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Transcript of Intro Small Business Workbook
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Introduction to Small Business
Workbook
Okanagan Nation Alliance3255C Shannon Lake Road,
Westbank, BC V4T 1V4Office Tel: (250) 707-0095
ONA Business Development LiaisonToll Free: 1-877-808-0886
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Table of Contents
Self Assessment……………………………………….3
Goal Setting…………………………………………….4
Relationship Building…………………………………. 5
Venture Planning..……………………..………………6
Business Structure………………………………….….8
Operational Plan……………………………………….11
Pricing Methods………………………………………..12
Marketing………………………………………………..13
Management…………………………………...……….14
Financial Forecasts…………………..………………..15
Going to the Bank – The 5 C’s of Credit……………..19
Financing and Funding Sources………………………21
Terminology……………………………………………..24
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SELF ASSESSMENT
You are at the heart of any business venture that you develop. All that it can,and will, become begins with your skills and abilities and is supplementedonly when you hire additional expertise. Therefore, it is critical for yourbusiness that you know yourself.
Yes No
Do you plan and organize your activity?
Are you responsible and a hard worker?
Are you self-motivated?
Are you trustworthy?
Do you get people motivated easily?
Are you comfortable making critical decisions quickly?
Do you set goals? Are you a strategic thinker?
Do you have good communication skills (oral/written)?
Are you sociable, considerate, cooperative, cheerful,tactful?
Do you have a strong need for achievement?
Can you keep records?
Do you have the technical knowledge required for your
industry (operations/computer literacy/equipment)?Do you have a financial plan to support you during the 1st,and 2nd year of business?Do you know how to ask for help or support from yourfamily or others?Do you have money saved as equity for thefinancing/funding?
The degree of yoursuccess in life isdirectly linked withhow muchresponsibility you takefor your life.
In the 1960s,psychologist JulianRotter developed aninventory to measurelocus (location) ofcontrol, or the degreethat someone takesresponsibility forthemselves. Researchfindings confirmed theabove. Participants ofthis study also believethat they control their
own destiny and areconvinced that theirown skill, ability andefforts determine thebulk of their lifeexperiences.
Your life and your
success are
profoundly influenced
by the degree that you
believe you control
your own life.
The Road Less Traveled: Aboriginal Entrepreneurs Building Economic Independence for the New
Millennium (June 1998) is a research document that analyzed 500 Canadian Aboriginal businesses.
This report found that Aboriginal small business owners were more likely to be successful if theyhad some experience and/or training in the following areas:
1) Management 2) Marketing3) Accounting 4) Computer
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Your business goals flow personal goals.
Your personal goals arfuelled by the things yowant to achieve in life
The things you doachieve in life aredetermined by the
priorities you set(conciously orunconciously).
GOAL SETTING
Clear and powerful goals set priorities that keep you focused and guide thehundreds of daily choices that you make. Goals are the conscious choicesthat make the difference between being carried along by the currents in astream and navigating your course to arrive at your destination.
List your Priorities in Life
1.
2.
3.
Goals & Motivation Use a table similar to the one below to write down your
professional and business goals. Decide what you really want and why, thenmost importantly develop an action plan to achieve it.
Personal Professional
Goal:
Why:
Goal:
Why:
Action Plan: Action Plan:
Yale University graduates formed part of a study, which demonstrates animportant lesson in goal setting. A questionnaire was distributed to thegraduating seniors, asking if they had clear, specific, written goals and ifthey had formulated complete plans after graduation. From that 1953 class3% had written down their plans, 13% had unwritten goals and the remaining84% had no clear goals at all. Twenty years after graduation, those samemen were surveyed again. Now in their early forties, one of the questions
they were asked was ‘What is your net worth today?’ They found that the 3%of graduates who had written their goals down had a combined net worthmore than the combined net worth of the remaining 97% of their classmates.Lesson: Set Goals!
Renew your goals
annually and post
them where you ca
see them every day
Remember that eve
single choice that
you make, no matte
how small will be
guided by these
goals. Stand firm t
them and take prid
each day in having
moved one step
closer to them.
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RELATIONSHIP BUILDING
The ability to communicate is directly related to your success in business, andyour personal life, and we communicate allot about who we are withoutsaying a word. For example in face to face communication we communicate:
• 50% body language•
40% tone of voice• 10% by words
The philosophy of relationship building:
1. Trust: Business is all about people and building relationships.Relationships are built upon trust. Be trustworthy.
2. Respect: Build your business and your network collaborativelywith partners, staff and associates by respecting their ideas.
