Monday, June 22, 2015

The ALWAYS Small Business

If you go around watching any TV, reading some news, or listening to politics; there is always the same recurring meme that small business is the backbone of this country. The idea is so heavily reinforced that most people will sit around and whole heartily agree that this is true.  You see it yourself with your neighbor Chris down the street who sells bicycles at his store, or down the other way, Julie who has her own yoga studio. On the outside everything appears to be running great, and business is easy.  Chris & Julie run almost every aspect of their business to varying degrees.  They both pay vendors, do the monthly invoicing, determine the marketing campaigns, and take care of all the other thousands of tasks a small business owner is faced with.  These are the types of activities large companies have whole departments handling with focused dedicated personnel.  

Chris and Julie while faced with generally the same situations might have different reasons for why they can’t expand.  Julie might be able to do all the functions above just fine, but she can’t or doesn’t have the time to figure out how she can expand into a new location.  Julie went into the first location with a love and passion for yoga, countless hours of hard work, excellent customer skills, and after many downward dog & mountain poses was successful.  She doesn’t want to make any mistakes for the second location, and has prepared a better strategy to do so.  But she’s not sure exactly how the second location will affect her financially.  Will she be able to fund the opening from cash flow, will she need debt, should she sell equity or even consider franchising? What about the cost of hiring more staff, including a manager for when she’s not able to be there all day? All challenges the warrior pose won’t solve for you. Julie is unsure of the answers to these questions, especially the cost of more staff.  Julie has always been pretty financially responsible so isn’t concerned if it results in a temporary pay cut if it so happened. She’s not extravagant with her home or entertainment budget, and has always tried to stuff some money under the mattress.

Chris on the other hand while having a robust business selling bikes, is far more fearful to expand. Chris is a one man show, and obviously all the profit becomes his.  This might sound crazy, or not, but Chris has a lifestyle that requires all of his income.  He has brand new cars, wears very nice clothing, eats at only the best restaurants, and a nicely updated home.  His lifestyle requires all of his income from the company. He’s afraid to expand even though he feels he could. The reason being is he’s certain the additional costs associated with opening the new location, and hiring a manager would severely affect his personal finances.  His ability to pay his mortgage and fund his current lifestyle would be hampered and could potentially force him into bankruptcy.

While Julie & Chris are both faced with similar business problems, they have vastly different personal situations affecting their outcome. But both know they need to expand their business. This is the area MAD Consulting can come into play to help solve both business and personal finance problems. We’ll explore both of these situations, and the state of small business’ in our country in further blog posts.

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