Starting Your Own Business
A Guide for Georgia Entrepreneurs
www.georgiasbdc.org
GEORGIA SBDC NETWORK
University of Georgia SBDC
Georgia State University SBDC
University of West Georgia SBDC
Kennesaw State University SBDC
Clayton State University SBDC
Georgia Southern University SBDC
Valdosta State University SBDC
Introductions
Hello, my name is…
Mark Whipkey
The Agenda
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Introductions
Entrepreneurship: A Big Decision!
Market Feasibility: Will It Sell?
Financial Feasibility: Will I Make A Profit?
The Business Plan: Your Road Map
Financing Your New Business
Legal and Risk Management Issues
Financial Record-Keeping
New Business Success
Entrepreneurship
• What is your Primary reason for going into business?
• Self assessment – Do you have what it takes?
• Goal setting – Personal & Business
– Short term
– Long term
• Is your business idea feasible?
– Marketing
– Financial
Market Feasibility
Field of Dreams
If you build it, they will come . . .
Market Feasibility
• What is your Target Market?
• How large is the Market?
• Who are your Competitors?
• How does your Product/Service
Compare?
• How much do you expect to Sell?
Market Feasibility
Market Research
– Secondary
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Industry Associations
Government Publications
Geographic Information Systems
Internet
Public Libraries
– Primary
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Observations
Surveys
Focus Groups
Mystery Shopping
Telephone Interviews
Market Feasibility
Secondary Research Websites
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GALILEO – full-text articles, UGA Library/Public Library
Industry Associations – national & local chapters
www.entrepreneur.com – business articles, start-up guides
www.inc.com – business articles, start-up guides
www.census.gov – population, migration, demographic
www.bls.gov/home.htm - Bureau of Labor Statistics- labor, spending
http://www.georgiastats.uga.edu/– Georgia demographics
http://www.terry.uga.edu/selig/ – Georgia demographics
www.fedstats.gov - demographics
http://ga2000.itos.uga.edu - Georgia GIS
http://www.dot.state.ga.us - traffic volume maps
http://www.claritas.com/home.htm – market research, Go to “Free Stuff”
www.bizstats.com - financial statistics
www.IBISworld.com – Industry reports
Market Feasibility
• NAICS – North American Industry Classification
• “NAICS (pronounced Nakes) was developed as the standard
for use by Federal statistical agencies in classifying business
establishments for the collection, analysis, and publication of
statistical data related to the business economy of the U.S.”
• http://www.census.gov/epcd/www/naics.html
• Enter business type and click “NAICS Search”
Get involved with your business community!
• Small Business Development Centers
– www.georgiasbdc.org
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County Economic Development Departments
Chambers, DDA’s, Networking Organizations
Industry Associations
Write Articles
– Your industry’s publications
– www.ezinearticles.com
• www.BusinessTechnologyRadio.com
• Read you local newspaper’s business section
Financial Feasibility
Personal Living Expenses – Start-Up Costs – Operating Costs
One Time Costs
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Accounting/legal
Buildout/renovation
Utility deposits
Lease deposit
Land/building
Fixed assets
Installation
Inventory
Supplies
Pre-opening marketing
Organizational costs
Closing costs
Recurring Costs
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Accounting/legal
Owners’ compensation
Salaries/wages
Cost of Goods Sold
Supplies
Rent/Lease payments
Telephone
Utilities
Insurance
Maintenance/Repair
Loan payments
Miscellaneous
$200
$800
$500
$100
$300
$1900
p. 29
$700
$60
$100
$50
$50
$100
$200
$100
$200
p. 30
$200
$1760
$1000
$760
$200
$960
p. 31
$960
$200
$800
$300
$150
$100
$100
$200
$200
$3010
p. 32
$1900
$15050 ($3010 x 5
mos)
$16950
p. 33
Show Me the Numbers!
• Where do I get the numbers?
