Tag Archives: Consulting Service for Start Business

Business Structure and Financing

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 limited partners; limited partners’ liability is limited to their contributed capital.

If you choose to go into business with a partner, be sure to prepare a formal, written partnership agreement. This should address the contribution each will make to the partnership, financial and personal; how business profits and losses will be apportioned; the salaries, and financial rights of each partner, and; provisions for changes in ownership, such as a sale, succession, or desire to bring in a new partner.

The corporation is a legal entity, separate from its owners. It is a more secure and better-defined form for prospective lenders/investors. Incorporation is perceived as limiting the owner’s liability, but personal guarantees are generally required whenever there is liability exposure.

The traditional form is called the C-Corporation. An S-Corporation is frequently preferable as a start-up form, since the losses expected in the early stages of the business may be applied to the owner’s personal tax return. Other forms include the LLC, or Limited Liability Corporation; Trusts, often for a specific time frame or purpose, and; combinations of legal entities such as “CoOps” and joint ventures.

Enlist the legal and tax advice of the professionals as to which form suits your venture best.

Ownership Structure and Capitalization

Once the legal structure is decided upon, issues of distribution of ownership, and distribution of risks and benefits may be addressed. The primary decision to be made is whether the entrepreneur will finance the venture or whether there is a need for other stakeholders, and whether these stakeholders will be investors or lenders or some combination thereof.

Financing our venture by borrowing adds to our fixed costs, but makes no claim beyond the amount of the debt no matter how great our success. Standards for debt financing are generally very difficult for startups to meet; lenders are not generally willing to share the risk with you. If a lender turns you down, ask them for specific reasons. If the reasons cannot be countered with this lender, the insight gained can be used to strengthen the presentation to the next.

The advantage of selling shares of ownership to raise capital, referred to as equity financing, is that the investor is sharing the risks of the venture; this lowers expenses since there is no debt service to be paid. The investor also shares the rewards, however, and the entrepreneur must be careful not to sell the equity too cheaply.

What do we have to offer prospective investors? For most, their primary interest is in a high return on their investment, through dividends and appreciation. There is little appeal to most investors in being a long-term minority owner in a closely-held business, so some way of “cashing out,” must be offered, such as a provision for company buy-back or a public offering.

Venture capitalists look for generally larger deals and impressive returns. Many fund projects only in specific industries; some work only from referrals from within their “network.” Carol Steinberg, in “Success Selling,” puts the odds of receiving venture capital funding in perspective: “Each year a venture capitalist fields 400 to 500 deals, seriously reviews 40 or 50, and funds only 4 or 5.”

Less visible as a source of startup capital are individual investors, known as “angels,” who typically invest $50,000 to $250,000 in private companies. While we must generally “recruit” such investors ourselves, angels are thought to represent a significant pool of risk capital.

While stakeholders are hard to find at startup, sources of assistance are available. A good starting point is the U.S. Small Business Administration (SBA). Their Small Business Investment Company (SBIC) program allows private investment partnerships, or SBICs, to leverage their own capital using SBA guarantees.

John B. Vinturella, Ph.D has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

The Strategic Plan

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 competitive business climate and an intimate knowledge of the market for the entrepreneur’s product.

The foundation for the strategic plan is a clear mission statement for the venture. Addressing the following questions can assist in developing this statement:

What business am I in? The answer to this question is not as simple as it seems. A good example of an industry group that failed to take a broader view is the railroads. If they had viewed their business as transportation rather than trains-and-tracks, then the airlines would be named Union Pacific and Illinois Central.

Who is our product intended to satisfy? What customer needs are being satisfied? How are these needs being satisfied, that is, by which of our methods or products?

An important strategic option is in how we price our product (as a price leader, value leader, or prestige product). Other options include the way in which we differentiate ourselves from the competition and the particular “niche,” or subset of the market, we seek to serve.

Once we have set internal objectives, we must examine the external and competitive environments in which we will be trying to achieve them.

