Competitive Edge Blog

Most venture capital firms concentrate primarily on the competence and character of the proposing firm's management. They feel that even mediocre products can be successfully manufactured, promoted, and distributed by an experienced, energetic management group. They know that even excellent products can be ruined by poor management.

Next in importance to the excellence of the proposing firm's management group, most venture capital firms seek a distinctive element in the strategy...

Many of today’s new ventures, particularly Internet startups with their enormous cash requirements, high risk, and high potential return, require approaching the venture capital marketplace.

What Venture Capital Firms Look For

One way of explaining the different ways in which banks and venture capital firms evaluate a small business seeking funds, is expressed by LaRue Hosmer as: "Banks look at its immediate future, but are most heavily influenced by its past. Venture...

In making loan requests, entrepreneurs tend to be confident that they will meet or exceed what they consider conservative financial projections. They then have trouble understanding when they receive a less than enthusiastic response. To complete the picture, however, we need to look at the process from the banker's perspective.

"What bankers view as a good loan application is at times different from what applicants think," says Ray Fincken, vice president of HSBC Bank USA in N...

The most common business structures are proprietorships, partnerships, and corporations. A proprietorship is simply a one-owner business. It is the most prevalent form (on the order of 70% of all businesses) because it is the simplest and least expensive to start.

A partnership is basically a proprietorship for multiple owners. Most are general partnerships, where each partner is held liable for the acts of the other partners. A limited partnership allows for general and lim...

Small businesses are not scale models of big businesses; they are characterized by resource poverty and dependence on a fairly localized market. Their greater vulnerability to the consequences of a lack of focus stresses the importance of their strategic plan.

The strategic plan defines the company's "competitive edge," that collection of factors that sets the business apart from its competitors and promotes its chances for success. It requires a clear evaluation of the compe...

One alternative to starting a business “from scratch” is to buy an existing business. To some extent, buying a business is less risky because its operating history provides meaningful data on its chances of success under our concept. We must, however, balance the acquisition cost against what the cost of a startup might have been.

Small-business sales are generally (on the order of 94%) sales of assets, with no assumption of liabilities; only about 6% are sales of company sto...

Back when I owned an inventory-based business, one of my better customers had a clever barb in his repertoire. If we were out of anything he needed in his order, he would say “You know, this would be a great place to open a supply house.”

But supply, we did for 20 years on my watch. We were in a smaller market, handling about 10,000 separate items, so we enjoyed few economies of scale. We competed with some large distributors and did very well largely due to our focus on invent...

A market analysis is a study of the market area and of probable future patterns. It should include the current state of the market, and the nature and extent of competition. The purpose of the analysis is to make it possible to develop more accurate, that is, more fact-based sales forecasts.

The first...

Abstract: Once a business idea is selected, it is highly recommended that we sharpen the concept by a detailed planning process. While this may seem a daunting task to first-time entrepreneurs, many “veterans” have found that there are software packages that can help to organize and format the material required for a comprehensive plan.

Once a business idea is selected, it is highly recommended that we sharpen the concept by a detailed planning process. The result of t...

This is a case study to sharpen your skills at forecasting and break-even analysis.

Dwight Payne and Gary Heap reside in Santa Barbara, CA, where they attend college and pursue their mutual hobby of science-fiction book collecting. They pooled their book collection of over 4,000 volumes, and sci-fi magazines going back over twenty-five years. All neatly cataloged and indexed, they estimate it would cost $20,000 to assemble the collection today.

Payne and Heap decide...

A significant advantage of some business ideas is that the venture can break even at what seems to be an easily achievable volume. A technique for quantifying that volume, called break-even analysis, examines the interaction among fixed costs, variable costs, prices, and unit volume to determine that combination of elements in which revenues and total costs are equal.

This article is drawn from our Entrepreneurship Knowledge Services series.

Fixed costs are those exp...

If you are considering buying or selling a service industry business you need to start with an evaluation. This can be very complex and the use of a venture research service provider can often give you a value that you can easily defend. The following article outlines the process, and is extracted from FBB Group Ltd: https://www.fbb.com/company-information/recentarticles/how-to-value-a-service-...

