 our third session of the business planning boot camp, which is a collaborative series between a number of local economic development agencies and our wonderful presenter today, Shilya Tell-Wiler-Dinkins, excuse me, Dawkins. Those collaborators are the SBA, the WBC, City of Columbia Office of Business Opportunities and the Small Business Development Center. And last but not least, USC Columbia Technology Incombatant, and I see we have Kate Stewart on with us today, who's the program and communications director there. If you haven't had a chance to learn from today's presenter, what you'll find out is that she's what I call a tax geek. And what I mean by that is she's someone who enjoys understanding the tax code and then clarifying that in a way that allows her clients to be tax minimizers and not tax evaders. And then she'll also help you take your business from a financial perspective and grow it to a point where you can potentially generate some wealth from it. And so I think you definitely end for a treat today as we go through our third session, focus on finance, just to recap of the two sessions that we've had previously. We had first week, April 7th. We focused on the concept and ideation. And then week two, which was April the 14th, we focused on industry market analysis. And then this week, week three, we're gonna go over finance. And then the last week, we're gonna actually talk about the marketing plan and some marketing actions that you can put into place to help you attract clients. So I'm gonna turn it over to today's presenter, Shia Tupwiler-Darkins. Good morning, everyone. And I hope everyone can see my screen. It has been a pleasure over the last couple of weeks just to partake in this amazing presentation. The goal for this class has been to kind of put you, rocking you through the process, as well as providing you with information that will allow you to facilitate your business plan. When we're talking about the concept, we did talk about one of the things that Alan said last week was can you solve a problem? And more importantly, does that problem want to be solved? Once you get your concept on Sheryl and Angela talked about your mission and your vision, and you put it down on paper and you recognize that your concept and your market has a place for you, then the next thing you need to worry about, I'll think about is understanding your business. And when I'm saying understanding your business, that includes understanding your finances. So today is all about taking that concept, taking that those market trends, taking all of your research and then what we're gonna do is we're going to put it in two numbers. I personally look at everything from a financial and a tax position. Last Monday was the last filing date for individual taxes. And if you had not filed, you should have filed an extension, but your taxes actually start January the 1st. How your tax return will flow starts January the 1st and it moves to December the 31st. For the most part, there is little that we can do to change the outcomes of that tax return after December the 31st. So it's important that you look at your business from not only a financial or a strategy, you also need to look at it from a technical as well as a tax regulatory feature. So today is about business planning, understanding your finances. I am Shilia Tuck, Wild Dolphins and I am the owner of Tuck Wild Dolphins LLC. The goal, my goal is to assist small businesses in strategic alliances, strategic leadership, organizational structure, as well as creating a plan for business success. What drives your bottom line on your profit and loss statement and we'll talk about that in the minute has a lot to do with how your organizational structure, your strategies, your mission, your vision, your market research, that determines your profit. And one of the things that Alan said last week that really made me think is that you do want to be, you do want to ensure that your pricing is competitive. However, being the lowest price in the market is definitely a can be a way for failure. So the goal of my firm is to provide financial services, tax calculations and operational support to clients by effectively navigating the challenges of a dynamic environment. The goal is to create relationships that promote integrity, accountability, transparency by educating clients and using pulling methods that decrease taxes and increase growth and profitability. What did I just give you? I gave you my vision for my firm. I think if anyone has listened to me over any period of time, you will know that while I don't agree with all of Steve Jobs scenarios, one of the things about him is he created something or created a product that we didn't even know that we wanted, that we desired. And his thought pattern was the people who are crazy enough to think that they can change the world or the ones who do. And that's kind of like a goal for me. With his partner, Steve, he founded Apple Inc in 1976, transformed the company into a world leader in communications. He made it possible for literally everything that we see now. And Apple is one of the driving force for new technology as well as our cell phones. I'm not an Apple fan. I'm an Android fan. I don't like Apple to be truthful. But his platform is how we have Samsung. I'm a Samsung girl. So when we look at your financial concept, that is a broad picture in that we start with our value, create a concept, create a value proposition. Is it something that someone wants, someone needs and are they willing to buy it? We want to research and understand the market. After you do that, then you wanna validate your concept and be willing to adjust your concept. Alan said last week, I have a great plan. I have a great concept, Google it, because occasionally that great concept that you have is like 300 other people have thought of that same concept but you can tweak it in order to create the value. It's a circle, so to speak. None of these pieces actually are standalone. They actually are the process of building your business. Once you validate your concept and you feel like that it needs, it can go, then you need to define how are you going to create your revenue, set up your, at that point, set up your startup costs and build your team. And we're gonna just briefly talk about, briefly talk about the legal requirements because a lot of times we don't think about that but that is something that we need to always keep in the forefront. We always talk about the marketing. We always talk about the social media platforms and we always talk about financing but we also need to keep in that same criteria what are the legal requirements based on the industry that I'm in. When I decided to go into taxes and create my own company, I had a number of regulatory agencies that I had to fulfill in order for me to get to that place. The first thing I needed to do was contact the IRS to make sure I could get all of the qualifications that I needed in order for me to do eFallon. So if I could not have got that qualification opening up a tax firm would be irrelevant because I can't sell the product. So making sure that you thoroughly understand the legal requirements is critical as well. Validating your concept, creating your value proposition, solving a known or unknown problem are critical in ensuring that your ideas are marketable. The next step is you need to finance that baby. All right, let's talk about basic accounting, just understanding