Raleigh Small Business Connect

January 25, 2018

SCORE Raleigh Chapter

▪ Introduction – small business realities

▪ Why do you want to start a business

▪ Your big idea – your company

▪ Marketing plan

▪ Legal entities, insurance, permits & licenses

▪ Management and organization

▪ Cash flow, capitalization, and commingling

▪ The Business Plan

▪ Final thoughts

▪ How SCORE can help you

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Small business realities

According to the SBA

85% make it through the first year

50% last for five years

35% last 10 years

Though it may survive, it can take several years for a

business to become financially sound

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Having or Gaining Experience and

Knowledge in your Field is Important

Have you worked in or do you have knowledge of

the field or industry?

Do you have business skills and experience?

Do you know how business is conducted in your

chosen field?

Have you networked with those in a

similar business?

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• Once you have clearly established your BIG IDEA, be prepared to present it to others if occasions arise.

➢ Should be one minute or less and tailored to the person you are speaking to:

✓Who are you?✓What your business will do?✓Why your business is unique?✓What is your immediate goal?

• Why do I need this? >> So you will be ready on informal occasions to present your business to potential investors, customers, landlords, etc.

• Rehearse the speech out loud, but don’t memorize it.

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• Identify your competition

• Create a SWOT (strengths, weaknesses, opportunities, threats)

analysis on key competitors and your business.

• Perform the necessary market research to understand the market

opportunities, key players, buying patterns and key customers.

• Library databases (OneSEARCH) are a great free source of

information

• Reference USA

• Hoover’s Company Profiles

• Simply Map

• US Census and NAICS (North America Industry Classification

System

• Know your costs (fixed, variable) and your margins

• What is competitor’s price

o Will this allow you to be profitable?

o Strategies to reduce costs – volume, efficiency

Example: Grocery stores

o Strategies to increase price – show value

Example: Lexus vs. Kia

• Assess Value

o What makes your product worth more/less than

competitors?

o Strategies to improve value – quality, service, delivery

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• Networking (face to face, referrals)

• Most effective

• Social Media – find out how target market is most interested in

being communicated to

o 4 Es of social media – Excite, Educate, Experience, Engage

o Essential for credibility

o Website content/key words; blog; Linkedin; Facebook

o Evolving rapidly; attend workshops

• Web presence – needs to be engaging and easy to use/locate

• Public relations – media/press kits, analyst reviews

• Conferences & Trade shows where target market attends

• Product samples for key influencers

• Testimonials of satisfied users

• Direct Mail / Email

• Advertising: Newspaper – Radio – TV

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The Social Media Conundrum

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1. You couldn’t

possibly use them

all

2. Find out where

your customers

are going to be

online

3. Then BE there!

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Why write a business plan?

• For yourself

o A 360°view of your business

o A tool to help you think critically about your business

o A blueprint for running your business

o A tool for measuring your operational success

o Balances your enthusiasm with the facts

• For investors, lenders, suppliers, landlords, etc

o Assurance that you have thought through the whole business idea and that it makes sense

o Understand the legal / intellectual / financial aspects

• For your team - a great communication tool

1. Executive Summary

2. General Company Description

3. Products and Services

4. Marketing Plan

5. Operational Plan

6. Management & Organization

7. Start Up Expenses and Capitalization

8. Financial Plan

9. Appendix

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How will you deliver your product/service to the customer?

Who is your competition? (name 3 competitors) What are your milestones & timelines for starting your business?

What are your financial objectives? What income do you expect?

Do you have a patricular advantage? (e.g., product difficult to copy) Describe in 25 words or less the nature of your business.

What is your Vision for the business?

What problem will your business solve?

Do you have experience in this business?

What product or service will you offer or sell?

Who will buy it; that is, who are your target customers?

Do you have enough money? How much will you invest?

How will your customer learn about your business?

What does the market for your product look like?

I am successful if I have achieved the following goal:

What is your solution to the challenges?

What are your biggest challenges?

