Chapter 1 Business Planning and Organization

1
Chapter 1 Business Planning and Organization

• BCN 4753 Fall 2008

2
Business Planning

• Idea
• Feasibility Research
• Strategic Plan
• Decide on Business Type
• Business Plan
• Revisit Strategic Plan
• (continuous over the life of the company)

3
Feasibility Research

• Can we do what we want to do?
• Are there any laws against it?
• Are there huge costs associated with doing it?
• What other barriers to entry are there?
• Is there a real future in what we want to do?
• What other risks are associated with it?
• Is there someone already doing what we want to do?

4
Strategic Plan

• Serve as a framework for decisions or for
  securing support/approval.
• Provide a basis for more detailed planning.
• Explain the business to others in order to
  inform, motivate involve.
• Assist benchmarking performance monitoring.
• Stimulate change and become building block for
  next plan.

5
Strategic Plan

• Mission Statement
• Long term i.e. 5 years
• Owners/directors (need all EEs)
• Matters of strategic importance
• Separated from day-to-day work
• Realistic, detached and critical
• Review periodically
• Written down.

6
Strategic Plan

• Vision
• Mission
• Values
• Objectives
• Strategies
• Goals
• Programs

7
Decide on Business Type

• Sole Proprietorship
• Partnership
• General Vs Limited
• Joint Ventures
• Corporation
• S-Corporation aka Subchapter S

8
Sole Proprietorship

• Simplest form of Business organization
• Owner is manager and makes all decisions
• Compliance with state and local business
  licensing requirements only
• Advantages easy to create, total control by
  owner, transferable, and liquidity
• Disadvantages personal liability, death of
  owner, must use property to secure loans, taxes
  and benefits not tax deductible.

9
Partnership

• Two or more persons in an agreement
• Co-owners
• liability
• Partnership agreement (like a Business Plan)
• General Partnership
• Pooled resources
• Limited Partnership
• At least one general partner and one or more
  limited partners
• Limited partner Capital for Return on capital
• Limited say limited liability

10
Partnership

• Advantages increased ability to raise capital,
  pooling of resources, pooling of talents, shared
  responsibility and minimal administration costs.
• Disadvantages General partners have unlimited
  liability, termination upon death, bankruptcy or
  withdrawal, non-transferable, benefits not
  tax-deductible

11
Joint Ventures

• Special combination of two or more persons or
  entities.
• Specific Venture
• No designation as a partnership or corporation
• Same rules as partnership
• Usually limited to single transactions

12
Corporation

• Creations of statutes
• Separate legal entity under the laws of state
• Same rights as individuals have
• Most costly to form
• Issues Stock

13
Corporation

• Advantages Exemption of liability, continuity of
  existence, death has no effect, high level of
  management, transferable ownership, fringe
  benefits are tax deductible, and able to raise
  capital.
• Disadvantages Lack of centralized control,
  closely regulated, expensive, record keeping, and
  double taxation.

14
S-Corporation

• Shareholders absorb all corp. income or losses
  report as individual taxpayers.
• Eliminates the problem of double taxation.
• IRS regulations
• Has most of the same advantages and disadvantages.

15
S-Corporation

• Must be domestic
• One class of stock
• Only individuals and estates can be shareholders
• Cannot be part of another organization
• Max number of shareholders
• No non-resident alien shareholders
• 20 of revenue must be from domestic sources
• Dividends, interest, royalties, rents, annuities,
  and securities transactions lt 20 of total
  revenue

16
LLC

• Owners will be the same from the beginning to the
  end. 
• There is no stock in an LLC. 
• The ownership is represented by 100 membership
  interest. 
• Typically used when you have investment in real
  estate or a rental property,
• The tenants should have no doubt that the owner
  is not you, it is a company. 
• An LLC is treated like a corporation for tax
  purposes. 
• It can have the same flow through attribute an S
  corporation is allowed. 
• It can also have a closed status, like a C
  corporation. 
• There is no record keeping requirements with an
  LLC. 
• There is no board of directors. 
• No requirement to hold board of directors or
  shareholders meetings. 
• Therefore there are no corporate minutes. 

