2015 Strategic Planning – Where will you be positioned in the market this time next year?

By Ron Simmons & Dede Gossage

Strategic Planning for 2015

Strategic Planning 2015

For the third time in over a decade, the Gainesville SBDC team will meet with the leadership from a client organization to assist them with the development of an in-depth strategic plan. It has been an exciting journey consulting with them and observing growth during their early formative years and sustaining growth post-recession. This year we will co-collaborate with one of our sister offices, the *DeKalb SBDC office who help us with the Strategic Planning process. Well known for the creation of in-depth Strategic Planning tools, Sharon and the DeKalb office uses them to assist many area businesses in the Metro Atlanta area. Collaboration with other SBDC consultants from area offices is always a bonus!

A few of the Initiatives that have been realized as result of their planned strategy have been; product diversity, the acquisition of expansion capital, increased sales goals and job growth. The growth was not without tenacity and dogged entrepreneurial determination to succeed.

Previous strategy sessions with this organization have led to achieved goals and objectives that have positioned the owners of the organization for a profitable exit. We say, BRAVO! In light of their success (and looking forward to this final strategic session with the owners) , we thought it might be helpful to offer insight on the content of a working Strategic Plan. The following information addresses those components.

A well planned strategy answers the following questions about company and its direction; who are we, where do we want to go, where are we now, how did you get here and finally, how will we get to where we want to be and how will we know when we have succeeded?

First, address the Vision of what you see as the ultimate objective(s) for this time next year in terms of physical appearance, activities, size and sales revenue. This planning exercise includes a revisit of your current mission statement which describes the nature of the business. It is the ‘why’ in the marketing plan that drives you to do what you do every day and supports the business key purposes. Posted in several locations both internally and externally, the stated mission of the business helps employees and management maintain a collective focus on what you are doing and why.

Address core values. The values of your company act as a guiding influence on conduct and internal behaviors with employees, customers, suppliers and stakeholders.

An evaluation using a S.W.O.T. analysis is a good tool to assess internal strengths, weaknesses and external opportunities and threats. It is also a good idea to evaluate this analysis based on both a current and future perspective. Performing this exercise has high value because a company generally has control over the internal environment and often little control over the external environment. The external environmental factors may include things like competition, governmental regulations, industry trends, and competitors’ actions.

The development of specific goals with the ability to quantify outcome(s) is a necessary component of a strategic plan. These goals generally target short-term dates in pursuit of longer term objectives.

Implementation is the linchpin that ties a strategic plan together with successful outcomes. The process includes tactical steps known as Action Plans (AP). Items included as AP’s are resource assignment; financial analysis, people & time-frame utilization as well as Key Performance Indicators (KPI’s).KPI’s are the measuring tools used to determine progress of the goals and objectives in the Strategic Plan. Everyone on the Strategic Planning team should be given a copy of the final plan with targeted dates and assignments for accountability.

Finally, we have a saying at the SBDC that we share often with our clients, ‘develop a habit of working “ON” your business and not always “IN” your business. Strategic Planning is that part of the “ON” your business that is a key component to successful goal achievement and business growth. Plan your work, then work your plan and remember, we are here to help when you need a coach!

*Special thanks to Area Director, Sharon Macaluso with the DeKalb SBDC for her Strategic Planning content included in this article.#GASBDC


Determining the Best Legal Structure for Your Business

By Alex Katz (Contributor) CFO ff Venture Capital for Entrepreur.com

Q: What are the advantages of being an LLC over a sole-proprietorship?

A: There are four main factors to consider when an entrepreneur decides on the form of organization that best fits her business: taxes, limitation of personal liability, ease of transferability and admission of new owners and investor expectation. In almost all cases, I recommend that a founder form her business first as a limited liability company (LLC) and that she plan to convert to a C corporation immediately before taking institutional investment (money from a venture capital firm, in many cases.)

The process can be a difficult one, because there are so many forms of organization from which to choose. A business can be organized as a sole proprietorship, a general partnership, a limited partnership, an LLC, a “C” corporation, an “S” corporation

Legal Forms

Decision making about legal forms

and, just to add one more level of complexity for companies in Massachusetts only, a Massachusetts business trust. Each type of organization has its own advantages and disadvantages, and I will run through a couple of the highlights here. (I left Massachusetts business trust out of this post.)

Because each state has its own tax structure, I will focus here on federal-level taxes only.

Sole-Proprietorship. A sole proprietorship is the easiest type of business to organize. The founder must simply apply for the required licenses to do business in her jurisdiction and away she goes. A sole proprietor can even use her own social security number and need not apply for a federal taxpayer identification number. Tax reporting is easy: Simply report the company’s income and expenses on a form (Schedule C) that the founder will attach to her annual tax return.

Unfortunately, a sole proprietor is 100 percent personally liable for all the company’s debts and obligations. This includes vendors, taxes (payroll and otherwise), loans and even lawsuits. Moreover, it is impossible for a sole proprietor to transfer an interest in her company and remain a sole proprietor by definition. In my view, the risk here far outweighs the benefit, and I almost never urge a founder to start her business as a sole proprietorship.

Partnership. A general partnership is easy to form and operate. However, it also provides no liability protection for the partners. Each general partner is completely liable for the debts of the partnership.

In the case of a limited partnership, the LPs are not liable for debts of the partnership. However, a limited partnership can be very complicated from a tax perspective (Subchapter K of the Internal Revenue Code is probably the most complicated section) and can be cumbersome from which to operate an ongoing business. Further, because each limited partnership must have a general partner who will be personally liable for the company’s debts, someone may get stuck holding the bag at the end of the day. While many venture capital and other funds are themselves formed as limited partnerships, operating companies are typically not so organized. Lastly, because the partnership tax rules do not easily lend themselves to special allocations among partners, I almost never urge a founder to start her business using a general or limited partnership.

Corporation. A corporation can provide protection to a founder against the liabilities of the company. If managed properly (e.g., setting up a separate corporate bank account, not paying personal expenses through the corporation, having the corporation’s board of directors authorize certain corporate actions) the corporation can protect the founder.

There are two types of corporations — based upon how the corporation will be taxed. A S-corporation will not pay any federal corporate-level income taxes. Instead, the profits and losses of the corporation will be reported on the individual tax returns of the shareholders. A S-corporation has some other restrictions, however, that make it less attractive. It can have only up to 99 shareholders, cannot have certain types of shareholders including limited partnerships and can have only one class of stock for economic allocations. (A S-corporation can have more than one class of stock so long as the only distinction between the classes is voting but no liquidation preferences that investors often expect.)

A C-corporation is a bit more flexible, in that it can have an unlimited number of shareholders and can have any number of classes of stock while still providing the limited liability provided by an X corporation. However, because a C corporation is a separate tax-paying entity, it may result in double taxation of a corporation’s profits — once when the corporation earns the profit and again when the shareholders receive the distribution as dividends or as a liquidating distribution. While not ideal, however, many investors insist on a C corporation. (More on that later.)

Limited Liability Company. A hybrid form of organization, a limited liability company (LLC) provides the limited liability protection of a corporation, while avoiding the double taxation. Because it is taxed like a partnership, it can be more flexible than a corporation. Seems like the best of all worlds and for many operating companies, it is. For many companies that will not seek venture capital or other substantial outside financing, an LLC should be the form of organization of choice, and for those that will seek outside funding, I often suggest they start as LLCs and convert to C corporations immediately before the funding comes.

However, many investors do not like to invest in LLCs. First, investing in an LLC can create unintended consequence

s under Employee Retirement Income Security Act (ERISA) for pension funds who may have invested in the fund making the investment. As a result, many funds are prohibited by their governing documents from investing in an LLC. Second, venture capital and other funds do not want to wait for a portfolio company to finish its own tax return and issue K-1s to its members before the fund can do its tax return and issue its K-1s to its investors. And finally, there is a significant tax incentive to investors who invest in “qualified small business” stock, which requires that the company receiving the investment be a C corporation.

After all that, let me cut to the chase. While there is no one-size-fits-all solution, I commonly recommend that founders start their business as an LLC and convert to a C corporation immediately before they receive substantial outside funding.

(Posted 10/26/2014

, http://www.entrepreneur.com/article/236450) Company.

Ron Simmons, Area Director of the Gainesville SBDC, was honored last evening with the 2014 GA SBDC Flewellen Award for exemplary consulting. The Award honors a GA SBDC consultant who has performed in an exemplary manner in the previous year. Please congratulate Ron for he is truly a wonderful asset to our region and our state as a small business advocate.

GainesvilleSBDC Area Director, Ron E Simmons

GainesvilleSBDC Area Director, Ron E Simmons