Business Idea Evaluation

Posted At : September 19, 2008 12:21 PM | Posted By : ISBDC Manager
Related Categories: Management,Research,Financing,Accounting

For some people it is easy to think of the idea for the perfect business, but they struggle evaluating the likelihood that it will survive and be successful. The Missouri Small Business Development Center has created an evaluation tool to help individuals analyze their idea.  The evaluation forms can be filled out online and then printed. The accounting sections even perform the calculations as the form is filled.
 
This tool forces the potential business owner to analyze many aspects of operating a successful business. These include the following:
  • What need is your business or product fulfilling?
  • Who is your customer, in detail?
  • Who are your competitors?
  • Do you have the financial means to startup?
  • Will your business be profitable or even self-sustaining?
The forms also include instructions and information that explains why the answers are important and the impact they will have on the survival of the business. These can be downloaded as one entire form (22 pages) or the expenses analysis can be separated out from the whole. There is also the Financial Projections worksheet in Excel format with instructions .

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Closing the Doors

Posted At : August 27, 2008 10:26 AM | Posted By : ISBDC Manager
Related Categories: Legal,Business Practices,Human Resources,Financing,Accounting

When a business decides to close its doors, it must do more than simply lock the doors. Just as in the beginning, there are specific steps to follow to dissolve a business. If that business has been incorporated, there are a few additional steps.
 
From a simplistic accounting viewpoint, it is a matter of emptying the balance sheet. Assets are liquidated, creditors are paid, and shareholders are given their respective portions of the liquidation. By state statute in Idaho, the dissolution must be filed with the Secretary of State. The necessary form is found on the Secretary’s website. And of course, the IRS must be settled with as well.
 
The IRS provides a checklist for businesses seeking to dissolve. Among others, this list includes:
  • Make final federal tax deposits
  • File final employee pension/benefit plan, final quarter or annual employment tax return and final tip income and allocated tips information return (if applicable)
  • Issue final wage and tax withholding to employees and payment information to any subcontractors
  • Report from W-2’s and 1099’s issued
  • Report capital gains and losses, partners’ or shareholders’ shares, corporate dissolution or liquidation, and sale of business assets or other exchange of property.
To read the full checklist, including links to the appropriate forms, visit the Closing a Business page within the Business section of the IRS website.  To read more about dissolving a business, check out these guides from AllBusiness.com and Quamut.com.

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Person-To-Person Lending

Posted At : May 22, 2008 1:12 PM | Posted By : ISBDC Manager
Related Categories: Technology,Financing

Earlier posts on this blog have discussed a variety of ways of financing your business. Most of these have been around for many years. With the advent of the Internet and particularly social networking, a new form of financing has arisen. 
 
Person to person (P-P) lending had a small, modest start several years ago. It has quickly grown to include multiple firms actively involved in the lending market. Approximately, $100 million in new P-P loans was initiated last year. The Online Banking Report forecasts this number to increase tenfold over the next two years. It is becoming so viable that major corporations like Virgin Group PLC and the Wall Street Journal and venture capitalists are taking notice. The Wall Street Journal’s Jane J. Kim wrote an article about this new form of financing this past March.
 
P-P lending works like shopping, dating, or other websites that gather like-minded individuals together. Instead of swapping wares or developing social relationships, P-P lending users are lending to and borrowing money from each other. Usually a small group desiring to be lenders will pool together to aid one borrower. Typically, the borrower will have posted a short bio that provides details about themselves, why they want the loan, how much they are seeking, and what interest rate they are willing to pay. From this point there are varying methods for finalizing the financial terms. Some are structured by the host (Virgin Money USA), some loans are bid on by potential lenders in terms of interest rate (Prosper.com), and others are chosen by the lenders, but the transaction is carried by an insured credit union. (Zopa.com)
 
The realm of person-to-person lending provides incentives to lenders and borrowers alike, regardless of the health of the economy. Lenders can often earn a better return with less risk than they would in the stock or bonds market. They also have the intrinsic reward of helping someone else. Borrowers of all credit ratings can obtain a loan easier with lower interest rates than from a traditional bank. Granted as the economy tightens, higher credit scores are more likely to find funds. Check out this NPR report for additional perspective on person-to-person lending. Or visit some of the lending sites, most have tutorials that explain their process in detail. 

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Fiscal Physical

Posted At : April 28, 2008 11:14 AM | Posted By : ISBDC Manager
Related Categories: Financing,Accounting

As part of the Northwest Professional Development conference that was held earlier this month for SBDC’s in Oregon, Washington, and Idaho, Business Resource Services presented a portion of their Profit Mastery® lecture series on financial management. The day centered on ways to prevent business failure due to poor financial management. BRS noted seven “financial killers”. 
  • Failure to plan properly before start up.
  • Failure to monitor financial position.
  • Failure to understand the relationship between price, volume, and costs.
  • Failure to manage cash flow.
  • Failure to manage growth.
  • Failure to borrow properly.
  • Failure to plan for transition.
Carl Forssen, our presenter, said that it is often common for small business owners to assume that if they can make it and sell it, they will survive. The managing of and the decisions regarding the structure of finances are often left to the accountants and bankers. Now it is wise to use experts to aid in decision making and analysis, but the owner should be involved with the financial management. 
 
Mr. Forssen recommends giving your business a fiscal physical; look at things like contribution margins, variable vs. fixed expenses, break-even analysis, and simply using the balance sheet and income statement together to track the flow of cash. Business owners should go through this process at least semi-annually and preferably quarterly. 
 
