5 Valuable Ways Business Funding Will Scale Your Business

Most businesses think that business funding is something that you need when your business is short on cash or times are hard. A lot of businesses go out looking for business funding when the business is not good. The time to get business funding is not when your business is doing horrible or you are strapped for cash.

If your business is doing great, there is no better time to go out and get business funding. Why?

1) It’s easier to qualify
2) You can get better rates and terms
3) It’s easier to grow your revenues with a capital infusion
4) It’s easy to utilize the simple formulas that we have in here to scale your growth.

DON’T WAIT FOR THINGS TO GO BAD; IF YOU ARE DOING GOOD – BUSINESS FUNDING CAN SCALE YOUR BUSINESS TO THE NEXT LEVEL.

This is how you can determine if business funding can help your business grow. There are 5 simple steps which will show you the value of business funding.

Step 1: What Do You Need To Grow Your Business?

While this may sound like a stupid question, it is a very important question.

The FIRST STEP you need to take is determining what your business needs to grow sales. Most businesses need one or more of the following?

• Inventory and More Products
• Expanding Existing Line of Products
• Adding Additional Services
• Marketing and Advertising
• Sales People or Personnel
• Machinery, Equipment, Software or Hardware
• Expanding into other Territories or Adding Another Location

Step 2: How Much Money Do You Need to Achieve That?

How much money do you need to achieve that? Again, another simple question and it may sound stupid. But you need to start off with basic questions.

How much would you like to invest into your business or how much do you need to grow your business?

$10,000, $20,000, $40,000, $50,000, $100,000 +

Step 3: Where will the come from?

There are only three forms of cash that flow into a business:

REVENUES FROM SALES
INVESTMENT DOLLARS
DEBT: A LOAN OR LOANS

Where will the money come from to help your business grow?

If you have an existing business and you want to invest in your business you either sell more or you have great close out balances and have enough reserves to re-invest. If you plan on selling more; most sales and marketing strategies require some sort of cash infusion. If that is not the case you only have two options: an investor or a loan.

Step 4: If you had the amount of money you need to do what you want in your business – there are two key questions: If you know the answers to these two basic questions; you will know immediately how to increase your sales fast.

1. How much money will you make with that money?

In technical financial terms – What will be the ROI (Return on Investment)?

2. In what time frame will you make that money back?

In what time frame will you achieve the anticipated or projected ROI (Return on Investment)?

EXAMPLE (CASE STUDY): (Simple Version)

If someone gave you $100,000 – what would you do and how would that impact your business.

Example:

I (YOUR NAME) would take $100,000 and allocate that money into marketing and increase personnel. (NEED AND WANT)

I (YOUR NAME) would take $100,000 and make 50% return in 5 months. The equivalent of 10% return per month…

Based on this information, you are clear on how you would use the money, what type of return you would make and in what time frame.

The next step; is to determine if you can?

• Increase sales to $100,000 and have the extra money to do this.

• If you obtained an investor how much would they want? Most investors will either charge you anywhere from 10% to 30% in interest or they will want 20% to 50% of net earnings. You have to figure out the cost of capital versus your return.

• If you obtain a loan the interest rate may range from 7% to 30%. You need to factor in the cost of capital versus your return.

EXAMPLE (CASE STUDY) – Crunching Numbers:

For Existing and Operational Businesses

Food Distributors of America currently generates $50,000 per month on an average. At the end of the month they close out $5,000 positive which is about 10% net. Currently, there cost of inventory is $20,000. This means every month they purchase $20,000 to make $50,000 Gross. The question you need to address is: How much are my costs to generate gross earnings? Once you know that, you know how much you need to increase gross earnings by 10%, 30%, or even 100%. In this example, we can increase earnings by 100% by making a capital infusion of $20,000.

We know that $20,000 generates $50,000 per month. We know that $20,000 and $50,000 of gross sales generates $5,000 per month net; which is 10%. They want more inventory because they have prospective buyers.

Conclusions:

• An additional $20,000 would generate an additional $50,000 in gross sales; increasing earnings to $100,000. This is a 100% increase in gross sales.

