Chapter 1 Business Planning and Organization BCN 4753 Fall
2008
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Business Planning Idea Idea Feasibility Research Feasibility
Research Strategic Plan Strategic Plan Decide on Business Type
Decide on Business Type Business Plan Business Plan Revisit
Strategic Plan Revisit Strategic Plan (continuous over the life of
the company)
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Feasibility Research Can we do what we want to do? Can we do
what we want to do? Are there any laws against it? Are there any
laws against it? Are there huge costs associated with doing it? Are
there huge costs associated with doing it? What other barriers to
entry are there? What other barriers to entry are there? Is there a
real future in what we want to do? Is there a real future in what
we want to do? What other risks are associated with it? What other
risks are associated with it? Is there someone already doing what
we want to do? Is there someone already doing what we want to
do?
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Strategic Plan Serve as a framework for decisions or for
securing support/approval. Serve as a framework for decisions or
for securing support/approval. Provide a basis for more detailed
planning. Provide a basis for more detailed planning. Explain the
business to others in order to inform, motivate & involve.
Explain the business to others in order to inform, motivate &
involve. Assist benchmarking & performance monitoring. Assist
benchmarking & performance monitoring. Stimulate change and
become building block for next plan. Stimulate change and become
building block for next plan.
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Strategic Plan Mission Statement Mission Statement Long term
i.e. 5 years + Long term i.e. 5 years + Owners/directors (need all
EEs) Owners/directors (need all EEs) Matters of strategic
importance Matters of strategic importance Separated from
day-to-day work Separated from day-to-day work Realistic, detached
and critical Realistic, detached and critical Review periodically
Review periodically Written down. Written down.
Decide on Business Type Sole Proprietorship Sole Proprietorship
Partnership Partnership General Vs Limited General Vs Limited Joint
Ventures Joint Ventures Corporation Corporation S-Corporation aka
Subchapter S S-Corporation aka Subchapter S
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Sole Proprietorship Simplest form of Business organization
Simplest form of Business organization Owner is manager and makes
all decisions Owner is manager and makes all decisions Compliance
with state and local business licensing requirements only
Compliance with state and local business licensing requirements
only Advantages: easy to create, total control by owner,
transferable, and liquidity 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. Disadvantages:
personal liability, death of owner, must use property to secure
loans, taxes and benefits not tax deductible.
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Partnership Two or more persons in an agreement Two or more
persons in an agreement Co-owners Co-owners liability liability
Partnership agreement (like a Business Plan) Partnership agreement
(like a Business Plan) General Partnership General Partnership
Pooled resources Pooled resources Limited Partnership Limited
Partnership At least one general partner and one or more limited
partners At least one general partner and one or more limited
partners Limited partner Capital for Return on capital Limited
partner Capital for Return on capital Limited say limited liability
Limited say limited liability
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Partnership Advantages: increased ability to raise capital,
pooling of resources, pooling of talents, shared responsibility and
minimal administration costs. 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 Disadvantages: General partners have unlimited
liability, termination upon death, bankruptcy or withdrawal, non-
transferable, benefits not tax-deductible
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Joint Ventures Special combination of two or more persons or
entities. Special combination of two or more persons or entities.
Specific Venture Specific Venture No designation as a partnership
or corporation No designation as a partnership or corporation Same
rules as partnership Same rules as partnership Usually limited to
single transactions Usually limited to single transactions
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Corporation Creations of statutes Creations of statutes
Separate legal entity under the laws of state Separate legal entity
under the laws of state Same rights as individuals have Same rights
as individuals have Most costly to form Most costly to form Issues
Stock Issues Stock
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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. 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. Disadvantages: Lack of centralized control,
closely regulated, expensive, record keeping, and double
taxation.
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S-Corporation Shareholders absorb all corp. income or losses;
report as individual taxpayers. Shareholders absorb all corp.
income or losses; report as individual taxpayers. Eliminates the
problem of double taxation. Eliminates the problem of double
taxation. IRS regulations IRS regulations Has most of the same
advantages and disadvantages. Has most of the same advantages and
disadvantages.
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S-Corporation Must be domestic Must be domestic One class of
stock One class of stock Only individuals and estates can be
shareholders Only individuals and estates can be shareholders
Cannot be part of another organization Cannot be part of another
organization Max number of shareholders Max number of shareholders
No non-resident alien shareholders No non-resident alien
shareholders 20% of revenue must be from domestic sources 20% of
revenue must be from domestic sources Dividends, interest,
royalties, rents, annuities, and securities transactions < 20%
of total revenue Dividends, interest, royalties, rents, annuities,
and securities transactions < 20% of total revenue
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LLC Owners will be the same from the beginning to the end.
