5 Keys to a Successful Business

Business owners are some of the most optimistic, and often the craziest people in the world. No-one starts a business believing that it will fail. We are all absolutely convinced that our idea is a great one, that we will be successful (where others have failed) and that this business will change our lives for the better. If we did not feel that way, we would never take the risk to invest our own money, or borrow from others to start our business. The reality is however, that, according to the SBA, most businesses eventually fail and more that 50% do not survive beyond the first 3 years. Even if you manage to get that far, things can still go horribly wrong, as many seasoned business owners found out during the recession which hit us during 2009 to 2012.

So, does this mean that you should not start a business at all? Absolutely not. I believe that your business can be an outstanding success, if you approach it in the right way, avoid repeating previous mistakes and impose discipline on yourself as the owner. Here are some of my suggestions on how you can make sure that your business succeeds:

Discipline:

Lets start with you. Successful business owners are disciplined people and more often than not, businesses fail because their owners fail. Your business must compete to succeed. There is always someone out there, trying to win over as many of the customers that you are targeting. Business is competitive and if you do not intend to work hard and discipline yourself, then don’t get into the arena. Anywhere there is competition, there must be discipline. You could have the most unique skill, or the best product idea, but your business will never achieve its full potential, if you do not have discipline.

Discipline is a determination to work hard to get it right. It is not settling for mediocre results but rather working until you achieve the qualities and results that you need to compete. No-one will buy your product if it is substandard, or hire your services if you cannot deliver what you promise. Business discipline requires an eye for detail. I learned a valuable lesson very early on in my career. I was once required to do a financial presentation to a senior executive and felt that since I knew this stuff, I could get by with a minimum amount of research and preparation. I went to the meeting and had my presentation ripped to shreds. I was unable to answer questions that were obvious and fell way short on the detail needed to be credible and convincing. I left that meeting upset and angry, not with the executive, but with myself and vowed that this will never happen to me again. As a business owner you will not get things right every time. You will make mistakes and mess-up on occasion. But if your product or service fails, let it not be for lack of effort and discipline on your part, or that you were too lazy to do it right.

Due Diligence:

“A fool and his money are soon parted” – Dr. John Bridges
“All that glitters is not gold” – William Shakespeare
“There is a sucker born every minute” P.T. Barnum.

These old sayings are trying to warn us that not everything we think is an opportunity or a good business idea, is likely to succeed. There are many con-artists out there, whose sole purpose in life is to deceive you into making financial commitments and who have no problem in robbing you blind. It is therefore foolish on your part not to do proper due diligence on any business idea, franchise or entity you intend to buy or invest in. This is where many business failures occur. At the very beginning.

Due diligence is a serious matter for start-ups as well as on-going businesses. Large successful businesses are constantly doing “due diligence” on their internal processes (systems review, business process improvement, financial and strategic planning) as well as on any expansion thrust or acquisition they may contemplate. Start-ups need to do this as well, before they invest significant funds. Be wary of taking advice from people with vested interests in your decision. For example, you may be considering investing in a franchise. Don’t rely solely on the advice of the franchise vendor with its polished website and a persuasive story, to tell you what a great opportunity this is and how much money you will make. Get independent advice and do your homework before you invest.

Many people start businesses based on a personal passion. While this a great plus factor for success, because your passion drives you to overcome obstacles, it does carry the risk of making business decisions with your heart rather than your head. Sometimes we are too close to the project to be objective and we become emotionally committed too early. This is where an independent expert like an experienced business coach or adviser comes in handy. Some would-be business owners need to hear the brutal truth (in a compassionate way), before they go on to make the mistake of their lives. “Faithful are the wounds of a friend” (Proverbs 27:6). Finally, don’t be taken in by those who pressure you into investing in “a once in a lifetime, limited space available” opportunity. Anytime someone says that to me, I take a step back, and take a good hard look, to see what I’m missing about the offer. It is better to miss out on a “limited offer” opportunity than to rush in and lose your money.

