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Entrepreneurship Training Presentation Transcript

  • 1. Bob Cohen Braintree Business Development Center
  • 2. Creating an entrepreneurial climate
  • 3. Creating an entrepreneurial climate
  • 4.  www.grants.gov  SBIR and STTR programs  USDA-ARS Technology Transfer Program  USDA Rural Energy for America Program (REAP)  USDA Value Added Agricultural Producer Grant  Ohio: Making Efficiency Work  Branded Program: www.brandedprogram.org
  • 5.  Feasibility Grant  Energy Audit Grant  Energy Efficiency Grant  Energy Efficiency Loan Guarantee
  • 6. Always start with the bank, that’s where the client should begin and end. Many other lending options or loan guarantee programs all work in conjunction with bank loans. Things banks will want  Application  Collateral  Credit  Business plan  Financials (historic and projections)
  • 7. Private Money Public Money  Examples  Examples  Personal Savings  Microlending  Family and Friends programs  Credit Cards  County or City CDBG  Bank Loans  SBA or ODOD  Private Equity financing  Pros & Cons  Pros & Cons  Simple application  Long application process (usually) process  Fast money (usually)  Slow money  Terms vary wildly  Low interest rates available
  • 8. SBA 504 loan Ohio 166 loan  40% of total project  40% of total project cost cost  Maximum $1.5  Maximum $500,000 million  1 job  1 job creation/retention creation/retention per $50,000 per $65,000  Prevailing wage  Temporary fee applies reduction from stimulus money
  • 9.  FSA offers direct loans and loan guarantees  Beginning farmers  Purchasing real estate or equipment  Improvements  Soil and water conservation projects  Disaster recovery  Operational financing  Farm planning and counseling
  • 10.  Loans up to $35,000 averaging $10-20k  Eligible uses  Equipment  Inventory  Working capital  Debt restructure  Short term projects  Flexible terms  Eligible business: Pre-venture, startup, and existing  Credit standards vary based on type of business, loan amount, and use of funds.
  • 11. Most SBA lending is a guarantee, not a direct loan  7a  SBA Express  SBA Patriot Express  Community Express
  • 12.  Ohio Treasurer's programs  Ag-link  Eco-link  Grow Now  Trade Adjustment  GLTAAC  Small Business Development Centers  Ohio Employee Ownership Center at Kent State University
  • 13.  Employee Stock Ownership Planning  Business Succession Planning Program  Cooperative Development Center
  • 14. The Small Business Development Centers Network of Ohio is the premier technical assistance program for Ohio‟s businesses. The network is provided through a partnership between the Ohio Department of Development, the U.S. Small Business Administration and selected Ohio chambers of commerce, colleges and universities, and economic development agencies. There are 36 funded Centers throughout Ohio staffed by highly trained, Certified Business Advisors®. Centers provide free, confidential, in-depth, one-on-one counseling for existing businesses and entrepreneurs. www.entrepreneurohio.org
  • 15. Quick Facts about starting a small business • Of all small businesses • For bank loans, you started today, 80% will must have excellent not be in operation in 5 personal credit to years. borrow money. • If you need financing, • It is normal to not earn you will have to provide a profit in the first two 5% - 50% of the total funds. years of operation. • In order to get a small • The IRS can and will business loan, you will seize personal and be required to business assets to personally guarantee its satisfy your business repayment. taxes.
  • 16. STEPS: Opportunity…Idea…Potential 1. Identifying a Business Opportunity - There is a need for … 2. Creating a Business Idea - I can fill that need by doing … Business Concept: Idea for a new business that can be tested. 3. Determine the Potential - My research and financial data shows me that I should be able to make … Business planning process which will help you determine a business idea’s potential and profitability.
