1. v0.31 Business Plans Part 2 Taken from http://www.bplans.com/hurdleonline http://www.sba.gov/starting/indexbusplans.html

2. v0.32 Initial Business Plan Assignment Mission/Objectives – what’s the true nature of your business (don’t be too narrow), how will you build customer satisfaction, what is your workplace philosophy, what value to the customer do you offer Keys to success – limit to three and focus on those Target Market – good educated guess Competitive Advantage – what distinguishes you and your product Basic Strategies – how will you develop the company and products

3. v0.33 Simplified Business Plan Outline Executive Summary Company Summary Product Description Market Analysis Summary Strategy and Implementation Summary Management Summary Financial Plan

4. v0.34 Company Summary - Legal Types of Business Entities –Sole Proprietorship Pros - simple, inexpensive up front Cons - personal responsibility to creditors Tax treatment is straight through to your personal return –Partnership Pros – partnership agreement serves as legal core, defines levels of risk, buy-out agreements, etc. Cons – requires good attorney, can be complex Tax treatment is usually straight through to your personal return

5. v0.35 Company Summary - Legal Types of Business Entities (Cont.) –C Corporation Pros – used by majority of companies, best shielding from liability, best non-tax benefits, best for raising money and going public Cons – profits taxed twice (taxed on income, then dividends distributed to shareholders also taxed) Tax treatment – C Corporation pays its own taxes –S Corporation Pros – used by smaller firms (25 owners maximum), profits taxed once Cons – less shielding from liability than C Corp. Tax treatment – S Corporation can pass profits or losses directly to owners –LLC (next page)

6. v0.36 Limited Liability Company (LLC) Advantages –Owners not responsible for debts and liabilities of business, so creditors cannot pursue owner’s personal assets (in sole proprietorship or general partnership, this is not true) –Taxed only once – income or loss is passed through to owner’s personal income tax statement –Has fewer annual reporting requirements than corporations –Can form any organizational structure agreed upon by the owners Disadvantages –Different states treat LLCs differently, you need to investigate a particular’s states rules –May not be taken as seriously by outside investors In the state of Mississippi, formation of an LLC costs $50 –If your company provides engineering services, then one of your officers has to be a Professional Engineer, and has to pay a $50 fee each year –http://www.pepls.state.ms.us/COAengineering.pdf From: http://www.bizfilings.com/learning/benefitsllc.asp

7. v0.37 Company Trademarks Trademarks law protects product names, logos, trade names, slogans. US Patent and Trademark Office website www.uspto.gov

8. v0.38 More on Trademarks A trademark™ can be registered  or unregistered –Registered trademarks offer more legal protection, but takes effort/money to acquire Trademarks (™ or  ) must be actively protected by the company –Anytime the company uses it, must include ™ or  (first time use in a document presentation) –The company must actively seek to keep others from using trademarks without permission

9. v0.39 Company Names Can’t reserve a name completely, but company has rights to its identity. Types –Your own name –“Doing Business As” (county registration) –Corporation (state registration)

10. v0.310 Company Internet Domain Names Can look in NSI Registrar database using searchers such as www.networksolutions.com/cgi-bin/whois/whois - to find available second-level names (example.com or example.biz) and - to find links to help register names -Very cheap to register domain names - a few $ for multiple years - Be careful of scams! (you have registered myname.com, and you get a renewal notice on mycom.info even though you did not register it. -Beware of squatters – if you let the domain registration run out, then somebody else may grab it and then hold it hostage..

11. v0.311 Company Location & Facilities Describe –Offices and locations and function of each –Size (square footage) –Lease arrangements (etc.) –Internet services –All location & facilities factors that sell your company

12. v0.312 Company Strategy Describe –Value proposition ex. reliability and service for a price –Competitive Edge Proprietary technology protected by patents Website name Headstart in area

13. v0.313 Company Start-Up Costs Start-Up Expenses – include only those that come before the start of the plan. Those that come after go in profit and loss table. Expenses – those items that are deductible against income

14. v0.314 Start-Up Plan - Expenses Legal$1,000 Prototype Dev. $15,000 Initial Advertising$1,000 Insurance $500 Expensed Equipment$4,000 Other$1,000 Total Start-up Expense $22,500 For an engineering company, initial prototype development is probably the highest cost. The legal cost above would greatly increase if a patent was included ($10,000 to $20,000).

