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financial strategies

Best use of PPP and other financing strategies for Latina business owners

Latina business owners are usually in industries that traditional funding sources are reluctant to invest in such as restaurants, beauty and the like. But sooner or later, they will need financing.  Economic times may seem challenging, but they are filled with opportunities.  In fact, this is the best time to invest in your business.  Many businesses have suffered financially.  However, the good news is that there is still capital available.  Take advantage of all the capital resources available right nowand develop your financing strategies.

What is a good financing strategy?
Financing should be part of your overall business.  You spend time on marketing, sales, operations, hiring and administration.  How much time do you spend on developing financing strategies?  A strategy consists of looking at short-term and long-term goals for your business.  All successful businesses had a plan to access capital.  For instance, Facebook raised debt and equity capital until it went public.  They had a financing strategy in place.  What are your options?

Government financing
First, take advantage of the Payment Protection Program (PPP) and Economic Injury Disaster Loans, or EDIL program loans.  Make sure you apply to both PPP and EDIL program.  Many business owners got discouraged when they heard that PPP had run out of funds.  Also, in May the SBA stopped taking EIDL applications.

Now, this has changed.  There is still PPP funding and the SBA is taking new applications for eligible businesses.  These grants and loans are probably the best for your business. Even if you had to pay back these loans, the interest rates on these loans range from 1% to 3.75%.  Also, do not get discourage if you are denied.

You can reapply as many times as you want as long as you can provide new financial documentation to support your case.  With the EIDL you have until December of 2020 to apply and reapply unless if they shut down again. You may need an agent or a business financial advisor to help you out.  Also, there are many initiatives for Latina Business Owners via the SBA and other resources.

Short-term financing options
Second, look into short-term financing options.  Prior to Covid-19 there were many online lenders who were providing business lines of credit and term loans up to 24-months.  Today, that is not the case.  Sad but true, the best online lenders such as On Deck Capital, Kabbage, and others have put lending to a halt.  Many banks are not lending to due the uncertainty in the economy, pending fed rates and also busy processing PPP loans.  As a result, short-term financing may be your only option.  These are loans are based on daily, weekly, and bi-weekly payments.  The repayment terms may range from 3 months to 12 months maximum.  How to integrate this type of capital into your financing strategy?

  1. Short-term returns
    If you are purchasing inventory and you can turn it around in 30 days, you can use short-term funding. If you gain a short-project, this capital may come in handy.2. Short-term planning
    There is saying “There is no tomorrow and there was not yesterday; if you truly want to accomplish your goals you must engulf yourself in today.” Cash flow is the blood line of any business. Integrate short-term financing into a short-term sales strategy. For instance, if you plan to increase online sales that can generate short-term cash that will help you repay back a short-term loan.3. Do not overleverage
    You may get approved for $50,000 but only use what you need.  Instead use $25,000.  This will avoid many problems in the future. Even if you do not need it use a minimal amount to establish a credit relationship4. Establish a credit relationship
    Any lender who is lending right now is assuming a huge risk. The effects of the pandemic on the economy and its recovery remain uncertain. However, if you establish an existing relationship with a short-term lender the future can only get better.  Usually, you can renew these loans when you pay off 50% of the balance or mid-way through the repayment term.  Let us assume you took out an 8-month loan. In month number 4 you can renew the loan.  This means you may be eligible to obtain more money, refinance it and obtain a better repayment term and interest rate.

Equipment financing
Equipment financing is also available in these turbulent times.  Since these loans have the equipment as collateral, they offer great terms.  Repayment terms can range from 2 to 5 years.  Furthermore, they offer monthly payments which help you manage cash flow better.

Sample of financing strategies

Quality Online Cargo Distributors was approved for $30,000 under the Payment Protection Program (PPP). They used the money to cover payroll for the next two months and rehire back existing employees.  Instead, of having the business pay for some of their personal expenses and taking the tax ride offs, they will have those expenses covered by the owner’s salary.  This way they avoid having to repay back PPP funds. In order for the PPP loan to be forgiven, at least 75% of the funds must be used for payroll costs, and 25% or less may be used for other authorized purposes. Payroll costs include: Salary, wages, commissions, or tips.  This business knows that this money will only last for two months.

