Is Your Business Facing Financial Frustration?

You never really know when you can end up having financial problems. Financial frustrations are normally experienced by medium and small sized businesses. The reasons as to why businesses experience financial crunches can be millions, which are often difficult to understand. But the major reason why small and medium sized businesses face financial crunches is because of the lack of knowledge and information regarding how to handle business finance in a competitive market.

The only two ways you can learn about business finance is either through text books or bank advertising? Our first medium of learning about business finance has always been books which we now know give out good information but it is simply not good enough to run a small or medium sized business effectively. Our books mainly cover how to make strategies for big businesses they rarely cover anything for small businesses that can be applied in the real world. so what do you do?

Of course, you have banks to seek help from. Their marketing campaigns will tell you allot about how you can qualify for a loan they will Never tell you how to can ease your way out without landing yourself into a mountain full of debt. Looking at all the trouble small and medium businesses have to go through regarding their financial issues we decided to help them. Mentioned below are some of the steps you have to take to ensure a financially crunch free business:

Understand your assets, cash flow and income generation means. Until and unless you do not have proper understanding of these three elements you are nowhere in your business.

Pay attention to your business and personal credit because nobody will give you a loan if you have a bad credit history. Keep an eye on your credit reports to make sure you do not end up making any sort of errors that turn out to be disastrous for your borrowing power.

Your marketing position should be strong. The better reputation you have in the market easier it will be for you to attain financial assistance. So it is best if you stay in the good books of important people of the society and don’t forget keeping your customers satisfied is the core essence of being successful.

Search for the finance lending sources. You need to lend from the right resource so it is better if you spend some time searching for the broker that finances the industry you belong to.

Last and the most important tip is that no matter how old your business is you need to invest money constantly to beat the competition, analyze your credit always and finally research before you decide to go for any of the finance resources.

Home Based Business and Financial Education for Couples

Most couples don’t plan to fail most couples fail to plan. Yet failing to create a realistic financial plan and follow it is still the number one reason for divorce in half of all marriages in America. Obtaining a financial education is equally as important as a college education. Prudent financial planning and implementation is necessary for a happy, long-lasting marriage and it is necessary for wealth creation.

Despite record high home foreclosures, the mortgage foreclosure rate according to Moody’s, isn’t expected to peak until 2008.Too many couples find themselves in houses they cannot afford to pay for; this growing occurrence may be a failure to plan to have adequate income or too much debt, such as excessive credit card debt or expensive cars.

Since the early 70’s the bottom fifth of American families have had their income fall by about 0.2 percent each year, at the same time the bottom 40% have not seen any growth whatsoever. It should be clear to every American that things have changed and job security no longer exists, as it did for our grandparents.

In addition to stagnant wages, many young couples today are saddled with paying back college tuition loans that threaten their ability to pay their bills, take an annual vacation, purchase a home and save for retirement. The success of; Franchise alternatives, legitimate business opportunities from home and home based business is the light at the end of the tunnel.

If asked, most couples will say that they need more income to live comfortably but lack an abundance of time to make more money, by lets say working another job. Home business opportunities or franchise alternatives, that generate passive income may allow individuals to pursue the career they trained for and the income they need to live a happy and fulfilling life free from financial stress.

Young people today entering the laborforce face an unregulated labor market that does not plan for the creation of their personal wealth. It’s up to each individual to learn how to become more financially capable and self-sufficient. Consider learning about the legitimate home business opportunities that can generate passive income if the lack of time is an issue.

Top 5 Reasons Why Businesses Fail Financially

As an entrepreneur, our brains are constantly churning. Constantly coming up with ideas on how we can help EVERYONE. Now as great a thing as this may be, it is also a not so great thing. Because it is these ideas that leads us to make mistakes that cause our businesses to fail. Mistakes that we don’t think about until it’s too late. We get so caught up that our eyes and ears are not open to the obvious. We’re so caught up in making it happen that we miss all of the warning signs. And as a result our businesses suffer. They suffer financially and by design.

But it doesn’t have to be that way. You can stop going down this spirally road that only leads to financial disaster. In order to stop though, you have to become aware of the reasons why you’re going through financial turmoil. And I think there are five key reasons that rank in the majority. The five reasons are often overlooked due to the sheer excitement of wanting to start your own business. What you have to remember is that excitement alone is not going to make you successful. It takes lots of planning and preparation along with blood, sweat and tears. No one wakes up a success. They planned it and worked hard at it.

I’m going to share these five reasons that I think are the most critical and I challenge you to take time and sit down and see which ones apply to you. Then take the corrective action and change things before it’s too late.

Here are the 5 key reasons why businesses fail financially.

1. No savings / funds. This is probably the number one reason why businesses fail financially. And it’s because, like I said already, of sheer excitement. You MUST have funds to start a business. A savings that you began many years ago; a retirement account or life policy you can draw a loan on; a home equity line; a rich relative. It doesn’t matter the source, just as long as you have a source. These funds need to be enough to carry you for 12-24 months at a minimum. The longer the better. Keep in mind that it takes time to build a business. It doesn’t happen overnight. So make sure you can provide a lifestyle while you building this business. It doesn’t have to be the “lavish lifestyle” you currently live and more than likely it won’t be. Just be sure you can pay your household bills and put food on the table.

2. No business plan. This is the one element of a business that no one wants to do. Yet it is the most needed. You need a business plan to be able to help you have a clear understanding as to what you want your business to be, how you want it to grow and who you’re going to serve. And this is only the beginning. It will no doubt tell you and any potential investor a whole lot more. This business plan will serve as the roadmap and guide for how to take you business from a caterpillar to a butterfly.

3. No clients. Now this one was a no brainer. But I want to touch on because I want to point out that, yes it’s important to get new clients when you are starting you business but it’s even more important to keep those clients. Your daily goal should be not only how to get new clients but also how to keep your current clients. There is nothing more rewarding than knowing that you have a base of clients who not only continue to use your services and products but who are also raving fans and will refer you to the world.

4. No systems / structure in place. Every successful business has a system in place. A system that everyone in the business from the owner to the lowest man on the totem pole follows. This system creates synergy within the business that leads to nothing but pure abundance. Having a tried and true system to follow allows you to operate your business more efficiently and effectively. Think about McDonalds and Starbucks. No matter which one in the world you visit, the system remains the same.

5. Not understanding the numbers. This reason why businesses fail financially is probably the least recognized. Many business owners and entrepreneurs start a business and never take the time to learn how to understand it and manage it on paper. The can manage the daily operations of their business beyond measure. But when asked what their profit margin is they respond with a “huh?” When asked how their business is trending compared to prior years they ask “what’s trending?” Understanding the numbers of your business tells you more than how much cash is in the bank. It tells you where you money is being spent and how your business is truly being financed. It helps you strategize on where and how to make improvements.

Business Plan Financial Projections: Stop Worrying About Being Right…

Business plan financial projections seem daunting because
they are so uncertain. This very uncertainty, however, is
what makes preparing them easy because you can’t possibly be
right. You can’t predict the future. None of us can. All you
can be is competent in the way you prepare your business plan

Before you finalize your business plan this year, consider
these six caveats to preparing your business plan financial

1. Don’t offer pull-out-of-the-air, “conservative”
guesstimates about getting some percentage of the overall
market demand or year-over-year growth.

It is a mistake to assume that business investors will
appreciate your being conservative with your business plan
financial projections in the early years of your business.
Don’t think for a Wall Street minute that presenting
“conservative” business plan financial projections indicates
“realism” to prospective business investors. Business investors
invest for one reason: to earn a return on their money. How
long the money is invested influences the amount of the return
earned. Let’s say a business investor wants to triple an
investment. Well, if that investment triples in 3 years, the
return is 44%. If it triples in five years, the return is
25%. Adding just two years to the investment period nearly
halves the return! Now do you see why time is so important
to a business investor? Here are a few other examples: let’s
say a business investor wants to:

Make 5 times an investment in 3 years = 71% return

Make 5 times an investment in 5 years = 38% return

Make 7 times an investment in 3 years = 91% return

Make 7 times an investment in 5 years = 48% return

Make 10 times an investment in 3 years = 115% return

Make 10 times an investment in 5 years = 59% return

So, while you may find it attractive to figure out how to
make “just a living” until the business venture proves
itself, you now understand why business investors want sales
and earnings to grow absolutely as fast as possible, without
being deceived, in your business plan financial projections.
On the whole, business investors are risk averse only to the
extent that they don’t want to lose their money or tie it up
in a low return investment. Typically when you make the claim
that your business plan financial projections are “conservative”,
it usually just means that you have no idea how and why you’ll
achieve a certain level of sales within a certain time frame.
Interesting, these kinds of estimates, provided that you’ve
done some good thinking about market segments and overall
demand, often turn out to be too low. Remember, it’s just as
bad to underestimate your sales, as it is to overestimate

