SCORE Business Workshop - Amazon S3 · 2017-01-12 · SCORE Business Workshop ... Now form your answers into your marketing strategy The Four P’s of the Marketing Mix 1. Product

SCORE Business Workshop

Williamsburg SCORE williamsburg.SCORE.org 1

Make Your Dream A Reality“How to Start Your Own Business”

Presented by Williamsburg SCOREJanuary 12, 2017

Williamsburg Library

Presenters:Bruce LandefeldSteven Maurer

Basic Decisions/Analysis Organizing Your Business Marketing Your Business Financing Your Business Managing Your Business Research & Decision

Resources How SCORE can help


Agenda - What We Will Cover

First Steps


Basic Decisions/Analysis

Planning


Most people don’t plan to fail, they fail to plan.The purpose of a business plan is identify the important issues and

Organize what you know Identify what you don’t know Develop contingency plans for unknowns Assess performance after startup

Planning


Lack of Planning

Insufficient Capitalization at Start-up

Mismanagement of Cash Flow

Insufficient Revenuea. Improper Pricingb. Low volume

Four Main Reasons Small Businesses Fail

Proper Planning is essential to the success of your business!

Basic Decisions


• Self-starter• Resourceful• Accountable (no excuses)• Organized• Hard worker• Persistent• Decisive• Healthy• Supportive family

Do you have the passionto run your own business?

Are you determined to make it succeed?

Decision #1: Am I Cut Out For This?Some Characteristics of Successful Entrepreneurs

Basic Decisions


Decision #2: Why Am I Doing This?Personal Goals. What are your reasons for wanting to own your own business?

Desire to be your own boss?

Create financial independence?

Others?

Are your reasons powerful enough to make you determined to succeed?

Basic Decisions


• No Existing Customer Base

• Start up Marketing

• Competitive Pressures

• Inadequate Cash Flow

• Introduce New Product or Service

• Develop New Location

• Add Your Expertise andExperience

• Lower Potential Investment

Disadvantages of NewAdvantages of New

http://www.scorehelp.org/lists/buying a franchise.htmlShould I consider buying a franchise?

Decision #3: How Will I Get Started?Starting New Business vs. Buying Existing or Franchise

Basic Decisions


• Long Hours (24/7/365)

• Many Responsibilities

• Exposure to Financial Risk

• Business Climate Changes- Competition- Changing Customer

• Many Bosses:Customers & clients, Government agencies, Suppliers, Banks, Investors, etc.

• Higher Independence

• Potential Rewards from Taking Risks (Profit)

• Pride of Ownership

• Future Wealth Potential

DisadvantagesAdvantages

Decision #4: How Will I Get Started?Still thinking about owning your own business……?

Basic Decisions


• Zoning or Deed Restrictions

• Isolation From Others

• Difficult Financing

• Family Distractions

• IRS Scrutiny

• Convenient Work Location

• Less Expensive

• Flexible Schedule

• Tax Advantages- % sq ft of total home- Percentage of utilities

DisadvantagesAdvantages

Decision #5: How Will I Get Started?Is a Home-Based Business an Option?

Business Organization


Organizing Your Business Form Regulation & Taxes Insurance

Business Organization - Forms


Sole Proprietorship (Default)

Partnership

Limited Liability Company (LLC)

Corporation (stock)

Non-stock Corporation (non-profits in VA are required to use this form)

The LLC is the best fit for most small businesses, though you should discuss your particular situation with your attorney.



• Start-up capital difficult to raise

• Unlimited owner liability

• Business may be dissolved when owner dies

• Simple and easy to start

• Low start-up expenses

• Owner is the sole manager

• Profits are not shared

• Income taxed on owner’s individual return

Advantages Disadvantages

Sole Proprietorship



• Must file & keep current with Secretary of State (vs Sole Prop)

• Some restrictions on ownership & ownership transfer (vs Sole Prop)

• Not difficult or expensive to form (vs Corp)

• Limited liability protection forowners (vs Sole Prop)

• Fewer rules and restrictions (vs Corp)

• Profits able to be taxed only once at owner’s level (vs Corp)

Advantages Disadvantages




To form an LLC in Virginia

Select a name for your LLC and check that it is unique in Virginiahttps://sccefile.scc.virginia.gov/NameAvailability

Complete SCC Form LLC-1011http://www.scc.virginia.gov/publicforms/322/llc1011.pdf

