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Small Business, Big Future How to Start Your Own Small Business

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1 Small Business, Big Future How to Start Your Own Small Business
Seminar Series Sponsored by: Peace Corps FPDL Moreni 28 – 29 October, 2005 Targoviste, Romania

2 Agenda for Day 1 09:00 – 09:30 : Welcome and Introductions
09:30 – 10:00 : “Business Brainstorming!” 10:00 – 10:45 : Developing the Business Plan: The What’s, Why’s, and How’s 10:45 – 11:00 : Coffee Break 11:00 – 12:30 : Practical Marketing Strategies for the Small Business 12:30 – 13:30 : Lunch Break 13:30 – 14:15 : Micro-lending for Small Businesses – BCR 14:15 – 15:00 : What about all the Paperwork? – Chamber of Commerce 15:00 – 15:45 : Human Resources Management for Small Business 15:45 – 16:00 : Afternoon Break 16:00 – 17:00 : Financial Management for Small Businesses 17:00 – 17:15 : Conclusion and Preview of Day 2!

3 Welcome! Who are we? Kylie Dore & Forest Ratchford
United States Peace Corps Volunteers Community Economic Development Sector Who are you? And why are you here?

4 Small Business, Big Future How to Start Your Own Small Business
“Business Brainstorming!” 09:30 – 10:00

5 “Business Brainstorming”
What do we mean by this? Basically, it means attempting to identify potential business opportunities in one’s own community. BUT… There’s more to it than that! This is the time to begin pondering 4 basic questions: What type of business should I start? What are the benefits of starting my own business? What are the risks of starting my own business? Is my small business idea a good fit for me?

6 1. What type of business should I start?
Choose something you enjoy doing. It’s much more difficult (and less fun!) to build a successful small business if that business doesn’t interest you. Choose a business you know intimately. Trying to learn a new industry or skill at while also attempting to get your business running adds much unnecessary stress to your venture and could lower your chance for success. Choose a business that has a chance of turning a profit. The best way to determine your business’s profit potential is to prepare a “break-even analysis” which will help you to estimate how easy or difficult it will be to turn a profit. We will get into this in much more detail later in the seminar. Add in something on starting something smaller that fits your resources currently. You may have to start smaller than you would like to fit your financial resources.

7 2. What are the benefits of starting my own business?
Independence and Flexibility. You will have more freedom and flexibility working for yourself. And when you firmly establish your business, you will find that you will have more flexibility to enjoy the moments in life which matter to you the most. Personal Fulfillment. Owning and running your own business can often be much more fulfilling that working everyday for someone else. Successful small business owners often cite the respect they receive from peers as a major motivating factor.

8 2. What are the benefits of starting my own business?
Power. When you are the boss you can have your employees do things your way. BUT, if power is important to you, find a way to use it constructively. Money. While risky, foregoing a steady paycheck can pay off when you own your own small business. It is possible to get rich in a small business, or at least do well financially. Most entrepreneurs do not get wealthy although it is certainly a possibility and if successful you most certainly will be able to attain financial security.

9 3. What are the risks of starting my own business?
Losing Money. You WILL need money to get your small business started. Whether you tap into family savings, borrow from friends and relatives, or take out a loan from a bank or other financial institution, there is the very real possibility that your business will not succeed and this money will be gone forever. If your business idea is risky – are you willing to gamble your retirement, friends, family, and good credit on this business idea?

10 3. What are the risks of starting my own business?
Personal Sacrifice. Success in business can come at a high personal cost. Starting a small business can consume most of your time and energy – maybe even evenings and weekends. You may find yourself short on time for friends and family or short on money to take a vacation. Before taking the step into your new small business make sure you (and your family) are prepared for the personal sacrifices which come with it.

11 4. Is your business a good fit?
Try it out. Before you embark on a small business, try to gain some experience in the industry or profession you plan to enter. Learn all that you can about every facet of the business. Talk to other entrepreneurs in the same field! If you are not familiar with the business and cannot gain practical experience, talk to others who are currently providing the product or service which is of interest to you. Evaluate whether you enjoy the work and excel at it. If not, then try something else! As mentioned previously, it is hard to be successful in a business which you don’t like and its unlikely you will like a business which you are not good at.

