Create A Vision: Create A Vision Determine What You're Good at and What You Like To Do Figure Out What The Market Needs

Developing large or small business ideas is a matter of creating a vision, leveraging your strengths and determining what the
market needs. These three steps should get you started.

Create a vision Determine what you're good at and what you like to do Figure out what the market needs
Create a vision Close your eyes for a few minutes and conjure up a detailed image of what you want your life to look like in 5 years. Be as specific as possible. Where do you live? How do you spend your days? What kind of work do you do? Do you work alone or with other people? Who are you surrounded by? What do you do when you aren't working?
Don't limit yourself to these questions; create a vivid vision of yourself, touching on things that are important to you. These are all personal issues that will impact the type of business you pursue - being a city or country person; wanting to travel or sit at your computer; liking to meet people or work on the phone. This activity will help you create a foundation for choosing from small business ideas, making business decisions, and setting clear goals. It is best to do this exercise with someone else and share your vision. If you can't, write it down to make your vision more concrete. Determine what you're good at and what you like to do It's often useful to look inside yourself to figure out what you like and dislike, and where your talents lie. It's one thing to come up with a winning business idea. It's another to come up with one that fits your skill set and interests you. Your business has to keep you excited so you can thrive over the long haul. One of the best ways to do this is to make three separate lists: List 1: What you're good at Everyone is good at something and many skills can be the foundation for a business. You might be naturally organized or have a knack for fixing things. You may be so used to your skills that they don't immediately come to mind, so assemble this list by observing yourself for a few weeks with an eye out for your aptitudes and by asking people who know you well for their impressions of what you excel at. List 2: Skills you've acquired over the years Whether or not you've worked in a conventional environment, you no doubt have accumulated many. Write down all the work responsibilities you've had; think about the varied tasks you know how to complete. Make sure this list is complete -- there should be at least 10 distinct items. List 3: Things you like to do List the things you enjoy doing. This may not be as easy as it sounds. This list should be at least 10 items long. Stretch beyond your hobbies and interests that spring to mind immediately. If you're stymied, ask people who have known you for a long time -- particularly people who knew you as a kid -- what they have seen you doing when you're happiest. Keep these three lists in an accessible place (for instance on your desk) for several weeks, and when small business ideas come to you, jot them down in the proper category. Ask people who know you well for their input or to help you jog your memory. Figure out what the market needs So far, you've been looking inward to come up with your business idea. Now its time to look outward to discover an unfilled need that you can meet with your product or service.
There are plenty of "Top 10" or "Hot New" business lists out there. These may stimulate some ideas, but the best business ideas will come from you and will be based on who you are and what the market is looking for. So while you're doing your soul searching and list making, put up your antenna and look out for business opportunities. The attached worksheet is designed to help you come up with ideas. Don't be afraid to be outlandish and don't be discouraged if your first few ideas are flawed. Put them aside and keep working.
Deciding on a Business
Provided by My Own Business, Content Partner for the SME Toolkit Characteristics of a Successful Entrepreneur
Step-by-Step Approach Decide if you really want to be in business Decide what business and where Decide whether to start full-time or moonlight
Selection Strategy Things to Watch Out For
Required Activities Comparative Evaluation How to Evaluate a Specific Business you have in Mind "For" and "Against" List Get Completely Qualified
Decision Time SESSION 1 Quiz
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Characteristics of a Successful Entrepreneur

Guts: Guts means you must have an entrepreneurial instinct, which is an overwhelming desire to start your own business. You must have the guts and dedication to be completely devoted to your goal. Incidentally, devotion to your goal is much more likely if you have a love for your intended business. Life is too short to start your own business only to discover that it doesn't give you satisfaction and joy. And, through good times and bad times, you will stick with something you love.
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Brains: While appropriate educational credentials are important, entrepreneurial "brains" means more than scholastic achievements. To become a successful entrepreneur, you must have a working knowledge about the business you plan to start before you start it. Common sense combined with appropriate experience is the necessary brainpower. Prudence, follow through and attention to detail are very important. Capital: To start your own business you will need seed money of your own plus sufficient cash to maintain a positive cash flow for at least the first year. In a future session you will learn how to forecast future cash requirements through cash flow control. Many businesses can be started on a very small scale with a small investment. Then, as the business grows and you gain experience, cash flow from your business can be used for growth. In some cases you don't need starting capital to hire other
Collette Paul STM Media Inc. Publisher of Trade Magazines "Be able to sustain a financial commitment to whatever business you start." Transcriptio n - html
people because you might start by doing everything yourself. The "do it yourself" start is a good way to learn everything about your business and also makes Testimonia you better qualified to delegate work to others later on. You can control your risk by placing a limit on l how much you invest in your business. Elaine [Back to top]
How To Start Your Own Business: A Step-by-Step Approach

Decide if you really want to be in business:
You will be putting some (not all, hopefully) of your net worth at risk when you take the plunge and start your own business. You will run the risk of becoming eccentric, meaning creating a life that is out of balance, with working hours taking away from other family or pleasurable activities. There may be levels of stress you have not experienced as an employee. Decide what business and where: Once you have decided you have the characteristics of a successful entrepreneur and that you definitely want to be in business, then you must decide which business is best for you and where to locate that business. Selection strategy is covered later on in this Session. Decide whether to start full-time or moonlight: There are some interesting advantages and some pitfalls in starting as a moonlight business. (That is, a business you start in your off hours while still working at your current job.) More often than not, the advantages of starting your business as a moonlighter outweigh the risks: You avoid burning your bridges of earnings, including retirement, health and fringe benefits and vacations. Your full-time job won't suffer if you maintain certain conflict of interest disciplines, including compartmentalizing your job and business into completely separate worlds. You can avoid conflict of interest with your job by choosing a business that is appropriate for moonlighting, such as: single products, real estate, specialized food, ecommerce, direct marketing or family-run operations. There are great advantages for
Mitchell Specialized Veterinarian "Hiring good staff members who also share the same philosophy has been very important." Transcriptio n - html
operating a family business. The family can run the business while you are at work. You have a built-in organizational structure. You can teach your kids the benefits of being in business. But there are also some pitfalls to consider in starting a moonlight business: There is a temptation to spend time at your job working on your moonlight business. That is unfair to your employer and should not be done under any circumstances. (You may need a family member or some trusted person to cover emergencies when you are at your job.) Another problem may be competing with your employer, which, again, is not right. Think of how you would feel or handle this employee if you were the boss. Any kind of conflict with your regular work can jeopardize your job and your moonlight business.
Overwork and mental and physical exhaustion can also become a very real problem for moonlight entrepreneurs. [Back to top]
Testimonia l
Millard
MacAdam Pro Active Leadership Selecting the wrong business is "As the saying the most frequent mistake that goes, fail to start-up entrepreneurs make. Here plan and you is a checklist to help you select a are planning to successful one: fail." Take your time Transcriptio and wait for the business n - html that is just right for you. You will not be penalized for missing opportunities. The selection process takes a lot of planning and your experience and complete knowledge is vital for your success when learning how to start your own business.
Selection Strategy
Don't tackle businesses that may be too challenging. It is better to identify a one-foot hurdle than try to jump a seven-footer.
Try to identify a business that has longterm economic potential. Follow Wayne Gretzky's advice, "Go to where the puck is
going, not to where it is." A big mistake can be an error of omission. This means you may fail to see an opportunity that is right in front of you. Look for a business that will grow in today's and tomorrow's markets. Many small retail stores are no longer in business because huge stores such as Wal-Mart and Home Depot provide more choices to the customer and often at a cheaper price. Follow the advice of Warren Buffett, Chairman of Berkshire-Hathaway Inc. and the most successful business picker in American history: Mr. Buffett looks for businesses that focus on a "consumer monopoly" with pricing power and long-term predictable growth prospects. Examples include: See's Candy's, Coca-Cola and Gillette Razors. Can you copycat this philosophy in a small way? Businesses to avoid are "commodity" businesses where you must compete entirely on price and in which you must have the lowest cost to survive. As Mr. Buffett has said, "In a commodity type business you're only as smart as your dumbest competitor." Most service businesses have pricing power. Should you bet on a business you don't know when you can bet on a business you do know? If you intend to manufacture a product, consider the pros and cons of contracting out production to a low-cost supplier. In other words, operate a "hollow corporation." A "hollow corporation" is a company that subcontracts manufacturing and packaging. [Back to top]
Things to Watch Out For:
Impatience
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Sophia Garcia A-Z Glass Company "To get ahead in this business you do everything to get the job." Transcriptio n - html
Do not let overconfidence shortcircuit you from analyzing your selection of businesses carefully. You must not fear of hearing the negative aspects; it is much better to be aware of them and face them early on.
Be realistic. Do not become lured by high rewards. They will come if you choose the right business and if you understand every aspect of the business before you open its doors.
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Required Activities
Crucial when learning how to start your own business, it is worth repeating again: The most common mistake and the most costly one is not picking the right business to begin with. This is the time for soul searching. IF YOU HAVE NOT DECIDED ON A BUSINESS, DO THIS: On the top of a blank sheet of paper, write an activity you like to do (make this the heading). Do a separate page for each activity or interest you have. On those same sheets list as many businesses you can think of that are related to that activity. On the same sheets list all the products or services you can think of that are related to that activity. Use your imagination and think of every possible product or service you could do. Make a list of businesses that do better in bad times (one may be appropriate for you). Some examples might be pawnshops, auto repairs and fabric stores. EXAMPLE Let's assume you end up with three potential businesses: towing service, selling used cars and auto repairs. You can now make a comparative evaluation using the following check-list (or better still your own checklist) with a 1-10 scoring system: Objective Towing Service Selling Auto Used Repair Cars
Can I do what I love to do? Will I fill an expanding need? Can I specialize? Can I learn it and test it first?
6 8 7 9
3 5 8 8
10 10 10 9
This kind of analysis can help you gain objectivity in selecting your business. How to Evaluate a Specific Business you have in mind. Here are some questions to help clarify your thoughts:
Is it something I will enjoy doing? My favorite activities are: __________________________ I like to serve people by: ________________________________
Will it serve an expanding need for which there is no close substitute? Can I be so good at a specialized, targeted need that customers will think there is no close substitute? Can I handle the capital requirements? Can I learn the business by working for someone else first? Could I operate as a hollow corporation, without a factory and with a minimum number of employees? ("Hollow corporation" refers to a business where everything is "outsourced," meaning you would subcontract manufacturing and packaging to outside sources. ) Is this a product or service that I can test first? Should I consider a partner who has complementary skills to mine or who could help finance the business? Once you have decided what business you want to start, do this: Make a "for" and "against" list regarding characteristics of the business. On a blank piece of paper, draw a vertical line down the middle of the page and list on one side all the "for's" and on the other all the "against's." Sometimes this will help clarify your thinking. Write down the names of at least five successful businesses in your chosen field. Analyze what these
five businesses have in common and make a list of reasons that make them successful. Talk to several people in your intended business. Don't be afraid of the negative aspects of your intended business. Instead, seek out the pitfalls: better now than after you open your doors. Take notes if possible. Write down the information as soon as you can. Analyze the competition that are not doing well and write down the reasons.
Get Completely Qualified

Before you start, get completely qualified: The best way to become qualified is to go to work for someone in the same business. Attend all classes you can on the subjects you need, for example: accounting, computer and selling. Read all the appropriate "how-to" books you can. Don't be afraid to ask questions or seek help from the most successful people in your intended business. [Back to top]
Decision Time:
What could you sell or what services could you perform that would make money and you would enjoy? To complete this session you should have decided on a business or at least selected a business you think would be best for you. To get the most benefit out of the next eleven sessions you should have a definite plan in mind. Session Two will show you how to prepare your business plan. [Back to top]
SESSION 1 Quiz: DECIDE ON A BUSINESS

Top of Form
1. Which of the following actions must always be taken to become a successful entrepreneur? A. You should be prepared to risk all of your family assets. B. Plan to quit your job before starting. C. Choose a business that is in a field you
enjoy.
D. Be prepared to put down a lot of money.
Bottom of Form Top of Form
2. The most common and biggest
mistake made by entrepreneurs is in not having sufficient money.

A. B.
True False
3. Which one of the following is NOT a good reason to consider starting a moonlight business? A. You won't burn your bridges of income and benefits while you're getting your business started.
Family members can become involved in your business.

B. C. You have the time and equipment available on your regular job to conduct your own business. D. New tools including the Internet, pagers and fax machines are available to conduct home-based businesses including e-commerce, direct marketing and single products.
If a part-time business proves out and becomes successful, you can decide at that time whether to quit your job and become a full-time entrepreneur.
E.
4. Let's say that you are looking for some overall guidelines for picking a business. Which one of the following
answers would be a good decision?

A. You have the choice between taking on a business that would be a huge challenge to make successful and one that would be a no-brainer for you to accomplish. You would go for the challenging one. B. Realizing that you're not getting any younger and this is going to be a big step, it would be better to jump right in and get something started and see what happens.
If you had the choice between getting into a business in which you already have experience and one that would be a fresh start in an entirely new field, you would go for the fresh start.
C. D. You'd take your sweet time to seek out that one great opportunity. E. If your heart is really set on opening a toy store in a strip shopping center, you would go for it no matter what.
5. Realizing that there are no hard and fast rules, generally speaking, which of the following businesses would be easier to start and command better pricing power? A. Operate your own gasoline service station.
Sell your grandma's special candies.

B.
6. In most cases, the very best way to become qualified in a business you intend to open is to:
Talk to everyone you can who is in that business.

A. B.
Do a "for" and
"against" analysis.
C. Do a twelvemonth pro forma balance sheet, income statement and cash flow projection. D. Work for someone in the same business.
Objectively weigh the collective opinions of your accountant, banker, lawyer and insurance agent.
E.
7. Starting a "hollow corporation"
means:
A. Starting a company with no assets. B. Starting a company with negative net worth. C.
Acquiring a
shell corporation. Creating a company where all activities are outsourced (manufacturing and packaging).
D.
8. You have always dreamed of
opening a hardware store but now that you're ready to start you realize that the Home Depots of the world would be too hard to challenge. You should:
A. Find a niche segment in the hardware business that you can specialize in.
B.
Find another
business.
C. Go to work for one of the "big box" hardware chains and see if any needs exist that you could uniquely fill. D.
All of the
above
9. What is the single most frequently made mistake that leads to failure?
Lack of experience in the business chosen.

A. B.
Undercapitaliz
ation.
C. Not picking the right business to begin with. D. Lack of knowledge of accounting.
Lack of familiarity with the competition.

E.
10. You don't need to worry about the dumbest competitor in a business that is service oriented. A. B.
Bottom of Form
True False
The Business Plan

Provided by My Own Business, Content Partner for the SME Toolkit

What is a Business Plan? Why Prepare a Business Plan? What to avoid in your business plan Business Plan Format Vision statement The people Business profile Economic assessment
Six Steps to a Great Business Plan Basic business concept Feasibility and specifics Focus and refine concept Outline the specifics of your business Put your plan into a compelling form Review sample plans
Business Plan's Necessary Factors Understanding your market Healthy, growing and stable industry Capable management Able financial control Consistent business focus Mindset to anticipate change
SESSION 2 Business Plan SESSION 2 Quiz
Testimonial
Antoinette Douglas Mother Love Family Day Care
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What is a Business Plan?

The primary value in learning how to write a business plan will be to create a written outline that evaluates all aspects of the economic viability of your business venture including a description and analysis of your
"Find out what it is that you really want to do, go to college, and get an education in that field." Transcription - html
business prospects. Since this course is broken down into twelve of the most important aspects to consider in starting a business, your business plan can follow this same format. Included in this session and in each of the following sessions there is a sample business plan outline covering each subject, that will aid you when learning how to write a business plan. When you put these all together, you will have a starting model for your overall plan. A business plan is an essential step for any prudent entrepreneur to take, regardless of the size of the business. This step is too often skipped, but we make it easy for you to learn how to write a business plan, by providing a format to build your plan as you progress through this course. Business plans can vary enormously. Libraries and bookstores have books devoted to business plan formats. But this course is a place to start. You can then go on from here to design one that would be ideal for your particular enterprise. Be aware now that most start-up entrepreneurs are reluctant to write down their business plan. It is therefore strongly recommended that you complete each segment of the plan as you progress through this course. We make it easy for you by providing sample plans for both product and service businesses and also an attractive blank form that you can download onto MS Word and customize Testimonial yourself. [Back to top]
Why Prepare a Business Plan?

