Small business owners have many things to do when running their business; from managing their sales team, looking after the finances and keeping inventory, to a countless number of tasks they have to achieve to have their business running smoothly and efficiently. Learning about the finance part of the business is a tricky yet important aspect that a lot of small business owners neglect. For more about this topic follow the links.
Smart ways to handle small business finances
Thinking about starting a small business or need help running one? Finances are one of the most difficult parts in managing your business.
In this week’s Money Quick Tips video, USA TODAY contributor Regina Lewis looks at some of the key moves you can make to help get your finances on track and your business running smoothly.
Go Ahead: Ignore Your Profit and Loss Statements
If a company is making huge profits this year but will not make any profits in the future, it is worthless in the eyes of an investor. But if it loses money this year and next year–and may lose money for a few more years–it can still be very valuable in the eyes of an investor.
Amazon had negative net income in 2012 and basically reported zero net income this year to date. And yet it is worth $166 billion in the eyes of investors.
This is because companies are worth the present value of future cash flows, not current cash flows, and certainly not past cash flows.
Amazon is not the only company that is plowing back all of its incremental profits into growing its business. This is very common for enterprise software companies as well. Salesforce has made or lost a small amount of money every year for the past four years, but it has grown its revenue from $1.3 billion to over $3 billion in those four years. And its market value has gone from $12 billion to $32 billion in the same time frame. Workday hasn’t made any profits in the last four years, in fact the net losses have been increasing. But, the stock has doubled in the past year and the company is now worth almost $14 billion.
The lesson here is that you can’t just value a company by taking its current performance into account–you need to have a view towards its future performance. You also need to understand why the company is not currently profitable.
M&T Bank top lender to small businesses in Central New York
Syracuse, NY — M&T Bank has once again topped the list of the most active lenders to small businesses in Central New York, according to the U.S. Small Business Administration.
For the eighth year in a row, M&T Bank topped all large commercial banks in the Central New York region and the SBA’s entire 34-county Syracuse district. In fiscal year 2013, which ended Sept. 30, M&T assisted small businesses in Central New York with 70 loans at a value of $7.6 million and district-wide with 150 loans totaling $17.1 million, SBA Syracuse District Director Bernard Paprocki said.
The loans were made under the SBA’s 7(a) program. The SBA does not make direct loans to small businesses. Instead, it guarantees a portion of loans that are made by private lenders to small businesses. Under the 7(a) program, loans are provided to establish a new business or to assist in the acquisition, operation or expansion of an existing business.