2. Avoid calculating costs as a straight percentage of

Sure it’s easier to do things this way, especially with
Excel and other business plan financial projection software.
Costs are real, however. You need to know what they are very
specifically. If you’ve done your homework in developing
your business plan, then you should already have this information,
or at least the basis of it. Just estimate and calculate your
costs on a product-by-product basis.

With these warnings in mind, use the following steps to
develop your business plan financial projections:

Think about what percentage of the overall market share your
competitors already own. Assume that they will continue
their present trends in growth. (Note: some competitors may
already be trending down and losing market share.) Temper
your market share estimates with some discussion of how your
entry into the market will affect these trends. Then,
estimate the percent of total, potential demand that remains
available to you.

Now, based on the limitations of your operations plans,
calculate how much of this remaining available demand you
can achieve. This is a very simple calculation. Start with
your overall productive unit capacity and factor it by the
expected yield of sellable product, then multiply these unit
sales by their respective selling prices and voila, you have
the revenue numbers for your business plan financial projections.

Let’s take an example.

Your research indicates that 2 out of every 10 females age
23 to 55 will under go some type of non-invasive cosmetic
treatment in your area. Your research also shows that this
number is expected to grow 20% each year over the next 5
years. There are 40,000 females in your target market. You
identified four competitors in your target market. These
four competitors currently handle on average 6 procedures a
day. You plan to start a non-invasive cosmetic treatment
center that uses the most advanced technology and is thus
capable of performing an average of 7 procedures a day.
Using this data you calculate the following statistics
about your market and market potential:

Total market 40,000 females x 20% = 8,000 procedures per

4 competitors x 6 procedures x 250 days = 6,000 procedures
per year

Available procedures: 8,000 less 6,000 = 2,000 per year

Your productive capacity: 7 procedures a day x 250 days =
1,750 or 21.875% of the total market. The average selling
price for a procedure is $400. Thus, the revenue for the first
year in your business plan financial projection would be 1,750
procedures times $400 or $700,000.

Now, let’s say you’re were projecting 2,200 procedures per
year. This would mean that you would have to alter your
operating plan to be able to perform 2,200 procedures. You
would also have to demonstrate how you would capture an
additional 200 procedures from your competitors.
Granted this is an over simplified example, but it should
give you a feel for how this process works.

Regarding price, in most cases you should have a clear idea
of how to price your product or service. There are usually
other, similar products or services out on the market.
Unless your competitive advantage is a cost reduction and/or
unless price is a critical basis of competition, just
estimate the value of your improvement and add it on to the
average price currently offered in the marketplace. In order
to make this estimate, you’ll have to be talking to
potential users. Find out what they pay now. Find out how
they feel about the current price. Ask them if they’d be
willing to pay more and how much more. If you ask enough
people, you’ll get a general idea.

3. Never determine price on the basis of a margin you think
is attractive.

The market will pay you only for the value you deliver,
which is determined by the consumer paying the final price.
It’s easy to make the mistake of thinking that a 20%, 40% or
even a 60% margin is great. Never considering that if the
product or service you’re offering provides a real
advantage. If you do this, you may be grossly
underestimating the price you can get in the marketplace and
underestimating your business plan financial projections.
Consumers don’t think in terms of margins. They could care
less about what you ought, “reasonably”, to get for your
product. That’s why you must find out the most that they’ll
pay. This is the value of your product or service. Come up
with some reasonable basis for determining this real value.
Keep in mind the obvious: If the consumer’s value on the
final product or service is less than your cost plus a
reasonable profit to keep your business growing, you’re in
trouble. Your business model will not be sustainable and your
business plan financial projections useless.

Now calculate the costs of manufacturing and distributing
your product. These costs flow directly from your revenues
estimates and operations plan. How much will it cost to
purchase what equipment and materials, hire what personnel,
engage in what selling efforts, pay what accountants and
lawyers, rent what kind of space and so forth, to achieve
the revenues you’re showing in your business plan financial
projections. You must be very specific. Project your costs
over time. Keep them tied to the units you need to sell to
achieve the revenues in your business plan financial

Obviously, costs and revenues work hand in hand.

