Startup Smart - A Handbook For Entrepreneurs - English - 20140322 - Hi Res PDF

Startup
Smart
ENTREPRENEURSHIP
A handbook for entrepreneurs
Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 1 3/22/17 4:01 PM

about the author
Deirdre
Sartorelli
eirdre Sartorelli is
D the director of the

Angle Center for
Entrepreneurship at
Endicott College in Beverly, Mass-
achusetts. Earlier she had her own
consulting firm and was a senior
executive in several high-technology
companies.
Sartorelli holds an undergraduate
degree from Salem State University,
a Master of Business Administration
from Bentley University and a doctoral
degree in business administration
from California Coast University.
She is enrolled in an innovation
and entrepreneurship program at
Stanford University.

contents
You can be Your customers:

1 an entrepreneur 4 getting, keeping
for one idea and growing them
or for a lifetime 46 | Accelerating
4 | Play to results for
make your idea work your startup
Building your Financing your

2 business block 5 startup
by block 56 | From
18 | Create a bootstrapping
lasting foundation to angel chasing
for your startup
You as business Launch

3 owner, manager 6 your dream
and leader business
34 | Becoming the 64 | Planning
entrepreneurial leader and networking for
you are meant to be startup success
Glossary | 74 Online resources | 76

h a n d b o o k o n e n t r e p r e n e u r s h i p
Steve Jobs wanted to Steve Jobs, right,

and Steve Wozniak
be kind of a master of a in 1976, the year
company and make something they founded Apple.
They reinvented
in lifeand I just wanted the personal computer
to design computers with the introduction
of the Macintosh.
and be a great engineer.
Steve Wozniak

Introduction
M
any people think that try to minimize those risks where possible.
entrepreneurs are born, not Well help you figure out what is needed to
made. Dont believe it! You make your business last long-term, and how
dont have to be born with to ensure that your business runs smoothly.
entrepreneurial spirit to start a successful We want you to be able to look back with
business. You can acquire the knowledge pride on your creation months and years
and skills to transform your idea from from now.
a thought to a business that provides a One thing that is vitally important to
livelihood for you and your family. your business is, naturally, the customer!
By taking a journey with us in this book, While you may want to think that everyone
you can develop a mindset and skills to will buy your product or service, you
make your business idea a reality. You can cant plan your business that way. It seems
learn the essential skills and ingredients to counterintuitive, but the truth is, if you try
launch and sustain your business. to sell to everyone, you will end up selling
Well start by exploring what it means to no one.
to be an entrepreneur. It may surprise you! Finally, we will help you plan for the
Then well help you refine and honestly future of your business. Remember, you
evaluate your business idea. That can be arent in this alone: We will brainstorm
hard work, but it will help separate your how you can find mentors, build your
new business from those that fail. networking muscles, deal with failure and
Starting a business, whether you are plan your business without necessarily
making a product or providing a service, having a formal business plan.
can be scary. Anyone who tells you Ready to ride the rocket ship that is
otherwise probably has never done it. being an entrepreneur? Strap yourself in!
We will work through how you can get
comfortable with the idea of risk and then

I gain inspiration from NKHENSANI

NKOSI
people, culture, history, Founder of Stoned
spirituality, love, Cherrie, a South African
fashion label.
fantasy and magic. Cape Town, South Africa

1 You can be an
entrepreneurfor one
idea or for a lifetime
C
hances are, if you are reading This may seem like a minor benefit, but
this sentence, you have asked this is how real economic growth can
yourself at some point, what happen in a small community.
would it be like if I were my own
Being an entrepreneur
boss? What is it even like to think of yourself
is different
as an entrepreneur?
It probably means feelings of excitement, Not all cultures appreciate entrepreneurism.
independence and creativityas well as What if, in your culture, it is not expected
anxiety, self-doubt and worry. Here is a that you own and run a business? In
secret: Every successful entrepreneur has some regions, cultural barriers and
had all of those emotions at some point. biases prevent women from pursuing
In fact, many startup owners will tell you, professional careers or going on their own.
if it werent for self-doubt and worry, they The family can prevent a woman from
never would have succeeded. These going into business in the belief that, as an
emotions can be used to fuel drive, gener- entrepreneur, she will neglect her husband
ate energy and inspire you to get up every and children. Even if unmarried, women
morning eager to show the world what often lack collaterala valuable thing
you can do. pledged as security for repayment of a
People start a business for a variety loanand access to potential mentors.
of reasons. Financial security and well- Addressing gender bias and removing
being are certainly high on the list, but barriers to womens entrepreneurship and
your business can positively affect your professional development could boost
neighbors, friends and even your com- economic development significantly,
munity. When others see how your hard according to a 2015 International Monetary
work, drive and inspiration have paid off, Fund study. This and other research
it may inspire them to take similar chances. suggest that women entrepreneurs invest up
to 90 percent of every dollar earned back

into their families to educate their children, You may indeed have a fabulous idea,
improve family health and provide better but it still must be refined and tested against
nutrition. The additional income produced reality. This chapter will introduce you to
by a business strengthens a familys some specific tools to help bring that idea
financial security. These arguments may out of your imagination and into the hands
help you persuade your family that your of potential customers.
business will make a difference in their You may also have picked up this
lives. The promise of eating and living book with no specific idea in mind for a
better can help settle a debate about you business, yet you just know you are meant
as a businesswoman. to run your own business. The what of the
Being an entrepreneur can be lonely, business, meaning the product or service
even in the best circumstances. Owning it sells to customers, is important, but just
a business when your culture discourages as important is being your own boss and
it because of who you are can add to that being in control of your own future.
feeling. With the internet and mobile tech- Lets begin with one essential fact that
nology, however, its easier than ever to holds true whether you already have your
reach out to others. business idea or not:
You can seek out others who are in a
similar predicament and together you can
A successful business
create a network. Through those contacts,
meets the needs of customers,
you can share experiences and ways to
pure and simple.
deal with biases and barriers, support You may have many different types of
each other emotionally and possibly even customers; ultimately your job is to please
pool your resources to help one anothers them. For example, you may have designed
startups where no financing is available. an innovative new farm machine, but if it
Also, a growing number of corporations doesnt meet the needs or desires of a good
and nongovernmental groups run inter- number of farmers, your business will not
national programs focused on giving work, no matter how wonderful your idea is.
A
potential female entrepreneurs the skills and
support they need to overcome barriers and lthough studies differ as to
start a business. Seek them out and find out the number, the fact is that the
how you can enroll. The more people you majority of all new businesses
get invested in your success, the less lonely fail. With odds like that,
you will be. You can pave the way and why would anyone start his /her own
become a role model for others to follow. business? We will discuss that in this book.
You will also learn how to put the odds for
Ideas are everywhere!
success more in your favor.
You may already have a specific idea for Many businesses suffer because they
a business. In this chapter, we will discover failed to act on this principle: You have
why, no matter how great you think your to develop a product or service that
idea is, you must be open to changing it, customers want or need. Thomas Edison,
at least a little bit. the American inventor of the lightbulb and
the phonograph, famously said, Anything
that wont sell, I dont want to invent.
What was true more than a century ago
is still true today.

Anything that Below: Generating
a new idea requires
wont sell, tapping many

inspirational sources
I dont want and exploring

promising paths.
to invent.
Thomas Edison

Where do we find ideas then? It is not willing to buy from you, this is known as
as difficult as you might think. You may market readiness. You will learn the skills
come up with an idea from a variety to test market readiness later in this chapter.
of sources: In some cases, you will not be creating
a product or service that no one has ever
A job you have done in the past
done before. This still could be a good
or are doing now.
business to launch. You will be selling to
School. Something in a class youre
customers who are already buying those
taking now or took in the past.
products and services elsewhere. These
Something youre good at, like
kinds of customers are known as an
a special talent or pastime.
existing market.
Your everyday experience.
Do you ever notice an unmet need An existing product
for a product or service? or service
Lets think about all the different products
Making something new
or services you use in the course of your
This may be the simplest entrepreneurial day. Chances are that at some point you
idea. Have you ever thought, I wish I have thought, If this product could only do
had a time machine! or What if a farm this or If my local food market only did
plow could use only sunlight for energy? that. These thoughts are important to a
Making something new is probably the budding entrepreneur. Your idea makes
one business area where you push the good business sense if you can do one or
boundaries of what if the most. Obviously, more of these things:
in our example here, time machines and
ee Build a product that has
solar-powered plows dont exist. In fact,
more or better features.
those ideas may sound silly to you.
ee Make something that does
But the idea Thomas Edison had for
everything an existing product
the lightbulb probably sounded just as
does but at a lower price.
challenging. Dont you think people found
ee Construct an item that lasts
it hard to take his idea seriously at the
longer and is more reliable.
time he came up with it? Yet, look at how
ee Offer a product or service that is easier
it changed the world. You may be read-
for a customer to use or obtain.
ing this book using light from this very
invention. New businesses improve existing
N
products every day. It may be your fresh
ow, whether Edison was the first eyes that can see an existing product or
person to think of the idea for service in a new light. Many entrepreneurs
the lightbulb is hard to prove. He have had a lot of success improving on
was, however, the first person to products and services that already exist.
design one, build it andmost importantly
An existing market with
market it successfully.
unmet demand
If your business idea is for something
completely new, we call this an innovation. Demand is just another word for requests
What is telling you that customers will be from customers. Unmet demand means
willing to buy this new product or service that the current providers of goods and
from you? When many customers are services cannot possibly provide enough

y o u c a n b e a n e n t re p re n e u r
of them to fulfill the needs of all possible Getting the product to

customers. Here, you would need to customers in new ways
do less investigation into what the market
We got a glimpse of product delivery in the
wants, as you already know that customers
prior example. Instead of having customers
want the type of product or service you
go to the bakery themselves, your new
intend to provide.
business brings the bread to the customer.
O
That is one example of getting the product
ne example might be freshly
to a customer in a new way.
baked bread. Who doesnt
The term for getting products to
like a loaf of bread fresh out
customers, distribution, sounds fancy,
of the oven? Bread is certainly
but it just refers to how the product goes
not a new product. But lets say that for a
from where its made into the hands of
particular town, the existing bakery cant
the customers. You should think about
make enough bread to satisfy the needs of
distribution a lot. If you can get goods or
all the customers. You enjoy making bread
services to customers in a cheaper, faster
and have noticed customers who dont
or more convenient way, what customer
get to buy bread. You have the time to
wouldnt be interested in that? Lets expand
bake it and, more importantly, are good at
your thinking even more. Going back to
baking. Why not consider a bread-baking
our bread-baking example, what if you
business then?
could expand the delivery area? And
Now, lets push your thinking. Instead of
perhaps add other baked goods?
just matching what the other bakeries do,
Your business idea might be for a
how about making an improvement? Could
service, not a product. For many services,
you consider delivering freshly baked bread
customers must travel to the place where
to customers? This would not only address
the service is performed. Think about how
an unmet need, but would also add value
you could make your customers lives
to the product by combining it with another
easier if you brought your service to them.
type of business. In fact, you just created a
You can do this in one of two ways. You
servicea bread-delivery service! So be
can physically perform the service at a
aware that you can make combinations of
location convenient to them; for example,
the five areas for new businesses. This can
hairdressing or tailoring. The other option
be to your advantage, as it makes it harder
for others to compete with you.
tip Checklist for a new idea

Check your idea against these five points
1 2 3 4 5
A brand new A way to Something for A different way Something that
product or improve an a market that of getting a pulls together
service. No one existing product currently exists product or many different
has brought such or service. but whose demand service into services or products
a product to the is not being met the hands to provide a
market before. completely. of customers. better customer
experience.

would be to bring work back to your home minimizes the business risk. If demand falls
or place of business. This could make sense for one of her goods, she can rely on
for services such as sewing or repairing. others to bring in sales. Later in this book,
Think of how many customers might enjoy we will talk more about how proper
having such a convenience. They might planning helps to minimize the risk for
be more apt to use your service because you as a new business owner.
it is right where they want and need it.
To make your idea work, play!
Y
ou will want to talk to your Every successful business, whether it is
potential customers about your run from a home, office or factory, started
service idea to make sure as simply an idea. But lets be clear: We
that it will be economical and are not saying that all ideas started out
convenient for them, thereby increasing fully formed. In fact, your idea should
the likelihood that they will use it. We will not be fully formed at the beginning. You
give you some ideas about how to talk to want to be open to changes that your
customers later in this chapter. customers identify when you ask them
for feedback. If you start out thinking you
Your idea pulls together more
know everything about your customers
than one product or service
and what they want, that could get you
This last categorypulling together or into trouble.
integrating more than one thingbuilds This first stage of entrepreneurial
upon some of the previous examples. thinking we will call idea making. As
Consider an entrepreneur who resells a adults we sometimes get caught up in what
product made by others; for example, we think can or cant be done. Remember
mobile phone prepaid cards. She buys the how much fun we had, as children, when
cards from a wholesaler and resells them we did not know what could or could not
to her customers. They are now asking be done? The possibilities were endless.
about certain accessories for the phones, Entrepreneurs need similar creative energy.
like power chargers. She hadnt thought The following example can help you
about that when launching her business. find and build out a business idea. Lets
However, having heard customer requests say that our phone card entrepreneur has
often enough, she decides to add power noticed that women dont have a place
chargers to her product line. Soon, as we to easily carry a mobile phone. When a
will see, she will also add something that woman puts her phone in her handbag,
can help people carry their phones. the phone falls to the bottom and cant be
Our entrepreneur is smart enough easily retrieved. The entrepreneur has been
to make sure that whatever inventory thinking that there must be a solution. So
she carries will meet customer requests. on a piece of paper, she writes hard to
By offering a variety of products, she find mobile phone in a handbag. (See the
infographic on page 11.)
Think beyond what

tip currently is and start thinking
about what might be.
10

needs
to be easily
accessible
cannot
fall out
Step 1
hard to find
falls to
cell phone the bottom of
hides among in a bag the bag
other things
in bag
e S
ketch out
your initial
needs to thoughts about
be carried in
a bag? the problem
Step 2 attach to
the bottom
needs to remove
be carried in falls to the bottom
e P
lay with a bag? the bottom
possible of the
bag
solutions
hard to find
cell phone
in a bag secure
with a snap
cannot
fall out
hides
among
other things
in bag
make voice
activated
Brainstorming
ideas for a business
can be fun. Dont
limit yourself
silly solutions can
eventually lead
to success.
11

