INTRODUCTION to
BUSINESS OWNERSHIP
Working Together To Achieve Success
1400 North FM 1788
Midland Texas 79707
432-552-2455
www.utpbsbdc.org
America's SBDC
U.T. Permian Basin
Who We Are
We are an economic development organization that creates jobs by providing assistance to new
business startups and by helping existing businesses solve problems and expand their operations
efficiently and profitably.
The America's SBDC - U.T. Permian Basin is part of a nationwide network of SBDC programs
and is affiliated with and supported by U.T. Permian Basin in Odessa. It is one of six centers that
comprise the Northwest Texas Regional SBDC Network.
The Center is a nonprofit entity that receives financial support from U.T. Permian Basin, the
United States Small Business Administration, the State of Texas, and other public and private
agencies.
The America's SBDC U.T. Permian Basin provides counseling and seminar training for potential
and existing businesses located in 16 counties surrounding Midland/Odessa. In addition, the
Center acts as a resource center, integrating the resources available to businesses through the
public, private and educational sectors.
What We Do
We provide confidential one-on-one consulting services at no cost, specializing in the following:
Startup Planning, Business Plans, Financial Analysis, Business Valuation, Financing and
Investors, Marketing and Advertising, and Internet Operations. We also provide training through
seminars and offer access to resources through our website at www.utpbsbdc.org.
Facts about Small Businesses
First, the bad news:
•
56% of all businesses started this year will fail before they are five years old.
•
The volatility of the recent recession has not yet let up. 12 businesses file for bankruptcy
every 60 minutes.
•
33% of small business owners work over 50 hours per week and an additional 25% work
over 60 hours per week and nearly always work six days per week. 70% work one weekend
on a regular basis.
•
Many small business owners were making more money working for someone else than
they will make working for themselves.
•
Many small businesses do not earn a profit during the first year or two of operation.
•
Most start-up loan requests are turned down due to lack of equity.
•
The IRS can and will seize personal and business property and assets to satisfy the tax
liabilities that your business has incurred.
Now, the good news:
•
Small businesses are the foundation of our economy, with over 23 million small employers
employing nearly 81 million workers and producing annual sales in excess of $6 trillion.
•
Counting businesses that do not employ people, there are 25.8 million small businesses in
the U.S.
•
99% of U.S. companies are small businesses.
•
Small businesses provide more than half (60-80% over the last decade) of the new jobs
added to the economy.
•
50% of the private sector workforce is employed by small businesses.
•
Over 50% of our non farm GDP is created by small businesses.
•
Small business represents over 97% of all U.S. exporters.
•
In the U.S., a new business is started every 1 ½ minutes.
FINANCING YOUR BUSINESS
Four Questions You Should Be Able to Answer:
1. How much money do you need?
2. What will you use the money for?
3. Where will you find it?
4. How will you pay it back? (Lender), or
What is the rate of return on my investment? (Investor)
The worksheets on the following pages are designed to help you identify your initial start up
costs, monthly expenses and potential monthly revenues.
With this information, an SBDC consultant can help you construct projected financials for the next
three years. If your business is already operating, projecting can help forecast your business’
health or test an anticipated change.
How Much Do You Need?
A. Capital Purchases
Put in a purchase price for everything you will need in your business. These are usually large,
depreciable items over $5,000.
Already Own
To Purchase
$ ___________
___________
a.
Land
b.
Buildings
___________
___________
c.
Vehicles
___________
___________
d.
Furniture
___________
___________
e.
Fixtures
___________
___________
f.
Machinery
___________
___________
g.
Equipment
___________
___________
h.
Computers
___________
___________
i.
Office machines
___________
___________
j.
____________________
___________
___________
k.
____________________
___________
___________
l.
____________________
___________
___________
$ ___________
___________
Total Capital Purchases
B. Initial Inventory Purchases
$
___________
C. One-Time Start-Up Expenses
These are expenses that will not reoccur once your business is up and running.
a.
Rent & Utility Deposits (telephone, electricity, etc)
$
___________
b.
Decorating / Remodeling
___________
c.
Equipment Installation
___________
d.
Initial Promotion
___________
e.
Initial Purchase of Office Supplies (business cards,
letterhead, envelopes, brochures, flyers, etc.)
___________
f.
Insurance Premiums (all that apply)
General Business & Liability
___________
Workers Compensation
___________
Vehicle
___________
Property
___________
g.
Legal, Accounting and other Professional Fees
___________
h.
Licenses and Permits
___________
i.
Shop and Office Supplies
___________
j.
Signs (buildings, vehicles, etc.)
___________
k.
Training Programs
___________
l.
Travel
___________
m.
____________________________
___________
n.
____________________________
___________
o.
____________________________
___________
p.
____________________________
___________
Total One-Time Start-Up Expenses:
$
___________
D. Monthly Operating Expenses:
a.
