Cash Flow Planning for Solo Professionals

You’ve heard it a million times – cash flow can make or break a business. Lack of cash flow planning is the reason why many businesses fail. In fact, many PROFITABLE businesses fail because of cash flow issues. Without adequate cash flow, you can’t pay your bills and you can’t make plans for your business.

So… what is cash flow planning? Cash flow planning is projecting your future cash inflows from sales, services, and loans, and comparing them to your future cash flow needs (suppliers, salaries/wages, loan payments, taxes, etc.). The difference between the two is your net cash flow.

Why is cash flow planning so important? Cash flow planning can help you identify problems down the road, and fix them before they occur. Cash flow planning can also help you make decisions such as should I attend that conference I’ve wanted to attend, should I buy the new computer I’ve been wanting, or do I need to work extra hard this month to avoid a cash flow deficiency next month?

The first step in planning your cash flow is knowing where you spend your money! Solo entrepreneurs need to have a good grip on both their personal and business spending, as most solo entrepreneurs rely on their business income to meet personal finance goals (i.e., pay the bills!). So, you should track both your personal and your business spending, although I recommend that you keep them separate (that’s a topic all by itself).

What’s the best way to track your spending? You can use pen & paper, spreadsheets or a software program. The best method for you is the method that you will actually use on a regular basis.

You should project your spending for at least the next 12 months so that you include annual and other periodic expenses. If you are experiencing a cash flow crisis, you should track & project your cash flow on a weekly basis, instead of monthly.

If you are an existing business, you can project your cash flow for the next year by reviewing your expenses for last year. If you are a new business, you will need to estimate your start up costs in addition to regular operating expenses.

Start up costs include inventory, legal expenses, advertising, licenses & permits, supplies, and many more costs that you may not have thought of. To research startup costs you should contact your local Small Business Development Center, contact a SCORE counselor, join groups of similar business owners, and read as many books or articles you can find on the subject.

To improve your cash flow, you should:

1. Complete the first 3 steps. You have to understand cash flow planning, track your cash flow, and project your future spending needs before you can improve your cash flow.

2. Create best and worst case scenarios and create appropriate responses to both scenarios. For example, if your best case scenario is to increase sales by 50%, how will you use the profits? Will you put the profits back into the company by investing in new equipment, training, etc.? If your worst case scenario is a drop in sales by 50%, how will you continue to cover your monthly expenses? By planning for the best and worst case scenarios, you’ll be ready for any situation.

3. When estimating your future income, realize that some people will pay late, and account for that fact in your projection.

4. Charge what you’re worth. Many businesses, especially service professionals, under-charge when they are first starting out. This is a great way to go out of business. Make sure you are charging what you’re worth, and remember you’re in business to make money, not to give your expertise away for free.

5. Watch your business spending. Focus on the value the item brings to your business, and avoid lavish spending (i.e., do you really need the fastest, newest computer available?).

6. Don’t hire until necessary. Consider using virtual assistants or temporary employees before hiring permanent employees.

7. Give incentives for early payment for products and services. On the flip side, chase down invoices the minute they’re late. Charge interest or late fees to encourage timely payments.

8. Update your cash flow regularly. Your cash flow plan will change frequently as your business grows. You may want to update your cash flow plan weekly when you first get started, then switch to monthly once you’ve got a good handle on your cash flow.

Remember – whether you are a new or growing business, your cash flow projection can make the difference between success and failure.

Bylaws – The Guts of a Corporation

Most states make forming a corporation relatively painless by providing forms for practically everything. The bylaws of the corporation, however, are an area you don’t want to rely on a form.

What Are Bylaws?

Bylaws are the technical rules that govern how a corporation will be run. They are a private document for the corporation and are not filed with any government entity. The purpose of the bylaws is to set out how things such as meetings, voting and share transfer will occur with the business.

