PRESENTED BY
TABLE OF CONTENTS 03 | These resources will keep your doors open Tom Pierson, Tacoma-Pierce County Chamber of Commerce
05 | Your blueprint to success: Drafting a business plan SCORE Tacoma volunteers
06 | Finding funding for your business Linda Jadwin
09 | SBA guaranteed loans in a nutshell The U.S Small Business Administration
10 | Position your business for government contracts Stephanie Scott, PTAC, Thurston EDC
12 | Resources for veteran entrepreneurship Greg Mowat & Terrance Hodge, Tacoma-Pierce County Chamber
13 | Things you need to know while you grow Annette Roth, Thurston Economic Development Council
14 | The ACA: What your business needs to know Chris Free, Rapport Benefits Group
15 | Do’s and don’ts: Marketing your small business Rusty George, Rusty George Creative
16 | Planning early for business succession Sam Armour, Armour Vickerman PLLC
BUSINESS RESOURCES
These resources will help keep your doors open
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s we depart the dark days of the Great Recession, we are entering a new economy. This economy does not look like economies in the past after other recessions or bubble bursts. This economy is going to make us think and act differently, and small business is the heart of innovation, entrepreneurial spirit, startups and job growth. When you think about it, every company was once a small business: Amazon, Costco, Microsoft, State Farm, Starbucks — the list goes on. Whether in retail, cybersecurity or coffee, new businesses are created daily. Sixty-three percent of all job growth comes from these small businesses! We need to be looking at reinventing ourselves as business owners, and always looking at consistently improving the experience. A business owner or leader in an organization needs to ask themselves — and everyone else who works in the organization — a very important ques-
“
By Tom Pierson Executive Director Tacoma-Pierce County Chamber of Commerce
tion every day: “What is the real value that we are providing to our clients that allows us to charge the price we are asking when people call upon us to serve them?” Starting a business can be done quicker and cheaper in the United States than anywhere else but keeping the doors open is the hard part. While 70 percent of new businesses are still in business two years later, only 50 percent of businesses are in business after five years. So keeping the doors open is critical, and it is why we need great resources for all our small businesses. Let me share a few to get you started: Chambers of Commerce Chambers of Commerce are a great place to start. Most chambers have a
common core competency of providing networking and referrals, which is a great way to get into a new network. Recently, our Chamber found through a survey that the top five topics for small businesses are leadership development, social media, marketing, networking strategies and business growth strategies. All of these point to topics that would be made available through our professional education series. Small Business Saturday Small Business Saturday is an American shopping holiday held on the Saturday after Thanksgiving during one of the busiest shopping periods of the year. First observed on November 27, 2010, it is a counterpart to Black Friday and Cyber Monday, which feature big box retail and e-commerce stores, respectively. By contrast, Small Business Saturday encourages holiday shoppers to patronize brick and mortar businesses that are small and local. This year, “Small Business Saturday” is on November 29, 2014. Spaceworks Tacoma
We need to be looking at re-inventing ourselves as business owners, and always looking at consistently improving the experience. - Tom Pierson
”
For aspiring creative entrepreneurs, this program connects artistic startups to no- or low-cost temporary space available and includes training. This program has an amazing 80 percent success rate! More program information can be found on spaceworkstacoma.com. There are many organizations in our community who are committed in helping our small business grow jobs locally, I highly encourage you to take advantage of these resources, who are ready and willing to help you be a success in our local economy!
2015 Small Business Resource Guide | 3
BUSINESS PLANNING
Your blueprint to success: Drafting a business plan
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our business plan is a crucial outline for your company’s success. A good business plan will project ahead some three to five years, with careful consideration as to how the company aims to increase revenues.
By SCORE Volunteers
re-thinking your ideas and assumptions. That’s the value of the process, so make time to do the job important properly. Those who do never regret the effort. Be sure to keep deThe real value of creating a tailed notes on your sources of inbusiness plan is in the process of formation and on the assumptions researching and thinking about underlying your financial data. your business in an organized way. Planning helps you to think things From business planning to through, research the market, and growth planning examine your ideas critically. Regular business plan reviews To start, a business plan tem- are essential once your small busiplate suitable for all types of busi- ness is up and running. It’s always nesses is available as a Word tem- helpful to revisit and revise your plate at www.SCORE.org. It consists projections, and make sure the facof a narrative and several financial tors behind them remain accurate. worksheets. As your business evolves, there The body of the business plan will be more influences on what you contains questions divided into do and the customers you serve, as several sections. It also has tips for well as new set of unknowns surfine-tuning your plan to make an rounding the directions in which effective presentation to investors you want to expand. Assuming or bankers. things will work out is riskier now because you have much more inIf this is why you’re creating your vested in the business. plan (and if it is, see ‘Finding funding for your business’ on page 6 of It is helpful to regularly engage in this guide), pay particular attention some strategic planning and define to your writing style. You will be near- and long-term objectives, the judged by the quality and appear- strategy and tactics by which you’ll ance of your work, as well as by pursue them, and metrics for gaugyour ideas. When you are finished ing your progress. The result is a writing your first draft, you’ll have growth plan, which will provide a a collection of small essays on the road map for the future and posivarious topics of your business plan. tion you for new opportunities. Why a business plan is
intended to be, or have you modified your mission? What are current strengths, and what areas could be improved upon? Any glaring problems or shortcomings should be addressed as quickly as possible. Also, take a comprehensive look at the state of your market, and what is shaping it. Your original expectations may be on target, or there may be emerging trends that will radically alter your industry. Needs and issues facing your existing and target customers should also be examined. With that knowledge, project three years out, and set objectives to keep your business in step with these trends. What resources will be needed? Where can they be found (for example, new staff, training, upgraded equipment and facilities)? What costs are involved? What kind of learning curve may be required? Develop an action plan for each one with milestones to assess your progress. Your growth plan, like your business plan, is a guide to be adapted as conditions change. You may find yourself ahead of schedule, or dealing with unforeseen factors that require a schedule revision or complete overhaul. But your business can only benefit, as there’s no such thing as too much planning.
