Business Management

3 Main Components of Financial Projections

Posted on Tuesday at 7:50

Successful entrepreneurs not only have visions in their minds, they also translate their abstract visions into concrete financial projections. Financial projections enable entrepreneurs to set targets for their goals, control costs and predict problems. Balance sheet, profit-loss statement, and cash flow statement are the 3 main parts of financial projections and should be included in any business plan:

Balance Sheet

It is a summary of the financial balance of a company. It looks at the company’s assets, liabilities, and equity. Assets are economic resources. They include tangible and intangible things that can be owned and controlled to produce value. Liability is defined as an obligation of an entity. To settle this obligation, an entity can transfer assets or provide services. Equity is the residual claim of investors in assets after all liabilities are paid. Assets, liabilities, and equity are listed on the balance sheet, and the difference between assets and liabilities is the company’s net worth. The balance sheet is a snapshot of a company’s financial condition, and it gives decision makers a solid understanding of the company’s resources and debts.

Profit-Loss Statement

It indicates how revenue, after charging against costs and tax, is transformed into profit. This projection vividly interprets the business’ entire operating process into financial figures. These projected figures might not largely match the company’s actual performance. But they, to a certain extent, give entrepreneurs a general idea of how profitable their businesses could be. The profit-loss statement helps entrepreneurs set goals for both short term and long term periods, and it also alerts entrepreneurs to potential costs that could incur.

Cash Flow Statement

It essentially indicates the flow of cash in and cash out of the company, and it has been a very useful tool to determine the business’ short term viability. Cash is the life blood of a business. Payroll and immediate expenses have to be paid in cash. Whatever scale a business entity is, it can go bankrupt if it runs out of cash. Therefore, the cash flow statement is crucial for a startup owner to judge the company’s financial health. It is also important for investors and lenders to judge the company’s potential return and its ability to repay. It as well tells how much startup capital the company will need.

Financial projections include balance sheet, profit-loss statement, and cash flow statement. They inform their readers the company’s financial condition. This information is crucial important and is in a professional business plan. Therefore, by having a business plan at hand, one can always examine his/her business’s financial health, and present investors or partners with valuable data.

Tags: balance sheet, Business Plan, cash flow statement, entrepreneur, profit and loss statement, strat-up. projections, stratup

The Habits of Self-Made Billionaires (Infographic)

Posted on Thursday at 11:04

If becoming one of the world’s richest people were easy, we’d all be doing it. Unfortunately, that is not the case, becoming a self-made billionaire involves taking an enormous amount of risk. Of the 100 richest people according to data from the Bloomberg Billionaires Index, 36 were born to humble households and 18 have no college degree whatsoever. By taking risks, these individuals were able to build an empire.

As the infographic from Enrepreneur.com shows, these individuals invested during hard times, bought companies that were all but ruined, adopted early trends, some got lucky and for the majority, their successful venture was not their first business.

Tags: bilionaire, infographic, richest people, risk, startup, venture

Better Business 101 – Record and Report

Posted on Tuesday at 12:00

Setting goals and milestones for a small business owner can be the difference between no results, average results and extreme success. Recording and reporting on your attempts to reach a goal and your achievements is absolutely essential. Often business owners feel like counting and measuring campaigns is never urgent or even that it is a waste of time. But the old saying comes to mind: “You can’t manage what you don’t measure.” For those that are rightfully convinced that setting goals and recording and reporting on their progress is beneficial here are some tips on measuring the main variables involved in business growth and development.

1. Regularly record selected data

2. Regularly report

3. Regularly consider tactics and tune in your strategy to improve on your results

Good news is that nowadays recording and reporting online data has become as easy as child’s play and is one click away with the help of Google Analytics. Setting up this type of record and report is in the reach of any small business and is, for the most part, free. If you as a business owner are not able to read or understand the vast amount of data that www.googleanalytics.com offers, recruit people that can to your support team – business consultant, website designer, marketing specialist, etc. Collect the data and follow up on it, improve on increasing and converting traffic, understand where your customer is coming from and what seems to be of value to him/her and improve on it. Next month repeat the process of recording, reporting and improving. Set some meaningful goals and try to reach them.

