“Being all things to all people” sounds good, but in most cases it reduces the liquidity of a business. Business liquidity encompasses the number of prospective buyers, the business valuation, and the amount of time required to market the then close the deal.
• The most liquid scenario is a co-located web hosting client base, with no data center, offices, or employees, and only one owner/decision maker. This type of business can be under contract to be sold within 48 hours. (Post ‘Letter of Intent’ due diligence, contract preparation, integration plans etc. all take a bit of time.)
• The least liquid scenario is a web hosting company, which offers design services, has offices, a data center, and offers related services such as access, marketing services etc.
Valuation Difference:
Something I have seen many times is the owner/decision maker on the sell side has heard web hosting company valuation formulas and wants to apply that formula to his company. Inevitably the owner is disappointed when the offer comes up short in their mind, and passes on what actually is a fair valuation.
Design Services:
The decision to staff up and start offering web design services to complement the pure play hosting recurring revenue is a huge decision with regards to the effect on business liquidity. Of course design services can be a natural fit with hosting clients by helping to reduce client churn and up selling existing clients. However, the value of the revenue and cash flow generated from one-time design jobs is no where near the value of the recurring hosting revenue and cash flow.
Negatives of design departments when it comes time to sell:
• From the buyer’s perspective, acquiring the entire company and keeping the design efforts going is risky. It’s 50/50 whether the key design people will stick around after closing … regardless what they or the seller states. In addition, if you have to replace key people, the new staff will not have the relationships with the client base.
• From the buyer’s perspective, acquiring the entire company then canceling the design efforts is usually a risky decision as well. There are offices to deal with in addition to staff which needs to be let go … both time consuming and detrimental to the existing client base.
• My estimate is for every 20 buyers of a pure play hosting company, there are only 1-2 buyers for hosting design shop combo’s.
Internet Data Center:
Investing in an IDC may increase the value of the entire company by an enormous amount over time, but definitely reduces the liquidity in the short run. Typically smaller web host co-locate in the beginning, then at a later date acquire their own data center. In turn, the company will then offer space to other smaller host hence creating yet another service offering.
Owning an underutilized data center reduces the number of one type of buyer … the “cash flow buyer”, yet invites a new category of buyer, the “asset and cash flow buyer”. The later buyer is looking to both grow through acquisitions and make the swap from co-location to owning the data center. The less remaining capacity of the data center, the more of a cash flow type deal it will be, hence usually more liquid.
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No two small businesses are alike, but most want to be like their larger counterparts in some key respects. For example, even if you own a company with only a few really great customers, you want to be visible enough to attract new customers, boost your odds of securing repeat business and do all you can to improve customer satisfaction.
The key, according to the U.S. Small Business Administration (SBA), is having a business Web site. The SBA’s own Web site notes that the Web “levels the playing field between small business and big business” because it is such a dynamic, inexpensive medium for advertising and customer service. “The Internet is making it possible for small- to medium-sized businesses to compete with the big guys,” the SBA said.
Conventional wisdom says that any business without a Web presence these days is at a distinct disadvantage, but the latest International Data Corporation (IDC) small-business research exposes a surprising gap. The IDC research found that of the 6.8 million businesses in the United States with fewer than 10 employees, only 3.8 million have a Web site. “That means 3 million U.S. small businesses-or 44 percent of the total-aren’t using the Internet to promote themselves online or engage customers and prospects,” said Ray Boggs, vice president of Small/ Medium Business and Home Office Research at IDC. “In today’s connected world, companies that take that step generally find that having their own Web site can deliver a significant opportunity to grow their business, especially if the site is updated regularly.”
Clearly, small businesses (and many of their customers) are online, yet more than half aren’t exploiting the full power of what the Internet can do to help build their business. That power includes creating a dynamic Web site to attract and retain customers, taking advantage of search engines to heighten awareness of a company in today’s global marketplace, and communicating with customers around the clock or at their convenience.
What stops small businesses from stepping up to this level? For many, the barriers are cost, complexity and inconvenience. By its nature, a small business typically has a small budget and an equally small staff. Unlike the larger companies it competes with, a small business generally can’t afford to spend thousands of dollars to buy a server, create a complicated infrastructure and hire an IT technician to keep it all running smoothly.
