Wenatchee Office located at 238 Olds Station Road, Wenatchee. By appointment call 509-888-7252 or email jim.fletcher@wsbdc.org

Thursday, October 31, 2013

SBA updates Rules for SBA 7(A) Loans

The U.S. Small Administration ("SBA"), updates to become effective on January 1, 2014, provides lenders with additional requirements for underwriting analysis when considering a 7(a) loan. Cash flow remains the key factor as the primary source of repayment for the proposed loan.  If an applicant "lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must be declined, regardless of the collateral available or outside sources of cash."  This statement reflects current practice by many lenders and SBA has added several new standards and requirements to verify adequate analysis.   

Analyzing the repayment ability of an applicant will be based on historical financial statements and tax returns (if an existing business) and detailed projections.  Analysis must support the following assumptions: 


  1. Analysis of historical cash flow should demonstrate total debt service coverage after the SBA loan;
  2. Define operating cash flow as "EBITDA" earnings before interest, taxes, depreciation and amortization;
  3. Analysis must document additions and subtractions to cash flow;
  4. Debt service is defined as required principal and interest payments on all business debt inclusive of new SBA loan proceeds.  The applicant's debt service coverage ratio must be 1.15 to 1 or greater on a historical and/or projected basis;
  5. Spread of pro-forma Business Balance Sheet (current business balance sheet + changes in assets and liabilities as a result of the loan, other debt, any required equity injection, and use of proceeds);
  6. Ratio calculations for:  Current Ration, Debt/Tangible Net Worth, Debt Service Coverage, and other ratios the lender considers significant for the business/industry (e.g. inventory turnover, receivables turnover, and payables turnovers, etc.);
  7. Analysis of working capital adequacy to support projected sales growth in the next 12 months

Monday, October 28, 2013

SBA 7(a) LOAN PROGRAM GENERAL UNDERSTANDING


SBA business 7(a) loan programs are initiated by a lender who is considering a business loan that otherwise would not meet their minimum lending requirements. SBA does not make loans but
agrees to guaranty a portion of the loan that meets minimum SBA requirements.
 ELIGIBILITY REQUIREMENTS
·         The applicant must be: An operating business, organized for-profit, located in the United States.
·         Loans are for capital purchase, working capital, cannot be used for investment or to payback owner’s investment;
·         The applicant must show that  funds are not available from alternative sources, including personal resources of the principals;
CREDIT WORTHINESS
Lenders must analyze each application in a commercially reasonable manner, consistent with prudent lending standards. On SBA-guaranteed loans, the applicants’ cash flow is the primary source of repayment, not the liquidation of collateral. Thus, if the applicant lacks reasonable assurance of repayment in a timely manner from the cash flow of the business, the loan request must be declined, regardless of the collateral available.

Tuesday, October 15, 2013

Statement of Cash Flows

A very useful but often overlooked financial statement is called the Statement of Cash Flows. Its purpose is to reconcile the income statement with the balance sheet thus revealing where your cash is hiding. A basic statement of cash flows has three sections: Cash from operating activities, cash from investing, and cash from financing.

The table below is an example of a statement of cash flows. Let’s discuss what it is telling us about this business, and how you can use the same report to monitor your financial status.

Cash from Operations

Starting with the cash from operations we determine the net income for the month was $15,000. During the month we expended depreciation of $1,000 so we add that amount back.See Note 1

On the current asset side of the balance sheet we recorded the following activities: A $5,000 increase in accounts receivable, a $7,500 increase to inventory. See Note 2

On the current liabilities side of the balance sheet we recorded a $5,000 increase in accounts payable; and, an increase in accrued expenses by $1,200. See Note 3.

Making the above adjustment to Net Income shows our actual cash from operations is actually $9,700 not $15,000 we thought we had.

Cash from Investing

During the month we purchased new equipment for $20,000 a negative number representing money out. We also cashed in a $5,000 certificate of deposit, positive number for money in. The net of these transactions is $15,000 cash out.

