Saturday, December 18, 2010

Five Small Business Banking Mistakes

The Bank of England in Threadneedle Street, Lo...Image via Wikipedia
As a virtual CFO, I have worked with a lot of small  businesses to improve their financial processes.  A lot of Entrepreneurs are so busy working in their business versus on their business, they make some common banking mistakes that can hurt their business.  The following are five common banking mistakes that I have observed and are easily fixable.

1.  Banking Only at One Bank: It is easy for a small business owner to utilize one bank and perform your banking activity through that one institution. However, this can have ill side effects. When it comes time for a loan and your bank denies you, if you don't have a relationship with another bank, you could be out of luck. Secondly, you should make banks compete for your business and shop around for the best deals.  You need to have a good handle on what your money management needs are to get the best deal for you.  Thirdly, if your business is with a small bank and you are fast growing and needing financing, you could outgrow the one banks ability to finance you by hitting their exposure ceiling.

Friday, December 17, 2010

Financial Traffic Accident Waiting to Happen

I am designing a Customer Lifetime Value Financial model for client.  We were digging into his website traffic data and found a disparity in some of the traffic data provided through various sources which would drive one to quite different conclusions.  This was frustrating!

I did a little research and found the following data in the November 29, 2010 issue of Brandweek.  The article listed Nielsen, comScore, Compete, and Quantcast numbers with the firms' internal data. With different filters and methodologies being used to determine what is a unique visit, I wasn't surprised about some variance.  However, there are big differences.  Even Nielsen has reported that there data has under counted visits.  Here is some data for some popular sites which highlights some of the challenges.  There are many stories about websites contesting their

                                            Unique Audience Numbers in Millions*

Site                  Hulu     Daily Beast    Huffington Post     Twitter   BreakMedia   ESPN
Internal Data     30.0          4.8                    44.2                190.0        34.2          NA
Quantcast         25.0          3.9                    24.7                  59.1        22.7         20.6
comScore        21.7           2.9                   23.1                  25.1         34.3         42.7
Compete          13.6           1.9                   12.3                  25.8          NA           0.136
Nielsen             12.3           NA                   13.0                  20.1          NA         21.1

* Other than Nielsen, data is for October 2010.  ESPN does not disclose traffic.

For the purchasers of this data, there is a lot of confusion as to who to believe and how do you deal with the data disparity.  Unique visits is one of the measures used to monitor the effectiveness of your social media strategy.  Have you seen this disparity with your sites?  I have with my alumni association web site.

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Sunday, November 21, 2010

More Interesting Numbers!

I enjoy interesting numbers and facts.  I found some more interesting numbers in my November 1, 2010 issue of Brandweek.

Broad "Gadget Ownership"
% of adults saying they own a:
Cellphone                 85%
Desktop Computer   59%
Laptop Computer     52%
MP3 Player              47%
Game Console          42%

  • 4,100 average monthly text messages sent and received by girls 13-17 years-old in the United States.
  • 79 million U.S. online visitors to education-category web sites in September 2010 +6% versus August.
  • Nearly 6% of packaged food products launched this year carry a "whole grain" claim, more than double the figure for 2005.
  • Twelve percent of the U.S. population last year was foreign-born.  Eleven percent was U.S.-born but with at least one parent born abroad. (Census Bureau).
  • % Who agree/disagree that if you work hard and play by the rules, you can achieve a middle-class life in America today. 
    • 53% Somewhat Agree
    • 28% Strongly Agree
    • 16% Somewhat Disagree
    • 4% Strongly Disagree
    • Among those who aren't living it now, 44 percent think they will someday.d
  • Sixty-three percent think the bailout of the financial/banking sector was "bad for the country"; 26 percent think it was "good for the country."  (Newsweek)
What interesting facts have you come across?

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Thursday, October 28, 2010

Factoids from the Workplace

An assortment of United States coins, includin...Image via Wikipedia
My finance background has always enabled me to relate to numbers.  I found the following "By The Numbers" interesting and thought I would share them with you.  There are some interesting observations.