4. Keep your fixed cost low.

Keep in mind that none of these revenues and the cost
estimates are going to be perfectly accurate, which means
the amount of profit or cash available to pay “fixed” cost
isn’t going to be accurate either. As a result, you can lose
your shirt trying to pay for equipment, a receptionist, or
other activities that don’t contribute to the sole objective
of making sales. Wherever possible, rent space, rent time on
equipment, answer your own phones, etc. To the extent that
you keep costs variable in your business plan financial
projections, you can cut back when sales are slower than
expected. It’s the worst situation to have a big,
well-furnished office with an expensive secretary who
needs the job, when the money isn’t coming in. High fixed
costs in your business plan financial projections also send
the wrong message to investors that you know more about the
“form” of doing business than about actually making money.

Now pull all your numbers together to prepare the financial
statements that summarize your business plan financial
projections. You need three basic statements: cash flow
analysis, income statements, and balance sheets. All of
these come directly from the above calculations. Your cash
flow analysis indicates when and what amounts of capital
infusion you’ll need to start and sustain your business plan.
Make your income and balance sheet projections on the
assumption that you’ll get the capital. For the first year
or two of your business plan financial projections, present
each of these statements on at least a quarterly basis.
Monthly is best. I suggest doing a 24- or 36-month projection
depending on your growth plans and changes in the industry that
you foresee. Follow these monthly or quarterly projections with
annual projections till you cover a span of 5 years.

Finally, run through some “what-if” scenarios or sensitivity
analysis. Though you business plan financial projections should
be based on your best, and best-supported estimates of costs
and revenues, you know you can’t be 100% right. That’s why it’s
important to identify those elements or assumptions of your
business plan financial projections that you feel are most
uncertain. Write out the nature of the uncertainty and the range
you think the estimates will fluctuate up or down. Then change
the estimates accordingly and re-run all your statements.
Pay close attention to how your business plan financial
projections, especially cash flows, change when you change
each assumption. This will help you determine how much
“cushion” you have available and, if business isn’t going
according to plan, at what point cash will become an issue.

5. Do not simply assume that costs and revenues may be
“off”, up or down, by some percentage.

Again, I know that Excel makes it easy to do this. For all
the same reasoning as above, stay focused on the assumptions
and details that make up your business plan financial projections.
It’s the details you need to examine for their sensitivity and
their impact on the bottom line. You only need to alter those
specific items that you’re most uncertain about. If it’s revenues
that you’re worried about, is it the price, the volume, or
both that concerns you most? How big a swing in the estimate
are you worried about, in what direction and why? If it’s
your cost projections that are keeping you awake at night,
which cost elements and why? Things like rents and labor
costs can be determined fairly accurately. But maybe you’re
unsure about materials or labor availability or how
efficiently you can produce your products or provide your
services. Maybe you’ll have to pay extra to ensure their
availability. This kind of thinking forms the basis for running
“what-if” or sensitivity analysis on your business plan financial

6.Do not include every possible business
plan financial projection scenario in your business plan.

Both you and your investors need to know what aspects of the
business plan financial projections are most uncertain,
represent the most risk, in what direction, why, and how
they affect the bottom line. Having hundreds of alternative
scenarios to sort through is like a man with two watches
showing two different times… he never knows what time it is.
Lots of alternative business plan financial projections also
indicate that you’re not too sure about anything. This is an
impossible way to communicate with business investors, manage
your business, or make important decisions. It’s much more
effective to identify the risky areas of your plan, tell why
and how they impact the bottom line and what actions you
plan to take if they occur. This helps you and your business
investors stay focused on the high impact areas and to think
clearly about whether other factors should be considered as
well. It also lends more credibility to your talents and
increases the likelihood of your plan’s success.

Finish this discussion with a summary of the critical
aspects of your plan and related contingency plans. If
you’ve followed all these steps, then you can figure out
what you’ll do if your actual performance turns out to be
different than your business plan financial projections.
Remember, you’re purpose is to demonstrate to business investors
that you’re competent; worrying about protecting their investment
and running a business, not just flying by the seat of your pants.