Monthly Archives: July 2016

First Tips To Writing a Business Plan

Entrepreneurs are often advised to write a business plan before they officially start their business. The act of writing the business plan will help focus on the details, find items that were not previously considered and fine-tune the approach to running a successful business.

Before a formal plan can be written, however, there are a few key elements you’ll need to work out that will ultimately help you craft that document. Entrepreneurs and business experts recommend taking the following steps before you sit down to write your plan.

Determine your purpose
The primary purpose of a business plan is to show investors, lenders and other potential stakeholders how your company plans to make a profit. Profit is important, but it’s far from the only thing that matters when you start a business, experts say.

“Business plans can be helpful tools to clarify … business activities, [but] they … encourage entrepreneurs to focus on what they are going to do,” said Alan Williams, co-author of “The 31 Practices” (LID Publishing Inc., 2014). “This overlooks two more important questions: ‘why’ — why it exists and why employees would want to get out of bed in the morning, and ‘how’ — the values of the business, what it stands for, how people representing the business will behave.”

Williams noted that entrepreneurs should take time to identify and articulate their business’s core values and purpose, which will serve as your organization’s compass for decision making at all levels. Williams’ co-author, Alison Whybrow, said that this “compass” can be discovered by having an honest, open conversation with your team.

“One thing that a team might want to do is engage in a formal assessment process — looking at habits, beliefs, values and capability — so that they are working from a clear starting point and have a framework for discussion about working styles, strengths, and individual and collective blind spots,” Whybrow said.

How to Test New Business Idea Before Launching

Do you have an idea for the “next big thing”? You may think your idea is perfect the way it is, but it’s wise to test it out before you spend a lot of time and money developing a business or product for which there’s no market. Here are six steps to help you make sure your product is something the world wants, before you launch it.

1. First wait; then build a prototype or test service.

Although you’re excited about your new business idea, you might want to wait a while before testing it, Greg Isenberg, a venture capitalist and serial entrepreneur, said in a 2014 interview.

“After I’ve gone through the process of writing down a bunch of ideas, I don’t like to rush into building a business plan or recruiting the team,” Isenberg said. “I like to wait a few weeks, [to] see which ideas really stick with me.”

Isenberg said he only moves forward if he has a burning feeling that the world really needs his idea.

“Once I’m through that, the best way to test a business idea is to build some prototype and show it to people to get some honest and authentic feedback,” he said. [Looking for a business idea? Visit our Business Idea Page]

2. Build a minimum viable product.

A minimum viable product, or MVP, is “the simplest form of your idea that you can actually sell as product,” said Eric Ries, a Silicon Valley-based entrepreneur and the author of “The Lean Startup” (Crown Business, 2011). Using the principles of Lean Six Sigma, Ries’ book advocates having a version of the product to test and market early in the development process so that any tweaks or changes are in response to real feedback from the target audience.

3. Run it by a group of critics.

When you have your first prototype or test service ready, take it to your potential target customers.

“You should talk [to] and/or survey at least 50 potential customers, to see if they identify with the problem the same way you do,” said Wayde Gilchrist, a startup consultant and host at TechStartRadio.com. “In other words, you need to find out if this is a real problem for a majority of your target market, or just a few,” he said.

However, to really put your new business idea to the test, select your 50 potential clients or customers carefully.

“Identify people in that target you know to be skeptical and critical,” said Chip Bell, founder of the business consultancy firm The Chip Bell Group. “These people could be irate customers from previous encounters, or friends who always take the glass-half-empty perspective.”

Bell advised handpicking your test group and then asking these people to pick your ideas apart.

4. Tweak it to suit your test market.

Isenberg took a similar approach to testing 5by, an Internet video finder app he developed and has since sold. Isenberg and his team went to college campuses and showed mock-ups of what the product was going to look like. They found the feedback from students invaluable in fine-tuning the original idea.

“We were able to quickly gauge that people … were frustrated that they couldn’t open an app and just be able to find the best Internet videos in whatever they were interested in with just a tap of a button,” he said.

Isenberg realized that although his initial business idea and mock-up were a good start, they needed tweaking.

“We quickly knew we were onto something, and then focused on building out the product, raising money, etc.,” he said.

5. Create a test website with social media tie-ins.

Once the word is out about your product or business, the target market needs a place to get more information about it or to show it to their friends. Building a simple website and using social media are ideal tools to provide information and monitor how many people are interested in what you are selling.

