The Importance Of A Plan
In my role as a franchise advisor, I’ve been able to work with a lot of really smart people over the years. I’m talking MBA’s, PhD’s-even a rocket scientist from NASA. I would guess that some of them were qualified to be members of MENSA.*
But, even smart people make mistakes, and I’ve seen some real whoppers take place at various stages of the franchise buying cycle. Some of them include:
· Not calling 10-15 current and former franchisees to ask about their experiences as owners
· Not visiting current franchisees in-person as part of the franchise research process
· Not having enough money set aside for the start-up phase
· Not using a lawyer who specializes in franchising
There’s one other thing that’s always baffled me about potential franchise owners, and it’s this:
How do some franchise buyers (after doing a lot of right things during the investigative process), manage to just about ruin their chances of ever becoming their own bosses towards the end of it?
I’m going to use a specific example that I’ve seen take place on more than one occasion, and my hope is by sharing it here, you won’t do the same.
The Business Plan
Some potential franchise owners don’t put enough time and energy into writing a powerful and convincing business plan for their new business.
Admittedly, it gets me a little aggravated when I learn that one of my clients isn’t taking their business plan very seriously. I won’t admit to losing sleep over it, but I know in my heart that my client’s chances of securing a small business loan diminish greatly if the business plan they submit to their bank is weak.
One person that may lose sleep over something like this is Tim Berry. He lives and breathes business plans. *
Here’s what Tim says about business plans:
“When a bank asks for a business plan, the bank wants a document that’s a convenient summary of the key points of the business. That includes highlights like what you sell, into what markets, through what channels, with what sales and marketing strategies. Also who’s in charge of this business, and what experience the people in the team have. “
But, banks want a lot more, especially today. So, you just have to give them more.
Tim goes on:
“Most of all, with a business plan that’s being submitted to a bank, they are looking for stability, reliability, and responsibility. They want to see a good credit history, both business and personal, and assets to cover loans and reduce risks.”
You’ll also need to tell your story by adding a human dimension to your business plan.
If you’ve never written a business plan, don’t sweat it; there’s plenty of help available:
1. Business Plan Software
You can purchase software that provides step by step instructions and includes templates with blank fields that just need your numbers added to them.
2. Small Business Development Centers
Administered by The US Small Business Association, SBDC’s provide no-cost services for future and up and running small businesses. Programs vary by location, but here’s an example of one that’s focused on helping entrepreneurs create solid business plans.*
3. SBA.Gov Online Tutorials
Watch a collection of useful how-to videos on business planning, including an introduction to the planning process, strategies, sales forecasting, and more. You can view them at your leisure, 24/7.
You don’t have to be a rocket scientist to know that in today’s lending environment, you shouldn’t even think of going into a bank to apply for a small business loan without a strong, formal business plan in your hands. The lender is going to want to see your projections and read your story. Use one or all of the resources I shared with you to make your plan shine.
It’s a smart thing to do.
Have you ever written a business plan? Do you feel that’s it’s crucial to have one?
* Non US Government links
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Projecting Your Business Cash Flow, Made Simple
Cash flow is king for small businesses and the self-employed. But planning cash flow is easier said than done, especially if you’re not a numbers person.
However, if you’re going to succeed in business, mastering basic cash flow projections is a must. After all, you can be a profitable business yet still have poor cash flow, simply because the cycle of cash in and out of your business isn’t synchronized.
So where do you start? The first thing to know is that your projections don’t have to be – and probably never will be – 100 percent accurate. It’s one of the reasons many business owners hesitate working through this process. But it is possible to simplify the process. Here’s how:
Cash Flow is About Timing
It’s important to understand that the timing of cash income and cash outgo comes down to the operating cycle of your business. This cycle includes many moving parts, such as buying or selling with credit, your collection process, the costs of running your business (salaries, rent, marketing, etc.) and, of course, when you get paid.
Why Manage Cash Flow Through Projection?
Using a basic spreadsheet as your tool, cash flow projection gives you a clear look at when money comes in, when it goes out and what money you are left with at the end of each month after you have paid your expenses and recorded your income.
Knowing your numbers in terms of cash flow projection allows you to plan and anticipate for the coming months. It also gives you enough information to see potential pitfalls within the cash-in and cash-out flow of your business. This might involve a short-term injection of cash from family, friends or a bank. Remember, you’ll need to share this kind of projection document if you want to secure a loan and prove your ability and timeline for making your loan repayments – another good reason to spend some time on this document.
What Does a Cash Flow Projection Spreadsheet Look Like?
SCORE offers small business owners a wide selection of free business templates for download, including a sample cash flow projection spreadsheet template (with formulas built in for those of us who are spreadsheet illiterate). Look for the download labeled Cash Flow Statement (12 months).
Try to think of cash flow projection as part of your ongoing business planning process. And although this document and the process itself is not a function of accounting, all your numbers and tracking categories should be in sync.
