As a business owner, you don’t want the first time you think about disaster recovery to be during an actual disaster. After a fire, flood or data loss, being prepared will hopefully decrease the damage done by the event, and get your business back on track sooner.
One of the best things you can do to prepare yourself is develop a disaster recovery or business continuity plan.
“Small businesses are vulnerable to failure when they’re impacted by significant events,” said Ken Katz, property-risk-control director at Travelers. “You’ll need to recover in a timely fashion, because your fixed costs continue even when you can’t open your doors.”
Factors to consider
If you don’t plan for a disaster before it happens, you’ll have to do it on the fly and make decisions when you’re stressed, Katz said. But what should actually go into your plan?
John Wise, CEO of Investcloud, a provider of cloud-based financial software and apps, said that disaster plans should assess and create plans for different scenarios both short and long term.
“They should detail key leaders and decision makers, backups and alternative forms of communication if cell towers go down or there is no power,” Wise said. “It’s ideal to have two alternate data centers — one close to access in person, and one far in the event of a larger-scale disaster.”
Thomas Phelps, CIO and VP of corporate strategy at enterprise content management company Laserfiche, said business owners make a few key mistakes over and over in their emergency-preparedness plans:
Not accounting for loss of critical people nor planning for the stress and trauma of staff
Not making the emergency plan accessible at the office, or making plans that are too generic, too detailed or stale
Failing to address communication choke points and having PR issues related to recovery
No alternative emergency operations center (EOC) or recovery sites, or having physical access issues with alternate site
Believing that outside assistance and insurance will take care of everything
Before you finalize your plan, be sure to address these areas, Phelps said.
Creating a continuity plan
Katz recommended the following steps to develop a formal continuity plan for your business:
Assess your risks. Know the threats that could damage your business, and determine how they might affect you.
Prioritize business functions. Decide the order in which certain business operations will be restored in the event of an interruption.
Develop prevention and mitigation strategies. Come up with strategies around the most important functions to prevent and mitigate the types of disasters you may encounter.
When your plan is developed, have your team walk through the steps of your disaster recovery plan to test it out. Ensure that employees know what to do, identify areas that need improvement, and routinely check plans and make updates as needed to account for staff change and lessons learned, Wise said.
“Your employees are critical to your company’s success, so it’s important to realize this and show that same consideration to ensure their safety,” he added.
While this may seem like a lot of things to keep track of, these events do happen, said Katz, and it’s best to be ready for the worst.
“It’s not often, but given enough time, something will occur,” Katz said. “It’s not a do-over activity — you only get one chance to do it right. The more you can think through what [a disaster] will look like for your business, employees and community, the more you can help your growth down the road.”
Approximately 700,000 to 800,000 small to mid-size businesses change hands each year. And, I can guarantee that in every case, the seller, and buyer for that matter, invested a good amount time, money and emotion throughout the undertaking.
For the seller especially, the process of selling a business can be an emotional undertaking. You’ve put your sweat equity into the business. You’ve sacrificed over the years — missing family time, skipping paychecks and working at all hours of the day and night. Your business is your baby.
However, when it comes time to plan and execute an exit strategy, you have to strip away a lot of the emotion. It is important to be as realistic as possible about what your business is worth. If the exit strategy is not done correctly, your business can suffer damage.
A few of the most common factors for a business not selling:
- Lack of preparation of business for sale
- Unrealistic selling price
Having a trusted, third party business valuation conducted is one way to begin the process. With the data from the business valuation, you can plan for the procedures needed to raise the value of the business so that you can maximize the return on your years of investment in the business.
The following list offers 5 tips to “put a shine” on your business when it comes time to sell. These have proven to add up to 20 or 30 percent more value to businesses.
Timing is everything
The best time to sell is when you are on top, when the company is doing well, the industry is flourishing, and next year looks even better. Additionally, cyclical factors are important. For example, in retail most revenue is earned in 4th quarter. Thus, it is recommended that you aim to sell your business in the 1st quarter of the following year to show good revenue and the inventory is at lowest point.
Getting a proper business valuation done to set the selling price
Most business owners are not aware of how businesses are valued. And, in many cases, sellers assume value based on emotion or rules of thumb. They overvalue based on how much time and work they put in, and how much it means to them. Generally they think the value is higher than the true market value. Thus, they need for a professional to give advice.
The first step before business valuation is to determine how much money the new owner will have to make … reason being, generally businesses sell for a multiple of what they earn or Sellers Discretionary Earnings.
Another formula is a Percent of Revenue. Hard assets are not a driving force in business valuation. Some assets add or subtract from value such as Accounts Receivable, Inventory and Work in Process. Comparable sales data is often used to determine market multiples.
Organize the books and records
When preparing your business to be sold, re-cast the financial statements, or normalize them.
Most small businesses operate their companies in a manner to minimize taxes. However, when selling, they need to know the true economic value of the business. Analyzing financials and eliminating all non-operating expenses and discretionary expenses do this.
De-emphasize the owner’s personal role in the business
When selling a business, you want to be certain that the buyer knows he’s acquiring talented leadership that can continue to run the business after the purchase. The original owner should not be positioned as the only decision maker. Rather, others should be involved in customer contact, and vendor contact. A “right hand man” is needed — male or female managers who are part of an infrastructure that reduces the dependence on ownership.
