Creating Your Own Business
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The document outlines essential considerations for starting and managing a business, emphasizing the resources offered by SCORE such as mentorship and seminars. It discusses the importance of a solid business plan, understanding financials, and identifying market needs, as well as advantages and disadvantages of different business structures and funding sources. Tips are provided for assessing personal readiness and preparing for challenges in the entrepreneurial journey.
Creating Your Own Business
- 1. Simple Steps THE BUZZ ABOUT CREATING YOUR OWN BUSINESS
- 2. What Is SCORE? How Can We Help? • 11,000+ mentors • Experienced executives as volunteers • Seminars • Free Mentoring o One-on-one o E-mail • Resources for small business: http://www.score.org
- 3. Meet Your Facilitators Today’s SCORE Mentors: • Dave Miller • Bill Robinson • Doug Whitney !
- 4. Myth #1 Start-Up Myths Myth: All I need is a good idea Myth: On your own, you won’t have to work hard or long hours Myth: You won’t have to report to a boss. Myth: Business owners do the work they want to do Myth: Self employment limits what you achieve. ! !
- 5. Key Success Factors • • • • • • • Cash Commitment Advice Not alone Not fast growth Innovate Communication skills •Multi-task ability •Education/experience •Time and location •Work ethic •Time management •Willingness to ask •Viable business plan ! 6
- 6. Are You an Entrepreneur? • • • • • • • • • Self-starter Resourceful Responsible Organized Hard worker Persistent Decisive Healthy Family support
- 7. Reality: Business Success Chart Title Percent New Businesses 33% Successful Successful Failed After Five Years Failed Source: U.S Dept. of Commerce, Bureau of the Census, Business Dynamics Statistics
- 8. Start Business Your Own Business ADVANTAGES DISADVANTAGES • • Not held back by old • Choose location, name, • logo, alliances • • Explore new markets and • directions • See a dream come true No base Greater risk No track record financing Dream can become a nightmare
- 9. Buy a Business ADVANTAGES DISADVANTAGES • Established clientele • Known quantity • Help in running business • Available records • Easier financing • Hidden issues: o o o o o Debts, transfer issues Taxes Reputation Loyalty to owner inventory • No guarantee of success
- 10. Home-Based Business Home Based Businesses ADVANTAGES • • • • Convenient location Less expensive Flexible schedule Tax Advantages DISADVANTAGES • • • • • • Zoning restrictions Isolation Difficult financing Distractions IRS scrutiny Possible scams * Not all organizations in these businesses are scams, but many individuals have been cheated by numerous unscrupulous operators in these fields.
- 11. Online Online Business Business ADVANTAGES DISADVANTAGES • Lower startup costs • Greater geographic reach • Convenience & accessibility • Flexibility ! • • • • Low conversion rates Higher competition No personal contact Limited information (e.g., taste, texture, odor)
- 12. Franchise Franchise a Business ADVANTAGES • • • • • Proven product or service Marketing power Training, guidance Continuing relationship Access to others for help DISADVANTAGES • Loss of control • Franchise = royalty plus other costs • Operational boundary • Binding contract • Franchisor problems are your problems Franchise Disclosure Document FDD
- 13. What Is A Business Plan Your business plan is your road map. It lays out the route to your business future.
- 14. Why You Need A Business Plan • To sell yourself on the business! • focus • financing • key employees • keep you aimed in the right direction • To define why buyers will prefer you 15
- 15. Business Plan Process Goal - not just to write a plan / It is a to complete the process •Research the big picture - industry, market, competition, etc •Document data & draw conclusions •Determine actions (strategies & tactics) to achieve a successful business •Develop a detailed outline for yourself •End with an Action Plan– long view / 3 years 16
- 16. Constructing Your Operating Cash Needs Plan •Define product or service •Define Target Market •Analyze competition •Clarify business model •Develop marketing / sales tactics •Forecast sales/ P&L/Cash Flow •Develop operations tactics !
