Anyone who begins a new business must have at least a basic concept of financial planning and ask, "Why is financial planning important in business?" Many people have the idea that financial planning is a complex process that only the rich need to concern themselves with. The simple fact is that everyone needs to construct a sound financial plan and for business owners this is even more important.
Financial planning isn't just for the rich, it the best way to become rich, says Jonathan D. Pond, financial analyst for PBS´s Nightly Business Report. "People who say they cannot or will not do it are really saying they don't mind spending their golden years under the golden arches, because that's what will happen to them." Pond says that virtually everyone is capable and has the means to become successful. The good news is that financial planning is really easy to do, but the bad news is there is no magic bullet. First you have to save money (and be out of debt), to invest, and the second thing is that you have to know how to invest it.
Sound financial planning is even more important for business owners for some of the following reasons:
o Most business owners are responsible for setting up and tending their own retirement plans. There will come a time when you will want to enjoy a good retirement and, as a business owner, you have no company pension plan, 401(k), or any other of the traditional fail-safe's to fall back on. Dealing with this is as simple as looking into IRAs or SEP, or setting up a complex Keough 401(k) or investing in a retirement business like network marketing.
o You cannot decide how to invest money unless you have planned to deal with debt, cut expenditures, and save. This means setting goals and sticking to them as well as keeping good records.
o The financial aspect of any business is vital to that businesses survival. Trying to succeed without proper organization and management of your finances can and will cause your business to fail.
o Having a sound financial plan for your business will allow you to estimate profits, project sales and the amount it will cost to run the business. Without this information it will be impossible to keep you business on the correct path to success.
The foundation of any sound business plan is having a mix of different kinds of investments including stocks, bonds and fixed-income vehicles, thereby increasing your invested savings by managing the risk.
Financial planning may seem to be just another "job" on your already overlooked schedule, especially if you are a new business owner. Failing to have a solid financial plan in place, however, will certainly take you from business owner to employee very rapidly.
Thursday, September 16, 2010
Tuesday, September 14, 2010
Small Business Retirement - A Way for Safe and Secure Future
Those who are small business entrepreneurs must think up of an effective small business retirement plan for themselves as well as for their employees. There are many reasons for this. The prime and the most important reason for you to think of a good retirement plan is that you are an employer and it is your duty to think about the future of not just yourself but also about the future of your employees. It is better to be smart and judicious enough to make a through research over finding a good small business retirement plan rather than just opting for any that may cost you higher than the usual.
There is more than one benefit for finding a suitable retirement plan for small businesses. Whatever contributions would be made by employer towards the retirement account of his employers, that amount would fall under tax-deductible expenses. The presence of a good retirement plan would also act like an attractive medium for welcoming proficient workers. This would enhance the integrity and credibility of business thus also winning the loyalty of employees.
Let us go through variety of small business retirement that can be selected as per employer's staff strength and other factors -
* Defined-Contribution Plan - This plan works over the fundamental of an allocation formula that helps in specifying some percentage of employees' contributions. The employees can opt for placing a part of their salaries into their retirement plan and make them grow in a tax deferred way.
* Defined-Benefit Plan - The employer of a small business has to make decision over the level of advantages that would go as the employees' retirement fund. This could be as a fixated monthly amount or as a percentage over the paid compensation. The amount of yearly contributions is calculated on the basis of age, service tenure; level of salary, rate of inflation and present rate of interest. The present work culture makes this plan less popular as most of the individuals prefer job-hopping in search of greener pastures.
* Simplified Employee-Pension Plan - This plan calls for directing some percentage of annual salary of employees (3% to 15%) into tax-deferred retirement accounts that are individual based over the discretion. Here the decision for finalizing the extent of investments lies over the employees thus making employers safe from any sort of risk involved. Employees can augment their contributions when they are earning higher and having fewer liabilities. Similarly, they can reduce their contribution when they have financial burdens over them.
* Savings Incentive Match Plan - This plan provides an effortless small business retirement where there are joint contributions into the tax deferred retirement accounts. The retirement account demands the contribution of 3 percent of employee's annual compensation. Along with this, the employer also makes some contribution that goes into the retirement account of the employees.
The suggested small business retirement are going to make life comprehensibly easier not just for the employer of the business but also for the employees who deserve an equally safe and secure future.
There is more than one benefit for finding a suitable retirement plan for small businesses. Whatever contributions would be made by employer towards the retirement account of his employers, that amount would fall under tax-deductible expenses. The presence of a good retirement plan would also act like an attractive medium for welcoming proficient workers. This would enhance the integrity and credibility of business thus also winning the loyalty of employees.
