Today, we are going to run through the overview of self-employment, using a flowchart that you have access to on the Web. It basically guides the development of a small business and takes you through the idea formation to how should that business be structured and what are the critical components of it? We have 30 minutes today. So, it is going to be very quick. Certainly, this is not the definitive look at business planning or small business development for folks with disabilities. But, this will give you some ideas of both the simplicity involved in small business, some of the complexities, and some of the places where you might see that you or the person that you are helping to support may need some help. We are also going to briefly touch on some of the Social Security aspects. One of the reasons we decided to start this short introduction to self employment around the idea of business plans is that having a business plan for those of us without a lot of ready cash, and that would certainly describe a lot of folks with significant disabilities, is your key to funding a lot of times. Whether you’re presenting your business idea to the Social Security Administration through a PASS plan, going to Vocational Rehabilitation to find support and financing, or going to a banker or a Workforce Investment program; all of those organizations are going to request to see some formal approach and proof that you've thought through the business idea. None of those agencies necessarily has to require you to have a business plan before they start supporting you. In fact, one of the great things that Vocational Rehabilitation, a PASS plan, or a Workforce Investment can do is to pay to help you develop this business plan. But, thinking through the plan a bit and thinking through the business development, is going to be critical to presenting a good idea. Here is my career goal. This is why my business will work. We will give you a nuts and bolts small business approach to it. We come from the background of Supported Employment. We are thinking, just as employment happens, that small business happens with support and that anybody can be a small business owner provided that there is a market for the product, that it meets that person's needs and dreams, and all the other variables that would go into wage employment. But also, there is some critical thinking that goes into this. For a lot of you, this is a new area of exploration. Right now, at both our private business and at the University of Montana, we have helped support about 200 different kinds of businesses. Some of them are in Montana and Wyoming through a Department of Labor project, and around the country. We are just starting to work with Kentucky, with both their developmental disability and vocational rehabilitation system. We have been to Maryland to talk to those folks a bit. Maryland looks like it is taking a lead, and certainly North Carolina, California, Oregon and Washington. A lot of folks are picking up on this idea that here is another opportunity for folks to go to work. I also want to say that this is a great opportunity for folks in rural areas, where maybe there are not quite as many job options. But, there are a lot of things that local communities buy or that can be sold in state, in the region, globally, or however that market develops. It is just another opportunity to help people get productive and to get some economic opportunities in their lives. I would like to walk through the process a little bit. Again, this is a very short introduction. It is not going to be comprehensive to any degree. It's to get you logically thinking about developing a business idea with somebody, then presenting it in such a way that it can garner support from those other partner agencies that you and I both work with. Some of the facts first before we get into the depth of this are that most small businesses succeed in the United States. Certainly, there is that old myth that 80 percent of small businesses fail within the first five years. Unfortunately, the data and the way that they collected and reported that data has been misleading for a number of years. The Department of Commerce last year released a study that showed that 79 percent of all small businesses actually succeed. What happens is that many people develop a small business, and then harvest it. They sell it off. They start another business. They add a partner. They diversify and change their name and their organizational structure. But small business is especially lucrative, and it's an especially nice way to avoid the pitfalls sometimes of wage employment. Not to say that it's not a difficult thing to do. Small business always has its challenges. Our challenge as a field is to figure out, "How do I support this person or these people in this particular business venture?" We also know that roughly 90 percent of businesses owned by people with disabilities succeed. Again, even though small business has this atmosphere around it of high risk, it's actually as successful and in many cases more successful than wage employment, because it's individually driven. It is a much easier accommodation, sometimes, for folks with particular types of disabilities. Home-based business is one of those accommodations or business models that accommodate a variety of personality types, products, and disabilities. For many years, we stayed away from small business development, because we were afraid that we were going to isolate people. We found, and I wish we had found it out much earlier because I think we lost 20 years in some cases, that people are connected because first, they have money in their pockets. If you have money in your pocket, that means you have a certain amount of power in our society. Folks also have customers. They are making those contacts. They have a supply chain that they are working through. We found the exact opposite [of isolation], that folks in home-based businesses, even though they might look isolated, are actually very much connected to their customer base, their suppliers, and their community. They have the liberating forces of actually having some expendable income. Certainly many of