Business Posts

Small Business Benefits of Joining Trade Associations

Joining trade associations can be an effective way for small businesses to increase their contacts and find potential customers, no matter what industry they operate in.

A trade association is an organization founded and operated by businesses in a specific field. Trade organizations often promote collaborative opportunities between companies and facilitate professional development opportunities for their members. In addition, they often publish materials for their members, including newsletters and magazines, directories, and professional resources.

They also may sponsor trade shows or conferences that bring together key players within a given industry to collaborate and learn, capture new customers, and view what’s upcoming and trending. These events often include workshops, breakout sessions, speaker presentations, targeted exhibition events, press and media opportunities, and networking events, as well as the exhibition floor, where companies can buy booth space to meet customers and promote their products and services.

Trade associations can help open the door to opportunities for small business owners through the people they meet—for example, they might develop stronger vendor relationships through their membership, or get the opportunity to work with other members on a collaborative project that increases their industry reach (and drives growth for their business as a result).

To help small business owners identify relevant trade associations and affinity groups, Naperville Public Library offers several resources that can be accessed within the library, as well as from home with a NPL card number and PIN.

  • Gale Directory Library includes information on more than 600,000 international and U.S. national, regional, state, and local nonprofit membership organizations. Results can be filtered by criteria including the types of publications produced by the organizations.
  • Gale Business Insights Global contains a wealth of industry information, including trade associations. This database can be searched by NAICS or SIC code as well as keyword.

Other useful resources that can be found online include:

  • Tradeshow Network Marketing Group offers an online calendar that lists upcoming trade shows from a variety of industries, along with locations and expected numbers of attendees and exhibitors.
  • Marketing Mentor maintains a list of links to major U.S. trade associations by industry.

For more information about this and other topics, consider registering for the NaperLaunch Academy workshop series or scheduling a one-on-one appointment with a business librarian or NaperLaunch coach.

Posted: 
Tuesday, November 2, 2021 - 14:15

Equity Funding Sources: Pros and Cons for Startups

When it comes to funding sources for small business startups, there are two main categories: equity and debt. We discussed debt funding in a previous post on qualifying for a business loan; in this post, we will focus on equity funding, in which a business gives up a percentage of its ownership to an investor or investors in exchange for capital. Please be advised that this post is for informational purposes only and should not be taken as advice or direction.

Sources of equity funding include self-funding, friends and family, investors, crowdfunding, and grants. Each of these sources requires some type of investment from the business owner, and each comes with advantages and disadvantages, as described below.

Self-Funding

Most new startups are initially funded by the owners themselves. Self-funding (also known as “bootstrapping”) means that you will need to supply sufficient capital to operate your business in the short- and long-term. Because it is unlikely that your business will break even in the first few months after startup, it’s important to ensure that you have the funds to cover any shortfall.

An advantage of bootstrapping is that you don’t need to ask for money or search for a funding source. In addition, completely financing your business yourself means you don’t have to give any ownership to partners or outside shareholders. However, a major disadvantage of self-funding is the potential impact on your personal wealth if your business fails. In addition, self-funding leaves you with limited reserves for the future.

Friends and Family

Another common source of equity funding is friends and family. Funding your business this way requires having enough friends and family to reach your monetary goal. You’ll also need proof of concept and a friendly pitch to convince them to contribute.

In this case, personal relationships help sell the idea to individuals who already know you and want to help. Advantages of this funding source including giving you more time to build your business and the likelihood of more forgiving terms for payback.

However, keep in mind that family and friends may not possess useful knowledge to advise or guide you in your business venture. In addition, a limited amount of funding may be available, and they may be a one-time source of capital. It’s also important to consider the impact that the failure of your business could have on your family and friends and/or your relationships with them.

Investors

Investors may include venture capitalists, private equity firms, and angel groups. Unlike friends and family, who may not have much business knowledge, investors can be partners in your business and may connect you with consultants, mentors, and other sources of support. In addition, they usually provide enough funding to launch and may be able to provide additional funds if needed.

Not surprisingly, securing investor funding requires a harder sell, with specific, financially based proof that your business idea is a good one. Investors will also expect your heavy investment first, and they will take an equity position, not just a payback of interest. In addition, they may not be willing to provide guidance or advice. It’s also important to keep in mind that investors generally won’t sign a nondisclosure agreement, so you’ll want to be sure you can trust their discretion.

Crowdfunding

Crowdfunding has become increasingly common as a source of startup funding with the advent of online platforms like Kickstarter and Indiegogo, among others. (Investopedia reviewed and ranked the top six platforms for business here.) While many people are familiar with rewards-based crowdfunding, in which donors receive incentives for their financial contributions, equity crowdfunding provides you with working capital in exchange for a piece of your company.

