What is a Small Business? – It May Not Be What You Think

“What is a small business?” is a question entrepreneurs don’t usually ask, because as business owners we assume the answer is pretty obvious. We have all known for some time that any business under 500 employees is considered a small business–right? WRONG!

The “Small Business Administration” (SBA), makes the size standard determination for all NAICS business codes, and publishes their results in a 44-page document called the “Table of Small Business Size Standards.”

Here is a sample of the SBA’s various business size standards:

* A convenience store is considered a small business if it has $27.0 million, or less, in annual revenue.

* A software publisher…if it has $25.0 million, or less, in annual revenue.

* A producer of chickens for egg production…if it has $12.5 million, or less, in annual revenue.

* A producer of chickens for meat consumption…if it has $0.75 million, or less, in annual revenue.

* A telecommunications reseller is considered a small business if they have 1,500 employees, or less.

* A cigarette manufacturer…if it has 1,000 employees.

* A Mineral Wool manufacturer…750 employees.

* The Wholesale Trade (all products)…100 employees.

Well, as you can see, the answer for; “what is a small business?” varies all over the place…there is no simple answer. The reason for all the variations seems to be because of the SBA’s appeal process. Initially, any business seeking government procurement contracts can “self-certify” their business as being “small.” In other words, you simply say you are a small business.

However, anyone (usually a competitor) can challenge your designation if they think you do not fit the SBA size standards. The challenge goes through the SBA appeal process and they can either change the size standards (which has created the variations), issue an exemption on size, or label your business as “other than small.” The SBA publishes an 18 page document listing (in fine print) the names of businesses that have been challenged and subsequently labeled as “other than small” and therefore not eligible for small business government contracts, or loans.

So, why is this even of concern to most business owners? Here are four basic reasons:

1.) Size becomes very important if you ever attempt to do business with the federal government, because many of their procurement programs are directed only at businesses defined as small.

2.) If you ever plan on applying for any of the SBA’s loan programs, it is essential that your business is indeed considered “small.”

3.) Periodically, the government offers special programs, grants, loans, etc. to small businesses, but you must be designated “small” by the SBA in order to qualify.

4.) The many government regulations affecting business often have different rules depending on size standards. It should be important to you to monitor the laws and rules being created that affect your business, and participate in having your voice heard…protecting your “small” status.

Marketing Your Business For Sale

Selling your business is an arduous and very demanding task; it is time consuming, stressful and often emotionally draining. Naturally the sale will dominate the owners thoughts and resources during this period and it is very easy for an owner to take their eye of the ball. The key to a successful sale is planning and preparation. Founders should build an exit strategy into their initial business plans, and this strategy should contain information on how the business will be advertised and marketed once the time has come for it to be sold.

Owners who have not been through the process of selling a business before often underestimate how important it is to market, and package their business so that it appears attractive to potential buyers.

As with all things pre-sale, the marketing must be thoroughly planned and executed perfectly. The aim of the marketing period is to drum up enough interest among qualified and motivated buyers to increase the chances of you business being sold for a premium. As many owners, business brokers and intermediaries will testify this is easier said than done.

When attempting to market your business the first place you should start as an owner is your own market or industry. You will know your market better than any business broker or intermediary, and as a result you will know which individuals, companies or organizations will deem your business to be an attractive proposition. If you have decided to market and sell your business without the use of a professional you will have to find the balance between reaching the widest audience possible and keeping the fact you are selling away from those who do not need to know. Marketing your business is a delicate task, if you do not reach enough buyers you risk entering negotiations at a disadvantage, however if you market to aggressively you may end up alerting vendors, creditors, customers and key members of staff. The fact you are selling, may, in their eyes be an indication that something is wrong, and your business may turn south at the worst possible time. Therefore the marketing of your business must be carried out with the least possible disruption to the day to day running of the business. Once you have identified a list of suitable candidates you would be interested in speaking to you need to draw up a non-disclosure agreement, and following that the chief marketing tool which is the sales memorandum.

