3 Reasons That Make a Business Plan Essential

3 Reasons That Make a Business Plan Essential
Smartphones Surpass Regular Cell Phones – Tablet Growth Surges
Factors Responsible for the Imminent eCommerce Growth Wave
Senate Passes Internet Sales Tax; Bill Moves to House
Top 5 Expenses a Startup Cannot Avoid

Posted: 07 May 2013 04:00 PM PDT

strategic business plan

Do you need a strategic business plan to begin a new venture? The answer depends on how you define a business plan. Every business must have a plan to begin with; but this does not mean that it has to be in a written format. Even a mental construction of a plan can serve as the foundation for your new business.

A study titled the “Pre-Startup Formal Business Plans and Post-Startup Performance: A Study of 116 New Ventures” by the researchers at Babson College displays the fact that there is no significant result in the success of a business started with a strategic business plan and that of a business started without one.

The question is: Why would you need a business plan if there is no significant difference in the end result? Below are a few things you need to think about before you make a decision about whether to create a business plan before you start a new business.

3 Reasons a Strategic Business Plan is Essential

A Business Plan Inspires and Motivates

When you have worked hard to prepare a strategic business plan, the chances that you will implement it increase. How does this work? You have to take one step at a time when you create a business plan. Taking steps helps you create a concrete plan from the abstract idea you have in your head.

But, a strategic business plan can’t be created out of thin air. You need to locate the target market, research and develop the idea, decide your product or service, identify the best ways to market the product/service, appoint a suitable team and make financial projections. All these steps lead to the formation of the plan.

The transformation of the idea into a plan gives a new entrepreneur the inspiration to begin his or her venture. It acts as the chief force that drives them to take on the challenge to create a real business out of the plan. This, therefore, is the first step toward the realization of your dream to become a business owner.

A Business Plan Helps Secure Funds

If you have family or friends to fund your new business, you may not need a plan to convince them to become investors. But this won't work if you have to go to others for the money. To convince them, you’ll need to prepare a strategic business plan that shows your active interest in transforming your idea into a venture.

Commercial banks, venture capitalists, government supported lenders – the places from which you can get the funds are numerous. But it’s not easy to convince them about a new business idea. And, it’s especially difficult if your business idea veers into a comparatively new and unexplored domain. Only a strategic business plan can make things work.

Does this mean you do not need a business plan if you have the funds? Well, it’s essential to have this document before you talk to potential investors. However, this does not limit the use of a plan to this situation alone. Even if you have arranged the funds, you can still benefit from a sketch of what, when and how you need to proceed.

A Business Plan Creates the Groundwork

The research and development you invest in preparing the plan makes it a good starting point. The plan helps you work out the steps you need for future business growth, considering any possible changes in circumstances. If you don’t have a vision about your new business, you may fail to achieve the success you desire.

If you think that the plan needs to be a 100 page document of white pages, you need to brush up on the basics. Such documents were in use decades back. Today's business plans are slick, crisp and precise. You can expect an investor to go through the entire document only if it’s short and to-the-point.

Apart from the length, the content and presentation of the business plan also matters. Investors are only impressed if they find that you have put effort into creating the document. Analysis of the potential market, identification of customers, creation of a business model and other elements must be incorporated in the plan.

A lengthy, drab and monochromatic document can never attract investors. The best way to prepare the plan is to use slides to highlight the main points, an executive summary, a management team, a marketing plan and financial projections about your new venture.

A strategic business plan identifies the path you need to take to get your business from its present state to its future. The first task is to decide where you stand now, and the second is to decide where you want to be within a specific period of time. The next task is to create the path that takes your business from its conception to prosperity.

This path is your business plan.

Business Plan Photo via Shutterstock

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Smartphones Surpass Regular Cell Phones – Tablet Growth Surges

Posted: 07 May 2013 01:30 PM PDT

smartphone market share

Smartphone shipments now outnumber those of “regular” cell phones worldwide.

