Recent Articles

Start-Up Issues

Starting out in Start up imagebusiness is complicated and confusing.  What do I do first?  What’s next? Learn the basics from having the idea to developing a plan.  Learn where to go to find capital, learn about negotiating contracts and working with customers, employees, and vendors.  Begin the process here in start-up issues. 

 
This website is designed to provide guidance and information for the small business owner.  These articles are in-depth in nature and oriented to educate the entrepreneur.  If you should have any questions, please contact me via e-mail – dave(use the standard ‘AT’ symbol)businessecon.org and I’ll get back to you in a short period of time.

FEATURE ARTICLES:

  • How to Make Money in Business

    In my career as an accountant I’ve noticed the same 3 elements of all successful business operations. I wrote this article as my first post to this website, honestly, this is horrible.  But I was new at this and excited to write something.  So I want you to read the replacement article written exactly two years ...
  • Cash is King – The Value of Cash Flow

    For any small business operation, getting cash into the bank account is critical to survival.  Without cash, the probability of success dissipates quickly.  So how do you get cash into the bank account?  There are several sources of cash: they include capital, loans and customer payments. Capital When the business operation starts the owners or family puts ...
  • Basic Economic Principle of Time and Money

    Time is MoneyOver the last 17 years I have talked to over 600 different business owners.  I always asked the same question when we start chatting.  ‘Why did you choose to do’ so-and-so?  Surprisingly almost all of them said the same thing.  “I just love doing …….”.  I learned over time that the best thing to get ...
  • Do I Need a Business Plan?

    Whenever someone wants to start a business, they ask their friends and professionals what they should do. The standard answer is always, ‘You need a business plan’. Really, do you? If I do, what is it and how do I proceed? To answer the question of whether you need a plan or not, first you need ...
  • Research Your Business Plan – Part I

    If you read my section on ‘Do I Need a Business Plan’ and followed those steps, you are now ready for the next step in this process.  Hopefully two important barriers have been breached in your quest to be the next new business.  First, you have answered the most important questions of who am I ...
  • Research Your Business Plan – Part II

    By now you have figured out the ‘Who’ of your plan and the ‘What’. If not, please go to Research Your Business Plan – Part I. Now that you know you are qualified to do the job and you have figured out your customers, competition, and suppliers, it is time to determine the ‘Where’ of ...
  • How to Find Investment Capital – The Family Connection

    Twenty Dollar billThere is one responsibility of all business entrepreneurs that is loathed more than any other.  It’s asking for money.  First off, you have to find financial resources and then you have to ask for money.  This article is dedicated to finding money and how to ‘ask’ for the money from a family member.  It is easier ...
  • How to Find Investment Capital – The Vendor Connection

    All vendors look for avenues to expand their market share or maintain their market share.  Many times it is to their benefit to provide start-up capital to potential point of sale opportunities.  If they can assure themselves of a long term buyer of their product or service, then they will give serious consideration to a new ...
  • Research Your Business Plan – Part III

    You have now completed the ‘Who’, ‘What’ and ‘Where’ of your plan as a part of the start-up function.  We will now complete the ‘When’ section of the plan.  Remember, you have not formally documented any of these steps.  You should have taken good notes so far, learned a lot and hopefully still have your ...
  • How Much is a Fair Profit? Part I of V – Owner Compensation

    A fair profit for a small business is between 9% and 37%.  To me, 100% is a fair profit.  The customer hands me their money and I do nothing in return.  The problem with that scenario is that the customer will never come back.  If I go to the other extreme, and I lose money ...
  • How Much is a Fair Profit? Part II of V – The Economic Cycle

    Variable CostsA small business fair profit is between 9 and 37%.  To me, 100% is a fair profit.  The customer hands me their money and I do nothing in return.  The problem with that scenario is that the customer will never come back.  If I go to the other extreme, and I lose money on each ...
  • How Much is a Fair Profit? Part III of V – Risk

    A third factor in determining a fair profit percentage is risk.  Risk is divided into two types.  The first is insurable and the second is uninsurable risks.  Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter.  ...
  • Tax Basis of Accounting – Accrual or Cash

