San Francisco SBDC

Small Business FAQs

What questions should you think about when planning a business?

  • In two minutes, how would you explain your business idea to a friend? - How does your business idea differ from those behind existing businesses?
  • What purpose does your business serve?
  • What is the state of the industry you are entering?
  • Who will your clients or customers be?
  • How will you market the firm’s goods or services?
  • How much will you charge?
  • How will you finance your business?
  • How will you measure your firm’s success or failures at specific time intervals?
  • What credentials qualify you to run this business?

Where can I go for help?

Your local SBDC can assist you with critical business development issues. The San Francisco Small Business Development Center has counselors and specialists with a myriad of expertise and knowledge. Clients will be assisted with any business issue by professionals that may include: management, marketing, finance and strategic planning as needed. SBDC service centers can also provide information for new and existing businesses. All counseling is confidential and the services are free to the public. We offer expert advice in critical areas of business growth and management to businesses that are experiencing growth spurts or growing pains, looking for expansion financing, hiring and training new employees and preparing to sell.

Gain the knowledge needed to make your business excel by attending our training classes held throughout our training network. Classes are offered in specialized subjects for experienced business owners. If you need some support from colleagues that understand the demands of growing a business but who aren’t your competitors, let the SBDC serve as one of your resources. Request services now.

Do I have what it takes to own/manage a small business?

You will be your own most important asset, so an objective appraisal of your strengths and weaknesses is essential. To determine if you have what it takes you need to answer some questions about yourself: Am I a self starter? How well do I get along with a variety of personalities? How good am I at making decisions? Do I have the physical and emotional stamina to run a business? How well do I plan and organize? Are my attitude and drive strong enough to maintain motivation? How will the business affect my family? You are the person in the best position to analyze whether you have what it takes to own or manage a business.

What business should I choose?

Usually, the best business for you is the one in which you are most skilled and interested. For example if you are trained as an auto mechanic you may want to consider opening a shop related to auto repair. As you review your options, it is advisable to consult local expert business persons about the growth potential of various businesses in your area. Matching your background with the local market characteristics will increase your chance of success.

What is a business plan and why do I need one?

Because they provide specific, organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan package. A business plan precisely defines your business, identifies your goals and serves as your firm's résumé. Its basic components include a market study, marketing/promotional strategy, current balance sheet, and income statement and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications and make the right decisions. Additionally, it can tell your sales personnel, suppliers and others about your operations and goals.

What legal aspects do I need to consider?

Licenses, permits, zoning laws and other regulations vary from business-to-business and from state to state. You will need to consider requirements of the Americans with Disabilities Act in order to accommodate needs of your customers and your employees. Your local SBDC office can provide you with general information about acquiring a business license. You also must decide about your form of organization (corporation, partnership or sole proprietorship).

What do I need to succeed in the business?

There are four basic needs for success in small business:

  • Sound Management Practices
  • Industry Experience
  • Technical Support
  • Planning Ability

Few people start a business with all of these bases covered. Honestly assess your own experience and skills, and then look for partners like the SBDC or key employees to compensate for your challenging areas.

Would a partner(s) make it easier to be successful?

A business partner does not guarantee success. If you require additional management skills or start-up capital, engaging a partner may be your best decision. Personality and character, as well as ability to give technical or financial assistance, determine the ultimate success of the partnership. A successful partnership usually occurs when partners complement each other so that one's weakness is another's strength. If you decide a partner is a good idea, make certain each of you has a clear, written understanding of your responsibilities and rights.

How much money do I need to get started?

One of the leading causes of business failure is insufficient start-up capital. Once you've taken care of your building and equipment needs you must also have enough money on hand to cover operating expenses (see fixed and variable costs) for at least one year. These expenses include your salary, as the owner, and money to repay your loans. Consequently you should work closely with your SBDC to estimate your cash flow needs and writing a business plan which will provide you with accurate information on your needs for capital.

Are there grants available for small businesses?

No. Many people are misled to believe that there are grants for for-profit small businesses. The only grants available are for research. Small Business Innovation Research program (SBIR) is a highly competitive program that encourages small businesses to explore their technological potential and provides the incentive to profit its commercialization. Small businesses must meet certain eligibility criteria to participate in the SBIR program:

  • American-owned and independently operated.
  • For-profit
  • Principal researcher employed by business
  • Company size limited to 500 employees.

Following submission of proposals, participating agencies make SBIR awards based on qualification, degree of innovation, technical merit and future market potential.

What are the alternatives in financing a business?

