1 The ABC’s of Starting A The ABC’s of Starting A Business Business Lisa Y. Goodman, Director Lisa Y. Goodman, Director The Women’s Business Center of Northern Virginia The Women’s Business Center of Northern Virginia 7001 Loisdale Road, Suite C 7001 Loisdale Road, Suite C Springfield, Virginia Springfield, Virginia 703 703-778 778-9922 phone 703 9922 phone 703-768 768-0547 fax 0547 fax http://www.wbcnova.org http://www.wbcnova.org Community Business Community Business Partnership Partnership • Women’s Business Center of Northern VA 703-778-9922 www.wbcnova.org • Small Business Development Center Small Business Development Center • Business Finance Center Business Finance Center • Business Incubation Center Business Incubation Center • Hispanic Entrepreneur Program Hispanic Entrepreneur Program • Financial Education Center for WE Financial Education Center for WE 703 703-768 768-1440 1440 www.cbponline.org www.cbponline.org Your ABC’s Your ABC’s Accountability Accountability Assessment Assessment Access Access Business Planning Business Planning Banking Banking Breakeven Breakeven Beating the Odds Beating the Odds Controls Controls Cash Flow Cash Flow Considerations Considerations Cost Cost Customers Customers A B C Is Self Employment For You? Is Self Employment For You? What are your main concerns ? What are your main concerns ? Personal Assessment Lifestyle Assessment Business Assessment Paths to Paths to Business Ownership Business Ownership Starting a direct sales business Starting a direct sales business Buy an existing business Buy an existing business Buy a franchise Buy a franchise Start from scratch Start from scratch
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The ABC’s of Starting A The ABC’s of Starting A BusinessBusiness
Lisa Y. Goodman, DirectorLisa Y. Goodman, Director
The Women’s Business Center of Northern VirginiaThe Women’s Business Center of Northern Virginia7001 Loisdale Road, Suite C7001 Loisdale Road, Suite C
Community Business Community Business PartnershipPartnership
• Women’s Business Center of Northern VA703-778-9922 www.wbcnova.org
•• Small Business Development CenterSmall Business Development Center•• Business Finance CenterBusiness Finance Center•• Business Incubation CenterBusiness Incubation Center•• Hispanic Entrepreneur ProgramHispanic Entrepreneur Program•• Financial Education Center for WEFinancial Education Center for WE
Is Self Employment For You?Is Self Employment For You?
What are your main concerns ?What are your main concerns ?
Personal Assessment
Lifestyle Assessment
Business Assessment
Paths toPaths toBusiness Ownership Business Ownership
Starting a direct sales business Starting a direct sales business
Buy an existing businessBuy an existing business
Buy a franchiseBuy a franchise
Start from scratchStart from scratch
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Starting A Business Under A Corporate Starting A Business Under A Corporate Umbrella (Umbrella (IntrapreneurshipIntrapreneurship))
AdvantagesAdvantages•• Build in supportBuild in support•• Established business planEstablished business plan•• Cooperative MarketingCooperative Marketing•• Relatively Low startRelatively Low start--upup•• Training and Management guidance/mentoringTraining and Management guidance/mentoring
DisadvantagesDisadvantages•• Highly selective screening process Highly selective screening process •• Licenses required vary state to state Licenses required vary state to state •• Must bring your own market nicheMust bring your own market niche•• Must be highly selfMust be highly self--motivatedmotivated
A few words of advice …
Honestly determine your true motivationsPre-determine your special market nicheMake sure your support system is in placeDetermine start up costsResearch the best companies
Starting a Direct Sales BusinessStarting a Direct Sales Business
AdvantagesAdvantages•• Build in supportBuild in support•• Established business planEstablished business plan•• Home basedHome based•• Low startLow start--upup•• Potential for large income in short amount of timePotential for large income in short amount of time
DisadvantagesDisadvantages•• Not always taken seriouslyNot always taken seriously•• The stigma of MLMsThe stigma of MLMs•• Bad experience of others may be hauntingBad experience of others may be haunting
A few words of advice …A few words of advice …
Be careful of new MLMs (they come and go)Be careful of new MLMs (they come and go) Don’t reinvent the wheelDon’t reinvent the wheel Take advantage of all training opportunitiesTake advantage of all training opportunities Be teachable and trainableBe teachable and trainable
Buying an Existing BusinessBuying an Existing Business
AdvantagesAdvantages•• Takes less time to get establishedTakes less time to get established•• Established track recordEstablished track record•• Customers and suppliers in placeCustomers and suppliers in place•• Previous owner as “mentor”Previous owner as “mentor”
