The 7 Major Reasons Businesses Fail and How to Overcome Them

This year, over 800,000 of the approximately 2,000,000 start

up businesses will fail!

Nearly 1,000,000 of those remaining will fail within 3 years.

Why do so many businesses fail? Many studies show that

approximately 98% of all failures occur because of the

owners. The other 2% are a result of acts of God. Here are

the key reasons and actions owners can take to avoid and

overcome business failure:

Reason #1: The owner is not mentally prepared or

motivated to run a business. There are three different ways

to use your energy, and your physical and mental efforts to

earn money. I call them the three "Games of Work.," and

they define the types of relationships between people and

their work. The rules that players have to follow to succeed

for each "Game" are shown below.

1. Bureaucrats,: Do what it takes to protect or expand their

position; Will divert responsibility whenever possible, but

will take credit for desirable results of others; The success

of the organization is secondary to kissing up to those who

make decisions about promotions, salaries and job

security; Have virtually no control over their job security; And

are compensated for basically showing up.

2. Partial Entrepreneurs: Choose to be responsible for work

performed or results achieved in their specialized field, but

do not want responsibility for the total business. Have more

control over their job and its security; And are paid for the

specific results they produce. Examples of Partial

Entrepreneurs include; commissioned salesmen, multilevel

marketing members, franchisees, and real estate agents.

3. Business Owners: Take full responsibility for their

business; Are in full control over their job and its security

(whether they know it or not); Have no one in the

organization to kiss up to; Learn to pass on as much credit

as possible; Constantly focus on the success of the

business; And are compensated only from the profits of the

business.

As you can see, the rules of a Bureaucrat and a Business

Owner are completely opposites in all categories, and the

Partial Entrepreneur is basically in the middle. The mental

effort it takes to convert from Bureaucrat or Partial

Entrepreneur to Business Owner is much greater than most

people realize. Many business owners never fully make the

transition.

Action: Before becoming a business owner in the first

place, determine if you truly want and will operate under the

Business Owner "Game Rules." If you choose to, do so

IMMEDIATELY, and COMPLETELY! To survive, let alone

succeed, you must commit to operate under the Business

Owner Rules 100%. Otherwise, you should seriously

consider playing one of the other "Games of Work" that best

suits your desires.

Reason #2: The business owner is unable to operate a

business. The success or failure of a business depends

on the owner. As the head goes, so goes the body.

Running a business is completely different than any other

"Game of Work," but, believe it or not, the rules are the same

for all types of businesses. Far too many owners fail to take

the time and energy to improve their own ability to run their

business. This means that they need to grow as a person

first and enrich themselves and discover their true passions

and priorities to be able to have the maturity, drive, and

energy to allow them to manage themselves and a

business simultaneously.

Action: You will greatly enhance your chances for success

by finding methods of self-improvement in all aspects of

running a business, and continue the process throughout

your entire business-ownership career. Obviously, as you

become better at running your business, the success of

your business will also get better. Many resources are

available to you, including respected advisors, mentors,

partners, "Godfathers, " and coaches.

Reason #3: The business owner thinks he knows what it

takes to run a successful business and is convinced he is

fully prepared to jump in. This is rarely true. The

fundamentals of owning and operating a business

sometimes referred to as the "rules of the game," are rarely

taught in the U.S. school system. (See Global

Entrepreneurship Monitor, published by Babson College

and Kauffman Center for Entrepreneurial Leadership, July,

1999.)

We are led to believe that an education fully prepares us for

running a business. In truth, the U.S. school system only

prepares us to get a job, not create jobs. The fundamentals

of successfully owning and operating a business are very

different from getting and keeping a job. Unfortunately, most

business owners are left to learn these fundamentals

through the age-old process of "Trial and Error" with an

emphasis on error. This "Trial and Error" dependence

causes far too many serious and fatal errors, and leads to

stress, financial damage, and eventual failure.

Action: Learn the rules of the game of business, other than

through the "Trial and Error" method. The very best way is to

find and use trusted mentors, advisors, and/or coaches to

guide you through the process of learning how to improve

your capability to run your business to avoid the many errors

others make. Frankly, the rules are simple, easy to learn,

and are based upon common sense, and high integrity

Reason #4: The business owner tries to execute all three of

the three basic functions needed for a business to succeed,

alone and without help. (See The E Myth Revisited by

Michael Gerber).

The three key functions a business must have executed to

succeed are:

The Technical function, which is the execution of the actual

service or product provided by the business. For example

the drafting action of a drafting company, the auto repair

actions of an auto repair company, the production of a boat

of a boat building company.

The Managerial function, which is the organization,

coordination, and supervision of the people assets and

activity of the business on a day to day basis.

The Visionary function, which is the discovery, setting and

communication of the future goals and purposes of the

entire business. The leadership to get all parts of the

business flowing towards the long term goals established.

The level of success of a business is limited to the level of

the execution of the weakest link of the three business

functions described. A business that has two of the

functions executed in an excellent manner and the other in a

poorly manner will eventually level out no higher than poor.