Do you have an idea for a book? Unless you can find a traditional publisher to fund it (no small feat) your only alternative is to self-publish. There are essentially no standards to what can be self-published. Of course, you fund the project yourself. For an overview of self-publishing see http://www.sfwa.org/other-resources/for-authors/writer-beware/pod/.

There are several companies that offer pa...

The following is excerpted from Careers in Entrepreneurship, http://careers-in-business.com/en.htm. If you find it overwhelming, consider entrepreneurial career consulting. There are sources of free consulting such as SCORE, http://www.score.gov.

Entrepreneurs start new businesses and take on the risk and rewards of being an owner. This is the ultimate career in capitalism - putting your idea to work in a competitive economy. Some new ventures generate enormous wealth for the e...

A franchise is a continuing relationship between a franchisor and a franchisee in which the franchisor's knowledge, image, success, manufacturing, and marketing techniques are supplied to the franchisee for a consideration. This consideration usually consists of a high "up-front" fee, and a significant royalty percentage, which generally require a fairly long time to recover.

Here are some statistics about the industry (Read More

Franchising provides a way for franchisors to grow their businesses more quickly than they could on their own. For franchisees, it reduces the probability of failure. Substantial personal resources are required to pay the franchise fee and all the other costs associated with start-up. The franchisor may or may not provide assistance with financing.

Often entrepreneurs engage a franchise business consultant to help evaluate and select the best fit to the buyer. Franchise model...

The following is excerpted from "Tips for Better Strategic Planning," By Erica Olsen. It is part of the Strategic Planning Kit For Dummies Cheat Sheet, http://www.dummies.com/business/strategic-planning-kit-for-dummies-cheat-sheet/ Before you get too far into your strategic planning process, check out the following tips — your quick guide to getting the most out of your strategic planning process:

Market Research Plan Consultant

From an ad for Ground Floor Partners (https://groundfloorpartners.com/market-research/ )

Accurate market research is the foundation for every business or marketing plan (https://groundfloorpartners.com/marketing-plans/) Ground Floor Partners can help you gain a much deeper understanding of:

• marke...

If you are considering buying or selling a service industry business you need to start with an evaluation. This can be very complex and the use of a consultant can often give you a value that you can easily defend. The following article outlines the process, and is extracted from FBB Group Ltd: https://www.fbb.com/company-information/recentarticles/how-to-value-a-service-business.

...

This writer, with Dr. Suzanne Erickson, is co-author of the book “Raising Entrepreneurial Capital.” The second edition of the book is currently published by Elsevier.

Raising Entrepreneurial Capital guides the reader through the stages of successfully financing a business. The book proceeds from a basic level of business knowledge, assuming that the reader understands simple financial statements, has selected a specific business, and knows how to write a business plan. It provide...

Hubspot suggests that “Earning the trust of prospective customers can be a struggle. Before you can even begin to expect to earn their business, you need to demonstrate your ability to deliver on what your product or service promises. Sure, you could say that you're great at X, or that you're way ahead of the competition when it comes to Y. But at the end of the day,...

For many businesses their competitive edge lies in their knowledge. Entrepreneurship Knowledge Services offer a way to maximize your advantage. The Canada Business Network expands upon this concept:

“What Is Knowledge In a Business?

Using knowledge in your business isn't necessarily about thinking up clever new products and services, or devising in...

The following is excerpted from Entrepreneur magazine: “The dictionary defines a consultant as "an expert in a particular field who works as an advisor either to a company or to another individual." Sounds pretty vague, doesn't it?

Businesses certainly understand what consultants are. In 1997 U.S. businesses spent just over $12 billion on consulting. According to Anna Flowers, spokesperson for the Association of Professi...

A new year, a new you: it’s a time-honored tradition to treat yourself to a spruce up as one year becomes another.

But the start of the next 12 months of your life isn’t just a chance to dust off your cobwebs and hit the gym, it’s an opportunity to make a big career change by starting a new business.