Officer /Owner Wages
b.
Employee Wages
___________
c.
Payroll Burden (12% FICA, FUTA, SUTA)
___________
d.
Advertising
___________
e.
Bank or Credit Card Fees
___________
f.
Dues, Subscriptions and Postage
___________
g.
Insurance (All)
___________
h.
Rents / Lease
___________
i.
Repairs & Maintenance / Janitorial / Security
___________
j.
Shop and Office Supplies
___________
k.
Taxes and Licenses
___________
l.
Telephone and Cellular
___________
m.
Travel
___________
n.
Uniforms
___________
o.
Utilities (All)
___________
p.
_______________________________
___________
q.
_______________________________
___________
r.
_______________________________
___________
Total Monthly Operating Expenses
E. Working Capital Reserve (Usually 3 to 6 months of Expenses)
$
___________
$
___________
$
___________
F. Revenue Assumptions
A
B
C
Product/Service:
___________
___________
___________
Unit Price:
___________
___________
___________
Unit Cost:
___________
___________
___________
Total Monthly Sales (Is there seasonality?)
# Sold
Total
# Sold
Total
# Sold
Total
Month 1
_____ = $________
_____ = $________
_____ = $________
Month 2
_____ = $________
_____ = $________
_____ = $________
Month 3
_____ = $________
_____ = $________
_____ = $________
Month 4
_____ = $________
_____ = $________
_____ = $________
Month 5
_____ = $________
_____ = $________
_____ = $________
Month 6
_____ = $________
_____ = $________
_____ = $________
Month 7
_____ = $________
_____ = $________
_____ = $________
Month 8
_____ = $________
_____ = $________
_____ = $________
Month 9
_____ = $________
_____ = $________
_____ = $________
Month 10
_____ = $________
_____ = $________
_____ = $________
Month 11
_____ = $________
_____ = $________
_____ = $________
Month 12
_____ = $________
_____ = $________
_____ = $________
Other Assumptions
You will collect payment:
 Before the sale
________% (of total sales)
 At the sale
________% (of total sales)
 After the sale
________% (of total sales)
 Credit Terms: (circle one)
30, 60 or 90 Days
FINDING THE MONEY
Personal Savings or Retirement Accounts -- The most common source of equity financing is the
owner’s personal savings and/or contributions from family, friends, and business associates.
Loans -- A bank loan is the most common form of debt financing. It can be either short-term (full
repayment due in less than one year) or long-term (repayment due over more than one year).
Borrowing money is one of the most common sources of funding for a small business, and banks
are but one source for getting a loan. Many government and non-profit agencies make loans to
small businesses, as well as friends and family members.
The SBA programs that are currently available are loan guarantees, which are essentially a kind of
loan insurance taken out on regular bank loans. If you are interested in an SBA loan guarantee,
the place to start is with your regular bank – you will have to get their commitment before the SBA
ever comes into the picture. The main advantage to an SBA loan guarantee is that it extends the
term of the loan, making the payments smaller, but it also adds to the total cost because , like any
insurance program, the SBA guarantee fee costs money.
Private Investors -- Many businesses are financed by private investors, and in nearly every case
the investor is someone that the business owner knows personally. It is unusual for any business
to attract investors by “cold calling” people who have money to invest.
Private investors, often called “Angels” or "Shark Tanks," have a different take on things than
venture capitalists. Angels tend to bet on you as a business person, rather than on your idea.
They usually invest with their own money and are usually content to let you run the business as
long as you do a good job. They still expect an opportunity to cash out with a nice profit. Private
investors can put money into your business in a number of ways, including loans, partnerships,
and stock purchases.
Venture Capitalists are professional investors looking for a huge return in a short period of time.
They typically look for new technologies which need money along with professional management
to make the leap to a higher business level. They are usually motivated to invest in companies
that have a high probability of going public; are willing to accept new management; and have the
potential to turn a $20 million investment into $200 million in three to five years.
Grants -- Grant money is a fantastic opportunity, but every grant program requires you to meet
certain qualifications, spend time completing an application process and often competing against
other business ideas. Many grants are geographically specific, that is, they are intended to
promote economic development in a specific community or region. Grant programs exist, but
many are so highly competitive that your realistic chances of getting any money are pretty slim,
and a large number of them are awarded to non-profit organizations. Warning: Don’t purchase
grant information, this usually involves a scam and will only offer useless information.
The Anatomy of a Credit Score
Your credit score, also often referred to as a FICO score, is a three-digit number that is designed to
gauge your creditworthiness. Lenders use it to assign interest rates on things such as auto loans,
mortgages and credit cards, among other borrowings.
The score, called FICO, ranges from 300 to 850 and is calculated by Fair Isaac Corp. using
information from the three major credit reporting agencies: Equifax Inc., Experian PLC and
TransUnion.