DisadvantagesDisadvantages•• Creativity is limitedCreativity is limited•• Usually more expensiveUsually more expensive•• Structuring the deal may be difficultStructuring the deal may be difficult•• Buying the Buying the BadBad along with the along with the GoodGood•• Discover too late the “real” reason they soldDiscover too late the “real” reason they sold
A few words of advice …A few words of advice …
Seek independent adviceSeek independent advice Insist on seeing past recordsInsist on seeing past records Is this a “bankable” deal?Is this a “bankable” deal?Watch for warning flagsWatch for warning flags Be willing to walk away from the dealBe willing to walk away from the deal
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Buying a FranchiseBuying a Franchise
AdvantagesAdvantages•• Shorter lead time to get startedShorter lead time to get started•• “Turn“Turn--key” operationkey” operation•• Lower riskLower risk•• Brand recognitionBrand recognition
DisadvantagesDisadvantages•• High startHigh start--up and ongoing costsup and ongoing costs•• Limited flexibilityLimited flexibility•• Franchisor may not be reliableFranchisor may not be reliable•• May be difficult to exit businessMay be difficult to exit business
A few words of advice …A few words of advice …
Review the agreement with lawyerReview the agreement with lawyer Are other franchise owners happy?Are other franchise owners happy? Costs comparable to other franchises?Costs comparable to other franchises? Territory and competition?Territory and competition? Is the Franchise sound?Is the Franchise sound?
Starting Your Own BusinessStarting Your Own Business
DisadvantagesDisadvantages•• No GuidelinesNo Guidelines•• Long time to get establishedLong time to get established•• Limited return during startLimited return during start--upup•• Uncertain IncomeUncertain Income
A few words of advice …A few words of advice …
Other sources of income for livingOther sources of income for living
Everything takes longer than expectedEverything takes longer than expected
Everything costs more than expectedEverything costs more than expected
Don’t be in such a hurry to get startedDon’t be in such a hurry to get started
Your Rich Aunt Last WishYour Rich Aunt Last Wish•• Put the money in a savings account. Put the money in a savings account.
Return = $ 5,000 per yearReturn = $ 5,000 per year
•• Give it to me so I can start my own businessGive it to me so I can start my own businessReturn = $ 11,000 per year Return = $ 11,000 per year (In monthly payments of $1,000) (In monthly payments of $1,000)
•• Give it to CharityGive it to CharityReturn= SelfReturn= Self-- esteem, change the esteem, change the
Business PlanningBusiness Planning
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Helps you maintain a “proactive” statusHelps you maintain a “proactive” status
Points everyone in the same directionPoints everyone in the same direction
Stimulates development of newStimulates development of newopportunitiesopportunities
Focuses attention on important questionsFocuses attention on important questions
Increase chances of successIncrease chances of success
Why Write A Business Plan?Why Write A Business Plan? Business Plan OutlineBusiness Plan Outline
I. Executive SummaryI. Executive Summary
Opening ArgumentsOpening ArgumentsCondensed Version of Business PlanCondensed Version of Business PlanHighlight Key SegmentsHighlight Key SegmentsThree “Cs”Three “Cs”
ClearClear ConciseConcise ConvincingConvincing
II. Mission, Goals & ObjectivesII. Mission, Goals & Objectives
Mission StatementMission StatementGoals & ObjectivesGoals & ObjectivesGeneral Description of the BusinessGeneral Description of the Business
Stage of developmentStage of developmentGeneral growth plan descriptionGeneral growth plan description
III. Background InformationIII. Background InformationA. The IndustryA. The IndustryBackground Industry Background Industry
A. The Products/ServicesA. The Products/ServicesProducts/Services DescriptionProducts/Services DescriptionFeatures/BenefitsFeatures/BenefitsLife Cycles/SeasonalityLife Cycles/SeasonalityGrowth Description Growth Description
B. The Market AnalysisB. The Market AnalysisCustomer AnalysisCustomer AnalysisCompetitive AnalysisCompetitive AnalysisMarket PotentialMarket Potential
Current Trade Area DescriptionCurrent Trade Area DescriptionMarket Size & TrendsMarket Size & TrendsSales Volume Potential (Current & Growth)Sales Volume Potential (Current & Growth)
C. Marketing StrategiesC. Marketing StrategiesProduct Features vs. BenefitsProduct Features vs. BenefitsPlace: Location/DistributionPlace: Location/DistributionPrice/Quality RelationshipPrice/Quality RelationshipPromotional StrategiesPromotional Strategies
Duration of Business OperationDuration of Business Operation
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Sole ProprietorshipSole ProprietorshipAdvantagesAdvantages
