Wyoming Entrepreneur Blog

It's That Time Again

Way back when before I worked for a non-profit, I disliked taking surveys. What is it about surveys? Probably there are many reasons: 

•    Time- anything beyond 5-8 minutes is probably not going to get a response.
•    Privacy-why do they need this information and what are they going to do with it?
•    Repercussions-if I don’t respond in a positive manner will there be a consequence?
•    What’s in it for me? Sometimes there are incentives to complete surveys (i.e. coupons, money, free products, etc.) and sometimes it is just out of the goodness of your heart.

I think surveys have been overdone in the past and that could be another reason for our hesitation.  I recently read the average response rate for surveys is 10-15%; seems pretty dismal. This makes our job to receive needed information very challenging.

So here it is-It is that time again , when we and all SBDC's send out the annual Chrisman survey. We randomly select a certain number of clients who have received five or more hours of counseling from one or more of our team of advisors and market researchers. 

We are genuinely interested in your response. There are several questions pertaining to the quality of service you received from Wyoming Entrepreneur SBDC, MRC & PTAC. If you were happy with our service, tell us! If we can improve our service, tell us that too.

There are also several questions pertaining to your business statistics; also known as impacts. We want to know if our counseling services provided positive impact for your business.  All responses are anonymous and will be kept strictly confidential.  All responses are compiled and analyzed by a third party researcher. The best news, it should take only about five minutes to complete!

Through the years I have been involved in several surveys and understand the angst of the person being surveyed, but also compassion for the surveyor.  Funders, stakeholders and the general public want to know what is the ROI or return on investment with the money received. Thus, gathering impact and performance feedback is valuable information for us.

So, if you were one of the lucky recipients to receive a survey and you have already completed it and mailed it back, Thank You! If you haven’t completed the survey, please take five minutes. We appreciate your time and effort!

Financial Literacy

I recently had someone tell me that after receiving their tax information back from the accountant, they realized that they need to have a better understanding of the financial side of the business. This is a fairly common theme this time of year.  Perhaps you received the news that you owe some tax to the IRS because you made a profit, yet you don’t have the cash to actually be able to write that check.  How can this be?

There are a number of reasons why this could happen and many business owners don’t truly understand all of the financial relationships that take place.  The income statement is fairly familiar to most as it tells you whether or not you made a profit, but the balance sheet is typically not as well understood (if they even know what that is), yet it is on the balance sheet that cash is managed.  And we pay bills with cash, not profit!  Do you have money tied up in accounts receivable, excess inventory, have loan principal payments to make, is debt structured properly, and so on?  All of these could be part of the answer.

Until September of 2012, Wyoming Entrepreneur – Small Business Development Center has made available to every business in Wyoming a program called Profit Mastery.  It is FREE, and is a great resource to help business owners obtain a better understanding of the financial side of their business.  To learn more about this program visit our web site at www.wyen.biz and click on the Profit Mastery button at the bottom of the home page.  This is an on-line course that you can take at your convenience, with great tools to assist you in implementing the concepts in your own business.  If you have questions about the program, contact the Wyoming Small Business Development Center office in your area, or call 1-800-348-5194.

Why Do A Business Valuation?

By Leonard Holler, Wyoming Entrepreneur – Small Business Development Center Regional Director and Certified Valuation Analyst.

Gil in Cody, Wyoming asks, “Why would a small business owner, like myself, need a valuation done? I am not trying to sell my business.”

At first it might seem that the only reason for a business valuation is for no more than the casual interest of a business owner. The fact is that there are as many kinds and varieties of values as there are reasons for valuing a business.

In some recent articles in Inc. magazine and Entrepreneur magazine, they conclude that business valuations are important for businesses of ANY size – and not just when a business is being bought or sold. Inc. magazine stated – “A business's success is ultimately measured by a business's value…. Knowing your net worth as a private business owner provides a useful snapshot of where your company stands, what options it has, and how it can improve in the long term." In short, business valuations are a significant planning tool for small and large businesses alike.

They are used in various business situations and can be impacted by any number of circumstances. Some of the common uses of business valuations include –

• Determining the price to buy, sell or merge a business.

• A reality check of your business performance.

• A tool for developing employee and business improvement goals.

• Setting prices for adding new shareholders, new stock purchases or buying back shares from existing shareholders.

• Helping determine the business owner’s personal net worth for estate planning, insurance requirements and financial planning.

• Obtaining or even maintaining financing options.

• Employee stock ownership plans (valuations are required by ERISA).

• Stock bonuses or other compensation incentive plans.

• Going public and IPO research.

• Feasibility of management or leveraged buyouts.

• Divorce proceedings of owners and shareholders.

• Various litigation support documentation.

• Mediation and arbitration of disputes between shareholders or business partners.

• Value of business spin-offs.

• Bankruptcy, business liquidation or reorganization decisions.

• Exit strategy planning and development.