Put yourself in her shoes, try to be open- possible. MedRegis is designed to help
minded and brainstorm possible solutions health care workers record, store and share
to this problem. You dont want to limit patient information in digital form. Based
yourself! The possible solutions will branch on their feedback, he changed the
out from the original circle. See where this prototype significantly.
is going?
Talking with customers
Some solutions make more sense than
early and often
others. And some are just downright silly.
Actually, if you have some silly solutions, Now you are ready to move from an idea
that is a sign of success. It means you are to a prototype. We have established that
pushing the boundaries of what is possible. we do not want to make many woven bags
H
without first talking with customers. But you
aving worked through this do want to make at least one bagyour
exercise, you have come up prototype. Prototypes, by their nature, are
with the possible solution of a far from perfect; in fact, you dont want them
handmade woven bag with to be perfect. You want your prototype to
a small pocket on the outside with a be a rough estimation of what your product
flap. On paper, it may look like you are might look like when its done. Youd want to
ready to start making these woven bags. roughly construct the bag with the material
After all, isnt the whole point of being an you think is the most appropriate, and with
entrepreneur to sell a lot of your product? the all-important pocket on the outside to
But starting to make the bags right away hold the mobile phone.
is precisely what you do not want to do. Once you have your prototype, you
Why invest your money buying materials should show it to your potential customers
and manufacturing equipment when you to get their feedback.
W
have not yet spoken with even one potential
customer to get her opinion? hen you talk with
As part of this exercise, you should talk customers, and especially
to others about how to solve the problem when you want their
of mobile phones getting lost in handbags. feedback on your
You would ask for their thoughts about prototype, you need to ask more than
the advantages and disadvantages you tell and listen more than you speak.
of your solutionsthey may even offer You will use a special language of what,
some alternatives of their own. But, a note how, why and when.
of caution: Be careful how you ask for These words are powerful because they
opinions. It is easy to unintentionally get your potential customers talking. For our
sway others to your side, to what you think prototype bag, we might ask:
the right solution may be. You have to
How many things do you usually
guard against thinking that you know what
carry in your handbag?
is best for the customer. The only person
How would you feel about carrying
who knows what is best for the customer
your phone outside your bag?
is the customer.
Is your phone safe?
Entrepreneur Dale Trotman talked to
What about the outside pocket
dozens of health care professionals in
would you change?
Barbados, where he is based, to make his
MedRegis app as helpful and efficient as
12

tip Talk with your customers

early and often as you build
your business.
Why would you buy, or not buy, If you ask 50 people their opinion of
one of these for a friend? your product, you will probably get 50
When do you usually buy different thoughts in return. Not all of this
a new bag? feedback is equally valuable.
O
How does the quality of the fabric
and stitching feel? ne way to prioritize feedback
From these questions (and answers), you is by making some assumptions
may suddenly discover a new use for your about your likely customer. In
bag. In our example, as we asked potential our example, we knew women
customers about the bag, we made a would be our primary target customers.
discovery. A young man happened to walk From feedback, we learned about the
by and asked us what our bag was for. potential of selling a bag to men. What
We soon learned that he, too, often had an if children saw your bag and loved it, but
issue with losing his phone and had always perhaps the size was too big for them?
wanted a safe place to store it in a bag. He At this point, you may need to make
then told us that many of his friends had a decision. You know that you can easily
the same problem. We learned he would make similarly sized bags in different colors
also be interested in purchasing one, but to satisfy both women and men. But it would
perhaps in a different color. This means we be hard to also make smaller bags for
may have an additional marketor group children right now. The childrens feedback,
of customersfor a bag, and perhaps while important, will have to be put aside
should be considering a bag for men. for now. It might seem like you are losing
But its important to ask some more men business by doing this, but your short-term
whether they would use our bag. By doing priority is getting products to the market,
that, you are testing for market readiness. and quickly. So we will keep our focus
If we had simply assumed there was only for this initial product on selling bags to
one type of customer for our bag, we could women and men.
have missed valid and important customer
feedback, and potential additional sales of
our product.
The only person
A never-ending process who knows what <
Having learned customers thoughts on the is best for the
prototype, you now need to evaluate their
input. You must go back and determine customer
what suggestions or conclusions from the is the customer.
customer feedback you will use to improve
your product.
13

This is a key point. We will talk about Speaking of happy
M
customers in greater depth in the next
chapter, but you need to get comfortable ost of us at some point have
with the fact that you cannot sell your had a job that wasnt especially
product to everyone. If you start out trying enjoyable, but it provided the
to make a product that meets everyones means to support our families
needs, that product likely will not appeal and ourselves. Youre likely reading this
to any particular group of consumers. book because you see owning your own
If that happens, your business will likely business as a way of having a job that
fail. Also, trying to please everyone will will make you happy. Certainly, by being
almost certainly cause you to panic and be your own boss, you will experience feelings
overwhelmed by all the demands you try of exhilaration and newfound confidence.
to satisfy. Dont fall into that trap. In this book you can learn approaches that
will help you sustain these happy feelings.
An excellent product
Remember though that just becoming
does one of two things
an entrepreneur doesnt guarantee your
To be successful, any business idea, no happiness, nor does it guarantee your
matter how simple or complicated, must do financial well-being. It is often hard and
one of two things. It must either: lonely work. There may be times when you
doubt your ability to sell your goods or
Increase pleasure
find new customers. This is not to sway
by making consumers
you from being an entrepreneur. We just
feel happy
want you to be clear on why you are
or embarking on this journey. And that brings
Decrease pain us to an important question that you may
by solving a problem be asking yourself:
for consumers.
Exactly what business
Think about it. All products out there should I launch?
do one or the other. One that increases
pleasure, or makes us feel happy, could Earlier we mentioned that one thing that
be ice cream. Whether you are a daily may help you decide what type of business
ice cream eater or have never tried it, the to launch is knowing your special talent.
mere thought of ice cream probably brings It might seem obvious that the right business
you happy thoughts of a cold, sweet treat. for you is one that engages your talent,
A product that decreases pain might be hobby or passion. Imagine all the fun you
an alarm clock. If you have to wake up can have every day doing what makes
at a certain time every day, chances are you happy and getting paid for it.
that you use an alarm to wake you up. The
But does it really work that way?
alarm clock probably does not give you
much pleasure when it rings, but it does That is the all-important question, and
solve a problem, by decreasing the pain the answer could make or break your
of sleeping too late. business. This book will help increase your
confidence that your business will last for
as long as you want it to.
Some entrepreneurs fail because they
believe that others will share their passion.
14

If you try to please Joanne Canady-Brown in her
tip thriving bakery The Gingered
everyone, you Peach in Lawrenceville, New Jersey.

She started with no employees in
will end up a rented commercial kitchen space

in 2011. Since then, Canady-Brown
pleasing no one. has opened a pastry shop and

hired 14 people.

This may or may not be the case. You So you really will be
must determine how your business idea like a scientist
S
overlaps with customers desires or need for
tarting and building a new
the product. More specifically, think about
business the right way will
what will convince customers to give up
increase your chances of success.
their hard-earned money in return for what
You might approach your business
youre selling. If you find that special place
idea as a kind of experiment.
where your passion overlaps with customer
Why this approach? Good scientists are
demand, you have found the sweet spot.
always testing and probing, testing and
It is at this very intersection of the two
probing. They also ask many questions.
circles below where their money will
You must do the same as an entrepreneur.
pass into your hands.
Together, in this book, we will work
E
through what we think we know about
arlier, we talked about baking bread
your business. Well test our assumptions
and selling prepaid mobile phone
early and often, and well do this even
cards. Does it seem hard to imagine
before we create an actual business plan.
that phone cards could be anyones
The problem with writing a plan
passion? Products like phone cards may
before doing any testing is that we would
not seem that exciting, but if our budding
be investing time and effort into writing
entrepreneur sees that by selling them she
about what we think we know about
is helping people communicate more easily
our market. But what if our assumptions
with one another, that might be rewarding.
about customers were wrong? This means
How about our bread baker? She may be
that the entire plan is built on a wobbly
an excellent baker and love the work, but
foundation that could easily collapse.
the thing that gets her up every morning is
A business plan requires details that we
seeing people enjoy good food. The bread
dont have yet, as we are still exploring
baking is just the thing that allows her to
what we want to do. It makes better sense
pursue this passion. For both entrepreneurs,
to do some business experiments first, to
where their passion meets their customers
learn about our customers and potential
needs is where they will make their money
pricing options, and only then create
and their living.
a business plan.
Being an entrepreneur can be the most
exciting adventure of your lifetime. It will
be challenging and will require a lot of
Your Customer
passion demand hard work, but once your business is up
and running, owning it will undoubtedly
e u be a thrilling ride. 4
*Find that special

place where your
passion overlaps
with customer
demand.
16

Good scientists are When he was 12 years
old, Shubham Banerjee
always testing and invented an inexpensive
probing. They also ask Braille printer, using a

Lego robotics kit as a basis.
many questions. You With family support,
must do the same he launched a company,

Braigo Labs, to further
as an entrepreneur. develop the printer for
educational and home use.
17

If youre not having JACOB MEDWELL

AND JONATHAN
fun, it doesnt count. SHRIFTMAN
Founders of Sol Bicycles,
which markets specialty bikes.
Venice, California

2 Building your business
block by block
Y
ou have a great idea for a That is not important. How you propose
business and you know it will to make it stand out from the rest of
be a huge successbut thats the crowd is. The features that make
only the first step. You will need your business unique make up the
to put your idea into action. value you propose to bring to it. Those
Developing a business plan is not the unique features constitute your value
next step, although someone may have proposition. Your product or service should
told you it is. Instead, you will build your be as special and unique as possible;
business model, the construction of all the otherwise, how will you attract customers
parts of your startup. For this, you need to to purchase your product rather than
gather as much information as you can competitors products?
before the launch. Understanding the needs, To determine your value proposition,
preferences and budget of your customers here are four questions to consider:
will enable you to create a good business
What problems does your product
model and, later, a better business plan
or service solve?
based on it.
What needs are you satisfying?
In this chapter, you will learn a building-
What category of products or
block approach to starting a business. The
services are you selling?
building blocks are presented in the order
How will your product or service
in which you should think about them.
be different from similar products
Those toward the end of the chapter build
or services?
upon your findings from the first few blocks.
Here is a way to better understand
Value proposition
value proposition. Our entrepreneur from
What makes your business unique is its Chapter 1 wants to sell prepaid phone
value proposition. Your idea for a business cards in her area. She knows demand for
may or may not be the first of its kind. such a product exists, but not much about
19

her potential customers. The entrepreneur Customer segments

asks them about their phone calling habits.
Customers have many different needs
From the feedback, she learns what type
and desires. You should divide your
of card they desire most and their preferred
potential customers into groups whose
card features. To set herself apart from
members have similar characteristics
other sellersher competitorsshe plans
relevant to marketing. This is called
to sell sought-after cards. In this way, the
customer segmentation. To help identify
entrepreneur aims to reach potential
your customer segments, consider these
customers not happy with the phone cards
two questions:
currently available to them. Providing
customers with the most sought-after Who are you
phone cards is the value proposition of creating value for?
her business. and
Now look at a real-life example.
Europeans love to eat snails year-round,
Who are your most
not just when they are in season. Ola
important customers?
Barramou of Fs, Morocco, could have Your business cant be everything to
been one of many exporters of wild gris everybody. If you try to please everyone,
snails to Europe. Instead, she launched you will end up pleasing no one. The
a business providing a high-quality phone card entrepreneur has some
farmed variety year-round, something customers who want to stay in touch
that competitors couldnt match. Thats with their relatives and others who need
Barramous value proposition. to communicate with their business
Next you need to understand the contactstwo different groups and two
problems you are solving, or the needs different needs. Well call the first group
you are fulfilling, for your customers. communicators and the second group
The phone card entrepreneur is probably connectors. The communicators may not
solving more than one. She has customers use a lot of mobile phone minutes each
who want to make phone calls to stay in month, but they could be regular customers.
touch with family and friends. That is one Our entrepreneur may want to offer them a
need. She also might sell phone cards free card for every six cards they buy. The
to business people who use their phones connectors are likely to use on average
to do business. Thats another need. more minutes per month because a mobile
T
phone is a basis of their livelihood. Our
he question of what products entrepreneur may want to offer them some
or services youre selling may type of volume discount. (You will learn
look obvious to you. But its not more about customer acquisition and
always the case. For example, our retention in Chapter 4.)
entrepreneur realizes she doesnt sell just Both types of customer segments are
plastic cards, but convenience, or an easy important to her business, but each has
way of connecting with people. Based on a different need and requires a different
that, she can later expand her product approach. Be careful, thoughyou dont
line by adding a few well-chosen phone want to have too many customer segments
accessories like battery chargers and or you will end up losing track of their
cases, as well as a phone repair service. distinct needs. About three or four customer
segments is the right number to focus on.
20

Opening a restaurant is a
Customers who popular entrepreneurial
tip contribute most to
dream; running one, though,
is relentless work. Still,
thousands of eateries open
your business each year around the world.
Top: A dumpling restaurant
bottom line require in Shanghai, China. Bottom:
the most attention. An eatery that specializes

in Tibetan cuisine in
Dharamsala, India.

Make it easy for customers

tip
to get your product.
D
eciding who your most important will likely differ for different customer seg-
customers are can be tricky. Your ments and different products and services.
instinct might be to believe all of Tom Szaky of the United States had
them. Of course, you should treat a vision for using hard-to-recycle waste
all customers with respect. But from a like packaging, wine corks and rubber
business point of view, they are not all equal. gloves to make new products. But he
If, for example, you have a customer needed to create a high-volume supply
segment that you anticipate accounts for 80 chain of waste and get many customers
percent of your sales, you need to give this for his products. Szaky used the internet
segment the most attention. Lets go even to recruit some 40 million people in 22
further: In this particular customer segment, countries to collect trash for his business,
there may be one specific customer TerraCycle, mostly by appealing to their
likely to spend the most money with you. environmental consciousness. He has
This customer should get some special turned them into customers by offering
treatment. This doesnt mean you ignore them points that can be redeemed for
others, only that you need to prioritize TerraCycle products.
the demands of different customers. Now suppose you have decided
In practice, this can mean you have to tailor clothing as your business. Youve
to scale back on the attention you pay to created your value proposition that will
a customer who buys little but demands help differentiate your business from
much of your time or effort. Otherwise, you others and have identified some customer
risk losing other more profitable clients. segments. One of these customer segments
Youll need to get comfortable with the is young professionals.
fact that not all customers will contribute As you talk with these young profes-
equally to your business bottom line and sionals, you begin to feel that this customer
therefore all cant be treated equally. segment will benefit from advice on what
looks good on them. Perhaps you also
Customer relationships
decide to offer laundry services or sell
Its not an accident that we are focusing neckties and other accessories. These
primarily on customers. Without this focus, customers might love the fact that you
you could end up building a business that pay particular attention to them and their
only few customers need. With customer clothing needs. They would expect you
relationships, we will explore the human to develop a special relationship with them,
side of dealing with the people who will be and over time, they will likely become
buying from you. loyal to your business.
Customers expect that you will establish You would need to invest a lot of time and
relationships with them. These relationships energy in getting to know each customer in
this group. You must learn what colors each
likes and which styles look good on each,
22

Nurture customer In Grozny, Russia, fashion
tip designer Fatima Tisaeva
relationships checks inventory in her

shop, which sells traditional
by listening more Muslim clothing for women.