•• Easiest, least expensive form to startEasiest, least expensive form to start•• Fewer reporting requirementsFewer reporting requirements•• No double taxationNo double taxation•• Owner’s personal income taxes offset by business Owner’s personal income taxes offset by business
losseslosses
DisadvantagesDisadvantages•• Unlimited personal liabilityUnlimited personal liability•• Potential dissolution at owner’s deathPotential dissolution at owner’s death•• No tax benefitsNo tax benefits•• Owner is personally responsible for taxes on Owner is personally responsible for taxes on
business incomebusiness income•• Limited ability to raise capitalLimited ability to raise capital
PartnershipsPartnerships
AdvantagesAdvantages•• Few FormalitiesFew Formalities•• Combination of resources and talentsCombination of resources and talents•• Same as Sole ProprietorshipSame as Sole Proprietorship
DisadvantagesDisadvantages•• Unlimited liability for all partners’ actionsUnlimited liability for all partners’ actions•• Distribution of power of each partnerDistribution of power of each partner•• Dissolution upon death of partnerDissolution upon death of partner•• “Pass“Pass--through” of income to partnersthrough” of income to partners•• No income splittingNo income splitting•• No taxNo tax--free fringe benefitsfree fringe benefits
Limited Liability CompanyLimited Liability Company
AdvantagesAdvantages•• Limited liability for members without limits Limited liability for members without limits
on management participationon management participation•• Flexible ownership and capital structureFlexible ownership and capital structure•• Avoids double taxationAvoids double taxation•• Flexible allocation of profits among membersFlexible allocation of profits among members
DisadvantagesDisadvantages•• Cost/Complexity of establishing and manageCost/Complexity of establishing and manage•• Poor tax treatment of fringe benefitsPoor tax treatment of fringe benefits•• Laws are still evolvingLaws are still evolving
CC--CorporationCorporationAdvantagesAdvantages
•• Limited liability of shareholdersLimited liability of shareholders•• Perpetual existencePerpetual existence•• Increased ability to raise outside capitalIncreased ability to raise outside capital•• Ownership transfer through sale or gift of stockOwnership transfer through sale or gift of stock•• Only ones that can fully deduct health insuranceOnly ones that can fully deduct health insurance
and have more options regarding pension plansand have more options regarding pension plans•• Favorable tax treatment for employee benefitsFavorable tax treatment for employee benefits
DisadvantagesDisadvantages•• Time consuming and expensive to establish (+ $500)Time consuming and expensive to establish (+ $500)•• Time consuming and expensive to manageTime consuming and expensive to manage•• Annual reporting requirementsAnnual reporting requirements•• Double taxationDouble taxation
SS--CorporationCorporation
AdvantagesAdvantages•• Taxed at individual shareholder level Taxed at individual shareholder level
(“pass through”)(“pass through”)•• Same as for C CorporationSame as for C Corporation•• Favorable tax treatment for employee health Favorable tax treatment for employee health
insuranceinsurance
DisadvantagesDisadvantages•• Except for tax consequences, Same as CExcept for tax consequences, Same as C--CorpCorp•• Shareholder limitations (100)Shareholder limitations (100)•• Shareholders must be individualsShareholders must be individuals•• Limited to one class of stockLimited to one class of stock•• Must be citizens or permanent residentsMust be citizens or permanent residents
Request:Request:
Business Registration GuideBusiness Registration Guide804804--371371--97339733
Or go on line: Or go on line: http://scc.virginia.gov/division/clk/brg.htmhttp://scc.virginia.gov/division/clk/brg.htm
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Licenses & RegistrationLicenses & RegistrationState (www.virginia.gov)State (www.virginia.gov)•• Is your name available?Is your name available?•• Register (if applicable) with State Corporation Register (if applicable) with State Corporation
CommissionCommission•• Do you Need a Special Business License?Do you Need a Special Business License?•• Tax Registration (form RTax Registration (form R--1)1)Federal (www.irs.gov)Federal (www.irs.gov)•• Obtain an EIN number (form SSObtain an EIN number (form SS--4)4)Local (county/city)Local (county/city)•• Home Occupation PermitHome Occupation Permit•• BPOL LicenseBPOL License•• Trade Name RegistrationTrade Name Registration
•• PropertyProperty•• Umbrella (house, car)Umbrella (house, car)•• Worker’s Comp Worker’s Comp (3 or more employees)(3 or more employees)
•• Unemployment Insurance Unemployment Insurance (1 or more (1 or more
employees)employees)
Tax ObligationsTax Obligations
•• Federal Federal –– Estimated Quarterly TaxesEstimated Quarterly Taxes–– Payroll TaxesPayroll Taxes–– SelfSelf--EmploymentEmployment
•• State (Income, Sales & Use, Litter, State (Income, Sales & Use, Litter, Tire, etc.)Tire, etc.)