Equity crowdfunding enables you to obtain financing even if you lack personal savings and access to other funding options. It also allows you to leverage an existing online platform with an existing database of investor users, and it can be a good way to test the public’s reaction to your product and build a following.

On the other hand, crowdfunding requires a significant investment of money and/or time to generate interest in your project before it launches. Prospective investors will expect transparency in the form of financials and business plans. In addition, you risk giving away too much of the business to investors if you get the rewards or returns wrong.

Grants

Grant funding is reserved for businesses operating with a not-for-profit business model. Grantmaking organizations exist to provide funds to nonprofits, and they do not require repayment. Grants can come from public or private sources, and there are many websites that assist grantseekers in locating them.

Applying for grants can be a very time-consuming process involving lots of paperwork, and there are often strict eligibility requirements and tough competition; for government grants especially, there may be many strings attached. Because of this, when applying for grants, it’s important to ensure that the nonprofit’s mission matches the grantor’s interest; otherwise, applying will be a waste of time.

For more information about this and other topics, consider registering for the NaperLaunch Academy workshop series or scheduling a one-on-one appointment with a business librarian or NaperLaunch coach.

Posted: 
Wednesday, October 20, 2021 - 09:00

The Lean Business Model Canvas: A Business Plan for Entrepreneurs

New entrepreneurs often assume that before they can start up, they need a detailed written business plan. But traditional business plans tend to be more useful for established businesses that are looking to scale up. Most new startups don’t need a plan that’s extremely detailed; the point is to get to the key things that matter.

At NaperLaunch, we encourage new startups to use the Lean Canvas, a 1-page business plan template designed especially for entrepreneurs. Created by Ash Maurya and adapted from Alex Osterwalder's Business Model Canvas, it helps you quickly assess the strength of your business idea by prompting you to examine essential aspects of your business early in your entrepreneurial journey.

With the Lean Canvas, you can focus on identifying problems and solutions. There’s only so much space to use, which means it’s necessary to boil down key points into the most important information.

The Lean Canvas covers, at a high level, all the major aspects of your company. It helps you determine whether your product or service should be created in the first place. It also helps you decide whether it is possible to build a sustainable business around a particular set of products and services.

The canvas breaks your company into nine building blocks, as shown in Fig. 1. Individually, they help you define your business in a logical order. When assembled in this configuration, they create a Venn diagram–like way of thinking about your organization.

The Lean Business Model Canvas
Fig. 1 The Lean Business Model Canvas
  1. Problem - This is what your product or service will solve for people. What problem(s) are you solving? Is it an adaptation or new product/service? Are you bringing lower cost, better design, more features?
  2. Customer Segments - These are the people that have the problems you’ve identified. It’s important to learn as much as you can about them, such as who they are, where they live, and how many of them there are.
  3. Unique Value Proposition - The heart of the canvas, the UVP is how you will set yourself apart from your competitors. It will guide you in your pricing strategy and your marketing messages. We describe the process of writing a UVP in this blog post.
  4. Solutions - What is your business going to offer that solve the problems you identified? Your offering should be something that your customer wants and for which the customer will pay enough to make your business profitable.
  5. Channels - What marketing and distribution channels will you use to reach your target audience (eg, Business to Consumer, Business to Business)?
  6. Revenue Streams - What is the market willing to pay? How much will you make and from where?
  7. Cost Structure - What will your solution cost to implement? Are you satisfied with your break-even analysis, and if not, how will you improve it?
  8. Key Metrics - What are the drivers for your business? What key performance indicators will you use to evaluate or predict performance of company activities or other specific outcomes against set goals?
  9. Unfair Advantage - What competitive advantage can you and your company develop, exploit, and maintain?

When completing the canvas, answer the questions starting at the top left with Problem, and continue to Customer Segment at the top right. Continue numerically until you've answered all the questions. You'll notice the boxes are out of order, but the Lean Canvas is designed this way to optimize your thoughts. When assembled, you'll see common themes emerge from the boxes that touch each other.

If you’re interested in creating your own Lean Canvas, the Naperville Public Library offers several resources to help you get started:

  • The NaperLaunch Academy offers a focused curriculum to help entrepreneurs develop fundamental business knowledge and learn the Lean Startup process. The next series of workshops kicks off Wednesday, Oct. 6 with Business Conceptualization, a session devoted to the first seven boxes of the Lean Canvas; the following session on Startup Financial Essentials, explains how to fill in the last two.
  • The library’s Gale Business: Plan Builder software, accessible at the library or from home with an NPL barcode number and PIN, is an interactive tool that walks users through the process of creating a Lean Canvas, and eventually, a business plan and strategic marketing plan.
  • If you’re interested in learning more about the Lean Startup process, this blog post is a good starting point. For more information, you can find Ash Maurya’s books, including Running Lean and Staying Lean, in the library catalog.
Posted: 
Tuesday, October 5, 2021 - 15:00