Investors want to fund good business ideas. That’s a broad statement because what seems like a good idea to me may be different from what seems like a good idea to you. So many ideas never seem to go anywhere. Some are just so uninspiring that they can’t seem to get the attention of anyone, much less investors. You can even write a whole business plan around a bad idea, leading to great disappointment when investors spot the fact it’s bad.
A good business idea is much more than just an idea. You can sit there all day and come up with ideas, but that doesn’t make them good. Good business ideas have certain qualities that differentiate them from other ideas. For one thing, a good business idea fulfills an unmet customer need, and it is often a need the consumer doesn’t even recognize yet. That may sound odd, but great ideas are often not great until someone invents a product or service.
Determining if a business idea is a good one requires more than just knowing the market will appreciate products or services. The idea must be feasible and realistic in terms of production costs, the time from funding to sales, profitability and safety. A good business idea is also one that can be brought to fruition because the entrepreneurs have the knowledge and skills needed.
There are more qualities associated with good business ideas, but one of the most important is related to innovation. Good business ideas offer a new twist on products or represent creative and innovative new products. The new twist or innovation should represent something that matters to people which means it brings some kind of satisfaction.
There are no hard and fast rules or magic formula to define a good business idea. Instead, investors will consider all of the qualities of the idea coupled with the marketing, competitive and financial factors.
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Free cash flow is one of the key indicators used to show the health of the business, particularly its profitability. Typically, it demonstrates the amount of money any business for other purposes after all the capital expenditures that may include equipment, buildings and various other necessary expenses that help businesses sustain their operations.
Although calculating cash flow is a complicated process, there are many ways you can do it. According to experts, it is always better to use all methods correctly. If they all generate the same result, it provides you a reliable way to cross-check your operations.
It is worth noting here that cash flow doesn’t relate to all businesses. It is precisely a measuring tool that non-financial firms use rather than professional associations and investment firms. If you own a non-financial enterprise, you can calculate the cash flow for free with these three equations.
Equations to Calculate Free Cash Flow
1.
Free
Cash flow: Subtract operation taxes and
costs from Sales revenues then subtract required investments for operation
capital
The equation is one of the
easiest ways to calculate free cash flow. Business owners take sales revenues,
including taxes and operating costs from their income statement. The fixed
assets show an increase when you invest in new operating capita. The balance sheet
shows everything from investments and revenue details.
For example, if your business has
earned revenues of $500,000, the amount is reduced to $300,000 because of taxes
due and operating costs. If your business requires an investment of $150, 000,
it will have the free cash flow of $30,000 to $50, 000.
2.
Free Cash
flow: Subtract net investments in
operating capital from net operating profits NOPAT (after taxes)
NOPAT refers to the same figure we used in the
previous equation: subtract operating taxes and costs from sales revenues. Net
investment of operating capital uses the same figure that is used in the third
term of first calculations. For calculating free cash flow through this equation,
it is better to use the increased fixed assets on your balance sheet.
That means, your NOPAT will remain
at the same amount of $30,000. You just need to exchange the required
investment of your business in operating capital for your net investments in
operating capital. If you assume the
same figures, your free cash flow will remain the same.
3.
Free Cash
flow: Subtract capital expenditure from the
net cash flow of operations
You can also calculate free cash flow by
subtracting the capital expenditure from the net cash flow that comes from
operations. Net cash flow in this
equation comes from the cash flow statement, while capital expenditure is taken
from the increase in the business’s fixed assets. For instance, if your operation’s net cash
flow is around $200,000, the figure might be reduced by your capital
expenditures.
Interestingly, all these free
cash flow calculation methods will give you the same answers when you work with
these equations. You might feel like approaching the same information and data
from three different angles.
How does Free Cash Flow Calculation Affect Your
Business?