Owners will be the same from the beginning to the end. There is no
stock in an LLC. There is no stock in an LLC. The ownership is
represented by 100% membership interest. The ownership is
represented by 100% membership interest. Typically used when you
have investment in real estate or a rental property, 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. 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. 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 have the same flow through attribute an S
corporation is allowed. It can also have a closed status, like a C
corporation. It can also have a closed status, like a C
corporation. There is no record keeping requirements with an LLC.
There is no record keeping requirements with an LLC. There is no
board of directors. There is no board of directors. No requirement
to hold board of directors or shareholders meetings. No requirement
to hold board of directors or shareholders meetings. Therefore
there are no corporate minutes. Therefore there are no corporate
minutes.
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Control of Business Sole Proprietorship absolute power over all
decisions. Sole Proprietorship absolute power over all decisions.
Partnership Control is shared between partners as per the agreement
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 Corporation- depends on
stock ownership, exercised through regular board meetings by the
board of directors
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Business Plan Purpose is to provide a written summary of the
contractors goals and objectives Purpose is to provide a written
summary of the contractors goals and objectives Defines how plans
are to be carried out Defines how plans are to be carried out Gives
a plan for implementing the business Strategy Gives a plan for
implementing the business Strategy Detailed business operation
plans Detailed business operation plans Needed to acquire capital
Needed to acquire capital
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Business Plan Nature of Business Nature of Business Markets
Markets Competition Competition Expense of Start-up Expense of
Start-up Projecting Income and Expenses Projecting Income and
Expenses Employment Needs Employment Needs Taxes Taxes Regulations
Regulations Financing Financing Site Location Site Location
Expansion Expansion Insurance Insurance Record Keeping Standards
Record Keeping Standards Advertising Needs Advertising Needs
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Business Plan Good plan should answer: Good plan should answer:
Type of constructing contracting Type of constructing contracting
Type of experience needed Type of experience needed What is the
nature of the business environment What is the nature of the
business environment Capital Requirements Capital Requirements
Benchmarking pricing structure in the market Benchmarking pricing
structure in the market Costs of your service offering Costs of
your service offering Profit margin Profit margin First year
expenses, Volume needs, Breakeven point First year expenses, Volume
needs, Breakeven point Foreseen liabilities and risks and plan
Foreseen liabilities and risks and plan
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Business Plan Nature of your Business Nature of your Business
Define your exact business Define your exact business What does
your business do for its customers? What does your business do for
its customers? What doesnt it do for customers? What doesnt it do
for customers? What distinguishes you from competition? What
distinguishes you from competition? What do you want it to do in
the future? What do you want it to do in the future?
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Business Plan Markets Markets What is it that you sell? What is
it that you sell? Is there a need for your product? Is there a need
for your product? What is included in the market? What is included
in the market? Competition Competition Who is that competition and
where are they? Who is that competition and where are they?
Benchmarking Benchmarking What sets you apart? What sets you
apart?
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Business Plan Expense of start-up Expense of start-up Initial
Capital Initial Capital Purchase or lease Equipment Purchase or
lease Equipment Deposits and installation fees Deposits and
installation fees Taxes, Permits, insurance, and licenses Taxes,
Permits, insurance, and licenses Professional Services Professional
Services Advertising Advertising Employees Employees
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Business Plan Projecting Income and expenses (Working Capital)
Projecting Income and expenses (Working Capital) Determine prices
Determine prices Monthly targeted sales, profits, variable costs
Monthly targeted sales, profits, variable costs Expected rate of
growth Expected rate of growth Basic costs: Labor, Materials,
Equipment Basic costs: Labor, Materials, Equipment Fixed costs
Fixed costs Lines of credit Lines of credit Your rate of pay Your
rate of pay Basis for projections Basis for projections Plan for
covering cash flow problems Plan for covering cash flow problems
Add in a margin of error Add in a margin of error
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Business Plan Employment Employment Hire other people or not
Hire other people or not Where to find employees Where to find
employees Duties and responsibilities of employees Duties and
responsibilities of employees Skills, experience, training and
other characteristics needed Skills, experience, training and other
characteristics needed Wage rate Wage rate Training plan Training
plan Rules and regulation for employees Rules and regulation for
employees Governmental regulations Governmental regulations Other
requirements Other requirements Employee regulation laws Employee
regulation laws
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Business Plan Taxes Taxes Federal and State Federal and State
Investment tax credit Investment tax credit When do you file taxes
When do you file taxes Employment taxes Employment taxes
Unemployment taxes Unemployment taxes Other taxes Other taxes
Impact fees Impact fees
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Business Plan Regulations Regulations What federal regulations
apply? What federal regulations apply? Filling Requirements Filling
Requirements Licenses Licenses Zoning laws, building codes, health,
fire, and police standards Zoning laws, building codes, health,
fire, and police standards Norms of community Norms of community
Special corporate requirements Special corporate requirements
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Business Plan Financing Financing Net income projections Net
income projections Reinvestment requirements Reinvestment
requirements What additional capital requirements are there? What
additional capital requirements are there? Where to get a business
loan? Where to get a business loan? Are government loans available?