Two helpful books on small business growth planning include The Pumpkin Plan: A Simple Strategy to Grow a Remarkable Business in Any Field by Mike Michalowicz, and Strategic Planning: Fundamentals It typically takes several weeks Start by comparing the current for Small Business by Gary May. to complete a good plan. Most of status of your business with your Both are widely available in bookthat time is spent in research and original intent. Are you where you stores and via online retailers. 4 | 2015 Small Business Resource Guide
SCORE is a nonprofit organization of more than 12,000 volunteers who provide free, confidential business mentoring and training workshops to small business owners. Some 20 Tacoma SCORE chapter members offer free one on one counseling for starting and growing successful small businesses and nonprofits.
• Request an email mentor anywhere in the country;
SCORE mentors are there for the life of a small business; from creating and evaluating business plans to purchasing equipment, leasing real estate, franchising, even selling and exiting. Last year, 33% of SCORE clients were in the Growth phase of business, 38% were in the Formation phase of business, and 29% were in the Start-Up phase of business.
Download the business plan template to draft your plan. Then go to www.Tacoma.SCORE.org to find a local mentor to review and refine your plan.
By logging on to www.SCORE.org, entrepreneurs can easily:
• Tacoma: 855-685-0166 – located at Bates Technical College – Room M-123B, 1101 S. Yakima Ave. Tacoma, WA 98405.
• Request a face-to-face local mentoring session;
• Find a local chapter or workshop; • Download thousands of free templates and tools; • And register for free live webinars and listen to recorded webinars.
Schedule a personal appointment at one of four area business centers by calling:
• Lacey: 360-754-6320 -- Thurston Economic Development Council, 665 Woodland Square Loop #201 Lacey, WA 98503. • Gig Harbor: 253-851-6865 -- Gig Harbor Chamber of Commerce 3125 Judson St. Gig Harbor, WA 98335. • Lakewood: 253-582-9400 -- Lakewood Chamber of Commerce 6310 Mt. Tacoma Dr. SW – Suite B Lakewood, WA 98499.
More resources: The Small Business Administration (which SCORE is not affiliated with) has a section on its website (http://www.sba. gov/writing-business-plan) that offers comprehensive tips on how to write and research for your business plan.
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FUNDING
Finding funding for your business
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ne of the hardest questions for a business to answer is the source of funding to launch or grow the business. Gone are the days of grants, no matter what others may say. Now, the question is to pursue equity, debt or social financing — and how to best prepare? The best preparation for any business is to complete a business plan, know the industry and the market potential of your endeavor. Equity financing can be in different forms: venture capital, angel investing or your own equity investment. Venture capital requires the owner to give up a portion of that ownership in order to secure monies. Angel investors — individuals who provides capital for business startups, usually in exchange for convertible debt or ownership equity — may not want to own part of the business but still expect a better than average return on their investment. Will you, as the owner, be ready to give up influence over your business, at lease, or partial control to obtain the next level for your business? Do you think the business will grow to point that you can promise a return on the money invested in you? Do you see the company going public and offering stock? Your business entity will also determine if this is a viable option for your business. You need to be prepared to answer questions about the industry, market share, product placement and barriers that will slow growth. Investors want a business that is scalable; you can begin small, but need accelerated growth potential. The return on their investment may 6 | 2015 Small Business Resource Guide
By Linda Jadwin Former President Northwest Business & Community Development
be paid as the business grows and achieves profitability. This is crucial when planning your business. The plan will need to fully explain how the business will grow with the cash infusion. Most investors will want to know what is the seed or beginning cash need, and then what monies will be needed to take the business to the next level. Will you need rounds of investing or just one infusion? Be prepared to explain exactly how the money will be used. You will have to know when you will add employees, how much of the money you have put into the business that needs to be repaid (this will never be 100 percent), equipment, facilities and so forth. Most investors will also want to read your executive agreement to ensure there is an exit strategy if one principal decides to remove themselves from the business, plus an employment agreement to ensure the company has the proper guidelines to lessen the chance of being sued by a disgruntled employee. Investors will also want a cash flow projection and an assumptions page to state how you have obtained the projected numbers. The cash flow needs to make sense to an investor. If the expenses and income is the same for each month, the business has not done enough research. It is hard to think of any business that does not have fluctuations. If you are planning on a micro-business (five
employees or less involved) and do not want to add locations, then you will be looking towards debt financing. Debt financing means lenders (banks and some credit unions) offering a sum of money now, to be repaid with regular principal and interest or monthly payments. Credit card financing falls into this category as well, and may be a logical tool to use if needed to just jump start a business for a lower sum than banks are willing to lend. If you have a signed contract in hand and need a very short term lending, this is not a bad option. Consider credit card rates for longer term monies and usually it will make more sense to obtain a lower interest rate bank loan. Banks and credit unions have different loan programs available. The business owner needs to establish a rapport with their bank as they plan for debt. It is always best to start with the bank that you do your personal banking with and inquire about their business lending program. Consider the lender to be part of your team. You will need to find a banker who you feel comfortable sharing both personal and business financial information. There are also nonprofit community-based lending institutions as well that offer debt financing. These usually offer loans to start-ups, lower amounts and higher interest rates because of the risk. Often times they can work with your bank to co-loan monies. Debt financing will require a business plan and cash flow as well. Also, be prepared to submit three years of both personal and business tax returns (if available), balance sheets
What a lender looks for when reviewing a loan request: how to prepare New Business
Established Business
1 Describe in detail the type of business to be established.
1 Current business financial information: Prepare a current balance sheet and an income (profit and loss) statement for current year up to the date of the balance sheet.
