By Phillip Thow
Phil Thow on why Start ups fail
Start ups fail for a variety of reasons. We talked with Phil Thow of the SD startup Burton Software’s and asked him what according to him the top 5 mistakes starts ups make were.
1. Not following the cash flow. Ever heard a startup founder say they could make it to the magic millions if only they had a couple more months of runway? A founder must at all costs watch his cash flow like a hawk.
2. The number one thing that trips up cash flows especially for first time entrepreneurs is poor management of amounts receivable. So you did your math and you were going to be cash flow positive this month except that those five customers you serviced haven't paid up yet. Always get paid in advance or at least at the time of service.
3. A surprising yet not uncommon way for startups to fail is expanding too fast. Forward planners are tripped over by this time and again. You know the business will come in next month so you must absolutely hire those 10 people and buy that additional space and inventory to allow for all that growth. What this does is that it makes your business vulnerable. If the business that is supposed to come next month comes a bit late, you will still be paying for it from now itself. Proper expansion plans must make for just in time growth.
4. Another related ones is spending too much time planning. This has been said over and over again and yet we see entrepreneurs fail on this time and again. Things rarely if ever go according to plan. This doesn’t mean that you shouldn’t plan and being able to make great plans is a valuable skill but it can kill your business if you spend too much time planning. Focus on execution and selling and getting money in through the door first.
5. Last but not least, Robin says that he is seeing a number of entrepreneurs who are promising way more than they can deliver and this is a sure road to failure. Without sales and cash flow coming in you have no business? But the extreme opposite is a problem as well. If you make lots of sales, but don't fulfill the product or services, you can be in trouble really fast.
These, according, to Phil Thow are the top 5 ways businesses fail and we think this is on the whole some very good and seasoned advice.
Key Man Insurance Benefits
The reasons why a company needs to buy key man insurance are easily described by Phil Thow. The persons like owner, partner, manager, top salesperson or a creative person are considered a Key person in the business. They are people who are the top contributors to the success of the company. The presence of a key man or key person in a business is very important as in their absence there are even chances that the business may come to an end.
As said by Phil Thow, the key man insurance is an insurance policy that compensates for any financial losses caused due to the death or disability of the insured person. The main aim of this policy is to help the company manage the loss of the key person and to continue the business. It aims at giving the amount that the person has worked for the company. The duration of the policy is usually a period of ten to twenty years but cannot outlive the expected longevity of that person with the company. It pays an amount between $500,000 to $5 million dollars.
The policy covers any costs for replacement personnel or training a new person, lost sales or income that the key person might have brought in. It also provides help for project cancellations and protection from share holders and even any business loan guarantees. If a company is working with bank or capitalists, it would be better to have a key insurance policy. A sudden death of a key person in the company can very badly affect the status of the company. The company will also face problems in convincing the clients. If the company is left out of key man insurance as stated by Phil Thow will have to suffer badly in the absence of the key person. So it is vital to have a key insurance policy in order to protect the company against total disaster in the absence of any of the key person.
MARGIN OF SAFETY
Another term that Phillip Thow believes that every business should utterly know is the margin of safety. This term signifies the strength of the business. According to Phil Thow, this can be used as a tool to identify the precise amount the business has earned or lost above or under the breakeven point.
The equation used in order to derive the margin of safety:
Margin of safety = ((sales - break-even sales) / sales) x 100% If P/V ratio is given then profit/ PV ratio
In unit sales
Phillip Thow affirms that if the product has large volume sales above or equal the breakeven point, then the company is assured of revenues, however, if it occurs below the point, the company is bound to have deficits.
Break-even quantity can be derived by:
Total fixed costs / (selling price - average variable costs).
Rationalization - in the denominator, "price minus average variable cost" is the variable profit per unit, or contribution margin of each unit that is sold.
Profit Equation
Phil Thow understands that the profit equation is important to business success: Profit = Revenues - Costs where Revenues = (selling price * quantity of product) and Costs = (average variable costs * quantity) + total fixed costs.
Therefore, Profit = (selling price * quantity) - (average variable costs * quantity + total fixed costs).
Total fixed costs can solve for the quantity of product at the breakeven point.
When the profit is zero, the quantity of products at the break even equals the Total fixed costs / (selling price - average variable costs).