As mentioned earlier, free cash
flow is useful for the health of your business. Firms with healthy free cash
flow are financially stable to meet the bills and investments every month. Plus,
they also have leftover funds that they usually distribute among dividends and
shareholders. Man firms use this extra fund to seize opportunities to help them
generate more revenues through acquisitions of innovative products.
That is to say, if your business
is booming and has high free cash flow, it is an indication that it is doing well
and you should consider expanding it. Conversely, if it fails to generate good
free cash flow, you might need to consider restructuring it as there are
remaining funds after the basic expenses.
However, it is important to
understand that poor free cash flow doesn’t always indicate a failing business.
It might be expected even when your business is pursuing growth. Development
and acquisition of new products are temporarily subtracted from the main
capital. That is the reason why most of the investors tend to work with the
businesses that have high free cash flow. These businesses are generally considered
healthy with bright prospects. If an investor finds a business that has rising
free cash flow with an undervalued share cost, it may be a great investment
bet.
How can you Benefit from the Free Cash Flow
Since you understand how positive
free cash flow may benefit you by indicating the healthy financial status of
your business, it is better to use this understanding to your advantage. It is
always better to look beyond the figures. Know that established firms have
relatively consistent and healthy free cash flow. New businesses, on the other
hand, are in a state where they need to pour money into growth and
stabilization.
Although it depends on the business
owners how they use the free cash flow, using the funds to expand the
operations, pay shareholders and dividends, invest in new products, research or
to reduce debt is beneficial for the business.
Always remember that companies
that have surging free cash flow due to debt elimination, dividend
distributions, cost reductions, efficiency improvements, or revenue growth can
reward their investors in the future.
In other scenarios, when free
cash flow is shrinking, businesses fail to sustain their growth earnings. Not
only this, insufficient free cash flow for growth forces a business to boost
debt levels. In a worse scenario, a business without enough free cash flow may
not even have the liquidity to sustain.
Final Thoughts
All in all, it is important to find an all-purpose tool that can help you test the fundamentals of your business that seem elusive. Free cash flow calculation is like a performance metric they provide entrepreneurs an opportunity to guard up if their business is not generating enough revenues.
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You might have heard of rising of Artificial Intelligence, right? Owing to utmost advancement in technology, people observe novel inventions in science and technology that bring unknown changes in every field of life. One of the very changes that have taken place is the incorporation of Artificial intelligence in most areas of life. Since it has been primarily infused in multiple departments of our lives, we can do a great business out of it. This article has been written to cast light on its applications and how it can be a great business. So, let us start without further ado!
What is Artificial Intelligence?
Artificial Intelligence directs the capability of machines or controlled robots to perform specific tasks that are generally affiliated with intelligent or human beings. In simple words, Artificial Intelligence makes possible the simulation of human intelligence processes and functions by machines, particularly computer programs. Operations that AI performs are learning, planning, and problem-solving.
Typical examples of Artificial intelligence are the following:
Self-driving cars
Robo-advisors
Conversational Bots
Email spam filters
Smart assistants
Article spinning software
How does AI work?
Artificial Intelligence works by merging large sets of data with intelligent, mathematical, and programming processing logarithms to absorb patterns and features in the data being analyzed by AI systems. Artificial Intelligence applications can be gauged by their working and processing. AI enhances its performance and adds expertise by assessing and measuring its performance, each time performing a set of data processing.
Since it is operated through software, it does not need any break while calculating even thousands and millions of tasks exceptionally swiftly.
It still confuses you, right? But, essentially, AI consists of many computers to solve problems, making it an entire scientific discipline.
The critical goal of Artificial Intelligence and Robotics is to model human behavior. As a result, it can solve complex problems via human-like thinking processes.
To accomplish these problems, the AI system employs a whole series of strategies, techniques, processes, and a vast range of technologies.
What disciplines comprise the field of Artificial Intelligence?
Different components can also be referred sub-fields of the most crucial science of AI.
Each of these departments is generally employed by AI:
1-Machine learning:
AI has astounding applications in this field that enables computer systems, programs, and applications to learn and improve results based on experience automatically.