Learning how to write a business plan is going to be useful in a number of ways. Here are some of the reasons not to skip this valuable tool. First and foremost, it will define and focus your objective using appropriate information and analysis.
Ezequiel Padilla Jugos Tropicales Mexican Food
"When your business is doing well, consider buying the property if it is possible." Transcription - html
You can use it as a selling tool in dealing with important relationships including your lenders, investors and banks. You can use the plan to solicit opinions and advice from people, including those in your intended field of business, who will freely give you invaluable advice. Too often, entrepreneurs forge ahead ("My Way!") without the benefit of input from experts who could save them a great deal of wear and tear. "My Way" is a great song, but in practice can result in unnecessary hardships. Your business plan can uncover omissions and/or weaknesses in your planning process. What to Avoid in Your Business Plan Place some reasonable limits on longterm, future projections. (Long-term means over one year.) Better to stick with short-term objectives and modify the plan as your business progresses. Too often, long-range planning becomes meaningless because the reality of your business can be different from your initial concept. Avoid optimism. In fact, to offset optimism, be extremely conservative in predicting capital requirements, timelines, sales and profits. Few business plans correctly anticipate how much money and time will be required. Do not ignore spelling out what your strategies will be in the event of business adversities. Use simple language in explaining the issues. Make it easy to read and
understand. Don't depend entirely on the uniqueness of your business or even a patented invention. Success comes to those who start businesses with great economics and not necessarily great inventions. [Back to top]
Business Plan Format: A Systematic Assessment of all the Factors Critical to Your Business Purpose and Goals
Here are some suggested topics you can tailor into your plan: A vision statement: This will be a concise outline of what your business purpose and goals will be.
Testimonial
Mari Lohr Graphic Artist
"Being in business for yourself is not for everyone." Transcription - html
The people: By far the most important ingredient for your success will be yourself. Focus on how your prior experiences will be applicable to your new business. Prepare a resume of yourself and one for each person who will be involved with you in starting the business. Be factual and avoid hype. This part of your business plan will be read very carefully by those with whom you will be having relationships, including lenders, investors and vendors. Templates for preparing resumes are available in your library, Kinko's, bookstores and the Internet under "resumes." However, you cannot be someone who you are not. If you lack the ability to perform a key function, include this in your business plan. For example, if you lack the ability to train staff, include an explanation how you will compensate for this deficiency. You could add a partner to your plan (discussed in Section 4) or plan to hire key people who will provide skills you don't have. Include biographies of all your intended management. Your business profile: Define and describe your intended business and exactly how you plan to go about it. Try to stay focused on the specialized market you intend to serve. Economic assessment: Provide a complete assessment of the economic environment in which your business will become a part. Explain how your business will be appropriate for the regulatory agencies and demographics with which you will be dealing. If appropriate, provide demographic studies and traffic flow data normally available from local planning departments. Cash flow assessment: Include a one-year cash flow that will incorporate your capital requirements ( covered in Lesson #7). Include your assessment of what could go wrong and how you would plan to handle problems. Include your marketing plan and expansion plans.
Refer to helpful government websites such as the Small Business Administration. See "Resources" on the home page of this website.
[Back to top]
Six Steps to a Great Business Plan

Start-up entrepreneurs often have difficulty writing out business plans. This discipline is going to help you in many ways so don't skip this planning tool! To make it easier, here are six steps for how to write a business plan: 1. Write out your basic business concept.
2. Gather all the data you can on the feasibility and the specifics of your business concept. 3. Focus and refine your concept based on the data you have compiled. 4. Outline the specifics of your business. Using a "What, where, why, how" approach might be useful. 5. Put your plan into a compelling form so that it will not only give you insights and focus but, at the same time, will become a valuable tool in dealing with business relationships that will be very important to you.
6. Review the sample plans we furnish and download the blank format to a MS Word document. Fill this in as you progress though the course.
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Testimonial
R.D. McDonnell Architect
Check Out If Your Plan Includes The Following Necessary Factors Which Will Produce A Successful Business
A sound business concept. The single might not otherwise consider most common mistake made by entrepreneurs when you put them down on is not picking the right business to begin with. paper." The best way to learn about your prospective Transcription - html business is to work for someone else in that business before beginning your own. There can be a huge gap between your concept of a fine business and reality.
Understanding of your market. A good way to test your understanding is to test market your product or service before your start. You think you have a great kite that will capture the imagination of kite fliers throughout the world? Then hand-make some of them and try selling them first. A healthy, growing and stable industry. Remember that some of the great inventions of all time, like airplanes and cars, did not result in economic benefit for many of those who tried to exploit these great advances. For example, the cumulative earnings of all airlines since Wilber Wright flew that first plane are less than zero. (Airline losses have been greater than their profits.) Success comes to those who find businesses with great economics and not necessarily great inventions or advances to mankind.
"You'll identify issues that you
Capable management. Look for people who you like and admire, have good ethical values, have complementary skills and are smarter than you. Plan to hire people who have the skills that you lack. Define your unique ability and seek out others who turn your weaknesses into strengths. Able financial control. You will learn later the importance of becoming qualified in accounting, computer software and cash flow management. Most entrepreneurs do not come from accounting backgrounds and must go back to school to learn these skills. Would you bet your savings in a game where you don't know how to keep score? People mistakenly do it in business all the time.
A consistent business focus. If you think of specific products or services you will find that specialists will outperform non-specialists. Zero in on something you can do so well that you will not be subject to competing with someone with a lower price.
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Business Plan for Sessions 1 and 2: The Business Profile, the Vision and the People.
Now is the time for you to review the sample plans we have provided. This will help you in formatting your own plan. For some tips on appropriate information to fill in, refer to the sample business plans: Sample Business Plan (Product): Widget Corporation MS Word
Sample Business Plan (Service): Smith E-Commerce Consulting MS Word You can now begin to assemble your business plan. If you have not yet selected a business, you can pick one out to practice on. Remember, we have provided attractive, individual business templates for each session that you can download as Microsoft Word documents or as printer friendly web pages. So start now! Section 1: The Business Profile MS Word
Section 2: The Vision and the People MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need. 3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have filled in.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 2 Quiz: The Business Plan

Top of Form
1. The best place to find more information on designing
your own individualized plan is:

A. B. C.
Your lawyer Your accountant
The Public Library, industry or government "Business Plan" websites, or bookstores

D.
Business Planning Consultants

2. The primary reason to prepare a business plan before you begin is to create a tool to deal with investors and financing sources. A. B.
True False
3. In preparation of financial projections for your
business plan, it is as important to estimate long range sales and earnings as it is to project short-term objectives.
A. B.
True False
4. A potential investor or lender is going to look over your business plan and in his or her mind this question will arise: Where is the tough person to make the really difficult decisions, handle negotiations skillfully and exercise restraint? Your business plan should provide the answer by: A. Projecting yourself in this image (assuming you're not!)
Making a point of stating that your team of consultants including your lawyer and accountant will be employed to maintain a disciplined business approach
B. C.
Facing this issue and stating it in your
business plan: your business will need tough and skillful management. Answer this need in a way that satisfies you as well those who will be doing business with you.
5. Preparation of a business plan is optional for some small businesses. A. B.
True False
6. Your business plan could EXCLUDE: A.
All the subjects covered in sessions of
this course.
B.
Personal biographies of management.
C. Financial statement projections and cash flow projections. D. E.
Your marketing and expansion plans.
Your plans to build a new vacation home with your profits.

7. If your business plan includes the exploitation of an invention, and provided you do not blunder in major decisions, your success can be most likely assured. A. B.
True False
8. Let's assume that your business plan is based on
starting a real estate related business. This business plan session would lead you to most favorably consider:
A. B.
Residential and commercial sales. Industrial and commercial
development.
C.
Room additions and industrial
construction.
D. E.
Specialize in one of above. None of the above.

9. In order to test your understanding of your market, the safest approach would be to: A. B. C.
Rely on your personal instinct. Conduct a survey among your friends. Test market your product or service.
10. To overcome the common stumbling block of not preparing a business plan, it helps to: A.
Complete the plan for each session as
you proceed.
B.
Have your business plan completed
before proceeding.
C. Prepare your plan after you have completed this course.
Bottom of Form
Basic Computer and Communication Tools

Types of Communication External Internal
Basic Communication Tools Telephones Pagers Facsimile Machines
Computers Desktop Laptop
Handheld Software
Internet Browsers Feasibility and Specifics Internet Service Provider Email
Technology Planning SESSION 3 Business Plan SESSION 3 Quiz
Testimonial
Gwyn Myers Management Consultant
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Types of Communication
Communication is key to any business success! Unless potential clients and customers are aware of your business, they will not have the information to contact you or to purchase your products. When they are aware of your business, they must be able to contact it easily.
"You can't do without communication and computers, they are absolutely key to the success of your business." Transcription - html
Two types of communication are essential - external and internal.

External communication reaches out to the customer to make them aware of your product or service and to give them a reason to buy. This type of communication includes your brochures, various forms of advertising, contact letters, telephone calls, web sites and anything else that makes the public aware of what you do.
Image is extremely important in external communication! Your logo should represent who you are; your letterhead should be a selling tool; your telephone message should reflect your professionalism.
Internal communication is essential to attracting and retaining a talented staff. You must provide the direction for the company by consistently communicating that message; you must motivate your staff through various forms of communication, which can include awards, newsletters, meetings, telephone calls and formal and informal discussions.
Effective communication requires tools and planning. In this session we will discuss those tools, as well as planning guidelines, to facilitate that key element of your business - communication. The following discussion will be grouped into 1) basic communication tools; 2) computers; and, 3) the Internet. [Back to top]
Testimonial
Greg Washington Consultant, Marketing for Physicians "Look at the Internet as an opportunity to create an electronic brochure." Transcription - html
Basic Communication Tools

Specific tools that can be used for communication include telephones, pagers, facsimile machines and Personal Digital Assistants (PDAs). The lines between the devices are blurring. For example, a
telephone can now contain all of the functions of a PDA and also access email and the Internet. For this discussion, however, each device will be presented as a separate entity.
Telephones
There are many types of telephones and only you can decide which type(s) or combinations of types are right for you. Even the standard telephone that is installed in your office has many options. You should start with at least one line that is unique to your business. This line should have the capability to take messages in case it is not answered personally. The wireless telephone is becoming a requirement. With a wireless telephone, you can avoid missing calls. The features needed for this type of telephone depend entirely on you and your needs. You can get the basic instrument free by signing up with most carriers, or you can get a model that can receive your email, store your contacts, maintain your calendar and allow you to play interactive games. There are many features from which you can choose on standard and wireless phones, such as call waiting, call forwarding, conferencing capabilities and voice mail. There are also many plans and many carriers from which you can choose. Competition has forced options that bundle popular features and usage patterns, making them very cost effective. Be sure to ask questions about your specific needs before selecting a carrier and a plan. When your usage or your needs change, do not hesitate to request information on plans that more closely meet your new set of requirements.
Telephone Tips
It is important to treat the telephone as an important business tool. Record a voice mail message that indicates when you will return the call and then continually check your voice mail to return calls promptly. Have a separate line for your business phone and your personal phone. Don't have family members pick up or use the business phone. Get any required extra telephone lines installed before you start. A remote (voice mail) answering system is usually more desirable than using an answering machine. Voice mail is reliable, reasonable in cost, accessible from anywhere and projects a more business-like image. The need for an 800 number is becoming less important because long-distance rates are much more affordable. Consider using a headset for both wireless phones and cell phones. It is clearer, safer and you can move about with free arms. When leaving phone messages, clearly state your name and phone number at the beginning and the end of the message. Be polite in wireless use! Good business courtesy includes avoiding being interrupted by telephone calls when in a meeting or during a business lunch.
Pagers
There are many varieties of pagers: those that only receive numeric messages; those that provide both voice and text capabilities; those that have two-way messaging; and, those that have the capability of receiving and sometimes even sending email. They now come in colors and sizes to meet your every need. Some devices operate on paging networks, have the features of a PDA, allow you to receive and reply to email messages and the latest models include a cellular telephone. One of the key decision points is the geographic coverage that you will be needing. This coverage can be as limited as your own county or as comprehensive as nationwide. Usage charges increase as coverage expands.
Pager Tips
Use the pager with the same polite guidelines as the wireless telephone. Keep the pager in "vibrate" mode when involved in business meetings. There is nothing more distracting than having a pager play music during an important discussion. If you use a pager with a wireless telephone, you can manage your interruptions. The one thing that you must do is to make sure that the expectations of those paging are realistic - you will get back to them as quickly as possible, not necessarily immediately.
Facsimile Machines
The decision must be made as to whether to get a simple fax machine or whether to get an "all in one" model that not only faxes but also prints and scans. Consideration should be given to your budget and your space constraints. Generally, the simpler the machine, the less problems you will have with it. It is very important to get as much memory as possible on your fax. That makes it possible to send at a rate faster than the rate at which the fax can print. Only when the memory is full will the transmission rate slow down to the speed of print. Some vendors can provide you with a fax number that works with your email system. Sending a fax to you works just like it does when the fax is being received by another machine but you receive it as an attachment to an email. This can be very handy for those who travel on a frequent basis and are not always near a fax machine. Facsimile Tips Use a cover page that is appropriate for your company. Remember, this is external communication that reflects your business and your Use a separate dedicated phone line for your fax machine. [Back to top]
Testimonial
Jane Williams La Habra Journal Community Newspaper "If you cannot go it alone, consider very carefully if you really need a partner." Transcription - html
Computers
A computer is such an affordable tool that it should no longer be considered an option for your business! The following discussion will focus on three basic models - desktop, laptop, personal digital assistants and the software that makes them work.
Desktop - This is the most common type of computer, one that is set up to operate in your office. This computer system should include a basic processing unit, a monitor, a modem, a CD drive, a floppy disk drive and a printer. Some type of backup storage should also be considered, such as a Zip drive or a read/write CD. Computer systems can be purchased for a wide range of prices. The only advice that seems appropriate is to get as much and as fast as you can afford. Given rapid advances in technology, whatever you buy today may quickly become obsolete. Fortunately, this does not mean that the computer you purchase will not meet your business requirements for a much longer period of time. Laptop - A laptop computer is portable. A single unit will contain a combination of the capabilities shown for the desktop. It usually does not include a printer so that will have to be purchased as an additional item. Another option is a docking station that allows you to plug your laptop into a unit at your office, giving the capability of using your laptop as the basic processing unit while enjoying the use of a larger monitor and a full-sized keyboard. Laptops tend to be a bit more expensive than desktops but if you travel and need computing capability, it is worth the extra expense. Once again, get as much
capability as you can afford. Personal Digital Assistants - Handheld computers, or Personal Digital Assistants (PDA's), are becoming increasingly popular. There are basically two versions of these units: 1) those that use the Palm Pilot operating system and 2) those that use the Microsoft Pocket PC operating system. These units allow you to synchronize your key organizational elements with your computer. In a very small package, you can have your entire contact list and your calendar as well as a list of things to do. Many of these units also allow you to receive and respond to email via wireless or modem transmission. You need never be out of touch! Software - The software you purchase is key to making your computer a productivity aid. The operating system, whether it is a PC or a Macintosh, should be loaded onto the system. Many software packages are often bundled into the system at the time of purchase. At the bare minimum, you should have the capability to do word processing, spreadsheets and presentations. Additionally, you should consider financial and accounting software that is appropriate for your particular business. Keep in mind that many accounting/bookkeeping software packages are not double-entry systems and care must be taken in making the entries correctly. Auxiliary Products - There are many products that can be used in conjunction with your computer to enhance the functionality and image of your business. These also require software specifically designed to facilitate their usage. Digital Camera - a picture taken by this type of camera can be directly loaded onto your computer for a variety of uses. Usage ideas include pictures of properties, product catalogs, pictures accompanying resumes and many more. Scanner - when you have a printed copy of something that you would like to include as part of a digital document, you can create a digital image by scanning the printed copy with this type of equipment. Generally speaking, the higher the price of the scanner, the better the image produced. Wireless Transmission - this feature allows you to communicate with other devices equipped with the same feature. Being able to simply point your device at another one, without hunting for the cord and plugs, is very appealing and has many productive implications. Don't overlook the importance of making regular external back-ups to the individual programs used in your business. Backups are commonly stored on CD's or Zip discs but there are also services provided on the Web to facilitate this Testimonial process. [Back to top]
Lloyd Totten Pest Control Service
Internet
The Internet has become a very important business tool! It can be used at a basic level for email and for research and it can be used at a more comprehensive level as a channel for selling your products and services.
"Offering good service and being punctual has resulted in word-of-mouth referrals." Transcription - html
To get access to the Internet, you need a browser. This is a piece of software. Microsoft Internet Explorer and Netscape Navigator are the two leading browsers. Now that you have a browser, you need to get access to the Internet. This is done through an Internet Service Provider (ISP). These providers range in the features that they provide, but all give you the capability of email. If you want a very
comprehensive set of features, then America Online or MSN might be for you. If you are comfortable with accessing the Internet and working within an environment that assumes a little more knowledge on your part, an ISP such as AT&T or Earthlink might meet your needs. As with other forms of communication, there are many plans and prices from which to choose. How you use the Internet in your business is up to you. Perhaps you are not ready to sell your products on the Internet, but you are interested in developing a website, or home page, that lets people know what you do. At the other extreme, you may want to use the Internet as your main sales channel. Just remember, the basics are still on the ground - you need products and services that people need; you need to attract people to your Internet site so that they have the option of purchasing these products and services from you; you need to convince them to buy; you need a place to store your products; and, you need a way to get them to the purchaser. Session 9 of this course will furnish you with detailed information about the Internet and E-Commerce. [Back to top]
Technology Planning
Before you start, plan for the technology that you will need. Get those extra telephone lines; purchase and learn how to use the computer; decide how you will and will not use the Internet. Keep in mind that the monitoring of employees' use of the Internet while at work is not a violation of their rights to privacy. Your policy should be in writing and signed by your employees. Remember, appropriate use of technology can make your business look established and successful from the very beginning! [Back to top]
Business Plan for Session 3: Basic Computer and Communications Tools

We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 3 and complete it now. Section 3: Communications MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here"
sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need.
3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have filled in.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word
Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 3 Quiz: Basic Computer and Communication Tools

Top of Form
1. If I am too old or inadequately educated to become
computer literate and to handle websites, e-mail and software, should I start a business?
A.
Yes: Start without a computer.
B. No: Learn. Read books, enroll in courses, and get tutoring.

2. I'm ready to start my business but haven't taken computer classes yet. Should I start my business without software programs in place and plan to convert to them later? A.
Yes, start without a computer program
in place.
B.
No, wait until my computer set-up is in

place.
3. In my new business, I plan to have employees accessing
the Internet. The monitoring of employees' use of the Internet while at work is violation of their rights to privacy.
A. B.
True False
4. Your fax machines should be set up with separate dedicated phone line. A. B.
True False
5. Which of the following is NOT an external
communication:
A. B. C. D.
Brochures Your website Employee meetings Your letterhead

6. When using the telephone (either wired or cell) you can improve clarity, safety and versatility by using: A. B.
An instrument's microphone A headset

7. 800 phone numbers are becoming less important because of lower long distance rates. A. B.
True False
8. What system of taking telephone messages is
recommended in case they cannot be taken personally:

A.
Voice mail, managed by your telephone
company
B.
A telephone answering machine

9. Spreadsheet know-how is considered to be: A.
Useful for a limited number of
businesses
B. C.
"Must-know" software and know-how Useful for many businesses

10. A personal digital assistant (PDA) can perform all of the following functions: Cell phone, sending and receiving forwarded faxes and email, and managing your calendar. A. B.
True False
Bottom of Form
Organization
Provided by My Own Business, Content Partner for the SME Toolkit In this session we will deal with three decisions that every entrepreneur must make: 1. Whether to go into business alone or with a partner. 2. What type of business organization to use for the business: proprietorship, partnership, corporation or limited liability company. 3. What professional advisors to select.
Should You Have a Partner Arguments For Arguments Against
What Type Of Business Organization Is Best For You? Sole proprietorship General partnership Limited partnership Corporation "S" Corporation Limited liability company
Laws That May Affect You Income tax returns Franchise tax returns Employment tax returns The time for payment of withheld and employers share of employment taxes Unemployment tax returns and payment Sales tax reports and payments
How Can Your Professionals Help You? Attorney Accountant Payroll service providers Other Professionals
Suggested Activities SESSION 4 Business Plan SESSION 4 Quiz
[Back to top]
Testimonial
B.J. Adelson Lawyer
Should You Have a Partner

