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QUICK START
ENTREPRENEUR
Guide
Aamer

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Table of Contents
Introduction .................................................................................................................2

Session 1: Deciding on a Business ................................................................................5

Session 2: Home-Based and Freelance Businesses ......................................................17

Session 3: Financing the Business ..............................................................................30

Session 4: Accounting and Cash Flow .........................................................................43

Session 5: Business Organization ...............................................................................64

Session 6: LICENSES AND PERMITS: ............................................................................85

Session 7: Communication Tools ................................................................................95

Session 8: Develop Negotiating Skills .......................................................................118

Session 9: E-Commerce ...........................................................................................129

Session 10: Opening and Marketing .........................................................................149

Special Feature: Selling: ............................................................................................166

Special Feature: Controlling Costs ............................................................................180

Special Feature: Making Ethical Decisions .................................................................192

Special Feature: Adapting in the Midst of Change .....................................................207

Special Feature: How to Talk About Your Business: Business Storytelling ..................210

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INTRODUCTION:

This Quick Start Entrepreneur program includes the 10 most important and essential sessions

from our Starting a Business and Business Expansion courses, available for a limited time to help

you accelerate your entrepreneurial education during the COVID-19 emergency.

Students who complete these 10 sessions and pass the final with a score of 80 or higher will earn

a Certificate of Completion and digital badge from Santa Clara University, just as with our other

courses.

We have also included five new bonus sessions on different topics. These sessions are not

required to earn your Certificate for the course. New topics Selling, Controlling Costs,

and Making Ethical Decisions were developed by MOBI Executive Director and SCU Professor

of Information Systems and Analytics, Drew Starbird, Ph.D., along with his colleague and MOBI

instructor David Aune. Two additional topics were developed in partnership with Santa Clara

University’s Ciocca Center for Innovation and Entrepreneurship: Business

Storytelling and Adapting in the Midst of Change.

Through this course, you will learn the tips and tricks regarding how to decide your specific

business. We will also teach you the top selling techniques and how to make right and ethical

decisions for your business. You will also learn the top negotiating skills and communication

tools for your business. We will also teach you the benefits of home-based freelancer and other

businesses. Through this course, you will also learn how to manage and maintain your bank

account. We will also teach you about the licenses and permits you will need for your business.

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During this difficult time amid the COVID-19 pandemic, small businesses and entrepreneurs

face unforeseen challenges and difficult decisions. Yours and your family’s well-being has

become our top priority right now. We hope the Quick Start Entrepreneur course gives you a

faster path toward entrepreneurship, perhaps even with an at-home or freelance business you can

start now. Please also visit MOBI's COVID-19 Resources for Entrepreneurs & Small

Businesses page for links to organizations providing information and assistance.

We welcome you to take some time to explore and learn about the Quick Start

Entrepreneur course. Once you learn this course, you will be able to start your own business

with ease, and eventually, compete with the top guns in the market.

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Session 1: Deciding on a Business

OBJECTIVE:

The most common serious mistake made by entrepreneurs is not choosing the right business

from the very beginning. This session will provide you with important evaluation techniques to

decide which business is right for you.

 Characteristics of a Successful Entrepreneur

 Step-by-Step Approach

o Decide if you really want to be in business

o Decide what business and where

o Decide whether to start full-time or moonlight

 Selection Strategy

 Things to Watch Out For

 Suggestions For People In Transition

 Required Activities

o Comparative evaluation

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 o How to evaluate a specific business you have in mind

o "For" and "Against" list

o Get completely qualified

 Decision Time

 Top Ten Dos and Don'ts

Characteristics of a Successful Entrepreneur

 Guts: "Guts" mean you must have an entrepreneurial instinct, which includes an

overwhelming desire to have your own business. You must have the guts and dedication

to be completely devoted to your goal. Incidentally, devotion to your goal is much more

likely if you have a love for your intended business. Life is too short to be starting a small

business that doesn't give you satisfaction and joy. And, through good times and bad

times, you will stick with something you love.

 Brains: While appropriate educational credentials are important, entrepreneurial "brains"

means more than scholastic achievements. To become a successful entrepreneur, you

should have a working knowledge of the business you plan to start before you start it.

Common sense, combined with appropriate experience, is the necessary brainpower.

Prudence, follow through and attention to detail are very important.

 Capital: Every business needs money of your own plus sufficient cash to maintain a

positive cash flow for at least a year. In a future session, operating entrepreneurs will

learn how to forecast future cash requirements through cash flow control. Many

businesses can be started on a very small scale with a small investment. Then, as the

business grows and you gain experience, cash flow from your business can be used for

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 growth. In some cases, you don't need starting capital to hire other people because you

might start by doing everything yourself. The "do it yourself" start is a good way to learn

everything about your business and also makes you better qualified in delegating work to

others in the future.

Step-by-Step Approach

Decide if you really want to be in business:

You are putting some (not all, hopefully) of your net worth at risk. You may run the risk of

becoming eccentric, meaning creating a life that is out of balance, with working hours taking

away from other family or pleasurable activities. There may be levels of stress you have not

experienced as an employee.

Decide what business and where:

Once you are satisfied you have the characteristics of a successful entrepreneur and that you

definitely want to be in business, then you must decide which business is best for you and where

to locate that business. Selection strategy is covered later on in this session. Also, see our home-

based business session for those considering operating a business from their home.

Decide whether to operate full-time or moonlight:

There are some interesting advantages and some pitfalls in operating as a moonlight business.

(That is, a business you start in your off hours while still working at your current job.) More

often than not, the advantages of starting as a moonlighter outweigh the risks:

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  You avoid burning your bridges of earnings including retirement, health and fringe

benefits and vacations.

 Your full-time job won't suffer if you maintain certain conflict of interest disciplines,

including compartmentalizing your job and business into completely separate worlds.

 You can avoid conflict of interest with your job by choosing a business that is appropriate

for moonlighting, such as single products, real estate, specialized food, e-commerce,

direct marketing or family-run operations.

There are great advantages for operating a family business. If you are a moonlighter the family

can run the business while you are at work. You have a built-in organizational structure. You can

teach your kids the benefits of being in business.

But there are also some pitfalls to consider in starting a moonlight business:

 There is a temptation to spend time at your job working on your moonlight business. That

is unfair to your employer and should not be done under any circumstances. (You may

need a family member or some trusted person to cover emergencies when you are at your

job.)

 Another problem may be competing with your employer, which is not right. Think of

how you would feel or handle this employee if you were the boss.

 Any kind of conflict with your regular work can jeopardize your job and your moonlight

business.

 Overwork and mental and physical exhaustion can also become a very real problem for

moonlight entrepreneurs.

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Selection Strategy

Operating the wrong business is the most frequent mistake that start-up entrepreneurs make.

Here is a checklist to help you to evaluate if you are in a potentially successful one or to

reassess the business you are in:

 If you have not yet selected a business, take your time and wait for the business that is

just right for you. You will not be penalized for missing opportunities. The selection

process takes a lot of planning and your experience and complete knowledge is vital for

your success.

 A common problem is not having much money to start a business. Surprisingly, there are

a number of businesses that require no money at all.

 Don't tackle or pursue businesses that may be too challenging. It is better to identify a

one-foot hurdle than try to jump a seven-footer.

 Try to identify a business that has long-term economic potential. Follow Wayne

Gretzky's advice, "Go to where the puck is going, not to where it is."

 A big mistake can be an error of omission. This means you may fail to see an opportunity

that is right in front of you.

 Keep in mind that as a general rule specialists do better than non-specialists. Wouldn't

you be more inclined to take your sick cat to a veterinarian whose practice is limited to

cats rather than to a general practitioner?

 Operate a business that will grow in today's and tomorrow's markets. Many small retail

stores are no longer in business because huge stores such as Walmart and Home Depot

provide more choices to the customer and often at a cheaper price.

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  Follow the advice of Chairman Warren Buffett, of Berkshire-Hathaway Inc. and the most

successful business picker in American history. Mr. Buffett looks for businesses that

focus on a "consumer monopoly" with pricing power and long-term predictable growth

prospects.

 Businesses to avoid are "commodity" businesses where you must compete entirely on

price and in which you must have the lowest cost to survive. As Mr. Buffett has said, "In

a commodity type business you're only as smart as your dumbest competitor."

 Most service businesses have pricing power. Pricing power means that you will not need

to have the lowest price in order to secure business. Your customers will be willing to

pay a fair price for a better product or service.

 Should you bet on a business you don't know when you can bet on a business you do

know?

 If you are manufacturing a product, consider the pros and cons of contracting out

production to a low-cost supplier. In other words, operate a "hollow corporation." A

"hollow corporation" is a company that subcontracts manufacturing and packaging.

 If your business is based on marketing an invention or patent, keep these ideas in mind:

a. First check to determine if there are any issued patents similar to your idea. You can secure

information from the U.S. Patent office at www.uspto.gov.

b. Be cautious about getting involved with firms that ask for up-front fees to market an

invention.

c. No matter what you hope for, you will need a product to test, to show and to solicit feedback.

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Things to Watch Out For

 Impatience

 Do not let over confidence short-circuit you from analyzing your business carefully. You

must not fear hearing the negative aspects; it is much better to be aware of them and face

them early on.

 The lure of high rewards. They will come if you have selected the right business and if

you understand every aspect of the business before you open its doors.

Suggestions for People In Transition

More people than ever are victims, or are about to be victims, of downsizing: also known as

"reduction in force," "made redundant," or "your job just went overseas." Scary questions begin

to arise: Where do I go from here? How am I going to make my mortgage payment?

For a laid-off worker who doesn't have bright prospects for replacing his or her job, there is a

possibility not to be overlooked - Why not go into business for yourself? For those still in jobs

but fearful of losing them (the signs are usually evident), there is the possibility of starting a

moonlight business now while still working.

Required Activities

It is worth repeating: The most common mistake — and the most costly one — is not selecting

the right business initially. This is the time for soul-searching for operating entrepreneurs.

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IF YOU HAVE NOT YET DECIDED ON A BUSINESS, DO THIS:

On the top of a blank sheet of paper, write an activity you like to perform (make this the

heading). Do a separate page for each activity or interest you have.

o On those same sheets list as many businesses you can think of that are related to

that activity.

o On the same sheets, list all the products or services you can think of that are

related to that activity. Use your imagination and think of every possible product

or service you could perform.

o Make a list of businesses that do better in bad times (one may be appropriate for

you). Some examples might be pawn shops, auto repairs, and fabric stores.

EXAMPLE

Let's assume you end up with three potential business ideas: towing service, used car sales, and

auto repairs. You can now make a comparative evaluation using the following checklist (or

better still your own checklist) with a 1-10 scoring system. This kind of analysis can help you

gain objectivity in selecting your business.

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How to Evaluate the Business

Here are some questions to help clarify your thoughts:

 Is it something I will enjoy doing? As Harvey McKay has said, "Find something you love

to do and you'll never have to work a day in your life."

 Also, if you're doing something you love, you're much more likely to stick with it through

thick and thin times.

 My favorite activities are __________________________

 I like to serve people by ________________________________

 Will it serve an expanding need for which there is no close substitute?

 Can I be so good at a specialized, targeted need that customers will think there is no close

substitute? For example, in California, nobody comes close to See's Candies.

 Can I handle the capital requirements? In Session 11 Accounting and Cash Flow, you

will learn a simple cash flow control method to forecast your future cash needs.

 Can I learn the business by working for someone else first? Our favorite example: if

you're planning to open a convenience store, for heaven's sake go to work for a national

chain first!

 One option for going into business is buying a business or a franchise. Valuable insights

in evaluating both possibilities are included in our Session 9 Buying a Business or

Franchise.

 An entire session in our course Business Expansion is devoted to buying businesses. In

many cases, buying a business is less risky than starting from scratch.

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  Could I operate as a hollow corporation, without a factory and with a minimum number

of employees? For example, if you have in mind marketing a line of furniture, you might

consider outsourcing to a manufacturing vendor in China. Cost savings is often the prime

objective, but you also free up your time and capital. The major risk is the performance of

the vendor and your success in developing good relationships that provide mutual

benefits.

 Is this a product or service that I can test first? Your concept of a successful product or

service may not be in harmony with the reality of the marketplace. On a small scale,

prove it out first. As Wolfgang Puck states: "I learned more from the one restaurant that

didn't work than from all the ones that were successes."

 Should I consider a partner who has complementary skills or who could help finance the

business?

Use a "For" and "Against" List to Evaluate your Business

Make a "for" and "against" list regarding characteristics of the business. On a blank piece of

paper, draw a vertical line down the middle of the page and list on one side all the "fors" and on

the other all the "againsts." Sometimes this will help clarify your thinking. We have provided

a Template to Evaluate a Business for you to use.

Write down the names of at least five successful businesses in your chosen field. Analyze what

these five businesses have in common and make a list of reasons for their success.

Talk to several people in your intended business. Don't be afraid of the negative aspects of your

intended business. Instead, seek out the pitfalls of your new business ideas — better now than

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after you open your doors. Take notes if possible. Write down the information as soon as you

can.

Analyze the competition that are not doing well and write down the reasons.

Get Completely Qualified

Before you proceed further in your business, get completely qualified: The best way to become

qualified is to go to work for someone in the same business.

o Attend all classes you can on the skills you need: for example, accounting,

computing and selling.

o Read all the "How To" books you can.

o Don't be afraid to ask questions or seek help from the most successful people in

your intended business.

Decision Time

To get the most benefit out of the remaining sessions of this course, you should either:

A. have decided on a business to start, or,

B. be operating the business that you think is best for you!

TOP 10 DO’S AND DON’TS

THE TOP TEN DO'S

1. Live frugally and begin saving up money for operating your business.

2. Learn your small business by working for someone else in the same business first.

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 3. Consider the benefits of starting a moonlight business.

4. Consider the advantages of operating a family business.

5. Objectively measure your skills and training against potential competition.

6. Consider subcontracting to low-cost suppliers if you're manufacturing a product.

7. Test market your product or service before starting or expanding.

8. Make a "for" and "against" list describing the business, you are in or considering.

9. Talk to lots of people for advice.

10. Make a comparative analysis of all opportunities you are considering.

THE TOP TEN DON'TS

1. Quit your job before you have completed start-up plans.

2. Consider operating a business in a field you do not enjoy.

3. Risk all the family assets. Limit your liabilities to a predetermined amount.

4. Compete with your employer in a moonlight business.

5. Be in a hurry to select a business. There is no penalty for missed opportunities.

6. Select a business that is too high a risk or hurdle. Go for the 2-foot hurdle.

7. Operate a business in which you must have the lowest price to succeed.

8. Neglect to learn the negative aspects of an intended business.

9. Permit entrepreneurial self-confidence to outweigh careful diligence.

10. Allow the promise of a conceptual high reward to deter reality-testing first.

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Session 2: Home-Based and Freelance Businesses

OBJECTIVE:

You don’t need a traditional office space to start a business. Many new entrepreneurs work from

home or from office space that is shared with other businesses. Working from home can be a

great way to keep costs down during the early stages of your new business, even if you plan to

expand later. Home-based businesses provide considerable flexibility and may allow you to

work as an employee for another business while you launch your own business on the side. One

very popular type of home-based business is called a freelance business. Freelance businesses are

businesses with one employee (you) who takes on contract work for other businesses,

organizations, and individuals. Many aspiring entrepreneurs also turn favorite hobbies into

business ideas they can pursue from home. This session will discuss different types of businesses

you can start from home and provide a Home-Based Business Readiness Template to help you

determine if you are ready.

 Benefits of Home-Based and Freelance Businesses

 What is the Gig Economy?

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  Characteristics of Home-Based and Freelance Businesses

 Starting a Home-Based or Freelance Business

o Home-Based Business Readiness Template

o Creating an oline presence for your home-based business

 Establishing Work-Life Balance in your Home

 Challenges of a Home-Based Business

 Top Ten Do's and Don'ts

 Business Plan

Benefits of Home-Based and Freelance Businesses

Launching a home-based or freelance business has several advantages:

 Flexibility: Starting a home-based or freelance business provides the flexibility to keep

your current job while you pursue your new business on the side. Some people call this

“moonlighting” because you might work one job during the day, and a second job in the

evening. Another name for this is a “side job.” One note of caution, if you are working

for another company when you start your business, don’t use your employer’s resources

for your new business and don’t start a business that directly competes with your

employer. You should make sure that you understand the non-compete and intellectual

property laws of your employment.

 Help from family and friends: Starting a home-based business, you will be in a familiar

setting with family and friends who can help if needed.

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  Low initial investment: Starting a home-based business typically allows you to begin

your business with less capital because you don’t need to pay the expenses associated

with leasing additional space. Having a small start can lead to big success later!

 Leveraged resources: Home-based businesses allow you to utilize the resources you

already have in your home. For example, a family computer or printer could be used for

your business needs as well as internet connectivity or storage space.

 Lower risk: The risk of failure is a part of every new business. Starting small at home

allows you to test ideas, products, services, and markets before you invest a lot of money

or incur financial obligations and dealings. To help reduce risk, it might be a good idea

to set a limit on how much money you can risk and keep your primary job while you

launch your new business.

What is the Gig Economy?

The term “gig economy” is used to describe an economy in which temporary and flexible

employment is common. In the gig economy, independent workers (freelancers) take on short-

term engagements with different employers instead of long-term permanent positions with the

same company. Freelancers seeking temporary employment often use specialized online

services to find opportunities. Examples of these types of businesses include TaskRabbit,

Thumbtack, Gentask, and Care.com to name a few.

The trend toward a gig economy has made employment much more flexible for both workers and

employers. This can be important for people who cannot work full-time or need to make their

own hours. However, it is important to note that gigs, consulting projects, and independent

contracts may not have the same types of employee benefits that full-time positions might, such

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as health care, vacation and sick pay, retirement plans, and more. Also, the laws regarding

independent contractors are changing, so be sure to understand whether your position qualifies

and what rights and benefits you are entitled to in that position.

Characteristics of Home-Based and Freelance Businesses

Home-based and freelance businesses have characteristics that set them apart from other

businesses. If your new business has some or all of these characteristics you might be able to

start it at home. With the right idea, it’s never too late to start!

 Businesses with few employees: One common characteristic of home-based businesses

is that there are fewer employees than the typical business. Of course, freelance

businesses only have one employee, you.

 Businesses with low storage needs: Homes often have limited space, so businesses that

have less need for storage are better for home-based businesses. Home-based businesses

with limited storage needs are businesses that provide services, businesses that make

products that are perishable (like catering), and businesses that make products that are

small and valuable (like jewelry). If possible, it’s a good idea to start by specializing in a

single product or service.

 Businesses that provide/deliver services to the customer: Many service businesses

involve working at the customer’s home or business. Examples of on-site service

businesses are landscapers, home repair, remodeling, electrician, rideshare,

cleaning/janitorial services, and care: child care, pet care, and elder care for example.

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  Businesses based on specialized skills: Many freelance businesses are based on

specialized skills customized for each client. Some examples include writing, translation,

coding, editing, consulting, accounting, tutoring, and website design.

 Businesses with virtual sales transactions: Many home-based businesses involve

virtual sales transactions. Virtual sales transactions are transactions that occur through an

internet portal. E-commerce companies are built around virtual sales transactions.

Examples include Amazon, Etsy, or other internet-based retailers. See Session 12: E-

commerce for more information.

Businesses that do not have the characteristics listed above are more difficult to operate out of

the home. What kind of businesses would be poor home-based businesses. Here are some things

to watch out for.

 Businesses with lots of employees: There are two cases where businesses need lots of

employees. First, when the product or service need lots of people with different skills to

make and deliver it (like hospitals, sports teams, restaurants, and manufacturing). Second,

when the sales and production volume is large. If either of these cases apply to your

business, then a home-based business is probably not best for you. Consider researching

other locations to pursue these types of businesses. See Session 10: Choosing a Business

Location for more information.

 Businesses that need lots of storage: Some businesses need lots of storage in order to

operate. Retail businesses like auto dealerships and grocery stores needs lots of

storage. Other businesses that need storage are dry cleaners, florists, and bakeries.

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  Businesses where the customer comes to you: If the customer comes to you, then a

home-based business is probably not a good idea. Businesses like this include salons,

gyms, bus tours, and theaters.

 Businesses that depend on a specialized location: Some businesses depend on location

and are not good as home-based businesses. Location is important in businesses that are

regulated, like businesses that sell alcohol, and businesses that are associated with travel,

like fishing charters.

If your business has any of these characteristics, then you should carefully consider whether a

home-based business is the right choice.

Preparing to Launch a Home-Based or Freelance Business

Starting a home-based or freelance business is similar to starting any other business. If you are

starting a home-based or freelance business, you will need to allocate your time carefully

because you are probably doing most of the work yourself. Doing some planning and

preparation before launching your business will ensure you have time to work with your clients

and increase your chance of success. The following template will help you figure out what you

need to do to be ready.

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Creating an Online Presence for Your Home-Based or Freelance Business

An important part of your home-based or freelance business is creating an online presence

(through a website or social media). An online presence is an efficient way for you to connect

with new customers, to describe your products and services, to authenticate your business, and to

sell products. (Session 12: E-Commerce has additional resources to consider.)

A website for your business: There are two ways to think about how to design your

website. Do you want static information or dynamic information? Some businesses create a

“static” website which has basic information about the business (such as location, phone number,

email, services offered, etc.), and the content does not change, or does not change frequently. A

static website allows people to find your business through an online search and to contact you

based upon the information on your site.

A “dynamic” website is one where the information is changing all the time. For example, if you

have a restaurant or food truck, you may want to post photos of your food, updates to your menu,

your hours, seasonal specials, and more. If you design graphic t-shirts and other clothing, you

may want to continually update your site with new designs, sale items, and customer photos.

There are many other examples where a dynamic website is a better fit for your business. In

general, dynamic websites will be more expensive to create and maintain. If you create a

dynamic website, you will need to commit to updating the content frequently.

You can build a website by hiring a professional (usually a freelancer!) or by creating it

yourself. PC Magazine recently published a list of tools for creating a website: The Best

Website Builders for 2019. Some of the tools to consider are Wix, Squarespace, and GoDaddy.

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A web store for your business: If you want to be able to sell items directly from your website,

you will need to make sure your website had a web store capability or online shopping cart.

Using a web store has a number of challenges and additional tasks that you need to carefully

consider. Some of those include shipping, packaging, managing inventory, consumer fraud, and

collecting sales tax. Many of the website building tools mentioned above (like Wix and

Squarespace) can help you set up your store.

Social media for your business: Some businesses use Instagram, Facebook, and other social

media platforms to create an online presence that they need. Social media platforms are great if

your target customers use social media as well and especially if your business is easily promoted

through photos. Social media platforms are less expensive than websites and it’s easy to update

information. However, social media can also be a difficult way to attract new customers unless

you are willing to pay for social media advertising.

Establishing Work-Life Balance in your Home

One of the unique benefits and important challenges of starting a home-based business is that

you can work on your business any time you want. It is important for home-based entrepreneurs

and freelancers to maintain a healthy balance between work life and personal life. Here are some

tips to help you do that:

 Create a specific space for your business. Establish a desk area or a unique space in

your house where you keep your business things and conduct your business work. If

your space is very limited and need to use family or personal space for work, then you

should try storing business items out of sight when you are not working. For example,

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 for work you can have a separate calendar, organizer/planner, file folder, laptop, and even

a set of pens that you take out and put away depending on your work schedule.

 Set work hours. Create a schedule for yourself, including breaks, and stick to it.

Established work hours will allow you to focus all your attention on your

business. When you attempt to divide your attention, your “working time” is less focused

and less productive. From the beginning, set a schedule that provides balance, and stick

to it.

 Dress for success. One of the ways to separate your home life and your working-at-

home life is to dress for work, even if you don’t have to. Getting ready for work will

provide a clear physical transition for you, and it will help your mental transition as well.

Your mindset will be more focused and dedicated if you dress for work even at home.

 Set goals. In addition to setting specific work hours, it’s also a good idea to establish

daily or weekly goals. The amount of work needed to start a business can be

overwhelming. It’s easy to fall into the habit of working around the clock on everything

all at the same time and never feeling successful. By establishing daily or weekly goals,

you can dedicate your work hours toward specific objectives and feel successful when

you achieve them. The idea of daily goals is discussed in the MOBI Blog for

Entrepreneurs post, “Setting Goals: Building a Business on Five Things a Day.”

 Live your life. Starting a business will likely take up more of your time than you expect.

However, it’s important that you don’t let it take ALL your time. Be sure to make time

for yourself and for your personal life. Make time to do things that you enjoy, and spend

time with your family and friends. Taking breaks from your business will give you the

time and space to clear your mind and keep your perspective fresh.

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Challenges of Home-Based Businesses

There are many challenges to starting a home-based or freelance business. Before you launch

your new business, you should think about how to address these challenges. The other MOBI

sessions can help you think through them.

 Finding new customers and generating sales: One challenge of starting a business is

finding new customers and generating new sales. You should plan on starting small and

building your sales by providing a great customer experience. Develop a plan for finding

and reaching new customers.

 Controlling risk and liability: Whether you are launching a home-based business or a

larger venture, you should give some thought to controlling your risk and limiting your

liability. Many risks can be controlled by purchasing a good insurance policy

(see Session 7: Business Insurance).

 Ensuring you have the right licenses, permits, and permissions: In addition to the

usual licenses for operating a business, home-based business owners need to understand

local zoning ordinances and Home Owners Associations (HOAs) restrictions (see Session

6: Licenses and Permits for more information). It is a good idea to visit the SBA

Businesses Licenses and Permits website where you can find information additional

information about state and federal requirements.

