Writeup Name and Date
HISTORY (Update only if the business has had significant changes otherwise, history remains the same, no need to cut and paste from previous session):
PREP DESCRIPTION (If time is charged to this category, please provide prep description):
The following was done in preparation for the session:
Searched SOS Direct
Searched availability of URL
Performed USPTO.gov search
Reviewed Business Reference Guide
The following resources were used to conduct research for the client:
Business Reference Guide
Texas Comptroller of Public Accounts
The following resources were reviewed, selected and printed in preparation of the client's visit based off their Client Assessment.
Basic Business Plan Outline
Business Feasibility Study
Business Plan Checklist
Business Plan for a Startup Business
Article: Entrepreneur – The Cost of Quality
What is Paydex Score?
Ways to Improve Your Business credit Score
Elements of a Marketing Plan
Choice of Entity
Guidelines for Employment and Independent Contractor Arrangements
How Much Does marketing Cost?
Small Business Marketing: How to Capitalize on Social Media
Profit and Loss Template by first 12 months
Profit and Loss Template for Year 2 and 3
List of accounts for Profit and Loss Statements
Key Points to Borrowing Money
Minority Certification Applications
Government Contracting Opportunities
SCORE 12 month Profit and Loss Projection Template
Texas Sales Tax – Frequently Asked Questions
Texas Taxable Services
How Startup Capital Works
Your Access to Free Credit Reports
The following Demographic Now comparison reports were provided:
Age By Sex Comparison
Consumer Expenditure Comparison
Demographic Detail Comparison
Demographic Trend Comparison
CEX – Apparel detail Comparison
CEX – Auto Transportation Detail Comparison
CEX - Convenience Store detail Comparison
CEX – Electronic Detail Comparison
CEX – Food and Beverage Detail Comparison
CEX - Healthcare Detail Comparison
CEX – HH Furnishings & Expenses Detail Comparison
CEX – Restaurant Detail Comparison
CEX – Shelter Utilities Detail Comparison
Daytime Population Comparison
Demographic Snapshot Charts Comparison
Demographic Snapshot Index Comparison
Housing Units Comparison
Mature Market Comparison
Mosaic Household Comparison
Mosaic Household Comparison
Mosaic Population Comparison
Retail Sales Potential Comparison
US Census 2000 Demographic Snapshot Comparison
US Census 2000 Employment Comparison
US Census 2000 Household Detail Comparison
US Census 2000 Housing Value Comparison
US Census 2000 Overview Comparison
US Census 2000 Population Comparison
US Census 2000 to 2010 Comparison
US Census 2010 Ancestry Comparison
US Census 2010 Overview Comparison
US Census 2010 Population Comparison
US Census 2010 Race Ethnicity Comparison
SOLUTIONS OR RECOMMENDATIONS:
The major areas of discussion include:
Types of entities
Steps to Forming a Business
Lending Guidelines for a Startup and Screening Criteria
Evaluation Criteria used by Lenders
Steps and Considerations in Buying an Existing Business
Selling a Business
Starting a Food Product Business
Reviewing a Business Plan and Checklist
We discussed the following regarding entities:
Described sole proprietors, LLCs, C Corporations
Differences between types of entities
Cost of formation
Options to form using attorney, legalzoom, rocketlawyer, mail to SOS or SOSDirect
We do not give legal advice and we always recommend to consult with an attorney
Terminology including members, shareholders, units, shares, by laws, operating agreement, certificate of formation, assumed name certificate and other terms relating to entities
Piercing the corporate veil
Tax treatment, disregarded entities
IRS defaults for LLCs to Sole Proprietor or Partnership
Election of S Corporation for LLC or Corporation
Getting EIN Number
Consent of registered agent
We discussed the steps in forming a business:
Emphasized that materials, services or products offered by the SBDC clients are available as a resource to assist the client with business concerns. Making these services available does not imply or constitute a recommendation or endorsement by the SBDC, but is only intended to be a convenience. The client must perform their own :due diligence" and it is advised to seek counsel from an attorney, Certified Public Accountant and other professional advisors regarding the formation and operation of any business. The SBDC will not provide legal or tax advice.