It’s the first time smartphones — that is, phones capable of computing and Web access — have outnumbered ordinary cell phones on a global scale. Here in the United States, smartphone shipments surpassed ordinary cell phones back in 2011.

The International Data Corporation, a global marketing intelligence firm, says 51 percent of the mobile phones shipped out in the first quarter of this year were smartphones. That’s 216.2 million out of a total 418.6 million mobile phones.

Another mobile device making big strides worldwide is the tablet, The Tech Report says. The website reports that tablet shipments more than doubled. There was a 117 percent increase of tablets shipped over last year, from 18.7 million in the first quarter of 2012 to 40.6 million in the first quarter of this year. While still a fraction of smartphone shipments, the pace of tablet growth is impressive.

Here’s the reason all of this is important: if people are using smartphones and tablets, they will increasingly interact with their favorite brands on mobile devices.

We’ve reported before about the increasing relevance of mobile marketing.

In 2012, Juniper Research projected mobile payments could reach $1.3 trillion by 2015.

So, small businesses need to be sure their sites are mobile friendly and ready to accept mobile payments where applicable.

Experts also worry about the security threats associated with mobile payments and accessing data through mobile devices. Internet security company Symantec reported a 58 percent increase in mobile malware between 2011 and 2012. Nearly one-third of those attacks aimed at stealing information, the report states.

Smartphones Photo via Shutterstock

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Factors Responsible for the Imminent eCommerce Growth Wave

Posted: 07 May 2013 11:00 AM PDT

ecommerce growth

It is natural that every etailer predicts future trends that fuel eCommerce growth. Some become successful in predicting the right trends while a few fail to do so. A healthy growth figure of eCommerce success can only be impacted by the integration of various strategies that can make online shopping more enjoyable and unique. However, these strategies are quick to implement.

If you are one such eCommerce entrepreneur reading this to learn about the prospective trends to follow for your online store, you have landed at the right place. This will provide you with a comprehensive picture of the factors that will drive the next eCommerce growth wave.

Factors Responsible for the eCommerce Growth Wave

Curated eCommerce

Shopping for lifestyle is more engaging and richer as analysis sees it across eCommerce industries. The powerful influence of various social media tools such as Pinterest or Facebook allows consumers to organize their favorite items and segment it into themed collections to share it with others.

This fuels personal expression in shopping and makes others reflect on their purchase decision. This is the evolution of influential personal recommendation.

Adoption of Multi-Channel Investments

Cross-channel investments are highly aggressive in augmenting both online and offline buying strategies. Multi-channel eCommerce business is an environment in which a company can sell through two or more online channels. Many stores are pushing endless-aisle initiatives and are being used as a warehouse for an online catalogue to enhance the speed of home delivery.

Sometimes a company also inherits legacy Web store from an acquisition.

Unique or Commoditized Products

Establishing a reputation and brand for quality products always drives demand. Commoditized products such as mainstream tools, consumer electronics or other equipment's generally show less success while selling online. Even though these are the most popular online items, consumers prefer to buy them from renowned retailers such as eBay or Amazon.

Some small businesses have found success through affiliation with major retailers.

Remarketing

Businesses of any size have to be creative to stand out of the crowd. Ecommerce creativity emerges from multiple touches to produce continued interests in the products. In one word, this technique is popularly known as Remarketing.

When any potential customer visits a website but leaves it without purchasing any items, companies follow them online. The attitude of the customers can be changed through Remarketing. Remarketing can convince an online shopper to revisit a website to complete their purchase that they have previously failed to do. It is a method of conversion marketing which is a receptive marketing technique that endeavours to appeal a consumer response.

One can experience Remarketing if they notice any ads that are extremely reflective of their interests.

Maintaining eCommerce Sites by the Third-Party Provider

Creating an attractive and functional eCommerce site is quite a challenging task. However, a third-party eCommerce provider will make this task simple for you. They offer site set up and maintenance to entice businesses. For instance, some of the third-party eCommerce site providers do not charge any transaction fees once the items are sold. Instead, they offer monthly plans.

