Transcript Course Overview

Welcome and Introduction

Welcome the staff members to the session

State the subject of the session

Describe the overall goals of the session
Course Overview
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
Session
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Preparing for Success
Researching Your Business Idea
Business Planning
The Marketing Plan
Laws, Regulations and Taxes
Managing Your Microbusiness
Analyzing Your Market
Product and Price
Placement and Promotion
E-Commerce
Selling Success
Cash Flow Management
Keeping Books and Records
Financial Tips and Tools
Bringing It All Together
Participant Materials
Session Outlines
◦ Session-by-session course outline
Text
◦ Business Plan Basics: NxLeveL® Guide for
Micro-Entrepreneurs
Worksheets
◦ NxLeveL® Micro-Entrepreneur Business Plan
Worksheets
Resource Guide
◦ NxLeveL® Business Resource Guide
Other
◦ Class handouts, supplemental materials
Class Agenda
Class Opener
Instructor Topics and Worksheet Time
◦ Worksheet Activities and Discussion
◦ Business Plan Sections
Guest Speaker
Break
◦ Refreshments
◦ Networking Activity
Instructor Topics and Worksheet Time
◦ Worksheet Activities and Discussion
◦ Business Plan Sections
◦ Writing and Reading Assignments
Expectations and Ground Rules
Attendance
Assignments
◦ Absenteeism
◦ Reading
◦ Punctuality
◦ Worksheets
Participation
◦ Discussion
◦ Confidentiality
◦ Listening
◦ Written business plan
sections
◦ Format
General
◦ Safe environment to test
ideas
◦ Ask questions
◦ Add ground rules as
needed
Traits of Successful Entrepreneurs

Passion. Enjoying what you do is a
big part of doing it well!

Persistence. Entrepreneurs don’t
give up when facing challenges.

Self-confidence. Entrepreneurs have
confidence in themselves.

Optimism. Entrepreneurs believe
their hard work and planning are
likely to pay off.

Critical thinking. Smart
entrepreneurs look at situations as
they are, not as they want or imagine
them to be.

Creativity. This is the main factor
that determines whether an
entrepreneur will succeed or fail.

Risk-taking. Entrepreneurs take
calculated risks to reach worthwhile
goals.

Willingness to work hard.
Entrepreneurs are achievementoriented people who take pride in
overcoming obstacles.

Cooperation. Smart entrepreneurs
know when to seek help.

Communication skills. Marketing
your business is an ongoing process
of communicating the things that
make it special.

Fairness. Successful entrepreneurs
earn a good reputation through fair
dealing and personal integrity.

Staying healthy. Entrepreneurs
know that taking care of business
requires taking care of themselves.
Risks of Business Ownership

Stress. Starting a business
is stressful at the best of
times. The more you have
at stake, the more stressful
it is.

Financial hardship. You
may have your own money
or other assets at risk. Also,
your income may be
irregular during the first
year.


Failure. The emotional
effects of business failure
can be hard to handle,
especially if you don’t have
strong support from friends
and family.

Long hours. You may have
to work 50 hours or more
per week. This could mean
giving up activities you
currently enjoy.
Debt. If your business fails, 
you may end up with
serious debt, credit
problems and other financial
troubles that make it hard
to get back on your feet.
Family problems. If your
family members don’t
understand and accept the
risks of your new business—
including long hours and
new financial stress—serious
conflicts are likely.
Rewards of Business Ownership

Independence. You’re in
charge of your own life and
work.

Helping your community.
Successful businesses help
communities grow and thrive.
Job security. These days, a
 Learning new skills.
microbusiness may offer more
Launching a business is a
stability than a traditional job
powerful learning experience
would.
that can transform many areas
of your life. No matter what
 Money. The financial rewards
happens, you’ll gain new
of running a microbusiness can
valuable skills and experience.
go far beyond what you would
earn at a normal job.
 Excitement. Running your own
business offers opportunities
 Pride. Running a successful
for excitement, creativity and
business can earn recognition
recognition that most
and build pride and selftraditional jobs can’t match.
respect.

Personal and Business Goals
Common personal goals

Use your creativity or talent.

Move to a bigger home.

Common business goals

Grow your business by 10 to
15 percent each year.
Put money aside for your
child’s education.

Grow the business to a
certain size and sell it.

Get off welfare or Section 8.

Grow the business and open
a second location.

Sponsor community events
(concerts, lectures,
afterschool programs).

Hire two employees in your
first year.

Spend plenty of time with
your family.

Be the greenest business in
your industry.

Help to solve a social or
environmental problem.

Capture a certain percentage
of your market.

Revitalize a struggling
community or neighborhood.
Why Do Microbusinesses Fail?

Lack of a well-researched
business plan

Not identifying their
target customers

Not understanding what
their target customers
need and want
natural disasters, theft,
illness and growth

Poor accounting practices

Poor inventory
management

Poor cash flow
management
Not setting the right price
for products and services  Owner’s salary is too high
 Failing to comply with
 Choosing the wrong
laws, regulations and
distribution method
taxes
 Poor customer service
 Failing to seek help from
 Failing to plan ahead and
mentors and other smallprepare for contingencies, business experts
including:

Why Do Microbusinesses Succeed?

Careful research and
planning at every
business stage

Taking steps to minimize
or avoid problems that
affect business operations
A clear understanding of  Good accounting and
who their customers are,
bookkeeping
where they live and what
 Good inventory
they need
management
 A unique product that
meets customer needs,  Careful budgeting
offered at the right place,  Effective promotions
the right time and the
 Good organization and
right price
management skills
 Excellent service based
on an ongoing dialogue  Asking for help when
necessary
with customers

Bootstrapping Ideas

Share a rental space with another
business.

Hire workers for one-time tasks
through a website like Craigslist.



markets, street fairs and “pop-up
retail” options.

Participate in a small-business
incubator.
Look for Local Exchange Trading
Systems (LETS) whose members
trade goods and services.

Look for a local nonprofit that
provides microbusiness owners
with free or low-cost computers.
Barter to procure supplies, or trade
expertise you have for expertise
you need.

Look for free supplies on
Freecycle.org and similar sites.
Use free or low-cost online faxing,
database and accounting programs.

Get funding through online tools
like Kickstarter.
Find an existing business that will
let you rent equipment or facilities.  Increase your visibility and reach
with Twitter, Facebook and other
 Test-market your product online
social networking sites.
with sites like Etsy or eBay.
 Send marketing materials and
 Ease yourself into business by
catalogs electronically instead of
selling at flea markets, farmers’
printing and mailing them.

Networking Tips




Think ahead! List all the

people you know, and think
about how they could help you
launch your business. Consider
family, friends, neighbors, work 
contacts, school contacts,
online contacts and interest
groups.
Be sincere! Most business
people are good at spotting
insincere networking attempts.
Be clear! Come up with a
simple, compelling way to
introduce yourself and your
business idea.

Keep your network warm!
Set up a system to stay in
touch with your contacts.

Be reliable! Always follow
through on your promises.

Be helpful! Networking is a
two-way street. The more you
give, the more you get!
Be prepared! Always carry
business cards.
Be confident! Learn and
practice positive body language
and conversation skills. If
necessary, get help from a pro.
Stand out in a crowd! Wear
something unusual to spur
conversation (e.g., a unique
pin, watch or ring).
Professionalism in Business
ALWAYS be on time for meetings and other
appointments.
ALWAYS dress appropriately.
ALWAYS speak and act politely and respectfully.
ALWAYS respond promptly to phone calls and emails.
ALWAYS maintain a clean, orderly workspace or
office.
ALWAYS do your best to exceed expectations.
NEVER
make promises you can’t keep.
NEVER
hire employees who don’t meet your
standards for professionalism.
NEVER
argue with customers.
Verbal Communication Tips

Speak at a clear,
comfortable pace—not
too fast, and not too
slow.

Speak at a moderate
volume—not too loud,
and not too quiet.

Avoid vulgarity, slang
and swear words.

Never interrupt people.

Listen! Good
communication
requires careful
listening.

Don’t use jargon or
technical terms without
defining them.

Stay positive and steer
clear of controversy.

Use business terms
correctly and
appropriately.

Record yourself
speaking and listen
back to identify areas
for improvement.
Listening Skills





Stop whatever you’re doing. When other
people speak, give them your full attention.
Be engaged. Look alert and maintain eye
contact.
Show interest. Encourage the speaker to
continue by nodding, laughing where
appropriate and showing other signs of
interest and attention.
Prove that you’re listening. Summarize
points and ask questions to make sure you
understand what’s being said.
Think before you respond. Listen carefully,
judge calmly and then react.
What Are Your Time Wasters?
Watching TV

 Talking on the
telephone

 Spending time online
 Disorganization

 Lack of clear goals

 Worrying
 Frequent interruptions 

 Long lines

 Unreliable
transportation
 Misplacing things

Other people make too
many demands on your
time
Feeling overwhelmed;
not knowing where to
start
Looking for information
Procrastination
Failure to prioritize
Oversleeping
Negative attitude
Time Saver Tips

Use a calendar or planner  Always put tools and
every day
equipment away

Prioritize your tasks

Ask family for more help
with household chores

Look for online
alternatives (e.g., buying
postage online instead of
waiting in line at the post
office)
Set clear boundaries
between family time and  Use timers or clocks to
business time
manage your time
 Complete difficult tasks
 Schedule regular breaks
when you’re at your daily
peak
 Plan shopping trips
carefully to avoid making
 Learn to say no
multiple runs
 Keep all business papers
 Get help with tasks you’re
filed neatly
not good at

Coping With Stress

Take a break! Getting some
distance clears your head and
helps you make better
decisions.

Find support! No matter what
you’re going through, someone
can help you cope.

Slow down! Set aside some
quiet time every day to reflect
and relax.
Get some exercise! Research
shows that exercise reduces
stress and eases depression
 Stay motivated! Carry an
and anxiety.
inspirational quote.
 Eat well! A microbusiness is
 Get help! If you have a hard
only as healthy as its owner.
time overcoming negative
 Get enough sleep! The
thoughts and worry, cognitive
combination of high stress and
behavior therapy (CBT) is
little sleep is very dangerous!
proven to reduce anxiety and
depression.
 Think positively! You may not
have control over stressful
events, but you can control
how you react to them.

Personal
Budgeting
Worksheet
Understanding Net Worth
ASSETS (What you own)
LIABILITIES (What you owe)
=
NET WORTH (What’s left)
Personal
Financial
Statement
Worksheet
What You Must Know About Credit




Whenever you buy

something on credit or apply
for credit, it’s reported to
national credit bureaus that
track your credit and

payment history.
The main three credit
bureaus are Equifax,
TransUnion and Experian.
When you apply for credit,
credit bureaus generate a
credit report based on your
name and Social Security
number.
A credit score is assigned to
you based on your credit
history.
Creditors and lenders use
credit scores to make
decisions about your
application.
Your personal credit score
affects your startup
business’s ability to get
credit.

