Guide To Access Capital Exploratory

Guide to Access Capital: Exploratory Phase

As a small business owner, the search for capital can be stressful to even think about.  In this exploratory phase, we recommend 5 steps that will help you prepare to “take it to the bank.”  Whether you are a start-up or an existing small business not making a profit yet, you can use these steps to save time and money.

1) Determine what you love to do that you do well, that someone will pay for.

We recommend to entrepreneurs that you pursue something that you know well, that you enjoy doing and do very well.  You can go to www.NitaBlack.com home page and download the Funding Your Sweet Spot guide.  This will help you clarify what you do or want to do.

A key element to any business is demand for your services and products.  This means that people are willing to write you a check for what you do.  If your prospective clients do not want to pay or are unable to pay you for your services and products, then you should re-think who your target audience is.  Target audience is who is the most likely client who will pay for what you do, what you offer.

2) Use a one-page business summary to begin describing your business.

The Cash Maker Brief we provide at the end of this blog is a way for you to summarize most, if not all, of the key elements of your business in one page.  You can use this as a start to describe your business.  As you progress with planning your business, a more detailed business plan will be needed.  We recommend using LivePlan.com as a cloud-based business planning tool.  Start with the one-page summary first and then integrate this summary information into LivePlan.com to develop an extensive business plan.

3) Research your industry and your competition.

Once you draft the one-page business summary, do some research on your industry.  You can use free tools on the internet and reports from sites like Census.gov to determine how many other businesses do what you do, what are their annual revenues, how many people do they employ, what are their average annual wages.  The more you know about your industry, the better you will be able to compete for client business.  Think of the industry information as the total group of competitors you need to know about so that you can beat them out of business.  The industry data reflects the market, how much people have spent on products and services in your industry.

Once you have identified your NAICS code(s) and pulled industry information, then look for specific competitor examples.  Pick 3 to 5 main competitors in your region and compile their information by name, headquarters, number of employees, messaging, colors, management team, legal structure, everything you can find out about each main competitor.  Then compare your information with each of your competitors on a grid so that you can see information side by side, in one snapshot.

The set-up of a sample competitor grid is shown below:

Download Competitor Grid

4) Estimate 12-months cash-in/cash-out.

Use a simple spreadsheet to estimate cash-in and cash-out for the first twelve months.  You should start with Beginning Cash.  This is the amount of cash you plan to put into the business from day one.  Then begin to estimate the number of customers you think you can sell to each month.  Estimate average sales price for each customer to determine total sales for each month.

In most service businesses, there is very little cost of goods sold.  The cost of each sale is the time that it takes to deliver services.  Since there are only 24 hours in each day for each person, this is another element to think about as you forecast cash-in and cost of goods sold.

Estimate monthly fixed expenses, like insurance, telephone, rent, utilities. Once you see how much cash you have left over, then estimate monthly wages.

For a complimentary copy of our 12-month Cash Maker Forecast and Instructions, you can email info@nitablack.com to request a copy.  You can also find various financial forecast templates to help you estimate cash-in and cash-out.

5) Review steps 1 through 4 – go or no-go?

Once you complete steps 1 through 4 above, think about the work it is going to take for you to do what you want to do.  Review your research and determine how difficult it may be to compete with others who provide similar products and services.  Decide if you are ready to legally organize your business and begin testing the market to sell your products and services.  At this point you may have spent some time thinking about your business and strategies to make money, but perhaps you are not out-of-pocket by spending a lot of money yet to get the business set up.  It’s okay to decide to ditch your idea and explore something else – better to do that now rather than waste time and money on an idea that has a lot of challenges from the get-go.

Watch for our next blog, Guide to Access Capital: Business Education Phase

Connecting 901eLearn with people who want “more.”

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