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.

Common Financial Ratios for Year End Reviews

Use financial ratios to compare year to year performance. Ratios will indicate a trend of better or worse than last year. Calculating these ratios will require a Balance Sheet and a Profit and Loss statement


BALANCE SHEET RATIOS (Liquidity)

• Current Ratio (Solvency) divide Current Assets by Current Liabilities to measure dollars of assets per dollar of debt shows ability to pay debts.
• Quick Ratio (Liquidity) divide  Cash plus Accounts Receivable by Current Liabilities to measure CASH available to pay debts show ability to quickly pay debts.
• Debt-to Worth (Safety) divide Total Liabilities by Net Worth to measure Dollars of Liabilities per dollar of net worth
• Working Capital divide Current Assets minus Current Liabilities by Sales to measure ability to pay short term debt
• Cash divide Cash plus equivalents by Total Assets to measure CASH as a percent of total assets

INCOME STATEMENT RATIOS (Profitability)

Health Care Reform

Here is a useful article entitled “After the Supreme Court’s Health Care Reform Decision:  What Employers Now Need To Do” supplied by the law firm of Schwabe, Williamson & Wyatt:  http://www.schwabe.com/Articles/WhatEmployersNowNeedToDo_July2012.pdf

Perhaps it will answer some questions.

Small Business Advisory: Crowdfunding

Posted by the North American Securities Administrators Association, June, 2012


On April 5, 2012, President Obama signed into law the Jumpstart Our Business Startups (JOBS) Act, a series of legislative provisions intended to facilitate capital formation in the United States. Part of this legislation included the CROWDFUND Act, which makes significant changes in current federal and state securities laws.


The CROWDFUND Act will allow entrepreneurs to raise capital by offering to sell interests in their businesses over the Internet. Under the CROWDFUND Act, a small business will be allowed to raise $1 million in a 12-month period by selling its securities to investors without registering that offering with federal or state securities regulators. However, the Act places limitations on how and to whom a small business can sell its securities. The Act directed the Securities and Exchange Commission to adopt rules within 270 days to implement a new exemption to allow securities sales through crowdfunding.

Business Plan Step One - The Budget

My preference when starting a business plan is, first develop a cash flow budget.  New business,  growing business or buying a business every action requires some investment of money with the purpose of making a return on that investment.  Therefore, before writing a business plan I want to have an understanding of what financial commitment will be necessary to enable this business to be profitable and finance eligible.

Purpose of a Cash Flow Budget
Preparing a cash flow budget is to understand how money will move through the business over a period of time. Most businesses can plan on a monthly basis while other like construction or manufacturing may need to plan on a weekly basis.

Cash flow budget is to reveal the money needed to fund seasonal sales and operating cycles.  For example, a retailer may need to spend money to buy inventory several months before the inventory is received and sold.  Or, for a landscape business how much of the money earned in the summer must be saved to survive the winter?

Cash Flow helps schedule business activities such as adding labor when sale are strong.

Cash Flow identifies financing needs and structure. A line of credit for short periods, or term loans for capital equipment purchases.

Cash flow planning is all about when money goes out and when money comes in. This is not a profit & loss model, nor concerned with non cash items like depreciation

Compare your budget to actual revenues and expenses. Determine if you are reaching your goals, costs are as expected. If not you can take corrective actions to reduce planned expenses and increase sales activities.