12 4. Is your business a good fit?
Judge your ability and desire to handle every aspect of the business. If you do not want to or cannot help out whenever and wherever help is needed – whether it involves manufacturing, finance/accounting, or customer service – then you should reconsider starting that type of business. It’s also during the planning phase that you have the opportunity to learn those skills which you may be lacking! Determine whether the business has a solid chance of turning a profit. After working in the field or discussing the business with other entrepreneurs for a few months you should be able to realize whether the business has a chance at profit. Research and analyze your market and conduct the “break-even analysis” to be sure. Learning by doing can be the best way to gain these skills…. Don’t hesitate to ask for advice in areas of business that you are not familiar with.

13 How do we find business ideas?
LOOK AROUND YOU! Do you notice a particular product or service which is lacking in your community? Is there a hole in the market which your small business can fill? DEMOGRAPHICS! What does the population of your community look like? Older, younger, richer, poorer, educated, etc. ? Is there a certain demographic in your community whose needs are not being met? Example: Catering to the newly aging population in America – Baby Boomers retiring!

14 How do we find business ideas?
ECONOMIC REPORTS! From local, regional, and national government sources. These reports can provide insight into how your community has been developing and is projected to develop in the future. VISIT OTHER SIMILAR COMMUNITIES! By visiting communities which are similar to your own you may find successful business which are not currently operating in your own community. Look at Foreign Domestic Investment trends in your community – will a new factory or large business presence bring new jobs to your community – More jobs mean more money flowing into your community which can then be spent in your new business.

15 How do we find business ideas?
BUSINESS-TO-BUSINESS SERVICES! Ask businessmen in your community about their needs. Is there anything that business community needs that is not being provided? DON’T ALWAYS LOOK AT PRODUCTS! Look for new ways to sell or market existing products. Look at retail in different ways. Don’t be afraid to visit larger cities and steal good ideas you see and bring them back to your community. Business-to-business services… ask businessmen about their needs… don’t always look at products… new ways of selling existing products. Look at retail in different ways. Distribution of goods.. Growing market, higher capital needed. Add in visiting to larger cities so steal ideas.

16 “Business Brainstorming” - Activity
Lets take 10 minutes to go around the room and brainstorm business ideas which you think could be successful in you community. We will come back to these ideas throughout the course of the seminar. Have participants give an idea and 1 supporting argument here… don’t allow negativity here!

17 Small Business, Big Future How to Start Your Own Small Business
Developing the Business Plan 10:00 – 10:45

18 Business Plan Basics What is a Business Plan? A business plan:
Precisely defines your business, identifies your goals, and serves as your firm’s resume (CV) Helps you allocate resources properly, handle unforeseen complications, and make good business decisions Informs sales personnel, suppliers, and others about your operations and goals

19 Business Plan Basics The importance of a business plan cannot be over emphasized! The following are dependent upon it: Outside financing Credit from suppliers Management of your operation and finances Promotion and marketing of your business Achievement of your goals and objectives

20 Business Plan Basics Before writing your business plan consider these 4 questions: What product or service does your business provide and what need does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start your business?

21 Business Plan Basics What goes into a business plan?
Description of business Marketing Finances Management Addenda should include an executive summary, supporting documents, and financial projections.

22 How does one USE a business plan?
A business plan is a tool with 3 purposes: A Communication Tool A Management Tool A Planning Tool

23 How does one USE a business plan?
As a communication tool, the business plan is used to: Attract investment capital Secure loans Convince workers to hire on Assist in attracting strategic business partners The development of a comprehensive business plan shows whether or not a business has the potential to make a profit.

24 How does one USE a business plan?
As a management tool, the business plan helps you to track, monitor, and evaluate your progress. The business plan is a living document that you will modify as you gain experience and knowledge. By using your business plan as a management tool you can gauge your progress and compare actual results to your projections.

