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Love the One Your With…

Posted by Elgin Carelock on August 1st, 2009

As a member of several business marketing groups, I constantly invade discussions of how to grow your business during these challenging times. Everyone is looking for the next greatest technique to drive new customers to your business.Whether it is network marketing, multi-level marketing, or viral marketing one key fact remains; "take care of your existing customer base". In a song written by Stephen Stills it says, "if you can’t be with the one you love, love the one your with". No better advice can be given as businesses seek to increase revenue and profits. We may not be able to lure the thousands of members of the various social networks, but we can build a better relationship with the customers we already have.

The best feature of proper client relationship management is the ease with which it can be implemented. If business is slow, take the time to write a letter to your existing customers to thank them for their loyalty. Explain how you would like to partner with them to create a better company and provide products and services that are important to them. Ask them to join you and other customers in a round table discussion, webcast, or any number of low cost conferencing.

During this time find out information concerning their current demographics. The affect of the economy on their purchasing, which items are considered crucial in their daily operations, and the overall affect of the economy on their friends and family. The next step would be to unveil a program of value added services that you have designed to not only maintain their current status as your customer, but create an atmosphere where they describe what they would buy if there has been a extended period since their last purchase. Also, in subsequent sessions, try to become more familiar with your clients; ask them for birthdays, anniversaries, and other important dates by using surveys that get into the profile of your customer. Add those facts to your database system and send e-cards to mark those occassions shared.

Once you have established a stronger relationship with your client, ask if they would recommend one other person whom you may contact to broaden the scope of opinions and offer a thank you gift to your client. The new person represents an opportunity to peer into your clients circle of influence and to test the strength of the value added product/service you collectively developed. As you begin dialogue with the new prospect, allow the original client to sit in on discussions to see how the product he/she helped designed is received by a person in their peer group. Just imagine the empowerment your client would feel if it was well recieved and the opportunity for greater partnership should it not. This is truly a win-win for the business and creates a stronger bond with its client base.

I’m sure you are beginning to see through my attempt to cloak the fact that I too am suggesting using viral and social marketing to grow business, but the difference is you are doing it on a personal basis with someone who knows you and now will have a relationship that causes them to want to see you succeed.

Marketing, Business Development | No Comments »

The Heartbeat of America

Posted by Elgin Carelock on June 25th, 2009

Now that we are certain the light at the end of the tunnel was the tail lights of the train that ran us over, we can begin to plan the recovery of our economy. While there is no arguing the creeping inflation and rising unemployment, the other undeniable fact is Americans needs to get a hold of their fears and get back to work. And I’m not tlking about the 9 to 5 we all cherish, but the work of rebuilding our communities.

As we look at our country from a county to county basis we find two persistent problems. First, the people who normally buy products and services don’t have any money and secondly, we have to turn around our sinking consumer confidence. With the slow down in the economy, businesses are laying off employees in an attempt to remain open, but is that truly what is needed? What most fail to realize is every employee is some business’s customer. You may be able to save your bottom line, but what damage did you cause in the community? Also, this fear of losing your job causes a pessimism that keeps our money in our pockets "just in case". We do without the pleasurable things in the hopes that if the bottom falls out we can some how sustain ourselves for a while. But who are we kidding, if you don’t have at least six months of salary saved, you won’t make it anyway.

All of our fates are tied together on the local level and the heartbeat of America is the pulsing of economic prosperity town by town, city by city. We have to reestablish our "Buy Local" mentality, which keeps the local small businesses hiring, which keeps the employees spending, which causes growth and so on. Even the federal government knows this to be true, which is evidenced by the small business stimulus loans currently being offered. Under this program small business owner can get a 0% interest loan of $35,000 to help save their business www.sba.gov.

There has been much debate of the theory of "Trickle down" economics. What I am proposing is just the opposite. In the "Buy Local" business model, funds trickle up to the larger markets as the smaller markets grow faster than capacity. For example, if acounty that had 10% unemployment was able to reduce that number to 5%, then the need for additional resources would increase as more demand from the employed grows. This increase would cause more suppliers to appear, which would add more jobs, which causes hire wages, which draws more people to the region, which causes more retailers to open, which causes more jobs, which causes a need for more housing, which causes more jobs….are you starting to get the point?

