Outsourcing and its Benefits for your business plan

/0 Comments/in /by

Outsourcing and its Benefits for your business plan

Outsourcing is the contracting out of internal business processes to a third party. Why Outsourcing is the best option for you, a young and strived to success entrepreneur?
Here are the top 5 reasons:
1) Control Your Costs – Outsourcing converts fixed costs to variable costs, and allows you to
use the capital for business investments;
2) Efficiency – maintaining all the processes inside the business tends to result in higher
expenses, which eventually are passed over to the customer;
3) Reduce Labor Costs – Hiring and training staff for short-term projects can be
very expensive, Outsourcing lets you focus your human resources where you need them
most.
4) Shift the focus to your business – given that every business-manager has plenty of issues
to deal with, outsourcing helps him to set priorities towards issues that actually increase
sales.
5) Reduce Risk – Every Business has risks (market conditions, competition, regulations,
technologies etc.). Outsourcing providers helps you reduce risk as they have the ‘KNOW
HOW’.
While preparing a business plan it is recommended to take these points into consideration and decide which services will be kept in-house and which will be outsourced.

The importance of updating your business plan

/0 Comments/in /by

The importance of updating your business plan

 “The most expensive lesson is the one you have to learn a second time…”
The business year is over? Updating your business plan? That’s exactly the time to sit back and review the year thoroughly – What worked? What didn’t? How can we improve and become more cost-effective? In order to make these analyses you’ll need to define each year the parameters which will be tracked on a daily/monthly basis (besides Revenue, Expenses, Inventory changes etc.). Remember: tracking the figures constantly gives you a quality tool which will help get your business forward.

Your business plan breakeven point

/0 Comments/in /by

Your business plan breakeven point

 
The BEP calculated in the business plan writing process, determine the point which total costs and total revenue are equal.
  Here are 3 ways to increase your return on investment by lowering your break-even point:
 1. Raising prices – thus, the gross margin percentage will be better and the BEP will be lower;
2. Outsource some of the fix costs – reduce your fix costs by outsource some of the less essential costs;
3. Sale of complementary products / services – By selling products / services in attractive price, the average profitability per costumer
will raise and low number of costumer will be needed to break even.    

Business plan for family businesess

/0 Comments/in /by

Business plan for family businesess

The standards for family business success aren’t only focusing on Achieving business goals but also on keeping the desirable family status. This ‘mission’ is a strategic challenge for them. As family problem may hold back business intentions, wrong move of the business may harm also the family relations. So while writing the business plan, be aware of those

unique strengths and weaknesses and act accordingly. Here are several highlights:

 

 

Strengths Weaknesses
loyalty high expectations from each other
coherence influence on family relations
family values strong exposed to criticism
commitment commitment to employ family members
the ability to influence resistance to change
flexibility complex relationship and thus, complex decisions
respect delegating problems

 

 

 

Business plan for the retail industry

/0 Comments/in /by

It is very important to maintain flexibility of thought, not to lose Critical vision and ability to judge

Business plan for the retail industry

Business plan for the retail industry
Starting a “seasonal affected business”? If you’re in the retail business – that’s probably the case
Note that you’ll probably at some point need to find working capital to fund seasonal inventory changes between high sales and low sales months
How do you get Working Capital? Here are Some options
Equity – If the business has just started to run and not yet profitable, you’ll have to rely on equity funds. These funds can be derived from your own resources / family members or from a private investor
Factoring – a financial transaction whereby a business sells its “accounts receivable” to a third party (called a factor) at a discount. In “advance” factoring, the factor provides financing to the seller of the accounts in the form of a cash “advance,” often 70-85% of the purchase price of the accounts.
Short Term Loan – a loan for less than a year. In this case, good relationship with your banker is a necessity
Trade Creditors – Good relations with your trade creditors (and a history of on time payments from your behalf) might help you solicit them in extending terms to enable you to meet a big order
Line of Credit – Only if your business is well capitalized you might qualify for short-term line of credit from the bank
A business plan before starting a business will help you predict the extent of the needed working capital

