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Secrets to a Low Risk and Profitable Small Business

If you have even considered starting and running your own small business – then you are not alone. For long-term financial growth and a stable and secure future, running your own business is a must. And, it’s the American way.

Since most of us aren’t wealthy – or don’t have even a few thousand dollars burning a hole in our pockets, then the traditional small business start up may just be simply out of reach for the vast majority of us. In a way that you may not have considered – this may be a good thing!

No matter the actual amount of a traditional businesses start up – whether it be $20,000 or $100,000 (or more), this is an amount of money that most of us have never seen in our lifetimes – and most likely never will, especially if we keep working for others.

The way out is to definitely be your own boss and make your own way through life. And never be dependent upon any one person for your livelihood ever again.

These are driving reasons why we want our own businesses. Financial rewards and independence top the reasons why Americans traditionally have started their own businesses – for going on 250 years now. The old days of working for one company your entire working lifetime and then drawing a nice, fat pension for the rest of your life is a thing of the past. You need to be in business for yourself. But, what can you do if you can’t cough up the excessive start-up costs dictated by the traditional business models?should abandon the idea of owning your own business and go on settling for a 9 to 5 salary for the rest of your life?

For me, the answer in a big fat NO. And, I figure that, for a large percentage of the population in the U.S., the answer is NO as well. I’m here to tell you that you can start a business on a shoestring – and a successful one at that! You really can go where your dreams will take you. That is, if you dare to dream!

I’ve found for myself that a person can truly start their own business for well under $300 – and be successful, at that! Where can this be done, you ask? Simple – by way of a modern miracle called the internet! It is a very real possibility that most anyone can start a small online business that’s profitable and, dare I say, fun to run?

Is it all fun and games? Is there no risk at all? Do you have to put forth any effort at all? You will have to work for your rewards, it won’t be all fun and games, and there is some risk involved – as is with all things in life worth anything. Here are some great reasons why you really should consider (seriously) starting your own online business – as soon as possible, in my humble opinion (IMHO)!

No Buildings

No need for a physical location, or a store front. No buildings, storefronts or warehouses are required for your online business. If you sell a physical product, then you can have it drop-shipped from the supplier. All you need is a small space for your computer, an internet connection – and a comfy chair!

No Employees

As you start your own small business on the internet, and for months and years down the line, there is really no need for employees. You may possibly need some help now and again, but you hire contractors for that work. You learn to become highly efficient at what you do – no need for employees!

Expenses Minimized

Since you don’t need buildings or employees or inventory then your expenses are incredibly small from the start. Really – I have a desk and a chair and my computer. That’s it!

The World Is Your Market

Unlike a traditional small business, you can do business with the world right from your kitchen table – literally made possible by the internet! You potentially have billions of customers that really want to see what you’re selling. This can happen with a business on the internet – not in your neighborhood.

Although, like in any part of life that involves business and large sums of money, there are liars and scams. But, if you hear of people making six figures with their internet businesses, there is plenty of evidence to back this up. Those who are legitimate run high-class businesses, and work hard at maintaining a good reputation. I know I do.

Even though starting and running your own small business on the internet is cheap to start and the earnings unlimited, it’s still work. You must be dedicated and put in the time required to be successful, as you do have competition. But, history (and facts) are on your side. You can definitely make a go if it with your own small business – many thousands have gone before you. And with some hard work, and a little luck, you too can be a successful small business owner!

However, it is a fact that anyone, absolutely anyone can do it because it is a lot easier than any of the traditional small business models and you need very little money to start, which means you will be risking almost nothing but some of your time and effort.

Small Business Financing Options – Know What to Expect!

So you have made the decision to start a small business franchise or home based business… now, how do you pay for it? As any rational individual understands, albeit contrary to what many internet “opportunities” would have you believe, any legitimate business requires capital: either cash or credit. As recently as a few years ago, obtaining funding to cover business start-up and operating costs was as simple as going to your local bank and getting a loan. However, due to the current economic conditions most individuals and small businesses are not able to qualify for large loans due to more stringent lending guidelines – banks just are not lending money like they used to. As a result, many would-be entrepreneurs are finding they must forgo their small business plans, put them on hold or become very creative at finding alternate means of financing. This article will provide a cursory overview of some basic methods business owners have used in order to fund their enterprises.

Depending on the small business plans you have in mind, you will most likely need some type of start-up capital along with your ongoing operating budget. Even small franchise opportunities are beyond the financial means for most individuals without assistance. Too little funding will virtually ensure either the immediate failure of your business, or will lead to you going out of business in a short time due to a lack of required operating income. Unless you are one of the fortunate ones in a position to have all of the needed investment capital liquid, meaning you have immediate access to the money, you will have to borrow money, either from people you know or from outside sources. Even if you are cash rich and have ready access to the required funding, it may still make fiscal sense for you to borrow, if possible. For the sake of this brief article I will separate the funding sources into personal and outside sources. I am writing this under the assumption that you already have or will have an approximate estimation of the nature of your desired business and how much capital you will require to realize your vision. Also, it goes without saying this article is not meant to provide in-depth financial advice. This is solely my opinion and I would strongly encourage you to make any financial or business decisions only after doing thorough due diligence.

In order to finance your business plan you may be able to raise the money personally or borrow money from people you know. This will probably be a more viable option if you do not need a large amount of money. On average, small business franchises usually require $10,000 – $30,000 to start, while you can start some small franchise opportunities and home businesses with as little as $2,000 or even less. Fast food franchises normally start around $100,000 or much more. You will almost certainly – unless you are in an extremely dire financial situation – be required to invest some of your own money in order to obtain additional financing. Individuals will probably be unlikely to invest in your business if you have not shown the same commitment. Even if you don’t have the money readily available in the most obvious places such as a savings or checking account, entrepreneurs frequently use available credit in the form of credit cards, money in retirement accounts including 401K savings or borrow against your 401K or house with a home equity loan or line of credit. If you are planning to approach family, friends or business partners to borrow, or are looking for a loan from outside sources, you should plan on preparing a business plan.

If you are unfamiliar with what goes into creating a business plan, you may find sufficient guidance online or from your local library. Any commercial lending institution (e.g. your local bank) and even family or friends will most likely require a formal written business plan. A business plan essentially details the nature of your business, including a strategy, risk level, expectations of profit, an overview of how you will operate your business and more. An informal plan may suffice if you just need a small loan from a friend, but plan on having a detailed and comprehensive plan if requesting a sizeable loan from a lending institution. Bankers will expect you to fully explain what the money will be used for: why you require the requested amount, when you can reasonably expect to repay the loan, etc. Do your homework ahead of time and be prepared!

You may need to seek professional guidance in this area especially if your plan is unusual or excessively complex, but otherwise you may be able to get by with a pre-formatted business plan template or even follow an existing business plan from another company. If you are looking to start a small business franchise you can likely use borrowing guidelines provided from the company. One of the benefits of franchise-type businesses is they give you a “cookie cutter” type format for what has proven to work for others, especially in regard to investment amounts. Regardless of the nature of your business though, lenders will take into account numerous factors when considering your plan. Request sufficient financing to allow you to operate your business as you have budgeted, but not an excessive amount or your application may be denied.

The author hoped to provide some insight and suggestions as you seek to fund your new business. This will hopefully provide some direction as you continue to do your homework on making your business ownership dreams a reality. From a personal standpoint you should look to use some combination of liquid funds, credit cards, retirement savings or possibly a home equity loan. If you need additional financing, consider approaching family, friends, business partners or commercial lending institutions. Regardless of where you plan to obtain the funding, plan to prepare a thorough business plan. As mentioned above, if you are starting a small business franchise you may be given investing guidelines to follow. No matter what type of business, however, prepare to provide potential lenders with a clear and complete picture of your business strategy, risk and repayment timeframe.

