An ideal lawyer will not just have a string of impressive credentials or gold lettering on his door. He or she will be caring, concerned, and devoted to their work. You need to think carefully before laying your trust in a lawyer after all in some cases your life, future, money or property will be in his hands.
Apart from doing extensive research to short list possible lawyers you must ensure that there is not conflict of interest, that you understand everything the retainer agreement states, and that you have checked the references and details regarding the practice.
You will know the lawyer you have chosen is the perfect one if:
1. He makes an effort to spend time to understand your case himself. He will not assign a legal assistant to take facts of the case down.
2. From experience and knowledge he will know what is relevant and what is not. He will set aside and ignore irrelevant facts, opinions, and personal emotions that cloud the case on hand.
3. He will insist that the footwork for the case be done thoroughly. All facts must be checked for accuracy and solid arguments jotted down with backing of earlier rulings.
4. He will not just focus on the problem at hand but examine the problem from all sides. This will create a complete picture highlighting all factors of relevance and the different ways one can approach the case.
5. He will use his foresight and anticipate moves by the opposition or opinions of the jury or judge and plan way ahead. Like a master chess player he will plan the case not by the day but by many hearings ahead.
6. He will not waste time beating around the bush or create verbose statements—many words strung together which look impressive but mean nothing. He will insist that the case and its arguments be clearly stated.
7. He will be self-disciplined, thorough, and self confident. Courteous at all times he will respect you as well as all the staff who work for him.
8. He is recommended by not just his friends and relatives but by other professionals of good standing and from his field.
9. He will not just present to you his victories but be happy to tell you why and how he lost certain cases.
10. He will lay the cards on the table and tell you clearly whether your case stands to win or loose. He will not claim that winning is guaranteed. He will be honest and upfront about his opinions and advice.
The bottom line is that the lawyer must be worthy of your trust. Use your inborn instincts and don’t go by the lawyer’s good looks or fancy car or office. After all it is competence in law and in court that is of essence to you.
Everyone worries about taxes and looks for ways and means of reducing the tax burden. When you have a small business of your own you must up date your knowledge of tax laws that pertain to “small businesses.” As a business owner you must understand clearly about accounting systems and tax planning. Sit down with your accountant and plan on ways of maintaining business expenses, filing receipts, planning on “tax saving” investments, and a strategy for running the business in the most beneficial way.
Did you know that:
1. According to law you can reduce your tax liability by hiring family members to carry out work in your business. Pay your children and spouse to perform assigned duties. This way you can shift from higher tax rates to lower ones.
2. Consider hiring independent contractors instead of employees. You will save on payroll taxes. However ensure that you meet the IRS’s criteria.
3. Think about “deferring income” postpone receiving money to January instead of December. This means that payments received will be up for “tax” calculations a year away. However ask your accountant’s advice as the benefits are dependant on profit and losses for the year and your corporate legal structure.
4. Take advantage of tax deductions allowed for charitable donations. Make donations in November or December instead of January so that you can include the donations for tax deductions in the current year.
5. Maximize your expenditure on equipment and office supplies. Buy in advance for a quarter and use the tax deductions allowed in the current fiscal year.
6. Include expenses of business related travel in the current year.
7. Pay all bills due before the end of the year. Payment to cell services, rent, insurance, and utilities related to the business can be included for accounting and applicable tax waivers.
8. Plan a retirement plan and make payments before the end of the year. This will reduce your income for the year and proportionately the tax due. Be sure to check on the limits. Plan a feasible and beneficial strategy with your accountant.
9. Be sure to deduct from your taxable income money paid to licensing fees, businesses taxes, and annual memberships to businesses related organizations. Be sure to deduct interest paid on borrowings for running the business and related fees. Insurance premiums paid to insure the business office and machinery are eligible for tax deductions. Make a list of your memberships and check which ones are eligible for tax deductions.
10. Check whether you have deducted management and administration expenses as well as money spent on maintenance and repairs of equipment.
Decide whether a cash accounting system or accrual one will benefit your business. The tax deductions are different depending on the system you use. When setting up your small business take the advice of a tax and accounting professional as to which accounting system would be most suitable.
Friday, January 30, 2009
Tuesday, January 27, 2009
8 Important Elements for Small Business Web Sites
Key visitors to your commercial pages include web robots that crawl the internet and catalog your content. Having proper HTML source code, plus the right combination of text and graphic presentation, is just one secret to success. Proper code may mean higher robot ratings, and the "look" is equally important. Once a new prospect finds your web site, you have 5 seconds to get them to stay.
As a small business web site owner, you may have asked "Why don't we get any hits?". Did you know web pages can load and appear correct with improper or deprecated HTML code? A browser may ignore your mistakes, and display what it thinks you meant, and it may look great. Web robots may not be as forgiving.
Following is a list of 8 basic elements for good search engine placement that need to be considered in your design and web site promotion. For details on code issues from the worldwide authority, visit the World Wide Web Consortium to view DOCTYPE and other quality standards.
1. DOCTYPE Statement
2. Page Title
3. Proper HTML Code
4. META Description
5. META Key Words
6. First Paragraph of the Home Page
7. An Extra Page of Just LINKS
8. Backlinks (Links to your pages)
These 8 key items are either missing or poorly designed in 85% of all web sites. Some search engines may only list the other 15% in their directories. In other words, as few as 15% of the 6 billion web pages online ever make it into some search engines. Even worse, there are mistakes that may result in your page being blacklisted, and the search engine web crawlers may never come back to see if it's corrected. This could explain why you "never get any hits".
Web sites can be simple and professional without using fancy software to create your pages. Veteran programmers hand code and many create the HTML in NotePad. Web authors who choose to use flash, frames, or the latest software may be losing a significant portion of new visitors (customers) because the visitor may lack the technology or newest version of browsers. If they are turned off and leave without giving your site a fair viewing, it could mean lost profits.
Most designers use prepackaged software to create web pages. If the software leaves out any of the key elements, the code is hidden, and you'll never know your site was not optimized for search engines. The designer may not know, or care, about these items as long as the page looks attractive. Note: Search engine algorithms vary by company, so some elements such as "an extra page of links" may not be as important today with some search robots. Backlinks refer to marketing your site and getting other web sites to link to yours.
Finally, business visitors want information. They do not visit your home page to be entertained. Most have a need (problem) and want a fast answer (solution), so designs should be created to minimize the use of music or video unless that's your core business. Anything that distracts from a positive first impression may violate my "5 Second Rule".
As a small business web site owner, you may have asked "Why don't we get any hits?". Did you know web pages can load and appear correct with improper or deprecated HTML code? A browser may ignore your mistakes, and display what it thinks you meant, and it may look great. Web robots may not be as forgiving.
Following is a list of 8 basic elements for good search engine placement that need to be considered in your design and web site promotion. For details on code issues from the worldwide authority, visit the World Wide Web Consortium to view DOCTYPE and other quality standards.
1. DOCTYPE Statement
2. Page Title
3. Proper HTML Code
4. META Description
5. META Key Words
6. First Paragraph of the Home Page
7. An Extra Page of Just LINKS
8. Backlinks (Links to your pages)
These 8 key items are either missing or poorly designed in 85% of all web sites. Some search engines may only list the other 15% in their directories. In other words, as few as 15% of the 6 billion web pages online ever make it into some search engines. Even worse, there are mistakes that may result in your page being blacklisted, and the search engine web crawlers may never come back to see if it's corrected. This could explain why you "never get any hits".
Web sites can be simple and professional without using fancy software to create your pages. Veteran programmers hand code and many create the HTML in NotePad. Web authors who choose to use flash, frames, or the latest software may be losing a significant portion of new visitors (customers) because the visitor may lack the technology or newest version of browsers. If they are turned off and leave without giving your site a fair viewing, it could mean lost profits.
Most designers use prepackaged software to create web pages. If the software leaves out any of the key elements, the code is hidden, and you'll never know your site was not optimized for search engines. The designer may not know, or care, about these items as long as the page looks attractive. Note: Search engine algorithms vary by company, so some elements such as "an extra page of links" may not be as important today with some search robots. Backlinks refer to marketing your site and getting other web sites to link to yours.
