Community Economic Development Fund


All about counting, controlling and making money for your small business.

Who is going to “BAIL” you out?

The Small Business Administration has many excellent educational programs for entrepreneurs. Inside the curriculum of several of their courses is a clever reference that I haven’t been able to identify the author of, but the turn of the phrase puts a smile on my face each time I hear it.

They teach that every business owner needs “BAIL.” And once you know the definition, you realize that, in reality, it’s a combination of resources that really can get or keep you out of jail in extreme circumstances

B stands for Banker who can help you not only obtain necessary capital but understand the prudent and efficient ways to finance your business as it grows. While one might be tempted to think of the banker as the one who “bails you out,” that can be a dangerously unlikely assumption.  CEDF, of course, is not a bank. So for our clients the B stands for Business Advisor who will connect you to the lending team as appropriate and usually take your worried 11 pm call to strategize on how you’re going to make payroll.

A is for Accountant. And this is meant to cover the territory of both bookkeeping and accounting. Many accounting firms do not choose to provide bookkeeping services, but a certified public accountant is the best choice for both bookkeeping clean up (often made necessary by using a less than experienced bookkeeper), long-range financial planning and preparation of tax returns.

I is for Insurance Agent who will make sure you are carrying the proper kinds of coverage and policy limits. Catastrophes that kill small businesses include not just natural calamities but the disaster of not obtaining easy and affordable coverage for predictable, although infrequent, events.

L is for Lawyer who will consult with a business owner on what legal form to adopt and provide direction for creating operating or shareholder agreements. The relationship should continue as the lawyer is consulted about employment law issues or legal matters related to property or specific industry regulation.

Entrepreneurs love to be self-sufficient and some take this to the extreme of avoiding use of any of these professionals for the sake of reducing expenses. And then, of course, when trouble comes, there’s nobody available to “BAIL” them out.  

-- Frederick Welk
CEDF Business Advisor

How do you put a price on your business?

Once in a while, the conversation between a CEDF business advisor and a client turns to the possibility of the borrower selling the business. It’s surprising how unfamiliar many small business owners are with the standard approaches for valuing a company in their industry, or any closely-held company for that matter.

Admittedly the subject is complicated, and while there are basic formulas, often individual circumstances can overtake the usefulness of any single customary approach. Probably this is one reason there is a whole industry of business appraisers, although most of their work is confined to “bigger” small businesses.

This article provides a nice tutorial for those who need to get grounded in the realities of valuation. As you can imagine, it’s not unusual for a small business owner to sometimes have an unrealistic idea of how much their operation would bring. In companies where the efforts of the owner are key to the past accomplishments and future success of the enterprise, it can come as a shock as to how little value the office furniture, old equipment, leasehold improvements of a rented space and even the customer list can bring.

A hard look at the realities is important both for personal planning and making short and long term decisions about investment, expansion, and potentially, succession. A talk with your CPA is a good first step toward evaluating the cold truth.

-- Frederick Welk
CEDF Business Advisor


Do you even need more money to solve your problems?

It’s probably natural that a nonprofit lender like CEDF, will encounter a lot of small business owners who are at their limits when it comes to adding more debt to their companies. Even though for many it continues to be a difficult environment to get traditional bank financing, there seem to be a growing number of sources in the “fintech” industry that are happy to make money available. Unfortunately, we often see small business owners stuck in quicksand, trying to get on top of endless amounts of “easy” internet money that was quick to get but very expensive.

One reason borrowing money is so attractive to entrepreneurs (even when they are paying crazy effective interest rates) is that they are even more frightened of selling off a piece of their baby before it grows up to be the super-productive money machine they are dreaming it can become.  Yes, equity is expensive. It means paying a share of the profits (more or less) forever. It means having to collaborate, compromise or at least consider that someone else has a say in your decisions.

But is money even the right answer for your business?  Here’s a provocative article from TV’s Daymond John who ponders whether debt or equity are even the right questions.


Do you have the right Key Performance Indicators?

Key Performance Indicators or KPIs are a staple of business, especially in corporate life, and I’ve read several articles quite critical of the practice because big companies have a way of overdoing it and measuring aspects that distort larger truth.

This hardly ever happens in a small business. The usual problem is that the business owner doesn’t have enough accurate, timely and relevant information to make good judgements and expedient decisions. In some companies the problem is not conducting competent up-to-date bookkeeping. If you don’t know, for example, how much money you are owed and by whom, you might find that very inconvenient, especially when you don’t know how much you owe and to whom.

Objectively, bookkeeping should be an easy problem to solve. Turn it over to a competent professional.

But there are more stars in the sky to track than those that make up basic accounting measures. Each industry has its own special elements that need attention. If your business uses some kind of application software it might provide these KPIs for you from a suite of reports. I have a client in a medical profession who employs this application to run office functions and track clients.  But, giving due attention to the rich information in the database requires curiosity and an investment of time to make the most of the tool.

Other kinds of businesses have to manually track the important stuff and possibly give creative thought to what should be tracked as a KPI. Knowing what more sophisticated peers in one’s industry do can be very helpful.

As an example, a retailer wants to know not just sales totals but average sale, customer counts by period, number of items purchased per transaction, days of inventory, inventory turn, sales dollars per payroll dollar and a many other similar stats. It is certainly possible to run a store (at least for a little while) without knowing any of these things.  But eventually a reckoning will come to the ignorant and unobservant.

This article from the developer of QuickBooks lists some popular financial KPIs.

The top seven items they tout sound important, but some are more relevant for some businesses than others. Inventory? Not for a service business.  Accounts payable turnover? Not for a business in an industry where payment terms are cash and carry.  One really has to study what dials and gauges on your dashboard (sorry, corporate speak) are vital. The best KPIs are the ones that help you spot trouble and attract necessary attention that you might be unlikely to offer otherwise.

I favor this article’s treatment because it outlines the reasons you should develop KPIs, even those that are nonfinancial but more operational in nature. The publisher is another small business financial software company, Xero. Among their recommendations, make sure your KPIs are as follows:

  • Relevant
    The best metrics are those that have the most impact.
  • Balanced
    Measure short and long-term KPIs.
  • Understandable
    Everyone in the business should know what the KPI means.
  • Shared
    Everyone in the business should know why it’s important.

Business isn’t only about numbers, but just like in sports, measuring the right things is a path to improvement.

-- Frederick Welk
CEDF Business Advisor


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