Marketing:

A well thought out and researched marketing plan is one of the most important ingredients that you need to succeed as a business owner. Unless you happen to own the only source of water in the desert, don’t expect people to automatically think of you and come flocking to your doors to buy your product. I worked in a corporate career as a CFO for many years before going off on my own. One of the biggest challenges that I faced when I decided to start my own consultancy business, was how to market my services. That is because, for many years, my job was about cleaning and cooking the fish that someone else caught. All of the businesses I worked for, had large, well staffed marketing departments, whose jobs it was to go out there and win customers. My job was to manage the money and make business decisions. That works fine if you are a part of a large well structured business. If however, you are the owner of a small business, marketing is not a secondary pursuit to be left to others, it is your primary point of focus. You may have a brilliant product or service to offer, but if you do not have a winning marketing plan, no-one will know about your business or care about what you sell. So, whether you are a small or large business owner, you must get involved and often drive the marketing function. You need to know the following:

What specific need does my product or service meet?
Who are my customers, what do they want and how much are they willing to pay for it?
How sustainable is the demand for my product or service?
What is it about my product/service that makes it unique? How can I take advantage of this?
Who are my competitors and what are they able to do better than me?
How do I reach out to potential customers to persuade them to buy my product /service?
How much money do I have available to promote my business?
What specific marketing/promotion activities will work best for me?

Answering these and other marketing questions would help you understand your product/service customer appeal and market potential and how it ranks against your competitors’ offerings. This forms the basis of your marketing strategy and business plan and is critical to your long term success.

Capital:

Raising sufficient capital to start and develop the business is very often the biggest challenge that entrepreneurs face. I have seen many, potentially successful businesses, grind to a halt because the owners did not have capital to take it from start-up, to sustainability. A business needs capital to acquire productive assets and fund its operations until the business itself can generate enough positive cash flow to continue as a going concern. Say as an example, you decide to start a restaurant. You would need capital to buy cooking equipment, furniture, renovate the premises to suit your needs, buy inventory, secure licenses and so on. This is what many people understand capital to be used for, the initial investment to start or acquire the business.

However it may take a while for your restaurant to become popular and attract enough clients to provide the revenue to fully fund operating costs. In the mean time you have overheads to pay such as monthly rent, wages to employees, advertizing costs, replenish inventory (drinks you sell and food ingredients you serve) and so on. This is where many businesses fail. The owners hope that the sales they generate in the future will cover their operating costs from day one and do not properly estimate the time it would take for the business to become established, during which the owner needs to have additional capital to carry the business.

Underestimating the point sustainability or “breakeven point” is a common and fatal mistake made by both seasoned and novice business owners. Before you start your new venture, you have got to realistically project your future cash flows and determine if you have sufficient capital to succeed. Here is what typically happens if you don’t do this. You start your new business by investing your life savings. Things go well for a while, but you soon realize that it is taking longer for the business to become established than you anticipated. Customers are coming in, but not in the numbers you first expected. A lower number of customers means less revenue to pay expenses and you quickly find yourself running out of money to pay suppliers and bills as they fall due. Next comes the juggling act of trying to figure out which suppliers to pay first and which ones you will stretch out far into the future. The calls begin to come in from creditors and you now find yourself working for free for a business that you love, but which is slowly dying, because it ran out of capital before it became sustainable. This is the most common reason for business failure and it supports the SBA statistic that it takes 3 years for a business to fail. That is the time the owner takes to realize the painful truth, that he/she never had sufficient capital to start the business in the first place.

Faith:

These four items, Owner Discipline, Due Diligence, Marketing Strategy and Adequate Funding are the main, universally applicable business ingredients needed to operate a successful business. There is however one more ingredient, which is personal to each business owner, and that is “faith”. I said earlier that business owners are either the most optimistic or the craziest people on earth. That is because we take risks with our capital as an act of faith, hoping for a successful outcome. It takes faith to start a business. But what is faith? It is an expectation that things will work out, or materialize, as we hope or believe. It is what gives substance to our hopes and dreams. The Bible tells us that “Faith is the substance of things hoped for, the evidence of things not seen”. (Hebrews 11:1).

