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The Entrepreneur Network

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entrepreneurs may find useful.

How To Make A Winning Loan Proposal

(A Business Plan designed for getting a loan approved)
Introduction
One of the least understood concepts is how to make an effective loan presentation to a lender. A borrower is often told to create a "Business Plan"
and to include various required documents. However, this generic approach may result in the loan request being relegated to a stack on the loan
officer's desk and perhaps a rejection.
Our objective is to share with you the secrets of selling your proposal to a lender. This is not an academic exercise but rather a professional approach
that works. It's similar to the process of gathering information that you would use for an internal management business plan to provide a map to
success and profit. In that case, you may want to tweak the format a bit and be more conservative with your projections.
Lenders want to be assured that:
Your business will repay the proposed loan. And that there are sufficient assets (collateral) to pay off the principal in the event the loan goes into
default. (For an internal management business plan, you want to assure yourself, partners, stockholders and key managers that you can make a
reasonable profit, pay financial obligations and achieve your stated goals.)
It is your job to provide the lender with these two assurances in a clear and concise format. Lenders reject loan requests when they cannot understand
the risk or the risk is greater than acceptable to them. An acceptable entrepreneur's risk is often greater than an acceptable lender's risk.
Choosing the Right Lender
Don't "shotgun" your loan request to many lenders. Instead, tailor it to the specific lender most likely to grant your request. Cultivate the relationship
before requesting a loan. Who do you know that can introduce you to the bank's president or chief loan officer? Open a bank account before making
application for a loan. It is more difficult for a lending institution to say "no" to a customer.
Ask lots of questions before preparing a loan presentation. Do you finance start up companies? Do you make loans under $100,000? Under $50,000?
What are your minimum collateral requirements? Do you make equipment or working capital loans? Do you have a very active SBA department? Do
not hesitate to switch to a lender that can better accommodate your borrowing needs. Avoid a formal submission if there is not a good chance of being
approved because other lenders may find out that you were turned down when they run a credit report.
The Loan Presentation
A winning loan presentation has substantially more sizzle than a business plan designed as a personal planning tool. It may also use a more aggressive
interpretation of the proforma operating numbers. Your loan presentation should contain several sections with extensive narrative and exhibits
personalized to your situation and your lender's underwriting. Use quality white bond that is easy for the lender to copy and in an attractive type style
which is easy to read. The following is a suggested table of contents that may be modified for different situations.
Table of Contents
Cover Letter
A. Photographs
B. Memorandum (Executive Summary)
C. The Borrower (Description of you and your company)
D. The Collateral
E. The Market & Marketing Plan
F. The Underwriting (Financial soundness of your plan)
G. Recommendation (Summary)
Motivate the loan officer to pick your presentation out of the many on his or her desk because it seems more interesting and doable than the others.
The cover letter, photographs and Memorandum of salient facts are designed to do that.
Cover Letter
The cover letter is your first opportunity to sell your loan. Make it great! Lenders have been known to reject loans after reading a poorly constructed
cover letter or one that is so impersonal that the presentation looks like it is being sent to every institution in town. Relate the cover letter to specific
discussions you previously had with the loan officer and verbal understandings.
The cover letter should be no more than one or two pages long. Explain how the loan will be used. Highlight the strongest aspects. Note the weak
points and how you plan to overcome them. If the collateral is particularly strong, emphasize it in your cover letter. Always recommend approval of
the loan as your final thought rather than meekly asking the loan officer to call if there are any questions. If you cannot recommend your loan to the
loan officer, don't expect him or her to recommend it to the loan committee.
If your presentation is for venture capital, you'll need to talk about an exit plan. How and when will your investors get paid back? Do you plan to go
public in a few years? Or will you refinance them out of their investment? You should also discuss return on investment (ROI). How much will they
get for taking the risk? And when will they get it? You can eliminate the cover letter entirely if your business plan is an internal management tool for
your eyes only. However, many entrepreneurs want to share their business plan with key managers and advisors so that everyone has the same vision.
In this case, a cover letter is a good idea also.
Photgraphs
Use them! An interesting 5" X 7" on the cover of your presentation can get your proposal read first. Put lots of interesting photos inside. Get the most
attractive shots you can and fully explain them. Use a professional if your own photographic skills are lacking. If real estate is the collateral, show the
subject, comparables and the neighborhood. If a real estate appraisal is required, tell the appraiser to take attractive photographs too. They are
notorious for taking photos showing overflowing garbage bins and water accumulations on the pavement. Negotiate with the appraiser on this issue.
Show your officers, happy employees, smiling faces, machinery and equipment (if attractive). This may be the only opportunity for the loan
committee to see these subjective exhibits that greatly help in selling your deal.
Captions under each photograph should tell the story you want the lender to know. For example: "Our offices will be located on this well-traveled
street. The landlord has given us sign privileges that assures us walk-in business and helps us to lower our advertising cost." The caption under a
photo of your store shows your business and marketing skills and gives the lender confidence that you'll succeed. Another example, "Joe Smith fine-
tuning our new computer system. Joe majored in Computer Science at the University of Georgia." This caption under a photo of your equipment and
an employee may be a solution to your lack of computer training or show you hire quality people.
Clip art and graphs used sparingly are good too. Cartoons and interesting artwork makes the lender's underwriting process more personal and
enjoyable. Marketing yourself and your company well "proves" that you have the ability to market your product or service to your customers. You
don't want to over do it but think outside of the box.
Memorandum of Salient Facts
The memorandum is also called the "Executive Summary". I call it the "memorandum" because lenders sometimes call it that when they pass it
around to their loan committee. Limit it to one or two pages. It should contain the most important facts. Ask if he has an example he's willing to share
with you. Ideally, you can use his format with your words. Your mission is to get the loan officer and you in a team effort in presenting your proposal
to committee. This is an honest, full disclosure negotiation. You both have the same objective -- to approve a good loan. Trust is the key.
Name and describe the legal entity. Explain why you chose that type of ownership. Describe your business and it's owners. Your objective is to sell to
the lender the previous success of the company, its principals and officers. Enclose a biography of all the principals and key employees. Don't make
them look like job resumes. Dates are not as important as the number of years of related experience you have. Awards and industry recognition of
your accomplishments should be noted. Avoid fluff that doesn't relate to the skills needed to make your business successful.
Do a detailed sources and uses of loan funds. It should clearly describe how the requested loan will be used. List other sources of funds, your own
personal contribution and how it's to be used. A simplified example is below.
Sources & Uses of Funds

Sources of Funds

Cash from owner previously contributed $ 25,000

Additional cash from owner 30,000

Proposed loan from bank 100,000

Total funds available $155,000

Uses of Funds

Working capital $ 15,000

Purchase computer & office equipment 20,000

Purchase building 120,000

Total uses of funds $155,000

Here are some things to keep in mind when preparing your startup budget and needs for working capital:
Office equipment (Fax machine, computer, printers)
Production equipment (if you will be manufacturing)
Office or production furniture
Office supplies
Legal and CPA fees
Insurance
Business licenses or permits
Lease deposits
Remodeling costs
Utility deposits (this can be quite large!)
Salaries
Shipping
Advertising and promotion
and the big one ... lots of working capital to carry you through breakeven
The Borrower section should include market value balance sheets (not book value) on the company (showing the status before and after the loan
closing) and its principals. Be sure to foot note and explain all line items including how everything can be verified (i.e. account numbers and phone
numbers). Show how there is enough liquidity (cash assets) already in your company and committed by its principals to make the venture successful.
The weaker the overall deal, the more of your own cash will be required.
Historical and proforma operating statements must demonstrate the necessary cash flow from operations to cover debt service (the proposed loan
payments) plus have an adequate cushion. The size of the cushion required will depend of the overall strength of the deal and the lender. Show cash
flow available for debt service before non-cash-flow items (such as depreciation), loans to be paid off at closing and provision for income tax. Don't
forget to include your own salary (be conservative here). If your salary will be temporarily deferred, show it below the cash flow available for debt
service line and explain how you intend to support yourself and your family without it.
Every line item should be clearly explained. All proforma line items must be justified. Use third party "proof" such as industry trade associations,
Robert Morris Associates statistical publications (RMA) and Dun & Bradstreet publications. Major accounting firms also publish statistics for small
businesses in many industries. Check with your local library for statistical publications you can use. Successful loan proposals include extensive
narrative discussions of how and why the numbers were selected. Don't be afraid to take several pages to explain the most important line items such
as revenues.
Do not ask your accountant or a packager to generate your operating numbers. You must do your own research and believe the proforma is
achievable. Internalize the numbers and make them part of you. Lenders reject loan requests from entrepreneurs who don't know their own deal.
Many businesses fail because the owner never took the time to learn at least the basics of financial management and rely on outside help to "count
their money".
Unless specifically asked for, do not include income tax returns. They can raise more questions than they answer. Items on the financial statements
should be grouped in the primary categories using the chart of accounts that are traditionally used in your industry. (Your accountant can help here.)
Exclude meaningless financial schedules such as your check ledger or intricate details of each and every operating expense item but be prepared to
produce any backup that is asked for.
Include subjective information and news articles that support your projections. However, avoid using meaningless fluff that doesn't demonstrate your
ability to repay the loan. An alternative is to note what documentation is available upon request.
The Collateral
We mentioned earlier that collateral is a secondary way of repaying the lender in the event of default. It's not very likely that a startup business will be
approved by the lender with zero collateral. Sometimes lenders use the "lack of sufficient collateral" as a catch-all excuse to turn loans down. It's
much more comfortable for them than to tell a customer he's an unqualified borrower, didn't save enough money or they don't like the concept.
Your objective is to "prove" the value and the marketability of the collateral. Well-located real estate may be quickly sold close to the value while
equipment would be liquidated at a deep discount. Lenders can tell horror stories about having to drive all around town looking for collateral such as
vending machines. Or not being able to sell tablecloths, knives and forks from restaurant failures. Lenders try to place a liquidation value on collateral
but may be lenient if they really want to do the deal.
When the collateral is weak, get the lender to focus on other aspects of your proposal that are strong (i.e. strength of the principals, large cash
investment, strong cash flow, etc.). Appraisals help if they are current, credible and tell the story you want. Critique and highlight the parts that sell
your deal.
The Market & Marketing Plan
The words "market research" are often scary to entrepreneurs even if they have advanced college degrees. They don't need to be. Your challenge is to
determine if there are customers for your product or service and how will you get them to buy. Furthermore, how many customers are there, how
much will they pay and how quickly will they write you a check. Understand that this is not an academic exercise. Its objective is to generate
meaningful operating numbers that can be used for your proforma (projected operating numbers). Ultimately, you will have to execute your business
plan and place the actual results along side of your proforma numbers to see if you are meeting your benchmarks.
Providing extensive market information is simply sharing with the lender the research you did before you decided to go into business. If you did your
homework, it should be easy. The market research should not look like a generic Chamber of Commerce report.
Describe your competition. Explain how you plan to compete effectively. Be sure to relate the data to your company. Demographics, census tracks
and traffic counts are meaningless without explaining how it will get customers in your door. Growth in your industry is only beneficial if you can
relate it to increased revenues. Your market research is the basis for the proforma operating statements. Refer back to your market research when
explaining line items in your operating statements.
View the procedure as an upside-down triangle or funnel starting with a wide base of information gathering. Ultimately, the wide base of knowledge
is narrowed down to specifically reflect your operating numbers on your proforma. Discard irrelevant information.
The wide base of information is available at the library. Major accounting firms also publish operating numbers for various industries. Your
accountant may be able to help you get to the right accounting firm. Each industry's trade association has operating statistics. A list of all trade
associations is catalogued in a good business library. Many trade magazines publish industry statistics. A list of most trade magazines can be found in
Standard Rate & Data Services (SRDS) at your library online or the print media department of advertising agencies. Use online search engines and
check out web pages such as www.findsup.com and www.census.gov The more corroboration you obtain from various sources the better. Your
business plan must identify the sources used. Avoid fluff that won't start your journey from the base of the triangle to your proforma.
This broad information may not reflect the uniqueness of your product or service, specific selling techniques, the personality and size of your
company. Therefore, you need to narrow it down by making it a better fit. Perhaps the trade association or the accounting firm can refer you to some
of the actual companies in your industry that may be willing to share information with you. Sometimes established companies are willing to help
budding entrepreneurs who are introduced through credible channels. Your own experience may help in the narrowing process but its not nearly as
credible or objective as a third party source.
Narrow the operating numbers even further by talking to prospective customers and salespersons with competing companies. If you are a would-be
restaurateur or retailer for example, visit every restaurant or similar retail store in the area. Tactfully question customers exiting competing
establishments. How did they like the product (food)? The service? What would they like to see in the neighborhood? What do they think of your idea
and how much are they willing to pay?
Often you can learn from prospective sales persons you interview. Ask them to document their historic production claims with commission statements
and pay stubs. What do they think of your concept? Your pricing? How would they improve it? What mistakes are their current employers (your
competition) making? This anecdotal information should be weighed carefully depending upon the motives and credibility of the source. However, by
interviewing enough people, a pattern of usable data begins to emerge.
If possible, test the market by making actual sales calls and trying to close deals. Go to a similar market elsewhere if confidentiality is a consideration.
Often you will learn more by asking a customer to put up their money than gathering hypothetical data. Of course if you are already in business, your
historical numbers are important in projecting the future. Include all the details and the math. Refer back to it when footnoting the operating numbers
in your proforma.
This is a hands-on process and it must make sense to you. Don't hire a professional to produce a slick, generic product. It's important that you struggle
through it, step-by-step. Internalize it and commit it to memory when telling the bank how you will repay their loan. Use it to share your aspirations
with your partners, key managers and sales persons.
Choosing the style of your proforma, chart of accounts, when to use month-by-month, quarterly or annual numbers are determined by how it is to be
used. Here your accountant can help. Your banker may have certain requirements. For example, SBA wants month-by-month for the first year and
then annually for the next 2 years. Some equity partners like to see 10 years of proforma. If you need help, take your market research and ask your
accountant to put it in the right form or do the spreadsheets.
There are many well-intentioned packagers and wanting to do your homework for you. They offer seminars, CD ROMs, books, audio or video tapes
and even may do the entire process for a fee. Most of the time, their finished product is too generic and full of fluff. Their credentials may be superb,
but their product is not what you need to get your loan or to run your company. If you don't clearly understand how the information specifically gets
you down the triangle to the operating numbers in your proforma, it doesn't belong in your business plan.
The Underwriting (Analysis related to lender's criteria.)
You may need your accountant to help you with this section. Some successful loan applicants leave it out entirely and hope that their proposal meets
the lender's benchmarks. When you initially selected the lending institution, you should have determined how they will underwrite your loan. Ratios
such as Debt Service Coverage (cash flow available for debt service / debt service) and Return on Assets (assets / profit) differ in importance from
lender to lender.
Calculate the ratios that the loan officer told you were important. Always add subjective comments focusing on ratios that exceed the required
minimum. Wherever a ratio falls below the lender's minimum requirements, stress compensating strengths of your proposal (such as good cash
position of the principals) and other ratios that exceed the minimum requirements. A business plan for your internal use only should modify this
section to identify your risks. Underwriting is the essence of getting an approval. If your loan fails to underwrite, don't submit it. There are several
other alternatives:
1. Review your assumptions and rework your numbers.
2. Try to get it to underwrite by being more aggressive with your assumptions.
3. Search for a lender that has more aggressive underwriting standards.
4. Make your loan underwrite by changing the deal. Typical changes include reducing the loan amount, raising more capital and offering
additional collateral (such as a private residence).
5. Delay your loan request until your business is able to increase its revenues.
Most start up companies do not underwrite well. Understand that institutional lenders are not willing to take the same risk that you as an entrepreneur
are willing to take. Likewise, venture capitalists rarely provide startup capital for small businesses. Many startup businesses get loans with a partial
SBA guaranty since it transfers much of the lender's risk to the SBA.
Recommendation
Recommending your proposal to the loan officer and the loan committee is essential. If you don't believe in it, no one else will. Your recommendation
may be brief. Recap all of the strong features of the deal and state that granting your loan is prudent.
In the real world, most small businesses are started with personal savings or funds from family and friends. Some government agencies help marginal
proposals get funded. They don't work for deals that miss the mark by wider margins. According to a survey by Arthur Anderson Enterprise Group of
businesses with up to 19 employees that got funding, the sources were: 68% bank business loans, 22% leasing, 16% vendor credit, 12% credit cards,
9% private lenders, 6% personal bank loans, 3% private stock sale, 2% venture capital and 9% other. In a broader context, far less startup businesses
and companies with fewer that 10 employees get loans from banks or obtain venture capital. Since the study appears to be among Arthur Anderson's
clients, they may also be more profitable than many other small business concerns and better qualified to get outside funds. I hope this guide will
provide you with an understanding of the process and improves the chances of getting your proposal funded.
A Guide To Market Research
The words "market research" are often scary to small business persons -- even if they have advanced college degrees. They don't need to be. Simply
stated, your challenge is to determine if there are customers for your product or service and how will you get them to buy. Furthermore, how many
customers are there, how much will they pay and how quickly will they write you a check.
Understand that this is not an academic exercise. Its objective is to generate meaningful operating numbers that can be used for your proforma
(projected operating numbers). Ultimately, you will have to execute your business plan and place the actual results along side of your proforma
numbers to see if you are meeting your benchmarks.
View the procedure as an upside-down triangle or funnel starting with a wide base of information gathering. Ultimately, the wide base of knowledge
is narrowed down to specifically reflect your operating numbers on your proforma. Nonrelevant information is discarded.
The wide base of information is available at the library in publications such as Robert Morris Associates and Dun and Bradstreet. The business section
librarian can help. Major accounting firms also publish operating numbers for various industries. Your accountant may be able to help you get to the
right accounting firm. Each industry's trade association has operating statistics. A list of all trade associations is catalogued in a good business library.
Many trade magazines publish industry statistics. A list of most trade magazines can be found in Standard Rate & Data Services at your library or the
print media department of advertising agencies. The more corroboration you obtain from various sources the better. Your business plan must identify
the sources used. Avoid fluff that won't start your journey from the base of the triangle to its ultimate objective -- your proforma operating numbers.
This broad information may not reflect the uniqueness of your product or service, specific selling techniques, the personality and size of your
company. Therefore, you need to narrow it down by making it a better fit. Perhaps the trade association or the accounting firm can refer you to some
of the actual companies in your industry that may be willing to share information with you. Sometimes the companies are willing to help budding
entrepreneurs who are introduced through credible channels. Your own experience may help in the narrowing process but its not nearly as credible or
objective as a third party source.
Narrow the operating numbers even further by talking to prospective customers and salespersons with competing companies. If you are a would-be
restauranteur or retailer for example, visit every restaurant or similar retail store in the area. Tactfully question customers exiting competing
establishments. How did they like the product (food)? The service? What would they like to see in the neighborhood? What do they think of your idea
and what are they willing to pay?
Often you can learn from experienced personnel you interview to fill sales positions in your company. Ask them to document their historic production
claims with commission statements and pay stubs. What do they think of your concept? Your pricing? How would they improve it? Sell it? What
mistakes are their current employers (your competition) making? Obviously, this anecdotal information should be weighed carefully depending upon
the motives and credibility of the source. However, by interviewing enough people, a pattern of accurate data begins to emerge that is useable.
If possible, test the market by making actual sales calls in your market (or in a similar market if confidentiality is a consideration) and trying to close
deals. Often you will learn more by asking a customer to put up their money than gathering hypothetical data. Of course if you are already in
business, your historical numbers become very important in projecting the future.
Include all the details and the math. Refer back to it when footnoting the operating numbers in your proforma.
So far, this is a hands-on process. It must make sense to you. Don't hire a professional to produce a slick, generic product. It's important that you
struggle through it, step-by-step. Internalize it and commit it to memory when telling the bank how you will repay their loan. Use it to share your
aspirations with your business partners, key managers and sales persons.
Choosing the style of your proforma, chart of accounts, when to use month-by-month, quarterly or annual numbers are determined by how it is to be
used. Here your accountant can help. Your banker may have certain requirements. For example, SBA wants month-by-month for the first year and
then annually for the next 2 years. Some equity partners like to see 10 years of proforma. If you need help, take your market research and ask your
accountant to put it in the right form or do the spreadsheets You may even want to get someone to make it more presentable.
One last word of caution. There are many well-intentioned packagers and academics wanting to do your homework for you. They offer seminars, CD
ROMs, books, audio or video tapes and even may do the entire process for a fee. Most of the time, their finished product is too generic and full of
fluff. Their credentials may be superb, but their product is not what you need to get your loan or to run your company. If you don't clearly understand
how the information specifically gets you down the triangle to the operating numbers in your proforma, it doesn't belong in your business plan