2 Describe your experience and management credentials. 3 Prepare a detailed estimate of how much capital will be needed to start. State how much you have and how much you will need to borrow. 4 Prepare a current personal financial statement, listing all personal assets and liabilities. 5 Prepare a month-by-month projection of revenues, expenses and profit for the first twelve months. Also do a companion cash flow projection for the same period. Explain your major assumptions in an accompanying narrative. 6 List the collateral to be offered as security for the loan, with estimates of the market value of each item. 7 Take this material to your banker. If the bank wants an SBA guaranty for your loan, they will make application to us. You deal with the bank; the bank deals with SBA. Source: Small Business Administration Fact Sheet
and income statements. Be ready to discuss your plans with the banker and be able to answer any questions posed. The business plan should reflect the cash flow. Be prepared to have your own money to invest, most financial institutions want to see between 20-30% of the loan amount as your own equity, or down payment. You will need to know exactly what you will be spending the loan money on so include quotes. Remember to obtain enough financing so you can work on your business and not worry about how you will pay the rent. Business owners need to show a good credit score (over 675), experience in running a business in the industry, cash flow that generates
2 Historical business financial information: Prepare income statements and balance sheets for the past three full years. Do not include personal items on the statements. Reconcile the equity balances between each year. 3 Prepare a month-by-month projection of revenues, expenses and profits for the next twelve months. Also do a companion cash flow projection for the same period. Explain your major assumptions in an accompanying narrative. 4 Prepare a current personal financial statement for each owner, partner, or stockholder owning at least 20% of the business. 5 List the collateral to be offered as security for the loan, with estimates of the market value of each item. 6 State the amount and intended uses of the loan. 7 Take this material to your banker. If the bank wants an SBA guaranty for your loan, they will make application to us. You deal with the bank; the bank deals with SBA.
enough income to pay back the loan, and have assets available to use as collateral to secure the loan. The above can also be a barrier to business owners obtaining capital. A newer movement has begun, and it is social capital. It has taken on a few forms: Kickstarter, Etsy, Kivazip to name a few. Locally, Community Sourced Capital and Invest Next Door have had successful campaigns. Social funding requires that you provide some of the lenders yourself. Some platforms require you to offer product for different levels of contribution. Other platforms want you to bring investors who are willing to buy into your business for a lower amount. You would combine
many contributors into a lump sum. This method will still require the owner to have a business plan as well as the means to pay back the investment either with product or monies. It usually requires less financials and to be in business at least a year. No matter the form of financing, every business should have a planning document and financial projections remember all of the above want to see that you as the business owner has provided capital to the business. A way to show what has been done and what monies are needed is a source and use of funds that show what an infusion of money will do for the business. 2015 Small Business Resource Guide | 7
BETTER BUSINESS BUREAU
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8 | 2015 Small Business Resource Guide
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FUNDING
SBA guaranteed loans in a nutshell
I
f you’re planning to start a business or expand an existing business, you might need financing help. The U.S. Small Business Administration participates in a number of loan programs designed for business owners who may have trouble qualifying for a traditional bank loan. To start the process, you should visit a local bank or lending institution that participates in SBA programs. SBA loan applications are structured to meet SBA requirements, so that the loan is eligible for an SBA guarantee. This guarantee represents the portion of the loan that SBA will repay to the lender if you default on your loan payments. The SBA Loan Application Checklist provides a listing of forms and documents you and your lender will need to create a loan package to submit to SBA. That checklist is available online at www. sba.gov. Loans for starting and expanding businesses Basic 7(a) Loan Program – Gives 7(a) loans to eligible borrowers for starting, acquiring and expanding a small business. This type of loan is the most basic and the most used within SBA’s business loan programs. Borrowers must apply through a participating lender institution. Certified Development Company (CDC) 504 Loan Program – Provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. Microloan Program – Offers very small loans to startup, newly established or growing small businesses. SBA makes funds available to nonprofit communitybased lenders which, in turn, make loans to eligible borrowers in amounts up to a maximum of $50,000. Applications are submitted to the local intermediary and
tion” when he bought and began to run Exeltech in 1998. By Melanie Norton Economic Development Specialist, SBA
all credit decisions are made on the local level. Export assistance loans Export Express – Provides exporters and lenders with a streamlined method of obtaining financing for loans and lines of credit up to $500,000. Lenders use their own credit decision process and loan documentation; exporters get access to their funds faster. SBA provides an expedited eligibility review with a response in less than 24 hours. Export Working Capital – Offers loans targeted at businesses that are able to generate export sales but need additional working capital to support these opportunities. International Trade Loans – Gives term loans that are designed for businesses that plan to start/continue exporting or those that that have been adversely affected by competition from imports. The proceeds of the loan must enable the borrower to be in a better position to compete. CAPLines – Help small businesses meet their short-term and cyclical working-capital needs through the SBA umbrella program called CAPLines. SBA Lending Success Story: Exeltech in Lacey After moving to Washington from India, Santosh Kuruvilla wanted to be “more than a dot in a large corpora-
His business grew from its initial forte of bridge design and expanded into bigger transportation projects. By 2009, Exeltech’s Lacey office maxed out their space, and Kuruvilla sought a way to increase his company’s assets. That’s when his banker encouraged him to look at purchasing office space. Kuruvilla used the SBA 504 Loan Program to purchase a building and renovate the space. “Going into the recession, having ownership of the building really helped us,” he said. As Exeltech obtained more work in the Seattle area, office space reached capacity in the new office too. So Kuruvilla worked to obtain another SBA 504 guaranteed loan to purchase and renovate more space. “My focus remains fixed on the clients who have projects that allow us to do innovative, cool stuff, and on the people I hire,” he said. “I don’t want to grow so big I don’t know the names of people and their families. If I continue to focus on the people and relationships, the growth and profits will follow.”
