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Business Moats – What Are They?

English: Moat at Caerlaverock Castle, Dumfries...
Moat at Caerlaverock Castle, Dumfries and Galloway, Scotland (Wikipedia)

By Randy Videen, Certified SCORE Mentor

Does your business have any sustainable moats? If so, how might you increase their size? If not, how might you build some? (Sustainability is of key importance. The more endurable the moat the greater the value.)

Business moats are sustainable competitive advantages. They help your business generate profits, protect your business during downturns and should help you grow your business profitably. Businesses without moats often find increased sales unrewarding. A permanent increase in profits without moats is difficult if not impossible.

Below are some examples of business moats:

  • Superior product performance – May include better product design or performance, consistent performance or flavor, ease of use.
  • Superior customer service – Including faster and or better delivery of products and or services, friendlier customer service.
  • Lower cost of production – Your business must have sustainable cost advantages which are not easily replicated by your competitors. A patentable process or design may lead to a long-term cost advantage. Costs reduced by capital expenditures which your business’s competitors will also eventually deploy are only temporary. The successful investor Warren Buffett likened large investments in capital in a low margin business to standing on your toes in a theatre. Soon everyone (meaning your competitors) is standing on their toes and yet no one, other than the company selling you the equipment has gained any advantage.
  • Customer loyalty – Often developed through a combination of factors. And often includes a business employing customer representatives who are friendly, courteous and helpful.
  • Stickiness – Aside from customer loyalty what criteria in your business model might make it difficult for customers to leave you and or pleasurable and easy to stick with you? What actions might you take to adhere customers to your business? Is it simple and easy for customers to order from you? Are most orders free from errors? Would it be difficult for your competitors to replicate your business model, level of service and quality of production?
  • Marketing – A business’s ability to reach potential customers more effectively and or efficiently. Many industries correctly spend substantial time and effort developing a marketing plan which enhances their business’s image, increases product awareness and sales. In the new modern day world of electronic marketing it is essential that you understand what drives customers to your electronic message.
    If it were simple and easy to build moats more businesses would have them. In addition to effort strategy almost always key to building sustainable moats. Some of the keys to developing and maintaining moats are;
  • Recognizing Changes in the Marketplace – It can often be difficult to recognize changes in the market place and customer needs in the market place. Employees closest to the customers are often best situated to recognize change.
  • Communication – How will you know when customers are dissatisfied? Does your business provide a simple and easy method for customers to communicate with your employees? And likewise are employees encouraged or incentivized to communicate with management? Is management too insulated or overburdened to be attentive to information which is delivered?
  • Flexibility – From the ground up your business must be flexible when necessary. This does not mean satisfying every customer whim. It does mean adjusting or even eliminating products or services when the needs of your customers are changing.

Many competitive advantages are best when identified through a business plan. It is imperative that you understand any competitive advantages your present or future competition has, who your customers are and what their needs are.

SCORE mentors are trained to help guide your through the process of developing or enhancing a business plan whether you plan to start or improve your business. Greater Phoenix SCORE has over 70 mentors most of whom have decades of valuable business experience.
Randy Videen Randy is one of out newest SCORE mentors. He’s a private investor: independent study and investments in various businesses and industries including manufacturing, chemicals, plastics, distribution, services, retail, insurance, beverage, cable television and construction.
He’s been responsible for multi-managerial and operational functions for this restaurant grossing $1M in annual sales volume and employing 40. Developed a productive team which included numerous long-term employees. Employed a profit sharing plan assist in reward and motivate employees. Negotiated contracts, insurance coverage, leases. Maintained extremely low workmen’s compensation and insurance claims. Eventually delegated the majority of duties to a dedicated, successful management team. Click here to schedule a free appointment with Randy or another SCORE mentor.

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SCORE Partner – Arizona Commerce Authority

ACAlogoOne primary resource for Greater Phoenix SCORE business mentors and their clients is the Arizona Commerce Authority (ACA). The overall mission of the ACA is to advance economic development by recruiting out-of-state companies to relocate their operations in Arizona; to work with and grow existing companies in Arizona; and to partner with entrepreneurs large and small to create new jobs and businesses.

The ACA is overseen by a public-private sector board appointed by the Governor. Its day-to-day management team has programs and services to assist with every stage of a start-up, specifically Small Business Services (SBS). Small Business Services has two primary focuses-first by advocating for and developing policies and programs addressing the needs of the small

business; and second (and most important to the SCORE business mentor and client) to provide information on business licensing and statewide resources for every stage of the business development.

