Frequently Asked Questions

Following are questions and answers either commonly asked or addressed. More questions and answers are at www.mainsbdc.org.

  1. How do I go about financing a startup business?
  2. How do I assess the prospects of a startup?
  3. How can I improve my company's position with respect to the competition?
  4. What does marketing entail?
  5. What is a business plan and why do I need one?
  6. What do I need to know about financial statements in order to start and manage my small business?
  7. How can I obtain help via SCORE email counseling in setting up my business?
  8. What professional help do I need?
  9. Do I need a computer?
  10. How can I do business on the internet?
  11. Should I hire family members to work for me?
  12. How can I obtain counseling from a SCORE volunteer with specific expertise?
  13. What prevents SCORE counselors from using my business ideas for themselves?
  14. How can SCORE help me if I have a business idea that is truly original?
  15. Can SCORE help with a not-for-profit business?
  16. If I am not a U.S. citizen but am a legal resident or Green Card holder, will SCORE help me?

1. How do I go about financing a startup business?

This is the major hurdle in starting a business, and the present times are especially unfortunate for anyone wanting to do so. There is practically no grant funding available to the ordinary entrepreneur. Two special situations do exist, however:

The normal approach of seeking a loan from a bank is especially risky. An out-of-state bank is unlikely to offer a startup loan under any circumstances; a local bank or SBIC agency may offer a loan; with the liklihood, however, of the loan conditional on a guarantee from the SBA, the interest rate will be about 10% or more. Also, at least 20% of the loan must be carried by the borrower, with property and maybe equipment providing collateral for the remainder. In view of the rate of failure of small businesses (about 80% within the first five years), this adds considerably to the risk and may make it hard to sleep at night.

If you do feel you can succeed with the burden of a loan, a bank will want to know how you will use it, how much you want, and how you will repay it. It will want a business plan which contains financial projections, details of the business, and a description of the experience and capability of you and your employees. A SCORE counselor can help with a business plan.

Another possibility is equity financing through venture capital. Usually, venture capitalists are looking for a huge return quickly for their risk and are unlikely to invest in the average business. They would also have major control.

Without a loan or investment from venture capital, you are left with two possibilities, financing from friends and family, and accumulation of the money yourself. These are generally slower and require care, but they have the advantage in the end of offering a greater chance of success. Besides which, you will need at least 20% to finance a loan anyway. If you choose this route, talk to everyone you can, to get ideas on how to proceed. Someone may come up with a thought that could make a difference in your business.

Once a business is running and with a reasonably successful record, a bank loan for expansion is much easier to acquire. That first step, however, is often done best on one's own.

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2. How do I assess the prospects of a startup?

Prepare at least the financial part of a business plan. This requires an analysis of sales and costs. You can do it on a form, available for example from the SCORE office, or with a computer spreadsheet. Your local bank may have a form. In addition, the national SCORE web site www.score.org offers many examples of business plans. Finally, local libraries and the Career Center at 5 Mollison Way, Lewiston, have useful books on business plans.

One of the two tricky part of costs is to be sure that you are including all of them. This is where a form is helpful, by listing items which you may ordinarily overlook. The second is to do whatever is necessary to pare them down; an essential feature of a successful business is to minimize costs. Do you really need a storefront, or might you possibly start up out of your home or apartment (assuming that the town will allow you to do so)? What is the cheapest way to effectively market the business? Do you need employees, or could you start alone or with your family?

Estimating sales is the most hazardous part of the process, but it doesn't have to be too wild. In many cases talking to potential customers can give you a good idea of prospects.

Depending on the business, you might want to consider help from a marketing consultant. If you do, be sure that the person has experience with your concern. One value of a marketing plan is that it will indicate how to compete best with similar businesses. See below for a related question.

More important than guessing how much money you can expect from sales is sales volume. Estimating that and the costs of doing business will give you some idea of a sales price. That will tell you the liklihood of success. A SCORE counselor can help you here as well as on decisions of costs and marketing.

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3. How can I improve my company's position with respect to the competition?

List the strengths and weaknesses of each competitor. Talk with friends and customers, visit the competition, call for information about the products, and see how the competition advertises. Also, become aware of changes in your industry as they occur. There may be opportunities that the competition misses.

With this information, give each competitor a rating on a scale of 1 to 10, for product quality, advertising, market position, customer satisfaction, etc. Use the rating to prepare a strategic marketing plan, which will become part of your business plan. It will help to spot weaknesses in your marketing and customer relations, and it may identify a market niche for expansion.

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4. What does marketing entail?

The "Four Ps" are the basic parts of marketing:

Clearly, marketing involves more than advertising and selling, for example it requires customer research. Consider the following questions:

The answers to these questions are essential to the success of your business.

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

A business plan defines the business. It identifies goals and serves as the company resume. It summarizes the operational and financial aspects of a business. It helps owners make good decisions. It will lend credibility to your employees, suppliers, and customers. If you do not expect to borrow money commercially, a business plan is not absolutely necessary. But it is a plan, and having a reasonable summary of the financial portion makes you aware of where to monitor troublesome areas.

Templates for a business plan are on national SCORE's website, www.score.org/template_gallery.html and the SBA website, www.sba.gov.

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6. What do I need to know about financial statements in order to start and manage my small business?

