Menu X Menu
How may we help you?

1-800-345-2677

The HBS Blog
Companies Served Since 1981

The HBS Blog


The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

Business Forecasting
By Gregg Schoenberg Monday, January 28, 2013

As a business owner you probably spend a great deal of time trying to figure out how to grow your business by increasing sales. But are you also taking the time to analyze how an increase in sales would affect your financing needs?

If not, then you may be setting yourself up for a nasty surprise instead of a celebration when your company achieves its sales targets. Fortunately though, by employing a relatively simple technique known as percent of sales forecasting, you can forecast and plan for the financing requirements that are likely to accompany an increase in sales.

In order to conduct this analysis all that you need is a copy of your latest balance sheet and an understanding of which items on it will change when your level of sales changes.

For our purposes here, we’ll use the following simple balance sheet for the fictitious ABC Corp., which has $2 million annual sales.

ABC Corp. Balance Sheet as of December 31, 2011

         
Assets     Liabilities & Equity  
Cash

 $100,000

  Accounts Payable

 $200,000

Accounts Receivable

 $300,000

  Bank Loan Payable

 $200,000

Inventory

 $300,000

  Other Current Liabilities

 $100,000

Plant and Equipment

 $500,000

  Long-Term Debt

 $300,000

Total Assets

 $1,200,000

  Equity

 $400,000

      Total Liabilities & Equity

 $1,200,000

If ABC’s sales are going to increase, we’ll need to identify the items on its balance sheet that will also automatically increase. On the asset side of things, a higher level of sales means that ABC will need to stock more inventory and that its cash and accounts receivable balances will both be higher. And on the liability side ABC will see its accounts payable increase as it increases its purchases on credit from its suppliers.

Now that we know which items will increase along with sales, it’s time to forecast how much they will increase. To do this we simply take each item that will increase, divide it by ABC’s $2 million in total sales, and express the result as a percentage, as seen in the table below.

ABC Corp. Percent of Sales Worksheet

         
Assets     Liabilities  
Cash

5%

  Accounts Payable

10%

Accounts Receivable

15%

     
Inventory

15%

     
Total

35%

   Total

10%

So now we can see that for any increase in sales ABC’s assets will increase by 35% and that its liabilities will increase by 10%. For example, say ABC is forecasting its sales to rise to $2.4 million (an increase of 20%) in its next fiscal year. What will happen to its cash, accounts receivable, inventory, and accounts payable?

To answer this question we simply take the percentages from the preceding worksheet and multiple them by the new total sales figure of $2.4 million, and we come up with the following results.

Assets     Liabilities  
Cash

 $120,000

 

 Accounts Payable

 $240,000

Accounts Receivable

 $360,000

     
Inventory

 $360,000

     

A quick comparison with our original balance sheet reveals that assets will increase by $140,000 while liabilities will only increase by $40,000. But a balance sheet has to balance, so what exactly is our forecast telling us?

It’s telling us that ABC’s liabilities will now be $100,000 short of funding its assets. Of course, if ABC operates at a profit then it can expect that some of the additional earnings it retains from making that extra $400,000 in sales will help fund the shortfall, but will it be enough? That’s the question that all finance managers at large corporations, and business owners at small ones, need to answer.

To answer it you’ll need to calculate whether or not your new sales figure generates enough earnings to fund your new higher level of assets. To continue with our example, say that ABC earns 5% ($120,000) on its total sales and retains 60% ($72,000) of that amount after taxes. It will still have a shortfall of  $28,000 ($100,000 - $72,000).

But luckily for ABC, they practice percent of sales forecasting and were able to see the need for additional funding back when they set their sales forecast at the start of the year. So they had the option of borrowing additional money from a bank or dipping into their cash reserves. If they hadn’t gone through this exercise when making their sales forecasts they could have wound up short of cash despite realizing higher sales.

So try to include a percent of sales forecast the next time that you are setting sales targets for your business. While it is not a perfect predictor of the future, it is a simple and pragmatic way to get a handle on how your financing needs may change as your business grows.

Facebook Twitter Google Reddit LinkedIn
3 Tools to Help Entrepreneurs Generate Fresh Ideas
By Jamillah Warner Tuesday, January 22, 2013

When it comes to creativity, there seems to be a box that everybody is trying to get outside of. We’ve heard — and in some cases used — these phrases so often that they have become clichés:

  • “Color outside the lines.”
  • “Think outside the box.”
  • “Be innovative and creative.”

In reality, creativity matters, but having a little fun goes a lot further than hurling the words “creative” and “innovation” at people. In fact, a bit of strange behavior off the clock can go a long way in expanding your mind, shaking up your perception and awakening that dormant idea that just needs a little nudge — from you.

