MSU Extension Product Center

Hello, my name is Tanya Williams and I am a financial educator here with MSU Federal Credit Union. Welcome to this three part limited series on entrepreneurship. We're going to cover our first topic today which is entrepreneurship phase one, Start up basics. What we're going to be talking about is going to be right here Within our agenda. We're going to be talking about your business plan, financing, book keeping, and business accounts. These are all of the topics we're going to explore through this presentation. Let's first talk about what is the start up? The term start up refers to a company in the first stages of operation. They're founded by one or more entrepreneurs who want to develop a product or service for which they believe there is a demand. Well, congratulations. If you are thinking about a business, welcome to this presentation. You are exactly in the start up phase. And what does this mean right now? You are just thinking about the business and you're getting ready and you're like, I know that I'm great at this, I know that I want to do this. Let's, what does that look like? Right? Or maybe you've already launched your business and maybe you're working out of your, maybe you're working out of a smaller space. Maybe it's just you maybe started with just you and now you're looking to bring in another person. Wherever you are, it doesn't matter you are in the startup phase and that is amazing. Congratulations, we're going to talk about the start up phase. One of the things that's really important about a business is having a business plan. What is a business plan and why is it really a foundation to your business? Well, first, it's the roadmap. Essentially, a business plan is the roadmap for not only you as the owner, but also for any potential lenders who you may reach out to for business products or services. When it comes to loans, a business plan also helps ask difficult questions. Business plans ask difficult questions to help you strategize success and to overcome obstacles, which there will always be some. I think business is much like life. You have your ups and downs, ebbs and flows. It's only reasonable to think that one, you will be successful, but two, you will also face obstacles as well. Then three, face the data. As a fellow entrepreneur, I can tell you that I have pretty great instincts and I usually go with my gut feeling in conjunction with the data I think is also important and that is what the data does. A business plan will require you to look at data that is often ignored in place of instincts and feelings. If you are a person who does have great instincts, it's also going to be helpful to make sure that those instincts might be backed up by the data. Or in fact, maybe the data says something completely different. Maybe you need to listen to that. But ultimately, that's what the data does. It gives you that tangible thing to help you make informed decisions. We talked about a business plan and what the foundation is and why it's important. We're going to talk about what's on a business plan now. If you do not have a business plan, now is the time. Pause this and really remember that it's important that you do this. If you do have a business plan, now might be the time to pause this, get it out, and revisit it, and make sure that it's up to date. I think that these are great things to always keep up to date, that things change. It's good to know and to see where your business is and how it's grown and where it's going. What is a business plan? We have really four categories to a business plan. We have our business description, we have our market analysis, we have our management and operations, and also the financial plan. The business description is pretty basic, Vague, vague, but basic. We talk about our customers. But first, let's make sure that we're covering what is the name of the business? Pretty important, right? Who owns the business? What service or products are you delivering? Who is your customer? What is the location? Maybe you don't actually have a location. Maybe your location is your home. Or maybe your location is a vehicle that drives to different locations in the city. Do you want to list all of those locations? Do you have no idea of where you want to go and you're still trying to figure it out? Even if you're trying to figure it out, it's important to start strategizing about where you want to be. We're going to talk about hours. What are the hours for your business? Are there any special certifications that you need now? Depending on your industry, which we'll talk about in a minute. But let's just say you're part of the food industry, right? Well, if you're part of the food industry and you're working in the state of Michigan and many other states, you're going to need some level of certification from a local health department saying that your space is clean to be serving food. Right. Same thing if you're creating beverages. Probably we want to make sure that if there are any special certifications you're going to need to run a successful legal business, then you want to make sure that those certifications are listed. Then we want to make sure we know what our purpose, mission, vision are. What is the purpose behind your business? Are you a water company that really works with enhanced waters? Are these enhanced waters really meant to aid, you know, one particular group of people? Or is it meant to aid the world? Right? What is the purpose? Why is this business so valuable in the thing that really is going to make a difference? Right? Then we want to talk about our mission. What is the mission for your business if we're looking at that? Enhanced water is our mission. The fact that we want to make water that enhances your athletic ability maybe. Right, is the vision to bring enhanced athletic ability to athletes around the world with our water. Right. Something like that. So we want to make sure that our ultimately our purpose helps you stay focused on your business during difficult times and obstacles. When it gets hard, when it gets mundane, our purpose is what really drives us. It's the why behind our business. And then our, our mission is this overarching, amazing thing. But the vision is this very forward, big picture thinking thing. Those are business descriptions that could change too, as maybe you're working through your business. This is why if you have a business plan, circle back to that. How has your mission been accomplished? How has your mission changed? Maybe through the process of business and learning. You've recognized there's some tweaks