Nxlevel Guide For Entrepreneurs

NxLeveL Guide for
Entrepreneurs
PowerPoint Presentation
4th Edition
Course Overview
Session #
1. Introduction, Overview & Entrepreneurship
2. Planning and Research: Entrepreneurial Essentials
3. Organizational Matters: Management & Legal Structure
4. Marketing- “Behind the Scenes”: Analysis & Understanding
5. Marketing- “On-Stage”: Strategies, Tactics & Implementation
6. Financial Overview: Books, Records & Controls
7. Managing Your Money: Financial Planning, Budgets &
Assumptions
8. Managing Your Money: Developing & Using Cash Flow Projections
9. Understanding and Using Your Financial Statements
10. Financing Your Business: Alternative Sources of Money
11. The Deal Making Process: Negotiating in the Real World
12. Your Business Future: Managing Growth & Plan Completion
NxLeveL™Guide for
Entrepreneurs-OHD 1-a
Participant Materials
TEXT—NxLeveL™ Guide for Entrepreneurs

WORKBOOK—NxLeveL™ Business Plan
Workbook and Resource Guide
 Session Outlines
 Workbook
 Resource Guide
 Class Handouts
SUPPLEMENTAL HANDOUTS
 Sample Business Plans
 Instructor Handouts
 Other
NxLeveL™Guide for
Entrepreneurs-OHD 1-b
Class Agenda
Class Opener
Instructor Topics
Guest Speaker
Break
 Refreshments
 Networking Activity
Work Hour
 Discussion Groups
 Worksheet Activities
 Business Plan Sections
NxLeveL™Guide for
Entrepreneurs-OHD 1-c
“Expectations & “Ground Rules”
Attendance
 Absenteeism
 Being on time
Participation
 Discussion
 Confidentiality
 Listening
Assignments
 Reading
 Worksheets
 Written Business Plan Sections
 Format
General
 “Safe” environment to test ideas
 Ask questions
 Add “ground rules” as needed
NxLeveL™ Guide for

Entrepreneurs-OHD 1-d
An Entrepreneur Must Have…
1. Passion
2. Persistence
3. Good Health/ENERGY
4. Creativity/Innovation
5. Independence/Self-reliance
6. Intuition
7. Self-confidence
8. Market Awareness
9. Ability to accept Challenges
10. “Hard Work” Ethics

Entrepreneurs-OHD 1-1
Ongoing Self Assessment
Entrepreneurial…or NOT?
Entrepreneurs Non-Entrepreneurs
Highly motivated Motivated by others

Can’t wait to get to work Monday already…
Lines between work/play blurred
Work is 8 to 5…period.
Energetic, Enthusiastic
Lackadaisical, Ho Hum
Creative
Takes prudent risks with capital Rigid
Active, Involved Gonna win that lotto soon
Well read Slug, Disengaged
Well rounded Reads only the comics
Inquisitive One dimensional
Assertive Rarely departs from the familiar
Industrious…bigger, better, cheaper?” “It’s not my job”
Inventive Does things the same old way
Shows great initiative
Does only as told
Independent, the lead dog
“It’s not my job”
Highly developed leadership skills
Competitive
Runs with the pack
A doer Let’s someone else direct
Enjoys being the boss Unwilling to put it all on the line
Sees problems as opportunities A watcher
Resents the boss
Sees opportunities as problems

Business Expansion Opportunities
Where Do the Ideas Come From?

 Un-met or under-met needs
 Study, read study
 New uses for old things
 New markets-track trends
 Become part of a “virtual corporation”

The NxLeveL™ Business Plan
Cover Page
Table of Contents
Section I. Executive Summary
Section II. Mission, Goals & Objectives
General Description of the Business
Mission Statements
Goals and Objectives
Section III. Background Information
The Industry
The Business “Fit” in the Industry
Section IV. Organizational Matters
Business Structure, Management & Personnel
Operating Controls
Section V. The Marketing Plan
The Products/Services
The Market Analysis
Marketing Strategies
Section VI. The Financial Plan
Worksheets and Notes to Cash Flow Projections
Cash Flow Projections
Financial Statements
Additional Financial Statements
Appendix Section Action Log
Supporting Documents

Entrepreneurs-OHD/Handout 1-4
Questions About Business Planning
“What’s in it for me…?”
 Isn’t planning for “big business” only?

 How does planning help management?
 Can’t I hire someone to do this for me?
 How can I know all the answers?
 How often do I have to do this?
 What if I don’t complete the process during
class…or ever!?!

The Role of Planning

Keys to a Successful Planning
Process
 The owner assumes the lead in the process

 The planning process involves everyone in the family
and/or business
 The plan reflects reality
 There is a contingency plan for the worst case scenario
 The goals and objectives are achievable and clear
 The plan is flexible
 The plan is reviewed often and revised whenever
“reality” dictates
NxLevel™ Guide for

Ten Reasons to Prepare a
Business Plan
 Forces you to look at the whole business

 Focuses attention on important questions
 Helps clarify and communicate your goals and objectives
 Becomes a means of assigning priorities
 Becomes a framework for daily decision-making and better
management
 Helps maintain a “proactive” business attitude
 Serves as a benchmark to track performance
 Stimulates development of a new/future business
opportunities
 Becomes a tool to access capital, acquire business partners,
attract employees
 ROAD MAP increases your chance of success

