SBDC Business Tools
SBDC BUSINESS TOOLS represents a selection of practical information utilized by the Directors of the Small Business Development Centers to assist their business clients. The selections represent a wide range of practical information. Some of the tools are very basic and probably will require no assistance. However, a number of the tools are fairly sophisticated and you may need additional support from an SBDC Director. It is our mission to serve you, so please do not hesitate to make a call if you require our help.
The following is a list of the "SBDC BUSINESS TOOLS":
1. BUSINESS PLAN OUTLINE , Steve Grover, Montana Community Development Corporation, Missoula.
2. PREPARING A BUSINESS PLAN, Cliff Bennett, Former SBDC Director, Kalispell and Eric Hanson, Regional Development Officer (RDO) Montana Department of Commerce (co-located at Kalispell Chamber of Commerce).
3. COMPARISONS AND CONTRASTS FOR VARIOUS TYPES OF LEGAL BUSINESS ENTITY FORMATIONS, Cliff Bennett, Former SBDC Director, Kalispell (Kalispell Area Chamber of Commerce)
4. DEVELOPING REALISTIC CASH FLOW PROJECTIONS-BUSINESS RESEARCH IS EVERYTHING , John Donovan, SBA Lender Relation Specialist.
5. DEVELOPING REALISTIC CASH FLOW PROJECTIONS FOR BUSINESS START-UP AND EXPANSIONS , John Donovan, SBA Lender Relation Specialist.
6. PROFORMA. Excel spreadsheet includes: Sources and Uses, 12 Month Cash Flow, Projection of Three Year Income, Pro-Forma Balance, Depreciation, Amortization Table, Breakeven, Pricing, Valuation, Matrix. John Donovan, SBA Lender Relation Specialist.
7. EXAMPLES OF PROFORMA: MANAGING YOUR MONEY. Excel spreadsheet includes: Sources and Uses, First Year Cash Flow, Projected Income Statements, Balance Sheet Start Up, Balance Sheet First Year End, Amortization Table. John Donovan, SBA Lender Relation Specialist.
8. PROJECTION NOTES. Review critical assumptions regarding cash flow projections. John Donovan, SBA Lender Relation Specialist
9. FINANCIAL INFORMATION FOR YOUR LENDER, Travis Wright, Former SBDC Director, Bozeman (Gallatin Development Corporation).
10. AMORTIZATION TABLE, CALCULATING PAYMENTS AND INTEREST ON LOANS, Travis Wright, Former SBDC Director, Bozeman (Gallatin Development Corporation).
11. BREAK EVEN ANALYSIS, Travis Wright, Former SBDC Director, Bozeman (Gallatin Development Corporation).
12. FINANCIAL INFORMATION FOR THE MANUFACTURING BUSINESS, Al Deibert, Special Projects Engineer, Montana Manufacturing Extension Center (MMEC), Bozeman.
13. HOW IS YOUR CREDIT: CREDIT SCORING, Fair, Isaac and Company or Equifax, link to your credit report score.
14. THE MARKETING PLAN, Cliff Bennett, Former SBDC Director at the Kalispell Area Chamber of Commerce.
15. EXPORT ASSISTANCE FOR THE MONTANA BUSINESS. The International Trade Officers at the Montana Department of Commerce Trade Bureau.
16. HOW TO SET UP A NONPROFIT, Cliff Bennett, Former SBDC Director at the Kalispell Chamber of Commerce.
17. STARTING AN ONLINE BUSINESS, Cliff Bennett, Former SBDC Director at the Kalispell Chamber of Commerce.
18. WEBSITE PERFORMANCE AND ANALYSIS, Cliff Bennett, Former SBDC Director at the Kalispell Chamber of Commerce
If you need personal assistance with the BUSINESS TOOLS described, the Small Business Development Center Director in your area may be found at: http://commerce.state.mt.us/BRD/BRD_SBDC_offices.html.
Montana Community Development Corporation
BUSINESS PLAN OUTLINE
By Steve Grover, Montana Community Finance Corporation
This example is used by Steve Grover, Director of the Small Business Development Center in Missoula. Steve is located at Montana Community Development Center. Steve may be contacted at 406/728-9234 ext. 206 or sgrover@mtcdc.org.
BUSINESS PLAN OUTLINE (Doc)
PREPARING A BUSINESS PLAN
By Cliff Bennett and
Eric Hanson, RDO Montana Department of Commerce
This article was written by Cliff Bennett, a former Director of the Kalispell Area SBDC and Eric Hanson, the Regional Development Officer for the Montana Department of Commerce. The Kalispelll SBDC and Eric are co-located at the Kalispell Area Chamber of Commerce. The SBDC Director, Lad Barney may be contacted at 406/758-2802 or kalsbdc@centurytel.net.
There is a lot of advice on how to write a business plan. There are courses, workshops, books, articles and a variety of resources on the Internet. In sheer numbers it is overwhelming. If you are unsure of your direction contact the local SBDC Director in your area for advice.