Yet, entrepreneurs (budding business owners) and

business owners try to personally perform all three

functions themselves. One single person will have an

extremely difficult time performing all three functions at a

high enough level for the business to eventually succeed.

Michael Jordan, one of the best basketball players of all

time, could not translate his huge basketball skills into a

successful baseball career. He proved that the skills

needed to succeed at the game of baseball are much

different from the skills needed to succeed at the game of

basketball. And when he returned to basketball, he had to

work extra hard to re-sharpen his basketball skills to his

previous levels. Likewise, the skills of owning and

operating a business are specific and very different than the

other two "Games of Work."

Action: Get help from someone, a partner, an employee or

an outsourcing resource to perform at least one of the two

functions for the business. This way that function can be

executed at a very high level and will allow you to focus on

executing no more than the other two at a similar high level.

Normally entrepreneurs initiate businesses where they

bring the technical skills and motivation to the table.

The three skills necessary to win in the business game are:

Technical Skills of the business; Managerial Skills to

manage yourself, time, things, concepts, and people; and

Visionary Skills to set future goals and organize the

business so that current activities will contribute to them

(See The E Myth Revisited by Michael Gerber).

You probably bring Technical Skills to the table, but to

succeed, you will also want to master the Managerial and

Visionary Skills. You are not born with these skills; you

learn them. You are born with natural talents towards

certain skills, but you have to work to perfect them. Michael

Jordan, and Tiger Woods were obviously born with

unbelievable talents, but they became successful only

because they worked very hard at developing the skills they

needed to win. Likewise, you will want to work to develop

your Management and Visionary Skills (from the Business

Owners Perspective) and continue the process throughout

your business ownership career.

Reason #5: The owner starts a business for the wrong

reason: "No one can boss me around;" Or; "I will create my

own job;" "If he/she can be successful, so can I;" "I will buy

a business and enjoy the fruits of ownership;" "I want to

pursue my passion for serving others." And so on. The

stresses and problems resulting from running a business

for the wrong reasons can become overwhelming,

especially when you generate little or no profits.

Action: "The only reason to have your own business is to

Make a Profit." Though this may sound cold and greedy, you

will realize rewards and compensation only from your

business profits. If your business doesn't make a profit, you

get nothing. You might even discover you have been

working for nothing, or worse, working to increase your debt.

This does not mean you have to avoid meaningful, and

emotional reasons for living. Not at all. The profits and

personal time gained from the business will provide you the

resources to pursue your life goals. Even religious

institutions require profits and time to pursue their passion

of serving others.

Reason #6: Business owners do not completely consider

the perspective and motivations of potential customers.

Customers' perspective must be addressed so owners can

entice enough customers to buy their products or services

at a price over their costs to produce the desired profits.

From the very beginning, owners should be focused on

enticing customers to buy. Owners who do not know,

understand, or appreciate their potential customers'

perspectives will most likely see their business fail.

Action: Learn as much as possible about your potential

customers. Design and provide products or services,

delivery methods, pricing, and ways to communicate with

them around their perspective. This might require that you

get help stepping out of your own perspective and into

someone else's.

Reason #7: Business owners insist on going it alone

without asking or accepting outside help. The sole

business owner has one of the loneliest positions in the

world. Many owners have difficulty confiding in their

employees, vendors, customers, lenders, or competitors,

for fear that any one of them will take advantage of revealed

weaknesses. Most owners try to go it alone by working IN

their business, and not near enough time working ON the

business. Consequently, they are not aware of what they

are doing, where they are going, or why! (the "Trial and

Error" method).

Action: Find and use Advisors, Mentors, Coaches, and/or

Trusted Partners who have the knowledge and desire to

educate and guide you, with your best interests at heart. All

professional athletes have one, if not several, coaches,

advisors, mentors, who help them become much more

successful than they ever could be on their own. Coaches

evaluate your ability to run your business. They will bring

you outside the stress, money, and time pressures you feel

from working IN the business, to help you make the

changes to result in improving your profits and reducing

your pressures. You will become much more successful

with advisors. Asking for help is not a sign of weakness, but

a sign of your desire to improve. Learning from the trials

and errors of others is an enjoyable and profitable

experience. Once you find the right advisors, you learn to

prevent and correct mistakes you might otherwise make.

Provided as an educational service by Bill Dueease of The Coach Connection, where ?connecting great people with great coaches? is their goal. You may receive a free copy of the article ?10 Insider Secrets Most Business Owners Never Learn? by contacting The Coach Connection at 800-887-7214 or 239-415-1777 or coaches@findyourcoach.com, or at http://www.findyourcoach.com/0o-business-coach.htm

What a Billionaire Taught Me About Successful Businesses

What a Billionaire Taught Me About Successful Businesses:

10 Lessons to Think & Act Like a Business Superstar

What you will find in this report

The sections that this paper is divided into are based on the questions my billionaire investor used to ask during various phases of our company's growth. Each question is itself based our investors experience in thousands of investments.