If you are denied credit, you
are entitled to a free copy of
your credit report.

You can get a free credit
report annually from each of
the three credit bureaus by
visiting
AnnualCreditReport.com.
How to Protect Your Credit



Get copies of your

Equifax, TransUnion
and Experian credit
reports annually. For

best results, order a
free copy from one of
the bureaus every four
months.
Note any incorrect
information on your
credit reports, and alert 
the credit bureaus in
writing.
Don’t apply for credit
accounts unless
absolutely necessary.
Create or sign up for
payment reminders to
avoid late payments.
Protect your Social
Security number, credit
card number and other
private information to
avoid identity theft and
other forms of fraud.
Check your monthly
credit card bill for
unauthorized or
incorrect charges.
Overcoming Credit Problems

Create a personal budget
and stick to it.

Do not apply for more
credit or incur more debt.
them. Make the largest
payments toward the
debt with the highest
interest rate while
maintaining minimum
payments on other credit
accounts. Once the most
expensive account is paid
off, move on to the next.
Contact creditors and
make arrangements to
pay back old debt. Try to
get monthly payments
reduced, if possible.
 Beware of ads and emails
that promise quick fixes.
 Fix any errors on your
Credit repair is possible,
credit report.
but it takes time and
 Pay your bills on time!
patience.
 If you are making
 Get help from a reputable
payments on multiple
credit counseling or debt
credit accounts, prioritize management service.

NxLeveL®
MicroEntrepreneur
Business Plan
Outline - 1
Section
Worksheet Pages
Cover Page
14-8
Table of Contents
14-9
Section I. Executive Summary
14-6
Section II. Business Concept
A. General Description of the Business
3-3 to 3-6
B. Business Goals and Objectives
3-1 and 3-2
C. Industry Information
Industry Background
4-5
Current and Future Trends
4-6 and 4-7
Business Fit in the Industry
4-8
Section III. Business Organization & Operations
A. Business Structure, Management and Personnel
Business Structure
5-1
Personal Background Information
1-8 and 1-9
Management Team
6-1 to 6-3
Outside Services and Advisors
6-4 and 6-5
Personnel
6-6 to 6-11
B. Operations Plan
Site and Equipment
6-12 to 6-14
Purchasing and Inventory
6-15
Risk Management
6-16 to 6-19
Laws, Regulations and Taxes
5-2 to 5-4
Contracts and Leases
5-5 and 5-6
C. Managing Books and Records
13-1 to 13-6
NxLeveL®
MicroEntrepreneur
Business Plan
Outline - 2
Section
Worksheet
Section IV. Marketing Plan
A. Products and Services
Product Description
Features and Benefits
B. Market Analysis
Customer Analysis
Competitive Analysis
Market Potential
C. Marketing Objectives, Strategies and Tactics
Product Strategy
Pricing Strategy
Placement Strategy
Promotional Strategy
D. Sales and Customer Service
Sales Strategy
Customer Service Strategy
Section V. Financial Plan
A. Capital Requirements
Startup Costs
Loans, Grants and Self-Financing
B. Sales Forecasts
C. Cash Flow Projections
Monthly Cash Flow Projections–Year 1
Notes to Cash Flow Projections
Annual Cash Flow Projections—Years 2 & 3
D. Financial Statements
Sources and Uses Statement
Personal Financial Statement
Income Statement [Optional]
Balance Sheet [Optional]
Attachments
Pages
7-1 to 7-3
7-4
7-5 to 7-7
7-8 to 7-11
7-12 and 7-13
8-1 to 8-5
8-6 and 8-7
9-1
9-2 to 9-8
11-1 to 11-5
11-6 to 11-8
12-2
14-1 to 14-3
12-7
12-1 to 12-9
12-10
12-11 and 12-12
14-1 to 14-3
1-14 to 1-16
14-10 to 14-11
Where Do Business Ideas Come From?
Prior job
56%
Hobbies and interests
18%
Chance
10%
Someone else’s suggestion
8%
Education
6%
Other
2%
Comparison of
Manufacturing
Service and
Retail
Businesses
How to Identify Business Opportunities

Take stock of your skills and
experience. What are your
strengths? What can you
offer?

Keep an eye out for unmet
or underserved needs
identified by friends and
relatives.


Meet temporary needs.
Rental businesses are
springing up for tools,
college textbooks and even
baby clothes!

Find new uses for old things.
There are hundreds of
potential uses for old and
discarded goods and
materials.

Find a new way to deliver an
old product. Many
entrepreneurs make their
fortunes by changing where
and how people buy an
existing product.

Stay informed! Stay on top
of business ideas and trends
by reading newspapers,
trade journals and
magazines.
Look for green
opportunities. Can you make
an existing product better
for the environment?
Evaluating Your Business Idea

Is my business idea safe and legal?


Is there enough customer demand to
support my business? Can I meet this
demand?
How often will they buy? How much will
they buy? How much will they pay?

How many competitors do I have locally,
regionally, nationally and internationally?

Where will I get the capital I need to
start this business?

Is anyone else offering my product? If
so, can I do it better? If not, why not?

Can I run this business by myself? What 
kind of workspace do I need? Can I work
from home?

Where will I get the materials and
equipment I need? How much will they
cost?

Who are my customers? Where are
they?

Where will my customers buy? At a
store? Online?

Why will they buy? Why do they need
my product?
What is my maximum possible financial
loss?

When will I start earning a profit? How
will I cover my personal expenses and
debts until then?

How do I know my business will become
profitable? Will the profit be enough to
cover my personal expenses and debts?

How and when will I grow my business?
What to Look For in a Niche Market

Clearly defined and
measurable
(skateboarders in your
area, aged 12 to 25).

Growth rate (stable or
expanding).

Presence and strength of
competition, locally and
online.
Accessibility (how will you
communicate with them?
 Percentage of the market
How will you deliver
you can realistically
products?).
target, given your
 Worthwhile size and sales
budget, capabilities and
potential (how many
competitors.
customers are there, and
how much do they spend  Percentage of the market
you must capture to earn
each year on skateboard
a profit.
parts?).


Unmet needs (no parts
shop in the area).
Segmenting Your Customers
Demographic segmentation
Geographic segmentation
◦
Age
◦
Country, state, city
◦
Gender
◦
Rural, urban, suburban
◦
Income level
◦
Population density
◦
Marital status
◦
Climate / weather
◦
Occupation
◦
Terrain (coast, prairie)
◦
Education level
◦
Access to Internet
◦
Kids at home?
◦
Infrastructure (roads, rail)
◦
Ethnicity
◦
Natural hazards
Psychographic segmentation
◦
Lifestyle
◦
Needs and values
◦
Attitudes
◦
Beliefs / opinions
◦
Buying styles
◦
Interests / hobbies
◦
Recreational choices
◦
Entertainment choices
What Makes Your Business Idea Unique?

New invention or service

One-of-a-kind product (e.g.,
arts and crafts)

Benefits other products lack
(comfort, ease of use, color,
shape, durability)


Special materials or
processes (handmade,
recycled, green, organic,
local)
Location (convenient for
customers; near a local
attraction; region has
historical or social interest)

Personal story (a family
tradition; your skills or
accomplishments; a
personal or social
commitment)

Faster and better customer
service

Customization or
personalization

Unique distribution channel
(house calls, online service)

Special add-ons or extras

Supports a cause or
philosophy (community
redevelopment, social
justice, green living)
Sources of Business Information

U.S. Census Bureau

Local nonprofit foundations

Small Business Development Centers
(SBDC)

Local or state office of economic
development

Small Business Administration (SBA)  Local credit union or community bank

Women’s Business Centers (WBCs)

Magazines and newspapers

Minority Business Centers (MBCs)

Business websites and expert blogs

University and community libraries

Talking with potential customers

SCORE

Talking with competitors

Association for Enterprise Opportunity
(AEO)

Microlenders

Business Information Center (BIC)

Trade associations

Suppliers and vendors

Local business mentoring groups

Local chamber of commerce
Questions About Business Planning

Is a business plan really
necessary for a tiny
microbusiness like mine?

How will planning affect
my bottom line?

What’s the connection
between a business plan
and management skills?

Why do lenders and
investors care about
business plans?


How can I make plans
when everything’s so
uncertain?
Do I have to get
everything right the first
time? What happens if I
learn new things or
change my business idea?

Can’t I just start my
business now, and deal
with management issues
as they come up?

How often is planning
necessary?

Who can help me
complete my plan?

What if I don’t complete
my plan?
The Benefits of Planning

Seeing the big picture.

Planning helps you sort through
your business issues and
identify the ones that cause
most of your problems.
Continuous improvement.
Comparing planned to actual
results is a terrific way to
improve your business
operations.
Clear communication. A good  Being prepared. A business
business plan clearly explains
plan helps you avoid, minimize
your goals to employees,
or recover from disasters.
partners, lenders and investors.
 Assessing financial
 New opportunities. Change
performance. Preparing a
brings opportunities. Careful
financial plan helps you
planning helps you make the
measure and improve your
most of them.
business’s financial
performance.
 Surviving economic
downturns. Microbusinesses
are vulnerable to changes in
the economy. Owners who plan
are more likely to stay in
business.