you know that vocational rehabilitation for many years has supported small business. Vocational rehabilitation around the country, many state agencies, and certainly the Rehabilitation Services Administration are very supportive of small business. But many states are struggling under the current rules, regulations, and staff training issues, around what constitutes a closure, because they are a results based system. How much money is enough money to invest in a small business? How much should the consumer bring in? How do we measure the legitimacy of a business? How do we form new partnerships in the community with small business development centers, with tribal business information centers? How does this work in urban versus rural issues? There are a lot of issues that vocational rehabilitation is going to struggle with. We're working with lots of vocational rehabilitation offices and agencies around the country. We're taking it on a case-by-case basis at this point. We know that vocational rehabilitation successfully closes nationally somewhere in excess of 5,000 small businesses a year as successful closures. There is no rule yet that really pinpoints what a successful closure is, but it's important to understand that it can be done, and that an individualized approach, based upon the individual plan of employment, makes a lot of sense at this point as we start to figure out how that system works. Also, the Workforce Investment Act programs can and do support small business. We just wrapped up a three-year demonstration project using WIA funds in the Department of Labor in Montana and Wyoming. We worked through the Montana Job Training Partnership and a host of other partners, like the Montana Community Development Corporation, vocational rehabilitation, many community rehabilitation programs, and centers for independent living. We were able, in three years, to help support about 80 small businesses, and another 80 wage jobs through that money. Again, it was demonstration. We are starting to figure out how we are going to do more and more self-employment for folks who are going through the One-Stop system. Social Security work incentives are going to be critical to those of you understanding small business. The use of self-employment subsidy to protect benefits and the use of PASS plans to finance small business has been critical to us and to others around the country who are doing a lot of self-employment pieces. Property Essential for Self-Support allows a business owner to go beyond that $2,000 resource limit under SSI, which restricts people in being able to build equity in a business or in their own personal lives. Social Security has been tremendous in their support through the PASS cadre and through the folks that we call a lot in Baltimore to talk about these emerging issues in self-employment. All of those systems are coming onboard. I want to talk about the actual physical network and development of a business plan. Again, I'll say that having a business plan does not guarantee success in a business by a long shot. In fact, it's been estimated that 75 to 80 percent of successful businesses in the United States do not have a business plan. However, we can probably pretty much predict that 100 percent of unsuccessful businesses didn't have a business plan, either. We really do want to think about the future. That is especially critical when we are using somebody else's cash resource, such as vocational rehabilitation or a PASS, to look at the impact of self-employment income on the benefits, on Medicaid or Medicare. How does that impact Section 8 Housing? All of those things are beyond the scope of this presentation. Having a business plan allows you to project what your possible earnings might be and to safeguard and work with these systems to create something that flows a bit more precisely. We also need a business plan to think about the future in terms of how is our market liable to evolve. Is there a point at which we need to get out of the small business, and is there a time? Certainly, lots of people who start small businesses start them to run for a very short period of time, and then sell out and take the capital to start another business and keep building that way. Anybody that owns rental property, knows that's a common approach to building a portfolio of revenue producing property. It is the same in small business. Lots of small businesses get sold. They were started for that very exact reason, to start a small market, grow it a bit, and then leverage that business to get a better business. If you go to the web and do a search, you can find examples of business plans for all types of different businesses. Let me reinforce that businesses are not started because there is a market need for them. That is the old economic development model. That is sort of related to the old job development model, where we go out, find a job for somebody, and then try to fit them into it. We really look at, what does that person want to do? What is their dream? What are their gifts and talents? Can we indeed create a market? We start by looking at the product or service that they are going to offer, and we try to refine that. When you're writing a business plan, as you'll see when you look at an executive summary on the web of somebody's business plan, you'll find that they can in a sentence or two, define what their business is, who their customers are, and what is it precisely that they are going to do. We are really trying to clear the cobwebs and really pinpoint exactly what we are going to do. We look at the environment in which we are going to be running this business. Environment is a very broad and very diversely defined term. The environment can refer to the economic climate of the local area. It can refer to a global market. It can refer to the environment of the Internet, if you are going to do e-commerce. It can refer to a main street business or the local location from which you're going to operate. Environment takes into account all different sorts of aspects of the environmental issues. Again, the location is obviously closely tied to that. Are you doing it from a workstation inside