It is best to make your decision concerning whether to have a partner by preparing a "for" and "against" list. The most common reasons for joining with another person to start the business are: There is safety in numbers. In other words, you have two heads instead of one to discuss and make decisions. You will not need to be at the business at all times. You will have someone else who will be there to share the load and permit you to take a vacation and have sick time.
"If you get advice from a professional, listen to him or her. He or she probably knows better than you do." Transcription - html
You will also have a highly motivated co-worker, not just someone who is earning a paycheck. Partners can also be advantageous when they have complementary skills. It may be necessary to have a partner to contribute capital and share the risk when things do not proceed as planned. Some of the arguments against having a partner are: You will have to share the rewards if the business is successful. You will lose total control over the business, particularly if you and your partner have difficulty in making decisions. You will have to share the recognition that will come if the business is successful. A partner can be a disaster if his judgment is not good.
You run the risk of a falling out and perhaps the necessity of one partner buying the other out if you do not get along. Some of the things to consider in deciding whether a particular person will make a good partner are whether you have similar work habits, similar objectives concerning how to run the business and whether your strong points are similar or complementary. For example, different capabilities permit you to spread the workload and provide better coverage for problems. Different capabilities may permit you to give each partner a veto over important decisions in his or her area of expertise to help maintain stability and eliminate conflicts. Finally, you may want to consider whether you should have a buy-sell agreement in the event of a disagreement, and how the purchaser will pay for the portion of the business he or she is buying (and whether you should fund the buy-sell agreement with Testimonial insurance in the event of the death of a partner). [Back to top] What Type Of Business Organization Is Best For You? Whether you are going it alone or with another person, it is best to consult a lawyer to determine which form of business organization will be best for you. Your choices and the attributes of each form are essentially as follows:
Gary Hobday Secured Retirement, Inc.
"Looking to the retirement future is very important." Transcription - html
A sole proprietorship is one person alone. He will have unlimited liability for all debts of the business, and the income or loss from the business will be reported on his or her personal income tax return along with all other income and expense he or she normally reports (although it will be on a separate schedule). Although proprietorship avoids the expense for forming a partnership or corporation, many start businesses this way because they are unfamiliar with the other forms of organizations.
In a general partnership each of the two or more partners will have unlimited
liability for the debts of the business. The income and expense is reported on a separate return for tax purposes, but each partner then reports his pro-rata share of the profit or loss from the business as one line on his personal tax return. With a limited partnership, each of the general partners has unlimited liability for the debts of the partnership, but the limited partner's exposure to the debts of the partnership is limited to the contribution each has made to the partnership. With certain minor exceptions, the reporting for tax purposes is the same as for a general partnership.
A corporation provides limited liability for the investors. Except as indicated below, none of the shareholders in a corporation is obligated for the debts of the corporation; creditors can look only to the corporation's assets for payment. The corporation files its own tax return and pays taxes on its income. If the corporation distributes some of its earnings in the form of dividends it does not deduct the dividend in computing its taxes, but the shareholder recipients must pay taxes on those dividends even though the corporation has paid taxes on its earnings. A corporation has some tax benefits such as deductibility of health insurance premiums. A corporation that has made an election to be an "S" Corporation for federal income tax purposes is treated as a partnership for tax purposes although it is treated as a regular corporation for other purposes. A limited liability company provides limited liability for all of its members, but typically can be treated as a partnership for federal income tax purposes. State laws may differ as to whether it is treated as a partnership or a corporation for state income tax purposes. It can be managed by all of the members or can have centralized management in one or more of the members.
Obviously there are variations in these rules and you should consult with your attorney and/or accountant in each specific case to determine what form of organization best fits your needs. One of the things to consider in making the final decision is that although a corporation has limited liability for its shareholders, if the corporation does not have sufficient assets various creditors may insist on personal guarantees from the shareholders. Examples are your landlord, some suppliers, and, by law, liability for certain payroll taxes and liabilities to employees. [Back to top] Laws That May Affect You There are many laws that are applicable to owners of small businesses. It is best to consult with professionals to determine which laws will be applicable to you, what permits you will need to commence business and where to go to comply with the various rules. Your attorney should be able to assist you in complying with labor laws such as the employment of minors, illegal aliens and workplace safety rules. Your accountant should be able to assist you in filing: Income tax returns Franchise tax returns Employment tax returns The time for payment of withheld and employers share of employment taxes Unemployment tax returns and payment Sales tax reports and payments
Your attorney may be able to help with requirements for business licenses including special licenses for particular businesses as well as building codes and permits for remodeling and zoning laws, health department requirements and environmental laws. [Back to top] How Can Your Professionals Help You? Your attorney In addition to the above items, your attorney should draw your partnership agreement, or form
your corporation, including the issuance of stock and appropriate filings with the Secretary of State and the Department of Corporations. He or she will help advise on the best form of ownership, assist in negotiations to buy an existing business and review documents if you are buying a franchise. He or she will also advise on buy-sell agreements and draft appropriate documents. If your business will require renting an office, store or factory, your attorney should review and approve your lease document. A lease obligation can become your biggest liability and your attorney can help negotiate fair and protective terms. For example, if you anticipate growth, your lease should include a provision for how expansion requirements will be handled. Your new business may require specialized legal advice to establish and protect your intellectual property rights. Intellectual property includes your ownership rights to your business name, trademarks, copyrights and patents. Intellectual property law is a specialized field and you may need an attorney who specializes in these matters. Your accountant Your accountant can be an important advisor in start-up decisions, such as: To decide what would be the appropriate division of the capital you contribute to a corporation between stock and loans To determine the best form of ownership To help set up the books and records of the business To advise on computer needs for accounting purposes.
He or she will have a continuing role in filing tax returns, advising on compensation of owners, preparing financial statements, helping forecast cash needs, including whether to expand, addition of employees, and whether you are really making money in this venture. Your Payroll Service Provider "Payroll Service Providers" can take over the responsibilities of a Human Resources (HR) department. They can handle your: Payroll, including tax deposits, payroll tax returns and reports Employee handbook development Assistance with hiring, interviewing, disciplining and training employees Benefits administration Unemployment insurance administration
Your Pension Plan Manager As a business owner you can participate in the benefits of tax deferred pension plans for yourself and your employees. Good pension planning will help you attract and keep good employees. Some payroll service providers now handle pension plan management. Your professionals can also be of significant assistance in helping formulate your business plan by advising on: The appropriate form of organization Allocating roles to each partner such as how much control each party will have
The areas in which each will have primary responsibility and how much ownership each party will have. In connection with the acquisition of an existing business, they should advise on good and bad terms of the proposed deal and help negotiate with the seller and his or her attorney. Finally, they should advise on your need for capital, both at the inception of the business and what additional capital will be needed if the business is successful and you decide to expand. [Back to top] Suggested Activities:
Before you start-up, collect referrals to and references about lawyers, accountants and insurance agents so you can select the most appropriate professional advisors well before the time you will need their services. Perhaps they will provide you with initial free consultations for your considering them as members of your professional team. [Back to top] Business Plan for Session 4: Organization We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 4 and complete it now. Section 4: Organization and Professional Advisors MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here$" sentence. This will
suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need.
3. After completing each box, delete the "Insert here" sentence, which will leave
only the permanent title of the box and the information you have filled in. We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 4 Quiz: Organization and Professional Advisors

Top of Form
1. A sole proprietor is not personally liable for the obligations of his business. A. B.
True False
2. In which of the following forms of organization can you deduct
health insurance premiums as a business expense?

A. B.
A proprietorship A partnership
C.
A corporation
3. If I set up my business up as a LLC (limited liability company) I will need to file my federal tax return as: A. B. C.
An individual A corporation A partnership

4. My brother-in-law and I want to start a small vacuum cleaner repair shop as partners. We want to keep our investment cost down. We should organize: A. B. C.
Through an informal handshake A Corporation A Partnership

5. As a business owner it is possible to put part of my company
earnings into a tax-free retirement plan for myself.

A. B.
True False
6. A good reason to consider starting a business with a partner is: A.
Your partner will take one-half the responsibility for
all liabilities.
B. Partners with complementary skills can enhance the success of a business.
7. It is a good idea to prepare your own payroll checks when you start. A.
True
B.
False
8. "Intellectual Property" refers to: A. B. C.
Your knowledge of your business Assets which exclude intangibles Patents, trademarks and copyrights
9. The lease document for your new office or store should be reviewed by your: A. B. C. D.
Accountant Attorney Banker Landlord's leasing agent

10. A partnership buy-sell agreement is usually funded by: A. B. C. D.
Your banker Your lawyer Life insurance Your accountant

Bottom of Form
Insurance
Insurance Coverage For Small Businesses Business Property Insurance Liability Insurance Worker's Compensation Insurance Other Insurance Coverage Excess Liability Coverage
Employment Practices Liability Coverage Life Insurance

Testimonial
Kelly Davis Insurance Agent
[Back to top]
Insurance Coverage For Small Businesses

"Before starting, you should Besides your attorney and accountant, another talk with an insurance professional you will need to bring into the start-up professional." process will be your insurance agent. It may be Transcription - html helpful to have one agent who can handle all of your insurance needs. There are policies available that are specifically designed to cover small businesses that, in one package, will cover most of your insurance needs.
Insurance is not only going to be important to you but it will be important to your other business relationships. For example, if you choose to lease office space, the landlord will typically require that you furnish a certificate of insurance or be listed as an additional insured on your policy as assurance that your business will not disappear overnight in the event a loss occurs. Here are some of the risks that should be protected by insurance: Business property insurance Property insurance should include a broad form of coverage to protect you from a wide variety of losses. Your insurance should include: Buildings. Coverage would be required here if you own the building your business occupies. In the event you lease a premises, your landlord should provide this coverage. Business personal property includes your tables, desks, chairs and equipment. Also, you will want to include the tenant's improvements you might make to leased premises. An example would be a room divider you add, or a display case, or a custom built counter that forms part of reception area for your clients. Loss of Income Earthquake Flood (which may or may not be available)
Keep in mind that an all-risk policy can be structured to cover all of your equipment, including computer hardware and software, plus your valuable records. A properly written policy will include loss of income that might result from breakdowns, as well as loss of income from other hazards that would temporarily close down your business. Liability Insurance A Comprehensive General Liability (CGL) policy is designed to provide coverage to third parties for the following:
Personal and Advertising Injury
Fire Legal Liability, which is often mandatory if you lease your premises. This protects you in the event your negligence results in damage or loss to your landlord's property. For example: you mistakenly leave a
small electric space heater running and go home for the evening. During the night, the heater shorts and starts a fire, resulting in fire and smoke damage to your landlord's building. In this case, the negligent act of leaving the space heater on caused the loss. This is where Fire Legal Liability protects your investment. Products and Completed Operations Medical Expense or medical payments
General Liability for your premises. The best illustration is the common "tripping over the torn carpet, resulting in an injury" loss. On occasion, some policies will exclude Products and Completed Operations and/or Personal Injury and Advertising Coverage depending on the services your business provides. In these instances, a Professional Liability, Malpractice, or Errors and Omissions Policy might be available for your type of operation that will cover the errors and omissions that might result in suits against your company. This is particularly true of professions that are held to a higher degree of care or standard, for example, attorneys, engineering consultants, insurance agents, realtors, doctors and dentists. Worker's Compensation Insurance If your business has employees, Worker's Compensation insurance will be mandatory. Startup operations typically find that the State Compensation Fund can accommodate their needs. As the business grows, you can then "shop" for better prices for the coverage. In addition, some worker's compensation insurers provide additional services such as risk management and loss control services that may be beneficial to your business operation. These services are typically helpful in holding down claim costs over the long term. Do not confuse risk management with your taking part of the risk. The insurance company should assume 100% of the worker's compensation insurance risks. Other Insurance Auto coverage for company vehicles. (Liability, Comprehensive, Collision and Uninsured/Underinsured Motorists.) Health insurance plans tailored to fit the size of your business (benefit: this coverage helps give you an edge when recruiting good employees). Excess Liability Coverage These are liability limits available over and above the maximum limit your carrier of choice may write and can be accomplished in two ways: Excess limits can typically be added at extra cost to the underlying package policy in "chunks" of $500,000 or $1 million dollar layers sometimes up to $5 million. Purchasing what is called a "commercial umbrella," which can typically provide excess coverage over and above most underlying package policies, including the business policy, business auto, and worker's compensation. SOMETHING TO KEEP IN MIND: Your carrier of choice may offer lower limits, which may look attractive from a premium standpoint. But savvy business owners should contemplate liability limits of at least $1 million. The additional cost is usually affordable and, in today's litigious environment, makes good sense.
Example: You, the business owner, suffer an auto accident in which you are determined to be at fault. In addition, the accident results in the victim being rendered a paraplegic. This type of loss can easily result in a multi-million dollar judgment against you.
Employment Practices Liability Coverage Employment Practices Liability insurance is a coverage that is starting to be carried by more companies, with premiums exceeding $2,000 annually for $1 million of coverage. While employment practices are rarely encountered in a small operation, the threat of wrongful termination or sexual harassment lawsuits, which are excluded under most business policies, becomes more prevalent as the size of your organization grows. Life Insurance As mentioned earlier, if you have a partner, your buy-sell agreement can be funded by life insurance in the event of the death of a partner. As your business grows this insurance can be increased. [Back to top] Suggested Activities:
Before you start-up, collect referrals to and references about lawyers, accountants and insurance agents so you can select the most appropriate professional advisors well before the time you will need their services. Perhaps they will provide you with initial free consultations for your considering them as members of your professional team.
[Back to top] Business Plan for Session 5: Insurance We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 5 and complete it now. Section 5: Insurance MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need. 3. After completing each box, delete the "Insert here" sentence,
which will leave only the permanent title of the box and the information you have filled in. We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 5 Quiz: Insurance
Top of Form
1. It is better to have one insurance agent who can handle all matters of insurance than to have separate agents for each category of coverage. A. B.
True False
2. Some small start-up businesses may find it difficult to
qualify for getting worker's compensation insurance.

A. B.
True False
3. In structuring a worker's compensation policy, it is worth assuming some of the risk in order to motivate employees in safety issues and lower the cost of coverage. A. B.
True False
4. Broad form business property insurance will protect
you against losses such as:

A. B. C. D. E.
Personal Injury General liability for your premises Company vehicles Your table, desks and chairs All of the above
5. Your CGL insurance (Comprehensive General
Liability) is designed to provide coverage for:

A. B.
Worker compensation claims Loss of income
C. D. E.
Earthquake and flood (if available) Personal injury All of the above
6. Worker's compensation insurance is: A. B.
Mandatory: required by law Optional

7. "Commercial Umbrella" insurance is to provide
protection above the maximum limit of your carrier's insurance:

A. B.
Property insurance coverage Liability insurance coverage

8. Self insurance is an acceptable cost-saving strategy for a start-up business. A. B.
True False
9. Health insurance plays an important role in: A. B.
Recruiting good employees Reducing worker's compensation
premiums
C.
Reducing premiums on uninsured

motorists risk
10. Employment Practices liability coverage is designed to provide coverage for the following:
A. B.
Threat of wrongful termination claims
Your electric space heater causes smoke damage to your premises

C.
A customer slips and falls in your store

Bottom of Form
Location and Leasing

Location, Location, Location Zoning Categories Criteria for Home Based Business Criteria for a Manufacturing, Warehousing or Industrial Business Criteria for a Retail Business
Leasing Do's and Don'ts Do's and Don'ts Points to Consider Before Signing a Lease or Purchasing Property Lease Check-Off List To Rent or to Buy Considerations
Do Your Homework Site Location Criteria Evaluation Table SESSION 6 Business Plan SESSION 6 Quiz
Testimonial
Jack Edwards Commercial Real Estate Broker
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Location, Location, Location

Whether you are a moonlight entrepreneur or fulltime, at some time real estate issues will become important to you. The success or failure of most retail businesses will hinge on the owner's selectivity and judgment in picking the right location.
"Most retail businesses require good accessibility and visibility." Transcription - html
An initial step in business is to decide where you will live and where your business will be located. You may have the opportunity to relocate to an area where you would really enjoy living and working. Zoning Categories Every city has a Planning Department at City Hall. You will be dealing with this and other municipal departments and agencies that have discretionary authority to approve or disapprove your intended plans. You can no longer rely on zoning codes to determine what the rules are in your desired location. Your intended location will often be subject to "precise plan"
approval, environmental impact assessment and other regulatory issues. You may find yourself appearing before a review board that can often seem unreasonable in their decisions. Many cities have redevelopment agencies authorized to impose conditions even more stringent than those established by local codes. One shopping center developer was so frustrated with the demands of city agencies that he finally threw up his hands and sold off his rights to the property. The new owner succeeded in developing the property. His secret, "I went into City Hall and told them that I would do anything they wanted me to do-----and did it." Now, obviously there will be times when unreasonable conditions will make a location for your business unattractive. In such cases you should unemotionally look for another location. Criteria for Home Based Business Be sure your home business is permitted and you have the license required by the city. Many homes have an association with regulations for the owners. Check to ensure you are in compliance. Criteria for a Manufacturing, Warehousing, Industrial Business Allow for future expansion Convenient for employees Accessibility Available labor force Appropriate utilities
Convenient to freight and express delivery systems Criteria for a Retail Business Each retail and commercial business has its own criteria. For example, a donut shop should be located on the "going-to-work" side of the street. On the other hand, a convenience store may be best positioned on the side of the street with traffic going home from work.
Testimonial
Donna Strachan Beauty Salon Owner
"Do what you do best, don't try to be all things to all people." Transcription - html
The selection of your first location will have an overwhelming impact on your chances for success. In Session One you analyzed businesses that are similar to the one you chose. Did you analyze where they were located and why?
Select the appropriate type of center (mall, strip, mini). Some business do best in a large center but some, like Mini-Marts, video stores and laundromats, do better in much smaller centers. Others do well located on the street front, such as florist, nursery or antique stores.
Demographic data will provide you information about the neighborhood. It will inform you about the population, the number of households, estimated population by race, age and income level within a one, two or five mile radius. You can find firms that supply this information on the Internet. Go to major search engines and enter "demographic data." Walk and talk the area. You will be surprised how much you can learn by talking to customers, employees and owners. Traffic count is very important because it will give you the number of cars at the intersection. You can also get the pedestrian count, which is
great for drop-in or walk-in business. This report can be obtained from the local traffic department.
Visibility and signage. Customers must know you are there. They should be able to see your store. Usually the end or corner location is better, which is why the rent for those spaces is higher. Get the biggest sign you can. Tell the public clearly what you are selling. Examples: Travel, Gifts, Pets, tell the products. Both your lease and the city ordinances will have limitations regarding your signs.
Access and parking: Be sure you have adequate and convenient parking. Avoid streets with dividers or one-way traffic. Customers prefer stores where the parking is in the front. Proximity to competition: Know where your competitors are located. You can get the names and address out of the Yellow Pages. Find out what your competition is doing and how they are doing it. Generators (anchors): These are the big national stores in a mall or shopping center. For example, Albertson's, Nordstrom, Wal-Mart and/or McDonald's will help to bring customers into the center. The closer your business can be to generators, the better it Testimonial usually is for your business. Larry Tien [Back to top] Leasing Do's and Dont's Leasing "Do's" Retain a real estate lawyer to assist you in negotiating your lease or purchase. A five-year lease on a $1,000 per month space is $60,000 (probably a personal obligation) and may well be your largest obligation for your beginning business.
"Make sure either your product or your service is the best." Transcription - html A B Photo Service
Most retail stores leases are Net, Net, Net (NNN) leases (a.k.a., Triple Net Lease) meaning that you as tenant will pay for the taxes, insurance, gardening, utilities, security, trash and sewer, litter, graffiti removal and repairs. This charge is based on the square footage of your space. CAM (Common Area Maintenance) charges can be costly so find out the estimated cost per month before signing the lease. CAM charges can vary but will normally include parking lot sweeping and repair and all aspect of common area upkeep. Ask for options. At the end of your base term you can then renew the lease or move. Try to keep your initial term short. There are some compelling reasons to have a short term lease with options: Your business may not be successful at your initial location. A short-term lease will minimize your overall rent obligation. You need flexibility in lease terms to accommodate growth. Startup businesses frequently find that their growth rate is more rapid than expected. Consider the possibility that you need to expand your business and will need more space. To provide for this, your lease could provide that if you need more room, your space can be expanded, you can move to another location in the center or you can cancel your lease. Leasing "Don'ts" Don't hurry your decision. There is no such thing as the last good location. Don't judge entirely on rent. Pay fair rent for an outstanding location. Don't let the lessor dictate all the lease terms.
Points to Consider Before Signing a Lease or Purchasing Property Is the location the best available in the area where you want to be? Does it meet your own specific criteria? Are utilities and tenant improvements adequate?
Lease Check-Off List (See Attached Exhibit: "Commercial Lease")
Figure (1) Rent: is the rent comparable to other rents in the same location? Term: is your lease for a short-term (a year or less) or long-term? Floor area: how much square footage of the space? Rent and CAM charges are base on the square footage of your space. Common area maintenance charges (CAM): what are the estimated charges for a year? Options: do you have options to renew the lease after the first term expires? Rent increase: is it a fixed rent increase or is it based on the CPI (Consumer Price Index). If so, negotiate a percentage cap. Percentage rent: some landlords will ask for fixed rent plus a percentage (of your sales) rent. An issue to negotiate. Tenant improvements: put the agreement in writing as to the responsibilities of the landlord and your responsibilities to do the necessary improvements to get the space open for business. Landlord's Construction Exhibit "C" should be made a part of the lease. Please refer to the sample exhibit furnished in this session. Right to assign or sublet: Landlord's consent "not to be unreasonably withheld" Signs: be specific with exhibit and description Provision for expansion requirements: if you think your business will be expanding Parking rights: be sure that adequate parking spaces are provided. In most retail centers tenants share "common area parking" rights. Nearby restaurants or theatres can monopolize the parking spaces you require. Personal guarantee: avoid, if possible. If it is required, ask your lawyer to review this clause carefully. Exclusive: ask that no other business similar to yours be allowed in the center if it's appropriate.
All leases have Exhibits
Figure (2) 1. Site plan, which is a drawing of the inside of the store, restrooms, windows, doors, A/C vents and utilities. 2. Sign criteria, put in a drawing of the type of sign you want, be sure to state color and size. 3. Construction obligations, state exactly what the landlord will do and what you will do. 4. Special requirements of tenant To Rent or to Buy Considerations For start-ups, primary consideration is that capital is needed for the business Are requirements going to change? If so, renting is probably preferable Are there tax and borrowing incentives available to buy? Some make more on the real estate than on the business. Talk to Community Development Department. [Back to top] Do Your Homework Completely fill out a standard lease form with contingencies necessary for your particular business Attend local Chamber of Commerce meetings to find out about community opportunities and concerns Fully evaluate a specific location, including the completion of a "Site Criteria" table [Back to top] Site\Location Criteria You can create your own "Site Model" in order to maintain objectivity when evaluating locations for your business. This can be done by assigning different values to the factors that are most important for your particular business. Then each location can be evaluated against these measurements. Some things to keep in mind in site selection: Maintain contact with the Community Development Department Find and get to know a good real estate lawyer Negotiate an actual lease as a dry run practice Ownership fixes future cost and availability of the location
There's no such thing as the "last good location."
Copycatting your most successful competitor's site criteria can help avoid making mistakes. If you are building a chain of stores, never sign a lease on your second location until your first location is profitable and proven. It is better to pay fair rent on a great location than pay great rent on a fair location. Don't rely on leasing agents to make your site decisions. Driving streets and walking neighborhoods is a good way to scout for locations. The following form will give you a methodical approach for evaluating the strengths and weaknesses of each potential location. First, evaluate your site location for each factor on a scale of 1 to 10. Number 10 being the highest. Second, decide the importance of each factor to your particular business on a scale of 1 to 5. Number 5 being the most important. Multiply the grade by the weight to determine the points for each factor. Add up the points to get a total score. Repeat this process for each site to gain an objective comparative analysis. Site Criteria Table Factors Grade 1-10 Weight 1-5 Traffic count: Cars or pedestrians Visibility access Proximity to competition Zoning Parking (include off-street parking) Condition of premises Proximity to customer generators Income level of neighborhood Population density Ethnic make-up of neighborhood Age factor Directional growth of area Area improving or deteriorating Crime/shoplifting rates Availability of qualified employees Labor rates of pay Supplier proximity Terms and rental rates Adequacy of utilities, gas, water Transportation accessibility Total Points [Back to top] Business Plan for Session 6: Opening and Marketing We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 6 and complete it now. Points
Section 6: Premises MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here$"
3. After completing each box, delete the "Insert here" sentence,
which will leave only the permanent title of the box and the information you have filled in. We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 6 Quiz: Location and Leasing