Overview of “Marketing”
Research
Study the industry…then
Study the customer, competition, and location.
Analysis
Analyze your research about the industry,
Customer, competition, and location.
Analyze your “competitive advantages.”
Strategies and Tactics
Determine your best methodologies for getting
your goods and services “to market” based on
your analysis.
The “P’s of Marketing” that will guide your

research, analysis and strategies:
PRODUCT
PRICE
PROMOTION
PLACEMENT
(& PEOPLE!)
Traditional Marketing Definition
Marketing is a process made up of these distinct

functions:
Determining what people want
Providing products or services to satisfy the
want
Selecting the most effective means of reaching
people with information about that product or
service
Developing strategies for Creating the desire for
the product or service in people who have not
actively expressed their “want”
Market Research
You must learn…

 Who
 How
 Where
 What
 When
 Why
 How often
 How much

Research Tools
 Libraries (Public, University/College, Private)

 On-line and off-line
 Trade Associations
 Business Periodicals
 State and Federal Resources
 Local Resources (Chambers of Commerce, SBDCs, BICs)
 Professional Research Companies
 NxLeveL™ Business Resource Guide
 Studying the Competition
 Surveys (focus groups and interviews)
 Observations
LEARN WHERE THEY ARE…
FIND OUT WHAT THEY PROVIDE!!!

Drawing Industry Conclusions
 How has the industry developed?

 How do small business operate within this industry?
 What are the current growth patterns in the industry?
 What is the industry’s size at present?
 What’s projected a year from now?
 Five years from now?
 Are there any niche markets that are hot?
 How has, and will, international trade impact your industry?
 How will current and new government regulations impact
the industry?
 How will technology impact your industry and the small
businesses within it?

Sole Proprietorship
Advantages
 Easy to organize
 Less reporting
 No double tax
 Freedom of action
Disadvantages
 Unlimited liability
 Fewer tax benefits
 Termination on death of owner
 Adverse tax consequences upon sale
 Limited ability to raise capital
General Partnership
Advantages
 Few formalities
 Combination of resources & talents
 Personal tax benefits
Disadvantages
 Unlimited liability
 Power of each partner
 Dissolution upon death of a partner
 Partnership profits taxed as income to partners
 Managing relationships between partners

Limited Partnership
Advantages
 General partners have additional capital
 Limited partners have limited liability
 Allocation of income and losses
 Avoids “double tax”
 Finite existence
Disadvantages
 Initial organizational cost high
 Limited partners have no control
 Partnership profits taxed as income to partners
 Compliance with state and federal securities laws
C-Corporation
Advantages
 Limited liability of shareholders
 Perpetual existence
 Flexibility of financing through outside investors
 Transfer of ownership by sale/gift of stock
 Tax benefits available to corporate employees
 Well-accepted form of doing business
Disadvantages
 Annual reporting requirement
 Double taxation
S-Corporation
Advantages
 Same as for C-Corporation
 Taxed at the individual shareholder level
Disadvantages
 Except for the tax consequences, same as for
C- Corporation
 With minor exceptions, only individuals can be
shareholders
 Limited number of shareholders
 Limited to one class of stock
 Must use calendar year
Limited Liability Company
Advantages
 Limited liability without limits on management
participation
 Flexible ownership and capital structure
 No double tax
 Allocation of tax benefits among members
Disadvantages
 Poor tax treatment of fringe benefits
 Transferability must be governed by buy/sell
provisions

Government Regulations
Which impact YOUR Business?
General Business Taxation
 Personal Income Tax
 Business Income Tax
 Sales Tax
 Property Tax
 Business License Fees
Employee Regulations
 Payroll Tax/Withholding
 Employee vs. Independent Contractor
 Wage and Hour Regulations
 Hiring Regulations
 OSHA
Consumer Protection Regulations
 Warranties
 Uniform Consumer Credit Code

Government Regulations (cont’d)
Which Impact YOUR Business?
Commerce Regulations
 Professional Licenses
 Business Registration
 Uniform Commercial Code
Zoning Regulations
 _______________________
Bankruptcy Regulations
 _______________________
Environmental Regulations
 _______________________
Other Regulations (specific to your business)
 _______________________
 _______________________
 _______________________

Terms of a Contract
 Performance
 Price
 Quality Control
 Bailout
 Time to Perform
 Non-Conforming Goods
 Place of Delivery
 Warranty
 Good Faith
 Remedies
What’s in a Lease?
 What are you leasing?

 True cost of the lease
 Payment “escalators”
 Permitted uses
 Lease responsibilities
(insurance, maintenance, etc.)
 Renewal options
 Purchase rights
 Right of first refusal
 Exclusivity

Ownership and Protection of Ideas

Types of Insurance
Covering Your Business

 General liability
 Product liability
 Professional liability
 Key-person
 Business property
 Business interruption
 Automobile
 Employee dishonesty
Types of Insurance-(cont’d)
Covering Your Employees

 Workers’ compensation
 Life insurance
 Health/Medical
 Pension plans
Specific to Your Business

 Other
 Other
 Other
 Other

Succession Planning
Ask the tough questions…

 Are family members capable of running
the business?
 Can family members work together?
 Do any family members want the
business?

