Entrepreneurial Success Begins With

1. EntrepreneurialSuccess Begins With The Snow College Small Business Development Center is a partnership program of the U. S. Small Business Administration. The SBDC is funded in part by the U.S. Small Business Administration under cooperative agreement No. 6-7770-0050-1. The support given by the SBA does not constitute an express or implied endorsement of the cosponsors or participants’ opinions, products or services. All of our programs are extended to the public on a nondiscriminatory basis. Reasonable arrangements for persons with disabilities will be made if requested at least two weeks in advance.

2. Agenda • Welcome and introductions • Rewards and drawbacks of entrepreneurship • Business entry strategies • The business plan • Legal and regulatory compliance • Choosing a form of ownership • Debt and equity financing • Where do I go from here

3. Rewards of Entrepreneurship • Profit • Freedom from the limits of standardized pay for standardized work. • Independence • Freedom from supervision and the rules of bureaucratic organizations. • Satisfying Way of Life • Freedom from routine, boring, unchallenging jobs.

4. Drawbacks of Business Ownership • Uncertainty of income • Risk of losing entire investment • Long hours and hard work • Lower quality of life until the business gets established • Complete responsibility

5. Characteristics of Successful Entrepreneurs • Passion • Persistence • High need for achievement • Willingness to take measured risks • Self-confidence and self-reliance • High energy level • Desire for responsibility

6. Alternative Routes to Small Business Ownership SmallBusinessOwnership Startup Buyout Franchising Family Business

7. Types of Ideas That Develop into Startups New Technology New Market New Benefit Example:Providing same day drain cleaning services with a money-back guarantee. Example:Providing health conscious Utah consumers with fruit smoothies. Example:Providing alternatives to incarceration by using high technology ankle bracelets for home arrest programs. New Market: Providing customers with a product/ service that is not in their market but already exists elsewhere.New Technology: Using a new technical process that provides the basis for new product or service ideas.New Benefit: Performing an old function for customers but in a new and improved way.

8. Sources of Startup Ideas Friends/Relatives5% Personal Interest/Hobby16% Family Business6% Suggestion7% Education/Courses6% Prior Work Experience45% Chance Happening11% Source: Data developed and provided by the National Federation of Independent Business Foundation and sponsored by American Express Travel Related Services Company, Inc. Other4%

9. Evaluation Criteria for a Startup Venture • Marketing Factors Need for product Customers Life of product Market structure Market size Market growth rate • Competitive Advantage Cost structure Degrees of control over price, costs, channels of supply Barriers to entry: regulatory protection, response/lead-time advantage, legal advantage, contacts and networks • Economics Return on investment Investment requirements Break-even point • Management Capability • Fatal Flaw

10. Pros and Cons of Buying an Existing Business • CONS • Inheriting any problems • Poor quality of existing employees • Poor business image • Modernization required • Purchase price based on inaccurate data • Poor business location • PROS • High chance of success • Less planning • Existing customers/suppliers • Necessary equipment • Bargain price • Experienced employees • Existing business records

11. Pluses and Minuses of Franchising Minuses Franchise fees Royalties Restrictions on growth Less independence in operations Franchisor may be sole supplier of some supplies Termination/renewal clauses Pluses + Formalized training + Financial assistance + Proven marketing methods + Managerial assistance + Quicker startup time + Overall lower failure rates

12. Key Concepts in Family Business Management • Require competence in family members. • Explain situation to non-family members. • Avoid favoritism in personnel decisions. • Discuss plans openly.

13. The Business Plan • Presents the business opportunity and how you will take advantage of it. • Helps you think about the business in a systematic and disciplined way. • Provides a blueprint for building your business over the next three to five years. • Used for presenting your ideas to lenders, investors, creditors, customers, managers.