SBA 7a Term Loan Guaranty Program

The U.S. Small Business Administration's 7a program provides loan guarantees to approved banks
and some other approved lenders. In the event of default by the borrowing Small Business Concern
(SBC), the SBA is willing to reimburse up to 85% of the loss that the lender would otherwise
sustain. Consequently, lenders may be willing to accept a greater credit risk and grant more
favorable terms than they might otherwise. SBA also has a revolving line of credit loan guaranty
program but very few banks are willing to participate. SBCs that are poor credit risks or fail to
clearly articulate their ability to repay the loan will probably be rejected.

Loan Amount

$100,000 to $2 million. Although the SBA encourages lenders to make loans as low as $10,000, the
paperwork is too extensive and the bank's set up costs too high to make small loans cost effective.
However, smaller banks are often motivated to consider lower loan amounts conventionally and
through SBA for existing customers with creditworthy proposals. Some large banks consider
making smaller Express Loans to existing businesses with a strong history of cash flow. Two banks
make Community Express Loans to under-served borrowers in the $5,000 to $50,000 range and
may accept tainted credit histories and no collateral.

Suitable Borrowers

For-profit SBCs with good credit (business and owners) and a history of sufficient cash flow. Some
small community banks make loans to start-up SBCs and require more cash assets, collateral and
experienced ownership. SBA defines the maximum size of the business by industry and is based
upon ether gross revenues or number of employees. Most SBCs qualify. A few industry types are
excluded from SBA programs.

Purpose of the Loan

To expand, acquire or start a small business. Weaker proposals normally require substantial
collateral, such as real estate while stronger proposals are sometimes accepted with less substantial
collateral, such as fixtures and equipment.

Loan to Collateral Value or Cost

Up to 90% of cost or value is possible for well-established SBCs with quality collateral. 70-80% more typical for most start-ups. Lenders have other
critical ratios related to cash flow, liquidity and assets that limit the loan amount available. Credit requirements, collateral prerequisites, cash flow
minimums and loan amounts vary among SBA approved lenders. Most have requirements that are more severe than the minimum acceptable to
SBA. Be sure to understand what your lender requires before you make application. Please go to www.sba.gov/financing/index.html for details on
SBA's financing programs.

The U.S. Small Business Administration's 504 program is intended to create jobs based upon a
formula that has been modified several times over the years. Particular preference is given to rural,
economically disadvantaged areas and minority and female applicants for which SBA may waive
the job creation requirement. The loan proceeds must be used to finance long-term assets such as
real estate and fixtures which makes the program ideal for construction, for expansion of
manufacturing facilities and other job intensive structures.

LOAN AMOUNT

Typically $250,000 and up. Because of the complicated processing, lower loan amounts are often
relegated to other loan programs and higher amounts may be too risky for most lenders. 504 loans
are processed by SBA-licensed Certified Development Corporations (CDC). The CDC creates a
SBA guaranteed subordinated debenture (similar to a 2nd mortgage). The debenture, up to $1.5
million ($4 million for manufacturing) is piggy-backed with a conventional first mortgage of any
amount. It's usually provided by a local bank. The borrowing Small Business Concern (SBC)
makes one payment to the CDC which is then proportionately paid to the bank and to the trustee for
the debenture holder.

INTEREST RATE

The debenture rate is fixed at closing at a rate close to treasury securities of like term. Banks may
charge a fixed or floating market rate for their conventional portion along with points and fees. The
result is a blended rate to the SBC. The CDC also charges fees.

TERM
The SBA portion is usually 20 years and the conventional portion is usually 10 years.

SUITABLE BORROWERS

For-profit SBCs with a history of success in the same industry for which the funds are to be used.
There are some company size and industry type exclusions.

LOAN TO COLLATERAL VALUE OR COST

Up to 90% of the cost for existing SBCs, 85% for start-ups. A classic percentage approved by SBA
is where the bank's conventional loan is 50%, the debenture is 40% and the SBC provides 10% or
more. An example financing of a $1,875,000 plant expansion might look like this:

• $750,000 -- SBA Subordinated debenture @ 6% fixed for 20 years.

• $937,500 -- Bank conventional loan @ 8%, 10 years adjustable every 3 years.
• $1,687,500 -- Total loan @ blended rate and term.

• $187,500 -- Minimum cash requirement from SBC

• $1,875,000 -- Total plant expansion

Community Express Loans

For good "characters", business loans just got a bit easier.

Cherie Ketchen is the owner of My Sisters Closet, a lady's clothing boutique on Shamrock
Boulevard in Venice, and is also employed full time as a nurse.

As such, she says there aren't enough hours left over to churn out all the exhibits needed to apply
for a small-business loan.

"The process seems so long and intimidating for such a small amount", she said.

What's more, most local banks won't consider amounts under $100,000 because they make more
money doing larger loans that require as much effort.

Bankers also want substantial collateral and meaningful investments of your own cash, unless
you've already established a solid track record of increasing profitability over several years.

Additionally, a few dings on your credit report can easily stand in the way of your getting the
money you need to pursue your entrepreneurial aspirations.

Even if you can overcome these obstacles, lenders require business plans, income and expense
projections, and considerable documentation to accompany your application.

Because of these deterrents, the U.S. Small Business Administration decided to change all that for
under-served borrowers by offering a new loan guaranty program based upon "character".

The approval process is less complicated.

"After the initial application was submitted, it was only a week to 10 days that I was approved",
Ketchen said about the SBA Community Express loan she received through BLX, a lender based in
Panama City. "The loan process was so smooth".

BLX and Innovative Bank of Oakland, Calif., are the only lenders making these loans. They told
me that they are eager to do more in Southwest Florida.

Both lenders will consider loans as low as $5,000. Innovative Bank goes up to $25,000, while BLX
recently increased its maximum loan amount to $50,000.

They don't require business plans, collateral or filling out lengthy forms. Approval is based on
credit scoring, and a few blemishes in previous years won't necessarily disqualify you.

Even though the two banks don't require business plans, their outsourced "technical assistants" will
ask you to write one.

Technical assistants provide free business counseling and help you fill out the application. Meeting
with one is a requirement of the program.

All Small Business Development Centers and many SCORE chapters are approved to perform the
assistants' function.

After she requested business counseling from SCORE's Manasota chapter, "I had a call from Jim
Martin, who became my SCORE mentor. He led me step by step through the business process",
Ketchen said.

"I left her with the Retail Start Up Business Plan (outline) and encouraged her to go through it in
detail to nail down expected costs and anticipated revenue", Martin said.

Growing up with four sisters at home, Ketchen was used to sharing her clothing with them. It was
as if they all shopped in her closet. Hence, she named her new business, "My Sisters Closet". The
store sells "gently worn, name brand and designer women's clothing and accessories", she said.

You can read more details about the loan program, get a list of technical assistants and download loan application forms from the BLX and
Innovative Bank Web sites, www.blxonline.com/community_express.cfm and www.innovativebank.com/site/loan_soho.html respectively

Leasing Real Estate vs. Buying

In my opinion, leasing is usually a better option for most business owners than owning. Sometimes,
local situations may justify owning. We all know stories about the small business owner who's real
estate was in the path of growth and was bought out by a developer for substantial profit. The
romance of owning real estate can be compelling and hindsight is 20-20. But in other circumstances
real estate proved burdensome and inhibited the growth of their core business. A lesson can be
learned from major corporations who rarely choose to own their buildings. Often they sell or sell
and leaseback their real estate to get it off their books. Here are some of the reasons.

1. Leasing affords more flexibility to expand or contract. It's a lot easier to renegotiate lease
terms than have to dispose of a building in a soft market.

2. Buying and selling real estate is a matter of market timing that professionals are better at
than novices. Too often novices buy at the top of the market and sell at the bottom.

3. Business owners often make real estate buying or selling decisions based upon the needs of
their business rather than the real estate market. One of the 2 will suffer.
 4. The business may be neglected because of real estate management distractions. Real estate
management is best done by professionals.

5. Selling a business may be more difficult if the buyer is required to buy the real estate as part
of the transaction. The seller is negotiating on 2 fronts and one will have a diminished
outcome.

6. Precious working capital is tied up in financing the real estate.

7. You can only write off interest expense (not amortization) on a mortgage while lease
payments are 100% deductible.

8. You can end up with phantom, taxable income when selling a depreciated building.

9. You should be spending your time making your business great and not having to deal with
the day-to-day maintenance and management headaches of owning a building. Let the
landlord do it.

10. Income to asset based ratios are improved by not owning real estate, which may help public companies compare better to others in the
same industry.

FAQ - Buying A Business

How do I go about finding the right business and determining how much it's worth?

Purchasing a profitable going concern has advantages over starting from scratch. Having an existing
customer base and predictable cash flow gives you a strong advantage. Start by defining your target
business. Assess your skills, financial resources and form a picture of the ideal target to acquire.
Make a list of all the businesses that meet the profile even if they're not advertised for sale. Contact
every owner on your list to let them know that you may be interested in buying and have the
financial resources to close the deal.

If you decide to use the services of a business broker be sure he or she represents you as a buyer's
agent -- not the seller. The broker's track record negotiating sales of businesses that fit your target's
profile should also be investigated.

Valuing a business is not easy. Even professional business appraisers often disagree. Market value is
the most probable price that a typical knowledgeable buyer and typical knowledgeable seller would
use to transact a sale if neither are under undue pressure to sell or buy. Of course, it takes only one
buyer and one seller and it's unlikely that either will be typical. Additionally, it's unlikely you'll find
exact, comparable, recent sales.

Value is determined by historic cash flow (revenues less operating expenses) and potential for
increased revenue. Sellers want to price the business based on the future but buyers want to buy
based upon the past. If they can compromise, a sale takes place. Rather than getting too hung up on
the value, I recommend that you dwell on the process for gathering documentation that will tell you
if the business is profitable enough to justify your investment.

1. Hire an experienced business acquisition lawyer. Ask for a checklist of all the documents
you'll need to get from the seller. Your lawyer will draft the definitive purchase agreement
and structure the transaction.
 2. Retain a competent accountant. Your accountant will perform due diligence - the process
of determining if the documentation provided by the seller is accurate.

3. Review the financial documents. Determine how much cash flow you can expect in the
near term after giving yourself a modest salary. Divide the cash flow by your cash
investment to get your return on investment. Is the ROI acceptable for your perceived risk?
If it is, make an offer.

Rely on the process work and you'll find the business that's right for you.

FAQ - Buy vs. Lease

Is it better to own or lease business real estate?

Often the choice to buy or lease space is ego driven rather than making the best business decision.
In my opinion, leasing is usually the better option. We've all heard stories about fortunes made in
real estate. But real estate can also be burdensome and may distract you from their primary mission
-- to make your business successful. A lesson can be learned from major corporations who choose
not to own their buildings. Here are some of the reasons.

1. Flexibility. Leasing affords more flexibility to increase or reduce space as needed. It's a lot
easier to renegotiate your lease than dispose of a building in a soft market.
2. Market fluctuation. Timing the market is essential when buying and selling real estate.
Professionals are better at it than novices. Too often novices buy at the top of the market and
sell at the bottom.
3. Business vs. real estate needs. Business owners often make real estate buying decisions
based upon the needs of their business rather than the real estate market. The best time to
liquidate real estate may not coincide with the time to sell the business.
4. Managing real estate. Your business may be neglected because of real estate management
distractions. Real estate management is a skill best left to professionals.
5. Your exit plan. Selling a business and real estate together may be more difficult. One will
have a diminished outcome.
6. Working capital is compromised. Precious working capital will be tied up in the real
estate. Lenders require a substantial down payment that could otherwise be used in your
business.
7. Better tax break leasing. You can only write off interest expense (not amortization) on the
mortgage while lease payments are 100% tax deductible.
8. Cash crunch. You may incur phantom income when selling your depreciated building.
Phantom income is taxable profit without corresponding cash flow.
9. Financial ratios. Income to asset ratios are better when leasing than owning real estate. Some lenders consider that important. The
romance of owning real estate can be compelling but leasing may be best for you.

FAQ - Real Estate Investing

by Jerry Chautin, SCORE Chapter 48, Atlanta, GA.

How can I buy multifamily rentals or commercial real estate for

investment?

Buying multifamily and commercial income producing properties can be

rewarding investments. At the beginning, you should avoid owning property
outside of your immediate area. That way you can know every property in
the neighborhood that fits your investment profile and jump on opportunities
as soon as they become available. By being in close proximity, you can also
maximize your maintenance and management control to increase asset
values.

Successful real estate acquisition professionals inventory every property in

the marketplace that meets their profile. To help, you can subscribe to lists
compiled from the county courthouse records. Alternatively, drive the
neighborhoods and search the records yourself. Some of the best acquisition
candidates are not advertised and may not be listed with real estate agents.
By contacting owners, you might persuade them to consider an offer. Three
things have to happen for you to negotiate successfully.

1. Establish credibility. Get the word out that you have the desire and
financial ability to offer a purchase contract and close the deal.
Sellers rarely agree to sell on the first visit so be prepared to make
several calls. Form relationships with owners of properties that fit
your profile.

2. Negotiate. Gather enough information about the property and the

seller to make an offer. Get the rent roll, historical operating
statements, physical details, copy of maintenance contracts, real
estate tax bill, copy of the hazard insurance, condition of depreciating
components (HVAC, roof, etc.). Don't tell the seller what you're
willing to pay. Whomever mentions price first, loses. Instead, explain
why you feel the net operating income (NOI) is lower than the seller's
estimate. Allow negotiations to be over interpretation of the Gross
Possible Income (GPI), operating expenses, reserve for replacement
and the NOI. Then, ask the seller what he would think the property is
worth with the NOI being lower than he thought.

3. Close the deal. All the major business points (i.e. purchase price,
seller financing, etc.) should be agreed upon before making a written
offer. Then it is up to the lawyers. The contract has to withstand a
process known as "due diligence" before the seller gets paid and an
actual transfer of title takes place. Your accountants, property
inspector (engineer), lawyer and you, pour over the books and the
physical structures to make sure that everything the seller told you is
accurate. If it's not, the deal may be renegotiated.

Buying multifamily and commercial real estate takes more effort than single
family homes but the rewards can be greater.

FAQ - Market Research

by Jerry Chautin, SCORE Chapter 48, Atlanta, GA.

Is there a simple way to do market research for a new business?

The words "market research" are often scary to entrepreneurs. They don't
need to be. Your challenge is to determine if there are customers for your
product or service and how will you get them to buy. Furthermore, how
many customers are there, how much will they pay and how quickly will
they write you a check.

Please understand, this is not an academic exercise. Its objective is to

generate meaningful operating numbers that can be used for your proforma
(projected income and operating expenses). Relate the data to your company.
Market research should not look like a generic chamber of commerce report.
Demographics, census tracks and traffic counts are meaningless without
explaining how it will get customers in your door. Growth in your industry is
only beneficial if you can relate it to your increased revenues. Market
research lends 3rd party credibility to your proforma.

Start with a wide base of information available from the chamber of

commerce and your local library. While there, ask for the Encyclopedia of
Associations. Industry trade associations collect extensive data and operating
statistics. Perhaps they can introduce you to companies willing to share
information with you.

Many trade magazines also publish industry statistics. The more

corroboration you obtain from various sources the better. Footnote the
sources used to produce your proforma. Avoid fluff that doesn't directly
relate to your business and its proforma. Make the data relate to the
uniqueness of your company. Your own experience may help in the
narrowing process but it's not nearly as credible or objective as a third party
source.