3. Seek to understand: Be genuinely curious and seek to
understand each person’s belief and point of view (which does notmean you have to agree). Show appreciation, listen and askquestions.
4. Use the appropriate communication style: There are manymodels for understanding and characterizing the styles of interactiondifferent people use. A widely used tool is the Myers-Briggs TypeIndicator (MBTI). It is based on the following four dimensions of aperson's preferred approach to life:
Mirror Excercize:
Pair up with a participant and spend 5 minutes discussing the weather. Atthe same time smile and maintain eye contact, while you mirror thefollowing body language:
• breathing• voice tone and quality• posture• movement and gesture• language content and key words• Learning / communicating language (auditory – I hear, kinesthetic – I
feel, visual – I see)
To quick fix a deteriorating
conversation remove
yourself and shift your
thinking from 'How can I
change that person's
behavior?' to 'How am I
reinforcing or triggering
that person's behavior?'
Explore how else you could
respond to him or her.
Some experts estimatethat 15% of your financialsuccess comes from your
skills and knowledge,while 85% comes fromyour ability to connectwith people and build trustand respect.
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VENTURE PLANNING
If you are not yet decided on the business venture you wish to pursue hereare some tips to help you along the way.
• Do something you are passionate about
• Do something that where you have skills, industry knowledge or
experience
• Do something where you see a market need
• Do something that fits your desired lifestyle (location, hours, etc)
• Look for a business in an industry that is strong and growing andthat provides the income that can support the standard of living youneed.
Preliminary Planning
As you do your preliminary and business planning ensure that you writeeverything down and keep it organized. You will need all of this for yourbusiness plan and when you start your business.
• Do preliminary research (product, clients, etc) to confirm and refineyour assumptions
• If you plan to apply for financing and funding you will need to havesaved sufficient cash equity. Research the costs for what yourequire to start your business and ensure you have a plan to savethe equity needed.
• Allow for at least 6 months to one year to write your business plan,
apply for financing/funding and open your business• Go to the municipal hall and find out what city licensing, permits,
insurance, health and security standards are required and theircosts.
• Start to network with people in that industry and find a mentor
Everyone is exposed to
business opportunities
everyday in casual
conversation.
The good businessperson has learned to
identify these
opportunities and does
their research.
-Randy Tan, AboriginalEntrepreneur/ PrincipalAjatan - the largest privatelowned film studio in BC.
Visioning Excercize
1. Close your eyes.
2. Imagine you are in a safe place.3. Imagine that it is the future and you own your own business.4. Imagine getting all that you want and need from the business.5. Imagine having the support of family and friends.6. Imagine how it feels. Then write it down and commit this feeling to memory.
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How to do Market Research?
Conducting research is a step by step process that is the foundation ofyour business and that you should not only do now but continue to dofor the life of your business.
First, ask yourself what am I trying to find out and why do I need thisinformation?
Second, estimate how much time you expect to spend on researchingeach of the following topics:
1. Money2. Market3. Management4. Methodology – Operations and process5. Menaces
Thirdly, decide where the best place to find the information is. There
are many places to do your market research. Even finding thesesources require their own research, however some good startingplaces are the library (the bigger the better), Internet search engines, aChamber of Commerce (which is not only a good resource when youare starting your business but also after) visit www.bcchamber.org, andfinally, check industry journals, and magazines. You will also need todevelop a plan on how you are going to do your formal research(statistics, industry periodicals, etc.) and informal research(interviewing people successful in the industry).
Finally, you will need to compile all your research and analyze the
results.
The degree of commitment and effort you put into this researchand planning phase is directly proportional to the future successof your business.
Banker Interview Excercize:
Using the 5 M’s in business take 5 minutes to make notes that would answer each (real or hypothetical).
In pairs interview each other as if you were a bankers considering giving this person a loan.
Report back to the group who got loans and who did not, with recommendations on research that will helpyour partner to better research for their business plan.
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BUSINESS STRUCTURE
How you structure your business and doing it right is one of the mostimportant business decisions you make.
The above corporate structure information are general guidelines. The ABSNBC recommends that you consult with a lawyer and/or accountant to ensure
that your company structure is best suited to your particular needs.
A. Sole Proprietorship
If you are going to be the sole owner of the business and the liability risk islow you might want to set up a: Sole Proprietorship
The advantages of a Sole Proprietorship are:
• Low startup costs to form the business• Greater freedom from regulation as compared to other
structures• The owner is in direct and total control of all decision making• The owner has tax advantages• Status Indians have potential tax exemption benefits• The owner has all profits
The disadvantages of a Sole Proprietorship are:
• Unlimited liability• Raising capital may be more difficult• The management skills and knowledge base of the company is
directly related to those of the owner
Again, if there is any degree of liability risk (the chance of someone suingyou) you might want to set up as a Limited Company or a Corporation whichgive you greater protection.