14. The Business Plan Cover Page Table of Contents Section I. Executive Summary Section II. Mission, Goals & Objectives General Description of the Business Mission Statements Goals and Objectives Section III. Background Information The Industry The Business “Fit” in the Industry Section IV. Organizational Matters Business Structure, Management & Personnel Operating Controls

15. The Business Plan - Continued Section V. The Marketing Plan The Products/Services The Market Analysis Marketing Strategies Section VI. The Financial Plan Worksheets and Notes to Cash Flow Projections Cash Flow Projections Financial Statements Additional Financial Statements Appendix Section Action Log Supporting Documents

16. Legal and Regulatory Compliance Checklist • Register your business name • Get a state business license (if needed) • Get a city/county business license • Get a federal/state tax ID number • Comply with minimum wage/overtime laws • Make arrangements for paying taxes • Make arrangements for statutory benefits

17. Forms of Ownership • Proprietorship • Partnerships • General • Limited • Corporations • Regular Corporation • Subchapter S Corporation • Limited Liability Company

18. Choosing an Ownership Form • Organizational costs • Limited versus unlimited liability • Continuity • Transferability of ownership • Management control • Raising new equity capital • Income taxes

19. The Sole Proprietorship Option • A sole proprietorship is a business owned and operated by one person. • There is generally no registration or filing fee. • Liability is unlimited. • The sole proprietorship is dissolved upon the proprietor’s death. • Ownership of the company name and assets may be transferred. • Management freedom is absolute. • Capital is limited to the proprietor’s personal capital. • Income from the business is taxed as personal income to the proprietor.

20. The Partnership Option • A partnership is a voluntary association of two or more persons to carry on, as co-owners, a business for profit. • There is generally no registration or filing fee. • Liability is unlimited. • Unless the partnership agreement specifies otherwise, the partnership is dissolved upon withdrawal or death of a partner. • Transferring ownership requires the consent of all partners. • A majority vote of partners is required for control. • Capital is limited by the partners’ ability and desire to contribute. • Income from the business is taxed as personal income.

21. The Limited Partnership Option • A written certificate must be filed with proper state office. • Liability is limited to investment for limited partners. • Withdrawal or death of limited partners does not affect the continuity of the business. • Limited partners may sell their interest. • Limited partners are not permitted any involvement in management. • Limited partners’ limited liability provides a strong inducement in raising capital. • Income from the business is taxed as personal income.

22. The Corporation Option • A corporation is a business organization that exists as a legal entity. • It is the form of organization that has the most fees and requirements. • Liability is limited to investment in the company. • Continuity of business is unaffected by shareholder withdrawal. • Ownership is easily transferred. • Shareholders have final control. • Usually it is the most attractive form for raising capital. • The corporation is taxed on its income, and the stockholder is taxed when dividends are received.

23. The Subchapter S Corporation • It is taxed as a partnership. • Eligibility requirements are as follows: • No more than 75 stockholders are allowed. • All stockholders must be individuals or qualifying estates and trusts. • Only one class of stock can be outstanding. • The corporation must be a domestic one. • No nonresident alien stockholders are permitted. • The S corporation cannot own more than 79 percent of the stock of another corporation.

24. Limited Liability Companies • Limited liability for owners • Taxed as a partnership • Easier to manage and control than corporations • Now in all 50 states • Limited transfer of ownership • May be cumbersome to share or transfer ownership (unanimous written consent)

25. Sources of Financing • Personal Savings • Friends and Relatives • Suppliers • Banks • Government Programs • Individual Investors (Angels) • Venture Capital • Sale of Stock

26. The Five Cs of Credit 1. The borrower’scharacter 2. The borrower’s capacity to repay the loan 3. The capitalbeing invested in the venture by the borrower 4. The conditions of the industry and economy 5. The collateral available to secure the loan

27. Selected Loan Programs • Credit card • Signature loan • Relatives and friends • Collateralized bank loan • Commercial loan • SBA Guaranteed Loan • Six-County RLF • Six-County TBAF • Other

28. SBA Guaranteed Loan (7A) • Bank makes loan, SBA guarantees between 75 to 85 percent up to $1 million • Interest rate capped at prime plus 2.25 to 2.75, depending on terms • Repayment terms usually seven years (longer for equipment, construction) • Contact: Local SBA lender

29. Other Sources of Assistance • Service Corps of Retired Executives (SCORE) • Business Information Center (BIC) • Partnership with SBA, SBDC, SCORE, Ogden City • Market research resources, computers, training and counseling services

30. Special SBA Programs • ProNet • Purpose and explanation • http://pro-net.sba.gov/ • 8A Program • Purpose and explanation • www.sba.gov/gcbd

31. Conclusion • Thank you for participating in this presentation. • Please tell your friends and neighbors about our services • Good luck!