Management Leadership Tips
 Delegate
 Set goals
 Create a vision
 Communicate
 Inspire
 Have fun
 Identify strengths of team members
 Plan long-term
 Trust
 Provide direction
Traditional Organizational Chart
P r e s id e n t
O p e r a tio n s S a le s M a r k e tin g F in a n c ia l
M anager M anager M anager M anager
Q u a l i ty A s s e m b ly L o g is t i c s A rea P u b l ic P r o m o tio n A c c o u n tin g F in a n c e

C o n tro l M a n a g e rs R e la tio n s
Employees
Employees

Optional Organizational Chart

Key Management Issues
Learn to “let go”

Develop both your “internal team” and your
“external team”
Look at the big picture
 Develop management goals and strategies
 Create a workable structure
 Assign responsibilities (who)
Communication is key
Lead by example
Get advice
Have fun, be creative!
Personnel Policies Manual
Sample Table of Contents

Overview and Mission
Employment Policy & Conditions
Conditions of work
Compensation
Benefit Plans & Programs
Personnel Records
Training & Development
Internal Staffing
Travel & relocation
Absences
Termination or Retirement
Establishing Policies
Policy Application
Equal Employment Opportunity

IRS 20-Point Checklist-
Independent Contractor or Employee
Primary Factors YES NO

1. Does the service recipient have the right to require compliance with  
significant instructions?
2. Does the service recipient have the right to set the hours of work?  
3. Does the service recipient have the right to set the order or sequence  
of services to be performed?
4. Does the service recipient have the right to discharge the service provider?  
5. Does the service provider have the right o hire, pay and supervise  
assistants as the nature of the work requires?
6. Does the service provider have no ability to realize a profit or loss?  
7. Does the service provider have no investment in significant tools, materials
and other equipment when such items are necessary to accomplish the task and are  
customarily provided by the service provider?
8. Does the service provider have no significant investment in facilities when
they are necessary to accomplish the task and they are customarily provided?  
Secondary Factors
9. Does the service recipient train the service provider?  
10. Does the service recipient have the right to require oral or written reports?  
11. Does the service recipient pay by the hour, wee k or month?  
12. Does the service recipient pay for business and/or travel expenses?  
13. Does the service recipient have the right to require personal service?  
14. Does the service provider usually not work for more than one firm at a time?  
15. Does the service provider maintain a continuing relationship with the service recipient?  
16. Does the service provider devote substantially full time to the service recipient?  
17. Does the service provider have the right to terminate the relationship at any time without
incurring liability?  
18. Is the service provider integrated into the service recipient’s business?  
19. Does the service provider not make or her services available to the public on a regular and  
consistent basis?
20. Does the service provider work only on their service recipient’s property or designated
location?  
Note:
Yes answers suggest employee status. No answer suggest independent contractor status.
More weight should be given to the first eight questions than the last twelve.
If you answered “yes” to any of these 20 questions, proceed with caution. Consult an accountant or tax lawyer who is familiar
with the problems raised by hiring individuals as independent contractors.

Key Employee Management Practices
 Identifying tasks and job descriptions

 Interviewing, selecting and hiring, and training
 Setting performance goals
 Evaluating/measuring performance
 Creating compensation and incentive strategies
 Facilitating communication and learning
 Teaming for collaboration and cooperation
 Building in fun and creativity

Risk Management Check-up List
 Are my goals written, measurable, and realistic?

 Have I communicated those goals with everyone in the business?
 Do I understand the goals of other family members and/or employees?
 Do I know which risks can keep me from attaining my goals?
 Have I decided which risks am I comfortable managing with my own
resources, and which I should shift to others or seek assistance with?
 Have I scheduled regular insurance check-ups for health, life, casualty,
property, disability and long-term care?
 Do I have a confident relationship with my risk management advisors?
 Do I understand how much coverage I need to provide adequate cash flow
for my business?
 Will my lender understand my overall plan for business and help me
achieve my goals?

Risk Management Check-up List-cont’d
 Are all my assets covered in my risk management plan?

 Do I know what financial records I need to adequately manage my
business? To document my borrowing requests?
 Do I understand the terms and conditions of my borrowing arrangements?
 Do I have alternative sources of income in case of low market prices, etc.?
 Do I have a will? When was it last reviewed?
 Have I advised family members as to the location of my will, other
important documents, etc.
 Do I have life insurance? Is my list of beneficiaries up to date?
 Have I explored ways of transferring assets to the next generation?




Pros and Cons of Outsourcing
Pros
 Allows a focus on core competencies
 May lower costs by eliminating redundant personnel, while freeing
up other staff for more important tasks
 May allow you to reassign tasks to staff members who earn less
money, thus reducing overall costs
 Relatively well-paid employees may become available to work at
lower scales
Cons
 Outsourcing to foreign firms may result in bad PR, low employee
morale, and consumer disaffection
 You may need to manage multiple outsourcing relationships across
cultural and legal boundaries
 Some tasks are not suitable for outsourcing, and some jobs are not
economical to outsource
NxLeveL Guide for Entrepreneurs

OHD/Handout 3-24
Is Outsourcing Right for Your
Business?
Understand your core competencies
 What expertise do you have in-house?
 What expertise must you seek elsewhere?
 Figure out what you do best, and consider delegating the rest
 Can you manage the new relationships that outsourcing will involve?
 Are there structures in place to make it work?
 What matters to customers? Will outsourcing affect their perception of your
business, or your core competencies?
Look at long-term viability, not short-term savings

 Pay attention to employee and customer perceptions and reactions
 Don’t assume that decreasing labor costs will always provide big savings!
 Weigh efficiency against effectiveness. Seeking greater efficiency is a bad
idea if it lowers your ability to meet customer service and quality standards!

OHD/Handout 3-25
What is Marketing?
Marketing is EVERYTHING
you do to promote your
business, from the moment
you conceive of it to the point
at which customers buy your
product or service and begin
to patronize your business on
a regular basis.
The key words to remember
are everything and regular basis.
- Jay Conrad Levinson

Traditional Marketing Elements
Three “parts” to the marketing process:

RESEARCH
ANALYSIS
STRATEGIES and TACTICS
The “P’s of Marketing” that will guide

your research, analysis and strategies:
PRODUCT
PRICE
PROMOTION
PLACEMENT
(& PEOPLE!)

