Researching Your Business Idea in the Connected Age

Most entrepreneurs aren't interested in beating around the bush once they've gotten an idea in their heads. They want to get it underway posthaste with business finance from crowdfunding and use digital marketing services to grow their revenue as fast as possible. This is understandable if the idea is something new that will meet with little competition at the present, but may enter a highly competitive market in the near future.

More than one person may dream of an invention or new type of service at almost the same moment in time, and attempting to get a patent may be problematic without a working prototype. While this may seem to be an excellent reason to get investors involved immediately with crowdfunding, it misses one of the most powerful parts of the social network - research.

Throughout history, most great ideas have benefited from the collective knowledge of many. We like to believe that some of the big names in business were self-made by their individual efforts, but that is generally not the case. Thomas Edison has been credited with more patents than any other person has, and he has always been portrayed as a tireless worker who hardly slept at all.

While Edison was a genius at taking things and improving them, he did not always carry an idea from concept to conclusion. Instead, he had a dedicated group that worked out the technical aspects of his and their ideas. The belief that he worked all the time was due to his peculiar habit of taking naps wherever he was when he got sleepy, an indication of dedication.

This use of other skillful people to test concepts and work out problems with his inventions is not a detriment to a great man; quite the reverse, it shows how he utilized every means at his disposal to aid in research so he could be more productive. It was not a new concept back then, and it is still widely used today.

Your social network is more than a basis for crowdfunding; it is one of the best research tools you can use. How you present information has a great deal to do with the input you receive from your support group. Network platforms include websites such as FaceBook, Twitter, LinkedIn, Pinterest, and MySpace just to name a few, and they are a great way to assist with the development and implementation of your crowdfund project.

Here are some ideas on how to get the most response from those in your personal and business network to benefit your crowdfund research.

1. Pinpoint the Best Places for Research Information

We have learned through experience that some social media are better than others for getting certain information. FaceBook may have some limitations based on the way you get participation and the rules you must follow, but 71% of companies worldwide have a FaceBook account.

That is too big an audience to pass up. Twitter commands almost 50% of those companies, and LinkedIn is the contact medium for the professional sector. Each one of these platforms has something to offer in the way of research.

Did you know that 43% of the businesses in the world have a company blog used for marketing? Much of what you need to know is readily available if you take the time to find it. The best way to make the right contacts is to join groups that fall in line with products or services you are attempting to crowdfund. Many of these groups may be representative of those companies with whom you will compete in the marketplace. The concept is to gather pertinent information, and the competition can be a wealth of knowledge.

The top 10 social networks represent 80% of the traffic for social networks, and users are spending more time on social networks than ever before. User participation in niche networks is increasing very fast, up almost 50% from last year. This is an ideal situation for you when you need to obtain raw research results.

Don't spread yourself too thin by participating in every group, but be selective and only take on what you can input into regularly.

2. Involve Your Audience

Whether your crowdfund idea is one that lends itself to a specific South African location or is more globally oriented has little to do with the interest of the person reading about it. What makes someone want to respond is a subject that is interesting and open enough to leave room for an opinion, and that is what you want when doing crowdfund research.

Make very sure you clarify that you want any positive or negative comments that might make the idea more viable and successful once it is put into motion. In the same vein, be sure to point out that you value the opinion of each person, which builds the foundation for investing in the crowdfund.

3. Start the Crowdfund with the Research

By involving the social network audience through their opinion, you have already planted the seed for investment opportunity. Instead of losing that momentum, go ahead and solicit for seed funding at the same time you are doing research. In this way, investors feel they are providing input that will improve the idea, making it more desirable to put money into the cause.

Incorporating both opinion and solicitation into one package also shortens the time between inception and the start of an enterprise. The sooner you start, the less chance there is that someone else will profit from the idea before you can get it underway. If you plan to use a professional crowdfunding organization, make certain that they are aware of your intent to both fine-tune your idea and get funding at the same time. This is not a new concept in the crowdfund process.

4. Use Your Research Results

Use the information you gather from your social networks by taking your own opinion out of it. It is entirely possible that you won't completely like what you find out from research, but it is a tool to guide you. The success of most products or services depends on the opinions of the public, so you must believe there is substance to back up your social networking research.

Most marketing experts don't believe that you can base everything on research through social media. While it may be necessary to revert to more traditional research methods in some cases, you should gauge highly what you learn from the support you receive and use it to your advantage.

In Conclusion

You may find that an idea is not drawing the amount of interest you expected. The opinions you receive may enlighten you to the fact that further study is necessary before proceeding with a venture or that some adjustments need to be made.

