Bartering is a tried and true (and ancient) business practice. It is still commonly used in many countries in every day business interactions. For whatever reason, it is not as common in the U.S. but this doesn’t mean it should be forgotten altogether!

If your small business is still afloat but you find yourself short on cash, give bartering and honest look. There are many barter exchanges which you can join and here’s how it works:

Step 1: Research the barter exchanges. Like I said there are a lot out there so do some research and pick the one you think will best suit you based on other members and how much you want to pay to join. You can find lists of these exchanges at nate.org , irta.com or itex.com .

Step 2: Join your chosen exchange. There are a wide variety of membership fees out there. Some have a one time fee of $800 for new members while others charge a much lower monthly fee in the $10 to $30 range. In addition to the fees, there can also commissions involved which, if you are a low-margin business, would make bartering a money losing venture. Run the numbers and find out.

Step 3: Barter away! You will receive "barter cash" for your and work you do/goods you offer which will be good only within the exchange you join.

Keep in mind these important factors (compiled by BusinessWeek.com ) when getting involved in a barter exchange:

Joining an exchange does entail costs, including fees and commissions. If you run a very low-margin business, those commissions may make bartering a money-losing proposition. Every business will want to limit its barter business to 5% to 15% of total revenue so that cash flow remains at healthy levels, says Ron Whitney, executive director of the International Reciprocal Trade Assn. (IRTA), a Rochester (N.Y.) nonprofit that promotes barter. And if you are bartering one-on-one, be careful. Misunderstandings can arise if you don’t have a formal contract. Then there is the IRS: Barter deals have to be treated like regular cash sales in federal and state filings. If a business owner uses barter services for personal reasons, the cost of the item is considered compensation on your income.

If anyone has tried this, I’d love to hear how well you think it works?

If you are like many companies, you’re already looking for ways to trim off a little fat. That could come in the form of not ordering as much inventory, looking for employees to lay off or any other cost-cutting measures.

As a matter of fact, many small business owners are already in a panic, with doomsday visions in their heads.

It’s time to stop and take a deep breath.

Fact Check

Look at the facts. Yes, we are in an economic downturn. Because of this, sales are down across most industries as people prepare for a recession.

In many respects, this could be making matters worse. By hoarding finances out of fear of a depression, we may well be speeding up its arrival. An economic downturn, whether or not it turns into a recession, can’t be predicted.

There is no way to know when it will end and everything will bounce back to normal. However, the one thing history does tell us is that it WILL bounce back. That means you can put those doomsday visions out of your head. The end has not come – rather, this is just a bump in the road.

An intelligent businessperson will prepare for the economic downturn and possible recession – but won’t panic.

Manage Debt

Part one of making it through an economic downturn is to manage your debt. Many companies live off a plan of leveraging their debt, counting on being able to roll current loans into new ones when they come to term.

This may not be an option the next time around. Instead, you need to build up your cash reserves so you have a comfortable nest egg in place the sit on during the economic ride.

Broaden Your Customer Base

While the U.S. Dollar may be having a tough time and the U.S. economy may be reeling, that does not mean the rest of the world is having the same problems. While U.S. buyers may be a little more reluctant right now, there are plenty of other countries around the globe ready and willing to find new suppliers.

Try to broaden your base of customers, and add new international clients into the mix.

Investing

If you have managed your debt well and built up a cash fund for your company, this may be a great time to invest in new items for your business. While everyone else is clamming up and afraid to buy, you can use this time (and your extra cash!) to expand your offerings, pick up new customers who want those items – and possibly take the lead in the race against your competition.

Changes in the economic tide are nothing new. Financial markets go up and down as they have for generations. The key to weathering the down times is to keep your wits about you and plan well while taking advantage of any new opportunities.

First, if you have never done it before living within a budget can be difficult as well as educational. For instance, knowing how to reasonably trim your expenses, or how much of a cash reserve to keep on hand will take time to develop the skills. Learning along the way, adjusting when appropriate will become easier as you practice.

Next, you developed a budget, but that was a best guess. You will need to be prepared that you will most likely miss your budget projections. However, your actions in correcting the missed budget will be adjusting it accordingly. Specifically, if you have a bill that you budget for, say around $100 a month and for the last three months it has been consistently around $150, this is where you will need to adjust your budget accordingly. If it is running less expensive than you budgeted for, you can then reallocate that money somewhere else within your budget.