According to Phil Thow, business still has the alternative not to sell the products that will not be lucrative in the market, for instance those that do not correspond suitably into their sales mix. Businesses may also choose to sell products that lose money to serve a loss leader and to present an entirely new string of products. However, Phillip Thow believes that there is no sense in selling or continuing the marketing of a product that obviously will not improve its sales by exceeding the breakeven point.
Start Up Business Credit – Get Started the Right Way; Phillip Thow
Are you thinking of starting a new business? Maybe a Nevada Corporation? Did you recently incorporate? If so, you must think about business credit first. You need to think about whether your business can qualify for credit or if you will need to personally finance your business until you can get your business credit built up. Maybe you don’t know whether your business is credit worthy. If you don’t, you can consult with our business credit experts to find out. One thing is for certain; you will need credit to get your business up and running and to eventually make it profitable, said Phillip Thow
There are two kinds of financing available to you: secured loans and unsecured loans. A secured loan requires that you reserve a certain percentage of the loan in cash with the lending bank. If you cannot make the payment and in turn default on a secured loan, the reserve is then property of the bank. An unsecured loan allows you to borrow money from a bank with a signed guarantee that you will pay them back. There are no reserves required. Obviously, an unsecured loan is more desirable, as none of your assets or cash are tied up with the bank. Your business credit rating will help determine whether you are qualified to receive a secured loan or an unsecured loan.
The best place to start your business credit, is with smaller creditors. While the initial amounts may seem small, this is the key to building solid business credit. As Phil Thow says, “And who knows, you may be surprised and you may be able to get more than you think.”
Phillip Thow knows that starting a new business brings much stress along with it. Business credit can be handled by experts and you should let them handle it. They know what they are doing and where to start. Building business credit responsibly, safely and correctly is key to creating a superior business credit profile. After all, your business credit will help determine exactly how fast your business reaches profitability. Don’t delay another minute. Call the experts and rid yourself of that undue stress of building business credit.
Credit Cards for Small Business by Phil Thow
When starting a small business, you will discover, or maybe already have, that it is no simple task to obtain business corporate credit. You may have the most perfected business plan, a superior personal credit score, but the lenders don’t care. All they see is that your business is brand new with no credit history. Phil Thow suggests starting smaller. Small business credit cards will help you get your business credit off the ground. By starting with small business credit cards, they are less hassle and more quickly and easily approved than small loans. Maintaining business credit becomes easier as well.
Phillip Thow says that starting with small business credit cards can help with fiscal responsibility. You are in control of your limit and your spending. With good payment history, a simple call to the creditor can usually result in an increased credit limit. No bank would approve that! You are in control of this type of credit and can choose to use it whenever it is needed, thereby giving you more control of your business finances.
Small business credit cards are a great way to gauge what your employees are spending and how much they are spending. The small business credit card expense reports show a clear picture of where your hard earned money is going. Another wonderful thing about small business credit cards is that you have a 30 grace period to pay your balance off. This frees up cash assets for a while and allows relieves any cash stress that your company may be experiencing, says Phil Thow.
Phil Thow also comments that these credit cards are important when starting a new company and getting it off the ground until profits can be made. Having sufficient cash flow will get you on the fast road to profitability. So stop the worry about how to get business credit and let the business credit experts handle the tedious job of building solid business credit.
Business Model by Phillip Thow
Business expert Phillip Thow knows that having a strong business model is just as or more important that initiating your business plan. A business model and a business plan are two separate things. A business model will take your business and lay it out specifically as to what function happens when and where in the business to show that in the end, all functions come together to form this business. Your business plan is an explanation of each function, almost like a handbook or manual.
Phillip Thow says your business model reflects the functions of each unit of the business and how each function works separately to create the entire business. Some of the things included in the business model and considered “units” are the services of the business, the clients, projected finances, business infrastructure.
Phillip Thow says the business model of your company is specific to your industry. A dentistry group will have a model specific to their specialty in the dentistry field, for example. They can also follow specific concepts, as pertaining to the method of sales and marketing techniques.
Obviously there are numerous business models that you could use, and Phil Thow says that it is up to you to determine which works best for your specific business and situation. Or take a model and create your own spin on it, customize it to fit your individual business needs. Phillip Thow says this is a way to personalize your business model.
Lastly; know your business model and know it well. This will help you really stand out in your industry and keep your business running smoothly. Phil Thow, advanced internet marketing specialist, says that knowing your business model is imperative to running to successful and profitable business. Phillip Thow suggests that business owners get to know their business model before they start running their business.
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