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Although paths vary - exact details vary from person to person.May happen all at once or slowing evolve from the most part-time operation. E.g. Author, Trainer, CatererStart-ups may be deliberate and well planned or just happen. E.g. Airasia, Youtube, Bihunsufi.com4-52. Rewards of Starting a New Business.Developing a business from scratch, a start-up - most risky path - most likely to produce greatest rewards.Success rates - much higher mentorE.g. Cradle, Micro Franchise, ActionCoach etc

Advantages of Start-UpsBegins with a "clean slate." Opportunity to use most up-to-date technologies. Provide new, unique products or services - not available from existing business or franchises.Can be deliberately kept small to limit the magnitude of possible losses. 6-6Disadvantages of Start-UpsNo initial name recognition. Requires significant time to become established - provide positive cash flows. Can be very difficult to finance no pre-existing assets to pledge. Cannot easily gain revolving credit from suppliers and financial institutions. May not have experienced managers and workers. 6-72. Top 10 Indicators of Start-up SuccessPrior experience by the founder - increases chances of success

Without experience - a number of ways to increase the chances of a successful start-up:

Take part in a mentoring program.

2. Start a business in an incubator provide financial, technical and managerial help and legitimacy to start-up businesses.E.g. Technology Park Malaysia

3. Have a detailed start-up budget helps exactly what needs to be spent - where itwill get the funding

4. Produce a product or service for which - a proven demand.

5. Secure outside investment - provides legitimacy - some outside eyes to double-check the business plan.

6. Start with > 1 founder - increases the synergy of business with new ideas - different strengths.7. Have experience managing small firms. E.g. basic business functions.* An average entrepreneur has three start-up failures before a success its a learning experience.8. Have industry experience.

9. Choose a business - produces high margins - a nice buffer for possible errors.10. Start a business with established customers.Spin-off from current employers business.Subcontract services to former employer or to other established businesses.

3. Special Strategies from ScratchFour other strategies that can helpfrom scratch start-up businesses.Starting a home-based business - reduce cash flow requirements and expenses in the early stages of a start-up.

2. Partnering - reduces personal time and money investment - partner may provide skills and abilities you lack.

3. Add individuals with special competencies as partner, stakeholders, employees or advisors; strengthen your weak area with their expertise.

4. If not directly competitive - current employer may be a source of support.

4. Opportunities of Purchasing an Existing Business.AdvantagesEstablished customers - provides immediate sales and cash inflows. Business processes - already in place in an existing business.

Often requires less cash outlay than does creating a start-up.

DisadvantagesFinding a successful business for sale - appropriate with experience, skills, and education is difficult and time-consuming.Difficult to determine what a small business is worth. Existing managers and employees may resist change.

Reputation - a hindrance to future success.

Business - declining due to changes in technology.

Facilities and equipment - obsolete or in need of major repair.

5. Problems to Buy A Business The more sources you consult - more likely to increase the chances of finding the right opportunity.Brokers advertise and facilitate the sale of a business for a fee. Networking by letting attorneys, accountants, insurance agents and other small business owners - can be effective.Trade journals / magazine exist for nearly every industry and advertise businesses for sale.Search the Internet.Ask current employer; they network and may have heard of opportunities.

Once found - start due diligence.Due diligence involves an exhaustive investigation legitimate - suitable.Caveat emptor* when it comes to purchasing a business. *A warning that notifies a buyer that the goods he or she is buying are "as is," or subject to all defects.Once a business for sale has been found:

Conduct extensive interviews - sellers of the business.Study financial reports and other records of the business.Make a personal examination of the site (or sites).Interview customers and suppliers.Develop a detailed business plan for acquisition.Negotiate an appropriate price for the business, based upon the business plan projections.Obtain sufficient capital to purchase and operate the business.

Due diligence has two goals:

1. To find any wrongdoing:Fraud committed by owners or managers; Misrepresentations of sellers (i.e improperly recognised revenues or expenses) and Missing information (i.e pending or threatened litigation, technological obsolescence of equipment, processes, product or service, and unpaid taxes)2.To find any inefficiencies, unnoticed opportunities, waste and mismanagement.

Financial statements - examined first - readily available, familiar, accepted as representative of business and indicators of future business results.

Why? Dont ask, dont tell.

The following should be examined:Income statement - to confirm the amount of revenues and expenses. Beware - income statements of small businesses - often misstated by charging personal expensese.g. cars, club membership, travel) to avoid taxesTend to overstate revenues and understate expenses highest profits.Balance sheet - to verify the assets and liabilities and their respective values.

Most common problems include misstated values of intangibles (e.g. account receivable, licenses, patent), and undisclosed liabilities.

Borrowed money, outstanding accounts with the suppliersThe last five years income tax returns will confirm timing of cash inflows and outflows and profitability of the business.

Due diligence also examines the non-financial picture as well. Why is the business for sale? Who are the key employees?

What is the extent of obsolescence of equipment

What opportunities can the company reasonably expect to have in the future?

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