive edge or advantage; this sets it apart from its competitors and gives it a unique position in the market place.

Entrepreneurs have several reasons for doing a business plan before they launch their business:

it guides the company’s operations by charting its future & devises a strategy for success
to attract lenders & investors
it forces the entrepreneur to take a hard look at the business & assess its chances of success

A well written business plan must answer the following questions:

does a market for a product or service (or retail format) exist?
can the company really produce the product or service?
does the product or service offer value?
how does the company strengths & weaknesses match those of its competitors?
how will management create an advantage over its competitors? Can the plan meet all its financial obligations? (interest, principal, wages, etc)
can the plan show how the owner can deliver an acceptable return on investment?

It is better to make mistakes on paper that try to make it happen by guess. This way, the potential bottlenecks and pitfalls will be known in advance and hence can be prepared for. The risk of failure is very high among start ups. Some estimate it is as high as 50% in the first three years of start up.

Some of the fatal errors that entrepreneurs make are:

Poorly Conceived Idea: There are good ideas and there are bad ones. In aeronautical terms a bad idea is one that cannot fly. It could fail for a number of reasons. People are not willing to pay that high price because it costs too much to produce. There is no demand for it or at least not right now (too far ahead of the market).
Poor Planning: Many entrepreneurs start a business in an ad hoc manner. They believe, in error, that having the idea is the beginning middle and end. Actually it is only the beginning. They miss some of the steps that one must go through from idea to reality. It’s a complex process and a road map must be developed. Its like building a house and improvising as you go along.
Cash Flow Problems: In the early stages, start-ups consume more cash than they earn. They are like cash sponges. Entrepreneurs find this out late in the game. While they are in business to generate a profit, cash flow is more important than profit. It’s like gas in your car, whether you have a luxurious car (high profit company) or an economy car (low profit company), if the high end car has no gas, it goes nowhere.
Poor Costing: Sometimes the love for a product is so great that entrepreneurs forget to calculate the cost. It might be easy to cost in one’s head an accra but some products need the hat of an accountant. Many products require assumptions on the life of the equipment, batch sizes, yield and raw material prices. These make costing a challenge and the result could be a price that offers little or no profit margin.
Bad Location: In the retailing business, the three most critical success factors is; location, location, location. If a business does not create convenience, then customers would not come.
Weak Promotion: There is a myth that if you have a great product customers will line up. With so many thousands of new entrants that are backed by heavy promotions, it is likely that the noise of the marketplace will drown out a new product. It’s like planting a tree without fertilizer.
Failure to Have a Mind of the Entrepreneur: Many entrepreneurs who leave their corporate jobs sometimes fail to develop the appropriate thinking and behaviour; the creativity, the innovativeness, taking initiative, moving with speed, risk taking, opportunity driven, etc. Many still work as if they had a boss over their shoulders.
Lack of Experience: An entrepreneur who gets into business that is entirely new to him/her is looking for trouble. There are operational issues like how to develop a supply chain, how to price for profit, how to deal with customer returns and all the other major business issues. When an entrepreneur is on the beginning of the learning curve and major mistakes happen, these can be catastrophic for the business.
Poor People Management: While your business may only need a few part timers in the beginning, it is a different story when it starts to grow. An expanding business needs more resources and human resources would be required for planting and harvesting or processing your produce. An entrepreneur would need a new skill set; its managing and leading people. This involves hiring, motivating, training, compensating and appraising.

It is interesting to see how far these character traits and other techniques of entrepreneurship pointed out by Hamid are reflected in real life. The following experience of an opportunity-motivated entrepreneur may illustrate these points. Eldon's story illustrates the issues, challenges and benefits of becoming an entrepreneur. It particularly proves the point made by Hamid "that entrepreneurship is a road that is filled with good and bad experiences. It is not all a bed of roses... and a road that only the strong willed can take ".\

F.Y.I.

Business Plan for a Startup Business – A Guide

The real value of creating a business plan is not in having the finished product in hand but rather, in the process of researching and thinking about your business in a systematic way. It typically takes several weeks to complete a good plan, so don’t rush it!

