Category Archives: Financials

Financials, Starting a Business

Be Nice To The Gatekeepers You Meet

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As you start or grow a business, you will come across a few gatekeepers. Gatekeepers are bankers, business analysts and managers of government or other programs that might provide grants to your business. While they are responsible to protect their employers’ funds, they can also play an important role in making opportunities possible for entrepreneurs.

A gatekeeper’s first order of business will be to perform the due diligence necessary to determine if your business idea is viable. She will evaluate whether or not you can live up to all those amazing promises made in your business plan, before taking your proposal forth to run the gauntlet with her boss or the decision making committee. The experience can be daunting to a newbie, but it really shouldn’t be.

As you work with gatekeepers, they invariably help you build a stronger business plan. Often they are highly knowledgeable generalists who research and evaluate a broad range of businesses. They can usually recognize whether you’re off or on track, and can become tremendous allies in your business endeavors.

Here are nine tips for working effectively with gatekeepers:

1. Be curious, be a learner, and be coachable!

2. Prepare for your discussions and meetings; manage the time efficiently.

3. Be on time for appointments, return phone calls promptly and honour all the promises you make.

4. Know your business plan thoroughly but accept that you may not have all the answers. When asked questions for which you don’t have answers, commit to finding them and follow through with that commitment.

5. Without being a know-it-all, try to anticipate which questions the gatekeeper might ask and have your answers ready.

6. If she seems to be negative about your business plan, ask questions until you understand the problem and what you need to do to fix it.

7. If your application is declined, determine if the decision is final or whether you can fix the problems and reapply.

8. Whether you reapply or not, use the gatekeeper’s input to strengthen any weaknesses in your business plan.

9. Say thank you. Whether you get the loan or not, express your gratitude for the time invested and the feedback.

The gatekeeper who appears to be laying roadblocks in your path is assessing you and your business idea to determine the level of risk. If you meet her requirements, you might just win the loan or grant and with it, the opportunity to start or grow your business.

Financials

Seven Fool-Proof Ways of Going Broke

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After years of getting cuffed around in the marketplace, it is my pleasure to share these foolproof strategies. No matter how well you are doing today, the following methods are sure to drive your small business into the ground.

  1. Be a know-it-all. Instead of adopting a learning attitude, be defensive and refuse to admit that anyone might know more than you about the business. Snub business analysts, counsellors, lawyers and bankers. Do not be curious.
  2. Don’t waste valuable time listening or talking to customers. Ignore them, they’re takers. They rarely say anything of substance and they can suck up a lot of your precious time. Why do you think the good Lord gave you one mouth and two ears? So you could growl at customers without pausing your IPod or interrupting your cell phone conversation. Reel ‘em in, get the money, kick ‘em out.
  3. Do not smile. Smiling is a sign of weakness. Be tough. Use the time-tested tools of terror: scowls, snarls and sneers. The slick thing about this method is that you only have to do it consciously the first few times, after that it happens habitually and you can effortlessly alienate customers without even having to think about it.

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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

Business Planning, Financials, Owning a Business, Starting a Business

Forecasting Isn’t the Same as Accounting

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There’s no doubt that forecasting or attempting to predict the future in any way, is considered by many to be a mild form of insanity.

Forecasting is one area of business planning that entrepreneurs tend to resist. There are many reasons for this.

  • Beyond spending, many people simply don’t like to deal with money matters.
  • Unless you’ve previously owned a business, the entire business financial arena tends to be a vast, spooky mystery.
  • Those who have weathered a financial black eye in their personal lives are inclined to be apprehensive about tackling the management of business finances.

Many people assume that forecasting is the same as accounting, and that it should be left to highly skilled professionals, such as bankers, accountants and MBA’s. And yet, the process of forecasting is sure to be a healthy learning experience for owners and anyone thinking about starting a business.

To dispel myths and misguided fears about forecasting, it is helpful to clarify what it is… and what it isn’t. One way to do this is to identify the ways that forecasting differs from accounting.

  1. Forecasting is an educated guess at future scenarios, while accounting is a detailed compilation of past transactions.
  2. Forecasting takes place prior to a period of business, while accounting happens after commerce is done.
  3. Forecasting provides an approximate picture of the future, while accounting shows an accurate record of business past.
  4. Forecasting is built upon safe assumptions and conservative estimates, while accounting is built upon precise records and receipts.
  5. Forecasting is usually best done by the small business owner, while accounting should almost always be entrusted to an accountant.

The truth is, most entrepreneurs have no crystal ball skills whatsoever, and most will never be accountants. Any yet, small business owners need to have a certain level of confidence in the future of their enterprises. A rationally constructed forecast can give you the confidence needed to move forward, while arming you with the information necessary to weather upcoming threats.

As surely as the business owner must pay taxes, he or she should take on the responsibility of forecasting. You can hire someone to foretell your future and you can certainly turn your business records over to an accountant for compilation, but at the end of each year it is the business owner who pays for any mistakes made and who reaps the rewards when things go right.

While attempting to predict the future might seem a bit crazy, the real insanity is trying to run a business without the benefits of forecasting.