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The First Step of Starting a Business

119 Technology CenterUniversity Park, PA 16802

814-863-4293sbdc@psu.edu

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About the SBDC• Eighteen Centers in Pennsylvania

• More than 1,000 Centers Nationwide

The SBDC network provides free confidential one-on-one consulting to current or potential small business owners and free and low-cost educational programs.

www.asbdc-us.org

www.pasbdc.org

www.sbdc.psu.edu

www.facebook.com/PennStateSBDC

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Starting a Business: Am I crazy?

• You really do have the time• Your risk exposure is as low as it will ever be• You are surrounded by resources and mentors who are

able to help• You can add ‘Entrepreneur’ to your resume

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Personal Qualifications

Ask yourself:Why do I want to own a business?

Am I willing to work hard?Can I make decisions?

Can I handle risk?Do I have the skills that I need?

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One-third fail in the first year, 50% go under within five years

• Poor Management: getting into a field with little or no experience• Poor Marketing: underestimating the time needed to build a market, ignoring competition• Poor Finances: not having enough working capital, not allowing for unexpected expenses

Why do businesses fail?

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Legal IssuesNew Business Registrations

www.irs.govwww.pabizonline.comwww.dos.state.pa.us

www.revenue.state.pa.uswww.dli.state.pa.uswww.eatsafepa.com

www.attorneygeneral.gov…and possibly others

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Pennsylvania Sales and Use Tax“The Sales and Use Tax is imposed on the retail sale, consumption, rental or use of tangible personal property in Pennsylvania. The tax is also imposed on certain services relating to such property and on the charge for specific business services.”

• A Sales and Use Tax License can be obtained by completing the Form PA100, the Pennsylvania Enterprise Registration, at www.pabizonline.com

• Publication REV-717AS “Retailers’ Information” details which products and services are subject to Sales and Use Tax

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Pennsylvania Sales and Use Tax“A Use Tax at the same rate as Sales Tax, is due on taxable purchases of tangible personal property or specified services used or consumed in Pennsylvania where no Sales Tax is paid to a vendor. Licensees must report and pay Use Tax at the time their regular Sales Tax return is due.”

The most common purchases that are subject to use tax include computer equipment, office furniture, and administrative and cleaning supplies

www.revenue.state.pa.us

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Other Pennsylvania RegistrationsProfessional Licenses:

Bureau of Professional and Occupational Affairs www.dos.state.pa.us

Retail Food Facilities:Bureau of Food Safety and Laboratory Services

www.eatsafepa.com

Home Improvement Contractors:PA Attorney General

www.attorneygeneral.gov

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Local Registrations and IssuesDifferent Municipalities:

City, Township, Borough, County

• Business Registrations• Tax Regulations: Local Sales or Occupancy Tax• Zoning Requirements: Home-Based Businesses and Signage• Health Department: Food Businesses• Codes Enforcement Officer: Uniform Construction Codes and Occupancy Permits

Ask for written verification of compliance

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Business Support

Banking:

• Checking Account• Merchant Card Processing• Loans• www.annualcreditreport.com

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Business Support

Insurance:

• Fire, Theft, General Liability• Worker’s Compensation• Life• Health—PPACA• Homeowners and Personal Auto Policy Endorsements

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Business Support

Attorney:

• Start-Up Issues• Ongoing Support

Tax Professional:

• Industry Specialist• Before Year-End

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Business StructureSole Proprietorship:

• One Owner• Individual Owns all Assets• Unlimited Personal Liability• Owner’s Compensation is a ‘Withdrawal of Equity’

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Business StructurePartnership:

• Two or More Owners• Partnership Agreement Suggested• Partners Own all Assets• Unlimited Personal Liability• Partners’ Compensation is Generally a ‘Withdrawal of Equity’

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Business StructureLimited Liability Company (LLC):

• Separate Legal Entity• Owner’s Interest can be Sold• Potentially Limits Personal Liability• Partners’ Compensation is Generally a ‘Withdrawal of Equity’

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Business Planning

Two rules of business planning:

Write the plan yourself!

Use the plan that you have written!

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Business PlanningFive Reasons for Writing a Business Plan

• It forces you to look at your entirebusiness

• It becomes a tool to help you manage your business• It demonstrates your goals and objectives to others• It provides a basis for your financing proposal• It creates a ‘yardstick’ to measure your progress

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Business PlanningOrganization and Management

• Business Purpose and Goals• Corporate Structure• Management Team• Individual Roles• Advisors and Support• Opportunities and Threats

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Business PlanningProducts and Services

• Products, Services, or Production Process• Facility Requirements• Suppliers• Pricing• Future Expansion

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Business PlanningThe Industry

• Industry Trends• Strengths and Weaknesses• Regulatory and Technology Issues• Trade Associations

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Business Planning

Human Resources

• Employees• Independent Contractors• Compensation and Benefits

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Business Planning

• What if…• Data Backup• Alternative Suppliers• Insurance

Disaster Preparedness

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Marketing Plan

The Competition

• Direct vs. Indirect• Strengths• Weaknesses• Differentiation

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Marketing Plan

The Customers

• Target Market• Size of the Market• Characteristics and Demographics• How to Reach Them

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Marketing Plan

Promotional Strategies

• Start-Up and Ongoing• Different Media—Traditional and Non-Traditional• Trial and Error

Remember that marketing is much more than advertising.It is every contact that your business may have with a customer.

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Financing a BusinessSources of Financing

• Personal Funds• Loans from Friends and Family• Crowdfunding• Commercial Loans• Small Business Administration Guaranteed Loans• State and Local Loan Programs• Angel Investors and Venture Capital Firms• Grants

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Financial Plan

Start-Up Costs

• Expenses Incurred Before Opening• Written Estimates• Overestimate• Working Capital Reserve

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Financial PlanRecurring Monthly Expenses

• Fixed Payments• Written Estimates• Overestimate• Seasonal Variations• Owners’ Compensation

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Financial Plan

Estimating Revenues

• Cash Sales• Credit Terms to Customers• Seasonal Variations

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Source and Use of FundsSources:• Owner Injection• Investors• Loan Proceeds

Uses:• Start-Up or Expansion Costs• Working Capital

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Cashflow Statement

“A summary of the inflows and outflows of cash in over a certain period of time.”

“What will my checkbook look like over the next few months or year?”

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For Additional Assistance:

200 Innovation Boulevard, Suite 119, University Park 152 East Market Street, Suite 100, Lewistown

814-863-4293 717-247-1280www.sbdc.psu.edu

sbdc@psu.edu