A Business Plan - What’s in it?

an ‘Executive Summary’, that you should write last, should be short (two or less pages), and should say everything you would cover in a 5-minute interview;
a ‘General Company Description’, that describes what your business is, your mission (i.e, what you will do); your goals (i.e., where you see your business heading); your objectives (i.e., how you will ‘mark and measure’ your progress); your business principles and philosophy (i.e., why is the business important to you); your market (i.e, who will buy your product or services); your growth projections; your most important company strengths and core competencies; and what is and why you have chosen your legal form of ownership.
your Products and Services, describing them in full detail, identifying your competitive advantages or disadvantages and the pricing/fee structure.
your Marketing Plan, based on careful and systematic primary and secondary research, that is as specific as possible; giving statistics, numbers, and sources. Research areas must include economics (facts about your industry), product description (their features and benefits from your customer’s point of view), customers (who and where they are), your competition (what products and companies will compete with you), your niche (where your company fits), your strategy (promotion, location, distribution channels), your sales forecast (a month-by-month projections based on a (1) "best guess", what you really expect, and 2) a "worst case" low estimate that you are sure you can reach no matter what happens)
your Operational Plan, describes how (what methods) and where are your products or services produced, the requirements (space, utilities, infrastructure, etc.) you need from your location.
your Legal Environment, licensing, permit, health, workplace and environmental regulations, insurance etc., trademarks, etc.

your Personnel, number, types of skills, training methods, pay structure, job descriptions, where you will find the right employees, etc.
your Inventory, what kind, from where, rate of turnover, lead time for ordering, etc.
your Suppliers, who, where are they, credit and delivery policies, reliability etc.
your Credit Policies, how you plan to sell, will you offer credit and on what terms, the cost of extending credits, how will you manage your accounts receivables and payables
company Management and Organization, Who will manage the business on a day-to-day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated? What are the position descriptions for key employees
a Personal Financial Statement, for each owner and major stockholder, showing assets and liabilities held outside the business and personal net worth. Owners will often have to draw on personal assets to finance the business, and these statements will show what is available. Bankers and investors usually want this information as well
your Startup Expenses and Capitalization, before you even begin operating your business. It’s important to estimate these expenses accurately and then to plan where you will get sufficient capital. Even with the best of research, however, opening a new business has a way of costing more than you anticipate. A recommended approach is to add a separate line item, called contingencies, to account for the unforeseeable.
a Financial Plan, comprising a 12-month profit and loss projection, a four-year profit and loss projection (optional), a cash-flow projection, a projected balance sheet, and a break-even calculation. Together they constitute a reasonable estimate of your company's financial future.

Extracted from: Business Plan for a Startup Business
http://www.score.org/downloads/Business%20Plan%20for%20a%20Startup%20Business_July.doc

Business Ideas

Home-Based Business
- - -yesterday’s “cottage industry”
is now more acceptable as many entrepreneurs
choose the comfort of their homes to build a business.

Home-Based Business
Today’s technology (cell phones, computers, internet) makes running a business at home easier and in some cases more effective. Many great entrepreneurs started their businesses in their homes: Bill Hewlett and Dave Packard started their computer business in their garage; Wilbur Balgobin owner of Willie’s Ice Cream started in an annex in his home in Trinidad.
Benefits	Lower set up costs More time spent working in business (limited commute) Lower cost of operation (no rent to pay, etc) Risks might be lower Flexibility to change if things don’t go as planned
Key Issues	Recommendations
Separating business life from personal life	Understand fully that your home is now a business and ensure you have the business mind-set when at home; Inform family and friends that you have a business at home and at times you need to deal with business issues; Set ‘business hours’ so family members and you can devote the time to develop the business; Manage at home distractions so they would not ‘eat away’ at your time; Dress appropriately to indicate you are on the job;
Separating your business space from your space	Create a separate space for your business so that both you and your customer would not be compromised Convert a space room or your garage (like Jeff Bezos the founder of Amazon.com did) into a work area
Office essentials	Get a new phone line or train family to answer in a professional way or set a voice mail system; Install a fax, internet line and get a P.O. Box; Ensure your home has a good location; customers like convenience (parking, easy to find, etc.); Put up an attractive sign; inform the neighbours of your business, you might just get 'word-of-mouth' promotion; Print business cards and give yourself a title; Buy a filing cabinet and set up a filing system; Set up a proper accounting system (invoice book, sales journal, purchases journal, inventory book or a simple accounting software package);
Business infrastructure	What human resources, infrastructure needed to start? Sufficient capital investment A layout to operates efficiently and effectively Work space for employees and utilities in place Store room for raw materials for processing
Regulations and other essentials	Research the regulations and laws that govern your type of business Inform neighbours to get their cooperation and ensure they are happy; you still want to keep them as friends Seek advice from your insurance agent and take out the necessary coverage

