Summer 2009 URG MBA Program Chapters 1-3

Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience Example: CEO Larry Hsu Legal and Financial Advisors

Business Structure Sole proprietor Limited liability Corporation Partnership LLC (Limited Liability company) Each type uses different: Documentation Regulations/Laws/Taxation SBA

Financial and Business Planning Business Cycle—What makes it tick Financial Statements Balance Sheet Assets and Liabilities Income Statement Income/Revenue and Expenses/Costs Cash flow Statements – Importance? EBIT (Earnings Before Interest and Taxes) EBIT Examples

Accounting and Actual Cash Flow Timing between sales and payment receipt Cost of doing business Credit card fees Barters Based on market price Example: Web page design and maintenance/Advertising Accounting depreciation Leasing and relying on credit from suppliers

EBITDA Earnings before interest, depreciation and Amortization Used in companies that have a high value in equipment Disadvantage : does not include maintenance of equipment Does not affect cash flow—does affect taxes and tax reporting

Financial Projections Forecasting cash needs Valuation of the company Compare actual performance to forecasts Gives creditability and reliability to your forecast Issues Markets are difficult to predict Promising a % increase must be substantiated Conservative estimates or not?

Policies Pricing What are some strategies? R & D Cost Credit How much and to whom? Establishing your own Dividend Affects cash balances

Cost Structure Analysis Break-even Point Be conservative here Establishing Fixed and Variable Costs Fixed costs are easy to establish/consistent Variable costs? Energy Costs Shipping, etc. Establishing what could and/or should be outsourced Cost of establishing your business network Who will be your business partners?

Strategic Planning Market analysis/feasibility Start-up costs R & D costs Consider target markets Test market? Decision making Establish a process Use a decision tree

Strategic Alliances Anti-trust issues Go to Youtube.com and search for AT&T funny video Look for the one that looks like a diagram Application to today’s markets? Banking Communications Transportation Car makers

Business Plan Great resource – SBA – Components: General description Business goals Product description/Service description The management team Current status Summary of financial projections Financial resource requirements