What is the conversion rate in your business plan

/0 Comments/in /by

An app is worth a thousand words or a few million dollars in a better case

The last few months have felt as if the dot com bubble which occurred in 1999 is returning with full force
Everyone today wants to be a millionaire and it seems like more and more entrepreneurs are achieving their dream. We read in the financial papers almost daily now, how this young bright mind is going to be netting a few dozen million dollars by making an exit of his cyber-security startup. However, one should also keep in mind that high growth startups and entrepreneurships have a very slim chance of surviving
According to research held by Berkley & Stanford faculty members in 2011, more than 90% of high-tech companies fail. Of those which fail, 74% fail because of premature scaling. Premature scaling happens when a company shows inconsistency in some of its business aspects, meaning for example, it invests heavily or unnecessarily before seeing any customers or revenue
Another example of premature scaling would be a company which releases a bugged or non-working product. Furthermore, the researchers also found that a solo founder takes longer to reach the scale stage and that balanced teams of founders (where one is technically-driven, and the other business-driven) tend to raise 30% more money, have 2.9x user growth and are less likely to scale prematurely than one-sided teams (where both founders are either technically-driven or business-driven)
This is to say that if you’re looking for a co-founder for your startup it is best that you not have the same background A good example of preparing for a real view of the company’s potential future is writing a business plan Our customers in the high-tech sector which require our assistance in writing business plans to potential investors (or even for internal needs, as objective and realistic financial projections) have to have basic knowledge of revenue-creating channels across the web
It seems that the most prevalent way nowadays is to either advertise via Google dwords or through Facebook Ads. When promoting your company’s web page, official Facebook page, or even a simple landing web page for an app/service or product you are offering, you need to keep in mind who are your potential clients and by what strategy you wish to advertise (but also make sure you have a great SEO team enhancing your site’s mobile visibility and compatibility with Google’s algorithms)
There are several advertising abbreviations and terms that every newbie in the online media must and should know
Unique Visitors (or simply Uniques) – A visitor who has never visited your site before. Each visitor is counted once, regardless of how many visits he makes (hence, Unique)
CPC (cost-per-click) – A financial number which suggests how much it costs in average to put an ad for one click by a visitor (this number can range between 0.01$ and a few dozen dollars, depends on what you’re promoting and your market audience). In general the average CPC rates have been diminishing since 2011. During the previous quarter, Average CPC rates have fallen by another 6% for an 11th consecutive time. Average CPC is comprised of various segments such as Mobile and Desktop or Geographical location (CPC in mature markets is rising, while in developing markets it’s falling) so the number itself (which is close to $1) is not that significant. The fact that there is an ongoing trend in the CPC rates should be recognized and familiar by aspiring promoters
CPM (cost-per-mille) – A financial number which suggests how much it costs to have 1,000 “eyeballs” (views) to your ad. Normally you would use this term when you try to get your ads to as many people as possible (to enhance brand awareness and not necessarily to get more clicks)
CTR (click-through-rate) – to know this statistics you divide the amount of people who clicked on your ad by the total amount of people who viewed it. You can use this statistic to learn about the effectiveness of your ad and the relevance and efficiency of it to your market audience
Conversion Rate – when you divide the amount of people that interacted with your site (customers, people who signed up for your service or purchased a product) by the amount of people who clicked –  the conversion rate for your ads emerges. A good conversion rate is considered somewhere between the range of 1%-4%, but it really depends on the product you’re selling (if you’re promoting luxury apartments in Manhattan, you’re probably going to get a much lower conversion rate, and it goes the other way around). This number can only be viewed once you start your marketing campaign, so along with CTR you can gauge the quality of your ads using these rates. Even though you will usually end up just paying some professional to promote your site, you should always become familiar with these terms as they can become critical to your marketing campaign success or failure