How will you get paid? (Cash, Check, Credit card, other)

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Specific Desired outcome is clearly defined? Internal Forces

What do you want to accomplish? Strength Helpful Weakness Harmful

Competence, experience, knowledge, Competitive disadvantages, gaps

resource availability, technology, in experience, lack of financing,

business know-how, financing reliability issues, loss of key staff

Measurable How will you know when you are there?

Need concrete criteria to measure progress

Attainable How can you accomplish the goal?

Challenging but realistic based on resources

External Forces

Opportunities Helpful Threats Harmful

Strategic partnerships, new markets, Strong competition, new competing

Relevant Is it worth the time spent? new technologies, innovation, technologies, pricing issues,

Does it meet your overall objective? improving economy weakening economy

Time-Bound By when will you have it accomplished?

What are your deadlines?

• Should be considered CONFIDENTIAL

• Don’t forget, the Business Plan is a “living document”, not

something that should sit on the shelf

o Once you start your business, you should update it at least

annually

• SCORE Business Plan template for start ups:

Raleigh.score.org >> Browse the Library > Business Plan Template

for a Startup Business

• Recommendation: Search the web for business plan

templates specific to your type of business.

• To get you started, see our simple One Page Business Plan

later in this presentation

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Options for structuring your business

You are protected from personal liability with these:

• Limited Liability Company (LLC)

• Corporations (“S” or “C”)

• Non-profit (set up as a corporation)

You are not protected from personal liability with:

• Sole Proprietorship

➢ These options affect your liability, ownership, and taxes

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Protecting Your Liability

“Corporate veil”

No “corporate veil”

Assets

are Not

Safe!!!

Your Personal Assets• House• Car• Savings Account

Your Company Assets• Inventory• Business Savings• Car, truck, building

Lawsuit

Assets

are

Safe!!!

LLC or Corporation

Sole proprietor or partnership

Limited Liability Company (LLC)

Pros

Owners have limited personal liability

Owners subject to only single taxation on personal

returns

Fewer regulations than “S” Corp

Multi-member LLCs are taxed as a partnership

Cons

Requires initial fee ($125) and annual reporting and

fee ($200)

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Corporation (“S” or “C”)

• Owners have limited personal liability

• Can raise capital through stock sale

Cons

• More complicated to form and maintain (e.g., Formal

Articles of Incorporation and Bylaws)

• Requires initial fee ($125), annual reporting fee and

separate Federal and State Tax filings

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“C” and “S” Tax Differences

• “S” corporations are not subject to double taxation

• “C” corporations are subject to double taxation (tax on

profits and on shareholder dividends)

Pros

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Legitimize your business – Things to consider

• Is your business name unique?

• Intellectual property issues?

• Get your EIN?

• Will you be operating as a DBA?

• What type of insurance will you need?

• What type of permits or licenses are required?

• Who will manage the business on a day‐to‐day basis?

o What experience does that person bring to the

business?

• If more than 5-10 employees, create an organizational

chart showing the management hierarchy and who is

responsible for key functions.

• Develop position descriptions for key employees.

o If you are seeking loans or investors, provide resumes

of owners and key employees.

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• Your Lawyer

• Your Accountant/CPA

• Your Insurance Agent

• Your Banker

• Your SCORE Counselor

➢ Establish these relationships early - don’t wait for a crisis

to arise before you contact them.

Essential if you have more than one owner!

• One of the most important documents used a business because it

structures the business' financial and functional decisions.

• Once signed by the owners, it acts as an official contract binding owners to

its terms.

• Documents owner responsibilities and is used to settle conflicts internally,

rather than resorting to state law.

• Governs the internal operations of the business.

Typical contents:

• Owner responsibilities

• Contributions of the partnership - who is contributing what to the business

and what are the ownership shares in profits

• Voting rights and responsibilities

• Allocation of profits, losses, and draws

• Admitting new partners and how to dissolve a partnership

• Withdrawal or death of a partner

• Dispute resolution (e.g., use a mediator rather than going to court)

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• Your experience in the industry or the type of business your

are starting.