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This business has other financial needs to address in the future.  As a result, they will need more capital.  With this in mind, they applied for the Economic Injury Disaster Loan (EIDL).  They were approved for $100,000 at a 3.750% interest rate with a 30 year repayment period.  Since this loan has a long-term payment repayment period, rather than using the money all at once they have developed a long-term plan.  Within that plan they considered their slow season and also new business development strategies to capture new clients due to the loss of clients resulting from the pandemic.  They know that this may take 1 year to achieve.  At the same time, they will set aside some of this money for business reserves for emergencies.

Lastly, this business applied for short-term funding and got approved for $100,000.  Instead of taking the $100,000 because the interest rate is higher; they only took $50,000.  They will use this money over a 3-month period, and they have projected to make a short-term return on the use of funds.  Also, they understand that this source of capital can serve their short-term needs on an ongoing basis.  On the other hand, the government incentives program will not be around in the years to come unless in there is another disaster.  Having a source of capital ready, when needed is important for your business.

financial strategies

Lendinero, a bilingual company that works with all types of small businesses. (Logo Courtesy Lendinero)

This business has created a strategy on how to use numerous capital resources.  More important, rather than using the money all at once they have diversified the usage according to the business short-term and long-term needs.  The biggest mistakes businesses make when obtaining funding is not having a clear plan of action and using the funds all at once.  Then, several months later you find yourself in the same position.  The most important aspect of using debt for your business is knowing how to use it and how to achieve return on investment.

This is a brief example.  This plan for this business also entailed a budget, projected profit to loss and other financial projections taking into account loan payments, accounts payables, accounts receivables, reserves, risk management and hypothetical outcomes. This requires time, but it’s worth the investment.  A business with no direction is bound for failure.

(This is a paid contribution from Lendinero, the number 1 company dedicated to find financial solutions for small businesses) 

martial arts

Martial Arts Sensen Marieangelic Martinez defeats industry stigma and work-life balance

Martial Arts and Family Fitness Center owner Marieangelic Martinez talks work-life balance, facing industry stigma, and mindset for success.

event planning

DACA Latina student turns event planning hobby into business venture

Georgeth “Geo” Sanchez is a Latina small business owner whose event planning venture arose from a hobby to support her college finances. Her business Geo & Co. specializes in chocolate dessert bowls, arranged fruit and candy buffets, handcrafted pretzel rods, and banquet chair covers and props to rent.

event planningGeo currently attends USC under the Deferred Action for Childhood Arrival (DACA) program where she is studying to become a social worker. While DACA provides many opportunities such as the ability to obtain a driver’s license, enroll in college, and legally secure employment, there are still hurdles, such as financial aid for students. Under DACA, students are disqualified from federal financial assistance which means all school related costs must come out-of-pocket. This can be incredibly difficult when college tuition is constantly rising.    

event planningDue to her financial need, Geo decided to turn her event planning hobby into an actual business to raise funds for her graduate school studies. With the help of C.P. Krishnan an Ann  Krishnan of CAK International, LLC, a 2017 Small Business Champion, Geo gained the courage and motivation to officially file her business name on March 8th, 2017, in honor of International Women’s Day.   

As someone who is studying part-time and working full time at a homeless women’s shelter, managing her own business is not always easy, but through every challenge she manages to find solutions.

One major obstacle has been working with a limited budget for her inventory. She explains how “in the event planning business, trends and styles are always changing and it’s difficult to house all the Pantone colors in overlays, napkins, chair covers” etc. And due to her financial need she cannot always purchase inventory in bulk or splurge on rare hues and prints which retails at higher costs.

Despite this, she has found ways around the challenge by sticking to classic colors and finding combinations that are timeless, clean, and sophisticated while allowing her customers to save money.

“As a small business entrepreneur in the event planning industry, I feel my bilingual skills and budget friendly approach to event planning has allowed me to gain the trust of customers. In our Hispanic/Latino communities, milestones (quinceaneras, baptism, weddings, birthdays, and graduations) are the cause of great celebration. That gives me the opportunity to offer my services while ensuring that my customers get the best deals possible.”

event planningShe also feels that much of her success has come from her faith in God and her grandmother’s watchful eye from heaven. Her grandmother was a successful business owner herself for over fifty years in South America and undoubtedly has been a great influence on Geo. She even incorporated her grandmother’s favorite flower the “flor de nardo” into her business’ logo in her honor.

