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Thank you for your interest in the free introductory workshops. Our workshops provide an introduction to a wide variety of topics related to starting and running a small business. In addition to our workshops, we also offer two courses, How to Start a Profitable Small Business and How to Run a Profitable Small Business, which cover additional topics as well as go into much greater depth than the workshops. While we cannot recreate the entire free workshops, below is a brief summary of the information presented to give you an idea of the kind of practical information that we consider necessary to increase the chance of your small business’s success.

Background

The courses were developed at a University in Detroit, Michigan over twenty years ago. The objective was to provide the student with a tested step by step method of starting and running a small business. Over the past eighteen years, hundreds of thousands of hours of research conducted around the country have been collected to provide the students with facts rather than the instructors opinion. The course is now offered in around 70 cities throughout the country. In 1997 the University of Buffalo, through the Center for Entrepreneurial Leadership, brought the course to the Buffalo area for the first time. The Center, whose objectives are to enhance entrepreneurial talents and improve prospects for growth and development in the economic region, added the course to their core program, mini clinics and networking events.

Instructor

Steven Sanders, MBA, CPA Director of Small Business Seminars, Operates an accounting practice located in Cheektowaga, NY, BS Cornell University in Applied Economics and Business Management, MBA University of Rochester in Finance and Corporate Accounting, Member AICPA, NYSSCPA, Board member of local nonprofit organizations, Partner in several partnerships, Owner of rental property, Author of Small Business Web Page - http://Buffalocpa.ws

Introduction

You can go to any seminar or watch any late night infomercial and hear someone tell you how you can get rich quick. Our workshops and courses are not get rich quick schemes. We do not sell or promote any business opportunities. We have found that to be successful every person needs knowledge and motivation. We cannot teach motivation, but we can teach knowledge. Furthermore, the difference between success and failure is business knowledge. Therefore the focus of our workshop is how to acquire business knowledge. There are three ways of acquiring business knowledge: trial and error, purchase and learning from others. Trial and error simply means learning from your own mistakes. Studies show that the average small business person fails 3.8 times before they succeed. This provides every small business person the chance to invest thousands of dollars and months or even years of their lives almost four times before they finally find the answers to their problems. Each failure may uncover a new problem, but with the opportunity to learn from their mistakes, eventually every business person will succeed. One can purchase business knowledge by buying a franchise. While there are many plusses and minuses in buying a franchise which we discuss in greater detail in our Start class, the fact is that franchises have a very low failure rate (about 1/6 of other businesses). So when you put down between $1,000 and $500,000 or more and also pay up to 5% of your gross sales, you are in return getting a much better chance of success. Learning from others is by far the quickest and easiest of the three. Thousands of hours of research have been conducted to find what works and what doesn’t work. These findings have been summarized in articles, books and educational courses. With a minimal investment you can accumulate the same information you need, without the pain of trial and error or the cost of a franchise. This workshop and two courses we offer (How to Start a Profitable Business and How to Run a Profitable Business) were designed to provide the student with practical business knowledge. Many small business courses rely on theory and abstract concepts. The information contained in the free workshop and the courses are designed to be practical, useful information that can be applied right away to saving money and improving your chances for success.

Why Small Business

The growth of small businesses in the past forty years has been tremendous. From 93,000 new businesses each year 20 years ago to over 700,000 new businesses each year today. These businesses are creating 86% of the new jobs in this country and account for 60% of the workforce, 45% of all sales and 40% of the GNP. Based on current growth, by the year 2005 there will be over 30 million small businesses in this country with the greatest growth in service and hi tech. But why are so many people starting small businesses? Well, 90% start a business for one of the following four reasons: 1) Independence - gaining control over their job and their paycheck 2) Challenge - enjoy creating new products 3) Prestige - enjoy the status of creating jobs and services in the community 4) NO RESTRICTIONS - education, age, race, sex, and background may keep you from getting ahead working for someone else, but no one cares about them when they consider buying your product - all your customer cares about are price and service.  The good news of starting your own business is that you can have a lot of fun, make a lot of money and use your business as a tax shelter to save on taxes. However, the bad news that you should never lose sight of is that you can also lose your shirt in small business if you are not careful.

Business Knowledge

The difference between successful businesses and business failures is knowing what to expect, that is the knowledge of the problems you will face. What problems/pitfalls/mistakes do almost every business face starting out, and on an ongoing basis? The next sections list and summarize the ten biggest pitfalls each in starting and running a small business. People first starting out need to overcome all twenty. Businesses that have already been up and running probably have solved the first ten problems one way or the other and therefore need only focus on the last ten. Although these may just seem like problem after problem, the student should realize that all problems have solutions and the purpose of our classes is to make sure that the student has the answers they need. Our course summarizes the research which has looked at what works and what doesn’t work. Both are important since we want to avoid other’s mistakes and repeat their successes.