Understand the mindset of buyers today
Seventy percent of all buyers are first time buyers, often displaced corporate employees who will be owner/operators replacing a job and looking for financial independence. What matters most to buyers today? Here’s a list of what buyers are looking for in businesses for sale:
- Buyers look for ways to enhance the business, is there an “upside.” They generally think that they can do better than the previous owner
- Proven verifiable books and records, tax returns
- Reasonable price
- Leverage and terms — they want to use bank financing, owner financing and as little of their own money as possible
- Solid, verifiable cash flow
- Furniture fixtures and equipment properly valued and in good condition
- Positive appearance of facility, good reputation
- Favorable lease and lease options
- Training, transition period with the seller
- Covenant not to compete, non solicitation agreement
- Solid reason why the owner wants to sell
- Experienced employees who will stay on
- No last minute surprises
For women who feel outnumbered by the men on their teams, transparent communication can help break down gendered perceptions and open the door to leadership opportunities within the group, finds new research.
A study recently published in The Leadership Quarterly journal discovered that in work groups that are composed primarily of men, women tend to take on more leadership roles as the group becomes more social.
For the study, researchers assigned nearly 1,000 participants of varying ages to small groups and had them rate which group members emerged as leaders after performing a series of tasks. They replicated the experiment with both short- and long-term groups to verify the results.
The study’s authors found that the more extroverted the teams were in terms of talking to each other and asking for help with their projects, the more likely it was for women to be seen as leaders.
The study’s authors believe the open collaboration allows group members to get to know each other better and see each other’s strengths and weaknesses. This in turn helps eliminate the preconceived gender stereotypes that are typically found in the workplace, said Jim Lemoine, the study’s lead author and an assistant professor at the University of Buffalo.
“When we first meet people, we tend to categorize them subconsciously based on snap judgments and observations,” Lemoine said in a statement. “But the more we get to know people, the less those preconceived ideas matter.”
Lemoine also noted that when work teams value communication and increase their interactions with one another, women may have a leadership advantage, since groups choose leaders based on who best exemplifies their shared values.
The study’s results have important implications for businesses looking to develop more women leaders. Lemoine said instead of having teams that are isolated and driven by goals, businesses wanting more women to take charge need to develop a culture where they are more opportunities for employees to get to know each other and collaborate on projects.
“When teams foster a culture of open communication and teamwork, it allows new leaders to step forward and diverse perspectives to be heard,” he said.
The study was co-authored by Ishani Aggarwal, assistant professor in the Brazilian School of Public and Business Administration in Rio de Janeiro, and Laurens Bujold Steed, a doctoral candidate at the Georgia Institute of Technology.
Not only are women approved for small business financing at a lower rate than men, female entrepreneurs also typically receive smaller loan amounts and worse loan terms than their male peers, new research funds.
The study from the online funding marketplace Fundera revealed that overall 32 percent of women are approved for small business loans, compared with 35 percent of men.
“While it is lamentable that approval rates for women-owned businesses are lower than for male counterparts, even if only slightly, the more alarming statistic concerns the type of financing for which women business owners are more likely to be approved,” the study’s authors wrote.
The research found that women were more likely than men to take short–term loans, which are the most expensive. Specifically, 30 percent of women, compared with just 23 percent of men, take short-term loans. [See Related Story: Best Alternative Small Business Loans 2016]
“They are structured similarly, but short-term loans have higher rates and lower eligibility standards,” the study’s authors wrote.
In addition, women are half as likely as men to be approved for loans from the Small Business Administration. The researchers said the federally backed SBA loans are almost always the most affordable type of business financing available, with average percentage rates between 6 and 10 percent. Short-term loans typically carry APRs of between 14 and 50 percent.
Women also receive smaller loan amounts than men. When broken down by different types of loans, the average amounts received by men and women are:
SBA loan ― Men: $156,279; Women $59,857
Medium-term loan ― Men: $107,305; Women $88,189
Short-term loan ― Men: $43,850; Women: $28,546
Line of credit ― Men: $25,483; Women: $16,561
Invoice financing ― Men: $9,561; Women: $6,796
Personal loan ― $13,357; Women: $10,000
“It is clear that women entrepreneurs get offered smaller loans across every product, from the same groups of online lenders, with no exception,” the study’s authors wrote. “Whatever the cause, this demonstrates a sizable disadvantage women face in growing their businesses with debt financing.”
While the researchers say causes of these gender gaps are difficult to pinpoint, they believe credit scores and annual revenue play some role. The study shows that men have average credit scores of 645, compared with 629 scores for women.
“Credit score is one of the most important factors, if not the single most important factor, in determining a business owner’s financing eligibility,” the study’s authors wrote.
Additionally, the research found that on average, female business owner loan applicants make 30 percent less revenue than male business owner applicants. The study discovered that about 60 percent of female entrepreneurs who applied for a loan through Fundera reported less than $250,000 in annual revenue, with less than half of male entrepreneurs reporting the same.
The researchers believe that the root of this problem might start with the gender wage gap.
“Although we cannot prove cause and effect here, it is no far stretch to connect the gender wage gap with lower credit scores, which leads to less business financing—and stunted growth in the form of lower revenue,” the study’s authors wrote.
The research was based on small business loan applications with Fundera. The data, from between February 2014 and June 2016, was comprised of more than 8,400 small business loan applicants, which included around 6,200 men and 2,200 women.