• An additional $20,000 would generate an additional $5,000 in net margins; increasing earnings by another 10% monthly = 20% monthly.

• If this business can do this every single month, they would increase net earnings by 10% x 12 months = 120%.

Not all businesses can do this. Even if you increase your net earnings by 2% per month = 24% increase in 1 year.

Businesses that carry inventory have an easier time achieving this.

Businesses that sell every day; such as restaurants, hair salons, and anyone who sells consumer products; have an easier time achieving this.

Seasonal businesses can also achieve these types of returns.

Step 5: Calculating Cost of Capital versus Return on Investment (ROI).

If you don’t have the extra money; you will need an investor or some sort of business funding or a loan.

There is nothing wrong with taking on investors or a loan. Most successful businesses have grown with capital infusion. Think of this way. Would the New York Stock Exchange or would the Chicago Board of Trade exists if businesses did not take on investors or debt? All businesses on major stock and debt exchanges have investors or debt.

How do you calculate ROI and Cost of Capital? Easy as 1, 2. 3.

Let’s assume you are able to obtain a loan for $50,000 to invest in your business. You project that you will make 5% return per month for the next 5 months = 25% return. Let’s assume you get a loan with a 12% annual rate = the same as 1% per month.

5% per month (your return) minus 1% = 4% your new return
4% x 5 months = 20% (after cost of capital)

The interest rate on a loan is important. However, if you know how to make a Return on Investment with a loan you will WIN in the end. More important, this is known as OPM (Other People’s Money). Making money with other people’s money! Read the Art of the Come Back, by Donald Trump. Do you think Donald Trump, Warren Buffet, and others utilize their own money to make money? The answer is NO.

The IRS Wants to Know, Are You Running a Business or a Hobby?

Being a small business owner brings with it a whole host of challenges. Not only are you concerned with taking care of your client’s needs, getting paid and paying your vendors. You also have to be concerned with staying compliant with federal and state laws as well as local guidelines. Small business owners, especially sole proprietors, are at an increased risk of audit. The federal government believes that self-employed people are grossly under-reporting their income and over-reporting their expenses. According to the website Tax Help Online, “You might be shocked to learn that 20% of all small business audits involve disallowing deductions because the IRS reclassifies the small business as a hobby under the so-called ‘hobby loss’ rule.” Internal Revenue Code Section 183 (Activities Not Engaged in For Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule”. As a small business owner, it is your responsibility to make sure your business is viewed as a legitimate business in the eyes of the IRS and not a hobby.

Below, I have listed some smart business practices that will not only help you define and grow your business, but will also help you document that you are running a real business and not just performing a hobby.

1) Write a business plan. There are lots of local small business support centers that can help you to put your plan in writing. For example, the Small Business Administration has both local and online resources to assist you.

2) Determine your legal structure (LLC, Partnership, C-Corporation, S-Corporation, Sole-Proprietor).

3) Obtain an Employee Identification Number (EIN) from the IRS.

4) Open a separate bank account for all of your business transactions (deposits and expenses). You need to keep your personal and business transactions separate.

5) Establish a separate line of credit or credit card to use with your business. Put personal expenses on a personal card and put business expenses on a business card.

6) Keep your business documents organized. The National Federation of Independent Business recommends keeping business records and receipts for at least seven years.

7) File completed tax returns on time. This would include all required schedules and signatures. Depending on the type of organization you have, you or your CPA will be filling out forms like 1020, 1065, 1040 Schedule C, 1096, 1099, 940 along with calculating your self-employed tax. I highly recommend finding a local Certified Public Accountant (CPA) that is familiar with your industry to help you determine which forms you will be required to file and making sure they are submitted on time and to the right government office.

8) Hire a support team: A lawyer can help you with your legal structure and a Certified Public Accountant can help you keep your finances in order as well as keeping you compliant with local, state and federal government.

9) Create industry standard business documents and forms to include: logo, letterhead, business cards, and website.

10) Advertise in your local media along with appropriate trade periodicals.

