Tag Archive for 'cash management'

Tim Berry’s Top 10 reasons small business start-ups fail

In 1998, the SBA reported that 50% of small businesses fail in the first five years. That wasn’t good news but, sadly, it got worse. By 2008, the mortality of small businesses actually increased by 20% when it was reported that 50% of small businesses were now failing in the first FOUR years.

There are as many reasons why a business fails as there are business failures, but over the years it has become clear that all of those micro-reasons can be conveyed up into a smaller number of macro-reasons, including being under-capitalized, bad management, bad idea, failure to plan, etc.

Recently, on my small business radio program, The Small Business Advocate Show, I talked with someone who knows a lot about why some small business fail and why some succeed. Tim Berry is the founder of Palo Alto Software, the publisher of Business Plan Pro, the #1-rated software for developing a business plan and the author of two great books on business planning, The Plan as You go Business Plan and the business planning bible, Hurdle: The Book of Business Planning.  Tim is also one of the founding members of my Brain Trust.

Take a few minutes to listen to our conversation on why businesses fail so you can avoid making these mistakes and land in the survive and succeed category. And, as always, leave your own story and/or comments. Listen Live! Download, Too!

For small business, Cash is no longer King – it’s the Emperor

For generations, business owners have learned that while Profit may be the Queen of business, Cash is King. And there is never a moment in the life of any business, large or small, when this generally accepted truth doesn’t apply. But in 2009, or anytime the economy slows, small businesses must elevate Cash to an even more supreme level. Consequently, these days, and for the foreseeable future,

Cash is Emperor.

Any Questions?

Blasingame’s 3rd Law of Small Business states: “It’s redundant to say, ‘undercapitalized small business.’” There are at least two reasons this statement is a law and not a maxim:

1. In every small business, there is always a place to put whatever capital may be available.

2. Small businesses typically have only three sources of capital: a) Retained earnings – profits left in the business; b) Bank loans; c) Investment capital, most of which comes from the owner.

Because of the impact of Blasingame’s 3rd law, any cash in a small business is precious and, therefore, availability must be maximized.

There are many fundamental best practices that can be executed to maximize cash. Here are a few:
- Sell at a gross profit margin that will more than fund operations.
- Manage expenses like a she-bear guards her cubs.
- Manage accounts receivable like your life depends upon it – it might.
- Establish and maintain a close relationship with a bank.
- Re-invest as much of the profits back into the company as possible.

Recently on my small business radio program, The Small Business Advocate show, I interviewed three top experts on cash management and capital acquisition. First, Gene Siciliano, author of Finance for the Non-Financial Manager, second, Joe Knight, author of Financial Intelligence for Entrepreneurs, and finally, Tom Markel, founder of iBank.com. Be sure to take a few minutes to listen to what these three world-class cash management experts have to say about this critical small business management fundamental. And, of course, be sure to leave your own thoughts.
For Gene Siciliano: For Joe Knight:
For Tom Markel:

    The Small Business Survival Song: Cash is KING!

    You know how you will hear a song that you absolutely can’t stand – on the radio or someone whistling it? And for the rest of the day you can’t stop it from playing, over and over and over again in your head. It’s maddening, right?

    Well, there is a song that I want to introduce you to which I call the “Small Business Survival Song.” I don’t care what melody you put under it, but for the foreseeable future, here are the lyrics that MUST by constantly playing in your head: Cash is KING!

    These words are actually the second part of this short song, which goes like this: “Profit is the Queen of business, but Cash is KING!” But right now, and for some time to come, profit is not your prime motivator – your prime motivation is CASH!

    For at least the next 12 months, you must live, eat, breathe, sleep and dream these most fundamental of all entrepreneurial survival lyrics: Cash is KING!

    When you’re spending money on anything – and I mean ANYTHING: Cash is KING!

    When you’re considering a new contract or renewing an old one: Cash is KING!

    When you’re making a sale on terms, regardless of who the customer is: Cash is KING!

    This week I interviewed two outstanding cash flow management experts on my small business radio program, The Small Business Advocate Show. The first one was Tom Markel- founder, chairman and CEO of ibank.com- who’s especially knowledgeable about cash and credit. The second interview was with Phil Holland, founder of My Own Business, Inc., who is an expert on small business start-up and growth strategies.

    Both of these members of my Brain Trust offered several outstanding tips and best practices when it comes to that song I’m trying my best to get stuck in your head: Cash is KING! Invest a few minutes to learn what just might be the difference between surviving and, well, you know. And be sure to leave a comment, if you want.

    Tom Markel’s interview: Phil Holland’s interview

    By the way, did I mention that Cash is King?

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