Meanwhile, combine this information with data that you can record and report on your own. Figure out what variables are important for your business development and growth. For example, when reporting on marketing consider the following metrics:

• Number of Suspects (Website Visits / Direct Mail Letters Sent)

• Conversion Rate 1 (Suspects converted to Leads)

• Number of Leads (Inquiries)

• Conversion Rate 2 (Leads to Opportunities)

• Number of Opportunities

• Marketing Investment (Expenses)

• Acquisition Cost 1 (per Lead)

• Acquisition Cost 2 (per Opportunity)

• Acquisition Cost 3 (per Customer)

• Marketing ROI %

• Lead Source

Then, set up a spread sheet (or use fulfillment software or even a piece of paper) and track the data for this month, for the quarter, for the year. Consider if your business is on the right track by measuring how far below or above you are in reaching your target goals. Brainstorm with your employees or with your support team on how to improve, implement new tactics and set up new strategies.

Then, record and report again. Your efforts are likely to soon pay off and you will find that you’ve acquired a sense of achievement in addition to business growth and development.
Lastly, if you have yet to launch your business and you are still in the business planning and business plan writing stages, be sure to state your goals and objectives and begin to develop methods for how you will track your goals. Getting started on the right foot will make a big difference.

Tags: Business, Business 101, Business Plan, How to, Recording, Reporting

Top 5 Benefits of Creating Financial Projections

Posted on Tuesday at 12:00

An old Woody Allen joke resonates with financial modelers and forecasters: “If you want to make God laugh, tell him your future plans.” We all know that financials projections are based on assumptions that likely never come true. Yet, putting together the financial information for your startup might be one of the most important and eye opening experiences before the launch date. Sales projections for an existing business are derived based on past sales figures and reports as well as statistics regarding other known pertinent internal and external factors. Yet when projecting for a startup, all previous sales history is non-existent and therefore, there are some arbitrary fundamental assumptions that need to be made. Almost every experienced entrepreneur will tell you that financial projections are absolutely necessary for any launch process. Below are 5 of the major benefits that novice entrepreneurs will enjoy simply by spending time projecting hypothetical financial projections for their business plan.

You will be able to show potential stakeholders that you have a levelheaded grip of reality and your expectations are practical. Possible creditors or investors are most certainly looking for realistic financial expectations in your business plan. Creating financials that are not too optimistic or too pessimistic will earn the respect of potential investors and give them confidence in what you are presenting.
You will be able to price goods and services more accurately and competitively. Lining up costs with revenues will provide you with an idea of your Break Even Point. This knowledge will be essential when it comes down to setting up an appropriate price to charge. If you charge too little you will make an inadequate profit, or if you charge too much you will end up alienating and losing customers.
You will be able to trim costs strategically. Once you have categorized your projected expenses you will see emerging spending habits associated with your business. Noticing excessive spending before it has occurred will force you to create innovative money saving strategies to create value with less capital. Paying attention to areas that you are overspending can improve your bottom line. For example, if you anticipate spending money on outsourcing, you might notice that this expense could be eliminated by adding the duties to some of your employees. If you considered business lunches, those might have to be transformed into coffee meetings instead. In other words, consider if each expense category is sufficiently helping your business to generate income. Depending on your answer, you may need to take preventative actions.
You will be able to pace your growth more effectively. At the startup point you will not have any idea of when you might need to hire more employees, find suppliers on a bigger scale or extend your services to other markets. In reality, you will consider expansion when sales and profits are growing consistently for a several month period. At startup you need to be prepared for that possible expansion and be able to recognize and respond to it accordingly. Creating a cash flow statement will allow you to consider corresponding income to expenses and will not leave your business grasping for cash during a crucial point of early development.
You might be able to reduce taxes. Often startup businesses don’t know how to take advantage of controlling their tax spending. If your projections predict that you will be making profits by the end of the year that means that you will be paying taxes. So, if you plan on spending for a company vehicle, the best time would be exactly before the end of the tax year, so you can take advantage of the tax deductions. Businesses that are sloppy about predicting their expenses are willing to miss dollar saving tax opportunities. Financial projections and following up on actual bookkeeping will help you decrease the tax spending of your business.

Lastly but probably most importantly your financial projections are a way for your business to set goals and to try to reach them. Your employees are all working towards a clearly outlined financial goal and reaching it will only provide satisfaction for all involved.

Tags: Business, Business Plan, Cash Flow, financial projections, How to, pace growth, pricing goods, reduce taxes, sales projections, trim costs

Managing Stress as an Entrepreneur

Posted on Thursday at 12:00

If you are trying to launch or run a startup business, chances are you have run into major amounts of stress. You are not alone, stress is a part of every entrepreneur’s life and there is no way around it; every entrepreneur will run into problems and turbulent times in their daily business life. The question is not how to avoid stress but rather how to manage it in a way that will cause you to pay the least expensive price for your success.

While some level of stress can be a motivational factor, over-stressing can quickly get in the way of your entrepreneurial and business duties. For example, your employees will quickly pick up on your elevated stress levels and will often mirror this behavioral style of their leader. As a result, your business may suffer from unwanted obstacles that weaken communication, collaboration, customer satisfaction and overall efficiency.

Furthermore, stress can be as devastating to your personal life as it can be to your businesses. Some of the most unpleasant causes of poorly managed stress involve sleep deprivation, weight gain, weakened immune system and unsatisfying interpersonal relationships, among other negative and unwanted effects.

As an entrepreneur you can minimize the negative effects of stress by managing it properly. Here are a few proven stress management techniques.

Sleep - as the old saying says, sometimes you need to “sleep” on a problem in order to solve it. For a lot of young entrepreneurs solving an issue is urgent enough that they fail to rest. But sleep is a great opportunity to reset your mind and gives you the chance to tackle problems from a new perspective and with improved energy and determination. So sometimes the best thing to do about a business problem is to do nothing in the next 7 to 8 hours. In return, your rested brain is going to pay you back.

Stay Positive - inspirational speakers cannot say enough about the power of positive thinking. In business it can be easier to see the world in negative terms, but this is not beneficial. Part of the entrepreneurial spirit is the entitlement of staying positive, of seeing solutions instead of problems, of creating opportunities instead of finding excuses.

Laugh - Laughter is the ultimate stress buster. It is true that not all problems can be solved through laughter but it is also true that so often new opportunities are created through laughter.

One way or another, stress will inevitably find you if you are running a business. But, use these three simple rules to create a personal stress management strategy that will help you become better at problem solving, creative thinking and team collaborations in your business… and of course in all other aspects of your life.

Tags: dealing with stress, fear, How to, self awareness, stress management

Hiring an Independent Contractor or Employee

Posted on Tuesday at 12:00

It is important that you know the difference between hiring an independent contractor vs. an employee so that you can determine which is best for you and your business. Before reviewing the pros and cons of each, start by gaining an understanding of the differences between the two:

Independent Contractor

Operates under a business name other than your own
Operates as an employee under that business name and therefore limits your ability to control the contractors tools, processes, hours, etc
Maintains a separate business checking accounts
Represents the contractor’s business name and advertises his/her services as such
Invoices for work completed
Likely has more than one client
Keeps separate business records

Employee

Performs duties and responsibilities as dictated by you and your company
Requires added responsibility such as training, support, health benefits, management, etc.
Works for only one employer, your business

With a brief understanding of the differences between independent contractors and employees, you can begin to think of the benefits that each present.

Independent Contractor

Often cheaper in terms of associated labor costs and overhead
No health benefits are required
Flexibility in regard to only hiring when works is demanded of your company, especially for businesses that are seasonal or experience fluctuating streams of business
Reduction in liability
More flexibility in regard to hiring and firing

Employee

Stronger sense of loyalty and dedication
Employees can perform a variety of roles
Improved work flow, especially for businesses that experience a steady stream of business

It is important that you take the proper legal steps when hiring an employee or independent contractor and ensure that you hire them under the correct legal classification in order to avoid costly legal consequences down the road.

Tags: Business Plan, contractors, employee, employees, Employer, firing, Guide to the Startup Phase, hiring, How to, independent contractors, Operating Expenses, Startup Team

What to Consider When Starting a Company With Your Spouse

Posted on Thursday at 12:00

Starting a business can be a risky endeavor (quitting your job, spending your savings, good potential for failure, and the list goes on). Starting a business with your spouse can be even riskier when you consider your shared finances, your retirement funds, your relationship, your mental health and happiness. Before you risk everything, ask yourself the following questions:

Are you willing, able and ready to work together? For any successful business, you must have a proper business plan. Part of this plan should outline ownership, roles, responsibilities, etc. Be sure that you and your spouse have a very clear understanding of each of these areas of the business. The more that you can divide your roles and responsibilities in different areas of the business, the better you will be able to share power and minimize arguments.
Can you mesh your personal and business lives seamlessly? Be sure to draw boundaries so that you maintain some semblance of your romantic life. Furthermore, make sure that you both have enough room to work so that when one is working with clients, or needs personal space or room to think strategically, there is not a conflict. Lastly, make sure that you have developed an effective way of airing differences and resolving disputes. You certainly will not see eye-to-eye on all aspects of the business. The better system you have for managing these discrepancies, the more successful you will be at doing so and the happier you will be with one another.
Are you clear with one another on what financial risks each is willing to take? There is a good chance that you will not see eye-to-eye in terms of when it is time to call it quits. By discussing your financial runway with one another and having a mutual understanding of when it is time to quit, you will save the headache and potential fallout down the road.
Lastly, ask yourself, what comes first, the relationship or the business? If and when times get tough, one of you may face the decision of having to lose the business to save the relationship. Determine when enough is enough.