75% of candidates who have had five or more interviews per month since the beginning of their job search who have not received a single offer, based on a survey of 79,000 active job seekers.  Talent Drive

72% of workers in small companies are not covered by retirement plans   Small Business Administration

59% of Americans who expect to receive a pension upon retirement.  But only 42 percent can identify a pension to which they are entitled.  Consumer Report

49% of employers who expect workers to check in with the office while they are on vacation.

42% of employers in 2010 who believe that the recession has increased the quantity and quality of candidates they recruit.  Talent Drive.

 What interesting numbers have you come across?

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Thursday, October 7, 2010

Small Business Job Act and Unintended Consequences

office of Jacob Fugger; with his main-accounta...Image via Wikipedia
2010 is becoming the year of major tax law changes with President Obama's signing of the Small Business Jobs Bill into law.   I do not know how the average small business is suppose to know what to expect with regards to taxation when the tax law frequently changes.  The challenge is that most small businesses will have to consult with a tax accountant to understand all the changes and the impact to their cash flow.

Thus, the rub.  Most small businesses do not have the budget for a full-time accountant and many are struggling just to keep their doors open. What lawmakers fail to realize is that when they make tax law changes, small businesses inevitably incur more costs because they will have to hire someone to explain how those changes impact the business. Those costs reduce the funds available to expand the business.

While the changes may be based on good intentions, the fact of the matter is that businesses thrive on predictability so they can do planning.  Changing laws constantly does not necessarily help small businesses.  It often leads to uncertainty and uncertainty leads to caution which means that nothing major will happen.  Along with many of the Bush Administration tax cuts likely to expire, and lack of understanding the consequences of implementing health care reform, uncertainty seems inevitable.This hurts investment and hiring and make it more challenging to get our economy on track.
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Thursday, September 30, 2010

Small Business Fraud - 10 Tips to Avoid

Several of my financial consulting engagements were the result of fraud within a client's company.  The business owner saw "weird" trends in his financial statements or "my financial statements show a lot of profit, but I don't see the cash".  The most common method of finding fraud is a tip or complaint from an employee, vendor, customer or anonymous informant. The following list of practical fraud prevention tips designed to prevent fraud from occurring and has been compiled from a variety of sources.

  1. The first step in preventing employee fraud is letting employees know you're watching for it. Inform employees during employee orientation, training programs, memorandums, or other communication that fraud is not tolerated and let employees know what to do if they suspect fraud. 
  2.  Have checks and balances in place.  For small businesses the biggest issue is to separate the duties of receiving funds, writing checks, signing checks, and reconciling bank accounts. Having one employee responsible for all cash-related functions makes small businesses vulnerable to fraud.
  3.  Have the monthly bank statement delivered unopened to the owner, who should review it for unusual transactions such as declining deposits, unanticipated payment and deposit patterns, and unfamiliar payees. Owners should look for signatures or endorsements that look forged, missing checks, check numbers that are out of order, and checks where the payee listed does not match the name in the check register.
  4. Institute background checks on new employees, and notify job applicants that their backgrounds will be checked.  Check past employment, criminal convictions, references, and education and certifications.  Always get the written consent of candidates before doing research since many federal and state laws govern the gathering of such information.  This should be part of the application process.
  5. Make sure expenditures are approved. For every expense, have a manager and someone in accounting approve it. The supervisor will ensure that the expenses are valid, while accounting will run the math.
  6. Monitor cash and inventory areas In a retail situation, have security cameras monitor activity at registers and storage areas where inventory is kept. People are less likely to do it if someone is watching them.  Deploy fraud tracking systems for any online stores you operate.
  7.  Insist that employees take a vacation for at least one week every year and use that time to have the books reviewed for discrepancies.
  8.  Adopt a tip hot line or complaint-reporting mechanism that will enable employees, vendors, customers, or outside sources to report suspected fraud anonymously  without fear of reprisal. Because most employees are reluctant to report suspicious activity, using a third-party hot line offers a level of anonymity that an in-house hot line might not provide, making employees more likely to blow the whistle on fraudulent activity.
  9.  Conduct audits, especially a "fraud audit" instead of a "general audit" if you suspect fraud. Catching an employee off guard could be your best bet in discovering fraud. The key is that an employee generally doesn't know what's coming and won't have the time to change the records to hide the fraud. A surprise audit also can uncover duplicate invoice amounts and duplicate or sequential invoice numbers, both of which can be red flags for possible wrongdoing.
  10.  Have an accounting software program expert, do the initial set-up of the program. In my QuickBooks work, I have found that the audit trail feature was never activated.  Access to personnel and vendor master file records should be password protected and restricted by job function.  Computer systems should create an audit trail of all changes made to the vendor master file records, including an identification of those who made the changes.  Changes to vendor master file records should require supporting documentation and supervisory approval.
What good techniques can you suggest?