This is, after all, the primary reason for research. If you cannot find the support you want, it is good to weigh responses and apply those concepts constructively to a new format of the same idea or scrap the plan entirely.

Another tip to keep in mind is if you are receiving the same input from several contacts in your research, there is most likely some substance to it that will assist you in your crowdfunding project. That makes it important to listen and analyze comments, both good and bad.

Crowdfunding for franchises

With so much talk of crowdfunding in the air, as a form of business finance with which to fund business plans, as many of you may already be wondering, I'm thinking if this may be a source of franchise funding.

We are already seeing the move towards this in the US with the countries first social network specifically for franchises.

Sprigster, the nation’s only crowdfunding platform focused exclusively on franchising, announced today the launch of its “Boost a Hero” program to help returning veterans raise the needed capital to realize their dream of franchise business ownership. Sprigster is introducing the donation-based crowdfunding program in the VetFran Pavilion during the International Franchise Association’s Annual Convention in Orlando.

"While veterans have access to discounted franchising fees, they often don’t have the initial start-up investment needed to open most franchise businesses," said Mark Mohler, CEO of Sprigster. “Sprigster provides a viable option to raise the necessary monies. These brave soldiers have served our country and acquired skills that are readily transferable to operating a successful franchise business. They just need a boost to get started.”

Sprigster’s “Boost a Hero” program is based on the increasingly popular crowdfunding approach in which an entrepreneur collects small contributions from “the crowd” to cumulatively fund a project – such as opening a franchise business. Prospective veteran franchisees set a funding goal, then “pitch” their project to the public, and through pledges and contributions, raise the capital needed to open their franchise business.

Qualifying U.S. veterans can register for the “Boost a Hero” program at Sprigster’s website. Once approved by their franchisor, a veteran’s profile and funding goals are developed and the project is featured on the website. Sprigster provides resources and coaching to assist the veteran in promoting his or her project to the “crowd” using social media tools. The crowd, which can include friends, family, the local community, other military veterans, fans of the franchisor, and essentially anyone compelled to support the veteran, can then contribute toward the funding goal.

"Sprigster's ‘Boost a Hero’ program is an innovative solution harnessing the power of social media and crowdfunding to accelerate veteran ownership of franchise businesses,” said Stephen J. Caldeira, IFA President & CEO. “As a sponsor of VetFran, Sprigster’s Boost a Hero is helping to strengthen our industry and the U.S. economy as well as doing the right thing for our veterans and our nation."

Franchisors who have prospective veteran franchisees approved for their concepts, as well as those who wish to attract returning veterans, are already signing on to participate in the program. Currently, Sprigster’s “Boost a Hero” site is running in beta mode and hosting approved franchisees from The Dwyer Group/Aire Serv (U.S. Army Veteran Larry Colley) and PostNet (U.S. Navy Veteran Amanda Crow). Additional franchise companies have agreed to participate as well and are currently seeking qualified veteran candidates. They include: BrightStar Care, Driven Brands, FASTSIGNS, Global Franchise Group, Granite Transformations, ServiceMaster, Tasti D-Lite and Valpak.

“We’ve already received tremendous interest and support from the franchising community in our ‘Boost a Hero’ program,” said Mohler. “It’s a very compelling proposition for franchisors in that they are able to obtain qualified veteran candidates – a highly desirable prospect – and receive significant exposure for their brand via Sprigster’s platform.”

Franchisors and veterans interested in learning more about the “Boost a Hero” program may visit the Sprigster Booth (#7E) at the IFA Convention or contact Todd Jones, senior vice president of business development for Sprigster, at (770) 292-9941 and todd@sprigster.com, or visit www.sprigster.com.

About Sprigster
Sprigster is the nation’s only crowdfunding platform focused exclusively on franchising. Sprigster’s initial franchise platform, “Boost a Hero”, was designed to facilitate access to capital for qualifying U.S. veterans. Sprigster was founded by serial entrepreneurs, Mark Mohler and Todd Jones, who have both spent the past 15 years focused on small business formation, with an emphasis on social entrepreneurship-based businesses. For more information about Sprigster, please visit www.sprigster.com. Also, please follow us on Twitter at @Sprigsterllc and check out our Facebook and Google+ pages.

So you want to franchise your business

So your business is already successful and you have pretty much got all the processes that makes the business tic down to a T. You've realized that in your industry, as long as you are doing the right things in the right way your idea is pretty much a banker in any area or city where it may start up in. So there seems to be plenty of opportunity to replicate your business plan, but there is only one of you. Plus of course growing your business very quickly can be extremely expensive you will probably need plenty more business finance. Well the option that many entrepreneurs in your shoes choose to franchise their businesses.

