Category: industry and markets

Finding Your Target Market

Venn diagram for finding your target market

Finding your target market requires analyzing your skillset, market characteristics, competitive landscape, and barriers to entry.

It is shocking how many entrepreneurs select their target market without a thorough analysis. Entrepreneurs often base their identification of the target market solely on their experience. This is a massive mistake. A developer wouldn’t build a house only on their knowledge of how to frame a wall. They would look at the soil underneath, the weather, the population, regulations, and much more.

A complete analysis to find your target market requires finding the intersection of your skillset, market characteristics, competitive landscape, and barriers to entry. Let’s discuss in greater detail:

  • Your Skillset: Your skillset is what you do well. Your skillset will include key personnel experience and connections, existing market knowledge, intellectual properties / operational know-how / institutional knowledge, and competitive advantages. Entrepreneurs often stop their research into target market identification here.
  • Market Characteristics: Market characteristics are elements such as rate of growth, size, behavior and consumption habits, segmentation and trends.
  • Competitive Landscape: The competitive landscape encompasses the overall industry. This includes your direct and indirect competitors, the sectors that your competitors occupy, because even direct competitors will offer the same set of products and services.
  • Barriers to Entry: Barriers to entry are the hurdles that potential competitors face when entering your space. Hurdles can include regulations, capital expenditures(e.g., the cost of acquiring expensive equipment), and knowledge capital from specialists on your team. Barriers to entry can also encompass emerging technologies that disrupt the ecosystem players in the space that they contend with. This is a separate consideration from the competitive landscape because barriers to entry focus on the environment that competitors must overcome.

As you can see, there are a significant number of considerations beyond just the entrepreneur’s skill set. Contact us today to conduct a thorough analysis to find your target market.

Americans’ confidence in finding a new job falls to record low

Americans' confidence in finding a new job falls to record low

Don’t wait until you get fired to find a new job. Americans’ confidence that they will find employment is at an all-time low.

Take proactive measures to set up your side-hustle or startup today. Dozens of businesses are recession-resistant, such as vintage thrift shops, vending machine owners, medical equipment pickup, estate cleanouts, and more.

Side businesses can be a safer and lower-commitment entry into entrepreneurship. We have the resources, such as business plans, marketing services, and access to capital, to help you launch and grow your business.

Contact us or schedule a meeting with us today to start planning for your future.

Strategies for Mitigating Cash Flow Problems

Strategies for Mitigating Cash Flow Problems in Business Operations

Cash flow is the lifeblood of any business and is essential for day-to-day operations, growth, and overall stability. However, managing cash flow can be challenging, especially when faced with unexpected expenses, delayed payments, or seasonal fluctuations in revenue.

In an article by Yahoo! Finance, small business bankruptcies rose with a 29% increase in Chapter 11 filings in September 2023 compared to September 2022

Mitigating cash flow problems requires proactive strategies and a solid financial plan to ensure the smooth functioning of a business. Here are some effective approaches for businesses to consider:

