Lessons From Failure: Borrowing Tools From Your Neighbors

Adam Berk had a vision of creating an online library where neighbors could borrow tools and electronics from one another. Why buy a fancy camera you only needed to use once for a big trip? Why invest the money in physical tools for a home remodeling project if you are never going to need them again? Adam and his best friend Dave spent 5 years creating this utopian community, neighborrow, powered by a new form of currency. Their business model was to eventually white label the product and sell it to large apartment buildings and others who wanted to facilitate a borrowing community. But they never achieved their vision. Adam learned a few lessons in the process and he’s here to share the full story:

Diana: What was your business background?

Adam: I graduated from Emory, became a prop trader at E-trade, and started investing on my own. In a very short amount of time, I had made a good amount of money betting on the right startups that found scalable growth. I thought I understood what made companies successful and that I could replicate it.

Diana: How did you come up with your big idea?

Adam: I was living in an apartment building in New York and had just come back from a big overseas trip. I wished I had more lenses for my camera for the trip, but I rarely used the camera outside of traveling. The rest of the time it just sat in my apartment. The building had 500 units, and there were 10 more buildings just like mine within walking distance. I was sure that someone in close proximity to me either had additional lenses that I could borrow or wanted to borrow the camera when I wasn’t using it. And there were probably a dozen other tools or gadgets in my apartment that would create the same level of value for my “neighbors”.

Diana: How did you vet the idea?

Adam: In the worst possible way! I had a best friend since childhood, Dave, and I trusted him implicitly.  Still do. He was in his first year of business school at the time. I always went to him whenever I had a business idea and, up until that point, he had shot down every single one. But this time was different.  He really liked the concept and said he wanted to be involved. That was all the validation I needed.

Diana: And you got started right away?

Adam: Yes. I spoke to a few more friends, but I had already made up my mind. I hired a kid off Craigslist to build it, spent my entire budget on a designer from Russia, and started chasing PR. We spent two years – designing, coding, and building the site. We spent thousands of dollars on totally unnecessary features for the site and business documents we would never use. Terms and conditions – $3,000. Integrating a shipment feature on the site – $6,000. It all seemed necessary at the time.

Diana: How did you finance your living expenses during those first two years?

Adam: I lived off my savings at first and eventually turned to credit cards to finance my living expenses. I was so sure it would all come back very soon.

Diana: Ok, so what happened with the business when you launched the site?

Adam: We were incredible at getting PR. It was an easy concept to cover and the media really liked it. We had stories in the Wall Street Journal, USA Today, National Geographic, the Today Show, CNBC, and every local news channel in NYC. The stories sent volumes of people to our site and many of them registered to use the service. Thousands of them. They would even write me letters about how I was changing the world.

I thought we were killing it, but in reality, no one was actually using it, not even the people who were sending me fan mail. They would sign up, and even list some of their inventory, but that was the wrong metric. No one was borrowing. We thought that this was because we didn’t have critical mass, so we kept tying to build users. We looked everywhere we could think of, schools, cities, states, etc. to build our user base, but nothings seemed to affect the borrowing rate.

Diana: So what was the disconnect?

Adam: It turned out that people didn’t really want to borrow anything. They didn’t mind buying things and just letting them sit unused. Plus, we weren’t solving a real problem. We weren’t top of mind. Most of the people who signed up never came back. They just forgot about us.

Diana: How long did it take to figure out that it wasn’t working?

Adam: Can you believe it took 5 years to figure it out? We can’t! I was just so convinced from all the publicity and the signups that I thought we could redesign the platform in this way or that way to get people to start using it. I thought that we could finance the high-end design with angel/VC funds. I was convinced that this was a great idea, the world needed it, the press loved it, and even my most critical friend loved it. But none of those factors can create a successful business. Only customers can create a successful business. We spent time setting up investment meetings and pitching when we should have been talking to our users. The investment meetings didn’t go well.

Diana: Can you point to a specific moment around year 5 where you finally accepted that it wasn’t going to work?

Adam: I can. Dave and I used to have huddles outside of the nearest subway stop from our last meeting to strategize about the company. We often spent 3 hours standing outside the Union Square stop theorizing about the one thing that would make this work. He used one of these sessions to stage an intervention. He had just read Steve Blank’s book and taken me to a meetup where Steve was the guest speaker. At his talk, Steve said “Stop arguing with your cofounders and test what you’re arguing about, you will quickly know who’s right or not.

So at this one huddle where I was trying to explain that we needed to buy insurance on our goods and what changes we needed to make to the website, Dave issued me a simple challenge. He bet I couldn’t get even one transaction completed in a month. Just one instance of a legitimate transaction that would create value for both sides – someone borrowing something from someone in close proximity. And I could even manually perform the transaction, meaning I could facilitate the transaction rather than have them go through the site. I laughed at what a waste of time that would be, but Dave insisted. Needless to say, I failed to get that one transaction, even though I tried my best and fully understood the implications of failure.

Diana: Wow. That must have been difficult to accept. In retrospect, what were the biggest blind spots in your original plan, or mistaken assumptions, that kept you treading water for so long?

Adam: I’ve got a couple.

1. I gave myself a lot of different justifications of why people weren’t borrowing: the design, features that were missing, lack of insurance, etc. But I just couldn’t see what was plainly in front of me, the users we were signing up just weren’t interested in borrowing. Period. And there was nothing I could do to convince them.
2. I thought I had to build something before I could really test anything. I felt like we needed economies of scale in order to make the company work. But we didn’t. We didn’t need anything to rent one drill to one person. We didn’t even need a website.
3. I didn’t understand the importance of distribution to a product’s success. It’s not enough just to be a “great product”, you have to be very thoughtful about how you can grow your startup and acquire paying users.
4. I wish we had done a better job of capitalizing on all of the traffic we received from the media stories. We didn’t test anything with those visitors and therefore just squandered all of the opportunities.
5. I wish that Dave and I had had a conversation about our motivations for starting a business early on. I wanted to solve what I perceived as a problem and was probably more interested in a social enterprise and Dave wanted a company that could go public. We were spending a lot of time both going in very different directions.
6. It took me a long time to figure out that all of my business plans, pitch decks and projections were complete BS. They were just guesses that never materialized.

Today, Adam is the founder of an online wedding photography company that started making money just by releasing a landing page- people were willing to pay for the IDEA of the value proposition long before there was even a product for them to use. He also serves as the Director of Entrepreneurial Science at Lean Startup Machine. Adam uses his experiences with both a successful and an unsuccessful startup to travel the globe and teach entrepreneurs about Lean methodologies. He has helped over 100 teams of entrepreneurs in Istanbul, Silicon Valley, NYC, Seattle, Vancouver, Montreal, and at The University of Florida, Microsoft, AOL, NewsInternational, etc.

You can find Adam on Twitter @AdamBerk

When you’re starting a small business, it’s easy to focus all of your attention on your business launch. But it’s equally important to consider what’s next so that you not only understand success, but you can also plan for it.