According to Fair Isaac, a credit score is made up of five components:
1. 35% reflects payment history: whether or not you pay your bills on time to a lender that
reports to one of the three credit-reporting agencies.
2. 30% reflects amounts owed: how your credit limits compare with the balance you carry;
the more you carry from billing cycle to billing cycle, the lower your score.
3. 15% reflects length of credit history: the longer your credit history, the easier it is for
lenders to see your track record.
4. 10% reflects new credit: how many accounts you’ve opened recently.
5. 10% reflects type of credit used: the mix of accounts – student loans, credit cards,
mortgages, etc.
Although Fair Isaac does not allow you to see your credit score free of charge, you’re entitled to
see your credit report, the blueprint for your credit score, once a year at no cost from each of
the credit reporting agencies. You can order a free credit report at AnnualCreditReport.com
Tip: Avoid sites like freecreditreport.com & creditkarma, which are not actually free.
Recommend website for business / commercial loans: myfico.com
Financial Terminology
Accounting Records are. . . Daily, weekly and monthly written entries which track revenues,
expenses and movement of cash through the business.
Financial Statements are. . . A means of organizing accounting records into a universally
accepted format. The format allows information from different periods to be compared, analyzed,
contrasted and reviewed quickly.
Financial Management is. . . Gathering, organizing, analyzing and using financial information to
make sound decisions to position your business for profits and success.
Accurate, timely financial records are one of the most important tools used in managing a
successful business. As a business owner, you are a money manager even if you’ve never taken
a course in accounting or finance. Financial records tell the business’ story and give you objective
information to help make decisions.
It is, of course, possible to run a business without ever looking at an income statement or a
balance sheet, but without financial management that business will have a very high failure rate
and find it difficult to grow. Financial management is too important to leave to the bankers or the
accountant at tax time – after all, it’s your business that will survive or fail based on your financial
decisions.
So, if your financial records tell the story of your business, what are the chapters inside that story?
Here’s a sample Table of Contents:
I.
Cash Hide and Seek
Finding cash drains and spigots
II.
Bad P&L = Bad Year...Bad Balance Sheet = Bad Life
Make sure your assets are growing
III.
Significant Profit vs. Getting by
No net profits or asset growth? Purchased Job
IV.
I See the Money!
Do you know how much you need now? Next year? Where is it coming from?
V.
How to Break Out of Breaking Even
Knowing your overhead and your cost of goods sold
VI.
His Dollar Works 9 to 5 – Mine’s on an Extended Lunch Hour
Use ratios to benchmark your performance against the competition.
Financial Statements
Income Statement
A measure of how the business has performed over a specific period of time. This is also known as
a Profit/Loss statement.
Income Statement Equation:
Revenues
- Cost of Goods Sold
= Gross Profit
- Operating Expenses
= Net Profit
Balance Sheet
A measure of the value of the business at one moment in time. It is called a balance sheet
because your assets have to balance with the money you invested or borrowed to buy those
assets.
The accounting equation: Assets = Liabilities + Owners Equity
Cash Flow Statement
A measure of changes in cash that the business has on hand from month to month.
Cash Flow Statement Equation:
Beginning Cash Balance
+ Cash Receipts
= Total Cash Available
- Cash Disbursements
= Ending Cash Balance
LEGAL STRUCTURE
The first step in starting a business is to determine the legal structure of the business. When
choosing the legal structure the following should be taken into consideration:
•
How risky is my business endeavor going to be?
•
Am I comfortable with taking risks?
•
Which structure is the easiest to implement and maintain?
•
Which structure is the least costly?
•
How will the business be taxed?
Sole Proprietorship
•
Not separate from the individuals in the business.
•
Individual or a married couple operates a business and owns all of the assets.
•
Easiest and least expensive to start.
•
Sole proprietor is personally responsible and liable for all aspects of the business.
•
Personal assets may be placed at risk.
•
Life of the business is limited to the life of the owner.
•
Sole proprietor is personally obligated to repay debts of the business should a loan default
occur.
•
Separate tax return not required, a Schedule C is filed with personal 1040.
•
Owner has control and receives all of the profits or losses.
•
Possible income tax advantages.
•
Ability to borrow money is based on capacity and credit history of the individual.
•
Owner owes 13.3% self-employment tax on draws or profit up to $110,100.
General Partnership
•
Not separate from the individuals in the business.
•
Exists when two or more individuals or entities join to operate a business.
•
Easy to form and individuals can pool resources.
•
Formal partnership agreement should be entered into.
•
Partners are personally responsible and liable for all aspects of the business.
•
Partners are personally obligated to repay debts of the partnership should a default occur.
•
Partners share equally in assets and liabilities unless stipulated differently in agreement.
•
No business income tax but partnership must file Form 1065 in addition to the partners’
personal returns.
