Missouri State University
College of Business News
"Think Bigger and Bolder"

Bears Business Brief: How to get through the red tape of starting your own business

By: Rayanna Anderson

AndersonRayanna webYou have a great idea.  You have the money and motivation to get started.  You are going to start your own business. Nevertheless, what are the legal and registration requirements for you to get started?

Step 1:  Decide on your type of business structure

Before you do anything else, deciding on your organization’s structure is key to formulating your business. If not for any other reason, it is required on all the other forms you fill out. Your small business structure choices include being a sole proprietorship, partnership, limited liability company (LLC) or corporation. Today’s go-to answer is probably to organize as an LLS or a Sub Chapter S Corporation, a special form of corporation. Both of these structures have some protection against personal liabilities from your business operations. In addition, your business structure determines how you are paid as an owner. This decision point may best be served by consulting with an attorney and accountant.

Step 2:  Register your business name

Of course, first you have to pick a business name. This can be tricky and complicated. Make sure you explore all the potential implications of your selection.  Then, check to see if someone else owns the business name by researching if the name is trademarked. Register your business name with the Missouri Secretary of State’s office. For sole proprietors and partnerships, a fictitious name registration is filed. For LLCs and corporations, the business name is typically registered when the formation paperwork is filled out and filed.

Although separate from the legal registration process above, you will want to research what website names are available for your new business in today’s market. Website name availability, called domains, can be acquired through several sites. GoDaddy.com is one of the most popular.

Step 3:  Determine your taxes, license and other requirements

You will have to pay personal taxes, both federal and state, on any salary or profits you receive from your business. If you have employees, each individual completes an IRS form W-4 and Missouri form W-4 along with an I-9 to verify employment eligibility. Additionally, you will need to withhold both federal and state taxes out of their paychecks and match their FICA (Social Security and Medicare) contribution. Also, you will be liable for federal and state unemployment taxes.  Many small businesses use QuickBooks accounting software to make these calculations and track the payments.

There is no general state business license, although some types of businesses in Missouri require state authorization, such as business license to sell liquor.  Business license requirements vary from city to county. Check with the city or county government entities in which you operate.

If you sell a product rather than a service, you will need a Missouri sales or use tax number from the Missouri Department of Revenue.

The state of Missouri requires companies to carry workers’ compensation insurance when they have five employees or more, unless the company is in the construction industry. Construction industry companies are required to carry workers’ compensation insurance when they have one or more employees.

Make sure you understand the new regulations surrounding the Affordable Care Act. Generally, any business with fewer than 25 employee is not required to offer healthcare insurance, but may be eligible for tax credits if they choose to offer coverage.

Step 4:  Get a federal employer identification number (EIN)

You only need an EIN if you have employees, have business partners or are forming an LLC or corporation. That being said, your bank may require you to have one to open a business account. Also, if you have employees, you will need a Missouri employer withholding tax number to enable you to deposit your employees’ state income tax withholdings.

Deciding to start your own small business can be one of the most exciting and rewarding decisions you will ever make. Legal and registration requirements are inevitable. Knowing what is officially required is one of your first steps to being a successful small business owner. Check out the website www.MissouriBusiness.net for additional information, forms, publications, and where to get assistance for your new business.

Rayanna Anderson, MBA, is director of the Small Business Technology Development Center and the Management Development Institute at Missouri State University’s E-Factory. Anderson writes about issues she sees regularly in her consulting with small businesses in Springfield and the state of Missouri. Email: randerson@missouristate.edu.

This article appears in the February 6th edition of the News-Leader and can be accessed online here.

Posted in Bears Business Brief, College of Business | Tagged | Leave a comment

Bears Business Brief: Consider these steps to be more secure online

By: Shannon McMurtrey

Shannon McMurtrey
Shannon McMurtrey

As I sit down to write this column, we are in the middle of the 12th annual Cyber Security Awareness Month. Established in October 2004 by the National Cyber Security Division with the Department of Homeland Security and the National Cyber Security Alliance, this month is intended to help all of us step back and consider what steps we can take to be more secure online. With that theme in mind, I want to share some best practices we can follow to increase safety online for ourselves, our families and the businesses we work for.