“You’ll be able to tell if the idea will get traction from the number of click-throughs on the ads, and the number of people who fill in your form,” Gilchrist said.

6. Create a marketing plan and use it.

All of the preparatory work means nothing if you do not perform enough actions to get a good measure of response. Once you have a viable product, you need to be able to act on the interest in it, said Ryan Clements, a consultant to entrepreneurs on marketing and sales strategy.

“Having worked with many startups — both on my own account as entrepreneur and as an adviser to others — I like to use a rule I call 100 / 1,000,” Clements wrote in a blog post on IvyExec. “Make a list of 100 things you can do to market the product, and then execute that list of 100, and in the process, speak with 1,000 people about the product.”

If you do this, you will have data on your product, Clements said. You’ll know who is interested in it, what marketing strategies worked and didn’t work, and how you can improve, all of which are invaluable steps in getting your idea and business off the ground, he added.

Walmart Slow its Efforts to Open New US Stores

Walmart said Thursday that it plans to significantly slow its efforts to open new U.S. stores, a strategic shift by the world’s largest retailer as it works to claim more of the shopping dollars that are rapidly moving online.

At a meeting with investors, Walmart executives said the chain will open about 35 supercenters next year, sharply lower than the 60 it expects to open by the end of the current fiscal year. It aims to open just 20 of its smaller, grocery-oriented Neighborhood Markets, a pullback from the 70 it is to open this year.

Instead, Walmart said it would work to increase sales by ramping up growth in its online division and squeezing more business out of its roughly 4,600 U.S. stores. The goals executives laid out for its digital business were ambitious: They say they expect to deliver 20 to 30 percent annualized growth in a segment that lately has not shown nearly that level of momentum. For example, last quarter, Walmart’s global e-commerce sales were up 11.8 percent over the previous year. In the last full fiscal year, the company’s online sales were up 8 percent.

“This company, over time, is going to look like more of an e-commerce company,” Doug McMillon, Walmart’s chief executive, said at an event at corporate headquarters in Bentonville, Ark.

The big-box chain recently moved to boost its e-commerce firepower by acquiring upstart shopping site Jet.com and by installing that company’s founder, Marc Lore, as the head of Walmart’s online shopping strategy. Lore and McMillon spoke repeatedly of a focus on “basket economics.” This means that they want to find ways to incentivize customers to bundle their online orders, scooping up several items at a time. This behavior would slash shipping and fulfillment costs for the retailer, thus allowing sales in this channel to be more profitable.

This tack would be different from the one that e-commerce leader Amazon.com has taken: That company has instead focused on getting shoppers to pay $99 a year for Prime memberships. Because shipping is free for members, these shoppers sometimes place several orders a day, one item at a time.

Investors sent Walmart’s stock down about 2.5 percent in afternoon trading, apparently disappointed by the financial forecast the retailer offered for the year ahead. Walmart said it expects earnings per share in the next fiscal year of between $4.29 and $4.49, about flat compared to what it anticipates for the current year. In the year after that, it expects 5 percent growth in earnings per share.

Walmart expects to put $11 billion toward capital investments in the coming year. The company plans to remodel about 500 stores, and will add its grocery pickup capabilities to 500 additional locations. As it aims to boost sales in its existing stable of stores, the retailer will continue efforts to spiff up its fresh food offering and to lower prices on certain merchandise. It is also trying to build a healthier business by moving its inventory more efficiently.

“Our goal is pretty simple,” said Greg Foran, chief executive of Walmart’s U.S. business. “We only want to touch an item once from when it hits the backroom to getting into a customers’ basket.”

Mars Tracks Along with The Rest of The Food Industry

Mars, the privately-held candymaker responsible for classic chocolate brands such as M&M’s, Milky Way and Snickers, is rebranding its candy offerings as Mars Wrigley Confectionery and moving management of its confectionery business to Chicago.

Mars bought Wrigley for $23 billion in 2008, but Warren Buffett’s Berkshire Hathaway, which helped fund the deal, retained a 20 percent stake of the purchased company. Mars announced Thursday that it recently bought Berkshire’s remaining shares and will fully merge with Wrigley next year.

The company says there will be no immediate changes to existing brands though new candy offerings could come in the future. A company spokesperson said the combination will make for simpler, more effective interactions with the vendors who make the company’s chocolates and candies available to consumers through retail and e-commerce channels.

“While they were running as two separate companies there was certainly collaboration, but there was a limit on coming together,” said corporate communications manager Kelly McGrail.

