What is a major flaw in the creation of business plans?  When Kristen Winterton visited Peru during the summer of 2010 to evaluate business plans for small start-up businesses and determine feasibility of these businesses, the biggest problem she saw was the lack of time spent on basic market research when developing a business plan.  A business idea may have great potential, but there is much more to the implementation of a successful business than just a great idea.

A thorough look at competitors, including indirect competitors, and the potential for growth for the company are critical to the successful implementation of a business plan.  For example, Kristen and her colleagues evaluated the business plan for a small copy center which was to be located near one of the several universities in the area.  In theory, this was an excellent idea, since college students spend a lot of money on copies; however, in actuality, a walk around the perimeter of one college campus yielded over fifty copy centers.  Additionally, when they spoke with the owners of the copy centers, they found that there were major concerns about how saturated the market was.  The copy centers had a hard time making a profit because of the steep competition they faced which forced them to cut their profit margin.  Many could not even afford to hire employees, and had to work seven days a week on their own to break even, or even take a second job to make ends meet.

Had the companies looked at the market before entering, they would have known many of the possible threats to their business.  An additional benefit of market research is the increased visibility that it gives in demand predictions, which aids in the development of more accurate pro forma income statements.  With greater information, companies can respond more effectively and become more profitable.

Market research can be as simple as going to the location to see what products or services are already offered, doing a preliminary search on the Internet to see what competitors already exist and how they run their companies, talking with current business owners to hear about the challenges they face, or as difficult as in-depth market surveys, focus groups, and statistical analysis.  With the ever-increasing and widespread availability of information there is little excuse to not do market research.

The information gathered in this research process can be gained while drafting the business plan, before the start of the company, and can drastically reduce the probability of failed business ventures and the associated costs of failure.  All of these benefits ultimately translate to better understanding about the competitive environment of the businesses, and how the business can be better positioned in its market.

By Jayme Mendenhall

Does the non-refundable policy of the airlines make you hesitate when scheduling a trip? Have you ever scheduled a flight and then needed to cancel it? What if there was a company where you could connect with other people who would buy your ticket off you if you needed to cancel? -And the airlines would be ok with that! That is exactly what Christopher Boll is proposing in the small business plan he entered for CREED’s Business Plan Contest. Christopher plans to “link consumers with common travel plans by a secondary market to resell unused or unneeded airline tickets”.  This is an idea whose time has definitely come!  Christopher’s company, KeNeXt Market, would be the first of its kind in the business world and if he can pull this off, it will change the face of airline travel for the better!

Christopher is a graduating senior at the University of Michigan majoring in political science. He is planning on taking a job in Florida after graduation as well as attending law school and getting his MBA. He is a member of the men’s rowing team there at the U of M and he is also involved in charity work. He participates in the “Relay for Life” as well as being a part of “Well Done”- an organization who helps provide clean drinking water for communities in Africa.

CREED would like to congratulate Christopher Boll as the winner of the Business Plan Contest! We wish him the best of luck in his future contributions to the business world!

Wendell Brock - Wednesday, August 18, 2010By Jayme Mendenhall

In just a few months, a tax tsunami will hit America. It will hit families and small businesses in three great waves on January 1, 2011. The first of the three waves will be outlined here:

First Wave
Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.  These tax cuts are all scheduled to expire on January 1, 2011.

Personal income tax rates will rise  
The lowest rate will rise from 10 to 15 percent, which is a 50 percent increase!  All the rates will rise as outlined below. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  

Itemized deductions and personal exemptions will be phased out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%

Higher taxes on marriage and family    
The child tax credit will be cut in half from $1000 to $500 per child.  

The standard deduction will no longer be doubled for married couples relative to the single level.  

The dependent care and adoption tax credits will be cut, which will hurt people who are taking care of parents or children with special needs.

The return of the Death Tax; this year, there is no death tax, for those dying on or after January 1 2011, the highest estate tax rate is 55 percent.  

Higher tax rates on Retirees, Savers and Investors
The capital gains tax on investment income will rise from 15 percent this year to 20 percent in 2011 or an increase of 33 percent. 

The dividends will be taxed as ordinary income, which could push the tax rate as high as 39.6 percent or an increase of 164 percent for those in the top tax bracket. These rates will increase another 3.8 percent in 2013.

At the end of the Clinton presidency the economy was in a recession. It was comparatively mild, but sluggish none the less.  With the Bush tax cuts, the economy rebounded and was renewed again.  If this were the only change to our tax code and our economy we could expect to go back to the sluggishness we were experiencing then; but its not, with these increases we will be plunging deeper into a recession again and this is only the first wave to hit our economic shores.

