Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

Things to Consider When Starting a Small Business

VIEWS: 162 PAGES: 34

									A Roadmap to Starting a
   Successful Business
Presented through the National Institutes of Health
         Office of Strategic Management Planning
                         and Small Business Office


                        Facilitated by Thomas Sides, M.A.
                            Symbols
   “Buzzwords” are key terms relating to the chapter
    topic. You should become familiar with these
    definitions, as they’ll assist you in making critical
    business decisions. The icon that indicates a
    Buzzword is shown to the right :
   A “Caution” warns the reader about challenges or
    precautions that relate to the chapter topic. Failure
    to pay attention to these Cautions could lead to
    delays, legal problems, fines, or even the end of your
    business. The icon that indicates a Caution is shown
    to the right:
   Additional Resources and information that may be
    helpful to the reader are indicated by the following
    icon:
   At the end of each chapter, the most “Important
    Points” for the reader to take away are indicated by
    the following icon:
              Getting Started
 Is business ownership right for you?
 An “entrepreneur” is a person who
  starts his or her own business
 Self-assessment questions:
    Are you a self-starter?
    How well do you plan and organize?
    Can you work long hours?
    How will the business affect your family?
         What Type of Business
            Do You Want?
 A startup:
   Follow your own dream
 Buying an existing business:
   You will have current customers and a
    known track record of performance
 Franchising:
   Brand recognition reduces marketing costs
   Questions to Ask When Starting Up
            A New Business
 Does the idea suit your personality and
  interests?
 Will you use your own name to brand the
  business?
 Will it be financially viable?
    Do you have startup money to invest?
    What will your monthly expenses be?
    Is there a current need in the marketplace?
    Who are you competing with?
          How the Small Business
          Administration Can Help
 The SBA assists, counsels, and protects
  the interests of small businesses:
    Training network with many free courses,
     workshops, and publications
    Local Small Business Development Center
     Programs
    Three SBA loan programs
    Volunteer counselors through the Service
     Corps of Retired Executives (SCORE)
      Choosing a Business Structure
 Different legal structures protect you in
  different ways and offer varying tax
  advantages:
    Sole Proprietorships
    General Partnerships and Joint Ventures
    Corporations
    Limited Liability Company (LLCs)
           Sole Proprietorship
 A “sole proprietorship” is the
  establishment of a business by an
  individual; there is no legal entity that
  owns ands operates the business
 The owner is personally responsible for
  all debts ands contracts
 Profits are disclosed on the owner’s
  personal income tax return and he or
  she can deduct business losses
          General Partnerships
 A “general partnership” is an agreement
  by two or more persons or entities to
  establish and operate a business
 A written agreement should be prepared
  between the partners
 Each partner discloses business profits
  in his or her personal tax return and
  deducts proportionate losses
 A “joint venture” is a general
  partnership set up to make a profit on a
  one-time basis
               Corporations
 A “corporation” is created by filing
  articles of incorporation with the
  appropriate agency in the State
 The corporation is separate and distinct
  from the owners of the corporation
 Owners of an interest in the corporation
  are called shareholders or stockholders
 They are protected from liability from
  the corporation’s debts and obligations
      Limited Liability Companies
 A “limited liability company” (LLC)
  combines liability protection with the tax
  status of a general partnership
 Owners of an interest in the LLC are
  called members
 Members have no personal liability for
  the debts and obligations of the LLC
 Members disclose profits and deduct
  losses on their individual tax returns
           The Business Plan
 A “business plan” is a roadmap that
  describes where you’re going and how
  you’re going to get there
 A guide to achieving your goals
 A tool to spark investor interest
 A document that helps employees
  understand the company mission
                Key Elements
            of the Business Plan
 Description of your products and
    services
   Market and industry analysis that
    demonstrates the need for your business
   List of competitors, including their
    strengths and weaknesses
   Marketing strategy (sales approach)
   Management team and operations plan
   Financial analysis: the investment
    needed
     Federal, State, and Local Taxes
 Federal taxes are paid at intervals with
  IRS coupons, usually through the
  Electronic Federal Tax Payment System
  (EFTPS)
 States tax structures vary; most require
  some form of tax on small businesses
 Local authorities may tax business
  property or all businesses operating in
  the area
 Research the laws that apply to you;
  accountants or tax lawyers may be
  needed
            Employment Taxes
 Federal income tax withholding
   Businesses must withhold Federal income
    tax from employees’ wages based on W-4
    information
 Federal unemployment tax
   Pays unemployment compensation to
    workers who lose their jobs
 Social Security and Medicare
   Required under the Federal Insurance
    Contributions Act (FICA), also called self-
    employment tax
         Self-Employment Tax
 “Self-employment tax” is the
  combination of Social Security and
  Medicare taxes for individuals who work
  for themselves
 Social security coverage provides
  various types of retirement and disability
  benefits
 You must pay self-employment tax if
  your annual net earning from self-
  employment is $400 or more
           Types of Insurance
 Business property insurance
 Liability and excess liability coverage
 Worker’s Compensation
 Health insurance