Send form and filing fee of $100 to SCC

This process can be completed digitally on the eFile partition of the SCC website.

https://sccefile.scc.virginia.gov/NewEntity


State of VirginiaThe “Business One-Stop” page of Virginia’s Department of

Business Assistance is easy to navigate and has excellent content:http://www.virginia.gov/business/business-one-stop

• Is your proposed type of business regulated or require a license? Here is a list of the professions regulated by the Virginia Dept. of Professional and Occupational Regulation:

http://www.dpor.virginia.gov/ProfessionsAndOccupations/

• Or is it in a health-related profession?

http://www.dhp.virginia.gov/formsbyprof.asp

• Food service business? We are in the Peninsula Health District of the Virginia Dept. of Health.

http://www.healthspace.com/Clients/VDH/Peninsula/Peninsula_Website.nsf

Business Organization - Regulation


Business Organization - Regulation


Local governments encourage small business creation and publish resource guides to explain and simplify the process.

City of Williamsburg:http://www.yeswilliamsburg.com/130/Content.aspx

James City County:http://www.yesjamescitycountyva.com/wp-content/uploads/2013/12/2014EssentialGuidetoBusiness.pdf

York County:http://www.yorkcounty.gov/Portals/1/Users/062/62/62/BRG_Web_Jan%202014.pdf

Newport News:http://newportnewsva.com/business-resources/small-business/

Links to these and other resources can be found on the Williamsburg SCORE website.

https://williamsburg.score.org/resources/tab-aLook for links in the green box on the right side of the page.

Business Organization - Taxes


At the Federal level, an LLC can be taxed as either

• a sole proprietorship, if the LLC has only one member, with all revenues and expenses being reported on Schedule C of the owner’s Form 1040 personal tax return, plus Form 941 for self-employment tax.

• a partnership filing Form 1065 if the LLC has more than one member

• as a corporation if the LLC requests such treatment by filing form IRS Form 8832

http://www.irs.gov/pub/irs-pdf/p3402.pdf

Discuss these matters with your accountant. A full discussion of the topic is presented in IRS Publication 3402.

Business Organization - Taxes


See IRS resources for Starting, Operating, or Closing a Businesshttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Starting-Operating-or-Closing-a-Business

Some examples of useful IRS information

Publication 15 (Circular E) - Employer's Tax GuidePublication 463 - Travel, Entertainment, Gift, and Car ExpensesPublication 535 - Business ExpensesPublication 560 - Retirement Plans for Small Business (SEP, SIMPLE, and

Qualified Plans)

Publication 583 - Starting a Business and Keeping Records

Publication 1635 – Understanding Your EIN, Employer Identification Numbers. Publication 1779 - Independent Contractor or Employee

Publication 946 - How to Depreciate Property

Insurance - General

TYPE COVERS LOSSES DUE TO • Property Fire/damage to buildings, contents, inventory• General Liability Accidental injury and damage to others• BOP Business Owners Policy: Property & Gen’l Liability • Workers’ Required by law if business has 2 or more workers;

Compensation covers injury, death and loss of wages• Health / Disability Health insurance for you and your workers• Motor Vehicles Business use of your vehicle• Umbrella Liability Additional layer of coverage over auto/property• Product Liability Losses due to products you sell or make• Professional Liability Losses due to errors or omissions• Business Interruption Covers expenses due to disaster if business must close


Insurance – Workers’ Compensation


• Covers injuries, death and loss of wages to workers on the job, including the owner

• Coverage is mandatory in Virginia for businesses with two or more employees

• If this coverage is not provided, injured employees may sue the owner for damages, including lost wages

• Owner (or other executives) may reject coverage for themselves

• See Virginia Workers’ Compensation Commission website for more details

http://vwc.state.va.us/content/employers

Marketing & Sales


Marketing Your Business

Marketing & Sales


1. Is there a demand for your planned product or service?

2. Who are your customers?

How will you find them? How will you reach them?

3. Who are your competitors and how successful are they?

4. Why will your product or service be a better value for customers?

Critical Planning Questions

Marketing & Sales


Now form your answers into your marketing strategy

The Four P’s of the Marketing Mix1. Product - A product is an item (or service) that satisfies what a consumer

demands. Describe the customer need and how the product or service has benefits which satisfy this need.

