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NxLeveL Instructor Presentation “Business Plan Basics” NxLeveL Guide for Micro-Entrepreneurs 2 nd Edition Course Overview Session 1: Keys to Your Business Success Session 2: Assessing Your Business Idea Session 3: Business Planning Session 4: The Marketing Plan

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Nxlevel instructor presentation l.jpg

NxLeveL Instructor Presentation

“Business Plan Basics”

NxLeveL Guide for Micro-Entrepreneurs

2nd Edition


Course overview l.jpg
Course Overview

  • Session 1: Keys to Your Business Success

  • Session 2: Assessing Your Business Idea

  • Session 3: Business Planning

  • Session 4: The Marketing Plan

  • Session 5: Government Regulations

  • Session 6: Management

  • Session 7: Market Analysis

  • Session 8: Product and Pricing

  • Session 9: Placement and Promotion

  • Session 10: E-Commerce

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-a


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Course Overviewcontinued

  • Session 11: Selling Success

  • Session 12: Where’s the Cash?

  • Session 13: Managing the Money

  • Session 14: Financial Tips and Tools

  • Session 15: Bringing It All Together

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-b


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Participant Materials

  • SESSION OUTLINESOne Page Session-by-Session Outline for the Course

  • 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 Material

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-c


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Class Agenda

  • Class Opener

  • Instructor Topics

  • Guest Speaker

  • Break

  • Refreshments

  • Networking Activity

  • Work Hour

  • Discussion Groups

  • Worksheet Activities

  • Business Plan Sections

NxLeveL Guide for Micro-Entrepreneurs-OHD1-d


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Expectations & Ground Rules

  • Attendance

  • Absenteeism

  • Punctuality

  • Participation

  • Discussion

  • Confidentiality

  • Listening

  • Assignments

  • Reading

  • Worksheets

  • Written Business Plan Sections

  • Format

  • General

  • Safe environment to test ideas

  • Ask questions

  • Add ground rules as needed

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-e


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Traits of Successful Entrepreneurs

  • Passion

  • Persistence

  • Good Health, High Energy

  • Communication and Listening Skills

  • Creativity

  • Self-Confidence

  • Willingness to Work Hard

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-1


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What Are Your Goals?

  • Your goals may focus on:

  • Yourself

  • Family

  • Children

  • Health/weight/exercise

  • Friends/relationships

  • Further education/degree

  • Job/career

  • Cars/vehicles

  • Home ownership

  • Starting a business

  • Travel/vacation

  • Retirement

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-2


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Personal Assessment

  • Why do you want to start a business?

  • What special skills, experience, and knowledge do you have?

  • How’s your personal financial health?

  • Do you have a mentor or advisor? Can you get one?

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-3


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The Risks of Entrepreneurship

  • Failure: Can you bear the emotional and financial risk of failure?

  • Long Hours: 60-70 hours per week is normal

  • Family Strain: Potential strain on relationships because of long hours

  • No Regular Paycheck: How will you support yourself and your family?

  • No Health Benefits: No employer-provided health coverage

  • Isolation: You’ll be working by yourself much of the time

  • Debt: You may have to take on additional debt

  • Responsibility: Everything may rest on your shoulders

  • Stress: New emotional, financial, and physical pressures

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-4


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The Rewards of Entrepreneurship

  • Success: You’ll be able to support yourself, and hire others!

  • Independence: You get to be your own boss

  • Learning: No matter what happens, you’ll have valuable new skills and knowledge

  • Self-Respect: Few things are as rewarding as succeeding through your own talent and hard work

  • Recognition: It’s always nice to be noticed…and it can lead to new opportunities, too!

  • Family Benefits: You’ll have something special to leave your children

  • FUN: You can make money doing something you really enjoy!

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-5


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Why Do Businesses Fail?

  • Poor management

  • No business plan

  • Don’t listen to customers

  • Don’t set prices appropriately

  • Poor cash flow management

  • Don’t ask for help

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-6


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Why Do Businesses Succeed?

  • Careful planning

  • Clear focus and purpose

  • Offer a unique product

  • Understand customers’ needs

  • Sell at the right price

  • Seek and follow expert advice

  • Get help when necessary

  • Understand industry and competition

  • Do regular bookkeeping

  • Know how to keep existing customers, and get new ones

  • Understand cash flow management

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-7


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Professionalism in Business

  • Health and Hygiene

  • Personal ImageFirst Impressions REALLY Count!

  • Appearance and Dress

  • Etiquette and Manners

    • Always use the magic words: PLEASE and THANK YOU

    • Be on time

    • Keep your promises

    • Respect people and be courteous

    • Follow up with thank-you notes

    • Return all phone calls

    • Call ahead to confirm appointments

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-8


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Check Your Verbal Skills

  • Speak at a comfortable pacenot too fast, not too slow

  • Make sure people can understand you

  • Speak at a good volume—not too loud, not too quiet

  • Avoid slang and swear words

  • Answer the phone slowly and clearly

  • Practice talking into a tape recorder and play it back…

  • How does it sound?

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-9


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Check Your Nonverbal Skills

  • Stand and sit straight, but comfortably

  • Make eye contact

  • Don’t yawn when someone is talking with you

  • Respect people’s “personal space”keep at least 18” between you & your listener

  • Don’t fidget, rock, tap your feet, etc.it looks like you’re bored

  • Look confident and proud of your business

  • Smile!

  • Know what signals your different facial expressions send to your listener

  • Practice shaking handsit should be firm (not like a vice grip, but not like a wet rag, either!)

  • Practice talking into a mirror…Do you look comfortable and professional?

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-10


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Written Communication Skills

  • Make written communicationSimple, Short, Specific

  • Make sure it answers:

    • Who

    • What

    • Where

    • When

    • Why

    • How

  • Don’t write when you’re angry or upset. Sleep on it…you may feel differently the next day!

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-11


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Check Your Listening Skills

  • Stop what you’re doing and pay attention to what the other person says

  • Maintain eye contact…look alert and interested

  • Prove that you’re listening by summarizing points and asking questions

  • Listen, understand, judge carefully…and then react

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-12


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Networking Tips

  • Have a purpose for networking

  • Have a confident handshake

  • Be aware of your body language

  • Wear something unusual to spur conversation (unique pin, watch, tie)

  • Always carry your business cards with you

  • Be able to talk about more than just the weather

  • At a networking event, don’t try to juggle food and drinks

  • Follow through on promises you make

  • Set up a system to keep in touch with your network

  • If you’re not comfortable networking, learn from a pro

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-13


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What Are Your Time Wasters?