your study at home? Are you running it from an espresso cart and have a particular location where you go in the morning and a different one at night? All of those things are critical, and they are tied back to that particular product or service. One of the things to be very clear about is that when starting a small business, don't try to be all things to all people. Really start to refine that idea. You probably don't want to sell hotdogs and birthday balloons. You probably want to focus in on one thing that you're going to do really well and then diversify later if that needs to happen. Probably the single question that we are asked [the most] is, how do we know that a business is going to work? Again, this is sort of looking at that potential and feasibility. We work with a number of small business development centers around the country. One of my favorite people, Rosalie Kates, who runs the Montana Community Development Corporation, has a wonderful small business feasibility study. She tells people, "Go sell one. Tell me how you did. Tell me who bought it. How much did they pay for it? Tell me what they use it for." Selling one or two products, if that is feasible, tells you a lot about who the end-user is. If you sell it wholesale, then your marketing approach will be different if you are actually selling it to the end-user. We want to think about how we test this. We have done a variety of different feasibility studies. One of the things that I like to do after I've worked with somebody for a couple days is to go to my motel room or my home, and I get the phone book and draw up five or six questions about that particular product or service. I call people at random, like a telemarketer, and say, very simply, "I would like to ask you a few questions about a business we're considering in your community. Do you have a few seconds to talk? I just want your opinion. If you don't have time, thank you very much. We won't bother you again." You would be surprised by how many people want to talk to you about your business idea, because a lot of people have business ideas, and they don't know how to get them started. The other piece, obviously, is that there are a lot of generic services available in most decent sized communities, certainly the small business development centers, the Service Corps of Retired Executives, tribal business information services, local economic development folks. Many Chambers of Commerce have small business groups that meet regularly. Again, it is about developing the potential and feasibility. A lot of times, it's not a major statistical undertaking. It is word of mouth and taking an opinionated look at your community. A lot of small business is guesswork. There is no way to engineer that out. Talk to people who are experienced in small business and who understand a variety of products and services. One of the next major places that we come to in the plan is the three C's. We are defining our customers. Sometimes people will say, "Everybody is our customer. We want everybody to buy Jello on a stick." You can't start that way. You have to really refine what is our typical customer going to look like? The buyer of Jello on a stick may not be a three-year old. It may be a three- year-old's mother. That tells us who is making the buying decisions. There is a lot of information about who makes buying decisions. There is a lot of information in bookstores, especially in the business section, about sales and marketing and refining who your customers are. If you're going to sell pet food you know that you need to target people who own pets. It's only logical that you do those sorts of things. This may help you refine who your customer is. Maybe you don't have a distribution network where you could actually go out and sell pet food, but you could sell pet food to the stores that sell pet food. You might also be selling to a manufacturer of pet food who does not have the capacity to meet all of the requirements of their customers. There are varieties of ways to look at how you sell your product by defining who is your end customer. Then we look at our competitors. Who else is making this? What are they not doing? We work with a gentleman who sells and installs custom windows for houses. He grossed a lot of money this year in a small town in Montana. He realized that he didn't have to compete with other glass installers and glass designers. He had to show his customers that he had a better product. He could ignore in a lot of ways his competitors by just looking at what his competitors are not doing. There is an opportunity to work with competitors who may have more business than they could handle and to form a partnership of some kind, whether that's a formal or a loose partnership. You need to ask, “Is there somebody else selling my exact service? Is there a way that I can do something value added?” Ford certainly didn't close when General Motors started selling cars. What they did was that they differentiated their product. They said, "Our product is better for these reasons. Our product comes in this variety of models. You can get it in this color, whereas maybe you can't get a Chevrolet in that color." There are varieties of ways to deal with your competitors. Looking at a business plan is a great way of looking at how a variety of people develop their competitor analysis. We are not talking reams and reams of paper. We have seen really good business plans that were five pages long. We have seen more complex ones that were 100 or 200 pages long. The typical one just isn't that big a document, and so it shouldn't scare you away. Those who write Plans for Achieving Self-Support for Social Security, are already well versed in the ability to put words on paper that make sense and that build a career. It's basically the same process. A lot of what would go into a PASS plan would also go into a business plan. Finally, we look at our capabilities. How much can we legitimately produce? I worked with Alyssa, a young lady in Montana, who makes gourmet dog biscuits. Her capacity was limited, because she only wanted to grow her business to the size of her residential kitchen. The problem with only