2. Price - The amount a customer pays for the product. When setting a price, the business must be aware of the customer perceived value for the product. Is demand expected to be price elastic or inelastic?

3. Promotion - All of the methods of communication that a business may use to provide information to potential customers about the product. Promotion comprises elements such as: advertising, public relations, sales organization and sales promotion.

4. Placement (or Physical Distribution) - providing the product at a place which is convenient for consumers to access.

Marketing & Sales - Product


What are you selling? Why does anyone care?Product - an item (or service) that satisfies a

consumer demand1. What is the customer benefit that your product is providing?

2. Is the customer aware of the problem that your product is solving? (example: basement radon detector)

3. What other options does the customer have for obtaining this benefit?

4. Can you make a profit selling the product at a price equal or lower than the value to the customer?

Market research is key to answering these questions.

Marketing & Sales - Product


What is Your Market Positioning?1. Are you creating a product for a market that does not

currently exist? (Ex: basement radon detectors)

2. Are you entering an established market with a new, better product that provides higher customer value than existing products? (Ex: 2007 introduction of the iPhone)

3. Are you creating a product in an established market that is similar to competing products? (Ex: open a pancake house with the best food and service in town)

Marketing & Sales - Promotion


Your product will not sell itself -- You need to do some kind(s) of advertising, but design your promotion to conform to your selling strategy:

Five stages of a customer’s buying decision process

• Product Awareness…or…. Problem recognition -- Many marketers advertise to “create” a problem to be solved

• Interest in your product – (maybe after evaluating alternatives)Customer now more attentive to your advertising messages

• Trial, Evaluation, Information search – info search usually only applies to more expensive purchases

Social media has revolutionized this processFear of making the wrong product purchase can lengthen info search

• Purchase (may be preceded by trial purchase)May be interrupted by negative comments by friends or online reviews

• Post-purchase behaviorHow customer’s expectations compare to actual product experience

Marketing & Sales - Promotion


Advertising can be crafted to target different and/or multiple stages of the customer’s decision-making process.

Awareness Interest Trial/Eval Purchase Post‐Purchase

Call 1‐800‐321‐1234 with your credit card

to order the Acme Vegetable Slicer

Call 1‐800‐321‐1234 to order the FREE DVD

showing the wonders of the ACME

Deluxe Treadmill

POP display of gossip magazines at grocery

store checkout counter

High School kids on the street holding sign

for a car wash

TV ad for 2015 Jaguar F‐type

Marketing & Sales - Price


Price of the product must satisfy several constraints:• It must be equal to or lower than the customer’s perceived value.

• It must be higher than your cost of production

• It must produce a price-value relationship that the customer perceives as superior to competing products.

Common Pricing Mistakes• Failure to experiment. For most businesses, pricing should be a

constant trial-and-error process.• Fear of raising prices.• Basing prices on competitor pricing rather than customer feedback.

Marketing & Sales - Placement


For a local storefront-type business, the placement strategy deals with selecting the type and location of leased space.

However, for a product business, achieving product distribution can be the most difficult, time-consuming and expensive part of growing a business.

• Running a house cleaning business in the Williamsburg area is a simple distribution problem.

• Selling cupcakes at a stall on DOG Street at the Farmer’s Market is a simple distribution problem.

• Selling cupcakes in every grocery store in the U.S. is a very big, expensive distribution problem.

Reaching customers in a way that is convenient for them is critical.

BREAK


STRETCHBREAK

Financing Your Business





1. Open the business doors (Start-up cash)

2. Stay open until you make profit (Operating cash)

3. Manage periodic “ups and downs” (Operating cash)

How Much Capital is Needed to:



It is crucial to have and maintain adequate operating capital.

No matter how great your product or service is,

WHEN YOU ARE OUT OF CASH,YOU ARE OUT OF BUSINESS.

How Much Capital is Needed?



Start-up Cash NeedsBefore your open for business, youmay need cash for such things as

• Tools and equipment• Leasehold improvements• Licenses and permits• Professional fees• Initial inventory• Working capital reserve fund



Operating Cash NeedsAn operating business has continuing expenses which consume cash:

• Salaries• Rent• Insurance• Taxes and fees• Advertising• Loan interest/ principal• Utilities• Maintenance



EquitySignifies Ownership

• Personal savings• Family and friends• Other investor/partner

contributions• Profits retained in the

business

• Personal savings• Family and friends• Bank Loan (may be insured

by SBA)• Credit cards (not recommended)

DebtDoes NOT Signify Ownership

How Will You Finance the Business?(It always takes more cash than you expect)



1. GRANTS - Many people believe that they can get a grant… but grants are usually not available to small businesses.Grants are issued by governments (and sometimes by philanthropies) to accomplish specific government goals. Thus the grantee business resembles a government contractor, often with stringent reporting requirements.