The one downside in this theory is there will be casualties. Invariably a switch in economic theory will cause a percentage of people to get caught under the wheels of progress. There will be some that spend their savings to try to get the local economy going and not have enough resources to take advantage of the growth. There will be those who don’t believe and will continue to live their lives in fear and finally, there are those who don’t care, they have enough money, screw everyone else.

In either respect, we have reached the end of our democratic republic and change is inevitable. We have to decide what derivation of socialism, marxism, or facism we can endure, but in the meantime, those of us who like things just the way they are can get together and fight the imperial government one city, county, or state at a time.

Thought of the Day, Business Development | No Comments »

Business Plan the Series - Week 9

Posted by Elgin Carelock on June 4th, 2008

Please excuse my absence over the past weeks, I have had too many things bothering me and lost focus of our last two weeks. We are working in the Financing section of the business plan and are going to cover projected Profit and Loss Statements (P&L), projected Cash Flow Statement, and projected Balance Sheet. These documents form the cornerstone of your business plan and further underscore your understanding of what it takes to run a successful business. As I mentioned previously, if this is a start up business, you need to use industry norms as the basis for your sales and projected growth.

Projected Profit and Loss Statement

A profit and loss statement shows the disbursement of all expesnses incurred in the operating your business during the prior year against net sales. Since we are discussing your first year, you are going to use projected figures, which will be compared to in years two and three. The bottom line of the atatement shows a net profit or net loss for the year.

Pro Forma Profit and Loss

FY 2002 FY 2003 FY 2004

Sales $501,200 $576,380 $662,837

Direct Costs of Goods $177,680 $204,332 $234,982

Other $0 $0 $0

———— ———— ————

Cost of Goods Sold $177,680 $204,332 $234,982

Gross Margin $323,520 $372,048 $427,855

Gross Margin % 64.55% 64.55% 64.55%

Expenses

Payroll $123,900 $135,450 $162,828

Sales and Marketing and Other Expenses $24,866 $27,420 $30,521

Depreciation $12,000 $13,500 $15,000

Leased Equipment $1,800 $1,800 $1,800

Utilities $3,600 $3,600 $3,780

Insurance $4,200 $4,500 $4,725

Rent $88,000 $88,000 $88,000

Payroll Taxes $30,975 $33,863 $40,707

Other $0 $0 $0

———— ———— ————

Total Operating Expenses $289,341 $308,132 $347,361

Profit Before Interest and Taxes $34,179 $63,916 $80,494

EBITDA $46,179 $77,416 $95,494

Interest Expense $8,433 $6,730 $5,040

Taxes Incurred $6,445 $14,296 $19,178

Net Profit $19,302 $42,889 $56,276

Net Profit/Sales 3.85% 7.44% 8.49%

Monthly Statement

Because the P&L statement is a operations document, you should produce it monthly; that way unfavorable financial trends will be identified early before they get out of control. It is also a good practice to transfer your monthly data into a spreadsheet. This will give you the ability to use a graph for a quick diagnosis before reading the detailed statements. Most accounting software such as Quickbooks Pro will give you that functionality.

Year to Date Statement

In addition to the monthly statements, you should submit a year to date analysis that shows the trends in both sales and expenses. The YTD statement is simply a compilation of your monthly statements to that point.

Projected Cash Flow Statement

The Cash Flow statement provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter. It is calculated by adding noncash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole. Cash flow can be used as an indication of a company’s financial strength.

Pro Forma Cash Flow

FY 2002 FY 2003 FY 2004

Cash Received

Cash from Operations

Cash Sales $501,200 $576,380 $662,837

Subtotal Cash from Operations $501,200 $576,380 $662,837

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $8,000 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $509,200 $576,380 $662,837

Expenditures FY 2002 FY 2003 FY 2004

Expenditures from Operations

Cash Spending $123,900 $135,450 $162,828

Bill Payments $335,368 $377,512 $426,127

Subtotal Spent on Operations $459,268 $512,962 $588,955

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $1,800 $200 $0

Other Liabilities Principal Repayment $10,000 $0 $0

Long-term Liabilities Principal Repayment $22,000 $24,000 $24,000

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $1,200 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $494,268 $537,162 $612,955