The Planning Cycle
Keys to Successful Planning
As the owner, you  The plan should
must take the lead
include contingency
role.
plans for worst-case
scenarios.
 Everyone in your
family and your
 The plan should be
business should
flexible.
have input.
 Review your plan


Goals and
objectives must be
clear, realistic and
include a deadline.
often and revise it
as necessary.
Business Goals and Objectives
Goals are things you
want your business to
accomplish over a
specific time period.
◦ Short-term goals are
things you want to
accomplish within one
year.
◦ Long-term goals are
things you want to
accomplish within two
to three years.
Objectives are
specific steps you will
take to reach your
goals.
Characteristics of a Good Mission Statement

Reflects the core purpose and direction of
the company

Embodies the basic values of the owners
and employees

Short, specific and focused

Written in plain English, without trendy
jargon and buzzwords
Setting Exit Limits
Exit limits are a safety net If my business experiences
against personal and
the following, I will call it
professional loss. Your exit quits:
limits might look something
◦ Overdue bills exceeding
like this:
$10,000
If my business experiences
◦ Annual sales below $20,000
the following, I will seriously
◦ More than $75,000 in longconsider calling it quits:
◦ Overdue bills exceeding
$5,000
term debt
◦ Annual sales below $30,000
◦ Profit margins below 10
percent over six consecutive
quarters
◦ More than $50,000 in longterm debt
◦ A buyout offer of $75,000 or
more
◦ Profit margins below 12
percent over four consecutive
quarters
◦ A buyout offer of $50,000 or
more
Elements of Marketing
Market Research
◦ Gather primary and secondary data about your industry.
◦ Gather primary and secondary data about your customer,
competition and market potential.
Market Analysis
◦ Analyze the data you gathered about your industry,
customer, competition and market potential.
◦ Identify your target customer.
◦ Identify your competitive advantage.
Marketing Objectives, Strategies and Tactics
◦ Determine the best methods of getting your goods and
services to your customers, based on your market analysis.
◦ Create a marketing mix using the Four Ps: Product, Price,
Placement, Promotion.
Contents of the Marketing Plan
A. Products and Services
◦ Product Description. What is your
product? What needs does it meet?
◦ Features and Benefits. What are your
product’s features and benefits?
B. Market Analysis
◦ Customer Analysis. Who and where
are your target customers?
◦ Pricing Strategy. What is your pricing
strategy? How have you calculated costs
and profitability?
◦ Placement Strategy. How will you get
your products to your customers? Why
is this the right choice for them and for
you?
◦ Promotional Strategy. How will you
promote your business? What media will
you use? How much will this cost? How
will you measure success?
◦ Competitive Analysis. Who and where
D. Sales and Customer Service
are your competitors? What are their
strengths and weaknesses?
◦ Sales strategy. How will you sell to
your target customers? Why did you
◦ Market Potential. How big is your
choose this method?
target market? What percentage can
you capture? What trends affect it?
◦ Customer service strategy. What are
What barriers to entry exist?
your quality control policies? How will
you track and measure customer
C. Marketing Objectives, Strategies
satisfaction? What is your refund and
and Tactics
return policy? How will you
communicate with customers, and what
◦ Product Strategy. What is your
steps will you take to resolve problems?
product line? What is your product
positioning strategy? What is your brand
identity?
Sales Forecasting Methods
Breakdown Forecasting
◦ Start with the largest population and break it
down to estimate sales from target customers.
Buildup Forecasting
◦ Estimate the size of each market segment, and
add them to get a total.
Indirect Forecasting
◦ Find possible indications of demand and sales
when specific market data are missing.
Sources of Industry Data

Federal, state and local government offices and
websites

Standard & Poor’s Industry Surveys (available
through library)

U.S. Census Bureau Economic Stats
(http://www.census.gov/econ/)

Standard & Poor’s Statistical Service (available
through library)

EconomicIndicators.gov


FedStats.gov
Encyclopedia of American Industries (available
through library)
International Trade Administration’s Office of
Industry Analysis
(http://www.trade.gov/mas/ian/index.asp)


Encyclopedia of Emerging Industries (available
through library)

ProQuest Statistical Insight (available through
library)

Join online industry forums and sites

Follow industry leaders and experts on social media

Professional research firms

Follow competitors on social media

Small Business Administration’s Business Data and
Statistics page (accessible from
http://www.sba.gov)

Small Business Development Centers (SBDCs)

Women’s and Minority Business Centers (WBCs and
MBCs)

Business Information Centers (BICs)


Local, state and national trade and industry
associations
U.S. Business Reporter Industry Research
(http://www.activemedia-guide.com/)

Conduct your own interviews and surveys with key
industry contacts and experts

National Association of Manufacturers:
Manufacturing & Trade Data By State
(http://www.nam.org/)

Business and industry magazines and websites

Local, state and national nonprofit foundations

Local newspapers and magazines

Chambers of commerce
Ways to Gather Primary Data

Face-to-face interviews

Phone interviews

Email or mail interviews

Email or mail surveys

Phone surveys

Online surveys

Post research questions on social media
(e.g., blogs, Twitter, Facebook)
Drawing Industry Conclusions




How has the industry 
developed?
How do

microbusinesses
operate within this
industry?

What are the
industry’s current
growth patterns?

What is the industry’s
current size? Is it
expected to grow or
shrink over the next
three years?
What niche markets
are hot?
How does
international trade
affect the industry?
How will new and
emerging technology
affect the industry?
How will current and
new regulations affect
the industry?
Sole Proprietorship
Pros

The simplest way of doing
business. Easy to form
and dissolve.

You have complete control
over the business and
receive all its income.

Filing income taxes is
relatively easy.
Cons

You are personally
responsible for every act
and debt of the business,
so creditors can legally
come after your house,
car and personal savings.

You can’t expand your
business through new
owners and their capital.

Sole proprietorships end
when the owner dies or is
unable to work. This can
cause serious problems
for the owner’s family.
General Partnership
Pros

Fairly simple to set up.

Partners may bring new
expertise or additional
funding to the business.

Business profit and loss pass
through to each partner’s
personal income tax return.
Cons

Partners are jointly and
individually liable for
business debts. Creditors will
go after whoever has enough
assets to cover the debt.

Each partner usually has the
right to sign contracts that
are binding on the other
partners.

General partnerships usually
end if one partner dies or
withdraws.

Partners pay tax on their
share of profit even if they
don’t withdraw it from the
business.
Limited Partnership
Pros


Limited partners are only
liable for debts to the
extent of their
investment.
Partners can provide
additional funding for the
business.
Cons

More expensive to form.

General partners are
jointly and severally liable
for debts.

If limited partners get too
involved in the business,
they can also be held
liable for losses that
exceed their investment.

It may be hard to find a
partner who’s willing to
invest without having the
authority to make
decisions.
Corporation
Pros

A corporation can shield
owners from debts and
liabilities.

You can raise money by
selling stock.

The business continues
even if the owner dies or
sells to a new owner.

You may be able to
deduct employee health
insurance and benefits.
Cons

If corporate rules aren’t
followed, the owners can
be held responsible for
debts and liabilities.

Time-consuming and
expensive to form. More
regulations, paperwork
and recordkeeping.

Risk of double taxation.
The corporation pays tax
on its income, and you
pay tax on any dividends
you receive as a
shareholder. (An
accountant can help you
avoid this problem.)
S Corporation
Pros

Profit or loss is
passed back to the
shareholders like a
partnership.
Cons:

Limited number of
shareholders.

Limited to one class
of stock.

Must file their tax
return on a
calendar year basis.
Limited Liability Company (LLC)
Pros

Limited liability, like
a corporation.

No double taxation,
like a partnership.

If one partner can
utilize tax losses
better than another,
the LLC allows
beneficial allocation
of that tax benefit.
Cons

Can be expensive
and complicated to
form, depending on
where you live.

Some states don’t
allow LLCs to have
only one owner.
Low-Profit Limited Liability Company (L3C)
Pros

Limited liability, like
an LLC.

Operating as an L3C
makes you eligible
for investment and
grant money from
nonprofits.
Cons

Can only be formed
for charitable
purposes.

Many states don’t
have L3C laws, so
you have to form it
in a state that does.
Cooperative
Pros
 Members own and
control the business.
 Potential for collective
efforts to improve
marketing and add
value to products.
 Shared expertise in
operation is a
potential benefit.
Cons
 Lengthy process by
members to set up
(bylaws, major policy
issues, direction,
board).
 Effectiveness
depends on
members’ long-term
dedication.
 Group decisionmaking and shared
ownership may be
cumbersome.
Government Regulations
Business Registry
◦ Business licenses
◦ Filing requirements
◦ Business name registration
Zoning Laws
◦ Signage restrictions
◦ Parking restrictions
◦ No manufacturing or sales
◦ No deliveries or storage
◦ No noise or pollution
Business Taxation
◦ State income tax
◦ Sales tax
◦ Property tax
◦ Federal income tax
Employee Regulations
◦ Payroll taxes / withholding
◦ Independent contractors
◦ Wage and hour regulations
◦ Equal Pay Act
◦ Immigration laws
◦ OSHA regulations
◦ Civil rights laws
◦ Child labor laws
Consumer Protection Laws
◦ Consumer privacy laws
◦ Do-Not-Call Act
◦ Direct emails (CAN-SPAM)
◦ FTC mail or phone order rule
◦ Refunds and returns
◦ False advertising
◦ Labeling laws
◦ Public health and food safety
Shipping Regulations
◦ Certification and licenses
◦ Hazardous materials laws
◦ Export controls and customs
Environmental Regulations
◦ Hazardous materials storage
◦ Clean Water Act / Clean Air Act
◦ Waste disposal
◦ Underground storage tanks
Bankruptcy Laws
◦ Filing requirements
◦ Limitations on protection
IRS 20-Point Checklist: Independent Contractor or Employee?
Primary Factors
1.
Does the service recipient have the right to
require compliance with significant
instructions?
2.
Does the service recipient have the right to set
the hours of work?
3.
Does the service recipient have the right to set
the order or sequence of services to be
performed?
4.
Does the service recipient have the right to
discharge the service provider?
5.
Does the service provider have the right to
hire, pay and supervise assistants as the
nature of the work requires?
6.
Does the service provider have no ability to
realize a profit or loss?
7.
Does the service provider have no investment
in significant tools, materials and other
equipment when such items are necessary to
accomplish the task and are customarily
provided by the service provider?
8.
Does the service provider have no significant
investment in facilities when they are
necessary to accomplish the task and they are
customarily provided?
YES suggests employee status.
NO suggests independent contractor status.
Secondary Factors
9.
Does the service recipient train the service
provider?
10. Does the service recipient have the right to
require oral or written reports?
11. Does the service recipient pay by the hour,
week or month?
12. Does the service recipient pay for business
and/or travel expenses?
13. Does the service recipient have the right to
require personal service?
14. Does the service provider usually not work for
more than one firm at a time?
15. Does the service provider maintain a
continuing relationship with the service
recipient?
16. Does the service provider devote substantially
full time to the service recipient?
17. Does the service provider have the right to
terminate the relationship at any time without
incurring liability?
18. Is the service provider integrated into the
service recipient’s business?
19. Does the service provider not make his or her
services available to the public on a regular
and consistent basis?
20. Does the service provider work only on the
service recipient’s property or designated
location?
Basic Contract Terms
Performance
◦ What actions must you complete?
Price
◦ How much, in what currency?
Place of delivery
◦ Where, by what method?
◦ Who’s liable while goods are in transit?
Time to perform
◦ When are the goods or services due?
◦ When is payment due?
Quality
◦ What quality standards must be met?
Legal remedies
◦ How will the contract be enforced?
What’s in a Lease?

What are you
leasing?

True cost of the
lease

Payment escalators

Permitted uses

Tenant rights

Renewal options

Purchase rights

Right of first refusal

Exclusivity

Triple Net Lease
(tenant pays taxes,
insurance, utilities,
maintenance in
addition to rent)

Common Area
Maintenance (often
added to the lease
in malls or shopping
centers)
Protecting Intellectual Property


Trademarks
protect your
business and
product name and
logo.
Copyright protects
creative work in
tangible form (e.g.,
writing, music, art,
photographs,
recipes, patterns,
etc.).