Cash from Financing

That new equipment was purchased with a loan, so long term debt increased by $15,000, money in. As owners we took $2,500 dividend, cash out. Net change from financing was an increase in cash by $12,500.
Summing all the business activities during the month our true net increase in cash was only $4,800. Adding our beginning balance of $6,000 indicates we should have an ending cash balance of $10,800.

Cash Flow from Operations

Net Income                                                          $15,000
Depreciation/Amortization add back                          1,000
Accounts Receivable decrease ( increase)                (5,000)
Inventory decreases ( increases)                               (7,500)
Accounts Payable increases (decreases)                     5,000
Accrued Expenses increases( decreases)                    1,200
Net Cash from Operations                                        $9,700

Cash Flow from Investing

Net Cash from purchase/sale of fixed assets

  • Equipment                                                 ($20,000)
  • Property

Net Cash from securities, CD’s                                  5,000   
Net Cash from Investing                                        ($15,000)

Cash Flow from Financing

Notes payable increase (decrease)                                  0
Long term debt increase (decrease)                        15,000
Cash dividends (paid out)                                        (2,500)
Net cash from Financing increase (decrease)         $12,500

CASH Flow Increase (Decrease)
Beginning Cash                                                      $6,000
Net Increase (decrease) Cash                                  4,800
Ending Cash                                                        $10,800

Notes:

1. Depreciation/amortization is tax a deduction, no cash was actually was spent so we add back the amount of depreciation/amortization.

2. When assets accounts decreases it represents more cash in from collections of A/R or sales of inventory so we add the amount of the decrease. On the other hand when asset accounts increase then more sales were on account or more inventories were purchased than sold and the amount of the increase is subtracted.

3. Liability accounts are recorded the opposite of asset accounts. When payables and accruals increase then cash was not going out and is added. As payables and accruals decrease then bills were paid, cash is gone and the amount of decrease is subtracted.

Friday, September 20, 2013

Understanding the Balance Sheet

As a business adviser I have observed many small business owners who do not have a good set of financial statements.  Often missing is the financial report containing current balances for asset, debts and net worth of your business.  A good balance sheet can reveal subtle trends of increasing debt, inventory control problems, and cash flow problems.  Additionally a good balance sheet is required when seeking a business loan approval and used in determining the value of your business.    

Balance sheets are a record of your financial status at a specific time.  Comparing balance sheets across different times will reveal trends in your business enabling you to take timely corrective actions. 
Try these steps to see what the balance sheet reveals about your business. 

Compare this month to last month   
      Check balances of current asset accounts for cash, accounts receivable, inventory, and current liability accounts for accounts payable, taxes payable, payroll payable.  Calculate a Quick Ratio by dividing the total CASH + Accounts Receivable by the total current liabilities. A low Quick Ratio indicates pending trouble in paying your bills.  A Quick Ratio greater than 1 to 1 is desirable, indicating sufficient ability to pay your bills. 

Show Me the Cash! A common problem for small business is cash flow, while the profit and loss statement shows a profit there is no cash in the bank. Common places to look for what happened to the cash are the accounts receivable, inventory. If the amounts in inventory and or accounts receivable are increasing then more of your cash is tied up until inventory is sold or customers pay their bills.  

Working Cash: Another method for determining how much cash you should hold in the bank is to calculate working capital needs by subtracting total current liabilities from total current assets then divide by sales. 

Cash hides in Inventory:  Efficiency can be monitored by calculating inventory turnover. Divide cost of goods sold as shown on the profit & loss statement by the value in inventory. If the ratio is 2 then each dollar of inventory worked twice, if the ratio is 6 then each dollar worked  much more efficiently at 6 times.  

Financial HistoryIn the equity section of a balance sheet the line for Retained Earnings is a track record of your business performance, adjusted for amounts taken out by the owners.  Retained earnings also represent the amount of value re-invested in growing the business.  

Return on Effort: Efficiency of your business can be measured in several ways.  A ratio measuring sales to assets indicated how hard your assets are working. Low sales to assets ratio may indicate you have too much money tied up in assets.   Return on Equity, pretax profits divided by net worth, reports the earning benefit of your investment in the business.   


