Cash Flow Key to a Home Forex Business

Often I hear of people who have invested in a home business, have performed their due diligence on how much it costs to set up the business and yet within a few months find themselves in a worse financial position than when they started. For all businesses whether they are small home business or multi-million dollar corporation, there is one law that runs throughout. This law states that “cash flow is king.”

Poor cash management is probably the most frequent reason for home businesses failing to succeed.

There are numerous examples of companies who have had full order books but who were unable to maintain themselves in business due to cash flow problems. If it is true for large corporations, then this is also true all home businesses where income is essential to pay for mortgages and to feed and clothe ones family.

So let’s get back to basics. There is a fundamental difference between the increase in profit and having cash. Profit is defined as the amount of money you expect to make over a given period of time. For tax purposes this will be for a specific financial year. For the vast majority of businesses the first year or sometime a couple of years the business will not have profits. Cash, however, is the key to make a business run. You need the cash to purchase supplies, training, marketing etc. You can’t spend profit; you can only spend cash.

Cash flow therefore defines the movement of money in and out of a business. Positive cash flow means that more money is coming into the business than going out. Negative cash flow means that more money is going out than coming in.

I would propose that there are three elements to successful cash flow management.

  1. The business owner needs to have a good idea of when, where and how cash will be moving within his business. This need not be complicated, but it is essential. I was recently reviewing the development of a small business with a friend who was looking at expanding. I had to admit, that they had an impressive vision of where they were going. However, I drew to their attention that if they were to grow as they projected then they would need to have the resources to meet the expected demand. They did not have the cash available to invest in those resources. There was no point in investing in extensive marketing if in the end a business does not have cash to deliver to its customers.
  2. Each business will require investment. I do enjoy watching the television programme called “The Dragons Den.” In this programme people with “ground-breaking” ideas (as well as those not so ground-breaking!) present their ideas to a panel of successful business investors who review what is being offered. The ideas that the “dragons” believed would be profitable would be invested in. They all realise that in order to achieve their dreams, they need financial input. Other investment sources may include an owners own savings as well as private and commercial loans.
  3. It is important to review on a regular basis the cash flow situation and to take decisions on whether to progress based on hard facts. It is no coincidence that accountants of large organisations provide monthly reports on the organisations financial position. If this is important for large organizations, it is also true for home businesses. A home business that on a regular basis requires considerable amount of money invested into it and offers a small return should be seriously reviewed.

During my time working in project management consultancy, one of the control points that we used was known as a project “gate.”This gate normally took the form of a senior managers meeting during which time the project manager provided details, amongst other things, of a projects progress, it costs, its risk and issues and how it aligned with the original business requirements as well as reviewing its assumptions and expected benefits. For smaller businesses especially those with limited financial support this exercise is crucial.

The home business owner should also set have financial goals and objectives that allow him to evaluate whether a business is going to be a profitable business or not. Cash flow is undoubtedly one of the most important elements that need to be included in any business plan.

It is important to ensure especially in the first few months, that the home business owner has enough financial resources available to allow the business to grow. The vast majority of people setting up a home business will not have the benefit of a bank loan or significant financial resources to get started. It is crucial therefore that operating costs are kept to a minimum.

So the question that I get asked is why did I get involved in Forex as a business. I was successful in project consultancy as well as running a property business. In response I will refer back to the three elements of cash flow managements detailed in this article.

  1. Before starting out spending too much money, I ensured that I had a good idea of how much I would need a) to start the Forex business and b) to grow the business. I was not naive enough to believe that I would be successful from day one. I realised that apart from investing in training, there would be a number of lessons to learn that would have a financial impact. I therefore put aside a set amount that would determine the maximum that I was prepared to lose.
  2. One of the beauties of Forex trading is that one can grow from a small amount and watch the cumulative growth of the business. I would not need to approach anyone for any loans. My strategy was that on achieving a certain level of competence (this was defined by having an account of a certain size) I would further introduce funds into the business. This would provide injections of cash into my business that would bring instant rewards.
  3. In order to measure progress I had designed and built a financial model that would track all the transactions, my investments into the business and also withdrawals. This was linked to my business plan that I had devised. The model tracked progress on both monthly and weekly time periods. In the first couple of months, I made some serious mistakes which brought me close to failing. It was the analysis of my weekly trading patterns that helped me identify where money was being lost and where it was growing. I plugged the gaps and exploited the growth.