You need to hire employees.

First, congratulations! Hiring employees is one of the best signs that you’re on track not only with your business idea, but also your company’s growth.

It’s true that filling positions in a company brings with it a new set of challenges, including who to hire, how much to pay them, how to manage them and what to do in the event of a separation or termination.

But look at how far you’ve already come. And think of hiring employees this way: it’s no different from other facets of your business in that you need a strategy and a plan.

Let’s break down your hiring approach to three steps. Ready?

STEP 1: ASSESS WHAT SKILLS OR ROLES YOU NEED

When you start your company, it’s likely you’ll juggle a number of roles to keep costs down as you gain your footing.

Yet as your company grows, you’ll want to identify key skills that you need on your team or roles you need fulfilled. These needs might also become evident through company pain points.

Here’s one example: you might find yourself drowning in various office and administrative responsibilities. If so, make specific notes about what tasks you need fulfilled or what skills you’re seeking — in this case, an office or business manager.

You’ll likely find in the early stages of hiring that you don’t necessarily need an executive team. Instead, a better approach is to fill critical gaps that will help keep your company on a path to success. Then, as your business continues to grow, you can look at opportunities to further expand your workforce.

STEP 2: ESTABLISH YOUR COMPENSATION BUDGET

Once you’ve decided which roles you need to fill, it’s time to crunch some numbers to see what salary you can offer for each role.

If you’re at a loss for where to even start, try exploring a few salary research tools like Glassdoor, PayScale and Indeed. Have a recruiter in your network? That person can also be an invaluable source of information.

Of course, setting salaries can be tricky. It’s best to start with a range, then you can fine-tune a specific salary based on that person’s skills and expertise. A typical caveat when hiring employees for a start-up company is that there’s potential for growth—in other words, the salary may not be as high as desired, but there’s likelihood for compensation to increase based on individual and company performance.

Yet don’t rely too much on promises—after all, they won’t pay your employees’ bills. Not being able to offer competitive salaries is one of the biggest obstacles that entrepreneurs face—and why they tend to be slow to add employees.

Keep in mind, too, that salaries aren’t simply about what appears on a paycheck. You’ll also want to decide if you’re offering benefits and/or a 401K, as well as ensure that your necessary local, state and federal tax withholdings and other regulatory obligations are covered. For example, the U.S. Department of Labor requires 12 records per employee, including full name and social security number, pay rate, straight time and overtime earnings for each work week, etc. The Internal Revenue Service also requires a number of documents, including a W4, I-9 Employment Eligibility Verification and proof of worker’s compensation insurance, to name a few.

That said, there’s often more flexibility with start-ups to enrich a salary with non-cash compensation, including accelerated career growth and professional development, as well as options like equity-based compensation. Take the time to understand your options so that you can offer a comprehensive compensation package that not only makes sense for your business, but will also help you attract talented, driven employees.

STEP 3: FINALIZE DETAILS, INCLUDING TITLES AND JOB DESCRIPTIONS

You’ve identified what roles you need to fill and the pay rate you can offer each role. Now’s the time to finalize details like the job title and description so that you can share the information and start the hiring process.

Some people opt to get a little more creative with their job titles, while others prefer a straightforward approach. Think about what makes sense for your company and the company culture you want to cultivate. Are you a fan of an enriching yet no-nonsense environment? Or do you prefer a more informal, laid-back vibe with more of an emphasis on growth and achievements rather than on details like business titles?

This sort of information is helpful not just for creating job titles and descriptions; it will also tie into your larger messaging strategy. For example, if your company culture is a more informal one, you’d want a voice and tone that reflects that culture to help reinforce your brand and what your business is all about.

It’s helpful to add a dash of salesmanship to job descriptions, too. The job market is a competitive one, and you want to be sure your job description stands out so that you have a greater chance of attracting strong candidates. It might not hurt to run your job descriptions and titles by a few trusted colleagues or friends and get their feedback before you start distributing the information.

The actual hiring process comes with its fair share of challenges, but that’s a topic best left to a separate post. In the meantime, you’ve likely got a lot on your plate to consider. Isn’t it funny how so many business decisions, like hiring employees, can lead to other thought-provoking considerations like what sort of company culture you want to build?

That’s why we created Kauffman FastTrac, an immersive online course that’s designed to help entrepreneurs launch their businesses. The course covers a number of topics, including managing business functions and developing an organizational culture.

It’s easy to get overwhelmed when you’re trying to start a business–and that’s exactly why we’re here to help so you can overcome obstacles and successfully launch your company. Register today, then start the self-paced course anytime.

One last thing: congratulations in advance on your new hires! Adding employees is a significant milestone for any entrepreneur, so be sure to celebrate this exciting new chapter.

“You’ll likely find in the early stages of hiring that you don’t necessarily need an executive team. Instead, a better approach is to fill critical gaps that will help keep your company on a path to success. As your business continues to grow, you can look at opportunities to further expand your team.”

A few years ago, Benjamin Enterprises Inc., the company I founded in 1985, made a decision to add a position that might be considered unusual for an entrepreneurial company: that of Corporate Culture Specialist.

Many have asked: What precipitated your decision? The answer is wrapped in our vision, mission and our core values. As our company is the preferred choice for Facility Support Services, our customers depend on our people to deliver high-quality security, janitorial, cafeteria and construction-flagging services. We recognize that to deliver superior services, several key components must be in place. These components, to name a few, include training, management, career development and self-improvement. The position of Corporate Culture Specialist focuses on two of these key components, mainly career development and self-improvement.

Our people – about 100 full time and 200 part-timers – come to us mostly as unskilled workers. Once hired, they are trained and certified in their field of choice and mentored by the Corporate Culture Specialist, focusing on each individual’s self-mastery and development. It is my firm belief that if we as a company make the effort to understand our team members’ goals and aspirations, and enable them to reach these levels of personal satisfaction, they, in turn, will help our company reach its goals.

A GUIDING PLACARD

In short, our team members are a constituency that we, as an entrepreneurial company, serve. If we are to build a thriving business, our team members must be included in our vision. Yet they aren’t the only entities that need to be included in our vision. There are three others: our customers, our community, and our company itself. Taken together, these four groups are the focus of the ethical core values that we have determined must be ingrained in our corporate culture.

At a time when major U.S. corporations, such as Enron, Tyco and Arthur Andersen have managed to set appallingly new lows when it comes to ethical business behavior, entrepreneurial concerns such as our own can and must take the high road. Yet is isn’t only in response to the lapses that we must do so; at Benjamin Enterprises, for one, the ethical high road is one we’ve been traversing since our founding 18 years ago. Indeed, a statement of our core values has long been prominently displayed on a placard that hangs in the lobby of our headquarters building.

What follows is a look at how Benjamin Enterprises has been doing business ethically when it comes to each group.