 Understanding the rules for business expenses and deductions: The Internal Revenue

Service has carefully defined what business deductions can be taken by home-based

businesses. The IRS website summarizes these rules for you.

27
TOP TEN DO’S AND DON’TS

THE TOP TEN DO'S

1. If possible, specialize in a single product or service.

2. Use the Home-Based Business Readiness Template to prepare.

3. Understand the independent contractor laws in your area.

4. Create an online presence for your new business.

5. Utilize your existing resources for your home-based or freelance business.

6. Evaluate the characteristics of your business to decide if it’s a good fit for a home-based

business.

7. Maintain a healthy balance between your work life and personal life.

8. Set daily or weekly goals to feel successful throughout your preparation process.

9. Make sure you have all the right permits, licenses, and permissions.

10. Understand the tax rules for home-based and freelance businesses.

THE TOP TEN DON'TS

1. Overlook a hobby as a potential home-based business.

2. Quit your job until all preparations are complete.

3. Compete with your employer.

4. Conduct business on your employer's time.

5. Overlook a small and humble beginning.

6. Overlook zoning and permitting requirements.

7. Be in a rush to get started: use the Business Readiness Template.

8. Incur unreasonable liabilities in financial obligations and dealings.

28
 9. Think it's too late to start.

10. Neglect the importance of selling, servicing and finding new customers.

BUSINESS PLANS FOR SESSION 3: HOME-BASED BUSINESS:

You can now continue to assemble your business plan. We provided Microsoft Word template

for this session below:

Section 3: Home-Based Business

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

29
Session 3: Financing the Business

OBJECTIVE:

Money makes your business go, and usually banks make loans only to businesses with operating

histories. In this session we will give you some alternatives, strategies, and things to think about

in your search for financial help. You will learn how to locate, negotiate for, and maintain

sources of money to help you start and expand your business.

 First Things First

 How Much Money Do You Need?

o What do you need it for?

o Unsecured Loans

o Secured Loans

o Collateral

 Loans (Debt) vs. Investment (Equity)

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  Where to Get the Money

o Types of Funding Sources

 The Art of Getting the Money

o Business Loans

o Repayment Plan

o Other Quick Tips

 After You Get the Money

 Suggested Activities

 Top Ten Do's and Don'ts

 Business Plan

First Things First

Money makes your business go. But don't try going to a bank to get it when you've just started in

business. Banks normally make loans only to businesses with operating histories. This section

will give you some alternatives, some strategies and some things to think about as you go about

finding the money to make your business work.

A banker's primary concern is your timely repayment of loans. The fuel to make loan payments

come from your cash flow. So your management of cash flow is of utmost interest to your banker

and you must convince the banker that you are an expert in making cash flow projections that

safely include your loan payments. Here is more information on cash flow which is taken

from of our Business Expansion course.

As pointed out in the first session on picking a business, don't be discouraged by not having

much money to start with. Many businesses can be started with no money at all. You can start

31
small and humbly and grow one order at a time. Here is a sample, partial list of businesses you

can start with very little cash: Businesses You Can Start for Little or No Money.

Our first reminder is that personal savings should be considered the primary source of funds for

starting a business. If you haven't started already, start now to begin accumulating cash through

personal savings.

Also, don't overlook the Small Business Administration (SBA) loan guarantee

programs available for start-up businesses. With a SBA guarantee program in hand, your bank

will be happy to talk with you!

Finally, start your search for financing with a good credit rating. Most all sources of financing or

credit have come to rely on a four-letter word to score your credit worthiness: FICO. FICO is a

numeric method, using just three digits, to predict the likelihood of paying your credit as agreed.

FICO scores range from 365 (not good) to a high of 850 (great). The score evaluates your credit

payment history, number of open accounts, overall credit balances and public records such as

judgments and liens.

Generally, a FICO score above 680 will produce a positive response while a score below this

will cause a lender to be cautious. Before seeking financing or credit, it is a good idea to know

where your FICO score stands. A number of credit cards now provide your FICO score on your

monthly statement. You can also visit myFICO.com to purchase your credit score and to review

your credit reports.

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How Much Money Do You Need?

Or, how much can you reasonably expect to get? Refer back to your business plan. If it still

doesn't answer the question, let's go step-by-step. In Session 11 Accounting and Cash Flow, you

will learn how to predict future cash needs by using a cash flow control form.

The cash flow control form will spell out all of your sources of income and expenses. For

example, some expense items might include:

 Buying supplies and inventory while waiting to get paid

 Paying payroll and rent

 Buying equipment and fixtures

 Getting a computer

 Buying the business

Prioritize those areas where your options are limited to paying in cash, and review your

alternatives where there may be another way. For example, it is not necessary to pay all cash for

a delivery truck when you can rent or lease one. Next, review what might serve as collateral for

your loans.

Unsecured Loans

Some credit is granted on an unsecured basis, such as credit cards, but most small business loans

are secured by the assets of your business, your personal assets, or both. Unsecured means that

there is no collateral granted for the loan. Examples of unsecured are

 Credit cards

 Unsecured lines of credit (like you get in the mail)

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  Friends or relatives

Secured Loans

Secured loans mean that there are assets pledged to secure the payment in the event you are not

able to pay. Examples of this are

 Computer lease

 Home mortgage

 Car loan or lease

 Small Business Administration loan

Collateral

Common types of collateral are equity in your home, accounts receivable, inventory of the

business and equipment. Lenders go through an evaluation of the collateral to determine how

much they can lend. Some key variables as to what kind of loan terms you can get are

 Number of years in business - This is your track record and is very important. Banks

usually require three years while others are less stringent.

 Size of your company and the amount needed - Financing institutions vary in the way

they service the public. For example, you would probably not get a car loan and a large

corporate loan at the same place. Do your research. Ask around. Get to the right spot.

Loans (Debt) vs. Investment (Equity)

You are most likely familiar with a straight loan (debt) where the lender gets an interest rate and

fees.
34
Equity is where the money raised gives the investor an ownership interest. This is common in the

sale of stock to a limited number of investors or participation by venture capitalists. The sale of

stock is highly regulated by state and federal agencies and you will need the help of a corporate

lawyer. Normally the initial sale of stock to the public (initial public offering or IPO) is deferred

until an earnings history is established.

Sometimes such a discussion arises with friends and family who want to be your partner.

Consider this carefully because they will then participate in the increased value of the business

and have voting rights.

It is well beyond the scope of this discussion to cover all the aspects of debt and equity. Just be

careful! Your lawyer and accountant would be appropriate sources for more information on this

subject.

Where to Get the Money

Entrepreneurs have a wide variety of options when it comes to funding. Below is a list of

possible options for a small business to research and consider regarding lender types.

Terms will vary considerably from lender to lender; important issues to consider:

 Cost

 Payback program/terms

 Loan size

As an entrepreneur, you will be legally obligated to have individual responsibility for the credit

obligation of your business. Regardless of legal organization (covered in ), lenders will have

35
documentation to circumvent the organizational structure. This is usually called a personal

guarantee. Don't panic! It is very common.

Lending options for small businesses:

 Personal Savings

 Friends and Family

 Banks/Credit Unions

 Home Mortgages (Traditional or Second)

 Peer-to-Peer (Prosper, Lending Club)

 SBA Loans

 Micro-Finance Options (Accion, Opportunity Fund, Grameen Foundation)

 Alternative Lenders (Kabbage, Dealstruck, Foundation, Funding Circle, OnDeck)

 Crowd Funding (Indiegogo, Kickstarter, RocketHub, Peerbackers)

 Equity Funding

 Venture Capital

 Angel Investment

 Commercial Mortgage

 Specialized Lenders (Industry expertise, auto, business brokers, high-tech, specialized

equipment, etc.)

 Lending Companies (OneMain)

 Finance Companies

36
The Art of Getting the Money

This starts by knowing what your lender wants. A common way is to simply ask. A better way is

to ask a friend or business advisor such as your CPA. Our Session 5 Business Organization

includes a comprehensive list of professionals that can help you.

Business Loans

For a business loan, the most common things are

 Business financial statements

 Business tax returns

 Business plan with budget or projection

 Personal financial statements

 Personal tax returns

Be ready to answer questions about your business, and be ready to highlight your financial

performance both in the past and in the future. You will be more impressive if you have carefully

thought out and become familiar with your plan. Bring your accountant if you need help.

Be prepared to tell lenders why you need the money. "I just need the money," does not inspire

confidence or the fact that you have thought it through. Earlier in this session, you studied a

number of different purposes. Give them some detail.

Repayment Plans

Propose a repayment plan. Examples of different structures are:

 A line of credit, payable at your discretion but subject to renewal annually by the bank

37
  Term loan payable monthly over ___ years starting on ____ date

Most places have some flexibility. Potential lenders appreciate that you are thinking about

paying them back instead of just getting the money.

Other Quick Tips

 Needless to say, being well dressed and neat in appearance at bank meetings will reflect

positively.

 Most lenders (including the SBA) will want to see your business plan.

 Keep your lenders informed on the status of your business: the good and the bad.

 If you are unable to make a loan payment on time, call your lender in advance, advise

him or her of the problem and request the extension you need. Explain the sources of

repayment.

 Virtually all lenders will do a personal savings and corporate credit check through a

company called TRW or by other means. Be prepared to discuss any prior credit

issues/problems. The best access to a lender is through a referral. Lending is a people

business. Have your CPA, attorney, or friend introduce you to a lender.

 The first thing that will spook lenders or investors is the fear you are "puff" rather than

"substance." Avoid giving the impression of being an over optimistic, "pie-in-the-sky"

operator.

 As a start-up, do not plan to spend money on expensive entertaining. Your lenders will be

more interested in knowing how their money is being used to grow your business.

 Do not depend on a bank to loan you money to start a business. Most small businesses are

funded by personal savings.

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  Make a shrewd appraisal to minimize your risks and to limit losses to a predetermined

limit.

 Your suppliers and vendors can be sources of financing. For example, if you need an

illuminated sign for your storefront, the company you contract with to make the sign may

provide financing so you can make monthly payments rather than pay cash. Examples of

financing from your suppliers include

o Longer payment terms

o Advertising and marketing assistance

o Furnishing or financing of equipment, signs or inventory.

o Advertising and promotional programs

 Bartering, which is to trade by exchange one commodity for another, can provide a

source of financing. For example, your advertisements in the local newspaper might be

paid for by the bagels you make!

After You Get the Money

Getting the money is only the first step. You should strive to be a good customer so you can get

cooperation if you need help later. A good customer sticks to his/her agreement. Make sure you

understand the requirements and perform to them as much as possible. In a business relationship,

lenders will ask for regular financial statements, which you should produce on time.

There may be covenants. A covenant is a written agreement in which you promise to meet

specified obligations such as submitting the aging of your accounts receivable. The "aging"

report will show the lenders if your credit customers are paying on time or not.

39
Be proactive. Contact them if there is a problem. Be sure to stay in touch even if nothing new is

going on. Get to the next highest level within the organization.

Suggested Activities

Sources of financing can surface from unexpected sources: List at least five of them:

A. ________________________________

B. ________________________________

C. ________________________________

D. ________________________________

E. ________________________________

Some possible answers are

 Suppliers: Ask for longer terms of payment.

 Your landlord: Ask the landlord to provide you with tenant improvements.

 Your customers: Ask for either cash or prompt payment.

 Your capital investments: Ask the suppliers of your fixtures, equipment and signs to

finance your purchases. They will be interested in doing so in order to get your business.

TOP TEN DO’S AND DON’TS

THE TOP TEN DO'S

1. Live frugally and begin saving up money now to start your own business.

2. Use your cash flow projection as your key tool to determine financing required.

3. Complete a business plan for meetings with potential lenders or investors.

40
 4. Have your business plan critiqued by appropriately informed people. Revise as necessary.

5. Ask the Small Business Administration for advice. (Have your business plan with you.)

6. Maintain a current financial information packet including financial statements and recent

tax returns.

7. Consider bartering services if appropriate.

8. Use your CPA or attorney as referrals to lenders.

9. Keep your lenders informed of your progress and any potentially adverse events.

10. If you need a loan for 6 months, ask for 12 months to be on the safe side.

THE TOP TEN DON'TS

1. Expect a bank to help finance your new business.

2. Ask for a loan without a detailed repayment plan in hand.

3. Overlook vendors and landlords (for tenant improvements) as sources of financing.

4. Avoid being the bearer of bad news to your lender.

5. Ask for less than enough to meet your realistic needs.

6. Exaggerate. (Instead, be conservative in your presentations to lenders.)

7. Write a check without adequate funds in your bank account.

8. Risk losing your home by taking a "Home Equity" loan unless you are certain of your

ability to repay.

9. Sign personal guarantees unless absolutely necessary.

10. Budget or spend money on expensive entertaining of potential lenders.

41
Business Plan for Session 4: Financing the Business

You can continue to assemble your business plan. We provided Microsoft Word templates for

this session below:

Section 4: Financing

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

42
Session 4: Accounting and Cash Flow

OBJECTIVE:

Before you start your business, you will need to learn how to keep score (basic accounting), and

how to maintain cash in your bank account (cash flow control). This session explains both in

simple terms, and the advantages of hiring an accountant before you start.

 Step One: Gain the Knowledge

 Step Two: Select an Accountant

o Methods of Accounting

 Cash Basis Method

 Accrual Method

o Keeping Separate Business Records

43
 o Tax Liability Issues

 Income taxes

 Payroll taxes

o Financial and Technical Assistance

o Internal Controls

o Quarterly Returns

o Bank Account Reconciliation

o Employee Benefits Policy

 Step Three: Do Your Own Bookkeeping!

o The Three Major Financial Statements

 The Balance Sheet

 The Income Statement

 Cash Flow Control

o Accounting and Cash Flow Punch List

 Top Ten Do's and Don'ts

 Frequently Asked Business Accounting Questions Answered by This Course

(Accounting 101)

 Business Plan

Step One: Gain the Knowledge

If you're going to be in business, you must know how to keep score. To gain this knowledge will

require that you go to school to learn both accounting and computer software that is used to

support your particular business. With this knowledge, you can talk intelligently about your

accounting needs with employees, bankers, and your own accountant.

44
The financial matters you will confront in your own business are little different than those of

large corporations. Financial tools, coupled with an understanding of how to use them, will assist

you in the proper management of your business. Without this understanding and without a

dedicated commitment to using financial tools, you reduce your chances of success.

Your business will be judged by the classic financial measures: the balance sheet, the profit and

loss statement, and the cash flow statement. These three measurements will define the financial

health of your company. In this session you will learn how:

 The balance sheet tells how much the business is worth.

 The profit and loss statement tells if your business is profitable or not.

 The cash flow statement predicts your cash balances into the future.

As a business owner, you need to feel comfortable with the values portrayed by each

measurement. Understanding these three measurements will whet your appetite to learn more,

which in turn will lead to your strategic use of credit and ability to make choices tying

operational activities to the best use of funds. They will help you make better decisions.

You will also need to gain knowledge of accounting in order to evaluate your competitors or

businesses you might wish to acquire (or be acquired by). While information about companies

may be obtained from stock brokers or interviews with key executives, the best source to learn

about your most successful and publicly owned competitors is to read their annual reports. You

will need to understand accounting to draw intelligent conclusions. Accounting courses at your

local community college will give you most of what you need to know.

45
Step Two: Select an Accountant

You should consult an accountant before you start. This could be a Certified Public Accountant

(CPA) who is a sole practitioner or a large accounting firm that can offer expertise in many areas

(and whose fees tend to be higher). Another type of accountant is an "Enrolled Agent" (EA). EAs

must pass a taxation test administered by the Internal Revenue Service.

You will need to decide how your accountant will prepare your annual financial statement. There

are several levels of audit to select from. They are listed in our Session 1 Getting Financial

Controls in Place in the Business Expansion course.

At present, there are no national certification standards for bookkeepers like there are for CPAs

or EAs. So, it may be best to look for referrals when selecting a bookkeeper. Many CPAs and

EAs will refer you to people they have confidence in to help you with your accounting needs.

Bookkeepers range from those who only pay bills or process receipts to "full charge"

bookkeepers who can summarize bookkeeping activity for your CPA or EA to prepare tax

returns.

On the other hand, if you want someone to advise you on business organization and prepare

income and payroll tax returns, you will probably want a CPA or EA to help you. The more

"routine" bookkeeping you know and do yourself, the better it is because you can then afford a

higher level of expertise.

You will need to determine what accounting software program will work best for your business

and your accountant can help decide this. Some good ways to determine this:

46
  Ask others in your industry whose judgments you trust about their experience with

software.

Payroll accounting and reporting is increasingly complex. If you will have employees, look up

the "Payroll Accounting Service" providers in your area. Your accountant may have a

recommendation. This complicated function can be outsourced at a reasonable cost.

Ways that your accountant can help in dealing with your banker:

Sooner or later, you will need financing in addition to your start-up sources. It is important to

establish banking relations BEFORE future needs arise. Your accountant can help you:

 Prepare cash flow control statements that will estimate what the cash needs of the

business will be in months to come.

 Prepare a personal financial statement, including a balance sheet of your personal assets

and liabilities along with a statement of income and expenses showing how much cash

flow you generate each month. Banks will usually require a personal guarantee.

 Locate a banker. This can be helpful because the banker has had prior dealings with the

accountant.

 Polish your business plan for your banker.

 Organize as much information as possible including financial statements in a neat and

orderly fashion.

47
Methods of Accounting

Before you start, you will need to decide what form of accounting your business will use. There

are two major types:

 Cash Basis Method: This is what the name implies; you recognize income when you

receive the cash and you recognize the expense when you pay the bill. Most service

businesses operate on the cash basis because it is much simpler to understand.

 Accrual Method: Here you match revenue with expense regardless when the cash may

or may not be collected. If you sell a product to a customer and he doesn't pay you for 30

days, the sale is recorded in the books on the day that you made the sale. When the

money comes in the "accounts receivable" is then turned into cash. The same with

expenses: if you incur an expense on one month but don't pay until the next month, the

expense will be recognized in the month in which you incurred the expense. If you're in

manufacturing or deal with inventory, the Internal Revenue Service generally requires

that you be on the accrual basis.

Keeping Separate Business Records

Even in a small business, you should, before you start, set up a business account even if you're a

sole proprietor. It will be important to keep your business records separate from your personal

records. This will make it easier for you and your accountant to pull records together for income

taxes when the time comes. Starting with proper small business accounting records will be key to

your success. Your accountant can help you prepare and set up your company accounts,

48
including establishing your checking accounts and or savings account for operating your

business.

Tax Liability Issues

There will be a number of tax liability matters that you and your accountant will need to deal

with:

 Income Taxes. If you start as a sole proprietor you will be reporting your business

activity on a schedule that is attached to your IRS form 1040, called Schedule C. Not

only will the sole proprietor pay income tax on business income, but the sole proprietor

will also pay social security tax on this income. This is reported as a separate item on the

income tax return. The social security tax can be quite a surprise for the new small

businessperson who does not expect to pay roughly 15% of net income for social security

tax on top of the income tax. Operating as a partnership or LLC does not relieve a partner

of the obligation of paying self-employment tax. Your accountant can help set up

estimated tax payments that will lessen the burden of your final tax bills as well as avoid

penalties for not paying taxes as you go along.

 Payroll Taxes. If you have employees, your accountant can help you apply for necessary

state and federal payroll numbers that you will need to file payroll tax returns. The

federal number is called a "federal employer identification number" or FEIN, and these

are obtained by form SS-4. Also, in every state, there are local and state taxes that are

required. For instance, in California, you need to apply for a state identification number

that will establish an account for you to pay the state withholding tax that you withhold

from employees and the state disability insurance monies withheld. There is also a state

49
 unemployment tax that you pay. There may be other taxes that may be unique to your

local situation.

Financial and Technical Assistance

Many times, there are sources of financing and technical assistance available to start-up

businesses that are given by various organizations and agencies that wish to spur the

development of small business. Your accountant may or may not be familiar with these sources,

but this might be a question you would pose to a prospective accountant before you hire him or

her. Financial and technical assistance may be available from:

 The Small Business Administration (SBA)

 SBA-guaranteed loans to businesses handled through banks

 Local community banks, funded by the federal government

 Tax incentives available for hiring minority employees

 Trade organizations

 Service Corps of Retired Executives (SCORE), which is a nonprofit organization whose

goal is to help small businesses become successful. SCORE offers workshops and

seminars on various business topics and may give you the opportunity to talk to someone

who has been down the same road before.

Internal Controls

"Internal controls" in business accounting refers to what is needed in the handling of funds,

where money in the form of cash, checks or credit cards, is exchanged for goods and services.

The goal is to make sure that the business receives all of its income without any of it being

50
siphoned off by waste, fraud, dishonest employees or just through carelessness. Even a business

that is healthy in all other respects can be very vulnerable to failing from the inside through lack

of internal controls. Your accountant can help set up appropriate controls for your particular

business.

Damage control planning is an important part of internal controls. You will need to be prepared

for adversities.

If you are in a manufacturing or retail business you will need to set up inventory policies and

controls because inventory, similar to cash, can disappear very rapidly through carelessness or

employee dishonesty. You need to have safeguards in place very early on in the process by

setting up controls as to who can sign for goods and services and who controls the release of

goods and services out the door after the processing has been completed.

You are probably getting the idea by now that in your selection process of retaining an

accountant, it is a good idea to get one with experience in your industry.

Quarterly Returns

Quarterly returns are primarily payroll tax returns and sales tax returns. Start-up businesses need

to file quarterly payroll tax returns and send the money that has been withheld from the

employee's check as well as the employer's share of social security taxes to the federal

government. Likewise, state income taxes that are withheld and state unemployment tax that the

employers pay to the state must be accounted for. These are matters you need to get right from

the beginning so that these taxes are paid in the appropriate time frame and you're not penalized

for late payment or non-payment of your tax obligations.

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It is a common occurrence for start-ups to be short of cash. And it is very tempting to hold off

paying certain obligations to conserve cash. Yet, you should not fall into that trap with your

government obligations because governmental agencies have little patience with delinquent

taxpayers.

Similarly, the sales tax money that you collect, in states that charge sales tax, needs to be

forwarded to the state, either on a monthly or quarterly basis depending on the volume of your

sales. Quarterly reports will be required to show how much you have collected and that you have

submitted this money to the state in a timely manner.

Bank Account Reconciliation

We suggested earlier that you set up separate business accounts to make it easier to track

expenses and business income. This bank account needs to be reconciled at least once a month

when you receive your bank statement. You can save money by learning to do this yourself,

leveraging accounting software, or your accountant can teach you if you don't know how.

Reconciliation refers to taking the balance in your checkbook and reconciling or mathematically

comparing it to the bank balance. You must also take into account any difference in those two

balances that are due to checks that you have written that have not yet cleared the bank. If this is

the case, your checkbook balance will be lower than the bank statement because the bank has not

yet seen some of the checks you have written. So it is important that small business owners take

these outstanding checks and subtract them from the bank balance and the resulting number be

compared to the number in their checkbook. When the two match, we say the account has been

reconciled.

52
Employee Benefits Policy

As you add employees to your business, you will need to decide:

 How many hours people will work.

 What holidays they are entitled to.

 What your vacation policy might be.

 For information regarding health insurance coverage for your employees, go to

healthcare.gov or talk to your professional advisors.

 What sick leave policy to offer. Will you pay employees when they are sick or will, this

time, be considered unpaid time off? Be sure to refer to the Fair Labor Standards Act

when making this determination. There are different requirements for hourly vs. salaried

employees.

There are a number of sources to give you some help in deciding these issues:

 Start with your accountant and lawyer.

 Your own experience in your particular industry will help determine your policy. What

has worked for similar companies in the past is very likely a good way to consider going

with your own company so you are competitive with other firms in your industry.

 Organizations such as SCORE can be helpful in determining policies and procedures.

Step Three: Do Your Own Bookkeeping!

Up to now, you have consulted with an accountant and have gone to school to learn basic

accounting. The next step in getting to know how accounting and cash flow works is to do your

own bookkeeping in your start-up mode. This is invaluable because as you do the bookkeeping

53
and understand the records that are involved, you are in a much better position to bring in

employees and train them as the business grows. You can then devote your time to more of a

manager level. If you have a willing spouse or a trusted friend, they can be invaluable in doing

the bookkeeping. If you are doing your own bookkeeping, it is very important that you choose

the right software. A good program that's easy to use can help make your life a lot easier.

Making entries into a software program does not require a trained bookkeeper but it is important

that you, the business owner, have a full understanding of double entry accounting.

There is one aspect of bookkeeping that you could consider delegating: payroll and payroll

reporting, which can be handled by Payroll Service Providers at a low cost.

If you are in a partnership, it is especially important that you have knowledge of the accounting

as well as what is happening in the other areas of the business. Remember that in a partnership,

all the partners have the authority to commit to the partnership. If a partner in charge of

accounting doesn't do a good job, it can affect all the partners.

Major Financial Statements and Software

Balance Sheet

The balance sheet is a "point in time" statement. Think of it as a snapshot. It is a listing of all of

your assets as well as your liabilities, and the difference between these two numbers is your

equity in your business. You will see in the example that the balance sheet is divided into two

major sections. The first section is "Assets." The second section is "Liabilities and Owner's

Equity."