One of the great attractions for me is that although there are costs associated with starting up a home forex business, once the skills of money management are mastered they will last a lifetime.

Improve Business Performance: How to Ensure Your Business Relationships Are Good for Your Business

Are you spending time with the ‘right’ people?

You are the average of the 5 people you spend the most time with.

You may have heard this quote before – but do you pay heed? Stop for a moment to think about this: it can be argued that all the most important aspects of your life – your dreams, aspirations, energy, contribution, relationships, feelings of success, health, financial situation etc. are likely to be a reflection of the average of the 5 people you spend most of your time with!

With respect to your business performance, it could well be worth spending ten minutes (or an hour!) examining who your influences are and the potential impact of these relationships on your business performance.

Follow this 4 step process to make sure that the top 5 people you currently spend the most of your time with are positive for your performance in business (and of course, in life!).

1.Identify WHO your top 5 business relationships are.
In your business life, who are the top 5 people and organisations you spend time with? Brainstorm all the people and organisations you spend time with – and get creative. This includes people you see face to face, those you think about, people you email, individuals who make you feel stressed! These could be your business partner, employees, people you share office space with, clients, suppliers, mentors, competitors, even websites you spend a LOT of time on.

Once you have them all there, circle the top 5 – the key individuals you spend most of your time ‘with’.

2. What is the IMPACT of these particular relationships?
Think about the following for each of your top 5:

  • For what reason does this relationship exist? Why do you spend so much time with or thinking about this person?
  • What sorts of emotions and experiences do these people generate for you? What energy do they have? How do you feel following interactions with this person?
  • Are they inspiring and motivating? Do they generate passion and creativity?
  • Are their values aligned with yours? Or are they focused on areas that conflict with your priorities?
  • What types of conversations are you having with these people?
  • Does your work and time spent with these people help to fuel the passion you have for your work?
  • Do these individuals and businesses have attributes that you want to posses yourself? Or are they in the same place as you, reinforcing where you are currently at, rather than where you would like to be?

3. Take stock of the impact of these working relationships on your business performance.
Bearing in mind what you have come up with in step 2, and your goals and aspirations for your business and your working life, take the time now to determine whether these relationships are good for you and your business or not.

How does your current business performance reflect your top 5?

Can you see any link between the current performance of your business and those top 5 relationships?

  • Maybe you are achieving huge success and surround yourself with like-minded people who support you to push yourself.
  • Perhaps you can recognise that you have some key relationships that sap a lot of your energy, leaving you drained and unable to hold yourself to the high standards you aspire to.
  • Do you have clients who you work with out of obligation rather than true alignment?
  • Is each relationship taking you and your business to where you want to be, or merely affirming your current position? Can you recognise that you are holding yourself and your business back by continually associating with individuals and organisations who are at the same place as you are, rather than with people who have already achieved the success you aspire to. Or maybe these individuals and businesses have attributes that you want to posses yourself and by being in relationship with them you are setting yourself up for success.

Use this step to identify those relationships that are positively impacting on your business performance, but also to determine which relationships are holding you back, inhibiting your progress, or negatively impacting on your performance.

And lets be clear – not every relationship should be examined with a mindset of ‘what can I get out of this’ or ‘how could this person benefit my business’, but it is important to surround yourself with positive influences – whether that’s people who challenge you to learn and grow, mentors who inspire you to be your best, or simply people who allow you to express your creativity and passion for your work.

4. Use this knowledge to IMPROVE your business performance.
Now that you have identified where your relationships are supporting you and which ones are holding you back, take action!

What can you do to enhance those relationships that are positive for you and your business? How can you ensure you nurture those relationships and that you continue to soak up the positives.

