4 Myths About Small Business Startups in Madison, WI

Whether you’re preparing to make a career change or are starting fresh in the business world for the first time, the decision to make your ideas into a reality with a business of your own is a decision that takes serious consideration and planning. When done right, you can find a whole new definition of professional satisfaction steering your company into the future. When done wrong, you can quickly find yourself in a financial mess that can be difficult to pull yourself out of.

We’ve talked at length about what every startup owner should consider prior to cutting the blue ribbon on opening day, but it’s equally important to know the myths and commonly-held beliefs about entrepreneurship that simply don’t hold up in the real world. Whether it comes in the form of advice from one owner to the next, or whether you read about a particularly striking story in the news, acting on misinformation can deal a big blow to productivity. (more…)

3 Ways You Can Protect Your Business From Outside Liability

When prospective business owners finally launch their idea into reality, one of the biggest risks to those who struggle to gather initial investment funds or enter into high-risk financing arrangements is the danger of business woes negatively affecting personal assets. While there are countless resources available to assist business owners letting losses impinge on their personal savings, few give much advice on how personal circumstances can end up hurting your business.

While business-to-personal finance risks are certainly a primary concern that should factor into what sort of business you start, it’s also important to protect yourself from outside liability should disaster strike. Here are three things you can do to assure your business remains safe during times of personal duress: (more…)

3 Financing Options To Start Your Small Business

Whether you’re a young entrepreneur still racked with school loans, or an experienced business professional lacking the means to fund your new startup idea, many thought-leaders and prospective business owners are finding the hurdle of initial investment too high to climb.

Fortunately, there are a number of financing options that are readily available and oftentimes welcoming to those who can demonstrate solid financial know-how and an idea with long-term potential for growth and development. While the process may not be particularly easy or enjoyable, matching yourself with the best financing plan can not only make your idea into a business reality, but can also give you a degree of financial breathing room without the need to pay dues upfront all at once. Let’s explore three common ways entrepreneurs are finding solutions to their financing problems:

1. Find a credit card built for your small business

For those unfamiliar with the differences between traditional personal credit cards and those built specifically for small businesses, the essential distinction involves protection and rewards. Personal credit card holders enjoy a greater variety of protections afforded by the government when it comes to maintaining a healthy line of credit. Those designed for businesses come with a higher degree of risk, but also offer many more benefits that are intended to help the average small business owner such as discounted business supplies, airfare, and so on.

The biggest advantage to opening a line of credit through a business card is the ease of attaining funds relatively quickly. This may be appeal especially to those who are forecasting cash flow problems shortly after launching. In addition to the relative quickness of the credit card solution, is the fact that credit cards present one of the easiest ways to get the money in the first place. So for those who’ve found this advice in hopes of working yourself out of a financial pinch, this may be an option you want to pursue.

If you do decide to open a line of specialized credit, be sure you’re aware of the pitfalls. Credit card interest rates are significantly higher than those associated with a traditional loan, so be sure you’re confident you’ll be able to keep up with the payments each month. Late payments can be a killer to an otherwise healthy credit score.

2. Repurpose retirement funds into investment materials

Specifically for those looking to invest in a franchising option, a relatively new trend is emerging that can provide a direct means of funding at the risk of your personal future savings.

One of the biggest challenges to prospective franchise owners is the often large initial fees. If you’ve accumulated a substantial pool of retirement through our career thus far, it’s possible to flip this money for a franchise investment. This is done through a Rollover for Business Startup Strategy you can explore more in depth here.

Since this strategy can present some more complicated financial issues, it’s wise to meet with a personal finance professional before making a substantial change to your retirement savings. Be aware that this too is an extremely risky move if you don’t have full confidence in your ability to make it work.

3. Turn to microloans for a more manageable solution

If your startup is in need of a more “intermediate” financing option, a microloan may be a useful solution. These loans are typically smaller than more traditional options and are issued to those with little income or have a credit history not quite up to the standards needed to qualify for a bank loan.

Issuers have found a good deal of success in terms of borrower repayment, with most statistics reporting somewhere between 90-99% of properly repaid loans. To add to the general assumption that microloans often result in significant success for borrowers, a survey conducted by Accion US Network found that 42% of respondents noted an income increase after being issued a microloan of some kind.

While each of these methods come with some degree of risk, remember that good ideas and solid business models can be very rewarding investments when executed carefully. While you should be careful when signing onto any kind of financing agreement that could put your money at jeopardy, those who are confident and complete in their research are those that typically succeed.

If you’re looking for financial advice regarding a new startup endeavor, our outsourced accounting and CFO services experts can help you carve a successful future for you and your business idea.

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3 Financial Principles to Grow Your Small Business in Madison, WI

Today’s entrepreneurs have no shortage of ideas when it comes to creating innovative products and services in today’s networked business world. The financial end of these ventures, however, can often fall by the wayside when the more “exciting” aspects of a startup take center stage. A dull regard for ones finances as they relate to a business’s sustainability can quickly derail them seemingly out of nowhere when diligent money monitoring isn’t established early on.