Home-Based Ideas

Home-Based Ideas	Areas to Research
Pets People are attracted to pets for a number of reasons; companionship, security and entertainment. Some include: rabbits, dogs, tropical fishes, pigeons & other birds	What are the types of pets that are required? Who is the customer you are targeting? What segment of the market is most profitable?
Compost Making One of the drivers of this is the preference for organic fertilizers	Where can I find the necessary compose items? How do I collect them? How do I construct a compost structure? Who do I target?
Dehydrated Foods They have an almost unlimited shelf life once stored at proper conditions. Transportation, storage and handling costs are lower as the product does not require costly refrigeration and storage. Health trend is driving demand.	What are some of the foods I can use? Where can I get a regular supply? What trade customers am I targeting? What packaging can I use? What equipment do I need?
Snack Foods There is a large market for locally grown fruits, vegetables & roots crops that can tap into a niche market unserved by the large firms: fried plantains, cassava, yam flakes, etc	What food technology do I need to keep the shelf life, taste & mouth feel? How to cope with seasonal availability so plant capacity can be fully utilized? What processing equipment? What food regulation do I need to meet?
Frozen Foods Many foods can be easily frozen & kept in small freezers. Many can be niche products: pigeon peas, cassava, mangoes, etc	What equipment do I need? Where is my supply coming from? What food technology do I need to keep the shelf life, taste & mouth feel?

Retailing

Opening a store is one of the easiest ways to start a business. The entrepreneur can sell to either farmers or the final consumer depending on the format. Retailing is more than selling from a box as it requires an understanding of (a) getting a good location, (b) knowing the merchandise mix and how to display them, (c) managing customer service and (d) store layout and design
Key Issues	Recommendations
The right location	A good location means easy customer access, visibility, parking & convenience Find a good location for source of competitive advantage Get a good location that has either high foot or vehicular traffic. Both are even better.
Merchandise Management	Buy what sells; find ways to improve inventory turns Display tools to improve visibility, sales & gross profit Select suppliers that create value Product mix and variety that makes your store unique
Customer Service	Meet or exceed customer expectation Hire, train & reward employees Keep a customer database to improve relationship management
Store Layout & Design	Create an in-store experience/image that is unique Plan store layout for efficiency, sales productivity and for maximizing gross profit
Retailing Ideas	Areas for Research
Plant & Flower Nursery	What plants & flowers are in demand? Do I target individuals or mall shops?
Green Grocer	Where do I find a good location? Who are my suppliers? How do I compete with the fresh produce markets? How do I manage spoilage?
Agricultural Shop	What product mix? Who do I target? What advice and other services can I offer to stand out?
Propagation	What plants are in demand? What infrastructure is needed? How to I acquire the skills to propagate?
Health Shop	Where to get ready supply of indigenous fruits & plants? Where do I locate? What drinks & foods do I offer?