To register your name yowill be asked to providethree choices and what tyof business structure youintend on operating as.
To fill out an on-line NamApproval Request formvisit www.onestopbc.ca
Once you have filled outthe Name ApprovalRequest form you must pto reserve the name, whicosts $32-$56.75. Youmust then submit yourName Approval Requestform and fee to:
The Corporate Registry PO Box 9431 Stn ProvGovt, Victoria BC, V8W9V3.
The usual processing timfor a Name ApprovalRequest is about threeworking days and your ncompany name will bereserved for 56 days, or
until you register yourcompany name.
You may also call the OnStop Help Desk at 1-877822-6727.
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B. Partnership/Limited or General
If your company is going to have more than one owner or there is a smalldegree of liability risk you might want to consider a: Partnership/Limited orGeneral.
The advantages are:
• Easy to establish this structure• Low start-up costs• Other sources of investment capital can be accessed• The partner(s) has possible tax advantages• Status Indians have potential tax exemption benefits• A broader management base as a result of additional vested
parties (partners)• Limited regulation as compared to other structures (corporations)
Disadvantages:
• Unlimited liability, except in the case of a limited partnership• There is a division of authority• Additional capital may be difficult to raise• Suitable partners may be difficult to find, and conflicts may arise• Partners can legally bind the other partner(s) without prior approval
Ensure that if you have a partner or a manager who is critical to the success of
the business that you have a contract in place. Also, be careful not to set up your
company for the sole purpose of tax savings.
www.governmentagents.gov.bc.ca/progdesc/onestop.htm enables you to complete multiplegovernment applications as well as apply for the following in less than one hour:
• Register your proprietorship or partnership name with B.C. Corporate Registry• Register as a vendor for the provincial sales tax with B.C. Consumer Tax• Register as an employer with Workers' Compensation Board of B.C.• Apply for personal optional protection coverage with Workers' Compensation Board of B.C.•
Apply for a business number account for GST/HST, payroll deductions, corporate incometax and import/export with Canada Customs and Revenue Agency• Apply for one or more municipal business licences with participating municipalities.
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C. Corporation:
If there is a serious liability issue, such as a business or service that involvesrisk to an individual then you should set up a Corporation.
The advantages of a Corporation or an incorporated business are:
• Limited liability, the corporation is legally liable rather than the
individual• A lower small business tax is a possible tax advantage if you qualify
for the small business tax rate• Specialized management• Continuous existence• Easier to raise capital (shares, investors)• Ownership is transferable• The business is a separate legal entity
The disadvantages are that your company will be subject to:
• Close regulation• Charter restrictions• Higher costs to establish ($1500.00 or more)• Record keeping needs to be extensive and you should have a good
bookkeeper or accountant• Double taxation of profits• Shareholders may be held legally responsible in circumstances• Status Indian taxation benefits are not possible, except for
employees of the corporation who qualify under current taxexemption regulations for status Indians
Plan, interview andchose your talent bank
Bookkeeper and/orAccountant:
Lawyer:
Consultant:
Your talent bank shouhave experience andexpertise that benefityour business. If they
do not have specificexpertise in yourindustry or Aboriginalbusinesses carefullyconsider if you want touse them.
Structure Excercize:
Going round circle, discuss with the group which business structure youwould consider most appropriate for your business and why.
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OPERATIONAL PLAN
An operational plan explains how the company will work, or the productionprocess; this is the day to day tasks required to make the company run. Toanswer operational plan questions, visit a competitor and/or imagine how yourbusiness will run on a typical day.
Some questions you should ask yourself in an operational plan are:
• What is the product?• What materials are required?• How is the product going to be obtained and how often and what are
the costs?• How is it going to be transported to the manufacturer or operating
facility and what are the costs?• If there is an inventory how will it be managed?• How will I secure all my equipment and/or materials?• How will my product/service be sold, packaged, shipped/distributed?
• Do I take special orders? How will those be tracked?• What are the wholesale and retail prices – and what is the industry
standard mark up?• What are the hours of operation going to be?• Does my facility have enough traffic for business/ does it need a
street front location?• How will I handle returns/ exchanges – what do my competitors do?• How will it be billed or sold? Who is responsible for collections?• Will I offer promotions/ corporate discounts?• Will I have daily/monthly and annual sales goals? How will they be
tracked?
