What are the Pros and Cons of having a Hybrid Non-profit and For-profit

A non-profit is defined by the business dictionary as an association, charity, cooperatives, and other voluntary organizations formed to further cultural, educational, religious, professional, or public service objectives. According to the Business dictionary, their startup funding is provided by their trustees or others who do not expect repayment, and who do not share in the organization’s profits or losses which are retained or absorbed. A for-profit primary goal is making money, as opposed to a nonprofit organization.

A for-profit can be retail stores, insurance companies to real estate companies. A lot of people believe just because you want to start a non-profit that you are crazy, and you will not make any money. I love nonprofits because you can provide a service, further cultural, and educational programs. You can still be paid for providing these services, and you will still feel like you are accomplishing something that can enhance the world.

In some instances, you can have a for-profit, and nonprofit exists under the same roof, and you do have pros and cons when they do. According to Lapowsky (2018), The model that works best the for-profit needs help to manage its philanthropy. Some corporate for-profits are starting their nonprofits and foundations to manage the charitable activities. This is a perfect relationship builder for, both entities and they can complement each other.

The Cons with both entities, you must have two boards, and if any decisions are made both boards have to approve it. Both entities may put themselves in a position that a possible crossover and that is a “no” “no” when it comes to the IRS. It is a thin line when it comes to the IRS laws, and we always want to stay in compliance.

References:

Lapowsky I, (2018). The Social Entrepreneurship Spectrum: Hybrids Retrieved from: https://www.inc.com/magazine/20110501/the-social-entrepreneurship-spectrum-hybrids.html
Read more: http://www.businessdictionary.com/definition/for-profit-organization.html

Read more: http://www.businessdictionary.com/definition/non

ENT-650 Being Professional through Bootstrapping

 

Being Professional through Bootstrapping

I will discuss how to protect yourself when it comes to bootstrapping your business through accepting money from your friends and family. Let’s first determine what is bootstrapping, according to the Business Dictionary; bootstrap funding is when individuals use their own money to fund their start-ups, interesting enough the money can come from their income and the savings they may have in accumulated. Finding money for your startup is sometimes tricky, so you may want to consider asking family and friends. To take money from those close to you could be an added stress, however in the process of obtaining the funds, you should remain professional, informative and consistent. By being professional, informative, and consistent about your start-up, you provide all that invested with a sense of ease and assurance. I will explain three ways that can be a guide to handling affairs with your family and friends.

According to Beesley (2016) 3 ways to properly obtain funding from friends and family is as followed:

1.Demonstrate Passion and Due Diligence- In this example, it is important for entrepreneurs to be passionate about their business. You should be able to provide a sound explanation of how your business operates, as well as to help your family and friends understand the sustainability and profits of your business. By presenting a business plan that has a research-based analysis would relieve some anxiety on both sides.

2.Come up with an Agreement with a Repayment Plan- Even though you may have an excellent relationship with your friends and family you need to keep it that way. The best way to help you remain in good standing is to treat every encounter with your friends and family like a business. Always have a detailed plan on the finances, the progress of the company, and a detailed repayment plan. The plan that you present should have every detail of the business so that they will not have any reservations and if they do have any they can opt out if they want.

3.Use a Peer-to-Peer Lending Service- This tip will help you keep your business free from emotions. To keep the peace, you may want to consider using a peer lending company. This concept is when you and the person that have loaned you the funds, use a mediator or middleman to handle the repayment of the loan. Both parties will come up with the agreement, and the peer lending will make sure that the rules are followed. The Peer-to-Peer concept keeps the process clean and provides a confidence of the lender that the loan will be paid in full, and for the service there is a small fee applied.

In conclusion, remaining professional, informative, and consistent with your lenders will help you grow your business. The three tips above will guide you in your business endeavors, as well as build your name for being a reliable and trustworthy borrower. Keeping a good name is critical for all business owners and especially for the new owners.

 

Beesley, Caron (2016), “6 Tips for Borrowing Start Up Funds from Friend or Family” Small Business Bureau article Internet , https://www.sba.gov/blogs/6-tips-borrowing-startup-funds-friends-or-family

 

Bootstrapping. (n.d.). In the Business Dictionary online. Retrieved from                                  http://www.businessdictionary.com/definition/bootstrapping.html

 

 

Financial Basics for an Entrepreneur 

Financial Basics for an Entrepreneur
In a recent post, I talked about the importance of an entrepreneur having at least some basic understanding surrounding the basics that make up their business.  Even if you have delegated some part of this responsibility to someone else, there are three concepts you may want to ensure you fully understand.
The first is cash flow operations. The cash flow statement shows how cash comes into the business and goes out of it.  Cash flow from operations measures the amount of cash dollars a company generates in a certain period from its regular operations; it shows the cash that has come into and out of the company from normal activities.  Cash flow operations does not take into account any loans, grants or other such financials that may have been obtained.  Having a good understanding of your cash can help you carefully guard the activity within your business.
Here is another concept to understand – net-income margin.  It can be really exciting to see money flowing into your company.  But you will want to be able to discern how much of the money is actually profit. You will also want to understand the percentage of profit you are earning on each sales dollar – this is called the net income margin.  The formula to determine your net income margin is:   [Revenues – All Expenses]/Sales.  There is no simple rule of thumb for what makes for a good ne-income margin. Generally speaking however, an operating profit margin of approximately 25% or better is considered favorable by most market analysts. Do yourself a favor and learn as much as you can about how to achieve the best net-income margins. Your business will have a better chance of thriving if you do.
Finally, let’s talk about revenue growth.  Sounds simple enough, it means more money is coming in.  When examining your revenue growth, please also give consideration to your rate of growth over a period of time.  If things are improving year to year, great.  Pay attention to those moments when you see a decline rate.  Think about contributing factors and plan accordingly.