It is best to work with an accountant in interpreting the financial statements which are relevant to your particular business. You should, however, be aware of three statements which are always important:

For an operating business, all three are necessary, although knowledgeable people may disagree about which may be the most essential. For a startup business, however, a projected profit and loss statement preceded by a break-even analysis should have the highest priority, inasmuch as it reveals whether the startup is worwhile pursuing no matter what the financial resources may be. The second priority should be a balance sheet to determine the need for financing, followed then by a cash flow projection to demonstrate that the details are reasonable.

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7. How can I obtain help via SCORE email counseling in setting up my business?

Visit the SCORE web site www.score.org and click on "Ask SCORE." After asking a question or entering keywords, you will see a list of volunteer counselors (with short biographies) matching your request. Submit your question to one of these; you will then receive a confidential e-mail response, usually within 48 hours. You may request counseling up to three times each day.

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8. What professional help do I need?

Almost certainly you will need an accountant and an insurance agent. You may not need a lawyer, but you should at least talk to some in order to be sure.

The main problem, of course, is choosing professional help. If you are fortunate, a friend can make a recommendation. Otherwise, you should talk to several. Ask them about their experience with the type of business you are in and the size of the business. Ask about the rate they charge. Don't choose the cheapest or the most expensive but rather one whose rate is comparable to the group as a whole.

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9. Do I need a computer?

A computer will probably help your business if you know how to use one and are aware of the problems. It should help your record-keeping and inventory management, it may help in marketing, and it may keep you better informed of the business community. The two major problems are security and getting locked into an investment of continuing expenses which are not worth the benefits.

Two issues of computer security are employee fraud and internet thievery. The first should not be problem with only a few, trusted employees, but the second is a major issue if the computer which contains the company records is exposed to the internet, especially with a permanent connection. Not only your records but also records of your customers are subject to compromise. The best solution to either of these, if they do pose a hazard, is professional advice.

Excessive expense for hardware and software is a common trap. The development of most hardware is driven by gaming and entertainment, and the latest on the market is unnecessary for most businesses. What you do want is reliability, which is often not a major priority for much of today's hardware. For software, you may want a bookeeping program, a data backup program, a spreadsheet, and a word processor. If you feel the need for an additional investment, the expense of a consultant knowledgeable with your type of business may pay for itself in the long run.

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10. How can I do business on the internet?

Consider your reasons for an internet presence. If it is solely for informing the public about your business, the task is not difficult. Most Internet Service Providers (ISPs) offer space and tools for building a web site at minimal cost. You should purchase a domain name (the internet address of the web site), because the address furnished by the ISP is unprofessional. The cost of a domain name is low; run an internet search for "domain registration" to find one that meets your needs at the best price.

Whether you design the web site yourself or hire a professional designer depends upon your skills, interest, time available, and your ability to learn on your own. There is an enormous number of guides and tutorials on the internet; the following links are especially helpful:

If you prefer working with books, avoid any that are more than three years old; the field is changing much too rapidly for older books to be of value. Two possibilities are "Head First HTML with CSS & XHTML", by Elizabeth and Eric Freeman, and "Spring Into HTML and CSS", by Molly E. Holzschlag.

If you want to sell online, you should either work through an internet host with a secure facility for accepting funds or get professional advice. A search for "web host" will turn up an enormous number of possibilities, all offering a different combination of services. Offerings include blogs, forums, marketplaces, databases, photoalbums, etc. The time you spend examining as many variations as possible will pay for itself in the long run. Above all, be sure that your choice has a secure facility for accepting funds. Some browsers have a capability of sensing whether a secure web site meets modern standards. Two that do are Opera and Firefox.

An internet presence can be important, but it is not your sole means for promotion. Include it with a market plan and in a budget, so that you have a balance among the various means at your disposal.

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11. Should I hire family members to work for me?

Frequently, family members "help with the business." For some business owners it is a rewarding experiences, for others a disaster. You have to assess the family objectively. Can you separate family and business decisions? Are the people involved mature? Consider the balance in personal relationships. For information of family-run businesses, go to the Family Firm Institute at www.ffi.org.

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12. How can I obtain counseling from a SCORE volunteer with specific expertise?

Ask the local SCORE office whether a volunteer who has the experience you need is available. If one is not at hand, go to the national SCORE web site at www.score.org, and look under "Ask SCORE" for a listing of e-mail counselors and short biographies of each.

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13. What prevents SCORE counselors from using my business ideas for themselves?

Each year volunteers sign compliance with SCORE's Code of Ethics and Conduct. This code states explicitly that no volunteer may receive a financial benefit from an activity performed as a counselor, and that a volunteer acts solely in the interest of the client.

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14. How can SCORE help me if I have a business idea that is truly original?

There are principles of starting and running a business which are independent of the nature of the business, for example bookeeping, a business plan, and a marketing plan. Presumably you need assistance in these areas, and this is where SCORE volunteers can help. If it turns out that you do need specialized help with your idea, a volunteer can identify the need quickly enough.

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15. Can SCORE help with a not-for-profit business?

SCORE has helped many non-profits start and run their organization. Business practices and marketing experience are largely independent of whether the enterprise is profit-oriented.

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16. If I am not a U.S. citizen but am a legal resident or Green Card holder, will SCORE help me?

SCORE offers free and confidential business counseling to anyone eligible to work in the United States. If you are allowed to work, SCORE will help you.

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