    Tax Basis of AccountingThis is the most often asked question by all new businesses.  Should I be on the cash or accrual basis of accounting for tax purposes?  The common layman would always answer ‘CASH BASIS’ for tax purposes.  They say this because they understand that you only pay the tax on the cash that you keep.   But ...
  • Three Primary Characteristics of Successful Businesses

    High Threshold of KnowledgeWell, this is my 200th article in two years.  So I’m going back to the very first article I wrote and essentially rewriting that piece.  When I reviewed it, I thought how poorly written and formatted the piece is and therefore I wanted to make my thoughts clearer.  So here it goes:  Over the last 19 ...
  • People, Process & Product – The Profit

    The ProfitMarcus Lemonis is the star of a TV series show called ‘The Profit’.  He helps failing business turn around and become successful operations by fixing the three core elements of every business.  He refers to these elements as the 3 P’s: People, Process and Product.  It is an interesting show as it falls into the ...
  • Substitution Principle in Business

    Substituion PrincipleThere are a multitude of principles used in business, some are industry specific, others are functions of business.  But there is one that is a general principle that is used across the board in all areas of business.  It is called the ‘Substitution Principle’.  It works just like the substitution principle in math that we ...
  • How Much is a Fair Profit? – Part IV of V Return on Capital

    For all investors in business, capital is the fronted equity an investor risks in exchange for a return.  This return can range from zero to infinity depending on the success of the business.  A fair profit is really a function of four different factors.  They are as follows:  Part I – owner’s compensation plays the most ...
  • Types of Business Models

    In business there are four distinct business models.  Just about any business can be identified with one of the four.  The following are the four types of business models: Low-Volume, Hi-Margin Hi-Volume, Hi-Margin Low-Volume, Low-Margin Hi-Volume, Low-Margin  No single model is the best or the worse.  Each works in their respective industries.  In general, the models exist by default and ...
  • Shareholder Dynamics in Small Business

    The majority of small businesses are owned by a single individual.  An additional pool is family owned or controlled.  The balance usually involves friends or relatives that are passive in ownership.  These forms of ownership create some interesting shareholder dynamics and if not thought out, can create some legal and financial issues in small business ...
  • Mission Statement

    A mission statement is a written document identifying the businesses’ primary reason for existence.  It should convey the core values and the principals of the company.  It should be reviewed with staff frequently to remind everyone of the chief goals of the company.   When asked about preparing a mission statement I tell clients to focus on ...
  • Microbusiness

    Microbusinesses are all around us.  Often overlooked and rarely given a second thought they are the backbone of our economic system.  From the local beauty salon to the Mom and Pop pizza shop; microbusinesses are everywhere.  Microbusiness is defined as the small closely held operation that provides a family a supplemental or primary source of income.  ...
  • Stock – Fundamentals of Ownership and Control

    The basic principle of stock is an ownership right of a company based on the percentage of outstanding shares in possession.   It is essentially a mutual understanding between shareholders that each investor’s percentage of ownership is similar in rights based on that percentage of ownership.   So if a shareholder owns 30% of all sold shares,  ...
  • What Startup Owners Can Learn from Expert Traders

    When it comes to managing a successful business, expert traders can teach entrepreneurs a thing or two about how to gain from a competitive market. It may not be too obvious, but trading and entrepreneurship have much in common. In fact, some of the most successful investors and traders have started their own profitable companies, ...
  • Feedback Loop in Business – Identification and Parameters

    The goal of accounting is to make continuous improvements in operation by monitoring economic results over a period of time.   Any changes to economic value is analyzed for impact and the source of the change.   In effect, management is constantly tweaking the business to gain marginal improvements via  financial results.  This entire process is known as ...
  • Business Barriers

    No business is instantaneously successful.   There are multiple obstacles referred to as barriers all owners and managers have to overcome.   There are three primary groups of barriers for every business out there.   They include capital (financial backing), knowledge (level of education and/or experience) and persistence (staying power).   The following sections introduce ...