According to IRS document, FS-2008-23, below are some of the questions that the IRS may ask when determining if your business is engaged in for-profit activity. You will need to be prepared to answer these questions and provide documentation.

1) How many hours a week do you work in the business?
2) Do you depend on income from this activity to pay your bills?
3) Do you have the knowledge needed to carry on the activity as a successful business?
4) Have you made profit in similar activities in the past?
5) Does the activity make profit in some years?
6) Do you expect the activity to make a profit in the future?
7) Are there elements of personal pleasure or recreation?
8) Has your business made a profit in 3 of the last 5 years?

According to IRC 183, “If your business activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.” The result is that your business deductions will now become itemized deductions and be limited to your hobby income.

For more information and assistance in helping your company maintain their position as a legitimate business, please contact a local CPA. Each state has its own independent licensing board. If you are located in North Carolina, you can contact the NC CPA Board website and click on their “Licensee search” button to locate a CPA near you. All licensed and active CPAs in North Carolina will be found on this website.

Why Half of All Small Businesses Don’t Have Websites

You can easily find a small-business owner that will tell you “I don’t need a website.”

And they’re right– businesses that don’t want to be successful certainly shouldn’t spend the time and capital to build a website for their company.

Honestly, it’s tough for me to admit that every company doesn’t necessarily need a website. But any company that plans to compete in the ever-changing market and become successful in the future will absolutely need a website. A crappy one might do better than none at all.

Half of all small businesses don’t have a website to market their business online. This is not an inflated number. According to a 2013 survey of more than 3,800 small businesses conducted by Google and research company Ipsos, 55% of small businesses don’t have websites representing their company.

These numbers are outrageous when you look at how much the world has changed in the last 10 to 15 years. Consider the growth of smartphones, tablets, Facebook, Google, Amazon, and anything that has to do with the internet.

The world is forever changing. So why the hesitation?

I believe that the problem lies in lack of education and perceived complexity. Here are some of the objections that I’ve come across.

An Incomplete Understanding of the Benefits of a Business Website

As professionals in web development, we have failed to educate the older generation in the benefits of the internet and how it can be used to improve business. 76% of small business owners are over 45 and Facebook has only been around since 2004!

The digital age has only become common in the last 10 to 15 years. Our small-business owners did not grow up in a world of internet technology, they’re only adapting to what is most convenient to them and what is the easiest to understand. Since the average small business owner doesn’t have a dependency on the internet, it would be difficult for them to understand why their business would.

They also don’t understand how a website could help their customers.

Their lack of dependency on the internet, blinds them from the fact that the newer generation would be crippled without the aid and resources of the internet and that their business would be able to reach these customers more effectively online.

“Nearly all consumers (97 percent) now use online media when researching products or services in their local area, according to BIA/Kelsey’s (http://www.bia.com and http://www.kelseygroup.com) Among consumers surveyed, 90 percent use search engines, 48 percent use Internet Yellow Pages, 24 percent use vertical sites, and 42 percent use comparison shopping sites.”

At the very least, small business owners should have their address or contact information on Google so when people are looking for them, they at least have a point on Google Maps. A business card or yellow page ad simply won’t cut it anymore.

By now it will sound like I’m beating a dead horse– I get it. Just to be clear, I am an advocate of figuratively beating dead horses if it means I prove my point. My point may seem obvious to those in the industry, yet it is still foreign to those who haven’t found a use for their business on the internet. It is only natural to have the idea that websites are complex, time-consuming, and not worth their time.

The truth is, anyone can build a website. Trust me, this article was written by a monkey on a laptop. It’s one thing to create a beautiful, functional, and fluid website, it’s another to optimize it so that people can find it and find use in it. Because of this reason there are companies like us that strive to making it easier and simpler for businesses to create a website and run their business online.

But what if my business is doing fine without a website?

Just because things seem OK now doesn’t mean everything is fine. That’s like jumping off a building and halfway down saying, “So far, so good!”

-justaddcontent.com

It may be true that these businesses are doing “fine” with word-of-mouth advertising and their current customer base, but this does not account for changes in the market or guarantee that they will have continued business. The longer it takes for us to realize the need for a website the more we give other companies the time to adapt and eventually replace us completely. Ignoring this concept is a recipe for entrepreneurial disaster.

