Professional Marketing Services – Do I Really Need Help?

A local radio station in my area Rejoice 100.9, ran their own advertisement to gage new clients that said, “Not advertising on radio is like winking in the dark…you know that you are doing it, but no one else does.” I thought it was quite clever to show that your non-marketing efforts were lost in the sea of darkness where the only sure one to show up is you. But we all know that starting a business is about sharing a product or service to a target audience for an attractive price to hopefully take your piece of the entrepreneurial pie or market share. Many new start-ups suffer because they are winking in the dark. Not enlisting the help of a professional marketing service is a great way to go out of business. Just because your family and closest friends think it’s a great idea, doesn’t speak for your target audience. A comprehensive marketing strategy can help a business mark its territory, brand their image and create a resilient presence.

The word itself mark-it, if you are southern, denotes a drawing the line between you and your competitors. Like a dog marking its territory, you want to “… ‘stake a claim’ to a particular space, area, or object by marking it, using a variety of methods at levels of intensity.” (Humane Society, 2018) You are making a statement of I am here to establish your brand.

Marketing helps with branding. They are not one in the same. “In the mind of customers, your brand isn’t the product itself, nor is it your company’s messaging, logo, website design, advertisements, etc. Your brand consists of the perceptions customers have about the business and how it makes them feel.” (Prendergast, 2015) A marketing campaign supports your business by cultivating trust now with continued trust for the future. It projects who you are as a business; not what you have to offer.

Many years ago, Wachovia’s, now Wells Fargo, slogan was “We are here. Where are you? Let’s get started.” They made their presence known in the community by intentionally cutting the lights on with advertising; hence no winking in the dark expecting customers to visit a branch because they were on the corner. Founded in 1879, Wachovia stood firm in the financial industry for almost 150 years. (Wells Fargo, 2018).

As an entrepreneur, we all have an expertise, passion or goals which cost. Small businesses that struggle to get off the ground often cut marketing budgets or have none at all due to trying to keep the doors open. Word of mouth and referrals are not a sustainability plan. In order for your business to grow, you should enlist the assistance of a professional marketing firm. Decide why you should obtain professional marketing services, then look for a firm that is compatible. It should never be like a blind date. But instead, it is similar to an online dating site. Fill out the profile of your company; then explore your obtains of compatibility. Do your research before you set up the first date. There is a process for finding the right one and you may kiss a few frogs before you commit to that royal an agency that meets your expectations. Let’s dig a little deeper into the reasons, process and expected outcomes for enlisting the help of a professional marketing service. The reasons are clear. The process may be tedious, but the outcomes outweigh the tensions.

Why do you need a professional marketing service?

As a new business owner, you may not have a pulse on the market. Yes, the classes that I am taking for this graduate program give me a snapshot of the real world of business ownership. It prepares me for what to expect and what I need to consider. It is a road map for what I can handle and what I should sub out. If you are expecting growth, you need help. Instead of picking your battles, pick your victories. What do you do very well? Allow others to help with the rest. “…the key is to stick to what you’re good at and find a partner for the rest. Marketing is a great place to start your outsourcing experiment because branding and outreach needs typically change at a rapid pace.” (Dearing, 2013)In the beginning you need to decide where to invest to ensure success or at least ensure continued growth and sustainability. I must continue to stress that word of mouth marketing may not be enough. You have to be strategic. Your real competitors will be and they have a pulse on what your particular market is doing.

With so many moving parts to a business, decide who your key team players will be. A marketing firm or consultant should be considered. Hiring outside help will create a success story for your business! Firms specialize in the business of moving your business. They have years of market research and trends specific to your business and market area. What could take you months to research is readily available through an outside agency in minutes. Their job is to be in the know so that you can focus on the product or service. Let them be great at what they do so you can be great at what you do.

Another reason to hire a firm or consultant is for the reality check. As an owner, you may not always be able to be objective. They can offer a realistic perspective about your business in relation to others in the market and give you the most advantageous plan to make your product or service a must have instead of an alternative. You pay them to be objective and honest. Whereas your view may take some emotional and illogical turns that could cost you growth. They will offer you a roadmap to follow and adjust as the business progresses allowing your dream to explode into a reality right before your eyes. They will strategically place your business in the eyes, ears and mouths of your market. A firm or consultant will give your business a face and a voice.

