Creating Your Own Business

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Greater Phoenix SCORE presentation on what you need to do when you are starting your own business. What entrepreneurs need to know about small business start-ups.

Text of Creating Your Own Business

  • 1. Simple StepsTHE 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 FacilitatorsTodays SCORE Mentors: Dave Miller Bill Robinson Doug Whitney ! 4. Myth #1Start-Up MythsMyth: All I need is a good idea Myth: On your own, you wont have to work hard or long hours Myth: You wont 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 skillsMulti-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 TitlePercent New Businesses33% SuccessfulSuccessful FailedAfter Five YearsFailed Source: U.S Dept. of Commerce, Bureau of the Census, Business Dynamics Statistics 8. Start Business Your Own Business ADVANTAGESDISADVANTAGES Not held back by old Choose location, name, logo, alliances Explore new markets and directions See a dream come trueNo base Greater risk No track record financing Dream can become a nightmare 9. Buy a Business ADVANTAGESDISADVANTAGES Established clientele Known quantity Help in running business Available records Easier financing Hidden issues: o o o o oDebts, 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 AdvantagesDISADVANTAGES 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 ADVANTAGESDISADVANTAGES 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 helpDISADVANTAGES Loss of control Franchise = royalty plus other costs Operational boundary Binding contract Franchisor problems are your problemsFranchise Disclosure DocumentFDD 13. What Is A Business PlanYour 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. Whats 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? oFeatures, Advantages, BenefitsWHY 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? Whats 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 ModelCaters 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 fundOperating 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 !3738 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. Owners 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 businessGreater Phoenix 40. Balance Sheet Sample ASSETSLIABILITIESCash $550 Accounts Receivable 300 Inventory 450 Office Equipment 250 Less: Depreciation (50) Total equipment 200 Utility Deposits 100Total Assets$1600Accounts Payable Payable to Credit Card Co. Total Liabilities$400 50 $450OWNER'S EQUITY Owner's Investment Retained Earnings Current Year's Earnings1,000 -150Total Owner's Equity1,150Total 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 2001200 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 bookson Hang on to cash as long you possibly canas Reconcile bank account monthly 43. A Business Owner Needs Trusted Advisors Your BusinessAttorneyBankerCPASCORE MentorInsurance 44. Types of Business StructuresTo 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 Approvalsand Labor Laws Immigration Laws IRS and S