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Frequently
Asked Questions
FAQ 1 Getting Started, Licenses and Permits
How do I get started, what initial contacts do I need to make,
who should I get to advise me and what preliminary steps do
I need to take financially, legally and governmentally including permits, licenses and tax forms in order to start a business?
FAQ 2 Grants, Loans and the SBA
How do I get money to start my business such as grants, bank loans, and money from SBA programs;
what information do I have to provide, how much interest will I have to pay and how much personal
capital injection and collateral will be required?
FAQ 3 Business Planning
Do I really need a business plan and, if so, how is it constructed and how do I generate
the information such as revenue, cost and cash flow projections?
FAQ 4 Business Structures
How do I determine the best legal structure for my business entity, what are the pro’s
and con’s, tax liability implications, costs both short and long term and how is it accomplished?
FAQ 5 Marketing
How do I market the products/services of my business?
FAQ 6 Advertising
How do I use advertising to attract quality customers at the least cost?
FAQ 7 Marketing on the Internet
Would my business profit from having a presence on the World Wide Web;
if so, how can it be done most effectively
from a functional as well as a cost standpoint?
FAQ 8 Insurance
Will I need insurance for my business; if so, what kind, where do I
get it and how much should it cost?
FAQ 9 Budgeting
What do I do about establishing a budget, recording sales, costs and other financial aspects of my business
including tax preparation and cash flow and operating statements?
FAQ 10 Buying a Business
If I want to buy an existing business, how do I determine its value and
what other factors should I consider in my decision making?
FAQ 11 About SCORE
What is SCORE, what do you do, what is your policy on confidentiality
and how much do your services cost?
FAQ 1 - How do I get started, what initial contacts do I need to make, who should I get
to advise me and what preliminary steps do I need to take financially, legally and
governmentally including permits, licenses and tax forms in order to start a business?
As with any successful undertaking, the best way to get started in business is to identify
all of the actions that must be performed and prepare a task list with target dates for
accomplishing the tasks. We cannot identify all of the tasks here because each case varies
but some of the activities common to all business startups are:
- Determine if business ownership is for you. While self-employment has a number of benefits
including the potential for greater income, greater independence and more satisfying work, it
has its drawbacks such as, risk of failure—70% of all new businesses fail within a five year
period, long hours, 60-70 hours per week is not uncommon and high pressure. You will need to
have self-confidence and the ability to direct others as well as derive enjoyment from taking
on new problems and identifying solutions and making decisions and sticking with them. These
qualties along with emotional stability and good health are requisites for business owners.
- Assess your skills. A prospective business owner should have skills in as many of these
areas as possible, depending on the nature of the business: management, sales, marketing, retailing,
public relations, advertising, accounting/finance. Although these skills can be hired, the more you
know, the greater the likelihood of success. At least obtain a knowledge of accounting. If you can’t
read your financial reports, you can’t tell whether your business is succeeding or failing.
- If you don’t already have experience in the business you are considering, develop a plan to get it!
Work in a similar business for three to six months full or part time. Short of this, get a mentor who is
experienced in your specific type of business or contract the former owner for six months or so.
- Evaluate whether you want to start a business from scratch or buy an existing business. Advantages
for “from scratch” include: you don’t have to buy any “goodwill” or “blue-sky” from previous owner and you
can select location, etc. The main disadvantages are that previously owned businesses have a higher success
rate and it takes time to build sales and profits with “from scratch” businesses.
- Identify your advisors. You will need an attorney, accountant, insurance agent, a business counselor,
such as a SCORE counselor, a mentor or SCORE counselor and a banker (if bank funds will be required).
The attorney should prepare or review all legal documents such as purchase or sales agreements, articles
of incorporation or LLC articles, partnership agreements, leases, etc. The accountant will audit any
purchase records, help establish purchase price if any and audit the books of the on-going company and
prepare or audit the tax forms before submission. Insurance is a complicated field and businesses may
need many types of insurance such as: worker’s compensation, general liability, fire and theft and automobile
or some specialized form depending on the business. SCORE counselors have a vast array of resources to bring
to bear on most any aspect of business—see the FAQ “About SCORE”. As soon as you know the funds you will
need to borrow, the collateral you can apply to securing the loan and the amount of “down payment”(20-25% at least)
you should select and contact your banker to determine the feasibility of the loan before you even apply.
- Set up a separate bank account for your business before you spend the first dime on it. You must
capture all of the revenues and expenditures related to the business and it is much easier to do if it all
runs through a dedicated bank account. Even if you have to write a check out of your personal account to
fund expenditures out of the business account, do it. Do not comingle business and personal funds.
- Begin the preparation of a business plan. It will provide a detailed roadmap for the operation of
the business but, perhaps more importantly, determine the viability (Is it profitable?) of the business
before you get into it. See FAQ “Business Plan”.
- Determine the licenses, registrations, and other governmental requirements to start a business.
The Secretary of State’s Office includes an “Office of the Ombudsman” who is responsible for communicating
about licenses and permits. That Office can be reached at www.in.gov/business.htm.
Another tool for determining the license requirements is at a site, www.businesslicenses.com.
When this site comes up on your screen, go to the bottom of the screen and select, “Browse Business Licenses” (in small print), then
select the state, e.g., Indiana, then the county, e.g., Vanderburgh and then the city, e.g., Evansville.
This will produce a list of license requirements for different types of businesses sorted by federal, state,
county and local. This is a commercial site and going beyond this point can cost money and you still may want
to use it to secure your licenses but, just be careful.
Locally, the requirements for licenses and permits varies by jurisdiction. In Evansville, for example, there
is no general business license requirement but businesses must register with the County
Recorder even if the business is headquartered outside of Evansville but does business in Evansville so a landscape maintenance
business operated out of Newburgh must still register with the Vanderburgh County Recorder. Each locality
has its own contacts but, initial contacts can be made with the city or county clerk’s offices. They will
direct you from there. Some of the phone numbers for these offices are:
- Select the location of your new business and a name. In order to avoid copyright or trademark infringement,
Google, “trade name search free” or “trade name search Indiana”.
- Select a business structure, sole proprietorship, partnership, corporation (c or s) or LLC.
Refer to the FAQ “Business Structure” for more on this important step.
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Boonville Zoning Administrator
Chandler
Evansville—Vanderburgh County Recorder
Mt. Vernon Clerk/Treasurer
Newburgh Clerk/Treasurer
Posey County Clerk
Vanderburgh County Recorder
Warrick County Recorder
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812-897-1230
812-853-5303
812-435-5215
812-838-3317
812-853-7111
812-838-1306
812-435-5215
812-897-6165
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The business reference section of your library is a good source of information on starting a business.
