The First Step: Launching Your Own Business in Illinois

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The First Step Launching Your Own Business in
Illinois
Illinois Small Business Development Center at
Harper College The ILSBDC at Harper College is
funded in part through a cooperative agreement
with the U.S. Small Business Administration and
the Department of Commerce and Economic
Opportunity, and Harper College to help our local
businesses start, grow, and expand.
Presented by Bonnie Richter, MBA Director, ILSBDC
at Harper College
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Illinois Small Business Development
CenterBusiness Consulting forEstablished and
Start-Up Businesses

• The ILSBDC at Harper College is funded in part
  through a cooperative agreement with the U.S.
  Small Business Administration, Department of
  Commerce and Economic Opportunity, and Harper
  College to help our local businesses start, grow,
  and expand.

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The ILSBDC

• Our mission is to contribute to the growth and
  prosperity of existing business, and improve the
  success rate of new business formation.
• Provide No-Cost, Confidential, One-on-One
  guidance
• Achieve marketing, financial and operational
  success

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The ILSBDC Helps Businesses

• Start, Survive, Expand, Prosper

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Todays Seminar Topics

• Traits Successful Entrepreneurs Share
• Business Planning The Key to Your Success
• Business Licensing and Registration
• Financing Your Business

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1. Traits Successful Entrepreneurs Share
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Traits Successful Entrepreneurs Share

• Commitment and determination
• Decisiveness
• Discipline
• Persistence in problem solving
• Opportunity obsession
• Market-driven
• Knowledge of customers needs
• Obsession with value creation
• High tolerance of risk, uncertainty
• Calculated risk-taker
• Risk minimizer
• Tolerance of stress and conflict

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Traits Successful Entrepreneurs Share

• Creativity, self-reliance, adaptability
• Non-conventional, open-minded
• Lack of fear of failure
• Restlessness with status quo
• Motivation to excel
• Goal and results orientation
• Drive to achieve growth
• Awareness of weaknesses
• Leadership
• Self-starter
• Internal control
• Patience
• Team builder

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Reducing Risk

• Consider knowledge in key areas
• Technical skills
• Most successful have experience
• Marketing
• Research and evaluation
• Pricing
• Customer service
• Operations
• Mfg. Management / inventory control
• Cost analysis
• Purchasing
• Finance
• Accounting
• Capital budgeting
• Cash flow management

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Reducing Risk

• Consider knowledge in key areas
• Administration
• Project management
• Negotiating
• Personnel administration
• Leadership/Team Building
• Vision / influence
• Coaching
• Conflict management
• People management
• Law
• Corporations
• Contract
• Tax

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Reducing Risk

• Follow strengths, interests, experience
• Assess feasibility of business idea
• Create a business plan
• Find a mentor

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Exercise

• Entrepreneurial Characteristics Interest
  Inventory
• Do at home
• Personal Entrepreneurial Strategy Exercise

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2. Business Planning The Key to Your Success
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Need for aBusiness Plan

• Strategically plan how you will compete
• Set goals measure progress
• Sales tool for raising capital
• Communication device to lenders, investors,
  creditors
• Share with employees develop commitment

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Elements of a Successful Business Plan

• Executive Summary
• Company Overview
• Products and Services Description
• Industry and Marketplace Analysis
• Marketing Plan
• Operations Plan
• Management Plan
• Financial Plan

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Executive Summary

• Single most important section
• One to two pages in length
• Covers important details section by section
• Capture highlights!
• Easiest to write this section last

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Company Overview

• Brief 1-page description about company
• Name
• Start-up, existing, or soon-to-be forming
• Location Current status of company, future goals
  and objectives
• Mission Statement

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Product/Service Description

• Introduction
• Description
• What is your product or service? Describe
  carefully.
• Market comparison
• Why is our product or service unique or better?
• What problems does it solve for customers?
• Proprietary rights (if any)
• Stage of development (brief)
• Use this section to sell your concept

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Industry and Marketplace Analysis

• Overview of industry and marketplace
• Trends, problems, opportunities
• PEST
• Growing
• Numbers
• Margins
• Demonstrate need
• Show how trends lead to your business concept
  being a good opportunity

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Marketplace Analysis

• Define and describe your marketplace
• Niche, geographic area
• Whats happening in your market?
• Network! talk with the marketplace
• Customers, competitors, vendors, suppliers,
  salespeople,
• Chambers of Commerce
• Industry trade groups

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Marketing Plan

• Introduction
• Target Market Strategy
• Distribution Strategy
• Positioning
• Product/Service Strategy
• Pricing Strategy
• E-commerce
• Advertising and Promotion Strategy
• Sales Strategy
• Revenue Model (Sales and Marketing Forecasts)

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Operations and Management
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Management

• 3 most important attributes of start-up
• Management, management, management
• Company Organization
• Organizational structure
• Ownership structure
• Board of directors/advisors
• Management Team
• Key managers
• Duties and responsibilities
• Unique skills
• Compensation
• Planned additions to the team

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Operations

• Operations Emphasis
• How will we win on dimensions of cost, quality,
  timeliness, and flexibility?  
• What comparative advantages do we have with our
  operational design?
• Management skill
• Processes
• Product development (RD)