Where there is room to step it up, get clear on what kind of people you do what to be surrounding yourself with, and to seek them out.

  • If you have specific aims or goals, which groups or individuals could you align yourself with so you can be with people who share your values and vision.
  • If you need development in a certain area, where are others in this zone congregating. Perhaps its a matter of joining a business forum, development or networking group so you can meet these like minded people.
  • AND – who do you need to distance yourself from? Perhaps you have clients who are draining your energy and sapping your passion for your work. Is it in your interests to create closure on that relationship so you can create space for clients who you feel a passion for working with. Similarly, if you are experiencing difficult or negative relationships with suppliers or even employees – what course of action could you take to get these relationships to a point where they are positive for you and your business?

If you have a strong desire to improve your business performance work through these four steps to ensure your interactions and relationships in business are not only inspirational and fulfilling, but take your business to the next level.

Four Sources to Properly Fund Your Business

Proper business funding/capitalization are an issue to all small businesses at all stages of the business cycle. Those businesses that are organized as corporations and LLC’s are required by the state granting the business charter to be adequately capitalized. The challenge here is there is really no clear definition of adequate capitalization.

The purpose of requiring adequate capitalization is to ensure that the business entity has the ability to carry out its business operations without subjecting those working with that business, including employees, to financial loss. Proper protection against financial loss also requires a business to address potential liability issues.

Funding requirements will differ significantly from one business to another as well as what stage in the business cycle the business occupies. One of the most difficult stages to fund is typically found with start-up small business ventures. New business ventures may have great ideas and potential for success but have no history of success nor have they produced financial results. These realities make securing funding difficult. Funding challenges, however real, do not relieve the business owner from the responsibility of providing adequate capitalization for their business enterprise.

There are many sources of funding available in the market place for small businesses and LLC’s, each with unique advantages and disadvantages. The best source for funding will depend on the particular circumstances of the business seeking the funding and may include using a combination of several different sources. Start-up funding in particular is a very specialized world and seeking experienced and competent help is strongly advised.

Here are the four most common sources of funding for businesses:

1. Cash investment from the founders of the business - Typically the easiest to obtain and the least expensive of all forms of capitalization.

2. Income from business operations – This is perhaps the best source and usually the least expensive, after the founder’s investment, source of funding and capitalizing a business. This is typically more readily available to businesses that have been operational for some time whereas a start up business may find this source difficult or even impossible.

3 Bank Loans – If available to the business bank loans are relative inexpensive in today’s environment but may be difficult to obtain. This is especially true for start up businesses and those who are not financially strong with good positive cash flow.

4. Venture Capitalist and Angel Investors – These sources of funding can be good and are available to those businesses that able to demonstrate a strong business and product that also has excellent potential for high returns. The trade off with these sources is that often they require a large percentage of ownership in the company to induce them to invest. This is not necessarily bad, just be aware of that fact when you start. Also, in many cases they may require a business they fund to go public within a specified time period. Again, not necessarily a bad requirement.

As with all funding sources, it is a financial necessity to carefully examine the conditions and structure of the funding.

Lack of adequate capitalization/funding has caused many promising business to fail before they have a chance to get started. In addition improperly structured funding has been the cause of both new and mature business operations to struggle financially and in many cases fail.

One of the often overlooked factors in adequate capitalization of a business operation is proper and adequate insurance coverage. If inadequate insurance exists in a business, a damaged claimant could potentially pierce the corporate veil due to under-funding. Most business owners will have property and casualty insurance for buildings, vehicles, equipment but do you have general liability insurance sufficient to cover claims not otherwise covered by property and causality policies. In addition, Directors and Officers insurance, as well as Errors and Omissions insurance, are an important part of those businesses that require these policies and qualify for them. The important key here is to seek advice from a highly qualified insurance/ risk management specialists for your small business or LLC.

As can be seen from this short discussion there are many factors that make up the discussion of providing adequate funding for a business as required by the states. Taking an active and disciplined action on this matter will protect the business as well as the owners of that small business or LLC.