There are a variety of ways to form an entity; use a lawyer or CPA, use www.legalzoom.com, www.rocketlawyer.com, www.bizfilings.com, mail in your formation documents to the Secretary of State or setup an account with the Secretary of State at SOSDirect.com. The SBDC always recommends that the client should consult with an attorney prior to forming any type of business entity.
Apply for EIN with the IRS at http://sa1.www4.irs.gov/modiein/individual/index.jsp
Get confirmation letter from IRS
Search, File or Complete Assumed Name Certificate with County
Determine if a Sales Tax certificate is required
Check with State Comptroller. Web address was provided to client
File for Sales Tax & Use Permit with State Comptroller
Open up bank account. Discussed what to look for in a small business account and possible options to avoid fees.
Perform URL search
Register URL, gave client list of 6 websites to register URL
Discussed merchant services and PayPal
Provided copy of Forming Business Checklist
We discussed the following regarding the steps and considerations in buying an existing business:
Find a business to buy using websites such as BIZBUYSELL.com, an acquisition search or asking individual owners
How to use BIZBUYSELL.com
How much down payment do you need
How to finance a business
How to get to seller financing through negotiations
How to read between the lines
Cash Flow vs SDE
What is SDE
Estimating the location
Working with Brokers
Buyer disclosures to broker
How to let broker know you are a serious buyer
Initial information provided by broker will be high level
Getting a buyer/seller meeting
Making an offer with contingencies such as; subject to acceptable third party financing, subject to an acceptable lease, subject to a training and transition plan, subject to review and approval of all financial information, subject to an acceptable non-compete agreement, subject to any franchisor approvals.
Negotiating the offer
Conducting due diligence
Negotiating closing documents
Getting documents prepared
Reviews and advice of attorneys are critical
Reviews and advice of CPA is important
Understand tax consequences
Have a plan for assuming control
We discussed the following regarding selling a business:
What buyers want
Using a broker or FSBO
Multiple of Seller's Discretionary Earnings
EBITDA and Owner's Compensation
Addbacks (Benefits of Ownership)
Fundamentals that influence multiples
Weights for fundamentals
Difference between weights from textbook and Q Score analysis
Value of inventory
Impact of value to assets to value of business
The selling process
Buyer and seller meetings
Getting an offer
Negotiating the ofer
Attorney and accountant support
Bill of sale
Abandonment of assumed names
Asset sale vs stock sale
Training and transition
Seller's promissory notes
We discussed the following funding fundamentals:
The C's of Credit, including:
Credit History, is a prediction of successfully meeting future obligations
Capacity and your ability to repay the loan, cash flow for existing businesses and outside income for startups. Different banks have different definitions of startups
Conditions including current conditions of the industry
Character, criminal record, parole, probations, felony charges. Credit is also affiliated with character
Cash and your equity injection, normally 15% to 30%. Cash injection must not ne encumbered.
Credit Reports, how file is established, lender will look at personal credit report. You and your business credit are one and the same in the beginning.
Credit score should be above 700 normally. 700 is considered average.
We also discussed startup costs, working capital, equity injection, industry experience, sources of capital, personal savings, family and friends, personal investors venture capital, angel investors
Discussed personal funds, savings, home equity loan, personal loan and using retirement funds
Crowdfunding, kickstarter, campaigns
Explained that the borrower must find a bank that wants to do the loan, that the SBA and SBDC do not have money to loan. The SBA Guarantee; "Under the guaranty concept, commercial lenders make and administer the loans. The business applies to a lender for their financing. The lender decides if they will make the loan internally o9r if the application has some weaknesses which, in their opinion, will require an SBA guaranty if the loan is to be made."
Grants: "At this time, Congress has not set aside any monies for grants to start and/or expand a small business. The U.S. Government does have grants that meet other purposes not related to business needs.
