Most businesses operate to some extent on borrowed money. Borrowing too much means you are paying more in interest than you need to. Borrowing too little means you are under financed and may not have enough capital to accomplish what you want to do. That is why you have to work out just how much money you will really need, and when you will need it, before you talk to anyone about borrowing funds for your business. Of course, you will also have to work out how to repay what you are borrowing. Here are just three tips for estimating your borrowing requirements.
Check your business plan
Start by taking a good look at your business plan. It should be an overall guide to both the amount you need to borrow and to the times when funds will be needed. If you don’t have a business plan that tells you this kind of information, create one before going any further.
Consider your vision for the business
Where do you see the business in three years from now? If growth is part of your vision it has to be funded somehow. Usually that means making an investment before you begin to get a return, and timing becomes a critical factor in ensuring your cash flow remains sufficient for business needs. Consider what resources your business will need to reach your vision. People and equipment are always necessary, but do not forget to plan ahead for other resources such as additional warehouse space or outside expertise (legal fees, marketing advice, etc.) that might also be needed.
Model the projected financial position of the business
You need to prepare a financial model of the business that will indicate the effects of borrowing the funds you need. This model should demonstrate that the extra funding injected will improve profitability sufficiently to cover the repayments you will have to make. It should also show clearly that the business will have adequate cash flow at all times until the loan is repaid.
Now you are ready to go to a lending authority and make an application to borrow the money you need. By doing your homework, you will know that you will not be borrowing too much or too little. You can be confident that the business will be able to repay the loan from the income it generates. You may also be more likely to impress the lender and get the loan. For help with business planning, budgeting, and financial modeling, please contact a Simons Bitzer team member.
Monday, May 10, 2010
Monday, May 3, 2010
Business Tax Changes in the 2010 HIRE Act
Below you will find an overview of the key tax changes affecting business in the recently enacted Hiring Incentives to Restore Employment (HIRE) Act.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
Extension of enhanced small business expensing (Section 179).
The new law gives a one-year lease on life to enhanced expensing rules, which allow qualifying businesses the option to currently deduct the cost of business machinery and equipment, instead of recovering it via depreciation over a number of years. For tax years beginning in 2010,the maximum amount that a business may expense is $250,000, and the expensing election begins to phase out when a business buys more than $800,000 of expensingeligible assets. These dollar limits are the same as those that were in effect for 2008 and 2009.
Payroll tax holiday and up-to-$1,000 credit for employers who hire unemployed
workers.
To help stimulate the hiring of workers by the private sector, the new law exempts any
private sector employer that hires a worker who had been unemployed for at least 60
days from having to pay the employer's 6.2% share of the Social Security payroll tax on
that employee for the remainder of 2010. A company could save a maximum of
$6,621 if it hired an unemployed worker and paid that worker at least$106,800—the
maximum amount of wages subject to Social Security taxes—by the end of the year.
As an additional incentive, for any qualifying worker hired under this initiative
that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for
an additional non-refundable tax credit of up to $1,000 after the 52-week threshold is
reached, to be taken on their 2011 tax return. In order to be eligible, the employee's pay
in the second 26-week period must be at least 80% of the pay in the first 26-week
period.
Workers hired after the date of introduction of the legislation (Feb. 3, 2010) are eligible for the payroll tax forgiveness and the retention bonus, but only wages paid after the date of the new law's enactment receive the exemption for payroll taxes.
To view some additional features of the new hiring hiring incentive, visit www.simonsbitzer.com.
Monday, April 26, 2010
3 Little Keys to Low Budget Marketing
Even in a downturn, if you do not get in front of people and explain your unique value proposition then your chances of selling will be restricted to current customers or accidental passersby. Marketing is what prepares you for selling. However, there are three important things you should appreciate before you start.
1. Your target customers need to hear your marketing messages at least 7 times to influence a buying decision. You need to choose strategies that allow you to repeat them often enough to work for you.
2. Expensive campaigns do not guarantee sales – even when they are popular with the public. Every marketing dollar has to translate into sales.
3. A sure fire way to improve sales is to use multiple marketing channels. Your underlying message should be consistent, but you need to get it out in a variety of mediums.
If you are a small to mid-sized business on a limited budget, your tactics should be to optimize your spending so that you get in front of the right customers regularly and in a variety of ways.
To learn more about marketing on a budget, make time to come to the “All Things Sales and Marketing” summit on Wednesday, April 28th, from 8:30-11:30 at the Woodland Country Club. Visit http://dlvra.me/s/3ekLl for more details or to register.
1. Your target customers need to hear your marketing messages at least 7 times to influence a buying decision. You need to choose strategies that allow you to repeat them often enough to work for you.
2. Expensive campaigns do not guarantee sales – even when they are popular with the public. Every marketing dollar has to translate into sales.
3. A sure fire way to improve sales is to use multiple marketing channels. Your underlying message should be consistent, but you need to get it out in a variety of mediums.
If you are a small to mid-sized business on a limited budget, your tactics should be to optimize your spending so that you get in front of the right customers regularly and in a variety of ways.
To learn more about marketing on a budget, make time to come to the “All Things Sales and Marketing” summit on Wednesday, April 28th, from 8:30-11:30 at the Woodland Country Club. Visit http://dlvra.me/s/3ekLl for more details or to register.
Monday, April 19, 2010
Is An IPO The Way To Go?
Faced with tighter borrowing requirements, more small to medium enterprises are considering all the options. One of these is “going public” with an initial public offering (IPO). Knowing the facts about IPOs can help you determine whether going public is the right move.
Before looking at the advantages and disadvantages of IPOs, you need to ask whether your company is ready. First, you have to be growing quickly enough to justify an IPO. Accelerating growth over several years is a prerequisite to be a contender in the market. You also will have a justifiable need for substantial funding and should consider the timing in the market by looking at how similar public companies are doing. On average, it takes one year to prepare the IPO, so you need to think about the performance of your industry when your offer is ready.
Advantages and Disadvantages
Many small and medium sized companies have stepped up to the next level with an IPO. An initial public offering can enable you to raise substantial amounts of equity capital without incurring interest and needing to repay debt. In addition, it creates an objective market valuation of your company, builds your image and legitimacy, and provides funds for future acquisitions. Against these benefits, you need to consider the loss of control, as well as the cost and time involved, in going public.
Alternatives
A direct IPO is one alternative to a conventional IPO. For example, businesses can sell shares online by filing a Small Corporate Offering Registration (SCOR). While there is minimal external review and oversight required under this process, backing up your case with audited financial statements will make it easier to sell your offering on the open market. A major disadvantage of the direct IPO is the time and effort required to sell the shares and the risk that you might not be able to sell them.
The advantages of an IPO may seem irresistible but they need to be balanced against the disadvantages.
Before looking at the advantages and disadvantages of IPOs, you need to ask whether your company is ready. First, you have to be growing quickly enough to justify an IPO. Accelerating growth over several years is a prerequisite to be a contender in the market. You also will have a justifiable need for substantial funding and should consider the timing in the market by looking at how similar public companies are doing. On average, it takes one year to prepare the IPO, so you need to think about the performance of your industry when your offer is ready.
Advantages and Disadvantages
Many small and medium sized companies have stepped up to the next level with an IPO. An initial public offering can enable you to raise substantial amounts of equity capital without incurring interest and needing to repay debt. In addition, it creates an objective market valuation of your company, builds your image and legitimacy, and provides funds for future acquisitions. Against these benefits, you need to consider the loss of control, as well as the cost and time involved, in going public.
Alternatives
A direct IPO is one alternative to a conventional IPO. For example, businesses can sell shares online by filing a Small Corporate Offering Registration (SCOR). While there is minimal external review and oversight required under this process, backing up your case with audited financial statements will make it easier to sell your offering on the open market. A major disadvantage of the direct IPO is the time and effort required to sell the shares and the risk that you might not be able to sell them.
The advantages of an IPO may seem irresistible but they need to be balanced against the disadvantages.
Monday, April 12, 2010
Getting the Best R.O.I. on Your Assets
Every business, large or small, has assets that help them perform their work, or deliver the services they provide, to their clients. These physical assets represent a significant monetary investment for even a small business. Curbing operating costs and maximizing asset productivity (asset management) is vital to achieve a greater return on your investment in assets.
Tracking assets
Having an accessible record of the details of individual assets is necessary in order to manage them. There are a number of asset tracking software solutions available specifically designed for the small and medium sized business owner, such as barcodes, radio frequency ID devices (RFID), wireless smart tags and GPS. They can track anything from a fleet vehicle to a computer. The database stores all the lifecycle details of any item such as its purchasing, leasing and invoicing details, physical location and, where relevant, which employee is in possession of it.
In trade occupations it’s not unusual for tradesmen to lose or damage tools and machinery on the job. Though each loss or repair may be small, the cumulative effect can be great. Asset tracking software adds an element of accountability, and encourages a greater degree of responsibility, in the use of company materials. Assets can be instantly located, eliminating wasted time spent searching for them, and unnecessary expenditures to replace supposedly lost items.