In particular the Evansville Vanderburgh Public Library has a rich selection of business references in
their “Business Central” collection. You may browse this selection on your computer at www.levpl.org
Here are other web sites with valuable startup information:
www.score.org(Rich in content with links to other sites)
www.sba.gov The Small Business Administration site- about loans and guarantees)
www.bplans.com (Sample business plans)
www.lsba.gov/sbdc (Small Business Development Center site)
www.sba.gov/index.html(Business Information Centers site)
www.business.gov (Link to all Fed. Info. Svcs. for business)
www.onlinewbc.lgov> (The Online Women’s Business Center)
www.payroll-taxes.com (Answers to payroll tax questions)
www.smalltownmarketing.com (Marketing help)
www.franchiseopportunities.com (Franchises)
www.melissadata.com (Demographics, tax stats)
www.smallbizu.org (Free courses in major business subjects)
www.about.com (A vast array of business and other information)
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FAQ 2 - How do I get money to start my business such as grants, bank loans, and
money from SBA programs; what information do I have to provide, how much
interest will I have to pay and how much personal capital injection and
collateral will be required?
Contrary to ubiquitous advertising claims, government grants to start up conventional businesses are,
essentially, non-existent. The U.S. Small Business Administration (SBA) puts it this way:
“At this time, Congress has not set aside any monies for grants to start and/or expand a small business.
The U.S. Government does have grants that meet other purposes not related to business needs. The following
website contains some of those resources:
www.sba.gov/financing/basics/grants and
www.evpl.org/research/databases/.
Also try www.allbusiness.com,
query “business loans and grants”. Also try www.grants.gov.
There are a number of ways to finance a business which fall into three broad categories, equity financing, debt
financing and personal financing.
Equity financing involves pledging title to a part of your business in exchange for cash. The most straightforward
form of equity financing is the sale of stock by a corporation. Stockholders hold a share of the issuing company
proportionate to the number of shares they buy of the total amount of company issued stock.
Another form of equity financing is venture capital. Businesses or individuals make funds available to finance
companies in exchange for a percentage of the business. Usually, these transactions are in the millions of dollars,
not a typical small business transaction, and involve exit strategies that ultimately take the company public (IPO’s).
Google, “Venture Capital Firms”.
So-called “Angels” are another potential source of equity financing; Google, “investment angels”.
Again, these are usually high dollar transactions.
Perhaps the most utilized method of equity funding is forming a partnership with others who have funds to invest and
similar interests in operating a business.
Debt financing for most people is borrowing from their bank or other financial institution such as, Credit Unions,
American General Financial Services or Heller Financial (now GE Capital). Obtaining a bank loan for a start up
business requires stellar credit ratings, a business plan, preferably with a provable cash flow, (See Business Plan FAQ)
and a minimum of 25%-30% capital injection on the part of the borrower. Interest rates currently vary from 7%-8%.
Working capital loans for an on-going business may not require a business plan but will require strong financial statements.
Interest on these loans is prime plus 1%-3% or, currently, 5%-7%. In order to apply for a loan, call your bank(s) of choice
and ask for the commercial loan officer, make an appointment and prepare to pitch your business plan or working capital
requirement story. All financial institution loans require collateral for more than the value of the loan and a personal
guarantee from the borrower even if the business is a corporation or an LLC.
Contrary to popular opinion, The SBA does not make loans; they guarantee a portion of a loan that a lending institution
makes to a borrower. One must be turned down for a regular bank loan before applying (through the bank) for an SBA guaranteed loan.
The SBA may guarantee 50%-90% of the loan but the bank must be willing to assume the risk for the balance. You may have to
apply to more than one bank before you are successful. The SBA does have a “Community Express Loan Program” working with
either of two banks in California and Florida for maximum loans of $50,000 at rates of prime plus 4 1/2% to 4 3/4% or,
currently 8%-8 1/2%. A Business Plan is required and must be vetted by one of our specially trained SCORE counselors.
Similar to the SBA, the Indiana Economic Development Corporation may guarantee loans for High Tech/Fast Track companies that
need high dollar amounts ($1,000,000 or more), www.in.gov.iedc.
No matter the source of your desired funds, you will need to know the precise amount of money you need, be able to
convincingly portray that it is the right amount, what it will be used for and how and when it will repaid.
The best way to finance a business is to use your own money. Money you have saved for the purpose of starting a business
or saved money you subsequently decide to use for that purpose. That being said, there are few people who save to start a
business so, other means of personal financing come into play:
- Home equity loans (puts your home at risk).
- Credit cards (a very expensive way to finance your business).
- Life insurance loans (if you’ve paid in enough for it to have value).
- Liens against your car, boat, motorcycle, tools, etc. or other collateral.
- Gifts or loans from family and friends (if you fail, Thanksgiving dinners can be awkward).
- Seller financing, if you are buying a business.
You are cautioned to use these methods of obtaining cash judiciously.
Your SCORE counselor has publications and other resources available to discuss help in getting a loan.
Web sites, www.SCORE.org and www.sba.gov/financialassistance/
are very informative as well.
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FAQ 3 - Do I really need a business plan and, if so, how is it constructed and how do I generate the information such as revenue,
cost and cash flow projections?
Yes.
Your business plan will provide:
- A prototype of your business, facilitating your evaluation of whether or not you should launch the proposed business before you put
money into it. For existing businesses it helps evaluate whether you should continue or implement an exit strategy.
- A guide for the operation of the business. The strategies generated during the development of the plan provide direction and
confidence in the operation of the business according to the plan.
- Through the process of creating the plan, the ability to be able to take an objective, critical and unemotional look at the business and,
essentially, take ownership of not only the business but the plan for its operation.
- A strong, confidence building platform for communicating your ideas to others and that provides the basis for financing proposals.
Information abounds about what a business plan is and how it should be constructed in both electronic and hard copy media.
Many of the web sites noted in the “Getting Started” FAQ, especially, www.score.org, www.sba.gov
and www.about.com are helpful or one can enter,
“Small Business Planning” into Google or another search engine. Your SCORE Counselor can provide a booklet, “Business Basics” which prescribes a
better than average approach to business planning. Here is an outline for your plan:
- Cover Sheet (Business address, names, addresses & telephones of owners).
- Statement of Purpose (If for a financing proposal).
- Table of Contents
- Executive Summary (Do this after the plan. It may be all some loan officers read).
- Business Description (What your business is about).
- Marketing Plan (How you plan to take your products/services to market).
- Operational Plan (Production, location, legal environment, policies & procedures)
- Financial Plan (Projections of P&L, Balance Sheets and Cash Flow)
- Exit Strategy (The best solution for getting out of the business if necessary).
- Supporting Documents (Personal resumes, personal financial statements, letters of reference,
letters of intent, copies of leases, contracts, brochures and the list of assumptions supporting your financial projections).
