Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The...

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Small Business Finance… Summer 2009 URG MBA Program Chapters 1-3

Transcript of Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The...

Page 1: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Small Business Finance…Summer 2009

URG MBA ProgramChapters 1-3

Page 2: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Establishing a VentureMost start-ups fail – Why?The idea

Demand?Need?Benefit provided?

Management TeamExperienceExample: CEO Larry Hsu

Legal and Financial Advisors

Page 3: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Business StructureSole proprietorLimited liabilityCorporationPartnershipLLC (Limited Liability company)Each type uses different:

DocumentationRegulations/Laws/TaxationSBA

Page 4: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Financial and Business PlanningBusiness Cycle—What makes it tickFinancial Statements

Balance Sheet Assets and Liabilities

Income Statement Income/Revenue and Expenses/Costs

Cash flow Statements – Importance? EBIT (Earnings Before Interest and Taxes) Examples

Page 5: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Accounting and Actual Cash FlowTiming between sales and payment receipt

Cost of doing business Credit card fees

BartersBased on market priceExample: Web page design and

maintenance/AdvertisingAccounting depreciationLeasing and relying on credit from suppliers

Page 6: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

EBITDAEarnings before interest, depreciation and

AmortizationUsed in companies that have a high value in

equipmentDisadvantage : does not include maintenance

of equipmentDoes not affect cash flow—does affect taxes

and tax reporting

Page 7: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Financial ProjectionsForecasting cash needsValuation of the companyCompare actual performance to forecasts

Gives creditability and reliability to your forecast

IssuesMarkets are difficult to predictPromising a % increase must be substantiatedConservative estimates or not?

Page 8: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

PoliciesPricing

What are some strategies?R & D Cost

CreditHow much and to whom?Establishing your own

DividendAffects cash balances

Page 9: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Cost Structure AnalysisBreak-even Point

Be conservative hereEstablishing Fixed and Variable Costs

Fixed costs are easy to establish/consistentVariable costs?

Energy Costs Shipping, etc.

Establishing what could and/or should be outsourced

Cost of establishing your business networkWho will be your business partners?

Page 10: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Strategic PlanningMarket analysis/feasibilityStart-up costsR & D costsConsider target markets

Test market?Decision making

Establish a processUse a decision tree

Page 11: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Strategic AlliancesAnti-trust issuesGo to Youtube.com and search for AT&T

funny video Look for the one that looks like a diagram

Application to today’s markets?BankingCommunicationsTransportationCar makers

Page 12: Summer 2009 URG MBA Program Chapters 1-3. Establishing a Venture Most start-ups fail – Why? The idea Demand? Need? Benefit provided? Management Team Experience.

Business PlanGreat resource – SBA – www.sba.orgComponents:

General descriptionBusiness goalsProduct description/Service descriptionThe management teamCurrent statusSummary of financial projectionsFinancial resource requirements