What Do You Sell ???
A Product???
A Service???
NEITHER!!
 BENEFITS ! 
Sell the Benefits!
Features: Size, Quality, Varieties, Types, Materials

Used
BENEFITS: What will your product or service DO FOR
or GIVE TO your customer?

“Product” Marketing Considerations
 Features & Benefits
 Life Cycle & Seasonality
 Packaging & Labeling
 Product/Service Mix

Parts of Market Analysis
1. Determine the “PROFILE” of your customer
2. Determine your MARKET AREA-geographic

boundaries and size
3. Determine the number of people (or

businesses) in your trade territory who
potentially “FIT” your customer profile
4. Determine the MARKET POTENTIAL for your

business in your trade area
Demographics
 Age
 Gender
 Location
 Education
 Occupation
 Income Level
 Martial Status
 Household Type

Psychographics
Needs
 Security, esteem, love, acceptance, understanding,
beauty, good health
Values
 Status, success, greed, simplicity
Buying Styles
 Price, fads, quality, technology, luxury, convenience
Cultures
 Modern, artistic, religious, liberal, conservative,
environmental
Interests
 Sports, reading, fitness, cooking, workaholic, gardening

Why Analyze the Competition?
You Might:
 Learn more about what the customer really wants (or
doesn’t want!)
 Discover unserved “niche markets”
 Get ideas for marketing, merchandizing, product mix
 Obtain valuable advice, support, information
(particularly from remote or indirect competition)
You Will:
Determine if you have any
COMPETITIVE ADVANTAGE

Place
The three keys to business

success…
Location
Location
Location !
Success !
Distribution Channels
 Industrial distribution channels take raw

materials to manufacturers.
 Wholesale distributors move the finished

goods from the factory to the vendor.

Product Strategies
 Understanding the features and benefits of

your product
 Determining product lines and appropriate
product mix (depth and width)
 Packaging and imaging your products and
your business
 Developing service enhancements

Developing a Company Image/Identity
The business name should reflect the nature of the business

“Joe’s Accounting” describes the business
“Joe and Associates” leaves you guessing
The logo should be professionally designed to convey a desired
identity
Use your logo consistently on all visual business items
Business cards, letterheads, signage, advertising and
promotional materials
Business cards allow your customers to contact you easily-make
them consistent with your logo
Signage should lead the customer to your place of business
Buildings should be inviting, clean, safe

Customer Service Essentials
 Welcome customers to your business

 Thanks customers for coming to you
 Educate customers about your products or services
 Answer questions-or find answers to those you don’t
know
 Follow up promptly
 Thank customers for choosing you
 Develop and implement customer retention strategies
“The customer may not always be right, but he/she

is always the customer…”
Pricing Strategies
Setting Your Price

 What are your costs?
 What will your customer pay?
 What image do you want to convey?
 What does the competition charge?
 What will the market bear?
 How does a service provider determine price?
 What other pricing challenges does your business
type face?

Public Relations & Networking
P.R. is:
 Advertising without paid advertising
 Press releases
 Sponsoring Events
 Drawings, contests, give-aways
 Speaking as a “Guest Expert”
 Participating in Community Organizations
Networking, Networking,
Networking!
Elements of Effective Advertising
WHO?
Right Audience
WHAT?
Right Message
WHEN?
Right Time
WHERE?
Right Place
HOW MUCH?
Right Budget!

Elements of an Advertisement
When it comes to your The headline
business, grabs attention
you may not want to
“go with the flow!” An illustration
may pull more
readers than the
headline does.
Make sure it
Going with the flow may take you where you don’t want to works with your
go. A good business plan will help you navigate your message.
business around the obstacles.
A little text that
Assure your business’ success by preparing a business
plan. NxLeveL will help by providing you with business
sells the benefits
planning classes. or shows how to
avoid problems
Don’t miss this opportunity to learn what you need to
know about keeping your business afloat. Call today! Name, address,
phone number —
Now they want to
Business Training Classes
1234 Main St., Downtown, 555-1234
talk to you!
5-7 Handout
Trade Shows & Consumer Fairs
 Good place to meet a lot of prospects all at once

 Great way to show the product in operation and
provide samples
 Attend the show before you exhibit
 Make your booth a class act
 Train your staff extensively
 Have a demonstration/video/sample in your booth
 Don’t forget business cards and brochures/flyers
 Follow up promptly
Evaluate everything you did and all costs

http://www.yourhomepage.com
Marketing on the Internet

 Does it work?
 Should all business have a web page?
 How to get started…
http://www.nxlevel.org/
Check it out!
Accrual vs. Cash Accounting
Accrual Method
 Work is done
 Record revenue and expenses at this time
Cash Method
 Cash is received
 Record revenue and expenses at this time

Sample Balance Sheet

Owner’s Equity
Asset Pie
Assets
Belong to
Creditors
Assets Belong
to Owners

Liquidity Ratios
“Liquidity” - the Business’ short term ability to pay its current

and unexpected debts.
Working Capital
 Current Assets - Current Liabilities
Current Ratio
 Current Assets  Current Liabilities (2:1 preferred)
Quick Ratio
 (Cash + Marketable Securities + Receivables)  Current
Liabilities (1:1 preferred)
Capital Structure Ratios
Debt to Equity Ratio
 Total Debt  Total Equity
Debt to Total Assets
 Total Debt  Total Assets

A Good Accounting System
 It works for you!