  • 17. 1. What is the need you fill or problem you solve? (Value Proposition) 2. Who are you selling to? (Target Market) 3. How would you make money? (Revenue Model) 4. How will you differentiate your company from what is already out there? (Competitive Advantage / Unique selling proposition) 5. What are the barriers to entry? (Keep you from starting) 6. How many competitors do you have and of what quality are they? (S.W.O.T. Analysis) 7. How big is your market in dollars? (Market Size) 8. How fast is the market growing or shrinking? (Market Growth) 9. What percent of the market do you believe you could gain? (Market Share) 10. How much would it cost to get started? (Start-up Costs)
  • 18. In business, there are no guarantees. There is simply no way to eliminate all the risks associated with starting a small business, but you can improve your chances of success with good planning, preparation, and insight. You can also improve your chances of success by understanding and avoiding some of the pitfalls encountered by others.
  • 19. PLANNING is critical before entering into any new business, or venture. The Business Plan is a “living” written document which outlines the goals of the business and describes how these goals will be achieved. “A Business Plan tells a story. Hopefully, a story with a happy ending.”
  • 20. The BUSINESS PLAN should…  Outline goals of company  Define market  Evaluate feasibility  Road map  Identify additional opportunities  Clarify financial needs  Necessary to obtain financing
  • 21.  Section I: Executive Summary  Section II: Business Description  Section III: Background Information  Section IV: Organizational Matters  Section V: Marketing Plan  Section VI: Financial Plan  Section VII: Supporting Documentation
  • 22.  Section I: Executive Summary Complete this section after the rest of the business plan and simply highlight the most important aspects of the plan.
  • 23.  Section II: Business Description A. General Description of Business 1) What business are you in? What are the key products/services of your business? 2) What market do you believe exists for these products or services? (Describe your current market.) 3) What is the location of your business? Why is this advantageous? 4) How do you operate your business? Who is involved in the operations? How much of your time is spent in the business? 5) What state of development is your business in? (Development stage, first year of operations, stable or mature business, stagnant mature business, etc.) 6) Is growth a part of your plan for your business? If so describe what kind of growth you are projecting, and how you think that growth will occur (adding product or services, expanding your market, changing your product or service mix, etc.)
  • 24. B. Mission Statement 1) What is the vision for the future of your business? 2) What is the purpose of your business, internally and externally? 3) Include Your Mission Statement C. Goals and Objectives 1) What are your short-term (within one year)and long-term (two to five years) goals and the objectives to reach your goals?
  • 25.  Section III: Background Information A. Industry Information 1) Identify your business industry 2) What are the current industry trends? Include growth patterns, niche markets, and size of the market. 3) What are the future industry trends?
  • 26. B. Business History (if applicable) 1) Provide a brief history of your business, including when it was founded, why it was started, profitability and growth patterns and how the business has changed over time. 2) How does your business fall into the current and future trends of the industry?
  • 27.  Section IV: Organizational Matters C. Business Structure 1) Describe the legal structure of your business. (Sole proprietorship, Partnership, Corporation or Limited Liability Company) Include in this the ownership of the business. 2) Describe business licenses and permits you may need as well as regulatory agencies that have jurisdiction over your business. D. Management Team 1) Describe your management team. Include key positions and the qualifications (or needed qualifications) of employees.
  • 28. E. Personnel 1) Describe the positions in your company, the job responsibilities and skills (or needed skills) of employees. 2) What is your plan for filling positions? Explain how you will recruit and what training might be needed. F. Outside Advisors 1) Describe what outside advisors you will use to enhance your business. This should include the cost to your business and what services they will provide. Examples include: Accountant, Attorney, Insurance Agent & Marketing Agent. 2) If you will use an advisory board, list potential members and areas of expertise.
  • 29. G. Risk Management 1) What types of insurance will you require, and what are the costs? (Include proof of insurance or a quote) 2) What are your exit strategies, including succession planning? H. Process 1)Describe the process necessary to get your product/service to your customer. This should include your inputs, how do you add value, packaging an delivery. Also, what types of labor inputs are necessary?