Patents protect
eligible new
processes, designs
and inventions.

Trade secret laws
protect private
business
information,
methods and
processes.
Pros and Cons of Working at Home
Advantages



Disadvantages
Flexibility in
scheduling

Isolation
Lower startup costs
and overhead

Loss of privacy

Credibility issues

Zoning problems

Space
More time with
family

Increased job
satisfaction

Tax advantages

No commute
Home-Based Business Tips

Set clear boundaries between work and
personal life

Make time for family!

Set up a functional office

Project a professional business image

Understand zoning regulations and taxes

Understand insurance needs

Stay connected!
Managing Business Communications
Written communication
◦ Be clear and concise.
◦ Always type your business
letters.
◦ Check spelling and grammar
carefully.
owners never say anything
they wouldn’t be willing to put
in writing.
◦ Be organized! Set an agenda,
and be clear and brief.
Phone etiquette
◦ Keep duplicates or backups of
all communication.
◦ Answer with a friendly greeting
that identifies yourself and
your business.
◦ Develop a secure and effective
filing system.
◦ Sound confident and
enthusiastic!
◦ Remember that putting things
in writing may form a contract.
◦ Always keep a duplicate
message pad handy.
Verbal communication
◦ Be honest! Always stick to the
facts, and never make
promises you can’t keep.
◦ Be reliable! Smart business
◦ Say thank you!
Traditional Organizational Chart
Optional Organizational Chart
Key Management Goals










Learn to delegate
Develop your internal team and your external
team
Develop management goals and strategies
Create efficient processes and structures
Assign responsibilities and authority
Ensure clear communication
Lead by example
Get advice when needed
Accept constructive criticism
Have fun!
Guidelines for Successful Outsourcing
Understand your core competencies
◦ What expertise do you have in-house? What expertise must you
seek elsewhere?
◦ Figure out what you do best, and consider delegating the rest.
◦ Can you manage the new relationships that outsourcing will
involve?
◦ Are there structures in place to make it work?
◦ What matters to customers? Will outsourcing affect their
perception of your business, or your core competencies?
Look at long-term viability, not short-term savings
◦ Don’t assume that decreasing labor costs will always provide big
savings!
◦ Weigh efficiency against effectiveness. Seeking greater efficiency is
a bad idea if it lowers your ability to meet customer service and
quality standards!
Basic Employee Management Practices

Identifying policies, tasks and job
descriptions

Interviewing, selecting and hiring, and
training

Setting performance goals

Evaluating and measuring performance

Creating compensation and incentive
strategies

Facilitating communication and continuous
learning
Expanding Your Network




Join a formal networking
group. Local chambers of
commerce and similar
groups usually offer regular
networking sessions and
business seminars.
organization, you’ll also
have an opportunity to let
others know about your
business.

Become active in local
business organizations, and
get to know people with
similar interests.
Add contacts to a mailing
list you can use to advertise
your products.

Start an informal support
group. Meet with other
microbusiness owners to
discuss common business
issues.
Use social networking tools
like Twitter and LinkedIn to
increase your visibility and
grow your network.

Remember that networking
is a two-way street. You
must give in order to
receive!
On behalf of your business,
get involved with a local
charity. As you give to the
Types of Insurance
Property and liability
insurance
Life and health
insurance
◦ General liability
◦ Workers’ compensation
◦ Business property
◦ Life insurance
◦ Business interruption
◦ Health insurance
◦ Business crime
◦ Self-insurance
◦ Fire and flood
◦ Social Security
◦ Key person
◦ Pension plans
◦ Commercial auto
◦ Electronic data
processing
◦ Website
◦ Home office
Tips for Lowering Insurance Costs
Secure all doors and windows!
◦ Adequate lighting, barred windows and secure doors greatly reduce the risk of
theft.
Fire safety is one of the biggest factors in insurance costs!
◦ Install smoke alarms and test them every month.
◦ Avoid dangerous electrical connections.
◦ Keep the perimeter and interior of your building free of debris and clutter.
◦ Store hazardous chemical properly.
◦ Keep fire extinguishers fully charged.
Keep your business site safe for visitors!
◦ Walkways should be clean and dry, and steps should be sturdy and well
maintained.
◦ Keep your office area free of clutter.
Keep your business safe for employees!
◦ Provide adequate safety gear, and avoid unsafe working conditions.
◦ Replace hazardous chemicals with safer alternatives wherever possible.
◦ Create a written safety policy and hold regular safety meetings.
Business Continuity Planning

List all necessary business functions,
who performs them, and what
equipment and supplies they require.

Compile contact information for key
employees and assign recovery tasks.  Revise the plan as necessary. When
things change, your plan needs to
Identify threats, and the business
change with them.
functions they threaten. Try to
minimize the damage they can do to  Test the plan regularly. It’s better to
infrastructure, equipment and data.
learn about mistakes during a practice
run than during a crisis!
Get contact information for all
essential outside partners (lawyers,
suppliers, etc.).



Identify and make copies of essential
documents. Create duplicates of all
the documents you need to run your
business.

Designate a secondary work site to
use until your primary site is restored
or replaced.

Get employee input. Seek employee
comments before finalizing the plan.

Distribute the finished plan to
employees. Every member of your
team should have a copy of the plan
at work and at home.
Requirements for Successful Business Growth

A profitable
business model

A stable or growing
market demand for
your products
Proven operating
procedures that
 The ability to
have been set down provide additional
in writing
training to your
employees, if
 A clear
needed
understanding of

your current and
future customers

Openness to change

Access to growth
capital
Surviving Economic Downturns

Revisit your budget and your
business plan. Expenses that aren’t
crucial may need to be cut, scaled
back or postponed.

Don’t stop advertising. In tough
times, the last thing you want to do is  Offer incentives. Special offers, free
reduce your visibility.
services and added value can attract
customers who are worried about
Innovate. Consumers may welcome
their finances.
new tactics and offerings.
 Don’t ignore payroll taxes and
Reduce inventory. This can free up
other payments that are due to
space, time and money!
the government. These agencies
can impose fines, place a lien on your
Keep employees informed and
property, or even shut down your
inspired. They may have good ideas
business altogether.
for cutting costs or boosting sales. If
they stand by you, reward their
 Keep your creditors informed. If
loyalty when things get better.
you’re having trouble paying your
bills, stay in contact with your
Keep an eye on your supply chain.
creditors and vendors, and offer them
If vendors, customers or partners are
a realistic payment schedule.
having financial problems, it may
affect your ability to fill orders or get
paid.





Form partnerships and alliances.
Other struggling businesses may be
looking for ways to weather the
storm. Work together to find win-win
solutions!
The Purpose of Market Research
Your goal is to identify:
◦ Customers. Who will buy your product?
◦ Market niche. Who’s your competition, and
where do you fit into the market?
◦ Price. What price will make your product
competitive?
◦ Competitive edge. What makes you better
than or different from the competition?
◦ Location. Where will you sell your product to
reach your target customer?
Market Research Tips
Identify your research problem.  Always document your sources
Set clear objectives for data
thoroughly (e.g., book title,
gathering.
author, year of publication,
page number).
 Create a budget and a
timetable. Placing limits on the  If you create a survey, include
research process will keep it
a space for open-ended
from spiraling out of control.
comments.


Prioritize your research tasks.
Identify the most and least
important research questions.

Ask permission to record
interviews to ensure that you
don’t miss any important
details.
Prioritize your data sources.
Which ones are most likely to  Keep your surveys and
have the information you need? interviews short, clear and
neutral.
 Keep an open mind and seek
viewpoints that differ from your  Organize and analyze the data.
own. Don’t let wishful thinking
Make sure it addresses the
or beliefs affect how you gather research problem you
or interpret data.
identified.

Where to Find Market Data

Surveys. Interview groups or individuals by mail, online, in person or on the
telephone.

Government publications and statistics
◦ FedStats (http://www.fedstats.gov)
◦ Economics and Statistics Administration’s Economic Indicators
(http://www.economicindicators.gov)
◦ State government websites

Libraries. Information from libraries is usually free, except for the cost of
printing or copying documents.

Internet. Most public libraries offer free Internet access to subscription-based
industry sites and journals.

Universities, technical schools and Small Business Development
Centers may provide free or low-cost information.

Census banks. These “banks” store information rather than money. To find
them, check at the library or visit http://www.census.gov.

Chambers of commerce and trade associations and publications.
Industry and business groups offer information and support.

Competitors. Visit them, review their advertising and customer reviews, buy
and test their products.
The Product Life Cycle
Introduction
◦ The product is new and
entering the market for the
first time.
◦ Customers are generally
unaware of the product.
◦ Sales are low and there is
little competition.
Growth
◦ Sales and profits begin to
increase as public
awareness increases.
◦ New competitors take note
of the product’s growing
popularity and enter the
market.
Maturity
◦ Many competing products
are on the market.
◦ Businesses increasingly vie
for market share though
branding, redesign,
packaging improvements,
new colors or flavors and
other marketing strategies.
◦ Sales and prices tend to
peak or decline.
Decline
◦ The market is saturated.
Sales, profits and prices are
low enough that many
businesses are forced to
discontinue the product.
Features vs. Benefits
Features

Size, color and
shape

Quality

Varieties

Types

Materials
Benefits

Time savings

Convenience

Status

Security

Safety

Fun
People buy benefits, not features!
Goals of Market Analysis

Identify your customer profile
(demographics, psychographics, access to
and attitudes toward technology).

Identify your trade area (geographic
boundaries and size).

Determine the number of people (or
businesses) in your trade area who
potentially match your customer profile.

Determine the market potential for your
business in your trade area.
Demographics

Gender. Men and women have
different buying habits.
on whether they’re single or
married.
Age. Different age ranges have  Children. Households with
different buying habits.
children have different buying
habits than those with no
 Income. This tells you whether
children.
a customer or household can
afford your product, especially  Education. Education may be
if it’s a nonessential item (e.g.,
an indicator of reading
jewelry).
comprehension, use of
technology, income, etc.
 Occupation. This relates to
age, income and education,
 Ethnic origin. People from
and may indicate ability to buy. different cultures may have
different values and needs that
 Location. This includes how
influence buying habits.
near the customer is to your
business, as well as regional or
national location, geography,
climate and weather.


Marital status. Customers’
needs and desires vary based
Psychographics

Beliefs and values. Cultural, religious and political beliefs and
values can have a strong influence on buying decisions.

Behavior. What are your target customers’ spending patterns
and buying behavior?

