A Closer Look at Business Plans

I’ve had a small business for a few years. The company performs a variety of services related to environmental projects. I would ultimately like to expand into alternative fuels as well. I currently don't have a business plan; it’s more like a business sketch in my head. Can you point me in the right direction that will help me pull together funding?

-M.Davis.

Some important plan elements to keep in mind are: Cover Page: Provides the reader with all of the necessary contact information about your company. Executive Summary: Usually written last, provides an abstract of the entire business plan. Company Description: Conveys what your company does and how you are set up. Products & Services: Describes your product(s) or service(s) with an emphasis on anything new you are offering. Market Competition: Describes who your competitors are and looks at your overall market. Marketing & Promotions: Describes how you plan to obtain customers and what marketing tools you intend to use. Management & Advisors: Describes the qualifications of all the individuals involved in the business including yourself. Financials: The financials bring together all the other aspects discussed in different sections and puts a numeric face on them. Lastly, the Appendix: includes all attachments, charts, exhibits, etc. that would only muddle up the other sections of your plan.

Although, there is no recipe for creating a business plan that will ensure small business success, the following tips may be helpful. Do your research. Good market research will be the fuel that drives the development of your business plan. Market research will help you identify how large of a market exist in your area and nationally for alternative fuels. Plan for the unexpected. This part of the process requires that you be somewhat psychic; keeping Murphy’s Law in mind that whatever can happen will happen-so make sure that you are prepared. Write a great executive summary. Let’s say that you only have a few moments to impress that big investor who is considering bankrolling your entire project. In that case the only thing standing between you and successfully starting or growing your business is your executive summary-so make sure that it is a good one. Specificity and realism are key. The first business plan I ever wrote read like the phone book and was as thick as one. It wasn’t until a short time later that I realized that business plans should be specific and to the point. Also, be sure to keep financial projections and overall goals from becoming to lofty or unrealistic. Keep in mind that a well written business plan could bring you one step closer to finding the funding you need and one step closer to achieving your small business goals.

Got a small business question? Or want more information on business plans? Send me an email, Cavanaugh L. Gray at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Incorporating Your Business: Sole Proprietor

Yesterday I received a call from one of my neighbors who also happens to be an awesome business women-that owns two apparel stores in our region. On occasion we have had the opportunity to chat and exchange ideas about various projects. In our recent conversation she was discussing a great project for fostering financial literacy and business development among in our area and wanted to know the best possible way to legally incorporate the organization. I promptly found the forms I thought she would be most interested in and decided that looking at the nuts and bolts of one particular form of business incorporation would make a great entry for the ‘Mailbag’.

One of the most important decisions you will ever make related to taxes and your business will be the type of legal structure that you choose. This decision will not only effect how much you ultimately pay in taxes but also how much administrative paperwork you are required to submit. According to U.S. Census data firms incorporated as sole proprietorships account for roughly 72% of all business incorporations and with good reason. An estimated 48% of these small firms usually employ 1 to 4 employees. It’s clear to see why small businesses have earned its title as the ‘engines of our economy’.

Being a sole proprietor is by far the simplest way to go into business for yourself. If your business is such that you can or intend to work alone, then this structure may definitely be the way to go. When it comes to making management decisions-you call the shots. Also, the amount of organization and ongoing paperwork are minimal usually only requiring you to file a one-page DBA, Doing Business As Form in your respective county at a cost of no more than $25-$50. Taxes are usually a cinch requiring you to fill out your business’s profit or loss on a Schedule C, Profit or Loss from Business form and include this figure on your personal income tax Form 1040. Unlike other forms of incorporation, as a sole proprietor, your business earnings are taxed only once.

However, like anything this type of incorporation does have its drawbacks. For starters, sole proprietors are 100% liable if anything goes wrong or if the company has any financial liabilities. This could place any personal assets at risks in the case of any outstanding debts or legal claims against the business. Whereas corporations (and some partnerships) are designed to be ongoing enterprises, if a sole proprietor is unable to continue the operations of a business for any reason the organization dissolves automatically. Sole proprietors usually ‘wear all hats’ and without any assistance proprietors can often find themselves stretched extremely thin. Lastly, as these small enterprises begin to grow, raising money can be difficult. Financial institutions and other sources may often be reluctant to lend money to small operations which would require proprietors to be creative in finding alternate forms of funding.