25 How does one USE a business plan?
As a planning tool, the business plan guides you through the various stages of your business. A well thought-out plan will help to anticipate potential obstacles so that you may avoid them. Many business owners will share the business plan with their employees in order to foster a better understanding of where the owners envision the business to go. Its important that your employees fully understand you vision for the business – this will lead to employees knowing how they fit into your business’s future and how their work can directly impact the company – they can see how their results are measured against your projections.

26 THE BUSINESS PLAN Table of Contents Executive Summary
General Company Description Products and Services Marketing Plan Operational Plan Management and Organization Personal Financial Statement Startup Expenses and Capitalization Financial Plan Appendices

27 Executive Summary Write this section last!
The executive summary serves as the face of your business plan. It is the first thing which will be read by potential investors, partners, suppliers, etc. Include here the fundamentals of the proposed business: What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?

28 General Company Description
What business will you be in? What will you do? Include here the following items: Mission Statement: Explains your company’s reason for being and its guiding principles Company Goals and Objectives: Where do you want your business to be (Goals) and how will you measure your progress along this path (Objectives) Business Philosophy: What is important to you in business? Describe your industry: How is your business positioned within the industry? Most important company strengths and competencies: What will make the company succeed? What are your competitive strengths? What skills do you bring which will help the success of your company? Explain difference b/w goals and objectives: Goals – broader general sense of where you see your business in 5-10 years. Objectives – measurable events which you can use to track your progress towards your goals. Example: a goal would be to achieve a market share in your industry of 20% within 10 years. Objectives would be in the realm of sales targets, revenue growth (month over month, year over year, etc.), new customer growth, etc. Try and use example in business they provided within their brainstorming.

29 Products and Services Describe in as detailed a manner as possible your products and services. NOTE: Technical specifications, drawings, brochures, etc. should be placed in the appendix. Describe the competitive factors which will give you an advantage or disadvantage in your market. Also include the detailed pricing structure and strategy of your products and services.

30 Marketing Plan The Marketing Plan consists of the following items which we will discuss in more detail in the following session. Market Research Economics of your market Marketing of your products or services Information about your customers Analysis of your competition Your “niche” Your marketing strategy A sales forecast

31 Operational Plan This section outlines the day-to-day operations of your business and includes details in the following areas: Inventory Suppliers Credit Policies Production Location Legal Environment Personnel

32 Management and Organization
This section of the business plan answers the following questions: Who will manage the business on a day-today basis? What experience or competencies does that person(s) bring to the business? Is there a plan in place to continue operations of the business should this person(s) be unable perform his/her duties?

33 Management and Organization
It is also to list other key players in the business in this section, including (not all need be relevant): Board of Directors Management Advisory Board Attorney Accountant Insurance Agent Banker Consultant(s) Mentors and other key advisors

34 Personal Financial Statement
In this section you should provide a personal financial statement for each owner and/or major stakeholder in the business. A personal financial statement includes the following: Assets and liabilities held outside the business Personal net worth Owners sometimes need to use personal assets to finance their business and these statements provide transparency as to what is available. Banks or other lenders also require this information.

35 Start-up Expenses and Capitalization
There WILL be expenses incurred prior beginning operation of you business. Expenses must be accurately estimated Conduct thorough research Be sure to include a line item for “contingencies” which will allow you to account for unforeseeable expenses. “Contingencies” should equal 20% of the total of all other start-up expenses.

36 Financial Plan The Financial Plan consists of the following items which will be discussed in greater detail in the session on financial management. 12-month profit & loss projection 4 year profit & loss projection (optional) Cash-flow projection Projected balance sheet Break-even calculation

37 Appendices should include:
Brochures and Advertising Materials Industry studies Blueprints and plans Maps and photos of location Magazine or other articles Market research studies List of assets available as collateral for a loan Detailed lists of equipment owned or to be purchased Copies of leases and contracts Letters of support from future customers Any other materials needed to support the assumptions in this plan

38 Small Business, Big Future How to Start Your Own Small Business
Coffee Break 10:45 – 11:00

39 Small Business, Big Future How to Start Your Own Small Business
Practical Marketing Strategies for Small Businesses 11:00 – 12:30

40 The 4 P’s of Marketing PRODUCT: The good or service that your business is trying to sell to its customers. PRICE: What and how the customer pays for your product or service. PROMOTION: The means of telling your customers about the positive aspect of your product or service, and of finding out what your customers want. PLACE: Making your products or services available where and when your customers want them Add slide on difference between advertising & marketing.

