How To Keep Your Business Startup Out Of The Red

According to Statistic Brain, 46% of businesses that fail do so because of the following reasons:

• Emotional pricing

• Living too high for the business

• Non payment of taxes

• No knowledge of pricing

• No experience of financing

• No experience of record-keeping.

All these factors have a huge bearing on a business’ cashflow. As a start-up, you must guard your cashflow jealously because it will determine if the business will sink or float. Here are some tips to help you manage your cashflow even better:

Limit Your Expenses

All things seem important when starting a business. It’s just like shopping for your first baby. You assume you will need everything that is sold at the baby store – including the battery-operated mixing spoon (which you may never use). The startup stage is when you need to count your pennies to ensure you have enough cash to keep you afloat. Limit your expenses and only buy what is needful. Do not splash out, anticipating the customers you will get along the way. You may also have to defer your salary for a few months until your business starts to generate a healthy profit.

Find a Bridge

There is nothing wrong in keeping your day job or finding a part time role when you start your business. Having a separate source of income in the initial start-up stage will take pressure off your business and eliminate the desperation. When business owners become desperate, they tend to cut corners, charge inappropriately and probably lose customers too. Avoid the feeling of helplessness in your business by ensuring you have funds available to take care of the first few months. When you start to generate a steady income for your business, you can quit the job and focus on your business on a full-time basis.

Be Realistic

You need to be realistic about your business goals. We all start with a high dose of hope that our businesses will do well. Many businesses do succeed, yours can too as long as you put hard work and effort into making it a success. When you enter the market, do remember that the other brands are not going to lie down and play dead. Your product might become the best seller in a few months – but plan your cash flow to take account of when the money has not started rolling in.

Keep Good Records

Be conversant of what goes in and out of your business bank account if you have one. If you do not have one, do get a bank account for business use. It is much easier to manage your business transactions if all your income and expenses are from a single-use account. Do not mix your home expenses with your business ones – it can be chaotic when you need to reconcile your accounts at year-end.

Credit Control

Manage your invoices effectively. Clearly specify your payment terms to your clients. If you sell products that are paid for before checkout, that is great. But if you provide services or supply on credit, you need to keep an eye on your invoices and outstanding payments. Follow up on late payers and ensure you step in early enough to recover your payments.

Plan Ahead

Before you subscribe to a monthly program, service and special offers be aware of your cash flow. Subscription fees are deducted on a monthly basis, whilst some are quarterly. Keep records of the payment dates and try to avoid the deductions coinciding with salaries or big expenses days.

No one knows your business as much as you do, so you know where adjustments are required to ensure it stays sustainable. Staying on top of your cash flow and business expenses will help you create a business that is viable and successfully for years to come.

How To Select The Right Home Business Model

Having the right idea is only the start of setting up a business. To run it successfully will depend on the type of business model you select from the beginning. It is wise to speak to an accountant on which option is right for you, however I’ve put together five business models and some key points to consider before deciding.

Business Model #1 – Proprietorship

This is the simplest and most common type of business model. There are no legal obligations to consider you can simply set-up shop and start selling your product or service. If in Australia you will need your Tax File Number and a Business Number to buy from other businesses. Registering for Goods and Services Tax is optional and is only needed once you earn over a certain threshold. A proprietorship gives you great flexibility to start your business on the “cheap” and without any major commitments apart from declaring your sales at tax time. But you should know that setting up this type of business means that you are legally responsible for anything and everything. Other than that this is a very tax efficient business model for small businesses.

Business Model #2 Partnership

A partnership is a relationship between two or more people who come together to run a business and share the profits earned. It is also sometimes know as a “firm”. Typically you would use an accountant and sometimes a lawyer to set it up, but mainly to formalise the rights and duties of all the partners and decide each partners share of the profits.

They are easy to set-up and it means that the business has access to more capital as there is more than one person contributing. Depending on how many people want to form the partnership you may need to check if there are too many of you. One drawback is the fight over power and you do need to check liabilities because personal assets are targeted should there be an issue with credit default.

This model works well for professional service firms such as accountants, lawyers, doctors etc.

Business Model #3 – Company

A company is just one person or a group of people. There is also a variety to choose from depending on the business model such as private, public listed, not-for profit, etc. When I started my business I opted for a private company but setting it up is complex process, expensive and involves much paperwork. But once it is set-up you can run many entities underneath. It is separate legal entity and involves at least a director but can also have shareholders and a board if it’s publicly listed. The best thing about a company is the limited liability. If there is a credit default, personal assets of directors and shareholders stay protected – although you should note since the global financial crisis there has been a big crack down in this area and cases where directors have been fined. For a start-up this business model should only be selected on the advice of your accountant.

