Every small business owner wants (and needs) growth, that much is obvious. What isn’t so obvious is exactly how they can achieve it.
You don’t need to have a ground-breaking sales strategy or an expensive marketing team to grow and strengthen your business. This article outlines 7 simple ways you can make your small business stronger and more profitable in 2020.
Federal contracts can provide small businesses with steady streams of revenue for extended periods of time, and there are plenty to compete for. …
If you don’t know what you’re looking for, trying to analyze financial statements can feel like swimming in a sea of numbers. By learning a few simple financial ratios, you can easily extract meaning out of what used to look like a jumbled mess.
This article outlines 5 simple steps you can use to analyze a set of financial statements and gain insight into any business.
Financial projections are the backbone of a solid business plan; and for most soon-to-be entrepreneurs, they’re also a major source of stress. What a lot of people may not realize is that once you finish writing the other sections of your business plan, everything you need for the financials is sitting right in front of you. It’s just a matter of putting it all into place.
This article breaks down the process of preparing income statement projections, provides a step-by-step example, and highlights a few things to keep in mind during the process.
Financial projections use numbers to show what the rest of the business plan explains with words. The financials shouldn’t say anything that isn’t already described in the written portion, and vice versa (everything in the written portion should be reflected in the financials). …
Different people look for different things in a co-founder. Whether you’re after their technical knowledge, industry experience, or professional contacts, getting lost in someone’s credentials can sometimes do more harm than good.
We naturally assume that the more information we have, the more likely we are to make the right choice. In reality, our brains don’t work that way; scientists have been trying to tell us for decades now. In their study, On the Pursuit and Misuse of Useless Information, Anthony Bastardi and Eldar Shafir found that mortgage officers have a harder time seeing the big picture after seeking out additional details on a potential loan applicant. …
Entrepreneurs and small business owners are usually more focused on refining their competitive strategies, and less interested in their accounting policies — completely understandable. But once a startup is ready to acquire the technology and equipment it needs to begin operations, having an asset capitalization policy becomes absolutely critical.
Asset capitalization policies help companies ensure that their purchases are properly accounted for. Without a written policy, companies run the risk of expensing something that should have been capitalized (or vice versa). This can quickly distort their financial statements, and cause companies to under/overpay the IRS at tax time.
This article explains the basics of an asset capitalization policy and the risks faced by companies without one. By the end, you will understand the difference between a capital purchase and an operating expense, and how each one affects the income statement and balance sheet. …
Most small businesses have at least one customer who seems physically unable to pay an invoice on time. The more past-due customers a company has to deal with, the longer it makes their cash conversion cycle (the time it takes to turn inventory into sales, plus the time to convert those sales into cash). If left unchecked, late-paying customers can wreak havoc on a company’s cash flows.
These negative cash flow consequences are intensified for companies with a low-volume, high-price sales mix — since a single invoice makes up a significant portion of their revenue. …
There are countless situations where a business owner might receive money straight from the company. Depending on what they’re for, owner payments can be categorized as either owner withdrawals, profit distributions, guaranteed payments, or expense reimbursements. Owner withdrawals and profit distributions only affect the balance sheet. Guaranteed payments and expense reimbursements reduce net income.
If owner transactions aren’t accounted for properly, it doesn’t just affect the individual owner — it can impact the entire company.
Rather than reinvesting earnings back into the company, business owners have the option to collect their share of profits at the end of every period. …
All business entities are not created equal. Deciding how to structure a company can be a daunting task for small business owners. The decision sets the rules of the game; it determines how much control is retained by the original owners, which owners are personally liable for the company’s actions, how profits and losses will be distributed to owners, how those distributions will be taxed, and whether ownership can be transferred or terminated.
To make sure you’re choosing the best structure for your business, take a few minutes to consider the four questions below.
The amount of revenue a business earns for a particular product depends on how much they charge for it— that’s obvious. For most small business owners, how to determine the most profitable price point isn’t quite so obvious.
Different types of costs affect your profit margins in different ways. Some costs increase or decrease depending on how many units of a product are produced, while others remain constant regardless of activity levels.
To analyze costs more effectively, cost accounting first requires you to separate them into two categories: fixed costs and variable costs. …
You have a great idea for a business — now what? Unless you know what to do with it, a great idea won’t get you far. This article outlines a few steps you can take right now to get yourself heading in the right direction.
Decide What You’ll Need in a Location
Will your business need its own physical location? Could you use a virtual storefront? What are your options?
So many people waste money on things they don’t need, mostly because they don’t realize there are other choices. For example, a lot of businesses don’t need a brick and mortar store. …