Time Saving Products

There is a growing trend by consumers and businesses to save time. Today, convenience fetches a high price. Consumers have become ‘time poor’ due to: (a) dual income homes means higher incomes and desire to trade money for time, (b) working women need more time to spend with their families, and (c) individuals cannot perform some tasks and would seek other sources to meet their needs. Businesses choose need to outsource work due to: (a) labour shortage, (b) need to lower costs and difficulties to do so, (c) difficulty of finding supplies, and (d) customers (shoppers) showing preferences for variety. Outsourcing could fit into many companies ‘cheaper, faster, better’ strategy.
Key Issues	Recommendations
Location	Locate near to good raw material sources and areas of high unemployment (rural areas are best) and utilities
Equipment needs	Begin with simple products that a small start up organization could easily and cheaply source; graters, grinders, packagers, small freezer, etc
Regulatory & legal requirements	Research government requirements Study what your business buyer’s requirements
Food Technology	Experiment with basic food processing & safety processes to master production processes Seek out already proven technology Research food technology issues (shelf life, taste, etc)
Time Saving Product Ideas	Areas for Research
Seasoned Meats Chicken, duck, beef, goat, sea food that are well marinated	What types of meats are in demand? Are their any difficult meats (to process or source) that are demanded (back yard chicken goats & ducks, wild meats) Which supermarkets are the best candidates?
Seasonings Shadow Beni, Chive, Celery, or blended versions, etc	What are the different combinations of fresh processed seasonings (bottled) demanded? Are there business customers who require seasoning in bulk?
Convenience Packs Ready to cook items include: cleaned dasheen leaves with condiments	What combination of vegetables can create the most value? Can it be sold as fresh or frozen or both? Can it branded to keep a check on competition and further build loyalty to your product?
Sauces & Chutney West Indian style pepper sauce, coconut & tamarind chutney, etc	What concoctions can you create that reflects your country’s heritage and help you stand out from foreign competition? Determine the level of spicy flavour needed? Need to a distributor for the foreign market?
Frozen Foods	See home-based business
Food additives Cassava starch, dried West Indian peppers, crushed pumpkins, local herbs, etc	What substitutes are there for thickeners? What indigenous produce can be used dried or crushed add to local foods?

Non Traditional Agriculture

Traditionally Caribbean farmers have stuck to producing and marketing a select group of crops. In a changing world, food has taken on some new dimensions. This is shaped by a number of factors which have led to some new opportunities in exports, agro-tourism, aquaculture, herbal, etc. These factors are: socio-cultural: consumers want more convenience, healthier, more natural, safer foods and the desire to try new and exotic ones; political: governments have responded to threats to their food security (bio-terrorism, etc), genetically modified food and higher prices; technological: genetic research and new farming methods and processes and the use of fast air transport to deliver food any where in the world in less than 24 hours; economic: shortages of food and agricultural water, bio-fuels and loss of agricultural lands; environmental: climate change, disposal of waste and appreciation that natural is better;
Key Issues	Recommendations
Change of perspective	Change your frame of reference (as a farmer) and assumptions of the world (paradigm shift) Adopt new skills sets Adopting life long learning as a value
Determine the drivers	Study different drivers/change forces in each area
Different production & marketing methods	Research areas that represent opportunities for new techniques, technologies & marketing systems/processes & products
Core competences	Establish where your core capabilities is and how to leverage these

Non Traditional Agriculture Ideas

Non-Traditional Agriculture Ideas	Areas for Research
Agro-tourism Cocoa, coffee, coconut estates; Dancing cocoa beans; Goat race:	What the ‘new tourist’ wants are? Can my farm be dual modeled to grow food & at the same time be a tourist attraction? Can I incorporate the larger community in my model to sell as a heritage-tourist concept? Does my community have any historical importance that I can leverage? Do I need to cooperate with other farmers to capture the large potential? How to develop linkages to other non-agricultural agencies/businesses that support tourism?
Culinary tourism Calloo, Flying fish, Accra, Curry Goat, Wild Meats	What Caribbean cuisine & signature foods to offer? Do I served them on the farm (in a specially design area) or in another area outside of the farm?
Aquaculture Tilapia & cascadu	What markets exist for fresh water fishes? What technology is needed? Is there an export market?
Herbal Health & Wellness Plants/Fruits Cosmetics	What herbs, spices, oils or organics substances have indigenous appeal? How to capture & market the distinctiveness and perceived value? Do I have the technology to develop these into products?
Organics Salad based produce & fruits	Is this niche market attractive enough? What items are demanded & in what quantities? What channel to use (supermarkets, health shops, hotels, other institutions)? What will the production processes deliver? organically grown produce? Is there a fresh export market?
Bio-fuels Sugar Cane	What impact this emerging trend has on the sector? Can I supply large bio-fuel farms with inputs if it takes off?
Controlled Environment Methods Tropical tunnel & Hydroponics	What technology is suited for high margin produce? What impact would these have on yields & quality? Is it more profitable than traditional methods?
Export	What markets exist for niche produce? Is the West Indian migrant population in large cities like Toronto, New York & London? Does a reliable air freight carrier(s) exist?

CaRAPN - Caribbean Regional Agriculture Policy Network

How does one start a business enterprise?

F.Y.I.

Business Plan for a Startup Business – A Guide

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