HOW TO START AND MANAGE YOUR SMALL BUSINESS
HOW TO START AND MANAGE
YOUR SMALL BUSINESS
A Reference Manual Prepared by the
Greater San Francisco Bay Area SCORE Chapters
East Bay SCORE North Coast SCORE San Francisco SCORE Silicon Valley SCORE Santa Cruz County SCORE
SCORE is s resource partner with the US Small Business Administration. SBA's participation in this Co-sponsorship is not an endorsement of the views, opinions, products, or services of any Co-sponsors or other entity. All SBA programs or co-sponsored programs are extended to the public on a nondiscriminatory basis.
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ISBN 0-9655360-3-3
The material in this publication is based on work supported by the U.S. Small Business Administration (SBA) under cooperative agreement SBAHQ-05-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the authors and do not necessarily reflect the views of the U.S. Small Business Administration. The participating SCORE chapters ("the chapters") make a sincere effort to ensure accuracy and quality of their published materials; however, no warranty, expressed or implied, is provided. The chapters disclaim any responsibility or liability for any direct or indirect damages resulting from the use of the information in this manual or products described in it. Mention of any product or service does not constitute an endorsement by the chapters of that product or service. The manual also includes information adapted from a variety of other sources, including information previously published in since discontinued pamphlets of the SBA. Much as we have tried to incorporate in this issue the most current and relevant information available we realize that we may have missed some information of importance to our target clients and we appreciate your feedback. Send your comments to:
Editor: Karl Haug East Bay SCORE 492 9th Street, Ste. 350 Oakland, CA 94607
Or e-mail to Info@
Copyright ?2014 (2005) East Bay SCORE Chapter 506 of the national SCORE organization. All rights reserved
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Table of Contents
Self Assessment Overview Self Assessment Test Characteristics of a successful entrepreneur Skills necessary to operate your business
Business planning Getting ready for the planning process Writing the Business Plan
- Executive Summary - The Company Operating Plan - Manufacturing or Sourcing Plan - The Marketing Plan - The Financial Management Plan - Appendices
Government Regulations Business Licenses, Fictitious Name Filing Building Codes, Permits & Zoning Workers Compensation Employee Screening Workplace Programs Safety and Health Regulations Hazardous Substance Compliance
People and your Business Employees Independent Contractors Outside Advisors
Legal Aspects Legal Forms of Business Sole Proprietorships, Partnerships, Corporations Copyrights, Trademarks and Patents
Marketing and Advertising Four "P's" of Marketing Pricing your Product or Service Choosing a Location Promotion Home Office and Small Office Marketing Sample Marketing Calendar
Financing Basics Financing Options Use of Funds, Application for Funds SBA Loan Program
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Chapter. Page
1. 1.1 1.2 1.3 1.4
2. 2.1 2.1 2.2 2.4 2.5 2.6 2.9 2.12
3. 3.1 3.2 3.2 3.3 3.4 3.4 3.4
4. 4.1 4.2 4.4
5. 5.1 5.2 5.4
6. 6.2 6.3 6.5 6.7 6.8 6.11
7. 7.1 7.3 7.3
Table of Contents ? continued
Risk Management Why you need Insurance Who sells Insurance Types of Insurance Questions you will be asked Glossary of Insurance Terms
Record Keeping - Accounting Types of Records and Retention Periods Accounting Glossary of Accounting Terms Sample Chart of Accounts Small Business Accounting Programs - Overview
Financial Statements Description and Templates of: Sales Forecast, Profit and Loss (Income) Statement Balance Sheet, Cash Flow, Break-Even Analysis Personal Financial Statement
Business Taxes Federal, State and Local Taxes, Payroll Taxes Overview of Returns and Payments, Due Dates Helpful Publications from the IRS
Technology Uses Buying a Business Computer Choosing the Right Software The Internet and your Business
Franchising Overview of the Franchising System Part I - Evaluating a Franchise Advantages/Disadvantages of Franchising Checklists for Franchisees Part II - Franchising an Existing Business
Exporting and Importing Planning, Preparation, Process, Financing
Small Business Support Organizations SCORE Chapters and Services Small Business Development Centers and Services Workforce Investment Boards and Services Business and Trade Organizations
Resources by Subject from Accounting ? Workshops
Check List for starting a Business
Index
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Chapter. Page
8. 8.1 8.1 8.2 8.4 8.6
9. 9.1 9.2 9.4 9.7 9.8
10. 10.1 10.4 ? 6 10.7 - 10 10.11
11. 11.1 11.3 11.5
12. 12.2 12.3 12.4
13. 13.1 13.2 13.3 13.4 13.7
14. 14.1
15. 15.1 15.2 15.3 15.3
16.
17.
Chapter 1
Self-Assessment
Overview
Each year there are more than 800,000 small business start-ups in the United States and only 40% will survive their first six years*.
