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Business Finance During a Recession- Part Two: Boot Strapping

October 25, 2009 by Frank Goley, Business Consultant

Date:  October 25, 2009

Author:  ABC Business Consulting, Chief Business Consultant

Subject:  Business Finance during a Recession- Part Two:  Boot Strapping

In the previous Blog on Business Finance, I talked about obtaining funding through smaller community oriented banks, and what Loan Officers look for when making lending decisions.  While it is important to establish close relationships with your local bankers, no matter the stage and situation of your company, your business may not qualify for a bank loan.  Let’s explore some other avenues businesses are utilizing today to obtain finance in tough, recessionary economic conditions. 

Bootstrapping

This is how I have built all my companies, and how many, incredibly successful companies have initially grown.  In fact, growing your company organically, with your own cash flows and most significantly, ingenuity, is the preferred method.  Get your company “right”, and then bring in outside funding.  You will find that you have many more options and opportunities this way, as well as, build a structurally sound company and business model, which when financed, will be “cash flow” successful from day one.  You will experience exponential, yet planned and controlled growth. 

When bootstrapping, it is imperative you take the time to develop and implement a well conceived Comprehensive Business Plan which you refine through the business building process.  With a Good Business Plan, a solid Business Structure and Foundation in place and some quality Product Development completed, it is now time to turn to your Marketing and Strategic Plans and bootstrap your business to a Cash Flow level that can attract different funding options.  Bootstrapping will present you with flexibility in funding choices, not forcing you to jeopardize your business with Business Finance that doesn’t fit or prohibitively expensive. 

Guy Kawaski (co-founder of Alltop.com, Managing Director of Garage Technology Ventures and author of the book, Reality Check), wrote an article in Entrepreneur Magazine (May 2009), “10 Tips for Successful Bootstrapping” and made some good points:

Focus on Cash Flow:  Cash Flow is your key to survival; not just profitability. Cash Flow first, then post-funding, profitability will come.  See ABC articles on Cash Flow for ways to successfully manage a company’s Cash Flow, along with the importance of good Budgeting.

Bottom up Forecasting:  Top Down Forecasting can be extremely unrealistic and overly optimistic.  Bottom Up analysis and forecasting is a building block process, which brings realistic goals into your forecasting process.  Start with real, achievable components, such as:  “x” amount of locations which can sell “x” amount and install “x” amount, rather than, guessing “x” percent of the market will buy “”x” products to be installed “x” times.   See the ABC Article on Profit Maximization for more information on Financial Forecasting.

Ship First, Then Test Later:  Like Kawasaki says, “good enough” is good enough.  Develop your products and services alongside your customers, using their input and requests.  You will also end up with better products and services as a result of this feedback and relationship. 

The Dream Team:  Kawasaki says they are over rated.  I completely agree.  Hire young (cheap), skilled, budding entrepreneurs and augment the inexperience with Investor experience down the road.  However, having good, experienced Leadership in the CEO position is a must. 

Don’t Overlook Services:  Don’t limit yourself to just products.  Services pay the bills and can be extremely lucrative, especially when built around product introductions.

Know your Cash Flow:  Cash on Hand divided by Cash Burn = your cash status or how soon you will be out of business.  Know and plan around this number on a daily basis as it is the essence of successful bootstrapping.

Other Great Tips:

Under staff:  Don’t staff for what could happen.

Sell Direct to your Customer:  Distribution is best done later in your company’s growth.  Use the power of E-Commerce.

Don’t try to be the Market Leader:  Initially position off the Market Leaders.

Build your Business Plan around bootstrapping, then when in the right position, your company will attract a variety of funding, giving you the right options at the right time for your Business.In my next blog, I will explore some concrete, available Funding Options, even in this economy! 