As believers in Christ, we have already established a platform of faith in our lives. We believe that an unseen God, who controls the universe, has a plan and a purpose for our individual lives. This plan is made real in us as we place our faith in our Lord Jesus as our personal savior and leader. Now, to everyone else, this is absolutely nuts. But to those of us who have taken this step of faith, it is as real as the air we breathe. Once we get to this point, every additional thing we do that requires faith, is built on this platform. As a result, our decision to start a business, is not based on an abstract optimism that things will somehow work out, but on the trust we establish in our Lord Jesus to lead and guide us.

I believe that when we become reconciled to God through faith in Jesus, an eternal destiny opens up to us. We who were all once distant from God, now draw close to Him and get plugged into His purpose for our lives. Our purpose for our businesses also transitions from simply being a source of personal wealth, to a tool that God uses to bless us and to bless others. As we actively cooperate with God as an act of unselfish faith, He leads us into decisions and opens doors for us, that we ourselves could not open, all according to His will and purpose. Being Christian business owners does not guarantee that we will all be rich and “successful”. It does however give our businesses and our lives an added dimension and very often, if we are committed to God’s processes, things work out to our benefit. Our role is to trust God for the unknown, follow His leading, even when this conflicts with our personal agenda and build our businesses on Biblical principles. When we take this approach, we have the assurance “that all things work together for good for those that love the Lord and are called according to His purpose” (Romans 8:28). This hope applies to our all aspects of our lives, including our businesses.

I hope this information was useful to you and I encourage you to contact me if you have any questions about your business.

Robert.
Website: http://www.christiancfo.com Email:rfullerton@christiancfo.com.

Business Loan Rates and Small Business Growth

Americans know that friendly business loan rates and small business growth are essential to the growth of the economy, and new business owners have many avenues for creating a successful start-up. Recent investigations by the Small Business Administration, which offers SBA loans to small businesses around the country, suggests that small businesses account for over half of all the sales made in the United States each year. Even more importantly, small businesses provide employment for over half the jobs in the country, as well as a significant number of all new jobs created in the country since the 1970s.

When a bank determines what business loan rates it will offer a client, one of the primary characteristics investigated is the history of the borrower. For new business owners or anyone looking to create a start-up, getting a great rate on commercial real estate loans is often dependent upon business history, which might not exist for some new business owners. In such cases, the only way to get low rates or even get a loan in the first place is when the business owner puts up his or her own collateral or uses his or her credit history to secure the loan.

This reliance upon an individual’s credit for new business loans is why it’s important to have all of one’s financial “ducks” in a row before applying for an SBA loan or any loan connected with a new business. Business loan rates fluctuate just like the economy, and one of the primary indications of whether a bank will loan an individual money is whether the business will be able to survive the expected fluctuations of the economy. A few months or even a few quarters of poor sales shouldn’t mean a new business needs to shut its doors. Some type of emergency reserve, collateral, or savings is an essential buffer for any business.

Sometimes it’s best to think of commercial real estate loans in the same way a borrower might approach a traditional mortgage. Securing a low mortgage rate means coming to the table with great credit. The same might be said for commercial loans. Business loan rates that are low are awarded when an applicant or business has good credit. However, new business owners must also consider a variety of other issues that will come under investigation by the bank such as cash flow and the industry in which a business will operate. Due to these additional factors, a borrower might need to go beyond a standard mortgage rate calculator to one with additional variables.

It might seem like an impossible feat to convince a bank of the creditworthiness of an individual who has never owned a business before; however, some options exist for ensuring a new application is granted the lowest possible business loan rates. For example, a new business owner may provide past examples of business success, even if the owner wasn’t at the head of a company during those successes. Perhaps a business owner once worked in the financial department of his or her last company and was able to save the company thousands of dollars with innovative ideas.