Finally, business visitors want information. They do not visit your home page to be entertained. Most have a need (problem) and want a fast answer (solution), so designs should be created to minimize the use of music or video unless that's your core business. Anything that distracts from a positive first impression may violate my "5 Second Rule".
Friday, January 23, 2009
8 BIG Small Business Mistakes
Here’s an interesting notion: Do you realize that there are mistakes you can make at various stages of your business’ growth that can be slowly killing it for months or even years if you don’t watch for them?
Well, these mistakes do exist and they are not just reserved for the rookie companies. Many working businesses, including those you might think are “successful” because they’ve been around for 10+ years, are often still making them… and are possibly losing a lot of money and/or wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service type companies, they really do fit the bill for almost any type of industry. I’ve done my best with the listings below to give examples to prove it.
Underestimating Project/Service Time- This is a big one and it pertains to service companies as well as companies that sell a product. This is a service company’s bread and butter. If you don’t estimate your time to perform each and every service in your repertoire, you will get burned and there is little you can do about it but bite the bullet and learn from it. The best way to estimate time is to do it once yourself or watch your best employee do the task and then throw in a little fudge factor on top of it. For product companies, time becomes an issue with logistics so be aware!
Not Knowing YOUR Company Numbers/Incorrectly Setting Prices- Notice I emphasized the word “your”. It’s a common mistake to use a competitor’s as your pricing gauge without actually knowing why they use those numbers. Think about the nightmare you will get yourself into if you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a bad pricing structure and is barely making money or even losing money?!?! What if your costs are more than theirs?!?! You can use competitor as a starting point but you can’t base your whole strategy on it.
Different industries have their own variables as far as costs go and you need to be aware of them for your project or product pricing. What you pay for a product you are going to sell is not the only cost to have in your head when you are pricing products. How much your labor and materials cost for a service is only a piece of an hourly rate. Employees cost more than just salary and not every employee is part of your labor cost. Every company has insurance to pay for. There are tons of overhead expenditures that need to be part of your price. Oh, by the way, the big one that many people forget about in their price is the quality factor. What you include as “standard services” or “standard product features” as well as job site etiquette or in store service or warranties all need to go into your pricing. I’ll get to more on why in the next segment.
Not Charging for All of Your Time & Costs- This seems like a stupid statement to some but I bet most business owners will admit that they have given away a little too much of the farm at times. Hey, there is nothing wrong with giving a little extra here and there to show you care. But either way, that’s not what I’m talking about here. What concerns me are those that put a lot of quality into their work or products or stores and do not cover the cost for it. As an example, say you run a service company and your competitors don’t do a certain standard service that you do. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront. Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it. These things cost you money and when your competitors don’t do them it costs them less money. Put out better service and then under price them, and your competition just has to wait a little bit for you to fall on your face so they can swoop back in.
As a business owner you need to believe that you are providing your clients worthwhile wares that deserve to be paid for. If you get the chance to explain why your prices are higher, then take that opportunity and do it. If they don’t like the fact that you include things that others charge extra for later or that you treat them better, then they are most likely completely price shoppers. You don’t want them as regular customers anyway. Trust me.
Not Getting Paid Fast Enough- That’s right, the old cash flow issue. As long as you are actually making enough money to pay the bills, this problem can be solved, prevented or at least made to be not as bad as it could be. Here’s the deal:
First off all, bill customers very promptly. It is very common for a small business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion (see the next segment for more). Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info to the billing people to be too busy to get it there or not have enough organization to give it to them the right way.
The second part to slowing down or stopping a regular cash flow crunch is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees. If there is any way not to pay employees any more than twice a month, you better do it. Contractors always have an issue with this. If you must pay weekly, then tell them before they are hired that they will be getting the first week held back, essentially buying you a week. It will help, I promise.
Part three involves credit. If your company can get a credit card, then get it. This allows for certain important things to be bought (that you can afford) that might come up during a cash flow crunch. Better yet, especially if you have no choice but to deal with 45+ day customer payments, do your best to get a company line of credit. This is a must if you plan on selling to the government or doing commercial service work. These clients often have 60 to 90 day wait periods.
Failure to Have Solid Systems and Procedures in Place- Too many procedures (known as “red tape”) is the reason why many people start their own business in the first place. Unfortunately, having no procedures and systems in place at all is not an alternative. Depending on the type of industry, business owners must come to a happy medium or chaos and the unknown will ensue. Some basic examples where procedures or systems are needed include billing, collections, payroll, hr (interviewing, hiring, vacations, benefits, job responsibilities, etc.), manufacturing, operating equipment, maintaining equipment, inventory, sales calls/visits and logistics to name a few.
Even a one person show needs to have some admin procedures in place. This will make it easier to hire temps and subcontractors and control what they are doing for you. Without at least a watered down version of a system or procedure to do everyday work, you will be to blame for causing many major headaches as your company grows. I can’t emphasize how important this is for when you bring on new employees. I’m sure you heard this before, but I am also a big proponent of having an employee handbook even for one employee. It’s amazing the trouble people can cause business owners just because they allow you to pay them.
Spending Advertising Money Just to Say You Advertise- I would almost rather see my clients not advertise then to spend without regard to tracking the results. There is no point in a marketing campaign if you do not put things in place that allow you to measure how well the plan is working. The other wasteful part of marketing that many people make the mistake of doing, is not tracking their previously successful campaigns. Why some people think that just because a $400 dollar a month ad worked once very well for one busy season, that it will automatically work every year after that is beyond me.
Spreading Yourself Too Thin- This is a classic mistake made by every entrepreneur. The key is to figure out when you are at that “wearing too many hats” point and start getting some help. The solution here is to know your strengths and to be able see when you are not performing the duties that demand these skills. If you are the best sales person on the company, you can’t get caught up in day-to-day operations. If you do, sales will slip and eventually you won’t have any operations to worry about. Think about this to help you figure out if you are spread too thin: Did you really go into business for yourself to work 80+ hours a week?
Not Getting Help Soon Enough- Set goals to know when to hire people to take over where you are light on knowledge. Not getting help or waiting too long can kill a company. Most people who start a business do it because they are good at the technical end or the sales end. If you know the best way to make a widget, then your strength is in production and that is where your time should be spent. Hire an outside company or consultant to take care of the sales and marketing and then hire inside when you can afford someone full time. Don’t be something to your company that you are not. It will only hold you back.
The three big issues people like to tackle themselves but usually are least knowledgeable about are legal issues, accounting/bookkeeping issues and daily operations issues. The odds are that these three things are your weakest link so if you don’t have a partner that has the background for these subjects, then be prepared to get help as soon as possible. It’s preferable that you do this before you start a business.
Although looking for these problems at any time is a good idea, the end of a year or season is an excellent business interval to make sure you are not making these errors. Take the time, or make the time, to fix these problems. If you don’t know how to reverse the problems, then get some help. If you really don’t have enough time to either figure out if you have these issues or know they are there and can’t break away long enough to do it right, then get some help.
Well, these mistakes do exist and they are not just reserved for the rookie companies. Many working businesses, including those you might think are “successful” because they’ve been around for 10+ years, are often still making them… and are possibly losing a lot of money and/or wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service type companies, they really do fit the bill for almost any type of industry. I’ve done my best with the listings below to give examples to prove it.
Underestimating Project/Service Time- This is a big one and it pertains to service companies as well as companies that sell a product. This is a service company’s bread and butter. If you don’t estimate your time to perform each and every service in your repertoire, you will get burned and there is little you can do about it but bite the bullet and learn from it. The best way to estimate time is to do it once yourself or watch your best employee do the task and then throw in a little fudge factor on top of it. For product companies, time becomes an issue with logistics so be aware!
Not Knowing YOUR Company Numbers/Incorrectly Setting Prices- Notice I emphasized the word “your”. It’s a common mistake to use a competitor’s as your pricing gauge without actually knowing why they use those numbers. Think about the nightmare you will get yourself into if you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a bad pricing structure and is barely making money or even losing money?!?! What if your costs are more than theirs?!?! You can use competitor as a starting point but you can’t base your whole strategy on it.