Talk to prospective customers and salespersons with competing companies.

How do they like the product or service? What would they do differently?
What do they think of your idea and how much are they willing to pay?

If possible, test the market by making actual sales calls and trying to close
deals. Go to a similar market elsewhere if confidentiality is a consideration.
This is a hands-on process. Don't hire a professional to produce a slick,
generic product. It's important that you struggle through it, step-by-step.
Internalize it and commit it to memory when telling the bank how you will
repay their loan.

Your accountant can help create the proforma financial statements. But be
sure its based on you own research and you internalize the numbers. You
may have to explain them to your lender.
Next Previous Contents

Protecting Your Creations

Trademarks, Service Marks and Copyright

Co-Authored, 30 March 2007, by Don J. Flickinger, SCORE Intellectual

Property Counselor, Phoenix, AZ Chapter, www.scorephoenix.org and
Michael W. Goltry, Registered Patent Attorney, Parsons & Goltry, Email:
mike@patentsavers.com. The material in this publication is based on work
supported by the U.S. Small Business Administration under cooperative
agreement SBAHQ 06-S0001. Any opinions, findings and conclusions or
recommendations expressed in this publication are those of the author(s) and
do not necessarily reflect the views of the U.S. Small Business
Administration.

OVERVIEW OF INTELLECTUAL PROPERTY

In 1787, Article 1 Section 8 of the United States Constitution was ratified. It
offered a contract to all citizens. In exchange for making creations of the
useful arts known, the creator will be given exclusive right to the creations
for a limited time. The concept of intellectual property was born.

Three types of property are known. These are real property, personal
property and intellectual property. That which is owned as real property or
personal property can be seen and touched. What is owned as intellectual
property can only be described in words on paper. For example, a book is an
item of personal property that can be owned. The right to reproduce the
book is intellectual property.

Four types of intellectual property are recognized; patents, trademarks

(including service marks), copyright and trade secrets.

Patents give coverage to inventions. In broad terminology, an invention is a

new, useful and unobvious article of manufacture or improvement thereto.
Inventions also include composition of matter, method of fabricating a
product, methods that are useful in business, ornamental design for article of
manufacture and asexually reproduced plants. Inventions and patents are
subject to the laws, rules and regulation set forth in Title 35 of the United
States Code and in Title 37 Code of Federal Regulations Chapter I.

Trademarks are used to distinguish the goods of one party from the goods of
another. Service marks distinguish the services of one provider from the
services of another provider. Trademarks and service marks are treated
equally under law and commonly referred to as marks. Marks are subject to
the laws, rules and regulations set forth in Title 15 United States Code and in
Title 37 Code of Federal Regulations Chapter I.

Copyright covers any original work of authorship or artistry fixed in any

tangible medium of expression. Copyright provides legal protection for
musical works, dramatic works, choreographic works, pictorial works,
graphic works, sculptural works, motion pictures and sound recordings.
Copyrights are the subject of the laws, rules and regulations set forth in Title
17 United States Code and in Title 37 Code of Federal Regulations Chapter
II.

Trade secrets are not subject to the United States Code, nor the Federal Code
of Regulations. A trade secret is a contract between two or more people.
Trade secrets will not be covered in this seminar series.

A brief treatment of trademark and copyright is set forth below in detail.

TRADEMARKS
A trademark is a word, phrase, symbol, design, or a combination of words,
phrases symbols or designs that identifies and distinguishes the source of
goods (physical commodities) of one party from those of others. A service
mark is the same as a trademark, except it identifies and distinguishes the
source of a service (intangible activities) rather than a product. The terms
"trademark" and "mark" refer to both trademarks and service marks. The
trademark laws of the United States provide protection for marks.

OWNERSHIP OF MARK

Only the owner of a mark can file an application for registration. Generally,
the person who uses or controls the use of the mark, and controls the nature
and the quality of the goods to which it is affixed, or the services for which it
is used, is the owner of the mark. The mark could have been created by
another and assigned to the owner for registration.

EXAMPLES OF MARKS WHICH CAN BE REGISTERED

Below are examples of marks which can be registered.

• Name - an adjective which defines a specific one of a generic item,

e.g., Kleenex™ Tissues
• Logo - a fanciful design with or without color.
• Symbol - a graphic design.
• Slogan - a collection of words usually arranged in a phrase, e.g, Best
in the West℠
• Color in a Mark - one, two, or more colors arranged in a distinctive
pattern.
• Shape - the configuration of the product or the container in which the
product is packaged.
• Scent or Smell - a selected or distinctive aroma impregnated into a
product.
• Color as a Mark - a color associated with an object or a service and
creating a distinctive commercial impression.

Scent, Color as a Mark and Sound can be registered as a mark, but the
evidence to establish registerability is substantial. Therefore, the services of
a trademark attorney is strongly urged.

MARKS WHICH CANNOT BE REGISTERED

Registration will be refused for the following:

1. the proposed mark consists of or comprises immoral, deceptive or

scandalous matter;
2. the proposed mark may disparage or falsely suggest a connection
with persons (living or dead), institutions, beliefs or national symbols,
or bring them into contempt or disrepute;
3. the proposed mark consists of or comprises the flag or coat of arms,
or other insignia of the United States, or of any State or municipality,
or of any foreign nation;
4. the proposed mark consists of or comprises a name, portrait or
signature identifying a particular living individual, except by that
individual's written consent, or the name, signature or portrait of a
deceased President of the United States during the life of his widow,
if any, except with the written consent of the widow;
5. the proposed mark so resembles a mark already registered in the
Patent and Trademark Office that use of the mark on applicant's
goods or services are likely to cause confusion, mistake or deception;
6. the proposed mark is merely generic, descriptive or deceptively
misdescriptive of applicant's goods or services;
7. the proposed mark is primarily geographically descriptive or
deceptively graphically misdescriptive of applicant's goods or
services;
8. the proposed mark is primarily merely a surname;
9. matter that, as a whole, is functional; and
10.a naturally occurring scent or smell, such as the result of
manufacturing
perfume is considered to be functional.

PREQUESITE TO USING A MARK

As noted above, a proposed mark that is likely to cause confusion, mistake or

deception within the same class cannot be registered. Use of such a mark
can also result in litigation initiated by the holder of the registered mark.
Therefore, a search of registered marks should be made prior to adopting and
using a mark. A free search can be conducted at the site web of the
Trademark Office.

On the web, go to www.uspto.gov and click on Trademarks. When the page

appears, click on "Main" near the top of the left column to display the home
page of the Trademark Office. First, it is necessary to determine the class in
which the goods or services belong. In the right column, near the bottom,
click on FAQ's - questions & answers". When the page appears, scroll down
to "What are the different classes of goods and services" under the heading
"Application Process". Each class of goods and services will be listed with
an international class number, i.e., "IC".
Now return to the Trademark home page and, near the top of the right
column, click on "Search" to display types of searches. Select "New User
Form Search (Basic)". Enter the proposed mark in the box that appears and
click on "Submit Query". Do not enter the generic name of the goods or
services into the box; only enter the proposed descriptive mark. This will
provide a list of similar marks. Click on each to determine the IC number. If
a confusingly similar term within the same class or a related class is found,
devise another mark.

The absence of a confusingly similar federally registered mark does not

necessarily indicate that the proposed mark can be used without restriction.
It may, for example, be registered and in use within a state. It is also possible
that a confusing similar mark is being used without benefit of either federal
or state registration. The user, therefore, has common law rights within the
area in which the mark is used and can take action against a confusing
similar mark being used within the area.

The search may disclose marks that are labeled as "Dead". This indicates
that the registration of the mark was not renewed as required by law.
However, the mark may still be in use under common law.

A "Full Search" to determine state registration and common law rights,

conducted by a trademark attorney, is strongly recommended to determine
the availability of a proposed mark.

INITIAL PROTECTION

Rights in a trademark or a service mark can be established based on

legitimate use of the mark. Immediately upon creation, the mark should
include the appropriate notation, "TM" for goods and "SM" for services.
Examples of each are shown below.
STARR℠ Reality Services
STARR™ Home Building

A trademark and the notation can be placed in any manner on the goods or on
containers of the goods or the displays associated with the goods or on tags
or labels affixed to the goods. If the nature of the goods makes such
placement impracticable, the trademark can be placed on documents
associated with the goods or the sale thereof.

A service mark notation should be used and displayed in the sale of services
or the advertising of services.

DATES OF USE

The date of first use anywhere is the date when the goods were first sold or
transported or the services were first rendered under the mark, if such use is
bona fide and in the ordinary course of trade. The date of first use can be
anywhere and includes local, national, intrastate, interstate or any other type
of use including commerce between the United States and a foreign country.

The date of first use in commerce is the date when the goods were first sold
or transported, or the services first rendered, under the mark in a type of
commerce that may be lawfully regulated by Congress, if such use is bona
fide and in the ordinary course of action. Generally, this means use across a
state line.

REGISTRATION

A mark must be currently in use in commerce to obtain a federal trademark

registration.

A trademark or service mark can be registered by a company or an

individual. A federal trademark application can be filed online at
www.uspto.gov. A mark can also be registered by use of a paper mail-in
form obtainable from the Trademark Office. Regardless of the method used
to file a federal trademark application, it is strongly recommended to use the
services of a qualified trademark attorney. The basic filing procedures are
set forth briefly below.

On the Trademark home page, top center, click on "File" near the top of the
right hand column. This will access a page entitled "Trademark Electronic
Application System". Before proceeding with the application process, under
the heading This will display a page entitled "TEAS TUTORIAL" which
provides instructions for using the TEAS form for filing on line.

Returning to the "Trademark Electronic Application System" page, under

"Forms", click on "ELECTRONIC FILING TIPS" for further information
concerning filing on-line.

Again returning to the "Trademark Electronic Application System" page,

under "Forms", click on "File for a NEW Mark". This will bring up another
page entitled "Trademark Electronic Application System". The box at the
top of the page is entitled "Trademark/Servicemark Application, Principal
Register". Read the instructions in this box and then click on
"Trademark/Servicemark Application, Principal Register" at the top of the
box. This will display a page entitled "Selection of Application Type".

The application can be filed by either the TEAS Form or the TEAS Plus
Form. The filing requirements for the TEAS Plus Form are substantially
stricter than the requirements for the TEAS Form and should be used only by
a trademark attorney. Accordingly, it is recommended that an applicant filing
his/her own application use the TEAS Form.

To file using the TEAS Form, read the corresponding instructions, check the
small box adjacent the title, TEAS Form, and then click on "CONTINUE" at
the bottom of the page. This will display a page entitled
"TRADEMARK/SERVICE MARK APPLICATION, PRINCIPLE
REGISTER". Read the instructions at the top of the page. Fill in the
requested information and click "CONTINUE" at the bottom of the page.
This will bring up a page entitled "Trademark/Service Mark Application,
Principal Register".

The mark, if a name or slogan, should be registered in plain block type. The
owner of the mark can then use the mark in any stylized form. It is important
that the owner of the mark secure rights to the mark, and not limited to any
particular style. Therefore, click the box entitled "Standard Characters" and
type the words in the box provided.

A drawing of the mark and a specimen are required to accompany the

application if the mark is a logo, symbol or includes color. For submission
of a stylized, design or color mark, refer to "TEAS Electronic Filing Tips".
Complete the form and then click on "Validate Form" at the bottom of the
page. The Trademark Office provides for filing on line. Read the
instructions concerning "electronic signature" and sending payment.

After the Certificate of Registration is received, replace "TM" or "SM" with

®.

INTENT TO USE

Marks that are currently in use in interstate commerce can be the subject of a
"Principle Register" application filed with the USPTO. If the mark is not
currently in use in interstate commerce, but it is contemplated that the mark
will be used in the future, the mark can be the subject of an "Intent to Use"
application filed with the USPTO. This will reserve the mark for a specified
time.

To file an "Intent to Use" application, follow the instructions above. On the

TEAS Form noted above, check on "Intent to Use". A drawing must be
submitted. A "Statement of Use" must be filed within a specified time.
Under "Basic Facts About Trademarks", click on "Additional Requirements
For 'Intent to Use' Applications".

The Trademark Office requires a filing fee to accompany an Intent to Use

application. Later, a fee is required to file a Statement of Use.

BENEFITS OF REGISTRATION

The specific benefits accorded a mark registered with the USPTO are:

1. constructive notice to the public of the registrant's claim of ownership

of the mark;
2. a legal presumption of the registrant's ownership of the mark and the
registrant's exclusive right to use the mark nationwide on or in
connection with the goods and/or services listed in the registration;
3. jurisdiction of the federal courts to uphold the registrant's claim to the
mark;
4. registration can be used as a basis for obtaining registration in foreign
countries; and ability to file the registration with U. S. Customs and
Border Protection to prevent importation of infringing foreign
material.

PROTECTING A MARK AFTER REGISTRATION

To protect a mark after registration, several important guidelines should be

followed when using the mark in advertising, literature, displays and signs,
product packaging, labels, business documents and correspondence. The
following are general guidelines:

1. Use the mark consistently, as each deviation may create a new,

different mark.
2. Use the mark continuously and do not abandon the mark. File Notice
of Continued Use at required times.
www.uspto.gov/teas/eTEASpageC.htm
3. Prevent others from using your mark improperly.
4. Prevent others from using and registering confusingly similar marks.
File a Notice of Opposition.
tess2.uspto.gov/tmdb/tmep/1500.htm#_T1503
5. Maintain your mark by filing, at the appropriate time, "Affidavits of
Continued Use" or "Excusable Nonuse". On the Trademark Office
home page, center column under "Keep a Trademark Registration...",
click on "Maintaining a registration" for information.
www.uspto.gov/teas/eTEASpageC.htm
6. Register the mark with the U.S. Customs & Border Protection to
prevent importation of infringing products. Instructions are set forth
at the end of this paper under the heading "United States
Government".

COPYRIGHTS
Copyright is a form of protection provided by the laws of the United States
for original works of authorship or artistry including literary, musical,
architectural, cartographic, choreographic, pantomimic, pictorial, graphic,
sculptural and audiovisual creations. "Copyright" literally means the right to
copy. This protection is available to both published and unpublished works.

AUTHORSHIP

Only the author or those deriving their rights through the author can
rightfully claim copyright. The author may be the creator of the work. In the
case of works for hire, the employer and not the employee is considered the
author. Copyright law defines a work for hire as:

1. a work prepared by an employee within the scope of his or her

employment; or
2. a work specially ordered or commissioned.

WORKS PROTECTED BY COPYRIGHT

Copyright protection subsists in original works of authorship fixed in any

tangible medium of expression which can be perceived, reproduced or
otherwise communicated. Works of authorship include the following
categories:

1. literary works, including computer programs;

2. musical works, including any accompanying words;
 3. dramatic works, including any accompanying music;
4. pantomimes and choreographic works;
5. pictorial, graphic and sculptural works;
6. motion pictures and other audiovisual works;
7. sound recordings;
8. architectural works; and
9. vessel hull design works.

WORKS NOT PROTECTED BY COPYRIGHT

Several categories of material are generally not eligible for federal copyright
protection. These include:

1. works that have not been fixed in a tangible form of expression (for
example, choreographic works that have not been noted or recorded,
improvisational speeches or performances that have not been written
or recorded)
2. titles, names, short phrases and slogans; familiar symbols or designs;
mere variations of typographic ornamentation, lettering or coloring;
mere lists of ingredients or contents;
3. ideas, procedures, methods, systems, processes, concepts, principles,
discoveries or devices as distinguished from a description,
explanation or illustration; and
4. works consisting entirely of information that is common property and
containing no original authorship (for example, standard calendars,
height and weight charts, tape measures and rulers and lists or tables
taken from public documents or other common sources).

INITIAL PROTECTION

Copyright is a form of protection provided by Title 37 of the United States

Code to the authors of original works of authorship or artistry. This
protection is available to both published and unpublished works. The
original author can transfer the rights of ownership to another. The owner of
copyright has the exclusive right to do and to authorize others to do the
following:

1. to reproduce the work in copies or phonorecords;

2. to prepare derivative works based upon the work;
3. to distribute copies or phonorecords of the work by sale or other
transfer of ownership, or by rental, lease or lending;
4. to perform the work publicly;
5. to display the copyrighted work publicly; and
6. in the case of sound recordings, to perform the work publicly by
means of a digital audio transmission.

To do any of the above without permission of the owner is an infringement

of the rights of the owner and is subject to litigation. It is permissible,
however, to record any material received by a television set. The material
thus recorded cannot be duplicated, sold, rented nor given to another.
MARKING

The creator of a work has vested interest in the work, automatically, upon
creation of the work. Neither publication nor registration is required. The
absence of marking or registration does not compromise the protection.
However, it is advisable to register a work as soon as possible, and to give
notice to the public by affixing the copyright notice to the work immediately
upon completion of the work.

Although not required, the notice for visually perceptible copies should
contain all the following three elements:

1. the symbol © (the letter C inside a circle), or the word "Copyright" or

the abbreviation "Copr";
2. the year of first publication; and
3. the name of the owner of the work.

Example: 2006 © John Doe

If the work is subsequently updated or revised, the date of the last revision
should also be included. Intermediate revision dates are not to be included.

Example: 2006, 2007 © John Doe

A phonorecord is the physical object in which works of authorship are

embodied. The word phonorecord includes cassette tapes, CDs, LPs, 45 rpm
disks, and other similar formats. The notice for phonorecords embodying a
sound recording should contain all the following three elements:

1. the symbol $#8471; (the letter P inside a circle)

2. the first year of publication; and
3. the name of the owner of the copyright.

Example: ℗ 2002 ABC Records

REGISTRATION

Registration of a work is a relatively simple procedure which can

accomplished by the owner. The Copyright Office home page provides links
to several informative pages which should be reviewed prior to beginning the
registration process.