Provisions

Typically, the bylaws will be the biggest document in your corporate book. If you are a single shareholder entity, they tend to be fairly straightforward since there isn’t really any dispute possibility unless you have a split personality. If there are two or more shareholders, however, the document is going to be a key item because it is going to detail voting rights and so on.

Typically, the bylaws of a corporation will cover the following specific issues:

1. Board of Director Meetings – When, where and how meetings will be conducted.

2. Notice of Meetings – The form, time and how notice must be given to board members.

3. Quorums – Before a board can issue resolutions on corporate business, a certain percentage of board members must be present. This “Quorom” is set out in the bylaws.

4. Annual Meetings – The bylaws typically detail when and where the annual meeting of the entity will occur.

5. Special Meetings – The process by which special board meetings may be called when an issue arises that requires the immediate attention of the board.

6. Voting Rights – Language detailing the voting rights of shareholders and board members in relation to passing or defeating resolutions.

7. Share Transfer Rights – Language detailing share transfer issues such as right of first refusal and so on.

8. Directors – Language detailing how many board members there will be, the length of their term, compensation, etc.

9. Amendment – The process by which the bylaws can be amended to reflect the evolution of the business.

10. Removal – Language detailing when and how a board member can be involuntarily removed.

There are numerous other provisions that can and probably should go into the bylaws of a corporation. Make sure to discuss them with your attorney.

Buy a Small Business in the UK

Looking for a serious investment opportunity? You may want to consider buying a small business in the United Kingdom. There are several ways to turn a good profit in small business, but there are some important things to keep in mind if you are looking for an investment opportunity, especially if you are an investor from the United States, Canada, and elsewhere.

Any investment opportunity naturally comes with some risk. Foreign investors will need to calculate an additional variable when figuring up the possible amount of profit margin, loss ,and potential for both, as well as the exchange rate. How well is your currency doing against the British Pound? Be sure to include some “wiggle room” in your budgeting for fluctuations in the exchange rate.

For those already living in the UK, concerns such as taxation and local regulation are familiar topics. To those in overseas locations, it’s important to look up the laws of the land pertaining to your type of business, the taxes for which you will be liable, and how to properly account for them. This may seem elementary to those with experience in putting money into an overseas investment opportunity, but for the first-time investor in a UK small business, there are many laws and policies that might surprise you. The key is to do your homework, get the advice of a good UK legal expert, and be prepared for a new and different way of doing business.

If you want to buy a small business in the UK, it’s good to do a bit of research into the type of business you want to use as an investment opportunity. Are there ways that you can expand the business onto the Internet? Can the Internet be a help to you in increasing sales, market visibility, or media awareness? All of these factors are important to keep in mind. The most successful small businesses are the ones whose owners know how to take advantage of the Internet, while still meeting local needs and demands with speed and precision. It’s not so different than doing business anywhere else in the Western world. It’s important to understand how the buyers in your area of the UK respond to and utilize the Internet when it comes to commerce.

You’ll also want to give your competing businesses a good hard look to see how they are using the Internet. Are you thinking of investing in an already crowded market? If so, you’ll need some fresh ideas to give your version of the business a new approach so that you can set it apart from the competition.

A UK investment opportunity in small business may bring some unexpected surprises if you are considering investing in a “rising star” business. For example, twenty years ago, nobody had ever heard of a “cyber café”. Today, cities are full of places that offer Internet services, games, coffee, and more for a price. This concept has become a very important part of many communities. Those who took the initial risk a few years ago, putting money in what they saw as a good investment opportunity, are reaping their rewards today.

Those who buy a small business in the UK often find that the investment opportunity is well worth the risks. With some research, a bit of financial planning, and the expert advice of a UK legal advisor, you can turn a potential opportunity into a major success. If you are living in America, Canada, or elsewhere,

Creating Cash Flow with Old Inventory

Being a retail consultant, there is a comment many business owners used. It is “I’m not giving away my inventory”. It is most common among store owners that business is in bad shape. It is too bad that most retail owners don’t understand about inventory. Inventory does two things. It eithers makes you money or costs you money.