1. People: By people, I mean the individuals who do the work that makes Benjamin Enterprises a company: our team members. Just as we believe we must cater to their goals and aspirations through steps such as hiring the Corporate Culture Specialist, we also believe that this core value calls for compensating employees according to performance. At Benjamin Enterprises, we’ve devised a point system, with credits being earned for outstanding performance that, in turn, can be used for a variety of benefits, such as increased salary or tuition reimbursement for advanced training. Using this approach, some team members at our company have been able to earn more than managers. A third leg in addressing this core value involves recognition; in our company newsletter, we regularly feature and praise employees for superior work ethics.
2. Company: At the heart of the ethical underpinnings for an entrepreneurial venture is the need for a commitment to the company itself; in short, a resolve to assure that it is profitable. At Benjamin Enterprises, we consider ourselves stewards of the company, which is an entity in and of itself and apart from our employees and our customers. Our baseline is our fiduciary responsibility to the company. Without black ink on the bottom line, nothing else is possible.
3. Community: Our commitment to ethical values doesn’t stop at our company’s doorstep. We believe we have an ethical obligation to contribute to the community to which we belong outside of the office. In addition to the usual contributions to service organizations, such as United Way, we have instituted two programs that are specific to our company. The first, called “Catch a Rising Star,” provides five $1,000 scholarships annually for formal education. The other involves my agreeing to meet once a month with five emerging business owners to offer support and advice. This mentoring program enables those owners to seek advice about specific issues from the professionals on our staff, such as our accountant and, yes, even our Corporate Culture Specialist.

In the wake of the scandals that have wrecked havoc on the ethics of corporate America, it bears noting that not all major companies have behaved badly. Indeed, organizations such as Johnson & Johnson have routinely been cited for good citizenship; a classic case in ethical behavior was that entity’s quick decision to recall during the Tylenol situation of a few years back.

Yet, if not all of corporate America is ethically lacking, the corollary is that not all entrepreneurial entities are ethical stalwarts. Indeed, it takes commitment to run a business ethically, even an entrepreneurial business. At Benjamin Enterprises, we’ve lived that commitment by adopting the core values of customer, people, company and community. It behooves all entrepreneurs to adopt those as the ethical bottom line for their enterprises.

Contributors: Michelle Benjamin, Founder/President/CEO, Benjamin Enterprises, Inc.

The content on this page is provided for informational purposes only and is not intended as tax or accounting advice that is appropriate for your specific situation.  Please consult your tax advisor for guidance on whether these general principles may apply to your specific situation.

If you are like most entrepreneurs trying to start a business, you’ve likely experienced anxiety around how to report and pay your taxes. But don’t fret, the basics are easy to understand–and once you understand them, everything becomes easier.

THE TWO PRIMARY WAYS BUSINESS AND THEIR OWNERS ARE TAXED

Most businesses are classified as “pass-through” entities. This includes sole proprietors, partnerships, most LLCs, and even some corporations. This means the business itself doesn’t pay income taxes. Rather, the income is passed-through to the owners and each owner will report his or her share of the profit on their personal income tax filing (using a Schedule C or IRS Form K-1). Each owner will then pay income taxes based on their share of the business’ profit.

Conversely, if you form a corporation then you’ll be subject to “double-taxation” (unless you make an S-Corp election). This means the business will pay income taxes on its profits and, if it distributes any of the remaining profits to its shareholders, those shareholders will pay income taxes on those distributions.

WHAT MOST NEW BUSINESSES DO

In most cases (but not all), you’ll want to start out as a “pass-through” entity. You can operate as a sole proprietor or you can form an LLC. Single-owner LLCs will usually be taxed as sole proprietors and multi-owner LLCs will usually be taxed as a partnership. In both cases, the company won’t pay income taxes because the profits will “pass-through” to the entrepreneurs that started the business.

HOW TO REPORT AND PAY YOUR TAXES

Now that you have a basic understanding of how the IRS will likely tax your new business, we’ll cover how to report and pay taxes for “pass-through” entities.

In both cases, you need to keep track of your income and expenses throughout the year so that you can complete these next steps. Also, although your tax filing is due annually, you still need to pay estimated taxes quarterly. You should speak to an accountant to set that up.

1. Solo-Founders: If you are a sole proprietor or run a single-owner LLC, then you’ll need to complete a Schedule C at the end of each year. The business won’t file that with the IRS but rather, you’ll attach it to your personal income tax filing and will owe taxes on that income.
2. Co-Founders: If you create a partnership or a multi-owner LLC and don’t make a different tax election, then the business will need to file an informational tax return with the IRS each year. The purpose of this filing is to let the IRS know how much profit each owner will report on his or her personal tax filing. Then, the business needs to give each owner a K-1 that he or she can attach to their personal tax filing so that they can pay taxes on that income.

NEED MORE INFORMATION?

Entrepreneurs across the country use the Kauffman Foundation’s FastTrac program to help them organize their business plan, figure out how to start their business, and more.

You can learn more and sign up for free at www.fasttrac.org.

Contributor: Chris Brown, Founder, Venture Legal

The Legal Audit: A Reality Check for Entrepreneurial Companies

The development of a business model and the achievement of the business objectives necessary to enable that model to be effective means that an advisory team must be put into place to help the entrepreneur keep plans on track. These outside advisors should perform periodic reality checks to test and adjust the validity of the business model. As a corporate lawyer, I am aware that these “business model reality tests” typically take the form of a legal audit.

In a legal audit, the company’s management team meets with corporate counsel in order to discuss strategic plans and objectives, review key documents and records, and analyze and identify current and projected legal needs of the company. The legal audit also lays the groundwork for the establishment of an ongoing legal compliance and prevention program in order to ensure that the company’s goals, structure and ongoing operations are consistent with the latest developments in business and corporate law. Finally, the legal audit helps managers identify the legal issues triggered by changes in strategies, goals or objectives and allows planning for the legal tasks that must be accomplished as a result of the issues identified.

ISSUES IN A LEGAL AUDIT

A comprehensive legal audit will examine a wide range of issues which may be as mundane as whether or not the company is qualified to do business in foreign jurisdictions or as complex as an analysis of the company’s executive compensation and retirement plans in order to ensure consistency with current tax and employment law regulations. The topics that must be addressed include: choice and structure of the entity; recent acts of the board of directors and documentation (or lack thereof) relating to those decisions; protection of intellectual property; forms and methods of distribution and marketing; pending and threatened litigation; estate planning; insurance coverage; hiring and firing practices; employment agreements; securities law compliance; antitrust and related trade regulations; product liability and environmental law; and a review of sales and collection practices. Naturally, the extent and complexity of the legal audit will vary depending on the size and stage of growth of the company, the type of business (such as service vs. manufacturing), the number of shareholders and employees, the extent to which the company does business in a “regulated industry,” and a host of other factors.

A legal audit may be performed on a periodic basis as part of an ongoing compliance program or may be performed in connection with a specific event, such as a financial audit, or in connection with a specific transaction, such as an acquisition or securities offering. There are also specialized legal audits in specific areas, such as tax; labor and employment; estate planning/asset protection; government contracts; franchising compliance; and environmental law. The mechanics of the legal audit and a sample questionnaire are listed below.