  1. Create Accurate Cash Flow Forecasts: Developing precise cash flow projections can provide a clear understanding of expected income and expenditures. By analyzing historical data, upcoming expenses, and revenue patterns, businesses can anticipate cash shortfalls and plan accordingly.
  2. Optimize Invoicing and Payment Processes: Streamlining invoicing procedures and implementing clear payment terms can expedite the collection process. Offering incentives for early payments or setting up automated reminders for overdue invoices can encourage timely settlements, thereby enhancing cash available to the company.
  3. Negotiate Favorable Payment Terms with Suppliers: Collaborating with suppliers to negotiate extended payment terms or discounts for early payments can ease immediate financial pressures. Establishing mutually beneficial agreements can help in managing cash flow more effectively.
  4. Control Inventory Levels: Maintaining excessive inventory ties up capital that could be used elsewhere. Regularly assess inventory levels, identify slow-moving items, and adjust ordering to match demand. Just-in-time inventory management can minimize surplus stock and free up cash.
  5. Explore Financing Options: Utilizing various financing options such as lines of credit, business loans, or invoice factoring can provide immediate liquidity during cash shortages. However, it’s crucial to weigh the costs and terms associated with each option.
  6. Implement Cost-Cutting Measures: Review operational expenses regularly and identify areas where costs can be trimmed without compromising quality or efficiency. This might include renegotiating contracts, reducing non-essential expenses, or optimizing processes to increase productivity.
  7. Diversify Revenue Streams: Relying heavily on a single source of income can make a business vulnerable to fluctuations. Diversifying revenue streams by introducing new products/services or targeting different market segments can help stabilize cash flow.
  8. Maintain a Cash Reserve: Building and maintaining a cash reserve serves as a safety net during lean periods or unexpected emergencies. Setting aside a portion of profits for contingencies can prevent cash flow disruptions.
  9. Monitor and Manage Debt Effectively: While debt can be a useful tool for growth, excessive debt or high-interest repayments can strain cash flow. Regularly review debt obligations and consider refinancing options to lower interest rates if feasible.
  10. Seek Professional Financial Advice: Consulting with financial experts or hiring experienced financial advisors can provide valuable insights and guidance. Their expertise can assist in devising tailored strategies to address specific cash flow challenges.

In conclusion, managing cash flow is an ongoing process that requires vigilance, strategic planning, and adaptability. By implementing a combination of these strategies, businesses can mitigate cash flow problems, ensuring financial stability and fostering long-term success.

Remember, each business is unique, so it’s essential to assess individual circumstances and tailor these strategies accordingly to effectively address cash flow challenges.

Contact Us or Book a Consultation for help with mitigating your business cash flow problems.

What Flamin’ Hot Can Teach Us About Entrepreneurship

What Flamin' Hot Can Teach Us About Entrepreneurship

Very loosely based on actual events but Flamin’ Hot can teach us a few things about entrepreneurship.

Flamin’ Hot is a fictionalized dramatization of how the wildly popular Flamin’ Hot line of products was created. A more detailed account of the creation of Flamin’ Hot Cheetos and related products can be found in this LA Times article. Although it is very loosely based on actual events, the film can teach us a few things about entrepreneurship.

Warning Spoilers Ahead

Entrepreneurial Spirit

Richard Montañez, the supposed creator was a natural entrepreneur since childhood. In the film, he was bullied by his classmates about his burrito lunch. He persuaded them to try it and got them to buy burritos from him. Richard then sold burritos to the entire school. Richard also showed interest in machinery early on which helped him understand the chip manufacturing process.

Not everyone is born with the traits and proclivities to create something new, but if you are, it’s a big advantage.

No Shame

Selling drugs got Richard in trouble with the law which limited his career options. So he pleaded his way into a janitorial job. Richard swallowed his pride and did the work.

Our perceptions about our self, how we think others perceive us, where we think we should be in life, pride, shame, etc. are all factors that can sometimes limit us. Overcoming this is probably more important than being a natural entrepreneur.

Industry and Market Research

Richard learned his job as a janitor but also learned how the chips were made. He also asked questions about chip manufacturing to people that were not in his department; thus crossing over departmental “cliques” — sanitation doesn’t mingle with engineers, etc. This allowed him to learn more about chip manufacturing than almost anyone. His willingness to overcome shame/embarrassment, in this case overcome corporate culture, also allowed him to access knowledge that others were unwilling/uninterested in learning.

Additionally, Richard’s Mexican-American background gave him exposure to spicy food and awareness about the large Latin-American population. In 1980, 6.5% of the US Population was Hispanic; by 1990, it grew to 8.8% as the total US population grew 22 million in that time. He saw how his friends and family would add spicy seasoning to their foods. Richard also saw, when he was on a delivery run with a coworker, that mainstream snacks were the only option in neighborhoods like his. A large and rapidly growing market did not have a spicy option.

This is all part of industry and market research.

In reality, Fred Lindsay, a Frito-Lay salesman that worked the Chicago and Great Lakes region noticed spicy products from regional competitors out-selling Frito-Lay.

