1. Do you have the necessary commitment?

To succeed, you must feel passionate about the work you have chosen. Lukewarm enthusiasm will not sustain you through the challenges you will face in a start-up business.

2. Are you prepared to work extremely hard?

Launching your own business demands long hours of labor. Are you sure you want to give up a good part of your social life: your weekends, golf games and vacations? For your developing business to succeed, you will need to focus all your energies on it.

3. Do you have the mental stamina and concentration to meet the demands your project will impose on you?

If your attention flags, you may jeopardize your venture.

4. Do you: Accept new ides easily? Treat other people’s ideas with respect? Make decisions right away?

An entrepreneur must be open-minded, flexible and able to respond to new ideas.

5. Are you prepared to spend time analyzing a problem and finding a solution?

 No matter how carefully you plan, you are bound to run into an unforeseen problem now and then. Be prepared to cope with such a situation.

6. Are you ready to commit to the long term?

A company’s success is never an overnight miracle. That is one reason you must be absolutely certain that you love your work—there will be a lot of it.

7. Do you have adequate backup resources?

Banks and other financial institutions seldom lend money to start-up businesses. Will family members or friends invest in your company or tide you over during a rough patch?

8. Are you good at concentrating on detail?

 Often, no one but you will be able to take care of small items. An entrepreneur’s life is not one of ideas alone.

9. Are you ready to sit down and write a careful analysis of your business prospects?

Without a best-case/worst-case scenario to guide you through the first years, you may be in for an unpleasant surprise or two. Be aware and be prepared.

10. Are you an optimist by nature?

 Mistakes and setbacks are bound to occur. Can you learn from your mistakes without getting derailed or discouraged?

During the bleak days of the Depression, an aggressive politician from New York named Franklin Roosevelt made a bold promise that his administration would put “two chickens in every pot and a car in every garage.” As it turned out, this was one of the few times in history when a political exaggeration was actually an economic understatement.

Today, poultry is so inexpensive that it is the most common meat used in pet food. And the automobile has become such a fixture in the American home that owning just one is a handicap rather than a privilege. In fact, we have such an innate understanding of the internal combustion engine that most of us have a rough idea of how it works and why it sometimes doesn’t.

Unfortunately, many business people have not come quite as far since the Depression in their ability to discern what makes a company or organization work and what needs to be done to ensure its survival. There are basically nine “danger signals” that indicate the strength and viability of a business.

1. Declining gross income, combine with operating losses. In most instances, declining sales will not be targeted as a problem until operating losses deplete cash reserves. Normally, operating costs will remain high and not be adjusted as sales decline. This creates the operating losses that eat up cash reserves.
2. The absence of an operating plan to guide the company. Most managers do not use a carefully crafted planning procedure to create an ongoing validation system. It a planning document exists; it is often shelved and forgotten as day-to-day concerts take precedence over future goals. When this happens, management has little or nothing to measure itself against and is oblivious to hidden dangers.
3. Breakdown in communications between upper management and the labor force. Failure to communicate vertically creates a situation where upper management cannot identify conflicts that exist in the on-going operation of the organization.
4. Inadequate cash flow. The ability to generate cash flow is the key ingredient in a successful business operation. Without adequate cash flow, an organization is doomed to failure. While it is normal for most organizations to have seasonal fluctuations, balancing these adjustments is critical for the survival of any organization.
5. Inability to convert accounts receivable to cash promptly. The slow collection process of accounts receivable can be a danger signal that poor job of screening accounts and granting credit has taken place.
6. Inability to convert inventory to cash promptly. A slow down in inventory may signal a problem in the quality of products shipped.
7. Cash tied-up in nonproductive assets. Investing heavily in new office building, equipment and personnel without careful planning can be a nonproductive use of assets and can destroy a company.
8. Amounts owed to vendors. When an organization is unable to meet the payment terms of their vendors, not only does a serious cash-flow situation exist, the future credibility of the company is in doubt. Long-term business success depends on the goodwill a company is able to generate with its creditors.
9. Low employee morale. Most employees truly want their organization to be successful. When a company is without solid direction, morale declines and with it goes productivity.

The natural tendency of most managers is to ignore potential problems until their urgency demands attention. By systematically—preferably on a monthly basis—reviewing the corporate goals and evaluating how successfully these goals are being achieved, management will maintain the fiscal vitality of their company and eliminate the anxiety that comes from last-minute problem solving.

Unfortunately, many business people have not come quite as far since the Depression in their ability to discern what makes a company or organization work and what needs to be done to ensure its survival.  There are basically nine “danger signals” that indicate the strength and viability of a business:

1. Declining gross income, combined with operating losses.  In most instances, declining sales will not be targeted as a problem until operating losses deplete cash reserves.  Normally operating costs will remain high and not be adjusted as sales decline.  This creates the operating losses that eat up cash reserves.

2. The absence of an operating plan to guide the company.  Most managers do not use a carefully crafted planning procedure to create an on-going validation system.  If a planning document exists, it is often shelved and forgotten as day-to-day concerns take precedence over future goals.  When this happens, management has little or nothing to measure itself against and is oblivious to hidden dangers.

3. Breakdown in communications between upper management and the labor force.  Failure to communicate vertically creates a situation where upper management cannot identify conflicts that exist in the on-going operation of the organization.

4. Inadequate cash flow.  The ability to generate cash flow is the key ingredient in a successful business operation.  Without adequate cash flow, an organization is doomed to failure.  While it is normal for most organizations to have seasonal fluctuations, balancing these adjustments is critical for the survival of any organization.

5. Inability to convert accounts receivable to cash promptly.  The slow collection process of accounts receivable can be a danger signal that a poor job of screening accounts and granting credit has taken place.

6. Inability to convert inventory to cash promptly.  A slow down in inventory may signal a problem in the quality of products shipped. 

7. Cash tied-up in nonproductive assets.  Investing heavily in a new office building, equipment and personnel without careful planning can be a nonproductive use of assets and can destroy a company.

8. Amounts owed to vendors.   When an organization is unable to meet the payment terms of their vendors, not only does a serious cash-flow situation exist, the future credibility of the company is in doubt.  Long-term business success depends on the goodwill a company is able to generate with its creditors.

9. Low employee morale.  Most employees truly want their organization to be successful.  When a company is without solid direction, morale declines and with it goes productivity.

The natural tendency of most managers is to ignore potential problems until their urgency demands attention.  By systematically – preferably on a monthly basis – reviewing the corporate goals and evaluating how successfully these goals are being achieved, management will maintain the fiscal vitality of their company and eliminate the anxiety that comes from last-minute problem solving.

By Dan Lacy

Business Growth Advisor

www.DynastyBuilder.com

www.DanLacy.com – blog

Companies we have worked with who had problems with collecting their accounts receivable have seen dramatic improvement when they followed these few principals.  They may be just what you need to get that cash out of the bush and into your hand.

1.      Implement a procedure in your organization where you or someone you appoint is systematically responsible for getting the invoices out in a timely manner.  It does not help cash flow if the end-of-the-month billing is not mailed until the middle of the following month.  Many customers take 15 to 45 days from the date they receive the invoice to make their payment.  If you get your invoice out late, it just adds that much more time before you receive the money.

2.      Always put the current date on the invoice.  Many times the customers gets a number of bills and they pile up until there is cash to pay them.  If your invoice is not dated, the customer assumes that they just received it and places it with the invoices just received. 

3.      Put the term of the sale on the invoice.  The customer will probably not remember your verbal agreement or may have misplaced the written agreement.  If there is not a reminder on the invoice of when the money is due, you always end up at the end of the line.

4.      Establish an accountability system for follow-up on overdue accounts receivable.  If someone is not in charge, believe me, no one will take the responsibility of collecting that past due money.

5.      Have your accountant or bookkeeper prepare a written aging of accounts receivable at the end of each month, so that you know what is collected and what is outstanding.  This report needs to be circulated to the appropriate people at least each month.  Increase the frequency of preparing this report and distribute it weekly if the monthly method is not effective. 