- 17. Constructing Your Operating Cash Needs Plan •Create implementation schedule •Develop start-up expenses •Forecast P & L •Estimate Cash flow •Create budget -> $$$ Required •Owner Worker •Worker competitive wage •Owner Profit
- 18. What’s In Your SWOT? : • Strengths – assets • Weaknesses - liabilities • Opportunities – current and future customers • Threats - competition 19
- 19. Know The Competition • Their advantages? • Location / promotion? • Client base? • Visit competitors • How do you compare to them? • What are your “F-A-Bs”? o Features, Advantages, Benefits WHY WILL BUYERS PREFER YOU? 20
- 20. Competitive Advantages - Examples • Product attributes • Unique Service • Better Value • Convenience • Experience • What makes you special? KNOW WHY BUYERS WILL PREFER YOU?
- 21. Your Plan Deals With Key Issues • • • • • • • • Your experience Your purpose The problem in the marketplace The solutions you offer Customer benefits The market, your marketing plan Competition Proof of profitability
- 22. What Business Are You Really In? • Who is the customer? • What do they want? • How will you reach them? • What value is provided? • What’s the competition? • How does the company actually make money?
- 23. Your Product or Service ! • • • • • What is it?! Who needs it?! Why do they need it?! Who are the competitors! How is yours different/better ! ! than the competition?
- 24. Business Model Business Design: How You... • Generate revenue • Attract customers • Configure resources • Make money • Capture profits Business Strategy: How You… • Cope with competition • Differentiate yourself • Provide a value proposition • Select niche or target markets • Gain and hold your U.S.C.A.
- 25. Business Model •Caters to moderate income market •Lower cost goods . •Large, easy to park •Print ads in newspapers
- 26. Business Model •Caters to high-end market •High cost, gourmet goods . •Boutique feel •Full color circulars to specific zip codes
- 27. Marketing Plan • • • • • • • • • Your Target Market ! Product / benefits delivered How are you different?! How are customers reached! Costs to reach customers?! Price/Value relationship! Distribution / Advertising / Sales Who & where are your competitors Will market price = profit? At what volume?
- 28. Marketing Plan Data Sources – – – – – – – – – Chambers of Commerce! Banks Civic Organizations Census Data Internet Focus groups Reference library Government websites Trade associations
- 29. Management Your Marketing Plan Plan • Responsibilities • Relevant experience o use names o verify information o include yourself • Identify management needs and strategies o technical, finance o marketing, operations, other
- 30. Financial Plan • Forecast 3 years of projections • Why Forecast? ▪ Hobby or Business ▪ Impact of assumptions • NOT exercise in accuracy • Cash needed • Focus P&L Cash Flow • Communicate in financial terms
- 31. Personal Personal Budget • Monthly cost of living • Costs you can cut back • Outstanding debt • Amount in savings • Total needed to cover 6 to 12 months of expenses
- 32. Essential Cash Start-up Cash Needs Needs Start-up Needs: • Tools and equipment • Leasehold improvements • Licenses and permits • Professional fees • Initial inventory • Working capital reserve fund Operating Needs: • Salaries • Rent • Insurance • Taxes and fees • Marketing • Loan interest/principal • Utilities • Maintenance
- 33. The Executive Summary • Most important section • Max two pages • Written last • Viewed first. • Enthusiastic snapshot • Explains who you are, what you do, how, why.