In managing equipment over its lifetime, owners and managers typically adopt a run-to-failure “strategy”. Often, they do not see the value in investing time and effort into a regular maintenance regime. Unplanned and reactive maintenance places a significant cost burden on businesses. Planning and management of asset maintenance increases the life cycle of the assets and keeps them performing at peak productivity levels.
Servicing manuals, pictures, warranty contracts, maintenance history and vendor contact details can all be attached to an asset’s record in the asset database. Providing one central location for the information can get a down machine up and running again, with minimum loss of time. This can be critical in potentially avoiding OSHA fines on top of reduced productivity.
Additionally, asset management software simplifies the process of developing a proactive system of asset management that incorporates real time logging of problems by operators, regular maintenance, and early replacement of failing components.
Improved management visibility into the location, use and performance of assets has enabled progressive businesses to shift from a short term, reactive model of asset management to a more strategic long term program that ensures they derive the maximum return on their investment in assets. A streamlined asset management system will reduce asset loss, operating costs and downtime so as to minimize total cost of asset ownership.
Tracking assets
Having an accessible record of the details of individual assets is necessary in order to manage them. There are a number of asset tracking software solutions available specifically designed for the small and medium sized business owner, such as barcodes, radio frequency ID devices (RFID), wireless smart tags and GPS. They can track anything from a fleet vehicle to a computer. The database stores all the lifecycle details of any item such as its purchasing, leasing and invoicing details, physical location and, where relevant, which employee is in possession of it.
In trade occupations it’s not unusual for tradesmen to lose or damage tools and machinery on the job. Though each loss or repair may be small, the cumulative effect can be great. Asset tracking software adds an element of accountability, and encourages a greater degree of responsibility, in the use of company materials. Assets can be instantly located, eliminating wasted time spent searching for them, and unnecessary expenditures to replace supposedly lost items.
In managing equipment over its lifetime, owners and managers typically adopt a run-to-failure “strategy”. Often, they do not see the value in investing time and effort into a regular maintenance regime. Unplanned and reactive maintenance places a significant cost burden on businesses. Planning and management of asset maintenance increases the life cycle of the assets and keeps them performing at peak productivity levels.
Servicing manuals, pictures, warranty contracts, maintenance history and vendor contact details can all be attached to an asset’s record in the asset database. Providing one central location for the information can get a down machine up and running again, with minimum loss of time. This can be critical in potentially avoiding OSHA fines on top of reduced productivity.
Additionally, asset management software simplifies the process of developing a proactive system of asset management that incorporates real time logging of problems by operators, regular maintenance, and early replacement of failing components.
Improved management visibility into the location, use and performance of assets has enabled progressive businesses to shift from a short term, reactive model of asset management to a more strategic long term program that ensures they derive the maximum return on their investment in assets. A streamlined asset management system will reduce asset loss, operating costs and downtime so as to minimize total cost of asset ownership.
Monday, March 29, 2010
Key Skills for Entrepreneurs
What is it that makes a successful entrepreneur? What is it that drives sales and builds a business? Entrepreneurs do seem to have some common traits, including:
- physical and mental stamina
- a drive to take control of their own destiny
- a competitive instinct
- resilience in the face of defeat
- good judgment
- decisiveness
- the ability to inspire others
- an unfailing positive attitude
- great communication skills
This could be quite a daunting list, unless you recognize that some key entrepreneurial traits can be acquired or enhanced. They often need to be, as not all entrepreneurs are natural marketers when they start their business. Some work independently to expand their skills. Others work in partnerships, where the partners pool their skills and parcel out the work accordingly.
Successful entrepreneurs are constantly asking themselves questions. Is this product what the customers want? Is there a way to improve it? What are competitors doing in this area? Are they posing any new risks?
They want to keep an eye on all aspects of the business. Are there problems with operations or marketing? What are the profit projections for the next three months? Is everything adequately financed?
Basically, successful entrepreneurs have trouble sleeping unless they have a good sense of what is happening in all areas of their business. They need to be confident that all areas of their business are working well together.
If you are one of these driven entrepreneurs, you likely feel the need to understand your business at all levels. You can begin by setting up benchmarks and Key Performance Indicators for your business, monitoring them on a regular basis to make sure you are moving in the right direction. Another great place to start would be a Business Diagnostic and Performance Review, where you will get a holistic analysis of your strategic and operational position and an Action Plan to put you in control of your business…so that you can sleep easier at night.