You need to have sufficient inventory to be profitable. However, having too much inventory is a larger problem than too little inventory.

Too much inventory ties up critical cash for your business. It can also result in more damages to your merchandise. The key is to find the right price to move your merchandise. Slow moving items take up space and cash that could be used for more profitable items.

There are times you have to adjust your pricing strategy. For example, let’s assume your retail price is double your cost. In this example, you pay $10 and it retails for $20. If it is a slow mover or discontinued item, what should be the new price? I would take 20% off for 1-3 months, 50% off and then 75% off. If you have to sell at 75% off, you will sell below cost. Cost should never be a factored in marking down an item.

I can hear you yelling now. I’m not giving away my inventory. You are looking at your inventory from the wrong perspective. Your product is worth what a customer will pay for it.

Using my example, let’s say you sold your product at 75% off. How much did you make on that item?Your answer most likely was a loss of $5.This was based on a $10 cost and $5 retail. That answer is partially correct. The more correct answer is that you made $5.

You took an item that was producing zero and turned it into $5 cash. You can take that cash and space and use it for a profitable item. Many times a business does not have enough cash to buy the needed quantities of the best-selling products. If you take the cash from the poor sellers and use it for good sellers, you will more than make your money- back.

No matter how good a buyer you are, there will be items that don’t sell. The key is to realize this and react before it ties up too much cash and profit.

An added benefit of taking care of your problem inventory is increased sales. You will get customers who will shop your store regularly looking for your markdowns. Many of them will buy your high gross items also. If you take care of your problem inventory regularly, your markdowns dollars will be less.

Inventory is critical to your business success. The key is to take action on the slow moving and discontinued. This will make your bottom line better in the long run.

Business Strategy – Year End Considerations

As we enter the final weeks of 2005, you are undoubtedly hunting for gifts. While these are obvious year end considerations, you should also be reviewing your business strategy for 2006.

Business Strategy – 2005

Whether your fiscal year ends in December or doesn’t, the end of the month is a good time to take stock of how things went in 2005. While the old saying is “time flies”, it is particularly true for businesses. Business owners tend to be fixated on two to three month time periods. As a result, they can fail to see developments over longer periods of time.

After you’ve taken care of all your holiday gift purchases, you should have some down time in the last two weeks of the month. Business tends to slow down as people deal with the holidays, travel to see family and so on. This is the perfect time to go back and consider the business year. Specifically, you should focus on where your business was in January 2005. What were your goals at that time? Did you meet them during the year? If not, why? You will almost always be surprised when you realize how the business developed over the last year. This global view can give you a better perspective and evaluation of how things are going.

Business Strategy – 2006

After contemplating 2005, you should give consideration to what you want to accomplish and where you want to be by the end of 2006. Ask yourself the following:

1. What is a reasonable revenue increase for 2006 compared to 2005?

2. Are their products or services you should pursue?

3. Are their products or services you should drop?

4. If a strategy is underperforming, does it make objective sense to continue pursuing it or cut your losses?

5. What are your biggest frustrations and how can you deal with them?

6. Who are your most valued employees and have you taken a moment to thank them?

7. Who are your least valued employees and what should you do about it?

8. Which vendors or suppliers do great work for you and which don’t?

Many other questions will run through your mind. There are no wrong ones. What is important, however, is you write the goals and thoughts down and keep them somewhere private. Next December, you should pull them out and see how things are going.

Commercial Machine Vending – What’s The Best Way To Get Started?

If commercial machine vending is a business that you are interested in, there is a wealth of information about vending machines and vending routes available online. It is one business that is easy to get into, but depending on the types of commercial vending machines you want to have, it could require a substantial investment. The distributors for commercial machine vending machines often have payment plans available and you can choose to lease the equipment you need.

Some people prefer to get into the vending machine business by purchasing an established vending route. Distributors can give you information about vending routes for sale where the machines are already placed in strategic locations. The locations for the vending machines determine how much money you will make in commercial machine vending because you do need areas where there are lots of people. The distributors will also have a used vending machine to purchase, which can save you money in getting started.

It is impossible to accurately predict how much money you can make with commercial machine vending. The success or failure of your business will depend on the location of the machines as well as the products that you sell and the reliability of the vending machines. If you want to purchase a vending route for sale, you should do your research beforehand and check out the machines. You might approach the seller about a vending machine to purchase so that you can start out small. This will also give you a chance to see if purchasing the full vending route might be beneficial to you.

Since the vending machine business is a commercial enterprise, you do need to abide by state/provincial rules regarding commercial machine vending. You will need to have a business licence and you need to keep accurate financial records for tax purposes. Another aspect that you have to consider with a vending route for sale is that the business owner gets a commission of the amount of money that you take out of each machine. This is usually 40% of the gross, before you deduct any expenses.

Look for a vending machine to purchase when you want to get into commercial machine vending. Most people start off with candy or gumball machines, but there is also a great profit into snack and soda vending machines. There are also vending routes for sale with machines that sell medical supplies, such as aspirin or even products associated with personal hygiene, such as toothpaste, soap and dental floss. The possibilities for products are almost endless when you consider the commercial machine vending business.

Electrical Safety Is Not Shocking

In electrical injuries there are four main types of injuries: electrocution (will cause death), electric shock, burns, and falls. These injuries can come from direct contact with the electrical energy, electrical arcs that jumps to a person who is grounded, thermal burns including flash burns from heat generated by an electric arc, flame burns from materials that catch on fire from heating or ignition by electrical currents, and muscle contractions can cause a person to fall. The fall can cause serious injuries also. High voltage contact burns can burn internal tissues while leaving only very small injuries on the outside of the skin.
There are some safeguard procedures that can be followed to ensure electrical safety:
1) Inspect tools, power cords, and electrical fittings for damage or wear prior to each use. Repair or replace damaged equipment immediately.
2) Always tape cords to walls or floors when necessary. Nails and staples can damage cords causing fire and shock hazards.
3) Use cords or equipment that is rated for the level of amperage or wattage that you are using.
4) Always use the correct size fuse. Replacing a fuse with one of a larger size can cause excessive currents in the wiring and possibly start a fire.
5) Be aware that unusually warm or hot outlets may be a sign that unsafe wiring conditions exists. Unplug any cords to these outlets and do not use until a qualified electrician has checked the wiring.
6) Always use ladders made of wood or other non-conductive materials when working with or near electricity or power lines.
7) Place halogen lights away from combustible materials such as cloths or curtains. Halogen lamps can become very hot and may be a fire hazard.
8) Risk of electric shock is greater in areas that are wet or damp. Install Ground Fault Circuit Interrupters, known also as GFCI, as they will interrupt the electrical circuit before a current sufficient to cause death or serious injury occurs.
9) Make sure that exposed receptacle boxes are made of non-conductive materials.
10) Know where the breakers and boxes are located in case of an emergency.
11) Label all circuit breakers and fuse boxes clearly. Each switch should be positively identified as to which outlet or appliance it is for.
12) Do not use outlets or cords that have exposed wiring or use power tools with the guards removed. Do not block access to circuit breakers or fuse boxes and do not touch a person or electrical apparatus in the event of an electrical accident. Always disconnect the current first.
A Ground Fault Circuit Interrupter (GFCI) works by detecting any loss of electrical current in a circuit. When a loss is detected, the GFCI turns the electricity off before severe injuries or electrocution can occur. A painful shock may occur during the time that it takes for the GFCI to cut off the electricity so it is important to use the GFCI as an extra protective measure rather than a replacement for safe work practices.
GFCI wall outlets can be installed in place of standard outlets to protect against electrocution for just that outlet, or a series of outlets in the same branch. A GFCI Circuit Breaker can be installed on some circuit breaker electrical panels to protect an entire branch circuit. Plug-in GFCIs can be plugged into wall outlets where appliances will be used and are commonly found in bathrooms. Another common use for GFCI is for pools and hot tubs.
Test the GFCI monthly. First plug a “night light” or lamp into the GFCI-protected wall outlet (the light should be turned on), then press the “TEST” button on the GFCI. If the GFCI is working properly, the light should go out. If not, have the GFCI repaired or replaced. Reset the GFCI to restore power. If the “RESET” button pops out but the light does not go out, the GFCI has been improperly wired and does not offer shock protection at that wall outlet. Contact a qualified electrician to correct any wiring errors.
Power tools used incorrectly can electrically hazardous. Switch tools OFF before connecting them to a power supply. Disconnect power supply before making adjustments. Ensure tools are properly grounded or double-insulated. The grounded tool must have an approved 3-wire cord with a 3-prong plug. This plug should be plugged in a properly grounded 3-pole outlet. Do not use electrical tools in wet conditions or damp locations unless tool is connected to a GFCI. The operation of power tools might ignite flammable substances and in can cause an explosion near certain vapors and gases.