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The general order of a balance sheet is to go from the most liquid to the least liquid. In other

words, under Assets you see the heading "Current Assets" and the first item is “Cash” because

cash is the most liquid of your assets. After Cash are “Receivables,” representing money owed

you from customers. When you receive the money, the receivable turns into cash. Next in Assets

are "Inventories." Since inventory is not as liquid as either cash or receivables, this falls below

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them on your balance sheet. Following Current Assets are “Property and Equipment” that are

typically carried at cost.

You will also notice "Depreciation" on a balance sheet prepared by an accountant. Depreciation

is a non-cash expense and is nothing more or less than an attempt to record that these assets go

down in value over time. IRS Publication 946 "How to Depreciate Property," contains

information that will give you a better understanding of depreciation.

One reason this particular financial statement is called a "balance sheet" is that Assets always

equal your Liabilities and Owner's Equity. This is called double-entry bookkeeping and is the

type done in nearly every business. The reason double-entry bookkeeping is the accounting gold

standard is that it serves as a check to make sure a transaction has been properly recorded. For

example, let's say the first thing you buy is a desk. You have an asset of office equipment. If you

paid cash, you don't owe any liabilities so your interest in that desk is called your equity (on the

other side of the ledger).

Similarly, other transactions will give rise to an increase in assets and/or an increase in liabilities

or equity. For example, looking at our balance sheet example under Current Liabilities (again,

from most liquid to least liquid) your “Account Payables” are the first item listed. After that,

there are items called "Accrued Liabilities," which usually refers to payroll taxes and sales taxes

that may not be due for another month or two.

Also, under Current Liabilities is “Debt Due within Year.” So, the current 12 months of

payments for equipment would be shown as a current liability. Following that, we have “Long

Term Debt,” which are items that are due after the current year.

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Following “Total Liabilities” is the section called "Owner's Equity" which is the owner's interest

in the business. If we take all the assets of the business, $37,000, and subtract the total liabilities,

$18,000, there is a difference of $19,000. Of this $19,000 amount, $13,000 is from past income

and $6,000 is from income earned during the current accounting period, thereby balancing out

$37,000 for both assets and liabilities and owner's equity.

When bankers look at a financial statement, they are interested in various financial ratios. Ratios

help indicate the financial strength of a business and how the business can handle payback of

loans. For example, current ratio is current assets divided by current liabilities. If your current

assets are less than your current liabilities, a red flag will go up because it would indicate a risk

of insolvency during the present year. Various industries will have different levels of ratios. You

can track your ratios with others in your industry to see how your business compares. Your

banker will probably be most interested in your owner's equity.

Income Statement

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The income statement (also called the "Profit and Loss" statement), unlike the balance sheet,

covers a period of time, usually monthly or quarterly. Usually, year-to-date figures are also

presented to show how the business is doing during the current accounting year. In the example

shown here, the financial statement covers a six-month period and shows the activity for the

current month as well as the year-to-date total of the prior five months plus the current month,

for a total of six months.

The income statement and the balance sheet tie together. Look back on the balance sheet and

you'll see current earnings of $6,000. The income statement shows this same $6,000, which was

the profit for the last six months.

Your income statement will disclose valuable information. You will see a section for sales as

well as a breakdown of all your expenses, leading down to the net profit for the period. The more

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current your financial statement, the greater will be its value. If you see a bad trend developing,

you can take action at once.

Computer programs can produce financial statements with a keystroke, which is why you need to

acquire the computer skills and software that are appropriate for your particular business.

Cash Flow Control

Just as jet fuel keeps a plane aloft, cash fuels business. A pilot is very careful to accurately

predict the fuel requirements. You should place the same importance on cash flow control

because if at any point in the future, you run out of fuel, like the pilot, you've got a BIG problem.

Cash flow control is a simple method of projecting your future needs for cash. It is an income

statement covering future periods of time that has been changed to show only cash: cash coming

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in and cash going out and what your balance of cash is at the end of designated periods of time.

This is a great tool because you can predict your future needs for cash before the needs arise.

In cash flow control, for each of a number of intervals of time, you make conservative estimates

for your future sources of cash (IN) and future expenditures (OUT). Use low, conservative

figures for IN items and use high estimates for OUT items. For the initial period, say a month,

you start with the cash you now have. To this, you add IN items and subtract the OUT items,

which results in the cash at the end of the month. The cash at the end of the month becomes the

starting cash for the next month.

The attached cash flow control spreadsheet shows that ending cash for this first period becomes

the starting cash for the second period. The ending cash for the second period becomes the

starting cash for the third period, and so on. Your projection should be made for an upcoming

12-month period. The projection will be a useful tool for you to arrange financing before it is

required by showing your banker that you are sophisticated enough to provide for future cash in

order to preserve liquidity.

You can use this simple cash flow format to make up your own cash flow projection for the

business you have in mind. It is so simple, yet can be so valuable!

Accounting and Cash Flow Punch List

 Prepare frequent financial statements, at least, monthly or even weekly.

 Keep track of key income statement percentages. If you're in manufacturing, your cost of

goods sold percentage should be relatively the same as competitors in your industry.

 Compare your income statement with prior periods.

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  To start with, you won't need certified financial statements. Accountants have three levels

of statements: certified, reviewed and compiled. For most startups, the compiled type will

work; that is, your accountant prepares the financial statement with a letter stating that

the numbers are based on the information you have provided.

 From the beginning, maintain good internal controls. Learn from the practices used in

your industry to prevent dishonesty and shrinkage. Shrinkage includes shoplifting and

other types of stealing, which results in the "shrinkage" of your inventory.

 Do not delegate the authority to sign checks or purchase orders.

 Don't use money that you have withheld for payroll taxes or sales taxes for other

purposes. You will be a trustee of funds belonging to the Internal Revenue Service,

Social Security Administration, and your state's sales taxing authority. A "payroll service

provider" can be used to manage these responsibilities.

 Keep in mind that liquidity is not the same as making money. You can be making a profit

and still go broke by running out of cash. Learn and practice cash flow control.

 Look ahead and write out your list of projected financial requirements including

premises, equipment, staff and working capital.

Arrange for financing well before the need arises.

TOP TENS DO’S AND DON’TS

THE TOP TEN DO'S

1. Learn basic accounting before you go into business. Go to school if necessary.

2. Consult and retain an accountant familiar with your industry before you start.

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 3. Determine what accounting software program works best for your business.

4. In the beginning, do your own bookkeeping to gain knowledge of your accounting.

5. Set up inventory policy and internal controls including safeguards against dishonesty.

6. Reconcile your bank account at least once a month when your bank statement is received.

7. Maintain and update your cash flow control spreadsheet monthly.

8. Plan to outsource your payroll and payroll reporting to a payroll service provider.

9. Prepare financial statements, at least, monthly.

10. Keep your business records separate from your personal records.

THE TOP TEN DON'TS

1. Delegate the authority to sign checks to anyone.

2. Use money withheld for payroll taxes or sales taxes for other purposes.

3. Commingle personal assets with your business assets.

4. Delegate cash flow projections--your lifeline to liquidity.

5. Be optimistic in sales projections or conservative in expense projections.

6. Rely on verbal agreements on any important matter including purchases.

7. Pay an invoice without matching it to your purchase order.

8. Delegate your relationship with your lending sources.

9. Wait to establish credit sources until you have a need for financing.

10. Overlook seeking advice from your accountant and lawyer on important financial

matters.

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Frequently Asked Business Questions Answered by This Course (Accounting 101):

 What is free cash flow?

 What is cash flow?

 What is cash basis accounting?

 What are the small business accounting best practices?

 How should I do my small business bookkeeping?

 Can I see cash flow statement examples?

Business Plan for Session 11: Accounting and Cash Flow

You can now continue to assemble your business plan. We provided Microsoft Word template

for this session below:

Section 11: Accounting and Cash Flow

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

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Session 5: Business Organization

OBJECTIVE:

This module will cover three important decisions that every business owner must make: whether

to go into business alone or with a partner, what business organization to use, and what

professional resources are needed.

 Should You Have Partners?

o Partners versus members of the founding team

o Pro's and con's

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  What is Liability and Where Does it Come From?

o How does timing factor in liability?

 What Type of Business Organization is Right for You?

o Sole proprietorship

o Partnership

o Limited partnership

o Limited liability company (LLC)

o Corporation

o S-Corporation

o Benefit or social purpose corporation

o Nonprofit

 Steps You Should Take to Organize Your Business

 Professionals That Can Help

 Top Ten Do's and Don'ts

 Business Plan

Should You Have Partners?

Partners versus members of the founding team

The term "partner" should be reserved for individuals who will actively be involved in managing

the business. In the early stages of starting your business, you may be tempted to trade an

ownership in the business for goods or services that your business needs to get started. Everyone

with an ownership stake is a partner, and partners will have rights under the law. If a partner is

fired or decides to stop working with the company, his or her ownership interest in the company

may continue. Imagine the uncomfortable situation of having to seek that person's vote or input
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on a business matter, despite the fact that you have parted ways. Therefore, before deciding to

make someone a partner or owner/shareholder in the company, you will want to consider factors

such as:

 The individual’s dedication – whether the individual will also be working for other

businesses/ventures or employers while also working with you;

 Whether the individual’s skills complement your own;

 Whether the individual’s work hours are similar to yours;

 Whether the individual’s vision for the business matches your own;

 The individual’s track record in growing and running businesses and/or working with

other partners;

 The nature of the individual’s contribution to the business; will he or she be contributing

standard services that can be outsourced from other organizations, or more important

attributes such as strategic advice, needed funding, or key intellectual property?

Pro's and con's

You may want to prepare a list of reasons for and against having partners in your business.

 Pro's of having a partner

o There is safety in numbers. In other words, you have two heads instead of one to

discuss issues and make decisions. In the words of Solomon: "Two can

accomplish more than twice as much as one. If one fails, the other pulls him up;

but if a man falls when he is alone, he's in trouble. And one standing alone can be

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 attacked and defeated, but two can stand back-to-back and conquer. Three is even

better, for a triple-braided cord is not easily broken."

o You will not need to be at the business at all times. You will have someone else

who will be there to share the load and permit you to take a vacation and have

sick time.

o You will also have a highly motivated co-worker, not just someone who is

earning a paycheck.

o No one can be good at everything. Partners can bring skills in areas that are

complementary to yours.

o It may be necessary to have a partner to contribute capital and share the risk when

things do not proceed as planned.

o Partners bring along their own networks of friends, colleagues, and professionals

which could be beneficial for your business.

 Con's of having a partner

o You will have to share the rewards if the business is successful.

o You will not be able to make decisions about the business without including your

partner.

o You will need to disclose and share any and all financial information with your

partner.

o You will lose total control over the business, this can be challenging particularly

if you and your partner have difficulty in making decisions.

o You will have to share the recognition that will come if the business is successful.

o A partner can be a disaster if his or her judgment is not good.

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 o Your partner might make decisions or take actions that you do not agree with.

o If you are 50/50 equal partners, then it may be difficult to resolve differences of

opinion.

o You run the risk of a falling out and perhaps the necessity of one partner buying

the other out if dissension arises.

What is Liability and Where Does it Come From?

One of the important differences between various types of business organizations, or entities, is

relating to how responsibility is assigned the responsibility of the owners for the acts of the

business. Responsibility for these acts is known as liability, or the liabilities of the business

assigned, or “liabilities.” Liabilities arise as the business grows, for example, from activities such

as the following:

 Contracts: Contractual obligations of the company, such as loans, leases, supply

agreements, or subscriptions, can cause potential liability.

 Workers: Hiring employees or independent contractors can cause potential liability.

 Partners: Having partners or co-founders can cause potential liability, especially if those

individuals do not have a written agreement.

 Product or service offerings: Issues can arise with products or services that are offered

by your business, such as warranties, defects, or other harm.

 Regulatory compliance: If your business is in an industry that is subject to regulations,

then lack of compliance with these regulations can be a sources of liability.

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Timing and liability

When deciding whether to set up an official business entity such as an LLC or corporation (see

more below), you should consider the potential liability that your business may be incurring

based on the stage that you are in. For example, if most of your business’ activities are relating to

prototype development, then your business may not yet be taking on a large risk of liability. As

you business grows and faces more liability, you can change your legal structure.

What Type of Business Organization is Right for You?

 Sole Proprietorship: A sole proprietorship is one person alone who is running a

business, even if he or she has not taken official steps to set up a business entity. For

example, Maxine, a culinary school graduate, starts getting paid by friends and family to

make wedding cakes. She would be considered a sole proprietor. Some characteristics of

a sole proprietorship include:

o The sole proprietor will have unlimited personal liability for the business.

o The income or loss from the business will be reported on the sole proprietor’s

personal income tax return along with all other income, expense, and personal

assets he or she normally reports (although it will be on a separate schedule).

o The sole proprietorship avoids the expense of forming an LLC or corporation.

o Many start businesses this way by default because they are unfamiliar with the

other forms of organizations.

 Partnership: A partnership is similar to a sole proprietorship, because even without

taking any action to set up a business entity, two or more individuals working on a

business can be considered a partnership. For example, Maxine the culinary school

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graduate continues to make wedding cakes, but realizes that many weddings need

someone to make appetizers as well. She and another friend come up with a name, and

sell package deals of appetizers and cakes for weddings under that business name. They

would be a partnership. Some characteristics of a partnership include:

o Each of the two or more partners will have unlimited liability for the business. So

in other words, two partners do not split liability 50/50 -- both are fully

responsible.

o The income and expense is reported on a separate return for tax purposes, but

each partner then reports his or her pro rata (or proportionate) share of the profit

or loss from the business as one line on the personal tax return. This is called

“pass-through taxation.”

o Partners each have the ability to make decisions on behalf of the organization, so

a formal agreement as to percent ownership and voting power is recommended.

 A partnership agreement should have provisions made for exit strategies,

and you will need experts experienced in succession planning. What

happens if a partner dies or becomes disabled? Or if family members want

to join or quit the firm? In our Business Expansion course, Session

14 Selling Your Business and Session 15 Considerations for Family

Succession can provide important insights and who to call upon for

advice.

 If some partners have special skills or talents, the partnership agreement

may allow some partners to veto or approve important decisions in his or

her area of expertise.

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  The partnership agreement should have buy-sell provisions that are clear

about what happens to the partnership in the event of a disagreement, and

how the purchaser will pay for the portion of the business he or she is

buying (and whether you should fund the buy-sell agreement with

insurance in the event of the death of a partner).

 Limited Partnership: Limited partnerships have a two-tiered partnership structure. As

an example, Jennifer and Alex start a consulting business whereby they both act as

general partners, but after a few years decide to promote one of their employees to

partner. Because their associate is young and relatively inexperienced in operating a

business, they choose a limited partnership so the employee can be a limited partner.

Some characteristics of a limited partnership include:

o With a limited partnership, each of the general partners has unlimited liability for

the debts of the partnership, but the limited partner's exposure is limited to the

contribution that partner has made to the partnership.

o With certain minor exceptions, the income and expense reporting for tax purposes

is the same as for a general partnership.

o Similar to a partnership, a limited partnership should employ a partnership

agreement that sets forth important provisions such as how the partners will make

decisions, split up ownership, and what happens when a partner quits, retires, or

dies.

 Limited Liability Company: A limited liability company (or “LLC”) combines the

limited liability for owners of a corporation with the flexibility and pass-through taxation

of a partnership. As an example LLC, Susan, Bianca, and Hillary, three experienced

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 computer engineers, decide to start an IT consulting company where they make house

calls to help people install and fix their home computer equipment. They choose to be an

LLC where each of the three of them shares voting rights and the income and expenses of

the business equally. Some of the characteristics of LLCs include:

o An LLC has the benefit of protecting owners from personally being responsible

for the liabilities of the business.

o In some states, the LLC can choose to be taxed like a corporation or like a

partnership, so the owners can enjoy the “pass-through” nature of expense and

income reporting.

o The LLC is flexible because it can be managed by all of the members or can have

centralized management in one or more of the members.

o One downside to an LLC is that generally venture capitalists will not invest in an

LLC. However, if venture capital funding is not required soon, a business may

want to form as an LLC because an LLC can be converted to a corporation if this

becomes an issue.

o An LLC is governed by an operating agreement amongst its owners (also called

“members”), which is similar to a partnership agreement.

 Corporation: A corporation provides limited liability for the owners (called

“shareholders” or “stockholders”), and has a more formal business structure than an

LLC. For example, assume four recent engineering graduates decide that they're going to

start a company to sell personal rocket packs. They know that they will not be able to

make the company work without large amounts of investment from a venture capitalist

(VC). They choose to start their business as a corporation right from the beginning, since

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 VC financing is a necessity, and this business entity will be compatible. Some of the

characteristics of corporations include:

o In general, none of the shareholders in a corporation is obligated for the liabilities

of the corporation; creditors can look only to the corporation's assets for payment.

o The corporation has the downside of being subject to double taxation under

federal income tax rules. The corporation files its own tax return and pays taxes

on its income, and then if the corporation distributes some of its earnings in the

form of dividends to its owners, the recipients must pay taxes on those dividends

even though the corporation has paid taxes on its earnings.

o A corporation is more difficult to maintain than a partnership or LLC, in that

corporate laws require formalities from corporations such as appointing a board of

directors and officers, holding regular meetings of the board and shareholders,

and providing owners with annual financial reports.

 S-Corporation: An S-corporation (or “S-corp”) is not a different type of entity than a

corporation; in fact, they are registered and organized the same way. However, if the

corporation’s shareholders meet the tests that are set forth by the U.S. Internal Revenue

Service, then the corporation can make an election to be an "S" corporation for federal

income tax purposes. An S-corporation is treated as a partnership for tax purposes,

although it is treated as a regular corporation for other purposes.

o In most cases, the S-election is not available if one of the shareholders is an

investment organization. Therefore, if the corporation takes on a venture capitalist

as a shareholder, then the company can no longer enjoy the pass-through taxation.

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 Benefit or social purpose corporation: A benefit or social purpose corporation is

generally similar to a corporation in the way that it is organized and operated, except that

in its Articles of Incorporation (or sometimes called a “Certificate” or “Charter”), the

corporation sets forth a social purpose. Some characteristics of a social purpose

corporation include:

o The social purpose is hard-wired into the business decisions of the corporation

because the board and management must consider the social purpose set forth in

the articles.

o The board of directors is protected when it makes decisions that further the social

purpose, even if the decision may not make the most profit for the shareholders.

o A benefit or social purpose corporation may be able to be treated as an “S-corp.”

o Companies who organize as benefit or social purposes corporations typically do

so not because they want to enjoy tax benefits, but because they perceive some

benefit in adopting a social purpose. For example, Patagonia, Inc., an outdoor

products company, became a Benefit Corporation in California in 2012. Their

founder Yvon Chouinard said, “Benefit corporation legislation creates the legal

framework to enable mission-driven companies like Patagonia to stay mission-

driven through succession, capital raises, and even changes in ownership, by

institutionalizing the values, culture, processes, and high standards put in place by

founding entrepreneurs.”

 Nonprofit: Nonprofit companies are beneficial because they typically are not subject to

income taxes. They are organized for an acceptable public purpose, such as charitable or

religious purposes, and must be approved by the taxing authorities (such as the IRS) to

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 enjoy tax exempt status. A downside of a nonprofit is that there are generally no private

owners of the organization. The assets of the organization belong to the public, and

cannot be used for purposes that do not further the nonprofit mission.

o For example, founder Jamie would like to set up an organization that will collect

used eyeglasses in the United States, and distribute them to people with bad

eyesight in countries who would not otherwise be able to afford eyeglasses. Jamie

is not looking to make personal profit through growing the business, other than a

reasonable salary in working for the organization. She chooses to organize as a

nonprofit and apply for nonprofit status with the taxing authorities.

Steps You Should Take to Organize Your Business

No matter what business organization you choose, there are certain steps you will need to take to

organize your business and minimize risk.

 Decide how organization will be divided. Take into consideration each owner’s

contributions to the company. Be sure that contributions to the company (money, assets,

talent, intellectual property) are always documented, and that the contributor is clear

about what he or she is receiving in return for the contribution. Otherwise, disputes can

arise, and contributors may try to argue that they are owners in the company even if that

was not intended by you..

 Operate under a written agreement. Even early on in your business, when you may not

have a product or service to offer yet, you may be working with other potential co-

founders or partners. You should be sure that expectations are clear as to what each

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 person’s expected role will be once the business entity is officially formed. This can be in

the form of a simple partnership or pre-incorporation agreement.

 Document intellectual property ownership. Ensure that all registered forms of

intellectual property, such as patents, trademarks, and copyrights, are assigned to the

company via a formal written assignment signed by the inventor, author, and creator. In

addition, all domain names should be in the name of the company. Finally, every person

who is doing work on company business, whether as an advisor, employee, or

independent contractor, must sign a confidentiality and assignment of intellectual

property agreement.

 Issue the founders' stock or ownership shares as soon as the entity is formed. In an

LLC, the ownership is defined in an Operating Agreement signed by all of the owners. In

a corporation, the stock is typically issued by having each recipient enter into a stock

purchase agreement with the company. Work diligently to complete these documents

promptly after registering the LLC or corporation, in consultation with your attorney and

tax advisor.

 Keep track of agreements. Be sure that when you enter into agreements such as non-

disclosure agreements, employee or independent contractor agreements, leases, etc., that

you obtain a copy with both parties’ signatures. Keep all signed agreements in a location

where they can easily be accessed and tracked.

 Understand which tax laws affect you. Before making any decisions as to what sort of

entity to choose, what state to incorporate in, or who should be an owner and for what

percentage share of the company, you must seek the advice of a tax advisor to fully

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 understand the tax implications associated with those decisions. As an example, in the

United States, businesses and their owners can be responsible for:

o Income tax returns

o Franchise tax returns

o Employment tax returns

o Unemployment tax returns and payment

o Sales tax reports and payment

 Understand other laws and regulations that affect you. Every business must comply

with a variety of laws, and consulting with a business attorney will help you to

understand which of these apply to your business. The following is a partial list of some

areas of law to take into consideration:

o Zoning and local business permitting

o Americans with Disabilities Act (ADA) requirements for US-based businesses

o Environmental

o Data privacy

o Product labeling and packaging

o Import and export

o Employment and labor

o Truth in advertising

o Antitrust

o Securities Regulations

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Professionals That Can Help

 Corporation filing services: Corporation filing services can assist with getting a

business entity, such as an LLC or corporation, set up initially. Be aware, however, that

some of these filing services specifically claim that they will not provide any legal

advice. Because choosing the appropriate entity for you has many legal considerations,

you will want to be sure to obtain competent legal advice and assess whether you can get

that competent advice from the filing service.

 Attorneys: Business attorneys are often generalists who can assist a new business with a

variety of issues, such as setting up your entity, finalizing investment paperwork, and

reviewing contracts. A business attorney can also help to negotiate a lease agreement.

Seek the assistance of a business attorney early on in the process of planning your

business. Your new business may require specialized legal advice to establish and protect

your intellectual property rights. Intellectual property includes your ownership rights to

your business name, trademarks, copyrights, and patents. Intellectual property law is a

specialized field, and you may need an attorney who specializes in these matters. Some

government agencies or universities offer free legal advice to small businesses through

events, clinics, or workshops. Check local administrations and mentors for information.

 Accountants: Your accountant can be an important advisor in start-up decisions, such

as:

o Deciding the appropriate division of the capital you contribute to a corporation

between stock and loans.

o Determining the best type of business entity.

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 o Advising as to tax implications associated with granting stock to founders or

employees.

o Helping set up the books and records of the business.

o Advising software needs for accounting purposes.

o Determining which state to organize in, based upon your ownership structure and

business plan.

o Filing tax returns, advising on the compensation of owners, preparing financial

statements, helping forecast cash needs, including whether to expand, the addition

of employees and determining profitability.

 You will need to decide with your accountant what kind of financial statements are

prepared. There are several audit levels that are described in Session 1 Getting Financial

Controls in Place in the Business Expansion course.

 Payroll and HR services: It’s a good idea to use a Payroll service provider (PSP) to

prepare payroll checks right from the beginning because getting the calculation of pay

and withholdings wrong can create liability for your business. PSPs often handle other

personnel issues as well, such as managing retirement plans, workers compensation

insurance, and pre-employment verification. Many payroll service providers incorporate

services such as:

o 401(k) and Simple IRA

o Business tax protection and payment

o Employee and manager training

o Employee postings and handbook

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 o Health insurance

o Human resources help desk

o Human resources software

o New hire reporting

o Pay-by-Pay workers compensation insurance

o Payroll tax calculation, deposit, and filing

o Pre-employment screening/background checks

o Reporting solutions

o State unemployment insurance management

o Time and attendance solutions

 Benefits consultants: Some payroll or HR providers may also offer advice on benefits; if

not, then you may be able to find benefits consultants by doing an internet search.

Benefits consultants can help you to understand the benefits that may be available to you

as a business owner, such as a tax-deferred pension plan, but can also assist with

understanding what benefits are required or recommended for employees.

 Insurance brokers: An insurance broker can help you to assess the appropriate types

and coverage amounts to protect your business. Even if you choose to set up a limited

liability business entity such as a corporation or LLC, there can be situations in which

personal liability can attach to owners, directors, or officers. Therefore, obtaining

insurance is recommended for all business forms.

 Pre-employment screening: Pre-employment screening can be especially important

when you are starting because you don't have ongoing revenues to offset mistakes. Many

new businesses skip screening because they're unfamiliar with it or don't know how to

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 have it done at a reasonable cost. Unfortunately, this can open them up to resume fraud

among other undesirable possibilities. Also, many tips on how to go about the hiring

process can be found through search engines by entering "hiring tips."