The external environment consists of those factors that are largely outside our control, but affect the market for our product. Examples of these factors include general economic conditions, regulations, technological developments, and consumer demographics and attitudes. This environment is very dynamic, but some attempt must be made at projecting its changes.

Analysis of the competitive environment must begin with consideration of whether there are any barriers to the entry of a new competitor into the market. How strong is consumer loyalty to existing brands? How important are economies of scale; can a small independent firm compete? Are capital requirements prohibitive? Is there some proprietary technology that puts prospective entrants in a serious competitive disadvantage? Is access to raw materials or to distribution channels limited in some way? Are new entrants limited by permit restrictions or regulations?

The competitive structure of the industry is another important consideration. Are there a few dominant firms, or is the industry fairly fragmented? Will current competitors attempt to “punish” new entrants, such as through a price war, heavy advertising, or exercising their clout with key suppliers? Is there some geographic niche we can serve? What factors create cost advantages or disadvantages? How important is a firm’s position on the learning and experience curves? How are prices set? Is demand rising, even, or falling? Are there exit barriers that raise the risk of entry?

Relative strengths of our strategic partners must also be considered. What is the bargaining power of suppliers? How wide is our choice of suppliers? Is it costly for us to switch? Can our suppliers compete with us for the same customers? How important is our industry to our suppliers?

Do buyers have a wide choice of vendors? Can they make our product themselves? Are there less expensive or superior substitutes to our product in some segments of the market?

These are certainly not easy questions to answer, but performing the research to make better informed decisions, and addressing these questions “head-on” can improve our chances of success.

John B. Vinturella, Ph.D has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

Buying an Existing Business

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 stock. Often the seller finances part of the purchase; typically the buyer makes a down payment on the order of one-third of the sales price, with repayment terms of five years at market rates. Do you see any danger for the seller in financing the sale?

If the decision is made that purchase of an existing business could improve our chances for success, we must then evaluate existing businesses to determine whether any are available at a price that is economically more favorable than a new venture. The most difficult issue in small business sales is establishing a selling price. It is an inexact science, characterized by a seller’s too-high expectations, and an overly skeptical prospective buyer.

Due diligence must be performed before a binding offer is made. Is the company’s history and network of business relationships clear? Are their financial statements representative? What do they say about the business? Are there any unstated dangers or risks? Are there any hidden liabilities? Often, a review of the financials by our banker and accountant can be valuable.

Intangible factors must also be considered, such as the seller’s reasons for offering the business for sale. Often these are for personal and career reasons, such as a readiness to retire with the absence of a successor, or another opportunity perceived as a better fit. Business reasons might include personnel problems, or a weak competitive position. Where business reasons predominate, we must decide whether all that is missing is a quality of management that we can provide, or whether there are some changes that we can make in the way the business is operated that will make the difference.

How “good” an organization is it? How do its customers and suppliers perceive it? If we do not buy it, how tough a competitor will it be? What will be the effect of an ownership change on the customer base, supplier relations, etc.? How much customer loyalty is to the business, and how much to the current owner?

Does the company have a “niche?” Is it the one in which you want to operate? Is there a competitive advantage to the operation that is sustainable? Are its assets useful to you? Will key personnel remain with the business?

Once we have gathered the necessary information, we may decide to extend a purchase offer. We should decide on a bargaining range before we go into any negotiating session. If we cannot meet on price, perhaps concessions on payment terms could make up the difference. We should know the tax and legal consequences of our options. If the discussion takes us outside our range, we should schedule another session, and reanalyze the data. We must allow for the possibility that the deal cannot be made.

Ultimately we must decide whether the purchase, at a price that the seller will accept, gives us a better chance of success than starting from scratch in competition with the business. Perhaps the seller’s errors would start us in a deficit position; we might prefer creating our own corporate culture and customer relationships; maybe we can find a better location, facility, newer equipment, etc. On the other hand, the cost of taking sufficient business away from existing firms could be ruinous.

It must be emphasized that there is no one correct value for a business. Any valuation is based on assumptions, and projections of future performance. Discomfort about basing financial decisions on assumptions and projections is natural. Entrepreneurship requires exploring uncharted territory, and operating in an environment of uncertainty. Success depends on applying our best judgment to reducing that uncertainty.

John B. Vinturella, Ph.D has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

Venture Research Service Provider

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-business.

Service businesses run the gamut, from accounting firms, to drycleaners, to janitorial services, engineering, public relations firms, and many other options. Despite their disparity, they all have one thing in common: offering a service to clients.

Valuing a service business involves many factors – a tidy, one-size-fits-all formula doesn’t exist. That being said, sellers should recognize that buyers will be particularly interested in certain characteristics for most service businesses. This, again, is where a venture research service provider can come in.

Normally, valuation is based on several criteria, including: history of profitability, cash flow, overhead, intellectual property, company reputation, number of years in business, opportunities for further growth and added profits, stability of key employees/management team, and customer diversification.

Crucial areas for valuation include intellectual property, ongoing relationships with clients, and having a good team in place – ensuring the company will retain its competitive edge, even when the seller (who typically drives new and repeat business) leaves.

Without significant capital assets, key customers and employees are critical. A strong management team adds to the value of a service business (often more so than in manufacturing) and, conversely, it can detract from value when there’s a poor or inexperienced team.
Another measure of value may include the amount of market share. Companies that provide a niche service and don’t have much, if any, competition will command higher multiples of value.

Cash flow is “king,” so the primary consideration for bankers is a buyer’s ability to stay current on loans for acquisitions and working capital. Banks focus heavily on reliable cash flow for service businesses, given that there is little, to no, collateral within the service business itself.

Whether you’re in the market to buy or sell, understanding the various considerations of valuation for a service business will make the process smoother and increase the probability of a more successful transaction.

Dr. Vinturella, has over 40 years experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site https://www.jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business. “ See https://www.jbv.com/8steps, available on Amazon.

Entrepreneurial Career Consulting

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 entrepreneur. However, the job of entrepreneur is not for everyone. You need to be hard-working, smart, creative, willing to take risks and good with people. You need to have heart, have motivation and have drive.

There are many industries where wealth creation is possible be it the Internet and IT, personal services, media, engineering or small local business (e.g., dry cleaning, electronics repair, restaurants).

But there is a downside of entrepreneurship too. Your life may lack stability and structure. Your ability to take time off may be highly limited. And you may become stressed as you manage cash flow on the one hand and expansion on the other. Three out of five new businesses in the U.S. fail within 18 months of getting started.

It’s important to be savvy and understand what is and is not realistic. The web is chock-full of come-ons promising to make you rich. Avoid promotions that require you to pay up front to learn some secret to wealth.

Look for inefficiencies in markets. Places where a better idea, a little ingenuity or some aggressive marketing could really make a difference. Think about problems that people would pay to have a solution to. It helps to know finance. It’s a must to really know your product area well. What do consumers want? What differentiates you from the competition? How do you market this product?

A formal business plan is not essential, but is normally a great help in thinking through the case for a new business. You’ll be investing more in it than anyone else, so treat yourself like a smart, skeptical investor who needs to be convinced that the math adds up for the business you propose starting.

John B. Vinturella, Ph.D. has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

Franchise Business Consultant Service 2

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 (http://www.azfranchises.com/quick-franchise-facts/):

• There are an estimated 3,000 different franchisers across 300 business categories in the U.S. which provide nearly 18 million jobs and generate over $2.1 trillion to the economy.

• Franchises account for 10.5 percent of businesses with paid employees; almost 4% of all small businesses in the USA are franchises.
• It is estimated that the franchise industry accounts for approximately 50% of all retail sales in the US.

• The average initial franchise investment is $250,000- excluding real estate; the average royalty fees paid by franchisees range from 3% to 6% of monthly gross sales.

Franchising offers those who lack business experience (but do not lack capital) a business with a good probability of success. It is a ready-made business, with all the incentives of a small business combined with the management skills of a large one. It is a way to be “in business for yourself, not by yourself.”

