Ways To Check Your Business is Producing Results

In the beginning, many start with stars in their eyes about what having their own business will mean and how the money will come pouring in with little or no effort; because of course, the idea or product is brilliant. But as time goes on, the new business owner may well realize that their business isn’t going as planned in the revenue sense or in the time sense. Some may close their doors prematurely. Some may keep their doors open indefinitely, pulling down family assets in the process.

Cash Flow:

Most businesses struggle with cash flow. Indeed when first starting your business, the tendency may be to spend all the money coming in on making and expanding your company. But then of course, a bill you had forgotten about resurfaces and you have to tell the other company or person to wait, that your cash flow. The fact that you are identifying that your cash flow is down may make the business owner doubt their abilities but cash flow is a fact of life for business, from the biggest to the smallest. There are times when the money comes in really well, perhaps a season and there are also down times.

One of the biggest problems with cash flow is when you are accepting Purchase Orders and waiting for the bill to be paid.

The best way to calculate if your business is worth keeping the doors open in terms of cash is whether it is a. covering all of its bills and b. whether all staff are getting paid as well as you at the top. You can also look at what capital purchases were made that bring assets into your company. If money is being spent to acquire assets at any level, chances are your business is doing well. It’s when your cash flow is negative, your bills are not being covered and you are not acquiring any assets (beit products or land).

To calculate this, you must look at your expenses versus your output over a 12 month period. Track where your money supply is short and where it is high. Learn to predict how well your business is doing in certain seasons and try to track the reasons for this upsurge or downsurge. I’ve actually met people who closed their business just before December. They felt that they were in over their heads too far and that keeping open one more month wouldn’t matter. But winter time is a buying season and with the advent of sales and shopping in December and January, there is no doubt they would have been better toughing it out.

The main business cycle is to open your doors for a year and spend and make money. The product or service has already been invented at this point. Money has already been invested and the main thing is to work on marketing to get a better share and to get your name out. The second year, you look at all your expenses and you start slashing. So if you accepted that your phone cost 100 dollars in the first year, you now look to other providers to beat that amount or to offer more services with that price. On the third year, you expand by buying assets. Doing this business cycle over and over again every three years means.

So in the case of a business that is not covering all their obligations, they may want to look at restructuring their outflow. Rather than paying a firm they need for layout and design per job, instead look at giving them a standard amount of money a month. In the case of high cost items, look at putting them over two years with the outflow again steady. This gives more stability to your business.

Certainly if you are negative for two years, shut your doors, pack it in and move on or seek to reinvent yourself. If you started with a product, there is no reason under the same name you can’t provide a service. Start again with the business cycle. Many business people have had flops for businesses right away but have gone onto run successful businesses, taking what they learned.

The business must always pay for itself and getting the accounting to have stabliity can be a driving force in sorting out cash flow problems.

Time

How much time should the business eat of your time? Are you in trouble if you are spending too much time on your business?

The average start-up of a business exceeds the average work week by approximately ten to twenty hours. So 50 to 60 hours per week to set up your business over a year is fine. Beyond that the second year, you’re in trouble. And if at that point, you can’t hire someone to split the time, then you should seriously consider closing your business. To your peril, you can lose your family, end up in divorce, wake up from all that work to find your entire world has been shaken upside down.

If you can’t devote 50 to sixty hours a week to your business plan to start with, my suggestion is to split your business plan in half and start with phases. Phase one is a certain product. Phase two is a certain product. This cuts your work week to your business in half and allows you to pursue outside employment or look after kids.

A good way to monitor time spent is to just create a schedule of when you want to work and also what you’ll be doing.

Assets

If your business is not developing assets by year three, then you could be in trouble. It means you’re standing still as a business. Assets can mean anything you can sell that is a product. But it refers to the buying of those items. So if you have ten thousand widgets of some sort to sell over the next however many years it takes, then you’re OK. If you’ve bought land with the money from your business or purchased another business, then you are acquiring assets. This is key. Without these assets, all you have is the name of your company and your work.

If you find yourself in a continuous spiral of not developing or buying assets, having only enough products to last a month or two, then again you should consider closing.

Assets are like the chestnut a squirrel buries in the field for when times are low. Imagine being able to liquidate or sell-off property if need be to make your business buoyant or to face difficult times in your personal life when you cannot devete as much time to your business.

Sales

It shouldn’t cost you more than you make to get the sale. Therefore, your advertising budget should fit neatly cost wise into less than 20 percent of what you make. Anything more means you’re spending too much.

The phone plans cost little. Faxing and email are pretty affordable. But many have been disappointed by mailing results. Unless you can buddy up with a few companies to make it affordable, you may be surprised at results of .05 percent per standard mail-out.

Summary

In determining if your business is worth it, look toward cash flow, expense to get sales, acquisition of assets and also allocation of time.

The Dynamics of Business Success

From the time you first decided to go into business for yourself, the only choice you had was to be successful. No one goes into business desiring failure, that would be self-defeating. Can you be as successful as you want? Can a person succeed on desire alone? Of course you can’t. No matter what the nature of your business, desire and passion only serve for motivation not hard core statistics. If you have not investigated the possibilities and learned the dynamics of running a business, then you are flirting with disaster. No amount of desire in the world will pay start-up cost and day-to-day expenses of a business. The cold hard facts are you must know your product and its’ market. You must know the dynamics of running a business.

How do you handle the bookwork, satisfy the IRS, schedule workers, where to locate, attend to restocking, marketing, sales, etc. Then there is the public relations side of being a business owner. Projecting the right image to your customers, vendors and employees is an all important task assigned to – guess who – that’s right, the business owner. Large businesses have departments to handle each challenge, but the small business owner in on his/her own. It would seem then, desire is only a small part of going into business. Preparing is as or more important than desire. There are many people across the country who have little desire for their business but succeed because they were well prepared and have the fortitude to keep on going. They did the things necessary to make their business succeed.

Then there is the competition. Beating out the competition comes from knowing your business and executing it with precision. No brick and mortar business can run on autopilot. Someone has to be at the wheel, steering, stepping on the gas, putting on the brake, someone has to be in control. Like a giant truck charging down the highway needs someone to keep it in control, a business can quickly become a wreck without proper guidance. Your business may be a franchise or it may be independent. It may be a product or service, in any case I cannot overemphasize the importance of preparing for the venture.

Franchise businesses have taken a lot of the guess work out of the equation. They present their business as a time proven package with all the necessary ingredients for success. They have been successful and offer a copy-cat version of the outcome. A business plan and marketing strategy is included right down to uniforms for the employees. They have already promoted the brand name and gained market recognition. They are what is called, “branded”. The brand is already recognized and accepted by the customer. The dynamics of this kind of business is in getting the momentum going and maintaining it.

A business opportunity is a cross between a franchise and new start-up. It’s sometimes referred to as a “turn-key” business start-up. Everything needed for success is supplied in a start-up package, except a business plan. The business owner must formulate his/her own business plan. The difference between a business opportunity and franchise is; in a business opportunity the business owner is free to put his/her own personality into the business.

The dynamics of new start-ups are conceptual. They are derived from the individual’s desires, mixed with background and abilities. This type of business venture is the most vulnerable and has the highest failure rate. A concept must become a marketable reality. Acceptance is paramount for this type of enterprise to survive. A person may think they have great idea but in reality it is not acceptable to the public.

Transfer businesses are those that have been established and then sold or transferred to another person. In many cases the transfer is between family members. Some times the transfer is to employees or another person altogether. This type of business is sensitive to change. If too much change takes place too fast the business may fail, unless change is warranted. Here you’re riding on the coattails of the previous owners. If they had a good customer base then chances are the new owner will succeed. If the new owner has to start up under a “new owner” banner, then the previous owner’s reputation has to be overcome. This is a very difficult type of business to be involved in.

All of these traditional brick and mortar establishments are dependent on correct location for visibility and accessibility. This type of business depends upon physical appearance, ease of stocking and maintenance. Because it is a physical entity, it requires physical support. The bigger it gets the more support it requires.

The Internet on the other hand provides a portal, a doorway if you will, for an individual to present a product to the customer and the customer to respond. Although physical location is not required, it is advised. How do you succeed in cyberspace? It’s basically the same as a brick and mortar business, you have to be visual to be found. You have to build brand recognition, confidence, and reliability for customers to respond. There are literally millions of business on the Internet and the customer will not go to great lengths to find you. If your not in front of their nose they will overlook you. The customer also tends to view everything with a measure distrust. These are the two most difficult obstacles to overcome when affiliate marketing on the Internet. You must be seen and trusted in order to be successful in an Internet business.