Connect locally at www.sba.gov/wa Learn more – View calendar listings for upcoming SBA Loan Briefings, including recurring briefings 12 to 1 p.m. on the 2nd and 4th Thursday of every month. Find a SBA Lender – Find a list of SBA lenders in Washington state or search for a SBA lender by ZIP code Find a Microlender or Alternative Lender – Review a list of microlenders and alternative lenders listed on pages 17 and 18 in the SBA Seattle District Office Resource Guide. 2015 Small Business Resource Guide | 9
GOVERNMENT CONTRACTING
Position your business for government contracts
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significant amount of federal contract spending occurs in Washington state, with total awards for performance in the state during fiscal year 2012 totaling over $13 billion. This represents great opportunities for Washington firms that understand the government marketplace and how to position themselves to compete for these contracts. The Washington Procurement Technical Assistance Center recommends the following steps to begin exploring the federal marketplace. Conduct market research A goal to “sell to government” is typically too broad. Determine which agencies purchase your product or services, who they are currently buying from, and when and how they buy using resources like www.usaspending.gov and the Federal Procurement Data System. Also consider sub-contracting, which can be a great option for small businesses to get involved in the federal marketplace. Develop a leads list of agencies or prime contractors to pursue business opportunities with. Evaluate your competitive advantages There are provisions in the federal marketplace designed to increase contracting and sub-contracting opportunities for small businesses as well as women owned, veteran and service-disabled veteran, minority owned, and firms located in some economically distressed areas. Visit www.sba.gov and www. vetbiz.gov for more information about certification processes.
10 | 2015 Small Business Resource Guide
By Stephanie Scott Washington Procurement Technical Assistance Center, Thurston EDC
Register to sell Businesses must be registered in the System for Award Management (www.sam.gov) in order to be awarded a contract with a federal agency and to be paid for work performed. Once registered, your firm will also have a profile in a searchable database used by government buyers and prime contractors to find small businesses. Registration is free; beware of firms charging to complete your registration for you. Market your firm Utilize marketing materials targeted toward your federal government buyers. Generally accepted format is a one page capability statement or line card that includes your DUNS number, CAGE code (Assigned after registering in SAM), North American Industry Classification Codes (NAICS), small business or other socioeconomic status, and information about your firm’s capabilities, technical expertise, and experience. Seek out opportunities to meet and build relationships with government end users, buyers, small business representatives and large prime contractors. Watch for opportunities All federal opportunities over $25,000 are posted on the Federal Business Opportunities site at www.fbo.gov. The site includes federal procurement forecasts and the
option to create a free account and have bid opportunities emailed directly to you. You’ll also find a wide array of opportunities for firms selling simple goods and services on www.fedbid.com, a reverse auction site used by many federal buyers, including Joint Base Lewis McChord. Additional sites and procurement vehicles are utilized by federal government buyers, but these are good starting points. Contact your PTAC The Washington Procurement Technical Assistance Center (PTAC), a program of the Thurston Economic Development Council, provides no-cost government contracting technical assistance. PTAC counselors across the state work one-on one with business owners and assist them with navigating government registrations, certifications, contract bidding, invoicing processes and much more. Find the PTAC office nearest you at www. washingtonptac.org. Using online resources to do business with JBLM Joint Base Lewis-McChord is one of the South Sound’s largest sources of government contracts for local businesses. Shrewd entrepreneurs will be able to use their online resources wisely to position their businesses for contract procurement with the base. 1. Sources Sought Notices Although Sources Sought aren’t actual bid or proposal
solicitations, they can still be a powerful tool for your business. Agencies post these notices on www.FBO.gov to conduct market research and identify possible sources for a project, including vendors who will help them meet their small business and socioeconomic goals. We frequently hear from federal contracting officers frustrated with the lack of small business response to these notices—they need to hear from you to confirm that there are highly capable small businesses available to meet their needs.
only a few firms in your small business category) or a sole-source award (if your capabilities and expertise are unmatched by others).
the lowest qualified bidder wins. It is free to vendors, with the “FedBid fee” incurred by the government customer.
Follow the instructions in the Sources Sought notice exactly, proof-read, ensure that you are putting your best foot forward and respond by the deadline. And be sure to watch www.fbo.gov for the eventual bid or proposal solicitation when they are ready to buy!
To access the site, firms must first register in the System for Award Management (SAM, www. sam.gov) to be eligible to win a federal contract. Next, register your company on www.fedbid. com. Register well in advance of a buy, as it can take five days for your SAM registration to process and 24-48 hours for your FedBid registration to become active.
We recommend monitoring for Sources Sought notices and responding if they fit your firm. Responding requires an investment of your time, but can potentially influence how a federal agency “packages” any eventual solicitation and can even lead to a set-aside (limiting competition to
Nearly 90 percent of Joint Base Lewis McChord buys for goods and simple services under $150,000 occur through Fedbid. com, a reverse auction site utilized by JBLM and many other federal agencies.
2. Fedbid.com
When bidding through Fedbid,
Through Fedbid, you can view and bid on opportunities as well as set up a search filter to email buys that fit your business. It is important to monitor these emails or the site frequently, as buy happen quickly and you may miss an opportunity to bid. Contact Washington PTAC for help!
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VETERAN RESOURCES
Resources for veteran entrepreneurship
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oday’s veterans have largely mastered the basics of the complex technological world. They are mature, understand mission, most have been introduced to advanced business techniques such as lean management, statistical process control, continuous improvement, and after action review process. In short, it is no wonder that beterans have a higher success rate in building successful businesses. As a veteran, you understand via your experience that success has numerous ingredients and that it grows from having a clear mission, a plan to achieve that mission, and resources to execute the plan. Veteran Entrepreneurship Success Story: Stewart & Son Computer Services With a 31 percent average growth in sales every quarter since opening in 2012, Army veteran Wade Stewart began with one important goal in mind: creating a customercentric niche for computer, network and server support services for small businesses. Stewart has used the Tacoma Chamber’s Veteran & Business Service well, connecting with veteran transition programs as he grows his staff. Stewart’s use of several attributes of military experience (careful planning, commitment to professionalism, focus on mission) in business illustrate the veteran advantage for entrepreneurial success. 12 | 2015 Small Business Resource Guide
By Greg Mowat & Terrence Hodge Tacoma-Pierce County Chamber of Commerce
The story of Stewart and Son and other veteran-owned business owners and their successes are emblematic of the “veteran advantage“ in the business arena. Their military training and experience are a “leg up” when it comes to the challenges of starting and running a business venture. Mission, planning and execution with experience in strategy, teamwork, focus, meeting deadlines, customer/stakeholder relationships and “learned learning” are the ingredients for a productive and profitable business. Resources for veterans Chambers of Commerce – Use these groups for networking, business events, general business information, business advocacy, business education, professional services. The Tacoma-Pierce County Chamber, specifically, has a Veteran & Business Service in partnership with nonprofit Workforce Central that helps entrepreneurs develop veterans hiring programs and works with veteran assistance Programs that support veterans in transition.
force Central – These offer information on the U.S. Dept. of Labor’s program, the Camo2Commerce program for seamless transition from military to civilian employment, and resources on self-employment preparation. Rally Point/6 – A one-stop services for Veterans, separating service members, active-duty service members, military spouses, and Guard & Reserve members for employment, entrepreneurship, VBA benefits, community connections. Small Business Administration/ Vetbiz – Comprehensive business resource information, financing info and support, networking & education. University of Washington Tacoma/Veterans Incubator for Better Entrepreneurship (VIBE)– Start-up support/networking for veterans attending the university. The various veteran service organizations available within the South Sound business community also play a great role in helping accomplish the mission of successful veteran transitions. Camo2Commerce Camo2Commerce is about providing opportunities for career development and jobs to service members transitioning out of Joint Base Lewis-McChord into civilian
Goodwill of the Rainier and Olympic Regions Veteran Services – Employment and entrepreneurial support/counselling, benefit connections, general assistance.
life in western Washington. Camo2Commerce (C2C) offers a number of customized services to transitioning service members, including one-on-one career coaching, job placement services, short-term
Pacific Mountain WDC/Work-
See VETERANS, page 18
BUSINESS UPSCALING
Things to know while you grow Scaling up your business: Transitioning from startup mode to capturing the market
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he challenges facing the entrepreneur in scale up mode – taking their business to the next level of growth - are vastly different than the challenges they face during start up. Often, startups are run by people who wear multiple hats and who make all or most of the decisions, from productions schedules to advertising placement. As they grow, however, many businesses experience growing pains as the role of the principal(s) changes from jack-of-all-trades to learning how to manage others and ensure market growth. In order to ensure success during this critical phase of business development, entrepreneurs must approach the management of their company from a different perspective than when in startup phase. Growing a business will change the way it functions, and it is important to ensure the company has the tools and resources it needs to grow successfully. The following are questions you should ask yourself when considering growing your company:
By Annette Roth Thurston Economic Development Council Marketing Manager
tems in place – such as chainof-command, customer intake, and production – so that business runs smoothly and everyone working for the company understands expectations and the direction of the company. Are my financial systems in good order? Ensuring that your accounting system is in good order will go a long way toward helping your company ease through the scale up phase. Learning how to read and understand a profit and loss sheet, as well as cash flow and other financial statements, will help you determine if you need to change your pricing structure, if you should access outside capital, know which business lines are profitable or not, and more.
Do I have good managerial and procedural systems in place?
Do I really understand my target market?
Many startups don’t have any formal procedural systems in place because the small number of employees generally share information and can discuss and solve issues as they arise. As a business expands, however, it is critical to have procedural sys-
While it is essential to continually innovate and refine your product or service, it is equally critical to identify and understand the market you are trying to reach. What do they need, and can my product or service provide it? How can I keep connected to
and respond to customers as the business grows? Taking the time to invest in adequately marketing your company and understand how your customers respond to your communication efforts will pay off in increased revenue and market share in the future. Do I have the right people in place to help the company grow? Often, bottlenecks of delegation and time management issues arise as startups experience expansion. Successful entrepreneurs recognize that in order to grow, they must delegate tasks to other employees, freeing themselves up to create the vision for the company. It is necessary to address human resource issues and procedures so that you can build the right team to succeed. Putting into place systems that address interviewing, hiring and supervising new staff will ensure that you avoid costly hiring mistakes. Developing a company’s capabilities during its scale-up phase is key to its long-term growth, success and profitability. The Thurston Economic Development Council’s Business Resource Center (BRC) provides counseling, training, mentoring and workshops to businesses in all stages of development. For more info, visit http://www.thurstonedc.com.
2015 Small Business Resource Guide | 13
INSURANCE
ACA having a big impact, so stay informed
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he Affordable Care Act is in full swing in Washington state, and employers need to be aware of the opportunities and pitfalls that have come along with it. We want to highlight some of the places to look and things to look out for as you strive to take good care of our local, hard-working employees. Health benefits have always been a complex purchasing decision for employers. Historically, they have had to weigh benefit options and employees’ needs against program costs while staying in compliance with a few laws and tax codes along the way. Now, there are new markets and funding options to explore and new regulations to comply with, on top of the complexities that we’ve worked through for years. The first step in implementing health benefits for employees is to look under every stone to ensure you’re offering your employees the best coverage for them and their families that your budget allows. To do this, you will want to work with a competent insurance broker. There are many insurance markets that cannot be accessed directly by employers and must be accessed through a broker. This may seem frustrating, but actually helps reduce the administrative cost of the insurance providers which is required by the Medical Loss Ratio requirements in Section 1001 of the Affordable Care Act. The SHOP (short for Small Business Health Options Program) Exchange, available to employers with 50 or less employees, is new to most of Washington State for 2015. In 2014, it was only available in Clark County, but starting in January, many of us have a new market to explore. For employers with 25 or less employees, this can be a very important option to look at, because it is the only way to access premium tax credits from the federal government that could pay as much as 50 percent of your premium, depending on qualifications. 14 | 2015 Small Business Resource Guide
By Chris Free Co-principal Rapport Benefits Group
Unfortunately, the SHOP Exchange — officially known as Washington Healthplanfinder Business — will only have one insurance carrier available on it in Pierce, King, Thurston, Lewis and Mason Counties. Fully-insured plans will still exist outside of the exchange from many carriers. The big change outside of the exchange is the shift in the association and trust markets. In 2014, many associations and trusts that had been providing health benefits to their members for years were forced to close or make drastic changes in their business models in order to stay compliant with the ACA’s regulations. This shift has left some employers without an association or trust plan to evaluate. For others, there may be up to a dozen new associations and trust plans available to your industry. As insurance continues to increase in price, the opportunity to create selffunded or partially self-funded plans for employers becomes increasingly viable. It’s worth running through some underwriting exercises just to see if these models might work for you. Self-funded plans are not available as “off-the-shelf” products and do require a broker to build them for you, but if you don’t look, you won’t know what you’re missing. Don’t be scared of the term, “self-funded.” There is liability protection to keep your company from sinking in the event something truly unfortunate happens to one or more of your employees. There are also a number of non-insurance, tax-qualified methods for funding employee health expenses. When designed appropriately and in conjunction
with health insurance products, employers have even more flexibility to find efficiencies in their employee benefits plans. Whether it’s a simple Section 223 HSA or a sophisticated Section 105 HRA managed by a third-party, the savings for employers can be astounding. As well, the flexibility inherent in many of these designs may also serve employees better than a standalone insurance plan. Some employers have been looking at providing reimbursements for employees who purchase individual insurance plans from the Exchanges. This should not be done until your tax accountant, and perhaps your lawyer, review IRS Notice 201354. This notice appears to make it clear (as clear as anything from the IRS, anyway) that employers should not reimburse employees for individual insurance premiums. However, there are some administrators who believe they have a way around the technicalities in 2013-54. It is my advice that you look to an advisor other than the one selling you the product as to the legality of this approach – or just avoid it. Either way, individual plans will not protect employers from the penalties assessed for not offering coverage to employees. Speaking of penalties, employers with 100 or more employees will be required to offer qualified and affordable coverage to the employees or face penalties. In 2016, these requirements and penalties will apply to employers with 50 or more employees. As you are working through the calculations for these penalties and determining whether or not to pay them or purchase coverage, please be sure to include the taxes on the penalties. They are not tax-deductible expenses. S-corps, LLCs, and other pass-through entities will see the penalties pass through as phantom income to the shareholders. C-corps will pay their applicable corporate tax rate on top of the penalty, as it’s paid out of profits. See INSURANCE, Page 18
MARKETING
Do’s and don’ts: Marketing your small business
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hat’s the biggest mistake you’ve seen when forming a feasible small business marketing plan? The biggest thing I get from clients that just makes me cringe is their over-reliance on social media — on Facebook, on Yelp, on Twitter, but mainly on Facebook. I literally had one client that came in and said, “Well, my marketing plan is I have a Facebook page and I have 120 people now.” Well, if you really break it down, and you’re serious about marketing and getting your name out there, it’s difficult to do it with just Facebook. For example: You spend a year building it up to a thousand likes or a thousand fans — that’s a year that you put into it, and if you get a thousand, that’s pretty darn good. But how many of those are just friends, or people that you’ve kind of contrived to get? When it’s time for you to actually give a promotion or do some real prospecting, how many are actually going to see the post and actually act on the post? Is it really going to be viral? Some people have this idea of a silver bullet, where they think they can create this viral video. And it, all of a sudden, is going to be seen by 125 million people and all of those people are going to be your brand advocates because of that. You have a better chance of being struck by lightning than having that happen. And also, that 1,000 people that you built up over a year, or maybe hired somebody or a company to build up to 1,000 people? That’s still only 1,000 people being exposed to your brand, as opposed to just biting the bullet and paying for radio ads, where you would be exposed to hundreds of thousands of people. Out of those hundreds of thousands of people, if there’s one percent of that who actually correspond with you, that’s already better than just doing Facebook.