  • TV

  • Talking on the telephone

  • Not keeping lists; poor planning

  • Disorganization

  • Unclear goals

  • Lack of motivation

  • Procrastination

  • No schedule; no procedures

  • Interruptions from co-workers, family, friends

  • Waitingdoctor appointments, long lines, etc.

  • Red tape

  • Always tired

  • Lose or misplace things often

  • Negative attitude

  • Not able to say “No”

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-14


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Time Saver Tips

  • Set priorities

  • Keep lists; cross off completed items

  • Use a calendar or planner…EVERY day!

  • Combine personal and business calendars

  • Ask family for help with household responsibilities

  • Involve family or friends in the business as appropriate

  • Complete difficult tasks during your peak time

  • Call ahead; confirm appointments

  • Set time aside each day to handle the unexpected

  • Set working hours and family time

  • Learn to say “No”

  • Create agendas for meetings

  • Reward yourself when major projects are completed

  • Keep desk clear of clutter; file papers immediately

  • Keep business papers in one location

  • Be on time; encourage others to be on time

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-15


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Coping With Stress

  • Take a break! Step away from the problem for a while

  • Take a walk! Exercise will clear your head

  • Think positively! Refuse to be negative

  • Identify the problem, and isolate it

  • Ask for help and advice

  • Don’t overreact! Choose to be in charge of your emotions

  • Take control! Manage your time better

  • Breathe deeply

  • Relax, reflect, meditate, pray

  • Carry some inspirational quotes with you

  • Be open to change, and make the most of it

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-16


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Your Personal Budget

  • The money you expect to come in each month (income, earnings)

  • The money you expect to go out each month (expenses)

  • The amount left over

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-17


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Personal Financial Statement

  • What you own: Assets

    minus

  • What you owe: Liabilities

    equals

  • What’s left: Net Worth

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-18


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What You Should Know About Credit

  • It’s good to establish a credit history

  • Each time you purchase something on credit, or apply for credit, it’s reported to a national credit bureau

  • National credit bureaus track your credit and payment history

  • If you apply for credit, a credit report is generated based upon your name & SS#

  • A “credit score” is a rating assigned to you based upon your credit and payment history, and is used by creditors or lenders to make decisions about your application.

  • You can and should obtain a copy of your credit report.

  • Your personal credit will affect your ability to get credit for a start-up business.

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-19


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How to Protect Your Credit

  • Obtain a consumer copy of your credit report (small fee)

  • Clear up any disputes on your credit report (in writing)

  • Do not carry too many credit cards

  • Protect your SS#do not give it out haphazardly

  • Don’t apply for credit too often; it will count against you

  • Don’t give your credit card number to telemarketers you’re not familiar with

  • Be aware of hidden costs at check-cashing or rent-to-own establishments

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-20


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Ideas for Dealing with Bad Credit

  • Develop a budget and stick to it

  • Obtain a consumer copy of your credit report

  • If you find an error on your report, contact the credit bureau(s) in writing

  • If you are denied credit, find out why

  • Contact creditors to make arrangements to pay back old debt

  • Do not ignore student loans, utility bills or delinquent taxesPAY THEM!

  • Do not apply for more credit

  • Do not incur more debt

  • Keep only one or two credit cards; destroy others and close the accounts

  • Work with a reputable credit counseling or debt management service

  • Be wary of quick advertisements to repair creditthere are no easy cures

  • Do not automatically file bankruptcy; it can be more damaging in the long run

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-21


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Credit Bureau Information

  • Trans Union Corporation

  • 800-916-8800

  • www.tuc.com

  • Experian

  • 800-682-7654

  • www.experian.com

  • Equifax

  • 800-685-1111

  • www.equifax.com

  • Also contact your local

  • Consumer Credit Counseling Service (CCCS)

  • 1,400 offices nationwide

NxLeveL Guide for Micro-Entrepreneurs-OHD 1-22


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Business Idea Sources

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-1


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Types of Businesses

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-2


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What Can Make Your Business Unique?

  • Features (different size, color, format, etc.)

  • Your location

  • Offer things that cannot be found elsewhere

  • New invention

  • Use of materials (green, recycled, American-only)

  • Pricing, guarantees

  • Customer service policies

  • Unique packaging

  • Individual artistry (e.g., crafts)

  • Add-ons or extras that come with a purchase

  • Your experience

  • Delivery policies / timeframes

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-3


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Who Are Your Customers?

  • Gender (male or female)

  • Age or age range

  • Income level

  • Education level

  • Residence location

  • Employment/job location

  • Worker type (professional, hourly, etc.)

  • Marital status (married, single, widowed)

  • With or without children

  • Renter or home owner

  • Lifestyles/interests (sports, arts, pets...)

  • Level of familiarity with your service

  • Beliefs/Opinions

  • Specifics to your business

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-4


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What Do You Need To Know ?

  • Who?

  • What?

  • Where?

  • When?

  • Why?

  • How?

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-5


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Start the Research ProcessThings to learn about…

  • Your niche

  • The need for your product

  • Customer identification

  • Competition

  • Location

  • Pricing

  • Costs/financing information

  • Regulations, licensing, certification

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-6


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Is Your Business Idea Viable?

  • Work in your industry on a part-time basis

  • Get a business mentor and learn from him or her

  • Volunteer for a small business owner to learn day-to-day operations

  • If you have a product, test it at a trade show, community fair, or block party

  • Call sales reps that supply your industry

  • Talk with local realtors, business owners, bankers, elected officials, etc.

  • Research the competition – start with the phone book

  • Contact local economic development and/or government agencies

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-7


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Where to Begin…Accessing Business Resources

  • Public Library

  • Trade Associations

  • Published Reports and Articles

  • Studying the Competition

  • Talking with Customers

  • Suppliers/Vendors

  • Local Economic Development or Business Resources

  • Banks

  • Internet

  • Small Business Administration

NxLeveL Guide for Micro-Entrepreneurs-OHD 2-8


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Questions About Business Planning

  • Isn’t planning for “big business” only?

  • How does planning help management?

  • Can’t I hire someone to do this for me?

  • How can I know all the answers?

  • How often do I have to do this?

  • What if I don’t complete the process during class?

  • What’s in it for me?

