Most Popular Blog Posts of 2010
There is a lot of talk and content on the internet about "bootstrapping." I had an interesting experience with this just last week. A company is looking to roll-out an innovative business model in a very competitive online business space. One partner in the business wants to grow slowly, gaining customers slowly and using the revenue generated to fund future growth.
I have long suspected that most business people cannot give a simple definition for the common term of "business model." It seems to be a nebulous and vague term that escapes most. Most people think they know what it means, but when you ask them to define it, they usually can't come close to verbalizing it.
I have heard this statement more often than I care to admit: "I cannot predict the future so a budget would be worthless for my business."
An article entitled How to Create a Budget in BusinessWeek prompted me to recollect some of my experiences with helping people who have the above attitude towards budgeting gain a new appreciation for the process and, more importantly, the results the process can generate.
This is a real situation experienced by a real emerging company. Names and figures have been altered to protect anonymity.
A company has a new opportunity and they create a financial model to try and forecast how their general assumptions for this opportunity will materialize. Specifically, they made significant assumptions
Every sensible financial model projects the results of all three major financial statements - the profit & loss, balance sheet, and statement of cash flow. The balance sheet, not the profit and loss, is what drives the cash flow of the business. If the balance sheet is not correctly modelled, then the cash flow forecast is most likely inaccurate and worthless. Yet the balance sheet is the part of the model that is usually the most neglected and le
Most of the folks who read our blog know we write from the CFO advisor perspective on start-up, emerging, and medium-sized businesses. This post will be no different, and its intent will be to clarify the two most significant flaws entrepreneurs, business owners, and CEOs experience when trying to understand their break-even point, both in terms of sales volume and units.
FLAW #1 - OWNER COMPENSATION
The traditional method for calculating
How many forecasts do you keep concurrently in your company? If the answer is zero, then we have some serious work to do. But if your answer is one, you may be falling well short of what is necessary in these difficult economic times.
Here is a real story of a conversation I had with a banker in the last 6 months about a client of our CFO firm. My client needed to finance some heavy growth and we stretching to try and use only bank financing to accomplish this growt