TOP TENS DO’S AND DON’TS:

THE TOP TEN DO'S

1. Use a "Pro" and "Con" list when deciding if and whom you should have as a partner.

2. If considering a partner, look for someone with complementary skills to your own.

3. If you take on a partner, be sure to have a partnership agreement in place that provides

how decisions will be made even if you don’t agree.

4. Consider whether your business is incurring liability, and at what stage it might incur

liability, when deciding whether to set up a corporation or LLC.

5. Consult with a lawyer when deciding on what form of business best suits your needs.

6. Be sure that all partners, founders, and/or other individuals working in the company sign

an agreement to assign their intellectual property rights to the business through a formal

signed agreement.

7. Consult with an accountant or tax advisor before setting up a business entity.

8. Use an intellectual property lawyer to protect your intellectual property rights such as

your trademarks, company name, logo, or product.

9. Outsource your payroll responsibilities to a payroll service provider, as getting the

calculation of pay and withholdings wrong can create liability for your business.

10. Obtain insurance for your business, even if you have set up a limited liability entity like a

corporation or LLC.

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THE TOP TEN DON'TS

1. Use a sole proprietorship or general partnership if you intend to limit your liability.

2. Start a corporation without consulting a lawyer or tax adviser first.

3. Fail to issue the founders stock as soon as a corporation is formed.

4. Sell stock in a corporation without consulting an attorney and obtaining required

governmental approvals.

5. Fail to pay your payroll tax liabilities on time. You may be personally liable even if you

set up a limited liability company such as a corporation or LLC.

6. Sign a lease or important agreements without your lawyer's advice.

7. Start your business without retaining an accountant and having an accounting system in

place.

8. Start a business with a handshake agreement amongst partners or founders.

9. Rely on your LLC or corporation as protection from personally guaranteed liabilities.

10. Fail to take the advice of your lawyer and accountant seriously.

Business Plan for Session 5: Business Organization

You can continue to assemble your business plan. We provided Microsoft Word templates for

this session below:

Section 5: Organization

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

82
Session 6: Licenses and Permits

OBJECTIVE:

Choose a suitable and available name for business and then research which licenses and permits

will be required. This session reinforces the need for finding a lawyer whose practice is focused

on business and then discovering what licenses and permits are required for your specific

business.

 First Things First

 Licenses & Permits

o Local Licenses and Permits

o State Licenses and Permits

o Federal Licenses and Permits

o Where do I go to get a license?

o How about if I am working from home?

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  Business Name or DBA (Doing Business As)

o Do I need to have a DBA?

o What are the benefits to establishing a DBA?

o What is the process of getting a DBA?

o Banking Under Your Business Name

o Should I Trademark My Business Name?

 Seller's Permit

o What is a seller's permit?

o Where do I get a seller's permit?

 Employer Identification Number (EIN)

o What is the importance of EIN?

o Do I need an EIN?

o An EIN is required if:

o How do I apply for an EIN?

o Useful Links

 Suggested Activities

 Top Ten Do's and Don'ts

 Business Plan

First Things First

While some of the issues regarding licenses, permits, and business names can be handled alone,

some matters (including establishing your business and brand names) may require the help of a

lawyer. So before you start, it's a good idea to line up a lawyer whose practice is focused on

business. A good way to find a lawyer is to ask for recommendations from your accountant or

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business acquaintances. If you're not sure about needing help on an issue, ask your lawyer about

it first. Your investment in legal fees now can help you avoid much bigger problems at a later

date.

If you're buying a business, keep in mind that all licenses and permits will also need to be

acquired. For details, please visit our Session 12 Buying Businesses in the Business Expansion

course.

LICENSES AND PERMITS:

Do I need any licenses?

The answer is most likely "yes". Without this, you may be conducting business illegally. Just

about all businesses need a county or city license. There may be local, county, state, and or

federal licensing requirements, depending on the type of business you select. The fees associated

with getting a license are typically minimal, if any.

Local Licenses and Permits:

Your local licensing requirements can and will vary. Some examples of these variations are the

following:

 You may need a zoning compliance permit before you can open for business. Make sure

the space you own or lease is properly zoned for the specific type of business you select.

 You may need a special license if you're conducting business out of your house, a beauty

salon for example. Please see session 3 to see which businesses work best out of the

home.

 Are you planning on remodeling your space? You may need to get a permit, so you will

want to check the building codes first.

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State Licenses and Permits:

There are certain businesses and professions that require a state license. State licenses are often

required for the following occupations: (not all inclusive)

 accountants

 appraisers

 auctioneers

 barbers

 bill collectors

 building contractors

 cosmetologists

 private security guards

 private investigators

 real estate agents

Your state may require you to have special licenses if you sell certain products such as firearms,

gasoline, liquor, lottery tickets, etc. You can check with your local and state government to see if

your business will require any special licenses. For listings of state websites see our "Useful

Links" section below.

Federal Licenses and Permits: For a very small number of businesses, federal licensing is a

requirement. In businesses that are highly regulated by the government, federal licensing is

typically required. Examples include

 Broadcasting

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  Drug manufacturing

 Ground transportation

 Investment advising

 Manufacturing tobacco, alcohol, or firearms

 Preparing meat products

 Selling firearms

Where do I go to get a license?

The best place to start is your local city hall or courthouse. See the city clerk, who should be able

to direct you. You can also phone the city or county clerk's office with questions, or look in your

local phone book under municipal government offices. Try a search online for "Your city hall"

on Google or Yahoo local searches to find the Web site for your local city hall.

How about working from home?

Investigate local zoning ordinances covering home based businesses. Some residential

neighborhoods have strict zoning restrictions that may prevent you from doing business out of

your home. Yet, it may be possible to get a variance or conditional-use permit. In many areas,

attitudes toward home-based businesses are becoming more supportive, making it easier to

obtain a variance. Condominiums and planned communities may have bylaws that could affect

your ability to do business out of your home.

Useful Link:

 Lists of federal or state government links: find information on business licensing in your

home state: SBA - Business Licensing

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Business Name or DBA (Doing Business As)

What is a DBA?

A "DBA" (also known as Doing Business As, or as a Fictitious Business Name) is the legal

name, other than the owner's name, you decide to give your business.

Do I need to have a DBA?

The answer is probably "yes," and you definitely want to take the time to find out. Most states

require that you get a DBA. Sole proprietors and general partnerships operating their businesses

under fictitious and or assumed names may need to apply for a DBA certificate in the county

where the business is physically located. You will not be able to enforce any contracts you sign

under your business name unless the name legally belongs to you. Another important point is,

unless you register your DBA, other businesses will not know that you exist and may take the

name.

What are the benefits to establishing a DBA?

Here are some of the more important benefits to establishing a DBA:

 Operate and advertise under your business name.

 Prevent other businesses from using the name within your state.

 Operate with a bank account under your business name.

 Accept checks written out to your business name.

 Gain a more professional image.

What is the process of getting a DBA?

Contact or visit your local county clerk's office and ask about the specific requirements and fees.

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There typically is a small registration fee. The county clerk's office will often conduct a

complimentary name search for the intended business name to make sure it's not already taken.

There are several online resources available to conduct searches on your intended business name

as well.

Some states may require you to place a fictitious name notice in a local newspaper for specified

period of time. The costs for this are usually small, and the newspaper may even file the

necessary papers with the county. Consider checking with different local newspapers to see what

they offer.

For the majority of states, corporations are not required to file fictitious business names unless

they do business under names other than their own. The incorporation documents have the same

effect that fictitious names filed for partnerships and sole proprietorships do.

Banking Under Your Business Name

The vast majority of banks will not allow you to open a bank account unless you have shown

them proof of a filed DBA. It is important to have a business bank account so that you can accept

payments written out to your company name. You may consider checking with different banks to

see the differences in services they will offer you and the requirements they have to set up a

business account.

Should I Trademark My Business Name?

You are not required by law to do this but registering your name as a trademark is always a good

idea. It provides you with protection in case another business tries to use your business name or a

name that is likely to be confused with your business name. It may be smart to file an application

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for a federal trademark if your company is doing business in several states. Run a search with the

government or through a service to determine if your name is taken.

Useful Links:

 U.S. Patents and Trademark Office

o www.uspto.gov

 How to Name Your Business - What's in a business name? Plenty. Not only must your

name reflect your brand and be memorable, there are also a host of legal issues to

consider. Here's how to choose a name that'll best suit your business.

o How to Chose and Register Your Business Name (SBA)

Seller's Permit

What is a seller's permit?

Sometimes a seller's permit is called a "certificate of resale" or a "certificate of authority." This

permit lets you collect sales tax from your customers, which you, in turn, pay to the state. Keep

in mind that a seller's permit is different from a business license. Are you engaging in retail

sales? If the answer is "yes," then you probably need to register for and get a sales tax license or

a seller's permit. You still would need this permit if you are also selling goods that are exempt

from state sales tax. If you are selling both products and services, it is important you keep sales

organized separately. Sales of services are not usually taxed in most states. Sales tax is imposed

at the retail level and will vary depending on your state.

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Where do I get a seller's permit?

You can register for a seller's permit through state's Board of Equalization, Sales Tax

Commission, or Franchise Tax Board. The following is a useful link from the Irs.gov website to

help you locate the appropriate offices in your state.

 IRS.gov - Register Seller's Permit

Employer Identification Number (EIN)

What is the importance of an EIN?

An Employer Identification Number (EIN), also known as a federal tax ID, is similar to a social

security number for your business. This nine-digit number is important because it allows you to

identify your business on important government forms and official documents. Often, wholesale

distributors require either a federal tax ID or a seller's permit from a retailer.

Do I need an EIN?

You are required to have an EIN in some, but not all circumstances. We recommend you get an

EIN instead of using your social security number. It is safer to give out your EIN than it is to

give out your personal social security number. There is no fee for receiving this from the IRS. A

benefit to having an EIN is that it can help you establish credibility with whom you do business.

An EIN is required if

 Your business has employees.

 Your business is a Corporation or a Partnership.

 You file any of these tax returns: Employment, Excise or Alcohol, Tobacco and Firearms.

 You withhold taxes on income, other than wages, paid to a nonresident alien.

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  You have a Keogh plan.

 You are involved with: trusts, IRAs, exempt organization business income tax returns,

estates, real estate mortgage investment conduits, nonprofit organizations, farmers'

cooperatives or plan administrators.

How do I apply for an EIN?

Fortunately, the Internal Revenue Service makes it very easy to apply. You can apply by phone,

fax, mail, or online. Please have a look at the links to the IRS website below. It is important to

note that your business may also need to acquire a tax identification number from your state's

department of revenue or taxation.

Useful Links:

 Information on EINs and how to get one from the IRS

o IRS - Employer ID Numbers (EIN) - How to Apply

Suggested Activities

1. Research your intended business name to make sure it is not taken.

2. Determine if it will be to your benefit to pursue a trademark for your business.

TOP TENS DO’S AND DON’TS:

THE TOP TEN DO'S

1. Determine if you need a zoning compliance permit.

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 2. Verify with your health insurance carrier if you need a National Standard Employer

Identifier.

3. Check on the zoning laws for your business location.

4. Check if you need a special license to do business out of your home

5. Check to see that the business name you have chosen is not already taken.

6. Get a DBA by going to your local county clerk's office.

7. Get a business license and a federal tax ID number.

8. Open a business banking account in your business name.

9. Get a seller's permit if you need one.

10. Consider registering your trademark.

THE TOP TEN DON'TS

1. Go into business without a business license.

2. Start building without a building permit.

3. Proceed without first consulting with a business attorney.

4. Use your social security number as your tax ID number. Get an EIN number instead.

5. Choose a business name without first checking to see if it is taken.

6. Begin business without verifying zoning requirements.

7. Operate under your business name until you have successfully filed for you DBA.

8. Forget to check if your business requires state and/or federal licensing.

9. Use your personal checking account for your business.

10. Fail to collect sales taxes when required.

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Business Plan for Session 6: Licenses and Permits

You can continue to assemble your business plan. We provided Microsoft Word templates for

this session below:

Section 6: Licenses, Permits and Business Names

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

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Session 7: Communication Tools

OBJECTIVE:

Communication is essential for starting and building a successful business. In this session, we

will review the basic forms of communication, tools, resources, and equipment available for your

business.

 Types of Communication

o External

o Internal

 Basic Communication Tools

o Mail

o Email

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 o Telephones

 Landline Telephones

 Cell Phones

 Smartphones

 Internet Calling: Google Voice and Others

o SMS/Text Messaging

o Cell and Data Plans

o Video and Web Conferencing

o Social Networking Sites

o G-Suite and Microsoft 365/Office

o Online Collaboration/Productivity Tools

 Computers

o Desktop

o Laptop

o Notebooks

o Tablets

o Software

o Auxiliary Products

 Internet

 Technology Planning

 Top Ten Do's and Don'ts

 Business Plan

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Types of Communication

External and Internal Communication

Communication is key to any business success. Strong external communication helps build your

brand and sell your product or service by making customers aware of your company and what it

has to offer. Internal communication between employees, teams, partners, and leaders is essential

to making the business run smoothly and efficiently.

Two types of communication, external and internal, have different objectives:

 External communication reaches out to the customer to make him or her aware of your

product or service and provide a reason to buy. This type of communication includes

brochures, advertising, contact letters/direct mail, telephone calls, business cards, Web

sites, and anything else that makes the public aware of what you do. A couple of things

to remember about external communication:

o Image is extremely important in external corporate communications! Your logo

should represent who you are.

o Consistency is also very important. Use the same words and messages to

communicate externally about your business.

 Internal communication with team members is essential to attracting and retaining a

talented staff and monitoring business performance. Consistent communication about

business goals will provide direction to the people in your company and make sure

everyone is working toward the same objective. Internal communication can be designed

to motivate your team. Methods for communicating internally include performance

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 awards, newsletters, meetings, telephone calls, and both formal and informal discussions.

Periodic meetings with top project management groups, including your board of directors

and advisory board, should be planned for regular intervals every year. The importance

of an advisory board is covered in Session 2 Getting Your Team in Place of the Business

Expansion course.

o As with external communication, consistency is very important. Use the same

words and messages with all members of your team to make sure everyone is on

the same page.

o Many large companies print key messages and goals on employee badges and ID

cards so that every person in the organization has the same words at their

fingertips.

Don’t take communication for granted. Effective communication requires careful planning and

uses many different tools. In this session, we will discuss those tools, as well as planning

guidelines, to facilitate business communication.

Basic Communication Tools

A wide variety of communication tools are used for external and internal communication. These

tools include mail, email, telephones, cell phones, Smartphones, computers, video and web

conferencing tools, social networking, as well as online collaboration and productivity

platforms. We begin with some basic communication tools and then discuss computers.

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Mail

Even with all the modern methods of communication, regular postal mail is still a powerful tool

for a business. It adds a personal touch, and is often used for delivering secure documents and

contracts and for delivering purchased items to customers. A convenient way to handle mail

from your own home or office is through a usps.com or Stamps.com account (in the U.S.), which

allows you to print postage from your own computer. If you are sending mail internationally,

there are a number of carriers available. Be sure to learn which carriers are most reliable in each

region where you conduct business. You can compare costs to get the best combination of price,

delivery date, and tracking options.

Email

Although you may already have a personal email that you use, having a business email will be

helpful in communicating with customers, vendors, and internal teammates. Checking email on a

daily basis is essential. There are many email features available depending on the type of account

you have. For example, for some accounts you can track email to ensure the recipient reads it.

You can also postpone sending outgoing email, filter incoming email, and set-up automatic

responses with different types of accounts. Platforms for hosting email include Gmail, Outlook,

and Yahoo. There are also others. For additional cost, these platforms will set up your own

business email address. For example, you could host [email protected] on one of the

email platforms by paying an extra fee.

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Telephones

The cornerstone of your business communication, both external and internal, may be your

telephone. There are many types of telephones, and only you can decide which type is right for

you. Even the standard telephone (landline) that is installed in your office has many options.

While you may have a telephone already, you should start with at least one line that is unique to

your business. This line should have the capability to take messages in case it is not answered

personally. Here are some telephone tips:

 It is important to treat the telephone as a business tool. Answer your phone in a timely

manner (within three rings if you can). Always identify yourself when answering. Record

a voicemail message that identifies the number, provides brief information about your

business, and indicates when you will return the call. Then continually check your

voicemail to return calls promptly.

 Have a separate line for your business phone and your personal phone. Don't have family

members pick up or use the business phone. Get any required extra telephone lines

installed before you start.

 When leaving phone messages, clearly state your company’s name and phone number at

the beginning and the end of the message.

 Be polite in cell phone use! Good business courtesy includes avoiding being interrupted

by telephone calls, texts, or email when in a meeting or during a business lunch..

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Landline

The landline is the telephone system that uses a physical wire for transmission. You may have a

landline in your home, your office, or at a public phone location. If the internet is unreliable, you

will still be able to use your landline because it relies on a different technology for

communication. There are many services available for landline telephones. If you have an

existing landline and would like to add additional services such as voicemail, multiple lines, and

conference calling, be sure to research the options offered by your service provider and its

competitors. You may not have to switch phone companies to get the features you want.

Cell Phones/Mobile Phones

The cell phone, also called a mobile phone, is used for mobile communications. There are

numerous carriers/providers and plans. Many carriers have plans tailored for small businesses

including options that bundle popular features and usage patterns making them very cost

effective. Be sure to ask questions about your specific needs before selecting a carrier and a plan.

Understand the duration and terms of your agreement. Many can be two years or more. Consider

what type of communication you will use most for your business - conversations over the phone,

texting, or data. Investigate plans that have unlimited access in your key area to compare pricing.

When your usage or needs change, do not hesitate to request information on plans that more

closely meet your new set of requirements. But be aware there are hefty fees for canceling early.

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Smartphones

A Smartphone is a cell phone that offers advanced capabilities with computer-like functionality.

A Smartphone incorporates features like email, internet, and social media. Smartphones are

capable of text messaging and include a camera with video capability.

Outside your office, a Smartphone can be a valuable tool for business. In fact, if you don’t have

an office, or work from your home, a Smartphone can be your office. With a Smartphone you

can use email, access the internet, review, edit, or scan documents, use GPS, accept and make

payments, and use a multitude of applications (apps) to do almost anything. The most popular

Smartphones are the Apple iPhone (iOs) and Samsung Galaxy (Android), but new Smartphones

are emerging on the market every day. Each has different strengths you will need to factor into

your business needs.

Internet Calling: Google Voice and Others

Internet calling is a way to make phone calls using the internet. There are several internet calling

providers. Google Voice is the most popular and it is free. Google Voice provides voicemail,

Short Message Service (SMS) and texting, and a local phone number. Users can send free text

messages, customize their voicemail, read voicemail text transcript, and more. Users can make or

receive calls or texts from their computer or from their mobile Smartphone. Google’s voicemail

service is now available for free to all Gmail users. Other internet calling providers include

Grasshopper, MightyCall, Nextiva, DingTone, Telzio, Freedompop, Line2, Voiceably, and On

SIP, to name a few. Each provides a service for a monthly fee with different features,

capabilities, strengths, and weaknesses.

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SMS Messaging and Texting

While not all mobile phones are Smartphones capable of receiving videos and pictures, nearly all

mobile phones can receive SMS (short message service) messages. These are texts of less than

160 characters that consist only of letters, numbers, and symbols. SMS messaging, and texting in

general, is a powerful way to communicate. SMS messaging and texting provide one-to-one

communication. As more and more people adopt mobile phones, there are more opportunities to

connect directly and personally with mobile phone users (who may be your customers!).

Companies can use SMS messages as a way to remind customers of sales, product offerings, and

other announcements. It is important to note that customers must opt-in to companies’ SMS

marketing campaigns and that it is illegal for companies to send SMS messages to customers

who have not opted-in. Companies can often encourage customers to opt-in by offering them

something in exchange. For example, a hot dog company could get customers to participate in

their SMS marketing campaign by offering them $5 off their next meal for texting a code to their

specialized SMS campaign number. Larger companies might purchase the services of an online

text message marketing company to manage these marketing campaigns and to provide them

with a short phone number code for customers to use to opt-in to the campaign. Small businesses

could also allow customers to sign up for text messages like they might sign up for a

mailing/emailing list and send messages directly.

Cell and Data Plans

There are two major types of mobile phone plans: pre-paid and post-paid. Pre-paid allows you to

pay a mobile carrier upfront for mobile services, and you must refill your minutes or data when

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they run out. Be aware that overage charges for minutes or data used that exceed your plan may

be billed at a higher rate. You will need to understand if it is possible to go over your pre-paid

amount, and what additional charges might be imposed. Post-paid plans allow you to sign a

contract with a mobile carrier for different types of mobile services, and you pay for those

services at the end of the month. Unused minutes or data may or may not roll over from one

month to the next month, meaning you have to pay for your minutes or data each month whether

you use it all or not.

Whichever plan you choose, be sure you understand the terms. There may be penalties for

terminating your contract early. You should think about your business needs before deciding on

a mobile service plan and whether you want to pay upfront or at the end of the month.

Video and Web Conferencing

Video conferencing provides a way to have face-to-face meetings without the expense of travel.

It provides a more personal way to communicate both externally with customers and partners and

internally with team members or employees who may work outside the office.

Video conferencing technologies transmit and receive images and voice in real-time so that you

can have a “face-to-face meeting.” Web conferencing adds another dimension - it allows you to

share documents and applications during your online meeting. Both options allow you the

flexibility to have one-on-one meetings, or conferences with multiple attendees. Seeing facial

expressions and nonverbal cues during crucial business discussions and negotiations can be

invaluable for your business.

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Some common tools for video and web conferencing are listed below. These tools are offered at

different levels and price points, although there are some you can access for free. Some examples

of video and web conferencing tools include:

 Google+ Hangouts

 Skype

 Zoom

 Ring Central

 Webex

 Goto Meeting

All these solutions allow you to communicate as if you were face-to-face with customers,

partners, and employees anywhere in the world. Time and money that would be spent on

traveling can be used other ways for your business. You can share documents, make

presentations, and conduct meetings on short notice. For example, without leaving your office,

you can collaborate with employees who work from home or from other company locations.

Social Networking Sites

If you are a member of a social networking site or utilize social media, you know that these

platforms are popular for businesses that use them for marketing. A social network is an online

community comprised of individuals or organizations that are tied together by common interests.

Internet-based social networking occurs through a variety of website platforms that allow users

with similar interests to share content and interact online. Some popular social networking sites

include Facebook, Instagram, Twitter, LinkedIn, Pinterest, YouTube, and many others.

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By creating social networks that follow your business, or the interests of your business, you can

build relationships with current and future customers. For example, there are online social

networks for companies, celebrities, politicians, and interests such as travel, home decor,

cooking, and exercise to name a few. By posting content to these groups you can provide

information to a large number of followers quickly and inexpensively.

Many companies pursue a social media strategy in their marketing efforts. Social media

marketing is a relatively inexpensive way to reach specific customer segments that you believe

will be interested in your product or service. To be successful it requires a steady effort and

participation over time. One mistake companies make is jumping in and posting frequently

initially, but then not maintaining the effort for very long. It’s better to begin with a pace you

know you can continue, whether it’s once a month, once a week, or once a day. If you find you

have more content to post, you can always do more. A note of caution on internet social

networking: once you put something out there it's hard to take it back, so you have to be careful.

Always be mindful of how a post will represent and reflect on your business. It’s also a good

idea to keep in mind that your personal social networks may also be visited by potential

customers, partners, investors, and employees.

Online Collaboration Tools

The world is at our fingertips when it comes to being able to work online within our business,

with partners, vendors and/or customers/consumers. From messaging to group chats, video

conferencing, file sharing, document collaboration, e-learning, and more, almost anything is

possible right from your device. In addition to the tools and resources discussed above, below are

some ideas and examples of tools that can be used depending on your goals.

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 G Suite: Google offers a suite of products that enable online collaboration. Using Google

Docs you can develop a document that can be edited by multiple people in different

locations (or all within the same conference room) in real-time, and at the same

time. Other G Suite products work the same way: Google Sheets, Google Slides, and

Google Drive for example. You can create and manage your documents in a filing system

that can be owned by one person or shared among a team. Google Calendar has become a

popular way for organizing your own schedule as well as scheduling meetings among

members of different organizations or businesses.

 Office 365/Office Online: Microsoft also offers a suite of products that enable online

collaboration. Office 365 includes Outlook, OneDrive, Word, Excel, PowerPoint, One

Note, Skype, and other applications. The Office 365 suite is not free. Microsoft Online

offers software in a cloud-based variety for free.

 Messaging Tools: Messaging tools allow for online chat and instant messaging between

individuals or teams. Some also feature file sharing, file storage, video calling, searchable

message-history, image viewing, and creating polls. Some of these tools integrate with

Google Drive, Facebook, Dropbox and other software. A few examples are:

o Slack

o GroupMe

o Google Hangouts

 Online and Shared Calendar Apps and Software: Online and shared calendar tools are

wonderful for time-management and scheduling meetings with others. Some examples

include but are not limited to:

o Google Calendar

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 o Doodle

o Outlook

o Team up

o Asana

 Task Management Apps and Software: Task management applications allow users to

manage their tasks from a Smartphone, tablet, computer, or smart watch. Many of them

are free; additional collaboration features are available in paid versions. They are a great

way to keep track of your progress and projects whether working on them individually or

as a team. Some examples include:

o Trello

o ClickUp

o Todoist

o Any.do

o Quire

o Wunderlist

Computers

A computer is so affordable that it should be included as a key tool in your business. Computers

can be purchased for a wide range of prices. For basic word processing, email, accounting, and

spreadsheet work, you will not need a top-of-the-line computer. Computers come in a variety of

configurations, sometimes called a “form factor.” Below we discuss the most common

configurations: desktop, laptop, notebook, and tablet.