  • 30.  Section V. Marketing Plan I. Products/Services 1) Describe each product/service you will sell. List each separately. 2) What is special or unique about the product/service you offer? 3) What benefit does the customer get from your product/service? 4)Who will your primary suppliers be? Will you have credit terms with them? 5) What will be the price points for these products/services?
  • 31. J. Customer Analysis 1) Describe the people buying or who are most likely to buy product/service. (If you have more than one target market, describe each). HINT: Resist the urge to say “everyone”. Some people will use products/services more often or in larger quantities than others. 2) Provide a customer profile including : gender, age, income, occupation, education, geography, and family status or if selling to other businesses provide an organizational profile including, purchasing decisions and procedures for buying and product usage. Are the people who purchase your product also the ones that (directly) use it?
  • 32. K. Competitive Analysis 1) List your strongest 3-5 competitors and where they are located. What customer profiles are they targeting? 2) What are the strengths and weaknesses? Include the following factors: products, price, quality, location, selection, customer service, expertise, reliability, reputation, management, and advertising. 3) What are your key competitive advantages? Explain why customers will buy from you rather than your competition.
  • 33. L. Marketing Potential 1) Describe your geographic trade area. 2) Describe the size of your market in terms of potential customers. Include whether this market is growing, stable, declining and why. 3) What is your market potential in terms of total potential sales? This should be based on market size, target market size, number that will be actual customers, average order size, and number of orders per year.
  • 34. M. Pricing 1) How will you price products/services? If necessary, include pricing strategy chart. Make sure you have considered your cost of goods. 2) How does this pricing position you in the market? N. Promotional Strategies 1) Advertising a) What advertising tools will you use and why did you choose these? Tools could include: newspaper, magazines, direct mail, yellow pages, radio, TV, Internet, business cards, and brochures. b) How often and how much will you spend on your advertising budget?
  • 35. 2) Public Relations a) Explain if you will use public relations, and what activities this might include, as a part of your promotional strategies. These activities might include trade shows, discounts, special events, sponsorship, and customer service. 3) Personal sales a) What part does personal sales play in the purchase of your product/service? b) Who will be responsible for selling? c) What qualifications will your salespeople have to have? d) What are your customer service policies?
  • 36. Section VI. Financial Plan This is the part that scares many clients the most. Without realizing it, you have gathered most of the information needed in this section just by completing the previous sections. Your SBDC counselor can help you pull it all together.
  • 37. O. Pre-Start-up 1) How much money will it cost to get ready to open? a) Building or remodeling costs b) Equipment, furniture, and fixture costs c) Inventory costs d) Rent or mortgage, utilities, insurance, and employees prior to opening e) Pre-opening advertising f) Attorneys, accountants, and other consultants prior to opening
  • 38. 2) How do you propose to finance this? How much will come from: a) Personal savings b) Bank Loans c) Personal loans from family and friends d) Outside investors e) Other P. Projections 1) What will your monthly sales be for the first year? What will your sales be for years 2 and 3? 2) What will your monthly expenses be for the first year? What will your expenses be for years 2 and 3? 3) Complete Monthly Income, Cash Flow, and Balance Sheet Projections for Years 1, 2, and 3. Be sure to include an explanation of how you came up with these numbers. It is critical that you provide assumptions so that development of numbers can be understood.
  • 39. Guidelines for Financial Projections Our experience in helping businesses has taught us that certain things help significantly in generating realistic and useful financial projections. What follows is a list of suggestions:
  • 40. VII. Supporting Documentation * This is a list of some of the kinds of things that may be needed. A. Personal financial statements for all owners (always needed) B. Resumes of key personnel (always needed) C. Employment contracts D. Quotes from suppliers for: inventory, construction or remodeling costs, furnishings, fixtures, equipment, insurance, and advertising E. Letters of intent from or contingent contract with: property sellers, landlords, suppliers, customers, prospective key employees F. Partnership agreement or incorporation documents G. Published facts, figures, and projections relevant to your business H. Historical Financial Information – if an existing business I. Past 3-5 years personal Income Tax Returns
  • 41. 1. Do not use straight-line projections if they do not reflect the reality of your business. If you have seasonal fluctuations in your income and expenses, reflect that in your cash flow. It may materially affect the size of the loan that you need. 2. For expansions, if you reflect more than 10% growth in sales per year, be prepared to justify why the amount you stated is valid. 3. Be sure that sales and inventory change in appropriate relation to each other. For example, if you project increased sales volume; make sure that you show increased purchases. 4. Be sure to include pricing information and how you arrived at your prices. Include price per unit, number of units sold, number of units produced, etc. 5. Overestimate your expenses and underestimate your income (reasonably).
