Get Smart! About Starting Your First Business

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There are 4 levels of products for you to choose from. I recommend having level 1 products to gain followers and level 2 products to earn passive income at the minimum.

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You can always add more products at any of the product levels as your coaching business grows. For the steps check out my article on the 9 Essential Technologies for Your Online Coaching Business — start with technology 1, add on 2, then 3, then 4 and so on! You can do this by promoting your freebie on your business cards and mentioning it in all of your public speaking engagements. My favourite promotion option is through paid advertising. It does not take much of your time and you reach a global market. When your products are ready, you can email your list and make sales from day one.

It does not matter what it is or how much it costs. Get it done and add it to your website. Add another info product or an online coaching program. Keep adding products until you feel that you have a good mix for your audience see Step 1. What you should aim for is at least one affordable entry level product, working your way up to a high-end exclusive VIP coaching program.

Instead focus on getting people on at the same time to work through your program see Step 2. In closing, my biggest advice to you is this…. Please add them into the comments box below. Hi Benay, you have made very nice and comprehensive article that is realy good start on thinking how to start! Must read for all of us who are starting! Thank you! While I am not a coach, I think that this list would be perfect for any business start-up. Whether it be blogging like me , coaching, or whatever area one can think of. I especially love the last tip encouraging us to just keep going.

That is the most important part I think. If you can do that, you can accomplish anything! Thanks for the great article Benay! Starting a business is one investment quadrant. What a comforting thought. Thank you Benay. I was a therapist for many years and am now a coach in the area of substance abuse recovery and family issues. Time Marches On and I need to find a way to do what I do four more people and less hours one-on-one coaching takes. You have given me a framework for starting a new life. Thank you. Hi Barbara. Thank you for the lovely message.

Love where you are headed too! If you need a support group for the journey ahead and you are into Facebook, please join my private group for online coach entrepreneurs. We are a friendly bunch and will be happy to answer questions, share opinions etc. Here is the link to join.

Happy Coaching! Hi Benay — I stumbled upon your blog while looking for basic info in starting an online coaching service. This takes what was a big, overitask and makes it bite sized. I will review your site for more content. So I have a divorce coaching business. I have created tools for parents that no one else has. I was in the family court system for 18 years ad have a lot of advice to give.

What is the best way to market? Like your personal preferences, your business goals and your budget. BUT everyone should at least have a website, with a freebie. From there demonstrate via email that you are the person they can trust to get them through this phase in life. Get that working first then drive traffic to your freebie. Try Google adwords — could be a good fit for your niche.

I love a step by step instructions. I have more than one idea for online business 1. Teaching a langue I taught it before at university 2. Life skills coaching for international students I currently teach at college. Please advise mehich one is better idea? Hi Kim. Happy to hear that the article helped. I think the best thing you can do is start coaching people on both topics. This way, you are moving forward and not procrastinating AND building experience.

By keeping moving forward, your path WILL reveal itself. I recommend some of my podcasts for you too: Both from Nicola Grace one is out now and the second will be out first week of October Plus the episode with Denise Duffield-Thomas will help — we kick off talking about how she found her niche. Hi Benay- thanks for putting this post together. I believe it getting it right and adding value and coming to your post, I can see some light at the end of the tunnel.

Is there a way to integrate all these learnings into the business analysis field? But also keep in mind that you may not need much in place until your coaching income reaches a certain level. Hi Benay. Thanks for writing this article. I am in the beginning stages of creating a coaching business. I am hung up on trying to create something different from the other coaches out there and have not chosen a niche thus far. I love helping people and have a helping profession background, but still cannot seem to choose how I want to approach coaching.

Is there any way you could suggest some resources for me to help me with this? Thanks in advance.