Top Ten Pitfalls in Starting a Business

1) Owner’s personal characteristics. Do you have what it takes to succeed? Only 1 in 4 people have the necessary skills, knowledge, personality to succeed in small business, 3 out of 4 are better off working for someone else. Chapter one of the Start course lists 25 questions to help rate your chance of business success. However, one characteristic that every entrepreneur must have to succeed is willpower. When you own the business, the buck stops here. There is no one else to cover for you, to get the job done when you don’t feel like it. If you do not have willpower, quit now before you spend years of your life and thousands of hard earned dollars.

2) Poor choice of opportunity. There are thousands of business opportunities available. Three opportunities that are currently saturated in the Western New York area are Pizza Restaurants, Instant Printing and Video Rental Stores. Some to consider are Senior Services, Spa, Consulting, Bathtub Refinishing, Importing, Videotaping Services, Mail Order, Home Security and Party/Wedding Planner. (I should highlight Importing since we spend 5 pages in the Start book listing references).

3) Inadequate start-up capital. The worst thing that can happen when you first start out is that you do not realize how much money you needed to start your business and you run out months or even days before your business would have started producing enough cash to continue. To avoid this pitfall, first make sure that you are buying only that which you absolutely must - use leases, rentals, commissions and consignments to minimize your investment and therefore start-up capital needed. The second step is to make sure that you have a cash flow budget to determine how much and when you will need capital. In chapter six of the Start class, we include lists of expenses to consider and tips on putting together the budget.

4) Too much investment in non-critical assets. Chapter four of our course focuses on what investments will increase your sales or decrease your expenses versus which will only increase your expenses. Consider, when you are first starting out, do you need a $5,000 computer, a cell phone, pager & PDA, a mahogany desk?

5) Emotional selection of location. In chapter three, twenty-seven factors are listed to help you make a scientific rational decision on where to locate your business. The number one factor that most people use is proximity to their own home. That factor is not even on our list of 27. People allow their emotions to make decisions rather than relevant important factors. On factor to consider for example is, if you want to open a bagel, coffee or donut shop, what side of the street should you put your store on? Think before you read the answer. The answer is the side of the street that people are driving on their way to work.

6) No knowledge of attracting customers. Even if you have the best product or service, no one is going to come to your store or call up your business unless you give them a good reason to. People are creatures of habit and they will continue to buy wherever they did before you came on the market until you convince them otherwise. In chapter three, we list various promotions that can help bring in customers for the first time. Regardless of which promotion you use, you should not have your grand-opening on your first day of business. Hold off your grand-opening a month or six weeks, so that you have a chance to get all the kinks out of your operation.

7) Failure to seek professional advice. When you start out, you are probably going to need to consult with Attorneys, Accountants, Real Estate Agents, Insurance Agents, Consultants, etc. What tasks do you need professionals for and what tasks can you do yourself. Furthermore, how do you know if you found a good professional? In chapter five we talk about what to look for and how to find a good match. Furthermore we also talk about how you can perform certain tasks like incorporating without an attorney.

8) Poor choice of legal form. You have five options: Sole Proprietorship, Partnership, C-Corporation, S-Corporation and Limited Liability Partnership/Corporation. Each has its own advantages and disadvantages. Furthermore, if you do not choose a form, the IRS will and not necessarily the best one for you. You may not be surprised to hear that Partnerships have a 70% failure rate in the first two years, much higher than any of the other four. To help increase the chance of a Partnerships survival, every Partnership should have a detailed written Partnership Agreement and assign an independent arbitrator. In chapter five we discuss the advantages and disadvantages of each legal form.

9) Insufficient experience in product/service. Most new businesses do not run into this pitfall because they start a business doing what they were already doing for someone else. For those getting involved in a new business or industry, make sure you take the time to learn the industry. Consider working part-time to learn the ins and outs of the business from someone else.

10) Insufficient planning and investigation. Surprisingly many people start a new business without doing the planning and investigation to even determine if they have a chance of making any money. Shouldn’t you know in advance whether your venture is likely to succeed? Chapter four teaches the tools necessary to determine the market and potential profitability for your product.  Of course the fact that you are taking the time to read this workshop summary indicates that you are unlikely to suffer from this pitfall and are will to do the planning and investigation necessary to succeed.