Franchises take many forms. Some are simply trade-name licensing arrangements, such as TrueValue Hardware, where the franchisee is provided product access and participation in an advertising cooperative. Some trade name licenses, particularly in skin-care products, are part of a multi-level marketing system, where a franchisee can designate sub-franchisees and benefit from their efforts.

Others might be distributorships, or manufacturer’s representative arrangements, such as automobile dealerships, or gasoline stations. It could be Jane’s Cadillac, or Fred’s Texaco; the product is supplied by the franchisor, but the franchisee has a fair amount of latitude in how the business is located, designed and run. The franchisor will frequently specify showroom requirements and inventory level criteria, and could grant either exclusive or non-exclusive franchise areas.

The most familiar type of franchise, however, is probably the “total concept” store such as McDonald’s. Pay your franchise fee, and they will “roll out” a store for you to operate.

The advantages can be considerable. The franchise fee buys instant product recognition built and maintained by sophisticated advertising and marketing programs. The franchisor’s management experience and depth assists the franchisee by providing employee guidelines, policies and procedures, operating experience, and sometimes even financial assistance. They provide proven methods for determining promising locations, and a successful store design and equipment configuration. Centralized purchasing gives large-buyer “clout” to each location.

The large initial cost can be difficult to raise. The highly structured environment can be more limiting than it is reassuring. Continuing royalty costs take a significant portion of profits. You may wish to use a franchise business consulting service. Several small business periodicals evaluate and rank franchise opportunities. There are now several franchise “matchmaking” firms who can assist in the evaluation process.

How do you choose among all the available franchises? Does it complement your interests? Even if you hire someone to manage the business, expect to spend a lot of time with the operation. Is the name well known? If not, what are you paying for? Is the fee structure reasonable, and all costs clearly described?

Is the franchisor professional? Evaluate them on the clarity of the agreement, and how well your rights are protected, the strength of their training and support program, and their commitment to your success. Be sure to talk to current franchisees about their experiences. Beware of a franchisor committed to a rate of growth that exceeds their ability to manage; they may not be sufficiently interested in the sales they have already made.

Is a franchise a sure path to instant riches? Is it the only hope for independent firms in today’s market? Can Jerry’s Quick Oil Change compete with SpeeDee? Does the franchise deliver business that we might not have gotten anyway? Is it really entrepreneurship; did I go into business or did my money?

This is excerpted from “8 Steps to Starting a Business.” See https://www.jbv.com/8Steps

Market Research Plan Consultant

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:

• market opportunities

• existing customers

• prospects

• competitors

• employees

• industry trends

• environmental or regulatory risks

We Help You Focus

Large market research firms research specific industries and generate standardized industry reports. The problem for most small businesses is that very few of them fit neatly into these industry categories. That’s where we come in. Instead of generating canned industry reports, everything we do is customized for each client.

• Effective marketing is all about targeting and focus. Better targeting means less waste, lower expenses, and higher profits. Some more examples of the kinds of market research we do for our clients:

• Conduct a comprehensive market opportunity assessment – Assess your markets and current market positions (market size and share of market, channels, growth trends, threats, and opportunities)

• Identify customer needs and determine which market segments hold the most, and least, attractive profit potential.

• Find out what customers and prospects think about your new customer service procedures, your sign-up process, your newest product, your new tag-line, your invoicing process, etc.

• Identify regulatory, political, and demographic trends that could create problems – and opportunities – for your business.

• Develop a thorough understanding of competitors – Who leads and who follows in this space? How much market share does each player have? What are their strengths and weaknesses? How do they differentiate themselves? How does their pricing strategy compare with yours? How do they market their products and services? How does their brand equity compare to yours?

• Identify opportunities to use your strengths and exploit competitor weaknesses.

Business Valuation Service Industry

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.

Business Valuation Service Industry

Service businesses run the gamut, from accounting firms, to drycleaners, to janitorial services, engineering, public relations firms, and many other options. Despite their disparity, they all have one thing in common: offering a service to clients.

