Apple Capital Group Blog

Tag Archive: financing

The Importance and Benefits of Small Business Certifications

The Importance and Benefits of Small Business Certifications

There are many important benefits and advantages available to businesses owned by women and/or minorities, but in order to qualify for them a business must become certified as a minority- or woman-owned enterprise. Connections, marketing assistance, and technical training are just some of the benefits that come with certification, says Susan Rittscher, president and CEO of the Center for Women & Enterprise, the New England affiliate of the Women’s Business Enterprise National Council, a leading certifier of women-owned businesses. (Others include the National Women Business Owners Corporation and the National Association of Women Business Owners.)

“First and foremost, if the diverse-owned business is interested in pursuing bids or contracts with a large corporation with a supplier diversity program, a state agency, or a federal agency, they must be certified in order to count toward supplier diversity goals,” Rittscher says. Another benefit of certification is connections to other certified businesses, which can be a powerful network of potential partners, clients, and advisors and mentors. “Certification is a strong marketing and selling tool for business owners when leveraged effectively,” she adds. Certified businesses may also have access to exclusive programs and services such as professional development workshops and networking and matchmaking events.

Tom Greco, vice president of ThomasNet.com, a free platform with a database of more than 610,000 companies, notes that there are many different ownership/diversity certifications that provide a competitive advantage to qualifying companies, and many businesses and government agencies are anxious to do business with them. “Indeed, 72 percent of buyers recently surveyed by CAPS, a research arm of the Institute for Supply Management, said they would be increasing their spending with diverse suppliers. Diverse businesses include Women-Owned Businesses and Minority-Owned Businesses as well as Veteran-Owned Businesses, Small Disadvantaged Businesses, HUBZone Businesses, and Service-Disabled Veteran Businesses,” he says.

While the process for obtaining various kinds of certification varies, Greco suggests that a business seeking any of the certifications mentioned above start by self-registering with the federal government’s System for Awards Management (SAM), since that is a requirement for most types of certification. Next, seek out one of the major certification organizations for your diversity group—such as WBENC for a women-owned business or the National Minority Supplier Development Council for a minority-owned firm. In most cases, minority-owned business certification falls under the purview of the individual states. Check out this useful list of certifying agencies by state to learn more.

It is important to note that in order to qualify for minority- or women-owned certification, the business must not only be owned by minorities or women but also controlled by them, says Dean dt ogilvie [ed. note: lack of capitalization is intentional and should be retained], the dean and a professor of business strategy at the Rochester Institute of Technology’s Saunders College of Business. “They have to be the ones making the decisions about strategy, business, and structure. They can’t just be figureheads to get the certification,” she warns. Owners must provide required documentation to prove ownership and control; they must have contributed capital and/or expertise to the business; they must be U.S. citizens (or, for some programs, resident aliens); and they must be independent in decision-making, Rittscher says.

Lisa Firestone is president and owner of Managed Care Advisors (MCA), a woman-owned employee benefits and disability management consulting and workers’ compensation case management firm based in Bethesda, Maryland, and she believes certifications and the set-asides to which they provide access play an important role in leveling the playing field for companies like hers. MCA is a certified minority business enterprise in Maryland and several other states and a WBENC-certified woman-owned business. In 2012 it also became certified as an Economically Disadvantaged Woman-Owned Small Business. “Honestly, before my business entered into government contracting, certifications and set-asides were unfamiliar concepts, and ones that made me a bit uncomfortable,” she says. “But what I have learned is that there really is no ‘special consideration,’ but just an opportunity to level the playing field and compete effectively. Certifications can get your business noticed, but they are not a direct conduit to a contract. You still have to get out there, compete for that business, and win it.”

May 15, 2014 Today's Business, , , , , , , , , , 0 Read more >

Using Your Benefits of Certification To Advance Your Business

Using Your Benefits of Certification To Advance Your Business

There are many important benefits and advantages available to businesses owned by women and/or minorities, but in order to qualify for them a business must become certified as a minority- or woman-owned enterprise. Connections, marketing assistance, and technical training are just some of the benefits that come with certification, says Susan Rittscher, president and CEO of the Center for Women & Enterprise, the New England affiliate of the Women’s Business Enterprise National Council, a leading certifier of women-owned businesses. (Others include the National Women Business Owners Corporation and the National Association of Women Business Owners.)