But franchising your business can be extremely daunting and certainly is not for the faint hearted. Of course in the log term he returns can be extremely rewarding and pretty much set you up for life if yo had the right idea to start with. Think of some of the more well known franchises in South Africa. Companies which have lately sprung up in every tow and city in the country almost as by magic overnight. I can ensure you that plenty of hard work, cleaver marketing and well thought out business planning went into the process.

Some of the steps that you can take once you have decided to create a franchise are:


1 Determine your fees. Franchisers typically earn two fees; the initial franchise fee and royalty fees. The initial franchise fee is a lump sum paid to the franchiser to start the franchise. Royalties are ongoing fees paid to the franchiser that are typically a percentage of gross revenue.

2 Set your advertising requirements. Every franchisee will need to advertise his own business. Franchisers will typically spell out specific advertising budgets for their new franchisees to follow.

3 Meet with an attorney to draft a franchise circular and franchise agreement. A franchise circular is the document required by the FTC that details the initial offering of a franchise. The circular and franchise agreement are typically presented together as the entire franchise contract.

4 Advertise your franchise. Your local classifieds are a great resource for advertising your new business opportunity.

5 Interview potential franchisees. You will be working closely with your new franchisees; be sure to conduct thorough interviews so you hire the right people to work with you.

Furthermore there are a number of other ideas that can help you with creating franchisee out of your business.

Idea #1: Make your partners profitable.
This first Idea sounds easy, but it often gets obscured by the economic pressures you will begin to feel preparing your financial projections.  First and foremost, your concept must allow your franchisees to make a significant profit.  The more the better.

Yes, a unique, exciting concept is helpful in attracting attention and selling franchises, but the business process and procedures, both operations and marketing, must give your future business partners (franchisees) the opportunity to be successful financially.  The more successful they can be, the more successful your franchise company will become.  If you maintain focus on this Idea, many of your other challenges will become much smaller.

Idea #2: Have a great answer for the question, “What have you done for me lately?”
Creating ongoing value is critical for a successful franchise relationship.  Once you have trained your franchisees and helped them establish their businesses, the value the franchisor contributes to their future success will diminish with time, at least conceptually.  Are your recipes unique and always changing? Does your scheduling system make your franchisees more efficient and profitable? Is your marketing process effective and inexpensive? Is your budgeting software critical to profitable projects? Does your real estate department help find great locations? These and other questions are ones franchisees will ask.

While a strong franchise agreement will protect the franchisor, the objective is to create a win-win relationship, and to continually innovate to make your business, service, marketing and products better.

Idea #3: Quit or hire.
Keep in mind you are embarking on an entirely new business endeavor in which you have no practical experience: franchising.  You are no longer running your business and training others how to do the same; you are the CEO of what you hope will become a successful national franchise company.

I’ve seen many companies fail and wind up entangled in the legal system because they never make the full commitment to their franchise company.  Hiring a franchise development company to create marketing and sales documents and prepare your Federal Disclosure Document is enough to help you sell a couple of franchisees.  But if you want to become a meaningful and successful company, you have to support your earliest partners and make sure they are successful.

Christian Faulconer [2], CEO of Franchise Foundry [3], offers some good advice here: Remember, if you decide to build a franchise system around your successful business, it’s like starting a second business. Selling your products or services to your customers will still require significant time and effort, but now you also have to find time to build the franchising infrastructure and market and sell your franchise opportunity. It can seem like you are running two separate businesses, and the demands can become overwhelming without the right partners.

Keeping your current full-time job as president of your business and then working in your startup franchise company almost never works out.  Consultants don’t cut it, either.  Make a commitment and either quit your job as president or hire someone to run the franchise business, but recognize you probably cannot be successful at both jobs at the same time.

Idea #4:  Raise capital.
There are two reasons for this sacred requirement.  First, it is a great reality check and screening mechanism.  When you begin to talk with others, friends, customers and especially franchise consultants, you’ll hear only positive feedback.  If you want to really hear the truth, ask for a check.

Consultants will tell you the idea is a sure success because they have a hammer and you are the nail.  Friends want to support you and it is always easier to praise and encourage than provide constructive feedback. Your customers already love your service, so they are not the best ones to offer feedback on the viability of national expansion.

Kert Gennings [4] is the COO of Boardwalk Fresh Burgers and Fries [5] and has grown two large food-service franchise companies. He offers this thought: “Preparing a formal business plan for converting your company into a franchise company is a very enlightening exercise as it will help you crystallize your thinking.  Once complete, use that document to raise the money you will surely need to have a fair chance at success.  If you cannot raise the money, listen to what the marketplace is telling you.  Not that you have a bad business, but that perhaps it is not ready for national expansion.”