Are government loans available? If A/R are late how will the cash
flow problem be handled? If A/R are late how will the cash flow
problem be handled? System for withholding taxes to ensure prompt
payment System for withholding taxes to ensure prompt payment
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Business Plan Site locations Site locations Specific location
requirements Specific location requirements Proximity to suppliers
or customers Proximity to suppliers or customers Resource
considerations Resource considerations Traffic, Parking, and other
businesses Traffic, Parking, and other businesses Expansion
Expansion Capital requirements Capital requirements Restrictions
Restrictions
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Business Plan Leasing Arrangements Leasing Arrangements Lease
or buy Lease or buy How is rent determined? How is rent determined?
Rent comparison Rent comparison Improvements Improvements Insurance
needs Insurance needs Renewal issues Renewal issues Sublet rules
and regulations Sublet rules and regulations Expansion options
Expansion options Restrictions Restrictions Terms of lease Terms of
lease Zoning Zoning
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Business Plan Insurance Coverage Property Insurance Casualty
Insurance Life Insurance Fidelity or Surety Bonding Employee
Insurance
Slide 32
Record Keeping Record Keeping What records do you need? What
records do you need? Financial Statements Financial Statements
Statement use Statement use Record-keeping system Record-keeping
system Record keeping services Record keeping services
Slide 33
Business Plan Advertising and Marketing Advertising and
Marketing Visibility Visibility Image of Company Image of Company
Identify business site Identify business site Identify Market how
to reach them Identify Market how to reach them Frequency and
allocation Frequency and allocation Message to potential customers
Message to potential customers Trade associations and other groups
Trade associations and other groups
Guidelines to Organizing State State Corporate Filling fees
Corporate Filling fees Articles of incorporation Articles of
incorporation Compliance with Florida General Corporation Act
Compliance with Florida General Corporation Act County County
Fictitious Names Registration Fictitious Names Registration Fulfill
requirements to operate under fictitious name Fulfill requirements
to operate under fictitious name
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Other Considerations Solid & Hazardous Waste Laws &
Regulations Solid & Hazardous Waste Laws & Regulations
Florida Department of Environmental Protection Division of Waste
Management Florida Department of Environmental Protection Division
of Waste Management Permit to Discharge into Navigable Waters
Permit to Discharge into Navigable Waters Permit for Construction
over Navigable Waters Permit for Construction over Navigable Waters
U.S. Army Corps of Engineers Regulatory Division U.S. Army Corps of
Engineers Regulatory Division
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Other Considerations Qualifying Agents Qualifying Agents Obtain
all Required Licenses and Permits Obtain all Required Licenses and
Permits IRS Registration IRS Registration State Tax Fillings State
Tax Fillings Occupational Licenses Occupational Licenses
Certificate of Occupancy Certificate of Occupancy Zoning Permits
Zoning Permits
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Sources of Information and Assistance The Florida Department of
Commerce The Florida Department of Commerce Division of Economic
Development Division of Economic Development Minority Business
Development Center Minority Business Development Center The Florida
Small Business Development The Florida Small Business Development
Small Business Administration Small Business Administration SCORE-
Service Corps of Retired Executives SCORE- Service Corps of Retired
Executives
Slide 39
Dissolving or Terminating of Business Organization
Consideration of all consequences Consideration of all consequences
Sole Proprietorship Sole Proprietorship Partnership Partnership 1
Dissolution 1 Dissolution 2 Winding up 2 Winding up 3 Termination 3
Termination Corporation Corporation Voluntary Voluntary Involuntary
Involuntary