Top Ten Pitfalls in Running a Business

1) Lack of planning. This problem is very similar to number ten for starting a business. Nevertheless, you still need an ongoing plan to determine where your company is going. Ask if you are running your business or your business is running you. If you are running your business, then you have no need for more business planning. However if your business is running you, then you either need more business planning or to refine your current plans. Chapter one of the Run course talks about how to analyze where your company is and where you should be going.

2) No knowledge of handling finances/recordkeeping. Fully 25% of business do not keep accurate business records, do not even balance their checkbooks. These same businesses can’t understand why their checks are bouncing all over the place. Consider, if your business plan is a map, your records are the “You are here” sticker. Forget about the risks of IRS or NYS audits. Forget about getting hit with penalties and interest or even jail for lacking accurate records. You need accurate records to see if your objectives are being met. In chapter one we discuss the basics of recordkeeping and determining whether your records are sufficient. The attached records retention table should be helpful in determining if you are keeping all the records you need to.

3) Carrying inadequate inventory and payroll. Once your records are updated and accurate, you can start analyzing if your numbers are good. Consider, if your inventory is too high, you have money tied up in inventory, are paying too much for rent, insurance and taxes, losing too much to depreciation or obsolescence and risk losing too much to theft. On the other hand if you do not carry enough inventories you will lose customers and sales when your customers find that you do not have what they are looking for. Chapter three shows you how to determine what the right inventory is for you. The same basic logic applies to payroll for service businesses. Hire too many employees or pay your employees too much and you are wasting money. On the other hand, if you do not hire enough employees or your employees do not do a good job because you do not pay them enough you will eventually lose customers and sales. Chapter four discusses how to determine the right payroll level for your business.

4) Poor credit granting practices. No matter what you do, any business that sells on credit will lose money. Clamping down too tight will only lose customers and sales. Still certain prudent steps should be taken to minimize the risk. For example, make sure that you separate the functions of sales and credit granting. Commissioned sales people will not care if they sell to a bad risk customer as long as they keep getting their commission. If you do not have the staff to separate the functions then make the salespeople accountable for bad debts. Chapter five lists several other steps to consider.

5) Emotional pricing. Never use your emotions when making business decisions. It is too easy to want to lower the price every time a customer doesn’t buy your product. Therefore you should only price your product based on what people who are likely to buy your product are willing to pay. You must ignore non-customers. Chapter two contains mathematical models to help you price your product or service scientifically.

6) Living too high for your business. When business is going good and you are making a lot of money, you must remember to put some money away. If you start taking expensive vacations or buying lavish gifts for friends and family, you will find that you do not have the money you need when business is not going so good. Natural business cycles tell us that there will be good times and there will be bad times. You must save up money during the good times so that you can stay afloat during the bad times.

7) Expansion too rapid. Chapter one helps you set a speed limit on the growth of your business. You must be able to handle all the problems at your current level before you try to grow to the next level. You may be able to handle one store or five employees or $10,000 debt, but can you handle three stores, twenty employees and $500,000 debt?

8) Wasted advertising budget. In chapter two, the Run course discusses how to set an advertising budget. Once you have set the budget, where do you spend it. One area most businesses waste money on is the yellow pages. To get the most out of every ad, you should include three things. First tell your customers why they need your product. Second tell your customers why they should buy the product from you rather than your competitors. What competitive advantage do you have? Finally you must tell your customers why they should buy your product now. Otherwise they put off buying your product and forget about you. One thing you should never put in your ad is your own picture. This is because although most people won’t care what you look like, up to 1/3 will not buy your product or service simply because they do not like the way you look. Chapter two goes into much greater detail analyzing the different media forms and how to maximize your advertising budget.

9) Inadequate borrowing practices. It is always much easier to borrow money when you do not need it than when you do. The trick is to find a lending source that is likely to lend to your type of business and then show them why you do not need their money. Much easier said than done. Chapter five lists several steps to help reduce interest costs. In addition we have a database of 2,500 lending sources and students of our course have an opportunity to use this database to identify lenders likely to lend to them.

10) Non-payment of taxes. Failure to pay taxes will result in interest and penalties that would be against usury laws if charged by any other business. In addition the government can seize your assets and throw you in jail. If you do end up in a situation where you do not have enough money to pay all your bills, be sure to pay your tax bill first.

The Tax Shelter

In our workshop we show how a simple example can save a person hundreds of dollars in taxes. Well, actually in the past we have show how a $4,418 tax bill could be turned into a $968 refund. If you would like to see the entire example, please call. The trick is to make sure that every deduction allowed is taken. We are not talking about tax evasion or tax loopholes. Every small business owner must be aware of the tax incentives offered by the government because they know that 86% of new jobs are created by small businesses. The entire chapter six of the Run course is focused on how to save on taxes using the small business.

The Complete Course