MECHANICS OF A LEGAL AUDIT

1. The Preliminary Questionnaire. The legal audit should begin with a comprehensive questionnaire for the company’s management team to review and address prior to the arrival of the team of attorneys who are to conduct the legal audit. In the case of smaller companies, a simple checklist of issues or a formal agenda will be more than sufficient to prepare for the initial conference.
2.  The Initial Conference. Once the documents and related materials requested in the questionnaire have been assembled and problem areas preliminarily identified, a meeting should be scheduled between audit counsel and the designated officers of the company who are well-versed in the various aspects of its operations. Related members of the management team, such as the outside accountant and other professionals who play key advisory roles, should be present during at least the portion of the audit that relates to their area of expertise. This initial series of conferences is an information-gathering exercise designed to familiarize the legal auditor with the most current information about all aspects of the company. In addition to these conferences with key personnel, the audit team should perform some on-site observations of the day-to-day operations of the company. The legal audit team should also review the current financial statements of the company and spend some time with the company’s accounting firm.
3.   Implementation of the Post-Audit Recommendations. Once the legal audit team has issued its post-audit evaluation to the management team, the entrepreneur can implement the recommendations of the report. What he or she does will vary, depending on the growth planned by the company, as well as the specific findings of the report. At a minimum, the entrepreneur should schedule meetings with key personnel to review and discuss the post-audit recommendations; prepare internal memos to educate the “rank-and-file” employees; conduct employee seminars to educate employees about proper procedures and compliance; and in certain cases, develop handbooks and operations manuals for continued and readily available guidance for the company’s staff. If significant problems are discovered during the audit, counsel should be careful about what is included in the final written report in order to avoid potential adverse consequences down the road under the federal or state rules of evidence. In addition, the company can establish a “tickler system” for periodic reporting and key dates/deadlines, as well as a time set for the next legal audit.

RISKS OF NOT COMPLYING

The failure to have an independent legal audit performed by qualified legal counsel can have a significant adverse impact on the company and its founders. The risks of non-compliance with these many laws and regulations include:

The process of going through a legal audit isn’t easy, but the risks associated with avoiding the issue are too high for any company to bear. Doing so is not only necessary, but beneficial. It is the entrepreneurial company’s reality check.

1.  Failure to keep proper books and records or mixing personal assets with business assets could lead to the ability by third parties to “pierce the corporate veil,” thereby removing the limited liability protection of a corporation or LLC, or even to litigation among co-owners.
2.  Failure to obtain all proper permits and licenses could lead to fines, penalties, and, in some cases, even closure of the business by governmental agencies.
3.  Failure to comply with certain laws and regulations may lead to problems under federal law with agencies such as the IRS, the EEOC, the EPA, and even the SEC.
4.  Failure to have employment applications, personnel handbooks and general employment policies reviewed periodically could give rise to governmental and civil liability.
5.  Failure by the directors of the company to keep accurate records and minutes of its decision-making procedures, such as proving that directors are exercising informed judgment, could subject the company and its board to liability to its shareholders and investors.
6.  Failure to monitor the company’s reporting requirements may put the company into default with lenders or investors.

The process of going through a legal audit isn’t easy, but the risks associated with avoiding the issue are too high for any company to bear. Doing so is not only necessary, but beneficial. It is the entrepreneurial company’s reality check.

Contributors:  Andrew J. Sherman,Partner,Dickstein Shapiro Morin and Oshinsky LLP

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3 Things to Consider Before Scaling Your Business

When you’re starting a small business, it’s easy to focus all of your attention on your business launch. But it’s equally important to consider what’s next so that you not only understand success, but you can also plan for it.

It might sound counterintuitive, but sudden success can often be the downfall of many start-ups. It’s not necessarily success that’s the problem; instead, it’s being able to rapidly shift and scale your business to keep pace with a sudden change.

Let’s say, for example, you sell a product that’s currently available on your website. You’re getting a small but steady number of orders per week, and you’re seeing incremental monthly growth.

But then, your product catches the eye of a major retailer. And they place an order for an as-yet unprecedented quantity. What do you do?

That’s why it’s so important to plan for business growth, including identifying the business processes that you can implement to help you quickly and easily scale your company as needed.

To help jumpstart that planning process, let’s look at three key considerations that will help prepare you to grow your business.

DEFINE SUCCESS

Before you make a plan to grow your business, you need to know what you’re working toward. Try answering these questions:

1. Where do you want your business to be in five years? In 10?
2. What’s your ultimate goal?
3. How do you define success?

It helps to look at success in multiple stages, too. Identify your dream goal (and yes: think BIG!). Then, note a couple of success benchmarks that could happen on the way to fulfilling that ultimate goal.

Remember: starting and running a business is a journey. And all of the planning and strategic thinking you do — especially your vision and your business plan— act as the roadmap to help get you to your final destination.

“The best piece of advice? Start small. It’s highly likely you don’t need to come out of the gate with a fully staffed team.”

HOW WILL YOU GET THERE?

Speaking of that roadmap, now it’s time to build one that’s focused on helping you fulfill your ultimate goal.

Remember when we mentioned earlier in the post that sudden success can sometimes have a damaging effect on a small business? That’s typically because the business owner didn’t properly plan for that success and was unable to keep pace with a sudden change.

Here’s the deal: you can’t plan for everything. But it’s important that you understand every facet of your business — and what you’d need to add or change to scale up — so that as success comes, you’re prepared to meet it head-on.

Let’s go back to the goals you identified in the previous section. Now, it’s time to make a plan for how you’ll achieve those goals. Consider the following questions:

1. Will you need employees? What roles? How many? What’s a reasonable salary?
2. How can you scale up production? What sort of facility do you need? Will a sudden increase in demand require a shift to overseas production or another similar and significant change?
3. What other operational and logistical changes do you need to make to support your goals? What are the costs?

It’s important to plan for growth because it’s likely not feasible to start out of the gate with a full staff and top-of-the-line production. Instead, it’s better to start small and then scale as your business growth supports it.

But with forethought and planning, you’re in a much stronger position to understand what you need to better leverage the momentum of success. And if that success arrives more suddenly than anticipated, you’ll be prepared rather than caught off guard.

UNDERSTAND WHEN TO ADD EMPLOYEES

One of the most common signs of business growth is the need to add employees. Yet there is no denying that hiring and retaining staff can be challenging, especially if you have never managed people before.

As part of your success planning, devote some time to specifically focus on your employee needs, including what roles you need to fill. Then, prioritize those roles. What support do you need when you launch your business? And what factors will determine when you need to grow your team?

By understanding your employee needs, you can then make a plan to fulfill them. When you start out, you’ll likely wear a number of hats and juggle a variety of roles. (This is an opportune time to revisit your personal strengths so that you can identify what skills you can provide until your revenue supports adding employees).