Committing your own funds is often the first financing step. It is certainly the best indicator of how serious you are about your business. Risking your own money gives confidence to others who may invest in your business. You may want to consider family members or a partner for additional financing. Banks are an obvious source of funds. Other loan sources include commercial finance companies, venture-capital firms, and local development companies. Your SBDC can put you in touch with a wide variety of lending opportunities, help you evaluate their risk and opportunity, and work with you to prepare all necessary loan documents.

NOTE: a list of banks which frequently work with the SBDC/SBA in providing loans to small businesses can be found at your SBDC.

What do I have to do to get a loan?

Initially, the lender will ask these sorts of questions:

  • How is your credit history? What is your credit score?
  • How will you use the loan proceeds?
  • How much do you need to borrow?
  • How will you repay the loan?
  • What sorts of assets do you have to contribute towards the business?

When you apply for a loan you will be asked to provide projected financial statements along with a cohesive, clear business plan which supplies the name of the firm, location, production facilities, legal structure, marketing and sales goals, financial analysis and operating plan. A clear description of your experience in management capabilities, as well as the expertise of other key personnel, will also be needed.

What kinds of profits can I expect?

Not an easy question, and you need to consider income and expenses before you even start to think about profits. However, there are standards of comparison called "industry norms and ratios" which the SBDC can help you estimate your profits. Return on investment (ROI), for example, estimates the amount of profit gained on a given number of dollars invested in the business. These ratios are broken down by Standard Industrial Classification (SIC) code for assets and size, so you can look up your type of business to see what the industry averages are. These figures are published by several groups, and can be accessed on the Internet. Help is also available through the SBDC.

What should I know about accounting and bookkeeping?

The importance of keeping adequate records cannot be stressed too much. Without financial records you cannot determine how well your business is doing or where it is going. At a minimum, records are needed to substantiate:

  • Your tax returns under Federal and State laws, including income tax and Social Security laws;
  • Your request for credit from vendors or a loan from a bank; and
  • Your claims about the business, should you wish to sell it.

But most important, you need them to run your business successfully and to increase your profits.

How do I set up a record-keeping system for my business?

The type of records and how many you need depend on your particular operation. The SBDC's resources in an account can provide you with many options. When deciding what is and is not necessary, keep in mind the following questions:

  • How will this record be used?
  • How important is this information likely to be?
  • Is the information available elsewhere in an equally accessible form?

What financial statements will I need?

You should prepare and understand three basic financial statements:

  • The balance sheet, which is a record of assets, liabilities and capital in a specific point in time;
  • The income (profit and loss) statement, which is a summary of your earnings, expenses and net profit (or loss) over a given period of time; and
  • The cash flow projection, which shows the actual inflows in actual outflows of cash into account of your business.

The SBDC's bookkeeping and accounting programs can help you with these issues.

What does a marketing strategy involve?

Marketing is your most important operational concern. There are four basic aspects of marketing, often called the "four P's":

  • Product: a description of the item or service you provide.
  • Price: what you charge for your product or service.
  • Promotion: how you inform your market as to who, what and where you are.
  • Place: the distribution channels you use to offer the product to the customer.

Your understanding and application of the answers to such questions play a major role in the success or failure of your business. As you can see, marketing encompasses much more than just advertising or contact local selling. In addition, while writing a business plan, a market analysis needs to be done to help the business owner decide the feasibility of their product in the available market. In addition, the major part of marketing involves researching your customers: What do they want? What can they afford? What do they think?

What is my market potential?

The principles of determining market share and market potential of the same for all geographic areas. First, determine a customer profile (who) and the geographic size of the market (how many). This is the general market potential. Knowing the number and strength of your competitors (and then estimating the share of business you will take them) will give you the market potential specific to your enterprise.

Where can I get information on market research?

Listed below are several market research resources.

General Business Information:

  • American City Business Journals - Business related news for many US cities. Search for articles on industry trends, compare similar businesses in other cities, and check your competition.
  • Edward Lowe Foundation - The Ed Lowe Foundation maintains a searchable database of articles, book chapters, and SBA publications dealing with a wide variety of small business issues.
  • EntreWorld (Kauffman Center) - The Kauffman Foundation supports entrepreneurial education. Their website provides a good source for training materials.
  • Forbes - Online version of Forbes magazine.
  • Inc Magazine - Search for general business trends at this popular business magazine’s website.
  • NAICS (North American Industrial Classification System) - The new system that will replace the SIC within the next few years. NAICS was created in order to compare and track the economies in Canada, Mexico and the United States. The 1997 US Economic Census is reported by NAICS.
  • SIC (Standard Industrial Classification) - All establishments are assigned a classification by the Federal Government for statistical and other reporting purposes based upon their primary business function. Most private and public statistics are reported at the SIC level.
  • Small Business Sourcebook (Gale Research) – Contains sources of information related to starting specific types of small businesses. Typical entries include citations for start-up info, associations, trade publications, reference works, statistics, supply sources and databases.
  • Small Business Profiles (Gale Research) – Provides short vignettes about selected small businesses. Includes brief statistics and contact information for associations and franchise opportunities.
  • SmartStart Your <State> Business (Oasis Press) – Part of a series that contains a variety of general business information and some knowledge specific to individual states. It includes federal and state agency contacts, sample legal forms, business plan guidelines, marketing information, and human resources advice.

