All the Reasons Why Mixing Small Business with Personal Banking Isn’t a Great Idea


When starting a new business, you face hundreds of new challenges – many of which you have already assessed and many that you couldn’t have imagined. Once you have made up your mind to start your business, you need to set some rules. While there are many, today’s topic is mixing personal banking with business finances. A great number of new and small business owners make the mistake of mixing their finances with business finances. Here are the reasons why you should not do this when you start your business.

Reasons Why You Should Not Mix Personal Banking and Business


  •       To Make Loans Easier

If you want to make it easier for you to obtain loans, you would want to keep your bank account separate from your business account. The first rule one has to learn as a business owner is “business has its own identity.” Keeping that in mind, you have to open a separate account for your business. With time, your business will create its credit history making it much easier for you to obtain loans in future.

  •     To Know Business Expenses

When you have your personal banking and business account all mixed up, you don’t know which expenses are which. If you need to buy a new wristwatch for yourself, the money comes out of that account. If you have to buy new furniture for your business, the money still comes out of the same account. As the time passes, it will become nearly impossible for you to sift and sort through your expenses and business expenses. To know your business’ profit, you need to know its expenses.

  •       To Make Tax Filing Easy

Tax filing can become a nightmare for you with your personal and business income and expenses are intertwined. By mixing the two accounts, you are making the job difficult for yourself. As for the sole owners of a small business, it is best to put some percentage of your income in a separate account, so you don’t have to pay the taxes from your pocket at the end of the year.

  •      To Keep It Professional

So, you want your business to turn into a brand. You have had your visiting cards, letterheads, brochures, etc. printed. You want people to know the name of your business. Having done that, how does it feel when your customers and clients have to write a check in your name and your business’? People might think that you are not serious about your business and that you might change your mind at any time, which is a lost opportunity for long-term B2B relations.

  •       To Keep It Transparent

When the money from your earnings and business go on the same account, you will not distinguish between both when it comes to spending. At times, you might be making up for business losses from your pocket, and at other times, you will be buying your stuff from business money.

Bottom Line

For the reasons above and many others, it is in your best interest that you open a separate account for your business and keep your savings personal. You could also close doors for future incoming investments due to this basic non-professional move.

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Sales Estimates in Business Plans – Getting Them Right to Avoid Failure


Chances are this is not your first business plans if you are considering starting a new business. Studies have shown that today’s successful entrepreneurs have tried 3 or 4 times before to start a business sales. Sharing that information is not meant to be discouraging though. It’s meant to be motivating because true entrepreneurs don’t give up easily.

In fact, you may like to know that Bill Gates and Paul Allen started Microsoft in 1981 after 3 prior failed business attempts. The 3 failed attempts were The Lakeside Programmers Group in 168, Traf-O-Data in 1970 and Micro-Soft partnership in 1975. In reality, the 3 failed companies were not failures at all in one very important sense. These 3 companies taught Gates and Allen a lot about business planning and development. They used that information to start Microsoft, Inc. and the rest is history as they say.

One of the strategies for managing a new business venture is the business plan. Because it forces the entrepreneur to identify sales specifics so that investors are comfortable providing equity, loans or other capital. The entrepreneur should also consider a graceful exit should the business not succeed as planned. Though you would not present a business destined to fail to investors, the people you are asking for money also want to know how their investment will be protected as much as possible.

When developing sales projections for the business plans, it’s important to go through each step with due diligence. It begins with a product or service description, followed by a market study. A sales estimate is calculated which drives needed production capacity. The needed production capacity then drives facilities planning and workforce estimates. Finally, the financial analysis is calculated.

One of the issues to be addressed in the business plan is the timing of sales growth. This is where entrepreneurs often get too optimistic. The end result is disappointed investors and a failed first, second or third venture. Sales projections need to be as realistic as possible because inflated numbers don’t do anyone any good. The business plan needs to tell an honest story and that will greatly increase your chances of getting the new business right the first time.


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Splitting Equity Equally among Founders, Is it the right decision?

Splitting private equity among the founders of small businesses may seem an easy task. After all, it is widely accepted that founders – and even just the pioneers behind a successful business – deserve equal shares in the company’s equity. Or are they? Some experts believe that equally splitting the equity among the founders is not really the best decision that entrepreneurs can have.

Splitting the equity equally seems fair for those involve. Actually, it is. But fairness should not be the only thing that matters when it comes to equity and revenue discussions. There are possible scenarios that founders must think about when discussing about the sharing of equities. Among these scenarios, one expert notes, is the possibility that someone from the group of pioneers would back out and leave the group. Why give him people equal shares of the equity if they will just leave the business after a few months?

The role of the people involved in the business is also crucial. Consider this scenario: Marco has a business idea and he decides to share this to Paul. Later on, the two of them decide to establish a business based on Marco’s idea.