1. How to select the ultimate business partners

2. How to tell good ideas from bad ideas

3. How to make sure your ego doesn't destroy your business

4. How to attract and manage your financial partners

5. How to hire super stars that won't cost you an arm and a leg

6. How to raise money for your venture

7. How to build a business that generates cash without increasing costs

8. How to make sure you never confuse passion with productivity

9. How to make tough decisions and feel good about it

10. How to create a lucrative exit strategy

____________________________________________________________

Important Notes:

If you received this report from a friend or a colleague you would not have received

your free copy of "8 Keys to a Successful Start-Up". If you would like your copy

please go to the Fresh Tilled Soil website and sign up for your own report and you

will receive you bonus report.

Also, if you like what you read in the reports you are going to enjoy reading Drawing

Horses: How to Set Your Business Up For Success our popular ebook. The ebook is

available for download at http://www.freshtilledsoil.com

____________________________________________________________

How to make the most of this report

I encourage you read and absorb these ten points. Once you have read these points

I suggest you ask yourself these questions as often as possible. Also, ask yourself

these questions when you are meeting other business founders and CEO's. Evaluate

all businesses and develop a habit of asking these questions all the time.

How this story began

If you are lucky you will have mentors that have done well in their own business and

can help you navigate the path to success. If you are really lucky these people will

be in your industry and will add more than just anecdotal support for your

decisions. Then there are the extraordinarily lucky few who will have a mentor that

will change the way they think about business forever. Several years ago I came

across such a mentor. In a series of chance connections I came face-to-face with a

billionaire that was ready to share his wealth of experience. In less than 2 hours this

person was able to change almost everything I knew about business. Even the most

fundamental ideas about how I thought businesses work would be set on their head.

My partner and I had been working together in an online ad sales company that was

over capitalized and growing mostly because of the hype surrounding the Internet.

He was my boss and I was selling ad space. We quickly realized that we would be

having more fun and making loads more cash if we were running our own business

outside of the corporate clutches we were in. Once we made the decision to leave,

our education began. In a frenzied period of deal making and late nights over our

laptops we were able to attract the attention of a very wealthy investor. He invited

us to meet him and some of his lieutenants in his hotel suite with instructions to

"leave behind any business plans and bring just your heads".

Although the first meeting was no more than a couple of hours the time seemed to

accelerate past us. The meeting was basically a series of well-considered questions

aimed at my partner and me. What was surprising though was that these questions

were very simple and quite basic in nature. We had been expecting some tough

questions about corporate financing and international arbitrage; instead we were

answering questions about who we were and what we thought we did to help the

company better. Over the next few months the relationship became financial and we

struck a deal with this investor. The deal was done but the questions kept coming.

The most interesting and benign question was asked of us almost once a week on

the phone and at every face-to-face meeting. Without fail I would get a call from

our new investor that would start with the question "What do you do?" At first I

thought this was a joke and played along by describing the company and what we

did for our clients. As time drew on it occurred to me that the question was a loaded

one and that my answers were not getting to the heart of the matter. Eventually I

came around and asked our billionaire investor "You keep asking that question and I

know you are not stupid so it can't be that you don't know the answer. What's the

point of asking the question?" He chuckled as he explained, "I ask it all the time

because it's the best question to get a sense of how focused people in the business

are." My silence prompted him to continue, "You see, if someone can't answer that

question confidently and in fewer than ten words they probably don't understand

what the real value of their service or product is."

To test how true this might be trying asking yourself that question and giving the

answer in ten words or less. Do you feel clear about your response or do you feel

confused? The next time you get the opportunity to ask the question of someone

else watch carefully how he or she answers the question. Do you need to sit down

and take a break after their long-winded explanation or do you get it immediately?

It's obvious to me now that if you need a whiteboard, a PowerPoint presentation and

forty-five minutes to sell your product you're in deep trouble.

Over the period that we were in contact there were many more questions. Each

question has the ability to cut directly to the problem and make sense of complex

situations. Here is a list of the questions that kept on coming up.

1. Who will be involved?

How to decide who will be involved in your business.

There is an old Moorish adage that says you should choose your companions before

you choose your journey. Before you embark on any business journey you have to

be sure your companions are the best you can possibly choose for the path ahead.

My billionaire mentor would remind us every time we needed to recruit another

member of the team, "Ask yourself what are the reputations, integrity and potential

of the people involved? Will these people set the company up for success or failure?"

The key here is to make sure that you not only get bright people with lots of energy

and passion but also be sure to get a group that together is ten times the sum of its

parts. You might have the smartest people on your team but if there is no chemistry

between them nothing will get done correctly. I once founded a technology company

that had the best of the best from the top engineering schools in the country. Even

though we had the ultimate brain power we could find there was no passion

amongst the group to drive that brain power forward towards our goals.

2. Is this a people thing or an idea thing?

How to tell good ideas from bad ideas

Ideas are the fuel of any business. Good ideas can create empires and bad ideas can

ruin them just as fast. Knowing the difference between good ideas and bad ideas is

what allows people to move towards success. The advice we received was simple, "If

you run into problems evaluate whether they are caused by people or by the idea

that they are working towards. Good people can turn a bad idea into a good idea

but bad people almost never change bad ideas into good ideas."

Even the most well considered business ideas might turn out to be flawed but it's

easier to manage the obstacles when you have good people. Develop a sixth sense

for evaluating ideas by constantly reading and learning how good businesses

continue to remain on top. Find out from successful leaders how they "smell" the rot

in a bad idea. Very often this is something that comes with practice but you can

begin making a difference now by filtering ideas through your best people, whether

they be partner, employees or advisors.

3. Are the founders the same people that will run the company?

How to make sure your ego doesn't destroy your business

Starting a business and running a business for the long-term can be compared to

sprinters and long-distance runners. Not everybody can be an entrepreneur and a

long haul expert. Don't believe that everybody that starts a business can be a

Michael Dell or Jeff Bezos. It's very rare that the founder of a business will have the

skills to both create the business and run it once it is a mature business. If you start

a company be prepared to step down or move positions when the time is right.

It's common knowledge amongst investors and venture capitalists that most start-

ups never mature beyond the first few years because the original leadership gets in

their own way. In a recent report by Ernst & Young it was discovered that only about

57% of founders remain in the CEO position. Unfortunately many entrepreneurs are

convinced that they can do everything and are reluctant to let the reins of the

business go to someone else. In my own experience I would say that this is the

number one reason why new businesses never mature or develop beyond the first

energetic tears. "In all the years that I've been starting and funding businesses only

two founders voluntarily stood down to make way for someone who would do a

better job" was what we heard from our billionaire mentor.

4. How much money will you need before you make a profit? Oh, and you can cut

the forecast bullshit.

How to attract and manage your financial partners

If you plan to finance your company with other peoples money you had better be

very honest with them. Expectation management is the key to all successful

relationships and it's never truer than between a business owner and the investors

they bring on board. Giving your investors accurate information about finances and

important decisions is so important it might make or break your business. From the

moment you meet with your investors you will be asked questions about what you

and your future business are capable of. If you exaggerate the truth or give your

investors false information it will come back to hurt you.

Part of the communication you will have with your investors, or potential investors,

is to develop financial forecast for your business. Beware, forecasts are nothing

more than a really good guesses so be cautious when you present your plans to the

people who will finance your company. Whatever you think it will cost, double that

and you might just make it before the money runs out. Plans are good guidance but

be prepared to make changes to them and be quick to update your investors as to

those changes. When my partner and I met with our investor for the first time we

wanted desperately to impress him with our predictions of how much money we

thought we could make. He stopped us short and reminded us that "Forecasts are

nothing more than your best guess guys. Don't waste my time with guesses, let's

figure out how much money we can make right now and avoid disappointing both

sides".

5. Do you really need a chief financial officer or can you get away with a good

accountant?

How to hire super stars that won't cost you an arm and a leg

Generally, the biggest expense in a new company is the payroll. People cost money,

and without doubt, good people cost the most money. Although it is essential to

have good people don't be fooled by advanced degrees or fancy titles on your

recruit's resume. In the beginning do you really need to have the big guns doing

basic work? Wait as long as possible before adding anyone to your team.

I made this mistake on my first start-up. In an attempt to get some momentum

going in the early months I hired some heavy hitters to join the team. Our investor

was the one to bring our mistake to my attention, "These new guys are smart.

Maybe the smartest people I've met for a while but do you really need a CFO to

make 100-odd journal entries a month? Can't this wait a bit longer?" If you can

outsource non-strategic roles until there is enough justification and cash to do so

you will save yourself good money.

6. Can you raise your capital from somewhere other than venture capitalists?

How to raise money for your venture

Investors can be very important to get going but you need them like a hole in the

head. Our investor asked us early on, "Can you raise your capital from somewhere

other than venture capitalists?" This might be a paradoxical question coming from

an investor but our billionaire was sensitive to the difficulties that these

relationships cause. Investor's desire to get returns from their investment and their

blindness to subtleties can cause great tension in the company. In his words,

"Investors are driven by one thing and one thing only. Don't ever convince yourself

otherwise." If you can raise the money from friends or family, or better yet from

yourself, you will avoid having to deal with venture capitalists.

Money is a huge temptation and can make you a little crazy when you are desperate

to close a deal. Entrepreneurs that are up to their ears in debt make quick decisions

that they later regret. Ideally founders need to consider where the money will come

from before starting their business. Entrepreneurs can develop connections to

investors well before or in parallel to their start-up activities. Successful businesses

don't wait until time has run out and they are desperate.

7. How can this business be scaled?

How to build a business that generates cash without increasing costs

This is my favorite question because I'm inherently lazy. Businesses that require me

to work more as they get bigger scare me. I'm excited when I can see a company

grow without having to increase the amount of resources needed to run it. I've

heard it said that the best measure of a company's success is its ability to grow

regardless of your day-to-day presence.

E-Bay is probably the best model of a scalable business in the marketplace today.

More buyers and sellers gather every day under the same technology platform. Their

business has evolved to the point that a million more visitors won't require

significant additions to the technology. More customers and more transactions do

not necessarily mean increasing staff or infrastructure. "Build a business that

operates to generate revenues even when you are sleeping", that's pretty good

advice when you consider that you will be asleep for an average of one third of your

life.

8. What's the difference between a hobby and a business?

How to make sure you never confuse passion with productivity

The answer is simple, "A business should have more money at the end of each

month than it had at the beginning but with a hobby it's just the opposite". If you

are doing something just because you like doing it even if it's a terrible business

then eventually it'll make you miserable. The best case is to find something you are

passionate about then make sure it's a good business model too.

Too many self-help books tell us to follow our heart and our passions.

Unfortunately that confuses us into believing that our hobby can also be our

business. A good friend of mine left college with a degree in finance but was not

excited by the idea of working in the world of financial transactions. His favorite

past-time was to take overland trips in his Land Rover across African's heartland.

He decided to create a safari business and follow his heart. It turned out to be a

really tough business to run. The vehicles frequently broke down and you can't do

much marketing to wealthy overseas prospects when you are in the deepest darkest

part of the African continent. He eventually closed shop and joined an investment

firm that had a special interest in the travel industry. It was a match made in heaven

and he made a mint doing what he loves.

9. Are you wetting your bed and or are you facing facts?

How to make tough decisions and feel good about it

Business leaders and entrepreneurs have to make tough decisions. What stops

business leaders from making tough decisions is they don't want to be perceived as

nasty bosses. Tough decisions are just that - tough. Get over your ego and get used

to the idea that not every step of the way is going to be paved with roses.

In one instance, after a particularly bad month we had to come to terms with the

fact we had too many people and not enough work to justify their presence. Even

though we had delayed the decision for months we would have to let some people

go. "Ignoring these tough decisions is the same as wetting your bed and not telling

anyone" our investor said. Our delay nearly cost us the company.

10. Do you have an exit strategy?

How to create a lucrative exit strategy

Have you given enough thought as to how you will ultimately profit from your

venture? Businesses make the best returns when they are sold or go public but there

are other ways to create liquidity events. Remember too that in this day and age it's

rare for a founder or company leader to hold their lofty positions for more than a

decade. Give some consideration for yourself and for the company.

This doesn't mean you have to write yourself out of the script before you start. It

does mean that you have to plan for your future once the company is a mature

entity that can live beyond your influence.

Thank you for reading this report. These ten points have given me a great

advantage in starting and building businesses. I hope that you too will absorb these

ideas and make them your own.

Good luck with your ventures!

About the Author

Richard Banfield lives in Boston, MA with his wife and two boys. Richard is a business development specialist with a focus on growing profits for early to mid stage global technology companies. He has delivered high-level business strategy, global marketing campaigns and materials to clients in the US, UK, Europe and Africa. He has lectured on the subjects of marketing and online advertising and has authored guides to sales, account management, global business development and marketing strategy.

Contact details:
richard@freshtilledsoil.com
+1 862 221 1805
http://www.freshtilledsoil.com

Working Capital: Financial Options For Small Businesses

Introduction

Large companies have always had a number of options that they could depend on to raise capital for their businesses. The have always had access to a number of alternatives such as selling stock, issuing bonds, bank loans and accounts receivable financing among others. Looking at the other side of the coin, smaller companies, those that have between $20,000 and $500,000 of yearly revenues, have always had a challenge trying to find capital to operate their businesses.

The lack of access to capital has prevented many small businesses from growing and capitalizing on the many opportunities that are available to them. It is not uncommon for small companies to reject large deals or opportunities because they do not have the necessary capital to obtain the resources to service the account. However, even when small businesses do take on large contracts, they find that they are never paid immediately upon delivery of services. Most contract terms demand that the supplier provide 30 to 60 days for the customer to pay their invoice - in effect, forcing them to extend them with supplier credit. The lack of adequate capital resources, along with the necessity to offer commercial credit to clients, creates a "perfect storm" that prevents small businesses from growing and that is very difficult to avoid.

A number of these issues could be sidestepped if the company had immediate access to working capital. Working capital could enable the business to add employees and resources to serve new clients and larger contracts. It also enhances a company's ability to extend 30 to 60 day payment terms to their customers.

This paper outlines the most common sources for working capital and provides an evaluation of each source. Each source has also been assigned a score, which summarizes the availability and flexibility of the source.

Scoring System

Each working capital source that has been evaluated has been given a score from 1 to 10. The following features where considered when assigning a score:

Accessibility to small businesses Requirement complexity (e.g. do they require significant financial reporting?) Flexibility Payment terms

A higher score indicates that the source of capital has a positive outlook on a number of these criteria and is available to small businesses. A lower score indicates that a particular source of capital may not be best suited for most small businesses.

Financial Options

Venture Capital - Score: 1

Many books and publications tout the benefits of obtaining venture capital to finance a new or ongoing operation. Venture capital is an option for small companies that have a seasoned management team and very aggressive growth plans, however, venture capitalists will rarely invest in small businesses that have no intention of going public. The venture capitalist objective is to invest in a company for a short period of time - say 5 years - and then cash out of the business while making a significant return on their investment.

Angel Investors - Score: 2

An Angel investor is a wealthy individual or group of individuals that typically invest in pre-venture capital companies. That is, companies that don't meet the current requirements of a venture capitalist but that could meet their requirements with a capital and management influx. However, you should not rule out angel investors completely since there are angel investment groups who focus on the growth of certain communities and will invest in small businesses. The best way to find an angel investment group near to you is to search them on the Internet using a search engine such as Google (www.google.com).

Banking Institutions - Score: 4.5

Most small businesses owners will first approach their bank to try and obtain a loan or line of working capital. However, unless the business has been in operation for a number of years, has substantial assets and all the appropriate financial records, their chances of obtaining any financing are minimal. Banks, however, can provide lines of credit if the business owner personally guarantees them. This means that the business owner will be personally liable for the repayment of these loans. These lines of credit can provide the business with the needed working capital; however they can be very risky, especially if the business does not produce the expected results and the owner is unable to repay the bank. Business owners should use this method of financing very cautiously.

Credit Cards - Score: 5

Much like bank lines of credit, many business owners use their credit cards to fund their businesses. Credit cards offer the ability to make purchases or obtain cash advances and pay them at a later time. It should be noted that credit cards can be a very expensive source of funding. Although most credit cards have reasonably low interest rates for purchases, their cash advance rates can be as high as 17% to 19% due to greater delinquency rates. Furthermore, most credit cards will charge you 2% to 4% of the face value of a cash advance as a "fee". Much like bank lines of credit, the business owner personally guarantees payment of a credit card. Thus, this method of financing can be very risky if the business does not produce the expected results and the business owner cannot repay the credit card company. Business owners should use this method of financing very cautiously.

Home Equity Lines of Credit- Score: 5.5

Business owners who are also homeowners have the option of tapping into their home equity to finance their ongoing business operations. Home equity loans and lines of credit have many advantages, such as low interest rates and the possibility of having some portion of it deducted from taxes . This method of financing gained a lot of momentum between the years 2000 and 2004 when interest rates where at their lowest point in decades and real estate was appreciating in value. A major disadvantage if this financing method is that it directly places the business owner's home at risk. In fact, the business owner is placing a bet - with their home as the potential wager - that the business will succeed and will be able to repay the loan. Much like lines of credit, business owners should use this method of financing very cautiously.

Small Business Administration - Score: 7.5

The US Small Business Administration (www.sba.gov) provides a number of very viable options to finance business operations. Although the whole scope of SBA services is beyond the scope of this paper, the SBA provides a "Microloan" program. The program objective is to stimulate micro-enterprises and provides loans of up to $30,000 to small businesses. These loans are usually provided through a financial institution or a bank. They have higher interest rates than traditional loans, but their requirements are more flexible, making them more accessible to small business owners.

Founders, Friends and Family - Score: 7

Friends and family are one of the most conventional ways of financing small businesses. Many entrepreneurs have been able to leverage existing relationships and obtain funding, either as a loan or as a capital investment, for their businesses. Although this source of funding can be easier to obtain that others, it does have some inherent problems. First, the business owner runs the risk of placing the relationship in jeopardy if things do not go as expected and the business defaults. Furthermore, these transactions are usually done with little formality and without written agreements, further complicating matters. If you elect to use this funding option, you should consult an attorney and draw some formal documents that describe the intent and responsibilities of each party.

Accounts Receivable factoring- Score: 8

Accounts receivable factoring, also known as invoice factoring, has been a source of working capital for large companies for many decades. It is now becoming mainstream and available to mid-size and small businesses. Factoring enables a company to sell their slow paying accounts receivable to a financial company, who in turn pays for the invoices within a day or two. After the sale, the financial company waits to be paid for the invoices. A key feature of factoring is that the factor will take the credit strength of the business' customers, as it's main consideration. Until recently, accounts receivable financing was out of the reach of the small business owner. However, enhancements in technology have now turned this method of financing into a viable alternative for small businesses. This means that a small company with little or no credit can leverage a strong roster of clients, sell their invoices and get funding very quickly. Factoring should be considered as an option for businesses that sell products or services to other businesses, rather than to consumers.

Conclusion

Obtaining working capital for their businesses is one of the most important decisions that a business owner can make. Like all important decisions, it should be carefully thought out and deliberately executed. The old adage that "the best time to look for capital is when you don't need it" is still true. You should spend some time researching the all available options for your business ahead of time, so that you can be ready to "tap" your war chest when the right opportunity arrives.

