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Small Business Finance…

Small Business Finance…. Spring 2010 URG MBA Program Chapters 1-3. Establishing a Venture . Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience Example: CEO Larry Hsu Legal and Financial Advisors. Business Structure. Sole proprietor

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Small Business Finance…

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  1. Small Business Finance… Spring 2010 URG MBA Program Chapters 1-3

  2. Establishing a Venture • Most start-ups fail – Why? • The idea • Demand? • Need? • Benefit provided? Management Team Experience Example: CEO Larry Hsu Legal and Financial Advisors

  3. Business Structure • Sole proprietor • Limited liability • Corporation • Partnership • LLC (Limited Liability company) • Each type uses different: • Documentation • Regulations/Laws/Taxation • SBA

  4. Financial and Business Planning • Business Cycle—What makes it tick • Financial Statements • Balance Sheet • Assets and Liabilities • Income Statement • Income/Revenue and Expenses/Costs • Cash flow Statements – Importance? • EBIT (Earnings Before Interest and Taxes) • Examples

  5. Accounting and Actual Cash Flow • Timing between sales and payment receipt • Cost of doing business • Credit card fees • Barters • Based on market price • Example: Web page design and maintenance/Advertising • Accounting depreciation • Leasing and relying on credit from suppliers

  6. EBITDA • Earnings before interest, depreciation and Amortization • Used in companies that have a high value in equipment • Disadvantage : does not include maintenance of equipment • Does not affect cash flow—does affect taxes and tax reporting

  7. Financial Projections • Forecasting cash needs • Valuation of the company • Compare actual performance to forecasts • Gives creditability and reliability to your forecast • Issues • Markets are difficult to predict • Promising a % increase must be substantiated • Conservative estimates or not?

  8. Policies • Pricing • What are some strategies? • R & D Cost • Credit • How much and to whom? • Establishing your own • Dividend • Affects cash balances

  9. Cost Structure Analysis • Break-even Point • Be conservative here • Establishing Fixed and Variable Costs • Fixed costs are easy to establish/consistent • Variable costs? • Energy Costs • Shipping, etc. • Establishing what could and/or should be outsourced • Cost of establishing your business network • Who will be your business partners?

  10. Strategic Planning • Market analysis/feasibility • Start-up costs • R & D costs • Consider target markets • Test market? • Decision making • Establish a process • Use a decision tree

  11. Strategic Alliances • Anti-trust issues • Go to Youtube.com and search for AT&T funny video Look for the one that looks like a diagram • Application to today’s markets? • Banking • Communications • Transportation • Car makers

  12. Business Plan • Great resource – SBA – www.sba.org • Components: • General description • Business goals • Product description/Service description • The management team • Current status • Summary of financial projections • Financial resource requirements

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