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.

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