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Cash flow enhancements
There is significant evidence that supply chains have “normalized.” Delivery times are fast and overall demand is low. Many companies are now looking at “longer-term” supply chain planning and changes. Some of these changes include multi-sourcing and digitizing supply chain operations. Geopolitical events and resulting tariffs/sanctions could quickly change the supply chain landscape, however, so it is more important than ever to be nimble with respect to strategic and tactical planning.
Expense Reduction Analysts (ERA) are looking at numerous ways to help companies save money and improve processes in an inflationary environment. One of ERA’s most successful verticals in assisting companies with their freight costs. Need: Business leaders are looking at unique ways to combat inflation and reduce freight costs. Solution: ERA’s freight specialists put forward 10 unique ideas to combat rising freight costs as a catalyst to initiate a conversation with decision-makers and promote our expertise. Value: Decision makers who utilize ERA’s group of experts will save more than with their internal teams alone. Please take a look a the attached PDF. Reach out if you have any questions or if I can be of help.
Shelby Jackson – Marketing Associate Revenue is up! But you have less cash than ever. Why is that? We’ll be covering the top 7 reasons why, like many other businesses, you might have no cash despite revenue being up. Then we’ll discuss important things to consider as you build your annual forecast. Reason 1: Delivering Before Getting Paid Revenue is up, but you have 3 types of revenue and the biggest one is net 30 (or net 60 or net 90). Sales are up, but you have no cash because you let your customers wait to pay. Being flexible with your customers is great, but do you know how it is impacting your business? If you have revenue growth but you get paid after 30 or more days, you need to pay your staff and probably your suppliers. That could cause a cash crunch in a rapidly growing company. Reason 2: Accounts Receivable Problems, You are Selling but Not Getting Paid for all your Sales Not all revenue is created equal! If you’re selling but not getting paid for all your sales, you could have Accounts Receivable (A/R) Problems and you will be short on cash. Some clients never pay! If you get stiffed by your customers, you still put time, money, and effort into supporting the sale. Make sure you’re selling to people who will pay! Do you know what type of customers you are adding? Reason 3: Returns! Clients return things and you refund the revenue If your customers buy more stuff and return it in a way you can’t resell it, you have all the expenses of producing the high sales, but not all the revenue you thought you’d get. Your sales are lower (because returns are not sales) but your expenses are higher! Are you looking at the right sales figures? Reason 4: Inventory Are you sitting on too much inventory? Even if everything you’re selling is highly profitable, a warehouse full of inventory costs money to contain and the inventory will eventually become ruined or obsolete. Do you know how much inventory you need to grow your business, and do you know how much cash you’ll need to support your future inventory needs? Reasons 5: Unprofitable Business You are selling but losing money! Here’s a case scenario. You have 5 products that make sense in a specific mix, but some of those products may actually not be profitable. You choose to keep them as loss leaders, to fill in gaps, or as a way to use extra scrap material. But what if your sales increases are from products like that? Is that where your money is going? Reasons 6: Inflation You are selling more but costs are higher, so it is actually less profitable! Inflation rapidly increased in 2022. According to BLS.gov, the United States saw the annual inflation rate increase by 7.1% as a result of the lingering effects of COVID shutdowns, supply-chain disruptions, and more. Even if revenue is up, income may be down due to higher expenses. Are you selling more units or just the same number of units (or fewer!) at higher prices? Are your expenses going up faster than your revenue? Reasons 7: You are selling more but debt and other overhead are eating all your profits You are making profitable sales, but your overhead is costing you way too much. This could include debt used to finance inventory, expansion, or even prior losses. Do you know how much your overhead is? How much do you need to sell to pay for your overhead? Will your overhead change as your revenue increases? How do I avoid this happening in the future? Our Answer: Build an Annual Forecast If you know how much you will really sell, how much profit that will really produce, how much inventory, financing, and overhead you’ll need to make this all work, you’ll have a better plan and lots of advanced notice on cash flow issues – well ahead