Friday, September 6, 2013

Low Sales Is A Symptom Not A Problem

Low sales are not the problem it is a warning sign that something more fundamental needs to be addressed.

When management is focused on declining sales as the problem the solutions are typically to do more, run faster, try harder. However attention may need to be redirected to find the cause of declining sales.

There are many factors that can cause declining sales and some objective thinking and self-reflection may help you identify the correct causes. Objectively consider the following:


  • Am I responsive and friendly with my customers, suppliers, employees? Note: employees tend to behave the same way the boss does.
  • Do my products satisfy the customer’s desired level of quality, service, or performance?
  • Are my products/services meeting current technology standards?
  • Are my prices correct
  • What are my customers really saying about my business? Do I really listen to the customers or do I jump to solutions before the customer has expressed their thoughts? You might find this video thought provoking are you really listening? http://vimeo.com/66753575
  • Is merchandising, floor layout, store decor, cleanliness, signs, inviting, up to date?

It might be easier to sit down with an objective outsider to contemplate and ask yourself questions like this to identify factors that you may be totally missing when you assume you've got a "sales" problem. Involve employees in the discussion their observations may bring a fresh perspective. Bring in someone from outside your business, who has no vested interest to protect.

Low or declining sales is always the result of some situation or lack of performance so focus on identifying the real problem to come up with an effective and lasting solution.

Thursday, August 22, 2013

Managing A Family Operated Business

A Family that operates a business often faces additional challenges of maintaining family relationships separate from business roles and responsibilities. The family may start with a strong parental leadership but as the kids become adults and start to take over the roles and responsibilities can become confused resulting in family strife.
I liked the article posted by Entrepreneur Magazine, by Lisa Evans “Father and Son Business Owners Share Their Secrets to Success” because it provides four simple and doable steps to helps family members keep the business separate form family.

To read the article Father and Son Business Owners Share Their Secrets to Success
BY LISA EVANS | June 14, 2013|
http://www.entrepreneur.com/article/226984#ixzz2WV9vpdF4

Sales Tax and Discount Vouchers

In a recent discussion on redeming discount vouchers such as Goupon we came across the following discussion paper published by Washingotn Dept of Revenue.

Dept of Revenue paper on Discount Vouchers

Use of web-based deal-of-the-day vouchers,that may be redeemed for personal property and services at a discounted price may be subject to sales tax on the sale of the discounted coupoun. It also explains how taxes apply on redemption of these discount vouchers. As a general rule, the retailer is required to collect retail sales tax based on the total amount paid for the voucher, plus any other consideration received by the seller (e.g., cash, check, or credit card amount). Read the refrenced special notice for additional details

Wednesday, August 14, 2013

Understanding the Balance Sheet

As a business advisor, I have assisted business owners to gain a better understanding of financial statements. They typically wanted to know how to make better us of the information contained on their balances sheet.

A good balance sheet can reveal subtle trends of increasing debt, inventory control problems, and cash flow problems. Additionally a balance sheet is required when seeking a business loan approval and used in determining the value of your business. Owners need to be aware of their current payable balances due and the current assets available to cover those bills. Lenders look at your balance sheet to determine your existing capital structure or the ratio of debt to equity to determine if you can support additional debt.

Balance sheets are a record of your financial status at a specific time. Comparing balance sheets across different times will reveal trends in your business enabling you to take timely corrective actions. Following are a few simple ways to use the balance sheet to understand financial trends of your business.

1. Compare this month to last month: check balances of current asset accounts for cash, accounts receivable, inventory, and current liability accounts for accounts payable, taxes payable, payroll payable. Calculate a Quick Ratio by dividing the total CASH + Accounts Receivable by the total current liabilities. A low Quick Ratio indicates pending trouble in paying your bills. A Quick Ratio greater than 1 to 1 is desirable, indicating sufficient ability to pay your bills.

2. A common problem for small business is cash flow, while the profit and loss statement shows a profit there is no cash in the bank. Common places to look for what happened to the cash are the accounts receivable, inventory. If the amounts in inventory and or accounts receivable are increasing then more of your cash is tied up until inventory is sold or customers pay their bills.