Clusters and Mind Maps

Dr. Gabrielle Rico calls it clusters. Tony Buzan calls it mind mapping. It’s the idea of getting both sides of your brain to have a conversation, and the connections that show up after they have a talk.

In Writing The Natural Way, Dr. Rico highlighted the scientific differences between the two sides of the brain. She calls the right hemisphere — the part we tend to leave at home when we come to work — the “design mind” specializing in the more artistic qualities of feeling, creation, connecting, and making associations between things. Dr. Rico refers to the left hemisphere as the “sign mind” and it tends to analyze, refine, correct and critique. The left hemisphere qualities are highly praised in the workplace, but it’s the bridge between the two that results in effective creativity. For the LifeHack Blog, Dustin Wax in Rico Clusters: An Alternative To Mind Mapping, explains how to cluster and get both sides of your brain working together. But clustering is not the only way to generate fresh ideas.

Dance Breaks, Horseback Riding And Other Random Acts

Sometimes the best thing you can do for innovation’s sake is to go into your office in the middle of a busy day — especially if they are always busy. Shut the door for 3 minutes. Close the blinds for privacy. Put your headset in your ear and just dance to your favorite song. You can find 3 minutes for every phone call: you can find 3 minutes for a quick break.

When you do things to mix up your normal flow, you also shake up your normal connections.

Here’s the assignment, enjoy your family this weekend. Do some of the things on your bucket list — horseback riding, random acts of kindness, etc. Have a big and deep laugh. And encourage your team to do the same, and then spice up your training. At the next staff meeting teach your team how to cluster, because you don’t want to be the only creative person in the mix.

Irrelevant Conferences With Minimal Contact To The Outside World

Since you’re the boss, spice up your conference experience. Even if you are not the boss, pay to learn some things outside of that box that we mentioned earlier.

Sign yourself up for training in a completely unrelated-but-interesting-to-you industry. And then go — guilt free.

Ideas need their own space to dance around. If you’re trying to keep them locked up in an office, then they cannot grow. and they can only go where you take them. So it’s time to hit the road, meet new people and learn new things.

Creativity is a strange bird and to keep up with her you have to dance a little, cluster a lot and sometimes be a bit irrelevant on purpose. If you do this off the clock, both sides of your brain will work better on the clock.

Facebook Twitter Google Reddit LinkedIn
Harvard Business Services, Inc. Earns A+ from BBB
By Brett Melson Monday, January 21, 2013

Harvard Business Services, Inc., founded in 1981, takes great pride in our stellar reputation for the creation of Delaware LLC’s, Delaware corporations and the guaranteed $50 a year Delaware Registered Agent Service. Accredited by the Better Business Bureau since 1998, Harvard Business Services, Inc. has no complaints filed with the BBB, unlike some of our competitors, who have well over 100 complaints.

Over 55% of our business comes from referrals or current clients, and we believe that is because of our consistently excellent customer service.  Every year, our number of repeat clients and referrals, for the creation of a Delaware entity or Registered Agent Service, continues to grow and, in my opinion, that speaks volumes!  For over 30 years, our goal has been to provide the fastest service, the most customer friendly Business Formation Specialists and the lowest Registered Agent fee in the industry.

The Better Business Bureau assigns letter grades from A+ to F, based on several factors, including the number of complaints filed against a company and how those complaints have been responded to and resolved. Harvard Business Services, Inc. always listens to clients, and we do everything we can to answer all questions/concerns in a timely, professional manner. Another factor the Better Business Bureua considers in its rating system is the length of time for which a business has been operating. Harvard Business Servcies, Inc. maintains an excellent rating since it has satisfied customers for over three decades.

Truth in advertising is important to an excellent BBB rating, and Harvard Business Servcies, Inc. lives up to the high standards advertised, as evidenced by our high number of referrals. It pays to do business with a highly respected, A+ company with zero complaints.

If you'd like to file a new Delaware LLC or Delaware corporation, or sign up for our Registered Agent Servcie, you can call, email, live chat, Skype or even walk in, and you'll find friendly, informatitve representatives waiting to help you. Feel free to view our stellar BBB report.

Facebook Twitter Google Reddit LinkedIn
Budgeting: Part 2
By Gregg Schoenberg Monday, January 14, 2013

In our previous HBS post we discussed the importance of setting an annual budget and introduced readers to the operating budget, which can be used to predict your company’s net income for a one-year period. And while net income represents your firm’s bottom line, you may remember from our series on financial statements that it is neither the most important metric nor the best indicator of company health.

