Not too long ago, I shared some lunch with Nancy, a relative newcomer to the speaking business. When we got to coffee, Nancy cleared her throat and asked me for some advice about one of her customers.

“It took me some time to land this customer,” she said. “Finally, he agreed to one of my proposals and I completed the assignment and dropped it off along with the invoice. The terms listed on the invoice were fifteen days. “

“I gather he hasn’t paid you,” I asked.

She shook her head. “No, and I’ve talked to him twice. I called him about day 30 and we talked about a number of things, but not the invoice. Around day 45, I called him again and just asked him straight out, “Did you get the invoice I left for you.”

He seemed a bit taken aback but said, “Yes, but in our business, the terms are 60 days.”

Being new to the speaking business and with no collection experience, Nancy accepted his statement and said she finally got paid about day 78.

“Well,” I said to her, “you did manage to get paid?”

“True, but he left me a message yesterday and I expect he wants to talk about another assignment. Other than the fact that he pays late, he’s a good client. What should I do?”

I told here that first of all, a good customer pays their bills on time, as agreed. Secondly, she should use the Cher approach. Her Farewell tour has been going on for a long time and shows no sign of stopping. (Was Sonny part of the tour when it started or is that just my imagination?)

When is it over? In opera they say it ain’t over until the fat lady sings. For Cher, it ain’t over until the thin lady stops singing. It’s her business – her terms.

Your customer wanted your service, I told Nancy, and that means he should be willing to accept your terms, but you need to be clear right from the start.

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Not long ago, Tori, a scheduling manager with one of my favourite clients called me. “I know your usual topic is Accounts Receivable,” she said, “but I was wondering if you also conduct programs on ‘Accounts Payable’? I don’t know the topics myself,” she added,” but how different can they be?”

Well, the short answer, as most of you know, is “A lot!” However, I am always preaching to folks about getting out of our comfort zones and expanding our knowledge, so for a number of different reasons, I accepted the assignment.

There are several hours of work involved for each half-hour in a program, so there was a fair amount of work involved: reading, interviewing, general research and then putting together a program. But in the long run, it was a good investment.

Somebody said that the best way to learn about a subject is to teach it. My knowledge of accounts payable has increased. That is good on its own but it isn’t the biggest benefit. As I have returned to the other side of the collection/bargaining table, my understanding and knowledge of what many of my clients and customers face is going to make me a better trainer and collector.

We often talk about trying to understand the other person’s point of view, but most of the time (me included) it is just talk. We need to go ‘walk-about’ in our customer’s shoes and the very best way to learn about a subject is to teach it.

You may find a benefit too, visiting your dark side. Perhaps it is staff and management of accounts payable you often deal with, but it could be others and you don’t have to teach a course:

1) Go to a seminar on ‘Accounts Payable.’ Embarrassed to tell ‘em you’re in collections? Tell ‘em you’re from a different department and wear a disguise if necessary

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In March this year, the Small Business Administration (SBA) placed a limit on the guarantees it was extending on “goodwill” financing, capping them at $250,000, or 50% of the total SBA loan amount, whichever figure was lower. “Goodwill” financing is a part of a SBA business loan that is used to acquire the intangible assets of an existing business. The aforementioned limits were introduced to prevent the inflation of the value of intangible assets. This is just one example of why you have to be prudent about asking for a SBA business loan to fuel your entrepreneurial ambitions. There are several other things you need to know about using SBA loans to finance a business acquisition.

SBA Loan Limits
Getting a SBA business loan is a very widespread method of financing a small business establishment. Essentially, the SBA can provide a bank with a guarantee on a small business loan, so that the bank would be willing to offer such a loan.

There are two main SBA business loan programs:

• 7(a) SBA loan program, the organization’s most flexible and popular initiative, designed to provide SBA commercial loans to small start-up and existing businesses
• CDC/504 SBA loan program, which provides long-term, fixed-rate funding aimed at acquiring fixed assets

These programs have different maximum loan amounts:

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Even the most lucrative and attractive business deal can freeze in its tracks if an entrepreneur cannot get adequate business financing. This aspect is especially important if there is an opportunity for business acquisition, as really remarkable deals can be very few and far between, and getting adequate business purchase financing on time is the key. If you have ever thought about buying an established business, are you certain that you are adequately prepared?