of time and before they become problems. You’ll be empowered to pick products that will make you more money. Reject customers that will cause you hassles, and plan for your overhead needs so that you have the necessary resources (human, financial, marketing, and more) to take your business to the next level. There are multiple factors that can lead to no cash despite revenue being up, and sometimes it can be difficult to pinpoint exactly how to move forward! An annual forecast is a great way to plan the next steps for your business to make measurable and intentional decisions for increasing cash flow. About Us Our team of seasoned CFO’s at Imperial Advisory have over 150 years of collective experience giving valuable corporate finance insights that can help you put your best foot forward in 2023! For more information, reach out to www.bls.gov/news.release/cpi.nr0.htm
A recent report says that businesses who utilize a mentor(s) have a 70% greater chance of surviving beyond 5 years than those who don’t. This seems intuitive, yet why do so many entrepreneurial owners not employ this strategy? All of us when we started in business didn’t know what we didn’t know but today it is much easier to identify knowledge gaps and to use Codified Wisdom to answer critical questions to business survival. Our Knowledge as a Service-based software company gives SMBs affordable access to impactful data and increases their ability to not just survive but thrive. It also tees up information for Coaches and Consultants to come in and save a lot of time by having clear, understandable information that can be implemented immediately. Not only that but without knowing it and by making data-based decisions versus running by gut, owners are preparing themselves and their business for a more smooth and profitable exit whenever the time is right.
Starting a business can be hard. From managing your supply chain to hiring staff, it is not cheap or easy. And it’s important for small business owners to have the support they need. Wallace Capital Funding, LLC serves this role as we ensure businesses get the support they need through financing and guidance. This is the story of one client named Steve and how Wallace Capital Funding, LLC provided him with the invaluable foundation his company needed. Steve is an entrepreneur whose past venture was with an employer, who did not appreciate his ideas or pay him as much as he deserved. After one disagreement, Steve believed he could do a similar job by himself and so he left. Steve’s product was a de-icing product that removes snow and ice. The difference between his product and popular remedies such as salt or cat litter is the environmental impact. Road salt and cat litter both have chloride-based properties that when melted, they wash into soil, lakes and streams. According to the Environmental Protection Agency, road salt ends up killing or endangering wildlife as high chloride levels are toxic to fish, bugs and amphibians. Even outside of the environmental concerns, Steve’s product proved to melt ice so it does not re-freezes. How did Wallace Capital Funding, LLC help? Steve came to Wallace Capital Funding, LLC to get support in manufacturing his product. He already had a contract with a retailer but he needed about $500,000 worth of equipment to manufacture his product himself. Wallace Capital Funding, LLC suggested he get a contract manufacturer to make the product for him so he would not have to worry about getting equipment or hiring staff. It would also allow him to focus more on promoting his product and getting more business. This also allowed him to save his profits and build his cash reserve. This is an important priority for less-established businesses with little to no credit profile. Now, Steve is looking to expand other products by attending business conferences and association conferences across the country. And his company will quadruple in profits this year alone. This was all possible using purchase order funding, which gives younger and less-established companies the chance to receive money through purchase orders like invoices to pay their suppliers. Things like personal or business credit is less important than ensuring your customers will pay their invoice. We knew Steve’s customers would pay so we funded his equipment and materials needs and sure enough, they did pay. With the help of Wallace Capital Funding, LLC, we find flexible funding options for start-up companies and well-established businesses alike. Work with our experts today to get the process started! You can also join WCF’s mailing list found on our website or call us at 1-800-809-5629. For all of your business financing needs, Wallace Capital Funding, LLC can help. Whether you need funding for new equipment, financing commercial real estate, or to cover staff expenses before your contract payment comes through, Wallace Capital Funding, LLC can create a custom funding solution that’s right for you.