2-Deep learning:
It is a particular machine learning that permits Artificial Intelligence to learn and improve by processing data. Deep understanding utilizes artificial neural networks which imitate neural networks in the human brain to process.
3-Cognitive Computing:
It is another significant part of AI dedicated to mimicking the interactions between humans and machines. This incorporates text, voice, and speech AI parts.
4-Computer Vision:
One of the most prolific and applaudable uses of AI is to review and interpret the content present on the image with the help of pattern recognition and deep learning. For example, computer Vision allows AI systems recognize components of visual data like captchas you usually find on websites.
Common Applications of Artificial Uses:
Although Artificial Intelligence applications are great in number in our natural world, we are presenting a few uses that we observe often:
1-Cyber-security:
AI plays the pivotal role of guarding against unauthorized attacks regarding important and susceptible data of an organization, be it private or governmental. The concept of Cybersecurity has been coined to cope with savage attacks from hackers, and AI plays an important in doing so for you. AI systems can detect cyberattacks and other cyber threats by monitoring the data that has been fed. Once this system detects a cyberattack, it can trace through your data to find the origin of the attack and help to prevent a potentially devastating failure.
2-Customer Relationship Management:
Artificial Intelligence and Robotics are bringing massive changes to Customer Relationship Management systems. Since software involved in Customer Relationship Management like Zoho and Salesforce require considerable human intervention to run the system accurately, AI has great potential in carrying out such tasks. When you AI technology to these platforms, the CRM system advances to a self-updating, auto-correcting system that causes your CRM system to excel.
3-Internet and Data Research:
Artificial intelligence helps internet users to improve their search experience by affording them more relevant information about their inclinations and circumstances. As Artificial Intelligence technology advances swiftly, users get better and more customizable experiences.
4-Data Research Assistants:
AI has eliminated all the repetitive hassles of doing emails and answering common queries by completely changing the company operating from the inside. AI offers chatbots acting as personal assistants to assist manage your emails, maintaining your calendar, and even give you suggestions about smoothening processes. Moreover, these AI assistants can also help respond to questions customers ask who call or chat online.
We have summed up Artificial Intelligence Applications.
Why is AI business worthy of investing and what is its Future?
Having thoroughly read about this technology, you might have got some understanding regarding its bright future and demand. As technology progresses by leaps to bounds, the upcoming world will likely have much more crucial problems to contemplate and devise solutions to rather than doing simple routine tasks. Therefore, its future is very bright, and it will overwhelm the globe with its catchy features. Owing to its productivity, it will be a sought-after technology that is worthy of investment. The artificial Intelligence business is still soaring and will soar with more impetus, generating humongous revenues.
Funded.com is the leading platform for accredited investors network worldwide. We monitor and provide updates on important funding events. Angel Investors and Venture Funding can be a key growth for a startup or existing business. Whether it is a first, second or third round financing having a strategic alliance with an Angel Investor or Venture Capital financing can propel a business to the next level and give the competitive edge.
For most business startup owners, one of the most difficult aspects of their job is the task of securing venture capital. And while there are many available sources of funds out there, we have to realize that there are also a huge number of business startups that are competing for the money.
So what elements of businesses guarantee financial support from investors? Actually, there isn’t. Most of the time, the chances of securing a venture capital greatly depends on the situation, in addition to the characteristics of the business and the venture capitalist. However, despite this reality, there are some things that a business owner can do to increase his or her chances of securing financial support from venture capitalists.
Among the most important pointers that a business startup owner must remember is the need for him or her to be prepared with what’s going to happen.
Establishing a business is not as easy as coming up with an idea that will entice a large market. In addition to passion and dedication, a business owner is expected to be knowledgeable with every single aspect of his or her business. Thus, before approaching a venture capitalist, it’s important for owners to know their businesses.