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Sunday, September 26, 2010

Restaurants Driving Sales and Service with Social Media throughTwitter

I recently read about Restaurants using Twitter and thought about several of my restaurant clients.  I also follow a variety of Kansas City area Restaurants and other small businesses to evaluate their social media programs and to track their issues. Twitter can be a low cost and very responsive way to track and respond to issues.  Twitter has another advantage in that if a person tweets to his or her group of followers, your response can also go to a large number of followers showing that you are taking care of the issue.  

Restaurants are using Twitter to market their menus in new and unusual ways, the AP reports. Take, for instance:
  • Big chains have taken on full-time social media employees to respond to issues and notify individual restaurants of issues being tweeted about.
  • Restaurants have seen "is this food any good" tweets and responded with "try us" gift cards through cell phone applications.
  • Some Restaurant owners  let tweeters help make decisions about the restaurant—such as what music to play.
  • Some of my clients have tweeted happy hour specials to drive traffic.

There are several applications that Restaurants can use to track their mentions on Twitter such as:
  • Socialoomph
  • Hootsuite
  • Tweetdeck

How have you used Twitter for Restaurant Sales and Service?

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Saturday, September 11, 2010

Small Business Loans and the Plan to Obtain One

Busy with these !Image by micamica via Flickr
Eventually most small businesses need to get a business loan, whether to get the operating capital for a business startup or to finance an expansion.  The success of a small business depends on the funding it is able to arrange from various sources, which make sure a smooth cash flow. Finding adequate funding for small businesses is tough and time-consuming.  But whether you're approaching an institution or a friend for a business loan, the lender will have the same expectations. 

You can greatly increase your chances of successfully securing a loan by being ready to meet those expectations.  If someone asked you for a small business loan, you'd want to know:
  1. Exactly why he or she wanted the money, and
  2. What the chances were that he or she would repay the loan in full and on time.

So the key to getting a loan is preparation to get the right answer  for those two questions.First, gather together the documents that will help persuade the lender that a business loan is necessary and that you are a good risk.  Answering the first question means being  conversant with all the details of your business plan and being able to point to the relevant financial statements, documents, charts or graphs   that will help convince the lender that you need the amount of money you're asking for to do what you want to do.  Answering the second question means having already given some thought to the credit risk you represent to the lender and being ready to discuss his or her concerns.

These are the documents you will need:

Statement of your personal financial status - A list of your personal assets, debts, and other income sources to give the lender a fuller financial picture.

Past business tax returns- For established businesses, you need to give past business tax returns.  They'll give the lender a better idea of how your business is doing financially.

Financial Statements-  You will need to have historical financial statements for established businesses and a forecast of those financial statements.  You will need to include Income Statement, Balance Sheet, and Cash Flows.  Many small businesses will not have audited financial statements, but an accountants "review letter" that the historical statements conform to generally accepted accounting principles  would be helpful.

Collateral you have - Collateral refers to  tangible assets you are willing to put up to secure the loan. These assets might be:  equipment, stocks and bonds, a house, a car - something of value that you own. If you fail to repay the loan, then the proceeds from the sale of the assets are used for repayment.  You should offer statements and valuations supporting the values.

Resume -  This should detail your experience and background in the area you are securing funding for.  Because the success of your business is dependent on this to some degree, any potential lender will want to know more about you.  You will need one for each member of the management team.

Your Own Funding - How much money will you be putting into the business and your sources of the funding.

Credit Rating Report -  This assessment summarizes how well you pay back any current credit relationships.  While the banker will and can easily get one on their own, its important for you to know what your business and personal credit ratings are and correct any errors before the banker orders one on you.  If there are any issues, be upfront and give an answer for any negative history.
Business Plan - This shows the lender not only why you want a small business loan but what you plan to do with the money. The financial element the investor will key on are the Cash Flow Projections  with a focus on will you be able to repay the loan.  Your business's cash flow projections give lenders  financial data that they can use to assess this risk.

Now that you have all the documents you need to get a small business loan in order, the next step in getting a small business loan is to persuade the lender to give you the loan. You need to prepare in advance to make a winning small business loan presentation.  Approach the loan presentation as a sales meeting with a major client.  Generally, you will have an hour to meet with the banker.  You should use 20 minutes for the formal presentation and reserve the remaining 40 minutes for questions and answers that will probe details.  Your "formal" oral presentation consists about 10 high level slides covering the following points:
  1. Why are you seeking the loan
  2. Describe the pain you are trying to solve or the Market Opportunity and how are you going to offer the solution.
  3. How are you going to market the solution.
  4. Summarize your business model that is in detail in your business plan.
  5. What background and support do you bring to the table? Detail your qualifications and those of your management team if you have one and show them that you are capable of producing, servicing, or marketing your product
  6. Don't try to impress with your language. Using simple terms, describe your goals, your product or service, what you intend to charge, and how you can compete with the competition.
  7. A forecast showing your ability to pay,  when you expect to breakeven, and what you will do with positive cash flow.

You will have a business plan with you that will give details to your oral presentation.  The oral presentation is the pitch to get the investor to discuss, read, and seriously consider the investment opportunity.This is a big effort, but the reward is funding for your business opportunity.
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Wednesday, September 8, 2010

Social Media Is Just Not About Customers

While working on the Social Media element of a Business Plan's Marketing strategy, many Entrepreneurs focus on the customer.  While the customer is king, we can not forget the other constituencies that Social Media touches.  Businesses of all sizes have long understood that building relationships with customers is key to success.  What is less recognized is the importance of the Social Media relationships across the entire spectrum of constituents.  Many organizations recognize and utilize Michael Porter's Five Forces SWOT analysis from an overall strategy perspective, it is often forgotten about in Social Media Implementations. Suppliers, Distribution Channels, Employees, etc. are all considered.  The stronger your relationships across all constituencies, the likelihood of your success increases.  These constituencies need to be considered in your Social Media Implementation:
  • Customers
  • Employees
  • Suppliers
  • Vendors
  • Distributors
  • Stakeholders
  • Governments
  • Outside Agencies
With the openness of the Social Media, remember and consider these other constituencies as they are likely listening to you as well as your customers.

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Sunday, September 5, 2010

Uncertainty Keeping Business Plans From Being Executed

Economic uncertainty and questions about the impact of health care reform and congressional tax and small business lending legislation are keeping many small businesses on the sidelines and not executing sound Business Plans.  In my discussions with small business owners, they are hesitant to hire, expand locations, and inventory.
  • There is a small business bill that is now stuck in the Senate. This bill would establish a  $30 billion small business lending program for community banks and provide small companies billions in new tax breaks.  Generally funding has been fairly tight even though a few larger banks are beginning to make some more loans.  Until this goes through, it will be tough to act on.
  • Small businesses are not seeing much of a recovery as evidenced through several surveys and general discussions.  Small Businesses have a lot of consumer like sentiment in "what recovery?"
  • Many small business owners are still trying to get a handle on what impact Health Care will have on them. Some accounting entrepreneurs are creating health care tax calculators to help small businesses evaluate the impact.  Do companies try to avoid being over 50 employees through different legal structures?   How much will insurance cost continue to increase above inflation?  How much can employers pass on to their employees without triggering  health care penalties?
What I am observing is that many solid value generating business plans that are financially sound are setting on the table until we have more certainty.  How has this uncertainty impacted you?
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    Friday, September 3, 2010

    10 Tips to Create a Budget For Your Small Business

    The key for small business success is cash flow which needs planned and managed. A budget is a useful tool. It is a written financial plan that helps you set goals and measure progress. A properly structured budget model will also let you do what if scenario analysis to see the impact on your cash flow and help to secure financing.

    Here are 10 Tips for creating your budget:

    1) What do you expect to sell? Start by coming up with a sales revenue target. This is driven by multiplying your units and price for your key products and services. This will allow you to test the impact of rate and volume variances. Your first year needs to be monthly so that you can check monthly cash flow needs. You also need to consider how your prices compare to the market to understand any pricing pressures you need to evaluate.
    2) What's it costing you to produce the goods/services you sell? If you're buying finished items for resale, this is relatively easy. It's trickier when your produce items since you have to calculate all the factors, such as labor and material, which go into manufacturing a product. This needs accuracy for your model to work properly. The cost per unit needs to match the units you are using to drive sales.
    The difference between your Revenues and Cost of Goods is Gross Profit. Dividing the Gross Profit by Revenues gives you a Gross Profit Margin percent. If your Gross Profit Margin percent is staying flat or trending upward, you're probably on track in terms of adjusting your prices to show changes in what you pay for what you sell or produce. Seeding a declining margin over time gives you a heads-up that you must adjust your prices or check your cost structure.
    3) What's it costing you to sell what you sell and operate? Advertising, marketing, labor commission, storage and general and administrative overhead. Some of these costs will be variable with sales and some will be fixed within a sales volume range.
    4) What are the financing costs? You need to include interest expense on all forms of debt including any credit card or accounts receivable financing. This expense will normally be a function of the amount being financed.
    5) How much Inventory do you Need? Inventory levels are very important to manage. It should be a reason of your forecast sales. Too much inventory and you are using up cash unnecessarily and too little, you may have lost sales. Managing your supply chain is critical to having proper and timely inventory levels. Retail businesses will have finished goods as their major inventory while manufacturing and construction businesses will have to factor in raw materials and unfinished inventory.
    6) What are your Accounts Receivable? Managing Accounts Receivable is critical to the cash flow lifeblood of a small business. You need to understand how long it is taking for your customers to pay and develop ways to improve it if it is hurting your business. There is where having a real credit and collections policy is important and you need to track delinquent accounts. For big-ticket items that have a long lead time, you may need to consider an upfront deposit
    7) What are your other assets? In addition to accounts receivable and inventory, you have cash balances and property, plant, and equipment to forecast. You also need to reduce the balance for accumulated depreciation and depreciation expense. Don't forget to consider the age of your equipment if you need to replace it during the forecast period. If your capital spending is a function of growth you need to have it as a function of your sales growth and don't forget about the lead time to get it installed.
    8) What are your liabilities? This represents who you owe including payroll taxes and current debt payments. This would also include credit cards. Accounts payable is important to manage. Pay too quickly and you are using up cash and pay too slow it could hurt your businesses credit rating. This should be a factor of your monthly expense forecast and capital spending. When you make debt payments you want to be sure to separate the interest as an expense and the principal portion as a reduction in the balance.
    9) What is your debt to asset ratio?  This measures debt as a percent of total assets.  If this ratio keeps increasing, your business becomes more riskier.  You need to include debt repayments on existing debt as well as new debt.
    10) What is your cash Flow? This is the bottom line of what you need to see. The following is the formula for cash flow:
    Net Income
    + Depreciation
    - Change in Current Assets
    + Change in Current Liabilities
    -Capital Spending
    + Change in Debt
    = Cash Flow

    Although tracking the big 10 budget tips and knowing what's up with your cash flow is essential to knowing and running your business, don't be afraid to turn to professionals for help. It needs to be done right.

    Tuesday, August 31, 2010

    The Sketchpad: Personal Finance on a Napkin

    This is an interesting article I saw in the New York Times Money Section. In a series of back-of-the-napkin drawings and posts on the Bucks blog Carl Richards, has been explaining the basics of money through simple graphs and diagrams.  The aggregated series of drawings can be found in this link.  If I was still teaching some of my Financial Planning and Analysis classes, this would be a good kick-off to each class (with authors permission of course).  

    It reminded me of the Dilbert carton by Scott Adams.  There were always good cartoons pertaining to what was going on around me or pertaining to concepts I was teaching.

    While both are very entertaining, they do point to some underlying truths.  I want to make sure my readers were aware of this resource.

    Great Reasons to outsource Payroll

    I have come across several small businesses with payroll and IRS issues when they attempted payroll on their own.  Even a small business with few employees should consider outsourcing of payroll.  While peace of mind may be reason alone for outsourcing payroll, below are additional reasons why outsourcing payroll services may be a great solution for your small business:
    1. Save time by letting outsourced payroll specialists do the work.
    2. Generate money by focusing your time on building your business.
    3. Avoid penalties where errors in federal, state and local taxes and filing requirements may be avoided.
    4. Reduce costs by comparing in-house processing wages to outsourced processing fees.
    5. Avoid the hassle of needing to stay on top of payroll rules and regulations.
    6. Economically Add employee benefits such as direct deposit and 401(k) plan options.
    7. Avoid payroll processing headaches having to upgrade in-house software.
    8. Leverage outside expertise on regulations, withholding rates and government forms.
    9. Eliminate payroll disruption if your payroll person leaves.
    10. Security, most payroll services firms have technologies that can spot and alert clients to various types of payroll fraud.
    11. Have all reports and forms filed timely.
    12. Ability to leverage multiple payment options.
    13. Small Business Accounting Systems such as Quickbooks have interfaces to major payroll vendors in addition to their own outsourced payroll service.  For those utilizing many of Quickbooks features, Intuit's payroll services should be considered.
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    Saturday, August 28, 2010

    Traditional Business Plan - Why it is Not Appropriate For Entrepreneurs

    Business Model Change and InnovationImage by Alex Osterwalder via Flickr
    In my Financial Planning and Analysis work, I had the opportunity to review and develop many business plans for both large corporations and for entrepreneurs.  A conclusion I have reached is the traditional business plan is not appropriate for entrepreneurs.

    When I review my small business consulting work, I have helped entrepreneurs develop four types of business plans depending on where they are in their business life cycle:

    • The "Idea" Business Plan: It is a summary where you describe your venture in broad strokes and what will be required to make it happen. The objective is to answer the question to you concerning the feasibility of the idea.  And, yes at times I have seen the original genesis on  napkins (They were big ones).
    •   The "Equity Financing" Business Plan: This highly polished 20-35 page document is used to persuade equity partners to invest now. The objective is to sell a potential investor on the value of a ‘show & tell’ meeting with you.
    • The "Operating" Business Plan: This plan evolving over time contains the details  documenting how to operate your business from launch date to maturity.  This Business Model can be used to highlight key processes for improvement.
    • The "Bank/Debt Loan" Business Plan: This conservative version of the business plan is used to apply for a loan and focuses on persuading the banker that you can satisfy their lending criteria.  Be careful since this plan can be the source of financial covenants you must meet in the loan document.
    I did some research given my corporate background since none of these were the traditional corporate business plan that I had developed and taught how to do over the past twenty years.  I found from my experiences and research the entrepreneur needed  a more flexible planning approach for the following reasons:

    1)  Mindset:    As I observed, entrepreneurs and larger corporations think differently and have different goal structures.   Research conducted in 1997 by Saras D. Sarasvathy, Phd of the University of Virginia concluded that entrepreneurs used an Effectual rather than a Causal reasoning when transforming their ideas into a full fledged business. Causal reasoning is the underlying philosophy of the traditional business plan structure:
    • Take a predetermined goal and given a set of means,
    • Develop any new means needed to achieve that goal,
    • Identify the best cheapest, fastest, most efficient way to achieve that given goal.
    Effectual reasoning is opposite of casual reasoning in that it begins with a set of means and allows the goals to emerge over time.  It is more of a stepping stone or option approach.  A good analogy can be derived from my restaurant consulting experiences.  Casual reasoning would be when a client provides the catering chef with a menu and the chef then determines the most effective way to prepare the menu.  Casual reasoning would be when a client asks the chef to prepare a menu at the last minute with what he currently has on hand.  The chef then looks at all the potential outcomes to make a decision.  The latter better reflects the mindset of the entrepreneur while the former reflects the business manager or strategist's in existing enterprises.” 

    2)  How do you research new?  Traditional business planning focuses on getting the market research right before you do anything else. How to you research new?  Entrepreneurs gain their best market research from actually launching in an Alpha mode and then adapting to the market as it responds to their new venture's offer.

    3)  Its all going to change!  Entrepreneurial research shows successful outcomes have high deviation from their original concepts.  The traditional business plan asks us to sit down and plan out the next 3-5 years and describe in detail the sequence of events. Experienced entrepreneurs know that there are just too many variables in resources, market acceptances, timing, product development and the entrepreneur themselves to predict meaningfully in detail the traditional 3-5 year business plan forecast. The entrepreneur will rely on their ability to adapt to the changing environment as it evolves around them.

    Thursday, August 26, 2010

    Financial Resources For Small Businesses

    In several of my engagements, I have helped Entrepreneurs secure financing for their business.  Every business needs a certain amount of money to start. The success of a small business depends on the funding it is able to arrange to ensure a smooth cash flow. Different Business Life Cycle Stages will help determine the type of financing available and timing of receiving the financing.   

    These life cycle stages are:
    • Startup:  You develop the business model and infrastructure and start early operations.
    • Growth: Generally a business has an initial time of negative profit until it breaks even and begins to show increased revenues that allow it to grow.
    • Expansion:  This is the point at which a business gets to the point where there is sufficient revenue being brought in so that there are no doubts of its survival and it can expand its horizons.
    • Mature: The business is now stable enough to survive most unforeseen circumstances. It has enough backing, capital and support to ensure that even if the market becomes unstable, it can pull through.
    While many small businesses may choose to get funding in the early stages to start the business, many need access to financial resources even for a running business especially with those that have seasonal patterns. Finding adequate funding for small ventures can be tough and time consuming. Often entrepreneurs end up utilizing their entire savings to keep the business afloat until other financing is available.

    These are some of the financing options available:
    • Self financing
    • Bank Loan
    • Friends and Family Loans
    • Cash Advance
    • Equipment Financing
    • Unsecured Loan
    • Accounts Receivable Factoring
    • Line of Credit
    • Home Equity Lines
    • Credit Cards
    • Inventory Loan
    • Vendor Financing
    • Working Capital Loan
    • Franchise Loan
    • Grants
    • Equity Investment

    Several of these options are more appropriate and easier to secure in the later life cycle stages.  Small business financing come at a price and also increase the element of risk involved. However, financing becomes necessary to ensure cash flow, purchase assets like property, expansion of business, equipment or inventory purchase, or simply to have adequate working capital.   Utilizing financing makes sense versus using up all of your personal assets and resources.  But getting a small business financing approved requires that the owner/borrower is able to provide the following:
    • A sound business plan
    • Personal profile with qualifications and experience
    • Personal financial status statement
    • Credit rating of the business if already in operation, or credit history
    • Track record of taxes paid in previous years
    • Collateral that can be used to secure the loan
    Subsequent Blogs will expand on each of these options and points.
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    Moving from Off Line to On Line

    All Present QR CodeImage by gullevek via Flickr
    One of the things I enjoy in working with clients on the financial performance of their business, is branching out into different areas of their operations such as marketing.  A cost effective marketing tool for some business segments is a Quick Response Code.  A Quick Response (QR) code is a two-dimensional code that can be scanned by smartphone cameras to pull up text, photos, videos, music and URLs.  These codes have become mobile-friendly ways to point people in the offline media space to online resources.  The online resource can be frequently updated.

    I have seen a few cost effective ways that you can use QR codes to liven up your entrepreneurial marketing strategies.
    • On business cards: A fast and simple way to use QR codes for your own professional purposes is to place them on business cards. Generate a barcode that directs scanners to your online resume, small business Facebook Page, LinkedIn Profile, or your website to help new contacts find you or your business faster and to learn more about you.
    • On marketing materials: You likely have brochures, programs, handouts, whitepapers and  other materials in your marketing media kit. Add QR codes to direct readers to a particular how-to video, send them to an oline photo gallery, to follow you on Twitter, or point them to a mobile-friendly landing page that promotes a new campaign or a current promotion.  You can use the codes for quick changing promotions.  For example, my restaurant clients can use this for daily specials to help manage their inventory levels.
    • In storefront windows: Google is sending out QR code window decals to top local businesses with Google Place Pages and Facebook Places will likely follow. If they don’t send you one, you can generate your own QR code to place in your window. You can use this code to encourage Foursquare checkins or simply invite customers to share memories on your Facebook Fan Page.
    When you are marketing this feature you will want to keep in mind that QR codes and smartphone applications are still foreign to many people even if they have smart phones.  More and more people are starting to associate the codes with action, but never assume your customers will know what to do. Make it a point to explain  how to scan the QR code and where they can find applications on their smartphones.

    Now, if you don't know how to generate a QR code, Mashable/Mobile has a very effective guide on How to create and deploy your own QR Codes.

    How do you see your business using QR codes?

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    Friday, August 20, 2010

    Business Has Increasing Social Presence with Facebook Places

    One way to increase value for your business is to leverage free social media.  In my Blog on Small Business Web Presence I list several good easy options.  With Facebook's Places announcement this week, we now have another tool.  Facebook Places is a reach extension for marketers -- when people check in from a venue, they essentially broadcast their presence to their Facebook network. While Foursquare is known for crowning Mayors and awarding badges from checking in to a physical venue,  Facebook Places will likely have a coupon or some other type of award.  It could be a place they can offer discounts and marketing messages to people within a particular proximity -- whenever Facebook introduces such a feature and cell phones have location services activated.

    Marketers with a physical location can benefit from Facebook Places by taking some basic steps.  Business Owners can claim their business's Places Page which will be verified by Facebook.  Likely in the same way Google Places verifies its Places.  Every time anyone checks in from that location, it's a huge deal and business owners will want to control that presence.  About 1.5 million business pages exist on Facebook, and each one can merge that page with their Places page by "claiming it".  If you are the official representative of your business,  take the following verification steps to claim your Place on Facebook:
    1. Search for the Place on Facebook you wish to claim as your business. If no Place exists for your business, you can create a new Place.
    2. Once you locate the Place for your business, click the "Is this your business?" link at the bottom of the Place.
    3. Complete the step-by-step verification process to claim your Place.

    This is the link for the Facebook Blog that discusses this in more detail.  There is currently an application available for the IPhone and for other HTML 5 and geolocation phones you can access through until those applications are developed.

    It will be interesting to see how Google and Facebook battle this one out.  Let me know what you think of this service.
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    Thursday, August 12, 2010

    RSA Animate - Drive: The surprising truth about what motivates us

    This is a very thought provoking video on what motivates us. It makes we want to revisit company reward and compensation systems. The other aspect of this presentation is how it is presented.  I found the style very effective and it kept my attention.

    Quality Everywhere!

    On several of my Virtual CFO engagements, I was asked to look at the effectiveness of key operating processes. I had the chance to roll out quality tools and approaches in a lot of different places ranging from an Amish Fine Furniture Maker to cabinet makers in Washington and Florida.  

    As part of the Six Sigma quality assessment process, you need to have measures after you defined the process.  In a couple of cases we had existing data, but wanted to engage the production team.  We created a simple manual tracking chart that was placed on the job floor to measure key process milestones.  It was as simple as placing some flip chart paper on a wall with volume lines and dates.  The shift supervisor updated it at the end of each shift and added any notes.

    It was interesting to note that we saw process output improvements as we started to measure the process without making any process changes. Other than the act of measuring!  We saw teams beginning to exhibit "one-upmanship" as they wanted to out perform other shifts.  For these businesses, labor and materials were key cost drivers.  Besides working faster, we identified some work flow, floor layout, supply chain, and communication issues that improved productivity and reduced waste.  Several simple paper tools were used to improve the process. On average, the businesses realized over a 20% improvement in productivity that made a noticeable improvement in operating margins and cash flow.

    Feel free to contact Steve Cassady for more information on improving your processes.
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    Saturday, August 7, 2010

    Shocking Facts You Did Not Know (at least I didn't)

    Interesting video that Kris Porter highlighted. This highlights how much and how quickly things are changing.  Imagine how much will change over the next 10 years!  Business is always changing.  Entrepreneurs have a lot of technology changes to factor into their business plans over the next several years.  This impacts marketing, customer service, and operations as well.  Technology allows entrepreneurs to better position yourself and to display your expertise in solving customers problems.
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