Interests. How do your customers’ hobbies, pastimes and social
causes affect buying behavior?

Media choices. These provide a clue to buying decisions, income
and education, as well as what promotions are most likely to
succeed.

Recreation. People who like outdoor activities such as camping
or hiking may have different needs than people who prefer indoor
activities such as videogames or scrapbooking.

Transportation. People who have a car, bicycle, motorcycle, RV
or boat may have very different buying patterns.

Entertainment choices. Music, movie, book and art preferences
tell marketers a lot about lifestyles and attitudes.
Gathering Customer Data

If you sell something to eat, ask people to
taste it.

If you offer a service, ask people to use it.

If you sell something to wear, ask people to
try it on.
−THEN−

If people hate it, ask them WHY.

If people love it, ask them WHY.

Ask them questions about themselves
(demographics, psychographics, needs,
wants, motivations).
Things You Should Know About Your Competition

Who are they? List current competitors
and research any that may enter the
market over the next year.

Where are they? Are they in your city,
county, region, state? Are they national or
international?

Customers. Who are their customers?
Don’t assume they’re the same as yours.
Two companies selling the same basic
product can have very different target
markets.

Product. What do they really sell? What
features and benefits make their product
unique? What’s their niche? How do they
back the product up with customer service?

Price. Is their price in line with customer
expectations? How do they compare with
competing brands?

Placement. Where and how do they sell
their product? Do they sell online, offline or
both?

Promotion. What type of promotions do
they run? In what media, and to what
audience? Are they effective?

Location. Are they local, regional, national
or international? Is their location
convenient for their customers? Is it
convenient for yours? Can you offer greater
convenience?

Company image. What’s their reputation?
What are people saying about them online?
Do they have lots of goodwill, or are people
looking for an alternative?

Weaknesses and strengths. What things
do they do best? In what ways are they
weak? Compare the way they represent
their service to the service you actually get
as a customer. How will you take advantage
of their weaknesses? How will you compete
with their strengths?

Goals. What are their stated goals? What
are their long-term plans? What strategies
and tactics are they using to achieve those
goals? Online “About Us” and “FAQ” pages
can be good sources for this information, as
can interviews, articles and annual reports.

Differentiators. What features, benefits
and messages make the competitor stand
out in the marketplace? What aspects of
their business do they emphasize most
strongly?
The Four Ps vs. SIVA
FOUR Ps
SIVA
Product is what you offer
your customers.
Your product is a solution for
your customers’ problem.
Promotion is how you tell
customers about your
product.
Promotion gives customers
information about your
solution.
Price is the amount you
Customers buy based on
charge customers to buy your how much they value your
product.
solution.
Placement is how you deliver
your product to your
customer.
Placement gives customers
access to your solution.
Product Strategies
Understand your features and benefits!
 Consider how each stage of the product life cycle
affects marketing strategies
 Define product lines (depth and width)
 Define your product’s position in the marketplace
 Write a positioning statement
 Define your brand identity
 Write a branding statement
 Plan for brand management
 Make packaging decisions that reinforce your
positioning and brand
 Define service enhancements

Product Life Cycle
Introduction
◦ High startup and marketing costs.
◦ Poor distribution and sluggish
sales.
◦ Competition is usually at a
minimum.
◦ Product strategy focuses on raising
awareness.
Growth
◦ Product is accepted by target
market.
◦ More sales, but also more
competition.
◦ Product strategies: Expand
distribution; defeat new
competitors by building brand.
Maturity
◦ Widespread competition and
slower sales.
◦ Competitive pressure to lower
prices.
◦ Features, benefits and branding
become more important as
consumers look for reasons to
choose your product.
◦ Improvements to product may be
necessary to attract new
customers, recapture old ones and
outflank competitors.
Decline
◦ Market is saturated. Competition is
high; prices and sales are low.
◦ Product strategies include
discontinuing the product, cutting
production levels, or selling or
leasing it.
Positioning Statement Tips

State real, lasting benefits. Vague benefits like “great
taste,” and variable ones like “low prices,” aren’t adequate.
Lots of businesses can legitimately offer “great taste,” and
lots of businesses with low prices are forced to raise them.
Your positioning statement must get at the heart of your
product’s specific value to customers. As a rule of thumb,
try putting your competitor’s product name into your
positioning statement. If it’s just as accurate, your
statement needs more work.

Pinpoint your differentiator. Businesses often throw
terms like “unique” around, but these words don’t mean
anything unless there’s a real difference. And if there is a
real difference, you should describe it clearly instead of
using buzzwords. In other words, don’t say you’re unique;
explain why you’re unique.

Keep your customers’ needs in mind. If your statement
doesn’t give them a strong, obvious reason to buy from
you instead of a competitor, you need to go back to the
drawing board.
What Makes a Good Brand Name?






Establishes or
reinforces your brand
identity
Suggests product
benefits
Easy to pronounce,
recognize and
remember
Sets you apart from
your competitors
No double or hidden
meanings
Creative, but not too
cute or weird
Eligible for trademark
protection
 Suggests product
benefits (e.g., Mr.
Clean, Krispy Kreme or
Beautyrest mattresses)
 Fits the brand identity
and attitude
 Doesn’t limit your
ability to grow, change
or sell your business
 Reflects the scope of
your business (local,
national, international)

Brand Management Basics



Make sure your brand communicate your
promises something
brand identity.
customers want.
 Involve your
Keep it simple! Focus employees. Get them
on communicating a
excited about your
few basic points.
brand, and they’ll
communicate that
Be consistent.
Remember that every excitement to others.
interaction with a
customer or client is
an opportunity to

Whatever your brand
promises, exceed it!
Basic Pricing Terms

Cost is what you spend to produce your
product.

Price is the amount you charge
customers for the product.

Value is what your customer believes the
product is worth.

Revenue is the amount of money your
business receives from sales over a
specific period.

Profit is what’s left over after you
subtract costs from revenue.
Pricing Considerations

What are your costs?

What will your customer pay?

What brand identity do you want to convey?

What does the competition charge?

What will the market bear?

How will your price affect demand?

How does a service provider determine price?

What other pricing challenges does your
business face?
The Four Cs of Pricing

Customers. Knowing your target customers’ income
level, lifestyle and concept of value is central to
setting a realistic price.

Competition. In the last session, you identified your
direct and indirect competition, and you compared
their prices, features, benefits, strengths and
weaknesses to yours. You must take all these things
into account when setting your price.

Company position. If you provide better service and
higher quality than your competitors, that means you
offer greater value. This appeals to customers who
place a higher importance on service and quality.

Costs. To set a price that will earn a profit, you must
know your total variable and fixed costs (including
taxes).
Understanding Your Costs - 1
Variable expenses are costs that go up or down in relation to sales
volume. Example: Suppose you sell custom T-shirts for $10.00 each.
Selling Price
$10.00
Variable Expenses
Raw material (T-shirt)
3.00
Hourly labor
1.00
Sales commission (10%)
1.00
Shipping charge
0.50
Total Variable Expenses
$ 5.50
Price – Variable Expenses
$ 4.50
The $4.50 is called the contribution margin, because it represents
how much each unit of sales “contributes” toward paying for fixed
costs and profits.
Understanding Your Costs - 2
Fixed expenses are costs that don’t change, regardless of
sales volume. Example: Fixed expenses (per month)
Rent
Telephone
Insurance
$ 800
100
50
Bookkeeping
100
Loan payments
300
Total fixed expenses
$1,350
QUESTION:
How many T-shirts do you have to sell each month to
pay for your variable and fixed expenses?
Break-Even Analysis
Your Break-Even Point
How many T-shirts must you sell each month to pay for your
variable and fixed expenses and start making a profit?
Break-Even Units Volume =
Fixed Costs
Price - Variable Costs
Example:
Selling Price
$10.00 per unit
Variable Costs
$ 5.50 per unit
Contribution Margin
$ 4.50 per unit
Fixed Costs
$1,350.00 per mont h
Break-Even Point In Units: $1,350 ÷ $4.50 = 300 T-shirts
When you sell your 301st T-shirt, you will start making a profit for that month:
300 T-shirts x $10 = $3,000
Planning for Profit

Can you sell 300 T-shirts per month?

How much profit do you want to make?

If it takes 300 T-shirts per month to break even, how many more
shirts must you sell to earn the amount of profit you want?
Example
You want to make $900 in profit per month. How many more Tshirts do you need to sell?

It took 300 T-shirts just to break even.

After the first 300 shirts sell, $4.50 per T-shirt contributes to
profits.

$900.00 ÷ $4.50 = 200 more shirts must sell to earn desired
profit of $900.
Can you sell 500 T-shirts per month?
Pricing Strategies


Loss leader pricing offers a low
price on one product to attract
customers who will then buy
additional products at the normal
price.
Multiple pricing offers a discount
for buying more than one of an
item.

Cost-plus pricing means totaling
your fixed and variable costs and
adding a target return percentage
to arrive at your sale price.

Competitor-based pricing
involves basing your price on your
competitors’ price for a similar
product.
Penetration pricing sets an
 Value-based pricing. The goal is
artificially low price in order to
to charge an above-average price
enter a new market and encourage
while leaving customers with the
customers to try your wares.
feeling that they’ve gotten a good
deal.
 Premium pricing usually indicates
high quality, customization, rarity  Retail pricing. To get a retail
or a one-of-a-kind item.
price, you multiply the wholesale
price by a certain percentage
 Price skimming sets a higher
(called a markup), and add that to
price in the short term. As demand
the wholesale price.
drops, prices are gradually
reduced.