The Copyright Office is an entity of the Library of Congress. The Copyright

Office is accessed by going to www.loc.gov and then clicking on "Copyright
Office" to display the home page. At the top of the page are several bars
providing links to various subjects. On this bar, click on "Publications" to
access a page which, in the upper left column, displays the headings
"Circulars and Brochures" and "Forms". First click on "Circulars and
Brochures" to bring up more than five dozen titles, each addressing many
related subjects. After obtaining any necessary information, return to the
preceding page and click on "Forms".
Several application forms are available on line. Each form is dedicated to a
specific type of work. The several forms and the corresponding type of work
relevant to each are set forth below.

• Form TX - literary works including fiction, nonfiction, poetry,

reference works, directories, catalogs, advertising copy, compilations
of information and computer programs.
• Form PA - performing arts, whether preformed live or recorded,
including musical works, dramatic works, pantomimes, choreographs,
motion pictures and other audiovisual works.
• Form SR - sound recordings including music, spoken or other sounds
and the underlying musical, dramatic or literary work embodied in the
recording.
• Form VA - two or three dimensional works of art including fine,
graphic and applied art, photographs, prints, art reproduction, maps,
globes, charts, technical drawings, diagrams, models and architectural
works.
• Form SE - serial works and periodicals including newspapers,
magazines, newsletters, annuals and journals.
• Form MW - patterns or integrated circuits fixed on a computer chip.
• Form D-VH - vessel hull designs.

The Copyright Office provides detailed instructions for completing the form.
When selecting a form, click on the desired form "with instructions". This
will access two pages of instructions and two pages of the form to be
completed.

At the top of the first page of instructions are several headings which provide
helpful information. The first heading, "When to Use This Form", lists all
material that can be registered with the selected form. The Copyright Office
is very user friendly and lists contacts under the heading "For Further
Information". Other useful information is located under the respective titles.

Next are the detailed instructions for completing the form. Each instruction
is set forth in detail under a heading. The first heading, for example, is
designated "SPACE 1: Title". The first entry of the form is entitled "Read
the instruction and then enter the data in the appropriate space".

An application for copyright must be accompanied by a deposit consisting of

copies or phonorecords representing the entire work for which registration is
to be made. Special deposit requirements exist for some types of works.
The following are examples of exceptions to the general deposit
requirements.

A motion picture deposit requirement is one complete copy of the motion

picture and a separate description of the contents. A literary work, dramatic
or musical work published only on a phonorecord, the requirement is a
complete phonorecord. Computer program requirement is a visually
perceptible in source code of the first 25 pages and the last 25 pages of the
code. CD-ROM format requires one complete copy of the material, that is
the CD-ROM, the operating software and any manuals accompanying it.
Works reproduced in three-dimensional copies, identifying material such as
photographs or drawings are required.

If confusion exists concerning the deposit requirement for a work, write or

call the Copyright Office and provide a description of the work to be
registered.

The current fee associated with each application form can be found by
clicking on "Copyright Fees" under the heading "Circular and Brochures".
The fee must be in the form of a check or money order. Credit cards are
accepted only if the application is filed in person in the Copyright Office.

The three elements of the application, completed form, copy of work and fee,
must be sent in one envelope. At the moment, the application cannot be filed
online. Online registration is among the goals of the reengineering program
of the Copyright Office.

The time the Copyright Office requires to process an application varies,

depending on the amount of material the Office is receiving. If the
application is in order, the certificate of registration will be received
approximately 4 months after submission.

The requirements for registration are:

1. a completed application form;

2. a deposit, a copy of the work; and
3. the current filing fee.

The Copyright Office is "user friendly" and willing to answer questions and
to assist anyone making application to register a work. Contact information
is set forth in the upper right corner of each form.

PROTECTION AFTER REGISTRATION

In general, copyright registration is a legal formality intended to make a

public record of the basic facts of a particular copyright. Copyright law
provides several inducements or advantages to encourage copyright owners
to make registration. Among the advantages are the following:

1. registration establishes a public record of the copyright claim;

2. before an infringement suit may be filed in court, registration is
necessary;
3. if made before or within 5 years of publication, registration will
establish prima facie evidence in court of the validity of the copyright
and of the facts set forth in the certificate;
4. if registration is made within 3 months after publication of the work
or prior to an infringement of the work, statutory damages and
attorney's fees will be available to the copyright owner in court
actions, also the infringement is considered a criminal offense with
court imposed penalties; and
5. registration allows the owner of the copyright to record the
registration with the United States Customs & Border Protection for
 protection against importation of infringing copies. Refer to "United
States Government" at the end of this paper.

DURATION OF COPYRIGHT

Copyright law has adopted the basic life-plus-seventy system, which is in

effect in most other countries. A work that is created (fixed in tangible form)
is automatically protected from the moment of creation and is given a term
lasting for the author's life plus an additional 70 years after the author's
death. In the case of a joint work prepared by two or more authors who did
not work for hire, the term lasts for 70 years after the last surviving author's
death. For works made fore hire, and for anonymous and pseudonymous
works (unless the author's identity is revealed in Copyright Office records)
the duration of copyright will be 95 years from first publication or 120 years
from creation, which ever is shorter.

FAIR USE EXCLUSION

One of the rights accorded to the owner of copyright is the right to reproduce
or to authorize others to reproduce the work. However, under certain
circumstances, the work can be used without the consent of the owner. This
right is subject to certain limitations known as the doctrine of "fair use". The
list of the various purposes for which the reproduction of a particular work
may be considered "fair use" includes criticism, news reporting, teaching,
scholarship and research.

Four factors to be considered in determining whether or not a particular use

is considered "fair use" are:

1. the purpose and character of the use, including whether such use is of
commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the
copyrighted work.

UNITED STATES GOVERNMENT

PROTECTION AGAINST IMPORTATION OF INFRNGING
MATERIAL

The United States Federal government provides protection against

importation of material that would infringe a registered trademark, service
mark or copyright. To obtain this protection, after the certificate of
registration is received, the owner should register with the United States
Customs and Border Protection (CBP). The United States currently has 327
ports of entry. The CBP inspects all incoming shipments.

For this protection, go to www.cbp.gov.. When the home page of the CBP
appears, enter "Intellectual Property" into the search box near the top of the
page and click on "GO" to display a page of links. Click on "U.S. Customs
and Border Protection - Import" to display a page entitled "Intellectual
Property Rights". When the page appears, click on "Intellectual Property
Rights e-Recordation (IPRR) Online System" to access a page entitled "CBP
IPR Enforcement". Read the instructions and at the bottom of the page select
either "TRADEMARK" or "COPYRIGHT". The registration number is
required to proceed.

PUBLICATIONS

The federal government has printed many publications containing useful

information concerning intellectual property. All are available to the public.
Some are free and many can be read online.

United States Patent and Trademark Office. On the web, go to

www.uspto.gov to access the Patent and Trademark Office home page. At
the top of the page, click on Site Index. When the list appears, scroll down
and click on "Products and Services Catalog". On this page are links to three
informative pages. The links, which appear in the upper left side are:
"Catalog Index", "Trademark Products", and "Trademark Services".

United States Copyright Office. On the web go to www.loc.gov and click

on Copyright Office. When the Copyright Office home page appears click
on "Publications" at the top of the page to display a page entitled
"Publications from the U.S. Copyright Office" and then click on "Circulars
and Brochures". Then click on "Information Circulars and Factsheets". This
will display a list of titles of informative brochures. Click on any title for the
complete brochure.

Next Previous Contents

Next Previous Contents

Starting A Small Business

by Jerry Glen,

Starting and managing a business takes motivation, desire and talent. It also
takes research and planning. Like a chess game, success in small business
starts with decisive and correct opening moves. Although initial mistakes are
not fatal. it takes skill, discipline and hard work to regain the advantage.

To increase your chance of success, take the time up front to explore and
evaluate your business and personal goals. Then use this information to build
a comprehensive and well-thought-out business plan that will help you reach
these goals.

The process of developing a business plan will help you think through some
important issues that you may not have considered yet. Your plan will
become a valuable tool as you set out to raise money for your business. It
should also provide milestones to gauge your success.

Getting Started

Before starting out, list your reasons for wanting to go into business. Some
of the most common reasons for starting a business are:

• You want to be your own boss.

• You want financial independence.
• You want creative freedom.
• You want to fully use your skills and knowledge.

Next you need to determine what business is "right for you". Ask yourself
these questions:

• What do I like to do with my time?

• What technical skills have I learned or developed?
• What do others say I am good at?
• How much time do I have to nun a successful business?
• Do I have any hobbies or interests that are marketable?

Then you should identify the niche your business will fill. Conduct the
necessary research to answer these questions:

• Is your idea practical, and will it fill a need?

• What is your competition?
• What is your business advantage over existing firms?
• Can you deliver a better quality service?
• Can you create a demand for your business?

The final step before developing your plan is the pre-business checklist. You
should answer these questions:

• What business are you interested in starting?

• What services or products will you sell?
• Where will you be located?
• What skills and experience do you bring to the business?
• What will be your legal structure? (see overview as follows)
• What will you name your business?
• What equipment or supplies will you need?
• How will your company's business records be maintained?
• What insurance coverage will be needed?
• What financing will you need?
• What are your resources?
 • How will you compensate yourself?

Your answers will help you create a focused, well-researched plan. Your
business plan should serve as a blueprint. It should detail how the business
will be operated, managed and capitalized.

Types of Business Organizations

When organizing a new business, one of the most important decisions to be

made is choosing the structure of a business. Factors influencing your
decisions about your business organization include:

• Legal restrictions.
• Liabilities assumed.
• Type of business operation.
• Earnings distribution.
• Number of employees.
• Tax advantages or disadvantages.
• Length of business operation.

The advantages and disadvantages of a sole proprietorship, partnership or

corporation structure follow:

Sole Proprietorship. This is the easiest and least costly way of starting a
business. A sole proprietorship can be formed by finding a location and
opening the door for business. There are fees to obtain business name
registration, a fictitious name certificate and other necessary licenses.
Attorney's fees for starting the business will be less than the other business
forms because less preparation of documents is required and the owner of the
business has absolute authority over all business decisions

Advantages:

• Easiest to get started.

• Freedom of action.
• Maximum authored.
• Tax advantages in very small firms,
• Social Security advantages to owner. 3.
• Unlimited liability of owner.

Disadvantages

• Illness or death endangers or ends business.

• Growth limited to personal ambition.
• Family or personal affairs easily mixed with business.

Partnership. There are several types of partnerships. The two most common
types are general and limited partnerships. A general partnership can be
formed simply by an oral agreement between two or more persons, but a
legal partnership agreement drawn up by an attorney is highly recommended
Legal fees for drawing up a partnership agreement are higher than those for a
sole proprietorship, but may be lower than incorporating. In Florida, a
limited partnership limits the personal liability of each partner to their capital
investment. Control of the business is shared by the partners. A partnership
agreement could be helpful in solving any disputes. However, partners are
responsible for the other partner's business actions as well as their own.

A partnership agreement should include the following:

• Type of business.
• Amount of equity invested by each.
• Division of profit or loss.
• Partners' compensation.
• Distribution of assets on dissolution.
• Duration of partnership.
• Provisions for changes or dissolving the partnership.
• Dispute settlement clause
• Restrictions of authority and expenditures.
• Settlement in case of death or incapacitation.

Advantages

• Two or more heads better than one.

• Additional sources of capital.
• Better credit rating than corporations of similar size.

Disadvantages

• Death, withdrawal; or bankruptcy of one palrtner.

• Difficulty in dissolving partnership.
• Debt of one partner becomes the debt of all partners.
• Growth inhibited by size of partnership.
• No clear line of authority.

Corporation. A business may incorporate without an attorney, but legal

advice is highly recommended. The corporate structure is usually the most
complex and more costly to organize than the other two business formations.
Control depends on stock ownership. Persons with the largest stock
ownership control the corporation, not the total number of shareholders. With
control of stock shares or 51 percent of stock, a person or group is able to
make policy decisions. Control is exercised through regular board of
directors meetings and annual stockholders meetings. Records must be kept
to document decisions made by the board of directors.

Small, closely-held corporations can operate more informally but keeping

minutes of company meetings cannot be eliminated entirely. Officers of a
corporation can be held liable to stockholders for improper actions. Liability
is generally limited to stock ownership, except when fraud is Involved. You
may incorporate as a "C" or "S" corporation. The "S" corporation is limited
to thirty-five (35) shareholders and may be taxed at the individual tax rates.

Advantages

• Limited liability for stockholders..

• Continuity.
• Transfer of shares.
• Easier to raise capital.
• Change in ownership need not effect management.

Disadvantages

• Heavier taxes with "C" corporations.

• Management control limited by charter.
• Less freedom of activity'
• Legal formality.
• Expensive to start.

Business Plan Outline

The following outline of a typical business plan can serve as a guide. You
can adapt it to your specific business. Breaking down the plan into several
components helps make drafting it a more manageable task.

Introduction . Give a detailed description of the business and its goals.

Discuss the ownership of the business and the legal structure. List the skills
and experience you bring to the business. Discuss the advantages you and
your business have over your competitors.

Marketing. Discuss the products/services offered. Identify the customer

demand for your product/service. Identify your market, its size and locations,
Explain how your product/service will be advertised and marketed. Explain
the pricing strategy.

Financial Management. Explain your source and the amount of initial

equity capital. Develop a monthly operating budget for the first year.
Develop expected return on investment and monthly cash flow for the first
year. Provide projected income statements and balance sheets for a two-year
period. Discuss your break even point. Explain personal balance sheet and
method of compensation. Discuss who will maintain accounting records and
how they will be kept. Provide "what if" statements that address alternative
approaches to any problem that may develop.

Operations. Explain how the business will be managed on a day-to-day

basis. Discuss hiring and personnel procedures. Discuss insurance, lease or
rent agreements, and issues pertinent to your business. Account for the
equipment necessary to produce your products or services. Account for
production and delivery of products and services.

Concluding Statement. Summarize your business goals and objectives and

express your commitment to the success of your business.

Once you have completed your business plan, review it with a friend or
business associate or a Service Corps of Retired Executives (SCORE)
counselor. When you feel comfortable with the content and structure, make
an appointment to review and discuss it with your lender. The business plan
is a flexible document that should change as your business grows

Next Previous Contents

Next Previous Contents

How To Raise Money For Your Small Business

by Jerry Glen,

One key to a successful business startup or expansion is your ability to

secure appropriate financing. Raising capital is the most basic of all business
activities. But as many new entrepreneurs quickly discover, raising capital
may not be easy. It can be a complex and frustrating process. However, if
you are informed and have planned effectively, raising money for your
business will not be a painful experience.

Finding the Money You Need

There are several sources to consider when looking for financing. It is

impotant to consider all of you options before making a decision.

• Personal savings: Most new businesses are started with the primary
source of capital coming from savings and other forms of personal
resources.
• Friends and relatives: Many entrepreneurs look to private sources
such as friends and family when starting out in a business venture.
Often money is loaned interest free, or at low interest rate which can
be beneficial when getting started.
• Banks and credit unions: The most common source of funding,
banks and credit unions, will provide a loan if you can show that your
business proposal is sound.
• Venture capital firms: These firms help expanding companies grow
in exchange for equity or partial ownership.

Borrowing Money

It is often said that small business people have a difficult time borowing
money. This is necessarily true. Banks make money by lending money.
However, the inexperience of small business owners in financial matters
often prompts many banks to deny loan requests. To be succesful in
obtaining a loan, you must be prepared and organized. You must know
exactly how much money you need, why you need it and how you can pay it
back. You must be able to convince your lender that you are a good credit
risk. Requesting a loan when you are not properly prepared sends a signal to
your lender. That message is ... "High Risk!"

Types of Business Loans

• Short-Term Loans: Short-term loans are paid back in less than one
year. Types of short-term loans are:
• Working-capital loans..
• Accounts-receivable loans.
• Lines of credit.
• Long-Term Loans: Long-term loans have maturities greater than one
year, but usually less than seven years. Real estate and equipment
loans can go up to 25 years. Long-term loans are used for major
business expansions, purchases of real property, acquisitions and, in
some instances, start-up costs. Types of long term loans include:
• Equipment.
• Commercial mortgages.
• Furniture and fixtures.
• Vehicles.

How to Write a Loan Proposal

Approval of your loan request depends on how well you present yourself,
your business and your financial needs to a lender. Remember, lenders want
to make loans, but they must make loans they know will be repaid. The best
way to improve your chances of obtaining a loan is to prepare a written
proposal. A good loan proposal will contain the following key elements:

• General Information. Business name, names of principals, Social

Security number for each principal and the business address, Purpose
of the loan: State exactly what the loan will be used for and why it is
needed. Amount required: Request the exact amount you need to
achieve your purpose.
• Business Description. History and nature of business: Give details of
your business's age, number of employees and current business
assets. Ownership structure: Provide details on your company's legal
structure.
• Management Profile. Develop a short statement on each principal in
your business. Provide background, education, experience, skills and
accomplishments of each principal.
• Market Information. Clearly define your company's products as
well as your markets. Identify your competition and explain how your
business competes in the marketplace. Profile your customers and
explain how your business can satisfy their needs.
• Financial Information.
Financial Statements: Provide balance sheets and income statements
 for the past three years. If you are just starting out, provide a
projected balance sheet and income statement.
Personal financial statement: Prepare a personal financial statement
on yourself and other principal owners of the business.
Collateral: List all collateral you would be willing to pledge as
security for the loan

How Your Loan Request Will Be Reviewed

When reviewing a loan request, the lender is primarily concerned about

repayment. To help determine this ability, many loan officers will order a
copy of your business-credit report from a credit reporting agency. Therefore,
you should work with these agencies to help them present an accurate picture
of your business. Using the credit report and the information you have
provided, the lending officer will consider the following issues:

• Have you invested savings or personal equity in your business

totaling at least 25 to 50 percent of the loan you are requesting?
(Remember, a lender or investor will not finance 100 percent of your
business.)
• Do you have a sound record of credit-worthiness as indicated by your
credit report, work history and letters of recommendations? This is
very important.
• Do you have sufficient experience and training to operate a successful
business.
• Have you prepared a loan proposal and business plan that
demonstrate your understanding of and commitment to the success of
the business.
• Does the business have sufficient cash flow to make the monthly
payments on the amount of the loan request?