Business Model #4 Franchise

A franchise is where you are the boss but don’t have to worry about branding. marking, product creation etc. This hard work is all done for you and is turn-key in the sense that the Franchisor instructs you on the exact method to set up your business so you hit the ground running from day one. The downside is that the marketing, product development, branding and working side of the business are in the hands of the Franchisor so there is little scope for innovation from the Franchisee. There are also royalty fees to pay and the up-front commitment cost.

Franchises come with high levels of support and an established brand name., is that you can find a business to suit all pockets, no matter which industry you want to set foot in. You should consider this model is you don’t like risk and want loads of support and handholding.

Business Model #5 Trust

Many people don’t think of Trusts as a business model but they are a great addition to a company structure. This was the option I also included when I set up my business. The trust becomes the majority shareholder and the trustees are primarily responsible for managing the assets and business for the benefit of the company.

I don’t recommend setting up a Trust on your own. They are often regarded as a Tax loophole and that’s because there is so many was of setting up a Trust. So get your accountant to do it for you.

Trusts allow you to keep control over your assets. This is perfect when you venture into property and don’t want to lose your assets to a relationship that goes sour. Trusts are therefore idea for family businesses, where you want to create a structure that preserves assets for future generations. You could also use a trust where you want to keep long-term control over managing the business.

9 Mistakes Plumbing Company Owners Make When Selling Their Businesses That Cost Them Time and Money

Introduction:

If you are the owner of a plumbing company, then you are probably like many other business owners.

You realize that you can’t work forever. In fact, it may be that you do not WANT to work forever despite enjoying what you do.

Even the most successful plumbers eventually get to the place where they are ready to hang up the wrench and do something different.

They may be burned out from the daily stresses of running a business, have physical or family issues that demand more of their time, or they simply want to move on to a new challenge.

However, for many owners, it’s difficult to find the time to sit down and map out a strategy for exiting the business. If you own a successful plumbing company, you probably don’t have a plan in place that will facilitate your goals of selling your business quickly, without a lot of hassles, while creating a lifetime stream of income from the proceeds.

A significant portion of your retirement planning is likely predicated on a successful sale of your business. Exiting a business is truly one of life’s most important transitions; a transition whose outcome can make or break your retirement future.

That’s why it is so important to create an action strategy that will help you avoid making mistakes that can result in you running out of money in retirement.

But, do you know exactly what it will take to create such a sale? When the time comes to leave will you become so frustrated, overwhelmed and desperate that you make poor decisions that will cost you lots of money?

Knowing the answers to these questions is important, especially if you are nearing retirement and more than ready to start the process of selling your business. You must seek solutions that promise a better, more financially lucrative and less stressful way of achieving your selling goals.

Plumbing company owners who want to sell in the 21st Century must seek alternative systems for selling a business that address some of the common mistakes owners make when they try to sell their companies.

I say “try” because more often than not, sellers wind up either not selling at all or having their businesses sit on the market for months, even years, before they find a qualified buyer. Even if they do manage to find a good buying prospect, there are currently so many businesses on the market that they may wind up getting a lot less money than anticipated.

9 of the most common business exit planning mistakes plumbers make and how to avoid them:

It is not uncommon for plumbing company owners to have no exit blueprint at all. They usually either haven’t given it much thought or they make assumptions about the future that may not be true.

1. Not planning at all

As the old saying goes, “it isn’t a plan until it’s written down.” For a succession plan to be effective and implementable, it MUST be written down and reviewed by all parties involved. A plan must be clear, concise, and free of ambiguities that could cause problems later.

A business exit plan, while being distinctly different than your estate plan, should nevertheless complement the estate plan and ensure that your overall retirement goals are being met.

That’s why it’s a good idea to have your CPA and/or estate planner review the blueprint and make suggestions that align with your goals and aspirations.

2. Making too many assumptions

In talking with business owners who are thinking about selling, it’s interesting to see how many of them are making assumptions about both the process of selling and the outcome of the sale. The skies in their world are a different color than reality when it comes to the futures of their businesses.

For example, some plumbing company owners take for granted that a son, daughter, granddaughter, grandson, or other relative will take over the business. They may have the idea that in the event their heirs don’t want it; a group of key employees will step in to buy out the company. Or, some savvy investment group will recognize how great the business really is and snap it up.

Another common assumption made by sellers is that the selling process is easy and quick -a handshake, a check and it’s done. They take it for granted that there will always be someone looking to buy at exactly the time they decide to sell, and that the price they are asking is correct and reasonable.

Unfortunately, none of these assumptions may wind up being true. Selling in the 21st century, with its economic flux and massively shifting demographics, is anything but simple. You can’t afford to predicate your plan on assumptions based in the past.

3.Not including your family in the planning process

“Stan” was the owner of an extremely successful commercial plumbing business.