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-1


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The Planning Cycle

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-2


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Keys to a Successful Planning Process

  • The owner assumes the lead in the process

  • The planning process involves everyone in the family and business

  • The plan reflects reality

  • There is a contingency plan for the worst-case scenario

  • The goals and objectives are achievable and clear

  • The plan is flexible

  • The plan is reviewed often, and revised when necessary

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-3


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Managing Your Personal and Business Goals

Goals: Dreams with deadlines

Objectives: How you’ll get there

(The steps to reach the goals, including what, who, when)

Business goals can be set for many parts of your business:

  • Sales volume

  • Number of employees

  • Desired owner compensation

  • Profit

  • Time commitment

  • Other:

  • Other:

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-4


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NxLeveL® Micro-Entrepreneur Business Plan Outline

Cover Page

Table of Contents

Section I. Executive Summary

Section II. Personal Background Information

A. Personal Skills and Experience

B. Personal Financial Resources

Section III. Business Concept

A. General Description of the Business

B. Business Goals and Objectives

C. Industry Information

Industry Background Information

Current and Future Industry Trends

Business Fit in the Industry

Section IV. Business Organization

A. Ownership, Regulations, and Contracts

Ownership

Government Regulations and Taxes

Contracts and Leases

B. Management Issues

Managing People

Internal Management Team

Employees

Outside Services/Advisors

Risk Management

C. Managing Books and Records

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-5


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NxLeveL® Micro-Entrepreneur Business Plan Outline (Cont.)

Section V. The Marketing Plan

A. Product Description

Product Description

Features/Benefits

B. Market Analysis

Customer Analysis

Competitive Analysis

Market Potential

C. Market Objectives, Strategies, & Tactics

Product Lines

Positioning

Packaging/Branding

Pricing–A First Look

Placement (Distribution)

Promotional Strategies

Customer Service

Section VI. The Financial Plan

A. Investment Required for Start-Up

Start-up Costs/Needs

Investment Required–Bank Loan/Self

B. Cash Flow Projections

Monthly Cash Flow Projections–Year One

Notes to Cash Flow Projections

Annual Cash Flow Projections—Years Two and Three

C. Additional Financial Information

Summary of Financial Needs

Personal Financial Statement

D. Conclusion

Attachments

NxLeveL Guide for Micro-Entrepreneurs-OHD 3-6


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Overview of Marketing

Research

Study the industry…then study the customer, competition and location.

Analysis

Analyze your research about the industry, customer, competition and location.

Analyze your competitive advantage.

Strategies and Tactics

Determine the best method of getting your goods and service to market, based on your analysis

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-1


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Contents of the Marketing Plan

PRODUCT DESCRIPTION:

  • Features and benefits (what makes it different or better?)

  • Design and material choices

  • Life cycle and seasonality

    MARKET ANALYSIS:

  • How big is your target market?

  • Who are your customers? (Demographics and psychographics)

  • Who are your competitors? What are their strengths and weaknesses?

  • What are the political, economic, social, and technological trends in your market?

    MARKETING OBJECTIVES, STRATEGIES, AND TACTICS:

  • What are your business’s objectives? How will you achieve them?

  • What’s your business niche?

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-2


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Sales Forecasting Methods

Breakdown Forecasting:

  • Start with largest population, and break it down to estimate sales from target customers

    Buildup Forecasting:

  • Estimate size of each market segment, and add them to get a total

    Indirect Forecasting:

  • Find possible indicators of sales when specific market data are missing

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-3


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Primary and Secondary Sources

SECONDARY:

  • Government (federal, state, local)

  • Small Business Development Centers

  • Women’s Business Centers

  • U.S. Small Business Administration

  • Trade and industry associations

  • Chambers of Commerce

  • Local newspapers and magazines

  • Census data

  • Business magazines

    PRIMARY:

  • Interviews

  • Surveys

  • Focus groups

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-4


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Research Tools

  • Libraries (Public, University/College, Private)

    • Online and offline

  • Trade Associations

  • Business Periodicals

  • State and Federal Resources

  • Local Resources (Chambers of Commerce, SBDCs, WBCs, BICs)

  • Professional Research Companies

  • NxLeveL Business Resource Guide

  • Studying the Competition

  • Surveys (focus groups and interviews)

  • Observation

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-5


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Ways to Contact Information Sources

  • In Person

  • Telephone

  • Facsimile (Fax)

  • Internet

  • E-mail

  • U.S. Mail

  • Express Delivery Services

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-6


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Drawing Industry Conclusions

  • How has the industry developed?

  • How do small businesses operate within this industry?

  • What are the current growth patterns in the industry?

  • What is the industry’s size at present? What’s projected a year from now?Five years from now?

  • Are there any niche markets that are hot?

  • How does international trade affect your industry?

  • How will current and new government regulations affect your industry?

  • How will technology affect your industry and the small businesses within it?

NxLeveL Guide for Micro-Entrepreneurs-OHD 4-7


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Sole Proprietorship

Advantages

  • Easy to form and the simplest way of doing business

  • Owner has complete control

  • Owner receives all the income

  • Avoids double taxation

    Disadvantages

  • Unlimited liability for all acts and debts of the business

  • Fewer tax benefits

  • The business dies when you die

  • Can’t expand the business through new owners and use of their money

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-1


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General Partnership

Advantages

  • Fairly simple to set up

  • Combination of resources & talents

  • Personal tax benefits

    Disadvantages

  • More recordkeeping requirements

  • Unlimited liability (including for each other’s actions)

  • Dissolution upon death of a partner

  • Partnership profits taxed as income to the partners

  • Possible friction between partners

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-2


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Limited Partnership

Advantages

  • General partners can provide additional source of funding

  • Limited partners have limited liability

  • Allocation of income and losses to owners (no business income tax)

  • Finite existence

    Disadvantages

  • Initial organizational cost high

  • Limited partners have no control… might be hard to find partners to invest without having authority

  • Compliance with state and federal securities laws

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-3


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Corporation

Advantages

  • Limited liability of shareholders

  • Existence continues even if death of owner or sale of stock

  • Flexibility of financing through outside investors

  • Transfer of ownership by sale/gift of stock

  • Tax benefits available to corporate employees

    Disadvantages

  • Initial organizational cost high

  • Annual reporting requirements

  • Double taxation if paying dividends

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-4


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S Corporation

Advantages

  • Same as for corporation

  • Taxed at the individual shareholder level

    Disadvantages

  • Except for the tax consequences, same as for corporation

  • With some exceptions, only individuals can be shareholders

  • Limited number of shareholders

  • Limited to one class of stock

  • Must use calendar year

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-5


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Limited Liability Company

Advantages

  • Limited liability without limits on management participation

  • Flexible ownership and capital structure

  • No double taxation

  • Allocation of tax benefits among members

    Disadvantages

  • Initial organizational cost high

  • Poor tax treatment of fringe benefits

  • Ownership transfer must be governed by buy/sell provisions

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-6


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Cooperatives

Advantages

  • 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

    Disadvantages

  • Lengthy process by members to set up (bylaws, major policy issues, direction, board)

  • Effectiveness depends on members dedication to long term

  • Group decision-making and “shared ownership” can be cumbersome

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-7


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Government RegulationsWhich Affect YOUR Business?

