Simple Steps for Starting Your Business Start-up Overview
Today’s Agenda • • • SCORE – Who we are Business and you Your business idea Finances of business Next steps
SCORE’s Mission This is ours. Do you have one? Our Mission is to help start new businesses 56, 079 in 2014 and grow existing businesses 47, 187 jobs created Thru Mentoring and Education
About Broward. SCORE The local team supporting you • • 50+ experienced executives Mentored 1, 000 last year 15 + Workshops each month For 3, 000 attendees last year Turnaround Team SCOREboard Radio program on 740 am broward. score. org
Simple Steps Process Roadmap This is where we’re taking you Session 1: Start-Up Basics Session 2: Business Concept Session 3: Marketing Plan Session 4: Financial Projections “Go or No-go” decision & next steps with mentor Session 5: Funding Sources Mentoring/Build Business Plan
Start-up Myths Let’s get them out of the way • All I need is a good idea. • Won’t have to work as hard as I do as an employee. • Will do only the work I want to do. • Working alone limits my achievement capabilities.
Critical Success Factors It’s all about you • • • Adequate capital. Ability to manage and multi-task. Education / experience in field. Strong work ethic. Effective time management. Willingness to ask for input from others.
Entrepreneur Characteristics It’s still about you! • • • Self-starter Resourceful Responsible Organized Hard worker Persistent Decisive Healthy Supportive family
The Many Hats Will You Wear To make sure your business runs smoothly
Different Starting Options Which one fits best for you? • • • Start a New Business Buy an Existing Business Buy a Franchise Be a Home-Based Business Be a Non-Profit Organization Run and Online Business
Moving on to Your Business Idea
Why did you select your business? How did you make your decision? • • ? ? ? Is there another way to do it?
How would an investor think this through? • Is there a market for the idea? – A problem needing a solution • Have a unique solution to the problem? – To capture a share of that market? • Can that share make a profit? – 30% - 50%+ Net Simple Profit • Can that profit produce a nice return? – Can that profit pay back a loan?
A Business Idea Process Helps you assess feasibility • • • Who are your Customers? What desperate Need/Problem do they have? What Features/Services do they expect? What does your Competition provide? Where your Industry is going? Your Unique…. Solution? Your Business Differentiation Strategy? Your Marketing Plan? Your Management Team?
Who are your customers? They decide your chances of success • How many revenue streams do you have? • Demographically, who are they? • How do they want to get your service…. – Determines your market size
What desperate need do they have? • • • Improve their quality of life? Save time or money? Solution to a problem? Help to be successful? Protection from something bad? Something that makes them feel good?
Features/Services they expect? • • • Pre-sale services? Basic features? Special / quality features? Price ranges? Post-sale services?
Who are your competitors? You need to know what they’re up to • • How many direct competitors are there? Is there indirect competition? What customer needs are not satisfied? What customer required features/services are not provided.
Where is the Industry going? Growing? Maturing? Declining? • Targeting a niche in a growing market? • Do you understand the current industry standards? Service Quality Price • Is your’s a breakthrough idea? • Changes looming on the horizon? • Barriers to entry?
What is your Unique Solution? • • A Solution to your customer’s problem With Features your customer wants And Services your customer expects Including some: – Not provided by your competitors • An unequaled Experience
Your Business Differentiation Strategy • Clearly define how you will exceed the industry and competitor norms – – Pre-after sale services Exceed in product quality Quality comes with price Overall experience you will provide
Your Marketing Plan To announce what you want to be known for • The best coverage of your target market • With the best response rates • At the lowest cost – Tell them you are in business – Have solutions to their needs – That the competition does not have
Your Management Team An indication of how serious you are • Industry-specific knowledge and experience • Management skills and experience • Experience delivering earnings • Experience managing cashflow • Business function skills • Required technical skills
Your Storyline Summarizes your business idea • • • This is what we’re offering…. We’re operating in this environment…. We’ll gain market share by solving these needs…. With these service and quality features…. We’ll be more profitable than our competitors… We’ll exploit these changes expected in the industry… We’ll market using this message and mix of channels…. The census-based target market size we can afford to address…. With a …. % response rate and …. % Sales conversion rate…. We expect to make #…. Sales annually and $…. Revenue After Operating Expenses, expect a …. % Net Profit This team will execute and manage the business….
Your Critical Numbers Model Supports the words in your Storyline
Can you get the finances to start the business? The Finances of Business
Budget Considerations How financially prepared are you? • Total monthly cost of living • Outstanding debt • Amount in savings • Total amount needed to cover 12 to 24 months of expenses
How much do you need from the business? How many customers will that require? Annual Need …. . …………. . $. . . Ro. T x 3………………. . …………………$. . . Selling Price/ Unit…. . …………. . . ……. $. . . Average # of purchases per year. …. . #. . . # Purchases x Selling Price…………$. . . # Customers needed…………………. #. . . .
How much do you need from the business? How many customers will that require? Live for a year…. . …………. . $. 30, 000 Ro. T x 3………………. . …………………$. . . Selling Price/ Unit…. . …………. . . ……. $. . . Average # of purchases per year. …. . #. . . # Purchases x Selling Price…………$. . . # Customers needed…………………. #. . . .
How much do you need from the business? How many customers will that require? Live for a year…. . …………. . $30, 000 Ro. T x 3………………. . …………………$90, 000 Selling Price/ Unit…. . …………. . . ……. $. . . Average # of purchases per year. …. . #. . . # Purchases x Selling Price…………$. . . # Customers needed…………………. #. . . .
How much do you need from the business? How many customers will that require? Live for a year…. . …………. . $30, 000 Ro. T x 3………………. . …………………$90, 000 Selling Price per unit…………………. $100 Average # of purchases per year. …. . # # Purchases x Selling Price…………$. . . # Customers needed…………………. #. . . .
How much do you need to… Live for a year…. . …………. . $30, 000 Ro. T x 3………………. . …………………$90, 000 Selling Price/ Unit…. . …………. . . ……. $100 Average # of purchases per year. …. . # 5 # Purchases x Selling Price…………$. . . # Customers needed…………………. #. . . .
How much do you need from the business? How many customers will that require? Live for a year…. . …………. . $30, 000 Ro. T x 3………………. . …………………$90, 000 Selling Price/ Unit…. . …………. . . ……. $100 Average # of purchases per year. …. . # 5 # Purchases x Selling Price…………$ 500. . # Customers needed…………………. #. . . .
How much do you need from the business? How many customers will that require? Live for a year…. . …………. . $30, 000 Ro. T x 3………………. . …………………$90, 000 Selling Price/ Unit…. . …………. . . ……. $100. . Average # of purchases per year. …. . # 5 # Purchases x Selling Price…………$ 500 # of Customers Needed………………. # 180
Funding Choices To help start your business • Debt – Decision based mostly on your credit report. • And on your personal financial situation. – Partially on your business plan. – You keep 100% ownership. • Equity – Decision based totally on your business plan. – You trade funds for ownership.
Lender’s View of Borrower You have control over these decisions • • • Character, Commitment Credit rating Cash flow Collateral, Capital Industry knowledge Personal investment Financial history Financial projections Management skills Competition
Your Funding Situation Was determined before you walked in today • Your past financial decisions affect: – Your funds available to start your business – Your credit score for getting a loan • The business you choose affects: – Your revenue possibilities – Your net profit opportunity affects: • Your start-up funding needs • Whether the business can fund the business
Your Credit Report • A report of past performance: – An indicator of future performance. • Uncovers: civil judgments, unpaid taxes, liens, bankruptcies. • Credit Scores use data in the credit report. – www. annualcreditreport. com • Credit Score is the major decision factor. • 700+ Credit Score is workable.
Your Credit Score • • • 35% based on payment history. 30% based on amount owed. 15% based on length of credit history. 10% for new credit. 10% for types of credit used.
Have a Walk-Away Strategy To minimize impact on personal resources • Avoid signing contracts / leases. • Don’t take-on a loan – (or only a 1 year loan for start-up exp). • Finance only inventory and working capital. • Don’t purchase unnecessary equipment.
Don’t…. . Don’t • Spend money you don’t have • On things you don’t need • To please people you don’t like • That includes……. rents / leases • capital equipment • future expenses
Making Your Business Legal Next Steps
Legal Structure Considerations Before you make the decision • Owner’s personal financial exposure: – If business involves risk – If owner has substantial assets • Control, if more than 1 owner • Ease of ownership Transferability • Costs: – To organize – To comply with reporting requirements • Note…. Business Insurance still needed: – Fire&Theft - Business Interruption - General liability
Typical Legal Structures SCORE does not give legal advice • Sole Proprietorship – Simple to create and operate – Profit / Loss on personal tax return – Personally liable for business debts • Partnership - 2 or more owners required • C Corporation – Limited personal liability on business debts – Double taxation because C-corp is a separate entity • Limited Liability Company – Limited liability for business debts – P&L can be allocated differently than ownership interest • S Corporation – Can use S-corp losses to offset personal income
Licenses, Insurance, Taxes Important contact information • Decide on your business structure; www. sunbiz. org • Get your Accountant, Banker, and Insurance agent • Get your state licenses, if necessary: www. myflorida. com/dbpr • Get your Broward county Business tax license: http: //www. broward. org/Records. Taxes. Treasury/Taxes. Fees/Pag es/Local. Business. Taxes. aspx • Register your Fictitious D/B/A Name: www. sunbiz. org • Get your Federal Tax EIN (Form SS-4): www. irs. gov • And, if you do a taxable transaction: www. myflorida. com/dor
Process Roadmap You’ve completed Session 1: Start-Up Basics Session 2: Business Concept Session 3: Marketing Plan Session 4: Financial Projections “Go or No-go” decision & next steps with mentor Session 5: Funding Sources Mentoring/Build Business Plan
Now What…. . ? Ready to test feasibility? Simple Steps for Starting Your Business series. Four three hour sessions …Wednesdays 6 -9 pm English Details at broward. score. org • Test the feasibility of your idea • Get you to GO or NO-GO decision
If it is GO……. then • Complete business plan • Start small and grow • Get a SCORE Mentor • Watch the Money
If it is NO GO……. then • Revisit concept • Revisit Marketing • Revisit Cash Flow • New decision
Thank You
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