Operational Plan
Brainstorming
Exercize
Another method toexplain an operationalplan is to take post itnotes and lay them out
on a table. All you neeis a pen, a pad of post inotes and an hour of uninterrupted time.
Start by drawing/writinthe finished product anput it at the bottom.
Then start brainstorminall the steps required to
get to the final productand write each step on different post it note,organizing the steps asyou go.
Finally, pick up all thepost it notes in order antype each step into youbusiness plan.
A SWOT Analysis is a quick and simple way to do a “check-up” on your business before/during orafter it starts.
Strengths of your business.
Weaknesses of your business.
Opportunities exist in the next 3-5 years.
Threats exist for your business.
You will need to do this when you write your business plan and it is recommended that you take afull day to do this each and every year.
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PRICING
There two basic formulas for establishing a price for your product/service:market based and cost based.
A. Cost Based Pricing
If you buy something from somebody else and re-sell it, you must recoveryour purchase price then add costs such as shipping/handing, shrinkage andyour expected profits (usually 70-100%) to arrive at a minimum selling cost,whether it is wholesale or retail. Shrinkage is the cost of spoiled or damagedgoods that form a part of your inventory.
If you process or manufacture products you must include the cost ofmaterials, your production costs, shrinkage, shipping/handling, and yourexpected profits into the final wholesale/retail selling price. The formula toarrive at your expected profit margin is generally 100% mark-up, or yourproduction cost x 2.
Cost of Goods Sold (COG’s)
The cost of goods sold is the costs of materials plus the production costs. Fora manufacturing company COGS is materials, labour and factory overhead.For a retail shop COGS would be the same as your wholesale cost.
B. Market Based Pricing
Market based pricing is the next step and should be taken into considerationalong with cost based pricing to arrive at your final per unit pricing.
Wholesale pricing is usually done in rounded numbers, which need to becompared with your competitors and in consideration of the final retail pricewhich includes generally a 100% mark up also. Adjusting your price inconsideration of your competitors is market-based pricing and should be usedin combination with cost based pricing. Some questions you should then askyourself are what would you clients comfortably pay for your product/service?How does the price compare to your competitors?
Once you have worked through both formulas and conducted your researchyou have arrived at your final price.
Pricing Excercize:
Using a volunteerfrom the groupwork together toformulate costbased pricing for
their business.
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MARKETING Even among the advertising experts and professionals advertising success iscomplex and can be difficult to predict and there’s no magic formula thatguarantees consistent results.
Your marketing plan must include a detailed description of the following:
• Price (Versus competition, market share, specific promotions)• Promotion (Where & when different campaigns will be used)• Product (What benefits will you promote?)• Place /Distribution (Unique because of hours, delivery, customerservice)
Advertising your product or service is the result of your marketing plan andmust communicate to your clients a simple message: Buy the product!
Most people can only recall two or three attributes or benefits about any given
company or product. The simplicity element of your campaign must bepassionate and communicate what is most important to who you are inpictures and in words.
Now that you have decided upon an ad use it for everything from voicemail tostationary, business cards, fax headers, ads, everything!
The marketing gold standard continues to be the following paper products:
• Business cards• Brochures• Flyers
Top attention getters in marketing are (1) Peoples faces/ People that yourclients can identify with (2) Graphics and lastly (3) Text.
The single most useful
tool to gauge the succes
of any new initiative or
change in business is to
use your cash flow and
input your sales regular
with notes on what transpired during that
week, month or year.
Ask your clients how the
heard about you and
track it against your cas
flow to see what is
working and what is not
to.
Be conservative about your advertising if you
are not sure what works
best and allow time
between initiatives so yo
can track which is the
most successful.
Ad Excercize:
Working in groups take 10 minutes to draw an ad that does the following:
1. Attracts the attention of your customers2. Creates interest and trust. You can create interest by researching
how and what others are successfully and not successfully selling inthe market. The best way to build trust is to offer them quality, aguarantee or satisfaction warranty and educational information
3. Delivers a clear message that your customer relates to quickly.Keep your message meaningful to your client and simple
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MANAGEMENT
Business Management is the primary reason businesses succeed orfail. Successful business managers know that they are only leaders ofa team wherein they must motivate the entire team to participate in thesuccess of the business. Characteristics of managers and staff thatform a successful team:
Take responsibility Follow through on commitments Contribute to discussions Actively listen to others Communicate clearly Give useful feedback and Accepts feedback easily
When you start your business if you have staff you must get off to a goodstart. To do so you should plan on the following with them:
Agree on a purpose of the business Identify short, medium and long-term goals Develop a strong communication plan (min. monthly meetings) to
communicate progress, and to celebrate and reaffirm goals Identify people who will be effected by the work of the team Identify limits and expectations individual and team's work Agree on roles and responsibilities Successful teams also must learn how to overcome potential
problems by creating a conflict resolution plan and see conflict asan opportunity for growth and an essential part of human dynamics.
