Building A Team, Fundraising and Entity Selection Debra Druther CPA Flashcards
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Running your business without knowing your numbers is like driving a car without being able to see your direction or speed. It’s only a matter of time before you crash.
The Two types of teams a brewery owner should have are
Outside team (CPA, Attorney, insurance agent) Inside Team (CEO, CFO, HR, Sales team) Also a third team is Support
Outside team is devoted to…
Getting all of the compliance stuff out of the way so you can focus on the business
Who should be on the outside team-CPA?
A good CPA should know
- Tax deductible fees
- Flag potential audits
- Missed deductions/credits
- Deals with laws and due dates
- Access to networks of providers
Who should be on the outside team-Bookkeeper?
A good bookkeeper or accountant
- Can be a combination of people (one does books and the other to make fixes)
- It helps you at tax time - no last minute scramble, staying organized all year.
- Important to understand fiscal health of your business, make sure people are paying you.
- Someone to do the dirty work on collections of payments.
Who should be on the outside team-Lawyers?
- At least two lawyers
- Should have one business attorney and one intellectual property, copyright etc. attorney
- Access to their networs
Who should be on the outside team-Insurance Brokers?
- Familiar with the industry
- Job to explain and coordinate different types of insurance as needed
- Work with you to figure out what you need
- Offer solutions based on industry, geography and or costs
- Can advise on best practices
- Keep you informed on law changes like (Health insurance and Obamacare)
Who should be on the outside team-Payroll services?
- outsource payroll to a payroll company
- Can remit payroll taxes direct from bank account
- Creates payroll reports for ease of use for your bookkeeper and tax prepare
- Files payroll tax returns on your behalf
Finding outside team members Who To?
- Ask friends and family
- Check credentials on Linked In
- Ask professionals for references and referrals
- Always interview first and ask good questions
- Remember you are building a team, not a group of strangers.
- Ditch them if they are not being useful
Building an Inside Team -
- Taking on multiple rolls is critical at start up
- Need a range of skills to be able to grow
- Find the right mix of people is essential
- Effective management team means a more efficient and capable business.
Building an Inside Team - Rolls inside
- Each team member should focus on their skills set.
- Brewery will benefit by having its overall growth and direction viewed from different perspectives.
- Don’t underestimate the importance of a good rapport between your internal team
Building an Inside Team - Roll of the Inside Team
- For operating in more than one location.
- Operating in more than one business type
- For different cultures, like mergers etc.
- Operating at different levels
Building an Inside Team - Management Team Skills Sets
- Sales and Marketing
- Production
- Food management
- Administration
- Procurement, Buying
- Finance
- Promotional
Building an Inside Team - Keys to a good team
- Making sure roles and responsibilities are in place
- Formal, manager meetings, progress reports
- informal - team building sessions, general feedback
Building an Inside Team - Typical Roles for A Working Brewery
- CEO, secures strategic relationships, spearheads innovation/modernization
- CFO, Negotiates supplies and distribution contracts, funds capitol improvements and expansion
- CIO, Optimizes production data and inventory and productivity savings.
Building an Inside Team - Typical Roles for A Working Brewery
- HR, human resources, provide recruiting, retention of brew-master and chefs, manage increased productivity
- VP Sales and Marketing building brand awareness, distributor relationships
Requirements for building the team
- Analyze skills the business requires and consider strengths/weaknesses you offer personally
- Analyze fit of existing skills among staff and prioritize missing skills
- Evaluate if staff development could fill the skill gaps which aide in forming a more cohesive team
- Consider your options, Independent contractors, Consultants etc.
Performance Management
Need to have a good system in place to monitor performance and rate.
Performance assessment is divided into two parts: PART 1
1- Measurement
Relies on key performance indicators like Measurable factors Like: Sales figures, production output, machine downtime, financial performance etc.
Performance assessment is divided into two parts: PART 1
2- Evaluation form 4 key phases
- Set objectives - have clear expectations of employee
- Manage the performance, provide employees with tools and resources they need to perform well
- Carry out appraisal, monitor, assess, and discuss performance and agree on future goals
- Provide rewards, not necessarily monetary
Fundraising, Debt Vs. Equity: Debt Financing
Debt Financing-
- Refers to money raised through bank or loan
- Must be re-paid, plus interest
- Usually a single purpose, over defined period of time.
