HOW TO START A SMALL BUSINESS 8/96
Provided by the US
Small Business Administration
Starting and managing
a business takes motivation, desire and
talent. It also takes
research and planning.
Like a chess game,
success in small business starts with decisive
and correct opening
moves. And although initial mistakes are not
fatal, it takes skill,
discipline and hard work to regain the
advantage.
To increase your chance
for success, take the time up front to
explore and evaluate
your business and personal goals. Then use
this information to
build a comprehensive and well-thought-out
business plan that
will help you reach these goals.
The process of developing
a business plan will help you think
through some important
issues that you may not have considered
yet. Your plan will
become a valuable tool as you set out to
raise money for your
business. It should also provide milestones
to gauge your success.
Getting Started
Before starting out,
list your reasons for wanting to go into
business. Some of
the most common reasons for starting a business
are:
* You want to
be your own boss.
* You want financial
independence.
* You want creative
freedom.
* You want to
fully use your skills and knowledge.
Next you need to determine
what business is "right for you." Ask
yourself these questions:
* What do I like
to do with my time?
* What technical
skills have I learned or developed?
* What do others
say I am good at?
* Will I have
the support of my family?
* How much time
do I have to run a successful business?
* Do I have
any hobbies or interests that are marketable?
Then you should identify
the niche your business will fill.
Conduct the necessary
research to answer these questions:
* What business
am I interested in starting?
* What services
or products will I sell?
* Is my idea
practical, and will it fill a need?
* What is my
competition?
* What is my
business's advantage over existing firms?
* Can I deliver
a better quality service?
* Can I create
a demand for my business?
The final step before
developing your plan is the pre-business
checklist. You should
answer these questions:
* What skills
and experience do I bring to the business?
* What will
be my legal structure?
* How will my
company's business records be maintained?
* What insurance
coverage will be needed?
* What equipment
or supplies will I need?
* How will I
compensate myself?
* What are my
resources?
* What financing
will I need?
* Where will
my business be located?
* What will
I name my business?
Your answers will help
you create a focused, well-researched
business plan. that
should serve as a blueprint. It should
detail how the business
will be operated, managed and
capitalized.
The following outline
of a typical business plan can serve as a
guide, but you should
adapt it to your specific business. We
recommend that you
break down the plan into several components.
This allows you to
work on several sections at a time.
Business Plan Outline
Introduction
* Give a detailed
description of the business and its goals.
* Discuss the
ownership of the business and the legal
structure.
* List the skills
and experience you bring to the business.
* Discuss the
advantages you and your business have over your
competitors.
Marketing
* Discuss the
products/services offered.
* Identify the
customer demand for your product/service.
* Identify your
market, its size and locations.
* Explain how
your product/service will be advertised and
marketed.
* Explain the
pricing strategy.
Financial Management
* Explain the
source and amount of initial equity capital.
* Develop a
monthly operating budget for the first year.
* Develop an
expected return on investment, or ROI, and
monthly
cash flow for the first year.
* Provide projected
income statements and balance sheets for a
two-year
period.
* Discuss your
break-even point.
* Explain your
personal balance sheet and method of
compensation.
* Discuss who
will maintain your accounting records and how
they
will be kept.
* Provide "what
if" statements that address alternative
approaches
to any problem that may develop.
Operations
* Explain how
the business will be managed on a day-to-day
basis.
* Discuss hiring
and personnel procedures.
* Discuss insurance,
lease or rent agreements, and issues
pertinent
to your business.
* Account for
the equipment necessary to produce your products
or services.
* Account for
production and delivery of products and
services.
Concluding Statement
* Summarize
your business goals and objectives and express
your
commitment to the success of your business.
Once you have completed
your business plan, review it with a friend
or business associate.
When you feel comfortable with the content and
structure, make an
appointment to review and discuss it with your
banker. The business
plan is a flexible document that should change
as your business grows.
For More Information
Information is power.
Make it your business to know what is available,
where to get it and,
most importantly, how to use it.
Sources of information include:
U.S. Small Business
Administration
* SBA District
Offices
* Small Business
Development Centers (SBDCs)
* Service Corps
of Retired Executives (SCORE)
* SBA OnLine
(electronic bulletin board)
* Business Information
Centers (BICs)
The SBA has offices
located throughout the United States. For the
one nearest you, look
under "U.S. Government" in your telephone
directory, or call
the SBA Answer Desk at (800) 8-ASK-SBA. To send
a fax to the SBA,
dial (202) 205-7064. For the hearing impaired,
the TDD number is
(704) 344-6640.
To access the agency's
electronic public information services,
you may call the following:
SBA OnLine: electronic bulletin board - modem and computer
required
(800) 697-4636 (limited access)
(900) 463-4636 (full access)
(202) 401-9600 (D.C. metro area)
Internet: using uniform resource locators (URLs)
SBA Home Page: http://www.sba.gov
SBA gopher: gopher://gopher.sba.gov
File transfer protocol: ftp://ftp.sba.gov
Telnet: telnet://sbaonline.sba.gov
U.S. Business Advisor: http://www.business.gov
You also may request
a free copy of The Resource Directory for
Small Business Management,
a listing of for-sale publications and
videotapes, from your
local SBA office or the SBA Answer Desk.
Other Sources
* State economic
development agencies
* Chambers of
commerce
* Local colleges
and universities
* Libraries
* Manufacturers
and suppliers of small business products and
services
* Small business
or industry trade associations
Did you know the SBA ...
* Has a portfolio
guaranteeing over $27 billion in loans to
185,000
small businesses that otherwise would not have had such
access
to capital?
* Guaranteed
over 60,000 loans totaling $9.9 billion to America's
small
businesses in fiscal year 1995?
* Last year
extended management and technical assistance to nearly
1 million
small businesses through its 950 Small Business Develop-
ment
Centers and 13,000 Service Corps of Retired Executives
volunteers?
* Provided more
than 45,000 loans totaling $1.2 billion to disaster
victims
for residential, personal property, as well as business
losses
in fiscal year 1995?
* Has 7,000
private sector lenders as partners providing their
capital
to small business?
* Has increased
its venture capital program with more private
capital
in the past two years than in the previous 15 years
combined?
* Provides loan
guarantees and technical assistance to small business
exporters
through U.S. Export Assistance Centers in 15 cities?
* Can respond
to written small business questions through the U.S.
Business
Advisor on the Internet (http://www.business.gov)?
All of the SBA's programs
and services are provided to the public
on a nondiscriminatory
basis.
FS0056 (8/96)