Wendell Brock - Tuesday, July 06, 2010AIDS has taken many lives, and  to the children in a small orphanage in Uganda it has turned their lives upside down as they learn to cope without their  family, mothers, fathers, brothers, and sisters.

The St. Paul and Rose Orphanage is currently taking care of 27 children.  Paul, the owner of the orphanage was only able to pay for 20 of the children which left 7 of them at home for a semester. Schooling in Uganda is expensive for the people, costing $50 (in U.S. currency) for one semester, and $1350 for all of the children in the orphanage to attend for only one semester.

Paul doesn’t want people to donate money so all of the children may attend school, because once one semester is over who is going to be able to pay for the next? Even if he receives more donations for many semesters to come, those donations will eventually come to a close. 

Children with the dental kits we handed out after showing them how to properly care for their teeth.

Instead, he would rather develop a micro-business that he and the children can work together to create a steady income for the children’s school fund every semester.  Running a micro-business will provide the children with a great economic education, which will strengthen their abilities to care for their own families later in life.

He has asked a team of young adults that have come to Uganda to help out with the AIDS victims to assist him and his children in building a chicken coup so the children will have an opportunity to sell the eggs at a market nearby. The team of young adults would absolutely love to help this orphanage out, but they don’t have enough funds to build it. But Paul didn’t give up. He asked the team to try to cut the project in half, “only do half as big of a coup”, but the team wouldn’t even be able to afford that small of a coup. It broke their hearts to have to turn down this sweet man’s request to help better the lives of orphans in Uganda, especially because with having a chicken coup these children will learn a valuable and practical skill in Uganda by caring, and taking care of chickens.

But this chicken coup is only the beginning of Paul and Roses dreams and aspirations for their humble orphanage.  "We have children show up on our doorstep every week asking for a place to live and the best we can do is give them some food before turning them away." Paul and Rose say. They want to be able to expand their orphanage so they are able to house more orphans.

Even though a chicken coup seems like a small little project, it will turn out to be what changes many children’s lives. Through this many children will be able to go through school, and eventually find work to take care of, and support their future families. Eventually Paul and Rose will be able to expand their orphanage and change many other children’s lives as well. But there is no way that any of this will be able to happen without donations to start on one chicken coup.  

The chicken coop will cost $1,500 USD to build it large enough and strong enough to withstand the elements and wild animals.  That will also supply them with a small flock of chickens to start out with as well.  All extra funds will be used for school kits we will send to the orphanage.

Learn More At: http://carrieinuganda.blogspot.com/2010/06/childs-prayer.html

Wendell Brock - Thursday, April 15, 2010

To Americans, “franchising” means golden arches and sandwiches named after public transportation. Many view these businesses as responsible for obesity, roadside trash, and ridiculous cartoon mascots.

But if you live in a developing country, franchising—and, more specifically, microfranchising—can mean the opportunity to own your own business and make an income to feed your family.

Just ask Rama Devi, who became a Vision Entrepreneur with Vision Spring, a microfranchise business that sells eyeglasses. In 2006, Ms. Devi had been a seamstress in India. But the $44 she earned each month wasn’t enough to support her husband and two children.

  As a Vision Entrepreneur, Ms. Devi now makes over $100 per month. Seeing how lucrative the business could become, her husband quit his agriculture job and they became co-partners in the endeavor. Along with financial security, the couple says their marriage is better because of the cooperative work they do as a sales duo.

Vision Spring helps entrepreneurs improve their communities by making the gift of sight available to those who previously didn’t have access to eyeglasses. Entrepreneurs sell the glasses on consignment, and then reimburse Vision Spring. Additionally, Vision Entrepreneurs educate their communities about eye health and refer those with serious eye problems to clinics.

Last month’s Entrepreneur Magazine has a nice article about Vision Spring and its founder, Jordan Kassalow.

Microfinance is a hot topic because it’s an out-of-the-box approach to combating poverty that works. Microfranchising just may be version 2.0, because it goes one step further.

Not only does microfranchising make owning a small business financially possible for those in developing countries, it gives the entrepreneur a business model, training, and materials. Vision Spring calls it “business in a bag.” I call it “opportunity in a bag.”

Vision Spring’s reach goes one additional step beyond any ordinary microfranchise. Because not only does it improve the entrepreneur’s life, it improves their community, too. The ability to see allows someone to work and become an engaged, productive member of their society.

BYU’s Economic Self-reliance Center is researching microfranchising, evaluating and streamlining its theories, and anticipating and heading off problems. According to their mission statement, they, “intend to be the leader in the emerging field of microfranchising and develop an arena for those who are either currently working or desire to participate in microfranchising to operate.”