This is important because it would prepare them for all sorts of questions that may arise during a presentation for potential investors. Likewise, a full understanding of the business would enhance the viability of the business plan, therefore increasing the chances of getting financial support.
Aside from being prepared with all the questions that a potential investor may ask, business owners must also have some knowledge on the people that would be the receiving end of their pitches.
Sometimes, owners tend to contact every single venture capitalist in the country. And while this increases your chances of securing investments, this also increases the amount of time that you spend looking for money. As they say, time is gold. So why spend a lot of time when you can do something much better?
Instead of calling every single venture capitalist in the planet, try to look into the list and study your chances of getting support from every single person in it. Doing this would make you realize that more than half of the people in your list would not even read your request because they are not interested on the concept of your business.
There’s no single advice that will boost your chances of securing venture capital. Nevertheless, like in any other field, being a little bit smarter will increase the possibility of getting financial support.
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Angel investors are known for investing billions of dollars investing in start-ups and have funded tens of thousands of small businesses. So it’s reasonable that entrepreneurs developing business plans will associate angel investors with money first. Yet angel investors have a lot more to offer business than just financing. They also have entrepreneurial skills, market knowledge and business savvy, which are all assets that new businesses can and should use to their benefit.
Angels spent considerable amount of time in a process called due diligence. They use their knowledge and business analysis skills evaluating business plans with two goals in mind: earn a designated return of investment and limit risk of loss. Investors consult with a number of professionals and get expert advice from a network of attorneys, accountants, business analysts and investor associates. For every entrepreneur initial rejection of funding by potential investor can also be an opportunity. Opportunity to learn from the reason of rejection, the business plan can be perfected for future requests using the information gleaned from the review process.
If the business plan is accepted, many angel investors offer time and advice as well as money. It’s not a case of interfering in the business or its management but rather a case of providing insight based on management and business experience. Most business owners welcome this insight as having enormous value. Angel investors giving feedback, mentoring entrepreneurs and promoting business growth are giving entrepreneurs assets that are at least as valuable as money for business growth. For some businesses, they are more valuable.
More detailed information and useful advice can be found at Funded.com. it offers expertise and assistance with developing and funding your concept. If you need to access a network of angel investors or business plans for start-up funding visit Funded.com
The capability of entrepreneurs to effectively and efficiently manage their own businesses is among the requirements to succeed in this field. However, there are other factors that contribute to the actual results of a venture.
One of these, apparently, is the general performance of the sector in which the entrepreneurs establish their businesses. According to a new report, healthcare and the real estate sectors remain the most profitable sectors, comprising almost half of the list.
Despite this, what topped the list is something that is not surprising as deals with money – accounting and other related services. These are some of the most profitable sectors are as follows:
Accounting and related services
There is no denying that proving accounting and related services, such as bookkeeping and payroll services, top the list of most profitable industries at the moment. According to latest reports, the sector has a net profit margin of 19.8 percent – primarily due to high demand and low equipment overhead and equipment costs.
Legal service
Next to accounting, which is also not a surprise, is legal services. With the rise of legal issues arising both between individuals and companies, there is nothing new with reports that among the sectors that reap a big margin is the field legal service. The only surprise, perhaps, is that it did not top the list this year contrary to the last.
Oil extraction; Machinery rental
Tied on the third place are sectors concerned with oil extraction and the leasing/rental of industrial and commercial machinery equipment.
The high ranking of these two is primarily on the current policy that focuses on increased production of crude oil and the rising number of constructions and industrial development in the country in recent years.
Dental services
The fifth on the list, dental services, is quite a surprise. Who would have thought that a specialized sector would be able to compete with, for instance, industries dealing with oil extraction? On another thought, however, the number of people requiring tooth extraction – not to mention other related dental services – will remain a demand so long as the humanity survives.
Real estate leasing; Brokers; Medical service
Tied on the sixth to eighth places are the real estate leasing, real estate brokerage, and the medical profession.
