Entrepreneurial Success Begins With

1
EntrepreneurialSuccess Begins With

• The Snow College Small Business Development
  Center is a partnership program of the U. S.
  Small Business Administration. The SBDC is
  funded in part by the U.S. Small Business
  Administration under cooperative agreement No.
  6-7770-0050-1. The support given by the SBA does
  not constitute an express or implied endorsement
  of the cosponsors or participants opinions,
  products or services. All of our programs are
  extended to the public on a nondiscriminatory
  basis. Reasonable arrangements for persons with
  disabilities will be made if requested at least
  two weeks in advance.

2
Agenda

• Welcome and introductions
• Rewards and drawbacks of entrepreneurship
• Business entry strategies
• The business plan
• Legal and regulatory compliance
• Choosing a form of ownership
• Debt and equity financing
• Where do I go from here

3
Rewards of Entrepreneurship

• Profit
• Freedom from the limits of standardized pay for
  standardized work.
• Independence
• Freedom from supervision and the rules of
  bureaucratic organizations.
• Satisfying Way of Life
• Freedom from routine, boring, unchallenging jobs.

4
Drawbacks of Business Ownership

• Uncertainty of income
• Risk of losing entire investment
• Long hours and hard work
• Lower quality of life until the business gets
  established
• Complete responsibility

5
Characteristics of Successful Entrepreneurs

• Passion
• Persistence
• High need for achievement
• Willingness to take measured risks
• Self-confidence and self-reliance
• High energy level
• Desire for responsibility

6
Alternative Routes to Small Business Ownership
SmallBusinessOwnership
Startup
Buyout
Franchising
Family Business
7
Types of Ideas That Develop into Startups
New Market
New Technology
New Benefit
ExampleProviding same day drain cleaning
services with a money-back guarantee.
ExampleProviding health conscious Utah
consumers with fruit smoothies.
ExampleProviding alternatives to incarceration
by using high technology ankle bracelets for home
arrest programs.
New Market Providing customers with a product/
service that is not in their market but already
exists elsewhere.New Technology Using a new
technical process that provides the basis for new
product or service ideas.New Benefit Performing
an old function for customers but in a new and
improved way.
8
Sources of Startup Ideas
Friends/Relatives5
Personal Interest/Hobby16
Family Business6
Suggestion7
Education/Courses6
Prior Work Experience45
Chance Happening11
Source Data developed and provided by the
National Federation of Independent Business
Foundation and sponsored by American Express
Travel Related Services Company, Inc.
Other4
9
Evaluation Criteria for a Startup Venture

• Marketing Factors Need for product Customers L
  ife of product Market structure Market
  size Market growth rate
• Competitive Advantage Cost structure Degrees
  of control over price, costs, channels of
  supply Barriers to entry regulatory protection,
  response/lead-time advantage, legal advantage,
  contacts and networks
• Economics Return on investment Investment
  requirements Break-even point
• Management Capability
• Fatal Flaw

10
Pros and Cons of Buying an Existing Business

• CONS
• Inheriting any problems
• Poor quality of existing employees
• Poor business image
• Modernization required
• Purchase price based on inaccurate data
• Poor business location

• PROS
• High chance of success
• Less planning
• Existing customers/suppliers
• Necessary equipment
• Bargain price
• Experienced employees
• Existing business records

11
Pluses and Minuses of Franchising
Minuses ??Franchise fees ? Royalties ??Restriction
s on growth ? Less independence in
operations ? Franchisor may be sole supplier of
some supplies ? Termination/renewal clauses
Pluses Formalized training Financial
assistance Proven marketing methods Manageri
al assistance Quicker startup time Overall
lower failure rates
12
Key Concepts in Family Business Management

• Require competence in family members.
• Explain situation to non-family members.
• Avoid favoritism in personnel decisions.
• Discuss plans openly.

13
The Business Plan

• Presents the business opportunity and how you
  will take advantage of it.
• Helps you think about the business in a
  systematic and disciplined way.
• Provides a blueprint for building your business
  over the next three to five years.
• Used for presenting your ideas to lenders,
  investors, creditors, customers, managers.