Even if you think you know your answers as well as your spouse’s answers to all of these questions, it is wise to sit down together and have an open discussion. Whether you determine that you are on the same page and ready to push forward, or you find that you have too many differences and that it would be too risky to go into business together, this is a worthwhile practice that will help mitigate any potential risks associated with starting a business with your spouse.

Tags: Business Plan, How to, Legal, Pre Launch, spouse, starting a business with a spouse, Startup Team

Beaches to Business Plans: A Market Pulse Interview with CEO Tyler Jensen

Posted on Thursday at 12:00

bio-img-tyler

Serial Entrepreneur and CEO of The Startup Garage Tyler Jensen speaks with Market Pulse on ESPN 1700 in San Diego. Tyler was invited to talk with Market Pulse for their weekly “Words of the Wise” segment. In this hour long interview Tyler talks about his first business, his journey in the launch, growth and sale of VaVi Sports and Social club, and how to avoid the mistakes he made as a first time entrepreneur.

Highlights include:

How he went from having nothing in his bank account to selling his first company for 125 times the initial investment.
How, after having sold VaVi, a year spent on the beaches of San Diego led to the realization that helping other entrepreneurs was his passion.
Why many people have great business ideas but going from the idea to a successful business is the challenge.
The importance of matching the lifestyle you want to live with the company you want to start.
Why having a business plan writer write from a place of personal experience is paramount.

Tyler also answers listeners’ questions on what it takes to write a business plan, the process of creating a business plan and how they’re priced.

Click on the link below to listen to full interview.

Market Pulse Interview – Tyler Jensen

Transcription coming soon.

Tags: Business, Business Idea, Business Location, Business Plan, Choosing a writer, ESPN1700, interview, launching, personal foundation, planning, startup, VaVi

Focus on the Customer

Posted on Thursday at 12:00

When considering the business model of the sales for your startup, leave yourself the flexibility to cater to the precise needs of every specific customer. As your business is small you can do this better than your big competitors. Accommodating the specific needs of every one of your customers is your competitive advantage. You know your customer face to face and you communicate with him in person. Therefore, you are much more likely to close on your customer, as you spend a little time on every one of your targets.

Know the fears of your customer. Often people are anxious to buy something that is too expensive or that would take a long time until it is ready to use. So, avoid their fears. Offer them a smaller package, or a sample, or a free week of using your product. In fact, offer all of this options and then track the results so that you know what has worked for you. If it is the price that scares away your customer, offer different payment options or financing programs. In the end of the day, what is most important is the fact that you have made a sale.

Be prepared to take the time to learn about your customers not only in the business sense but also figure out why they are successful, what their hobbies are, what conferences and business seminars they go to. Customize your product to fit their lifestyle or simply use your knowledge to craft a more compelling message to them or to build a better marketing campaign. As your business grows you would be able to use your customer knowledge and group your clients by their similarities and differences. Use this to your advantage when you target them later.

Tags: Business Plan, competition, customers, sales

Stage 5 of Non-Profit Incorporation: Sustain

Posted on Monday at 5:00

File Annual Registrations with the IRS

IRS Form 990, Return of Organizations Exempt from Income Tax, is the most detailed and misunderstood filing for non-profits. It is a complete documentation of an organization’s financial history and is often used to hold the organization accountable for its past actions and future decisions. Recent rulings by the IRS state that nonprofit organizations must make their Form 990 and applications for tax-exempt status widely accessible and available to anyone upon request.

File Periodic Registrations with your state of incorporation

In California, a biennial Statement of Information can be submitted on Form SI-100.
For all other states, search for your state’s Statement of Information form online. The form can also be called the Biennial Statement or the Annual Report.
In California, charitable corporations with gross revenues of over $2 million must prepare annual ﬁnancial statements and have them audited by an independent certiﬁed public accountant (CPA).
For financial reporting requirements in other states, please look at the National Association of State Charity Officials website.

Apply for bulk mail permit at your local post office

Non-profits can receive a discount on their outgoing mail expenses.

Understand and comply with your state’s ethics and accountability laws

In California, the Nonprofit Integrity Act is available here. In other states, consult your state Attorney General’s web site.

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