 The right information at the right cost
 Keep it simple
 The business owner is involved
 Good internal control

Accounting Journals
Sales Journal
 Sales on account
Purchases Journal
 Purchases on account
Cash Receipts Journal
 Cash received
Cash Disbursements Journal
 Cash paid out
General Journal
 Other transactions

Computerized Accounting Systems
Be sure you find out about :

 Hardware requirements
 Ability to modify
 Support services
 Ability to expand
 User friendliness
 Training
 Reports and documents
 Personnel requirements
 Local use
Income Taxes
Sole Proprietorship
 The owner pays tax
 Schedule C
Partnership
 The partners pay tax
 Form 1065
Corporation
 The Corporation pays tax
 Form 1120
LLC
 Taxed as a Partnership

Records Retention
Type of Record Retention Period

Bank Statements 7 years
Business licenses Until expired
Cash register tapes 3 years
Cash registers Keep permanently
Canceled checks 3 years
Financial statements Keep permanently
General ledger Keep permanently
Inventory records 7 years
Invoices (A/P) 3 years
Invoices (A/R) 3 years
Property, plant & equip. records Keep permanently
Purchases orders 3 years
Receiving reports 3 years
Tax Returns Keep permanently
Time cards or tickets 3 years
Travel expense records 7 years
Other:

Payroll Taxes
Federal Income Tax

 Paid by employee
State Income Tax

 Paid by employee
Social Security
 Paid by employee & employer
State & Federal Unemployment

 Paid by employer

Payroll Tax Reporting
Form 941
 To report federal income and social security
taxes
Form 940
 To report federal unemployment taxes
Form 8109
 To make deposits
Form W-2
 To detail employee earnings

Internal Controls
 To control environment
 Authorization
 Segregation of duties
 Physical controls
 Tickler system
 Audit trail
 Monitoring and review

Why Should You Budget?
 Get to know your business

 Be prepared
 Fuel creativity
 Provide benchmarks
 Uncover bottlenecks
 Coordination
 Involve employees

What Makes a Good Budgeting
System?
 Everyone is involved
 The budgets get used
 Performance is evaluated
 Creates desired behavior
 Allows flexibility
 Assumptions are documented
 Uses what you have

Sales Forecast Example
Henry’s Appliance Shop

Months Jan Feb Mar Total
Product/Service #1
Units Sold 30 40 50 120
Price per Unit $300 $300 $300 $300
Total Sales $9,000 $12,000 $15,000 $36,000
Product/Service #2
Units Sold 70 70 80 220
Price per Unit $500 $500 $500 $500
Total Sales $35,000 $35,000 $40,000 $110,000
Product/Service #3
Units Sold 2 2 2 6
Price per Unit $3,000 $3,000 $3,000 $3,000
Total Sales $6,000 $6,000 $6,000 $18,000
Total-All Product/
$50,000 $53,000 $61,000 $164,000
Service Sales

Cost of Projected Product
Units Sold Budget
Months Jan Feb Mar Total
Product #1
Units Sold 30 40 50 120
Cost per Unit $45 $45 $45 $45
Total Cost $1,350 $1,800 $2,250 $5,400
Product #2
Units Sold 70 70 80 220
Cost per Unit $150 $150 $150 $150
Total Cost $10,500 $10,500 $12,000 $33,000
Product #3
Units Sold 2 2 2 6
Cost per Unit $300 $300 $300 $300
Total Cost $600 $600 $600 $1,800
All Products
$12,450 $12,900 $14,850 $40,200
Total Cost

Growth (or Start-up) Expenses
Cost
A Cash Available Now
1 Purchase fixed assets( Land, equip., building, vehicles)
(See Fixed Assets Acquisition Budget Worksheet)
2 Remodeling costs (fixtures, signs, paint, cleaning)
3 Installation fees (equip., phones, leased equip.)
4 Deposits (utilities, lease, phone, leased equip.)
5 Fees and licenses, certifications
6 Special one-time legal fees (specifically for growth/start-up)
7 Special accounting and/or other professional fees
8 Pre-opening labor expense
9 Pre-opening training costs
10 Beginning inventory of merchandise or materials
11 Supplies (letterhead, forms, price tags)
12 Promotion (grand opening, prizes, give-aways)
13 Advertising (initial media, direct mail, coupons)
14 Other rxpenses (one-time, specifically related to growth/start-up):
14a
14b
14c
14d
B. Total Growth (or Start-up) Expenses
C. (A - B ) Beginning Cash Balance

Financial Worksheets Completed
 Salaries/Wages & Benefits

(including payroll taxes)
 Outside Services
 Insurance
 Advertising Budget
 Occupancy Expense
 Miscellaneous Expense
 Sales Forecast
 Cost of Projected Product Units Sold
 Fixed Assets
 Growth (or Start-up) Expenses
 Existing Debt

Performance Report Example

January January Variance
Budget Actual Over (Under)
Cost of Goods Sold
Product/Service #1
Units Sold 30 42
Cost per Unit $45 $40
Total Cost $1,350 $1,680 $330
Product/Service #2
Units Sold 70 65
Cost per Unit $150 $157
Total Cost $10,500 $10,205 ($295)
Operating Expenses
Labor
Salaries & Wages $30,000 $32,000 $2,000

Fixed Expenses (Costs)
$6,000
Fixed Expenses (Costs)
$4,000
$2,000
$0
0 100 200 300 400
Number of Product/Service Units Sold

Variable Expenses (Costs)
$2,500
Variable Expenses (Costs)
$2,000
$1,500
$1,000
$500
$0
0 100 200 300 400
Number of Product/Service Units Sold
“Break-Even”