SBIR and Technology grants
We discussed the following screening criteria for lending guidelines for a startup:
All 20% or greater owners have a credit score of 700 and willing to sign a personal guarantee
Have any owners had a bankruptcy?
Knows amount of startup costs
Has a detailed breakdown of startup costs
Has 20 to 30% of liquid assets to inject into the business, (unencumbered).
Has additional outside income (startups) sufficient enough to cover personal needs and repay the loan
Does the borrower have personal or business collateral exceeding 70% of the anticipated loan amount?
Does at least one of the owners have direct industry experience? (sometimes waived for franchises)
Is the industry attractive to lenders with a positive 5 year growth outlook?
SBA Form 413, Personal Financial Statement for each owner with greater than 20% ownership or other PFS to support assets and collateral
ALL THE SCREENING CRITERIA SHOULD BE POSITIVE BEFORE PROCEEDING TO A BUSINESS PLAN OR BEFORE APPROACHING A LENDER
A copy of the Screening Criteria and Evaluation Criteria Worksheet was provided to client.
We discussed the following evaluation criteria for lendors:
Strength of credit history, strength of owner's injection, validity of startup costs and needs, strength and stability of outside income, strength of industry, validity of business concept, validity of business plan, validity of business financials, strength of owner's industry experience, strength of owner's business acumen, review of Personal tax returns
Strength of franchise and review of the FDD and franchise agreement
Has been in business for 2 or more years or is a franchise or has additional outside income if a startup
We reviewed the major components of a business plan and a checklist to validate the plan:
Business Plan Checklist
Whether you are creating a formal Business Plan or an internal working plan, your plan should be complete and free from errors. Follow the instructions provided to create a complete and accurate Business Plan.
A. Review your Executive Summary. The Executive Summary could very well be the most important section of the entire Business Plan because most readers will find the answers to their questions in this summary. Still, this summary of your plan should not be more than two to three pages long. As you review the Executive Summary, keep in mind your intended reader and the purpose of presenting the plan. Every time you present your plan to a new audience, you will want to consider writing a new Executive Summary. That way you can highlight the information the new audience is most interested in. Individual attention to readers’ needs is more likely to gain their attention to your request.
Place a check beside the common mistakes below that you need to review in your own Executive Summary:
Too much superficial data that fails to inspire the reviewer to read further
Failure to identify unique features and benefits of the proposed product/service
Too much technical information
Written in first person—uses “I” instead of using your name
Long sentences and phrases
Too much trivial information
Failure to specify what you hope to accomplish with the business
Failure to identify how much money the company needs, its uses, sources, and repayment
B. Review your plan against the Business Plan Checklist. After your Business Plan is assembled, review it for completeness and accuracy. For each section, this Business Plan Checklist identifies what information should be included in your plan and tips on how it should appear. The Business Plan Checklist helps you evaluate if your plan includes key content and is well written.
Use the following checklist to find changes that need to be made to make your plan more readable, concise, complete, fact-based, and error free.
Language is concise (does not read like a novel or term paper).
Each section stands on its own and clearly defines and satisfies its objective.
Facts are supported with sufficient documentation.
Conclusions drawn from facts are reasonable.
Contents are supported with sufficient charts and graphs.
Spelling is correct.
Grammar is clean.
Math is error-free.
Taking Action Business Plan Checklist
Font choice is readable.
Spacing between lines is sufficient.
Plan contains headings and subheadings.
Formatting on headings and subheadings is consistent.
Plan includes page numbers.
Formatting on page numbers is consistent.
Plan contains enough white space for readability.
Cover Page / Table of Contents—for formal Business Plan
Cover Page contains name of business.
Cover Page contains chief executive’s name.
Cover Page contains address, telephone, fax numbers, e-mail, and Web address.
Cover Page contains company logo.
Page numbers in Table of Contents correspond correctly.
Appendix includes a Table of Contents.
Does not exceed three pages and wholly describes the new venture.
Describes the unique features and benefits of the product/service.
Identifies the management team and supporting infrastructure.
