How to Really Start Your Business

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Welcome toWelcome to

Business Seminars Business Seminars

How to How to ReallyReally StartStartYour Own BusinessYour Own Business

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What What isis SCORE? SCORE?

• A Non-Profit OrganizationA Non-Profit Organization SBA SponsoredSBA Sponsored

• Experienced VolunteersExperienced VolunteersAll facets of businessAll facets of business

• Personal Counseling & MentoringPersonal Counseling & MentoringFace-to FaceFace-to Face

• On Line Cyber CounselingOn Line Cyber Counseling www.score.orgwww.score.org

Counselors to America’s Small BusinessCounselors to America’s Small Business

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Today’s AgendaToday’s Agenda

1.1. A Small Dose of Reality TherapyA Small Dose of Reality Therapy2.2. Developing the Idea… Developing the Idea… 3.3. Structuring Your BusinessStructuring Your Business4.4. Understanding Money & Cash FlowUnderstanding Money & Cash Flow5.5. The Business PlanThe Business Plan6.6. Starting Out on the Right FootStarting Out on the Right Foot7.7. Q&A - Counselors RoundtableQ&A - Counselors Roundtable

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Reality TherapyReality TherapyThe taste is terrible…The taste is terrible…

but it works!but it works!

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Reality TherapyReality Therapy

• Advancing technologyAdvancing technology

• Corporate subcontractingCorporate subcontracting

• Accessible marketing informationAccessible marketing information

• E-commerce, InternetE-commerce, Internet

This can be a DeceptionThis can be a Deception

Perhaps you think…Perhaps you think…

““It’s easy to start a new business”It’s easy to start a new business”

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• Intense competitionIntense competition

• Fickle customersFickle customers

• Difficulty raising capitalDifficulty raising capital

• Difficulty finding good peopleDifficulty finding good people

These can be Land Mines…These can be Land Mines…

Have you noticed how fast Have you noticed how fast business conditions change?business conditions change?

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Difficulty raising capitalDifficulty raising capital Difficulty finding good peopleDifficulty finding good people Finding the right marketplaceFinding the right marketplace

The Land Mines!The Land Mines!

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• FamilyFamily• LocationLocation• Income – now or laterIncome – now or later• TalentsTalents

Your Your PersonalPersonal GoalsGoals……the most important issuesthe most important issues

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The IdeaThe IdeaHow to look at How to look at your your ideaidea…… objectivelyobjectively

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The IdeaThe Idea

• Personal goalsPersonal goals• Prior work experiencePrior work experience• Knowledge baseKnowledge base• Solving a problemSolving a problem• The right attitudeThe right attitude

Where does it come from?Where does it come from?

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Evaluate the IdeaEvaluate the Idea

1.1. Has the Has the IdeaIdea passed the passed the Time TestTime Test??

2.2. Are you ready to commit Are you ready to commit 55 years? years?

3.3. Is this Is this IdeaIdea reallyreally for you? for you?

4.4. What is the What is the rewardreward potential? potential?

5.5. Are you plugged into the Are you plugged into the right right networksnetworks??

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Test the IdeaTest the Idea

• Gather your factsGather your factsGet more than you needGet more than you need

• Talk to prospective customersTalk to prospective customersExpress your Idea…listen carefully!Express your Idea…listen carefully!

• Assess the CompetitionAssess the CompetitionStrengths & WeaknessesStrengths & WeaknessesPricing & DistributionPricing & Distribution

Startup market researchStartup market research

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Protect the IdeaProtect the Idea

• Theft? Theft? Much less danger than you think!Much less danger than you think!

• Protect what is proprietary Protect what is proprietary Patents & AgreementsPatents & Agreements

• Understand reality…Understand reality…Copyright & TrademarksCopyright & Trademarks

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A New TechniqueA New Technique

The The Elevator Talk:It’s a well-practiced answer to the questionIt’s a well-practiced answer to the question

Tell me, what’s Tell me, what’s youryour business? business?Brevity and content are what countBrevity and content are what count

Your mother would understand in the Your mother would understand in the time it takes to ride an elevator up to time it takes to ride an elevator up to the second floor. the second floor.

Experts say, “Be ready to sell your business Experts say, “Be ready to sell your business whenever the opportunity arises.”whenever the opportunity arises.”

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WorkshopWorkshopHow to create How to create

youryour

“Elevator Talk”“Elevator Talk”

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Put the Idea in WordsPut the Idea in Words

1.1. State your business conceptState your business concept What is it What is it you doyou do for Customers? for Customers?

2.2. How does the Customer benefit?How does the Customer benefit? What’s What’s in itin it for the Customer? for the Customer?

3.3. Who is in your Target Market?Who is in your Target Market? How can Prospects be How can Prospects be identifiedidentified? Separate from others?? Separate from others?

4.4. How do How do youyou want customers to want customers to perceiveperceive your business? your business?

Write your Write your Idea’sIdea’s components… components… (each in (each in 2525 words or less) words or less)

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Your Elevator TalkYour Elevator Talk

Now…Now… Boil down all 4 answers to just…Boil down all 4 answers to just…

2525 toto 3030wordswords

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Select yourSelect yourBusiness StructureBusiness Structure

ExamineExamine 44 AlternativesAlternatives

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Business StructureBusiness Structure 4 choices… 4 choices…

• Sole ProprietorshipSole Proprietorship• Partnership Partnership • Incorporation Incorporation • Limited LiabilityLimited Liability

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Business StructureBusiness Structure

• Most used – 70% of 20 million Most used – 70% of 20 million businessesbusinesses

• Easy and inexpensiveEasy and inexpensive

• You own the liabilityYou own the liability

Sole ProprietorshipSole Proprietorship

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• Group gains Tax benefitsGroup gains Tax benefits

• Easy, inexpensive & flexibleEasy, inexpensive & flexible

• You still own the liabilityYou still own the liability

PartnershipPartnership

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• Separates personal from businessSeparates personal from business

• CredibilityCredibility

• FlexibilityFlexibilityCapitalizationCapitalizationHealth & Insurance benefitsHealth & Insurance benefits

• S-CorporationS-Corporation Tax benefitsTax benefits

IncorporationIncorporation

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• A Hybrid – Corporate & PartnershipA Hybrid – Corporate & Partnership

• Professional servicesProfessional services

• Income and Tax benefitsIncome and Tax benefits

Limited Liability CompanyLimited Liability Company

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Managing your MoneyManaging your Money

Cash FlowCash Flow is the most is the mostimportant process important process you have to masteryou have to master

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Cash FlowCash Flow

Cash FlowCash Flow helps you know helps you know how much how much cashcash you’ll need you’ll need beforebefore the business the business supports itself.supports itself.

Cash FlowCash Flow is is notnot the same as the same as Profit & Loss.Profit & Loss.

Cash FlowCash Flow is the movement of money is the movement of money into and out of the business over into and out of the business over a specified period of time.a specified period of time.

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Stretch Your CashStretch Your Cash

• Watch Watch overheadoverhead costs costs

• Always Always negotiatenegotiate on price on price

• Give credit Give credit very very carefullycarefully

• Collect very Collect very aggressivelyaggressively

Spend & Collect with care…Spend & Collect with care…

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WorkshopWorkshopUnderstanding Cash FlowUnderstanding Cash Flow

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Cash Flow CriteriaCash Flow Criteria

• Cash Sales -Cash Sales - Begin at $5,000 monthly and Begin at $5,000 monthly and increase by $3,000 in month 3 and $2,000 increase by $3,000 in month 3 and $2,000 thereafter.thereafter.

• CollectionsCollections -- Are $1,000 each in months Are $1,000 each in months 2 and 3 and increase by $1,000 monthly 2 and 3 and increase by $1,000 monthly thereafter.thereafter.

CASH IN…CASH IN…

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Cash Flow TerminologyCash Flow Terminology

• The amount of cash you have on hand at The amount of cash you have on hand at the start of the month. Starting cash is the the start of the month. Starting cash is the same number as the previous month’s same number as the previous month’s ending balance.ending balance.

Cash In:Cash In:• Sources of cash – sales, paid receivables, Sources of cash – sales, paid receivables,

interest and others.interest and others.

Starting Cash:Starting Cash:

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• Fixed expensesFixed expenses – regular and not – regular and not easily eliminated (rent, etc).easily eliminated (rent, etc).

• Variable expensesVariable expenses – Can change – Can change from month to month (advertising, from month to month (advertising, supplies, promotion, services.supplies, promotion, services.

Cash Out:Cash Out:

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Ending Balance:Ending Balance:How much cash is left at the end of the How much cash is left at the end of the

month. (Cash In less Cash Out)month. (Cash In less Cash Out)

Cash Flow:Cash Flow:The amount of cash that has flowed The amount of cash that has flowed

through the business. It is a measure of through the business. It is a measure of change for that month.change for that month.

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Cash Flow CriteriaCash Flow Criteria

Rent is $3,000 a month.Rent is $3,000 a month.Two employees are hired at salaries Two employees are hired at salaries

of $24,000 a year each, paid on a of $24,000 a year each, paid on a monthly basis.monthly basis.

Supplies cost $2,000 the first month and Supplies cost $2,000 the first month and increase $1,000 a month until month 3, increase $1,000 a month until month 3, then stay the same.then stay the same.