Like any relationship, when you make an investment, there is an expected return or ROI, known as return on investment. It is important to interview your potential marketing partner. You want to know that they not only have capabilities, but they have a proven track record of success. Inspect what you expect. Establish a master plan or blueprint of your expectations and come to an agreement with what is doable. There are many cuts of beef from a cow. You may talk prime rib or filet mignon, but your budget is sirloin. Or just the opposite, the firm may boast T-bone, but they only possess ground beef reach. Setting realistic and attainable goals are essential to meet or exceed expectations. Goals should also be measurable. There should be benchmarks for reaching the goals which allow you to track the success of your investment. Benchmarks also give you a place to park and evaluate for change. This change could be internal (financial, management, etc.) or external (shift in market trends, the local economy, or political shifts). You want to have a solid plan with an open mind that allows for flexibility and creativity.

Your reasons for trusting someone else to tell your story- marketing is the story of your business-could range from small beginnings for the mom & pop small town local shop on a two-way street in Smallville, to the major technology race on the 26 lanes I-10 in Houston. This is your brand; your statement of who you are. This partnership is not just about the product or service, but it is about who you are as a company. Whatever road map you choose with a marketing partner becomes a track for your success. Every aspect of this journey means engagement by you in the process in order to see the desired outcomes. Whether you start off big with a major campaign or small with event promotion, always remember you are the driver and they are along for your ride to success.

Resources

Dearing, G. (2013, December 18). Capital One SparkVoice: 5 Things to Look for When Hiring Your Marketing Agency. Retrieved April 30, 2018, from https://www.forbes.com/sites/capitalonespark/2013/12/18/5-things-to-look-for-when-hiring-your-marketing-agency/#6a7bc30c7bfa

Prendergast, C. (2015, October 08). 3 Marketing Mistakes Business Makes That Hurt the  Brand. Retrieved April 29, 2018, from  https://www.entrepreneur.com/article/251307

Urine-Marking: Why Dogs Mark Their Territory. (n.d.). Retrieved April 30, 2018, from http://www.humanesociety.org/animals/dogs/tips/urine_marking.html

Wachovia Is Now Wells Fargo. (n.d.). Retrieved April 29, 2018, from https://www.wellsfargo.com/about/corporate/wachovia

 

Small Business & Technolgy Development Center SBTDC

I had the opportunity to visit my local SBTDC and I wanted to share the services they offer with you. This NC based service will give entrepreneurs a wealth of assistance with you start-up or existing business.

History of the SBTDC

Established in 1984 by The University of North Carolina system, the Small Business & Technology Development Center (SBTDC) provides counseling, management education, and specialized market development services designed to help businesses and organizations meet challenges, manage change, and plan for the future. With approximately 80 associates located across 16 campus-based centers, the SBTDC serves a diversity of clients, including small to medium-sized businesses, as well as university, non-profit, and government entities.

The SBTDC provides in-depth management counseling and education services designed to help business owners make better decisions in achieving their business goals.   Unlike consultants who work FOR businesses, SBTDC counselors are experienced and knowledgeable advisors that work WITH businesses, providing information, guidance, and feedback to entrepreneurs.  The efforts of SBTDC professional staff are supplemented by the engagement of students and faculty from all University of North Carolina system campuses and several private universities and colleges.

The basic counseling services are provided without charge, as the SBTDC is funded in part by federal and state tax dollars.  Additional services, including management education and in-depth marketing research, are provided on a cost-recovery basis.

Services offered through the SBTDC

  1. General Business Servicers
  2. Business & Management Advice
  3. Financial Assistance
  4. Financial Analysis
  5. Marketing Assistance
    • Explore into new geographies, customer segments, products/industries, marketing channels.
    • The SBTDC has experienced professionals that can help you:
    • Access federal, state, and local government contract opportunities
    • Commercialize new products / technologies
    • Identify international export opportunities
    • Develop an impactful marketing strategy
  6. Research
  7. Strategy Development & Implementation
  8. Leadership & employee Performance

http://www.sbtdc.org/ 

 

Greatest Marketing Campaign Radio Advertisements-ENT 610

AD-Superior Chevrolet 4G Road trip

https://aef.com/ad-campaigns/4g-roadtrip/

Chevrolet is the first company to offer built-in 4G LTE Wi-Fi to cars, trucks and crossover SUVs. When your car is running or is in accessory mode, you’ll have a better in-vehicle experience than using your smartphone. It’s a fast and reliable connection that doesn’t rely on your mobile device’s battery. It’s automatically on after initial setup and ready to connect up to 7 devices.

