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Small Business Handbook Small Business Handbook For Columbia County, Wisconsin For start-ups, improvements & expansions TABLE OF CONTENTS Page Is small business ownership right for you? 3 Business Plan Outline 4 Forecasting 5 Projected Profit and Loss Statement 6 Cash Flow Projections 7 Projected Balance Sheet 8 Glossary of Terms 9 Legal Forms of Organization 10-11 Business Regulations 12-13 List of Economic Development Businesses & Agencies 15-17 Service Providers 18-19 This business information is provided to help you develop your company’s overall business strategy. Pages 2 through 6 are the business plan. For the start-up business, there is a series of questions that will help you develop clear business objectives. The answers to these questions will help you complete the next step - - the actual business plan and forecasting forms. If you already have an established business plan, you may want to review this section to insure that your present plan has addressed all pertinent areas. For your convenience page 11 is a glossary of terms that may help you complete the business plan. Pages 7 through 11 request information about your business. Complete the information after you have developed your business plan. Pages 2 through 10 will help you compile the information likely to be requested by a potential lender. 2 Is small business ownership right for you? The business plan is a management tool. When developed and used properly, it is one of the most effective communication tools used to obtain financing for your business. It also can help you reach your goals and measure your progress toward reaching them. The business plan should reflect your own ideas clearly and succinctly. Before you start developing your business plan, ask yourself the following questions: 1. Are you the kind of person who can get 11. Have you tried to find out how well a business started and run it successfully? businesses similar to the one you want to open are doing in your community and in 2. Does your family agree with your plan the rest of the country? to start a business of your own? 12. If you need to hire someone to help you, 3. Have you worked in a business similar to do you know where to look? the one you want to start? 13. Do you know what benefits to provide? 4. Have you had any business training in school? 14. Do you have a plan for training your employees? 5. Do you know how much money you will need to get your business started? 15. Have you talked with the company’s potential suppliers? 6. Have you determined how much of your own money you can put into the business? 16. Have you decided whether to let your customers buy on credit? 7. How much personal income do you require and could this be reduced, if 17. Have you talked with an insurance agent necessary? about what kind of insurance you need? 8. Have you decided on a marketing plan? 18. Do you know what equipment and suppliers you will need and how much 9. Have you talked with other business they will cost? owners in the area about what they think of your proposed business? 19. Can you save money by buying secondhand equipment? 10. Can you determine what you should charge for each product or service you 20. Have you compared prices and credit sell? terms of different suppliers? 3 Business Plan Outline The previous questions should get you thinking about the importance of developing a business plan. Once you have formulated your answers, you can begin developing your business plan. The following is an outline to be used in developing your business plan. I Cover Letter VI. Marketing Strategy A. Dollar amount requested A. Overall strategy B. Terms and timing B. Pricing policy C. Type and amount of collateral C. Methods of selling, distributing and D. Purpose and source of repayment servicing II. Summary VII. Management Plan A. Business description A. Form of business organization B. Board of Directors (Owner of 1. Name Partners) 2. Location and plant description C. Officers: organizational chart and 3. Product responsibilities 4. Market and competition D. Resumes of key personnel 5. Management and business goals E. Staffing plan/number of employees B. Summary of financial needs and F. Facilities plan/planned capital application of funds improvements G. Operating plan/scheduled of work III. Products or Services for next 1-2 years A. Description for product line B. Proprietary position: patents, VIII. Financial Plan copyrights, legal and technical A. Financial statements consideration (Three years to present) C. Product comparison B. Three-year financial projections (Monthly for the first year) IV. Manufacturing Process (if applicable) 1. Profit and Loss statements A. Materials 2. Cash Flow charts B. Source of supply 3. Balance sheets C. Production methods C. Explanation of projections D. Explanation of use and impact of V. Market Analysis new funds A. Description of total market B. Industry trends C. Target market D. Competition 4 Forecasting When preparing projected financial statements for your business