The market for Islamic
than talking. clothing is projected

to grow by more than
40 percent by 2019.

and come up with good advice. But the time your customers. A distribution channel
and cost can be worth it. By making this is the way to get products or services into
investment in understanding your customers the hands of customers.
and catering to their tastes, you will likely Lets consider these questions:
benefit by seeing more orders.
ee How are you reaching your
You also may have customers who only
customers, and how do they want
drop off laundry with no need for other
to be reached?
services; they have a different relationship
ee If you use more than one distribution
expectation. That segment may see the
channel, do they work together?
laundry only as a transaction. This isnt
ee Which channels are most
a bad thing at all; those customers bring
cost-efficient?
A
business, while requiring less of your time
and energy. store in your town could be
Lets peek into the future. Your business a distribution channel for a
has been successful, and you realize that number of clothing vendors.
you need to add staff to help you handle For each of these vendors,
a growing number of customers. You will having a store on her/his own might be
want these new employees to become too expensive. By selling products through
familiar with customer needs as closely someone elses store, a vendor can reach
as you are, because you believe that customers in a cost-effective way.
stellar customer service distinguishes your The way you distribute your product
business. As long as sales outweigh the cost can be a decisive factor in growing your
of adding workers, it is a good decision. business. Darril Saunders knew her Exotic
(We talk more about this in Chapter 3.) Caribbean Mountain Pride brand of
It is up to you, as the business owner, cocoa drinks would reach only a limited
to learn what kind of relationship your number of customers on the island of
customers expect from you and to Trinidad if she couldnt sell them in
plan accordingly. supermarkets. Thats why she put a lot
of efforts into meeting requirements
Distribution channels
regarding the bar codes, packaging
In the pastand still today in some parts and other items that supermarket chains
of the worldfarmers and craftsmen would impose on their suppliers.
trade goods by river or in a towns market. For Saunders, the supermarket is the
This was how they distributed what they middleman. Theres no way she could
had to offer. In the same way, you will need reach the number of customers on
a system to get your products or services to her own that supermarkets can provide.
When pricing your

tip product, consider:
H
ow much How good How much
money the crafts- convenience
you spend manship is it may add
to make it to the
customers life
24

b u i l d i n g y o u r b u s i n e s s b l o c k b y b l o c k
The supermarkets are in the middle, The internet is an example of a modern

between Saunders and her customers. They distribution channel, whose reach, and thus
have to make money, too. Saunders had importance for business, is only growing.
to figure this into her pricing model for her In many countries, products and services
cocoa drinks. can be either bought in a regular store or
She could do this in more than one way: ordered online.
B
ee Increase her price to cover what
ut just as with customer segments,
the supermarket charges her.
a business can have too many
ee Keep her price the same and
distribution channels. The number
earn a smaller profit on each item,
of customers is finite, and if your
with the expectation of a higher
multiple channels compete for the same
volume of sales.
customer, some channels will not be
The phone card entrepreneur has profitable. In addition, each distribution
learned how her customers want to pur channel will require your time and other
chase these cards. She decides to rent a resources, decreasing the attention you can
small kiosk in the center of her town, as her devote to your customers.
potential customers frequent this area and
Revenue model
the area gets a lot of foot traffic in general.
The customers like the predictability A revenue model is a framework that
of her manning the kiosk, ready to sell identifies which revenue sources to pursue,
them cards when they need them. what value to offer, how to price the value
Over time, the phone card business and who pays for the value. Revenue most
grows, and the entrepreneur thinks about often means sales, and we will use those
expanding it to neighboring towns. In each words interchangeably.
town, she recruits other women to sell the A revenue model is part of a companys
phone cards. Each woman is paid based business model. Pricing is derived from
on how much she sells. This percentage is the revenue model, but it also depends on
known as a commission. The women are a factors such as demand and a customer
distribution channel. The commissions paid segment. The revenue model is related to
to them have to be figured into the phone a companys business strategy, while
card prices. pricing is more of a tactic, which can
What if a friend of our entrepreneur change frequently.
proposes to open up a kiosk to sell her Lets focus on the following questions
cards in a larger town with more potential regarding revenue:
customers? He asks for a larger commission
What are my customers
than the women, who are in smaller towns.
paying for?
Is this a good idea? Potentially yes, if he is
able to increase sales enough to warrant
the higher percentage of the profits.
Distribution will always increase your
Your business
business costs. Thus you will want to carefully cant be <
consider these costs and weigh them against
an increase in revenues produced by an
everything to
additional distribution channel. everybody.
25

In the beginning, you may have to prove

tip to your partners that you understand what
it takes to be successful.
What is my customers risk of something going wrong. None of

ability to pay? his competitors offers a warranty because
How much money should I put the quality of their leatherwork is not as
into my product or service? good as his, and such an extra perk would
How should I price my reduce their profit. Our entrepreneur doesnt
product or service? believe he should charge the same price
as the other producers who are making
An example of an entrepreneur selling
inferior products. What is a fair price then?
leather goods can help explain the revenue
The following are major factors in
model concept. He has made his goods for
determining a fair price for a product
several years and his craftsmanship has
or service:
gained a wide reputation. People know
that when they buy a bag or wallet from The amount of money your
him, it will last a long time. He has come to customers can spend.
realizein response to the first question What it costs to make a product
that his customers are paying more money or provide a service.
for his products than for competitors goods What competitors charge.
because they perceive an extra value in his Customers perceptions of the
quality workmanship. value of a product or a service.
Like anyone else, his customers like to
Knowing that his product lasts four to
think they are getting a bargain. Many
five times longer than his competitors, you
of them negotiate the price, which in his
may think he should charge four to five
culture is expected. He has a good sense
times what his competition charges. That
of how much he should charge for his
may or may not be the right tactic. Based
products. If he charges too much, he may
on his local market knowledge and his cost
not get many sales; too little, and he wont
calculation, he may decide to charge two
cover his costs.
or three times what his competition charges.
T
At that price, his products sell reasonably
o set himself apart from his
well. But feedback from customers and
competitors, he decides to offer
other market signals may convince him that
a warranty to his customers. If,
at a slightly lower price, he will sell more
for example, the stitching on his
goods. He expects that the extra sales will
products gets torn in the first year of use, he
more than make up for the lower prices.
will fix it free of charge. He knows, however,
This is why we call pricing a tactic rather
that because of his quality workmanship,
than a strategy; you may decide to adjust
the chance of that happening is remote,
your prices based on experience.
so it is a safe bet to offer this guarantee as
An entrepreneurs approach to pricing
part of the purchase price.
a product is her revenue model. It is
Customers love the guarantee as part
something you need to develop for your
of the product offering, as it minimizes the
own business. A simplistic approach to
26

pricing is figuring your cost to make a with key partners can be a good way
product and then adding the profit you to grow or expand your business.
expect to make. However, you should think First, consider the following questions:
in a more in-depth way about pricing.
ee Who will be your
When pricing your products, think about
key partner(s)?
how much customers are willing to pay,
ee Who will be your
competing products and market conditions.
key supplier(s)?
Key partners and suppliers ee What key items or services
are your partners providing
Throughout this chapter, we have been
to you?
methodically building the foundation for
your business model. In the following Your key partner can be a supplier,
section, you will be challenged to a distributor, a company you sell to or
think about the people and groups a business that sells a complementary
you need to deal with to make your product or service. Back to our phone card
business work. If you dont have a lot entrepreneur. Whatever phone companys
of cash, creating business alliances cards she is selling, that company can be
A Ugandan dealer of solar
Treat your key suppliers lanterns, mobile-phone
tip with honesty and dignity.

chargers and home power
systems designed and marketed
by d.light design. Two
If you have disagreements, Stanford University graduates,
Sam Goldman and Ned Tozun,
resolve them quickly started the company in
and fairly. 2007 to provide electricity

and related financing to
off-grid communities.

To identify your key In 2014, Canadian Jordan
tip activities, ask yourself,

Whelan started Framestr,
an e-commerce and
marketing platform, and
What must I absolutely Our Paper Life, a design
firm specializing in
do to satisfy my customers cardboard furniture
and marketing displays.
and make sales?

one of her key partners. The leather the supply partner. If you dont sell enough
goods maker can have his leather supplier products, or if your supplier finds out that
as his partner. you are selling competing products, you
Entrepreneurs and suppliers can could be found in violation of the contract,
bebut dont have to bepartners. The and it can be terminated.
two groups make a good match if their Other business alliances with a supplier
business relationship is based on mutual may be less formal and not legally binding.
trust, openness and shared risk and reward You and the other party may just decide
that produce a competitive advantage for that doing business together makes sense
both. These traits help form an excellent for both of you. These can be just as
foundation for a business alliance. successful as legal partnerships and much
Another business, or person, can be easier to end if things dont work out for
considered a key partner if your relation either party.
W
ship with that business has at least
one of the following characteristics: ho might be a key
supplier for you?
You share in success or failure.
Someone who provides
You have an opportunity to develop
you with the supplies
products and services together.
your business cant function without. If you
You share the same customers.
have a bakery, whoever is providing you
You have an opportunity to share
with flour, yeast and other ingredients is a
some costs.
key supplier, and the ingredients are key
Remember that business alliances are items. Without these supplies, you cant
not always equal. If our entrepreneur sells make bread.
many phone cards, both her business You must pay close attention to key
and the supplier will benefit. If her sales relationships, as your business depends
are meager, she may have to close her on them. But not every supplier is essential
business; the phone card provider, however, to your business. For example, someone
will survive, as it supplies cards to many who supplies you with paper bags is not
other vendors. As a small-business owner, essential, as you would be able to make
our entrepreneur has less leeway. and sell bread without paper bags.
When you start out, you have little
Key resources
negotiating power with your suppliers.
Only when you prove yourself as a The most important items required to make
shrewd businesswoman or businessman your business work are your key resources.
and make your business grow will For our leather goods entrepreneur, for
you be in a position to negotiate a example, its leather.
better deal with the suppliers. Often, a key resource will be a material
Sometimes, business alliances with you need for your product. But not always.
suppliers are spelled out in a contract. This For our phone card entrepreneur, not the
means that you may be required to sign card itself but phone minutes allocated to
paperwork committing to selling a certain it are a key resource. For a tutor, his/her
number of products or achieving a certain knowledge is a key resource.
volume of sales. You might also be asked You should prepare for key supply
not to sell products from other companies interruptions by making a backup plan.
that could be viewed as competitors to
29

If you are providing a special

tip
A Rwandan
farmer processes
value to your customers, her coffee beans
the pricing of your product for sale to a
U.S. company.
or service should reflect
that value.
30

When supply vehicles break down or on. If your business depends to a large
storms make roads impassable, you may degree on advertising, it can be considered
be left without key supplies for hours, a key activity.
days or weeks. Typically, if you are making and selling
When you are ready to start, you may goods, the production of those items is a
need to purchase some items to set up your key activity. Likewise, if you are providing
company. The money you need to get your a service, that service is a key activity.
business up and running is often a key Ensuring that you have a steady stream of
resource. In the beginning, this usually is customers is a key activity.
a resource in short supply, so dont spend Knowing what activities are essential
it carelessly. You need to prioritize your can help you prioritize your work. At times
expenses, asking yourself every time you you will want to do things that arent
consider spending money, Is this something essential. Do them only when your critical
I really need now? tasks are completed.
Key activities Cost structure
O
Knowing that you alone are responsible ur final building block is cost
for your success can make you anxious. structure, which is the cost of
But it also can be exhilarating. Working all the critical items such as
for yourself can mean long hours and no time, materials, rent, wages
holidays, with many tasks requiring your and advertising that go into your product
attention. There may be orders to place, or service. This block comes last because
money to collect, bills to pay and the work one needs to consider all the prior blocks
to do to serve your customers. With all of before deciding what to include in the
these things on the to-do list, how does an cost structure. The following questions can
entrepreneur prioritize them? By identifying help you determine the cost structure of
your business key activities; that is, the your business:
activities that are essential to making your
ee What are the most important
product or providing your service.
costs in your business? These
These questions may help you target
become your key costs.
key activities:
ee What key resources are the
What activities does my value most expensive?
proposition require? ee Which of your key activities
What must I do to support my will cost more than others?
distribution channels?
To determine these key costs, think back
What tasks need to be
to your value proposition, the elements that
performed to acquire and
make your product or service valuable to
retain my customers?
customers. If you are making a product,
What must be done to ensure
your key costs are the total expenditure for
healthy revenue streams?
all the materials and components that go
In a bakery, baking is a key activity. into it. For sellers of goods, what they pay
Reading about the history of bread making for these goods is a key cost. Our phone
is not, although it may come in handy later card seller knows she also has to rent her
kiosk and pay business taxes.
31

I truly believe that the
next Mickey Mouse
should be born in
China where20 million
babies are born a year.
Poman Lo
Poman Lo, founder of Century
Innovative Technology, a Hong
Kong-based maker of educational
toys, cartoons, games and music
videos for the Chinese market.
Born into a family real-estate
business, she refused to
give up on her dreamto
create a Chinese counterpart
to Walt Disney Company.
I can make
coffee and
I can make
it good.
Keba Konte
A coffee bar in
Oakland, California,
run by Red Bay Coffee,
founded by Keba Konte.
Konte, an artist and
a serial entrepreneur,
has owned coffee bars,
an eatery, a gallery
and an urban garden.
Focus on making
tip a good product,
provide excellent
service and charge
a right price.