DISCLAIMER

This paper is written to provide small business owners with an overview of the financial options that are available for their businesses. However, this paper does not intend to provide financial or legal advice as only qualified professionals can do so. The author and Commercial Capital LLC disclaim all liabilities arising from the use of the information on this paper. Please consult a professional before making an important decision about your personal or business finances.

Invoice Factoring Group

Invoice Factoring Group and its small business factoring subsidiary can provide you with factoring and purchase order financing quotes at no cost to you. Marco Terry, its president, can be reached at 866-730-1922.

Why Businesses Fail - And What You Can Do About It!

Have you unintentionally set your business up for failure?

No one sets out to fail! Most business owners read all the statistics (maybe more than once) before they open their doors. Many know the reasons why businesses fail. But some businesses operate under this paradigm: "failure can never happen to me because I know better." Is that you?

What most business owners miss is looking at the reasons for business failure and turning them into action steps to help overcome the odds of failure. How do I know? I once thought I knew better, too!

Bear in mind that even "adolescent" businesses fail. According to the SBA statistics, 90% of small businesses fail within the first five years. Many businesses aren't producing enough income because the business owners aren't "business wise." They may be excellent at a specific task -consulting, programming, massage therapy, web site design, copywriting, etc. Or they have a great product. But wise about the "business" of business, they are not!

In the past five years of my business, not one client (including those who have been in business for more than 10 years) provided me with a business plan to review. Not one! Two of 100 clients have had marketing plans, but marketing plans don't work without a business plan and other focus type tools, too. The other common (95%!) mistake I see (and help my clients correct) is pricing their services very low as a way to gain market share and new clients. So low, in fact, that a potential buyer will perceive the service or product as being cheap and of low quality, even when the provider offers years of expertise. NO ONE wants to hire a business that is cheap! Inexpensive - yes; affordable - yes; cheap - no, no, no!

The most common problems business owners experience stem from simple functions like streamlining, organizing, information resourcing, marketing, planning, visioning, languaging, communication, technology and ecommerce. Example: If you know that most businesses fail because they don't have a usable business plan, develop your own business and marketing plans and use them daily; don't create one that gathers dust on a shelf. I use the One Page Business Plan Book or Interactive CD by Jim Horan. It helps business owners create very realistic, focused, and well thought-out business and marketing plans, including scorecards to help you anticipate and avoid business problems.

Example 1: Recently, a client turned down an opportunity to teach computer classes on a subject she could easily teach. Using teaching to market her business is on her marketing plan. So why not? Well, the proposed classes weren't going to help her get business for her primary business, they weren't going to attract her ideal client, and the pay was much lower than her usual hourly rate. She felt confident about declining the offer. Of course, that same week, other new business - the type she really wanted - came her way!

Example 2: New client knows she wants to create a business plan. She also has a strategy of increasing her income by joining four organizations with networking opportunities for her to meet her ideal clients. She joins the first two groups - total cost: $400.

As she starts her business foundation work, which includes the One Page Business Plan, she realizes that her ideal client isn't whom she originally thought it was! Some clients might be found in the two groups she's already joined, but not her ideal clients. As a new business owner, she wants to spend her time around her ideal clients, first and foremost. Planning just a little more for her business would have saved her $400 in membership fees.

What other simple things can you do to build a solid business foundation?

? Use a one-page plan daily to create your to-do list and monitor your business.

? Create an Ideal Client Profile and Elevator Speech and define a niche for your business.

? Read one of the "E-myth Revisited" books by Michael Gerber.

? Go with your strengths. Hire individuals whose strengths ARE your weaknesses to "fill in the gaps."

? Remember that there is no need to repeat the SAME mistakes others have made.

? Know what your business exit strategy will be.

Most business owners don't know what they don't know. Get assistance by hiring non-biased professionals who help you realign with your vision, create plans and financial scorecards to monitor your business. Look for someone who can suggest resources to help you and your business grow. Someone who's been in your shoes and succeeded. Start looking at how having a partner - a business consultant, coach, counselor, strategist, organizer or planner - can help you grow your business.

Ready to learn more about business success? Take a look at the articles I found on business failure that are posted below, ( http://www.coachmaria.com/articles/succeed.html ). Learn to overcome the costly (both in money and your time) errors that other business owners have already made. Give your business a fighting chance to continue to succeed.

? 2004 Maria Marsala, is a business builder who helps women-owned service businesses increase their bottom line in less time. A former Wall Street trader and manager, she used her business expertise to create 6 S.I.M.P.L.E. Business Steps, a program developed to help her clients succeed in less time. Learn more at http://www.ElevatingYourBusiness.com

Why Small Businesses Fail (or Fail to Thrive)

Tammy, a skilled and gifted horticulturist, called me to discuss what she needed to know to start her own florist and landscaping business. She had been in the horticulture industry for 10 years and was incredibly skilled at working with flowers and plants - one of the best. She also had great design skills, as well as good customer service skills. But she had little business management experience and less self-employment experience.

Discovering why small businesses fail was a smart research project for her, as it helped her uncover her own weaknesses and begin to build up some strengths before she invested in becoming self-employed. It's no secret that a large majority of small businesses fail in the first five years. The question is: Why do they fail and what can I do to prevent problems in my own business?

As we talked, we reviewed some of the common reasons why small businesses fail. Here are 14 top reasons, which might help you to determine why your business isn't growing and thriving. Some of them are related to learnable business skills; others relate to personal attitudes, habits, or self-sabotaging belief, which are not so easy to change, except through coaching or other self-development work.

1. Mistaking a business for a hobby: Just because you love something doesn't mean you should convert it into a business. Too often businesses fail because the owner feels their passion is shared by others. Research your business idea and make sure it's viable.

2. Poor planning: Yes, you must have a business plan. It can be a simple three-page plan or a huge 40-page plan. The point is that you've looked at all the aspects of your business and are prepared to handle problems when they arise. Your business plan helps you to focus on your goals and your vision, as well as setting out plans to accomplishing them. And don't get mellow - revisit and revise your business plan annually.

3. Entrepreneurial excitement: Entrepreneurs often get excited about new ideas, but are unable to determine if they're "true opportunities" and/or put them into practice. Test every new idea against your business plan and mission statement before deciding whether to undertake it or not, and ask yourself, Do I have the time and skill to implement this?

4. Putting all your eggs in one basket: Too often, small business owners will have just one product, one service or one big client. They cling tight to this one thing because it brings in good revenue. But what if the one thing disappears? Variety and diversification will cushion you against the ebb and flow of business tides.

5. Poor record keeping and financial controls: Yes, you have to keep financial and business records, you have to review your revenue and expense report each month, and you have to file taxes and other business-related filings. If you don't know how to do these, or don't want to, get help from someone who does.

6. Lack of experience in running a business or in the industry you're entering: There are so many hats you have to wear, from marketing and selling in order to run a business effectively. On top of that, you have to understand your industry, the skills required to offer your products and services, and the trends in the industry. If you don't know about these basic skills, educate yourself. Talk to others who are successfully running their own businesses, talk to industry leaders, get a book, find a website, get a coach, do your homework. And keep increasing your business and industry skills by attending classes or reading new books every year.

7. Poor money management: You need to be able to live for one to two years without income when getting started; often businesses are very slow to get off the ground. Also, you have to create and use a realistic business budget, and not constantly drain the business income on personal spending.

8. Wrong location: If your business runs out of commercial space, you need to make sure that you are convenient to your customers, and near to your suppliers and your employees.

9. Competition: Customers will go where they can find the best products and services. It's important for you to know who your competition is, what they have to offer, and what makes your own products or services better.

10. Procrastination and poor time management: Putting off tasks that you don't enjoy will sink your business faster than anything else. You can't afford to waste time on unimportant tasks while critical tasks pile up. All tasks need to be done; if you don't like to do them (or don't want to spend your time doing them), hire someone to do them for you. If your time management and prioritizing skills are rusty, hire a small business coach or take a class to help you.

11. Ineffective marketing: Learn the basics of marketing and make sure that you track the success or failure of each marketing technique you use, then dump those that aren't working.

12. Ineffective sales techniques: Once you have a potential client, you have to know how to lead them down the sales path. If you don't understand the basics of selling, get some education on it immediately. If a selling technique doesn't work, try another one.

13. Poor customer service: Once you have a customer, you have to keep them. There are two key points here - make sure you pay attention to what the customer wants (and how these wants can change over time), and make sure you provide quick return of phone calls and emails, proper billing, win-win problem solving and an overall pleasant demeanor.

14. Entrepreneurial burnout: owning your own business requires a huge investment of time, money, energy and emotion. It's easy to work long days and forget to take time off. But in the end, this only causes burnout where your motivation and creativity will suffer, and a pessimistic attitude prevails. You'll find yourself unable to balance your business and personal life, and both will suffer. Schedule self-care time into your work week and be religious about taking time off from your business.

Dunn and Bradstreet recently did a study and determined that "90% of small businesses that fail do so because of a lack of skills and knowledge on the part of the owner." However, D&B also did a study that showed that over 90% of small businesses were still in business after five years IF they had the help of a Small Business Development Center (SBDC) or other expert assistance. You can find a list of the SBDC in your area here:

http://www.passionforbusiness.com/web-resources.htm

As Tammy and I concluded our coaching session, she made a list of the areas where she needed to grow, and created a task plan to get the help she needed. Today she has a thriving business and is happily self-employed. You can do it, too. It just takes a little planning and a close look at both the reasons for your success and where you might need to get a little help.

Karyn Greenstreet is a Self Employment expert and small business coach. She helps you increase sales and profits, and learn practical small business skills.

Get the free audio and ebook, "The Art of Networking and Referrals" by visiting http://www.PassionForBusiness.com

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