3. Business owners who do not “control” their company’s operations are at the mercy of market whims, irrational customers and every other yahoo who walks through the front door. You should be in control. Don’t Blame – New road by-passing downtown … Your computer … Discount Center City … Lazy employees Ungrateful customers... Back stabbing suppliers … or that no-good son-in-law.

4. Your begin with a plan - Set a few goals Adapt to change Monitor performance Adapt to change Communicate success and Adapt to change

5. Formalize the company’s direction over the next 12 months. Plans should be flexible enough to adapt to market changes yet rigid enough to resist passing impulses. http://www.bplans.com SIMPLE: Is it easy to understand? How readable is it? SPECIFIC: Are its objectives concrete and measurable? Does it include specific actions, dates, responsibilities and budgets? REALISTIC: Are the sales goals, budgets, and milestones realistic? Nothing stifles implementation like unrealistic goals. COMPLETE: Does it include all the necessary elements? 500+ Sample Plans

6. Business Start-up Costs A. One-Time Start-up Costs Purchase / down pmt on the business Office furniture, equipment + HVAC Computer – hardware / software / installation Business cards / stationery Decorating remodeling Fixtures, counters, displays + installation Starting inventory Tools, instruments, equipment Utility, telephone deposits Professional fees Licenses & permits Advertising / promotion Signage – outdoor & indoor Lease and security deposits Petty cash Other B. Ongoing Monthly Expenses Payroll – all employees Payroll taxes Rent / Mortgage Lease payments Advertising Postage & shipping Supplies (office, shop & store) Telephone / fax Utilities / City Professional fees Internet connection Insurance – general, vehicle, liability Insurance - health Loan & credit card payments Inventory Repairs & maintenance Taxes Vehicle / travel Other C. Est. # of months to get established Business Start-up Costs = A + (B x C) Small Business Finance Center http://www.businessknowhow.com/startup/startup.htm

7. http://quickbooks.intuit.com/ http://www.simplyaccounting.com/productsServices/ http://www.peachtree.com/ http://www.sagebusinessvision.com/ http://office.microsoft.com/en-us/accounting/FX100518171033.aspx Accounting Systems – 1. Software And don’t overlook 3. Manual bookkeeping systems But, if you don’t know the difference between mark-ups and margins, you might need to sharpen your management skills

8. 1 st - Remember why you’re in business. □ A. Add to the local economy □ B. Build a sustainable enterprise □ C. Sell company merchandise / services □ D. Satisfy customers □ E. Expand markets □ F. Reward ownership □ G. Provide jobs for employees 1. Net Income 2. Asset Management 3. Pricing for Profits You were thinking something else? You don’t need many.

9. For certain, it’s the only thing that will sustain you in business. It should be the only reason why you’re in business.

10. To choose a realistic income goal for the company … think about the business costs needed to “sustain” the company. Two Types: 1. The “direct” costs incurred selling products & services 2. The costs needed to “support” the the business.

11. Retail = Cost of merchandise to be sold Cost of sales commissions Cost of any direct labor Cost to move the goods to your store ▲ in inventory value (Beginning – Ending) Retail = Other Payroll Advertising Utilities Communication Insurance Taxes Space Repairs Donations Supplies Rentals Bank Fees Vehicle Exp. Postage Dues Prof. Fees Furnishings “Other”

12. Retail = Cost of merchandise to be sold Cost of sales commissions Cost of any direct labor Cost to move the goods to your store ▲ in inventory value (Beginning – Ending) Retail = Other Payroll Advertising Utilities Communication Insurance Taxes Space Repairs Donations Supplies Rentals Bank Fees Vehicle Exp. Postage Dues Prof. Fees Furnishings “Other” How much for the next 12 months? Since we’re looking a year out, it’s okay to guess. Make it your best guess.

13. What’s a fair reward for the owner for the risks taken over the next 12 months? That’s a fair goal. Also, what’s a fair mark-up for the products & services you’re planning to sell?

14. Now a few words about business math. Revenues $279,600 less CGoS 139,800 = Gross Profit 139,800 less Operating Costs 95,000 = Operating Income 44,800 +/- “Other Income/Expense 0 =NIBT 44,800 less Income Tax 9,800 = Net Income $35,000 math $279,600 - $244,600 = $35,000

15. Given the company’s cost estimate and your goals, how much business do you need? Net Sales__________ less CGoS __________ = Gross Profit __________ less Operating Costs __________ = Operating Income __________ +/- “Other Income/Expense __________ =NIBT __________ less Income Tax__________ = Net Income $35,000

16. http://www.okcommerce.gov/mainstreet Company Pro Forma Tool

17. Assets = What the business owns. Two Classes: Current = Fixed = Cash, Accounts Receivable & Inventory Building, Property & Equipment (Vehicles) What’s the most important current asset?