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Desktops

Desktops are the most common computer configuration. They are not portable but can be

customized to meet the needs of your business. A desktop computer system should include:

 A basic processing unit: either a PC (Personal Computer) or a Mac (Apple). PC's are

more common in usage and are lower in cost. Most businesses work in a PC format.

However, for many users and applications utilizing graphic arts and design work, the

Mac enjoys very steadfast supporters. Considering how you plan to use your computer

will help you determine whether to choose a PC or Mac platform. You could also

research the programs or applications you will need to ensure they are available on the

platform you choose.

 A flat-panel monitor.

 Internet connectivity, USB ports, and web camera.

 Speakers or a sound bar if you plan to do video conferencing or recording.

Laptops

A laptop computer offers portability with many of the features offered by a desktop, which make

it ideal for meetings or if you travel frequently. Drawbacks for laptops include: they are higher in

price than desktops, have smaller keyboards and monitors, have limited battery life, and are

subject to theft. Most laptops provide the option of connecting to your keyboard, mouse and

printer wirelessly or through a USB cable. If you travel and need computing capability, it is

worth the extra expense. Popular laptop examples include the Chromebook, Surface Pro, and

MacBook Pro.

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Notebooks

Notebooks are a rapidly evolving category of small, light, and inexpensive portable computers

suited for general computing and accessing web-based applications. They are very popular with

students, bloggers, and businesses owners alike.

While generally less expensive than laptops, manufacturers are starting to beef up notebooks,

which is increasing their cost. A caution: their compact size makes them attractive for traveling

but if you are considering one to save on the cost of a laptop, you probably will be getting less

memory, and many do not have full applications or compatibility with your other business

applications.

Things to keep in mind if getting a desktop, laptop or notebook:

 Get as much capability as you can afford. Laptops are not typically as easy to upgrade as

desktop computers because of the nature of their construction.

 Be sure you get all the features you need when you purchase.

o Make sure your computer, laptop, or notebook has a webcam built in for video or

web-based meetings. If it doesn't you can buy an external one relatively

inexpensively.

 If you do not normally have access to an electrical outlet, get a laptop or notebook with

extended battery life.

 Keep all documentation, software, and accessories that come with your device.

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Tablets

A tablet is equipped with a touch screen or stylus rather than a keyboard to operate the computer.

The advantages include flexibility to use without a mouse or keyboard, recording diagrams and

symbols, and easier navigation than a keyboard and mouse or touchpad. Disadvantages include

higher cost, slower input speed, and risk of damage to the tablet screen. You can purchase a

keyboard and mouse for a tablet, but that would also increase the cost. Be wary of the total cost

because the cost may be similar to a laptop that has more capacity and capability. Examples of

tablet computers include the iPad, Galaxy Tab, Surface Go, and Amazon Kindle.

Software

The software you purchase is key to making your computer productive. The operating system

(OS), whether it is a PC or a Mac, should be preloaded onto the system. The operating system is

what allows you to interact with your computer. Many software packages are often bundled with

the system at the time of purchase and some in the form of trial software. At the bare minimum,

you should have the capability to do word processing/create documents, spreadsheets, and

presentations.

To protect your information, an antivirus program is essential. You can purchase one or use a

free program; however, the free programs will not afford you as much security as the paid

versions.

Additionally, you should consider financial and accounting software that is appropriate for your

business. Keep in mind that many accounting/bookkeeping software packages are not double-

entry systems and care must be taken in making the entries correctly. Keep in mind that home

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and professional versions of accounting software may not be compatible or may not be

appropriate for your operating system. Be sure to read the software specifications before you

purchase to ensure that your hardware and software are compatible.

Auxiliary Products

Many products can be used with your computer to enhance the functionality and image of your

business. Auxiliary products often require special software.

 Printer: Printers are available at many price points. The connectivity, either wireless or

hard wired, will depend on the type of computer you have. Be sure to research the

compatibility of your computer and printer before making a purchase. Laser printers cost

more up front than inkjet printers but are less expensive over the long run when taking

printing costs into account. You can choose either a color or black and white printer. A

color printer may allow you to print marketing materials for your business. If you have a

small space to work with, consider an all-in-one printer which can fax, scan, copy, and

print. Some printers have USB ports or slots for memory cards, allowing you to print

directly from these media storage devices.

 Digital Camera: Many people have a digital camera on their smartphones. For specialty

photos or to produce very high quality photos, a dedicated digital camera may be more

appropriate for your business. A picture taken with a digital camera can be directly

loaded onto your computer for a variety of uses. Many digital cameras also offer wifi

connectivity so you can upload images directly to the web or a social network

platform. Usage ideas include pictures of properties, product catalogs, pictures

accompanying résumés, and many more. Digital cameras come in various shapes and

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 sizes, but what really sets them apart in price is image quality. Smartphone camera

quality is good and improving all the time. So you may have all the digital imaging

capabilities you need in your Smartphone already.

 Scanner: Scanners provide the ability to convert a paper document into a digital

document that you can send, store, or copy. Fax machines used to be a popular way to

collect signatures on documents from people in a different location. Now a scanner is

more frequently used because the digital document can be sent by email. There are also

applications that allow you to scan a document with your phone. In many cases, a

photograph can also be taken of a document, and that image sent or stored as needed.

 Hard Drives and External Storage: Don't overlook the importance of making regular

external backups of the content, images, and individual programs used in your business.

A backup is simply saving your information to a second source so you have a second

copy in case your system crashes or is lost. Backups are commonly stored on USB flash

drives, external hard drives, and/or a cloud-based system. External storage is relatively

inexpensive. There are also services provided on the web to facilitate this process.

Internet

The internet is an essential marketing and communication tool for every business. It allows you

to communicate with potential customers, create leads, and establish your business. You should

register with internet search engines and crowd sourced business review sites to build your

online presence and allow people to find your business quickly. You can advertise on these sites

to get more visibility on the page. Utilizing your ability to register on search engines and crowd-

source business review sites is an essential marking tool to communicate with potential

customers and creating leads.

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To learn more, see the links below:

Search Engines:

 Google My Business: https://www.google.com/business/

 Bing Places for Business: https://www.bingplaces.com/

Crowd sourced business review sites (U.S. based):

 Yelp: https://biz.yelp.com/

 Angie's List: http://www.angieslistbusinesscenter.com/?cid=AL

 Google reviews

How you use the internet in your business is up to you. Perhaps you are not ready to sell your

products online, but you are interested in developing a website that lets people know what you

do. At the other extreme, you may want to use the internet as your main sales channel. Just

remember, the basics are still on the ground: you need products and services that people want;

you need to attract people to your internet site so that they have the option of purchasing these

products and services from you; you need to convince them to buy; you need a place to store

your products; and you need a way to get them to the purchaser.

Website hosting fees vary, so be sure to consider whether you want a site where updates will be

infrequent (it’s just a landing page where people can learn about your business), or a very

interactive site, with frequent updates, a shopping cart, lots of different types of content, etc. You

will also need to pay for your domain, the web address for your business such

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as www.yourbusinessname.com. Both the hosting and domain fees can be paid annually or for

several years at a time.

Session 12 E-Commerce of this course will provide detailed information about the internet and

E-commerce.

Technology Planning

It is important that you and your employees use the internet appropriately when representing

your business. You should have a policy about using the internet at work. Your policy should be

in writing and signed by your employees to make sure they understand it. Remember,

appropriate use of technology can make your business look established and successful from the

very beginning! Unfortunately, inappropriate use of the internet, social media, and social

networking can make your business look unprofessional and turn away potential customers.

Top Ten Do's and Don'ts

THE TOP TEN DO'S

1. Ensure that your external and internal communications are consistent and support your

brand.

2. Establish a designated phone number for your business, record a professional voicemail

message, and speak clearly and slowly, repeating your name and number when calling

others.

3. Investigate the option of purchasing a Smartphone, and use it to support your business.

4. Consider using video and web-based conferencing tools to allow for face-to-face

meetings without the expense of travel.

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 5. Create a social media strategy you can maintain, to allow for the most success in

interacting with followers and promoting your business.

6. Investigate and explore what online collaboration tools would work best for you and your

team.

7. Conduct thorough research on what computer is best for you to purchase for your

business, and buy the most capabilities you can afford.

8. Consider a laptop computer if your business requires mobility.

9. Register on search engines and crowd sourced business review sites for marketing as well

as a way to communicate with potential customers and leads.

10. Invest in antivirus software to protect your computer, your identify, and your

information. Regularly backup your data.

THE TOP TEN DON'TS

1. Underestimate the importance of communications in business.

2. Assume your personal social media posts will be private and not seen by your customers,

investors, and partners.

3. Use a shared line or family phone number for business.

4. Overlook the internet and Smartphones as important business tools.

5. Start your business without knowledge about and possession of computer tools.

6. Overlook making regular external backups to computer programs and your data to a

second source such as external hard drive, USB storage, or cloud-based service.

7. Spend for a top-of-line computer unless it is required in your business.

8. Sign up for extended time periods on any service including phone and mobile.

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 9. Start an active social media campaign if you can’t maintain the frequency of your

posting.

10. Use SMS or text marketing unless you have permission by users who have opted-in to

receive your messages.

Business Plan for Session 8: Communication Tools

You can continue to assemble your business plan. We provided Microsoft Word templates for

this session below:

Section 8: Communication Tools

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

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Session 8: Develop Negotiating Skills

OBJECTIVE:

In this session we cover the important impact of good negotiating skills in growing your

business. We will also explore ways to build up skill in negotiating.

 Good negotiating skills will help you grow

 Reasons for failed negotiations

o Lack of confidence

o Overconfidence

o Not recognizing the other side's situation

o Viewing as a win/lose situation

 What is acceptable to the other side?

o Determine market comparables

o Pricing power

o Determine the deal points for both sides

o What special benefits will the other side derive?

o What is their reason to buy or sell?

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  Comparison of "My Leverage" and "Their Leverage"

o Chart out each side's leverage

 Negotiating rules

o Know what you want and how much you will pay

o Ask the other side to make the first offer

o When buying, require an asking price

o Don't make an offer without contingencies

o Be willing to walk

o BATNA

o Top Ten Do's and Don'ts

Good negotiating skills will help you grow

Growing your business includes ongoing daily encounters where you are either buying or selling.

The outcome of these transactions can play a major role in your future. To a large measure then,

the degree of your success can depend on your skills as a negotiator. This session will explain

techniques you can employ in all transactions as you grow the business and ultimately when you

sell the business.

Reasons for failed negotiations

There are two ways to expand your business: either increase your earnings or pay less for what

you buy. To be successful in paying less requires negotiating skills. But for some entrepreneurs

negotiating is not a pleasant experience. Some lack the confidence to ask "what special price are

you offering today?" You can quickly overcome this by starting the practice of asking this

question every time you buy something. Some guidelines to keep in mind:

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  Negotiating is the collaboration between you and the other side to satisfy both sides of a

transaction and a win/win result.

 It is a standard and healthy business practice.

 It is not based on greed but from a healthy business attitude to thrive.

 As you practice it, you will get better at it.

 As Wayne Gretzky has said: "You miss 100% of the shots you don't take."

Overconfidence

On the other hand, overconfidence can upset a potentially profitable transaction for both parties.

Here's an example: A shopping center landlord was negotiating with 7-Eleven Stores to renew a

lease and 7-Eleven was asking for a reduction in rent due to disappointing sales. As a credit

tenant, the 7-Eleven occupancy was valuable to the landlord.

But through overconfidence, he turned down the offer and rented the space to an independent

store which resulted in many headaches. He had overlooked a non-negotiable 7-Eleven deal

point: they could only pay rent that was justified by past sales. The landlord should have

negotiated a lower rent with provisions for rent increases as sales improved.

Not recognizing the other side's viewpoint

The 7-Eleven lease is also an example of one side (the landlord) not fully considering the other

side's viewpoint and limitation. The lesson is to listen more than talk. Ask questions to expose

attitudes and flexibility of thinking. Here the purpose of negotiating is to discover the parameters

of the other side. Then after getting their story, persuade them to listen to your side of the

situation. In this process, put yourself in the other side's shoes to evaluate both the most and the

least they’d be willing to sell so that your proposal is realistic.

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Viewing it as a win/lose situation

"Win or lose" means that one side is going to lose. But approaching a negotiation as a contest is

not the way to accomplish a transaction that could be good for both sides. Instead, look at the

negotiation as a collaboration that begins by figuring out what they want and how much you can

give them. The more you are able to give them what they want, the more likely they are to give

you what you want. The resulting goal will be a compromise where each party gives up a little to

gain a little.

What is acceptable to the other side?

Determine market comparables

Before starting a negotiation, the buyer should determine what the actual closing prices were in

recent comparable transactions. For example, in real estate the use of "comps" plays an important

role in establishing benchmarks for how much is paid for houses. In an important transaction,

such as selling your business (covered in another section of this course), a professional appraiser

could also be used to establish the price along with other evaluation methods.

While "comps" establish overall pricing guidelines, sellers must then justify any additional

benefits inherent in their product to justify a price above prices paid in other recent "comps".

Some other factors to consider in a purchase transaction can be found in Session 9 in the Start a

Business course.

Pricing power

As an operating entrepreneur, one of your primary goals should be to build pricing power into

your product or service. Pricing power is also a powerful tool in a negotiation. It can remove a

product from the competition. For example, a toll road with no competitors has ultimate

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powerful pricing power because there are no alternatives to choose from. Coke© has built their

pricing power and consumer preference through saturation advertising, marketing, and consistent

quality over the decades. Your goal will be to build pricing power into whatever you are selling

to help distance yourself from competition and justify your negotiating position.

In a buying transaction, you must consider the other side's pricing power to establish how much

you are willing to pay. For example, you may agree to pay $1.00 for a Hershey bar when

competitor "Joe's" chocolate bar is $.70, but you may not want to pay $2.00 for the Hershey

against Joe's $.80 bar.

A commodity, on the other hand, has no pricing power. The price is established by the market. In

order to succeed in a negotiation involving a commodity, you will need to have the lowest cost in

order to achieve any degree of pricing power. Examples of commodity businesses include

agricultural commodities and airlines (even as airlines try to differentiate themselves to justify

higher prices).

Determine the deal points for both sides

Both parties to a negotiation will have some issues that are "deal points." A deal point is a non-

negotiable condition and a transaction cannot be closed without including it. Most all

transactions will have deal points and you need to determine what they will be on both sides of

the negotiation. Here are some deal points between a landlord and a tenant:

The landlord's deal points:

1. A cost-of-living adjustment to reflect inflation.

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 2. A net (triple net) lease where the tenants pay their share of taxes and other common area

costs.

The tenant's deal points:

1. A right to sub-lease the premises.

2. A kick-out clause in the event the anchor tenants vacate the center.

What special benefits will the other side derive?

The other side may be highly motivated to make a deal because of a special benefit to be gained

from what you are selling. You need to determine if this is so. For example, your product may

have special features which can be leveraged up to satisfy a huge market. Or you may possess a

special real estate location, or a patent, or a market share which the buyer is willing to pay a

premium for, above what might otherwise be considered the going market rate.

What is their reason to buy or sell?

It is useful to know if there are underlying reasons why a business is for sale. Is the seller in need

of cash to make payroll? Does the buyer of your patented widget have ability and desire to scale

it up? Does the seller of a business have pressing family problems?

Comparison of "My Leverage" and "Their Leverage"

Here is a simple tool you can use to help establish your negotiating stance on any buying or

selling transaction. Open a new word document and create two columns. Title the left column

"my leverage" and the right column "their leverage". Leverage means advantages and pricing

power each side brings to the table. Under these headings begin listing each side's leverages

including vulnerabilities, pricing power and any other relevant factors. This analysis can furnish

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 a better overall understanding of the transaction. Here is an example where we are considering a

shopping center location for a franchised chain of pizza stores:

The pizza operator's leverage The landlord's leverage

Traffic count slightly below required The location is also desirable for other fast food chains

We offer a bankable lease An independent shop will pay more rent

It's not the last good location in town Our location has an anchor grocery store which will

attract more shoppers

What may emerge is a clarification of the reasons you need to be more or less flexible in meeting

the other side's positioning. Or you may begin to see that the risks will outweigh the merits of the

deal.

Negotiating rules

Know what you want and how much you will pay

Have a clear written specification in place to describe the product or service you are buying and

the required terms of purchase. Terms would include delivery date required, payment terms and

discounts, warranties, cancellation provisions, etc.

How much you pay can also be determined by evaluating the economic return your investment

will produce. For example, you may establish a minimum annual return on investment of say

20% and any purchase price must achieve that goal.

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Willingness to pay will include factors such as how much the other side needs your product and

what degree of pricing power does your product (or their product) possess? Do you have a

pricing edge for any of these reasons?

If you are leasing or buying real estate locations for your retail chain, you should create a site

model criteria format for evaluating sites. This will be your tool to objectively rank each

potential location based on appropriate factors such as traffic count, etc.

When buying, require an asking price

Vendors selling flowers and oranges at busy intersections make a mistake by not displaying their

prices...so potential customer drive on. Whenever you are the buyer, the seller should be required

to specify his asking price and terms. If there is no price, there is nothing to consider. With an

asking price in hand, you are in a position to evaluate whether the transaction has enough

potential to be pursued.

Don't make an offer without contingencies

It would be a mistake to rely on any contingency provisions without the advice of your attorney.

However, the following is a general discussion on how a contingency strategy can become part

of a negotiating event. The purpose of including a contingency provision in an offer is to give

you an escape in the event that subsequent information would cause you to change your mind

and wish to withdraw the offer.

Your offer would be made subject to the contingencies you specify in your offer. In some

instances, it may be worth it to the party making the offer to include a provision that in the event

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of cancellation based on a contingency, a "break-up fee" be paid. Here are some "subject to"

examples:

1. Buyer's approval of licensing and permits

2. Buyer's approval of financing

3. Buyers approval of conditions covenants and restrictions

4. Approval of buyer's board of directors or advisory board

5. Approval of buyer's attorney

6. Subject to seller's acceptance of offer within a specified time and date

Keep in mind that contingency number 6 above (subject to acceptance within a specified time)

does not provide an "out" in the event the other side accepts the offer within the time specified.

Be willing to walk

A framed motto is in the office of most every good real estate developer states:

THERE IS NO SUCH THING AS THE LAST GOOD LOCATION

BATNA

"BATNA" means "Best alternative to a negotiated agreement". It is a term coined by Roger

Fisher and William Ury in their book, "Getting to Yes: Negotiating without Giving In". It is a

standard to protect you from accepting terms too unfavorable and from rejecting terms that

would be in your best interest. In simple terms, to determine your BATNA you:

 Make a list of potential alternative approaches to negotiation

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  Convert the more promising ideas into practical actions

 Select the best option

o BATNA will also tell you when to accept and when to reject an agreement. You

first decide what your best alternative would be and if the proposal is better than

that you accept it and if the proposal is worse you reject it.

o Part of BATNA strategy is to also determine the BATNA of the party with whom

you are negotiating. You can follow the same approach used in determining you

own BATNA. Having defined both your own BATNA and that of the other side

will help determine the strength of your own position. Once you weigh your

comparable positions, you would only reveal your own BATNA if it's better since

revealing a weak BATNA will weaken your position....and revealing a strong

BATNA will strengthen your position.

Top Ten Do's and Don'ts

THE TOP TEN DO'S

1. Practice and study to develop negotiating skills.

2. Fully consider the other side's viewpoint and limitation.

3. Evaluate your leverage with that of other side.

4. Build pricing power into your product or service.

5. Determine the "deal points" for both sides.

6. Compare "your leverage" and "their leverage".

7. Evaluate the economics to determine how much to pay.

8. Spell out the detailed terms of a purchase.

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 9. Ask the other side to make the first offer.

10. Include an expiration date in your offers.

THE TOP TEN DON'TS

1. View negotiating as a win-lose transaction.

2. Lack confidence to ask for a special deal.

3. Be over confident in a potentially profitable negotiation.

4. Overlook the power of effective negotiation skills.

5. Ignore the other side's reason to buy or sell.

6. Refuse to be flexible to meet the other side's positioning.

7. Consider buying without first having a seller's asking price.

8. Make an offer without including an escape clause or clauses.

9. Be blinded by emotional enthusiasm.

10. Be afraid to walk away.

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Session 9: E-Commerce

OBJECTIVE:

E-commerce is the sale of products and services over the Internet, and the fastest growing

segment of our economy. It allows even the smallest business to reach a global audience with its

product or message with minimal cost. In this session, you will learn if an E-commerce website

is right for your business, how to set up a website, tips for developing a successful site, how to

manage search engine placement, and how to get started on eBay.

 E-Commerce Overview

o What is E-Commerce?

o Is an E-Commerce website right for your business?

o The three segments of E-Commerce

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 Money Transactions

o E-Commerce Considerations

o Alternative methods of online payments

o Money transactions summary

 Setting Up a Website

o Registering your domain name

o Hosting your website

o Building your website

o Hiring a professional website developer

o Designing your own website

 Tips For Developing a Successful Site

o Make your site easy to use

o Provide useful content

o Encourage customer feedback

o Develop a mailing list

o Encourage Social Media

o Make sure your website is optimized for mobile viewing

 Online Marketing and Promotion

o Search engines: your primary marketing tool

o How does your website rank?

o What are people searching for?

o How to manage search engine placement

o Key components of successful search engine marketing for a website

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 o Outsourcing search engine optimization

o Targeted e-Mail

 E-commerce platforms

 Top Ten Do's and Don'ts

 Business Plan

E-Commerce Overview

What is E-commerce?

E-Commerce is the sale of products and services over the Internet. It is the fastest growing

segment of our economy; E-Commerce sales are expected to reach $550 billion by 2020 and will

grow by over 17% just in 2016. Shopping on smart phones is expected to drive this continuous

growth as Smartphones continue to get larger and consumers become more comfortable with the

technology. Engaging in E-Commerce allows even the smallest business to reach a global

audience with its product or message with minimal cost. The sale of products or services on your

website can generate sales that will make the difference between success and failure.

Is an E-commerce website right for your business?

Probably. Much depends on the nature of your business. Websites such as Amazon.com have an

established place in the market, and their sheer size, name recognition and the relationship of

trust they have with their customers allows them to dominate this market with good pricing (due

to economies of scale) and remarkable customer loyalty.

However, if you own a local company, there are several ways to reach new customers, get them

to know you better and have them keep coming back for more. You might want to offer notices

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of special promotions or in-store special events. Trust will become the cornerstone of building

your e-business. As Warren Buffett has said, "If you don't know jewelry, know your jeweler."

A website doesn't need to exist solely to sell your product online. It could supplement the sales

of your already established retail store. If you sell a unique product, such as wheat grass or

gourmet chocolates, you might find success reaching others around the country (or the world, for

that matter) who do not have access to these products in their own towns.

Using the Internet for conducting E-commerce will not assure you of being able to compete

favorably with large established competitors. They already have the inventory, delivery and

marketing systems in place, and they can deliver the orders just as cheap as (or more cheaply

than) you can. Yet, the beauty of the Internet is that it provides a global audience of potential

customers and it never closes.

Your customers will have access to information about your business 24 hours a day, 365 days a

year. You can add pictures, audio, video, news, and so much more. Your customer will even be

able to buy from you 24 hours a day. So, your website address should be promoted everywhere

including your stationery, sales forms, and advertisements.

A website can transform a local business into one engaged in global commerce. But you will

need to be aware of the advantages and disadvantages of international trade outlined in

our Session 11 Global Expansion in the Business Expansion course.

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The Three Segments of E-Commerce

There are three segments of E-Commerce you should be familiar with. The First segment, Online

Shopping (B2C) is the most well-known segment. The second segment is Business to Business

(B2B) where businesses sell to other businesses or buy from a wholesaler. The last segment is

the fastest growing segment, Consumer to Consumer (C2C). This segment gives individuals and

sole proprietors the ability to sell items on sites such as EBay and Etsy. It is important to

understand what segment you are in because it will change the way you market your site and

interact with your customer.

Money Transactions

There are many ways to complete money transactions online. If you already have an established

website that your clients know, you will probably want to keep it and can add on an E-commerce

solution. If you do not have an E-commerce website, you may consider E-commerce solutions

offered by major online sites such as Yahoo, Amazon, and Google with little to no web design

experience needed. (Enter "commerce solutions" in the search box.) Online auction sites such as

eBay, Yahoo, and Google might also offer additional avenues for your business. Payment

processing companies such as Square, Intuit and PayPal are yet another avenue for collecting

funds online and may offer solutions to use their payment systems in person as well. Consider

hiring and/or consulting with an experienced web designer or firm to set this up for you. Their

experience can often save you time, money, and unnecessary aggravation.

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E-Commerce Considerations

 Be sure to take into account all your costs such as monthly E-commerce fees, packaging

costs, shipping costs, time, etc. You will also want to take into consideration costs

associated with your return policies.

 Some payment processors require a deposit account for customer charge backs and

warranty claims and/or hold money back for a period of time before dispersing to you. Be

mindful of these rules and the limited cash flow you might have until you can overcome

these guarantee periods.

