How to Prepare for Business Growth

Living in the age of advanced technology tempts entrepreneurs to travel the globe in pursuit of data
that enhances business growth strategies. Gathering new business information is a valid pursuit for
owners of young firms, but before you begin importing data, make sure you are effectively
managing what you already have. The foundation for sustained business growth is the maintenance
of accurate information on which to base decisions and actions. Because record-keeping often seems
less important than producing or selling a product, many entrepreneurs place these tasks last on
their “to do” lists. Year two of the business can not be built on year one’s experience and so
mistakes are repeated, customers lost and expenses compounded. By years three and four when the
firm needs to secure financing for growth into other markets, to buy additional equipment or
acquire a computer, the necessary records for attracting lenders and investors is non-existent.
Technology has made the “cardboard box” method of record-keeping almost obsolete, but regardless
of the method of record retention, it is the owner of the small business who is responsible for
deciding which records will be kept and managed. A way to begin that process is to answer these
questions:

What records are mandatory? (Those required by state or federal law, insurers, investors and
lenders.)

What records are needed to continue operations in my absence? (Ask yourself what day to day
tools you use and what information you depend on regularly.)

What records are necessary for effective financial management?

What records protect the business and its employees?

What records are required to maintain and improve sales opportunities?
After answering these questions, make a list of those who have an interest in any of your records
such as shareholders, lenders, customers and suppliers. Determine what information they require.
With these items added to your list, you should have a thorough compendium of the information
you must maintain. Your next step is to decide which records are particularly sensitive and must be
indicated as such. You can then begin developing the record-keeping system that is easiest for you
to access as you make growth decisions.
Checklist for Record Retention
Contracts and leases
_ Patents, trademarks and copyrights
Tax bills and returns
Business plan, organizational objectives
Guaranties
Insurance policies
Financial reports
Accounting data
Human Resources files, benefits,
policies, performance appraisals
Goods ordered, goods sold
Suppliers and credit terms from
each
Customer lists
Sources of sales leads
Promotional literature
Competitors’ promotional literature

How to Finance Your Business

A leading cause of small business failure is inadequate start-up capital. Before you begin your new
venture, you must realistically project not only your start-up costs for such things as equipment,
renovations, and promotion, but also your cash flow requirements for the early stages of operation.
It often takes time to build sales levels, yet rent, utilities and other costs are immediate. During this
time, bills are arriving faster than the customers, cash reserves can help the business survive.
Funding needed for start-up and operation of a business is available in two forms: (1) debt capital -
borrowed funds; and (2) equity capital - funds generated through the sale of stock, or by the investment
of the owner.
The terms on repayment of debt capital vary and are negotiated between lender and borrower.
Raising capital through the sale of stock is complex and highly regulated; you should seek legal
advice. More than half of all businesses are started with capital invested by the owner or the
owner’s family. Should you decide that your own resources are insufficient, the traditional sources
of financing are: banks, local, state and federal agencies, and venture capital firms.
In many cases the most fundamental document you will need for a loan application is a business
plan, because it shows the lender your ability to research and envision the establishment and
operation of the firm. In the previous section of this guide, the business plan outline contains several
items marked with an asterisk (*). These items are particular additions for a business plan being
used with a loan application. In addition to the plan, lenders consider several factors in evaluating a
business loan:

Management Experience: your background compared to the skills required for your chosen
business.

Repayment Ability: your realistic projection of business income allows you to maintain loan
payments.

Collateral: your pledge of assets toward business stability and loan repayment.

Credit: your historic and current record of repayment of obligations.
Obtaining a loan requires preparation and credit worthiness, but a bit of sales ability can help. You
will be competing with many other business owners, and knowing what the lender needs when
requesting a loan is just as important as knowing what a customer needs when selling your product.
Many lenders want assurance that:

You have something at risk in starting and operating this business. (Do not ask them to go out
on a limb to back you if you are not out on the limb yourself. You must have resources committed
to your own venture to secure the support of others.)

