By Leonardo Pozzobon, Program Coordinator with EGBI
A business plan is NOT the be-all-end-all magic solution to your business problems; that will lie only in your adequate execution. A business plan is, however, a guide to show the path to profitability, listing your challenges and needs to get there. You may eventually reach roadblocks that you hadn’t anticipated, you may consider things initially that you then discard, and you shouldn’t let this discourage you; remember “Plans are useless, but Planning is everything”. You may eventually find a better opportunity or a better market that makes you change your mind on something, but you will know where you stand initially and where to go.
That being said, let’s think about what goes into a Business Plan. But first, a Business is only a business if you have identified a Problem or Needthat you want to solve or address, if you can provide the right Solutionfor it, and find the right Customerwho will have this problem, as long as he or she is willing and able to Pay you in exchange for your solution. The way to find and solve any given problem is unique to that industry, as are the regulations you need to navigate; finding the ideal customer and ideal price is just part of the Marketing and Financial plans. Thus, logically these should be addressed on your “road to success”, or Business Plan:
Problem / Solution (what you’ll do and how)
Marketing Plan (who’s your client and how will you find them)
Finance Plan (how are you making money)
Operations (how are you making more of your solution)
I want to look at the example of a Childcare Business, which provides a near priceless service to working families: Caring safely for the young while parents work to bring food to the table. What 200 years ago might’ve been a role for the extended family, in this industrialized world young adults move far from home and family. Now in the post pandemic move to more affordable places, it’s even more important to understand the parts of a good business plan to take advantage of new opportunities.
Start by looking at the needs and wants of your customer. Parents will most often want to drop off their children when going to and from work, so your best bet is to be close to home or work, and to find how to best connect with these customer segments. Connecting with your ideal customer is the next step on your marketing strategy, and you should not neglect investing in the most basic items of a standard strategy: maintaining a clean and safe image, being visible and easy to find from the street, and having an updated online presence. When directly doing outreach to parent groups, remember these form spontaneously around whatever platform or system that gets traction, and these vary from town to town. A neighborhood can communicate using Facebook, six blocks away another neighborhood can use Nextdoor, and yet a third one can just use an old school bulletin board. It’s okay to bootstrap your marketing strategy, just as well as it is to have money to spend, just make sure that you spend your money wisely, and research before.
Moving on to the money topic, remember that a business doesn’t go bankrupt if it’s losing more money than what it makes, it goes bankrupt when it runs out of Cash. What does this mean? It means you want to build a war chest large enough to cover your first week, or month, or year, however long it takes you to start making a profit and paying yourself. What does that mean, again? Do a budget, find out what your spending categories are, find out everything you need to spend to open, to stay open, and to serve your customers. Or in CPA lingo: your Start-up Costs, your Fixed Costs, and your Cost Of Goods Sold (COGS). Everything, as usual, will depend on both your investment decisions and the resources available to you; there’s a huge difference in initial investment and monthly costs between purchasing real estate and leasing a place, and your available funding caps one side of what you can and cannot do (your Total Addressable Market caps the other side). So first decide what you have available to invest, what your grand vision of a childcare center looks like for you, and then research all the costs and investments needed to reach your vision with your available resources. That will then become the starting point of your Financial plan.
So up until now, all I’ve talked about is spending, spending, spending, let’s get to making money. Providing the solution to a problem, be it selling a physical product or selling your time and knowledge, will always bring certain costs associated with each unit of product or service that you sell; that is what we call Cost Of Goods Sold. These will define, first, the lowest amount you can charge, and give you some guidance on what price to set for your services. Finally, the # of clients you serve will determine your income, subtract your COGS and you’ll have your estimated Gross Profit. This is what you’ll use to cover your fixed expenses, loan payments, payroll and your final income. So you see how important it is to do a good, realistic estimation on all your expenses, fixed and variable. Overestimate the # of children you can serve, and you won’t cover your costs; underestimate your rent, utilities, or payroll expenses, and you may not have any money left to pay yourself. One underestimation may mean your business is no longer sustainable.
This is a very short description of everything you need to consider when making your Business Plan for a childcare business. If you would like to go deeper on any of these topics, feel free to reach out to Economic Growth Business Incubator (EGBI) for a coaching session.
