What do you do if you suddenly find you have sold your business? Yes, it can happen that the process is so quick, that you suddenly find yourself without a business. You have some capital, but not enough to live off, for very long. You need to live off the capital and start a new business really quick before you consume the capital. The pressure you suddenly find yourself under, can reduce your ability to think clearly and inhibit your creative processes.
A quick rule of thumb is to try and start a business that will give you some real income fairly quickly, especially if your capital base is fairly small. Remember that most businesses, particularly business-to-business sales, often have a 3 to 6 month lead time. Do you have enough capital to last 6 months? If not look for a small cash only retail opportunity. This may then cover your living expenses while at the same time preserving your capital for the development of another business with greater growth opportunities.
Once the other business is up and running you can then sell off the small cash retail business or let your wife or kids run it. Remember to ensure it has immediate sales, and no long sales cycles, which invariably means a consumer type product or service. However, even this kind of business, unless a franchise outlet, is likely to become a major source of profit overnight. However, it may generate sufficient cash flow to sustain the business into the profit zone.
Showing posts with label financial. Show all posts
Showing posts with label financial. Show all posts
Saturday, June 28, 2008
Wednesday, June 4, 2008
SMEs - the correct use of finance (2/2007)
One of the common mistakes we make as SMEs, is to use our working capital to purchase fixed assets. I see it happen so often and must admit to having done it myself from time to time.
SMEs tend to ignore the working capital needs of their business, and instead look at their bank balance, when they need to purchase an asset. A month later they cannot pay their bills.
This is linked in a way to a culture of "pay cash" that many older entrepreneurs have. These are the people who lived through the 1930's depression, and avoid credit. They too have had an impact on their children, the baby boomers, who to a lesser degree take a similar approach.
SMEs need to pay more attention to the different financial needs they have, and to then use the correct source of funding. Cash is not always the best answer, just as much as credit is not always the correct answer.
Next time you need an asset, talk to your accountant. There are a lot of factors that influence the decision, such as gearing, cost of capital, opportunity cost. If these terms are strange to you, then talk to your accountant when making the decision.
Rob Smorfitt
SMEs tend to ignore the working capital needs of their business, and instead look at their bank balance, when they need to purchase an asset. A month later they cannot pay their bills.
This is linked in a way to a culture of "pay cash" that many older entrepreneurs have. These are the people who lived through the 1930's depression, and avoid credit. They too have had an impact on their children, the baby boomers, who to a lesser degree take a similar approach.
SMEs need to pay more attention to the different financial needs they have, and to then use the correct source of funding. Cash is not always the best answer, just as much as credit is not always the correct answer.
Next time you need an asset, talk to your accountant. There are a lot of factors that influence the decision, such as gearing, cost of capital, opportunity cost. If these terms are strange to you, then talk to your accountant when making the decision.
Rob Smorfitt
SMEs - business planning and the format (2/2007)
There has been some discussion on the topic of whether a business plan is necessary. but the real issue in mond mind is only one of whether to document the business plan or not. However, whether you believe a business plan should be in writing or not, you still need a format to work to.
A wide variety of formats exists but the one I have found covers all the critical success factors in business is as follows. This is the one I use and teach my clients and students when lecturing.
* Business model
* PESTEL analysis
* SWOT analysis
* Marketing plan
* Human resources plan
* Financial plan
* Harvest plan
Business model - How will this business make it's core profit. It helps to keep the business focused on the key areas and not get distracted.
PESTEL analysis is the external environments which we need to understand, in order to know what their impact on our business might be. They must be considered in the local, regional, continental and global context. The acronym applies to the Political, Economic, Social and cultural, Technological, Environmental and Legislative environments.
SWOT analysis is the internal analysis of the entrepreneur's and the businesses Strengths and Weaknesses, and then using them to consider how the environmental issues will impact negatively as a Threat or positively as an Opportunity for the business.
Marketing plan is the plan on how to grow your business. Read Philip Kotler for more assistance on this subject.
Human resources plan looks at what people and skills you will need to achieve your growth, and allows you to plan for how you will get the skills/people.
Financial plan looks at the financial implications of the marketing and human resources plans.
Harvest plan looks at who will want to buy the business in the future, what the buying triggers will be and what you are likely to want to sell for. This then allows you to decide at what point you will sell the business and harvest the wealth you have created.
Rob Smorfitt
A wide variety of formats exists but the one I have found covers all the critical success factors in business is as follows. This is the one I use and teach my clients and students when lecturing.
* Business model
* PESTEL analysis
* SWOT analysis
* Marketing plan
* Human resources plan
* Financial plan
* Harvest plan
Business model - How will this business make it's core profit. It helps to keep the business focused on the key areas and not get distracted.
PESTEL analysis is the external environments which we need to understand, in order to know what their impact on our business might be. They must be considered in the local, regional, continental and global context. The acronym applies to the Political, Economic, Social and cultural, Technological, Environmental and Legislative environments.
SWOT analysis is the internal analysis of the entrepreneur's and the businesses Strengths and Weaknesses, and then using them to consider how the environmental issues will impact negatively as a Threat or positively as an Opportunity for the business.
Marketing plan is the plan on how to grow your business. Read Philip Kotler for more assistance on this subject.
Human resources plan looks at what people and skills you will need to achieve your growth, and allows you to plan for how you will get the skills/people.
Financial plan looks at the financial implications of the marketing and human resources plans.
Harvest plan looks at who will want to buy the business in the future, what the buying triggers will be and what you are likely to want to sell for. This then allows you to decide at what point you will sell the business and harvest the wealth you have created.
Rob Smorfitt
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