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7 Tips To Fund Your Small Business on a Budget

Starting your own business can be expensive, but it doesn't have to be as costly as you think. These tips from experts in the field of small business will help you launch and grow your enterprise without breaking the bank (and going into debt).

So, consider investing in real estate or starting an online business; consider these seven tips to fund your small business on a budget.

1. Crowdfunding

Crowdfunding is a great way to fund your small business on a budget. There are many platforms out there that can help you get started. When choosing a platform, select one that is right for your business and your target audience. Also, be sure to create attractive rewards for your backers.

With some planning and effort, you can quickly raise the funds you need to start your business. There are other ways to get money besides crowdfunding, like grants, loans from family or friends, or investments from angel investors or venture capitalists.

2. Use Social Media to Attract Customers

As a small business, you may not have the budget to run television or print ads. However, you can still reach your target market through social media. Here are some tips:

  • Create a profile on each of the major social media platforms (Facebook, Twitter, Instagram, LinkedIn, and so on) and ensure that your branding is consistent across all of them.
  • Use relevant hashtags to reach potential customers searching for products or services like yours.
  • Interact with other social media users by commenting on their posts, sharing their content, and tagging them in your own.
  • Run social media contests and give away prizes that will appeal to your target market.

3. Invite Investors Online

You can find investors for your small business by pitching your business online. There are many websites and forums where entrepreneurs can connect with potential investors. When you post your pitch, include information about your business model, team, and financial needs. It would be best if you also briefly explained why you think your business is a good investment.

4. Get Professional Help

If you're not sure where to start when it comes to funding your small business, don't worry – you're not alone. Many entrepreneurs feel the same way. The good news is that you can take steps to get professional help and make the process less daunting. You might find that you'll need to do this as your company grows.

As for what you should do now, here are some tips for getting started:

  • Reach out to individuals or companies in the industry who have experience raising money for startups or projects similar to yours.
  • Reach out to incubators, accelerators, and other organizations that specialize in helping new businesses like yours succeed.
  • Look into government grants available through local, state, or federal agencies focused on small businesses.

5. Use Opportunities in Market Cycles

When it comes to funding your small business, you can do a few things to take advantage of opportunities in market cycles. First, consider using crowdfunding platforms to raise capital. This can be a great way to get started if you don't have much money to invest. Additionally, consider ways to reduce overhead costs by negotiating with suppliers or finding cheaper office space.

Finally, take advantage of low-interest rates by refinancing any loans or buying new ones.

6. Get Government Assistance

One way to fund your small business is to apply for government assistance. Many programs can help you with funding, so it's worth doing some research to see if you qualify. The Small Business Administration (SBA) is an excellent resource for finding government assistance programs. If you're looking for financing in the form of a loan or grant, this agency may be able to help. They offer loans of up to $500K and grants of up to $50K per year.

One program they offer is the Express Loans Program, which provides fixed-rate loans of up to $35K for those who want funds within 14 days or less. Another option is the Grant Assistance Program, which provides funds not exceeding $5K per year.

7. Do Something Different

One way to stand out when seeking funding for your small business is to do something different. Whether you're taking an untraditional approach to your business model or marketing your company uniquely, find something that sets you apart from the competition. This can help you get the money you need by making you more appealing to investors.

Final Thoughts

One of the most important things you can do when starting a small business is to ensure you have the funding you need to get off the ground. However, if you're working with a limited budget, this can be a challenge. Luckily, there are plenty of affordable options for funding your small startup.

Contact us today or visit our website to learn more about how we can help fund your small business. You will not regret it!

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Eight Crucial Elements You Should Not Miss In Your Business Plan

Every business needs a business plan. Whether you are just starting out or need financial investment, or are looking to raise capital and expand your business, a good business plan is a must. A well-written business plan is not only important for your investor pitch; it can also help you articulate what it is you hope to achieve with your business-your goals, values, mission, and the company's growth trajectory.

However, most entrepreneurs, when drafting a business plan, tend to forget the key elements needed to make the plan successful. Here you will learn about the crucial elements you should not forget to make your business plan a winning and complete document.

Eight crucial components in business plans that are easily overlooked

1. Executive summary

The executive summary is the most critical and most read section of your business plan. It should be at the front of your document, but it's mostly advisable that it be the very last part you write. The summary should be brief and businesslike, probably no longer than one page. It is the space where you will present all the key elements surrounding your business.

The statement should outline the four "W" s (What, Why, Who, and Where) as well as the mission statement. Write about why you started the business, where you would like it to be in the future, why your customers will be interested in your business, why your business will succeed, and what measures you will take to get there.

2. Competitive analysis

This is a statement of the business master plan and how it relates to the competition. Most people forget to include this in their business plans, but it is one of the most important components. Strategize on how to beat your competition by first identifying the current and potential competitors, grouping the competitors according to their competitive strategies to understand what motivates them, and determining your unique value factor that makes your business different.