So how do we fix this?

Simplification, Education, and Affordability.

First we make it easier for anyone and any business to get up and running online.

We then teach them how to take advantage of their online business, reach their customers online, and promote their website.

In order for these to be possible, we have to find a way to make it affordable and accessible to all business owners and entrepreneurs.

Having a website for business shouldn’t just be another business investment, this should be an absolute necessity for every small business. Period. Non-negotiable.

The Advantages of Getting an Unsecured Business Loan for Your Business

If you simply do not have the spare money to spend, you can turn to an unsecured business loan. These type of loans are a positive alternative for people who own businesses – some companies make sure the money is available within 24 hours of applying. Take note that business loans are different than personal loans – these type of loans are only meant to be used for business reasons.

Easier to Obtain Than Secured Business Loans

An unsecured business loan will be easier to obtain than a secured business loan. This is because your business will not need to put any collateral up front.

No Collateral with Unsecured Business Loan

With a secured loan, if you do not pay the loan back, lenders will be able to take the collateral from you. However, if you default on an unsecured business loan, the lender will not be able to take your business’ property, unless they get a court order.

The Court Can Discharge Unsecured Loans When Filing Bankruptcy

If for some odd reason your business has to file for bankruptcy (we hope this never happens), the court can discharge those unsecured loans. However, it’s not normal for them to discharge a secured loan.

Quick Turnaround Time

With most lenders, as long as you qualify for the loan, you will have cash available in a couple of business days. With banks, on the other hand, it could take weeks before you see the money you need.

Credit Scores Don’t Count

If you are a business going in for an unsecured company/business loan, your credit scores will not count. The qualification will be based on your business – if you have a strong business, you shouldn’t have a problem getting money from a lender.

Payments will be Adjusted

The amount you are asked to pay back on a daily basis will all depend on the profits your business made. What this means is the amount repaid will adjust in accordance with both slow business and profitable times. This technique makes it easy to pay the money back, without going broke at the same time.

Unlimited Funding Potential

As the sales for your business increase or if you simply need more money for your business, you can apply for more money, as long as you are in good standings.
As you see, there are many factors to getting an unsecured business loan to help your business during harsh times. Almost any established business, regardless of the industry, can qualify for this form of loan. Most companies have a short application that you are required to fill out in order to determine if you are eligible for the money.

Ready to Sell the Business?

An old saying goes, “the two best days of owning a boat – the first, when you buy it and the second, when you sell it. The same seems to apply to some start-up businesses too.

As financial experts point out, a business can be sold only once. Even if a business owner has no intention of selling it at any particular time, there may come a time when it is imperative to do so and some plan to smoothen the process may have to be in place earlier. The preparedness such a plan provides may also help get a better price for the business when it needs to be sold considering the amount of hard work and effort that has gone into investing and running a business in the first place.

What it entails

The need is not to make a commitment to sell but to be informed about what is necessary and what it entails to sell a business. Some of the important aspects to be aware of and some upfront questions that are pertinent include:

• What is the business worth? – This is the first question every business owner has to ask and really evaluate. However, money should not be the only reason for selling because then it means that the owner is not exactly ready to sell and chances are that the business will be undersold. Having said that, whatever valuation is done by the owner, accountant or banker, only marketplace trends can really evaluate the current value of the business.

• Is the reason for selling a valid one? – Again there is a double-edged sword; if the business owner has a really solid reason it will most likely be sold. Here, the catch is to have reasonable expectations that increase the chances of the business getting a good buyer at the price expected.

If these two basic questions have been answered favorably, there are some important things about the business that require attention and putting together.
An initial checklist of the business and its operations should include:

• Profit and Loss statements going back at least three years
• Federal and Income Tax returns
• List of assets such as equipment and fixtures
• Lease related documents
• Details of loans taken, if any and repayment schedules
• If business is a franchise, terms of the franchise agreement
• Inventories of cash on hand, amounts to receive etc
• Details of additional investors or business associates, if any

It’s important to remember that any business, particularly a small one, has to make the right impression with the buyer. The above details help to provide a professional outlook and will go a long way in impressing a potential buyer.

In addition to presenting the business ‘well on paper’, an honest and sincere outlook and potential of the business also helps to create the right impression. Prospective buyers will certainly want to review income and expenditure figures but beyond that, the sustainability of the business and its pros and cons should not be ‘shrouded’. After all, no one will want to buy a business that will not provide a living; a seasoned business professional may have the acumen to see the potential and be willing to take a risk, but it’s impractical to expect everyone to have that view.
What next?

Once the selling has been figured out, it’s time to ponder on who could be a possible buyer. It could be a like-minded upcoming business entrepreneur who is looking for a chance to escape the ‘run-of-the-mill’ work atmosphere, a competitor or a large company looking to increase its business portfolio. No matter who the buyer is, knowing their aspirations and interest upfront helps to avoid long-winded negotiations and frustrating delays. Getting into a negotiation format with an entity that is not really serious about buying is a mere waste of precious time. This can be overcome by preparing a list of potential buyers amongst the circle of business associates and friends within the owner’s circle who is found to be capable of handling the business in a way that the business owner envisages.

That single aspect is enough to provide more satisfaction than the actual business sale.

Are Small Business Plans Really Needed?

Writing a business plan or even thinking about doing it drums up feelings of dread. It is a bit tedious and takes some dedicated time. You may even think it isn’t really needed for your small business. But, you are wrong!

Your business will not reach its full potential if you don’t know where you are headed. You need to have your business goals written down so you can see how far you have come. It is so satisfying to look at your business plan (or goals) one year later and say, “WOW, I surpassed all of my goals!” If that is the case, it’s time to write a new business plan with bigger goals. It is an evolving thing.

Most of the time, the only reason small businesses prepare a business plan is out of necessity. They need to show it to their banker or investor to raise funds for their small business. That is fine, but this report should be a priority when starting your business. You have to AIM for something and make a plan on how to make it happen. That is what all successful entrepreneurs do.

This applies to all small businesses. You can be a blogger, an independent home consultant for one of the many companies out there selling essential oils or beauty products, an auto repair shop, or a professional attorney or accountant. It doesn’t matter which business you create, you need to have a plan in place for your growth.

What is a business plan? It is simply a list of answers to questions that people might have about your small business. It is also a forecast of where you hope to be financially within the next year, two years, and five years from now. Your business plan should include a description of your service or what products you will offer. Once you know what your business will do, the next thing you need to know is whom you are going to be doing it for. What makes your business different? You need to explain what makes your business different from other businesses in your market. How do you plan to make the business succeed? You will need to forecast expected income and expenses. This will be a bit easier if you have solid financial numbers and have been in business for a while already. It is a lot harder if your business is brand new.

This has been a brief overview. If you need more help with your business plan, doing a quick search on the Internet will bring up several ideas and templates to use. The Small Business Administration has this great tool to use. Remember, if you are truly determined to build a successful business then you must have a business plan written and in place to help you measure that success.

How To Get Your Business Funded Writing A Great Business Plan

It is not uncommon for small businesses with limited resources to be challenged at the thought of facing their bank manager to apply for business funding. The reason is simple; regardless of how long you have been with your bank, you will still have to comply with formalities when it comes to funding your business start-up or business growth. Fundamentally, you will be asked to write a business plan for funding which must be presented with your application form. You may wonder why you need to present a business plan to lenders or investors. Let’s think about why banks want you to prepare a business plan and then you will fully understand why investors ask for this precious document that will cost you some time and money to put together, but ultimately, if done well, will help you raise the much needed finance.

Some Reasons Why Banks Need A Business Plan

1. Banks are taking a risk on you and your business and they need to understand that risk and compare it against the expected reward from your business. Have you ever thought about how banks make their money for their shareholders? Well, they do so investing their capital (money – usually investors’ funds and borrowed funds) in your business with full expectations of earning higher returns than the costs they must pay for borrowing or raising their own capital. If you fail to deliver the returns on their investment from your business, they will end up being a victim of your problems which will cost them their business. In short, your risk of business failure becomes their risk too.

2. They want to gain a better understanding of your management team who will be responsible for managing the funds invested in your business. This is a concept many small businesses and start-ups, don’t grasp fully. They may think their business ideas or wonderful products are sufficient ingredients for business success. Nothing can be further from the truth. A business is an organisation of integrated functional activities designed to accomplish a desired objective. These integrated activities must be managed competently by different people inside or outside the organisation for successful results to be accomplished. The bank manager reviewing your application must be satisfied that your team possesses competencies both at the level of technical knowledge and correct attitude – the critical ingredients for success when present and vice versa. A business that is poorly managed will fail irrespective of the quality of its products and benefits offered to its target market. With this in mind, you must be aware that when you apply for funding from a bank (or any other types of funders), your management team’s quality will have to be judged based on past performance. They also want to know if your management team possesses industry, business and market knowledge. Of course, if you are a one man business, you need to ensure you put in place a team, virtual or physical that brings the balance of expertise critical to give assurance to the bank that your business will not expose them to unmeasured risks.

4. They want absolute assurance that your business model is robust. That you have thought about the pros and cons of each option and have a viable business proposition that is not devoid of reality. This will be tested with questions in areas where gaps are detected and you will be expected to give answers that are credible to ensure their funds are not exposed. Banks want to see positive returns on their investment in your business, they won’t make any compromise for your own short-comings and the sooner you address the weaknesses in your business plan the faster you will be able to raise funding for your business.

Taken together, irrespective of whom you wish to raise funding from, if you want to successfully fund for your business as a start-up or an existing business seeking growth, you must address all the four areas mentioned above in your business plan. I have merely summarised some of the key points for you to bear in mind and you can find more of my articles to learn about the subject thoroughly. In my experience of writing and reviewing hundreds of business plans for funding, a clearly written concise 10-15 pages business plan is sufficient. This should include 3-4 pages of financial information and may I also caution you to stress-test your financial plan for variation in assumptions underpinning cash-flow projections to ensure you have plans to mitigate risks revealed by the tests, as the bank will do so as part of their own due diligence test. This is referred to as sensitivity analysis.

Good Luck

Small Business Grants For Minority Business Owners

Setting up a business from the scratch can be a tough choice for enthusiastic entrepreneurs, especially if they fall in the minority section. Arranging for the funds and dealing with the expenses can be risky and daunting. The government has thus, initiated varied assistance programs for the minorities interested in small businesses, assisting and boosting them for their endeavor.

There are numerous plans, programs, monetary funding and aid for you under the Federal Assistance for Minorities’ Small Businesses. Go through the list and apply today to accomplish your dreams of having an independent career.

Financial Assistance for Minorities’ Small Business Owners

Firms and business owned by the minorities are offered financial aid in the form of loans, grants, counseling, assistance and training to help them run, expand and compete in the federal marketplace. The aid programs for enthusiastic minority business owners are listed below:

SBA 8(a) Business Development Program

The Business Development program helps firms to qualify by providing training workshops, counseling and technical and management guidance. The program also helps these businesses to compete in the federal marketplace by providing opportunities in the government contract space.

For program qualification some minority groups have already been categorized as economically and socially disadvantaged. These groups include:

• Native Americans

• African Americans

• Subcontinent Asian Americans

• Hispanic Americans and

• Asian pacific Americans

Apart from these groups, other individuals can also be considered for the program if they can provide substantial documentation and evidence suggesting racial discrimination and economic disadvantage.

SBA supports the certified firms by providing business development assistance. It also provides a Mentor-Protégé program which pairs the mentor firms with protégé firms so that mentor firms can provide assistance.

Small Business Administration’s Minority Owned Program

The SBA’s Minority Owned Program offers varied federal resources for the success and growth of your business. It helps in the initiation, financing for the startup, strategically developing and then the overall growth of business.

SBA’s HubZone Program

The program is engaged in promoting for the economic development and growth of underdeveloped areas through the expansion of small businesses in these specific sectors. It encourages in attaining more of federal opportunities and support if your business in located in these distressed areas.