Different industries have their own variables as far as costs go and you need to be aware of them for your project or product pricing. What you pay for a product you are going to sell is not the only cost to have in your head when you are pricing products. How much your labor and materials cost for a service is only a piece of an hourly rate. Employees cost more than just salary and not every employee is part of your labor cost. Every company has insurance to pay for. There are tons of overhead expenditures that need to be part of your price. Oh, by the way, the big one that many people forget about in their price is the quality factor. What you include as “standard services” or “standard product features” as well as job site etiquette or in store service or warranties all need to go into your pricing. I’ll get to more on why in the next segment.
Not Charging for All of Your Time & Costs- This seems like a stupid statement to some but I bet most business owners will admit that they have given away a little too much of the farm at times. Hey, there is nothing wrong with giving a little extra here and there to show you care. But either way, that’s not what I’m talking about here. What concerns me are those that put a lot of quality into their work or products or stores and do not cover the cost for it. As an example, say you run a service company and your competitors don’t do a certain standard service that you do. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront. Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it. These things cost you money and when your competitors don’t do them it costs them less money. Put out better service and then under price them, and your competition just has to wait a little bit for you to fall on your face so they can swoop back in.
As a business owner you need to believe that you are providing your clients worthwhile wares that deserve to be paid for. If you get the chance to explain why your prices are higher, then take that opportunity and do it. If they don’t like the fact that you include things that others charge extra for later or that you treat them better, then they are most likely completely price shoppers. You don’t want them as regular customers anyway. Trust me.
Not Getting Paid Fast Enough- That’s right, the old cash flow issue. As long as you are actually making enough money to pay the bills, this problem can be solved, prevented or at least made to be not as bad as it could be. Here’s the deal:
First off all, bill customers very promptly. It is very common for a small business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion (see the next segment for more). Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info to the billing people to be too busy to get it there or not have enough organization to give it to them the right way.
The second part to slowing down or stopping a regular cash flow crunch is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees. If there is any way not to pay employees any more than twice a month, you better do it. Contractors always have an issue with this. If you must pay weekly, then tell them before they are hired that they will be getting the first week held back, essentially buying you a week. It will help, I promise.
Part three involves credit. If your company can get a credit card, then get it. This allows for certain important things to be bought (that you can afford) that might come up during a cash flow crunch. Better yet, especially if you have no choice but to deal with 45+ day customer payments, do your best to get a company line of credit. This is a must if you plan on selling to the government or doing commercial service work. These clients often have 60 to 90 day wait periods.
Failure to Have Solid Systems and Procedures in Place- Too many procedures (known as “red tape”) is the reason why many people start their own business in the first place. Unfortunately, having no procedures and systems in place at all is not an alternative. Depending on the type of industry, business owners must come to a happy medium or chaos and the unknown will ensue. Some basic examples where procedures or systems are needed include billing, collections, payroll, hr (interviewing, hiring, vacations, benefits, job responsibilities, etc.), manufacturing, operating equipment, maintaining equipment, inventory, sales calls/visits and logistics to name a few.
Even a one person show needs to have some admin procedures in place. This will make it easier to hire temps and subcontractors and control what they are doing for you. Without at least a watered down version of a system or procedure to do everyday work, you will be to blame for causing many major headaches as your company grows. I can’t emphasize how important this is for when you bring on new employees. I’m sure you heard this before, but I am also a big proponent of having an employee handbook even for one employee. It’s amazing the trouble people can cause business owners just because they allow you to pay them.
Spending Advertising Money Just to Say You Advertise- I would almost rather see my clients not advertise then to spend without regard to tracking the results. There is no point in a marketing campaign if you do not put things in place that allow you to measure how well the plan is working. The other wasteful part of marketing that many people make the mistake of doing, is not tracking their previously successful campaigns. Why some people think that just because a $400 dollar a month ad worked once very well for one busy season, that it will automatically work every year after that is beyond me.
Spreading Yourself Too Thin- This is a classic mistake made by every entrepreneur. The key is to figure out when you are at that “wearing too many hats” point and start getting some help. The solution here is to know your strengths and to be able see when you are not performing the duties that demand these skills. If you are the best sales person on the company, you can’t get caught up in day-to-day operations. If you do, sales will slip and eventually you won’t have any operations to worry about. Think about this to help you figure out if you are spread too thin: Did you really go into business for yourself to work 80+ hours a week?
Not Getting Help Soon Enough- Set goals to know when to hire people to take over where you are light on knowledge. Not getting help or waiting too long can kill a company. Most people who start a business do it because they are good at the technical end or the sales end. If you know the best way to make a widget, then your strength is in production and that is where your time should be spent. Hire an outside company or consultant to take care of the sales and marketing and then hire inside when you can afford someone full time. Don’t be something to your company that you are not. It will only hold you back.
The three big issues people like to tackle themselves but usually are least knowledgeable about are legal issues, accounting/bookkeeping issues and daily operations issues. The odds are that these three things are your weakest link so if you don’t have a partner that has the background for these subjects, then be prepared to get help as soon as possible. It’s preferable that you do this before you start a business.
Although looking for these problems at any time is a good idea, the end of a year or season is an excellent business interval to make sure you are not making these errors. Take the time, or make the time, to fix these problems. If you don’t know how to reverse the problems, then get some help. If you really don’t have enough time to either figure out if you have these issues or know they are there and can’t break away long enough to do it right, then get some help.
Sunday, January 18, 2009
7 Tips to Starting a Successful Small Business
Getting a small business off the ground is challenging to say the least. Here are some tips which will prepare the ground for running a successful small business.
Have Goals
This is where it all starts – the foundation for success. Know exactly where you are heading. What will the business ‘look’ like in the future? How will you know when your business is a success? When you wake up in the morning, do you know what actions you have to take to get you on the road to success?
Take Action
The difference between success and failure is down to the actions you take. The failures in life are the people who know what they have to do but never do it. The successful small business owners are people who take action on their ideas, ones who never say, “I wish I had done …”
Seek Feedback
There is a saying that feedback is the breakfast of champions. During the early days of your business you must continually seek feedback about all aspects of your business. What works? What doesn’t work? What needs changing slightly? Speak to customers, suppliers, your bank manager, your accountant - anyone who can provide you with a fresh perspective.
Find Out What Do You Don’t Know
You can’t expect to know everything about running a business. Undertake your own skills analysis and find out your areas for development. Once you know your knowledge gaps seek out courses, books and advice, which will get you on track.
Be Focused
Let no one distract you from achievement of your goals. At the start of every day get yourself into the frame of mind that you will only do tasks which will get you closer to your goal – nothing else matters.
Take Risks!
You will never achieve anything if you’re not prepared to jump off the cliff a few times! We’re not talking about risks which will put the business in jeopardy; just risks which are planned and thought out, yet at the same time test the edge!
Think Positive
Yes, the oldest cliché in the book, but totally true. See the positive in everything. If something has not gone right train yourself to ask, “What good has come out of this?” Understand that in every problem there is potential for good.
Have Goals
This is where it all starts – the foundation for success. Know exactly where you are heading. What will the business ‘look’ like in the future? How will you know when your business is a success? When you wake up in the morning, do you know what actions you have to take to get you on the road to success?
Take Action
The difference between success and failure is down to the actions you take. The failures in life are the people who know what they have to do but never do it. The successful small business owners are people who take action on their ideas, ones who never say, “I wish I had done …”
Seek Feedback
There is a saying that feedback is the breakfast of champions. During the early days of your business you must continually seek feedback about all aspects of your business. What works? What doesn’t work? What needs changing slightly? Speak to customers, suppliers, your bank manager, your accountant - anyone who can provide you with a fresh perspective.
Find Out What Do You Don’t Know
You can’t expect to know everything about running a business. Undertake your own skills analysis and find out your areas for development. Once you know your knowledge gaps seek out courses, books and advice, which will get you on track.
Be Focused
Let no one distract you from achievement of your goals. At the start of every day get yourself into the frame of mind that you will only do tasks which will get you closer to your goal – nothing else matters.
Take Risks!
You will never achieve anything if you’re not prepared to jump off the cliff a few times! We’re not talking about risks which will put the business in jeopardy; just risks which are planned and thought out, yet at the same time test the edge!