Top of Form
1. During the formulative years of Denny's Restaurants, they passed up many good locations because their primary criterion was to be located on freeways. If it was not on a freeway offramp, they passed. Was this a good policy? A. B.
Yes No
2. If you start a business that does not depend on "location," where you start is of secondary importance. A. B.
True False
3. Why is it that the most astute start-up entrepreneurs
rent their premises rather than own the real estate where they conduct their businesses?
A.
They can't find suitable properties to
buy.
B. They can use their money more productively in their business. C. They are not sufficiently informed regarding the benefits of owning business real estate.
4. You are planning to open a single retail store (or to
start a chain of retail stores). The WORST way to scout for a location is to:
A.
Drive the streets
B. Copycat the type of locations that your most successful competitor utilizes. C. Create a site model for your specific business and evaluate each site on a weighted and objective basis, using the criteria of your model.
Rely on the information furnished by leasing representatives.

D.
5. It is better to make a deal for your first retail location
where:
A.
You can get a great deal on a fair
location.
B.
You can get a fair deal on a great

location.
6. The most important player on your team to check out a lease for your first location is: A. B. C.
Your accountant Your team of co-workers Your real estate agent
D. E.
Your lawyer Your banker

7. One of the following answers is NOT a good reason to
sign a short-term lease with options:

A. You will probably be asked to personally guarantee the lease and the liability of a longterm lease is too much to swallow. B.
You may need to expand before your
primary term is up.

C.
Your business might not work at all in
the location.
D. A short-term lease with options to renew is most desirable. If you're successful in the location, you have the security of future occupancy. And if you're not successful, your lease term will be appropriately short. E.
The rent will be lower.

8. When you lease a space for an office, retail or warehouse, how do you protect yourself from being tied into a lease even if you have outgrown the space? A.
Become personal friends with your
landlord
B.
Plan to add space if necessary at a
remote location
C. Plan to sublease your premises and relocate to larger quarters D.
Provide for this contingency in your

lease
9. A Net, Net, Net lease means that the tenant pays their share of:
Real estate taxes, insurance and common area maintenance

A. B. C.
Telephone, utilities and insurance Parking, fire and police services

10. Zoning requirements can be obtained from: A. B. C.
Board of Equalization A demographic survey City Hall

Bottom of Form
Accounting and Cash Flow


Step One: Gain the knowledge Step Two: Select an accountant Methods of Accounting Cash Basis Method Accrual Method Tax Liability Issues Income taxes Payroll taxes Grants Internal Controls Quarterly Returns Bank Account Reconciliation Employee Benefits Policy
Step Three: Do your own bookkeeping! The Three Major Financial Statements The Balance Sheet The Income Statement Cash Flow Control Accounting and Cash Flow Punch List
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"Kn Te owl sti Step One: Gain the knowledge edg mo e of Tra nia acc If you're going to be in business, you must know how to keep score. nscr oun la D To gain this knowledge will require that you go to school to learn ipti ting vid on andthe concepts of small business accounting and also become familiar Lo htm tax with computer software that is used to support your particular hr issul business. With this knowledge you can talk intelligently about your accounting needs with Co es mp employees, bankers and your own accountant. wer ute e r You will also need to gain a knowledge of accounting in order to evaluate your competitors or big Co businesses you might wish to acquire (or be acquired by). While information about companies less nsu ons may be obtained from stock brokers or interviews with key executives, the best source to learn ltan for about your most successful and publicly owned competitors is to read their annual reports. You t me. will need to understand accounting to draw intelligent conclusions. Small business accounting"
and finance courses at your local community college will give you most of what you need to know. [Back to top] Step Two: Select an accountant
You should consult an accountant before you start. This could be a Certified Public Accountant (CPA) who is a sole practitioner or a large accounting firm that can offer expertise in many areas (and whose fees tend to be higher). Another type of accountant is an "Enrolled Agent" (EA). EA's must pass a taxation test administered by the Internal Revenue Service. At present, there are no national certification standards for bookkeepers like there are for CPA's or EA's. So it may be best to look for referrals when selecting a bookkeeper. Many CPA's and EA's will refer you to people they have confidence in to help you with your accounting needs. Bookkeepers range from those who only pay bills or process receipts to "full charge" bookkeepers who can summarize bookkeeping activity for your CPA or EA to prepare tax returns. On the other hand, if you want someone to advise you on business organization and prepare income and payroll tax returns, you will probably want a CPA or EA to help you. The more "routine" bookkeeping you know and do yourself, the better it is, because you can then afford a higher level of expertise. You will need to determine what small business accounting software program will work best for your business and your accountant can help decide this. Some good ways to determine this include: Ask others in your industry whose judgments you trust as to their experience with software.
Your accountant may even be helpful to set up and train you in software applications. Or he may have business acquaintances do so. Look for ads in trade magazines for software and visit booths at industry trade shows for ideas. Payroll accounting and reporting is increasingly complex. If you will have employees, look up the "Payroll Accounting Service" providers in your area. Your accountant may have a recommendation. This complicated function can be outsourced at a reasonable cost. Ways that your accountant can help in dealing with your banker: Sooner or later you will need financing in addition to your start-up sources. It is important to establish banking relations BEFORE future needs arise. Your accountant can: Help you prepare cash flow control statements that will estimate what the cash needs of the business will be in months to come.
Help you prepare a personal financial statement, including a balance sheet of your personal assets and liabilities along with a statement of income and expenses showing how much cash flow you generate each month. Banks will usually require a personal guarantee.
Help as a source of introduction to a banker. This can be helpful because the banker has had prior dealings with the accountant. Help you polish your business plan for your banker. Help organize as much information as possible including financial statements in a neat and orderly fashion. Methods of Accounting Before you start you will need to decide what form of accounting that your business will use. There are two major types:
Cash Basis Method: This is what the name implies; you recognize income when you receive the cash and you recognize expense when you receive the bill. Most service businesses operate on the cash basis because it is much simpler to understand and account for.
Accrual Method: Here you match revenue with expense regardless when the cash may or may not be collected. If you sell a product to a customer and he doesn't pay you for 30 days, the sale is recorded in the books on the day that you made the sale. When the money comes in the "accounts receivable" account is then turned into cash. The same with expenses: if you incur an expense on one month but don't pay until the next month, the expense will be recognized in the month which you incurred the expense. If you're in manufacturing or deal with inventory, the internal revenue service generally requires that you be on the accrual basis. Keeping separate business records Even in a small business you should, before you start, set up a business account even if you're a sole proprietor. It will be important to keep your business records separate from your personal records. This will make it easier for you and your accountant to pull records together for income taxes when the time comes. Your accountant can help you prepare and set up your company accounts, including establishing your checking account and or savings accounts for operating your business. Tax liability issues: There will be a number of tax liability matters that you and your accountant will need to deal with:
Income taxes. If you start as a sole proprietor you will be reporting your small business accounting activity on a schedule that is attached to your IRS form 1040, called Schedule C. Not only will the sole proprietor pay income tax on business income, but the sole proprietor will also pay social security tax on this income. This is reported as a separate item on the income tax return. The social security tax can be quite a surprise for the new small businessperson who does not expect to pay roughly 15% of net income for social security tax on top of the income tax. Operating as a partnership or LLC does not relieve a partner of the obligation of paying selfemployment tax. Your accountant can help set up estimated tax payments that will lessen the burden of your final tax bills well as avoid penalties for not paying taxes as you go along.
Payroll taxes. If you have employees your accountant can help you apply for necessary state and federal payroll numbers that you will need to file payroll tax returns. The federal number is called a "federal employer identification number" or FEIN, and these are obtained by form SS-4. Also, in every state there are local and state taxes that are required. For instance, in California, you need to apply for a state identification number that will establish an account for you to pay the state withholding tax that you withhold from employees and the state disability insurance monies withheld. There is also a state unemployment tax that you pay. There may be other taxes that may be unique to your local situation. Grants Many times there are sources of financing available to start up businesses that are given by various organizations and agencies that wish to spur the development of small business. Accounting firms are not always familiar with grants, so this might be a question you would pose to a prospective accountant before you hire her/him. Grants may be available from: The Small Business Administration (SBA).
SBA guaranteed loans to businesses, handled through banks. Local community banks, funded by the federal government Federal grants available for hiring minority employees. Trade organizations
Service Corps of Retired Executives (SCORE), which is a nonprofit organization whose goal is to help small businesses become successful. SCORE offers workshops and seminars on various business topics and may give you the opportunity to talk to someone who has been down the same road before. Internal controls "Internal controls" refers to what is needed in the handling of funds, where money in the form of cash, checks or credit cards, is exchanged for goods and services. The goal is to make sure that the business receives all of its income without any of it being siphoned off by waste, fraud, dishonest employees or just through carelessness. Even a business that is healthy in all other respects can be very vulnerable to failing from the inside through lack of internal controls. Your accountant can help set up appropriate controls for your particular business. If you are in a manufacturing or retail business you will need to set up inventory policy and controls because inventory, similar to cash, can disappear very rapidly through carelessness or employee dishonesty. You need to have safeguards in place very early on in the process by setting up controls as to who can sign for goods and services and who controls the release of goods and services out the door after the processing has been completed. You are probably getting the idea by now that in your selection process of retaining an accountant, it is a good idea to get one with experience in your industry. Quarterly returns Quarterly returns are primarily payroll tax returns and sales tax returns. Start-up businesses need to file quarterly payroll tax returns and send the money that has been withheld from the employee's check as well as the employer's share of social security taxes to the federal government. Likewise, state income taxes that are withheld and state unemployment tax that the employers pay to the state must be accounted for. These are matters you need to get right from the beginning, so that these taxes are paid in the appropriate time frame and you're not penalized for late payment or non-payment of your tax obligations. It is a common occurrence for start-ups to be short of cash. And it is very tempting to hold off paying certain obligations to conserve cash. Yet you should not fall into that trap with your government obligations because governmental agencies have little patience with delinquent taxpayers. Similarly, the sales tax money that you collect, in states that charge sales tax, needs to be forwarded to the states either on a monthly or quarterly basis depending on the volume of your sales. Quarterly reports will be required to show how much you have collected and that you have submitted this money to the state in a timely manner. Bank account reconciliation We suggested earlier that you set up separate business accounts to make it easier to track expenses and business income. This bank account needs to be reconciled at least once a month when you receive your bank statement. You can save money by learning to do this yourself and your accountant can teach you if you don't know how. Reconciliation refers to taking the balance in your checkbook and reconciling or mathematically comparing it to the bank balance. You must also take into account any difference in those two balances that are due to checks that you have written that have not yet cleared the bank. If this is the case, your checkbook balance will be lower than the bank statement because the bank has not yet seen some of the checks you have written. So it is important that these outstanding checks get subtracted from the bank balance and the resulting number be compared to your number in your checkbook. When the two match, we say the account has been reconciled. Employee benefits policy
As you add employees to your small business, some accounting-related issues you will need to decide include: How many hours people will work. What holidays they are entitled to. What your vacation policy might be.
If you elect to cover employee medical expenses or provide medical insurance, you will need to give some thought to what type of policies you will provide. This might be an HMO, PPO, or pick your own doctor policy. What sick leave policy to offer. Will you pay employees when they are sick or will this time be considered unpaid time off? There are a number of sources to give you some help in deciding these issues. They include: Start with your accountant and lawyer. Your own experience in your particular industry will help determine your policy. What has worked for similar companies in the past is very likely a good way to consider going with your own company so you are competitive with other firms in your industry. Organizations such as SCORE can be helpful in determining policies and procedures. [Back to top] Step Three: Do your own bookkeeping! Up to now, you have consulted with an accountant and have gone to school to learn basic small business accounting. The next step in getting to know how accounting and cash flow works is to do your own bookkeeping in your start-up mode. This is invaluable because as you do the bookkeeping and understand the records that are involved you are in a much better position to bring in employees and train them as the business grows. You can then devote your time to more of a manager level. If you have a willing spouse or trusted friend they can be invaluable in doing the book keeping. There is one aspect of bookkeeping that you could consider delegating: payroll and payroll reporting, which can be handled by Payroll Service Providers at a low cost. If you are in a partnership, it is especially important that you have knowledge of the accounting as well as what is happening in the other areas of the business. Remember that in a partnership, all the partners have authority to commit to the partnership. If a partner in charge of accounting doesn't do a good job it can affect all the partners. The Three Major Financial Statements:
Balance sheet
The balance sheet is a "point in time" statement. Think of it as a snapshot. It is a listing of all of your assets as well as your liabilities and the difference between these two numbers is your equity in your business. You will see in the example that the balance sheet is divided into two major sections. The first section is "Assets." The second section is "Liabilities and Owners Equity." The general order of a balance sheet is to go from the most liquid to the least liquid. In other words, under "assets" you see the heading "current assets" and the first item is cash, because cash is the most liquid of your assets. After cash are receivables representing money owed you from customers. When you receive the money the receivable turns into cash. Next in assets are "inventories." Since inventory is not as liquid as either cash or receivables this falls below
them on your balance sheet. Following current assets are property and equipment that are typically carried at cost. You will also notice "depreciation" on a balance sheet prepared by an accountant. Depreciation is a non-cash expense and is nothing more or less than an attempt to record that these assets go down in value over time. One reason this particular financial statement is called a "balance sheet" is that assets always equal your liabilities and owners equity. This is called double entry bookkeeping, and is the type done in nearly every business. The reason double entry bookkeeping is the accounting gold standard is that it serves as a check to make sure a transaction has been properly recorded. For example, let's say the first thing you buy is a desk. You have an asset of office equipment. If you paid cash, you don't owe any liabilities so your interest in that desk is called your equity (on the other side of the ledger). Similarly, other transactions will give rise to an increase in assets and/or an increase in liabilities or equity. For example, looking at our balance sheet example under current liabilities (again, from most liquid to least liquid) your accounts payable are the first item listed. After that there are items called "accrued liabilities," which usually refer to payroll taxes and sales taxes that may not be due for another month or two. Also under current liabilities is debt that is due within a year. So the current 12 months of payments for equipment would be shown as a current liability. Following that we have long-term debt, which are items that are due after the current year. Following total liabilities is the section called "owner's equity" which is the owner's interest in the business. If we take all the assets of the business, $37,000, and subtract the total liabilities, there is a difference of $19,000. Of this $19,000 amount, $13,000 is from past income and $6,000 is from income earned during the current accounting period, thereby balancing out $37,000 for both assets and liabilities and owner's equity. When bankers look at a financial statement, they are interested in various financial ratios. Ratios help indicate the financial strength of a business and how the business can handle payback of loans. For example, current ratio is current assets divided by current liabilities. If your current assets are less than your current liabilities, a red flag will go up because it would indicate a risk of insolvency during the present year! Various industries will have different levels of their ratios. You can track your ratios with others in your industry to see how your business compares. Your banker will probably be most interested in your owner's equity.
The income statement (Also called the "Profit and Loss" Statement)
The income statement, unlike the balance sheet, covers a period of time, usually monthly or quarterly. Usually year-to-date figures are also presented to show how the business is doing during the current accounting year. In the example shown here, the financial statement covers a six-month period and shows the activity for the current month as well as the year-to-date total of the prior five months plus the current month, or for a total of six months. The income statement and the balance sheet tie together. Look back on the balance sheet and you'll see current earnings of $6,000. The income statement shows this same $6,000, which was the profit for the last six months. Your income statement will disclose valuable information. You will see a section for sales as well as a breakdown of all your expenses, leading down to the net profit for the period. The more current your financial statement, the greater will be its value. If you see a bad trend developing you can take action at once.
Computer programs can produce financial statements with a keystroke, which is why you need to acquire the computer skills and software that is appropriate for your particular business.
Cash flow control
Cash fuel drives you in business just as jet fuel keeps a plane aloft. A pilot is very careful to accurately predict his fuel requirements. You should place the same importance on cash flow control because if at any point in the future you run out of fuel, like the pilot, you've got a BIG problem. Cash flow control is a simple method of projecting your future needs for cash. It is an income statement covering future periods of time that has been changed to show only cash: cash coming in and cash going out and what your balance of cash is at the end of designated periods of time. This is a great tool because you can predict your future needs for cash before the needs arise. In cash flow control, for each of a number of intervals of time, you make conservative estimates for your future sources of cash (IN) and future expenditures (OUT). Use low, conservative figures for IN items and use high estimates for OUT items. For the initial period (say a month) you start with the cash you now have. To this you add IN items and subtract the OUT items, which results in the cash at end of the month. The cash at the end of month becomes the starting cash for the next month. The attached cash flow control spread sheet shows that ending cash for this first period becomes the starting cash for the second period. The ending cash for the second period becomes the starting cash for the third period, and so on. Your projection should be made for an upcoming 12-month period. The projection will be a useful tool for you to arrange financing before it is required by showing your banker that you are sophisticated enough to provide for future cash in order to preserve liquidity.
You can use this simple cash flow format to make up your own cash flow projection for the business you have in mind. It is so simple, yet can be so valuable! Your small business accounting and cash flow punch list: Prepare frequent financial statements; at least monthly or even weekly. Keep track of key income statement percentages. If you're in manufacturing, your cost of goods sold percentage should be relatively the same as competitors in your industry. Compare your income statement with prior periods. To start with, you won't need certified financial statements. Accountants have three levels of statements: certified, reviewed and compiled. For most startups, the compiled type will work, that is, your accountant prepares the financial statement with a letter stating that the numbers are based on the information you have given him.
From the beginning, maintain good internal controls. Learn from the practices used in your industry to prevent dishonesty and shrinkage. Shrinkage includes shoplifting and other types of stealing, which results in the "shrinkage" of your inventory. Do not delegate the authority to sign checks or purchase orders. Don't use money that you have withheld for payroll taxes or sales taxes for other purposes. You will be a trustee of funds belonging to the Internal Revenue Service, Social Security Administration and your state's sales taxing authority. A "payroll service provider" can be used to manage these responsibilities.
Keep in mind that liquidity is not the same as making money. You can be making a profit and still go broke by running out of cash. Learn and practice cash flow control. Look ahead and write out your list of projected financial requirements including premises, equipment, staff and working capital. Arrange for financing well before your needs arise. [Back to top] Business Plan for Session 7: Accounting and Cash Flow We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 7 and complete it now. Session 7: Accounting and Cash Flow
MS Word
Instructions on filling in the business plan template: 1.