If you’re unsure how to forecast your sales or expenses, business planning pro Tim Berry has broken this down into a simple process, too. Read his blog – How to Project your Basic Business Numbers – for a step-by-step guide.
Lastly, if cash flow is a problem, it might be worth talking to your accountant. There are a number of options available before you dive into borrowing money. Read more about these in this article: 5 Things to talk to your Accountant About, by Barbara Weltman.
- The Bare-Bones Business Plan for Any Business
- Six Ways to Manage Cash Flow as a Seasonal Business Owner
- Understanding and Expanding Cash Flow
- Dealing With Cash Constraints? Tighten Your Belt and Fight Back With Bootstrapping
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Partnerships Built To Last For Small Business: SBA Forges New Alliance With US Black Chamber
Over the last three years, SBA has provided small businesses owners and entrepreneurs with the tools they need to not only survive, but thrive in tough economic times. We’ve supported more than $80 billion in loans to more than 150,000 businesses in tight credit markets and worked to bring 1,000 community banks back to SBA lending. Today, we’re seeing commercial markets improve, but we know gaps still remain, especially in underserved communities.
At the SBA, and across the Administration, we are committed to building strong communities and creating an economy built to last. I was excited to participate in the Administration’s annual African-American Women’s Forum earlier this week at the White House to underscore that commitment and highlight SBA’s efforts increase access and opportunity in our community.
We’ve stepped up our outreach to underserved communities and held eight White House Economic Forums to connect small business owners and entrepreneurs with the resources and networks they need to start, expand and create more jobs. Through that effort, we’ve had tangible results, reaching thousands of small business owners and millions more through social media. In addition, we established the Advisory Council on Underserved Communities (CUC) to get invaluable input on ways to improve our programs and services for our customers in underserved communities.
And we continue to look for new opportunities to expand our reach. That’s why today, I formalized a partnership with the U.S. Black Chamber, Inc. to build on our efforts to support underserved communities that have been hit hard by the recession. This partnership is designed to increase the participation of African American small businesses in SBA programs, including:
- Loan programs and access to capital initiatives;
- Government contracting programs like the 8(a) program and the Women-Owned Small Business Program; and
- Up-to-date information and access to SBA’s extensive resource partner network.
President Obama has fought since the beginning of his Administration to support small businesses. The success of America’s small businesses is critical to our economy, our communities and our future. The partnership established today is yet another example of our commitment to creating an economy built to last-one that is inclusive, resilient and robust and brings more access and opportunity to more communities.
About the Author:
Former Deputy Administrator
Starting a Freelance Business – How to Take Care of Legal, Tax and Contractual Paperwork
If you are new to freelancing or thinking of becoming a freelancer, you’ll no doubt have lots of questions, especially about the legal and regulatory paperwork you need to obtain and manage throughout the business year.
Freelancing, particularly if you are unincorporated, is one of the least paperwork-intensive forms of business ownership. Nevertheless, you are still a business and you need to be sure you have the right licenses or permits, make estimated tax payments on time, report your earnings each year, and deal with client paperwork such as contracts, non-disclosure agreements, and more.
To help you stay on top of your obligations, here’s a breakdown of key legal and regulatory processes, plus important “business-ready” documentation you’ll need when dealing with new clients.
Legal and Regulatory “Must-Dos”
Here’s what you’ll need to do to ensure you set up and manage your freelance business legally:
1. Get the Right Licenses and Permits – All businesses need some form of license or permit to operate in their state, county or city. In all likelihood, your freelance business is operated out of your home. So you may need a Home Occupancy Permit and a General Business License. You can get both from your local government website. Or simply use SBA’s “Permit Me” online tool for information about the licenses or permits you may need. Be sure to obtain these before you start doing any business.
2. Register Your Business Name – If you want to name your business anything other than your given name, then you’ll need to register a “Doing Business As” name with your local government. This guide explains how. If you use your own name, skip this step.
3. Pay Estimated Taxes – This one often comes as a surprise to freelancers, who may be used to having their taxes withheld by an employer. As a freelancer, it’s your responsibility to pay Uncle Sam and your state revenue agency almost as soon as you earn income each quarter. If you expect to owe $1,000 or more when you file your annual return, then you must pay estimated taxes on income. For information on how to calculate and make your payments, read: How To Calculate and Make Estimated Tax Payments.
4. Complete a W-9 Form When You Get a New Client – When you ink an agreement or start work with a new client, it’s likely they will ask you to complete IRS Form W-9 (you may have to ask them for it). Filling out a W-9 is straightforward: provide your name and social security number, or “Doing Business As” name. The client holds this form and doesn’t send it to the IRS; it’s a formal certification by you that your tax ID (SSN) is correct. The form also asks if you are subject to backup withholding – most taxpayers are exempt.
