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Micro Business Basics MoneyWI$E A joint financial education project of Consumer Action and Capital One. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Topics we will cover: What a micro business is. How to anticipate the needs of a new business. Business planning and bookkeeping. Different ways that businesses are organized. © 2009 Consumer Action MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Your expectations What do you hope to get out of this seminar? MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Micro businesses Micro businesses are very small companies run by their owners with few or no employees. They are often home-based, with annual sales under $250,000. Many micro businesses start with a hobby or a great idea. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Growing micro businesses Micro businesses can qualify for loans to help them grow into large regional, national or franchise businesses. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP Failure rate The U.S. Small Business Administration says that more than half of small businesses fail in their first year. Many businesses fail because they lack adequate funding.

MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP Ready for business? Some people are better off as employees rather than as business owners. What issues do you think people who are thinking about starting a business must consider?

A good businessperson has... Discipline Experience Patience People skills Aptitude with numbers Can you think of other attributes you need to excel in business? MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Anticipating business needs Sound financial planning is key to a successful business Try to predict what it will cost to run your company Prepare a budget that closely reflects your business plan* * A written document that outlines your business idea and the steps you will take to make the venture succeed MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business resources SCORE, SBA, MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business vs. personal funds Co-mingling personal and business transactions makes it hard to track business activity MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business credit cards Manage cash flow Keep your business obligations separate from your personal obligations Earn discounts on supplies, rental cars and other services MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Planning and bookkeeping Keeping accurate, organized records is vital to the success of your business. A lost receipt is a lost deduction Lost deductions mean you pay more money in taxes. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business plan One of the first documents you need to prepare A business plan will help you focus your vision for your business You can use your business plan to approach lenders and potential partners MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

In a business plan Your business purpose Products or services The company’s structure (sole proprietorship, partnership or limited liability company, for instance) Short bios of key personnel MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Help in writing your plan Community groups SCORE SBA Free templates online MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business bookkeeping Monitor your profits and losses Know the value of your business MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Start up costs Many fast-growing companies are started with the founder’s personal savings, in some cases no more than $10,000. Start-up funding should cover operating expenses for at least one year. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Typical start-up costs Salary needs Initial costs Direct costs Overhead Recurring costs MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Topics for the next session Business structure Finding funds for your business SBA Loans Reading a projected profit and loss statement Government requirements Micro business mistakes MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Welcome to Session Two We will cover: Business structure and organization Finding funds for your business SBA Loans Reading a projected profit and loss statement Government requirements Top five micro business mistakes MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Structure/organization Businesses can be established legally in different ways This is known as its business structure or organization No one legal structure is best for all micro businesses MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Sole proprietorships and partnerships Sole proprietorships are one- person businesses Partnerships are businesses formed by two or more owners MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Corporations A corporation is a legal entity, organized under state or federal laws It is legally separate from the people who own it Corporation owners are usually protected from personal liability MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Limited liability companies Known as LLCs Combines features of sole proprietorships, partnerships and corporations LLCs can help business owners protect their personal assets MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Finding funding Use your own money Find a partner or investor with cash to invest Borrow funds MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Credit A business loan or business line of credit can help you meet your business needs MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Business credit cards Business credit cards can help: Manage your cash flow Keep your business and personal obligations separate MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

SBA Loans The Small Business Administration (SBA) can help you prepare loan documents It also guarantees loans You pay for these services through fees when your loan is approved MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

SBA sponsored lending Loan guaranty programs Building and renovation loans Loan pre-approval services Start-up financing and technical assistance for start-ups, newly established micro businesses and growing micro businesses Federal contracting assistance MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

SBA streamlines lending Lower down payments Longer terms Lower interest rates MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Steps to an SBA loan Ask the SBA for a list of banks in your area Compare choices by contacting SBA lending officers at a few of the banks Decide where you will apply Compile the financial and business records required by the bank The bank will submit your loan to the SBA for approval MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Government contracting There are many opportunities for small business and minority- owned businesses to provide goods and services to the government. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Class activity Sample Projected Profit and Loss Statement Take out the sample Projected Profit and Loss Statement worksheet MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Local and state requirements Business licenses Building permits Health/occupational rules Sales/income tax Employee withholding Workers’ compensation insurance MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Federal requirements Verify your employees’ right to work in the U.S. Withhold federal income taxes Minimum wage, overtime and child labor laws Make estimated income tax payments Social Security and Medicare payments MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Micro business mistakes Inadequate planning Failure to discipline yourself financially Insufficient cash reserves to sustain growth Poor record-keeping Excessive debt MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Questions and answers We have reserved some time to answer your questions. Please raise your hand if you have a question. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Congratulations! You have completed the MoneyWI$E seminar on Micro Business Basics MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

Your feedback Please fill out the Seminar Evaluation Form and leave it on your way out. MoneyWI$E A CONSUMER ACTION AND CAPITAL ONE PARTNERSHIP

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