Let us go through variety of small business retirement that can be selected as per employer's staff strength and other factors -
* Defined-Contribution Plan - This plan works over the fundamental of an allocation formula that helps in specifying some percentage of employees' contributions. The employees can opt for placing a part of their salaries into their retirement plan and make them grow in a tax deferred way.
* Defined-Benefit Plan - The employer of a small business has to make decision over the level of advantages that would go as the employees' retirement fund. This could be as a fixated monthly amount or as a percentage over the paid compensation. The amount of yearly contributions is calculated on the basis of age, service tenure; level of salary, rate of inflation and present rate of interest. The present work culture makes this plan less popular as most of the individuals prefer job-hopping in search of greener pastures.
* Simplified Employee-Pension Plan - This plan calls for directing some percentage of annual salary of employees (3% to 15%) into tax-deferred retirement accounts that are individual based over the discretion. Here the decision for finalizing the extent of investments lies over the employees thus making employers safe from any sort of risk involved. Employees can augment their contributions when they are earning higher and having fewer liabilities. Similarly, they can reduce their contribution when they have financial burdens over them.
* Savings Incentive Match Plan - This plan provides an effortless small business retirement where there are joint contributions into the tax deferred retirement accounts. The retirement account demands the contribution of 3 percent of employee's annual compensation. Along with this, the employer also makes some contribution that goes into the retirement account of the employees.
The suggested small business retirement are going to make life comprehensibly easier not just for the employer of the business but also for the employees who deserve an equally safe and secure future.
Wednesday, September 8, 2010
We Need Local Community Financial Planning for Seniors Modeled on SCORE Mentoring
Whenever the federal government regulators create more regulations in any industry, there are always unintended consequences. Take the securities industry for instance; the SEC has put forth so many rules and regulations concerning financial planners and stockbrokers that most firms and most practitioners won't even deal with people who have less than $500,000 to invest. As you know, this is less than 5% of our population, and less than 10% of retirees.
The sad statistic about most people being dead or broke at age 60 is actually a reality in America, even if we don't like to admit it. What we need is local community financial planning mentors, coaches, and consultants for seniors. This way they will not be snookered into some kind of high commission annuity conversion plan of all their assets, or be sold a bill of goods for some type of limited partnership which will never work out.
There are far too many groups that are taking the money from seniors, and because of all the rules and regulations, most financial planners will not deal with those with less than $500,000 in savings, pension, or assets not including real estate. It is my contention that we should model a community financial planning system along the same structure as SCORE, or Service Corps of Retired Executives. These are folks who go out into the community and help small business people, and entrepreneurs.
Most of their services are free, and since it is a nonprofit group, it attracts volunteers and small business people who are starting out on a shoestring. It works quite well, and SCORE is to be commended. This is exactly what we need to promote, and get going on a national level in every community across the United States in my humble opinion. Please consider all this.
The sad statistic about most people being dead or broke at age 60 is actually a reality in America, even if we don't like to admit it. What we need is local community financial planning mentors, coaches, and consultants for seniors. This way they will not be snookered into some kind of high commission annuity conversion plan of all their assets, or be sold a bill of goods for some type of limited partnership which will never work out.
There are far too many groups that are taking the money from seniors, and because of all the rules and regulations, most financial planners will not deal with those with less than $500,000 in savings, pension, or assets not including real estate. It is my contention that we should model a community financial planning system along the same structure as SCORE, or Service Corps of Retired Executives. These are folks who go out into the community and help small business people, and entrepreneurs.
Most of their services are free, and since it is a nonprofit group, it attracts volunteers and small business people who are starting out on a shoestring. It works quite well, and SCORE is to be commended. This is exactly what we need to promote, and get going on a national level in every community across the United States in my humble opinion. Please consider all this.
Tuesday, September 7, 2010
The Real Secrets to Smart Small Business Advertising
Small business advertising seems to change in some important way almost every week. As the economy remains tight, making smart choices about advertising becomes increasingly important. The rate of technological change, and the increasing affordability of electronic devices, continually alters the advertising landscape.
Smart small business advertising must weigh in the balance a number of considerations before locking into a plan. These include:
- The struggle of print media to remain viable
- The continuing popularity and importance of social media
- The proliferation of new communication devices
- The equally rapid proliferation of new ways of communicating with these devices
- The growing importance of video
- The shift from such traditional standards as the Yellow Pages to online search
These are only a few of the changes businesses must learn to deal with when planning marketing and sales efforts. At the very least, smart small business advertising today must include far more than traditional advertising, even if the ads are moved from print to electronic media.
What is Smart for Small Businesses Advertising Today?
In the digital age, smart small businesses' advertising must invest the time in understanding the advertising and marketing channels available today. Even more important, they must learn what makes these new channels different, how they are used differently, and which channels are most likely to reach their target customers. Then they must make choices and decisions about how to use each channel most effectively and most cost-efficiently to meet their goals. These are the critical tasks in smart advertising.
The flat space ads used in newspapers and magazines will attract only limited attention online unless it is very special. Today's ads need to move and speak and interact with potential customers. Even a banner ad on a website really needs to do more than just sit there. Small business advertising has changed in important and far-reaching ways.
Smart small business advertising must also note that a website must also be more than a three or four page brochure. Every page must be designed and written to grab the attention of the visitor in as little as 1.5 seconds, or that visitor is gone. Every page has a job to do. Moving people from page to page until they are asked to make a decision is what converts a visitor into a sales lead.
If you operate a brick-and-mortar store, you have the opportunity to take advantage of some very exciting small business advertising tactics to get people into your store, but you must figure out not only the right message and the right offer, but also the right medium, the right device and the platform used by that device. You need to be ready to use location-based email and on-the-spot coupons and special offers delivered by text message when someone is outside your store or in a place where your beverage is served.
What is smart for small business advertising today is discovering the right mix of lead generation tactics, the right amount of advertising, the right focus on providing information and benefits your target market wants, and keeping everything within the budget. When you find the people who can do each of those things for you will be ready to construct a viable advertising campaign.
Smart small business advertising must weigh in the balance a number of considerations before locking into a plan. These include:
- The struggle of print media to remain viable
- The continuing popularity and importance of social media
- The proliferation of new communication devices
- The equally rapid proliferation of new ways of communicating with these devices
- The growing importance of video
- The shift from such traditional standards as the Yellow Pages to online search
These are only a few of the changes businesses must learn to deal with when planning marketing and sales efforts. At the very least, smart small business advertising today must include far more than traditional advertising, even if the ads are moved from print to electronic media.
What is Smart for Small Businesses Advertising Today?
In the digital age, smart small businesses' advertising must invest the time in understanding the advertising and marketing channels available today. Even more important, they must learn what makes these new channels different, how they are used differently, and which channels are most likely to reach their target customers. Then they must make choices and decisions about how to use each channel most effectively and most cost-efficiently to meet their goals. These are the critical tasks in smart advertising.
The flat space ads used in newspapers and magazines will attract only limited attention online unless it is very special. Today's ads need to move and speak and interact with potential customers. Even a banner ad on a website really needs to do more than just sit there. Small business advertising has changed in important and far-reaching ways.
Smart small business advertising must also note that a website must also be more than a three or four page brochure. Every page must be designed and written to grab the attention of the visitor in as little as 1.5 seconds, or that visitor is gone. Every page has a job to do. Moving people from page to page until they are asked to make a decision is what converts a visitor into a sales lead.
If you operate a brick-and-mortar store, you have the opportunity to take advantage of some very exciting small business advertising tactics to get people into your store, but you must figure out not only the right message and the right offer, but also the right medium, the right device and the platform used by that device. You need to be ready to use location-based email and on-the-spot coupons and special offers delivered by text message when someone is outside your store or in a place where your beverage is served.
What is smart for small business advertising today is discovering the right mix of lead generation tactics, the right amount of advertising, the right focus on providing information and benefits your target market wants, and keeping everything within the budget. When you find the people who can do each of those things for you will be ready to construct a viable advertising campaign.
Friday, September 3, 2010
The Significance of Practical Financial Planning
The concept of financial planning is more complex than what is required. This is because many people try to build up complex plans for themselves. They invite unwanted complexity in to their financial plans. Ultimately they fail in their attempt to make up effective budgets for themselves and their family.
If we are able to produce an effective budget, then it is a very powerful tool that can drive us to a very much desired financial security. But most of the people go wrong in this planning. The major reason for this is their attempt to introduce too much of feelings into the planning.
The point I would like to make clear is that planning has to be done very professionally and practically. You have got to keep the practical aspect in your mind. By practical aspect, I mean that you got to make sure that you are building budget plans that are practically possible. A plan that saves you a fixed amount of money every months the best method of planning.
Most people seem to create budgets that will make up a savings of thousands of dollars every month. The major issue with this is that it is practically impossible. A plan that aims at savings of more than 20% to 25% of your income is the best. It is practically impossible to make your plans aiming at 40% savings of your income true. So the basic point that has to be kept in mind is that you will have to device plans that can actually work out for you.
If we are able to produce an effective budget, then it is a very powerful tool that can drive us to a very much desired financial security. But most of the people go wrong in this planning. The major reason for this is their attempt to introduce too much of feelings into the planning.