 For Internet-based orders and shipping, you should check with your State Board of

Equalization Office to determine the appropriate sales tax. The IRS "Small Business and

Self-Employed Tax Center" provides valuable information and links regarding taxes

 You will also need to check the states regulations that you are shipping to on tax law,

prohibited items and customer warranty requirements.

Alternative methods of online payments:

Cash payments are less advanced but easier to set up. Funds are transferred from the buyer's

bank account or credit card to the seller's account, via companies like PayPal. There are also

other companies that allow you to accept online payments and provide a smart phone app to

process payments in person. Companies like Intuit and Square both have secure payment

processing systems that allow you process payments in person with a physical card and also

connect to your website for secure processing.

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Money transactions summary

Consider issues such as taxes, security, cost, regulations and reliability. If your site becomes very

popular, your e-commerce system will need to be scalable to that growth. Many more electronic

payment companies can be found on the popular search engine Google.

Setting Up a Website

Before you get started you need to answer the following questions:

 What types of customers will you attract?

 How will these customers interact with your website, and how can you make your

website promote that interaction?

 How many sales do you expect to make each month from just your website? What

additions would you like to add once you get going?

 What are your competitors doing on their websites? What do your potential customers

like and dislike about your competitor’s sites (use this time to do some competitor

research and check reviews).

 Are you going to integrate a CRM (Customer Relationship Management) system? If so,

will your CRM choice integrate into your website?

 Can your website be optimized for mobile viewing?

 When looking at website hosting, is there a cap on hosting size or traffic? What is the

reliability of the hosting firm in regards to outages? Do they have full packages for

hosting, domain purchase and email exchanges? Can you link to your company’s social

media platforms?

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Setting up a professional Web presence with an E-commerce system can be a big project. Be

sure to consult with professionals in this field who have experience in E-commerce, not just web

design.

Registering Your Domain Name

Each website has its own unique name, such as Amazon.com or eBay.com. This is your "domain

name." It is a unique name that identifies you to all of the other computers on the Internet. There

are a number of companies, known as "registrars," that will assist you in registering your

website's name.

Find an easy-to-remember ".com" name for your site. Once you've successfully registered your

domain name, it will remain in your name and control for as long as you pay to keep it. There are

typically promotions that give you the first year for a low price, however you can lock those low

prices in if you pay for and register for multiple years. People who type

www.yourcompanyname.com into their browsers will be taken directly to your website. To

completely secure a name, it's not a bad idea to also buy the .net and .org and .biz extensions for

it.

Your company name, trademarks, logos and artwork used on your site will require appropriate

trademark and copyright protection under intellectual property laws. Your lawyer should be

consulted on this issue in order to avoid unpleasant surprises (for example, the possibility of

being advised that your company slogan belongs to someone else). You can also do a quick

check at the US Patent and Trademarks office: www.uspto.gov. Remember to frequently check

into the patent and trademark office as sometimes it takes months for other company information

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to show up on the website. Also beware of fraudulent international accounts. These sites are

opened to try to convince your customers to buy your product or one similar to yours off their

websites buy using domains that are similar to yours or off by one frequently mistyped character.

If you have a product that needs to be more protected in this area, it is sometimes important to

register the domain names where this could happen to prevent this fraudulent activity.

Hosting your website

Your online business will need a place to reside. You may choose to buy (by having your own

network server) or lease (by having your site hosted by a Web-hosting service). In most cases,

people find it much easier to lease hosting space. For a monthly fee, the web host handles the

technical details, and you are free to spend your time developing content for your website. Most

of the companies that you can buy your domain from will also offer hosting packages for your

site. It is important to also choose a hosting company that will provide a quality email program

that is attached to your domain. In this case, cheaper is not always better. Check the hosting

company’s packages to purchase a domain with hosting and email as well as read reviews on

user ability and reliability.

Hosting services can also provide "user statistics," which track the number of visitors to your

site.

Building your website

You will need to decide whether to hire a professional web developer to create your website or to

produce your own site "in-house." Both choices come with costs and benefits. If you decide to

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create your website, it is advisable to have an employee who is skilled and experienced with web

design.

If you have a real desire to learn how to create your own site, spend some time with online

tutorials on creating your own site. Your credibility is at stake, and if your site is difficult to

navigate, has broken links or images or out-of-date content, you will not engender trust with your

customers.

Most of the companies that you can purchase your hosting and domain packages from have some

website templates. If you choose to use a template from one of these sites, make sure that the

design is customizable to prevent you from looking like everyone else. You will also want to

make sure the website it easy to use so it is important to do your research and visit other

company’s sites that have used the template designs. Make sure the templates allow you to

integrate some tools to engage your customers such as a blog and allows you to link your site to

your businesses social media pages.

Tools such as Adobe Dreamweaver® allow you to create a website without any (or much) prior

knowledge of Web design. These "what you see is what you get" editors are similar to programs

such as Microsoft Word in that you insert text and graphics onto your page and specify the

appropriate links. Pre-defined templates give a consistent look and feel to your entire site and

built-in tools allow you to globally change navigational links throughout your site.

These programs have improved significantly in recent years but are not a perfect substitute for a

professional web developer/designer. Advanced features are difficult to implement. When having

someone else design your webpage, once completed, ask for all the files related to the website on

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a flash drive. This way, if for some reason the designer is no longer available and something

happens to your site, you can give these files to another designer to work on.

Hiring a professional website developer

Before hiring a web developer, it's important to determine:

 The purpose and budget of your website, as well as the ongoing maintenance needs.

 Who will provide the content and who will own the copyrights for these materials?

 Whether the developer will be responsible for both design and marketing of your website.

Look at other websites the developer has created and ask for references. Did the developer

deliver the product in a timely manner at the quoted price? Did the developer listen effectively

and present a product that matched the company's vision?

Once you've identified your developer, get a written contract that specifies the responsibilities of

the developer, the timelines for project completion and a complete budget for the total project.

This should include arrangements for ongoing maintenance of the site. Keep in mind the

developer you choose is someone you will most likely have a long-term relationship with as you

add and improve the website. Ask for the files related to the website. This will insure that if the

developer is no longer available and changes need to be made or something happens to your

website, you can hire another developer to work on the project.

Contracting out your website offers several advantages. A professional developer has the

technical knowledge to create a site that works with all browsers and should be fluent with the

current technologies. Investing in a professional developer will allow you to spend more time on

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creating a successful business and less time learning the new trade of being your own website

developer.

Tips for Developing a Successful Site

Make your site easy to use:

While it might be tempting to have a cutting-edge website - don't forget the basics. You will fail

if a visitor can't navigate successfully through your site. Provide clear, easy-to-understand

navigational tools on each page of your site. Make it easy for a visitor to find your contact

information on every page. Keep the site up to date and change the navigational tools when

needed.

Provide useful content:

Don't just sell! These days, it's not enough to have a website that lists your products and provides

a shopping cart for purchases. If you want your visitors to return, you'll want to provide

meaningful content. A CPA's site could publish tax tips and offer links to IRS forms. A catering

service could offer articles on how to host a successful party.

Encourage customer feedback via online forms and e-mail:

Pay attention to the valuable information your customers can give you. Ways to improve online

feedback are spelled out in our Session 3 Customer Feedback in the Business Expansion course.

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Develop a mailing list:

Most consumers resent junk e-mail, also called "spam." A far more appealing strategy is to

develop a mailing list. Invite your customers to "opt in" to receive a newsletter or notices of

specials running at your business. Make this information relevant and useful for your customer.

Consider providing a "coupon" that will give them a discount on their next purchase. And,

always give the recipient an easy means to "opt out" of receiving future e-mails.

Encourage social media:

Make sure that your site has clear access to “like” or visit your social media platforms. This is

another way for you to engage your customers and it is expected!

Make sure your site is optimized for mobile viewing:

The majority of growth in the E-Commerce sector is due to browsing on smart phones, with an

estimated 80% of Internet browsing being done on a smart phone. Just because you build a

website, doesn’t mean it will show correctly on these smart phones. Make sure that your site has

a “mobile” version and test it frequently for issues.

Online Marketing and Promotion

There are thousands of well-designed websites, but very few are visible on the search engines.

Almost 90% of Internet users today use search engines to find the information they need. Yet,

many businesses are not registered with search engines. Over 3.5 billion searches are done per

day worldwide. Search engines have a great capacity to drive traffic to your site, yet few new

entrepreneurs have the know-how to tap into this resource.

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Search engines: your primary marketing tool

In the past, the methods that search engines used to rank pages were primitive and easily

deciphered for savvy webmasters to manipulate.

Times have changed and gaining a high rank on the top search engines has become extremely

competitive. Today, submitting your website to a large number of free search engines will only

result in your e-mail address being added to a large number of spam lists. Search engines are

now looking to provide quality listings for their users, but also to turn a profit: hence "paid

listings."

How does your website rank?

It is important to monitor your search engine rankings so that you can track changes, monitor the

ones that you need to improve and identify engines with whom you are not listed. If your

customers did a search for specific keywords on a search engine, would they find your site? Are

you in the first 10 results or the first 30? The average visitor scrolls through 1.8-page results

during a typical search. If your business does not appear in those first 1.8 results, that could

translate to lost business.

What are people searching for?

"Search volume" is the number of times a specific keyword is searched over a period of time.

Having knowledge of search volumes will give you a sense for what is being searched for and

what keywords you may want to focus on. The goal is to find keywords or keyword phrases that

you feel would drive qualified traffic to your site. These keywords need to be in line with the

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content you have on your site and should be unique. Keep in mind the amount of competition for

each keyword and be creative in finding different keyword combinations that others may not

have tried yet.

How to manage search engine placement

It takes hard work, market research, educated decisions, and even trial and error. There are ways

to improve your rankings - and actions to avoid that will hurt your rankings. While you have the

option of hiring a search engine consultant to manage this important responsibility, you can also

do this yourself. Here are the factors that go into search engine placement and how to better

optimize your pages for search engines.

Key components of successful search engine marketing for a website

 Start with a descriptive domain name: The domain name you choose is important. It is so

very important because the name itself can help your website be more relevant to search

engines. Pick a domain name that is easy for your clients to remember.

 Submit to the top engines: Submit your website for review and indexing only to the top

search engines where people are actually doing their searches such as Google, Yahoo,

MSN, etc. Be careful to read the submission guidelines for each search engine before

submitting. For example, have a look at Google's search engine guidelines. Check in with

Google frequently as they sometimes have classes for the business owner on how to

master optimization on their platform.

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 Make sure your business also has a home: Register for Google places and other

business listings. The more your business is visible on the Internet, the higher your

optimization will go.

 Focus on your homepage: Your homepage is the single most important page on your

site. Your homepage represents your business and its image. Make sure you focus on

developing the content and the relevancy to search engines for this page.

 Develop content rich pages: Add content that includes keywords and phrases you are

targeting. Many search engines consider the location of the keywords in your site along

with their frequency to assess how relevant your site is to those keywords.

 Keep an eye on your competition: Stay informed of your competition's rankings. Top-

ranked pages rank well for a reason - so see what you can do to be more competitive! Can

you offer something they do not offer?

 Add new content: Keep your website fresh and updated with new content. Your visitors

will appreciate it, and the search engines will look favorably upon it.

 Networking with others: Expand your "link popularity" by gaining more inbound links

to your site. Get the word out and let other sites know about your site and how to link to

it. The more links coming into your site, the more doorways you open for visitors to find

you.

 Title Tags: Make sure the title tags across all the pages on your site are relevant to that

particular page. Your domain name is not a good idea for a title tag. Make sure your title

tag fits what your business does and matches content on your website.

 Pay per Click Advertising: Consider "pay per click" strategies such as Google.com and

Bing.com to enhance your overall marketing strategy. Pay per click now offers local

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 search options to better reach a targeted audience and will allow you to choose a

maximum dollar amount per day that you are willing to spend to fit your budget.

 Review your activity logs: "Activity logs" or "server statistics" provide you with statistics

on the number of visitors coming to your site, where the visitors come from and what

keywords are used. Some Web servers/hosts provide this information free. Google also

offers this as a new free service called Google Analytics.

Outsourcing search engine optimization

If you would like to outsource search engine optimization, ask your professional consultant for

the names of previous clients or "case studies." Speak with these clients to determine what, if

any, improvements they experienced. Make sure that unethical or questionable practices are not

used that will be harmful in the long run.

Targeted e-mail

E-mail allows you to communicate directly with your customers. It is also one of the most

abused forms of online advertising. Nobody enjoys receiving unsolicited e-mail touting a

business or service. While it is possible to purchase huge mailing lists of e-mail addresses that

can be used for marketing your product, you are likely to turn off large numbers of potential

customers by engaging in this practice.

Instead, opt-in mailing lists are now the preferred method of establishing e-mail lists of

customers who are genuinely interested in your product or service. Consider creating an online

newsletter. Make it informative, useful and worth reading.

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Finally, remember that each e-mail should also contain instructions for how the recipient can be

removed from the e-mail list.

E-Commerce Platforms

When starting your own business and promoting your product online, it may be appropriate to

start considering selling your product on 3rd party E-commerce platforms such as Amazon,

EBay, Etsy, Ebid etc. If you are looking to be noticed more in the international space, Alibaba

might be a good platform to get started on. No two sites are the same and no two sites will sell to

the same market and customer. It is important to research all E-commerce platforms and watch

your sales and traffic carefully. You have to be quick to identify problems with marketing and

product and be willing to change and adapt quickly.

How to get started

To sell on 3rd party E-commerce sites, you will need to register and then verify your identity.

Registration is a quick and easy process. Verification will be a little more involved, but is a

necessary process to ensure that eBay remains a safe marketplace. Once you have completed

these two steps, you will have a "Seller's Account" and will be able to start listing your items for

sale.

It is important to also protect your identity. If you will be selling out of your home office to start

with, it is advisable to get a P.O. box with a suite number (UPS Stores have these) so that you

can easily ship and receive shipments.

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Listing basics

 Write a good title and description. This is essential. Take pictures when possible.

 Specify what payment methods you will accept, and your return policy.

 Focus on order fulfillment- this is the key to maintaining your online brand. Manage

orders by giving up to date shipping information. There are applications that can help you

do this.

 Don’t forget about customer service. Make sure to be available and give expectations for

return calls/ emails when customers have questions.

Top Ten Do's and Don'ts

THE TOP TEN DO'S

1. Create a website to complement your business.

2. Hire a professional to create your website.

3. Use a .com website domain name that is descriptive of your business and easy to

remember.

4. Register your domain name. Keep your account information in a safe place.

5. Develop a mailing list to better connect with your visitors.

6. Provide updated useful content on your website in order to encourage visitors to return.

7. Encourage customer feedback via online forms and e-mail.

8. Learn how to, and continually implement, ways to improve your placements on top

search engines.

9. Keep your eye on your competition's rankings and get pointers from its sites.

10. Consider eBay as a means of selling your product and gaining traffic to your online store.

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THE TOP TEN DON'TS

1. Assume a website will assure you of competing favorably with large, established

competitors.

2. Turn your customers off with an unprofessional website.

3. Incorporate unusual or unique web design styles that are difficult to print or save.

4. Make it difficult to navigate your site.

5. Permit out-of-date content to remain on your site.

6. Rely on graphical buttons.

7. Try to create a website on your own unless you are a web designer.

8. Make it difficult for people to find your contact information.

9. Turn off your customers with unsolicited e-mail advertising.

10. Weigh your pages down with too much graphics and media.

Business Plan for Session 12: E-Commerce

You can now continue to assemble your business plan. We provided Microsoft Word template

for this session below:

Section 12: E-Commerce

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

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Session 10: Opening and Marketing

OBJECTIVE:

Before you open for business, make sure that all the elements of your business are in place. In

order to do this, we have provided a "Before You Start" checklist for you to review and

supplement with appropriate items. You will learn how to buy, and how to market, promote, and

advertise your business.

 Opening for Business

o Before You Start checklist

 Business Marketing

o What it takes to promote sales

o What and how to buy

o How to buy checklist

o Marketing tools

o E-commerce

o Promotion and advertising

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 o Mailing lists

 Most Common Mistakes

o Checklist to avoid pitfalls

 Suggested Activities

 Top Ten Do's and Don'ts

 Business Plan

Opening for Business

First things first

An opening checklist is a great place to start. Remember that airline pilots are required to use a

checklist before they take off!

Here are items you should have on your opening checklist. Add additional items that would be

appropriate for your own business.

Before You Start Checklist

 Have I focused on a specific product or service? As a general rule, specialists outperform

non-specialists. Will further specialization or focus improve my prospects for success?

The more specialized, the better.

 Will my business be home-based? Online? Storefront? Franchise?

 Have I acknowledged my competition and limitations? It may be hard to compete with

Walmart or Home Depot. These "category killer" discount chains have powerful buying

power and efficiencies of scale. Does your marketing plan serve a special niche?

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 Do I understand the difference between finding a market "niche" and going against what

the public wants? For example, if you build a house for sale, stick with a floor plan that

most buyers are seeking rather than trying to be uniquely different.

 Do I have a one-year cash flow projection prepared to ensure there will be ongoing

liquidity?

 Do I have the necessary E-commerce tools in place?

 Do I have appropriate insurance coverage in place? Are all insurance policies in force?

 Will I sell on credit and, if so, do I have a credit-rating policy in place for customers? The

last thing you need is to have customers who don't pay on time, and good customers will

respect you for this policy.

 Is my business plan complete and in written format? Does it include pre-opening, first

year and long-range planning? It will play a key role in securing investors and will help

uncover any weaknesses in the planning process.

 Have I taken the time to gain practical job experience and learn the basics of my business

by first working in the business for someone else? This is probably the best way to

discover if you have made a choice that will not only be successful but also satisfying to

you.

 Have I budgeted adequately for prototypes, research, sampling, and trials?

 Have I successfully test-marketed my product or service? Was the response positive? If

not, you need to re-design, re-work, and re-test.

 Have I focused on selling a great product at a fair price rather than a fair product at a

great price? "Great product" suggests a product or service with pricing power and "fair

product" suggests a commodity-type business more susceptible to competition.

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 Do I have all the communication, computer and other business tools in place? Do I have

the skills to use them?

 Do you have employee policies in place that comply with local laws? For example, are

you familiar with the difference between independent contractors and employees?

 Are the following elements of my business structure in place:

o Are my premises ready? This includes having a signed lease and my tenant

improvements completed.

o Have all permits and licenses been secured?

o Has the business name been registered? Check with your attorney.

o Are computers, telephones, cell phones, fax, and utilities operating?

o Are graphics for advertising and promotional materials ready?

o Is the domain name registered and the website online?

o Is infrastructure in place for E-commerce, if appropriate?

o Are all security systems in place including protection of premises, shrinkage

(theft) control and internal security?

 Have I selected and trained the number of employees I will need?

 Have I determined my personal work schedule? We recommend you maintain both daily

and long term (weekly or monthly) to-do lists. Also, be sure to maintain an appointment

book, such as the "Month-at-a-Glance" or Google calendar book to schedule

appointments.

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Business Marketing

What it takes to promote sales

Every business has a specific marketing strategy that usually works best and has already been

proven by your most successful competitors. You can benefit from their experience by copying

successful marketing plans, including selling methods, pricing and advertising. Make a list of the

most successful businesses that fall within your field of interest and study them (and even go to

work for them). Visit these businesses and be prepared to ask the questions that are most

important to you.

Learn as much as you can about the needs of your customers and how to gain feedback from

them. For example, if you open a restaurant, a displeased patron will probably not complain

because it is not a pleasant experience. Instead, he will not return. So, for example, you must take

care to inspect the plates as they are returned to the kitchen. For an in-depth review of the

importance of feedback and ways to benefit from it, review Session 3 Customer Feedback in the

Business Expansion course.

Will your customers be looking for convenience, pricing, quality and/or service? It will be

difficult to make sound marketing and promotional decisions without being informed of their

real wants and needs. If a specific geographical area defines your market, free and low-cost

demographic reports based on the census can be obtained that will furnish information on

population by race, income and home ownership. For resources that provide this information, use

Google.com to search for "demographic data." The United States Census Bureau has a Small

Business Edition that is free and can generate reports with key information pertaining to your

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location and type of business as seen below. Offering small business owners a tool to help

forecast demand.

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155
What and how to buy

Since products are changing and improving at a more rapid rate, inventory obsolescence has

become a greater business risk. Many products, such as computers, can be obsolete the day they

are purchased.

Rapid delivery firms (UPS, FedEx) and just-in-time assembly systems are great tools to use to

minimize your inventories. These expanding technologies have greatly reduced the need for

warehousing as well as the risk of obsolescence. And, the cash you free up can be put to uses that

are more productive.

If you are selling a product, you may want to consider having the item manufactured by an

outside source rather than setting up your own production facility. Many start-up entrepreneurs

outsource production in order to concentrate on marketing. There may also be cost

considerations because other places might be able to provide the same product more cheaply.

How to Buy Checklist

 Buy only what you think you can sell.

 Never place an order without knowing the price and the terms.

 Purchase orders must be in writing.

 Have complete specifications.

 Buy subject to your contingencies.

 Have backup sources.

 Be loyal to good suppliers.

 Have promises and extras verified in writing.

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  Get price protection.

 Try to award to the lowest bidder.

 Don't hesitate to repeatedly contact suppliers to expedite needed merchandise. "The

squeaky wheels get the grease."

 Communicate complaints quickly and respectfully.

 Use internal controls for ordering and receiving.

 Count and inspect everything as received.

 Use an inventory control system.

 Ask for and take term discounts.

 Pay on time.

 Pay only after verification.

 Watch your cash flow.

 Consider suppliers as a source of financing.

 It is better to pull suppliers your way, not push them. Be pleasant.

How to go about making major one-time purchases such as fixtures, equipment, major

repairs or construction needs:

 If possible, it is best to stick with suppliers within your community. Search for suppliers

through the "local" feature of search engines rather than responding to large ads placed in

yellow page directories. If you're looking for an electrician, enter "electricians" in a

search engine and enter your zip code for a "local" search.

 Clearly spell out in writing the scope of the work to be performed or exact description of

what you are seeking to purchase.

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  Let potential suppliers know that you are required to take bids on all purchases over a

stated limit, say, for example, $500.

 In some cases, a supplier may be a source of financing such as in the purchase of

electrical signs, fixtures or office equipment.

 A high level of negotiating skills will be a big advantage when making major purchases.

Learn how to negotiate in Session 5 Develop Negotiating Skills of the Business

Expansion course.

Marketing tools

Your business name will announce who you are and what you stand for. A memorable logo also

adds to your marketability. It will establish your name and brand recognition. It will enhance the

image you wish to create. Your logo can be used on all company materials including stationery,

business cards, brochures, Web site, gift boxes and shipping containers.

A good name:

 Is easy to remember.

 Is simple to spell and pronounce.

 Clearly says what you do.

 Stirs customer interest.

 Doesn't confuse you with a similar business.

 Has a positive ring to it.

 Evokes a visual image.

 Doesn't limit you to a geographic location or to a product.

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E-commerce

You may want to include the Internet in your Marketing Plan. Please refer to Session 12 E-

Commerce for more information.

Promotion and advertising

Your advertising plan becomes your blueprint for marketing. It will include your objectives,

budget, media plan and creative approach. A basic rule in promotion and advertising is, "Do

what you do best, and hire for what you don't."

Discuss your advertising plan with your vendors. They may provide you with co-op money if

you follow their rules and make proper application for the money. Even the smallest advertiser

can get up to half of their advertising costs reimbursed.

There are many types of paid media to deliver your message. Here are a few of the most

commonly used:

 Print (newspapers, magazines and newsletters)

 Radio

 Television, including cable

 Internet

 Yellow Pages

 Direct mail

 Trade shows

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Every entrepreneur learns through experience that there is a most efficient way to spend

advertising dollars. This can be hit or miss for the beginner and very costly. So, once again, learn

from the previous mistakes of your competitors. Find out and follow how your most successful

competitors advertise and promote their products or services.

Whatever advertising media you decide to use, become knowledgeable regarding the do's and

don'ts of advertising in that particular medium. For example, if direct mail works best for you, go

to a search engine and research direct mail. They will provide huge insights that can save you

from wasting advertising dollars on a flawed marketing plan.

Media publicity is free and helps to create a positive image for your business. Newspapers could

be interested in writing a feature story about you because of the widespread interest in

entrepreneurship and the fact that you are a successful start-up. Local newspapers, even the free

ones, are very effective. Your "press release" must have news value that can be turned into a bit

more of a feature story, as opposed to an announcement. This will make it more interesting and

relevant to the reader. Editorial space is much more valuable to you than display space...and it's

free!

Mailing lists

Before your start your business, now is the right time to begin developing a database of future

customers you wish to target. This list can be used for direct mail, invitations and newsletters.

Your database could include specific individuals, companies, and groups by location. Begin now

to:

 Join the Chamber of Commerce.

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  Collect business cards.

 Collect names or mailing lists from your church, school, organizations and community

groups.

 Get involved in your industry and community affairs.