that could be done to your mission statement to more reflect the business that you have. Market analysis. This is getting more into that meat and potatoes of our business plan. What is your industry if you're in the beverage industry? Are you part of soda or pop? Are part of tea? Are you part of coffee? Are you alcoholic or non alcoholic beverages? Are you part of water? Thus, our enhanced water. Right. What is the industry in which that you're operating? Again, you're going to have the overarching industry of beverages, but then we have our subcategory, right? Then we have our Swat analysis, which is strength, weaknesses, opportunities, and threats, which can include internal and external business threats. So we want to make sure we're taking stock of what are we great at, where are our weaknesses, what are some opportunities that we have for our business. And then also this circles into our best customer, if we know that we're really working with enhanced water and there's a lot of enhanced waters out there, but our Swat analysis says this is what we're great at. That greatness could ultimately lead you to your ideal customer, right? Or who your best customer is. Maybe it's athletes, maybe you are at athletic events and you're seeing a great customer market. And now you're like, how can I tie this product to that customer, right? These are the things that are going to help drive your business forward. What are the benefits of your product? Do you have a particular sales area that you're working with? Who are your direct competitors in the market? Right, If we're talking about our Hancedon Water again. Well, we know that there's a lot of name brand enhanced waters that you can buy at the local gas station. How are you going to sell? Where are you going to sell? Can you get into a local gas station? Can you get into a local grocery store? Your direct competitors are national brands. Do you have any direct competitors that are local brands? Since we know what those are, what's your competitive advantage? Right? What's the brand image? When we talk about our industry all the way through on down to our brand image, we're not talking about just our logo, We're talking about the overarching. When people think of our brand, this is what they believe, this is what they think, right? All of these things can lead into that brand image. And then we want to talk about our brand description and our sales strategy. When we dive into our market analysis, a lot of these things are like a waterfall effect, right? Or they're building blocks. One thing leads into another that leads into another that can help circle back. It's very important that we really focus on our business description, but really that market analysis is going to be more of the meat and potatoes behind the business plan. And then what's our management and operations? Who's our key personnel? What are the names, qualifiers and duties? Maybe right now it's just you and that's totally okay. But we want to make sure that we're talking about what are the duties that you're doing as you get to that growth phase and you're going to be growing your business. What duties can you delegate to a new employee or to another employee? What duties do you think are going to be most important to keep to you as the owner until you move forward through that growth process again? And then operations and processes, steps, activities in a flow chart. This is important because it is like a, well, it is the business plan. But it's important because one of the best things I've ever heard about business is you should have an operation manual that somebody can open up and run your business if you're gone, right, That you're writing down the steps and activities that you do in order to make your business successful. One of the things that I always circle back to, hopefully that you've heard this is, is the peanut butter and jelly analogy, right? That there is always this question, how do you make a peanut butter and jelly sandwich? And then you get people, they're like, well that's easy, Get some bread, you get some peanut butter and jelly, you smack it together and you have yourself a sandwich. True. But when we really break it down, there are a lot more steps that go into making that peanut butter and jelly sandwich. First, you may need to stand up from wherever you're sitting or lying or laying down. Then you may need to walk into the kitchen or stroll into the kitchen, or however you get there, you may need to get to the kitchen. Then you have to open the cabinet, pull the bread out, open the bread, take the bread out. Take a couple of slices of bread out. Seal up the loaf of bread, put it back in the cabinet. Then you have to churn and move maybe your drawer. Pull out a knife, right? You get the idea. The point is, is that making a peanut butter and jelly sandwich isn't necessarily as easy as pulling out some bread, peanut butter and jelly, putting it together and have an egg sandwich. Instead, you now have all these little tiny steps that lead to creating a peanut butter and jelly sandwich. So that is where your operations and processes are very important. You can simply say, well we pour this into here for our water. Well, that's great. But really, what does that look like? Right? And so these are, this is an important part to your business plan. And then we have our financial plan. What items does it take to run your business? What is the cost of those items? What is the purchase plan for getting to those items? What are your income projections and what are your expense projections? Those are very important things to keep in mind when we're talking about building a business plan. Because ultimately these things speak to lenders. When you get to the phase of financing or growth, growth will cover in our part two ways to finance a business. Many entrepreneurs start with self funding, and that could mean savings accounts, credit cards, equity loans, selling assets or belongings, which we'll talk about these things in conjunction with our financial institutions. But at the end of the day, sometimes our businesses are self funded and then we talk about crowdsourcing. Crowdsourcing can be a great way to start a business. We could utilize online, reputable platforms for crowdsourcing. You might be friend funding. If your friends believe in your business, maybe they're looking to help fund it without actually being an investor, right? Looking for something back in return. Same thing with your family or your coworkers. Maybe you've been delivering the best enhanced water ever to work. And people are like, you know