14
The Business Plan

• Cover Page
• Table of Contents
• Section I. Executive Summary
• Section II. Mission, Goals Objectives
• General Description of the Business
• Mission Statements
• Goals and Objectives
• Section III. Background Information
• The Industry
• The Business Fit in the Industry
• Section IV. Organizational Matters
• Business Structure, Management Personnel
• Operating Controls

15
The Business Plan - Continued

• Section V. The Marketing Plan
• The Products/Services
• The Market Analysis
• Marketing Strategies
• Section VI. The Financial Plan
• Worksheets and Notes to Cash Flow Projections
• Cash Flow Projections
• Financial Statements
• Additional Financial Statements
• Appendix Section Action Log
• Supporting Documents

16
Legal and Regulatory Compliance Checklist

• Register your business name
• Get a state business license (if needed)
• Get a city/county business license
• Get a federal/state tax ID number
• Comply with minimum wage/overtime laws
• Make arrangements for paying taxes
• Make arrangements for statutory benefits

17
Forms of Ownership

• Proprietorship
• Partnerships
• General
• Limited
• Corporations
• Regular Corporation
• Subchapter S Corporation
• Limited Liability Company

18
Choosing an Ownership Form

• Organizational costs
• Limited versus unlimited liability
• Continuity
• Transferability of ownership
• Management control
• Raising new equity capital
• Income taxes

19
The Sole Proprietorship Option

• A sole proprietorship is a business owned and
  operated by one person.
• There is generally no registration or filing
  fee.
• Liability is unlimited.
• The sole proprietorship is dissolved upon the
  proprietors death.
• Ownership of the company name and assets may be
  transferred.
• Management freedom is absolute.
• Capital is limited to the proprietors personal
  capital.
• Income from the business is taxed as personal
  income to the proprietor.

20
The Partnership Option

• A partnership is a voluntary association of two
  or more persons to carry on, as co-owners, a
  business for profit.
• There is generally no registration or filing
  fee.
• Liability is unlimited.
• Unless the partnership agreement specifies
  otherwise, the partnership is dissolved upon
  withdrawal or death of a partner.
• Transferring ownership requires the consent of
  all partners.
• A majority vote of partners is required for
  control.
• Capital is limited by the partners ability and
  desire to contribute.
• Income from the business is taxed as personal
  income.

21
The Limited Partnership Option

• A written certificate must be filed with proper
  state office.
• Liability is limited to investment for limited
  partners.
• Withdrawal or death of limited partners does not
  affect the continuity of the business.
• Limited partners may sell their interest.
• Limited partners are not permitted any
  involvement in management.
• Limited partners limited liability provides a
  strong inducement in raising capital.
• Income from the business is taxed as personal
  income.

22
The Corporation Option

• A corporation is a business organization that
  exists as a legal entity.
• It is the form of organization that has the most
  fees and requirements.
• Liability is limited to investment in the
  company.
• Continuity of business is unaffected by
  shareholder withdrawal.
• Ownership is easily transferred.
• Shareholders have final control.
• Usually it is the most attractive form for
  raising capital.
• The corporation is taxed on its income, and the
  stockholder is taxed when dividends are received.

23
The Subchapter S Corporation

• It is taxed as a partnership.
• Eligibility requirements are as follows
• No more than 75 stockholders are allowed.
• All stockholders must be individuals or
  qualifying estates and trusts.
• Only one class of stock can be outstanding.
• The corporation must be a domestic one.
• No nonresident alien stockholders are permitted.
• The S corporation cannot own more than 79 percent
  of the stock of another corporation.

24
Limited Liability Companies

• Limited liability for owners
• Taxed as a partnership
• Easier to manage and control than corporations
• Now in all 50 states
• Limited transfer of ownership
• May be cumbersome to share or transfer ownership
  (unanimous written consent)

25
Sources of Financing

• Personal Savings
• Friends and Relatives
• Suppliers
• Banks
• Government Programs
• Individual Investors (Angels)
• Venture Capital
• Sale of Stock

26
The Five Cs of Credit
1. The borrowers character 2. The borrowers
capacity to repay the loan 3. The capital being
invested in the venture by the borrower 4. The
conditions of the industry and economy 5. The
collateral available to secure the loan
27
Selected Loan Programs

• Credit card
• Signature loan
• Relatives and friends
• Collateralized bank loan
• Commercial loan
• SBA Guaranteed Loan
• Six-County RLF
• Six-County TBAF
• Other

28
SBA Guaranteed Loan (7A)

• Bank makes loan, SBA guarantees between 75 to 85
  percent up to 1 million
• Interest rate capped at prime plus 2.25 to 2.75,
  depending on terms
• Repayment terms usually seven years (longer for
  equipment, construction)
• Contact Local SBA lender

29
Other Sources of Assistance

• Service Corps of Retired Executives (SCORE)
• Business Information Center (BIC)
• Partnership with SBA, SBDC, SCORE, Ogden City
• Market research resources, computers, training
  and counseling services

30
Special SBA Programs

• ProNet
• Purpose and explanation
• http//pro-net.sba.gov/
• 8A Program
• Purpose and explanation
• www.sba.gov/gcbd

31
Conclusion

• Thank you for participating in this presentation.
• Please tell your friends and neighbors about our
  services
• Good luck!