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Posts Tagged ‘Three’

Copyright (c) 2008 Schauffler Associates LLC

The heart of any useful business plan – and any plan that attracts financing and partners, is the financial projections section. Most important to those projections are the assumptions used.

TIP 1: BE CAREFUL ON ASSUMPTIONS

The core of any usable business plan, and also any plan that is created in order to find financing or partners, are the financial projections. Then, most important to those projections are the assumptions used to create these projections.

Are the assumptions understandable? If you’ve written your business plan because you’re looking for an investor or lender, don’t assume that the reader can understand your business plan assumptions. By the time you are finished with your projections, you will be very familiar with the assumptions you used to construct your financial models. A first time reader of your business plan will not. Are you certain that you made it easy to follow your logic? It’s better to explain a little more than you have to, than not explain enough.

The best kind of projections are well-rounded ones. Telling the investor that his projected return is 52. 444% is not any more impressive projecting a return of 50%. Many entrepreneurs come down with a bad case of “spurious exactitude” when doing projections. This would be a very contagious disease.

TIP 2: BE CAREFUL WITH “WHIZ BANG” SCENARIOS

Many people think that the more complex their financial models are, and the more “what if” scenarios they concoct, the higher their chances of being funded. A variation of this is the business plan that has projections seemingly for decades. 50 pages of imaginary numbers are not better than 5. Particularly in this age when technology is evolving so quickly, it is impossible to accurately forecast 3 years out, let alone 7.

Concentrate instead on answering these questions: How fast are we going to use the investor’s money, when does the company’s cash flow turn positive, and what margins can this company earn? It is definitely better to KISS (Keep It Simple, Sam) than to try and wow your business plan reader with outlandish scenarios that they will know instantly are not realistic.

TIP 3: THE HARD TRUTH ABOUT BUSINESS PLAN SOFTWARE

There are a number of business plan software packages that sell thousands and thousands of copies. Software can be very helpful in developing financial models and preparing projections. But they are not going to write the narrative sections of the business plan for you, so you may be disappointed in the results you get from using a computer program in building your business plan. How can the programmers of “Super Duper Hot Business Plan Package” or whatever the software is called, possibly know how your plan should look since they have never met you and do not know anything about your company? Software can’t think for you.

Much better would be to learn what you need in your plan and then simply write the plan with the correct information. You can go to Small Business Tool Kit (www.toolkit.com) for an excellent outline. This site is a free Wiki site to all who use it; believe it or not, they are not selling anything! Amazing, huh?

For the average cost of these software packages you could take your family out for dinner, and at least two of them could order dessert. Why not do that instead of wasting you money on one of these software packages that will not really make things any less complicated for you anyway?!

The overall idea here is: Make sure your assumptions are simple and easy to accept, then your financial projections and the example scenarios you create will also impress and inform your business plan readers.

It is easy and effective to plan well in small business. Planning doesn’t take a lot of effort, it shouldn’t take a lot of time, and the best part is: it’sfree. Use these 3 simple steps to get an advantage over the competition.

1. Mission and Objective

What is the overall purpose for your business? Your answer should be detailed, specific, meaningful and measurable. To say “make a lot of money” is not an objective. To say “consistently exploit advantage X to create Y amount of value by date Z” is better. A good objective will be realistic, but ambitious. It will focus your attention and push you to take reasonable risks. It specifically defines what “success” looks like. Although the world of small business is constantly changing, with new opportunities and new threats all the time, your mission should provide a solid, consistent framework. Within that framework, you will plan, strategize, innovate and execute in a changing marketplace.

2. Strategy

How will you attain your objective? What fundamental rules or method will you use? That is your strategy. Strategy is a long term approach that underlies all of your short term actions, in the service of your objective or mission. A good strategy, like a good objective, will be detailed. It should be detailed enough to provide answers to a variety of important questions that you will encounter. But it should be general enough to only change occasionally. What major tools, methodology or resources will help to achieve your goal? What kinds of advantages, characteristics or unique qualities will allow you to stand out from the competition? These kinds of questions will help you develop a strong strategy.