what, this is amazing. You should definitely be selling this on a larger scale. And instead of looking at themselves as an investor, they're looking at the, they're the people who want to say I was there when it started and so they're going to help fund that business for you. Then we have grants. Grants are a great way. This is money that is given to you by another institution of some kind to help fund a business. But it's important to remember that sometimes most of the time grants will want to also see your business plan. They want to make sure that the money they're giving aligns with their own personal mission, vision. It's important that we have that business plan. And when you take the time to do the business plan, it's one less step that you're going to have to do as you're doing the grant, But also it's going to have all the intention and purpose behind it, instead of a rushed business plan just to fill out a grant application. When you're looking at grants, there's private foundations, public foundations, corporations, state governments, and federal governments. One thing to keep in mind is that 63 respondents, 63% of respondents won at least one grant application by only applying one time. On the flip side to that, 99% of respondents won at least one grant when they filled out 21, 30 applications. That's a big range. But ultimately, there's an increase of 36% likelihood that you will receive a grant the more applications that you put in. This is why the business plan is important, is because do you want to have to rewrite that business plan every 21 for 21 applications? No, we want to make sure that it's well established. And then finally we have financial institutions. Financial institutions are a great way to go because they may give you a fixed rate loan that has Termed Options. This is going to tell you exactly what your interest rate is all the time in comparison to credit cards which are variable rate. Then you have termed options. This means you know, when you'll be done paying, whereas credit cards you could be paying for a very long time, especially if you're sticking just to that minimum payment. And then we have fixed payments. Again, if you're utilizing a credit card, then that payment could go up and down. But most likely up. It's never going to be a fixed payment because the rate isn't fixed. Financial institutions are a great option when it comes to funding your start up. So now we're going to talk about bookkeeping basics. As you work to get your business up and running, explore how you might keep accurate and thorough financial records. Because once your business is in operation, it'll be very imperative that all funds are traced back to where they originated or where they went, including funds entering and leaving accounts. This is where proper book keeping or a proper bookkeeper can be helpful for you. If you're not a person who might not be the best organized or might not be the best consistent at record keeping and logging things, then maybe this is a good option for you to have a bookkeeper. And we'll talk about good bookkeeper traits as well. But ultimately, at the end of the day when we're talking about bookkeeping, we want to make sure that we have a list of assets. This is anything that's valued or owned by the company, which can include inventory. We want to make sure that we understand what our liabilities are, refers to obligations and debts owed by your business to lenders or suppliers. The other thing is revenues. This is what is coming into the company and business based upon your sales and then expenses. Expenses are basically related to cash that flows out of the business to pay for services like insurance, utilities, and payroll. And then we have equity. Equity is the remaining value of your interest in the business after all liabilities have been subtracted. This includes any stock and profit. Ultimately, when we're talking about bookkeeping, there are four main categories you want to make sure that you are tracking. That is going to be the date of the transaction, the amount of the transaction, who the payer or payee is, who's paying you or who are you paying? And then the category, was it income or expense? While these four categories seem very simple, it's important to recognize that this is actually really quite important, especially once we get to tax time when we're filing our taxes. And the more consistent and organized you are, the less stress and the less rush you're going to have to do in order to track all of these things When it comes to tax time bookkeepers. Bookkeeping is definitely not an easy job or a job to be taken lightly, and it is also a very involved role for your business. This means that your bookkeeper should definitely be able to be organized, that attention to detail is super important, then also general math skills are very helpful as well. Additional responsibilities outside of record financial transactions include invoicing, billing, tracking the payroll, and setting accounts receivable in bank statements. You might also help with company pay. A bookkeeper might also help a company stay on track and with growth. And that could look like budget planning. That could also look like participating in book keeping. Related to payroll and income and employment and small business tax deductions. Now, a bookkeeper might not necessarily be able to do your taxes for you, but they can definitely help you in the process of getting ready for tax time. It might seem like it's a lot of responsibilities of an accountant and sometimes the roles can be combined depending on the certifications and the experience of your accountant. But remember, accountants and bookkeepers are two different types of businesses careers, but they can also be combined as well. So that's something to just keep in mind and research if need be, but ultimately It's important that you are managing your books and to start in. A lot of businesses start out using spreadsheets, which is totally okay. And eventually they might graduate to a software applications to help them manager grow their business. The benefits of software is that the software can actually link to your bank account and can sync with your bank account to help make sure that we're tracking everything and keeping all the things together. Which is why we want to talk to you about the benefits of a business account. Having a business account will help you prepare for pay. Paying so many words will help you prepare for paying your business taxes and just getting your taxes done in general. The important part, like we said in the last slide, is that