Business Loans

Eligible women business owners, recognized by the government, can receive low-interest loans by SBA, provided they belong to the minority section. The loans are attainable even with bad credit history report and can be repaid after a long duration of time. Enthusiastic minority women can now avail the financial assistance for their startups.

USDA Grant

The U.S. Department of Agriculture (USDA) offers funding to grantees up to $150,000 in rural sectors through the Rural Business Opportunity Grant. The funds facilitate in providing technical and training assistance to nonprofit corporations and cooperatives for their business development and growth.

Georgia-Pacific Grant

The program, initiated in 1927, helps minorities’ small businesses to set off and expand eventually through the funding program. The grant program usually funds business plans, ventures or projects for entrepreneurship that benefits the lives of the community. Minority business owners with these criteria qualify for this program.

Amber Foundation Grant

The program is targeted towards women entrepreneurs seeking to venture into the business world and accomplish their dreams. Commenced in 1998, the program offers funds to commemorate the death of a 19 year old woman who could not fulfill her aspirations. Amounts ranging from $500 to $1,500 are granted to women from different cultural groups to cover the expenses of starting and setting up a business.

In addition to small business startup grants, minority business owners can also look for assistance from their individual state governments, nonprofit organizations and government accredited agencies to kick-start their business. Make the endeavor with the finances available for a successful venture.

Your Dream or Your Nightmare: Successful Small Business Development

This is supposed to be your dream come true. Finally, your business is up and running. You’re breathing life into your big idea. You no longer have to answer to the boss because you are the boss. You’re working your business plan. You’re finding your path to financial freedom. You know your target market and you’re finding new clients. You have positive feedback on your products and services. You’re developing new technology. You’re finding additional funding. You’ve finally found the right team to work with. You have the right workspace. You can feel the exciting energy when you walk into your business each morning.

Yes, there are bumps in the road, but you’re learning to be resourceful and to move through, over or around them. Each day is long and brings surprising new challenges, but you’re gaining momentum along with new customers and increased revenue. You learn to balance the ups and downs of the market and business challenges. You learn to pace yourself. But as time passes and you analyze your business growth, you see that the trend line isn’t moving upward, it’s declining. Your plans aren’t working out as you expected. At this rate, you’re not sure how long you can continue operating. You realize that as passionate as you are about the business, the problems are overwhelming you. Your dream is turning into a nightmare.

Why Small Businesses Fail

In spite of your best efforts, your business is succumbing to one of the top ten reasons that businesses fail. (Non-prioritized list according to Jay Goltz, The New York Times, January 5, 2011).

1. Owners who cannot get out of their own way.

2. Operational inefficiencies.

3. Dysfunctional management.

4. The lack of a succession plan.

5. The math just doesn’t work.

6. Out-of-control growth.

7. Poor accounting.

8. Lack of a cash cushion.

9. Operational mediocrity.

10. A declining market.

In particular, the first four reasons are linked to how you develop and structure your business. Small business owners who seek expert advice in running their business have a better shot at overcoming these pitfalls. To address them, here are eight tips for successful small business development that are critical components for you as a small business owner.

Tips for Success

1. Be The Leader – Be purposeful about leading and designing your company for success. If you think you know everything necessary for success, and close your mind to new and different ideas, you AND your business will stop growing. Instead, find a business mentor, seek customer feedback, attend workshops, read books, keep a bias for learning and set the example for your team to learn.

2. Manage Your Passion – Don’t let your passion manage you. Just because you love shoes, doesn’t mean you should open a shoe store. Make sure you’ve identified the void in the marketplace that your business can fill; or the need that you’re satisfying. Make sure you know your target market, and understand what they’re willing to pay and do for your product or service. Most importantly, assess your financial resources. There are too many stories of entrepreneurs who had what seemed to be a great idea, but got over their heads into debt, and tumbled into bankruptcy.

