Taking a different turn here with this post - I am going strictly with my feelings on this topic. That will probably get me in hot water somewhere in someone's office but this topic is a big one for me.
Recently, a client of mine came to me with a idea that I felt skeptical about mainly because I could not understand his small business idea. He was persistent in making it happen as he had the passion for it and had a successful model to follow. We worked on the business plan and he produced a solid one. He got it. He went to four banks and after six months, the fourth agreed to fund him. I was so excited for him.
Another client has an even stronger idea for a small business in the area and she also has a strong idea. In fact, if we can get this to happen, it will be the only retail outlet between St Louis and Memphis offering the product locally. With this client, she cannot get funded from any bank. We have practiced the pitch and interview, reviewed the business plan for weaknesses and tightened the financials even more. She finally turned to her personal retirement fund and is now moving forward. We went to six area banks and not one would even touch it past the first meeting.
So here is the question - if small business start ups provided 70%+ of the new jobs in the last 10 years, why do they have such a hard time getting financed? Yeah yeah the fact that only 10 out of 100 survive the first 5 years is a biggie but the loans are secured so the banks can get thier money. They even have the SBA guarantee option for the loans also.
I know there are many conversations starters with this topic and are started every day in my world of small business development. But why is it so hard to get an answer out of a bank?
Share with me your thoughts and opinions on this one.
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Cash is the King of the Royal Family and Then Some...
We have all heard it and probably seen it to be true in some form of real life situation - Cash is King. We can either be inside the gates and enjoying life at court or we can be outside living as a pauper. Which would you prefer? I know I want to be inside the gate with all the other fine Lords and Ladies.
But on a more serious note, if you are not tending to the court of Cash in your small business, you could be in trouble. You need to be regularly checking the books to make sure you are not in the red and spend when you need to and at other times not spending to carry over the balances.
I recently came across some tips to help protect the cash balance of your business and wanted to share them with you.
1) Cash may be 6 feet under in your business - you may have extra inventory sitting around or equipment you brought and no longer have any use for in the business. Ask an employee to review the physical layout of the business (meaning places like warehouse, storage etc.) or have someone who does not work there come in and question the existence of such items. Once you find the buried cash, sell it to generate revenue and add that to your books.
2) Track your cash - monitor your cash flow reports regularly so you can better manage your small business. You will start to notice signs telling you something is going to happen and practically scream at you to make a change in the operation/sales side of the business. Make sure you ask the people who impact your cash flow what are they doing to drive it up. You may get a P&L monthly but make sure you dig into it and understand what is happening. Where did the cash come in from and where did it go?
3) Sign your own checks - nothing else to be said here.
4) Grow at the pace you can afford - growth is a cash eater and you need to be careful you don't start to grow faster than you can afford. Manage your growth to a rate you can afford while still providing adequate returns on the business to any investor like yourself.
5) Communicate to your bankers- do not surprise these people. If there is one person you don't want to surprise it is your banker. Talk to them about your situation, tell about your first sale and your last sale of the day. If you think you are going to miss a payment, get on the phone and work something out. They want you to be successful so let them help you be just that.
6) Build a stronger castle for the King - the King likes it when you build his treasury (your business net worth) so concentrate on increasing the company's net worth or equity as you grow the business. This growth in equity will allow you to borrow without increasing your debt to equity ratio which is a very good thing for a small business. So watch your equity account and help it grow by putting money aside but don't starve the business by not spending when you need to.
7) Look into new opportunities - Star Trek went where no man has gone before and you may need to do that too to keep your business fresh and growing. Don't be afraid to ask people for their thoughts on your business and what you can do to grow it. Be creative with outreach programs when seeking input.
Remember cash is king but you rule the business so plan to survive, thrive and grow and you will come out on top.
How do you manage your cash accounts? Let me know and share your thoughts and ideas. Let's talk.
But on a more serious note, if you are not tending to the court of Cash in your small business, you could be in trouble. You need to be regularly checking the books to make sure you are not in the red and spend when you need to and at other times not spending to carry over the balances.
I recently came across some tips to help protect the cash balance of your business and wanted to share them with you.
1) Cash may be 6 feet under in your business - you may have extra inventory sitting around or equipment you brought and no longer have any use for in the business. Ask an employee to review the physical layout of the business (meaning places like warehouse, storage etc.) or have someone who does not work there come in and question the existence of such items. Once you find the buried cash, sell it to generate revenue and add that to your books.
2) Track your cash - monitor your cash flow reports regularly so you can better manage your small business. You will start to notice signs telling you something is going to happen and practically scream at you to make a change in the operation/sales side of the business. Make sure you ask the people who impact your cash flow what are they doing to drive it up. You may get a P&L monthly but make sure you dig into it and understand what is happening. Where did the cash come in from and where did it go?
3) Sign your own checks - nothing else to be said here.
4) Grow at the pace you can afford - growth is a cash eater and you need to be careful you don't start to grow faster than you can afford. Manage your growth to a rate you can afford while still providing adequate returns on the business to any investor like yourself.
5) Communicate to your bankers- do not surprise these people. If there is one person you don't want to surprise it is your banker. Talk to them about your situation, tell about your first sale and your last sale of the day. If you think you are going to miss a payment, get on the phone and work something out. They want you to be successful so let them help you be just that.
6) Build a stronger castle for the King - the King likes it when you build his treasury (your business net worth) so concentrate on increasing the company's net worth or equity as you grow the business. This growth in equity will allow you to borrow without increasing your debt to equity ratio which is a very good thing for a small business. So watch your equity account and help it grow by putting money aside but don't starve the business by not spending when you need to.
7) Look into new opportunities - Star Trek went where no man has gone before and you may need to do that too to keep your business fresh and growing. Don't be afraid to ask people for their thoughts on your business and what you can do to grow it. Be creative with outreach programs when seeking input.
Remember cash is king but you rule the business so plan to survive, thrive and grow and you will come out on top.
How do you manage your cash accounts? Let me know and share your thoughts and ideas. Let's talk.
It was the Best of Times...It was the Worst of Times...
The song went something like that. Today we hear the economic crisis has passed then with the next newscast, it still is present but weakening. The economy is improving but taking a very slow upward tick. Regardless of what we hear, read or speak, we have been in one of the worst recessions ever recorded and we are probably not out of it by a long shot.
But even with the improvement, it is important to learn from the past so we don't repeat it. That is something I am very conscious of as I am always seeming to learn from my repeated mistakes after I have banged my head a few times too many. So I decided to find some universal advice that would work in both bad and good times. I think I found it. Some may call it common sense but we all know that item is in short supply these days in America's business world today. But read on and let me know your opinions on the advice.
#1 - Adapt your business - don't be afraid to answer those questions/problems that are constantly there waiting - fix them and get them off your back; look to see if your business strategy is still in line with your customers; take a look at your strengths and weaknesses and address any changes; realize the correct decisions made now will make you stronger in the future.
#2 - Motivate your people - Remember your workforce is your best selling tool to the public; tell them the tough decisions you need to make and share with them the why you are making the decisions; it is important they understand your actions and can support them; if you have to cut people, try to do it one time as repeated cuts only serves to demoralize the workforce; get it done and behind you so you and your most important asset, the people, can move forward together.
#3 - Be more focused on your core - Look at your products and if something does not make sense, fix it; if it is not profitable, then get rid of it; ask yourself - what does this product contribute to the company's bottom line?
#4 - Stay True to Your Vision - Know where you are and where you want to be in the future then work towards that goal; constantly ask yourself how does this decision get me closer to my ultimate destination for the business?; look into the future and see where your business fit in.
#5 - Communicate, Communicate, Communicate - When you make a decision talk to your key stakeholders about the reasoning behind it; don't let your marketing efforts suffer either as companies that advertise during a down time consistently come out on top in market share/sales when the economy improves.
#6- Innovate on new ideas - Encourage your employees to think of new ideas, you think of new ideas; watch people use your product for new ideas; take some calculated risks in research and development and when they hit pay dirt, you could transform the industry; look for new partnerships to create win-win situations.
#7 - Remember your customer - Position your small business through marketing efforts to talk to your customer and remind them of your solutions to their needs; build on a few key themes to drive home; remember to add value instead of cutting price so you can maintain pricing levels, keep customers buying and overall increase your market share.
#8 - Retain credibility - Honesty is always the best policy; lies have a way of being found out and then cause harm to the business and you; when the news is bad news, say so, tell why and your plan of action to correct it; face the music and you will be stronger for it.
#9 - Inspire customers to be better - That sounds sickening sweet but if you can create an emotional tie to your customers you have just strengthened their willingness to purchase your product no matter what; emotions are strong influcencers for us.
Well there they are folks - some universal tips to help us in both the bad and good times. Send me your thoughts and opinions so we can start talking about these ideas.
But even with the improvement, it is important to learn from the past so we don't repeat it. That is something I am very conscious of as I am always seeming to learn from my repeated mistakes after I have banged my head a few times too many. So I decided to find some universal advice that would work in both bad and good times. I think I found it. Some may call it common sense but we all know that item is in short supply these days in America's business world today. But read on and let me know your opinions on the advice.
#1 - Adapt your business - don't be afraid to answer those questions/problems that are constantly there waiting - fix them and get them off your back; look to see if your business strategy is still in line with your customers; take a look at your strengths and weaknesses and address any changes; realize the correct decisions made now will make you stronger in the future.
#2 - Motivate your people - Remember your workforce is your best selling tool to the public; tell them the tough decisions you need to make and share with them the why you are making the decisions; it is important they understand your actions and can support them; if you have to cut people, try to do it one time as repeated cuts only serves to demoralize the workforce; get it done and behind you so you and your most important asset, the people, can move forward together.
#3 - Be more focused on your core - Look at your products and if something does not make sense, fix it; if it is not profitable, then get rid of it; ask yourself - what does this product contribute to the company's bottom line?
#4 - Stay True to Your Vision - Know where you are and where you want to be in the future then work towards that goal; constantly ask yourself how does this decision get me closer to my ultimate destination for the business?; look into the future and see where your business fit in.
#5 - Communicate, Communicate, Communicate - When you make a decision talk to your key stakeholders about the reasoning behind it; don't let your marketing efforts suffer either as companies that advertise during a down time consistently come out on top in market share/sales when the economy improves.
#6- Innovate on new ideas - Encourage your employees to think of new ideas, you think of new ideas; watch people use your product for new ideas; take some calculated risks in research and development and when they hit pay dirt, you could transform the industry; look for new partnerships to create win-win situations.
#7 - Remember your customer - Position your small business through marketing efforts to talk to your customer and remind them of your solutions to their needs; build on a few key themes to drive home; remember to add value instead of cutting price so you can maintain pricing levels, keep customers buying and overall increase your market share.
#8 - Retain credibility - Honesty is always the best policy; lies have a way of being found out and then cause harm to the business and you; when the news is bad news, say so, tell why and your plan of action to correct it; face the music and you will be stronger for it.
#9 - Inspire customers to be better - That sounds sickening sweet but if you can create an emotional tie to your customers you have just strengthened their willingness to purchase your product no matter what; emotions are strong influcencers for us.
Well there they are folks - some universal tips to help us in both the bad and good times. Send me your thoughts and opinions so we can start talking about these ideas.
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