18. Not all bills are due the 1 st of the month … Most accounting reports are about history … Every organization needs to understand their “flow” of money … What’s the short-term cash demand on your business … Upon how many “sources” of cash can your company draw … You need to know these things.

19. http://www.okcommerce.gov/mainstreet Cash Management Tool

20. Cash Flow

21. 3. Pricing For Profits

22. It’s management’s responsibility to establish company pricing objectives. How will I set prices? What should pricing accomplish? What about “loss-leaders”? What about sales promotions? Is it time for an increase? What about discounts?

23. What’s the “trick” in establishing company prices? The Owner ! Me! To have the customers pay all company costs, reward the owner, and retain a few $ for contingencies.

24. Many businesses begin product pricing with cost … What other factors impact pricing decisions? Competition Market Demand Business Image Profit Goals Market Share

25. Sport Coat: $52.05 $74.00 $ 2.00 $128.05

26. Many businesses start the pricing process by applying a “mark-up” to the product’s direct costs. For example - Company: Ajax Tailors Product: Sport coat Direct cost: $128.05 Mark-up @ 120% Product price = $281.71 If the trick is for price to cover all costs! We have to know the cost structure of the business. $281.99

27. Performance: Monthly average last 6 Months & planned performance for next 12 months. Revenue: $ 27,600 Cost of Sales: 11,500 Gross Profit: $16,100 Overhead: $ 8,200 Other: 900 Oper. Income $ 7,000 Taxes $ 1,850 Income $ 5,150 41.7% 58.3% 25.4% Monthly Average The business needs $16,100 in gross profit each month to pay “overhead” expenses, debt service, taxes, provide a fair return to ownership and keep some $ in the company. 18.7% The Sport Coat mark-up of 120% yields a gross profit rate of 54.5% - short of the “planned” rate of 58.3%. What are your options?

28. What’s the difference between “Mark-up” and “Margin”? Direct cost: $128.05 Mark-up @ 120% Product price = $281.71 Gross Profit = $153.66 Mark-up = Gross Profit / Cost 153.66 / 128.05 = 120% Margin = Gross Profit / Price 153.66 / 281.71 = 54.5% 1. Converting Mark-ups to Margins = 1+ 1.20 =2.20 = 1 / 2.20 = 0.4545 = 1- 0.4545 = 54.5% 2. Converting Margins to mark-ups = 1-.545 =.454 = 1 /.454 = 2.20 = 2.20 - 1= 120%

29. When things don’t go as planned … and they won’t … keep the focus on profit. That’s why your in business. the volume of gross profit dollars that pays all of the other business costs.

30. When companies experience an unexpected decline in business, the temptation many times is to lower prices to stimulate sales. Before making any adjustments in price, answer these questions. 1. Is the decline short or long term? 2. Is the decline industry wide? 3. What are competitors doing? 4. What are vendors doing? 5. What’s the level of stock? 6. Is demand still healthy? 7. What are non-price options? 8. What’s the company’s financial position? 9. Are there untapped markets? 10. How much “sale” business do you need to hold gross profit levels?

31. http://www.okcommerce.gov/mainstreet How Price Changes Impact Profit Relate pricing to profits

32. Financial reports are great and it’s important to review them on a regular basis. But remember, they’re “history”. Control the company’s operations by planning ahead – just a little. Plan your reward (Net Income), the company’s assets (Cash Flows) and price company products & services for profits. If you don’t plan for them, they probably won’t happen!

33. Paper Trails Inventory Control Break-Even Analysis Z-Score* Succession Plan Job Descriptions Engaged Employees Customer Access Open-mindedness to change Attitude & Grit Do you use any of these controls? *Z-Score – the sum of 5 ratios that predict bankruptcy Oper. Income / Total Assets Sales / Total Assets Working Capital / Total Assets Equity / Debt Retained Earnings / Total Assets 1.81 or below 

34. http://www.irs.gov/businesses/small/article/0,,id=99336,00.html http://smallbiz.att.com/OSB/Tips-Tools/Starting-Up.Page http://www.sba.gov/smallbusinessplanner/index.html http://www.entrepreneur.com/bizstartups/index.html http://www.allbusiness.com/business-planning-structures/starting-a- business/3470974-1.html http://www.business.gov/start/start-a-business.html http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P01_0000 http://www.myownbusiness.org/ http://www.inc.com/guides/start_biz/ http://sbinformation.about.com/od/bizopportunities/a/startup101.htm Need Help Starting A Business?