Tag Archives: financial information

Financial Statements

How’s Your Business Doing? Check Your Financial Statements

Curious to know how your business is doing, financially? Look at your financial statements; here’s how.


You’re the owner of your business. You know how to sell; you know how to make your product; a you know how to find opportunities that will make your business grow.

But do you know how to determine if you’re doing well from a financial standpoint?

It’s Time to Be Honest With Yourself

Be honest. Do you really know how to look at your financial statements and determine if you are doing well? Do you really know what is most important when you look at those statements?

“What statements?” you may ask. The P&L (profit & loss statement), the balance sheet and the cash flow statement – those are the statements you need to look at each month. And they need to be prepared and given to you as soon as possible after the close of each month.

Now, I’m being a little facetious here, but it is not that unusual for me to speak with owners of businesses and get some interesting answers to questions like:

  • Are your financial statements prepared on a timely basis?
  • Are they free from error?
  • Does your controller tell you, when reviewing the October P&L, “Well, I had to make some adjustments to the September results, so September was a little better than we thought, but October isn’t so good”?

If you have heard this before, join the crowd. You are not alone. It’s not terribly unusual if you either don’t get routine, timely financial statements or if you don’t trust them. But you need to receive regular, reliable financial information each month that you can use to help you make decisions.

Think How Your Banker Thinks

And, while we’re on the topic, ask yourself another question:  “If I don’t trust my own financial statements, what must my banker think about them?”

You may remember when bankers didn’t always insist on seeing your financial statements or waited until you gave them the annual statements. Well, those days are over. All good bankers expect quarterly statements, at a minimum, and many also want to see how you are doing on a monthly basis, as well.

They want to see the statements so that they can determine if there are any causes for concern. You can understand that. But you need to know what areas would give rise to such concerns long before your banker identifies them. The only way you can do that is to have reliable financial statements and to analyze them as your banker (or a CFO) would:  What are the trends that offer opportunity, or are they cause for concern? How am I doing with respect to the covenants in the loan agreement? You need to be able to understand what is important to your banker and be able to explain how you are doing in concrete financial terms, using the statements as the basis for your conversation.

And You Need Even More Information

In addition to the basic financial statements, you also need to have a few reports that provide you with the important information you need. You know what’s critical to your business. It may be a little different for each company, but I’ll bet you want to know a few things every month:

  • Who’s my biggest customer, and how profitable is that customer?
  • Which customers are 10 percent ahead (or behind) last year?
  • What sales are in my pipeline?
  • What’s my cash position?
  • Where will my cash be at the end of the month, and will I have enough cash when my taxes are due?
  • What’s my gross margin this month, compared with where I thought it should be?
  • How am I doing compared with budget? (You DO have a budget, right?)

You may have started your company knowing what you needed to know. But if you’ve grown — or if you’re struggling to make a profit or improve it — chances are that the information you’re getting is not really helping you now.

If you need help with getting this information, stop kidding yourself. As the owner, you are probably not the best-equipped person to create this information — and you certainly have better things to do as the owner than to create financial statements. You need to find someone who can help you determine what information you need and who knows how to get it; you need someone who has developed such information in the past. This is not a place to skimp.

So the question — “How’s my business doing?”— is simple to answer. But the answer can be quite difficult, because you need to understand what you don’t know — and to find a way to get that information.

For more information about the topics discussed, including financial statements, visit B2BCFO.com.

Attracting Investors

How Can You Make Your Business More Appealing To Potential Investors?

The reality is more and more companies are competing for a limited supply of funding, so much like in the dating scene you want to appear attractive and engaging. Whether your business is seeking financial support from a bank, a private investor or a venture capitalist group, it is crucial that you make the right impression from the onset. When you are approaching bankers for funding, this includes putting together all the necessary documentation for a loan package, but when you are seeking investors the approach is slightly different.

In addition to the financial documents you’ll need to gather, there are other things you can do to make your business more appealing to potential investors.

Update the business plan

The business plan provides detailed descriptions of the way your company works. By developing instructional materials and documenting information on the “how to” for the operation, investors can get a strong sense of the company and how it operates. The creation of a company manual should include everything from detailed major operation information and key vendors to an organizational chart of employees and the small day-to-day tasks.

Gather financial figures

Investors are called investors for a reason. They are looking to invest their money in a business, not just give it away. Business owners need to make sure all financial information is up-to-date and ready share. This includes current and projected sales figures as well as what the company expects to need for operating costs and marketing.

Understand your financials

Just having the financial information isn’t enough. Be prepared to justify and explain where every penny comes from and where it goes. Investors will want to know what their investment will be going toward.

Reasonable compensation

Make sure the owner’s salary and compensation is reasonable. If the salary is too low, the investor will be concerned that a replacement will cause a serious cash flow issue. If the salary is too high, the investor will feel they are funding the owner’s lifestyle. This also goes hand-in-hand with making sure that you have the most competitive price for goods and services you are buying. You don’t want to overpay for goods that can be negotiated for a lower price.

Create a marketing plan

More often than not, simply opening the doors to your business does not drive traffic. A marketing plan will show how you plan on increasing awareness and traffic to your business. For the marketing plan, you’ll need to describe what you’re doing and the results, as well as the return on investment.

Develop a strong team

Most investors will want to meet with the key players at any organization. They will be looking to see that the management and key employees are professional, qualified and the right person for the job. This is also the time when the potential investor will get a real feel for the company, the flow of communication and the chemistry between the potential investor and the employees.

