Tag Archive for 'Tom Markel'

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:

    Small business capital acquisition even when the credit market stinks

    This isn’t my first rodeo. The current recession is my 7th one to work in since 1969. As I have noted several times in the past few months, the single greatest difference between this downturn and others is the collapse of the credit sector resulting in a steep reduction of credit availability to consumers and businesses. In every other economic crisis since the Great Depression, when consumers and businesses wanted to make a purchase requiring some level of credit, there has always been a healthy and motivated credit industry standing by to help put purchaser and seller together. Not this time.

    And this challenge is no respecter of size: Pharmaceutical players no less than Pfizer and Wyeth had to cobble together transactions from five banks in order to finalize their merger.

    Thankfully there are some bright spots for established small businesses. Independent community banks are still lending to small businesses that have, or want, a relationship with those institutions. Credit unions are still hanging in there and expanding their influence with businesses. But for the most part, consumer credit firms and the big banks are MIA.

    Notice my qualification word “established” in the previous paragraph. In my 2009 predictions, I said that, unlike previous recessions, the current credit dearth will not be kind to small business start-ups, which historically have relied heavily on the founders’ personal credit lines, including home equity, to capitalize their new small business baby. Consequently – and sadly – start-ups will not play as large a part in this economic recovery as they have in others.

    Also in my 2009 predictions, I said that the Obama administration would deploy part of its stimulus efforts through the Small Business Administration. The president should expand the influence of this well established channel to help small businesses acquire the capital they need through their local banks, and I think this will come to pass.

    Recently on my small business radio program, The Small Business Advocate Show, iBank founder and Brain Trust member, Tom Markel, (www.iBank.com)talked about the state of the credit landscape, plus his own proposal for what he thinks President Obama should do for small businesses in his first 100 days in office. Be sure to listen to the wisdom of this important voice on small business capital acquisition, including his multi-step small business stimulus proposal for President Obama. And don’t forget to leave a comment.




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