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week_4peer.docPEER RESPONSES: WEEK 3 - DISCUSSION 1 5
Engagement/ Participation: Respond to two of your classmates.x
Distinguished - Contributes to classroom conversations with at least the minimum number of replies, all of which were thoughtful, relevant, and contributed meaningfully to the conversation. Fully engages in the conversation with appropriate topic-based responses.
Proficient - Contributes to classroom conversations with the minimum number of replies that are somewhat thoughtful, relevant, and contributed meaningfully to the conversation. Attempts to fully engage in the conversation with appropriate topic-based responses.
Week 4 - Discussion 1
S. Thomas: Peer # 1
The first thing a small business owner must do is have a cash management plan. This plan can help the business owner to avoid unexpected cash shortages which is a major reason most small businesses fail. I did not know anything about tracking the money I had invested in the business. The only I was interested in was making the product and I left that to my daughter and granddaughter. They had no experience in managing the cash flow of a business we were just ready to make money. Finally I noticed that I was investing money every week into the supplies that I needed to continue to produce products to sell. I was making money, but spending it as fast as it came in. During a meeting with my daughter we realized that we had to do better if we were going to continue in the business. I had to get my spending under control in order to see if I could make a profit or just break even.
There were so many things I never considered when I started this business. One evening we got together and I pulled out fifteen boxes of beads and other jewelry making supplies and we put them all in categories of types and prices. This job took us several hours. When we finished my inventory valued at over one thousand dollars. This is where all the money was going, I did not realize I had so much inventory on hand because it was not organized properly. We discovered that by creating a cash budget for buying supplies I would not over spend and buy organizing the supplies I had on hand I could avoid having to spend money on products I already had. I was responsible for keeping all receipts with the merchandise I purchased and putting it in a spread sheet to better control the inventory of supplies.
A cash budget is nothing more than a forecast of the businesses’ cash inflows and outflows for a specific time period, it gives a clear picture of a company’s estimated cash balance for the period (Scarborough, 2013).
According to the SBA an effective cash flow system will help you manage funds to cover operational costs and bills and help you foresee potential problems in the future. Business USA is another valuable resource to help a new business owner find help in financing for a startup business. Developing profit and loss statements and income statement ca be used to determine projections for future cash flow trends in business. These documents are essential for making cash flow projects in your business.
References
Scarborough, N. M. (2013). Essentials of Entrepreneurship and Small Business Management (7th ed.). Upper Saddle River, N. J.: Person Education
A. Sykes: Peer # 2
I believe all businesses struggle with the issue of cash flow; especially newly developed businesses. Our text states “Nearly every small business has the potential to improve its cash position with little or no investment. The key is to make an objective evaluation of the company’s financial policies, searching for inefficiency in its cash flow” (Scarborough, 2013).
Cash is king and rules in the business world. I also believe a lack of cash flow and cash flow generation in a business can prevent businesses from being competitive with other businesses. Let’s just say if one started a business on The Internet or opened a storefront, he/she may discover distinctive business contending for items you offer and new business that concentrate on a solitary item and invest all their energy and concentrate on being the absolute best at only by selling a certain item or one thing. This expansion in general choice and more engaged fulfillment will make it more troublesome for businesses of all sizes to keep clients who can change their vendors with the touch of a mouse. It is a clash of recognition, focus, and promoting. Entrepreneurs who ace these components and give an extraordinary client experience will win the deal.
Trimming wasteful expenditures, investing surplus funds, and carefully planning and managing the company’s cash flow enable them to compete effectively (Scarborough, 2013).
Three creative kinds of business relationships/financing arrangements that can be used to help manage cash in a small firm are as follows:
Leasing- Businesses spend about $800 billion on equipment annually, and companies acquire about one-third of that equipment through leases (Scarborough, 2013). Machinery, office equipment and the like depreciate over a period of time and the value of these benefits is not in owning them but rather in utilizing them. “Businesses lease for efficiency and convenience” (Scarborough, 2013).
Leasing enables businesses to conserve and control cash. Equipment leasing/renting spares your working capital (bank lines) for everyday costs of doing business, business developments, or sudden business related costs. Notwithstanding sparing your working capital, with a rent you have a foreordained month to month line item, which can help you spending more adequately. With unsurprising month to month costs, you can establish long range plans gets for your business with certainty and get your business set up with the machinery, equipment, etc. you require, while keeping your income accessible for different consumptions.
Hire part-time employees or temp-employees instead of hiring full-time employees because it “saves on the cost of salaries, vacations, and benefits” (Scarborough, 2013). As indicated by the Reference for Business site, government law says low maintenance specialists work under 1,000 hours for each year, or around 17.5 hours for each week. They may deal with a regular or year-round premise, and ordinarily do not get benefits. Contracting low maintenance laborers (part-time employees) assists entrepreneurs with keeping expenses to a minimum, and allows businesses to experiment with another contractor before making him/her a full-time representative.
