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Introduction

Thank you for downloading the latest e-book from B2B CFO®. We have tried to compile a collection of insightful business tips for the small business owner. These articles are written by

B2B CFO® partners and are the result of over 5,000 years of col ective experience in the

business world.

We have organized these articles by author rather than topic since there are so many different

categories that are addressed. Please review the table of contents in order to find the articles

that can help you the most with your business.

Copyright © 2012 B2B CFO® 6

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Articles By Mark Gandy

What Forecasting is Not

Forecasting is not about predicting the future. And while everyone knows that, the CEO’s and

CFO’s in the war room continue to forecast like they are predicting what will likely happen. At least that’s what I experience regularly through listening to corporate leaders.

Instead, let this smal -town CFO offer his take on forecasting (it can be cash, production levels,

sales, or how many games the Cubs will lose this year):

1. Forecasting is about trying to make better business decisions based on what we know today.

Accordingly, forecasting is not a prediction. Bottom line, the forecast is only as good as your assumptions. Poor forecasts? Then the result is poor assumptions.

2. You wil get better at this over time. Accordingly, forecasting is not an ongoing practice of futility.

Let’s say you start a forecasting process as part of a new management system you start (one

that forecasts sales, production levels, and inventory). I promise you the first 3 or 4 months will

be fair to poor. But in time, you wil get better and better. One way to show improvement in

this process is to use a waterfall chart – I give them to clients who are only serious about excellence and want to take their B game to an A game in all areas of their business. Stay the

course; you’l get better at this.

3. Forecasting starts at the macro level, not the micro/detailed levels. That’s why I initially don’t like accountants involved in forecasting. Many like to start with the details and look at history.

Instead, the view should start high (where’s the market heading, what are the current trends,

what’s happing in the economy). Ignore the macro level and you are flirting with disaster.

Case in point, I was visiting with a banker (one of the sharpest banking minds I’ve ever

encountered in 20 years). We were talking about case goods for wine product. He stated some

wineries like to push growth to the extent they case too many gal ons, then they get stuck with

al those case goods. The end result is that they have to dump the goods through huge

discounts. I countered that would never happen in an environment where there is a formal

forecasting and planning process in place. He agreed.

Parting Comments

Finally, eventually dump the term forecast and exchange it for the term plan, because that’s

exactly what we’re doing–planning the future based on what we know today. The planning

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process should be adaptive, agile, and collaborative. Adaptive and agile are self-explanatory.

Collaborative means getting the key team involved (the sales VP, the OPs manager, the CFO).

And while we said forecasting is about trying to make better decisions, specifical y, it’s about

matching demand with supply. So if you are a products-based business, understanding the

future demand helps you to plan production and inventory levels accordingly. The same

applies to service-based businesses. There’s an art to planning excess capacity human

resources when future demand looks weak. Bottom line, the goal is to get demand to

approximate your supply-side products or service levels.

Weekly Financials

One of my favorite topics– weekly financial statements.

My third controller/CFO client in 2001 actually taught me something. While I was big on the

one-day close or same-day close already, I never knew about weekly financials in non-banking

situations (as a KPMG Peat Marwick accountant, my bank clients had those ugly green bar

reports showing their financials from the day before–so I knew about daily financials already,

albeit in the banking arena).

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Ten years later, the weekly financial report is one of the most important flash reports you need

to look at every Friday or Monday. And below are just a few recommendations to pull these

off:

1. Keep them simple. Quickly, you want to know what happened last week and if changes are

needed. You should only need to study this flash reporting in just a couple minutes, so detail is

not required. Certainly, if you want drill-down capability, the make that supplemental detail,

but keep the primary reporting stupidly simple.

2. Forget the monthly/period expenses. Just focus on direct costs. Only do payroll every two

weeks? No big deal. In this case, you need two pieces of information–hours worked and

average hourly pay rate. Those can be used to calculate direct labor. I have a sample

contribution margin report below showing the numbers that count.

3. Consider a trailing 4 or 8 week analysis with a target column. I like 4 weeks because I’m

concerned about last week and I already know what I want my target to be. If I want to do

trend analysis, that’s fine and there’s great software to do that. I want this darn thing to be

simple and a quick-read. Four weeks works for me. It should for you.

