How do I decide if a business idea is likely to be successful?
While there are no guarantees any startup business will be successful, a good first step to determine if an idea makes sense before proceeding with an investment of time and resources is to do a venture feasibility study.
A venture feasibility study analyzes an idea from several perspectives: market opportunity, competition, resources available, resource gaps, financial viability, operational issues, intellectual property rights, development timeline, and technology needs. Consider a venture feasibility study as a start on a business plan if the idea looks profitable.
Determining the market opportunity is based on reasonable market research, both primary and secondary. Primary market research consists of interviewing or surveying potential customers on their preferences and ability to purchase. Secondary market research consists of gathering information that is already available regarding the target customer group, such as demographic data available through the U. S. Census Bureau. Are there enough customers willing to buy your products, often enough, at a profitable price that your business can pay all expenses and provide a decent living wage to owners? If not, the business idea is not feasible.
Many people who want to start a business believe they will be able to get grants or loans to help them finance the venture. Often this is not true. Part of a venture feasibility study is to look at what financial resources are already available, in personal bank accounts, equity in a home, life insurance, family and friends, or from selling assets. Personal credit ratings and collateral are also important. Lenders make decisions based on customer ability to repay the loan. A major cause of business failure is not having enough cash available to cover all startup costs and operate for at least a year. Ask yourself, “Am I willing to risk what I own to go into this business because the potential rewards are greater than the risks?”
A good first step in the feasibility determination is a SWOT analysis (strengths, weaknesses, opportunities, and threats). Look honestly at all the pros and cons for this type of business venture. Analyze ways to overcome weaknesses and threats. The local Small Business Development Center office is a resource that can assist with the venture feasibility process. Find the location nearest you.
What is meant by “company culture,” and how is it important to my business?
Company culture is defined as the shared values, beliefs, and practices of company employees, including management. This is not the written policies, procedures, or strategic plan—it’s the actions and attitudes of each individual who is a part of the organization.
Knowing the culture in any business is important to ensure the long term health of the business. Company culture changes as the employees in the business change, as management makes strategic decisions and as the business environment shifts. The most successful businesses have an adaptive culture. A study co-sponsored by Crawford International and HR.com in Palo Alto, California in 2006 found that “companies that create adaptive corporate cultures outperform companies with non-adaptive cultures by a factor of 900 to one, as measured by long term net income and stock price growth.”
An adaptive culture is defined as one that is aligned with the business mission and strategic goals. How can a business owner assess their company culture? Look for common employee behaviors. How do employees act with customers and with each other? Listen with an open mind to employees, suppliers, customers, the media, and members of the community. What is being said about the company in public, on social media, and in the hallways of the business? What employee actions are rewarded or punished? Are sales growing or shrinking?
Once the assessment is completed, the next step is to determine what you want the company culture to look like in the future. Review corporate mission, vision, values and goals to make sure the company culture you are inventing is supportive of them. Develop an action plan considering what is working well and what needs to be improved. Brainstorm changes in formal policies and business practices that enhance the desired improvements. Make sure to include employees at all levels of the organization in the brainstorming sessions. Develop models anticipating the changes and communicate with all employees about the expected outcomes. Monitor the results of any changes that are initiated to see if they are impacting the company culture in a positive way.
Company culture cannot be dictated by management, it can only be modeled. Reward behaviors that align with strategic goals. Celebrate accomplishments and communicate regularly with all employees about the progress towards reaching the strategic goals of the company. The bottom line: To change the culture of a business, the leaders must start acting differently and enlist enough support within the organization that others act differently as well.
Do I need to hire a Certified Public Accountant (CPA) for my small business?
A Certified Public Accountant (CPA) is a state licensed professional who offers various accounting, auditing, tax, financial analysis, business valuation, and consulting services. CPAs must pass the uniform CPA examination, achieve educational requirements set by the state, and have experience working in a CPA firm under the direct supervision of a qualified licensee to obtain their license. As a licensed professional, a CPA has to adhere to a code of professional ethics.
Many accounting tasks done in a small business do not need to be handled by a CPA, but there may be a benefit to using the services provided by a CPA firm. A CPA can perform audit services and attest that financial information adheres to “generally accepted accounting principles (GAAP).” GAAP are rules and standards set forth by the Financial Accounting Standards Board to ensure financial information is presented fairly, accurately and in an understandable manner. This assurance can be beneficial if the business is seeking loans or investment funding. CPAs also can represent clients in case of an Internal Revenue Service (IRS) audit. Financial analysis and management advising are also services provided by CPAs.
Before hiring a CPA, it’s important to ask several questions and get to know the skills and limitations of the person doing the accounting work. Find out how many other businesses this person has worked with in your industry. Ask what the firm’s specialties are (tax, audit, business valuation, etc.). Check with the state Board of Accountancy to be sure the CPA’s license is in good standing. Ask who will actually be doing the work you are contracting with the CPA firm to perform. Ensure you have a clear understanding of work to be performed and what the benefit is to your company. For instance, there is a difference between financial statement preparation, a financial review, and a full audit. Also, when you ask a financial question, are you satisfied you understand the answers you receive? Make sure you fully understand the cost of services you are having performed, what information you need to provide, and when you can expect an answer or a final report or a tax return.
How do I sell my products to the federal government?
The U.S. federal government purchases billions of dollars of goods and services each year, and hundreds of millions of that is from small businesses in rural areas. That’s a lot of purchasing power, and definitely a market for any business to consider. To effectively sell to the federal government, it’s important to learn how the contracting process works, determine if government contracting is the right fit for your business, and make sure your business qualifies as a contractor.
When a Federal agency wants to buy goods or services, it must follow procedures that conform to the Federal Acquisition Regulation (FAR). Most small business owners find these procedures daunting. In Oregon, The Government Contract Assistance Program (GCAP) has assisted thousands of businesses to reach their government contracting goals through education, marketing assistance and in-depth procurement advising since 1986.
All federal government purchasing opportunities in excess of $25,000 are available on the government’s Federal Business Opportunities website. Unfortunately, that directory has more than 20,000 listings at any given time, and a thorough search could require many hours, not just once, but on a regular basis. One of the services provided by GCAP is the bid match program, a daily computer matching service that informs you about opportunities that fit your business, saving you time and money.
Contracting with the federal government is not the only option available. State and local governments also purchase billions of dollars worth of goods and services. Knowing how to find those opportunities also requires a great deal of time. GCAP advisors are available to assist with selling to any level of government. To proceed in selling to the government, several initial steps are necessary including defining your North America Industry Classification (NAICS) and size standard, registering your business as a contractor, learning the procedures for selling to the government, knowing the reporting processes to get paid and establishing a relationship with the agencies you wish to sell to.
The Small Business Administration (SBA) provides a contracting checklist to help small businesses to get started in selling to the federal government. Using the valuable resources available to small businesses can shorten the learning curve significantly and provide insights into the best contracting opportunities to pursue. Those resources can also ensure procedures have been followed so payment on a government contract will be received in a timely manner.
What do you want to know?
Got a question about running or starting a small business? Ask us and we will either direct you to the appropriate source or answer the question ourselves. Leave your question in the comments below.
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