•
May be operated under the names of the owners, or a different name.
•
Owners have control and are taxed on the profits or losses.
•
Unlimited personal liability, including for partners actions.
•
Hazy lines of authority, the business is bound by the acts of any partner.
Corporations
•
Separate from the individuals in the business.
•
A separate entity, filed with the state for the purposes of operating a business.
•
The corporation has its own legal identity, separate from the owners.
•
Corporation offers protection to the business owners’ personal assets.
•
Owner/shareholders are not usually liable for the actions of the corporation.
•
Taxation varies depending on the tax election: either Subchapter C or Subchapter S.
•
Double taxation if taxed under subchapter C.
•
Must file with the Secretary of State.
•
If an assumed name is used, a DBA should be filed in the county in which the business is
located and must be filed with the state.
•
Liability limited to capital invested.
•
Easier to raise capital and transfer ownership.
•
More costly to start and maintain (more regulation).
•
Might have to pay state a Margin Tax (formerly know as a Franchise Tax) which is based on
gross revenues or capital.
•
Control is determined by the percentage of ownership.
Limited Liability Company
•
Separate from the individuals in the business.
•
Similar in most ways to Corporations.
•
Provides limited liability with fewer restrictions than “S” Corporations.
•
Can choose tax filing status.
•
Easier and less expensive to start and maintain than Corporations.
•
More costly to start and maintain than sole proprietorships and partnerships.
•
Control of company is determined by the Membership Agreement and not the percentage of
ownership.
TAXES
Property Taxes
Those taxes that a business pays on real property (real estate) and other business property (tools,
equipment, fixtures, inventory and etc.). Usually collected by the respective counties who then
remit the funds to the various taxing entities: school districts, hospital districts,
water districts, counties, etc. These are paid annually.
Sales Taxes
Those taxes that are collected by the State Comptroller on the sale of goods and some services.
Sales taxes are charged to the end user of the product. Purchases of goods from a wholesaler
generally are not taxed. Some labor is taxable while some labor is not. Contact the State
Comptroller for assistance in determining what is taxable. Must be remitted on a monthly, quarterly
or annual basis based on amount of taxes owed.
Payroll Taxes
Those taxes that a business is required to pay on their employees. These include Social Security,
Medicare taxes, state unemployment and federal unemployment. These must be remitted on a
monthly, quarterly or annual basis. Although not a “tax” you may be required to provide workers
compensation insurance.
Margin Taxes (formerly know as Franchise Tax)
The Texas margin tax is a privilege tax imposed on each business chartered or organized in Texas
or doing business in Texas. Every entity is required to file a margin tax report but may not owe any
margin taxes.
Federal Income Taxes
Those income taxes paid to the Internal Revenue Service regardless of the type of the business
entity. The amount of the tax due is based on the net profits of the business. If a business loss is
incurred then there is no income tax due.
Self Employment Taxes
Most people who pay into Social Security work for an employer. Their employer deducts Social
Security taxes from their paycheck, matches that contribution and sends taxes to the Internal
Revenue Service (IRS) and reports wages to Social Security. But self-employed people must
report their earnings and pay their taxes directly to the IRS with Form 1040-ES.
When you start a small business and you do not incorporate or form a partnership, you report the
results of your operations on Schedule C and file that with your Form 1040. The result of netting
your revenues and expenses is a net profit or loss. You report your earnings for Social Security
when you file your federal income tax return. If your net earnings are less than $400, you don’t
have to pay self-employment tax.
You calculate your self-employment tax on Schedule SE and report the total tax calculated on
Schedule SE in the “Other Taxes” section of Form 1040. In this way, the IRS differentiates the SE
tax from the income tax.
Good News! You can take one half of your self-employment tax amount as a deduction against
total income on your Form 1040.
Example:
You run a painting business as a sole proprietor. In 2011 your net profit as reported on Schedule
C is $35,000. Your net earnings as calculated on Form SE would be $32,323 ($35,000 x 0.9235).
Your self-employment tax would be $4,298 (32,323 x 0.133) and you would report that amount on
Form 1040 in the "Other Taxes" section.
Then you would report 57.51% of your self-employment tax, $2,473 ($4,299 X .5751) on the 1040
as an adjustment to income, which reduces your adjusted gross income and the amount of income
tax you owe.
Tips: If you operate more than one business, combine the net incomes together and use only one
Schedule SE. You will find this very useful if one of your businesses operated at a loss.
Husbands and wives must fill out separate Schedule SE forms.