4. Tailor to your situation. In the example below, the format and process works great for retail,

distribution, and hospitality. How about service firms with longer-term projects? Then

customize. For example, columns could include each project showing current revenues with

direct costs and then expected revenues and costs to complete. Remember, there are no rules

for format and what’s included or left out–you make the rules. Bottom line; find a weekly

reporting format that works in your situation.

DO THIS. There is no excuse not to include these in your weekly flash reporting. Ignorance,

laziness, and apathy are not reasons to punt on these. Want to be better? Implement this

stupidly simple tool. The time and expense to develop and implement this process will be very

low.

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Cash Projection Basics

Too bad I don’t have a dollar for every cash projection model I’ve built over the years. Most are

stupidly simple, but all have this in common. They work.

A few days ago, an awesome CFO asked for some examples of my cash projections tools. If he

asked, a CFO, maybe non-CFO’s need to know what they look like. So here goes.

First, simplicity and big picture. Can I make payroll at the end of the month, or not? Can I even

buy inventory this week? Do I need to extend my line of credit? The projection tool should

answer these questions quickly.

The Basic Elements of a Cash Projection Model

1. Start with a clean beginning cash number. Reconcile cash daily, no exceptions. Then start

with that clean number.

2. Enter your LOC limit which is required in the analysis deeper in the model (see image below).

I love the financial term called cushion. As we project cash, we want plenty of cushion between

the projected LOC balance and your LOC limit.

3. Enter your projected cash outlays–the big guys. Forget the little stuff. Your big numbers are inventory purchases, payroll, rent, and other regular ongoing payments.

4. Enter cash receipts–this can be harder if your receipts are irregular. Guess, and be

conservative. Do this weekly, and you’ll get better at it.

5. Now start entering projected draws and pay downs based on your projected cash flow. I

used to make this a calculated number, but I quit doing it for strategic reasons. I wanted

owners and their accountants to real y think through the process by doing the LOC math

manually. Then, look at the LOC results which fol ow.

6. I’m big on documentation. Ask my buddies. They’ll confirm I’m anal on documentation. So

have an area to list your assumptions. Your projections are only as good as your assumptions.

7. Finally, have a summary section showing the big picture. There are scores of ways to this.

Bottom line, the CEO should determine what he/she wants in the summary section.

I recommend doing this activity weekly in either 5, 9 or 13-week increments. There is no right

or wrong time period. But here’s a good rule of thumb. Bigger cash flow problems should

equal a longer time horizon. So if you are always living week to week, consider a 13-week

rolling forecast (and fix the causes of your problems too).

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Finally, your cash projection tool needs to be actionable. Serious problems should lead to a

smal handful of activities that need to be carried out (for example, calling past-dues ASAP or

asking select vendors for an extra ten days).

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Articles By David Kirkup

How to break out of your business plateau

Entrepreneurs often hit plateaus as their business transitions from the startup phase into the

next growth phase. It might be that sales growth is stal ed, or that more and more procedural

tasks seem to pile up. It might that the business owner is starting to feel a little burned out.

But plateaus can offer a good opportunity for improvement. Here are several steps help you

push through to the next level:

Find experts

You can find experts in every field or industry where you might need help. There are experts in

every field, industry, hobby or any area you need help with. Seeking advice from others, who

have been there, may help find a short cut.

Ramp up your reading

The web offers a huge window on knowledge and research via Google will often locate a fire

hose of good information. Find PowerPoint’s to jump start your own presentation, solutions

you have not thought of, ideas to take to the bank. Read a good business book, in fact, read a

good business book or journal at least every month.

Network with Peers

Find someone on LinkedIn in a similar but non competing role and network. Build an Advisory

Board of like-minded professionals to share information and ideas.

Brainstorm new Ideas

Spend some time brainstorming new ideas to implement. Break out of the rut and do some in-

depth thinking about tasks, procedures, objectives.

Work Harder

Force yourself to do the things you have been putting off. De-clutter. Clearing your desk may

make you feel refreshed and ready for a new chal enge.

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Work Smarter

Sometimes, working harder isn’t the solution, but working smarter is. Try focusing on #1

priorities for longer periods of time, and refuse to allow the #2s and #3s to intrude for a while.

Work these productivity stretches into your daily timetable.