3. Another method for determining how much cash you should hold in the bank is to calculate working capital needs by subtracting total current liabilities from total current assets then divide by sales.

4. Inventory efficiency can be monitored by calculating inventory turnover. Divide cost of goods sold as shown on the profit & loss statement by the value in inventory. If the ratio is 2 then each dollar of inventory worked twice, if the ratio is 6 then each dollar worked much more efficiently at 6 times.

5. In the equity section of a balance sheet the line for Retained Earnings is a track record of your business performance, adjusted for amounts taken out by the owners. Retained earnings also represent the amount of value re-invested in growing the business.

6. Efficiency of your business can be measured in several ways. A ratio measuring sales to assets indicated how hard your assets are working. Low sales to assets ratio may indicate you have too much money tied up in assets. Return on Equity, pretax profits divided by net worth, reports the earning benefit of your investment in the business.

Tuesday, June 11, 2013

Who runs your business if something happens to you?

We all believe ourselves to be invincible. Yet accidents and serious illness happen.  This story from newsobserver.com is just one example how quickly you can be out of action for a prolonged time.

The simple solution is to have a clear understanding and in writing instructions to a successor.


When you are the key to your business very existence then key-man insurance might also be a good idea to consider for added financial protection.

Friday, June 7, 2013

Washington Health Plan Finder

Countdown to Coverage


To help you understand the upcoming changes associated with the Affordable Care Act and the new options that will be available through the online health insurance marketplace, we are pleased to present a new webinar series titled “Countdown to Coverage.”

The series, which runs from April to July, will include eight webinars that will walk you through the impact of the federal health care law on Washington State, how Washington Healthplanfinder works and where individuals can go for additional assistance to enroll in an appropriate health plan. A more detailed schedule is included below for your reference.
http://wahbexchange.org/countdown-to-coverage-webinar-series/

This fall, Washington residents will have a new way to find, compare and enroll in health insurance. It's called Washington Healthplanfinder, and it gives individuals, families, and small business owners the confidence to choose the plan that best fits their needs and their budget. Washington Healthplanfinder offers:


•Apples-to-apples comparisons of health insurance plans

•Financial help to pay for copays and premiums

•Expert customer support online, by phone, or in-person through a local organization, insurance broker or agent
http://www.wahealthplanfinder.org/

Tuesday, June 4, 2013

Friday, May 10, 2013

Sell Value, Not Low Price

Improve your sales with value based on quality and service. Customers will pay up to 14% more for quality and 10% more for great service. Let’s call service and quality the Value Proposition, a statement that describes the unique value your business offers and separates you from the competition. A strong value proposition that clearly set your quality and service can result in your ability to obtain a better price.


Creating a value proposition can be achieved with the following basic business activities.

Become a trusted advisor. Provide knowledge about your products, your industry and the ability to help the customer resolve their problem. Validate your trusted advisor relationship with integrity offer accurate information on products and services.

Understand the customer’s situation. Listening to your customer, don’t be in a hurry to sell a solution before you have a clear understanding of what the customer is trying to tell you .

Be easy to deal with. Customize solutions be flexible and creative allow adaptions of products and service. Partner with customers in creative problem solving. Many innovative new products were invented as a result of solving a customer problem.

Confirm the proposed solution. You offer great service and quality so you can reduce any perceived uncertainty the customer may have by offering no hassle return policy, guarantees, warranties or exchanges.

Reinforce the relationship. Ask your customers simple feedback questions about delivery of services or products. Asking customers will reinforces positive experiences and help you to immediately identify and correct any complaints, thus turn a potential unhappy customer into a happy customer.

Thursday, May 2, 2013

Crowdfunding



The ORIGINAL "crowdfunding" sites started as a way to make a donation to support an arts project/investigative reporting/documentary film or other "worthy cause". Initially the "rewards" were things like being listed in the credits of the documentary. This has evolved (in many cases) into something much more like placing an order for a product that has yet to be produced; hence the reference to game designers "not really delivering" and there are other cool products at the prototype stage that have raised money in this way by promising to produce and send the donor the item once the requisite funding is received for them to be able to produce it.

