and managing a business takes motivation, desire and talent. It
also takes research and planning. Like a chess game, success in
small business starts with decisive and correct opening moves. And,
although initial mistakes are not fatal, it takes skill, discipline
and hard work to regain the advantage.
increase your chance for success. take the time up front to explore
and evaluate your business and personal goals. Then use this information
to build a comprehensive and well-thought-out business plan that
will help you reach these goals.
process of developing a business plan will help you think through
some important issues that you may not have considered yet. Your
plan will become a valuable tool as you set out to raise money for
your business. It should also provide milestones to gauge your success.
you start to develop ideas and plans for your business, there are
a variety of resources available to assist you. One of your first
actions should be visiting one of the Small Business Development
Centers identified in Chapter 9 of this
guide. They can be of great assistance to you in developing your
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starting out, list your reasons for wanting to go into business.
Some of the most common reasons for starting a business are:
want to be your own boss.
want financial independence.
want creative freedom.
want to fully use your skills and knowledge.
you need to determine what business is "right for you." Ask yourself
do I like to do with my time?
technical skills have I learned or developed?
do others say I am good at?
much time do I have to run a successful business?
I have any hobbies or interests that are marketable?
you should identify the niche your business will fill. Conduct the
necessary research to answer these questions:
your idea practical and will it fill a need?
is your competition?
is your business advantage over existing firms?
you deliver a better quality service?
you create a demand for your business?
final step before developing your plan is the pre-business checklist.
You should answer these questions:
business am I interested in starting?
services or products will I sell?
will I be located?
skill and experience do I bring to the business?
will be my legal structure? (see overview below)
will I name my business?
equipment or supplies will I need?
insurance coverage will be needed?
financing will I need?
are my resources?
will I compensate myself?
answer will help you create a focused, well-researched business
plan that should serve as a blueprint. It should detail how the
business will be operated, managed and capitalized.
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of Business Organizations
organizing a new business, one of the most important decisions to
be made is choosing the structure of a business. You may structure
your business as a sole proprietorship, partnership or corporation.
Factors influencing your decisions about your business organization
include: legal restrictions, liabilities assumed, type of business
operation, earnings distribution, capital needs, number of employees,
tax advantages or disadvantages and length of business operation.
The advantages and disadvantages of sole proprietorship, partnership
and corporation are listed below.
is the easiest and least costly way of starting a business. A sole
proprietorship can be formed by finding a location and opening the
door for business. There are fees to obtain business name registration,
a fictitious name certificate and other necessary licenses. Attorney's
fee for starting the business will be less than the other business
forms because less preparation of documents is required and the
owner has absolute authority over all business decisions.
are several types of partnerships. The two most common types are
general and limited partnerships. A general partnership can be formed
simply by an oral agreement between two or more persons, but a legal
partnership agreement drawn up by an attorney is highly recommended.
Legal fees for drawing up a partnership agreement are higher than
those for sole proprietorship, but may be lower than incorporating.
A partnership agreement could be helpful in solving any disputes.
However, partners are responsible for the other partner's business
actions, as well as their own.
Partnership Agreement should include the following:
of equity invested by each partner.
of profit or loss.
of assets on dissolution.
for changes or dissolving the partnership.
of authority and expenditures.
in case of death or incapacitation.
business may incorporate without an attorney, but legal advice is
highly recommended. The corporate structure is usually the most
complex and more costly to organize than the other two business
formations. Control depends on stock ownership. Persons with the
largest stock ownership, control the corporation, not the total
number of shareholders. With control of stock shares or 51 percent
of stock a person or group is able to make policy decisions. Control
is exercised through regular board of directors meetings. Records
must be kept to document decisions made by the board of directors.
Small, closely-held corporations can operate more informally, but
record keeping cannot be eliminated entirely. Officers of a corporation
can be liable to stockholders for improper actions. Liability is
generally limited to stock ownership, except where fraud is involved.
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following outline of a typical business plan can serve as a guide.
You can adapt it to your specific business. Breaking down the plan
into several components makes drafting it a more manageable task.
a detailed description of the business and its goals.
the ownership of the business and the legal structure.
the skills and experience you bring to the business.
the advantages you and your business have over your competitors.
the products/services offered.
the customer demand for your product/service.
your market, its size and locations.
how your product/service will be advertised and marketed.
the pricing strategy.
your source and the amount of initial equity capital.
a monthly operating budget for the first year.
an expected return on investment and monthly cash flow for the
projected income statements and balance sheets for a two-year
your break-even point.
your personal balance sheet and method of compensation.
who will maintain your accounting records and how they will be
"what if" statements that address alternative approaches to any
problem that may develop.
how the business will be managed on a day-to-day basis.
hiring and personnel procedures.
insurance, lease or rent agreements, and issues pertinent to your
for the equipment necessary to reproduce your products or services.
for production and delivery or products and services.
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your business goals and objectives and express your commitment to
the success of your business. Once you have completed your business
plan, review it with a friend or business associate. When you feel
comfortable with the content and structure, make an appointment
to review and discuss it with your lender. The business plan in
a flexible document that should change as your business grows.
from the Small Business Administration.)
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