Succession Planning Best Way to Get Top Dollar For Your Business

Growing up in a small business environment, watching your parents work harder and harder to make a good life for us as children I believe that my parents probably worked too hard and didn’t give themselves the opportunity to maximize the value of their businesses before retiring.

Succession planning should start earlier, not at age 65 when people retire, but several years before in order to determine an exit strategy which either passes along the family business to the siblings or to get the businesses ready for sale.  In Canada according to a CFIB (Canadian Federation of Independent Business) 70% of small businesses owners will retire in the next 5 years.  That provides 2 business scenarios for small business owners, one, that the businesses will be hopefully passed along to one of their siblings in order to quickly deal with the succession planning issue or two, that there will be a lot of small businesses coming up for sale.

But I believe that one of the biggest hurdles to succession planning is that small business owners who have had businesses for a long period of time actually think of their businesses as being part of the family like another child and there’s the emotional tug of war on deciding to give up the business even to their children if that’s the route they choose.  The more difficult decision is to decide to sell the business to an outsider and that’s probably one of the biggest reasons why people outside the business might view it as procrastination, but to the small business owner it could be more an emotional factor.  My parents were already past retirement age when they decided to sell some of their businesses and hang onto a few others.

This delay hurts both the employees of those businesses as well as the owners in that their is a definite lack of plan of going forward and the owner’s passion has already waned and they’re no longer really interested in running their businesses, but don’t want to necessarily letting go.

These businesses have been profitable but the owners’ have had a hard time taking time away from the day to day running of the business, or taking a step back to look at their business at the 10,000 foot level and trying to setup their business to become saleable at the most attractive price.

A study released late last year by business transition specialists ROCG Americas found only one in 10 owners received a price for their business near what they wanted or expected. The primary reason given was improper or lack of planning.

ROCG conducted the survey in North America and found that businesses with revenues between $1 and 100 million said that they were either too busy to plan for a business sale or it was too early to start thinking about it, even though 84% of them said it was important to their retirement plans.

“Many business owners are not aware of the complexity involved in the succession planning process, particularly in executing a divestiture transaction,” says Michele Middlemore, vice-president of Aon Corp.’s M&A Transaction Advisory Group. “Almost always, they underestimate the time and work and difficulty involved in getting something like that done. More often than not, they tend to postpone dealing with it and are not prepared adequately when the time is upon them.”

Businesses should be planning 2 or 3 years in advance for the divestiture.

One of the big ideas to put in place is the movement of the value of the business is from the business owner to that of the business itself.   Since small business owners are generally the drivers of the business, it’s usually been in the sales and marketing roles and this is one of the areas which has to be transitioned over to the company.  This is easier said than done, in that one quite often that there isn’t the bench strength to take over and this has to be brought into the company.  Their might be changes in technology which might be needed to brought into the company as well to allow to compete better.

One can look at the succession planning in a way is like embarking on a new business plan and here a corporate financial advisor can help with getting an independent valuation of a business to let owners know where the strengths and weaknesses lie and what to expect as a potential starting point for a dollar value of a business sale.

According to the Business Development Bank of Canada, business succession is a process that requires thought, planning and time to arrange and execute: “Whatever your definition of success, making the commitment to let go of the business and place it in the hands of someone else is perhaps the critical factor that ensures your business transition goes smoothly and profitably,” the bank notes.

Just remember though that succession planning shouldn’t be determined by what the economy is doing or the stock markets, but by personal circumstance, if you’re ready to retire, then you should be planning for it in advance by 2 to 3 years.  The process is a complex one and is similar to building a new business plan, except that you’re trying to help build for the next set of owners’ to succeed and by doing so you and your family will get top dollar for your business you have built over the years.

Written by Richard Wong, CMA [email protected]