By identifying and tracking few key performance indicators (KPIs) any small business owner can not only figure out how the business is performing; but also forecast where it is headed. This is no different from when the doctor checks vital signs such as blood pressure, pulse, weight, etc. of the patient to find out what is wrong or could go wrong. You only need 5 or so KPIs to get a feel of the business performance.

Typically, these KPIs will be different for different industries. For example, the retail store should look at comparable sales and inventory turnover; while exercise facility would track customer turnover and average sales per customer. Most large publicly traded companies include these KPIs in their annual reports or in the financial analyst reports.

For your business and industry you too can identify few KPIs that can be easily tracked by looking at your profit and loss statement and balance sheet. Typically, you will have some KPIs that track sales and some others that track expenses.

Sales Related KPIs

In the simplest form, the total sales is composed of two components – price and quantity. The KPIs that drive quantity are customer count, order count, customer churn, room occupancy rate, etc. The KPIs that drive price are average order per customer, total discount, gross margin (revenue – Cost of Goods) etc.

Expense Related KPIs

These KPIs can vary from industry to industry. You can find out the ones that are important for you by looking at your P&L statement for the categories that are largest. For a restaurant and fast food place these would be food cost and labor cost. For a convenience store this could be purchase cost and real estate cost. Again, by looking at the annual reports and analyst presentations of large publicly traded companies you can find out what expense related KPIs are important for your industry.

You should ensure that the daily, weekly and monthly reports you look at include these KPIs. Also, as we mentioned in that post it is important to look at the trend over time and comparison to previous periods.

We at Angel Business Advisors also provide a service in which we analyze the financial statements and provide custom report showing how business is performing. You can use this service to analyze the seller’s financials when buying a business or analyze your own financials to understand what improvements can be made.

These stimulus funds awakened lenders from their  recession-induced comas.  Approvals began  trickling in for small business owners.   While lines of credit were still being reduced or canceled, SBA term  loans were getting a new lease on life.   But, as of May 31st, the SBA had spent all of the money  allocated to it for the stimulus provisions.   It was the fourth time in a six-month period that the funds had run  out.  In prior months, Congress allotted  additional funds to maintain the programs.   This time, Congress has not acted.   Bills have been shuffled back and forth in the House of Representatives  and the Senate, but still no action.
The stalling in Congress means even fewer loan  approvals for small business owners working to survive.  In today’s shaky and uncertain economy,  lenders are very selective.  It is a  banker’s market, and borrowers need to understand the mind of the lender.  The Federal Reserve held a forum on July 12th  to discuss ways to increase lending to small businesses.  Bankers said the demand, and not just the  availability, of capital has decreased.   They are receiving fewer and fewer applications from borrowers.  Many business owners assume their loan  request will be declined, so they are no longer seeking financing.

However, there are ways for businesses to access  capital as bankers slowly get back to the business of lending.  When seeking financing, request the kind of  loan the bank wants to approve.  Lenders  want to finance healthy businesses.  To  remain in business, banks need to remain profitable just as borrowers do.  Cash flow is the life blood of every small  business.  When you approach a bank, make  sure you can repay the loan.  Banks  approve loans and not grants.  Even in  this weakened economy, they want to see experienced entrepreneurs who can  demonstrate historical profits over the last three years.  This is not wrong.  It is what good credit analysts are supposed  to do.

Lenders require a complete loan package before  making their final decision. Research, investigate, and invest your time and  resources in preparing the loan application package.  Each bank has its own requirements, so tailor  your package to the specific lender you are approaching.
As a business owner,  research the top SBA lenders in your state www.sba.gov.  These banks usually have a commitment to  small business lending, and they are a great starting point when seeking the  best match for you.  Find out the  lenders’ underwriting requirements and make sure you fit in their box.  If not, go on to the next lender.  You will have greater success meeting a  lender that is already looking for your kind of business instead of trying to  change the mind of one who is ‘just not that into you.