basic accounting. The first thing you want to start off with is your balance sheet. Your balance sheet basically says what you own can contribute to your business, who the business owes and the equity in simple format, assets equals liabilities plus equity. If your assets are higher than your liabilities, meaning that you owe what you owe, your assets and we're going on a personal level, your car, your house, your bank accounts, your stocks, those are your assets. If those assets are higher than your liabilities, liabilities would be your mortgage payments, your car note, then you have equity in your business. For example, your car, when you put it on the books, is worth $20,000. Now, there is a depreciating factor that comes along that we can talk about as well, but for the most part, your car is an asset, $20,000. However, the asset is placed against that liability because even though I drove off the lot with this brand new car that's worth $30,000, I actually owe the bank $27,000, so my equity is $3,000. A lot of times when we do financing, you wanna make sure that you don't have negative equity in that my house is worth $100,000, but I owe the bank $110,000, so I'm actually $10,000 in the hole. So your balance sheet is first, then your profit and loss statement, and for profit and loss statement, I'm talking about your income statement, for those who are sole proprietors, it will be your schedule C. Your profit and loss statement is a moment, a snapshot in time saying that as of March 31st, I made X amount of dollars, I paid X amount of expenses, and at the end of the day, there's either a gain or a loss. That's a snapshot in time. Now you can keep, you can be, you wanna start, you may wanna do it by March 15th or March 30th, but typically your balance sheet and your profit and loss sheets are within a 30-day period. For the most part, your balance sheet, when you go for funding, they'll ask you for your balance sheet as of the year end, and then they want you to update it as of March 31st or as of April 31st. Your profit and loss as of the year end, then you do it on a month to month basis. Your cash flow statement is something totally different. While the balance sheet and the profit and loss statement affect the cash flow, the cash flow is a continual, meaning that it moves from one month to the next month saying that last month, I made a profit of $1,000. So my cash flow says that I have a profit of $1,000. This month, I lost $1,500. So my cash flow is a negative $500 because that's a continuation. Your cash flow is actually of all the statement, your most important statement because it shows the viability or the viability of the liquidity of your firm. All right. The question came last week about debt to equity or debt to income ratio. I don't remember what, oh debt to equity, the debt ratio. So these are, when you go and apply for a loan, your underwriter is gonna look at probably the first two, the liquidity, which is your current ratio and your cash ratio. But we'll start with the profitability. It's just dividing your profits by your revenue. So if your profit is $10 and your revenue was $100, then your actual gross profit ratio is 10%. The operating ratio is another thing that we can talk about as well. But typically for the most part, you want to actually pay attention to your gross profits, pay attention to your return on investments and your return on investment is says, I won't shield you to invest in my business. I need her to give me $500. The first thing shield you is going to want to look at is how am I going to receive any profit on a return on investment? We talk about cash ratio, that has to do with your cash and cash equivalent. Cash, when I say cash equivalent, and let me back up with a balance sheet. When you're looking at a balance sheet and you're looking at your asset, the first thing you always deal with is what is your cash or what is your cash equivalent? And as the numbers move down, what happens is it means that it's the least likely to be converted into cash. Cash and cash equivalent equals money's in the bank, your savings account, your money market. If you have stocks, accounts receivables, all of those things for the most part should be easily converted into cash. Then you look at other things like your inventory. Inventory typically is next. That's something that you want to convert into cash or it's a way of converting it into cash where you look at your fixed assets like your computers, your building, your automobiles, your goodwill, all of those things, those are less likely to be converted into cash. For the most part, when we talk, and then the last piece of this is leverage. Leverage is quick ratio is another one that they look at. That's the current assets minus inventory divided by your current liability. When you approach a lender or investor, they look at several ratios. Some of the ratios are self-explanatory, others need an explanation. A cash ratio is considered good if it's between 0.50% up to a dollar. A dollar, we're talking percentage, I'm sorry. Any number greater than one typically means your business is healthy. The higher the debt is to your equity is also better. On the other hand, if you're the lower, I'm sorry, the higher the debt to your equity is not good. However, on the other hand, the lower the debt ratio is better. So we're looking at the debt ratio, anything under 0.40 mean my total liability, I owe $20,000, but I've got $100,000 in the bank. So my debt ratio is 0.20. This is a good place for questions. Hey, Shilia, we had someone ask if you could say the equation again that you just mentioned. The debt ratio? Okay, I can go back to that one. Total liabilities divided by total assets. So let's take that card that we bought for $30,000. That $30,000 is going to be for just for practicality is going to be, so I'm gonna take that $30,000 and that's my numerator, my denominator. I had to think about that numerator and denominator. Denominator. However, my, I owe on that card $20,000, so that becomes my numerator. If I did, let me make these numbers round. So I have a card, it's $100,000. I would never buy any kind of card for $100,000, but that's just so we can round it. That's my total assets. If my liabilities on that asset is $50,000, and that's 0.50, which means that I have a higher debt ratio. Now let's take that same $100,000 and I only owe on that $30,000, then that's 0.30. And I'm simplifying these assets because you know assets typically have a, they are depreciated. So if I bought the car in 2019, and typically cars are depreciated a five to seven years, in 2022, that car has depreciated. So that same $100,000 has to show a decrease in value. And you want that to, so your payments should be going down as well. So what I'm saying is over simplifying it, but as we move forward, I hope I can give you a little bit more explanation on it as well. Did I answer the question? Yes, she said that she understands and she said, thank you. The other question was asking if you're going to be addressing seed financing and how to approach investors for that seed funding? I am going to address it on a peripheral level, but I will show you what you need to do in order to at least be able to approach any investor. Any other questions? That's all the ones we've gotten in the chat so far. So now someone is talking about seed investment, or when you go to a lender, you want to understand what your startup requirements are. That would