With so many options to choose, what sets Wallace Capital Funding, LLC apart? With an estimated 5,500 financial institutions in the United States, there are lots of options for you to choose from. Whether you need a rehab loan or you need financing on the purchase of an investment property, it is important to trust your lender. This was the case for one Wallace Capital Funding, LLC client who felt overwhelmed with so many options and wanted to know what makes us different from everyone else. The biggest difference? Our membership with the Small Business Financial Exchange (SBFE). SBFE is a trade association of business lenders and merchant acquirers that advocates “for the safe and secure growth of small businesses.” SBFE has a group of certified lenders that help small businesses get an accurate look of their credit history and Wallace Capital Funding, LLC is the only real estate lender that is a member. Who else are members of SBFE? Large financial institutions such as American Express, Bank of America, PNC Bank, Wells Fargo and more just to name a few. It’s no coincidence that Wallace Capital Funding is on the same stage as these multibillion dollar banks and other financial institutions. And oftentimes, they are not conducting the same services as WCF including the Business Fund Analysis and getting them various lines of credit. Well, that’s impressive but what else makes Wallace Capital Funding, LLC different? It’s our ability to report on business credit profiles. Reporting on business credit profiles allows us to have more lines of credit (i.e. more money) for our clients than traditional institutions. The same institutions that are known to corner their clients into continuously working with them in an expensive and never-ending cycle. They don’t want their clients to end in better places. We do. One WCF client had several investment properties but for one of them, he needed money to fix it up. He was looking for good terms in funding like a thirty-year mortgage rate. He had decent income in that property but wanted to transition into a different stage in life and take advantage of other opportunities. To do this, he needed access to additional funds. He also wanted the opportunity to not be in the same position by getting a line of credit from the bank. Working with Wallace Capital Funding gave him the chance to not only get him funding to fix his properties but reporting on his credit profile allowed him to get multiple lines of credit. Now, he has flexibility to cash out on his properties and invest in others. If you too would like flexibility in your investment properties, Wallace Capital Funding, LLC can help. Whether you need funding for new equipment, financing commercial real estate, or to cover staff expenses before your contract payment comes through, Wallace Capital Funding, LLC can create a custom funding solution that’s right for you. Our consultants will report on your business credit profile to help ensure you can get the cash your business needs. You can also join WCF’s mailing list, which can be found on our website or give us a call at 1-800-809-5629 to learn more.
Manufacturers understand the critical importance of cash flows and margins. Yet, the majority of business owners don’t do enough to protect working capital, which is the combination of accounts receivable, accounts payable and inventory. According to a
Loans from the U.S. Small Business Administration can help businesses “start, build, and grow” but can they also be used to cash out? If you are a small business owner, chances are you have heard of SBA loans. If you haven’t, SBA loans are a means of funding for small businesses through the U.S.’s Small Business Administration. These loans give small business owners the chance to get financing with the backing of the federal government. The federal government guarantees the loan so if something happens, they will pay back the bank if the loan defaults. Say you invested $500,000 in the constructing and building of your business and you wanted to cash out. Could you actually cash out using an SBA loan? One couple came to Wallace Capital Funding, LLC with the same question. The couple had a long history of coaching local kids in basketball and wanted to have a basketball facility of their own as a way to give back to their community. But not just any basketball facility, they wanted to have a world-class basketball gymnasium for kids to come and train. Without taking out any loans, the couple invested $3 million of their own money and brought this multi-million dollar facility to their community. The facility turned out to be a large success and amassed millions of dollars in value. The couple wanted to see if they could cash out their investment through an SBA loan. The answer is it depends. Currently, we are looking into the method of how they invested into their business. Under SBA guidelines, there are regulations on ways and how much you cash out? Every transaction is different, and unique rules apply to your specific opportunity. The benefit of working with Wallace Capital Funding, LLC instead of a bank is that we will work with you to ensure the structure of your loan application under SBA guidelines from a business owner point of view. WCF consultants will use the Business Funding Analysis to help structure the deal properly so you can get the cash your business needs. You can also join WCF’s mailing list, which can be found on our website or give us a call at 1-800-809-5629 to learn more. For all of your business financing needs, Wallace Capital Funding, LLC can help. Whether you need funding for new equipment, financing commercial real estate, or to cover staff expenses before your contract payment comes through, Wallace Capital Funding, LLC can create a custom funding solution that’s right for you.