In order to better gauge financial well-being we need to look at cash flows, and in order to properly manage cash flow we need to create a cash-flow budget each year along with our operating budget.

To get started with your cash-flow budget, take the numbers from your operating budget and plug them into the same software you used to create that budget. The next step is to look at all of your receivables and payables and determine when the cash associated with each is likely to be moving into and out of your firm’s coffers. For example, if customers have 60 days to pay their invoices in full, then January’s income should be represented as March’s cash flow. Of course, the same logic also applies to your expenses; your cash-flow projections for critical things like inventory should be budgeted for the period in which you actually have to pay for them, which can be prior to receipt.

Going through this exercise will highlight the difference between income and cash flow and can help you to identify and plan for times when cash is likely to be tight. Say you need to make a lump-sum payment due in June but won’t have the cash flow to cover it until you collect the invoices that are due in July; if you’ve done your cash-flow budgeting you’ll see this coming months in advance and can make a contingency plan that involves borrowing money for the short term or temporarily cutting back on expenses. But if you don’t have a cash-flow budget it may be too late to do anything about the shortfall once you realize that it’s there.

It’s difficult to overstate the importance of cash flows, and by extension the cash-flow budget, yet many entrepreneurs seem to ignore this critical component and instead focus on revenue and net income. This is a huge mistake, as a business can operate at a loss for an extended period of time, as most start-ups do, but it’s impossible to survive with negative cash flows. And even profitable business can run into life-threatening trouble if they don’t properly manage their cash flows. So make cash-flow budgeting a core part of your financial due diligence, and review your cash-flow budget on a monthly basis to make sure that your finances are either on track, or that you have time to adjust when things aren’t going according to plan.

Facebook Twitter Google Reddit LinkedIn
Simplify Sales with Marketing Automation Software
By Kathryn Hawkins Tuesday, January 8, 2013

Not all sales prospects are alike: they each respond best to a personalized message that acknowledges their specific needs and fits in with their current sales cycle, whether that means educating them about your industry or giving them hands-on demonstrations of your solution. However, if you’re dealing with a large volume of leads, you may be taking a one-size-fits-all approach with your prospects, and missing out on sales as a result.

If you need assistance delivering the right targeted message to your prospects and clients, it may be worth considering marketing automation software, which can help you track important notes about your prospects, automatically determine which messages a prospect should be receiving, and calculate the ideal times to send those messages.

Here’s a look at some of the most popular marketing automation software options and how they can help you streamline your customer relationship management and lead-nurturing process.

Salesforce  - Salesforce is a cloud-based customer relationship management (CRM) tool that’s used by thousands of small- and enterprise-level businesses alike. The product helps sales and customer services representatives track all interactions with prospects and customers in detail, enabling them to do a better job of responding to customer needs and personalizing their interactions. If multiple people at your company interact with customers, it’s an important tool for managing these important customer relationships.

Marketo - This powerful tool can help you score your existing leads and generate new content that will be compelling to your customers, with different landing pages and content offers for each audience segment. The software allows you to develop email marketing campaigns and then analyze their results. The platform also helps you plan the creation of additional content, such as white papers and e-books, and then deliver this content to your leads on a schedule timed for maximum impact.

Eloqua - Similar to Marketo, Eloqua is a cloud-based software platform that enables you to score and categorize your sales leads, and to nurture new leads with the deployment of planned content. The software offers detailed analytics insights, allowing you to collect data to determine how successful your marketing messages are and determine what changes should be made for the future.

Other popular marketing automation platforms include Hubspot, Silverpop, and Pardot. The software programs are available at a number of different price points, depending on the number of users and the features you need, but each program typically costs upwards of $1,000 per month.

Is it worth it? It depends on the size of your business and your business model—however, if you’re able to avoid hiring another employee by using the marketing automation technology to keep all of your pending sales deals moving towards a close, the monthly expense is likely to pay off quickly.

Facebook Twitter Google Reddit LinkedIn
Secure Connection
X Secure & Confidential

Your personal information is encrypted by Secure Sockets Layer (SSL) software so that it cannot be read as the information travels over the Internet.

Trustpilot
X Our customers love us!
We have lots of great customer reviews.
Like our service? If you are one of our many satisfied customers, please let us know.
BBB A+ Rating
X A+ Rated BBB Accredited Business

Need more proof that we're the best? Check out our record!

100,000+ Companies Formed
X
162,647

Companies Formed Since 1981

Disclaimer: Harvard Business Services, Inc. is a document filing service that provides general information. We cannot render legal or financial advice and your use of this site is subject to additional terms and conditions. HBS is not affiliated with Harvard University.

© Copyright 1996-2017. All rights reserved.