As the ice thaws, Texans are getting a better understanding of the damages caused by last week’s winter storms. The most common damages suffered were as a result of burst pipes, falling trees and power failures. As home and business owners begin to tackle the cleanup and repairs, they are looking for answers. Some of the questions we are getting in my office are can I be reimbursed for food spoilage? Is tree removal covered? Can I get my hotel stay reimbursed? The answer to these questions can be found in your insurance policy. As this can be a complicated document, it is important to consult your insurance agent to determine what your policy does and does not cover. When deciding whether or not to file a claim, there are some important things to consider: – Make sure you check what your deductible is. Many coverage’s are subject to your deductible. – If you stayed at hotels do to power outage or no water. Many insurance will not cover you hotel stay. If you or your family had to evacuate your home due to storm damage, your policy might cover your cost. – If you do have a claim keep in mind plumbers and restoration are two to four weeks out. Get your name on as many waiting list as possible. Also insurance companies are dealing with many claims, don’t wait until they call you to get your contractors or plumber. – Take pictures of everything, before, during and after getting work done…if you think you are taking too many picture take more! Keep every receipt, and itemized list of the damages. – Keep your family safe and try to mitigate the damage.
In some situations the damage may not be covered by insurance. In these instances, there may still be help available from the federal government. If you have loss that your insurance doesn’t cover consider filing a claim with FEMA. FEMA can’t duplicate benefits for losses covered by insurance however, if insurance does not cover all of your damage, you may be eligible for federal assistance. The fastest way to apply is online at www.disasterassistance.gov.
If you don’t have internet access you can register by calling 800-621-3362 or TTY: 800- 462-7585. The phone lines operate from 8 a.m. to 10 p.m. CDT each day. Here are some Q&A from Texas Department of Insurance https://www.tdi.texas.gov/consumer/storms/winter-storm-faq.html
Citizenship requirements: A member of the household must be a citizen, non-citizen national or qualified alien of the US, including a minor child who is a citizen, non-citizen national or qualified alien of the US with a parent or guardian in the house applying on their behalf.
FEMA assistance does not have to be repaid and is not taxable income. It has no effect on Social Security, Medicaid or other social safety net programs.
Temporary housing, lodging expenses, home repair, home replacement permanent housing construction AND child care expenses, medical and dental expenses, funeral and burial expenses, damage to household items, fuel for primary heat source, clean up items, damage to essential vehicles, moving, storage and other expenses or serious needs as determined by FEMA.
Multiple disaster loans can be given since multiple declarations were declared. (Covid and Winter Disaster) There cannot be any overlap(double dipping) as far as funds go, but two separate disaster loans can be active for the two declarations.
Credit history acceptable to SBA
Show repayment ability
Collateral needed for loans over $25K
$2 million ceiling; interest rate between 1.25 and 6%; terms from 7 – 30 years
Applications for the new
$900 billion COVID-19 small business relief package begin for new borrowers the
week of Jan 11, 2021 from community financial institutions like PeopleFund in
Austin. What this means for small business owners:
If
you did not apply for a SBA Paycheck Protection Program (PPP) loan in 2020, you
could be eligible for a First Draw PPP loan under this new legislation starting
Jan 11, 2021.
If
you received a PPP loan in 2020, you could be eligible for a Second Draw PPP
Loan under the new COVID-19 relief package starting Jan 13th.
If
you did not apply for an SBA Economic Injury Disaster Loan (EIDL loan) in 2020,
there is additional money in the legislation to fund new loans.
Major rules relevant to EGBI small
business clients
The following is a quick glance at the
Interim Rules for the PPP. Please refer to the SBA for the complete regulations
or talk to your lender about your specific situation.
Small businesses
apply for PPP loans from financial institutions. Talk to your lender. If you
don’t have a lender, the SBA will roll out funds to community financial
institutions like PeopleFund, LiftFund, BCL of Texas before banks and credit
unions. Use this link to get on PeopleFund’s waiting list for a PPP loan: https://peoplefund.org/covid-19-loan-programs/
The loan is
guaranteed by the SBA. No collateral is required. No personal guarantee is
required. The borrow will not pay any fees for the loan. Lender must make a
one-time disbursement of the loan within 10 days of approval.
The full amount
of both First Draw and Second Draw PPP loans may be forgiven if used according
to law. The interest rate is 1% for 5
years for any part not forgiven.
Small businesses
are eligible if you were in operation by February 15, 2020 and have less than
500 employees. Documents that can establish your eligibility: payroll records,
payroll tax filings, Form 1099-MISC, Schedule C or F, income and expenses from
a sole proprietorship, or bank records.
Second Draw Loans
have special eligibility criteria:
Borrower for a Second Draw Loan must prove a revenue reduction of 25% or greater in any one quarter in 2020 compared to the same quarter in 2019. This provision appears to make start-up businesses ineligible for a Second Draw Loan if they did not have significant revenue in 2019.
Business has 300 or fewer employees.
Borrower must use the full amount of the First Draw Loan on eligible expenses before the second loan is disbursed.
You don’t have to
apply for forgiveness for your First Draw loan before you apply for a Second
Draw Loan. The forgiveness process for the First Draw Loan should be clarified
and simplified by the end of January 2021. You have 10 months from the end of
your loan forgiveness period (typically 24 weeks after disbursement of the
loan) to apply for forgiveness. Contact your lender to apply for forgiveness.
The FORMULA for
PPP loans is the same as last time, 2.5 times your monthly payroll costs and
may include owner’s net profit in lieu of payroll as calculated on the Schedule
C for 2019 or 2020.
Payroll costs
consist of compensation to employees (whose principal place of residence is the
United States) in the form of salary, wages, commissions, or similar
compensation; cash tips or the equivalent (based on employer records of past
tips or, in the absence of such records, a reasonable, good-faith employer
estimate of such tips); payment for vacation, parental, family, medical, or
sick leave; allowance for separation or dismissal; payment for the provision of
employee benefits consisting of group health care or group life, disability,
vision, or dental insurance, 62 including insurance premiums, and retirement;
payment of state and local taxes assessed on compensation of employees; and for
an independent contractor or sole proprietor, wages, commissions, income, or
net earnings from self-employment, or similar compensation.
USES of the loan:
At least 60% of the loan must be used for payroll costs; the remaining 40% may
be used” to support the ongoing operations” such as:
Mortgage interest payments
Rent
Utility
Interest on debts prior to Feb.15, 2020
Refinancing an SBA EIDL locan made between Jan 31, 2020 and April 3, 2020
Covered operations expenditures such as business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses
Property damange related to vandalism and looting due to public disturbances that occurred in 2020 that were not covered by insurance
As background, the Relief
legislation will be administered by the US Small Business Administration (SBA)
and included:
$284 billion for a second round of the
Paycheck Protection Program (PPP). The new relief package includes:
additional funding for new PPP loans
the ability to obtain a second PPP loan for small businesses facing significant revenue declines in any 2020 quarter compared to the same quarter in 2019
clarifications providing for the deductibility of business expenses paid with forgiven PPP loans (a material change from existing IRS guidance)
loan eligibility for Section 501(c)(6) not-for-profit organizations for the first time
$15 billion for live venues, independent movie theaters and cultural institutions
$20 million for the Economic Injury Disaster Loan Program
For
more information about the Interim Rules:
Business Loan Program
Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act
Todos Junto learning Center is a bilingual, 2Gen nonprofit that works with children and parents simultaneously, building them up together to create meaningful opportunities for both.
We were proud to have a conversation with Christina Collazo, Founder & Executive Director at Todos Juntos Learning Center her journey, challenges during COVID-19, how EGBI has assisted them through coaching and bookkeeping services, and the impact of her programming in the community. We were also joined by EGBI’s board member and supporter Yolanda Davila, Community Relations Executive at BBVA.
Interview with Christina Collazo, Founder & Executive Director at Todos Juntos Learning Center below.
Due to the current unprecedented events, many of us have been forced to move our work remotely or adjust to a new way of communicating from our homes. Now the questions is, where do I even start? Here is a quick go to list to begin.
DropBox Bring your files and cloud content together with the tools your team wants to use.
Free Conference Call provides HD audio conferencing, screen sharing and video conferencing with up to 1000 participants. Sign up for a free account.
Google Free access to Hangouts Meet, which allows up to 250 participants and live streaming up to 100,000 viewers per domain, and G-suite until July 1, 2020 .
Jamm Free platform for voice and video collaboration for teams working remotely (integrates with Slack) .
LoomVideo recording and sharing service offering boosts to free service plan, discounted prices on LoomPro, and free access for educational institutions through July 1, 2020 . There is no recording limit until July 1, 2020.
Microsoft 365Free 6 month trial of Microsoft 365 E1, with web-based Office apps and business services including email, file storage and sharing, meetings, and instant messaging
Webex– Video Conferencing, Online Meetings and Screen Share