This ad highlights the 4G data streaming system that all the family can use to make a long trip more pleasurable. They use a Brian Adams karaoke wannabe to evoke freedom for the one behind the wheel. With the 4G system now in Chevrolets, everyone can plug into a different source of entertainment, which eliminates frequent stops and the dreaded juvenile sound of “are we there yet.”

OBJECTIVE-Increase Vehicle Sales

Sell more Chevrolets. Summer brings out automotive deals. This radio ad showcases a feature that is mainstream for most families-electronic mobile devices for entertainment.

TARGET MARKET-Families with Children

This 4G feature provides in-vehicle streaming services that are more reliable than cellular devices. Therefore, the family road trips allow all members to create a private viewing, listening, or chatting paradise for summer vacations road trips.

ACTION-Buy a Chevrolet to make long road trips more enjoyable.

By purchasing a Chevy car, truck, or crossover SUV, the driver will have an easier driving experience. This 4G feature eliminates frequent stops due to “potty breaks” or roadside attractions because it is a distraction within itself. The ad allows the mom to stream movies and the kids to video chat with friends. Dad, who is driving, can get to the destination with fewer interruptions. He gets to drive in peace.

VALUE PROPOSITION-Family Vacationers-Better Road Trip with reliable and multi-leveled in-vehicle entertainment with 4G-Standard Feature Included in Price

This 4G feature highlights the family (especially the father-the primary driver) vacationers who take those long road trips. It changes the face and pace of the drive. Everyone can find an enjoyable experience in the vehicle without having to be a family. They don’t have to engage. So it also changes the family time of stories and memories created on these trips. This 4G is aligned with where society is now-electronically non-engaged. But this is just for the road. Hopefully the destination will provide more real family time. This feature is part of the standard equipment, which is no added cost to the customer. This 4G feature is in all vehicles from the Cruz to the Suburban; therefore no exclusion for those who can’t afford the higher end vehicles.

Resources: https://aef.com/ad-campaigns/4g-roadtrip/ and http://www.chevrolet.com/

AD-VocaliD-Know My Voice

https://aef.com/ad-campaigns/know-my-voice/

VocaliD redefines how we interact with intelligent devices — and each other. Over ten million people are unable to speak. Over 500 million everyday devices and applications are narrated by a voice. All of them choose from the same few generic, mechanical voices. But our voices are not identical. Our voices are our identities.

This radio ad humanizes a generic mundane sound that we have so often heard from those who have loss their vocal chords function. This raspy sound made me think of someone who had throat cancer. Imagine sounding like a victim of cigarettes even when you have never had a cancer stick in your mouth. The ad used sound visuals to immediately sympathize for the woman who sounds like and android behind the voice.

OBJECTIVE-To Inform and Create a Compassionate Move to get Involved

This ad pulls on the heart strings of many by drawing you in to the world of the person who is reduced to use this generic voice box sound. They want the listener to help change the lives of many.

TARGET MARKET-National Audience

Their goal is to build “the world’s largest repository of speech recordings from speakers of all ages and backgrounds.”

ACTION-Donate your Voice via Crowdsourcing

This ad compels the listener to log in and “bank your voice to build a voice” by “powering the creation of digital vocal identities that capture the essence of being human.”

VALUE PROPOSITION-Creating and Replacing the Human Voice

This ad allows the listener to give back in an alternative way. They are not asking for money, hours of volunteering, nor a talent. But they are asking you to be someone’s voice. The end user is someone who unfortunately and literally is voiceless. Your voice is the product that meets to need at no cost to you, but priceless to the recipient.

Resource: https://aef.com/ad-campaigns/know-my-voice/ and https://www.vocalid.co/

AD-The Humane Society-I’m Going to Die

https://aef.com/ad-campaigns/im-going-die/

The Humane Society is the most effective animal protection organization in the US. They provide hands-on care and services to more than 100,000 animals each year, and they professionalize the field through education and training for local organizations.

