4 Secrets of Successful Joint Ventures

Companies that build successful joint ventures follow the same systematic process. Although the costs of forming alliances is inexpensive, the cost of not planning out the partnership is far greater in lost profits and failed relations.

1. Set Clear Goals: Know from the beginning what you want to accomplish. Is it reduced product costs, expanded sales, or market credibility? Your partners’ goals may be different but complementary to yours.

2. Find a Partner: The best partnership is based on a mutual win-win relationship. Take the time to locate a business with an honest interest in joint ventures and a similar corporate culture. If your small business is focused on long-term customer relations and your strategic partner cares about gaining market share quickly, then your two cultures may clash.

3. Plan the Venture: Map out your negotiation tactics and understand the legal aspects of the deal. Keep win-win agreement in mind.

4. Manage the Relationship: Once a winning joint venture is formed the real work takes place. A good alliance is like a marriage. It is built on communication, trust and understanding.

Joint ventures and strategic alliances can be a positive outcome for all parties involved. Take the time to understand the process and your small business will be well positioned into the future.

8 Small Business Trends

Running a small business requires a focus on the present daily operations. With time restraints looking ahead becomes difficult. However, in order to succeed you need to know what’s ahead to better plan and avert danger. The 21st century presents plenty of changes that will impact your small business in the future. Here are 8 small business trends for the 21st century:

The Small Business Revolution: The face of entrepreneurship is changing from the white middle-aged college educated male to a new class consisting of immigrants, women, baby boomers, and the younger digital generation. These groups are better prepared for success.

The boomers have a vast repertoire of skills and experiences while the youth possess a risk-taking attitude with very few financial commitments. According to the Kauffman Foundation, Americans aged 55 to 64 start a business at the highest rate of any age group—28% higher than the adult average. A growing number of employees will value the path to entrepreneurship continuing the small business revolution. Look for greater political clout and financing for small business.

An Empire of One: Forget the hiring headaches, managing problems, and added paperwork of running a business with employees. According to the Census Bureau, small business without payroll makes up more than 70 percent of America’s 27 million companies, with annual sales of $887 billion.

An empire of one can operate in a low-cost of location such as the home office and be more nimble than larger companies. One-person businesses can take advantage of outsourcing many functions while focusing on core strengths. The empire of one model will be appealing to more and more corporate employees leaving behind big companies with limited pensions and job security. Small businesses built around the empire of one model will be able to weather the perfect talent storm on the horizon.

The Perfect Talent Storm: A fast aging population, a rapid declining pool of younger workers combined with global competition creates the perfect storm for a serious labor shortage. Unlike past labor shortages, this is a global phenomenon impacting workers in many areas and businesses of all types. It will continue for much of the future regardless of economic cycles.

According to the U.S. Bureau of Labor Statistics, the U.S. is heading for a shortage of 3 to 6 million workers by 2012. Immigration provides little comfort with other countries facing similar talent crunches; retaining citizens will be a top priority. This storm means small businesses will have to compete aggressively for talent and learn how to fully engage the hearts and minds of employees.

The Innovation Age: The most important asset that will be fully realized in the future is the 3-pound creative universe in our heads. Our true competitive advantage is our ability to create and execute new business ideas. Although we have mastered the fundamentals of business such as sales or marketing, we have yet to grasp the concept of innovation. Smarter companies will leap ahead with the understanding that innovation is a process dependent system as opposed to a flash of genius.

Cash IS King

Don't Take "No" for an Answer - Cash is King

“You can survive decreased profits if you have cash flow, but… if cash flow takes a dive, you’re in trouble While most business know the above to be true, most have been told by their financial “partners” that they do not meet the criteria for additional capital, even though their financials are strong and their ability to repay is not in question. The past 18 months demonstrated that even financially healthy companies were hamstrung when it came to accessing capital. Every company should have multiple sources of liquidity – in good times and bad. It is your fiduciary responsibility to be “cash prepared.” Look for ways to optimize your balance sheet and alleviate your cash flow management concerns. Seek out reliable partners that will help you to finance your growth on your terms and, ultimately, work with you to reduce your cost of capital. For example, Burt & Associates allows you to decrease your DSO and improve your financial performance by allowing you to set terms that work for you. Like we said, Cash is King!