Learn everything you can about your business, other people’s businesses, your customers, their customers. Knowledge is power.

New Product/Service Creation

It is important to note that Flamin’ Hot Cheetos (according to the movie) did not happen over the course of a couple of years. Richard was working at the plant for over 8 years when the idea came to him. Also, in the movie, Richard’s wife Judy, developed the recipe in what seems like less than a year.

In reality, Lynne Greenfeld and a team of product developers at Frito-Lay was assigned in 1989 to create a snack designed to compete with spicy snacks sold in the inner-city mini marts of the Midwest. Greenfeld would go on a field marketing tour throughout the Midwest and bring back 50 different bags of snacks that were all new to her. Eventually, she and her team honed in on a flavor combination and chubby devil branding that we know today. This process took around a year.

Bootstrapping

With the recipe in hand, Richard needed to acquire chips to coat the newly developed spicy slurry with. At the Frito-Lay factory, brown chips were thrown out because they only wanted the lighter colored chips. Richard took the discarded chips to create his first batch.

Finding inexpensive solutions is a crucial task in entrepreneurship.

Pitching

A pivotal moment in the movie happened when Richard looked up the contact info of Roger Enrico, CEO and Chairman of PepsiCo Inc., the corporate owner of Frito-Lay, to pitch the idea to him.

In the movie, Richard stumbles when asked about market share and product yield. This is where our services come in. Our industry leading pitch decks come with industry and market overviews, projected sales, and much more. Companies from a wide range of industries have used our pitch decks to raise funds from banks, SBA, and angel investors.

Guerrilla Marketing

Even after convincing Enrico to launch the Flamin’ Hot line, it was not all smooth sailing. In the movie, Frito-Lay did not launch an advertising campaign as most companies do for most products and services. As a result, the products were not selling.

To raise awareness for the product, Richard resorted to guerrilla marketing. He rallied his friends, family, and coworkers to start giving away unsold bags for free to anyone in the neighborhood. This strategy, more specifically, is called product sampling, and is commonly used by companies to raise awareness and increase the chances of initial purchases.

In reality, the Flamin’ Hot line of products had the full force of Frito-Lay’s marketing department. Unfortunately for most entrepreneurs, they do not have a large corporation driving awareness for their newly launched product.

Contact us today for help with your new product development.

WOCCON Summit

WOCCON Summit

The WOCCON Summit is an invitation-only conference that brings together entrepreneurs, allies, and thought leaders to explore ways to help women of color advance on the grow-scale-exit trajectory. The Summit will share stories about the unique entrepreneurial journey of women of color, facilitate honest conversations about allyship, and propose solutions that can lead to systemic change.

While a growing number of Black and Latinx women-led startups crossing the $1MM threshold, the majority of Black and Latinx women-led startups raise significantly less than the average funded startup. For those who have not raised over $1MM, the median seed round raised by Black women founders is $125,000 and the median seed round raised by Latinx women founders is $200,000. As of 2020, the national median seed round funding for a startup is $2.5M. Source: ProjectDiane2020

Your Startup Guru is thrilled to attend the WOCCON Summit and committed to creating a more inclusive entrepreneurial ecosystem. Capital constraint remains a defining problem for the majority of Women of Color entrepreneurs. As our post, What Angel Investors Prefer discusses, there are considerable pre-money valuation and round size discrepancies when it comes to the various demographics of entrepreneurs. This highlights a disturbing flaw in the angel investment community.

Strategy consulting

Zavros - Your Startup Guru - Strategy Consulting

Strategy consulting helps organizations solve complex business problems by developing and implementing plans. Your Startup Guru works with clients to identify their goals, analyze their current situation, and develop a roadmap to achieve their objectives.

Zavros came to us for help with a pivot to one of their existing businesses. They were looking at new industry sectors to enter where they would enjoy a competitive advantage and protection by barriers to entry.

Through meticulous industry research and market analysis, we found a growing niche that met their goals. A 5-year financial projection model comprising of a profit & loss statement, balance sheet, and cash flow statement was also created so Zavros could see how much to charge customers, when to acquire new assets and at what price, as well as overhead expense budgeting.