The NEW "crowdfunding" as covered by the JOBS Act is an equity offering and there are already a ton of rules (including having to go thru an "approved portal") built into the law. The corresponding regulatory framework is now being set up and was to go into effect on January 1st but rules have not yet been adopted by the Security Exchange Commission (SEC). It is interesting that one of the companies that has set itself up to be and "approved portal" says they are targeting companies with sales of between $3 million and $15 million, because this is the size/maturity of company that is big enough to deal with the expense/bureaucracy of the new crowdfunding procedures, but small enough to be unable to obtain debt financing for a major scale up. Thus the term is used for two entirely different processes. ( Kevin Hoult, WSBDC)

There are four basic forms of crowdfunding:

Original Crowdfunding includes:1. Gift-Donation -- often used on the art funding sites where everyone tosses in a small amount of money.

2. Prepaid Purchase – future customers are paying today for something they hope to receive later, like community supported. Revenues are considered sales and subject to taxes.

New Crowfunding includes:
3. Loan - Borrowing money and will pay it back, usually to a fund rather than to the individual contributors.. May be viewed as an offering under security rules.

4. Equity – The SEC must complete rule-making before the ban on general solicitation in Rule 506 offerings is lifted or before crowdfunding can commence. That rule-making is not complete. The SEC has published a warning to this effect on its website at: http://www.sec.gov/spotlight/jobsact/crowdfundingexemption.htm

A recent Internet search revealed hundreds of websites offering crowdfunding many specializing on topical area such as: non-profits, social causes and issues, arts and entertainment, consumer product development, or technology development.  Before registering examine funding website to identify the purpose and types of projects that site want to promote, read rules and identify all the fees.

Posting on a crowdfunding site is only the beginning. Raising funds will be more successful if you also have a social media marketing strategy spreading the word about your proposal. 

Tuesday, April 23, 2013

Starting a Business Expense Budget

Before you can open the doors of your new business do you know your Start up Expenses?

This list is provided as a simple start up budget planning tool.  Pre-opening typically costs more and takes longer than planned.  Estimates should be on the high side, you can always spend under budget, but it is very difficult to obtain more money when you run short. Plan a contingency fund of 20% of your start up budget and enough working capital to last to cover operating expenses for six months. 

Capital Purchases Buildings/Real Estate

Leasehold Improvements

Item 1 -$
Item 2 -$
Item 3 -$
Item 4 -$
Total Leasehold Improvements $-

Moving and Set up

Labor -$
Decorating-$
Moving Expenses -$
Total Moving & Set up -$

Capital Equipment Purchases 

Furniture - $
Equipment - $
Fixtures - $
Machinery - $
Other - $
Total Capital Equipment $- $

Prepaid Expenses 

Location and Admin Expenses

Rent - $
Utility deposits - $
Legal and accounting fees - $
Prepaid insurance - $
Pre-opening salaries - $
Permits and Licenses - $
Other - $
Total Location and Admin Expenses $-

Opening Inventory

Category 1 - $
Category 2 - $
Category 3 - $
Category 4 - $
Category 5 - $
Total Inventory $-

Advertising and Promotional Expenses

Advertising - $
Signage - $
Printing - $
Travel/entertainment - $
Other/additional categories - $
Total Advertising/Promotional Expenses $-


Other Expenses

Other expense 1 - $
Other expense 2 - $

Total Other Expenses $-

Reserve for Contingencies - $

Working Capital - $ 


Summary of Start up Expenses


Buildings/real estate - $
Leasehold improvements - $
Moving & Setup - $
Capital equipment - $
Location/administration expenses - $
Opening inventory - $
Advertising/promotional expenses - $
Other expenses - $
Contingency fund - $
Working capital - $

Total Start up Expenses - $                                   


Security and Collateral for Loan Proposal


Collateral for Loans

Real estate
Other collateral
Other collateral
Other collateral

Owners Investment

Your name here, amount of investment and source
Other owner, amount of investment and source
Other owner, amount of investment and source

Loan Guarantors (co-signers other than owners)

Loan guarantor 1
Loan guarantor 2
Loan guarantor 3



Branding Includes A Customer Experience Promise

A brand helps people identify their expectations about your business. A strong brand includes a customer experience promise that helps new customers choose your business, strengthens customer loyalty, ultimately increasing repeat sales and profitability. Customer experiences become your brand’s reputation creating your unique competitive advantage enabling your business to standout with distinction from competitors.


