How to Really Start Your Business

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How to Really Start Your Business

  1. 1. 1 Welcome toWelcome to Business SeminarsBusiness Seminars How toHow to ReallyReally StartStart Your Own BusinessYour Own Business
  2. 2. 2 WhatWhat isis SCORE?SCORE? • A Non-Profit OrganizationA Non-Profit Organization  SBA SponsoredSBA Sponsored • Experienced VolunteersExperienced Volunteers  All facets of businessAll facets of business • Personal Counseling & MentoringPersonal Counseling & Mentoring  Face-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
  3. 3. 3 Today’s AgendaToday’s Agenda 1.1. A Small Dose of Reality TherapyA Small Dose of Reality Therapy 2.2. Developing the Idea…Developing the Idea… 3.3. Structuring Your BusinessStructuring Your Business 4.4. Understanding Money & CashUnderstanding Money & Cash FlowFlow 5.5. The Business PlanThe Business Plan 6.6. Starting Out on the Right FootStarting Out on the Right Foot 7.7. Q&A - Counselors RoundtableQ&A - Counselors Roundtable
  4. 4. 4 Reality TherapyReality Therapy The taste is terrible…The taste is terrible… but it works!but it works!
  5. 5. 5 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”
  6. 6. 6 Reality TherapyReality Therapy • 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 fastHave you noticed how fast business conditions change?business conditions change?
  7. 7. 7 Reality TherapyReality Therapy  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!
  8. 8. 8 Reality TherapyReality Therapy • FamilyFamily • LocationLocation • Income – now or laterIncome – now or later • TalentsTalents YourYour PersonalPersonal GoalsGoals…… the most important issuesthe most important issues
  9. 9. 9 The IdeaThe Idea How to look atHow to look at youryour ideaidea…… objectivelyobjectively
  10. 10. 10 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?
  11. 11. 11 Evaluate the IdeaEvaluate the Idea 1.1. Has theHas the IdeaIdea passed thepassed the Time TestTime Test?? 2.2. Are you ready to commitAre you ready to commit 55 years?years? 3.3. Is thisIs this IdeaIdea reallyreally for you?for you? 4.4. What is theWhat is the rewardreward potential?potential? 5.5. Are you plugged into theAre you plugged into the rightright networksnetworks??
  12. 12. 12 Test the IdeaTest the Idea • Gather your factsGather your facts Get more than you needGet more than you need • Talk to prospective customersTalk to prospective customers Express your Idea…listen carefully!Express your Idea…listen carefully! • Assess the CompetitionAssess the Competition Strengths & WeaknessesStrengths & Weaknesses Pricing & DistributionPricing & Distribution Startup market researchStartup market research
  13. 13. 13 Protect the IdeaProtect the Idea • Theft?Theft? Much less danger than you think!Much less danger than you think! • Protect what is proprietaryProtect what is proprietary Patents & AgreementsPatents & Agreements • Understand reality…Understand reality… Copyright & TrademarksCopyright & Trademarks
  14. 14. 14 A New TechniqueA New Technique TheThe Elevator Talk: It’s a well-practiced answer to the questionIt’s a well-practiced answer to the question Tell me, what’sTell me, what’s youryour business?business? Brevity and content are what countBrevity and content are what count Your mother would understand in theYour mother would understand in the time it takes to ride an elevator up totime it takes to ride an elevator up to the second floor.the second floor. Experts say, “Be ready to sell your businessExperts say, “Be ready to sell your business whenever the opportunity arises.”whenever the opportunity arises.”
