Make Your Dream A Reality

Transcription

1 SCORE Business Workshop Make Your Dream A Reality How to Start Your Own Business Presented by January 12, 2017 Williamsburg Library Presenters: Bruce Landefeld Steven Maurer williamsburg.score.org 1

2 Agenda - What We Will Cover Basic Decisions/Analysis Organizing Your Business Marketing Your Business Financing Your Business Managing Your Business Research & Decision Resources How SCORE can help williamsburg.score.org 2

3 First Steps Basic Decisions/Analysis williamsburg.score.org 3

4 Planning Most people don t plan to fail, they fail to plan. The purpose of a business plan is identify the important issues and Organize what you know Identify what you don t know Develop contingency plans for unknowns Assess performance after startup williamsburg.score.org 4

5 Planning Four Main Reasons Small Businesses Fail Lack of Planning Insufficient Capitalization at Start-up Mismanagement of Cash Flow Insufficient Revenue a. Improper Pricing b. Low volume Proper Planning is essential to the success of your business! williamsburg.score.org 5

6 Basic Decisions Decision #1: Am I Cut Out For This? Some Characteristics of Successful Entrepreneurs Self-starter Resourceful Accountable (no excuses) Organized Hard worker Persistent Decisive Healthy Supportive family Do you have the passion to run your own business? Are you determined to make it succeed? williamsburg.score.org 6

7 Basic Decisions Decision #2: Why Am I Doing This? Personal Goals. What are your reasons for wanting to own your own business? Desire to be your own boss? Create financial independence? Others? Are your reasons powerful enough to make you determined to succeed? williamsburg.score.org 7

8 Basic Decisions Decision #3: How Will I Get Started? Starting New Business vs. Buying Existing or Franchise Advantages of New Disadvantages of New Introduce New Product or Service Develop New Location Add Your Expertise and Experience Lower Potential Investment No Existing Customer Base Start up Marketing Competitive Pressures Inadequate Cash Flow Should I consider buying a franchise? a franchise.html williamsburg.score.org 8

9 Basic Decisions Decision #4: How Will I Get Started? Still thinking about owning your own business? Advantages Higher Independence Potential Rewards from Taking Risks (Profit) Pride of Ownership Future Wealth Potential Disadvantages Long Hours (24/7/365) Many Responsibilities Exposure to Financial Risk Business Climate Changes - Competition - Changing Customer Many Bosses: Customers & clients, Government agencies, Suppliers, Banks, Investors, etc. williamsburg.score.org 9

10 Basic Decisions Decision #5: How Will I Get Started? Is a Home-Based Business an Option? Advantages Convenient Work Location Less Expensive Flexible Schedule Tax Advantages - % sq ft of total home - Percentage of utilities Disadvantages Zoning or Deed Restrictions Isolation From Others Difficult Financing Family Distractions IRS Scrutiny williamsburg.score.org 10

11 Business Organization Organizing Your Business Form Regulation & Taxes Insurance williamsburg.score.org 11

12 Business Organization - Forms Sole Proprietorship (Default) Partnership Limited Liability Company (LLC) Corporation (stock) Non-stock Corporation (non-profits in VA are required to use this form) The LLC is the best fit for most small businesses, though you should discuss your particular situation with your attorney. williamsburg.score.org 12

13 Business Organization - Forms Sole Proprietorship Advantages Simple and easy to start Low start-up expenses Owner is the sole manager Profits are not shared Disadvantages Start-up capital difficult to raise Unlimited owner liability Business may be dissolved when owner dies Income taxed on owner s individual return williamsburg.score.org 13

14 Business Organization - Forms Limited Liability Company (LLC) Advantages Not difficult or expensive to form (vs Corp) Limited liability protection for owners (vs Sole Prop) Fewer rules and restrictions (vs Corp) Disadvantages Must file & keep current with Secretary of State (vs Sole Prop) Some restrictions on ownership & ownership transfer (vs Sole Prop) Profits able to be taxed only once at owner s level (vs Corp) williamsburg.score.org 14

