Invention to VentureIdaho State University

February 18, 2014Rick Paul, Entrepreneurship Instructor, College of Technology

Enterprise Formation• Pro-Forma Sales Forecasting• Using Your Pro-Forma Sales Forecast to Determine

Units Sold Per Hour• Resources:

• Personnel• Space• Equipment

• Legal Structure• Small Business vs Entrepreneur• Financial

• Debt vs Equity Financing• Typical Resources for Financing Small

Businesses• Entrepreneurial Funding vs Stage of Venture• Entrepreneurial Financing

Pro-Forma Sales Forecast

JAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTALS

Competitor #1 $15,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $50,000 $45,000 $40,000 $35,000 $465,000

Competitor #2 $10,000 $20,000 $25,000 $30,000 $35,000 $45,000 $55,000 $52,500 $50,000 $45,000 $35,000 $18,000 $420,500

Competitor #3 $30,000 $45,000 $55,000 $65,000 $75,000 $85,000 $95,000 $85,000 $75,000 $65,000 $50,000 $45,000 $770,000

AVERAGES: $18,333 $30,000 $36,667 $43,333 $50,000 $58,333 $66,667 $64,167 $58,333 $51,667 $41,667 $32,667 $551,833

YOUR SALES FORECAST $5,000 $8,000 $9,000 $10,000 $12,000 $14,000 $16,000 $18,000 $18,000 $14,000 $15,000 $10,000 $149,000

CAPTURE RATIO: % of Competitor's Sales 27% 27% 25% 23% 24% 24% 24% 28% 31% 27% 36% 31% 27%

Pro-Forma Sales Forecast

Pro-Forma Sales Forecast

JAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTALS

Your Sales Forecast $5,000 $8,000 $9,000 $10,000 $12,000 $14,000 $16,000 $18,000 $18,000 $14,000 $15,000 $10,000 $149,000

Days in the Month 31 28 31 30 31 30 31 31 30 31 30 31 365

Average Sales Per Day $161 $286 $290 $333 $387 $467 $516 $581 $600 $452 $500 $323

Average Hours Per Day 8 8 8 8 8 8 8 8 8 8 8 8

Average Sales Per Hour $20 $36 $36 $42 $48 $58 $65 $73 $75 $56 $63 $40

Average Price Per Unit $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Average # of Units Sold Per Hour 4 7 7 8 10 12 13 15 15 11 13 8

Use Your Pro-Forma Sales Forecast to Determine Units Sold Per Hour

Resources - PersonnelResources based upon sales levels, break down your monthly pro-forma sales forecast into units per hour to determine your needs.• Personnel

• manufacturing or production• sales staff• office staff• other staff, shipping, receiving,

janitorial, etc.

Pro-Forma Sales ForecastJAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTALS

Your Sales Forecast $5,000 $8,000 $9,000 $10,000 $12,000 $14,000 $16,000 $18,000 $18,000 $14,000 $15,000 $10,000 $149,000

Days in the Month 31 28 31 30 31 30 31 31 30 31 30 31 365

Average Sales Per Day $161 $286 $290 $333 $387 $467 $516 $581 $600 $452 $500 $323

Average Hours Per Day 8 8 8 8 8 8 8 8 8 8 8 8

Average Sales Per Hour $20 $36 $36 $42 $48 $58 $65 $73 $75 $56 $63 $40

Average Price Per Unit $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Average # of Units Sold Per Hour 4 7 7 8 10 12 13 15 15 11 13 8

PERSONNEL: Production

Sales

Office

Staff

Supervisors or Managers

Resources – Personnel Per Hour

Resources - SpaceResources based upon sales levels, break down your monthly pro-forma sales forecast into units per hour to determine your needs.• Space

• How much room do you need for• incoming supplies / inventory storage• your production area• outgoing / shipping • retail / showroom area• offices• break room• restrooms• parking

Pro-Forma Sales ForecastJAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTALS

Your Sales Forecast $5,000 $8,000 $9,000 $10,000 $12,000 $14,000 $16,000 $18,000 $18,000 $14,000 $15,000 $10,000 $149,000

Days in the Month 31 28 31 30 31 30 31 31 30 31 30 31 365

Average Sales Per Day $161 $286 $290 $333 $387 $467 $516 $581 $600 $452 $500 $323

Average Hours Per Day 8 8 8 8 8 8 8 8 8 8 8 8

Average Sales Per Hour $20 $36 $36 $42 $48 $58 $65 $73 $75 $56 $63 $40

Average Price Per Unit $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Average # of Units Sold Per Hour 4 7 7 8 10 12 13 15 15 11 13 8

