David Mace Business Consultant Kansas Small Business Development Center
1. 2. 3. 4. 5.
Buy or start? Finding the opportunity Planning for success Arraigning the resources It’s all in the details
Freedom
and independence To make a difference To make a fortune To make a living Tired of being laid off every few years To “found a private kingdom”
Factor
Buy Business
Start Business
Brand Name
History Baggage
No history (good or bad)
Customers
Built in Some might bail Some are no good
No customers No income
Start-up Costs
What’s included?
Ground level
Valuation
Can be tricky “Blue Sky”
Not an issue
Commitment
Buy in
Jump in
Hybrid
Franchise
Financials
Three years of tax returns (personal and business) Three years of financials (cash flow, income statement and balance sheet)
Customer
List Supplier List Business Appraisal
Asset Valuation Future Stream of Cash Flows Owner’s Benefit
Asset
Appraisal
Additional
claimants
Heirs “Give my kid a job”
Background
check
Criminal Financial Business
Document
everything Ask questions
“Why are you getting out of this business?” “What do you absolutely HATE about it?”
You
must have a market, not just a product:
“I really like __________” “People have always told me I should _________” “I think the world needs a __________”
None of these are good reasons to start a business There
must be a demonstrated marketplace of customers with willingness, opportunity and ability to buy from you
1. 2. 3.
Obtain funding Create a plan Hope for a market
Identify the market Create a plan
1. 2.
Confirm feasibility
1.
Technical Operational Financial
Obtain funding Have a road map
Obtain funding
Market Capital Leverage Plan
What’s
not being done?
Differentiation Segmentation
-OR How
can you do something better?
Quality Niche Reduced Cost
So how do you find these opportunities?
1. 2. 3. 4.
Start with the customer Assess the industry Examine competition Where to look
Customer information
Income Occupation Education Household characteristics Hobbies Habits Current provider of product or service
Likes Dislikes
Willingness to pay for perceived improvements
Google U.S.
Census and zipskinny.com KSBDC (SBDCNet) Chamber of Commerce Articles Blogs Academic papers Trade associations Surveys, interviews and focus groups Observation (ethnography)
Is
the industry growing, shrinking or flat? Customers Suppliers (concentrated or fragmented) Revenue Market share
What
are the barriers to entry? Why hasn’t someone done this before? How is technology changing the industry? Has the industry failed to respond?
Google Books Economic
Census (costs, jobs, sales, value) Incumbents (visit other states, locales) Trade associations Suppliers (they have a stake) Academic papers University R&D
SWOT
analysis Competitive matrix Pose as a customer Talk to customers Talk to suppliers
Strengths
Weaknesses
Opportunities
Threats
Brand
Flavor
Freshness
Speed
Delivery
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n/a
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n/a
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Cash Loans Grants Equity
Financing Your Business 1. 2. 3. 4. 5. 6. 7.
Personal Savings – Your credit history, your savings, your belongings and your debt Friends and Family – Put it on paper Grants – Tough competition for limited supply Banks – Not major risk takers SBA – Various programs Venture Capitalists – It’s their business Angel Investors – Don’t want control, just return
USDA
Rural Co-Op Loans Value-Added Ag Loans
Kansas
Department of Commerce
Value-Added Ag Loans Agritourism Loans
NetworkKansas
Start-up Kansas Loans
Cities
and Counties
Revolving Loans Main Street Loans
See you at 11:30.
To obtain funds To confirm feasibility To create a road map
Cover
page Table of contents Description of business Market analysis Marketing strategy Operations Human Resources Financials Appendix
Company
name Company address Company telephone Company logo Contact information for owners (12% or more) Month and year finalized Version number Name of preparer
Lists
major sections and page numbers
Microsoft
Word will build one for you
Set up headings, subheadings and body text using styles on toolbar Insert table of contents on page one
Make
reader want to read further Most important idea: Profitable Project Supporting evidence:
There is a market We can reach the market We are significantly different than competition We have the right leadership in place Here are the financials to back it up
Five Major Sections
Company Ownership Description of Products and Services Company Location and Facilities Licenses / Permits and Regulations Insurance / Bonding
Product Price Place Promotion
Marketing is‌ Delivering the Right Product/Service To the Right Customer In the Right Place At the Right Time With the Right Message Marketing Makes the Money
Differentiation Low-Cost Specialization All-in-one Product
lines
Price tiers Features and options Market segments
Cost-plus
pricing Benchmark pricing Penetration pricing Price skimming Prestige pricing Target pricing
Wholesale
Dealer Retailer
Retail Combo Brick
and Mortar Online Click and Mortar Sales force or outsource?
Choose
your values Choose your message Choose your outlets
Base them on your customer Where are they when they’re thinking of you?
DON’T
Focus your efforts Measure your efforts
Set
“spray and pray”
S.M.A.R.T. promotional goals
Redemption Awareness
It’s
all about two things:
Trust (credibility) Rapport (communication)
Feature
articles, press releases and columns Speaking engagements Open house Social media
You have more fans than you think Dialogue is the key to good relationships
Charitable
giving and service
How it gets done Who does it
Facilities Procurement Production
and processing Quality control Outbound logistics
Organizational
structure Management and leadership qualifications
Toot your own horn but don’t stretch the truth Write a third-person bio for each key person Include résumé in appendix
Employees
or contractors? Training and certification
The REALLY fun stuff
Income
Statement Also known as a profit and loss statement or P&L Shows the financial results of the business operations OVER TIME – profitability – how much was made or lost
Revenue
LESS Cost of Goods Sold (COGS) EQUALS Gross Profit LESS Sales, General & Admin Expenses (SGA) EQUALS Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) LESS Interest, Taxes, Depreciation & Amortization EQUALS Net Income
Balance
Sheet A snapshot in time of what the business has, what it owes and anything else left over (equity) Formula: Assets = liabilities + equity Shows: net worth, good will, receivables, fixed assets and more
A
monthly accounting or projection of inflows and outflows resulting in a net cash position each month
Important Uses
to develop from the bottom up
the most defensible numbers available
Update
regularly as fresh numbers are available – at least monthly
Overly
optimistic assumptions (sales, loans, market size) Underestimating costs and/or delays (purchase costs, production costs, collection delays) Ignoring industry trends (seasonality) Unfounded or hollow accuracy – Looks great on paper, but . . .
Contact KSBDC for assistance from us and referral to other resources: David Mace, business consultant BCC Kansas Small Business Development Center 316.218.6374 dmace@butlercc.edu