Calculating The True Cost Of Disaster Preparedness

Small-business owners who think preparing for a disaster is expensive should think again. Being unprepared-and losing everything-can mean paying a much higher price.

For example, in July 1996, the president and owner of Brookville Mining Equipment Corporation, Dalph McNeil, faced every business owner’s nightmare when the nearby creek crested at eight feet after a 24-hour downpour.

Expensive new machinery was covered in mud and a powerful current of water had swept away inventory and collapsed a 30-foot section of wall. The flood caused nearly $1.6 million in damages and losses.

After receiving a Small Business Administration (SBA) disaster loan, McNeil relocated his plant away from the floodplain and asked one of his employees to take on the additional responsibility of “safety coordinator.”

Besides doing quality assurance and control, the safety coordinator, according to McNeil, “runs monthly meetings with representatives of the company, making sure all the employees understand the early warning and evacuation plans, and the emergency procedures.”

“You can never be too prepared, as a small-business owner, for disaster,” McNeil remarked. “It’s something you don’t want to think about. How do you carry on business as usual, as quickly as possible, after a disaster? You have to be a bit of a fatalist, thinking in terms of the worst-case scenario for your business.” And while he hopes he never has to use the emergency plans he has in place, McNeil says he is now ready for anything.

Experts say preparedness starts with developing such an emergency action plan that is tailored to the company’s needs and addresses several disaster scenarios. The plan should include a timetable, budget, assignment of responsibility, prevention and mitigation steps to be completed, and a list of risks and hazards to the business. It’s also a good idea to encourage employee involvement in the process.

A communications strategy is a key post-disaster recovery strategy. Phone numbers and e-mail addresses for your insurance carrier, suppliers, creditors, employees and customers, the local media, utility companies, and the appropriate emergency response and recovery agencies should be updated regularly.

This list should be maintained by a key employee and a backup person. Appoint a spokesperson to get the word out that your business is still open to dispel rumors of business failure.

Making sure your insurance coverage is adequate is another issue. According to the Insurance Information Institute, a recently released survey conducted for the National Hurricane Survival Initiative (done by Mason-Dixon Polling & Research) reports that one in three residents in hurricane-vulnerable states said it had been three years or more since they reviewed their insurance coverage.

When shopping for insurance, think about property damage and the loss of revenue and extra expenses that occur when business is halted by a disaster. Business interruption insurance covers necessary expenses that occur while the business is shut down. Many business owners don’t realize that basic hazard insurance does not cover flood damage. Additional purchased flood insurance is essential; most of the over $10 billion in disaster loans made by the SBA after last year’s Gulf Coast hurricanes were for flood damages.