Compounding this issue is a sense of financial automation new business owners assume is possible with today’s advanced bookkeeping tools. While accounting software provides a far more convenient solution for keeping track of one’s records and forecasting short-term budgeting considerations into the future, no tool is able to give you total financial autopilot. Whether you’re completely new to small business finance or need to brush up on what you should monitor most, here are four areas you should keep close tabs on as you continue to grow:

Make every effort to keep your cash flow positive

For those who are operating on a fragile budget, cash needs to be a top concern. The “cash flow from operations” line on your statements is the key metric to monitor your cash flow in terms of your day-to-day operations. The implications of a negative cash flow are simple: you won’t be able to pay your bills and may risk running out of cash altogether if steps aren’t taken to rectify the imbalance.

Putting in the work to establish a sustainable positive cash flow brings with it the ability to devote more of your attention to the other dimensions of your business. You can begin to devote your time toward strategic business growth rather than worry about staying afloat week to week or month to month. It’s also important to understand the difference between profit and cash flow.

Being “profitable” doesn’t necessarily mean you’ll be able to sustain a positive flow of regular cash. This can become a reality when clients begin paying you through accounts receivable rather than immediate cash. Although you can account for the revenue, you may not actually be able to use it to pay bills or other expenses until sometime in the future.

Have a firm understanding on your net growth

Perhaps the biggest takeaway of this advice is to hold your net margins in the highest regard. Simply put, your net is the clearest indicator of the profit you’re making for each dollar of sales you’re closing. Looking deeper into the value of this metric, it provides a unique way to gauge your company’s ability to maintain profit regardless if your dollars of profit begin to decrease.

This is accomplished by a simply equation: your company’s net income divided by total sales. The result will give you a useful percentage of profit margins you can use to better understand your financial standing even when sales dip.

Make borrowing decisions carefully

No matter how confident you are in your product or service, borrowing too much capital when you launch your business is a huge risk. The fundamental problem is a disconnect between your business’s financial needs and borrowing payment agreements.

In essence, if your initial sales projections turn out to be less than you’d expected them to be, you’re stuck with the same monthly payments to those you’ve borrowed from. While smart borrowing can be a great way to push your company towards expansion, your business model needs to hold up accordingly.

When decisions are made to borrow too much too early, it doesn’t necessarily mean the end of your company, but it can put a heavy damper on your growth for months or years to come. With less revenue than you’d expected to see, more of your money will have to go to those you owe rather than towards new projects. Don’t find yourself a situation where your business is guided more by cash flow restrictions rather than your plans for growth.

If you’re looking for financial advice regarding a new startup endeavor, our outsourced accounting and CFO services experts can help you carve a successful future for you and your business idea.

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5 Expenses You Should Avoid When Starting Your Business

For entrepreneurs and prospective business owners making their first foray into starting their own business, longsighted goals and lofty idealism can often obstruct more pressing considerations that need to be addressed and planned for during a business’s first few months. Specifically, accounting for one’s expenses is a task that while extremely vital to the security of a young company, is too often ignored as being a secondary concern for the accountant.

While the prospect of starting your own business is certainly exciting, crafting a budget that adheres to a plan for eventual growth should be a sobering and important part of the preparation process. The major predator to a startup’s early finances is expense. While some expenses are obviously necessary to create an atmosphere to conduct business and pay those who may be helping you achieve your goals, there are many expenses that should not even be on the table when you’ve just cut the ribbon.

Hold off on unneeded travel

Unless your business relies on you to be in constant movement, traveling is one of the easiest ways to drain your wallet with virtually no return on investment.  On top of the fact that airfare and other travel costs can add up to be very expensive, research has shown workers to be less productive when not working from home base.

Today, the need for in-person meetings has been essentially erased by cheap or even free software tools like Skype and GoToMeeting, which allow people from all over the world to connect virtually from their own offices.

Don’t take on employees if extra help isn’t essential

While the stigma of the “large company” still seems to stand as a measure of success within business, taking on a crew too large for the ship can sink it quickly. Not only does payroll often end up destroying your bottom line when you employee too many people, but there’s also the problem of efficiency when smaller tasks end up in the hands of too many people.

Too many cooks in the kitchen can lead to miscommunication, delays, and other issues that can slow your workflow down considerably. Of course, depending on the size and specific kind of work you do, you may need to delegate business to a team of employees. Make sure when you do hire, your team is talented and ready to assume the responsibilities you’ve carefully laid out for them to accomplish.

Don’t go overboard on a website

This can become a complicated part the business depending on the industry you’re in. Of course, if you’re a software company or another digitally-oriented organization, designing your website is probably more important than designing your office.

However, for those new to web development or are looking to create a “stunning web presence,” remember that although anything is possible online, the design of your website should reflect the efficiency of your actual business. The more bells and whistles you attach to your site, the more can go wrong. Shape your web presence around practical functionality rather than provocative aesthetics.

Don’t advertise until your product or service is solidified

The first six months in the life of a startup are not set in stone. No matter how concrete and thorough your planning process was before launching, your business will no doubt encounter some ebbs and flows, which may ultimately lead you down another business path. With so much uncertainty as you test the waters, it’s wise not to make any major advertising commitments before you know exactly what your product or service will be.

Quick money versus longterm customers

While some startups are simply too large in scope to get off the ground without some degree of outside investment, most startups can get off the ground on a limited amount of initial capital. Unless you find yourself at the helm of a high-growth business needing the attention of investors, turn your attention to attracting customers. Raising money can be a full-time commitment than can pull the head of a company away from more pressing day-to-day tasks that will result in more sustained growth.

If you’re looking for financial advice regarding a new startup endeavor, our outsourced accounting and CFO services experts can help you carve a successful future for you and your business idea.

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