The Female Entrepreneur & Business Financials

This week I had the honor to speak on the topic of business financials at a panel discussion held by WELD (Women For Economic Leadership & Development). The discussion centered around the importance of women entrepreneurs becoming comfortable with assessing business financials, and exploring financing opportunities in order to grow a business.

There were a few points raised and I would like to discuss three of these points with you guys:

• Conflicting information about whether or not a certain business or business owner needs a business plan. Well, I think you know the answer to that. Yes! Every business needs a business plan! My entire business model was formed around the idea that smaller or service based businesses were limiting their potential by avoiding a business plan. How can you start small to finish big if you don't plan. You'll instead start small and finish small. If you've been a frequent reader of this blog, you can see in older posts that I've outlined specific reasons to get a business plan. In short, a business without a business plan lacks a model or structure. So if you don't have one, you might as well stop referring to yourself as an entrepreneur; because entrepreneurs are innovators and dream builders. It takes a plan to invent and build upon a dream. And if you are someone telling an entrepreneur that they don't need a business plan, shame on you! Better yet, if you are a female entrepreneur, please do not limit yourself.

• Fear and uncertainty about getting any kind of business debt. Some of this fear for women stems from the reality of becoming a personal guarantor of the business. Without "sugar coating" anything, the reality is you may just have to be. Unless your business is a registered corporation that has been in existence for about ten years or so, a bank will also most likely have you guarantee a loan. Of course, you have to be disciplined in how you use financing: use it to enhance your cash flow by saving your cash "cushion" (i.e. instead of using cash from sales to purchase inventory until you get paid from your client, use your line of credit and pay it back at the end of the month. If by then your client hasn't paid you, pay off most of the line of credit until you receive your payment. That way, you use your cash for fixed costs: rent or salaries; and you were not dependent completely on your client. Make sense?) It just comes down to this: no one wants to give you anything without getting something in return. There's no such thing as "free money." (Refer to my past posts about banking specificity). Women, you take calculated financial risks frequently for the family: The house was a risk, the private schooling for your child was a risk; what if they never graduate, the contractor you paid to remodel was a risk; what if he didn't complete the job? What about taking a risk on you? You'll get the job done too won't you?

• Cash flow. Why cash flow is important in simple terms: it lets you know if your business can avoid a short-term pitfall in order to make it long-term. You don't want to be a part of the SBA's negative business statistic. This is the financial statement (found in your business plan) that gives a financier some idea of your short-term viability; by looking at a month-to-month snapshot of cash coming in and going out of your business. This should show months of inventory you have to keep on hand, how long it takes for you to receive money from your contractors, clients, etc. This is also where you figure out if your startup will need more money before you open your doors. It is the same statement that lets you know when you may be in trouble of falling short of cash or needing to borrow more money. Still think you don't need a business plan? Females tend to be more thorough in evaluating a concept, this is why women entrepreneurs can benefit from understanding cash flow.

The simple fact is: you will need to give something in order to get something. You will need to invest in your business if you want to ask others to invest (and this means personal guarantee, money, etc) and you will need to take a risk to realize your dream. Just make sure to educate yourself about financing risks, banking guidelines, investor requirements, etc. By educating yourself, you know when your business cannot afford a loan. Then don't ask for one. By educating yourself, you know the risks when dealing with an investor.

At the end of the day, it's not just about taking a risk. It's about taking a calculated risk.

About the Author: Cheryl Isaac is a Startup Business Planner & Owner of Isaac Business Services, The Business Startup Company. She is also the creator of The 12MonthBizPlan.com; an online business planning center where business owners can work with a personal advisor who writes & updates their business plans on a monthly basis for up to a year.