“First and foremost, if the diverse-owned business is interested in pursuing bids or contracts with a large corporation with a supplier diversity program, a state agency, or a federal agency, they must be certified in order to count toward supplier diversity goals,” Rittscher says. Another benefit of certification is connections to other certified businesses, which can be a powerful network of potential partners, clients, and advisors and mentors. “Certification is a strong marketing and selling tool for business owners when leveraged effectively,” she adds. Certified businesses may also have access to exclusive programs and services such as professional development workshops and networking and matchmaking events.

Tom Greco, vice president of ThomasNet.com, a free platform with a database of more than 610,000 companies, notes that there are many different ownership/diversity certifications that provide a competitive advantage to qualifying companies, and many businesses and government agencies are anxious to do business with them. “Indeed, 72 percent of buyers recently surveyed by CAPS, a research arm of the Institute for Supply Management, said they would be increasing their spending with diverse suppliers. Diverse businesses include Women-Owned Businesses and Minority-Owned Businesses as well as Veteran-Owned Businesses, Small Disadvantaged Businesses, HUBZone Businesses, and Service-Disabled Veteran Businesses,” he says.

While the process for obtaining various kinds of certification varies, Greco suggests that a business seeking any of the certifications mentioned above start by self-registering with the federal government’s System for Awards Management (SAM), since that is a requirement for most types of certification. Next, seek out one of the major certification organizations for your diversity group—such as WBENC for a women-owned business or the National Minority Supplier Development Council for a minority-owned firm. In most cases, minority-owned business certification falls under the purview of the individual states. Check out this useful list of certifying agencies by state to learn more.

It is important to note that in order to qualify for minority- or women-owned certification, the business must not only be owned by minorities or women but also controlled by them, says Dean dt ogilvie [ed. note: lack of capitalization is intentional and should be retained], the dean and a professor of business strategy at the Rochester Institute of Technology’s Saunders College of Business. “They have to be the ones making the decisions about strategy, business, and structure. They can’t just be figureheads to get the certification,” she warns. Owners must provide required documentation to prove ownership and control; they must have contributed capital and/or expertise to the business; they must be U.S. citizens (or, for some programs, resident aliens); and they must be independent in decision-making, Rittscher says.

Lisa Firestone is president and owner of Managed Care Advisors (MCA), a woman-owned employee benefits and disability management consulting and workers’ compensation case management firm based in Bethesda, Maryland, and she believes certifications and the set-asides to which they provide access play an important role in leveling the playing field for companies like hers. MCA is a certified minority business enterprise in Maryland and several other states and a WBENC-certified woman-owned business. In 2012 it also became certified as an Economically Disadvantaged Woman-Owned Small Business. “Honestly, before my business entered into government contracting, certifications and set-asides were unfamiliar concepts, and ones that made me a bit uncomfortable,” she says. “But what I have learned is that there really is no ‘special consideration,’ but just an opportunity to level the playing field and compete effectively. Certifications can get your business noticed, but they are not a direct conduit to a contract. You still have to get out there, compete for that business, and win it.”

 

April 30, 2014 Today's Business, , , , , , , , , , 0 Read more >

Understanding its advantages and disadvantages of Venture Capital Funding

Understanding its advantages and disadvantages of Venture Capital FundingUnderstanding its advantages and disadvantages of Venture Capital Funding

Understanding its advantages and disadvantages of Venture Capital Funding. Before taking on venture capital, entrepreneurs must ask themselves a fundamental question – “Do you want to be rich or be king?” As Harvard Business School Professor Noam Wasserman explains, it’s difficult for founders to maintain control over their businesses once they take on outside investors. However, without them, such businesses like Twitter and Facebook would likely have never have taken off. For those entrepreneurs who have developed a product with a large untapped market and a potential for rapid, high growth, venture capital (VC) funding makes sense if you’re willing to give up some control and most likely sell your business at the end of the investment period, or fund life-cycle (i.e. when the fund becomes due). However, if you would like to build a generational business, an angel investor may offer more favorable terms that will allow you to receive some equity while maintaining a degree of control.