As you navigate through the ACA’s website you will find the Arizona Entrepreneur’s Edge (AzEE). This is a resource guide to starting, operating and growing a business. Topics are broad and comprehensive ranging from business structures, registration and licensing to labor guidelines and workforce assistance.

The website provides a Checklist Program with tools to help the SCORE business mentor and client navigate quickly the business licensing required to start and operate a business in Arizona.

Along with the Checklist Program is a resource, Frequently Asked Questions (FAQ) and quick links to state, county and city licensing offices.

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The Buzz About Creating Your Own Business

Entrepreneur Mentor Success

So you’re looking into starting your own business. SCORE mentors presented “The Buzz about Creating your own Business” on Dec. 7, 2013. If you missed it, here are the slides.

Are you an entrepreneur? If you’re:

  • A self-starter
  • Resourceful
  • Responsible
  • Organized
  • A hard worker
  • Persistent
  • Decisive
  • Healthy
  • Have family support

If you’re thinking of starting your own business, SCORE volunteers are available to help you for free in whatever stage you’re in. Whether you have questions about

  • Financing
  • Marketing
  • Is my idea viable?
  • Is there a market for my idea?
  • Should you buy an existing business or start from scratch?
  • How to put together a business plan
  • Accounting
  • Types of businesses

Whatever your question, SCORE mentors have been there and can help you. Click here to schedule an appointment with a SCORE Mentor.

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When Your Business Plan Meets Reality

by Bryan Janeczko, to see original post click here.

Business strategy organizational charts and graphs
Creating your business plan doesn’t come until Step 6 in Wicked Start’s 10-Step Roadmap for starting your new business. There’s a good reason for that. We believe there are five key steps to take before you spend the time to create your plan, and these critical steps will help you to ultimately be in a better position to develop a successful plan. That’s especially important if you’re going to use that plan to ask for money from outside sources.

Here’s an example of why the first five steps are so important. A Wicked Start user I’ll call Joe has been in a professional services career and now wants to open a retail establishment. He’s seen a store similar to his concept before, and thinks he can do a better job than the existing one. He made a plan and wants to go out to raise about $200,000 in capital, but he’s been having trouble.

When he expressed his frustration with the situation to me, I said, “Well, you’ve got a great professional background, and you’ve got a strong plan, but no one wants to give you money because you have no experience running this type of retail business, and neither do any of your advisors.”

The first step in Wicked Start’s Roadmap is about building a case for your idea. Joe has seen a similar store, but maybe he didn’t take the time to spell out the viability of this offering. The second step is about learning the industry, finding mentors, and actually getting experience.

After our conversation, Joe joined a similar business in another part of his town as a junior-level employee. This will help Joe see the operation from the inside, and will also show investors he’s so serious about his startup idea that he is willing to be the low person on the totem pole to learn the business. He’s also looking for mentors in this industry who can advise him in his new business.

The next thing I suggested to Joe was to develop a detailed design comps, wireframes, or pictures of stores he wants to use as models for his store to show to potential customers. He can use these to get  at least one focus group together to make sure these images and the offerings of his retail establishment resonate with his target customers. This is consistent with Wicked Start’s third step, which is developing a prototype of what you’ll be selling.

It’s after this hard work is done that Joe can think about establishing the structure of his business; finding the appropriate name, logo and website; setting up a bank account; and completing some of the other financial and legal nitty gritty that is required for new businesses to operate.

Once all this is done, it’s time to start writing the business plan. The plan will be stronger with this background, experience and focus group feedback. Including mentors or advisors with retail background will help him sell this concept as well. And thinking through some of the details of setting up your new business shows real commitment.

When Joe goes for funding, he’ll have a much stronger case with the addition of his experience and customer input, and with industry connections he’ll find more potential investors.  In addition to asking friends and family to invest, potential investors who would make “ideal” clients for his business would the best way to go for Joe.

Bryan Janeczko – Founder, Wicked Start
Bryan has successfully launched multiple startups. His latest venture, Wicked Start, provides tools to plan, fund, and launch a new business. Also author of WickedStart: Guide to Starting a New Venture with Passion and Purpose, Bryan is committed to helping small businesses grow and succeed.
www.wickedstart.com | Facebook | @WickedStart | LinkedIn | More from Bryan

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Transitioning to Entrepreneur from Corporate America

by Bryan Janeczko, to see the original post click here.

Working at home
Working at home (Photo credit: gibsonsgolfer)
More and more Americans are leaving the corporate world to start their own business. While some strike out to create a new industry or move in an entirely different direction, most decide to start businesses in the industry they have worked in throughout their corporate career.