In order to simplify the gathering and preparation of all of this information, break it into pieces and start with a small piece,
say the “Business Description”, complete it and go to the next piece. The task will be less overwhelming if approached in this manner.
While you can hire someone to do a business plan, you should really do it yourself. It is important that the plan be your plan for your business.
It is helpful to be able to use a computer for preparing your business plan mainly because making changes is so easy. The computer and
appropriate software make it much easier to do “what if” scenarios with the data and be able to present “worst case”, “most likely”
and “best case” data for the financial plan. Although there are software packages for preparing business plans, they are far from necessary
and, arguably, it is better to simply use a word processor like “Word” or “Word Perfect” and a spread sheet package like, “Excel”.
At www.score.org there are excellent word processing and spreadsheet templates for plan preparation. At the site, query, “Business Tools”
and click on “templates” under “Template Gallery”. Help with computer tools may be available from your SCORE Counselor.
Perhaps the most challenging part of putting together a business plan is generating the financial projections.
As you prepare to meet this challenge, keep in mind that no one knows more about your business than you do. You are the expert!
Revenues are the key to your financial plan. Start with a list of all the goods and services you are going to
provide and estimate how many units (hours, if services) you are going to sell in the first month, then the second,
third, etc. and on into the next two to three years. You may be adding goods or services along the way and your sales may be
impacted by seasonal influences. Further, your sales may benefit from the impact of your marketing plan. Factor all of these in to your numbers.
Don’t forget price changes and inflation and potential supply interruptions.
To help you get a handle on all of this, seek out information from similar businesses in non-competing areas. Owners are happy to
talk about their businesses as long as it doesn’t pose a threat. Trade associations amass huge databases of statistics about their
member businesses. Find out who they are and what’s available. Use the library or the Web to find the trade associations. To find
out about your customers’ sex, age and income levels along with many other useful pieces of information, use the state’s census data.
Go to www.stats.indiana.edu. You can determine if your market is growing, shrinking or staying the
same based on the census demographics.
Once you have generated the revenue numbers go to cost of sales then each expense item and think through each just as you did with the revenue numbers.
After you have completed the profit and loss statement. go to the balance sheet and cash flow statements and conduct the same thorough examination of the
factors affecting each element. Are you going to buy a car, truck, equipment, inventory, etc. What is your credit sales policy going to be (effects your
balance sheet and cash flow). See the “Budgeting” FAQ for information on cash flow.
As part of your plan, filed in the appendix, you should prepare a “list of assumptions”. These are the conditions you based your estimates upon.
They are important for two reasons: (1) in six months you won’t remember why you said sales were going to be “x” amount in September of 2011 and (2)
they will support your numbers if challenged by a financial institution in the loan process.
In order to validate your estimates of revenues, you may want to compare your results with peer businesses. This can be accomplished by using
the RMA Annual Statement Studies found in the business reference section of the Evansville Vanderburgh Public Library. These are a compilation of
financial data gathered from banks about every type of business and the data are sorted by business size within type. Library staff will help with your search.
Remember…….A goal……..without a plan is…….just a wish!
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FAQ 4- How do I determine the best legal structure for my business entity, what are the pro’s and con’s, tax liability implications,
costs both short and long term and how is it accomplished?
Selecting a business structure is one of the most important decisions business owners make. It affects safety of personal assets, taxation
and smooth continuation of the business upon ownership change.
Many businesses start out as sole proprietorships or partnerships. Both of these structures provide management flexibility. The primary risk
to sole proprietors or partners, however, is personal liability for company debts and judgments. To avoid these risks, businesses may opt to
incorporate or form a limited liability company (LLC) to protect their families and financial interests. Here are the five most critical items
to consider when selecting or re-selecting your business structure.
- Protection of personal assets-Sole proprietors and partners have unlimited personal liability for business debt or law suits against
their company. Creditors can attach homes, cars, savings or other personal assets. Incorporating or forming an LLC separates personal
identity from business identity. Corporation shareholders or LLC members have only the money they put into the company to lose.
- Pass-Through Taxation-For sole proprietors and partners, company profits/losses pass directly through to their personal tax returns.
For corporations, profits are taxed, then the profits that are distributed to shareholders as dividends are taxed again on the personal
level. This "double taxation" can be avoided while still enjoying the benefits of personal asset protection by forming an LLC or by electing
an S Corporation. S Corporations and LLC's are taxed just like partnerships.
- Tax Deductible Employee Benefits-Incorporating or forming an LLC usually provides tax-deductible benefits for you and your employees, an
advantage that sole proprietors and partners do not enjoy. Even if you are the only shareholder or employee of your business, benefits such as
health insurance, life insurance, travel and entertainment expenses may now be deductible. Best of all, corporations and LLC's usually provide an
increased tax shelter for qualified pensions or retirement plans (e.g. 401Ks).
- Uninterrupted business-Sole proprietorships and partnerships may automatically end or become legally entangled when one owner dies or retires.
Corporations and LLCs are enduring legal business structures. They may continue regardless of individual officers, managers or shareholders.
Corporation ownership may be transferred, without substantially disrupting operations, through sale of stock.
- Access to Capital-Sole proprietorships and partnerships may find investors hard to attract because of personal liability. Investors are more
likely to purchase shares in a corporation where there is a separation between personal and business assets.
Both S Corporations and LLC's allow owners to avoid "double taxation" and to pay income taxes on a flow-through basis like sole proprietors and
partners. However, LLC's are quickly becoming a preferred entity among small business. Here are some key examples of the benefits of an LLC verses an S Corporation:
- An LLC is simpler and faster to form. It may be formed in one step, while an S Corporation election can only be made after a General Corporation is formed first.
- An LLC is not required to hold annual meetings or to keep formal minutes, while an S Corporation is required to do so.
- LLC members can split profits/losses in any way they choose. In an S corporation, shareholders must receive dividends according to the number of shares that they
own, regardless of the amount of effort put into the business.
- An LLC can be owned by any combination of individuals or business entities. Only United States citizens and resident aliens may own an S Corporation. Other
entities generally may not own an S Corporation.
While many business owners are enjoying the simplicity and flexibility of the LLC, it may not be the best choice in every case:
- Enticing or compensating employees with stock options or stock bonuses requires forming a corporation since LLC's do not issue stock.
- S Corporation shareholders pay Medicare and Social Security tax only on money received as wages or salary, but not on profits received as
dividends or that stay within the company. Under certain conditions, LLC members may need to pay Social Security and Medicare taxes on the entire
amount of LLC profits. In particular, LLC's that provide professional services such as health, law or engineering should consult a tax advisor on this issue.