CASH OUT…CASH OUT…

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Cash Flow Month 1Starting Cash $0

Cash INCash Sales $1,000

Collections $0Other

Total Cash IN $1,000

Cash OUTRent $700

Payroll $1,000Other $300

Total Cash OUT $2,000

Ending BALANCE ($1,000)

Change (CASH FLOW)($1,000)

Determining Cash Flow

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Determining Cash Flow Cash Flow Month 1Month 2 Starting Cash $0 ($1,000)

Cash INCash Sales$1,000 $1,500

Collections $0 $500Other

Total Cash IN $1,000 $2,000

Cash OUTRent $700 $700

Payroll $1,000 $2,500Other $300 $300

Total Cash OUT $2,000 $3,500

Ending BALANCE ($1,000)($2,500)

Change (CASH FLOW)($1,000)($1,500)

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Determining Cash FlowDetermining Cash Flow

Cash Flow Month 1Month 2 Month 3Month 4Month 5Month 6Starting Cash $0 ($1,000)($2,500)($2,200) ($400)$2,900

Cash INCash Sales$1,000 $1,500 $3,000 $4,000 $5,000 $5,000

Collections $0 $500 $1,000 $1,500 $2,500 $2,500Other

Total Cash IN $1,000 $2,000 $4,000 $5,500 $7,500 $7,500

Cash OUTRent $700 $700 $700 $700 $700 $700

Payroll $1,000 $2,500 $2,500 $2,500 $2,500 $2,500Other $300 $300 $500 $500 $1,000 $1,500

Total Cash OUT $2,000 $3,500 $3,700 $3,700 $4,200 $4,700

Ending BALANCE ($1,000)($2,500)($2,200) ($400)$2,900 $5,700

Change (CASH FLOW)($1,000)($1,500) $300 $1,800 $3,300 $2,800

Start Up Cash Required

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Determining Cash FlowCash Flow Month 1Month 2 Month 3Month 4Month 5Month 6Starting Cash $2,500 $1,500 $0 $300 $2,100 $5,400

Cash INCash Sales$1,000 $1,500 $3,000 $4,000 $5,000 $5,000

Collections $0 $500 $1,000 $1,500 $2,500 $2,500Other

Total Cash IN $1,000 $2,000 $4,000 $5,500 $7,500 $7,500

Cash OUTRent $700 $700 $700 $700 $700 $700

Payroll $1,000 $2,500 $2,500 $2,500 $2,500 $2,500Other $300 $300 $500 $500 $1,000 $1,500

Total Cash OUT $2,000 $3,500 $3,700 $3,700 $4,200 $4,700

Ending BALANCE $1,500 $0 $300 $2,100 $5,400 $8,200

Change (CASH FLOW)$1,500($1,500) $300 $1,800 $3,300 $2,800

Start Up Cash Invested

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The Business PlanThe Business Plan Just Just whatwhat is a business plan? is a business plan? Do I Do I reallyreally need it? need it? Do I Do I reallyreally have to have to writewrite it? it?

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The Business PlanThe Business Plan

Discussing future plansDiscussing future plansDemonstrating achievabilityDemonstrating achievabilitySatisfying reader’s needsSatisfying reader’s needs

A selling document that sells by:A selling document that sells by:

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• Bank FinancingBank Financing

• Investment FundsInvestment Funds

• Strategic AlliancesStrategic Alliances

• Mergers & AcquisitionsMergers & Acquisitions

• Customer & Distributor RelationsCustomer & Distributor Relations

Using the Plan – Outside the CompanyUsing the Plan – Outside the Company

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A “Sanity Check”A “Sanity Check”Force a thinking processForce a thinking processSet specific, achievable goalsSet specific, achievable goalsOblige management commitmentOblige management commitment

Using the Plan – Inside the CompanyUsing the Plan – Inside the Company

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• CompanyCompany• PeoplePeople• MarketMarket• AccomplishmentsAccomplishments• ProductionProduction

The data you’ll need:The data you’ll need:Information about…Information about…

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• Summary PlanSummary Plan – 10 to 15 pages – 10 to 15 pagesStartup, bank funding, investment Startup, bank funding, investment

• Full PlanFull Plan – 20 to 40 pages – 20 to 40 pagesMajor financingMajor financing

• Operational PlanOperational PlanUsed internally to guide the company Used internally to guide the company

and its management.and its management.

How big a Business Plan?How big a Business Plan?

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Business Plan ContentsBusiness Plan Contents

• SummarySummary• The CompanyThe Company• Markets & Markets &

CompetitionCompetition• Product/Service Product/Service

DescriptionDescription

• MarketingMarketing• ManufacturingManufacturing• Financial Financial

InformationInformation• Timetables & Timetables &

BenchmarksBenchmarks

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Starting OutStarting Out has a Dual Focus:has a Dual Focus:

All these business issues All these business issues plusplus

Your own state of mindYour own state of mind

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Put your right foot first…Put your right foot first…

Make a Make a TOTALTOTAL Commitment Commitment

SellSell yourself yourself

Be Be single-mindedsingle-minded in seeking customers in seeking customers

Prepare yourself mentally to…Prepare yourself mentally to…

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Ask for dates and subjects for upcoming…Ask for dates and subjects for upcoming…

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