PREPARING A BUSINESS PLAN (Doc)
COMPARISONS AND CONTRASTS FOR VARIOUS TYPES OF LEGAL BUSINESS ENTITY FORMATIONS
By Cliff Bennett, Kalispell
This spreadsheet provides a look at the various factors to consider when choosing the business entity that best works for you. We recommend prior to making a selection that you discuss the options with your legal and financial counselors.
Comparisons and Contrasts for Various Types of Legal Business Entity Formations (Doc)
Headwaters Resource Conservation & Development Area, Inc.
DEVELOPING REALISTIC CASH FLOW PROJECTIONS-BUSINESS RESEARCH IS EVERYTHING
By John Donovan, Butte
John Donovan is a former Small Business Development Center Director at Headquarters RC&D in Butte.
John's article is an excellent overview of the steps necessary to create accurate cash flow projections. How valuable are cash flow projections? Here is what John says in his introduction:
"Developing accurate projections, especially the sales forecast is probably the most difficult part of building financials for your business plan. Unfortunately many people don't spend enough time and effort on this part of their plan and end up living with the consequences after their project is funded."
Developing Realistic Cash Flow Projections-Research is Everything
DEVELOPING REALISTIC CASH FLOW PROJECTIONS FOR BUSINESS START-UPS AND EXPANSIONS
Developing Realistic Cash Flow Projections For Business Start-up and Expansions
PROFORMA
Excel spreadsheet includes: Sources and Uses, 12 Month Cash Flow, Projection of Three Year Income, Pro-Forma Balance, Depreciation, Amortization Table, Breakeven, Pricing, Valuation, Matrix. John Donovan, SBA Lender Relation Specialist.
EXAMPLES OF PROFORMA: MANAGING YOUR MONEY
Excel spreadsheet includes: Sources and Uses, First Year Cash Flow, Projected Income Statements, Balance Sheet Start Up, Balance Sheet First Year End, Amortization Table. John Donovan, SBA Lender Relation Specialist.
Examples of Proforma: Managing Your Money
PROJECTION NOTES
Review critical assumptions regarding cash flow projections. John Donovan, SBA Lender Relation Specialist
FINANCIAL INFORMATION FOR YOUR LENDER
By Travis Wright
Travis Wright, is a former SBDC Director at the Gallatin Development Corporation in Bozeman. You may contact the SBDC at 406/587-3113 or botmline@bozeman.org.) He uses this comprehensive tool to assist his business clients who are preparing proposals for banks and other lenders. Most of his clients need assistance with preparing this financial information.
(In the article, Travis uses the first person singular however, feel free to try completing the information on your own.) Travis has enclosed the following summary which describes the steps to completing a proposal.
Here are some of the details on the cash flow tool that Kent Wood and I worked up after he had been at the bank for a couple of months (some items such as the sources and uses and monthly cash flow were tools developed by other SBDC's that we adopted into our file). Our goal was to build a comprehensive tool that I could use with clients to prepare proposals that provided lenders all of the necessary information to use in their Winfast analysis and credit committee write-ups (with the exception of the discounted collateral analysis, which I typically have the client include in their executive summary).
When working with an existing business I typically use the following temporal prioritization. (With Startups I always start with the monthly cash flow and market research. Also, when completing the monthly cash flow I highly recommend clients use John Donovan's, "Developing Realistic Cash Flow Projections" above, (it is excellent):
- I have the client bring in their last three years of tax returns and I input that data into the income statement and balance sheet portion of the spreadsheets. If you use the excel file correctly it will perform the ratio analysis for you. I always check a couple of the ratios by hand just to make sure. For the formulas to work properly you must line the spreads up. (Example: if you are inputting the 1999 income statement in the first column then you would want to input the December 31, 1999 balance sheet data in the first column of the balance sheet tab).
At that point I sit down with the client and discuss/analyze in detail. I get into a lot of ratio analysis (comparing their business to peers utilizing RMA data), discuss the companies operating cycle, trouble shoot any red flags, etc. I also get into the historical cash coverage analysis. This entails taking the historical income statements and adding back items that would be available to service future debt. Examples could include: Depreciation, Amortization, Historical Interest Expenses, Rent (in certain situations), Historical Owner's Comp, any onetime non-reoccurring expenses (I am very conservative with this one and usually discuss with their lender), etc. This gives me what the spreads call Net Adjusted Cash Flow, but what most people refer to as pro forma Earnings Before Interest Taxes Depreciation and Amortization (EBITDA). I then take this number and subtract future owner's compensation. This gives you a pretty good idea of how much cash from historical operations (does not include cash from financing, investing or the effects of the balance sheet on cash flow) would be available to service future debt. After you input future annual debt service, the program automatically calculates debt coverage ratios (EBITDA/Annual Debt Service). Most banks are looking for ratios above 1.25:1, which means that there is 25% more excess cash from operations then proposed debt. - With the historical information in hand, I work with the client in the development of their monthly cash flow projections. I feel it is very important that the client does all of the work. It needs to be their projections based on their numbers and market research. The only role I provide is to give them input and technical assistance with the cash flow.
- I then use the cash flow projections that the client has built to build income statement and balance sheet spreads for the next two years (startups I go out to three years). Again, I sit down with the client and discuss/analyze.