According to latest reports, the improvement of the economy has resulted in the better performance of the housing market, thus the good profit margin of real estate brokers. Moreover, however, this has also pushed the profits of those engaged in rental services, the prices of which have shot up in recent months.
Meanwhile, doctors, as expected, are in the list – primarily due to the increasing population, and partly due to the issues on health and lifestyle that is affecting the new generation.
Other health practitioners; Management companies
Tied for the ninth and tenth spots are other health practitioners and management companies.
Dentists and doctors are not the only ones reaping the increase in profit margin in the past months. Expected to join them are other health practitioners, who are very much needed just like the doctors and dentists in this part of the world.
With the growing trend of businesses outsourcing management strategies to experts, those who have management backgrounds have jumped at the bandwagon and established their own companies that provide the current demand – for a profit, of course.
These ten industries are just some of the most profitable sectors that those who consider establishing businesses – or even just applying for a job – should think about. Runner-up include outpatient care services, schools, real-estate related activities, death care services, and mining support.
More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.Funded.com Copyright 2014 Funded.com LLC
Disaster preparedness should always be on the priority list of business start-up owners. Unfortunately, not all entrepreneurs out there seem to understand that everything can disappear in a matter of seconds during the onslaught of a powerful hurricane or tornado or floods.
The latest Small Business Disaster Survey showed that 74 percent of small businesses in the United States do not have recovery plans in case disasters damage a portion of the company. What’s more surprising is that 84 percent of small businesses do not have natural disaster insurances, and that 71 percent of these companies do not even have generators.
The possible cause of this phenomenon is the fact that around 76 percent of small business owners in the United States have never been affected by a major natural disaster. And while it is reassuring that not everyone is going to be devastated by a hurricane or tornado in the next few years, the reality is that the number of major weather events that hit the country is continuously going up.
Data from the National Oceanic and Atmosphere Administration showed major weather events (those inflicting damage of at least $1 billion) has increased from around two per in the 1980s to around 10 per year in 2010. More alarming is the data showing that 65 percent of businesses operating in the US are located in areas that have a high risk of getting ravaged by a natural disaster.
With this, it is only fitting for small and large business owners to invest in good disaster recovery plans to mitigate the possible harsh effects of natural weather disturbances to the companies. Some believe that “disaster recovery plans” are unnecessary expenses for businesses that need to limit its financial burden in order for it to survive. This is not a true claim.
Creating a plan does not need a lot of money. In fact, business owners can develop their own using information that they can get from the Internet or other sources. Planning does not have to be very extensive, but rather a concrete precaution in case of disasters.
Such plans should include the creation of back-up files in strategic locations in case a disaster destroys the original ones in the main office. Having a back-up power source is also a good idea, especially for businesses that rely on technology and machinery.
An alternative “home base” must also be established or conceived in case the main office becomes unavailable due to disasters. The plan should also talk about basic evacuation plan for employees in case an abrupt disaster strikes while everyone is in the middle of production.
No one wants to experience a disaster destroying his or her business. However, having a plan to address this issue is always better than having nothing at all.
More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website. Funded.com
Business plans are important for every business startup. Entrepreneurs often spend time creating these documents, which often spell the difference between the success and failure of a venture. Business plans often serve as the framework of the startup and sets the realistic short-term and long-term goals of the company.
There are various ways to create a business plan. Most of the time, their format vary depending on the group of people who will utilize them. A business plan meant for the employees is usually different from a business plan for potential investors.
For instance, a business plan for investors or mentors would contain more detail as compared to the business plan for the personal use of the owner and his or her business partners. After all, it is expected for the latter to be more knowledgeable of the particulars of the company, therefore eliminating the need for a more detailed plan.