Break-Even Analysis
How many do you need to sell before
you start making a profit?
Break-Even Units Volume =
Fixed Costs
Price minus Variable Costs
Example:
Selling Price is $10.00 per unit
Variable costs are $5.50 per unit
Contribution margin is $4.50 per unit
Fixed costs are $1,350.00 per month
Break-Even Point in Units =

$1,350.00 = 300 units per month
$4.50
When you sell unit #301, you will

start making a profit for that month.
(Break-Even in Dollars of Sales =
300 units x $10 =$3000)
Emtrepreneurs-OHD 8-4
Pricing and Planning for Profit…
 Can you sell 300 units per month at the

$10.00 per unit price?
 If it takes 300 units per month to

“break-even” how many more can you
sell to make a profit?
 How much profit do you want to make?
Example: You want to make $900 per

month profit. How many more units
per month do you have to sell?
1. It took 300 units to just break-
even
2. $4.50 per unit after the first
300 can contribute to profit
3. $900.00  $4.50 = 200 units
more to make $900 per month
profit
? Can you sell 500 units per month????

The Cash Flow Cycle

Entreprenuers-OHD/Handout 8-6
Managing Inventory
Inventory Turnover =
Cost of Goods Sold  Average
Inventory
Example:
Cost of Goods Sold = $390,000
Average Inventory = $30,000
Inventory “turns” 13 times per year
Average Days in Inventory =

365 days  Inventory Turnover
Example:
365 days  13 = 28
On the average, goods remain in inventory
28 days

Managing Accounts Receivable
Receivables Turnover =
Net Credit Sales  Average A/R
Example:
Net Credit Sales = $715,000
Average A/R = $65,000
Receivables “turns” 11 times per year
Average Collection Period =

365 days  Receivables Turnover
Example:
365 days  11 = 33
On the average, it takes 33 days to
Collect receivables

Accounts Receivable Aging Report
Bullfrog, Inc.
October Accounts Receivable Aging Report
Age of Account Account Name Amount Totals
Barnaby $ 200.00
0 - 30 Days Johnson $ 150.00
Total 0 - 30 Days $ 350.00
Hamilton's B & B $ 1,250.00
Connor $ 100.00
30 - 60 Days Kline $ 200.00
Jones $ 450.00
Total 30 - 60 Days $ 2,000.00
Jones $ 350.00
60 - 90 Days
Total 60 - 90 Days $ 350.00
Jones $ 300.00
Over 90 Days
Total Over 90 Days $ 300.00
TOTAL RECEIVABLES $ 3,000.00

Entrepreneurs-OHD 8-9a
Accounts Receivable Aging Report
(cont’d)
How do you speed up collection?
What would you do with the Over 90 days

category?
How does your collection policy impact your

Cash Flow Projection?

Entrepreneurs-OHD 8-9b
Internal Controls for Cash
 Authorization
 Receiving Bank Account
Statements
 Reconciling Bank Accounts
 Segregation of Duties
 Physical Controls
 Controls for Cash Registers

Segregation of Duties for Cash
Segregation of Duties for Cash Sales

 Handles central cash register Person 1
 Closes register at the end of the day and reconciles cash Person 2
 in the drawer to total sales
 Prepares deposit slip Person 1
 Makes deposit daily and compare deposit slip to cash Person 3
 report prepared by Person 2
Segregation of Duties for Checks Received in the Mail
 Opens mail and makes a list of checks received Person 4
 Prepares deposit slip Person 5
 Updates A/R records Person 6
 Compares the information from Person 4, 5, and 6 Person 7
Segregation of Duties for Cash Disbursements
 Prepares checks Person 8
 Signs checks & reviews supporting documents Person 9
 Mails checks Person 9 or 10
Segregation of Duties for Bank Reconciliation
 Prepares bank reconciliation Person 11
 Reviews bank reconciliation Person 12

Sample Income Statement

Vertical Analysis

Entrepreneurs-OHD-Handout 9-2
Horizontal Analysis
1996 1997 1998 1999
$120,000 $126,000 $180,000 $186,000
100% 105% 150% 155%

Operating Ratios
Ratios that reflect activities crucial to making a

profit in your business
Gross Profit Percentage
 Gross Profit  Net Sales
Inventory Turnover
 Cost of Goods Sold  Average Inventory
Receivables Turnover
 Net Credit Sales  Average Net Receivables

Profitability Ratios
Ratios that compare earning to the resources

available in the business.
Think of these ratios as answering the question:
“How well did I do given what I had to work with?”
Return on Sales
 Net Income  Net Sales
Returns on Assets
 Net Income  Total Assets
Earnings Per Share
 Net Income  Average # of Common Shares Outstanding

Statement of Owners Equity

Annual Statement of Cash Flows

Why Do You Need Financing?
 Research and development

 Growth (or Start-up) expenses
 Purchase a business
 Seasonal working capital
 Permanent working capital
 Equipment acquisition
 Real estate acquisition
 Other:

Fitting the Loan to the Need
Short-term Debt
Used to meet short-term needs, such as seasonal
inventory purchases or short-term liquidity problems;
repayment within one year
Intermediate Debt
Three to seven years. Used for permanent expansion
of working capital or to acquire equipment
Long-term Debt
Used for real estate purchases or the initial purchase
of a business

Debt or Equity
Financing Considerations
 Change in ownership
 Obligation to repay
 Tax considerations
 Capital structure
 Time required to do it
 Cost of obtaining the funds
 Personal factors/preferences
 Lender and investor reactions

The C’s of Credit
 Credit history
 Character
 Capacity
 Collateral
 Conditions
 Capital