His oldest son had worked alongside him for several years, proving himself especially adroit at bidding for large jobs, handling customer issues, and managing employees. Stan assumed, without ever really discussing it, that his son would take over from him when he decided to retire.

When he finally made that decision and approached his son, he was stunned to learn that Stan, Jr. had applied to a local business college and had no interest in taking over his dad’s company. Neither did the other kids, for that matter.

It’s easy to avoid this situation (and many others) by keeping your family apprised of your intentions from the very beginning in an honest, transparent manner.

You should work to achieve consensus on all important issues, including discovering whether or not a family member or spouse wants to take over, which family members will stay on as employees or move into management.

Business succession planning is definitely NOT something you want to keep secret from your loved ones.

Meet regularly with the family all during the planning process. Explain to them what your vision of the future looks like and what must occur in order for you to achieve this. By doing these things, you will go a long way toward avoiding the kinds of family feuds that can derail the sale of a business.

4. Poor organization and record keeping

The day before you decide to sell is not the time to discover that your records are a mess and that key documents are missing. If you intend to sell, or even if you want to keep the business in the family, organized records are essential.

Buyers will want to see your financial records for at least the past five years, perhaps even for the last ten years. They will want to know where to locate your marketing pieces, customer lists, employee records, leases, and everything else pertaining to the business that should be filed and easy to locate.

To ensure less stress when selling, start organizing your records right now.

Note: To get a free exit planning checklist detailing exactly what kinds of documents buyers will want to see when valuating your business visit the website listed at the end of this article.

5. Forgetting to give the business “curb appeal.”

A temptation for all business owners who realize they want to sell the business and retire is to stop putting any more money into the company that is necessary to keep the daily operations going.

They might stop repairing or replacing tools and machinery, not wash their fleet vehicles as much, or allow their building and landscaping to become shabby.

Owners might postpone doing things such as buying new uniforms and badges for employees or upgrading safety equipment and signage.

Just as a home that has had some basic TLC before going on the market usually sells for more money, it’s the same for a business that wants to attract more qualified buyers.

Buyers of businesses are in short supply and they know it. They can afford to be very picky when it comes to which businesses they decide to purchase.

A savvy plumbing company owner who wants to sell more quickly and for more money will invest a bit of time and money in ensuring that their company looks appealing and professional.

6. Not sustaining your succession planning focus

Many times plumbing company owners who, coming to terms with their need to plan their exits, throw themselves into succession planning with a vengeance.

They hold formal planning review meetings, talk to their families and seek out the counsel of their trusted advisors and mentors,

Then, for whatever reason, the succession planning process just dies on the vine. It goes nowhere, frustrating the owner as well as all his key employees and advisors.

Why does this happen? I believe it is because business owners tend to see succession planning as a “one of” event, rather than a vital part of the company’s business planning cycle.

Exit strategies risk gathering dust unless they are integrated into the overall plans of any business long before the time comes to leave

7. Failure to integrate your plan into your company culture

It’s absolutely true: Long-term business objectives can’t be reached without an effective succession plan. That plan has to be as integrated into your company culture as your mission statement or guarantees.

Having an exit plan in place will allow you to retain your best and brightest employees by allowing them to know that when ready to sell, they will still have a future with the company.

A company built around the idea that there will be an orderly succession that keeps the business intact and thriving is a company whose managers and key employees are not inclined to abandon.

8. Not understanding that selling takes time

In the same way you take time to plan before performing a complex plumbing project, you must allow an adequate amount of preparation when you get ready to sell your company. In fact, your success is directly related to how much quality time you put into the process.

You need to sit down and write down what your idea of a successful sale looks like. How do you want the sales process to play out? Walk through everything thing has to happen to make this a reality.

You need to be able to articulate what success in exiting your business looks like to you and share this vision with your key players, employees, and family members.

Yes, this will take a lot of time and thought. But it is definitely NOT something you want to rush through just to “get it over with.” After all, if you are like most people, you are only going to get one chance to sell your business and retire successfully. Take the time to do it the right way and avoid any mistakes that could wind up significantly impacting your lifestyle in retirement.

9. Not staying on top of the plan

Exiting your plumbing business, in many ways, is a lot more work than when you first started it. There are many moving parts and complex tasks that must be executed successfully in order to avoid failure.

You need to be sure that all of your employees and family members have bought into your vision and are performing their tasks as assigned.

You are going to need the support of all key players if you are going to break past the lousy 3% success rate for selling a business in the United States.

Check in often with those entrusted to help you exit, and hold each one accountable for completing their assigned tasks within a stated time frame.

Conclusion

Selling your successful plumbing business is a process that should be begun right now, even if you think you NEVER want to sell.

By having a plan firmly established before you need it, you will be able to make better overall business decisions and give your employees, family members, and yourself more peace of mind.