0816_TOEFL-Test-and-Score-Manual-1997

50 ● 201 Great Ideas for Your Small Business
GREAT
Create a Sensitivity Analysis
Want to impress a banker when you apply for a credit
IDEA
line or loan? Walk into the meeting with a sensitivity
analysis. It sounds hard to do, but it’s not especially complicated, according
to Denise Howard, a former banker who now works as a financial planner
for many business owners.
“You basically need to look at what will be your break-even point,” said
Howard. “Figure out the minimum dollar amount you will need to break
even. Then, look at the worst- and best-case scenarios.”
Howard said if you are prepared to discuss the impact of these various
scenarios, “you will blow the banker away.”
Before you meet, bring along or submit in advance a pro forma balance
sheet and a profit-and-loss statement. These are not the same thing.
“Many small business owners don’t understand the difference between
an income statement and a cash flow projection,” said Howard.
The bottom line is this: You have to show a potential lender where,
when, and how their loan will be repaid in a timely manner.
Howard has another tip: “Bankers don’t like surprises. We’d much
rather have you call and tell us what’s going on—even if it’s bad news.”
She has this cautionary tale: one of her former clients was making so
much money, he started buying two or three new gas stations and convenience
stores a year. He used cash from his existing stores to open the
new ones. “Unfortunately, he wasn’t monitoring expenses, including
the rising price of gasoline.”
Everything began to fall apart. He was about to file for bankruptcy
protection when Howard helped him find someone willing to invest in the
crumbling gas station empire in exchange for equity.
“Just because you have money in the bank doesn’t mean you are making
money,” she warns.
GREAT
IDEA
Find a Good Accountant
Now that you have customers, clients, and money to
grow your business, it’s time to hire an experienced