Running your own business is a challenging, but supremely rewarding, experience. If it’s something you’ve been thinking of for a while — there is no time like the present to ...

An important consideration in setting up a new business is to set up an accounting system which is easy-to-use but robust enough to contain features needed for a well-managed business. QuickBooks is the accounting system of choice of many professionals.

Mariette Martinez discusses the pros and cons in terms of the features required by sm...

The Census of Retail Trade provides the average number of stores per capita for a variety of retail outlets. Based on their data, we can determine how well our proposed market area is served on a relative basis for the type of business we plan to start. For example, there is, on average, a stationery store for every 33,000 people; for every 26,000 people there is one bookstore and one nursery and garden supply store.

A piano tuner recently moved to Buffalo, NY, and would lik...

The prospective new business owner approaching a lending institution should keep in mind the "five c's of credit:" character, cash flow, capital, collateral, and (economic) conditions. Character consists of the borrower's integrity, experience, and ability; particularly close attention is paid to a borrower's credit history, which is a matter of record. Should you decide to try to fund a startup through a commercial lender, the remaining criteria are addressed in the loan request.

The purpose of the business plan is to recognize and define a business opportunity, describe how that opportunity will be seized by the management team, and to demonstrate that the business is feasible and worth the effort.

The successful entrepreneur is generally more inclined, once a business idea is selected, to sharpen the concept by a detailed planning process. The result of this step is a comprehensive business plan, with its major components being the marketing "mix", the ...

In his book, The Road Ahead, Bill Gates of Microsoft writes of “friction-free capitalism” made possible by developments in communications, chief among them the Internet and its World Wide Web. In this context, “friction” is everything that keeps markets from functioning as the “perfect competition” of economics textbooks. This friction can be a function of distance between buyer and seller, costs of overcoming this distance, and incomplete...

Craft an entry strategy. What type of business could best seize the chosen opportunity?

The basic rule is simple: "Find a market need and fill it"! The process of finding the need, and the method chosen to fill it are where the difficulties arise.

Based on our opportunity scan, does the market need a product or service that is not currently being provided? Is there a needed product or service currently being provided in a less than satisfactory way? I...

Abstract: What kinds of people start businesses? Their skills are seldom different from those of people who succeed at working for others. The more successful entrepreneurs tend to be proactive, assertive, and highly observant.

Why do people start small businesses? The most frequently cited motivation for business start-ups is to allow the entrepreneur to achieve independence; money is secondary. Is this surprising? The other reasons named most often are that an opportun...

Abstract: Innovation, in a business context, is generally thought of as the product or application of creativity. Peter F. Drucker suggests that innovation "is the specific instrument of entrepreneurship".

Mr. Drucker further suggests that there are seven sources of innovative opportunity. Four of these relate to a specific industry or service sector: the unexpected; the incongruous; process needs; and structural change. The oth...

A brief case study in entrepreneurship is presented to demonstrate how opportunities can be evaluated.

Business opportunities are often based on broad trends, such as:

The process of creating or seizing an opportunity is less the result of a deliberate search than it is a mindset of maintaining a form of vigilance that is sensitized to business opportunity. Successful entrepreneurs recognize an opportunity while it is still taking shape.

Richard Branson, billionaire ...

In the golden age of ecommerce, it has never been easier to set up and start generating a profit online. If you have a product to sell, or you’re looking to make money from your blog, this post will tell you how you can use websites to help you pay the bills.

Step One: Choose a Niche

As the range of goods and services available online is extensive, you should start off approaching your home bu...

We are all self-employed; even as employees of a firm, we are still primarily personal career managers.

Many people equate being self-employed with being an entrepreneur. We suggest that few of us are entrepreneurs, but all of us are self-employed. To make the distinction, let us explore the requirements of entrepreneurship.

Entrepreneurship is generally characterized by some type of innovation, a significant investment, and a strategy that values expansion. The entre...

You may have noticed that I am pushing my latest book pretty hard. I made a large investment and am struggling to move them. See 8 Steps to Starting a Business. The included picture shows our sales force. I also offer small-business consulting services, and operate a travel agency. How may I help you?

How would you like to donate entrepreneurship textbooks to schools to encourage teaching of the topic?

"8 Steps to Starting a Business" is my latest book on entrepreneurship. It is written at a level suitable for community colleges and advanced high schools.  The book is well researched, interesting (with lots of case studies) and challenging.

The book is self-published with a retail price of $20. The total cost per copy (printing,...

An elevator pitch is an overview of your business that can be conveyed within 30 seconds (30-80 words) during a ride on an elevator with a prospective stakeholder. It should leave your listener wanting to know more. Elevator pitches can be written for products, people or businesses.

There are a variety of advantages in defining your elevator pitch or mission of your small business and much of your marketing efforts...

Introduction

Entrepreneurship is the process of creating or seizing an opportunity, and pursuing it regardless of resources currently controlled. The American Heritage Dictionary defines an entrepreneur to be "a person who organizes, operates, and assumes the risk for business ventures."

These are rather abstract concepts for a person just beginning to consider whether they ought to start a business rather than take a job, or leave a secure job for a chan...

The "spark" for many entrepreneurs is seeing an opportunity that doesn’t yet exist. Ted Turner, for example, launched CNN because he perceived that people wanted more television news than they were being offered. It took a lot of patience on Turner’s part to realize the vision, but he had read the market in a way that few "experts" did at the time.

In realizing the promise of CNN, Turner demonstrated another facet of the entrepreneurial spirit, persistence. There are a lot of bri...

As everyone who has launched their own business knows, becoming self-employed can seem like a double-edged sword. You have all the benefits of being your own boss, choosing the direction your business takes, and selecting the team you work with. However, as Benjamin Parker often told a young Spiderman, “with great power there must also come great responsibility.” After all, if things do not go as planned, you are the one who will have to bear the co...

What is your concept of what a consultant does? They consult with businesses, but what is it that they offer that the business can’t handle itself? Generally they have a specialty that the business lacks, or a specialty that is in short supply. The specialty is often called the consultant’s “niche.” Can you identify your niche? It is important that you be able to describe this niche to the prospective client so that they are clear about what you have to offer. Specialties include busine...

When an entrepreneur is starting a business he or she is faced with the requirement of several functions in which they might not be experts. They may know, for example, all there is to know about wholesale distribution but have no idea how to build a website.

Since most companies are started with very limited funds, many entrepreneurs are reluctant to set money aside to pay for consulting services to fill in their knowledge gaps. For example, many create a website from the many t...

With a heightened awareness of opportunity, ideas can often be generated by market research. The National Women’s Business Center (NWBC) defines market research as “a systematic, objective collection and analysis of data about your target market, competition, and/or environment with the goal being increased understanding. Through the market research process, you can take data–a variety of related or non-related facts–and create useful information to guide your business decisions.

1. Find out about your potential partner by talking to them, reading their mission statement and researching them – as well as learning how they make decisions. This will reveal the "buttons" that you’ll need to press as you describe the benefits of the partnership (i.e. more profits, something new to offer their clients, giving their business a new edge on competition, etc.).

2. Make an offer they can’t refuse. Again, this will also take some re...

Q: I am not yet ready to be self-employed, but wish to be in the near future. What can I do in my current job to prepare?

We are all self-employed; even as employees of a firm, we are still primarily personal career managers. Still, some of us are, or will become, entrepreneurs.

The U.S. Small Business Administration has developed a Checklist for Going into Business (http://www.sba.gov/content/use-our-starting-assessment-tool) that leads the prospective...

About 8 Steps Can entrepreneurship be taught? Many of the skills of successful entrepreneurs can be taught, and sensitivity to business opportunity can be sharpened. A thorough and orderly approach to business planning allows us to assess whether an opportunity exists, and to chart the best way to take maximum advantage of that opportunity.

From there, a hardy individual can decide, with a little less uncertainty, whether or not to pursue that opportunity. A feat...