Stephenie Frazier Whitfield brings a wealth of experience and skill to her client engagements. From operating her own business consulting firm in Washington, DC to working as a business banker in the fourth largest U.S. bank and an SBA lender for community banks in Metropolitan Atlanta, Stephenie has met the financing needs of small businesses for over 12 years.
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I know what you’re thinking: “No kidding!” (this from our more gentle readers). Don’t get me wrong – there are certainly plenty of ways to reach a ball park figure – and I’ll elaborate on those methodologies momentarily – but the eventual sales price is impossible to predict with any precision.

The following are major factors to consider BEFORE undertaking more scientific forms of valuation

Cult of Personality: How much of a company’s success is due to the leadership and skills of the owner? For example, how many clients and/or vendors have a favorable relationship with the company because they like the owner? How about employees? In a small company, personalities play a more significant role than in corporations – especially if there are only a few big accounts that contribute a preponderance of profits. Fortunately, it’s been my experience that these type of owners reciprocate the loyalty shown to them by clients, vendors, etc. and are usually very selective about potential buyers. Conscientious brokers will also recognize that it will take a special kind of buyer – it doesn’t behoove anyone in the long run to sell a business to someone who will fail.

All Airspeed – no Rudder: No matter how hard some owners may work – there are simply not enough hours in the day to compensate for mismanagement. I’ve seen advertisements from brokers stating that they only list ‘cash positive’ businesses. In reality, some of the very best buys are losing money – the owners are discouraged – having long since decided that either the business model is not workable or – in rare cases – that they’re not cut out to be in that business. The result is usually a low price – even lower than the fair market value of the assets. Frequently, they believe that their only option is to auction off the assets. Keep your eyes peeled for this kind of listing – if you trust yourself to identify the fatal flaw(s) that led this owner down the wrong path – it’s one heck of a bargain.

Customers Won’t Beat a Path To Your Doors if They Don’t Know You’ve Built the Best Mouse Trap. Many owners actually manage their company well in every respect except marketing. Contrary to what we’ve always been told – even if he’s the best at what he does, works 80 hours a week, and helps little old ladies cross the street – he can still be an utter, albeit noble failure. In many cases, he’s spent a ton of money making sure that the business sparkles on the inside and out – prepared for anything – except the deafening silence of no customers.

You’ve heard all the stories about how small businesses fail for lack of cash. This is certainly true and there are plenty of studies to prove it. Let’s drill down a bit, though – cash for what? It’s my pet theory – mainly because I’ve seen it so often – that initially, everyone is reluctant to invest in marketing. It all seems so expensive and so – well, ethereal – I mean, who knows if anything’s going to work?

Unfortunately, instead of researching the subject, most small business owners mentally throw their hands up in the air and hope that good service and product will save the day. By the time the owner becomes desperate enough to venture out into the marketing world, it’s too late. At this point, cash flow to pay operating costs is not adequate and the end is imminent.

SO – when the business finally fails – the apparent reason is lack of operating funds when, in reality, the lack of sales due to very little or no marketing was the catalyst for this disaster. The cause is camouflaged by the result. When you run into a business for sale that appears to be well managed but struggling – bear this tendency in mind. In fact, if the owner is already painfully aware of his misstep, you might want to consider a partnership – after all, he’s already doing a great job in management and creating a great product.

Peter Principled or Owner is Pushing the Personal Envelope: Frequently, owners recognize that they are not equipped to take a company to the next level or simply aren’t ready to make the commitment. There’s a huge difference between an owner-operator and an owner-CEO – each requiring distinctly different skill sets. If you think about it – how many famous entrepreneurs are still CEO’s of the company they started?

A few obvious comparisons: a CEO must be able to attract and retain qualified employees; delegate authority; create and communicate policies & procedures; and most importantly, to lead the company with a vision. The owner-operator, on the other hand, enjoys greater freedom but must rely upon himself to execute a vision. With rare exceptions, everything related to the business is in his head – exactly where he wants it.

Ironically, even though the owner-operator often performs all tasks – including the proverbial “taking out the trash”, the CEO usually has less time to devote to family and other activities.