Even though you have established a budget, this does not mean that you become extremely rigid in regard to the budget. You will need to be flexible to change things accordingly, such as your revenue is not as high as you had budgeted for, then you will need to trim back on expenses, and if you are bringing in more than expected, you may want to invest the money into upgrading equipment, etc.

Additionally, ensuring that your inflow is more than your outflow will be crucial to following your budget. Monitoring the inflow will help you to know if you will be able to cover your monthly expenses, particularly if your business has long periods of time between the inflow of money.

It is also a good idea to be a little more conservative when setting up your budget. You can do this by overstating some of your expenses, along with anticipating your revenue to be lower. This is a good strategy to ensure that your cash flow will be enough to cover your expenses. Money saving ideas is a good choice as well, such as lower phone plans or less expensive office furniture, etc.

If you can, set aside a cushion of cash. Having a stash of cash will help any small business with both success and threats to its survival. Of course trimming expenses is a good way of adding cash, but if there is any extra, it is a good idea to put it away. If your budget allows for it, earmark a certain amount of money and put it into a money market account. This money may come in handy if your taxes were higher than anticipated or an unanticipated bill is received.
Again, ensure that you are checking your budget every month, if not more often. Examining your cash flow will ensure that you are away of what available funds you have and need. If you are adjusting your budget as you go, then this will help to provide a cushion should you have any overruns in your budget. Of course saving any extra for such occurrences is also a good idea.

Last, your budget should help to restrain you from impulse purchases rather than constraining you to pay for what you should be paying. Setting up and maintaining a budget is a good discipline tool as well as ensuring that you are reviewing it for any adjustments needed.

What is your small company to do when you feel a growth spurt coming on and are having a tough time getting financing from your banking institution?

Look online.

Beginning Your Online Search

There are a number of companies that may not have brick-and-mortar buildings, but do have money to lend that you can get a piece of.

When you begin your online search, remember for as many honest lenders that are on the Internet, there are just as many fraudulent lenders who are just trying to get your personal information and steal your identity. Never give your personal information out until you have done some research on the company that you are considering.

You need to look for an online loan company with a positive reputation. Once you have found a lender you are interested in, do a Google search for that lender’s name. Also, check with the Federal Trade Commission . They keep track of companies that have complaints levied against them.

You should be able to log on to the FTC site and search for the company you are considering using to see if any complaints come up. If so, you may want to look for another lender.

Well-Known E-Funding Sources

Try contacting larger, better-known online lenders such as ELoan or Lending Tree . These companies have been around for a while and have completed a number of successful transactions.

They offer loans in all categories, from home loans to personal and commercial loans, so there is little doubt you will be able to find a loan that suits your needs.

Non-Traditional Online Sources

You may also want to investigate less traditional loan avenues including companies like Globe Funder and Prosper.com . Globe Funder takes your loan needs and shops them around to various lenders worldwide to try to find a match. Prosper.com allows person-to-person loans. They match up borrowers and private lenders, who want to help people.

The interest rates for these types of loans are comparable to bank loans and are often much lower than credit card financing rates would be. It is important to note that with companies like Prosper.com, you will not be able to secure large loans, as they rarely do loans over $25,000.

Loans, Rates and Fees

You will have to choose between secured and unsecured loans. Secured loans are loans where you use collateral to back up the loan. With unsecured loans, you get the money without putting anything on the line. If you need a longer loan period, you may want to find the collateral for a secured loan, as they have longer grace periods for repayment.

Read interest rate information carefully. There are many companies that offer loans, but that hide their high interest rates. Many payday loan operations offer personal and business loans. If you do not do your research, you could end up paying 600% or more in annual interest.

Also, watch for any loan “fees”. While small processing fees are common, some scam artists out there will take advantage of your situation and charge you astronomical fees to apply for a loan. In many cases, these are not even legitimate businesses and they will disappear with your “application fee”.

The online world has opened many doors to new opportunities for small businesses. Finding business loans is one of these. The key to getting the right online business loan for your company is to make sure you choose carefully and do your research before you sign anything.

First, choose carefully a business where you do not have to invest a lot of capital to get it started. Obviously a franchised business will be out of the question. Be realistic about the type of business you choose, and the amount of resources that are available to you. You may be starting out small, but think big! A suggestion is to start out part-time until you have raised enough capital to go full-scale. Another idea is to ask your spouse to support you while you are in the start-up phase of the business.

You may not have a lot of capital, but your time and effort are worth a lot of money. Realistically, the lack of capital will require you to put in more time and effort in order to get the business going and keep it going strong.