3. Cash flow analysis

One of the most common mistakes first-time business owners make is focusing on profits, not cash. Understanding that businesses spend cash and not profits is a piece of critical information in your business plan. Thus, it is always good to have a solid understanding of your cash flow and clearly illustrate it in a graph or table.

4. Market psychology

Your market psychology should strictly be based on logical findings and research. The market analysis proves that you know the trending ins and outs of that particular industry and the specific market you intend to enter. When you discuss the statistics and data in this section, use colored graphs and spreadsheets to showcase your insights.

You can also make a smart move and write about your customers' mindset and emotional problems and needs that your proposed product will solve.

5. Clear, measurable business goals

For your business plan to succeed, you should be able to clearly articulate your goals measurably. Instead of saying, "I want to run the most successful ice cream shop in town," which is not measurable, you can say, "I want to serve 10,000 new customers in 2022." This also makes it easier to hold yourself accountable for goals associated with a specific quantity or time frame.

6. Ask "What if?"

When developing your business plan, it makes sense to brainstorm "What if?" scenarios, especially when it comes to a company growing fast. This long-range thinking will give your investors confidence that you can be able to manage a fast-growing company, come what may. For example, what if your website traffic increased ten times, or what would be your plans if you got more orders than expected?

7. Exit strategy

To get venture capital investment, you will need to have a well-researched and detailed exit plan. Most venture capitalists or investors want to know that you are thinking about a liquidity event-how and when they can cash out of your startup. They want to see a return of ten times the initial investment. Identify your preferred exit strategy, including particular candidates for sale or merger, and time frame.

Another alternative would be to go public. All this is to show how your rate of return would be attractive to your investors.

8. Examine your document

Spelling, grammar, style, and punctuation are all important when it comes to getting your business plan on paper. This would seem like it's not a big deal to the investors, but you should be aware that they are always looking for clues about the underlying business and its bosses when perusing the business plan.

Before you submit your plan, go through every single line personally. You can also have a friend or business associate proofread it to avoid any minor mistakes. A small typo can create a negative impression on your investor's minds about your professionalism and startup idea.

Writing a strong business plan can feel like a daunting task, but with the right resources, research, and help, you can implement it in the right way. You should also remember that a business plan is a useful roadmap that will help you stay on track based on your business objectives and goals.

At PS Group, our mission is to guide startups and established companies through their journey to success focusing on the generation of revenue, margin, and reach. Our skill sets are also managed to guarantee that your business is ready to adopt our projects. Contact us for further questions and to learn more.

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Acquiring Small Business Funding for Women (2022)

If you are looking to fund your small business enterprise, grants and crowdfunding may be good funding sources. Thus, if you are a lady that currently owns and operates a small business, you may find it best to apply for some of these grants as well as look towards crowdfunding to get these funds. This post reviews some of the sites you can apply for grants and those which can help you crowdfund.

Where to Find Grants

Regardless of whether you need public or private sources of funding, the following are some good platforms to begin searching for grant opportunities.

Grants.Gov

Grants.Gov is the largest United States government database on the internet. As of 2022, the site has more than 2200 grants that are active for application. This site will be helpful if you feel the need to get a federal grant. Thus, you can begin your search here.

IFundWomen Universal Grant Application Database

IFundWomen is a platform that helps fund women entrepreneurs. If you are looking to generate funds through crowdfunding and business grants, then this is the right platform for your business. The platform offers different types of grants, which include business partnerships and grants from crowdfunding. To find out whether you qualify for this type of grant, you can check for active grants and eligibility requirements.

IFundWomen has a unique grant application database, whose purpose is tailored to offer you grant opportunities. Upon submission of your application, they add you to their database, meaning that you will wait for feedback regarding whether you qualify for the grant or not. IFundWomen will then broker a grant, after which they match the criteria of this grant to their database. The platform then gives you a notification to apply if you match the program criteria. This means that you will not waste any more time on your application only to realize that you are not eligible.

Best Crowdfunding Sites for Small Businesses

Some of the best platforms to crowd-fund provide low fees, potential affluent investors and also create room for many types of campaigns. These sites have also proven to help projects meet their goals of funding. If you are looking to raise money for your business through crowdfunding, the following sites may come in handy.

Crowdfunder

Crowdfunder is a platform that enables investors and entrepreneurs to "meet". Crowdfunder is a community of more than 200,000 individuals and 15,000 certified investors. The site focuses on equity crowdfunding, meaning that you will need to provide a stake of equity stake in your business for you to get funding. Like a majority of other sites for crowdfunding purposes, Crowdfunder gives you resources that will help you to come up with the best crowdfunding appeal.

Wefunder

Wefunder has helped in the funding of over 450 startup businesses and helped raise more than $160 million. Unlike "Kickstarter" which allows you to sell products, Wefunder lets investors invest in your business with small ownership stakes. The site is only available to small businesses in the U.S. Wefunder may be what you need because the site does not charge any up-front fees and even offers you a chance of price matching should you find a better offer elsewhere.

Ready to Fund Your Small Business?