SO – before taking the reins of a company – you need to decide if you want to be an owner-operator or a CEO. That is, do you plan to continue along the current path or do you want to expand? The value of the company to you may differ significantly depending upon the answer

Julie A. Barnes, is a serial entrepreneur who has started and managed businesses in such diverse industries as horse transportation (Louisville, Kentucky), software development (Austin, Texas), and magazine publishing (Austin, Texas). She also served as a member of the first Peace Corps contingency to include only business professionals in Russia – where she consulted for four years to small businesses and taught “capitalism” to university students. Her first love is horses, her second, helping small businesses to flourish.
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Some simple strategies to improve your personal credit score:

- Pay your bills on time
- Don’t close old accounts – the older accounts you have the better
- Don’t use only one credit card – too often people will use one credit card each month to make charges and max out the card
- Check you credit report for inaccuracies

Step 2- Put your business in compliance with the lending markets. Most small business owners never take the time to put their company in compliance. One of the first things almost every credit grantor will do is a simple compliance check on a credit application. They want to know that you are a real business. Do everything you can to be a real business.

Do simple things such as:

- Have a business phone line
- Answer your business phone in the company name
- Have a physical business address

There are over 2,000 automated and manual checks that credit grantors use to determine a credit approval. BCS offers a compliance check as part of the Capital Access program.

Step 3 – Determine what you need the money for. Take some time to determine exactly what you need the money for in your business. Then write down how much you need, specifics of where you would spend the money and what you would buy.

Putting a plan together is important to accomplish the financing you want.

Step 4 – Don’t focus on only one channel of financing or one bank. There are plenty of options for any business owner. Although the first option may not work, don’t get discouraged. Always have several options ready.

Also, don’t rely only on banks for financing. There are lots of options for businesses when it comes to financing and you need to be open to each of them. Some may be higher interest rates than others, but require less to get approved, so there are trade-offs.

Last, but not least – focus on the goal. The goal of any business is ultimately to provide a service or product at a value that allows the business to make a profit. Focus on your profitability at all times.

David Gass is the Founder of Business Credit Services, Inc. and creator of the Business Credit BuilderSM process. Through his companies he has helped small business owners raise hundreds of millions in credit and financing. He is the author of the books, “Building Business Credit for Business Owners,” “Success Steps to Business Credit,” “Success Steps to Business Financing,” and the ten book series “Building Blocks to Business Success.
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Just a few months ago, BofA offered an express business line of credit program that even entrepreneurs in business just a month or two could qualify for with the right credit scores. They pulled the program in the last quarter. American Express for years has offered a Business Line of Credit program that entrepreneurs could apply for in addition to their American Express credit cards. The line of credit was competitive in the industry with interest rates and most small business owners with an American Express credit card were getting approved. The program was pulled in the last quarter.

The closing of great programs such as the BofA Express Line of Credit and Amex Business Line of Credit are signaling the need for small business owners to find alternative ways to finance their businesses. There are several unconventional methods that most entrepreneurs can use to build up access to capital they will need from time to time. Some of these methods include: merchant account cash advance programs, equipment leasing, equipment sale-lease back, A/R Factoring and trade credit (also known as corporate credit or business credit).

Trade credit is the single largest source of lending in the entire world. It is when one business sells services or products to another business on credit terms. For example, when Dell Computers sells a laptop to a small business owner, the business owner is given a choice: pay now with a Mastercard/Visa/Amex credit card, apply for a Dell Computer line of credit or apply for a Dell Computer Credit Card. When the small business owner chooses to apply for a Dell Credit Line or Credit Card they are using trade credit. Dell will then offer terms to the applicants who qualify. Terms may include no-interest for 30 days if paid in full, or an interest rate charged each month a balance is carried and a small monthly payment that must be made on the credit card.

If the business owner has structured their company properly before applying for the credit, they will likely receive an approval based solely on the business credit profile, business credit score and how compliant the company is with the business credit market. If the business is prepared and built some initial business credit before applying with Dell, they will likely get approved regardless of what the personal credit score of the owner looks like. This is True trade credit (corporate credit), when you rely completely on the business’ ability to obtain the credit and not just that of the individual owner or officer of the company. Every entrepreneur should have a business credit profile and score. That includes also being in compliant with the lending market.

A business credit profile and score need to be created with all the major business credit bureaus, not just one. D&B (Dun and Bradstreet) is the oldest business credit bureau, although Experian Business and Equifax Business have created very competitive products and services to compete directly with D&B over the last few years. Most credit bureaus create a business credit profile and score when companies report to the bureaus the payment history of their clients. The more companies reporting to a business credit profile, the better. Companies who purchase a business credit report for analysis to determine credit approvals, like to see when others have granted credit already. They would prefer to see several credit accounts with the business, whereas with an individual you may find it more difficult to obtain credit when you have a lot of credit accounts.

Most small business owners seeking financing are looking for the money to purchase a product or service. The majority of time the product or service can be found through a company offering credit terms. Trade credit is used by household supply stores, marketing companies, printers, graphic designers, internet marketing companies, gas stations, equipment companies, auto-dealers, shipping companies, office supply companies, furniture companies and many more.

In addition to trade credit as an alternative financing option there is merchant account cash advance programs. Although this type of financing can be expensive it is still a great option for some businesses. This type of financing is for businesses with a merchant account charging more than $10,000 per month on the account. Many merchant cash advance companies will advance up to three months charges on a merchant account with very little personal credit information required to obtain the loan. The loan is then paid back out of future merchant account activity as a percentage of the total amount charged that month.

Another alternative source of financing is A/R Factoring. If a company has accounts receivable with other businesses with decent history and credit scores, a factoring company will come in and buy the receivables for a discount on the future value. The business gets money now and the factoring company waits for the invoices to be paid. When they are paid by the customers of the business, the factoring company gets their share and repayment on the advance.

A company can also use leasing as an option to finance their business. A lot of equipment and even software can be leased. There is extremely beneficial to start-up companies and those looking for large equipment purchases. The company doesn’t have to pay up front for a large ticket item, which than conserves cash for the growth and day to day operations of the company.

Small business owners need to get creative when it comes to building a business and finding the financing they need. Using trade credit and other alternative financing options just may help your business avoid the obstacles and pitfalls so many have fallen into and lost. For creative solutions for your business financing needs go to www.bcscredit.com and get a free ebook on Building Business Credit for Business Owners.

David Gass is the Founder of Business Credit Services, Inc. and creator of the Business Credit BuilderSM process. Through his companies he has helped small business owners raise hundreds of millions in credit and financing. He is the author of the books, “Building Business Credit for Business Owners,” “Success Steps to Business Credit,” “Success Steps to Business Financing,” and the ten book series “Building Blocks to Business Success.
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As Mike Hirst and I discussed Bendigo’s wish to provide a better platform for SMEs to grow their business, it occurred to me that almost all the services we were discussing were candidates for the cloud. Here are a few that came to mind:

Accounting, Cash Flow Modeling and Credit Services:

Plugged into an SME’s basic accounting package (think MYOB, etc.) the ability to provide some intelligent tracking of cash flow, help businesses to think about aged receivables and rightsizing a credit or overdraft facility is a very valuable tool. A plethora of these are being introduced into Internet Banking facilities this morning, but extending a basic accounting facility with cash flow analysis tools that is an extension of your banking relationship is not a stretch. Ben May, MD of OnlineFactor, recently showed me a new tool they had been playing with called Imagineering Profit which allows users to plug in their basic financial statements and get some great analysis on break-even, cash flow, and various what-if scenarios.

If this could be married with basic account information, accounts and invoicing data, etc — this could give SMEs a nice tool embedded within banking to start to look at a basic overdraft facility, factoring, inventory financing and a whole range of complementary services.

Easier Merchant and P2P Enablement

By 31st October, 2018 the UK Payments Council has mandated that central cheque clearing will be phased out. The decline of cheque use in the UK has been widely documented. In 2000 cheques represented 25% of all non-cash transactions, but by 2008 they accounted for less than 10%, this year they will be less than 5%.

This is also where the mobile device and P2P platforms come into play. While debit cards have had big success in recent times, as credit and debit cards are integrated into your mobile phone for contactless payment capability, it is obvious that the use of cheques and cash will further decline. With the introduction of Square and Verifone PayWare it is becoming increasingly simple to provide merchant type services to accept payments.

But Person-2-Person is the big innovation for SMEs and businesses. In 2009, financial institutions including Bank of America (BAC), ING Direct and PNC Financial (PNC) rolled out so-called P2P technology that lets customers use the Web or a mobile phone to transfer money from their account to any other account. Within the next 3 years our phone will become the payment device of choice for paying SMEs who work in the service arena. This makes cloud services even more viable as SMEs will increasingly rely on virtual platforms to effect and receive payments. The ability to augment basic banking services to capture the need for virtual P2P and payments capability is a no-brainer.

SME Community Building

There are hundreds of thousands of groups currently active on LinkedIn, many dedicated to SME forums and the like. Ecademy is an social networking site based in the UK, but active globally with more than 17 million members. A survey by O2 in the UK showed that more than 600 SME businesses were joining Twitter everyday, and that 17% are already actively using Twitter to support their business.

SME community building is a great way to empower businesses and is a logical extension of the already powerful network that banks have with their customer base. Banks don’t use their community of clients to encourage interactions, but as a trusted intermediary it makes absolute sense for bankers to utilize their community to encourage internal business between their SME clients. The cloud and online communities such as LinkedIn, Ecademy and others seem like the perfect partner to kick this off.

SME banking services and the cloud make a great partnership

Conclusions

The cloud is increasingly critical for SMEs not only for facilitating business, but also for enabling closer connections with partners, integrating shared services, improving payments and cash flow and marketing their services. Banks have a huge opportunity to be not just a trusted partner for banking services, but extending their platform to help SMEs build their business.

There’s one key problem with banks extending platform for SMEs. To illustrate, the current e-Invoicing and Accounts Payable Integration services banking provide today, a process designed ostensibly to reduce paperwork for an SME and improve cash-flow, is saddled with an antiquated, compliance heavy sign-up/application processes that mean the initial onboarding for such services is erroneous and time consuming. The benefits aren’t there for SMEs if the application process takes more effort than the benefits.

Hari Chandrashekar is the CEO & Managing Director of Arxxus Technology Partners, a niche Cloud Computing solutions provider that helps businesses adopt efficient cloud-based technologies. Hari co-founded Arxxus and is responsible for Strategy, Finance and Corporate Development. Arxxus works with leading Cloud platforms including Salesforce.com, Google, Amazon and Microsoft. Arxxus also develops proprietary Cloud-based software products delivered in the Software-As-A-Service (SaaS) model

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A good business plan tackles three major areas:  The Business, The Market, and Finances. Look at the questions within each of the three areas below and answer them as they apply to your business.

• The Business

What is the legal structure of your business? Will it be a sole proprietorship, a partnership, or a corporation? What is the name of your business? Who are the people in your business? Is your business uniquely positioned to succeed? What are existing conditions within your industry? How do you intend to grow? What is your product? What does it do? How will you handle and deliver orders? Will you back your cash flow with a small business loan?

A thorough business plan is especially important when you know in advance that you will need new business financing. There are countless reasons to have a solid business plan, all of which weigh heavily on whether your business succeeds or fails. The Small Business Association agrees that “the importance of a comprehensive, thoughtful business plan cannot be overemphasized.”

The most important reason to have a small business plan is so that you know where your business is heading and what you’re doing with your business. You must know the product or service you plan to offer, and how you plan to offer it, market it and price it. You must plan for any problems which may arise, so that if and when they do, you know exactly what to do. Otherwise, you’ll reach a hurdle and will have to improvise. Having a small business plan will ensure that you are prepared for these problems when they come.

Among the many other reasons to formulate a small business plan, the most crucial one is that it’s nearly impossible to receive any sort of startup business financing without a business plan. Most banks require one up front or they won’t even talk to you. And while private investors will generally take on more risks than banks and other financial institutions, not even they will invest in a startup business that doesn’t have a solid plan. The only investment that a small business plan requires is time and thought, and the payoff is well worth that investment.

• The Market

Who are your customers? Why are they customers? What motivates your customers? What needs are you servicing? How will you motivate people to buy from you? How will you find and attract these customers? Who is your competition? What advantage do you have over your competition? How will you position yourself to win market share? Do you have technical data, surveys, or information sources to back up your claims? Do you need a small business startup loan to support your marketing strategies?