During the establishment phase, Marco and Paul realize that they need money to finance the operations of the business. To solve this, they decide to contact their friend Anna to ask for some capital. Anna agrees to provide money for the business on the condition that she will be considered a “founder” of the business.

The question is, would it be fair to split the equity equally between Marco, Paul and Anna? Paul would definitely agree to the proposal, but it may seem unfair for Marco and Anna.

Marco was the one who had the idea, and it was Anna who provided the capital for the business All Paul did was to agree with the idea and probably help in convincing Anna to fund the business.

Unless Paul did something relevant for the company (such as managing the manpower or using his networks to help in the actual formation of the business), it may seem inappropriate to give him an equal share of the equity.

Founders of small business often have personal relationships prior to the creation of the business. However, entrepreneurship is a professional field, and people should understand that partnership should always be prioritized over personal ties.

Instead of looking into the years of friendship or familial ties, co-founders of the business should look into the professional aspects of the company when they are deciding on equity split.

Some of the factors that should be considered include the business idea, the intellectual property, the capital, time, opportunity cost, and expertise of the person on the industry where the business is a part of.





More detailed information and useful advice can be found at Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.


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Know Why Businesses Fail So Yours Does Not!

One of the most common reasons for businesses failing is failure to write a business plan. When an entrepreneur fails to plan, the chances are good that even growth can lead to serious business problems. How can growth lead to problems? It’s not growth per se. It’s when growth is too rapid and the business is unable to meet demand that causes small business failure.

Business growth must be managed. You can accept a half million dollars of customer orders, but if you can’t meet the demand in production or delivery the business will quickly get a bad reputation when unable to deliver goods and services as promised. Growth should be carefully planned so that resources are always available.

The business plan can help company owners and management avoid the most common reasons for business failure. In fact, knowing the reasons and then addressing them one by one in relation to your own business can help you avoid the pitfalls a new business typically faces.

Top of the list of reasons for business failure is lack of experience. The business plan includes a section on business management for a very good reason. Investors will want to know if the management is qualified and experienced. Even if you aren’t looking for an investor, it’s still important to identify the skills and competencies of key personnel. If gap exists, you’ll know it’s necessary to bring other talent onboard.

Lack of capital is another reason for business failure. The financial analysis needs to address money needed now and for planned growth. The keyword is ‘planned’ because unplanned growth can cause inventory, cash and personnel shortages.

That brings us to one of the most important advantages of a business plan. The elements of a business plan are integrated. For example, investing too heavily in assets can lead to a cash shortage which leads to poor customer service and lack of operating funds. Lack of management experience can lead to poor decisions that lead to marketing mistakes. The integrated nature of the business plan is precisely what makes it so valuable as a planning tool. No one starts a business expecting it to fail. Knowing why businesses fail can help you avoid a business failure. Plan to succeed in the business plan.

More detailed information and useful advice can be found at Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

Customer Focused Businesses Attract Investors

To sell a business plan to investors, you have some things to prove beyond the immediately obvious like marketing and the period the investor can expect a return on investment. You must also prove that you are customer focused from the very beginning. What does that mean exactly? It begins with a business that has products or services that solve customer problems and then expands from there.

Customer focused business plans attract investors for a good reason. The well thought out business plan that is customer focused finds a good balance between providing quality customer service with the need to achieve a return on investment. Achieving this balance is necessary because a business that is in it for the long haul must meet both goals to survive. In other words, you can’t have great customer service and lose money, and you can’t have poor customer service and a good return. If the latter situation exists, the business has moved to a company focus which means customers are being neglected. Eventually, competitors will get the neglected customers’ business.

For this reason, it’s critical that businesses needing investors prove they fully understand customer needs, can convert those needs into opportunities and have developed strategies to retain customers. The business plan will also need to prove that customers will get value for their money. In other words, the customer should be central to all decision making and planning. When investors review the business plan, they will look for customer focus as well as financial viability. In the final analysis, the two are so tied together that it’s impossible to separate them anyway.

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Traversing the Entrepreneur’s Valley of Death with a Business Plan

The business plan is a bridge that extends from initial startup to plans for long range success. That bridge crosses a wide canyon that includes seed money, angel investors and eventually venture capitalism and commercial funds. The first round of funding by angel investors is enough to get the business established and generating income through modest growth, but at some point for successful businesses the funding chasm becomes wide and deep. This Valley of Death, as the $2 million to $5 million is not so affectionately called,  can kill young businesses if it’s not traversed with injections of new venture capital investment money. On the other side of the valley can be found business loans from traditional lenders meaning the company is now poised for unlimited growth.