Throughout her journey so far as a business owner, Geo has surmounted obstacles and fought for her dreams. This mentality is what she encourages other aspiring Latinas to have when pursuing their own dreams.

“Think outside the box, ask for help, and fight for what you dream of,” she says. “We are often paralyzed with fear and although quite normal- what defines us is what we do with that fear. Today, I choose to fight for my DREAM!” And she hope you do too!

cash flow

How your small business can survive and thrive with these cash flow tips

Keeping your business cash flow alive is one of the most difficult challenges for small business owners and entrepreneurs. It can define the life or death of your business. Handling these savvy tips can help you plan your cash flow during the whole year.

A healthy cash flow can help your business survive and thrive.

Michael Lewis, a former business executive and financial blogger, does not sugar coat things when he says, “owners who cannot efficiently manage their cash flow are almost certain to fail.”

Every day new entrants throw their hat into the ring of entrepreneurship. And every day several die off. Many of these entrepreneurs, after spending considerable time fine-tuning their business plan, find themselves scratching their head, wondering why their company, with its innovative product or service, suffered such a fate.

In a great many cases, the answer is easy: cash flow.

“Cash flow is the lifeblood of a business and critical in its growth,” according to entrepreneur and marketing communications consultant Caron Beesley. “With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.”

The lesson that entrepreneurs must master immediately is that a business cannot operate very long when cash outflow exceeds cash inflow. Every business, particularly a startup, must zealously monitor its cash flow to prevent a serious business disruption. In business, cash is king and cash flow is priority # 1.

A significant percentage of cash-flow issues result because owners have not spent adequate time estimating the arrival of various revenue streams and balanced that against their need to pay certain expenses. Entrepreneurs must realize the critical importance of calculating accurate cash-flow projections to address day-to-day activities. Owners who don’t thoughtfully estimate their cash flow for an upcoming period (the day, week, month and quarter) place their business at serious risk.

From Day 1 businesses must track and manage their cash from the time that they must pay vendors, employees and others to the time that they collect from their customers. Doing anything less assures near certain failure. The following tips can help business owners ensure that their cash flow is managed well and not placing the business at risk of failure:

  1. Create a Budget.

Business owners should sit down to thoughtfully estimate expected cash inflows and outflows. Factors that to consider include the sales cycle, terms and discounts provided customers, industry delinquency rates and other factors that may affect the timing of incoming cash.

Similarly, it is necessary to estimate expenses and other cash outlays. This includes the timing of the purchase of equipment, raw materials and supplies. It also includes the schedule for payment of salaries, taxes and other day-to-day expenses. SCORE, a national nonprofit support group for small business owners, provides a free budget template that business owners can use to manage their cash flow.

  1. Monitor the Results.

Examining the budget should not be an infrequent activity. On at least a monthly basis (but more frequently if warranted), the actual cash flow should be compared with the budget to work out the kinks in the system. If cash inflows are less than anticipated, figure out the reason for the shortfall. If cash outflows end up being greater than expected, understanding the cause is also important.

Once the reasons for the budget variances are determined, the business can make the necessary corrections, either to the budget or the business plan or both.

  1. Have a Plan B.

Regardless of the amount of time and energy a business owner devotes to creating a budget, unexpected events can suddenly crop up, wreaking havoc on even the best cash-management system. During such times, the business might need to rely on a contingent source of cash to keep the operation running until things return to normal.

Typical sources of contingent funding include lines of credit, personal assets and friends and family. Business owners should have a Plan B lined up well before the funds are needed.

For example, a business owner who plans to borrow funds to cover a cash shortfall should have the loan or a line of credit in place well before the cash is needed. Allowing a cash-flow disruption to occur before applying for a loan is asking for trouble as most banks will hesitate to lend money to a business in distress.

Even if a bank were willing to extend a loan, few financial institutions can underwrite and approve a request in less than a month. By then, the business may have already failed due to its inability to cover its cash needs.

  1. Bill Quickly.

cash flow

A key element of cash flow management is controlling the timing of funds coming in and going out. It may be customary, depending on the industry, for a business to extend credit to purchasers. For example, customers may be extended a 30-day period to furnish payment. Every time this type of transaction occurs, it places a strain on the business. While the buyer need not provide payment for 30 days, the company must continue to meet its financial obligations.