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Hello Benay, Loved your article and buding a comprehensive coaching system is exactly what I need. I would love to learn more how you can help me. Where ate you based? Hi Joana. I work with coaches all over the world. Talk soon! Best, most realistic, helpful, valuable article I have read on the subject. Others have made me feel overwhelmed and ill-equipped. Financial statements for the past five years. Evaluate these statements, including all books and financial records, and compare them to their tax returns.

This is especially important for determining the earning power of the business. The sales and operating ratios should be examined with the help of an accountant familiar with the type of business you are considering. Sales records. Although sales will be logged in the financial statements, you should also evaluate the monthly sales records for the past 36 months or more. Break sales down by product categories if several products are involved, as well as by cash and credit sales. This is a valuable indicator of current business activity and provides some understanding of cycles that the business may go through.

Compare the industry norms of seasonal patterns with what you see in the business. Also, obtain the sales figures of the 10 largest accounts for the past 12 months. If the seller doesn't want to release his or her largest accounts by name, it's fine to assign them a code. You're only interested in the sales pattern. Complete list of liabilities. Consult an independent attorney and accountant to examine the list of liabilities to determine potential costs and legal ramifications.

Find out if the owner has used assets such as capital equipment or accounts receivable as collateral to secure short-term loans, if there are liens by creditors against assets, lawsuits, or other claims.

10 Tips For Starting A Small Business That You Haven't Heard A Thousand Times Already

Your accountant should also check for unrecorded liabilities such as employee benefit claims, out-of-court settlements being paid off, etc. All accounts receivable. Break them down by 30 days, 60 days, 90 days and beyond. Checking the age of receivables is important because the longer the period they are outstanding, the lower the value of the account. You should also make a list of the top 10 accounts and check their creditworthiness. If the clientele is creditworthy and the majority of the accounts are outstanding beyond 60 days, a stricter credit collections policy may speed up the collection of receivables.

All accounts payable. Like accounts receivable, accounts payable should be broken down by 30 days, 60 days, and 90 days. This is important in determining how well cash flows through the company.

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On payables more than 90 days old, you should check to see if any creditors have placed a lien on the company's assets. Debt disclosure. This includes all outstanding notes, loans and any other debt to which the business has agreed. See, too, if there are any business investments on the books that may have taken place outside of the normal area.

Look at the level of loans to customers as well.

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  • Merchandise returns. Does the business have a high rate of returns? Has it gone up in the past year? If so, can you isolate the reasons for returns and correct the problem s? Customer patterns. If this is the type of business that can track customers, you will want to know specific characteristics concerning current customers, such as: How many are first-time buyers? How many customers were lost over the past year? When are the peak buying seasons for current customers? What type of merchandise is the most popular? Marketing strategies. How does the owner obtain customers? Does he or she offer discounts, advertise aggressively, or conduct public-relations campaigns?

    You should get copies of all sales literature to see the kind of image that is being projected by the business. When you look at the literature, pretend that you are a customer being solicited by the company. How does it make you feel? This can give you some idea of how the company is perceived by its market. Advertising costs. Analyze advertising costs. It is often better for a business to postpone profit at year-end until the next year by spending a lot of money on advertising during the last month of the fiscal year.

    Price checks. Evaluate current price lists and discount schedules for all products, the date of the last price increase, and the percentage of increase. You might even go back and look at the previous price increase to see what percentage it was and determine when you are likely to be able to raise prices. Here again, compare what you see in the business you are looking at, with standards in the industry. Industry and market history. You should analyze the industry as well as the specific market segments of the business targets. You need to find out if sales in the industry, as well as in the market segment, have been growing, declining, or have remained stagnant.

    This is very important to determine future profit potential. Location and market area. Evaluate the location of the business and the market area surrounding it. This is especially important to retailers, who draw the majority of their business from the primary trading area. You should conduct a thorough analysis of the business's location and the trading areas surrounding the location including economic outlook, demographics and competition.