Finding Funding for Purchasing a Business
Business acquisition financing most commonly comes in two forms:

• Debt financing – relying on an outside source to get financing for business
• Equity financing – selling stock or shares of your establishment to investors

Nowadays, it can be difficult to get business acquisition financing using either approach, given tight credit market conditions and wary investors. However, a knowledgeable entrepreneur should not face any insurmountable obstacles.

If you choose to follow the first approach and borrow a certain sum of money, there are several key aspects to be aware of. To begin with, to get a loan from a bank or any other lender you will almost inevitably have to demonstrate your business skills. The lender will also likely want to get adequate information on a particular venture you want to purchase, your collateral, and your plan on how you will repay the money back.

To secure business acquisition financing, you will need to keep several other things in mind. First, always have a backup plan – get approved by as many banks or other lenders as possible to protect yourself in case one of them backs out. Second, know that adequate business purchase financing should also cover operating costs. It is advisable to have a contingency plan in case the revenue drops.

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The basic concept of business value is that the future benefits (return) of owning a company must be adjusted (discounted) for the risks associated with owning the company. The sales or earnings of a company are typically used to represent the benefits (return). Multiples and rates are used to represent the risks. The sales and earnings figures are already recorded as numbers, but how can risk be quantified? Multiples and rates are the results of various methods to quantify these risks.

Specific Risk Factors 
One way to accomplish this is to evaluate a number of specific factors affecting your company and ranking their level of risk. The factors considered should cover all aspects of the business like management, operations, financial, workforce, sales and marketing, legal, environmental, regulation, and competition. A simple scale from 1 to 3 can be used to assess the risk level – 1 = very high risk, 1.5 = high (above average) risk, 2.0 = normal (average) risk, 2.5 = low (below average) risk, and 3.0 = very low risk. The average score is multiplied by the cash flow or earnings of the company.

Payback Period
Another way to calculate a multiple is to consider how quickly you would want an investment in a company to be recovered through its earnings. A riskier company would require a shorter payback period. Small companies are often expected to have a payback period between 1 and 3 years. The average score from the specific risks method (from the previous section) can also be used as the payback period. The payback period is multiplied by the cash flow or earnings of the company.

Expected Return on Investment
Another way to look at risk is to determine what rate of return would be required to make the risk level of the investment acceptable. For example, a bank certificate of deposit is very safe and has a low rate of return (interest rate).

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In 1969, Robert Plant famously sang: “Don’t know where you’re goin’, only know just where you’ve been”. Even for those that don’t listen to Led Zeppelin on a regular basis, there is some truth to be found here. When a financial advisor attempts to build a relationship with his client, it is useful to ask what sort of footprint that client wants to leave behind. In fact, it is a question that must be asked, if any dialogue is to take place at all.

Financial advisors frequently ask me where that dialogue begins, and I believe the first step is identifying what the ideal client looks like. The ideal client is someone with whom you are familiar, whose name you know, whose kids’ names you know, and who you are excited to meet with-whether it is at the store or in a professional setting. It is, in short, somebody you are comfortable with; in whom you have an interest that goes far beyond numbers and graphics. Only once an advisor reaches that comfort zone can he or she determine if the client is open to having an in-depth dialogue. This, however, requires a different type of investment on the part of both the advisor and the client.

At the True Wealth Institute, we have developed a holistic screening process that defines the parameters of the client-advisor relationship. In financial planning, we not only focus on the changing trends in the financial services profession, but we also research health, happiness, and knowledge. The client who achieves True Wealth lives a life that focuses on more than merely their bottom line. The financial advisor is instrumental in making the client understand what True Wealth is about, namely, all that money cannot buy, and all that death cannot take away.

Memories, relationships, family, and personal legacy are all concepts that fit into this category.

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Finding Franchise Financing
Individuals or groups looking to buy a franchise rarely have the kind of cash it takes to pay for everything up front.  When you take into account the initial franchise fee – anywhere from $25,000 to $50,000, or more – plus money for equipment, inventory, supplies, advertising, and possibly even real estate, you are easily talking about anything from a low- to mid-six-figure number up to a million bucks, or more.  That’s a pretty expensive neighborhood.  As a result, you will be looking for a franchise loan to accommodate at least part of that figure, and most likely a large chunk of it.  Franchise loans are tough enough to secure in relatively good times, but what about during a recession?  One report estimated that 2009 could see as much as a 40 percent reduction in franchise financing, due to the current economy.  Is this bad news for the prospective entrepreneur?  Not necessarily.