Think Positive
Yes, the oldest cliché in the book, but totally true. See the positive in everything. If something has not gone right train yourself to ask, “What good has come out of this?” Understand that in every problem there is potential for good.
Saturday, January 17, 2009
7 Key Tactics For The Small Business Owner
For most folks, owning your own business is a dream come true. The freedom of being your own boss and succeeding to the best of your ability are facts of life for the small business owner. Sure, there's more stress than what you probably imagined when you were creating your grand plans, but with a little strategy and planning you can overcome any tough spot you get in. There are 7 tactics developed by successful marketers that are sure to make your business as successful as theirs.
1. Create A One of a Kind Selling Point
If you want to stand out from the crowd, create a unique selling proposition that stresses the benefits the customers will receive from doing business with you. Will they get faster service? Go ahead and dramatize it, but keep the customer at the focus..."Get free overnight delivery!" Hey, it tells the customer...you get quick service and a discount on shipping. Two definite benefits in one statement.
Why should someone buy from you and not your competitor? I hate to deal a blow to your ego, but it really has nothing to do with you , your product, or your service. Yeah, its a little self-centered, but customers are attracted by offers that point out the things that benefit THEM.
Don't go out on a limb to create new products and services to get attention. Just, add a special benefit to the ones you already have... maybe it's quicker service. The most effective things to emphasize are benefits that your competition cannot or is not willing to give.
2. Use Testimonials
Hey, we all know that business owners think their product or services are the best thing going, but it's what the current customers think about it that really matters to your prospective customers. They're the ones who see things from their point of view... what they have to say about the business has an impact.
Testimonials play an important part in advertising - especially for small businesses. Yeah, big businesses with well-known names don't have to worry about it, but small companies can use testimonials as marketing tools to build credibility.
Think about it...how else can we gain credibility than by creating a group of satisfied customers and shouting what they have to say? Let's look at some ways we can make testimonials an effective part of our marketing campaigns.
3. Upsell
Upselling is one of the most successful marketing trends today. Everywhere you go, someone is trying to get you to buy more. From McDonalds with its supersize options to clothing stores that try to sell you shoes to match your outfit, everyone's jumping on the band wagon. Why? It works!
Your customers already know that you have great products and provide satisfactory service. They trust you to come through for them. Think about it... it's much easier to make sales to someone you already have a relationship with.
Use every opportunity to increase your sales volume within the customer audience you already have. Do you have a product that goes with the one they are purchasing? Offer it to them at the register. It's a proven and effective method for increasing sales. You may be shocked at the additional sales you can generate from those who are already buying from you.
4. Make Your Price Seem Smaller
Divide and conquer... The old war tactic works in marketing too! When the price seems too steep, break it down into "buyable" size bites. An $120 item is only 12 low monthly payments of $10. A $365 purchase would only cost $1 per day. Now that sounds affordable!
5. Paint The Benefits Pretty
Customers buy because they want to enjoy the benefits of the purchase. A lady might buy a dress because she wants to feel sexy, or a man will buy a book because he finds pleasure in reading. Emotions are the key element that drives purchases.
Use word pictures to stir up the emotions that will instigate the sale. Let them "feel" the benefits, and they'll be more apt to head for the cash register. Put them where you want them.
6. Create Attention Getting Headlines
Are you ready to capture your reader's attention with great copy? The headline is the place to start. How often do you scan the newspaper's headlines before you decide whether or not to read the article? Yeah, that's where we lose or gain the reader's interest, so it's a pretty important part of the advertisement.
A good headline should telegraph its message in twelve words or less. Double check those headlines. Do they make a promise of a positive benefit, or ask a provocative question? Don't settle for less than attention grabbing statements.
7. Provide An Offer They Can't Resist
Is your deal too good to pass up? If not, you need to improve it. Hey, I'm not talking about cutting prices even more...you've still got to make a profit. You can make the deal sweeter just by increasing the readers knowledge of the value of the product, or adding bonuses that are perceived as valuable, but cost you little.
Motivate buyers with expirations. Yeah, an open ended offer encourages procrastination...which leads ...yep, nowhere. When the customer knows he has until Saturday to purchase an item he'll pay more for on Sunday, he'll make it a priority to head for your shop.
1. Create A One of a Kind Selling Point
If you want to stand out from the crowd, create a unique selling proposition that stresses the benefits the customers will receive from doing business with you. Will they get faster service? Go ahead and dramatize it, but keep the customer at the focus..."Get free overnight delivery!" Hey, it tells the customer...you get quick service and a discount on shipping. Two definite benefits in one statement.
Why should someone buy from you and not your competitor? I hate to deal a blow to your ego, but it really has nothing to do with you , your product, or your service. Yeah, its a little self-centered, but customers are attracted by offers that point out the things that benefit THEM.
Don't go out on a limb to create new products and services to get attention. Just, add a special benefit to the ones you already have... maybe it's quicker service. The most effective things to emphasize are benefits that your competition cannot or is not willing to give.
2. Use Testimonials
Hey, we all know that business owners think their product or services are the best thing going, but it's what the current customers think about it that really matters to your prospective customers. They're the ones who see things from their point of view... what they have to say about the business has an impact.
Testimonials play an important part in advertising - especially for small businesses. Yeah, big businesses with well-known names don't have to worry about it, but small companies can use testimonials as marketing tools to build credibility.
Think about it...how else can we gain credibility than by creating a group of satisfied customers and shouting what they have to say? Let's look at some ways we can make testimonials an effective part of our marketing campaigns.
3. Upsell
Upselling is one of the most successful marketing trends today. Everywhere you go, someone is trying to get you to buy more. From McDonalds with its supersize options to clothing stores that try to sell you shoes to match your outfit, everyone's jumping on the band wagon. Why? It works!
Your customers already know that you have great products and provide satisfactory service. They trust you to come through for them. Think about it... it's much easier to make sales to someone you already have a relationship with.
Use every opportunity to increase your sales volume within the customer audience you already have. Do you have a product that goes with the one they are purchasing? Offer it to them at the register. It's a proven and effective method for increasing sales. You may be shocked at the additional sales you can generate from those who are already buying from you.
4. Make Your Price Seem Smaller
Divide and conquer... The old war tactic works in marketing too! When the price seems too steep, break it down into "buyable" size bites. An $120 item is only 12 low monthly payments of $10. A $365 purchase would only cost $1 per day. Now that sounds affordable!
5. Paint The Benefits Pretty
Customers buy because they want to enjoy the benefits of the purchase. A lady might buy a dress because she wants to feel sexy, or a man will buy a book because he finds pleasure in reading. Emotions are the key element that drives purchases.
Use word pictures to stir up the emotions that will instigate the sale. Let them "feel" the benefits, and they'll be more apt to head for the cash register. Put them where you want them.
6. Create Attention Getting Headlines
Are you ready to capture your reader's attention with great copy? The headline is the place to start. How often do you scan the newspaper's headlines before you decide whether or not to read the article? Yeah, that's where we lose or gain the reader's interest, so it's a pretty important part of the advertisement.
A good headline should telegraph its message in twelve words or less. Double check those headlines. Do they make a promise of a positive benefit, or ask a provocative question? Don't settle for less than attention grabbing statements.
7. Provide An Offer They Can't Resist
Is your deal too good to pass up? If not, you need to improve it. Hey, I'm not talking about cutting prices even more...you've still got to make a profit. You can make the deal sweeter just by increasing the readers knowledge of the value of the product, or adding bonuses that are perceived as valuable, but cost you little.
Motivate buyers with expirations. Yeah, an open ended offer encourages procrastination...which leads ...yep, nowhere. When the customer knows he has until Saturday to purchase an item he'll pay more for on Sunday, he'll make it a priority to head for your shop.
Friday, January 16, 2009
7 Critical Business Financing Mistakes
Avoiding the top 7 business financing mistakes is a key component in business survival.
If you start committing these business financing mistakes too often, you will greatly reduce any chance you have for longer term business success.
The key is to understand the causes and significance of each so that you're in a position to make better decisions.
>>> Business Financing Mistakes (1) - No Monthly Bookkeeping.
Regardless of the size of your business, inaccurate record keeping creates all sorts of issues relating to cash flow, planning, and business decision making.
While everything has a cost, bookkeeping services are dirt cheap compared to most other costs a business will incur.
And once a bookkeeping process gets established, the cost usually goes down or becomes more cost effective as there is no wasted effort in recording all the business activity.
By itself, this one mistake tends to lead to all the others in one way or another and should be avoided at all costs.
>>> Business Financing Mistakes (2) - No Projected Cash Flow.
No meaningful bookkeeping creates a lack of knowing where you've been. No projected cash flow creates a lack of knowing where you're going.
Without keeping score, businesses tend to stray further and further away from their targets and wait for a crisis that forces a change in monthly spending habits.
Even if you have a projected cash flow, it needs to be realistic.
A certain level of conservatism needs to be present, or it will become meaningless in very short order.
>>> Business Financing Mistakes (3) - Inadequate Working Capital
No amount of record keeping will help you if you don't have enough working capital to properly operate the business.
That's why its important to accurately create a cash flow forecast before you even start up, acquire, or expand a business.
Too often the working capital component is completely ignored with the primary focus going towards capital asset investments.
When this happens, the cash flow crunch is usually felt quickly as there is insufficient funds to properly manage through the normal sales cycle.
>>> Business Financing Mistakes (4) - Poor Payment Management.
Unless you have meaningful working capital, forecasting, and bookkeeping in place, you're likely going to have cash management problems.
The result is the need to stretch out and defer payments that have come due.
This can be the very edge of the slippery slope.
I mean, if you don't find out what's causing the cash flow problem in the first place, stretching out payments may only help you dig a deeper hole.
The primary targets are government remittances, trade payables, and credit card payments.
>>> Business Financing Mistakes (5) - Poor Credit Management
There can be severe credit consequences to deferring payments for both short periods of time and indefinite periods of time.
First, late payments of credit cards are probably the most common ways in which both businesses and individuals destroy their credit.
Second, NSF checks are also recorded through business credit reports and are another form of black mark.
Third, if you put off a payment too long, a creditor could file a judgement against you further damaging your credit.
Fourth, when you apply for future credit, being behind with government payments can result in an automatic turndown by many lenders.
It gets worse.
Each time you apply for credit, credit inquiries are listed on your credit report.
This can cause two additional problems.
First, multiple inquiries can reduce you overall credit rating or score.
Second, lenders tend to be less willing to grant credit to a business that has a multitude of inquiries on its credit report.
If you do get into situations where you're short cash for a finite period of time, make sure you proactively discuss the situation with your creditors and negotiate repayment arrangements that you can both live with and that won't jeopardize your credit.
>>> Business Financing Mistakes (6) - No Recorded Profitability
For startups, the most important thing you can do from a financing point of view is get profitable as fast as possible.
Most lenders must see at least one year of profitable financial statements before they will consider lending funds based on the strength of the business.
Before short term profitability is demonstrated, business financing is based primary on personal credit and net worth.
For existing businesses, historical results need to show profitability to acquire additional capital.
The measurement of this ability to repay is based on the net income recorded for the business by a third party accredited accountant.
In many cases, businesses work with their accountants to reduce business tax as much as possible but also destroy or restrict their ability to borrow in the process when the business net income is insufficient to service any additional debt.
>>> Business Financing Mistakes (7) - No Financing Strategy
A proper financing strategy creates 1) the financing required to support the present and future cash flows of the business, 2) the debt repayment schedule that the cash flow can service, and 3) the contingency funding necessary to address unplanned or unique business needs.
This sounds good in principle, but does not tend to be well practiced.
Why?
Because financing is largely an unplanned and after the fact event.
It seems once everything else is figured out, then a business will try to locate financing.
There are many reasons for this including: entrepreneurs are more marketing oriented, people believe financing is easy to secure when they need it, the short term impact of putting off financial issues are not as immediate as other things, and so on.
Regardless of the reason, the lack of a workable financing strategy is indeed a mistake.
However, a meaningful financing strategy is not likely to exist if one or more of the other 6 mistakes are present.
This reinforces the point that all mistakes listed are intertwined and when more than one is made, the effect of the negative result can become compounded.
If you start committing these business financing mistakes too often, you will greatly reduce any chance you have for longer term business success.
The key is to understand the causes and significance of each so that you're in a position to make better decisions.
>>> Business Financing Mistakes (1) - No Monthly Bookkeeping.
Regardless of the size of your business, inaccurate record keeping creates all sorts of issues relating to cash flow, planning, and business decision making.
While everything has a cost, bookkeeping services are dirt cheap compared to most other costs a business will incur.
And once a bookkeeping process gets established, the cost usually goes down or becomes more cost effective as there is no wasted effort in recording all the business activity.
By itself, this one mistake tends to lead to all the others in one way or another and should be avoided at all costs.
>>> Business Financing Mistakes (2) - No Projected Cash Flow.
No meaningful bookkeeping creates a lack of knowing where you've been. No projected cash flow creates a lack of knowing where you're going.
Without keeping score, businesses tend to stray further and further away from their targets and wait for a crisis that forces a change in monthly spending habits.
Even if you have a projected cash flow, it needs to be realistic.
A certain level of conservatism needs to be present, or it will become meaningless in very short order.
>>> Business Financing Mistakes (3) - Inadequate Working Capital
No amount of record keeping will help you if you don't have enough working capital to properly operate the business.
That's why its important to accurately create a cash flow forecast before you even start up, acquire, or expand a business.
Too often the working capital component is completely ignored with the primary focus going towards capital asset investments.
When this happens, the cash flow crunch is usually felt quickly as there is insufficient funds to properly manage through the normal sales cycle.
>>> Business Financing Mistakes (4) - Poor Payment Management.
Unless you have meaningful working capital, forecasting, and bookkeeping in place, you're likely going to have cash management problems.
The result is the need to stretch out and defer payments that have come due.
This can be the very edge of the slippery slope.
I mean, if you don't find out what's causing the cash flow problem in the first place, stretching out payments may only help you dig a deeper hole.
The primary targets are government remittances, trade payables, and credit card payments.
>>> Business Financing Mistakes (5) - Poor Credit Management
There can be severe credit consequences to deferring payments for both short periods of time and indefinite periods of time.
First, late payments of credit cards are probably the most common ways in which both businesses and individuals destroy their credit.
Second, NSF checks are also recorded through business credit reports and are another form of black mark.
Third, if you put off a payment too long, a creditor could file a judgement against you further damaging your credit.
Fourth, when you apply for future credit, being behind with government payments can result in an automatic turndown by many lenders.
It gets worse.
Each time you apply for credit, credit inquiries are listed on your credit report.
This can cause two additional problems.
First, multiple inquiries can reduce you overall credit rating or score.
Second, lenders tend to be less willing to grant credit to a business that has a multitude of inquiries on its credit report.
If you do get into situations where you're short cash for a finite period of time, make sure you proactively discuss the situation with your creditors and negotiate repayment arrangements that you can both live with and that won't jeopardize your credit.
>>> Business Financing Mistakes (6) - No Recorded Profitability
For startups, the most important thing you can do from a financing point of view is get profitable as fast as possible.
Most lenders must see at least one year of profitable financial statements before they will consider lending funds based on the strength of the business.
Before short term profitability is demonstrated, business financing is based primary on personal credit and net worth.
For existing businesses, historical results need to show profitability to acquire additional capital.
The measurement of this ability to repay is based on the net income recorded for the business by a third party accredited accountant.
In many cases, businesses work with their accountants to reduce business tax as much as possible but also destroy or restrict their ability to borrow in the process when the business net income is insufficient to service any additional debt.
>>> Business Financing Mistakes (7) - No Financing Strategy
A proper financing strategy creates 1) the financing required to support the present and future cash flows of the business, 2) the debt repayment schedule that the cash flow can service, and 3) the contingency funding necessary to address unplanned or unique business needs.
This sounds good in principle, but does not tend to be well practiced.
Why?
Because financing is largely an unplanned and after the fact event.
It seems once everything else is figured out, then a business will try to locate financing.
There are many reasons for this including: entrepreneurs are more marketing oriented, people believe financing is easy to secure when they need it, the short term impact of putting off financial issues are not as immediate as other things, and so on.
Regardless of the reason, the lack of a workable financing strategy is indeed a mistake.
However, a meaningful financing strategy is not likely to exist if one or more of the other 6 mistakes are present.
This reinforces the point that all mistakes listed are intertwined and when more than one is made, the effect of the negative result can become compounded.
Thursday, January 15, 2009
5 Simple Steps to Small Business Success on the Internet!
For years, the website design market used to fall into three separate entities for website design and development: (i) graphics and animation studios, specializing in custom graphic design and creative animations, (ii) website marketing/promotion firms, (iii) Web programming companies specializing in database-driven website development. Nowadays, however, you get to see a fusion of these three entities in several dynamic Web Development and Promotion companies operating from any part of the globe. These web design, development and web promotion firms are virtually allrounders that cater to a diverse range of clientele, include those coming up for creative web design, web databases CRM / ERP as well as for SEO (search engine optimization) needs.
Most small business firms all over the world heavily rely on the services of such web development firms as they usually cater to small business website design by providing web based marketing methods that small companies can afford due to small budgets. Depending on the effectiveness of such web-based marketing, clients often see incredible successful results from clicks to conversion. There are some case studies which show that utilizing their marketing equation; some sites have gone from 10 leads a month to 300 leads. However, to achieve this is easier said than done. Web marketing firms that create a full plan for their clients using both the strategic and tactical methods crafted by specialists/consultants in turn are able to give small or large businesses increased sales. After all, that is the reason one can zero down on in order to be in a business, right? To have more sales and offer value. Therefore, the objective behind any web development or website promotion project is to create a unique selling proposition through your website that can set you apart from your competition so your customers should only think of doing business with you, regardless of price.
Small business firms today look forward to the professional creative website design and strategic web development and web promotion companies for the simple reason that they want their site to have the look and usability of a Fortune 500 company site without having to spend huge bucks for it. Yes, it is definitely considered a plus if the website is designed as a tactical marketing tool that aims to engage and educate their clients in turn. And most of these businesses have a concern in their minds: can their web site provide a means to gather analytical data for them to offer better service for all?
Yes, definitely they can. However, for this, optimal, effective website design strategies need to be incorporated. In a word, small business clients should be enriched with at least some of these features in order to fetch more conversions:
* Cutting-edge small business website design, tailor-made to provide broad market exposure of the products and services to potential clients.
* Highly scalable digital website designs, aimed at boosting up the growth and realization of the full perspective of the small business houses.
* Small business website design strategies including full-featured e-commerce solutions, to help these businesses deploy cost-effective, powerful e-commerce stores.
* Customized search engine optimization services, based upon individual needs and goals.
However, there are umpteen so-called 'cheap, quick' solution-providers, and any small business firm must think twice before taking the plunge with them. Ideally, one should always trust a professional web development firm that gathers relevant information about their clients' business through hours of discussion, clear up ideas about the requirement, nature and goal of the clients' business. Based on these details, experienced, skilled web designers and developers carry out extensive research to find out the best small business website solution. On the other hand, creative, innovative content writers create specific and unique content for small business website requirements, thereby enhancing business prospects. Finally, website maintenance and search engine optimization techniques that comprise scientifically proven techniques available at a competitive price are sure to give your business a boost. Flash Presentation, Multimedia Presentation, Multi-lingual website development and E-Commerce integration solutions complement these customized website solutions for brightening the online and even the offline image of small business firms.
The Five Steps to Success:
To ensure success of your small business through a unique website presentation, it is important that you develop a five-step process for creating websites that meet your customer's goals. Whether it is a small business firm eager to generate leads, sell online, provide information about their services, connect their vendors to their company electronically, or start an entirely new kind of service, this five-step process not only takes them from concept to completion, but also is the trademark of any Internet development company. Consulting: Every website starts with an idea. Perhaps you've been thinking about developing a website, or redesigning your existing site. At the consulting stage, a professional website development firm would strive to clear all doubts about the clients' requirements. Consultation for this usually comes free in case of small to medium-sized businesses.
Website Design: After the initial consultation, the website development firm solidifies the clients' ideas by creating a blueprint for their site by employing something they call "Strategic Design".
Website Development: The website development project is then handled by a creator' hive, composed of specialists who handle their own respective pieces of the site development. Remember, for successful website development, it is necessary to be handled by a versatile team of expert graphic artists, content writers, programmers, database specialists and technical personnel. This ensures that a qualified professional handles each task of the given project.
Web Hosting: Since websites are an intricate interplay of graphics, text, programming and computer resources, building your site on a rock-solid web hosting foundation is critical to its marketing success.
Website Maintenance: Once the site is available to the public, it must be maintained with the help of ongoing updates and continued development to the site so that they don't give clients/visitors of the site a chance to complain about its quality and content.
Most small business firms all over the world heavily rely on the services of such web development firms as they usually cater to small business website design by providing web based marketing methods that small companies can afford due to small budgets. Depending on the effectiveness of such web-based marketing, clients often see incredible successful results from clicks to conversion. There are some case studies which show that utilizing their marketing equation; some sites have gone from 10 leads a month to 300 leads. However, to achieve this is easier said than done. Web marketing firms that create a full plan for their clients using both the strategic and tactical methods crafted by specialists/consultants in turn are able to give small or large businesses increased sales. After all, that is the reason one can zero down on in order to be in a business, right? To have more sales and offer value. Therefore, the objective behind any web development or website promotion project is to create a unique selling proposition through your website that can set you apart from your competition so your customers should only think of doing business with you, regardless of price.
Small business firms today look forward to the professional creative website design and strategic web development and web promotion companies for the simple reason that they want their site to have the look and usability of a Fortune 500 company site without having to spend huge bucks for it. Yes, it is definitely considered a plus if the website is designed as a tactical marketing tool that aims to engage and educate their clients in turn. And most of these businesses have a concern in their minds: can their web site provide a means to gather analytical data for them to offer better service for all?
Yes, definitely they can. However, for this, optimal, effective website design strategies need to be incorporated. In a word, small business clients should be enriched with at least some of these features in order to fetch more conversions:
* Cutting-edge small business website design, tailor-made to provide broad market exposure of the products and services to potential clients.
* Highly scalable digital website designs, aimed at boosting up the growth and realization of the full perspective of the small business houses.
* Small business website design strategies including full-featured e-commerce solutions, to help these businesses deploy cost-effective, powerful e-commerce stores.
* Customized search engine optimization services, based upon individual needs and goals.
However, there are umpteen so-called 'cheap, quick' solution-providers, and any small business firm must think twice before taking the plunge with them. Ideally, one should always trust a professional web development firm that gathers relevant information about their clients' business through hours of discussion, clear up ideas about the requirement, nature and goal of the clients' business. Based on these details, experienced, skilled web designers and developers carry out extensive research to find out the best small business website solution. On the other hand, creative, innovative content writers create specific and unique content for small business website requirements, thereby enhancing business prospects. Finally, website maintenance and search engine optimization techniques that comprise scientifically proven techniques available at a competitive price are sure to give your business a boost. Flash Presentation, Multimedia Presentation, Multi-lingual website development and E-Commerce integration solutions complement these customized website solutions for brightening the online and even the offline image of small business firms.
The Five Steps to Success:
To ensure success of your small business through a unique website presentation, it is important that you develop a five-step process for creating websites that meet your customer's goals. Whether it is a small business firm eager to generate leads, sell online, provide information about their services, connect their vendors to their company electronically, or start an entirely new kind of service, this five-step process not only takes them from concept to completion, but also is the trademark of any Internet development company. Consulting: Every website starts with an idea. Perhaps you've been thinking about developing a website, or redesigning your existing site. At the consulting stage, a professional website development firm would strive to clear all doubts about the clients' requirements. Consultation for this usually comes free in case of small to medium-sized businesses.
Website Design: After the initial consultation, the website development firm solidifies the clients' ideas by creating a blueprint for their site by employing something they call "Strategic Design".
Website Development: The website development project is then handled by a creator' hive, composed of specialists who handle their own respective pieces of the site development. Remember, for successful website development, it is necessary to be handled by a versatile team of expert graphic artists, content writers, programmers, database specialists and technical personnel. This ensures that a qualified professional handles each task of the given project.
Web Hosting: Since websites are an intricate interplay of graphics, text, programming and computer resources, building your site on a rock-solid web hosting foundation is critical to its marketing success.
Website Maintenance: Once the site is available to the public, it must be maintained with the help of ongoing updates and continued development to the site so that they don't give clients/visitors of the site a chance to complain about its quality and content.
Wednesday, January 14, 2009
5 Key Components Of A Small Business Acquisition Loan
Major Challenges To Securing A Business Acquisition Loan
Qualifying for a small business acquisition loan can be quite an ordeal to say the least.
If the business being sold is very profitable, the selling price will likely reflect a significant amount of goodwill which can be very difficult to finance.
If the business being sold is not making money, lenders can be difficult to find even if the underlying assets being acquired are worth substantially more than the purchase price.
Business acquisition loans, or change of control financing situations, can be extremely varied from case to case.
That being said, here are the major challenges you'll typically have to overcome to secure a small business acquisition loan.
>>> Financing Goodwill
The definition of goodwill is the sale price minus the resale or liquidation value of business assets after any debts owing on the assets are paid off. It represents the future profit the business is expected to generate beyond the current value of the assets.
Most lenders have no interest in financing goodwill.
This effectively increases the amount of the down payment required to complete the sale and/or the acquisition of some financing from the vendor in the form of a vendor loan.
Vendor support and Vendor loans are a very common elements in the sale of a small business.
If they are not initially present in the conditions of sale, you may want to ask the vendor if they would consider providing support and financing.
There are some excellent reasons why asking the question could be well worth your time.
In order to receive the maximum possible sale price, which likely involves some amount of goodwill, the vendor will agree to finance part of the sale by allowing the buyer to pay a portion of the sale price over a defined period of time within a structured payment schedule.
The vendor may also offer transition assistance for a period of time to make sure the transition period is seamless.
The combination of support and financing by the vendor creates a positive vested interest whereby it is in the vendor's best interest to help the buyer successfully transition all aspects of ownership and operations.
Failure to do so could result in the vendor not getting all the proceeds of sale in the future in the event the business were to suffer or fail under new ownership.
This is usually a very appealing aspect to potential lenders as the risk of loss due to transition is greatly reduced.
This speaks directly to the next financing challenge.
>>> Business Transition Risk
Will the new owner be able to run the business as well as the previous owner? Will the customers still do business with the new owner? Did the previous owner possess a specific skill set that will be difficult to replicate or replace? Will the key employees remain with the company after the sale?
A lender must be confident that the business can successfully continue at no worse than the current level of performance. There usually needs to be a buffer built into the financial projections for changeover lags that can occur.
At the same time, many buyers will purchase a business because they believe there is substantial growth available which they think they can take advantage of.
The key is convincing the lender of the growth potential and your ability to achieve superior results.
>>> Asset Sale Versus Share Sale
For tax purposes, many sellers want to sell the shares of their business.
However, by doing so, any outstanding and potential future liability related to the going concern business will fall at the feet of the buyer unless othewise indicated in the purchase and sale agreement.
Because potential business liability is a difficult thing to evaluate, there can be a higher perceived risk when considering a small business acquisition loan application related to a share purchase.
>>> Market Risk
Is the business in a growing, mature, or declining market segment? How does the business fit into the competitive dynamics of the market and will a change in control strengthen or weaken its competitive position?
A lender needs to be confident that the business can be successful for at least the period the business acquisition loan will be outstanding.
This is important for two reasons. First, a sustained cash flow will obviously allow a smoother process of repayment. Second, a strong going concern business has a higher probability of resale.
If an unforeseen event causes the owner to no longer be able to carry on the business, the lender will have confidence that the business can still generate enough profit from resale to retire the outstanding debt.
Localized markets are much easier for a lender or investor to assess than a business selling to a broader geographic reach. Area based lenders may also have some working knowledge of the particular business and how prominent it is in the local market.
>>> Personal Net Worth
Most business acquisition loans require the buyer to be able to invest at least a third of the total purchase price in cash with a remaining tangible net worth at least equal to the remaining value of the loan.
Statistics show that over leveraged companies are more prone to suffer financial duress and default on their business acquisition loan commitments.
The larger the amount of the business acquisition loan required, the more likely the probability of default.
Qualifying for a small business acquisition loan can be quite an ordeal to say the least.
If the business being sold is very profitable, the selling price will likely reflect a significant amount of goodwill which can be very difficult to finance.
If the business being sold is not making money, lenders can be difficult to find even if the underlying assets being acquired are worth substantially more than the purchase price.
Business acquisition loans, or change of control financing situations, can be extremely varied from case to case.
That being said, here are the major challenges you'll typically have to overcome to secure a small business acquisition loan.
>>> Financing Goodwill
The definition of goodwill is the sale price minus the resale or liquidation value of business assets after any debts owing on the assets are paid off. It represents the future profit the business is expected to generate beyond the current value of the assets.
Most lenders have no interest in financing goodwill.
This effectively increases the amount of the down payment required to complete the sale and/or the acquisition of some financing from the vendor in the form of a vendor loan.
Vendor support and Vendor loans are a very common elements in the sale of a small business.
If they are not initially present in the conditions of sale, you may want to ask the vendor if they would consider providing support and financing.
There are some excellent reasons why asking the question could be well worth your time.
In order to receive the maximum possible sale price, which likely involves some amount of goodwill, the vendor will agree to finance part of the sale by allowing the buyer to pay a portion of the sale price over a defined period of time within a structured payment schedule.
The vendor may also offer transition assistance for a period of time to make sure the transition period is seamless.
The combination of support and financing by the vendor creates a positive vested interest whereby it is in the vendor's best interest to help the buyer successfully transition all aspects of ownership and operations.
Failure to do so could result in the vendor not getting all the proceeds of sale in the future in the event the business were to suffer or fail under new ownership.
This is usually a very appealing aspect to potential lenders as the risk of loss due to transition is greatly reduced.
This speaks directly to the next financing challenge.
>>> Business Transition Risk
Will the new owner be able to run the business as well as the previous owner? Will the customers still do business with the new owner? Did the previous owner possess a specific skill set that will be difficult to replicate or replace? Will the key employees remain with the company after the sale?
A lender must be confident that the business can successfully continue at no worse than the current level of performance. There usually needs to be a buffer built into the financial projections for changeover lags that can occur.
At the same time, many buyers will purchase a business because they believe there is substantial growth available which they think they can take advantage of.
The key is convincing the lender of the growth potential and your ability to achieve superior results.
>>> Asset Sale Versus Share Sale
For tax purposes, many sellers want to sell the shares of their business.
However, by doing so, any outstanding and potential future liability related to the going concern business will fall at the feet of the buyer unless othewise indicated in the purchase and sale agreement.
Because potential business liability is a difficult thing to evaluate, there can be a higher perceived risk when considering a small business acquisition loan application related to a share purchase.
>>> Market Risk
Is the business in a growing, mature, or declining market segment? How does the business fit into the competitive dynamics of the market and will a change in control strengthen or weaken its competitive position?
A lender needs to be confident that the business can be successful for at least the period the business acquisition loan will be outstanding.
This is important for two reasons. First, a sustained cash flow will obviously allow a smoother process of repayment. Second, a strong going concern business has a higher probability of resale.
If an unforeseen event causes the owner to no longer be able to carry on the business, the lender will have confidence that the business can still generate enough profit from resale to retire the outstanding debt.
Localized markets are much easier for a lender or investor to assess than a business selling to a broader geographic reach. Area based lenders may also have some working knowledge of the particular business and how prominent it is in the local market.
>>> Personal Net Worth
Most business acquisition loans require the buyer to be able to invest at least a third of the total purchase price in cash with a remaining tangible net worth at least equal to the remaining value of the loan.
Statistics show that over leveraged companies are more prone to suffer financial duress and default on their business acquisition loan commitments.
The larger the amount of the business acquisition loan required, the more likely the probability of default.
Tuesday, January 13, 2009
Small Home-Based Businesses -- Five Simple Steps to Success
Did you know that, in Australia, 60% of small businesses fail in the first twelve months? For those of us who would like to start a small business -- maybe even work from home -- that’s a very discouraging statistic.
Does that mean that your business idea is doomed to failure? Far from it! There are steps you can take that greatly increase your chances of success. With a little time and some serious research you can hit the ground running. Let’s start from the beginning…
The bright idea
First, of course, you need to come up with an idea. Typically, business opportunities can be divided into four groups:
1. Offering an existing product/service in an existing market.
2. Introducing an existing product/service to a new market.
3. Offering a new product/service in an existing market
4. Introducing a new product/service to a new market.
At this stage of the game the only limit is your imagination. Inspiration can come from anywhere -- maybe you have a hobby that you’d like to turn into a full-time job; you may be on the receiving end of bad service one day and decide to try doing it better yourself; or you may have a talent that you’d like to capitalise on.
Once you’ve come across something that you’d like to do, it’s time to take a look at the market and see what’s on offer.
Passing the test
So you’ve had a great idea and you’re keen to roll with it; now it’s time to put it through its paces. For the purpose of the exercise, let’s say that you have a passion for healthy living, and that you want to distribute a range of lifestyle accessories that promote healthy living with a do-it-yourself approach.
Ask around: Is there a market for products that promote healthy living? What sorts of products are available? Who would you be competing with and what do your competitors offer? Do you have the necessary skills to run such a business and -- more to the point -- what would those skills be? Where would your business be located?
Once you’ve answered those questions you should have a fairly clear picture of what your business will look like.
You source some products and decide to do some further research into the range of lifestyle products offered by a company called Vitality 4 Life. Your own life experience plus some work you’ve done as a dietician has given you the necessary skill sets, and you think that you’ll be able to work from home, giving you more time for family. There is an existing market, but there’s room for expansion. Now it’s time to take a closer look.
To be or not to be?
It’s time to get down to the nuts and bolts. You don’t want to jump into something feet first and find out the hard way that the budget just doesn’t work.
To get started, sit down and work out if you need to hire staff, which means paying wages.
If you lease a premises you’ll need to be able to pay the rent, and your location will have to be suitable for your business and target market (which also means that you’ll have to think carefully about just what that target market is). You’ll also need to work out the likely demand for your product/service.
Ok… you’ve worked out that there is enough demand for good quality juicers, sprouters, water filters and other high end accessories to take a shot at a distributorship as a home-based business opportunity. Now you need to make some marketing decisions.
Look at me! Look at me!
Advertising can be costly so you’ll want to be sure that your advertising budget is spent wisely. That means more market research, this time one-on-one. Profile your customer groups so you can aim your marketing at the right group/s of people.
Draw up a questionnaire (a short questionnaire -- people run out patience if you ramble for too long) and hang around outside a few of the local gyms (for our particular example). Come up with a mixture of open questions (What do you think of……..?) and closed questions (Do you have a gym membership? Yes/No.); sliding scales can be useful too.
For our health accessories business, a good question might be ‘How did you hear about this gym? Radio, tv, newspaper, word of mouth etc…’ Such a question would then give you an indication of the types of media that your target group responds best to.
Choose a business name, print up some business cards, buy some stock and get ready to trade!
Measure it, manage it!
A teacher of mine made the point that, in business, if you can’t measure it you can’t manage it.
You need to be able to plan ahead, and to do that you need to know -- or to be able to accurately predict -- your total sales. The equation is simple: number of customers x average sale x frequency of visits per customer per year = total sales. Remember it, revise it often, measure your business and you’ll be able to manage it!
Keep an eye on your bottom line and, most importantly, always be aware of your cash flow -- the cold, hard cash that you have in the bank. Allow for invoice periods (14 days, 30 days etc) when you’re planning your budget.
The market place has a life of its own, and no one can prepare for every contingency. Put some thought into your idea; make sure that there’s a market for what you’re offering; research, research, research; promote your business effectively; always know what’s going on in your bank account and don’t forget about cash flow!
It’s not perfect but, if you follow these few simple steps, you’ll be miles ahead of many new small business ventures. If you’ve heard of a great home-based business opportunity, or have a product or service of your own to market, you’re off to a great start!
Does that mean that your business idea is doomed to failure? Far from it! There are steps you can take that greatly increase your chances of success. With a little time and some serious research you can hit the ground running. Let’s start from the beginning…
The bright idea
First, of course, you need to come up with an idea. Typically, business opportunities can be divided into four groups:
1. Offering an existing product/service in an existing market.
2. Introducing an existing product/service to a new market.
3. Offering a new product/service in an existing market
4. Introducing a new product/service to a new market.
At this stage of the game the only limit is your imagination. Inspiration can come from anywhere -- maybe you have a hobby that you’d like to turn into a full-time job; you may be on the receiving end of bad service one day and decide to try doing it better yourself; or you may have a talent that you’d like to capitalise on.
Once you’ve come across something that you’d like to do, it’s time to take a look at the market and see what’s on offer.
Passing the test
So you’ve had a great idea and you’re keen to roll with it; now it’s time to put it through its paces. For the purpose of the exercise, let’s say that you have a passion for healthy living, and that you want to distribute a range of lifestyle accessories that promote healthy living with a do-it-yourself approach.
Ask around: Is there a market for products that promote healthy living? What sorts of products are available? Who would you be competing with and what do your competitors offer? Do you have the necessary skills to run such a business and -- more to the point -- what would those skills be? Where would your business be located?
Once you’ve answered those questions you should have a fairly clear picture of what your business will look like.
You source some products and decide to do some further research into the range of lifestyle products offered by a company called Vitality 4 Life. Your own life experience plus some work you’ve done as a dietician has given you the necessary skill sets, and you think that you’ll be able to work from home, giving you more time for family. There is an existing market, but there’s room for expansion. Now it’s time to take a closer look.
To be or not to be?
It’s time to get down to the nuts and bolts. You don’t want to jump into something feet first and find out the hard way that the budget just doesn’t work.
To get started, sit down and work out if you need to hire staff, which means paying wages.
If you lease a premises you’ll need to be able to pay the rent, and your location will have to be suitable for your business and target market (which also means that you’ll have to think carefully about just what that target market is). You’ll also need to work out the likely demand for your product/service.
Ok… you’ve worked out that there is enough demand for good quality juicers, sprouters, water filters and other high end accessories to take a shot at a distributorship as a home-based business opportunity. Now you need to make some marketing decisions.
Look at me! Look at me!
Advertising can be costly so you’ll want to be sure that your advertising budget is spent wisely. That means more market research, this time one-on-one. Profile your customer groups so you can aim your marketing at the right group/s of people.
Draw up a questionnaire (a short questionnaire -- people run out patience if you ramble for too long) and hang around outside a few of the local gyms (for our particular example). Come up with a mixture of open questions (What do you think of……..?) and closed questions (Do you have a gym membership? Yes/No.); sliding scales can be useful too.
For our health accessories business, a good question might be ‘How did you hear about this gym? Radio, tv, newspaper, word of mouth etc…’ Such a question would then give you an indication of the types of media that your target group responds best to.
Choose a business name, print up some business cards, buy some stock and get ready to trade!
Measure it, manage it!
A teacher of mine made the point that, in business, if you can’t measure it you can’t manage it.
You need to be able to plan ahead, and to do that you need to know -- or to be able to accurately predict -- your total sales. The equation is simple: number of customers x average sale x frequency of visits per customer per year = total sales. Remember it, revise it often, measure your business and you’ll be able to manage it!
Keep an eye on your bottom line and, most importantly, always be aware of your cash flow -- the cold, hard cash that you have in the bank. Allow for invoice periods (14 days, 30 days etc) when you’re planning your budget.
The market place has a life of its own, and no one can prepare for every contingency. Put some thought into your idea; make sure that there’s a market for what you’re offering; research, research, research; promote your business effectively; always know what’s going on in your bank account and don’t forget about cash flow!
It’s not perfect but, if you follow these few simple steps, you’ll be miles ahead of many new small business ventures. If you’ve heard of a great home-based business opportunity, or have a product or service of your own to market, you’re off to a great start!
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