5. Annual Tax Reporting: The 1099 Form – If you’ve earned more than $600 in a year from a client, they have to report these payments to the IRS through Form 1099-Misc. Your client will send you a copy by the end of January each year. Be sure it’s accurate – does the amount the client stated they paid you match your records? You don’t have to do anything with the form other than it in your records and use it as a reference when you report your annual income to the IRS. Think of it as the freelancer’s equivalent of the W-2 form.
I’ve deliberately excluded incorporation as a “must-do” legal and regulatory step for freelancers. Incorporation isn’t a legal must-do. While it has its benefits, it can also have cost disadvantages. To help you decide if incorporation is right for you take a look at: Should You Incorporate Your Freelance or Consulting Business? SBA’s Incorporating your Business guide is also a useful reference.
Essential “Business-Ready” Documentation for Freelancers
Here’s a list of some of the day-to-day documentation and paperwork that you will likely need or encounter as a freelancer:
1. Cost Estimate and Proposal Documents – Give your business a professional touch by creating your own branded template for project quotes and proposals. You can pay a graphic designer to create many of your basic business documents and graphics, or use freely available templates in software such as Microsoft Word and Google Docs. Sites such as FreelanceSwitch also offer free templates and resources.
2. Contract Documents and NDAs – Most clients will have their own contracts in place for independent contractors or freelancers. Be sure to read through the terms with a fine tooth comb. Don’t be afraid to question anything that doesn’t make sense or is irrelevant. The Non-Disclosure Agreement or NDA is usually included and is pretty standard. It requires you to agree to the client’s legal rights for protecting company knowledge or information you may have access to during the course of business, as well as intellectual rights relating to the work you produce.
If your client doesn’t present you with a contract, you may wish to protect your own interests by producing your own. This blog offers tips: Setting Up a Client Contract.
3. Statement of Work – Even if you have a client contract in place, many clients will also ask for individual statements of work (SOW) for each project. It’s a good idea to volunteer one even if they don’t ask for it. A SOW is a project-specific agreement outlining the mutually agreed scope of work and the timeframe for its completion. It sets expectations, deliverables, and the price. It may also include information on resources needed for the project, including roles and responsibilities on both sides. The secret to a good SOW is to avoid being vague – if it’s too broad and non-specific, you may end up with a dispute. Once the SOW is agreed and signed, you are ready to begin the project.
Got questions? Post them in the SBA Community Discussion Boards.
- Run a Home-Based Business? – Find the Licenses and Permits You Need
- How to Calculate and Negotiate Your Hourly and Project-Based Pricing
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How a Business Email Address Can Hurt or Help Your Financing Efforts
We can all agree that email is another tool used for exchanging information. But when it comes to business, it plays a much greater role then many people seem to realize.
Unfortunately, one of the most common mistakes business owners make is obtaining a business email account from one of the many free email services available on the Internet. While a free email services does serve a purpose, it can give a bad impression to a potential customer or even hurt your chances for obtaining credit because some creditors require a dedicated business email account.
You can help your business by obtaining a business email account that clearly shows that your company has a personalized domain name. The email address you set up should have @yourbusinessname.com. Not only does this look professional, but it also shows that you are a “real” company with a dedicated communications system.
The first thing you will need to do is register a domain name for your business with an approved domain registrar.
Once you visit the site, you will need to conduct a domain search to see if a .COM for your company name is available. I strongly suggest that you obtain a .COM because it adds another layer of credibility and professionalism to your business as opposed to a .Biz or .Net name.
If your company name is not available as a .COM, then consider searching for a .COM with the extension of your structure title as well. For example, ABC Company.com may not be available, but try ABC CompanyLLC.com as an alternative.
Be prepared to supply the following information when setting up your business email account:
- Name, company name, address and phone number
- Administrative contact information
- Technical contact information
- Domain Name System (DNS) server details
The DNS server is usually provided by the web hosting company that you use to host your website. If you don’t have a website, you can have your domain name parked on your registrar’s servers until you set one up. This can be done afterwards and you can always contact their tech support for additional help.
Once you register a domain name, you will be able to set up a business email account associated with your new domain name. When you select an email address, keep it simple because you will be supplying this information on all your company documents, applications, registrations and so on.
If you decide to establish multiple email addresses like firstname.lastname@example.org, email@example.com and firstname.lastname@example.org, make sure you use only one of these email addresses on all things related to the business credit building process.
It’s essential that you understand how lenders and credit providers assess the creditworthiness of a business. Even though it may seem like a minor detail, having a dedicated business email account does play a role in the decision making process. Small details like this that get overlooked can cause problems for you later on.
About the author
Marco Carbajo is CEO of the Business Credit Insiders Circle (http://www.businesscreditblogger.com), a step-by-step business credit building system providing credit recovery, lines of credit, business credit cards, trade credit, and funding sources.
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