Beware of online profiles and posts

Investors will do a thorough due diligence of the owners and the key players. With the technology available, that also means researching the company on social media sites. Make sure that your company Facebook and Twitter pages are active and engaging toward the individual audiences. It is equally as important to look at the personal profiles of owners and employees. This may mean deleting inappropriate posts and comments or adjusting the privacy settings.

Go into the transaction with a realistic value of the company

If you undervalue, you will give up too much of the company for nothing. If you over value the company it can kill the deal. Hire an expert to get a real valuation — it will be worth the money spent.

Partnering with investors can be a great way to give your company the financial boost it needs. For many small companies, it may also be the best alternative to helping the business develop and succeed. Like any relationship, finding the right investor for your company can be challenging, but the better prepared you are, the greater chance for finding the best match.

For more information on how to make your business more appealing to potential investors, visit fswfunding.com.

Selling the Company

Planning Ahead: Steps To Selling The Company

With the new year, entrepreneurs and business owners are looking ahead and putting plans in place for the coming year and beyond. For most the focus is on increasing sales and revenues to grow the business, for some it is looking to take things in a new direction, and for others it may be stepping away from the business entirely and selling the company. Regardless of the objective, planning is essential.

If a business owner is interested in actually selling the company, there are a number of key steps that need to be taken to help ensure success.

Take your time when selling the company

Planning for the sale of a business should begin at least one year in advance. It can take this long to get financial information and documentation pulled together to allow the owner to find the best buyer for the business, that is a match financially and has the right professional experience to step in and take over. When a buyer is found and the deal is finalized, it is also important to allow time for the transition.

Find the right people for the job

To find a buyer, you may want to consider consulting a reputable business broker. A broker can help navigate the steps of preparing and selling the company. Also, tap into your connections to ask around and get advice from trusted sources such as an accountant, banker and attorney. You may be an expert in your industry, but these professionals have handled transactions like this numerous times and often know what to look for. Consider asking people in your business network for referrals and while brokers can be helpful, avoid professional brokers that ask for large upfront deposits.

Succession planning

When selling the company, the business owner may stay on for a period of time as a consultant or contractor. Either way, at some point they will be leaving, and it is crucial to put together a management team that can run the company without the owner. This process can also take time.

Do not assume that relying on longtime employees and managers is enough. In some cases, a manager may have been on staff a long time, but they are still not as involved in the entire business process as the owner and may not know a great deal of the business operations. Planning ahead will eliminate the need for the seller to stay on long after the business is sold and allow time to train and promote someone from within or to hire a qualified person from outside the business.

Document an operations manual

In addition to developing the right management team, developing instructional materials and documenting information on the “how to” for the operation is vital to a successful transition. The creation of a company manual should include everything from detailed major operation information and key vendors to an organizational chart of employees and the small day-to-day tasks. This gives a real value for the company by providing the potential buyer with a base for operating the business.

Make your company desirable to buyers

First impressions are important. Think of how you would react to your business if it was your first time walking in or seeing the behind-the-scenes operations. Making necessary upgrades, documenting procedures and listing business statistics, such as operation costs, yearly sales increases and customer growth, gives a potential buyer the information they need upfront.

Transferring the products

If the company sells a service, most contracts are month-to-month so customers can leave anytime. This means the buyer will devalue the cash flow stream. If you can patent or trademark services and products, this will add value to the company, allowing the seller to command a higher price. If possible, do not take a seller carry-back note. This means the sales price will be paid over a time period and may be based on the future profitability of the company. Less cash upfront is better than more cash over a longer and uncertain period of time.

When selling, it is important to be realistic. According to data from BizBuySell.com, more small businesses were sold in 2010 than 2009, but were sold for less.

Whether it is a business-to-consumer or business-to-business model you are trying to sell, planning ahead is vital. Reviewing the business structure, its operations and securing a reputable broker positions the seller best. In other words, planning to sell the company you have spent countless hours building will ultimately make it more desirable to buyers.

The only question now is, once the business is sold what will you do next?

For more information, visit fswfunding.com.

 

Financial Information

Properly Understanding Financial Information In The Media

Our society is constantly overwhelmed with financial information either by television, internet, cell phones or print media. Deciding which is best and most accurate can be very daunting for the average investor. In addition to choosing the right media source, investors also have to apply that information to their financial situation. In many cases, this can become a full time job, very challenging and requiring constant monitoring.

Minimal education is provided to us by our parents, peers or in school about how our financial system works. However, since it is an ever changing industry the information we have learned in the past may not be relevant today. Therefore, it is critical to understand what reliable information is and what may be misinformed facts.

These media sources are a critical role in today’s society but also come with some information risk. Everyone’s interpretation is different and we must realize that a percentage of the information is purely entertainment. In today’s environment, the media is influenced by marketing dollars, and understanding what may be accurate information and what may not is important to understand.

With tons of information about the financial industry — that (in many cases) is indirectly affected by other sources such as politics, government, other countries, weather, market shifts, innovations and technology — being properly informed and avoiding the “junk” information can be difficult, but must be done. As investors, we must not only focus on the investment, such as a stock, bond or mutual fund, but consider the strategies in place to account for current events.

Also, once an investor has decided on an appropriate investment strategy he or she will then manage the investments or work with a financial professional. Information is key and deciphering that information according to a situation can be difficult when creating an appropriate investment strategy as well as making changes within a portfolio as needed based on economic shifts. Many times, working with a financial professional can help investors use up to date, reliable information to meet financial objectives.

For more information regarding understanding financial information, visit jacobgold.com.

 

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.