Being creative when it comes to getting things done is also required when you do not have a lot of capital. For instance, if you do not have the money to rent an office space or to properly set up your home office, start off on the dining room table.

Additionally, the many materials needed to market your business can get expensive. You will need to get creative, and this effort you put in at the ground level of your business will actually make it and you stronger.

Instead of using banner ads for marketing, use discussion boards or article submissions to spread the word of your business. These are usually free or very low cost. Every cost-cutting measure you take will help you to gain capital; plus you do not have money to waste.

Being a small business owner, you will be responsible for completing all the tasks that need to get done. You are the accountant, the sales person, the marketing guru, and the CEO of your newly started business. With a lack of capital, you need to be prepared to do all these tasks yourself, even when you do not want to do them.

In order to raise more capital quicker, you may want to enlist investors or borrow money. You will need more money in order to grow your business; but be very careful about borrowing. Do not borrow more than you need, but be realistic about how much will be needed-if all of your cash flow is going to pay debts, then it will be hard to grow your business. Be prepared to obtain loans in the future, should the need arise.

Starting a business with low up-front investment cost in terms of dollars is very possible, particularly with the advent of the internet and internet commerce. Learn your business, invest your time and talent in your enterprise and soon you will be astounded by the growth in sales and profits.

Also, there are some aspects of your business that you just can’t afford to cut out; the cost to your business is too high. The key to success in business is having the wisdom to know when and what to invest in and when and where you can cut expenses without hurting your enterprise.

How Do I Know If Something Is Critical Or Not?

If I cut this out, how will it impact my business? This is the key question to ask yourself before you get too far down the road planning to cut out something. Whether you are contemplating a reduction in product or service offerings, or looking at laying off an employee, look at how will the reduction impact your business. In the short term the answer may be that the impact is negative – but what does the long term look like?

If you were in the wagon wheel industry as a marketer or reseller, you needed to transition when Henry Ford invented the automobile. Those who failed to shift their strategy paid the price. While this example is extreme, the lesson is still valid – change happens and you and your business need to be aware and ready for change.

If I Make This Investment What Will the Payoff Be? How Long Will It Take to Realize the Benefit?

Most people in business have heard of the term ROI, or return on investment. While there are many math calculations to help you figure out the ROI of a capital investment, there are other more subjective factors to consider in the return on your investment.

If you are considering a new product offering, make sure you have an accurate gauge of the demand for the new product or service. While this can be difficult to estimate, look at similar industries or technologies and study how the demand developed and trended over time.

If the investment you are considering is a capital investment, will it result in additional sales or increased efficiency? For example, you may be considering the purchase of a new multi-function printer for your business. If you are able to double side print your documents, improve your use of toner, and save on spending at your outsource copy company, the investment will save money for your operation. If you are having to spend time to go to the copy facility and use gas to drive there, be sure to calculate a cost for your time and the vehicle fuel and maintenance. It is important you calculate all costs into your decision matrix so you can make the best decision possible for your enterprise.
Remembering to ask these three questions when considering cost-reduction tactics can save you time, money, and your sanity in the long run.

This takes into account your sales (Money In), your expenses (Money Out), and your profits (Balance). If you’re a small one-man business, you may find that this is more than enough for your needs. And because Excel allows you to use its auto-sum feature, it will keep a running balance for you as you input any new figures. Yet if you find that you need to keep track of more information than Excel or any other similar chart program can manage, it’s probably time to start looking at more advanced alternatives.

Cost vs. Need
Of course, one of the things you should take into account first before updating your invoicing and accounts system is its cost-effectiveness. If it’s not going to offer you much more than what you currently have (whether that’s Excel or similar), then it’s probably not worth the extra outlay.

However, if it’s going to save you valuable man-hours, which can be spent marketing your business or attracting new customers, then it’s definitely worth the financial outlay. Better still, if you use an accountant or a part-time administrator to do your accounts for you, and the new software enables them to be completed in half the time, again it’s saving you money. So make sure you take the time to look at how much it would cost to upgrade, and how much you would save by doing so. This should then enable you to make a final decision.

Options to Choose From
Once you’ve decided that you definitely want, or need, to upgrade your current system, the next thing to do is decide what software you want to go for. There are literally thousands on the market, and all offer benefits over each other, as well as disadvantages. So, once again, take the time to look at what you need it for, and then narrow your search down to include just the software that will meet your specific needs. You can read more here about [ur=http://www.gowholesale.com/news/view/Choosing_Accounting_Software_For_Your_Businessl]choosing accounting software[/url].