While it is possible to go on-line with the Indiana Secretary of State’s office, fill out a form and become incorporated and you can subsequently contact the IRS and
elect to be an S Corporation, it is usually desirable to work with an attorney to either incorporate or setup and LLC.
The initial costs of incorporation are less than that of an LLC but, over time, the lower costs of quarterly and annual reporting, required for a corporation,
will offset the additional up-front costs of the LLC. You should expect to pay a lawyer between $250 and $1000 for a simple incorporation or LLC setup.
Alternatively, you may want to engage the services of a business which specializes in helping others incorporate or form an LLC such as, The Company Corporation,
www.incorporate.com, a resource partner with SCORE.
If you are starting a very small business and are strapped for cash, you may want to stick with a sole proprietorship as long as you have liability and worker’s compensation insurance.
Sources for this information include Brett Davis and Karen J. Lange both of The Company Corporation in separate writings, “The Importance of Business Structure”
and “Choosing Between an S Corporation and a Limited Liability Company”. Additional information is available from your SCORE Counselor and www.SCORE.org,
search “business structure” or at www.incorporate.com .
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FAQ 5 - How do I market the products/services of my business?
Marketing is everything you do in your business to attract and retain customers. It can be as simple as keeping your
premises clean and neat to establishing fair and easy to understand return policies to quality control to customer service training for
yourself and your staff and on to advertising and sales promotion. A marketing plan is needed to guide you through the elements of marketing
your products/services and your company. Research is the key to completing the following six steps necessary to prepare your plan.
Step one: The Five Components of Market Research
- Service/Product-Why would someone use/buy this?
- Company- Sales figures, sales persons’ reports, warranty cards, etc.
- Customer- Customer profiles. Potential customers/prospects.
- Competition-Who are they? What is their market share?
- Marketplace-Seasonality. Economic trends. Environmental issues.
Step Two: Establish Your Objectives
- Marketing goals for next five years-Dollar sales, unit sales, profits.
- Marketing problems-Rank in order of urgency.
- Opportunities/obstacles during next five years-Prioritize.
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- Competition-What will they do in next five years?
Step Three: Determining Your Market Mix-Be sure to encompass the Five P’s of Marketing in your evaluations:
- Product/Service-Desirability of your work or product.
- Price-Attractiveness of fees or product price.
- Place-Convenience and appearance of your business.
- Promotion-Ad campaigns, word of mouth, internet.
- Positioning-How you set your business apart from others.
Your SCORE Counselor can provide information to help you do a marketing audit.
Step Four: Strategy and Execution
- Constrained by the realities of cash flow and budget considerations.
- Complete your cash flow projections to determine spending limits for advertising.
- Prepare a task list and schedule.
- Don’t be overwhelmed by choices.
- Your SCORE Counselor has, “100 Marketing Ideas to use Today”.
- Track results to see that you are spending marketing dollars wisely.
Step Five: Prepare Your Written Marketing Plan
- A compilation of all the previous steps.
- Plan will provide you and your employees a schedule to work from, criteria by which to measure success of strategies
and a foundation for revising you strategies.
Step Six: Track Your Results
- Evaluation provides the basis for your next set of objectives.
- Provides the basis for future research and makes it easier.
As you develop your marketing plan, spend a disproportionate amount of time determining how your business is going to be
different and better than your competition. The more you can differentiate your business, the more likely you are to succeed.
Your SCORE Counselor can provide a booklet called, “Business Basics” which further details the preparation of the marketing plan.
While the marketing plan is very important, you will need to address other aspects of marketing early on in the life cycle of your business.
In a small business, everybody is a salesperson and a customer service representative so everyone needs to be trained. They need to
know the product or service inside and out and they need to know how to service customers. This is true even if the only person in the
organization is the owner. Local schools conduct classes at reasonable cost and at convenient times. Online training is available
at www.smallbizu.com and information is abundant on the internet especially at
www.score.org, www.sba.gov, and www.about.com.
Good marketing begins with the policies the business establishes:
- What level of quality can a customer expect from your business. Make sure everyone in the business knows what your
quality expectations are and sign on to deliver that measure.
- Your product return policy needs to be fair and easily understood by customers and employees and the owner should
always be the final arbiter in customer disputes.
- Promised delivery of products as well as start and completion of services must be strictly observed.
Remember, promise what you can do and do what you promise without fail.
- Settle customer disputes fairly and with a smile. It is self defeating to win an argument with a customer.
You will lose in the end because there won’t be a repeat opportunity.
- If you are scheduled to be open for business at 8:00 a.m., make sure someone is there ready to conduct business
at 8:00 a.m. Customers do not like to wait either for your business to open or for someone to finish opening up.
- An expectation on the part of the owner is required for phone etiquette. When are employees expected to return phone
messages (hourly, at the end of the day, at the completion of a job and before the next one)? Customers will not wait very
long for a return phone call before calling another supplier and if you already have the job or have sold the product, they
won’t buy again if they get poor post-delivery service.
- How do you expect employees to greet your customers both in person and on the phone? A gruff or rushed demeanor
is a put off for many even if backed by otherwise good skills.
Look at every aspect of your business from the customer’s point of view and put policies, procedures and training in
effect to make sure your business is the place customers want to come to now and in the future.
The price of your product or service is really determined by your competition. Find out what your competitor’s
are selling their like products/services for and you have a starting point for your pricing. The next thing to do is look at
your costs very carefully to see if you can actually sell at that price and still make enough money. If you’re in the ball park,
compare the products or services to determine if they are actually the same in every respect. If you plan on offering something
in addition or something better, then you might expect to price your product higher, if customers actually want the enhanced
product or service. Or, perhaps you need to modify your offering to meet the competitor’s level. At the end of each
evaluation of pricing strategy, be sure to double check that you make enough money at that price. If you are in a retail
business and prices are based on a markup, be sure the markup provides sufficient margin to cover costs and expected profit.
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FAQ 6 - How do I use advertising to attract quality customers at the least cost?
Advertising is one of the key elements of your Marketing Plan. The strategies you develop here will strongly influence the success
of your business. It is easy to overspend on advertising so develop your strategies carefully and stay within your budget. Do not
fall prey to the “specials” that businesses in the advertising trade may offer. Stay with your plan and your budget.
There are some rules of thumb to observe about advertising:
- Repeat your message at least three times to be most effective.
- Your ad budget should be 1%-3 ½ % of revenue—consider doubling it in the first year.
- Spend 60% of budget evenly during the year; 40% during the busy season.
- Try to use two media types for your advertising, e.g., 60% TV/radio; 40% mail.
- The message must maturely inform the target audience and be persuasive; not cutesy.
Advertising methods and related costs are discussed in the following paragraphs.
Word of Mouth-The best kind of advertising so make sure everyone you know is aware of your business. Hand out business cards prolifically.
