Category Archives: Finance

What makes or breaks a successful small business?

business colleagues high fiving

What makes or breaks a successful small business? There are several key commonalities among businesses that succeed, according to several studies polling entrepreneurs.

Here’s a closer look at four things successful business owners do right—and one thing they need to do better.

What successful entrepreneurs do right

  1. They start strong. In a poll of 500 successful entrepreneurs, a whopping 84% of respondents say their companies achieved profitability within their first four years in business. In fact, 68% became profitable within the first year. Only 8% became profitable after their fifth year in business, suggesting that the first years in business are make-or-break ones for most entrepreneurs.
  2. They focus on finding new customers. Small business owners in the survey say finding new customers is their top business challenge—far ahead of cash flow issues or dealing with the competition. Smart entrepreneurs stay focused on continually generating new leads and closing new business.
  3. They put cash back into the business. Forty percent of business owners say whenever they have surplus cash, they put it back into the business rather than paying themselves, a separate study found. What’s more, 47% tap into personal savings to finance their businesses at one point or another.
  4. They work hard. Never let it be said small business owners are slackers. Some 86% work on the weekends; 23% take fewer than two vacation days total all year long; and of those who do take vacations, 75% work during their time “off.” Continue reading

How much cash should a small business keep in reserve?

piggy bank cashCash is the fuel that makes a business run. It is needed to pay salaries including your own, fund marketing programs to acquire and retain new customers, invest in equipment and facilities, pay rent, supplies and many more day-to-day activities. Most financial experts recommend three to six months of operating expenses, but using this for every business in every situation is misleading.

To determine how much cash you need, you must look at the following key areas.

How Much Cash Have You Been Using?

If you’re an established business owner, look at your monthly cash flow report (or go to the next paragraph if you’re a start-up). This report will provide an historical and seasonal perspective. Note the cash received from sales and the cash spent. The net of these two is often referred to as the “net burn rate.” For example, if you have $50,000 in sales and $30,000 in expenses, then your net burn is +$20,000

Your “gross burn rate” only takes cash expenditures into account; in our example, that’s $30,000 and is the more conservative amount, since it does not assume any sales are made. Historical spending patterns are a good starting point in considering future spending plans.  Continue reading

Where’s the Money?

10 Types of Small Business Financing and How to Qualify

Choosing the right financing option for your small business—and figuring out which ones you can get—can feel confusing or overwhelming.

This guide will help you understand ten popular types of financing often available to small businesses.

More importantly, it can help you understand which ones are available and appropriate for your business now.

Continue reading

Should your startup business get a loan?

approved small business loan applicationMany startup small business owners take pride in pulling themselves up by their bootstraps and not using financing to get their companies off the ground. But that approach can backfire, a new study in the Journal of Corporate Finance suggests.

The study, conducted by Florida Atlantic University faculty, assessed what happened to companies that took on debt during their first year of operation.

The authors discovered businesses that took on debt are more likely to succeed (as long as they use business debt as opposed to taking on personal debt).

What’s more, they’re also more likely to achieve higher revenues.  Continue reading

How Good Is Your Revenue?

by Kelly Deis of SoundPoint Consulting

A dollar is a dollar. That’s true. And, all revenue is equal. Right?  Well no, not in an investor’s or potential buyer’s eye. So what makes some revenue good and other revenue not quite as good?

1. Recurring

Recurring revenue is highly desirable because is it known and predictable. The best example of this is an auto-renewal fee or service charge periodically charged directly to a customer’s credit card. Once the initial sale is complete there are no more costs to acquire a customer. The revenue stream is much like an annuity. Continue to provide the goods or services as promised and the revenue keeps coming in.

Great examples of this are insurance premiums and streaming fees. Once customers have decided to purchase the product – and assuming they remain content, they are happy to have their credit card billed automatically.

In contrast, consulting and attorney fees are often one-time in nature. Revenue ceases when the project is complete and the engagement ends.  Continue reading

Finding the best financing option for your small business.

finding-the-best-financing-option-for-your-small-businessDue to the growth of online lending, the quickest way to get money in the bank isn’t always by going to the bank!

During this workshop, Lendio’s Brock Blake reviews the alternative sources of financing that may make better sense for your business and are easier to obtain than your traditional bank loan. Brock presents sought-after information and insights that are sure to help you identify the best source of financing for your company – and help you secure it!  Continue reading

Here’s how to fund your business.

by Kelly Deis of SoundPoint Consulting

So, you have a great idea for a start-up or you want to expand your current business. You have the perfect business plan and are confident that both revenue growth and profitability are sure-fire.

Problem is, you don’t have the capital to fund the start-up or expansion. If that is the case, here are a few ways to fund your business. Which one is right for you?  Continue reading