Corporate social responsibility (CSR) refers to business practices involving initiatives that benefit society. A business’s CSR can encompass a wide variety of tactics, from giving away a portion of a company’s proceeds to charity, to implementing “greener” business operations.
There are a few broad categories of social responsibility that many of today’s businesses are practicing:
1. Environmental efforts: One primary focus of corporate social responsibility is the environment. Businesses regardless of size have a large carbon footprint. Any steps they can take to reduce those footprints are considered both good for the company and society as a whole.
2. Philanthropy: Businesses also practice social responsibility by donating to national and local charities. Businesses have a lot of resources that can benefit charities and local community programs.
3. Ethical labor practices: By treating employees fairly and ethically, companies can also demonstrate their corporate social responsibility. This is especially true of businesses that operate in international locations with labor laws that differ from those in the United States.
4. Volunteering: Attending volunteer events says a lot about a company’s sincerity. By doing good deeds without expecting anything in return, companies are able to express their concern for specific issues and support for certain organizations.
Why CSR matters
Liz Maw, CEO of nonprofit organization Net Impact, noted that CSR is becoming more mainstream as forward-thinking companies embed sustainability into the core of their business operations to create shared value for business and society.
“Sustainability isn’t just important for people and the planet, but also is vital for business success,” said Maw, whose company connects students and professionals who want to use business skills to do social good. “Communities are grappling with problems that are global in scope and structurally multifaceted — Ebola, persistent poverty, climate change. The business case for engaging in corporate social responsibility is clear and unmistakable.”
“More practically, [CSR] often represents the policies, practices and initiatives a company commits to in order to govern themselves with honesty and transparency and have a positive impact on social and environmental wellbeing,” added Susan Hunt Stevens, founder and CEO of employee engagement platform WeSpire.
As consumers’ awareness about global social issues continues to grow, so does the importance these customers place on CSR when choosing where to shop. But consumers aren’t the only ones who are drawn to businesses that give back. Susan Cooney, founder of crowdfunding philanthropy platform Givelocity, said that a company’s CSR strategy is a big factor in where today’s top talent chooses to work.
“The next generation of employees is seeking out employers that are focused on the triple bottom line: people, planet and revenue,” Cooney told Business News Daily. “Coming out of the recession, corporate revenue has been getting stronger. Companies are encouraged to put that increased profit into programs that give back.”
Examples of corporate social responsibility
While many companies now practice some form of social responsibility, some are making it a core of their operations. Ben and Jerry’s, for instance, uses only fair trade ingredients and has developed a sustainability program for dairy farms in its home state of Vermont. Starbucks has created its C.A.F.E. Practices guidelines, which are designed to ensure the company sources sustainably grown and processed coffee by evaluating the economic, social and environmental aspects of coffee production. Tom’s Shoes, another notable example of a company with CSR at its core, donates one pair of shoes to a child in need for every pair a customer purchases.
However, Stevens said companies need to really understand what their core social purpose is and how that aligns with their stated mission, to create a cohesive CSR strategy.
For example, Stevens said that Kashi, a Kellogg’s brand, wants to increase organic farming and is one of the few certified organic cereals. Since only 1 percent of U.S. farmland is actually organic, the breakfast brand worked with Quality Insurance International to help certify new organic farmers across the nation.
Practicing what you preach
Undertaking socially responsible initiatives is truly a win-win situation. Not only will your company appeal to socially conscious consumers and employees, but you’ll also make a real difference in the world. Keep in mind that in CSR, transparency and honesty about what you’re doing are paramount to earning the public’s trust, Givelocity’s Cooney said.
“If decisions [about social responsibility] are made behind closed doors, people will wonder if there are strings attached, and if the donations are really going where they say,” Cooney said. “Engage your employees [and consumers] in giving back. Let them feel like they have a voice.”
Stevens, of WeSpire, reminded business owners that the corporate world has more power than many realize, and using that power to improve the world can bring people of all backgrounds, ages and interests together.
“Given their power and sheer size, corporations can solve big social problems and have a huge impact,” she said.
An idea commonly heard in the entrepreneurial community is that stronger government regulations mean less profitability. However, new research from the University of Kansas (KU) suggests that more-stringent regulations, when coupled with a light-touch enforcement approach, often lead to more profitability for private companies in the long run.
Dietrich Earnhart, a KU professor of economics, and Dylan Rassier, a KU alumnus and an economist with the U.S. Bureau of Economic Analysis, studied the effects of the U.S. Clean Water Act and its implementation by the U.S. Environmental Protection Agency (EPA). The study provides support for “the Porter hypothesis,” formulated by economist Michael Porter in 1995, which states that strict environmental regulations could lead to innovation and improved efficiency that would ultimately improve a company’s ability to compete.
The study rests on the idea of “effective regulatory stringency,” which the authors separate into two parts: legal requirements and government attempts to enforce compliance. The researchers examined government inspection data from the EPA’s Permit Compliance System database and used U.S. Securities and Exchange Commission filings to determine profitability for publicly traded firms. Comparing the two sets of data, Earnhart and Rassier found that when regulations are strict but enforcement actions are infrequent, companies are more likely to innovate and, thereby, increase their future profitability.
“If an environmental agency pushes hard on a pollution limit, but does not monitor the limit too stringently, the agency creates a space in which companies can be creative and discover ways in which they can either market their environmental protection efforts to customers and secure a bigger market share or find less costly ways of manufacturing their products or dealing with waste,” Earnhart, the lead author, said in a statement. “The regulations put a different pair of glasses on companies. By looking through a new lens, companies get creative.”