This planning will also give you the information you need to better understand your employment options. Let’s say, for example, that a business accountant is a mission-critical need. Yet when you start out, you probably won’t have enough work to support a full-time, on-staff accountant. That’s when outsourcing to a third-party vendor is an ideal option, and one that’s commonly used for business services like accounting, legal consulting and marketing.

Once you identify a list of skills or roles you need fulfilled, you can also do a little research to find the best fit for your particular business model. You’ll likely want to outsource some work to a third-party, but will you work with an individual contractor or a firm or agency? It may help to consult with some fellow entrepreneurs to get their firsthand experience before you make a decision.

Then, the trick is to keep a close eye on your numbers, including your expenses and revenue. As your business grows, you’ll likely hit a point when it’s cheaper to hire someone full-time rather than continuing to outsource to a third-party. And that’s when you can focus on building your full-time team.

The best piece of advice? Start small. It’s highly likely you don’t need to come out of the gate with a fully staffed team. Sure, you might work long hours for awhile, or juggle some tasks you don’t love. But if you focus on filling your most critical needs first, then growing your team as your revenue permits, you’ll be positioned to achieve long-term, sustainable success.

There’s no denying you’ll need various types of support to grow and launch your business and that’s where we come in. If you find yourself stuck at any point in the planning process — or simply want some outside expertise — register for Kauffman FastTrac, a free online course  designed to help entrepreneurs like you launch their businesses.

The course is self-paced, so you can work around your schedule. And with an immersive format, you’ll take away tips, tools and resources that you can immediately apply to your own business to help accelerate your company’s growth.

Remember when we compared starting a business to a journey? Think of Kauffman FastTrac as a visitor’s center, ready to dispense the information and resources you need to make the adventure as smooth as possible. Next stop: success!

Every entrepreneur I have ever met starts with a dream in which they truly believe. The dream is usually best described as passionate, primarily based on intuition and/or a missed opportunity that may have occurred previously in the entrepreneur’s career.

In every instance, a degree of risk is involved and the ability to “jump off the cliff” and manage risk is what breeds emerging businesses, products, and services that began as a dream.

In most instances, what prevents those with an entrepreneurial spirit from actually turning that dream into a living is the inability to take the incumbent risk involved in leaving a salaried job, the money necessary to actually launch and sustain a business, or the knowledge required about where to go to understand whether there is a market for their idea—what to do to understand if their idea is truly unique, has true potential, and what the competitive dynamics are that must be contended with.

In short, there is a base level of market research that must be conducted to confirm there is a customer need, who those customers are, where they are and how to reach them, and what they might be willing to pay for the products or services the business is providing.

In many instances, entrepreneur’s plans are blunted by the perceived high costs of having to field primary research in the form of conducting qualitative or quantitative research with the help of research experts. It’s true that primary research initiatives can be extremely expensive, complex, and time intensive.

However, there is a wealth of information available to entrepreneurs across virtually any business, product, or service arena that one might seek to enter at costs ranging from reasonable to free. This is typically what is known as secondary research and anyone with the drive, time, and patience to weave their way across the incredible amount of existing published information that exists can confirm that their dream or idea has “legs.”

There are a number of places that entrepreneurs can go to better frame-up a business plan and conduct the base level research necessary to confirm that there is a market and a unique place they can own with the target customer. This is true for both Business-to-Business focused initiatives as well as Consumer-focused businesses. These sources of what can be termed “credible” information and data that serves as base-level research include:

1.  Industry Publications and syndicated data usually only available to large corporations can be found in public libraries or specialty libraries like the James J. Hill Library in St. Paul, MN.
2.  On-line sources of abundant information about an industry, companies, products, and trends via trade and association sites, general business sites, company Web sites, and even blogs
3.  Articles found in traditional sources for daily business activities like The Wall Street Journal, The New York Times Business Section, Fortune, Forbesand Bloomberg BusinessWeek.
4.  Local business publications usually exist in almost every major metropolitan market and should be reviewed or subscribed to, including your local newspaper and its business section.
5.  Government sources at both the federal and state levels can provide valuable insights.
6. The business schools of most land-grant universities house tons of information that may be available to you by taking a single course or by simply strolling into their libraries and spending time there.

These are just some of the places that are repositories for a vast amount of utilitarian and accurate information. This is data entrepreneurs can refer to in confirming their idea is worth minimally investing their time against, as well as for qualifying customer interest and potential (as well as constructing a business plan to take forward for funding).

One area that usually is missed is the industriousness of simple, old-fashioned detective work. That means simply picking up the phone and asking for help. You will be amazed at the generosity of people who are experts or sources of information that can help you determine your future as an entrepreneur by giving you the information needed to breed success.

Professors, librarians, writers at local newspapers, experienced business women and men you come across in your life or via references from friends all represent rich sources of information and confirmation about your dream or idea. Call them. Write them. Reach out to them by using your network or accessing an existing professional network available to you.

All it takes is the courage to ask. The worst that can happen is you get a “no” or no reply but you will be surprised at the genuine and good spirit of people who truly want to help.

CUSTOMER DATA

An area that deserves specific mention is that every business, product, or service can only be successful or get funded if it has customers or consumers that want it. In helping the many numbers of individuals, small companies, and major corporations determine whether a new business or initiative has a future, we always go right to the target audience. The customer determines success at every level of planning and implementation. And you would be amazed how often the customer’s viewpoint or the perception of need for what is being considered is ignored.

Once you identify what the business or product is, you must evaluate it via the eyes, mind, and heart of the customers being targeted. What is its core value as perceived by the target? What makes it unique compared to what else is out there. In virtually every business, there is a customer experience that occurs. What is the desired or perfect customer experience that one seeks when their product or service comes into contact with the target?

Trends affect the success of all new businesses or products whether it’s a B2B targeted situation or a consumer targeted situation. In the food business, trends in areas like convenience, healthy eating, ingredients composition especially organic, packaging, and functional benefit are all critical factors in determining success.

Quality, availability and pricing are simply table stakes. Understanding customer trends that exist at present as well as those predicted in the future serve as benchmarks for immediate and future potential and they must be considered.

Positioning is dependant upon defining the core value proposition combined with the critical point of difference as viewed by the target. Successfully positioning your business or product requires entrepreneurial understanding of what the target customer thinks, wants and perceives as unique or different and worth trying. As such, all message development that goes into sales materials, and content development found in advertising or Web sites should be developed with the customer in mind first and foremost.

As noted above, the resources available to entrepreneurs to gain insights about customer expectations, desires, and interests is rich and broad. Most of the resources noted previously house a wealth of customer and trend data. And taking your business or product idea to friends, family, peers, or your personal network or via referrals cannot be underestimated for what can be learned.

It should also be noted that there is one syndicated resource that exists on a by-industry basis that should be explored—Mintel. Mintel publishes reports on a by-industry basis that factors in market, Competitive, and trend data with customer and customer segment insights that are extremely valuable but comes at a cost. The cost per report is in the thousands of dollars but should be explored for the quality it represents and conclusive information that can provide speed to market and confirmation about the entrepreneur’s investment.