For more information about setting up your Key Performance Indicators or conducting a FREE Business Diagnostic and Performance Review, please contact our office at (317)782-3070.
- physical and mental stamina
- a drive to take control of their own destiny
- a competitive instinct
- resilience in the face of defeat
- good judgment
- decisiveness
- the ability to inspire others
- an unfailing positive attitude
- great communication skills
This could be quite a daunting list, unless you recognize that some key entrepreneurial traits can be acquired or enhanced. They often need to be, as not all entrepreneurs are natural marketers when they start their business. Some work independently to expand their skills. Others work in partnerships, where the partners pool their skills and parcel out the work accordingly.
Successful entrepreneurs are constantly asking themselves questions. Is this product what the customers want? Is there a way to improve it? What are competitors doing in this area? Are they posing any new risks?
They want to keep an eye on all aspects of the business. Are there problems with operations or marketing? What are the profit projections for the next three months? Is everything adequately financed?
Basically, successful entrepreneurs have trouble sleeping unless they have a good sense of what is happening in all areas of their business. They need to be confident that all areas of their business are working well together.
If you are one of these driven entrepreneurs, you likely feel the need to understand your business at all levels. You can begin by setting up benchmarks and Key Performance Indicators for your business, monitoring them on a regular basis to make sure you are moving in the right direction. Another great place to start would be a Business Diagnostic and Performance Review, where you will get a holistic analysis of your strategic and operational position and an Action Plan to put you in control of your business…so that you can sleep easier at night.
For more information about setting up your Key Performance Indicators or conducting a FREE Business Diagnostic and Performance Review, please contact our office at (317)782-3070.
Monday, March 22, 2010
Family Business Transition – Who Gets the Baton?
Family business transition planning is frequently predicated on the assumption that someday the parents will be passing on the baton to one (or several) of their own children. What more satisfactory way of crowning their lifelong efforts and hard won success than to pass on the legacy to their own kin so they too can continue to enjoy and prosper from it.
However, children are never clones of a parent and generations also vary one from another. Changes in educational opportunity, in affluence, and especially in technology have created a different life style and set of expectations among generations from that of the business’ founder. This may translate as a lack of any particular commitment to or passion for the family business or a desire to take a different career path altogether.
Before attempting to develop a business transition plan based on passing it to the next generation you must ask yourself this key question: do the proposed successors have the necessary commitment and passion for the business that will see them through the long hours and tough times that are part of managing and growing a business?
Where there is absolutely no interest in the business demonstrated by the next generation, then, blasphemous as it may sound to the senior generation, selling it to a third party could well be the best decision – for the business and the heirs.
If you are still some way from a transition point, there may be time to develop a grooming program for candidate successors, including working up through the company to establish their knowledge of operations and their credentials with employees and customers, management training and so on. This provides you with the opportunity to evaluate their aptitude, reason for commitment, and level of passion.
Creating a family council opens up a formal forum for discussing succession planning openly and assessing the real wishes and passion of potential heirs to the business. If a child doesn’t want a role in the family business, it is better to arrange an alternative transition strategy that recognizes the fact. This may not necessarily involve selling to a third party though. It may be possible to hedge bets by bringing in external managers or transferring ownership to a trust to delay the need for a decision, at least for a period.
However, children are never clones of a parent and generations also vary one from another. Changes in educational opportunity, in affluence, and especially in technology have created a different life style and set of expectations among generations from that of the business’ founder. This may translate as a lack of any particular commitment to or passion for the family business or a desire to take a different career path altogether.
Before attempting to develop a business transition plan based on passing it to the next generation you must ask yourself this key question: do the proposed successors have the necessary commitment and passion for the business that will see them through the long hours and tough times that are part of managing and growing a business?
Where there is absolutely no interest in the business demonstrated by the next generation, then, blasphemous as it may sound to the senior generation, selling it to a third party could well be the best decision – for the business and the heirs.
If you are still some way from a transition point, there may be time to develop a grooming program for candidate successors, including working up through the company to establish their knowledge of operations and their credentials with employees and customers, management training and so on. This provides you with the opportunity to evaluate their aptitude, reason for commitment, and level of passion.
Creating a family council opens up a formal forum for discussing succession planning openly and assessing the real wishes and passion of potential heirs to the business. If a child doesn’t want a role in the family business, it is better to arrange an alternative transition strategy that recognizes the fact. This may not necessarily involve selling to a third party though. It may be possible to hedge bets by bringing in external managers or transferring ownership to a trust to delay the need for a decision, at least for a period.
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