The easiest tactic for a business to pursue is to bill a client immediately. Businesses that make sales on credit must ensure that the invoice is delivered within 24 hours of the transaction. Furthermore, companies should track their invoices and send reminders before the payment-due date. Businesses that delay invoice delivery will likely receive their payments late due to the processing time required by the buyer. Business owners should consider delivering invoices by email to ensure rapid and certain delivery of billings.

To alleviate the pressure created by credit sales, a business should implement tactics to accelerate payment. A common technique includes providing discounts to buyers who pay their bill within 10 days. Buyers with sufficient cash to make their payment will be willing to forego availing themselves of the payment period in exchange for a discount.

Every business owner dreams of making a big sale. Unfortunately, businesses that make big sales on credit are often put under duress because they may then require the purchase of additional inventory. In such instances, business owners should consider making the buyer provide a down payment against the purchase so as to relieve the burden on the company’s cash flow.

You might be interested: 5 Cs bankers ask for small biz loans post-Recession

5.Timely Payment Policies.

A sound cash-flow management strategy calls for rapid collection of invoices and timely payments. This means that the business should not pay its bills ahead of time — or late. The company should pay its bills when they are due. This ensures that its cash is working hard.

To the extent that the organization is flush with cash, business owners should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful.

 

Mexican tacos social media for small businesses

Social media for small businesses, a must-do or die

Social media for small businesses has become an imperative in today’s competitive business world. Here are some tips from four experts in the field. 

“Who has time for Twitter and Facebook?” a Hispanic restaurant owner once asked me. His reasoning? All his clients were local, he was in a very good and visible location well-known for his “authentic Mexican food,” and he was working at full capacity. The man was right in all his assertions; however, if there is something in life you can count on, that something is change.

Mexican tacos social media for small businesses

Six months later, a big fast food Mexican chain opened a store half mile down the road. The novelty and the quick service together with the promise of “fresh and prepared-on-the-spot” dishes drew half of this restaurant owner’s clients to the new place. The war was on.

Soon my acquaintance realized that the old ways were insufficient to play hard against the chain. Not only had he to bring in new customers but also position his restaurant under a different light. The “authentic Mexican food” needed to be now an “authentic Mexican experience.” However, until those customers stepped in the door, how could he show the change?

Social media for small businesses best tips

Social media offers an array of opportunities for small business owners, providing tools that –although not totally free as they require some time and attention–, are manageable at very low cost with great and unexpected results. Yes, it can be overwhelming if there is little understanding of how to use the tools. Also, it can get discouraging if the tools are not being used properly.

So here are some tips for the beginner as well as the intermediate social media user:

  1. Like many other aspects of your business, you need to learn how to use the tools in order to master social media. Understanding what channel is the most adequate for your type of product, how to reach a local clientage that might be interested in your products and services, and how to adequately promote them needs some thought and know-how. Learn from the experts and apply to your particular craft or service. Attend a workshop at a local chamber of commerce –usually for free– or community college.

Michael Fertik, Forbes Contributor and Founder, & Owner, Reputation.com

“Small businesses should identify strong social influencers – bloggers that your customers read, individuals with robust followers – and start engaging with them.  Follow them on their social channels to spark a return follow.  Share their content.  Comment thoughtfully, respectfully and without self-promotion on posts multiple times a week.  As time goes on, the door for conversation will open – as will opportunities for more meaningful engagement like sharing new milestones or promotions, guest blogging or even reciprocal commentary on your posts,” says Michael Fertik, Social Media expert at Forbes (Is Social Media Worth It for Small Businesses?)

2. Once you choose the channels you want to work on, invest time and some dinero in a good page design. It should look as good as your business looks when a customer shows up at your location. A beauty parlor can share pictures of their popular haircuts and hairdos using Pinterest or a video on YouTube to demonstrate how a technique is done. While it is hard to share a recipe in 140 characters on Twitter, you can ask your Twitter followers to make comments about your place, ambiance, music or whatever makes your restaurant attractive in exchange for an offer or coupon. A real estate agent or broker can target potential local customers by showing listings, asking clients to give testimonials and providing tips on how to prepare a home for a quick sale.

Shantosh Kanekar social media for small businesses

Shantosh Kanekar, Advisor to Hedge Funds, Startups & CEOs

“Find out what is relevant to your customer’s life and give them the information that they want.

