EntrepreneurialSuccess Begins With

The Snow College Small Business Development Center is a partnership program of the U. S. Small Business Administration. The SBDC is funded in part by the U.S. Small Business Administration under cooperative agreement No. 6-7770-0050-1. The support given by the SBA does not constitute an express or implied endorsement of the cosponsors or participants’ opinions, products or services. All of our programs are extended to the public on a

nondiscriminatory basis. Reasonable arrangements for persons with disabilities will be made if requested at least two weeks in advance.

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Agenda Welcome and introductions Rewards and drawbacks of entrepreneurship Business entry strategies The business plan Legal and regulatory compliance Choosing a form of ownership Debt and equity financing Where do I go from here

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Rewards of Entrepreneurship

Profit Freedom from the limits of standardized pay for

standardized work.

Independence Freedom from supervision and the rules of

bureaucratic organizations.

Satisfying Way of Life Freedom from routine, boring, unchallenging jobs.

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Drawbacks of Business Ownership Uncertainty of income Risk of losing entire investment Long hours and hard work Lower quality of life until the business gets

established Complete responsibility

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Characteristics of Successful Entrepreneurs Passion Persistence High need for achievement Willingness to take measured risks Self-confidence and self-reliance High energy level Desire for responsibility

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SmallBusiness

Ownership

SmallBusiness

Ownership

StartupStartup

FranchisingFranchising

BuyoutBuyout

Family BusinessFamily Business

Alternative Routes to Small Business Ownership

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New Market

Example:Providing health conscious Utah consumers with fruit smoothies.

New Technology

Example:Providing alternatives to incarceration by using high technology ankle bracelets for home arrest programs.

New Benefit

Example:Providing same day drain cleaning services with a money-back guarantee.

New Market: Providing customers with a product/ service that is not in their market but already exists elsewhere.New Technology: Using a new technical process that provides the basis for new product or service ideas.New Benefit: Performing an old function for customers but in a new and improved way.

Types of Ideas That Develop into Startups

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Prior Work Experience

45%

Family Business6%

Other4%

Chance Happening11%

Education/Courses6%

Suggestion7%

Personal Interest/Hobby16%

Friends/Relatives5%

Sources of Startup Ideas

Source: Data developed and provided by the National Federation of Independent Business Foundation and sponsored by American Express Travel Related Services Company, Inc.

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• Marketing FactorsNeed for productCustomersLife of productMarket structureMarket sizeMarket growth rate

• Competitive AdvantageCost structureDegrees of control over price, costs, channels of supplyBarriers to entry: regulatory protection, response/lead-time advantage, legal advantage, contacts and networks

• EconomicsReturn on investmentInvestment requirementsBreak-even point

• Management Capability

• Fatal Flaw

Evaluation Criteria for a Startup Venture

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CONS

• Inheriting any problems

• Poor quality of existing employees

• Poor business image

• Modernization required

• Purchase price based on inaccurate data

• Poor business location

PROS

• High chance of success

• Less planning

• Existing customers/suppliers

• Necessary equipment

• Bargain price

• Experienced employees

• Existing business records

Pros and Cons of Buying an Existing Business

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Minuses

Franchise fees

Royalties

Restrictions on growth

Less independence in operations

Franchisor may be sole supplier of some supplies

Termination/renewal clauses

Pluses

+ Formalized training

+ Financial assistance

+ Proven marketing methods

+ Managerial assistance

+ Quicker startup time

+ Overall lower failure rates

Pluses and Minuses of Franchising

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Require competence in family members.

Explain situation to non-family members.

Avoid favoritism in personnel decisions.

Discuss plans openly.

Key Concepts in Family Business Management

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The Business Plan Presents the business opportunity and how you

will take advantage of it. Helps you think about the business in a

systematic and disciplined way. Provides a blueprint for building your business

over the next three to five years. Used for presenting your ideas to lenders,

investors, creditors, customers, managers.

