Help Clients Start a Business Right by 8 Tips

When clients fail to plan, they plan to fail

Starting and running a profitable business is not rocket science. The 1st reason many people fail is they fail to follow a well-established business development process. Below are 8 tips to business development that, when followed with purpose, will significantly help your business clients and customers improve their chances for growth and long-term success:

1. Test the Waters: Encourage client so close a sale. While this is not possible for all ventures, making a sale validates the business idea on multiple levels, such as who will buy, why they buy, what they'll pay, how much it costs and how much profit will be made.

2. Research, Research, Research: Encourage clients to Web surf and shop the competition to learn how similar businesses define, price, market and sell their offerings. LIttle is new. Take advantage of what works.

3. Connect Clients to Experts: There are over 33,000 "volunteer" business mentors in the U.S. that offer all types of expertise, such as tax, funding, marketing, import/export, govt. contracting, etc. Introduce and help clients to connect.

4. Write the Business Plan: Require clients to write their own plan and invest the time, hard work, learning and focus that will be the keys to their future success.

5. Fund Innovatively: You well know, banks are rarely lending. Get creative. Will customers invest or prepay? Is joining forces an option where client have "x," someone else has "y" and together they're better off? Is contracting for a service versus buying equipment an option, such as a delivery service instead of buying a truck.

6. Recordkeeping: Require clients to demonstrate that they understand and have arranged for reliable expertise for maintaining breakeven, forecasting, cash flow and bookkeeping records. Business success lies in the details of managing the numbers.

7. Defeat Fear Through Knowledge: Asking for the sale is scary. Maintaining financial records can be intimidating. Investing in ones future is risky. Yet millions of people are doing this every day with success. Help clients connect with no-cost business assistance networks to learn how they can do it too.

8. Focus, Focus, Focus. Profitability is the first objective in business. Focus on a sales cycle where revenues exceed expenses. Assist clients with refining and repeating this process before they start something new.

Like most things in life, the more purposefully you engage, the more likely you'll get the results you seek. Good luck!

Preparing a Loan Application

Obtaining a business loan has become more difficult as the economy, regulations, and lendig policies become more stringent.  I took the following notes during a recent staff training presentation and hope they will help you to understadn what lenders need to see in a business loan appllication. 

I. Understanding the Lender

It is much easier to find a business lender if you understand what a lender needs in order to process your loan application. I recommend starting with the lender you are already doing business with but check for the most recent bank policies and procedures. Government regulation and bank policies are frequently updated. To prepare you application it is helpful if you know the following:

Bank Policies –

Loan portfolio mix, number of and type of loans they like to make.

Loan Programs they use? (SBA or USDA programs?)

Loan requirements – Minimum Credit score, Loan to Value, Collateral, Equity, Lending Ratios -- Liquidity, Debt Coverage, others

Risk tolerance – some banks are more liberal, others more conservative.

Lender’s experience with customers in your industry?

Recent changes in the bank’s corporate structure that effect lending policies.

Banking regulations that affect the bank’s lending policies.

Average time to close a loan.

• Loan Underwriting – The lender will only know what you provide, incomplete applications get denied. Your loan officer will need to justify a loan approval based on due diligence review of you and your business. Information they are looking for includes:

Is the loan purpose consistent with the type of loan?

Credit Standing (score and credit report)

Cash Flow, is the business be profitable?

.... Are losses explained?

.... How were losses funded?

Collateral

.... Quality and value

.... Collateral value covers loan?

Equity/Net Worth

.... Has equity increased or decrease over last three years?

.... Amount of contributed equity and earned equity (retained earnings)

Financial ratios

.... Exceed lenders minimum target?