a lot of business softwares link directly to that bank account, which can help create and make the tax process more organized, right? I'm sure that my tax preparer might not necessarily appreciate the program that I use, but she does because it does organize things a little bit more differently than I think she's used to. But ultimately it's all there because I have a software program that is linked to my account and that's having a business account is super important. It keeps the bookkeeping easy for you. It also helps to protect your personal assets, which is very important. Separating personal and business expenses protects you from business debt liability. If your business is established as a corporation or an LLC or limited liability company, you're likely to be protected from creditors coming after your personal assets should you become unable to pay your debt. However, if you are mixing your personal and business transactions, it becomes a lot harder to determine what assets are owned and owed by you versus the business. In this instance, you might not be able to protect your personal assets when you've been mixing everything together between business and personal. It's really important to have a business account that allows you to protect those personal assets too. Also, a personal business account helps to legitimize your business tax deductions. In order to count business expenses as tax deductible, your organization must be able to account for each transaction. Keeping accounts separate and good bookkeeping is really one of the only ways to do this. And these practices will also allow the IRS to easily determine if transactions are allowable or your business is a legitimate business. I think it's important to remember that when you establish a business as a corporation or an LLC, that establishment gives you an EIN, which is a federal number to indicate your business. That number allows you to open up a business account which legitimizes those business expenses because it's coming through a business account that has to have an established employer number. So just keep that in mind as well. We'll talk more about the EIN and business credit in conjunction in phase two of our three part series. The other thing we're going to talk about though here about the business accounts is how it assists lenders. It can help you obtain business credit because you're keeping that personal account personal, and that business account as a business account, it shows that you're having income coming into the business. It shows that you are making transactions and purchases as you are supposed to. But also you're developing that relationship with that financial institution because they're seeing you utilize your business account in an appropriate way that can help assist them in showing that you are making money as you're going through the business process. When you are going through the loan process, if you are making sure that you are keeping your account positive, it's not falling into the negative you're not getting with a business account. This is establishing that relationship and that trust with any lenders. Just as another part of bookkeeping, it does provide account statements. Again, it's just another way to support it's just another way to support your business at tax time where you have all of these records. Should you ever need them, you can print them off, you can download them as a PDF and send them off to wherever they have to go. But ultimately, those account statements, it provides you with more information and more legitimacy of your business with that business account. Then ultimately, your business account builds confidence. It creates confidence if you are paying for expenses using your personal funds. It might actually seem to vendors, to your employees, or even to clients that you don't believe in Your business will endure and that's going to be hard for people to want to shop with you or support that business. But making transactions with a business, check a business, debit card or credit card, sends the message that your business is legitimate, that your business is professional, and that your business is organized. And then this can in turn inspire trust from your employees. Inspire trust from your clients, and inspire trust from vendors while improving your image of your business. Within your community are a vast majority of benefits to having a business account. One of the things I want to make sure that I cover with you today is the resource that we have here for you. At MSU, we do have our business solutions department and they're able to help with opening business accounts, reviewing business accounts. They are able to help with business loans and business services such as merchant processing, deposit, payroll solutions, and fraud protection. Another thing that's also really cool too is that our members get a Turbotax discount when it comes to tax time. As just a great appreciation here from MSUFU. Lastly, we have a few other additional resources. We have our Wallet Watch podcast, which you can catch any time and we have a lot of episodes there for you to listen to. We're already planning to record our next season. We do have our Financial Education Seminar series, which is an adult education series that you can catch online. You can register to attend live or you can catch the replay on our Youtube channel. We also have our Financial 4.0 website and this website is geared and app as well. This is geared towards our college age, youth and adults. A lot of really great things they can do. There are calculators there for them to be able to calculate debt payments to car payments. There are blog posts there for them to read to get caught up on some of the latest information. There's also quizzes there to see how financially fit or ready or all the financial information that they may or may not know which can help guide them to where they should be looking for our blog and things of that nature. And then they also have the ability to ask a financial educator through there. Then lastly, we have our desk drawer fund. Our desk drawer fund has five pillars that it focuses on. It's going to be art and culture, stable housing, empowering the youth, financial education, and fostering entrepreneurialism. If you choose to donate to the Deter fund, all donations are tax deductible. And those are some additional resources here for you from MSU FU. I want to thank you again for allowing me to share this information with you. My name is Tanya Williams. I am a financial educator here at MSU Federal Credit Union, and thank you so much.