41 Marketing vs. Advertising
MARKETING is the commercial processes involved in promoting and selling and distributing a product or service. Marketing is the process while… ADVERTISING is the activity of attracting public attention to a product, service, or business, as by paid announcements in the print, broadcast, or electronic media Add slide on difference between advertising & marketing.

42 Why Make a Marketing Plan?
Optimize Profitability Have an overall picture of your company’s activities Get more customers Discover new opportunities for your company Spend time and money more efficiently Be informed

43 How to Develop a Marketing Plan
Establish your company’s marketing goals: What do you want your business to achieve? BE AS SPECIFIC AS POSSIBLE! 2. Make an internal and external analysis of your business.

44 Internal & External Analysis
Internal Analysis: What are your company’s strengths and weaknesses? External Analysis: What are the opportunities and obstacles outside of your company that will help or impede its marketing goals?

45 How to Develop a Marketing Plan
3. Establish your company’s marketing strategy. What/Who is your target market? How will you achieve your company’s marketing goals?

46 How to Develop a Marketing Plan
4. Define your marketing operations. What will be the role of each element of the marketing mix (4 P’s) within your company’s overall marketing plan?

47 How to Develop a Marketing Plan
5. Costing your marketing operations and comparing it to your budget: How much money will your company need to spend for its marketing operations? Is this reasonable and possible considering the overall budget?

48 How to Develop a Marketing Plan
6. Programming: How will your company schedule the necessary marketing activities to ensure that they are undertaken in the right sequence, and at the right time?

49 Market Research: Why is it Important?
For your business to be successful, you must know about the market in which you will operate. Market research is simply an organized and orderly way to find out about the people who might buy your products or services

50 Market Research Shows You:
Alternative approaches to your market Provides more accurate profit predictions Aids in the creation of your marketing plan Market research helps your company find out what products or services will be bought by your potential customers in a certain area.

51 Sources of Market Data Primary Data: Observational Data – watching, either mechanically or in person, how people behave Questionnaire Data – asking people about their attitudes, awareness, intentions, and behaviors – Methods include direct mail, telephone/ surveys, interviews, focus groups *Note* Do not expect large returns on questionnaires unless they are directed toward a very specific group.

52 Sources of Market Data Secondary Data:
Internal Data – already collected by your business: financial statements, sales records, customer service, research reports, etc. External Data – published outside the organization: magazines, trade associations, census, government reports, etc.

53 The “Target Market” “The target market is a group, or groups, or consumers selected for special marketing attention.” There are 5 Target Marketing Variables: Demographics Variable Geographic Variable Psychographic Variable Benefit Variable Usage Variable

54 Demographic Variables
Age Sex Level of Income Occupation Nationality Education Level State of family life cycle (retired, newlywed, etc.)

55 Geographic Variables Region Urban/suburban/rural
Small town or large city Climate Local infrastructure Connection to neighboring communities

56 Psychographic Variables
Outgoing/withdrawn Confident and willing to try new things Risk-aversion Satisfaction with things as they currently are

57 Benefit Variables Why do people buy/use your product or service?

58 Usage Variables What use does the customer make of your product or service? Non-use/light-use/heavy-use Loyalty vs. willingness to shop around “80/20 Rule” 80% of your business comes from 20% of your customers.

59 Understanding Your Market
“You must understand your customers before you can develop or offer a product or service that they will want to buy.”

60 Understanding Your Market
Once you decide on a product or service YOU MUST ANALYZE YOUR MARKET! This involves interviewing: Competitors Suppliers New/Potential customers

61 Understanding Your Market
Before researching your market, ask yourself the following questions: Who are my customers? Where do they live? Do they want to buy my product or service? Why would they buy? How many competitors offer the same product or service? Can you create a demand for your product or service? Can you effectively compete in price, quality, and delivery? Can you price your product or service to give you the projected profit? Stress here the importance of analyzing your competition – how do you stack up?