3. Increase Business Value – Your greatest business value resides in your people, processes, products/services, technology and customer relationships. It’s important to understand the right combination and how you best provide it to others. Then preserve and improve on that. For instance, the fact that you guarantee same-day service, and thorough clean up by your service technicians could be your greatest value. But to provide that, you must have a sufficient number of trained technicians on call at all times; and a reliable 24/7 contact and communication process.

4. Build Your Culture – This is the DNA of your business. Whenever a client comes in contact with your business, whether face-to-face, by phone, by email, or by social media, they gain nuances and impressions that determine whether they want to continue to engage with you again. Set the tone by treating your employees the way that you want them to treat your customers. Make customer service a priority. Create an environment that is welcoming and comfortable. Ensure that the style or décor will appeal to your target market, and effectively represent your product or service.

5. Position Your Family – Do you have a family business or a business family? Does your business exist as a place to employ your family or a place to serve your clients? The wonderful family members who helped you to get started may need to evolve to different supporting roles as the business grows, to ensure that you have the most qualified people in the positions where they can perform well.

6. Develop Your Successor – Your role in founding your business is important, but none of us are irreplaceable. Constantly develop others to learn the business, and make leadership decisions based on who and what will add value to the business. When the business has greater value to your clients, you will benefit from that.

7. Understand Business Roles – Roles and responsibilities must shift as the business grows and/or the market shifts. Be flexible, clarify responsibilities, and hold the right people accountable.

8. Document Business Processes – Continually review and update your operating processes to ensure maximum efficiencies. Involve the employees who actually perform the work, and find ways to eliminate waste, rework and scrap because they all result in lost money.

So take time now to plan for your business. Becoming a small business owner is a lot like falling in love. Once you fall madly in love with a seemingly fantastic person, it’s more difficult to recognize your areas of incompatibility. Similarly, once you have a seemingly fantastic business idea that you’re passionate about, it’s more difficult to see the potential pitfalls to your success. Plan with a clear head, and a focus on how you can serve others.

Small Business Valuation and Its Benefits

If you watch the TV show Shark Tank, you often see business owners who lack an understanding about small business valuation. It is estimated that over 80% of small businesses have no financial estimate as to what their business is worth, nor do business owners seem to care. This is like me asking you how much money you have in the bank and you have no idea what I am asking you. You would not run your personal financial life this way; so why would you run your business with no understanding of the value.

So why should small business owners care about valuation? The answer is simple: The personal wealth of every small business owner is directly linked to the valuation of their business. If you expect to be worth a million dollars, then you better have a business that has a valuation of one million dollars. This is important because at some point every small business owner must retire and your retirement is based on the value of your business. Consider the fact that 70% of private companies in the United States will be put up for sale by 2030 and according to the National Federation of Independent Business, only 30% of all businesses that are put up for sale are sold. This is because most small business owners never pay attention to the valuation of their businesses.

Where does valuation come from? Valuation gets assigned based on the benefit stream of your business. The most common benefit stream is Earnings Before Interest Taxes Depreciation and Amortization or EBITDA for short. When you go to sell your company and retire from your business, you will sell your company for a multiple of your EBITDA. The bigger the company, the higher the multiple and the higher the valuation. The key is to get the multiple up which will increase your valuation. This requires an aggressive growth strategy linked to the valuation of your business.

The good news is that financial professionals are now offering cloud based solutions that empower any small business owner with a road-map for increasing value. The bad news is that this road-map can take five years or more to implement. Additionally, most road-maps require a strong professional team to facilitate the process. Having worked with various solutions, I would recommend small business owners consider one of two solutions:

1. Value Opportunity Profile – This is a comprehensive assessment of your business based on interviews with your management team. Specific recommendations are made on how to increase value in three phases.

2. Value Builder System – This is a 12 month program that starts with your own self-assessment, allowing you to decide if you want to embark on the program or not. Exercises are used each month to improve the valuation score of your business.

Regardless of how you get there, it is imperative for every small business owner to recognize how important valuation is to their own personal wealth. Because so few owners seem to grasp valuation and how to increase it, having a professional outside team can help. You need someone to orchestrate and facilitate the process while everyone else runs the day-to-day operations of the business.