General Business Taxation

  • Personal Income Tax

  • Business Income Tax

  • Sales Tax

  • Property Tax

  • Business License Fees

    Employee Regulations

  • Payroll Tax/Withholding

  • Employee vs. Independent Contractor

  • Wage and Hour Regulations

  • Hiring Regulations

  • OSHA

    Consumer Protection Regulations

  • Warranties

  • Uniform Consumer Credit Code

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-8


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Government Regulationscont’dWhich Affect YOUR Business?

Commerce Regulations

  • Professional Licenses

  • Business Registration

  • Uniform Commercial Code

    Zoning Regulations

  • Home-based business

  • Signage

  • Manufacturing / retail

    Bankruptcy Regulations

  • How much protection?

    Transportation Regulations

  • Professional Licenses

  • Customs

    Environmental Regulations

  • Waste disposal

  • Storage tanks

  • Siting / Buying property

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-9


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IRS 20-Point ChecklistIndependent Contractor or Employee?

Primary Factors Yes No

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?

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?

Note:

“Yes” suggests employee status. “No” suggests independent contractor status.

 More weight should be given to the first eight questions than the last twelve.

 If you answered “yes” to any of these 20 questions, proceed with caution. Consult an accountant or tax lawyer who is familiar with the problems raised by hiring individuals as independent contractors.

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-10


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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?

  • Time to perform. When are goods or services due? When is payment due?

  • Legal remedies. How can you enforce the contract?

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-11


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What’s in a Lease?

  • What are you leasing?

  • True cost of the lease

  • Payment “escalators”

  • Permitted uses

  • Lease responsibilities

  • (insurance, maintenance, etc.)

  • Renewal options

  • Purchase rights

  • Right of first refusal

  • Exclusivity

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-12


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Protecting Your Intellectual Property

What needs protecting?

  • Patent

    • Prevents others from copying and selling your invention. Costly to enforce.

  • Trademark

    • Words, logos, symbols, that represent your company.

  • Copyright

    • Protects work that is independently created, such as songs, textbooks, creative writing. Inexpensive to register.

  • Trade secrets

    • Secret processes, methods and information may be protected under Uniform Trade Secrets Act.

NxLeveL Guide for Micro-Entrepreneurs-OHD 5-13


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Traits of Effective Managers

  • Build a team and lead it

  • Organize and plan

  • Solve problems

  • Manage money

  • Provide superior customer service

  • Build strong public relations

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-1


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Business Communication

  • Written Communication

    • Be clear and to the point

    • Keep duplicates

    • Develop a filing system

  • Verbal Communication

    • Be honest! Don’t make promises you can’t keep!

    • Don’t say anything you wouldn’t put in writing!

  • Phone Etiquette

    • Sound confident and enthusiastic

    • Answer with a greeting

    • Keep message pads handy

    • Always end with “Thank you!”

  • Networking

    • When you get something from a networking partner, always give something in return!

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-2


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Traditional Organizational Chart

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-3


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Optional Organizational Chart

Operations

Marketing

Owner/

Entrepreneur

Finance/

Accounting

Other

NxLeveL Guide for Micro-Entrepreneurs-OHD6-4


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Key Management Issues

  • Learn to let go and delegate

  • Develop your internal team and your external team

  • Look at the big picture

    • Develop management goals and strategies

    • Create a workable structure

    • Assign responsibilities

  • Communication is key

  • Lead by example

  • Get advice

  • Have fun, be creative!

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-5


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Key Employee Management Practices

  • Identifying tasks and job descriptions

  • Interviewing, selecting and hiring, and training

  • Setting performance goals

  • Evaluating/measuring performance

  • Creating compensation and incentive strategies

  • Facilitating communication and learning

  • Creating cooperative teams

  • Building in fun and creativity

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-6


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Elements of a Personnel / Company Handbook

  • A letter from the founder, team leader, and coach (you!)

  • Company mission statement

  • Employee relations policy

  • Employee benefits package

  • “Principles of doing business” statement

  • Employee performance appraisal procedures

  • Employee problem resolution procedures

  • Vacation and holiday policies

  • Reporting structure and functions

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-7


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Types of Insurance

  • Covering Your Business

    • General liability

    • Product liability

    • Key-person

    • Business property

    • Business interruption

    • Automobile

    • Electronic data

  • Covering Your Employees

    • Workers’ compensation

    • Life insurance

    • Health/Medical

    • Pension plans

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-8


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Risk Management Check-Up List

  • Are my goals written, measurable and realistic?

  • Have I communicated those goals with everyone in the business?

  • Do I understand the goals of other family members and/or employees?

  • Do I know which risks can keep me from attaining my goals?

  • Have I decided which risks I’m comfortable managing myself, and which I should seek assistance with?

  • Have I scheduled regular insurance check-ups for health, life, casualty, property, disability, and long-term care?

  • Do I have a confident relationship with my risk management advisors?

  • Do I understand how much coverage I need to provide adequate cash flow for my business?

  • Will my lender understand my overall plan for my business and help me achieve my goals?

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-9


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Risk Management Check-Up Listcont’d

  • Are all of my assets covered in my risk management plan?

  • Do I know what financial records I need to adequately manage my business? To document my borrowing requests?

  • Do I understand the terms and conditions of my borrowing arrangements?

  • Do I have alternative sources of income in case of business slowing, business failure, etc.?

  • Do I have a will? When was it last reviewed?

  • Have I advised family members as to the location of my will, other important documents, etc.

  • Do I have life insurance? Is my list of beneficiaries up to date?