Other types of costs also are associated variable cost. If he sells a lot of
with a business. Operational costs, for goods, he will spend more on
example, include rent, taxes and payroll. the raw material. If he sells fewer
Think of operational costs as those goods, he will spend less on the
expenses you must pay to keep your raw material.
business up and running. Some operational
Can you ever charge less for a product
costs are only paid once; for example,
than it costs? In some circumstances, yes.
a business registration fee. Others are
Sometimes businesses will sell products
recurring, like rent and utilities.
below the production cost, or with an
Thoroughly understanding your costs
insignificant profit, to try to attract customers.
is important to your success. This doesnt
However, this is not recommended when
have to be challenging. In fact, a simple
you are just starting out. Focus on making
cost structure will make it easier for you to
a good product, provide excellent service
manage your business, and to know when
and charge a fair price.
things are going well and when you may
need to adjust your tactics. Talk, listen and build
Costs are divided into two categories:
In this chapter we cover all the essential
Fixed costs are those you will incur blocks of the business model. You have
whether you sell one item or one learned that you can build a strong
thousand. An example is rent for foundation for your business model using
a store. You will spend the same feedback from your potential customers.
amount to rent space for one month (Your business plan, which we discuss in
regardless of how much you sell. Chapter 6, will be based on your business
Variable costs depend on how model.) If you are open to customers needs
much product or service you sell. and willing to make adjustments, you will
In the shop of the leather goods increase your chances of success. 4
maker, leather is considered a
F Mobile banking
including sellers of goods
e Mobile banking is
and services, and to redeem
gaining popularity around
the world. Where banking deposits for regular money.
services are expensive or Mobile banking significantly
bank branches are hard to lowers the cost of money
reach, mobile apps that allow transfers and helps expand
payments to flow from one a potential customer base
person to another through for entrepreneurial ventures.
mobile networks are particu It plays a major role in
larly important. The service Africa, where infrastructure
allows users for a small fee deficiencies are especially
to deposit money into an daunting. As mobile banking
account stored on their cell remains mostly unregulated,
phones, to send balances some of the related apps are
using PIN-secured SMS text more secure than others.
messages to other users,
33

Life is much easier now. ERWAN & ICHSAN

JAMALUDDIN
With more tourists and established a surfboard rental and
more business, I have my repair business on a beach after theyd
lost their family to the 2004 tsunami.
zest for life back. Aceh, Indonesia

3 You as business owner,
manager and leader
M
any entrepreneurs concentrate Planningit never stops!
most on getting their business
When you came up with a business
up and running and spend little
idea, you probably had a particular vision
time thinking about what will
of what your business would someday
happen after the launch. But thinking about
become. Hopefully, this vision, or dream,
how your business will operate day to day
was bigand big is however you want
is critical to success. Once your business is
to define it. But the path from your vision
launched, it must be runand run efficiently.
to an actual business is rarely a straight line.
This takes a slightly different set of skills from
You will face challenges that will require
those you have learned so far; developing
you to adjust your plans; for example,
these skills will serve you and your new
refining the companys value proposition
business well.
or taking advantage of a technological
After you start your business, you may
change. It is the ability to adapt without
find it necessary to hire people. You may
losing sight of your vision that will make
need to acquire more inventory and more
your success more likely and help you get
space to store it. And, of course, all of this
through the difficult days.
will cost money. This is the point in your
Here are some examples of visions
up-and-running business at which you can for businesses:
become a business innovator as well as a
ee I want to help everyone
business owner.
in my village communicate
For that, in this chapter we will focus
with their loved ones.
on five areas:
This could be the vision
Planning of our phone card entrepreneur.
Organizing ee My business will make peoples
Leading lives easier.
Staffing This might be our leather
Controlling goods makers vision.
35

ee Our shop will help make our community Selling related products that enhance
healthy and happy. your main money-making product;
This vision could lead to a new bakery for example, phone accessories in a
or a service that provides clean water. mobile phone shop or watch batteries
A
in a jewelry shop.
merican teacher Toni Maraviglia
Here are some examples of tactics:
had a vision for a virtual tutor
Offering a discount on slow-
business, teaching and guiding
selling days.
students in remote or isolated
Purchasing supplies when the
locations in Kenya. Her partner, Kenyan tech-
suppliers prices go down.
nologist Kago Kagichiri, helped her translate
Offering a rebate if a customer
this vision into a company, Eneza Education,
buys an additional item.
that delivers interactive educational content on
Negotiating a bigger discount
mobile phone platforms.
from a supplier if you commit to
Do you see how these visions convey
a long-term agreement.
the broad idea of an objective that an
entrepreneur wants to achieve, but dont Your vision for a business should stay
specify products or services? That is fairly constant. It would be confusing if
because one can derive from ones vision you were to change it constantly. But the
different products or services by following strategies to achieve this vision, or an
different paths. These paths, or strategies, objective derived from it, can change
may have to change over time. Think of it somewhat. The tactics can change more
this way: A boat leaves one village to go to frequently in response to changes in the
another. Along the way, a rainstorm slows marketplace. Think of tactics like hand tools.
the boats pace. It may have to navigate If you are building a house, you cant use
around rocks or shallow waters. The vision a saw for everything. Youll need a hammer,
of arriving at the other village doesnt nails and other items as the house takes
change, but you may need to use different shape. Similarly, as your business takes
navigational strategies to get there. The shape, youll need to use different tactics
same is true for your business. to grow it and make it profitable. They
You may need to use a sail, or perhaps should always be rooted in your vision
an oar, to propel your boat. The plans or and support your business objective.
procedures that support your navigational If you are wondering whether to employ
strategy are called tactics. You need to do a certain tactic or not, ask yourself, Will
some thinking about strategies and tactics doing this bring my business closer to
for your business. achieving its objective?
S
Here are some examples of strategies:
Adding another way to sell your ean Leow had envisioned an
products (or a distribution channel, online community of alternative
as described in Chapter 2). Chinese artists and musicians.
Adding another revenue stream, such He started Neocha to promote
as a laundry service in a tailor shop and connect them with one another.
or bread delivery in a bakery. But when revenue from advertisements
Switching to a new, more efficient and mobile payments didnt materialize,
technology to manufacture a product he asked an acquaintance, Adam
or deliver a service.
36

y o u a s b u s i n e s s o w n e r , m a n a g e r a n d l e a d e r
Schokora, to help him refocus the business This is a business owned by one individual.
on content production, market research This person gets to keep all the profits, but
and events planning, thus changing his is responsible for all liabilities as well. It is
original strategy. one of the most popular types of business
structures because its the simplest.
Organizinga little now
Another way to organize a business
saves a lot later
is through a general partnership. This type
Most entrepreneurs start their companies of business is made up of two or more
in order to make a profit. This kind of people who share ownership. Each partner
company is called a for-profit. Some launch contributes resources such as money,
a company to support social, environmental property or labor to all or some parts of the
or other goals rather than to make a profit. business. In return, each partner shares in
This kind of company is called a nonprofit. the profits and losses. For example, if two
This books focus is on for-profit businesses. people start a business, each could be an
Most small businesses start out organiza- owner of 50 percent of it. Does it have to be
tionally the same way as businesses have for 50 percent? No. The split can be mutually
thousands of years: as a sole proprietorship. decided based on who contributes what.
Your vision for a business Many issues must be

discussed when you
should stay fairly start a company; founders
constant. It would be and employees of Dable,
an online content
confusing if you were to platform, do just that at
change it constantly. the Google campus in
Seoul, South Korea.

U
nder terms of a limited partner- may not reflect this. Thus, registering a
ship, usually one person acts as business may not be easy, and obtaining
the general partner and makes required permits and certificates perhaps
all day-to-day decisions, such less so because of bureaucracy and
as dealing with suppliers and hiring staff. possibly even corruption.
The other partners, referred to as limited, Despite the urge to get your business up
typically are not involved in day-to-day and running as soon as possible, you must
operations. Generally speaking, the risk resist the temptation to resort to bribery to
all partners take on is limited to whatever speed up bureaucratic proceedings. You
money they have put into the business. should conduct your business in a fair and
Some entrepreneurs bind together to honest manner. In the long term, business
spread the risk more broadly through a integrity strengthens your reputation, which
cooperative. Such an organization is owned pays off, as customers are drawn
and run jointly by its members, who share to reputable companies.
the profits and losses. A cooperative gives its If you are a victim of corruption, safely
members more purchasing and marketing seek out others who may have been
power than they would have as individual similarly affected and share your story.
business owners with meager resources. There is power in numbers, and you will
Yet another form of business organization feel less alone. If you feel that the proper
is a public company. Its a company that authorities will support you, especially when
issues shares to be traded freely on a stock youre a victim of extortion, theft or cheating,
exchange. Were not going to discuss this report the issue. By doing so, you put the
kind of legal structure, as its most often offenders on notice that you are aware of
chosen by large, fast-growing businesses. what they have done.
Most likely, you will choose a sole pro- As a general rule, when launching
prietorship, a partnership or a cooperative a business, quicker is better than slower.
for your business. The rules for establishing However, that is not the case if it means
a business differ among countries. You compromising the quality, safety or integrity
should learn about the steps you need to of a product, a service or your firm.
take in your country to register your business Remember that your product is associated
and its name, and to obtain all necessary with your business reputation, and vice
permits and licenses. For example, if you versa. For example, resist the temptation
are selling food or drink, a health code or to use inferior materials to save money.
sanitary requirements may apply to your Dissatisfied customers may tell potential
business. customers about a bad experience with
Learning about rules and regulations your product, and this may cost you more
affecting your business will help you in lost sales than you were able to save
avoid conflict with authorities, which can on cheaper materials.
be costly.
Leadingyou can do this!
Doing business
It is easy to fall into the trap of thinking
the right way
you can handle everything yourself. It may
If you live in an emerging market country, be true in the beginning and if your business
you are contributing to its economic is really small. But when your company
development. But its laws and regulations starts growing, you must recognize that,
at some point, you may not be able to
38

handle everything yourself and will need Many books have been written on
help. Employees can make products, sell how to become an inspiring leader. You
directly to customers, process inventory or can read some, but if you dont have time
perform other tasks. or access to the books, you can rely on
Hiring people would make you the boss characteristics common among great
of others, and dealing with employees business leaders. They:
requires a special set of skills.
Act with integrity.
A true leader recognizes and acknowl-
Stay true to their vision.
edges his/her shortcomings and limitations
Are open to feedback from others.
and learns to depend on others. Seeing
Treat their customers as they
that you are comfortable relying on others
would treat family or friends.
knowledge and skills will encourage
Run their business in a way
your employees to ask questions, make
that inspires others.
suggestions and seek more responsibilities,
Hold their workers to a high
thus contributing to the success of your
standard but acknowledge them
business.
when they are doing a good job.
Leadership is often the most challeng-
ing area for an entrepreneur. More than Follow these rules and people will want
financials, customer relationships or making to work for you.
products, the idea of leading can seem Family may be the first and easiest source
daunting. This is especially true if, by to look to for help in the business. For many
launching your business, you are blazing reasons, family members can make the
a new trail in the business world. best workers. But theres no guarantee that
Leadership requires you to understand such an arrangement will work out. For
both business and people. Most people come example, consider how you will handle:
to work for you wanting to do a good job
Tardiness or absences of
and be acknowledged when they do well.
family employees.
Yet employees have feelings and attitudes
Pay and promotions. Would family
that you need to take into account when
get priority treatment over other
leading them. For some, understanding what
deserving employees?
motivates people comes easy. For others,
Employee development. How will
it is something that comes with experience.
instruction or praise given by you
Either way, good leadership can be learned.
be received by family members?
Think of some leaders you admire. What is it
Acceptance. Will family members
about them that makes them good leaders?
accept you as the boss?
W
hether you hire others or You may decide not to mix business
not, you are the leader of and family. Then you would need to hire
your business. People will people from outside who have the qualities
be watching and judging your business needs. No one will know
you to see whether you measure up. Do you better than you what your operations
want to be seen as someone who can take require and what your customers expect.
initiative and inspire those around you, or Think carefully about these needs, and
someone who struggles to make decisions hire people who exhibit the ability to meet
and pays scant attention to people who them. Consider putting all new hires on
work for you?
39

a 30- or 60-day trial period. Set up clear ee Customer satisfaction drops.

requirements for them and see how they ee A plan is being developed to
perform over the trial period. Help them out expand business.
if they make some mistakes, especially early ee An opportunity to beat a
on. However, if after a reasonable amount competitor emerges.
of time they dont perform as you expected, ee The owner feels exhausted by
you should let them go. doing everything himself/herself.
As a leader, you will have to develop a ee Important business tasks
strong working knowledge of the people arent done.
who work for you. Whether you have just
You also may need to work with outside
one employee or 20, each person will
specialists, such as a bookkeeper or lawyer.
bring to the workplace different talents,
Think of these experts as temporary hires.
expectations, attitudes and ideas. Your job,
You will pay them for work done when it
as a leader and manager, is to learn how
needs to be done, but wont bring them on
to bring out the best in your employees
the regular payroll unless necessary. You
while discouraging negative attitudes and
might even be able to barter something in
behaviors. It takes time to develop such skills
return for their help.
but is well worth the effort.
W
Staffingbalancing sales ould you ever bring
and expenses someone in when your
sales do not support
Employees will be the backbone and,
an employees salary?
perhaps, the face of your business if they
Yesin certain circumstances. Sometimes
deal directly with customers or suppliers.
business owners need to build demand for
Hired workers will either help you grow
their product or service before any
your business or slow you down. If you hire
significant sales come in. This requires
people in a rush because you need them
investing time and energy into convincing
on short notice, you may end up with
people that they need that product or
employees damaging your business rather
service. In such a case, entrepreneurs will
than contributing to it. For example, a bad
have to cover expenses for some time before
hire can handle customers so poorly that
they start to see revenue. Well discuss in the
they decide not to return.
next chapter how this is accomplished by
As adding an employee costs money,
getting outside investments. But for now, the
you must consider what makes more
general rule is: A new employee should
business sensegetting enough sales to
support enough new sales to cover his/her
support the expense of a new hire or hiring
salary and add to your companys profit.
someone to boost the sales. It will be up
to you to develop an instinct for the right Small things can add up
timing. These are telltale signs of a company to big profit, orloss
in need of hired hands:
This brings us to cash flow. The money from
ee Sales are lost because the a sale flows into a business. This is referred
entrepreneur cant handle to as cash flow, and you will want to pay
increased customer demand. particular attention to it as you manage your
business. Cash flow is the lifeblood of every
business, big or small.
40

Everyone seems
satisfied with what
they have...They
dont want to take
the risk of breaking
free. I have always
wanted to fly.
Siddhant Kumar
Siddhant Kumar
overcame caste
discrimination to start
FunRally Games in
2012 in Delhi, India.
The company produces
tabletop games.
We didnt start
a company with
a mission, but
we had a mission
that turned into
a company.
Blake Mycoskie
Blake Mycoskie,
founder of TOMS,
a U.S. shoe and eyewear
company. For each
pair of shoes sold, his
business gives a new
pair of shoes to an
impoverished child.
reak your
B
tip
business goals into
small, measurable
milestones.