include that you have validated your concept, you have researched your market, you understand what barriers, regulatory, legal, what barriers you need to cross in order to get there. At that point, you want to take that information and create what are your startup requirements. I will say upfront, you need to have a clear understanding of where you're going in order to be able to understand how you're going to finance it. When we talk about your business plan, and this is me, Sheila, being honest, when I'm working with a client, I need to understand where they're trying to go in order to provide them with strategic leadership as well as how to approach someone when it relates to your business or if you need financing. So the first question I will ask is have you done the narrative portion of your business plan because the narrative portion drives what we need to have our startup requirements are. So this is Sheila. I know that I am going to need website and e-commerce, and then let me say this, when I started my business, I did a scavenger hunt through my house number one. I said, okay, there's a desk over there that, well, no, it was the sofa tables that we put behind the couch. That became my desk. I have a computer, take some lamps out of some bedrooms, set up my office, which meant that even though I needed some additional things such as computers, et cetera, I already own certain things. So the goal is to, if you're just starting off to try to minimize what you have to spend that we call capital expenses, because capital expenses are indirect costs and they're not necessarily generating business. If I have a desk, whether I'm sitting at the desk doing homework or whether I'm sitting at the desk servicing a client, it doesn't matter. So this desk theoretically does not provide, it doesn't have anything to do with my producing income, so to speak. So you have to look at capital expenses, what is required in order for me to make money, that's where your funds need to go. What is required in order for me to set up, did limit that. The thing about the e-commerce situation would be that, okay, so I need space to meet a client. I don't necessarily need office space. So I had to look at it from a different angle. So I didn't need any land, I didn't need any real estate because I am not signing up with a lease, then I don't need that. Now, if you are selling product, you may need your real estate and your buildings and your lease improvements, but because I did not need that, then this is, I didn't have to use that. The top of your first, the things with your first requirements affect your assets. So my website and my e-commerce, I had to have a website, I had to have certain requirements as it relates to security, yeah, cybersecurity, regulatory stuff. So I had to, as I priced that out at 2,500 dollars. I needed robust computers. I needed several printers. So I priced that out as equipment. Now, if you need some, I mean, for me, equipment meant computers. Furniture and fixtures, I needed things like furniture fixtures, one of those file cabinets, file cabinets, printer stands. I needed a bookshelf, so I spent 1,500 dollars. Then I just put others because there are little, really things that I needed in order for me to be able to take care of that. So then, so that became the first part of my process. This is what I need in order to not open the door, but in order to say that I'm in business. This is the basis of your, let me just say this, your balance sheet or not, and this is where most people will say, why spend X, Y, Z to start up my business? Can I write it all? In truth, the answer is no. It's not considered an actual expense. Now, there are some regulations that will allow that. You can take the 179, section 179 allows you to depreciate everything all at one time. There are some new tax laws that came in 2019 and 2020 that allowed individuals to take capital expenses and depreciated totally. I will say this, if you write off all of your business, so let's say you're one, you didn't make any, well, you made a little money, and you have a talking schedule C and you have a gross income, I'm sorry, net income of $600. So you notice that you have to pay self-employment tax. 600 or 400, I think it's 600, no, $400. So you have to pay self-employment tax. Then you look at, well, if I write all of this off, or if I write off, let's say the furniture and fixtures, that gives me a negative number so I don't owe any self-employment tax. Next year, you made, I don't know, $20,000. So when you're thinking about how you depreciate and how you amortize, you always wanna look at both the state implications and if my business is more successful this year, will me writing off things last year increase my taxes for the following year. And I'm gonna say that again. So I write everything off this year. I make small profit. Next year or I'll say 2021, just get the taxes for 2021. This year, my profits increased to $20,000. But I've written off everything in 2021. So that $1,500, $2,500 may reduce my taxes in 2022. So there always has to be a financial plan and a strategic plan, as well as a state plan, looking at how does this implicate, how the, what is, if I do something with the state, how will that affect both my federal and my state return? All right, let me go back up. Okay, so we're still talking about startup costs. For the most part, we don't think that we need a salary when we start our business. We don't think that we need a salary. If you are working for yourself and you have mortgage rent, Carnot, whatever that you have to pay, then your business is not only gonna, I'm sorry, your business will not only have to finance itself, it has to finance your living expenses. Note for tax, if you have a schedule C, you cannot pay yourself wages, which means that whatever you take out is considered a owner's draw. So it cannot be deducted from the bottom line, but you still need to account for that. Prepaid insurance premiums, are you going to hire? Do I need workers comp? I needed errors and omission insurance. I needed that. If I have a business where I'm in a, let's say a storefront, do I need liability insurance? Ensuring that that's like one of the first things that you need to consider. Your legal and accounting fees. It is a good, a wonderful idea to meet with your legal profession. And I know that the Women Benedict, I mean, Benedict's College Women's Business Center has legal assistance provided that you are part of the, are vetted in that group, where you can meet with an attorney to review your documents. You need to have your seal. You need to ensure that all of your documents in place. I did a DIY because, you know, I'm smart. And I think I know what I'm doing. Then I had my attorney friend look at my paperwork for my LLC come to find out. I had checked the wrong box and the wrong box said that if anything happened in my business, then my personal assets could be attached. I didn't read all of that. So having a good attorney in place to take a look at them. Let me just keep a breath sometime. Do you need rent deposits? Do you need utilities? What supplies are you using? What type of licensing that you're using? And anything that's $150, you always need pens, paper, whatever. And a part of your operating capital is what funds do you have to work with? So if we go back to page to the first one, we say that we need $10,000 just to open the door. Then we say that we need $6,965. So that's the total of everything I need in order for my business to stay afloat. All right. This is, and I didn't mention this. I'm sorry. This is the score, the score Excel spreadsheet. And I'll walk you through that as we get to the point. Did we send that out? Okay. Okay. By the way, I'm using the score Excel spreadsheet. I think we did show you. I think we sent it out, sent the other document out. Okay. So when we talk about source of funding, regardless of whether you use seed funding, I think there is cabbage, American Express, SBA, whatever your family and friends, what they want to know first of all is, what do you bring into the table? So even though my owner's equity does not, does not meet, does not, I'm sorry, all of my owner's equity is not cash because I have my office expenses. I mean, because I was able to set up my office, et cetera. 