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Find new start-ups through entrepreneurship groups

April 28, 2009|Karen E. Klein

Dear Karen: My firm helps start-ups with marketing strategies. How can we reach them early on, before our competitors do?

Answer: Affiliate with an organization that is on the front lines of entrepreneurship. That might be an angel investor group, college entrepreneurial program or a business plan competition, said Stephen M. Rapier, a marketing professor at Pepperdine University.

"University faculty often provide the first structured opportunities for business students to move beyond dreams to real concepts," either in entrepreneurial courses or business plan competitions, Rapier said. "While not all students who participate will actually launch a product or service, your involvement among both students and faculty may provide an ongoing stream of opportunities."

Private investors are often among the first to get wind of promising entrepreneurial ventures while they are still in the planning stages. "It may be possible to be the angels' preferred provider of marketing services to their funded projects," Rapier said. "These positions may provide press opportunities as well, potentially leading to even more opportunities."

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Collections, not invoices, are the key to cash flow

Dear Karen: How do I improve my company's lagging cash flow?

Answer: Business owners often fall prey to the erroneous thought that the more they sell, the more money they'll make. Remember that an invoice is not cash.

Separate your revenue from profit so you can see where your cash is tied up.

Do three-month projections that show where your accounts are in the collection cycle, said Jonathan Blitt, chief executive of Aztec Software, a Springfield, N.J., company that develops financial education for small businesses.

"Include interest values in your projections that visualize how your cash decreases if you don't collect in timely fashion," he said.

Paying close attention to your accounts payable helps you better spot and plan for delinquent clients. Offering discounts for early payment, especially during this credit crisis, also can help.

If you're really tight on funds, consider accounts receivables funding (also called factoring), Blitt said.

It's costly, but it may substantially improve your cash flow and open up opportunities to expand your firm in a difficult time.

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Formal employment is a gray area in family business

Dear Karen: My 72-year-old husband volunteers as a partner in my S-Corp. Is he considered an employee?

Answer: It's not uncommon for relatives to work in a family business without being formally classed as employees, said Eli Kantor, a Los Angeles employment attorney.

However, this practice can be troublesome at tax time and when you eventually sell your firm.

"A husband helping out a wife is probably OK, but it's something of a gray area," Kantor said. He represented a family-owned manufacturer where several relatives worked without employment contracts, he said, and they were raided by the state and eventually fined.

That's unlikely to happen in your case, but it's worth asking your attorney or accountant whether your husband's involvement in your company should be codified.

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Got a question about running or starting a small enterprise? E-mail it to inbox.business@latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.

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