- Usually secured with collateral, like a home or the equipment being purchased.
- Monthly payments fore you to manage cash flow
- Bankers look closely at debt to equity ratio
Fundraising, Debt Vs. Equity: Equity Financing
Equity financing:
- Money invested in a business in exchange for a portion of ownership and future profits
- Usually long term, general use funds
- Taking on equity usually means placing a priority on growth, or that you cannot afford to take on anymore debt.
Fundraising, Debt Vs. Equity: Debt Advantages
Debt advantages:
- Debt does not dilute the owners ownership interest in the company
- Lender is entitled to repay of only the agreed upon loan amount plus interest, with no claim on future profits
- Loan plus interest are known amounts, the payments can be planned
- Interest on the debt is tax deductible, which in effect lowers the cost of the actual loan
- Raising debt capitol is usually less complicated
- Don’t need to send performance updates to large numbers of investors.
Fundraising, Debt Vs. Equity: Debt Disadvantages
Debt Disadvantages:
- unlike equity, debt must at some point be repaid in full.
- High interest costs during financially difficult periods can increase risk of insolvency
- Companies that are highly leveraged find it difficult to grow due to high cost of debt.
- Cash flow is not required, but must also be budgeted for.
- Loans can come with restrictions on what you can use it for.
Fundraising, Debt Vs. Equity: Disadvantages of debt equity compared to equity
Compared:
- Higher debt:equity ratio make a company look more risky to potential investors and lenders
- Need to put up collateral or a personal guarantee
Equity Advantages:
Benefits of taking on investors:
- Growth, cash influx from investors help accelerate launch of new products, hiring of employees, and expansion into new facilities.
- Low risk, don’t have to pay money back if un- successful
- Patience, Lenders are more times than not more flexible with payments and
- Widen your investment network and experts
- Additional knowledge and ideas for bettering processes
- Partnering to fill strength gaps
Equity disadvantages:Risks of taking on an investor
- Control, shared
- More scrutiny and accountability
- Expectations, investors will want strategic plans that effect profitability
- Marriage, California is a common property state, what your investor owns so does his or hers spouse.
- Expensive to buy out as shares increase in earnings.
- Early investments means selling off large chunks of the business in the beginning
Debt to equity ratio
Brewery standards are a debt:equity ratio of 1.4 or 140%
- Debt to Equity ration = Total debts divided by total equity
Entity selection is state specific
Sole Proprietorship:
- Simple entity
- No formal procedure to start
- No separate tax return needs to be filed
- Personally liable for debts and obligations of the business.
General and Limited Liability Partnerships
LLC and General partnerships:
- Easy form like a sole prop.
- Basically is an association of two or more persons to carry on the business
- Separate tax returns to be filed Form 1065
- income deductions pass through individual partners.
- General partners treated as having the liability for debts and liabilities of the business.
- Partners share the liability
- Must have at least one general partner
- Annual $800.00 / franchise tax board
LLC
- Most popular and flexible
- Offers liability and protection of a corp. but can be taxed like a partnership
- Separate tax returns
- income deductions pass through individual members
- $800 franchise tax
- Additional CA LLC fees based on gross receipts, (Double taxation)
Single member limited liability
- LLC that has one member
- Disregarded entity for fed. tax purposes
- Files separate tax return
- $800 Franchise tax
- Additional CA LLC fees on gross receipts.
C- Corp
- The business people think of
- Owned by individual shareholders
- Shareholders vote on policy issues but decisions are left to board of directors
- Day to day operations run by officers of the company (CEO, CFO, CIO)
- Shareholders pay tax on dividends
- taxed at graduated rates from 15-35%
S- CORP
- Most restrictions
- Only one class of stock
- Limited number of investors, no foreign investors
- Files separate tax returns
- income, deductions pass through shareholders individual taxes
- Reasonable compensation
- Risk being treated as a C-Corp if any restrictions are broken.