According to the Small Business Administration, small businesses occupy somewhere between 20 to 34 billion square feet of commercial space in the United States. Keeping that number on an upward trend is essential for America, and small business loans, as well as commercial real estate loans, help keep the country growing in a post-recession environment. Business owners who make smart decisions about credit and arrive at a bank with the best possible application will ensure the business opens its doors with the best possible financial future. Entrepreneurs should investigate business loan rates and help make sure the economy continues to grow through new small businesses and valuable jobs.

Business Landline Phone Systems – Why You Need To Have One

For every business, a business landline is no longer a luxury, but a necessity. It is in fact regarded as a fixture. As a matter of fact, if a business decides on a simple business landline, they are on the losing end, essentially because PABX and Asterisk propelled systems are now available for any tech-savvy enterprise.

The great news is the UK is at the forefronts of technology these days. Even telecommunications in the UK are rapidly growing and expanding at truly breakneck speeds.

Taking Advantage of New Telecoms Technologies

With the growth of telecommunication technologies, we are able to multi-task and with the new fiber optics technology we are now embracing mobile as well as wireless technology, any business owner is now faced with too many options for the kind of business landline technology that they prefer to use.

Computer technology has made it possible for business organizations to create communications systems that are able to manage hundreds to thousands of calls at a given time, hence, there is a need for any business owner or a company to look closely into the many features and services that many telecoms companies can actually provide and offer.

Oftentimes, the many business landline phone plans are diverse and distinct from each other; hence, there is a need to closely look into a business owner’s available options. There are a lot of business landlines provider that will help you with your business and other preferred services and features.

By obtaining better value for your money, you in turn get better business, and since you save more on overhead expenses, the more your money goes into profits, which you can use to scale up your business in case of growth and expansion.

Getting The Best Business Facilities

Whenever you search for the best business landline deals for your business organization, your customers likewise find it worth their money to remain following and patronizing your business. This creates a cycle of maximizing your profits that simply propels your business on top of the competition.

The moment you see the connection of availing the best facilities to the maximum potential for your business, you will then see that there is practically no room for any compromise in the telecommunications facilities that your business should make use of.

Kinds of Business Landlines

ISDN or Integrated Services Digital Network Lines

ISDN lines or Integrated Services Digital Network services refer to those lines that are capable of handling voice as well as data services. If you want to include fax services, and throw in some internet capabilities to your business phones, you should go for this type of business landlines.

On the contrary, there are home-based businesses or small scale enterprises that do not require a cutting edge or top of the line telecoms technology. Finding one that best matches your business will surely help grow your business to the next level.

PSTN or Public Switched Telephone Networks

This PSTN or Public Switched Telephone Networks are still useful in this day and age. They are also very affordable for any business owner to have.

The best in telecommunications equipments allow for reduced downtime and enables maximum time spent in doing productive tasks and innovative business deals. Whichever you choose, ISDN or PSTN, checking with your local telecoms provider will provide you with the best deals out there.

You can even explore other options such as VoIP or Voice over Internet Protocol, or PABX, otherwise known as PABX or Private Automatic Branch eXchange or telephone eXchange. It is a system that is connected to the PSTN line, which adds other value added services such as call forwarding, call recording, and even call transfers. PSTN line turns any ordinary landline into a PABX system.

What To Expect When Selling Your Business

Building a successful business takes years of effort and attention. Having expended plenty of blood, sweat and tears over that time, business owners want to maximize their value when selling.

Many of the qualities that make a business owner successful will benefit a business seller, too. However, not many owners have much experience in selling a business. It is a long, complex process. Here are some of the major issues business owners should consider before, during and after a sale to secure the best value for their hard work.

