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7 Common Mistakes that Impact Cash Flow and How to Avoid Them

January 3, 2012 2 Comments


Cash flow is a lifeblood for small business. Fail to plan properly for the month-end cash flow needs and you will start losing your sleep when the time arrives to write paychecks for employees or to pay vendor bills. That’s why it is very important to keep a keen eye on money coming in and going out, and plan for those times when you will need sizeable cash outflow. Not only that, but you have to take into account unexpected emergencies that will force you to spend money here and now. In earlier post, we showed how managing your inventory, account payables and receivables can help you better manage your cash flow.
In addition to those tips, you should also look at the obvious as well as not-so-easy-to-find ways in which small business owners squander cash and end up in dire situations. Here are examples of the mistakes many small business owners make and how you can avoid them.
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Framework for Deciding What NOT to do

September 28, 2011 Leave a Comment


In the previous post we highlighted that the most difficult decisions you will ever make are the ones where you decide NOT to move forward. By focusing your resources and energy on narrowly you can achieve number of benefits and get higher return on your investment of time, money or effort. We mentioned how Apple has succeeded to become the most valuable company in the U.S. by applying this principle, while GM had floundered by spreading resources over multiple brands with lot of overlaps.
You should use this approach in decision making every step of the way. If you take a step back and think about the decision in terms of cost vs. benefit of the current choice and evaluate it against alternatives you can improve the odds of making the right choice. You can use this principle in number of different areas as shown below.
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15 Simple Cost Reduction Techniques for Small Business Owners

August 21, 2011 Leave a Comment


In the previous post we showed a systematic approach you can use to reduce cost in small business while still keeping your foundation intact allowing you to take advantage of the upturn in economy when it happens. We suggested that you should take surgical knife approach to cost reduction as opposed to using machete.
By applying this approach your business may come up with tactics that will be different from some other type of business. You have to tailor the systematic approach to your business and situation. However, there are common tactics that can be employed by almost all types of businesses. Below we describe those techniques categorized by stages in the cost reduction approach.
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Benefits of Buying a Franchise versus Independent Business

January 26, 2011 5 Comments

As we mentioned in the previous posy on myths and realities of franchising franchising model helps those who want to get into small business; but do not have prior experience or do not want to start from scratch. These people like the fact that buying a franchise versus independent business will reduce the risk of failure. At the same time, they also question the value provided by franchisor for the amount of money they have to pay to them in terms of initial franchise fee as well as ongoing royalty.
As with any business transaction, it is important that you understand what you are getting in return for the money paid to the franchisor. While franchisor does provide benefits in exchange for the fees they receive; not all of them are equal. In addition, different franchises provide value in different areas depending on their strengths and strategy. You should know why you are buying one franchise over others and set proper expectations before making decision.
In our experience, franchises provide value in 4 categories listed below:
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10 Questions You Must Ask Franchise before Joining

January 12, 2011 1 Comment

As we mentioned in the previous post the franchising model provides a springboard to many would-be entrepreneurs who dream of owning their business; but do not have experience or time needed to take care of myriad aspects of running a small business.
While franchising does provide the needed support and tools for running the business; many people wrongly believe that because they are going in the franchising business they can operate the business without much effort on their part. Nothing could be further from truth. It is imperative that you do your homework before signing the franchise agreement and hand over the check for franchise transfer fee.
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How to Evaluate Business Before Buying

November 11, 2010 Leave a Comment


For many would-be small business entrepreneurs the path to business ownership starts with purchasing an existing business. While you will be paying a premium for the existing business in terms of goodwill, it gives you peace of mind knowing that the business is already established.
While this is true to some extent; we believe that you still have to be extra careful when purchasing an existing business. Just because the business has been operating for several years does not mean that it is running well. There is no guarantee that you will make a good return on your investment. We have come across several situations where the buyers, particularly the first-time buyers, were blindsided by the realities of the business AFTER they had signed closing papers. That is why it is very important to spend extra time in performing due diligence before signing on that dotted line.
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How to Start a Business with Little Money

October 25, 2010 Leave a Comment


In most budding small business owners’ mind, the important thing needed to start a business is money. We think that this is really a misconception. Because of this misconception many good, passionate entrepreneurs are discouraged because they don’t have enough cash to start a business. In fact, we are working with one such individual who is passionate about music and wants to start a music themed coffee shop; but is struggling to find money to do it.
The good news is you can start a business with little money. There are ways by which you can get started as long as you have passion to put everything you have in it. The key is to start small and not go for a big bang as well as have a well-thought plan to achieve your grand vision even while taking baby steps.
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How to Reduce Startup Expenses when Launching a Business

October 20, 2010 1 Comment


Most people who are launching a business underestimate the time, money and effort required in the initial stage. They end up spending more time and money than they had initially planned. While they are working hard to put everything in order to start the business on-time; the bills continue to pile up and it comes as a shock when they examine the total expense incurred before the money has even started coming in.
There are good reasons to reduce your start-up cost. The less money you spend before you open your business, the more money you will have for advertising and promotion; which is crucial in the early stage. Besides, it will allow you to set more money aside for working capital; which is particularly important for first few months.
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How to Save on Credit Card Processing Fees

August 12, 2010 4 Comments


A while ago we wrote about how most small businesses are overpaying for credit card processing. In our conversations with number of small business owners we have not come across a single owner who does not hate credit card processing companies for the exorbitant amount of money they charge. In this article we showed several techniques that can help you save money. Many of our readers have found it helpful.
We have recently come across a web site – TransFS that makes it easy to compare rates from various credit card processors. Not only that, but they go one step further and bring you quotes from various credit card merchants by auctioning your business to them. Here is how it works…
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Importance of Due Diligence in Buying a Business

June 29, 2010 2 Comments


Whether you are buying a business for the first time or you have purchased and sold number of businesses you cannot underestimate the importance of due diligence before signing on that dotted line. The mistake made at this stage can not only be costly in terms of financial losses; but it will get you stuck with bad business for a long time.
So what is due diligence? Due diligence is the process of looking at the business you are planning to purchase from multiple angles to verify that the financials match with what the seller promised earlier. Presumably, you have already done your homework in terms of market analysis, competition, and future potential before putting an offer with the seller. The due diligence comes into picture after the seller has agreed to your offer. It is usually one of the last steps in the buying process before you start preparing the closing documents.
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