.... Ratio trends over last three years

Business condition – Strengths, Weaknesses, Issues

Other

.... Other business owned

.... Other sources of income

.... Personal Financial history

II. Preparing a loan package

Presenting the lender with a complete package is critical. Your package must demonstrate your capacity to manage the business, your capacity to produce stated outcomes, and the market place capacity to buy your service/product. Incomplete packages slow review and errors or misstated information will result in a denied application. Lenders will be examining:

1. Financial Statements – History

• Profit Loss Statements- YTD  Revenue, margins, profit

 • Cash Flow: EBITDA and Working Capital needs, Owner draws, distributions, When you spent cash, when you received cash

• Last three years of Tax records, Explain differences between tax records and Profit & Loss Statements. Explain any expenses made for tax purposes

• Balance Sheets – current liquidity, asset quality, leverage, capital structure, retained earnings, Aging of A/R and A/P

• Budget Projections with assumptions

• Break Even analysis

• Ratio analysis - Liquidity, leverage, performance over time has been consistent and is sustainable Sales to Assets, ROI, ROA, A/R Turnover, Average Collection period A/P turnover, average payment period Inventory Turnover, Inventory on hand

2. Management

Character of top management, resume of management experience, experience as management in this business/industry. Team depth, who does the tasks of CEO, CFO, A/R and A/P. Succession (who runs the business if you can’t be there?) Performance as compared to industry standards and trends

3. Business Plans

• Supports and explains how you will accomplish what you claim in your budget. How you meet the five C’s of credit. (Character, Capacity, Capital, Conditions, Collateral)

• Explains market opportunity

• Provides budget assumptions.

• Describe the business, how you make money

• Describe the service/product, provide pictures, marketing materials, samples

• Associated documents, Articles of Incorporation (Partnership), Leases, Contracts, firm estimates on major purchases, Collateral

III. Presentation Tips

• Be enthusiastic

• Be professional

• Be prepared

• Make an appointment, be early and ready

• Be organized and bring copies of all the document to leave with the lender

IV. Deal Breakers

Some issues in your history can be deal killers, there must be extenuating circumstances before a lender can consider proceeding with an application. Other problems could result in a loan application being considered as a higher risk. If a loan were to be approved, these issues could result in higher interest rates and more conditions and restrictions.

Preparing a quality loan application package will help identify potential deal breakers and provide you the opportunity to explain what happened and what you have done to correct the situation. Remember, it is safer for the lender to say no if there is any doubt or perception that your loan is a higher risk than the lender wants to accept.

Typical Requirements For Business Loans

Seeking a business loan requires preparation and excellent documentation of your businesses financial health. The following list will help get you started, complete and accurate information will help the lender complete their review with a better chance of reaching approval. Pay close attention to financial projections and cash flow needs, they must be believable and supported by your business plan market assumptions


Proof read your documents as errors will delay review and possible cause rejection. Have someone else review you documents did they clearly understand what you wrote?


I. Cover Letter --States who you are, how much money is needed, what the money will purchase and what results are expected.

II. Business Plan
A. Description of the business
B. History and nature of business
C. Ownership structure. Attach contracts or organizing charter, copies of business licenses, EIN, Resolution/Articles of Incorporation or partnership contracts.
D. Key Management resumes
E. Description of product/service and market place. Including competition, market area, major customers, major suppliers, description of plant and equipment
F. Amount of loan requested. Specific dollar amount and purpose of loan, use and benefits, amount of owner’s contribution, primary source of repayment and repayment terms, list of collateral.

III. Business Financial Reports
A. Projected cash flow budget, income statement, balance sheet, financial assumptions
B. Business financial history for last three years
C. Tax returns for last three years
D. Itemization of all debts
E. Current aging of accounts receivable

IV. Personal Financial Statements (for each co-owner)
A. Recent personal financial statements, recent
B. Personal Tax returns for last three years

V. Attachments
A. Application forms.
B. Business incorporation documents, partnership agreements, buy/sell agreements, etc.
C. Legal documents: leases, contracts, franchise agreements,
D. Detailed lists of assets to be purchased
E. Summary of market research
F. Supporting documentation, pictures, plans, contractor estimates, customer contracts.


NOTE: Loan Decisions Points – Lenders have several critical decisions points. The information you provide must prove to a lender your ability to accomplish your business goals.  A lender review will include but is not limited to:

• Evidence of your ability to achieve the cash flow budget
• Total amount existing debt and how much more debt will be added with a new loan
• Ability to pay all of your debts and still be profitable
• Personal and business credit history
• Amount you are investing as the owner
• Amount of collateral
• Potential risk of business failure
• New business vs. well established business

Will It Work? Tips for Determining the Feasibility of a Business or Project

Entrepreneurs are often faced with answering the question “Will it work?” Lenders, investors, perhaps

suppliers and others involved in the project should also ask that question or scan the business plan to see if

“will it work” is addressed. Whatever the specific project—starting a new business, expanding an existing one, or even selling or buying a business—the basic issue is feasibility.  Can it be implemented successfully?

