Top 10 Things To Consider Before Building A Business, Or Buying A Business
According to a research provided by MetLife, 25 % of adults 44-70 want to own their own their own business. Another research revealed that 54 % of young people (18-34) want a life of self-employment; even if they don’t have the funds to start.
Owning a business is still the dream for most, but everyone can use a reality check; 95 % of companies fall short in the first five years. Before we begin, here are 10 things as a business broker we think you should consider before you create or buy a business:
1. Beginning from the start is more costly than buying an existing business.
2. A business client can benefit by buying a organization with years of record.
3. Professional financial institutions are eager of financing to start-ups, but enterprise suppliers will often finance the buy.
4. Every element of a start-up is mysterious, and therefore more dangerous than a current enterprise.
5. Property owner credit score specifications are stronger for start-ups than advancing a rental for a current tenant.
6. Start-ups generally buy new apparatus that depreciates quicker than it amortizes.
7. Most current companies have customers; no start-up has clients.
8. Start-ups spend more amount of time in digging a groundwork than creating up.
9. In contrast to the fact that entrepreneurs provide because they are in trouble, many companies on the market are successful.
10. Re-capitalizing an existing business can create a successful business.
Many companies use an enterprise bundle, that is, workstations, information, computer systems and telephone system that could be used for any other enterprise. A start-up generally purchases this apparatus new. A start-up generally has no experience in the enterprise, and the entrepreneur’s credit score will depend on earnings from a job. Both specifications are needed for an industrial financial institution to loan cash.
Credit is a key part of enterprise durability. Every season an enterprise will pay off its charges is proof it will continue to do so. As opposed to humankind, organizations don’t die, so an established one has built-in value as a credit business. A start-up business owner should consider buying an current organization for no other reason than to say, “We have been in business for 20 years.”
If you use a business broker agent to buy your business, you should get a Vendor’s Disclosure or report of information about the business. This is like seeing a celebrity without outfit and make-up. You know what you’re getting. Making a business from the start is like the fantasy of a film. It’s all concocted in your imagination; it’s not actual. With proper assistance, buying a business can be far less strain than creating from the ground up.
Bill Whitehurst has been engaged as a Texas business broker for the past 15 years and has over 100 successfully closed transactions. For more information please visit Whitehurst-MA.com.
Make Millions And Make Change Reveals Path To Entrepreneurs Independence
Plenty of people quickly think that riches can never be theirs. They actually assume that the only way how to make a million dollars is by being a celebrity as in an actress, singer, dancer, famous author, or expert athlete. Yes, people do get rich in these professions, but there are numerous others that are not. Does this suggest that if you do not have any unique talents you cannot become wealthy? One can learn how to make millions. There are regular everyday people which are millionaires. You may shop together in your local supermarket and not be aware of it. They might not transmit their prosperity as a flashy display. This signifies that it is possible that you could get rich.
Warren Buffet is among the wealthiest men in the world. He has a net worth in the billions of dollars. He was not always rich. And his wealth wasn’t passed down. He gained his wealth the old fashioned way. He started a business and built it to prosperity. You can also learn how to make millions from his small business book. He did not become rich immediately. It is a procedure that you will have to follow. But how fast you get there and how much you earn is dependent upon your own actions and motivation to be successful regardless of what potential distractions or what others may say about your desire to become rich.
There are plenty of paths that people may take to be a millionaire. The Internet is full of success stories of ordinary individuals with no special expertise and no genius mentality. What you’ll need is a plan or guide which will demonstrate the way. The average majority of most millionaires are that they had a coach to point them in the correct path. They weren’t afraid to inquire about questions plus they followed the directions that their mentor provided to them.
So your main strategy is to first find a mentor in the avenue you wish to take. After you decide how to name a business, you can start building an online website empire, or renovating residential homes, or even beginning your personal franchise. Whatever choice you do choose you need another person that’s more experienced that can assist you when you stumble and become discouraged. Next you need a plan. This plan ought to be well thought out and lead you to being a millionaire. It might not happen as fast as you would like it to, but it should be within your reach. If it is a difficult plan then you will give up easily and not complete your dream.
Then you need to take action. It is okay to have a plan but, it must be carried out. Next you continue until you realize your dreams. Once that happens the circle is not complete until you help others that want to become successful. You should give back. Once you yourself have become a mentor to someone learning how to make millions is the true goal complete.
Jordan has given advice for many years to entrepreneurs and has given great examples on how to choose a business name. This book showsHow to Make Millions and gives some very good samples of what must be done to succeed. It helps you know how to plan and remain focused on your plan.