Next Previous Contents

Next Previous Contents

Guide To Writing A Business Plan

by Jerry Glen,

1. Name of Firm. State the legal name of the business.

2. Owner or Owner-To-Be. State owner(s) name(s), as well as the form and

percent of ownership.
3. Information on the Business

• a. Type of Business and Product or Service.

• State the general and specific nature of the business
(i.e.,general -energy-, specific - oil, solar, wind: or general -
food; specific restaurant, catering, farming, ice cream parlor,
bakery).
• State the type of business(manufacturing, service,
construction, wholesale, retail,other).
• State the company's goals and electives.
• Describe your products and/or services.
• State who buys the product/service and who the final users are
(briefly here, because youwill be discussing your customers
very thoroughly under Market Analysis
• Describe how the product/service is sold to customers (walk-
in stores,sales representatives, mail order catalogs, telephone
orders, etc.).
• Describe how and where buyers get the product/service (walk-
in stores, mail, delivery, etc.).
• Comment on Quality of product/service.
• Estimate average price of produce/service.
• b. History.
• If new, say so. If existing, discuss age of business, prior
owners, how acquired and length of time operated by you,
image or reputation, number of employees, last year's sales
volume and profit and any significant events that have
affected the company's development
• c. Offices/Plant
• Give addresses and description of area and building.
• State whether rented, leased or owned. If rented or leased,
state from whom and under what conditions.
• Describe access to building (major roads/freeways, walking,
parking,etc.). Is the location convenient for customers?
• State business hours. State size of facility (square footage).
• d. Personnel
• For the present and future: State the number of employees,
type of labor needed (skilled, unskilled, etc.), source of labor
(especially minorities, handicapped, veterans or other socially
or economicallydisadvantaged groups), timing of hiring (or
layoffs).
• Comment on the quality of the staff and their job descriptions.
• e. Economic/Accounting
• Describe how the business will make money.
• State how prices are or will be determined and by whom.
• State what financial records will be kept and by whom.
• f. Inventory
• Describe what inventory, raw materials and/or supplies the
business uses.
• List your suppliers - name, address, type and percent of
supplies furnished, length of time you have been buying from
 each, reliability andfrequency of purchase.
• How easy or difficult is it to get necessary supplies?
• If it is difficult, how will you deal with potential or actual
shortages?
• Are the prices of your supplies steady or fluctuating? If
fluctuating, how do you feel deal with changing costs?
• g. Legal
• State form of business (sole proprietorship, partnership,
corporation) and status (already formed or in process of
formation).
• State licensing requirements (type and licensing source) and
status (notyet applied, applied and pending, obtained).
• State zoning requirements and status (verified, OK, rezoning).
State insurance requirements (type, source) and status.
• Have building codes been complied with?
• State any health code requirements.
• Describe any other laws and regulations that affect the
business.
• Describe lease, if any. Trademarks, patents, licenses and
copyrights should be checked for legality.
• h. Future Plans
• What are your plans for the future (maintain, expand,
diversify, sell,etc.)?

4. Market Analysis

• a. Customers (Market)
• What is your market, or, who are your customers (wholesalers,
retailers,consumers, government, etc.)?
• Why does this market need your product/service? Is your
product/servicea fad or continuing need; being phased out or
created by new technology?
• List the characteristics of your average customers: age,
location (market area), average income/sales, sex, lifestyle
(family or single), working, and other important information.
The more you understand about your market, the better you
can sell to it.
• What do customers like and dislike about your product/service
or business?
• Estimate the size of the market (in terms of the number of
customers).
• Estimate how much the total market will spend on these or
similar products/services in the next year
• b. Environment
• Describe any environment factors (economic, legal, social or
technological) that affect your market or product/service.
Environment factors are those that have significant effects on
your operation, but over which you have no control, i.e.,
county growth, rising energy prices, etc.
• c. Competition
 • Discuss your competition: number of competitors (direct and
indirect), type of company (i.e., product or service), location,
age, reputation, size (sales or customers), market share.
• Estimate how much of your product/service the competition
will provide in the next year.
• List competitors (names and addresses) and discuss their
product/service features, price, location/distribution,
reputation/image, market share, size, age, product/service,
quality, and marketing strategy.
• d. Competitive Advantages and Disadvantages
• Discuss how your product/service meets market needs and
how you compare with the competition in terms of
product/service features, location/distribution, price, other.
• Compare your estimates of the market's demand and the
competition's supply. The relationship of supply and demand
will affect your marketing and sales strategy, i.e., high demand
with low supply usually means less competition and less
advertising. Conversely, low demand and high supply
indicates a very competitive situation and a need for extensive
marketing.
• e. Projections
• Give your projections in terms of the number of customers or
items sold or contracts obtained, etc.

5. Market Strategy

• a. Sales Strategy
• Present your marketing strategy. Tell how you will get the
edge on your competition and get customers. This is your
action plan to get business.
• Your product/service will sell because one or more of the
following is attractive: features, pricing (high, medium or
low), distribution system (limited, widespread, etc.), and
promotion.
• b. Promotion Strategy
• Describe how you plan to promote your product/service. State
how you will promote: advertising, direct mail, personal
contacts, sponsoring events or other (word-of-mouth, trade
associations).
• If you plan to advertise, state what media you will use: radio,
television, newspaper, magazines, telephone book yellow
pages, and/or other (billboard, etc.).
• State why you consider the media you have chosen to be the
most effective.
• State the content of your promotion or advertising: what your
product/service is, why it is attractive, business location,
business hours, business phone number, and other. When you
are designing your advertising, remember you are selling to
satisfy someone's need.
• Refer back to your Market Analysis on need.
6. Management

• Why have you chosen this type of business? For key management
personnel, include the following: resumes, personal financial
statements, tax returns for the last three years, and personal family
budget.
• Describe prior experience that qualifies management to run this type
of business.
• State why you feel you can run this business. State how much time
management will devote to running this business. Discuss local
contacts who may assist you in your business.

7. Financial

• a. Sources and Uses

• Describe the project to be financed.
• State where the money to pay for the project will come from
(sources) and show in detail how it will be used (uses). The
most common uses are equipment, leasehold improvements,
inventory and working capital.
• b. Statements - Historical and Projected
• If business is an existing one, include business tax returns and
financial statements for the last 3 years.
• Financial statements should include:
• Balance Sheet
• Income Statement
• Accounts Receivable and Aging
• Accounts payable and Aging
• Debt Schedule
• Reconciliation of Net Worth
• For both existing and new business, project the following
financial statements for the next three years (monthly for first
year, annual for second and third):
• Operating (or Income) Statement with explanation
(sales, expenses, profit)
• Balance Sheet
• Reconciliation of Net Worth
• Cash Flow with explanation
• Break even Analysis

Next Previous Contents

Next Previous Contents

Selected Small Business Websites

by John Mole, SCORE Chapter 7, Pittsburgh, PA. (revised 4/6/99)

SCORE
www.score.org
SCORE National Site (Many excellent web sites for business)
www.scorepittsburgh.com
Chapter 7, Pittsburgh

Carnegie Library of Pittsburgh

www.clpgh.org/ein
Electronic Information Network
www.trfn.clpgh.org
Three Rivers Free-net
trfn.clpgh.org
Internet Search
www.clpgh.org/clp/libctr/business/buswww.html
Business Sources on the Internet -- many excellent web sites for
business, and sites for small business support

SCORE Partner Sites

www.micronpc.com/sbsolutions
Micron Small Business
www.microsoft.com/smallbiz
Microsoft Small Business
www.visa.com/cgi-bin/vee/fb/smbiz/main.html
Visa Small Business
www.toolkit.cch.com
CCH Small Business Site -- many excellent sites for business
www.quickenbiz.com
Intuit -- Quicken/Quickbooks manufacturer

US Government
www.sba.gov
Small Business Administration -- starting place for all SBIR grants
www.census.gov
Bureau of the Census
www.business.gov
Business Advisor
www.doc.gov
Department of Commerce
www.exim.gov
Export Import Bank
www.uspto.gov
Patent and Trademark Office
www.loc.gov/
Library of Congress
www.state.pa.us
Pennsylvania Government Access to State small business programs.

Small Business Resources and Publications

www.cchtoolkit.com
CCH Business Owners Toolkit
www.smalloffice.com
Small Office Computing
www.entrepreneur.com
Entrepreneurial Magazine Online
www.edgeonline.com
Entrepreneurial Edge Magazine
www.inc.com
Inc Magazine Online
www.webcom.com/seaquest/sbrc/reports.html
Free Information for Entrepreneurs
www.entreworld.org
Kaufman Foundation

Related Web Sites

www.uschamber.com
U. S. Chamber of Commerce
www.greatinfo.com
The Information Center

Venture Capital
www.moneyhunter.com
Money Hunter
www.vfinance.com
Venture Capital Resource Center
www.pw.com/vc/
Price Waterhouse Venture Capital Survey
/ace-net.sr.unh.edu
Angel Capital Electronic Network -- AceNet
www.cashfinder.com.first-step.asp
Cash Finder
www.businessfinance.com
America's Business Funding Directory
www.cfol.com
Commercial Finance Online
www.enturea.com/clubs2.htm
Venture group listing -- states
www.techfunding.com
Technology Funding

Other Useful Sites

www.metlife.com
Metlife -- go to "Life Advice", pull down "Starting, Running, Selling a
Small Business"
www.sb.gov.bc.ca/smallbus/workshop/workshop.html
British Columbia Small Business -- excellent business planning tutorial
and pull down information on how to write a business plan
www.monster.com
Good Franchise and Employment site
www.apics.org
Educational Society for Resource Management -- formerly American
 Production and Inventory Control Society
www.ntis.gov/naics
NAICS, National Association of Industrial Classification Systems --
replaces SIC
www.beman.com
SIC, Standard Industrial Code -- replaced by NAICS
www.companiesonline.com
Dunn and Bradstreet Business-to-Business Directory
www.websitegarage.com
Free Web Site Evaluations
www.businessforum.com
Business Forum Online
www.lowe.org/smbiznet
SmallbizNet -- a service of the Edward Lowe Foundation
www.nolo.com
Nolo Press -- legal self help
www.thomasregister.com
Thomas Register of US Manufacturers

Other useful directories

www.bigbook.com
www.switchboard.com
www.yellownet.com
www.whowhere.com
www.ceoexpress.com
CEO Express
www.Four11.com
National Directory of E-mail Addresses

Science and Technology

www.inventnet.com/list.html
Inventions Help -- Inventnet forum
wisbus.uww.edu/innovate/innovate.htm
University of Wisconsin Innovation Center
www.wal-mart.com/win/how.html
Walmart Innovation Institute - University of Southern Missouri
lcweb.loc.gov/copyright/
The Copyright Office
www.uspto.gov
Patent and Trademark Office
www.nas.edu
National Academy of Sciences, Engineering, Medicine and National
Research Council
www.nist.gov
National Institute of Standards and Technology
www.sba.gov
Small Business Administration -- starting place for Small Business
Innovation Research Grants

Selected International Business Web Sites

www.doc.gov/bureas/bureas.htm
Export Information-US Department of Commerce
www.exporthotline.com
Export Products, Country plus other information
www.astr.gov/
United States Trade Representative
www.tradeport.org/ts/
California State Web Site for Exports
www.exim.gov
US Bank of Import/Export Loans and Insurance for Export
www.uswest.com
US Export Manufacturers-Export Management Companies
www.stat-usa.gov/stat-usa.html
NTDB
www.stat-usa.gov/products.html
Products for Export
www.customs.ustreas.gov
US Customs Rules, Regulations, Quotes, etc. Import info
www.fas.usda.gov/
US Department of Agriculture—Foreign Agriculture Service
ciber.bus.msu.edu/busres/asea.htm
MSU-Asia
www.tdc.org.hk/
Hong Kong Trade Development Council
www.info.gov.hk/info/ag
HK Agriculture Information
www.tdb.gov.sg/tradeshow/tr_ctry..html
Asia Country Trade Shows
www.tdb.gov.sg/tradeshow/tr_menu.html
Major Trade Shows Asia
www.digilead.com/
Search Engine for International Products
35.8.133.57/busres.htm
International Business Resources
www.lcweb.loc.gov/global/state/ca-gov.html
California State and Local Government
www.cdfa.ca.gov/exports/
California Food and Agriculture Export Program

Year 2000 y2k Technical Support

www.sba.gov/y2k/
Small Business Resource Site
www.year2000.com/cig-bin/y2k/year2000.cgi
Small Business Resource Site Year 2000 y2k technical support
www.software.ibm.com/year2000
IBM
www.it2000.com
National Bulletin Board
www.nist.gov/y2k
National Institute of Standards and Technology

Search Engines and Domains

www.yahoo.com
www.excite.com
www.infoseek.com
www.geocities.com
www.lycos.com
www.altavista.com
www.microsoft.com
www.netscape.com
www.aol.com
www.dogpile.com
May be used to search all other domains. A place to start.
www.metacrawler.com

Taxes
www.computercpa.com
Accountant’s Home Page
www.smbiz.com
Small Business Tax Management
www.scuped.com/tax/tax.html
Taxing Times

Trade Groups
www.hoaa.com
The Home Office Association of America
www.isbc.com
The International Small Business Consortium
www.nfibonline.com
National Federation of Independent Business
www.sohoa.org
The Small Office/Home Office Association International
www.soho.org
The Small Business Benefits Association

Management Resources
www.brint.com
Business Research in Information and Technology
www.gohome.com
Business at Home
www.industryweek.com
Industry Week
www.ioma.com
The Institute of Management and Administration
www.smalloffice.com
Your Small Office

Internet Advertising, Store Providers and Marketing Sites

www.newbie-u.com
General Internet information
www.internic.com
Domain names registration
www.iplabs.com/internet-marketing
Marketing
www.aismedia.com
Advertising
www.elsop.com/wrc.in_card.htm
Credit card merchant accounts Virtual store fronts
www.VanServ.com
VanServ
www.CardService.com
CardService
www.icat.com
Icat (Free store front --up to 10 sale items
www.GenesisUnlimited.com
www.imall.com
www.cybermegamall.com
www.amanet.org/seminars/public
American Management Association -- web site design

Market Research
www.informationaccess.com
Information Access Company Computer Select CD-Rom -- 11,000
computer companies and software
www.iacnet.com
Intelliseek CD-Rom. Data sources for software

Free Home Pages

www.angelfire.com
Angelfire
www.geocities.com
GeoCities
www.inc.com/createsite
Inc Online
pages.infoseek.com
InfoSeek/WBS
www.theglobe.com
The Globe.com
www.tripod.com
Tripod
www.yahoo.com
Yahoo
There are many other free home page sites, generally supported by
advertising.

Next Previous Contents

Next Previous Contents

Selected Small Business Websites

by David R. Small, SCORE Chapter 422, Brockton, MA. (revised 09/28/08)

Business Plans:
home3.americanexpress.com/smallbusiness/tool/biz_plan/
This site is authoritative and absolutely complete. In an easy to follow
and understand approach, it contains everything needed for planning to
start a business, including sample plans and downloadable worksheets
for all financials. When you enter the site, be sure you search it
completely and open all the active internal links, because it contains so
much, one has to be careful not to miss anything. On the home page,
go to: "Small Business /Access Information /Starting a Business
/Create an Effective Business Plan" and then examine in order, all the
connections available at each of the main sections in the table at the
bottom of the page.
www./bankofamerica.com/smallbusiness
www.jian.com
www.toolkit.cch.com/
www.Inc.com
www.quicken.com/small_business
smallbusiness.yahoo.com
www.guru.com
www.bizcoach.org/start.htm
www.Bplans.com
www.sba.gov/starting/indexbusplans.html
www.sba.gov/sbdc
www.businessplans.org
Particularly clear financials presentations with examples.
www.howstuffworks.com
This site is particularly loaded with all kinds of valuable links to small
business interest topics such as Franchising, Business Plans and
Patents.
www.BizPlanIt.com
www.office.microsoft.com
www.myownbusiness.org
Excellent free online detailed course in BP writing and everything
related.
www.innovateurs.com/models.html
Free complete templates for sophisticated b-plans.
www.caycon.com
Guide for serious advanced business planners.
www.va-interactive.com/score/businessplan/businessplan.html

Not For Profit business:

www.benevon.com/
www.idealist.org/
www.lvdv.com
www.sos.state.tx.us/corp/nonprofit.shtml
Enter your own state.
www.nonprofits.org/if/idealist/en/Home/default

Retail Business
www.retailowner.com/
websearch.about.com/od/invisibleweb/a/invisible_web.htm

Starting a Small Business:

www.sba.gov
app1.sba.gov/training/sbprimer/index.html
Primer course for startup from concept to operation
www.score.org
www.isquare.com/
www.nfibonline.com/
www.corporate.com
www.workz.com
www.bizmove.com
www.allbusiness.com
www.members.tripod.com/houbc
www.entreworld.org
www.office.com
www.about.com
www.entrepreneur.com
www.state.ma.us/mobd
www.smbtn.com
www.chamberbiz.com
www.startupjournal.com
www.hud.gov/groups/smallbusiness.cfm
msbdc.som.umass.edu
www.state.MA.US/mobd
ww.smalloffice.com
www.onvia.com
www.sba.gov/library/pubs.html
smallbusiness.yahoo.com/r-mainCat-m-1-getting_started-i
smallbusiness.yahoo.com
www.rjclarkcpa.com
Very good materila despite being a selling vehicle for the site host.