Commercial Business Loans

When you start a business, you generally have two ways to raise capital: loans and equity contributions. There are some obvious disadvantages to loans. They require you, for example, to pay back the lender whether or not the business is successful, which is not the case with equity contributions. But the advantage of a typical loan is that if your business prospers, the lender is only entitled to an interest return on its loan — not a percentage of the profits or a share in the company that an investor would expect.
Whether you obtain loans from a bank, individuals or other lenders, a number of variables can affect how good or how bad they are for your business. Virtually all of these variables are negotiable: There is no such thing as a “standard loan.” Be sure to negotiate these key issues if you plan to get a loan for your business:
Due date. You need to set a date when the loan is to be repaid. This can be formulated as a lump-sum payment at the end of the term of the loan or as a periodic payment of principal with a final payment. For example, you can agree to borrow $50,000, with entire principal due in two years, or you could agree to repay the principal in 20 equal monthly installments of $2,500. In any event, make sure that the payment schedule is reasonable given your anticipated cash flow. Realize that interest will be charged to you either way.
Interest payments. When a lender establishes an interest rate, it must comply with any applicable state usury laws. (These laws govern how much interest can be charged on a loan.) Often, however, usury laws will not apply to banks. The law may also allow a lender to charge a higher interest rate for business loans than for personal loans (such as consumer credit). The interest payment dates should be clearly defined — the most common method requires monthly interest payments due the first day of each month. You might also try to adjust the timing of your interest payments to match the cash flow patterns of your business.
Loan fees. The lender may charge up-front loan or processing fees. Check these fees carefully, and try to get an estimate as soon as possible to help you evaluate the loan package.
Prepayment. Ideally, you want to be free to pay off the loan at any time before its due date. Make sure that your loan agreement or promissory note gives you this flexibility and try to avoid a prepayment penalty for paying off the loan early.
Defaults. The lender may define a variety of events that will constitute a default on the loan, including failure to make any payment on time, bankruptcy, insolvency and breaches of any obligations in the loan documents. Try to negotiate advance written notice of any alleged default, with a reasonable amount of time to cure the default.
Grace period. Try to get a grace period for any payments. For example, the monthly payments may come due on the first day of each month, but they won’t be deemed late until the fifth day of the month.
Late charge. If the loan includes a fee for late payment, try to make sure that it is a reasonable charge.
Collateral. The lender may insist on a pledge or mortgage of some asset to secure the loan. Under a mortgage (for real property) or a security agreement (for personal property), if you default on the loan, the lender is able to foreclose upon the asset and sell it to repay the money owed to the lender. If you are required to provide security, try to limit the amount you have to give to secure the loan. And make sure that when the loan is repaid, the lender is obligated to release its mortgage or security interest and is required to make any government filings acknowledging this release.
Co-signers and guarantors. A lender may ask for a co-signer or guarantor as a way to further ensure that the loan will be repaid. A co-signer or guarantor runs the risk that their personal assets will be liable to repay the loan. If you ask someone to co-sign the loan with you, you may want to draw up a co-signer agreement to let the person know how you will repay them if you default on the loan.
Attorneys’ fees. The lender will likely insist on a clause that says in the event of any failure to pay on the loan, the borrower will reimburse the lender’s fees and costs in enforcing or collecting on the loan. Try to insert a qualifier that the reimbursement will cover only “reasonable” attorneys’ fees.

Business Spending by Will Rogers 1919

Why don’t somebody print the truth about present economic condition?

We spent years of wild buying on credit everything under the sun, whether

We needed it or not & now we are having to pay for it & howling

Like a pet coon This would be great world to dance in if we didn’t

Have to pay the fiddler

Raising Capital Though Bad Debt

An important decision for a business wanting to raise capital is that of choosing among the various ways to structure financing. Bankers and investment bankers may offer a number of possibilities besides straightforward bank debt, which is basically a loan that can be a fixed term loan or a revolving line of credit. Other possibilities bankers may offer include convertible debt, which is debt that may be converted into equity at some predetermined price per share. Mezzanine debt, which is senior to equity but subordinate to convertible debt, typically has a term of three to five years and often requires warrants or stock options in addition to substantial interest rates on the notes. Equity financing includes preferred equity and common equity. Preferred equity is stock that has certain preferential rights higher than common equity, which in turn is the sale of ownership of the company that issues the equity. for more information check Burt & Associates

How Price Increases Bad Debt?