Establish ground rules and logistics of when and where to meet
Today’s business requires that management is purposeful, strategic andlogical. A common tool used in business today to purposefully andstrategically examine business management is Total Quality Management,which is designed to continuously improve, develop, and maintain quality,cost, delivery, and morale. TQM means learning to think in terms of systemswith strong emphasis on problem solving, communication and long-termgoals.
Planning should include identifying operational processes broken down intorepeatable steps and thinking about the other steps that lead to predictableresults.
Total QualityManagement(TQM), also knownas Total QualityControl in Japan, isa standardizedmanagement
system designed tosatisfying theneeds of everyoneyou deal withincluding staff,customers andsuppliers. The goaof TQM is tocontinually improvequality in all areasof operations.
All companies, justlike all people,have problems andTQM as a systemallows you toidentify problems,pick which ones towork on thendesign andimplement
solutions thatimprove the wholesystem.
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FINANCIAL FORECASTS:
Financial forecasts or Pro-Forma’s are an essential part of any business fromthe moment an idea is conceived. You can easily learn how to do some ofyour financials, as follows:
1) 12 Month Cash Flow2) 3 Year Projected Income Statement
For these it is recommended that you hire a bookkeeper, accountant orconsultant to prepare with you.
3) 3 Year Projected Balance Sheet4) 3 Year Net Income Statement
Even when a business is up and running, financial forecasts will remain animportant part of planning and control. Regular and prudent review will quicklyhighlight areas where costs require attention or a particular product or serviceline is in trouble. You will then be able to take corrective action before itreaches crisis point.
So that you can learn how to do your own we have broken down the first twointo smaller sections for you to work on:
Start Up Costs are the one time only costs that are required to open yourbusiness.
Anything you pay for monthly or annually is considered an operating cost.For example a catering company would not purchase a catering van eachyear; therefore it is a start up cost.
List your start up costs (equipment, inventory, lease hold improvements, etc.).When you are doing your research for your start up costs always ask forwritten quotes and allow for an additional 20% for unexpected costs.
Item Description Cost
Total Start Up Costs:
Start Up CostsExcercize:
Take ten minutes towrite out your startup costs ingroupings, asfollows:
- Capital Costs, which are thecosts of design,acquisition,construction,expansion,modification,conversion,transportation,installation and
insurance (durinconstruction) offixed assets, aswell as the costof licensing andfranchising feesincurred by aneligible applican
- Operating
Costs, such asequipment,
inventory orsupply purchase
- Marketing
Costs, such asbusiness cards,brochures,website, trade-shows, magazinor newspaperadvertising, etc.
- Business
Services- Training, if
required.
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Start Up Cash Position is the total of your equity, your loans and/orcontributions you are applying for, based upon what allowablefinancing/funding is available.
You should only include a small amount, if any, to cover monthly operatingcosts as the assumption is made that shortly after opening your revenuesshould cover your operating costs.
Financing/ Funding Agency Amount
Total:
Monthly Operating Costs are the expenses your business incurs once ormore each year.
Write down what you expect to pay for your operating costs. Examplesinclude rent or lease payments, inventory/supplies, vehicle lease/gas/ maintenance costs, equipment repair and maintenance, bank fees,bookkeeper/ accountant fees, legal fees, communication (phone, fax, andcell), marketing costs, etc.
Line ItemCost/
Frequency1234567891011
Total Monthly Operating Costs:
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Monthly Revenues are the sales that you think you can achieve each month.
List your start up costs with as accurate as possible amounts from yourresearch into one or more categories. For example an art gallery could havesix categories of sales including: Jewellery, masks, art prints, clothing, largecarvings, small carvings, etc.
Sales Categories:
Category:Potential
Monthly Sales12345
Total Monthly Sales:
The majority of small businesses have high and low seasons. For example
service and retail industries have a high and low which is the same as thetourism season.
(A) Potential Sales usually reflects your high season(B) Minimum Sales is a worst case scenario and is usually your lowseason(C) Mid Season Sales Totals are the middle number between the low andhigh season.