Basing your startup in a field you know well offers many obvious benefits. Contacts, peers and clients can be transformed into co-founders, employees and customers. Familiarity with the market or manufacturing process, on-the-job training from their previous employers and even access to groups and associations in their industry are just a few of these clear advantages.

But, not all is perfect. There are some downsides to having a corporate background before becoming an entrepreneur, and they are more likely and pronounced if one has spent a long time in corporate America. Here are the key disadvantages:

1. Lack of Flexibility

In the corporate world people get accustomed to and even dependent on many things that just don’t work in an entrepreneurial environment. Complicated organizational charts, detailed and specific processes, reliance on big-brand suppliers, and similar things create a rigidity that takes away the nimbleness of their small business. Don’t try to beat the big guys at their own game; you need to be quicker, more responsive, and more creative.

2. Financial Stability

When you know how much your paycheck is, when it is coming, and the likelihood that it will continue to come in the future, it eliminates a lot of the hardest parts of financial planning, stress and management. With your own business, especially starting out or in growth spurts, you may have no income or even negative income for days, weeks, even months. (I took no pay in my first company for 1 1/2 years!) If you are not accustomed to this, it can be jarring and disruptive, and create issues in your family and community affairs. Plan accordingly, and prepare yourself for this potentially huge change in your life and lifestyle.

3. The Desire to Change Everything

Many people leave corporate America feeling under-appreciated, unfulfilled, and/or completely burnt out on working for someone else. They are essentially jaded towards the corporate environment, and swing much too far in the other direction. They may hire only or mostly friends and family, maintain no routines or timelines, and favor “going with the flow” over planning and strategy. While it is your business, remember, it IS A BUSINESS, and you have to have your priorities straight. Sure you can ditch the dress code, take a vacation when you normally wouldn’t or promote a more “relaxed” culture in your office, but don’t throw the baby out with the bath water. Corporate America makes big money for a reason, and you shouldn’t stray too far away from their models.

Leaving the corporate world to start your own business is exciting and liberating, and can very well lead to improved fortunes, lifestyle and satisfaction from your work. But, if not properly done, can have quite the opposite effect.  Have you made the transition to entrepreneur from corporate America? I’d love to hear your story in the comments below!

Bryan Janeczko Bryan JaneczkoFounder, Wicked Start Bryan has successfully launched multiple startups. His latest venture, Wicked Start, provides tools to plan, fund, and launch a new business. Also author of WickedStart: Guide to Starting a New Venture with Passion and Purpose, Bryan is committed to helping small businesses grow and succeed. www.wickedstart.com | Facebook | @WickedStart  | LinkedIn | More from Bryan

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Three Rules of Thumb for Setting Up Your Small Business Marketing Budget

Written by: Jeanne Rossomme

Owners are feeling more optimistic about the economy. Sixty eight percent of small businesses plan on increasing their marketing budget in 2013 (according to a recent study by Aweber), and almost all (97%) plan on at least maintaining their current level of marketing spend.

But that begs the question: What is a smart marketing budget? How much is too much, where you are throwing away resources? How much is too little, where your revenue will remain flat — or worse yet, eaten away by competition?

For this article I was hoping to come up with a neat chart with small business marketing benchmarks by industry. Unfortunately those figures do not seem readily (or publicly) available. But I have seen several polls by different companies that all point to the same general “rules of thumb” for marketing budgets. These levels of dedicated time and money are typical of businesses that are growing and want to keep growing:

  1. Dedicate about 10% of revenue to marketing and sales. Many companies (according to a recent survey by the CMO Council) spend quite a bit less than this figure with 16% of companies spending between 5-6% of revenue on marketing, with 23% spending over 6%. But marketers of new products often invest 20% of projected revenues for launch. So, in general for a relatively new and growing business budget, allocate about ten percent of revenue to marketing, with half of that amount spent on labor – either your internal staff or external marketing firms.
  2. Dedicate 20% of your time to sales and marketing. Every successful owner I know is spending at least two hours per day or a day a week on marketing and sales. Included in this time are cultivating relationships via social media and networking, bringing on distributors and salespeople, and managing marketing campaigns.
  3. Expect $10 in additional revenue for every dollar spent. Marketing and sales programs are an investment in your business. As such you should expect a significant return for your time and effort. (I will write more about specific metrics by marketing tactic later this month.)

 

Jeanne RossommePresident, RoadMap Marketing
Jeanne uses her 20 years of marketing know-how to help small business owners reach their goals. Before becoming an entrepreneur, she held a variety of marketing positions with DuPont and General Electric. Jeanne regularly hosts online webinars and workshops in both English and Spanish.
www.roadmapmarketing.com | @roadmapmarketin | More from Jeanne

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