- 34. The Executive Summary ! • Describes customers & market needs you meet • Tells how you make money • Stresses your unique sustainable competitive advantage • Tells where you are now / Where the company will go • Your 15 minutes of fame
- 35. A Good Business Plan • Ensures you fully understand cash requirements • Guides to keep you on track to success • Provides you with a powerful management tool for life of your business • Shows you as a smart and business owner • Is your dream in your own words ! serious
- 36. A Good Business Plan • Is a dynamic, evolving, living document • Focuses on the work to be done • Has SMART Goals • Details action plans • Cycles through plan several times • Changes actions to change results
- 37. Why Financials Understand & manage business Understand impact of changes Plan financials are PROJECTIONS ! Key Financials . Income: Profit & Loss Balance Sheet: Own & Owe Cash Flow: Where is the CASH !37 38
- 38. Profit and Loss Sample Sales Cost of sales: Materials Labor Overhead Total Cost of Sales Gross Profit Operating Expenses Depreciation expense Total expenses Earnings before tax $500 50 75 25 150 350 150 50 200 $150
- 39. Owner’s Equity ASSETS - LIABILITIES = EQUITY ! What your business OWNS minus what your business OWES = EQUITY ! You can think of equity as the NET WORTH of the business Greater Phoenix
- 40. Balance Sheet Sample ASSETS LIABILITIES Cash $550 Accounts Receivable 300 Inventory 450 Office Equipment 250 Less: Depreciation (50) Total equipment 200 Utility Deposits 100 Total Assets $1600 Accounts Payable Payable to Credit Card Co. Total Liabilities $400 50 $450 OWNER'S EQUITY Owner's Investment Retained Earnings Current Year's Earnings 1,000 -150 Total Owner's Equity 1,150 Total Liabilities & Equity $1600
- 41. Cash Flow Statement Sample Beginning Cash Receipts: Owner Investment Cash Sales Total Receipts Payments: Make Utility Deposit Payment of Expenses Payment on Payables Total Payments Cash Flow for the Period Ending Cash $ 0 1,000 200 1200 100 150 400 650 550 $ 550
- 42. Cash Is Key! Cash: Most Important Asset • Open a separate bank account for your business ASAP • Deposit all receipts “intact” • Use a petty cash fund • Separate sales tax receipts your books on • Hang on to cash as long you possibly can as • Reconcile bank account monthly
- 43. A Business Owner Needs Trusted Advisors Your Business Attorney Banker CPA SCORE Mentor Insurance
- 44. Types of Business Structures To protect personal assets? ! • Sole Proprietorship: no • Partnership: no • Corporation: possibly yes • Limited Liability Company (LLC): possibly yes SCORE© seminar facilitators do not represent themselves as Legal or Tax Experts. The information being provided to you is correct to the best of our knowledge at the time of presentation. We strongly urge you to seek advice from an attorney and/or a CPA. 45
- 45. Government Regulations Government Regulations • Business Licenses Approvals and • Labor Laws • Immigration Laws • IRS and Social Security Withholding & Payments • IRS’ Employer Identification No. (EIN)
- 46. Sources of Funds Equity - Signifies Ownership • Personal savings • Family and friends • Partners’ contributions • Retained profits • Investors Angels VC
- 47. Sources of Funds Debt - Does NOT Signify Ownership • Banks* and credit unions • Credit cards (not recommended) • Community Express Micro Loans* *Usually guaranteed by SBA ! !
- 48. Sources of Funds Crowdfunding • Currently Donations • Kickstarter • Indiegogo • ! SEC equity rules to be defined
- 49. Lenders’ of Borrower Lender’s ViewView of Borrowers • • • • • • • • Character Commitment Credit rating Cash flow Collateral Capital Competition Conditions
- 50. SBA Guaranteed Loan Advantages • Banks hesitate to approve a loan for a start up business without an SBA Guarantee • SBA may guarantee up to 75% • Banks may lend for a longer time (depends on use) • You must present a viable Business Plan to an SBA qualified lender 51
- 51. Use of SBA Loan Proceeds Eligible: • Working capital • Inventory • Machinery & equipment • Land & building • Debt refinancing • Change of ownership • Floor plan financing Ineligible: • Real estate held for investment • Purchase part of the business • Payment to principals • Delinquent payroll taxes
- 52. Summary • Do your homework • Be prepared to work hard • Be prepared for success • Meet with a SCORE Counselor frequently to help you reality-check the progress of your plan in face to face meetings • Attend workshops on facets of planning •“Nothing great is ever achieved without enthusiasm” Ralph Waldo Emerson 53
- 53. Before You Start Small Business Readiness Self Assessment Topic Question My product/service is servicing an unmet need. Idea Feasibility My product/service could be expanded to gain additional customer groups. I know who my potential buyers are. Market Identification I have a clear value proposition for my potential buyers. I know what it will take to start my business. Implementation I know what it will take to run my business. I understand what it will take to obtain funding. Funding I have a plan to fund my business start. I am ready to work hard to achieve my business goals. Personal Readiness I understand the challenges ahead and have a plan to tackle them.
- 54. Before You Go… Do you have any questions? If not, thanks for attending! For a follow-up meeting: Call SCORE office: (602) 745-7250 Office Hours 9am to 1pm M-F http://www.scorephoenix.org Greater Phoenix