SUMMARY

While it is true that it is difficult to compete with the resources and investment abilities of successful, existing corporations in the area of market and customer research, there is also a vast array of data and information that can be mined at little cost and with a simple investment of time.

This data can go a long way to confirming that an entrepreneur’s dream has real success potential, can be used in drafting a business plan that is attractive to potential investors and can be used to successfully launch an enterprise.

Further, insights gained in the area of consumer and market trends, customer expectations around products, and experiences will shape the way you develop communication targeted to those customers you seek to market to.

And the good news is it’s out there, it’s available at reasonable to no cost, and requires only your time and resourcefulness to access it, leverage it, and use it as a springboard to launch your dream.

© 2007 Greg Heinemann. All rights reserved.

Reaching Future Customers: A Path to Success

Planning, launching and marketing a small business is like a reverse funnel. Instead of starting with a large scope and narrowing it down, you start small: what’s your personal vision? What are your goals? What motivates you?

Then, that scope slowly widens. Once you’ve identified your ambition and your motivators, then it’s time to expand your focus outward. First, it’s your company: what’s your mission? What’s your business plan?

Second, you’ll broaden your focus to your market and your competition. What’s the business landscape like? Who are you competing with? And what do you offer that your competition doesn’t?

Now, it’s time to expand your focus even further: your target customers. They’re among the most critical parts of your business, because without customers, your business won’t last.

And just as you’ve so carefully and thoroughly planned your business, including operations and logistics, you’ll want to put similar effort into your small business marketing and messaging. To do that, you’ll need to understand who you’re trying to reach so that you can talk to them in a relevant, meaningful way. Sure, you want to sell them something — but you also want to build a relationship, which will keep them coming back to your business.

Let’s take a closer look at why your target audience is so important. Then, we’ll delve into ways that you can identify and learn more about your customers so that you can more effectively communicate and do business with them.

WHY YOUR TARGET AUDIENCE MATTERS

Here’s one of the most important lessons you’ll learn as a business owner: You can’t be everything to everyone.

Just think about it for a minute. If you had to create a product or service that appealed to everyone, you’d be exhausted! And you’d probably never achieve the full potential of your success.

That’s why it’s so important to identify your target audience. Who are the people who need your product or service? How can your product or service help improve their lives? What challenges will you help them overcome?

In an earlier FastTrac feature, we talked about identifying your entrepreneurial strengths with the caveat that no one is good at everything (and, honestly, they shouldn’t be!) Instead, it’s important to know your strengths, then channel them into your business.

The same goes for your target audience. You don’t need to appeal to everyone, but you do need to understand your customer base. Not only will that knowledge help you develop a more effective product or service, but you’ll also have customer-driven insight that will help guide your small business marketing strategy.

Keep this in mind: marketing, simply put, is delivering the right message to the right person in the right way and at the right time. If you know who that person is, the rest of the strategy is much easier to build.

IDENTIFYING AND LEARNING ABOUT YOUR CUSTOMERS

No matter what industry you’re in, chances are good that your product or service is helping someone solve a problem. Focusing on the pain points that your business alleviates can be an effective way to start identifying and understanding your customers.

Brian Kearns is a great example. He spent 18 months researching the problems that businesses face when hiring part-time employees. Then, when he fully understand those challenges and how he could help solve them, he launched HipHire, an online service that connects businesses with qualified part-time job candidates. As a result, businesses reduce their employee acquisition costs and turnover.

You don’t necessarily need to spend that much time on market research, but Brian’s experience underscores the importance of knowledge. Let’s take a closer look at three ways you can identify and understand your target customers so that you can build a similar knowledge base.

CREATE A PERSONA

You’ll often hear about creating customer personas as you delve more deeply into marketing strategies for small businesses.

Personas, in essence, are characters. They’re a generalized and fictional depiction of your customer. But although they’re fictional, their demographics, behaviors and needs can — and should — be rooted in reality.

Let’s say, for example, you’re starting a pet-sitting business. Your company will be located in the downtown area of a large city because you want to help area residents — most of whom are juggling busy schedules and don’t necessarily have access to a yard — take care of their pets.

Based on your business model, as well as insight you’ve gathered from your competitive analysis, you can create customer personas based on your target market. In the case of the downtown pet-sitting business, you’d have several: a young professional who has little downtime due to a hectic work and social schedule, but can’t imagine life without their beloved dog. Another persona could be an executive who frequently travels and whose pet-sitting needs may fluctuate depending on their schedule, which isn’t always consistent.

As you identify personas, don’t hesitate to indulge your creative side. Craft a short but informative back-story about each persona. Try identifying the following details about each persona:

1. Name
2. Age
3. Occupation
4. Address
5. Salary
6. Type of pet
7. Primary challenge
8. Secondary challenge
9. How can you help solve these challenges?

Don’t get too wrapped up in creating customer personas. After all, they’ll likely evolve as you better understand your customers and as you refine your business. But if you find yourself stuck on identifying specifics about a particular persona, the next tip can help.

USE PRIMARY MARKET RESEARCH

As you might have deduced from the name, primary market research means you’re getting your information straight from the source. And that’s why this type of research can be especially valuable as you focus on getting to know your target audience.

Common primary market research methods include surveys, interviews and focus groups. When you’re in the early stages of identifying and understanding your customers, focus groups and interviews can be especially helpful. One advantage to focus groups over one-on-one interviews is that you can gather information from several people at the same time, making your research more efficient.

Depending on how important this type of research is to your business planning and strategy, you may want to consider enlisting the help of a market research firm, although services will likely be costly.

If a market research firm isn’t in your budget, try starting with a more informal approach. Using your personas as a guide, gather a group of people and have a conversation about who they are, what they need and how your business can help. This sort of primary market research is beneficial no matter where you are in the audience development spectrum: it will give you the information that will help you expand your customer personas, or will help validate the work you’ve already done.

LISTEN AND LEARN WITH SOCIAL MEDIA

Social media will undoubtedly play an integral role in your marketing strategy, especially when it comes to brand building.

Much of the focus on social media is sharing and engagement, and rightfully so. But social media channels are sometimes overlooked as powerful listening tools. After all, they’re conversation platforms. And if you make a point to pay attention to what other people are saying, you’ll reap a wealth of insight that includes understanding more about your target audience and how you can best help (and connect) with them.

To get started, try setting up a few listening streams in a free social media dashboard like Hootsuite. Pick a few search terms or hashtags that are relevant to your business, industry and customers. Then, you can set up streams for each term or hashtag and simply follow along with the discussion.

Let’s revisit our hypothetical pet sitter. The entrepreneur (we’ll call her Myra) could set up a social stream with the hashtag of her city. That’s a lot of information, but it could help her spot possible customers and problems they could be facing (no nearby dog park, for example). A little research on a platform like Twitter can also help identify other hashtags or terms to watch. In our home city of Kansas City, for example, #dogsofkc is a fairly widely used hashtag and could make for an effective social listening stream.

Other tips are to watch for relevant Twitter chats, which are typically focused on a particular industry or topic. Here’s a helpful overview of current chats.