There are many other grants and crowdfunding sites catering to specific industries and products. Thus, do not despair in case you did not find an option that suits you in the list above. Take time to research on the type of funding that suits you the most and begin applying for funding for your business!

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10 Reasons Why You Should Invest in a Franchise

There are many reasons that you should invest in a franchise. We will discuss the top ten reasons why franchises are a significant investment. Franchises have been growing in popularity in recent years and for a good cause! They offer entrepreneurs stability and support while also allowing them to maintain control of their business. If you are thinking about starting your own business, you should consider investing in a franchise.

1. The Franchisor Has Made Mistakes Before and Learned from Them

One benefit of investing in a franchise is that the franchisor has made mistakes before and has learned from them. It means that they will have a wealth of knowledge and experience to share with you and will be able to help you avoid common pitfalls. Again, you don't have to make the same mistakes.

2. You Will Be Working for Yourself

One of the best things about owning a franchise is that you are your boss. It means that you get to call the shots and make all the decisions regarding your business. You will also have the freedom to run your business the way you see fit.

3. You Are Investing in A Proven System

When you invest in a franchise, you invest in a proven system. It means that the business model has been successful and is likely to be successful in the future. Franchises offer a level of stability that many independent businesses do not.

4. Brand Recognition

Another great reason to invest in a franchise is that you will be able to benefit from brand recognition. Franchises have already established themselves in the marketplace and have built up a loyal customer base. It can give your business a real leg up on the competition.

5. You Will Receive Training and Support

When you invest in a franchise, you will receive comprehensive training and support from the franchisor. They will help you get your business up and running and will be there to offer advice and guidance when needed. It can be a huge benefit, especially for those new to business ownership.

6. Franchise Will Be Easier to Finance Than an Independent Business

Another advantage of investing in a franchise is that it will be easier to finance than an independent business. It is because banks and other lenders view franchises as less risky ventures. As a result, you should have no trouble securing the financing to get your business off the ground.

7. The Franchisor is Going to Be your Bank

Another great thing about owning a franchise is that the franchisor will be your bank. It means that you will have access to all the resources you need to grow your business. The franchisor will provide you with funding, marketing support, and more.

8. The Other Franchisees in The System

When you invest in a franchise, you will be joining a community of other franchisees. It can be a great thing, as you can share ideas and learn from each other. It can also help you build relationships with potential customers and suppliers.

9. The Exit Value of Your Business May Be Higher

Another benefit of investing in a franchise is that the exit value of your business may be higher. It is because franchises are often much easier to sell than independent businesses. If you ever decide to retire or move on to something else, then you should be able to get a reasonable price for your franchise.

10. Rate of Success

Finally, one of the best reasons to invest in a franchise is the success rate. Franchises are much more likely to be successful than independent businesses. Almost 90% of all franchises are still operational after five years. That is a pretty impressive statistic.

Let's Get Started with PS Group

So, there you have it. These are just a few of the many reasons investing in a franchise can be a great idea. If you are thinking about starting your own business, a franchise should be on your radar. It can provide you with all the advantages of owning your own business without many risks.

At PS Group, we specialize in executing a delivery roadmap to stabilize, inflate, and exceed growth expectations, integrating strategic partners, or raising capital to support the next steps in achieving success. Contact us and we can discuss how we can help you.

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Steps to Reduce Taxes on Investments

Investors in the current volatile tax environment should pay special attention to strategic after-tax investments. Other people in the highest income tax brackets face unpleasant surprises due to changing tax liabilities in the last two years. The extended period of robust stock performance, coupled with the current American Taxpayer Relief Act of 2012, has increased taxes.

The new changes result in a tax increase of about 24% for top ordinary income tax. The typical capital gain rate also increased by 58%. Furthermore, tax planning constantly requires attention. The recent market volatility also resulted in domestic stock changes to experience a sell-off.

Most investors get frustrated with their losses, and advisors seek opportunities to re-position portfolios and reduce clients' tax bills.

Proper tax planning will be more critical going forward in the era of higher taxes. You have several ways to legally reduce, eliminate, or defer taxes on your investment gain and keep more profits. It pays to be smart, minimize your taxes, and have more of your money working for you.

Read on to find the best methods to eliminate or reduce taxes levied on investment income.

How Your Investments Get Taxed

There are tax measures for every investment's income as per The Internal Revenue Service (IRS). Such taxes differ significantly from the IRS tax income coming from working wages. The differences may be the tax rates and when and how the authorities assess taxes on the investment income.

Generally, investments generate income in two broad ways, where each has a unique treatment during taxation:

  • Capital gains: Refer to an increase in the price of an asset, such as when a stock or a real estate asset value increases over time. The government will tax the capital gains only after realizing, say, selling an asset for cash.
  • Dividends or cash income: These include money received during a year and is subject to taxes when the company gets it.

Investors looking to minimize taxes on their investments have to work around these two broad rules.