By Rusty George Principal Rusty George Creative
Or, if you can afford it, there’s television, which still reaches millions of people in this area. That is so much more effective. Not being afraid to rely on traditional media — and not thinking that you have to spend money for that while you don’t have to spend money on social media — is a big part of a lot of successful marketing. In marketing your business, often, you get what you pay for. Understand that I’m not necessarily saying, “You should just do traditional media.” What I’m saying is that social media is just one component of a larger campaign. One other obvious component should be having a good, structured website, which is very important. If you’re serious about getting out there and being heard, you have to have a multifaceted approach. How much should a business be investing in its marketing? It’s a rule of thumb that you should spend 10 percent of your revenues on marketing. It should be consistent. One of the biggest things is that people think, “Oh, I’ll just buy two months worth of billboards,” or, “I’ll have advertising for six months and that will be it.” You have to have something that’s continuous, consistent and always reinforcing who you are. What about branding? Any big red flags that small businesses should avoid? A big red flag as far as branding goes is having a weak logo. Having a logo that is a “me too” logo — or a logo that’s basically copying what everybody else already knows or is already out there too much,
like with a swoosh or with Papyrus font — is just as damaging as not having a logo. A logo is your brand. It is the icon that represents you: your personality, your brand promise, who you are, what your value is. You only get one chance to make a first impression, and it has to communicate that you’re professional, that you’re knowledgeable, that you’re a specialist and that you take yourself seriously. You are up against 10 other people and if you don’t have something that shows credibility, potential customers or clients are going to immediately not attach to you. They’ll go on to something else. Another red flag is talking about what you do, versus why somebody would want to interact with you, on everything from websites to Facebook to your brochures. Ninety percent of the people that we start with, they’re all about talking about “what we do.” They know what they do, and they’re very proud of what they do: They’ve built up this specialty, they’ve built up this knowledge base and they want to just kind of regurgitate it on all of their materials. And it’s all text, everything they could possibly add in about what their benefits are and what their specialty is and what their product is going to do to make your life better. In that case, you’ve completely overestimated anybody’s willingness to sit down and actually read. It’s not that it’s not important, but we live in an age of changing channels. In this ADD, completely fragmented marketplace, nobody has time to read anything. We’re talking about marketing; we ‘re not necessarily talking about all the details and specifics of your business. That can be done in the actual sales part, when you’re meeting with a client, and you can have separate, specific material for that. But when we’re talking about how you brand yourself and represent yourself See MARKETING, page 18 2015 Small Business Resource Guide | 15
EXIT PLANNING
Prepare early for business succession
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ne of the greatest issues facing business owners, their families, and our communities is succession or exit planning. You may be well aware of some commonly referred-to statistics, such as the large percentage of businesses that are closely held or the trillions of dollars in business value that will (or may not!) transition over the next couple decades due to the sheer size of the Baby Boomer generation that will be retiring. When it comes right down to it, however, succession planning is a deeply personal and intimate endeavor. Business owners, like most individuals, tend to have extremely busy lifestyles, making it challenging to set aside time to step outside of their business and engage in effective, long-range planning. However, for the health of the business and his or her financial future, it is important for business owners to make time for succession planning. Like it or not, all owners will eventually transition out of their businesses. The term succession/exit planning conjures up different visions for all of us. I use it to refer to the strategic process of assessing the owner’s and the business’s financial health, discussing the owner’s desires for his or her lifestyle after leaving the company, determining the current value of the company and steps to be taken to potentially increase that value, and exploring various options for selling or transferring ownership of the company. To be a truly effective process, a business owner should include all of her key advisors in discussions, including her attorney, CPA, valuation specialist, and financial advisor. The expertise of each of these advisors will be important to ensure the owner is receiving the most complete picture of her options available. As the process ensues, it is possible that other experts (i.e. HR, operations 16 | 2015 Small Business Resource Guide
By Sam Armour Certified Public Accountant Armour Vickerman PLLC
management, insurance, etc.) will become involved. The efforts of the financial advisor and valuation specialist are vital in determining the outlook of the owner’s financial future and the role the monetization of the value of the business will play. The “look” of a transition can vary drastically, from simply turning the business over to children through gifting or sale, to selling the business to any of a variety of purchasers, including key employees, a competitor, supplier, or other outside investor. The guidance of the attorney and CPA will help the owner pursue the option that makes most sense for that owner. It is also possible that the planning process will reinvigorate the owner, causing her to question whether or not she actually wants to exit the business anytime soon. Let me give you an idea of some of the issues the business owner is going to face or have to consider. Ongoing management of the company after the owner exits must be addressed. Are there employees in place who have the necessary skills, or the potential to obtain the skills, to lead the organization? If not, what is the owner’s plan for putting management in place, particularly if the owner intends to exit the business but retain ownership? Will a potential outside buyer rely on the owner to have strong management in place or will the buyer implement his own management team? As part of the valuation process, the owner and her advisors must take a good look at the company’s financials. How
does the organization stack up against industry benchmarks? Ratio analysis can be a good tool to compare things like operating margin, profit margin, inventory turns, sales per employee, etc., against the industry. This analysis can serve as a strong management tool, but will also be used by the valuation expert to provide a current value for the company and to give guidance to management on actions that can be taken to increase that value. In addition, an evaluation of the financials must include addressing any personal expenses the owner may be running through the company. The financials should be rid of any such expenses well before taking the company to market. If they are included in the financials at the time a prospective buyer is looking at the company, then adjustments must be made to show the true financial picture to that buyer. It is likely that the buyer may become skeptical as more adjustments need to be made. There is a wide variety of other issues that must be addressed over time, including compensation plans and agreements, estate planning, personal financial planning, buy-sell agreements and funding, insurance options, key-employee retention, ownership structure, and many others. If family members are involved with the company as employees or owners, then there are a host of other issues to be considered. The number of topics to address can seem daunting. However, by having the proper team of advisors in place, the owner will make substantial progress on each of them over time and will be more successful in her transition. As with most things, exploring options and having a plan in place is more likely to make the succession from his or her business a success for the business owner than continuing without one.