Marketing on search engines

Utilizing your ability to register on search engines and crowd-source business review sites is an

essential marking tool to capture customer leads. To learn more, see the links below:

Search Engines:

 Google My Business: https://www.google.com/business/

 Bing Places for Business: https://www.bingplaces.com/

Crowd-sourced business review sites (U.S. based):

 yelp: https://biz.yelp.com/

Most Common Mistakes Made in Opening a Business

Your checklist to avoid pitfalls:

 Haste: slow down and prepare yourself for success

 Lack of focus: specialize, specialize, specialize

 Lack of on-the-job experience

 Inadequate research and testing: test your market first

 Lack of a well thought-out, written business plan

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  Lack of working capital

 Unprofessional decor, theme, logo, stationery, attire, packaging, ads, and website

 Not opening quietly to work out the shortcomings

 Poor signs: make them big, clear and readable - simple is good

 Untrained staff

 Poor relationship with vendors

 Unfocused marketing plan

 Not using the advertising media that works best for your specific business

 Skimping on insurance

 Ignoring possible problems

 Not recognizing your limitations

Suggested Activities

 Develop an email and mailing list before your start.

 Watch for growth possibilities and plan growth direction.

 Join your trade association and subscribe to trade magazines (stay current).

 Continue to review, develop and update your business plan, stating how you will market

your product or service.

 Continue to develop your budget, including proposed expenses for displays, signs,

advertising, promotions and online marketing like social media.

 Begin a file for merchandising and marketing ideas.

 Take seminars and classes. Use MOBI resources.

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  Read current trade magazines, papers and books. Attend openings and promotions of

businesses like yours.

 Develop and maintain an employee handbook.

 Talk to anyone and everyone in your field and collect business cards.

 Prepare a plan for growth possibilities.

 List potential problems and possible solutions.

 Become personally involved in selling your product or service.

 Keep your skills and knowledge current.

 Keep a journal to record your business experiences.

Top Ten Do's and Don'ts

THE TOP TEN DO'S

1. Use a "before you start" checklist.

2. Focus on selling a great product or service at a fair price.

3. Specialize. Specialists outperform non-specialists.

4. Train your employees thoroughly in marketing skills.

5. Consider outsourcing the manufacture of your product to a low-cost producer.

6. Minimize inventories by a just-in-time delivery and ordering system.

7. Consider your suppliers as a source of financing.

8. Now, before you start, develop a database of future customers.

9. Open quietly to work out the bugs before you schedule the grand opening promotion.

10. Include the Internet in your marketing plans with an appealing Website.

THE TOP TEN DON'TS

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 1. Order from a vendor without a written purchase order outlining all terms.

2. Hesitate to repeatedly contact suppliers to expedite needed merchandise.

3. Launch a new product or service without test marketing it first.

4. Be satisfied with unprofessional décor, logo, name, attire packaging or advertising.

5. Open unless your cash flow projection is positive for the first 12-month period.

6. Be in a hurry to open.

7. Compete with discount chains unless you efficiently serve a specialized need.

8. Fail to meet IRS rules regarding employment practices.

9. Be afraid to say "no" to poor credit risks.

10. Depend on your customers to complain; they just won't come back.

Business Plan for Session 13: Opening and Marketing

You can now continue to assemble your business plan. We provided Microsoft Word template

for this session below:

Section 13: Opening and Marketing

The full template for all sessions can be downloaded as one document:

MOBI Business Plan Template

Bonus Sessions

(Part -2)

This Quick Start Entrepreneur program includes the 10 most important and essential sessions

from our Starting a Business and Business Expansion courses, available for a limited time to help

you accelerate your entrepreneurial education during the COVID-19 emergency.

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Students who complete these 10 sessions and pass the final with a score of 80 or higher will earn

a Certificate of Completion and digital badge from Santa Clara University, just as with our other

courses.

We are also including five bonus sessions on new topics that can help support your

business. These sessions are not required to earn your Certificate for the course. New

topics Selling, Controlling Costs, and Making Ethical Decisions were developed by MOBI

Executive Director and SCU Professor of Information Systems and Analytics, Drew Starbird,

Ph.D., along with his colleague and MOBI instructor David Aune. Two additional topics were

developed in partnership with Santa Clara University’s Ciocca Center for Innovation and

Entrepreneurship: Business Storytelling and Adapting in the Midst of Change.

During this difficult time amid the COVID-19 pandemic, small businesses and entrepreneurs

face unforeseen challenges and difficult decisions. Your well-being and that of your family have

become a priority now like no other time, and it may be difficult to think about, let alone make

time for your business goals. We hope the Quick Start Entrepreneur course gives you a faster

path toward entrepreneurship, perhaps even with an at-home or freelance business you can start

now. Please also visit MOBI's COVID-19 Resources for Entrepreneurs & Small Businesses page

for links to organizations providing information and assistance.

We welcome you to take some time to explore and learn about the Quick Start

Entrepreneur course. All of the sessions of the course are available to preview. Once you decide

you are ready to learn more and pursue your Certificate, please click here to register for the

entire online course.

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SPECIAL FEATURE: SELLING:

OBJECTIVE:

In this session, our objective is to create a practical and successful plan for getting new

customers for your business. First, we start by introducing a way to focus your sales effort on the

most likely buyers. From there we define the sales process and how you can use it to attract

customers. Then we discuss the importance of a sales script and how to write one. Finally, we

present the idea of a monthly sales activities calendar and strategies for keeping your sales

strategy on track. The session includes the following sections:

 Focusing Your Sales Effort

o Collecting information on your sales contacts

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 o Developing a set of key questions

o Ask the key questions and filter your sales contacts

 Understanding and Using the Sales Process

o Find

o Learn

o Buy

o Use

o Share

 Creating a Sales Script

o Listening to preferences

o Explaining value

o Understanding constraints and obstacles

o Meeting constraints and obstacles

o Closing the deal

 Planning Future Sales Activities

 Selling Worksheet

 Summary

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 Focusing Your Sales Effort

One of the common mistakes of new business owners is trying to sell to everyone. As a small

business owner, you want to use your time as efficiently as possible. One way to use your time

efficiently is to focus your sales effort on customers who are most likely to buy from you.

Identifying the best customers, those most likely to buy, involves three steps:

1. Collecting information on your sales contacts. Sales contacts are individuals or

organizations who express some interest in your product or service. When you identify

sales contacts you want to make sure that you collect and record their contact

information. Use your phone, a computer, or a notebook to write down the name, address,

phone, and email of your sales contacts.

2. Developing a set of key questions. Develop key questions that will reveal how likely the

contact will become a customer. The key questions should address (1) whether the

contact has the problem that your product solves, (2) whether the contact is in the right

place at the right time to buy the product, and (3) whether the contact has the resources to

buy the product. Here are some examples:

Business description Key questions

Child care  Do you have pre-school children?

 Where is your home and your school?

 How much are you willing to pay for care?

Residential fencing  What kind and how much fence do you need?

 Are you sharing the cost with your neighbor?

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  When do you need it done?

 How much are you willing to pay for a fence?

Catering  How many people and when do you need it?

 Where is the event you are catering?

 What kind of event is it?

 What kind of budget do you have?

3. Ask the key questions and filter your sales contacts. Your key questions will tell you

whether your sales contact has a problem you can solve, is in the right place at the right

time to buy your product or service, and has the resources to buy your product. If the

answers show that a sales contact is likely to buy from you, then you can focus on

making a sale to them. The process of filtering your sales contacts is sometimes

represented by a funnel:

To make your business successful, you need to focus your attention on the best customers, those

most likely to buy. Once you identify them, you can begin the sales process.

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Understanding and Using the Sales Process

Selling is one of the most important responsibilities of a business owner. You will be better at

selling if you understand the “sales process” and use it to close the sale. The sales process is the

series of steps that your customer goes through to find, learn, buy, use and share your product or

service. The five steps of the process are:

Your responsibility as a business owner is to help the customer go through this series of steps. If

you do this well, your customer will buy from you and share that information with other

potential customers. When you are talking to customers, you want to know where your

customers are in the process so that you can provide information that moves them to the next

step. Below, we describe these steps in more detail.

Find. The first step is helping the potential customer FIND your product or service. The

potential customer must know that your company exists and that you offer a product or service

that solves their problem. You want to make sure that your company is advertising where the

potential customer is looking for information. In order to make sure you are advertising in the

right place:

 Find out where your prospective customers look for information.

 Find out what words prospective customers look for when searching.

 Match your company name and description to keywords the customer is looking for.

 Use advertising that uses customer keywords.

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For example, a coffee shop might use email, Yelp, or signage to reach customers and use

keywords like “coffee”, “pumpkin spice latte”, and “tea” in their messages. The coffee shop’s

business name and logo should reflect these keywords and the value proposition.

Learn. Customers who FIND your business will want to LEARN more about your product and

service. They might check out your website, look for reviews on Yelp, or talk to your existing

customers to see if you do what you promise to do. They want to know that you make customers

happy with your product or service. They may also look at competitors to see how you stack up.

Here is how you can help your prospective customer easily learn about your product and

services.

 Demonstrate how you can meet the customer’s need. Create a video, give a

demonstration, and explain how your product or service works. Make sure to explain how

the features of your product or service benefit the customer. For example, a coffee shop

might give free brewed coffee samples. A residential fence company might show lumber

and gate hardware samples.

 Make sure your existing customers are satisfied. Provide great service and correct

customer problems and complaints quickly. For example, a coffee shop is better off

making a new coffee drink for a customer who is not satisfied. A happy customer will

more than pay for the small price of remaking a drink.

 Use customer testimonials. Show how your customers are happy and satisfied with your

product or service. Your existing customers have much more credibility than you do.

Testimonials, positive product review, word-of-mouth recommendations are very

powerful ways to get new customers. For example, a coffee shop with great product

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 reviews online would influence new customers. Existing customers who invite their

friends to coffee is the best kind of selling.

 Research your competitors and the industry. Know what things are important to compete

in your particular market place. Figure out all the minimum things customers will expect

from you to be considered. For example, a coffee shop might need to open at 6am and

offer seating during the lunch hour.

Buy. After your potential customers LEARN about your products and services, you want them to

BUY from you. In this step, your goal is to give your potential customer reasons to buy and to

remove any obstacles to buying from you.

 Tell the customer why they should choose you. Customers have many choices. Tell the

customer why you are better, faster, or higher value. For example, a coffee shop might

say “Our coffee is better because we have organic, freshly roasted, high quality exclusive

beans”

 Explain benefits. Make a list of benefits and tell the customer. Make it easy for the

customer to understand how they will benefit by choosing you.

 Overcome objections. Confirm that your product or service meets the customer needs.

Ask if you have answered all their questions and issues. Ask the customer if there is

anything preventing their purchase. Then address the issue to remove the obstacle.

Address common objections before the customer even brings them up.

 Ask for the order. Ask the customer to buy from you. Don’t be shy.

 Find out why. If they do not buy, see if you can find out why. This will help you

improve.

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Use. Your job isn’t finished after the customer BUYs. After the customer buys your product or

service you want to make sure that they USE it correctly. If they use it correctly, they get all the

benefits, value and results they expect. Good customer service will create additional sales and

lead to recommendations. Resolve customer issues or complaints promptly. Unhappy customers

will talk to more people than happy customers will.

 Help the customer get started. Help the first time customer learn how to use your product

and service. Do an orientation or walk through as necessary.

 Be proactive. Go along with the customer and help them along the way. Proactively reach

out to them to make sure everything is okay. Encourage them with good customer

service.

 Resolve problems. Check to make sure their needs are being met and the problem is

solved. Give them information to show that their problem is solved.

 Be responsive. Answer the phone, reply to email and text messages. Respond to social

media complaints. Responding quickly shows you care.

 Get feedback. Ask your customer if they are satisfied. Ask if their expectations are

exceeded.

Share. After your customer USEs the product you want them to SHARE their experience with

other potential customers. You want every customer to be a satisfied customer who recommends

you to others.

 Get recommendations. Ask your customer if they are satisfied enough to recommend you.

 Ask customers for referrals. Make it easy for customers to recommend and send you

referrals. You could give discounts or rewards for referrals that turn into new customers.

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  Ask for reviews. Ask your customer to write a positive review.

The sales process will lead to satisfied and happy customers who will help you bring new

customers to your business and make new sales. Part of the process is making sure that a

consistent message is delivered to your potential customers. In the next section, we talk about

creating a sales script that ensures that you give all potential customers the same information

every time.

Creating a Sales Script

A sales script is an outline of the conversations between you (or your staff) and potential

customers for your products and services. A good sales script helps you organize the

conversation in a way that ensures you collect the information you need, clearly state to the

customer how they will benefit from buying your product and service, and close the sale. In

most businesses, you will talk to many more potential customers than actual customers. A

customer who does NOT buy your product or service can provide information that will be very

helpful for making the next sale and making your business successful in the future.

Here are the key parts of the sales script:

 Listening to preferences. The first step in the sales script is listening to the customer to

understand their needs and wants. Tell the customer what you heard and ask if you stated

it correctly. If not, ask more questions until you understand.

 Explaining value. After you understand what the customer needs, explain how he or she

will benefit from your products and services. Make it clear how your product or service

will meet their needs.

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  Understanding constraints and obstacles. During the conversation, find out if your

customer has constraints that must be met before the purchase can occur. Typical

constraints include how much they can pay, when they can take delivery, where they can

take delivery, and other people who might be involved in the transaction. Understanding

the constraints is important for making the sale with this customer and making sales with

other customers in the future.

 Meeting constraints and overcoming obstacles. Once you understand the customers

constraints and obstacles, explore ways to overcome them. Can you come up with terms

and conditions that make it possible for the customer to make the purchase?

 Closing the deal. Ask for the order and agree on the method and terms for payment.

The sales script can include all of these parts but it can also be very simple. For example,

imagine that you are at a trade show or neighborhood event where you want to make people

aware of your coffee products, including coffee beans and prepared coffee. Here is an example

of a simple sales script:

Listening to preferences “Would you like to taste our new coffee blend?

“What kinds of coffee do you like: light, medium, dark roast?”

“Do you drink coffee every day?”

“What do you like with your coffee -- milk or sugar?”

Explaining value “Did you know that our coffee is available for purchase online?”

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 “Did you know that our coffee has been ranked #1 in our market?”

“Did you know that we have our own unique app that has coupons and

loyalty points?”

“Do you know that our coffee is grown using sustainable agricultural

practices?”

Understanding constraints and obstacles “How much do you spend on coffee everyday?”

“Do you have constraints on how much time you have for coffee?”

“Do you have any health challenges that impact how much coffee you

can drink?”

Meeting constraints and overcoming “Our coffee is relatively inexpensive, so you will save money”

obstacles.
“You can order our coffee in advance so you have more time on your

coffee break.”

“We offer decaffeinated coffee to address your concerns about

caffeine.”

Closing the deal. “How many pounds of beans would you like to buy?”

“Let me send you our app so you can download it”

“Here is a loyalty card. Be sure to fill out the form.”

“Here is a coupon. Just take it to the coffee shop.”

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 Creating and using a sales script will help you gather all the information you need to identify the

best customers and what they need. It will also help you move the customer from the LEARN to

the BUY step in the sales process.

Planning Future Sales Activities

Now that you have identified your customers, started the sales process, and created a sales script,

you can begin planning sales activities to support your sales process in the future. A “sales

activities plan” list the activities that will support customers in the sales process over the next

three to six months. Some customers will be at the FIND stage and some will be at the USE

stage. A good sales plan will have activities related to every stage of the sales process.

Here is an example of a sales plan for the next three months for our hypothetical coffee shop.

Sales process October November December

Find Activities

 Email
Lemonade Tea Pumpkin Spice Egg-Nog
 Event

 Ads/promo World Series event Thanksgiving events Holiday parade

Halloween promo Google ads Coupons

Learn Activities

 In store
Tea brewing Cold brew Espresso equipment
 Website

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  Reviews News - tea News - beans News - equip

Yelp, Instagram Yelp, Instagram Yelp, Instagram

Buy Activities

 Loyalty Card
2 for 1 drink New brew special Food complement
 Drink/Beans

Blend of the Month Bean of the Month Tea of the Month

Use Activities

 Remodel
Outdoor patio Meeting spaces Holiday decor
 App

Halloween game New design New Year contest

Share Activities

 Gift
Equipment sale Mug sales Gift basket
 Reviews

Yelp, Instagram Yelp, Instagram Yelp, Instagram

Of course, every business will have different Find, Learn, Buy, Use, Share activities for different

market segments. Part of the development of a sales activity plan is to discover what works and

what does not work with your potential customers. If you find that activities related to sports

(like the World Series) do not motivate your customers, then it will need to be replaced with

another activity in the future (like a Halloween Costume event).

The most important part of planning for future sales activities is thinking in advance about what

you will be doing to attract new customers. Your competition will be planning and working hard
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to take your customers away. You need to continue to attract and keep customers in order to stay

competitive.

Selling Worksheet:

Where are your going to write down/record the

name, address, phone, and email of your sales

contacts?

What is one of the key questions you will ask a

sales contact to predict whether they will buy?

What are the five steps of the sales process? 1._____________________________

2._____________________________

3._____________________________

4._____________________________

5._____________________________

Where do your customers look for information

about products/services like yours?

Why should the customer buy your product or

service? Why is it special?

What is the most important obstacle to buying

that impacts your customers?

What will you say to ask for the order?

Name an activity you will do in your first

month to help customers learn about your

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business.

Summary

In this module, we covered several topics related to selling your product and service. Selling is

essential to the survival of your new business and it will take up a lot of your time. The most

important thing to remember about selling is that your selling activities must change with the

market-- and the market has the potential to change very quickly. As the owner of the business,

you need to be ready to change your message, your communication method, your sales script,

and sale process to adapt to the needs of your customers.

Special Feature: Controlling Costs

OBJECTIVE:

In this session, our objective is to help you manage the costs of your business so that you can

make a profit and grow your business. We start by talking about the options for tracking costs,

then discuss the different categories of costs your business will have. We continue with a

discussion of strategies for managing costs so that you can keep them under control. We finish

the session with a look at productivity and how it is related to cost and the business’s success.

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 Tracking Your Costs

o Professionals

o Bookkeepers and accountants are not the same

o Software

 Organizing Your Costs

 Categorizing Costs

o Direct vs. indirect costs

o Costs of goods sold

o Capital expenditures

o Necessary and ordinary expenses

o Inventory shrinkage

 Managing Costs

o Consolidate purchasing for a better price

o Encourage competition between your vendors

o Ask for discounts based on loyalty

o Convert fixed costs into variable costs

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 o Outsourcing

 Productivity and Cost

 Controlling Costs Worksheet

 Summary

Tracking Your Costs

Tracking costs is one of the most important things that a business owner does. Your business’s

survival depends on keeping costs under control and so you need to know how much you are

spending on the things you need to run the business.

Tracking your business’s costs may seem like a challenging (and perhaps boring) task.

Fortunately, there are a number of tools you can use to make the task easier. Which tool you use

depends on how much of the work you want to do yourself. In general, business use two

different ways to track costs. One way is to hire professionals to track and report on costs. The

other way is to utilize one of the many software programs designed to track costs.

Professionals. Just like you use lawyers for legal matters, you can use accountants and

bookkeepers for financial matters like tracking your costs. Large businesses have accountants

and bookkeepers who are employees of the business. Smaller businesses often hire independent

accountants and bookkeepers to spend a few hours each week, month, or quarter to track costs

and prepare financial statements.

Bookkeepers and accountants are not the same. Bookkeeping is the process of recording an

organization’s day-to-day financial transactions. Tracking the checks you write, the money you

deposit in your savings account, and the charges on your credit card are bookkeeping activities.

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One of the jobs of a bookkeeper is to provide accurate information on financial transactions to

the business’s accountant.

Accounting is the process of converting the transactions reported by bookkeepers into

information that managers use to make decisions. Accountants create reports and make

recommendations regarding cash flow, income and profit, and the assets and liabilities of the

business. They make recommendations on investments, tax planning, and where to get more

funding. In general, accountants have more training than bookkeepers. Certified Public

Accountants, CPAs, have passed a standardized test that proves they have the knowledge and

skills to provide accounting services to the public.

Software. Small business owners have a number of software options for tracking costs and

performing basic bookkeeping functions. Most of these software options are internet-based, are

relatively inexpensive, and provide up-to-date information on your business’s financial situation.

The most popular small business accounting software programs in the US in 2019 are

Quickbooks, Freshbooks, Zoho, and Xero. These programs offer different options depending on

how complex your business is and what kind of reports you would like the software to generate.

Of course, the price of the software depends on these features as well.

The most important features of software for accounting and bookkeeping are:

 Easy to set-up and use.

 Provides multilingual technical support.

 Tracks both expenses and income.

 Creates invoices for customers.

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  Pays your bills online.

 Integrates with your business’s checking account and credit cards.

 Prepares financial statements for your accountant.

Additional useful features include managing accounts receivable and accounts payable, and the

ability to accept online payments.

Every business, small or large, needs to track costs in order to stay healthy. Fortunately, there are

many options for performing this vital function. Before you select the best option for you and

your new business, you should consult with others in the business, talk with you accountant, and

carefully review the features you need for your business.

Organizing Your Costs

Now that you have a method to track your costs, you need to think about how to organize

your costs. First, we will review the differences between fixed and variable costs, then we will

assign costs to products, services, and profit centers.

Fixed costs are costs that are independent of volume. Fixed costs tend to be costs that are based

on time rather than the quantity produced or sold by your business. Examples of fixed costs are

rent and lease costs, salaries, utility bills, insurance, and loan repayments. Some kinds of taxes,

like business licenses, are also fixed costs. Since you have to pay fixed costs regardless of how

much you sell, you should be careful about adding fixed costs to your small

business. Fixed cost is often called overhead.

Variable costs are costs that change as the volume changes. Examples of variable costs are raw

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 materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies,

and credit card fees. In some accounting statements, the Variable costs of production are called

the “Cost of Goods Sold.”

(To review product and sales volume and fixed and variable costs further please Fixed and

Variable Costs)

The main reason for tracking costs is to make good decisions about your business. One of the

most important decisions that you make will be deciding which products and services are you

going to offer. This decision is easier if you organize your revenue and costs around the product

and services that you offer.

For example, suppose that you own a bakery that sells cakes and pies. Cakes and pies require

different ingredients and different amounts of labor to make. If you know the costs of the

ingredients and the cost of the labor for these products, and you know the price at which you sell

them, you can calculate the profit per item. If you know the profit per item, then you can make

good decisions about whether or not to offer a product, how much to charge, and where you need

to reduce cost.

The following table illustrates this idea:

Product Cakes Pies

Selling price (per item) $10 $9

Cost of ingredients (per item) -$5 -$3

Cost of labor (per item) -$3 -$3

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Other costs (per item) -$1 -$1

Profit (per item) $1 $2

Even though cakes have a higher price than pies, the expenses for cakes are higher than the

expenses for pies, so pies are more profitable. With this information, you can decide whether to

continue to sell cakes, whether to charge more for cakes, or whether to try to reduce the cost of

making cakes.

Organizing your financial information around products or services will help you make better

decisions for your business. In the next section, we look more closely at the different kinds of

expenses that you have.

Categorizing Costs

A helpful way to learn more about your expenses and how to manage them is to put your costs in

different categories. By categorizing your costs, you get more information about how you are

spending your money and so you will be able to make better business decisions. You will also be

ready when it is time to pay your taxes. Below we talk about different ways to categorize your

business expenses and the way to use the information to make good decisions.

Direct vs Indirect Costs. Direct costs are costs that are assignable to a specific product, service,

location, or project. Direct costs can be raw materials or ingredients, equipment, or labor.

Indirect costs are costs that you need to pay to run your whole business and cannot be assigned to

only one product or service. Examples of indirect costs are the costs of bookkeeping, insurance,

the office computer, cell phones, and vehicles. By the way, your salary as an owner is an indirect

cost because it is assignable to all you business’s products and services, not just one.

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Tracking direct and indirect costs tells you how you are spending your money on different

products, locations, and projects. If you know how you are spending your money, you can make

sure you are charging the right price to your customers and you know where to focus your

attention to reduce cost.

Costs of Goods Sold. The cost of goods sold (COGS) is the sum of all the direct costs used to

make the products that a company sells. It is only relevant for companies that make and sell

products. If you take the total revenue that a company gets from sales and subtract the COGS,

you get the gross profit of the company. COGS are an important number on the income

statement for your business and you should watch it from month to month to make sure that costs

aren’t increasing.

Tracking COGS tells you if productivity is changing (discussed later) or if the cost of materials

and labor is changing for the products that your business makes.

Capital Expenditures. Capital expenditures are costs associated with assets that last longer than

a year like buildings, property, technology, and equipment. Since these assets last longer than a

year, they don’t get “used up” like regular operating expenses. They continue to have value over

many years. For example, at the bakery described in the preceding section, the oven used for

baking is a capital expenditure that will be used for many years.

Tracking capital expenditures will help you understand whether the business’s assets are being

used productively. By knowing the cost of capital expenditures, you can decide whether or not

the business should lease or buy equipment, for example. Knowing the cost of capital assets is

especially important when you are preparing your company’s tax return.

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Necessary and Ordinary Expenses. According to the Internal Revenue Service (IRS),

businesses can only deduct expenses that are “ordinary” and “necessary” from the calculation of

income taxes. Ordinary expenses are expenses that are “common” and “accepted” by businesses

like yours, and necessary expenses are expenses that are “helpful” and “appropriate” to a

business like yours. The IRS watches small businesses to make sure that owners do not deduct

personal expenses as if they were business expenses. It is illegal to deduct personal expenses as

business expenses on your tax return.

If you use part of your home as a business office, then you can deduct part of your home

expenses (a portion of your rent, for example) as a business expenses. Similarly, if you use your

car for both business and personal activities, then you can deduct part of your car expenses as a

business expense. You should consult with your tax preparer to make sure that you are

complying with tax law.

