Options for Financing Your Business

Our newsletter this week features articles providing alternative sources of financing a small or home-based business. We all know that a business needs money to survive, but finding that money is sometimes very challenging, especially if you have no money, has poor credit, and very poor connections.

Read this week's PowerHomeBiz Home Business Alerts . You can subscribe by entering your email in our newsletter subscription box at the homepage.

Where Do Small Business Owners Get Funding for their Businesses?

The National Small Business Association did a survey and found that the most commonly used sources of financing for small businesses are:

• Credit cards - 44%
• Earnings of the business - 43%
• Bank loan - 29%
• Private loan (friends or family) - 22%
• Vendor credit - 18%
• Leasing - 7%
• Small Business Administration loan - 6%
• Private placement of debt - 4%
• Selling/pledging of accounts receivables - 3%
• Private placement of stock - 1%

Credit cards may be an expensive source of funds, but well, it is the most accessible and easiest to get. Especially for those with poor credit who don't stand a chance getting approved for a bank loan. It is not uncommon to find small business owners to be in credit card debt up to their eyeballs (love that term!). Credit cards may not be the wisest route to financing a business, but surely beats reading rejection letters from banks.

I have experienced first hand how it is to labor day and night crafting what I thought to be a great business plan, only to be rejected by the bank for not having any collateral. I was one of those who mistakenly believed that banks are willing to give you money if you have an outstanding business idea, even though you don't have any equity investment or collateral. That experience proved to me that you need money in order to make money. So just like many other entrepreneurs, I had to use my plastics to fund the business.

You can read the 2007 NSBA Survey of Small and Mid-Sized Businesses (data is on page 20)

How to Improve Effectiveness of Your Email Campaigns

A home based entrepreneur who sells candles on the Web complained about the poor performance of his email campaigns. He finds it hard to get the response he wants from his email campaigns sent to his existing customers and newsletter signups, which suffers from low open rates to low clickthrough rates.

My suggestions to him are:

• First, make sure that your list is indeed 100% opt in -- without trickery. When you ask people to sign up for the newsletter, make sure that they actually not sign up and not have the newsletter signup box checked by default. By having the newsletter signup checked as a default, many people fail to realize that they have been signed up and agreed to receive the newsletter.
• Don't buy email lists. With the ever growing spam complaints, you want to make sure that people actually want to receive your mailings.
• Clean up your list. Look at your mailing list, and segment your current subscribers. Remove those that have not opened your emails for the last year (or some other timeline). If they have not opened your emails in the last year, chances are they are not going to open it again.
• Remove from your list those who have blocked you, or bounced emails, or emails no longer exist. It may cut your list by half, but you will be left with the more responsive half.
• As part of segmenting your list, send different sets of emails to those who have just purchased from you, as against those who have purchased from you 5 months ago.
• Then of course make your offers more compelling. Look at your past emails and their open rates. What types actually got the best open rate? Then tweak the best performing ones some more

Whitepapers on Doing Business Online

If you are selling or doing business online, you may want to check out the following white papers from different vendors/companies:

• Post-Holiday Paid Search Strategies
• MarkMonitor Brandjacking Index
• Online Businesses Discover Direct Response TV
• The Effect of DRTV on Search Engine Marketing
• The Evolution of Landing Pages
• 2008 ePayment Management Guide

Some of the above will require registration, while some are direct links to the white papers. Skip through the promotional blah-blah, and you will find some gems from these papers. Be prepared though to get some phone calls from these vendors (umm .. "I just downloaded your white paper, and has no interest in your business whatsoever.")

40 Best Business Tips for Home-Based Entrepreneurs

We all love great tips on how to increase our incomes, be more productive and generally make our lives easier. So how about 40 such tips?

We've compiled tips, strategies and tactics from various magazines and books on different topics affecting the home based entrepreneurs. From choosing a home business to raising capital from angel investors to protecting your business idea, the article "40 Best Business Tips for Home-Based Entrepreneurs" provides some of the best business tips that can possibly help your business.

Of course, this compilation is by no means complete, and there are hundreds if not thousands of great tips out there for business owners. If you know of other great tips, do let me know. Perhaps, we'll turn the "40 Best Business Tips for Home-Based Entrepreneurs" into 100 tips!

How to Get Financing from Angel Investors

One way to finance your business is to find wealthy individuals who can provide the funding you need. Often called "angel investors" these are private investors who may also be entrepreneurs.

Guy Kawasaki writes in his book "The Art of the Start" that raising money from angel investors require s a different approach because their goals are different from those of professional investors. He gave the following advice:

• Don’t underestimate them. They may care less about financial returns than professional investors, but this doesn’t mean they are suckers.
• Understand their motivation. Where professional investors want to make money and maybe pay back society, many angel investors want to pay back society and maybe make money.
• Enable them to live vicariously. A side benefit that many angels seek is a chance to relive their youth or a romantic past.
• Make your story comprehensible to a spouse. The “investment committee” of an angel is his or her spouse.
• Be a nice person. Whereas a professional might invest in a jerk because “money is money,” an angel won’t.
• Sign up people they know or have heard of. Angel investing is often about socializing as much as profiting.

As to where to find angel investors, you can start in your community -- your lawyer, accountant or even the wealthy retiree living in the McMansion next door might be interested in investing in your business. Or go to angel investors network, which I list in the article Find an Angel Investor for Your Small Business

How to Build Your Brand

Many small and home-based business owners consider branding to be an exclusive domain of big companies. It is something that Coke, Nike, Apple, Disney and other companies with big marketing budgets engage in.

And this is often a big mistake. Many small businesses unfortunately fail to reap the benefits of having developed a strong brand -- or the process of establishing an emotional connection between the business and the customer.

Jeffrey Gitomer, in his book "The Little Red Book of Selling" has identified several ways a business can build a brand, even for 1-person businesses, and these are:

• Create demand for your product or service indirectly (through means other than direct advertising)
• Get the business community to have confidence in your business. Earn a reputation for quality performance so good that it’s talked about.
• Establish yourself as an expert. Why just be in the field, when you can be perceived on top of it?
• Register your name.com. Go to some name registration site and register your name as fast as you can.
• Dedicate time to make it happen. Or it won’t happen. If you want to make a lasting mark, it must be preceded with a master plan
• Get others to help you. List the people you think can help you or help you connect – and ask for their support. (The easiest way to get support? Give it first – without keeping score.
• Stay in front of the people you want to do business with. By combining your outreaches, you can create a steady flow of images to your target market. It takes between five and ten images to create awareness great enough to make a buying decision
• Become a resource. It’s much more powerful than someone perceiving you as a salesman or entrepreneur.
• Persistence and consistency are the secrets. If you’re good, have patience. Your phone will ring.
• Ignore idiots and zealots. There are a lot of jealous people and naysayers in the world.
• Become known as a person of action. The result of these actions will be a person who is known for getting things done – a leader.
  

What Consumers Want in their Online Shopping Experience

Sterling Commerce and Deloitte Consulting collaborated on a very interesting survey entitled "What Consumers Want in their Online Shopping Experience?" that looks at consumers attitudes and preferences when shopping online.

The findings of the paper are as follows:

• Shoppers have three major areas of dissatisfaction: lack of information availability, out of stock items, and lack of assistance/poor customer service
• In terms of importance, consumers rank online notifications higher than product rating and review features
• Tracking an order is a necessity
• Out of stock sale items decreases consumers' willingness to shop with that retailer

If you are selling on the Web, this free paper (requires registration to download) is a must-read

What is the Most Important Step for Small Business Success?

Someone asked me recently, "If there is a single step in starting a business that could guarantee success, what could it be?"

This is a tough question to answer. It's like asking for a magic bullet for attaining business success when none exists. Success in business sometimes feels like it depends on whether the stars align perfectly in the sky or if Lady Luck smiles at your efforts and reward you for your work.

Luck aside, I feel that the most important step is detailed preparation. Rare are those who can wake up one day and decide to start a business they know nothing about and then succeed. For most people, having an extensive knowledge of the product or service is critical. You don't succeed in a lawncare business if you don't know anything about grasses. Or become the best search engine optimization firm out there when you know nothing about search engines and how to rank well.

By having deep knowledge of the business you are going in, you are able to understand what your customers need and want, address these needs and wants, and offer them products that will be of value to them.

Detailed preparation also entails going through the business planning. No, you don't have to write the business plan if you are not going to apply for a loan or finding an investor. But the business plan process can help you understand your business and prepare you for what you need to expect when you start the business. The process can help you understand your value proposition, identify your target market, find ways to best reach them, know the financial requirements of the business, among other critical information.

So what is the most important step for you in starting a business?