  15. 15. 15 WorkshopWorkshop How to createHow to create youryour “Elevator Talk”“Elevator Talk”
  16. 16. 16 Put the Idea in WordsPut the Idea in Words 1.1. State your business conceptState your business concept What is itWhat is it you doyou do for Customers?for Customers? 1.1. How does the Customer benefit?How does the Customer benefit? What’sWhat’s in itin it for the Customer?for the Customer? 1.1. Who is in your Target Market?Who is in your Target Market? How can Prospects beHow can Prospects be identifiedidentified? Separate from others?? Separate from others? 1.1. How doHow do youyou want customers towant customers to perceiveperceive your business?your business? Write yourWrite your Idea’sIdea’s components…components… (each in(each in 2525 words or less)words or less)
  17. 17. 17 Your Elevator TalkYour Elevator Talk Now…Now… Boil down all 4 answers to just…Boil down all 4 answers to just… 2525 toto 3030 wordswords
  18. 18. 18 Select yourSelect your Business StructureBusiness Structure ExamineExamine 44 AlternativesAlternatives
  19. 19. 19 Business StructureBusiness Structure 4 choices…4 choices… • Sole ProprietorshipSole Proprietorship • PartnershipPartnership • IncorporationIncorporation • Limited LiabilityLimited Liability
  20. 20. 20 Business StructureBusiness Structure • Most used – 70% of 20 millionMost used – 70% of 20 million businessesbusinesses • Easy and inexpensiveEasy and inexpensive • You own the liabilityYou own the liability Sole ProprietorshipSole Proprietorship
  21. 21. 21 Business StructureBusiness Structure • Group gains Tax benefitsGroup gains Tax benefits • Easy, inexpensive & flexibleEasy, inexpensive & flexible • You still own the liabilityYou still own the liability PartnershipPartnership
  22. 22. 22 Business StructureBusiness Structure • Separates personal from businessSeparates personal from business • CredibilityCredibility • FlexibilityFlexibility CapitalizationCapitalization Health & Insurance benefitsHealth & Insurance benefits • S-CorporationS-Corporation  Tax benefitsTax benefits IncorporationIncorporation
  23. 23. 23 Business StructureBusiness Structure • A Hybrid – Corporate & PartnershipA Hybrid – Corporate & Partnership • Professional servicesProfessional services • Income and Tax benefitsIncome and Tax benefits Limited Liability CompanyLimited Liability Company
  24. 24. 24 Managing your MoneyManaging your Money Cash FlowCash Flow is the mostis the most important processimportant process you have to masteryou have to master
  25. 25. 25 Cash FlowCash Flow Cash FlowCash Flow helps you knowhelps you know how muchhow much cashcash you’ll needyou’ll need beforebefore the businessthe business supports itself.supports itself. Cash FlowCash Flow isis notnot the same asthe same as Profit & Loss.Profit & Loss. Cash FlowCash Flow is the movement of moneyis the movement of money into and out of the business overinto and out of the business over a specified period of time.a specified period of time.
  26. 26. 26 Stretch Your CashStretch Your Cash • WatchWatch overheadoverhead costscosts • AlwaysAlways negotiatenegotiate on priceon price • Give creditGive credit veryvery carefullycarefully • Collect veryCollect very aggressivelyaggressively Spend & Collect with care…Spend & Collect with care…
  27. 27. 27 WorkshopWorkshop Understanding Cash FlowUnderstanding Cash Flow
  28. 28. 28 Cash Flow CriteriaCash Flow Criteria • Cash Sales -Cash Sales - Begin at $5,000 monthly andBegin at $5,000 monthly and increase by $3,000 in month 3 and $2,000increase by $3,000 in month 3 and $2,000 thereafter.thereafter. • CollectionsCollections -- Are $1,000 each in monthsAre $1,000 each in months 2 and 3 and increase by $1,000 monthly2 and 3 and increase by $1,000 monthly thereafter.thereafter. CASH IN…CASH IN…
  29. 29. 29 Cash Flow TerminologyCash Flow Terminology • The amount of cash you have on hand atThe amount of cash you have on hand at the start of the month. Starting cash is thethe start of the month. Starting cash is the same number as the previous month’ssame 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:
  30. 30. 30 Cash Flow TerminologyCash Flow Terminology • 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:
  31. 31. 31 Cash Flow TerminologyCash Flow Terminology Ending Balance:Ending Balance: How much cash is left at the end of theHow 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 flowedThe amount of cash that has flowed through the business. It is a measure ofthrough the business. It is a measure of change for that month.change for that month.