62 Pricing Prices say something about a business and its target market.
Consumers may rely on prices to give them an indication of the quality of products or services. Remember to include the costs of utilities, labor, taxes, etc. in the price of your product.

63 Pricing Strategies Standard Mark-Up Approach
A retailer bases its price for an item on what the retailer paid for it, plus a percentage of that cost. Retail Price = Cost + Mark-up Try and give example using their brainstormings.

64 Pricing Strategies Match-the-Market Approach
Similar to the Standard Approach, but this strategy reflects what 1 or 2 business should be. Examples: Prices may reflect a lower mark-up to attract customers. A business may not think that customers are price-sensitive for a product, and therefore raise the mark-up in order to increase profit.

65 Pricing Strategies Market-Based Approach
Pays particular attention to the competitiveness of the marketplace. If analysis indicates that numerous businesses already offer a good selection of products or services, have reasonable prices, and are conveniently located, prices of the competition should be matched, or lower prices should be offered, to take market share. Gas stations, everyday consumer goods, fast food

66 Pricing Strategies Market-Penetration Approach
If the target market is price sensitive then this approach should be utilized. This approach works best when: Existing businesses have been taking advantage of the market by charging higher than appropriate prices. If your company’s cost structure is significantly lower than the competition’s

67 Pricing Strategies Skimming Approach
If you determine that there is a significant part of your target market whose needs are unsatisfied then use this approach. When people want something that is not available, they are generally prepared to pay more for it. Example in romania – ethnic cuisine

68 Pricing Strategies Pricing Strategies should address sales discounts and seasonality. Prices can be lowered temporarily for certain items to: Attract new customers Encourage existing customers to purchase more To sell inventory that has been building up To raise cash to meet pressing financial obligations

69 Small Business, Big Future How to Start Your Own Small Business
Lunch Break 12:30 – 13:30

70 Small Business, Big Future How to Start Your Own Small Business
Presentations by: Sibiu Chamber of Commerce & CHF Romania 13:30 – 15:00

71 Small Business, Big Future How to Start Your Own Small Business
Human Resources Management for the Small Business 15:00 – 15:45

72 Human Resources Management
The following items are critical for effective human resources management in any small business. Assessing your business needs Finding and hiring the right people Training Principles of managing people Notes: An overview of the presentation

73 Human Resources Management
Hiring References Interview Application Advertising Job Description and Business Needs Analysis Evaluate Good Employee Training Notes: An overview of the presentation

74 Assessing YOUR Needs When assessing your needs and your business’s needs think about the following: Looking ahead to the future What are your business’s needs? Look at your current employees and how they fit into the future plans you have for your business. Analyze your strengths and weaknesses. Both as a business and as an OWNER. Determine what type of people you need in order to achieve your goals. You should think several years out, and about what type of people you will need for your long range plans. Think about your business’s needs. Do you need technical people, customer service oriented people or managers. Will your current employees be adequate, are you happy with them, do you need to replace them? Look at your own strengths and weaknesses. Hire people who can help you in your weaknesses.

75 *TIP Always think ahead about personnel needs.
Hire people before you need them and budget these expenses into your business planning. You WILL spend more in the beginning on personnel before you actually need them BUT it can be even more costly to hire and train a second or third person for the same position later on.

76 Job Descriptions Job Descriptions will help you and potential employees to know exactly what is needed and how they will fit into the overall organization of your business. Write a specific and detailed description of the position or job. Be sure to include all of the activities and duties that the person will be required to perform. List all of the skills, abilities, and personality traits that person will be required to have. Note: This should be done for all of your positions in your company. The key is, when people know what to expect and know what is expected of them, they are more likely to achieve the results. This will make everyone happier. COMMUNICATION! Notes from Brian: Mention, that some job titles are regulated by the government.

