Welcome to the Small Business Center
Your Partner for Business Success
Checklists for Small Business
According to the Small Business Administration, two-thirds of new businesses survive for at least two years, and only 44 percent survive at least four years. Position your business for success by using these success factors in determining if your business is feasible.
Business Feasibility Checklist
- Completed Business Plan – Having a written plan promotes success, faster growth and higher profits.
- Received Objective Feedback – Have an objective individual or group review the plan. Now is the time to eliminate costly oversights; save time and money.
Examine Your Business Plan
- The Right Business Idea – Does your business idea fill a market need, or is it just something you like to do?
- The Right Size Customer Base – Are there enough potential customers to be profitable?
- Starting for Right Reasons – A business takes commitment. Are you ready to invest the time it takes to start a business?
- Invest in Your Business – Before you borrow money, are you willing to invest your own first?
- Right Place to Start – Are you picking the right location to start your business?
- Right Time to Start – Are you starting at the best time of the year?
- Build Long-Term Value – Do you accept that repeat business is more valuable than short-term profits?
- Involve Your Family – Can you start a business with your family’s support?
- Sufficient Capital – It takes longer to be profitable. Have you planned for more cash?
- Realistic Revenues – It takes time to build sales. Have you planned for enough time?
- Increase Marketing – Are you prepared to invest in enough marketing to build sales?
- Non-Traditional Marketing – Can you embrace guerrilla and viral marketing, rather than simple traditional marketing?
- Keep Debt Low – Lease, not buy, rent, not own. Will you start small, looking for ways to lower overhead?
- Control Costs – Before positive cash flow occurs, can you avoid spending down initial cash?
- Right Business Location – Are you near customers? Do you have visibility, good parking?
- Know Your Customer – Consumer loyalty doesn’t just happen. Can you work to earn it?
- Expand Slowly – Can you grow with good cash flow while increasing your customer base?
- Establish a Team – Can you do what you do best and delegate the rest?
- Establish a Niche – Do not be all things to all people. Will you focus on customers you can best serve?
- Unique Selling – Do you know what makes you unique to attract and retain profitable customers?
- Adapt to Change – The only thing certain is change. Are you prepared for change?
- Strong Internal Controls – Do you have procedures in place for accounting, HR, fraud, theft, etc?
- Sales Tracking System – Do you know the marketing source and cost of inquiries, appointments, sales, etc.?
- 100 Percent Commitment – Even if the business is part-time, are you 100% committed?
- Have an Objective Adviser – Don’t rely on friends and family. Do you have a good adviser?
- Right Focus – Do you know the 80-20 rule? 20% of customers produce 80% of the profits: focus on the 20%.
- Have a Website – Are you prepared to implement a website?
- Web Marketing Strategy – Do you have an optimization plan to attract people to your website?
- Prepare the “Elevator Speech” – Can you explain your company in thirty seconds?
One of the biggest mistakes you can make is to rush to open your business. Take the time to know the answer to each question.
There are pros and cons to starting your own business versus buying an existing business or a franchise.
Pros of Starting a Business
- Less Capital Needed – There are less costs up front when starting a business.
- You Can Create It Your Way – There is no franchised cookie-cutter format.
- You Can Manage It Your Way – There are no franchise operation policies.
- Higher Initial Profits – Extra money is not needed for the cost of purchasing an existing business to pay for up-front franchise fees or on-going franchise royalties.
- Ability to React Quickly to Marketplace Change – No bureaucracy to prevent or slow down change.
Cons of Starting a Business
- Higher Failure Rate – There is no franchise support. Success rate is primarily based on the owner’s plan.
- Longer Start-up Time – It takes longer to open versus buying an existing business or a franchise.
- Can Be Harder and More Expensive to Build a Customer Base – There isn’t one established as with an existing business or a franchise.
- Hard to Get Traditional Financing – You are selling your own idea.
- Hard to Start a Business From Scratch – You have to create everything.
- Lack of Experience – For those that have not owned a business the challenges will be new and more difficult.
- Smaller Support System – There won’t be assistance from franchise management.