Copyright 2009 ABC Business Consulting, LLC

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BIZ FINANCE DURING A RECESSION: PART ONE: COMMUNITY BANKS

October 17, 2009 by Frank Goley, Business Consultant

Date:  October 17, 2009

Author:  ABC Business Consulting, Chief Business Consultant

Subject:  Business Finance During a Recession- Part One:  Community Banks

Obtaining Business Finance can be challenging during a Recession but there is money out there for enterprising entrepreneurs.  This Five Part Business Finance Blog will provide some real-time, real world finance sources and conduits to help you grow your company, despite the looming recession.

Community Banks:

Recession or not, it is highly advantageous to have solid relationships with Community Banks.  Community Banks are looking for new ways to seize market value with businesses as the large banks falter.  According to BancVue, Community Banks only have 34% deposit market share (Entrepreneur Magazine, July 2009, “Community Banks to the Rescue” by Jennifer Wang).  Look for this to change as small Banks seek to increase market share when big banks are at a disadvantage.Good business means having a good relationship with local, small bank Loan Officers, VPs and Presidents.  Community Banks often take the time to get to know you and your business, giving you a prime opportunity to build a funding relationship, something tough to do with the ever changing ranks of bigger banking institutions.

Troubled Asset Relief Program (TARP): 

Many small banks are obtaining TARP funds to immediately loan to small businesses in their market areas.  Small business is the foundation of our economy and Community Banks understand this. Some examples:

Enterprise Bank in Western Pennsylvania has only one office, three shareholders, $180 million in Assets and $4 million in fresh funds from TARP, plans to make loans with these funds to “fledgling businesses.”

River Valley Bancorporation in Wausau, Wisconsin took advantage of $15 million in TARP capital so they could continue lending.  18 branches in Michigan and Wisconsin.

Virginia Community Bank in Newport News, Virginia was approved for 4.7 million in TARP funds.  A small 2 branch bank.In the last 30 days, small banks have received $164 million in TARP funds, and they plan on growing and lending to small businesses to facilitate their growth. 

Check out your local banks for TARP funding recipients, and you may find a willing lender.  Build small bank relationships!

Reference:  Wall Street Journal, Sat-Sun, June 27-28, “Small Banks not Shying from TARP” by Robin Sidel.

The Do’s and Don’ts when Approaching A Bank Loan Officer: 

Ok, so you want to approach Community Banks for business finance what should you keep in mind?  Mr. Dolphin, Chief Commercial Lender for 21st Century Bank, has the following advice, which from the perspective and opinion of this Business Consultant, can be applied to most banking relationships.  (Reference:  Entrepreneur Magazine, June 2009, “Impress Loan Officers” by Tom Nawrocki).

Things to Do:

Have a solid Loan Package. It also wouldn’t hurt to have a good, concise Business Plan as well.Historical Financials are a must, and they should be accurate, with the Assumptions clearly defined.  Know your numbers!

Things to Watch:

Profit Projections should take in account the current economic situation.  Don’t predict sales to increase in your one year outlook- keep it realistic.  Outperforming is a good thing but over projecting will be penalized.

Don’t keep information from the Banker.  Give the Banker the whole picture and be completely honest.  This builds trust, as well as, gives the Banker the opportunity to help you with problems.

Don’t be wasteful or flamboyant.  A Banker wants a frugal Loan Applicant during a recessionary environment.

Look for the upcoming Part Two of this Business Finance Blog for more ways to obtain funding for your business in this Recessionary Economy.  In the meantime, please visit our Business Finance Section for in-depth, how-to-articles on the multitude of ways to fund and grow your enterprise.  These articles will teach you about how to obtain funding, as well as, where to look and get funding.

We would like to hear your funding stories- what has and has not worked for you in obtaining Finance for your Business.  Your Feedback is appreciated!