  • Have I explored ways of transferring assets to the next generation?

  • ___________________________________________

  • ___________________________________________

  • ___________________________________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 6-10


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The Purpose of Market Research

You want 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?

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-1


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Important Info-Gathering Tips

  • Keep your eyes and ears open

  • Ask lots of specific questions

  • Carefully listen to the answers

  • Honestly evaluate the importance of the answers

  • Don’t let wishful thinking, assumptions, or prejudices affect how you gather or interpret data

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-2


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Sources of Information

  • Survey of potential customers

  • Small Business Development Center

  • Chamber of Commerce

  • Library

  • Commercial Sources (local utility companies, market research companies)

  • Trade Associations

  • Stock Brokers

  • Online Resources

  • Phone Book

  • Competition (visit, review advertising materials, buy their product)

  • Census Information

  • Local Zoning Plan

  • Suppliers

  • Test Market

  • Other: ________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-3


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The Marketing Mix

The Four Ps will guide your research, analysis, and strategies:

PRODUCT

PRICE

PROMOTION

PLACEMENT

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-4


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Features vs. Benefits

  • Features:

    • Size

    • Quality

    • Varieties

    • Types

    • Materials

  • Benefits:

    • What your product will DO FOR your customer (time savings, convenience, status, security, etc.)

      PEOPLE BUY BENEFITS,

      NOT FEATURES!

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-5


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Your Product In Use

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

When people hate it, ask them WHY.

When people love it, ask them WHY.

Then, ask them more questions about themselves. These are yourtarget customers.

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-6


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Demographics

  • Age

  • Gender

  • Location

  • Education

  • Occupation

  • Income Level

  • Marital Status

  • Kids / No Kids

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-7


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Psychographics

  • Needs

    • Security, esteem, love, acceptance, understanding, beauty, good health

  • Values

    • Status, success, greed, simplicity

  • Buying Styles

    • Price, fads, quality, technology, luxury, convenience

  • Cultures

    • Modern, artistic, religious, liberal, conservative, environmental

  • Interests

    • Sports, reading, fitness, cooking, workaholic, gardening

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-8


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Why Analyze the Competition?

Because You Might:

  • Learn more about what the customer really wants

  • (or doesn’t want)!

  • Discover unserved niche markets

  • Get ideas for marketing, merchandising, product mix

  • Obtain valuable advice, support, information from remote or indirect competition

    Because You Will:

  • Determine whether or not you have a COMPETITIVE ADVANTAGE

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-9


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Things You Should Know About Your Competition

  • Direct or Indirect Competition?

  • Where are they located?

  • What is their brand image?

  • Who are their customers?

  • How do they price their products?

  • How is their overall performance?

  • How is their customer service?

  • What type of promotions do they use?

  • What are their strengths and weaknesses?

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-10


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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)

NxLeveL Guide for Micro-Entrepreneurs-OHD 7-11


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Your Target Market

Questions You Need to Answer:

? Are there enough people in the target market to make enough sales to generate a profit?

? Does it have unique and definable characteristics that will let you develop marketing strategies for it?

? Are there unmet or under-met needs within the target group that your product or service could fill?

? Is there room for growth?

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-1


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Product Strategies

  • Understand the features and benefits of your products

  • Determine product lines and appropriate product mix (depth and width)

  • Position your product in the marketplace

  • Package your products and your business

  • Develop service enhancements

  • Create a unique brand identity

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-2


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What Makes a Good Name?

Choose your business name wisely!

Guidelines:

  • Tells people what you do

  • Easy to pronounce

  • Not used by someone else

  • No double or hidden meanings

  • Be careful with acronyms

  • Be creative, but not too cute

  • Not too long

  • Be cautious about using your last name or initials

  • Develop appropriate logo or trademark

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-3


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Basic Pricing Concepts

  • VALUE is what your customer believes your product is worth

  • PRICE is the amount of money you charge your customers per sales unit of your product

  • COST is what you spend to make your product or deliver your service

  • PROFIT is what’s left over after you subtract COST from PRICE

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-4


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Pricing Considerations

  • What are your costs?

  • What will your customer pay?

  • What image do you want to convey?

  • What does the competition charge?

  • What will the market bear?

  • Where do you want to be positioned?

  • How does a service business determine price?

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-5


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You Must Understand Your Costs!

Variable Costs

Costs that go up or down in relation to sales volume.

Example: You sell personalized T-shirts for $10.00 each.

Selling Price $10.00

Variable Costs:

Raw material (t-shirt) $3.00

Hourly labor $1.00

Sales commission (10%) $1.00

Shipping charge $ .50

Total Variable Costs $5.50

Price minus Variable Costs $4.50

The $4.50 is called the contribution margin because it represents how much each unit of sales “contributes” towards paying for fixed costs and profits.

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-6


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You Must Understand Your Costs!

Fixed Costs

Costs that don’t change regardless of sales volume.

Example: Fixed expenses (per month)

Rent $ 800.00

Telephone 100.00

Insurance 50.00

Bookkeeping 100.00

Loan payments 300.00

Total Fixed Expenses $1,350.00

QUESTION:

How many t-shirts do you have to sell each month to pay for your variable and fixed expenses?

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-7


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Break-Even Analysis

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-8


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Your Break-Even Point

How many t-shirts do you need to sell each month before you pay for your variable and fixed expenses and start making a profit?

Break-Even Units Volume =

Fixed Costs

Price minus 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 / month

Break-Even Point in Units =

$1,350.00 = 300 t-shirts per month

$4.50

When you sell t-shirt #301, you will start making a profit for that month.

Break-Even = 300 t-shirts x $10 =$3,000

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-9


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Planning for Profit

? Can you sell 300 t-shirts per month?

? If it takes 300 t-shirts per month to break even, how many more can you sell to make a desired amount of profit?

?How much profit do you want to make?

Example: You want to make $900 profit per month. How many more t-shirts per month do you have to sell?

It took 300 t-shirts to just break even

After the first 300, $4.50 per t-shirt contributes to profit

$900.00  $4.50 = 200 t-shirts more to make $900 per month profit.

? Can you sell 500 t-shirts per month?

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-10


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Pricing Strategies

  • Cost-based pricing

  • Competition-based pricing

  • Value-based pricing

  • Retail pricing

NxLeveL Guide for Micro-Entrepreneurs-OHD 8-11


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Distribution Basics

Questions You Need to Answer:

  • Where will I distribute my product?