Equipped with a strategy, Zavros now has a clear picture of how to enter into this new business endeavor.

Contact us to create a winning strategy for your business strategy.

Launch and Grow Your Business

Emerging Young Entrepreneurs

Emerging Young Entrepreneurs

Your Startup Guru Managing Director, Joon Hong, recently had the opportunity to advise the 2022 cohort in the Emerging Young Entrepreneurs (EYE) program on their pitch decks.

The National Minority Supplier Development Council’s Emerging Young Entrepreneurs (EYE) program is a year-long program uniquely designed to provide the next generation of minority entrepreneur participants ages 19-35 with support to enhance their growing business. Business owners will receive guidance from corporate sponsors, MBEs, and additional stakeholders. EYE will utilize an interactive pre and post-conference curriculum along with five days of hands-on training and practical application. Participants are provided the skills, tools, and strategies to start or grow their innovative businesses.

About NMSDC’s Emerging Young Entrepreneurs Program

Founded in 1972, the National Minority Supplier Development Council Inc.® (NMSDC®) is the longest-operating business growth engine for the broadest group of systematically excluded communities of color (Asian-Indian, Asian-Pacific, Black, Hispanic, and Native American), and our impact goes far beyond supply chain. It’s about upward mobility for the emerging majority of Americans, an equal shot at participating in the American experiment of free-market capitalism and entrepreneurship. Our work is about correcting the unequal access to wealth-building opportunities.

Launch and Grow Your Business

Pitch decks are a fantastic document to raise capital for your business. Contact us today to get started on your pitch deck.

SBIR Seed Funding

America's Seed Fund

The Small Business Innovation Research (SBIR) is investing up to $2 million in seed funding, aka America’s Seed Fund. America’s Seed Fund is a program within the National Science Foundation and housed within the Directorate for Technology, Innovation and Partnerships. This congressionally mandated program aims to foster innovation and help create businesses and jobs in all areas of the United States, and small businesses funded by our program have since gone on to tremendous success, changing industries, and helping people and the planet. Click here for more information.

Contact us today to get started on your pitch deck.

The Floppy Disk Business

The Floppy Disk Business

Talk about being in a niche market! This fascinating article talks about Tom Persky the self-proclaimed “last man standing in the floppy disk business.”

See a Need, Fill a Need

Leveraging his experience outside of the floppy disk business as a tax attorney and software developer, Persky found opportunities to offer sales, recycling, and data transfer services.

“Because we were a tax-oriented company and had specific tax filing deadlines, we only used our duplication equipment once every quarter. For 89 days in a row, the machines would be unused and then, on a single day, we would punch out thousands and thousands of floppy disks. At some point, I looked at the machines and how they were unused for so much of the time, and I had the idea to take in other people’s laundry.” – Tom Persky

Client Feedback

Persky had a business model in mind but shrewdly pivoted to include other service offerings at the request of his customers. Clearly a business should not listen to every whim of their customers. However, the service should be added if the cost-benefit analysis indicates a profitable expansion. Contact us for help with this analysis.

“In the beginning, I figured we would do floppy disks, but never CDs. Eventually, we got into CDs and I said we’d never do DVDs. A couple of years went by and I started duplicating DVDs. Now I’m also duplicating USB drives. You can see from this conversation that I’m not exactly a person with great vision. I just follow what our customers want us to do. When people ask me: “Why are you into floppy disks today?” the answer is: “Because I forgot to get out of the business.” Everybody else in the world looked at the future and came to the conclusion that this was a dying industry.” – Tom Persky

Luck

Luck is ALWAYS a factor in business. However, it takes skill to be able to survive long enough for a chance for luck to come your way. Tom recounts how over time, the total number of floppy users decreased. Concurrently, the number of businesses that provided floppy disks went down even faster. Tom occupies the niche between those two curves.

Circling back to seeing a need and listening to customers. Opportunities will present themselves when you keep your eyes and ears open.