  • 42. 6. Do not have substantial “other” category. If “other” becomes a substantial amount, break it down into specific categories. 7. Include a narrative or footnote of your income and expenses. Explain how you arrived at these numbers. 8. Include a salary for yourself so you don’t get too excited when your projections show a “profit”. Use this figure to analyze your opportunity cost. (How much could you earn – or not spend – doing something else?) 9. Emphasize real world research. Call the phone company and see how much the installation, monthly service charge and yellow page listings will actually be. Talk to businesses in other communities similar to yours and find out what start-up sales volumes you might expect. Look at industry statistics and find out what percentage of gross sales you might need to be spending on advertising.
  • 43. Links to help entrepreneurs: 1st Stop Business Connection http://development.ohio.gov/1ststop/onestop/index.cfm • Provide a FREE, downloadable, business information kit which will contain the basics all business must know and the state- level regulations and forms specifically for your business. Ohio Secretary of State Office http://www.sos.state.oh.us/SOS/businessServices.aspx • Click on NAME AVAILABILITY to determine if your business name is available in the state of Ohio. SBDC at Ohio University www.ohio.edu/sbdc • Free online training and worksheets for entrepreneurs
  • 44. www.ohio.edu/sbdc
  • 45. www.ohio.edu/sbdc
  • 46. Other RESOURCES & PARTNERSHIPS • Chambers of Commerce • Economic Development Staff • SBDC’s • SCORE Chapters • Commercial Lenders • Educational Institutions (Colleges & Universities) • Other area business owners
  • 47. Thank You, SBDC at Ohio University Shawn Mallett Building 20, The Ridges, Suite 174 Athens, OH 45701-2979 740.593.0474 mallett@ohio.edu
  • 48. Finance What are my funding options as I start my business?
  • 49. Finance •Grants •Loans • Traditional • Banks • Non-traditional • Revolving Loan Fund (RLF) • Small Business Administration (SBA) • Venture Capital • Micro Loans M
  • 50. Traditional Banks Local banks, large banks, credit unions • Upside: - Existing customers tap into loyalty of local banks - Many larger banks have small business departments • Downside: - Conservative lending practices - Must be accountable to their stockholders • Good for: - Purchase of real estate - Buildings - Large equipment • Difficult for: - Working capital - Start-ups B
  • 51. Revolving Loan Fund (RLF) Payback through municipality or county government • Example: - jurisdictions can use for bridge (gap) financing to entice startups or new business recruitment • Upside: - flexibility, direct tool for political leaders to use • Downside: - limited monies - tax base supports funding at some level - strict guidelines - long process • Good for: - manufacturing, creation of full time jobs. • Difficult for: - retail - restaurants B
  • 52. Small Business Administration (SBA) SBA Loan - Government-backed bank financing • Example: - An extension of traditional bank financing; banks are 'insured' if loan defaults so they take more risk. • Upside: - increases lending • Downside: - lots of hoops (regulations) - low bank participation - cautious of yearly renewal • Good for: - renewal loans - existing businesses • Difficult for: - startups M
  • 53. Venture Capital Private investor groups - investors seeking high potential in exchange for debt/equity in the company (Tech Columbus, SBIC‟s via SBA) •Upside: - fund where traditional banks won‟t - lend credibility by virtue of „being on the board‟ - instant connections increases chances of success •Downside: - take controlling interest (voting power) & upside growth - typically debt is convertible •Good for: - high potential - high growth (technology, medical) •Difficult for: - retail - restaurants or income based companies M
  • 54. Microenterprise Economic Development Strategies  Retention and Expansion of Existing Businesses  Entrepreneurship Development  Attraction of New Businesses  Encouraging Additional Consumer Spending in the Community  Seeking Public Grants and Projects T