2.
Each box has a permanent title in CAPITAL LETTERS
Below each title is a sentence starting with an "Insert here..." sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have filled in.
3.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All
MS Word
Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top] SESSION 7 Quiz: Accounting and Cash Flow
Top of Form
1. Which of the following statements is FALSE: A. A balance sheet consists of financial information at a specific moment in time.
An income statement consists of financial information over a specified period of time.

B. C. D.
A current liability is debt that is due in six months. Owner's equity equals assets less liabilities.
2. The first number your banker will be probably be looking at in your financial statements will be: A. B. C. D.
Owner's equity Current ratio Current earnings Cash flow projection

3. As a start-up business, it is better to prepare your payroll checks and manage payroll accounting and reporting yourself. A. B.
True False
4. If you plan to have a business that requires inventory or if you are going to manufacture products, the IRS will generally require that you use: A. B.
The cash method of accounting The accrual method of accounting

5. Where is the best place to find out financial (and other) information about the large public competitors that you must deal with? A. B. C.
A professional stock broker Annual reports to shareholders Interviews with key executives
6. Which of the following expenses is a non-cash expense? A. B. C. D.
Insurance premiums Interest on loans Depreciation Taxes paid

7. In the cash basis of accounting, you match revenue with expense regardless when the cash may or may not be collected. A. B.
True False
8. Once you have prepared your cash flow projection, which of the
following scenarios would be the best course to take:

A.
Change (modify) the numbers every twelve months.
B. Try as much as possible to change your strategy as you go along so the numbers in your projection maintain liquidity.
9. On your cash flow projection, each period of time analyzed will include: Starting cash plus cash sales plus any other cash sources, less cost of sales, less all other cash expenses equals ending cash. A. B.
True False
10. In your Business Plan, your one year cash flow projection indicates that after six months you will go negative $50,000 due to receivables outpacing your income. You should:
When that future time comes, ask your vendors for longer payment terms to maintain liquidity.
A.
Reduce your prices so as to generate cash to make up for your negative cash position.
B.
Have financing in place before you start, either from vendors, lenders or your mother-in-law in order to provide the cash for this anticipated future condition.
C. D. If you experience a negative cash flow due to slow paying customers, you should slow your own payments to vendors proportionately.
If and when the condition actually does arise, make an appointment with your bank, show them your cash flow problem and arrange for supplemental financing.
E.
Bottom of Form
How to Finance Your Business


First Things First How Much Money Do You Need? What do you need it for? Unsecured Loans Secured Loans Collateral
Loans vs. Investment Where to Get the Money Types of Funding Sources Lender Comparison Table
The Art of Getting the Money Business Loans Repayment Plan Other Quick Tips
After You Get the Money Activities SESSION 8 Business Plan SESSION 8 Quiz
[Back to top]
First Things First

Money makes your business go. But don't try going to a bank to get it when you've just started in business. Banks normally make loans only to businesses with operating histories. This section will give you some alternatives, some strategies and some things to think about as you go about finding the money to make your business work. Our first reminder is that personal savings should be considered the primary source of funds for starting a business. If you haven't started already, start now to
begin accumulating cash through personal savings. Also, don't overlook the Small Business Administration (SBA) loan guarantee programs available for start-up businesses. With a SBA guarantee program in hand, your bank will be happy to talk with you! Refer to the Resources section to get more information. [Back to top] How Much Money Do You Need? Or, how much can you reasonably expect to get? Don't get too excited just yet this is not your chance to ask for a million dollars when you only need $50,000. Refer back to your business plan. If it still doesn't answer the question, let's go step-by-step. What do you need it for? OR Buying the business Prioritize those areas where your options are limited to paying in cash, and review your alternatives where there may be another way. For example, it is not necessary to pay all cash for a delivery truck when you can rent or lease one. Next review what might serve as collateral for your loans. Some credit is granted on an unsecured basis, such as credit cards, but most small business loans are secured by the assets of your business or your personal assets or both. Unsecured means that there is no collateral granted for the loan. Examples of unsecured are: Credit cards Unsecured lines of credit (like you get in the mail) Friends or relatives
Buying supplies and inventory while waiting to get paid Paying payroll and rent Buying equipment and fixtures Getting a computer
Secured loans mean that there are assets pledged to secure the payment in the event you are not able to pay. Examples of this are: Computer lease Home mortgage Car loan or lease Small Business Administration loan
Common types of collateral are equity in your home, accounts receivable, inventory of the business and equipment. Lenders go through an evaluation of the collateral to determine how much they can lend against it. Some key variables as to what kind of loan terms you can get are: Number of years in business - This is your track record and is very important. Banks usually require three years while others are less stringent. Size of your company and the amount needed - Financing institutions vary in the way they service the public. For example, you would probably not get a car loan and a large corporate loan at the same place. Do your research. Ask around. Get to the right spot. [Back to top] Loans (Debt) vs. Investment (Equity)
You are most likely familiar with a straight loan (debt) where the lender gets an interest rate and fees. Equity is where the money raised gives the investor an ownership interest. This is common in the sale of stock to a limited number of investors or participation by venture capitalists. The sale of stock is highly regulated by state and federal agencies and you will need the help of a corporate lawyer. Normally the initial sale of stock to the public (initial public offering or IPO) is deferred until an earnings history is established.
Testimonial
John Marder Banker
"One of the worst mistakes you can make is to ask for more money than you can afford to repay." Transcription - html
Sometimes such a discussion arises with friends and family who want to be your partner. Consider this carefully because they will then participate in the increased value of the business and have voting rights. It is well beyond the scope of this discussion to cover all the aspects of debt and equity. Just be careful! Your lawyer and accountant would be appropriate sources for more information on this subject. [Back to top] Where to Get the Money The chart below will show some differences between some of the types of lenders. Terms will vary considerably from lender to lender; the summaries in the chart are only meant to be representative and give you an idea of what to expect when seeking money from different sources. Important issues to consider: Cost Payback program Loan size
Some of the pros and cons of the different lenders are briefly listed below. There will likely be one common characteristic among them all. As an entrepreneur, you will be legally obligated to have individual responsibility for the credit obligation of your business. Regardless of legal organization (covered in Session 4), lenders will have documentation to circumvent the organizational structure. This is usually called a personal guarantee. Don't panic! It is very common.
Type Cost Payback Terms Sizes None For Easy, cheap Flexible, best value 80-100% + of home equity value 3,000-10,000 Cheapest, longest term Against Risk of Loss Can create friction Your house is at risk in the event of non-payment
Personal Savings No cost
Friends & Family Usually good Very flexible rate or none Home Mortgages 7-9% - Traditional or 8-14% on Seconds equity loans Credit cards 16-23% Very long and flexible
40-60 months
Easy qualifying, Small amounts no collateral Inexpensive, unsecured Preserves cash for assets you can't take with you Short term
Suppliers
Free
30 days +/-
Landlord
Adds to rent Over term of cost lease
Hard to get; assets acquired are usually only good at one location;
difficult to move Venture capital 25-40% 5-7 years $500,000+ Can get large amounts Very hard to get; share ownership
Commercial mortgage
7-9%
25 year $300,000+; 75% payment; all due of appraisal in 10 years 5-7 years Varies Accessible through dealer, who is motivated to make sale of equipment or business; payback terms more favorable than bank Same as above; also 100% financing Longest payback for other than real estate loan Can be a complex process Debt service can be high
Specialized 12-18% lenders (industry expertise, auto, business brokers, high tech, specialized equipment, computers, phones, etc.)
Leasing companies
12-18%
5-7 years
Varies
SBA
7-9%
7-20 years
$50,0001,000,000
Finance companies
14-30%
1-3 years
$100,000+
An alternative Expensive; when you don't picky about have many collateral Generally least expensive Generally hardest to qualify for
Banks
6-9%
1-5 years
$50,000+
[Back to top] The Art of Getting the Money This starts by knowing what your lender wants. A common way is to simply ask. A better way is to ask a friend or business advisor such as your CPA. For a business loan, the most common things are: Business financial statements Business tax returns Business Plan with budget or projection Personal financial statements Personal tax returns
Step two is to be ready to answer questions about your business, and be ready to highlight your financial performance both in the past and in the future. You will be more impressive if you have carefully thought-out and become familiar with your plan. Bring your accountant if you need help. Be prepared to tell them why you need the money. "I just need the money," does not inspire confidence or the fact that you have thought it through. Earlier in this session you studied a number of different purposes. Give them some detail. Propose a repayment plan. Examples of different structures are: A line of credit, payable at your discretion but subject to renewal annually by the bank
Term loan payable monthly over ___ years starting on ____ date
Most places have some flexibility. Potential lenders appreciate that you are thinking about paying them back instead of just getting the money. Other tips to keep in mind: Needless to say, being well dressed and neat in appearance at bank meetings will reflect positively. plan. Most lenders (including the SBA) will want to see your business
Keep your lenders informed on the status of your business: the good and the bad.
If you are unable to make a loan payment on time, call your lender in advance, advise him/her of the problem and request the extension you need. Explain the sources of repayment.
Virtually all lenders will do a personal savings and corporate credit check through a company called TRW or other means. Be prepared to discuss any prior credit issues/problems. The best access to a lender is by a referral. Lending is a people business. Have your CPA or attorney or friend introduce you to a lender. The first thing that will spook lenders or investors is the fear you are "puff" rather than "substance." Avoid giving the impression of being an over optimistic, "pie-in-the-sky" operator. Most start-up businesses don't find a place for expensive entertaining. Your lenders will be more interested in knowing how their money is being used to grow your business. Do not depend on a bank to loan you money to start a business. Most small businesses are funded by personal savings. Make a shrewd appraisal to minimize your risks and to limit losses to a predetermined limit.
Your suppliers and vendors can be sources of financing. For example, if you need an illuminated sign for your store front, the company you contract with to make the sign may provide financing so you can make monthly payments rather than pay cash. (They want your business.) Examples:
Longer payment terms Advertising and marketing assistance Furnishing or financing of equipment, signs or inventory. Advertising and promotional programs Bartering, which is to trade by exchange one commodity for another, can provide a source of financing. For example your advertisements in the local newspaper might be paid for by the bagels you make! [Back to top] After You Get the Money Getting the money is only the first step. You should strive to be a good customer so you can get cooperation if you need help later. A good customer sticks to his/her agreement. Make sure you understand the requirements and perform to them as much as possible. In a business relationship, lenders will ask for regular financial statements, which you should produce on time.
There may be covenants. A covenant is a written agreement in which you promise to meet specified obligations such as submitting the agings of your accounts receivable. The "agings" report will show the lenders if your credit customers are paying on time or not. Be proactive. Contact them if there is a problem. Be sure to stay in touch even if nothing new is going on. Get to the next highest level within the organization. [Back to top] Activities Sources of financing can surface from unexpected sources: List at least five of them: A. ________________________________ B. ________________________________ C. ________________________________ D. ________________________________ E. ________________________________ Some possible answers are: Suppliers: Ask for longer terms of payment. Your landlord: Ask the landlord to provide you with tenant improvements. Your customers: Ask for either cash or prompt payment. Your capital investments: Ask the suppliers of your fixtures, equipment and signs to finance your purchases. They will be interested in doing so in order to get your business. [Back to top] Business Plan for Session 8: How to Finance Your Business We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 8 and complete it now. Section 8: Financing MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need. 3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have filled in.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and
research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 8 Quiz: How to Finance Your Business

Top of Form
1. The best source of money to start my business is: A. B. C.
A bank My savings Sell stock to my friends or the public

2. You want to start a business that will require lots of
money. The venture could fail if conditions change. Your banker will loan you the money but wants your personal guarantee and the equity in your house as collateral. You should:
A.
Start on a very small basis without bank
debt.
B. The very nature of an entrepreneur is to be willing to risk personal and family money: go for it.
3. Your business plan is going to be an important tool in
your financing program. You will use it with bankers, suppliers, landlords and even customers. Why is a meticulously prepared business plan so important in accomplishing your financing objectives?
A.
To impress them with your ambitious
goals
B.
To reassure them of your business

conservatism
4. You have an outstanding installment loan with your
bank and find that you are unable to make a payment on time. You should:
A. Make the payment as soon as you can even if it is a late one.
Call your lender in advance and tell him/her you will be late in making the payment.
B. C. Call your lender in advance, advise him/her of the problem, and request the terms you need to a stretch out payments, including explaining the sources of repayment. D.
Call the lender and ask that that loan be

renegotiated.
5. The WORST advice in dealing with a lender would be: A. Never exaggerate and get your lender involved in your growth plans. B. Generate high expectations and keep the bad news from him/her.
If you see clouds on the horizon, let your lender know about your fears.
C.
6. 6. You can get added support from lending sources by: A.
Keep them informed of the good and
the bad.
B. C.
Entertain them lavishly. Use the "no news is good news"

philosophy.
7. What is the LEAST likely way that a supplier could
help finance your new businesses?

A. B. C.
Extend longer repayment terms. Guarantee your lease obligation.
Furnish or attractively finance your equipment or signs.

D.
Furnish free advertising and
promotions.
8. Personal liability for a business loan can be avoided by organizing the business as a corporation. A. B.
True False
9. Equity financing means: A.
Money borrowed on a fair ("equity")
basis.
B.
Borrowed money that is paid back in
installments.
C.
Money that stays in the business as an

ownership interest.
10. Most lending sources (SBA, for example) will require
submission of a business plan.