Preparing For The Sale

No matter what sort of business you own or how big it is, determine why you are selling and what your priorities are. Do you want to hold out for an all-cash sale, which may be harder to successfully negotiate, or are you willing to consider an installment sale or taking equity in the acquiring company? Do you have a minimum price determined by factors other than the business’s value, such as your retirement plans? Do you want to preserve the jobs of family members or long-term employees? These and other considerations may seem obvious, but it is essential that you articulate them to yourself before you begin.

It is generally wise to hire outside help. Look for advisers who have relevant experience and vet them thoroughly. Make sure your experts have no potential conflicts of interest in a sale. Advisers you might consider hiring include an accountant, a tax expert, legal counsel, an appraiser or valuation expert, an investment banker and an intermediary or broker. Some people may fill more than one of these roles, and not every business sale will require all of them. Almost every business owner, however, will want at minimum an accountant, legal counsel and an intermediary on their side before and during a sale. The broker or intermediary can be the point person for identifying and working with potential buyers. The accountant (and the tax expert, if they aren’t the same person) will help you get your books in order and consider issues such as how to allocate the business’s purchase price most effectively and how to deal with federal, state and local tax concerns. Legal counsel will draft and review the documents and agreements necessary to complete the sale.

Be aware that many lawyers or other advisers will expect you to sign retainer agreements up front once you have decided to hire them. This protects both parties, but it can mean a substantial outlay of money at the beginning of the process. Also, if you have a business that is very small, you may have trouble finding a broker who is interested in your transaction. Many brokers who specialize in business sales look for businesses valued at several hundred thousand dollars or more. For very large businesses, an owner is more likely to hire an intermediary, who generally functions as a consultant and offers more sophisticated services.

Once you have hired a team, work with it to understand how the sales process will unfold before you start. The better you understand the process, the more purposeful you can be with your choices throughout. One key aspect to have in order early is your bookkeeping and records. Consider conducting a mock due diligence process to make sure you are thoroughly prepared for a prospective buyer’s examination. You may also want to obtain an objective third-party valuation. This will give you a realistic idea of your business’s worth and will help you decide on a realistic asking price.

Once a potential buyer has been identified, a tighter focus on compiling and presenting books and records is warranted, since the buyer will be able to specify the information for review and the preferred format. For example, many prospective buyers want to see books and records that have been prepared according to generally accepted accounting principles (GAAP), which most small businesses do not routinely use. The process of converting a business’s books to GAAP can be a significant undertaking, so if this is a concern, it should be addressed early in the process.

Finally, don’t neglect personal preparation for letting your business go. Create or revisit your personal financial plan. Try to work out several scenarios for the sale to see how it will affect your short-term and long-term goals. For some business owners, especially founders, letting go of a business can also have an emotional component. Know what you plan to do next and accept that the new owners will change your business once you are gone. Both you and your business will begin new chapters after the sale closes.

The Sale

The process of selling a business can be protracted. Once you begin, prepare yourself for the sale to take six to 12 months, though, obviously, this timeline can vary. To make your business more attractive, consider improving assets, cleaning up potential liabilities and generally taking care to make your business look its best. Much as you might repaint your house before you sell it, you can take steps to spruce up your business, too. Consider the timing of the sale; try to avoid selling right before a lease or key contract expires so that a buyer doesn’t face the prospect of renegotiating it as soon as he or she arrives.

Ensure that your business continues to operate effectively throughout the sale process. The sale can occupy a large chunk of your attention if you are not careful. Be sure to manage your time wisely and do not neglect day-to-day operations. Keeping performance high will not only make the business more attractive from without, but also will keep morale and dedication high within your staff. This is another reason to hire outside consultants, as spreading yourself too thin may hurt the business and ultimately reduce the price you can obtain.

Consider carefully who in the business needs to know that your company is for sale. You have a duty to any partners or co-owners, as well as to shareholders, which may dictate a certain level of disclosure. However, widespread knowledge that the business is for sale can create anxiety among employees, customers and vendors. This, too, can reduce the ultimate selling price.