Businesses that have earned a strong brand reputation understand the customer’s total experience includes non-monetary concerns for customer interaction and trust. By creating a total customer experience they help potential customers to clearly set expectations for a purchase and for after-the-sale use of products and services. When expectations are met customers are happier and more likely to be repeat purchasers.

To improve your brand’s customer experience promise determine which monetary and non-monetary factors you can control and those you cannot control then:

• Use price strategies like price points, discounts, sales or specials to control monetary values.

• Influence non-monetary issues with customer interactions and listening to customers, offer warranties, level of quality, staff knowledge of products and services, loyalty programs.

• Create a vision of what customer experience should include promote this vision as a company culture, with staff authorized to resolve any customer problem.

• Set goals for customer experience outcomes that align with the vision. Trainings and continuous reinforcement of a customer service culture.

• Measure outcomes against goals by collecting customer feedback. Celebrate and reward achievements.

• Use customer feedback to continuously improve customer loyalty.

Creating a total customer experience that builds on and strives to exceed customer expectation will enhance your reputation and brand value with increased repeat customers.

Friday, March 29, 2013

Health Care Excise Taxes Effective in 2014

I received this link to an article by Grant Thornton regarding businesses with 50 or more FTE employees.   Excise Taxes under health care reform  The requirements are getting more challenging to follow, calculating the FTE includes all employees who average 30 hours per week; hours worked during 2013 will be the base for calculating 2014 FTEs.  Sever Excise Tax penalties.

Very few people can explain how this all fits together, thus it is best to seek advise from several sources including: HR specialist, CPA, insurance program managers, attorneys.

Thursday, March 21, 2013

Mobile Marketing Basics


People are using mobile phone to purchase almost everything and they are doing so at their convenience. According to Chetan-Sharma Consulting during 2012 consumers purchased $7 Billion in goods and services using Mobile devises and Paypal. Plus $5 Billion in purchases using a Mobile phone adaptor called Square.

If your customers cannot find your business on their Mobile devices they are possibly shopping someplace else. A few basic steps can at least get your business a presence:

Create A Mobile Web Page

Small screens display less information than a traditional web site. Graphics and pictures will not look good on a small screen. Text that was easy to read may become illegible. Mobile devices are about convenience and what the customer wants to know immediately. Some of the most frequently searched information are street addresses, store hours, phone number, list of services and link to your website.

Post Your Business Location

In addition to your street address, get your business location on Google maps. It is estimated that one third of all mobile searches are looking for a local source. Location will influence the results on Google search to show the closest stores to the customer’s present location. To place or update your business location on Google Maps go to www.google.com/places

Customer’s Convenience

Mobile devices enable people to check their email at any time and place. People sitting in a waiting room, on a bus, airport terminal, or walking in the park can keep in contact. This implies that email messages should be short and focused to be easily read and understood. Unfortunately, this also implies customers what more information faster, if they cannot get an immediate answer to their question they are likely to try someone else.

Texting is Big

Texting is compatible with all mobile phones and is the most often used form of communication on a mobile phone. Allow you customers to sign up to receive text messages a method to receive notices of specials, announcements or reminders of their appointment. Integrate texting codes into your entire marketing strategy. Whatever media you choose for advertising should include your text address

Mobile Apps

Apps are much more than games. A business App can enhance customer relationships and loyalties. Business Apps essentially place the entire business on the customer smart phone speed dial. At present the use of Business Apps appears to be strongest with very frequent customers.