 

Looking for that big return

“A VC firm does not invest in a business,” explains investment banker Jeff Koons of San Francisco-based Vista Point Advisors. Instead, it invests in a company that will sell for a lot more than it’s worth at the time of the initial investment. And such firms are looking for a big return (up to 20 times the initial investment) in a relatively short amount of time (3 to 10 years, depending on the fund life-cycle). “If your business is growing just 20 to 30 percent per year, VC funding is not for you,” notes Koons. Focusing primarily on the tech sector, Vista Point acts as a broker to bootstrapped entrepreneurs entering the VC world for the first time. “We help them think through the process from valuation to exit,” notes Koons.

 

Defending your interests 

Vista Point vets various VC firms for the best valuation and possible outcome for the entrepreneur. Unlike others in their field, Vista Point only works on the “sell side,” meaning their sole clients are entrepreneurs. They do not work with VC firms on other deals. “VC firms sometimes look for a break in the negotiations on these smaller deals for the promise of future work for the investment bank on more lucrative deals down the road,” cautions Koons. So a good rule of thumb is to ask any investment brokers if they work on the “buy side,” with VC firms, as well.

 

Having sound advice makes all the difference when entering the complex world of equity financing. Joshua Mag, CEO of SquareHook, a content management system provider, consulted a former professor who is an operating partner at a large VC firm before taking on equity from an angel investor in June 2012. “Potential investors want to know what market you’re targeting and its size,” notes Mag. “They’re not going to invest in something that doesn’t produce a large return, so there needs to be a big potential market for your product.” The angel investment allowed Mag to quit his full-time job to focus exclusively on building his business, which included hiring a few employees and seeking development assistance. “My decision to take on capital was a choice of acceleration,” explains Mag. “Had I not taken on the capital, this would have been a slower task.”

 

Equity comes at a price

Mag gave up 20 percent of equity of his company in exchange for the angel investment; however, a VC investor typically wants at least 20 percent ownership in addition to a board seat and the ultimate sale or IPO of your company upon exit. Nevertheless, how much ownership an entrepreneur gives up, whether to a VC or angel investor, is largely determined by the amount of equity the entrepreneur needs, the valuation of the business, and whether it’s the first, second, or third round of investment.

 

Aaron Skonnard, CEO of Layton, Utah-based Pluralsight, grew his company’s online training platform for software developers organically for about a decade before taking $27.5 million in Series A funding in 2012. “We saw periodic interest over the years from investors,” notes Skonnard. “But we thought it was too risky to give up too much control in case we needed to change direction.” It was only when Skonnard and his partners felt they had a solid business model and were set to enter a high-growth mode that they decided to take on VC funding

Shop around

“It wasn’t so much about the money as forging those strategic relationships,” Skonnard points out. “Once we decided, then it became a financial exercise –– how much do we take, how much do we want to sell, and who’s the right partner to go with.” Skonnard and his partners met with five or six VC firms several times before they decided on one they believed would add the most value to their business. “It was our comfort level with the people and personalities that drove our decision more than the financial metrics,” explains Skonnard. “Make sure you’re happy with the people that will be on your board of directors.”

 

Investors provide more than just cash

While the cash infusion helps grow your company, partnering with a VC firms also gives you access to new players in your industry, which in turn helps attract the top talent and increase your market presence. Pluralsight’s traditional model had been to work directly with content producers to build its online training library. But with the funding, it was able to finance the purchase of two online training companies, which doubled its content library in a matter of months. “The Series A really unlocked our ability to make those acquisitions,” Skonnard points out. “We would have never been able to consider that without such funding.”

 

Beyond their connections in financial and sector-specific industries, some VC investors have an entrepreneurial background as well. Brendan Anderson bought his first business in 1995 and has helped manage and invest in many more since then. In 2006, he co-founded Cleveland, Ohio-based Evolution Capital, which invests in $5- to $6-million companies that have at least $500,000 in free cash flow. “We are point-in-time investors looking for entrepreneurs/founders with a vision creating something compelling in the market,” explains Anderson. He and his partners then work with these entrepreneurs to implement the steps needed for growth.