growing your business so big and it's a competitive market, which dog treats are, is that somebody else comes in who isn't afraid to get bigger and they take your market. What she has had to do, and luckily she makes enough money that she can do this, is grow her business. It only took about $3,000 to start that business. Now she has two contract bakers working for her. That is impressive. Most of our businesses have only cost in the $4,000 or $5,000 range, so we are not talking about businesses like Microsoft. We are talking about micro enterprises that employ 1 to 5 people. When Henry Ford started making Model Ts, he said, "Our capability is that you get only one color, because if we offer six colors we can’t make a profit." This is what capabilities mean. How far can I go with this product? How far can I ship it? How far can I advertise? And, how many of these things can I make in a day or deliver in a day? And that is something that needs to be realistically portrayed. You can grow it later. Indeed, we encourage people to grow their businesses, but not too fast. The marketing mix is basically where we start to look at that niche market. If we are going to do a pooper scooper business for dogs, we will only go to neighborhoods where there is a high concentration for dogs and people who don't have kids, whose job it is to clean up after the dogs. We find out that information through simple surveys, canvassing, and knowing people in a variety of neighborhoods. We can talk to city planners about where we might find those folks. The Dan Quayle Center and Museum is in Indiana. This is a specific niche in that community that people come and see this particular vice president's memoirs, the library, and all those things associated with him. This is truly a niche market. We want to look at price. How much can people afford? Do we need three different versions of it? Do we need Levi's or some off-brand, some Kmart brand? Even if we make them out of the same shop, people want variety, sometimes. Sometimes there is a low cost buyer. Sometimes there is a high cost buyer. So, we have to determine where is it that we can sell at what price. Distribution is one of our toughest pieces, especially for those of you in rural areas who know that getting the product out to a variety of people can be very tough. This is where we may want to hire a sales representative to go and sell our product. This is where we may want to look at some form of Internet sales. This is where a service like an auction house like E-bay, which brings in 6 to 10 million buyers a day to look at products, this is another approach for distribution. Distribution means getting a wholesale agreement with somebody, or it means selling chocolate chip cookies on Main Street. If you have a town of 300 people, you probably are going to exhaust your market really fast. You want to be looking at diversification. You want to be looking at how do I get my chocolate chip cookies to six other small towns in the area. You are just thinking about how are we going to do it. In promotion, we look at how is it that we are going to market and advertise this product. Are we going to do word of mouth sales? Are we going to have an advertising budget? Are we going to advertise in print media or are we going to go on the radio or the TV? We've had people buy radio ads in Montana or Wyoming for their businesses, which is generally a pretty big mistake, because we don't have drive time. We don't have people stuck in cars where they are in range of the local radio station. When you go behind a mountain in Montana, Wyoming, Colorado or New Mexico, you've lost your market. Print advertising or word of mouth, networking, joining the local Chamber of Commerce, or Kiwanis sometimes can be your best promotion. Do public service announcements, get press and do press releases. There are variety of ways that you can promote a small business for low cost. Certainly we spend time on operations. How is the person going to actually produce and deliver the product? This is where a lot of people will need a variety of supports that are similar to Supported Employment. The training, support techniques, and assistive technology are all of the same sorts of things. Lots of times, it's a matter of having an Internet connection or a digital camera to display your goods. Sometime it's the ability to own an automobile so that you can go out and sell your products. Operations takes those all into consideration. And, you need a good supplier chain so you can get your products when you need them. If you are running a bagel stand and the local bakery's ovens breakdown every other day and you have no product to sell, that is not a good situation in which to be. You need to cultivate good prices and good delivery with your suppliers. You need to think this through before you open your business. It doesn't mean you can't establish new relationships as you are going. People need hands-on training in producing a product efficiently. We will teach people and instruct them and their support people. Finally, you need contingencies in case there is an accident and your products or supplies don't get to you. That gets folded into a production plan. How many of these can we produce on a given day? How many do we need to? When do we need to tell people that we are done? Finally, let's look at the financial piece. How much cash do you have to put into this business? Is somebody else contributing cash? We are not looking at major capitalization. What are the assets that you bring? Is this a place where we look for investors? Let's do a simple cash flow projection. Those are easy to do. You can find those on the web. What kind of work incentives can we use? Do we want to borrow money? There are a number of low interest and, unfortunately, high interest loans for entrepreneurs. We do simple break-even analyses. At what point do profits exceed expenditures, so that we know when we are starting to make a profit? And again, finally, how do we use our Social Security work incentives, such as Property Essential for Self-Support and Plans for Achieving Self-Support to help finance our businesses? And our 30 minutes are up.