STARTING & FINANCINGSTARTING & FINANCINGA SMALL BUSINESSA SMALL BUSINESS

Sponsored by:Sponsored by:

Small Business Development CenterSmall Business Development CenterAccion TexasAccion Texas

U.S. Small Business AdministrationU.S. Small Business AdministrationJ.P. Morgan Chase BankJ.P. Morgan Chase Bank

Thursday, January 5, 2006Thursday, January 5, 2006

About the About the SBDCSBDC

Roque R. Segura, BBA, MARoque R. Segura, BBA, MA

DirectorDirectorThe Small Business DevelopmentThe Small Business Development CenterCenter

El Paso Community College

Regional SBDC ProgramRegional SBDC ProgramRegional & Field OfficesRegional & Field Offices

• San Antonio• El Paso• Edinburg• Victoria• Laredo• Corpus Christi• San Angelo

• San Marcos/Austin• Alpine• Eagle Pass

Specialty Centers• Technology• International Trade• SBDCNet

SBDC Program ServicesSBDC Program Services

• Confidential Advising

• Technical Assistance

• Training

• Resource Information

• Research

• Website

AssistanceAssistance• Project Feasibility• New Business Start-up• Business Planning• SBA Financing & Loan Packaging• Minority Enterprise Certification• Marketing & Sales Development• Business Analysis and Forecasting• Management & Problem-solving

Small Business Small Business Management InstituteManagement Institute((48-hour Training Program)48-hour Training Program)

• Strategic Planning

• Marketing

• Administration & Personnel

• Finance & Accounting

• Business & Contract Law

• Business Resources

ESSENTIALS IN STARTING ESSENTIALS IN STARTING A BUSINESSA BUSINESS

Ms. Olga M. TavMs. Olga M. Tavárez, MBA, CBAárez, MBA, CBA

Certified Business AdvisorCertified Business Advisor

Small Business Development CenterSmall Business Development Center

Thursday, January 5, 2006Thursday, January 5, 2006

AGENDAAGENDA

• Business formation (determine the legal structure)• Business permits and registrations• Market research • Market planning & location of the business• Start-up costs and owner investment• Bookkeeping system & taxes• Financial Statements• Business plan• SBA Financing• Meeting with an SBDC advisor

Business FormationBusiness FormationSelecting a Business StructureSelecting a Business Structure

• Sole Proprietorship (One owner)

• Partnership (Two or more owners)

• Corporation (Stockholders)

• Limited Liability Company (One or more owners)

Registrations & PermitsRegistrations & Permits

• Assumed Name Registration

• Employer Identification Number (E.I.N.)

• Texas Sales & Use Tax Permit

• State Unemployment Tax Registration

• I-9 Employee Eligibility Verification

• Business Personal Property Tax – CAD

• Other Business Specific Permits

Other Business SpecificOther Business SpecificPermit TypesPermit Types

• Home Occupation Permit – EP County• Child Care Business Licensing - Texas• Beer, Wine/Alcohol Beverages - Texas• Food Handler’s Permit – EP County• Texas Motor Carrier Licensing - Texas• Environmental Compliance – Texas• Nursery/Floral – EP County• Others

Market ResearchMarket Research

Market Research can help you identify:Market Research can help you identify:

Industry trendsIndustry trendsTarget marketsTarget markets

Needs and wants of customersNeeds and wants of customersPurchasing behavior Purchasing behavior

Strengths and weakness of competitorsStrengths and weakness of competitorsLevels of customer satisfactionLevels of customer satisfaction

Kinds of ResearchKinds of Research

• Primary Research (surveys)

• Secondary Research (secondary sources)

Secondary Sources

Industry & trade associations

Government publications

Universities & Libraries

Research bureaus

Internet

Purpose of Market PlanningPurpose of Market Planning

• Know your potential customers

• Determine your market share

• Determine who your major competitors are

• Determine your sales promotion

• Determine your business location

• Develop your overall marketing strategy and budget

Start-up CostsStart-up Costs

• Merchandise Inventory• Wages• Rent• Equipment and furniture• Tools • Vehicles• Licenses & permits• Insurance• Supplies • Advertising & promotion • Deposits (Telephone & Utilities)• Initial Working Capital

Bookkeeping SystemBookkeeping System

A bookkeeping system is vital to A bookkeeping system is vital to tracking the financial activities of the tracking the financial activities of the

business and complying with tax business and complying with tax obligations to governmental entities.obligations to governmental entities.