Specifically, in the case of the Clean Water Act, the researchers found that when wastewater-discharge limits were strict and government inspections were commonplace, profits declined; those results follow the conventional line of thinking, that regulation inevitably stifles economic growth. However, when enforcement actions and inspections were infrequent, companies tended to experience more profitability, a trend that is consistent with the Porter hypothesis.
Earnhart suggested that by working to reduce discharged wastewater, companies more thoroughly examined their operations and created new, more efficient management practices. Moreover, the ability to market themselves as environmentally friendly may have helped them achieve a larger market share, Earnhart said.
“With a new perspective and with new information, these companies could find a way to defy conventional wisdom,” Earnhart said. “Any agencies working on clean-water or clean-air regulations should be concerned about how they induce compliance and what the trade-offs are. If there is a win-win situation, everyone should want to learn about it.”
If you have an online presence, you have a personal brand. Just like a corporate brand, every status update, tweet, blog post and photo you share becomes a part of your cumulative image. Anyone who views your social profiles — be it a colleague, an employer or a potential business partner — can form an opinion about you based on what’s there. That’s why so many of today’s professionals invest time in building and curating an authentic presence that highlights their best qualities.
“Social and mobile technologies continue to reshape how we interact, communicate and glean insights,” said Seeta Hariharan, general manager and group head of TCS Digital Software & Solutions Group. “These same technologies provide an opportunity for you to shape your message and take ownership of how people, customers and businesses perceive you.”
For women in particular, a strong personal brand can open the door to new business and career opportunities. Smart female professionals know that closing the gender gap in the workplace begins with supporting your female colleagues, and putting yourself out there is the best way to make important networking connections with other women in business, said Gabrielle Wood, Ph.D. and adjunct faculty member at Kaplan University.
“As female leaders climb the ladder, they often find themselves among a few women in upper-management positions,” Kaplan said. “Personal branding provides an opportunity for them to gain support by connecting with other female leaders.”
“Women in business, and particularly women in tech, have become incredibly influential allies,” added Lori Wright, chief marketing officer of BlueJeans video communication platform. “Women professionals have more opportunities than ever before, and a strong network can open up opportunities in areas you may never imagine alone.”
Mou Mukherjee, director of marketing at Aruba S.p.A.’s .Cloud top-level domain registrar, noted that women in business can learn a lot from each other. Sharing your own experience through personal branding can help you find mentors and other female professionals who can play a vital role in your life, she said.
“Women can be your biggest advocates because they have overcome challenges themselves,” Mukherjee told Business News Daily. “There are some common issues that women may face in their careers; however, each will take a slightly different path, and I think there’s a lot to be learned in those nuances of female character.”
Whether they’re just starting their careers or looking to advance, here are a few important things for women in business to keep in mind when they’re building their personal brands.
Let others know where you stand
Who you are and what you value are important parts of your personal brand, Kaplan said. She said that you should share your ideas, advice and opinions on professional subjects via social media. This allows readers to get to know your strengths, where you stand and what to expect from you, she said.
“This can pique the interest of others in your talents, leading to invitations to engage in professional activities that match your interests and competencies,” Kaplan said.
Get involved in your community
Whether it’s a digital forum or an in-person networking event, devote some time to causes and conversations that matter to you on a personal and professional level, said Hariharan.
“By strengthening your greater network, you can exchange ideas, find a sounding board and sometimes a support system among those who understand the benefits and challenges and can empathize on multiple levels,” she said.
Involvement can also mean talking to other women in your industry and asking them for professional advice, said Amy Callahan, co-founder and chief client officer of Collective Bias, a platform that connects brands and consumers through influencer-generated social content.
“Business today operates at light speed, so having connections is a huge asset,” Callahan said. “I find people, and women in particular, are happy to share knowledge as long as it’s not proprietary information. So not only does your personal brand benefit your organization, but the relationships your brand allows you to build can become critical when looking for that next opportunity.”
Project confidence and a sense of belonging
Connie DeWitt, senior vice president of product management at financial software company Adaptive Insights, said women in male-dominated work environments often feel like it’s not really “their” culture. This sense of feeling like an outsider can really put a chip in your confidence, but DeWitt emphasized the importance of working past that, and assuring yourself that you do deserve a seat at the table.
“Stop feeling like a fish out of water and just believe it’s your water, too,” DeWitt said. “It’s not just about establishing yourself as a leader and building a strong personal brand, it’s about believing that you belong and have truly earned your stripes. That what gives you the confidence to propel your career forward.”
Believe in what you’re doing
Savvy social media users can spot a disingenuous online presence from a mile away, and if you’re pretending to be interested in something when you’re not, they’ll figure it out. Wright noted that authentic, genuine passion is essential to a credible personal brand.
“You can’t fake passion for long, so make sure you believe in what you are doing, whether that is the company you build, or the company you work for,” Wright said. “You can pick up a lot of skills in a variety of roles, but the only way to ever achieve your personal greatness is to find the role that piques your passion.”
Make your actions count as much as your words
Although your digital profiles are the easiest way for new contacts to learn about you, your personal brand goes beyond what you post online, Mukherjee said. It’s also about what you do in your everyday life.