You might also consider joining a few groups on sites like Facebook or LinkedIn. And channels like Instagram make it easy to track hashtags so that you can follow posts and also identify people to follow.

And if you do decide to jump in the conversation? Effective social media marketing is a whole separate post, but just remember: despite the fact that you’re behind a screen, all social media use is simply talking with other people. Converse with someone online as you would in person — and that means you don’t want to jump straight into a sales pitch. Build a rapport; the time to sell will come later.

HOW TO REACH YOUR CUSTOMERS

Once you understand who your customers are and how you can help them, it’s an ideal time to think about how you can reach your customers.

We already mentioned social media playing a key role in your marketing strategy. And if you set up a few social listening streams, you’ll be ahead of the curve in terms of knowing where your customers spend their time.

For example, you might find that many of your target customers use Facebook, Instagram and Twitter, but they’re not particularly active on LinkedIn or Snapchat. Using that insight, you’ll be able to focus your customer-focused communication — and brand-building — on the channels your customers prefer.

This is also a prime time to revisit your personas. Based on the information you’ve created and compiled, how else can you reach your customers? Would direct mail be a worthwhile experiment? What about a booth or table at an upcoming conference or festival? Would your customers be interested in a blog? An email newsletter? Traditional advertising in print or broadcast?

As you launch and grow your business, you’ll definitely discover some of these answers through trial and error. Just know that you don’t need to try reaching all of your customers at once. Focus on a few channels and grow that audience. Then, you can broaden your marketing focus to encompass a different type of content or delivery.

The most important point is to understand the value of using data and insights to inform decisions. You’ll be experimenting and testing as you go, but you also don’t want to build your customer base (and your business) by taking wild guesses and seeing how they pay off. They say knowledge is power, and that’s especially true for entrepreneurs.

Remember the funnel analogy from the beginning of the post? If you feel yourself getting overwhelmed as you continue to expand the scope and focus of your entrepreneurial journey, take a deep breath. Then, consider registering for Kauffman FastTrac.

These free, online courses are specifically designed for entrepreneurs, both aspiring and established. They’ll walk you through key tasks like finding your target marketing, discovering your competitive advantage and defining both your brand and marketing.

If you find you’re stuck on a particular part of your small business planning or launch, Kauffman FastTrac can help you move forward. Or, if you’ve already done research and have tools like customer personas in place, FastTrac can help you validate the work you’ve done so far and affirm you’re on the right path. That’s the beauty of FastTrac — wherever you are with your business and whatever help you need, you’ll have access to the resources you need anytime you need them.

After all, we said earlier that marketing is delivering the right message to the right person at the right time and in the right way. In the case of FastTrac, you’re our target customer. And we want to work with you to solve your problems and bring your small business idea to fruition. How can we help?

Branding Basics for Entrepreneurs: Building Your Message

WHAT IS BRANDING AND WHY IT MATTERS

Google “What is a brand?” and you’ll find so many definitions it will make your head spin.

So let’s keep things simple. A brand is a promise. Your brand tells your customers what you do, what they can expect and how you’re different from the competition.

Yet that’s where branding can become challenging. You don’t want to over-complicate your brand, which is why every element of your branding should be deliberate, strategic and thoughtful.

After all, one of the reasons why your brand is so important is that it helps customers connect with your business while boosting your presence in a crowded market.

That’s because a brand doesn’t just represent the products or services you offer. It’s also a reflection of your company’s identity. It can be difficult to think about a company and a brand like you would a person, but that’s exactly what will make your brand effective.

Keep this in mind: every business has a story. And that story starts with the brand. Let’s look at some ways you can start your own brand-building with a critical element: your brand message.

HOW TO IDENTIFY YOUR BRAND MESSAGE

Branding, like small business marketing, should be strategic. Just as you identified the personal vision that guides your company, you should create a branding strategy that serves as the foundation of your brand. And that strategy starts with your brand message—or, in essence, the definition of your brand.

Before we look at some ways you can create your brand message, let’s try an exercise.

Take just a few minutes and think about a few brands you admire. Jot down their names, then a sentence or two about why the brand resonates with you.

Now, turn that reflection inward. Look at what you wrote and think about what you want your brand to reflect and say. As you start to formulate your brand message, answer the following questions:

1. What does your company do? 
2. What benefits do your products or services offer?
3. What qualities and emotions do you want customers to associate with your company? 
4. Why should customers care about your company? 

That information will help guide the creation of your brand message. You want to keep your message fairly brief, although once it’s finalized, you can further condense it into an elevator pitch that will be a part of your external communication strategy.

And if you get stuck? Don’t beat yourself up. Company branding is challenging and complex—in fact, many entrepreneurs enlist the help of branding firms to help with this part of the process.

We have another solution: Kauffman FastTrac. These free, self-paced online courses guide you through the process of starting a business, and that includes defining your company’s brand and marketing.

One of the benefits of FastTrac is that they’re designed to fit your specific needs. If, for example, you hit a wall on your branding, the courses will act as your guide. Or, if you prefer to tackle your own branding and want to evaluate your work, the courses can help with validation and feedback.

Once you’ve defined your brand message, let’s look at three ways you can communicate and support it.

3 WAYS TO COMMUNICATE AND SUPPORT YOUR BRAND MESSAGE

Once you’ve created your brand message, you’ll have the foundation on which to build the rest of your branding elements. Here are three key ways that you can communicate your brand message:

YOUR LOGO

Your company’s logo is arguably one of the most important parts of your brand. After all, it makes an instant impression. And it’s likely one of the things that people will most often associate with your company.

Your logo should be a visual reflection of your brand, which is why it’s important to first develop your brand message, then your logo.

Think of your brand attributes and what you want people to associate with your brand. How can you reflect those outcomes in your logo?

This is also a prime time to think about your company’s color palette. You don’t want to just pick colors on a whim. Remember: everything about branding is strategic, deliberate and thoughtful.

Let’s say, for example, that part of your brand is energetic. You’d want to choose bright, vibrant colors to reflect that energy, rather than, say, a muted neutral palette.

Revisit the list of your favorite brands and think about their logos. This isn’t to say that you should copy them. Instead, it’s an exercise to help you identify what connects with you, what moves you, what provokes an emotional reaction, because you want to do the same with your brand and customers.

YOUR COMPANY VOICE

Remember when we mentioned earlier that your branding is a reflection of your company’s identity? To communicate and support that identity, you’ll want to create your company’s voice.

Again, revisit your brand identity and your brand attributes. What sort of voice supports that message? Are you informal? Straight-forward? Casual with a dash of professionalism? Slightly snarky? Approachable? Authoritative?

Once you identify your company voice, you should use it to create all of your marketing materials and collateral, as well as guide other marketing efforts like your social media presence. Brand consistency is critical, especially when you’re launching a business and in the early stages of building brand recognition.

YOUR TAGLINE

Your company’s tagline summarizes your brand in just a few words—maybe some of the most important words you’ll choose as a business owner (no pressure!)

