Business Failures: They Don’t Have to Happen

About half of all new businesses started in the U.S. will be out of business within five years. Or in other words, the long-term success rate for U.S. businesses is only about 50 percent.But how often do business failures go unnoticed? The fact is, most business failures are noticed, but they’re ignored. It’s kind of like the hidden camera TV shows where bystanders witness something uncomfortable, like an old guy who ran out of gas and is trying to push his car, but nobody actually gives him a hand.Look For the SignsWhen a business is suffering, the signs are usually there. Even though sales may be steady and the business owner optimistic, it’s a little like a train wreck for outside observers who know what to look for: You know it’s going to happen, but you can’t stand to look.These businesses often have operating lines of credit and operating accounts, but frequent overdrafts, or they have a line of credit that has turned into an evergreen loan. If you’re wondering why they don’t pay their bills on time, it’s simple: They have no cash flow.Surprisingly, these businesses sometimes struggle for years with no real direction from the person who could be their savior: their banker. Nobody tells them anything, and the banker who “wined and dined” them to get their business when times were good is now looking for a way to exit the credit, leaving the business owner confused and wondering what happened to the “red carpet” treatment.As authorities in the business community, bankers, accountants and business attorneys should be the ones to spot the early stages of business trouble. Who else is as close to a business’ financial condition? The best way to spot potential business failures is to look for early signs of financial trouble, such as late or inaccurate financial statements, evergreen lines of credit, increasing A/P, and slow-paying A/R (e.g., an increasing amount of A/R that’s over 90 days).The Snowball EffectThe typical routine of watching and waiting for a business to fail is a detriment and disservice to the customer. Think about a snowball that keeps picking up speed and girth as it rolls downhill. As the business failure picks up speed, it eventually becomes too much for the business owner who doesn’t possess the skills necessary to get the situation under control.Remember that most business owners go into business with a trade skill, not an accounting degree. They may not know how to forecast, or even know what breakeven means, which leaves them not really understanding why they are losing money or having negative cash flow. The fact is, the average business owner doesn’t have the knowledge or training to understand what is going wrong.Unfortunately, the psychology of disengaging from a credit is often exactly what it shouldn’t be: adversarial. How can this be managed in a win-win way? How can you tell a business owner you can no longer support him or her without sounding like you are leaving the business in a lurch?The good news is that there is a way you can join hands with these businesses and be part of a successful solution that also helps you keep a valued customer relationship. Even if you have to exit the credit, you can still keep the business’ deposits while referring them to experts who know how to help improve their financial situation and cash flow.Bring in the ExpertsAsset-based lending (ABL) and factoring emerged from the need for better cash flow for businesses that are either too new to get traditional bank credit, or that need to exit a bank because they are no longer in compliance with loan covenants. In either case, you can refer your customers to an asset-based lender or factor that can administer the line of credit while you continue to meet all of the business’ other needs, such as deposits and cash management services.Since asset-based lenders and factors are accustomed to dealing with these kinds of financial problems, they can often increase the availability of cash while the other issues are being addressed. They can also be a part of the solution when a credit has been over-extended and things are still not improving.Creative debt restructuring is very common, and asset-based lenders and factors are very well versed in how to handle these situations. In short, they are a great referral in the right situation.Another expert that can help troubled businesses is a type of management consultant known as a turnaround expert. Even though they are an added expense when cash flow is already tight, they can more than pay for their services if they are good at debt restructuring and negotiations.It Takes a TeamIt often takes a team to help businesses succeed during tough times. The business may need an injection of cash that can be achieved with asset-based lending or factoring, as well as a good business advisor to teach them about the financial side of their business.Finding quality business professionals who understand this niche can be the tough part. The Internet is a vast and scary space when business owners don’t know what they’re looking for. The terms used to describe these consulting services are not taught in school, and most owners don’t know how to find this kind of help. This is where you can provide invaluable advice and assistance-asset-based lending, factoring and quality management consulting are all referral-dependent.No business has to fail due to financial mismanagement or a lack of expert financial assistance. But owners need advocates surrounding them who are proactive in identifying when they may need a helping hand-and then making the right introductions.

You Want to Sell Your Business Someday – How to Prepare Today

Every Business Needs an Exit Strategy. Do you want to Run Your Company Forever? Do you Want to Sell your business? Do you want to leave your business to your children? Do you want to sell your business to Your Employees? Do you Just want to close your doors and Move on? How do you want to exit your business?- And when? Recently a good friend of mine that is a successful owner contacted me about the prospect of selling his Company in a few years. He asked me to contact him regarding what he may want to be doing now to prepare his business for sale. He has a successful growing company, he has grown his number of employees from 10 to 75 over the last 18 months. He is effective at gaining new contracts and growing revenue, but like so many businessmen, he has never attempted to sell his business.Normally during the startup of a new venture the thought of an exit strategy is not even a consideration. Then small business owners get so involved with the day-today operation of their operation that again an exit strategy is either not even thought of or possibly just put on the back burner. Taking some time to put some thought into your exit strategy can go a long way to increasing your odds of exiting your business the way you desire to.Planning, gaining knowledge, and preparing may be the 3 most important measures you can take when considering an effective exit strategy. If your exit strategy involves an interest in trying to successfully sell your business in several years, what sort of measures or actions should an owner take to make this successful:
Make sure your financials are in order. Clean understandable Income Statements and Balance Sheets will add value to your business.
Systematize and document your operations and procedures. Well documented policies, procedures and practices are a sign of a well run company and probably would help your company run better, and add value. If you got hit by a truck tomorrow could someone use your documented practices to help continue run your company?
Move your business towards a business that does not rely on you. Do your customers do business with your company or do customers do business with you. When you go to sell your business are you selling a business that is dependent on you the owner or a self-sustaining business based on a solid philosophy, solid customer service and reliable employees and practices. Or when you go away, does your business go away?
Speak to your trusted advisers- let them know your intentions see if they have any input suggestions that could help move you towards this goal. Trusted advisers may include your attorney, CPA, financial advisor, business brokers.
Learn by speaking to your trusted advisers what are the most important aspects that affect your business value. How does one value your business? What is most important to business buyers?- Your Assets, your cash flow, your sales, your number of customers, your patents, trademarks, your competitive advantage. Learn what the real driving factors are behind raising the value of your business and work on them. Understand that not all businesses that attempt to sell actually do find a business buyer and sell.
Running your company and concurrently, preparing your business for sale is a viable approach towards business transition. It is not a” one or the other approach”. Preparing your business for sale does not need to get in the way of running your company, and most measures improve your company. If you make needed improvements to your business and or operations and decide not to sell your business or exit your business, you still most likely will have a better company on your hands.
For planning purposes try to learn what the potential value of your business may be. Also educate yourself on the business buying or selling marketplace. It is not always the same. Selling a business during the 90’s was different than selling a business in 2006, and is significantly different than selling a business in 2010. If you think you want to sell your business in 5 years for $1M, attempt to understand what realistically your approximate value may be today. If your business may realistically only be worth $250,000- change your expectations, change your time frame, or maybe more importantly get to work on making necessary changes to your business.

Mobile Location – Part 2 – What is Location-Based Advertising?

Mobile Location Based Advertising describes the provision of location-sensitive advertisements to mobile subscribers.For example, suppose a person carrying a Nokia N97 is close to a store that sells mobile telephone accessories. They might be offered 20% off the price of accessories for their N97, provided they purchase in the next 30 minutes. This example demonstrates the key virtue of location based mobile advertising: the offer can be made highly relevant to the subscriber, because they are in close proximity to the store. The example also shows how location information can be combined with other information (in this case the model of their mobile) in order to make the offer even more relevant.When discussing location based mobile advertising, one way to categorise the advertising is as Pull or Push:Pull AdvertisingThis occurs when a user has requested some information, and an advertisement that is relevant to the person’s location is presented together with the requested information. For example, if a user accesses an article on a release of a new Toyota model, an advertisement could be inserted for a motor dealer close to their current location.Pull advertising is not inherently intrusive, as the advertisement is just part of the normal stream that is being presented to the user. However, this lack of obtrusiveness also means that the advertisement may not be noticed.Push AdvertisingThis occurs when a person is presented with an unsolicited advertisement triggered based on their location. In the case of the N97 user described above, an SMS could be sent to them when they are close to the mobile phone store, offering them the 20% off the price of accessories. In this case, the advertisement is more likely to be noticed, but the consumer may react negatively to the intrusion.Push advertising is inherently more intrusive than Pull, but it could be far more effective than most forms of Pull. Many analysts anticipate that carefully targeted Push advertising inventory will attract significant premiums compared to mobile display inventory.Business ModelsCurrent business models for mobile location based Pull advertising tend to follow internet advertising models, with either Cost per Mille (CPM) or Cost per Click (CPC) fees.. The required accuracy for most mobile location based Pull advertising can be quite low. For example, often an advertiser may just want to target ads according to the city or state a subscriber is located in.There are far fewer commercial examples of mobile location based Push advertising in operation currently. Business models include CPM and CPA.AccuracyThe accuracy requirements for Push based advertising will often be more exacting than those for Pull advertisements. In order to justify the intrusion, the advertisement needs to be particularly relevant to the subscriber, so fine-grained localization is needed (e.g. the need to know when a subscriber is within easy walking distance of a store). Another requirement for Push based Advertising is that the underlying location technology needs to support geo-fencing. This is the capability to trigger an alert when a mobile enters or leaves a defined geographical region. Because reliable geo-fencing is difficult for NCID, this tends to favor handset and SIM based location.Subscriber PrivacyIn order for Mobile Location Based Advertising to be a success, it is important to take into account the privacy of the mobile subscriber. These concerns are likely to be even more important for Push than for Pull based advertising. In the case of Pull based advertising, the user may not even perceive that their location is being used to target the advertisement, but for Push, this will become obvious very quickly. In both cases, the best way to handle this issue is for the subscriber to opt in to receiving the localized advertising, and for the subscriber to have explicit control over their location information.