For example; tourism/ retail businesses high season is from June – August,with the low season being November-April. The sales between seasons
gradually increase and decrease from your high and low season, as follows:
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
The biggest mistakemany small businessowners make is tooverestimate theirfirst year of sales andunderestimate theirfirst year of costs.
Take your potentialsales and divide themby half.
Your potential salesare usually achievedin your high season inyour third-fifth yearof operating.
Once you havefinished your firstyear cash flow youare operating yourbusiness additionalrevenues and loweroperating costs willonly mean additionalprofit into yourpocket!
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First Year Sales:
List your low and high season months and sales in the boxes below andabove it draw the corresponding sales curve:
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
$
$
$
$
$
$
$
$
$
$
$
$
Three Year Projected Income Statement
The 3 yr income statement are the year-end totals for each ‘line item’ andadd your projected increase in revenues and costs, which should beconservatively estimated from 5-15%. Anything higher than 20% is toooptimistic and will negatively impact the funders overall assessment of yourplan. For this exercize, determine what your anticipated increase in salesand costs will be and complete the following table.
Revenue Year One Year Two Year Three1
2Total Revenue (A): Operating Costs Year One Year Two Year Three
12345678
Finally, all your calculations should be noted in the assumptions of eachpage. The remaining financials, The Net Income Statement andBalance Sheets should be completed with the assistance of aconsultant, bookkeeper or an accountant.
Remember that yourfinancial statementsweigh equally with thenarrative of thebusiness plan in theevaluation of yourbusiness for financingconsideration so it isvery important that youhave a goodunderstanding of thesetwo financialstatements. Thesefinancial statementsalso allow you to seethe net increase ordecrease of yourbusiness profits monthto month and year toyear for the first threeyears of operation,
which should increase.
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GOING TO THE BANK: The 5 C's of Credit
By becoming knowledgeable about the criteria that loan officers use todetermine whether a business plan is bankable, you will significantly increaseyour chances of obtaining a business loan. These five criteria are detailed asfollows:
Capital
In order to survive during its first few months, a business must have enoughmoney to pay for not only operating costs and capital costs but also have acontingency fund for those unexpected costs that always come up.
Lenders will only provide financing to business owners who have committed asignificant amount of their own cash to the business. No lender will approve aloan for 100% of the total funding needed. In that case they would be taking asignificant risk, but their expected return on their investment would be limitedto the interest they charge on the loan. Furthermore, a business owner whohas no investment in the business probably won't stick it out when the goinggets a bit rough.
Capacity
Capacity is the ability of the owner and the business to repay the loan. Inorder to repay the loan each month the business must meet their anticipatedprofit as identified in their cash flow. In fact, of all the other financialstatements, many bankers consider the cash flow statement to be the mostimportant.
Collateral
Capacity is the ability of the owner and the business to repay the loan. Inorder to repay the loan each month the business must meet their anticipatedprofit as identified in their cash flow. In fact, of all the other financialstatements, many bankers consider the cash flow statement to be the mostimportant.
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Character
Lenders rely upon your credit rating to show a good history of repaying debtsand maintaining a reasonable debt total. Using the Equifax credit rating scoreof R1 (good) to R9 (bad) each credit account will be used to assess youroverall credit history and ability to qualify for a loan.
According to statistics, 4 out of 5 businesses that fail do so as a result of poor
management. Being aware of this fact, lending institutions pay very specialattention to the owner's ability to manage the business. In particular, lenderswant to ensure that the business owners have sufficient experience in theindustry. For example, if the business owner wants to start an auto repairshop, lenders will be looking for the owner to have management experiencein an auto repair shop.
Condition
Condition usually describes external factors that lenders consider inassessing a loan proposal. Examples of such factors are: the economy,
interest rates, legal issues and the lender's own experience with lending tosimilar businesses in the client's industry. In some cases, banks are reluctantto lend money to businesses that are in industries where they have had badlending experience.
If you are declined you can go to other banks, but before you do ask thelender why they declined funding your business. You will always learnsomething as a result that will allow you to develop or adapt your plan, whichcan increase your chances of success with another lender.
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FINANCING AND FUNDING SOURCES
ONA members have access to a wide range of financing and fundingsources. Both require an initial application that must be clearly laid out andnot changed in the application process, so be sure you know exactly what youare applying for and what will/will not qualify. You may also “stack” loans andprograms together, but be sure you know which ones.