Tax Forms
Sole
Proprietorship
Partnership
Corporations
Sub C
Sub S
Limited
Liability
Company
Form 1040
Schedule C
Schedule SE
Basic Tax
Forms and
Schedules
Form 1120-S
Schedule K-1
Form 1040
Schedule C
Schedule SE
Form 1065
Schedule K-1
Form 1120
Form 2553
(1st Year
Only)
or
Form 1065
Schedule K-1
or
Form 1120-S
Estimated
Tax
Payments
Form 1040-ES
Form 1040ES
Form 1120-W
Form 1120-W
Form 1120-W
and/or
or
Form 1040ES
Form 1040ES
Form 8832
Helpful
Publications
And
Instructions
Publication 334
Publication
541
Publication
542
Inst. 1120S
Schedule K-1
Inst. 2553
Inst. 1040
Schedule C
Schedule SE
Inst. 1065
Schedule K-1
Inst. 1120
BUSINESS NAME
County-Filed Businesses
•
•
•
•
•
•
•
•
Non-separate legal structures.
If forming a sole proprietorship, general partnership or unincorporated nonprofit association,
an assumed name certificate, or DBA (doing business as), should be filed with the county clerk
(the SBDC can provide forms and notarize signatures).
Must have an assumed name certificate for each name used.
File with county clerk in each county where a business premise will be maintained.
If no business premise, then file in each county where business will be conducted.
A search of the records should be performed in each county to determine if the name selected
for the business is available.
An assumed name filing is good for a maximum of ten years, but may be renewed.
The county clerk does not police the filing of assumed name certificates.
State-Filed Businesses
•
•
•
•
•
•
•
•
Separate legal structures.
Corporations, limited liability companies, and other state-chartered businesses must file an
assumed name certificate with the Secretary of State if utilizing a trade name that is different
than the name of the business.
Foreign or out-of-state corporations (chartered outside of Texas) must register with the state as
a foreign corporation.
If the corporation operates under an assumed name, they should file with the county clerk as
well.
The Secretary of State provides a summary of requirements for the creation of these entities,
and provides the necessary forms online.
A name may not be used by more than one corporation or LLC in the state.
The Secretary of State can perform a name search to determine name availability.
Search only applies to business names registered with the Secretary of State.
Professional tax consultants, accountants and/or attorneys should always be consulted
before determining legal structure and business name.
Forms are available at the SBDC office
LICENSES AND PERMITS
INTERNAL REVENUE SERVICE
1004 N. Big Spring
(432) 686-9977
Midland, TX 79701
Hours: M-F 8:30 to 4:30
www.irs.gov/businesses/index.html
TEXAS STATE COMPTROLLER
Comptroller of Public Accounts
4682 E. University Blvd.,Suite 200
Odessa, TX 79763
Local (432) 550-3027
Austin 1-800-252-5555
www.window.state.tx.us
Tax information for new businesses and applications for
employers I.D. # (form SS-4); necessary if hiring any
employees, otherwise use your own Social Security
number; information on self-employment tax.
Information regarding Texas taxes including franchise
or margin tax; online tax forms and sales tax permits;
beer, tobacco and wine permits; population and
economic data for the Texas Economy.
TEXAS WORKFORCE COMMISSION
2626 JBS Parkway BLDG D
Odessa, TX 797962-8104
(432) 367-3332
www.twc.state.tx.us
Payroll I.D. number, reporting forms (state
unemployment tax, state unemployment compensation
fund, tax on corporations),
TEXAS WORKERS COMPENSATION
4500 West Illinois Avenue, Suite
Midland, TX 79703-5486
(800) 252-7031 www.twcc.state.tx.us
Information concerning Worker's Compensation
Insurance.
TEXAS ONLINE
Website for licenses, permits and registrations
www.texasonline.com/category
Ector County Health Department
221 N. Texas
Odessa, TX 79761
(432) 498-4141
www.odessa-tx.gov/public/planning-zoning/index.asp.
ECTOR COUNTY CLERK
300 North Grant Ave. #111
(432) 498-4130
Odessa, TX 79760
www.co.ector.tx.us/ips/cms/
countyoffice/countyClert.html
MIDLAND COUNTY CLERK
500 N. Loraine St. 4th Floor
Midland, TX 79702
(432) 688-4401
www.co.midland.tx.us/directory/
location/ccdetail.asp?department=24
A-Z alphabetical directory of links relating to acquiring
licenses, permits and registrations in Texas by name or
type.
For Ector & Midland counties: health permits; food
manager certificates; information on inspections and
licenses. If outside of Ector & Midland counties,
contact the TX Dept of Health.
Assumed name certificates (DBAs) are filed with the
county clerk. Check a business name from google
website at www.google.com.
Assumed name certificates (DBAs) are filed with the
county clerk. Check a business name from google
website at www.google.com.
MARKETING PLAN
Just as a mission statement guides the operation of your company, a Marketing Plan or Customer
Profile will guide your sales effort. Develop an overview of your target customers so that you and
all of your employees are clear about whom you are selling to and the message you want to
communicate.
Put yourself in your customer’s shoes. Do you know why they buy your products or services? Is
your pricing appropriate? Have you set any marketing targets or sales goals for the next month or
the next year?
A marketing plan gives you a roadmap that will drive your actions and point the way. A marketing
plan can help you:
Identify which customers are your best prospects.
Evaluate company data against your industry or market.
Track results so you learn what really works.
Without a plan, you may be moving fast, but you may not be moving in the right direction. The
following worksheets will help you to start a strategic and practical marketing plan. Put your
marketing plan in a three-ring binder and refer to it at least quarterly, but better yet monthly. Leave
a tab for monthly reports on sales and/or manufacturing; this will allow you to track performance as
you follow the plan.
The plan should cover one year. This is often the best way to think about marketing. Things
change, people leave, markets evolve, and customers come and go. You can create a section of
your plan that addresses the future--two to four years down the road, but the bulk of your plan
should focus on the coming year.
You should allow yourself plenty of time to develop and improve the plan, even if it's only a few
pages long. Developing the plan is the "heavy lifting" of marketing, while executing the plan has its
challenges, deciding what to do and how to do it is marketing's greatest challenge.
Identify Market and Competition
□
Describe the Basic Idea.
______________________________________________________________________________
______________________________________________________________________________
□
Specify the Products or Services Offered.
______________________________________________________________________________
□
Identify special features and benefits of product/service.
______________________________________________________________________________
□
Identify the Market Driver
People NEED what I’m selling because
______________________________________________________________________________
People WANT what I’m selling because
______________________________________________________________________________
Identify your KEY ADVANTAGE. Why will people buy from you?
______________________________________________________________________________
□
Profile Your Market
Where do your customers live? ____________________________________________________
How many live there? ____________________________________________________________
Can they afford to buy from you? ___________________________________________________
What age range do they fall in? _____________________________________________________
What gender? __________________________________________________________________
Are they married/single/child? ______________________________________________________
What is their education level? ______________________________________________________
Is there a trend related to your product? ______________________________________________
Is this an impulse buy or something they save up for? ___________________________________
How will they use this product or service? _____________________________________________
Other information ________________________________________________________________
□
Identify Factors Affecting Your Business
Main Strength (Internal) ___________________________________________________________
Main Weakness (Internal) _________________________________________________________
Biggest Opportunity (External) ______________________________________________________
Biggest Threat (External) __________________________________________________________
Attracting Customers
□
What are your Marketing Goals? (Are they measurable?)
Increase store traffic, create a desire to buy, improve reputation, etc.
______________________________________________________________________________
______________________________________________________________________________
□
How Will They Find You? What is your Marketing Media?
Traditional – Print (newspaper, newsletters, and journals), radio and TV
Person-to-Person – Networking, word of mouth, trade shows and public relations
Internet (SOCIAL MEDIA) – Website, facebook, twitter, google (SEO), newsletters, blogs and
emails
Direct Mail – Business cards, brochures, postcards and direct mail pieces
______________________________________________________________________________
□
Make a Marketing Plan - Establish Measurable Goals
Create Awareness – Inform customers of your product by ________________________________
Action – What you will do to attract customers _________________________________________
Brand Building – How they will remember your name ____________________________________
Announcement – Inform the public by ________________________________________________
Affiliation – Make customers feel connected by ________________________________________
Attitude – Show you are innovative and new by ________________________________________
□
Specify Marketing Activities by Calendar Date
1. ___________________________________________ By ______________________________
2. ___________________________________________ By ______________________________
3. ___________________________________________ By ______________________________
□
Measure Success
Activity: ____________________________ Outcome: ______________ Cost: _______________
Activity: ____________________________ Outcome: ______________ Cost: _______________
Activity: ____________________________ Outcome: ______________ Cost: _______________
□
Keeping the Customer Happy
Is your product what you say it is? ___________________________________________________
How will you continue to communicate with your customer? _______________________________
How will you handle complaints? ____________________________________________________
How will you watch the customer or ask for their opinion? ________________________________
What is it worth to keep a client? ____________________________________________________
Operations: How things will work on a daily basis
□
Identify Facilities/Location _______________________________________________________
□
Decide Hours of Operation _______________________________________________________
□
Identify Equipment Needed ______________________________________________________
______________________________________________________________________________
□
Identify Employees Required (Full-Time/Part-Time, Hourly/Salaried, Skilled/Unskilled)
Manager _______________________________________________________________________
Daily Worker(s) _________________________________________________________________
Bookkeeper ____________________________________________________________________
Marketing Person _______________________________________________________________
Sales Person ___________________________________________________________________
Customer Service Rep ___________________________________________________________
Technical or Specialized __________________________________________________________
Other _________________________________________________________________________
□
Identify Professionals Required
Attorney _______________________________________________________________________
Accountant ____________________________________________________________________
Other _________________________________________________________________________
□
Determine Bookkeeping Requirements
Purchase Accounting Software _____________________________________________________
□
Determine Insurance Requirements
Property _______________________________________________________________________
General Business & Liability _______________________________________________________
Workers Compensation ___________________________________________________________
Other _________________________________________________________________________
BUSINESS PLAN
“No business ever plans to fail; they just fail to plan.”