A. B.
True False
Bottom of Form
E-Commerce
E-Commerce Overview What is E-Commerce? Is an E-Commerce website right for your business?
Setting Up a Website Registering your domain name Finding a host Setting up and maintaining your own server Hosting services Building your website Hiring a professional website developer Designing your own website
Tips For Developing a Successful Site
Make your site easy to use Provide useful content Encourage customer feedback Develop a mailing list
Online Marketing and Promotion Advertising online Search engines Use key words - meta tags Submit your site Check your positioning regularly E-Bay
[Back to top]
E-Commerce Overview
What is E-Commerce? E-commerce is the sale of products and services over the Internet. It is the fastest growing segment of our economy. It allows even the smallest business to reach a global audience with its product or message with minimal cost. Currently, there are more than 250 million people using the Internet internationally. Sixty-nine percent of the online population has made at least one purchase in the last 90 days. Analysts project online sales of $3.2 trillion by the year 2004. The Internet user average household income is $59,000, Testimonial making this a very attractive demographic for your Brian Kerns business to target. Is an E-Commerce Website Right For Your Business?
Computer Programmer, Web Developer/Designer
"A project must be able to Probably. Much depends on the nature of your carry talent and time at least business. If you own a small independent bookstore, for the cost of the time." is there a good chance that you can get rich selling Transcription - html your books online? Probably not. Amazon.com and Barnes & Noble have established their hold over this market, and their sheer size, name recognition and the relationship of trust they have with their customers allows them to dominate this market with good pricing (due to economies of scale) and remarkable customer loyalty.
However, if you own a local bookstore, there are several ways to reach new customers, get them to know you better and have them keep coming back for more. You might want to offer notices of special promotions or readings by authors. Trust will become the cornerstone of building your e-business. As Warren Buffett has said, "If you don't know jewelry, know your jeweler." A website doesn't need to exist solely to sell your product online. It can serve a number of roles. It could supplement the sales of your already established retail store. If you sell a unique product, such as wheat grass or gourmet chocolates, you might find success reaching others around the country (or the world, for that matter) who do not have access to these products in their own towns. Using the Internet for conducting e-commerce will not assure you of being able to
compete favorably with large established competitors. They already have the inventory, delivery and marketing systems in place and they can deliver the groceries as cheap (or more cheaply) than you can. Yet, the beauty of the Internet is that it provides a global audience of potential customers and it never closes. Your customers will have access to information about your business 24 hours a day. How many times have you wanted information about a store, looked them up in the Yellow Pages, given them a call on Sunday morning and found that they were closed? Sure, most companies have a recorded message that will say that they are closed and will give you their hours of operation. But it is much better to not only have information about your store hours available to your potential customers 24 hours a day, 7 days a week, but also about your entire product line. You can add pictures and maybe even video. And your customer will even be able to buy from you 24 hours a day. So, your website address should be promoted everywhere including your stationery, sales forms and advertisements. [Back to top] Setting Up a Website Registering Your Domain Name Each website has its own unique name, such as Amazon.com or Pets.com. This is your "Domain Name." It is a unique name that identifies you to all of the other computers on the Internet. You must register your website's name through something called the Internic so that the other computers on the Internet will know you exist. Once you've registered, people who type www.yourcompanyname.com into their browsers will be taken directly to your website. There are now a number of companies that will assist you with registering your website's name, including Network Solutions, Register.com, worldwidedomains.com, domainit.com and many others. But remember, because most of the common and obvious names have already been taken (over 20 million names have been registered), you'll want to use a utility called "Whois" to find out whether the name you have in mind has already been snapped up. Register.com has a "Whois" look-up box on their site just for this purpose. While there are other extensions beyond ".com," it is the easiest to remember. Some extensions such as ".org" are meant for non-profit institutions, and "edu" and ".gov" for education and government institutions respectively. Other less widely known extensions include ".ro," ".gs," ".cc," and ".vg." These are often international extensions. While it might be possible to register mufflershop.cc (mufflershop.com was registered in August of 1999), people will have a harder time remembering your website's address. If they just type mufflershop into their browser, they'll probably be taken to your competitor's ".com" site instead of yours. Try first to find an easy-to-remember ".com" name for your site. Once you've successfully registered your domain name, it's yours to keep. It currently costs about $35 per year to have your name registered, usually with a two year minimum. Keep in mind that your company name, trademarks, logos and artwork used on your site will require appropriate trademark and copyright protection under intellectual property laws. Your lawyer should be consulted on this issue in order to avoid unpleasant surprises (for example, the possibility of being advised that your company slogan belongs to someone else.) Finding a Host During an earlier My Own Business session you learned about location and leasing space for your business. Similarly, your online business will need to reside somewhere as well. Your choice will depend on a number of factors. You may
choose to buy (by having your own network server) or lease (by having your site hosted by a web-hosting service). Setting Up and Maintaining Your Own Server Setting up your own server is analogous to owning your own store. You set up and maintain the computer (server) that people on the Internet connect to when they visit your site. Having your own server is almost a necessity if you will be using large databases for your inventory and customer tracking, as well as for more advanced programming features. This approach requires a significant amount of technical knowledge and expertise. Buying and setting up your own server will also be more costly in the short run. The server needs to be up and running and connected to the Internet 24 hours a day. If it goes down, your website is no longer accessible to the web surfing public. You will also want to have a high-speed connection to the Internet, which can cost several hundred dollars or more per month, to assure fast access to your site when the traffic is heaviest. You may remember when Victoria's Secret had a fashion show during the Superbowl. Tens of thousands of earnest football-loving lingerie shoppers flooded the site, bringing it to a near stand-still. More recently, weddingchannel.com promoted a tie-in with the soap opera All My Children. Viewers were encouraged to log into the site and vote for which dress one of the lead characters should wear for her wedding. The response was so great that the site crashed due to too many users trying to access the site simultaneously. The size and speed of your servers must be adequate to meet the demands of your most successful days, or your potential shoppers will be turned away. Hosting Services A simpler solution for businesses that do not want to get into the technical burdens of hosting their own site is to have the website hosted by a web hosting service. Using a web hosting service is analogous to leasing real estate for your store. For a monthly fee ranging from $10-$200 per month for small to moderate sized businesses, the web host handles the technical details of server maintenance, and you are free to spend your time developing content for your website. Hosting services can also provide "user statistics," which track the number of visitors to your site. Depending on the size and complexity of your site, using a hosting service is often a more cost effective solution for most small businesses. Resources such as "thelist.com" and "Cnet.com" offers a list of hosting services you can compare and contrast. Building Your Website Your company will need to decide whether to hire a professional web developer to create your website or to produce your own site "in-house." Both choices come with costs and benefits. Hiring a professional website developer: Before hiring a web developer, it's important to do your homework. What is the purpose of your site? Is it to serve as an online brochure of your products, or do you plan to actually sell your product or services over the Internet? What is your budget? Who will be responsible for ongoing maintenance of the site? Who will provide the art and content for the site? Who will own the copyrights for these materials? Will the developer be responsible for both design and marketing of your website? Once you are able to answer these questions, begin interviewing site developers. Be sure to look at other websites they've created and ask for references from other clients with whom they've worked. Ask those references about their experience with your potential developer. Did they deliver the product in a timely manner at the quoted price? Did they listen effectively and present a product that matched
the company's vision? Once you've identified your developer, get a written contract that specifies the responsibilities of that developer, the timelines for project completion and a complete budget for the total project. This should include arrangements for ongoing maintenance of the site. Contracting out your website offers several advantages. A professional developer has the technical knowledge to create a site that works with all browsers and should be fluent with the current technologies -- whether it's Flash animation, Javascript enabled tools, streaming audio and video -- and online commerce solutions. Investing in a professional developer will allow you to spend more time on creating a successful business and less time learning the new trade of being your own website developer. Designing your own website Despite the advantages of using an outside contractor, many businesses choose to create their own websites. If you or one of your employees has a strong interest in computers and website design, this can be a more affordable solution. Your web design should not incorporate unusual or unique fonts. It is better to stay with standard and widely used fonts that can easily be printed or saved to a file. Tools such as Microsoft Frontpage and Macromedia's Dreamweaver allow you to create websites without any (or much) prior knowledge of HTML. These "what you see is what you get" editors are similar to programs such as Microsoft Word in that you insert text and graphics onto your page and specify the appropriate links. The program then generates the HTML code for you. Pre-defined templates give a consistent look and feel to your entire site and built-in tools allow you to globally change navigational links throughout your site. While these programs have improved significantly in recent years, they still are not a perfect substitute for the hand-coded sites created by a professional web developer. Advanced features, such as interactive forms and e-commerce capabilities, are difficult to implement. And every hour spent trouble-shooting problems with your website is time spent away from running your business. If your business's budget does not allow you to hire a professional and you have a real desire to learn how to create your own site, spend some time with some of the many online tutorials on creating your own site. Just remember: your customers will be turned off by a site that appears amateur. Your credibility is at stake, and if your site is difficult to navigate, has broken links or images or out-of-date content, you will not engender trust with your customers. [Back to top] Tips For Developing a Successful Site Make your site easy to use. While it might be tempting to have a cutting edge website with all of the bells and whistles - don't forget the basics. You will fail if a visitor can't navigate successfully through your site. Provide clear, easy to understand navigational tools on each page of your site. Don't rely on graphical buttons for your links. Not all web surfers have graphic capable browsers, and some surfers intentionally turn their graphics off to speed download times. Provide text links. Provide Useful Content. Don't Just Sell! These days, it's not enough to have a website that lists your products and provides a shopping cart for purchases. If you want your visitors to return, you'll want to provide meaningful content. If you sell ski equipment, your site could post local ski conditions, articles about the latest ski fashion trends, resort reviews or any other information that would give visitors a reason to want to return for more. A CPA's site could publish tax tips and offer links to IRS forms. A catering service could offer articles on how to host a successful party.
Encourage customer feedback via online forms and email. Ask your customers what they want. Did they find what they were looking for? How could your site be more useful or easier to use? Listen to your customers' frustrations and gripes. They'll tell you what you're doing right and what you're doing wrong. Develop a Mailing List. Most consumers hate getting junk email, also called "spam." A far more appealing strategy is to develop a mailing list. Invite your customers to "opt in" to receive a newsletter or notices of specials running at your business. Make this information relevant and useful for your customer. Provide a "coupon" that will give them a discount on their next purchase. And, always give the recipient an easy means to "opt out" of receiving future emails. [Back to top] Online Marketing and Promotion Advertising Online If you build it will they come? Not necessarily. Once you have established an online presence, your next task will be drawing traffic to your site. Remember, you are a needle in a haystack competing against millions of other websites. How will your customers find you? There are a number of strategies for getting potential buyers to visit your site. Search Engines You are probably familiar with Yahoo. It is not really a search engine. It is a directory, which is a vast collection of websites listed on the Internet. Each submitted site is viewed and approved by one of Yahoo's editors. Listing your site on Yahoo is free, but not guaranteed. Your site must meet a level of professional standards, not have broken links or images and offer something unique for Yahoo's visitors. Not all websites who request a listing on Yahoo are successful. Read their submission guidelines carefully before attempting to list your site. Yahoo is just one of many search tools on the Internet. Your site should be registered with all of the major search engines and directories. These sites include, but are not limited to: AOL Search AltaVista Ask Jeeves Direct Hit Excite FAST Search Go / Infoseek Google HotBot LookSmart Lycos MSN Search
Netscape Search Northern Light Snap WebCrawler Yahoo
Registering your site is usually free, although it is now possible to receive better placement on many search engines by paying a substantial fee. Unless you have a large marketing budget, this is not feasible for most new online businesses. Instead, simply go to the search engine and look for the link that says "Submit a URL" or "Submit a site." There are services available on the Internet that charge a fee to register your site with hundreds of search engines. This is generally not necessary because site registration, while time consuming, is not particularly difficult.
By scouring the Internet 24 hours a day, the search engines catalogue the vast number of pages on the Web, creating indexes based on the content of your site. However, there are things you must do to make your website "search engine friendly." Before submitting your site to the search engines, you'll want to add meta tags within the tags of your html documents. Meta-tags are a list of keywords that users will be most likely to type into a search engine when searching for your product or service. Many search engines will index your site based on these keywords, as well as the content of the text within your site. A sample meta-tag for a designer clothing store might be:
<meta http-equiv="keywords" content="fashion, clothes, clothing, shopping, designer, pasadena, Valentino, Moschino, Calvin Klein, Jil Sander, Lagerfeld, Giorgio Armani, Prada, St. John, Ralph Lauren, Anne Klein II, DKNY, Escada, Emmanuel Ungaro, Celine, Gianni Versace, France, Catherine Leroy, garments, informal, formal, shopping, retail, retailer, retailers, retailing, specialized, couture, pret-a-porter, ready to wear, haute, haute couture, information, season, spring, winter, summer, autumn, fall, in style, professional, style,">
The meta Description tag should provide a single sentence that accurately describes your online business or service. This description is often displayed by the search engine below your URL when your site is listed in the search results. For example, a Description meta-tag for a discount designer clothing store might be:
<meta http-equiv="description" content="The finest in Designer Clothing by your favorite designers, including Gucci, Prada, and Versace, at a fraction of the retail cost.">
Be sure to check your search engine positioning regularly by typing in your targeted keywords into all of the search engines. Examine the statistic logs of your website to find which search engines are driving traffic to your site and which keywords are most frequently used to find your site. Targeted Email Email allows you to communicate directly to your customers. It is also one of the most abused forms of online advertising on the Internet. Nobody enjoys receiving unsolicited email touting a business or service. While it is possible to purchase huge mailing lists of email addresses that can be used for marketing your product, you are likely to turn off large numbers of potential customers by engaging in this practice. Instead, opt-in mailing lists are now the preferred method of establishing email lists of customers who are genuinely interested in your product or service. Give customers the option of signing up for the opportunity to receive periodic emailing of future promotions and information. Consider creating an online newsletter - something that does more than just tout your products. Make it informative, useful and worth reading. For example, if your online store sells tropical fish, write a short article detailing useful aquarium maintenance tips. Include relevant links to your site within the email itself, encouraging readers to find more information by clicking on the appropriate links. Consider providing time-limited online "coupons" that can be redeemed at your site. Barnes and Noble has effectively used this strategy to reward frequent buyers at their online store. Finally, remember that each email should also contain instructions for how the recipient can be removed from the email list. eBay
The largest of the online auction houses, eBay can provide a means of both selling your product and driving additional traffic to your online store. Selling products on eBay is a terrific way to find customers who have a genuine interest in your product. Within the product description of each item you list for auction, be sure to provide links to your website, informing auction visitors that more products are available at your website. Banner Ads Banner ads are by far the most common form of online advertising on the Internet. These are the flashy rectangular advertisements you see at the top and sides of most commercial and many amateur websites. DoubleClick and LinkExchange are the largest distributors of online banner advertising. Banner ads provide a means of reaching thousands of potential customers with your marketing campaigns. The effectiveness of these campaigns is often measured by calculating the "clickthroughs" rate. This rate is the percentage of times an ad is clicked on, based on the number of times it's viewed. If a banner ad is seen by 200 site visitors and 10 of them actually click on the ad, the banner ad has a click-though rate of 5%. The click-through rate, however, does not tell the whole story. To accurately determine the effectiveness of your ads, you'll need to know which click-through resulted in actual purchases from your site. This is now possible with the marketing tools provided by the major online marketing distributors mentioned above. By analyzing this data, you will be able to better tailor your marketing campaigns to effectively reach your best potential customers. To use your marketing dollars most effectively, be sure that your advertisements are aimed at sites catering to your targeted demographic. If you sell fine china, you will probably be disappointed with an ad campaign displayed on a youthoriented website. Consider exchanging banner ads with other sites that complement your product or service. The online seller of aquarium equipment would find substantially higher click-through rates by advertising on websites related to tropical fish. Placing banner advertisements on your website can provide a means of generating additional revenue for your site. The sponsor will pay you for each visitor who clicks on the ad, although this is usually just pennies per click. If traffic to your site is high, these pennies can begin to add up. There are also disadvantages to placing advertisements on your site. Banner ads tend to be large and result in longer download time for your pages. Customers who would rather see the content on your site are forced to wait longer for pages to load. This increases the likelihood that they will shop elsewhere. The ads also are not usually aesthetically pleasing and can distract from the content on your site. And finally, remember that each time your visitor does click on an ad placed on your site, he will be taken away from your site. Unless you have a contract with the sponsor that states otherwise, you should set the ad to spawn a new browser window when the ad is clicked. That way, when the user closes the new browser window, he/she will be back at your site when the new window is closed. [Back to top] Business Plan for Session 9: E-Commerce We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 9 and complete it now. Section 9: E-Commerce MS Word Instructions on filling in the business plan template:
Section 1-12: All MS Word 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here..." sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need. 3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information you have filled in.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document. Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 9 Quiz: E-Commerce

Top of Form
1. The single most important ingredient for success utilizing e-commerce is: A. B.
Getting people to visit my site. Designing a website that is easy to
navigate and use. Trust of my customers and assuring them that I will be honest and ethical.
C. D. Creating a web address that is easy to remember and enter. E. Having adequate infrastructure including warehousing and delivery systems in place.
2. The information I present on my website is
automatically protected by intellectual property laws and cannot be used by others.

A. B.
True False
3. It's not a good idea to disclose my website address on
my business cards, stationery and advertising.

A. B.
True False
4. In registering my domain name, I should keep in mind that the most easily remembered websites end in: A. B. C. D.
.bus .net .com .org

5. My website design should incorporate: A.
Artistically designed and unusual or
unique fonts.
B.
Standard and widely used fonts.

6. Knowledge of search engine placement is important to my website because: A.
Search engines have an impact on my
credit rating. Good search engine placement will bring more customers to my site.
B. C. Good search engine management will reduce the risks of viruses.
7. E-commerce websites exist solely to sell products on-
line.
A.
True
B.
False
8. It will be possible for me to keep track of how many
people are visiting my website.

A. B.
True False
9. The use of the Internet for conducting e-business will assure me of competing favorably with large established competitors paying rent on a store. A. B.
True False
10. Setting up my own server is like: A. B. C.
Renting my own store Owning my own store Creating my own website

Bottom of Form
Buying a Business or Franchise

How Should I Go About Buying A Business? Opportunities Financial ability Evaluating a Business Verify revenue information Buying an existing or new business
Pro's and Con's of Buying a Franchise Pro's and con's of buying a franchise What I should know about a prospective franchiser Becoming a franchiser
Suggested Activities Visit different operations
Attend trade shows Understand your intended business Analyze any appropriate existing business Analyze a franchised operation

[Back to top]
How Should I Go About Buying A Business?

This should be a step-by-step sequential process. Here are the steps: FIRST: You need to decide if you will be buying a business to provide yourself with a full-time job or if you are making the purchase as a part-time investment. SECOND: You will need to thoroughly investigate the industry you are considering to conclude if this is really a business in which you can make a commitment. THIRD: Attend industry meetings, talk to existing business owners, spend time at typical businesses and visit competitive locations to determine if your conclusions are shared by those who are already in the industry. FOURTH: You need to decide whether you want to start a new business, buy a new business or buy an existing business. AND FINALLY: Appraise your own experience, skills and background and decide if this business is a good fit for you. Are the economics of the business sound? Is there a reasonable predictability of future growth in earnings? Is there a sound financial foundation?
Buying a business with these good characteristics but bad management can be an especially good opportunity. Don't overlook service businesses and e-commerce businesses. Review Session One: "How To Pick a Business"
Where do I find out about business opportunities for sale? There are many sources for learning about business opportunities. The most popular are: Business opportunity brokers Classified newspaper ads Companies that supply or set up new locations Business opportunity trade shows A franchiser for any particular type of business
How do I determine my financial ability to buy a business: Most people will not pay cash for a business, so some sort of financing will be involved. The equity position that will be required (the amount of cash necessary to put down) will determine the type and size of business you will be able to buy. Depending on the business you select, you will need sufficient operating capital in addition to the down payment. The source of the equity funds should be cash or liquid assets and not borrowed money.
Who can I ask for help in evaluating a business? Remember that this is your decision and only you can decide whether a business is for you. Don't let any expert decide whether or not you should buy a business. Instead, ask them for specific advice on the various components of the business. Here are two examples why your attorney will be an important expert: A. Have your attorney review the lease. B. Your attorney should advise you as to whether you should purchase the stock or the assets of the business. If there are unpaid (and possibly unknown) liabilities including amounts owed to government agencies, you may be advised to purchase the assets rather than the stock. The following experts can be helpful: Attorney Accountant Banker Business opportunity broker Equipment suppliers or vendors Other business owners
Once I have settled on a particular business, how do I determine how much the business is worth and how much should I offer to purchase it?
This is the "due diligence" process. A buyer must obtain and examine the seller's financial statement and records. If the business is listed with a broker, the broker should have this information. The information you need should include the following:
Profit and Loss records for the past 24-36 months Current Balance Sheet Cash deposit records Utility bills Supplier bills In making your offer, use all the information you have collected to determine what your net income will be. This will give you a basis for making an offer based on a capitalization rate (the desired return) you will want. For example, if a business will show an annual net of $50,000 and you have determined you want a 25% return of your investment (without considering financing) you would offer $200,000 for the business:
What are some sources for business financing? The seller of an existing business will often provide some of the financing and will be your best source of financing. Businesses are sold by motivated sellers. In many cases the seller will take some cash down and let you pay the rest out of earnings over a period of time. The SBA (Small Business Administration) offers loan guarantee programs through commercial lenders. These will almost always need to be secured by additional assets. Equipment suppliers often have financing programs available for the development of a new business. Venture capital firms, commercial banks and relatives offer an
additional source.