  • Retail location?

  • Wholesalers?

  • Customer’s site?

  • Internet?

  • How will I deliver my product?

  • UPS, express mail services, USPS?

  • Personal delivery?

  • Special packing, warehousing?

  • My office or their office?

  • Will I need someone to help me sell?

  • In-house sales team?

  • Sales representatives?

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-1


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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

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-2


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Elements of Effective Advertising

  • WHO?

    • Right Audience

  • WHAT?

    • Right Message

  • WHEN?

    • Right Time

  • WHERE?

    • Right Place

  • HOW MUCH?

    • Right Cost

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-3


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Types of Advertising

  • Word of Mouth

  • Print (Newspaper)

  • Broadcast (Radio and TV)

  • Other:

    • Business Cards/Letterhead

    • Brochures/Flyers

    • Catalogs

    • Magazines

    • Classified Ads

    • Direct Mail

    • Telemarketing

    • Signage

    • Novelty/Specialty Advertising

    • Yellow Pages

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-4


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The ABCs of Signage

Attracting new customers

  • You need to “restock” customers who move away or change their buying habits!

    Branding your business

  • Your sign is a promise that tells customers what to expect. Remember, first impressions count!

    Creating impulse buys

  • Impulse buys make up 68% of total sales!

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-5


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Public Relations & Networking

P.R. is:

  • Promotion without paid advertising

  • Press releases

  • Sponsoring events

  • Drawings, contests,

  • Giveaways

  • Speaking as a “Guest Expert”

  • Participating in community organizations

NxLeveL Guide for Micro-Entrepreneurs-OHD 9-6


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Online vs. Offline Buying

WHY PEOPLE BUY ONLINE:

  • Speed and convenience

  • Vast product selection

  • It’s easy to compare prices and save

  • Search capabilities

  • No driving and parking, or crowds

    WHY PEOPLE DON’T BUY ONLINE:

  • Product is easily available locally

  • Doubts about reliability of seller or shipper

  • Security, fraud, and privacy issues

  • Shipping costs are too high

  • Inability to sample, try on, taste, or test product

  • Return and warranty issues (trust)

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-1


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Benefits of Being Online

  • Provides business and product info to global markets

  • Increases consumer awareness of your product

  • Improves customer service by providing online product tips, instructions, and links to helpful sites

  • Gives prospective customers one more way to contact you

  • Networking, partnering, and bootstrapping opportunities

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-2


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Building Your Own Website: Pros and Cons

Advantages:

  • Your company learns site-building skills

  • You can update your site instantly

  • 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

  • Cost of site-building tools, and possible training

  • Site may not have a professional look, and may take longer to develop

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-3


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Hiring a Web Designer: Pros and Cons

Advantages:

  • You don’t have to learn new skills

  • Costs are upfront and known

  • No time wasted on site-building

  • Site can be built quickly

  • Professional look

    Disadvantages:

  • You must rely on outside help

  • Higher expenses

  • It may take longer to update site

  • Site maintenance costs will be higher in the long run

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-4


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Selling Through an E-Commerce Host: Pros and Cons

Advantages:

  • Usually very easy

  • No time wasted on site-building

  • E-commerce functions already in place, with appropriate security

  • Some hosts may have consumer trust, and offer problem-resolution services

  • Professional look

    Disadvantages:

  • Higher charges (per month, per transaction, by traffic volume, etc.)

  • Some hosts have uniform look and provide fewer opportunities for branding

  • “One size fits all” format may not suit your business

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-5


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Issues to Address When Planning Your Site

  • What business tasks do you need to do online?

  • Do your customers buy online?

  • What information do your customers need?

  • How quickly do you need a functioning site?

  • How much can you budget for site creation and maintenance?

  • How will you market your site?

  • Are you prepared to sell internationally, or will you only sell in the USA?

  • How often will your site get updated?

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-6


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Website Tips

  • Clean design, and fast-loading pages

  • Accept as many forms of payment as possible

  • Avoid backorders

  • Send an e-mail confirmation for all orders

  • Offer many shipping options, including express mail

  • Include shipping info for foreign consumers

  • Make sure site fits brand identity

  • Optimize for search-engine placement

NxLeveL Guide for Micro-Entrepreneurs-OHD 10-7


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Things to Consider Before You Start Selling

Your image is your business’s image. These things influence that image:

  • First Impressions

  • Dress

  • Language

  • Being On Time

  • Business Meeting Etiquette

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-1


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Traits of Successful Sellers

  • High energy

  • Self-motivation

  • Good grooming

  • Persistence and perseverance

  • Good listening skills

  • Technical knowledge

  • Ability to use the product

  • Ability to explain the product

  • Good communication skills

  • Ability to overcome objections

  • Knowing how to close the sale

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-2


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Six Steps to Sales Success

  • Prospect and Prioritize Accounts

  • Plan and Prepare for Sales Calls

  • Make the First Contact Count

  • Present your Product

  • Handle Objections

  • Close the Sale

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-3


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Closing Techniques

Basic Close

Offer Alternative Choice

Compare Pros and Cons of Buying the Product

Ask Closing Questions and Summarize

Cite Examples of Others Who Have Purchased

Isolate the Customer’s Potential Objection and Clarify

Use a Secondary Question to Close

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-4


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Four Customer Service Basics

  • Positive Talk

  • Recognizing Customer Needs

  • Finding Common Ground

  • Building Trust

When We Communicate…

7% of our message is delivered by words

93% of our message isnonverbal!

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-5


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Learn What Your Customer Needs

  • To Be Understood

  • To Feel Welcome

  • To Feel Important

  • To Feel Comfortable

  • Why We 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 goodservice

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-6


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What Customers Expect

  • Clean, comfortable, attractive surroundings

  • To be welcomed pleasantly

  • Well-groomed, professional sales personnel

  • Immediate, focused attention

  • Eye contact

  • To be addressed by name

  • To be assisted by someone with excellent product knowledge

  • Confidentiality

  • To be treated with courtesy and respect

  • Other: ___________________

  • _________________________

  • _________________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-7


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General Guidelines for Dealing with a Complaint

  • LISTEN!