Things to Consider When Choosing a Location








Proximity to

customers
Neighborhood

Convenience

Safety (lighting, off- 
street parking, etc.) 
Accessibility (ADA)
Visibility
Foot traffic, vehicle
traffic
Other complementary
businesses nearby
Size/floor plan
requirements
Lease or own
Zoning restrictions
Landlord restrictions
Costs (property,
amenities, required
improvements,
common area
maintenance)
Distribution Basics
Questions you need
to answer:
Where will I distribute
my product?
◦ Retail location
◦ Personal delivery
◦ My home or office
◦ Their home or office
◦ Online
◦ Wholesalers
Will I need someone to
help me sell?
◦ Customer’s site
◦ In-house sales team
◦ Online
◦ Sales representatives
How will I deliver my
product?
◦ Agents
◦ UPS, express mail
services, USPS
◦ Distributors
Distribution Considerations
Product
◦ Perishable or fragile products may
require direct sales to avoid
spoilage or breakage.
◦ There may be shipping restrictions
on certain products, based on
weight, size, materials,
destination or purpose.
Profit
◦ The more intermediaries you
have, the more units you must
sell.
◦ Selling direct may distract you
from core business tasks.
Customers
◦ Distribution strategies must reflect
customer lifestyle.
Competition
◦ How and where do your
competitors sell? Will your
products be handled by the same
stores, wholesalers, distributors or
agents?
◦ If an online retailer offers lower
prices and free shipping, what can
you offer to outweigh those
advantages?
Confidence
◦ Can you trust your intermediaries?
◦ Can you afford to have all your
eggs in one basket?
Technology
◦ Your distribution methods must
reflect your customers’ access to
and attitude toward current
technology.
Distribution Strategies








Direct marketing (to customers or to other
businesses)
Manufacturer to retailers through
intermediaries (sales reps, agents, brokers,
wholesalers)
Consignment
Mail-order catalogs
Classified ads
Home shopping networks
Piggyback with other products
Internet
Elements of Effective Advertising
WHO?
Right Audience
WHY?
Right Benefits
WHAT?
Right Message
WHEN?
Right Time
WHERE?
Right Place
HOW MUCH?
Right Budget
Common Promotional Tools
Print
◦ Newspapers
◦ Magazines
◦ Catalogs / brochures
◦ Newsletters
◦ Fliers
◦ Business cards
◦ Classified ads
◦ Yellow Pages
Other
◦ Direct mail / email
◦ Telemarketing
◦ Signage
◦ Word of mouth
◦ Networking
◦ Novelty advertising (e.g.,
pens, hats)
◦ Sign spinners
Online
◦ Paid ads
◦ Web directories
◦ Business directories
◦ Craigslist
◦ Online Yellow Pages
◦ Social media
◦ YouTube videos
◦ SEO
Broadcast
◦ Radio
◦ Internet radio
◦ Broadcast TV
◦ Cable TV
The ABCs of Signage
Attracting new customers
Because a certain number of your customers will move out
of the area, change their buying habits or switch to
competitors, your business must constantly restock its
customers, just like it restocks its inventory.
Branding your business
A sign that’s visible every day may do more to
communicate your brand identity than all your other
marketing efforts combined.
Creating impulse sales
Studies show that 68 percent of all U.S. sales are impulse
sales. Your job is to attract your share of these impulse
buyers and turn them into regular customers.
Public Relations Ideas

Donate money or time to clean
up highways, parks or beaches.

Help improve a piece of local
land.

Write or contribute to a blog or
industry-related website.

Get involved in historic
preservation efforts.


Install a new, cleaner energy
system and offer public tours.
Use Twitter, Facebook or
YouTube to attract a community
of followers for your company.

Donate prizes or time to local
fundraisers.

Join service organizations or
clubs.

Attend trade shows as an
exhibitor or observer.

Offer to be a guest speaker on
a radio show to discuss
elements of your business, or
offer how-to advice that relates
to your business.

Cosponsor local sporting, arts
or charity events. Be sure to
put up posters or banners
announcing your support.

Hold contests and giveaways.

Give lectures to trade
organizations or chambers of
commerce.

Send your business story to
your local newspaper or trade
association.
Benefits of Being Online



Provides business and 
product info to global
markets
Increases consumer

awareness of your
product (note that even
if your target

customers aren’t
online, people who are
may recommend your
product)

Improves customer
service by providing
online product tips,
instructions and links
Gives prospective
customers one more
way to contact you
Helps you keep track of
what your competitors
are doing
Online interaction with
customers can build
your brand or improve
your products
Networking, partnering
and bootstrapping
opportunities
Online vs. Offline Buying
Why people buy
online
 Speed and
convenience
 Vast product selection
 Special deals and
coupons
 It’s easy to compare
prices and save
money
 Search capabilities
 No driving, parking or
crowds
Why people don’t
buy online
 Product is easily
available locally
 Shipping costs are
too high
 Security, fraud and
privacy issues (trust)
 Inability to sample,
try on, taste, or test
the product (trust)
 Return and warranty
issues (trust)
Building Your Own Website: Pros and Cons
Advantages

You may be able to get a
site online quickly

You learn site-building
skills

You can update your site
as needed

Site maintenance costs
may be lower
Disadvantages

Time spent learning skills
distracts from core
business tasks

Time spent maintaining
site distracts from core
business tasks

Site-building tools may
lack features you need

The appearance and
function of the site may
be limited by your design
and tech skills

Site may not be able to
grow with your business
Selling Through an E-Commerce Host: Pros and Cons
Advantages
Disadvantages

Setup is usually very easy
and fast


E-commerce functions
already in place, usually
with appropriate security
Higher charges (per
month, per transaction,
by traffic volume, etc.)

Hosts may have uniform
look and few or no
opportunities for building
your brand

“One size fits all” format
may not suit your
business

Some hosts may have
consumer trust, and offer
problem-resolution
services

Professional look and
function

Host may include useful
promotional tools, social
media capabilities, etc.
Hiring a Web Designer: Pros and Cons
Advantages

You don’t have to
waste time on sitebuilding

You have more
control over features,
appearance and
function

Costs are upfront and
known

Professional look and
function
Disadvantages

You must rely on
outside help

Updating and
maintaining the site
may be slow, difficult
or expensive if you
don’t have adequate
tech skills

Higher cost

Site maintenance
costs may be higher
in the long run
Issues to Address When Planning Your Site





What business tasks
do you need to do
online?
Do your customers
buy online?
creation and
maintenance?

How will you market
your site?
Are you prepared to
What information do
sell internationally, or
your customers need? will you only sell in
the USA?
How quickly do you
need a functioning
 How often will you
site?
need to update your
site?
How much can you
budget for site

Website Design Tips

Avoid site features that are distracting,
irritating or hard to use, such as
animation, soundtrack music or
horizontal scrolling.

Support your promotional messaging
with facts anyone can understand and
verify, like reviews and awards from
credible sources.

Don’t clutter your site with slow-loading
images. Every second your customer
must wait for content increases the
likelihood that she will give up and go
elsewhere.

Ensure consumer privacy with secure
socket layer (SSL) protection.

Use professional, high-resolution
photography to display products.

Use a cross-selling application to
suggest products that go with whatever
product the customer is looking at.

Include helpful tools where needed (e.g.,
rulers and calculators).

Include all relevant product information
(e.g., height, weight, color, size,
ingredients, sourcing).

Include customer reviews and
recommendations. Consumers trust
other consumers more than they trust
businesses!

Display your contact information clearly
on every page.

Answer questions and concerns.
Features that build customer trust
include a “Frequently Asked Questions”
page, video explanations or tutorials,
and a clearly stated return policy.


Don’t ask users for personal information
unless you’re making a sale or giving
them something in return.
Check your site regularly to ensure that
links and other site features work
properly.
Site Organization
Social Media Basics






They feature user-generated content.
They allow networking and collaboration between
friends, family, associates, clubs, product users
and interest groups.
They are based on dialogue, rather than
monologue. Users can give and receive feedback
on information, content and ideas.
They are increasingly integrated (e.g., you can
tweet about the podcast available on your blog).
They are usually free, and easy to set up and
maintain.
Social media account for 22 percent of all time
spent online, according to the Nielsen Company.
Types of Social Media

Blogs are online journals  Social bookmarking
containing text, graphics, sites allow users to
photos, audio and video
gather, rate and
content. This category
recommend websites,
also includes
news stories and other
microblogging formats
content. Examples include
like Twitter and Tumblr.
StumbleUpon and Reddit.

Social networking sites 
like Facebook create
connections and build
trust-based communities.
Geosocial networks like
Foursquare allow

interaction with
individuals and
businesses in a specific
location
Multimedia sites like
YouTube and SlideShare
allow users to share
multimedia content like
videos and slideshows.
Consumer review sites
like Yelp and Epinions
allow users to find, rate
and review businesses
and products.
Rules for Social Media

DO YOUR HOMEWORK. Different
social media have different
demographics. Research sites to
make sure they reach your target
customers.

TAKE YOUR TIME. Get to know the
format, the site and the community
before participating.

BE HONEST. Don’t pretend to be
someone you’re not.

BE CONSISTENT. Whenever
possible, use the same name, colors,
images and other elements in each
account.

BE PREPARED. Don’t launch a
specific channel until you’ve prepared
content and created a posting
schedule.

BE RELIABLE. Don’t make promises
you can’t keep. Don’t promote
upcoming content and features unless
they’re actually ready to launch.

BE HELPFUL. Answer questions,
provide advice, seek out and link to
worthwhile content.

BE RESPECTFUL. Don’t spam users
or sites with marketing messages, or
use social media as a vehicle for
shameless self-promotion. Help
yourself by helping others.

BE ENGAGED. Keep your content
fresh and current. Post regularly, even
if it’s just a link to someone else’s
article. Respond promptly and
courteously to comments and
requests.

HAVE FUN! The more you enjoy what
you’re doing, the more likely you are
to earn friends and followers!
Search Engine Optimization Features

A domain name that
describes your brand,
products or business
(e.g., nxlevel.org,
fireworks.com).

Descriptive keywords
in your site headlines,
body copy and links.

Alternative text tags
for graphics. This is
descriptive text that
appears if an image
doesn’t display.
Flat site architecture.
The fewer clicks a visitor
has to make, the more
likely you are to convert
 Fast loading time.
that visit to a sale.
Pages that load slowly or
 A descriptive title for
incorrectly are hard for
each page of your site.
search engines to index,
The title tag for each
and frustrating for human
page should be unique to users, so they tend to get
that page; using the
a lower page rank.
same title on multiple
pages will undercut your
efforts.

Tips for Writing Online Content

Write about what you know. The Internet is full of ill-informed speculation
and opinion. Sticking to practical, helpful facts will make your content stand
out.

Stay focused. Your content should flow logically from one paragraph to the
next. Don’t try to cover too much ground at once. If content doesn’t seem to
fit, use it for another article.

Quality is more important than quantity. It’s better to have less content
than to fill space with material that lacks usefulness, credibility or interest.

Format text carefully. Short paragraphs, clear punctuation and informative
headings are usually best for online text.

Don’t use quotes unless you’re quoting someone. Many inexperienced
writers put quotes around everything from “figures of speech” to “product
names.” This is “unnecessary” and “distracting.”

Don’t overuse exclamation points!!!!! Use them only when absolutely
necessary, and never use more than one at a time. Multiple exclamation points
communicate inexperience and desperation.

Avoid clichés and buzzwords. Don’t try to promote innovation or originality
with worn-out phrases like out of the box or pushing the envelope. And don’t
use business or industry jargon that your readers may not understand.
Traits of Successful Sellers


Empathy. Good sellers can relate to 
each customer’s unique situation.
They don’t try to force a one-size-fitsall solution on them, or pressure them
to spend more than they can afford. 
Personal drive. Good sellers have a
strong personal desire to make the
sale and satisfy customers’ needs.