Ways to Minimize Taxes on Your Investment

Savvy investors use multiple techniques to minimize taxes on investment gains. These may differ from behaviors and the tax-advantaged discounts required to get an efficient tax code. The most popular methods are:

1. Buy and Hold

The tax systems in the US seem to favor investors who hold on to their investments for at least a year after purchase. According to IRS law, you get taxed only on realized gains after selling and converting your investment to cash. It acts as a loophole you can jump through and minimize taxes in the long run. As long as you hold, you are not liable to capital gains taxes that can be substantial.

The main primary goal of taxing capital gains is to discourage speculative buying or day trading. Unfortunately, many investors engage in such practices. For example, you only pay capital gain tax for all investment gains when you buy a stock and sell it after a year. The current tax rates range from 0% to 20% based on your general income.

On the other hand, when you purchase stock and sell it in less than a year, you are liable to pay ordinary income tax for your investment gains. These short-term stock gains could quickly push you into a higher stock bracket.

It's also possible to buy and hold on to your investments permanently and indefinitely to defer all the taxes on gains.

Another benefit of buying and holding is ensuring your investments perform better in the long haul. According to research, passive investing may outperform active investments after long periods. Still, a hold is a win-win situation both ways. You will make more money and save on taxes payable to the IRS.

2. Start a Business

A side business offers various tax advantages and earns you more additional income. It will reduce the total tax obligation, allowing you to deduct income generated from daily business activities.

The most important tax reduction relating to this is health insurance premiums for self-employed individuals available for people who meet special requirements.

Following the Internal Revenue Service (IRS) guidelines, every business owner can deduct some home expenses with a home office deduction. You can also remove a portion of the utilities and internet you need in your business from income.

You can claim these deductions after making tangible profits from your business. The IRS will evaluate several factors included in Publication 535. Any investor who will realize profits after three of the last five years will be engaged in business for profit.

The SECURE (Setting Every Community Up for Retirement Enhancement) act of 2019 offers tax incentives for employers who join multiple-employer plans and have retirement offers for their employees.

3. Open an IRA

Workers can invest income for retirement to achieve more tax advantages by using an IRA. Using a traditional IRA, you can put away money on a pre-tax basis and reduce your taxes significantly in that year. You can also defer taxes on profits on either dividend for capital gains.

When it reaches the point of taking distributions from your account above 59 ½ years, you can start paying taxes on money withdrawn from the account. You will legally defer taxes from your IRA for decades in the process.

Investors looking to get rid of the IRS can opt for the Roth IRA. With the Roth IRA, you will put away your money on an after-tax basis. You will not receive a tax break that year. However, you can continue increasing your contribution tax-free and ultimately withdraw it tax-free after contributing after 59 ½ years. It's the most common pick top most retirement accounts.

It is essential to be careful when choosing between the traditional IRA and Roth. The right choice will meet your needs and save you yearly fees. Check for the rules required for every option, as it is possible to get hit with penalty fees when you make a misstep. In other terms, don't avoid taxes to fall into another costly trap.

4. Use Tax-Loss Harvesting

Another intelligent way investors eliminate or reduce taxes is using tax-loss harvesting on every taxable capital gain. The IRS allows investors to write off any realized investment losses against gains through tax-loss harvesting. With this, you will owe tax only on the net capital gain.

For instance, investors with a gain of $10,000 for a single investment and a $15,000 loss on another will have a net loss of $5,000. However, the investors can claim only $3,000 for the year's tax return. The remaining $2,000 is only liable for future tax claims.

It is common for most investors to minimize their taxable gains this way. However, you will end up repurchasing the investment when it is valuable in the long term (about 30 days), eliminating a wash sale.

5. Use Tax-Loss Harvesting

An employer-sponsored 401(k) plan is an excellent addition to providing various tax advantages like an IRA and more. Using a traditional 401(k) allows you to defer finances directly from your paycheck on any pre-tax basis. It enables you to reduce tax in the same year. You can also defer taxes on your earnings for dividends or capital gains.

When you make more contributions after 59 ½ years of age, you will continue paying taxes for every withdrawal you make. The best thing to do is defer the investment's profits during the decades when you are still actively working.

A Roth 401(k) has more benefits than using a traditional 401(k) at this level. You can get paycheck deferral, employer matches, and others. However, it only does so on an after-tax basis. It means you are liable to pay taxes on all contributions. The best way to go around this is to grow your account tax-free, then withdraw tax-free when you take distributions. Others even roll it over to the Roth IRA after some years.

Equally important, both the 401(k) plans are common among workers. It is essential to consider the plan that works best for you. Ensure you adhere to the plan's rules, especially for withdrawals, to avoid unnecessary penalties from the IRS.

6. Consider Asset Location

All gains like dividends and other cash distributions you receive yearly are taxable whenever. Anyone using a taxable account will not have an easy way to free you from taxes as you do with capital gains. Always consider where you hold your assets to keep your taxes low on dividends.

