Blog Archives

Continuing Your Business When a Major Change Occurs

8/30/2017

Most business owners don’t prepare a continuation plan (which is part of business succession) because they don’t like to think about their own mortality. In the unlikely event either of these facts of life listed above occur, it’s not always necessary for the business to close. But if the business is to continue following the departure of an owner or key person, there must be plan to detail how that will happen.

Failing to prepare a business continuation plan can have a devastating effect on those left behind to manage the operations. Remaining owners of the company are put in a position of trying to figure out what the future of the company will be while dealing with a distressing loss when these issues should have been thought out in the beginning.

As part of the plans for continuation, decisions need to be made as to how the business will continue. This requires consideration of how the ownership interest of the departing owner will be handled, what will be the source of income for their family, and what is the direction for the company. These decisions should include, but not be limited to:

What funding vehicles will be used for the buy-out of their ownership interest?
What is the fair value of their ownership interest?
Who in the company will take control of the affairs of the departed owner as it pertains to their ownership interest in the company?
What are the plans for working with family/heirs to their ownership interest, and how they will receive income from the business?
What are the details in the agreement for continuing the business?
How will the company be restructured, if at all?
Will the company be sold, merged, acquired or liquidated? If so, what will be the timeframe?

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

Early Succession Planning for the Future of Your Company

8/28/2017

Death, disability, divorce or retirement of owner(s) or key person(s), and transferring a business is a fact of life. Decisions relating to how or if the business will continue, be transferred, sold, merged, acquired or liquidated when either of these events occur should be addressed at the start of the business planning process. This is known as succession planning and is designed to plan for an exit when closing or transferring a business, and to mitigate conflicts that can arise when it becomes necessary to do so.

Just as strategic and long range planning are vital to the future success of your business, succession planning is equally important in that it provides for an exit that will not leave heirs saddled with a huge tax bill or will keep your business moving forward. No business plan is complete without a succession plan. Unfortunately, many business owners fail to recognize the significance of what could happen in the absence of an owner or key person. No one likes to think in terms of when it will end, but at least being prepared helps to ease the pain.

In addition, succession can be the determining factor as to whether a loan or funding is granted. Many lenders and investors want to see a succession plan as part of the financial package. The reason is that they want to know how they will be repaid or receive a return on their investment in the event transfer, sell, merger, acquisition or liquidation of the business is necessary.

Whether the business is to be transferred or it continues, there are laws and regulations that dictate how that can be done. Here is another example of where the expertise of an attorney, insurance agent and accountant can be invaluable. They can advise you on the best way to handle the transfer or the continuation when the need arises from both a legal and financial standpoint.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

Problem Solving to Reach Business Goals

8/25/2017

Inevitably problems will arise during the course of business. It’s not necessarily because of poor planning or no planning at all. Sometimes issues arise that are beyond the control of the business owner. Legislative, environmental, material shortages, problems with suppliers, etc. are just a few reasons why things go wrong. Problem-solving skills are a vital skill set for business owners to get back on track after issues arise.

Here are just a few steps for problem solving:

Identify the specific problem. Be sure the problem is clear and understood. The only way to solve a problem is to understand exactly what it really is.
Assemble the appropriate persons to help provide solutions. Solicit input from all relevant parties so that every option in resolving issues can be considered and all available resources are employed.
Settle on a mutually-agreed upon solution. The more input and buy-in from the relevant parties, the more likely a solution can be found.
Implement the solution. Not everything that works in theory works in fact. So whatever the outcome of the planning is, it must be implemented.
Review, measure and revise. Once the new process is in place, it must be reviewed, measured for effectiveness and then revised if necessary.

Knowing that problems will always occur (hopefully less often than so), there always needs to be a process in place to mitigate them as they occur and devise a plan to ensure they don’t recur. Obviously some issues will require more time to resolve than other issues, but the basic steps for resolution are outlined above. These are the initial steps for resolving any issue at any time.

Embracing challenges is also a means of resolving them. It’s difficult to face challenges head on, but the way they get resolved is to do exactly that. So often problems look much bigger and greater than they actually are. Once you have decided that you are confronted with an issue that could potentially destroy or at least derail your business, figuring out how to solve the problem will keep you moving forward. The old adage, “you only fail if you quit” is a very valid statement.

As you continue to work towards a resolution to any problem that may arise in your business, you should not consider this a defeat. Even if a problem is the result of a bad decision made by you or top-level people in your company, it’s not the end of the world. But when it happens, you should immediately:

Take ownership of the problem.
Be transparent about what happened and your role.
Apologize for your mistake.
Take whatever criticism that is given.
Devise and implement a plan to mitigate any damages.
Employ all necessary resources available.
Move forward.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

What Does it Cost You to Acquire Each Customer?

8/24/2017

There is always a cost or costs to acquiring new customers. Whether you are using social media, which is for the most part free of charge, there is a cost for the time spent identifying a target market and posting your product/service information. As your business becomes better known and sales increase, you should inevitably acquire more customers. The formula for customer acquisition is:

                                 Cost of sales and marketing expenses at a given time
                                      The number of customers acquired at that time

You will always want to make sure you are prepared when the time comes to acquire more customers. Nothing is worse than having a successful marketing campaign, and being unable to provide the products/services promoted. And understanding what it costs to acquire those customers will let you know whether earning that customer was worth the resources expended.

Always remember that no single promotion strategy works for everyone. Regardless of the medium you use, it need not be expensive. Promotions are ineffective when they don’t reflect the product/service for the intended audience. But whatever your campaign strategy entails, all efforts should be well understood by everyone in the company as well as customers.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

What is Your Competitive Advantage?

8/21/2017

Your competitive advantage is the one element that separates you from your competition. It focuses on the attributes that make your products or services stand above everyone else’s. It could entail having:

intangible assets such and knowledge and/or skills in areas unmatched by the competition;
a patented product that’s new, innovative and unmatched;
relationships in the industry or with a customer that the competition doesn’t have equal access; and
technical expertise in providing continuous innovation not easily or efficiently replicated.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

Which Markets are Best Suited for Your Products and Services?

8/18/2017

Accessing the best and appropriate market(s) that will purchase your products/services is what doing business all about. Success is predicated on identifying and reaching your target customer at the right time, in the right place at the right price. In accessing the appropriate markets, you will need to determine:

current needs to be met in the marketplace;
the demand for each need;
how current products/services meet the needs;
which markets are best suited for your products/services, which ones are not and why;
what marketing strategies will be used to penetrate these markets;
which contracting or procurement opportunities within those markets would meet sales, profit and return on investment objectives; and
what is your competitive advantage in each market.

It’s a fact that business success hinges on your ability to identify and access the markets best suitable for you to sell and deliver your products or services. It’s important to note that there are barriers to entry in most industries, including any area of government. In other words, there are limitations that can inhibit a business’ ability to enter a particular market. Limitations such as finances, expertise, size, scale, competition, relationships and capital equipment resources top the list.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

What is Included in a Financial Plan?

8/15/2017

As previously stated, the Financial Plan is vital to your business whether or not you’re seeking outside financing. It gives you and your potential lenders or investors a clear picture of your company’s financial strength. Documents typically contained in a financial plan include:

Cover letter – The cover letter simply identifies the financial plan and describes the documents included and the purpose for submission.
Balance Sheet – Sometimes called the Statement of Financial Condition or Statement of Financial Position, this statement is used to show a company’s financial position at a particular date. It’s called a “balance” sheet because total assets invested in the business at any time are matched by the sources of these assets.
Income Statement – Sometimes called the Operating Statement or Profit and Loss Statement (P&L), is used to list revenues and the costs and expenses charged against them for a specific period of time.
Cash Flow Analysis – Used to show the changes in assets (especially cash, accounts receivable, inventory and working capital) and liabilities (payables).
Operating Budget – This statement provides an estimate of sales and expenses for one year. Using historical data, you can project economic trends, inflationary increases and anticipated business changes (e.g., capital expenditures, increases/decreases in staff, production, etc.).
Estimated Projections & Forecasts Statement – This statement uses historical information to project the future. It provides information to predict what could happen under various circumstances. Projections should be made for an entire year.
Assumptions – This is a supposition that facts or ideas would be true under an arranged set of circumstances. For instance, pro forma (information before the fact) statements are prepared under the assumption that certain planned activities will yield the anticipated result. Some examples of financial assumptions are:
Notes to Financial Statements – Numbers alone don’t always paint a complete picture of a company’s financial position. For this reason, accounting notes are prepared to explain, in detail, what the numbers actually mean. For example, notes can state what accounting rules applied to the financial statement or discuss other information not included in the financial statements. If accounting notes are required, the following statement should be centered at the bottom of each page containing the data for which the notes are written:
“See accompanying accountant’s review report and notes to the financial statements.”
Key Financial Metrics (Terms, Ratios & Formulas) – Most common terms, ratios and formulas used in financial accounting and in pricing your products or services.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

How Do You Handle the Financial Accounting in Your Business?

8/14/2017

Accurate financial, accounting, sales and other management records are vital to the profitability, success and long range planning of your business. Improper recording and use of inaccurate financial information can be very costly. Additionally, if inaccurate information is used in any decision making, significant losses in revenue, time and resources are likely to result.

The financial planning process begins with a reliable accounting system. The importance of accurately recording all transactions affecting a company’s financial position cannot be overemphasized. The major components of every accounting system include:

Source documents – original documents, usually a sales slip, invoice, time card or check;
Journalizing – the manual or electronic processing of any source document into various journals;
Posting – transferring data from the journals to the general ledger; and
Trial balance – listing of all accounts, their titles and all debits and credits in the order in which they appear in the general ledger.

When setting up your accounting system, you must determine whether you will use an accrual based or cash based accounting system. With an accrual-based system, a customer could buy your product/service in August, but cash may not exchange hands until September. Even though the sale is made prior to payment, the revenue is recognized upon delivery as opposed to when payment is actually received.

With the cash based system, however, revenue is recognized at the time payment is made. For credit card sales, the revenue is recognized when payment is received. Regardless of the type of system you implement (specially-designed or commercially-marketed), it should be tailored to meet the specific needs of your business.

You don’t have to be a Certified Public Accountant (better known as a CPA) to be successful in business or understand the finances of your company. However, you must incorporate a good financial accounting system. Today there are several software programs on the market that can efficiently record and report sales transactions of your business. Quickbooks by Intuit is one of the most popular small business accounting systems.

While software programs are designed to easily, quickly and efficiently handle the financial reporting of your business, the software alone is not the answer. You will still need a clear understanding of what numbers need to be calculated and what they mean.

No matter where you do business in the world, there are rules and guidelines that accountants and bookkeepers follow for recording all business transactions. The Financial Accounting Standards Board (FASB www.fasb.org) is the independent body in the U.S. that governs what we call generally accepted accounting principles (GAAP). GAAP (pronounced “gap”) is essentially the uniform way in which financial statements are prepared or presented.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

10 Reasons Why You Need a Financial Plan for Your Business

8/12/2017

The Financial Plan is vital to your business whether or not you’re seeking outside financing. It gives you and your potential lenders or investors a clear picture of your company’s financial strength. Even in large corporations presidents and board of directors rely heavily on the “bottom line” in their decision making. This is important to note because many of the financial decisions that need to be made by small businesses are similar to that of large businesses.

If finance and accounting aren’t one of your strengths, it’s critical that you hire a bookkeeper or accountant as early as possible. But whatever choice you make, understanding the principles of bookkeeping and accounting are essential for your business success. This especially holds true in this time of economic uncertainty.

Financial planning will aid you in:

understanding your company’s present and anticipated financial position;
making sound financial decisions (e.g., major purchases, hiring additional staff, etc.);
creating and managing budgets;
determining how much money, if any, you will need to borrow;
determining how the money will be used and when it’ll be repaid or the return on investment;
filing tax returns;
passing financial audits;
settling legal matters;
measuring business success for failure; and
monthly, quarterly and annual financial reporting.

Because financial planning takes years of study and practical experience to master, hire, consult or barter with a financial expert who will teach you how to set up your financial reporting systems and handle your financial reporting.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."

What is Included in a Business Plan?

8/9/2017

There are many formats and structures for business plans. But, whatever structure or format is used, business plans contain the same general types of information. The following is one structure of a business plan which includes:

Operating Plan – Details of the business you’re in, your products/services, and how they are manufactured/produced.
Marketing Plan – Details of how you will promote and sell your products/services, and the marketing and promotion activities, including social media campaigns.
Management Plan –Details how you will staff your operation.
Financial Plan – A clear picture of what your business looks like to include costs (or projected costs) on all business operations and activities you’ve identified.
Strategic (Long Range) Plan – Details of where you think your business will be in the next year, three years and five years.
Succession Plan – Details of devising and implementing a plan for transferring, selling or liquidating the business if or when it becomes necessary.
Executive Summary – A part of the Introduction that briefly summarizes every aspect of the business and all information contained within the body of the completed business plan, and is placed in the beginning, but is prepared last.
Appendix – Includes any type of documentation that supports your business plan (e.g., agreements, licenses, corporate documents, studies, articles, etc.).
Introduction – Includes the cover page, cover letter, executive summary and table of contents. While these documents are placed in the front of the business plan, they are always prepared last.
Glossary – Includes all terms that are unique to your business or industry. Don’t assume the terms throughout your business plan are familiar to individuals in your company, bankers or investors. Even if they are familiar, adding a glossary can ensure that all parties understand how each term is used specifically in your business.
Table of Contents – List and number each section of the business plan. It makes it easy for persons reviewing it to quickly locate their area of interest.

Once completed, make sure your business plan is free of typographical errors, is constructed in a neat and legible format and all pages are numbered. Also, appearance is as important as content. Hiring a professional word processor is highly recommended. Assign or hire one or more individuals to proofread. Once completed, each copy should be laser printed or copied with the best equipment available then bound before use and distribution.

Excerpted from, "The Start of Something BIG: Your Ultimate Guide to Writing a Dynamic Business Plan."