Explains the opportunities found within the industry.
Contains plans for targeting a market segment and penetrating it.
Specifies how much money the company needs and how funds will be obtained.
Management and Organization
Explains the legal form of business.
Lists key management positions, including primary job responsibilities.
Identifies the board of directors/advisory board members, including primary contributions expected.
Documents the process of recruiting and selecting employees.
Clarifies the compensation and employee reward systems.
Establishes credibility of the management team.
Describes product/service in plain language (not too technical).
Describes product/service in specific terms (not too broad).
Provides evidence that the product/service is technologically feasible.
Identifies unique features.
Identifies special benefits.
Wholly explains product/service liabilities and potential solutions.
If applicable, identifies production process and facility plans.
Provides backup suppliers and subcontractors.
Anticipates future related products/services and spin-offs.
Describes how intellectual property will be created and protected.
Lists requirements from regulatory agencies.
Marketing Plan – Industry Profile
Focuses on current size and growth potential of the industry.
Discusses industry trends and opportunities associated with each.
Addresses geographic locations, seasonality, and industry profit characteristics.
Identifies existing distribution networks.
Marketing Plan – Competitive Analysis
Identifies direct, indirect, and future competition.
Contains matrix to illustrate competitive position in marketplace.
Describes competitive advantage.
Marketing Plan – Marketing Analysis and Penetration
Contains customer profile.
Contains target markets and size of each.
Fully illustrates the image of the company.
Describes plans to reach the market, including customer service, location, sales force, licensing and distributing.
Addresses plans for advertising and promotion.
Includes plans for marketing through technology, including the Internet.
Discusses other penetration strategies, including publicity, telemarketing/direct mail, Web site, and trade shows.
Describes plans for evaluating market penetration effectiveness.
Marketing Plan – Pricing
Addresses pricing strategy.
Contains price sheet.
Includes volume and special pricing information.
Contains the company’s pricing policies.
Describes control systems.
Overviews risk management.
Documents work flow and related accounting processes.
Refers to procedures and employee manuals.
Describes disaster plan.
Sales and profit projections appear to be reasonable.
Assumptions and projections are wholly supported.
All operating expenses have been included.
Hidden costs have been identified.
Salaries and other benefits are in line with industry standards or entrepreneur’s goals.
Contingency plan seems reasonable if sales forecasts go unmet.
Figures on various documents are consistent.
Sources of debt or equity financing are appropriately identified.
Exit strategy is clearly defined.
Appendix – for formal Business Plan
Contains resumes of the management team and key personnel.
Contains all employee contracts, stock option plans, and retirement plans.
Contains personal financial statements for each of the principals.
Contains patent and copyright approvals.
Contains such agreements as partnerships, sales, distributor contracts, non-compete/non-disclosure, corporate bylaws, and other legal documents.
Contains copies of product/service brochures or other advertising samples.
Contains copies of all logos that have been developed.
Contains copies of recent reference letters, recommendations, and endorsements.
Contains copies of market studies or articles from trade journals or other media.
Contains professional photographs of the product.
Contains detailed outlines of the operating and control systems.
Contains customer-signed orders or letters of intent.
Contains documents that support the industry study.
Contains detailed description of high-tech products.
C. Have the final draft of your Business Plan reviewed by a trusted adviser. Feedback from trusted advisers can be immensely valuable in determining the strengths and weaknesses of your plan. If possible, someone familiar with your industry should review the plan. Ask your reviewer to check for these components:
Product/service – Do your products and services represent the core competencies of your business?
If a growth plan includes an expansion of the product or service line, does the expansion seem reasonable? Do governmental regulations exist that are not discussed in the plan?
Market – Does the Marketing Plan accurately describe the growth potential of the market? Is the market penetration plan reasonable and affordable?
Financial – Are the revenues and expenses accurately portrayed? Can the necessary growth funds be obtained? Is an exit strategy identified?