Whether or not you choose to be a sole proprietorship ultimately depends on the overall complexity of your business as well as some of the other factors outlined previously. Be sure to get the advice of a knowledgeable accountant. Remember that once your business takes off (and it will) and you find that this form of incorporation no longer suites your needs you can easily convert to another business form.

Got a small business question? Or want more information on business incorporations? Send me an email, Cavanaugh L. Gray at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

I stumbled across a local newspaper, liked the layout and decided to check out their website. The site was really bad so I called the web developer and asked if he would like some help with the site. I was asked for a quote for the site redesign. After some research I came up with a quote based on professional web design company would charge. Based on that, I delivered a quote to them based on my skill level and experience. It has been three weeks now and I haven’t heard back from them. I thought I went about developing the quote the right way but now I’m wondering if my pricing was ridiculous and they just ignored it completely.

-R.Rindfuss

Setting prices is probably one of the most misunderstood elements of small business. Price your products or services too high and you risk losing business to your competition. Price yourself to low and you run the risk of losing money. It’s important that you understand the overall market for your product or service, what channels of distribution exist, who your competitors are and the type of business you are operating before you begin to set prices. In any successful business you want to set prices to cover total costs plus some margin of profit.

If you were setting prices in a retail business, you would need to be familiar with two costs. The first cost is that of acquiring the goods or the Costs of Goods Sold (COGS). The other costs are called “operating expenses”-which can include wages, advertising, management salaries, rent, utilities, and office supplies. In the case of the retail store, one of the key pricing factors will be in determining your markup cost. This markup cost will go toward covering your operating expenses and some level of profit for yourself. Known as a cost based approach this pricing strategy simply adds an amount that is a percentage of the COGS price or some set amount in order to arrive at a final sales price.

There are however other pricing strategies that could apply to both product and service businesses. A competition based approach refers to a strategy where a company bases it prices on those of its competitors. If non-price considerations are important to customers and there is a certain level of differentiation surrounding your product or service such as: customer service, friendly attitudes, exclusivity, employee expertise, etc. then it is possible to pursue a prestige pricing approach. This approach allows you to charge higher prices. Lastly, there is the penetration pricing approach that focuses on low prices designed to capture market share.

As in your case, many businesses have become more knowledge based enterprises-where primarily one’s own expertise is used. In these instances consultants will usually price their services by the hour depending on their level of expertise. For longer assignments you may want to consider a complete project cost. This project costs includes charges for an adequate number of hours, travel expenses (if necessary), special costs such as equipment or printing, marketing expenses etc. A few items to keep in mind when setting prices are: (1) Do the prices you have set provide you with adequate profit margins? (2) Are your prices consistent with the image you currently project? (3) To set yourself apart and to better justify your pricing have you tried adding value-added services such as free delivery, discount prices, revisions, etc.?

From your question it sounds as if you were definitely on the right track. However, keep in mind that a company’s intentions may be good, however, it just may not be the right time for them to make a move even if they would like to. No worries though, it’s simply time to make another phone call.

Got a small business question? Or simply want more information on setting prices? Send me an email, Cavanaugh L. Gray at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
 

I received a call recently from a good friend who started the conversation with "I seem to have gotten myself into a bit of a jam". Luckily for my friend his 'jam' was a very minor one. He had recently done some freelance work for a client and with the holidays looming he was unable to receive payment from the client without having established an Employer Identification Number (EIN)-also known in IRS terms as Form SS-4. The best way to describe an EIN is to think of it as a Social Security Number for your business that identifies it as a distinct entity primarily for tax related purposes. In addition, if you plan on opening a business bank account (which I highly recommend) most banks won't allow you to do so without an EIN. In my friend's instance we were able to resolve this problem in less than five minutes.

You have four options for applying for an Employer Identification Number, the first and the quickest is to contact the IRS assistance line at 800-829-4933, in most cases you will be instructed to the correct prompt in order to apply and get your tentative number instantly-right over phone. Next, you can log on to the following link Apply Online Now or go to www.irs.gov for more information. The other two options are just as effective but will take more time as they have to be processed manually . To mail or fax your EIN form simply call 800-829-4933 and ask an agent for the appropriate fax number or mailing address for your particular location. However you choose to apply be sure to only apply through one channel as you could end up with multiple EINs and that could spell confusion come tax time. To print out a copy of this form click the following link Print EIN Form SS-4.

Got a small business question? Send me an email, Cavanaugh L. Gray at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .