(You may download this document from the FILES menu on the BBS.)

HOW TO START A SMALL BUSINESS

Most entrepreneurs are not adequately prepared to go into
business. While they have the motivation, desire and talent,
many have not taken time to properly investigate and research the
business they are interested in starting.

Similar to the game of chess, success in small business starts
with decisive and correct opening moves. And although initial
mistakes are survivable, it usually requires skill, discipline
and hard work to regain the advantage.

Reasons to Start a Business

Before starting a small business, list your reasons for wanting
to go into business. Whatever they are, use a specific and
systematic approach to build a plan from which your success can
be evaluated.

Some common reasons for starting a business are:

You want to be your own boss.
You want financial independence.
You don't work well with others.
You dislike policy and procedures.
You want creative freedom.
You want to fully use your skills and knowledge.

To determine what business is "right for you," answer the
following questions:

What do you like to do with your time?
What technical skills have you learned or developed?
What do others say you are good at?
Will you have the support of your family and/or spouse?
How much time do you have to run the business?
Do you have any hobbies or interests that are marketable?

The next step is to determine what niche your business will fill.
The following helps you to answer that question.

Is your idea practical, and will it fill a need?
What is your competition?
What is your advantage over existing businesses?
Can you deliver a higher/better quality service?
Can you create a demand for your business?

The last step in your model is the pre-business checklist. The
following are questions you should answer. Write down your
responses to each question before developing the plan.

Describe the business you are interested in starting.
What services or products will you sell?
Where will you locate?
What skills and experience do you bring to the business?
What will be your legal structure?
What name will you go by?
What equipment or supplies will you need?
How will your business records be maintained?
What insurance coverage will be needed?
What financing will you need?
What are your resources?
How will you compensate yourself?

From the checklist, start to organize your business plan.

It is recommended that you break down the plan into several
components. This allows you to work on several sections at a
time or as information is received. The following summary should
serve as a guide for this process.

Business Plan Outline

Introduction

Give a detailed description of the business.
Explain the type of business.
Discuss the ownership of the business and the legal
structure.
List the skills and experience you bring to the business.
Discuss the product/service offered.
Discuss the advantages over your competitors.

Marketing

Identify the demand for your product/service.
Identify your customers and their location(s).
Explain how your product/service will be advertised.
Discuss how your product/service will be delivered.
Explain pricing strategy.
Explain your source and amount of initial equity capital.
Develop a monthly operating budget for the first year.
Provide three years of projected quarterly balance sheets
and profit or loss statements.
Provide monthly cash flow statements which tie to other
statements provided for a two-year period.
Discuss your break-even point.
Explain your personal balance sheet, and method of
compensation.
Discuss how and who will maintain your accounting records.
Provide "what if" statements to demonstrate alternative
approaches to addressing any negative which may develop.

Operations

Explain how the business will be managed on a day-to-day
basis.
Discuss how you will hire your employees and discuss
personnel procedures.
Discuss insurance, lease or rent agreements, and issues
pertinent to your business.

Once you have completed your business plan, review it with a
friend or business associate. When you feel comfortable with the
content and structure, make an appointment to review and discuss
it with your banker. The business plan is a flexible document
that will change as your business grows.


How To Get More Information

Information is power! Make it your business to know what
business information is available, where to get it and most
importantly, how to use it. Sources of information include:

U.S. Small Business Administration

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your
local SBA office or call the Small Business Answer Desk at 1-800-
8-ASK-SBA for information on any of the above resources. Also,
you may request a free copy of The Small Business Directory, a
listing of business development publications and videotapes, from
your local SBA office or the Answer Desk.

Other Sources:
State Economic Development Agencies
Chambers of Commerce
Local Colleges
The Library
Manufacturers and suppliers of small business technologies
and products.

All SBA programs are available to the public on a nondiscriminatory basis.
(You may download this document from the FILES menu on the BBS.)

PLANNING...THE MOST IMPORTANT INGREDIENT

Unless you know how to get where you are going, you will end up somewhere
else. Think about that!

Suppose you lived in Boston and decided to drive to Dallas, would use a map?
Of course you would. But what would if you didn't? It would be a very long
trip and if you didn't know your geography, you probably would not make to
Texas, never mind Dallas.

Starting or running or business without proper planning is like driving from
Boston to Dallas without a map. Planning will show you your destination and
the best road to get you there.

This information summary will provide you with an overview of planning and
discus how and why to prepare a business plan.

Why Planning Is Critical

Planning gives you a path to follow. It makes your future what you want
it to be.

It is the most important guide to starting, building and managing a
successful business.

It is the best tool available to help a small business raise money.

A business plan can be a communications tool for investors, suppliers,
employees and others interested in understanding
the operations and goals of your business.

If you don't plan for the success of your business -- you will fail. It
is that simple!

Planning Can Be Difficult

Although planning is critical to your success, it is often overlooked in
favor of intuition or "gut feeling." There are other
obstacles that hinder planning, including:

Lack of know-how -- it is sometimes difficult to know how to plan and
what to plan for.

Fear of the unknown -- it is hard enough dealing with the problems of
today without worrying about what's going to
happen in the future.

Inexactness -- the best set plans have a funny way of not working out
exactly the way they should.

These obstacles are very real. However, they must be overcome if you are to
be successful. While we may find it difficult to
face the future, heading into it without any direction is much worse.

The Business Plan

The business plan is a written document that clearly defines the goals of a
business and outlines the methods for achieving them.
A business plan describes what a business does, how it will be done, who has
to do it, where it will be done, why it's being done
and when it has to be completed.

Dreams and ambitions are great and important. But what really counts in the
business world are results. Therefore, it is important
to establish realistic goals with a sound methodology for achieving them. A
business plan:

Is the management and financial "blueprint" for a business start-up and
profitable operation.

Is written by the business owner with outside help as needed.

Explains how the business will function and depicts its operational
characteristics.

Details how the business will be capitalized and managed.

Elements Of A Business Plan

1. Business Description

Business name, address and owner identification

Identifies goals and objectives. Clarifies why you are or why you want
to be in business.

2. Products and Services

Very descriptive explanation of all products and services.

Describes what you are selling and why.

3. Sales and Marketing

Sales and marketing are the core of your business rationale. Your plan
should address several basic questions.

Who and how large is your market? How will you be competitive? What
pricing and sales terms are you planning? How will you market your
products and services?

4. Operating Requirements

The plan should identify and describe the equipment, facilities and
people necessary to generate your products and services.

How will your products and services be produced and made available to
the customer?

5. Financial Management

This is the most critical part of your business plan. You will establish
vital schedules that will guide the financial health of your
business.

If you are just starting a business, your plan should include:

Projected "start-up costs."

Your expected profit or return on investment (ROI) for the first year.

Projected income state and balance sheet for two years.

Projected monthly cash flow statement for 12 months.

If you have a young or established business, your plan should include:

Income statement and balance sheet for the last two years.

Projected income statement and balance sheet for the next two years.

Projected monthly cash flow statement for 12 months.

Your plan should include an explanation of all projections. If you feel that
your finance or accounting knowledge is not sufficient
to prepare these statements, get professional assistance.

The bottom line is: will, or does your company make a profit?

6. Concluding Narrative

This segment of your plan should summarize your business goals and
objectives and send a message that your are
committed to the success of your business.

Put Your Best Foot Forward

Your business plan should be complete, clear, neat and accurate. It will be
an extension of you and your business.

The length of a good plan will vary from a few pages to well over a hundred
pages. The plan should provide a sound "blueprint"
for your business and entice any reader to want to know more.

A Final Word On Planning

Planning is the most important part of starting and running a successful
business. It is a fact...unless you know where you are
going, you will end up somewhere else.



How To Get More Information

Information is power! Make it your business to know what business information
is available, where to get to and most
importantly, how to use it. Information sources include:

U.S. Small Business Administration

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your local SBA
office, or call the Small Business Answer Desk at
1-800-8-ASK-SBA for information on any of the above resources. In Washington,
D.C. call 202-205-7333.

Also, you may request a free copy of The Small Business Directory, a listing
of business development publications and products,
from your local SBA office or the Answer Desk.

Other Sources

State Economic Development Agencies
Chambers of Commerce
Local Colleges
The Library
Manufacturers and suppliers of small business technologies and
products.


















All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

UNDERSTANDING YOUR MARKET

Your business will not succeed just because you want it to succeed.
Determining if there is a market for your products or services
is the most critical item of planning. Once you decide on your product or
service, you must analyze your market -- a process
involving interviewing competitors, suppliers and new customers.

However, before you begin researching your market, you should take a brief,
but close, look at your product or service from an
objective standpoint. In terms of a checklist, you should ask yourself the
following questions:

- Is this product or service in constant demand?
- How many competitors provide the same service or product?
- Can I create a demand for my product or service?
- Can I effectively compete in price, quality and delivery?
- Can I price my product or service to give me the projected profit?

Once you are satisfied that these questions are answered, move on to
performing your research.

Market research is extremely beneficial; the information gathered can
increase your profit potential.


Market Research

- Shows alternative approaches to your market.
- Provides a more accurate base for making profit assumptions.
- Aids in the organization of marketing plans.
- Assists in the development of critical short/mid-term goals.
- Breaks down your market's profit boundaries.

Unfortunately, many entrepreneurs fail to complete this critical section of
their business plan. Collecting research data can be
frustrating unless you have defined your goals and organized the collection
and analysis process. To prevent this from happening,
you must plan how you will collect, sort and analyze the information.
Maintain a notebook and file in which to store, organize and
retrieve data as needed.


Questions To Ask

Your research should ask these questions:

- Who are your customers?
- Where are they located?
- What are their needs and resources?
- Is your service or product essential in their day-to-day activity?
- Can the customer afford your service or product?
- Where can you create a demand for your service or product?
- What areas within your market are declining or growing?
- What is the general economy of your service or product area?


Market Data

Knowing your market not only requires an understanding of your product, but
also an understanding of your customers' socio-
economic conditions. This information will serve as a map in letting you know
what is ahead.

More market information can be found in:

- Library listings of trade associations and journals.
- Regional planning organizations' studies on growth trends.
- Banks, realtors and insurance companies.
- Competitors.
- Customer surveys in your market area.
- U.S. Government publications.

Once you have obtained and analyzed this information, it will become the
foundation of your business plan. Research data is important
because it supports the basic assumptions in your financial projection --
your reason for going into business.


Summary

To be successful, a small business owner must know the market. Market
research is simply an orderly, objective way of learning
about people -- the people who will buy from you.


How To Get More Information

Information is power! Make it your business to know what business information
is available, where to get it and, most importantly,
how to use it. Sources of information include:

U.S. Small Business Administration

- SBA District Offices
- Small Business Development Centers (SBDCs)
- Service Corps of Retired Executives (SCORE)
- Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk at 1-800-
8-ASK-SBA for information on any of the above resources. In Washington D.C.
call 205-7333.

Also, you may request a free copy of The Small Business Directory of business
development publications and products from your
local SBA office or the Answer Desk.

Other Sources

- State Economic Development Agencies
- Chambers of Commerce
- Local Colleges
- The Library
- Manufacturers and suppliers of small business technologies and
products.

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

INFORMATION...THE KEY TO SUCCESS

The Importance of Information

Information is power! It is an asset that can help overcome uncertainty and
open new avenues for opportunity. Success in business depends on what you
know and how well you can apply what you have learned. With the right
information, your business gains an important edge in today's competitive
world. Learn to use the following information sources. They are the key to
unlocking your business's full potential.


Federal Information Resources:

The Small Business
Administration

The SBA is an independent government agency created by Congress to help small
businesses grow and prosper. The SBA has more than 100 offices that offer
small firms financial assistance through guaranteed loans, management
assistance, help in obtaining government contracts, counseling services, and
many low-cost publications. The SBA is an excellent source of information.

Small Business Answer Desk
1-800-8-ASK-SBA
This toll-free hotline provides personalized attention to your business
needs. Provided by the SBA's Office of Business Initiatives, Education and
Training, the ANSWER DESK is an excellent information and referral service.
You're only one call away from improving your business...don't hesitate,
phone today! In Washington, D.C. call 205-7333. The hotline operates from
8:30 a.m. to 5:00 pm. (EST), Monday through Friday.

SBA Publications and Products
The SBA has more than 50 business booklets and products available for a small
suggested donation (most under $3.00). These publications and products
address important business topics and answer the questions most frequently
asked by prospective and existing small business owners. Get your free copy
of The Small Business Directory listing SBA's products by contacting either
your local SBA Office or the SMALL BUSINESS ANSWER DESK.

Service Corps of Retired Executives (SCORE)
SCORE consists of more than 13,000 business executives who volunteer their
time to provide training and free management counseling to small business
owners. SCORE's nationwide reputation for helping new and existing businesses
is a result of their high-quality service.

Small Business Development Centers (SBDCs)
SBDCs are sponsored by SBA in partnership with state and local governments,
the educational community and the private sector. They provide high-quality,
low-cost assistance, counseling and training to prospective and existing
small business owners. There are more than 700 SBDCs in 50 states.

Small Business Institute (SBI)
SBIs are operated through the SBA in every state on almost 500 college
campuses across the nation. Over the course of a college semester, the
Institutes provide in-depth student and faculty counseling to select small
business clients.

SBA District and Regional Offices
Most SBA offices maintain a "training calendar" to help business people
locate appropriate training sessions and information. Consult your telephone
directory under U.S. Government, or call the SMALL BUSINESS ANSWER DESK at
1-800-8-ASK-SBA to locate the SBA office nearest you.


Department Of Commerce

Office Of Business Liaison (OBL)
The Office of Business Liaison provides information on business assistance
programs offered by all Federal agencies. For a listing of U.S. Department of
Commerce services, call 202-377-3176.

Economic Development Administration (EDA)
EDA assistance is available for areas experiencing high unemployment, low
income quotas or sudden and severe economic distress. Call 202-377-5113 for
more information.

The Minority Business Development Agency (MBDA)
MBDA provides management and technical assistance to business owners and, in
general, encourages financial support for minority-owned firms. Look under
U.S. Government in your local telephone directory or call the SMALL BUSINESS
ANSWER DESK to find the MBDA office nearest you.

International Trade
Administration (ITA)
ITA's office of U.S. and Foreign Commercial Service maintains a vast data
base of up-to-date foreign market information and assists in establishing
foreign market contacts. Call 202-377-1289 for more information.

Internal Revenue Service
For more information on your Federal tax obligations, go to the local office
of the Director of Internal Revenue Services. An excellent booklet (revised
from year to year) on this subject is Tax Guide for Small Business, prepared
by the Internal Revenue Service.

STATE INFORMATION RESOURCES:

State Economic Development Agencies
Most states have agencies that promote economic growth within the state by
helping the state's businesses grow and by encouraging outside firms to
relocate in the state. These agencies are a valuable source of information on
business opportunities, markets and state and local business assistance
programs. Check your phone directory under Government (State), for Economic
or Industrial Development Agencies.

LOCAL INFORMATION RESOURCES:

City or County Development Agencies
Like most states, many local governments have their own development agencies
which help small businesses in their jurisdiction.

Schools
Local colleges are an excellent source of business information. Most colleges
offer courses in entrepreneurship, business management and other disciplines
helpful to the small business owner.

The Library
Your local library is a virtual gold mine of information -- use it! Most
libraries have a business section and there is usually someone available to
assist you in finding the specific information you need.

Business Periodicals
Information on most business topics can be found in a business periodical.
These magazines and newspapers are a great source for up-to-date business
news, recent technological developments, new marketing and management
techniques, finance and related subjects. To find the article you need, look
in the Business Periodical Index at your local library. The Readers' Guide to
Periodical Literature is another excellent source for locating small business
articles.

Chambers of Commerce
Most cities and towns have a Chamber of Commerce. These organizations promote
the interests of local business owners and serve to stimulate business
activity throughout their jurisdiction. Your local Chamber is an excellent
source for information about local markets, business activity and business
opportunities.

Banks
Many bank officers have a broad understanding of finance, business
operations, and the local economic climate. Do not be afraid to ask your
banker questions.

Consultants
Consultants make their living by providing information and can be a great
asset to a small business owner. A business consultant's fees typically range
between $25 and $250 an hour. If you decide to retain the services of a
consultant, make sure he/she is reputable and be certain that you understand
the fee schedule up-front.

Ask The Right Questions... Get The Right Answers

Before you rush out to use these valuable resources, it is essential that you
have a strategy -- that you have focused on what questions you need answered.
If you don't prepare, it won't be long until you're overwhelmed by a tidal
wave of meaningless facts, figures and recommendations.

1) Be prepared; know exactly what you want to ask and ask intelligent
questions.

2) Express your questions as simply as possible and be diplomatic.

3) Always be prepared to tell someone why you are asking the questions.

4) If the person you ask does not have an answer, ask where you can find
the answer.

5) Seek knowledgeable people and be persistent.

Knowing where to find the information your business needs is extremely
important. Cultivate your knowledge of these resources, learn how to use them
to your business's advantage, but most importantly -- use them!

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

HOW TO PRICE YOUR PRODUCTS AND SERVICES

The primary goal of business is to make a profit. Many small businesses fail
to do so because they do not know how to price their products or services.
Pricing is the critical element in achieving a profit and is a factor that
all firms can control.

Before setting your prices, you must understand your product's market,
distribution costs, and competition. Remember, the marketplace responds
rapidly to technological advances and international competition. You must
keep abreast of the factors that affect pricing, and be ready to adjust.

Retail Cost and Pricing

A common pricing practice among small businesses is to follow the
manufacturer's suggested retail prices. The suggested retail price is easy
to use, but it can cause problems. It may create an undesirable price image,
and it doesn't consider the competition.


Competitive Position

Another approach is a strategy in which a firm bases its price on those of
its competitors. A small retailer should compare prices with a similar
store. Do not try to compete with a large store's prices, because they can
buy in larger volumes and their cost per unit will be less. Instead,
highlight other factors, like customer service. Customers will often pay
more for merchandise if they get courteous service.

Pricing Below Competition

Many vendors have been very successful using this pricing strategy. Since
this strategy reduces the profit margin per sale, a firm needs to reduce its
costs and:

Obtain the best prices possible for the merchandise;
Locate the business in an inexpensive location or facility;
Closely control inventory;
Limit the lines to fast moving items;
Design advertising to concentrate on "price specials;"
Offer no or limited services.

Pricing goods below the competition can be difficult to maintain. Why?
Because every cost component must be constantly monitored and adjusted. It
also exposes a business to pricing wars. Competitors can match the lower
price, leaving both parties out in the cold.

Pricing Above The Competition

This strategy is possible when price is not the customer's greatest concern.
Nonprice considerations important enough for customers to justify paying
higher prices include:

Service considerations: delivery, speed of service, satisfaction in
handling customer complaints, knowledge of product or service, helpful
and friendly employees,
A convenient or exclusive location,
Exclusive merchandise.

Price Lining

This strategy targets a specific segment of the buying public by carrying
products only in a specific price range. For example, a store may wish to
attract customers willing to pay over $50 for a purse. Price lining has many
advantages:

Reduced errors by sales personnel;
Ease of selection for customers;
Reduced inventory;
Reduced storage costs, due to smaller inventory.

Multiple Pricing

This strategy involves selling a number of units for a single price. For
example, two items for $1.98. This is useful for low cost, consumable
products like shampoo or toothpaste. Many stores find this a desirable
pricing strategy for sales and year-end clearances.

Service Costs And Pricing

Every service has different costs. Many small service firms fail to analyze
their services' total cost, and therefore, fail to price them profitably. By
analyzing the cost of each service, prices can be set to maximize profits and
eliminate unprofitable services.

Service Cost Components

Material, labor and overhead make up the total cost of any product or
service.

Material Costs

This is the cost of materials found in the final product. For example, the
wood and other materials used in the manufacturing of a chair are direct
materials.

Labor Costs

This is the cost of the work that goes into the manufacturing of a product.
An example is the wages of all production line workers. The direct labor
costs are derived by multiplying the cost of labor per hour by the number of
man-hours needed to complete the job. Remember to use not only the hourly
wage, but also include fringe benefits. These include: social security,
workers compensation, unemployment compensation, insurance, and retirement
benefits.

Overhead Costs

Any cost not readily identifiable with a particular product is overhead.
These include indirect materials and indirect labor, such as maintenance,
supplies, repairs, heat and light, depreciation and insurance. These are not
charged to direct labor, but must be included as a cost. Examples are
clerical, legal and janitorial services and supplies. Insurance, taxes,
rent, advertising and transportation are also overhead costs.

Part of the overhead costs must be allocated to each service performed or
product produced. The overhead rate can be expressed as a percentage or an
hourly rate.

Adjust your overhead costs annually. Charges must be revised to reflect
inflation and higher benefit rates. It is best to project the costs semi-
annually, including increased executive salaries and other projected costs.

A cost lid must always be used in preparing a bid or quoting a job. Include
shipping, handling or storage in the total material cost.

Figuring Costs And Profits For A Consultant Service

Pricing services where your own labor or expertise is used is different from
pricing services that use materials and other labor. For instance, most
consultants price their services by the hour. Senior consultants charge more
for their time than do their less experienced counterparts.

Remember to charge for an adequate number of hours. Travel time is usually
listed as an extra charge.

It is unlikely that all of your time will be billed to clients. Therefore,
hourly or contract fees must be set high enough to cover expenses during slow
periods. That is why one-half of the total normal working hours for a given
year are used in figuring overhead rates. Try to obtain long term, monthly,
or contract assignments when possible.

Summary

Your pricing structure and policy are major components of your public image
and are crucial to securing and keeping your clientele.

Pricing for service businesses may be more complex than retail pricing.
However, the result is the same: cost, plus operating expenses, plus desired
profit, equals the services price.

The key to success is to have a well-planned strategy. Establish your
policies, constantly monitor prices and operating costs to insure profit.
Accuracy increases profits!

How To Get More Information

Information is power! Make it your business to know what business
information is available, where to get it and most importantly, how to use
it. Sources of information include:

U.S. Small Business Administration

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk at 1-800-8-ASK-SBA for
information on any of the above resources. Also, you may request a free copy
of the Small Business Directory, a listing of business development
publications and videotapes, from your local SBA office or the Answer Desk.

Other Sources:

State Economic Development Agencies
Chambers of Commerce
Local Colleges
The Library
Manufacturers and suppliers of small business technologies and
products.

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

SMALL BUSINESS AND EXPORTING

World Trade is increasingly important to the health of our economy and to the
growth of U.S. companies. Every billion dollars in U.S. exports generates
about 25,000 jobs. Exporting not only creates jobs, but provides small firms
with new growth, new markets and additional profits. There has never been a
better time for American businesses, particularly small businesses, to begin
exporting. As the world economy continues to become more interdependent, the
opportunities for small businesses to compete in the international
marketplace become more attractive.

Exporting is booming in the U.S. and small businesses are beginning to
realize that the world is their market. Experience shows that small
businesses can and do export successfully. A business does not have to be
big to sell in the global marketplace. Finding your niche in the world
market is similar to finding it in the U.S. market. The same qualities that
make small business owners successful in the U.S. apply to success in world
markets: hard work and tenacity.

The Advantages of Exporting

Small business exporters can play a significant role in improving the U.S.
balance of trade while at the same time protecting their competitiveness and
improving their profits. The international marketplace represents a vast
array of opportunities and challenges for small businesses. Entering the
overseas marketplace offers many benefits, including:

increased growth;
increased profits;
additional markets;
extended product/service life cycles;
increased number of customers;
tax advantages;
added product/service lines;
improved competitiveness; and
favorable publicity and recognition.

Exploring New Markets

Many thousands of small firms are already in the global market. Yet small
firms still represent the largest pool of potential exporters - companies
that could export but do not. Small firms already account for almost a
quarter of all exporters, and survey results show substantial export growth
potential for this size firm. This should encourage smaller companies to
consider the global arena.

Entering the overseas market does not have to be difficult. The same basic
strategies applied in the U.S. market can be used in exporting. Selling
abroad requires hard work, perseverance, and a commitment of resources. It
requires planning, market research and attention to detail. It may also
involve changes, like new packaging and metric conversion.

The mystery can be taken out of exporting by considering some of the
fundamental elements of the export process:

analyze the capabilities of your small business;
know the export potential of your product/service;
locate the foreign markets that are right for you;
study market entry strategies and export procedures; and
learn how to process exports.


Where to Find Assistance

Once a decision has been made to expand into the overseas marketplace, the
next step is knowing how to get started. There are many resources that
provide assistance for the small or medium-sized business seeking to export.

Federal Programs: Small business exporters may benefit from a variety
of services provided by the SBA and the U.S. Department of Commerce
(DOC). Types of services include:

export counseling;
workshops and training conferences;
publications; and
financial assistance.

Special services provided by the SBA include:

Service Corps of Retired Executives (SCORE),
Small Business Development Centers (SBDCs),
Export Legal Assistance Network (ELAN), and
Export Revolving Line of Credit (ERLC) Program.

SCORE, with over 730 locations and 13,000 members throughout the country,
offers one-on-one counseling by retired executives, providing small
businesses with access to years of business and international experience.

SBDCs, operating in cooperation with local colleges and universities, also
offer in-depth business counseling and training.

Through ELAN, a small business can receive free one-time legal consultations
from export-knowledgeable attorneys.

SBA's financial assistance programs are also available to small business
exporters. The ERLC program provides guarantees on short-term, pre-export
working capital and commercial bank lines of credit. In addition, through
its Export Information System (XIS), the SBA can provide an initial market
study. XIS identifies the primary importing and exporting countries for a
particular product.

The Department of Commerce offers a wide range of information on export
potential, overseas markets, trade leads, and overseas contacts. The
Department also conducts trade missions and catalog exhibitions, and assists
firms participating in overseas trade shows. For more information about DOC,
consult your telephone directory under U.S. government.

State and Local Agencies: Entrepreneurs interested in international
trade may look to state and local agencies for additional information
and programs.

Chambers of Commerce: Small business owners may take advantage of
assistance available through chambers of commerce. Some chambers are
active in promoting exports, providing training programs, counseling,
referrals, trade missions, and publications.

International Trade Associations: Many of these associations and other
private organizations offer a wide range of services. Most conduct
regular meetings with qualified speakers and provide networking
opportunities with others involved in international trade.

Export Management and Export Trading Companies: These companies serve
as export sales intermediaries and representatives for manufacturers.
They can aid small businesses by locating foreign buyers, promoting
products, making export sales, providing documentation and shipping
products overseas.

Consulting Firms: Trade consultants can provide information on domestic
and foreign trade regulations and overseas markets, and can assess
overseas commercial and political risk. They often specialize in
product lines and/or geographical area.

Some small law firms, accounting firms, or specialized marketing firms
also provide international trade consulting services.

For information about SBA consult your telephone directory under U.S.
government or call the Small Business Answer Desk at 1-800-8-ASK-SBA. You
may also contact the Office of International Trade, U.S. Small Business
Administration, Washington, D.C. 20416 (202) 205-6720.


All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

HOW TO START A HOME BASED BUSINESS

Fifteen years ago, going to work meant traveling from home to a plant or
office. Today, many people do some or all of their work at home. A private
marketing research firm estimates that as many as 13 million people squeeze
extra hours into their workweek by taking work home from their full-time
jobs, and that 9 million people are independent home-workers who work
exclusively at home.

Many people find working at home is the "ideal work arrangement" and decide
to formally set up businesses in their homes. SBA estimates that more than 3
million of these home-based businesses are now operating throughout the
country.

Every day, people are striking out and achieving economic and creative
independence by turning their skills into dollars. Garages, basements and
attics are being transformed into the corporate headquarters of the newest
entrepreneurs -- the home-based business person. And with today's rising
demand for "service-oriented" businesses and recent technological advances,
the opportunities seem to be endless.

Getting Started

Before you dive headfirst into a home-based business, it's essential that you
know why you are doing it. To succeed, your business must be based on
something greater than a desire to be your own boss. You have to plan and
make improvements and adjustments along the road.

As you ask yourself the following questions, remember: there are no "best" or
"right" reasons for starting a home-based business. But it is important for
you to understand what this new venture involves.

Working under the same roof that your family lives under may not prove to be
as easy as it seems. It is important that you work in a professional
environment. One suggestion is to set up a separate office in your home to
create this professional environment. Ask yourself these questions:

Can I switch from home responsibilities to business work?
Do I have the self-discipline to maintain schedules?
Can I deal with the isolation of working from home?
Am I a self-starter?

Finding Your Niche

Choosing a home business is like choosing a spouse; your decision must be
approached with a great deal of care and concern for the future.

Before you invest your time, effort and money, take a few moments to answer
the following questions. They'll help separate sound ideas from those with a
high potential for failure.

Does your home have the space for a business?
Can you identify and describe the business you plan on establishing?
Can you identify your business's product or service?
Is there a demand for your product or service?
What advantages do you have over your competitors?
Do you have the talent and expertise needed to compete successfully?
Can you successfully run the business from your home?

Legal Requirements

A home-based business is subject to many of the same laws and regulations
affecting other businesses. Here are some general areas to watch out for, but
be sure to consult an attorney and the state department of labor to find out
which laws and regulations will affect your business.

Be aware of your city's zoning regulations. If your business operates in
violation of them, you could be fined or closed down.
Certain products cannot be produced in the home. Most states outlaw the
home production of fireworks, drugs, poisons, explosives, sanitary or
medical products and toys. Some states also prohibit home-based
businesses from making food, drink or clothing.

In addition, there are registration and accounting requirements to consider.
Among them:

You may need to obtain a work certificate or license from the state.
Your business's name may need to be registered with the state.
Usually, a sales tax number must be obtained.
A separate business telephone and bank account normally are required.

And if you have employees, you are responsible for:

Withholding income and social security taxes.
Complying with minimum wage and employee health and safety laws.

Once you've thought over the pros and cons of home-based businesses, it's
time to put together a business plan.


Developing A Business Plan

Putting together a business plan forces you to take an objective and critical
look at your business idea. Even more, the finished product is an operational
tool that will help move your business toward success.

A business plan should be neat, not fancy, and should include:

Cover Page: List the business name, address, mailing address, telephone
number and the name of the owner(s). Identify your primary goals and
objectives.

Business Description: Include an accurate and concise description of the
business.

A. What is the principal activity? Be specific. Give product or service
descriptions.
B. How will the business be started?
C. Why will it succeed? Promote your idea.
D. What experience do you bring to the business?

Marketing

Remember, marketing is the core of your business. Carefully think about these
questions:

A. Can you market your business from home?
B. Who and what is your market?
C. What pricing and sales terms are you planning?
D. How will you be competitive?

The Financial Plan

Money is what fuels all businesses. With a little planning you'll find that
you can avoid most financial difficulties.

When you're drawing up a financial plan, don't worry about using estimates.
The process of thinking through these questions helps develop your business
skills and leads to solid financial planning.

Start-up Costs: To estimate your start-up costs, include all initial expenses
such as fees, licenses, permits, telephone deposit, tools, office equipment
and promotional expenses. Business experts say you should not expect a profit
for the first eight to 10 months, so be sure to give yourself enough cushion.

Projecting Operating Expenses: Include salaries, utilities, office supplies,
loan payments, taxes, legal services and insurance premiums. Don't forget to
include your normal living expenses.

Projecting Income: It is essential you know how to estimate your sales on a
daily and monthly basis. From the sales estimates, you can develop projected
income statements, breakeven points and cash flow statements. Use your
marketing research to estimate initial sales volume.

Cash Flow: Cash pays your bills, not profits. Even though your assets may
look great on the balance sheet, if your cash is tied up in receivables or
equipment, your business is technically insolvent. Or to put it in layman's
terms, you're broke.

Make a list of all anticipated expenses and projected income for each week
and month. If you see a cash flow crisis developing, cut back on everything
but the necessities.

Remember, preparation is the foundation of success. Talk to home-based
business people, join a home-based professional association or "moonlight" at
a similar business. Learn how to use business resources to strengthen your
home-based business. Success doesn't just happen, you have to make it happen.

How To Get More
Information

Make it your business to know
what business information is available, where to get it and, most
importantly, how to use it. Sources of information include:

U.S. Small Business Administration

SBA District Offices.
Small Business Centers (SBDC).
Service Corps of Retired Executives (SCORE).
Small Business Institutes (SBI).

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk at 1-800-8-ASK-SBA for
information on any of the above resources. In Washington, D.C., call 205-
7333.

Other Sources

State economic development agencies.
Chambers of commerce.
Local colleges.
The library
Manufacturers and suppliers of small-business technologies and products.

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

CASH FLOW ANALYSIS

In recognition of the importance of small business to a strong economy, the
U.S. Small Business Administration (SBA) endeavors to help meet the
information needs of existing business owners and aspiring entrepreneurs. We
hope this "Focus on the Facts" can be a catalyst for the continued success of
your small business.


Understanding Cash Flow

To be competitive, small business owners must plan and prepare for all future
events and market changes. Possibly the most important aspect of preparation
is effective cash-flow planning. Failure to properly plan cash flow is one
of the leading causes for small business failures in the United States.

Experience has shown that many small business owners lack a general
understanding of accounting principles. For this reason, a few of the basic
principles will be covered. There also are self-instructional guides from
which you can obtain a better understanding of accounting.


The Basics

Cash in business serves several purposes. First, it is used for meeting
normal cash obligations (i.e., paying bills). Second, it is held as a
precautionary measure for unanticipated problems. Third, it is held for
potential investment purposes. The term "cash" refers to:

Cash
Checks
Checking Accounts

The Operating Cycle

The operating cycle can be defined as the system through which cash flows,
from the purchase of inventory through the collection of accounts receivable.

It measures the flow of assets into cash and is, in effect, a "business
stopwatch."

For example, the operating cycle may begin with both cash and inventory on
hand. Additional inventory is purchased on account to work as a cushion for
future sales to guarantee that you will not deplete your stock. Except for
cash sales, when some of your inventory is sold, accounts receivable
increase, but your cash doesn't. Typically, you pay for the inventory you
have purchased thirty days after it is received. When the payment for
inventory is made, both cash and accounts payable are reduced. Thirty days
after the sale of inventory, receivables are usually collected, which
increases cash. Now your cash has completed its flow through the operating
cycle and is ready to begin again.


Current Assets

Cash and other balance sheet items which convert into cash within twelve
months are referred to as current assets. Typical current assets are:

Cash
Marketable Securities
Receivables
Pre-Paid Expenses

A Plan is Necessary

Cash-flow analysis shows whether your daily operations have generated enough
cash to meet your obligations, and it shows how major outflows relate to
major inflows. As a result, you can tell if inflows and outflows from your
operation combine to result in a positive cash-flow from operations or in a
net drain. Any significant changes over time will also appear.
Understanding this will lead to better control of cash-flows and will allow
adequate time to plan and prepare for the growth of your business.

It is best to have enough cash on hand each month to pay the cash obligations
of the following month. A monthly cash-flow projection helps to project
funds and compare actual figures to past months. It is important to project
your monthly cash-flow to identify and eliminate deficiencies or surpluses in
cash. When cash-flow deficiencies are found, business financial plans must
be altered to provide more cash. When excess cash is revealed, it might
indicate excessive borrowing or idle money that could be invested. The
objective is to develop a plan which will provide a well-balanced cash flow.

Planning a Positive Cash Flow

To achieve a positive cash flow, you must have a sound plan. Cash reserves
can be increased by:

Collection of receivables
Tightened credit requirements
Price of products
Loans
Increased sales


Collection of Receivables

Actively manage accounts receivable and quickly collect overdue accounts.
Revenues are lost when a firm's collection policies are not aggressive. The
longer your customer's balance remains unpaid, the less likely it is that you
will receive full payment.

Tightened Credit Requirements

As credit and terms are tightened, more customers must pay cash for their
purchases, thereby increasing the cash on hand and reducing the bad debt
expense.

While tightening credit is helpful in the short run, it may not be
advantageous in the long run. Looser credit allows more customers the
opportunity to purchase your products or services. But, be certain that the
increase in sales is greater than the increase in bad-debt expenses.

Pricing of Products

The primary goal of business is to make a profit. Many small businesses fail
to do so because they do not know how to price their products or services.
Pricing is the critical element in achieving a profit as well as in
maintaining positive cash flow, and is a factor all firms can control.

Before setting your prices, you must understand your product's market,
distribution costs, and competition. Remember, the marketplace responds
rapidly to technological advances and international competition. You must
keep abreast of the factors that affect pricing and be ready to adjust.

Loans

Loans from various financial institutions are often necessary for covering
short-term cash-flow problems. Revolving credit lines and equity loans are
common types of credit used in this situation.

Increased Sales

Increased sales would appear to increase cash flow, but be careful. For many
companies, a large portion of sales are purchased on credit. Therefore, when
sales increase, accounts receivable increases, not cash. Collection of
receivables is usually 30 days after the purchase date, and sales expenses
are most often incurred befor e receivables are collected. When sales rise,
inventory is depleted and must be replaced. Because receivables have not yet
been collected, a substantial increase in sales can quickly deplete a firm's
cash reserves. Again, by using a computer, you can maintain this critical
data, as well as speed the time required to consider the "what if" concept.


Other Helpful Tips

Cash Reserve

You should always keep enough cash, as an added cushion for security, on hand
to cover expenses. But, it is unwise to keep more money on hand than is
necessary to cover your obligations. Excess cash should be invested in an
accessible, interest bearing, low-risk account, such as a savings account,
short-term CD or T-bill. Keeping excess cash on hand reduces both the growth
and the return on investment.

Projections

Good accounting records and projections are important tools for a small
business. Qualified accountants are necessary to help keep your records
accurate and current. However, you can reduce your accounting expenses by
producing your own summary statistics and projections.

Using A Personal Computer

With a personal computer, your business can have the added advantage of quick
cash-flow projections as well as many other useful financial planning tools.
A good financial-management package and computer will enable you to review
projected inflows and outflows of cash from month-to-month or year-to-year.
By analyzing these projections you can see the fluctuations in cash flow and
create management policies to avoid potential shortfalls.

There are numerous computer programs for making projections and keeping
records and many advantages to having a personal computer for your business.
The capabilities of modern computers are almost unlimited--they can aid in
nearly every situation, from basic bookkeeping and "what if" analysis to
inventory control or market demand projections. While a computer is not a
specific requirement to success for a small business, it is a business tool
which in the future will separate the competitive from the mediocre.

How to Get More
Information

SBA has a number of programs and services available. They include training
and educational programs, advisory services, publications, financial
programs, and contract assistance.

Our offices are located throughout the country. For the one nearest you
consult the telephone directory under U.S. Government or call the Small
Business Answer Desk at 1-800-U-ASK-SBA. A free copy of The Small Business
Directory of publications may be requested from your local SBA office or the
Answer Desk.

Other helpful sources include:

State Economic Development Agencies
Chambers of Commerce
Colleges and Universities
Public Libraries


All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

BUYING A COMPUTER

U.S. Small Business Administration in cooperation with Microsoft Corporation

Successful small business expansions and new formations lead the way in
creating new markets, innovations, and jobs that fuel economic growth and
prosperity.

In recognition of the importance of small business to a strong economy,
Microsoft Corporation has joined with the U.S. Small Business Administration
(SBA) to help meet the information needs of existing business owners and
aspiring entrepreneurs.

We hope Focus on the Facts meets your needs, and we invite your comments and
questions. Your success in business depends on what you know and how well you
can apply what you have learned.

Do I need to computerize?

The decision to buy a computer system for your small business can be a costly
one, in both time and money. Be sure you are ready to invest in making
computerization work for you. There are two major reasons to computerize a
small business: to increase your profit and to increase your productivity.
The kinds of benefits that may result from computerizing include:

No more bottlenecks in the flow of information or products
On-the-spot information on which to base decisions
Increased sales and new opportunities that come with being well-
organized
More current accounts receivable and, as a result, reduced cash flow
problems, reduced overtime and higher productivity for yourself and your
employees

What tasks will I computerize?

The prime candidates for computerization are labor-intensive tasks. Payroll,
order tracking, monthly invoicing, cash flow analysis, account tracking,
proposal writing, form letters, and mailing lists are some examples of labor-
intensive tasks.

First make a list of all the tasks you need to do in your office. You might
find it helpful to design a form on which to put information about each task:

What information does the task require? Financial data? Charts?
Drawings? Customer information?
What results from the task? A business plan? A report? Mailing labels?
A client newsletter?
How often is the information needed? Daily? Weekly? Monthly? Yearly?
Who uses the information? You? Your accountant? Your clients?
What process is currently used to produce the information? Do you or an
employee produce it manually? Do you contract it out?

Will computerization save me time or money?

Analyze each of the tasks you put on your list to determine how computerizing
them might save you time or money:

How much does it cost to do the task manually? For example, how much
time and salary does it cost you to type five identical contracts for
five different clients?
How much time and salary would it cost you if the contract were typed
once on a computer and then printed out in five individualized copies?
Is your current process an efficient one? There is no point in speeding
up a bad system.
Do you need to do lots of calculations? Is most of your work typing
tasks? Do you have many records to keep track of? Or does your business
require all of these?
Are there things you are not doing now that you would like to do? How
about a daily cash-flow report? Weekly inventory status? Direct mail to
preferred customers?

What software do I need?

When choosing a computer, you will need to select the right software.
Software is what gives your computer instructions and tells it how to do your
tasks.

There are five primary types of business software, often called applications:

An electronic spreadsheet does calculations such as budgets, business plans,
amortization, cash-flow analysis, statistical analysis, what-if analysis, and
other mathematical functions.

A word processor creates and stores documents such as letters, reports,
catalogs, mailing labels, and procedure manuals. With many word processors,
you can put charts from a spreadsheet or drawings from a graphics application
into your documents.

A database stores information about customers, vendors, investors, or
inventory and then organizes, sorts, and updates the information so that you
can create reports, catalogs, invoices, monthly statements, or form letters.

A desktop publisher gives you tools to produce sophisticated layouts for
newsletters, catalogs, business plans, and other documents.

With communications you can connect your computer to a modem and call other
computers to send or receive information. This might include getting market
demographics from an online database service, filing taxes, or sending
financial information to your accountant.

Integrated software includes several tools-spreadsheet, word processor,
database, and often communications-that work together to help you do all your
basic business tasks.

How do I choose the right application?

Before shopping for applications, create a table that lists your required
tasks in one column and each software package you want to look at in another
column. Compare the packages to find out which one does the best job for you.

Create a sample document or representative worksheet of the task(s) you want
to do with the computer, and take this with you when you shop. Ask the
salesperson to demonstrate the software and show you how to use it to do your
work. Then try the software yourself: learn enough to type a letter or create
a spreadsheet. This can help you decide which software will work for you and
your business.

What kind of applications you buy depends on three main factors:

The tools you need to automate the tasks in your business.
The cost to purchase and install: when does this software begin to pay
for itself?
The cost of and method for training yourself or employees, fixing any
problems, and keeping the system running.

There are two ways to buy software: off-the-shelf or custom-made.

Off-the-shelf software can be purchased at a computer store, a software
store, or through a mail-order catalog. The cost can be approximately $50 to
$500 per package. You can also purchase additional tools, such as financial
models, to adapt off-the-shelf software to your needs.

Custom-made software is written for you by a consultant, who also provides
the training and manuals for the system. Such a system will be more expensive
than off-the-shelf software.

Shopping for the computer hardware

What software you buy determines how much operating memory (RAM) you will
need, how much storage space you will need for your data (disk memory), how
fast the computer needs to be, and how many people can work with it at the
same time. Once you have selected a software package that fits your needs,
you need to find hardware to run it on. You can buy a desktop computer that
stays in the office or a laptop computer that travels with you.

What hardware do I need?

There are several components to a computer, all of which combine to give you
a system that meets your needs.

Microprocessor - The electronic heart of the computer. It performs all the
operations of the computer. The speed (megahertz-Mhz) at which a computer
processes information is determined by its microprocessor.

Memory - How much information (kilobytes-K) the computer can process during
a work session. Called Random Access Memory, or RAM.

Disk space - The amount of information (kilobytes-K or megabytes-MB) you can
store on a disk. Disks are either enclosed in your computer (a hard disk) or
put into the computer each time you need the information (a floppy disk).

Monitor - The screen on which you see the information in your computer's
memory (RAM). The most important consideration is the screen's readability-
can you see what you need to see without eyestrain?

Printer - The component you use to get the information out of the computer
and onto paper. If your primary need is for high-speed rather than high-
quality printing, you might consider a dot-matrix printer. Laser printers
provide high-quality output that resembles typed or typeset text.

To get more information

Information is power. Make it your business to know what business information
is available, where to get it, and, most important, how to use it.
Information sources include:

U.S. Small Business Administration (SBA)

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

For information on any of the above resources, consult your telephone
directory under U.S. Government for your local SBA office, or call the Small
Business Answer Desk at 1-800-8-ASK-SBA. In Washington D.C., call
202-205-7333. Also, you may request a free copy of The Small Business
Directory, a listing of business development publications and products, from
your local SBA office or the Answer Desk.

Other sources

State economic development agencies
Chambers of commerce
Local colleges
Libraries
Manufacturers and suppliers of small business technologies and products.

The SBA's participation in this publication does not constitute an overt or
implied endorsement of the co-sponsoring company's product or service. SBA
Authorization No. 88-1133
Microsoft is a registered trademark of Microsoft Corporation.

Microsoft Part No. 098-10989
All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

SMALL BUSINESS HEALTH INSURANCE

U.S. Small Business Administration in cooperation with The Travelers
Companies
Successful small business expansions and new formations lead the way in
creating new markets, innovations and jobs that fuel economic growth and
prosperity.

In recognition of the importance of small business to a strong economy, The
Travelers Companies has joined with the U.S. Small Business Administration
(SBA) to help meet the information needs of existing business owners and
aspiring entrepreneurs.


Structuring Your
First Benefits Plan

Health insurance is the second most-coveted fringe benefit in America today
-
- behind only paid vacation. Yet only half of employers with fewer than 10
employees offer it, some because of the price tag.

Cost, of course, is a major consideration. But in today's environment of
managed care plans and increase cost-sharing with employees, it doesn't have
to be an overriding issue.

Structuring your benefits plan properly -- with an eye on the quality and
cost of care -- can help you attract and retain qualified employees.


Where to Start

When considering your first benefits plan, begin by determining the needs of
your employees/ You may want to sit down with them to discuss options,
making it clear that you may not be able to afford all of what they want and
that some costs may have to be shared.

Armed with this information, you should contact an independent insurance
agent or broker who:

Can explain the different coverage options available,
Present you with alternative plans and quotes and
Sell and service your policy.

Because you will have an ongoing relationship with your agent, consider the
agent;s reputation, personal dynamics and responsiveness when making your
selection.

Your agent will explain to you the major categories of insurance plans,
including:

Indemnity

This is a traditional pay-as-you go health insurance plan. The employee pays
a set deductible, then a coinsurance percentage (usually 20 percent) of
covered expenses. After he or she has paid a certain amount out of pocket,
the plan pays 100 percent of the expenses. The employee can use any doctor
or hospital, and simply files claims for reimbursement.

Some indemnity plans have "managed care" features, which control costs by
monitoring care to make sure it is appropriate and cost-effective. Pre-
admission review of hospital stays or medical treatment is one popular and
effective managed care feature.

Another method of controlling costs with an indemnity plan is raising the
deductible and/or increasing the employee's portion of the coinsurance. The
higher the deductible and employee coinsurance, the lower the cost to the
employer and employee.

Managed Care

Managed care plans, which are becoming increasingly popular, encourage
employees to avail themselves of quality, cost-effective care by offering
them financial incentive -- usually higher coinsurance -- to use certain
doctors and hospitals. The provides in a managed care network agree to limit
their fees in return for a guaranteed number of patients. The provides also
handle all claims of quality reviews.

One type of managed care network is a Health Maintenance Organization (HMO),
which generally provides 100 percent reimbursement for most services, but
provides little or very limited benefits if the employee chooses to see
doctors outside of the network for care. In a Preferred Provider
Organization (PPO), the employee receives higher reimbursement (often 90
percent) when using a network provider, but benefits are lower (sometimes 70
percent) when the employee receives care from a physician outside the
network. However, many plans reimburse emergency care at the 90 percent
level, regardless of whether the services is provided by a physician within
or outside of the network.

Self Insurance

Some employers self-fund their own plans, but contract with an insurance
company for claims administration. This option is generally for larger
businesses with more sophisticated insurance administration capabilities and
financial resources to absorb the higher risk involved.

Selecting a Plan

Your agent or broker will probably provide you with several different
proposals and quotes from insurance companies. Since each quote may provide
for different coverages, don't just compare prices. Ask to see the entire
proposal from the insurer, including customer service and claims paying
capabilities.

In reviewing the proposals, ask your agent the following questions:

Is the insurance carrier reputable and financially strong?

Will the policy be renewed every six months or annually?

Is the plan easy to administer? Is there a toll-free 800 number to call
to make changes or have questions answered?

Does the insurer process and pay claims quickly?

What are the penalties employees should know about? Are there any
"hidden" deductibles, such as a separate inpatient hospital deductible?

Will the insurer underwrite the policy as a group, as individuals or
both?

Does the managed care plan provide enough of a financial incentive to
encourage employees to select network providers?

Once you decide on a benefits plan, your insurance company will provide
follow-up information for employees that details plan specifics, enrollment
periods and claims procedures. Once the program is operational, you will
soon become aware of the importance of accurate, responsive service. And,
keep the lines of communication open between you and your insurer. Only
through continued dialogue can the benefits program be fine-tuned to provide
the highest level of service to you and your employees.

In today's benefits environment, providing employee health insurance coverage
does not have to be an all-or-nothing proposition. Understanding your
employees' needs, researching the options available and selecting a reputable
insurer can give you a competitive advantage in recruiting and retaining a
skilled workforce.

How To Get More Information

Information is power! Make it your business to know what business
information is available, where to get it and most importantly, how to use
it. Sources of information include:

U.S. Small Business Administration

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk at 1-800-8-ASK-SBA for
information on any of the above resources. Also, you may request a free copy
of the Small Business Directory, a listing of business development
publications and videotapes, from your local SBA office or the Answer Desk.

Other Sources:

State Economic Development Agencies
Chambers of Commerce
Local Colleges
The Library
Manufacturers and suppliers of small business technologies and products.

The U.S. Small Business Administration's participation in this cosponsorship
activity does not constitute and expressed or implied endorsement of any of
the cosponsor's opinions, products or services. SBA Auth: 88-1190

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

THE IMPORTANCE OF GOOD RECORD-KEEPING

You arrive at work this morning and look around with a sense of
accomplishment. This business is yours! From the start, you've done
everything right. You conducted meaningful market research. Your product is
in demand. You understand the competition and have identified your
competitive advantage (i.e., cost, service, and/or quality). You've
established the optimum price. Business flows steadily through the doors.
Yet, this bright sense of accomplishment begins to fade slowly as you
acknowledge those little nagging questions that ever seem to disturb your
great American dream. "Why is my cash flow always a problem? How much real
profit is in my business, anyway? I'll deposit the payroll taxes well enough
. . . but, why is it going to be tight again this quarter?" What's really
happening in your business? If you're not exactly sure, then it's time to
return to the basics -- the basics of good record keeping.

Why?

Bluntly, a small business that fails to keep complete and accurate financial
records places its long term success and continuance in grave, grave doubt.
The following three points discuss some of the major reasons that good (i.e.,
complete and accurate) financial record keeping is crucial to the success of
your business.

1. Good records provide the financial data that help you operate more
efficiently, thus increasing the profitability of your
enterprise. This is because accurate and complete records enable you,
or your accountant, to identify all your business assets, liabilities,
income, and expenses, which, when compared to appropriate industry
averages help you pinpoint the strong and weak phases of your business
operations.

2. Good records are essential for the preparation of current financial
statements, such as the Income Statement (Profit and Loss) and the Cash
Flow Projection. These, in turn, are critical for maintaining good
relations with your banker. They also will present a complete picture
of your total business operation which will benefit you as well.

3. Good records are required for the preparation of complete and accurate
tax documents. For example, poor records often lead to the preparation
of income tax returns that result in underpayment or overpayment of
taxes. In addition, good records are essential in an IRS audit
situation, if you hope to answer questions accurately and to the
satisfaction of the IRS.

The Key to Success is Information

Think back to the steps you went through to open your business. First, you
invested a tremendous amount of time in gathering information -- about your
abilities, finances, market, customers and competitors. You understood why
you wanted to go into business -- the opportunity to be your own boss, a
desire for financial independence, the freedom to set your own course.
Then you chose the business "right" for you. And, more importantly, your
market research showed that your particular "business dream" was in demand.
You then took all this information and developed a business plan -- the same
business plan that helped you get the loan you needed to open the doors. You
demonstrated your business skills to the bank when you stated precisely how
much money you needed, why you needed it, and how you were going to pay it
back.

What Went Wrong?

While it's true that success often begets success, it's equally true that
success often breeds failure -- in a small business as well. That's because
as a business begins to grow rapidly, the owners often work frantically to
simply meet demand, minimizing the time they devote to keeping good records.

If one of your reasons for starting a business was to get away from
paperwork, it is critical that you hire someone to perform the necessary task
of keeping your financial records. Although you must pay for the services of
a public accountant, bear in mind that their professional advice frequently
can increase your profits, more than covering the professional fees.

What Exactly Will The Records Tell You?

The following checklist highlights the type of information your financial
records should provide in assuring your success:

How much income are you generating now and how much income can expect to
generate in the future?
How much cash is tied up in accounts receivable (and thus not available)

How much do you owe for merchandise? Rent? Equipment?
What are your expenses, including payroll, payroll taxes, merchandise
and benefit plans for yourself and employees (such as health
insurance, retirement, etc.)?
How much cash do you have on hand? How much cash is tied up in
inventory? What is your actual working capital budget?
How frequently do you turn over your inventory?
Which of your product lines, departments or services are making a
profit, which are breaking even, and which are financial drains?
What is your gross profit? What is your net profit? What is your gross
profit? What is your net profit?
How does all of the financial data listed above compare with last year
-
- or last quarter? How does it compare with the projections in your
business plan?
How does all of the financial data compare with that of your
competitors? With that of the industry?

While your review of this checklist may have uncovered some glaring
deficiencies, it's never too late to correct problems related to poor record-
keeping habits. It may take you a bit of time and effort to analyze the
company checkbook, take inventory, review bank statements and, in general,
just catch up on your paperwork. It is essential that you make the effort to
determine the precise financial condition of your business at present. It is
just as critical as maintaining good customer relations.

What to Look for in an Accountant

How do you find an accountant who is knowledgeable, capable and discreet?
Here's what you should ask possible candidates: How do you find an accountant
who is knowledgeable, capable and discreet? You will be seeking an individual
with high ethical standards who will be a respected member of the community.
Due to the ever-changing complexities of the tax laws and development in the
methods and practices of accounting, the accountant must be alert to the
value of continuing professional education. Look for an accountant who takes
advantage of educational seminars, professional publications and other study
opportunities.
You will probably want your accountant to assist you in many ways, as a
consultant, financial advisor, counselor, etc., who understands your business
affairs as well as you. So, seek out broad experience, as well as education,
in selecting your accountant. Professional accountants have year-around
offices and are listed in telephone directories under accountants, public
accountants, bookkeepers and tax preparers. Look for references or
recommendations from local business associates, your banker or attorney Look
for memberships in state and national professional accounting societies. This
generally proves a commitment to continuing professional education and the
profession. Additionally, in most all cases, membership requires adherence to
a strict code of ethics and high standards for professional performance.

The Basic System

A basic record keeping system should be simple to use, easy to understand,
reliable, accurate, consistent and designed to provide information on a
timely basis. It needs:

A basic journal to record transactions (receipts, disbursements, sales,
purchases, etc.)
Accounts receivable
Accounts payable
Payroll records
Petty Cash records
Inventory: Equipment & Goods

Without knowing where your business is financially, you may be forced to
close or sell, despite an excellent customer base. You could find yourself
in this trap
if your cash flow is desperate, or
if you are unable to pay creditors, or if too much of your cash is
tied up in old inventory and accounts receivable.

Make a vow now to maintain your records and assure your success! If yours is
a small firm just starting out in the exciting world of business, resolve now
that you will not fall into the trap of letting the books wait until --you
are less busy -- you are more rested -- you have more time available to start
and finish the job all in one sitting -- or whatever excuse you use at the
time.
Remember, too, there are experts available to help you in all aspects of your
new business. There are people who can assist you with market research and
advertising/promotion, there are those who can help you with your real estate
needs, transportation and shipping, telecommunications needs and more.
But most important of all, there are professionals available to help you
maintain and manage your financial records. They are public accountants, and
they are ready to serve you and your business.

SBA's participation in this publication does not constitute an overt or
implied endorsement of the co-sponsoring company's product or service. SBA
Auth. 88-1178

All SBA programs are available to the public on a nondiscriminatory basis.(You may download this document from the FILES menu on the BBS.)

USING THE METRIC SYSTEM IN YOUR BUSINESS

Successful small business expansions and new formations lead the
way in creating new markets, innovations and jobs that fuel
economic growth and prosperity.

In recognition of the importance of small business to a strong
economy, the U.S. Small Business Administration (SBA) is pleased to
help meet the information needs of aspiring entrepreneurs.

We hope Focus on the Facts meets your needs and we invite your
comments and questions.

Metrication

The U.S. government's decision to mandate the metric system as the
preferred system of weights and measures for procurement contracts
will have far reaching implications for the business community and
for society. Metrication will have an impact on both product-
oriented and service-oriented firms. For example, a retail
business currently selling fabric in units of inches and yards
will, after conversion, sell fabric in centimeters and meters.
Similarly, a janitorial firm vying for cleaning contracts will bid
on office space based on specifications for square and cubic
meters.

Metrication in essence will create a new business language as well
as new opportunities for business growth.

Despite these new opportunities, some small business owners will
resist metrication. You should, however, convert as quickly as
possible. Why? The answer is simple. Those small businesses
among the first to convert to the metric system will be able to
obtain the benefits of improved competitiveness, market access and
standardization savings, while those who are slow to convert will
recover little, if any, of their costs. The conversion process,
which may involve some effort, is a procedure small business owners
must undergo in order to retain their share of federal contracts.
Any small businesses failing to make the transition eventually will
not be competitive in metric markets of the future.

The Process

Metric conversion is not necessarily a complicated process. But,
it will take time and careful planning to make the transition as
cost-effective and as efficient as possible. There are a number of
steps you can take to simplify the process.

First-Cut

The initial stage in metric conversion is called First Cut. In
First Cut you perform a quick, rough analysis to determine if
conversion is warranted.

Questions you should address are:

When should you start developing a metric capability?
How fast should you phase-in metric capability?
What is involved in moving in that direction?

Once you have assessed and answered these questions, you are ready
to analyze the market to assure yourself there is or will be a
large enough market to justify the investment. Also during this
stage, prepare a cost analysis for an estimate of the costs and
prepare a preliminary phase-in plan to identify when to start
implementation. Your analysis should include:

Market Analysis

Define goals and objectives
Check metric products sales trends (foreign and domestic)
Check suppliers, competitors and trade associations for
trends
Identify types of product conversions and their impact on
servicing work
Project customary vs. metric new business

Cost Analysis

Add, replace or modify tools and service equipment
Add, replace or modify inspection and test equipment
When necessary, train employees in metric
Maintain, store and handle dual inventories, but work to
reduce and phase-out non-metric items
Revise service order forms and other documents
Project total costs for developing metric servicing
capability

Preliminary Metric Phase-in Decision

Review projected sales revenues
Consider alternative phase-in plans for cost reductions
Evaluate non-cost considerations
Make preliminary decision

By analyzing these factors, you will be able to

Identify new market areas,
Determine if your market is saturated with small businesses
offering similar services,
Estimate the initial cost and
Outline a conversion method.

Planning

Next, start your Planning. This process usually focuses on four
major areas --

Demand forecasting
Service planning
Personnel training and
Paperwork changes

Gather the following data for each area.

Demand Forecasting

Trends in converting products now serviced to metric
Potential new metric product service work
Sales literature
Customer notification
Continuing metric market research

Servicing Planning

Tools and service equipment
Inspection and test equipment
Performance and testing specifications
Metric supply sources
Purchasing specifications
Dual inventory facilities procedures
Scheduling metric servicing phase-in (lead time
requirements)

Personnel Training

Employee notification
Training needs identification
Type of training determination
Training materials availability (including shop charts)
Scheduling training

Paperwork Changes

Service order forms
Testing reports
Parts/tools check-out forms
Accounting records
Scheduling procedural/printing changes

By working through the areas described above, you now have a
comprehensive, detailed metric servicing plan. But, before you
make a final decision, there are two additional cost factors to
consider.

First, consider whether you will need to borrow money to cover the
costs of metrication.

Second, consider the tax implications of your metric phase-in plan.
With this information you will be able to prepare a fairly accurate
cost projection, which can be incorporated into the financial
section of your business plan and used to justify investment costs
if you apply for a loan.

Phase-In

Now you are ready to begin the final stage of the metrication
process: Phase-In. A usual way to begin this stage is to schedule
a meeting in which you affirm your commitment to the metric
program. Employee motivation and support can be enhanced by
outlining the importance of the program to the future of the
company and to job security. Also, keeping employees informed
about and identifying their roles in the process will alleviate
fears and make the transition smoother. Remember, your employees
are a vital key to the success or failure of the conversion
process.

As your company changes to metric, it is critically important that
you keep a continuous check on how closely the conversion process
correlates with your plans. Many companies have discovered that
the most effective way of accomplishing this is by having frequent
meetings of task leaders to review the previous week's experience,
and by generating a set of special reports for use by the leaders.
The contents of these reports should be tied closely to your phase-
in plans.


Metric Information

Excellent sources for further information and assistance on metric
conversion and the metric system are:

American National Metric Council
1735 North Lynn St., Suite 950
Arlington VA 22209

National Institute of Standards and Technology
Office of Metric Programs
Gaithersburg MD 20899

American National Standards
1430 Broadway
New York NY 10018

U.S. Small Business Administration
409 Third St. SW
Washington DC 20416

For More Information

Make it your business to know what business information is
available, where to get it and, more importantly, how to use it.
Several sources of information include:

U.S. Small Business Administration
SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your
local SBA office or call the Small Business Answer Desk at 1-800-U-
ASK-SBA for information on any of the above resources.

Other sources
State economic development agencies
Chambers of Commerce
Local colleges and universities
The library
Manufacturers and suppliers of small business technologies
and products
Trade and professional associations

All SBA programs are available to the public on a nondiscriminatory
basis. ADVERTISING YOUR BUSINESS


Recognizing the importance of small business to a strong economy, Yellow
Pages Publishers Association (YPPA) has joined with the U.S. Small Business
Administration (SBA) to help meet the information needs of existing business
owners and aspiring entrepreneurs. This Focus On The Facts discusses the
fundamentals of advertising planning.

Advertising Your Business
Advertising is an investment in your business, similar to other investments
to improve and expand your business. The return you receive depends on the
planning and thought that precede the actual commitment and expenditure of
advertising dollars. By first developing an effective advertising plan you
increase the likelihood of a positive return on your advertising investment,
regardless of the amount of money you spend.

Four Basic Questions
The basic premise of an advertising plan requires you to thoroughly analyze
the answers to key questions before you can make effective advertising
decisions. There are four key questions to ask yourself:

1. What do I want my advertising to accomplish?
2. Who should my advertising speak to?
3. What should my advertising say?
4. What advertising medium should I use?

In a specific business situation, each question has any number of potential
answers. As you think about each question do not accept any answer until you
have considered and explored the full range of possibilities.

What Do I Want My Advertising To Accomplish?
The first step in developing your advertising plan is to specify your
advertising goals. Be as precise as you can as to why you are advertising and
what you want to achieve. Everyone wants advertising to increase business,
but for your advertising plan to work it requires you to be more precise.
Some possible goals for your advertising are:

Increase awareness of your business.
Attract competitors' customers.
Increase the likelihood of keeping current customers and developing
their loyalty.
Generate immediate sales or sales leads.

It is possible you may want your advertising to achieve all of these goals
plus some others. What is important is that you prioritize your goals.
Advertising works best when it is developed to meet one specific goal at a
time.

Who Should My Advertising Speak To?
Once you determine your advertising goals you can then select the target
audience for your message. Advertising that tries to reach "everyone" rarely
succeeds. Successful advertising is written with a specific customer in mind.
Try to picture the person you must reach in order to achieve your advertising
goals. Try to describe your target consumers in each of the following:

Demographics: such as gender, age, income, location of residence or
business, etc.
Behaviors: such as current awareness of your business; the
products, services or vendors they currently use; loyalty to
either you or your competitor's business, etc.
Needs or desires: such as what benefits consumers look for, the
basis on which they will decide whether to use your product or
service, and how your business can fulfill those needs, etc.

What Should My Advertising Say?

Once you know who your target audience is and what they are looking for in
terms of the product or service you offer, you can decide what your
advertising will say.
Advertising should always be written to communicate a message that will be
seen as important by your target customer. Your advertising should clearly
and convincingly "speak" to your target audience, explaining the important
benefits your product or service offers.
In deciding how to discuss the major benefits of your product or service in
your advertising keep "AIDA" in mind: attract Attention, hold Interest,
arouse Desire and motivate Action.

Where Should I Place My Advertising?

Every month new advertising options become available. Beyond "traditional"
media you can place ads in airports, on ski lifts and on television monitors
in the front of grocery carts. Where you place your advertising should be
guided by a simple principle: go where your target audience will have the
highest likelihood of seeing or hearing it. Many advertising media work well
to reach a diverse range of target consumers. There is no single medium
inherently good or bad. A good medium for one product or service may be a
poor medium for a another. As you consider media choices look for one that
fits your advertising goals, reaches your target efficiently and cost-
effectively and is with your advertising budget. Based on, these
considerations, the following summarizes the relative advantages and
disadvantages of the advertising media most frequently used by small
businesses:

Television

Television provides a means for reaching a great number of people in a short
period of time. Small businesses will typically use either spot television or
cable television. A spot television ad is placed on one station in one
market. The number of target audience who see your ad depends upon how many
viewers are tuned into the television station at a specific time. Cable
advertising is placed either on a local cable television channel or on a
cable network. The number of people reached by cable advertising depends upon
the cable penetration and cable channel/program viewership in a given market.
Beyond television's reach, an additional advantage is its ability to convey
your message with sight, sound and motion. The disadvantages of television
advertising are: relatively higher cost - both the terms of airtime and
production, limited length of exposure, short airtime (making it difficult to
present a complex or detailed message) and the clutter of many other ads.
Television ads may require multiple exposures to achieve message retention
and consumer action. Also, many commercials are considered intrusive,
prompting viewers to switch channels to avoid them.

Radio

Radio, like television, has the ability to quickly reach a large number of
consumers. The major advantage of radio lies in its ability to efficiently
target narrowly defined segments of consumers. The vast array of radio
program formats lets an advertiser gear ads to almost any target audience.
Beyond this advantage, radio is commonly used by small businesses because it
is relatively inexpensive (both in terms of airtime and production costs) and
because deadlines for placing radio advertising are relatively short,
providing an advertiser with increased flexibility. The disadvantages of
radio are: an advertiser is limited to an audio message so there is no visual
product or service identification, ad clutter can be high and exposure to the
message is short and fleeting. Finally, similar to television, multiple
exposures may be required for message retention and consumer action. Also,
listeners may change stations to avoid commercials.

Newspapers

Newspapers permit an advertiser to reach a large number of people within a
specified geographic area. Newspaper advertising has several advantages for
the small business. An advertiser has flexibility in terms of ad size and
placement within the newspaper. Exposure to the ad is not limited, so readers
can take their time with your message. Short deadlines permit quick response
to changing market conditions. Disadvantages of newspaper advertising
include: declining readership and market penetration, ad space can be
expensive, clutter of competitive advertising and a relatively short life-
span (newspapers are typically read once, then discarded), thus requiring
multiple insertions.

Magazines

Magazines provide an advertiser with the means to reach highly targeted
audiences. Specific groups can be reached by placing an ad in a magazine
whose editorial content specializes in topics of interest to that target.
This is true of both consumer and business publications. Audiences can be
reached by placing ads in magazines which have well-defined geographic,
demographic or lifestyle focus. Beyond the ability to reach specific
audiences, the advantages of magazines include relatively long ad life and
re-peated ad exposure (magazines are typically looked through several times
before discard), excellent reproduction quality and pass-along value. The
disadvantages of magazines include: long lead time, limited flexibility in
terms of ad placement and format, and the potential for high costs in
production and placement.

Outdoor (Billboards)

Outdoor advertising is typically used to reinforce or remind the consumer of
the advertising messages communicated through other media. The advantages of
outdoor advertising are: ability to completely cover a market and high levels
of viewing frequency. The disadvantages of outdoor advertising are related to
viewing time. Because target consumers are typically moving, an outdoor
advertisement must communicate with a minimum of words. Messages must be
simple, direct and easily understood.

Direct Mail

Direct mail advertisers use targeted mailing lists to reach highly
specialized audiences. In addition to low waste in ad exposure, direct mail
provides an advertiser with great flexibility in the message presentation.
The disadvantages of direct mail include: relatively high cost per contact,
obtaining updated, accurate mailing lists and difficulty in getting the
audience's attention (direct mail is often considered "junk mail").

Yellow Pages

The Yellow Pages are an advertising medium that share many of the strengths
of other advertising media while at the same time avoiding some of the
limitations or disadvantages. As such, the Yellow Pages are best used to
complement or extend the effects of advertising placed in other media. Like
other media, the Yellow Pages permit an advertiser to select a well-defined
geographic area, ranging from a neighborhood to an entire metropolitan area.
Once the geography is defined, a Yellow Pages ad has permanence: Yellow Pages
are kept as a regular reference. In addition, Yellow Pages support your other
advertising by providing a convenient way for consumers to contact sources
and obtain information on the products or services they desire at the time
they are ready to "take action." Also, the Yellow Pages are relatively low in
cost in terms of both ad production and placement. The disadvantages of the
Yellow Pages include: lack of timeliness (ads can be changed only once per
year and, as a result, there is no opportunity for "price advertising"),
potential clutter in some classifications and not as much creative
flexibility as other print media.

How To Get More
Information:

Television Bureau of Advertising, Inc. (212) 486-1111
Radio Advertising Bureau, Inc. (212) 254-4800
Newspaper Advertising Bureau (212) 921-5080
Magazine Publishers of America (212) 752-0055
Outdoor Advertising Assoc. of America (202) 371-5566
Direct Marketing Association (212) 768-7277
Yellow Pages Publishers Association (313) 680-8880

U.S. Small Business Administration

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk - 1-800-8-ASK-SBA. Also, you
may request a free copy of The Small Business Directory, a listing of
business development publica-tions, from your local SBA office or the Answer
Desk.

The SBA's participation in this publication does not in any way constitute an
express or implied endorsement of the cosponsor's opinions, products or
services. SBA Auth. No. 88-1250. All SBA programs are available to the public
on a nondiscriminatory basis. SOFTWARE COMPUTER PIRACY


The personal computer (PC) has become a necessity for today's successful
small business operations. These increasingly powerful machines use
sophisticated software programs for a variety of applications. Software can
help a small business correspond with its customers, keep track of inventory
and even answer the phone and process orders.

Unfortunately many computer users make illegal copies of computer software.
Called "piracy" in the computer industry, this theft is a violation of
federal copyright law. Software pirates hurt themselves as well as others
through their actions. They sacrifice the long term benefits of legitimate
software ownership for a cheap, short term fix. This fact sheet identifies
the hazards of illegal copying and the benefits for small businesses in
becoming "software legal."

Software is developed by publishers, including many small businesses relying
upon steady sales not only to survive but also to improve their products and
invest for the future. The creative teams who develop software --
programmers, writers, graphic artists and others -- also deserve fair
compensation for their efforts. Without the protection given by our copyright
laws, they would be unable to produce the valuable programs that have become
so important in our daily lives: educational software that teaches us much
needed skills; business software that allows us to save time, effort and
money making us more competitive, and entertainment and personal productivity
software that enhances our leisure time.

The fact sheet you are holding was produced using a licensed word processor
on a personal computer.

What is Software Piracy?

Computer software is protected under the federal copyright law which states
that, "Users may not make a copy of a piece of software for any other reason
than as an archival back-up without permission of the copyright holder." The
unauthorized reproduction of a computer program is considered theft. In 1990,
the PC software industry lost $2.4 billion in the United States alone and
over $10 billion worldwide, according to estimates by the Software Publishers
Association.

Computer piracy is different from copying other recorded media, such as
videotapes and compact disks, because there is no degradation in the quality
of the copy. The computer industry is the only industry that empowers the end
user to become a manufacturing subsidiary. Trust and responsibility is placed
in the hands of the computer user. A computer program copied over and over
again will work exactly like the original. A program that took years to
develop can be copied in a few seconds. And, although software is expensive
to develop, almost any PC can be used to generate a cheap copy.

Why Is It Important?

Why should a computer user be concerned with software compliance? First and
foremost, computer piracy is illegal and there are stiff penalties for
breaking the law. Companies and individuals who break the law can be
penalized as much as $100,000 for every instance of software copyright
violation. Recently, a 75-employee Colorado embroidery and monogramming
company paid $30,000 in penalties, and a 200-person New Jersey commodities
business paid $46,000. These small businesses were caught and paid the price
for illegal software use.

There are also valuable benefits for becoming software legal. By using
original versions of computer software, users receive upgrade notifications,
usually at discounted prices. They are also investing in the quality
assurance and reliability of the product. Legal compliance means that the
business relationship does not end when the buyer walks out of the store.
Full documentation, technical support and product change notices await the
rightful owner of computer software. The user also enjoys efficient business
functions due to fully operational and productive employees, computer systems
and virus protection.

Who Pirates Software?

There is no one type of person who misuses computer software. Many people do
not even realize that what they are doing is illegal. People who would never
think of stealing a candy bar from a drug store may have no qualms about
duplicating a $500 software package. In a small business environment,
resources may be limited and an owner may even think that such a small
infraction can have any serious consequences. After all, a small business is
very different from a large corporation. But piracy is theft and theft is
against the law.

What Types of Piracy Exist?

Computer piracy comes in many forms. Software counterfeiting is the illegal
duplication and sale of copyrighted software in a form designed to make it
appear legitimate. Hard disk loading takes place when computer dealers or
consultants load unauthorized copies of computer software onto the hard disks
of personal computers, often as an incentive for the user to purchase from
that particular person. Electronic bulletin board services (BBS) may offer
the illegal opportunity to download copied software using a modem connected
to a telephone. Finally, there is the all too common practice of copying
software within companies for use in the home or office, or "sharing"
software among friends.

This last type of piracy accounts for over half the total revenues lost by
the industry. The reasons for piracy differ widely. A small business person
may copy one piece of software to trim costs. Another user may feel that
"everyone else is doing it" and they do not wish to stand out. Finally, there
are those who believe that piracy "doesn't hurt anyone" or "isn't really
stealing." They are wrong.

Who Must Obey the Copyright Law?

Many people do not realize that the copyright law applies to organizations,
both large and small, as well as individuals. More and more businesses have
written policies against illegal duplication of software. In a small
business, there is a unique opportunity to initiate and oversee a
comprehensive software policy. In a smaller environment, software purchases,
installations and access can all be easily monitored to help the small
business become "software legal." But compliance does not stop when a small
business person leaves his or her job. Employees may face disciplinary action
if they make extra copies of the company's software for use at home or on
additional computers in the office. A good rule to remember is that there
must be one authorized copy of a software program for every computer upon
which it is run.

What About Upgrades?

Generally speaking, upgrading of software does not give a small business the
right to give away the earlier version. The upgrade is an improvement of the
original software and not a new copy. The earlier version and the upgrade
should be treated as elements of the same software product and not
distributed.

What Can I Do?

Because the software industry is relatively new, and because copying is so
easy, many people are either unaware of the laws governing personal computer
software use or choose to ignore them. It is the responsibility of each and
every software user, big or small, to understand and adhere to copyright law.
Small business owners can take the initiative to make software compliance an
integral part of their daily procedures. If you are part of a small business,
see what you can do to initiate a policy or procedure that everyone respects.
Also, suggest that you or your management consider conducting a software
audit. You can also help spread the word that users should be "software
legal."

Finally, free educational materials, including a Self-Audit Kit, are
available. The Self-Audit Kit includes SPAudit, which helps as a software
inventory program. Using these tools a small business can find out what
software they have on their computers' hard drives and what they must do to
become "software legal." The benefits of becoming "software legal" far
outweigh the disadvantages.

How to Get More Information

Information is power! - Make it your business to know what business
information is available, where to get it and most importantly, how to use
it. Sources of information include:

U.S. Small Business Administration

SBA District Offices
Small Business Development Centers (SBDCs)
Service Corps of Retired Executives (SCORE)
Small Business Institutes (SBIs)

Consult your telephone directory under U.S. Government for your local SBA
office or call the Small Business Answer Desk - 1-800-8-ASK-SBA for
information on any of the above resources. Also, you may request a free copy
of The Small Business Directory, a listing of business development
publications, from your local SBA office or the Answer Desk.

Other Sources:

State Economic Development Agencies
Chambers of Commerce
Local Colleges
The Library
The manufacturers and suppliers of small business technologies and
products.

The SBA's participation in this publication does not constitute an expressed
or implied endorsement of any of the cosponsor's opinions, products or
services. SBA Auth: 88-1307

All SBA programs are available to the public on a nondiscriminatory basis.