  • Are you a hiking gear company? Great. Talk about the best hikes in your local area and the world. Talk about the issues which are commonly faced by hikers. Develop Trust. Then weave in your gear story.
  • Are you a corner restaurant? Talk about the latest food trends in your local area and around. Make videos of how you are making your signature dishes. Show your chef visiting the market for picking up his recipe.
  • Are you an accountancy firm? Share the latest in small business accounting. Make your partners generate a video which simplifies complex tax issues. Share how you can help them through your Facebook posts.

Content which helps your buyer journey has to be the focus of your social media.Content is the step before Conversion,” says Santosh Kanekar, Startup Mentor, Leadership Coach and Author, Contributor at Entrepreneur (Social Media Trends for Small Businesses in 2017).

You might be interested: Lorraine Ladish uses social media to build community

3. In Latino culture, personal relationships are important. In person, a handshake, a greeting and a warm voice can close a deal. Be yourself on social media, talk about the issues that matter to you, as a business owner but also as a person. Let your potential customers know who you really are and trust you before they step into your door. Social media is not only a way to offer products and services; it is mainly a way of building relationships.

 

Ted Rubin

“The real value of social media is the SOCIAL part. That means having conversations with your followers, responding to them, interacting and engaging with them. It boils down to what seems like an obvious statement – to get a return on relationships with social media you have to be social. Ted knows this is a seemingly obvious thing to say, but as he tells me in the interview, “Ray, I’ll make this real simple. Almost everything I preach, almost everything I talk about, people can look at me and say, ‘Well, that’s common sense.’ But the truth of the matter is, common sense? It’s not very common.”

Knowing that the key to accruing ROR is communication, interaction, and engagement with customers, you might say to yourself – I don’t have the time (or the money) to communicate with everyone! Well, you don’t have to. Earlier we told you that return on relationships is “both perceived and real” and THAT is the trick,” says expert SM Guru Ted Rubin, who coined the Return on Relationship ROR benchmark (Ted Rubin on How to Maximize your Return on Relationships) 

4. Follow up with your fans as you would do with a client who visited you at your business. Give them feedback, ask for feedback. Contact them for their services and get truly interested in what they do or have to offer. Social media is a two-way street, not a window to show off.

Brian Hughes social media for small businesses

Brian Hughes, CEO and founder, Integrity Marketing & Consulting

“Small businesses need to have a solid online presence if they expect to be successful. 36% of people surveyed in the study indicated that they might choose not to do business with those small businesses that have no website. This is true for many industries. Small businesses need to be active on social media. It’s crucial to respond to critical reviews to keep customers. The study found that close to one in five respondents will avoid small businesses that are unresponsive to critical comments about the business,” says Brian Hughes, CEO, Founder, Digital Marketing Expert at Integrity Marketing & Consulting (Reality Check: Small Businesses Must Be Using Social Media). 

Increase your networking opportunities and contact those new potential clients afterwards on social media. Meet and greet other Latino entrepreneurs as well as general market businesses to exchange product offers, services and ideas. Don’t miss this opportunity to promote your business in style!

 

Feast or famine? How to keep your cash flow working for your business

Are you in control of your small business cash flow?  Michael Lewis, a former business executive and financial blogger, does not sugar coat things when he says, “owners who cannot efficiently manage their cash flow are almost certain to fail.”

Business cash flow

Every day new entrants throw their hat into the ring of entrepreneurship. And every day several die off. Many of these entrepreneurs, after spending considerable time fine-tuning their business plan, find themselves scratching their head, wondering why their company, with its innovative product or service, suffered such a fate.

In a great many cases, the answer is easy: cash flow.

“Cash flow is the lifeblood of a business and critical in its growth,” according to entrepreneur and marketing communications consultant Caron Beesley. “With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.”

The lesson that entrepreneurs must master immediately is that a business cannot operate very long when cash outflow exceeds cash inflow. Every business, particularly a startup, must zealously monitor its cash flow to prevent a serious business disruption. In business, cash is king and cash flow is priority # 1.

A significant percentage of cash-flow issues result because owners have not spent adequate time estimating the arrival of various revenue streams and balanced that against their need to pay certain expenses. Entrepreneurs must realize the critical importance of calculating accurate cash-flow projections to address day-to-day activities. Owners who don’t thoughtfully estimate their cash flow for an upcoming period (the day, week, month and quarter) place their business at serious risk.