Partnership Information
us.bbb.org/WWWRoot/SitePage.aspx?site=3D113&id=3Dc407080b-04e3-
431=3-957e-eb8481cbf7ad
Better Business Bureau dispute resolution service, that provides both
mediation and arbitration
www.smar=tonline.com/servlets/syngen/navigation/busforms_c
sample partnership agreement

Record Keeping and Accounting

tenonline.org/art/bsr.html
Excellent series of articles by SCORE counselor Ed Zimmer.
tenonline.org/art/bsr/9712.html
Popular statement of Basic Accounting from above list.
www.office.microsoft.com/en-us/templates
www.edwardlowe.org

Pricing Strategies:
http://www.sba.gov/idc/groups/public/documents/sba_homepage/pub_fm13t.
txt
http://www.porter-sloan.com/Pricing-Strategy.html
http://www.zilliant.com/?gclid=CJbD3bG-7ZICFQFjxwodB1I-5Q
http://www.managingautomation.com/maonline/research/webcast/view/How
_Manufacturers_Can_Leverage_the_Power_of_Pricing_to_Increase_Profits_
27754526?gclid=CP3VqNG-7ZICFQVYxgodvVbc5Q
http://www.inc.com/articles/2003/07/pricing.html
http://images.inc.com/tools/pricing/pricing.swf
http://www.inc.com/encyclopedia/pricing.html

General Information Sources:

www.caycon.com/resources.php
Excellent all-inclusive huge resource site.
www.score.org/template_gallery.html
Templates with detailed how-to guides for every conceivable startup
activity -- an outstanding resource.
www.Business.com
www.business.gov
www.thomasregister.com
www.directories.com
www.tsnn.com
www.bigstep.com
www.businessEKG.org
www.e-cityhall.com
Zoning Info.
www.bizstats.com
Business statistics of interest to small business startup entrepreneurs.
www.ebmagz.com
www.bbb.com
Better Business Bureau
www.ISORegistered.com
www.lowe.org
www.bcentral.com
www.allbusiness.com
Wide range of small biz information.
www.nifb.org
www.coursejunction.com
Clearing house source of valuable education courses in all formats.
www.itssimple.biz/biz_tools
Another huge source of valuable info, it covers all the bases.
www.businessknowhow.com
www.ripoffreport.com
The name says it all
www.tannedfeet.com
www.infousa.com
www.psmj.com

Marketing, Advertising Sales:

www.score.org/intranet/resources/markaz.html
This is a member's only site that requires their ID and password.
www.score.org/intranet/resources/fundamentals.html
www.score.org/intranet/resources/10comm.html
www.knowthis.com
www.imarketinc.com
www.marketitright.com
www.sprinks.com
www.justsell.com
www.getpress.com
www.yudkin.com
www.gmarketing.com
www.gmarketingcoach.com
www.bcentral.com
www.bizweb2000.com
www.SmallTownMarketing.com
sbs.dnb.com
www.bettermanagement.com
www.marketresearch.com
www.quirks.com
www.marketsegment.com
www.bni.com
www.presentations.com
www.zdnet.com/presentations
www.zoomerang.com
www.supersurvey.com
www.intellicontact.com/index.php
wilsonweb.com
Excellent authoritative source for all e-commerce marketing questions.
www.independent-sales-reps.com/
Source for connecting with sales reps.
www.sellingselling.com
www.marketingprofs.com
www.marketingpower.com
www.gmarketing.com

Suppliers/Purchasing:
www.isquare.com
www.napm.org
www.smallbusiness.com
www.ThomasRegister.com
www.thomasglobal.com

Trade Show Information:

www.globalsources.com/TRADESHW/TRDSHFRM.HTM
www.apparelnews.net/TradeShows/
www.buyerzone.com
www.tsnn.com
www.exhibitions-world.com
www.idgworldexpo.com
www.techweb.com/calendar
www.websiteestates.com/tradeshows.html
www.tradegroup.com/resources/showdirectories.htm
www.tradeshowadvisor.com/resources/directories.html
www.mmaweb.com/meetings/Directory/tradesearchnfr.html
www.arhs.net/related/trade+show+directory
www.pcma.org
www.conventionplanner.com
www.creative-expos.com
www.e3expo.com
www.comnetexpo.com
www.guerrilla-guide.com
www.festivalnet.com
Crafts fairs and events.
www2.tradepub.com/free/fq
www.dmnews.com

Insurance references:
www.iii.org
Click on: Business
www.nfib.com
www.AIG.com
www.EHSmanager.com
www.hiaa.org/consumer/guides.htm
Small-Group Health Insurance Guide.
www.healthinsuranceinfo.net
By States.
www.eHealthInsurance.com
Research, compare, apply and purchase Health Ins.
www.workerscompensation.com/businesscenter

Payroll Outsourcing:
www.paychex.com
www.ebs.adp.com
www.wellsfargo.com/biz
www.surepayroll.com
www.paymaxx.com
www.payroll.com/services

Lists Sources:
www.GreatLists.com
www.hdml.com
www.caldwell-list.com
www.mnileads.com
www.infousa.com

Manufacturing Business & Manufacturers Representatives:

www.mep.nist.gov
www.independent-sales-reps.com
www.unitedsalesagents.org
www.greatrep.com
www.MANAonline.org
www.Replink.com
www.mrpusa.com

Women's Business Sites; Center for Women & Enterprise:

www.onlinewbc.org
www.sba.gov/womeninbusiness/wbcs.html
www.sba.gov/services/specialaudiences
www.onlinewbc.org
www.cweboston.org
www.discoverbusiness.com
www.nawbo.org
www.springboardenterprises.org
www.nwbc.gov
www.wfn.com
www.womensventurefund.org
www.wtc-sf.org

Minority and Disadvantaged Business Assistance:

www.mbda.gov
www.ushcc.com
www.website1.com/aamb

Find Competition:
froogle.google.com
Look for competitor's products and pricing.

Financing Sites:
www.inc.com/guides
www.score.org/workshops/business_angel.html
www.inc.com/articles/details
www.sba.gov/financing/frprequal.html
www.sba.gov/financing/frcdc504.html
tenonline.org/sref/jg2.html
www.workingcapital.org
www.seedcorp.com
Applies to SE MA area users.
massdevelopment.com
www.BankRate.com
www.capital-connection.com
www.livecapital.com
www.businessfinance.com
www.garage.com
www.businessekg.org
www.bankofamerica.com
www.wellsfargo.com
www.fdncenter.org
About foundations.
www.blxonline.com
www.innovativebank.com

Leasing:
www.elaonline.com
www.GEsmallbusiness.com
www.TrinityBusinessGroup.com

Research and Development:

sba.gov/sbir
www.sba.gov/advo/research
Franchising Sites:
www.howstuffworks.com/franchising.htm
www.frandata.com
www.startupjournal.com
www.bizstats.com
www.franchiseregistry.com

Franchises for Sale:

www.franchise.org
www.bison1.com/acad/acad-assoc.html
www.frannet.com
www.franchisehandbook.com/directory/
www.entrepreneur.com/Franchise_Zone/FZ_FrontDoor/0,4670,,00.html
www.score.org/cgi/third_party.cgi?url=http%3A/franchiseemporium.com

Venture Capital
www.garage.com
ace-net.sr.unh.edu/pub
vfinance.com
www.venturereporter.net
www.dfi.com
www.focusventures.com
www.3i.com
www.humwin.com
www.battery.com
www.jafco.com
www.trinityventures.com
www.atv.com

Grant Application Guide Sites:

www.sba.gov/services/financialassistance/
www.cfda.gov
Wonderful guide to government programs.
www.sba.gov/expanding/grants.html
SBA grant programs
12.46.245.173/cfda/cfda.html
www.hud.gov/grants/index.cfm
www.lib.msu.edu/harris23/grants/
www.fdncenter.org
www.escus.org
www.guidestar.org/
www.sba.gov/sbir/indexsbir-sttr.html
govbenefits.gov/govbenefits/index.jhtml
www.kauffman.org
www.moneyfunding.com
Lots about grants but some links are off topic.
agwa.us
www.grantwriters.org/resources/ethics.htm
www.stellargrants.com
www.niaid.nih.gov/ncn/grants/
www.learnerassociates/net/proposal/">
www.proposalwrite.com/grants.html
www.lindasanchez.house.gov/index.cfm?section=services&service=grants
www.un.org/Depts/dhl/sflib/libmgnt/grantproposals.htm
foundationcenter.org/getstarted/tutorials/shortcourse/
www.research.ku.edu/kucr/howto/writing.shtml
tigger.nic.edu/depts/ovcr/research/proposals/
www.willamette.edu/dept/saga/carson/tips.htm
www.umass.edu/research/ora/dev.html
research.microsoft.com/Users/simonpj/papers/Proposal.html
www.scorepdx.org/pdf_4/BRC_4_Ha.pdf
www.bankofamerica.com/philanthropic/grantmaking.action
site for non-profits to search for foundations

Human Resources and Employment:

aipb.org
Evaluating prospective bookkeepers.
www.hrzone.com
www.sba.gov/library/pubs/pm-2.txt
www.acinet.org/acinet/licensedoccupations
Occupation licensing directory for all states

Patents, Trademarks and Inventions:

tenonline.org/sref/jp1.html
www.uspto.gov/web/offices/pac/doc/general/whatis.htm
uspto.gov
www.ftc.gov
www.loc.gov
Click on Copyright Office.
www.patentcafe.com
www.willitsell.com
www.iplex.com
www.pl-x.com
www.aipla.org
www.howstuffworks.com/patent.htm
www.micropatent.com
www.trademark.com
www.nolo.com
www.patentpending.com
www.cpl.lib.uic.edu
www.cpl.li.uic.edu/cpl.html
www.patents.com/copyright.htm
www.patents.com/weblaw.htm
www.fplc.edu/tfield/copynet.htm - TOC
www.les.org
tenonline.org/art/0402.html
www.loc.gov/copyright
www.gettyimages.com/
www.inventorsalliance.org/index.cgi?ba

Consulting Business:
tenonline.org/sref/ap3.html
tenonline.org/sref/ap2.html
www.escus.org/flash/index.html
 Non-profits consulting.
www.nwfusion.com/net.worker/research
www.Intranets.com
www.CPAdirectory.com

Buying and Selling a Business:

www.freeman-assoc.com
www.mergernetwork.com
www.usbx.com
www.nationalist.com
www.lycos.diomo.com/index.asp?.cat=View
www.scorepdx.org/pdf_4/BRC_4_K.pdf
Comprehensive SCORE chapter reference for this topic
www.bizbuysell.com

Real Estate Sites:

www.icsc.org
www.boma.org
www.naiop.org

Federal and State Government Procurement, Contracts and

Subcontracts, Compliance, Regulations:
pro-net.sba.gov
web.sba.gov/subnet
www.mac.doc.gov
www.sba.gov/hubzone
www.sba.gov/library/pubs.html
www.sba.gov/library/forms.html
www.comm-pass.com
www.state.ma.us
Substitute any state letters to access that state's central info.
www.business.gov
Links to all Federal Government business services.
www.rcacwv.com/home.html
www.firstgov.gov/Business/Business_Gateway.shtml
www.statelocalgov.net/index.cfm
Local Government Directory
www.ccr.gov/
Central contractor register National Registration
www.dnb.com/us/
DUNS number free registration
www.fedbizopps.gov/
E posting for government bids
www.gsa.gov/Portal/gsa/ep/home
General services site for doing govt. biz
www.sba.gov/subnet
SBA subcontracting network
www.neco.navy.mil/
Electronic contracting navy
www.gsa.gov/
Buying from and selling to the government
www.govcon.com
 If a minority, get status certified by the government--SBA can help
www.tsn.wes.army.mil/
Services e bid site for tri services
www.exostar.com/
Internet based procurement
www.ccr.gov/
Government/Central Contract Register
www.gsa.gov/Portal/gsa/ep/home/
General services admin.. guide to doing govt. biz
www.census.gov/epcd/www/naics.html
NAICS look up guide
www.govcon.com/
www.sba.gov/GC/whatwedo.html
www.nwbc.gov/
www.nwbc.gov/
www.womenbiz.gov/
www.usa.gov/Business/Business_Gateway.shtml
www.mbda.gov/?
section_id=4&bucket_id=150&content_id=2362&well=entire_page
For small minority and woman business access to GSA National
Procurement Activities,
www.gsa.gov/oed
www.nationalcontractors.com/hvac.html

Small, Disadvantaged Business:

www.hud.gov/offices/osdbu/index.cfm
www.sba.gov/sdb/

Small Business Size Standards:

www.sba.gov/size

Taxes:
www.tax.gov
www.irs.ustreas.gov/business/
Click on Small Business/Self Employed
www.irs.gov/formspubs/
IRS forms and publications
www.payrolltaxes.com
www.dor.state.ma.us/
MA state withholding taxes
www.smbiz.com
www.irs.gov/pub/irs-pdf/p531.pdf
www.irs.gov/pub/irs-pdf/i8027.pdf
www.irs.gov/pub/irs-pdf/p1875.pdf
www.rjclarkcpa.com
Power Point Videos Like Small Business Workshops on Taxes and
Accounting

Publications:
www.sba.gov/library/pubs.html

Statistical Reports:
www.sba.gov/advo
www.fedstats.gov

Export:
Export.gov
USAtrade.gov
www.tda.gov
www.SBA.gov/oit
www.globalpg.com
www.state.ma.us/export
www.Exporthotline.com
www.sbea.com
www.exportsbdc.org

Legal Information References:

www.findlaw.com
www.corporate.com
www.willitsell.com
www.BusinessLaw.gov
www.nolo.com
www.Freeadvice.com
www.SmartAgreements.com
www.legalzoom.com
Complete standard legal services on-line including fixed pricing lists
www.insiderreports.com/LEGALFRM/B10193.htm
www.usda.gov/rus/water/ees/englib/pdf/C-410-02a.pdf
virginiadot.org/business/const/forms-main.asp
store.construction-businessforms.com/coprfocobidf.html
www.smallbizresource.com/finance-legal
www.abanet.org
American Bar Association home page--References to legal profession
www.acinet.org/acinet/licensedoccupations
www.acinet.org/acinet/licensedoccupations
All States Occupation Licensing Information)

E-Commerce (entry level):

store.yahoo.com
www.gobizgo.com
www.vastweb.com
www.swapsmarts.com/home.asp
www.elance.com
www.wilsonweb.com/art/ecomm/window-display.htm

Full Service Host Providers for E-Commerce:

www.powweb.com
www.ipservices.att.com/sbh23
www.dellhost.com
www.ibm.com/services/webhosting
www.interland.com
www.hostcentric.com
www.verio.com
www.Yet2.com
www.icdsoft.com/hosting.php
www.hostglobal.com
www.hottesthosts.com
www.tophosts.com
www.globalhosting.com
www.ipowerweb.com

Website Services including Credit Card Services:

www.1and1.com
www.netmechanics.com
www.zdnet.com/enterprise
www.techweb.com/netbiz
www.builder.com
searchenginewatch.com/webmasters
www.networksolutions.com
www.godaddy.com
buildit.sitesell.com/main/home.html
gobigstep.com
www.2checkout.com
All these credit card sites need individual checking for fees and
successful references.
www.chexelle.com
www.biz-cashflow.com
www.nase.org/
www.paypal.com/
www.shoppingcart.com
www.cybercash.com
www.vanserv.com
intellepay.com
www.paymenttech.com
www.hitslink.com
websitebuildermagazine.com
www.mercantec.com/wilsonpromo
www.intoyourweb.com
contact the president Hebba Abdul at habdul@intoyourweb.com

Website Hosting Services Directory (and Low Cost Hosting Sites):

thewhir.com
The Web Host Industry Review, a magazine of the industry.
www.register.com/hosting/
www.icdsoft.com
www.racknebula.com
www.pair.com
www.dreamhost.com

Website Enabled Database Software:

www.weboffice.com/EN/Home/
www.dbqwiksite.com/
www.quickbase.com/p/home.asp
www.server-technology.com/index.jsp
Professional
www.callcentermagazine.com/
 Overall Information Source
www.salesprocrm.com/

General E-Commerce:
www.IBM.com/smallbusiness
www.fedexecommerce.com
www.ec.ups.com
www.e-commerce.com
www.howstuffworks.com
www.internet.com
www.wilsonweb.com
Excellent all-inclusive web marketing and e-commerce guide.
sbdcnet.utsa.edu/SBIC/e-com.htm
Very detailed listing of e-commerce reference sites.
www.dirtyworksolutions.com/
Very interesting traffic building aid.
adwords.google.com

Shipping:
www.stamps.com

Payment:
www.paypal.com
www.shoppingcartindex.com

Returns and Replacements:

www.thereturnexchange.com

Note:
The above list has enough content and internal links to make anyone
knowing all of it ready for an instant MBA degree!! The references are for
information only without implied endorsement by the compiler. Any user
should explore the sites and decide independently which seem suitable for a
specific application. There are numerous links associated with each site that
should not be overlooked because they provide very valuable additional
related information.

Inclusion here in no way implies site endorsement by compiler or SCORE.

This is just a compilation for users to look through and make their own
judgments as to whether the content is valuable and the site providers are
reliable. (It is always possible that a few of the sites may have been
withdrawn since this list was begun, but the vast majority is still active. New
sites are constantly being added. In the compiler's opinion, they collectively
offer tons of valuable information, ideas, suggestions and guidance for users
to browse through and use as they see fit.)

Next Previous Contents

Next Previous Contents

 Business Plan Outline

by Dick Stevenson, SCORE Chapter 432, Moline.

Please follow the suggested outline and consider the questions listed under
each heading. Omit areas that are not applicable to your specific business.

The Cover Sheet

• Identify the business and the document.

• Identify the location and telephone numbers of the business or where
the principals can be reached.
• Identify the person who wrote the business plan.

Statement of Purpose

• Who is asking for the money?

• How much money is needed?
• What is the money needed for?
• How will the funds benefit the business?
• Why does this loan or investment make business sense?
• How will the funds be repaid?

Table of Contents

• Section One: The Business

• A. Description of Business
• B. Product/Service
• C. The Market
• D. Location of Business
• E. The Competition
• F. Management
• G. Personnel
• H. Application and Expected Effect of Loan
• I. Summary
• Section Two: Financial Data
• Section Three: Financing Proposal
• Section Four: Exhibits
• Section Five: Supporting Documents

Section One: The Business

• A. Description of Business
• What business are you in?
• What is the status of the business? (startup, expansion,
 takeover)
• What is the business form? (Proprietorship, Partnership,
Corporation)
• Why is your business going to be profitable? (or continue to
grow)
• When will (did) your business open?
• What hours of the day and days of the week will (are) you in
operation?
• Is your business seasonal?