As a business owner, it is your responsibility to determine what the demand for your product is. Knowing the market’s needs and how it is currently serviced provides you with key information that is essential in developing your product or service. Too often, small businesses spend thousands of dollars launching a “new” idea with a limited market because of competition. The owner is forced to reevaluate his strategy and determine if there is room for another player.

Although the terms “marketing” and “marketing analysis” can both be described as games of information, they are not to be confused. Marketing encompasses all of the activities that go into promoting a product or service. A marketing analysis is the actual assessment of the target population, competition and needs for marketing that product or service.

• Finances

How much money are you bringing to your business? What are your start-up costs? Will you apply for a small business loan or a small business startup loan? How will the money from the startup loan be used? When will your small business become profitable? What are your financial projections for the next five years?

Sincerely,

Ilya Bodner

Small Business Owner

The author works as SVP of Business Development for GoBigNetwork.com. Over the course of the last 5 years as an entrepreneur he has successfully launched, managed, and sold off several businesses. Each organization started has added some value to his understanding of the business world today. The latest project was Initial Underwriting Group.

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A traditional source of funds for many start-up entrepreneurs is Family, Friends and Fools. The family and friends will invest in you just because they like you, want you to do well, etc. The fools invest their money like a gambler does by placing $100 on black on roulette in Vegas. They don’t know why they choose black – but they hope they’ll make some money with it.

You can raise some good money with founders, family, friends and fools, but most of the time it’s not just about the money but rather the team of people you are putting together to start and grow your business. This is where the experts come in. If you are looking for investor money it’s important to know how to get to the experts and what to say once you are there. Expert investors are Angel Investors and Venture Capitalists. I would stick with the angel investors to start. There are a lot more of them and they are easier to get to than a Venture Capital firm.

There are television shows now even showing people presenting to investors – The Shark Tank just came out and has entrepreneurs presenting their business to a panel of five investors. The investors have all made millions starting their own companies and are now looking to have their money work for them in other ventures. They are experts – but the real winner in a show like that is the producer, Mark Burnett. He gets 3% of gross sales from anyone who wants to audition for the show. That’s right, just to audition you need to give up 3% of all your sales.

It can be very expensive to work with investors and if you have a great idea but little experience or knowledge of working with investors you could get eaten alive. Thus the name: The Shark Tank.

Here are a few questions an expert investor will likely ask you. Be prepared to answer these in your presentation or after.

Does the company recognize competitors?
Does the company control a first-mover position?
Does the Board of Directors have a diversity of skills and background?
Has the management been previously funded?
Has the company articulated the use of raised funds?
Has the company considered a reasonable exit strategy?
Do the product/services solve a current market issue?
Are there unique attributes to the product/services which provide market differentiation?
Is the market adequately described?
Is the market realistic?
What is the size and scope of the market?
Is the market considered a growth market?

There are many more questions that you can be asked and should be prepared to answer. If you ever do get in front of an expert investor be prepared. If you aren’t, schedule a time to present to them in the future. You wouldn’t want to waste your one opportunity.

To get more information about presenting your business, understanding what investors are looking for and having the opportunity to meet a few angel investors join us at our next Business Breakthrough event in Las Vegas, NV. www.BBSeminar.com

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About David

David Gass is the Founder of Business Credit Services, Inc. and creator of the Business Credit BuilderSM process. Through his companies he has helped small business owners raise hundreds of millions in credit and financing. He is the author of the books, “Building Business Credit for Business Owners,” “Success Steps to Business Credit,” “Success Steps to Business Financing,” and the ten book series “Building Blocks to Business Success.

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Even though there is some truth in this argument; the reality is operating a multi-unit business is hard work. You need to think long and hard before expanding and consider the pros and cons of multi-unit operations before making a decision. Below I have tried to highlight some of the key points to consider in terms of the benefits and pitfalls.

Pros

• Lower variable costs

You can buy material cheaply when you buy more. Your marketing cost will also go down when you order higher quantities and so on. The lower cost will result in higher profit.

• Could be easier to manage

With multiple units you can cross utilize employees between locations depending on the need; particularly when the multiple units are close by. In some cases you can get by with only one manager for two locations by having him manage them on a part-time basis.

• Learn and Improve

With multiple units you can afford the luxury of experimenting your product or marketing at one location and apply the successful formula at other ones. This way you can improve your bottom line while keeping the risk low.

• Lower fixed costs

You can spread fixed cost over multiple items resulting in savings and higher profit. For example, you can use the equipment at more than one location if it is not used all the time. This is what people are talking about when they 1 plus 1 equals greater than 2 in multi-unit business.

• Can handle crisis better

Imagine you are running a restaurant and run out of food in the middle of busy time or you don’t have enough employees to take care of customers. We have all been through this one time or another. With multiple units you can transfer food or employees from another location for the time being to handle the rush.

Cons

• Could be difficult to manage

While it may be easier to manage certain parts of the multi-unit operation it can wreak havoc on your time and may stretch you too thin if you are not careful. Particularly, if you are a hands-on person who does not like to delegate you will have great difficulty managing multiple units. You will be running around all day and night eventually leading to burn out.

• May hide problems at some units

If you do not look at the financials of multiple units separately you may overlook the problems that may be lurking at one unit. For example, if one unit is making only $20K; while the other one is making $100K overall the combined profit will be $120K; which is not bad. However, this is hiding the fact that there is a lot of room for improvement at the first unit.

• Could lead to higher cost

This is contrary to the pros I mentioned earlier. The reason it is also in Cons bucket is related to difficulty in managing multiple units. If you are not watching your costs and overall operations carefully, the cost can get out of hand and you may not even know it. I am sure many of you have experienced this first or second hand.

• Could lead to lower sales

Problems at one unit may impact the performance of the other ones by association. For example, if customer service is poor at one location and the customers know that the other unit is also owned by the same person they will avoid going to the other locations too leading to lower sales and profits.

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About Harry & Sally Vaishnav

Harry and Sally Vaishnav are founders of Angel Business Advisors – a consulting firm focusing on small business and franchises. Angel Business Advisors was founded to help small business and franchise owners and aspirants succeed.

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Underlying the various lending models are the five C’s. These five characteristics of a loan rarely change, and some would argue never change. The lending market may be aggressive, or it may be slow, but the five C’s continue to be the foundation. Here are the five C’s and a brief discussion of their importance.

Capacity - does the applicant have enough income from their revenue stream(s) to make the payment? This is most important.  The applicant can be well qualified in all other lending criteria, but if the applicant has insufficient cash flow the payment will not be made.

Capital - does the applicant have their own money invested? With more money invested, the borrower will work harder to insure payments are made. Declining housing markets are the perfect example. When houses are worth far less than what is owed, some people simply walk away from the house and the financial obligations associated with the house. If the house has equity, it is unlikely that the owner will walk away.

Collateral – are there assets that can be used if the borrower defaults? If so, the secured collateral is then sold by the lender to satisfy the debt. Normally, the proceeds of the loan are used to buy an asset which then serves as the collateral. Should loan proceeds be used for a purpose other than buying an asset, collateral is typically offered by the borrower to secure the loan.

Conditions – do the current economic conditions have a negative or positive impact on loan repayment? Additionally, conditions describe how the loan proceeds will be used. It is far more comforting to a lender if the proceeds are used to buy assets, rather than to pay off a liability such as a tax lien, payroll expense or other underfunded liability. Lenders are reluctant to lend on paying liabilities because there is often nothing to use as collateral. If the borrower defaults; what is available to the lender to sell?

Character – what is the applicant’s nature?  This is difficult to categorize because of its subjective nature. If the applicant establishes a friendship immediately with the loan officer and the other four C’s are in order, a loan approval is probably forthcoming. Conversely, if all is in order, but the loan officer suspects the applicant to be fraudulent or dishonest, a loan is probably not going to be approved.

In summary, the five C’s listed above should serve as a common sense guide to successful borrowing. If applicants follow these guidelines, they should be in a position to be considered for a loan. While there are additional details to be completed, by following these guidelines many will be done.

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About David

When you are meeting with the lender, do not appear to be nervous or intimidated. Present yourself in the best possible manner

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