Financial Information:

  • Almanac of Business and Industrial Financial Ratios (Prentice Hall) – Provides ratios and industry norms in actual dollar figures derived from IRS data. Each industry includes performance indicators such as total assets, cost of operations, wages, asset turnover, and profit margins.
  • Financial Studies of the Small Business (Financial Research Associates) - Similar to RMA but surveys small and micro-businesses only. Organized by industry.
  • Market Share Reporter (Gale Research) – Organized by SIC categories (industry groups). Reports percentage of market held by leading companies in each category covered. Usually gives total market size for each category.
  • Robert Morris Associates (RMA) Annual Statement Studies – On disk or in print. Contains ratios derived from statements of commercial bank borrowers and prospects. Organized by 4 digit SIC code, most editions contain only national averages.
  • Standard & Poor’s Industry Surveys – Industry surveys in each of 52 topics. Each topic contains trends comparative company analysis and forecasts. Each survey is published independent of the other topics.
  • US Industry & Trade Outlook (McGraw-Hill/US Dept. of Commerce) – Hundreds of tables and charts, industry reviews, trends and forecasts divided by 50 major industry groups. Each group essay may contain more specific information about products and services in that category.

Demographic Information:

  • American Factfinder (US Census) - Users can access statistical data about their geographic area. Includes demographic and economic statistics.
  • ESRI Business Information Solutions - General demographic data, including lifestyle characteristics
  • Demographics Journal (MSA Statistics) - From the publishers of the American City Business Journals. State and MSA rankings for a variety of different demographic characteristics are available.
  • The Dismal Scientist (MSA & State Statistics) - This site was created by economists to provide a single location to readily obtain economic and demographic statistical data. Data are provided for state and metropolitan areas.
  • Household Spending: Who Spends How Much on What (New Strategists) – Gives household spending averages based on Bureau of Labor Statistics’ Consumer Expenditure Survey. Includes 35,000 different spending records from homes and cars, to apparel and food. Also contains average spending by age and gender.
  • The Sourcebook of ZIP Code Demographics (CACI) – Demographic information by zip code. Includes population, race, income, and expenditure information for each ZIP code in the US. See also: http://econdata.net and http://sbdcnet.utsa.edu/SBIC/demograpics.htm.

Directories:

  • American Wholesaler and Distributor Directory (Gale Research) – Provides listings of wholesalers and distributors sorted by product category and by state.
  • Catalog of Catalogs (Woodbine House) – Billed as “ The Complete Mail-Order Directory” this resource contains the descriptions and contact information to 14,000 catalogs. It is indexed by subject and by company name.
  • Directory of Manufacturers' Sales Agencies (Manufacturing Agents National Association) – Lists manufacturer’s sales agencies alphabetically and by state. All companies included are members of the Manufacturers’ Agents National Association. Also has information on how to select a sales agent.
  • Encyclopedia of Associations (Gale Research) – Guide to thousands of National and International organizations. Contains contact information and descriptions and is indexed by name, key word, and geographic area.
  • Thomas Food Industry Register - Free directory of food manufacturers and suppliers to the food industry.
  • Thomas Register of Manufacturing - This widely used directory includes national listing of most manufacturing firms.

Market Research Tutorials:

Miscellaneous:

What about advertising/promotion?

Your business growth will be influenced by how well you plan and execute an advertising program. Because it is one of the main creators of your business's image, it must be well-planned and well budgeted. Contact your local SBDC who can help you develop an understanding of your market potential and write your market plan, or put you in touch with advertising agencies to assist you in developing an effective advertising/promotional strategy.

What's required to issue a press release?

Below are a few helpful techniques on how to get your press release noticed.

IS IT OUT OF THE ORDINARY?
What makes your product, program or event stand out from all the rest? Does it replicate a new or existing trend? Link your press release to a current event like a news story. By relating it to a hot topic or icon, it will have more of a chance of attracting more attention.

HOW WILL READERS/VIEWERS/LISTENERS BENEFIT FROM THIS?
Depending on your product, program or event, choose your target markets wisely and use different approaches to each.

