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Finding Alternative Funding Sources for Your Small Business – Q&A with Tom Gazaway

Finding Alternative Funding Sources for Your Small Business – Q&A with Tom Gazaway

by on June 2, 2011 in Cash Flow & Finance, featured, Q & A Interview, Q & A Interviews, SmallBizChat

small biz chat with melinda emersonTom Gazaway is the President of Hawkeye Management. Tom is a certified Business Finance Consultant. He was personally trained by the #1 credit expert in the United States, John Ulzheimer. Tom is an advocate for entrepreneurs and small business owners. His company, Hawkeye Management, provides loans & lines of credit to help business owners start, build, and grow their businesses more effectively through having access to loans and lines of credit.

Smallbizlady: What would you say are the biggest challenges small businesses face today with credit & financing?

Tom Gazaway:

1 – Knowing their options

2 – Credit Challenges

3 – Borrowing the RIGHT way

4 – Choosing the correct lender(s)

Smallbizlady:  Please explain the 2 ways you can raise capital for a business?

Tom Gazaway: Yes.  You can only raise capital through debt or equity.  Explain each briefly.

Smallbizlady: Credit is still really tight. What are the lending solutions for small business owners in today’s economy?

Tom Gazaway: At this point, there’s nothing new about credit being tight.  Loan options for small business owners are primarily a function of credit, collateral, and the revenue and profit of the business.  Of course, it does eliminate a lot of people if you need lots of revenue, good profit, valuable collateral, and great credit so this is a big reason why banks deny approx. 90% (or more) of the applications they receive from small business owners.

If you’re part of the 90% that won’t get approved by the bank then you’ll want to find someone who works with small business owners on non-bank financing solutions.

Smallbizlady: In my book, BYOB stands for Be Your Own Bank, but give me your opinion, Can a start-up get a loan?

Tom Gazaway: We do financing for start-ups all the time but that doesn’t mean it’s easy.  HELOC’s used to be the most popular form of start-up financing and now we’ve seen that dramatically shift to credit cards.  According to the Meredith Whitney Advisory Group 82% of small business owners use credit cards.  The problem is that most people end up using those credit cards the wrong way and they miss out on several benefits.  Keep in mind that 30% of our FICO scores are determined by the balances on our personal credit cards so if you use your credit cards the wrong way like most people do then you’ll hurt your credit scores, miss out on tax benefits, increase your risk of losing your credit lines, and pay too much in interest.

Smallbizlady: How can a small business obtain an unsecured loan?

Tom Gazaway: Your best bet for unsecured money is either through credit cards or a peer to peer loan.  Some banks offer unsecured personal loans but the one’s that are approved (less than 10%) are usually for less than $10,000 so they are pretty small.

Smallbizlady: What credentials should a small business owner have in place to qualify for loan?

Tom Gazaway: It does depend on the kind of loan they are looking for but it does go back to understanding your lending options and it’s normally pretty important to either have good credit or to work on making it better.  Credit is such a foundational component of most small business lending solutions that I can’t emphasize its importance enough.

Smallbizlady: What is a conventional business loan vs. a line of credit and how should they be used?

Tom Gazaway: A loan is a fixed installment loan that you can only use once and a line of credit is something you can use over and over again.  Loans are generally for long-term purposes of 2-5 years and lines of credit are traditionally best for short terms purposes (30 days to 12-18 months).

Smallbizlady: Your niche is getting loans and lines of credit for businesses without collateral and – many times – without financials? How is this done?

Tom Gazaway: For us we’ve worked with hundreds of small business owners and we’ve done thousands of applications with all the top banks across the country so when you do this you learn what’s best, what works and what doesn’t, and you learn to match people with the lenders that are best for them.  We have found some good ways to get people between $25k – 100k with good terms and without needing collateral or financials.

Smallbizlady: There’s lots of scams out there so how can small business owners find a trustworthy vendor to help get them secure financing?

Tom Gazaway: First of all, you should check out any companies thoroughly before dealing with them.  Check out their record with the Better Business Bureau and also, be careful if they charge up-front fees.

Smallbizlady: I’ve heard of programs where you can buy a shelf corporation or build your business credit separate from your personal credit and you can obtain loans and lines of credit without any personal guarantees…is that real?

Tom Gazaway: No.  We have never sold a Shelf Corp and we’re intimately familiar with the strategies involved in building business credit.  Although I would love to be proven wrong, it’s just not a reality to think that you can have or get a “cash line of credit” as a small business owner without a personal credit check and without personally guaranteeing the loan.  The exception to this are the vendor tradelines…explain.

Smallbizlady: What are the biggest challenges you face in dealing with people who are looking for financing?

Tom Gazaway: It’s kind of tough to answer because we get so many applications from so many good people all around the country.  There’s the obvious answer of some people not having good credit but for the 75% of our Pre-Quals that we can work with I would say that the answer has to do with what I call the “trickle-down effect”.  Let me explain.  We all know that we’re in a tough time with the economy.  We also know that the credit and lending markets are right at the heart of the challenges we’re facing.  Lending has not shut down but it has seriously slowed down compared to a few years ago.  We are offering a pretty nichey solution where people can get between $25-100k in loans or lines of credit and we can do it without collateral and without financials.  There are sometimes 2 extremes that we face with this.  One, is that some people who realize how tough the credit markets are simply don’t believe we can even do it.  We simply tell them that we can, we do it all the time, and remind them that we don’t charge any up-front fees so if they only have to pay our fees after they get their approvals then what is there to lose?  Then the other extreme are people who sort of long for the “good-ole days” and they think that it should be easy to get the money since they have such good credit.  I remind these people that the pendulum has swung from one side to the other side and that until we get the pendulum somewhere in the middle that we can only pursue the options that we have as of today.  Let’s not be-labor the point and do what we can in todays economy, move forward, and position ourselves even stronger for the future when we hope the lending markets will open back up a bit.

