Small Business Planning Workshops

1. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Small Business Planning Workshops

2. Objective • Write an effective plan for your business • Learn to use business planning forms • Learn to conduct market research • Build a cash flow forecast spreadsheet • Write a persuasive executive summary • Learn about financing options • Create a decision-making tool for long-term success

3. Workshop 1 BUSINESS PLAN Introduction What is a business plan? Who needs it? 3-Step Process Overview of major sections Planning templates Starting Business Checklist Three Workshop Series Workshop 2 • MARKETING • Product or Service Description • Identify Target Market • Understand your Customer • Identify competition and Your advantage • Marketing strategies • Sales and margin forecast Workshop 3 • MANAGING MONEY • Test Financial Feasibility using Cash Flow forecast • Begin with four budgets • Breakeven analysis and fixed costs • Three financial statements • Example • What the lenders want to see, including 5C’s of credit

4. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Write a Winning Business Plan • What is a Business Plan? • Who needs it? • Three step process • Overview of major sections • Planning templates from SCORE • Starting Business Checklist

5. The Business Business is the process of taking materials, goods or services from a beginning point and adding value along the way to the final user

6. The Entrepreneur • The entrepreneur is a capitalist, an innovator, an employers and an owner… • … who manages the process of adding value, organizes the business, creates jobs and assume the risk for the sake of profit • What does it take to start your own business? • A dream; Belief in yourself; Hard work; and • A Plan • Find an unmet need • Figure out how to add value • Figure out your unique advantage • Organize resources

7. Starting Business is a Three Step Process • THINKING ABOUT IT • Do you have the right stuff • Choosing your business vs opportunity costs • Do you have the necessary funds • PLANNING FOR IT • Business plan • Marketing plan • Financial plan • DOING IT • Creating your business • Managing and Operating your business • Marketing your business

8. Step 1Thinking About It

9. Before you start… Do you have the Right Stuff? • Characteristics of an Entrepreneur • Personal Characteristics • self starter, strong work discipline, finisher, integrity, physical and emotional stamina. • Social Characteristic • ability to communicate, like meeting people, uninhabited talking about your business, honesty • Business Characteristics

10. … Business Characteristics • Can introduce and implement meaningful managerial policies and directives • Enact strong leadership disciplines • Display good business “common sense”, integrity • Make good decisions under pressure • Good organizer. And who must face and endure the “Entrepreneurial Shock”: The psychological realization by a start-up business person that the “work-for-yourself” idea is accompanied by difficult decisions and disappointments. Entrepreneurial Shock often occurs when a start-up business person has worked in a corporate environment and was not exposed to all the complications of operating a business.

11. 2. Buy Existing Business Conduct due diligence – ask for 3 years of past performance Know why business is being sold Prepare a business Plan 3. Buy Franchise Carefully investigate franchisor Read FTC Disclosure statement Read and understand franchise agreement Prepare a Business Plan 1.Start New Business Select your new business Define your business and product/service Understand your target market and competition Prepare a business plan Choose The Right BusinessStep 1 Increasing possibility of success

12. Choose the Right BusinessSteps 2 &3 • Do you have the necessary funds? • First determine what you can afford • Then select an appropriate business • Pick a business that • you know something about • have training or education in or • feel passionate about

13. Do You Have the Necessary Funds? • Equity from yourself • Own savings • Informal borrowing from family and friends • Refinance your home or home equity loan • Borrow from pension funds (401K or 403B) • Use credit limits on personal credit cards • Equity from Partners or Investors • Debt* Be Cautious * You must have at least 1/3rd of the capital necessary to start the business

14. Step 2Planning for It

15. Why Plan? • Many things have to go “right” for a business to succeed • Right Idea • Right Market • Right Place • Right Time • Right Management • Right amount of Capital • Planning doesn’t eliminate risk; takes time now … but avoids costly mistakes • The value lies in the process of researching and thinking; not in producing a finished plan

16. A Business Plan… • Uncovers every facet of the business being developed • Explores new company’s strengths and weaknesses • Reveals ways to capitalize on the strengths and minimizes the weaknesses • Points to the best method for development • Provides a structure for company’s pursuit of ultimate success

17. What is a Business Plan?It is a written document that says: • I know why my business exists • I know where I am and where I plan to go • I know my competitive advantage and why I will succeed • I know the strategies that I plan to follow to get from here to there • I know my business generates enough profits to: • Service debt • Provide adequate return to attract investors • Provide adequate return on my investment and sweat equity

18. Who Needs A Business Plan? • Lenders • Investors • Suppliers • YOU You need a Business Plan as a decision-making tool to start & successfully operate your business over the long term

19. Business Plan Outline • The Title Form • Table of Contents • Executive Summary (complete last) • Business Section • Marketing Section • Financial Section • Supporting Documents

20. The Title Page • Company Name and address • Telephone number, Fax number, e-mail address • Name of person preparing Plan • Date Plan prepared • Request return • Mark Confidential

21. Table of Contents • Reference to major topics in plan • Make it user friendly • Indicates completeness

22. Business Section • Mission of your business • Unmet need that you will satisfy better than competition • Products / Services • Legal Structure • Ownership Structure; Management Structure • Other topics you may need to cover: • Facility • Technology • Management Information & Control • Manufacturing and Assembling