Despite the differences, it must be emphasized that all business plans have a lot of elements in common. Failure to include any of these ten important business plan component would mean disaster for they contribute to the overall effectiveness of the document:
A mission and vision statement that highlights the goals and objectives of the company and its owner;
A detailed description of the business startup and an introduction of the products or services that it offer;
A detailed description of the products or services and a discussion on how the differ from the rest that are currently offered in the market;
An analysis of the market in which the company would enter, including a detailed description of the possible competitors;
A description of the key officials of the company, as well as the rest of the management team;
A detailed discussion of the game plan on how to market the product or service and encourage potential customers;
An analysis of the company’s strengths and weaknesses, including viable opportunities and challenges that could improve or affect its performance;
A segment on the financial statement which will show the owner’s understanding of the cash flow of the business and its importance to the growth of the company;
A description of the projected revenues of the business; and
A summary to conclude the business plan
Including these things would ensure that the business plan would be effective in fulfilling its roles as the framework of the business. The owner may decide to include other information, depending on the people who will utilize the document.
More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website. Funded.com Copyright 2013 Funded.com LLC
In recent years, the number of available venture capital funds for business startups that are coming from traditional sources has started to go down. Fortunately, there is a viable alternative – corporate venture funds.
It can be noted that a several multinational corporations have started to allot some of their funds for business startups. Latest data show that roughly around 900 corporate venture funds are currently available for new businesses. Last year, around 16 percent of companies have acquired corporate venture capital, a number that is expected to increase this year.
Corporate venture funds have been available for more than two decades now. But recently, corporations have started to embrace this trend even if it would disrupt the status quo. The reason, they can’t afford not to anything about it.
Several companies have recently declared bankruptcy or have started to vanish because it failed to recognize the changing landscape of the market. For instance, rental company Blockbuster would still be a major player if it recognized startups such as Netflix. This is similar to the case of Kodak. If only it recognized newbies Shutterfly and Instagram, it might have averted declaring bankruptcy.
Fortunately for some companies, they still have time to catch up with the situation. Nielsen, for instance, has already allotted money to fund small investments. Dell is doing the same, maintaining that it will continue investing in startups even with plans for it to be taken private.
Corporate venture capital allows public company to focus on the long term. For instance, American Express Ventures will participate in merger of e-commerce and payments industries. It is also looking for new technologies that could be utilized for the next decade.
If you are an owner of a business startup who is in need of capital, then it is a good idea to look for venture funds from corporations. Securing one would be a good thing, especially since big companies could assure a successful future for your business startup.
More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website. Funded.com
Securing funds from venture capitalists or angel investors is one of the most difficult tasks of business startup owners. Not only do they need to convince potential investors that they will benefit from the deal, they are also tasked to convince them to believe in the potential of their ideas.
Venture capitalists and angel investors are experienced when it comes to choosing which startups to fund. Most of the time, they know how to separate the entrepreneurs who lack the ability to run a viable business to those who are made to be successful. In order to avoid falling into the first category, business startup owners should avoid committing these obvious pitching mistakes:
Asking for a non-disclosure agreement
While it is understandable that you wanted to protect your ideas, asking your potential investor to sign an NDA on your first meeting is a major turn-off. Unless you have patented algorithms or formula that could be considered as your intellectual property, you have to realize that NDAs do not have much value in the business startup world. Keep in mind there are hundreds of other people out there who might have been thinking the same way as you do.
Asking your potential investor to sign an NDA is a sure way to shoo them away as it inserts a level of untrust worthiness in your supposed partnership.
Talking about equity splits
Opening your pitch with the idea of equity splits at early stage may turn away a lot of potential investors. Of course, it’s important to deal with agreements and percentage points, among others. However, talking about this too much instead of focusing on the product and other more relevant things would surely upset your potential investor.
Determining who will be the CEO is important, but spending all your time arguing the pros and cons of appointing one is futile, especially for business startups that have yet to establish a name for itself.
Failing to present a financial plan
Investors want to know how they will benefit from a deal. So a good business startup owner is expected to present a financial plan detailing how is he or she planning to gain revenue. Be realistic, a business without a detailed financial plan is not a business.
More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.Funded.com