Listening to customers, employees

tip and key allies is an essential part
of your job.
A sale made today supports a sale You know you need to let the water flow so
made tomorrow and the next day. Ideally, that the river downstream remains healthy
it allows you to pay rent, vendors and (you pay vendors, employees, etc.). But you
employees, and to make more products dont want to release too much too soon
to sell to more customers. A slowdown in because you may empty your reservoir (cash
cash flow doesnt necessarily mean disaster. savings) too quickly. You dont want to release
In a business that sells more products or too little either, or things downstream wont
services during a particular season, a drop survive (vendors may go out of business,
in revenues, for example during winter, employees may quit). You want to hold onto
can be acceptable. But in a year-round cash as long as possible, but remember
business, higher cash outflows than inflows that otherskey partners, suppliers and
for an extended period, or other cash-flow employeesmay depend as much on your
problems, may signal a broader issue and prompt payment as you depend on timely
put your company at risk. payments from your customers.
S
Now, reflect on how a household budget
ome business customers of our is run. Lets say that your family members
phone card entrepreneur have are thrifty and give you a small amount
asked her to sell them cards on of money from their savings. This is your
credit, with a promise to pay her beginning cash. If you have a job, your
when they make money in their businesses. wages amount to cash inflow. The money
This means that she cant collect money at you use to pay bills and buy groceries make
the time she makes the sale and has to wait cash outflow. The amount you have left over
for payment. This arrangement makes her is your net cash flow.
dependent on her customers sales success. To summarize, in terms of your business:
With less immediate money from card sales,
Beginning cash: the amount of
she will need to dip into her savings, if she
money you have on hand or
has any, to keep cash flow going. If she
ready to invest in your business.
ends up not being able to collect the money
Cash inflow: the money from
from her customers, her business could be
sales coming into your business.
in trouble.
Cash outflow: the money you
Be careful extending credit to buyers,
pay to vendors, employees,
if you do it at all. This has a role when used
payments on loans, rent, etc.
wisely at the right time. When you are just
Net cash flow: the sum of the
starting out is not the right time.
preceding three.
Think of cash flow as a large river
that has been dammed up in a reservoir.
You control this reservoir (your revenues).
42

A
positive cash flow is what Are all of them absolutely necessary?
you want for your business. If you make goods for example, asking a
A negative cash flow means specialized producer to manufacture them
you owe money to someone for you can be less expensive than buying
employees, vendors or partners. Although expensive machinery. Jonathan Shriftman
occasionally this may happen, you should and Jacob Medwell found an inexpensive
avoid such a situation, particularly over manufacturer in China when they launched
an extended period. Thats why controlling Sol Bicycles in 2009 to market fixed-gear
expenses is important, especially at an bicycles.
early stage. Pieces of property or equipment
Think carefully about the things you spend purchased exclusively or primarily for
money on to run your business, such as: business use are referred to as business
assets. They are good to have because
ee Raw materials
they allow you to make your product or
ee Tools and equipment
service and can serve as collateral. Realize,
ee Transportation
however, that you may have to borrow
ee Manufacturing
money to pay for these assets. Alternatively,
ee Office space
Think twice before In this hive, customers
tip spending your money.

can grow at home
mealworms, considered
delicacies in some
Your expense should be countries. Katharina
justified by your business Unger, left, and Julia
Kaisinger developed it for
essential needs. their startup Livin Farms
at a business accelerator
in China.

you can rent machines, tools, vehicles he hosted a lavish art and music party in
and office space if you cannot afford to Shanghai to launch his company Neocha.
buy them. Later, to survive, he had to downsize Neocha
Our leather goods entrepreneur bought staff, move the companys office to a smaller
some tools in order to launch his business. space and switch to a less expensive web-
These tools became a business asset. As hosting service.
he did not have much beginning cash, he Large expenses are easy to see and track.
borrowed money from his father, whom But smaller ones, such as office supplies, can
he promised to pay back in two years. go unnoticed. When added together, they can
He makes regular sales, so he can make become a drain on revenues.
the modest monthly loan payments. The For example, our phone card seller
borrowed money is considered a business advertised in a local newspaper, assuming
liability. In the next chapter, we will discuss it could boost her sales. Comparing revenues
some other ways to raise money. from before and during the ad campaign
When you start out, you want to minimize helped her realize that an ad-related
the money you spend on things required increase in sales was only marginal. She
for your business. Aim to have enough discontinued costly ads and relied on word
sales to support expenses such as loans, of mouth and paper flyers for marketing,
rent and supplies. which cost little. She demonstrated a good
O
grip on her finances.
ur phone card entrepreneur has
Running a company as a leader
enough experience to be able to
make sales projections. She buys After developing your business model and
enough cards to have on hand, getting your business up and running,
but resists the pressure from a key supplier to you are now faced with many operational
buy more. Buying more than shes able to sell issues. You must balance the excitement of
would tie up too much money in inventory. launching your business with the day-to-
On the other hand, the leather goods maker day activities of managing, selling, paying
has enough cash available to stock up on bills, dealing with customers and employees,
leather hides when their price goes down. tracking money and negotiating with
By expanding his inventory, he saves money. suppliers.
Both entrepreneurs display good control of You learn in this chapter that, by
their business expenses. virtue of being a new business owner,
The most brilliant business idea wont you may be viewed as a leader by those
succeed if a business cant pay its bills. Sean around you, particularly your employees.
Leow didnt think much about the costs when Your business success may depend to a
large degree on whether you can infect
them with your enthusiasm and inspire them
When you start to contribute to your business to the best
of their abilities. 4
out, insist on
being paid at
the time of the
transaction.
44

A true leader recognizes Top: Silicon Valley entrepreneur
tip and acknowledges

Bowei Gai traveled around
the world in 2013 to produce
a report on startup communities.
his/her shortcomings Bottom: Abhinav Sureka of
Mumbai, India, graduated from
and limitations and learns Babson College in Massachusetts,
which focuses on entrepreneur-
to depend on others. ship education. About 2,000
other U.S. colleges and universities
offer an entrepreneurship course.

Dont believe in overnight BEL PESCE

Serial entrepreneur and writer.
success. If you go deeper, Her latest venture is FazINOVA,
you see that people worked which helps students develop
entrepreneurial skills.
really hard. So Paulo, Brazil

4 Your customers
Getting, keeping
and growing them
Y
ou may think that getting of people? You cant. You must focus on
customers will be easy as long the customers who you think may buy your
as you offer a good product or products or services. You must get to know
service. But thats not always the these potential customers and their traits as
case. And even if you do attract customers, much as possible. Here are some questions
how do you keep them? that can help you achieve that:
In this chapter, you will learn how to
Are most of my customers
identify potential customers, persuade them
male or female?
to buy your product or service, and make
Typically, how old are they?
them stick with your business. We will also
What do they do for a living?
discuss how being open to changes and
Where do they live?
dealing effectively with missteps is essential
How do they spend their
to your success.
leisure time?
Getting your customers How do they buy? What do they
think about my competitors
Customers can be easy to understandor
products/services?
they can be a mystery. Why do they prefer
How much money might
one product or service over another? You
they have to spend on
have to put yourself in a customers shoes
products/services like mine?
to get answers. The more you think like a
customer, the greater the chance you get Turning a potential customer into an
the right answer. actual customer who buys your product
But arent they just like me? you ask. or service occurs in stages. (See infographic
They arent, necessarily. And they arent on page 53.) Potential customers can get
all like one another. They have different stuck at any of the first three stages: They
preferences and tastes, needs and desires. may not be aware of your product, they
How can you satisfy such a diverse group
47

can be aware but not interested or they can appeal to their senseslet them hold
can be interested but not persuaded to or use the product, give them a sample to
actually buy. taste or post a homemade how-to video
For the knowledge stage, think about online. Allowing customers to sample
how you will get the word out that you your product encourages them to imagine
are in business. The most obvious way is themselves using it.
through advertising. One may consider People work hard for their money, and
placing a small ad in a local newspaper, its not easy to get them to spend it. Often,
on a local radio station or, in regions such what stops them is the fear of making a bad
as Africa, through a mobile service. Printed choice. Alleviate their qualms by reassuring
flyers are relatively inexpensive and can them that what you are selling will make
grab attention. their lives easier, better, more meaningful or
If you dont have money for ads, mobilize more fun. Communicate with themdirectly
your imagination. Entrepreneurs around or indirectly through email, social media
the world have had success using low-cost or a comment cardabout how they will
or no-cost guerrilla marketing techniques actually use the product or service. Ask
such as graffiti, stickers and unusual them what they like and dont like about
window displays to reach their customers. competitors products. This will demonstrate
In Bogot, Colombia, Gigliola Aycardi that you care about their needs. You may
and her business partner installed floor-to- overcome hesitation by offering a warranty
ceiling windows in their first Bodytech gym or money-back guarantee. Its your job to
to display machines and exercising patrons persuade a customer that what you are
to drivers and pedestrians passing by. selling is worth the money.
T
As you talk with potential customers, you
here is probably something may discover that your product or service
about you that you can use to is not a good fit for them. The right thing to
present yourself as an expert in do in this case is to not insist on the sale, but
your field. What are you known rather suggest another product or service.
for? Your ability to grow food or plants? They will be grateful for your honesty and
Your needlework? Your technology skills? may even refer their friends to you. Either
Positioning yourself as an expert helps give way, you may end up with more business.
your business credibility. People like buying Could a business spend too much to
from someone who is knowledgeable about acquire a customer? Perhaps more than the
what he/she is selling. business might receive in the first initial sale
Iris Huang co-founded Glogou Inc. to to that customer? Yes. A business owner
help U.S. companies market their products may decide that the long-term value of a
and services in China through Chinese- customer will more than make up for the
language social media. Her expertise in expenditure for attracting this customer.
the Chinese market is supported by her Understanding the customer acquisition
backgroundshe grew up and studied in costs is important because they can make
China before getting her graduate degree or break your business.
in the U.S.
Keeping your customers
Customers must see how your product
or service fits their tastes, preferences or A lot of effort and money go into
lifestyles. To help them figure that out, you persuading customers to buy. Doesnt it
make sense then to work just as hard
48

Farming on vacant urban
et free advertising
G land and big cities peripheries
tip for your business: Teach
provides residents with access
to fresh nutritious food and
a class, offer an interview improves the environment.
Bottom: Brooklyn Grange,
to a newspaper, write the worlds largest rooftop
a blog or publish a farm, started in 2010 in
New York. Top: Luis Miranda
newsletter online. grows organic produce near
Sacramento, California.

to keep those customers? Lee Resources experience with others. As a result, you
International Inc., a consulting firm, may lose not one but many customers.
found that attracting a new customer, on Another tactic for keeping customers
average, costs five times more than is offering product updates. Such updates
keeping existing ones. often follow the introduction of technology
S
products. For example, firms that market
everal tactics can help you retain mobile phones and computers regularly
your customers. The first, and send software updates. This is a great way
simplest, is the customer check-in. to ensure customer loyalty, because it shows
With a check-in, you contact the you care for product quality and customer
customer after the purchase to see how satisfaction.
things are going. You have learned the You can do product updates in non-
importance of listening in winning over technology businesses as well. Take our
customers wallets. Customer feedback also entrepreneur who sells phone cards. Over
will help you retain those customers. time, she has added cell phone cases to
After a sale, you want to learn how the her product line. Now she has learned that
product they purchased is working for them, waterproof cell phone cases are available.
or if they are satisfied with the service you She will want to start offering them and try
provided. Pay attention to what they say. to convince her customers they need one.
K
If they are happy, let them know you hope
they continue to buy from you. If they are eeping customers is really about
not happy, find out why and fix the problem. creating customer loyalty. A loyalty
Do what it takes to make it up to them. Offer program rewards customers
a replacement product or a redo of the for sticking with your products
service. If you cant fix the problem, offer or services. By creating one, you are
them money back. This applies whether recognizing that your customers have a
you have a small business where you choice and offering them an incentive to
personally deal with individual customers stay with you. Such a program shouldnt be
or a large business with thousands complicated or difficult. Our bread maker,
of customers. for example, could offer a free loaf of bread
Many entrepreneurs dont do the for every six loaves purchased. She could
customer check-in. They dont want to deal give a customer a card with seven circles.
with bad news or unhappy customers. But Each time the customer buys a loaf of
they risk losing a customer who is unhappy, bread, the baker stamps one circle with her
and this customer may share the bad bakery logo. After the customer has bought
six loaves, he/she surrenders the card
for a free loaf of bread. The process can
be repeated.
Positioning yourself The reward you offer is up to you. It might

be something free, a discount off a future
as an expert helps purchase, a special treatment for a customer
give your business or a chance to win a prize in a sweepstakes.

But whatever you offer must be understood
credibility. and valued by customers, otherwise the
loyalty program wont work. It is important
that you communicate your program
50

y o u r c u s t o m e r s : g e t t i n g , k e e p i n g a n d g r o w i n g t h e m
Do a customer check-in and

tip deal with any post-sale problems
when they come up.
clearly. Your customers need to know fancy products. He shows the pricier
what they gain by staying with you. products first to customers because he
A loyalty program also is a way of makes more money when they choose
building a relationship with your most them over cheaper products.
valuable customers. As part of the program, With unbundling, you break out the
they may be more willing to share with component parts of a product or service
you their personal data and preferences. and sell them individually. Lets consider
Using that information, you can make them an entrepreneur who runs a secondhand
feel special; for example, by letting them clothing store. She buys entire contents
know first about new products that fit their of wardrobes and closets and then sells
preferences. Customer information collected clothing items separately for a higher
from your loyalty program can help you price than she paid for them as part of
make smarter business decisions in general. a clothing collection.
C
Growing your customer base
ross-sellingselling products
Growth for your business can come from related to what the business
two sources: more customers and more already is offeringis a good
sales to your existing customersyour strategy for increasing revenue,
customer base. It is that second source that as you already have earned trust with your
we will turn our attention to now. customers. They may be more willing to
You learned about all the effort it takes to buy related products from you than to
convert a potential customer into a paying seek out other sellers of similar products.
customer. Once you make a sale, you want For example, a chicken farmer can add
to focus on building and then strengthening quail and duck eggs as well as poultry
the customer relationship in order to sell meat to his product line.
more to the same customer. You can Although upselling, unbundling and
increase your sales using four different cross-selling are all useful sales techniques,
sales techniques: there is no more effective way of attracting
new customers than referrals. When your
ee Upselling
satisfied customers try to convince people
ee Unbundling
they know to buy from your company, they
ee Cross-selling
act as your free representatives. All you
ee Referrals
need to do is ask satisfied customers to
Upselling refers to getting a customer send their friends and acquaintances
to buy more of the same item, a more to your business. They may even do this
expensive product, an upgrade or other without being asked if they really like
add-ons. For example, our leather goods what you are selling.
maker can put a higher price on selected
51

Y
ou can reward customers with You will have to keep one step ahead
money or discounts for referrals. of competitors. This may mean offering
This is perfectly ethical. For new products, features or services, which
example, our phone card will lead to the expansion of your business.
entrepreneur gives customers five business Lets look at some of our entrepreneurs
cards and asks them to put their names on and how they have mastered the art
the cards and give them to friends. When a of change.
new customer comes in and gives her one Our bread-baking entrepreneur got a
of these cards, the customer who referred local competitor. To gain an edge over
him /her gets a prepaid five-minute phone the rival, she introduced some pastries in
card. her bakery. She had the equipment and
In real life, referral programs come in knowledge to expand her product line. The
many shapes and sizes. Referral rewards new items support her value proposition
range from invitations to exclusive parties and keep her ahead of the competitor. The
to special-edition products not available to leather goods maker started making some
the public. For example, Dropbox, a digital of his goods waterproof in response to
file-hosting service, offers an extra 500MB customer requests. The new feature makes
of free storage space to the customer who his products more appealing than those
makes the referral and to the newly referred of his rivals.
user. GoldieBlox, a maker of toys and These entrepreneurs changed
games for girls, offers 20 percent off the next something about their business in response
purchase for both the referring customer to market signals. Your business will also
and the new customer. This accomplishes need to adapt to market conditions.
two things: GoldieBlox gets a new customer Many entrepreneurs struggle to change,
and the company encourages the referring because they have fallen in love with their
customer to buy repeatedly. business idea. Passion is important, as it fuels
an entrepreneurs drive. But you
Changing to stay ahead
need to test your vision against market
Dont expect your business to last long if realities continuously.
it remains the way you started it. To be Be on the lookout for signs that
successful, entrepreneurs must be open your business needs to change:
to changewithin themselves and their
Customers suggest modifying
businesses. It is unlikely that you will be
your product.
starting without any competitors. The
Some of your customers have
pressure they will exert on your business
switched to your competitors.
is likely to force you to implement change
New technology makes doing
in your company at some point.
business faster, cheaper or easier.
Customers like to feel special.

tip When a customer reaches a loyalty
program goal, make a big deal of
whatever you are giving them.
52

y o u r c u s t o m e r s : g e t t i n g , k e e p i n g a n d g r o w i n g t h e m
You have a hard time retaining bode well. Being a successful entrepreneur
good employees. requires regularly looking at your business
and yourself with fresh eyes and being
What if, no matter what you do, your
open to new ideas and new ways of
business doesnt seem to work? Do you
doing things.
give up on your dream? You know the
It is important to challenge yourself
answer is an emphatic no.
to think outside the box, to support your
S
personal growth and to develop your
tarting a business means doing
leadership skills. You need to keep your
something new and taking risks.
thinking fresh and feed your leadership
Such an endeavor rarely goes
soul by learning from others. Its not
exactly as planned. If sales dont
frivolous to take time for yourself. Just as
materialize, stay meager or start falling,
you need to invest in your workers, you
you should look at what might have gone
must invest in yourself. Here are some
wrong: Perhaps your customer acquisition
ways to do this:
projections were too optimistic. Or maybe
you dont control your expenses strictly ee Networking with other
enough. Or your management is poor. entrepreneurs regularly.
Once you pin down the reasons for your ee Reading about business in print
business troubles, correct the problems and and online.
change course to avoid repeating mistakes ee Reaching out to potential mentors.
in the future. Just dont keep doing the same ee Attending entrepreneurship
thing that got you in trouble. If you do, you events in your area.
will likely get the same result.
Talking withor networkingwith
Investing in yourself other entrepreneurs is almost a necessity.
You can share your experience and learn
Just as merchandise can get stale, an
from others (ideally, not your competitors)
entrepreneur can get stale as a business
how they meet challenges similar to the
owner and a leader. Its easy to get caught
ones you face. The internet and mobile
up in running a business as-is. If you
devices make networking easier. The
find yourself in such a situation, it doesnt
goal is for each network participant to
From potential customer

s to actual buyer
e Awareness e Interest e Persuasion e Purchase
You let You get them You make They
customers interested them willing to actually
know what you in what you are purchase your buy what
are selling. selling. product. you are
selling.
53

receive and give something of value. The internet is a great resource.

