Photo (CC) by 401(K) 2012, on Flickr

You probably have heard the phrase, “follow the money.” The phrase became popular the book and movie, “All the President’s Men,” by Bob Woodward and Carl Bernstein. These Washington Post reporters uncovered the details of the Watergate scandal, which led to the resignation of President Richard Nixon.

Today, this phrase remains valid for small-business owners who, when looking to succeed, need to “follow the money.”

Most business owners take this task seriously and record income and expenses so they can determine profitability. They look at what part of the operation generates the greatest revenue and, likewise, where they spend the most money. They often make changes, across quarters and years, to ensure growth remains steady and that no one area is bouncing up or down.

But to get the most out of following the money, digging deeper is necessary.

Starting on the income side, you need to look at where your business generates the most money and who are the clients buying your products and services.

Once you have identified who is buying, you need to search for why they buy. From these two pieces of information, you perhaps can sell more to your existing markets as well as find new customers through marketing additional benefits that may appeal to others.

This research also may give you the information you need to move into new markets. And it may identify where your clients are hearing your messages about your business and its products and services.

On the expense side, your task is to dig deeper into the categories to see where you may have leaks, or money that is dripping away. However, that task can be very time-consuming, so the savvy small-business owner must balance his or her time against the potential savings.

When evaluating your expenses, you need to consider new ways of doing things. Might you benefit from implementing technological changes? Balance such changes against maintaining customer and employee goodwill.

Finally, when looking at expenses, be sure to consider how a line item expense relates or correlates to the income side of the equation. An obvious example here is marketing. It may seem like an overhead item that can be trimmed. But what might be the ramifications of reducing your marketing efforts?

Perhaps spending more money on certain marketing tools will increase revenue substantially. The same might be said for salaries, the cost of your location, technology, etc. You don’t know what the best steps to take are unless you “follow the money.”

You can’t deny that “follow the money” is a great line for books and movies. Yet it also is very powerful when building a successful business.

Photo by Becky McCray

Whether you are starting a business or looking to grow your business, there is always a need for capital or financing.

With the advent of Internet, new opportunities for capital have developed. Plus all of the old methods are also still a possibility.

Typically, you, the owner, make the first investment into the business. It may be savings or income from your day job or from another family member. You may also look at borrowing from family and friends. Sometimes it may be sweat equity but it may also be the home you live in put up as collateral.

Another commonly used technique is bootstrapping, finding ways to get the job done cheaper or with bartering or doing without.

And don’t forget the goal of making money which can be another source of funds with which to build your business.

Pam Schallhorn, a colleague from the University of Illinois Extension, recently introduced me to a free ebook, “Startup Wisdom: 27 Strategies for Raising Business Capital.”

This book, done jointly by the Washington State Department of Commerce and Washington State University Extension, covers the methods I just listed plus other funding options such as angel investors, crowdfunding, and “Shark Tank.” It even mentions the use of lottery winnings (not likely to happen). Free money is not discussed (typically a myth) but it does discuss grants which are hard to find and are the closest thing to free. Realize thought that they often come with restrictions, may require matching funds, and take time to both write the application, wait for the review process and then wait even longer for the funds to arrive.

When looking for funding, you need to prepare yourself. A business plan is often needed and some want proof of feasibility. For any type of loan, you will need a clean credit record.

During the course of your business, you probably will use multiple means of financing. Different scenarios may make the various alternatives more or less acceptable.

A useful tip is to build a relationship with your banker. At some point in every business, a loan is often needed. And even if you never go that way, your banker can be a good adviser to your business.

It’s important not only to build the relationship but to work at maintaining it. Keep your banker in the loop with what is going on with your business.

Financing is part of building your business. Take the time to learn your options.

Photo (CC 2.0) by DC Central Kitchen, on Flickr

How often are you asked, as a small business owner, for a charitable donation?

I have a friend who has labeled this process as being “$20 to death.” Her comment is often accurate as most small-business operators see a steady stream of people asking for money to support charities, sports teams, clubs, civic groups, etc. And many small-business owners, wanting to be a good citizen, dig into the till and contribute.

There is no argument that supporting such efforts is positive for the business owner in terms of goodwill and social responsibility. However, often there is no focus to the donation program leaving part of the return slip away.

To achieve the greatest return, the owner must:

• First and foremost, know how much you can give without hurting the company.
• Second, plan where those donations will be going. In other words, plan their donation strategy in advance. Part of the plan should be developing a focus or area of interest. Don’t give the same $20 to everyone. Get known for supporting a cause. (Check out this link on “Cause marketing.”)
• Take advantage of the marketing opportunity. Don’t just expect word-of-mouth to be your marketing channel. Talk about the donations when the award is made, when the even occurs, and even take a look back at the event and discuss what happened or what changes occurred. Remember though that the story you are telling is not yours, it is the story of the sponsored group. You are just part of the supporting cast.
• For your priority causes, consider doing more. Volunteering is great as is helping them with their marketing.
• If you have to say no, but want to help, think about non-cash support. Again, you can volunteer. Or maybe you just open the door to another source of funding.

I recently had the opportunity to discuss the $20 donation with the rural telcomms, NTCA – The Rural Broadband Association, at one of their meetings. These thoughts are some of the highlights of the conversation we had. And it was a conversation as I took away probably at least as much as I shared.

If you want more information about this topic, you can:

• Listen to the podcast done for the event
• Watch a 6 minute highlight video
• View the PowerPoint slides for the event

Because many donation requests are for relatively small amounts of money, little thought is given to them in terms of marketing or impact on the bottom line. Yet donations represent opportunities.  It’s in your best interest to think about what you want from your charitable giving program and use it, just like all of your other tools, to build your reputation and your brand.

What’s your response to the next donation request?