The ad gives an animal a voice. The humanization of this animal makes me immediately visualize a helpless dog. When I went to the website, the first impact was of an abandoned feeble dog. The dog says that he is going to die as many do because of overpopulation, abandonment and lack of care. The technique was helplessness. To pull on the heart strings even more, the animal believed that death was a better alternative that being on the streets alone. It walk us through the death by injection process, which seemed just as cruel. I did not like this ad and it was very disturbing to my ten year-old daughter. The actor’s voice just did not pull me in to give. I did feel the cold room that would be the end of the animal’s life, but the voice made it seem like this is life, so be it instead of help us live.

OBJECTIVE-Give to the Humane Society to save the lives of destitute animals.

This ad walks through the thoughts of an animal before the death penalty and the crime was a lack of resources. The Humane Society wants people to get involved in the cause of animal rights and protection.

TARGET MARKET-Animal Supporters

There are many reasons to love animals. A primary one is that we have humanized them as family members. For some they are children for those who cannot have them, siblings for an only children and companionship for others.

ACTION-Give and Support

The action is to give monetary donations that will help care for these unwanted animals. Supporting this cause will make you feel good about making a difference and it is also tax deductible.

VALUE PROPOSITION-Supporting a Worthy Cause

The animals benefit when we give. They have no voice so this organization gives them one. You get to decide how much support to provide.

Resources: http://www.humanesociety.org/?credit=web_id93480558_web_globalfooter and https://aef.com/ad-campaigns/im-going-die/

AD-Netflix Holiday Radio

https://aef.com/ad-campaigns/netflix-holiday-radio/

Netflix is a streaming service that allows our customers to watch a wide variety of award-winning TV shows, movies, documentaries, and more on thousands of internet-connected devices. With Netflix, you can enjoy unlimited viewing of our content without having to watch a single commercial.

This was a humorous ad that showed extreme personalities with one commonality – a show on NETFLIX.

OBJECTIVE-Bringing Family Together

This purpose of this ad was to take the family Christmas gathering into the living room where a common thread other that blood would bring family together. NETFLIX is that “something to do while visiting.” It was a way for NETFLIX to gain more members in hopes of them keeping the service after the holidays.

TARGET MARKET-Families “It just might bring everyone together”

The ad gave two conversations-one with a father and estranged son and the other was an estranged grandson and grandmother. It gave both relationships common ground for polar opposites.

ACTION-Sign-up for NETFLIX

The announcer asks the listener to sign-up to make family a family again, by watching TV together and enjoying each other’s company by the one similarity-a NETFLIX original.

VALUE PROPOSITION– Free Trial period

NETFLIX is offering a three-month FREE trial period. It costs nothing to bring the family together. And because NETFLIX is inexpensive (as low as $8 a month), you might keep it. They have an extensive variety of movies TV series and original shows. There are also parental controls. It is a win-win for every one and not just during the holidays.

Resources: https://help.netflix.com/en/node/412 and https://aef.com/ad-campaigns/netflix-holiday-radio/

AD-Careerbliss.com-Tom

https://aef.com/ad-campaigns/tom/

CareerBliss empowers you to choose happy with over 3.5 million job postings, 4 million salaries and 700,000 company reviews.

This ad uses a simple 30 second jingle to catch your attention by looking into the cubicle of a man named Tom who is in denial about his current work situation. CareerBliss offers him a way to explore new career opportunities online.

OBJECTIVE-Site Search for a New Career

This ad was packed with information about the website which offers job listings, company reviews and salary research just to name a few. It was short and to the point. They called for him to take action now.

TARGET MARKET– People seeking a career change

So many people are Tom; in jobs that are not satisfying, wondering if things will ever change, and in lacking motivation. This ad calls for action for your life -a life changing career.

VALUE PROPOSITION– Taking Control to Change Your Life

The end user, Tom, will get out of that “cubicle life.” The products and services provided through the CareerBliss website allow you to research a company before you even tailor your resume for a position. It empowers you to navigate your career path at your fingertips. And the reviews are written by real employees. The sign up was painless and then I love the “welcome to the community” completion, which offers continued support along the journey.

Resources: https://aef.com/ad-campaigns/tom/ and https://www.careerbliss.com/

The In Crowd

 

Crowd funding literally is getting everyone you know and everyone that they know and on and on to get involved in what you are doing. This indirect way of fundraising via social media, directly affects your ability to raise a designated amount of money in a short period of time, usually 30 days. I have always said, anything can turn around in 30 days.