Look at Your Productivity

How much are things like email, social media and consistent interruptions impacting your day?

If distraction is adding to your inability to get past the plateau, work on a plan to eliminate or

reduce it. A simple change, such as checking email and social media sites just a few times a day,

can be just what you need to get past a plateau.

Cal In Reinforcements

We all need a little help from time to time. If your plateau is caused by simply too much on your

plate, get rid of something. As an Entrepreneur you are – or should be – the Finder. If you’re

not finding new business and improving customer relationships then you’re failing. Partner up

with trusted advisors – like a B2BCFO to make your workload more manageable.

Personal Branding – Taking Control

In a 1997 Fast Company article, management guru Tom Peters is credited with inventing the

term Personal Brand. Peters said, “Regardless of age, regardless of position, regardless of the

business we happen to be in, al of us need to understand the importance of branding. We are

CEOs of our own companies: Me Inc. To be in business today, our most important job is to be

head marketer for the brand called You.

It’s that simple — and that hard. And that inescapable.”

So how do you build your Personal Brand in the age of Social Media? Is it time to get on

LinkedIn? Some would say that if you’re not already LinkedIn, Facebooked, Tweeted and

Digged then you don’t exist – brand-wise, that is.

British branding coach, Lesley Everett (author of Walking TALL) describes a Personal Brand as being just like a corporate or product brand. It’s how you make others feel about you, what

people say about you, and the words they use to describe you. If it’s that important, then

constant Brand Management is obviously going to be necessary.

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Everett has several key steps to build that brand including:

1. Who you really are – Getting feedback from others on how they see you is a good

beginning. Ask others for three words to describe you. This collection of perceptions from

others is your brand. Is it working?

2. The First Seven Seconds – that’s al it takes for others to judge us. People make snap

decisions based on what you look like, what you sound like and what you say.

3. Dress like you mean it – style, dress and grooming are important components of your

brand. Are you presenting yourself in a way that invites trust and credibility? Do you smile

and have a good handshake with positive eye contact.

4. Consistency – this is key since the consumer experience has to be repeatable in order to

build value.

While much of this may sound like Etiquette 101, it’s certainly true that each of us has the

capacity to control our external image, and that image is part of the reason that others will do

business with us.

Two Numbers that Every Business Owner needs to know.

There are real y only two numbers you need to track in your business. You should know your

Current Business Value and your Potential Business Value. Together these numbers can help

you improve your earnings, build your retirement fund and ensure you have a successful Exit

strategy. In a typical business the Potential Business Value can be two or three times the

Current Business Value. We call that ratio the Business Value Improvement Index™ (BVI

Index™), and your long term goal is to equate Current and Potential Business Value and get a

BVI index of around 1.0.

The BVI Index™ promises to reinvent the way companies are sold by focusing on benchmarking

the Market Readiness of a company. Many companies are undervalued due to sub-par

financial management, poor operational strategies or poor execution of planning, and these

gaps can lead to significantly unrealized value and earnings.

So…what exactly is Potential Business Value? It’s the unrealized value and earnings that could

be achieved by systematic focus on business process improvement. By using more

sophisticated financial management, and by creating a detailed plan you can determine how

much of your Potential is achievable and over what time. It is possible to take any promising

business and identify the factors that will drive increased business value.

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The first step in understanding your company’s Potential Value is to review your financial

information, your core strategies, the strengths of your staff and the ability of the company to

perform to plan. You are looking to benchmark your current situation. You need to answer the

question: where are you now? And, more importantly, what is the potential value of your

business? Business buyers wil fight to acquire companies that can demonstrate consistency,

solid management, good process and strong profitability. If you can document the strengths

and weaknesses of your company you wil start to find ways in which your business value can

be improved.

Once you have identified areas of improvement and gained an idea of the potential locked in

your business, you should lay out a financial strategy for improvement. Is it possible for your

business to go beyond its current business goals? What kind of investments will you need to

make and what resources might you need to bring on? And what would be the return on

investment of doing that? How can you improve profitability, better manage cash flow and

improve internal processes. Most important, how can you – the owner – start to disengage

from the minding activities that have you working 18 hour days, and that, frankly, unless

corrected will cause any serious buyers to pass on your company in the future. You are laying

out the process to achieve your retirement goals.

