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Monthly Archives: October 2015

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Are You Bankable ~ What Does Your Cash Flow Tell Lenders About Your Business

As a business owner, your cash flow is a significant indicator of your company’s financial health and cash position from one period to the next. Managing the cash inflows and outflows within your operating, investing, and financing activities are very important for making sound decisions. Lenders assess your cash flow statement to observe the changes within those inflows and outflows to rate your ability in repaying your potential loan. Your business must be able to present stable or positive cash flows for at least three to five consecutive years.  The obligation to make your loan payments on an ongoing basis restricts your free cash flow to invest in growing your business and provides insight on the flexibility of your future cash flows, if there is an emergency.

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For many companies accounting is a top issue, and preparing sound financial statements can be problematic. Balance sheet accounts and elements of the income statement are used by banks to access their risk. It is important to stay current on all payments, invoices, and tax liabilities to prevent any setbacks within the loan process.

Besides your profitability, the 5 Cs of credit are key in determining whether your business is bankable:

  • Character (credit history) – a subjective measure of your willingness and ability to repay the loan, based on your personal credit history, (FICO) score and credit report, which provides the names of lenders that have extended credit to you, types of credit you have, your payment history, and your personal financial strength as a means to help understand how reliable you have been in repaying past your past debts.
  • Capital – is a measure of the borrower’s investment in the business such as initial cash infusion, retained earnings, or other assets of the business owner. Your personal investment is what can make your business more favorable.
  • Capacity – determines your financial capacity to manage repaying your loan, based on the historical cash flows, debt service coverage, and debt to income Ratio generated by the business.
  • Conditions – a measure of the environmental and economic conditions that may affect your company’s ability to repay your loan.
  • Collateral – lenders can secure your loan by the value of assets such as buildings, automobiles, equipment, CDs, or savings accounts ect. to help in determining their lending decision; they must have some recourse in case you default on your loan.

The PMC Team


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Which Face Belongs to Your Customer – Customer Measures to Assess your Image and Reputation

How does your customers really think of you? This is a question that every business owner should know the answer to, from their customer’s perspective! How was their experience in your establishment and overall, did your level of service leave them with the best impression? Customer Relationship Management is a way to synchronize your sales revenue, marketing, and customer service to interactions with your current and future customers. One or a few happy customers out of many should never be enough.

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There are customer metrics you can use to provide insight on how effectively you’re penetrating your market. If your customers are satisfied, they will be loyal, help increase your market share, and ease the work it takes in improving your brand image. Below are the four customer metrics that will help you gage your overall market share and reputation:

 

  1. Customer satisfaction – The number one way to see if customers are happy with your products or services is to simply ask for feedback! A quick survey regarding their experience or a few verbal questions about their level of satisfaction can go a long way! Customer satisfaction metrics bring to light their perception on your business’ overall quality and reliability.
  2. Competitive Pricing – Your price communicates your level of value to your customers. Your cost of goods or services should be considered in calculating that value to them. Your compeitive pricing analysis should also be measured against your competitors to assess if you’re providing the right value for a the right price.
  3. Customer referals – Happy customers tell their friends about how good their experience was with your company. Referals are an opportunity for new business from a customer reference or recommendation to their peers. Customer referrals are free leads; if you’re not considering referrals, you’re missing out on significant value.
  4. Customer Retention – This is often thought of as being synonomous with customer loyalty. Customer retention is about keeping your current customers, while customer loyalty is about building the long-term relationship through monitoring churn rates and cohort analysis.

The PMC Team


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