A Business Plan – A Financial Must

A Business Plan – A Financial Must

Most entrepreneurs recognize the importance of having a business plan.  According to Forbes Magazine, a business plan is a document that explains your business idea in writing – how it will succeed and who will make it happen. A business plan pushes you to almost run your business on paper before you make any final decisions to open your business or promote your product.  A business plan can help you identify possible challenges and flaws in your approach.

The good news about a business plan is that it can be your guiding force as you move forward in your business.  It’s not just a document you do and then forget.  Your business plan should be followed, shared and modified when necessary. An important part of a business is the financial plan.

The financial part of a business plan includes various financial statements that show where your company currently stands and where it expects to be in the near future. This information helps you determine how much financing your business needs and helps outsiders determine whether lending you money or investing in your business is a wise use of their funds.  The numbers may not always be easy to outline and crunch, you will have many assumptions, but this is okay.  Think of the plan as a working document with moving parts that can be changed and modified. The most important thing to do is to ensure that the financials of your business receive as much attention (if not more) as your fantastic business or product idea. 

Factors to Consider When Your Product is Not Selling – Marketing Matters!

Factors to Consider When Your Product is Not Selling – Marketing Matters!

If you are reading this, you may be at a place where you have a great product (or at least you think you do), it is ready and available for promotion and ready to be sold, but there is a problem – no one is buying it.  This is sad and disappointing.  But what do you do about it?  How can you determine what the solution is?

There may be many reasons why your product or service is not selling.  It will be important to stop and think through all the pieces.   An important place to start is to think about how you have been promoting the product or service.  So, let’s start with marketing first.  Have you done everything you could do to promote your business? What about friends or family? Have you let them know about your business?  Have you provided them with print information that they can offer to others.  Have you considered a live party?  What about an online party for the launch of your product?  Be sure to get out there and really let others know about your business.  Sing it loud and proud from every single platform you can.

When we start a business one of the things we attempt to do (or at least we should) is solve a problem society is experiencing. When you think about your business or service, have you thought about what problem does your product solve?  Why have you created your product?  And why should others care? You need to really think about this and face your realities.  This may not be easy, but as you examine your business, are there changes or modifications you could make to create a better product or service.  The best way to market your product is if you know what problem it is the solution for. And if you don’t how to answer this question, it may be one of the primary reasons why your product is not selling.

If you are convinced that you have a good product – one that you are proud of – then my last suggestion is this…Never stop marketing.  Never stop marketing.  Never stop marketing.  Never stop marketing

Financial Stress and the Entrepreneur

Financial Stress and the Entrepreneur

At some time in our lives, we may face financial stress.  As an entrepreneur, financial stress can lead to personal, physical and psychological stress, poor business production and even loss of customers. According to Money Magazine it is important for entrepreneurs to remember that they are business people – whether they like it or not. When a person decides to go into business for themselves, it is important to also “learn the lay of the land”.  By this I mean, get smart about the basics of finances and running a business.  Even if you hire someone to handle the finances, you want to understand exactly what they are doing, and how they are making decisions.  You do not want to let ignorance of the topic keep you from working within this important aspect of your business.

Here is another suggestion that may not feel immediately comfortable – embrace technology.  There are many very good and easy to use computer based systems that can help you streamline and organize your business finances.  Look around on the web, try signing up for a few free financial software trials to see how things feel.  You may find one that helps reduce some of the financial stress related to running your business.

Get and stay organized.  Reducing financial stress and moving forward is a lot easier when you have all of your ducks in a row. Go through the proper initial steps, such as applying for a business license and EIN, opening a company bank account, and getting insured. After that, keep diligent records of all your company’s transactions. Being consistent and thorough will reduce fear and relieve financial stress.

Vendors and Suppliers

There are so many things to think about when starting a business.  We begin with amazing ideas that can help others in a variety of ways.  We nurture our ideas, test approaches and re-design our concepts.  When we arrive at a concept we are comfortable with, more decisions present themselves. 

A decision that many entrepreneurs have to consider relates the vendors and suppliers we used.  For example, think about the person who plans to open an internet café.  Suppliers will be need to address everything from the internet provider to the company that will provide the cups and napkins.  Before a final cost for products or services can be determined, we must explore and re-explore all potential vendors.

One of the most important thing that can be done – and very early on is to decide what’s important to you.  You may find many, many vendors with items and services that you want.  Their prices may be very comparable, and their customer service both garner rave reviews.  What will separate the competition and help you to decide? While price and service are important so too are shipping and lead time for orders for example.  If one potential company is oversees, shipping can take quite a while.  As a result it will be important to take shipping lead times into consideration.  Another important factor relates to minimum and maximum order quantities.  Some companies have established minimums.  Do these minimum meet your needs?  You may wish to purchase from a vendor without minimum and maximum requirements.  Other consideration to take into account include quality assurance processes and payment terms and conditions.  Setting the criteria in advance will enable you to evaluate potential suppliers on each of the listed items and ensure that you don’t overlook any important requirements.