• Capital – how much of your own money are you investing?

• Collateral – What is the fair market value of any security that

you are offering to guarantee repayment?

• Capacity to repay – will your projected cash flow allow you

to repay the loan? For existing businesses, banks want to

see 3 years of tax returns (business and personal).

• Character – what is your track record and your credit score?

• Solid Business Plan

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• Caution: Figuring out how much cash you will need

during start up is essential.

• One of the main reasons small businesses fail >> they

run out of cash!

• Do month by month projections at least for year 1

o Preopening - no revenue, only expenses

o Business opens - little revenue, on-going expenses

o Business gets going - expected revenue, on-going

expenses

• Let’s look at a start up example: Acme Widget Co.

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• Loan funding (most common for small businesses) -borrowing the money you need to finance operations and growtho Personal loans, credit cards, home equity loanso Operations-related financing – supplier credit, lease financing

equipmento Business loans – SBA loans, lines of credit, supplier credit,

leasing

• Equity funding – you sell a partial interest or ownership in your company in return for a share of the profito Informal investors (“angels”)o Limited stock offeringo Venture capital firmso Stock Initial Public Offering (IPO)

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• Crowd funding o Financing from a large pool of backers (“the crowd”), who provide small

contributions usually made online by means of a web platform

• Set your goal

• Backers contribute money with no ownership stake and no return

expected

• Meet or exceed goal > success! (odds of success are 1 in 3)

• Do not meet goal > no money received (usually)

o Can be used for ventures such as art, comics, dance, design, fashion,

film, food, technology, small business, non-profits

o Cost:

• Initial fee: 3-5% of funds generated, if successful

• Payment processing fee: 3-5% if successful

o Examples: Kickstarter, Indiegogo, RocketHub, etc.

o Rules vary – find the best fit for you.

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More Information: www.sba.gov/financing

• SBA sets the guidelines for SBA lenders and loans

• Loans are provided by banks, community development

organizations, credit unions and micro lenders.

• In 2016 in NC, the SBA funded loans for both start ups and existing

businesses through it’s 11 programs:

• Funded 662 loans for existing businesses.

• Funded 677 loans for start ups (51%).

• SBA generally guarantees between 50-85% of the loans, while the

banks assume the remainder of the risk.

• Check with your lending institution to find a SBA loan officer to

discuss SBA loan productions (not all banks have SBA loan officers)

• If you have a corporation or LLC, the Corporate veil protects your personal assets if you have a lawsuit or debt you cannot pay.

• Commingling funds can allow creditors to “pierce

the Corporate veil” and take your personal assets!

• Examples of comminglingo Transferring money between business and personal accounts without

documentation.o Writing business checks for personal reasons/expenses or writing personal

checks for business reasons.o Having only one bank account for personal and business needs.o Depositing business checks into your personal bank account.o Withdrawing money from your business account to pay personal expenses

without documentation.

➢ Limit your liability >> How to avoid commingling?o Set up a small business account for handling your business finances

(business checks, debit and credit cards) and use it only for business purposes.

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Be prepared for:

• Commitment

• Sacrifice

• Surprises

But it is Rewarding

• It is your Business!

• You get to live your dream

• Independence

Final Thoughts

…and don’t be afraid to ask for help!

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• A Non-Profit, SBA sponsored organization

• Volunteers experienced in all facets of business

• USA membership

o 315 Chapters

o 12,000 volunteers

• Raleigh Chapter

o 70 counselors, 7 locations in Raleigh, Apex and Rocky Mount

o Face-to-face mentoring

o Workshops

o On-line counseling

➢ Counselors to America’s Small Businesses

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• Visit SCORE website for dates and times of other workshops and webinars

• Visit SCORE website to request a free mentoring appointment

• Before you leave: Please complete the Workshop Evaluation Form

Raleigh.score.org

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• Mentoring services are free.