  • 55. Microenterprise IS IS NOT  VERY small businesses, • Small businesses with more with 1-5 employees than 5 employees • Business/owner with access  Unable to access to credit traditional, commercial • >$35,000 (although ECDI credit can go to $100,000)  <$35,000 (normally, although standard microenterprise cap is changing to $50,000) T
  • 56. Microenterprise Through: - Addresses the credit gap - Technical assistance - Is an asset building - Lending strategy - Comprehensive - Builds on entrepreneurial program to increase culture opportunities for the - Takes into account business AND the owner economic and geographic segregation T
  • 57. Grants Industry Specific • Limited given current economic conditions i.e. the well is dry. • Use local grant writers to identify opportunities. • Individual Development Accounts  often a step toward building credit, loan qualification  some type of earned income required  financial literacy training required  matched savings plans, used to do one of the following: 1. start a business 2. down payment on a home 3. post-secondary education 4. automobile purchase B
  • 58. Micro Loans Small Loans to help start-ups with a specific need • ECDI - financial literacy and business plan training - loans from $500 to $100,000 • Where are they? - Working to identify all of the micro-programs in Ohio over the next couple of months - ECDI currently serves 18 counties in Central and Southwest Ohio B
  • 59. Microenterprise • Frequently need training and technical assistance, especially one-on-one • Do not have access to traditional/commercial lending • Sometimes more social work than business development • May need credit counseling • Risky B
  • 60. Microenterprise  Retention and expansion of existing businesses  Entrepreneurship development  Creation of new local businesses  Creates jobs  Diversifies economic base  Supports local people  Enhances local tax revenues  Provides role models  A process, not an event  Where public policy and free enterprise intersect B
  • 61. Microenterprise  Community action agencies  Non-profit organizations  Faith-based organizations  Political jurisdictions  Chambers of Commerce and CIC‟s T
  • 62. Microenterprise www.microenterpriseohio.org/ T
  • 63. Microenterprise MOO's Mission is to:  provide a practitioner support network  share resources among microenterprise programs  host a forum for the free exchange of best practices  develop program standards in line with those being developed on the national level  conduct advocacy on behalf of Ohio's microenterprise programs T
  • 64. The “What do I do now?!?!?!?!” Moment Angie Hawk Maiden Jeff Siegler President/CEO Director of Revitalization ACEnet & ACEnet Ventures Heritage Ohio 04 Columbus Road 846 ½ E. Main Street Athens, OH 45701 Columbus, OH 43205 740-592-3854 614-258-6200 angiec@acenetworks.org jsiegler@heritageohio.org
  • 65. It looked really nice on paper, but things got really complicated once it was real.
  • 66.  Furnishings – Embrace Gently Used vs. New Red Flag Quote “My shop looked great with all the shiny new furnishings, but I had no cash to buy things to put on them.” Green Flag Quote “I checked out second hand shops and yard sales to find flexible items that I maximize the space at a minimal space.”
  • 67.  Inventory–  Consignment vs. Purchase  Specialty vs. Commodity Red Flag Quote Green Flag Quote “I bought 500 pounds of tea to “I have worked with some save on shipping, but now I producers to exclusively can‟t pay my bills.” offer their high quality products on a pilot basis. You won‟t find this at Walmart.”
  • 68.  Inventory– So what is selling? Red Flag Quote Green Flag Quote “I plan on counting everything “I am using an inventory once a month before I place system so I can adjust my my order.” inventory based on what is selling.”
  • 69.  Finances– So…are you profitable? Red Flag Quote Green Flag Quote “I need to sit down with my “Let me print of a couple of box of receipts and the reports from my real time register tape, and then I will system so we can analyze get back to you…eventually.” the data.”