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Financial Plan

• Critical to assess dollars sense
• Determined by logical, real assumptions
• Predicted sales
• Expenses
• Tax and interest rates
• A/P and A/R aging, etc.
• Develop budgets
• Start-up

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Financial Pro Formas

• Opening balance sheet
• 3 years ending balance sheets
• Income statement (3 years)
• Cash flow budget (3 years)

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Balance Sheet
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Income Statement
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3. Business Licensing and Registration
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Types of Legal Structures

• Sole Proprietorship
• Partnership
• General (O/E, Profits, Hours)
• Registered Limited Liability (debts, obligations,
  wrongful acts, omissions, misconduct)
• Limited (General partner manages)
• Corporation
• C and S
• Limited Liability Company (LLC)

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Filing for a Fictitious Name

• Known as DBA (Doing Business As)
• Required for sole proprietorships and general
  partnerships
• File with the County Clerk
• Publish your fictitious name
• newspaper circulated in your county
• three consecutive editions
• newspaper issues a Publication Certificate

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Legal Requirements

• Secretary of State (www.sos.state.il.us)
• Incorporating
• BCA-2.10 Articles of Incorporation
• Elect S corporation file IRS form 2553
• Guide to Organizing Domestic Corporations
• LLC
• LLC-5.5 Articles of Organization
• LLC file form 8832 to elect to be taxed as a
  corporation

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Legal Requirements

• Business license
• Contact local village or city
• Employer Identification Number
• Call IRS at 1-866-816-2065
• Electronic SS-4 at www.irs.gov/smallbiz
• Click on New Businesses

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Legal Requirements

• Taxes
• See Starting a Business in Illinois handbook,
  pages 8 to 10
• Illinois Department of Revenue
• Required if sell merchandize w/i state
• Use merchandise purchased out-of-state
• NUC-1 Illinois Business Registration
• Retailers Occupation Tax Number (ROT)
• Use Tax
• Service Occupation Tax (SOT)
• Service Use Tax

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Legal Requirements

• Immigration Reform and Control Act (I-9)
• Verify employment eligibility of new employees
• INS forms and handbook available
• Illinois Department of Employment Security
• Assistance in determining contribution call IDES
  and request Employer Start-up Kit
• 1-800-247-4984 or 312-793-4880
• Wage Withholding For Child Support
• Workers Compensation Insurance
• Hire employees required by law to provide
• Injury due to accidents, illness, death

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4. Financing Your Business
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Cash Flow Analysis

• Cash flow projection in business plan supports
• amount funding required
• timing
• ability to repay
• Mistakes in analysis can result in business
  failure
• Consider financing alternatives such as leasing
  to reduce initial need

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Types Sources of Funding

• Debt Financing
• Friends
• Family
• Banks
• SBA Guaranties
• DCEO Programs

• Equity Financing
• Friends
• Family
• Partners
• Angel Networks
• Venture Capitalists
• Public market (IPO)

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SBA Loan Programs

• Largest Source of Funding
• Unable to Secure Financing Reasonable Terms
• SBA Seeks
• Personal Equity (not finance 100)
• Repayment - primary
• Character/credit worthiness
• Management Capability
• Sufficient Funds (start-up, initial operating)
• Collateral
• Personal Guarantee (20)

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SBA Loan Programs

• 7(a) Loan Guaranty Program..
• SBAs primary lending vehicle
• 75.00 - 85.00 guarantee (lender)
• Maximum 2,000,000 (1,000,000 guarantee)
• Can be used for
• Expand/renovate
• Purchase machinery
• Finance receivables/augment working capital
• Construct buildings
• Purchase land/buildings
• Seasonal lines of credit/inventory

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State Loan Programs

• Department of Commerce Economic Opportunity
  (DCEO)
• Participation Loan Program
• Up to 25 (not lt10,000 or gt750,000)
• Capital Access
• Do not qualify for conventional
• Loan portfolio insurance for defaults
• 3 to 7
• Minority, Women and Disability Participation Loan
  Program
• May not exceed 50 of project, 50,000 maximum
• Must create or maintain Illinois jobs

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Loan Package Checklist

• Business plan
• Cash flow projections
• Projected Income Statement and Balance Sheet (3
  years)
• Resume

• Personal financial statement (s) of all owners
  and guarantors (20 or more)
• Credit report (s) of all owners
• Personal income tax returns (3 years)

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Grant Resources

• Generally support
• Non-profit organizations
• Churches, colleges, etc.
• Intermediary lending institutions (HUD)
• State and local governments
• The arts
• Foundational grants by private individuals

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Grant Resources

• Federal Grants
• Catalog of Federal Domestic Assistance
• www.cfda.gov
• SBIR (Small Business Innovation Research)
• STTR (Small Business Technology Transfer)
• www.sba.gov/sbir/indexsbir-sttr.html
• Stimulate technological innovation
• Small business/nonprofit research institution
  partnerships

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Grant Resources

• State Grants
• Department of Commerce and Economic Opportunity
• Coal, community, energy, tourism, low income,
  recycling, technology, job training
• http//www.illinoisbiz.biz/bus/gri/grants_bus.html
  

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Next Steps

• Continue education about business management
• Assess feasibility of business idea
• Write business plan
• See advice and counseling

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Closing

• Traits Successful Entrepreneurs Share
• Business Planning The Key to Your Success
• Business Licensing and Registration
• Financing Your Business