For entrepreneurs and success seekers, sometimes the best way to build something is to break it. Yes, you must think things through and have a plan, but at some point the planning, analysis and feasibility studies are no longer useful and it’s time to get off your chair, jump into action and go for it. Here are five marketing lessons for entrepreneurs: 1. Action beats perfection: A well-thought-out plan executed today is better than the perfect plan executed whenever it’s going to be perfected. (Which is usually never.) 2. Boring kills: A book, video, sales letter, brochure, opera, story, song, dance or any creative work can never be too long – it can only be too boring. 3. Say what you want: When you want someone to do something, don’t speak in codes. Whether you’re talking with your kids, raising money for a charity, crafting a marketing message or making a keynote to inspire an audience – tell them what you want them to do. They’re big kids and they can decide if they agree with you and if they want to take that action – but only if they know what the message is. 4. Be bold: The best promoter of you, your product, service or cause is you. You know it best and no one is going to make a more passionate case than you. If you believe in something, stand up for it. 5. Take risks: That mailing that the nonprofit was hesitant to use ended up being the most successful fundraiser in its 80-year history. That marketing piece I’m creating for my client is going to be bold, different and unconventional – and that’s why it will crush. Sometimes you have to break things. Shake it up. Bust it up – because that’s where the breakthroughs live.
EV to
Economic Development Council. He can be reached at dmurrow@ thurstonedc.com.
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INSURANCE continued from page 14
Along with new mandates and penalties comes some new regulations and reporting requirements. Just like the penalties, many of these requirements apply whether you purchase coverage for your employees or not. All businesses must inform their employees of the existence of the health exchanges, preferably using the model notices available from the Dept. of Labor. Employers who are subject to penalties and have part-time or seasonal workers should be using the ACA’s timetracking method and must report enrollment information and other details to the federal government using new tax forms 1094-c and 1095-c. Of course, all of the old regulations still apply. You still have to follow ERISA, §125, COBRA, HIPAA, USERRA, FMLA, and the
MARKETING continued from page 15
to your audience at large, all those extra details are going to completely lose them. And yes, the proper setup for text is important for search engine optimization, but if somebody goes to a website and it’s nothing but text, they’re going to immediately close it and look for something else. You have to believe in the power of editing down to the most distilled down, important parts of what you do. And while we’re on that, equally important is getting away from what you do and focusing on why you do it. What makes you get up in the morning? What drives you to do that? Because what you want people to do is connect and relate with what you’re doing, as opposed to just kind of scanning through and just going, “Okay, this person will do.” Most of the time, it’s not about somebody that’s going to do comparative research and start a spreadsheet and compare your service to somebody else’s
18 | 2015 Small Business Resource Guide
rest of the alphabet soup the federal government has given us. Even if you had procedures in place to make sure your company is in compliance with these laws, all of them have had to be altered to fit with new ACA regulations. So it’s worth reviewing what’s new and what you might need to change to stay in compliance. It’s a brave new world out there. The ACA has proven to be a life-saver for some and the most expensive regulation imaginable for others. The key component that your company needs in order to get the most out of this new reality – or to avoid catastrophe – is a good advisor. To that end, you’re in luck. The Washington Association of Health Underwriters is available in your backyard and there are hundreds of members across Washington State who are qualified to help you, your business and your employees find the optimum position in the market.
service to make a decision, although there are those people out there. Most of the time, it’s all gut instinct. When you go into the supermarket and you have the choice between three sodas, you’re not going to choose RC Cola. Why is that? It’s the same ingredients as Coke, but Coca Cola has created this brand that you connect with on a subliminal level, a gut level. They do such a great job of connecting with you on a gutand-heart level that that’s what makes you go with their product. That’s what we try to educate our clients on. Get away from spending so much time and space talking about what you do. That’s important, but it should be very subordinate to why you are the person to go with. Think about this: What is the most important value of your service or product? Lead with that. One more thing: Don’t lead with promotions. The more promotions you put in there, the more desperate you’re going to look. If you lead with promotions, you’re leading with prospecting, and you’re not leading with the actual foundation of why anyone would actually want to work with or buy from you.
VETERANS continued from page 12
training, hiring fairs and more. C2C works to fully integrate the public workforce system into the transition services provided on military installations. C2C’s goal is to enable transitioning service members to seamlessly shift into the civilian workforce, and specifically into high-demand career opportunities. Find C2C online at http://www. pacmtn.org/camo-2-commerce. Boots to Shoes The Boots to Shoes program augments veterans support services for 21st century veterans’ successful transition into civilian jobs. Boots to Shoes serves as an example of going forward by giving back. Boots to Shoes is online at http://www.bootstoshoes.org. Rally Point/6 Rally Point/6 (RP/6) engages mentors and encourages service members, veterans and their families in their next steps to complete their personal mission. The greatest losses a veteran feels upon exiting the military are lack of “mission” and “team”.. The support, services and mentorship at RP/6 is all provided at no cost for the service member, veteran or family member. Thorough the various veteran support organizations the veteran advantage is able to partner with a well rounded team to tackle the mission of helping our veterans make a fruitful transition home. Rally Point/6 is online at http:// theunfinishedmission.org.
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