First Citizens Fund is a perpetual fund, created in 1969 to enhance culture,education and economic development opportunities for Aboriginal people inBC. Each year an average of 150 Aboriginal small businesses throughout BCstart, expand or make improvements to their businesses with the support of aFirst Citizens Fund business loan.
Business loans are available up to a maximum of $76,500, of which 40 percent of the principle will be contributed from the First Citizens Fund in pro-ratainstallments over the term of the loan. All programs and services aremanaged and delivered in partnership with the following BC Aboriginalorganizations that are available to ONA members:
All Nations Trust Company208-345 Yellowhead HighwayKamloops, BC V2H 1H1Phone: 250 828-9770Fax: 250 372-2585Toll-Free: 1-800-663-2959www.antco.bc.ca
First Nations Agricultural Lending Association
408 Paul Lake RoadKamloops, BC V2H 1J8Phone: 250 314-6804Fax: 250 314-6809Toll-Free: 1-866-314-6804www.fnala.co m
Financing Tip:
The most importantfactor in any financinor funding applicationis to establish a goodworking relationshipwith your loansofficer. Before youapply you should
meet with them tounderstand exactlywhat is requiredbefore yourapplication issubmitted. Most willbe happy to meet wityou to review yourapplication beforeyour formalsubmission.
After you have
successfully beenapproved to submityour plan, keep yourrelationship strongwith your loans officeand particularly afteryou have beenapproved. If after yohave successfullyreceivedfinancing/fundingsupport and you havedifficulties
immediately contactthe ONA BDL andplan to contact yourloans officer and worwith them to ensureyour credit rating isheld in good standing
ANTCO Youth Loan (19-35):
ANTCO also offers an Aboriginal Youth Business Fund (AYBF), which is available to Aboriginalyouth ages 35 and under. The AYBF is up to $15,000, with a 25% contribution. The lowerinterest rate offsets lower forgivable portion and this loan fund is available year round so it isless competitive.
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Aboriginal Business Canada
ABC provides non-repayable contributions of up to $75,000.00 for eligibleprojects and requires that the project have a loan component, comparable invalue to the contribution. To research program funding visit:http://strategis.ic.gc.ca/epic/internet/inabc-eac.nsf/en/Home
Similar to the AFI’s ABC requires an initial application, called a Statement ofIntent (SOI). You may apply on-line on their website. Once your SOI issubmitted you will be assigned an officer and may be eligible for a 75%contribution toward the use of a consultant (you identify) to prepare yourbusiness plan with you. Be sure to allow for sufficient time between the initialapplication and when you expect to possibly receive your contribution – 6-12months is recommended.
New Businesses: ABC has several categories of funding for new businesseswhich you may qualify under, as follows:
1. Tourism
2. Manufacturing
3. Business, Professional, Scientific or Technical Services
4. Business Opportunities Linked to Major Developments
5. Youth
Existing Businesses: For existing businesses you may qualify under thefollowing programs:
1. Innovation
2. Expansion of Existing Markets
3. Expansion into New Markets
ABC Head Office:
Aboriginal Business Canada300 West Georgia StreetVancouver BC V6B 6E2Tel.: (604) 666-3871Fax: (604) 666-0238
Officer for the ONA Region: Eric Murray
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Indian and Northern Affairs Canada – Band Businesses
The Community Economic Opportunity Program provides financial supportto First Nation and Inuit communities and the organizations they mandate,
as well as other organizations working on their behalf. The support is forapproved projects to enable the communities to provide public services ineconomic development. The public services may address the employmentof community members, development of community-owned and communitymember businesses, the development of land and resources undercommunity control, access to opportunities from lands and resourcesbeyond community control, promotion of investment in the community, andresearch and advocacy.
The Community Economic Opportunities Program is expected to lead tocommunity economic benefits including more community employment and
related incomes, greater utilization and increased value of land andresources under community control, more community government revenuefrom economic development, enhanced community economic and otherinfrastructure, more and better arrangements to access off-reserveresources, more investment in the community, a better climate andenvironment for community economic development, more and largercommunity businesses, more contracts and sales for communitybusinesses, and enhanced capacity within the community government toaddress future economic opportunities.
For more information on this new streamlined program and eligible applicants,
projects, expenditures, application requirements and project approval criteriavisit www.inac.gc.ca/bc.
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TERMINOLOGY
Business Plan A written summary of how a business will operate. Commonly used tosecure financing and to improve the success of a business.
Capital Money or property owned or used in business.
Collateral Things with a depreciated cash value that is sufficient to secure orguarantee a loan.
