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Feature / Spotlight

Feature / Spotlight

Taking a Business Loan?

There are a lot of things to consider when applying for a small business loan and whether or not your lender reports your good credit history to the appropriate business credit bureaus should be on that list. Borrowing from a lender that does not report your credit history may help you build credit with that particular lender, but won't do anything to help you build a business credit profile that will be seen by other potential lenders or creditors.

Although most lenders will consider your personal credit score as part of the equation when evaluating your business' creditworthiness, building and maintaining a strong business credit profile is an important part of the equation that can't be ignored—particularly if you anticipate the need for business financing from time to time. Keep reading to learn more.


Dealing with People Issues

How can an entrepreneurs get good results without “micro-managing” every detail? And what’s a good place to get answers to HR questions as they arise? Any business owner with employees must deal with “people” issues every day. As your company’s top executive and Human Resources (HR) manager, you are the one responsible for making it all function smoothly.

But that’s not easy, given the long list of laws and regulations governing your dealings with employees. And the legal aspects are just the beginning. Applying proper small business management skills can be an even bigger obstacle. For example, most business owners have delegated work to an employee, only to find a finished task or product that’s nothing like what they envisioned. In most such cases, the culprit is simply poor communication.


Small Business Makeover

Much like moving to a new home, sometimes you know it's time to move your small business to greener pastures. Whether you're moving to a better location for sales, a place that will save you money or for a larger space, it's a big endeavor to move your business. It takes a lot of planning.

Are you ready?

Don't underestimate the importance of conducting a thorough financial and marketing analysis. A move is often an opportunity for better visibility or a newer building, but the rent or lease will cost more. Deciding whether that is a worthwhile investment requires quantitative work.

Open communication

Yet, the biggest hiccup was one that Chisum and The Foundry Collective team couldn't control – a series of delays that prolonged the opening date due to the fickle nature of construction.

Keep a to-do list

When planning your move, keep a checklist of the things you need to accomplish. When you've decided that it's the right time, start working right away.


Built Your Budget. Now What?

Creating a budget is one of the more challenging chores you must undertake as a business owner.

Right up there on the list, though, is adhering to your budget. If you’re a sole proprietor and have total control, there are steps you can take to make your budget work.

  • Be diligent about tracking income and expenses. This is always important, but it’s especially crucial when you’re living within a budget. Are you using an accounting application? This would shave time off your bookkeeping and make it more accurate and up-to-date.
  • Always know where you stand. QuickBooks Online has a report called Budget vs. Actuals that can be customized using numerous filters. If you use QBO, run this report regularly. If you don’t, set up a spreadsheet or do this manually.
  • Establish acceptable variances. You can’t expect to hit your budget numbers on the nose. But you should determine how far afield you can go before it’s time to curtail expenses and/or find ways to bring in more revenue.
  • Create an ongoing list of action items. What will you do when a line item hits the variance percentage you’ve set? Don’t wait until it happens: Dedicate a paper notebook or electronic file to just this purpose, and add to it when you think of something.

Credit: MarkNelson

Growing a Small Business?

Cash flow may be the lifeblood of a small business, but the ability to create accurate projections and forecasts for your business is what moves it forward. Knowing what’s coming in and what’s going out, and being able to use that knowledge to plan and act is the only way a small business owner can effectively pursue and manage growth opportunities.

1. Profit Margin = Net Income ÷ Sales

Your profit margin refers to how much money you get to keep after selling your products or services, accounting for initial outlay and investments. The amount of profit may vary from product to product and should reflect the total amount of cost outlay, labor and a small percentage of overhead. When it comes to forecasting, your profit margin helps you anticipate how much money will be coming in in the future, especially when matched with your asset turnover (see metric number 4).

2. Current Ratio = Current Assets ÷ Current Liabilities

Your current ratio tells you if you have enough money to pay off your short-term debts. In general, the higher the ratio, the better the financial health of your company, although you can have too much in cash. By knowing this ratio, you can see if you may be facing any capital emergencies, or — if you have a higher ratio — if you have capital available to reinvest in other parts of your business.

3. Asset to Equity = Assets ÷ Shareholders’ Equity

Your asset to equity ratio tells you how your business is being financed—either by loans or by positive cash flow. The higher the ratio, the more your business is being financed by debt.

4. Asset Turnover = Sales ÷ Assets

Your asset turnover measures how quickly you are able to sell your products. If your capital is tied up in unsold inventory, you can’t invest it in other areas of your business. The higher the asset turnover ratio, the better return you are receiving on your money. An accurate view of how long your capital will be tied up in certain stock items can help you see your true financial picture and also forecast what capital will be available and when.

5. Payables Period = Accounts Payable ÷ Credit Purchases per Day

Your payables period is what you owe (vendor payments) and what you are owed in return (client invoices). Daily updates of what you have due to come in and to go out will help you form a clearer picture of your business’ health and avoid a cash crunch.

Robust cash flow metrics are critical to accurate cash flow projections and provide you with a sound understanding of the fundamentals of your business. By knowing the details of your cash flow you can efficiently run your day-to-day operations and confidently respond to new business opportunities.


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