Friday, March 1, 2013

Before you Sign That Lease


There are countless items that business owners should consider before signing a lease and starting a business, (like making sure the revenues and cash flow support it!) but here are six details to be aware of in negotiating a commercial space.

Read and understand the entire lease.

A lease is a legal document and what you don’t know will hurt, ask for clarification on everything you don’t understand. Once signed, the written word is binding, verbal statements are not.

A typical commercial lease may have almost 40 sections, not including any riders or addendum's, and it can be difficult to comprehend what the terms and different options mean. Taking the time to read through and analyze a prospective lease can save you time and money in the long run. It may also allow you to add in items that clarify and give you better control of your costs.

Obtaining legal counsel now may save stress and much bigger legal costs later.

Everything is negotiable.

It is important to understand that all things can be negotiable (within reason): rent, base rent, square footage, improvements, lighting, signage, lease terms, options, deposits, possession dates, and more. You may have more success if you look for a few important items that influence your costs.

The full cost of rent, maintenance, parking, utilities must fit within your budget. Above all...if you have not developed a cash flow budget, balance sheet and projections, do not sign anything until you are sure that the business revenues can support a lease payment.

Seek to limit your share of Triple Net costs including: Common area maintenance charges; Property taxes passed through; and Insurance on the overall building and property that is owned by the landlord including common area liability insurance.

Define all proposed tenant improvements, as well as square footage (usable is typically less than actual) be certain that all uses common to your business are allowed. Tenant improvements that are professionally installed, such as lighting, walls, plumbing, built in equipment, typically become the property of the landlord. However, you may be required to remove and restore the space at your expense upon termination of the lease.

Make certain that all of your business activities are specifically allowed. Understand that some uses can be prohibited because another tenant has a non-compete clause.

Get an exit clause in case the business fails. Consider short term leases, with options to renew so you have options if your business s outgrows the space or the economy gets worse.

Be objective.

The space is available, but may not be the correct location for your business. A tenant can be so in love with a space that they fail to see fatal flaws in the location or costly extras. There will always be another option. It might not be exactly what you are looking for, but there is always another choice. Pause and consider, if this site is so good, what happened to the previous tenant?

Friday, February 1, 2013

Business Succession - Just Closing Is Not A Plan.


You have invested a lot into your business. You invested sweat, cash, worry, hard work, and more cash, what happens to your investment when you are ready to retire? A succession plan is a predetermined strategy specifying the best way to exit your business. Preserving your legacy and your retirement income may depend on identifying how ownership will be transferred. A succession plan should also identify what will happen to your business if you have an accident or serious illness. Will your business just close or is there someone who can operate the business until you return?

Plan Ahead

If you are approaching retirement start planning at least three years ahead. It takes time to select and train a successor. Of if you sell find a buyer who is capable of continuing operations and hence qualify for financing. Preparing key customers and suppliers to work with your successor will protect sales revenues and vendor terms. Address family issues and expectations to provide an orderly transition. Prepare for your retirement financial needs.

Planning to Start a Business



This past year I worked with more than 30 people who want to start a business or buy their first business. Statistically, only 1 in 4 new businesses will still be in business in two years. Those who survive typically have a well prepared business plan, understanding the true market and sales potential, starting with enough of their own money, and dogged determination to survive long hours and a demanding lifestyle.

A good business plan is short and focused on conclusions reached from researching the basics of market place conditions, identifying the real customers, verifying that there are enough customers, a good estimate of startup costs and operating budget for the first year. Sales projections need to be supported with solid assumptions about the market.

Planning to Staying in Business

 “Good fortune is what happens when opportunity meets with planning.” Thomas Alva Edison

The action word in Edison’s statement is “planning” an activity not the end result. One reason staying in business is hard is lack of adequate preparation. Businesses that lack the resources and knowledge to execute their business model and seize the opportunity quickly run out of money. The act of planning means you have though through the desired project as well as thought about what could go wrong. Unexpected events often become death traps for new business ideas. Likewise, as Edison points out lack of information can result in missed opportunities.