Starting a New Business
So you want to start your own business? You have some ideas but have not developed a plan to make it happen. The following steps will help you develop a plan for your business and ensure that you have considered all of the important aspects. The plan will increase your chances of success and will be necessary if you intend to borrow money
Step 1 – Evaluating Your Business Idea
The first step in developing a business plan is to have a well thought-out concept. Carefully read and complete the “Evaluating Your Business Idea” workbook. This workbook will assist you in addressing all of the topics necessary to develop your business plan. Taking the time to evaluate yourself and your business concept, will improve your chance of success.
Step 2 – Determine your personal financial situation
Most new or future business owners need to have a personal financial statement. The statement includes all of your personal assets, liabilities and net worth and will determine the income necessary to meet personal financial obligations. Accurately and completely fill out the “Personal Financial Statement” for each owner. Anyone owning 20% or more of the business, or anyone having a majority financial interest in the business, will need to complete a personal financial statement. It is also important to know and understand your personal credit score before approaching a lender for consideration.
Step 3 – Consider your management skills
Complete the “Management Resume” for each owner as well as key employees who are critical to the success of the business. In addition to identifying skills, you will need to provide some personal information that may be required by your lender.
Step 4 – Meet with a Professional Business Consultant
The Small Business Development Center will assist you in organizing your information into a complete business plan. To apply for assistance, complete your request at Southeast Minnesota SBDC Client Signup.
Step 5 – Determine if you need a license or permit
Some business types are regulated and require a license or permit issued by the state or local government. You can search the following link to identify if a license is required and the steps necessary to complete the application: http://mn.gov/elicense/
Step 6 – Determine the appropriate business structure
Once you have finalized your plan you will need to determine the appropriate form of organization for your business situation. There are many factors to consider in choosing a form of organization; the “Guide to Starting a Small Business in Minnesota” provides valuable information to help you make a decision. Also, the SBDC hosts a Legal Advice Clinic that can provide information to assist you.
- Sole proprietorship/Partnership – Certificate of Assumed Name
- Corporation – Articles of Incorporation (seek competent legal advice)
- Limited Liability Company – Articles of Organization for a LLC (seek legal competent legal advice)
- Business Law
Step 7 – Registering your business with the Federal Government
You may or may not need to register your business with the Federal Government, go to the following link to determine whether or not it is necessary for your business.
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employer-ID-Numbers-EINs . If you need an Employer Identification Number (EIN):
Step 8 – Registering your business with the State of Minnesota
All businesses need to be registered with the state of Minnesota. The registration process will provide a number that will be used to file income and sales tax. Complete hhttp://www.revenue.state.mn.us/businesses/Pages/Business-Center.aspx
Managing and Growing Your Business
Everyday small businesses are faced with decisions about managing operations to keep up in competitive markets. At the SBDC our consultants will help the business owner evaluate the company’s strengths and weaknesses to help the company grow and maintain profitability. Too often we see businesses grow at a rate that outstrips their short or long term cash flow position, and subsequently struggle with trying to fulfill obligations without the necessary financing. Additionally, when sales decrease and expenses are increasing, our consultants can assist the business owner in creating a plan to re-position the company to weather the storm and survive the economic down- turn. Below is a list of a few of the various projects the SBDC can assist you with:
- Managing accounts receivable
- Managing Inventory
- Purchasing new equipment and buildings
- Addition of new products
- Refinancing existing debt
- Does your company have too much debt
- Increasing working capital (cash on hand)
- Leasing equipment vs purchasing equipment
Any time the business owner wants or needs to make a change to their business, careful planning is essential to building a success and profitable business. Simply call or e-mail using the contact information on this page. We look forward to hearing from you soon.
Buying an Existing Business
One of the best entry strategies into the world of business ownership is to purchase an existing business. The main advantage to buying an existing business is that the business concept is already proven since there are already customers purchasing the products/services. However, before deciding to buy a business there are two key pieces of information that must be determined. First, the business must be valued, and second, the adjusted profitability has to be made for changes in the new ownership.
In order to place a value on a business you will need the following information:
- List of all fixed assets (buildings, equipment, office furniture, computers, vehicles, etc.)
- List of all inventory (items held for resale to customers)
- Three years tax returns (schedule of profits and losses as reported to the IRS)
- Asking price of the Business
- Schedule of accounts receivable
- Is the seller willing to finance a percentage of the sales price.
- Current profit and loss statement and current balance sheet
- Costs to modify the business (building needs a new roof or new piece of equipment)
By obtaining the above information from the current owner of your targeted business acquisition, you will be able to provide the SBDC with all of the information necessary to approximate the market value of the business.
Determining the adjusted profitability of a business requires you to first identify the current profitability from the most recent fiscal year profit and loss statement and then add/subtract increases in revenues/ costs associated with the change in ownership. These revenue/costs can include new product lines, increased margins, owners salary, interest payments, rents, taxes, and fringe benefits. The SBDC has counselors who are trained to analyze these types of business transactions and can provide you with FREE and confidential assistance. Contact us today using the numbers or e-mail on the bottom of this page.
Competent business planning assistance is just a phone call away