Happy New Year

Happy New Year to all my readers.

You will see some more changes as we enter the new year. I will continue postings on Mondays (starting January 7th) the Starting a Small Business Series to help you get started on developing that business plan. Also one day a week I will post items to help you better compete against the big box stores.

I will be comment on important articles that will affect your business. You will also see some changes to the look of the blog in the near future to make it look better.

Thank you for reading and I look forward to hearing from you in the new year.

John Dornoff
Dornoff Consulting Group

Do you need a virtual assistant?

Well you can be your own virtual assistant. The Bootstrapper blog has 100 tools in order to keep you organized during your day.

I have look through some of the list and all of them can be potential sources of help for you. Have have resources for to do lists, accounting, phone, email, scheduling, presentations, information, project and time management, and client relations.

Everything you can do to stay more organize will allow you to spend more time building your business.

Starting A Small Business Series-Profit and Loss Statements

Last week we talked about the Profit and Loss Statement.

Today we will take a look at the Balance Sheet. So what is the balance sheet? It shows you how much your company is worth. You start off with your assets on one side with your liabilities and net worth on the other.

On the asset side your first listing is your current assets. These are assets that you could turn to cash very quickly. This obviously includes cash in the bank, your petty cash, temporary investments such as money market accounts, inventory, accounts receivable (money you are owed), supplies, and prepaid insurance.

Next is your investment which is anything long term such as stocks, bonds, mutual funds, etc.

Following up after investments comes your plant and equipment. This can include land, your building, and manufacturing equipment with your allocated depreciation taken out. After your plant and equipment come intangible assets. This could include goodwill and trade names which can be hard to calculate. Last would come to misc. assets.

Now you total up all of your assets and move to the next column.

The next section you work on is your liabilities and we start of with current liabilities. This includes Notes payable, wages payable, interest payable, taxes payable, warranty liability, and unearned revenue. Current liabilities basically cover anything that will be due by the end of the year.

Next on your list will be your long term liabilities which are anything that will be due past this year. This would include bonds payable and notes payable such as a mortgage on your business or a business vehicle.

You then add your current liabilities and long term liabilities and get a total.

Finally you have your owner’s equity. If it is just you then that is pretty simple. If you have stock you will have your stock and retained earnings.

Finally you add your liabilities and equity together. The number you get should be equal to the number you have for your assets. If they do not match something is wrong go back and figure out what is wrong. Once you are done you know how much you own, how much you owe and how much equity you have in your business.

To see what a balance sheet should look like you can go to Accounting Coach.

Next week we will move to the Cash Flow Statement.

Lessons to be learned from CompUSA

CompUSA has announced that it will be closing the remainder of it's stores at the first of the year. For those of us that have been watching this company, it is a surprise that it has made it this long (but then again K-Mart keeps going too).

The stores suffered not only due to issues within the stores but also with corporate management. The corporation could not decided what they wanted the stores to be. When they were not successful they looked to another successful chain and try to copy them instead of finding their own direction.

Today we will look at what the stores were and what they tried to be so that you can avoid the pitfalls that CompUSA made.

Just looking at the name you figure that CompUSA sells computers and computer supplies and that is what they started out doing. They also offered training and had a fairly good business department for many years.

However over the last few years (especially the last couple) CompUSA started losing their focus. They saw the success of Best Buy and like many companies instead of following their own path tried to copy someone else's and it failed.

Over the last year many of its stores have been remodeled and now look like a low end Best Buy. Instead of focusing on what they did best they tried to be all things to all people and started doing everything very poorly. Their business sector started to suffer which started costing them those type of customers.

In the end the store become the store for no one. The business people who used to buy their computer supplies there went elsewhere. The computer geeks could no longer find the supplies they need so they went to companies online like New Egg. Finally, the marketing they tried to attract with high end products such as LCD and Plasma TV's sought out stores with better customer service and a better selection. In the end CompUSA satisfied no one.

Once again it goes back to finding your niche, and sticking to it. While you can add items and possible move up or down, but do not alienate your existing customer base. While stores like Nordstrom and Wal-Mart can make mistakes and survive, you cannot afford to make mistakes like this.

Starting A Small Business Series Part V

In previous additions we talked about how to figure out what kind of small business you should operate and figuring out some of your start up cost. Now we are going to start getting into the financial statements you need to make.

The first one we will go over is the Income Statement with is also refereed to as the P&L with stands for profit and loss.

The first part of the income statement is estimated sales. You need to make realistic estimates of how much you are going to make. I would recommend doing estimated P&L statements for the first five years. It will usually take about three years before you start making a profit.

The Cost of Good Sold applies to retail businesses. Here is how you calculate your cost of goods Sold:

Beginning Inventory 100

Purchases 100

-Returns 50

Frieght 50

Ending Inventory 100

Cost of Goods Sold 100

Now the returns in the Cost of Goods Sold are returns to your vendors, not customer returns.

After you subtract your cost of goods sold you come up with your gross profit. After that you take out all those lovely expenses such as rent, power, insurance, phone, internet, and any other payments you may have then you end up with your net profit or (loss).

Sales 100

Cost of Goods Sold 50

Gross Profit 50

Rent 25

Electricity 5

Insurance 5

Phone 5

Total Net Expenses 40

Net Profit 10

Now of course yours will be a little more complicated but you get the general idea.

If you are a retail business I also suggest you subtract 10% off your sales to account for customer returns and put that in the balance sheet which I will talk about later.

Keep your income statements simple when you’re getting started. As you become more familiar with them you can get more creative with them.

Another source for more information is Accountingcoach

Holiday Season Ideas

On my other blog I posted some ideas that could be of help to you this holiday season.

Holiday Season Ideas

The Start Up Spark Blog had this entry:

Get more holiday jingle by increasing sales this season

Blog Postings that May Interest You.

Here is some postings from other business related bloggers that I found interesting and may interest you also:

Hiring a Savvy Tax Advisor

Better than Monster: 50 Free Places You Can Post A Job Online and Get Top Talent

A Strategic Solution for Business: Outsourcing

The Marketing Nitty-Gritty: Part Two

How To Fix The Mistakes You Made In 2007

Time to Hire a Bookkeeper?

How To Be Compelling

Each of these posting has great information to help you in your business.

Starting A Small Business Series Part IV

In the last edition of the Starting a Small Business Series we talked about how to cost out the capital requirements for your business.

Now we need to figure out some other cost of running your business. The first cost you are going to get is rent. You should have a pretty good idea of what kind of facility you’re going to need whether it is a home office, store, industrial, etc. To get estimated rent cost you can check your newspaper, local business journal or call a commercial realtor to get some estimates. Some realtors can be real jerks but remember you are going to be in the market so find one that is nice and seem like you can work with. Just let them know that you are getting an idea for your business plan and will talk to him or her when you are ready to go.

Next estimate a phone bill. These days you can use the phone company’s website to estimate the cost of phone service. The variable will be if you have to pay per call like some places in the Midwest, the cost of long distance service, and the number of 800 call you will get if you decided to get an 800-number which I recommend.

Another factor to consider is electricity. One way to estimate the cost of electricity is to check with the power company. If you already have a specific building in mind they can tell you what the power cost was for the building for the past year. Otherwise talk to your real estate friend from above and get an address of a building you can use of an estimate and get it that way.

Other cost you need to is garbage, water, and any other incidentals to running the business.

Next week we will talk more about the financial statements.