2. LOANS – Many people also believe the SBA makes small business loans. Actually, the SBA only guarantees bank loans; it is a guarantor, not a lender.

A bank will usually only use an SBA guarantee to make a loan it wants to make, but needs the SBA guarantee for to satisfy certain of its underwriting criteria.

Common Misunderstandings



Source: fundastic.com

Traditional and Non-traditional Sources of Business Funding



SCORE has excellent templates available for free download.

Find them on the Templates & Tools section of the Williamsburg SCORE website.

https://williamsburg.score.org/resources/tab-a

This will take you to the page with this green box on the right containing many resources for new and existing businesses in the area.

Download the

• Startup Expense Worksheet

• Financial Projections Templates and Instructions

Accounting


• Single Entry - Cash Basis– Very simple - (like household accounting)– Recognize income when received– Recognize expenses when paid– Can use simple spreadsheet software

• Double Entry - Accrual Basis– More complex - use an accountant to set up– Recognize income when earned; expenses when incurred– Needs dedicated software (Quickbooks, Quicken, Peachtree)– Software generates financial reports

Discuss with your accountant before making selection.

Two Basic Accounting Methods

Business Management


Managing Your Business

Management


Who will own the business? You? Your Spouse or Partner?

Other Relatives?

Who will manage the Business? Who will be responsible for

Operations?Management?

Marketing and Sales? Is one (and only one) person clearly assigned

responsibility for each management function?

Define Roles and Responsibilities

Management


Lawyer

Accountant

Insurance Agent

Banking resources

Business Mentor

Every Business Owner Needs:

Management - Suppliers


Who will they be?

Can you depend on them when you need them?

What are their purchasing or payment terms?

What training or other supportwould they be willing to provide?

Suppliers and Providers can be a very important source of training, financing and support. Remember, you are their customer and they want you to succeed.

Management - Employees

W2 Employee• You pay wages, but withhold

– Fed & State taxes• You withhold, match, send to Gov’t

– Social Security Taxes– Medicare Taxes

• You pay to state Gov’t– Workers comp insurance– Unemployment insurance

• You may pay Benefits– Holidays, vacations, time-off– Medical, dental, 401(k), term life– Continuing education, …

Total Benefits: >30% of comp

Independent Contractor• You pay cash wages

– You withhold no taxes– You report wages paid

(IRS Form 1099)• Worker responsible to pay own

– Fed & State taxes– SocSec & Medicare (both sides)– Insurance

• No work = no pay = no paid time off• Therefore, you can pay higher wages to

a Contractor– But he has many more

personal expenses Worker pays all insurance, taxes and other expenses



Research and Decision Resources

Information Is Your Friend!


• Competitors• Business locations• Customers and business-to-

business sales leads• Suppliers• Key business contacts

Use ReferenceUSA for detailed local info on:

Need Industry Info?


• Market share reports and trends

• Annual industry sales reports• Trade associations and

publications• Business news

Use Business Insights for industry and company analysis:


How SCORE Can Help

About SCORE


SCORE is the most widely recognized provider of business mentoring services in the country

Nationwide - Over 360 Chaptersand 13,500 Volunteers

Helps emerging entrepreneurs and existing businesses

SCORE Advisers are known for their experience and expertise

All mentoring sessions are Free

SCORE Services


Want to Meet with a SCORE Business Advisor in Williamsburg??

Call SCORE at 757-229-6511

Visit the Chapter Web Site: williamsburg.score.org

Request a meeting:williamsburg.score.org

The SCORE Office is conveniently located at the Chamber & Tourism Alliance Building421 N. Boundary St, Williamsburg, VA 23185

One-on-One free Mentoring

williamsburg.score.org


54Williamsburg SCORE

williamsburg.SCORE.org757-229-6511

Questions ??

Documents

SCORE Business Workshop - Amazon S3 · 2017-01-12 · SCORE Business Workshop ... Now form your answers into your marketing strategy The Four P’s of the Marketing Mix 1. Product