Category Archives: General Business Advice

The Business Plan: Your Guide to Success

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J. Roy Miller, State Director, NMSBDC

J. Roy Miller, State Director, NMSBDC

Imagine you are starting a trip. Where are you going? How will you get there? A plan helps you chart the best course, ensures that you follow your route, alerts you to important landmarks and reminds you of your schedule and budget.

You wouldn’t embark on a trip without a plan so why would you start a business without one? Studies have shown that the failure rate of start-ups without business plans is three times higher than that of businesses whose owners prepared a plan.

A business plan provides you with the analysis needed to decide whether it is in your financial interest to go into the business. If you decide to continue exploring the idea, this analysis is critical to obtaining the main thing that fuels the business world: capital. A plan helps the prospective investor – be it your banker or brother-in-law – determine the merits of the “deal.”

Plans can be as short as one page or as long as one hundred; most are between twenty-five and fifty pages in length. Whatever length and style is suitable for you, your plan should, at a minimum, contain the following information:
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Avoid the Financial Danger Zone

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Leslie Hoffman, Director of Lending, ACCION New Mexico

Leslie Hoffman, Director of Lending, ACCION New Mexico

Credit can be an important financial tool, especially for people who are trying to start or grow a small business. Credit can be used to buy inventory, finance the start-up of a business, or make purchases for large-ticket items like equipment or office space.

But like all tools, performance must support cost. Credit is not extra income — it is money that must be paid back. If it’s not managed well, it can become overwhelming and can prevent you from reaching your financial goals.

When your level of debt outpaces your ability to pay for it, you are in the financial danger zone. You are much less likely to qualify for additional credit and you need to take steps toward better financial health.

One tool lenders use to determine if you’re in the financial danger zone is a mathematical expression of the relationship between your debt level and your income. It’s called debt-to-income ratio and it is calculated by dividing your total monthly debt payments by your total monthly net income – or your take-home pay after taxes and other deductions. Generally, a debt-to-income percentage that exceeds 20 percent is a sign you need to take care of your current obligations before taking on any more debt.
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Take Control of Your Credit

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Leslie Hoffman, Director of Lending, ACCION New Mexico

Leslie Hoffman, Director of Lending, ACCION New Mexico

Ever tried to borrow money from a bank? What about applying for a credit card?  Have your ever financed the purchase of a car? The banker, credit card company or car dealer probably asked about your credit history.

For some, it’s an intimidating question, but it doesn’t have to be.  You can take control of your credit if you understand what it is and what it can do for you.

Credit is the ability to borrow money to pay for things.  Good credit means you make loan payments on time and pay off your debts when they are due.  Poor credit means you miss payments, don’t meet pay-off deadlines or have too much debt.

Credit can be useful in emergencies if you need money quickly. It can also allow you to make larger purchases when you don’t want to pay the full amount at one time. For entrepreneurs, it can be a critical element in the growth or start-up of a business.

Financial institutions verify your credit through a credit report that reflects how you have handled your debts.  There are three national agencies that produce credit reports – Equifax, Experian and Transunion – and all include similar information in their reports.
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