Leasing vs. Purchasing
Advantages
 Usually no down payment
 Often over a longer time period than a loan
 Protects against equipment obsolescence
 May allow “off-balance-sheet” financing
 Increases possible sources of financing
Disadvantages
 May cost more if tax advantages lost
 May not own assets at end of the lease
 Is still a long-term legal obligation
Other Sources of Financing
Self
Friends and Family
Suppliers
Customer Deposits
Credit Cards
Insurance Companies
Factoring Companies
Loan Guarantor
Loan Broker
Franchising
Grants
Other:

Tips for Working with Your Banker
 Deal with a local bank when possible

 Make an appointment
 Select a banker you trust
 Select a banker you trust
 Select a banker familiar with your type of business
 Dress appropriately
 Ask for advice
 Develop a long-term relationship
 Know your needs
 Present a complete proposal
 Explain uses and benefits of the loan
 Be flexible
 Be patient
 Tell the truth
 Recommend your banker to others

Traits of Effective Negotiators
Good negotiators:
 Account for their counterpart’s interests and
perspectives
 Use this knowledge to improve
communication and the quality of the
proposals they make
 Understand themselves and what they want
out of the process
 Achieve an objective perspective that allows
then to overcome hurdles during the
negotiating process
Positive Context for Negotiations
Negotiations occur best when parties…

 Perceive that they will have a long-term relationship
 Perceive that they rely on one another for mutual gain
 Have strong leaders who can accept or enforce an
agreement
 Allow a third party to offer insight, additional
information and guidance
 Are truly motivated to find a solution
 Understand underlying issues
 Develop a level of trust
 Listen to one another
What Determines the Level of Power?
Power can exist as a result of…

 A position or title
 Level of expertise
 Access to information
 Amount of “currency” possessed
 Level of interest in a continued relationship
 Past achievements or track record
 Ability to satisfy goals elsewhere or by
other means
Dealing With Obstacles
 Fall back & re-group

 Name the enemy
 Commonly used tactics
 Time is on your side
 Look back
 Get off the hot seat
 Get in their shoes
 Open your ears
 Spotlight common interests
 Reframe the issue
 If not, why not?
Deal-Making Tips
 Set limits on your involvement and commitment

in advance
 Stick to your limit
 Avoid looking to your counterpart for guidance
 Be clear about your motivations
 Understand the costs involved
 Stay alert
 Listen-Listen-Listen

Key Tasks of Contract Management
 Create processes & practices

 Review time frame
 Evaluate criteria & measures
 Identify smaller units within the contract
 Define responsibilities of each partner
 Identify contingency plans
 Establish payment of terms
 Review performance and look ahead

Tools for Staying “In Touch”
with Your Customers
Personal visits
Toll-free phone line
Fax machine
Beeper
Cellular phone
E-mail and the Internet
Newsletters
Semi-social meetings
Regularly scheduled meetings

Reasons to “Grow” Your Business
 Enhance profits
 Master new challenges
 Dominate the competition
 Protect your market share
 Acquire volume discounts
 Achieve economies of scale
 Enhance image and prestige
 Acquire broader customer base
 Reach your break-even point sooner
 Better serve the customer (through new location,
broader product lines, lower prices, etc.)

Pitfalls of Unmanaged Growth
 Growth is limited, short-term

 Inability to maintain consistent performance standards
 Unprofessional behavior
 Poor employee morale
 Lack of adequate employee training
 High employee turn-over
 Loss of profitability
 Inefficient use of resources
 Loss of customer loyalty
 Diminished quality of products and/or services
 Inability to focus on core strengths
 Paralyzed or overworked leadership
 Cash crunch
 Bankruptcy

Three Ways to “Grow”
Your Profitability
1. Increase your sales volume

(without increasing your fixed costs)
2. Reduce your fixed costs
(without causing a decrease in your sales
volume)
3. Increase your contribution margin by:
• Increasing the sales price
(without compacting volume)

• Decreasing variable costs
• Changing product mix to those with
higher contribution margins
(without impacting volume)

Types of Ratios
Liquidity Ratios
 Can your business meet its short-term obligations?
 Examples: Quick ratio, current ratio
Asset Management Ratios
 How efficiently does your company handle operations and assets?
 Examples: Inventory turnover, receivables turnover
Profitability Ratios
 What is your return on sales and capital?
 Examples: Gross profit margin, net profit margin, return on investment
Capital Structure Ratios
 How much does your business owe, and how much does it own?
 Examples: Debt to equity, debt to assets

OHD/Handout 12-4
What to Look for in
Accounting Software
Ease of Use
 How steep is the learning curve?
 How long will it take you to become proficient?
 How much will training time add to the cost?
Scalability
 What other modules are available?
 Does it integrate seamlessly with other business applications?
 Is it compatible with your accountant’s system?
 Will it accommodate growth?
 Will you have to make multiple upgrades as you grow?
Flexibility
 Can the programs be customized to meet your unique needs?
Security
 Is it secure?
 Does it prevent unauthorized access to your data?
Technical Assistance
 Does the program have an adequate help utility, help desk, or community user forum?
 Does the manufacturer offer training?
 Is the manufacturer likely to stay in business?

OHD/Handout 12-5
Understanding the Supply Chain
Logistics
The set of processes and activities that enable the transfer of a product or
delivery of a service from its origins to its destination.
The Supply Chain
 Comprises interdependent business processes and activities
(“channels”) that extend from sourcing raw materials, to delivering
the product to its ultimate destination.
Channels
 Identifiable sets of business processes and activities extending
from one end of the supply chain to the other
 Example: Marketing is a channel within the supply chain
Sub channels
 Functional areas within channels, that do not extend from one end
of the supply chain to the other.
 Example: Market research is a sub channel of the marketing
channel

OHD/Handout 12-6
The ABCs of Effective Signage
Attracting new customers
 A certain number of your customers will inevitably move out
of the area, change their buying habits, or switch to
competitors, so your business must constantly restock its
customers!
Branding your business
 Signs can trigger emotional responses. They create
expectations in terms of ambiance and quality. They either
beckon or repel customers.
Creating impulse sales
 Impulse sales comprise 68% of total sales. Signage must
attract impulse buyers and turn them into repeat customers.