Inventory Shrinkage. Shrinkage is the loss of inventory due to theft, errors, fraud, or damage.

Shrinkage costs can be a real problem for retail firms and can add up to a lot of money. It is

measured by comparing the difference between the recorded inventory and the actual inventory.

Inventory is an asset owned by the company and when inventory “shrinks” then the value of the

inventory declines.

Tracking inventory shrinkage will reveal whether or not inventory is being stolen or mishandled.

With this information, you can decide to invest in security measures.

In this section, we discussed several ways of categorizing business expenses in order to make

better business decisions. In the next section, we present several strategies for reducing costs.

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Managing Costs

As the owner of the business, it is your job to manage costs and keep them as low as possible

without sacrificing product quality or failing to deliver to your customers. There are a number of

strategies for keeping your costs low:

1. Consolidate purchasing for a better price. Many suppliers will offer better prices for

consolidated purchasing. If you are buying supplies for many different sources, then

explore the option of using one supplier and asking for lower prices.

2. Encourage competition between your vendors. If there are multiple possible suppliers

for your business, encourage them to compete for your business by reviewing purchasing

agreements and contracts frequently.

3. Ask for discounts based on loyalty. If you have been served by the same supplier for a

long time, you can ask for a discount based on your loyalty. It may be possible to enter

into a contract that keeps costs low.

4. Convert fixed costs into variable costs. Whenever possible convert fixed expenses into

variable expenses. Variable costs take the pressure off your cash flow needs by

converting fixed costs to variable costs.

5. Outsourcing. You might be able to “outsource” some of the work that you do “in-

house.” Outsourcing means finding another company to do part of the work instead of

doing the work yourself.

The best strategy for controlling costs is to be frugal. Whether you are talking to partners,

employees, or lenders, you should let them know that you are careful with money and expenses.

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By being frugal, you sent an example for others and build trust with your investors and your

employees.

Productivity and Cost

Productivity is an important measure of business performance that is closely related to cost. A

common definition of productivity is the amount of products or services that the business makes

with a given quantity of inputs. Usually, productivity is expressed in terms of output per hour of

work. For example, a less productive bakery might produce 25 loaves per hour of work and a

more productive bakery would produce 30 loaves per hour of work.

More productive companies produce more goods and deliver more services with the same

amount of inputs. By producing more with the same inputs, your business reduces the cost of

meeting the needs of your customer and you increase your profitability. A word of caution --

don’t increase productivity by sacrificing quality. Sacrificing quality may lead to short-term

profit, but your business will lose in the long-run as customers decide to go elsewhere.

Good businesses measure productivity over time to see if they are getting better, worse, or

staying the same. Here is a simple example for a bakery:

Week 1 2 3 4 Total

Production (loaves) 1000 1200 980 1100 4280

Labor (hours) 40 40 40 40 160

Productivity (loaves per hour) 25.00 30.00 24.50 27.50 26.75

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In this example, productivity is high in week 2 and low in week 3. A good owner asks why this

happened and works to improve productivity over time. Remember, as productivity increases,

the cost per unit of production declines, and profit increases.

Controlling Costs Worksheet

How will you track costs? ❐ Professionals ❐ Software

Why would a business owner track costs and

profits by product or by service?

Why would a business owner track the Cost of

Goods Sold (COGS)?

What kind of costs does the IRS let you deduct

from your taxes?

What is inventory “shrinkage”?

What cost management strategies could be

used by your business?

What is the best strategy for controlling costs?

What is a common definition of

“productivity”?

As productivity increases, the cost per unit of (a)_____________________________

production (a) ______, and profit (b) ______. ( (b)_____________________________

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Summary

In this session we discussed the importance of tracking, organizing, categorizing, and managing

your business’s costs. Controlling costs leads to increased profitability and growth for your

business. Costs can get out of control fast if you don’t keep an eye on them. Make sure you have

a plan for tracking costs and asking questions when they increase.

Special Feature: Making Ethical Decisions

OBJECTIVE:

In this session, our goal is to help you make ethical decisions. We start by explaining what we

mean by an ethical decision and why there are misunderstandings about expectations for ethical

behavior in business. Then we identify some of the common ethical mistakes in business and the

implications of unethical behavior in business. Finally, we present the idea of codes of conduct,

how to write them, and how to deal with issues not covered by your code of conduct.

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 Ethical Decisions

o Ethics

o Business ethics

 Misunderstandings about Ethical Expectations

o Announcing a Code of Conduct or Code of Ethics

 Common Ethical Mistakes in Business

 Implications of Unethical Business Behavior

o Reputation

o Risk

o Ethical mistakes are avoidable risks

 Codes of Conduct

o Workplace

o Business practices

o Community

 Writing a Code of Conduct

o Decide on the areas that need to be covered

o Make a list of ethical challenges and your expectations

o Write out the rules (and revisit every six months)

 Connecting Ethics, Integrity, and Trust

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  Making Ethical Decisions Worksheet

 Summary

Ethical Decisions

As a business owner, you will face many decisions that impact you, your business, your

customers, and your employees. Nearly all of your decisions will have some kind of ethical

dimension to them. For you to make ethical decisions, you first need to understand what is meant

by ethics.

Ethics is the set of principles that govern behavior. In most cases, we think of ethics as

governing a person’s behavior, but it is common to have a set of principles that governs the

behavior of an organization or the behavior of a community. For example, professional

associations often define codes of conduct that govern the behavior of the association’s

members. Similarly, some communities define ethical principles that govern behavior in order to

create a healthy and safe place for people to live and work. Of course, religious principles are

written to create a common understanding of the difference between right and wrong among

members of the same church.

Business ethics is the set of principles that govern the behavior for people who are involved with

business. Since business involves the exchange of money for products or services, there are

many opportunities for ethical mistakes. Ethical mistakes usually arise because of a

misunderstanding about expectations for behavior. In the next section we talk about the source of

these misunderstandings.

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Misunderstandings about Ethical Expectations

Ethical mistakes in business arise because of misunderstandings about appropriate and

inappropriate behavior with customers, employees, coworkers, the community, and the

government. The person responsible for eliminating misunderstandings is you, the business

owner.

When everyone understands the set of principles that governs behavior, there are fewer ethical

problems. Unfortunately, expectations for ethical behavior are not always understood in the same

way by everyone. There are several reasons for this kind of misunderstanding. Sometimes the

principles that govern behavior are unclear because they are not explicit. The leaders of the

community, organization, or family have not made it clear how they expect people to behave.

Sometimes the principles are unclear because people are doing something new for which

standards of behavior have not yet developed. This case is common when new technology is

being developed or when a new business is being started. Sometimes, the set of principles that

govern behavior is closely related to community and culture. As the community becomes more

diverse, sometimes there are misunderstandings about what is appropriate and what is

inappropriate ethical behavior.

Regardless of the reason for the misunderstanding, it is the responsibility of the business owner

to announce how she or he expects people in the business to behave. In many cases, this

announcement takes the form of a “Code of Conduct” of a “Code of Ethics” which we discuss

below. In addition to making this announcement, the business owner must demonstrate the

importance of ethics by modeling the appropriate behavior (“walking the walk”).

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Here is an example of Code of Ethics for a construction company that clearly announces the

company’s expectations for behavior.

Code of Ethics: ABEL Construction Company

Employees will ensure that:

1. They do not engage in any activity that might create a conflict of interest for the company or for themselves individually.

2. They do not take advantage of their ABEL position to seek personal gain through the inappropriate use of ABEL information

or abuse of their position. This includes not engaging in insider trading.

3. They will follow all restrictions on use and disclosure of information.

4. They observe that fair dealing is the foundation for all of our transactions and interactions.

5. They will protect all company, customer, and supplier assets and use them only for appropriate company-approved activities.

6. Without exception, they will comply with all applicable laws, rules, and regulations.

7. They will promptly report any illegal or unethical conduct to management or other appropriate authorities.

Source: https://www.abelconstruct.com/code-of-ethics, accessed August 29, 2019.

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Common Ethical Mistakes in Business

Business is based on commercial transactions. In your business, you exchange products or

services for your customers’ money. You also exchange money for work from your employees

and money for supplies from your vendors. Of course, you also pay yourself for the effort you

put into your business. Over the course of a year, a business engages in hundreds or thousands of

transactions.

Every business transaction involves a buyer, a seller, and the community. Although we rarely

think about it, the community (including the environment and the government) is involved in

every transaction in some way. If you use the public road, pay a business tax, employ others,

borrow money, or use the courts, you are engaging the community in your business transactions.

The community is significantly involved in businesses that are highly regulated, like food

service, and in businesses that use public assets, like roads.

The most common ethical challenges facing businesses arise from dishonesty and failure to

comply with agreements. Dishonesty isn’t limited to lying. Dishonesty includes failing to

disclose important information to a buyer, seller, employee, or partner. For example, if you buy

insurance from a company but that company does not have the assets to reimburse you for a

claim, then important information has been withheld. If you sell a product that has a defect that

the buyer doesn’t know about, you are withholding important information from the buyer

Failure to comply with agreements is another common ethical challenge. The details of every

business transaction involves a contract. Sometimes the contract is written down (explicit) and

sometimes the contract is not written down (implicit). Whether the contract is implicit or explicit,

you are obligated to fulfill the contract as you have promised. As we mentioned above, the

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community is also a part of your transactions. When you do business, you make an agreement

with the community (and the government) to pay taxes, comply with environmental regulations,

and obtain the licenses and certifications required by law.

Below we list some of the common ethical dilemmas that face small businesses.

Common Ethical Dilemmas Facing Businesses

1. Compliance with environmental and safety rules. Business owners and employees are tempted to shirk

rules regarding the environment or the safety of workers. The usual justification is that the impact of one

unethical decision on the environment is small, while the cost of compliance can be relatively high for

small businesses.

2. Paying workers for overtime and extra time. Sometimes, business owners must ask employees and

colleagues to work long hours to finish big jobs or meet customer expectations. It is tempting to ask for

the extra work without paying for it.

3. Honesty in operations, accounting, or marketing. Business owners will be tempted to exaggerate

efficiency, productivity, profitability, and sales -- and conceal losses, mistakes, risks, and disputes.

4. Discrimination with customers or employees. In the US, refusal to do business with a person for reasons

related to race, color, national origin, religion, sex (including pregnancy, childbirth, and related

conditions), disability, age, citizenship status, and genetic information is prohibited by law. In California,

a number of categories are added to this list including sexual orientation, gender identity, political

affiliations, and veteran status. When you refuse to do business with someone who is represented on this

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 list, you are imposing your own set of principles and values on someone else.

5. Honesty about hidden attributes. In many transactions, the products or services have attributes that canno

be immediately observed or verified. Examples include production attributes like organic or fair trade

coffee, safety attributes related to contamination, certifications of service providers, and indemnification

against risk (insurance). It will be tempting to tell a potential customer that these attributes exist when

they do not.

Implications of Unethical Business Behavior

Now that we have discussed some of the ethical challenges facing small business, we can address

the implications of unethical business behavior. Many will argue that acting ethically is its own

reward. This may be true, but there are two additional reasons that you should act ethically if you

own a small business. These business reasons are related to reputation and risk.

Reputation. If your business has a good reputation, you will attract more customers and attract

good employees. Building a good reputation takes a lot of effort over many years. Losing a good

reputation happens very quickly, especially in a world where customers can check your

reputation on social media outlets, like Yelp.

The quickest ways to ruin your business reputation is to fail to fulfill your contracts and other

obligations. Examples of this kind of failure are discriminating against customers or employees,

lying about hidden attributes of your product or service, and asking for extra work without

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paying for it. In each case you have made a commitment to comply with law, or deliver a certain

quality, or pay for a service, and failed to fulfill your obligation.

Risk. Every business faces risk and one of the responsibilities of a business owner is managing

risk. Depending on the kind of risk, there are different ways of managing it. Unavoidable risks

are usually managed by insurance. For example, if part of your business includes operating a

motor vehicle, your company can purchase automobile insurance to protect you from the cost of

collisions.

Ethical mistakes are avoidable risks. The best way to protect you business from ethical

mistakes is to operate your business in a way that is consistent with ethical behavior. As the

business owner, this means announcing your expectations regarding the behavior for your

employees and partners, and modeling ethical behavior.

Ethics impacts your reputation and your risk and, therefore, the success of your business. One of

the ways to ensure that your expectations about ethics are clear is to create a “code of conduct”

for your business. The code announces to your employees and your customers how you will do

business. In the next section we talk about these codes.

Codes of Conduct:

A code of conduct is a set of rules for the behavior of the people in your business, including you.

It is an expression of your ethics and the way that you want to do business. Many large

organizations and companies have detailed codes of conduct. For example, the National

Education Association publishes a “Code of Ethics” that governs the behavior of teachers.

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 Similarly, the Coca-Cola Company has a 48 page “Code of Business Conduct” for its employees,

managers, and partners.

Even if it you are only a one-person business, you should have a written code of conduct.

Writing out a code of conduct will give you a chance to think about what behavior is acceptable

to you and what behavior is unacceptable to you. Having a written code of conduct prepares you

for the ethical challenges you will face and helps you to make better decisions. You can use your

code of conduct to show customers and potential employees that your take ethics seriously and

that you will be a good business partner.

Your code of conduct should cover at least three areas:

1. Workplace. Your code of conduct should indicate how people who work in the business

treat one another, how they treat customers, and the importance of health and safety for

everyone involved in the business. Here is an example from the General Motors Code of

Conduct:

“Safety in the Workplace: We want to provide a safe work environment for everyone at GM, including

employees, contractors, and visitors. We take our commitment to ensuring a safe and healthy workplace seriously

and believe it’s everyone’s responsibility.”

General Motors Code of Conduct: Winning with Integrity.

2. Business Practices. Your code of conduct should talk about your commitment to honesty

in sales practices, to meeting your obligations, and to fair dealing with suppliers and

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 vendors. It should also address the fair compensation of your workers, employees, and

owners. Here is an example from the Starbucks Standards of Business Conduct:

“Our communications with our customers or potential customers must be truthful and accurate. When we say

something about our products and services, we must be able to substantiate it.”

Starbucks Business Ethics and Compliance: Standards of Business Conduct

3. Community. Your code should address your commitment to complying with laws and

regulations, especially with respect to diversity, licensing, taxes, and the environment.

Here is an example from the Waste Management Code of Conduct:

“Waste Management is committed to conducting business in a manner that respects, preserves, and improves the

environment.”

Waste Management Code of Conduct

As the business owner, your ethics guide the business’s code of conduct. Don’t wait until your

business is facing an ethical crisis to think about these issues and how you want your business,

employees, and partners to behave.

Writing a Code of Conduct

Writing a code of conduct may seem like a difficult task, but it is actually straightforward. There

are three steps in the process of writing a code.

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 1. Decide on the areas that need to be covered. Depending on the size of your business

and the type of business, you might be able to restrict your attention to just a few areas.

For example, a one-person business doesn’t need to spend time on employee issues like

workplace harassment. The list below shows “Common Provisions of Codes of Conduct

and Ethics” from the Ethics & Compliance Initiative.

2. Make a list of ethical challenges and your expectations for your own behavior. Based

on your experience, make a list of ethical dilemmas and challenges that will face

businesses like yours. Along with the dilemma, decide how you want to behave, and how

you want your business to behave when these challenges arise. For example, if many of

your transactions are in cash, you might be tempted to hide your income from the

government. What is your policy about declaring income and paying taxes? You might be

able to get a better price from suppliers if you bribe the salesperson. What is your policy

regarding bribes? Perhaps some of your customers belong to a religion or ethnic group

that you dislike. What is your policy about discriminating among your customers on the

basis of race or religion?

3. Write out the rules (and revisit every six months). Based on your list of challenges,

write out your rules for behavior. Every six months you should revisit the rules and make

sure they cover all the issues you face as a business owner. Add rules when needed.

Common Provisions of Codes of Conduct and Ethics

Compliance, Integrity and Anticorruption Environmental Issues

 Accuracy of corporate finances and  Commitment to the sustainability

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 financial reporting  Employee health and safety

 Employee records and expense reports

Ethics and Compliance Resources
 Bribes

 Political contributions  Ethics advice helpline

 Reporting procedures
Conflicts of Interest
 Anonymous/confidential reporting

 Gifts and gratuities hotline

 Political activity  Summary of investigations process

 Outside employment  Anti-retaliation policy and protections

 Family members for reporters

 Disclosure of financial interests  Accountability and discipline for

violators
Employee, Client and Vendor Information

 Ombuds program
 Maintaining records and information

 Privacy and confidentiality Internet, social networking and social media

 Disclosure of information
 Internet and social network use at work

Employment Practices  Prohibited sites and content

 Policies regarding posts about

 Workplace harassment
company, work products or coworkers
 Equal opportunity
 Online relationships between managers
 Diversity
and their reports
 Fair treatment of staff

 Work-family balance

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  Discrimination Relationships with third parties

 Fair labor practices

 Procurement
 Illegal drugs and alcohol
 Negotiating contracts
 Use of organization property and

resources

 Proper exercise of authority

 Employee volunteer activities Source: Ethics and Compliance Initiative:

 Romantic relationships with coworkers https://www.ethics.org/resources/free-

 Incentives and recognition systems toolkit/code-provisions/ accessed August 29,

2019.

Connecting Ethics, Integrity, and Trust

For every business (and person) there is a strong connection between ethics, integrity, and

trust. In this chapter, we discussed ethics and how to create a code of conduct for yourself and

your business. Integrity is a word that means firm adherence to your code of conduct. People of

integrity follow the code of conduct, even when other people are not watching.

Integrity leads to trust. If others believe that you follow your code of conduct, they will believe

that you are trustworthy. Even if they do not agree with everything in your code of conduct, they

will trust you if they believe YOU will follow your code.

Trust leads to strong relationships and strong relationships are the foundation of successful

business. A strong relationship with a customer leads to repeat sales from that customer and new
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sales from customers who hear about your business. A strong relationship with a vendor means

consistent delivery and quality even when supplies are short. A strong relationship with a partner

means aligned goals, quick decisions, and increased profit.

Making Ethical Decisions Worksheet

What is business ethics?

What do you think is the most common reason

for misunderstandings about ethics?

In business, dishonesty means lying. It also

means what?

There are three parties to every transaction: a

buyer, a seller, and…..

Which of the “Common Ethical Dilemmas

Facing Business” do you think is the MOST

common in your business?

Who is responsible for ethics in your business?

What three areas should every code of conduct 1.

cover? 2.

3.

Pick one of the “Common Provisions of Codes

of Conduct and Ethics” that does not apply to

your business?

Ethics leads to integrity, and integrity leads

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to_____________________________

Summary

Making Ethical Decisions Session © Drew Starbird and Dave Aune 2020

Special Feature: Adapting in the Midst of Change

OBJECTIVE:

It is common for businesses to experience a crisis, whether natural disaster, economic downturn,

or health emergency like COVID-19. Small business owners have to quickly adapt to changes in

the marketplace, and, more specifically, in their own personal marketplace. So what should small

business owners focus on in order to pivot their business during a challenging time? In this

session we discuss three key areas to consider: Communication, Community, and Delivery.

 Number One: Communication

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 o Customers want to hear from you

o Build trust through relationships

 Number Two: Community

o Use social media to connect

o Shift focus to engagement

o Encourage return visits to your site

 Number Three: Delivery

o Think outside the box

o Establish client loyalty

 Summary

Number One: Communication

Communication is always essential. When so many things are in flux, your customers want to

hear from people and businesses that matter to them. As a small business owner, you have the

unique advantage of knowing your clients and having a personal relationship with them. Now is

a great time to get out your email list, and let your customers know how you are acknowledging

and responding to the change, but more importantly, it’s a chance to check in with them and see

how they’re doing. Remember trust is built through relationships.

Example:

A bookseller in Michigan owns a small store with a very regular “older clientele.” She knows this

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particular group of clients is not active on social media and yet, they are regular readers.

Understanding the technological limitations of her clients, she contacted them via phone and email

to check in on them, and rather than expecting them to go to her website to order books, she simply

took photos of new items and books that she was receiving and sent them by email so they could

see what was available in the store. Customers are able to order these items via email by replying

with what they want. The store owner is able to reach her clients in a very personal way, further

developing their loyalty to her and vice versa.

Number Two: Community

Over time, you have likely established a community around your business, accompanied by a

social media presence. Use social media to connect with your community. However, shift your

focus from an outward push - offering goods and services - to engagement. Use this time to ask

your followers to send some information to you! Maybe something fun like a social media poll?

What are you doing to stay sane during this “shelter in place” mandate? Perhaps an easier

question like “What is bringing you joy right now?”

Asking your community to post pictures or share a story of what they are doing engages them

and gives them something to look forward to. The idea is to keep them coming back to your site,

further developing your relationship with them. As a small business owner, you have the ability

to foster a relationship with your clients in a very personal, unique way. It is worth your time.

Number Three: Delivery

Are you able to deliver your product the same way you always have? Likely not. Is there another

way you can get your product or service to your customers? Challenge yourself to think outside

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the “box.” How might you maintain some type of revenue even though you might not be able to

perform your service or deliver your product?

Example:

A nearby auto shop has started selling oil changes in “packs” at a reduced price. So the customer

is able to buy several oil changes at a time, to be used now and in the future. This business owner

gets the revenue now, and has the opportunity to sell other services during future visits. By

drawing the customer back several times, the business owner has the opportunity to establish

client loyalty.

Summary

Small businesses are in a unique position to foster relationships with their clients, and during a

time of change, and perhaps isolation as with COVID-19, these connections are increasingly

important. By focusing and really spending some time thinking about ways to pivot how you

think about Communication, Community, and Delivery, you can Quickly Adapt your Business in

the midst of sudden changes your business may face.

Adapting in the Midst of Change - Important Take-A-Ways

For a quick reference guide on ways to impact your business from this session, download

the Adapting in the Midst of Change Take-A-Ways infographic.

Special Feature: How to Talk About Your Business: Business Storytelling

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OBJECTIVE:

As you travel along the road toward entrepreneurship, you will talk about your business to many

different people and in many different situations. Sometimes it will be a formal business pitch,

and other times it will be during a casual conversation. Either way it’s good to know how to talk

about your business, to have a story in mind. In this session, Morgan Slain, Director of the

SCU Ciocca Center for Innovation and Entrepreneurship's Bronco Venture

Accelerator and active private equity and venture capital investor, lends his expertise on

techniques for successful business storytelling.

 Why a Story?

o The best pitches are great stories

o Stories are what we remember best

o Entrepreneurs tell their business story often

 What Makes for a Great Business Story?

o Speak to emotions

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 o Build common ground

o Use the power of contrast

 How You Tell Your Story Counts

o The "how" of your story is the "why" of your business

 Summary

Why a Story?

The best pitches are great stories. We human beings are hard-wired to recognize stories and

imagine them in our minds. Stories are what we remember best and so telling a good story, even

if it’s short, creates a better experience for people who are hearing you talk about what you are

doing and why you’re doing it.

As entrepreneurs, you have the chance to tell your business story all the time. You tell a story not

just when you are talking to investors, but also when you are recruiting employees, trying to

motivate your staff, and selling to a potential customer. You even tell your story when you are

asked about what you do by a friend or relative, or someone you don’t know.

What Makes a Great Business Story

1. Speak to Emotions. The best business stories engage the listener’s emotions. As an

example, consider the story of a visually impaired person asking for donations with a sign

he had created. The sign says, “I am blind. Have a beautiful day.” He gets only a few

donations. Then, someone walks by and rewrites the sign. Suddenly, there are many more

donations. When he asks someone what his new sign says, he is told it says, “It’s a
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 beautiful day, and I cannot see it.” Using nearly the same words and ideas, this new sign

conveys a stronger emotional message. This story is powerful because it speaks to

emotions, and emotions are more powerful than logic.

2. Build Common Ground. Part of the power of the example above is that it builds on

common ground - as humans we can all appreciate beauty. It is something that connects

us. You can do the same thing with your business whenever you are pitching. Establish

common ground with your audience, and it really helps your story resonate and stick.

3. Use the Power of Contrast. The third element of a powerful business story is contrast

and the surprise that goes with it. When you ask someone a routine question like what do

they do for work, you don't expect the answer to be, “I make people happy,” or “I help

people succeed,” or “I change people’s lives.” These answers show that what your

business does every day is really a means of creating happiness and success for your

customers and clients. You go beyond “what is” and begin talking about “what can be” -

that can be very inspirational. It can provide a compelling contrast to the way a problem

is commonly approached, or approached by your competition. Think of contrast as a new

point of view that gives you the edge.

How You Tell Your Story Counts

Another thing to keep in mind is that often what you say is not really as important as how you

say it. The truth and authenticity of what you say is more powerful than your message itself.

Often how you tell your story is the “why” of your business. In telling your story, why you are

doing what you are doing is more important than the details of what you are doing. And

definitely more powerful than how you are doing it.

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Summary

I hope some of these suggestions are helpful in thinking about your own story for your business,

product, or brand. For inspiration, you can draw most effectively from your own life, the lives of

your friends and family, and life all around you.

When you are talking about your business in your daily life, with customers, or potential

investors down the road, I urge you to really think about your story. What emotions are you

trying to reach? What common ground are you building on? How is contrast and surprise

inspiring your audience? And perhaps most importantly, how are you telling your story? Be

honest and authentic, and your passion about your business will shine through.

Business Storytelling Important Take-A-Ways

For a quick reference guide on ways to impact your business from this session, download

the Business Storytelling Take-A-Ways infographic.

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