It is a relatively simple process; it is quick detailed and most definitely worth the time investment. Most people have heard of Gofundme, Kickstarter and Indiegogo, but at the rate of Crowdfunding success, the sites are numerous.

So how can you pick the right one for your venture? Click on the link to see an extensive flow chart by Eric Markowitz, 22 Crowdfunding Sites (and How to Choose Yours!). This chart will help you drill down to the place where you can find a successful source of funding for your next great idea, project or passion.

https://www.inc.com/magazine/201306/eric-markowitz/how-to-choose-a-crowdfunder.html

 

EXIT STRATEGIES

 

You don’t immediately think, “I must plan for an out, when I have just jumped in.” But this rational is indeed so when it comes to entrepreneurial success. This is your baby- you have planted watered, tended, weathered and harvested only to see your field of dreams in the rear-view mirror instead of the windshield.

Exit Strategies allow you to plan your Out– You ultimately want to optimize the best situation rather than escape a bad one. Exit strategies are about succession planning and successful transitioning. I created a YouTube video that talks about various ways to escape.

THE WHOLE OF THE MATTER-Just as you plan to build the business to be profitable, plan to leave the business with a profit.

 

CONSIDER COMMUNITY

Even though the community bank presence in local communities have been declining since 1984 from 17,401 to 6,146 in 2013, their contribution to small business operations still makes and impact in the communities they serve. (The Statistical Protal, 2017.)

WHY THE DECLINE? Stricter regulations due to the housing crisis almost ten years ago, shift in demand and interest rates initiated the spiral. Many community banks have changed faces several times, “but the profitability of those remaining has recovered closer to pre-crisis levels than it has for larger banks. And, perhaps most important, community banks’ share of the market for small business loans—the lifeblood of community banking—remains robust and vastly disproportionate to their size.” (Community Banking, 2016)

WHAT MAKES THE DIFFERENCE? People! People bank with people and not buildings. Most banks have similar products and rates, but it is the teller, customer service representative and bankers who are constant fixtures even when the name changes that make the difference. Community Banking in the 21st Century 2016 National Survey “…offers insight into the close relationships that community bankers cultivate with these borrowers, to whom they lent $340 billion last year, an amount that, while slightly lower than in previous years, was nevertheless higher than the amount extended by their larger counterparts.” (Community Banking, 2016)

WHY COMMUNITY? Community Bankers are our friends and neighbors. The personal attention with face-to-face interactions allow for long-term relationships to be maintained while consistently not wavering with a .25 discount on a loan. “Unlike the large banks, community banks have usually been seen as a friend to the entrepreneur.” (Rogers, 2014, pg.180) Many of the larger banks offer an order taking style of service. Even though you can sit down with a person, lending decisions are made from a centralized loan office at head quarters which is hundreds of miles from small town USA. Depending on loan size, community lenders can decision loans at the branch and have answers within 24-48 hours. The community banker knows their customers and the customer capacity outsideof the ratios.

They work with you where you are not from an electronic application. “Close relationships between businesses and banks also are suggested by the frequency with which community bankers meet with, provide advice to or otherwise monitor small business borrowers.” (Community Banking, 2016) The frequency of the meeting may vary from quarterly to annually, but the premise is based on the needs of the customer.

I support community banks because I used to be a part of this financial sector. It brought me joy to accommodate a customer’s needs or offer an alternative solution. Community banks are a trusted friend for entrepreneurs. Start building your relationship today.

References

Community Banking in the 21st Century 2016 National Survey. (2016, September 28). Retrieved from Community Banking: https://www.communitybanking.org/~/media/files/communitybanking/2016/cb21cpublication_2016.pdf?la=en

Rogers, S. (2014). Entrepreneurial Finance Finance and Business Strategies for the Serious Entrepreneur. New York: McGraw Hill.