Place business cards, flyers and brochures in other local businesses. Many stores, including chains, will permit posting or will take your
card for referencing. Deliver flyers to nearby homes and businesses. File news releases with local media.
Yellow Pages-Do list your business in the yellow pages. If you have a land line phone, you get the name of your business and the number
listed for free. If you have a cell phone, you can buy a listing for about $25/mo. A one inch ad, including five or six lines of text
including your phone, fax, e-mail or web address costs about $40/mo. The number to call in the Evansville area is 1-800-382-1777.
A local newspaper is typically read by 75% of its total market; men and women almost equally. 71% of people 18-34 read it and 84% of
people over 55 read it. 84% of people with incomes of $55K+ and 80% of homeowners read it while only 65% of renters do. Be sure you
know the demographics of the customers you are trying to reach. The cost of a business card size ad is about $250 one time, a ¼ page
ad about $1,325 one time. Discounts for repeat ads are substantial e.g., the same ¼ page run 13 consecutive weeks costs about $865 each time.
Newspapers also print and deliver coupon booklets. A typical coupon booklet might be
7 ½”X4 ½ “ and costs about $800 for one time and about $725/ea. for three times; a half coupon
(3 ¾”X4 ½”) is $450 one time and $425/ea. for three times. The big advantage of coupon advertising is that it is easy to measure the
response by the number of coupons that are returned.
Locally published magazines, e.g., Evansville Business Journal and Evansville Living Magazine, typically have a relatively low
readership but, their readers may fit your demographic needs. The readership’s household income approaches $100,000, 25%-60% of
which are business owners, managers or directors. Ad rates range from $160 to $680 for a 1/3 page color ad depending on the
magazine; a business card size ad is about $175. There are discounts for multiple insertions. Contact the Evansville Courier Press,
812-464-7472, www.courierpress.com or Tucker Publishing, 812-426-2115,
www.evansvilleliving.com.
Radio stations target a specific set of listeners so, picking a station with listeners in your demographic set is critical. Before
picking a station to do your advertising, clearly identify who you are trying to reach and shop the stations for penetration of that market.
A station might have 20,000 listeners, 89% of which own their own homes, 21% of which are managers or business owners, 15% are professionals
and 58% have incomes of over $50K and 79% are male. A 30 second ad for this news talk show station might be $12-$20 for the 6 a.m.-9a.m.
time slot Monday through Friday, $3 on Saturday and $10 on Sunday. A 2p.m.-5 p.m. slot might be $15-$19, $7-$10 and $7-10, respectively.
The price depends on the ratings and the time slot.
Cable TV advertising is affordable and can be effective. A cable TV provider such as Insight Media might charge from $2 to $9 for each
30 second spot commercial, depending on the time slot for the commercial, for coverage of Metropolitan Evansville plus Newburgh (73,000 homes).
That would be for 20 channels including AMC, Big 10, Cartoon, E, Hallmark, MTV, SciFi, SOAP, etc. This is the lowest of the four tiers of
pricing. The highest ranges from $6 to $97 depending on the time slot and includes ESPN, ESPN HD, Lifetime, TBS, TNT, etc. for the same 73,000
subscribers (viewers could be more). Production of first 30 second standard commercial is free. Demographics are available on each time slot.
Contact the cable TV supplier for the area you are trying to reach for more information.
As an example of TV station pricing for commercials, a representative station charges $25 for a 30 second ad in the 6 a.m.-8 a.m. time slot,
$90 for the 5 p.m.-5:30 p.m. “Judge Judy” slot, $125 for the 6 p.m.-6:30 p.m. News, $800 for the 7 p.m.-8 p.m. “House” slot and $750 for the
Sunday 1 p.m.-5 p.m. “NASCAR” slot. Fifteen second commercials are available and cost 60% of a 30 second ad. Production cost of the first commercial
is free. Their market is 32 counties covering a population of 535,000 people compared to the 73,000 Cable TV subscribers.
Media advertising (newspaper, magazines, TV and radio) may best be purchased through an advertising agency because they buy space or time in
volume and can pass along the savings. Many are listed in the yellow pages. Much of the information provided here was provided by Media Mix
Communications, Inc., 812-473-0600, www.mediamix1.com.
Here are two examples of Direct Mail advertising that have proven to be effective. The first is an advertising “wrap” that is known in this
area as the “Red Plum Wrap”. It is a four page piece with ads on all four pages and it holds all of the other advertising pieces in a “package”.
The Postal Service delivers it weekly to 127,000 households in the Evansville area. It is claimed that 72% of the households look at this mailing
and that 39% make a purchase from it. A four color ad on the “wrap” costs between $1,726 and $2,921 including layout, printing and mailing costs.
A four color 8 ½ X 11 insert ranges from $1,107 to $1,282 complete. These can be targeted to specific zip codes and include a minimum of 20,000 homes.
To learn more, contact Valassis/ADVO, 812-471-9011, www.valassis.com.
Data Mail, Inc. uses the postal service for specifically targeted direct mail using census data and zip code data. Mail pieces can be post card,
four page flyer or envelope inserted. As an example, a customer wanted to send a direct mail piece to sales people who operate out of their homes
so Data Mail produced a four color, 5 ½ X 8 ½ post card mailing to 742 people within a 100 mile radius of Evansville for $747 complete.
If desired, Data Mail will use a mailing list provided by the customer and they will also produce mailing lists only. In one instance of a very
targeted search, Data Mail supplied a list of 1675 companies which met the criteria along with the name of the chief decision maker at a cost of $400.
For more information, contact Data Mail, Inc., 812-484-9227, www.datamailinc.com.
Billboards can be effective especially when used in conjunction with radio advertising because the 71% of people who listen to their car radios
pay greater attention to billboards as well. A 10’ X23’ billboard poster rotated monthly between 12 different billboards throughout the city, costs
about $600 per month using the same ad and about $650 per month using a different ad on each of twelve billboards. The price includes production
and printing costs. Contact Lamar, 812-477-9203, www.lamar.com, for more information.
Mall Advertising is available at the Eastland Mall. Representative options and prices follow:
- Sky banners-5’ X 9’, $750/mo. + $280 printing charge
-8’ X 14’ $1,500/mo. +$700 Printing charge
- Table Tents-$500/mo. For 100 tables
- Door Clings-$500/mo. (3 per entrance)
Other services are also available. Contact Eastland Mall, 812-477-7171.
There are other modes of advertising which business people can explore including the internet and a separate FAQ covers that very important medium.
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FAQ 7 - Would my business profit from having a presence on the World Wide Web; if so, how can it be done most effectively
from a functional as well as a cost standpoint?