Secondly, you will need the money you raise to help with marketing, sales, franchise support, registration in states that require it, and hiring a person to help run your old or new business (see point 3).

Idea #5:  You must have a great selling process (selling is service and vice-versa).
You must have a process to sell your franchise to people you do not know.  Ninety-five percent of your customers who tell you they are interested in becoming a franchisee will never write you a check.  And even if all of them do, it is not enough to create a viable business.  You need to sell to people you do not know. All successful sales are the natural outcome of a successful process.  If you want a great example of an automated process, you can visit Process Peak [6].

Keep in mind, your initial franchisees will be early adopter personalities, risk takers.  They will become franchisees because they like ground-floor opportunities and are easier to sell based on a concept and an opportunity.  However, when you update your FDD [7], you are required to list your current franchisees (with contact info).  Those people will become a critical part of your sales process weather you like it or not.  The key to your long term-success is how happy you make those early franchisees, and if you are cutting corners to save money or because you are not committed to the idea of franchising your business, their negative comments to prospective franchisees will really hurt future sales.

Keep in mind that franchising is a heavily regulated industry. The IFA [8]has developed a process for selling franchises called FranGuard [9]. Your sales team should be familiar with that process and the steps you need to take to protect your system as you sell franchises.

Becoming the next great American franchise is a worthy goal, but there are many challenges along the way.  Make sure you’ve done all of your research and identify partners who are truly vested in your future success.


Self-Funding Pitfalls and How to Avoid Them

If you’re determined to start your own business, but you’re business plan has been turned down by everyone from banks to angel investors, then there’s still one business funding option open to you: self-funding.

Self-funding is usually the last business funding option people choose, because let’s face it, it’s the hardest one! However, if nothing else is working, and you know you’re onto a great idea, it’s worth the effort. 

In this article, we look at some of the more common (although often ignored) pitfalls of self-funding your business, and how you can avoid them.

Not Creating a Separate Legal Entity

When you get funding from an external source, whether it’s a bank or a venture capital firm, one of the primary criteria is usually that your company is a separate legal entity. There are many reasons for this, but one of the biggest is that it ensures that there is limited risk involved, for your financiers, and that your personal finances are clearly separated from your company’s.

When you decide to self-fund your business, you might choose to skip this step, – after all, you’re not getting business funding per se, you’re bootstrapping, right?

However, you should remember that self-funding is one of the hardest business funding methods to succeed at, and if you haven’t protected your personal assets, by creating a separate legal entity, in the form of a registered company, if your idea doesn’t work, you stand to lose everything – including your personal assets!

Bottom line? Make registering your company a priority, and don’t do business until you have.

Being Overly Ambitious

It’s completely natural to be enthusiastic and excited about your business. However, if you haven’t found external business funding, you’re going to have to tone down that excitement, and take it slow!

When your business funding comes out of your own pocket, you’re going to need to be even more careful. That means cutting your overheads to the bone, starting as small as possible and expanding cautiously.

This is especially true if you are getting your business funding from your home loan or your retirement fund – the more money you can keep in the bank, while you start and grow your business, the better.

Treating It As Your Money

When you get business funding from an outside investor, you will have to keep careful records of how it is spent, and on what. You won’t be able to use any of the business funding you get for personal needs, and you’ll have to account for every cent.

When you choose the self-funding route, it’s easy to fall into the trap of not keeping track as carefully. You might take money out of your home equity, or your savings, and you might decide to spend some of it on personal items. Before you know it, your capital is gone, and your business is not earning enough to keep you afloat!

It’s very important to treat self-funding as you would any other kind of business funding. Make sure that every purchase and expense is justified by the business, and recorded, and treat it as if you were answering to a board of investors.

Yes, You CAN

The good news is that self-funding is entirely possible, for a great many entrepreneurs. In fact, whether you start your business with almost nothing, or whether you have a small nest egg to draw from, if you are careful, it’s entirely possible that you can build up a company that is a roaring success.

Just remember that self-funding is the same as any other type of business funding. You need to be able to show results for every purchase or expense, and you have an investor – you!

How to turn your business into a franchise

When wanting to move from running your own business towards running a successful franchise a number of things will need to happen. The first issue to consider is to ensure your business is attractive enough for others to want to buy into it. Apart from that you will need to ensure a market for the product exists outside of where you are currently trading supported by solid research figures and ideally evidence of what you are doing at the moment. Lastly and often the biggest challenge for the business owner is to capture the process of running the business effectively into an easy to understand manual which franchisees can follow once they have chose your specific franchise. Remember that that this will be run as a franchise and for that to work the franchisee will be looking to do everything the same as you do/did.