THE BENEFITS IN TEN WORDS OR LESS.
Your headline should be an attention grabber as it might be the only thing the reader/viewer/listener may come across. However, it is imperative that you thoroughly support it in the meat of your press release.

THINK UPSIDE-DOWN PYRAMID.
The first paragraph should answer who, what, when, where, why and how. It is possible to move this information down to the second or third provided that the first paragraph already captures the audience.

SAY NO TO JARGON.
Do not use fluffy words. Keep it straightforward and to the point so that your audience will understand your message clearly.

NEW HIRES’ WORTH.
What makes the new hires interesting? What will they contribute to the company? What are their expertises?

THE POWER OF QUOTES.
Quote your expectations while telling a story. According to Rebekah Donaldson, president of Business Communications Group, quotes reflect character.

FACTS WITH ACKNOWLEDGEMENT.
When quoting someone, use their title and attribution.

KEEP IT SIMPLE, STUPID.
It is easy to go overboard with information. Be brief yet concise. The shorter it is, the better.

How do I set price levels?

The price of a service or item is based on three basic production costs: Direct Materials, Labor and Overhead (the share of facilities, utilities, taxes, insurance, security and other general operating costs of the business attributable to the product or service -- for example, if one product accounts for 10% of your business, 10% of your overhead is assigned to it). After these costs are determined -- the "break-even" cost -- you factor in the profit desired. Because pricing can be a complicated process and you must remain competitive as well as profitable you may wish to seek help from an expert at the SBDC.

Are some locations better than others?

Time and effort devoted to selecting where to locate your business can mean the difference between success and failure. The kind of business you are in, the potential market, availability of employees, the number of competitive establishments and customer accessibility all determine where you should put your business.

Location is critical to small retailers where traffic flow spells the difference between success and failure. Home-based businesses initially operate out of the founder's home and, as they grow, the issue of location becomes vital to their continued success.

Is it better to lease or buy the store (plant) and equipment?

This is a critical question that needs to be considered carefully. Leasing does not tie up your cash as much. However, a disadvantage is that the item has no reseller salvage value since you do not own it. Careful weighing of alternatives in a cost analysis with your SBDC counselor will help you make the best decision.

Can I operate a business from my home?

Yes. In fact, experts estimate that as many as 20% of new small business enterprises are operated out of the owner's home. Local SBDC offices and chambers of commerce can provide pertinent information on how to manage a home-based business.

How do I find out about suppliers/manufacturers/distributors?

A prime source for finding suppliers is the Thomas Register which lists manufacturers by categories in geographic area (to be www.thomasregister.com). Most libraries have a directory of manufacturers listed by state. If you know the product line, a letter or phone call to the companies will get you the local distributor-wholesaler. In some lines, trade shows are good sources of getting suppliers looking over competing products.

How can I hire qualified employees?

Choose your employees carefully. Decide beforehand what you want them to do. Write a job description. Be specific. Having flexible employees who can shift from task to task is required. Interview and screen applicants with care. There are many specific regulations discussing what may be asked in a job interview, so be sure you know what's legal. Remember, good questions lead to good answers. The more you learn about each applicant's experience and skills, better prepared you are to make your decision.

Guide to Hiring Employees

How do I set wage levels?

Wage levels are calculated using position importance and skill requirements as criteria. Consult your local SBDC, local trade association an accountant to learn the most current practices, cost ratios and profit margins in your business field. While there is a minimum-wage set by federal law and by some states for most jobs, the actual wage paid is entirely between you and your prospective employee.

What other financial responsibilities do I have for employees?

You must withhold federal and state income taxes from all wages and salaries, contribute to unemployment and workers compensation systems, and match social security contributions. You may also wish to inquire about key employee life or disability insurance. Because laws on these matters vary from state to state, you should consult local information sources through your SBDC office.

What kind of security measures must I take?

Crimes ranging from armed robbery to embezzlement can destroy even the best businesses. A good physical security system should be installed. Just as important, policies and safeguards must be established to ensure awareness and honesty among personnel. Because computer systems can be used to defraud as well, make sure to keep records and check into a computer security program. Finally, careful screening when hiring can be your best ally against crime.

Should I hire family members to work with me?

Frequently, family members of the owner "help out in the business." For some small-business owners it is a rewarding experience; for others it can cause irreparable damage. Carefully consider their loyalty and respect for you as the owner-manager. A question of paramount importance that you must be able to answer: can you keep your family and business decisions separate?

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It all starts here. Complete the application and submit your request. A member of the SBDC will follow up with you and help you achieve your small business goals -- at no cost to you.
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Funded in part through cooperative agreements with the U.S. Small Business Administration, the California Governors Office for Business and Economic Development, and other private and public partners;  and nationally accredited by the association of SBDCs.