• B. Product/Service
• What are you selling? (not "what are your products or
services?")
• What are the benefits (as opposed to the features) of what you
are selling?
• How do your products and /or services differ from competing
products and/or services?
• If your product is new or state-of-the-art or otherwise unique,
what makes it different? Desirable?
• If your product or service line is not special, why would
people buy from you?

• C. The Market
• What are your markets?
• Which ones are buying from you now?
• What products are they buying?
• Who are the people who are buying from you?
• How would you characterize your markets? (growing, steady,
declining)
• Why do these people buy from your company?
• Why do they buy from you and not the competition?
• What are they buying from you? On what cycle?
• How can you find more buyers like these?
• What is the size of your market?
• What percent of each market do (or will) you have?
• What is each market's growth potential?
• As each market grows, will your share increase?
• Is the market competitive or not? If not, why not?
• How will you attract and keep these markets?
• How can you expand your markets?
See Exhibits for Annual Sales Forecasts

• D. Location of Business
• Where are you located?
• What are the physical features of your building? What should
you have?
• Do you lease or own your space?
• What renovations are needed, and how much will they cost?
• Does zoning in your area permit your kind of business?
 • What other kinds of businesses are in your area?
• Why did you pick this site over others?
• Why is this the right location for your business? Where should
it be?
• How will this choice of location affect your operating costs?
• Are any demographic or other market shifts taking place?

• E. The Competition
• Who are your five nearest competitors?
• How is their business? (steady, increasing or decreasing)
• How are their operations similar and dissimilar to yours?
• What have you learned from watching their operations?
• How will your operation be better than theirs?

• F. Management
• 1. Personal history of the Principals
• Who is on the management team?
• What is your business background?
• What management experience have you had?
• What education (including both formal and informal
learning experiences) has a bearing on your managerial
abilities?
• What are your ages, special abilities and interests,
reasons for going into business, where do you live and
have lived, etc.
• Are you physically up to the job?
• Why are you going to be successful in this venture?
• What is your personal financial status?
See Exhibits for Owner's Personal Financial Statement.
• 2. Related work experience
• What is your direct operational experience in this kind
of business?
• What is your managerial experience in this kind of
business?
• What other managerial experience have you had?
(different businesses, clubs, teams, civic or religious
organizations, etc.)
• 3. Duties and responsibilities
• Who does what?
• Who reports to whom?
• Who makes final decisions?

• G. Personnel
• What are your current needs ?
• What skills will your employees need in the near future? In
five years?
• What are your plans for hiring and training personnel?

• H. Application and Expected Effect of Loan

 • How much money do you need?
• For what purposes will it be used?
See Exhibits for Sources and Uses of Funds

• I. Summary
• Summarize ideas developed in the preceding sections.
• Make sure the different parts of the analysis make sense,
support each other logically and coherently, and project
probable success.

Section Two: Financial Data (forms attached)

• List additional financial documents to be found in the Exhibits

section.
• A. Sources and Uses of Funds
• B. Capital Equipment List
• C. Balance Sheet
• D. Break-Even Analysis
• E. Projected Income Statement
• 1. Three Year Summary
• 2. Detail by Month, 1st year & Quarter, 2nd and 3rd
years
• F. Cash Flow Projections
• 1. Three Year Summary
• 2. Detail by Month, 1st year & Quarter, 2nd and 3rd
years
• G. Budget Deviation Analysis
• H. Historical Records (Balance Sheets, Income Statements
and Tax Returns for past 3 years.
• I. Summary
• Explain basic assumptions used in their preparation.
• Provide other comments necessary to understand the
documents
• Position the documents in the Exhibits section.

Section Three: Financial Proposal

• Explain fully your proposal to the lender.

Section Four: Exhibits (as required and/or appropriate)

Section Five: Supporting Documents

• For example: Brochures & advertising materials, industry studies,

blueprints & plans, maps & photos of locations, magazine or other
articles, lists of equipment owned or to be purchased, copies of leases
& contracts, letters of support from future customers, other materials
which support the assumptions in this plan.
 SUBSIDIARY SCHEDULES FORM

Sources of Funds

Owners Investment
A.
B.

Total Owners Investment

Bank Loans
A.
B.

Total Bank Loans

Other Loans
Econ. Develop. Loans

Total Other Loans

Total Sources

Uses of Funds

Buildings/Real Estate
Land/Improvements
Construction
Remodeling
Leasehold Improvements

Total Bldgs/Real Estate

Capital Equipment
Furniture
Equipment
Fixtures
Machinery

Total Capital Equipment

Administrative Costs
Deposits
Prepaid Insurance
Goodwill

Total Administrative Costs

Opening Inventory
 A.
B.
C.
D.

Total Inventory

Preopening Expenses
Accounting & Legal
Advertising
Car/Delivery/Travel
Insurance
Interest
Outside Services
Payroll Taxes
Rent
Repairs & Maint.
Supplies
Taxes
Telephone
Utilities
Wages
Misc. 0

Total Preopening Expenses

Owners Withdrawal
Working Capital Requirement
Contingency Fund

SUMMARY SCHEDULE FORM

SOURCES OF FUNDS

Owners's Investment
Bank Loans
Other Loans

Total Sources

USES OF FUNDS

Building/Real Estate
Capital Equipment
Administrative Costs
Opening Inventory
Preopening Expenses
Owner's Withdrawal
Working Capital Requirement (from Cash Flow Projection)
Contingency Fund (amount required to make Cash Flow Projection
 breakeven)

Total Uses

SECURITY AND COLLATERAL FORM

Collateral for Loans .......... Value .......... Description

Note: Value is lower of cost or market value

Total Collateral

Signers for Loans (Requires all major owners)

Guarantors for Loans (Other than owners)

Next Previous Contents

Next Previous Contents

A Simplified Business Plan for an Internet

Startup

by Marv Trott,

The best way to start a new business is to create a Business Plan. Another
way to look at a Business Plan is to consider it a story about what you expect
to happen during the first year of business. The story has to include how you
will acquire customers (or clients), how much money you expect to collect
and spend each month, how much profit you expect to make during the first
year, and last but not least how many hours these efforts will take.

Here are three of the many web sites that have outlines of Business Plans to
help you get started:

• wsj.miniplan.com/
• www.quicken.com/small_business/
• www.sba.gov/starting/indexsteps.html

I would suggest that you start with the Projected Monthly Cash Flow
Analysis in the plan. By starting here it will make you aware of all of the
potential income and expense items you might encounter. After you have
completed the Cash Flow you should prepare the Projected First Year Profit
and Loss Statement.

As you try to determine the projected monthly income you will be faced with
the major question: "How can I project how many customers I will sign up
that month?. This will expose you to the real world of starting and running
any business. That is, "How do I make customers aware of my services, how
do I get them to purchase these products or services, and how do I get more
customers?".

A web site alone will not create customers. However you can direct the
potential customer to go to your web site for more information or to purchase
your products or services. To accomplish this you need to develop a
marketing and sales promotion plan. This might include presentations to
selected groups, running advertisement in selected publications and
distributing printed advertising material.

With this information you will be well on your way to understanding what
might happen in your new business during the first year.

Although the Analysis may not be what actually happens during the first
twelve months, it is far less expense to face the problems on paper then to
find out about them after the "doors are opened" in your new business.

If you need a further explanation of anything I have suggested, please don't

hesitate to ask for help.

Good luck.

Next Previous Contents

Next Previous Contents

Starting A Construction Business

by Kit Werremeyer, SCORE Chapter 203, Tampa, FL

1. Organize. Determine a name for your company. and then strongly

consider organizing as a Limited Liability Company (an LLC) or a
Subchapter S Corp (a Sub S). Organizing in this way will better protect your
personal assets in the event of a claim or lawsuit against your company.

There is also a tax advantage to using an LLC or a Sub S. The profit or loss
from your business in each case is passed through to you and any co-owners
to report as normal income. You report this income on your year end IRS
personal tax returns. Since a LLC or a Sub S do not pay any state or federal
income tax (as separate business entities), there is no double taxation.

If you are going to have partners or shareholders in your new company, make
sure you have some kind of written members (LLC) or shareholders (Sub S)
agreement as a part of your organizing documents; this agreement outlines
all the rights, duties, responsibilities and obligations of all members or
shareholders. You can download example copies of these agreements for a
nominal fee from the internet.

Find a Certified Public Accountant (a CPA) near you to do all the

organization paperwork. The CPA can explain the personal tax
considerations of organizing as a LLC or a Sub S. The CPA will also apply
for an Employer Identification Number (an EIN) for your company, a DUNS
number (for business credit reporting) and, if necessary, a Fictitious Name or
Doing Business As (DBA) registration. An EIN is the federal number your
company needs to use when your company reports business income or
receives revenues (payments) from commercial clients.

If you resell construction materials you will likely need a state tax certificate
and sales tax number to collect and remit sales taxes to the state. Check with
your county for any zoning requirements that may affect your business
location.

2. Bank Account. Set up a bank account in the name of your company. All
revenues received and expenses paid out by your company must go through
this account. Do not co-mingle your personal funds with the funds in this
account. Pay all of your company's bills through this account. Do not use
the business account for any personal purposes. If you start this account with
your own personal funds, lend this money to your new company through a
written loan agreement that pays interest; this is a legitimate business
expense for which you can reimburse yourself.

3. Insurance. Insurance is an important asset of your construction

company. Secure General Liability and Auto/rental equipment insurance in
the name of your company. This will better protect you and your company
against claims for personal injury and property damage, and will provide you
with legal defense of those claims, which may arise out of your company's
operations. Talk to a business insurance agent near you about your insurance
needs.

You will also want to strongly consider securing Workers Compensation

insurance for you and any of your employees. Most clients will not allow
you to work at their jobsite unless you have proper insurance and can provide
certificates of insurance for the required policies, including Workers
Compensation.

If your company will do architectural designs, engineering designs and

calculations, or similar, then you will also need to consider securing
Professional Liability (Errors and Omissions) insurance to better protect you
and your company from claims arising out of mistakes made in designs and
calculations.
4. Licenses. Go your local county courthouse, contractors section, and find
out what types of professional and/or business licenses you will need to
secure for your new company and the type of work you intend to perform.
Secure all required licenses. You may have to take a test, or tests, to secure
certain types of contracting licenses. You can also find out about state
licensing requirements for contractors at www.contractors-license.org.

5. Performance Bonds. If you intend to do work in the public sector, it's

likely your company will be required to provide a performance bond to
ensure that you complete the work in accordance with terms of the contract.
Bonds, guarantees actually, are provided by surety companies. Start early on
getting your company qualified to provide bonds as the surety company will
go through a due diligence process on your company to determine the dollar
value of work they will write bonds for. You can find bonding companies in
your area on the US Government's Circular Number 570 at www.ustreas.gov.

6. Business Plan. Write a business plan. This is a roadmap for your

business. It doesn't have to be fancy or long. Best bet is to take a course or
attend a seminar on how to write one. Check with your local SCORE
chapter to see if they offer such a course. Local universities and colleges
often offer these courses as well. Your business plan is a "living document".
Change it as often as necessary to meet the changing needs and aspirations of
your company. If you want to borrow money from a bank for your business,
one of the first things they will want to see is your business plan.

7. Start-Up Money. For a newly established business without two to three

years of success, borrowing money to get the business going will likely be
difficult. Personal funds, loans against the equity in a home, funds from
investors in the new business, loans from friends and relatives, are some
sources to consider for start up money.

If your personal credit is good, you may be able to establish a line of credit
or secure a small value loan from your local banker. Talk to several banks in
your area about loans and see what their requirements are and how much
they would be willing to lend you and under what terms and conditions.

There is no grant (free) money available. Despite what you may hear or
read, little if any grant money from the Government is available to for-profit
business. The majority - perhaps 95% - of grant money goes to not-for-profit
businesses. Do not waste your valuable time or money by taking a course in
how to apply for grants; use that same money to invest in your new
business.

Who lends money? Banks lend money. The US Small Business

Administration (SBA) and SCORE do not lend money or give out grants,
despite what your friends or the rumor mill may tell you. The SBA does
provide guaranties for loans made by banks to small businesses. You can
find out more about the SBA guaranty process for small business loans at
www.sba.gov/financing.

8. Accounting. Start early and get into the routine of collecting and
recording all of your company's revenues and expenses. Establish a detailed
chart of accounts for expense categories. Alternatively, develop a working
relationship with a CPA who will do all your books, prepare your monthly
(or other time frame) cash flow statement, profit and loss statement, balance
sheet, and prepare your required annual tax returns. You can do this
accounting work yourself if you are so inclined, but your time is more
valuable being used to manage your business and making it grow and be
successful. Strongly consider hiring someone to take proper care of your
accounting process.

9. Estimating and Pricing Process. Develop an estimating and pricing

process for the work you intend to perform. Most clients are going to want a
firm lump sum price for the work they want done, so make sure you fully
understand all your direct labor, materials and equipment costs, your
overhead (home office) costs, and your profit expectations for the work you
quote. The sum of all these is your price to the client. You can find lot of
excellent construction estimating guides through the publisher RSMeans at
www.rsmeans.com.

10. Contracts. Develop a simple contact form to use for your work with
clients. Make sure all your contracts have at least a well defined scope of
work, good terms of payment, an achievable schedule and a good
extras/claims clause. Do not do any work on verbal orders; get everything in
writing, always, no exceptions! You may want to engage a lawyer who
specializes in construction contracts or a contracts professional experienced
in engineering/construction contracts to assist you in writing a contract to use
for your projects.

Take a course in engineering/construction contracts so you understand such

contract issues as: various types of terms of payment, indemnity, additional
insured status, warranties, guarantees, types of damages, claims and dispute
resolution. Learn how to understand, evaluate and then mitigate the
commercial risk you may be exposed to in a contract; the assets of your
company may be at stake.

11. Marketing. Develop some marketing materials about your company and
the work it does and get it out to potential clients. Join local contractors
groups and your local chamber of commerce. Advertise in regional and local
community newspapers. These are all excellent venues to network and
advertise for new jobs. Marketing is simply client education. An educated
client is a buying client.

In your marketing materials note the work you do, successful projects,
licenses, insurance provided and that you are a safe contractor who
completes his work on time and has respect for his clients. If applicable note
that you are Veteran-Owned, a Women-Owned, or a Minority-Owned small
business. If you intend to market your engineering/construction services to
the government you will have to first register your company at www.ccr.gov.

12. Sales. Develop a sales process. Selling is simply convincing the client
to buy your engineering and/or construction services. This process begins
after you have done your marketing with the client. Learn how to write a
proper proposal to respond to a client's inquiry or request for proposal
(RFQ). What makes your company better than the competition? What are
your strengths? What are your weaknesses? Improve your strengths and
work on changing your weaknesses into strengths.

Always go see you clients face-to-face when selling. When you see them,
make sure you are always cleaned-up, well-dressed and presentable. Learn
from your competition. Never bad-mouth your competition; it's temping but
unprofessional and they might actually do a better job than you do. Slaging
the competition will turn off your client to doing business with you.

13. Labor. Labor necessary to complete your operations comes generally

from three sources: subcontracts, direct hire, and broker labor.

With subcontracts, you hire a specialty contractor for certain portions of the
work you intend to perform. Make sure the subcontractors you use have
appropriate experience, are properly licensed and insured, and, if necessary,
bonded. Pay your subcontractors on time and treat them as equal partners in
the successful completion of your work.

With direct hire, you now have employees. As such you will be responsible
for their wages, certain insurance, and any applicable state and federal
withholding taxes related to their wages, such as Social Security, income tax
withholding, Workers Compensation and unemployment insurance. You
may also be responsible for other employee benefits such as vacation pay,
health insurance, and contributions to a retirement program.

With broker labor, you engage a broker to furnish the workers you require to
meet the skill needs of your project. You pay the broker a fixed amount (per
day, per hour, etc) for the workers he provides. The broker pays all required
taxes, withholdings, and insurance from the fees he charges you for the labor
provided. The labor provided by a broker will not typically be considered to
be your employees, but check with your legal representative on this issue to
make sure. Also check to make sure your general liability insurance covers
claims that may arise out of your use of brokered labor.

14. Safety. Develop a safety program in accordance with the US

Occupational Health and Safety Administration (OHSA) guidelines for your
construction activities. Publish it and give it to all employees. Prominently
post it on all jobsites. Continually enforce the program with all your
employees, subcontractors, any brokered labor you hire, and all others who
may be on your jobsite. Have your management's and supervisor's
compensation packages, and even employee pay, linked to safe work
practices.

The best insurance policy and way to reduce or eliminate claims for personal
injury or property damage is to always work safely. Zero OHSA recordables
and zero OHSA lost time accidents ought to be your goal. Unsafe employees
should be requested to find employment elsewhere.

15. Where to Get Some Help. There is no better place to get some help
than your local SCORE chapter. The SCORE motto is "Counselors to
America's Small Businesses." There are approximately 400 SCORE chapters
in the US and approximately 10,000 counselor volunteers ready to help with
new and existing businesses. SCORE counselors typically have many years
of corporate or small business ownership experience, or both. SCORE
counseling is free. Business related courses offered by the various SCORE
chapters are typically provided for a nominal fee or may be free of charge.
You can a find a SCORE chapter near you at www.score.org.

Next Previous Contents

Next Previous Contents

Basic Contracting for New and Start-Up

Construction Companies

by Kit Werremeyer, SCORE Chapter 203, Tampa, FL

A set of management skills that always needs continuous improvement for

owners and managers (contractors) of new and start-up construction
companies is how to read, understand, analyze and negotiate the often
confusing commercial terms and conditions found in construction contracts.

A common scenario is this: Contractor bids on a project. Contractor is low

bidder on the project and it appears he will be awarded the project.
Contractor is given the clients standard contract, which contains the client's
favorite set of commercial terms and conditions, to sign as a condition of
getting the project award. Contractor closes his eyes and signs the contract
because he is reluctant to try to change the terms to something better for
him. Contractor puts the signed contract in his bottom desk drawer and
prays hard that nothing will happen during the course of the project that will
cause him to ever have to read the contract again.

Well, it just doesn't work that way.

Here are ten important examples of how it does work:

• Poorly defined scopes of work create claims and disputes.

