1. Starting Your Own Businesspart 1 Dr. John Abraham Professor UTPA

2. Time Commitment Takes more time than being employed Willing to work minimum 6 days a week Difficult to take vacation

3. Commitment to Education Educate yourself in the area of the intended business. If it requires certification get it first. Even if the certification is not required, if there is one get it. If the product you are going to sell requires authorization training, get it. Work for someone else in the same business to learn the business.

4. Capital Make sure you have the money to pay rent for one year, and resources to keep the necessary inventory. If you are going to hire employees, you need to have sufficient funds for 6 months salaries. Go in with the understanding that you might lose your investment

5. Part time vs full time business If you need to feed your family, don’t quit your regular job until the business can sustain you. If you keep your job, realize that you will be scrutinized more and must fulfill all your duties on time. E-commerce will lend itself to part time business in the beginning. Do not do any private work at your regular work place. Never compete with your current employer.

6. Create a Business Plan Written evaluation of economic viability of the business. Do not start a business without a written business plan.  Mission, Sound business Concept, Market Analysis, Good management, Financial control http://www.sba.gov/smallbusinessplanner/index. html http://www.sba.gov/smallbusinessplanner/index. html

7. Business Plan Part 1: The Executive Summary  It provides a concise overview of the entire plan along with a history of your company. This section tells your reader where your company is and where you want to take it. It's the first thing your readers see; therefore it is the thing that will either grab their interest and make them want to keep reading or make them want to put it down and forget about it. More than anything else, this section is important because it tells the reader why you think your business idea will be successful.

8. Part 2: Market Analysis  The market analysis section should illustrate your knowledge about the particular industry your business is in.  Industry Description and Outlook  Identifying Your Target Market  Market Tests  Lead Times  Competitive Analysis  Regulatory Restrictions

9. Part 3: Company Description a high level look at how all of the different elements of your business fit together. define the nature of your business (or why you're in business), be sure to list the marketplace needs that you are trying to satisfy Primary success factors might include a superior ability to satisfy your customers' needs, highly efficient methods of delivering your product or service, outstanding personnel, or a key location. Each of these would give your business a competitive advantage.

10. Part 4: Organization & Management Organizational Structure Ownership Information Management Profiles - resumes Board of Directors' Qualifications

11. Part 5: Marketing and Sales Strategies Marketing is the process of creating customers, and customers are the lifeblood of your business. In this section, the first thing you want to do is define your marketing strategy. There is no single way to approach a marketing strategy; your strategy should be part of an ongoing self- evaluation process and unique to your company. However, there are steps you can follow which will help you think through the strategy you would like to use.

12. Part 6: Service or Product Line A detailed description of your product or service (from your customers' perspective). Here, you would need to include information about the specific benefits of your product or service.

13. Part 7: Funding Request be sure to include the amount you want now and the amount you want in the future, the time period that each request will cover, the type of funding you would like to have (i.e., equity, debt), and the terms that you would like to have applied. How you will use your funds is very important to a creditor. Is the funding request for capital expenditures? Working capital? Debt retirement? Acquisitions? Whatever it is, be sure to list it in this section.

14. Part 8: Financials Last five years of income statements, balance sheets, and cash flow statements Prospective Financial Data. Make sure that your projections match your funding requests. See later slides on financials

15. Part 9: The Appendix credit history (personal & business) Resumes of key managers Product pictures Letters of reference Details of market studies Relevant magazine articles or book references Licenses, permits, or patents Legal documents Copies of leases Building permits Contracts List of business consultants, including attorney and accountant

16. Sample Business Plan http://www.businessplans.org/Vusion/Vusi on00.html http://www.businessplans.org/Vusion/Vusi on00.html

17. Office Equipment Plan Telephone system File Server Web Server Email Server Copiers, Printers Intra-Office communication

18. Organization of your Business Sole Proprietorship General Partnership Limited Partnership Corporation, General or S LLC, Limited Liability Company  http://www.irs.gov/businesses/small/article/0,,i d=137016,00.html http://www.irs.gov/businesses/small/article/0,,i d=137016,00.html

19. Investigate about Tax Consequences Who will do the tax forms?  Income Tax  Franchise Tax  Unemployment tax  Witholding Tax  Sales Tax

20. Possible Insurance Needs Insurance is to transfer a risk to someone else  Building Insurance  Content Insurance (business use related)  Merchandise insurance  Liability Insurance  Worker’s Compensation Insurance  Umbrella Coverage  Life Insurance  Auto insurance  Health Insurance  Flood Insurance

21. Types of Insurances Building  Fire, wind, etc. replacement cost Liability  Comprehensive liablity: personal and advertising injury, fire legal liability, medical expenses, customer falling, etc. Workers Compensation:  Employees’ injury related to work Life Insurance for partner, employees, etc.– owned by who..beneficiary?  Whole life  Term Umbrella: coverage over comprehensive.

