Entrepreneurial EssentialsEntrepreneurial Essentials

E2E2

Presented by:Presented by:

A member of the Minnesota Small A member of the Minnesota Small Business Development Center Business Development Center NetworkNetwork

HELPING BUSINESSES GROW AND SUCCEED

www.umdced.com218-726-7298

Northeast Minnesota’s Small Business Development Center

What we will cover today:What we will cover today:

Am I an Entrepreneur?

Feasibility

Business Plan

Business Financing

Basic Legal Requirements for Start-Up

Questions to ask yourself…Questions to ask yourself…

• Self-starter• Positive thinker• Lifelong learner• Well-disciplined• Willing to put in

long hours

?• People-person• Have family

support• Willing to make

sacrifices• Face challenges

Are YOU…

ResourcesResources

Small Business Administration (SBA) www.sba.gov

– Assessment tools– Sample business plans– Online workshops and seminars– Library of resources

MythsMyths

Fact: Your hours depend upon the businessand the work that needs to be done

Fact: There are no grants or easy money

• Myth: You can set your own hours

• Myth: There are grants to help startyour business

• Myth: You are your own boss

Fact: Your customers are your boss

More RealityMore Reality

• Plan on long hours every day, every week

• Consider the financial investment risks• Meeting normal family expenses• Funding for the business• Financial commitment• Loss of investment

Don’t underestimate the amount of time and investment needed in the beginning and growing

stages of your business

FeasibilityFeasibility

• Start with your idea– What is the business you want to start or buy– Does fit with your lifestyle– Do you have the necessary skills to manage this type

of business

• Identify your market(s)– What is the businesses market and where is it

located

Feasibility Feasibility

• Identify your competition– What products/services are competitive to yours– Who and where is your competition your competition

and do they compete for the same market share

• Can you make a profit– Is the business financially feasible– Will it provide enough profit to meet your personal

needs and lifestyle

• Experience as a manager/supervisor

• Knowledge of the industry

• Basic business knowledge

• Basic financial knowledge

• Willingness and ability to hire someone to fill gaps in knowledge

• Does it offer something not currently available or being offered

• Can it serve an existing market in which demand exceeds supply

• Can it be competitive based on quality, selection, price, or convenience

• Who are your target customers?

• What do they ‘look’ like?– age, sex, education, nationality, income, etc.

• Where do they live and shop?

• What are their needs, wants, hobbies, interest?

• Will you offer a product or service they will use and benefit from?

• What are your monthly sales estimates?– price– units sold

• What will it cost you (product vs. service)?– cost– units purchased

• What are your monthly sales estimates?– price– units sold

• What will it cost you (product vs. service)?– cost– units purchased

• How do you make good revenue projections?

– Start with national trends– Use demographic information

• Decide how much you need to spend on initial marketing.

– cost– Where will you spend it?

• What are your one-time start-up costs?– equipment– building or renovation– down payments– legal fees– Supplies– Computers– Software– Website

• What are the on-going monthly expenses?– lease – building/equipment– wages– utilities/telephone– Supplies– Supplies– Payroll– Website (internet marketing)

• Financial literacy•Credit score•Lender possibilities•Seasonal trends (cash flow)•Monthly personal income needs•Expansion plans•Receivables/collections•Written business plan

Where do we go from here?Where do we go from here?

Financing

Legal Issues

Business Plan

Failing to Plan is

Planning to Fail……

The importance of your Business Plan

Do I Do I reallyreally need a business plan? need a business plan?

• A business plan is a powerful business document

• A well thought-out plan tells the story of the business

→Where is it now…

→Where is it going...

→How it will get there!

ExplainsIn

Detail

Provides A

System

Maps the future

ProvidesInsight

The business plan is vital because…The business plan is vital because…

Business Plan - NarrativeBusiness Plan - Narrative

• Written last – Placed first

• Considered most important

– A lender will often read only the Executive Summary when making a preliminary decision to finance a business.