15. v0.315 Start-Up Plan - Assets Cash Requirements $25,000 (cash may need to change as you get better estimates for cash flow) Other Short-Term Assets$7,000 Total Short-Term Assets $32,000 Long-Term Assets 0 Total Assets $32,000 Short term asset: can be easily converted into cash within one calendar year (cash, money market account, checking account, accounts receivable). Long term assets are things like real-estate, machinery. http://www.businesstown.com/accounting/basic-sheets.asp

16. v0.316 Why is ‘cash’ a Startup cost? When you open the doors of your business, it needs cash on hand to operate –Used for additional expenses after door opening but before new cash inflow from product sales –To generate cash flow, you need to prime the pump! –A company generally cannot operate with zero dollars in the bank account. Thus, cash on hand at startup is an ASSET, and also an initial COST, as you need it in order to open the doors. This cash has to come from somewhere – it will come from your initial investors.

17. v0.317 Total Start-Up Plan Requirements Total Start-up Expense $22,500 Total Assets $32,000 Total Start-Up Requirements $54,500

18. v0.318 Start-Up Funding – Investments Investor 1 $20,000 Investor 2 $20,000 Other $0 Total Investment $40,000 If you do not have outside investors, then the ‘investors’ are yourself and your partners. You are transferring money from your private bank account into the company’s startup bank account. The money is no longer yours – it is now an asset of the company.

19. v0.319 Start-Up Funding – Liabilities Short-Term Liabilities Unpaid Expenses $0 Short-Term Loans $14,500 Interest-Free Short-Term Loans $0 Subtotal Short-Term Liabilities $0 Long-Term Liabilities $0 Total Liabilities $14,500 Liabilities are debts and obligations owed by the business to outside creditors. In this case, borrowed some money to help fund startup costs. Total startup costs must be covered by investment + liabilities borrow money to cover investor shortfall

20. v0.320 Start-Up Table Summary Total Start-Up Expenses $22,500 Total Assets $32,000 Total Start-Up Requirements $54,500 Total Investment $40,000 Total Liabilities $14,500 Investment + liabilities $54,500 Loss at Start-Up (Investment - Capital) ($22,500) Total Capital (Assets – Liabilities) $17,500 Total Capital and Liabilities $32,000 Checkline (total investment – capital – loss at startup = 0) 0 The loss at Start-up is equal to startup expenses if everything is done correctly. Investment– capital = loss at startup for correct accounting. If you have more investment, you typically transfer this extra investment to startup cash, so loss at startup just becomes equal to startup expenses. Observe that more liabilities  decreases capital (which is a measure of the company’s net worth) Match

21. v0.321 Rule of Accounting Capital = Assets – Liabilities This is company’s Net Worth Capital: the net worth of a business, that is, the amount by which assets exceed its liabilities. http://www.investorwords.com/694/capital.html

22. v0.322 Product Description Describe the product –What the product is –How much it cost –Who purchases it Think about customer needs and benefits –Use this to as possible way of generating new ideas Do competitive comparison –What buyer choices are available –How does you product line compare to other companies

23. v0.323 Product Description Describe what goes into your product –What are the sources of vital components Describe the product –What the product is –How much it cost –Who purchases it Think about customer needs and benefits –Use this to as possible way of generating new ideas

24. v0.324 Product Description (cont.) Describe future products –How will they be developed –What is the relationship to present products –What are the market needs Include sales literature –Advertisements –Brochures –Tech. Specs.

25. v0.325 Business Plan Assignment 2 Executive Summary Company Summary Product Description Market Analysis Summary Strategy and Implementation Summary Management Summary Financial Plan