Once a business is underway and making profits, the owner's first financial objective should be to build an Emergency Fund equal to at least six months of fixed overhead expenses (which includes the owner's salary). Twelve months would be ideal. These profits should be invested in a liquid portfolio, meaning that the assets can be converted into cash within a matter of days. Real estate, of course, is not considered a liquid investment.
Bettering Your Bottom Line Communicating With Vendors in Tough Times As tough as this recession has 2. What if you owe $50,000 bankers that your firm is a worthy your doors knowing that you still been, I see nothing but good, even (or more) to a key cabinet vendor, risk for a long-term loan and/ owe money to key vendors? It takes great, opportunities and the credit manager wants or credit line. Please contact me courage to make the calls, but for smart this paid off before processing directly if you need a Cash Flow that’s what you must do if you still businesspeople in your next order? Time for some Forecast and an explanation of want a decent livelihood of some the kitchen and bath serious planning! Actually, you how to implement it. form in this industry. If your firm industry. To finally would be rather late. Because if Once you have developed this goes down without warning, you get your operation you had capitalized your business 3-Month Cash Flow Forecast, you will be treated as a pariah for years “lean and mean,” adequately, budgeted it properly will be in an informed position to come. Indeed, you may never to diversify into and reviewed your financial to discuss realistic payment live down the stigma. It’s not so new products and statements carefully every month arrangements with the vendor’s much that your firm failed during markets, to gain to see what they are saying about credit manager. It’s unlikely that the worst economic decline in the Ken Peterson market share over the state of your firm’s financial the $50,000 can be paid off in one last 80 years, it’s how it failed – CKD , LPBC the competition and performance compared to budget, lump sum unless you were able to without notice – that will be the to earn more value you wouldn’t find yourself in this secure additional financing. But sticking point. from a key industry organization untenable and embarrassing if you use customer deposits (i.e. As painful as this process to which you belong are but a few position. 50% at contract signing, 40% upon will be, you need to articulate of the opportunities that present It’s every owner’s responsibility cabinet delivery, and 10% upon your showroom closing plan. If themselves now. to be properly capitalized at all substantial completion) for working your displays have not been used But none of these is more times. Vendors should never be capital purposes like most dealers as collateral in securing a bank important than the opportunity for put in a position of serving as your do in this industry, you should be loan, then offer them back to dealers to forge tighter bonds with bank, since it imperils both your able to pay down this debt over a specific vendors to help pay down key vendors. The need for each business relationship and your few months. If you are a valued your debts with them. If you had other’s support is paramount for operation’s viability. customer, and you show solid proof to sign a personal guarantee in both parties to emerge from this Once a business is underway of judicious financial planning, setting up the original account, be deep recession relatively unscathed and making profits, the owner’s most credit managers will work prepared to negotiate a satisfactory and prepared to grow again. first financial objective should be with you to arrive at reasonable resolution to any outstanding debt – or face a possible lawsuit. WORKING TOGETHER Yet in my travels, I encounter Business owners in the kitchen and bath industry don’t THE RIGHT PLAN dealers who have made egregious In conclusion, business owners mistakes – perhaps, but not plan to fail, most just fail to plan. in the kitchen and bath industr
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