The point I would like to make clear is that planning has to be done very professionally and practically. You have got to keep the practical aspect in your mind. By practical aspect, I mean that you got to make sure that you are building budget plans that are practically possible. A plan that saves you a fixed amount of money every months the best method of planning.
Most people seem to create budgets that will make up a savings of thousands of dollars every month. The major issue with this is that it is practically impossible. A plan that aims at savings of more than 20% to 25% of your income is the best. It is practically impossible to make your plans aiming at 40% savings of your income true. So the basic point that has to be kept in mind is that you will have to device plans that can actually work out for you.
Thursday, September 2, 2010
Financial Resources For Small Businesses
Every business needs a certain amount of money to start. The success of a small business depends on the funding it is able to arrange to ensure a smooth cash flow. Different Business Life Cycle Stages will help determine the type of financing available and timing of receiving the financing. These life cycle stages are:
* Startup: You develop the business model and infrastructure and start early operations.
* Growth: Generally a business has an initial time of negative profit until it breaks even and begins to show increased revenues that allow it to grow.
* Expansion: This is the point at which a business gets to the point where there is sufficient revenue being brought in so that there are no doubts of its survival and it can expand its horizons.
* Mature: The business is now stable enough to survive most unforeseen circumstances. It has enough backing, capital and support to ensure that even if the market becomes unstable, it can pull through.
While many small businesses may choose to get funding in the early stages to start the business, many need access to financial resources even for a running business especially with those that have seasonal patterns. Finding adequate funding for small ventures can be tough and time consuming. Often entrepreneurs end up utilizing their entire savings to keep the business afloat until other financing is available.
These are some of the financing options available:
* Self financing
* Bank Loan
* Friends and Family Loans
* Cash Advance
* Equipment Financing
* Unsecured Loan
* Accounts Receivable Factoring
* Line of Credit
* Home Equity Lines
* Credit Cards
* Inventory Loan
* Vendor Financing
* Working Capital Loan
* Franchise Loan
* Grants
* Equity Investment
Several of these options are more appropriate and easier to secure in the later life cycle stages. Small business financing come at a price and also increase the element of risk involved. However, financing becomes necessary to ensure cash flow, purchase assets like property, expansion of business, equipment or inventory purchase, or simply to have adequate working capital. Utilizing financing makes sense versus using up all of your personal assets and resources. But getting a small business financing approved requires that the owner/borrower is able to provide the following:
* A sound business plan
* Personal profile with qualifications and experience
* Personal financial status statement
* Credit rating of the business if already in operation, or credit history
* Track record of taxes paid in previous years
* Collateral that can be used to secure the loan
There are a lot of considerations that go into small business financing. Subsequent articles will expand on each of these options and points.
* Startup: You develop the business model and infrastructure and start early operations.
* Growth: Generally a business has an initial time of negative profit until it breaks even and begins to show increased revenues that allow it to grow.
* Expansion: This is the point at which a business gets to the point where there is sufficient revenue being brought in so that there are no doubts of its survival and it can expand its horizons.
* Mature: The business is now stable enough to survive most unforeseen circumstances. It has enough backing, capital and support to ensure that even if the market becomes unstable, it can pull through.
While many small businesses may choose to get funding in the early stages to start the business, many need access to financial resources even for a running business especially with those that have seasonal patterns. Finding adequate funding for small ventures can be tough and time consuming. Often entrepreneurs end up utilizing their entire savings to keep the business afloat until other financing is available.
These are some of the financing options available:
* Self financing
* Bank Loan
* Friends and Family Loans
* Cash Advance
* Equipment Financing
* Unsecured Loan
* Accounts Receivable Factoring
* Line of Credit
* Home Equity Lines
* Credit Cards
* Inventory Loan
* Vendor Financing
* Working Capital Loan
* Franchise Loan
* Grants
* Equity Investment
Several of these options are more appropriate and easier to secure in the later life cycle stages. Small business financing come at a price and also increase the element of risk involved. However, financing becomes necessary to ensure cash flow, purchase assets like property, expansion of business, equipment or inventory purchase, or simply to have adequate working capital. Utilizing financing makes sense versus using up all of your personal assets and resources. But getting a small business financing approved requires that the owner/borrower is able to provide the following:
* A sound business plan
* Personal profile with qualifications and experience
* Personal financial status statement
* Credit rating of the business if already in operation, or credit history
* Track record of taxes paid in previous years
* Collateral that can be used to secure the loan
There are a lot of considerations that go into small business financing. Subsequent articles will expand on each of these options and points.
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