“When it comes to personal brand, people immediately think about writing articles or having a personal website,” she told Business News Daily. “While all of this can reinforce and amplify who you are, ultimately, your personal brand is a combination of all your real-life interactions. It’s about how you build relationships, how you respond to situations, and the impressions you leave behind.”
Women are natural-born leaders, so it’s no surprise that women have founded so many of today’s most interesting and powerful companies. According to the National Association of Women Business Owners, more than 9.4 million companies are owned by women, employing nearly 7.9 million people, and generating $1.5 trillion in sales as of 2015.
Here are 10 successful businesses that were started by inspiring female entrepreneurs:
1. Bark & Co.
Carly Strife co-founded Bark & Co. with Matt Meeker, Henrik Werdelin, who were brought together by their love of all things pups. The trio launched Bark & Co’s first product, BarkBox, with little thought as to how popular it was going to be, according to the website.
Strife, who serves as the COO, was also the NYC operations manager at Uber, in addition to working for management and consultation firm Deloitte before Bark & Co. According to Forbes, the company has an approximate valuation between $150 million and $200 million.
Rashmi Sinha is the female mastermind behind the popular presentation-sharing platform, SlideShare. Sinha co-founded the company with CTO Jonathan Boutelle in 2006, a year after launching another project called MindCanvas. Before launching SlideShare, Sinha was doing lab work after earning a Ph.D. in cognitive neurospychology, when she realized her passion for web technology and co-founded another company called Uzanto.
SlideShare was acquired by professional social networking giant LinkedIn in May 2013 for a reported $118.75 million and now has more than 16 million registered users.
Birchbox, one of the top monthly box-subscription services, was co-founded by two entrepreneurial women: Katia Beauchamp and Hayley Barna. The duo met at Harvard Business School and created their company in 2010 with the goal of improving the beauty industry and making it more customer-friendly. In 2012, Barna made Forbes’ “30 under 30” list of marketing and advertising influencers.
Initially, Birchbox was a subscription service for women looking to try new beauty product samples, but the company expanded in 2012 with the addition of Birchbox Man. As of 2014, Birchbox had more than 800,000 subscribers and was bringing in approximately $96 million a year in sales.
Sandra Lerner founded what would become technology giant Cisco alongside then-husband Len Bosack, after the pair was unable to email each other from offices in different buildings while working together at Stanford University. Lerner’s desire to connect with her husband led to them designing the multi-protocol router — the platform that launched Cisco in 1984.
While she was eventually ousted from the company in 1990, Lerner reportedly walked away with $170 million from the sale of stock options. She went on to start Urban Decay, a cosmetics company, and today she’s running a certified organic and humane farm in Virginia.
At age 35, Caterina Fake, who had worked as the art director for Salon.com, founded the popular photo-sharing website Flickr in 2002. The site was actually an offshoot of a game Fake was developing with Stewart Butterfield, her husband at the time. While the game quickly went bust, the photo-sharing technology they designed was a hit.
In 2005, Fake and Butterfield sold Flickr to Yahoo for a reported $35 million in cash and stock options. Fake has since co-founded the website Hunch, a site that makes recommendations based on detailed user preferences, and been named to the board of directors of the handmade online marketplace Etsy.
6. Liquid Paper
Liquid Paper was the brainchild of executive secretary Bette Nesmith Graham, who in the 1950s began using white, water-based tempera paint and a thin paintbrush to cover her typing errors. She sold her first bottle, originally called Mistake Out, in 1956. Graham later patented the must-have office product and renamed it Liquid Paper.
After starting with just 100 bottles a month in sales, Liquid Paper was selling 25 million bottles a year when Graham sold it for a reported $47.5 million in 1979. She passed away six months later at age 56.
7. The Body Shop
After trying her hand at running a hotel and a restaurant, Anita Roddick started The Body Shop in 1976 in England to create a livelihood for herself and her two daughters while her husband was traveling the globe. The bath-and-body-product concept caught on, and she opened a second shop within six months. She soon launched The Body Shop’s franchise program, which has opened stores all across the world.
The company went public in 1984 and in 2006, 30 years after its founding, Roddick sold The Body Shop to L’Oréal for a reported $1.4 billion. Today, there are more than 2,500 stores in 61 countries.
8. Ruth’s Chris Steak House
Following a career that included teaching and horse training, Ruth Fertel mortgaged her house in 1965 to buy a little restaurant, Chris Steak House, on the corner of Broad and Ursuline in New Orleans. A fire ravaged the restaurant in 1976, forcing her to open in a new location under a new name, Ruth’s Chris Steak House.
That same year, Fertel agreed to let Tom Moran, a regular customer, open the first Ruth’s Chris franchise location. Today, there are more than 130 company and franchise-owned locations around the globe.
Fertel, who passed away in 2002 at age 75, sold her majority interest in the chain to private equity firm Madison Dearborn in 1999 for an undisclosed amount.
9. Build-A-Bear Workshop
Maxine Clark came up with the idea for Build-A-Bear Workshop after shopping with a 10-year-old who questioned why she couldn’t just make her own stuffed toy when she couldn’t find one she liked. Clark turned the idea into a business when she opened the first Build-A-Bear Workshop in St. Louis in 1997.