Dressed For Capital Success. The Top Five Ways To Attract Business Financing
The pursuit of business funding is like a capital courtship. The competition for attractive business loans and start-up capital is intense with lenders and investors searching for the most promising and creditworthy companies. Attractive borrowers at the debt dance scan the lending crowd for the best terms and rates. The A-list lenders are looking for beautiful borrower sponsorship. The most eligible capital providers hunt for hotly pursued entrepreneurial companies with solid credit capacity. Start-up companies with a limited track record become wall flowers. Do you need a capital markets makeover to attract the sources of funds your business desperately needs? Here are the five most important credit qualities that attract good business capital.
You Have Valuable Collateral: The best small, mid-sized and large business borrowers have desirable loan security. The lender is looking for proven business revenue to service the debt. The loan collateral cash flow must comfortably cover the scheduled principal and interest payments. The debt service coverage is expressed as a ratio of the amount of net operating income divided by the scheduled debt service. Lenders look for a level of 1.25 times or more depending on the borrower and current credit cycle conditions. The value of the collateral is another major factor the capital provider uses to determine funding levels. The loan-to-value (LTV) ratio varies depending on the credit risk profile of the borrower, the collateral and current credit market conditions.
You Have Loan Administration Systems in Place: The loan closing is just the beginning of the borrowing relationship. Your lender will demand timely and accurate financial reporting. The bank will reach out to you throughout the term with a variety of requests for information. Your documents will contain specific obligations, procedures and delivery dates. Failure to comply can be a default! Do you have the capacity to satisfy standard lender requirements for financial reporting, covenant compliance, consent processing, collateral inspections, site visits and interest rate management? The attractive borrowers have theses capabilities. Your lender gets comfort from receiving your information with a consistent look and feel. You can enhance your perceived credit worthiness with a professionally managed loan administration system.
You Have Multiple Sources of Repayment: The attractive borrower has valuable collateral to post as security for a loan and other sources of repayment for the lender. Many lenders require a loan repayment guaranty from a qualified business entity or individual. Be very careful about signing a loan guaranty on a business or personal level because it will increase your financial exposure. Start-up companies and entrepreneurs are lured into signing personal guaranties to fund their company ambitions. If the borrower fails to pay or violates the loan agreement the lender can look to the guarantor for repayment. Some lenders attach other collateral as security for a loan even if the primary collateral generates sufficient cash flow to cover debt service.
You Have Excellent Borrower Sponsorship: The parent company or another interested party is also known as the borrower sponsor. Your company and sponsor’s reputation, industry standing, years of experience, net worth and balance sheet strength all play a key role in the lender’s evaluation of your credit application. A banker will feel much more comfortable lending to someone who has a sponsor with deep industry experience. A strong sponsor balance sheet with reasonable leverage and lots of cash or other high quality assets is the foundation for a creditworthy guarantor. A start-up company will have a more difficult time securing financing without a strong sponsor.
You Have an Unblemished Credit History: Last but not least the borrower should have a clean credit history, especially with the lender from whom they hope to borrow money. Small, mid-sized and large business borrowers that have a history of reliable repayment during good and bad economic periods are considered more creditworthy. The start-up entrepreneurial company with limited credit history should plan to use credit strategically to build a borrowing and repayment track record. Like the leopard eventually shows its spots the borrower can be identified based on its credit history. A lender that has been burned on a previous loan is less likely to grant credit to that borrower again. Make every effort to keep a good relationship with your lenders by doing what you said you would do in the loan agreement.
These and other steps can make your small, mid-sized or large business more attractive to lenders. Beef up your borrowing systems and shape your credit profile to improve your chances of getting to YES at the capital markets dance.
Michael Shelton is President and CEO of Shelton Business Services which provides executive coaching, management consulting and financial services. Call 602.463.1199, email [email protected] or visit sheltonbusinessservices.com Advance your business ability with our proven executive coaching, objective management consulting and dependable financial services.
How To Evaluate A Business Investment
The idea fairy often drives the decision to make a business capital investment. A company can improve its earnings, valuation and industry standing through the realization of dreams and goals. But the dream is only the beginning point. A solid fundamental analysis of the investment opportunity must be completed to ensure it adds tangible enterprise value. The business executive needs to be reasonably sure based on sound financial calculations that a minimum acceptable return on invested capital will be realized.
The most important part of a prospective investment is the gross income that will be generated. The top-line revenue, if it is big enough, will flow through the expenses, any debt service and eventually reach the owners in the form of distributable cash flow. The point of any investment is to make a profit and add value to the business. The primary business income, whether it is lease revenue from tenants or coins from a vending machine, is the key driver for business cash flow. Gross income can be affected by under-utilization of business resources such as vacancy at a shopping center or down time for manufacturing equipment repairs. An allowance for less than 100% revenue generating capacity is a good idea when evaluating a business investment. A portion of revenue may become noncollectable and eventually winds up as bad debt expenses. The investment pro forma should have an estimate for bad debt.