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The Business PlanCover PageTable of Contents

Section I. Executive SummarySection II. Mission, Goals & Objectives

General Description of the Business

Mission StatementsGoals and Objectives

Section III. Background InformationThe IndustryThe Business “Fit” in the Industry

Section IV. Organizational MattersBusiness Structure, Management &

PersonnelOperating Controls

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The Business Plan - ContinuedSection V. The Marketing Plan

The Products/ServicesThe Market AnalysisMarketing Strategies

Section VI. The Financial PlanWorksheets and Notes to Cash

Flow ProjectionsCash Flow ProjectionsFinancial StatementsAdditional Financial Statements

Appendix Section Action LogSupporting Documents

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Legal and Regulatory Compliance Checklist Register your business name Get a state business license (if needed) Get a city/county business license Get a federal/state tax ID number Comply with minimum wage/overtime laws Make arrangements for paying taxes Make arrangements for statutory benefits

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Forms of Ownership Proprietorship Partnerships

GeneralLimited

CorporationsRegular CorporationSubchapter S Corporation

Limited Liability Company

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Choosing an Ownership Form Organizational costs Limited versus unlimited liability Continuity Transferability of ownership Management control Raising new equity capital Income taxes

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• A sole proprietorship is a business owned and operated by one person.

• There is generally no registration or filing fee.

• Liability is unlimited.

• The sole proprietorship is dissolved upon the proprietor’s death.

• Ownership of the company name and assets may be transferred.

• Management freedom is absolute.

• Capital is limited to the proprietor’s personal capital.

• Income from the business is taxed as personal income to the proprietor.

The Sole Proprietorship Option

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• A partnership is a voluntary association of two or more persons to carry on, as co-owners, a business for profit.

• There is generally no registration or filing fee.

• Liability is unlimited.

• Unless the partnership agreement specifies otherwise, the partnership is dissolved upon withdrawal or death of a

partner.

• Transferring ownership requires the consent of all partners.

• A majority vote of partners is required for control.

• Capital is limited by the partners’ ability and desire to contribute.

• Income from the business is taxed as personal income.

The Partnership Option

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• A written certificate must be filed with proper state office.

• Liability is limited to investment for limited partners.

• Withdrawal or death of limited partners does not affect the continuity of the business.

• Limited partners may sell their interest.

• Limited partners are not permitted any involvement in management.

• Limited partners’ limited liability provides a strong inducement in raising capital.

• Income from the business is taxed as personal income.

The Limited Partnership Option

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• A corporation is a business organization that exists as a legal entity.

• It is the form of organization that has the most fees and requirements.

• Liability is limited to investment in the company.

• Continuity of business is unaffected by shareholder withdrawal.

• Ownership is easily transferred.

• Shareholders have final control.

• Usually it is the most attractive form for raising capital.

• The corporation is taxed on its income, and the stockholder is taxed when dividends are received.

The Corporation Option

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• It is taxed as a partnership.

• Eligibility requirements are as follows:

No more than 75 stockholders are allowed.

All stockholders must be individuals or qualifying estates and trusts.

Only one class of stock can be outstanding.

The corporation must be a domestic one.

No nonresident alien stockholders are permitted.

The S corporation cannot own more than 79 percent of the stock of another corporation.

The Subchapter S Corporation

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Limited Liability Companies

Limited liability for owners Taxed as a partnership Easier to manage and control than corporations Now in all 50 states Limited transfer of ownership May be cumbersome to share or transfer

ownership (unanimous written consent)

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Sources of Financing$ Personal Savings$ Friends and Relatives$ Suppliers$ Banks$ Government Programs$ Individual Investors (Angels)$ Venture Capital$ Sale of Stock

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1. The borrower’s charactercharacter2. The borrower’s capacitycapacity to repay the loan

3. The capitalcapital being invested in the venture by the borrower

4. The conditionsconditions of the industry and economy

5. The collateralcollateral available to secure the loan

The Five Cs of Credit

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Selected Loan Programs Credit card Signature loan Relatives and friends Collateralized bank loan Commercial loan SBA Guaranteed Loan Six-County RLF Six-County TBAF Other

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SBA Guaranteed Loan (7A)

Bank makes loan, SBA guarantees between 75 to 85 percent up to $1 million

Interest rate capped at prime plus 2.25 to 2.75, depending on terms

Repayment terms usually seven years (longer for equipment, construction)

Contact: Local SBA lender

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Other Sources of Assistance Service Corps of Retired Executives

(SCORE) Business Information Center (BIC)

Partnership with SBA, SBDC, SCORE, Ogden City

Market research resources, computers, training and counseling services

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Special SBA Programs ProNet

Purpose and explanationhttp://pro-net.sba.gov/

8A ProgramPurpose and explanation www.sba.gov/gcbd

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Conclusion Thank you for participating in this

presentation. Please tell your friends and neighbors

about our services Good luck!