How to make profit off an application

/0 Comments/in /by

How to make profit off an application

Most entrepreneurs and application developers who turn to us for a business plan are rushed to present the market with their product before is has a set business model.
They have great enthusiasm and a strong will to enter the market with an innovative application that they have developed, and wish to examine exactly how the market reacts to it and continue developing it accordingly. This decision, taken by entrepreneurs and developers, is well described in a study that was conducted by Google, which found that out of 2,000-3,000 application developers in Israel, approximately 62% are professional developers, 38% have an entrepreneur background, 30% are from the business development field, 25% are from the marketing field, 12% are from the sales field, 7% are from the creative field and 12% are from various other fields. The study shows that there is a relatively small number of entrepreneurs that have a background in business, marketing and sales, this might be the reason why many of them disregard the importance of a set business model and rush to present the market with their application. Creating a business model, as part of a business plan, is the first and basic step after determining the idea of the venture and determining the strategic model. Unfortunately, skipping and disregarding this step, believing that a business model will simply “appear” in time, is a common mistake.
What is the optimal business model for an application?
When creating an optimal business model for an application, as part of preparing a professional business plan, you must be familiar with the various relevant statistics and study the parameters involved which could possibly affect the application user when deciding upon whether or not to purchase the offered service. We have summarized the following crucial information regarding the three most popular business models:
Approximately 44% of the applications that have been downloaded over half a million of times, base their income on advertisements – this is a business model that depends on income from advertisements, as its main income source. In addition, statistics show that approximately 50% of banner clicking in applications by users is a result of error. Our recommendation is that during the writing process of the desired business plan, it is best to avoid creating a business model that is based on advertisements alone. The best option would be to combine this source of income with additional sources, such as creating a business model that includes purchases of memberships/transaction fees between both sides or promoting a business in search results, if the application serves as a business/purchase platform and promotes a business and/or various professionals, etc. The goal is to operate an advertising model alongside the additional, mentioned models (or one of them). This way, its relative part of the total income will be smaller.
Approximately 33% of the applications that have been downloaded over a half a million of times, operate under a Fremium model, which is a model that combines Free+ and Premium. This business model’s idea is to allow the user the opportunity to experience the application for no charge. During the users’ experience with the application, parts of its significant features will be unavailable to them. We recommend not requiring payment too soon, during the development process of the application in order to prevent potential users of being discouraged by it and objecting to it, but rather require a purchase at an appropriate time when the users understand why exactly they are being asked to pay and will choose to do so. For example, if it is a game application in which the user is required to buy “special powers” or pay for a game that is not limited in its levels, we recommend to allow the user to experience several free “open” games without any limitations and enjoy the advantages of those “special powers” or begin playing exciting levels that will be offered later on. Using “special powers” and experiencing advanced levels in a game will cause the users to purchase and continue playing, lowering their natural resistance to the payment issue, because they had the option to choose whether or not to pay after being exposed to the application’s special features.
Approximately 10% of applications that have been downloaded less than half a million of times are membership based and are dependent on temporary membership sales (monthly, six month, yearly membership etc) or memberships that are limited on the number of contents/games/services etc that they offer. We recommend that membership based applications usually require a sign up process. The number of users that quit a sign up process is high, between 50%-70%, in most applications! Try to require a minimum number of identification details, this will significantly decrease the number of users who quit the process during the process of signing up to your application (to approximately 15%). A requirement for a Facebook sign up (“Facebook Connect”), will probably cause a high quitting rate, such as a requirement for a date of birth a, address or picture upload. Obviously, the more information you have regarding your users will help you in the future, but we wish to emphasize that a great deal of details regarding only a small number of users will not assist you much, while partial information regarding a large number of users will most likely assist you more in the future.
An additional model
There are additional business models other than the three mentioned above, such as: Micropayment – a purchase of virtual goods within an application, purchase of an application download, selling actual products, etc. During the writing process of the business plan, make sure to form an appropriate business model that will suit your service’s characteristics. A relevant business model for the service will be more successful than a general, unspecific one.
* The data was taken from a TheMarker article and is based on studies conducted by Google Israel.

A Step Before Searching for Funding Solutions and Writing a Business Plan

/0 Comments/in /by
A Step Before Searching for Funding Solutions and Writing a Business Plan

A Step Before Searching for Funding Solutions and Writing a Business Plan

Important things to know before searching for funding solutions for your business and writing a business plan.

Newsletter guest: The Israeli Center of Finance.

The Israeli Center of Finance is an organization that assists businesses and individuals in finding potential fund sources and in addition, assists in the capital raising process.

 Loans for Businesses:

Throughout the years in which they operate in, many businesses are required to raise funds by taking loans due to various reasons, such as establishing a new business or expanding an existing one, or in times of financial difficulties when there is a decline in cash flow. In Israel, there are three main options in which a business can receive a loan – bank loans, private loans (non-bank) and government funds. Each option has its advantages and disadvantages. However, there is no doubt that the best option would be funds that are given by the government, since their sole purpose is to assist business owners without any additional return. The best kind of fund aimed to assist small and medium size businesses, is the state guaranteed loan fund.

Private Loans for Businesses (Non-Bank):

In private (non-bank) loans, the terms and conditions are more flexible than in a regular loan from a bank, including in higher risk loans. Amongst the private loan providers there are credit companies, factoring companies, insurance companies and private funds and the process of receiving the loan from one of them is considerably shorter than the process of receiving it  from a bank, this type of loan does not affect the banks’ credit limit. However, it is important to understand that a loan from a private provider usually involves higher interest rates and faster payment programs.

