Money Matters

When I made the decision to start my own company, I had been personally debt-free for many years and had no intention of going into debt to grow the business. So my partner and I bootstrapped the business using our personal savings and went about the task of finding new customers and delivering services.

I had no trouble finding paying customers. I figured the company could self-fund any future growth once we became a viable player in our niche. That plan worked well for a few years until several customers started making late payments. By this time, there were plenty of ongoing costs like payroll, employee benefits and taxes.

The company was able to sustain the delays for about 18 months and then we hit a cash crunch. I thought surely a trip to our commercial banker would solve the cash flow problem. We had been loyal bank customers for several years. The folks at the local branch knew me and some of the people on my staff. We had a solid set of financial statements.

Suffice it to say, I got a wake-up call when the bank turned down my request for a line of credit. Why? The company didn’t have a strong enough credit history because I had been careful not to assume any debt. The next bank said the company hadn’t been around long enough. The next bank never really gave an answer, they just kept asking for more paperwork until I grew tired of attempting to comply. I was faced with the fact that I had waited too long to seek financing. Now that there was a real financial need, the lenders weren’t interested.

Now there are folks that will say my financing theory was flawed from the beginning, but there are other woman owned small businesses that were built on the same premise. For example, TransPerfect Translations, has been recognized by Inc. 500 as one of the fastest growing privately held companies in the US.

Ultimately, I sold our accounts receivables to a third party to help with our cash flow. This is commonly referred to as “factoring” and it does come with a small price. Here’s what I learned along the way:

Get to Know the Playing Field – There are many financial tools available to small business owners such as credit cards, lines of credit, commercial loans, equity investment, accounts receivable financing and of course personal savings. Research from the National Association of Women Business Owners reveals that women entrepreneurs typically use more than five sources of capital when growing their businesses. Take time to learn about the pros and cons of each, and how to match the right kind of financing with your business needs.

Get to Know Your Lender – Consider making your banker part of your extended financial team. Meet with your account representative on a regular basis to ask questions about any programs that might be a fit for your business. Make sure s/he has an understanding of your growth plans, discuss which financial tools will help to accomplish your goals and develop a plan on how to get there.

Get Financing Before You Need It – Just because you’ve been a loyal bank customer doesn’t mean your bank will lend to you once you start having cash flow problems. On the contrary, research from OPEN: The Small Business Network from American Express shows that most lenders are risk averse and don’t like hearing that a company is having trouble paying its bills, even if they’ve worked with the customer before. Apply for financing when your cash flow is strong and tap into the funds when a need arises.

Get as Much Money as You Can – Don’t just ask your lender for a line of credit to help you make payroll. Take a good look inside and outside the company and determine the factors that might impact your business down the line. In his book Kiss Theory Good Bye, Bob Prosen suggests using your financial team to anticipate what capital needs are now, what they are projected to be in the future, and how to position the business to best meet those needs now. That may mean asking your lender for a line of credit to maintain payroll and a commercial business loan to fund expansion.

So what’s the moral of the story? Whatever financial strategy you come up with – just don’t run out of money!

Integrity Matters

I've been accused of being too honest. One of things I'm famous for saying is "I'm going to tell on you. Do you want to go with me or wait here until I get back?" It's what I've said many times when others have crossed what I believe to be my invisible ethical line. Once I served on a jury that had been deliberating a case for about a week. Most of the evidence indicated that the defendant was guilty but there was this lingering doubt in all of our minds that something didn't add up. It seemed that the plaintiff had more to do with the crime than she let on.

When it appeared that we might be deadlocked, one of my fellow jurors stood up and addressed the group. He said that he was tired; concerned that he might lose his job if we didn't reach a decision soon and began to encourage the group to find the defendant guilty so we could get out of there by close of business. Now, I too was tired. There were no judicial officials in the room, the tags on my vehicle had expired while I was in court; and since I'm self employed, I was losing money for each day that we continued to deliberate. However, I wasn't too tired to give the case my full and undivided attention. His concept of finding the defendant guilty wasn't in the slightest bit tempting to me. We were talking about sending a human being to jail for a crime that we weren't sure he committed. I couldn't go to sleep at night knowing that I had made a decision about someone else's life based on the fact that I was fed up. So, being the jury foreperson that I was, I asked the group to disregard his comments and continue to deliberate the case. When he persisted, I said those famous words..."I'm going to tell on you. Do you want to go with me or wait here until I get back?" Well, you can imagine he wasn't too pleased with my statement but when it was all said and done, we got back to the business of deliberating.

Take a Stand

Someone once said if you don't stand for something, you'll fall for anything. I believe in standing up for what's right, even if it means my decision won't be a popular one. I am not afraid of what people might think of my decision to do what's right, which is why I offered my fellow juror the opportunity to accompany me to an authoritative source once I made my decision.

Too often business owners find themselves in a position of deciding between making a sale and doing what's right. When I started Ex Nihilo I established a set of values that would govern the way we conduct business. We are committed to providing professional services with a commitment to:

Continuous Improvement

It felt good to have a solid basis for decision making. Those values were tested within our first year of business, and it meant walking away from a client that was offering follow-on business at rates that were very profitable for us. The ability to make honest, professional decisions has been one of the most satisfying facets of owning my own business.

I don't know what ultimately happened to that defendant. We found him not guilty on some of the charges and we finished deliberating by close of business that day.