There’s a lot of debate on whether this valley really exists. Many business analysts believe there is always money for market worthy companies that need cash. This is based on the assumption that inefficient companies or companies with products that don’t succeed in the marketplace will drop out of the running for funding. That leaves the companies with competitive products and services looking for funding. Angel investors play an important role in this process because they fund companies with the well designed business models and that are most likely to succeed over the long run based on their analysis. The poorly prepared business plan and angel investors act like culling tools and force bad ideas out of the funding process early in the process.

Crossing the Valley of Death will take a concerted effort to find multiple sources of funding in many cases. For example, young entrepreneurs can bridge the gap by vigorously blending venture capital with government tax credits. A fairly new concept is the ‘certified capital company’ in which a state issues tax credits to companies in return for making investments in young businesses ready to cross the Valley of Death. There are a number of new and creative funding concepts being introduced across the nation to stimulate job growth and economic development.

In other words, if you need angel funding or are facing the Valley of Death, rest assured that professionals familiar with the funding environment can steer you to funding arrangements you may not even be aware exist. If you see the Valley of Death looming, it only means you have been successful already.

More detailed information and useful advice can be found at Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

Writing Business Plans that (Really) Matter

Business plans are not all alike and neither are angel investors, venture capitalists and loans. Then why do so many business plans seem like carbon copies of each other? Rubber stamping, so to speak, a business plan and only changing the names isn’t going to generate much interest among savvy investors. How many small businesses are ready to become the next corporate success story, but can’t seem to get investor interest? There are plenty, and many will never get a chance to find success because their business plans don’t pique the interest of angel investors or any other investor for that matter. The business plans are just too ordinary and fail to convey the uniqueness of the new idea, concept, product or service.

If you took a test and it said to name the most common mistake made on business plans, would you know the answer? The answer is: The business plan begs for money but doesn’t beg for understanding. A business plan is much more than a plea for money. It’s a driver’s manual that defines goals and objectives while providing the road map to a new destination. If the directions are clear and point right towards what makes your idea market unique, investors can’t get lost on their way to the endpoint. That’s where the financing waits. Focus on what makes your concept unique and prove you have carefully thought through the components of success – people, opportunity, context or relationship to industry and market, risks and rewards. In other words, write a business plan that really matters and not just one that fills in the blanks and makes a pitch for money. Don’t be ordinary…be unique. It’s what entrepreneurship is all about.

More detailed information and useful advice can be found at Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

Small Business Funding Is a Searing Hot Topic

Small business funding can’t be called just a hot topic because it’s far beyond hot…it’s searing hot. The National Federation of Independent Business (NFIB) reports that SBA 7(a) loans have fallen dramatically in the last few years. In 2010 only 41% of all businesses were able to get financing from any source, and 16% of businesses didn’t get any credit at all.

You can’t help but wonder how businesses are staying in business when they can’t get credit. But who says they can’t get credit?  The fact is that many of those small businesses did get credit from sources like angel investors and equity partners and other sources of private lenders.  In other good news, there are probably just as many or more businesses that are eligible for private funding, but they are still pursuing traditional financing routes.

Perfect Conditions for Successful Funding

There is much inefficiency in the lending marketplace which is precisely why there is a thriving private funding marketplace. This marketplace was created because of the mismatch between the number of lenders and amount of capital available and the number of borrowers looking for business funding.  It works the other way too. There are borrowers trying to find investors with little success. In a free enterprise economy these are the perfect conditions for creating a thriving market that fills a void.

Small businesses generated 64% of the new jobs in the economy in the last 15 years according to the NFIB. You would think that traditional funders would make sure that small business has the capital needed for job creation, but instead it is estimated that trillions of dollars are sitting idle in banks and corporate accounts.

This is a perfect storm for private lending. If the big companies and banks won’t spend or lend, then it is up to the private business funding market.  The private capital market is lending more than ever before for various purposes. There are lenders willing to loan small businesses venture capital and startup funding for example. The private market is also lending in a variety of forms that include business loans, equity partners and angel investors.

Making Sense of Funding

If there is so much money available for business funding then why aren’t more small enterprises taking advantage of this capital availability? There are several reasons.

·    Don’t know how to find investors
·    Don’t know how to complete a lender worthy business plan
·    Don’t understand the variety of capital available in the private market
·    Entrepreneurs get discouraged after getting turned down in the traditional lending marketplace
·    Don’t want to pay expensive originating fees for business loans

It can be disconcerting to consider approaching equity partners or searching for venture capital without help. It can be just as intimidating to consider presenting a new idea that needs startup funding.  It can certainly be frustrating going from bank to bank feeling like a beggar.

Using a central point for finding private business funding makes sense. It is efficient because you don’t have to go from lender to lender, and it is cost effective. Most of all, it offers funding solutions for the very businesses and entrepreneurs that keep the economy growing.

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