ConfidentialityAgreement
A written and signed agreement between two parties to not disclosebusiness information that might compromise the success of one orboth parties ventures.
Cost of GoodsSold:
Cost of Goods Sold is the cost to purchase or manufacture inventoryfor resale. The items that should be included in this category arethose that a business needs to make their product. A business in theservice industry may not need this component on its incomestatement.
Depreciatedvalue
The reduced value of an item that with time is worth less than theoriginal purchase price.
Equity The net worth of your company. Also called owner's equity or capital.Equity comes from investment in the business by the owners, plusaccumulated net profits of the business that have not been paid out tothe owners. It essentially represents amounts owed to the owners.Equity accounts are balance sheet accounts.
Expenses Expenses include all of the operating costs of bringing the product andservices to the market place. This would include wages, rent, etc.
Gross Profit The profit before we subtract the expenses of doing business; it isobtained by subtracting cost of goods sold from net sales.
Gross ProfitMargin:
Gross Profit Margin is the difference between Revenue and Cost ofGoods Sold.
Interest A fixed charge for borrowing money; usually a percentage of theamount borrowed.
Inventory The merchandise that a shop has on hand; "they carried a vastinventory of hardware".
INVOICE The written record of a transaction, often given to a customer or clientwhen a service or product is delivered, but not paid for. Sometimesinvoices are called bills, or even statements, although statements aretechnically something else.
Lease A contract granting use or occupation of property during a specifiedtime for a specified payment.
LIABILITIES The things that your company owes to others: accounts payable, creditcard debt, mortgages, etc.
Manufacturer The company engaged in the original production and assembly ofproducts or equipment or a company that purchases such productsand equipment manufactured in accordance with companyspecifications.
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MarketResearch
The process of planning, collecting, and analyzing data relevant tomarketing decision-making. Using a combination of primary andsecondary research tools to better understand a situation.
Net Profit A company's total revenue less total expenses, showing what acompany earned (or lost, called net loss) for a set period, usually oneyear. Listed often literally as the "bottom line" on the statement ofearnings. Also called net earnings and net income.
Profit The earnings a company realizes after all costs, expenses and taxes
have been paid. It is calculated by subtracting business, depreciation,interest and tax costs from revenues. Profit is the supreme measure ofvalue as far as the market is concerned. Profit is also called earningsor net income.
PROFIT ANDLOSSSTATEMENT
One of the reports that your accounting system will generate to giveyou a picture of how your company is fairing. A P&L statement willlook at a period of time such as a month, a quarter, or a year. You cancompare with other periods of time to make decisions.
Pro-Forma An estimated cash flow for your business during the first 3 years ofoperating. It includes how much will be received, how much will bespent and how much profit the company could realistically realize.
Revenue: Revenue is the money received for a business’ products or services.ROI (ReturnonInvestment)
The amount of profit (return) based on the amount of resources(funds) used to produce it. Also, the ability of a given investment toearn a return for its use.
Security Property that your creditor can claim in case you default on yourobligation; "bankers are reluctant to lend without good security".
STATEMENT A written summary of unpaid invoices. Statements may containseveral invoices and are usually sent as a reminder of payment due.
Term The period of time between the beginning loan date on the legaldocuments and the date the entire balance of the loan is due.
Total Quality
Management
A term initially coined by the Naval Air Systems Command to describe
its Japanese style management approach to quality improvement.Since then, TQM has taken on many meanings. Simply put, it is amanagement approach to long-term success through customersatisfaction. TQM is based on the participation of all members of anorganization in improving processes, products, services and theculture in which they work.
Wholesale The selling of goods to merchants; usually in large quantities for resaleto consumers.
ONA Business Development LiaisonToll Free: 1-877-808-0886
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ONA WORKSHOP EVALUATION
This evaluation is confidential.
On a scale of 1(not satisfied) - 10 (excellent) please answer and comment onthe following questions:
Name: Workshop Location: Rating
Address: Phone: 1-5
Please rate how satisfied you were with the overall usefulness of this workshop? 1 2 3 4 5
Comments:
Please rate how satisfied you were with the facilitator? 1 2 3 4 5
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Please rate how satisfied you were with the quality of the materials? 1 2 3 4 5
Comments:
Did this workshop meet your expectations? 1 2 3 4 5
Comments:
What would you like to see added or changed in this workshop?
Are there any additional comments you would like to add?
Thank you for your time and input into helping make
this workshop better for you and your community. If
you have any questions now or in the future please do
not hesitate to contact the ONA BDL at toll free: 1-877-
808-0886. Good luck on your exciting new journey!
Date: