“Getting Your Business Idea Off the Ground!” Speaker Martha Londagin, Executive Business Consultant Former business attorney and commercial banker, current small business owner for 16 years Visit startupjunkie.org to see all our EVENTS and/or to book a no-charge business consultation!
Roadmap: -Introduction to planning to launch a small business -Lean Canvas/ Business Plan -Startup Steps -Financing -Resources in NWA to assist
Market Status of current local industry? Market size? Is there a demand for YOUR product or service? YOUR competition?
Founder/Owner Your experience in the Industry? KEY! Who will do what? Team? Daily operations? Manage finances, who will keep “the books”? Who will perform services or deal with customers/orders?
Financing Needs Identify all start-up costs Identify amount of owner’s investment needed or required in cash or equipment Formulate projected sales, profit, and cash flow calculations to determine feasibility
Prepare Your Plan to Launch!
Lean Canvas Map
Attorneys and Accountants Hire a true “small business” Attorney and a CPA/Accountant You will need a reputable attorney or CPA/Accountant who regularly practices in the areas of small business and employment law in your region for legal entity setup and to file taxes; can hire just bookkeeper for day to day records Attorneys don’t just incorporate-they help with contracts, leases, employee issues, etc. Can hire accountant or bookkeeper to train you on software like QuickBooks
Registering Your Business Name and Incorporating Your Business Articles of Incorporation or Doing Business As (DBA) Organization filed with the certificate is issued from Secretary of State if: county clerk’s office if not incorporated: C Corporation (RARE) • Sole Proprietorship S Corporation (RARE) • Partnership (RARE) Limited Liability Company • (owner/s SS#) ANNUAL fee due to S of S • (these have FEIN #) Search the availability of name using sosweb.state.ar.us.
Formal Business Plan Elements Organizational Plan Executive Summary Financial Plan Company Description Balance Sheet Market Analysis Income Statement or P and L Strategic Plan Cash Flow Statement Competitive Advantage! Marketing Plan (Outlets, Social Media, Website) Operations Plan Day to Day
Financing
Sources of Financing Your savings Friends and family Equipment leasing companies Bank financing (with or without SBA Guaranty Loan Program) Alternative financing options/credit cards Venture/Investor capital
General Comments About Obtaining Financing Obtain a loan commitment before ANY binding agreements are signed Don’t expect to get a grant (more non-profit sector) Don’t assume you can get a bank loan Don’t expect 100% financing
US Small Business Administration Loans SBA financing from a local bank due to SBA guaranty to the bank (NOT all banks do SBA loans) SBA does restrict the maximum allowable interest rate prime rate plus 2.75% added to prime SBA does allow for longer-term financing (7-10 years without real estate collateral, up to 25 years with real estate SBA also offers longer term Lines of Credit more than 1 year
SBA Loans continued… SBA does charge a fee after your loan is approved (3% of the 75% or 50% guaranty) that the bank will add to your total loan amount SBA does look at credit history Be prepared for second mortgage on personal real estate for larger loans All startup loans must have 10% of the TOTAL project need, cash or equipment already owned and valued, injected by the borrower into the business SBA has requirements about criminal background, residency in USA, can’t have failed on a government loan ever SBA website sba.gov
In-House Bank Loans Banks have their own in-house standards and rules for loans as well, vary bank to bank May be better interest rate, but usually shorter term, and on real estate has to be renewed every five years, good and bad points to this Banks can make quicker, more flexible decisions about your loan amounts, repayments, problems, collateral, etc. Good to work with bank you already have a home loan with or account for new business loan, they KNOW you!
Basic Startup Requirements
Permits, Licenses and Taxes Check for licensing boards that may regulate your specific • line of business Contact city or county clerk’s offices to obtain a business • license Check zoning laws for your location (includes home-based) • May need to obtain FEIN number from IRS • Contact Dept. of Finance and Admin. (DFA) for sales and • use tax if selling a product or providing certain services Check permit requirements (health, alcohol, tobacco, etc.) •
Taxes Find out which taxes are applicable: Sales and use taxes Self-employment tax (Social Security and Medicare) Federal and state income taxes for owners, possibly including estimated tax payments you will have to send in quarterly Withholding taxes on employee wages Federal and state unemployment taxes Corporate state franchise tax
Recordkeeping Record all your business income sales activities and business expenses separate from your personal records Keep a schedule of business assets showing purchase date, purchase price, serial and model numbers Maintain business records for a minimum of 3 years, in some cases indefinitely or permanently (for example, a car title) Consult an accountant in setting up bookkeeping system Regularly visit the IRS website, www.irs.gov
Banking Maintain a SEPARATE bank account for your business income and expenses even if just dba Do not co-mingle your personal money with business money Get to know a bank loan officer before you need money If you borrow money, keep the loan officer informed about your business
Insurance Check with your insurance agent about the types of coverage your business needs. Property/casualty General Liability Product Liability Workers’ Compensation Business Interruption Key Person Insurance or Life Insurance
Personnel Know employment laws - Arkansas Dept. of Labor http://www.arkansas.gov/labor Understand differences between an employee and an independent contractor Know proper practices for interviewing, hiring and firing Develop a personnel manual or employee handbook Consider employment or temp agencies
Home-Based Business Issues Zoning laws, covenants and regulations for your location and type of business Tax advantages of business use of home Insurance coverage other than homeowner/renter policies Mail delivery -> home vs. post office box (GOOGLE business listing issue…) Telephone -> business vs. residential
Marketing Your Business Website VITAL for validity (many free website companies that will host you on the www) Google Business listing Social Media Platforms to Choose Networking (chambers of commerce, networking referral groups, small business community) Advertising budget for direct mail, internet advertising and directory listings
Other local assistance resources: ASBTDC https://sbtdc.uark.edu/ ALL area chambers of commerce SCORE (also helps non-profits) https://northwestarkansas.score.org/ Brewer Family Entrepreneurship Hub (U of A connections required) https://brewerhub.uark.edu/ Arkansas PTAC (for free help bidding on govt contracts) Max Franks is in Bentonville https://www.uaex.edu/business- communities/arkansas-ptac/default.aspx Arkansas Food Innovation Center https://afic.uark.edu/
Questions & Answers
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