Sweet Dreams

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June 20, 2016
Sleeping Newborn photo

It’s three o’clock in the morning.  Something woke you.  Was it your anticipation of the delivery of your next inventory shipment - while hoping the payment from the client’s last order appears soon?  Or your anxiety about the new accounts on the horizon? (Which, mind you, are not yet accounts, but you are optimistic - a good trait of an entrepreneur!) Or are you stressed about the frantic process of creating inventory to fill those new orders?  

Finally, you emerge from a fitful night, and start worrying whether you have enough money to participate in that important trade show, or start that marketing campaign, or rent that extra space that just opened up that will put your business on a new growth trajectory.   Why would you expect a good night’s sleep? After all, you are a busy small business owner in growth mode, without a full staff, adequate inventory, an IT department, or even a CFO.

Surprisingly, even when things look potentially rosy, growing companies have these common storm clouds on the horizon.  Can you relate to this? You are not alone.

Growing businesses need funds to hire, market, open a new location, buy inventory, purchase equipment, and manage cash flow. 

While money isn’t always the answer, often an infusion of capital can lessen an entrepreneur’s anxiety.  But, first, do some serious planning so you know the amount of money you really need, exactly what you will use it for, and how and when you will pay it back. 

Start with a regimen of business planning exercises.  You need a written business plan outlining what you need to do to grow, and the amount you need to fund your growth. 

  • At the core of the plan will be a “sources and uses” table outlining how much money you need, how it will be used and where you plan to get it. 
  • Develop your cash flow projections to determine exactly how much money is needed.  When are funds coming in?  When are they going out?  Where are the sticky spots – those times when the ins and outs aren’t quite in sync, and access to more funds would help?
  • The balance sheet presents all of your assets (what you own) and liabilities (what you owe) and the net worth, or equity, of the business. 
  • To show that the business is operating at a profit (or not), create the profit and loss statement, or income statement, that combines revenue and variable and fixed costs to demonstrate the business’ financial state over a period of time.
  • Equally important is the breakeven analysis, which shows the point where your sales revenue is equal to all of your expenses, including any expected additional loan payment. 
  • How are you going to increase your sales?  You need a marketing plan that outlines who your customers are and how you plan to reach them. 

Collectively, these documents can tell your story effectively, in a way that bankers, investors, and community loan funds understand.  This carefully articulated story gives them confidence you have charted a successful path.

If your business is growing at a terrific (terrifying!) rate, and you are considering looking for new funds, do some serious planning.  Ask your advisors – your SBDC advisor or one of our partners – to work with you to help chart the future of your business - and then look for financing.  Sweet dreams. 

- Andrea O'Brien, Business Advisor, NH SBDC