  • 70.  The Great Marketing Dilemma – How to let them know you exist?  Collaborate with others  Find intersections for your target  Beware of the advertising associates  Evaluate what works  Free ads  ASK YOUR CUSTOMERS WHERE, WHEN, AND WHAT THEY GET INFO
  • 71.  The Business Dilemma Your Convenience Vs. Consumer’s Convenience The “But I like having my weekends off too” syndrome
  • 72.  Approach as a livelihood…  Change your hours of operation…  Be strategic about location…  Be realistic about how, when, and who to communicate…  It is all about customer service and the value proposition…
  • 73. Della G. Rucker, AICP, CEcD JACOBS | Urban Design + Planning Heritage Ohio Entrepreneurship Training November 3, 2010
  • 74.  How much funding do you have?  How many people do you have? If you have limited time and money, you need to focus on those entrepreneurial sectors that offer the best potential to meet your community’s objectives.
  • 75.  What does your community need?  Jobs for residents?  Property taxes?  Improved reputation/ appearance?  Income/earnings taxes?  What needs to happen?  Growth  Change in quality  Improved appearance  New jobs  Build the consensus
  • 76. What are these? Provide/do/support better than others. Unique to your community. How do you find them? Analysis - high growth/high share sectors. Examine successful, similar places. Ask your business owners, leaders, residents.
  • 77. What Potential Entrepreneurial Sectors Fit Our Goals and Want Our Assets?
  • 78.  Quantitative  Qualitative
  • 79.  Talk to People: Local Successful Businesses/ Successful Businesses in nearby communities  “What’s working?”  “What do you think will change in the next 5 years?”  “What would you invest in/get into if you were starting over today?”
  • 80.  Talk to People: Big Businesses  “What suppliers do you use locally?”  “What suppliers or services would you use if they were local?”  Do you anticipate any significant changes to your technology, suppliers, service needs over the next 5 to 10 years?  “If I gave you $100,000 to invest in the local economy today, what would you do with it?”
  • 81.  Talk to People: Subject Experts  Bankers  Business Professors  “What business sectors do you see growing in this area?”  “What benefits do they derive from being here?”  “How do you think the local economy (or your favorite economic sector) will change in the next 5 years?”  “What’s the strongest investment one could make in the local economy today?”
  • 82.  Read:  Quarterly Reports:  Jones Lang LaSalle  Grubb & Ellis  Other local realtors  The Federal Reserve  Yearly Outlooks  But, remember…  Their information = regional or submarket.  You might be special  You might not be in one of their regions
  • 83.  Relative strength and price points of broad sectors of local real estate market.  Ease of capital - challenges facing small businesses in getting construction and operating loans  How markets and investors are feeling about your broad area.
  • 84.  Sources:  www.census.gov (income levels, age, home values)  http://www.census.gov/econ /geography.html (businesses by sector)  http://www.development.ohio.gov /research/files/s0.htm (Ohio County Profiles)  www.claritas.com (“psychographics”)
  • 85.  Look for sectors that are growing from one period to the next  Look for sectors that line up with your basic criteria, such as income levels or business size  Look at what types of consumer characteristics your area appears to have.
  • 86.  How old is the data?  How does the area you want to study line up with the area they are presenting?  What data have they suppressed?  What are _they_ not seeing?
  • 87.  List the sectors that the sources identified as potential  List all the characteristics of those business sectors you can identify.  Consider setting up as a series of matrices to compare:  Sectors compared to your priorities  Sectors and their relationship to you assets;  Sectors and current market issues – cost of property, cost of borrowing.
  • 88. Trust Your Gut
  • 89. Della G. Rucker, AICP, CEcD JACOBS | Urban Design + Planning 1880 Waycross Road Cincinnati, OH 45240 Phone: 513-288-6613 Della.Rucker@Jacobs.com www.dellarucker.wordpress.com Twitter: @dellarucker