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Welcome to the ABC Biz Success Blog

October 11, 2009 by Frank Goley, Business Consultant

 Author:  ABC Business Consulting, Chief Business Consultant

Subject:  Welcome to the ABC Biz Success Blog

ABC Business Consulting, LLC is a new company (formed in July ’08), yet we bring over 20 years experience in starting, growing and helping small and medium sized companies.  We understand the importance of a Business Plan, yet we firmly believe for a Plan to be any good, it must be Implemented and Tracked.  In short, ABC develops Action Based Business Plans (as well as Marketing Plans, Strategic Plans, Turnaround Plans and Web Development Plans) in partnership with our clients to achieve specific, measurable goals and results.  We back our Plans with Interactive Consulting and Action Oriented, Success Based Implementation Processes, Steps and Plans.

Some Basics on ABC:

What’s in the Name?

“ABC” to indicate a step by step, building block process, developed over 20 years of business building experience:

Step A:  Planning

Step B:  Consulting

Step C:  Implementing

The ABC Mission

Work as a Partner with our Clients to create sustained and measurable Business Success through Planning, Consulting and Implementing Business Plans, Processes and Action Strategies, leveraging our Proprietary Planning and Consulting Methods and Business Building Experience.

What is ABC Business Consulting, LLC?

Two Main Functions:

Business Success Resource for Entrepreneurs / Business Owners / Executives / Managers:

In-depth, “How to Articles” on Business Success Strategies.

Over 25 Action Oriented Business Success Articles featured on our websites:   

www.businessconsultingabc.com

www.businessplansabc.com

FREE FOR A LIMITED TIME:  Business Success Guide

ABC Business Consulting’s Comprehensive Business Planning Guide and Workbook

Resources Section with Business Tools to help Companies Succeed.

Forum for Entrepreneurs to Share Ideas and Comment to ABC:  Coming Soon! 

Membership Site featuring Exclusive Business Success and Collaboration, Tools, Forums, Processes and Action Strategies:  Coming Soon!

Business Success Book Club:  Coming Soon!

And much more…

Business Consulting Firm Offering:

Comprehensive Business Plans that bring Results

Purpose-Specific Business Plans: Investor Plan, Lender Plan, Customer Plan, Product Development Plan, Strategic Partner Plan and so forth….

Highly Effective Marketing Plans

Action Based Strategic Plans

Web Development Plans 

Business Turnaround Plans

One-on-One Biz Consulting, leveraging 20 years of Business Building Experience

Implementing Business Plans, Systems, Processes and Strategies to create, build and sustain Business Success.

For more information on our Value Based, Measurable Result, Action Oriented Business Planning, Consulting and Implementation Packages, please visit our Services Section.

Who is ABC Business Consulting?

An Entrepreneur and Business Owner, with 20 years experience starting, growing and turning around small and medium sized companies in a broad range of industries. Please visit our About Us section for more info… 

When are We Open for Business?

Our FREE Business Success Resources are Available Now!  Leverage our Experience! 

Go To:  www.businessplansabc.com  and  www.businessconsultingabc.com

Business Planning and Consulting Services are available NOW!  Visit our Services Section for more details on our Value-Based Business Packages. 

What is the ABC Blog?

Business Success Oriented

Real World Business situations and solutions

Interactive:  We want Entrepreneur and Business Owner/ Executive Comments, Tips and Collaboration! 

Weekly Themes:  i.e.  Business Finance, Business Planning, Smart Business Tactics, Business Technology, Leadership, Cash Flow Management, Business Resources, Smart Start Up Strategies and so on…Updated weekly!

Challenging:  Challenge all of us as Entrepreneurs and Business Owners to think outside the box, never be complacent, and most importantly, always take Action toward Success.

Partnerships:  The Strength of our Client Relationships, Strategic Partner Relationships and Online Collaborative Relationships will define the strength of our Company and Blog. 

We encourage your comments, feedback, collaboration and Strategic Relationship Inquiries and Ideas. Interested in a Cross-Link Relationship?  Please contact us through our Feedback Section.

Please Refer our Blog to your friends, partners and associates:

ABC Business Success Blog

                  

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