The best way to maximize your chances of having a successful business is to create an effective
plan and then follow through on implementing that plan. The process of developing a sound
business plan is time consuming but not necessarily difficult. The key is to follow a structured
approach and to develop the plan as a series of logical steps or sections.
Benefits of writing a business plan:
• The creative thought process involved forces a critical, objective and non-emotional look at the
business.
• The completed plan provides a “road map” or operating tool for managing the business and
lowering the risk of failure.
• The plan forms the basis for communicating your ideas to others (i.e., lenders and investors) in
order to obtain financing for the business.
One of the most frequently asked questions about a business plan is “How long should it be?” The
answer is “long enough to get the job done.” There is no universal rule of thumb on length. Each
individual business varies in both size and complexity. Larger and more complex businesses will
generally require more detailed plans than is necessary for small and less complex ones.
Consider this: if you can’t clearly and simply describe your ideas to yourself and others, you
haven’t thought them through in enough detail. If your proposed venture is marginal, the business
plan will show you why and help you avoid the high cost of experimental learning or possibly even
failure. It is obviously less costly and stressful not to begin a venture that is doomed to failure than
to learn by experience what several hours of concentrated effort on a business plan would have
revealed in advance.
The following outline is intended to provide a logical structure and sequence to use in developing
your plan. The outline is general and is designed to help you organize and focus your thoughts
and energy. Your specific plan may require more or less information and may also be more
effective in a different format. Use your own style, creativity and judgment.
A few tips to keep in mind are:
• Keep it simple.
• Make it neat, attractive and concise.
• Clearly define your reason or purpose for writing the plan before you begin.
Some possible examples might be:
• Provide an operating plan and policy guide for your business.
• Assessing the feasibility of a new business venture.
• Plan for growth or expansion of an existing business.
• Acquiring an existing business.
The Business Plan Outline
Cover Sheet
Place a cover sheet on the front of your business plan that clearly identifies what the document is.
It should include:
•
•
•
•
The name, address and phone number for the business.
Purpose of the plan.
Name of person or institution for whom the copy of the plan is being provided i.e., bank,
investor, etc.
Name and contact information of the author of the plan.
SBA,
A unique cover sheet will allow the plan to be customized for presentation to different potential
investors, lenders or other appropriate parties.
Table of Contents
I. Executive Summary
II. The Business Concept
III. The Marketing Plan
IV. The Operations Plan
V. The Financial Plan
VI. Appendix
I. Executive Summary or Overview
This section should be written last and should be no more than two pages in length. Begin writing
this section by assuming that the reader will have no knowledge of your proposed venture and that
this overview should provide a quick, general understanding of the business potential and generate
interest in learning more. It should summarize:
• Business structure (sole proprietor, partnership, LLC)
• Qualifications of management
• Products and/or services provided
• Target market
• Major competition
• Marketing strategies
• Operational requirements
• Key financial data
II. The Business Concept
This section should provide key details about the company structure and management, the
products and/or services offered, who will buy those products or services and what the competition
for those customers will be.
a. The Company
• Describe the legal structure and ownership.
• Explain what business the company is in – i.e., the industry, the “niche” or area of
specialization, the type of business, etc.
• Include a “mission” or “vision” statement.
• State the key goals or objectives of the business. Include the “character” or “image” that
will be projected to the customer.
• Describe the skills, experience and qualifications of the management team that are relevant
to this business.
b. The Products and/or Services
• Accurately describe each type of product and/or service the business will provide.
• Explain how and why they will be used and in what volumes.
• State how they will benefit the customer.
• Describe future direction – i.e., “next generation” and/or planned changes.
• When applicable, include pictures, drawings, test dates, and patent or copyright
information.
c. The Market
• Describe the market to be served: Where is it? How large is it? Who/What makes it up?
Consumers only, other businesses or both?
• Explain what trends, patterns, lifestyles and other factors affect demand for your products
or services (both positive and negative).
• Identify the principal competition – i.e., who will be competing for the same dollars.
Compare strengths and weaknesses of competitors and yourself.
• Describe any unique advantages you have – i.e., is there anything that will differentiate”
your business and/or products or services.
III. The Marketing Plan
This section should address how you intend to attract, satisfy and retain customers. Marketing is
often described in terms of the six “P’s” or elements: Price, Positioning, Promotion, Product, Place
and People. Since you have described the product/service in Section II. B., focus now on the
remaining “P’s.”
a. Pricing Strategy
• Describe how you intend to price your products/services. Will you compete on price alone
or will you stress other factors – i.e., quality, service and value?
• Explain how you will establish prices in relation to cost and competition – i.e., what gross
profit margins you expect to achieve.
• Will you offer discounts and at what percentage/amount will you still be profitable?
b. Positioning Strategy
• What needs, wants, problems or feelings are you trying to meet?
• What unique benefits and advantages will you offer that others can’t or don’t?
c. Promotion Strategy
• Describe how you intend to “communicate” your message to potential customers. Will you
use personal selling, advertising, publicity, telemarketing, direct mail, brochures or a
combination of several?
• Explain how your promotion plans will reach your target market. Your promotion must get
the “right message” to the “right people” at the “right time.” Include a regular schedule of
marketing activities.
d. Distribution Strategy (place)
• Describe how your products/services will be packaged and sold to the end user. Will they
channel via a retail outlet, jobbers, wholesalers, brokers, mail order, door-to-door, party
plan, etc.?
• Explain the rationale for your distribution strategy.
e. Customer Service
• How will you meet, greet, serve, deliver to, wait on, check out, collect from and answer
phone calls from customers? Remember that organizations and customers are people. A
business is no better than the people it employs from the janitor to the CEO.
IV. The Operations Plan
This section should address the physical operation of the business – i.e., where it will be located
and what resources or assets will be utilized in its operation. You should explain the following:
a. Location and Facilities
• Describe the size and type of the building to be utilized. Include a description of
provisions for customer access, parking and storage.
• Explain relationship of the facility location to your target market(s) (customers) and to your
suppliers.
• Discuss any zoning requirements or local ordinances that affect your location or use.
• State your hours of operation.
b. Equipment and Fixtures
• Describe what type of machinery, furniture, fixtures, etc. are required to operate the
business.
• Explain the current status of needed equipment. Is it already in place or must it be
acquired? Is it (or will it be) new or used? If used, how old is it?
• Discuss plans (if any) to lease any portion of the equipment.
c. Employees
• Describe how many employees are required to operate the business and whether they will
be full-time or part-time.
• Explain method of compensation – i.e., hourly, salaried or commissioned.
• Discuss what skills are required and what provision you have made for training.
• Explain when you plan to employ the needed personnel including plans to add employees.
V. The Financial Plan
This section should address the financial aspects of the business – i.e., how much money is
needed versus how much is already available, how the money will be used and what return is
projected in terms of profits, assets and equity.
a. Investment Required (Sources and Uses of Funds Statement)
• Quantify total amount of money needed to start or expand the business. Include one-time
start-up costs plus necessary cash for operating funds (or working capital).
• Explain how much money will be provided by the owner(s) of the business (equity
investment). Are these funds already available and/or committed or must new investors be
located? If the latter, what percent of ownership will be given for an equity injection?
• Describe what loans and terms will be needed and what the funds will be used for (i.e.,
buildings, land, equipment, inventory, etc.) Explain how the loans will be repaid and what
collateral and security will be provided to the lender.
b. Financial Projections
• Develop a forecast or projection of anticipated financial performance on a three year
planning horizon. Data should be provided monthly for the first 12 months and on an
annual basis for years 2 and 3.
Data should be formatted as follows:
1.
Projected Profit or Loss
2.
Projected Cash Flow
3.
Projected Balance Sheets
c. Trend Analysis of Historical Performance (If an existing business)
• Summarize financial data for previous 3-year period.
• Format data into common sized profit and loss statement and balance sheet.
VI. Appendix
This section should include any relevant information not provided above. Some examples are:
• Resumes of key personnel
• Research information or studies
• Letters of reference or intent
• Pictures of products or prototypes
• Patents, logos, trademarks or blueprints
START-UP CHECKLIST
FINANCING
□ Complete preliminary estimates (begin financial worksheets)
□ Determine your money sources
□ Complete initial requirements for financing (personal financial statement,
credit report)
FORMATION
□ Choose legal structure (sole proprietorship, corporation, etc.)
□ Choose name and verify availability (appropriate agency filing)
TAXES, LICENSES, & PERMITS
□ Identify taxes you will be subject to
□ Identify needed licenses & permits
MARKETING
□ Identify your market
□ Research your competition
□ Determine how you will attract customers
OPERATIONS
□
□
□
□
Identify facilities, equipment and/or location
Identify individual work responsibilities
Choose bookkeeping system
Determine insurance requirements
OPEN THE DOORS
□ Use above information to complete business plan & financial
projections
□ Complete all paperwork & filings (from above)
□ Capital funding from savings, loan or investor(s)
□ Grand opening!
NOTES
All opinions, conclusions or recommendations expressed are those of
the author(s) and do not necessarily reflect the views of the SBA.
A member of the Northwest Texas SBDC Region
Funded in part through a cooperative agreement
with the U.S. Small Business Administration
©