Bank Loans for Businesses:

This type of loan is currently most popular in Israel. However, this option isn’t most feasible for businesses, since the banks’ loan conditions are extremely strict, which make the process much more difficult and in many cases the bank will refuse to grant a loan to a new business or entrepreneur, since they are perceived as high risk clients. In addition, banks demand complete guarantees for the entire amount of the loan and in many cases the interest rates are extremely high as well.

Government Funds for Business Loans:

The government owns funds which are aimed specifically to help fund small businesses and thus encourage economy growth. As mentioned, one of the most recommended options for small and medium size businesses is a loan provided and guaranteed by the state, which offers relatively convenient terms and conditions such as long term payment programs, a small personal guarantee and low interest rates which are usually thirty percent of the entire sum. However, it is important to advise a professional in order to apply correctly for a loan and include a business plan, a correct application is at times key for its confirmation.

It is important to remember that a professional business plan is almost always a basic condition in receiving funding of any kind.

 

About the Israeli Center of Finance:

The Israeli Center of Finance, Grant and Investment, provides advanced advisory services for companies and organizations while focusing on capital raising processes from government sources, bi national funds, public bids, encouragement grants, venture capital funds and private investors.

Writing a Business Plan for a Franchise – part 2

/0 Comments/in /by

Writing a Business Plan for a Franchise – part 2

( Writing a Business Plan for a Franchise (part 2

The advantages of a franchise:

 

  • Data exchange within the company chain – data exchange amongst the different branches provides all branches with a competitive advantage over business opponents that are individual and not part of a chain. An important point to mention, is that the more thorough the research is, the more difficult it will be to transfer the data amongst the different branches, since in most cases, the research is fitted specifically to the local market in which it operates in. Therefore, the concluded local data is less relevant to other branches and vise versa.
  • An efficient work method in heterogenic markets – company chains handle production, distribution and marketing. The geographic distance exposes the company to various, local market conditions which require an adaptation to the maximized performances, which vary from one branch to the other. Since there is no one standard operating procedure that can maximize all performances in heterogenic markets, a franchise is a suitable and efficient solution.
  • A solution for difficulties in monitoring and supervising – A franchise offers an effective solution for big companies that are dispersed over a large geographic range, this makes the monitoring process much harder since they are located a distance away from each other and from the company headquarters. A lack of monitoring might increase employee absences and directly effect business profits.
  • The maintenance is operated by the franchisee – The franchisor dismisses itself of all responsibilities that have to do with maintenance and upkeep of the different branches.
  • Utilization – Franchisees are characterized by a high motivation and a great will to succeed, due to a personal interest that’s involved in the business.

 

The disadvantages of a franchise:

  • A limited control structure – The more the Pure Control method is used, the harder it gets to supervise.
  • A franchisee using the Research Method – The research method characterizes franchisees and exposes them to great risk, since it is considered to be innovative, experimental and sometimes precedent.
  • Lack of experience – In many cases, the franchisee lacks management experience.
  • An attempt to harm the brand name – The franchisee purchases a branch from the franchisor. The brand has its name and reputation which were established over the years. A risk might rise in a Pure Control Structure, since this structure strengthens and empowers the franchisee, giving it complete control over the branch. In such case, wrong decision making or an inadequate management performance, might harm the brand name.
  • I will conclude with a few main emphasized points that were brought up in different researches that show a correlation between the different franchise structures and the success/failure rate of businesses: The total amount of cash invested in the franchise system by the franchisee, increases the trust of the franchisor in him, and increases the involvement and dedication of the franchisee in the branch, due of the capital that was invested in it. As a result: New franchise systems that require a personal, high capital investment have less risk of failure.
  • Experienced franchisees are most likely to have good management abilities and sometimes have a great deal of knowledge regarding the local market. As a result: Franchise systems that are run by experienced franchisees have less risk of failure.
  • When the geographic distance between the franchisor and the franchisee is greater, there is a bigger chance that the franchisee may deviate from the pre-signed agreement and might create a difficulty to the monitoring process of the manager. As a result: Franchise systems which are relatively close geographically to each other have less risk of failing.

Writing a Business Plan for a Franchise – part 1

/0 Comments/in /by

Writing a Business Plan for a Franchise – part 1

Writing a Business Plan for a Franchise (part 1)

The Wonders of a Franchise:

A franchise is a trading method in which a certain chain or brand, meaning the granter of the franchise, allows a company or an individual to purchase and use its brand name, its ideas, plans and its established reputation in order to sell products and services to the public.