  • Recognize the customer’s feelings

  • Apologize when it’s the right thing to do

  • Clearly explain what you’re going to do about the situation

  • Thank the customer for bringing the problem to your attention

  • Take action to make things right

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-8


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Customer Service Essentials

  • Welcome customers to your business

  • Thank customers for coming to you

  • Educate customers about your products

  • Answer questions

  • Follow up promptly

  • Thank customers for choosing you

  • Follow up with the customer, to make sure that your product and service were satisfactory

  • Use follow-up responses to improve your product or service

NxLeveL Guide for Micro-Entrepreneurs-OHD 11-9


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Cash Flow Projection Worksheet Sections

(A) Beginning Cash Balance

(B), (C) & (D) Cash From Operations

  • (B) Cash In from Operations

  • (C1) Variable Expenses

  • (C2) Operating Expenses

  • (D) Net Operating Cash

    (E) Cash From Investment or Loan Activities

  • (E1) Other Cash In

  • (E2) Other Cash Out

    (F) Net Monthly Cash

    (G) Ending Cash Balance

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-1


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Sample Chart of Accounts

Account #Description

Asset Accounts:

100 Cash On Hand

101 Cash in the Bank

102 Petty Cash

105 Inventory

110 Equipment (Net)

111Accum Deprec-Equip

Liability Accounts:

200 Accounts Payable

210 Payroll Taxes Payable

Capital Accounts:

300 Owner’s Equity

310 Owner’s Draw

Revenue Accounts:

400 Sales

401Product #1 Sales

402Product #2 Sales

403Service #1 Sales

410 Interest Income

420 Other Income

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-2


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Sample Chart of Accountscont’d

Account #Description

Expense Accounts:

500 Inventory Purchases

600 Advertising

610 Auto Expense

620 Bank Charges

630 Dues & Subscriptions

640 Insurance

650 Licenses

660 Office Expense

670 Miscellaneous

700 Payroll Taxes

710 Professional Services

720 Rent

730 Supplies

740 Telephone

750 Travel

760Utilities

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-3


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Start-Up Expenses Worksheet

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-4


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Operating Cash Out Worksheet

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-5


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Operating Cash In Worksheet

Product/Service Sales Forecast

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-6


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Michele’s Photo StudioBlank Worksheet

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-7


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Michele’s Photo StudioStart-Up Expenses

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-8


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Michele’s Photo StudioCompleted Worksheet

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-9


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Michele’s Photo StudioWhat If I Borrow $2000?

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-10


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Michele’s Photo StudioWhat If No Wedding Sales?

NxLeveL Guide for Micro-Entrepreneurs-OHD12-11


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Sample Income Statement

Your Business Income Statement

For the Year Ended

December 31, 20__

NET SALES

Product Sales $ 630

Services Sales $ 3275

Total Net Sales $ 3905

COST OF GOODS SOLD

Beginning Inventory $ 0

Plus Purchases 500

Less Ending Inventory (185) 315

Other Direct Labor 0

Other Materials Expense 185

Total Cost of Goods Sold $ 500

GROSS PROFIT $ 3405

OPERATING EXPENSES

Advertising $ 464

Bank Charges and Interest 88

Insurance 116

Office 45

Professional Fees 50

Salaries (Indirect Wages/Benefits) 1500

Subscriptions and Dues 45

Supplies 550

Taxes and Licenses 50

Utilities 210

Miscellaneous 60

Depreciation 100

Total Operating Expenses $ 3278

NET PROFIT (LOSS) BEFORE TAXES $ 127

Income Taxes Due 0

NET PROFIT AFTER TAXES$ 127

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-12


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Sample Balance Sheet

Balance Sheet Formula:

Your Business

Balance Sheet

As of December 31, 20__

ASSETS

Current Assets

Cash $ 1892

Accounts Receivable 0

Inventory 185

Other 0

Total Current Assets $ 2077

Fixed Assets

Equipment $ 1000

Less Accum Depreciation (100)

Furniture and Fixtures 0

Less Accum Depreciation 0

Total Fixed Assets $ 900

TOTAL ASSETS $ 2977

LIABILITIES

Current Liabilities

Accounts Payable $ 0

Payroll Tax, due not paid 0

Sales Tax, due not paid 0

Total Current Liabilities $ 0

Long Term Liabilities

Notes Payable $ 1850

Mortgages Payable 0

Total Long Term Liabilities $ 1850

TOTAL LIABILITIES $ 1850

OWNER’S EQUITY $ 1127

TOTAL LIABILITES TOTAL EQUITY $ 2977

NxLeveL Guide for Micro-Entrepreneurs-OHD 12-13


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Preparing for Success

  • Set achievable financial goals

  • Do business on the books

  • Keep personal and business money separate

  • Accept the responsibility of paying taxes on time!

  • Develop a code of ethics for your business, and stick to it

  • Commit to keeping track of your budgets and comparing them to actual expenses

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-1


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Why Keep Records?

  • Financial Management

    • To provide financial background information about your business

    • To help produce financial statements

    • To provide tax preparation information

    • To provide borrowing information

    • To pay and/or collect bills when due

    • To control cash flow

  • Internal Control

    • To watch costs and budgets

    • To prevent theft

  • Legal

    • To document events in case of lawsuits

  • Management Decisions

    • To provide planning information

    • To monitor business progress

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-2


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Learn the Terminology

What is Recordkeeping?

  • Recordkeeping (or bookkeeping) is the tracking of income and expenses that relate to your business.

  • What Does “Cash vs. Accrual” Mean?

    There are two methods of accounting for your income and expenses:

    Accrual MethodCash Method

    Work is done Cash is received

    Record revenue & Record revenue &

    expenses at this time expenses at this time

    even though cash may not even though work

    have been collected yet may not be complete

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-3


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Record Retention Guide

Type of RecordRetention Period

Bank statements 7 years

Business licenses Until expired

Cash register tapes 3 years

Check registers Keep permanently

Canceled checks 3 years

Deeds, titles, title insurance While you own property

Financial statements Keep permanently

General ledger Keep permanently

Inventory records 7 years

Invoices (A/P) 3 years

Invoices (A/R) 3 years

Phone/Utility bills 3-6 years

Property, plant & equip. Keep permanently

records

Purchase orders 3 years

Receiving reports 3 years

Tax returns (& related backup) 10 years minimum

Time cards or tickets 3 years

Travel expense records 7 years

Other: ______________ __________________

____________________ __________________

____________________ __________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-4


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Paperwork and Forms

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-5


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Computerized Accounting Systems

Be sure you find out about:

  • Hardware requirements

  • Ability to modify

  • Support services

  • Ability to expand

  • User friendliness

  • Training

  • Reports and documents

  • Personnel requirements

  • Local use (other businesses using this software)

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-6


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Business Ownership & Tax Forms

Each legal entity has its own tax filing requirements. Contact your accounting professional for help in finding out which forms must accompany your tax returns.