15 Business Organization - Forms Limited Liability Company (LLC) To form an LLC in Virginia Select a name for your LLC and check that it is unique in Virginia Complete SCC Form LLC Send form and filing fee of $100 to SCC This process can be completed digitally on the efile partition of the SCC website. williamsburg.score.org 15

16 Business Organization - Regulation State of Virginia The Business One-Stop page of Virginia s Department of Business Assistance is easy to navigate and has excellent content: Is your proposed type of business regulated or require a license? Here is a list of the professions regulated by the Virginia Dept. of Professional and Occupational Regulation: Or is it in a health-related profession? Food service business? We are in the Peninsula Health District of the Virginia Dept. of Health. williamsburg.score.org 16

17 Business Organization - Regulation Local governments encourage small business creation and publish resource guides to explain and simplify the process. City of Williamsburg: James City County: York County: pdf Newport News: Links to these and other resources can be found on the website. Look for links in the green box on the right side of the page. williamsburg.score.org 17

18 Business Organization - Taxes At the Federal level, an LLC can be taxed as either a sole proprietorship, if the LLC has only one member, with all revenues and expenses being reported on Schedule C of the owner s Form 1040 personal tax return, plus Form 941 for selfemployment tax. a partnership filing Form 1065 if the LLC has more than one member as a corporation if the LLC requests such treatment by filing form IRS Form 8832 Discuss these matters with your accountant. A full discussion of the topic is presented in IRS Publication williamsburg.score.org 18

19 Business Organization - Taxes See IRS resources for Starting, Operating, or Closing a Business Some examples of useful IRS information Publication 15 (Circular E) - Employer's Tax Guide Publication Travel, Entertainment, Gift, and Car Expenses Publication Business Expenses Publication Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) Publication Starting a Business and Keeping Records Publication How to Depreciate Property Publication 1635 Understanding Your EIN, Employer Identification Numbers. Publication Independent Contractor or Employee williamsburg.score.org 19

20 Insurance - General TYPE COVERS LOSSES DUE TO Property Fire/damage to buildings, contents, inventory General Liability Accidental injury and damage to others BOP Business Owners Policy: Property & Gen l Liability Workers Required by law if business has 2 or more workers; Compensation covers injury, death and loss of wages Health / Disability Health insurance for you and your workers Motor Vehicles Business use of your vehicle Umbrella Liability Additional layer of coverage over auto/property Product Liability Losses due to products you sell or make Professional Liability Losses due to errors or omissions Business Interruption Covers expenses due to disaster if business must close williamsburg.score.org 20

21 Insurance Workers Compensation Covers injuries, death and loss of wages to workers on the job, including the owner Coverage is mandatory in Virginia for businesses with two or more employees If this coverage is not provided, injured employees may sue the owner for damages, including lost wages Owner (or other executives) may reject coverage for themselves See Virginia Workers Compensation Commission website for more details williamsburg.score.org 21

22 Marketing & Sales Marketing Your Business williamsburg.score.org 22

23 Marketing & Sales Critical Planning Questions 1. Is there a demand for your planned product or service? 2. Who are your customers? How will you find them? How will you reach them? 3. Who are your competitors and how successful are they? 4. Why will your product or service be a better value for customers? williamsburg.score.org 23

24 Marketing & Sales Now form your answers into your marketing strategy The Four P s of the Marketing Mix 1. Product - A product is an item (or service) that satisfies what a consumer demands. Describe the customer need and how the product or service has benefits which satisfy this need. 2. Price - The amount a customer pays for the product. When setting a price, the business must be aware of the customer perceived value for the product. Is demand expected to be price elastic or inelastic? 3. Promotion - All of the methods of communication that a business may use to provide information to potential customers about the product. Promotion comprises elements such as: advertising, public relations, sales organization and sales promotion. 4. Placement (or Physical Distribution) - providing the product at a place which is convenient for consumers to access. williamsburg.score.org 24

25 Marketing & Sales - Product What are you selling? Why does anyone care? Product - an item (or service) that satisfies a consumer demand 1. What is the customer benefit that your product is providing? 2. Is the customer aware of the problem that your product is solving? (example: basement radon detector) 3. What other options does the customer have for obtaining this benefit? 4. Can you make a profit selling the product at a price equal or lower than the value to the customer? Market research is key to answering these questions. williamsburg.score.org 25

26 Marketing & Sales - Product What is Your Market Positioning? 1. Are you creating a product for a market that does not currently exist? (Ex: basement radon detectors) 2. Are you entering an established market with a new, better product that provides higher customer value than existing products? (Ex: 2007 introduction of the iphone) 3. Are you creating a product in an established market that is similar to competing products? (Ex: open a pancake house with the best food and service in town) williamsburg.score.org 26

27 Marketing & Sales - Promotion Your product will not sell itself -- You need to do some kind(s) of advertising, but design your promotion to conform to your selling strategy: Five stages of a customer s buying decision process Product Awareness or. Problem recognition -- Many marketers advertise to create a problem to be solved Interest in your product (maybe after evaluating alternatives) Customer now more attentive to your advertising messages Trial, Evaluation, Information search info search usually only applies to more expensive purchases Social media has revolutionized this process Fear of making the wrong product purchase can lengthen info search Purchase (may be preceded by trial purchase) May be interrupted by negative comments by friends or online reviews Post-purchase behavior How customer s expectations compare to actual product experience williamsburg.score.org 27

28 Marketing & Sales - Promotion Advertising can be crafted to target different and/or multiple stages of the customer s decision-making process. Awareness Interest Trial/Eval Purchase Post Purchase Call with your credit card to order the Acme Vegetable Slicer Call to order the FREE DVD showing the wonders of the ACME Deluxe Treadmill POP display of gossip magazines at grocery store checkout counter High School kids on the street holding sign for a car wash TV ad for 2015 Jaguar F type williamsburg.score.org 28

29 Marketing & Sales - Price Price of the product must satisfy several constraints: It must be equal to or lower than the customer s perceived value. It must be higher than your cost of production It must produce a price-value relationship that the customer perceives as superior to competing products. Common Pricing Mistakes Failure to experiment. For most businesses, pricing should be a constant trial-and-error process. Fear of raising prices. Basing prices on competitor pricing rather than customer feedback. williamsburg.score.org 29

30 Marketing & Sales - Placement For a local storefront-type business, the placement strategy deals with selecting the type and location of leased space. However, for a product business, achieving product distribution can be the most difficult, time-consuming and expensive part of growing a business. Running a house cleaning business in the Williamsburg area is a simple distribution problem. Selling cupcakes at a stall on DOG Street at the Farmer s Market is a simple distribution problem. Selling cupcakes in every grocery store in the U.S. is a very big, expensive distribution problem. Reaching customers in a way that is convenient for them is critical. williamsburg.score.org 30

31 BREAK STRETCH BREAK williamsburg.score.org 31

32 Financing Your Business Financing Your Business williamsburg.score.org 32

33 Financing Your Business How Much Capital is Needed to: 1. Open the business doors (Start-up cash) 2. Stay open until you make profit (Operating cash) 3. Manage periodic ups and downs (Operating cash) williamsburg.score.org 33

34 Financing Your Business How Much Capital is Needed? It is crucial to have and maintain adequate operating capital. No matter how great your product or service is, WHEN YOU ARE OUT OF CASH, YOU ARE OUT OF BUSINESS. williamsburg.score.org 34

35 Financing Your Business Start-up Cash Needs Before your open for business, you may need cash for such things as Tools and equipment Leasehold improvements Licenses and permits Professional fees Initial inventory Working capital reserve fund williamsburg.score.org 35

36 Financing Your Business Operating Cash Needs An operating business has continuing expenses which consume cash: Salaries Rent Insurance Taxes and fees Advertising Loan interest/ principal Utilities Maintenance williamsburg.score.org 36

37 Financing Your Business How Will You Finance the Business? (It always takes more cash than you expect) Equity Signifies Ownership Personal savings Family and friends Other investor/partner contributions Profits retained in the business Debt Does NOT Signify Ownership Personal savings Family and friends Bank Loan (may be insured by SBA) Credit cards (not recommended) williamsburg.score.org 37

38 Financing Your Business Common Misunderstandings 1. GRANTS - Many people believe that they can get a grant but grants are usually not available to small businesses. Grants are issued by governments (and sometimes by philanthropies) to accomplish specific government goals. Thus the grantee business resembles a government contractor, often with stringent reporting requirements. 2. LOANS Many people also believe the SBA makes small business loans. Actually, the SBA only guarantees bank loans; it is a guarantor, not a lender. A bank will usually only use an SBA guarantee to make a loan it wants to make, but needs the SBA guarantee for to satisfy certain of its underwriting criteria. williamsburg.score.org 38

39 Financing Your Business Traditional and Non-traditional Sources of Business Funding Source: fundastic.com williamsburg.score.org 39

40 Financing Your Business SCORE has excellent templates available for free download. Find them on the Templates & Tools section of the website. This will take you to the page with this green box on the right containing many resources for new and existing businesses in the area. Download the Startup Expense Worksheet Financial Projections Templates and Instructions williamsburg.score.org 40

41 Accounting Two Basic Accounting Methods Single Entry - Cash Basis Very simple - (like household accounting) Recognize income when received Recognize expenses when paid Can use simple spreadsheet software Double Entry - Accrual Basis More complex - use an accountant to set up Recognize income when earned; expenses when incurred Needs dedicated software (Quickbooks, Quicken, Peachtree) Software generates financial reports Discuss with your accountant before making selection. williamsburg.score.org 41

42 Business Management Managing Your Business williamsburg.score.org 42

43 Management Define Roles and Responsibilities Who will own the business? You? Your Spouse or Partner? Other Relatives? Who will manage the Business? Who will be responsible for Operations? Management? Marketing and Sales? Is one (and only one) person clearly assigned responsibility for each management function? williamsburg.score.org 43

44 Management Every Business Owner Needs: Lawyer Accountant Insurance Agent Banking resources Business Mentor williamsburg.score.org 44

45 Management - Suppliers Suppliers and Providers can be a very important source of training, financing and support. Remember, you are their customer and they want you to succeed. Who will they be? Can you depend on them when you need them? What are their purchasing or payment terms? What training or other support would they be willing to provide? williamsburg.score.org 45

46 Management - Employees W2 Employee You pay wages, but withhold Fed & State taxes You withhold, match, send to Gov t Social Security Taxes Medicare Taxes You pay to state Gov t Workers comp insurance Unemployment insurance You may pay Benefits Holidays, vacations, time-off Medical, dental, 401(k), term life Continuing education, Total Benefits: >30% of comp Independent Contractor You pay cash wages You withhold no taxes You report wages paid (IRS Form 1099) Worker responsible to pay own Fed & State taxes SocSec & Medicare (both sides) Insurance No work = no pay = no paid time off Therefore, you can pay higher wages to a Contractor But he has many more personal expenses Worker pays all insurance, taxes and other expenses williamsburg.score.org 46

47 Research and Decision Resources williamsburg.score.org 47

48 Information Is Your Friend! Use ReferenceUSA for detailed local info on: Competitors Business locations Customers and business-tobusiness sales leads Suppliers Key business contacts williamsburg.score.org 48

49 Need Industry Info? Use Business Insights for industry and company analysis: Market share reports and trends Annual industry sales reports Trade associations and publications Business news williamsburg.score.org 49

50 How SCORE Can Help williamsburg.score.org 50

51 About SCORE SCORE is the most widely recognized provider of business mentoring services in the country Nationwide - Over 360 Chapters and 13,500 Volunteers Helps emerging entrepreneurs and existing businesses SCORE Advisers are known for their experience and expertise All mentoring sessions are Free williamsburg.score.org 51

52 SCORE Services One-on-One free Mentoring Want to Meet with a SCORE Business Advisor in Williamsburg?? Call SCORE at Visit the Chapter Web Site: williamsburg.score.org Request a meeting: williamsburg.score.org The SCORE Office is conveniently located at the Chamber & Tourism Alliance Building 421 N. Boundary St, Williamsburg, VA williamsburg.score.org 52

53 williamsburg.score.org williamsburg.score.org 53

54 Questions?? williamsburg.score.org