SPACE: Production

Sales

Office

Staff

Resources - Space

Resources - Equipment

Resources based upon sales levels, break down your monthly pro-forma sales forecast into units per hour to determine your needs.• Equipment

• List the equipment you will need for• production

• equipment #1• equipment #2

• vehicles • shipping• storage • retail / showroom area• offices• break room

Pro-Forma Sales ForecastJAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC TOTALS

Your Sales Forecast $5,000 $8,000 $9,000 $10,000 $12,000 $14,000 $16,000 $18,000 $18,000 $14,000 $15,000 $10,000 $149,000

Days in the Month 31 28 31 30 31 30 31 31 30 31 30 31 365

Average Sales Per Day $161 $286 $290 $333 $387 $467 $516 $581 $600 $452 $500 $323

Average Hours Per Day 8 8 8 8 8 8 8 8 8 8 8 8

Average Sales Per Hour $20 $36 $36 $42 $48 $58 $65 $73 $75 $56 $63 $40

Average Price Per Unit $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5 $5

Average # of Units Sold Per Hour 4 7 7 8 10 12 13 15 15 11 13 8

EQUIPMENT: Production Sales Office Staff

Resources – Equipment Per Hour

Resources - Legal Forms of Your Venture

• Criteria for Deciding the Legal Form of Your Venture

• Limited Liability – the ability to protect yourself and your personal assets from lawsuits in case of slip and fall, product/service liability, professional omissions, malpractice, etc.• Ownership – percent of the business you will actual own?• Control – who can make decisions about the business?• Fund Raising – the more people involved equals more potential capital raised.• Life of the Business – a contract, the life of the owner, or indefinite?• Taxation – do you want to get taxed once or twice on your income?

Limited Liability Ownership Control Fund Raising

Life of the Business Taxation

Sole ProprietorNO TOTAL TOTAL OWNER OWNER ONCE

PartnershipNO PERCENTAGE PERCENTAGE OWNERS ANY CHANGE ONCE

Limited Liability Partnership (LLP)YES & NO PERCENTAGE PERCENTAGE OWNERS ANY CHANGE ONCE

C CorporationYES % SHARES MOST SHARES STOCK INDEFINITE TWICE

S CorporationYES % SHARES MOST SHARES STOCK INDEFINITE ONCE

Limited Liability Corporation (LLC)YES % UNITS MOST UNITS STOCK INDEFINITE ONCE

Legal Form of Ownership Comparison

Small Business vs EntrepreneurA small business is replacement income for the owner so they do not have to work for someone else. These businesses are focused on local opportunities, not national. These small businesses account for 95% of all start-ups.

An entrepreneur has the intent of going national with their product or service. True entrepreneurs account for about 5% of all start-ups.

Most small business owners and entrepreneurs start in the same place. It’s the long-term goals that differ in the start-up stage.

Resources - FinancialDebt financing

• Pros• Maintain ownership• Certain % of debt helps return on equity

• Cons• Monthly interest and principle payments• Too much debt will limit ability to raise

more capital and hurt your credit rating

Equity financing• Pros

• Raise capital with no monthly payments• Attract investors and management skills

• Cons• Gives up ownership in the business in

order to raise capital.

Typical funding sources for start-up or pre-seed to seed stage businesses:

• trade credit• your bank accounts• your home equity• your IRA• your credit cards• your family and friends• a line of credit at your local bank (how good is your credit rating?)• social lending or crowd funding debt financing / loans• micro loan (SBA)• bank loan• SBA Guaranteed Loan Programs at a participating bank• a partner and their assets• a partner’s family and friends.

Resources - Financial

Summary• Pro-Forma Sales Forecasting• Using Your Pro-Forma Sales Forecast to Determine

Units Sold Per Hour• Resources:

• Personnel• Space• Equipment

• Legal Structure• Small Business vs Entrepreneur• Financial

• Debt vs Equity Financing• Typical Resources for Financing Small

Businesses• Entrepreneurial Funding vs Stage of

Venture• Entrepreneurial Financing

For a copy of this PowerPoint presentation please go to: http://businessinformationisu.wordpress.com

For a copy of The Experienced Entrepreneur please go to: http://www.amazon.com/The-Experienced-Entrepreneur-Rick-Paul/dp/0970020600

If I can be of further assistance, please start a conversation at:https://www.facebook.com/experiencedentrepreneur

For the College of Technology Entrepreneurship class information please go to: http://www.isu.edu/ctech/business_information/

For the College of Technology please go to: http://www.isu.edu/ctech/index.shtml

Or visit the College of Technology at the Pocatello - Chubbuck Chamber of Commerce Business After Hours on 2/20 from 5:00 to 7:00 pm at the Clarion Inn, Pocatello, Idaho.

Additional Resources: