Archive for the 'Business planning' Category

How to get a bank loan: Part One

One of the markers of this post-recession, so-called recovery has been the practice of deleveraging. Across the economy, from consumers to businesses large and small, debt has become something to get rid of.

Out here on Main Street, this trend has manifested in a dramatic drop in bank borrowing by small firms. Indeed, for more than a half decade, survey after survey has shown that less than 5% of business owners report their borrowing requirements have not been met, while the majority say emphatically they don’t want or need a loan. Consequently, there’s a pretty good chance your business hasn’t made a loan request to a bank in a while.

But the economy will eventually kick into an expansion phase, and what has become no less than a de facto moratorium on borrowing won’t last forever. And since most small business growth capital comes from bank loans, even for well-capitalized firms, it’s always good to revisit a few banking relationship fundamentals.

But don’t worry. If you’ve never asked a banker for a loan, or if it’s been a while, getting a bank loan is a lot like the process of qualifying a prospective customer. For example, you want to know these three things:

1. Who decides?

You have the right to ask who is going to make the decision on your loan. Can your loan officer decide, or will it go to the local loan committee or somewhere else? Why do you care? The more people involved in the loan approval process increases the scrutiny of your deal, which means more questions and more time for you to budget from proposal to answer.

2. What do they need?

Your banker will ask for personal and business financial information. They might accept last year’s business numbers, but they could also ask for an interim report. Depending on the size of your request and what you’re using the money for, they may ask for a business plan. If the loan is for real estate, a current appraisal will be required.

Don’t give the bank more than they ask for, but give them everything they ask for. Remember, the quicker your banker gets the information, the quicker you’ll get an answer.

3. How do they want it?

Ask your banker what information can be presented verbally and what needs to be in writing, whether hard copy or electronic. Whether you’re borrowing $5000 for a computer, or $5 million to buy out a competitor, knowing as much as you can about the loan approval process will significantly improve your chances of not only getting a quick answer, but a yes.

Next time, Part Two: What motivates your banker.

Write this on a rock …

Qualify a bank like you do customers, and be sure to do your homework.

Business Growth: An Irony in the Marketplace

Here’s a scenario that plays out in the marketplace every day in Small Business, USA:

“My business is really growing these days,” a small business owner confides to his friend, “but we’re still experiencing negative cash during the month.”

And then, with that deer-in-the-headlights look on his face, he completes his concern, “I thought by now, with sales and profits up, cash flow would be the least of my worries. I used to be afraid I couldn’t grow my business; now I’m worried that our growth will collapse it.”

This entrepreneur’s lament is one of the great ironies of the marketplace: A small business in danger of failure as a result of extreme success.

Beware Blasingame’s Razor: It’s redundant to say, “Undercapitalized small business.”

This maxim is especially true for growing small companies, because sales volume growth depletes cash in two dramatic but predictable ways:

1. When the business is growing, organizational upgrades are to be expected in order to handle the new demands ­ new vehicles, staff, technology, etc. Of course, you must fund these things, often while the exciting new sales growth is merely on paper, and not yet in the bank.

2. Selling to customers on an open account - where payment for work or products is collected after delivery - is essentially making loans to customers. And while it’s true that your vendors may let you do the same, typically they allow you less time to pay them than you allow your customers to pay you. This difference between when you pay and when you collect mathematically creates negative cash.

Here’s how to manage these two challenges:

1. Growth plans must be compatible with the ability to fund that growth. Too often we think that the big growth hurdle is to get customers to say yes. But we must consider the impact of sales growth on cash flow before delivering a proposal. And don’t be surprised if the answer to this equation shows that you actually have to turn down some business.

2. Don’t use operating cash to fund acquisition of capital assets that have a life expectancy of more than 2 years. Capital purchases should probably be funded by bank debt, and the interest you pay is the wages of Blasingame’s Razor.

If you don’t like debt, or paying interest, that should motivate you to leave profits in the business as retained earnings, which is ultimately the best way to overcome Blasingame’s Razor.

3. Do a better job of collecting receivables on time. Understanding the relationship between Accounts Receivable Days and Accounts Payable Days is an “ah-ha” moment for any small business owner. Sustained growth cannot happen without continuous and regular monitoring of this ratio.

Write this on a rock…. If your business is growing nicely, congratulations. But beware Blasingame’s Razor. It is possible to succeed yourself right out of business.

The rare and wild entrepreneur

If you venture into the marketplace jungle, you may be able to observe that rare wild creature, the entrepreneur, in his or her natural environment (darting is not necessary, entrepreneurs are very gentle - just rub their stomachs). As you study them, you will find levels of vision, curiosity, courage, tenacity, and faith. Here’s what to look for in order to identify this elusive critter:


Vision: Entrepreneurs see things and consider the possibilities before they exist, even as the world is telling them, “It won’t work.” When entrepreneurs are deep into their vision they go into what their families call a “zone,” which is when it’s easiest to slip up on them.

Curiosity: Entrepreneurs ask questions other humans don’t. They can’t help it. If someone asks you a question and you have no idea what they are talking about, you are probably having a close encounter with an entrepreneur. Don’t be irreverent; you might be at ground-zero of the 21st century equivalent of Velcro or the microchip.

Courage: Entrepreneurs attempt things that other human species won’t. As you peer through the triple canopy at your subject, look for death-defying acts in the face of conventional wisdom. Entrepreneurs eat conventional wisdom for breakfast.

Tenacity: Entrepreneurs keep trying when other humans give up. They have a high pain threshold, which when combined with a visceral desire that can only be compared to the maternal instinct, delivers a primal display of tenacity which often is frightening to other humans. If the entrepreneur you are observing is crouching, lie down quickly. You probably aren’t in danger, but fainting is a possibility.

Faith: Entrepreneurs believe in themselves and their vision. The great writer and even greater curmudgeon, H.L. Mencken, once said, “Faith may be defined briefly as an illogical belief in the occurrence of the illogical.” That’s our entrepreneur! If you see someone demonstrating an inordinate commitment to an “illogical belief,” congratulations. You’ve found your entrepreneur.


Catch and release, please.

Replace worry & fear with business performance

In his book, Blue Highways, William “Least Heat Moon” Trogdon said his Osage Indian grandfather, William “Heat” Moon, taught him this about worry: “Some things don’t have to be remembered; they remember themselves.”

Owners are justified in worrying about their small businesses, but sometimes they waste emotional energy worrying about things over which they have little or no control, or aren’t likely to happen.

In the movie, Bowfinger, Eddie Murphy played Kit Ramsey, an action movie star also famous for being a pathological worrier. He leads a frightened and miserable life because he worries about strange things that would never happen.

Ramsey’s greatest worry was being captured, killed and eaten by space aliens. He also worried about being crushed by a gigantic foot, or that his body might burst into flames. Pretty silly, huh?!

Watching Murphy play this unstable character is hilarious. But it’s not funny or silly when you and I worry about things that, like Ramsey’s obsessions, probably will never happen.

·  Instead of aliens, how much do you stress out about your business being killed and eaten by the dreaded Internet competition?

Stop obsessing about online competitors. First, you should be an online competitor yourself. Second, without a fixed base, online-only competitors may have what customers need, but you have something more powerful: You know what customers want.

·  Instead of being stepped on by a giant foot, do you obsess about being squashed by one of the Big Boxes?

In The Age of the Customer, prospects often rule you in or out before they know how much you charge. You can establish a level of relevance with prospects and customers that no Big Box can, as they continue to focus first on being competitive.

·  Instead of bursting into flames, do you wake up in the night obsessing that your business might go up in smoke if customers abandon you?

In The Age of the Customer, you actually should obsess about customer expectations, otherwise they won’t really leave, you’ll just become irrelevant.

Instead of living a frightened and miserable life like Kit Ramsey, put that energy into performing so well that any competitor would be hard-pressed to take customers away. Build relationships with customers to the degree that when something they want pops into their heads, as Trogdon’s grandfather would say, your company remembers itself.

Write this on a rock -

Don’t live a frightened and miserable life. Replace worry with action and performance.

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.

Continuing education leads to more intelligent planning

The life of a small business owner is hectic, to say the least. Multi-tasking is the norm. So much of our day is spent reacting to the crisis of the moment, conducting the business of the day, and initiating our plans for the future. And once we acquire a level of competence in this life we’ve chosen, it’s natural to want to relax, settle in, and seek the ease that can come with familiarity and repetition.

But the marketplace isn’t a comfortable, lumbering vessel anymore, rolling along like a single screw trawler. It’s become more like a vibrant starship capable of warp speed. Indeed, it takes a much more knowledgeable person to successfully operate a business in today’s marketplace than it did even 10 years ago.

The great American revolutionary and legendary wordsmith, Thomas Paine, said, “I have seldom passed five minutes of my life, however circumstanced, in which I did not acquire some knowledge.” This from a corset maker who dropped out of school at 13.

You can’t anticipate everything, so react when you must. The business of the day, obviously, must be attended to. And what will you have tomorrow if you don’t plan for it?

But however circumstanced, before you succumb to the human tendency to rest on your laurels, make it part of your daily tasks to acquire some knowledge.

Make it your daily intention to learn something new that might help you react more effectively, operate more profitably, and plan more intelligently.

Why I Thanked My Boss for Firing Me

In 1989 I was managing the national ad sales effort for a sports magazine, based out of my home office. Having designed that office space as part of the house I’d built a dozen years earlier when I was a territory sales rep for Xerox, I was home-based long before being home-based was cool.

At 8:30am one Monday the phone rang – of course, I was at my desk. The caller was a boss who got to the point: They had a new plan for how they were going to market, but I wasn’t going to be part of their plan. The call was over by 8:35.

As I collected my thoughts, the first clear one was that I’d better dust off my resume. After all, I had a pretty good one: 23 years of successful corporate employment, from sales rep to C-Suite. And then there were those five other details: a wife, two teenagers and two mortgages.

But for some reason, I couldn’t pull the trigger. I remember thinking, “I don’t need any help screwing up my life; I can do that by myself.” So at 8:36am, my Macintosh and I designed the logo and business cards for my new business, Jim Blasingame & Associates, Business Consultants. At that moment the Mac and a laser printer were my associates.

Reinvention was nothing new to me. I had successful tenures in more than one industry over the years. But this trip was new because I was now going to work the high-wire act of entrepreneurs, which by definition means without a net. A professor friend calls it, “Living by your wits.”

That life-changing phone call came 26 years ago this week and I’ve since reinvented myself as a business owner at least one other time. Along my entrepreneurial journey there have been good times and bad times. Speaking of the latter, there were times when I didn’t know if I would be in business one more hour, let along another day. Entrepreneurship is not for sissies.

But in all the time since that momentous call I’ve never looked back – even when offered a job during one of those tough times. I’ve loved being a small business owner for the past 26 years, warts and all, for one prime reason: ownership. But not just business ownership.

This might sound strange, but I love that I have ownership of the challenges, too. All of them, against all odds. Because when you own the challenges, by definition you own the opportunities you turn them into.

Money and stuff are just ways to keep score. Claiming ownership of a Tyrannosaurus Rex business-eating challenge and turning it into your advantage is, to me, what being a small business owner is all about.  Perhaps you can relate.

By the way, within a year I called that boss and thanked him for firing me.

Write this on a rock …

Ring, ring … “Hello. Oh, hi, boss. What? I’m fired? Okay. Thank you very much.”

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.




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