6.      Depending on your industry, there is normally a standard for how your customers pay their bills.  If a customer exceeds that time frame, either follow up with a nice letter or a personal phone call.  There is no need to get aggressive with the first contact.  In that contact, see if the customer received the invoice and if it is in their system to be paid.  Flag your calendar based on their response, and follow up (if no payment) and get another commitment for payment.  Follow this process until the account is paid in full or becomes 90 days old (or the date your have predetermined by your collection policy).  At that point, send a letter indicating that the bill will be sent to the collection agency if arrangements are not made by a specific date (usually 10 days from your current date).  If the amount is large, try to get a face to face meeting with the pay due customer.  In that meeting try to work out payment terms or a trade for product or service.  If that does not work, assign it to a local collection agency or attorney for collection.  Courtesy and consistency have worked the best for me, maybe it will for you, too. 

7.      If, for some reason, you want to speed up collections because you need an injection of money for a specific purpose, give a freebie.  In the radio business, a station could easily give a few spots away if the customer paid their current bill within 15 days when the normal is 30 or 45 days.

By Dan Lacy

Business Growth Advisor

www.DynastyBuilder.com

www.DanLacy.com Blog

• The average age is 57. Only 10% are under 40.
• Grew up in middle or working class families. (80% are first-generation millionaires).
• Attended some college (15% dropped out by 12th grade).
• Approximately 60% are men, 40% are women.
• Drives an older American car (60%).
• Dresses moderately and conservatively.
  

Home Life

• Over 80% are married, many to their high school or college sweetheart. Small families.
• Two grown children is average.
• About half of America’s millionaires live in working or middle class neighborhoods. The rest live in nicer neighborhoods.
• Both husband and wife often work. The wealthier they are, the less likely the wife is working.

Business

• Millionaires are paid for performance. They are generally self-employed (only 16% work for someone else).
• The gross revenues of most of these companies is between $50,000 and $10 million a year.
• Average family income is $130,000, but can range from $30,00 to over $1 million. They may have only one part-time employee or provide jobs for up to 100 people. It depends a lot on the nature of the business.
• There are only three ways that business owners can get rich in America:

a.  Carve out a narrow market niche and charge premium prices for their product or services.
b.  Develop a unique application of a mundane process or product that has a broad market.
c.  Superior management that can squeeze a profit from any market.

Every sector of the bank is feeling the pressure including the sector that makes loans to closely held businesses. In fact, banks are turning down loans today that they would have happily made 12 months ago and many business borrowers are finding that are being asking to find new financing, some are moved directly to the “work out department” (work out means down the road, loan paid off as fast as possible). One business owner I know was asked by his bank to leave because he had not met his financial forecasts over the last 24 months, although the business had never missed a payment and the borrower had nearly as much cash deposited in that bank as the size of the loan.

Word of caution. If your business has hit and miss profitability, losses this year or last, limited equity or high debt to worth ratio, it is time to get a plan in place to improve performance.  You could be on the list to be asked to leave and you will find that replacing your borrowing costs are going to be 2 or 3 times higher than it is today.

Total write-offs (much due to the sub-prime market)  are $146 Billion:  Merrill Lynch in for $24.5B, Citigroup $22.1B, Bank of America $7.9B, Wachovia $4.7B, Chase $3.2B, Wells Fargo $1.7B, National City $1.4B; the list stopped at $1.0B others under that point are not named.  If your business is irregular in profit performance, banks are less tolerant  and because of other factors outside of your industry or market, your company could be in jeopardy.  Consistent, steady profit performance is critical to maintaining outside financing support in up and down financial markets.   A company with strong steady profitability can get financing about anytime or anywhere.

Truth be told, the biggest single ingredient holding back a company that is stalled-out is the person that is running it. Running a small business is probably one of the toughest jobs in the US today. It isn’t the long hours, it isn’t the technical knowledge or industry expertise; its how the CEO chooses to manage people and delegates authority and responsibility. Those that learn to grow their ability as leaders (vision, communication, responsibility, accountability, responsibility, delegation, etc.) as their company grows are the ones that see growth in their organization, improved profitability, increased cash flow and wealth.