Читать книгу Starting and Running Your Own Martial Arts School - Karen Levitz Vactor - Страница 12

CHAPTER THREE:

L AY THE BUSINESS GROUNDWORK

Assemble Your Team of Advisors

Running a small business means doing a variety of jobs. The life of your business requires you to make professional decisions about everything from finance to dealing with the government, from insurance coverage to advertising. How do you do it all well? You get help.

You need to have a relationship with an accountant, an attorney, and a banker, before you need them. These business professionals have specialties. You will want yours to be familiar with the needs of a small service business.

Don’t be afraid to interview several accountants, attorneys, and bankers before choosing one. Make sure your advisors have experience with the kinds of things you need them to do. Make sure, also, that they have the same philosophy of business you do. For example, if you want to pursue every possible income tax deduction, you don’t want an extremely conservative accountant. If you are running a small business, you don’t want an attorney who works only for multinational conglomerates and considers your small businesses a waste of time. Find advisors who share your values and understand your business priorities. Look at who they have as clients. Does your business fit in with their client list? Then, listen to them when they answer your questions. Do they talk with you in terms you can understand?

If you have students who are attorneys or accountants, you may want to engage their services for your business. Be sure to pay them or offer like-valued services in exchange for their help. If students feel that you are taking advantage of them, you could lose them, both as students and as advisors. Moreover, be sure these students can get away from their business when they’re studying with you. One main reason working adults sign up with a martial arts school is to spend some time each week forgetting their job. Make sure your students who work for you do so during their work time, not during their recreation time.

Accountant

At a minimum, have your accountant do your business income taxes. The IRS tax code makes it difficult and very time-consuming for untrained individuals to do their own business taxes. Having your accountant do your taxes can not only save you time and aggravation but also save you money.

A good accountant can be a valuable consultant not only at tax time but whenever you need insight into financial matters. For example, ask your accountant for a list of the licenses and tax forms you will need to open and run your business. Accountants deal with such things as a part of their job. They should be able to make sure you haven’t forgotten something crucial.

By the way, if you can’t read a financial statement, don’t hesitate to ask your accountant for help. Reading a financial statement is a matter of understanding ratios. Your accountant can teach you which ones are necessary for you to get a good idea of how healthy your business is. (See chapter 12 for more information on financial statements and ratios.)

How do you find a good accountant? Ask business associates, your banker, your attorney. Look for someone who is a member of a state or national professional accounting association. Most of these associations require their members to subscribe to a code of ethics. They also require continuing education, which is crucial for an accountant who wishes to keep up with new accounting methods and the ever-changing tax code.

Accountants typically have a price list for various services. It’s a good idea to get that list before you begin a relationship. In fact, get the list before you begin making financial estimates for your prospective business. Budget enough money to hire a good accountant right from the beginning.

Attorney

Do you need an attorney? Yes. It’s an attorney’s job to know where the legal land mines are. Especially if you’ve never owned a small business before, attorney’s fees will probably be a small price for peace of mind. An attorney’s function is not just to get you out of legal trouble. A good attorney can help you avoid legal problems before they happen.

For most of your needs, you want a basic business attorney, in other words, a corporate attorney who knows small businesses. Describe your business needs to the attorney. If your needs lie outside her specialization, ask for a referral to the correct specialist. Many attorneys work in large practices with experts in several different specialties under one roof. These large firms give you the advantage of multiple resources when you need them. Always have one main attorney representing your interests, though.

When you go in for the initial interview with an attorney, in fact any time you go in for a consultation, have a list of questions. Time with an attorney is not cheap. Do some advance planning. Use your attorney’s time wisely. Doing so is using your own money wisely.

Banker

Of course you will want a checking account with a bank. But more than that, you should have a good business relationship with a bank. A good bank can handle your accounts, provide you with a line of credit, handle your credit card transactions, and even give you valuable business information.

Make an appointment with the manager or account representative of several banks in your area. Tell them you’re opening a martial arts school in the neighborhood and are interviewing banks. Compare overall service, fees, and whether they offer the specific services you need. In your interview with a banker, you are doing three things: First, you are getting enough information about fees and services to make an informed decision about where you want to bank. Second, you are feeling out where you might be able to get a loan and what would be required in doing so. And finally, you are getting a feel for the “personality” of each bank and the people who run it. Based on these three kinds of information, you make your choice of bank.

If you develop a good, long-term relationship with your banker, you can get important business advice from her. Ask your banker to give you her definition of a healthy business. Ask her to describe the telltale signs of a business that’s getting into financial trouble. Remember that bankers make a career of determining which businesses are good credit risks and which aren’t. Ask them what ratios they like to see on small business balance sheets. Forge a relationship with not only a bank but also the people who run the bank: the branch manager, a loan officer, the person in charge of credit card services. Greet them by name when you come in to make a deposit. Make them your allies.

Other Consultants

The SBA supports several organizations whose purpose is to foster small business growth. Throughout the United States, this federal government agency has local offices whose sole purpose is helping small business owners.