17
Control of Business

• Sole Proprietorship absolute power over all
  decisions.
• Partnership Control is shared between partners
  as per the agreement
• Corporation- depends on stock ownership,
  exercised through regular board meetings by the
  board of directors

18
Business Plan

• Purpose is to provide a written summary of the
  contractors goals and objectives
• Defines how plans are to be carried out
• Gives a plan for implementing the business
  Strategy
• Detailed business operation plans
• Needed to acquire capital

19
Business Plan

• Nature of Business
• Markets
• Competition
• Expense of Start-up
• Projecting Income and Expenses
• Employment Needs
• Taxes
• Regulations
• Financing
• Site Location
• Expansion
• Insurance
• Record Keeping Standards
• Advertising Needs

20
Business Plan

• Good plan should answer
• Type of constructing contracting
• Type of experience needed
• What is the nature of the business environment
• Capital Requirements
• Benchmarking pricing structure in the market
• Costs of your service offering
• Profit margin
• First year expenses, Volume needs, Breakeven
  point
• Foreseen liabilities and risks and plan

21
Business Plan

• Nature of your Business
• Define your exact business
• What does your business do for its customers?
• What doesnt it do for customers?
• What distinguishes you from competition?
• What do you want it to do in the future?

22
Business Plan

• Markets
• What is it that you sell?
• Is there a need for your product?
• What is included in the market?
• Competition
• Who is that competition and where are they?
• Benchmarking
• What sets you apart?

23
Business Plan

• Expense of start-up
• Initial Capital
• Purchase or lease Equipment
• Deposits and installation fees
• Taxes, Permits, insurance, and licenses
• Professional Services
• Advertising
• Employees

24
Business Plan

• Projecting Income and expenses (Working Capital)
• Determine prices
• Monthly targeted sales, profits, variable costs
• Expected rate of growth
• Basic costs Labor, Materials, Equipment
• Fixed costs
• Lines of credit
• Your rate of pay
• Basis for projections
• Plan for covering cash flow problems
• Add in a margin of error

25
Business Plan

• Employment
• Hire other people or not
• Where to find employees
• Duties and responsibilities of employees
• Skills, experience, training and other
  characteristics needed
• Wage rate
• Training plan
• Rules and regulation for employees
• Governmental regulations
• Other requirements
• Employee regulation laws

26
Business Plan

• Taxes
• Federal and State
• Investment tax credit
• When do you file taxes
• Employment taxes
• Unemployment taxes
• Other taxes
• Impact fees

27
Business Plan

• Regulations
• What federal regulations apply?
• Filling Requirements
• Licenses
• Zoning laws, building codes, health , fire, and
  police standards
• Norms of community
• Special corporate requirements

28
Business Plan

• Financing
• Net income projections
• Reinvestment requirements
• What additional capital requirements are there?
• Where to get a business loan?
• Are government loans available?
• If A/R are late how will the cash flow problem be
  handled?
• System for withholding taxes to ensure prompt
  payment

29
Business Plan

• Site locations
• Specific location requirements
• Proximity to suppliers or customers
• Resource considerations
• Traffic, Parking , and other businesses
• Expansion
• Capital requirements
• Restrictions

30
Business Plan

• Leasing Arrangements
• Lease or buy
• How is rent determined?
• Rent comparison
• Improvements
• Insurance needs
• Renewal issues
• Sublet rules and regulations
• Expansion options
• Restrictions
• Terms of lease
• Zoning

31
Business Plan

• Insurance Coverage
• Property Insurance
• Casualty Insurance
• Life Insurance
• Fidelity or Surety Bonding
• Employee Insurance

32
Business Plan

• Record Keeping
• What records do you need?
• Financial Statements
• Statement use
• Record-keeping system
• Record keeping services

33
Business Plan

• Advertising and Marketing
• Visibility
• Image of Company
• Identify business site
• Identify Market how to reach them
• Frequency and allocation
• Message to potential customers
• Trade associations and other groups

34
Business Management

• Planning
• Organizing
• Directing
• Controlling
• Standardizing
• Assigning
• Communicating

35
Guidelines to Organizing

• State
• Corporate Filling fees
• Articles of incorporation
• Compliance with Florida General Corporation Act
• County
• Fictitious Names Registration
• Fulfill requirements to operate under fictitious
  name

36
Other Considerations

• Solid Hazardous Waste Laws Regulations
• Florida Department of Environmental Protection
  Division of Waste Management
• Permit to Discharge into Navigable Waters
• Permit for Construction over Navigable Waters
• U.S. Army Corps of Engineers Regulatory Division

37
Other Considerations

• Qualifying Agents
• Obtain all Required Licenses and Permits
• IRS Registration
• State Tax Fillings
• Occupational Licenses
• Certificate of Occupancy
• Zoning Permits

38
Sources of Information and Assistance

• The Florida Department of Commerce
• Division of Economic Development
• Minority Business Development Center
• The Florida Small Business Development
• Small Business Administration
• SCORE- Service Corps of Retired Executives

39
Dissolving or Terminating of Business
Organization

• Consideration of all consequences
• Sole Proprietorship
• Partnership
• 1 Dissolution
• 2 Winding up
• 3 Termination
• Corporation
• Voluntary
• Involuntary