Small Business Development Center
At Chemeketa Center for Business & Industry
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Monthly Archives: August 2014

Think carefully before entering into partnership

By Chemeketa SBDC

What do you think of the idea of a couple of friends going into business together? It’s a good question and unfortunately a pretty tough subject. Some good reasons to choose partnership include shared dreams, financial agreements, shared workload, advantages of support, etc.

But think carefully! These reasons need to be discussed fully before you actually finalize any agreement. Many business partnerships begin with a promise and progress just fine. However, this is the exception and not the rule. Any agreement, expectations, and “what if” scenarios need to be in writing. By having a written agreement and having all partners agree to key issues you have a specific and concrete document to refer to if (and inevitably when) there are any conflicts or disagreements in the future.

Oregon does not require a partnership agreement but it is an essential tool for success. The terms of agreement for a general partnership do not have to be formal but have it signed by all partners and notarized. It is up to you (and your partner) to decide what shape the agreement will take. An attorney can help you focus on issues and suggest possible solutions but you and your partner must make the basic choices – not the attorney.

The following checklist should help:

• What name will be used?

• What happens to the name if the partnership is dissolved?

• How much capital will each partner contribute and what percentage of ownership will each person have?

• What contribution of time, service, and property will each partner make?

• What are the functions and responsibilities of each partner?

• When will owners’ draws be taken, how much and when?

• Are bonuses to be granted? By whom and when?

• How are profit and losses to be shared among partners?

• What will the duration of the partnership be? What guidelines are provided as to how the partnership will be dissolved?

• If a partnership is terminated, how will the business be valued and how will the sale or transfer to a new partner take place?

• Are there any restrictions on the activities of the partners outside the partnership?

As with most legal agreements, it is probably best to consult and attorney and a CPA. Keep in mind that you can change the agreement at any time and you don’t have to start from scratch, but if there are changes, sign and notarize again.

You can find template forms online that you can use as a starting point but you must personalize it. Not to end on a negative point but think of all the things that can go wrong and plan for them up front.


What traits do successful business owners have?

By Chemeketa SBDC

What does it take to be a successful business owner, and why do some people seem to “have it” while others don’t? There are a handful of characteristics that set a high achieving entrepreneur apart from the rest of the pack, and the good news is that you don’t need to be born with these, you can learn them.

Look around at the successful businesses you know, chances are the owners will exhibit several, if not all, of these traits.

• First is the ability to self manage. This is the ability to train yourself to do what you don’t want to do. It’s self-discipline that you develop and that becomes a regular habit. It’s hard at first, but you can practice this until it is second nature. You won’t succeed unless you can manage yourself (and after that managing someone else won’t seem so daunting!).

• Along these lines is the ability to work hard. Putting in long hours, following up on details and commitments. It’s staying on the job until the job is done. Successful business owners make whatever sacrifices they need to in order to reach their goals. This entails making hard choices (and sometimes those can take a personal toll).

• Achievers are focused on where they’re going. They’re not idling along without a plan, they’re moving towards a goal at a good clip. They lock onto their vision and pursue it. They choose not to let distractions deter them from their destinations.

• And because they have this focus, they are able to be decisive. They ask themselves the question of whether an opportunity presented will get them to their goal or not. And they don’t take forever to make the decision either. Delaying action is delaying achievement, and so they act on opportunities and choices in a timely manner. Yes, sometimes the decisions don’t pan out, but indecisiveness is worse.

• The successful have a will to succeed that underwrites the above points. They are able to channel motivation into focused goals, and then drive themselves to achieve those goals.


Five things to do when money is flowing out the door

By Chemeketa SBDC

If you’re a business owner and your books are full of red ink and your bank account is bone dry, here are some issues to consider going forward.

Take a hard look at your resources. Is it really true that you have no money, or is it true that you just aren’t willing to rob Peter to pay Paul? Does it mean that you’re not going to hit revenue targets, or that you don’t anticipate having cash on a certain date? If you can honestly and accurately describe your situation using numbers (without drama) it won’t solve your circumstances, but it will give you a true picture of where you truly are so you can start working toward solutions.

Do a thorough assessment of your internal capacity. Running a business is a serious matter, and it can leave a business owner feeling burned out and exhausted. You may feel like you have nothing left to give, but do you perhaps have almost nothing (meaning there’s a little bit left)? There is a difference between truly being at the end, and almost being there. If there’s something left, then keep going. If not, make peace with it and move on to your next opportunity.