Increasingly, small businesses are including the use of the internet as a vital part their marketing strategies. Surveys show that
over 80% are connected to the internet and well over half have active web sites. An Internet presence makes sense even if your business
does not transact business over the internet. Business can be conducted over the internet with a full scale catalog of products with
illustrations, color choices, prices and payment alternatives. Alternatively, it can also be used to gather information about customers
including demographics and needs. Or, it can be a very powerful communications tool that sells your company’s message about itself,
about its products and about its services. In the offline world, it can be compared to either a printed brochure describing a company
and its products or a merchandise catalog from which customers select and buy items.
Here’s what it takes to make Internet marketing an integral part of your marketing plan:
- A website-the words and graphics potential customers view. This can be as simple as an online brochure or as complex as a catalog
from which customers select and buy merchandise including payment. Cost can be minimized by building the website yourself or using
one of the many firms that offer templates that you simply fill in. The cost is in a range of $200. Google “diy website” for a list
of providers. A good information site is www.diyestores.com.
Complex sites with multiple pages and payment capabilities are more
expensive, $1000+. These are probably best done by a local professional. Look in the yellow pages under, “Internet Web Site Design
and Development” or contact your ad agency or IT professional. Your SCORE Counselor may also have information about developers.
If you want to develop a website on your own, and many do, Microsoft has training at, “Web Development for Beginners”,
http://msdn.microsoft.com/en-us/beginner/default.aspx.
Also go to www.seamoz.com or www.recommendedwebtools.com for a
list of internet development tools. Or, your hosting site may offer web site development at a reduced price.
Whether you build it or have it built, your web site should meet these five criteria in order to maximize its effectiveness:
(1) It must deliver what it promises. A person querying a search engine expects to receive abundant information from the sites
that they “hit”. (2) It must load quickly. Fancy pictures and graphics won’t impress if the potential customers don’t stick
around long enough for them to load. (3) Contact information must be easy to find. Make sure you include the physical address
(reassurance that you are a real business), all of your phone and fax numbers and web site and e-mail addresses. (4) Update the site
frequently. People want to see fresh, not stale, sites.(5) Provide for interaction such as customer feedback, forms to fill out, a
notice to bookmark the site before they leave and, of course, the opportunity to send an e-mail directly from the site.
- A host for your website. It has to have a place to reside and most small businesses do not invest in the computer horsepower and
communications infrastructure necessary to support an active web site. Web hosting facilities are inexpensive ranging from $4 to $8 per
month. And, if you use a firm such as Go Daddy, www.godaddy.com, and register your domain name
with them, your hosting may be free.
- Domain name registration. Once you have selected the name of your website or domain, you must register it in order to ensure
that it is unique. Google, “domain registration cheap” for a list of registrants. The fees vary but are quite modest although
they are for specific time periods, not forever.
Once you have a website, you must position it so that it has the broadest exposure to potential customers and the search engines
they use such as Google, Yahoo, MSN, BING and ASK. This is accomplished through search engine optimization (SEO) or keyword selection
or one can buy “pay per click ads”, (PPC) or “Pay for Inclusion” (PFI) listings in website directories. PPC has the advantage of fixing
the cost of website usage in order to provide better budget control. Again, you can do this yourself with help from online sources such
as, diyestores, www.diyestores.com or www.seomoz.com.
Or you can have it done professionally. It may be included in the cost of the website development if you use a professional for that.
Locally, the Evansville Courier Press offers search engine marketing programs at three levels, bronze, silver and gold. They work
with clients to select 40 key words to maximize the number of “hits” on your web site and target the cities where you want to reach
customers. At the lowest level, you pick one of the search engines from a choice of Google, Yahoo, MSN or ASK, at the second level
you pick two and at the third you get all of them. Prices range from $200-$499 per month at the lowest level, $500-$1,499/ mo. for
the second level and $1,500-$4,999 for the third. Within these ranges, allowable hits are 100-250, 250-750 and 750-2,500. There is
no setup fee with a 12 month minimum agreement, a $75 fee for six months and $125 for three months. Contact,
www.courierpress.com.
Be sure that you are promoting your website at every opportunity. The address should be on everything that is printed in your business,
business cards, letterheads, flyers, promotional items such as pens, balloons, T-shirts, writing pads, etc., etc., etc. And, on every
Email that leaves your business (it can be on a template).
Measure the effectiveness of your web site. There are multiple methods for doing this but the simplest is to record the number
of hits to your web site, recorded by your provider, and compare those numbers to your incremental sales to a similar period before
you had a web site.
A research firm reports that, “E-mail is the single most effective electronic tool for strengthening customer relationships.”
Uses include responding to warranty requests, or confirming shipments, directing customers to a particular page of your web site or
they may lead to a phone conversation from a customer service rep to respond to more complicated issues.
The instant access of e-mail can be a double edged sword. When a customer sends an e-mail, he/she expects fast turnaround on the
receiver’s part. So establish standards for answering e-mails just like you do phone calls. Prompt responses capture a customer’s
attention, loyalty and orders.
Be aware of key e-mail functions. Multiple Personalities involves setting up different e-mail accounts for specific brands,
locations, projects, etc. which facilitates routing to the proper person and archiving e-mails by function. Filters create sub
categories in your mailbox so that mail is automatically deposited in, say, each client’s project slot. In-boxes. Even if you
don’t use filters, you can still build archives of e-mails by topic or customer or project. Templates, or, stationery lets you
create boilerplate messages for mass mailing. Auto-respond provides for bouncing back a canned answer to a general e-mail such
as a “I’m not here” message. Embedded links transport customers directly to sites you include in your e-mail like your latest
and greatest widget.
Professional e-mail services such as Constant Contact create professional e-mails with a multiplicity of templates to promote
new products or services, create newsletters, make announcements and other uses. They manage the address lists, track and report
results and compare your results with other users. The service provides for unsubscribing which lets your customers know they
are using a legitimate service. There are no setup fees for lists under 25,000 names. Fees are: $15/mo. for up to 500 names,
501-2,500 names costs $30.00 month and costs are graduated up to 10,000 to 25,000 names at $150/mo.
Although they will not be explored here, there are other internet marketing tactics which can be quite effective for small businesses including:
- Banner advertising--the placement of banner ads on a website for a fee.
- Online press releases.
- Blog marketing--posting announcements or comments in your own blog or posting your URL (website address) on another blog.
- Article marketing--writing articles about your business and having them published online.
And, don’t forget to ask your SCORE Counselor for the booklet, “How to Really Market on the Internet.”
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FAQ 8 - Will I need insurance for my business; if so, what kind, where do I get it and how much should it cost?