There are more than 400 stores worldwide have helped people create more than 100 million furry friends. Clark, who remains the company’s “Chief Executive Bear,” was inducted into the Junior Achievement National Business Hall of Fame in 2006 and named one of the 25 Most Influential People in Retailing by Chain Store Age in 2008.
Classmates studying dermatology together at Stanford University, Katie Rodan and Kathy Fields felt strongly about finding a better treatment for acne because both of them had lived with it at some time in their lives. After starting separate practices, the pair noticed the problems acne posed for people of all ages. The realization led them to start working on a new way to treat facial blemishes.
Over a five-year period, Rodan and Fields developed a comprehensive acne skin care system, Proactiv Solution, which combines acne medicine with soothing botanicals to create an acne-fighting system designed to leave skin smooth, clean and clear. The product, which has found success via 30-minute television infomercials, has become one of the top-selling acne medications in the U.S.
When you have a big business decision to make, one of the smartest things you can do during the planning process is conduct a SWOT analysis.
SWOT, which stands for strengths, weaknesses, opportunities and threats, is an analytical framework that can help your company face its greatest challenges and find its most promising new markets. The method was created in the 1960s by business gurus Edmund P. Learned, C. Roland Christensen, Kenneth Andrews and William D. Book in their book “Business Policy, Text and Cases” (R.D. Irwin, 1969).
In a business context, the SWOT analysis enables organizations to identify both internal and external influences. SWOT’s primary objective is to help organizations develop a full awareness of all the factors involved in a decision, said Bonnie Taylor, chief marketing strategist at CCS Innovations.
“It is impossible to accurately map out a small business’s future without first evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats,” Taylor said. “A SWOT accomplishes this in four straightforward steps that even rookie business owners can understand and embrace.”
When to use SWOT
SWOT analyses are often used during strategic planning. They can serve as a precursor to any sort of company action, such as exploring new initiatives, making decisions about new policies, identifying possible areas for change, or refining and redirecting efforts midplan.
Performing a SWOT analysis is also great way to improve business operations, said Andrew Schrage, founder and CEO of Money Crashers.
“It allowed me to identify the key areas where my organization was performing at a high level, as well as areas that needed work,” Schrage said. “Some small business owners make the mistake of thinking about these sorts of things informally, but by taking the time to put together a formalized SWOT analysis, you can come up with ways to better capitalize on your company’s strengths and improve or eliminate weaknesses.”
While the business owner should certainly be involved in creating a SWOT analysis, it could be much more helpful to include other team members in the process. Shawn Walsh, president and CEO of Paradigm Computer Consulting, said his management team conducts a quarterly SWOT analysis together.
“The collective knowledge removes blind spots that, if left undiscovered, could be detrimental to our business or our relationship with our clients,” Walsh said.
The elements of a SWOT analysis
A SWOT analysis focuses entirely on the four elements included in the acronym, allowing companies to identify the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can help companies more effectively communicate what parts of a plan need to be recognized.
When drafting a SWOT analysis, individuals typically create a table split up into four columns to list each impacting element side-by-side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats, though they should correlate somewhat since they’re tied together in some way. Billy Bauer, managing director of Royce Leather, noted that pairing external threats with internal weaknesses can highlight the most serious issues faced by a company.
“Once you’ve identified your risks, you can then decide whether it is most appropriate to eliminate the internal weakness by assigning company resources to fix the problems, or reduce the external threat by abandoning the threatened area of business and meeting it after strengthening your business,” Bauer said.
The first two letters in the acronym, S (strengths) and W (weaknesses), refer to internal factors, which means the resources and experience readily available to you. Examples of areas typically considered include:
- Financial resources, such as funding, sources of income and investment opportunities
- Physical resources, such as your company’s location, facilities and equipment
- Human resources, such as employees, volunteers and target audiences
- Access to natural resources, trademarks, patents and copyrights
- Current processes, such as employee programs, department hierarchies and software systems
Mitchell Weiss, business professor at the University of Hartford in Connecticut, recommended fully analyzing your strengths and weaknesses first.
“Companies can’t hope to take advantage of or control the external factors until the internals have been objectively assessed,” he said.
External forces influence and affect every company, organization and individual. Whether or not these factors are connected directly or indirectly to an opportunity or threat, it is important to take note of and document each one. External factors typically reference things you or your company do not control, such as:
- Market trends, like new products and technology or shifts in audience needs
- Economic trends, such as local, national and international financial trends
- Funding, such as donations, legislature and other sources
- Demographics, such as a target audience’s age, race, gender and culture
- Relationships with suppliers and partners
- Political, environmental and economic regulations
Once you fill out your SWOT analysis, you will need to come up with some recommendations and strategies based on the results. Linda Pophal, owner and CEO of Strategic Communications consulting firm, said these strategies should be focused on leveraging strengths and opportunities to overcome weaknesses and threats.
“This is actually the area of strategy development where organizations have an opportunity to be most creative and where innovative ideas can emerge, but only if the analysis has been appropriately prepared in the first place,” Pophal said.
SWOT analysis template
Bryan Weaver, a partner at Scholefield Construction Law, was heavily involved in creating a SWOT analysis for his firm. He provided Business News Daily with a sample SWOT analysis template used in the firm’s decision to expand its practice to include dispute mediation services.
·Construction law firm with staff members who are trained in both law and professional engineering/general contracting. Their experience gives a unique advantage.
·Small (three employees) — can change and adapt quickly
·No one has been a mediator before or been through any formal mediation training programs.