Executive Summary

Business DescriptionBusiness Description

• Detailed outline of the business

– Business name

– Owners

– Business history

– Location

– Description of the legal structure

– Mission Statement

Goals and ObjectivesGoals and Objectives

• Define short and long term goals of the business

• Use the SMART approach– Specific– Measurable– Achievable– Relevant– Time bound

“I will achieve one million in annual sales revenues within 3 years by selling household cleaning products and

providing personal business opportunities to motivated entrepreneurs through the community.”

Amway Independent Business Owner

Industry AnalysisIndustry Analysis

– What is scope of the businesses industry?

– What are its current trends?

– Is the industry growing? Stable? Declining?

– How does your business fit into the existing industry?

Products and ServicesProducts and Services

Describeeach

product orservice

In detail.

What is your product or

service?What is the benefit to your customer?

How will the product or service

beproduced or

delivered to the end user?

Marketing Analysis and StrategyMarketing Analysis and Strategy

– Who or what is the market you will serve?– How will you reach them?– Who or what is your competition?– What sets you apart from your competition?– What are your promotional strategies?– What distribution channels will you use?– What is your price point?– What technology will you use?– Will you have a website?

Operational PlanOperational Plan

– How will your business operate?

– What facilities will the business require?

– Where will the business be located?

– Will the location meet the immediate and future needs of the business?

– What is your exit strategy – retirement, merger, buyout, go public, low performance, etc.?

Management and OrganizationManagement and Organization

– What are the personnel requirements of the business?

– Who are the key people that will manage the business?

• What are their responsibilities?

• Describe their experience, document their education and background.

• Why are they are best-suited for the position within the business?

FinancialsFinancials

• Your opportunity to persuade the investor/reader that the business makes “cents” (aka money)

• Must reflect what is included in the plan

• Must be conservative and realistic

The process of thinking through the financial plan will improve your insight into the inner workings of your

company

Financial PlanFinancial Plan

• Equipment and Supply List– Details purchases of substantial property such

as land, facilities, vehicles and equipment

• Sources and Uses of Funds– Verify where the business funds will come

from and where they will be spent

• Loan Application– Application specific to the lender you are

approaching

Financial PlanFinancial Plan

• Breakeven Calculation/Analysis– Estimates how much you need to make in sales

each month before you begin to turn a profit

• Cash Flow Projections– Shows how money will flow in and out of your

business– Indicates whether you will earn enough money

to pay your bills

Financial PlanFinancial Plan

• Balance Sheet– The value of the company– States the business’s assets, liabilities & net

worth

• Profit and Loss (P&L) Projections– Indicates when and if your business will be

profitable– Three years of projections – first 12 months

must be more detailed

Financial PlanFinancial Plan

• Assumptions• The financial part of the business plan is based

upon these assumptions• Any part of the financials that are not obvious to

the reader should be explained in this section

AppendixAppendix

• Owner’s financial statements

• Brochures and advertising materials

• Industry studies

• Magazine or other articles relating to your business

• Letters of support from future customers

Understanding Understanding Business FinancingBusiness Financing

Equity

Where do I get the money to start a business?

Guarantee to pay back an obligation at acertain rate (or variable rate), usually over atime period or at some point in time.

No guarantee of repayment, often management control, share in profits, and expected residual value when sold or closed.

Sources of FundingSources of Funding

Debt

Bank

Family&

Friends

Suppliersor

Trade Credit

Non-bankLenders

PrivateInvestors

Sources of Debt CapitalSources of Debt Capital

Equity

Savings

Sale ofAssets

PersonalCredit

Resources

Familyand

Friends

Investorsor

Partners

Sources of Equity CapitalSources of Equity Capital

How do I get money from a lender?How do I get money from a lender?

Commitment

Collateral Character

CapacityConditions

5 C’sof

Credit

What does a lender want from me?What does a lender want from me?

FinancialProjections

PersonalFinancials Proposed

Collateral

Legal Documents

Funding Request

Business Plan

Main Considerations

Taxes

Income Tax

Self Employment Tax

Liability

Level of Liability

Liability Insurance

Selecting a Legal StructureSelecting a Legal Structure

BasicBasicLegalLegal

RequirementsRequirements

Four Levels of GovernmentFour Levels of Government

– Federal Government

– State of Minnesota

– County Government

– City Government

THANK YOUTHANK YOU

www.umdced.com 218-726-7298