 

These include getting the entepreneurs’ financials in order to develop a plan for growth, which in turn enables these businesses to attract the best people. Next is transparency, making sure the entrepreneur communicates his vision and shares day-to-day operational data with employees. Finally, holding the entrepreneur and employees accountable for tasks that will move their company forward. “Once these best practices are implemented, they’re happy with the results,” Anderson points out. “But the process of doing it is usually painful.”

 

“The founder/entrepreneur still owns a major piece of the business even after we invest,” Anderson points out. However, Evolution Capital typically controls the majority interest (more than 50%) and maintains the right to change management and control their exit (with a typical investment ranging from 3-7 years). “We want to build businesses that continue to grow long after our ownership,” he says.

 

Understanding terms, conditions, and valuation

If you’re considering taking on equity, it’s critical to understand the terms and conditions of any investment agreement. Whether the entrepreneur maintains some control is largely determined by how the deal is structured. Mag decided to go with an angel investor, who was looking for a longer investment with annual dividends rather than a large payout at the end of a VC fund life-cycle. “Taking on VC means you need to have an exit strategy: IPO, sell, or dividends,” notes Mag. “Most VCs want a full exit to collect on their return within a period that is reasonable.”

And that’s largely determined by when a business becomes part of the fund. “You want to be invested as soon as possible in the life of the fund,” explains Koons. “If there’s only two years left before the VC firm needs to return capital to their limited partners (i.e. investment occurs in year five of a seven year fund), a company could be sold for a loss or spun out even if it’s achieving its growth projections.” Understanding its advantages and disadvantages of Venture Capital Funding

 

Typically, investors are looking for preferred terms that will position them better than other parties (e.g. paid first upon exit, right of first refusal, put option, liquidation preference). Pluralsight has a minority interest deal with their VC investment firm, which has allowed Skonnard and his partners to only give up two seats on their seven-seat board. “The founders still control the board and the ultimate direction of our strategy,” notes Skonnard. “While we have a very healthy relationship with our new board members, we didn’t want to give up too much control.” Understanding its advantages and disadvantages of Venture Capital Funding

 

It’s also important to understand valuation, as you need to know what your company is worth in order to negotiate the best terms. “One way to valuate your business is to look at your competitors to see what they sold for upon exit,” explains Mag. There are a number of public sources and tools that list industry comparables. This will also help figure out how much equity you’ll need to put into your business to achieve your growth plans. “That investment defines what your business will be valued at,” explains Mag. “By taking on more than you need, your business is likely losing equity unnecessarily.” Understanding its advantages and disadvantages of Venture Capital Funding

 

November 19, 2013 Today's Business, , , , , , , , , , , , , , , , 0 Read more >

How Much To Ask When Applying For A Small Business Loan

How Much To Ask When Applying For A Small Business LoanHow Much To Ask When Applying For A Small Business Loan

It’s a question that besets many small business owners when applying for business loans: how much should I ask for? More so than deciding on which lender to approach, not having a sound estimate of how much capital you need to borrow could lead to cash flow problems—which could lead to your business shutting down. How Much To Ask When Applying For A Small Business Loan

How then can small business owners determine how much financing they need when approaching lenders? What factors should they take into account when calculating the ideal sum of their business loan?

Be clear on the reason for the loan

Are you launching a startup? Or do you need the loan as additional working capital to make improvements in your business? Answering yes to either question is critical when deciding on how much you need.

Denise Beeson, a small business-funding consultant who previously lent her services to a local SBA-administered Small Business Development Center, a provider of mostly free resources and training to small business entrepreneurs, in Santa Rosa, California, always asks her small business clients the previous questions whenever they come to her about wanting to apply for loans. For those with startups, she does issue a caveat: “If this is a start-up, I remind them that an SBA preferred lender does not fund startups,” says Beeson “We then discuss where they may find funding, such as peer-to-peer lending options, tapping into their personal resources, or asking family and friends.”