One of the biggest mistakes you can make is to hurry into business. So it is important to review the pros and cons of each business start-up option, and make sure that the business you are exploring fits your needs, experience, and financial capacity.
Below are the pros and cons to buying an existing business versus starting from scratch or a franchise.
Pros of Buying an Existing Business
- Quicker Startup Time – Business concept, customer base, operations in place. Getting a business off the ground can be the hardest part of starting a business.
- Grow vs. Start – Money and energy can be invested into growing the business versus starting from scratch
- Existing Cash Flow – Thanks to existing customer base, inventory and receivables.
- Pre-Existing Customer Goodwill and Reputation – People will already know the business, so the costs of advertising will be less.
- Avoid Uncertainty – Attracting customers to the business can turn into a fulltime job in itself.
- Easier to Finance – if the business has a positive track record.
- Existing Market Demand
- Existing Systems and Resources – Business may come equipped with existing Business & Marketing Plans, Policy & Procedures, Client Contracts, etc.
- Lowers Initial Staff Recruitment and Training – Have an existing staff and management.
- Knowledge Transfer – Learn about running the business from the current owner.
- Existing Vendors – Eliminates the need to find, contact and setup accounts with vendors.
- Existing Premises – Can eliminate the need to search for new premises.
- Problems Solved – With a good business, many of the problems may have been discovered and solved already.
- Simpler and Safer – Compared to starting a business from scratch.
Cons of Buying an Existing Business
- Higher Initial Purchase Cost – Cost of acquiring an existing business may be greater then than starting one.
- More Cash Required – Needed for transition cash flow requirements, professional services to include legal, financial, etc.
- Buyer Beware – Existing problems you many may not be aware of them at the time of purchase.
- Business May be Overvalued – Business sales, cash flow, profit and assets may be valued higher at the purchase time, but later turn out to be less.
- May Not Be the Right Fit – Business may not fit your needs, experience and financial capacity.
- Capital for Revitalization – More cash will be needed to turn the business around, if the business has been neglected.
- Outstanding Obligations – Existing contracts, leases or obligations may not be in your best interest.
- Possible Employee Turnover – Existing employees may have problems or good employees may leave with a new owner.
- Business Goodwill Overrated – No guarantee that customers will stay with new ownership.
One of the biggest mistakes you can make is to hurry into business. It is important to review the pros and cons of each business start-up option, and make sure that the business you are exploring fits your needs, experience and financial capacity.
There are the pros and cons to buying a franchise versus starting from scratch or buying an existing non-franchise business.
What is Franchising?
A franchise is a right granted to an individual or group to market a company’s goods or services within a certain territory or location. The franchisor (the company owner) sells the rights to the franchisee and then typically receives a fee for ongoing support, therefore giving the franchisor a vested interest in the success of the franchise.
Pros to Buying a Franchise
- Lower Failure Rate – Franchises have a higher success rate, since applicants are pre-screened and a use a proven business formula. The products, services, and business operations have already been established. Franchisees have an 80 percent success rate, much higher than starting a business from scratch.
- Easier to Finance – Bankers usually look at funding a franchise of a successful business more favorably because they have a lower risk of repayment default.
- Turnkey Operation – Most franchises offer a turnkey operation, with equipment, supplies, etc. making it easier to get started.
- On-Going Support – In an effort to help the the franchisee succeed, the franchise companies usually provide on-going training and support, including management assistance.
- Recognized Company – Company image and brand awareness are already recognized. Consumers are more comfortable purchasing items they are familiar with and working with companies they know and trust. When you buy a franchise business, you are accessing a built-in customer base.
- Marketing Assistance – Most franchises offer the benefit of national, regional, or local marketing campaigns.
- Buying Power – With the benefit of the franchise’s collective buying power of inventory and supplies, purchasing costs are less than if you were running an independent company.
- Profits – A franchise business can be immensely profitable. One does not need to reinvent the wheel, but be part of a winning team.
Cons of Buying a Franchise
- Less Business Control – Franchisors usually require franchisees to follow their operations manual in order to ensure consistency. This may limit creativity on the part of the franchisee and may be limiting to entrepreneurs with their own vision.