Some excellent options include NetSuite, Microsoft Office Accounting Professional 2008, QuickBooks and Simply Accounting by Sage. They all offer unique selling points, so make sure you pick the right one for you, and your accounts will soon be running themselves.

Not only will this allow you to go over the previous year and see where you can improve, it will let you plan ahead, for seasonal blips or similar. By setting your financial plan into motion now, you’ll be able to have a far better grasp of your business finances, as well as stave off any potential cash flow problems. It will also help you apply for any business loans, should the need arise, since all your finances, both present and future, will be available for the lender to look at.

What do I need for a Financial Plan?

How you put your financial plan together depends on what information you want from it, and how in-depth you want it to be. For example, if it’s just an idea of what stock you’re going to need to buy and how much it’s going to cost, you can probably do it yourself. However, since a good financial plan is so important to your company’s success, it’s better to either become better aware of what’s involved, or seek out a specialist financial business advisor.

If you are deciding to compile the financial plan yourself, there are some tools that you can use to help you do it properly. For instance, you can buy software that will allow you to forecast your financial needs for the year ahead. By using a combination of graphs, images and an easy-to-follow interface, you can soon put together a reasonably comprehensive report.

Alternatively, you can also make use of the various resources online for putting together business plans, company forecasts, etc. Just go to any search engine and type in the phrase that’s relevant to your needs – “financial plan” or similar, for example. There are also some free resources available to you, such as your local small business development center, the local Chamber of Commerce, or any similar association. These have experts that can guide you through the complete process, and they won’t charge you for their services either.

However, if you can afford it, it’s definitely worthwhile enlisting the help of a professional advisor. After all, these people work with financial plans as part of their daily routine. They’ve also undergone extensive training, and will be able to give you an unbiased report on your current and future financial status. This will ensure that nothing is bypassed or ignored, especially if you’re inclined to put a more positive slant on bad news.

Whatever way you decide to go, there’s never a better time than now to start planning your company’s financial year ahead. It could save you more than time in the long run.

But there’s another critical aspect of your business- you. As owner and manager of your business, your time and investment are valuable and worthy of compensation, even in the start up years.

You wear many hats in your business, but the two main ones are that of manager and investor. We’ll look at each of these roles separately.

The Small Business Manager

This is the role you are most familiar with. You are in this role when you work IN your business. Some of the main management functions are: business planning, human resource management, supply management and sales.

You could hire a manager to perform these functions for you, but most small business owners do it themselves out of financial necessity. Say, for the time being, that you will keep the manager job. How well does it pay?

Let’s look at your situation. Fill in the following information:

(A) Amount of income from your business that you were taxed on last year: _____________
(B) Number of hours you worked in your business last year: ____________
(C) A divided by B = ___________

Are you at least making minimum wage? If you’re like most owner/managers, you are making between $1 and $3 per hour. Hardly a sustainable wage!

Why is it that small business owners are willing to put up with such a low hourly wage? Because they believe they are building something for the long term. The problem is that 80% of all businesses fail in the first five years, and 80% of the rest fail in the next five. Odds are, there will be no long term, especially for those businesses that fail to plan well.

Time and time again, I see clients in my practice who slave away at their businesses ten and twelve hours (or more!) a day for years without getting paid. Any money they do make gets farmed back into the business to keep it going. The toll that this takes on the business owner’s morale, health and family is astronomical. How long would you work for someone else and not get paid? Not very long.

You must plan for your own compensation. Not enough money in the cash flows for that? That indicates a problem. It means you are under-capitalized. It also means that you are permanently chained to your business. You couldn’t hire a manager for free, so you will have to continue to do it forever. Not very heartening!

How do you know how much you’re worth as a manager? Look around your industry. Look at what your competitors are paying their managers. Look in the Help Wanted section of your local newspaper. What are the salaries being offered to managers in similar roles?

Once you have a sense of what you’re worth to your business, put your pay in the cash projections and make it work. If you’re in the start up phase, you may have to borrow from a lending institution in order to cover your salary. The business must be able to cover the principal repayments on the debt as well as the interest. If it can’t, you will need to look at new ways of attracting increased business.

When you have planned out your salary, PAY YOURSELF FIRST! This is critical. Like any other area of your life, if you leave yourself until last to get paid, there’s a good chance you will run out of money before you get around to it. You will make sure all other suppliers get paid because they will pick up the phone and yell if they don’t get paid. You have to treat yourself just like any other supplier- worthy of prompt payment.

The Small Business Investor

You wear another hat in your business. You are an investor in your business. You have most likely invested personal resources (cash, equipment) into the company, and like any other investment, you should receive a financial return.

This has nothing to do with the hundreds of hours you spend working. This only relates to the financial resources you have expended.

Let’s say that when you started your company, you took $5,000 out of your savings account for start up costs. What else could you have done with that money?

* Invest it in the stock market
* Buy a bond
* Put a downpayment on investment real estate
* Loan it to another start up company

What would have been the benefit of doing those things? If you had invested in the stock market, you might have income on your investment in the form of capital gains or dividends. A bond would have generated interest income. Real estate will provide capital gains and rental income. A loan to another company would generate interest. In all these cases, you would be making a financial return on your $5,000.

You didn’t do any of those things however. You invested in your own company. Was it a good investment decision? It is if you are making a return on that investment that is similar to other investments that carry similar levels of risk.

For example, when you invest your money in the stock market, you expect to be compensated for the risk that you won’t get your money back out.

When you buy a bond, you bear the risk that the underlying bond issuer will not be able to repay the principal or the interest to the bondholders. The issuer needs to compensate the bondholders for that risk.

Investing in your own small business has risks too. In general, you know that the money is illiquid. In other words, you cannot take it back whenever you want. It is needed for the operation of your company for a certain length of time. You also know that the small business failure rate is extremely high. These are risks that should be offset by financial return.

So, how much return should you receive on your investment? Probably more than a government guaranteed investment and less than a junk bond.

Your accountant will be able to help you navigate through the owner compensation issues and set up a system that gives you the maximum return with the minimum tax consequences.

Step 1: Write your business plan. Whether you’re seeking commercial financing or a loan from an angel investor, you must be clear about how much you want, what you want the money for and how you plan to repay the loan. The answers to these questions should be spelled out in detail in your business plan. You don’t have to be a Hemingway to draft a business plan-use software or pre-formatted plans into which you simply plug your information (the writing is virtually done for you). For more information about writing a business plan, including links to commercial software, visit the SBA at www.sba.gov .

Step 2: Repair your personal credit if there are problems. Although your business is requesting the loan, your personal credit history is a key factor in whether a lender will approve your application. After all, in most cases, you must personally guarantee any loan to your business.

Contact each of the three major credit reporting bureaus to request a copy of your credit report (the same report that lenders will see). Under federal law, you’re entitled to a free copy annually.
* Equifax (www.equifax.com )
* Experian (www.experian.com )
* TransUnion (www.transunion.com )

Review all information to make sure everything is correct. If there are errors-such as old loans still being reported that you have satisfied or unpaid items that aren’t yours (they belong to the other Mr. Joe Smith)-you can have them corrected. Talk with the credit bureaus to find out what documentation is needed to update your files (it may be as simple as your writing a letter requesting the correction).

Idea: Build your business credit, separate and apart from your personal credit, to expand your borrowing opportunities.

Step 3: Fix your balance sheet. Yes, lenders do look at your balance sheet-the financial statement about your assets and liabilities as of a certain date.

You may need to pay off existing loans before the lender will consider your application for a new loan (i.e., you generally can’t pay off your current debt with a new loan).

Step 4: Find the right lender. Save yourself time and energy by submitting your application to the lender with which you stand the best chance of approval-a lender that aggressively supports small-business lending activities. It may be a commercial bank, a line of credit through a credit card company, or a private lender.

Important: If you’re looking for seed money to start a business, choose carefully since many lenders only deal with companies that have been in business for at least several years.

Ask around-for example, consult other small-business owners and your accountant-to learn which lenders are currently giving loans to businesses like yours.

Step 5: Put it all together. You’re ready to ask for a loan and you’ve found the right potential lender to talk to. Now you must complete the loan application. This entails more than filling in the blanks. You usually need to assemble:
* Financial information-balance sheets for yourself and the business, profit and loss statements, cash flow statements, and other numbers that the lender requests. For numbers on the projection of business activities, make monthly and quarterly forecasts for the coming year and quarterly and annual forecasts for subsequent years.
* Old tax returns, both business and personal-generally for each of the preceding three years.
* Other documents-leases, franchise agreements (if the business is a franchise), patents and other proprietary items, letters of intent from suppliers and manufacturers and any testimonials or scientific studies supporting your product or services.

Idea: Make a final check of your application package. It may be advisable to have your accountant or another numbers person review your application to help you present yourself in the best possible light.