If the small business owner is seeking to buy a business from another, Beeson notes that the seller may fund the loan. How Much To Ask When Applying For A Small Business Loan

 

Also, if the small business owner is seeking working capital for myriad reasons, which might include increasing the marketing budget, making renovations, or paying off debt, Beeson says she will ask clients if they can produce documentation verifying that the debt was accrued as a result of the business.

 

Without providing the necessary paper trail needed to accompany a loan application, small business owners could hurt their chances of getting financing from a lender, insists Beeson. To prove her point, she offers the following anecdote:

 

“Recently a restaurant client was interested in an SBA loan to consolidate debt based on improvements to the premises,” she recalls. “They had almost $100,000 in debt including credit card debt that was claimed as accumulated to the business during the recession. However, when we looked at the statements, the entries were not clear when and what had been done. In addition they could not produce any paid invoices from contractors or suppliers linked to the credit card statements. Unfortunately, we could not move forward because the borrower could not provide the needed documentation to the preferred SBA lender.” How Much To Ask When Applying For A Small Business Loan

Consult trusted financial professionals

If you are unsure or confused about how much you should ask for when applying for a business loan, it might behoove you to visit a financial expert such as a reliable bookkeeper or a CPA that regularly deals with small business clients. By reviewing your financials, he or she can then approximate how much financing you will need, taking into account existing debt obligations and operating revenue. And a word of caution: don’t be lax or lazy when it comes to understanding your financials. Sloppy bookkeeping or a lack of knowledge about your books or tax returns will prevent you from acquiring a loan.

Take into account your other non-related business expenses

To determine how much you’ll be able to repay and the length of the loan’s duration, small business owners need to do a cash flow analysis of all their expenses, including mortgage payments or auto loan payments. By doing so, a business owner will be able to develop a more viable estimate of how much they’ll need to borrow from a lender.

 

Rohit Arora, CEO of the six-year-old Biz2Credit.com, feels this is an imperative step for all small business owners to take when deciding on how much of a loan they should apply for.

 

“A lot of business owners don’t take [their miscellaneous non-business expenses into account when deciding how much money they should borrow,” he says. “Everything boils down to your repayment capacity. So if you feel that you can borrow some money and there’s some good opportunity that will help you make money off it, that’s good. But that calculation is not a certainty.” How Much To Ask When Applying For A Small Business Loan

Carefully consider payment terms

After you analyze your financial situation, both on a personal and business level, you will also need to decide on how long you want to pay off your loan. By following this best practice, you will be able to produce a rational figure as opposed to an amount that you will never be able to discharge in light of your finances and debts.

Arora agrees, offering a hypothetical scenario: “Let’s say a business owner is borrowing $100,000 and they have to pay back everything in one year,” he explains. “Then the amount of repayment they have to make in terms of speed is pretty steep. Typically for small businesses, the cash flow is their bloodline.”

Similarly, Arora says small business owners need to exercise extreme caution, particularly if they’re planning on borrowing from alternative lenders. “A lot of times they want their money back pretty quickly,” he warns.

Know the lender

When figuring out how much money you need to borrow, it’s vital that you research your lending options. Which banks or lenders are amenable to small business owners in your sector? Just conjuring up a random number for a loan will not help you if the lender is not open to your industry, says Beeson, who advises business owners to also explore nontraditional lending options.

If you need to figure out how much of a business loan you should ask for, you will need to know offhand all of your business and non-business expenses. Not only is this information essential for maintaining good credit—a prerequisite for getting a loan—but it will help you come up with a realistic number that will allow you to comfortably fulfill repayment terms and not disrupt your cash flow. How Much To Ask When Applying For A Small Business Loan

November 19, 2013 Today's Business, , , , , , , , , , , , , , , , , , , 0 Read more >

Creating a Living Business Plan

Creating a Living Business Plan

To strengthen your focus and prospects for growth, commit your strategy to paper—and let it live off the page.Creating a Living Business Plan

1. Introduction: Plan Because You Need To

Staff members at the Shenandoah Valley Small Business Development Center (SBDC) receive frequent calls for help in creating a business plan. The trouble is, the entrepreneurs who seek this assistance often aren’t launching new companies. They’ve been running existing companies without a business plan and sit down to write one only when forced to by banks or other lenders who need that document to process a financing application.