·One staff member has been a part of mediations, but not as a neutral party.
·Most commercial construction contracts require mediation. Despite hundreds of mediators in the marketplace, only a few have actual construction experience.
·For smaller disputes, mediators don’t work as a team, only as individuals; Scholefield staff can offer anyone the advantage of a group of neutrals to evaluate a dispute
·Anyone can become a mediator, so other construction law firms could open up their own mediation service as well.
·Most potential clients have a negative impression of mediation, because they feel mediators don’t understand or care to understand the problem, and rush to resolve it.
Resulting strategy: Take mediation courses to eliminate weaknesses and launch Scholefield Mediation, which uses name recognition with the law firm, and highlights that the firm’s construction and construction law experience makes it different.
“Our SWOT analysis forced us to methodically and objectively look at what we had to work with and what the marketplace was offering,” Weaver said. “We then crafted our business plan to emphasize the advantages of our strongest features while exploiting opportunities based on marketplace weaknesses.”
SWOT supplements and alternatives
The SWOT analysis is a simple, albeit comprehensive strategy for identifying not only the weaknesses and threats of a plan, but also the strengths and opportunities it makes possible.
Cleighton DePetro, founder of Bare Tattoo Removal, noted that a SWOT analysis is just one tool in the strategy toolbox.
“When SWOT is used in conjunction with other analysis models, these frameworks for strategic thinking are well worth your time and should guide your decision-making,” DePetro said.
SWOT can also prompt businesses to examine and execute strategies in a more balanced, in-depth way.
“A SWOT analysis is helpful in broadly addressing questions to develop a business plan, but it doesn’t go far enough,” said Alan Lobock, co-founder of SkyMall and Convrrt. “The exercise alone won’t identify your key value drivers of your business. Planning without first knowing your goals and the metrics by which you will measure your progress toward achieving those goals is inefficient and misguided.”
Is this your first time venturing into the small business loan frontier? Obtaining a small business loan is just one of the first steps to launching your business. Proper financial planning, however, is critical to your success.
There are two key things to keep in mind as a small business loan first-timer. If you’re seeking a small business loan, the way you present your business idea, business plan and financial forecasts can be the difference between gaining or not gaining investors’ or a bank’s approval. But once you do get a business loan, how you manage your operations and where those funds go can make or break your entire business.
From creating a budget to managing costs, there are several steps you can take to make the most out of obtaining and managing small business loans. Holly Nicholas Signorelli, a certified financial planner and CPA, advises aspiring entrepreneurs and small business owners to maintain realistic expectations. Based on more than 20 years’ experience, Signorelli shared the following do’s and don’ts of first-time small business loans.
Editor’s Note: Looking for a small business loan for your business? If you’re looking for information to help you choose the one that’s right for you, use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free:
1. Do create a real budget.
About 90 percent of the time, clients come in with a huge budget made up of millions of dollars in profits, Signorelli said. But when you start to go through the line items, there isn’t any real backup to substantiate the numbers. Instead, there is always some hype about the product, the market in general and, most of all, “the potential.” Banks and investors don’t want to buy your idea; they want to make a profit, Signorelli stressed. For them to believe in your idea, they have to believe there is a profit. With very few exceptions, they are not going to invest in your idea if it doesn’t make sense, or if it feels too good to be true, Signorelli said.
2. Do have budget references.
Make sure that every single line item has a reference behind it, Signorelli said. “Real figures, real research — get down and dirty on it,” she said. “For example, if you are providing a service and your budget states that you can sustain XX amount of customers per month at XX amount of dollars, then the price of the service will be easy to show, given the average price of that service in your geographic area,” Signorelli said. However, you need to back up why the customers would come to you versus the competition. “That’s ‘down and dirty,’ and you can’t get too detailed; keep it short and to the point with backup,” Signorelli said. “Think about it: When you are reading a budget, you don’t want someone rambling about their pipe dream. You want to know that the person understands what it’s going to take to make a profit and has a clear plan to bring in business.” In other words, you want details, but you want them to be short and concise.
3. Don’t overestimate your income.
“In 20 years, I have never seen a budget where the income was as high as predicted in the first year,” Signorelli said. This is critical, because the lack of income in the first year is what causes 80 percent of small businesses to go out of business, she said. “Once your budget is done, go back to it and reduce your income 25 to 50 percent less than what your due diligence led you to put on the report,” Signorelli advised.
4. Don’t underestimate your expenses.
“There are things that you underestimated, no matter how meticulous you were, and there are things that you forgot altogether,” Signorelli said. “Just like income, you need to go back to your budget and take your expenses and increase them by 25 to 50 percent.”
5. Do have extra funds.
As a small business owner, it’s critical that you have enough savings, to make sure you can pay your bills during the first year, Signorelli said. “It was hard enough to get your loan, but I promise you that six months into when you are not profitable, no one will want to loan you more money to get you though the next six months,” she said.
6. Don’t stress about finances.
To make it through the first year and build a profit, you want to focus on marketing and bringing business in, so you don’t need to stress about finances, Signorelli said. Manifesting and building a business requires you, the owner, to believe in yourself and your new small business. With the right budget, you will get the right amount of money from the right investor, giving you the freedom and confidence to focus on your dream and make it happen, Signorelli said.
7. Do learn from your mistakes.
Yes, it’s OK that you made mistakes, as long as you learned lessons from them.