Review the sources in Session 8, "How to Finance Your Business".
Other factors to consider in determining value: Unless you are also buying the property, the lease is probably the most important document you will evaluate. Review Session 6, "Location and Leasing". The following are the most relevant lease items: The term or length of the base leases Are there options to the base lease term? Is the base rent affordable and competitive? How often and how much is the adjustments to the base rent? What are NNN charges? What are the assignment provisions? If new, what will the Landlord contribute to the improvements? What is the quality of the improvements and fixtures: will they need replacement? What is the quality and size of the inventory: is it overstocked with obsolete items? What is the condition and amount of the receivables: are they collectable? If I am to buy the payables, how current are they and what is the accurate total? for? Is there an order backlog? How strong are customer relationships: the goodwill you will pay Is the primary marketplace stable or changing?
Does the business have, or can it obtain, all necessary government approvals and licenses? Are there any exorbitant fees?
Is the seller motivated or anxious?
How to verify revenue and receivables information: Ask for the seller's personal and business tax returns. In some businesses, you can determine the income by analyzing utility bills or supplier's records. If you are skeptical about the information's accuracy, make your offer to purchase based on a trial period where both you and the owner collect the receipts. A week spent at the cash register will disclose a lot and is the best way to verify sales. The receivables of a business (amounts still owed by customers) can be best verified by requiring written verification from people who owe the business money. Interview the owners of similar businesses for financial comparisons. How do I know if starting my own business, buying an existing business or buying a new business is best for me? Is it affordable? A new business will often cost more than an existing business of the same type. An existing business may be the only
way to enter the industry.

Location is an important factor. In some communities, certain types of business can no longer be built and an existing business will be the only way to enter the industry. Proximity to your home will also be a factor.
Some benefits to buying a new business: Everything is new and works Customers like to go to a new business The area may be under-served The value of the new business after you open may be greater than the cost of equipment New and inventive ideas may be better executed
Benefits to purchasing an existing business: The business has a track record of income and expenses Operating costs are often lower than in a new business The business will already have trained employees There may be true goodwill already built in The business may already dominate the market in the
Testimonial
Mike Coyne Midas Muffler Franchisee
[Back to top] What are the pros and cons (for and against list) of buying a franchise? Advantages: Big Brother (franchiser has proven business formula and can offer ongoing support in all facets of the operation). Disadvantages:
"Franchising is a great way to get in business for yourself." Transcription - html
Risk of poor and/or unprofitable location Loss of absolute control Big up-front fees and ongoing fees to franchiser What should I know about a prospective franchiser? Financial statement of franchiser Copies of profit and loss statements on franchise locations that you select. Any franchisee lawsuits pending against franchiser? Conduct due diligence interviews with other franchisees whom you select. (Probably the least important step in your "due diligence" investigation is to talk to the names of franchisees the franchiser gives you as references.) Existing franchises will normally be happy to share information on the success or shortcomings of their operations. Don't rely too much on "pro forma" financial statements. These are
statements that are estimates provided in advance regarding future prospects. Here are some Pros and Cons of YOU becoming the franchiser of your own business (and license others to become your franchisees): Advantages: Eliminates workman's compensations insurance, health insurance costs and employee-related problems Rapid expansion possible over broad geographical area Franchisees provide expansion capital Franchisees are motivated operators Disadvantages: Loss of absolute control Problems with unprofitable and/or difficult franchisees Controlled by state and federal franchising statutes [Back to top] SUGGESTED ACTIVITIES: Visit different operations, both independently owned and franchised and interview the owners for advice. Attend trade shows. Get to understand your intended business really well before you decide to buy or start one. Analyze any appropriate existing business that is for sale: Get the necessary information from a business opportunity broker. Describe your method for evaluating the business. Describe your financing plan on purchasing that business. Do the same analysis for a franchised operation. Study the term and conditions of a real franchise agreement, item by item. [Back to top] Business Plan for Session 10: Buying a Business or Franchise We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 10 and complete it now. Section 10: Acquisitions MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here"
3. After completing each box, delete the "Insert here" sentence, which will leave only the permanent title of the box and the information
you have filled in. We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 10 Quiz: Buying a Business or Franchise

Top of Form
1. In buying a business it is usually recommended to purchase the stock of the business rather than the assets of the business. A. B.
True False
2. When purchasing a business, the more important consideration is: A.
The economics of the business
B. The management quality that has been running the business

3. The BEST way to verify the sales of a small business is
to:
A.
Stand at the cash register and record the
sales.
B. Study the present and past income statements of the business. C. D.
Analyze the state sales tax returns. Review cash register tapes.
4. To be a real entrepreneur you should concentrate your
efforts on buying a business that produces something, has inventory, a factory and, hopefully, is vertically integrated.
A. B.
True False
5. Before buying a franchise, which of the following choices is the LEAST IMPORTANT step to take in your "due diligence" investigation: A. Have the franchiser give you names of franchisees to talk to. B. Make a "for and against" analysis as to whether you would be better off starting independently. C.
Talk to franchisees of your own
choosing. Have your lawyer review the franchise agreement and determine if there are franchisee lawsuits pending against the franchiser.
D.
6. The best source of financing when you buy a business
is:
A. B. C. D. E.
The Small Business Administration Your savings Taking on a partner The seller of the business Friends and relatives
7. If you invest $50,000 in a business and earn $10,000 annually, your return would be: A.
25%
B. C.
10% 20%
8. If you are considering buying a franchise, existing
franchises will be reluctant to disclose financial information to you.

A. B.
True False
9. The best way to verify the quality of receivables in a business you are considering buying is:
Require the seller to furnish a certified financial statement.

A. B.
Inspection of the seller's records by
your C.P.A.
C. Obtain written verification from accounts receivable parties.
10. A "pro-forma" financial statement shows: A. B.
Past financial information Projected future financial information
(estimated) Financial information before accounting for state and federal income tax obligations.
C.
Bottom of Form
Opening and Marketing


Opening for Business Before you start checklist Marketing Pinpoint your customers Recruit the "good" employees
Train your employees thoroughly in marketing skills Check list for hiring and training of your marketing team What and how to buy How to buy checklist Marketing tools E-commerce Promotion and advertising Mailing lists

Most Common Mistakes Checklist to avoid pitfalls Suggested Activities SESSION 11 Business Plan SESSION 11 Quiz
[Back to top] Opening for Business First Things First An opening check list is a great place to start. Remember that airline pilots are required to use a checklist before they take off! Here are items you should have on your opening checklist. Add additional items that would be appropriate for your own business. Before you start checklist
Testimonial Charlene McNeil Holiday One Hour Cleaners
Have I focused on a specific product or service? As a general rule, specialists Transcription - html outperform non-specialists. Think about this in any field: retailers, real estate and food (where did you buy your last take-out pizza or chicken)? For example, if you open a doughnut shop, it would not be a good idea to sell ice cream during summer months when the doughnut business slows down. If you do both, you will lose the identity of being the very best in either one of them. Will further specialization or focus improve my prospects for success? The more specialized, the better.

"Keep the customers satisfied, and they will recommend other people to your business."
Will my business be home-based? On-line? Storefront? Franchise?
Have I acknowledged my competition and limitations? It may be hard to compete with Wal-Mart or Home Depot. These "category killer" discount chains have powerful buying power and efficiencies of scale. Does your marketing plan serve a special niche?
Do I understand the difference between finding a market "niche" and going against what the public wants? (For example, if you build a house for sale, stick with a floor plan that most buyers are seeking rather than trying to be uniquely different.)
Do I have a one-year cash flow projection prepared to insure there will be ongoing liquidity? ( Refer to Session 6).
Do I have the necessary e-commerce tools in place? ( Refer to Session 9).
Testimonial Daina Johnson Owner, Tudor Cottage Gift Shop
Are all insurance policies in force?
If I plan to sell on credit terms, is my Transcription - html credit rating policy in place to avoid taking on customers with poor credit ratings? (The last thing you need is to have customers who don't pay on time, and good customers will respect you for this policy).
"The basic rule of buying: buy only what you know that you can sell."
Is my business plan complete and in written format? Does it include pre-opening, first year and long-range planning? It will play a key role in securing investors and will help uncover any weaknesses in the planning process. Have I taken the time to gain practical job experience and learn the basics of my business by first working in the business for someone else? (This is probably the best way to discover if you have made a choice that will be not only successful, but also satisfying to you.) Have I budgeted adequately for prototypes, research, sampling and trials? Have I successfully test-marketed my product or service? Was the response positive? (If not, you need to re-design, re-work and re-test.) Have I focused on selling a great product at a fair price rather than a fair product at a great price? ("Great product" suggests a product or service with pricing power and "fair product" suggests a commodity-type business more susceptible to competition.)
Do I have all the communication, computer and other business tools in place? Do I have the skills to use them?
Has my accountant fully explained the difference between hiring independent contractors and employees and the importance of compliance with IRS rules? (While my landscaper may be an independent contractor, in most cases my sales staff will be employees and I must conform to reporting and withholding requirements.) Are the following elements of my business structure in place: Is my accounting and bookkeeping system in place? Accountant selected?
Are my premises ready? This includes including having a signed lease and my tenant improvements completed. Have all permits and licenses been secured?
Has the business name been registered? Check with
my attorney. Are computers, telephones, cell phones, fax and utilities operating? Are graphics for advertising and promotional materials ready? Is the website name registered and website on line? Is infrastructure in place for e-business, if
appropriate? Are all security systems in place including protection of premises, shrinkage control and internal security? Have I selected and trained the number of employees I will need? Have I determined my personal work schedule?
Testimonial John Fellegi Whittier Car Wash
Have I included my requirements for managers, consultants, independent contractors, agents and sales representatives? [Back to top] Marketing What it Takes to Promote Sales
Every business has a specific marketing strategy that usually works best and has already been proven by Transcription - html your most successful competitors. You can benefit from their experience by copying successful marketing plans, including selling methods, pricing and advertising. Make a list of the most successful businesses that fall within your field of interest and study them (and even go to work for them). Visit these businesses and be prepared to ask the questions that are most important to you. Learn as much as you can about the needs of your customers and how to gain feedback from them. For example, if you open a restaurant, a displeased patron will probably not complain because it is not a pleasant experience. Instead he will not return. (So, you must take care to inspect the plates as they are returned to the kitchen.) Will your customers be looking for convenience, pricing, quality and/or service? It will be difficult to make sound marketing and promotional decisions without being informed on their real wants and needs. If a specific geographical area defines your market, low cost demographic reports based on the census can be obtained that will furnish information on population by race, income and home ownership. For resources that provide this information, go to "demographic data" on the Internet.
"If you don't know the business, hire a company that makes sure to research it for you."
Take time to recruit and then train your employees thoroughly in marketing skills. Finding the good employee. Most employers agree: the toughest part of being an employer is finding and keeping good employees. Begin your search for the good employee as soon as you decide that you are going to be an entrepreneur. Define what you need from an employee. List the characteristics you require. Network: get the word out that you are looking for help. Develop and maintain sources for building your workforce. Consider family members, retired workers and students.
Your customers need to feel confident that they are dealing with people who are knowledgeable and helpful. Five characteristics customers like most when dealing with a sales or service person are: 1. Product or service knowledge 2. Presentable appearance 3. Courtesy 4. Honesty 5. Sincerity To achieve these qualities, look for marketing employees who:
Like what they do Are quick learners who have curiosity to expand their knowledge Project a pleasant and positive image Like people and relate well to them Are helpful to customers as well as to fellow associates Are ambitious and hope someday to have your job Know who you will need to hire.
Here's a checklist for hiring and training your marketing team: Have a hiring policy in place that includes salary structure, incentive compensation and perks. Create job descriptions for everyone (including for yourself), including specific skills required for each employee. Maintain a schedule of ongoing staff meetings to discuss product information, sales techniques and customer service. Develop policies and procedures on handling customer complaints and concerns. Keep in mind that you will get your best marketing feedback from an unhappy customer. Develop clear protocols for handling customers via telephone, fax or e-mail. Continuously re-define the skills and requirements needed by new employees. What and How to Buy Since products are changing and improving at a more rapid rate, inventory obsolescence has becomes a greater business risk. Many products such as computers can be obsolete the day they are purchased.
"I work my own hours and work around schedules." Transcription - html Testimonial Ray Kovar Pool Maintenance
Rapid delivery firms (UPS, FedEx) and just-in-time assembly systems are great tools to use to minimize your inventories. These expanding technologies have greatly reduced the need for warehousing as well as the risk of obsolescence. And, the cash you free up can be put to more productive uses. If you are selling a product, you may want to consider having the item manufactured by an outside source rather than setting up your own production facility. Many start-up entrepreneurs outsource production in order to concentrate on marketing. There may also be cost considerations because other places might be able to provide the same product more cheaply. How to Buy Checklist Buy only what you think you can sell. Never place an order without knowing price and terms. Purchase orders must be in writing. Have complete specifications. Buy subject to your contingencies. Have backup sources. Be loyal to good suppliers. Have promises and extras verified in writing. Get price protection. Try to award to the lowest bidder.
Don't be hesitant to repeatedly contact suppliers to expedite needed merchandise. "The squeaky wheels get the grease."
Communicate complaints. Use internal controls for ordering and receiving. Count and inspect everything as received. Use an inventory control system. Ask for and take term discounts. Pay on time. Pay only after verification. Watch your cash flow. Consider suppliers as a source of financing. It is better to pull suppliers your way, not push them. Be nice.
Marketing Tools Your business name will announce who you are and what you stand for. A memorable logo also adds to your marketability. It will establish your name and brand recognition. It will enhance the image you wish to create. Your logo can be used on all company materials including stationery, business cards, brochures, website, gift boxes and shipping containers. A good name is: Easy to remember Simple to spell and pronounce Clearly says what you do Stirs customer interest Doesn't confuse you with a similar business Has a positive ring to it Evokes a visual image Doesn't limit you to a geographical location or to a product
A memorable logo also adds to your marketability. It will establish your name and brand recognition and enhance the image you wish to create. Your logo should be used on all of your company's materials including brochures, stationery, business cards, website, shipping containers and documents. E-Commerce You may want to include the Internet in your Marketing Plan. Please refer to Session 9: ECommerce Advertising: Getting the Right Message to the Right Audience Via the Right Media Your advertising plan becomes your blueprint for marketing. It will include your objectives, budget, media plan and creative approach. A basic rule in promotion and advertising is, "Do what you do best, and hire for what you don't."
Testimonial Terry Haney Consultant, Disaster Management "If I had to do it over again, I probably would want to get started sooner." Transcription - html
Discuss your advertising plan with your vendors. They may provide you with coop money if you follow their rules and make proper application for the money. Even the smallest advertiser can get up to half of their advertising costs reimbursed. There are many types of paid media to deliver your message. A few of the most
commonly used are: Print (newspapers, magazines and newsletters) Radio Television, including cable Internet Yellow Pages Direct mail Trade shows
Every entrepreneur learns through experience that there is a most efficient way to spend advertising dollars. This can be hit-or-miss for the beginner and very costly. So, once again, learn from the previous mistakes of your competitors. Find out and follow how your most successful competitors advertise and promote their products or services. Whatever advertising media you decide to use, become knowledgeable regarding the do's and don'ts of advertising in that particular medium. For example, if direct mail works best for you, there are books in your library devoted to this subject. They will provide huge insights that can save you from wasting advertising dollars. Media publicity is free and helps to create a positive image for you business. Newspapers could be interested in writing a feature story about you because of the widespread interest in entrepreneurship and the fact that you are a successful startup. Local newspapers, even the free ones, are very effective. Your "press release" must have news value that can be turned into a bit more of a feature story, as opposed to an announcement. This will make it more interesting and relevant to the reader. Editorial space is much more valuable to you than display spaceand it's free! Mailing Lists Now, before your start your business, is the right time to begin developing a database of future customers you wish to target. This list can be used for direct mail, invitations and newsletters. Your database could include specific individuals, companies and groups by location. Begin now to: Join the Chamber of Commerce. Collect business cards.
Collect names or mailing lists from your church, school, organizations and community groups. [Back to top] Most Common Mistakes Made in Opening A Business: Your Checklist to Avoid Pitfalls. Haste Lack of focus: specialize, specialize, specialize Lack of on-the-job experience Inadequate research and testing: test market first Lack of a well thought-out business plan Lack of working capital Get involved in your industry and community affairs.
Unprofessional decor, theme, logo, stationery, attire, packaging, ads and website
Not opening quietly to work out the shortcomings Poor signs: signs should be big, clear and readable - simple is good Untrained staff Poor relationship with vendors Unfocused marketing plan
Not using the advertising media that works best for your specific business [Back to top] Suggested Activities Develop a mailing list NOW. Watch for growth possibilities and plan growth direction. Skimping on insurance Ignoring possible problems Not recognizing your limitations
Join your trade association and subscribe to trade magazines (stay current). Continue to review, develop and update your business plan, stating how you will market your product or service. Continue to develop your budget including proposed expenses for displays, signs, advertising, promotions and website marketing. Begin a file for merchandising and marketing ideas. Take seminars and classes.
Read current trade magazines, papers and books, attend openings and promotions of businesses like yours. Develop and maintain an employee handbook. Talk to anyone and everyone in your field and collect business cards. Prepare a plan for growth possibilities. List potential problems and possible solutions. Become personally involved in selling your product or service. Keep your skills and knowledge current.
Keep a journal to include your dreams of having your own business. [Back to top] Business Plan for Session 11: Opening and Marketing We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 11 and complete it now. Section 11: Marketing MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information to insert. The boxes will enlarge as you take up more room so use all the space you need.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top] SESSION 11 Quiz: Opening and Marketing
Top of Form
1. If you are planning to open a doughnut shop, it would be a good marketing strategy to sell ice cream during the summer when the doughnut business slows down. A. B.
True False
2. The main reason why many small retailers have gone
out of business is:

A. Shopping center rents including CAM costs have become unaffordable. B.
Employees and customers have become
too litigious.
C. Governmental regulatory agencies have become too complicated in their reporting and inspection requirements. D. Large "category killer" discount store chains are hard to compete with.
3. You're planning to go into business to market a widget.
It would be a good idea to:
Look for ways to outsource the production of your widget.

A. B. Plan to develop your own production facilities using your own employees.
4. You would be better off to: A. B.
Sell a great product at a fair price. Sell a fair product at a great price.
5. It would be a good idea to have your employees work for you as "independent contractors" for the following reasons: A. It will save you from paying worker's compensation insurance. B. Since your workers are not classified as employees, you can avoid withholding gross earnings for social security and income taxes. C. D.
It will be easier to hire and fire workers. None of the above.