With more and more workers being impacted by down sizing and outsourcing of jobs in large businesses, people desiring more independence and a more flexible work place and environment, self-employment has become increasingly attractive as an alternative to traditional employment. As most experts will tell you, it is the primary option of choice for risk takers.
Because owning and operating a small business is risky, those who are not prepared for the demands on time, effort, and skill that are inherent in operating a business are likely to be facing an almost impossible task.
You also need to understand the difference between an idea and a business opportunity. An idea is a concept that may not have a market. A business opportunity is a market-driven, profitable venture.
We begin this workbook at exactly the same point you should begin the process of exploring self-employment by determining if you have what it takes to successfully start and operate a business of your own.
_________________________ *Business Failure Record, Dun and Bradstreet Corp., Wilton, Conn. 1995
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Self-Assessment Test
Starting a business is risky at best, but your chances of making it will be better if you first understand whether you have what it takes. Below are some questions to help you evaluate whether you do.
Questions to Ask Yourself 1. Are you a self-starter? ____ I do things on my own. No one has to tell me to get going. ____ If someone gets me started, I keep going all right. ____ Easy does it. I don't put myself out until I have to. 2. How do you feel about other people? ____ I like people and can get along with just about anyone. ____ I have plenty of friends and don't need anyone else. ____ Most people irritate me. 3. Can you lead others? ____ I can get most people to go along when I start something. ____ I can give the orders if someone tells me what we should do. ____ I let someone else get things moving; then I go along if I feel like it. 4. Can you take responsibility? ____ I like to take charge of things and see them through. ____ I'll take over if I have to, but I would rather let someone else be responsible. ____ There is always some eager beaver around wanting to show how smart he/she is.
I say let 'em. 5. How good an organizer are you? ____ I like to have a plan before I start. I am usually the one to get things lined up. ____ I do all right unless things get too confused; then I quit. ____ I get all set and then something comes along and presents too many problems. So I just
take things as they come. 6. How good a worker are you? ____ I can keep going as long as I need to. I don't mind working hard for something I want. ____ I will work hard for a while, but when I have had enough, that's it. ____ I can't see that hard work gets you anywhere. 7. Can you make decisions? ____ I can make up my mind in a hurry if I have to. It usually turns out okay too. ____ I can if I have plenty of time. If I have to make up my mind fast, I think later that I should
have decided the other way. ____ I don't like to be the one to decide things. 8. Can people trust what you say? ____ You bet they can. I don't say things I don't mean. ____ I try to be on the level most of the time, but sometimes I say what is easiest. ____ Why bother if other people don't know the difference?
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9. ____ ____ ____ 10. ____ ____ ____
Can you stick with it? If I make up my mind to do something, I don't let anything stop me. I usually finish what I start - if it goes well. If it doesn't go right immediately, I quit. Why beat my brains out? How good is your health? I never run down! I have enough energy for most things I want to do. I run out of energy sooner than most of my friends.
Now total the number of checks you have next to the first, second and third answers. If most of your checks are beside the first answers, you probably have what it takes to run a business. If not, you're likely to have more trouble than you can handle by yourself. Better find a partner who is strong on your weak points. If most of your checks are next to the third answers, even a good partner will not be able to shore you up.
Characteristics and Skills Necessary to Successfully Operate Your Business
The information in this section will provide you with an overview of those management aspects of a business in which you must achieve competency. The following are the business skills essential to successfully operate a business.
Personal Characteristics of a Successful Entrepreneur
? Has commitment, drive, energy to complete tasks ? Totally self-confident ? Reasonable risk taker ? Highly involved and innovative ? A goal setter ? Very competitive ? A money maker ? Has the ability to compete against self-imposed standards ? Has job and management skills or is willing to learn ? Can manage resources, finances, materials, people, technology
Analysis of Personal Situation
? Condition of health ? Currently employed or self-employed ? Source(s) of current income or cash flow ? Other potential source(s) of income ? Future job or employment prospects vs. own business ? Support of family
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Analysis of Financial Situation
? Nature and extent of personal assets ? Business or personal debts ? Possible outside assets/funds for a loan retirement ? How much is needed to cover personal needs ? Has a personal budget been developed ? Determination of net worth
The following are the basic business skills considered to be essential to successfully operate and manage a business.
I. Managing Money
A. Ability to borrow money B. Record keeping C. Purchasing D. Handling credit E. Budgeting
II. Managing People
A. Hiring employees B. Supervising employees C. Training employees D. Evaluating employees E. Motivating employees F. Terminating employees
III. Directing Business Operations
A. B. C. D. E.
F.
Chapter 1
Buying supplies, equipment and merchandise Managing inventory Filling orders for products/services Managing the facilities Directing sales operation 1. Obtaining necessary sales to cover costs 2. Teaching others how to sell 3. Identifying customer/client needs Marketing 1. Analyzing potential customers/clients 2. Establishing pricing for products/services 3. Advertising 4. Budgeting
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