The good news is that some new offerings are cropping up that allow you to establish a Web presence without heavy-duty in-house technical resources and a big cash outlay. For example, Microsoft Corp. has a new Internet-based service called Microsoft Office Live, which at the most basic level provides a small business with a domain name, e-mail accounts and a Web site for free.* It’s one of the quickest and easiest ways today to get your business on the Internet. And, because it’s supported by advertising revenue, and the advertising is designed to be unobtrusive and not appear in the customer’s public-facing Web sites, the basic offering is free. Yes, it’s free, and you can sign up to test-drive the service at http://www.officelive.com.
“I need an attractive, easy-to-navigate Web site that I can update frequently and efficiently. With Office Live, I can create a slide show of a sailboat race and have it online before the boats even get back to the dock,” said Elizabeth T. Becker, a freelance writer and photographer and owner of Seaport Photography. “That means I get to spend less time in front of my computer and more time behind my camera. It’s smooth sailing.” Becker’s Web site can be seen at http://www.seaport photo.com.
With such an all-in-one solution, a small-business Web site really is a no-brainer. Look at it this way: In a day and age when the majority of Americans use the Internet regularly, it’s highly likely that a large percentage of your customers do, too.
Starting your home business is the easy part, but realizing your long-term goal of financial freedom takes much effort and dedication. There are many ways to operate a home business, but the tips below outline some solid principals you should follow to earn a steady income from home no matter what your home business.
1. Set Goals for Success
Setting goals will help you stay focused on what you want to accomplish within your home business. Start with long-term goals for where you would like to be financially five, ten, even fifteen years from now. Next, create short-term goals for daily, weekly, and monthly achievements. To attain financial freedom is a great long-term general goal, but it will take many small goals to reach this level. You’ll need to set small goals to create a steady cash system. A home business will go nowhere without goals, so take this step before starting any other tasks.
2. Create a Pleasant, Professional Home Office
Evaluate your home business workspace. Do you work in a corner of your bedroom with a desk and computer? Is your office usually the kitchen table between meals? Do you try to work in the living area while the rest of your family enjoys conversation or entertainment? If you answered “yes” to any of these questions, you’ll probably need to make some changes.
Create an office space that is for work only. Even if it’s in the corner of another room, block its view with office sectional walls or some type of barrier wall to give a sense of privacy. An office should be just an “office” and nothing else. When you arrive at your office, you’re ready for work. When you leave the office space, the workday is over.
3. Get Organized
Once you have a defined work area for your home business, fill it with supplies and tools to make work easier and more efficient. Choose a desk and chair for comfort as well as back, neck, and arm support. Desks with shelves and cabinets can make organizing your office a cinch, especially if you have limited office space. Also, keep a daily to-do list, calendar, and schedule book to prioritize tasks.
4. Stay on Schedule
When you work at home, it’s easy to get off schedule because of interruptions or the temptation to take time off for leisure activities. Keep in mind that every moment wasted today usually means more work the next day. Eventually, you’ll be working around the clock and never seem to accomplish anything. For home business success, keep a steadfast work routine daily and set a work schedule you can stick with every day. Develop a mentality that every job is actually a pay-by-the-hour job. Every hour spent working will help you make money and gain financial freedom.
5. Separate Business from Personal Tasks
Once you set a schedule, stick to it. Don’t allow personal tasks to get in the way of work. These can be anything from cleaning the house to visits from friends or relatives to watching television. Take breaks from your computer, but try to avoid getting involved in personal tasks during your breaks. Many women confess to washing dishes, ironing clothes, vacuuming, and other personal tasks while on break from their home business. Personal tasks can cause your mind to be off-focus, and it will be difficult to return to a regular work routine afterward.
Find other things to do during breaks that won’t take your mind too far away from work. Take a 15-minute walk. Sit and read a self-help book related to your business. Or, take a quick snack break, with a healthy snack of course!
Once you take these steps, you’re ready to enjoy a steady cash system at home that works. You can earn money doing what you love most, and your home business can soar to heights never imagined if you stick with these basic principals. Get ready for a bumpy road, but also look for the financial freedom that awaits you just over the horizon!
Knowing what your risk tolerance and investment style are will help you choose investments more wisely. While there are many different types of investments that one can make, there are really only three specific investment styles – and those three styles tie in with your risk tolerance. The three investment styles are conservative, moderate, and aggressive.
Naturally, if you find that you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use.
If you are saving for retirement in your early twenties, you should use a conservative or moderate style of investing – but if you are trying to get together the funds to buy a home in the next year or two, you would want to use an aggressive style.
Conservative investors want to maintain their initial investment. In other words, if they invest $5000 they want to be sure that they will get their initial $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts.
An interest earning savings account is very common for conservative investors.
A moderate investor usually invests much like a conservative investor, but will use a portion of their investment funds for higher risk investments. Many moderate investors invest 50% of their investment funds in safe or conservative investments, and invest the remainder in riskier investments.
An aggressive investor is willing to take risks that other investors won’t take. They invest higher amounts of money in riskier ventures in the hopes of achieving larger returns – either over time or in a short amount of time. Aggressive investors often have all or most of their investment funds tied up in the stock market.
Again, determining what style of investing you will use will be determined by your financial goals and your risk tolerance. No matter what type of investing you do, however, you should carefully research that investment. Never invest without having all of the facts!
The world today is a global village. It is no longer necessary, or sometimes even possible, for all the employees of any organization to come together. Equally though people need to share ideas and information more than ever. Business associates or even family and friends may be located anywhere, but our need to stay connected grows daily. We may need to talk, share pictures and programs, work together or collaborate on many projects.
The Internet has brought the world even closer. It has taken our ability to share information to a new level with brand new abilities to work and communicate worldwide. Internet meetings are web based and accessible to anyone with high speed Internet access. Unlike email, they are real time and they allow you to get immediate feedback and communicate your ideas faster.
At an Internet meeting you can exchange all sorts of information. Internet meetings have many different features depending on the software and service provider used. Most Internet mettings today use live video and audio. They can also pass files between participants and share a common whiteboard to share ideas as well as the ability to work on Word, Excel or PowerPointdocuments together. Web meetings also provide the ability to share programs running on your PC and let the Internet meeting attendees view your desktop.
With these capabilities, the options of Internet meetings to help us keep connected are endless. Perhaps a family will stay in touch with children at school or university where they can talk and share experiences and pictures.
Small business owners can also benefit immensely from Internet meetings. A small business can present a very large and professional corporate image using Internet meetings. Internet meetings, for the small business user, are a cost effective way to grow the business. They can offer long distance sales presentations to customers or update a sole salesman living and working thousands of miles away.
Small business’s now have the ability to have global offices – in reality a virtual office residing on your desktop. It becomes easy and cost effective to invite clients from Europe, Africa, or anywhere in the world to join in a virtual meeting. Working with contractors and clients all over the world has never been easier.
Internet meetings are often hosted by Internet service providers. For a flat fee, you can log in via the web and set up a virtual meeting with participants in the USA, Europe, the Far East and Australia. Even scientists at the South Pole can join in via satellite technology. Once you have scheduled the meeting, your meeting attendees can log in via the web at no additional cost.
Internet meetings make you more productive and can reduce your travel costs and increase your productivity. Internet meetings are a way to meet with one person, ten people or a thousand people virtually. You can collaborate and work without the time and expense of travel or locating physical conference rooms.
As many small business owners know, financing is crucial to the financial health of their enterprise. While some small business owners have the resources to launch their business, most look to the credit market for financial help. Indeed, the banking industry is an important source to gain necessary capital. However, many entrepreneurs may not realize that that applying for commercial credit requires a great deal of preparation. Here are five tips to assist entrepreneurs in improving their chances of getting credit approval.
Tip #1: Decide on the type of commercial loan that is needed. Loan options include short-term loans, intermediate loans, long-term loans, and lines of credit.
Short-term loans are usually for less than a year. They typically provide interim working capital for a business temporarily in need of cash.
Intermediate loans are often used for business set-up, the purchase of new equipment, expansion, or an increase in working capital. This loan can be anywhere from 1-3 years.
Long-term loans are for major capital improvements, acquiring fixed assists, and business start-ups. The loan term is usually from 3-5 years and repayment installments are on a monthly or quarterly basis.
A line of credit gives a small business the ability to borrow money repeatedly, up to the credit limit. The lender will usually perform a review once a year, at which time the borrower is asked to update financial statements.
Tip #2: Make sure all paper work is in order. Applying for commercial loans can be very tedious and requires much more documentation than applying for consumer credit. So, the key is to be prepared. In addition, entrepreneurs who have carefully put together the needed paperwork to include the loan purpose, the amount of money needed and for how long, and a repayment schedule proposal will be viewed more favorably by many lenders.
Tip #3: Develop a well thought out proposal. The proposal should include the loan purpose, the amount of money needed and for how long, and a repayment schedule proposal. Points to include are the business description that tells the nature of the business, product and service, a personal profile, and a business plan that outlines the corporate strategy for the next three to five years. Additional points to add are supporting documentation that supports the information outlined in the proposal, and collateral that will be used to secure the loan. Financial statements, both personal and for the business, are important as well.
Tip #4: Seek advice! It is important for entrepreneurs to talk with someone who has gone through the process of obtaining commercial credit before a lender is approached. This is especially important for the first time buyer. Entrepreneurs can approach mentors, qualified business counselors, business support groups, and the U.S. Small Business Administration. This step will increase the chances of getting a favorable credit decision.
Tip #5: Be prepared to pursue various options. Sometimes, financial institutions will say no. Once again, obtaining credit can be difficult, especially for entrepreneurs who are first-time borrowers. However, since financial institutions have different standards, an inability to meet the standard of one lender does not mean one fails the standards of all. It is highly possible that credit approvals can be gained with another lender. So, it is important to keep seeking until a lender is found.
Obtaining credit is necessary for many small businesses. Knowing what steps to take in this process can greatly increase an approval from a financial institution. Now, put these five tips into practice and be on your way to getting the credit you need for your business venture.
These are just some general tips to keep in mind as you design/operate your small business:
1. Take the time out to explore and understand whether or not you are compatible with running our own business. Some people are just plain happier and better off financially on the other end of the paycheck.
2.Get your personal finances in order. Before you jump into the entrepreneurship world, get your own money matters squared away.
3. Pick your niche. Many small business owners succeed in businesses that are hardly unique or innovative. Take stock of your skills, interests, and employment history to select the business that is best suited for you.
4. Benefit from your business plan. The exercise of creating a business plan is what pays the dividends. Answer the tough questions now before the meter starts running.
5. Do not think you need bankers and investors at the outset of your business. The vast majority of small businesses are bootstrapped.
6. Acquire the proper background. In the early months and years of your business, you will have to acquire many skills. Gain the background you need to oversee all facets of your business well, but determine what tasks you should outsource or hire employees.
7. Remember that nothing happens until a sale is made – How many good products go nowhere because they do not reach the shelves? Sales drive your business. You will need a good marketing plan to sell your product or service.
8. You have to see a customer to know one. N o matter how busy you are, spend at least 25% of your time with customers. You cannot make the proper business decision without understanding their viewpoint.
9. Solve your customers’ problems. The best way to satisfy your customers is not by selling them products but by giving solutions to their problems. There is a big difference.
10.Quality takes minutes to lose but years to regain. Quality is not a destination, it is a never ending journey. After you have strayed from quality’s path, your journey maybe sidetracked forever.
11. Put profitability first, rewards seconds. In small businesses, profitability must come first. Find out how to measure your cash flow and understand key financial ratios.
12. Hire supporters. If you intend to create a growing business, your number one duty is to assemble a great team of employees.
13. Do not do it alone. Find such help from small business peers, a mentor, even trade associations. They can help take some of the trial and error of beginning your business.
14. Vendors are partners too! Treat your vendors like customers and watch your partnership grow.
15. Make use of benefits. Understand how to provide insurance and other benefits for your employees and cut your tax bill at the same time.
16. Ignore regulatory issues at your peril. Federal, state, and local governments require licenses, registrations, and permits. Obey them or face losing your business.
17. Know the tax laws. Invest in understanding tax issues that affect your small business.
18. It’s the people! Whatever happens to a small business happens at the hands of the people who work for it. The evolution of the business is a result of their efforts.
19. Fast, good, cheap. Pick any two. Serious trouble awaits those who attempt to be all three in the market place. Stick with what you do best.
20. Develop a passion for learning. As your business grows, you need to change and grow along with it. One common denominator can be found in all successful business owners and that is a passion for learning.