 Life insurance
 An insurance agent should be included in
  the business startup process
        The Five “C’s” of Credit
 How banks determine whether to loan
  you money:
    Character: Credit history is very important!
    Capacity: What is your track record of debt
     repayment?
    Capital: How long will personal resources
     support both you and the business?
    Conditions: Current economic conditions
    Collateral: Assets the company pledges as a
     source of repayment for the loan
          Secured and Unsecured
              Lines of Credit
 If you have trouble getting financing, a
  “secured line of credit” can be used to
  purchase equipment
    Property or equipment is used as collateral,
     which guarantees repayment
 An “unsecured line of credit” does not
  require collateral
    This is given as a personal loan to the
     company’s officers, based on the
     individuals’ credit histories
             Effective Marketing
 A “marketing plan” serves as a blueprint
  for you to follow to get your products
  and services known and recognized. It
  has:
    Competitor and issue analysis: challenges
       and opportunities facing the business
      Objectives: What do you want to achieve?
      Action program: A “to-do” list
      Budget: Detail expenses
      Strategy: The Four “P’s”
       The Four P’s of Marketing
 Product: Describes features and benefits
 Price: Lists prices and pricing strategy
 Promotion: Tools or tactics to achieve
  marketing objectives
 Placement: Sales philosophies and
  methods
                      Licensing
 Licenses or permits are required to operate
  certain types of businesses
 One or more licenses may be required from the
  city, State, county, and/or Federal Government
    You may need multiple licenses if you work in more
      than one jurisdiction
 Failure to obtain the proper licenses can result
  in fines or the loss of your business
 The application process varies according to
  jurisdiction; research the requirements in your
  area
                    Bonding
 “Bonding” guarantees that a business will
  perform its assigned tasks. A bond is issued by
  a bonding company after the business is
  thoroughly investigated
 Surety bonds: The surety company agrees to
  compensate the customer if the business fails
  to pay a debt or meet an obligation
 Fidelity bonds: Protect against the actions of
  employees (such as embezzlement)
 You must have an agent or broker to guide you
  through the application process; the SBA also
  provides assistance
                  Zoning
 “Zoning” specifies where residential,
  industrial, recreational or commercial
  activities can take place
 Business owners must check on local
  zoning ordinances (e.g., a business may
  not be allowed in your home)
 A variance is a request to make an
  exception to current zoning
  requirements
         Copyrights, Trademarks,
               and Patents
 Copyrights, trademarks, and patents all
  deal with intellectual property and how
  to protect it
 “Intellectual property” is a product
  based on an idea and it has some type of
  commercial value
 Intellectual property includes a wide
  range of products, such as books,
  musical compositions, and works of art.
                   Copyrights
 Copyrights protect individual creative
  expression. The Federal Copyright Act of 1976
  specifies how to register a copyright; there are
  no State copyright laws
 If a work is in the “public domain,” anyone can
  use it without permission from the author or
  the author’s heirs
 The U.S. Copyright Office explains how to
  register literary works, visual art works,
  performance works, sound recording, serials
  and periodicals, and mask works
                Trademarks
 A “trademark” is a brand name--a
  distinctive sign, logo, slogan, symbol, or
  other emblem used by businesses to
  distinguish their products from others
 Trademarks do not expire and can apply
  indefinitely
 Although trademarks can be registered,
  it is not required; just using a mark
  establishes a common law right to it
                  Patents
 A “patent” gives an inventor exclusive
  use of his or her invention
 Patents are issued by the United States
  Patent and Trade Office (USPTO)
 Most inventors use a patent lawyer to
  help with the application process
                Accounting
 Sound accounting and bookkeeping
  practices are essential to any business
 Many businesses rely on an accountant
  to handle financial recordkeeping
 Computer programs such as Quicken,
  Peachtree, or Quickbooks can simplify
  some bookkeeping tasks
        Cash and Accrual Methods
              of Accounting
 The “cash basis” method of accounting
  requires only that you record financial
  transactions when money is paid or
  received
    Not adequate for businesses that give
     credit to their customers or maintain a
     large inventory
 The “accrual basis” method reports
  income when earned and expenses when
  incurred, not when money actually
  changes hands
             Human Resources
 The Human Resources function deals
  with hiring and managing employees
 Be specific when interviewing
  candidates
    Avoid inappropriate and illegal questions
     during the interview
 Provide competitive compensation and
  benefits
 Maintain detailed employee records
 Consider an Employee Stock Ownership
  Plan (ESOP)
           Getting on the Web
 A Website can attract customers and
  boost earnings
 Sales through the Internet can take place
  internationally, 24 hours a day
 A professional Website designer can
  develop your site at a relatively low cost
 Promote your site through major search
  engines or a link exchange program
         Resources for Additional
               Information
 SBA, SBDC, & SCORE
 NIH SBO Web site http://sbo.od.nih.gov/
 Library of Congress
 SBA, Small Business Classroom
 International Trade Administration
 U.S. Government Printing Office
 Government Information Locator Service
 Chamber of Commerce
 State, County, & City Government Offices
 Trade Associations
 Banks & Financial News Publications
 Internet
             Final Thoughts

 Build on every success


 Learn from your mistakes


 Take time to relax and reduce stress!

								
To top