• Conducting due diligence on mergers or acquisitions.

Business owners also need to periodically evaluate their own performance. Financial ratio analysis and business valuations can help them objectively determine their management effectiveness. This is not the only measurement of how well a business is operating, but can give you reason to ask more questions about how you operate your business.

I only need to borrow $5,000 to get my cleaning business up and running. My credit isn’t great and the banks aren’t interested in loaning me that small of an amount. Are there any other sources of financing that I could contact?

A microloan may be your answer.  Microlending originated in the 1970’s with Grameen Bank in Bangladesh.  The philosophy was to eliminate poverty through entrepreneurship.  Since that time, the concept has expanded worldwide, operating through a number of different types of organizations.  Today, microcredit is available in the US.  Grameen Bank began operation in New York in April 2008. 

Wyoming is fortunate to have our own microlending institution, the Wyoming Women’s Business Center.  They can loan between $100 and $10,000 to individuals unable to get financing through traditional means.  In order to be considered for a loan, you must have been denied credit from a financial institution for a similar loan request, show current responsible use of credit, contribute personal equity in either cash or assets, as well as have some collateral.  In addition, a business plan or explanation of the business and how you plan to utilize and repay the loan funds (application requirements depend upon loan amount) is required.  Interest rates vary from 8.5% to 12.5%, and loan terms up to 72 months are available.  Loan application charges are $47.00.  For more information about the Wyoming Women’s Business Center microloan program, contact Andrea Presse at (307) 778-3908, [email protected], or visit their website, http://www.wyomingwomen.org. 

Another alternative for small businesses is Accion USA.  Accion, a non-profit organization, sponsors a Global Bridge Fund that allows individual investors to lend money to the funds and earn interest, while their pooled funds support microfinance institutions.  Available loan sizes vary from $500 to $50,000, and interest rates range from 8-15%.  They also charge 3-6% in closing costs.  Start-ups are required to have a cosigner and an external source of income.  Learn more at http://www.accionusa.org. 

If you are a borrower, beware of predatory lending practices.  Research any microlenders very carefully. Some microlenders operate via donations, others repay principal only to the investors, and others repay principal plus interest to investors.  Funds paying interest to investors will be charging higher interest rates to their borrowers.  Walk away from any lender charging over 15%.  Watch carefully for added closing or application fees.  Any organization charging very high fees is using fees as a profit center.

If you are an investor, consider combining investment with social impact.  eBay’s subsidiary, MicroPlace.com, defines itself as a “social business,” a financially sustainable company that has a social mission.  They offer numbers of alternative methods to invest by geographic location, desired return or term, level of poverty, and type of enterprise.  As for borrowers, be careful that the company you are investing with is legitimate, and that a fair proportion of your investment actually goes to those in need.

I missed the “Free Money” Workshop in Riverton last month. Can you tell me if there really is “Free Money” in the State? M. Dollars, Dubois, WY.

Sorry you missed the workshop Ms. Dollars, but it’s true. There is “Free Money” in the State and it is fairly easy to obtain. A terrific opportunity to business owners (with or without employees) is the Wyoming Department of Workforce Services, Workforce Development Training Fund program. The program may be able to assist new and existing businesses by providing up to $2,000 per employee (owners are considered employees) per fiscal year for established businesses who need a skill upgrade or retraining. The program may also provide between $1,000 and a maximum of $4,000 per employee per fiscal year for new or expanding businesses, depending on the employee's full-time status and wage amount. In order to register the business and submit an application for a grant, businesses must be in good standing with the Wyoming Department of Employment, Unemployment Insurance and Workers’ Compensation. The business must complete the “Joint Application Form” with the Department of Employment. Prior to applying for a grant, regardless of entity type (sole proprietor, LLC, Corporation, etc.), even if the business has no employees. This process can take up to two weeks. A business currently registered with the Wyoming Department of Employment does not need to re-register in order to apply for a Business Training Grant. Time is of the essence when applying for a grant. The program provides a date calculator under “What do I need to know about preparing an application.” This will let applicants know when an application can be submitted based on the start date of the training. Applying one day late can make the difference between receiving the grant or not. A business currently registered with the Wyoming Department of Employment does not need to re-register in order to apply for a Business Training Grant.

Another great “Free Money” opportunity is the Wyoming Business Council, Trade Show Incentive Grant Program. The Wyoming Business Council Trade Incentive Program exists to encourage Wyoming businesses promote and sell their products to statewide, national and international audiences. The Trade Show Incentive Program is a reimbursable grant; and as such, the applicant must pay all expenditures before the grant award can be disbursed. The business shall function independently in performing this activity and shall assume sole responsibility of any debts or liabilities that may be incurred in regard to this trade event. The grant award cannot be assigned.
Please keep in mind the program has a limited amount of funds. Money will be dispersed on a first come, first serve basis. Tell me about any “Free Money” your business has received.