In Conclusion
Internet affiliate marketing is not about having the best product or how much desire you have. It’s not about passion or family values or anything other than marketing. Success depends on how many prospects you can drive to your website and how well your sales copy coverts them into customers. The Internet is a marketing medium and social gathering place only. It doesn’t produce a product or change anything on a physical level. Internet sales are liken to phone sales. The prospect is contacted, given a sales pitch and converted to a customer, or the prospect contacts the seller from advertising media and the same process is preformed. On the Internet, in most cases, the prospect is never verbally or physically contacted. All transactions are by form.

The success rate in Internet businesses are very low. The glamor or promises of making huge incomes is thwarted by time constraints. Success comes from hard work over a long period of time. Overnight success is not possible or a reality unless a person has a large bankroll to start with.

The thing is, success comes to those who take the time to learn the dynamics of the business they are getting into. Develop a passion, learn and stay the course.

Four Easy First Steps to Small Business Accounting

When starting a new business one of the most daunting tasks the entrepreneur will face is that of accounting. Many small business owners neglect this important area of business, particularly during start up. Making this mistake can be fatal and many companies fail because of a lack of knowledge of the business’ finances. Keeping good records and having good accounting practices from day one is paramount. There are many simple, yet effective techniques that can help the small business owner get their finances on track.

The first, and most important thing, you can do is to set your business up as a legal entity separate from yourself. This means setting up some type of corporation, or LLC. This simple step is overlooked by too many entrepreneurs. Keeping your personal and business finances and taxes separate is the main reason for this, but there are other benefits as well. Which of the different entities is right for you will depend on many factors of your business, and you should consult a CPA and an attorney to help you with the process.

Once you have decided on which entity you will use and have followed your state’s guidelines to set it up you will need to file form SS-4 with the IRS to obtain your EIN, which will be your business’ federal tax ID number. As soon as you have set up your business entity your next step will be to visit your bank (be sure to check out the competition’s offers as well) to open your business checking account. Most banks offer free small business checking accounts with no minimum balances. If the bank is going to charge you for small business checking, or a debit card, find another bank.

When choosing a bank be sure to ask the sales representative if the statements are cut on the last business day of the month, so that each statement represents an individual month. If the statement is cut on a floating 30 cycle, or if the cycle begins on the day of the month on which you opened the account find another bank. This simple thing can save hours when settling your account each month.

It is also a smart idea to have multiple accounts dedicated to different portions of your business as well. This may include a payroll account, an account that receives payment deposits and an operating account to name a few. If the bank only allows one free account per business find another bank. You may find that you need multiple accounts and keeping up with them all is starting to get confusing. If this happens ask your banker about the Cash Management services they offer. These services will normally include fees, but can help save you time, energy and headaches.

Once you have your new business set up and you are starting to see some cash flow you must make sure to keep your business and personal finances completely separated. This means that only revenue from the business should be going through the business checking accounts, and more importantly that no personal purchases be made through the business.

It is crucial that you take a salary from your business, rather than spending the business’ money on yourself. There are several different ways to take a salary including taking a fixed amount and/or a percentage amount based on the business’ performance.

My last point is also on the list of things often overlooked by the small business owner. Make sure you hire a bookkeeper. This point bears repeating – Make sure that you hire a bookkeeper. Even if your business is small it will be a tremendous benefit to hire someone to keep the books. Most new businesses fail to do this because they are trying to save money, but the fact of the matter is that you can get a bookkeeper for around $25 per hour depending on where you do business. Your time can be better spent on other aspects of the business that are your specialty and others can’t do. Make sure you are leveraging your time properly. There are thousands of bookkeepers out there but only one you! These types of services will usually save you a lot of money in the long run.

These are just a few points that all new business owners should make sure to focus on during start up. This was by no means an exhaustive list of accounting procedures, but only a few of the most important first steps. Finance and accounting are some of the most important aspects of business, but are so often overlooked by the new business owner.