I want to start with our kids. Parents today face a wider range of threats from online adversaries than at any time in our history. Not only do we have to worry about bullying on the playground, now we also need to be aware of bullying online. Prohibiting kids from playing games online might work while they are very young, but as they get older, it becomes imperative that we teach our kids about the risks they face online and help them to develop good judgment. This comes from a good relationship with our kids, where we establish trust and open lines of face-to-face communication. If we can do a good job of that when they are young, they will be less likely to run into trouble when they are older.

All of us could probably use a reminder to put down our phones and spend more time playing games with our kids and grandkids. Help them know what is and is not OK and how to report offensive behavior. Oftentimes kids may be interacting with adults while they are online and not even realize it. We have to teach them that just because a social profile says that the person on the other end is a boy or girl their same age, that is not always the case.

Speaking of interacting with others online, how safe are your habits in that area? Do you really know all of the people on your Facebook friends list? One of the most common attacks leveraged against companies today is called “spear-phishing.” The name originated from “phishing” attacks. A “phishing” attack is one of those emails you get that is often riddled with spelling errors, bad grammar and obvious mistakes promising that if you click on their link, you will win a million dollars. While those may be easy to avoid, “spear-phishing” emails are more problematic. Those emails are directed toward top-level executives in companies or people who may have access to information that the bad guys want – and they are very convincing.

The first step in a spear phishing campaign is reconnaissance. This goal of this stage is to learn as much about the victim as possible so that an email can be crafted in such a way that it sounds legitimate and makes it more likely that someone will click on it. Facebook is a fantastic weapon in this attack. The spearfisher creates a fake profile on Facebook and sends out a friend request to their potential victim. The victim will very often accept the friend request without knowing the person at all. Once that request has been accepted, the spearfisher is free to browse all of their target’s postings, learn about the potential victim’s hobbies, friends, interests, etc. and then go to work writing the perfect email. So think twice the next time you receive that friend request from someone you don’t really recognize. While you are at it, go through and clean up your friends list. Stay safe online and think twice before accepting my friend request!

Shannon McMurtrey, Ph.D., is director of Missouri State University’s master’s program in cybersecurity, as well as program director for the master’s in computer information systems in the department of computer information systems. Email:shannonmcmurtrey@missouristate.edu.

This article appeared in the January 30th, 2016 edition of the News-Leader and can be accessed online here.

Posted in Bears Business Brief, College of Business | Tagged | Leave a comment

Bears Business Brief: Making a profit as a business owner

By: Barry Cobb

Barry Cobb headshot

Every business owner strives to make a profit.  As a business owner, one key to maximizing profit is the efficient use of labor and other resources such as materials and energy to produce your product or service. It seems simple, but how can you measure whether these resources are actually productive?

Productivity is the ratio of the product or service you provide (the output), compared to the materials and/or labor used to create the products or services (the input).  In other words, output is the product or service provided — such as shirts produced by the Wise Guys screen printing shop, barrels of beer brewed by White River Brewing Company, or roller coaster rides at Silver Dollar City.  Anything that adds to the cost of the product or service is an input. Inputs for the businesses mentioned above might include gallons of ink for the screen printer, pounds of barley for the brewery, and kilowatt hours of electricity for the theme park.  Additionally, employee labor hours are an input for each of these businesses.

Let’s use a specific example to illustrate productivity more clearly. Suppose you operate a restaurant and two of the primary costs (inputs) in serving meals (output) are employee labor hours and electricity. Let’s say you served 4,700 meals last month and 5,000 meals this month. And let’s say you utilized 975 employee labor hours last month and 1,000 hours this month.

Based on labor alone, which month was more productive?