If you found this interview helpful, join us on Wednesdays 8-9pm ET follow @SmallBizChat on Twitter.  Here’s how to participate in #Smallbizchat http://bit.ly/S797e

For more tips on how start or grow your small business subscribe to Melinda Emerson’s blog http://www.succeedasyourownboss.com.

Melinda F. Emerson, SmallBizLady, is one of America’s leading small business experts. She is an author, speaker and small business coach whose areas of expertise include small business start-up, business development and social media marketing. As CEO of MFE Consulting LLC, Melinda develops audio, video and written content to fulfill her mission to End Small Business Failure.  She publishes a resource blog, www.succeedasyourownboss.com and hosts a weekly talk show on Twitter called #Smallbizchat for emerging entrepreneurs.  Forbes Magazine named Melinda Emerson one of the Top 20 Women for Entrepreneurs to follow on Twitter. Melinda has been featured in the New York Times, Wall Street Journal, The Washington Post, Fortune and Black Enterprise. She’s the author of the bestselling book “Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works.” She writes a column for www.secondact.com, and is an instructor for the Black Enterprise Small Business University.

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Dasanj Aberdeen

Bootstrapping Your Business From the Ground Up!

by on May 3, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

There is no doubt that starting a business is exciting!  Whether it is something that you’ve dreamed about for years or life led you in that direction, it is undeniably gratifying to know that you are building something from the ground up.  It is exhilarating, fulfilling, time-consuming and let’s not forget costly.  Yes, we can’t forget the numbers.  Even if it is something you absolutely love doing, as long as you plan to approach it as a business, it will come down to the bottom line.

So how are you going to manage your money?

There are many sources of funding out there; and it is best to weigh the options, develop a strategy and determine what will work best for your business.  You can get grants or business loans and even funding from angel investors or venture capitalists.  And of course, there is the option of reaching into your own pocket and funding your venture yourself.

Let’s focus on the latter, often called bootstrapping.  Bootstrapping is essentially taking a self-sustaining approach and maximizing available resources without having to reach out externally.  So with this option, you’re getting your business off the ground with your own capital and reinvesting your profits into your business as it grows.

Of all, this is probably the most gratifying approach because it taps into every business owner’s desire to not just survive, but to thrive.  It pushes you to make every dollar count and to also think about your return on investment.  How are you going to sustain and generate new business?  How can you turn your $100 into $1000?  How can you cut costs so that you breakeven? When the going gets tough and you are personally vested, you will find a way!

Putting all accounting jargon aside, a business exists for the purposes of generating profit and you generate profit by maximizing your revenue and limiting your expenses.  Three things are essential if you are bootstrapping – generating cash flow, saving, and being a penny-pincher when it comes to expenses.

Here are some ways you can maximize your bootstrapping efforts:

Big picture thinking. Before you step forward, always step back and think.  In business, you want to think about the details, which are important, but you also want to think about the “big picture.”  Your business is a unit.  Your expenses aren’t mutually exclusive from your revenue streams so think about the effect that aspects of your business have on others.  In fact, you may need to spend money to make money.    So force yourself to think about your business as a cohesive unit at all times.

Get creative. What can you do yourself that you can avoid spending money on?  Marketing and advertising are two key areas where you can cut down your expenses.  These days, you don’t need an ad in the newspaper or a billboard to get the word out about your budding business. You can create a Facebook Page and get a Twitter account in a matter of minutes; and they are both free!  Certainly these are in-line with your cost-cutting initiatives.  An added bonus of online tools is that they help you expand your business’ reach beyond your local community.  So what can you roll up your sleeves and do yourself? Maybe create your own business cards using Microsoft Word or PowerPoint.  Maybe using a blog to connect with your customers instead of snail mail.

Differentiate your product or service.  Taking the time to focus on your work product and your customers will go a long way.  The truth is, maintaining a repeat customer is a lot cheaper than finding a new customer.  Not only does finding a new customer involve money, but it also involves your time.    Repeat customers will not only be your largest customer-base over time, but they will also bring you new customers via word of mouth at no cost to you.  Yes, this means free publicity.  This too is in-line with your cost-cutting initiatives.  So make that extra step with each of your customers.  Go the extra mile in giving them a personal experience and value.  And be sure to follow up, because the sale doesn’t end with the actual transaction.  Find out how they like your product and ask for their feedback.   If there are ways that you can improve, they will know best.

Barter. Be keen to your strengths and be honest about your weaknesses.  You can’t physically do it all.  So when another business is also looking to keep their expenses low, create opportunities to work together.  Maybe bookkeeping is their expertise and they’ll be willing to help you with that in return for your service.  Keep track of the people in your network and make a list of the areas in which they excel.  And if you’re unsure of what you have to offer, ask!  There is no exchange in money but quality service will be exchanged, resulting in a win for everyone.

Visualize the numbers.  At the end of the day, you will need to look at the numbers.  You have to keep track, and you need to see what your money is doing.  Cash flow management is so essential when you are bootstrapping so if this isn’t your expertise, leverage tools that make it easier for you.  These days, you can track revenue and expenses with your phone or online without having to be in the details yourself.  Whether you’re hands on with this or not, make sure you’re armed with enough knowledge that you can accurately assess your financial situation.  Evaluate your results and be creative about incorporating additional cost-cutting measures.

 

Dasanj AberdeenDasanj Aberdeen is an entrepreneur who embodies the combination of left-brain logic and right-brain imagination as a businesswoman and artist. She founded TheAfter5Edge.com as a platform for encouraging others to optimize their potential by discovering and leveraging their strengths to obtain their competitive edge.  She is a graduate of the Wharton School of the University of Pennsylvania.  Follow her on Twitter at: @TheAfter5Edge.

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What Small Business Owners Need to Know About Attracting Funding

What Small Business Owners Need to Know About Attracting Funding

by on April 26, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

What Small Business Owners Need to Know About Attracting Funding“Where am I going to get money?” is a common question that small business owners have and it’s a real concern.  If you are not in a position to be your own bank, you’ll need to find another source.  When you are ready to start pitching banks or investors you might want to keep a few things in mind.

Here are 7 tips on attracting funding to your small business:

  1. Dare to be different – Starting out, it’s vital to choose to operate a business where you already know something about the industry, or you have experience having worked in the field.  Nobody wants to invest in a business where you’re reinventing the wheel, so use the knowledge to innovate something different in your field before you forge ahead.
  2. Bootstrap like there’s no tomorrow – With no debt and no investors, you’re free to take your company in whatever direction you see fit.  Rule #1 for the small business owner should be to self-fund for as long as is humanly possible – then look to external sources for funding.
  3. Be more attractive – The #1 most attractive trait? It’s not being a blonde or driving a Maserati – it is being profitable! If you’re not there yet, have a clear, well-thought-out plan in place that shows your company’s path to profitability.  This will enable you to at least negotiate some of the terms of third party investments.
  4. Show your growth – For most businesses, funding in the early stages of a company’s launch is incredibly difficult.  As the business owner, your #1 priority should be growing your business, in terms of customers and infrastructure.  The best way to do this is to focus all of your energies on your core function and outsource what you can – the cloud offers ample opportunity to save time, effort, and money.  Even early stage companies that show solid growth will be attractive to investors.
  5. The impetus behind increments – The first step is to decide how much money you need.  And no, “a lot” doesn’t count!  When you’re talking to potential to investors, they’re going to ask you the size of the increments you’ll be offering (i.e. $1 million raised in $100,000 increments).  Pick the largest increment size you think you can get investors to match.  You can always split and quarter your increments, but some investors will take “one” no matter the size, and the fewer investors you have, the more control you’ll have over your own business.
  6. VCs can be costly – My best advice is to avoid VC (Venture Capital) funding in your company’s early stages. When there is little you can offer them in terms of value, many VCs will “offer” to take a controlling stake in your business in exchange for the funds you seek.  If you take them up on their offer, you will likely end up with a group of “bosses” that tell you what to do with your business to ensure a quick return on their investment.  Once you’ve built a team and an infrastructure, and you’re profitable – that is the right time to go after VC funding.
  7. Consider other options – Many times there are alternatives to VC funding including local angel groups, private investors and – surprise! – friends and family.  In fact, the easiest money to raise is from friends and family – friends will follow other friends and, if you’re willing to let your family invest in your business, most will consider the investment sound.  Try to evaluate what your venture realistically needs to succeed and first look for funding and strategic support close around you – you may be surprised at the interest and advise you’ll find!

 

Bill Grodnik is a CEO of Davinci Virtual. www.davincivirtual.com As CEO of Davinci Virtual and Davinci Meeting Rooms, Bill Grodnik is responsible for overseeing the growth and marketing strategy of both companies.  Bill also earned a B.S. in Business from Arizona State University.

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Rabbi Issamar Ginzberg

How to Use the Four Types of Income to Your Advantage

by on April 19, 2011 in Cash Flow & Finance, Guest Articles, Your Small Business

How to Use the Four Types of Income to Your Advantage“The poor man’s budget is full of schemes”. – Proverb

“The definition of insanity is doing the same thing over and over and expecting different results”. – Albert Einstein

 

How are your budgeting strategies doing?

As a small business owner, it can be far too easy to get stuck in a bad budget rut. We set lines and parameters; we stick to them; and, after a while, we get so engrossed in our new budding business that we forget to check up on our budgeting health once in a while.

 

Let’s talk about the four kinds of income:

1.   Work income: You work in the pizza store, and that’s work income – money you’re paid for the hours worked.

2. Transactional income: When I come into the pizza store and buy a piece of pizza, I give you money and you give me pizza.  The deal works for both of us.  I may come back; I may not.  The transaction is finished and a one-time deal.

3. Renewal income. This income renews itself; one real-life example may be a magazine that you continue receiving, renewing every year when the notice comes. This is much better than the other forms of income because you don’t have to keep looking for new people. The same people come again and again–repeat business.  Most people will continue getting the same magazine they like.

4. “Till forbid” income.  Every single month, money is charged to your credit card or deducted from your bank account–until you say stop, whether it’s a membership site online, or any other form.  For example, business magazines automatically charge your card at the current rate.  GoDaddy, a popular company for registering domain names, provides this service for the small amount of $7.49.  Unless you choose otherwise, the domain name will automatically get renewed every year.  When they do it automatically, as opposed to giving you a notice that your domain is going to expire, you will be charged $7.50 (or more, depending on the current renewal rate).  That may not sound like much unless you have 50 or 100 domains, or if you just don’t like wasting money you realize they’re really getting you.  All subsequent years, your rate will be billed at the non-discounted rate which is currently of $11.99.  After the first year at a special rate, the automatic renewal is at full base price.  Another example: NEBS is a company that sells blank checks and stuff like that.  When you try to order from them the first time, you get what’s called a mail code, which gives you 50% off the price.  You’re getting a steal of a deal.  You get 1000 envelopes for pennies.  However, when you reorder, there is no mail code.

GoDaddy and other online registrars work the same way.  They are not exactly giving you the perceived “steal of a deal”; their real money is made on the automatic renewal at a coupon-free, full price.  This also works well because by artificially raising the prices, you think of the “true retail price” as being discounted and you feel so slick about having found a coupon code online- while, in all honestly, you are actually paying the “true retail” price.

In business, you really want to try to get one of these forms of income.  Work income, once you stop working, you don’t get this anymore.  Transaction income, if you’re closed for the day, you don’t get any more income.  And out of the two remaining incomes, the “Till forbid” income is the much better income than renewable.  You can automatically charge your customer’s credit card every month until they cry, “Stop!” – and the potential for profit triple, because many people may forget to cancel.

What’s my bottom line? Funnel your income into the most profitable type possible.  If you can increase the amount of repeat income, you can increase the value of your business tremendously.

 

Rabbi Issamar GinzbergRabbi Issamar Ginzberg is often called “the marketer for marketers”, a strategy and marketing advisor, ideas generator and action planner, experienced mentor and friend consulting to independent professionals and businesses large and small worldwide.  For more info visit: www.issamar.com or reach him on Twitter at @RabbiIssamar . Find secrets like these and more at his blog: www.issamar.com/strategy

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Where to Find the Money to Start Your Small Business

Where to Find the Money to Start Your Small Business

by on April 18, 2011 in Become Your Own Boss Tips, Before You Start, Cash Flow & Finance, Your Small Business

Where to Find the Money to Start Your Small BusinessOne of the most common questions that I get as SmallBizLady is about start-up financing. ”Do I know where people can get a grant to start their small business?”. Now Hear This: BYOB doesn’t just stand for Become Your Own Boss! BYOB also stands for Be Your Own Bank! There are NO grants! When you are starting out in business you must come up with your own money to invest into your brilliant idea. You also need to have resources to maintain your household while you are building your business.  You are your business’s credit and debt. Now there are micro-loan programs when you may be able to borrow up to $25,000, but you better have a great business plan to get it.

If you are ready to start your business, you must develop a plan for yourself to save more money and become debt free. Now, I am not talking about paying off your mortgage, but I do mean everything else.  I am talking zero debt—meaning no credit cards, no car payments. Basic living expenses only. Eliminating your debt will allow you to always make decisions that are in the best interest of your business. You also need to establish zero debt to free up your credit capacity. When I realized that I wanted to leave my job to start my first business, I took out a home equity loan (which you need to do while you are still working and can prove income) and paid off every bill I had, even my car.  I used home equity because you can write off the interest paid against your income taxes.

Getting your house in order financially will be one of the first milestones on the road to starting your own business.

 

To find the money to start your business, take these steps:

  1. Develop a plan to eliminate all debt. Make a list of all debt, the balance owed and the interest rate. It is best to start with the credit card with the lowest balance, while you continue to pay the minimum fees on the others cards to keep them current. By starting with the card with the lowest balance you will boost your confidence about your personal finances. Next, should be the card with the highest interest rate. Keep working your way down the list.
  2. Make of list of what you need at the store. To avoid impulse buying, take a list with you to the all stores and do not deviate from it!  Be careful not to go grocery shopping when you are hungry. It is very hard to stick to your list that way.
  3. Keep driving your car. Drive you car until it stops running. As a new business owner, you will no longer be able to afford to upgrade your vehicle every two years. Buy a reliable car and take care of it, so you can ride without a car payment as long as you can. (I still do this! My car is more than five years old).
  4. Cut back on trips to Starbucks, Dunkin’ Donuts, and cut your cable bill. The money you spend each month on unnecessary extras can really add up. Treat yourself once in a while to a pay per view, but the pay channels need to go. You’ll be shocked how the money you save will add up.
  5. Check out the library. You can borrow books, magazines, and the latest DVDs from the library. You can also make requests and they will order things for you. If you’re a serious book junkie like me, find a good used bookstore or buy used books on Amazon.com. The books will still be new to you.
  6. Drink at home. Stop drinking alcohol in bars and restaurants. If it’s beer, wine, or mixed drinks that you like, they are much cheaper when you pour them yourself. Pick up a six-pack or a few bottles invite over some friends and hang out at your home.

You will start your business if you develop the ability to control your spending and cut costs. Follow this advice. I promise you will find money you never realized that you had.  You cannot kick your addiction to your paycheck all at once. It will be a gradual step-by-step process, but you can do it!

Do you have any other cost saving suggestions for start-up entrepreneurs?

 

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure.  As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine recently named her one of the Top 20 Women for Entrepreneurs to Follow on Twitter. She hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for emerging entrepreneurs, and publishes a resource blog at: www.succeedasyourownboss.com. Melinda is also the author of the national bestseller Become Your Own Boss in 12 months: A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

 

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Ask @SmallBizLady: How to Develop an Effective Sales Strategy

Ask @SmallBizLady: How to Develop an Effective Sales Strategy

by on April 8, 2011 in Ask Smallbizlady, Cash Flow & Finance, Grow Your Business

Every Friday, I answer your small business questions in a video blog segment called Ask Small Biz Lady.

This week, we are taking on the question: How to develop an effective sales strategy for your small business?

Here’s the answer:

  • Know your target customer!
  • Determine your 30-day sales goal.
  • Determine your weekly sales goal.
  • Determine your sales activity action plan to generate your monthly and weekly sales goals.
  • This will also help your figure out your monthly marketing budget.

If you have a question for Melinda Emerson, Small Biz Lady, leave a comment on this blog using the contact us page or send me a note on Twitter @SmallBizLady, on Facebook at www.facebook.com/smallbizlady or you can hit me up on LinkedIn: www.linkedin.com/in/melindaemerson

I’m always here as a resource.

P.S. Want an “I [heart] #SmallBizChat t-shirt? It’s available! for $20.00 plus s/h sizes M-L-XL-2X



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Small Business Taxes Made Easy: How to increase your deductions, reduce what you owe, and boost your profits (2nd Edition) by Eva Rosenberg @TaxMama

Now Read This: Small Business Taxes Made Easy

by on April 6, 2011 in Cash Flow & Finance, My Recommendations, Your Small Business

Small Business Taxes Made Easy: How to increase your deductions, reduce what you owe, and boost your profits (2nd Edition) by Eva Rosenberg I like this book Small Business Taxes Made Easy: How to Increase Your Deductions, Reduce What You Owe, and Boost Your Profits by Eva Rosenberg (@TaxMama).

It is great no-nonsense tax-advice! Eva is passionate about helping small business owners pay the least business taxes legally possible, but she also provides information (however tough it may be to read) on how to make your business more profitable. This book is full of effective business tax strategies that are good at tax time and throughout the entire year as you are running your small business.  I conducted an interview with her to ask her more information about her book. Check out her other tax resources at www.taxmama.com

SmallBizlady: What are the tax characteristics of successful business owners?

TaxMama®: They take the time to do three primary things for their business.

  • Foundation: They take the steps outlined in Chapter 1 of Small Business Taxes Made Easy to get the proper licenses, file with the proper government agencies, get the minimum requisite insurance coverage, and find the best advisors, vendors and resources for their business.
  • Prosperity: Successful business owners have business plans. They look at the big picture relative to their business goals, tying them in to their personal and family goals. Not only is this essential for building a good life, it ensures the business becomes ever-pro profitable, and protects them in the event of tax audits.
  • Tax Planning: They meet with their tax advisors, and perhaps their advisory team, at least twice a year to lay out a tax plan and to rebalance it as the year’s profits or losses emerge.

o   This avoids the complaint one talk show host got from a local CPA. His client complained that his CPA wasn’t letting him take the medical and health care insurance deductions that TaxMama® said his business should have.
o   Why couldn’t he use those deductions? Simple. He had never taken the time to call his CPA to do the planning to establish the written plan his business needed in order to claim those deductions. Continue Reading →

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Give Your Business Finances a Fighting Chance

by on February 22, 2011 in Cash Flow & Finance, Guest Articles

Give Your Business Finances a Fighting Chance, by Morgan Leu Parkhurst

Whether you have owned your business for years or plan to open your doors for the first time next week, there are a few things you can do to save money.  The Joneses of the business world will have you believe that if a business looks wealthy then it must be.  But lessons of the last few years tell otherwise.  Do you want to give your business a healthy chance at survival?  If so, below are a few expenses worth postponing (or simply ignoring altogether) until your cash-flow is plentiful.

  1. A luxury car.  I have met countless small business owners who insist on driving fancy cars to “look” established.  They operate under the impression (whether they know it or not) that the car they drive is somehow more important than the value they offer.  How sad.  If you can’t afford a luxury car, that’s okay.  Lead with your strengths, focus on the needs of the other person, and let the quality of your business show how established you are.  As for those business owners with fancy cars, well quite a few of them aren’t in business anymore.
  2. Tailored suits.  Like the car, the tailored suit implies wealth but doesn’t ensure it.  Do you habitually tell clients and prospects where you buy your clothes?  If not then you’re in luck.  No one will ever know your suits aren’t tailored.  Most won’t care.  They have better ways to occupy their time, like thinking about how your proposal affects their bottom line.  If they do care, you probably don’t want them for clients anyway.  Stick with a few basic pieces for important meetings, save some money, and leave the fluff to someone else.
  3. Dining at restaurants.  I love dining out as much as the next person.  But it can be a real cash guzzler on your business and personal finances.  It’s best to keep it in check.  To stretch your dollars a little farther, suggest coffee meetings instead.  You’ll be amazed at what you can save throughout the year.  Likely no one will notice the shift.  And if they do, they will probably secretly thank you for it since they could be taming their expenses (and waistlines) too.
  4. Extensive business overhead.  Do you really need multiple landlines (in addition to cell phones), fax lines, and top-of-the-line printers as well as other operating expenses?  If not carefully planned for, these items can eat away at your financial stability.  If you can’t afford it, don’t buy it.  There are often low-cost alternatives to common operating expenses.  For example, instead of paying for another landline for your fax machine, set up an email fax account in its place.    
  5. Business debt.  This one is tricky.  While we know we should keep our personal debt under control, we don’t always remember that for our business.  Every business “want” turns into a business “need,” and we end up taking on more debt than we should.  Perhaps you can’t run your business without a loan.  But do be careful how much you borrow.  Even if the business closes, you could still be personally liable for the remaining balance owed.  Ouch.  Work with organizations like SCORE and SBA to assess how much financing you really need, and whether you have the cash-flow in place to pay for it.

Giving your business finances a fair shot at winning isn’t always easy.  But it is worth it.  Let the love you have for your business energize you when you make sacrifices.  It is that love that will fuel you as you succeed at being your own boss.   

By day Morgan Leu Parkhurst helps individuals put the pieces of their marketing puzzles together.  By night she teaches marketing communications to aspiring entrepreneurs. Reach her at sharpmindmarketing.com or on Twitter at @Morgan_LP.

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Smallbizlady’s Sales Advice for Start-up Businesses

by on February 14, 2011 in Cash Flow & Finance, Grow Your Business, Your Small Business

Generating sales is a task that many aspiring entrepreneurs sometimes feel ill-equipped to take on, but no sales = no money. So what is a start-up entrepreneur to do?

Have a detailed marketing plan and sales projections, but take on sales in your business in small chucks. I like to look at things in terms of 30-day sales goals.  All I care about is how much money I need to make this month. 

Here are SmallBizLady’s 5 tips for building one’s sales savvy

Have a strong 30 second commercial.  One of the most important jobs a small business owner has is selling themselves and their business.  If an entrepreneur dreads networking, they should find a fellow business owner that will attend events with them. Try to attend three networking events a month.  Approach all potentials contacts with a “give to get” mentality. To get the most out of any networking opportunity, it is best to focus on how you can help them first. Every entrepreneur should arm themselves with a killer elevator pitch or as I like to call it their “30 second commercial.” When a business owner can succinctly explain their business, it builds trust. Be sure to add background from the last job or a brief client list and describe the niche target customer.  Offer just enough information to get a target interested in chatting again.

Craft a sound sales strategy.  The first step in a sound sales strategy is identifying the niche target customer. Then the sales goal should be set for the year and for every 30 days. Once the monthly goal is set, the business owners should determine how many sales activities including developing proposals, meetings, weekly sales calls, emails, networking events and social media marketing activities must take place to meet the monthly goal.  If the business is achieving the 30 days sales goals, that’s a good indication that the sales process is working.  I also suggest investing in professional sales training, if developing a sales process is too difficult.

Develop an online brand and collateral materials. Small businesses must first invest in a professional website. Professional collateral materials are still appropriate, but electronic versions of all marketing materials should be a top priority. Entrepreneurs should use social media networking to meet qualified leads and then use professional marketing materials to close the business. After all, nothing is more powerful than a personal note on branded stationery.

Use Social Media as much as Possible.  Utilizing social media is the best way for small business owners to stay on top of the needs of their customer. Entrepreneurs should know their niche customer, and produce information and products that are needed by that customer. Business owners should monitor blogs in their industry and of their competition.  Small business owners should develop signature content as an attraction strategy including blogs, special reports, and white papers to distinguish themselves as a thought-leader in their industry.

Create a Referral Engine.  Small business owners should first do great job for their customers. Be sure to thank clients for doing business with a follow-up call or a personal note. Then ask for referrals and create incentive programs such as giveaways, coupons, and finder’s fees to get their customers to become advocates for their small business.  Keep in mind: “It’s cheaper to keep her or him. It’s much easier to keep a customer than to go out and find a new one.”  Take good care of your customers.

What other sales advice would you give to fellow small business owners?

Become Your Own Boss in 12 Months Books By Melinda EmersonMelinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure.  As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, in Forbes, the Wall Street Journal and Black Enterprise Magazine. Melinda is also the author of the national bestseller Become Your Own Boss in 12 Months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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Managing Positive Cash Flow in Your Small Business

by on February 7, 2011 in Cash Flow & Finance

The two most important jobs you have as a business owner is getting business and getting paid. Being a bill collector is one the toughest jobs you’ll have as an entrepreneur.  But if you take control of the situation up front, you can minimize any delays with payments.  The key thing to do is make sure you are not hit with any surprises. Does your customer pay vendors net 45?  You need to know. Here are some tips that I have used to in my business to manage cash flow:

1) Make sure you understand at the signing of a contract the procedure for getting paid.  Ask about their accounts payable policy. Ask about whether you can be paid via electronic funds transfer, you get your money much faster this way.  Then make sure you understand what you need to do to facilitate getting you payment.

How does your invoice need to be formatted?

Does your EIN number need to appear on the invoice?

Do you need to file a W-9 IRS form to become a new vendor?

Do you need to have an EDI system in place to get paid?

Note: An EDI system is Electronic Data Interchange (EDI), which is a way to submit invoices and receive payments electronically. If you are doing business with a major corporation or manufacturer, they may require this type of system for doing business with them. The great thing about EDI systems is that all of your transactions are web-based and available anytime and anywhere via the Internet.

2) Develop a contact in the Accounts Payable department.  You never want to annoy your actual customer with a payment issue until you have no other alternative.  If you start out knowing a name in accounts payable its makes things so much easier if there is an issue. Call this person at start of the contact to ask them what the procedure is for becoming a new vendor in the system and getting that first invoice paid.

3) Develop a discount incentive program for paying early. Please not do not discount for paying Net 30! That is what your customers are supposed to do.  Offer a 2% – 5% discount for Net 10 or Net 15 payment for your customers depending on the amount of the contract.

4) Make sure you get a deposit up front and create an incremental payment schedule.  You should offer your clients a payment schedule such as 50% at the start / 25% mid way / 25% on delivery or 25% / 25% / 25% / 25%. Do not even start work without a signed contract, purchase order and a deposit.

5) Start making collection calls at 30 days to inquire about the status of your invoice.   In this economy, people will easily ignore an email, letter or fax.  Do not ever be afraid to pick up the phone to ask about your money. Do not wait 45-60 days to initiate collection procedures. The polite, but squeaky vendor always gets the check.

Do you have any more suggestions for managing cash flow in a small business?

Become Your Own Boss in 12 Months Books By Melinda EmersonMelinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure.  As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, in Forbes, the Wall Street Journal and Black Enterprise Magazine. Melinda is also the author of the national bestseller Become Your Own Boss in 12 Months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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How Do You Make Business Decisions?

by on September 6, 2010 in Cash Flow & Finance, My Recommendations

It’s great to have a nice website, a regular sales process and glossy business cards for your small business. All of these things steer sales, and sales is the engine that drives business. You must look credible in order for a corporation to do business with you, and you must have relationships to make a sale, and people must know where to reach you so business cards are important–but before you make any decisions in your business—you need up-to-date financial information about how your business is doing under the hood. 

By the 15th of every month, you should have three financial statements which should include a balance sheet, income statement, and a statement of cash flow. These statements will outline the previous month activity including what sales were made, who has paid you and who you owe, and how much cash you have on hand to make it through the next month.

Once you put a process in place to generate monthly financial statements (such as hiring a bookkeeper to reconcile your accounts monthly and generate the statements), get into the habit of referring back to your financial statements and annual budget for information. Do not make business decisions based on what the account balance is online. Also, do not make decisions based on what you want or think you need for your business. Ask yourself or your staff WHY three times before making any purchases. 

Always refer back to your budget and see what it says you have planned to spend, before committing to purchasing equipment, hire consultants or plan on attending any conferences.  Also never purchase a booth at a trade show the first year you plan to attend—walk the show the first year. Talk to the other vendors about whether they got their money’s worth.  It costs a lot of money to attend conferences—be sure it’s the right place to engage your niche target customer.  Here are four financial tips to keep in mind in your small business.

  1. Use a budget—Manage your business with an annual budget. In October, start working on the budget for the following year.
  2. Monitoring profit margins—It’s fine to know your gross revenues, but in the end, it’s really all about the profits you keep.  In every sale, know how much money is for you.
  3. Understanding the cash position daily—Cash is king. A business with contracts and no cash will soon be out of business.
  4. Know your numbers by the 15th of every month—Do not wait until tax time to deal with your financial statements.  Have them complied monthly, so that you can know where you stand as a business.

 What other financial tips should small business owners keep in mind? Add a comment below.

For more tips on starting or growing your small business subscribe to Melinda Emerson’s blog at www.succeedasyourownboss.com

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure.  As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, the Tavis Smiley Radio Show, in the Wall Street Journal, Entrepreneur and Black Enterprise Magazine. She hosts #SmallBizChat weekly on Twitter for emerging entrepreneurs and publishes a resource blog www.succeedasyourownboss.com  Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010) 

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How Entrepreneurs Can Develop Multiple Streams of Income

by on August 23, 2010 in Cash Flow & Finance, Grow Your Business, SmallBizRadio, Your Small Business

I recently interviewed Stephanie Chandler @bizauthor on Smallbizradio, my monthly show on #Blogtalkradio about how entrepreneurs can develop multiple streams of income.  Small business owners can grow numerous business lines by taking their knowledge and packaging it for sale in the ways that people absorb information: audio, video and written, of course.  The purpose of Smallbizradio is to create a place for entrepreneurs to learn how to grow a successful small business.  We feature top business experts to bring you helpful information to navigate the obstacles of building a growing business. Smallbizradio is recorded live every 4th Wed of the month at 1pm ET.  To listen or join in with a question here’s the link http://www.blogtalkradio.com/smallbizradio and the dial-in number is (347) 843-4182 AND PRESS “1”

Stephanie Chandler is the author of four business and marketing books including (one of my favorites) From Entrepreneur to Infopreneur: Make Money with Books, eBooks and Information Products (John Wiley & Sons). Stephanie is also founder and CEO of AuthorityPublishing.com, which specializes in custom book publishing and marketing services.  She is a frequent speaker at business events and on the radio; she has been featured in Entrepreneur Magazine, BusinessWeek, Inc.com and many other media outlets.

Listen to the complete interview with Stephanie Chandler http://tobtr.com/s/1063193

In this interview Stephanie answers questions including:

What types of information products are best and easiest to produce?—Teleseminars, tips booklets, workbooks or in-person classes?

Should a small business be paying attention to the competition?

How do you price infoproducts?

What are some ways to market my info products?

What are the keys to info product success?

Here are links to Stephanie’s books:

LEAP! 101 Ways to Grow Your Business

From Entrepreneur to Infopreneur

The Author’s Guide to Building an Online Platform

If you found this interview helpful, join us every 4th Wednesdays 1pm ET follow @SmallBizLady on Twitter for details on upcoming guests.

For more tips on starting or growing your small business subscribe to Melinda Emerson’s blog at www.succeedasyourownboss.com

Melinda F. Emerson, known to many as SmallBizLady is one of America’s leading small business experts. As a seasoned entrepreneur, professional speaker, and small business coach, she develops audio, video and written content to fulfill her mission to end small business failure.  As CEO of MFE Consulting LLC, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. She has been featured on NBC Nightly News, the Tavis Smiley Radio Show, in the Wall Street Journal, Entrepreneur and Black Enterprise Magazine. She hosts #SmallBizChat weekly on Twitter for emerging entrepreneurs and publishes a resource blog www.succeedasyourownboss.com.  Melinda is also the author of the national bestseller Become Your Own Boss in 12 months; A Month-by-Month Guide to a Business That Works. (Adams Media 2010)

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The real deal on starting a small business.

5 Common Myths About Starting a Small Business

by on May 24, 2010 in Become Your Own Boss Tips, Before You Start, Cash Flow & Finance, How to Start, Mompreneurs, Pink Slip Entrepreneurs, Solopreneurs, Women in Business, Your Small Business

The real deal on starting a small business.

What's the real deal about starting a small business?

This is national small business week.  In honor of that I thought I would use my blog to dispel 5 common myths about starting a small business. I chose these five as they are the most common questions I get when I speak around the country and do workshops on how to transition from a job to small business ownership. Entrepreneurship is the only way to build true wealth in America, but you need to make sure that you understand what you are getting into for the long haul.  

Myth #1: Starting my own small business will give me more control over my schedule.

Reality: Starting a small business is not a 9 to 5 job. In the beginning your business owns you—you do not own it or your time.  For many startups, 14-16 hour days are not unusual.  As an entrepreneur, you do 10-13 jobs at once including being the chief sales person, business planner, secretary, payroll manager, human resource manager, brand manager, chief financial officer, technology manager, project manager and bill collector. Carving out time for yourself will be a luxury. If you duck out early to run a personal errand, you’ll need the make the time up once the kids go to bed.  For the first three years, do not plan on spending lots of time on the golf course, or taking off every Friday. Your business will need every minute you have to spare.

Myth #2: I don’t want any loans to start my small business – I can get grants.

Reality:  There’s no such thing as getting a grant to start your small business. Expect that the money to start your business will come from your right or left pocket. Successful startup entrepreneurs save 20-40% of every paycheck for at least 12 months prior to starting the business.

In fact, there are three pools of money you should have before your start a business 

  • An emergency savings account 
  • Enough budget to go for 12-24 months without a paycheck 
  • The first year of operating capital to run your business

Banks do not typically loan money to start-up businesses either. You need to be in business for two to three years to qualify for even a line of credit. The only chance you have of earning money you don’t need to pay back is if you win a business plan contest or new inventor competition, but that’s a long shot.  Now there are some franchises that provide funding, but 20-30% of the loan must come from your own resources.   

Myth #3: My business idea is so great my products will sell themselves.

Reality: Do not fool yourself. Building sales requires time, money, and a disciplined sales process that starts with strategic relationship building. How strong is your network? That’s where your first customers and sales will come from for your business.  What are your weekly marketing activities? Marketing is the engine that fuels a small business — no marketing = no sales.  Even if you have a big client, you do not want to put all your eggs into one basket.  Make sure your client base is diversified.   

Myth #4: I have been successful in corporate America; running a small business will not be too hard. 

Reality: If entrepreneurship were easy, everybody would be doing it. The biggest difference between working in corporate America and self-employment is infrastructure. You must build everything. You will have to do every job until you can afford help. Your corporate job can survive without you for a day or a week.  In your own business, if you don’t work, you don’t eat.  Sick days, hour lunches, health benefits and 401K perks don’t really exist in the start up phase of a small business.  You must be prepared to learn everything you can. If you already know everything, keep your good job—if you can.

Myth#5: Anybody can use my product or service.

Reality: One of the top reasons why small businesses fail is lack of having a niche target market.  Do not make the mistake of trying to sell to anyone that you think has money.  Take the time to develop a customer profile.  You should be able to see the face of your customer and know everything about her. How old is she? Does she have children?  In what country does she live? Does she make purchases using the internet? How much education does she have? What is her income? How often does she buy your product or service?

What other myths are out there about starting a small business?  Please let me know.

Melinda Emerson “Smallbizlady” is a seasoned entrepreneur, professional speaker, and small business coach. Her areas of expertise include small business start-up, business development and social media marketing.  Melinda hosts #Smallbizchat, a weekly talk show on Twitter for emerging entrepreneurs.  Melinda’s first book Become Your Own Boss in 12 months; A Month-by-Month Guide to Start a Business that Works was released in March 2010 by Adams Media.

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Can You Afford to Become An Entrepreneur?

by on March 29, 2010 in Become Your Own Boss Tips, Before You Start, Cash Flow & Finance, How to Start, Mompreneurs, My Recommendations, Pink Slip Entrepreneurs, Solopreneurs, Women in Business, Your Small Business

Everyone has good ideas.  Some of them may even be million dollar ideas, but if you live from paycheck to paycheck or way beyond your means, you may never be able to quit your job and start a business.

As the Smallbizlady, often I get emails, facebook messages and DM’s on Twitter from people asking me to help them start a business.  My first three questions are usually something like this. 

  • What is your business idea? 
  • How much money do you have saved?
  • How much money do you think it will take to launch this business? 

If question two brings on a case of stuttering, I start shaking my head.

You should have three pools of money before your start a business. 

  • An emergency fund for the household
  • 12-24 months of budget to run your household
  • 12-18 months of money to launch and operate the business.

Now hear this, “Your ability to save has everything to do with your ability to start a business!” 

Money is not everything.  It’s just a tool, but it is certainly the beginning of a business plan.  Banks rarely, if ever, loan money to start-up businesses.  Banks will typically not deal with you for a loan or line of credit until you’re been in business 2-3 years and can show growth in the business with your financial statements and business tax returns. 

There are some franchising opportunities that will provide some working capital, but 30-50% of the money will still come from you. And by the way, you will need to have significant net worth and assets to collateralize the loan.  Think of it this way, no credit = no business.  When you are first starting out in business, you are your business’s credit.

So what do you do if you have a great idea and no money? There are other sources of funds to start your business. There’s the 3 F’s Family, Friends, Fools.  Your family loves you and hopefully believes in you enough to invest in your business.  If you are fortunate enough to have a family that can afford to invest in you– you are fortunate, but beware.  Your rich Aunt Sally may think she’s your boss and might call you up every 30 days to check on how her $50K is doing.  You may not want that kind of pressure in your new business. 

Then there are your friends. Nothing can kill a friendship faster than borrowing money that you can’t pay back.  I have a rule.  I do not loan money to friends, I give it to them.  I make sure that I do not give away any money that I can not afford to lose.  Would your friends do that for you?  If so, they could be an option. 

Every once in awhile, a hungry entrepreneur will come across a rich guy who’s an idealist about business, who falls in love your idea but doesn’t wish to run the business.  That is an angel investor— who will invest money in the company for an equity stake and lend his or her network to help you.  Do not get your hopes up about finding an angel investor in this economy.  It can happen, but let’s just say you are better off using your own funds that you save to start your business.  Family, friends or an angel investor can be fools for investing in a half-baked business idea.  Invest your time, to make sure you have a sound business plan before you take anyone’s money.  And do have a plan to show them—for when and how you think you’ll pay it back.

If you do have assets, you are in a different situation.  You can borrow against your 401K, you can take out a home equity loan, you can sell your home or rental property, you can cash in a Roth IRA.  The money must come from somewhere—its best when it comes from your own coffers.

It’s essential that you start your business from a position of financial security. Otherwise, you’re finished before you get started.

WANT TO USE THIS ARTICLE IN YOUR EZINE, E-NEWSLETTER OR WEB SITE?  You may, as long as you include this complete blurb with it:

Melinda Emerson “SmallBizLady” is a Veteran Entrepreneur, Small Business Coach and Social Media Strategist who hosts #SmallBizChat on Twitter.  #SmallBizChat is the trusted resource on Twitter to discuss everything entrepreneurs need to know about launching and running a profitable small business.  Melinda also publishes a resource blog on small business best practices at www.succeedasyourownboss.com  Her first book, Become Your Own Boss in 12 Months was released by Adams Media in March 2010.

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