By their nature, service businesses don’t have much in the way of tangible assets, making EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), for larger businesses, or SDE (Seller’s Discretionary Earnings), for smaller businesses, multiples typically lower than manufacturing businesses. Generally, the smaller the service business, the lower the SDE multiple.

Valuing a service business involves many factors – a tidy, one-size-fits-all formula doesn’t exist. That being said, sellers should recognize that buyers will be particularly interested in certain characteristics for most service businesses.

Normally, valuation is based on several criteria, including: history of profitability, cash flow, overhead, intellectual property, company reputation, number of years in business, opportunities for further growth and added profits, stability of key employees/management team, and customer diversification.

Further consideration goes to whether the company can add more services. Value increases when a service business offers something unique, especially in a growing industry or market. These industries include rapidly growing service sectors, such as: internet/web-based or cloud-computing services and information technology. Relocatable, internet-based businesses with low overhead are particularly attractive due to scalability. Also, the ability for a business to be operated from anywhere increases the number of prospective purchasers – which increases the business value due to higher demand.

In addition, companies with a large recurring monthly revenue stream (for example, when a high percentage of clients are signed up for automatic bill pay each month) will command more value. Examples include alarm companies or website/email-hosting companies that have monthly auto bill pay from clients. Such a consistent revenue stream impresses both buyers and lenders alike.

Other crucial areas for valuation include intellectual property, ongoing relationships with clients, and having a good team in place – ensuring the company will retain its competitive edge, even when the seller (who typically drives new and repeat business) leaves.
Without significant capital assets, key customers and employees are critical. A strong management team adds to the value of a service business (often more so than in manufacturing) and, conversely, it can detract from value when there’s a poor or inexperienced team.
Another measure of value may include the amount of market share. Companies that provide a niche service and don’t have much, if any, competition will command higher multiples of value.

Within the industry, B2B (business-to-business) companies generally command more value than B2C (business-to-consumer). For both, however, client-base diversity commands value – more medium- or small-sized clients being preferable to a few large clients. With low customer concentration, financial risk is reduced. If one client, for instance, cancels a contract or goes out of business, the service business remains financially viable.

Although contrary to an owner’s instinct, businesses command higher value when they’re not dependent on the owner’s personal relationship with clients. If the owner generates a substantial amount of revenue versus the other employees in total, the business could be at risk after the sale. Service businesses are more valuable when customer relationships are readily transferrable: as customers of a drinking-water delivery or HVAC service business don’t usually care who the company’s owner is, for example. Also, keep in mind that seasonal businesses, due to their cyclical nature, have lower value.

Cash flow is “king,” so the primary consideration for bankers is a buyer’s ability to stay current on loans for acquisitions and working capital. Banks focus heavily on reliable cash flow for service businesses, given that there is little, to no, collateral within the service business itself.

Whether you’re in the market to buy or sell, understanding the various considerations of valuation for a service business will make the process smoother and increase the probability of a more successful transaction.

John B. Vinturella, Ph.D. has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

Consulting for Case Study

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, what you really need to win new business is cold, hard proof.

One of the best ways to prove your worth is through compelling case studies. When done correctly, these examples of your work can chronicle the positive impact your business has on existing or previous customers.”

It can be advantageous to use a consultant to prepare the case study. In addition to saving your time the consultant will be objective.

Kissmetrics describes why a case study can be effective:

“People enjoy reading a story. A great case study will allow someone to really get to know the customer in the case study including:

• Who is the sample customer and what do they do?

• What were the customer’s goals?

• What were the customer’s needs?

• How did you satisfy those needs and help the customer meet their goals?

A final thing you could do is simply follow up with the customer in the case study and update your case study a few months down the road to show how your products / services are continuing to have long term benefits for the customer. This would give readers the opportunity to see that your goal is not only to help with immediate needs, but also to ensure long term results.”

John B. Vinturella, Ph.D. has over 40 years’ experience as a management and strategic consultant, entrepreneur, and college professor. He is a principal in the business opportunity site jbv.com and its associated blog. John recently released his latest book, “8 Steps to Starting a Business,” available on Amazon.