Go back to the work you’ve already put into your branding: your message, your logo, the list of brands you admire. Use all of that information to guide the creation of your tagline.

This is a prime time for a brain dump. Grab a piece of paper or head to a whiteboard and just start brainstorming and writing. Don’t worry about the quality of your output—the goal is to create as big of a list as possible, then you’ll evaluate your options.

And don’t hesitate to bring in a few close friends, associates or mentors to weigh in on several of your strongest choices. Not only will you get valuable input, but you can also conduct a small test of your branding and how it resonates with your target audience.We know: it’s a lot. But branding really is such a thrilling part of your entrepreneurial journey. This is the point in the process when your business really starts to come to life and you’re that much closer to launch.

And just remember: if you need help, we’re just a click away.

Where Do You Stand Among the Competition: 4 Questions to Help You Find Out

As an entrepreneur, you likely spend much of your time focused on your business. Yet as you prepare to launch (or grow) your company, it’s just as important to expand that focus to your competitors. Knowing and understanding your competitors is a key part of any company’s success. After all, odds are you’re not bringing a brand-new product or service to the market. That means you have competitors – and you need to show potential customers why they should do business with you, despite other choices in the market.

To help you get started, we’ve created a list of four questions you should answer about your competitors and your business.

1. WHO ARE MY COMPETITORS?

Before you delve into what your competitors are doing, you need to know who they are. Our recommendation: start with a competitive analysis.

By completing a competitive analysis, you’ll not only identify your top competitors; you’ll also examine what they offer, their message and how they’re connecting with their customers.

Then, you can use that information to refine your message, marketing, even your launch strategy, so that you can stand out from the rest of the pack.

Here are a few things to include in your competitive analysis:

1. A list of your top 10 competitors (including company demographics, size and location)
2. What products or services do they sell?
3. A one-sentence summary of their value prop or message (Note: If you can’t easily figure this out from their website and social channels, that’s important to note—and another opportunity for you to stand out).
4. Each competitor’s market share
5. Each competitor’s retail presence — online-only? Brick and mortar? Omnichannel?
6. Their social media channels
7. Their content, including but not limited to blogs, e-newsletters, whitepapers, direct mail, etc.
8. Each competitor’s strengths and weaknesses
9. Possible threats to your business?

You should be able to get a lot of this information just by exploring a company’s website, visiting their store (if feasible/applicable) and taking a look at their social media presence.

For help building your initial list of competitors, use company directory databases like Dun & Bradstreet or ReferenceUSA, which should be available at most public libraries.

And while you’re in research mode, it’s also a good idea to do a market analysis. This is an examination of your industry so that you can take notes of trends, whether the industry is expanding or diminishing and possible disruptors.

A great starting place for industry information is a trade organization and that organization’s publications and magazines, if they have them. You can also use the Encyclopedia of Associations (available at your local library) to help point you in the right direction.

2. WHY YOUR BUSINESS OR PRODUCT?

Now that you have a solid understanding of who your competitors are and what they offer, it’s time to look at your own business. Consider these questions:

1. What makes your product or service different from your competitors?
2. Why should a customer choose your product or service instead of a competitor?
3. What opportunities exist for you to innovate and stay ahead of the competition?

This way, you’re building on the foundation created by your competitive analysis. You not only know who your competitors are and what they’re doing, but also how you stand out. And it’s this information that will drive your messaging and marketing so that customers know who you are, what you offer and how you can help them.

3. WHAT’S YOUR VALUE PROP/MESSAGE?

Take the information you compiled in the last section — namely, what makes your product or service different from your competitors and why a customer should choose you — and solidify your company’s value prop and message.

As you articulate your value proposition, it will likely be similar to — or at least inspired by — your personal vision. After all, there’s a reason you want to start a business. There’s a reason you want to offer a particular good or service. Use that motivation to help tell customers what makes you a different — and better — choice when compared to competitors.

Conducting a competitive analysis before you create your company messaging can also help you craft a more impactful, results-driven message. Think back to the competitive research you did and which competitors stood out. Did you connect to any of the companies on a more emotional level? Did one do a better job than the others of telling you how they’re going to solve a problem?

There’s no harm in gleaning inspiration from your competitor analysis. You do, of course, want to avoid any sort of plagiarism. Instead, think of your customers and put yourself in their shoes. What do they want to know? What sort of message will inspire them to act? And how will your product or service help make their lives better?

4. HOW/WHERE CAN YOU SHARE THAT MESSAGE?

Once you’ve crafted your company’s messaging, think about how, where and to whom you can share that message.

Again, take a cue from your competitive analysis and look at what your competitors are doing. How are their websites? Do they blog? Are they active on social media? What social media channels are they using?

This isn’t necessarily the time to plan your full marketing strategy, but it is an ideal moment in which to start thinking about how you can connect with prospective customers to generate interest pre-launch and help drive sales and awareness once your business is up and running.

Remember: you don’t have to do everything your competitors are doing. And, honestly, you shouldn’t. After all, you’re presenting a better option than what your competitors are currently offering, and you need to share that message accordingly. Look for opportunities to be ahead of the curve, whether with a particular type of content, a new channel or platform, or another way that you can not only reach customers, but also connect with them. Successful businesses are those that help build and nurture relationships, and effectively communicating why you’re a better option is an optimal way to make a lasting — and positive — first impression.

 

TWO EASY WAYS TO KEEP TABS ON COMPETITORS

Once you’ve launched your business, you’ll want to keep tabs on your competitors. After all, they’re going to be modifying and refining their products and services to keep up with consumer demand, changing market conditions and industry trends — and you need to be proactive about doing the same.

It doesn’t hurt to revisit your full competitive analysis on a semi-annual or annual basis. But in the meantime, here are two ways you can stay connected to your competitors.

1. Subscribe to their emails: Pick 2-4 of your strongest competitors and, if they offer an email newsletter, subscribe to it. That way, you’ll get their business updates, product news and other info delivered straight to your inbox.
2. Set up listening streams on social media: Social media is an effective way to build brand awareness, help encourage sales and engage your customers. It’s an equally effective tool when it comes to staying in the loop with your competitors and industry in general.

Use a social media dashboard like Hootsuite to set up listening streams in Twitter. Pick a keyword, a search term or a competitor’s name, then Hootsuite will automatically create a matching Twitter stream. When you manage your company’s social media, take a few minutes and check in on those streams to see what your competitors and their customers are saying. Since social media sites like Twitter offer a real-time flow of conversation, social listening is one of the best ways to stay involved in your market while also spotting opportunities for improvement or differentiation.

If at any point in your competitive analysis or ongoing research you find yourself stuck — or you wonder if you’ve successfully identified your best competitive advantage — help is just a few clicks away.

Sign up for Kauffman FastTrac, free online courses designed to help both aspiring and established entrepreneurs. While you learn at your own pace, you’ll get information, exercises and tips to help you think through your business idea and position your company for lasting success. Talk about a way to stay ahead of your competition!