From Day 1 businesses must track and manage their cash from the time that they must pay vendors, employees and others to the time that they collect from their customers. Doing anything less assures near certain failure. The following tips can help business owners ensure that their cash flow is managed well and not placing the business at risk of failure:

  1. Create a Budget.

Business owners should sit down to thoughtfully estimate expected cash inflows and outflows. Factors that to consider include the sales cycle, terms and discounts provided customers, industry delinquency rates and other factors that may affect the timing of incoming cash.

Similarly, it is necessary to estimate expenses and other cash outlays. This includes the timing of the purchase of equipment, raw materials and supplies. It also includes the schedule for payment of salaries, taxes and other day-to-day expenses. SCORE, a national nonprofit support group for small business owners, provides a free budget template that business owners can use to manage their cash flow.

  1. Monitor the Results.

Examining the budget should not be an infrequent activity. On at least a monthly basis (but more frequently if warranted), the actual cash flow should be compared with the budget to work out the kinks in the system. If cash inflows are less than anticipated, figure out the reason for the shortfall. If cash outflows end up being greater than expected, understanding the cause is also important.

Once the reasons for the budget variances are determined, the business can make the necessary corrections, either to the budget or the business plan or both.

  1. Have a Plan B.

Regardless of the amount of time and energy a business owner devotes to creating a budget, unexpected events can suddenly crop up, wreaking havoc on even the best cash-management system. During such times, the business might need to rely on a contingent source of cash to keep the operation running until things return to normal.

Typical sources of contingent funding include lines of credit, personal assets and friends and family. Business owners should have a Plan B lined up well before the funds are needed.

For example, a business owner who plans to borrow funds to cover a cash shortfall should have the loan or a line of credit in place well before the cash is needed. Allowing a cash-flow disruption to occur before applying for a loan is asking for trouble as most banks will hesitate to lend money to a business in distress.

Even if a bank were willing to extend a loan, few financial institutions can underwrite and approve a request in less than a month. By then, the business may have already failed due to its inability to cover its cash needs.

4. Bill Quickly

A key element of cash-flow management is controlling the timing of funds coming in and going out. It may be customary, depending on the industry, for a business to extend credit to purchasers. For example, customers may be extended a 30-day period to furnish payment. Every time this type of transaction occurs, it places a strain on the business. While the buyer need not provide payment for 30 days, the company must continue to meet its financial obligations.

Its raining money cash flow

 

The easiest tactic for a business to pursue is to bill a client immediately. Businesses that make sales on credit must ensure that the invoice is delivered within 24 hours of the transaction. Furthermore, companies should track their invoices and send reminders before the payment-due date. Businesses that delay invoice delivery will likely receive their payments late due to the processing time required by the buyer. Business owners should consider delivering invoices by email to ensure rapid and certain delivery of billings.

To alleviate the pressure created by credit sales, a business should implement tactics to accelerate payment. A common technique includes providing discounts to buyers who pay their bill within 10 days. Buyers with sufficient cash to make their payment will be willing to forego availing themselves of the payment period in exchange for a discount.

Every business owner dreams of making a big sale. Unfortunately, businesses that make big sales on credit are often put under duress because they may then require the purchase of additional inventory. In such instances, business owners should consider making the buyer provide a down payment against the purchase so as to relieve the burden on the company’s cash flow.

5.Timely Payment Policies.

A sound cash-flow management strategy calls for rapid collection of invoices and timely payments. This means that the business should not pay its bills ahead of time — or late. The company should pay its bills when they are due. This ensures that its cash is working hard.

To the extent that the organization is flush with cash, business owners should ask for a cash discount at the time of a purchase instead of buying on credit. The offer of a cash payment may entice the seller to offer a discount. This can be especially beneficial in cases of big-ticket purchases where a discount can be meaningful.

 

Exit strategy for Selling your business

Start today your exit strategy to sell your business successfully

Exit strategy for Selling your business

 

In his book,  The Seven Habits of Highly Effective People,  Stephen Covey said, “Begin with the end in mind.” Covey worked to facilitate the achievement of personal and professional goals through a systematic approach that resulted in the creation of a step-by-step guide.

By beginning with “the end in mind,” Covey tasked his students with establishing and envisioning a goal and then working backwards from that goal, one step at a time. The result of the exercise was the creation of a road map that provided the necessary elements to successful goal achievement.

Most business owners envision an exit for their business. For some, the goal is to own a business that provides a comfortable living and that can one day be passed down the family tree. For many, however, the goal is more straight-forward: build a business, sell it, make a reasonable return, and do it again.

Now that the economy appears to have stabilized…somewhat, many longtime business owners that survived The Great Recession are giving thought to cashing out. Unfortunately, many of these entrepreneurs are finding themselves depressed as they discover that their companies are not worth what they thought.

On May 14, 2014, I had the opportunity to interview Matthew Winefield, President of Winefield & Associates. Matthew joined me on my//  NBC radio show to share his experiences as a consultant to business owners seeking to sell their companies.

There are many ways to value a company. There is the Asset Valuation Approach (what are the assets worth). There is the Liquidation Value Approach (how much can I get in a fire sale). There is the Market Value Approach (how much did similar companies get). There is the Income Capitalization Approach (how much is the company expected to earn in the future). And there is the Income Multiplier Approach (how much does the company make multiplied by some industry factor). While each approach is logical and can produce a rational value, by and large, the most common approach to valuing a company is the Income Multiplier Approach.

The Income Multiplier Approach takes the business’ net income, adjusted for owners benefit (add back owner’s salary, owner’s benefits, interest payments, depreciation and deduct capital expenditures) and multiplies it by an industry factor. The factor, usually expressed as a range (e.g., 3 – 5 times), is multiplied by the adjusted net income number to arrive at the value.Exit strategy for Selling your business

According to Winefield, the process is far from precise. Many factors may affect the multiplier. For example, lower sales can lower the multiplier along the range. Niche businesses can raise the multiplier along the range. And other similar factors can have an effect. An experienced consultant with strong familiarity of the particular industry can provide a business owner with a realistic sense of the multiplier.

Business owners that seek to exit their business some day through a sale should begin the valuation process as early as possible. Winefield stated that many times he must deliver an unexpected wake-up call to business owners when they realize that the valuation of their company is nowhere close to what they thought.

Winefield stated that business owners should conduct valuations early in their business’ life to find out where they fall relative to their exit “goal.” This tactic can provide the time to implement a strategy to achieve their goal. An early valuation analysis will provide the business owner with the metrics (e.g., sales, net income, etc.) that must be acheived to bring in the desired sales price.

At the end of the day, a business is ultimately worth what someone else is willing to pay for it. But given the general acceptance of certain valuation methodologies, a seller is always best served by being aware of the values derived through these methods.

crowdfunding money access to capital

The truth about crowdfunding to access capital for small biz

Many small business owners “in the fringe” are looking at crowdfunding as a way to access capital for their small businesses but not everything is as simple as making your plea online.

Posted by Dustin McManus on November 19, 2014 on the Small Business Majority Blog.

crowdfunding, money, access to capital

Q: How do small business owners feel about access to capital?

A: Access to capital has been a persistent problem for entrepreneurs, particularly since the recession. While some parts of the business community have found it easier to secure capital, there are significant gaps in critical areas, such as minority and rural communities, as well as for groups of entrepreneurs like women and veterans. Our opinion polling found that an overwhelming 90% of small business owners nationwide agree that access to credit for a small business is a problem, with 61% agreeing it’s harder to get a loan now than it was before the 2008 recession.

Q: How does crowdfunding relate to access to capital?

A: Crowdfunding is a method of funding by raising monetary contributions from a large number of people, typically online. Small businesses have seen the rapid growth of alternative sources of capital like crowdfunding, which leaves entrepreneurs at risk due to the lack of fair and clear regulations on this new venture. Policymakers must address the risk that comes with alternative sources of capital that balances very real opportunities without stifling this same innovation that has the potential to create more options and points of access to capital for small businesses.

You might be interested: Women business startups apply for seed grant program

Q: How can lawmakers ensure fair regulation of crowdfunding to protect small businesses?

A: The JOBS Act of 2012 required the SEC to issue guidance on crowdfunding. Lawmakers should issue these final rules as quickly as possible, with no further delay, and strike the appropriate balance between oversight and opportunity.

Q: What else can be done to help small businesses access capital more easily?