50% of what I need, I am funding myself. If you can fund 20%, you can do that as well. But you want to, when you're talking to an investor, a banker, seed funding, however you want to find this, the first question they will ask is, what do you bring to the table? Now, I needed some outside investor. That happened to be my husband, so, but he's still outside. So he gave me 1697. Now, the other part of this is I know that I am going to me, I'm going to put some stuff on my credit card. So that's 40%. Your total source of funding needs to be 100%. But then as you look at what I'm generating here, the owner's equity doesn't have anything. That's what I, that's what I own. There's no loan rate involved. There are no monthly payments. I didn't apply for a commercial loan or a vehicle loan. But if you notice, if I financed 40% through my credit card, that's $6,786, my interest rate is 22%, which means that before I even open my door, I have a monthly payment of 187. And those are things that you have to think about as well. Are there any questions that this want? Oh, there's I didn't see anything. I didn't see anything. Okay. So your startup requirements equals your fixed assets or basically on your balance sheet would typically are capital expenses. They don't generate any income. Your operating capital is what you need to generate income. So if you are making a widget, then what you're going to include in your operating capital, what inventory you need in, what inventory you need in order to create that operating capital. And then the next part of that is your source of funding. And that includes you, your family members, your investors, seeding, banking, and so forth. Now, after you figure out what you need in order for you to move forward or open the door, now you've got to figure out what you need in order for you to be successful in the first year. You want to start off with the first year. Recently, when I look at my expenses, excuse me, when I look at my expenses, I'm sorry, forgive me. I recognize that my expenses are $2,500 a month. I know I'm going to need that in order for me to be okay. So I'm the first employee, I need to make $2,500 a month. That is $30,000 a year. But if you look at the total salary it's $37,399 a year because in that income, I've got to include my social security and Medicare. And this is when most entrepreneurs don't pay attention to the bottom line, they don't put in the self-employment tax as a part of their, as a part of the gain. So at the end of the year, when you file your taxes, if you made $30,000, the first thing that's going to hit your taxes would be the sources, I mean, the income subject to self-employment. And that piece cannot be changed. I mean, you can have credits up to that. But that, so when I'm looking at the $30,000 that I want to pay myself, even though it's going to be considered an honest draw, I also recognize that of that $30,000, I need to have somewhere stored in my account so that when the tax man comment, which he will, I'll have funds to pay for my, to do my payroll taxes, self-employment taxes. All right, so we figured out what we are going to start up with. We figured out what our needs are as it relates to payroll. Now we have to determine what our cost, I mean, what our products are, what our products or services are going to be. This is where competitive pricing comes into play. This is where your market research comes into play. This is where you understand the trends and your competitors today, as well as your future competitors. Pricing out your product line. This is what I do. I said that in order for, so I priced it out, audit preparation is $500, technical advisor, $1,000, income reconciliation, et cetera, et cetera, et cetera. And if it's something that I need to do hourly, that's $75 an hour. Okay, for those who serve, for those who sell product, your price per unit, let's say it's $500, your cost of goods sold is $100. So that's my margin. Typically when you're talking about product, your margin isn't that high. But for those of us who are in service, we also need to determine what the price, what the cost of the indirect costs and direct costs. For service organizations, your labor costs typically is your highest cost because it is what drives your business. Pricing out your product line or service. Alan talked about this on last week. Is it a cash cow or a poor dog? The cash cow means that we're making money. The poor dog means that it's just draining space. When we talk about blockbuster last year, blockbuster was doing great. I mean, it was a bunch of video stores did. And I remember had to, you know, you go on Friday nights, pick up your video, make sure you take it back on Monday so that you could get it taken care of. Actually Netflix went to blockbuster and said, look, we want to make this a leg of our business. And blockbuster said no. That cash cow became a poor dog and they eventually went out of business. You have to always pay attention to trends because product or services, they go in wage. Introduction, adaptation. Then do we need to add something to it so it can continue to be marketable? Or is it something that's on the downswing? Your business plan, as you research in, and when we say research, we mean research all the time. Understanding where your trends are. Two years ago, three years ago, a tax return was easily $1,000 because you had to do it manually. Now a business tax return is probably $500. And if I don't pay attention to the trends, then I don't know what the competitive rate is. All right, after you priced out your product, then you want to make an adjustment on what is your growth rate. I want my growth rate to be 15% from year one to year two. I want my growth rate to be 25% between year two and year three. Growth rate is not a fiction number. It's not a number in the sky. It's you doing market research to determine are there products that I can add to this? Are there products that I can leverage off of? I did this before inflation actually came into play, which means that because inflation is a part of the process, my growth rate for it from year one to year two more than likely will be lower. So it is a good idea every year to take a look at your profit and your loss. If your business is growing relatively fast, then you want to do that on a quarterly basis. You want to make sure that you're paying attention to trends, ensure that you have enough data, as Alan said last week, have enough data where you can make some kind of choices as it relates to what it is that you need to do and then make those adjustments as it relates to your cash flow. And I hope you guys can see this. What I did was I, and I'll show you the spreadsheet in about 10 minutes. After I priced everything out, after I paid attention to my gross margin, then the system actually, or that spreadsheet actually calculated it based on what I feel should be for year one, year two and year three. And then it's telling me the units that I've sold, what my margin needs to be, where do I want to go? And then you have to continue to go back and forward to pay attention to the process. Yes, we need to talk about this. As we are in business, two things that drive your cash flow accounts payables and accounts receivables. You want to extend your accounts payables to when you are working with your vendors. I mean, typically it's net 15, net 30, pay those within 30 days. Also, you need to pay attention to your accounts receivables specifically if you are in services. We talked about government contracts, government contracts are the bone, but they take a minute for you to get paid with those. So understanding what your ratio is to how many of your clients pay on time, how many of your clients pay within between 30 and 60 days. And then you always want to allow for what we call bad debt. I did a tax return, I charged the person $285. It's been four months, they haven't paid me. That's probably going to end up being bad debt. The same thing as it relates to your accounts payables because this affects your cash flow as well as your balance sheet. Going back to the front end, we looked at what I desired my minimum cash in the bank that I should have, which was $3,500. And then I have a line of credit, which is my credit card. That's the interest rate on, which is the 22%. The other thing too is you want to pay attention to your tax rate. If you're a corporation, your tax upfront, if you're 1120 S, which is a shareholder, that tax rate is predicated on your personal tax rate. If you're LLC, your income subject to self-employment is a separate taxation is typically around 0.765%. There are some other calculations that are involved. But you also, I mean, you want to make sure that you pay attention to your tax rate. After you've gone through and priced out your product, then you want to look at your total expenses. And I'm not going to be too long on this because I mean, most of us know our expenses. And a common question people ask me is can I write out my travel expenses? And I want to answer that question. If your business, or if you are going, let's say I'm going to a, I'm going to a conference, a tax conference in Atlanta, let's say in July. So my cost of that conference is $570. The conference is Tuesday, Wednesday, and Thursday. So that's hotel fee. And I'm just rounding up a number, $500. That's another $500, that's $1,000. I'm going to drive there. So we're talking, let's round it up to another $100. So we got $1,100 so far. That is what, that you can write off. But if you decide that you want, well, and I will, I'm going to decide that I'm just going to stay until Atlanta until Sunday. That conference is over on Thursday. That means that the expenses for Friday, Saturday, and Sunday, those are not necessarily travel, well, no, those aren't business expenses. Some of the things that the IRS really hone in on for small businesses is your travel meals and entertainment because we tip to click and we'll dump some stuff into that number when it's not necessarily business expenses. As it relates to your home office, if you are employed by someone else, even if you worked at home during the pandemic, you cannot write that off. However, if you are self-employed, you can write off your home office expenses. I typically take the simplified because it's just easier and there's less to explain. Anything that the IRS gives you the simplified method of take that unless there's clear documentation between the business expense and the home expense. Yeah, yeah. Yes. Can you repeat that again? Because I think that was really good advice, just basic general advice about the simplified. Oh, okay, so there is specifically with the Schedule C, you can take your home expenses up to your profit. You can actually take your home in the form as the 8829. You can actually carry some of those expenses over. I typically use the simplified method because it does not require a whole lot of explanation. My office is a 200 square feet. My home is 2187 square feet. I divide that 200 square feet by the 2187. There is a simple, click the simplified method. And then I don't have to explain about, okay, did I use, how many utilities did I use was the depreciation on the home taken into consideration. It's an easier route. And I will say this about vehicles. And I'm kind of veering off a little bit. So let me get back to where we are. When you take vehicles depreciation on anything, that typically signifies that it is a business asset. If you abandon that asset, sell it, et cetera, that depreciation that you were able to take, you have to recapture that as ordinary income. So for mallet, take your mallet easier, no recapturing income for home expenses. Let's go simplify. And I'm going to just put it, put it in all again. What I'm gonna do now, because I think the rest of this is about putting it all together. So what I wanna do is just stop sharing and then open up the, open up the spreadsheet so we can take a look at that for a second. And while I'm doing this, if there are any questions, please let me know. There was one question a little bit earlier that was asking where in the startup requirement spreadsheet would you place marketing funds needed or estimated? I know the expenses that you put the marketing and advertising together, but I think- I'm gonna show that to you right now. Okay, perfect. I'm walking you through the spreadsheet. It is, I was actually quite impressed to be truthful. You could fill out this out as well. You got that and you have to use the one, two, three, four for any, excuse me, to unlock any of the spreadsheets. So the starting point, basically, is when we're talking here, is this is what I did. That is what we want to enter all of our information in as it relates to what we need to start up. There are a lot of, you can click on your links here to get to your loan and your depreciation schedule if you wanna get that intense. Everywhere you see that there is a, so let me do this. If I take this number out, if you notice, that number changed, that when you see the red, it actually is telling you that you need some more funding. What did I, oh, I thought that was funny. Sure, can you zoom in a little bit? Zoom in, oh, yeah, sure. Thank you. Okay. So if you notice, I changed this to 30%. The 10%. So it's telling me that you require more funding. And if I change that back to 40%, it's telling me that you're fully funded. If you are a new business, then you only need to deal with the fixed assets, the operating capital, and the source of funding. If you are an existing business, you can use this as well by adding in whatever cash you have that's on hand. And the system, I mean, and the spreadsheet itself actually does an excellent job with walking you through the process. So this is what we're dealing with. We're dealing with starting my business. If you move to QuickBooks and you fill this information out, you can very easily put this information into your QuickBooks. And that's a whole nother class in itself. And let me see if I can zoom this out. So when we started off with our employees, I gave it the, you know, if you have more than one employee, you'll have to do that as well. What's the estimated value? That's my estimated month. And then it also calculated my taxes. And at the end of the period, it gave me the annual period. So starting off with the number of employees with a full-time part-time, adding in those amount, the system is going to actually calculate the rest of it for you, as well as calculating your social security taxes. So I'm paying myself $2,500, but my actual expense on my income statement is $3,000. $117. So then it kind of takes that information and I'm not going to go so far. It takes that information and it forecasted out for you for the three years. Okay, so let me go to, okay. So this is my sales. And as I took my product line, I actually priced that out based on one month. You can actually do this on a 12-month period or you can do it month to month. For tax accountants, where is my tax returns? For tax accountants, which is another thing I need to bring up, for the most part, you need to understand the workflow of your business. As a tax accountant, January and February, slow. March, April, I've got more work than I can deal with. May, June, July, slow. After the kids go back to school, then I've got more work to deal with. That is where you just can determine gaps in your business. Do I need to incorporate other things as well? So if you look at my tax returns, they're not set out by every, I mean, they're not set out by every month. They're actually, I'm looking at the flow of my work. So start in by pricing out your product. What is my sales price? What is my cost? What is my cost of good? And if you're a service organization, you really don't have cost of goods, but $75 an hour, it's gonna take me two hours to do it. $150, that is what my margin is as well. All right, and then it moves it to, and most of this stuff is calculating. So I won't hold it, talk to you very long. After that, then it starts to calculate because I told it that I wanted a 15% growth in year one and I wanted a 25% growth in year two. So then it actually moves it so that I'm able, so the system is doing that for me as well. There are some additional inputs that I wasn't, oh, this is where I talked about my accounts receivables. So it goes through each piece. Some of those are where we start off with, where we have to add the numbers to it. Others are where we want to create the growth rate. This intel is going to create your cash flow and it goes year one, year one to three, and then it provides you a income statement and those are generated. The last thing I really want to talk about is your monthly break-even. After you complete, and let me enlarge this as well, after you complete all of the information, all of the data input, the system will tell me that my monthly break-even amount, in other words, in order for me to recoup my indirect costs, my labor costs, my direct costs, I need to make $5,637, which means that this is my total fixed cost, divided by my gross margin and my total sales. That's my break-even. How much money do you need to make in order for you to start at zero? So anything over the $5,637, theoretically, is profit. And this is the last piece that I am going to talk about, well, so as we go through the process, those ratios that I told you about, those, that's provided to you as well. And I'm sure there's a whole another class in the class that I'm going to talk about as well, but I'm sure there's a whole another class in excess. But let's just talk about what the system, after I did this, what the system actually told me that I needed to do. And this is the diagnostic too. Can everybody see this? Can you see this? Okay. So based on the industry. We can zoom in a little bit more though. Okay. Please, thank you. Okay. Based on the industry, my owner's cash injection into my business is 50%. The system says that it is reasonable. It's saying that I'm requiring this. It's telling me that that is reasonable. It's telling me that my interest rates are reasonable. It's telling me that my margins. Okay. So this right here, look at what it says, owner's compensation may be too high relative to the profitability of the business. So it's telling me that based on the money I'm making, that my labor costs for shield, you're taking care of myself is too high. It's telling me that, and then you can go back and adjust. That's what I'm saying. And then it's telling me that my profit, my profitability doesn't seem reasonable. That was one thing I wanted to see. One thing that it says, what was something in here that I, that's what I'm saying. It's telling me that my balance sheet is not, that I'm off by $2,500. And it's saying that my balance sheet is not in balance. So going back to my starting point, I need to make sure that my balance sheet is in balance. So what I would do, if I was doing this on my own, I would save this spreadsheet to my desktop and create a copy. That way you can break it, whatever you need to do so that you understand what needs to take place. And then after you finish it, you can put it into your, I'm sorry, put it into your, your, what are we working on? Business, food care. Yes. Yes. So do you think, based on what you just said, I think that's a really good example. Do you think that that's a great way of also doing scenarios, coming up with scenarios? It is a great way of coming, yes it is. It is a great, great way of coming up with scenarios. So a lot, I wanna say this correctly, a successful business has to have three things. One of them include insight and being able to understand what is scenarios. That comes from your, for understanding your market. The other thing is strategies, objectives, policies and procedures as well as quality control. The insight, so you can have all of the policies and, oh and then creativity. You can have all of the policies, processes, strategies, et cetera, et cetera. But if you don't have insight and creativity, your business will fail. So will you say that again because those are really good points. So you need insight. Insights. You need policies and procedures. Policies and procedures. And you need creativity. You say strategy and control too. Yes, so your strategy and your objectives and your goals drives your policies and your procedures which includes quality control. That needs to be standard in the box, understanding break even, understanding what drives your profit, understanding, that's a box thing. Follow those goals. That's not in the, that's not a out of the box thing. That's a, those are your non-negotiables. Those are your non-negotiables. Your insight is directly related to marketing, strategy, I'm not saying marketing, trends, understanding your current and future competitors. That requires vision. That means you need to have, you need to be in the clouds, doing the birds eye view. Then you need to have creativity in order for all of this to flow. Okay, okay. Not having vision is detrimental. And I'm going back to church on this one. Yeah. The Bible says. Alana said preach shield you. The Bible says write the vision, make it plain so others can run with it. So I've got insight. I'm writing a vision, which is my business plan that controls my, that controls my operational policies and procedures. Then the next thing I gotta have is my creativity. So insight and creativity equals policy and processes. Sure. Will you do me a favor and bring up your spreadsheet again? Sure. Cause I wanna emphasize something you just talked about in relationship to your spreadsheet. Go back to the page where it had the diagnostics on it. Yes, sir. Please ma'am. Not a problem. And so what I wanna emphasize something she said is that she talked about being able to control, quality control. And one of the benefits of this diagnostic is that if you're thinking about some of the things that share, so it says on a compensation is at the upper limit. Owners compensation may be too high relative to the profitability of the business. But then you take into consideration that the owner's cash injection to the business is reasonable, right? It's 50% value, right? You may work those things opposite from each other, right? And so if you have significant amounts of resources to put cash into the business at this point, what you may do is reduce your cash injection and help me if I'm thinking about this correctly, Shay. You're right. Right, reduce my cash injection, which will make the cash that I'm putting in the business lower from a personal perspective. So I have more cash to address personal issues, which means I can then lower my personal cash flow, right, then I'm taking my personal compensation out of the business and see how that affects the business's sustainability in that first year, right? That is absolutely correct. Okay, okay. Absolutely correct. So, and you know, the business, being in business means that you, and I wanna say this means that you will make mistakes, means that you will say that there's a product that's absolutely amazing and it may fail, but the goal is always keeping your hand on the ball. And one of the things that I have is a coach that typically we meet every Friday from three to four. The coach helps me because when I'm in the weeds and I'm working and I'm trying to get a client and I'm doing all of this, the coach pulls me out of the weeds and then puts me in a place where I'm taking the airplane, taking the airplane view or the bird's eye view because as business owners, we can work ourselves out of business, which means if I'm doing everything, number one, if I'm doing everything, number one, and I'm trying to satisfy my clients, number two, I lose my vision. My coach and I, we went back, and this is, you know, honest. When I first set up my business, I said that 10 clients is what I know that I can successfully take care of, and I'm not talking tax returns, I'm talking about bookkeeping, et cetera, et cetera. 10 clients was what I could successfully take care of on a monthly basis and give them a quality of service that they need. We looked at where we are today. It's time for me to bring somebody on, at least on a part-time basis, because my client, Shilya, if Shilya continues to work on the additional clients, then my business stops because I can't market anymore. I can't see the vision anymore. So you have to always, in addition to strategies and all, you need someone that pulls you out of the weeds so that you can run your business, work your business, but keep the vision of your business moving as well. Because businesses are moving, business is a moving target. All right, that's a good point, Shilya. You made me think about something. So Shilya mentioned market research. That's one of my topics. That's what I really, one of the things I like. So a lot of times the question comes up with, how do I know when I need to hire someone or bring somebody on? One of the ways that we take a look at that is we look at, from a percentage of sales perspective, in relationship to your labor costs, right? So Shilya talked about when we were using that example about her and labor components. One of the things is you can look and see, compared to others in the industry, your size, where from a percentage of sales does your labor cost compared to theirs, right? So for example, if you're looking at one company, or you're looking at a few companies, and all of you all generate $2 million in sales, and it's for a size company with five employees or less. And you see that their cost is at 10% of sales. And you're looking at, and then you say, oh, well, my cost is at 15% of sales, right? You might be paying too much, or you might have too many people on staff that are not doing as much work as they could be doing based on your labor pool, right? And by versa- Can I piggyback on that too? So there are methods in working with someone like Shilya and myself or some of the other entities can help you kind of begin to back into some of that. And that's one of the benefits that she's talking about of having outside eyes, someone that can provide an injective view to your business. Shilya talked about having your head in the game, right? Your head in the game and eyes on the ball is one of the things I say. Shilya, what would you say about percentage of sales, labor pools and things of that nature? What advice would you give her? Before I address that, let me say this. So, and not being flippant, but I am in role age and I have an MBA, I'm working on my doctorate. When I work on something, my fee is $125. Well, I charge somebody for that as well. I can bring somebody in to do my bookkeeping at what, $18, $20 an hour. So then that means that my labor costs realistically is going down even though I'm still involved in that. So that's one of the avenues you look at as well. Priced yourself reasonably based on my credentials, the going rate for me giving you services is $175, regardless of whether I charge you that, that's the going rate. So when I'm looking at that from a competitive scheme, the theory would be that if I bring on someone where I can charge the client $35 or $40, you know, for whatever it is for an hour, I can actually address more clients based on that number. So opportunity costs comes into play with pricing your price, being honest about your price, being honest about your true labor costs and saying that, okay, if I was running, let's say a PwC, who would I use to do this work? I would bring somebody else in that I could pay $20 an hour for to do this work. So you have to look at it from that point. I would say that if your business is at a profit of 20% provided that, and we're talking, you know, $75,000 more, and you have the, wherewithal to bring someone in, you can do that as well. Alternatively, doing busy season, call Indeed, call one of the temp agencies that takes all of the money from the company that takes all of the stress from me as it relates to workers comp, 941, South Carolina, all of that stuff they take on that piece and bring them in for while my busy season is on. So there are independent contractors, there are ways to get around it. What I will say though, I think we had a class, maybe, I don't know, this class or the other class, recognizing the difference between an independent contractor and an employee, and that's a whole, another class. That's a whole ongoing conversation. Right. And you covered a lot of good things. You talked about managing costs. I have a question, but I wanna defer my question to see if there are any other questions in the chat before I go, because we're at 12, 11, 23 right now. I did not see. I don't see. So, so, so should, you know, early in business, you know, if a person hasn't really, you know, been exposed to how businesses operate, you know, what you may see, you say, may see co-mingling of money, right? You know, so can you talk about the importance of, you know, having separate accounts and separating business and personal