INTRODUCTION xixPART 1: FINANCE YOUR BUSINESS 11 So, What Kind of Business Should You Start? 3Introduction 3Why Do You Want to Be an Entrepreneur? 4Money 4Freedom 4Empire building 4What Kind of Business Should I Start? 4Manufacturing business 5Retail/Wholesale business 5Service business 5Eight Questions to Ask Yourself 62 Is It a Business or a Hobby? 9Introduction 9What Is the Difference Between a Business and a Hobby? 10It's Not Always about the Money 11Contentsnumbers 101SMALL BUSINESSforv3 Build or Buy? 13Introduction 13Building a Business from Scratch 14Buying an Existing Business 15Financial Considerations in the Build-versus-Buy Decision 16Considering a start-up business 16Considering a business purchase 18What's Right for You? 224 Getting Your Personal Finances in Order 23Introduction 23Your Retirement Goals 24How much will you need at age 60? 25How much do you have to put away between now and retirement? 25The Concept of Net Wealth 26Debt Management 26Your Credit History 28Insuring Your Assets 29Life insurance 29Mortgage insurance 29Property and casualty insurance 30Health insurance 305 Setting Your Business Goals 33Introduction 33Chasing the Almighty Buck 33What Is the Purpose of Your Business? 35The Business Plan 36What Should Your Business Plan Include? 36The Monthly Management Operating Plan 36Your Exit Strategy 396 Putting Your Money Where Your Business Plan Is 41Introduction 41Projecting Your Funding Needs 42Paying for the start-up costs 42Providing liquidity to the business 43Sources of Funding 45A Bank's Perspective 46vi Finance & Grow Your New Business: Get a Grip on the MoneyContents vii7 Debt Financing 49Introduction 49Your Own Resources 49Credit Cards 50Suppliers 50Friends and Family 51Banks 51Leasing Companies 52Private Lenders 548 Equity Financing 55Introduction 55Common Shares 56Preferred Shares 56Partnership 56Joint Ventures 57Venture Capitalists 589 Risky Business: How to Assess Business Risk 59Introduction 59Secured Loans 59Personal Guarantees 60Fixed Price Agreements 60Interest Rate Risk 61Foreign Exchange Risk 61Economic Dependence 6110 Home Sweet Home 63Introduction 63Does It Really Save Me Money? 63How Will It Affect My Personal Life? 65The neighbors 65The on-call syndrome 65The convenience 66Willpower 6611 Choosing Your External Team 69Introduction 69Your Lawyer 70Your Accountant 70Your Financial Adviser 72Your Board of Directors 7312 Assessing the Competition 75Introduction 75Identify the Competition 76What Do They Do Right and Wrong? 76How Are They Positioned to Take Advantage of Opportunities? 77How Vulnerable Are They to Changing Market Conditions? 77How Do You Stack Up? 77Competitive Analysis 78Intelligence Resources 7813 Forecasting Profit 81Introduction 81Keep Your Bookkeeping Up-to-Date 81Always Forecast a Rolling 12 Months 81Tighten Up Billing and Collection Policies 82Hire Someone to Do It If You Can't 82Keep on Top of Changes in the Operating Environment 82Keep the Work Coming In 83Continually Assess New Sources of Financing 8314 Investing in Labor 85Introduction 85The Cost of an Employee 85Salary 86Employer taxes 86Office space 86Fringe benefits 86Calculating the Benefit 87Direct labor 87Indirect labor 87Your Billing Multiplier 88Five Signs It's Time to Hire 8815 Investing in Equipment 91Introduction 91To Buy or Not to Buy 91viii Finance & Grow Your New Business: Get a Grip on the MoneyContents ixErosion 92Financing 92Risk 9316 Financing Expansion 95Introduction 95Horizontal Expansion 96Increase your capacity 96Expand your geographic area 96Develop new products or services 96Develop a franchise 97Find new markets for your existing products and services 97Vertical Expansion 97The Dangers of Expansion 97Liquidity issues 97Triggering call provisions 97Increase in fixed costs 98Calculating the Benefits of Expansion 98Finding the Money to Expand 100PART 2: MANAGE YOUR BUSINESS GROWTH 10317 The Successful Entrepreneur 105Why Small Businesses Fail 105Managing versus Doing 106The Four Foundation Walls 106Entrepreneurial drive and vision 107Record keeping 108Financial management 108Planning and strategizing 10918 The Life Cycle of a Business 113The Three Stages of a Business 113Infancy 113Maturity 115Decline 115At What Stage of the Life Cycle Is Your Business? 116How Can My Business Use This Information? 11619 A Systems Approach 119Anatomy of a Franchise 119A Real-Life Example 120Benefits of a Systems Approach 120Your Business as a Machine 121Becoming the Head Mechanic 12120 Analyzing the Status Quo 125Entrepreneurial Drive and Vision 125Record Keeping 126Financial Management 126Planning and Strategizing 127The Busy Entrepreneur 127Defining Processes and Procedures 12821 Growing Your Business 131Your Business Goals 131Profit 132Freedom 133Recognition 133Peace of mind 133Planning for Growth 133Good versus Bad Growth 134The Three Ways to Grow Your Business 134Attracting new customers 134Selling them more 135Selling to them more often 136Leverage Revisited 13622 Getting a Handle on Your Revenues 141How Many Customers Do You Have? 141How Often Do Your Customers Come to See You? 143What Do Your Customers Spend? 145What Kind of Customers Do You Have? 145Fire Away! 146The Next Step 14623 Your Strategy 151Your Business's Vision Statement 151The Mission Statement 153Your Operational Plan 153x Finance & Grow Your New Business: Get a Grip on the MoneyContents xi24 Testing Change 159Advertising 159Prices 161Environment 16225 Your Product or Service 167Why Should Customers Buy from You? 167Competing on price 167Competing on value 168How Is Your Business Different? 168Selling a Product 169Up Selling 169Providing a Service 170Teaching Your Customers 17226 Your Customer Interactions 175Telephone Interactions 175The Art of Closing the Deal 175Getting more people to call 177Increasing your conversion rate 178Using Scripts 179AWord about Screening Callers 181Tracking Conversion Rate Changes 18227 Your Marketing and Promotions 185The Lifetime Value of a Customer 185Covering the Cost of the ""Dry Holes"" 187Customers Beget Customers 18828 Your People 191How Do You Know When It's Time to Hire? 191What Will a New Employee Do? 192The Laws of the Land 194Attracting Quality Employees 194The Interview 196Hiring from an Employment Agency 196Goal-Based Compensation 197So Long, Farewell, Auf Wiedersehen, Adieu 19729 Your Systems 201The Goals of Systemization 201""How We Do It Here"" 202Continuous Improvement 20330 Business Acquisitions 209Another Way to Grow 209What Are You Buying? 210Asset purchase 210Share purchase 210Goodwill 211Customer lists 211Valuing the Acquisition 211Floor price 212Ceiling price 213Evaluating the Choices 21331 Exit Strategies 217Your Personal Goals 217Heading for the Exits 217Passing on the business to your children 217Selling the business to an outside party 218Liquidating your business 218What's My Business Worth? 219Getting Ready for the Sale 219The Mechanics of the Sale 21932 What Happens Next? 223A Last Word 224Appendix 1Present Value of $1 225Appendix 2Present Value of an Annuity 227Appendix 3Future Value of an Annuity 229Appendix 4Resources for the Growing Business 231Glossary 233xii Finance & Grow Your New Business: Get a Grip on the MoneyContents xiiiChecklists1 The Successful Entrepreneur 1102 The Life Cycle of a Business 1173 A Systems Approach 1224 Analyzing the Status Quo 1305 Growing Your Business 1386 Getting a Handle on Your Revenues 1497 Your Strategy 1578 Testing Change 1649 Your Product or Service 17310 Your Customer Interactions 18311 Your Marketing and Promotions 18912 Your People 19913 Your Systems 20614 Business Acquisitions 21215 Exit Strategies 221Diagrams1 The Four Foundation Walls 1072 The Life Cycle of a Business 1143 Typical Time Chart for a Business Owner 1274 Recommended Time Chart for a Business Owner 128Tables1 A Quick Reference to Ratios 532 Equity Statement for a 50/50 Partnership 573 Cash Flows for Grace's Market Garden 994 Discounted Cash Flows for Grace's Market Garden 100Samples1 Cash Flow Projection for a Start-Up Business 172 Discounted Cash Flows for a Start-Up Business 193 Cash Flow Projection for a Business Purchase 204 Discounted Cash Flows for a Business Purchase 215 Business Plan Outline 376 Cash Flow Projection 447 Cash Inflows 468 Customer Survey Form 1439 Billings by Customer Report 14410 Terminating a Customer 14811 Vision Statements 15212 Mission Statement 15413 Telephone Interactions 17614 Potential Customer Interaction Review Form 18015 Telephone Script 18216 Documenting Your Work Processes 19317 Employment Advertisement 19518 Human Resource Policy 20419 Valuing a Business Acquisition 212Worksheets1 Retirement Planning 272 Competitive Analysis 79