23. Marketing Section • Product and/or service (from customer’s view … hopefully addresses an unmet need) • Industry Description: size, growth, trends • Target market (your niche) • Characteristics of target buyer, unmet needs • Competitor Analysis (Strengths and Weaknesses) • Competitive advantage (why will a customer do business with you?) • Strategies (selling, pricing, purchasing, location and advertising) • Goals (sales volume & margins forecast; list key assumptions)

24. Financial Section • Your Personal Budget (only for lenders and you) • determines “Owners Equity” • Start-up Budget • Land, facilities, capital equipment, inventory, other one-time costs, and “working capital” • How you plan to finance the start-up • Sources of equity and debt • Expense Budget • Sales Volume and Margin Budget • Cash Flow Projections • Break-even analysis and sensitivities • Pro-forma Financials • Income Statement – Balance Sheet

25. Supporting Documents • Personal resumes and other documents • Owner’s financial statements & credit report • Copy of leases, mortgages, purchase agreements • Contracts and Letters of reference • Key Employee job Descriptions • Licenses and permits required • Attorney/accountants/insurance advisors

26. Executive Summary • Write this last • 1 page long … 2 max • Include everything that you would cover in a five-minute interview • Make it readable, enthusiastic and complete • Must have What, When, How and Why

27. Executive Summary • What do you want to do? • Describe your product and/or services • Describe your business and your niche • When do you want to do it? • How are you going to do it? • Start up costs and timing • Funding (equity and debt) • Organization • Facilities and capital items • Why do you think you will succeed? • Mission and Objectives • Competitive advantage • Breakeven point and Risks

28. Planning is Iterative • At any point you may need to rethink, rework or refine something you’ve already done • Do not get stuck on any section or form – do the best you can, move on and return to that topic later • Go back, review and improve what you wrote previously

29. Step 3Doing It

30. Check List • Create legal business • Get Federal Employer Identification Number • Get state employer I.D. or sales tax permit • Obtain a business license or permit • Obtain financing (equity & debt) • Establish a line of credit (if necessary) • Set up a business checking account • Buy insurance

31. Legal Structure

32. What Do Lenders Looks For? • 5 C’s • Character • Collateral • Capacity • Conditions • CAPITAL • Management Skills and Experience • A Business Plan demonstrating the debt can be satisfactorily serviced

33. Doing It Check List (continued) • Establish Credit / Check processing services • Identify Personnel and begin recruiting • Line up suppliers • Set a starting date • Set up physical business • Order business cards and stationary • Order signage (Outside and Point of Sale) • Develop a website • Begin pre-opening advertising

34. Wrap-up • Think – Write the Plan – then Do it • Choose the Right business, based on: • Knowledge • Training • Experience • Passion • Make sure you’ve got the funds • Be honest with yourself • Plan is for lenders, investors and YOU

35. Use Free Counseling from • Our mission is to help small businesses succeed. We accomplish this mission by Educating Counseling Mentoring

36. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Congratulations&Thank You!Keep in touch.www.scorehouston.org

37. Back up

38. Buying a Business • If possible, buy assets not stock • avoids potential liabilities, unknown at the time of purchase. • Describe the existing business • Date business was originally started • List the present owners • Are the present owners the original start-up owners? • Date present owners acquired business • Present Organizational form

39. Buying a BusinessPrice • Asking price • Appraised value (see due diligence) • Goodwill • (difference between the price and book value) • How and by whom were the assets appraised

40. Buying a BusinessDue Diligence • Review Business History • 3-year Financial reports • 3-year Income tax reports • Review Operating History by major product lines • 3-year Sales and Operating reports • Forecast sales and margins by major product lines • Appraise the Business Value • Verify Market value of inventory, receivables, capital assets, payables and debt • Determine the value rules in your industry based on similar sales • Compute business value using DCF Analysis based on forecasted sales and margins and compare it to the rules above • Verify Business Goodwill • Business reputation – Positive or Negative • Brand identity – Strong or Weak? • Customer feedback – Positive or Negative • Why is the owner selling the business • Banker; Customers; Supplier; Broker • Attach itemized lists of assets & liabilities at book and appraised values in the Appendix

41. Buying a FranchiseIs this a repeatable franchise? • Is it listed in SBA Franchise Registry? • How long has the franchisor been in business? • Has the brand/product/service good market acceptance? • What is the reputation and credit-worthiness of the franchisor • How many franchisees are presently operating? • What is the rate of turnover and closings of the franchisees? • Contact several franchisees at random (not from a list the franchisor provides) • Carefully review Uniform Franchise Offering Circular

42. Buying a FranchiseIs the franchise fee competitive? • How much is the franchise fee and is it competitive and reasonable? • Are the “royalty fees” reasonable and competitive? • Are the following included for these fees? • Training program for franchisee and employers • Assistance in obtaining financing • Assistance in selecting and acquiring the right location • Assistance in facility design and layout • After start-up management assistance and performance evaluation • Co-op advertising, POS and sales promotion programs

43. Buying a FranchiseLegal Issues • What is the term of the agreement? • Under what conditions can the franchisor terminate this agreement? • Under what conditions can you terminate this agreement? • Can you sell the franchise to others without the franchisors permission? • What are your renewal rights? • Are your outside business activities limited? • Is the franchise territory protected? • Are there other “similar” franchisees located nearby? • Are there limits to the number of franchisees one can own and operate? • Is the investment required all-inclusive? • How is the royalty fee used? • What co-op programs are you required to participate in? • Are there constraints on buying supplies and products from others? • Do you have the original and a copy of the franchise agreement and other required legal documents, signed by both parties Have an attorney carefully review the franchise contract or agreement