It’s harder than ever to get customers to accept price increases, thanks mainly to Alan Greenspan. But you’re making a mistake if you don’t raise prices on a regular basis.

Alan Greenspan is a wonderful guy, and he has my wholehearted support in his battle against inflation. I doubt, however, that he has the same warm feelings about people who share my philosophy on prices. I believe that as a matter of sound business practice, it’s important to raise prices regularly.

Otherwise you’ll be letting your profit margins erode and undermining the value of your company. If you’re not careful, you could wake up one day and discover you’re in serious trouble. At that point you may have no choice but to take the kind of action that will drive your customers crazy.

“I don’t have a choice a small business told me ” We haven’t had a price increase in 10 years. I’ve been giving the staff raises every year, and I haven’t been getting any additional income. Now I’m at a point where I can’t go on without a significant increase. I won’t be able to pay my bills. The place won’t survive.”

Small businesses has my sympathy. It’s never easy to raise prices, and it’s particularly tough to raise them in an environment like this one, thanks mainly to Mr. Greenspan. He’s done such a great job of fighting inflation that most people think prices shouldn’t go up at all. As for big increases, you make them at your peril. There’s simply no way to do it without antagonizing customers and thereby putting your most important relationships at risk.

Faced with such resistance, a lot of businesspeople are tempted to forgo price increases altogether, or at least put them off for as long as possible. If you do either one, however, you’re making a big mistake. Granted, you may not feel the pain for a while. If your sales are going up, you’ll probably be able to take home the same amount of money from one year to the next. As a result, you may not see the risks you’re taking. In the short term, you’ll think you’re doing fine.

But, in fact, two things will be happening. First, your profit margins will be shrinking. Why? Because your costs will be going up. Even in Greenspan’s America, certain costs always rise. It’s what I call “creeping expenses.” Some types of expenses have a life of their own. If you don’t watch them like a hawk, they go up all by themselves. They may even go up if you do keep an eye on them.

In most small businesses, for example, you can count on payroll increases every year. You can expect regular hikes in insurance rates as well, and I’m not talking just about health insurance. The costs of utilities and supplies also have a tendency to rise over time. OK, some things are cheaper these days — basic phone service, for example — and computers let people work more efficiently than before. Nevertheless, your average costs per dollar of sales are going to rise from year to year. They may rise only 2% annually, but compound the increases over 5 or 10 years and eventually you won’t be earning a profit anymore — unless, of course, you raise prices.

Even if you don’t let the problem go that far, however, you’re damaging your business in other ways by not raising prices on a regular basis. For one thing, you’re gradually undermining the perceived value of your services or products. Like it or not, there’s a natural tendency to link quality and price. I’m not saying you always have to charge as much as the most expensive suppliers, but if the gap between your prices and theirs gets too large, customers will start to regard you as the cheap alternative in the market.

At the same time, you’ll be undermining the real value of your business as a whole. That’s a point most small-business owners miss. They look at the company only as a source of income. They forget that it’s also a major asset, probably their most valuable one, and — like any asset — it needs to be maintained.

That means, among other things, making sure the company has strong profit margins — as good as or better than the rest of the industry’s margins. If you let your margins erode, you’re going to have trouble when you try to sell the business. Indeed, you may not be able to sell it at all.

It’s sort of like selling a house. If the place needs a new roof, buyers will discount the price accordingly, or they’ll look for a house that doesn’t need one. By the same token, business buyers are going to shy away from a company with weak margins, especially if they’re weak because prices are too low. Who wants to buy a business and immediately start raising prices? Even under the best of circumstances, it’s tricky to maintain a customer base through a change of ownership. It’s almost impossible when you have to begin by doing something that will antagonize every customer you have.

So I’m sorry, Mr. Greenspan, but I’m going to keep raising my prices, and I’d advise most other businesspeople to do the same. The increases don’t have to be big ones. In this economy they can’t be. I have to fight for every increase I get, but I always insist on raising the price at least a little. I have to admit, however, that there is one group of people I’d encourage to ignore my advice and give Mr. Greenspan a hand in his fight against inflation: my suppliers.