expenses, you know, and some of the challenges that may exist, but you know, definitely why it's extremely important that you do that. Okay, so, so contrary to popular belief, the IRS does not require that you have a separate bank account. It does require that you have separate books. So, while that, that's the code. On the other hand, on the other hand, I like shoes. I like shoes. If you've heard me talk, I love shoes. I buy shoes that I don't have nothing to wear with. I have shoes in my closet that I need to find something to wear with. If I'm walking around with my business credit card in my hand and I don't have my own woman, if I got all my money in one account, even though that $500 belongs to the business, my personal nature, I'm buying those shoes. So, what I did was I did two things. Not, I mean, Bank of America, I use choice. They have a really good program for entrepreneurs. So, I set up a bank account with choice with VBNT at the time. I did not get a debit card with that bank account. Everything that goes through their bank account has to go on either, you know, ACH or actually ACH. I took one of my credit cards that I rarely use and I put all my businesses, expenses on that as well. You don't have to have QuickBooks. You can use Excel. However, you need to get a QuickBooks, a Xero, whatever, a Quicken, one of those so that you have, QuickBooks will, if you enter the information in, it will create a balance sheet for you. It will create an income statement for you as well. One of the things that, and this is actually true. In 2017, the IRS did close to 80,000 audits. 10,000 of them, the IRS, IRS was able to get money from the client because, or whatever reason, it was favorable to the IRS. The balance of them, it was favorable to the individual, which means that the individuals did not have accurate records when they did their taxes. They lost out. You can get a refund with them. The IRS can audit you back in, what, 1999 if you were living then. And I'm gonna answer, do we need a business coach then? Okay. The IRS can audit you since the first time you've been doing taxes. If you owe them, they can continue to find you forever. You can only get your refund up to three years, which means that if they audit you in 2017 and they find out that they owe you money, theoretically you've lost your money because the refunds are up to three years. Businesses fail not only because of bad concepts, they fail, the major reason business fails are because of bad records, no processes, and the lack of organization. So those are things personally that you need to have. And if you are starting off now, create or find a system that you can work with. So when your business blows up, because that's why we're here, we want you to make money, you have accounting principles and practices in place. The business plan talked about all of that before the business plan talked about all of that. So we need to do that. And then I'm gonna answer this last question before we go, do we need a business coach then? No. Who do you know that you, work with that know more than you do? My friend, I call him my coach, but he really is someone that I know does processes and policies. So I'm using the people in my circle to ask questions to, you don't have to pay for a coach. There, Alan is a coach, I'm a coach, Cheryl's a coach, Kate's a coach. There is so much free information, SBA are coaches. So don't pay for a coach, please. And Alan and Jack, you know, so like she said, you know, the other agencies that's representing here, that's bringing you the series were especially created to help you start, run and grow your business from an economic development perspective. You know, the services that you get through our office, which are one-on-one, no fee confidential consulting, quote unquote coaching, is paid for by you already through your taxes. Same with the score, with the WBC, any of those resource partners that, you know, work with the SBA, you know, I do believe sometimes though that you need to pay for coaching. And I say that because, you know, if you're a consultant and you have a business, you know, when you consult with someone, you know, there are some, maybe some specific insights that you're helping them to resolve or you're providing, they should pay you for your insights. And so it depends on where you are and what type of information you need, what type of assistance you need to determine who and when, you know, and so start out in your market and in your personal network. If you don't have the insights there, you know, reach out and be on your network and see if there's an opportunity there. You know, there was a question about investors. You know, I'm gonna share something and show you before we get off. I know we're at 2, 11, 32, but, you know, you really need to determine, you know, so what determines in large part what type of investor you get and how you approach it depends on the possible size of your business can grow. All right, so think about from an investment perspective. Most investors are looking for a 10X return, meaning if they put, you know, a dollar in, they want $10 back, right? So they put a thousand in, they want 10,000 back. If they put a million in, they want 10 million back. And so part of the approach there is figuring out what the capacity your business has from a return perspective as a top-line revenue. And that's where the tool that Sheila just went through adds so much value because it's gonna tell you what capacity your business has to do at a top-line revenue, what type of revenue, right? And so your approach depends on the size of the company you're gonna have. If it's a smaller size company, then you would probably approach, you know, friends, people in your personal network for smaller amounts of capital. And then as your revenue sources grow, right? Your revenue grows looking for people outside of your network, you know, immediately like angel investors. And then there are some local entities here in the state of South Carolina where you can get investments, you know, as well, you know, some convertible notes and things of that nature. Are you on mute? Yeah, yeah. We're going to close out, I will, okay, first of all, you will be provided the slides, the, there's a YouTube video of everything that we have here. Next week is about the executive plan and market, the executive summary and marketing. For those who want additional assistance as it relates to this Excel credit spreadsheet, we will still have the follow-up meeting on next Tuesday. And I try to just go through step by step of what we talked about. It's not recorded because I want it to be a collaborative where we can all talk and be honest about where we are. And it has been a pleasure to be able to assist you guys. I hope that this is assisting you. Also, there is a survey that is generated by the City of Columbia Office of Business Opportunity that will, where you can say that we want additional training on XYZ and we will provide, I'm sorry, we will provide that as well. So hopefully this information was educational. We look forward to providing you with these services again. And a copy of the chat will also be in, will also be in the documentation as it relates to this webinar. Guys, it is 11.35. I have taken an extra five minutes of your time. I appreciate it. I know it was a lot of information, but we're here to assist you as well. You guys have a wonderful day. Thank you, Sheila, y'all have a great day.