plan, you must start with basic assumptions for income and expenses. These assumptions for income and expenses should be detailed in your business plan with supporting documentation taken from the market study and the market strategy in your business plan. The projected financial statements should indicate economic changes in your business cycle. For instance, if your business is seasonal, sales during a specific period will be greater than another period. Your financial projections should indicate that fluctuation in sales and expenses. There are three types of financial statements: Profit/Loss Statement: Balance Sheet: The profit/loss statement will show your The balance sheet records the total assets, income minus expenses and indicate either a liabilities and equity on a specific day. profit or loss statement should be done on a monthly basis. The second and third year may The projected balance sheet is done every 12 be done on a quarterly basis. months. If your company’s business year end is December 31st, then your proforma balance Cash Flow Statement: sheet reflects the assets and liabilities, and equity on that date. The projected balance The projected cash flow statements will show sheet should reconcile with the projected the cash generated and collected from the profit/loss and cash flow statements. business operations. This statement will utilize the same income and expenses as the Included in this list are forms to be used in the profit/loss statement; however, it takes last financial forecasting of your business. A rule month/quarter previous cash and adds that into of thumb when forecasting: Be as total cash/receipts for the new month/quarter. conservative and as realistic as possible. Remember, your business plan should provide Timing differences resulting from accounts you with all the supporting documentation receivable turnover and the ongoing need for when forecasting. cash to fund expenses will indicate your business need for working capital. 5 Glossary of Terms Accounts Payable: Amount owing on open Debt-to-Equity: Total liabilities divided by total accounts to creditors for goods and services shareholders’ equity. This shows to what extent (usually within one year). owner’s equity can cushion creditors’ claims. Accounts Receivable: Money owned to a Fixed Assets: Tangible property used in the business for merchandise or services sold on open operation of business, but not expected to be accounts (represents current assets). consumed or converted into cash in the ordinary course of event. Land and building, machinery and Accounts Receivable Financing: Short-term equipment, furniture and fixtures, and leasehold financing whereby accounts receivable serve as improvement composes the fixed assets of most collateral for working capital advances. companies. Balance Sheet: A financial report showing the Fixed Asset Financing: A term used primarily to status of a company’s assets, liabilities and owner’s describe a particular type of finance. Funds used to equity on a given date. purchase land and buildings, machinery and equipment, and leasehold improvements. Fixed Breakeven Point: The point at which sales equal Asset Financing does not finance working capital or costs. The point is located by breakeven analysis, accounts receivables. which determines the volume of sales at which fixed and variable costs will be covered. All sales over the Liquidity: The ability of a business to meet its breakeven point produce profits; any drop in sales current debts with cash payments. below that point will produce losses. Note: Positive difference that results from selling Cash Flow: Net income plus depreciation and products and services for more than the cost of other noncash expenses. producing these goods. Collateral: Assets pledged to a lender until a loan Revolving Credit: A contractual agreement is repaid. If the borrower defaults, the lender has the allowing a customer to borrow funds when needed right to seize the collateral and sell it to pay off the up to a specific maximum amount for a limited loan. period of time. Cost of Goods Sold: Figure representing the cost Selling, General, and Administrative (SG&A) of buying raw material and producing finished Expenses: Grouping of expenses reported on a goods. Direct costs are clear-cut factors such as company’s Profit and Loss Statement. Included are such direct labor as well as others less clear-cut, such as items as salespersons’ salaries and commissions, overhead. advertising and promotion, travel and entertainment, office payroll and expenses and executives’ salaries. Current Assets: Cash, accounts receivables, inventory and other assets that are likely to be Working Capital: Current assets minus current converted into cash. liabilities. Current Liabilities: Company’s debt or other obligations coming due within a year. 9 Legal Forms of Organization There are four basic legal forms of organizing your business: sole proprietorships, partnerships, limited liability companies, and corporations.
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