Entrepreneurship Knowledge Services

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 ingenious new ways of selling them. It’s much more straightforward.
Useful and important knowledge already exists in your business. It can be found in:

• the experience of your employees

• the designs and processes for your goods and services

• your files of documents (whether held digitally, on paper or both)

• your plans for future activities, such as ideas for new products or services

The challenge is harnessing this knowledge in a coherent and productive way.

Existing forms of knowledge

• You’ve probably done market research into the need for your business to exist in the first place. If nobody wanted what you’re selling, you wouldn’t be trading. You can tailor this market knowledge to target particular customers with specific types of product or service.

• Your files of documents from and about customers and suppliers hold a wealth of information which can be invaluable both in developing new products or services and improving existing ones.

• Your employees are likely to have skills and experience that you can use as an asset. Having staff who are knowledgeable can be invaluable in setting you apart from competitors. You should make sure that your employees’ knowledge and skills are passed on to their colleagues and successors wherever possible, e.g. through brainstorming sessions, training courses and documentation. See the page in this guide: create a knowledge strategy for your business.

Your understanding of what customers want, combined with your employees’ know-how, can be regarded as your knowledge base. Using this knowledge in the right way can help you run your business more efficiently, decrease business risks and exploit opportunities to the full. This is known as the knowledge advantage.

BASIC SOURCES OF KNOWLEDGE

Your sources of business knowledge could include:

• Customer knowledge – you should know your customers’ needs and what they think of you. You may be able to develop mutually beneficial knowledge sharing relationships with customers by talking to them about their future requirements, and discussing how you might be able to develop your own products or services to ensure that you meet their needs.

• Employee and supplier relationships – seek the opinions of your employees and your suppliers – they’ll have their own impressions of how you’re performing. You can use formal surveys to gather this knowledge or ask for their views on a more informal basis.

• Market knowledge – watch developments in your sector. How are your competitors performing? How much are they charging? Are there any new entrants to the market? Have any significant new products been launched?

• Knowledge of the business environment – your business can be affected by numerous outside factors. Developments in politics, the economy, technology, society and the environment could all affect your business’ development, so you need to keep yourself informed. You could consider setting up a team of employees to monitor and report on changes in the business world.

• Professional associations and trade bodies – their publications, academic publications, government publications, reports from research bodies, trade and technical magazines.

• Trade exhibitions and conferences – these can provide an easy way of finding out what your competitors are doing and to see the latest innovations in your sector.

• Product research and development – scientific and technical research and development can be a vital source of knowledge that can help you create innovative new products – retaining your competitive edge.

• Organizational memory – be careful not to lose the skills or experience your business has built up. You need to find formal ways of sharing your employees’ knowledge about the best ways of doing things. For example, you might create procedural guidance based on your employees’ best practice. See the page in this guide: create a knowledge strategy for your business.

• Non-executive directors – these can be a good way for you to bring on board specialized industry experience and benefit from ready-made contracts.

EXPLOITING YOUR KNOWLEDGE
Consider the measurable benefits of capturing and using knowledge more effectively. The following are all possible outcomes:

• An improvement in the goods or services you offer and the processes that you use to sell them. For example, identifying market trends before they happen might enable you to offer products and services to customers before your competitors.

• Increased customer satisfaction because you have a greater understanding of their requirements through feedback from customer communications.

• An increase in the quality of your suppliers, resulting from better awareness of what customers want and what your staff require.

• Improved staff productivity, because employees are able to benefit from colleagues’ knowledge and expertise to find out the best way to get things done. They’ll also feel more appreciated in a business where their ideas are listened to.

• Increased business efficiency, by making better use of in-house expertise.

• Better recruitment and staffing policies. For instance, if you’ve increased knowledge of what your customers are looking for, you’re better able to find the right staff to serve them.

• The ability to sell or license your knowledge to others. You may be able to use your knowledge and expertise in an advisory or consultancy capacity. In order to do so, though, make sure that you protect your intellectual property.”