– Reference materials (industry standards)
– Check w/competitors in other locations
– Find a lawyer or accountant who represents
companies similar to yours
– Suppliers/equipment sellers to your industry
– Call local competitors for information on
prices/services
Financial Feasibility
What you need to know…
• Balance Sheet
• Income Statement
• Cash Flow Statement
• Breakeven Analysis
Financial Feasibility
Balance Sheet – Financial Health
• Shows what a business owns, owes & what’s left over
Assets = Liabilities + Equity
• Shows a business’s net worth (financial progress)
Assets – Liabilities
-Track progress yearly
• Shows Accounts Receivables, Accounts Payables, Inventory
p. 36
Financial Feasibility
Income Statement – Profitability
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Revenues – Cost of Sales = Gross Profit
Gross Profit – Expenses = Net Profit
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Net Profit is taxable.
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If your Gross Profit is too low, then…
– You’re setting your prices too low, or
– You’re paying too much for your goods, or
– Both.
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Expenses can be fixed or variable.
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Keep an eye on your expenses!
p. 40
Financial Feasibility
Cash Flow Statement – Solvency
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Cash Inflow vs. Cash Outflow
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Shows a business’s ability to repay its debts
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A business can be profitable and still have poor cash flow
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Accounts Receivable (not cash until you collect it)
Principle on Mortgage (doesn’t show up on Income Statement)
Equipment (doesn’t show up on Income Statement)
Inventory (only Cost of Goods Sold shows up on Income Statement)
Depreciation (not cash – doesn’t show up on Cash Flow
Statement)
p. 43
p. 44
Financial Feasibility
Break Even Analysis
• Total Revenues = Total Expenses
• Level of sales at which there is neither profit nor loss
• Can the business generate enough revenue to surpass the
breakeven point?
• Breakeven = Fixed Costs/Contribution Margin
The Business Plan
• How most of us react when we hear
the words “Business Plan”…
Why a Business Plan?
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It forces you to focus
It tests your commitment
It brings you down to reality
It gives you a benchmark
Required by banks and investors
Preparing a Business Plan
Narrative
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Executive Summary
Business Description
Mission Statement
Market Analysis
Competition
Location
Market Strategy
Management
Personnel
Operations
Preparing a Business Plan
Financials
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Sources & Uses
Assumptions
Balance Sheets
Cash Flows
Income Statements
Breakeven Analysis
Collateral Offering
Preparing a Business Plan
Supporting Documents
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Resumes
Personal Financial Statements
Income Tax Returns
Lease Agreements
Purchase Agreements
Construction Estimates
Market Research
Explanations
Financial Sources
Two ways to raise capital:
• Equity Financing
– Private investors
– No collateral
– Will want some level of ownership
– Performance requirements may be placed on
business
• Debt Financing
– Banks don’t want ownership in your business
– They just want you to repay your loan
Financial Sources
• Self
• Family/Friends
• Banks, (p.64)
– Conventional loans
– SBA loans
• Stock
• Venture Capital
Obtaining a Loan
The Five C’s of Credit
 Character
 Capacity
 Capital
 Collateral
 Conditions
Obtaining a Loan
SBA Guaranteed Loans
– Guarantee
– Types
• 7A
• 504
• Patriot Express
– Misconceptions
– The process
Obtaining a Loan
Documentation Requirements
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Business plan
Personal financial statement
Tax returns
Cost estimates
SBA paperwork
Financial statements (pro forma)
Legal agreements
Corporate documents
EPA studies
Grants
• Domestic Need
– Daycares (adult/child)
– Research (SBIR/STTR)
• Economic Development
– Revolving Loan Fund Moneys
– OneGeorgia
– Downtown Development Authorities
• www.grants.gov
Legal Structure
• Sole Proprietors
• Partnerships
• Corporations
- C-Corps
- S-Corps
• LLC’s
Legal Structure
Sole Proprietor
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One owner
Easy formation
Don’t have to register with State
Dissolves with death or disability of owner
Tax Form 1040 + Schedule C / Schedule SE
Unlimited Liability – Owner is personally liable
for all of the business’s debts
Legal Structure
Partnership
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Two or more owners
Register name with State
Partnership agreement
Dissolution
General vs. Limited
Tax Form 1040 + Schedule SE + Form 1065
Unlimited Liability