Every business requires insurance, at least commercial general liability coverage. The nature of the business will determine
the extent and amount of coverage. A home based internet business probably requires less liability insurance than a contractor
who works on other peoples’ property and is required to provide an insurance certificate to the customer. Likewise the cost of
insurance varies with the nature of the business and its size as well as the different rates charged by insurance companies.
Unfortunately, there is no generic formula that can be used to predict how much insurance will cost but, costs can be obtained
from internet sites which are all too eager to quote a price. Be sure to have the details available before you ask for a quote.
Google, “Business Insurance Rates” to find sites which quote rates. Keep in mind that a personal home owner’s policy does not
cover business losses of a home-based business.
Here are the kinds of insurance which are applicable to small business:
- Property Insurance—Insures against loss or damage to your real or personal property. The preferred form of coverage is one
that covers “open perils” (all risk of loss or damage) subject to stated exclusions. Flood is a separate insurance.
- Liability Insurance also called Casualty Insurance---Provides protection to the business owner for third party claims for
bodily injury, personal injury and property damage arising out of the conduct of the business. This insurance is provided to
cover your negligence in the conduct of the business by you and/or your employees, whether on or off the premises.
- Commercial Auto—Just as your personal liability insurance does not cover business liability, your personal automobile policy
does NOT cover vehicles used for your business. Separate coverage for collision (losses due to accidents), comprehensive (fire and theft)
and liability (protection from losses from being sued) is required.
- Workers Compensation—You will need to insure your employees against on-the-job injuries. Every state is different but
every state requires some form of coverage. Locally, Google, “Indiana Workers Compensation” to get quotes.
- Health Insurance—Often driven by the need to be competitive, many companies offer their employees health insurance either
fully or partially funded by the employer.
- Life and disability insurance—protects against the death or disability of key employees.
- There are a variety of other insurance or policies such as, Business Interruption Insurance for disaster
coverage and Group Life Insurance.
Many businesses are eligible for a “package” policy known as a Business Owner’s Policy (BOP). This is a type of insurance
that combines property and liability coverage and may offer tremendous savings over separate policies. Check with your agent or on-line insurer.
A home owner’s policy does not cover losses sustained by a home based business. You will need home business insurance.
The good news is that you may obtain coverage by a rider attached to your current home owner’s policy. What’s more, it
may be the least expensive way to go. Your home based company may also be eligible for a premium-saving Business Owner’s
Policy (BOP). Be mindful that home business insurance is just as important as business insurance for larger enterprises
so do your homework before buying.
One can buy business insurance online, direct from an insurance company or through an agent located in the business owner’s locality.
An agent is responsible for analyzing the business and securing correct and adequate coverage, along with the administrative duties of
handling your account which includes assistance when claims occur.
Before you meet with your insurance representative or shop for insurance on-line, you must have the necessary information on which to base a quote:
- Company overview-how long you have been in business, projected and current gross receipts and the number and nature of employees.
- Address and building specifications-you will need to state whether your business is being operated from a home or a commercial location.
If commercial, the total customer area, the age of the building and the types of tenants that occupy the building. The addresses of
all the places your employees work and the name and address of the landlord(s).
- Business vehicles-names, social security numbers and driver’s license numbers for all employees who drive company vehicles
and the VIN numbers for the vehicles.
- Chemical storage-if you use chemicals in your business, some carriers will want to know where the supplies are stored.
If in mobile vehicles, where the vehicles are parked.
- Equipment-age and location of any critical or unusual equipment.
There is an excellent reference booklet available on-line at www.netquote.com. Click on, “business
insurance” then click on the, “downloadable guide to business insurance”. Other sources of information
about business insurance include, www.about.com and www.sba.gov.
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FAQ 9 - What do I do about establishing a budget, recording sales, costs and other financial aspects of my business
including tax preparation and cash flow and operating statements?
Business people budget for many of the same compelling reasons they prepare a business plan; it is a roadmap of how your business
is going to progress over the budget period, usually a year. The budget is the numerical representation of your operating plans
for the selected period. The lack of a budget indicates the lack of a plan and we all know, a business without a plan is a plan for failure.
Starting with your marketing plan, the basis for your revenue projections, make a list of all of the factors which will
impact your business during the upcoming year, e.g.:
- Demographic changes that may be occurring (Is the population in your market growing or shrinking? Is the mix changing?)
- Any seasonal impacts.
- The effects of new advertising or other promotional activities.
- Price changes for next year.
Examine every element of your business and its market environment for changes that could impact sales.
Next, put a value on these changes, add them to the prior period’s actual revenues and, voila, you have your revenue for the budget period.
Do the same thing for cost of sales and manufacturing costs as well as expenses. Take the list of changes you identified in your revenue
forecasts, carefully consider whatever additional changes, which only impact costs, and factor those into your budget for costs and expenses.
After determining your costs and deducting them from revenues, you will know how much your profit or loss is going to be for the next budget period.
The budget needs to be projected month by month and actual numbers compared as soon as possible after the close of the month.
If changes have to be made to the operating plan in order to meet the budget, it is best to start as soon as possible, therefore,
it is imperative that the books be closed and reports prepared as soon after the close of a month as possible.
Changes in asset values and liabilities need to be identified and included in a balance sheet projection. Sales or purchases of
assets, loan repayments, capital additions or withdrawals, receivables losses, etc. need to be considered in your balance sheet budget.
For a small business, the most critical measurement of all is Cash Flow. This might better be called cash planning because the cash
flow budget is a guide for determining when you need to inject cash into the business and when you can take some out. Your cash flow
statement is comprised of these elements:
Beginning Cash Balance (From last month)
- Cash Sales
- Accounts Receivable Payments Received
- Other Cash Receipts
Total Cash Inflows
Cash Outflows
- Capital Purchases
- Cost of Sales
- Change in Inventory (increase is negative, decrease positive)
- Business Expenses
- Add Back Depreciation, a Non-Cash Item
- Income Taxes
- Loan Payments
- Interest Expense
- Loan Repayments
Total Cash Outflows
Operating Cash Balance
Line of Credit Draws
Ending Cash Balance
All of the above information is available from your profit and loss and balance sheet budgets.
If you are a startup business, your budget is included in the first year of your business plan financial data.
If you are an existing business, you probably have an accounting program such as Quicken, Quick Books or Peachtree
Accounting all of which have a budget component. If, however, you choose to prepare your budget separately, budget
forms abound on the internet. Just Google, “Budget Forms” and choose the form you prefer.
Your budget is a very important part of your business. It is even more important that you, the business owner, is involved
in it and that you understand its contents and examine the monthly reports that compare actual results to budget. It is an
excellent tool to help manage your business.
For more information on budgeting try the business section of your local library and/or the internet.
Try, www.about.com and query business budgeting. Also go to www.score.org and
www.sba.gov.
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FAQ 10 - If I want to buy an existing business, how do I determine its value and what other
factors should I consider in my decision making?