For example, the SBA’s Small Business Development Centers offer free counseling, training, and technical assistance to small business owners. These centers are staffed by a mix of government and private sector consultants, mentors, and teachers. Their purpose is to direct you to experienced professionals who can teach you how to put together a business plan, find financing, or set up a profitable business. SBA consultants are available to small business owners who can’t afford to pay a private consultant to help them begin or expand their first small business. The SBA has at least one Small Business Development Center in each state. SBA offices are in the telephone directory under “U.S. Government,” you can check their Web site at www.sba.gov, or you can call the Small Business Answer Desk at 1-800-8-ASK-SBA.

Another service of the Small Business Administration is the network of Business Information Centers. These centers are high-tech laboratories that have computer workstations, videos, and other technical resources for start-up small businesses. Counselors can help you use these resources to set up your business or to improve your existing business. The Business Information Centers are less widespread than the Small Business Development Centers, but more than thirty are scattered throughout the country. Check your telephone directory under “U.S. Government” to see if there is one in your city.

For a novice business owner, one of the most valuable SBA resources is SCORE, the Service Corps of Retired Executives (www.score.org). These experienced volunteers work with the SBA to provide free counseling on most facets of starting and managing a small business. The SCORE program can help you find and supplement the areas where you are weak. For example, if you have experience in bookkeeping and accounting but have never done any management, SCORE can recommend a mentor with management experience. Be aware, however, that SCORE is a mentoring program. It’s not their job to run your business or to do your work for you. They can give you experienced advice, but only you can chart the course of your business.

Set Up the Legal Form of Your Business

Once you’ve assembled your team of professionals, it is time to enlist their help and make some important decisions. Before you put together your business plan, before you start applying for loans, you need to choose the legal form of your business.

The legal form of your business determines the way the IRS and the legal system see you and your business. Your choice will have tax and liability repercussions. In most states, you have five main options: sole proprietorship, partnership (general or limited), limited liability company, C corporation, or subchapter S corporation.

A sole proprietorship is owned an operated by a single individual (or that individual and a spouse). The business is financed by that individual or by loans in the individual’s name. Profits and losses are treated as personal income. The individual is personally responsible for paying any debts and liabilities against the business with his personal assets as well as those of the business.

A partnership is a business co-owned by two or more people. In a general partnership, the partners pool their time and abilities in the day-to-day operation of the business. Any member of the partnership can conduct business as an agent of the partnership. As in the sole proprietorship, profits and losses are treated as personal income, and all partners are personally responsible for any debts and liabilities against the business. A limited partnership gives only general partners the authority to conduct business. Limited partners are not involved in the day-to-day operation of the business and are liable for debts against the partnership only to the limit of their investment. Commonly, if one partner should die, a partnership must be dissolved.

A limited liability company is similar to a partnership or sole proprietorship, but the owners are not personally liable for business debts. Profits and losses are treated as personal income.

A C corporation is a separate legal entity. In other words, a C corporation in the eyes of the law exists as a separate “individual,” independent from its owners. A corporation is formed when papers are filed, usually with the state in which the corporation operates. The owners of a corporation are known as stockholders. They receive a return on their investment in the corporation as stock dividends. The stockholders of a corporation are not personally responsible for debts and claims against the business (unless they have guaranteed something personally). Stockholders are at risk only for the amount of money they have invested. And the corporation pays its own corporate income taxes.

Although a C corporation offers business owners more legal protection than either a sole proprietorship or partnership, it is more complicated and expensive to set up. Some states require an attorney to file the articles of incorporation. And many C corporations find that an accountant is necessary to manage the tax and other financial implications of incorporation.

A Subchapter S corporation, like a C corporation, is a separate legal entity. The owners of an S corporation have the same legal protection as other corporate owners. An S corporation, however, is not taxed as a corporation. Shareholders in an S corporation report their share of the S corporation’s profits as personal income when they file their personal income tax returns. Usually, an S corporation is a simpler financial and legal entity than a C corporation.

Learn as much as you can about the business structure options available to you. Consult with your accountant. Then take your questions and decisions to your attorney. The attorney will do the legal work necessary to set up your legal business structure.

Can you set up the legal form of your business yourself? Yes. In many states, you can file the paperwork yourself without going through an attorney. If you’ve done it before, or if you know someone you trust who has done it before, you may find the process is not too difficult. If, however, you make a single mistake, that mistake can cost you a great deal of time and money. If you plan to file by yourself, consider the possibility of pulling the paperwork together on your own and then paying an attorney to look it over before you file.

The choice of legal form for your business is not necessarily a permanent decision. As the business grows and changes, you may change forms later. But the decision you make will have legal, liability, and tax consequences from the very beginning. Educate yourself and consult with your advisors before making your choice.

Put Together a Professional Business Plan

It takes time and energy to put together a successful business plan. You may look at this outline and dismiss the process as too much work. Doing so would be an unwise decision. A business plan offers five very important benefits.

Why Put Together a Business Plan?

First, a business plan charts a course for your business. Think about the process a new student embarks on when she first begins practicing your art. You, as the teacher, know the progression of skills the student will need to develop. You possess the analytical and intuitive skills you need to assess and guide her development. Now think of your business. Can you see right now, in advance, the steps it will need to go through to develop and grow? Do you know what specific things you have to do to guide and spur that growth? A business plan helps you think like a business owner, to develop the analytical and intuitive skills you need to develop a profitable school. It is the “big picture” you need to have when deciding the course of your business.

Second, you will need a business plan if you want a business loan, whether from a bank or a private lender such as a family member. You will need to persuade your investor that you know how to make your business a success. Your business plan is your most important tool in convincing lenders that you know your business, that you can make money, and that you can and will repay a loan.

Third, it provides focus anytime you need to express your goals to a professional such as an attorney or accountant. You must know where your business is going before you can get effective help in getting it there.

Fourth, it allows you to see before you start spending money whether your business ideas are likely to succeed. It’s easy to dream great dreams. It’s harder to finance those dreams. Do you know how much money it will take to keep your dream school afloat? Do you know how many students you will need to support it? Do you know where your students will come from? Do you know how you will be advertising to them? If you make specific plans and run the numbers before you start spending money, you can decide whether your dream is likely to become a reality. Furthermore, in spending time with your business plan, you’ll see if you have the skills and temperament you’ll need to run your business well. Did you hate putting together financial projections and marketing plans? Did you find yourself procrastinating when it came time to put together cash flow projections and balance sheets? Then maybe you want to be a martial arts teacher, not a martial arts business owner.

Fifth, a business plan helps you keep track of your goals and what it will take to meet those goals. How will you know you’ve “arrived” as a business if you didn’t know where you were going in the first place?

The Layer Approach

One way to put together a business plan is in layers. Especially if you’re still in the process of growing your martial arts school from scratch, you will need to compile a layer of foundational information first. You can fill in the details as you are able to do the necessary research.

The first layer is the dream stage. Go through each point and sketch a qualitative picture of what you would like to see for each point. In other words, don’t spend a lot of time thinking about the numbers at this stage. Without doing any serious research, get a rough picture of what you would like your school to look like.

The second layer is the planning stage. Do some preliminary research, and get estimates. Check out the martial arts schools in town to see what they look like and what they charge. Research your market, and decide who it is you want to teach. Investigate how much an appropriate facility will cost you, how much your monthly expenses will be. Set a tentative tuition rate and calculate your break-even point. Go through each point in the business plan, and do some research. In stage two of the process, you will say things like, “to reach my target market, children and young families, I will locate my school on the north side of town between 5th and 15th Avenue. In that neighborhood I can get a space that will meet my needs for $3,000–$4,000 per month.” This layer of your business plan is for you, no one else. It’s a tool you use to educate yourself about what it takes to make your dream a reality.

In the third layer you nail down your estimates and do a reality check. At this stage you need to be certain in your own mind that you have an accurate picture of what it will take to start and run your business. At this stage you want to know exactly how much money you will need to start up. You need to have a specific space picked out, and you need to know exactly what that space will cost you. You will know, to within 10 or 15 percent, what all your monthly and annual expenses will be. You will have well-researched financial projections for income and profitability. You will have a clear idea of what will be involved in advertising to your target market. In other words, the third layer is a detailed and accurate projection of what your business will look like. Put these projections together as though the life of your future business depended on them. It does.

The fourth layer is for other people to see. These are the plans you show your lender, the SBA, your attorney, your business advisors. By this time, you must be willing to stand by your numbers. If you tell the SBA you will need $8,000 for inventory for a pro shop, don’t expect to change your mind a couple of months later and say you want $10,000. At this point in your business plan, other people need to be able to rely on your estimates.

The fifth layer comes into play after you have started your business. Your business plan at this point in its development includes not only projections but also real statistics about cash flow, actual expenses, actual income, and other figures. This is the plan you need to steer, adjust course, grow a new aspect of the business. Revisit your business plan every six months. Have goals—financial and otherwise—that you want to meet within six months, a year, five years. If you put them in front of you in writing, you will be more likely to make them a reality.

Anatomy of a Business Plan

What information goes into a business plan? Frankly, far more information than can be covered in any detail in a single chapter. If you want to create an effective business plan, you will need to find some more help. The SCORE program specializes in just such help. Books and computer programs are also widely available.

Double-Check Your Plan

A business plan is not something you can put together an hour or two before meeting a loan officer for an interview. For it to be convincing, you need have specific, accurate information, and you need to make your plan persuasive. Look at it from the perspective of the person who will be reading it. Does it help the lender see your business like you see it? Does it say “good risk” to your prospective lender? Make the plan look neat and professional. Be descriptive and complete, but edit sections until most are two pages or shorter. Then, before you bring your business plan to the lending agency, have a friend or business associate, preferably one with business background, look at it. Listen to suggestions with an empty cup and try to incorporate those things that will strengthen your presentation.

Running a martial arts school requires more than just teaching skills. To run a successful school, you must learn to think like a small business owner. Assemble a team of advisors. Then start working on your business plan. Doing so will greatly increase your chances for success.