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Financing Your Dream Business
Prospective business buyers are always looking for innovative ways to come up with the money to start a company or acquire an existing one.  If you want to buy a business, your choices may be limited based upon what you own, what you owe, how good your credit rating is, and what sort of incentives the seller may be willing to offer.  The smart business buyer will look carefully at every opportunity, selecting the one that offers the most “bang for the buck.”  In some cases, the best option to finance your business purchase is right under your feet—if you’re standing in your living room, that is.  The home equity loan is definitely worth exploring.

What is Home Equity?
According to a fairly reliable online resource, home equity is “the market value of a homeowner’s unencumbered interest in the … property.”  In layman’s terms, it is the current value of your home minus what you owe on it.  For example, if your house is worth $450,000 and your mortgage balance is $200,000, then your home equity is $250,000 (or 55.6 percent).  Banks or similar lending institutions, such as credit unions, typically provide home equity loans.

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Know The Buyer
One of the top commandments for anyone looking to sell a small business is to recognize where your prospective buyers will come from, and what will motivate them to acquire your company.  Among all the things you can do to sweeten the deal and attract a wider selection of prospects, one of the best involves seller financing.  Many buyers will express an interest in your company and possess the skills to run it properly, but they may be financially constrained in doing so.  By understanding what motivates a buyer and showing the willingness to accommodate him or her, you will sell your business more quickly and for the price you want to achieve.

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Taking the Money Step
There are many factors to consider when buying a franchise.  You have to decide what industry to enter, what form of operation your franchise will take, and which brand to represent.  No single decision is more important, however, than figuring out where the money comes from.  Very few people have enough cash on hand to buy a franchise outright.  Even for those who do, they may be better off financing at least part of the purchase and saving the cash for a rainy day, or those slow business days you will encounter while working hard to bring your new venture to profitability.  The money step is a big one, but you have plenty of franchise financing options at your fingertips.

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Creative Business Financing
There are a number of interesting ways to finance a business purchase.  The most traditional method involves securing a loan from a bank or a credit union.  You could also pool funds from friends and relatives or ask the seller to carry a note for a portion of the purchase price, or even all of it.  But one of the secrets for small business finance may be sitting closer than you might expect—your retirement fund.

What is a 401(k) Plan?
While the pension plan has pretty much gone the way of the dodo bird, companies have found other ways to allow their employees to set aside money for their retirement.  The 401(k) plan allows a salaried worker to deposit a small portion of his or her wages every pay period into a tax-exempt account.  Employers offer to match these funds up to a certain percentage or dollar amount; this figure may also vary depending upon the fiscal health of the corporation—where a year with greater profits will mean a higher matching deposit.  Oftentimes there are “vesting” issues, where the employer’s contribution does not completely accrue to the employee until he or she has been there a predetermined number of years.  No matter how these issues are structured, the money contributed by the worker is sacrosanct.  Surprisingly, you can use this money for financing a business.

Penalties Versus No Penalties
Once funds are deposited into your 401(k), whether they are yours directly or else matching contributions from your employer, the I.R.S.

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Why Business Valuation Is Important
The process of arriving at an accurate assessment when valuing a business is perhaps the most challenging aspect of any prospective small business purchase.  A seller has arrived at a specific price he or she wants for the company, and one must determine if that business value is accurate.  Pay too much, and you will struggle to make a profit.  Pay too little—well, there’s hardly a down side there, but the scenario is unlikely at best.  There are several ways to value a business; choosing the most appropriate one for your situation—and ensuring that it’s accurate—can make the difference between success and failure.

Three Basic Approaches
Small business valuation generally falls into one of three categories:

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Financing a Business Purchase

Few people who wish to buy a business have the kind of cash it takes to pay 100 percent of the purchase price up front.  Some sort of financing is almost always necessary.  The traditional path to financing the purchase of a business involves sitting down with a banker, filling out a loan application, and waiting to see if you qualify.  Once the loan is approved – assuming everything is in order – you have the money you need to proceed.  Whether you are buying an existing business, starting one from scratch, or purchasing a franchise, the path to ownership almost always runs through some sort of financial institution, whether commercial bank, credit union, or private equity firm.  But there is another route available to you, if you happen to be buying a business that is already up and running – having the existing owner provide some or all of the financing.

What is Seller Financing?

In its simplest terms, seller financing means that the current owner of a business offers to carry some or all of the debt incurred by the buyer when taking over the enterprise.  Let’s say the sale price of XYZ Company is $500,000, and the owner – Mr. Z – has no outstanding liens or mortgages.  In other words, he owns XYZ free and clear.  Ms. B, the prospective buyer, has only $100,000 to put toward the purchase.  Mr. Z agrees to take the hundred grand as a down payment and has Ms. B sign a promissory note for the difference.  By entering into this agreement, she now owns XYZ in its entirety while Mr. Z has $100,000 in the bank, plus a guaranteed income stream based upon monthly payments from Ms.

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What is the SBA?

The U.S. Small Business Administration (SBA) is a federal agency, created in 1953, responsible for assisting and protecting the interests of American small business.  The agency operates through a series of field offices around the country – as well as in partnership with public and private organizations – to offer such things as technical assistance (how to do business overseas; how to teach your workers new skills), contracting assistance (how to bid on government jobs), and other areas of importance to small business owners.  These might include recovering from natural disasters, complying with civil rights laws, or helping young entrepreneurs get a business off the ground.  But the main reason most people approach this agency is to obtain an SBA business loan – either as start-up funding or for financial assistance to expand an existing business.

What Are SBA Loans?

With no sense of irony whatsoever, it is not possible to obtain an SBA business loan unless you have been rejected in your application for a conventional loan.  In order to keep this government agency from unfairly competing with commercial lending institutions – banks, credit unions, and so on – the law states that the SBA may not guarantee a loan if the customer can secure one “on reasonable terms” from some private source.  There are a number of different types of SBA loans available to the business owner, depending upon the size of the loan, the use to which it will be put, and other factors.  Here are some examples:

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Cash-Poor Entrepreneur
Many of us have dreams of owning our own business.  Franchise opportunities abound for people who have ready cash to spend, although it can take close to six figures ($100,000) to do a proper job of it – what with the initial franchise fee, start-up or build-out costs, inventory, supplies, and so on.  But what about those entrepreneurs who have a self-employment wish but little or no money to sink into the venture?  Breathe a bit easier, folks, because it CAN be done.

The Real Estate Model
In all kinds of financial times, but especially when things are a bit tight, there are plenty of stories about people who buy houses with “little or no money down.”  Although this article is aimed at actual businesses – “flipping” houses by buying, fixing up and reselling them is clearly a business, but outside the scope of this discussion – many of the techniques used by budding real estate magnates are applicable here as well.  And the secret to buying a business with no money down can be boiled down to a single word – financing.

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Franchise financing is essential in the marketplace today because it can make all the difference between potential entrepreneurs having the cash to invest in a proven business and ultimately missing out on what could have been the best opportunity of their lives. Until recently, franchise financing was limited but the surge in demand for franchises has led to a major change. Now you can find financing from a number of sources, but in order to be able to benefit from it you have to know where you can access it in the first place.

What Is Franchise Financing?

Although many people would love to establish their own businesses and forward their entrepreneurial goals, many do not have the money to do so. Although investing in a franchise may well be a fantastic idea, those individuals do not know about the franchise business financing options that are available. There are many providers that offer you a whole range of products, depending ultimately on your needs, the level of financing required, and what it will be used for.

In effect, franchise financing is there to provide you with the money that you need to be able to invest in a franchise opportunity. Some providers offer help towards your initial investment whereas others will only provide you with financing assistance if you have already invested the initial fee.

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Writing a business should be the first step before you start your business. Reducing your ideas to writing will greatly assist you along the way as you develop and mature your thoughts and decision making. It is often in the process of writing the plan itself that your vision is strengthened and galvanized into you mission statement and direction. Though a business plan, in order to be effective, needs to be a working and actionable document updateable at least on an annual basis and more often if situations warrant. A good business plan will contain the below components which are essential to the overall plan’s depth and ultimate success:
 

Cash Forecasts. Perhaps the biggest failing of entrepreneurs and business owners alike is their failure to carefully contemplate and plan for amount of cash that will be needed to adequately fund the business’s growth and day-to-day operations. It has been often said, “tongue in cheek,”  that one should carefully evaluate and plan for the cash flow that will be needed to run a business and then they should double it Often owners will spend cash without thinking ahead or re-forecasting for the next months and years only to find, if they had a “do-over” that they would have been more prudent with their spending. Developing a systematic and cautious methodology for spending that includes checks and balances, layers of approval, ample cushions and available credit are good defenses to ensure sound cash management practices. Great caution should be exercised to ensure that credit is only used when needed and not when convenient, when there is adequate investment in the expenditure/project by the company, and when there is a sound, reliable and predictable basis for repayment.
 