3. Tactics

Tactics are the short term, day-to-day and week-to-week measures taken to support the strategy. Good tactical decisions allow you to compete more effectively. Tactics are inspired by two types of sources–internal and external. Internally-inspired tactics come from new initiatives and new projects that you think will help to further success. Externally-derived tactics are responses to short term changes in the marketplace, in the overall economy, feedback from customers or new moves by competitors. Success requires flexibility. Flexibility is what good tactical decisions are all about. By staying flexible and responsive to both internal and external developments, small businesses can find success consistently.

Here are the Three Deadly Weapons that can wreck the sale of your business. These weapons are based upon experience, discussions with many business owners, and many years of representing businesses in and out of the courtroom.

In selling a business, you can learn how to avoid the three mistakes that will literally cut the sales price of your business in half. Think about having a business that should be worth $750,000 but only being able to sell it for $375,000.

There are 700,000 businesses that will come on the market and change hands every year. That number represents 30% of 2,500,000 businesses that owners will want to sell every year. 70% of the businesses do not sell. Many of those end up being liquidated for lack of a buyer.

If you do not pay attention to three factors in selling your business, you literally may only receive half of what you should get.

1. Not Understanding the True Value of Your Business.

Albert wants to sell his business that has a ten-year track record. The business provides Albert an income of $150,000 per year in the retail area. Albert has done his own valuation of what he thinks the business should sell for and wants a price of $1,500,000 for the business. That price is a factor of 10 times the net income. Unfortunately, in the retail sector of Albert’s business, the going rate is a multiple of three times the net income or $450,000.

Because of his unrealistic price, Albert will not be able to sell his business.

2. Not Understanding How The Sales Proceeds Will Be Taxed When Received.

Janet owns a business in a corporation. The sale is proposed to her as a sale of assets and no assumption of liabilities. Although the sale of assets will be treated as a long-term capital gain at the corporate level, she has not considered how she will get the money out of the corporation and into her hands personally. Unfortunately, she has also signed the Purchase and Sale Agreement without consulting her attorney or her accountant. How much tax will she have to pay?

There are a number of options that could have been considered on how to structure the transaction. Unfortunately, you have to game plan and run the numbers on all of the options BEFORE you sign the purchase and sale agreement. Some owners have actually unintentionally structured transactions by not planning advance with the result that they were taxed at ordinary income rates rather than long term capital gains rates!

3. Business Owners Selling Must Follow The Boy Scout Motto ? ?Be Prepared?

After working for twenty-five years, two owners decide that they want to sell their business and retire. They begin working less and have not trained anyone to do the technical things that they do so well. Of course by working less, less technical tasks get fulfilled and less income rolls in. The best preparation would be to sell before income goes down and better yet have installed the six systems that literally double the value of your business.

One needs to begin preparing to sell a business probably years before the business is sold or even offered for sale. There are six systems that every business must have. Without them, the business is not an investment that buyers drool over.

This test will tell you whether your business has those systems:

1. If you take off all of next week and do nothing in your business, what will happen to the income of the business?

Increase Decrease Unaffected (Circle one)

2. If you take off all of next week and do nothing in your business, what will happen to the flow of new business?

Increase Decrease Unaffected (Circle one)

3. Do you have a written business continuity plan? Yes No

4. Do you have videos or audios of your plans for the business over the next three years? Yes No

5. When someone calls your office to schedule an appointment, does someone different answer the phone and/or do they have a set script to use to answer the call and close the appointment? Yes No

6. Who is your favored buyer for your business?

___________________________________

Do you have a name ready or do you have no clue whom the buyer would be?

7. If you do not come back from your next appointment, ever, who will sign checks at your company?

____________________________________

8. Will your death cause your company’s lines of credit to be called due?

Yes No

9. Do you have a checklist to be followed if you are suddenly disabled and unable to care for the business? Yes No

10. Are you ready to learn how to implement the necessary steps for an effective exit strategy? Yes No

How to publish a book is a question many writers ask themselves. There are three options to publish a book:

Self-publishing

Vanity/subsidy publishing

Commercial publishing

Is self publishing right for you?