    For service businesses, get a map of the area covered by the business. Find out, based on the locations of various accounts, if there are any special requirements for delivering the product, or any transportation difficulties encountered by the business in getting the product to market. Reputation of the business. The image of the business in the eyes of customers and suppliers is extremely important. As we mentioned, the image of the business can be an asset, or a liability. Interview customers, suppliers and the bank, as well as the owners of other businesses in the area, to determine the reputation of the business.

    Seller-customer ties.

    You must find out if any customers are related or have any special ties to the present owner of the business. How long has any such account been with the company? What percentage of the company's business is accounted for by this particular customer or set of customers? Will this customer continue to purchase from the company if the ownership changes? Inflated salaries. Some salaries may be inflated or perhaps the current owner may have a relative on the payroll who isn't working for the company.

    All of these possibilities should be analyzed. List of current employees and organizational chart. Current employees can be a valuable asset, especially key personnel. Evaluate the organizational chart to understand who is responsible to whom. You must also look at the management practices of the company and know the wages of all employees and their length of employment.

    Examine any management-employee contracts that exist aside from a union agreement, as well as details of employee benefit plans; profit-sharing; health, life and accident insurance; vacation policies; and any employee-related lawsuits against the company.

    OSHA requirements. Find out if the facility meets all occupational safety and health requirements and whether it has been inspected. If you feel that the seller is "hedging" on this and you see some things you feel might not be safe on the premises, you can ask the Occupational Safety and Health Administration OSHA to help you with an inspection.

    As a prospective buyer of a business that may come under OSHA scrutiny, you need to be certain that you are not buying an unsafe business. Some sellers may perceive your asking for OSHA's help as a dirty trick. But you must realize that as a prospective, serious buyer, you need to protect your position. Establish what type of insurance coverage is held for the operation of the business and all of its properties as well as who the underwriter and local company representative is, and how much the premiums are.

    Some businesses are underinsured and operating under potentially disastrous situations in case of fire or a major catastrophe. If you come into an underinsured operation, you could be wiped out if a major loss occurs. Product liability. Product liability insurance is of particular interest if you're purchasing a manufacturing company.

    Insurance coverage can change dramatically from year to year, and this can markedly affect the cash flow of a company. No decision is more emotionally charged than deciding upon a price for an existing business. The owner has one idea of how much the business is worth, while the buyer will typically have another viewpoint. Each party is dealing from a different perspective and usually the one who is best prepared will have the most leverage when the process enters the negotiating stage.

    Keep in mind that most sellers determine the price for their business arbitrarily or through a special formula that may apply to that industry only. Either way, there usually aren't very many solid facts upon which to base their decisions. Price is a very hard element to pin down and, therefore, is for the buyer to assess.

    There are a few factors that will influence price, such as economic conditions. Usually, businesses sell for a higher price when the economy is expanding, and for a much lower price during recessions. Motivation also plays an important factor. How badly does the seller want out? If the seller has many personal financial problems, you may be able to buy the business at a discount rate by playing the waiting game.

    On the other hand, you should never let the seller know how badly you want to buy the business. This can affect the price you pay adversely. Beyond these factors, you can determine the value of a business using several different methods discussed below.

    Simply put, some owners gauge the value of their business by using a multiplier of either the monthly gross sales, monthly gross sales plus inventory, or after-tax profits. While the multiplier formula may seem complex and quite accurate to begin with, if you delve a little deeper and look at the components used to arrive at the stated value, there is actually very little to substantiate the arrived at price. Most of the multipliers aren't based on fact. For example, individuals within a specific industry may claim that certain businesses sell at three times their annual gross sales, or two times their annual gross sales plus inventory.

    Depending on which formula the owner uses, the gross sales are multiplied by the appropriate number, and a price is generated. Of course, you can check the monthly sales figure by looking at the income statement, but is the multiplier an accurate number? After all, it has been determined arbitrarily. There usually hasn't been a formal survey performed and verified by an outside source to arrive at these multipliers.