Dealing with a difficult customer? Someone Many websites offer free guidance
out there has walked that path before. to entrepreneurs.
Learned something new while doing the
Acquiring customers,
bookkeeping? Someone in your group
embracing change
would surely benefit from hearing about
it. Feeling stuck or challenged? Sometimes In this chapter, we focus on how to build
you just need to have someone who had a customer base: how to get customers, how
a similar experience hear you out. A bonus to keep them and how to grow
of networking with other entrepreneurs: their number.
You can refer customers to one another. Customers are the bread and butter
In newspapers and business magazines of your business. If you keep them satisfied,
you may find ideas and inspirational stories your business will grow. If you dont, your
about entrepreneurs who made it and how revenue will go down and the money
they made it. you spent to attract them will be wasted.
Specialized knowledgelike accounting, Youre unlikely to keep them satisfied
finance or managementyou often can if you dont embrace change, and change
find online or, possibly, in your local library. comes in many varieties. By staying close
If you cant access a library, consider to customers, competitors and employees,
starting one with members of your you will position yourself to adapt to any
networking group. change coming your way. 4
When things Ion

ll try to improve
the area that is
go wrong not working out
for me. If it has not
5 happened yet, Ill
try to avoid things
that can fail my
business.
Pgorofit and loss
hand in hand,
Susan Koilel from Kisharu,
Kenya, who runs a computer
so I dont give up. literacy business
If my business
isnt doing well,
I might relocate
it to another place Ycarefully
ou need to look
at what
where it would went wrong and give
do well. it another try.
Mamo Shiro, David Sempui,
owner of a sewing who operates guided
business in Kenya tours at Mount
Suswa in Kenya
54

Bottom: Serial entrepreneur
You need to keep your Hassina Syed at the modern
Badam Bagh farm in Kabul,
thinking fresh and one of a number of companies
she started. Top: Former music
feed your leadership event organizer Dominic
Cools-Lartigue launched Street
soul by learning Feast, pop-up food markets in
London that combine the fun
from others. of tasting different foods in one
place with cool music.
55

The challenging part is in the TOM SZAKY

Founder of TerraCycle Inc.,
beginning; its a leap of faith. which collects and transforms
But I think the most important hard-to-recycle waste into
colorful consumer products.
thing is to just do it. Start. Trenton, New Jersey

5 Financing your startup
E
ntrepreneurs are often thought of as To get your business up and running,
risk takers. Many people may not you need to obtain certain essential items.
consider becoming an entrepreneur These key items are called assets. An asset
because they are uncomfortable is something that has value and helps you
with risk. But here is a secret: Most success- earn money. Here are some examples:
ful entrepreneurs dont like risk either. They
Fabricif you make clothes.
just work hard to reduce risk in what they
Flourif you start a bakery.
do. The ideas in this book can help you
Prepaid phone cardsif you
work toward this goal.
sell mobile phone supplies.
So what are the risks related to starting
A computerif you design apps
your own business?
or websites.
A business costs money. Starting a new
business can pose a big risk to your finan- Now, think about special tools, utensils,
cial stability. But dont worry; there are machinery or equipment you will need.
many ways to raise money for new enter- Will you need to rent a store or kiosk? This
prises, and your family and friends can is where you need to understand the nature
also contribute. of the business you are starting. If you dont
have a good sense of it, talk to and observe
Moneywhere does an
others who are running ventures similar
entrepreneur find it?
to what you have in mind. Focus on the
Virtually every new business requires things you must have. This helps minimize
some money to start. Entrepreneurs call both your financial risk and the amount
this startup capital. The amount of startup of startup capital you will need. When your
capital you will need depends on the business becomes successful, you can con-
nature of your business. sider adding less essential items.
Where do entrepreneurs look for
startup capital?
57

When just starting out, ask yourself,

tip Do I absolutely need this asset to
make a sale? If your answer is yes,
then go ahead and get it.
Bootstrapping Your personal savings may not be

sufficient to get your business up and
First, consider using your own savings
running. In such a case, the closest thing
combined with your resourcefulnessknown
to using your personal savings is getting
as bootstrapping. This term means that
money from family members or friends.
an entrepreneur relies entirely on his /her
They can also back your startup in other
own resources because she/he wants to
ways; for example, by working for you in
do these things:
their free time.
ee Retain complete control of
Donations
the business.
ee See how far she /he can take Perhaps you have a parent or grandparent
the business without outside loans who really wants to see you succeed.
or investments. Or you may have friends who believe in
ee Prove that her /his business idea supporting one another. They may give you
will work. money as a donation.
ee Show personal commitment to A donation, which doesnt require you
the business. to pay money back, amounts to a vote of
confidence in you as an entrepreneur. But
Bootstrapping may be all it takes to get
be cautious, as there are some caveats.
a business up and running at the beginning.
The donor may want to have a say in how
It usually requires some sacrifices and
your business is run or get a share in profits
extra effort to find free resources, such as
if your business is successful. And keep in
scrap metal that can be turned into simple
mind that a failure may strain relationships
equipment or space in a local school that
between you and your family or friends.
can be used to teach classes. If you choose
to start this way, then cut your expenses, use Loans
your resourcefulness and do some extra
You can also obtain your startup capital
paid work, if possible, to save money.
through a loan from a family member, a
Using personal savings as startup capital
friend or an unrelated investor. You have
has some advantages: It is interest-free,
to pay back a loan, most often with some
gives you complete control over money
extra money. This additional amount is
and demonstrates that you are committed
known as interest. The interest and the time
to your business idea. Be mindful, however,
you can take to pay the loan back, or the
that if you deplete your savings you will
term, you must negotiate with the investor.
have less money available for emergencies
The term might only be long enough for
and you may lose your money if your
you to get the business up and running, or
business fails.
it could extend over a period of years. As
58

f i n a n c i n g y o u r s t a r t u p
N
an entrepreneur, you have to weigh how o matter the source and the
quickly you will begin making a profit form of the cash infusion, the
versus how long you want the loan to last. entrepreneur needs to write an
Daymond John held a job at a fast-food agreement with a donor or a
restaurant and his mother mortgaged her creditor. Most of us wont remember every
house in Brooklyn, New York, to get startup detail of an oral agreement. By writing
capital for his FUBU hip-hop clothing down the general terms of a gift or loan
company in the 1990s. By the mid-2010s, agreement, you are helping yourself and
it had become a global company with the person giving you money. Let this
$6 billion in sales. person know that the agreement helps you
J
gain important experience. The agreement
ohns mother took a financial risk doesnt need to be complicated, but needs
to support her sons business vision. to be clear.
Its fairly common for fledgling Be creative when considering a loan.
entrepreneurs to get financial You may consider giving products or
support from their families. But both sides services in lieu of repayment or interest
need to weigh carefully the profit potential to the person lending you the money. For
of a new business against the financial example, a bakery owner can give to a
stability of the family. person who extended a small loan to her
Heres another example: An entrepren- one loaf of bread a week for six months in
eurs mobile app helps farmers connect return. But again, just as you would do with
directly with grocery stores without a monetary loan, write out the agreement.
involvement of middlemen. Farmers post
Microloans
through the app what they have for sale
and get a better price from grocery stores. Some organizations lend small amounts of
Grocery stores, thanks to the app, can money to entrepreneurs. These microloans
sell fresher produce, making customers can sometimes be all that is needed to get
more satisfied. a business up and running.
The app entrepreneur doesnt need to A microloan may be a good
rent a store or stock inventory. But if he uses alternative for really small businesses,
almost all of his personal savings to buy as it secures at least some of the money
a used laptop computer and pay for pub- an entrepreneur needs. But, as with any
lishing the app, he needs to find another loan, do your homework before you
source of financing to keep his business take a microloan. You can be charged a
running. He may ask a family member for high interest rate or offered difficult terms
a donation or search for a loan. by a microlending organization.
If you are considering a microloan,
talk with other business owners who have
Even if you are getting a

tip donation or a loan from family
or friends, you should document
it in a written agreement.
59

used the microfinance lender you want to These are some advantages of
approach. Ask these questions: shared ownership:
How easy was it to understand ee You get the startup capital you need.
the terms of the agreement before ee The people giving you money will
you signed it? naturally want you to succeedyou
Did you feel pressure to sign an have their money.
agreement before you could ee If your business makes a profit, your
understand it? investors receive only a percentage of
What obligations would I have to your profits.
the person making the original
But there are disadvantages as well:
donation to the microloan group?
Some organizations ask that you ee Your investors may want to get more
give the donor progress reports. involved in your business than you
Are the rates reasonable? would like them to.
With a microloan, the rate should ee If your business is not making
be fairly low. enough or losing money, you may
Are female entrepreneurs treated have to deal with upset investors.
as well as male entrepreneurs? ee You are not the sole owner of the
business anymore. Your investors are
The right microloan from the right
owners too, even if they arent working
organization may be just the thing you
in your business.
need to get your business started.
Shared ownership
Crowdfunding
C
Another way to get startup capital is to
rowdfunding is a relatively new
offer a share in your business in return.
source of startup capital. If you
People who give you money for a stake
have regular and inexpensive
in the business are known as investors;
access to the internet, this may
the stake is known as equity. Lets say
be an option for you.
you believe your business will eventually
Crowdfunding gives you an opportunity
be worth $2,000. You own 100 percent
to appeal to a crowd of regular people
of this equity. A man with money in your
who may have some money to spare and
neighborhood offers you $100 in exchange
may be willing to invest it in your product
for a stake in your business. You offer him
in exchange for a token of appreciation, or
5 percent ownership (since $100 is 5 percent
something more substantial.
of $2,000) and you retain 95 percent
To ask the online crowd for money, go
ownership.
to a crowdfunding website, fill out a profile
This is a simplified way of calculating
and write a short business pitch about
shared ownership. As there are no set rules,
your idea. Your work in Chapter 2 on the
sharing equity in exchange for capital can
business model for your startup will pay off
get complicated.
here. You can amplify your pitch through
social media.
You need to name an amount you want
to raise. On crowdfunding sites, people
pledge money (often in small amounts)
60

Top: Bhavish Aggarwal
When taking a loan from founded Ola Cabs, a
tip someone, be certain to
taxi-based transportation
network in Mumbai,
understand just how involved India, in 2010. Since
then, his company has
this person or group wants expanded to other cities
to be in the management and industries. Bottom:

A souvenir seller in
of your business. Ha Long Bay, Vietnam.
61

If you must let others buy into your

tip
business, stay in a position of power by
owning more than 50 percent. This
makes you the majority owner.
because they believe in your business idea. Some angel investors are motivated by
You set a pledged money goal that must be the desire to do good. They mentor an
reached before you get the donations. If its entrepreneur, leverage personal networks
S
not reached, you get nothing. and share their knowledge for the good of
ome of the money can come as the startup.
donations. To other investors The amount an angel investor may
you may have to promise your invest can range from several thousand
product once it is made or a small dollars to several million. The angel
payment once the business is up and investment, or any original investment, in
running. Once your goal is reached, the your startup is called seed money. Just as
crowdfunding website usually takes a small a plant starts with a seed, a startup starts
percentage of the money raised. with seed money. After you have used your
Crowdfunding can be ideal for small personal savings or money from friends
businesses. It is expected to become an and family, an angel investment can be
even more popular way of raising startup the next step to finance your startup. The
capital as more and more people get con- next level up from an angel investment is
nected to the internet. venture capital.
However, precautions discussed earlier
Venture capital
A
apply also to crowdfunding. So whether
you get money as a donation, through venture capital firm collects
a loan or another way, make sure you millions of dollars from
understand all the details, particularly individuals, companies and
your obligations. investment firms and pools this
money together into a fund. The fund is then
Angel investors
used to invest in startups with high growth
An angel investor is someone, typically potential. Venture capitalists (called VCs)
wealthy, who gives money to a startup focus on selected business areas in which
either as a loan that may become equity they have expertise and interest. They
later or for a percentage of ownership in usually are more involved in managing
the business. Angel investors usually focus their startups than angel investors.
on a specific business area, most often the Startups that go to a venture capital
area in which they have been successful. fund for financing must be able to show
This means that they have not only funds solid assets, which may include intellectual
but also specialized expertise that can be property, convincing projections of big
useful for a budding entrepreneur. revenues or a quickly growing number of
employees. Such startups usually have a
62

f i n a n c i n g y o u r s t a r t u p
high degree of risk, as they often deal with your exit strategy early in the discussions,
innovation. In return for high-risk financing, they may come to question your real
venture capital funds typically demand commitment to the business.
equity stakes in the business.
Bank loans
S
Break-even point
ome entrepreneurs dont have
A person starting a new business often asks: any access to banks. For others,
When will my company make a profit? or especially budding entrepreneurs,
What level of sales do I need to reach to bank loans wont be a viable
cover the costs? If you have investors, they source of funds. Banks are reluctant to lend
are likely to ask these or similar questions to entrepreneurs because they usually dont
as well. The second question refers to a have collateral, or assets such as a home
concept called the break-even point, the or a car that can be pledged as security
number of units sold at which projected for repayment of a loan.
revenue equals the total business costs. All Banks like collateral because if you
units sold above that level produce a profit, dont pay the loan back, they can take the
making your company financially viable. collateral, sell it and keep the proceeds as
To calculate your break-even point, payment for the loan.
you will need to identify your fixed Also, most banks like to see a detailed
and variable costs. (Refer to Chapter 2 business plan before they will lend you
to see what they are.) The break-even money. We said earlier in this book that
point equals fixed costs divided by entrepreneurs shouldnt write a plan until
the difference between unit selling price they experiment with their business and
and variable costs. gain some experience.
Exit strategy Raising capital,

avoiding pitfalls
At some point in your companys growth,
investors will want to take their money out This chapter gives you an overview of
of the businesstheir original investment startup capital sources. They include your
plus any appreciation on that investment. own savings, family donations, loans,
Thus, when you talk to potential investors, shared equity, crowdfunding, venture
they may ask you: What is your exit capital funds, angel investments and, on
strategy? All they want to know is your rare occasions, banks.
longer-term plan for your business. Which When you start, you should first consider
is your plan? options that dont put you in debt, though
Have it acquired by or merged you may not have a choice if youre short
with another company. of money. And outside investment has its
Sell it to other private investors. advantages, as equity partners or investors
Sell it to the public through an initial can bring skills or expertise your business
public offering (IPO). may need. 4
Buy out another company and keep
it for yourself.
Give an exit strategy some thought.
Be cautious, though, when first meeting
with potential investors. If you talk about
63