There are hundreds of businesses for sale at any given time. To make your business stand out, you need to provide potential buyers with information that will help them to make an informed decision. A descriptive and well-organized sales memorandum will help in the sale process. The sales memorandum is a document which is used to present your company in the best possible light and motivate prospective buyers into making a solid enquiry. The sales memorandum can be prepared by a business broker, an accountant or by the owner of the company. This document will highlight all the positive things about the business and will help whet the appetite of potential buyers.

The sales memorandum contains information on areas of possible growth and expansions, information on the unique value proposition of the business, its current assets, and key financial figures such as profit, cash flow, and total debt.

This document should be tailored to the individual or group you are in negotiations with as different aspects of your business will appeal to different types of buyers. If you are talking to a company that offers a similar product, or serves a similar customer base as your own, your marketing efforts should be tailored to present your company as one which has a large and loyal customer base, in doing so you will increase the appeal of your company in the eyes of the buyer, and this will help you achieve a better deal during negotiations. If the buyer is part of a large conglomerate which is more interested in acquiring the skills of your workforce or the technology your business runs on, then these are the things which will need to be stressed within any marketing material you produce and put before them.

During the sale process sellers must make sure that the business’ physical state is in good condition. The premises should be clean, the inventory current, and the equipment in good working order. It is very easy to overlook this during the marketing process, so you should ensure that your office, factory or shop is well kept, as a neglected workspace is often a red flag to many buyers. It is important to sell or dispose of any unused or outdated stock, apply a lick of paint to the premises, and check that all machinery and equipment is up to date and working, as many buyers will factor the cost of replacing or fixing damaged machinery into their offers. Doing this will create the impression of a well organized business and this inspires confidence in prospective buyers.

Many owner managers do little, if any marketing once they have decided to put their business up for sale and as a result they can end up leaving money on the table when they eventually sell their business. Marketing, when done effectively can increase the amount the owner finally receives as there is nothing which drives up the price of a business then a room full of motivated buyers bidding on the business.

Small Business Bank Loans – Get Funding For Your Business Idea

Funding your small business can be difficult. That is why so many turn to small business bank loans to help them out. These can be a great way to get your business up and running. But you need to know the ins and outs so that your interest charges don’t overwhelm you and your new business venture.

Planning to own a business is a very crucial since you have to do some planning on what kind of business you want. Owning a small business means you need to have determination and the effort to make it grow. Research is needed, patience, perseverance, guts.

There are several options to find funds for your business; you can borrow some money from your relatives, friends, and etc. for the individual who are just starting to own a small business.

If you have a business and you need an additional capital then many banks offer small business loans. Sometimes extra financing is necessary to propel your business to grow.

Or having a dream to have a business and you need money as capital to start a small business, and then you can have a small business loan from the bank. Some banks offer startup loans for businesses and knowing that borrowing money from the bank has an interest which you need to pay.

So bear in mind that having business is not as easy as what you see and think. You need to estimate the overall expenses every day, your monthly bills aside from your loans, rental of the space for your business. A thorough research is really needed to have a business.

In small business loan in the bank offer lower interest rates than a line of credit commercial loans but when you are just starting your business, more or less bank will grant your loan for your business around 25 to 35% only since the length of your business is not very long yet.

If you want a bigger amount of loan for your business for sure bank will have to ask for collateral in order for them to approve your loan to bigger amount. Although when you have your loan to other financing institution, still they will ask for collateral. Always remember that banks and other financing institution always mean business.

When you go to the bank for a small business loan, you should have your key documents in order to start the solid business plan. Most likely, these are the requirements needed for your loan:

Financial Statements available
Plan or projection for the business
Collateral – such as real estate, bonds or stocks, personal asset, personal guarantees.

Most banks also want to know you are making your own business and most likely approve your business loan if sees that you are investing a good percentage of the necessary startup capital into your business.

Although types of loans processed differ from bank to bank. If you have an existing bank account to one bank, then preferably have your loan from your existing bank. For sure they will be glad to accommodate you for small business loan and since the relationship you have with your bank is good then for sure they will grant you for small business loan.

If you go to other banks, you have to have lots of documents to prepare since most banks, when you loan or any kind of loan; they need some documents as requirements. Traditionally, banks are more conservative with their investment dollars due to the fact that they are investing the money of their depositors so banks should be careful.