Self publishing means you not only write the book, you’re responsible for every part of the production and sales process. True self publishing means you own the International Standard Book Number (ISBN). That’s important because you set the sales price and discount for the bookstores.

An offset printer is the most cost effective method of printing 500 copies or more, but you’re responsible for all the formatting, interior design and artwork. If you expect the book be profitable, offset printing gives it the best chance. An offset printed book can be less than 20% of the cost of a print-on-demand.

Print on Demand is simply a technology that allows as little as one copy to be printed at a time at a reasonable cost. A 250 page trade paperback with four color covers will cost about $5.00 each.

It’s a huge undertaking but some titles can be a success when they’re self published.

Vanity/Subsidy Publishing

You can use a publish-on-demand or vanity/subsidy company such as Iuniverse, authorshouse or xlibris. The fees are reasonable and you can print as few copies at a time as you need. One company, lulu.com doesn’t charge any fees upfront, although you need to have your book, including the cover artwork and formatting all ready to go. Again you can have one copy printed or one hundred. These vanity/subsidy houses will take care of getting your title on amazon and in the Ingram database that the bookstores use to order books.

If your goal is to see your book being sold in bookstores then it makes sense to forgo the self publishing route and consider selling your book to a commercial publisher.

Mainstream Commercial Publishers

There is a bit more cache when a book is published by a mainstream commercial publisher rather than self published. Publishers vary in the types of books they’re interested in. Some only want nonfiction narrative, some cookbooks, others business books. There are a number of resources, both websites and books, which describe what types of books each publisher is looking for, their contact information, and often the name of the editor to contact.

Commercial publishers will pay you an advance, which is simply a fee for allowing them to publish your work, and take care of all the editing, formatting, cover design, and marketing. The advances can run from a few thousand dollars to several hundred thousand dollars. Once your book is accepted, you do not have to pay the advance back, unless of course it’s stipulated in the contract, but that is very rare.

Commercial houses have the distribution and sales force in place to get your book into bookstores. Most bookstores, both independent and chains, do not stock self-published books.

Hopefully this information will help you make the decision on how to publish a book.

When you have home based business you have to fill many roles in order to keep the company moving. One in particular is the role of the company accountant or bookkeeper. Many businesses use QuickBooks to handle their accounting needs as do I. The benefits of using QuickBooks are endless. Mainly the program provides an easy way to invoice your clients and keep track of your accounts.

However, there is a learning curve using QuickBooks to its full capacity. Also, you want to spend their time doing what’s most important business and that’s taking care of your customers. So if you can budget this, you will see that there are benefits outsourcing your book keeping. While I recommend that you perform the invoicing yourself, I recommend outsourcing to a book keeper for the other accounting tasks if your business budget allows.

Here are three very good reasons why you should consider outsourcing to a book keeper.

First of all it saves you time and energy. Depending on the size of your business, it could save you a few hours a week. Could you imagine having a few extra hours a week? So here’s how they save you time.

Most book keepers instruct you to keep all of your receipts and they post them for you when you send to them. While you want to view reports of your finances, you want to have the book keeper do the leg work by posting payments, receivables and organize and categorize your business according to the accounting software they use.

Most book keepers ask you to submit your materials monthly, bi monthly or quarterly. It depends on your business and the volume of transactions you have. Most work with QuickBooks and categorize all of your transactions in the software itself.

The second reason is you can focus on being the best at your trade and helping your customers. Remember you are offering a service and you need to be better than your competition. So why spend time on something that doesn’t make your business better?

For example, you know every detail of the product and service you provide to your clients. You’re considered a professional and are expected to know the latest trends in you industry. You can expect the same from the book keeper and you don’t have to learn every detail of their trade.

Finally, the book keeper is able to provide information to your CPA to file taxes or they can help you file your taxes.

If you are using Quick Books you are provided with many robust reports to help you file you taxes. The book keeper will be able to provide assistance and advisement.

Whether you use a CPA, your book keeper or yourself to file your businesses taxes the bookkeeper builds and provides the financial snapshot of your business. The bookkeeper then becomes a valuable resource to your business.

When you are always pressed for time to get your projects completed, it may be best to out source your businesses book keeping needs to save you valuable time.