Look at your worst-case fallback plans and consider doing them. These are the ones you might have thought about in the early days when you were getting your business started. They include things like getting a job in order to sustain your business, taking out a second mortgage, selling your home and living with relatives. These are drastic measures, but is it time to think about implementing one of them? If you haven’t engaged one of them, then ask yourself why not. Either times aren’t desperate enough, or your heart’s just not in it. Ask yourself the tough questions.

Consider what you would do in a difficult life situation where money was flowing out the door. Take your passion for your business dream out of the equation and look at the situation from the standpoint of its being a medical emergency or a job loss. What would your options be? How crazy would you be in trying to solve things?

Put your last efforts into a killer marketing campaign. You need customers and cash flow, so right now is likely the time to double down on marketing. If your business needs to be pulled out of the fire, then throw caution to the wind and go for it.

Projecting sales is important for any business

By Chemeketa SBDC

Even if you have an existing business, you should be forecasting – projecting your sales. You may use actual numbers if you have historical financial records. But what do you do if you have nothing to refer back to? You will need to determine how many potential customers are there, how many of these potential customers are likely to buy from you, decide the average sale per customer and then project this out for the year. Try this:

First: Determine the total number of potential customers living in your territory. (Don’t forget: the more clearly you can define your customer, the more realistic your research!) If you sell to the general public, you need to find the information from the new U.S. Census data for your market area. You can find this information on the web or at the library (

If you sell to other businesses, there are many potential sources of information; one of the best is a trade association that represents your industry. You can also find this information through a web search or at the public library. Once you have determined the total number of potential customers living within your geographical area, you have the base to begin narrowing down your target market.

Second: Determine the number that will likely buy from you. You need to be realistic. Consider your competition (both in number and quality), consider that some of the people will not buy from you or your competition, and consider that some people will find substitutes for your product. What percentage of the total available population will you be able to attract?

Third: Determine your average customer sales per year. How many purchases will your average customer make in a year? How much will they spend on each purchase? Is this a repeat business or once and only once. Does the average customer buy the same product/service or will they need other complimentary services? Trade associations are good sources of information to help answer these questions.

Fourth: Determine your annual sales volume. You have determined the number of customers and determined the average amount each customer will spend per year. Multiply these two numbers together to calculate your expected annual sales volume.

Finally: Evaluate the annual sales volume figure. Does the number you calculated make sense? If not, go back and work the numbers again. What assumptions have you made about your customers? How accurate or risky are these assumptions?

You can guess, and this is not a bad place to start. But then you need to back up your assumptions with actual figures to gain the greatest degree of reality for your projections.


Expand your reach into other markets

By Chemeketa SBDC

When I think of traded sector business and bringing new dollars into the local economy, I like to think big. As in international-sized big.

Did you know that doing business with foreign markets isn’t nearly as daunting as it sounds? “International” could be as close as Canada or Mexico. And many places around the globe are English speaking, making business negotiations a lot less scary. Have you considered trying to sell your products outside of the United States?

There are some basic reasons for wanting to expand your product’s reach into other countries. For one thing, there are a lot of customers out there! The United States represents only 5 percent of the world’s consumers, and that leaves the other 95 percent as a potential market for you. If you have saturated your local market(s) then casting your gaze to farther away places makes sense. This has the potential of increasing cash flow, and even smoothing out the seasonality of your cash flows.

Additionally, going global can be a risk management strategy as your business wouldn’t be tied only to the local economy and the business cycles of the domestic economy.

But how do you even begin to think about this if the idea is new to you?

Start with examining four basic readiness factors. Ask yourself if you have 1) a good handle on your current production and product line 2) the commitment from management to try an international expansion 3) adequate cash flow 4) and the capacity and capability to produce products for an international market.

If the answer is yes to all four of these, then look at the challenges associated with such an endeavor and assess whether your business can manage them.

Do you have a long enough timeline to enable you to move in this direction, and will your cash hold out while you implement all the pieces? Will you need to modify your products to suit the regulations of the new market? Can you assume a financial risk without getting hurt beyond repair? What about licenses and documentation in the new country?

You can explore these questions and many more at the website. There are links to all kinds of great free information resources. Additionally, there’s a wonderful nine-module series called Before You Go Global at

Think big! Your local friends and neighbors will thank you!


Business owners should get comfortable with the numbers

By Chemeketa SBDC

How do you feel about math and numbers? If you’re like a lot of business owners you either don’t like them, don’t understand them, or don’t pay attention as closely as you should. You know you should have a handle on all of this but can’t find the motivation to get any further.

Lots of business owners have some form of math anxiety. Couple that with an aversion to accounting and you’ve got a real problem on your hands.

But here’s the raw truth: your business runs by numbers and if you don’t know how to read them you are flying blind. It’s time for you to step up and make the decision to get the training and knowledge you need to make that happen. You need to understand what the numbers mean and what the relationships between them. You don’t need to love it, you just need to be competent. And you need to do it now!

You already know that numbers will tell you if you’re making a profit or not. But numbers will also tell you whether you can afford to buy a new piece of equipment or hire someone. They’ll tell you how your marketing campaign is contributing (or not) to your bottom line. How good your sales are. Whether your costs are increasing, etc.

You can’t sit around and wait for your bookkeeper or your accountant to bring you up to speed on these things. It’s your responsibility. You need to dive into your financial statements and bring these things to light yourself. So how do you do that?

First, decide that it’s worth your time and attention and that it’s a priority. Really, isn’t it more than time for you to know this stuff? Consider all the decisions you’re making now based on guesses and hunches, and then imagine making those same decisions based on hard facts. What might you do differently? I’ll bet probably plenty.

Second, look around for educational opportunities. Community colleges have accounting, bookkeeping, and other types of financial courses. There are free online sources like educational websites. Hit your public library and check out one of their books on any of these subject areas. They have lots of titles; find one that’s written so you can understand it. Google a term like “cash flow” and then go to a site that looks to have lots of definitions. Look up the concept on Wikipedia. Ask people you know who are good at this and see if you can’t get a little tutoring.

Keep working on this a little at a time. You’ll be amazed at how even a small increase in your understanding in this area will transform your thinking as a business owner. Your business will thank you.


Is now the right time to sell your business?

By Chemeketa SBDC

Is the timing right for you to sell your business? Perhaps you’re a baby boomer who is eyeing retirement. Or maybe you’ve built a solid business and your employees want to take it over. There’s even a possibility of a private equity group looking to deploy their cash reserves to make purchases and looking for a business just like yours.

What would it involve to prepare your business for such a sale or transfer? Usually a two-to three-year plan is required to position a company for an optimal sale. Your company and your books may still be recovering from the recent difficult years. But as the economy improves your bottom line is probably looking brighter. Consider that a high point in earnings is an excellent time to look towards a sale.

To properly gauge the value of your business you must put yourself into the shoes of a potential buyer. This is no small trick! You are no doubt partial to your business and probably see it with rosier glasses than a buyer would. A better option is to find an objective adviser, business broker, or other professional to assist you with reasonable valuation.

And then move on to ask for help in identifying areas you can enhance in order to increase that value. Look into the issues of your changing customer mix and the marketing messages you are using to reach those folks. Are you reaching the right people with the right information? What about your workforce, are they skilled and ready to start fresh with another business owner? If not, what needs to be added to their knowledge and skill base to make them so?

Look also to your products and services and ask yourself if you are keeping up with the pace of change and innovation. Is it time to make some new starts or modernize? What about your internal systems, are they up to speed? Your information systems? Can a new buyer walk in and find everything? Can he or she assume control right away, or will there be a steep learning curve?

Getting your house in order prior to a sale will make you more attractive to buyers and improve the odds that you’ll get top dollar for all you’ve built. The time might just be right.


Financing Your New Business

By Chemeketa SBDC

Obtaining a loan for an existing business can sometimes be very difficult. It is even more difficult for a new startup company. It is, however, usually possible to do so if the owner or prospective owner is willing to follow some basic steps.

The prospective borrower should realize that small business loans are considered high risk for a bank. Lending institutions, therefore, almost always require the pledging of personal property by the owner as collateral.

The first step to obtaining a loan is the creation of a loan proposal which consists principally of a business plan. The loan proposal must be a selling document with its main purpose to give the prospective lender confidence that the business is or will become financially successful. To be successful a business must be profitable, have positive cash flow, provide an adequate return on investment, show a strong balance sheet, and perhaps most importantly have longevity and value beyond the present owner.

The loan proposal should first state how much money is being sought and how it will use the funds. If equipment is to be purchased, specific quotes from the manufacturer or supplier of the equipment should be included. Enough working capital should be requested to ensure that the business will have enough cash to operate successfully. It is important to show how the loan will be repaid so a cash flow projection for at least the next three years must be included. Of particular interest to the lender is the balance sheet which must show all the assets of a business balanced against its liabilities and owner’s equity. Most lending institutions want to see an owner’s equity of at least 20 to 30 percent.

A description of the owner’s background experience in the field, the owner’s personal financial statement, and copies of personal tax returns for at least the last three years should be included.

All of the above should be neatly packaged and presented to the lending establishment. Business loans, when granted, are normally for no longer than five years and interest rates are usually higher than loans for non-business purposes such as the purchase of a new car or truck.