People in Iran didnt know what NAZANIN DANESHVAR

startups were or they associated founded Takhfifan, a pioneering
e-commerce business, in 2011.
them with fraud. But now It offers deals and coupons to
they are taken seriously and around 1 million subscribers.
people show trust. Tehran, Iran

6 Launch your
dream business
S
o far in this book, we have been A pitch essentially is telling a story
laying the foundation for your about your business idea. You start out
business. If this foundation is strong, by getting the listeners attention, then you
your business will stand the test of create curiosity, capture their interest and
time like a solidly built house. build excitement.
At this point, you want to start thinking Your story will differ slightly depending
about how to pitch your business idea. The on the person to whom you are making
pitch is a well-known term in the entrepre- a pitch: a customer, a supplier, a partner,
neurial world. Whether youre a farmer, a family member, a friend or an investor.
a seamstress or a mobile app creator, you It should prompt the listener to take
must be able to tell the story of your bus- an action:
iness to different audiences. In this chapter,
ee Buy your product.
well discuss how to make this story, or the
ee Work with you to fine-tune your idea.
pitch, effective, and how to create and
ee Introduce you to important contacts.
present a more detailed proposal, or your
ee Give you worthwhile business advice.
business plan.
ee Invest in your business.
Making a great pitch
Whatever the audience you pitch to,
Think back to when you were a child. Do focus on why you want to start a business
you remember a parent or grandparent and how you plan to achieve its goals. But
telling you stories? Think of what made dont overdo it: Be concise and leave out
these stories interesting. details. Your listeners will ask you about
An exciting idea? the details they consider important. Listen
Interesting characters? carefully to their questions and suggestions
A call to do something? because they may indicate essential issues
A new way of looking at something? you need to tackle. If youre seeking advice,
A good feeling it produced? dont hesitate to ask questions.
65

Customers pitches to older customers and childrens

parents. Generally, the pitch should
Customers may be the easiest audience to
be shortsometimes you get only five
pitch to. You need to tell them about your
minutesthough for certain pitches, such
product or service. This is the sales pitch.
as for complicated technical products,
It should make customers want to buy your
you might need more time, followed by
product or service. Your pitch should be
additional explanations.
driven by the desire to sell customers on
Your sales pitch must be authentic and
your product or service.
truthful. You may get someone to buy your
So before you make a sales pitch, you
product once by giving a less-than-honest
have to understand the needs of your
pitch, but you wont keep that customer
customers. Depending on what you sell,
for long. When the customer discovers
the pitch may be similar for each customer
your deception, he /she wont be buying
or customer segment, or it may have to
from you anymore and may share the
be tailored. For example, a farmer selling
experience with others. As a result, you can
eggs delivers the same pitch to all of his
lose sales. Youre better off making your
customers, but an entrepreneur teaching
pitches honest.
computer skills is likely to make different
Andrew Rugasira steered

A good pitch his small firm Good
tip makes the listener
African Coffee in Uganda
toward international
markets to create his
feel inspired to global coffee brand. The
take action. company has trained

more than 14,000 coffee
farmers and signed them
on as suppliers.

l a u n c h y o u r d r e a m b u s i n e s s
Your sales pitch should emphasize

tip how your business meets the needs
of your customer.
Suppliers/partners A simple way to pitch your business

idea to family and friends is to let them
The pitch to someone who may be a
know how your success could affect their
potential supplier or business partner will
lives in a positive way. It can:
be different from your sales pitch. You
will want to emphasize mutual benefits Ensure more (and better) food
and shared success to everyone you do on the table.
business with. Improve access to education
You need to craft your pitch in a way and health care.
that ties your supplier/partners success to Make you a role modeland
your own. For example, our entrepreneur employerto young people in
who sells prepaid phone cards can ask the family.
her supplier for a special discount or a few Bring a higher standard of
free cards once she reaches a certain sales living to your community.
threshold. By doing this, she invests her
Investors
supplier in her own success. If she reaches
that threshold, both parties winshe gets As we discussed in the previous chapter,
the discount, and her supplier registers you may need to raise money to launch or
more sales. expand your business. In such a case, you
You can invest your suppliers/ must pitch your business idea to investors.
partners in your success by asking Investors want to make money. Therefore,
for certain things: your pitch has to show the road to profits
by addressing the following questions:
ee Discounts once certain amounts
are sold. ee The problem you are solving
ee Money to help you market or an opportunity you are taking
your product. advantage of.
ee Annual cash rebates once a ee The value proposition of your
certain sales volume is reached. product/service. (See Chapter 2.)
ee The courtesy of referring customers ee How your business will make
to your business. money. (You can use your
business blocks from Chapter 2
Family and friends as a model for this.)
ee Why your product/service
You already know that the support of
is unique or different from
family and friends can be important to
existing products.
your business. But to earn their support,
ee How you plan to get, keep and
you need to convey to them what motivates
grow customers.
you, why you think you will succeed
ee What competitors you have.
and, possibly, what they can gain from
ee Your and your partners (if you have
your success.
any) background and experience.
67

ee Sales projections (for at least 12 months Some tricks can help you boost your
and up to three years). confidence. Science has shown that a
ee The status of your business. Have tall, erect posture is one way to increase
any sales been made? the bodys supply of confidence chemicals
ee The ask. those that help regulate mental alertness
in your body. Just think of what wild
The ask, although listed last, is a crucial
animals do when they feel a heightened
part of your pitch. It is exactly what the
level of excitement. They make them-
word suggestsif you are making a business
selves look bigger by doing things such
pitch, you want to ask your audience for
as fanning their feathers or shaking
something. Usually it is money, but it can be
their mane.
something else: an important business intro-
So before making a business presen-
duction, or business coaching or mentoring.
tation or meeting with an investor, walk
Think of the ask as falling into one or more
around with your hands on your hips. You
of three buckets:
will be giving yourself a temporary, but
ee Treasure (a financial investment) useful, boost of confidence. Another way
ee Talent (sharing subject knowledge) to calm nerves and boost confidence is to
ee Time (coaching or mentorship) breathe deeply and slowly. Try to focus on
your breathing. Your body will begin to
Regardless of what you are asking
relax and your mind will quiet down.
for, you will need to say how you will be
Another trick is to act as if. When you
using your investors, mentors or fellow
are about to do something important
entrepreneurs treasure, talent or time in
for your businesscalling on a
your business.
customer, asking for a loan or making a
The confident entrepreneur presentationact as if you are already a
S
successful entrepreneur. Observe people
ome entrepreneurs are good at
who are already doing what you want to
interacting with people; others get
do. How do they carry themselves? How do
nervous when they need to present
they talk? Are there certain qualities that
their businessespecially if it
seem common to these people? We dont
involves asking for money or other forms
mean you should be arrogant or cocky.
of support. Whether you are speaking with
Just have an air of belief in yourself. Show
customers or with someone whom you want
a high level of energy about whatever you
to invest in your business, its natural to be
are talking about. Soon enough, you will
nervous. Your passion for your business idea
no longer be just acting.
and your knowledge of your market are
the best tools for calming your nerves and The business plan
reassuring your audience.
If you have made a strong business pitch
Its natural for an entrepreneur to feel
to investors and captured their interest, they
excited about his/her business. Dont try to
may ask to see your business plan. The
hide your excitement; its likely to be seen
business plan has much more detail than
as passion and energy. Investors, potential
the pitch. The pitch might be considered the
business partners and others like to see
blueprint for your business; the business
someone who is excited and enthused!
plan will include the details your audience
needs to know to understand how you plan
to make the blueprint a reality.
68

Top, from left to right:
Ask for talent or time Tanayot Saihaikam, Kanya
tip from other entrepreneurs;
Thuaylai and Taweechai
Boontum, founders of
Saanha in Thailand, which
they will usually be sells handmade dolls.
Bottom: Do you play guitar
generous with advice. or another instrument? If you
do, why not try to open a
musical instrument store?
69

The work you did constructing your for someone to enter your business
business blocks and preparing your pitch niche? For example, if you created
can now be expanded upon in your a unique product, are there copyright
business plan. Whats included will depend laws that will protect your invention,
on the business you are launching. But making it harder for someone else
make it concise, because people who will to create a similar product?
be reading it usually dont have much time.
Lets look at a simplified outline. e M
arketing
How will you let customers
e E
xecutive summary know about your business? Will
This can be a one-page summary it be through word of mouth,
of your business. Write out what your advertisements or something else?
business is about and the value How will you sell or deliver your
proposition you offer. product/service to customers?
(See Chapter 2.)
e P
roduct/Service
Describe briefly the product or e O
perations
service you want to offer and how it This section explains how you will
is going to help people. produce your product and sell it,
as well as how you will keep track
e C
ustomers of your expenses, revenues and
Who will buy your product or profits. It includes details like the
service? How will you get, keep number of employees and the key
and grow customers? (See supplies you will need. You detailed
Chapter 4.) You will want to show this information in Chapter 2. Try
that you understand your potential to answer the following questions:
customerstheir buying habits,
How will your product be
preferences and other characteristics.
made or your service provided?
How many people will you
e C
ompetition
need to help you make things
Who else is doing what you do?
or perform the service? What do
What differentiates your product
you need to make the product
from those sold by your competitors?
or provide the service?
If there are no competitors currently,
How will you monitor the
what is your prediction for possible
finances of your business?
future competition? Are there
(See the section on cash flow
certain things that make it hard
in Chapter 3.)
Learn from your mistakes, correct your

tip course and press on. Your determination
to succeed and your perseverance
will carry you over a difficult period.
70

When you start a business

tip for the first time, you must
learn a lot from others.
e M
anagement Even in a written business plan, you
How do you intend to plan, organize, may want to include some drawings
staff, lead and control your business? to convey your ideas. See one approach
(See Chapter 3.) Write about yourself to visualizing your business model at
and your expertise, key employees http://griffinworx.org/viztoolz/.
and any mentors you have enlisted to Also, be sure to keep tabs on your
advise you. Explain why you are the business plan: You dont want copies
best person to lead this business. of your plan slipping into the hands of
your competitors.
e F inancials
Mentors and other resources
S
In a simple business plan, you need
to answer just two questions: How elf-confidence is a key trait most
much will you charge for your entrepreneurs have. But too much
product/service? How will you get of it can get you into trouble by
paid? But if your business is bigger making you believe that you can
or more complex, you may need do without other people. In business you
to estimate your projected sales in actually must rely on other peoplesuch
the first 12 months and possibly for as mentors, partners, investors, suppliers,
the first three years. distributors and buyersand their expertise
and honesty. And you can learn a lot
Getting help to write your plan from them.
The work you did in Chapter 2 on your Where do you find these people? Start
business blocks should make the writing of locally. Try to find established business-
your business plan easier. If you dont have people near you who are willing to share
writing skills, however, you can create a their experiences. In some communities,
visual business plan. Grab something to business owners meet casually to share
draw onpaper, chalkboard or computer, stories and help one another. This is a
whatever you feel comfortable withand great way to build your business network
try to capture what you want to do with and observe other businesspeople. How
some type of graphics. do they act? What do they talk about?
Since a picture is worth a thousand At such meetings, you can get
words, a drawing can help others feedback on your business idea or plan.
understand your business and its goals. You can also get advice on what has
Then you or someone who is helping you worked for others and what hasnt.
can try to translate the pictures into words. At the end, you will still need to make
As an additional benefit, drawing can decisions on your own, but you will be
unlock your minds creative side and make doing it based on solid information.
you think about details or opportunities
you may have overlooked.
71

If theres no peer-to-peer business group or business idea, you can receive

where you live, consider starting one by advice and guidance, essential contacts
inviting a few business owners to your and money.
home or a caf to talk. Invite them again If a mentor or investor wants to learn
a few weeks later and ask each one to more, writing a business plan is the next step.
bring a friend who is in business. You need to show others that you understand
In larger towns, business organizations what you are getting into and have a
can be a good source of business advice. vision for your business future. If you do it
Some even offer free or low-cost entrepre- successfully, you will be able to launch or
neurship programs. expand your company. Then the market will
An increasing number of emerging test itand you as a business leader.
market and developing countries
Just the beginning of an adventure
sponsor national programs to promote
entrepreneurship. If youre lucky to live in Starting a business is an adventure. You
such a country, use the program to find wouldnt undertake a long journey or climb
mentors and other forms of guidance a mountain without careful preparations.
and support. Likewise, you should not launch a
Large corporations, governments, business without careful consideration of
universities, business accelerators, business all essential issues and detailed planning.
competitions and nongovernmental groups This book provides you with a structure
also promote entrepreneurship at the for your thinking and planning. Being
local level. an entrepreneur means you are always
learning. The issues we have discussed
Telling the story and
will provide you with a road map and
making it happen
help get you moving in the right direction.
Youve learned how to do an important Are you ready to begin your business
thing for your business: to tell its story. By adventure? 4
engaging others, or pitching your business
An advanced business plan contains

tip projections of:
e I ncome statement e Cash flow

The sales minus the costs. Beginning cash + sales expenses
= net cash flow.
e Balance sheet e Break-even point

Assets: the result will be the When do you expect that
items you have to purchase in revenues will begin to equal or
order to get your business going. exceed expenses? An investor
Liabilities: money you owe (to will want to know how soon
suppliers, employees, landlord, you expect to be at least
etc.) and any loans you have.
covering your costs.
Equity: money you and others
have in the business.
72

Lisbon Innovation
You must be able Kluster (LINNK) in
Portugal, co-founded
to tell the story of your by Joana Rafael, center,
is among hundreds
business to different of business incubators
and accelerators that
audiences. help entrepreneurs
to start up or grow
their ventures.