  32. 32. 32 Cash Flow CriteriaCash Flow Criteria Rent is $3,000 a month.Rent is $3,000 a month. Two employees are hired at salariesTwo employees are hired at salaries of $24,000 a year each, paid on aof $24,000 a year each, paid on a monthly basis.monthly basis. Supplies cost $2,000 the first month andSupplies 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…
  33. 33. 33 Cash Flow Month 1 Starting Cash $0 Cash IN Cash Sales $1,000 Collections $0 Other Total Cash IN $1,000 Cash OUT Rent $700 Payroll $1,000 Other $300 Total Cash OUT $2,000 Ending BALANCE ($1,000) Change (CASH FLOW) ($1,000) Determining Cash Flow
  34. 34. 34 Determining Cash Flow Cash Flow Month 1 Month 2 Starting Cash $0 ($1,000) Cash IN Cash Sales $1,000 $1,500 Collections $0 $500 Other Total Cash IN $1,000 $2,000 Cash OUT Rent $700 $700 Payroll $1,000 $2,500 Other $300 $300 Total Cash OUT $2,000 $3,500 Ending BALANCE ($1,000) ($2,500) Change (CASH FLOW) ($1,000) ($1,500)
  35. 35. 35 Determining Cash FlowDetermining Cash Flow Cash Flow Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Starting Cash $0 ($1,000) ($2,500) ($2,200) ($400) $2,900 Cash IN Cash Sales $1,000 $1,500 $3,000 $4,000 $5,000 $5,000 Collections $0 $500 $1,000 $1,500 $2,500 $2,500 Other Total Cash IN $1,000 $2,000 $4,000 $5,500 $7,500 $7,500 Cash OUT Rent $700 $700 $700 $700 $700 $700 Payroll $1,000 $2,500 $2,500 $2,500 $2,500 $2,500 Other $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
  36. 36. 36 Determining Cash Flow Cash Flow Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Starting Cash $2,500 $1,500 $0 $300 $2,100 $5,400 Cash IN Cash Sales $1,000 $1,500 $3,000 $4,000 $5,000 $5,000 Collections $0 $500 $1,000 $1,500 $2,500 $2,500 Other Total Cash IN $1,000 $2,000 $4,000 $5,500 $7,500 $7,500 Cash OUT Rent $700 $700 $700 $700 $700 $700 Payroll $1,000 $2,500 $2,500 $2,500 $2,500 $2,500 Other $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
  37. 37. 37 The Business PlanThe Business Plan  JustJust whatwhat is a businessis a business plan?plan?  Do IDo I reallyreally need it?need it?  Do IDo I reallyreally have tohave to writewrite it?it?
  38. 38. 38 The Business PlanThe Business Plan Discussing future plansDiscussing future plans Demonstrating achievabilityDemonstrating achievability Satisfying reader’s needsSatisfying reader’s needs A selling document that sells by:A selling document that sells by:
  39. 39. 39 The Business PlanThe Business Plan • 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
  40. 40. 40 The Business PlanThe Business Plan A “Sanity Check”A “Sanity Check” Force a thinking processForce a thinking process Set specific, achievable goalsSet specific, achievable goals Oblige management commitmentOblige management commitment Using the Plan – Inside the CompanyUsing the Plan – Inside the Company
  41. 41. 41 The Business PlanThe Business Plan • CompanyCompany • PeoplePeople • MarketMarket • AccomplishmentsAccomplishments • ProductionProduction The data you’ll need:The data you’ll need: Information about…Information about…
  42. 42. 42 The Business PlanThe Business Plan • Summary PlanSummary Plan – 10 to 15 pages– 10 to 15 pages Startup, bank funding, investmentStartup, bank funding, investment • Full PlanFull Plan – 20 to 40 pages– 20 to 40 pages Major financingMajor financing • Operational PlanOperational Plan Used internally to guide the companyUsed internally to guide the company and its management.and its management. How big a Business Plan?How big a Business Plan?
  43. 43. 43 Business Plan ContentsBusiness Plan Contents • SummarySummary • The CompanyThe Company • Markets &Markets & CompetitionCompetition • Product/ServiceProduct/Service DescriptionDescription • MarketingMarketing • ManufacturingManufacturing • FinancialFinancial InformationInformation • Timetables &Timetables & BenchmarksBenchmarks
  44. 44. 44 Starting OutStarting Out has a Dual Focus:has a Dual Focus: All these business issuesAll these business issues plusplus Your own state of mindYour own state of mind
  45. 45. 45 Put your right foot first…Put your right foot first… Make aMake a TOTALTOTAL CommitmentCommitment SellSell yourselfyourself BeBe single-mindedsingle-minded in seeking customersin seeking customers Prepare yourself mentally to…Prepare yourself mentally to…
  46. 46. 46 Setup your first appointmentSetup your first appointment for a 1-on-1 Counseling Meeting:for a 1-on-1 Counseling Meeting: Go toGo to www.scoreworks.orgwww.scoreworks.org,, Press the “Counseling” buttonPress the “Counseling” button Ask for dates and subjects for upcoming…Ask for dates and subjects for upcoming… SCORE Business SeminarsSCORE Business Seminars Go toGo to www.scoreworks.orgwww.scoreworks.org,, Press the “Seminars” buttonPress the “Seminars” button
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