The Statistical Protal. (n.d.). Retrieved from Statistica: https://www.statista.com/statistics/318034/community-banks-number-usa/

 

One Eyelet at a Time

 Bootstrapping ENT 650

In 1997, little did I know I would begin a venture as an entrepreneur. I just thought a group of friends that sang together in church were going to make something special and offer music outside the four walls of the sanctuary. It sounded simple enough because we had singers and musicians. My partner who was the visionary behind this plan, had been in the music industry before and he was a musician and producer. I was a banker by day and a songwriter by night. We had a place to practice, voices and full instrumentation, but where was the money coming from to start lacing the shoe? It came from our own boot.

I did not know it then, but our financial source came from bootstrapping. Investopedia describes bootstrapping as building a company without external investments. The startup company uses personal finances and the operating revenue generated by the company for capital. We held true the characteristics of a bootstrapping. There was little money as discretionary income and assets were definitely invisible to the naked eye. We didn’t have savings, but we were wealthy in sweat equity. We knew if we could complete a recording, we could sell the product at concerts. I had two vehicles at the time and I sold my work car to purchase the first round of product. That $1500, though little, gave our recording company straps.

The recording company branched off into another line of the business allowing us to form a lighting and sound company. The extra income from providing this service at other venues gave an additional infusion of capital for the recordings. We had basically all equipment needed for these other shows and if it was something that we didn’t have, we rented it and increased our base cost of service.

These two ventures were maintained for nine years by owner financing and operating revenues without other investors. We did not ask the members of the group to make any investment, allowing us to maintain control over the direction of the companies. Also we did not want them to take a personal loss on our dreams. Though it was beneficial for us to have decision-making power, we only achieved regional success. Our finances limited our ability to expand, but we were able to tie the laces into a bow by establishing ourselves as music artist one eyelet at a time.

RESOURCE

Bootstrapping. (2003, November 25). Retrieved September 30, 2017, from http://www.investopedia.com/terms/b/bootstrapping.asp

 

 

Cash Flow Management

Cash Flow Management – ENT650

Once you have developed a cash flow forecasting module, management of it is where you can see where your projections meet reality. Cash flow management is like pinching pennies. You pinch today in order to have reserves for tomorrow to handle those shifts in revenue. But even more than just being frugal, Rogers and Makonnen believe that it includes “…making somewhat complicated decisions about delaying payments to a supplier in order to use the cash resources to temporarily increase production.” (2014, pg. 85) A delay in payment will allow you to float cash for a short period of time, but you will run the risk of insolvency by not paying your obligations when due. Inc. suggests that “Insolvency is the primary reason firms go bankrupt; [whereas] efficient cash management means more than just preventing bankruptcy. It improves the profitability and reduces the risk….” There is a tight balancing act between outflows and inflows to ensure proper cash flow management.

Mismanagement of cash flows creates a bundle of problems for start-ups which include inability to: support consumer demand, manage unforeseen costs, limits growth potential and creates a high turnover rate. These are just a few examples of a slow drain on cash flow that dehydrates the lifeline of the business.

In a case study originally conducted by SmartCompany.com.au, Emily Ross gives best practices for managing cash flows in a “Cash flow boot camp checklist.”

  1. Focus on sales and debt management
  2. Create a cash flow boot camp checklist with clear payment terms
  3. Find a great accountant for daily monitoring
  4. Chase early, not later by setting clear payments goals
  5. Communicate, communicate, communicate – be transparent when talking fees
  6. Get disciplined by issuing timely and correct invoices with follow-up
  7. Hedge your bets with a mixture of long and short term payments
  8. Spread out payments to decrease default of total debt owed
  9. Take further action with debt collections

I believe Inc. sums the cash flow management task when it suggests, “The key to successful cash management, therefore, lies in tabulating realistic projections, monitoring collections and disbursements, establishing effective billing and collection measures, and adhering to budgetary restrictions.” For a new entrepreneur, enlisting the help of an account or accounting software with help to manage cash flows so that you can make profitable decisions about funding your business.

RESOURCES

Cash Management. (n.d.). Retrieved September 21, 2017, from https://www.inc.com/guides/finance/cashmanagement.html

Rogers, S., & Makonnen, R. (2014). Entrepreneurial finance: finance and business strategies for the serious entrepreneur. New York, NY: McGraw-Hill.