77 Finding the “Right” Employees
Finding the “right” employees for your company can be difficult. Here are some some sources: Internal Promotion – giving more responsibility to an existing employee Schools – an excellent source for part-time employees, ask the directors and teachers who their good and smart students are Public Employment Offices Employee Referrals Advertising

78 *TIP Advertising for employees: IT WILL SAVE YOU TIME!
Be sure to briefly include in your advertisement the type of person, skills, abilities, and a description of the job . When people see the ad they will know better if they fit the job given you better qualified applicants. IT WILL SAVE YOU TIME!

79 Screening and Hiring Application Interview HIRE Evaluate
Check References HIRE Train Evaluate

80 The Application The Application is ALWAYS used to help qualify basic skills and experience. You can make one yourself: Name Phone/Address Education Work Experience – Include dates, company, boss, job activities, reason for leaving References – Include names, company, phone numbers Note: This saves you time in selecting people for the job. Also even when you are not hiring and someone asks you about a job you should have them fill out an application and keep it on file. You may need someone later.

81 The Interview The interview is THE MOST CRUCIAL part of the hiring process: Prepare for the interview! Read the the job description and ask them if they have any questions. Write down questions that you would like to ask before the interview. Be sure that they help you find out if the applicant has the skills, abilities, personality, and experience that you wrote about in the Job Description. Note: Maybe an example here if time permits

82 The Interview Ask the same questions to all of the applicants and take notes about their answers so that you may compare applicants easier, especially if interviews are spread over several days or weeks If you need to give them writing, math, or other tests to make sure that they have the essential skills… DO IT! Don’t be embarrassed. If you have a large pool of applicants for 1 position, use the initial interview to narrow the field and invite the finalists to a second interview before making a final decision. Note: Maybe an example here if time permits

83 Checking References Always check references! Why? Because people lie!
Who can be a reference? Teachers, former bosses, former work colleagues, pastors, maybe one friend or family member

84 What Do You Ask References?
Ask the references to confirm the details on the application and from the interview. Tell them about the job and ask if they think the applicant is a good fit. Ask them about the applicants personality.

85 Training and Teaching NO! As long as…
Does the applicant have to be a perfect match for the job description? NO! As long as… The skills, abilities, and qualities that they lack can be taught. If they can be taught, then you need to have a plan to train and teach them the skills that they need.

86 Tips on Training Make a specific plan on what things will be taught, when they will be taught, and who will teach them. Explain the plan to the employee Also be very clear about when you expect the employee to be able to perform the activities that they are being trained for. ****TIP It is very normal in Romania for people to be trained in an activity and they only do that activity. Cross- train employees; be sure they know how to do as many things in your business as possible. They will be happier and if someone is sick or quits, you will have someone else who can do the job.. You will also have people watching each other to reduce theft and to insure the jobs are being done satisfactorily. Also at busy times, employees can help each other out.

87 Building Employee Trust and Productivity
If you want to have honest and hard-working employees then… Be open and honest about day-to-day operations. When dealing with them about work, money, and rules always be fair and honest. Communicate, Communicate, Communicate! No Surprises!

88 *TIP As a small business owner you should always remember that when you speak to an employee it is your responsibility that they understand exactly what you said and what you mean. Always be sure you communicate clearly with your employees, they cannot get inside your brain. They may hear you, but they may not understand why they need to do it or how to do it. Note: Example: I own a bar, and tell my employee to check the bathroom every hour and be sure that it is clean. I come in the next day and check the bathroom and it is dirty. I say, “The bathroom is dirty, I told you to check it every hour”. He says, “I did check it every hour and it was not clean”……….What I should have told him is….”Please check the bathroom every hour and if it is dirty then clean it, also tell him what dirty to me means, what to clean it with, and why we need to clean it every hour. ….because a dirty bathroom makes our customers more comfortable and helps our image as a quality place. And the cost of keeping the bathroom clean is very low.

