Finance & Grow Your New Business: Get a grip on the money

by Angie Mohr

Overview

Learn how to grow your small business using sound financial planning. Entrepreneurs need to know how to measure the effectiveness of their operations, human resources and marketing in order to pinpoint inefficiencies and maximize profits. This book outlines all the ways to raise capital and then make it work for you!

Product Details

ISBN-13:	9781770408784
Publisher:	Self-Counsel Press, Inc.
Publication date:	04/15/2012
Series:	101 for Small Business Series
Sold by:	Barnes & Noble
Format:	eBook
Pages:	256
File size:	6 MB

About the Author

Angie Mohr CPA, CA, CMA is a chartered accountant and certified management accountant. She can be heard regularly on radio with Small Business Survival Tips. Mohr is also a business columnist for a large daily newspaper and has written many articles for business magazines. Mohr believes strongly in planning the entrepreneur’s business and personal life holistically. Her approach helps business owners to understand their business better and to run personally satisfying lives and immensely lucrative businesses. Angie is the author of these books from Self-Counsel Press: * Bookkeepers’ Boot Camp * Financial Management 101 * Finance&Grow Your New Business * Start&Run a Bookkeeping Business

Table of Contents

INTRODUCTION xix PART 1: FINANCE YOUR BUSINESS 1 1 So, What Kind of Business Should You Start? 3 Introduction 3 Why Do You Want to Be an Entrepreneur? 4 Money 4 Freedom 4 Empire building 4 What Kind of Business Should I Start? 4 Manufacturing business 5 Retail/Wholesale business 5 Service business 5 Eight Questions to Ask Yourself 6 2 Is It a Business or a Hobby? 9 Introduction 9 What Is the Difference Between a Business and a Hobby? 10 It’s Not Always about the Money 11 Contents numbers 101 SMALL BUSINESS for v 3 Build or Buy? 13 Introduction 13 Building a Business from Scratch 14 Buying an Existing Business 15 Financial Considerations in the Build-versus-Buy Decision 16 Considering a start-up business 16 Considering a business purchase 18 What’s Right for You? 22 4 Getting Your Personal Finances in Order 23 Introduction 23 Your Retirement Goals 24 How much will you need at age 60? 25 How much do you have to put away between now and retirement? 25 The Concept of Net Wealth 26 Debt Management 26 Your Credit History 28 Insuring Your Assets 29 Life insurance 29 Mortgage insurance 29 Property and casualty insurance 30 Health insurance 30 5 Setting Your Business Goals 33 Introduction 33 Chasing the Almighty Buck 33 What Is the Purpose of Your Business? 35 The Business Plan 36 What Should Your Business Plan Include? 36 The Monthly Management Operating Plan 36 Your Exit Strategy 39 6 Putting Your Money Where Your Business Plan Is 41 Introduction 41 Projecting Your Funding Needs 42 Paying for the start-up costs 42 Providing liquidity to the business 43 Sources of Funding 45 A Bank’s Perspective 46 vi Finance&Grow Your New Business: Get a Grip on the Money Contents vii 7 Debt Financing 49 Introduction 49 Your Own Resources 49 Credit Cards 50 Suppliers 50 Friends and Family 51 Banks 51 Leasing Companies 52 Private Lenders 54 8 Equity Financing 55 Introduction 55 Common Shares 56 Preferred Shares 56 Partnership 56 Joint Ventures 57 Venture Capitalists 58 9 Risky Business: How to Assess Business Risk 59 Introduction 59 Secured Loans 59 Personal Guarantees 60 Fixed Price Agreements 60 Interest Rate Risk 61 Foreign Exchange Risk 61 Economic Dependence 61 10 Home Sweet Home 63 Introduction 63 Does It Really Save Me Money? 63 How Will It Affect My Personal Life? 65 The neighbors 65 The on-call syndrome 65 The convenience 66 Willpower 66 11 Choosing Your External Team 69 Introduction 69 Your Lawyer 70 Your Accountant 70 Your Financial Adviser 72 Your Board of Directors 73 12 Assessing the Competition 75 Introduction 75 Identify the Competition 76 What Do They Do Right and Wrong? 76 How Are They Positioned to Take Advantage of Opportunities? 77 How Vulnerable Are They to Changing Market Conditions? 77 How Do You Stack Up? 77 Competitive Analysis 78 Intelligence Resources 78 13 Forecasting Profit 81 Introduction 81 Keep Your Bookkeeping Up-to-Date 81 Always Forecast a Rolling 12 Months 81 Tighten Up Billing and Collection Policies 82 Hire Someone to Do It If You Can’t 82 Keep on Top of Changes in the Operating Environment 82 Keep the Work Coming In 83 Continually Assess New Sources of Financing 83 14 Investing in Labor 85 Introduction 85 The Cost of an Employee 85 Salary 86 Employer taxes 86 Office space 86 Fringe benefits 86 Calculating the Benefit 87 Direct labor 87 Indirect labor 87 Your Billing Multiplier 88 Five Signs It’s Time to Hire 88 15 Investing in Equipment 91 Introduction 91 To Buy or Not to Buy 91 viii Finance&Grow Your New Business: Get a Grip on the Money Contents ix Erosion 92 Financing 92 Risk 93 16 Financing Expansion 95 Introduction 95 Horizontal Expansion 96 Increase your capacity 96 Expand your geographic area 96 Develop new products or services 96 Develop a franchise 97 Find new markets for your existing products and services 97 Vertical Expansion 97 The Dangers of Expansion 97 Liquidity issues 97 Triggering call provisions 97 Increase in fixed costs 98 Calculating the Benefits of Expansion 98 Finding the Money to Expand 100 PART 2: MANAGE YOUR BUSINESS GROWTH 103 17 The Successful Entrepreneur 105 Why Small Businesses Fail 105 Managing versus Doing 106 The Four Foundation Walls 106 Entrepreneurial drive and vision 107 Record keeping 108 Financial management 108 Planning and strategizing 109 18 The Life Cycle of a Business 113 The Three Stages of a Business 113 Infancy 113 Maturity 115 Decline 115 At What Stage of the Life Cycle Is Your Business? 116 How Can My Business Use This Information? 116 19 A Systems Approach 119 Anatomy of a Franchise 119 A Real-Life Example 120 Benefits of a Systems Approach 120 Your Business as a Machine 121 Becoming the Head Mechanic 121 20 Analyzing the Status Quo 125 Entrepreneurial Drive and Vision 125 Record Keeping 126 Financial Management 126 Planning and Strategizing 127 The Busy Entrepreneur 127 Defining Processes and Procedures 128 21 Growing Your Business 131 Your Business Goals 131 Profit 132 Freedom 133 Recognition 133 Peace of mind 133 Planning for Growth 133 Good versus Bad Growth 134 The Three Ways to Grow Your Business 134 Attracting new customers 134 Selling them more 135 Selling to them more often 136 Leverage Revisited 136 22 Getting a Handle on Your Revenues 141 How Many Customers Do You Have? 141 How Often Do Your Customers Come to See You? 143 What Do Your Customers Spend? 145 What Kind of Customers Do You Have? 145 Fire Away! 146 The Next Step 146 23 Your Strategy 151 Your Business’s Vision Statement 151 The Mission Statement 153 Your Operational Plan 153 x Finance&Grow Your New Business: Get a Grip on the Money Contents xi 24 Testing Change 159 Advertising 159 Prices 161 Environment 162 25 Your Product or Service 167 Why Should Customers Buy from You? 167 Competing on price 167 Competing on value 168 How Is Your Business Different? 168 Selling a Product 169 Up Selling 169 Providing a Service 170 Teaching Your Customers 172 26 Your Customer Interactions 175 Telephone Interactions 175 The Art of Closing the Deal 175 Getting more people to call 177 Increasing your conversion rate 178 Using Scripts 179 AWord about Screening Callers 181 Tracking Conversion Rate Changes 182 27 Your Marketing and Promotions 185 The Lifetime Value of a Customer 185 Covering the Cost of the “Dry Holes” 187 Customers Beget Customers 188 28 Your People 191 How Do You Know When It’s Time to Hire? 191 What Will a New Employee Do? 192 The Laws of the Land 194 Attracting Quality Employees 194 The Interview 196 Hiring from an Employment Agency 196 Goal-Based Compensation 197 So Long, Farewell, Auf Wiedersehen, Adieu 197 29 Your Systems 201 The Goals of Systemization 201 “How We Do It Here” 202 Continuous Improvement 203 30 Business Acquisitions 209 Another Way to Grow 209 What Are You Buying? 210 Asset purchase 210 Share purchase 210 Goodwill 211 Customer lists 211 Valuing the Acquisition 211 Floor price 212 Ceiling price 213 Evaluating the Choices 213 31 Exit Strategies 217 Your Personal Goals 217 Heading for the Exits 217 Passing on the business to your children 217 Selling the business to an outside party 218 Liquidating your business 218 What’s My Business Worth? 219 Getting Ready for the Sale 219 The Mechanics of the Sale 219 32 What Happens Next? 223 A Last Word 224 Appendix 1 Present Value of $1 225 Appendix 2 Present Value of an Annuity 227 Appendix 3 Future Value of an Annuity 229 Appendix 4 Resources for the Growing Business 231 Glossary 233 xii Finance&Grow Your New Business: Get a Grip on the Money Contents xiii Checklists 1 The Successful Entrepreneur 110 2 The Life Cycle of a Business 117 3 A Systems Approach 122 4 Analyzing the Status Quo 130 5 Growing Your Business 138 6 Getting a Handle on Your Revenues 149 7 Your Strategy 157 8 Testing Change 164 9 Your Product or Service 173 10 Your Customer Interactions 183 11 Your Marketing and Promotions 189 12 Your People 199 13 Your Systems 206 14 Business Acquisitions 212 15 Exit Strategies 221 Diagrams 1 The Four Foundation Walls 107 2 The Life Cycle of a Business 114 3 Typical Time Chart for a Business Owner 127 4 Recommended Time Chart for a Business Owner 128 Tables 1 A Quick Reference to Ratios 53 2 Equity Statement for a 50/50 Partnership 57 3 Cash Flows for Grace’s Market Garden 99 4 Discounted Cash Flows for Grace’s Market Garden 100 Samples 1 Cash Flow Projection for a Start-Up Business 17 2 Discounted Cash Flows for a Start-Up Business 19 3 Cash Flow Projection for a Business Purchase 20 4 Discounted Cash Flows for a Business Purchase 21 5 Business Plan Outline 37 6 Cash Flow Projection 44 7 Cash Inflows 46 8 Customer Survey Form 143 9 Billings by Customer Report 144 10 Terminating a Customer 148 11 Vision Statements 152 12 Mission Statement 154 13 Telephone Interactions 176 14 Potential Customer Interaction Review Form 180 15 Telephone Script 182 16 Documenting Your Work Processes 193 17 Employment Advertisement 195 18 Human Resource Policy 204 19 Valuing a Business Acquisition 212 Worksheets 1 Retirement Planning 27 2 Competitive Analysis 79