For instance, many investors have a tax-advantaged account like an IRA and another taxable brokerage account. If you have any dividend stocks, it is best to keep them within the tax-light confines of the IRA.

It can help you avoid taxes on your distribution day.

Meanwhile, remember stocks with capital gains can be held within any regular taxable account. However, in the taxable account, you will enjoy the top key IRS benefits, tax deferral. The tax deferral will continue until you sell your investments decades later. You can make more financial sense here by considering whether to stuff all dividends into an IRA.

7. Take Advantage of Depreciation

Savvy investors rely on depreciation as it allows them to lower tax bills seamlessly. Many people use this as their significant tax breaks. According to IRS, any typical residential property will depreciate over 27.5 years. The depreciation equals 3.6% of the property's initial value, which will be the deductions each year, reducing the rental income on taxes paid in that year.

Although it is best to recapture deprecation when selling, the recapture is at 25%. The rate is typically lower than the marginal income tax rate. Furthermore, the depreciation doesn't have to be recaptured when you plan to exchange the property under the 1031 exchange to avoid selling it.

8. Go for Lower Long-Term Capital Gains Rates

Tax on investment and wage income invest greatly. It is evident in the way the IRS treats capital gains. Long term taxes on capital gains is at 15%, 20%, and 0%. But you need to adhere to the rules very carefully to avoid costly repercussions.

The tax rates are relatively lower than paying for short-term capital gains. The capital gains are taxable at any typical income rate. However, when you hold an investment for more than a year, you will take advantage of the long-term rates that are significantly lower. It is another benefit of buying and holding assets.

9. Use a 1031 Exchange

As a real estate investor, it makes a lot of sense to use the 1031 exchange when selling a property and investing in another. 1031 works as an exchange to allow you to sell one investment property and defer capital gains as much as you invest the process in another property.

The only issue with using the 1031 exchange is that it has complex rules that govern the process. Every investor must follow them keenly or else lose the tax deferral. Like in any other asset, you can hold on to your property investments and defer your capital gains that have gone on for decades. In addition, you will avoid the typical high real estate commissions.

10. Maximize Your Retirement Plan Contributions

Maximizing your qualified retirement contribution plan or IRA is essential. You have to consider whether to make a Roth or Traditional contribution depending on your age, income tax bracket age, the tax bracket. Anyone looking to get the reduction instantly will go the traditional way. Another critical factor to consider when making the Roth versus Traditional decision is the high stock market.

As stressful as it is for investors to pay taxes, putting your money into a Roth 401(k) or Roth IRA is the best route to minimizing them. After storing your cash, check for chances of market decline to ensure you make appropriate decisions.

Wrapping Up

The reach of the taxman is becoming longer each day. If you want to lower tax bills, there are a few ways to do so. These investment tips will avoid paying taxes excessively and boost your revenue. Most savvy investors use tax-advantaged accounts as a great way to minimize the tax hit.

The easiest and most reliable way is to buy-and-hold invest. Submit an application to PS Group today to stay in the loop with investor updates.

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EBITDA vs. EBIT: Which Is More Useful for Investors?

Regulatory agencies and researchers have long recommended investors look beyond earnings to more valuable financial metrics. When it comes to measuring a company's performance, many investors prefer net income. But is net income the best metric for comparing competitors? A comparison of EBITDA and EBIT may help you decide which is better after reading about how each one is calculated.

Types of Profitability Metrics

Earnings (or net income) is the bottom line of a company's profit and loss statement (also called an income statement). It represents the sum of all revenue less all expenses, including taxes. Earnings can also be calculated using cash flow statements that include depreciation and amortization; these are called "cash earnings." However, EBITDA and EBIT are more common profitability metrics.

Cash Earnings vs. Accrual Earnings

One reason why some people prefer using cash-based measures like EBITDA is because they believe accrual earnings (which include depreciation and amortization) do not accurately reflect a company's performance. Accrual earnings are subject to the differences in non-cash depreciation and amortization policies that companies use, as well as assumptions on useful life of their assets.

What Is EBITDA?

EBITDA stands for "earnings before interest, taxes, depreciation and amortization." It is used to measure a company's operating cash flow and is calculated as:

EBITDA = Operating Income + Depreciation and Amortization − Interest Expense + Non-Operating Items (Ex: Restructuring Charges)

Investors like EBITDA because it shows how much money a company earns without the effects of tax rates, accounting methods and capital structure. EBITDA is particularly useful for comparing companies in different industries with varying tax rates because it shows cash flow from operations before taxes.

What Is EBIT?

Like EBITDA, EBIT stands for "earnings before interest and taxes." It is calculated as:

EBIT = Operating Income + Interest Expense − Depreciation and Amortization − Non-Operating Items (Ex: Restructuring Charges)

EBIT is preferred by some analysts because they believe it shows cash flow generated or used by a company's operations before the effects of accounting methods and capital structure. As with EBITDA, it is less affected than net income by differences in tax rates and artificial accounting costs such as depreciation.

Which Is More Accurate?

Both EBITDA and EBIT are useful ways of measuring a company's profitability, but they may not always tell you what you want to know. Remember that the point of investing is to make money; if you buy stock in Company A thinking it will be more profitable than Company B, you might want to look at each company's net income instead of EBITDA. Furthermore, companies have different depreciation and amortization policies, so a comparison of EBIT or EBITDA cannot be used to compare profitability for all companies.

In the 1990s, American Airlines believed their planes had a longer useful life than industry-standard when they calculated depreciation for their financial statements. American Airlines used shorter depreciation periods when they should have been using longer ones, so they appeared to be more profitable than competitors when in fact it was simply an accounting illusion.

EBITDA and EBIT are also not a good measure of a company's ability to pay interest or generate free cash flow because they do not account for the level of debt on the balance sheet. To measure a company's ability to pay back its debt, you want to look at free cash flow or EBTIDA minus interest expense. The point is that both metrics have strengths and weaknesses and should be considered together when looking at a company's performance rather than used independently.

Some companies prefer not to use EBITDA or EBIT because they fear these metrics do not provide enough of a realistic picture of their performance. Instead, companies may want to disclose metrics that show the contribution of every segment.

Reported Earnings vs. Cash Earnings

Some analysts believe it is important to look at all sales and expenses when evaluating a company's performance because reported earnings can be affected by transactions that are not necessarily related to the company's core operations, such as weather disasters or currency fluctuations. These analysts believe it is more useful to look at a company's cash earnings, which exclude transaction-related expenses and instead focus on what they call "tough-to-manipulate items" such as EBITDA and depreciation.

Investors should keep in mind, though, that reported earnings are required by the U.S. Securities and Exchange Commission (SEC) to have a greater focus on cash flow from operations than on historical costs. While it is useful to look at transactions that occurred during a certain period, you cannot remove them from reported earnings.

The Bottom Line

EBITDA and EBIT are useful ways to compare the performance of different companies, but should not be used alone. Both metrics can be further broken down into more specific measures linked to a company's operations. Remember that an individual metric may not tell you what you want to know about a company's performance, so it is important to look at several different measures together. Furthermore, while EBITDA and EBIT do not include all of the items that may affect a company's cash flow, some analysts believe that they provide more realistic measurements than reported earnings or cash earnings.

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6 Things Private Equity Firms Look for in Start ups

Not every company qualifies for private equity since there are certain things they look for in a company to determine if it's worth investing in. Private equity firms must research since they invest between $50 million and $1 billion in a business. If you need assistance for your small business, you can opt for a private equity investment. Make sure you tailor your business to meet the needs of private equity firms. Here are things private equity firms look for in startups.

What is a private equity firm?

A private equity (PE) firm is an investment company that uses its funds or funds from other investors to invest in startup operations. PE firms invest in companies that are not listed publicly. Private equity firms have a mission of investing in companies, creating value, and selling their shares to get the greatest gain.

As such, PE firms are always on the lookout for business with growth potential. They buy the majority position in an organization and make it successful by leveraging the resources.

What PE firms look for

1. Strong management team

One of the things that private equity firms look for is a good management team. Top-quality managers are a factor PE firms consider unless they want to change the management. Private equity firms must invest in companies with top quality management teams since they will not run the day-to-day activities of the company. Private equity firms look for a management team that can do the following:

  • Growth through sales motion including customers, new joint ventures, and alliances
  • Changing the structure of the company to cut down on costs
  • Know how to transform the business model to reflect customer needs

2. Steady cash flows

Private equity firms use leveraged buy-out on a company. They'll, therefore, need a company with steady cash flows to help them meet the interest payments. Missing the interest payments would mean losing ownership of the company. PE firms will also have a view of sales, operating costs, assets, inventory, overhead, and liabilities.

3. Favorable industry trends

PE firms also look at the disruptive technology within an industry when deciding on the company to invest in. The organization's mission and vision must align to the potential for transforming the industry.

4. Potential for growth

Growth potential is also another factor that PE firms look for when choosing an investment. Private equity firms need high rates of growth to get a bigger market share. It's, therefore, crucial for the company to be well-positioned in the market. Here are a few factors that indicate potential growth:

  • State of the market landscape for the industry
  • Past successes
  • Sufficient market size
  • Stable customer base
  • A positive state of the industry

5. Security

Private equity firms, unlike banks, don't have an idea of the return on investment. They stand to lose everything if things don't go as planned and the company goes into bankruptcy. PE firms look for things that will bring security, such as:

  • Financial visibility
  • Sound contingency plan

6. Low capital requirements

PE firms look for a business that can sustain themselves with only one investment. If a business needs multiple rounds of investment, then it will not be an ideal target for PE firms.

Private equity firms invest in businesses to create value in a few years. Therefore, they look for companies with growth potential. If your business is growing but you don't qualify for bank loans, you should consider private equity firms. Once you understand what private equity firms look for, you'll be better placed to get a good deal. If a PE firm is not an ideal option for you, you can get in touch with us to get advice on the best investment option for your business.