The National Flood Insurance program provides coverage to property owners. For more information, visit the Web site at www.floodsmart.gov. Flood insurance must be purchased 30 days before the disaster hits to be in effect.

Civilization 4 and Why I Hate My Office Phone

If you’re familiar with the strategy PC gaming series “Civilization”, you probably know that it’s only slightly less addictive than crack. I’ve never tried crack, but the “word on the street”, so to speak, is that it’s a bit hard to let go of. I recently purchased Civilization 4, which is the latest in the Civilization series. That in itself isn’t so interesting, but what happened to me at my job as a result of it most certainly is. I work as a network administrator for a large insurance company in Illinois.

Part of my job is to repair PC’s as needed, which is quite often considering how many there are around this place. I informed my coworker, also a big civilization fan that I had the game and he suggested I bring it in for a little test run. Against my better judgment, we decided to play a hot seat game during work. “Hot seat” means that one player takes a turn, followed by the other, which is only possible with turn based games such as Civ. We both figured that there would always be one of us to answer the phone in our little repair-shop cubbyhole so we didn’t see how we could possibly get caught. Boy were we wrong! About four hours into a game things started getting interesting.

My civilization found his civilization and we started going to war against each other, as one might expect. I sat down for my turn and my coworker decided to head off to the bathroom. The phone rang, and I didn’t pick up so that whoever was on the other end wouldn’t hear the Civ theme music or the explosive sound of my Panzers running over his infantry. What I failed to remember is that our advanced phone system allows anyone to communicate with us on an open speaker phone provided we aren’t on the phone already. My boss utilized this function since no one answered while I was taking my turn…o.k., actually while I was taking my turn and bragging out loud to myself about how well I was doing in the game. I found myself in his office that afternoon, but luckily I was only reprimanded and not fired. Not only did I get into trouble, my coworker continues to make jokes about it at my expense.

I hate my office phone.

Foreclosure Listings Home Buying Tips

Home buying is a big deal, but it doesn’t have to be difficult.

People buy homes for many different reasons. Most buy for the sole purpose of living the American Dream, others use the home buying market as an investment tool, and some even use the margins inherent in real estate transactions as their daily income. Many homes are sold each year as foreclosure listings. These can be purchased for a significant discount over market value.

There are many factors one needs to consider when buying a house, whether to live in or as an investment opportunity through a foreclosure listings directory.

First and most important is do the research. Know what you’re buying.

One of the most important factors to research when buying a home is location. City, State, and, even neighborhood should all be considered carefully.

We’ve heard it said over and over again. “Location, Location, Location”

So why is location so important? Well, unless you plan to live in the house forever, eventually, you or your estate will want to sell it. You want the home to appreciate in value. You also want to be able to sell quickly. What you don’t want is a house for sale sign sitting in your front yard for years.

It doesn’t matter how wonderful your property is, you’ll have a very difficult time trying to sell your home for top dollar in a bad neighborhood in a reasonable amount of time. This doesn’t necessarily mean that it’s a bad home. It simply means that there will be less demand. That’s not what you want when you decide or have to sell your house.

One needs to apply a neighborhood litmus test when buying a home. Things to consider include schools, nearby growth and development, and convenience. Local governmental agencies often list a school district’s rankings. This information can also be found on the Internet. If all else fails, real estate agents have access to this information and can be very helpful. The value of your home will appreciate much more if it is located in a neighborhood with good schools.

New construction nearby also plays a great role in improving the value of a house and should definitely be considered when buying a house. A neighborhood which is on the outskirts of a new development will benefit from the higher prices of the newly constructed homes. If, however, the neighborhood exhibits signs of decline, one should think twice before buying that house.

One other item to consider when looking for a house for sale is it’s proximity to places of convenience like shopping centers, transportation hubs, and parks. Remember, someone else will be house buying from you in the future. It will happen. And… They will be looking at the same factors at that time.