• No limit to the number of mentoring sessions.

• You will meet with two SCORE counselors.

• Discuss your needs, challenges or opportunities.

• Complete confidentiality.

• We encourage a continuing relationship between clients

and counselors.

• We do not provide legal, accounting or other

professional advice (web site has a providers list).

• We advise, suggest and direct. We do not do the work

for you.

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Small business resources

SBTDC Business Start-up Guide

www.sbtdc.org/pdf/startup.pdf

Business Link North Carolina

www.blnc.gov

SBA North Carolina

www.sba.gov/nc

Raleigh4U web site – Small Business Resource Guide

www.raleigh4u.com/

How to form a LLC in North Carolina

www.nolo.com/legal-encyclopedia/north-carolina-form-llc-32045.html

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Legitimize your business

Choose your business entity name

Search the NC Secretary of State web site to find whether your business

name is already in use (it must be unique):

https://www.sosnc.gov/thepage.aspx

To search within the US, go to the US Patent and Trademark Office web site

www.uspto.gov/ >> Trademarks >> TESS Search Trademarks

Google your business entity name

Register your business entity (e.g., LLC or corporation) in NC

o Complete the Articles of Organization form and mail in with the fee

($125):

www.secretary.state.nc.us/Corporations/Forms.aspx?PItemId=5429715&Typ

e=LimitedLiability%20Company

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• Patents

• Trade Secrets

• Trademarks

• Copyrights

Recommendation: Seek assistance of an

“IP” experienced attorney.

Legitimize your business (cont.)

• Secure an EIN (Employer Identification Number - Federal Tax ID

Number) for your Corporation/LLC: www.irs.gov >> Apply for an

Employer ID number

• If your business entity name (“Joe’s LLC”) is different from your

business’s commercial name (“Joe’s Pizzeria” – a DBA (“doing

business as”):

• DBAs, regardless of business structure, must be filed in the

county Register of Deeds office. The "Assumed Name" filing

is a one-time event and costs $26 in Wake County (the form

needs to be notarized).

• Regardless of the type of entity, if you will collect employee

withholding or sales taxes, apply for a state tax number at

dornc.com

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Legitimize your business (cont.)

• If you don’t feel comfortable making the choice of your

business entity, get assistance from an attorney:• You can get a list of attorneys who can provide legal

assistance from

Raleigh.SCORE.org website: Browse the Library tab >> Raleigh

SCORE Services Directory

• Make use of on-line resources like legalzoom.com for

assistance in Corporation or LLC filing

• These types of insurance are generally considered essential for a business:

o General Liability – will help protect you against suits for physical

damages to someone on your property

o Product Liability – protection for liabilities arising from the use of the

products or services your company sells

o Auto – required for any vehicle used for business purposes; personal

auto insurance will not cover liabilities resulting from business use

o Hazard/fire – coverage for fire, wind, water and theft

o Workers Comp – required by law if you have three or more employees,

but is recommended even if you have fewer

• Don’t depend on your homeowner’s insurance to give you full coverage if

you have a home-based business

• Insurance is required by law for some types of business (e.g., electricians)

• Speak to an insurance broker about your needs

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State of North Carolina

• Contact Business Link North Carolina (BLNC), a division

of the state Dept. of Commerce, for NC state permits and

licensing requirements.

www.blnc.gov

Counties and municipalities

• BLNC can also assist with giving you contacts to find the

requirements of NC counties and municipalities.

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Raleigh SCORE 300 Fayetteville St. Raleigh, NC 27602

Tel: 919-869-4151

Email: contact.raleigh@scorevolunteer.org

Website: raleigh.score.org

Blog: raleighscore.wordpress.com/

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Facebook: www.facebook.com/RaleighSCORE96

Twitter: www.twitter.com/raleigh_score

LinkedIn: www.linkedin.com/company/raleigh-score

YouTube: www.youtube.com/user/raleighscore

Raleigh.SCORE.org