Besides, the emergence of digital services is gradually proving to be the leading driver for eCommerce growth. The rise of portable mobile devices and advanced videos is increasing the desire of the consumer to spend more time researching online for price matching and ultimately on their buying decision.

Let us find out the impact of mCommerce to drive eCommerce future progress. Research shows that 81% of the Smartphone users access the Internet on their mobile devices. Does the eCommerce store need any other reason to make their sites mobile optimized? (I guess NO). With the discovery of different innovative apps every day, eCommerce has matured extensively. It is not just the phones that are driving retail Web traffic, but, tablets are equally responsible in this context. Tablets are mostly used during evening prime-time hours, when the consumers are in their leisure state of mind.

Payment methods can make or break a purchase decision. The choice of payment methods offered to the consumer seems to be constantly evolving. Besides the growth of contactless payment methods with mobile transactions, there is a drastic change in the way people pay for their products. Services like Apple's iTunes and PayPal have already initiated centralized payments on various mobile devices. Such liberties to accept payment will be invaluable for merchants of all sizes in the near future.

Nonetheless, eCommerce merchants have the freedom to incorporate richer media content than ever before. The increased use of videos to provide insights into products has undoubtedly made the shopping experience more delightful. Videos are a great alternative to give customers a virtual feel of products.

The eCommerce industry will continue to evolve and progress with the passage of time. Of all the upcoming trends, the only thing that will remain consistent is the need to build loyal customers through competing on value and by providing quality customer service.

eCommerce Photo via Shutterstock

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Senate Passes Internet Sales Tax; Bill Moves to House

Posted: 07 May 2013 08:00 AM PDT

online sales tax

More than two-thirds of U.S. Senators voted in favor of the so-called Internet Sales Tax on Monday evening. Small business owners who do business online are divided on the measure.

According to CNNMoney.com, the Senate voted 69-27 Monday to pass their version of the Marketplace Fairness Act. The bill now moves to a divided House and if it gets through that body, it would go to President Barack Obama, who has previously expressed his support of the measure.

The Marketplace Fairness Act, or Internet Sales Tax, would allow states that collect sales tax on regular purchases at brick-and-mortar retail shops to impose a sales tax on goods sold online to their residents, no matter where the seller is located. States can require online merchants to collect sales tax if they generate $1 million in sales or more in state, even if they do not have a physical presence such as a store or warehouse.

For small business owners, as we’ve reported, the Internet Sales Tax is likely to have a profound impact on how business is done. Small businesses that try to compete with bigger brick-and-mortar shops by selling their products on sites like eBay will now have to consider their prices, factoring in the tax. What once was an appealing deal for consumers because they didn’t have to pay a sales tax may not be much of a bargain when sales tax is accounted for.

Opponents of the Internet Sales Tax say the bill would turn many small business owners into tax collectors rather than merchants. Small businesses would be burdened by being forced to collect sales tax from more than 9,600 tax jurisdictions across the U.S. If the bill becomes law, small business owners everywhere could be subjected to out-of-state audits, eEay President and CEO John Donahoe recently said in an open letter opposing the Marketplace Fairness Act. He added that businesses generating less than $10 million in sales or having less than 50 employees should be exempt from the bill if it becomes law.

Texas Sen. Ted Cruz has been an outspoken critic of the Marketplace Fairness Act. A post from the online merchants’ advocate We R Here quoted Cruz from an op-ed saying, “Imposing a national Internet sales tax while the nation is still trying desperately to create jobs and provide new opportunities for millions of Americans still struggling to find work is economic foolishness.”

By contrast, the affiliate marketing industry has largely embraced the bill, saying it will eliminate the need for so-called affiliate nexus taxes in six states including Arkansas, Connecticut, Illinois, New York, North Carolina and Vermont. Those laws have caused online merchants to end their relationships with affiliates in nexus states, causing affiliates in those states to close shop or move across state lines to stay in business.