Persistence. Good sellers don’t get
discouraged by rejection.

Confidence. Good sellers believe in
their products and know how to get
other people excited about them.

Flexibility. Customers vary, so the
ability to adapt to different buying
styles is essential.

Quick thinking. Sellers need to be
able to think on their feet to answer
objections and assess counteroffers.

Excellent listening skills. Smart
sellers ask relevant questions and
listen respectfully while customers
answer.

Technical knowledge. Sellers
should understand everything about
their product.
Good communication skills. The
best sellers make their points clearly,
briefly and respectfully.
Respect for the customer.
Remember: Without customers, you
have no business!
Understanding Buyers
Most buyers respond to stories.
Instead of describing features, explain how those features solved a
problem for a previous customer. Be prepared to back up your stories
with references.
Most buyers like to talk about themselves
Being a curious, engaged listener is vital to building a relationship,
and building a relationship is vital to earning loyal customers.
Business buyers are usually more cautious than
everyday consumers.
Business buyers usually want to see strong evidence of value,
technical expertise, reliability and professionalism.
Behind every buying decision, there’s a desire or a
fear.
What are you really selling? Fun? Beauty? Youth? Security? Status?
Unless you understand the hidden motivations that guide buying
decisions, you’ll find it hard to get customers to buy in.
Eight Steps to Selling Success
Step 1: Prioritize Prospects
Step 2: Prepare to Sell
Step 3: First Contact
Step 4: Make the Presentation
Step 5: Overcome Objections
Step 6: Close the Deal
Step 7: Reflect and Adapt
Step 8: Follow Up
Common Closing Techniques
Basic close by using a sales form.
Begin by asking the customer a question from the form. Write in the answer.
Proceed to the next item. If the customer doesn’t stop you, you’ve made a sale.
Close by offering choices.
“Do you prefer green or blue?” When a prospect makes a minor decision, the
major decision is near.
Close by making a balance sheet.
Take a sheet of paper, draw a line down the center and help the prospect list the
reasons for and against buying.
Close by asking clarifying questions.
If you have a prospect who seems interested but won’t commit, ask questions:
“Is there anything I didn’t make clear?”
Close with a confirming question.
If a prospect asks whether it’s possible to get what you’re selling in a particular
size, format or color, ask the prospect if that’s the way he wants it. If the answer
is “yes,” the prospect has bought.
Close by setting a date to do the work.
If you run a lawn care business, for example, you might offer to cut their lawn
and trim their hedges next Thursday.
Selling Tips





Be honest. Tell the truth
about your product. Don’t
hype attributes or downplay
problems.
Don’t procrastinate. Take
on tough clients now, not
later.
Practice active listening.
Work to improve listening
skills and develop
interactive sales
presentations.
Be patient. Building longterm relationships takes
time and care.
Keep learning. Become an
expert in your field so that
customers see you as a
valuable resource.

Stay in touch. Check in
with customers regularly
and always bring something
of value to the conversation.

Study your competitors.
Knowing their strengths and
weakness will help your
sales presentation.

Referrals build sales.
Always ask for referrals.
Satisfied customers will
usually be happy to help.

Be positive and have fun!
A positive attitude will carry
you through tough times.
What Customers Want

Availability. Customers
want you to be available,
responsive and engaged at
every stage of the selling
process.



Consistency. Customers
want the same level of
service and quality every
time they deal with you.
Understanding. Customers
want to feel that you are
listening to them and
making an effort to
understand and satisfy their
needs.

Confidence. Customers
want to feel they can trust
you. They don’t necessarily
expect perfection, but they
do expect you to make
things right when they go
wrong.
Attention. Customers want
to feel that you’re alert,
interested and ready to
help. They want to feel that
you’re willing to do what it
takes to meet their needs.

Comfort. Customers want
to feel comfortable,
welcome and secure. They
don’t want to feel rushed or
pressured. They prefer
businesses to be clean,
attractive and organized.
Why Businesses Lose Customers
1%
die
3%
move away
4%
drift to another business
5%
change on a friend’s
recommendation
9%
buy it cheaper somewhere else
10%
have a service problem that is not
resolved
68%
leave because they feel they’re not
getting good service
The Benefits of Customer Loyalty
Loyal customers:
◦ Show less sensitivity to price changes
◦ Generate referrals and word of mouth
◦ Buy add-ons more often
◦ Make it harder for competitors to enter your
market
◦ Need less handling, education and selling time
◦ Are easier and more cost-effective to sell to
than new customers
Your Customer Service Plan
Every business should have a customer
service plan within its marketing plan.
This should include:
◦ Customer service goals
◦ Customer service benchmarks (how you’ll measure
success or failure)
◦ How you will gather, store and use customer data
◦ After-sales service practices
◦ Return, exchange and customer complaint policies
◦ Special order or custom service policies
◦ How different areas of your business deliver service
◦ A formal system for customer feedback (e.g.,
questionnaires, report cards, online surveys or forums,
complaint forms)
Resolving Customer Complaints
Step 1: Listen!
Step 2: Recognize the customer’s feelings.
Step 3: Apologize!
Step 4: Thank the customer for bringing
the problem to your attention.
Step 5: Explain your solution.
Customer Service Essentials

Greet customers
immediately and
pleasantly.

Memorize the names of
frequent customers.

Always answer the phone
within three rings. Don’t
automatically dump
customers on hold. If you
must, ask if you can put
them on hold, or call
them back within five
minutes.

Always make an extra
effort to help customers
find what they need.

When you make a
mistake, fix it!

Follow up on all customer
contacts. Always record  Answer emails promptly,
the customer’s name,
and proofread them
phone number and order
before you hit “send.”
type. After customers call
for product information or
service assistance, follow
up within two days to
check on satisfaction.
Cash Flow Projection Worksheet Sections
(A)
(B)
(C)
Beginning Cash Balance
Cash In From Operations
Operating Cash Out
(C1) Variable Expenses (Cost of Goods Sold)
(C2) Operating Expenses
(D)
(E)
Net Operating Cash (B - C1 - C2)
Cash From Investment or Loan Activities
(E1) Other Cash In
(E2) Other Cash Out
(F)
(G)
Net Monthly Cash (D + E1 - E2)
Ending Cash Balance (A + F)
Sample Chart of Accounts - 1
Account
Account
Asset accounts:
Capital accounts:
100
Cash on Hand
300
Owner’s Equity
101
Cash in the Bank
310
Owner’s Draw
102
Petty Cash
105
Inventory
400
Sales
110
Equipment (Net)
401
Product 1 Sales
111
Accum. Depreciation - Equipment
402
Product 2 Sales
403
Service 1 Sales
Liability accounts:
Revenue accounts:
200
Accounts Payable
410
Interest Income
210
Payroll Taxes Payable
420
Other Income
Sample Chart of Accounts - 2
Account
Expense accounts:
500
Inventory
670
Miscellaneous
600
Advertising
700
Payroll Taxes
610
Auto
710
Professional Services
620
Bank Charges
720
Rent
630
Dues and Subscriptions
730
Supplies
640
Insurance
740
Telephone
650
Licenses
750
Travel
660
Office Expense
760
Utilities
Startup
Expenses
Worksheet
Operating
Cash Out
Worksheet
Operating
Cash In
Worksheet
Michele’s
Photo
Studio−
Blank
Worksheet
Michele’s
Photo
Studio—
Startup
Expenses
Michele’s
Photo
Studio−
Completed
Worksheet
Michele’s
Photo
Studio—
What If I
Borrow
$2,000?
Michele’s
Photo
Studio—
What If No
Wedding
Sales?
Sample
Income
Statement
Sample
Balance
Sheet
Developing a Professional Mindset

Set clear, achievable goals

Do business on the books

Keep personal and business accounts
separate

Develop a code of ethics for your
business, and stick to it

Make tax payments on time

Commit to making budgets and
comparing them to your actual expenses

Keep accurate books and records
Why Separate Business and Personal Finances?

Taxes. The IRS lets you 
deduct expenses for a
business, but not for a
hobby. If you mix
business and personal
income, the IRS is more
likely to decide that your
microbusiness is a hobby.
But even if it doesn’t,

mixing funds will make
your taxes harder to
calculate and pay. The
cost and effort of keeping
your accounts separate is
minimal compared to the 
problems sloppy
accounting can cause.
Loans. If you need a
business loan, you
normally must show your
financial records. Mixing
funds makes it hard for
lenders to know how
profitable your business
is.
Professionalism. Having
separate accounts shows
customers, suppliers and
clients that you’re serious
about your business.
Management. If you
don’t separate your
funds, it’s harder to make
good business decisions.
Why Do You Need Records?






Producing financial
statements
Preparing tax returns
(including
deductions)
Providing information
to lenders and
investors
Paying and collecting
bills when due
Budgeting and
planning
Applying for loans






