NEWS You Can Use

Business debt may make good sense

Posted by on Oct 6, 2014 in Business Basics, NEWS You Can Use

Business debt may make good sense Published in The Tennessean October 6, 2014 By Ed Rappuhn – SCORE Nashville “Our 3 year-old business is doing well. We have never had a loan and I believe in being debt free. My partner is pushing to get a loan to help us grow. What do you think?” Starting a business without debt is a great idea. It’s difficult for start-ups to get loans and it allows you to prove your concept without worrying about payback schedules. You have shown financial discipline by surviving and even growing without debt. Now look at your future goals and what it will take to get there. Are you happy where you are or do you want to do more but are limited by available cash? Running a business debt-free is admirable, but sometimes not preferable. To grow a business, you need to invest in the business. To this point you have invested hard work, your profits, and perhaps some of your own money. To grow further, borrowing might be necessary. Let’s look at some examples. Advanced Marketing has the opportunity to land a $125,000 annual contract. Advanced has produced a sample ad campaign using in-house talent and cell phone video. The client loves the concept....

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Business degree not needed for success

Posted by on Sep 22, 2014 in Business Basics, NEWS You Can Use

Business degree not needed for success Published in The Tennessean September 22, 2014 By Ed Rappuhn – SCORE Nashville “I’m thinking of starting a business but my degree is in art history. Do I need to go back to school?” A business degree is not necessary to be successful; few of my clients have one. But you do need business knowledge. You might consider taking classes at a local college or university. These could be related to entrepreneurship, accounting, management, marketing, or any other business subject that is relevant to you. These are in depth studies and can help you run your business better. The problem is the time and money it takes to complete the courses. Or you can learn many of the necessary proficiencies on your own. You will need to have self-discipline for this approach. Start by subscribing to entrepreneur-related magazines and reading applicable articles in newspaper business sections. Read industry publications and subscribe to Internet or email newsfeeds. Find books that cover the information you need to know. Libraries are a great source for the books and many offer free magazine downloads, business research, and other services. You will need to cull through the plethora of information available to determine relevancy. Unsubscribe to extraneous periodicals...

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Small changes can start chain reaction

Posted by on Sep 8, 2014 in Business Basics, NEWS You Can Use

Small changes can start chain reaction Published in The Tennessean September 8, 2014             By Ed Rappuhn – SCORE Nashville “If I could just fix (insert idea here) everything would be great.” Many clients come to me with a single idea that will fix their business and there will be no more problems. Occasionally they are right, but often they overlook the consequences of that one change. A few months ago, I did a series of articles about Business Modeling. The Business Model includes your: Value proposition (product/service) Customer segments and relationships Channels by which you reach your customers Key resources, activities and partnerships Cost structure  Revenue streams. The business model is illustrated on a single sheet of paper, whiteboard, or wall. You can see your whole business on one flat surface showing all its interrelationships. Whenever you make a change, you need to look at the possible consequences. In Chaos Theory there is a hypothetical situation known as the “butterfly effect” where a butterfly flapping its wings can create a small disturbance that over time causes cumulative changes and a hurricane forms halfway around the world. You cannot ignore the big picture when changing one part of your business model. For example, you...

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Choice of new owner impacts exit plan

Posted by on Aug 25, 2014 in Business Basics, NEWS You Can Use

Choice of new owner impacts exit plan Published in The Tennessean August 25, 2014 By Ed Rappuhn – SCORE Nashville Exit planning involves valuing your business and identifying potential buyers. Two weeks ago I discussed business valuation. Today, we’ll look at potential buyers. These include family members, business partners, outside individuals, other companies, and employees. You might run your business differently depending on your planned exit strategy and what would be most important to the likely buyer(s). Be careful in selling to family members. What if one offspring is interested in running the business and another is not? Or what if you have several children interested in ownership? Can the business that has done well for you support multiple owners? Would co-ownership and subsequent decision-making create problems within the family? For an owner with an only child brought up in the business, however, a family transfer might be the perfect exit strategy. A business partner is an obvious choice for exiting the business. The partner knows the business and its potential. One of the biggest problems is agreeing on a valuation. Outside valuations or offers from others can help determine a fair price. If you have a partner, the valuation process should be established in a buy-sell agreement long...

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Exit planning’s value could be priceless

Posted by on Aug 11, 2014 in Business Basics, NEWS You Can Use

Exit planning’s value could be priceless Published in The Tennessean August 11, 2014 By Ed Rappuhn – SCORE Nashville ”I have a successful small business and am told I should consider exit planning. Where do I start?” The value of exit planning cannot be overrated. Earning a nice income operating your business is great, but it’s possible the greatest benefits will come at the time of sale. This is such a big topic; it’s worth two articles. Today we’ll look at the value of your business. In two weeks, we’ll look at potential markets for your business. Many mistakenly believe the equity on your balance sheet represents the value of the business. In simple terms, balance sheet equity is your assets (what you own) less your liabilities (what you owe). The value of your business has much more to do with future cash flow projections than your equity. Usually a buyer projects how much money they can earn from a business. This is often a multiple of cash flow. A business that has an annual positive cash flow of $100,000 is worth $300,000 if the multiple is 3 or $600,000 if the multiple is 6. There is significant subjectivity in determining the multiple. If you are in an industry...

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Why no decision may be worst decision

Posted by on Jul 28, 2014 in Business Basics, NEWS You Can Use

Why no decision may be worst decision Published in The Tennessean July 28, 2014            By Ed Rappuhn – SCORE Nashville “I’m having a hard time making business decisions. There’s so much information out there, some of it conflicting, I just get stuck.” You are suffering from a common ailment known as paralysis by analysis. I love this quote by Theodore Roosevelt, “In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.” When making decisions look at your business model to identify any potential unintended consequences. Does the decision require changing your value proposition, partnerships, customer segments, etc.? Then follow these steps: Identify your choices. Remember, maintaining the status quo is one choice. Consider the possible outcomes (benefits vs. cost) of each choice. Establish the probability of each outcome. Determine, based on the probability of the outcomes, which choice has the greatest value. This analysis helps you make the choice with the greatest likelihood of success. With so much data available (and it’s growing exponentially), there will always be subjectivity in determining data accuracy, probabilities and cost/benefit ratios. There are rarely “perfect” decisions,...

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