U.S. Capitol Photo via Shutterstock

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Top 5 Expenses a Startup Cannot Avoid

Posted: 07 May 2013 05:00 AM PDT

startup expenses

Initiating a business is exciting, fun even. But startup dreamers shouldn’t forget the business of starting a business. Sure, it's enjoyable to pick out a cool logo, a mission statement, a team of professionals to back your vision and a sweet office rental. But don't let the looming, obligatory startup expenses involved in getting your startup off the ground get lost in the excitement.

If you do, your success will falter. Estimating an accurate startup cost is essential to meeting your future goals. Make sure you get your funds in order for the following expenses.

Top 5 Unavoidable Startup Expenses

1. Professional Costs

Whether you're setting up an LLC, a corporation or otherwise, you're going to have to pay a fee just to move past the phase of conceptualizing your startup by making it into a real, registered business. States differ on costs and registration procedures, but this is often the first check you're going to stroke as you get your business off the ground.

Your professional costs will expand and skyrocket from there: You're going to need to shell out expenses for copyrights and patents. And, you're definitely going to need an accountant and a lawyer at some point, and we all know how affordable those services are.

2. Technology

Another one of the initial startup expenses not to discount as you financially plan for your startup is the cost of designing, developing and hosting a website. A lot of people naively think that they can accomplish most of these technological feats themselves, and they can dream on. Designing, developing (and most importantly) efficiently hosting an e-commerce site to house your startup is no easy task.

Unless you have a fully-functioning, professional IT staff on board when you initiate your startup (which I'm guessing you don't), you're going to have to look into a qualified hosting company that can provide your site with the resources it needs to successfully get off the ground. This will likely include talk of servers, hardware, software, Web security, maintenance and further IT consulting.

And, don't forget other tech costs like high-speed Internet access, printers, payroll software, cell phones and beepers. Okay, just kidding about that last one.

3. Marketing

It's likely that you're not going to forget about the fact that you're going to be shelling out some money for advertising and promotion to effectively get your new business off the ground. But hear me out. There's a chance you might not be factoring in quite enough funds in this department.

Sure, you know you're going to want to place ads locally and nationally (who knows, maybe globally), and you're probably going to be looking into paying for online advertising and SEO costs. However, common marketing expenses are often forgotten, like the fact that you're going to be printing stationery, posters and other marketing materials. And don't forget the cost of admittance to trade shows and industry events to get your name out there (as well as chamber of commerce membership fees and the expenses involved in joining industry associations).

Public relations isn’t cheap, but investing in PR can take your business far, fast.

4. Administrative Costs

Little things add up, so take everything into account when budgeting for your startup expenses — right down to the purchase of paper clips and staples. Never mind the bigger expenses like desks, office chairs, filing cabinets, etc. Also, remember that administrative costs go far beyond office supplies to include licenses and permits, parking, utilities, rent and more.

Plus, if you want to really look professional, you're going to need to invest in the proper packaging materials for your business (and don't forget shipping and postage), which brings us to the next startup cost factor not to be forgotten.

5. Cost of Sales

It seems counterproductive to think of your startup's first few sales as costing your business money; but that's how it is when you're just starting out. Raw materials are going to factor into the cost of your sales, and you're going to have to beef up your product inventory in order to actually even make those sales.

If your startup is going big, then you'll have to factor in warehousing and shipping insurance as well.

Don't Freak Out

Take a deep breath and stop biting your nails. Now roll your shoulders a little and relax.

The above mentioned startup expenses shouldn't freak you out and discourage you from accomplishing your startup dreams. But you should take note of them as you budget for the future of your business.

Every company's startup expenses and costs may differ, but chances are you'll be spending some time and money getting some of these facets of your nascent business in order. And if you do so mindfully — your startup will grow into a full-fledged, successful company.

Expenses Photo via Shutterstock

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