Budgets.

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These time tested techniques will do much to enlighten you to discover “hidden information” and relevant data as you prepare your 2008 Year-End Income Tax Returns. Whether you are a C Corporation, S Corporation, in Ministry, an LLC or LLP, Partnership or proprietorship looking beyond the numbers is the best way to discover critical and insightful news to help make wise and informed financial and business decisions. Whether you have a CPA prepare the return for your business or you chose to “go it alone” seeking out and utilizing this data will make you a wiser and more dutifully informed owner and entrepreneur. Evaluating and staying abreast of these key ratios, components and insights well help you steer clear of financial disaster:
 

Limit Debt Payments

We are continually exhorted to limit our debt payments but our society and now even our government has gotten on the band wagon of debt is good. In fact even the recent $15,000 “tax credit” announced by the IRS is not really a credit at all but a loan, as these monies will have to be ultimately repaid. By limiting your debt payments, you allow yourself to both have discretionary spending, to take advantage of opportunities, and to fulfill your mission statements and dreams. For the only way to have money, is not to spend it. A good general rule of thumb goes back to the old days of mortgage lending when debt could not exceed 25% of aggregate income and cash flow. In a bad economy a better goal would be 15% and when it is anticipated that interest rates are going to rise, then limiting your total debt payment to less than 10% would be prudent and advantageous. If we do not limit our debt then we will certainly become its slave.
 

Avoid Credit

If there is a key item on this list, it would be to avoid credit in its entirety.

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Helping to lift the veil of business is a key concern and goal for all those concerned in pursuing the furtherance of your business venture. Keeping these basic tenants in mind will do much to ensure your business success, and in so doing will enable the spiritual goals of it as well. These considerations will help you along the way and to ensure that your plans are both achievable and achieved.
 

Financial Model/Business Plan

Perhaps the most important first step is the development of a Financial Model/Business Plan. Such a plan should take the form of a written document and should be detailed enough so that someone independent of your operations would be able to review and to quickly discover your business resources, talents, goals, and plans to get there. A good business plan would contain all of the following:

• Description. Knowing and documenting who you are and what your short and long term vision are the essential components of this section.
• Marketing. Knowing how you plan to grow your business, church or ministry is integral to having a workable and viable plan.
• Financial Management. Knowing your financial strengths and weakness and your cash flow needs and need for capital are a critical part of the process.
• Management. Knowing not only the needs of key management players and the “trigger dates” for bringing on additional staff and administration are integral components of the success quotient.

Writing a business plan is your first step to maintain order and to develop a well-thought out and seasoned plan. It is during this process that many “missteps” can be avoided with wise and judicious planning.
 

Plan, Plan, Plan

Business Planning and its continual updating are essential.

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It is a known fact that money makes money and it certainly makes the world go round! However, clichés aside, banks actually provide a real investment opportunity for entrepreneurs looking to build a sizable business empire. There are plenty of banks for sale, believe it or not, as a result of the harsh global economic conditions. Many are going out of business or need an injection of cash because they cannot afford to keep going. However, there are a number of things to consider before buying a bank and much involved in the process, including the following:

Preparation
Do you have a financial background in terms of business? If the answer is no then you should avoid buying a bank. However, if you do have a strong financial background the in may be the opportunity you are looking for. You must have experience in investing and taxation, and have a strong business head for monitoring profits and loss if you want to succeed. Investment knowledge is perhaps the most crucial step because of the skills that come with it, including the ability to gage risk and potential.

Unlike investment in another business, you cannot take a back seat in the running of a bank so you must be prepared to devote time and energy into your new business. If you are an established entrepreneur then you may not want this commitment but it is essential if you are to succeed. Many banks will already have existing managerial and support staff in place but you should only draw on their experience at a later date and not rely on it.

Buying Your Bank
Now you have decided to devote your time to getting a bank off the ground you should find one. For this you will need specialist knowledge because many banks are generally not advertised for sale.

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