summer 2009 urg mba program chapters 1-3. establishing a venture most start-ups fail – why? the...
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Small Business Finance…Summer 2009
URG MBA ProgramChapters 1-3
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Establishing a VentureMost start-ups fail – Why?The idea
Demand?Need?Benefit provided?
Management TeamExperienceExample: CEO Larry Hsu
Legal and Financial Advisors
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Business StructureSole proprietorLimited liabilityCorporationPartnershipLLC (Limited Liability company)Each type uses different:
DocumentationRegulations/Laws/TaxationSBA
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Financial and Business PlanningBusiness Cycle—What makes it tickFinancial Statements
Balance Sheet Assets and Liabilities
Income Statement Income/Revenue and Expenses/Costs
Cash flow Statements – Importance? EBIT (Earnings Before Interest and Taxes) Examples
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Accounting and Actual Cash FlowTiming between sales and payment receipt
Cost of doing business Credit card fees
BartersBased on market priceExample: Web page design and
maintenance/AdvertisingAccounting depreciationLeasing and relying on credit from suppliers
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EBITDAEarnings before interest, depreciation and
AmortizationUsed in companies that have a high value in
equipmentDisadvantage : does not include maintenance
of equipmentDoes not affect cash flow—does affect taxes
and tax reporting
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Financial ProjectionsForecasting cash needsValuation of the companyCompare actual performance to forecasts
Gives creditability and reliability to your forecast
IssuesMarkets are difficult to predictPromising a % increase must be substantiatedConservative estimates or not?
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PoliciesPricing
What are some strategies?R & D Cost
CreditHow much and to whom?Establishing your own
DividendAffects cash balances
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Cost Structure AnalysisBreak-even Point
Be conservative hereEstablishing Fixed and Variable Costs
Fixed costs are easy to establish/consistentVariable costs?
Energy Costs Shipping, etc.
Establishing what could and/or should be outsourced
Cost of establishing your business networkWho will be your business partners?
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Strategic PlanningMarket analysis/feasibilityStart-up costsR & D costsConsider target markets
Test market?Decision making
Establish a processUse a decision tree
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Strategic AlliancesAnti-trust issuesGo to Youtube.com and search for AT&T
funny video Look for the one that looks like a diagram
Application to today’s markets?BankingCommunicationsTransportationCar makers
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Business PlanGreat resource – SBA – www.sba.orgComponents:
General descriptionBusiness goalsProduct description/Service descriptionThe management teamCurrent statusSummary of financial projectionsFinancial resource requirements