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What is the Difference Between Private Equity and Venture Capital?

Venture capital and private equity are types of investors who invest in private companies in exchange for future profits and exchange for ownership. Most people confuse private equity with venture capital, since they refer to investing in companies and exiting by selling the investment. Here is a look at the differences between private equity and venture capital.

What is private equity?

Private equity is when firms invest in a company. As a private equity investor, your focus will be on companies that are mature and not in the growth stage. The goal of the private equity investor is to get a return on their investment.

Private equity firms invest in companies that are not publicly listed. In private equity, high net worth individuals and organizations buy a share of private companies. Investors can also invest in public companies to delist them from the stock exchanges.

What is Venture Capital?

Venture capital firms invest in companies in their start-up phases with growth potential. The funding comes from investment banks, specialized venture capital, and wealthy investors. The investment is not only financial, but startups also benefit in the form of managerial expertise.

Differences between private equity and venture capital

While private equity and venture capital seem to overlap, there are still significant differences between them. Here are some differences between private equity and venture capital.

Type of Business Invested In

Private equity investors want well-established businesses. They look for a business that is struggling due to poor processes or failing to make profits. Private equity takes on less risk but has a lower return on investment. The investor comes into the business and makes significant improvements. Venture capital investors look for companies with high growth potential. A venture investor can take more risks.

Stage of Company

Private equity and venture capital investors invest in companies in different stages. Private equity firms invest in companies that are established and have five years or more in operation. Venture capital investors, on the other hand, invest in newer companies and startups. The companies are just getting off the ground.

Ownership Status

Private equity firms buy a majority share of the organization's shares and participate in the management. They have at least 51% which is needed for a controlling share. Venture capital firms are minority investors in an organization. They buy less equity and allow the company to maintain control.

Private equity companies buy 100% of the company while venture capitalists acquire less than 50% of the company.

Exit Strategy

Private equity investors invest in a business, improve it and then sell it. They are not interested in being in business for a long time. The exit opportunities for private equity are venture capitalists, hedge funds, entrepreneurships, and secondary funds. The exit opportunities for venture capital investors are the venture capital fund, buy-back shares, initial public offerings, and mergers and acquisitions.

Structure

Venture capital firms use equity to make investments and private equity firms use both debt and equity.

Types of Industries

Private equity companies invest in all types of industries, irrespective of the industry they operate in. Venture capital investors focus on companies belonging to industries like clean-tech, biotech, and technology.

Size of Investment

The investment size in private equity is 100 million dollars minimum and a maximum of 10 billion dollars. Venture capital firms, on the other hand, have much smaller investment size. The investment size of venture capital is 10 million dollars or less.

The above are some of the differences between private equity and venture capital. If you were looking for funding for your business, now you know which one to choose from.

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5 Most Common Financial Mistakes That Startups Make

As an entrepreneur, you need to work your way up to build your services or products, grow your business, and achieve your goals. At startup, every company faces challenges reaching new markets and expanding their business. Unless you are a top financial whiz, working out a proper financial plan with precise numbers will be challenging. Still, it is essential to avoid falling into the wayside.

Even the best financiers can find creating a working financial plan challenging. Proper financial plans are critical to the success of all business operations from the start. They're the best way to convince investors of the company's validity and meet customer demands.

Fortunately, some widely successful startups are minting millions yet are still very young. For example, the success rate of companies such as Facebook, WhatsApp, and Twitter shows that it is possible to become successful even at a startup with the right financial plan.

Most startups fall victim to various common mistakes. When you learn and understand these missteps, you can make the necessary adjustments to avoid them early enough and accomplish your goals. Here are the five most common mistakes financial mistakes startups make and how to avoid them.

1. Underestimating Your Cash Burn

A business burn rate refers to the amount of capital required every month to keep your business in operation. Most people ignore these rates at startups either due to miscalculation or ignorance. When you don't understand your burn rate accurately, it will hinder your ability to achieve your milestones before you run out of finances.

The first step to managing your finances effectively is to have a bottom-up projection and use real-world variables before you venture into an investment. Reforecasting is also another way to make predictions on what to expect in the current state of your business.

2. Failing To Understand the Market Conditions

It is essential to understand the market conditions at startup to develop a proper pricing plan for your products or services. Don't merely add up costs without considering the margins you want to make.

It would be best to understand your customers and research the pricing methods of your competitors. You will have more to offer and follow the trends in the market to avoid lagging.

3. Hiring and Expanding Quickly

The greatest expense for any business is its employees. Your staff and everyone involved in your company's operations gets paid in incentives, and it significantly affects your finances.

It is best to keep the costs low by saving money on staffing. Many employees are a huge drain on your finances. It is beneficial to use technology to automate most manual tasks and hire only for value addition. Also, hire slowly and improve your business process before making hiring decisions.