Using a trusted formula to help small businesses manage their finances effectively Remember
The commercial real estate market has never been this hot. Consider a sale leaseback instead of hoping that the business buyer wants to own a building too. I can’t count the number of times I have been called in with 24-72 hours left to close to “clean up” the real estate aspects of a transaction. Why wait till then. Business owners looking to exit in the next 12-48 months should take advantage of these amazing market conditions.
Free webinar to learn about expensing and depreciation strategies to counter upcoming tax increases. Presentation will include the following. Bonus Depreciation Cost Segregation Little know safe harbors Expensed repairs vs capitalized improvement property And much more. Here is the link to listen to the recording of our recent webinar on Expensing & Depreciation Strategies.
CSSI will be hosting a live, no-cost 1.5-hour CPE webinar on Tuesday, Nov. 9th at 11:00 CT on ‘Expensing & Depreciation Strategies to Counter Upcoming Tax Increases.’ CPE credits are for CPAs only. Registration is open to everyone. Please indicate that Mark Gross invited you. Copy and paste link below or click link on PDF to register. Tax Changes are on the way. Tax professionals are creating cash flow for clients through little known strategies on commercial real estate or tenant space. An example and scenario filled presentation with straightforward explanations will identify opportunities to advise your clients with confidence how to reduce or defer income taxes in connection with their owning a commercial building or paying for their own tenant space. See PDF for more details about the webinar. Contact Mark Gross for a no cost preliminary analysis of cost segregation savings for any property nationwide. mgross@cssi-associate.com 630-329-9801 www.cssistudy.com
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As an advisor, your role is to help clients prepare to exit their business, yet many people resist thinking about the future because it involves so many unknowns, decisions, and choices. And emotions typically complicate matters further, sometimes derailing the process altogether. Here are some questions that can help you establish rapport with your clients, learn more about their concerns, and move the conversation forward. How are you feeling about your work/profession/business these days? Which aspects of work are you still enjoying, and which are you ready to leave behind? Do you envision retiring from work at some point, or are you contemplating an encore career? What part of planning for your future feels most challenging? How do you imagine your life in retirement will be different from how it is now? What process are you using to figure out what you’ll do next after you retire? What would you like to see happen with your business long term? What options have you considered for the transfer of your business? What steps have you taken to make your business more attractive to a potential buyer? What are your concerns about transitioning your firm to new ownership? What would be your ideal scenario for transitioning out of your company? What topic(s) have we touched on today that we should put on our agenda to revisit? So, what happens after you pose a few of these questions and your clients open up about emotional matters? Remember, the most helpful thing you can do is to listen attentively. You’ve created a valuable opportunity for them to talk about things they may not share with other advisors. Here are some tips for managing the conversation when clients raise emotionally loaded topics: Don’t try to “fix things” by immediately offering suggestions. Doing so sends the message that you’re uncomfortable hearing their concern. You can offer suggestions but do so later. Don’t say anything that conveys the message that their feeling or concern is unwarranted. “There’s really no need to feel that way” or “I’m sure it will be just fine” may sound reassuring to you but could be experienced as dismissive by your client. Don’t immediately offer a logical counterpoint to your client’s emotion. Remember, feelings don’t have to make sense; they’re “as is”. Put another way, if feelings made sense, they would be thoughts. People report concerns and characterize their feelings differently from one another, so it’s in your best interest to seek amplification and clarification by inquiring as follows . . . “I want to make sure that I understand exactly what you mean by ___. Can you tell me more?” “People sometimes mean slightly different things when they talk about ___. What does ___ mean for you?” “Before I suggest anything, I’d like to learn more about it from your perspective.” It’s possible that during early conversations your client may hint at mixed feelings about exiting their business. That’s perfectly normal, but you need to bring it out into the open. You want to foster an atmosphere such that your client keeps you apprised about where they’re at. If they keep their ambivalence to themselves, it has greater potential to blindside you and complicate the sale. You can say: “In my experience, it’s normal to have some mixed emotions about selling. Those thoughts may not always be top of mind, but when they do pop up let’s be sure to talk about them. Believe it or not, they can help inform our process and alert us to aspects of the sale that are important to you.” You may also find that your client is overly risk averse. If so, consider saying the following: “Our work together won’t be comprehensive if we only plan for what could go wrong. That’s just half the equation. It’s fine to be conservative and err on the side of caution, but to be truly realistic we should also consider a range of possibilities both good and bad.” Author’s Note: The concepts in this article are derived from Robert Leahy’s book, Overcoming Resistance in Cognitive Therapy. New York: Guilford
For five decades, the southern United States has been an attractive location for automakers to open plants thanks to generous tax breaks and cheaper, non-union labor. However, after decades of failing to unionize automakers in the South, the United Auto Workers dealt a serious blow to that model by winning a landslide union victory at Volkswagen. In an effort to fight back, three southern states have gotten creative: they passed laws barring companies from receiving state grants, loans and tax incentives if the company voluntarily recognizes a union or voluntarily provides unions with employee information. The laws also allow the government to claw back incentive payments after they were made. While these laws are very similar, each law has unique nuances. If you are in an impacted state, you should seek local counsel. In 2023, Tennessee was the first state to pass such a law. This year, Georgia and Alabama followed suit. So why this push? In 2023, the American Legislative Exchange Council (“ALEC”), a nonprofit organization of conservative state legislators and private sector representatives who draft and share model legislation for distribution among state governments, adopted Tennessee’s law as model legislation. In fact, the primary sponsor of Tennessee’s bill was recognized as an ALEC Policy Champion in March 2023. ALEC’s push comes as voluntary recognition of unions gains popularity as an alternative to fighting unions. We recently saw this with the high-profile Ben & Jerry’s voluntary recognition. Will this Southern strategy work to push back against growing union successes? Time will tell. Brody and Associates regularly advises its clients on all labor management issues, including union-related matters, and provides union-free training. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
Almost since time began, the nimble small business has been axiomatic. Large corporations are like big ships, the common knowledge goes. They take a long time to change direction.
I once had the thrill of interviewing Jerry West on management. He was “The Logo” for the NBA, although back then they didn’t advertise him as such. Only the Laker followers knew for sure. In 1989 the “Showtime” Lakers were coming off back-to-back championships. Pat Riley was a year away from his first of three Coach of the Year awards.
Can you Offer Too Many SKUs to Your Customers? The short answer is YES! A SKU, or Stock Keeping Unit, defines each different product version that you sell and keep inventory of. There may be different SKUs of the same overall item based on size, color, capacity (think computer or cellphone memory), features, and many other parameters. For build to forecast businesses, that number of variations can quickly explode and become difficult to manage. Your customers are busy and want ordering simplified. Of course, they may need (or want) more than one variation of a product. That is reasonable and a common aspect of business – one size does not fit all! But there is a point where too offering too many SKUs is not value added either for your customer or your business. In his April 30, 2013 article “Successful Retailers Learn That Fewer Choices Trigger More Sales” in Forbes, Carmine Gallo discusses his experience and a study about “choice overload” by other authors. He writes about a retailer that “has discovered that giving a customer more than three choices at one time actually overwhelms customers and makes them frustrated…when the customer is faced with too many choices at once, it leaves the customer confused and less likely to buy from any of the choices!” Choice overload is well-documented in consumer studies but can apply in B2B as well. While customer satisfaction is important, another key concern is the often-hidden costs associated with a business offering and managing a large number of SKUs for a given product type. These costs include holding inventory, S&OP (Sales and Operations Planning) team time, small production runs, and scrapping inventory. Holding inventory takes up space, which may come with a cost or utilize racks that could be used for other products. Scheduled inventory counts take up employee time and may result in blackout periods when the warehouse is not shipping product. The more SKUs there are, including extra SKUS, the greater the potential impact. The Sales team’s forecasting and the Operations team’s purchasing reviews that are part of the S&OP process can occupy more of their valuable time if they need to consider these times. If small orders or forecasts require a new production run, this could be costly and create excess inventory. Whether from this new production or past builds, eventually it will make sense to write off and scrap old inventory, another cost impact to the company. How do you know which SKUs to focus on if you wish to look at reducing your total number of SKUs? Start by examining SKUs that have: Low historic sales over a period of time Small variations between SKUs that customers do not value Older technology or model when newer option SKUs are available This requires a true partnership between Sales and Operations. It starts with educating both teams on the costs involved – neither group may be aware of the money and time impact to the company. Periodic (such as quarterly) reviews of SKUs that meet the above descriptions should become a fixed part of the calendar. A review of the data and other available for sale options should result in the identification of SKUs which may not be needed. At that point, it is helpful to have a customer friendly EOL (End of Life) Notice process by which you inform customers of last time buy requirements for this SKU and alternates available. It is usually best to provide some time for the last time buy in the interest of customer satisfaction, although that may not always be necessary. At a company that designed and sold electronics, a robust SKU rationalization process was implemented to help address these issues. A representative from the Operations team analyzed SKUs that met a version of the above criteria and suggested candidates for the EOL process. Next, a member of the Sales team reviewed them and, where appropriate, issued product change or EOL notices to customers, providing them time for last time buy orders when needed. These steps helped reduce the work involved in maintaining these SKUs while not leading to any customer complaints. A final note – sometimes it makes sense to continue offering low selling SKUs – to support customers buying other items (hopefully in larger quantities). It may be worthwhile to encourage them to keep coming back to you for all of their product needs and this may be a way to accomplish that. But it helps to understand that this is truly the case and not assume that this customer would not be equally happy with another, more popular, SKU. Steven Lustig is founder and CEO of Lustig Global Consulting and an experienced Supply Chain Executive. He is a recognized thought leader in supply chain and risk mitigation, and serves on the Boards of Directors for Loh Medical and Atlanta Technology Angels.
When it comes to careers, business owners are a minority of the population. In conversations this week, I mentioned the statistics several times, and each owner I was discussing it with was surprised that they had so few peers. According to the Small Business Administration (SBA), there are over 33,000,000 businesses in the US. Let’s discount those with zero employees. Many are shell companies or real estate holding entities. Also, those with fewer than 5 employees, true “Mom and Pop” businesses, are hard to distinguish from a job. The North American Industry Classification System (NAICS) Association, lists businesses with 5 to 99 employees at about 3,300,000, and 123,000 have 100 to 500 employees (the SBA’s largest “small business” classification.) Overall, that means about 1% of the country are private employers. Owners are a small minority, a very small minority, of the population. Even if we only count working adults (161,000,000) business owners represent only a little more than 2% of that population. So What? Where am I going with this, and how does it relate to our recent discussions of purpose in business exit planning? It’s an important issue to consider when discussing an owner’s identity after transition. Whether or not individual owners know the statistics of their “rare species” status in society, they instinctively understand that they are different. They are identified with their owner status in every aspect of their business and personal life. At a social event, when asked “What do you do?” they will often respond “I own a business.” It’s an immediate differentiator from describing a job. “I am a carpenter.” or “I work in systems engineering,” describes a function. “I am a business owner” describes a life role. When asked for further information, the owner frequently replies in the Imperial first person plural. “We build multi-family housing,” is never mistaken for a personal role in the company. No one takes that answer to mean that the speaker swings a hammer all day. Owners are a Minority We process much of our information subconsciously. If a man enters a business gathering, for example, and the others in the room are 75% female, he will know instinctively, without consciously counting, that this business meeting or organization is different from others he attends. Similarly, business owners accept their minority status without thinking about it. They expect that the vast majority of the people they meet socially, who attend their church, or who have kids that play sports with theirs, work for someone else. There are places where owners congregate, but otherwise, they don’t expect to meet many other owners in the normal course of daily activity. This can be an issue after they exit the business. You see, telling people “I’m retired” has no distinction. Roughly 98% of the other people who say that never built an organization. They didn’t take the same risks. Others didn’t deal with the same broad variety of issues and challenges. Most didn’t have to personally live with the impact of every daily decision they made, or watch others suffer the consequences of their bad calls. That is why so many former owners suffer from a lack of identity after they leave. Subconsciously, they expect to stand out from the other 98%. “I’m retired” carries no such distinction. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
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