Net Cash Flow $14,932 $39,218 $49,882

Cash Balance $109,932 $149,150 $199,033

Projected Balance Sheet

A Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders’ Equity

Balance Sheet

Pro Forma Balance Sheet

FY 2002 FY 2003 FY 2004

Assets

Current Assets

Cash $109,932 $149,150 $199,033

Inventory $16,748 $19,260 $22,149

Other Current Assets $0 $0 $0

Total Current Assets $126,680 $168,410 $221,181

Long-term Assets

Long-term Assets $62,700 $62,700 $62,700

Accumulated Depreciation $12,000 $25,500 $40,500

Total Long-term Assets $50,700 $37,200 $22,200

Total Assets $177,380 $205,610 $243,381

Liabilities and Capital FY 2002 FY 2003 FY 2004

Current Liabilities

Accounts Payable $19,303 $47,719 $53,214

Current Borrowing $200 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $19,503 $47,719 $53,214

Long-term Liabilities $108,000 $84,000 $60,000

Total Liabilities $127,503 $131,719 $113,214

Paid-in Capital $25,000 $25,000 $25,000

Retained Earnings ($13,300) $6,002 $48,891

Earnings $19,302 $42,889 $56,276

Total Capital $31,002 $73,891 $130,167

Total Liabilities and Capital $158,505 $205,610 $243,381

Net Worth $49,876 $73,891 $130,167

The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at that point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period. Neither statement is better than the other - rather, the financial statements are built to be used together to present a complete picture of a company’s finances.

Business Development | No Comments »

Business Plan the Series - Week 8

Posted by Elgin Carelock on May 14th, 2008

Welcome to the final section of the business plan before the Executive Summary…..Yeah!! Unfortunately the Financial Plan section takes longer than nearly any other section in the plan. This is true because here you will establish your company’s goals and expectations for sales, revenue, and growth. It is important that you properly research your industry and set expectations based on industry performance over the last two to three years. If your company is a smaller section of a larger industry, try to find a breakout percentage and use it for your research.

If you have a innovative product and stand to gain far above the norm, use industry standards anyway. Nothing scares investors more than prospective financial statements that far exceed the norm. It is better to out perform expectations then to have to explain miscalculations in the second phase of funding.

As you can see by the diagram below, it will take an additional couple of weeks to discuss the sections of the financial plan. This week we will discuss important assumptions, key financial indicators, and break even analysis.

Financial Plan

Important Assumptions
- General Assumptions
Key Financial Indicators
- Benchmarks
Break-even Analysis
- Break-even Analysis
- Break-even Analysis
Projected Profit and Loss
- Profit and Loss
- Profit Monthly
- Profit Yearly
Projected Cash Flow
- Cash
- Cash Flow
Projected Balance Sheet
- Balance Sheet
Business Ratios
- Ratios

Important Assumptions

Initially your assumptions should address those factors in your industry that traditionally affect your business’s finances. For example, if you are a bathing suit manufacturer in the United States, stating a 15% drop in production during the 4th quarter is a reasonable assumption. Be certain to list any mitigating factors such as government regulations, tax increases, seasonal expenses, and/or predictable fluctuations in revenue.

General assumptions should list factors that have a reasonable expectancy to remain consistent throughout the time period specified in your business plan. For example if your are a car dealer, you can list the following:

New car inventory will be maintained at 40% of showroom
Manufacturers setback remain at 3%
Sales team will contain 10 members
Sales commision average 15%

These assumptions can easily be put into a spreadsheet and the results posted in your plan.

Key Financial Indicators

Key Financial Indicators (KFI) represent the major financial factors that affect your business during the periods of your business plan including revenue, expenses, profit margin, inventory, and employment costs to name a few. Of course, each business will have different KFIs, but the intention is the same; to provide a overview or 10,000 foot view of the information that will be provide in susequent reports. I have included an example in graph form below:

Break Even Analysis

The break even analysis represents the point where revenues and are equal. Graphically it shows how much income is required to offset all of the expenses your business incurs on a monthly basis. It is very important that you have accurate figures for this section, make sure all of your expenses listed on your Income Statement, Balance Sheet, and P/L Statement are included in your break even analysis. The graphical representation below gives a gfood example of how your analysis should look.

Next week will we complete the Projected Profit and Loss Statement and the Projected Cash Flow Statement. Research is the key to solid financials and I am here to answer any questions you may have.

Business Development | No Comments »

Business Plan the Series - Week 7

Posted by Elgin Carelock on April 28th, 2008

Can you believe it, only two more sections and we can write the Executive Summary! This week we will be discussing the Management Summary. The management summary covers the management team and personnel requirements.

Management Team

If you are a business seeking funding, this section is where you convince the potential investors of the quality and experience of those who will run the business. Remember, lending is all about risk assessment (how likely are we to get our money back and how long will it take) and investors first look at the executive level to determine the quality of those who set the vision.

As you begin to list the officers, be careful not to have it read like a resume. Give the job description of each position and how each person is uniquely qualified to execute those responsibilities. Stay with pertinent information regarding their qualifications for being part of the team, but do not describe prior work experiences in too much detail - you can include their resume in the Appendices.

The key positions to be listed are the President/CEO, VP Sales/ Marketing and Secretary/Treasurer. These are the vital functions within an company’s structure and represent the vision, implementation and administration of your business. If you are a Sole Proprieter or a two person Partnership, you will need to have resources that will function in the needed capacity whether compensated or non-compensated. Why? because investors know no business can be successful when the principles perform all facets of operations.

Remember, this is a three to five year plan, so it is a good idea to include the job descriptions of positions you have not filled. This will show your understanding of the type of infrastructure you will need to accomplish the financial goals you stated in the last section and if you can justify the principles functioning in many roles, it shows you have plans to alleviated that situation.

Personnel Requirements

Just as with the management team, list the job descriptions of your supporting staff. Whether you have completed hiring or not, it shows the framework on which your company will be built. Include the annual expense of the position and at which point in your plan those positions will be added. Use a spreadsheet to represent total personnel expenses as illustrated below:

Personnel Plan

FY 2002 FY 2003 FY 2004

Store Managers/Partners $96,000 $96,000 $100,000

Salespeople — Full-time $0 $0 $0

Salespeople — Seasonal $4,650 $3,070 $3,380

Stock/Delivery — Full-time $21,320 $23,500 $28,850

Stock/Delivery — Seasonal $2,460 $2,700 $2,970

Other $0 $0 $0

Total People 6 7 7

Total Payroll $124,430 $125,270 $135,200

The figures in your spreadsheet should reflect those in your pro-forma balance sheet. Take the time to research the average salaries and hourly rates for the positions to be added. A good source for this would be www.salary.com.

Management, Business Development | No Comments »

Business Plan the Series - Week 6

Posted by Elgin Carelock on April 21st, 2008

This week we will finish the Strategy and Implementation section by discussing what I feel is the most crucial aspect of marketing for small businesses, Strategic Alliances. Under this heading, you will list all of your collaborative relationships and how you will use them to the benefit of your company. Whether professional organizations, vendors, suppliers or other businesses, you need to show your potential investors you understand it is near impossible to be successful on your own.

In design your strategic alliances should fall into two categories, resources and business partners. Resources represent those persons or organizations that will provide you with insight into areas of strategies you may not be familiar with, but are essential to your success. For example, having a relationship with a graphic artist has a two fold benefit. First, they can provide you with artwork that will increase customer awareness and brand recognition. Secondly, the can provide insight into what you competitors are doing, what campaigns have been successful in the past, as well as colors, images, and verbiage.

Business partners are another source of insight and information, but also represent the opportunity for expansion. Companies that share you target market can be geat business partners, even though you are competiting for the same discretionary income. A good example would be a partnership of an exterior painter and a landscape designer. Both deal with exterior beautification and can bring each other in on large projects. One of the best ways to esablish these types of partnerships is networking. Networking puts you in front of companies that have similar interests, vocations, or target audiences. Since you have already identified your target segments in the previous sections, finding a good business partner is more a matter of determining who has the same dedication to quality service, professionalism, and reputation worthy of your association.

Be very vigilant in accepting strategic partners, do your research, before putting anyone’s name in association with your company.