Independent analysts don’t expect the move to affect prices.

“The most important worry has to do with cocoa and chocolate and other ingredient costs,” said Bernard Pacyniak, editor of Candy Industry Magazine. “The fact that [Mars] is acquiring the rest of the stock is probably a good thing. They want to be in control.”

The continuing consolidation at Mars tracks along with the rest of the food industry, where a stream of megadeals has given a handful of dominant players control of the market.

Among the largest combinations came last year when Kraft and Heinz combined in a multibillion-dollar deal that was also funded by Berkshire. Hershey rejected a $23 billion takeover deal from Mondelez earlier this summer that would have given the two companies a dominant position in the candy market.

Mars, which is headquartered in McLean, Va., is a rare privately-held company competing with multinational, publicly-traded behemoths like Mondelez, Nestle and Hershey.

Pacyniak said Wrigley was a smart acquisition for Mars, which bought the then-public company for its domination of the gum segment. The combination brings major gum brands including Doublemint and Orbit under the Mars umbrella.

Where is Location of Strike Big Oil

The discovery, which it claims amounts to 6 billion barrels of light oil, was based on two wells drilled this year and 126 square miles of three-dimensional seismic data. The company estimates it to have 1.8 to 2.4 billion barrels of recoverable oil.

He added that Caelus, which is backed by the private-equity fund Apollo Global Management, was drawn to Alaska by tax credits the state offers to companies that search for oil. These tax credits have offered incentives for producers to search for oil, but have also been a point of heated debate recently among state lawmakers scrambling to save funds amid the more than two year long drop in oil prices of around 60%.

 Its evaluation of the discovery is not complete — Caelus said it had not flow-tested the wells and it plans to drill another appraisal well in 2018. If the find proves to be as substantial as Caelus believes, and with the regulatory process expected to take between three to five years, Caelus projects that oil could flow to the trans-Alaska pipeline in 2022.

Caelus added that the field could produce around 200,000 bpd of light, high mobile crude, which would, if correct, make the field more prolific than ConocoPhillips’ Alpine unit that began production in 2000 and reached a production peak of 139,000 bpd in 2007.

However, Caelus’ field would still pale in comparison with several of the world’s largest oil fields. Saudi Arabia’s Ghawar oil field, discovered in 1948, is the largest conventional oil reserve in the world with an estimated 70 billion barrels of oil remaining.

It produces around 5 million bpd of crude. However, the actual amount of oil reserves at Ghawar is a closely held state secret. Some analysts claim that as much as 60% of all Saudi production is derived from Ghawar. The U.S. Energy Information Administration (EIA) states that Ghawar has more oil reserves than all but seven other countries.

Kuwait’s Burgan field, discovered in 1938, holds an estimated 66 to 72 billion barrels of reserves, which accounts for more than half of Kuwait’s total, producing between 1.1 and 1.3 million bpd. It didn’t start production, however, until around 1948.

The Safaniya field, also in Saudi Arabia, is estimated to hold around 50 billion barrels of oil, but it is also very mature and has been in production for around 60 years.

Iraq also has holds some of the largest oil fields in the world. Its Rumaila field holds an estimated 17.8 billion barrels of oil, while its West Qurna-2 field is the country’s second largest, holding nearly 13 billion barrels of oil reserves.

The Bakken field in the U.S., discovered in 1951, has 24 billion barrels of reserves remaining, and produces around 1.4 million bpd.

Alaska is also suffering from other maturing fields, while new discoveries have been unable to offset this decline – which makes the Caelus discovery so promising for the state.

Not only has the state suffered oil production losses, but the current roil in global oil prices has also caused budget deficits for Anchorage, creating political turmoil as Alaska Gov. Bill Walker tries to find ways to offset lost revenue.

Another blow to the state came when three of the four Alaska LNG project partners, ExxonMobil, BP and ConocoPhillips, pulled out last month after a study prepared by energy consultancy Wood Mackenzie said the project was “one of the least competitive” LNG projects in the world.

Walker, for his part, is still optimistic that the project can go forward, but given the glut of LNG that is projected to last past 2020 and the drop in LNG prices from more than $20 per million British thermal units (MMBtu) in February 2014 to just over $5/MMBtu in Asia currently, the Alaska project’s intended market, Walker faces strong headwinds as well as political infighting in Anchorage to keep the project proposal alive.

Caelus’ discovery comes less than a month after Apache announced a multi-billion barrel oil discovery in Texas.