6. It is a good idea to consider following the marketing
methods of your most successful competitors.

A. B.
True False
7. You have decided to build and sell your first "spec" house. Should you incorporate a floor plan that is uniquely different from the going trend or should you stick with what most buyers are seeking? A. B.
Try to be different from the crowd.
It is better to stay reasonably close to prevailing standards.
8. In order to build sales volume quickly it is good
marketing strategy to take on customers with less than desired credit rating.
A. B.
True False
9. You plan to start a very small business as a moonlighter. You have no customers for this business. How would you get started? A. Start with a big advertising budget so you can overcome starting inertia. B.
Look for your first customer.

10. A restaurant owner can determine if the customer has enjoyed the food by: A.
The customer will complain if not
satisfied.
B.
Use a postage paid "customer survey"
form.
C.
Inspect the plates as they are returned to

Bottom of Form
the kitchen.
Expanding and Handling Problems

Rules to Follow Before Expanding Starting with a Pilot Operation First
Problems in Expanded Business not Present in a Start-up
Delegation of responsibility and authority Monetary incentive plans
Ways to Motivate Key Employees Leveraged profit sharing plan Unleveraged profit sharing plan Commission plan
Do's and Don'ts of Profit Centers Do's Don'ts Long-range financial planning
Common Business Problems Uncontrolled cash flow Drop in sales or insufficient sales Higher costs New competition Business recessions Incompetent managers or employees Dishonesty, theft Basic rules for handling serious business problems
Testimonial
[Back to top]
Rules to Follow Before Expanding

Once your business has started, you will face the challenge of making it grow. In this session you will learn about some basic rules to follow before expanding.
Phil Holland Founder, My Own Business
" I think the most common mistake made by entrepreneurs is not picking the right business to begin with." Transcription - html
Before even thinking about growing your business, you must first have a stable platform from which to take off. You must work out the bugs in your initial operation including making it profitable. Your readiness to expand will improve if you can gain experience
in all aspects of your start-up unit. Whether you have started an Internet business or opened a restaurant, become personally involved in all the functions of your business. Then you can detect weaknesses that can be remedied early on, where changes can be made rapidly and at less exposure to loss. Another reason to become personally involved in every aspect of your business is that later on, after expansion plans are implemented, you will be depending on others to whom you must delegate responsibilities. Then, no one can fool you about how to run the store. You will have had personal experience in doing so. Remember that after your expand, you will no longer be the person at the cash register. You must have systems in place to prevent employee theft and shrinkage (shoplifting). The lossprevention systems that work best for your particular business have probably already been figured out by your competitors. So, check out and implement systems already being used in your industry. (If you're going to open a convenience store, go to work for 7-Eleven beforehand to learn their systems that work!) Try to avoid giving your personal guarantee on leases or creditor obligations. As much as possible, separate your business liabilities from your personal assets. While banks will most likely require your personal guarantee on business loans, exposure of your personal assets can be mitigated by drawing the line against this practice whenever possible. For example, a potential landlord for your second store may ask you to personally guarantee the lease. Your exposure in a fiveyear lease of $3,000 per month would be $180,000. This amount could far exceed the initial capitalization of your business. Yet because of the desire and enthusiasm to add more stores, it will be tempting to incur such potentially overwhelming liabilities. Instead, by practicing discipline in limiting your liability, you might insist on negotiating a one-year lease with options for additional periods of time. Your liability in this case would be reduced to $36,000. [Back to top] Reasons Why Start-up Entrepreneurs Overlook the Importance of Starting with a Pilot Operation First There are some understandable reasons why many entrepreneurs overlook the importance of having a successful pilot operation in place before expanding.
Testimonial
Colette Coffeman Catering Service
"If it can't be profitable, make sure that you don't go out and show yourself off in a bad light." Transcription - html
Entrepreneurs by definition are self-confident. The problem is that too often we are over confidant either in ourselves or our product or service. This overconfidence can propel us into expansion programs without carefully working out the wrinkles including getting to the point of having a proven and profitable pilot plant (model) from which to expand. One reason for overconfidence is that many wealthy entrepreneurs have enjoyed success in an unrelated field. A
wealthy tycoon who had a successful career, for example, might start a new business in a field that he or she doesn't know or understand and might meet with failure because he or she assumed their expertise would transfer. Another enemy is haste. Entrepreneurs who start multi-unit businesses will experience some deficiencies in their first unit. Many will lose money at the beginning. This is the time to work out the bugs and produce a positive income statement. If you can't, this may be time to abandon the idea. But, if you are starting a restaurant chain and in haste open six of them with problems, your losses could become [Back to top] Elements You Must Deal With in an Expanded Business not Present in a Start-up
Testimonial
Erik Wong Video Producer
There will be controls needed in your "It is important to pace yourself as to the number of expanded business that have not been initial clients you take on. " present in your start-up mode. It will Transcription - html take careful preparation to break the do-it-yourself mode. For example, your business will need accounting and cash flow controls that measure performance of individual units within your overall operation. These reports will be required on a frequent basis. In many businesses weekly income statements are used to prevent small problems from growing into bigger ones that may become unmanageable. Your accountant can help you set up unit financial reporting. Your expanding business will require delegation of responsibility and authority. New skills in recruitment, evaluation and training will be needed. The greatest leap of expansion for most businesses is growing from the first unit to the second one. Once you have made the big step from one to two, you are now a chain! From then on it can become a continually improving cookie-cutter operation. Delegation of authority can be accomplished by: Financial motivation of key employees Creation of profit centers
Testimonial
Flecher Hull Fletcher Hull Motors, Auto Sales and Leasing "Make sure that you don't wait too long to hire people to help you expand."
Sometimes it is difficult for the Transcription - html beginning entrepreneur to delegate authority. There are many ways to do so without relinquishing certain functions that you will want to keep for yourself. For example, you should be the only person signing checks and deciding on capital allocations, yet you might want to delegate the training of employees to your managers. But without giving up these functions, you can still motivate key employees in two ways: recognition and reward. Recognition means much more than bestowing an impressive title. The most important recognition is to let it be clear that your key people are
in positions of authority as well as responsibility. While delegating authority will mean that your managers will be making some mistakes, their mistakes will be limited to their spheres of responsibility. Also, frequent financial reporting will minimize adverse financial impact of their mistakes. Good managers are motivated by monetary incentive plans that are tied to their individual success. The incentive compensation of your management team should be therefore compartmentalized for each manager, so that a manager's bonus is based solely on what he or she has accomplished and not diluted by how other parts of the business are doing. For example, if you develop a chain of stores, each store manager's incentive compensation should be based only on the profit of his or her store. If you are uncertain as to how to set up such a profit sharing plan, you might get ideas from your most successful competitors, who have already gone through the trial-and-error process of refining such systems. [Back to top] Ways to Motivate Key Employees: Reward and Recognition Let's first set a definition of recognition: It is creating a business structure where your key employees are given authority and responsibility, which is tied to profit and accountability. This becomes a "profit center" that the key employee manages. Each profit center has separate profit and loss accountability, which is determined frequently. (Many fast food stores operate on weekly profit and loss statements!) The idea is to create an atmosphere where your key people feel they have entrepreneurial decision making authority, and are paid incentive compensation based on their own center profits. But, they are not given authority in two non-delegated roles, which remain your sole responsibility: 1. Capital expenditures 2. Signing checks This suggests that your key people will be given enough latitude in operating their profit centers that they might make some mistakes. By the two restrictions stated above, plus frequent financial reporting, you can recruit well-motivated managers and at the same time limit your exposure to big losses. Obviously, the incentive plan must be tailored to each business situation and be based on the profit and loss report of the individual's separate responsibility. By rewarding managers through profit participation, you create the engine that will drive your managers to success. And, the greater their success (and reward), the more your overall business will benefit. Here are three types of plans (there are many) that have been used to structure a manager's incentive.
LEVERAGED PLAN. Managers receive all, or a large part of, unit earnings over a fixed target. This has
been used successfully by fast food chains that are company owned and operated (rather than franchised units). Here is an example of a simplified weekly income statement of a doughnut shop that is operated by a company employee-manager. This plan is "leveraged" because every penny saved becomes a penny going into the manager's bonus check. Sales $5,000 Wages $1,500 Purchases $1,500 All other expenses (including co. profit) $1,500 Total expenses $4,500 $4,500 Weekly profit and manager's bonus: $500
UNLEVERAGED PROFIT SHARING PLAN. In this case your manager receives a percentage of earnings of his or her profit center. Here is an example:
Sales Wages $1,500 Purchases $1,500 All other (actual) expenses $500 Total expenses $3,500 Net profit Manager bonus @ 10%:
$5,000
$3,500 $1,500 $150
COMMISSION PLAN. In this plan, the manager receives a percentage of sales for the accounting period. Assuming, as above, that sales for the period are $5,000 and the commission is 5%, the compensation would be $250. In many instances, commission incentive is not appropriate because it does not include provisions for expenses. Your manager could get rich while you go broke. But commission incentive can work well when the manager does not control pricing. Salespersons in a retail clothing store would be a good example of a commission structure.
[Back to top] Do's and Don'ts of Profit Centers: Let's review some of the basic rules that apply in the creation of profit centers:
Create a separate profit center for each expansion unit. This means separate profit and loss statements that are compartmentalized for each manager.
Make the accounting periods very short. When there are not big fluctuations in inventories or other costs, even weekly profit and loss statements work well. But, if possible, don't wait for six or twelve months to reward managers. Rewards are best when received early!
Keep you profit sharing incentive plan simple and clear. It will avoid misunderstandings and misinterpretations. Use simple words and simple
accounting.
Have all your profit sharing agreements in writing. It will avoid innocent differences of interpretation. A ball painted half black and half white is going to look differently depending on where you are viewing the ball!
Check out how your best competitor motivates their managers. Your competitors may have already come up with a system that is most appropriate for your particular business. [Back to top] Some Do's and Don'ts in Starting Your Business Do's Save Money. Stay in a field you love.
Know your business before you start (work for someone else in it). Copycat the winners in your business. Specialize, even to a single product. Find a product or service that is: Needed or desired Thought by customers to have no close substitute Not subject to price regulation Set a cap on your liability. Learn computer skills. Learn communication skills.
Have a lawyer, accountant, and insurance agent before you start. Prepare a business plan. Prepare the site criteria model for your particular business. Don'ts deal. Never sign a lease without your lawyer's review. Don't rush: there is no such thing as the last good Do "for and against" lists for major decisions. Buy when everyone is selling (and vice versa). Deal with those you like, trust and admire. Learn accounting. Create your own internal control plan. Keep going to school in subjects important to you. Give back to the community.
Avoid a "commodity" business (one without pricing power).
Don't burn bridges of job security to start a business if you can help it. Don't become a business zombie: take time off. Don't compete with category killers (Wal-Mart or Toys-R-Us) unless you have a special niche. Begin Your Long-Range Financial Planning Before expanding your business you should consult with your lawyer, accountant and insurance agent to develop benefits for your future employees as well as for yourself. The goal is to provide benefits sufficient to recruit and maintain outstanding managers. Provisions can be considered for retirement plans, health insurance and vacation and holiday benefits. These costs should Testimonial then be included in your budget. Martin Ruiz [Back to top] Common Business Problems Now let's identify some of the common mistakes made when businesses begin to grow. These mistakes can be deadly, so benefit from the others who have gone before you!
"Anyone who has the desire to be their own boss should consider going into business." Transcription - html Gardener
Uncontrolled Cash Flow. People fail because they run out of money. When you run out of cash, you crash. So, prepare your cash flow projections for expansion very conservatively. Review "Cash Flow" in Session #7. In projections, be sure to: 1. Forecast income (sales) very low 2. Forecast expenses very high 3. Provide for unanticipated contingencies. A drop in sales or insufficient sales. If this happens, your income and cash flow will be impacted. Immediately take the necessary remedial steps by ruthlessly cutting costs.
Higher costs. Can you increase volume of sales? Can you offset with higher prices? New Competition. The reality of the entrepreneur's life! Can you learn from them? Can you neutralize their opening impact? Business recessions. You will need to promptly cut costs to maintain earnings and cash flow. Incompetent managers or employees. Act swiftly to rid yourself of them. Dishonesty, theft. Study the ways your most successful competitor controls all forms of dishonesty that your business is exposed to including shrinkage (shoplifting) and employee dishonesty. Each business will be different.
A combination of any or all of the above.
Basic rules for Handling Serious Business Problems: Identify and acknowledge your problems with brutal honesty.
Immediately reduce your losses by unemotionally cutting your costs to maintain a positive cash flow and profitability. This is the first and most important action to take.
Don't switch horses. Stay with the business you know unless its future is fatally defective. Take the initiative to explain to your creditors what your problems are and why slow or smaller payments will be necessary. Never write post-dated checks or send late payments without an explanation.
Don't cut value or quality of your products or services. Make them even better.
Improve every aspect you can of your performance and image. Look for opportunity in adversity. Sometimes there will be bargain opportunities during business slumps. Remember that businesses have cycles. So, hang in there and ride out the adverse periods. [Back to top] Suggested Activities Review case histories of the most successful businesses in your field.
Review the case histories of businesses you know that failed to determine the reasons they failed. Was it inadequate testing, planning and experience?
Identify a typical business problem in your intended business and plan a solution. Identify a combination of problems in your business and plan a solution. [Back to top] Business Plan for Session 12: Expanding and Handling Problems We heartily recommend that you download the individual business plan template for this session Business Plan Template Document 12 and complete it now. Section 12: Growth Program MS Word Instructions on filling in the business plan template: 1. Each box has a permanent title in CAPITAL LETTERS
2. Below each title is a sentence starting with an "Insert here" sentence. This will suggest information
to insert. The boxes will enlarge as you take up more room so use all the space you need.
We suggest that you fill in each section of the business plan as you proceed through the course. The template for all sessions 1-12 can also be downloaded into your computer as a single document: Section 1-12: All MS Word Include sufficient research findings and background materials. Make it interesting up by the use of background data, your biography, charts, demographics and research data. When your business plan is completed, print off and assemble the 12 sections. Many other business plan formats are available in libraries, bookstores and software. [Back to top]
SESSION 12 Quiz: Expanding and Handling Problems

Top of Form
1. When you decide to expand your business, which of the following activities should not be delegated: A. B. C. D.
Writing checks Signing checks Training employees Profit center responsibility

2. If you are using a commission plan to motivate an employee, you should be sure that: A. B.
The employee controls the pricing. The employer (you) control the pricing.
3. The best place to find the most appropriate bonus (profit sharing) plan for
your growing business is:

A.
Your accountant
B. C. D.
McDonald's Your most successful competitor The library

4. One of the most important skills in managing your own business is knowing
what to do when you get into trouble. When your business experiences an unexpected drop in sales, what is the FIRST step to take:
A. B. C.
Reduce your prices to regain sales volume. Review and improve on the quality of your service or product. Look for ways to begin trimming expenses now.
5. If you find yourself in the position of not being able to pay your rent on time, you should: A. Rather than writing a check that isn't good, postdate it to when you think it will clear. B.
Wait until you have the funds and then send in the check even
though it is late. Call your landlord and explain that you will be late and why. Tell him when the check can be expected and keep to this promise.
C.
6. You plan to start a chain of convenience markets. The best way to find out how this business controls shrinkage and employee theft is to: A. B. C.
Join the Convenience Market Association. Take graduate courses in marketing management. Go to work for your most successful competitor.
D. Based on your personal experience in the business, create business systems to control these losses.
7. The "cookie cutter" approach to expansion refers to:
A.
Following the marketing method of your favorite cookie
competitor.
B. Working out all the problems of a pilot operation until it is profitable and then expand it by "cookie cutter" duplication. C. Try different shapes and sizes of "cookie" concepts to produce a variety of expansion formats.
8. If your cash flow projection indicates a negative cash flow six months down
the line, the FIRST remedy would be to:

A. B. C.
Attempt to sell the business. Begin looking for alterative business opportunities.
Bring your cash flow projection back into "positive" by increasing sales, cutting costs and obtaining financing.
9. If you open a second store (you are now a chain!) and sign a five year lease for $3,000 per month, you will create an obligation to pay: A. B. C.
$3,000 per month $180,000 $130,000

10. Good managers are most motivated by: A. B.
Incentive compensation based on the company earnings. Promotion to officer and vice president of the company.
C.
Bottom of Form

Create A Vision: Create A Vision Determine What You're Good at and What You Like To Do Figure Out What The Market Needs

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Create A Vision: Create A Vision Determine What You're Good at and What You Like To Do Figure Out What The Market Needs

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Developing large or small business ideas is a matter of creating a vision, leveraging your strengths and determining what the

market needs. These three steps should get you started.

Selection Strategy Things to Watch Out For

Decision Time SESSION 1 Quiz

Characteristics of a Successful Entrepreneur

How To Start Your Own Business: A Step-by-Step Approach

Things to Watch Out For:

Get Completely Qualified

SESSION 1 Quiz: DECIDE ON A BUSINESS

2. The most common and biggest

mistake made by entrepreneurs is in not having sufficient money.

Family members can become involved in your business.

answers would be a good decision?

Sell your grandma's special candies.

Talk to everyone you can who is in that business.

7. Starting a "hollow corporation"

8. You have always dreamed of

Lack of experience in the business chosen.

Lack of familiarity with the competition.

The Business Plan

SESSION 2 Business Plan SESSION 2 Quiz

What is a Business Plan?

Why Prepare a Business Plan?

Ezequiel Padilla Jugos Tropicales Mexican Food

"Being in business for yourself is not for everyone." Transcription - html

Six Steps to a Great Business Plan

"You'll identify issues that you

SESSION 2 Quiz: The Business Plan

1. The best place to find more information on designing

your own individualized plan is:

Your lawyer Your accountant

The Public Library, industry or government "Business Plan" websites, or bookstores

Business Planning Consultants

3. In preparation of financial projections for your

Facing this issue and stating it in your

5. Preparation of a business plan is optional for some small businesses. A. B.

6. Your business plan could EXCLUDE: A.

All the subjects covered in sessions of

Personal biographies of management.

C. Financial statement projections and cash flow projections. D. E.

Your marketing and expansion plans.

Your plans to build a new vacation home with your profits.

8. Let's assume that your business plan is based on

Residential and commercial sales. Industrial and commercial

Room additions and industrial

Specialize in one of above. None of the above.

Complete the plan for each session as

Have your business plan completed

Basic Computer and Communication Tools

Types of Communication External Internal

Basic Communication Tools Telephones Pagers Facsimile Machines

Computers Desktop Laptop

Internet Browsers Feasibility and Specifics Internet Service Provider Email

Technology Planning SESSION 3 Business Plan SESSION 3 Quiz

Two types of communication are essential - external and internal.

Basic Communication Tools

Business Plan for Session 3: Basic Computer and Communications Tools

SESSION 3 Quiz: Basic Computer and Communication Tools

1. If I am too old or inadequately educated to become

Yes: Start without a computer.

B. No: Learn. Read books, enroll in courses, and get tutoring.

Yes, start without a computer program