The end game is to create a company with increased business value and better marketability.

It’s now time to help the company create a leadership position in their market. How can you

identify and implement business growth strategies to surpass, outclass and outrival your

competitors – resulting in profit maximization and continued business value growth. With a

focus on market prominence you can now start to attract the attention of strategic buyers

willing to pay a premium for a company like yours.

Whether a business owner uses the powerful data from a BVI Index™ analysis to build company

value over time, or to negotiate with a buyer to get a better offer today, the benefits are

substantial. This process can show you how to dramatically increase current earnings and as

much as double or triple the value in your company. Hiring an as-needed CFO to guide you is

the first step.

B2B CFO® , the world’s largest CFO firm, can be your partner and help guide you through the

Business Value Improvement process and the Exit Strategy process using techniques and

resources unique to our firm.

The terms “BVI Index™“, “Market Readiness” and “Potential Value” are all terms owned by BVIresources Group. Use of the BVI Index™ and associated tools and Programs are authorized

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under a BVI-PM User licensing agreement by Nixon Childs, President, BVIresources Group. More

information can be found at www.bviresourcesgroup.com

Business Predictions for 2020

Long range predictions are really quite easy. Rarely does anyone check up on you in ten years,

and most of what you predict wil not happen. Futurologists always predict the emergence of

“space city” and what we actually get are cars that do two more miles per gallon. But it’s

necessary for a serious blogger to make predictions in order to add to one’s gravitas. So here

we go…

1. Solar energy development will exponentially grow, according to futurist Ray Kurzweil. Solar

Power capacity is now doubling every year to the point that we wil be energy independent

within 10 to 15 years. This should take care of Global Warming, clean water, and food

shortages.

2. Middle East democracy will continue to spread in fits and starts. Iraq will stabilize and

flourish, Afghanistan will regain the peace and prosperity it enjoyed for nearly three centuries

prior to the Soviet invasion. Tourism, improbably, will flourish as aging boomers once again hit

the hippie trail to Kabul – this time riding Harleys (three wheelers).

3. Audiovisual communication will become much more personal. Audio and video will be used

as routinely for personal communication as text or images, requiring audiovisual production to

become part of the school curriculum and a standard skill in the workplace. Better look into

Video Blogging – your LinkedIn profile with ten connections is not going to cut it.

4. Smart phone technology will continue to grow rapidly, and shrink dramatically. Look soon for

implantable devices that will reside on the eye. These upgrades will give you a number of

options for visible information, flipping from thermal to night vision and back to ‘standard’

easily, as well as allowing for augmented reality (a scientific term for 24/7 advertising). The

technology will be known as I-Glasses.

5. Women’s fashions wil enjoy tremendous growth due to the continuous development of

robotic manufacturing technology, which will allow for almost daily complete changes in

fashion wardrobe featuring lots of silver metallic fabrics. Dramatic changes in men’s fashions

will result in business suits with 1/2” wider lapels.

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6. Enhanced Reality will create a new way of seeing and interacting with the world. Social

networking applications will benefit from apps that will give you personal data ‘tags’ appearing

over participating users. That way, as you stroll down the street, you may see someone who is

also logged in and above them will be such ‘tweets’ as: “Going out for drinks!” LinkedIn users

with less than 10 connections wil be flagged for social exclusion.

7. More Americans will move to urban clusters – in part to share resources as cash starved

boomers try to maintain living standards, dissolving suburbia and leading to outlying ghettos.

Cities will grow rapidly.

8. Microsoft Windows technology wil advance to the point that PCs and Laptops wil be capable

of starting within 5 seconds. (Ok… this one is real y out there.)

7 Steps to Cash Flow Management

When it comes to properly managing the cash flow of your business, the best way to move

from where you are now to where you want to be is to get a clear picture in your mind of the

benefits you wil enjoy as you take control of your cash flow.

The benefits include:

• Increasing the likelihood that your business never runs out of cash.

• Eliminating the constant worry associated with not knowing what your cash balance is right

now or what you expect it to be next week.

• Improved relationships with your vendors because they are no longer banging on your door

demanding that their past due invoices be paid immediately.

• The ability to see cash flow problems long before they can happen.

In short, you free yourself to focus on growing your business rather than fighting the constant

cash flow fires.

Here are 7 cash flow rules you can implement immediately that will transform the way you

manage your business from this point forward. These rules are the keys to creating a successful

and valuable business.

1. Cash Is King. It’s important to recognize that cash is what keeps your business alive.

Manage it with the care and attention it deserves. It’s very unforgiving if you don’t.

2. Know the Cash Balance Right Now. What is your cash balance right now? It’s absolutely

critical that you know exactly what your cash balance is. Even the most intelligent and

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experienced person will fail if they are making business decisions using inaccurate or

incomplete cash balances.

3. Do Today’s Work Today. The key to keeping an accurate cash balance in your accounting

system is to do today’s work today – or ensure that your book-keeper stays up to date.

When you do this, you wil have the numbers you need – when you need them. Produce

daily, weekly cash updates – QuickBooks makes it easy.

4. Don’t Manage From the Bank Balance. The bank balance and the cash balance are two

different animals. Rarely will the two ever be the same. Don’t make the mistake of

confusing them. It’s futile (and frustrating) to attempt to manage your cash flow using the

bank balance. It’s a prescription for failure. You reconcile your bank balance. You don’t

manage from it.

5. Know What You Expect the Cash Balance to be Six Months from Now. What do you expect

your cash balance to be six months from now? This question real y gets to the heart of

whether you are managing your business or whether your business is managing you. Do you

have a financial plan with long range cash flow projections?

6. You Absolutely, Positively Must Have Cash Flow Projections. Cash flow projections are the

key to making wise and profitable business decisions. It’s impossible to run your business

properly without them.

7. Eliminate Your Cash Flow Worries So You Are Free to Do What You Do Best – Take Care of

Customers and Make More Money. This is the real key to your success in business. The

reason you have to make sure you have the cash flow of your business under control is so

you are free to focus all your time and talents where you can make the most difference in

your business. You are the Finder.

When you have your cash flow under control, you are free from worry, doubt and concern. You

have the cash flow information you need to make sure that everything you do each day in your

business is clearly focused on making your business better. You have the information you need

to measure your progress using the amount of cash you generate (and keep) for yourself and

your business as your ultimate financial measurement.

Taking Financial Control of Your Company

Many small and mid-sized companies have basic accounting systems. They have a book-keeper,

maybe a Controller. They have an accounting system – probably QuickBooks, or possibly a more

advanced product. What they usual y don’t have - and what for many is a major weakness – is a

coordinated Financial Process. Jim Collins, entrepreneurial author and guru, says there are

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plenty of great mousetraps but not very many great processes and that’s where entrepreneurs

should focus. The better process wil enable others to build better mousetraps.

A B2B CFO can help you build such a process for financial excellence. Here are the ten key steps

to taking financial control of your company.

• Key Metrics – Select some key performance indicators and report daily, weekly and monthly

• Cash Flow Forecast – A weekly forecast of cash will create a strong control discipline and

enable you to look forward at least a month.

• Timely Financial Statements – Accurate and timely financial statements are essential for

managing results

• Financial Analysis – Carry out a monthly comparative review of financial and other

indicators

• Commentary – Prepare a monthly operations overview with suggestion for improvement

and strategic development

• Monthly Ops Meeting – Chair a monthly meeting on the financial performance, impact on

strategy and implications for change

• Financial Planning – Develop budgets, plans and rol ing forecast to manage desired

activities

• Cash Management – Build relationships with banks and investors to ensure company cash

flow plan materializes Financial Control – Implement process and procedures to deter

fraud, improve efficiency and maintain confidence in results

• Financial Systems – Implement and tune best current systems and staff to improve and

maintain information flow

Financial Management Makes the Difference

Well managed companies employ many tools to optimize financial performance, some of which

can be very sophisticated. However, most of these techniques fall within three key areas:

accurate financials, adequate internal control and proactive management.

Invariably, companies that under perform their peers or experience fraud or some other

catastrophe will have failed in at least 2 of these categories. And the price of failure can be

harsh. Many companies that experience a negative event – such as a fraud perpetrated by an

employee or a significant misstatement of their financial statements – may be forced into

bankruptcy or may be forced to merge or restructure against their wishes.

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So it is wise to review your business operations and determine if you are lacking in these areas.

If so, you should take quick, calculated action to supplement the areas of internal control,

financial reporting and financial monitoring.

Accurate, detailed financial statements produced in a timely fashion

• Management should ensure that financial statements and management reports are

produced in a relatively timely fashion. If your accounting staff cannot produce meaningful

reports in a timely fashion or if the information is inconsistent or contains many errors, you

could have a serious problem. If erroneous data is being sent to bankers, auditors or joint

venture partners, you may lose credibility or may incur financial losses directly attributable

to the loss of confidence of your stakeholders – such as the closure of a debt facility. You

should ask yourself these questions:

• Is the financial data contained with reports consistent? Does it dovetail with what you

know is happening with the business? Does it al ow you to exploit new opportunities and

control exposures?

• Are you able to answer relatively simple questions such as what has led to an improvement

or deterioration in your business over time or what is the biggest contributor to operating

profit?

Adequate internal controls including adequate segregation of duties

• Most business fraud is quite simple in nature. Making checks to fictitious vendors or

altering such checks are very common. Most fraud results from opportunity and lax

supervision.

• Does your business have adequate controls and procedures in place to prevent errors and

irregularities?

• Do the proper checks and balances exist so that one employee does not have an undue

level of access or control? What controls and procedures are in place to prevent an

employee from making an unauthorized disbursement by check or wire transfer? What

prevents an employee from setting up a phony vendor or phony employee in your

computer system?

Proactive, wel informed, inquisitive management

• The most valuable asset to a small business is astute management that asks the right

questions, has a strong vision and is able to capitalize on opportunities quickly and

efficiently. This type of management will use the solid financial data at their disposal to

determine where their business is headed, to change course and/or speed and use al their

resources to get to their destination.

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• Management wil need to be able to “mine” data to determine how the business is doing

and why? Which clients are profitable and which are less so? Which products generate the

highest gross margin and which contribute little? How are the trends in your business

versus competitors of a similar size and make up? How do you position your business for a

trade sale and how do you modify your business to give rise to a higher purchase price from

an acquirer?

• Management will need timely, reliable financial data produced in a strong control

environment to be really successful. Otherwise, you will be making decision and

determining a course that might not be the best one.

If your management is not able to be really proactive, to gain the knowledge that they require

from management data and to be truly inquisitive, you may be incurring serious exposure due

to poor performance in financial management.

The inclusion of a B2B CFO® partner onto your senior team can give you the financial expertise

and strategic insight that you need to maximize the performance of your operation. Our

partners, who have over 4000 years of cumulative experience, (including significant merger and

acquisition related experience), are part of the largest US firm providing services on a part-time

basis to closely-held companies with annual revenues of as much as US$75 million.

Funding a Business Acquisition

The credit crunch has led to an increase in seller financing, asset-based lending and alternative

sources of capital for buyers.

A recent Inc.Com article on funding business acquisitions notes the huge changes in our financial system over the last 24 months due to the subprime lending crisis and the general

economy. This has led to many traditional lenders modifying their lending criteria, and

restricting available credit and the flow of capital to many entrepreneurs. Some of the key

points in the article:

1. Bank financing of 80% or more with buyer and sel er splitting the down payment have now

shifted to 50% bank financing, and more sel er financing.

2. Alternative lenders have sprouted up, but criteria and conditions can vary a lot, so buyers

need to get educated on their options.

3. Deal structure wil depend very much on the condition of a company. The type of business

being acquired, the valuation of assets and cash flow, perceived market risk as well as

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growth plans, are the characteristics that determine which capital sources and financing

structure is the most appropriate.

4. For bank financing you wil need good credit, strong cash flow and profits and minimal

existing debt load. SBA loans now provide up to $5 million.

5. Seller Financing may provide up to 70% funding. Typical terms would be 5 to 7 years with 8

– 10% interest.

6. Asset based lending – on equipment and business assets – can be easier to obtain but you

will pay a significant interest penalty.

7. Private Equity may be an option for companies with $2 mil ion plus in net earnings, but it

will come with significant conditions and the owner will give up a large chunk of equity.

8. Other options include a mix of debt and equity cal ed Mezzanine financing.

To get the best possible financing terms and improve the likelihood of success in any deal

structure, you need to make sure your offering memorandum or business plan is wel thought

out. Your plan should be based on the combined business operation and not just your current

business. It should illustrate how the combined operations will provide more collateral, more

cash flow, and greater growth.

Having a professional part-time CFO on your team will help you better understand the

economics of an acquisition and convince lenders that you are serious about financial strategy.

What is the true cost of an employee?

Hidden employment costs

As companies start to once again think about maybe, possibly, perhaps starting to hire

employees – it makes excellent sense to really understand the true cost of hiring. Whether you

are looking for additional assembly line workers, software consultants that will be re-billed out

to clients, or high level executive positions the true cost of an employee can be much, much

higher than the sticker price. When comparing the cost of hiring vs. temporary or outsourced

workers it is essential to use the full loaded employee cost as your basis for comparison. The

additional “hidden” costs will vary by company, but are always significant. Think benefits,

insurance, computers, phones, office space, lunches, taxes, training, travel, and everything else

that goes into an employee.

Trend to outsourcing

A leading trend for growing Georgia companies in the next year will be increased use of

outsourced employees at al levels of the business. Although this trend will not help ease

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The Ultimate Small Business Playbook

recession level unemployment figures, it is emerging as a structural trend across industry. The

reasons why more companies are considering outsourcing and subcontracting are many. Cost

is a significant reason – with in-house employees carrying overhead burdens of as much as 40-

60% or more. What about all the other costs associated with hiring full-time employees? When

employees are “on the clock” what are you really paying for? Will you experience notorious

time-wasters such as frequent socializing, running personal errands on company time,

prolonged Web surfing, late to arrive/early to leave, personal phone calls and emails. How do

calculate this cost into the overhead burden?

Professional Service Firms

For software consultants, law firms, engineering and architect firms the fully loaded employee

cost is very important. How else can you ensure that you are bil ing the true cost of your

business to clients and making a satisfactory return? Determining an effective overhead load

rate is the first step in making sure that a professional service firm is profitable.

Professional Advisors

While many Atlanta companies have hired part-time and temporary workers at the lower

experience levels, the trend has now expanded to “C” level employees. Many companies would

benefit from the expertise of a seasoned financial manager to help build cash flow and

profitability and position the company for growth and value. A full time CFO might cost $150K

+ in base salary with overhead and bonus pushing their cost way above $200K a year. In

contrast a part-time CFO might be hired on a weekly or monthly basis for little more than $12 –

$25K. The same logic applies to other expertise that is required consistently but not 24/7.

The world has changed with profound effects for future employment levels. The just in time

model of purchasing expertise as needed is more prevalent and useful to growth companies. It

is important to compare alternatives correctly. While a consultant’s hourly rate may seem

“high”, once you compare that to the year round cost of an employee you may find it is a

bargain. Add to that the benefits a contract employee can bring such as wider experience, no

office politics or gossip, no benefits, a can do attitude and a highly professional approach.

Copyright © 2012 B2B CFO® 24

The Ultimate Small Business Playbook

Now You’re the Boss: The 6 Things Your Boss

Shouldn’t Teach You

Over my career I have experienced demoralization from certain bosses, and have worked in

environments where complete teams and even entire companies were brought down. For

those so inclined, I lay out the top 6 techniques for creating a thoroughly demoralized team.

These techniques wil ensure that your company never reaches its goals, that staff turnover wil

be in double digits, and that your company value will be squandered. Use them carefully…

1. Mistakes – when an employee makes a mistake, make sure they’re punished well, point a

finger at them, scold them, and get real y angry with them for what they did or did not do.

Do this in front of other employees, so they will realize they must do a good job all the time

in order to avoid punishment. Results: anxiety, depression, risk-avoidance, lack of initiative,

more involvement for boss in minding activities.

2. Demoralize. Change your mind constantly on what needs to be done. You’re the boss, so

you can adjust your instructions regularly; tel your people how to do their jobs, establish

and maintain an environment where your staff know who’s the boss and will always come

to you on every decision. Results: confusion, distrust, paranoia, risk avoidance, lack of

initiative, more involvement for boss in minding.

3. Delegation. Give your people precise instructions on the how and why and when it must be

done, and do not al ow any negotiation. Let your people be clear that someone superior to

them knows best and that questioning authority wil limit their career and promotability.