4. Making Bad Hires

Hiring is a daunting process that takes time and money. It would be best to only hire for potential as opposed to experience. You don't have to waste money and effort on hiring experience when you don't need the skills in the workplace. You can use alternative ways like outsourcing to help you focus more on business-critical processes.

5. Doing Your Finances Yourself with No Prior Training

When your business is earning good revenue, you need to look for financial services from a reputable CFO to manage them. They will offer financial support and help with business accounting and bookkeeping. These professionals understand their job and will help you achieve your financial goals.

About PS Group Services

PS Group offers outsourced financial services and support for businesses at all stages of development. Our services are impactful and will help you to achieve your goals. Apply here today to get started.

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LLC and Corporations: What Are the Differences?

As an entrepreneur, you need to understand the differences between corporations and LLCs. You also need to understand why there are differences and what impact this may have on your business structure.

In this article, you will learn what LLCs and corporations are and their differences.

What is an LLC?

An LLC, by definition, is a limited liability company that gives the benefits of an incorporated entity to the owners. An LLC functions as a hybrid between a partnership and corporation, giving business owners many of the benefits of incorporating while still maintaining the legal protection of having an LLC versus being completely incorporated.

Main Characteristics That Define an LLC

  1. An LLC is owned by one or more owners, called members. These members are not liable for debts beyond their investment amount, which means that if your business accumulates debt, the creditors cannot come after you personally to collect on the business's obligations.
  2. LLCs have a lot of flexibility when it comes to rules, regulations, and structure. Unlike corporations, LLCs do not have many bylaws that govern operations.
  3. An LLC has limited liability like a corporation. However, unlike incorporating, an LLC member only needs to pay for one share of stock, whereas incorporated entities must purchase at least two or more shares of stock.
  4. LLC's are easy to create; you only need to file with your state and register your business name.
  5. An LLC is not required to hold annual meetings or record minutes of the meeting.

The hybrid nature of an LLC offers businesses a tax structure similar to a partnership. This means that an LLC is taxed as a pass-through entity, which does not have taxes imposed at the business level. Rather, members of an LLC report and pay taxes on their personal returns.

What Is a Corporation?

A corporation is a separate legal entity from its owners. In other words, corporations are self-owned entities that can do business. You establish corporations by filing articles of incorporation with the state department of business along with the initial filing fee. To run a corporation, you must have a board of directors and shareholders.

Main Characteristics That Define a Corporation

  1. All corporations are required to hold annual business meetings (typically in the month of the company's incorporation) to elect officers and conduct other corporate matters.
  2. All corporations must record the minutes of all meetings.
  3. All corporations must purchase at least two shares of stock to be issued. The corporation owns one share while the second share remains with the corporation to name officers.
  4. Corporations have a separate legal identity. This means that the owners of a corporation are not liable for the company's debts or obligations.
  5. Corporations are subject to double taxation. The business is taxed at the corporate level, and then income from the corporation is taxed again when it's distributed to shareholders in the form of dividends.
  6. Corporations are required to have bylaws that govern their operations.

What Is the Difference Between an LLC and a Corporation?

The primary differences between corporations and LLCs are as follows:

Liability

An LLC provides limited personal liability, while corporations provide none.

Tax Treatment

Business profits and losses are only recognized by the corporation. There is no difference between business income/losses and individual income/losses (i.e., pass-through taxation) for an LLC.

The Number of Members Allowed in a Corporation

Depending on the state in which you operate a corporation, there may be a limit to how many memberships or shareholders it can have. Most states do not have this limit for LLCs.

The Number of Directors Allowed

States may also have a limit on the number of directors that can be in a corporation. For example, California does not allow for more than five board members. Five or fewer LLCs are governed by this law as well, but other states do not have such restrictions.

Tax Filing Requirements

Corporations must file a special tax form with the IRS to report business profits, called the 1120S. For LLCs, all owners must submit a personal income tax return (Form 1040) and include their share of the profits/losses from the LLC.

Stock Ownership

Corporations can be owned by shareholders or other corporations. An LLC can be owned by business owners and other LLCs.

The Structure of a Corporation

The IRS has very strict rules about how corporations can be structured. This means that you must divide your corporation into departments and positions that match the IRS requirements for all corporations (called "headings"). Most LLCs do not have such restrictions, so it is easier to customize the structure of an LLC.

Issuing Stock

To have a corporation, you must issue stock to owners (called shareholders). This enables them to participate in earning profits and voting on business matters. An LLC can be member-managed or manager-managed, so there is no need to issue shares of ownership.

Taxes

LLCs are not required to pay income taxes at the business level, but members may have to pay self-employment tax on their share of business profits (depending on the state). Corporations must pay income tax and may also be subject to certain levels of double taxation (paying the corporate tax and individual shareholder/owner's personal income tax).

Foreign Ownership

Foreigners in most states can own up to 20% of an LLC; it is much more difficult for foreigners to own stock in a corporation (foreign ownership limits vary by country).

By understanding the differences between corporations and LLCs, you will better understand what type of structure is best for your business. You can then make an informed decision that is right for your business needs.

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