We discussed the steps to starting a food product business:
Business and Marketing Plan. Preliminarily, even just brainstorming ideas on paper to create a basic foundation is a good start. Unless you are planning on getting an SBA loan or funding from Angel Investors, Venture Capitalists, etc. then you don’t have to have a formally completed business plan to get started. A business plan is great to put your ideas and vision on paper, but most of the time it will be pretty fluid during the first year or two – so don’t waste too much time stressing about it. Now, if you are seeking outside funding/financing to launch your business, then you will certainly need a solid, polished food business plan.
Establish business name. You can have a corporate name such as “Your Name Foods Incorporated” and a different brand name (or names) such as “XYZSweets” for your products. Setting up your business name this way is a good idea if you plan on introducing brand extensions at a later time that are completely different from your first line (i.e. you start with a line of salsas and sauces but then introduce a different line of baked goods a year later). A good example of this is Bodine Specialty Foods (corporate name) who produces several lines, including their “RC Buck’s” line, their “Cocktail Dancers” line, and their “Memphis Mojo” line, just to name a few.
It is strongly recommended to trademark your brand
Business filing (Sole-proprietorship, LLC, S-Corp, etc). Before filing, you will need to register for an EIN (Employer Identification Number) which can be done online at the IRS website here. It is then advised to consult with a CPA to determine best option for your business structure and state in which you conduct business. Your CPA can do the filing for you, but you can also do it on your own (and save some money in the process) at sites like www.incfile.com once the filing status has been chosen.
Manufacturing: Self or Co-pack? It is recommended to make this decision as early as possible. This can be one of the most difficult and frustrating parts of launching a food product.
Self-manufacturing: will you be building/customizing your own facility, renting a commercial kitchen, or using a shared commercial kitchen? Your facility will need to comply with health standards and will need inspection from the local health department.
Using a co-packer: a co-packer (contract packaging company) is a company that will produce your product for you in large quantities for a fee. Most co-packers produce their own line of branded products, but aren’t operating at full capacity – so they also produce other products to maximize their production facilities’ efficiency.
Consider different production obstacles your products may encounter (i.e. products with meat and dairy will require USDA certified facilities, not just FDA certified). It is always preferable to find a local co-packer within a reasonable driving distance for testing and quality control purposes. Co-packers provide a great advantage when getting started as they typically have a food-scientist/technologist on staff that can help you with your recipe and regulatory issues (shelf-stability, compliance, etc).
Get help understanding the ‘ins and outs’ of manufacturing food products.
Product liability insurance. You will need to get product liability insurance to protect your business. This can be attained from most insurance companies with most policies offering coverage in the $500k-$2MM range.
Logo and Branding. This is the face of your business/products, and must be done with great consideration and planning. Your logo and brand should be something that can implemented with consistency throughout all literatures and sales channels such as your packaging/labeling, letterhead, business cards, sales materials, order forms, and website. Get help with food logo design and food branding.
Packaging/Labeling: if using the services of a co-packer, they will likely have many resources for bottling/packaging to fit your needs. If you plan using a non-standard package/bottle/jar, make sure you check with the co-packer to see if they can fill that type of container. Some co-packers offer nutritional label & ingredient statement analysis services, but most of the time you will need to take your recipe to a 3rd party labeling company.
In addition to the nutritional/ingredient labeling, it is recommended to attain UPC codes for each of your SKUs. There are a number of resources available online for UPC codes, and surprisingly, the process and turn-around time is quite simple, quick, and reasonably priced.
Once you have your nutritional/ingredient statement labels and UPC labels, you will need to find a company that help with your food label design.
Website , Sales Materials Business Cards, etc.
Time to Market and Sell!
ACTION AGREEMENT: BUSINESS ADVISOR
Assist as requested
Request research from SBDCNET
Conduct additional research
ACTION AGREEMENT: CLIENT
Review information provided
Open bank account
Apply for sales tax permit
Work on business plan
Investigate funding options
ECONOMIC IMPACT (Jobs Created or retained, any Capital infusion to include equity, loans and business starts):
Business Start Potential
Should be Empty: