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Self-Counsel Press - Angie Mohr

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179 pages

English

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Description

Learn how to grow your small business using sound financial planning. Entrepreneurs need to know how to measure the effectiveness of their operations, human resources and marketing in order to pinpoint inefficiencies and maximize profits. This book outlines all the ways to raise capital and then make it work for you!
INTRODUCTION xix
PART 1: FINANCE YOUR BUSINESS 1
1 So, What Kind of Business Should You Start? 3
Introduction 3
Why Do You Want to Be an Entrepreneur? 4
Money 4
Freedom 4
Empire building 4
What Kind of Business Should I Start? 4
Manufacturing business 5
Retail/Wholesale business 5
Service business 5
Eight Questions to Ask Yourself 6
2 Is It a Business or a Hobby? 9
Introduction 9
What Is the Difference Between a Business and a Hobby? 10
It’s Not Always about the Money 11
Contents
numbers 101
SMALL BUSINESS
for
v
3 Build or Buy? 13
Introduction 13
Building a Business from Scratch 14
Buying an Existing Business 15
Financial Considerations in the Build-versus-Buy Decision 16
Considering a start-up business 16
Considering a business purchase 18
What’s Right for You? 22
4 Getting Your Personal Finances in Order 23
Introduction 23
Your Retirement Goals 24
How much will you need at age 60? 25
How much do you have to put away between now and retirement? 25
The Concept of Net Wealth 26
Debt Management 26
Your Credit History 28
Insuring Your Assets 29
Life insurance 29
Mortgage insurance 29
Property and casualty insurance 30
Health insurance 30
5 Setting Your Business Goals 33
Introduction 33
Chasing the Almighty Buck 33
What Is the Purpose of Your Business? 35
The Business Plan 36
What Should Your Business Plan Include? 36
The Monthly Management Operating Plan 36
Your Exit Strategy 39
6 Putting Your Money Where Your Business Plan Is 41
Introduction 41
Projecting Your Funding Needs 42
Paying for the start-up costs 42
Providing liquidity to the business 43
Sources of Funding 45
A Bank’s Perspective 46
vi Finance & Grow Your New Business: Get a Grip on the Money
Contents vii
7 Debt Financing 49
Introduction 49
Your Own Resources 49
Credit Cards 50
Suppliers 50
Friends and Family 51
Banks 51
Leasing Companies 52
Private Lenders 54
8 Equity Financing 55
Introduction 55
Common Shares 56
Preferred Shares 56
Partnership 56
Joint Ventures 57
Venture Capitalists 58
9 Risky Business: How to Assess Business Risk 59
Introduction 59
Secured Loans 59
Personal Guarantees 60
Fixed Price Agreements 60
Interest Rate Risk 61
Foreign Exchange Risk 61
Economic Dependence 61
10 Home Sweet Home 63
Introduction 63
Does It Really Save Me Money? 63
How Will It Affect My Personal Life? 65
The neighbors 65
The on-call syndrome 65
The convenience 66
Willpower 66
11 Choosing Your External Team 69
Introduction 69
Your Lawyer 70
Your Accountant 70
Your Financial Adviser 72
Your Board of Directors 73
12 Assessing the Competition 75
Introduction 75
Identify the Competition 76
What Do They Do Right and Wrong? 76
How Are They Positioned to Take Advantage of Opportunities? 77
How Vulnerable Are They to Changing Market Conditions? 77
How Do You Stack Up? 77
Competitive Analysis 78
Intelligence Resources 78
13 Forecasting Profit 81
Introduction 81
Keep Your Bookkeeping Up-to-Date 81
Always Forecast a Rolling 12 Months 81
Tighten Up Billing and Collection Policies 82
Hire Someone to Do It If You Can’t 82
Keep on Top of Changes in the Operating Environment 82
Keep the Work Coming In 83
Continually Assess New Sources of Financing 83
14 Investing in Labor 85
Introduction 85
The Cost of an Employee 85
Salary 86
Employer taxes 86
Office space 86
Fringe benefits 86
Calculating the Benefit 87
Direct labor 87
Indirect labor 87
Your Billing Multiplier 88
Five Signs It’s Time to Hire 88
15 Investing in Equipment 91
Introduction 91
To Buy or Not to Buy 91
viii Finance & Grow Your New Business: Get a Grip on the Money
Contents ix
Erosion 92
Financing 92
Risk 93
16 Financing Expansion 95
Introduction 95
Horizontal Expansion 96
Increase your capacity 96
Expand your geographic area 96
Develop new products or services 96
Develop a franchise 97
Find new markets for your existing products and services 97
Vertical Expansion 97
The Dangers of Expansion 97
Liquidity issues 97
Triggering call provisions 97
Increase in fixed costs 98
Calculating the Benefits of Expansion 98
Finding the Money to Expand 100
PART 2: MANAGE YOUR BUSINESS GROWTH 103
17 The Successful Entrepreneur 105
Why Small Businesses Fail 105
Managing versus Doing 106
The Four Foundation Walls 106
Entrepreneurial drive and vision 107
Record keeping 108
Financial management 108
Planning and strategizing 109
18 The Life Cycle of a Business 113
The Three Stages of a Business 113
Infancy 113
Maturity 115
Decline 115
At What Stage of the Life Cycle Is Your Business? 116
How Can My Business Use This Information? 116
19 A Systems Approach 119
Anatomy of a Franchise 119
A Real-Life Example 120
Benefits of a Systems Approach 120
Your Business as a Machine 121
Becoming the Head Mechanic 121
20 Analyzing the Status Quo 125
Entrepreneurial Drive and Vision 125
Record Keeping 126
Financial Management 126
Planning and Strategizing 127
The Busy Entrepreneur 127
Defining Processes and Procedures 128
21 Growing Your Business 131
Your Business Goals 131
Profit 132
Freedom 133
Recognition 133
Peace of mind 133
Planning for Growth 133
Good versus Bad Growth 134
The Three Ways to Grow Your Business 134
Attracting new customers 134
Selling them more 135
Selling to them more often 136
Leverage Revisited 136
22 Getting a Handle on Your Revenues 141
How Many Customers Do You Have? 141
How Often Do Your Customers Come to See You? 143
What Do Your Customers Spend? 145
What Kind of Customers Do You Have? 145
Fire Away! 146
The Next Step 146
23 Your Strategy 151
Your Business’s Vision Statement 151
The Mission Statement 153
Your Operational Plan 153
x Finance & Grow Your New Business: Get a Grip on the Money
Contents xi
24 Testing Change 159
Advertising 159
Prices 161
Environment 162
25 Your Product or Service 167
Why Should Customers Buy from You? 167
Competing on price 167
Competing on value 168
How Is Your Business Different? 168
Selling a Product 169
Up Selling 169
Providing a Service 170
Teaching Your Customers 172
26 Your Customer Interactions 175
Telephone Interactions 175
The Art of Closing the Deal 175
Getting more people to call 177
Increasing your conversion rate 178
Using Scripts 179
AWord about Screening Callers 181
Tracking Conversion Rate Changes 182
27 Your Marketing and Promotions 185
The Lifetime Value of a Customer 185
Covering the Cost of the “Dry Holes” 187
Customers Beget Customers 188
28 Your People 191
How Do You Know When It’s Time to Hire? 191
What Will a New Employee Do? 192
The Laws of the Land 194
Attracting Quality Employees 194
The Interview 196
Hiring from an Employment Agency 196
Goal-Based Compensation 197
So Long, Farewell, Auf Wiedersehen, Adieu 197
29 Your Systems 201
The Goals of Systemization 201
“How We Do It Here” 202
Continuous Improvement 203
30 Business Acquisitions 209
Another Way to Grow 209
What Are You Buying? 210
Asset purchase 210
Share purchase 210
Goodwill 211
Customer lists 211
Valuing the Acquisition 211
Floor price 212
Ceiling price 213
Evaluating the Choices 213
31 Exit Strategies 217
Your Personal Goals 217
Heading for the Exits 217
Passing on the business to your children 217
Selling the business to an outside party 218
Liquidating your business 218
What’s My Business Worth? 219
Getting Ready for the Sale 219
The Mechanics of the Sale 219
32 What Happens Next? 223
A Last Word 224
Appendix 1
Present Value of $1 225
Appendix 2
Present Value of an Annuity 227
Appendix 3
Future Value of an Annuity 229
Appendix 4
Resources for the Growing Business 231
Glossary 233
xii Finance & Grow Your New Business: Get a Grip on the Money
Contents xiii
Checklists
1 The Successful Entrepreneur 110
2 The Life Cycle of a Business 117
3 A Systems Approach 122
4 Analyzing the Status Quo 130
5 Growing Your Business 138
6 Getting a Handle on Your Revenues 149
7 Your Strategy 157
8 Testing Change 164
9 Your Product or Service 173
10 Your Customer Interactions 183
11 Your Marketing and Promotions 189
12 Your People 199
13 Your Systems 206
14 Business Acquisitions 212
15 Exit Strategies 221
Diagrams
1 The Four Foundation Walls 107
2 The Life Cycle of a Business 114
3 Typical Time Chart for a Business Owner 127
4 Recommended Time Chart for a Business Owner 128
Tables
1 A Quick Reference to Ratios 53
2 Equity Statement for a 50/50 Partnership 57
3 Cash Flows for Grace’s Market Garden 99
4 Discounted Cash Flows for Grace’s Market Garden 100
Samples
1 Cash Flow Projection for a Start-Up Business 17
2 Discounted Cash Flows for a Start-Up Business 19
3 Cash Flow Projection for a Business Purchase 20
4 Discounted Cash Flows for a Business Purchase 21
5 Business Plan Outline 37
6 Cash Flow Projection 44
7 Cash Inflows 46
8 Customer Survey Form 143
9 Billings by Customer Report 144
10 Terminating a Customer 148
11 Vision Statements 152
12 Mission Statement 154
13 Telephone Interactions 176
14 Potential Customer Interaction Review Form 180
15 Telephone Script 182
16 Documenting Your Work Processes 193
17 Employment Advertisement 195
18 Human Resource Policy 204
19 Valuing a Business Acquisition 212
Worksheets
1 Retirement Planning 27
2 Competitive Analysis 79

Sujets

Small business

Informations

Publié par	Self-Counsel Press
Date de parution	15 avril 2012
Nombre de lectures	0
EAN13	9781770408784
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0032€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

Extrait

FINANCE & GROW YOUR NEW BUSINESS
Get a Grip on the Money
Angie Mohr, CA , CMA
Self-Counsel Press
(a division of)
International Self-Counsel Press Ltd.
USA Canada

Copyright © 2012

International Self-Counsel Press
All rights reserved.
Introduction

Entrepreneurs are people with a dream. They build on their skills and abilities and try to provide a stable income for themselves and their families.
There are as many reasons for starting a business as there are entrepreneurs. For some, it’s about the money. For others, it’s security and stability that are most important. Many entrepreneurs find satisfaction and fulfillment in building something from nothing and witnessing the quickening; that point where the business takes on a life of its own.
The freedom that comes from running your own business, and your successes and failures, is an irresistible pull for most entrepreneurs. This drive is what fuels them and keeps them going even when money is tight and business is bad. This sets them apart from others and makes them a special breed of individuals.
Entrepreneurs quickly learn that starting your own business is incredibly hard work, and it requires great commitment with little financial reward in the beginning. This book will help explain how you, as an entrepreneur, can get the money you need to finance your business, and how you can manage it on an ongoing basis.
Part One of this book, “Finance Your Business,” will cover questions such as—

• What kind of business should I start?

• Should I buy an existing business or start one from scratch?

• What’s a business plan?

• Where will I find money to start up?

• How do I find my external advisers?

• How will I know how I stack up against my competition?

• How do I know when it’s time to hire people?

• Should I invest in new equipment?

• Where do I get money to expand?
Part Two of this book, “Grow Your Business,” will delve deeper into the ongoing process of running your business. Businesses are like machines, and they need monitoring, maintenance and the occasional rebuild. This section will help you look at critical financial processes that separate successful businesses from failures, and teach you how to apply those processes to your growing business.
Part 1
INTRODUCTION
1
So, What Kind of Business Should You Start?

Just because you are a hairdresser doesn’t mean you should start a salon. In this chapter, we’ll examine the pros and cons of different types of businesses.

Introduction
Starting a business can be scary, exciting, and fulfilling, all at the same time. Frequently, small businesses are started by people who have been employees in the same industry. For example, hair stylists often open salons and accountants start accounting firms. You may feel that because the industry you’ve previously worked in is familiar to you, you would be successful at starting a business in this industry.
It’s important to keep in mind, however, that building a business, managing a business, and doing what the business does are three very different activities requiring different skill sets. You may be interested in doing only one of these three things. For example, you may get great pleasure out of hair styling, but have little patience for managing the day-to-day operations of a business. In this case, you will want to reconsider your decision to start a business. No matter how much joy it gives you to “be your own boss” while doing the thing that you do best, you will come to despise all the other tasks that go along with owning and managing a small business. On the other hand, you may love building the business: designing the office space, putting together the marketing plan, forecasting, and building the customer base. You may, however, be thoroughly bored with the management aspect or with doing what the business does. Entrepreneurs who feel this way tend to build a business, get it up and running, sell it, and start all over again. The thrill for them is in the creation process.
If you plan to build your business, manage it, and be its chief employee, make sure that you have the energy and the skills to do all three of those things. If not, you will have to hire other people in those positions that you do not wish to do yourself, or rethink your business plan entirely.
Once you have assessed your strengths and weaknesses in terms of building, managing, and operating a business, it’s time to look at your personal goals.

Why Do You Want to Be an Entrepreneur?
Before you jump with both feet into starting a business, take some time to examine your motivations. What is it that is driving you towards starting and running a business? Many small-business owners cite things such as more money, freedom, and empire building as their motivators.

Money
Owning and running a business has the potential for providing you with a higher level of investment return and remuneration than you would receive working for someone else. The profit potential is definitely there, but high profits are a trade-off for high risks. Starting a small business is a risky proposition and you, as the owner, face the potential for financial loss as well as gain. It’s important to keep this in mind as you build your business and make sure that you not only have the ability to survive failure, but also the ability to tolerate risk. We will examine business risk in greater detail in Chapter 9.
When small-business owners talk about money, though, they often don’t mean that they want money for money’s sake. Money means something slightly different to each person, but in general, it represents financial independence, prosperity, and security. The more time you spend planning your business model before you begin, the more likely you will be building a profitable enterprise that will meet your personal financial goals.

Freedom
Many small-business owners like the freedom that comes with not having a boss and being able to make their own decisions. However, with this freedom comes ultimate responsibility for the business, including responsibility for customer satisfaction, working conditions, supplier shortages, product failure, and the economic well-being of your employees. Look at whether you are the type of person who can handle these responsibilities while simultaneously making considered, but quick, decisions on a daily basis.

Empire building
For many small-business owners, the most important consideration is that they are building something that will outlive them and perhaps provide income and stability to future generations. If this is an important consideration to you, it will be critical to make sure that you are building a business that has value, and that the value can be transferred to others through sale of the business or inheritance. The unfortunate reality is that over 80 percent of small businesses do not survive into the next generation but die with their owners.

What Kind of Business Should I Start?
The three major types of businesses are manufacturing, retail/wholesale, and service. There are pros and cons to running each type of business, as well as financial considerations. Let’s have a look at the characteristics of each one.

Manufacturing business
Manufacturing involves purchasing raw materials and adding labor and specialized machinery to create a product to be sold to customers. An example is a furniture manufacturer. This type of business would buy lumber from a sawmill, as well as nails, screws, glue, and varnish from a supplier. It would then have its employees use saws, drills, and other tools to turn the lumber into tables, chairs, and other furniture.
A manufacturing environment usually requires a hefty upfront investment in the equipment that will be used in the manufacturing process. Manufacturers also tend to need more highly skilled workers than, for example, a retail business. For these reasons, it is very difficult to start up a manufacturing business on a small scale and expand as you go along.
One of the main benefits of this type of business is that it can service very large customers with very specialized products. For example, a manufacturer can supply the entire North American auto industry with injection-molded fan vents.

Retail/Wholesale business
Retailing and wholesaling involves the purchase and resale of products. A retailer sells the products to the final consumer while the wholesaler is simply an intermediary, selling the product to another business that will ultimately sell it to the final consumer.
Almost every store that you can think of is a retailer. For example, a bookstore will purchase books from the publisher and display them for sale in the store. An example of a wholesaler is an importer that purchases teapots from Japan and sells them to stores, usually in large quantities.
Operating a retail business generally requires rented or purchased display space and therefore requires incurring the fixed costs of running that space right from the beginning. For example, if you wanted to run a variety store, you would have to rent (or buy) a storefront location where customers can drop in during your open hours. On top of that, you will have to invest in the store’s inventory, which is usually the largest cost to a retailer. The inventory can cost upward of $100,000 depending on the size and scope of the store. For these reasons, retail businesses are usually quite capital intensive and need financing from the