OHD/Handout Signage-1
The Four Standards of
Effectiveness
Readership
 How many people see the campaign?
Reach
 Who responds best to the sign? To maximize your reach,
you need to tailor your visuals to the taste and age
groupings of your most likely customers
Frequency
 How many times does your target population see your
message?
Cost per 1,000 exposures
 How much does it cost to expose 1,000 viewers to your
message?

Understanding Sign Codes
Traffic safety codes
 Studies have shown that signage does not cause accidents by distracting drivers
 Some restrictions on signage actually make streets more dangerous, by limiting the
visibility and informational content of signs
 Hidden, defective, or unreadable signs do pose a traffic hazard, and are also failures
as promotional devices
Zoning Codes
 Zoning regulations define parcels of land in terms of the activities permitted on them
 Signs can be controlled as to size, illumination, height, and so forth.
 Codes that ban certain types of signs selectively are increasingly viewed with
skepticism by the courts
Aesthetic Codes
 Often valid if based on community standards, but must be fairly applied
 The public generally approves of useful, attractive, informative signage
 Consider brand image and goodwill issues before attempting to overturn aesthetic
codes

Signage and the Constitution
Constitutional Related Signage
Amendment Issues
First Amendment Restraints on commercial and
noncommercial communications
Freedom of Expression Content Control
Censorship
Fifth Amendment Amortization
Abatement
Just compensation Takings
14th Amendment Discriminatory code
administration, interpretation,
Due process, Equal and application
treatment
Design Standards for Effective
Signage
Visibility
 Your sign must be in a place where your target customers
can see it
Conspicuity
 Your sign must jump out and grab the customer’s attention
Legibility
 Your sign must be effortlessly readable, and give consumers
plenty of time to see, read, and react
Interest
 Your sign’s design and content must be compelling to the
target customers you identified in your market research

Elements of Design
Size is a basic factor in visibility. The size of a sign frequently determines how long it
takes a driver to see it and decide to turn.
Angles-A flat sign against the wall will be almost invisible to motorists. A two-side V-
shaped sign at a 30 degree angle leads to good visibility in both directions
Cone of Vision-If your sign isn’t easily visible inside a twenty degree arc from center of
the road, you’re not getting the job done. Also, signage outside the cone of vision can
create traffic hazards.
Fonts-Simple, clean fonts make for the most effective signs.
Colors-High contrast combinations of two or three simple colors are best
Contrast-Contrast is what makes the letters or images on a sign jump out at the viewer
Amount of text-Text should comprise three to five words in order to make it readable in
a single glance. To avoid visual clutter, thirty to forty percent of your sign should consist of
blank space
Height of letters-More height means better reaction time for drivers. It’s better to err in
favor of greater visibility than to risk having your message lost.
Lighting-How bright your sign will be depends on many factors: community standards and
sign codes, type of neighborhood, cost of lighting fixtures electricity, and your operating
hours
Shapes-Your logo and text determine the type and kind of shape you’ll choose. Also,
consider custom shapes that reflect your product or service.

Things You Should Know Before
Approaching a Signage Provider
What’s your budget for signage and sign maintenance?
What’s the traffic flow for pedestrians and automobiles?
What’s your cost per 1,000 exposures?
How will psychographics and demographic data affect your signage
decisions?
What kind of signage fits your branding and positioning statements?
How will signage communicate your brand identity?
What sign codes and local standards apply?
What permits and licenses are required
What weather and temperature extremes must your sign withstand?
What size, materials, and style do you want?
What colors work best in the context of your site?
What are competitors doing, and does it seem to be working?


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TEXT—NxLeveL™ Guide for Entrepreneurs

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9. Ability to accept Challenges

10. “Hard Work” Ethics

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Highly motivated Motivated by others

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Where Do the Ideas Come From?

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 Isn’t planning for “big business” only?

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 The owner assumes the lead in the process

NxLevel™ Guide for

 Forces you to look at the whole business

NxLevel™ Guide for

The “P’s of Marketing” that will guide your

Marketing is a process made up of these distinct

You must learn…

NxLevel™ Guide for

 Libraries (Public, University/College, Private)

NxLevel™ Guide for

 How has the industry developed?

NxLevel™ Guide for

NxLevel™ Guide for

NxLevel™ Guide for

NxLevel™ Guide for

NxLevel™ Guide for

 What are you leasing?

NxLevel™ Guide for

NxLeveL™ Guide for

Covering Your Business

Covering Your Employees

Specific to Your Business

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Ask the tough questions…

NxLevel™ Guide for

Q u a l i ty A s s e m b ly L o g is t i c s A rea P u b l ic P r o m o tio n A c c o u n tin g F in a n c e

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Learn to “let go”

Sample Table of Contents

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Primary Factors YES NO

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 Identifying tasks and job descriptions

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 Are my goals written, measurable, and realistic?

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 Are all my assets covered in my risk management plan?

NxLeveL™ Guide for

NxLeveL Guide for Entrepreneurs

Look at long-term viability, not short-term savings

NxLeveL Guide for Entrepreneurs

NxLeveL™ Guide for

Three “parts” to the marketing process: