Category Archives: Starting a Business

Financials, Self-Employment, Starting a Business

New Business Deal Breakers

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new_business_deal_breakers-001No matter how brilliant a business idea might be, no matter how eloquent the business plan, certain deal breakers will stop it in its tracks. Deal breakers are the secrets you would rather not share with your business analyst or banker, though you probably should.

If you are preparing your business plan in order to apply for a loan to start or grow a business, here are some common deal breakers you should know about:

1. Inadequate Equity. You have undoubtedly heard gripping stories about folks who wangle 100% financing without investing a dime of their own. Those tales make great fodder for talk shows and infomercials, but lack of equity is usually a deal breaker in the real business world. Unless you’re borrowing from love ones, business start-ups should plan to bring at least 20% equity to the deal.

2. Cards & Toys. This means ballooned credit card balances and a backyard bursting with toys, such as boats, bikes, and skidoos. There is nothing wrong with owning toys if you can afford them; it’s the high interest loans with outstanding balances and endless minimum payments that break the deal. It’s easy to fall into the “cards & toys” trap when you are doing well financially. The problem usually surfaces following an unplanned reduction in earnings, often triggered by an injury, an illness, or loss of a job.

3. Fantasy Forecasts, Unrealistic Cashflow. Would you invest in a new venture without the seeing sales and cashflow forecasts? Financial projections are your cheapest form of self-defense and an opportunity to impress lenders that you know or do not know your business. Loading your business plan with pie-in-the-sky sales projections and fictional cashflow forecasts are unlikely to help entice rational investors to a deal. Conservative sales and realistic expenses are necessary building blocks for credible financial projections.

4. Looming Liabilities. Liabilities can arise from many places, often not related to a business deal. For example, legal battles and bitter marital break-ups do not endear one to potential lenders. Any business opportunity will lose its luster in the shadow of legal strife. You will need to have a stellar strategy for all liabilities.

5. Ten-Bell Credit Rating. A 10-bell pepper will peel the gums off your molars; a 10-bell credit rating will undermine even the best business plan and have your banker reaching for Rolaids. In this highly leveraged, consumer frenzied world, it’s easy to end up with a financial black eye. Negative credit ratings can occur from not paying bills, making late payments, or attempting to sweep that old student loan under the carpet. When it comes to accessing money to get your business started, financial skeletons will spook potential investors.

If you’re planning to pitch your business plan, take time to scan your state of affairs for anything that will make you less attractive. You will find it easier to entice investors or lenders once any deal breakers have been dealt with.

Related Articles:

Are You Starving Your New Business?

Three Keys to Clear Financial Communications

Seven Foolproof Ways of Going Broke

Seven Secrets to Forecasting a Rock Solid Cash Flow

Cash Flow is an Entrepreneurs Lifeline

Entrepreneurship, Owning a Business, Starting a Business

Running a Business Is Like Riding a Snowboard

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A couple years ago I tempted fate by tackling my first snowboarding lesson. I was 51. Though my future was in doubt for the entire incident, I survived. Whether from repeatedly landing on my head or from the hot toddies that followed, I felt compelled to apply the lessons of snowboarding to running a business.

  1. A rider becomes one with the snowboard; an owner gets immersed in the business. Neither business nor snowboard will run smoothly until you learn some skills and tune into the conditions. Until you reach that point you might look like a newborn calf – gangly, uncoordinated and off-balance.
  2. Snowboarding and business are both learned by doing. A bit of theory is nice, but the real thrill comes from getting out there and doing it. No amount of theory compares to a real ride down the mountainside or a day of running your own business.
  3. Fitness and flexibility are important. This seemed quite clear as, from a variety of unflattering positions I observed skilled snowboarders flying over jumps and loving the airtime. Ah yes, I thought, I really should have stuck with the cardio program. It’s also easier to withstand the rigors of business ownership when you’re fit.
  4. Dignity may abandon you at times. Why is it that people love to see skiers and aging snowboarders do face-plants? Furthermore, why is there always a crowd handy to cheer when you blow it and land in a heap? One gains a disturbing sense of humility while skidding to a stop on elbows and tailbone at the feet of the entire T-Bar line up. Make a mistake in business and the crowd will probably laugh – you might too once you get over the pain.
  5. Snowboarding and business are risky. Friends and family get concerned and start reciting horrifying statistics of bruises and injuries. Everybody knows someone who has hurt themselves snowboarding or who has lost everything they own in a bankruptcy. Things don’t always turn out the way you plan. In fact, if you don’t land upside down occasionally, perhaps you aren’t trying hard enough. Your survival depends upon your ability to assess and manage risk.
  6. Snowboarding and business are both manageable. The secret to success is to start by learning the basics, like standing upright and controlling your direction. Until I learned to use the edges of my snowboard, I changed direction by landing on various body parts and by careening off trees and unsuspecting skiers. You bump into some of the nicest people on the hill… and in business.

Whatever else can be said, snowboarding and business ownership will both get you outside your comfort zone and present opportunities to learn.

Ready to hit the slopes of business ownership?  Get started on your business plan today. We’ve got free resources and tools to make your business planning fast, easy and fun.

See you on the slopes!

Business Planning, Starting a Business

Prove Your Business Case: Selling Laptops to Polar Bears

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The purpose of business planning is to prove or disprove your business case.

Scary as that might sound, it’s as simple as making sure your business will draw enough customers to pay enough money for your products or services to enable your business and you to survive and perhaps even thrive.

What’s proof to some may not be proof to others. While absolute proof is hard to come by, there are many ways to strengthen or weaken your business case. The stronger your case, the more confident you will be in your business idea. Your confidence will come about as a result of a number of things you do. The important thing is to use building blocks that make sense to you, and to those you may be trying to romance with your business plan.

Newbies tend to experience uncertainty at the beginning of any business venture. A business plan provides an opportunity for you to gain confidence in your ideas. In other words, prove it to yourself and you will be in a better position to convince others.

Here is a glimpse of how it works. Imagine you have $100,000 and I am trying to entice you to invest it in my hot new business idea; selling laptop computers to polar bears.

When I first mention my business idea, you might think I’m crazy and set your browser to block my emails.

If I back my claim up with letters of support from the Northern Polar Bear Association, you might be curious enough to want to know more.

If I show you written orders for 20 laptops, signed by furry bad-breathed polar bears, you might start returning my phone calls.

If I increase the number of orders to 100 and include a couple of long-term contracts with established retailers in polar bear country, you might take me more seriously. You might even Google me, my ancestors, polar bears (your misdirected search for “bare laptops”, proves to be nasty!).

If I provide you with credible financial projections that detail how you can earn a staggering return on your investment over the next 18 months, you might consider the case “proven” and lunge for your chequebook.

The business plan is an opportunity to build your business case, step by logical step. By the time you get through it you will either have proven your business case, or not. Prove it and you may be ready to go into business. If you can’t prove it, don’t give up your day job just yet.

Business Planning, Entrepreneurship, Starting a Business

Ten Ways to Strengthen Your Business Plan

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The most important reason to write a business plan is create a roadmap for the entrepreneur or business owner. A business plan can also be a valuable tool for communicating your business idea to others, for example, to secure financing or attract investors.

Whatever your reasons, any business plan will be stronger by following these basic guidelines.

  1. Anticipate the questions readers will have and answer them in your business plan. They’ll want to know about you, your business, and your industry. They’ll be interested in your financial and employment history. They’ll need to know that you understand your customer, and that you know how to makes sales and serve customers.
  2. Forecast sales a bit lower than you think they will be. Smart business planners will intentionally err on the conservative side, showing viability with as few sales as possible.
  3. Estimate expenses a little higher than you believe they might be. The brutal truth is that contingencies or expense buffers are all too often necessary and get spent once the business is in play.
  4. Remove some of the guesswork from your sales projections by gathering items such as signed contracts, letters of intent or some other form of written confirmation that customers are willing to buy your products or services from your business.
  5. Provide a complete set of clear and realistic financial forecasts, and make sure you know them well enough to discuss them intelligently with your banker or investor. Demonstrate your understanding of how money flows in and out of your business, and convey your knowledge with sales projections, a cash flow forecast, and pro forma income statements and balance sheets.
  6. Be frugal. In your business plan, show readers that you make wise buying decisions and that you are sourcing the best products and materials. If you can get by with an older truck, don’t ask for financing for that shiny new one.
  7. Be realistic and factual throughout your business plan. Nothing undermines your credibility quicker than inaccuracies. Where it makes sense to do so, state where the information comes from.
  8. Communicate various ways that you know your business, including, understanding your customers, having a savvy approach to pricing, and knowing how to make the operation work efficiently.
  9. Your business plan needs to communicate your knowledge of the industry you will operate in. What types of goods are sold? Who are your competitors? What competitive advantage will motivate customers to buy from you?
  10. Somewhere in your plan you’ll want to talk about your qualifications, and share information about any business-relevant assets such as your educational background or work experience.

Everything you do to create a business plan will increase or decrease your confidence in the business idea. As your confidence increases you move toward launching the business; if it decreases, you have more work to do.

For most small business or micro-business ventures, the business plan doesn’t need to convince anyone that you’ll be wealthy or retire early. It has only to demonstrate viability, that is, to show that the business will provide you with enough of a salary to pay your monthly living expenses, and hopefully earn a bit of profit as well.

Ready to write your business plan? Get started with our free business plan template or become a member of the Oasis today!