Legal Structure
C Corporation
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Most expensive, complex
One or more owners
Must be approved by Secretary of State
Can raise capital through the sale of stock
Separate Legal Entity (Business pays their own
taxes)
Continuity
Double Taxation
Tax Form – 1120 or 1120A (Short Form)
Limited Liability
Legal Structure
S- Corporation
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Must start out as a C-Corp
75 or fewer owners (shareholders)
No Foreign Investors
No Wholly-Owned Subsidiaries
Consent of All Shareholders
Continuity
No Double Taxation
File IRS – Form 2553
Tax Form 1120-S
Limited Liability
Legal Structure
Limited Liability Company
• Hybrid of Partnerships and Corporations
– Liability protection of a corporation with the flexibility of a partnership
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One or more “Members”
Register with Secretary of State
No “Continuity of Life”
Pass through Taxation
Limited Liability
Choosing a Trade Name
• All corporations & LLC’s must register with the State
– Check registered names:
• https://cgov.sos.state.ga.us/Account.aspx/LogOn?ReturnUrl=
%2fhome.aspx
• Check the federal register of names patented and
trademarked
– www.us.pto.gov
• Google your business name
• File trade name locally
Compliance Issues
• Local
• State
• Federal
Local Compliance Issues
• Planning and Zoning
– Zoning Restrictions may apply to
• Property
• Parking
• Signage
• Home Based Businesses
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Certificate of Occupancy
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Local Fire Marshall will inspect for fire code compliance
before building can be used
Certificate of Building Inspection
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Local building inspector certifies use of accesses,
restrooms, and construction types
• Licenses:
– Business License/Business Tax Certificate/ Occupational Tax
Permit – obtained at city hall, county courthouse or city admin
building
– Liquor License: Check with city license and tax department
State Compliance Issues
• Permits, Licenses, Inspections:
– Over 30 types of businesses
• www.sos.state.ga.us/plb (p.81)
– Food Sales – Ga. Dept of Ag.
• www.agr.state.ga.us (p.81)
- Food Service- local environmental health dept.
• Trademarks, Service Marks, Patents, Copyrights may
be registered for legal protection (p. 82)
• Sales and Use Tax:
• Apply for sales tax number with State of Georgia and get
instructions for collecting, reporting and remitting tax monies
– www.dor.ga.gov
More State Compliance Issues
• State Income Taxes
– Forms needed depends on the type of business entity
• Worker’s Compensation Insurance
– Required by law for employers with 3+ employees
– Regulated by State but sold by private insurance companies
– http://sbwc.georgia.gov (p.87)
• State Unemployment Insurance Tax (SUTA)
– 2.7% of first $8,500 of employees yearly earnings
– www.dol.state.ga.us (p.86)
Federal Compliance Issues
• Federal Income Taxes
– Federal Tax ID Number (EIN) – Form SS4
- Can apply online; free
- www.irs.gov (p.84)
• Employment Issues:
– FICA Insurance (S.S. & Medicare) – Form 941
-calculated based on employee’s salary
- www.irs.gov (p.85)
– Federal Unemployment Tax (FUTA) – Form 940 or 940EZ
• 0.8% of first $7,000 of employees yearly earnings
- Employee vs. Independent Contractor
Employee Taxes
15.3%
Employee
Employer
7.65%
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FICA
7.65%
SUTA
2.70%
FUTA
0.08%
FED W/H
Legal Issues - Insurance
Risky Business
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Using hazardous materials
Operating heavy machinery
Manufacturing or selling edible goods
Building or repairing structures or vehicles
Caring for children or animals
Alcohol
Driving as main part of job
Allowing activities that may result in injury
Accounting
Recordkeeping systems
– Manual
– Software –
• QuickBooks®
• Microsoft Small Business
Accounting 200X
• PeachTree
• Industry Specific
Why Businesses Fail. . . .
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Lack of capital
Lack of experience
Unwarranted personal expenses
Poor location
Poor Inventory management
Excessive capital equipment
Poor credit / collections
No business plan
Inadequate marketing
No competitive edge
Avoid Mistakes By . . . .
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Watching cash flow
Developing time management skills
Proper recordkeeping
Seeking advice from qualified experts
PLAN ! PLAN ! PLAN!
Training your employees
Paying attention to customers
On-going market research
Community Involvement
www.sba.gov
• U.S. Small Business Administration
• SBA Loans & funding
• Starting & managing a business, licenses and
permits, contracting..
THANK YOU!!!
Call the SBDC office, if you would like to discuss:
Business plan development
Financing alternatives
Market research
Cash flow analysis..and more!
Sara Spinks
(706) 542-7436
www.athenssbdc.org