•• Local (Personal Property, Real Estate, Local (Personal Property, Real Estate, etc.)etc.)
RESOURCESRESOURCES
Small Business AdministrationSmall Business Administration
•• SBDCsSBDCs•• Women’s Business CentersWomen’s Business Centers•• Business Information CentersBusiness Information Centers•• Loan Guarantee ProgramsLoan Guarantee Programs•• MicroMicro--Loan ProgramsLoan Programs•• SCORESCORE
www.sba.gov/dcwww.sba.gov/dc
SBA ProgramsSBA Programs
•• Hub zoneHub zone•• 8(a) Certification8(a) Certification•• ProPro--Net Net
(now (now Central Contractor RegistrationCentral Contractor Registration or CCR)or CCR)
•• SBICSBIC•• SBIRSBIR
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Lower The Risks of a Lower The Risks of a StartStart--UpUp
Don’t sell what you want Don’t sell what you want ---- sell what your sell what your customers wantcustomers want
Marketing Marketing ---- even on a shoestringeven on a shoestring---- is essential!is essential! Learn to manage your finances (personal and Learn to manage your finances (personal and
business) business) -- cash flow, price, savings…cash flow, price, savings… Be prepared to become tired & discouragedBe prepared to become tired & discouraged Research Research -- use facts to substantiate insights & use facts to substantiate insights &
huncheshunches Follow your strengths & interestsFollow your strengths & interests
Plan, Plan, Plan!
Next Steps …
Activities Month 1 2 3 4 5 6 7 8 9 10 11 12Define your ideasDecide what business to startAssess the impact on your life and familyLocate Sources of Business Advice/SupportObtain necessary skillsDefine business objectivesPick a name and a logo for your businessDo some market feasibility researchSearch for different locationsBegin writing your Business PlanChoose legal form for your businessSetup a recordkeeping systemEstablish relationship with a bankerOpen business checking accountPrepare cash flow projectionsDefine amount of investment you'll needPrepare financial statementsObtain license, insurance, permits…Secure FinancingPrepare your operative planSet up office and operational spacePurchase busines cards, office suppliesHire staff Cut the ribbon !!!
My Work PlanSmall Business Toolkit SeriesSmall Business Toolkit Series
Class 1 - Business Planning and Financing for GrowthDevelop a comprehensive business plan, complete with financial data.
Class 2 – Tax Planning & BookkeepingSet up a business accounting system and plan for annual tax reporting
Class 3 - Marketing, Legal & Risk PlanningFind your customer and get their attention on a budget that works!
Learn how business entity and insurance choices help effectively manage risk.
First Friday’s Networking BreakfastFirst Friday’s Networking BreakfastNetwork with other women and hear a professional guest speaker.
Accounting Software ClassesAccounting Software ClassesQuickBooks Pro
Special SeriesSpecial SeriesCheck out the Calendar for the latest series!
Contact Information:Contact Information:Women’s Business Center of Northern VirginiaWomen’s Business Center of Northern Virginia7001 Loisdale Road 7001 Loisdale Road –– Suite CSuite C703703--778778--99229922www.wbcnova.orgwww.wbcnova.orginfo@[email protected]