Common Payroll Tax Forms

  • 941 Employer’s Quarterly Federal Tax Return

  • 940 Employer’s Annual Return

  • 8109 Tax Deposit Coupon

  • W2 Wage and Tax Statement

  • 1099 Miscellaneous Income Statement (used to report independent contractor wages)

  • Workers’ Compensation

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-7


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Tips for Keeping Better 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.

  • Keep 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, if you’ve kept up with your recordkeeping chores.

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-8


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Twelve Check-Writing Tips

  • Always write in ink (or type the check)

  • Always write clearly, and be sure the spelling is correct

  • Date the check correctly

  • Write the payee’s name after the printed words “Pay to the Order of…”

  • Write the amount of the check in numbers close to the printed dollar sign ($) so that other numbers can’t be inserted

  • 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

  • Draw a wavy line through any blank space

  • Do not sign a blank or partially complete check

  • Sign the check just as you signed the signature card

  • Use the memo line to help keep a record of your spending

  • Record each check you write or deposit you make in your checkbook register immediately

  • Don’t forget to record automatic withdrawals or deposits in your checkbook register

NxLeveL Guide for Micro-Entrepreneurs-OHD 13-9


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Why Do You Need Financing?

  • Research and development

  • Start-up expenses

  • Purchase a business

  • Seasonal working capital

  • Permanent working capital

  • Equipment acquisition

  • Real estate acquisition

  • Other: __________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-1


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Sources of Capital

  • Debt Capital

    • Money borrowed for the business

    • Use of the money is repaid, with interest as “payment” for the use of the loan

  • Equity Capital

    • Money invested by the owner(s)

    • Not a debt; nothing to pay back

    • Investor(s) get a part of the ownership, and share in the profits or losses

  • Personal Capital

    • Personal funds of the owner(s)

    • Any debt borrowed on a personal basis

    • Includes savings, second mortgages, personal loans, etc.

  • Angel Money

    • Money received from friends, family, or interested 3rd party

    • Document as you would for other debt or equity financing

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-2


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Fitting the Loan to the Need

  • Short-term Debt

    • Used to meet short-term needs:

    • Bullet loan

    • Seasonal inventory purchases

    • Line of credit

    • Accounts receivable financing

  • Intermediate Debt

    • Three to seven years:

    • Permanent working capital loans

    • Equipment loans

  • Long-term Debt

    • Longer than seven years:

    • Real estate purchases

    • Initial purchase of a business

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-3


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Debt or Equity Considerations

  • Change in ownership

  • Obligation to repay

  • Tax considerations

  • Capital structure

  • Time required to do it

  • Cost of obtaining the funds

  • Personal factors/preferences

  • Lender and investor reactions

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-4


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Other Sources of Financing

  • Home Equity Loans

  • Alternative Lenders

  • Suppliers

  • Customer Deposits

  • Credit Cards

  • Insurance Companies

  • Factoring Companies

  • Loan Guarantor

  • Loan Brokers

  • Grants

  • Other:

  • ______________________________

  • ______________________________

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-5


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Financing Factors

  • The growth potential of your business

  • The risk of your business venture

  • The length of time you need the money

  • The kind of money you need (debt or equity)

  • The amount of interest you can pay (debt) or the amount of ownership you will give up (equity)

  • Profit potential of the business

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-6


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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 shy away from 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 items 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

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-7


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What Lenders Require

  • Business Loan Application Form

  • Complete Business Plan

  • Cash Flow Projections

  • Monthly for 12 months

  • Quarterly or Annual for Years 2 and 3

  • Personal Financial Statement

  • Personal Tax Returns

  • (2 to 3 years)

  • Other Documentation (Options)

  • Accounts payable aging

  • Accounts receivable aging

  • Inventory status reports

  • Appraisals

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-8


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The Cs of Credit

  • Credit History

  • Character

  • Capacity

  • Collateral

  • Conditions

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-9


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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 source and uses of the loan

  • Be flexible

  • Be patient

  • Tell the truth

  • Recommend your banker to others

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-10


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Understanding the Financial Health of Your Business:

  • Ratio Analysis

    • 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 the ratios tell you about the health of your business?

  • How are ratios used by lending institutions?

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-11


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Ways to Offer Your Customer Credit

  • Credit Cards

  • Checks

  • Credit Terms

    • Credit Card Considerations

      • Know what equipment you need to process the credit card payment

      • Look for the best merchant account rates (discount rate and transaction fee)

      • Know when deposits will be made to your account

    • Check Considerations

      • Call the bank on large check amounts

      • Decide on your check acceptance policies

      • Trust your instincts!

      • Know your collection policies/options

NxLeveL Guide for Micro-Entrepreneurs-OHD 14-12


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Basics of Negotiation

  • There would be no negotiation unless both sides expected a benefit

  • A goal of negotiation is to create a new situation that’s better than the old one

  • Unfair deals last only while one party feels weaker than the other

  • Win-win negotiation delivers the best, most enduring deals

  • Like any other skill, negotiation can be learned and practiced

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-1


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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)

    • Tough on problems, easy on participants!

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-2


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Stages of Negotiation

  • Setting an Agenda

    • Why are you negotiating? What are the issues, and 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

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-3


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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 of bluffs

    • Not trusting or trustworthy

  • Win-Win Negotiators

    • Work towards the best outcome for all

    • Flexible, but can be firm when it’s appropriate

    • Attack problems, not people

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-4


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Pitfalls of Business Growth

  • Growth may be short-term

  • Inability to maintain performance standards

  • Unprofessional behavior

  • Poor employee morale

  • Lack of adequate employee training

  • High employee turn-over

  • Loss of profitability

  • Inefficient use of resources

  • Loss of customer loyalty

  • Diminished quality

  • Inability to focus on core strengths

  • Paralyzed or overworked leadership

  • Cash crunch

  • Bankruptcy

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-5


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Bringing It All Together!

  • Celebrate what you’ve accomplished

  • Organize what you have learned

  • Fill in the gaps

  • Complete your business plan

  • Ask for help

  • Remain positive

  • Never stop planning!

NxLeveL Guide for Micro-Entrepreneurs-OHD 15-6


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