Here at the Small Business Development Center (SBDC) we work with entrepreneurs on a variety of projects, and most of them involve feasibility. Here are some tips on feasibility that we’ve found work in most situations.

Do A Rough Analysis First

A good starting point is what we call “back of the napkin” analysis. In a short amount of time and with little data, you can often get a rough idea of the feasibility of a project. The results of this rough analysis may quickly decide if you need to spend more time on the detailed analysis, alter your idea a bit, or move on to

another idea.

For example, say you are thinking of making cookies to sell to stores, cafes, espresso stands, and restaurants. In a short amount of time you can gather some basic data:

• The cost of ingredients of a batch of cookies, and how many cookies a batch makes.

• The time it will take you to bake them.

• How much rent will be to use a commercial kitchen (assuming you will lease space until you are established).

• The price of competing cookies (the price to your customer—the store, café, espresso stand or restaurant, that is).

• How much money you need at a minimum to take out of this business for yourself for the time you spend in it.

Although you will have other costs (insurance for example), you can quickly calculate using the above data, what your capacity is (how many you can make in the time you have in your leased commercial kitchen), and what your gross profit (sales less cost of ingredients) per cookie will be. You can then calculate how many cookies you need to sell per month to pay the rent, and provide you with the income you have decided is the minimum you need. You can then see if at this very basic level of analysis if it seems feasible enough to continue.

If the rough analysis seems feasible, you can gather more detailed costs and refine the analysis. Then you can start your market research to determine the level of demand. While our example is a simple one, this approach can apply to any type of business: starting a commercial fishing business, expanding a manufacturing business to add a new product, or starting a service business, such as bookkeeping services.

The tasks are the same:

• Gather rough estimates of your basic and largest costs, including profit for the owner(s)

• Figure out how many of your product you need to sell to cover these basic costs.

• Ask yourself if the resulting sales figure seems reasonable. Calculate how many different customers you might need.

• If your rough results are encouraging, proceed to next steps.

• Refine your cost estimates and redo the analysis.

• Start your marketing research to determine demand

What happens, though, if the rough analysis is not encouraging? Rework your idea — explore various options for parts of your plan. Being successful in starting a business or expanding an existing one involves determining if the venture is feasible — will it work. Start your analysis and contact the SBDC if you need assistance.

INC Magazine Best Business To Start

A colleague forwarded this link to an article regarding businesses  start up opportunities.

http://www.inc.com/ss/best-industries-starting-business-right-now?nav=related#3

Can You Increase Sales by Exporting?

The Washington Small Business Development Center Export Program focuses on working with new-to-export and new-to-market companies with little or no expertise in international trade. The program has set an ambitious goal of establishing a “Culture of Exporting” across the state within the next two years.

The Washington SBDC recently opened two Export Centers to assist Washington businesses to prepare for or expand their export capabilities. Located in South Seattle and Spokane, each center is staffed with two seasoned trade specialists. These new centers join a statewide network of 24 small business development centers and 26 certified business advisors who provide no-cost small business advising services.

The four trade specialists bring to their work assisting new-to-market businesses several decades of experience in international markets, unique skill sets and many years of living and working abroad. In addition, a group of WSU interns are conducting targeted export market research that will assist SBDC clients as they develop business plans that ensure successful and long-term export activities.

The Export Centers:

• Provide no-cost confidential, in-depth, and long-term one-on-one export advice

• Assist in preparing market and trade research

• Help clients assess their export readiness and determine next steps

• Collaborate with clients to develop a plan that ensures short and long-term exporting success

• Provide or locate additional resources as needed

The Export Web Portal at export.wsbdc.org is also available, featuring the following:

• Extensive research resources that are categorized and link to specific web pages not just websites.

• Export process “mind map” that outlines the process of preparing and executing an export plan. The process includes links to information, outlines, resource documents and partner resources.

• Frequently asked questions “mind map” that leads to specific resources that have the needed information.