Jason S. Fairbourne, director of BYU’s MicroFranchise Development Initiative, was first author onMicroFranchising: Creating Wealth at the Bottom of the Pyramid.

In it, he writes, “We live in a unique period of time in which people living in developed nations … are experiencing a standard of living that was unfathomable half a century ago. Simultaneously, many more are suffering from the tribulations of poverty.”

Perhaps, with basic economic education, microcredit, and the implementation of microfranchises, the next half-century can improve the standard of living for more people.

Wendell Brock - Friday, February 26, 2010

When Ted Terrazas retired from the US Air Force as a Medical Services Officer, he entered civilian life having learned a few things about delivering timely, efficient, and cost-effective medical care. Starting a medical consulting firm was the next logical step. Except such a venture couldn’t be launched from Mr. Terrazas’ garage, or with family loans.

But with a $10,000 loan from micro financier ACCION Texas, Mr. Terrazas was able to found TerraHealth in 2001. In the company’s first five years, it enjoyed an 8,000% growth rate. And in 2006, Mr. Terraza joined ACCION Texas’ Board of Directors, giving back to an organization that had done so much for him.

Make it Better
ACCION Texas’ reach isn’t limited to new businesses. In 2004, Guadalupe Perez was co-owner of a thriving café in El Paso when her partner decided she didn’t want to be in the restaurant business anymore. Ms. Perez either had to buy her out or sell the café. Because of a loan from ACCION Texas, she’s now Navajo Café’s sole proprietor.

ACCION Texas began in 1995, and last year expanded next door into Louisiana. Good things multiply. It’s also worth noting that ACCION Texas began as a franchise of ACCION USA, which has lent $117M nationwide since its inception in 1991.

Common Ground
In May, the Microfinance USA conference will commence in San Francisco. The location could not be better. Not only does California have America’s largest economy, its 12.4% unemployment rate (December 2009) is one of the nation’s highest. Californians know firsthand about the need for economic assistance, and not in the form of unemployment benefits extensions.

Microfinance USA will include people from all sides of this burgeoning industry—investors, government representatives, and small business owners—with the goal of helping American small businesses.

Road to Recovery
Depending on the day or the news source when you check the news—our economy is either slowly approaching a road to recovery, or still stuck in a pothole without a tow truck. Statistics can be crunched in any number of ways to any number of effects, but what we know for sure is that things aren’t great for a lot of people.

But where large banks and our federal and local governments haven’t been able to help, micro finance groups—like ACCION Texas, the PLAN Fund and many others who’ll converge on San Francisco this May—are effecting real change. As CREED grows we will begin this year to start developing a database of micro-enterprise business plans and proposals for enterpreneurs to access, so they can start their own business venture with a solid base.

Wendell Brock - Tuesday, November 10, 2009

Small businesses in the United States are often pushed aside because; well they are small – individually, however collectively they amass some very large numbers according to the Advocacy Office of the Small Business Administration. Considering the current economic conditions it would make sense that if small businesses create about 75% of the new jobs, then you would think the government economic stimulus would support helping small businesses succeed at a time where unemployment is pitching ever higher. 

Typically small business investment goes directly into the economy in the form of wages, trade and capital expenditures. Because most businesses are small, these businesses often trade amongst themselves, often circulating dollars many times in the economy and more frequently, thus creating more value to a dollar spent by a small business.
Below are some information data on U.S. small businesses and their contribution to our economy:

·    provide about 75% of the net new jobs added to the economy  
·    represent 99.7% of all employers  
·    employ 53% of the private work force  
·    provide 47% of all sales in the U.S.  
·    provide 55% of innovations  
·    account for 35% of federal contract dollars  
·    account for 38% of jobs in high technology sectors  
·    account for 51% of private sector output  
·    represent 96% of all U.S. exporters 
·    U.S. firms sized 10 or less make up 94.9% of all businesses 
 
Source: U.S. Small Business Administration

Next time you have the opportunity to invest, issue a contract opportunity, or simply find a new supplier – chose a small business; they may be the one that helps save your job, or invents the next amazing breakthrough in science, medicine or technology!GCK2D9YHS8V9

Wendell Brock - Tuesday, October 13, 2009

CREED has developed a new website and we hope you enjoy it!  We are working to expand our services to provide quality economic education and development opportunities.

We are also working on a small business plan project wich we are all very excited about and expect to povide an entrepreneur with some extra needed cash to help start their business.  The announcement is coming soon so stay tuned!

Best of Luck, 

Wendell Brok
Executive Director