BRS has developed a financial Road Map to aid in this process. After you have identified areas where your business may be weak, you can find the weakness and track back to potential causes or work forward to what will happen if the problem isn’t corrected. (Read more about the Road Map analysis).  Just like personal health, financial health is developed through consistent monitoring and careful attention to the details; crash diets, sporadic exercise, or quick-fix surgeries rarely work for physical or financial health. For more tools, visit BRS’s Critical Issues Toolkit . Or gather your financial statements, and visit your Idaho SBDC consultant to help you with your financial review.

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Help For The Little Guys

Posted At : February 21, 2008 12:12 PM | Posted By : ISBDC Manager
Related Categories: Business Practices,Financing,Accounting

Many entrepreneurs often feel like the bureaucrats and big government are conspiring against them. The New York Times offers new hope for those feeling this angst. In the February 5 article, ”Government Help for Small-Business Owner (No Joke)” four different entities were highlighted including how they are helping.
 
  1. The U.S. Small Business Administration – This organization has implemented the Answer Desk. The Answer Desk is a national toll free telephone or email service for small business owners to ask questions or voice concerns about small business in general or SBA specific policies and helps. There is a TTY and Spanish version as well. 
  2. Department of Commerce – The Dept. of Commerce has partnered with the Kaufmann Foundation to create Entrepreneurship.com. The website aims to aid entrepreneurs or aspiring entrepreneurs in all functions of running a successful business. It also includes links to other organizations whose mission it is to help entrepreneurs succeed.
  3. MyMoney.gov– This website provides resources to educate anyone on the basics of financial management, including saving, investing, budgeting, and retirement. This can be a great way for small businesses to help their employees.
  4. IRS.gov – The Internal Revenue Service claims that 40% of unpaid taxes lie with small and home businesses. To insure ignorance isn’t to blame, their website includes a Small Business/Self-Employed Resource section that makes filing taxes and being knowledgeable about your tax responsibilities a feasible task. The IRS also provides webinars and other group conference sessions to educate on specific topics.

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Beware "Free" Money

Posted At : February 1, 2008 12:31 PM | Posted By : ISBDC Manager
Related Categories: Business Practices,Financing

There are a variety of methods for obtaining the necessary finances to start and operate a small business. The two basic categories are outside investors and lending institutions. Both groups will require certain standards and a return flow of cash. Because of these requirements, individuals become attracted to grants. A perception exists that there are pools of “free” money waiting to be applied for, similar to scholarships and grants for education. For a significant majority of the business world, this is far from the reality.
 
Grants are primarily made available to not-for-profit organizations, such as museums, churches, research institutions, or to restore economically depressed areas. There are very limited grant opportunities for profit-based organizations. Generally, funds for this group are limited to firms that have an innovation or invention that would be a national benefit.
 
However, given these facts, it is not uncommon to see TV infomercials, newspaper ads, or to receive emails promising “free money” or “golden” home business opportunities. Just pay an “application fee” or “buy the book or list” and the money is yours. A majority of these are either scam artists or individuals providing misleading information. NBC has done an investigation on one of these misleading prospects. Additional information and links on grants can be found under Hot Topics at the Idaho Small Business Solutions website and in  our FAQ section at the Idaho SBDC website. Usually, if something sounds too good to be true, in the world of grants, it probably is. The local Better Business Bureau will often be aware of scammers and the SBDC offices have books on the different types of grants available. So always do your homework first, and, if in doubt, contact your local SBDC consultant, who can help you research the source.

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Know Your Money Needs

Posted At : November 28, 2007 11:11 AM | Posted By : ISBDC Manager
Related Categories: Financing

Many people put off starting their own business because they don’t think they have enough capital to finance the start up. Jill Jorgenson, Region II director wrote an article for the February 2006 Business Times addressing this very topic.
 
It turns out that 60% of new startups need $5000 or less and only 3% need more than $100,000. The financial issue that should be a concern is not where the initial start up money is coming from but where is the cash coming from to sustain it. How long until the business begins to sustain itself month to month? 
 
There are several tools that will help a potential business owner calculate these costs. They are a budget (seems obvious, doesn’t it), pro forma income statements, forecasted cash flow statements, and break-even analysis. These tools will help you and the investors see how much money is needed, where the money is coming from, and most important to your investors, when is the return on investment going to show up.
 
These documents and a business plan should give any future small business owner the courage and structure needed to face the dreaded loan officer. More importantly than that, the dream will become a reality.
 
For the full article, click here.
 

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Pick Yourself Up

Posted At : November 8, 2007 10:01 AM | Posted By : ISBDC Manager
Related Categories: Business Practices,Financing

Today's info comes from Region II's very own Jill Thomas-Jorgenson. She brings us information that can be applicable to any small business regardless of industry or location. Jill is writing on the concept of "bootstrapping". 

"Bootstrapping" references the phrase "Pick yourself up by your bootstraps" dated to at least the early 20th century referring to the practice or ability of an individual to advance their situation on their own. Essentially in the business world it means doing everything in your power to see your business succeed by limiting required resources and maximizing those that are mandatory. 

Jorgenson explains it this way: "Bootstrapping at a more complex level is the process of analyzing the operation to discover ways to save money and to put cost saving measures into place. This practice can also produce added benefits for the business which include improved operational efficiencies, and the opportunity to learn more about the company from the inside out. An added benefit can also be that by becoming more efficient and cost conscious, the entrepreneur can actually put the organization into a stronger position which may help it qualify for additional financing." 

As one might imagine there are a myriad of ways to do this. Jorgenson's list includes the following: Low or no rent, used equipment, sell wholesale, outsourcing, cooperative purchases, and customers' or suppliers' help. The bottom line is be creative and don't be afraid to think outside of the box when looking for ways to finance your dream.

For the full article, click here.

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