AMORTIZATION TABLE
Provided by Travis Wright, Bozeman
If you know the loan amount, the annual interest rate and the term of your loan, this table will give you the monthly and total amounts due, and the monthly principal and interest payments.
Amortization Table (Excel)
BREAK EVEN ANALYSIS
By Travis Wright, Bozeman
Travis Wright, is a former Director of the SBDC in Bozeman at Gallatin Development Corporation provided the following example of how to perform a break even analysis. Travis may be contacted at 406/587-3113 or botmline@bozeman.org.
Break-Even
For many business owners, performing break-even (BE) analysis sounds like doing a bunch of math. However, if used properly it can tell a business owner whether they are controlling their costs well and if they are not, what they need to do about it.
So what is BE and how can you use it in your business? Lets consider two examples:
RC, Inc.'s management is working with its sales staff to benchmark its next years sales. First, they have determined that their variable costs consist of cost of sales, production labor, and advertising, which historically has averaged 43% of sales (giving them a "contribution margin" of 57%). The company is also considering adding several administrative positions, which would increase its fixed costs from $275,000 to $375,000. What sales level do they need to achieve to break-even? By performing a couple of easy calculations (formulas below) RC, Inc.'s management determines that by increasing fixed cost by $100,000 they would need to achieve $657,895 in sales compared to $482,456 (an additional $175,439) to break-even. Based on some in-depth market research and historical trends, management and sales only feel that $550,000 in sales is achievable, so the company decides to hold off on the additional staff.
Several days later RC, Inc.'s management learns that a major supplier has increased costs on a critical component used in their product. If they did not adjust their own price, this would increase their variable costs to 48% of sales (giving them a "contribution margin of 52%). This means the company would now need to reach $528,846 in sales (an additional $46,390). Based on their market research, management feels they are providing enough value to pass the price increase on to its customer.
Used correctly and periodically break-even can be one of your most valuable profit planning tools. After a business understands the concepts behind break-even, they can use simple to follow formulas to make educated business decisions that drive dollars to their bottom line.
For the formula and spreadsheet junkies out there I have included all of the formulas necessary to calculate break-even. If you would like to stop in and discuss break-even, cash flow, business plan development or access to capital give me a call.
Break-even = Fixed Costs/Contribution Margin
Contribution Margin = (Sales - Variable Costs)/ Sales
FINANCIAL INFORMATION FOR THE MANUFACTURING BUSINESS
By Alan Diebert, Field Engineer, MMEC
This information is provided by Montana Manufacturing Extension Center (MMEC) located in Bozeman at Montana State University. MMEC has engineers in various communities in Montana who provide technical assistance to companies involved in manufacturing. Their website is: www.mtmanufacturingcenter.com.
This business tool provides financial analysis that may be used by a manufacturing business owner to determine sales, variable expenses (an expense that changes in total proportion to productive output or any other volume measure), employee expenses and operating expenses. If you have difficulty using this tool, please call the MMEC Engineer in your region.
Financial Tools - MMEC Spreadsheet (Excel)
HOW IS YOUR CREDIT SCORING
What's your score? When applying for a business loan, one of the most crucial factors your lender will scrutinize is your credit score. In the past, actual score numbers were not available. An individual might only see his or her credit report. Now, however, Fair, Isaac, & Co. (www.myfico.com), the creator of the leading credit scoring system, and Equifax (www.equifax.com), one of the major credit reporting companies, have both agreed to provide consumers with internet access to their actual scores for a small fee.
Most scores fall between 500 and 850, with the 40% of the population who have the best credit having scores of 750 or more.
These business tools are provided by Cliff Bennett, the SBDC Director in Kalispell, at the Kalispell Area Chamber of Commerce. Cliff may be contacted at 406/758-2802 or kalsbdc@centurytel.net.
How To Create A Marketing Plan
Provided by Cliff Bennett, Kalispell SBDC
For more information on marketing, the standard resource guide for the small business owner is Jay Conrad Levinson's Guerrilla Marketing now in its Third Edition. Mr. Levinson had a corporate marketing background with J. Walter Thompson, then began to explore how the small business person, with a small business budget, can accomplish great things by adapting the marketing rules to fit the the environment that governs the life as a small business owner.
How To Create A Marketing Plan
How To Set Up a Nonprofit
Provided by Cliff Bennett, Kalispell
Not all business ideas should be set up as profit making entities. Some ideas should be organizaed, not for profit, or as nonprofit organizations.
Starting An Online Business
Provided by Cliff Bennett, Kalispell
This is a lot of information with a tremendous amount of resources. All of the links may not be still active.
Website Performance and Analysis
Provided by Cliff Bennett, Kalispell
More information regarding your website.
Website Performance and Analysis
Export Assistance Menu for the Montana Business
Provided by the International Trade Officers at the Montana Department of Commerce Trade Bureau
This information is located at www.exportmontana.com. For personal assistance call (406) 841-2754 or email: Export Montana
Export Assistance Menu
Export Education
Export Documentation
Export Licensing
Export Finance
Shipping
Insurance
Shipper's Export Declaration
North American Free Trade Agreement
