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Monday, December 24, 2007

Budget Help For The Small Business Owner

By Ellen Rohr

Are you ready for the new year that is right around the corner? How wonderful...a brand new year lays at your feet. What are you going to do with it?

Take a look back at January 2007. Compare where you were then with where you are now. Check your progress. Are you happy with it?

Another year gone by. Sigh. It's scary how fast it went.

Are you better off than you were last January? Are your relationships more rewarding? Is your bank account bigger?

"You may delay but time will not." Benjamin Franklin

You are too old to waste time. You have an opportunity to create the life you want starting this year, right now. It's time for the "B" word. "B" stands for goal setting. "B" stands for planning. "B" stands for...BUDGET.

And it's time for you to get over your "B" word problem. You know you are supposed to put a budget together, right? Have you? Have you lined up 2007 in numbers and dollars? Have courage. I'll help you. I have struggled with this. I learned how to budget only because I HAD to. And so do you. If you don't set goals and measure your progress, your business won't get any better. It will get worse! Yikes! Together, we can get through it. Here are some tips for putting together your business budget for 2008...and beyond.

Getting Started...

• stopping. Stop whining about budgeting. Stop claiming you can't do it. Stop claiming you don't get it. Budgeting is your best guess at what you can do for sales and expenses for a future period of time. That's all.

• Don't worry about doing it just right. You can't do it 100% right, meaning you will never guess exactly what you will have in sales and expenses. You can't do it wrong. Any swing at doing a budget is a positive move.

• Realize your power. You are incredibly powerful, so much more so than you realize. Writing your goals, crafting your budget, actually sets your goals into motion. You have everything to gain and nothing to lose by budgeting. So, let's go!

Tools to use...

• Your accounting program probably has a budgeting program in it. Use it. It will do the math for you.

• Do you provide plumbing, heating, cooling, electrical, over-the-counter sales and septic tank pumping? Create a budget for each entity. Use the departments feature in your accounting program.

• Columnar pads are your friends. You know those green tinted sheets with the rows and columns inked in already? There is nothing wrong with using a pencil and paper to work out your budget.

• Print out your Income Statement (aka Profit and Loss or P&L) from the last two years. If you don't have them, find your income tax returns. Your tax preparer created an income statement for your tax return. You can also have your check book register handy.

Basic Budgeting Steps...

• Create a reasonable chart of accounts. The chart of accounts should reflect YOUR business. Your accountant may encourage you to use THEIR chart of accounts. Doing so makes it easier for him to do your taxes. He should accommodate you and your business by helping you create a chart of accounts that is plumbing-business specific. I've attached a sample chart of accounts for you to use. Show it to your accountant and customize it to reflect the action at YOUR company.

• Simple budgeting involves goal setting for sales and expenses (costs.) Start with account number 4-1000 and work through the rest of the expenses. Of course you can add other expenses. This is just a starting point. More sophisticated budgeting involves the balance sheet items...assets, liabilities and equity (accounts 1-1000 through 3-9000.) If you are new to budgeting, start with sales and expenses. Address the other items with your accountant after you have done that.

• Find a Budget Buddy. Doing your budget with someone else is a GREAT idea. Two sets of eyes will catch more math errors. Two brains will help you think out your assumptions. And, making an appointment with another person to work on the budget will discipline YOU to keep that appointment. Budgeting is easy to blow off because it's not an urgent activity. Who should be your Budget Buddy? Another business owner is good. You can also work with one of your employees on the budget. Don't be afraid to share your financial information with a key employee. Their financial literacy makes them more valuable to your organization.

• There are two ways to approach the sales line of your budget.

1. Set a sales goal... and work from there.

2. Fill in all your projected costs, and then see how much sales will have to be to cover costs and leave your desired profit.

Either way is OK. If you start with the sales line, and there is not enough on the top to cover all the expenses you anticipate, you can go up to the top line and change your budgeted sales to make it work. Remember...the Budget is pretend. It's a guess. You can move the numbers around.

• Work your way down the list of costs and make your best guess. Reference your income statement, tax returns and check register to see how much you have spent on expenses in the past.

• You can fill in the budget for the whole year, or month by month. Month by month is a more usable format when it comes to checking actual performance to budgeted numbers.

• The budget is just goal setting. It doesn't need to be bound by strict accounting rules. You can budget for expenses you haven't incurred yet. For instance, if you want to set aside money for buying a new truck, you can budget for it first...and then buy once you have the money saved.

• Keep a Budgeting Log. You are going to pull some of your budgeted numbers from thin air. Write down notes to yourself as you come up with the numbers for your budget. When you refer to your budget in the months to come, you may forget your assumptions. Write them down in your Budgeting Log.

• John Young, venture capitalist and marketing maverick, helps me put my budget together for Benjamin Franklin Plumbing. He gave me this great piece of advice: Don't put down budgeted numbers that you KNOW won't happen. For instance, if you KNOW that your insurance costs are going to go up this year, don't put down the same dollar amount as you paid last year. If you don't know the increase amount yet, find out...or put in an increased number from last year. But don't put in the same number...because you KNOW that won't be it.

Use it or lose it...

• Don't bury your budget in a drawer once you consider it "done." A budget is a viable goal setting...and getting...tool. Each month, compare your actual performance to your budgeted performance. Even better, check MID month. Check your progress on the 15th of the month. If you are behind in sales, take action to crank up sales...and to cinch down expenses. If you don't refer to your budget until after the month is over, you may miss the opportunity to salvage a month.

Once upon a time, I taught skiing at Park City Ski Area. A client signed up to take a week's worth of ski lessons with me. As an instructor, a week of lessons is a big money maker. Still, I had to turn him down.

I told him, "Listen, you are only going to be here for a week. If you take lessons every day, you'll miss the chance to just SKI. You need to learn a bit, and then go practice. Have fun. Make some mistakes. Try things out on your own. If you only take lessons, you'll miss the point: YOU want to SKI." We settled on a few lessons with some free time in between.

So...go forth and budget. You know more than you think you do. Don't avoid budgeting because you are not sure that you know how. This stuff isn't that hard. If you aren't super comfortable with it, you will avoid it. Or, claim you don't "get" it. But you get it enough to give it a swing. This column has enough information for you to get started. Put together a budget for 2008. Check your progress against it each week. And have some fun out there on the steep slopes of business.

This year, let the "B" stand for BIG BUCKS!
For more help...visit or call 877.629.7647
We make business basics EASY at Bare Bones Biz!

Ellen Rohr is the President and Founder of Bare Bones Biz, a business training and consulting company that teaches clients how to turn big ideas into successful businesses. Rohr is the successful author of numerous business basics books, including: Where Did the Money Go? - Accounting Basics for the Business Owner Who Hates Numbers and How Much Should I Charge? - Pricing Basics for Making Money Doing What You Love.

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Buying a Business - Understanding Small Business Financing

By Jason L. Pittman

As a business broker I am frequently discussing with clients and prospective buyers methods of small business financing. Once a buyer and seller agree on price and terms, it all boils down to due diligence and financing.

A lot of factors can determine how lenders will view your deal. It will depend on the type of lender, type of business, and what kind of assets does the business own that can be used as collateral. Is there real estate involved in the transaction?

A commercial banker or loan broker will show you what factors matter most and get your deal funded with their products.

Cash and Equity

Of course, if you're paying all cash, none of this is your concern, however 100% cash deals are not the norm.

Every business is unique and different, but one thing is certain before you seriously consider pursuing a business for sale: You or one of your partners will need sufficient liquid capital or equity for anyone to finance your deal.

Bank Financing

The stories of a "no money down" deals and 90% seller financing are rare and I have personally never seen one that was legitimate.

Again, depending on various factors, when acquiring small business financing through a commercial lender, there is a good chance you'll need 20-40% cash/equity down on the business, financing the balance with debt capital.

You will probably pay "prime + 2" in interest, meaning if the prime rate is 8%, your interest will probably pay 10%.

The term of the loan will probably be 5-10 years. Many of the commercial loans I've seen are 7 year terms.

Business with Real Estate

If you are acquiring real estate in addition to the business, many products are available as "Blended Loans". These loans are "blended" with the standard "real estate loan" (10% down, 30 years).

You end up with roughly a 15% down payment, and a term of 18 - 22 years, which is great for keeping your debt service down and increasing your Cash Flow.

On the other hand, 15% of business and real estate can still be a sizable down payment.

The cost on the "blended loan" will likely be more favorable as well with the real estate as collateral.

Seller Financing

Most small and mid size companies will involve a portion of seller financing.

It is appropriate to amortize the financing over a period of time and have a balloon after 2 or 3 years.

This way the financing serves two purposes: Funds the deal and shows that the seller has confidence in the business - and the buyer.

Jason L. Pittman is a business broker and intermediary in Chicago, IL.

To access more info and resources on real estate and small business:

9 Steps to Building Business Credit

By Lisa Phillips

Building business credit can be accomplished regardless of your personal credit history. Business credit is essential in conserving cash flow, keeping track of business expenses and more importantly, protecting personal assets and personal credit history. The most important element to building business credit is finding lending institutions, credit card issuers and vendors that will establish business credit without you giving a personal guarantee from your individual credit information.

Business credit is also a way of building your company’s image and identity. The following are 9 Steps to Establishing Credit for Your Business:

Step One
Decide how you want to structure your business. This may take some research but a few common ways to structure a business are: C-Corporation; S-Corporation; Sole-Proprietorship; Limited Liability and Partnerships. For business credit separate from your personal credit you will need to structure your business as a Corporation or LLC. You can also purchase a “shelf” or “aged” corporation in the State where you want to do business. A shelf or aged corporation is one which has no activity and is created and put on the “shelf” to age and use at a later date. There are companies which sell shelf corporations.

Step Two
Obtain an employer identification number (EIN). Business credit is tracked using your business name, business address and employer identification number. You may obtain an EIN from the IRS online. ( The application is real simple and takes about 5 minutes. As a sole proprietor you may apply or if you are a corporation any officer may apply.

Step Three
Open a separate bank account under the exact legal name of the business. Business checking accounts can be opened with as little as a $100.00 deposit.

Step Four
Business address and telephone number must be listed under the business name in the 411 directory and the telephone must be answered in your business name.

Step Five
Obtain required business license, permits, registrations, etc., in the City or Jurisdiction where you do business.

Step Six
Technically, at this point you are ready to establish business credit with some vendors such as Staples. Simply go to fax your business phone bill along with the credit application on your business letterhead to apply for business credit. No personal guarantee is required and you should receive the standard business credit line of $750.00

Step Seven
Establish a profile with Dun and Bradstreet (DNB) and obtain a D-U-N-S Number. DNB is the largest tracker of business credit. The D-U-N-S Number is a nine-digit identification number that provides unique identifiers of business entities. The website for Dun & Bradstreet is There is no charge and you will receive a D-U-N-S Number within 30 business days. You can pay for their credit builder services in order to receive the D-U-N-S immediately, but it is definitely not necessary. Companies where you apply for credit that use Dun & Bradstreet services will request your credit file and this will establish your file. It may take up to 45 days for the companies to report.

Note: If you do decide to pay for their credit builder services preparation is vital when contacting Dun & Bradstreet. Make sure you have covered all your bases. What you say to DNB goes permanently into your file

Step Eight
Now that you have received your D-U-N-S number you are prepared to apply for business credit. As you begin to establish business credit it is imperative that you pay your invoices before the grace period. A Paydex Score of 80 is considered very good and is based on your payment history with at least five (5) vendors. It makes a difference for every day you pay earlier than the actual due date unlike personal credit. Business credit scores range on a scale from 0 to 100 and a Paydex score of 80 will get you the best business credit cards and terms.

Step Nine
After completing the process you may want to apply to the following companies with no personal guarantee required. Do not apply for everything at one time. This may get your business credit file flagged. Allow a couple of weeks between applications.

Office Depot-UPS-Staples-Fedex/Kinkos-T-Mobile-Dell Computers-Office Max-Nextel-Chevron Oil-Cingular-Nebs

Lisa Phillips is a marketing consultant specializing in business expansion and development. Because many small business owners lack the personal and business credit necessary to grow and expand, she has developed a free website to aid consumers as well as entrepreneurs in rebuilding and taking control of their credit.

Securing Business Credit For Your Startup Business

By Tl Kleban

One of the most important aspects of running a successful business is securing the finances to run it properly. This involves obtaining loans which has become easier now than in years past thanks to the ample funds and financial resources available in the market. As a business owner we can choose to get loans from either private banks to government institutions. It's this change of attitude by bank which has made acquiring loans easier. It's still not all fun and games, however.

The thing is for these banks to take you seriously as an entrepreneur, you need to separate your personal finances from your business life. They look at your business activity as they would a typical consumer for credit purposes, and will turn you down if your personal credit score is low.

A recent study showed that almost 74% of bankers say financial documentation is the most important aspect when they go to approve a small-business loan, and that 60% of those small businesses are turned down because of poor documentation. Here are some other steps you can take to ensure you are approved for that business loan:

Before you go to your bank asking for a loan, you better be sure that your account is in good standing with them. Think of this as an unwritten assurance which could help you increase your chances of getting that loan.

Do you have enough assets to pledge for your credit. This would consists of items like a house, car or a business premise. All of these items represent your ability to repay the loan back.

Many credit professionals recommend building a good credit score and personal credibility through paying taxes and maintaining all legal documents right from the beginning of the business venture. All lenders like to see both when making a decision on a loan.

Are your sources of past credit correctly reporting your credit and payment history to the chief credit reporting bureaus of your state? If they are not, then you may be in a little bit of trouble.

Keep a file of all business documents you have. They need to be complete and comprehensive. This includes licenses, permits, telephone listing, business name, domain name, investment details and spent capital. These act as an indication of the credibility of your business and you, the proprietor of it.

Another good idea is to try and invest a significant amount in the business before you apply for that credit or loan. Doing so gives the bank the impression you are willing to work hard to reach your business goals. This makes them more comfortable approving you for a loan since you will be more apt to pay the loan back.

What is the profitability of the business? You'll find that banks and other lending institutions will only offer loans to entities more likely to earn back the investment. This happens more often when profit realizations are expected to take a long time.

Visit a few small banks in your area to ask for financing. Bigger banks expect great credit history, collateral, hard cash and also personal credibility before they will offer any loan out to a business, making them difficult to deal with. Smaller banks are easier to work with and why most experts recommend them.

Merit Capital Advance looks at the big picture by offering a financing program that provides small businesses with fast business cash. It is the most convenient way to get a small business cash advance when you need it most. Visit Merit Capital Advance at

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Cathy Harris is an Empowerment and Motivational Speaker, Non-GMO Health and Wellness Expert, Self-Publishing and Business Coach.