Your proposal is a sound one based on the 5 C’s of credit: capacity, capital, collateral, character,
and condition (industry).
Refer to Section IV, Pennsylvania Resources for sources of financing

How to Assess Yourself and Your Business Idea

Four basic factors influence a successful business start-up: a qualified entrepreneur, a profitable
business idea, a thorough business plan, and adequate capital. The latter two factors, plan and
capital, are subjects of the next two sections of this guide. Before you proceed, you should assess
both your own entrepreneurial skills and the viability of your business concept. If it is not feasible
(profitable) for you and your business concept to succeed, you will not need to spend time writing a
business plan and seeking financing.

Is Entrepreneurship the Right Choice for You?
Your previous work experience may not have fully prepared you for business ownership. Therefore,
before you can begin your entrepreneurial education, you will need to identify the characteristics of
successful entrepreneurs and compare them to your own strengths and weaknesses. Many studies
have been conducted and even more articles written on “the right stuff” for being an entrepreneur.
A summary of the primary characteristics of successful business owners follows. Rate yourself with
a plus (+) for those traits you already possess, or minus (-) for those that could benefit from
improvement.
Problem-solving: can explore innovative ways to respond to opportunities.
Goal-oriented: can envision a desired outcome, as well as plan and implement the activities
required to achieve it.
Self-confidence: believes in own ideas and abilities, and conveys that belief to others.
Risk-taking: can abandon status quo, explore options and pursue opportunities.
Decision-making: ability to make prudent choices even in a stressful environment.
Persistence: can tenaciously pursue goals regardless of the energy and commitment required.
Communication: can speak, listen and write effectively.
Interpersonal relationships: can understand the wants and needs of others, as well as inspire
them.
Leadership: can direct others effectively and empower their performance.
If you gave yourself a minus in any of the traits on the checklist, it does not mean you should give
up your entrepreneurial venture and seek a job in someone else’s business. By making a conscious
effort, you can strengthen weak entrepreneurial characteristics. Begin improvement by reading
business magazines and books, enrolling in educational programs, and seeking out a mentor who
exhibits the traits you need most. If you have some other idea about how to strengthen a weak
characteristic, that is good. You possess another characteristic of successful entrepreneurs—you are
creative!
As an entrepreneur you must possess not only the personal traits for success, you must also possess
some degree of expertise in each of the managerial skills required for business survival and growth.
Although you can hire skilled employees, engage qualified consultants, and develop a corporate
advisory board, ultimately, it is you who must determine the strengths and weaknesses of your
business, diagnose problems and seek out the expertise of others. You must learn to wear each of

How to Write a Business Plan

Like all entrepreneurs, you will need to do a great deal of research before opening your business.
Writing a business plan, a document that clearly describes your vision of all the details of business
operation, is recommended. The plan allows you to apply your research to your decision-making.
Although a business plan is time consuming, it is important to business success. Completing the
plan forces you to examine all decisions of management, marketing, personnel and finance in an
objective and organized way. Another important benefit of the planning process is that you will
project the amount of financing needed for start-up and the early stages of your business. The plan
will, therefore, become a useful tool in securing capital before start-up. Then the plan becomes your
owner’s manual guiding your daily operation and activities.
Among other things, the business plan describes the products and services you will sell, the
customers to whom you will sell them, the production, management and marketing activities
needed to produce your offerings, and the projected profit or loss that will result from your efforts.
A complete outline of the content of the plan is supplied below. When you adequately cover all of
the outline elements, your business plan will provide answers to these questions:

Who are you? A personal resume outlining the education and experience that will allow you to
start and manage your business successfully.

What are you going to do? A description of your business concept, the products and services
you will be providing, the market which you will serve, where you will be located, how much
money you will invest and how much additional money you will need (if any).

Where are you going? The short- and long-term goals you have set for your business.

How are you going to get there? The strategies that will allow you to meet your financial responsibilities,
compete with others in the marketplace, learn new management skills, communicate
with your customers, etc.
Business planning is an ongoing activity. Existing businesses, as well as start-up firms, benefit from
writing and updating their goals, plans and activities. Although plans differ in some content
elements depending on whether the firm is a retail, manufacturing, distribution or service enterprise,
the following outline should provide a solid framework for preparing your business plan.
Brief explanations are provided in each section, but if you have questions about the application of
the outline to your particular business, contact the Small Business Development Center (SBDC) or
Service Corps of Retired Executives (SCORE) Chapter in your area. Refer to Section IV, Pennsylvania
Resources Section for contact information.