Recommended:

Dome Simplified Monthly Bookkeeping Record

Cost: $8.99

Recommended:

Intuit’s QuickBooks Simple Start Edition

$99.95QuickBooks: Pro 2006

$199.95

Financial StatementsFinancial Statements• Profit or Loss Statement

• Balance Sheet

• Cash Flow Statement

Financial statements are designed to show both how your business has performed over a specific period of time and what the status of your business is at a given point.

For financial statements to be beneficial to you in managing your business, they must be produced on a monthly basis.

Profit or Loss StatementProfit or Loss Statement

• Sales

• Cost of goods sold

• Gross profit margin

• Expenses

• Net Income (Profit or loss)

Refer to Handout

Balance SheetBalance Sheet

• Assets

• Liabilities

• Capital (Net Worth)

Assets = Liabilities + Capital

Refer to Handout

Cash Flow StatementCash Flow Statement

The cash flow statement is the most important financial The cash flow statement is the most important financial tool for evaluating your business. It informs you about tool for evaluating your business. It informs you about where the cash in your business where the cash in your business came fromcame from and and where where

it wentit went. .

Over time, a company’s profits are of little value if they Over time, a company’s profits are of little value if they are not accompanied by positive net cash flow.are not accompanied by positive net cash flow.

Refer to Handout

Importance of Business PlanningImportance of Business Planning

• Provides a road map for your future

• Determines priorities for allocating resources

• Helps attract and keep key employees

• Helps obtain financing

• Helps obtain large contracts and strategic alliances and customers

Business Plan ContentsBusiness Plan Contents

• Title Page• Executive Summary• Description of the Business• Market Analysis• Sales Strategy• Production Plan• Management• Financial Plan (Forecast)• Appendices/Exhibits

Establishing a Relationship with Establishing a Relationship with Your LenderYour Lender

• Get to know your banker

• Invite the banker to your business

• Be prepared to meet with the banker

• Keep the banker informed about your business

• Be responsible with your credit

Types of FinancingTypes of Financing

• Debt Financing – loans

• Equity Financing – owner investment or other equity investment

What the lender reviewWhat the lender review

• Credit – credit history

• Character – commitment, education, exp.

• Cash flow - repayment ability

• Collateral – security for the loan

• Conditions – state of economy, timing, preparation, past history of business, business type

OWNER INVESTMENTOWNER INVESTMENT

25% OF Total Project25% OF Total Project

Example

Total Project: $100,000

Borrower 25,000 (25%)

SBA/Bank Loan 75,000 (75%)

To SummarizeTo Summarize

• Business Formation (Legal Structure)• Business Registrations and Permits• Research your market (customer base)• Develop a Business Plan • Finance the Capital Requirement of the

Business:Owner Investment 25%Bank/SBA Loan 75%

Three Major ReasonsThree Major Reasons Why Businesses Fail Why Businesses Fail

• Poor Planning

• Poor Management

• Undercapitalization

Don’t let this happen to you!

Small Businesses don’t plan to fail,

they just fail to plan.

Meeting with SBDC AdvisorMeeting with SBDC Advisor

• Setting the Appointment

• Request for Counseling (SBA 641)

The initial session one-on-one with an SBDC Advisor is between one and two hours. Some initial sessions may take longer depending on the client project. Other sessions as needed may be scheduled with

the advisor.

For projects that require more than 5 hours, a project action agreement will prepared regarding technical assistance and related

services.

For Appointments call: 915.831.7743

SBDCSBDC

Main OfficeMain Office359 Lomaland Drive, 359 Lomaland Drive,

Suite 535Suite 535El Paso, TX El Paso, TX

Voice: 915.831.7743Voice: 915.831.7743

Downtown Office Greater El Paso

Chamber of Commerce 10 Civic Center Plaza El Paso, TX Vocie: 915.534-0511

Website: www.elpasosbdc.biz

Financing the BusinessFinancing the Business--

Commercial LendingCommercial Lending

Pedro GaliciaPedro Galicia

Vice President of LendingVice President of Lending

JP Morgan Chase BankJP Morgan Chase Bank

ACCION TEXASACCION TEXASEl PasoEl Paso

Elvira VallesElvira VallesLoan OfficerLoan Officer

915.629.7729915.629.7729Fax: 915.598.5307Fax: 915.598.5307

EVALUATION EVALUATION QUESTIONNAIREQUESTIONNAIRE

THANK YOU!