Monday, November 25, 2013

Do you have a handle on the finances of your business?

Keeping up with all of the day-to-day demands of operating a small business can cause owners to lose sight of the company’s overall fiscal situation. Owners should be proactive with company finances; here are a few tips that may be useful:

Know where you are and what your targets should be. A plan is useful and need not be too formal. As milestones are reached know how you are going to get to the next level and what financing may be needed.

How liquid is the business? Having immediate access to cash can reduce borrowing costs. With funds available you are able to make the most of capital-intensive business opportunities.

If sales are growing but there seems too often to be a cash shortage after bills are paid, the business may have profitability issues. Monitoring profit margins instead of gross sales will help determine what the business is actually earning.

Stay involved
Business liquidity, profitability and other key ratios are important to evaluating the business – but only if owners spend time reviewing the information. It is necessary to schedule time every month to actually review the data.

While it is not necessary to review financial data daily, consistent reviews are the only way to know if the business is improving or regressing. Owners owe it to themselves and to shareholders to stay aware of the financial health of the business.

I hope the tips are useful, let me have your thoughts.        

Monday, November 18, 2013

Avoid those killer start-up errors

Are you planning to start a new business?  There are many hazards that might be faced and avoiding these can help improve the chances of success.
Here a few hazards new entrepreneurs should try to avoid.

1. Under financing: lack of sufficient funding is probably the most common reason new businesses fail. Many entrepreneurs fail to assess the burn rate of the capital they have. Often the most costly step is hiring too many people. Try paying people with equity rather than salary, you will end up with a much more committed team and preserve cash. Don’t overspend on equipment and technology you really don’t need to get going.
Also, many start-ups fail to realize that few customers pay promptly; this can severely impact cash flow.

2. Starting without a plan: enthusiasm over a good idea is over-rated. An idea is only an idea and without a well-developed business plan chances of success are minimal. It is also very difficult if not impossible to raise financing without a plan.

3. Fear of Failing: It is natural to have some fear that the business will not succeed and certainly problems will arise and challenge your business acumen. However, if the concept is strong and validated you should not let fear of failing stop you from trying to live your dream.

4. Inflexibility: with start-ups you have to be prepared to change on the go. Rarely does the plan get executed without a hitch. Marketplace dynamics, competitive behaviour and economic conditions can dramatically impact the plan. Ability to react and change plans may be a key to survival.

These are some hazards you may face in starting a business. There are others but avoiding these may help improve your chances of a successful start in business.

I hope this helps you get underway. Let me know.

Monday, November 11, 2013

How do you measure your Financial success?

How do you measure the success of your company? Many small-business owners rely on two traditional financial reports: the balance sheet the income statement. The first tells you what your business owns and owes at a particular point in time, and the second tells you what profit you’ve made over a period of time.
Although both are important here are a few other controls to monitor the health of your business:

• Cash Flow. Are you generating sufficient cash to operate? Is bank financing required to help fund growth? Ever wonder at the end of the year where all the money went? This will provide the important tracking.
• Accounts receivable Collections: Cash flow is dependent on timely collection of receivables. As receivables grow cash flow is stretched thinner. Slow collections can affect liquidity and your ability to cover short term obligations.
• Average sales per customer. As overall sales grow it is important to maintain growth with existing customers. This is often easier than finding new business and a measure of your success in gaining repeat business.
• Margin. Don’t become too focussed on net revenue and become content if this increases yearly. It is important that revenues don’t cost more to generate each year. Operational efficiencies are important to monitor continuously.
Sometimes businesses can measure their performance against competition within the industry. That may help highlight areas where improvement may be needed.

These were just a few considerations. Please let me hear your thoughts.

Monday, November 4, 2013

Do you have a crisis management plan?

Is your organization struggling to deal with a crisis or plans to ensure the business exposure to a crisis is minimized?  It is not uncommon to see this paralysis because managers often prefer not to deal with the situation.
Let’s look at some steps that can be taken to help build a safety net.

1. Maintain sensitivity for even minor events. Some could have the potential to develop into major issues that could be a blow to the business.
2. Plan ahead with a look to long term strategies as a guide. Work out best and worst case scenarios to help prepare for unseen events.
3. If a crisis arises act quickly; procrastinating rarely improves the situation.
4. Create a crisis management team with a mandate to identify potential problems and empower them to enact changes to protect the business.
5. Provide effective training to key employees and take steps to eliminate small issues so they don’t erupt into major problems.
6. Explore optional solutions and look for new ground to operate from if standard solutions prove inadequate. Think outside the box for solutions.
7. Don’t panic in a crisis situation. As the leader employees want strength. Keeping a cool head may facilitate focussing on the issues and getting a solution right.The key to avoiding or minimizing the impact of crises that may arise is to be proactive ahead of adversity.

I hope these tips provide insight into ways to fight through any situation that may arise with minimal damage to your business.