glossary
angel investor business alliance commission

someone who invests in a partnership, usually involving money that is paid to an
promising startups, and key partners, in which two or employee or a reseller upon
sometimes also helps with more companies cooperate selling a certain amount of
advice and contacts to maximize revenues for all goods or services. It is usually
a percentage of the sale.
ask business model
the act of soliciting money, a design for the successful cooperative
advice or coaching from operation of a business that a business organization owned
others as part of pitching identifies revenue sources, by its members, who share in
a business idea customer base, products, the profits and losses
resources and financing source
asset cost structure
an item of value in the business pitch a method to determine how much
form of cash, inventory, a brief presentation of a business it will cost a company to produce
equipment, buildings, idea or plan to prospective a product and how much profit
etc., that helps a business investors or other parties the product will generate
operate and make money
business plan cross-selling
balance sheet a written document that selling products related to those
a financial statement that describes in detail the vision that a business is already offering
summarizes a companys and goals of a new business
assets and liabilities and the and how it will achieve both customer
shareholders equity at a acquisition cost
specific point in time cash flow all expenses incurred to
the total amount of money that attract a paying customer
beginning cash comes into a business from sales
the amount of money used and goes out of a business in customer base
to start a new venture the form of expenses all of a business existing
customers
bottom line cash inflow
the amount of money a money that comes into a customer check-in
business has left after deducting business, usually in the form of an after-sale activity that
all costs from revenues sales. It can also be an infusion aims to ensure that customers
of cash from investors, family are satisfied
break-even point or loans.
the time when revenues customer segmentation
(sales) equal the expenses of cash outflow dividing customers into groups
a business, often considered money that a business pays that share similar characteristics.
a key metric for measuring for supplies, salaries and other Customers within a segment
the success of a business expenses should respond to similar
marketing.
collateral
something of value that is demand
pledged to cover the payment consumers desire and
of a loan. If the loan isnt paid willingness to pay for a specific
back, the lender can take product or service
ownership of the item.
74

y o u c a n b e a n e n t r e p r egn l eou sr s af o
r y
r o n e i d e a o r a l i f e t i m e
distribution key supplier revenue model

the movement of goods to a supplier of goods or a plan that identifies which
stores and other businesses services without which a revenue sources to pursue,
that sell to consumers business cannot function what value (goods/services)
to offer, how to price goods/
distribution channel liability services and which types of
a business or a chain of a companys financial debt customers (market segments)
businesses or intermediaries or obligations that arise during will buy the goods/services
through which a product the course of its business
or service passes to operations seed money
reach consumers the initial investment in
limited partnership a business, used to get it
equity a form of business organization up and running
for the purposes of this in which two or more partners
book, a share of ownership unite to conduct a business sole proprietorship
in a business; it can have together. Partners share losses a business owned and run
other meanings and profits based on how much by one person; the simplest
each has invested. form of a business
fixed cost
an expense that does not change loan term startup capital
with an increase or decrease in the time a borrower has to pay the money that is required
the number of goods or services back, or renegotiate, a loan to start a new business
produced or sold
market readiness unbundling
general partnership a condition in which there are a marketing technique in which
a form of business organization in enough customers willing to goods or services once offered
which two or more individuals buy a product or service so as a whole are sold separately
own a business together and that the business producing as individual parts at prices that
share in the profits and liabilities the goods or services can be make their sum more profitable
economically sustained
initial public offering upselling
(IPO) net cash flow a sales technique through which
the first time a maturing business the amount of money a seller induces the customer to
offers ownership shares to left after cash outflows purchase more expensive items,
members of the public in (expenses) are subtracted upgrades or add-ons in an
order to raise capital from cash inflows (revenue) attempt to make a more
profitable sale
key activity networking
a task or a project that is essential an activity aimed at creating value proposition
to a business and helps make its a group of acquaintances and a business or marketing
products or services unique and associates and keeping it active statement that summarizes
valuable to customers through regular communication what is unique about a
for mutual benefit product or service and
key cost why customers will find the
an expense associated operational cost product or service valuable
with a product or service an expense incurred to keep
that supports a business a business up and running, variable cost
value proposition such as rent, utilities and taxes a cost that changes in relation
to production volume or
key partner (ally) public company sales, such as raw materials
an individual or company that is a company that has sold or sales commissions
essential to a business success shares through an initial
public offering and is traded venture capital
key resource on a stock exchange financing that investors
an item, such as a raw material provide to startup companies
or specialized knowledge, referral selling with high growth potential
that is essential to a acquiring new customers
business operations from existing customers
Sources:
BusinessDictionary.com
Investopedia, Wikipedia
75

online
onlineresources
resources
Getting started and kairos society seedstars world

accelerating growth A network of young, A company that promotes,
innovative entrepreneurs connects and invests in
endeavor that provides peer support, emerging market startups
Mentoring and accelerating mentoring and access through a competition
support for entrepreneurial to investors www.seedstarsworld.com
companies with high www.kairossociety.com
growth potential start-up chile
www.endeavor.org launch A government-sponsored
A U.S. private-public program that includes
globalstudent partnership that helps seed funding
entrepreneur awards selected innovative www.startupchile.org
A competition for businesses from around
students who own and the world refine their ideas startup farm
operate businesses and market their products A Brazilian accelerator
www.gsea.org or services for tech startups
www.launch.org www.startupfarm.com.br
goldman sachs
launchLab startup india
10,000 women
A network of university A government program that
A program for women
campus-based business includes financial backing
entrepreneurs offering
incubators in Africa www.startupindia.gov.in
business and management
www.launchlab.co.za
education, mentoring and
access to capital startup rio
www.goldmansachs.com/ lions@frica
A Brazilian private-public
citizenship/10000women A private-public partnership
partnership that provides
that helps potential
mentoring, work space
entrepreneurs learn business
griffinWorx and equipment to early-
skills and launch Africa-
A business incubator/ stage startups
based businesses
accelerator that moves around www.startuprio.org
www.lionsafrica.org
the world to help local
businesses refine and enhance
their ideas
www.griffinworx.org
76

o n l i n e r e s o u r c e s
startup weekend Crowdfunding: soko

A Google-sponsored initiative finding many angels A service that connects
that brings together women artisans in the
entrepreneurs, business goGetFunding developing world with buyers
coaches and investors Helps raise money for through mobile networks
for one weekend anything that matters to a user www.shopsoko.com
www.startupweekend.org www.gogetfunding.com
techstars indiegogo Using the internet

A mentorship-driven Helps entrepreneurs who seek to get paid
technology accelerator capital www.indiegogo.com
with chapters in the U.S., bKash
Mobile financial services
U.K., Germany, Israel and kickstarter
South Africa in Bangladesh for consumers
Funds creative projects
www.techstars.com with no, or limited, access
in the arts, photography,
to traditional banks
film, design, gaming
unreasonable group and technology
www.bkash.com
A multifunctional service www.kickstarter.com
that helps scale up existing mfs africa
businesses that have large A gateway to money
kiva
social impact transfers in Africa across
Provides loans to
www.unreasonablegroup.com major mobile networks
microenterprises
www.mfsafrica.com
www.kiva.org
m-pesa
play business
A Vodafone mobile money
Funding: Connects startups with small
system available in Africa,
investors in Mexico
finding your angel Afghanistan, India and
www.playbusiness.mx
Eastern Europe
astia www.mpesa.in/portal
An investment program for rocketHub
high-growth ventures owned Supports artists, activists and
by women entrepreneurs entrepreneurs seeking funds
http://astia.org www.rockethub.com
Free information
googles
startup
communities entrepreneur
A partnership that provides A magazine with free content
Using the internet from people creating
financial support and other
resources to startup
to sell your product businesses
communities www.entrepreneur.com
beadforLife
www.googleforentrepreneurs. A matchmaker for women
com/startup-communities entrepreneurship
artisans and buyers
Kauffman Foundations free
associated with Street Smarts
savannah fund Business School, a free six-
content for entrepreneurs,
A seed capital fund specializing policymakers, investors,
month program
in investments in early-stage, mentors, researchers
www.beadforlife.org
high-growth technology and academics
startups in sub-Saharan Africa www.entrepreneurship.org
crater creations
http://savannah.vc A nonprofit organization
inc.
that brings products from
tayrona ventures the Maasai in Kenya to market
A magazine offering
A fund that invests in early- free content on starting and
www.cratercreations.org
stage companies in Colombia growing a business
www.inc.com/guides/start_biz
and throughout Latin America rising international
www.tayronaventures. A service that helps sell
wordpress.com/ crafts made by women in startup digest
developing nations through A selection of articles,
U.S. home parties videos and information
www.risinginternational.org about events on high-tech
and high-growth startups
www.startupdigest.com
77

u.s.
small business women 2.0 Just for women
administration An information and networking entrepreneurs
A U.S. government agency website that helps women
that helps small businesses, launch technology ventures astia
with information available www.women2.com An investment program for
in English and Spanish high-growth ventures owned
www.sba.gov by women entrepreneurs
www.astia.org
Training and tools beadforlife

A matchmaker for
Grow your network founder institute women artisans and buyers
Weekly training courses and associated with Street
b.e.a.m business-building assignments Smarts Business School,
An app that provides for budding entrepreneurs a free six-month program
access to a global community http://fi.co www.beadforlife.org
of entrepreneurs, investors,
developers and business junior
achievement eWomenNetwork
journalists worldwide A networking site for
www.beam.today An organization dedicated to women entrepreneurs. www.
educating students about ewomennetwork.com
business owners entrepreneurship and finance
idea caf www.jaworldwide.org goldmansachs
An interactive forum for 10,000 women
young people on business laboratoria A program for women
ideas and startup strategies A social enterprise that trains entrepreneurs offering business
www.businessownersideacafe. women to become web and management education,
com designers and links them mentoring and access to capital
with potential employers www.goldmansachs.com/
founderDating www.laboratoria.la citizenship/10000women
A network of entrepreneurs
helping one another start strategyzer laboratoria
and grow companies A multilingual service that A social enterprise that trains
www.founderdating.com/about helps entrepreneurs create women to become web
their value proposition designers and links them
founders network and develop a business model with potential employers
A network of tech company www.strategyzer.com www.laboratoria.la
founders helping to teach
entrepreneurs to learn, grow udacity rising international
and overcome challenges Free video courses A service that helps sell
www.foundersnetwork.com on entrepreneurship crafts made by women in
www.udacity.com/course/ developing nations through
global how-to-build-a-startup--ep245 U.S. home parties
entrepreneurship week www.risinginternational.org
An annual event celebrating viztoolz
and promoting entrepreneurship Self-guided visual thinking soko
among young people around tools for designing, testing A service that connects
the world and building any type of women artisans in the
www.genglobal.org/gew business developing world with buyers
www.griffinworx.org/viztoolz through mobile networks
peer www.shopsoko.com
An app that enables searching young african
for professionals and talking leaders initiative women 2.0
to them over live video A U.S. government program An information and
www.peer2.me that offers training and networking website
networking opportunities to that helps women launch
startifi African entrepreneurs, technology ventures
A social network for professionals and civic leaders www.women2.com
entrepreneurs and investors www.yali.state.gov
www.startifi.com
78

Always work hard on SERGEY BRIN
AND LARRY PAGE
something uncomfortably started Google in a garage near
exciting! Stanford University, California,
in 1998.
Larry Page Venice, California
79

e Bureau of ac t i n g i i p c o o r d i n at o r : Jonat ha n Hen ick

International i i p d e p u t y c o o r d i n at o r , p r o d u c t s : Nicole Chu l ick
Information director, office of editorial content : M ichael Jay Fr ied ma n
Programs m a nag i ng edi tor s : A n d r z e j Zw a n i e c k i , M a r y T. C h u n k o
writer : D ei rd re S a r torel l i
United
art director | lead graphic design : D i a n e Wo o l v e r t o n
States
graphic design : Ju l ia Ma r u s zew s k i , S a ra Wi l k i n s on
Department
of State
ph oto cr ed its
Front cover: Shutterstock; bottom: Bloomberg/Getty Images. P45, top: courtesy Bowei Gai; Chapter 6
Inside front cover: courtesy P23: AFP/Getty Images. bottom: AP Images. Page 64: Behrouz Mehri/Getty
Dierdre Sartorelli. P27: courtesy DIVatUSAID/flickr. Chapter 4 Images.
Page 2: Picture Alliance/ P28: Richard Lautens/Getty Images. Page 46: Paulo Fridman/Getty Images. P66: Jonathan Torgovnik/Getty
Photoshot. P30: courtesy Westrock Coffee. P49, top: AP Images; bottom: Images.
Chapter 1 P32, top: Bloomberg/Getty Images; AP Images. P69, top: Thierry Falise/Getty
Page 4: Per-Anders Pettersson/ bottom: courtesy Randolph P55, top: Felicity McCabe/Getty Images; bottom: Barry Austin/Getty
Getty Images. Belle/RBA Creative. Images; bottom: Romeo Gacad/ Images.
P7, 11: Shutterstock. Chapter 3 Getty Images. P73: Bloomberg/Getty Images
P15: Jeff Wojtaszek Photography. Page 34: Bloomberg/Getty Images. Chapter 5 P79: AP Images.
P17: AP Images for Microsoft. P37: AP Images. Page 56: AP Images.
Chapter 2 P41, top: Mint/Getty Images; bottom: P61, top: Bloomberg/Getty Images;
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P21, top: Bloomberg/Getty Images; P43: AP Images. McKelvey/flickr.
80

Startup
Smart
ENTREPRENEURSHIP
A handbook for entrepreneurs

Startup Smart - A Handbook For Entrepreneurs - English - 20140322 - Hi Res PDF

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Startup

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 1 3/22/17 4:01 PM

D the director of the

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 2 3/22/17 4:01 PM

You can be Your customers:

Building your Financing your

You as business Launch

Glossary | 74 Online resources | 76

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 1 3/22/17 4:01 PM

Steve Jobs wanted to Steve Jobs, right,

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 2 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 3 3/22/17 4:01 PM

I gain inspiration from NKHENSANI

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Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 5 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 6 3/22/17 4:01 PM

wont sell, tapping many

I dont want and exploring

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 7 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 8 3/22/17 4:01 PM

of them to fulfill the needs of all possible Getting the product to

tip Checklist for a new idea

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 9 3/22/17 4:01 PM

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Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 10 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 11 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 12 3/22/17 4:01 PM

tip Talk with your customers

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 13 3/22/17 4:01 PM

This is a key point. We will talk about Speaking of happy

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If you try to please Joanne Canady-Brown in her

tip thriving bakery The Gingered

everyone, you Peach in Lawrenceville, New Jersey.

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pleasing no one. has opened a pastry shop and

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*Find that special

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 16 3/22/17 4:01 PM

probing. They also ask Braille printer, using a

must do the same he launched a company,

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 17 3/22/17 4:01 PM

If youre not having JACOB MEDWELL

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 18 3/22/17 4:01 PM

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 19 3/22/17 4:01 PM

her potential customers. The entrepreneur Customer segments

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 20 3/22/17 4:01 PM

the most attention. An eatery that specializes

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 21 3/22/17 4:01 PM

Make it easy for customers

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 22 3/22/17 4:01 PM

tip designer Fatima Tisaeva

relationships checks inventory in her

by listening more Muslim clothing for women.

than talking. clothing is projected

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 23 3/22/17 4:01 PM

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Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 24 3/22/17 4:01 PM

The supermarkets are in the middle, The internet is an example of a modern

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 25 3/22/17 4:01 PM

In the beginning, you may have to prove

What is my customers risk of something going wrong. None of

Startup Smart_A Handbook for Entrepreneurs_English_20140322.indb 26 3/22/17 4:01 PM

tip Checklist for a new idea

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