Managing cash flow
Setting and
measuring progress
toward business goals
Tracking and
managing costs
Preventing theft
Providing compliance
with laws
Supporting your case
in a lawsuit
Record Retention Guidelines
Type of Record
Retention Period
Bank statements
7 years
Business licenses
Until expired
Cash register tapes
3 years
Check registers
Permanent
Canceled checks
3 years
Financial statements
Permanent
General ledger
Permanent
Inventory records
7 years
Invoices (A/P)
3 years
Invoices (A/R)
3 years
Phone/utility bills
3-6 years
Property/plant records
Permanent
Purchase orders
3 years
Receiving reports
3 years
Tax returns
10 years minimum
Time cards or tickets
3 years
Travel expense records
7 years
Property deeds/titles
Keep while you own
Common Business Forms
Computerized Accounting Systems
Before buying a program,
do some research!
◦ Compatibility. Will your
computer be able to run this
program? What are its
hardware requirements?
◦ Ease of use. Can you figure
out how to use the program
out without getting a Ph.D. in
math? Always factor learning
and training costs into the
price of the system!
◦ Range. What modules or tools
does it offer? Do you actually
need them?
◦ Flexibility. Can you easily
customize the program? Does
it mesh with other business
applications, as well as email
and word processing
programs?
◦ Security. Is it secure? Does it
prevent unauthorized access
to your data?
◦ Add-ons. Will you have to
make multiple upgrades as
you grow? If you’re planning
for a certain level of growth
within a year or two, will the
system still meet your needs?
◦ Help. What type of training is
available? Does the program
have a reliable help utility or
online user forum? Is the
manufacturer popular enough
that it’s likely to stay in
business?
Tips for Keeping Books and Records
Keep your records daily.
◦ Deal with your bookkeeping on a regular basis, and it could take as little as
20 minutes a day.
Create an audit trail.
◦ Keep checks in numeric order. Never skip a number, and always record
voided checks.
◦ Keep invoices filed sequentially and/or alphabetically.
◦ Make everything easy to find and track.
Request a bank statement with a “month-end” cut-off date.
◦ It’s easier to reconcile your records when they all end at the same time.
Keep withholding taxes withheld.
◦ Don’t spend this money−it’s not yours!
Don’t panic if you find a mistake.
◦ Everything can be fixed, as long as you’ve kept up with your recordkeeping
chores.
Twelve Check-Writing Tips
1.
Always write checks in ink, or
type them.
2.
Always write clearly and check
your spelling.
3.
Date the check correctly.
4.
Write the payee’s name after
the printed words “Pay to the
order of.”
5.
Write the amount of the check
in numbers close to the printed
dollar sign ($), so that other
numbers can’t be inserted.
6.
Write the amount of the check
in words starting as far to the
left as possible, leaving no
room for the amount to be
changed.
7.
Draw a wavy line to fill any
blank space left after you write
the amount.
8.
Do not sign a blank or partially
complete check.
9.
Always sign your checks just as
you signed your bank’s
signature card.
10.
Use the memo line to help keep
records of your spending.
11.
Record each check you write—
and each deposit you make—
immediately in your check
register.
12.
Don’t forget to record automatic
deposits and withdrawals in
your check register.
Sources of Capital
Self-Financing. Most lenders
and investors want to see that
you’ve committed personal
funds to your business.
◦ Personal funds
◦ Savings or investments
◦ Outside salary
◦ Home equity
Debt Capital
◦ Money that you borrow
◦ Interest is usually charged for
use of the loan
Equity Capital
◦ Money provided by an investor
◦ Investor shares in profits or
losses
◦ Not a debt (unless you agree
to pay the money back even if
the business fails)
Angel Money
◦ Money received from family,
friends or interested third
party
◦ Can be debt or equity
financing
◦ Always formally document
angel money as you would
traditional debt or equity
financing
Fitting the Loan to the Need
Short-Term Debt
◦ Used to meet short-term needs, such as seasonal
inventory or short-term liquidity problems.
◦ Repayment time: One year.
Intermediate Debt
◦ Used for permanent working capital or equipment
acquisition.
◦ Repayment time: Three to seven years.
Long-Term Debt
◦ Used for real-estate purchases or the initial
purchase of a business.
◦ Repayment time: Seven years or more.
Debt or Equity Financing Considerations

Change in
ownership

Obligation to repay

Tax considerations

Capital structure

Time required

Cost of obtaining
the funds

Personal
factors/preferences

Lender and investor
reactions
Debt Financing Sources

Banks

SBA programs

Credit unions


Microlenders
State and local loan
programs

Peer-to-peer lending  Business incubators
/ crowdfunding
 Leasing

Consumer finance
companies

Commercial finance
companies
Leasing vs. Purchasing
Advantages
 Usually no down
payment
 Often over a longer
time period than a
loan
 May allow upgrade to
current equipment
models
 May allow “off
balance sheet”
financing
 Increases possible
sources of financing
Disadvantages
 May cost more if tax
advantages lost
 May not own asset at
end of the lease
 Is still a long-term
legal obligation
 Terms and conditions
may limit flexibility of
use
Other Financing Sources

Suppliers

Customers

Factoring

Grants

Credit cards
Financing Factors
1.
The growth
potential of your
business
2.
The riskiness of
your business
3.
The length of time
you need the
money
4.
The kind of money
you need (debt or
equity)
5.
The amount of
interest you can
afford to pay
(debt) or the
amount of
ownership you’re
willing to give up
(equity)
6.
The profit potential
of your business
Preparing for the Loan Process
Before you apply for a loan:
Find a lending institution that regularly lends to microbusinesses
◦ What size businesses do they normally lend to?
◦ Do they avoid making loans within certain industries?
Check your credit history
◦ Are there credit problems you need to clear up?
◦ Do you know how to repair your credit?
◦ Are there credit problems you don’t know about?
Get your business records in order
◦ Have your business plan ready.
◦ Be able to describe your recordkeeping procedures and accounting
system.
◦ Find out what books and records the lender will want to see, and
gather them.
What Lenders Require

Business loan
application form

Personal tax returns
(2 to 3 years)

Complete business
plan

Other documentation
(optional)

Cash flow projections
(monthly for 12
months, quarterly or
annual for years 2
and 3)
◦ Accounts payable aging
Personal financial
statement
◦ Appraisals

◦ Accounts receivable
aging
◦ Inventory status
reports
The Cs of Credit

Credit history

Character

Capacity

Collateral

Conditions
Tips for Working with Your Banker






Deal with a local bank 
when possible
Make an appointment 
Select a banker you 
trust
Select a banker

familiar with your
type of business

Dress appropriately 
Ask for advice or

clarification of
anything you do not 
understand
Develop a long-term
relationship
Know your needs
Present a complete
proposal
Explain uses of the
loan
Be flexible
Be patient
Tell the truth
Recommend your
banker to others
Ratio Analysis:
Understanding the Financial Health of Your Business
Current Ratio =
current assets ÷ current liabilities
Example: $1,000 ÷ $500 = 2 (or 2:1)
Debt to Equity Ratio =
long-term liabilities ÷ owner’s equity
Example: $5,000 ÷ $10,000 = .5 (or 1:2)
Net Profit Margin =
net profit ÷ gross revenue from sales
Example: $1,000 ÷ $10,000 = .10 or 10%

What do ratios tell you about the health of your
business?

How are ratios used by lending institutions?
Warning Signs of Credit Card Fraud
If an order shows two or
more of these warning
signs, take extra steps to
confirm that the buyer is
for real before you ship!

Orders for multiple
expensive items or large
amounts of cheaper items.

Multiple large orders within
a short time frame,
especially from buyers in
Russia, Eastern Europe or
Southeast Asia.

Overnight shipping,
especially to foreign
countries.

Vague contact information,
such as a private box
address, an unlisted phone
number or a free, Webbased email address.

Large orders from
“businesses” that don’t
appear when you search for
their names online.

A shipping address that
doesn’t match the credit
card billing address.

Asking the delivery person
to leave the package at the
door. To avoid fraud, require
the person who receives the
package to sign for it.
Check Acceptance Guidelines

Call the bank that issued
the check and ask if there
are sufficient funds in the
account to cover it.

Ask for personal
identification, such as a
driver’s license. Look
closely at the picture and
signature on the license,
and jot down the license
number on the check.


Use a company that
verifies checks. The
verifying company assumes
the risk if a check doesn’t
clear the bank.

Never accept a check
written for more than
your selling price. Some
crooks will write bad checks
for more than the selling
price of an item, and then
ask the merchant to return
the amount they overpaid.
Decide what checks you
will take beforehand. The
SBA recommends never

accepting checks that are
undated, postdated or more
than 30 days old. You
should also avoid third-party
checks.
Never issue a refund
before the check clears.
If you refund money you
haven’t actually gotten yet,
you run the risk of an even
bigger loss!
Smart Credit Policies

Base your credit decisions on
the individual customer’s
creditworthiness.
make some errors about who’s
a good credit risk and who
isn’t.

Realize that the credit terms

you offer might differ from one
customer to the next. Your best
customers deserve more
generous terms. (The reverse
is also true: Your worst

customers deserve less
generous credit terms.)
Consider your policy in relation
to your cash flow. Your policy
should not endanger the cash
flow you need to operate your
business.

If a customer is late on
payments, you may have to
reduce or eliminate the credit
terms you offer that customer
until he or she re-establishes a
good payment record.

Expect to achieve your ideal
credit policy only through trial
and error. You’re bound to
Remember that your credit
policy will change over time,
along with your business’s
growth and economic
conditions. Reevaluate it at
least once a year to make sure
it still meets your needs.
Five Basics of Negotiation
1.
There would be no negotiation unless
both sides expected a benefit.
2.
The goal of negotiation is to create a
new situation that’s better than the old
one.
3.
Unfair deals last only while one party
feels weaker than the other.
4.
Win-win negotiation delivers the best,
most enduring deals.
5.
Like any other skill, negotiation can be
learned and practiced.
Negotiation Strategies
Soft Negotiators
◦ Avoid conflict at any cost
◦ Usually don’t stand up for their best interests
Hard Negotiators
◦ Aggressive and competitive
◦ May use threats or bluffs
◦ Not trusting or trustworthy
Win-Win Negotiators
◦ Work toward the best outcome for all
◦ Flexible, but can be firm when it’s appropriate
◦ Attack problems, not people
Stages of Negotiation
Setting an Agenda
◦ Why are you negotiating?
◦ What are the issues? What are the goals?
Voicing Demands and Offers
◦ What are your interests and positions?
◦ What do you want, and what are you willing to give in
return?
Working to Minimize Differences
◦ Where do interests overlap?
◦ Where is the common ground?

Closing the Deal
◦ “Win-win” means both sides are better off than when
they started.
Traits of Effective Negotiators
Good negotiators:
◦ Understand their counterparts’ interests and
perspectives
◦ Understand the difference between positions
and interests
◦ Understand the difference between real power
and perceived power
◦ Know their settlement range
◦ Know their BATNA (Best Alternative To a
Negotiated Agreement)
◦ Know when to walk away from negotiations
Overcoming Negotiation Problems

Recognize manipulative tactics such as
stonewalling, bullying and deception.

Open your ears and listen. Being a careful listener
is the best advantage you can have.

Get in the other person’s shoes. Understanding
your counterpart’s point of view will help you find
common ground.

Slow down and regroup. When things get stressful,
taking time out will clear your head.

Get off the hot seat! Don’t make important
decisions on the spot. Go to a safe location to
consider your options.

Know when to walk away. Knowing your limits
ahead of time gives you more control over the
situation.
Key Contract Management Tasks

Create processes and practices

Review timeframe

Evaluate benchmarks and measures

Define the responsibilities of each partner

Identify contingency plans

Establish regular meeting times

Resolve conflicts and problems

Review performance and improve where
necessary
Dangers of Unmanaged Growth
Failing to manage growth can affect every area of your
business’s performance. Major pitfalls include:
◦ Inability to maintain consistent performance standards
◦ Low employee morale, and high employee turnover
◦ Loss of profitability
◦ Loss of customer loyalty
◦ Lower quality and professionalism
◦ Slowdown in business learning and competitiveness
◦ Inability of overworked leadership to provide direction
◦ Cash flow problems
◦ Inefficient use of resources
◦ Stress and burnout
◦ Loss of focus on core objectives
◦ Poor communication among employees
Moving to the Next Level

Celebrate what you’ve accomplished!

Organize what you’ve learned!

Fill in the blanks!

Ask for help!

Finish your business plan!

Check and double-check!

Polish your presentation!

Don’t stop planning!

Take advantage of the NxLeveL®
Training Network!