Market testing is an important part of this. If you cannot prove that there is a demand for the product or service your franchisees will be offering, they will be doomed to failure.

If you can demonstrate a clear demand for your product and service, you then need to prove that the franchise model works through the establishment of a pilot operation. The pilot operation will establish that all the back-up systems including training, operating manuals, financial support and marketing campaigns are effective. It will also give franchisees an indication of likely set-up costs, break-even points and how long it will take to become profitable.

The operations manual gives detailed information on how to set up and manage a new outlet. It highlights all the key activities, and explains how to do them the right way.

As well as preparing an operations manual, you also need to decide what support you will provide. This typically includes initial training for new franchisees, and continuing marketing and administration support.

Your brand is likely to be an important part of what you offer franchisees. Even if they know how to run a successful outlet, they stay with you because your brand helps them get customers. Protecting your brand is essential. For more information on brand management, see our guide on branding: the basics.

It is important that you put in place relevant protections to prevent your intellectual property (IP) being infringed (for example by registering your trade marks and company name or obtaining patents for your products). Once you have adequate protections in place you can then benefit from your IP through licensing. It is also easier to protect your IP if it is registered and you can prove ownership. See our guides on how to use trade marks in your business and protecting intellectual property.

Your operations manual and support services are an important part of this. They help to ensure that different franchisees do things the right way and provide consistent quality.

Is franchising right for your business?

Many businesses have used franchising successfully, including well-known names like McDonalds, Wimpy, Domino's, and others. However, franchising doesn't suit every business.

To start with, your business needs to be successful. Nobody will want to buy the right to franchise a business that doesn't make money. A franchised business needs to be profitable enough to make money for both the franchisee and you.

More broadly, your business needs to be one that can be replicated in different locations by your franchisees. Businesses that need high skills levels or professional qualifications can be more difficult to franchise but all the major optician chains have succeeded in doing so.

At the same time, you need to offer your franchisees something that makes it worth their while paying you, instead of simply setting up their business independently. For example, you might have a recognised brand name, provide equipment or supplies they need, or help with training and marketing support. For more information, see the page in this guide on how to develop your business format.

Having a well-organised and well-run franchise helps you recruit franchisees and is a strong incentive for franchisees to remain part of the franchise at the end of the initial franchise period.

You also need to think about the demands franchising places on you. You need to invest in developing and marketing the format. If you have limited financial resources, or are already working flat out running your business, you may not be able to do this.

Finally, you need to have the right skills and attitude to make franchising a success. You need to be able to sell your concept to potential franchisees, and to work with and control them. Rather than dealing directly with customers yourself, you profit by helping your franchisees to be successful.

The benefits of franchising your business

The benefits of franchising include using the franchisee's capital to develop a brand at a local rather than national level. The customer then receives a better and more localised service.

Growing your business can be difficult and expensive. The more you grow, the more capital you need, for example, to finance new outlets. At the same time, managing the business becomes more difficult, particularly if your business is spread across the country. You will need to be prepared to travel around the country when giving support.
Finance

Each 'franchisee' finances their own outlet. While the franchisee meets all the costs and collects the income, you receive franchise fees or a mark-up on products sold by your franchisee. For more information, see the page in this guide on franchise fees and royalties.
Management demands

The franchisees also run their businesses, reducing the management demands placed on you. The best franchisees will be highly motivated and have local expertise, making your life much easier.

Rather than managing their business, your role involves supporting your franchisees. This is likely to include:

    * helping the franchisee find and fit out premises
    * training
    * creating operating systems to help franchisees set up and run their franchise
    * providing marketing materials and resources such as a branded website
    * running advertising campaigns to build brand awareness
    * protecting and defending your intellectual property

In the early stages you are likely to spend a lot of time growing the franchise by recruiting other franchisees - perhaps through attending franchise exhibitions and running marketing and advertising campaigns.

As your business grows, there can be additional benefits. The more franchisees you have, the better known your brand becomes. Your purchasing power may also increase as you buy more, allowing you to negotiate discounts.
Potential drawbacks

Franchising can have its drawbacks. You need to invest in developing and marketing the franchise. You also need to make sure that you get the right franchisees and control what they do. A bad franchisee can damage your reputation and brand, hurting all your franchisees.

Despite this, franchising could still be the best way to grow your business. For more information, see the page in this guide: is franchising right for your business?