- The Cost of Buying a Franchise Can Be High—You pay for all the franchisor sells.
- Initial Franchise Fee – There is a fee to purchase the franchise and in most cases it is higher than the cost of starting a business from scratch.
- Ongoing Costs – Paying monthly royalties to the franchisor may cut into your profits
- Additional Fees – The franchisor may also charge additional fees for services provided, such as the cost of advertising.
- Ongoing Support – Varies, not all franchisors offer the same degree of assistance in starting a business and operating it successfully.
- Not All Franchises Worth the Investment—Buying a little-known, perhaps inexpensive franchise can be a gamble. There is no guarantee that the franchise you buy will be successful.
- Loss of Franchise – One can lose the right to their business if the franchise contract is breached.
- The Risk of Non-renewal – Renewal of the franchise contract is not typically guaranteed.
One of the biggest mistakes you can make is to hurry into business. So it is important to review the pros and cons of each business start-up option, and make sure that the business you are exploring fits your needs, experience, and financial capacity.
It is important to take your time and make sure that the sale process fits your needs and that you position the company for the highest sales price.
Steps to consider when you want to list your business for sale.
- Selling Strategy – Decide when and how to sell, as well as who is going to help you.
- What is your business worth—Determine a realistic value. And look for ways to maximize your business’s value.
- Finding a buyer – Hire a business broker, create a selling memorandum, and have a sales strategy.
- Structuring the deal – Know your options and the tax implications of each.
- Financing the deal – Become knowledgeable about seller financing and third-party financing.
- Completing the deal – Have a plan, starting with the letter of intent and going all the way to the closing.
Tips for Successfully Selling Your Business
- Diversify Your Customer Base – Maximize your business’s value. A diversified customer base increases business value.
- Hire An Auditor – Have an independent auditor review your financial statements. Savvy buyers will ask to review independently audited records covering at least two or three prior years of performance.
- Get Help – Surround yourself with a strong advisory team to assist with the sales negotiation process, including a lawyer, accountant or perhaps a banker or other financial adviser. Remember that someone has to run the business (that would be you) during this period.
- Confidential Data – Put all pertinent financial records and other key documents on a CD, or perhaps post them to a password-protected website. Only give buyers access to your data after they sign a strict non-disclosure agreement. Make sure a buyer is serious before releasing any confidential info.
- Tell Your Story – Word of the sale is bound to leak out. Have your story about why you are selling the business ready to go. Start with top managers. When appropriate, give employees the basic information, but don’t go into detail. Vendors and suppliers will probably hear the news through the grapevine, so be sure to speak with them directly to contain rumors from spreading.
- Learn To Let Go – Begin diminishing your role at the company – for two reasons. First, if you are the business, recruit a strong management team that can carry on without you after the sale. This will increase the value of the company. Second, understand that the new buyers may not want you around.
One of the biggest mistakes you can make is to rush to sell your business. So it is important to take your time and make sure that the sale process fits your needs and that you position the company for the highest sales price.
The following tips ensure a smooth transition from one generation to the next.
- Start off with a succession plan – Build an exit strategy into the first business plan. The earlier one begins succession planning, the smoother the transition will be.
- Involve family in business succession planning – A discussion process is critical for a successful succession. Take into consideration personal feelings, ambitions and goals of family members.
- Select the best successor – Examine the strengths of all successors and what is best for the business. Look for who has strongest skill set and interest.
- Not everyone needs to have an equal share – It may be fairer for the successor(s) to have a larger share of ownership than non-active family members. Or it may be best to transfer both management and ownership to the chosen successor(s) and make other financial arrangements to benefit the other family members or children involved.
- Train your successor(s) and work with them – Successful ownership transitions occur when successor(s) have been trained for a year or two before they take over.
- Get expert help with succession planning – Ask a family-business succession-planning firm, as well as lawyers, accountants, and financial advisers to assist in facilitating the process of working through succession plan issues.
A good succession plan ensures that you’ll have the funds necessary to retire, or start a new venture, and guarantees that the business you built thrives under its new leadership.
Follow these 10 tips to take your business to the next level.