• The completion schedule is way too short and exposes the contractor
to damages for failure to complete on time.
• Terms of payment places contractor in a perpetual negative cash flow
situation.
• Client keeps 5% to 10% of contractor's price as retention for up to a
year after contractor finishes the project, which may be all the profit
in the project.
• Indemnity clauses make contractor financially responsible for bodily
injury and property damage claims caused by the negligence of the
 client.
• Indemnity clauses also make the contractor pay for the legal defense
of the client for bodily injury and property damage claims caused by
the negligence of the client.
• Contractor is required to name client as additional insured on
contractor's general liability insurance policy which gives the client
free insurance and full access to the policy coverage and limits.
• The term and/or coverage of the warranty is beyond normal industry
standards.
• Dispute resolution clauses require only arbitration and then litigation,
probably the two worst ways ever invented to resolve disputes.
• The client's pre-printed final waiver of lien document (necessary for
contractor to receive final payment) waives all contractor's rights to
recover unpaid extra work and to pursue any claims that arose during
the course of the project.

There is a perception -- misperception actually -- that contracts can only be

understood, analyzed and negotiated by lawyers. That simply isn't true. Any
contractor with the initiative to learn can do a very good job of understanding
and analyzing the commercial terms and then negotiating better and less
risky commercial terms and conditions for the contracts he undertakes. Let's
examine the contract commercial issues found in the above ten bullet points:

Scope of Work: Nothing in a construction contract is more

important than a clear, well-defined scope of work that, in detail,
outlines the work to be performed by the contractor. The scope of
work needs to also define work that is excluded and all work to be
done by others, including the owner, that may interface with the
contractor's scope of work. Don't worry about too much detail; that
detail will significantly help with the avoidance or resolution of
claims and disputes that may arise out of the scope of work.

Schedule: A simple precaution. Make sure you have enough time in

the schedule to properly perform the scope of work. Always put
some contingency time in the schedule; minor delays, weather,
equipment problems, etc. are always going to occur and it's unlikely
the client will be sympathetic to giving you more time for these
delays. Contingency time in the schedule is even more important if
you are faced with liquidated damages for late completion.

Terms of Payment: Terms of payment should always generate a

positive cash flow. Negotiate hard for good terms of payment. Get a
downpayment. Or at least get some form of early payment. That will
get cash coming in early. Paid when paid and paid if paid terms are
unfair, period! Clients who want these types of payment terms all
have very good access to plenty of money and can pay you per your
preferred terms so you can enjoy positive cash flow. Remember the
three key rules of business: have cash, have cash, have cash.

Retention: Resist as hard as you can allowing retention to be

withheld from your periodic payment invoices; provide a warranty
guaranty instead. The common mantra is: "the retention will assure
your warranty obligations". If that's what the client wants to achieve,
then provide a warranty guaranty which does the same thing. It's a lot
cheaper to provide the guaranty than to allow the general contractor
to sit on 5% to 10% of your money for a year or more. Guaranties
are provided by surety companies for a premium.

Indemnities: Wherever you see the words "indemnify and hold

harmless", regardless of the clause heading in the contract, you are
looking at an indemnity. Indemnities come in three flavors:
• Broad Form: A broad form indemnity contractually obligates
you, the contractor, to be responsible for claims arising out of
any amount of the client's negligence, including his sole
negligence. The 100% indemnity.
• Intermediate Form: An intermediate form indemnity
contractually obligates you, the contractor, to be responsible
for claims arising out of the client's negligence, excluding
only those claims arising out of the client's sole negligence.
The 99.9% indemnity.
• Limited Form: A limited form indemnity contractually
obligates both the contractor and the client to be responsible
only to the extent they are negligent for a claim.

Indemnities typically cover claims for bodily injury, death of persons

and property damage. Not only do broad and intermediate form
indemnities make you pay for bodily injury, death and property
damage claims caused by the client, you will likely be contractually
obligated to pay for the clients attorney's fees and defense costs too.
An indemnity in contracts can be a very, very dangerous risk transfer
agreement that may be enforceable in a court of law and, if it is
enforced, could possibly bankrupt your company for something you
didn't do. Seek help if you don't fully understand how to negotiate
away the extreme risk found in indemnity clauses in a contract.

Additional Insured Status: A typical requirement in the insurance

clause in a contract will say: "Contractor will name Client as an
additional insured on his General Liability Insurance policy." When
you name your client as an additional insured to your general liability
insurance policy (bodily injury and property damage coverage) he
receives full access to the policy monetary limits and coverage
provided by the policy -- for free!! The client also gets to receive and
enjoy -- for free! -- the legal defense of a claim because your general
liability policy will very likely provide legal defense as part of its
coverage.

Why do clients really want to have additional insured status?

Free insurance for one. But also they want the insurance company to
step up and defend them against claims, for free of course, because
it's your policy and you pay the premium and deductible. And don't
forget, we're talking about claims arising out of the client's
negligence. It's also much better and easier for the client to get your
insurance company to pay for claims and defense costs rather than
 having to try and enforce the indemnity obligations.

Seek help if you don't fully understand how to negotiate away the
extreme risk found in naming your client as an additional insured to
your general liability insurance policy.

Warranty: Warranties are good things! This is your commitment to

stand behind your work and fix or replace something -- without
complaining -- that's wrong or irregular about your work. Standing
behind your work with a good warranty is one thing that will give
you a very good reputation. However, warranties don't have to go on
forever. Twelve to 18 months warranty ought to suffice. Your clients
can pay for longer warranties. Also, your warranty should exclude
things like normal wear and tear, corrosion, improper usage, etc.
Make sure your warranty is specific as to what it includes and
excludes, when it starts and when it ends.

Dispute Resolution: Always have a well written dispute resolution

clause in all your contracts that outlines the process to try and resolve
disputes. The first avenue of resolution ought to be negotiation (the
best!). If negotiation fails, then go next to mediation (an excellent
process by the way!). If you can't mediate a settlement, then next
provide for a senior executive in each organization to try and resolve
the dispute. If these three options fail then all that's left is arbitration
and/or litigation and both parties will lose.

Lien Waivers: Never, never, never, provide an advance waiver of

liens. All 50 states have lien laws that provide contractors with some
measure of protection against non-payment by the client. Also, make
sure you study with an eagle's eye the client's final wavier of lien
document that will likely be hidden away somewhere in the bowels of
the contract documents. Sometimes these final waivers also waive
your rights to collect outstanding extra work and/or pursue bodily
injury or property damage claims against your employees or property
caused by the negligence of the client.

Lastly, take the time to educate yourself about contract commercial terms
and conditions. Don't be so proud to ask for help to fully understand the
risks found in contract commercial terms and conditions. The worst thing
you can do is to just sign the contract and pray nothing happens.

Next Previous Contents

Next Previous Contents

Some Import/Export Considerations

by Kit Werremeyer, SCORE Chapter 203, Tampa, FL

There certainly is a lot of interest today by entrepreneurs in establishing

import and export companies and getting involved in international business.
The international shipment of goods is highly organized and very efficient in
getting the goods to and from most countries. After you organize your new
company, set up a bank account and an accounting process, write a business
plan and get your business licenses, here are some very important import and
export issues you will have to fully and completely understand in order to be
successful.

Letters of Credit: Take a one to three day course in understanding Letters

of Credit (LCs). LCs are a mainstay of paying for international sales of
goods transactions. As a buyer -- the applicant -- you deposit funds and
establish the LC with a bank. LCs are also called "Documentary Letters of
Credit". An LC is issued by a bank. LCs are paid by the bank "at sight". All
"at sight" means is that the bank looks over the documents produced by the
seller -- the beneficiary -- of the LC, and required by the LC, and if those
documents are in order, they pay the beneficiary the full value of the LC.
Partial payments under an LC can be allowed. The LC will have a list of
documents noted on its face that have to be produced by the beneficiary or
his agent in order for the bank to cash the LC; hence the name
"Documentary".

Some typical documents listed on the LC that must be produced in order for
payment to be made to the beneficiary are as follows:

• Commercial Invoice (what goods are in the shipment)

• Bill of Lading (shipping documents, ocean, inland)
• Proof of Insurance (are the goods being shipped properly insured)
• Inspection Certificate (have the goods been properly inspected)
• Certificate of Origin (where did the goods originate -– what
country)

For a very basic understanding of LCs go to the following websites:

www.creditguru.com/guestarticleLC.htm and www.crfonline.org/orc/cro/cro-
9-2.html.

Hong Kong and Shanghai Banking Corporation (HSBC) and Bank of

America (B of A) often offer courses in understanding letters of credit. Call
them to see if they offer a course near you or can refer you to a training
course offered by someone else. Other private training companies offer these
courses as well and you can find them by doing an internet search for "letters
of credit training".

INCOTERMS: INCOTERMS are the terms commonly used and accepted

world-wide by all countries for shipping goods from one location to another.
There are thirteen INCOTERMS that you need to be completely familiar
with. The thirteen INCOTERMS are as follows:

• EXW -- Ex Works (at named place, e.g.,mfg's warehouse)

• FCA -- Free Carrier (to named place, e.g., to outside the port)
• FAS -- Free Alongside Ship (to named port of export, next to ship)
• FOB -- Free On Board (to named port of export, loaded on ship)
• CFR -- Cost And Freight (to named port of import)
• CIF -- Cost, Insurance, and Freight (to named port of import)
• CPT -- Carriage Paid To (to named place of destination)
• CIP -- Carriage and Insurance Paid To (to named place of destination)
• DAF -- Delivered at Frontier (to named place)
• DES -- Delivered Ex-Ship (to named port of import)
• DEQ -- Delivered Ex-Quay (to named port of import -- "Quay" is
pronounced as "Key" and is the usual name for a portside location)
• DDU -- Delivered Duty Unpaid (to named port of import or other
location)
• DDP -- Delivered Duty Paid (to named port of import or other
location)

Common definitions of the thirteen INCOTERMS are maintained by the

International Chamber of Commerce (ICC). You can get some more general
information on the definition of these terms from the ICC website at
www.iccwbo.org/incoterms/id3040/index.html

There are very significant differences in costs and risks associated with these
INCOTERMS, so before you leap into the import/export business, make sure
you completely understand INCOTERMS and the costs, obligations and
responsibilities associated with each of them.

Example 1: You are a US company and buy a lot of goods from a

supplier/manufacturer in China, EXW (Nanjing, Peoples Republic of
China). Since the order is EXW (at named place), you, or your agent or
representative, are responsible for picking up the goods at the
suppliers/manufacturers named place of business in Nanjing, PRC. You are
also responsible for shipping and insuring the goods from Nanjing by inland
and ocean freight to wherever you want them to go to as a final destination in
the US. In addition you would have to deal with all the customs and import
considerations leaving PRC and entering the US.

Example 2: You are a US company and you buy a lot of goods from a
supplier in China, CIF (Port of Import, New York, New York, USA). Since
the order is CIF, you, or your agent or representative, are responsible for
picking up the goods at the named Port of Import -- New York, NY, USA.
The supplier of the goods is responsible for and pays for the inland/ocean
shipping and insuring of the goods from China to the Port of Import, US.
You are responsible for any US customs duties or tariffs and for shipping the
goods from the US Port of Import to their final destination in the US.

Example 3: You are a US manufacturer and sell a lot of your goods to a client
located in Kabul, Afghanistan DDP (Client's warehouse, Um Quasir, border
of Pakistan and Afghanistan). You are responsible for shipping your goods
from the US to the border location noted. This would include all
inland/ocean freight and insurance to Port of Import, Pakistan, customs
clearance and duties at Port of Import, Pakistan, and all onward shipment
from the Port of Import to the client's warehouse at the border city noted.
Good luck!

In the definitions of the INCOTERMS maintained by the ICC, all the

responsibilities of the buyer and the seller are clearly outlined in detail so
both parties to the transaction know exactly what they are obligated to do and
pay for. This is extremely important so there is no confusion over who is
responsible for loading/unloading, insurance, customs duties and tariffs and
any necessary onward shipment.

When you sell something to an overseas client, CFR and CIF are very often
used and it's likely you will find many of your potential clients or suppliers
will want to use these shipping terms. When you buy something from an
overseas client, you should strongly consider using CFR or CIF as the
shipping terms.

Letter of credit courses will very likely cover the proper use of
INCOTERMS.

Freight Forwarders: A freight forwarder is your shipping agent for

international locations. He provides the necessary delivery services of your
goods. He gets your goods out of the country from the port of export to the
named port of import, and perhaps onward, and will be familiar with all the
export documentation required. Freight forwarders can also provide for
export packing, insurance and trucking, in addition to ocean and
transshipment services.

A freight forwarder can also consolidate your shipment with other shipments
going to the same or nearby international locations. For example: if your
shipment only takes up half of a 20' or 40' container, the forwarder can
consolidate your shipment with one or more other shipments to fill up the
container. This will save you money.

Freight forwarders can arrange for your goods to be shipped by air, by rail,
by ocean going vessel, and by truck. He can also review all shipping related
documents to make sure they comply with letter of credit documentary
requirements.

Freight forwarders can also make arrangements with overseas customs

brokers to clear your goods through the port of import and onward if
necessary.

IMPORTANT: Do not try to do freight forwarding yourself!!!

You can find freight forwarders near you at the National Customs Brokers
and Forwarders Association of America's website: www.ncbfaa.org

Customs Brokers: A customs broker gets your goods through the customs
department at the port of import or port of export. This is called "clearing".
They are licensed specialists who are knowledgeable about all the rules and
regulations regarding custom procedures, fees and tariffs in the particular
country. There are more than 500 pages of customs and tariff regulations for
goods being imported into the US. Customs brokers can also assist in the
onward transport of goods to the final location.

Many times you will find that a freight forwarding company also has a
customs broker department, so you can deal with one company for these two
important specialty services.

IMPORTANT: Do not try to do customs clearing yourself!!!

You can find customs brokers near you at the National Customs Brokers and
Forwarders Association of America’s website: www.ncbfaa.org

The US Foreign Corrupt Practices Act: If you are an American and do

business in a foreign county (yes, this would include your exports to a
foreign country and foreign client) you are subject to the provisions of the
US Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq.
(FCPA).

The FCPA prohibits corrupt payments to foreign officials for the purposes of
obtaining or keeping business. This is bribery. If convicted, criminal
penalties can apply up to US$2,000,000 and five years imprisonment. Civil
penalties can also apply up to $100,000.

Both the US Department of Justice and US Securities and Exchange

Commission are responsible for enforcement aspects of the FCPA.

If you have a foreign agent or representative, and he bribes an official to

obtain business for you, you can be penalized under the FCPA if it is
determined this happened. Just because your agent or representative bribes a
government official, doesn't mean you can avoid the provisions of the FCPA.

If you need to have an agent or representative in a foreign country, you must

do a serious due diligence on that individual or firm; get some good written
references and written background info on several individuals or firms.
Select the best and most reputable, and then develop a written contract for
their services that includes specific reference to the fact that, as your agent or
representative, they agree to fully abide by all the provisions of the US
FCPA. Keep all of the selection process information and a copy of the
contract in a file for safekeeping. This same process would apply if you
established a company in a foreign location or had a joint venture partner in a
foreign location.

There is an exception in the FCPA for payments to foreign officials that the
US Department of Justice deems: "facilitating payments". Some examples of
facilitating payments are: obtaining permits, licenses, processing government
papers like visas and work permits, police inspection, power and water
supply, loading and unloading cargo. Don't assume. When in doubt contact
the US Justice Department in Washington, DC and request a Foreign
Practices Opinion Procedure to get an opinion of what specific type of
payment constitutes a facilitating payment.

General guidance on the FCPA to exporters of US goods can also be

provided by the US Department of Commerce in Washington, DC.

Familiarize yourself with the provisions of the US FCPA at the following US

Department of Justice website:
www.usdoj.gov/criminal/fraud/docs/dojdocb.html

Good luck with your new import/export business! All you need now are
good, reliable foreign or US suppliers and buyers for your imports and/or
exports.

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Score Reference Materials

• Contributor
• Article
• Jerry Chautin ( bio )
• How to Make a Winning Loan Proposal
• A Guide to Market Research
• SBA 7a Loan Guarantee Program
• SBA 504 Program
• Community Express Loans
• Leasing Real Estate vs. Buying
• FAQ - Buying A Business
• FAQ - Buy vs. Lease
• FAQ - Real Estate Investing
• FAQ - Market Research
• Don Flickinger
• Protecting Your Creations
• A DIY Intellectual Property Manual
• Jerry Glen
• Starting A Small Business
• How to Raise Money For Your Small Business
• Guide To Writing A Business Plan
• John Mole
• Selected Small Business Websites
• John Pederson
• Selected Intellectual Property Websites
• Truths About Patents
 • Austin Pryor
• Business Plan Checklist (24Kb pdf)
• Choosing the Business Legal Structure (901Kb pdf)
• Market Research (112Kb pdf)
• Market Positioning (8Kb pdf)
• Low-Cost Marketing Methods (479Kb pdf)
• Managing the Finances (130Kb pdf)
• Sample Human Resources Handbook (66Kb pdf)
• Search Engine Optimization (51Kb pdf)
• Patents and Trademarks (373Kb pdf)
• Becoming an Independent Consultant (195Kb pdf)
• Pricing Consulting Services (11Kb pdf)
• Home-base Computer Service Business (19Kb pdf)
• Fund Raising for Non-Profits (255Kb pdf)
• David Small
• Selected Small Business Websites
• Dick Stevenson
• Business Plan Outline
• Marv Trott
• A Simplified Business Plan for an Internet Startup
• Kit Werremeyer
• Starting A Construction Business
• Basic Contracting for New and Start-up Construction
Companies
• Basic Import/Export Issues

• Jack Hardy
• Bootstrap Marketing articles at his site
• Alan Zell
• Sales & Marketing articles at his site
• Melvin DeGeeter,Ph.D
• Technology Commercialization Articles at his site (see listing
under AUTM 2004 Meeting Presentation). Dr. DeGeeter also
publishes a book, Technology Commercialization Manual:
Strategies, Tactics and Economics for Business Success, that
is also available as an e-book.

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