Business Cash Advance Blog

Is Business Cash Advance Dream Insurance?

I hate seeing articles like this when the press congratulate small business owners for “chasing their dreams”.   I hate them because I see the other side so often, when people look back and ask them self; “what was I thinking”.

Vanessa and Steve look like a very nice couple.  I admire them because they are both making their own way in the world.  She is a mom, business owner, wife and community member.  I feel like I know her because I know so many wonderful people like her.  Here is the problem:  When you sell your home and have to drive trash to save a few pennies, there is a problem with your business, and it is not just the economy.

I wish someone would shake her rather than praise her, in the end I think it will be a better form of love, which brings us the the concept of Dream insurance.  When you read the story of Vanessa, you’ll see that she has always held a dream of running her own business.  My guess is that dream did not include driving home trash, limited opportunity, stress and even selling her home, but that is for another blog.

Consider Jim and his two brothers.  They also had a dream of running a great local grocery store in Nebraska City, Nebraska.  It was a great and profitable dream for almost 12 years until WalMart moved to town and the dream faded into a night mare pretty quickly.

Before the boys gave up on their dream, they spend over $190,000 to bring a coffee and sandwich franchise into their market.  They funded that expansion with a business cash advance and when the business ultimately could not survive the price cutting and volume discounts from WalMart, they simply walked away from the  remaining $97,000 balance due.

They had other funding options at the time which could have saved them a couple thousand dollars in financing costs.  Instead, they paid a little extra for “dream insurance”.  Today, unencumbered from that $97,000, they are dreaming again and pursuing new business options.

Dreaming is great, our country has been build by entrepreneurs with big dreams.  however, it is also foolish to ignore business history and the fact that over 70% of businesses do not survive 10 years.  With those odds, dream insurance may not be a bad ides.

How do I get additional capital…Wrong Question.

t seems like almost every day I talk with a business owner who asks about the most effective way to get additional capital (not start up capital) for their business.  In most cases we’re able to help them locate the funding they need.  So…question answered.

Problem is, the wrong question was asked and answered. 

Better:      Why do I need capital?

The real important question is typically covered over by these new funds that helped to avoid whatever the immediate was.  Moving from crisis to crisis is no way to operate your business.  It may feel easier to attend to the next fire rather than take a hard look at the more difficult, underlying questions, but that merely masks long term (more expensive) problems.

I have these conversations almost every day and notice 1) Not much has changed when I get the call looking for the next round of funding, and 2) most cash needs stem from one of the following issues just below the surface.

1)      initially under capitalized

I spoke with the owner of a fruit bouquet franchise this morning who was searching for capital and admitted they we under capitalize from the outset.  High on expectation and optimism, they launched ahead regardless.

In their 16 months of business his credit score has dropped 140 points which makes most traditional funding impossible and he’s already sold away 25% of his future credit card sales to help make ends meet.

He’s in a death spiral yet has not admitted this to himself, he’s too wrapped up in the day to day details and it will likely cost him whatever else he commits to his business.

2)      slowing sales

The impact of 2008’s forth quarter was felt across the country as sales have slowed almost everywhere.  So, what have you done about it?  What changes have you made to cut costs, reduce inventory, and pick up market share?  Recessions always provide opportunities; they are just not as obvious.  Additional capital and the impact on cash flow will not magically improve sales, that is up to you.

New capital will either reduce your equity or will be a drag on what is already lower revenue.  More debt without a plan to improve sales is now much of a plan.

3)      poor planning      

Many of the national food service franchises require their owners to remodel their location every 5-7 years, yet this seems to surprise many long time owners.

A friend of mine owns several limited service hotels and his franchise company requires they set aside a percentage of revenues each year for capital improvements.  The reinvestment into his properties is significant, but already budgeted for in a planned, considered manner.

What are you preparing for?  Whether required or not, advance planning makes you a better and more profitable business owner.  “Unexpected” events are part of business and part of life, start preparing for them now.

4)      unplanned opportunity

We’re an optimistic bunch which is probably why we’re in business for ourselves.  Every time I get a call for capital because of an opportunity I inquire if the excitement is because it offers something better or just something different.

I just spoke with a restaurant owner the other day who had a great opportunity to take over a vacated Bennigans restaurant location at about 20% lower rent than the past tenant.  So I wondered, why that location went out of business (the chain filed bankruptcy), what the traffic flow was, if their concept could fill a location twice their current size, what would the impact to their first location be?

It was the first time he’d pulled his attention from the lower rent and “free equipment” to consider these issues that could put his entire company at risk.  Not to mention the impact to his current cash flow and lifestyle.

Getting additional capital is seldom the complete solution to what ails your business.  Look deeper and ask more focused, pointed questions that will yield better results.

Focus Here for 90 Days

Last week I stopped my Wall Street Journal subscription for 60 days. I’m an avid daily reader of the Journal and have been for years, but I just could not take it any more. Constant stories of Madoff, layoffs, the auto industry, the bail out and the stock market, I needed a break…

I did not need to escape, but I did need to change my focus. There may be plenty of bad news out there, but I do not need to focus my attention on that bad news, I’ve got better and higher use for my time.  And other activities will have more benefit for me and others.

Remember, I am a realist, I know times are more challenging than they have been in decades; I know unemployment is rising and sales are slowing. I know, I get it, but I can only change my world, so that will be my focus for the next 90 days.

I do not miss the Journal as much as I thought because I’ve replaced it with other reading I never found time for. In my business, I’m focusing on these 5 areas that are improving my life and the life of my clients, now when we need it most.

Give it a try and let me know how it changes your thinking and impacts your business.

Focus on others

Uncertainty shakes our confidence and drives business owners into themselves. Resist this temptation and move in the other direction. Share honestly with others your challenges, your positive attitude and focus on a better future. Enthusiasm is contagious and you will be a source of confidence for others.

Focus on relationships

Forget the product you sell and focus on deepening the relationships you have with customers. This is your biggest asset. Understand their problems and challenges, see how you can help them. This is what people talk about with others and remember for a long time.

Focus on today

The future is an abstract concept and only exists in your mind based on what you tell yourself.  If you are honest, most of the things we worry about actually never happen. Trouble is, we tend to extrapolate the present on a strait line into the future and scare ourselves toward inaction. Focus on today and this week, what can you do to be better for your clients?

Focus on your responses

When things are going well we tend to give ourselves all the credit and feel like we are in control of the world around us. When we realize that is not always true, we get scared and grasp for security. Decisions made from fear are seldom noteworthy or exciting decisions. Focus on your decision making and be sure you are making decisions based on who you want to become, not what you are afraid of.

Times are difficult and now is the time to decide if you will complain or be grateful, be negative or positive, become part of the solution or part of the problem. For the next 90 days, limit your focus to these key areas and see how business and life in general improves for you.

Small business has always been part of the solution and this recovery will be no different.  Practice controlling your focus for the next 90 days and please share your results.