These are the questions business owners need to answer in order to be successful. In the first month, your labor productivity was 4,700 meals divided by 975 labor hours (or 4.82 customer meals per labor hour). In the second month, this same equation gives us 5,000 divided by 1,000, equating to 5 customer meals per labor hour. In the current month, you spent more for employee labor, but used that labor more efficiently, resulting in a 3.7 percent increase in productivity.

Measuring productivity in this way allows you to judge whether or not operational changes are working. If a restaurant makes changes to the layout of its dining room or kitchen to allow employees to work more efficiently, calculating productivity before and after the change is a way to evaluate this potential process improvement.

Productivity can be calculated for non-labor inputs as well. Continuing with the example above, suppose 9,900 kilowatt hours were used to produce the 4,700 meals last month, for energy productivity of 0.47 customer meals per kilowatt hour. If 10,000 kilowatt hours of electricity were used to produce the 5,000 meals this month, energy productivity for the month is 0.50 customer meals per kilowatt hour — a 5 percent increase in energy productivity. Measuring energy productivity can lead a restaurant to implement ideas for producing a meal using less electricity.

This example illustrates that simply monitoring the usage of resources like labor and energy doesn’t give a complete picture of efficiency. Although more inputs (costs) were used in both cases, the increase in the number of customer meals served was significant enough to improve productivity. Increased inputs (resources) resulted in increased outputs (services), which may lead to greater profit.

Profit is one measure of business performance. Implementing productivity measurements can help you determine whether the resources used to create your product or service are utilized efficiently. Monitoring productivity over time can help you recognize methods and processes that work most effectively for your business.

Barry Cobb is Interim Department Head in the Department of Management at Missouri State University. He holds a Ph.D. from the University of Kansas and conducts research and consulting in the areas of operations and supply chain management.

This article appeared in the January 8, 2016 edition of the News-Leader and can be accessed online here.

Posted in Bears Business Brief, College of Business | Tagged | Leave a comment

Bears Business Brief: Preparing for succession can be essential

By: Rayanna Anderson

AndersonRayanna webOver the next five years, it is estimated that 60 percent of owners of all small and medium-sized businesses will transition out of their business, according to a Gallop Press study. And for a family-owned business, preparing for succession is essential to enable the business to succeed into the next generation and beyond. Unfortunately, the statistics regarding this scenario are not pretty.

Only about 30 percent of these closely held businesses survive into the second generation and just 10 percent survive into the third.  The quote, “The first generation creates it, the second generation enjoys it and the third generation destroys it!” appears to be supported by those statistics.

Now, are you ready to think about a strong succession plan that can maintain a healthy company for future generations and a smooth retirement or exit? The development of a successful succession plan can be broken down into four major steps:

1. Consider your options. The first step in succession planning should always be deciding who has the ability to be your successor.  Begin by preparing a list of the people you know, inside or outside your organization, who have the ability to carry out your company’s business strategy. If that list has you coming up a bit short, consider the option of selling your company or discussing a merger with another company or competitor. If your first choice is to see the company stay intact for the next generation, consider someone with similar values and objectives to yours.

2. Communicate your decision. If it is a family business and there are multiple potential heirs, communicating how the succession will take place is crucial. The support of critical players in the business will be paramount to a smooth transition. Don’t neglect the employees who have made your business a success.  Consider how you might make the transition more palatable. Rewarding the employees who have supported you over the years will encourage them to stay beyond your tenure.

3. Develop a plan and timeline for the succession. Your plan should include professional guidance. Support from your attorney and accountant are necessary.  However, you might consider incorporating direction from business consultants with experience with the process and even friends or acquaintances who are willing to share their succession history.

The technical aspects of the plans typically include: how the business ownership will transfer; how the tax implications will be organized; and, if the transfer is to a family member, how the financing of the successor will be handled. Also, include a plan for how future profits will be disbursed.

Amazingly, many times the thing missing from a succession plan is the future vision for the business, including clear and concise detail about roles and responsibilities. This key component should include a strategic plan that includes sales and marketing resources for at least the next 12 to 18 months in order for the successor to acclimate into their new role.

