Business Success Through Risk Elimination: The Top Ten Rules of Successful Start-Ups - Softcover

Davies, Brian

Softcover

ISBN 10: 1475971435 ISBN 13: 9781475971439

Verlag: iUniverse, 2013

Inhaltsangabe

Entrepreneurs are made, not born. By following the best practices of entrepreneurs before you, you can learn from the best and use those techniques to insure your business success. Brian Davies, who has created wealth with two start-up medical device companies and as a real estate investor, walks you through uncertain economic times so you can take charge of your financial future. Learn the top ten things you must do to ensure your start-up is successful, and discover how to reduce risk with solid financial strategies; launch a business with little or no money; control expenses and secure credit; and develop top-performing teams. It's not every day that an entrepreneur who has started multiple firms, including one that was bought by a publicly traded company, opens up his playbook. Davies lays out everything, and the only thing he wants is for you to share in his success by starting something of your own. There are key elements that all successful new business have in common. These tips can help you take charge of your life, grow your business, and transform your financial future with Business Success through Risk Elimination.

Über diesen Titel

Über die Autorin bzw. den Autor

Brian Davies serves as pastor of Lord of Glory Lutheran Church in Grayslake, Illinois. He is chaplain for the Grayslake Fire Department, husband to Beth, and dad to Kate, Megan, and Luke.

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BUSINESS SUCCESS THROUGH RISK ELIMINATION

The Top Ten Rules of Successful Start-Ups

By Brian Davies

iUniverse, Inc.

Copyright © 2013 Brian Davies
All rights reserved.

ISBN: 978-1-4759-7143-9

Contents

Introduction...............................................................
vii
Part One: Finance..........................................................
Reduce Your Risk with Solid Financial Strategies...........................
Rule #10 Equity Financing: A Step toward Start-Up Success..................
3
Rule #9 Line of Credit: Your Safety Net....................................
9
Rule #8 Accurate Financial Models..........................................
14
Rule #7 Controlling Expenses: A Crucial Step...............................
19
Rule #6 Sales: The Key to Success..........................................
26
Part Two: management and Planning..........................................
Reduce Your Risk with Effective Systems and Planning.......................
Rule #5 The Sales and Marketing Plan.......................................
37
Rule #4 Business Ethics and Integrity......................................
45
Rule #3 Roles and Responsibilities.........................................
50
Rule #2 Your Area of Experience and Expertise..............................
56
Rule #1 Success through Determination......................................
60
Afterword..................................................................
63
Glossary...................................................................
69
Bibliography...............................................................
71
About the Author...........................................................
73

Excerpt

CHAPTER 1

Rule #10

EQUITY FINANCING:A STEP TOWARDSTART-UP SUCCESS

Expect the unexpected whenyou start a business from scratch.

Rule #10Start-up successes use equity financing.Start-up failures use too much debt financing.

There are two types of business financing you can use when youstart your business. One is debt, and the other is equity. Theyreside on opposite ends of the risk spectrum. Start-up successesuse equity financing—the less risky money. Start-up failures usetoo much debt financing.

Equity financing is the foundation of a successful new business.This is money that is put into the business by the owners andother shareholders. The people who put this type of money intothe company own a piece of the company. Some of the typicalsources of this type money are the owners, relatives, venturecapital companies, and other business partners. This money isnot a loan; it is repaid in the form of stock and dividends.

Debt financing is money put into the company in the form of aloan. These loans typically come from a lending institution like abank or the Small Business Administration (SBA), via your localbank. This money is paid back usually on a monthly basis. Thismoney is a debt for the company and is paid back out of cashfrom business activities. Because debt financing must be paidevery month, it is a burden on the company and increases thestart-up risk.

Case Study

In the first six months of my first start-up, we encounteredseveral obstacles and unplanned events. Our business wasstarted in 1995 as a contract manufacturer in the health-careindustry. Our business plan was based in large part on salesto a company with whom we had personal relationships. Itwas outsourcing the manufacturing for its consumer retailproduct.

Two months into the business our customer informed us it wasreducing the number of suppliers from five to two. We werenot one of the two. This had an enormous impact on our plan.This one customer/prospect represented about 50 percent ofour projected sales in year one. Suddenly our sales were shortof plan; it was the worst-case scenario. Sales were slow to rampup and were behind plan for most of the first year. Because ofthis, our revenues dropped but our expenses did not change. Ifour business financing had relied too heavily on debt, our cashflow and business would have been in immediate trouble.

This example illustrates the type of unexpected and unplannedevents that can occur and the havoc they can create in your newbusiness. The important distinction between equity financingand debt financing is that equity financing isn't a monthly drainon cash flow. It enables you to absorb unexpected events moreeasily. Debt financing is a loan with a scheduled repayment plan,usually monthly. This loan (debt) will usually come from a bank,the SBA, or another institution. If your revenues suddenly drop,you still have to make this loan payment. This drains cash fromyour business. And because cash flow is the lifeblood of anybusiness, it is important to maintain the integrity of cash flowat all times.

Equity financing eliminates this payment burden. With equityfinancing you raise money by selling a part of your company inexchange for ownership (equity). This lump-sum cash infusion isused to pay expenses of the company while sales and profits arebeing built. When the company receives this type money, it is aninvestment by the person, institution, or group in the business.This money is not paid back on a scheduled payment plan soit does not drain cash and create a burden on cash flow. Theequity investor expects to see the return of the money investedplus growth, usually over several years. Often the equity investorsare paid back when the company is sold.

Whether you use equity or debt financing or a combination ofthe two, make sure you get enough money in the beginning.As a general rule, you should have enough money to take youthrough your worst-case business/sales plan. You will know thelevel of financing is adequate when your cash-flow model stayspositive—that is, it does not run out of money. As you start thetask of building your business, it is very disruptive to have to stopand go back to the activity of raising additional money.

One tool that will help you determine how much money/capital you need to finance your business is to build a cash-flowstatement. You can find standard cash-flow statements in anExcel spreadsheet on the Internet or in the business section of thebookstore. This spreadsheet will use sales and expense projectionsthat model your cash flow. How much money or cash will you bebringing in from customers and how much cash will be outgoingfrom your operating expenses? You should build your cash-flowmodel based on your most accurate projections, Plan A, andyour back-up, Plan B. The cash in your bank account must lastuntil profits are sufficient to enable the business to operate on itsown.

Case Study

Our next unplanned event nearly resulted in an uncollectableaccount receivable invoice of $50,000 to one of our newcustomers. As a supplier of disposable medical devices andcomponents, one of the products we supplied was an antifogplastic eye shield that our customer used to make its hospitalsurgical mask. On a hot July day, we made a large shipmentof these shields from our plant in Texas. The plastic shieldsbecame stuck...

Details zur Ausgabe

• Verlag: iUniverse
• Erscheinungsdatum: 2013
• Sprache: Englisch
• ISBN 10: 1475971435
• ISBN 13: 9781475971439
• Einband: Taschenbuch
• Anzahl der Seiten: 86
• Kontakt zum Hersteller: preigu GmbH & Co. KG; mail@preigu.de; ; Lengericher Landstr. 19; Osnabrück; Niedersachsen; 49078; Deutschland