- Open another location – Good choice for businesses with consistent bottom-line profit and steady growth. But business expansion isn’t always the best growth solution if done without careful feasibility research and planning.
- Offer your business as a franchise or business opportunity.
- License your product – This can be an effective, low-cost growth medium, particularly if you have a branded product. You can receive upfront monies and royalties from the continued sales or use of your products. Licensing minimizes your risk and is low cost in comparison to the price of starting your own company to produce and sell your brand or product.
- Form an alliance – Aligning yourself with a similar type of business can be a powerful way to expand quickly.
- Diversify – Diversifying is an excellent growth strategy that allows for multiple streams of income that can often fill seasonal voids, increase sales and profit margins.
- Target other markets – If your current market is serving you well, look for other complementary markets.
- Do business with the government – The federal, state, and local governments are one of the largest buyers of goods and services in the world.
- Merge with or acquire another business
- Expand globally – Remember you don’t need to acquire another business to expand globally. You just need to position your company products or services for an international market.
- Expand to the Internet – As Bill Gates said, “there will be only two kinds of businesses: Those with an Internet presence, and those with no business at all.”
One of the biggest mistakes you can make is to expanding too quickly. Take the time to review your expansion options and make sure that they fit your needs, experience, and financial capacity.
Tips on Doing It Right
- Seek Professional Advice – Use the expertise of a business lawyer or business adviser, or consult an insolvency practitioner.
- Smart Exit Strategy – Look for the simplest exit possible that leaves the owner, with no long-term liabilities or responsibilities.
- Seek Advice From a Good Tax Accountant – Maximize the amount of money you can legally leave the business with taking into consideration your personal tax position.
- Plan Your Exit – The longer you prepare for business closure the better the terms.
- Business Closure Is Not Failure – Businesses fail, not entrepreneurs. If you can learn lessons and gain a greater understanding from the experience, you will be in good position the next time you are ready to go into business.
20 Action Steps to Closing the Business
- Vote to Close – For corporations and partnerships, vote to close the business based on state business statutes. (This does not apply to sole proprietors.)
- Dissolve Your Business Officially – Obtain a “tax clearance” and file the required forms, such as a “certificate of dissolution.”
- Cancel State, County or City Permits and Licenses—Examples: Seller’s permit, business license, and fictitious or assumed business name.
- Cancel Your Lease and Insurance Policies.
- Collect Outstanding Accounts Receivable – Do this before you notify your customers you’re going out of business.
- Notify Your Employees – Pay them their last paychecks within the amount of time required by state law.
- Notify Your Customers – Fulfill any contractual obligations, if possible. Return any deposits or payments for goods not delivered or services not rendered.
- Liquidate Saleable Inventory – Consider a “going out-of-business” sale.
- Make Final Federal and State Payroll Deposits.
- Submit Final Sales Tax Forms and Funds Due Up to the Closeout Date.
- Notify Your Creditors: Suppliers, Lenders, Service Providers, and Utilities.
- Comply With “Bulk Sales Laws.”
- Settle or Pay All of Your Business Debts – Money owed to your landlord, bank, suppliers, utilities, and service providers.
- Get Letters Stating That Your Bills Are Paid in Full – Do so as you pay off each creditor.
- Cancel Your Business Credit Cards.
- Sell Business Assets – File IRS Form 4797, Sales of Business Property or, if you sell the bulk of your business assets to one buyer, file IRS Form 8594.
- File Your Final Employment-related Tax Returns – IRS Form 940, IRS Form 941, state tax withholding and wage reporting forms.
- File Your Final Income Tax Returns – Check the box stating that this is your final return.
- Leave Contact Information – Tell former business contacts, colleagues, and employees.
- Close Your Business Bank Account.
One of the biggest mistakes you can make is to rush closing the business. Take the time to go through each step. SBC can assist in closing a business.
Need a computer to do Internet research, create or update a business plan?
A computer with Internet access is located in our resource center for you to use.
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Small Business Center Locations
Henderson County Campus 180 West Campus Dr. Flat Rock, NC 28731Mondays, Tuesdays, Wednesdays, Fridays |
Transylvania County Campus 45 Oak Park Dr. Brevard, NC 28712Thursdays |
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