In many cases, the franchising agreement includes assistance of the company in establishing a new branch, staff training and additional assistance and even after the branch is up and running, the company granting the franchise, which is also known as the franchisor, stays involved and supervises over the management and maintenance of the branch.

In addition to the investment costs which are involved in establishing a new branch which are take into consideration during the business plan writing process, the company or individual that purchase the franchise are also committed to pay a franchise fee of USD50,000 and more, monthly royalties that amount to between 4%-6% of the monthly revenues. The local franchisee will sometimes have to also co-pay between 1%-3%, in local advertisements.

In many cases, the franchisee will be committed to operate its branch in accordance to the franchisor’s rules and regulations and business plan, which creates in a mutual dependency between the two. This dependency must be considered by the entrepreneurs who wish to own and operate a franchise. In certain cases, the franchisee will be allowed to operate the branch as he pleases without a commitment to the company’s rules and regulations. In such cases, the dependency between the franchisor and the franchisee is reduced and he can operate more freely in his business.

 

The contribution of a franchise, to both sides involved, varies: For the companies that grant a franchise, this method is part of a business strategy as part of the business plan aiming to expand the company brand. This is stated very clearly while writing a business plan. Such business plan will display a business scheme which is based, amongst other things, on royalties paid by the franchisee. For individual entrepreneurs, the franchise method is the fastest way to ensure them an ownership of a business of high standards and minimum errors.

There are two different kinds of franchises: A partial franchise or a complete franchise.

A Partial Franchise: Enables its owner to use the brand’s trademark, without complying with  its maintenance and management rules and regulations.

A Complete Franchise: Enables its owner to use the brand’s trademark but also includes a commitment to complying with its maintenance and management rules and regulations.

Both types of franchises can be implemented in a local, multiple branch franchise, or in a single branch franchise. A local franchise refers to the option of purchasing and operating the brand throughout a certain geographical range and selling the individual branches in this range.

What are the reasons that might cause a company to grant a franchise?

The will to expand – A company that wishes to expand its business might choose to use the franchising method. The high investment costs that are involved in establishing an individual branch, are many times considered to be an obstacle for a company, and prevents a quick expand of business. When these costs are imposed upon the franchisee instead, the franchisor easily overcomes this obstacle.

 

Monitoring remote managers – The process of supervising all management techniques of the various managers located further away from the company’s headquarters, is difficult. Without proper supervision, the company might find itself investing in acts that do not match local branch performances. Granting a franchise can help overcome this difficulty. The franchisee operates his branch in order to increase revenues, due to the big investment that was made by him. This is obviously a great consideration to the franchisee. In addition, the success of the business will directly effect the franchisee’s cash inflow, which is not an issue for a standard branch manager who is a paid employee.

When a company decides to grant a franchise or not, it must select a structure of control. There are two types of such structures in a the franchise method which are different from each other in the source of investment, this is a critical issue in the process of a building a business plan:

Pure control: The franchisee is the sole investor, the franchisor receives a certain amount of its profits.

A partnership-based franchise: A partnership between the franchisor and the franchisee. The company is involved in the investment as well as in the profits.

Each structure of control is characterized by different business and organizational conduct. Let us distinguish between the two:

Utilization – improvement of existing routines: Experience based re-organization. Companies learn from the experience of their present resources and use the gathered information for future improvement. This learning method usually characterizes a structure of control that is not a franchise, but an actual ownership. When a branch is owned by a company and not by a franchisee, the operator of the branch has less motivation to research and develop new, more successful methods since he is a paid employee and doesn’t directly benefit from an increase in inflow, therefore, the company’s profits in the long run, are less relevant to him. In such case, renovation is usually rare.

Research – development of new routines: This allows the company to adapt to versatile markets. This learning method characterizes the pure control method. When one is in complete control of a branch, it is certain that the present and future success of the business is his number one priority since the more successful the business is- the greater the profits will be. The Research method is popular amongst coffee shop franchises. In some branches of a coffee shops chain, the menus vary and are creative, in order to meet the local customers’ preferences and tastes. Different menus might also include a certain gimmick or added value which match the branch’s design, service and are fitted to the branch’s design, atmosphere and clients.

So which option is better?

Neither one of the options is better when used separately. A company that implements only the utilization method, will not be innovative enough and sometimes even be considered old fashioned and ultimately find itself behind on business. At the same time, an organization that implements only the research method might fail to view the changes that have been taking place around it and ultimately find itself operating a routine that is not optimal business wise. Therefore, a combination of the two options should be implemented.