    In addition, even if the multiplier was accurate, there is such a large spread between the low and high ends of the range that it really just serves as a ballpark figure. This is true whether a sales or profit multiplier is used. In the case of a profit multiplier, the figure generated becomes even more skewed because businesses rarely show a profit due to tax reasons.

    Therefore, the resulting value of the business is either very small or the owner has to use a different profit factor to arrive at a higher price. Don't place too much faith in multipliers. If you run across a seller using the multiplier method, use the price only as an estimate and nothing more. This is a fairly accurate way to determine the price of a business, but you have to exercise caution using this method. To arrive at a price based on the book value, all you have to do is find out what the difference is between the assets and liabilities of a company to arrive at its net worth.

    This has usually been done already on the balance sheet. The net worth is then multiplied by one or two to arrive at the book value. This might seem simple enough. To check the number, all you have to do is list the company's assets and liabilities. Determine their value, arrive at the net worth, and then multiply that by the appropriate number. Assets usually include any unsold inventory, leasehold improvements, fixtures, equipment, real estate, accounts receivable, and supplies.

    Liabilities can be anything. They might even include the business itself. Usually, though, you want to list any unpaid debts, uncollected taxes, liens, judgments, lawsuits, bad investments--anything that will create a cash drain upon the business. Now here is where it gets tricky.

    In the balance sheet, fixed assets are usually listed by their depreciated value, not their replacement value. Therefore, there really isn't a true cost associated with the fixed assets. That can create very inconsistent values. If the assets have been depreciated over the years to a level of zero, there isn't anything on which to base a book value. The most common means of judging any business is by its return on investment ROI , or the amount of money the buyer will realize from the business in profit after debt service and taxes. However, don't confuse ROI with profit.

    They are not the same thing.

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    ROI is the amount of the business. Profit is a yardstick by which the performance of the business is measured. Typically, a small business should return anywhere between 15 and 30 percent on investment. This is the average net in after-tax dollars. Depreciation, which is a device of tax planning and cash flow, should not be counted in the net because it should be set aside to replace equipment. Eventually equipment does wear out and must be replaced, and it sometimes has to be replaced much sooner than you expect. This is especially true when considering a business with older equipment.

    The wisdom of buying a business lies in its potential to earn money on the money you put into it. You determine the value of that business by evaluating how much money you are going to earn on your investment. The business should have the ability to pay for itself. If it can do this and give you a return on your cash investment of 15 percent or more, then you have a good business. This is what determines the price. If the seller is financing the purchase of the business, your operating statement should have a payment schedule that can be taken out of the income of the business to pay for it.

    Does a percent net for a business seem high? Everybody wants to know if a business makes two, three, or 10 times profit. They hear price-earning ratios tossed around, and forget that such ratios commonly refer to companies listed on the stock exchange. In small business, such ratios have limited value. A big business can earn 10 percent on its investment and be extremely healthy. The big supermarkets net two or three percent on their sales, but this small percentage represents enormous volume.

    Small businesses are different. The small business should typically earn a bigger return because the risk of the enterprise is higher. The important thing for you, as a buyer of a small business, is to realize that regardless of industry practices for big business, it's the ROI that you need to worry about most. Is it realistic? If the price is realistic for the amount of money you have to invest, then you can consider it a viable business. Valuing a business based on capitalized earnings is similar to the return-on-investment method of assessment, except normal earnings are used to estimate projected earnings, which are then divided by a standard capitalization rate.

    So what is a standard capitalization rate? The capitalization rate is determined by learning what the risk of investment in the business would be in comparison to other investments such as government bonds or stock in other companies. For instance, if the rate of return on investment in government bonds is 18 percent, then the business should provide a return of 18 percent or better on the investment into it.

    To determine the value of a business based on capitalized earnings, use the following formula:. If your capitalization rate is 18 percent, then the value of the business would be:. Generally, a good capitalization rate for buyouts will range between 20 to 40 percent.