“I worked for a great CPA right out of college for five years to learn all I needed to know to run a business,” Signorelli said. “I still made mistakes in the first few years, but the foundation had been set and above all else, it was not an option for it not to succeed. It was my life, and whatever you are taking on must be your dream that you will move heaven and earth to make happen.”
Conducting a SWOT analysis means listing your company’s strengths, weaknesses, opportunities and threats. It is used to evaluate your current market environment and how it may change for better or worse, and then develop a response strategy.
Strengths and weaknesses are for internal factors such as location, patents held and reputation. Opportunities and threats look outside the company for things like competitors, market changes and supplier impacts. When you evaluate those four things against one another, you can see where potential problems lie as well as market gaps that you can position your company to fill.
If you have never done a SWOT analysis, you might not know where to begin. Here are eight tools, software and apps to help you get started.
Looking for a free SWOT analysis? MindTools offers a free SWOT analysis PDF worksheet that you can download, fill out and save on your computer. Each section contains sample questions to help you with the process, such as “What do you do well?” for strengths, “What could you improve?” for weaknesses, “What trends could you take advantage of?” for opportunities and “What is your competition doing?” for threats. MindTools also offers a complete how-to guide that covers what a SWOT analysis is all about and how to create the best one for your business. Similar resources include the TOWS Matrix — an alternative to a SWOT analysis — and tools that help with strategizing, problem solving and decision making.
The term “SWOT analysis” may sound boring, but yours doesn’t have to be. Creately, a Web-based SWOT analysis software, lets you create colorful SWOT analysis diagrams that you can fill with content, logos and other personalized elements. The software is also jam-packed with features like premade, professional SWOT analysis templates; Google Images integration; the ability to import your own images; and collaboration capabilities for feedback and contributions from members of your team. Creately also provides sample SWOT analyses from other companies, along with a database of tutorials and diagrams, to give you an idea of how to begin. To start using Creately, just click on the Start Drawing Now button to launch the no-install software right on your browser.
Gliffy operates on an HTML 5 editor that is more than two times faster than Flash, making large diagrams quick and easy to create. You can set themes and colors, protect and track changes, and share or publish easily with a read-only URL that you can embed in social media. Gliffy also offers Google Drive Integration so that you can access them on any device, making collaboration and review processes a snap. It also allow Visio imports, allowing you to upgrade your sharing methods while retaining and repurposing all of your old diagrams.
Cost: Starts at $5 per month per user for basic functionality. Access to full features starts at $10 a month per user with Gliffy’s Business pricing plan.
Don’t have an iOS device? Check out Grapholite, which lets you create, edit and save SWOT analysis diagrams on an Android or Windows 10 device (Windows 8 users need to contact the company directly for a link). Although Grapholite is essentially a flow-charting tool — you can create everything from Venn diagrams to organization charts and mind maps — its SWOT capabilities are more than enough for any small business. This full-featured app offers drawing tools, drag-and-drop shapes and elements, online and offline modes, and the ability to export SWOT diagrams into common image and document formats.
SmartDraw is all about speed. This software claims to let you create a SWOT analysis in minutes. First, choose a template. Then, add action buttons, shapes and other content, all within the Microsoft Office suite. The software will automatically align elements, providing a foolproof way to create professional-looking SWOT analyses. Although SmartDraw aims to help you create a SWOT analysis as quickly as possible, it also offers all types of SWOT examples to review before you get started and use as guidance for your business. In addition to basic SWOT diagrams, other examples include different types of SWOT diagrams, such as angled, pie chart and tabbed; different kinds of SWOT analysis, like Key SWOT Questions, Market Analysis SWOT and Product Marketing SWOT; and SWOT for different types of businesses, ranging from coffee shops to car manufacturers and everything in between.
SWOT Analysis Generator
Don’t know where to start? Creating a SWOT analysis doesn’t get any easier than WikiWealth’s free SWOT Analysis Generator. Each section in the generator is prefilled with a list of possible strengths, weaknesses, opportunities and threats to help you get started, and you can also enter your own ideas that aren’t on the list. Just enter your product or company name, and start checking off statements that apply to your business. When you’re finished, simply click on the Create SWOT Analysis button, and the generator will automatically build your SWOT framework and take you to your SWOT analysis. Besides helping you build a SWOT analysis, what makes WikiWealth’s Free SWOT Analysis Generator especially valuable is that it helps you gain a deeper understanding of each section and your business. Once your SWOT analysis is created, you can view explanations and definitions of each SWOT statement, as well as add comments to better evaluate each section. You and members of your team can also up-vote or down-vote items to better prioritize them and make wiser business decisions.
Create a SWOT analysis right on your iPhone or iPad. SWOT Map is an iOS SWOT analysis app that can help you tell a story, inspire and send a message with your SWOT analysis. First, the app offers more than 100 customizable SWOT analysis templates to help you find the perfect fit for your business or product. It also features a robust SWOT Editor to help you create and modify SWOT ideas, content and templates. And if you don’t feel like using the editor, SWOT Map lets you use your iPhone or iPad camera to take a snapshot of a handwritten SWOT analysis and then use the rest of the app’s functions. SWOT Map stands out because of its collaboration and social-sharing capabilities. You can not only email SWOT analysis diagrams to your team and colleagues but also post them on Facebook and Twitter, as well as save them as images to your Camera Roll.