89 Notes on Honesty Secrecy breeds suspicion, and suspicious employees are more likely to be dishonest. Employees will often think that the business is making more money and that you, as the owner, have more money than is actually true. Be open and honest about expenses, revenues, and profits. If your employees know the real situation that the business is in then they are more likely to be careful and honest. Set an example; Be honest in your life! Communication! Don’t just tell them good things about the business. Ask them about what they want to know and find out what they are thinking about your business.

90 Notes on Fairness Treat employees equally and consistently.
Obey the work laws Everyone in the company, including you, should follow the company rules and policies. Be sure that the rules and policies are clear and that every employee receives a copy of them. Treat people with dignity and help them to do their best. Communicate! If you ask them to do something, tell them the reason why.

*TIP In running a small business, YOU as the owner must set the example: Be the best communicator Have the best attitude Work with customers the best Be the first person to admit mistakes and ask others what their opinion is Be the best listener Be the hardest worker Be the most honest and most fair Be the person who is always trying to find a better way. EVERYONE IS WATCHING YOU!!!

92 Principles of Small Business Management
No Surprises! Empower Your Employees Have Effective Meetings: make an agenda and keep records/minutes of all meetings. Be a Solution Approver vs. a Problem Solver Planning! Daily, Weekly, Monthly, Yearly Provide and Seek Professional and Advisory Support

93 In Summary… New employees can be a strain on you and your business, but without people you cannot grow your business. They WILL take time to train and they WILL make mistakes. A good training program and a good hiring process WILL increase you chances of having productive and happy employees. Through thorough preparation and selecting the best people, you can only strengthen you company and increase its chances for success. When or if the process fails, look back at what happened, learn from your mistakes, and do better in the future.

94 Small Business, Big Future How to Start Your Own Small Business
Financial Management for the Small Business 16:00 – 17:00

95 Overview: What We Will Discuss
Sources of Funds: We will talk about sources of funds and ways to become an entrepreneur on very little capital. Financial Statements: What they are, what they do, and why they are important. Cash Flow Management: Cash is the life of your business. Why and how do we manage it? Break-Even Analysis: Know your costs. How does a change in sales and cost structure affect your profit?

96 Sources of Funds 1. Friends and Relatives Beg and borrow.
Have a professional business plan and present it like you would to a bank. ALWAYS have an agreement for repayment in writing.

97 Sources of Funds 2. Micro-Lending Organizations
Usually loan to existing businesses. They will need thorough and organized financial information about your business. They can offer you invaluable advice and you should contact them while you are putting together your business plan.

98 Sources of Funds 3. Leasing or Financing
Reduces your exposure through purchasing on credit. Reduces the amount of cash needed in the beginning BUT increases the amount of cash you need to pay every month. Generally, you can lease or finance buildings, vehicles, or equipment.

99 Financial Statements The following are the most important financial statements you business WILL have to provide. 1. Balance Sheet 2. Income Statement Use excel spreadsheet for examples…

100 The Balance Sheet The balance sheet shows what your business OWNS and what it OWES: Assets: what the business owns Liabilities: what the business owes to those who supplied the money to purchase the assets. Use excel spreadsheet for examples…

101 The Balance Sheet Use excel spreadsheet for examples…

102 The Income Statement The income statement shows the operating results for a period of time (month, quarter, year). Operating results are gross and net profit (or loss) Use excel spreadsheet for examples…

103 The Income Statement Key Issues: Pricing Cost Control
Margin Maintenance Use excel spreadsheet for examples…

104 The Income Statement Use excel spreadsheet for examples…

105 Cash Flow Management Which is more important?
Cash – The amount of money available immediately to pay bills and buy inventory. Profit – The amount left over after subtracting all costs and taxes from total turnover. Turnover – The total value (in Lei/Euro/$) of the products and/or services you sell. Use excel spreadsheet for examples…

106 The Cash Cycle Cash Inventory Accounts Receivable
Use excel spreadsheet for examples…

107 Cash vs. Profit Cash is used to pay short-term debts and obligations.
Profit is used to pay long-term debts and obligations. Use excel spreadsheet for examples…

108 Common Causes of Cash Shortages
Fast growth Poor inventory management Poor cost control Lack of adequate start-up capital People are not paying their bills Owner does not know future cash needs Use excel spreadsheet for examples…