4. Relax and enjoy your new life. Knowing you have done the planning, prepared for any contingencies or hiccups, and made the best decision for the continuation of your business, should help put your mind at ease.

Rayanna Anderson, MBA, is director of the Small Business Technology Development Center and the Management Development Institute at Missouri State University’s E-Factory. Anderson writes about issues she sees regularly in her consulting with small businesses in Springfield and the state of Missouri. Email: randerson@missouristate.edu.

This article appeared in the December 26th, 2015 edition of the Springfield News-Leader and can be accessed online here.

Posted in Bears Business Brief, College of Business | Tagged | Leave a comment

Bears Business Brief: Unique marketing challenges in the service sector

By: Ronald Clark

head shot of RonaldAccording to a recent study conducted by the Springfield Business Journal, 93 percent of jobs within the Springfield MSA (metropolitan statistical area) are in the service sector. Therefore, only about 7 percent of the jobs in the Greater Springfield Area are in manufacturing. This is slightly higher than the national average.

As a Professor in the College of Business at Missouri State University, the reality of the dominance of the service sector in our economy means that we must be diligent as educators in preparing graduates for the unique characteristics of services industries. This contrasts with the manufacturing industry mindset that business schools focused on during prior generations.

A large amount of the marketing research of the last three decades has focused on addressing the unique marketing challenges the service sector faces. Much of that research has looked at the relationships between service quality, customer satisfaction, and customer loyalty. Other research has examined the trade-offs between service quality and productivity in the service sector. Still other research has dealt with the intangible nature of service products that often makes them difficult for customers to evaluate.

The applications of this body of research are many, which has increasingly helped us, as educators, prepare the work force to manage this dynamic shift in our economy over the last few decades. Indeed, one of the major thrusts of marketing education at the undergraduate and graduate level is to translate scholarly research findings into pragmatic business strategies that recognize the realities of the marketplace while remaining adaptable to future business trends in a dynamic, technology-driven world.

What about manufacturing in the Greater Springfield area and the rest of the country? There are several indicators such as increasing wage inflation in manufacturing economies (e.g., China), modernization of the work force, increased productivity of the U.S. manufacturing workforce, etc. that point to a potential resurgence of manufacturing here at home. Has all of this focus on preparing business students for the service sector prepared graduates for an increase in demand for well trained marketing managers in manufacturing, should it occur?

It may be somewhat surprising to learn that marketing managers steeped in modern services marketing strategy are actually better equipped than ever to move into manufacturing. The reason for this is the application of service dominant logic to the marketing management of the manufacture of physical goods.

A relatively recent marketing strategy has applied service marketing principles to physical goods. Service dominant logic tells us that consumers buy the service the manufactured good provides, not the manufactured good itself. For example, people buy razors for their ability to provide a quality shave rather than being motivated by the mere ownership of a quality razor. It is a subtle but important distinction. The emergence of cheaper razor alternatives (e.g., Dollar Shave Club) is an artifact of this managerial mindset.

Experienced managers may oversimplify this as, “selling the sizzle, not the steak”. However, there is more meat in the concept than that implies. Service dominant logic reminds us that both services and physical goods are co-created (i.e., they require quality effort on the part of both the business and the customer). For instance, a customer will better enjoy the steak if they inform the server (and by extension, the cook) how they desire the steak to be prepared. Likewise, a personal trainer is only successful if the trainee puts in the level of effort necessary to get results.

Ultimately, a better understanding of the nuances of services marketing will make for a better prepared marketing manager in the modern economy.

Ronald Clark, Ph.D., associate professor of marketing at Missouri State University, specializes in issues related to marketing and advertising. He teaches classes in consumer behavior, services marketing, advertising and promotion, personal selling, and sales management.  Email: ronclark@missouristate.edu.

This article appeared in the December 20th, 2015 edition of the Springfield News-Leader and can be accessed online here.

Posted in Bears Business Brief, College of Business | Tagged | Leave a comment