Buying a business requires the performance of certain specific actions:
- Determining whether business ownership is right for you including evaluating your personal characteristics
and matching your skills and experience to the business.
- Evaluating buying a business vs. starting from scratch as well as determining the kind of business (retail, manufacturing, etc.).
- Enlisting the aid of advisors
- Establishing search criteria and obtaining and evaluating leads.
- Valuing the potential business and negotiating the price.
- Ensuring that all legal documents are in place whether buyer or seller generated
- Performance of “Due Diligence”.
- Obtaining financing.
Assuming you have determined that business ownership is the right course for you (See FAQ On “Getting Started”)
you must establish criteria for buying a business. These criteria should include:
- Type of business ( retail, service, manufacturing, wholesale, franchise)
- Size, in terms of sales
- The desired longevity of the business (how long in business?)
- The minimum and maximum number of employees, daily hours of operation and number of days per week
- Maximum purchase price and minimum down payment
- Annual sales growth potential and desired gross profit margin
The extent of lienable assets.
You may wish to add other criteria to this list.
Sources for finding businesses which might meet your criteria include, business brokers, classified advertising, trade magazines,
placing your own ad in newspapers and trade journals, networking with bankers, lawyers, accountants, family, friends, acquaintances
and, of course, the internet ( Google “businesses for sale” or “business franchises”). As indicated in FAQ, “Getting Started”,
select a business in which you have first hand operating knowledge.
Franchises offer some advantages, chief among which is that the rate of failure is less than other business acquisition
categories. They also have their disadvantages, e.g. you are at the mercy of the franchiser in the on-going operation
of your business. Franchises can be pursued in a number of ways. Google “business franchises” on the internet or,
go to the franchiser of interest web site, e.g. www.mcdonalds.com.
Valuing a business can be accomplished through a variety of methods almost all of which require a working knowledge of accounting.
While it is desirable for every business owner to have some knowledge of accounting, you may need help from an accountant in order
to value the prospective business. Here are a few of those methods and while we will not elaborate here on the calculations involved,
your SCORE Counselor will have this information available:
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• Cash Flow Based
• Excess Earnings
• Capitalization of Earnings
• Ability to Pay
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• Adjusted Book Value
• Revenue Based
• Comparable Sales
• Rules of Thumb
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Each of these has its proponents but they are best used in combination.
Your new business, even though it is an established business, still needs a business plan. You need it as a roadmap and, if financing is involved,
lenders will insist upon it. The good news is that you at least have the business’ history as a foundation for the numbers you are presenting.
(See the “Business Plan” FAQ for more information.)
As a buyer, you will want to ensure that there are basic documents in place such as:
Letter of Intent, Sales (Purchase) Agreement including the Parties involved, the Purchase Price and Terms, the
Allocation of the Price to accounts receivable, inventory, fixed assets, land, buildings, goodwill, etc., “As Is” Sale,
Expenses of Sale, Seller’s Covenant Not To Compete, Contingencies (Conditions Precedent), Prorated Items, etc. A “Consulting Agreement”
will be necessary if the seller is going to continue to work for you.
Before completing the purchase, you must perform “due diligence” which is the process of making sure that
all representations of the seller about the business are accurate. This involves close inspection of all
appropriate records. Documents that you may wish to inspect include:
- All financial statements and tax returns from the past five years including interim financial statements, the results of any tax
related audits and all supporting footnotes, disclosures and supporting tables relating to financial statements
- All sales tax reports for the past three years as well as, proof that payroll tax deposits have been made in a timely and accurate manner
- Corporate bylaws, articles of incorporation, board minutes, franchise agreements, property and lease agreements, etc.
- Seller’s disclosure form for real and business property
- Contracts with employees, customers, suppliers and maintenance and security companies
- Copies of loan agreements or other debt obligations
- Appraisals, deeds including any independent appraisal of the business value
- Most recent business plan
- Complete list of furniture, fixtures and equipment and any associated liens
Negotiating has been the subject of many books and you should read at least one of these. Among other aspects, it is important
for you to know the technique of incremental negotiation. It can save you thousands on the purchase price. You will also have an
advantage if you have based your offer on one or more of the valuation methods mentioned earlier because the seller’s price will
probably be an off the cuff number not supported by calculations.
Financing of the purchase can be had from a variety of sources. Debt financing may be obtained from commercial banks and
non-bank lenders such as Heller First Capital Corp and CIT Small Business Lending Corp. Equity financing means that a portion
f the business is sold in exchange for money needed to purchase the business. This may be obtained through partners, venture
capital firms or “Angels” (try “investment angels” on the internet). The U.S. Small Business Administration (SBA) is a major
player in the financing of small businesses through its various loan guarantee programs. Go to www.sba.gov on the internet.
(See the “Grants and Loans” FAQ.) Don’t discount “Seller Financing” in either the debt or equity categories.
The major source for the information related above is a work entitled, “Buying and Selling Businesses” prepared by Dennis Jones of
SCORE Chapter 61, Springfield, MO. and available through your SCORE Counselor. Other sources include various web sites including,
www.score.org, www.sba.gov and www.evpl.org.
Web sites with information on buying a business include: www.usabizforsale.com,
www.bizwantednow.com, www.buysellbizlinks.com,
www.bizcomps.com, www.simplesba.com,
www.bizbooksoftware.com and www.businessbrokeragepress.com .
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FAQ 11 - What is SCORE, what do you do, what is your policy on confidentiality and how much do your services cost?
The SCORE Association is a national organization headquartered in the Washington, D.C. Metropolitan Area.
It is a resource partner of the Small Business Administration (SBA). Through its nearly 400 chapters, with 11,200 volunteers throughout the country,
it provides professional business counseling and conducts workshops for people who want to go into business or who are already in business.
SCORE’s Evansville Chapter maintains a complement of about 20 professional business people with a range of skills from retail to mining and
manufacturing to services. They are engineers, accountants, bankers, attorneys, underwriters and marketers. We provide free face to face,
phone and e-mail counseling to our clients, keeping all client information confidential. In addition, we provide periodic workshops for
large and small groups. Our phone number is (812) 426-6144; fax (812) 426-6138. The e-mail address is scoreevv@aol.com
and our web site is www.scoreevansville.com.
Nationally, SCORE provides cyber-counseling on-line through a network of professionals expert in a wide variety of disciplines. Clients can
make this connection through www.score.org.
Beyond our Chapter and national websites, noted above, there is a vast array of business information available on the internet and at the
area libraries, particularly the Evansville, Vanderburgh Public Library. These websites have a wealth of general business information:
www.score.org www.sba.gov,
www.smallbizu.com, www.about.com. Specific information sites are noted in other FAQ’s.
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