109 Tools for Cash Flow Management
Cash-flow budget Statement of cash inflows and outflows Good inventory records Use excel spreadsheet for examples…

110 Break-Even Analysis Your Break-Even point is the point where there is no profit and there is no loss, revenues exactly cover all costs. Types of Costs in a Business: Start-Up Costs: the expenses which your business will incur before you even make your first sale and it is imperative that they are estimated honestly and incorporated into your business plan. Fixed Costs: the costs that are independent of sales; these costs are incurred whether or not you sell anything. Variable Costs: the costs that are incurred by sales.

111 Start-Up Costs Calculation
Office Space Rental Euro___________________________________ Office Equipment Office Supplies Insurance Utilities (phone, electricity, heat, water) Maintenance Advertising Labor/Personnel Business Licenses Accounting Services Inventory Equipment Losses Incurred Total Start-Up Costs

112 Fixed Costs Rent Employee Salaries Maybe Utilities Lease payments
Loan payments (to a bank or micro-lending agency) Accounting/Bookkeeping Services Marketing and Advertising Any other costs which must be paid every month regardless of sales activity

113 Variable Costs Inventory Taxes Maybe Utilities Delivery Costs
Marketing and Advertising Any other costs which directly correlate to your sales activities.

114 Break-Even Analysis Contribution Margin:
The percent of each euro in sales that is left over after variable costs are removed Sales – Variable Costs = Contribution Margin The percent of each euro in sales that is available to pay for fixed costs.

115 Break-Even Analysis Sales in Euros Variable Cost Cup Fixed Net Profit
Contribution Margin (Percent of Sales)

116 Break-Even Analysis How to use the contribution margin to make decisions: Change in fixed costs Change in variable costs Change in sales or pricing Use excel spreadsheet for examples…

117 How to Calculate the BREAK-EVEN
Go to excel spreadsheet…..

118 Small Business, Big Future How to Start Your Own Small Business
Customer Service TBA

119 Customer Service What is it?
Ask participants to define customer service…

120 It’s about making new friends at work!
Customer Service A definition: All activities that directly or indirectly affect the customer’s level of satisfaction with your products or services. It’s about making new friends at work!

121 We like friends that… Are happy and fun to be around Will help us
Are concerned about our happiness We can trust Remember our name and something about us Will do more for us than other people

122 Keys to Customer Service
All parts of the company are focused on the customer. Hire employees for attitude not just for experience. Listen to and know your clients and customers. Make and keep commitments. HAPPY EMPLOYEES

123 Customer Focused Business
Focus your company on your customers! When a decision is made, always think about how it will affect your customers It’s an attitude! A way of thinking!

124 Hiring Employees: Attitude Not Just Experience
Hire employees for their good attitudes not just their experience, especially if they will be dealing with customers. It’s much easier to teach someone to count than to smile!

125 5 Sample Interview Questions
What do you do when you walk into a room full of strangers? What type of person irritates you? What would you do if…? What skills make a good listener? How do you get motivated after you have been disappointed?

126 Tips to Conduct a Great Interview
Listen more than you talk Ask open-ended questions Solicit examples of how they handle situations Avoid yes/no answer questions Be positive Use your time to sell the benefits of the job

127 Listen To and Know Your Customers
The closer you become to your clients, the better for you and your company. Your business needs to become friends with your customers. The more expensive the product, the closer you should be with your individual customers. Keeping Records! Each type of business will have different records that are important. It isn’t fun but it can tell you what customers want and what they are buying.

128 Relationship Marketing
The new fashion in Marketing… A long-term customer service approach that tries to build a strong feeling of attachment to a company’s products or services or time. Examples: Men’s Clothing Store, Magazines, Car Salesman

129 Make Commitments, Keep Commitments
A business is like a person. No one wants to be around someone who can never make a commitment or someone who never keeps a commitment.

130 Happy Employees Employees that are not happy do not… Smile
Care about customers Have patience with people Care about the company’s image Try and make other people happy

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