That approach deprives the company of a resource that can play an important role in driving and guiding growth. “The plan is really a management tool for the business owner,” says Joyce Krech, the SBDC’s director. “It’s a great piece of the lending package, as well, but we would prefer that they be doing it for their own purposes and not because they’re being asked to do it.”Creating a Living Business Plan

2. Stay On Course and On Target

Capturing your business planning process in writing gives you a solid analysis of the company’s mission, income, financial obligations, and paths to growth. Companies that operate without a written plan run the risk of getting distracted and thrown off course by opportunities that may seem interesting but aren’t really germane to their core business and function.

“They lose their focus, which just deters them from growth,” says Gwen Moran, founder of Biziversity, an online information resource for small businesses, and co-author of The Complete Idiot’s Guide to Business Plans (second edition, Alpha). “A business plan acts as your touchstone to keep you on track, to make sure that your business is performing in the way that you expected it to perform. Without a business plan, it’s very difficult to gauge those metrics and to know exactly what your business needs are at any given time.” Creating a Living Business Plan

Once the plan is written, how do you keep it in play and optimize its value to your business? Experts recommend that you revisit your plan each time you review the company’s performance—whether that means at annual or quarterly meetings or in regularly scheduled conferences with your financial advisor. That helps business owners to hold themselves accountable to their plans and look objectively at whether the company is on course in terms of liquidity, credit, human resources, pay scales, production capabilities, distribution and logistics systems, risk management, and marketing.

“A good accountant will be able to help you fine-tune your plan and see opportunities and pitfalls that you might not even see because you’re so in the day-to-day of your business,” Moran says. Other options include SBDCs, the Service Corps of Retired Executives (SCORE), or non-competing business owners who are interested in providing mutual support. “You’ll get insights from different industries and new ways of thinking about doing things.” Whichever option you choose, make sure you select advisors who are willing to stand up to you and make sure you engage in all the critical thinking necessary to maximize the company’s potential for success. Creating a Living Business Plan

3. Know How to Answer, “What If?”

These reviews will help you to assess not only how well your company is performing, but how thorough the plan is in anticipating what could go wrong and how you’ll handle those scenarios. “It could be a resource issue. It could be a competitive issue. The law could change,” says management consultant and business planning specialist Jenifer Grant. “There should always be a risk section in the business plan. And then you can assess, what happens if a key person goes away? What happens if the costs of our main ingredients go up? What if I need to hire people, and I can’t find them? You need to assess all the different risks that could have an impact on your business.”

And those if-then analyses aren’t limited to worst-case scenarios. You should also consider what you’ll do if, for example, your product takes off so much faster than anticipated that you suddenly need to ramp up production and contend with cash flow issues and staffing shortages. “Fast growth can be as much of a stressor as slow growth, or even more so,” Moran says. “You have demands placed on your business, and if you can’t meet the demands of your customers, you’re ultimately going to disappoint them, and they’re going to turn elsewhere.” Creating a Living Business Plan

Comparing what’s written in the plan with what’s happening day to day can even produce insights about entry into new markets or expansion of your customer base. “Then you start thinking, as one of my clients did, ‘I never thought about this particular type of customer for my product before, because I had one vision in mind, one road on my roadmap. I didn’t see this other parallel customer base that I can tap into at very little cost,’” Krech says. In that scenario, too, a business plan is an invaluable resource in helping the company to modify its course and take advantage of those additional opportunities. Creating a Living Business Plan

4. Bring the Whole Team on Board

But the business plan is not just a resource for entrepreneurs and executives. It’s a big challenge, but to get the biggest return on your investment in the plan, you’ve got to look for ways to make it live throughout the organization and ensure that it is supported by every employee. “On a day- to-day basis, you come in, you do your job, whatever it is,” Grant says. “It has to resonate with what you do—you, the individual employee.”

As a business owner, part of your job is to communicate the plan’s importance through your actions and behavior. “As you begin to fulfill your plan, it’s your job to talk to your employees, to talk to your team members, to get them as excited about your business as you are,” Moran says. She advises business owners to make sure their employees understand the solution that the company offers in its market and also the strategy you’re pursuing to achieve your market share. In addition, all employees should know their roles in the business and how they are important to the overall corporate vision. “That’s how you get buy-in. You need to be excited about your plan. If you’re not, then you need to go back to the drawing board until you find what makes you excited about your business, something that you can communicate to the people in your organization to get them excited about the difference that they’ll make in this process.” Creating a Living Business Plan

Moran offers the example of the CEO of a mid-sized manufacturing company who each month invites a small group of employees to his office for coffee, donuts, and conversation about the business. Giving employees that kind of access to a business owner who knows their names and asks after their families is a morale booster. It also gives staff members a chance to see how committed the boss is to the company. “When you see someone who’s truly excited or truly passionate about something, it’s hard not to care about that,” she says. “You get that great one-on-one face time. You get that opportunity to convey excitement, to convey enthusiasm, to let people know that they’re part of a winning team. And everybody wants to be part of a winning team.”

5. A Plan for Top Performance

Once you’ve integrated the plan into your company’s day-to-day operations, how often do you need to revisit and re-evaluate it? That depends on your business and its rate of growth. During periods of rapid growth or cash flow crisis, some entrepreneurs and venture capitalists find it necessary to review the business plan weekly to make sure the numbers are on track. And any time you pass a major milestone or hit a certain revenue target, it’s good practice to re-evaluate the plan and make sure that it’s still serving you well. At a minimum, experts say, you must review the plan annually, and a quarterly review is preferable. Creating a Living Business Plan

“When you keep a microscope on those numbers, they’re going to tell the story of your business. And too many business owners don’t,” Moran says. “They let a few financial statement periods go by before they actually look at the numbers. Then they realize that their expenses are far too high and their incoming revenue is far too low, and they start getting into trouble. But when you start following the numbers monthly and then doing a very serious dive into what’s happening in your business according to the metrics on a quarterly basis, that’s when your business plan starts to become a living, breathing document.” Creating a Living Business Plan

Ultimately, that shouldn’t come at the expense of a huge investment of your time. You can achieve these goals without creating a massive document; a few pages can suffice. The objective is to be equipped to compare current operations and numbers with a written projection or benchmark that points out any divide—positive or negative—between the company’s projected and actual performance. And over the long run, a resource that accomplishes that should save you time, keep your company on track, and help ensure that the business delivers on its potential for sustained profitability and growth. Creating a Living Business Plan

August 20, 2013 Today's Business, , , , , , , 0 Read more >

5 Tips for Optimizing Your Cash Flow

5 Tips for Optimizing Your Cash Flow

Iris Dorbian.

5 Tips for Optimizing Your Cash Flow.  For a small business owner, managing your cash flow, (the movement of cash to and from your business as opposed to cash deposited in a bank) may be your most important responsibility. In fact, in a recent poll conducted by CPA2Biz, the marketing and technology services subsidiary of the American Institute of CPAs, 83 percent of the 500 small businesses surveyed reported that their prime concern is maintaining adequate cash flow.

And according to the Small Business Administration, the federal agency that provides support and resources to small business owners and entrepreneurs, the failure to manage cash flow is a significant reason why so many small businesses close their doors each year. Make no mistake about it: Even if it’s unintentional, just a mere oversight or misstep in your handling of the company coffers can cause untold damage to your reputation, brand, and credit rating. How then can you prevent such errors from happening while optimizing your cash flow? Here are five cash flow best practices that can steer you in the right direction. 5 Tips for Optimizing Your Cash Flow.

1. Negotiate with vendors

This takeaway can be a great method for pre-empting future financial headaches. If you’re experiencing a fiscal pinch, talk to your vendors about extending due dates. Or try re-negotiating payment terms. Remember, your vendors are also in business and they, like you, want to get paid on time.

John Burger, owner of the online toy company Playfully Ever After, has made this tip a key underpinning of managing his company’s cash flow. And based on his experience, most vendors are willing to be flexible if it guarantees payment. 5 Tips for Optimizing Your Cash Flow.

To bolster his point, Burger, whose company is based outside Dallas and has seven employees, recounts an experience where re-negotiating with a vendor garnered positive results.

“We hit a cash-flow crunch after spending quite a bit of money at the Toy Fair 2013 expanding into new toy lines,” he recalls. “There was no way we could place the large orders we needed to make to sustain our top-selling brand. I called and talked with our rep and they were more than willing to work with us. In fact, they even offered us special terms. From now on, we only have to spend $3,500 to get the same 10 percent discount or $1,500 to get a 5 percent discount. This meant we could reorder more frequently and keep items in stock, which increased sales for both of us.”

OptimizeCash_PQ.jpg2. Build yourself a cushion

Almost every business goes through an up-and-down cash cycle. Such fluctuations can often be dictated by myriad factors that range from seasonal trends to the overall health of the economy. During periods when your cash flow is booming, don’t get complacent and risk your business with extravagant or unnecessary expenses. Be prudent in your spending and start saving for those periods when money might not be flowing like champagne. 5 Tips for Optimizing Your Cash Flow.

Adrienne Polk, operations and strategy manager of the Washington, D.C-based Ross Business Management, a provider of financial and operational solutions to small businesses, agrees. “You want to create a buffer along the way, not just once in a while,” she says. “This will allow you flexibility and more breathing room in your business. When you are down to the wire all of the time, it can be completely paralyzing. Although you may need to spend money to make money, if you are paralyzed by fear or lack of funds, your business will suffer.” 5 Tips for Optimizing Your Cash Flow.

3. Trim unnecessary expenses

If you want to attain a strong grasp of your cash flow, then it behooves you to make a thorough and detailed assessment of the items that can be cut from your balance sheet and what can stay in. Scrutinize your expenses. Figure out what is essential and what can be excised.

“You
don’t have to buy the employees lunch, take a client golfing, or spend money on a birthday cake,” Burger explains. “Those types of things can wait. It’s more important that your employees get paid and you have money to buy product.”

4. Request prompt payment of services

This might sound like a no-brainer solution to cash flow problems, but it bears repeating when dealing with vendors and/or clients. 5 Tips for Optimizing Your Cash Flow.

Andrew Schrage, co-owner of Money Crashers, a personal finance website, agrees, but notes that debtors might need to gain an incentive to ensure prompt payment. “To motivate debtors to pay quickly, offer a small discount for prompt payment,” he says. “So even though you may take a bit of a hit on profits, it’s ultimately worthwhile.”

5. Tighten up employee hours during slow times

To better optimize your cash flow, you might consider reducing hours for employees during the slow periods. This tip has worked wonders for Burger’s Playfully Ever After staff. When his business was experiencing the doldrums, Burger had his hourly staff start work one hour later. And on days that were especially slow, staffers were told to go home earlier than expected.

“This saved an extra $600 a month in payroll,” he explains. “Every bit helps.”

Along the same lines, if your cash flow problems are growing increasingly dire, short of terminating your staff, you might also want to change employees’ salary status to an hourly basis. “Most employees hate this and it can be a tough sell,” admits Burger. “But it allows you to save money on slow
times when employees may not be working as much. If your business is in jeopardy, this is an option you should think about.”

Other ways to solve your cash flow problems courtesy of Burger are as follows:

Offer one free vacation day instead of pay raises. “To improve cash flow for the next year, give everyone in the company an extra day off each month in lieu of pay raises,” he says. “I had an employer do this once, and at first people were upset, but then we learned to love having the first Friday off of every month.”
Establish a line of credit. “Talk with your banker,” advises Burger. “Most banks are more than willing to help you establish a line of credit for your business. You don’t have to use it all the time, but this can help when cash gets
tight.” 5 Tips for Optimizing Your Cash Flow.

To maintain the longevity of your business operations, it’s imperative to manage your cash flow as wisely as possible. In this area, there’s no room for carelessness or irresponsibility, especially if you want your business to survive the long haul. 5 Tips for Optimizing Your Cash Flow.

July 27, 2013 Today's Business, , , , , , , , 2 Read more >