Once you or your broker has identified a prospective buyer, it makes sense to prequalify the candidate to make sure nobody’s time is wasted. During the prequalification process, you will also want to secure confidentiality or nondisclosure agreements. Serious buyers should not have problems agreeing to such terms; if they resist, treat it as a red flag. (The same holds true for your team of advisers, who should also formally agree not to disclose sensitive information about the business.)

The prospective buyer should offer a letter of intent, which is a nonbinding offer outlining all the major terms of the proposed transaction, including the total purchase price, the structure and all other important conditions. The letter of intent serves as a basis for you, your buyer and your respective lawyers to negotiate terms and draft the final legal documents. Be sure to have a good idea of which terms you are willing to compromise on and which are deal breakers. As a rule, the more thorough and specific you can be during the early stages of a deal, the better.

A key decision for many business owners will be whether they want to structure the sale as an asset or a stock deal. Generally, buyers prefer to purchase assets because they can obtain a step-up in basis, resulting in enhanced tax deductions in the future. Buyers also limit their own risk in an asset sale. Sellers generally benefit more from a stock sale, if one is possible, because they obtain clear, long-term capital gains treatment by doing so. If the seller holds stock in a C corporation, the seller may have no choice but to hold out for a stock sale to avoid double taxation. In other cases, an asset sale will tend to attract more buyers, but a seller should not hesitate to ask for a higher price accordingly, given the benefits to the buyer inherent in an asset sale. In many cases, the structure of the business dictates the tax treatment of the sale. For example, the sale of a sole proprietorship is always treated as an asset sale.

While a stock sale is relatively straightforward, an asset sale is treated as a sale of all business assets, with a portion of the purchase price allocated to each asset. Allocating the purchase price among assets is often a key part of the negotiation process, as buyers and sellers may want certain assets treated differently to receive the most favorable tax treatment. For example, buyers might want more of the purchase price allocated to hard assets, which they can depreciate, as opposed to intangible assets or goodwill, which generally must be expensed over longer periods of time. Sellers want the opposite, because the sale of hard assets often results in ordinary income tax treatment, whereas intangibles and goodwill can often receive capital gains treatment. Both parties must agree on the final allocation, as the buyer and seller will both disclose this in their tax filings with the Internal Revenue Service.

You should also address issues of transition as part of the selling process. Will you stay on for any length of time to ease the transition? If so, you will need to negotiate an employment agreement explicitly outlining the terms of such work. If not, how will you hand over the business and when? At what point will key employees be notified?

Follow best practices even in the small details as you proceed through the negotiation and the sale. Keep good, clear records and follow any directions from your lawyer carefully. Meeting exacting ethical standards is the right thing to do, and it also limits your liability. As a seller, not only do you have duties to your partners or shareholders, but you also have legal disclosure obligations to potential buyers. Make sure there is no question that you have met all such obligations fully.

After The Sale

In most business sales, your involvement with the business does not end on the day it’s sold. Founders and key executives often receive employment contracts to stay on and help the business transition to the new ownership. Depending on how the sale was negotiated, this can also include additional incentive payments, or “earn-outs,” which are contingent on how the business performs during the first few years after the sale. Earn-outs are common when founders and key executives stay on through the transition, providing them with incentives to keep the business running smoothly. Most business sale contracts include noncompete provisions, under which an owner’s ability to continue to do business in a certain geographic area or industry can be limited.

Remember that Uncle Sam will take a healthy share of the business sale proceeds. Work with your accountant to prepare all necessary tax filings following the sale. The tax impact could extend over multiple years if you receive payments under an installment sale.

Selling a business is complex, and this article discusses only some of the legal and financial considerations involved. Do not hesitate to bring in a team with experience and to take the time you need to educate yourself before you proceed. Most business owners only sell a business once. It is important to get it right.