22. Find a business Location Zoning Traffic count Visibility access Proximity to competition Proximity to customers Direction of growth Crime Labor rates Transportation accessibility.

23. Zoning  A-0 agricultural open. R1: single family. R2:duplex-fourplex. R3A: apartment. R3c: Condo. R3T: Townhouse. R4: Mobile home  C1: office building. C2: neighborhood commericial (close to subdivisions) example convenient stores, barborshops, etc.  C3L light commercial. C3: General business. C4:commercial industrial. I1 – light industrial. I2: Heavy industrial.

24. Leasing Lease agreements  NNN (net,net,net): tenants pay for taxes, insurance, gardening, utilities, security, trash, sewer and repairs. Also common area maintenance.  Shell & tenant improvements  Term and Option to renew.  Deposit  Repair responsibilities  Signs  Parking  Additional space as you grow.

25. Name of the business Choose a name for your business Check with State offices to see if that name is taken Obey trademarks, patents and copyrights http://www.governor.state.tx.us/divisions/e codev/sba/step1 http://www.governor.state.tx.us/divisions/e codev/sba/step1

26. Assumed name certificates Register with the county and city for Assumed name (if you don’t use your name or the corporation’s name) http://www.co.travis.tx.us/county_clerk/dba.pdf http://www.co.travis.tx.us/county_clerk/dba.pdf File assumed name with state of Texas  http://www.sos.state.tx.us/corp/forms_boc.sht ml http://www.sos.state.tx.us/corp/forms_boc.sht ml

27. Tax Identification Federal Tax ID  https://sa1.www4.irs.gov/modiein/individual/index.jsp https://sa1.www4.irs.gov/modiein/individual/index.jsp Obtain Texas State Sales Tax Identification  http://www.window.state.tx.us/taxinfo/taxforms/01- forms.html#Apps http://www.window.state.tx.us/taxinfo/taxforms/01- forms.html#Apps  Obtain Employer ID number from State and your tax rate. http://www.window.state.tx.us/taxinfo/taxforms/01- forms.html#Apps http://www.window.state.tx.us/taxinfo/taxforms/01- forms.html#Apps http://www.twc.state.tx.us/ui/tax/c3.html#c3

28. Hire Employees Create Employee handbook Withold taxas: FICA, Med, FIT – report 941  http://www.irs.gov/pub/irs-pdf/f941.pdf http://www.irs.gov/pub/irs-pdf/f941.pdf End of the year send out W2 and W3  http://www.irs.gov/pub/irs-pdf/fw2.pdf http://www.irs.gov/pub/irs-pdf/fw2.pdf  http://www.irs.gov/pub/irs-pdf/fw3.pdf http://www.irs.gov/pub/irs-pdf/fw3.pdf

29. Employee benefits Holidays Sick leave (8 hours per month) Vacation Medical insurance Retirement plan Profit sharing Bonus

30. Texas Resale Certificate If you are buying items to sell  http://www.window.state.tx.us/taxinfo/taxforms /01-3392.pdf http://www.window.state.tx.us/taxinfo/taxforms /01-3392.pdf

31. Financials and reporting

32. Important tax info from IRS http://www.irs.gov/businesses/small/article /0,,id=97726,00.html http://www.irs.gov/businesses/small/article /0,,id=97726,00.html http://www.irs.gov/businesses/small/article /0,,id=176080,00.html

33. Methods of Accounting Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it, regardless of when payment is received, and deduct expenses in the tax year you incur them, regardless of when payment is made.

34. Accounting Periods Calendar year Fiscal year  A fiscal year is 12 consecutive months ending on the last day of any month except December. 52-53-Week Tax Year You can elect to use a 52-53-week tax year http://www.missouribusiness.net/irs/pdfs/p 538.pdf http://www.missouribusiness.net/irs/pdfs/p 538.pdf

35. Payroll Accounting http://www.irs.gov/pub/irs-pdf/p15.pdf Using payroll service Using accounting programs such as peachtree or quickbooks At the minimum use spreadsheet  See in class demo.

36. Payroll withholding W-4 (Employee’s withholding allowance certificate) SS -6.2% employer and employee  Base limit is $102,000 (for 2008) Medicare – 1.45% for employer and employee. File 941 FUTA

37. Cash Flow Statement static.howstuffworks.com/pdf/sample- cash-flow.xls Company’s incoming and outgoing money for one year. Viability of company depends upon cash flow Sample cash flow statement Reconcile bank statements

38. Balance Sheet List all of your assets All of your liabilities The difference is Owner’s Equity

39. Income Statement Shows if your company is profitable