“Another thing that happened organically was the start of our floppy disk recycling service. We give people the opportunity to send us floppy disks and we recycle them, rather than put them into a landfill. The sheer volume of floppy disks we get in has really surprised me, it’s sometimes a 1,000 disks a day.” – Tom Persky

Know Your Market

Persky knows his market. A.K.A. customers. Your market (customers) are not only those that you’ve identified but also those you did not know use your (or your competitor’s) product. Knowing your market takes a lot of research and asking questions.

“Take the airline industry for example. Probably half of the air fleet in the world today is more than 20 years old and still uses floppy disks in some of the avionics. That’s a huge consumer. There’s also medical equipment, which requires floppy disks to get the information in and out of medical devices. The biggest customer of all is probably the embroidery business though. Thousands and thousands of machines that use floppy disks were made for this, and they still use these.” – Tom Persky

Tom Persky truly fell into the floppy disk business but made smart decisions to capitalize on the opportunities that came up. Part of it is luck, but part of it is also making the right decisions long enough to be lucky.

See our posts: Importance of Niche-ing, See a Need, Fill a Need, and Product Life Cycle for more related information.

The Case for Small Businesses

The Case for Small Business

The case for small businesses is a strong one. From job creation to patents filed, small businesses are a major driving force in the economy.

Small Businesses are an Engine for Job Creation

Despite losing 9.1 million jobs in the first two quarters of 2020, small businesses’ job growth rebounded swiftly following the COVID-19 recession. In the four quarters following, small businesses have gained 5.5 million jobs, making up for 60 percent of the decline during the early pandemic. Small businesses have generated 12.9 million net new jobs over the past 25 years, accounting for two out of every three jobs added to the economy. Source.

Small Businesses are Drivers of Innovation

Experts often use patenting activity as a proxy for innovation. Data from the National Science Foundation show that small businesses that engage in R&D generate more patents per employee than larger businesses that engage in R&D. However, small business patenting activity fell significantly following 2010.

The decline is now reversing. Small businesses recovered to two-thirds of peak patent application levels from 2015 to 2018 and recovered to half of peak patents received levels in the same timeframe. Source.

Small Businesses Need Support

Unfortunately, more than 90,000 restaurants that have closed across the U.S. in the past two years. Restaurant industry sales in 2021 were down $65 billion from 2019’s pre-pandemic levels. A touching article in High Country News tells the touching story of the last day at DeDe’s, a mom-and-pop restaurant in St. George, UT.

She suffered a stroke a year ago and hadn’t been able to visit. “When DeDe found out, she made my mom’s favorite meal — a ham, mushroom, and spinach omelet with Swiss cheese and a slice of cantaloupe — and delivered it to the care facility,” Feesago said. “It’s more than food. DeDe made us feel like family.”

This type of value-added service without an exorbitant surcharge would be unheard of in a corporate restaurant scenario. The personal touch is also gone. Optimizing for profit results in diminished customer experiences. The typical story of a small company that grows until it catches the eye of a larger firm is common. The value and brand that the small company created are gutted to make room for shareholder value creation. The original loyal customers eventually leave because the magic is gone. This is done over and over again until Main Streets throughout the US begin to look exactly the same with the same 15 corporations.

The tragic irony in all this is that corporations spend a considerable amount of resources trying to recreate a “we treat you like family” environment that customers want. Unfortunately, it is just marketing, and the user experience is not genuine. The corporations would do better as a holding company that lets the small business operate with minimal interference. The parent company could provide occasional funding for expansions, hiring, and process improvements.

Small improvements can lead to significant benefits. Our blog post Competitive Advantage and Coffee talks about how a simple gesture such as remembering regular customers’ names can result in higher coffee sales. Another example is DK’s Donuts a small independent donut store in Santa Monica, CA that has been in business since 1983. Even when mega-chain Dunkin’ Donuts opened a block away, business did not suffer because the user experience, customer service in other words, was not there at Dunkin’ Donuts.

Launch and Grow Your Business

Contact us today to discuss how you can start your own small business.

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