A: One solution is to change outdated regulations that limit credit unions from meeting small business needs. Currently, there are federal regulations in place that bar credit unions from lending more than 12.25% of their assets to businesses, resulting in businesses belonging to these credit unions having $13 billion less in capital available to them. Bipartisan legislation in Congress would change this and allow credit unions to lend up to 27.5% of their assets, increasing options for small businesses and creating thousands of new jobs with no additional risk for taxpayers.

Q: What about efforts for entrepreneurs that are historically underserved in accessing capital like minorities and women?

A: Continuing to support and expand efforts by the SBA, USDA and other agencies to close gaps through loan guarantee programs will help serve minority, women, veteran and rural entrepreneurs in their attempts to access capital. With innovative new ways of streamlining and simplifying loan-making for small businesses and opening new avenues of capital for them being used, the existing needs of minority entrepreneurs will can be met in order for them to continue serving their function as job creators. Particularly for women, who account for only 16% of conventional small business loans, legislation such as the Women’s Small Business Ownership Act would address this gender gap in lending by expanding or improving SBA programs to reach more women seeking business loans.

 

Organo Gold cup of coffee

Adriana Wilson the silver lining and health benefits of coffee

Adriana_Wilson_Organo-Gold

Adriana Wilson shows Organo Gold products

¡Hola! Soy Adriana Wilson and I wanted to share my story with all LIBizus!

In 2009, I was affected by the economic crisis. I lost my job, we did not have health insurance and we struggled to pay our mortgage. We applied for help but unfortunately, according to our income level, there was no financial assistance available. I found a night job and during the day I worked as a substitute teacher.

In 2012, I was able to get a job related to my profession. In this new job, I had some experience that made me rethink my whole perspective of life. One of my co-workers who sat next to me was going to retire soon but during a terrible winter storm that year, he fell and died.

He was always telling me about his plans for retirement, so his death affected me greatly. That day I realized that life is too short and I promised myself I was not going to wait until I turned 65 to retire. I will retire at 55 and have a different style of life where I can have time to spend with my family, and travel around the world without any health issues.

Then one day, someone offered me a box of coffee so I bought it to help her. Once I started drinking it, I noticed the good effects it had on my health. I researched the product. So when she called to ask how I liked it and how I felt, I told her about my increased energy and my digestion working better.cup of coffee

She then told me about a business opportunity behind this incredible product. I was curious about how the business worked. As I learned more about this opportunity, I realized this was it! This is what I was waiting for to accomplish my early retirement! I can have extra income to save for my retirement, the products are good for my health and I can help others to achieve their dreams by offering health, wealth, and balance through healthy products.

My goal is to share this great opportunity with those who are looking to have the financial freedom they want to do what they love and those looking for a different lifestyle. I also want to share the knowledge our great group of motivators are teaching us on a daily basis and have allowed me to grow personally. Now I know that God has given me the capacity and the wisdom to achieve whatever I want and that success lies on what I believe I am entitled to.

Organo Gold is a global network marketing company on a mission to spread the knowledge of Ganoderma to the entire world. The company’s vision is to help people improve their lives by reaching new levels of health, wealth, and balance through opportunity and products. In just five short years, this vision has inspired and helped millions around the world.

Benefits of Ganoderma Lucidum

Benefits of Ganoderma Lucidum

The products speaks for itself as Organo Gold has harnessed the properties of the Ganoderma Lucidum, known as the “King of Herbs” for its health properties, and infused it into a wide ranging line of coffees, teas, as well as nutritional supplements and personal care products.  The company, Organo Gold, was nominated in the Richmond’s Profiles of Excellence magazine for its excellent products and it stands as the sole North American firm to partner with the largest, certified organic Ganoderma plantation in the world.

In addition, Organo Gold has accepted the Napoleon Hill Gold Medal Award from Napoleon Hill Foundation. The award was presented to Bernardo Chua, Founder and Chief Executive Officer, Shane Morand, Co-Founder and Global Master Distributor of Organo Gold, and Holton Buggs, Executive Vice President of International Sales. “Napoleon Hill understood that the most effective technique of motivation is based on example,” explained Dr. J.B. Hill, the grandson of Napoleon Hill. “Throughout its six year history, Organo Gold has continually demonstrated Napoleon Hill principles.”

 

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Did you like this story? Do you want to be featured as a LIBizus with your business? Contact Susana@latinasinbusiness.us/ for a free PROMO (limited time offer).

 

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