Ross, E. (n.d.). Entrepreneurs reveal their cash flow advice. Retrieved September 21, 2017, from http://www.business.vic.gov.au/case-studies/entrepreneurs-reveal-their-cash-flow-advice

 

Cash Flow Forecasting

Cash Flow Forecasting-ENT 650

Financing for your company can be determined by preparing a cash flow forecast. Your financial needs can be managed much better when this forecast in place. “The forecast will tell you if your business will have enough cash to run the business or pay to expand it. It will also show you when more cash is going out of the business, than in.” (Business Victoria, 2017) Financing needs can change due to short term growth such as holiday or seasonal sales and long-term development for expansion due to demand which also will require an increase in employees. Repairs or new equipment also need to be taken into consideration. (Rogers & Makonnen, 2014)

Forecasting is about the future. Your future sustainability and your future growth. Forecasting for an existing business starts with the previous year’s sales. For a start-up, an estimation or assumptions will be used. By estimating all your expenses or outgoing cash, you will be have a better picture of the sales or capital needed to cover the expenses. A three to five year plan is a good start.

Outflows and Inflows will look different for the type of business. Below are just a few considerations for each category given by Business Victoria.

OUTFLOWS INFLOWS
Operation expenses Rebates and refunds
New assets Owner investment
Loan repayments External grant funding
Payments to owners Sale of assets
Investing surplus funds Royalties

Once you determine what capital is needed, another important consideration is when to obtain it. Rogers and Makonnen offer two common practices-Series of Funding and All Funding at One Time. Series is getting “only what you need year to year… [and All Funding] is that you should get the maximum that you will need at once.”(2017, pg. 84) Both offer uncertainties, but the determination is based on the confidence you have in the forecasts.

Accuracy in forecasting is crucial for cash flow management. You are not only looking at the inflows and outflows, but also timing. Your projections determine your success and growth. Part of the process also includes checking actual results with what has been projected, which we will take a closer look at in the Cash flow management blog.

Resources to help you manage this process include software packages like Quick Books and Excel Templates.

RESOURCES

State Government of Victoria. (2017, July 21.) Cash flow forecasting. Retrieved September 20, 2017, from http://www.business.vic.gov.au/money-profit-and-accounting/getting-paid-on-time/cash-flow-statement-projection-with-template

Rogers, S., & Makonnen, R. (2014). Entrepreneurial finance: finance and business strategies for the serious entrepreneur. New York, NY: McGraw-Hill.

Bank On You

The life-line for creating a successful start-up entails securing capital. Be it your money or someone else’s, the financing of your big idea or dream translates into cash flow-in and out. Maybe you have been saving for this new venture or you are enlisting financial support from venture capitalists or angel investors. Another alternative funding source could derive from a financial institution. Any external funding support will require that you prove your ability to be trusted in order for risk to be taken by others. You can risk your own money at your expense, but when you enlist the help of others, your dream becomes their expense or profit.

You, the entrepreneur are the key factor for debt or equity financing. What makes an entrepreneur attractive for risk? “Ideally, investors prefer people who have both entrepreneurial and specific industry experience.” (Rogers and Makonnen, 2014, pg. 2) Investors are more comfortable with those who have the know–how to make it work. It is similar to applying for a job. The employer may require a certain degree level and years of experience or the years of experience in lieu of the degree. They want to see a proven track record of success.

RATING EXPEREINCE
A Entrepreneurship and industry
B Entrepreneurship or industry
C No entrepreneurship or industry

Table 1-1 (pg. 2)

 

Investors rate entrepreneurs with an A, B, or C depending on experience. The table above taken shows how these ratings are determined. An A rating is given to a person who has “…experience as an owner or even an employee of an entrepreneurial firm and also experience in the industry that the company will compete in.” B rated entrepreneurs “…have experience either in entrepreneurship or in industry, but not both.” (pg. 2) The C rating, which is least desirable, with no entrepreneurial or industry experience, sends a red-flag to investors. No history in business says that you are still a dreamer.

Position yourself for favorable outcomes. The life of your business depends on your expertise. A race car only experiences the checkered flag because of the driver’s practice, passion, and pursuit. Even though a race car only has a seat for one, the help of the pit crew (management team) creates a winning situation for everyone. But it is you, the driver, which everyone is banking on to come across the finish line first. Bank on you to make the business successful and others will bank on you too.

RESOURCE

Rogers, S., & Makonnen, R. (2014). Entrepreneurial finance: finance and business strategies for the serious entrepreneur. New York, NY: McGraw-Hill.