Business Development | No Comments »

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Archive for the 'Business Development' Category

Love the One Your With…

The Heartbeat of America

Business Plan the Series - Week 9

Business Plan the Series - Week 8

Business Plan the Series - Week 7

Business Plan the Series - Week 6

Pro Forma Profit and Loss
	FY 2002	FY 2003	FY 2004
Sales	$501,200	$576,380	$662,837
Direct Costs of Goods	$177,680	$204,332	$234,982
Other	$0	$0	$0
	————	————	————
Cost of Goods Sold	$177,680	$204,332	$234,982

Gross Margin	$323,520	$372,048	$427,855
Gross Margin %	64.55%	64.55%	64.55%


Expenses
Payroll	$123,900	$135,450	$162,828
Sales and Marketing and Other Expenses	$24,866	$27,420	$30,521
Depreciation	$12,000	$13,500	$15,000
Leased Equipment	$1,800	$1,800	$1,800
Utilities	$3,600	$3,600	$3,780
Insurance	$4,200	$4,500	$4,725
Rent	$88,000	$88,000	$88,000
Payroll Taxes	$30,975	$33,863	$40,707
Other	$0	$0	$0
	————	————	————
Total Operating Expenses	$289,341	$308,132	$347,361

Profit Before Interest and Taxes	$34,179	$63,916	$80,494
EBITDA	$46,179	$77,416	$95,494
Interest Expense	$8,433	$6,730	$5,040
Taxes Incurred	$6,445	$14,296	$19,178

Net Profit	$19,302	$42,889	$56,276
Net Profit/Sales	3.85%	7.44%	8.49%

Pro Forma Cash Flow
	FY 2002	FY 2003	FY 2004
Cash Received

Cash from Operations
Cash Sales	$501,200	$576,380	$662,837
Subtotal Cash from Operations	$501,200	$576,380	$662,837

Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$0	$0	$0
New Other Liabilities (interest-free)	$0	$0	$0
New Long-term Liabilities	$0	$0	$0
Sales of Other Current Assets	$8,000	$0	$0
Sales of Long-term Assets	$0	$0	$0
New Investment Received	$0	$0	$0
Subtotal Cash Received	$509,200	$576,380	$662,837

Expenditures	FY 2002	FY 2003	FY 2004

Expenditures from Operations
Cash Spending	$123,900	$135,450	$162,828
Bill Payments	$335,368	$377,512	$426,127
Subtotal Spent on Operations	$459,268	$512,962	$588,955

Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$1,800	$200	$0
Other Liabilities Principal Repayment	$10,000	$0	$0
Long-term Liabilities Principal Repayment	$22,000	$24,000	$24,000
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$1,200	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$494,268	$537,162	$612,955

Net Cash Flow	$14,932	$39,218	$49,882
Cash Balance	$109,932	$149,150	$199,033

Pro Forma Balance Sheet
	FY 2002	FY 2003	FY 2004
Assets

Current Assets
Cash	$109,932	$149,150	$199,033
Inventory	$16,748	$19,260	$22,149
Other Current Assets	$0	$0	$0
Total Current Assets	$126,680	$168,410	$221,181

Long-term Assets
Long-term Assets	$62,700	$62,700	$62,700
Accumulated Depreciation	$12,000	$25,500	$40,500
Total Long-term Assets	$50,700	$37,200	$22,200
Total Assets	$177,380	$205,610	$243,381

Liabilities and Capital	FY 2002	FY 2003	FY 2004

Current Liabilities
Accounts Payable	$19,303	$47,719	$53,214
Current Borrowing	$200	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$19,503	$47,719	$53,214

Long-term Liabilities	$108,000	$84,000	$60,000
Total Liabilities	$127,503	$131,719	$113,214

Paid-in Capital	$25,000	$25,000	$25,000
Retained Earnings	($13,300)	$6,002	$48,891
Earnings	$19,302	$42,889	$56,276
Total Capital	$31,002	$73,891	$130,167
Total Liabilities and Capital	$158,505	$205,610	$243,381

Net Worth	$49,876	$73,891	$130,167

Personnel Plan
	FY 2002	FY 2003	FY 2004
Store Managers/Partners	$96,000	$96,000	$100,000
Salespeople — Full-time	$0	$0	$0
Salespeople — Seasonal	$4,650	$3,070	$3,380
Stock/Delivery — Full-time	$21,320	$23,500	$28,850
Stock/Delivery — Seasonal	$2,460	$2,700	$2,970
Other	$0	$0	$0
Total People	6	7	7

Total Payroll	$124,430	$125,270	$135,200