Business Planning

02

Jun'18

What do I Need to Know about Finance and Accounting for my Startup?

Knowing a number of basic finance and accounting concepts is essential to the success of your startup. At the bare minimum, you need to understand basic bookkeeping and preparation of financial statements, even if you are going to hire an accountant (recommended). You also need to understand the basics of finance and financial markets, as they impact the economy. Without this knowledge of finance and accounting you are running your startup blind. So, as a bare minimum, you need to master a beginning accounting and business finance class at the college level. I would suggest a local community college. You should also take a course in basic taxation, because you need to understand that. To be effective in running a business, you need these skills: (1)basic bookkeeping (2) setting up and monitoring internal controls (3) banking and credit including the way credit works, how to balance your checking account, managing cash (4) payroll, and payroll tax compliance (5) Sales, GST and VAT tax compliance (6) the basics of income tax (7) cost accounting, to the degree necessary to figure out what your product/service costs are, your overhead, and your margin under varying circumstances (8) how to read a financial statement, …

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27

May'18

Should I Go All-In and Invest All my Savings into my Startup?

All in? Invest everything you have into your Start-Up? No reserves except credit cards? Throw caution to the wind, jump onto that boat and make it float? If it springs a leak, use credit (borrowings) to float it for a while, until it finally floats? Eventually, sail off into the sunset with the gentle wind at your back, the beautiful girl at your side. I like the idea. Reality might be something entirely different. Do you have a business plan? Have you thought out what can ( and probably will) go wrong? Have you figured out how your competition succeeds? Have you really done the research to know what your costs and risks are? Remember, you are about to put real money into this… A true story may clarify. I have a good friend who started a business. At first they did very well. He upped the ante and put all his cash into it. Then the recession hit, and he weathered the storm, but incurred over $ 90,000 of credit card debt to keep it afloat. Limped along for several very stressful years. End of the story is he got lucky and found someone to buy the business for …

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25

May'18

How do I find the Right CPA?

Finding the right CPA or the right accountant is really important. Important because the results depend upon who you get, and it’s an area where you, the client may not be aware of whether you got the best advice or not. There are a lot of stuffy accountants (CPAs) out there who have very high opinions of themselves. They talk about “the firm” and act like they are something special. They tend to be rigid, unimaginative, high priced and advocate for themselves. There are also a lot of very friendly nice guys who are not very competent. They talk a good spiel, but they have neither the resources nor the experience to handle your problem. So how do you find the right CPA? What are you looking for? Lets see: 1. A hard-bitten no nonsense negotiator who can deal with the IRS at their level, knows all the audit tricks, has been there many times, a street fighter. 2. A clever innovative thinker who knows all the ins and outs of the law, understands the difference between light gray and dark gray, wants to take you to the limit of tax savings, but without crossing the line. 3. A plugger, …

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19

May'18

How do I start a business with no experience?

How do you start a business with no experience? Maybe you haven’t worked in a job, other than maybe a temporary job in school. Becoming an entrepreneur, doing a start-up, and being successful is not as easy as it might be portrayed in Entrepreneur or Fast Company, or Inc magazines. They highlight the .1%, not the 95% who didn’t make it. My suggestion is that you shouldn’t start a business just yet, because you really need to have a lot more experience working for someone before you start your own business. Starting a business is hard. You have to know a lot about business, taxes, employees, marketing, organization, etc. Yes, you can learn a lot about these things at school, taking the appropriate courses, but as the saying goes, “in theory there is no difference between theory and practice, in practice, there’s a big difference.” Truer words have never been spoken. Now a lot of people are going to jump all over me saying “you don’t need any experience, just do it! There are many examples of people who did exactly that and succeeded.” Right. And for every one of them, there are 100 you don’t hear about who tried …

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24

Apr'18

What Should You Know to Analyze a Financial Statement?

What do you need to know to analyze a financial statement? The answer is a little complicated. Here are the things you should know: A basic understanding of accounting. You need to be able to appreciate what the various components of a financial are, and where they come from. You need to understand the pitfalls of financial reporting, and the limitations of GAAP. A good understanding of the tools of financial analysis, how they are used and what they reveal. Things like ratios, trend lines, scatter charts, and the like are important tools, if you know how to use them. A good understanding of the industry. You need to know what is expected and what is unusual. Without some comparative information and background, your financial analysis of the company is in a vacuum, and probably meaningless. A good understanding of the business. If you don’t know anything about the business except what you see in the financial statements, you don’t know very much. When I read an annual report, I spend far more time reading the explanatory material than actually looking at the financials. I do a web search on the company, try to understand what their products are, their …

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21

Apr'18

What’s the Difference Between a LLC and a S Corp?

There are many differences between a LLC and a S Corp, even though at first glance they appear to be essentially the same. First, let’s tackle the issue of forming a LLC versus a corporation, in general. The LLC is generally a lot easier to form. Usually it only requires registration from the state. To make things formal, you should have what’s known as an operating agreement amongst the owners. That’s it. With a corporation, you also have to register with the state, but you have a lot of busy work to do. You have to adopt a charter, adopt bylaws, appoint a board of directors, pass resolutions, etc. Both a LLC and a Corporation will most probably have to do annual filings with the secretary of the state in which they are formed. Some states, like Missouri do not require that for a LLC. Now, what is the difference between a LLC and a S Corp? Easy. The S corp has one set of rules for its taxation. Very rigid rules. Very mechanical in application. Some of the other respondents have pointed out that S corps must pay their owner/officers reasonable compensation. The balance of the income can be …

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04

Apr'18

Should I leave my low paying, meaningless job to start a business?

Oh my, some serious issues in this question! Jumping off the current boat to swim with the sharks and try to stay afloat and build a new boat from scratch is incredibly difficult, far more difficult than it looks. Look very, very carefully before you jump. The water is cold, full of sharks and unpredictable big crashing waves. Once you abandon the ship you are on, be prepared for some rough times. You may drown. You cannot start a business until you have sufficient savings, have done intensive research, have networked and made good connections, and have a backup plan. Low pay job: Ok, so make something of it. Do the best job you can, be a superstar. Be a sponge: learn everything you can and more. Prove to your employer that you are worthy of a raise. Then look around for another, better paying job. Work your way up. “Meaningless job” – there is no such thing. The meaning you have in a job is what you put into it. If you are a janitor cleaning toilets, put everything you have into cleaning them the best way anyone could. If you sweep the floors, do it with style and …

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02

Apr'18

How do I sell my consulting services?

This is an easy one! First, you have to know as much as you can about your prospective clients. What are their needs? What are the problems that gnaw at them and cause them to lose sleep? What things are just annoying and irritating that they have to deal with? Know your prospect. Understand what motivates them and where their “pain” is. Now, how will you, yes you, solve their problems in a seamless, easy, cost-effective way? What will you provide that will give them (almost) instant relief? What is your USP ( unique selling proposition)? Don’t give them some “generalities” or fuzzy answers. You have to be razor sharp on this. You have to be able to prove that you can solve their pain. Otherwise, why would they risk dealing with you? What guarantees or warrantees can you provide ( and remember, these have to be realistic… if you promise too much, they won’t believe you.) That brings us to the next issue: credibility. Why are you, as an individual, uniquely qualified to provide this “relief?” What are your credentials? What experience do you have? What references can you give? What case studies can you provide that prove your …

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29

Mar'18

What does a Treasurer Do?

What is the function of the treasurer of a company? The answer is simple: the treasury function is all about looking at possibilities, risks, and returns. A treasurer of a company analyzes the economy, the business cycle, the product life cycle and the business plan of the company. What funds are going to be needed? Is there a recession coming or underway? How can funds be deployed for the best risk-adjusted returns? What is the cost of capital? The answers to these questions are all moving targets, and a lot of it is educated guesswork. The treasurer has to work with the management team in formulating and executing the business plan. The work is at the same time very granular and yet also broad brush to the point of conceptual. If they have promising projects, with large risk-adjusted returns on investment, that is where they should put their funds. If they can buy businesses with a good return on investment, they should do it. If they can place the money in investments which pay a greater return than their cost of capital, they should do it. If the Treasurer’s team sees a big recession coming, they may decide to build …

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24

Mar'18

What’s the Best Business to Pursue?

The best business startup is the one that suits your skills, experience, temperament and financial wherewithal. Only you can determine that. There are so many different opportunities, the problem is narrowing the choices to ones which have a definite market demand. What is it people need, and are willing to pay for? Generally a successful business concept addresses one of three mandates: the business performs tasks that nobody wants to do (trash, cleanup, bookkeeping, plumbing) , functions which are difficult, or require specialized knowledge (computer programming, construction, dental work), or it provides recreation or lifestyle enhancement ( restaurants, entertainment, gyms, personal trainers). In order to be successful, a business must have a USP ( unique selling proposition), a well defined, identifiable and reachable prospect base, and a business model that provides for adequate profit and cash flow. “Occam’s razor” is the principal that the best solution is usually the simplest. Many entrepreneurs try to make things too complex. Pick a business that is simple, straight-forward and not too expensive to start. Do a test marketing to see if it will fly. Then roll it out. We have some excellent videos and other material at https://CEAnow.org (https://CEAnow.org) to allow you to …

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