Posts Tagged ‘business growth’

Why You Should Keep a Flexible Business Plan

What happens when your business veers off course and your business plan seems worthless?

The Unexpected

Imagine you’re on a vacation that involves a long drive. You’ve planned your route carefully to allow you to see the things you want and to make the drive as quick and efficient as possible. Then, unannounced and out of nowhere it seems, detours arise that throw a wrench in your well-made plans. For some this becomes a cause for getting upset, others are frustrated but deal with it as best they can, and still others see it as an opportunity. Making and using business plans can be a similar experience. Read the rest of this entry »

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Sound Business Growth

If you want to grow a business don’t you want to do it in a sound method that actually improves the business? Say “Yes!” Trust me, you do.

What Are You Growing?

Typically the focus of business growth seems to focus on one of the following and perhaps more than one of them: Read the rest of this entry »

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Debt Can Kill Growth

It is very common for companies to go into debt to finance growth. Is that always a good idea?

Debt-A Financial Demon

Many a person has purchased something like furniture on credit. Now, there is nothing inherently wrong with that, especially if they have ample income to make the monthly payments. However, many learn some very important lessons they hopefully will never forget. Perhaps after three or four months of making payments they realize how they hate making those payments. Not only that, these payments can restrict what they can do as the payments cannot be avoided, at least if they want to build and maintain a good credit rating. They may even find that the furniture they bought no longer looks as good to them as it did. But, this is just on the personal level. When it comes to business, debt can kill growth for similar reasons.

Servicing Debt

Servicing debt means making the agreed to payments of interest and principle. If cash flow is adequate this may not be difficult. But, if the total obligations that a company has for expenditures of any kind becomes excessive then a cash crisis can easily develop. When that happens the company may be surviving day-to-day. It’s easy to see why debt can kill growth. Any time a company considers taking on additional debt they need to ask a few fundamental questions, such as:

  • Will the cash generated be sufficient to cover payment?
  • What is the payback time for the debt?
  • If the debt is for something like equipment, how long will it take before they recover the cost through additional sales and profit?
  • Is there an alternative?

One example of how timing is an issue has to do with depreciation. Perhaps equipment is purchased using a three year note payable. If this equipment is depreciation over say five years then the depreciation deduction is insufficient during those three years of note payments to offset them. In that case the additional sales or efficiency the equipment contributes needs to be sufficient.

Some Key Things to Monitor

If you do find that your company needs to go into debt, be sure to consider a few key ratios, such as debt-to-equity, debt leverage ratio and debt coverage (see Debt Coverage). Since debt can kill growth, be certain you can justify it. One other thing to keep in mind is that anytime your company has debt it opens the door to additional pressure from outside the company.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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Sales and Earnings Acceleration

Most companies would be thrilled to see their sales accelerating. However, it needs to be accompanied by acceleration of earnings. The reality is that for growth to be healthy sales and earnings acceleration go hand-in-hand. Read the rest of this entry »

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Avoid Critical Critics

Like it or not, we all need people to offer advice and feedback. Part of this advice involves critiquing our plans and actions. Be careful who does this.

Good Criticism

By good criticism I do not mean just what we want to hear. In fact, there will be times when good critics offer advice that is Read the rest of this entry »

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Monthly Financial Checkup

Have you ever worked somewhere that always seemed to be financially in trouble? Were they surprised at this? If they were surprised then one of the main reasons could be that they were not sufficiently monitoring financial activity, specifically by performing a monthly financial checkup.

What Is a Monthly Financial Checkup

Before answering that question, let me ask one. Read the rest of this entry »

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Getting Started

Everything we do has a starting point. Unfortunately many never get past this point. Why is that? Read the rest of this entry »

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Expert Advice

None of us knows everything we need to be successful. So whose help do we need and where do we find it? The idea of a self-made man or woman is not reality. Yes, there are those who like to go it alone, but in the long run they will either fail or fall short of their potential unless they get expert advice somewhere along the way. Read the rest of this entry »

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Leave the Past Alone

Have you ever known someone who cannot get out of the past? Whether it is their failures or their successes, that’s where they live their life. In another posting, When Planning is a Roadblock, I talked about how people so often cannot move forward either because they cannot plan completely for the future or they cannot escape their past failures. Here I want to focus on getting beyond past failures in order to move forward. Essentially they have to learn to leave the past alone. Read the rest of this entry »

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When Planning is a Roadblock

We’ve all had the experience of planning something in detail, only to see it all go wrong. Don’t let this stop you in your tracks. This idea of things not going as planned is well expressed in the saying, “The best-laid plans of mice and men often go awry”, which is an adaption of a line from the Robert Burns’ poem To a Mouse. The sentiment of course is that we simply cannot know how things will turn out, not matter how carefully we may plan. That of course is no reason not to plan. But, when I said don’t let this stop you in your tracks I was referring to a different aspect of progress. Read the rest of this entry »

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