If you are making a capital infusion for an existing business asset you must evaluate only the marginal income that will be generated compared with the marginal or new investment in that asset. The original cost of the asset is irrelevant in the calculation of the return on the new capital contribution. The historical costs are considered sunk costs and do not become part of the new investment pro forma return calculation.
Ancillary sources of income can contribute to top-line revenue in certain capital investments. An office building might generate revenue from billboards on the property. A sports team generates ancillary license revenue from the sale of merchandise. The pro forma evaluation of an investment should include all sources of quantifiable ancillary revenue. Again, some discount should be applied based on the probability of realizing the ancillary revenue.
Operating expenses will usually have the largest impact on operating revenue. We would expect the primary revenue generating activity to also generate most of the expenses. Other types of expenses not related to operating the investment are classified as non-operating or management expenses. These expenses are typically incurred by management but not directly related to operations. The cost of legal and accounting services is an example of non-operating expenses. Certain accrual accounting line items for the smoothing of revenue and expenses should only be included below the net operating income line in the investment pro forma analysis.
Net operating income (NOI) is the difference between the investment operating income and operating expenses. Non-operating expenses can also be included in this calculation if they can be directly allocated to the investment. NOI is one of the most important figures used to evaluate the financing capability of an investment. The amount of debt that can be used to leverage an investment is directly dependent on NOI among other factors. However, an investment should be evaluated on an un-leveraged basis first, that is without debt, when making a capital decision.
Other expenses might come into play including federal, state and local taxes, depreciation, amortization and other accrual accounting items. Again, theses should be included below net operating income and play a less important role in determining the return on a capital investment. Capital expenditures are also below the NOI line and include items like estimates of long term improvements to an investment and capital reserve funds.
The cash flow available for debt service is the net number after subtracting operating, non-operating and capital expenditures. This is the amount of money available to pay monthly principal and interest on any loans used to finance the investment. Over-leveraging an investment can result in negative cash flow, foreclosure and or bankruptcy so this calculation is extremely important.
The owners get paid last with any remaining cash flow that can be distributed or reinvested. Some investors choose to hold distributions in favor of establishing reserves as a cushion against future expected and unexpected expenses. Your capital investment analysis should show a net profit and distribution to ownership. After all, that is the most compelling reason to write the investment check in the first place.
Michael Shelton is President and CEO of Shelton Business Services which provides executive coaching, management consulting and financial services. Call 602.463.1199, email [email protected] or visit sheltonbusinessservices.com Advance your business ability with our proven executive coaching, objective management consulting and dependable financial services.
How Much Money Do I Need for Retirement?
Have you ever heard someone say “if you have to ask how much it is, you can’t afford it”? Doesn’t how much money do I need for retirement sort of sound like the same thing? I know that it really is a legitimate question and most people are just looking for a ballpark figure.
I think it’s fair to assume, or read into, the question that a lot, not all by any means, of the people are asking not only how much money do I need for retirement, but how do I make more?
Or when they ask that question on the internet they are saying that they already know they don’t or won’t have enough, I need to know how to make more.
When you search on the internet using that question you are provided with a shipload of websites that are all basically saying the same thing; use a retirement calculator, add up what you think you’ll get from your retirement plan, add that to what you think your Social Security will be and voila!
Then some will actually tell you that you need to figure out what prices will be in the future, how much you’re spending now, how much you’re going to spend in the future and I even read one that said plan on spending less than you do now because you need to plan to live on 80% of what you are living on now. Well how exciting and enticing is your retirement future with that kind of thinking?
If you are satisfied with that kind of limited thinking and living then you might as well stop reading now and go continue planning your poverty filled retirement. Seriously, if you’re anything like me, your dreams of retirement don’t include counting pennies and applying for government assistance.
Do you want to have “just enough” to retire, just enough to make it month to month? Or do you, and this is my motto, want to do anything you want to do any time you want to do it? Well, I know that’s kind of a no-brainer, so then the question becomes; what are you willing to do to get to that point?
If a good majority of the people who ask the question “how much money do I need for retirement?” aren’t also asking; how do I make more?, I’ll eat my hat (smile).
This is where we separate the men from the boys and the women from the girls. Have you ever considered your own business? Not a 10 or a 100 or a 500 thousand dollar franchise but just a simple home based business. Simple but potentially very lucrative, one you can start for under $1K.
There is an industry that has gone through some very long and strenuous growing pains but today is really coming in to its own.
That industry is network marketing and with the unprecedented number of people reaching the retirement age (baby boomers) and the uncertainty of the economy, people are looking at the industry and the opportunity with renewed vision and are more open to the possibilities than ever before.
So even though the question of how much money do I need for retirement is legitimate, start exploring how you can make more. The more you make and the more you have the less you will be forced to ask the other question. Do it right and you won’t have to worry about it anymore.
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