Under the business/employer mandate segment of PPACA, employers with no less than at least 50 all day laborers (full-time employees), characterized as those working over 30 hours a week, will be required to offer employees insurance or face a punishment by fine of $2,000 per specialist, every year.
Outsourcing-The act of having certain occupation capacities done outside an organization as opposed to having an in-house office or representative handle them; capacities can be outsourced to either an organization or an individual. Outsourcing enables businesses to cut costs. Outsourcing controls capital costs by converting fixed costs into variable costs, discharges capital for venture somewhere else in your business, and permits you to evade substantial uses in the early phases of your business. Outsourcing can likewise make your firm more appealing to financial specialists, since you are ready to pump more capital specifically into income creating activities.
It also lessens work costs. Enlisting and preparing staff for a brief term or fringe activities can be exceptionally costly, and impermanent representatives don't generally experience your desires. Outsourcing gives you a chance to center your HR where you require them most.
References
Zimmerer, T.W Scarborough, N.M. & Wilson, D. (2008). Essentials of entrepreneurship and small business management (5th ed.). Upper Saddle River, NJ: Pearson Education.
http://www.referenceforbusiness.com/small/Op-Qu/Part-Time-Employees.html Retrieved February 10, 2017
http://www.benefitspro.com/2014/02/26/part-time-workers-beware Retrieved February 10, 2017
http://www.nytimes.com/allbusiness/AB5221523_primary.html Retrieved February 10, 2017
Week 4 - Discussion 2
D. Hutchinson: Peer # 1-
It’s no secret that small businesses sometimes need a little boost of funds in order to either launch, or grow. In order to do that, they will have to choose between equity financing and/or using long-term debt. My recommendation would depend highly on the current standing of the company itself. An advantage to equity financing is that it does not need to be paid back later. This means that if the company is aware of other future needs for funding, they will be able to take advantage of profits earned. The disadvantage, however, is that some portion of the company will now be owned by the investor. This also means that you will have to split profits at a later time with those same investors. Another interesting thing to note is that investors will sometimes also require their own personnel onto company boards and/or in executive positions. Long-term debt also has advantages and disadvantages. An advantage to using long-term debt financing would be that it allows you to grow your business or buy new equipment before earning the funds that are required. This works for companies that are prepared to take on debt and are also in need of immediate supplies/assets. A disadvantage to long-term debt is that though the money comes in quickly, paying it back (plus interest) must be figured into future spending. This means spending the money needed and risking the company’s assets if the company does not become profitable enough to pay back the loan. They could also have the obvious risk of losing the asset purchased if not paid back. “A bank usually lends the small business from 60 to 80 percent of the equipment’s value in return for a security interest in the equipment” (Scarborough, 2013).
Given these advantages and disadvantages, my ultimate recommendation is that the company go with long-term debt. This is because when a business is still too small to grow, it would be better to not give up a portion of the company. In fact, the ideal that put that company together suggests that the owner relies on their own independence and likely would prefer not to give that up. As well, though you do have to pay the loan back, this concept is no different than a person buying a home privately or a personal vehicle. You can call it, “the cost of doing business”.
Reference:
Scarborough, N.M. (2013). Essentials of entrepreneurship and small business management (7th ed.). Upper Saddle River, NJ: Pearson Education.
S Estep :Peer # 2-
Although it sounds counter-intuitive to pay for money when you have money, I would recommend long-term debt. The reason I say that is because even as an LLC you are probably going to be required to guarantee the debt personally (Scarborough, 2013). Long-term loans tend to have lower interest rates because they require more collateral. By financing as much as you are able you keep the cash you have on hand. This money can be spent on inventory, marketing, or invested to make more money. If you finance with owner equity, you run the risk of encountering a problem with no cash to take care of it. At that point you can take out a loan, but it is harder to get a short term unsecured loan. Trying to get a long-term loan at that point may take longer than you have to maintain healthy relationships with suppliers.
Another reason I recommend a long-term loan is it gives you time to establish credit-worthiness. My father has been in business for 51 years. He started with a long term loan on the property he built the business on. As he repaid the loan, the bank he does business with in town got to know him and his reputation for honoring his word. The business he is in is very seasonal, the employees cannot work when the temperature drops below 20 degrees because the water freezes. The water is vital to the operation. Also, when the ground freezes, people cannot be buried in some places. Even if they can be buried, the family does not want to go into the cemetery to either pick out the style of choice or watch when the monument is being set. During the winter months, my father can go to the bank and ask for a short-term single payment loan to get him through the winter. Once spring arrives and he goes back into operation, he repays the loan with the first money that comes in.
Reference
Scarborough, N. (2013). Essentials of Entrepreneurship and Small Business Management (7th ed.). Upper Saddle River, NJ: Pearson Education. Retrieved from https://content.ashford.edu/books/AUBUS362.16.1
