Blog Entries - 2015

Know Your Financial Ratios

Posted on: October 19, 2015
Tags: Ratio, Ratios, Operating capital, Cash flow, Balance sheet, Income statement

Measure Your Business's Health with These Financial Ratios

business financial graphicLarge companies use defined financial ratios to analyze the health of the organization. There are dozens of established ratios that test a variety of financial domains, including the ability to pay debt, secure stockholder funding and expand services.

Not all ratios are used by every company. Small business owners should use the following ratios that help manage day-to-day activities while still keeping an eye on growth:

Quick Ratio

This metric derives its name from the speed in which you can get out of your business. The quick ratio is cash, accounts receivable and other assets that can be quickly realized divided by your total current liabilities. This ratio tells you whether or not you can cover your debt without tapping into your inventory. It looks at a point in time for your business and determines if it is healthy at that point.

If your assets are greater than your liabilities, the quick ratio will be greater than one. Decimal ratios show that your business needs a fast infusion of cash to be strong. You may consider cashing out long-term income from things like structured settlements and annuity payments using J.G. Wentworth. If your quick ratio is more than two, this means that you have twice the capital that you need and should think about expanding your business.

Operating Margin

The second ratio of the financial triumvirate measures the income from operations divided by the net sales. The operating income is the profit after deducting variable costs of production or service delivery. If this ratio is equal to one, then there is no cost for doing business and all of the income from sales is profit. On the other hand, if the ratio approaches zero, all of the income from sales is eaten up by producing the item. Somewhere is the middle of these two extremes is a good profit margin. This ratio only looks at operating costs and before-tax sales. It does not take into consideration after-tax effects or cash assets.

There are other profitability ratios that are more robust in their analysis and work better for larger companies, but for a small business, the operating margin ratio tells you everything you need to know about your profit. Since entrepreneurial ventures are often closely linked to the owner’s net worth, things like tax bases and fixed expenses do not fit into the mix. When we drop the kids off at school, go see a client, then come home to the office, it is useless to separate out these expenses as fixed costs. Theoperating margin lets us ignore these and focus only on the profitability for one service or product.

Cash Flow to Debt

Many new businesses have failed because they did not analyze their cash flow. As a matter of fact, theU.S. Small Business Administration cites underfunding and poor cash flow as one of the main reasons a new business fails. This coverage ratio is your net income plus depreciation divided by total debt, and it is considered the best predictor of business failure. A number less than one means you cannot cover your bills without securing additional funds. A ratio greater than one but less than two is good, and anything high shows that you have surplus capital and you should start looking at investing or expanding.

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Branding 101: Five Tips for Solopreneurs

Posted on: June 29, 2015

Strong branding is critical in our ad-cluttered world. After all, you want to ensure that you're the first provider in your niche that comes to customers' minds. But what if your brand is, well, just you? How can you be memorable and stand out?

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SBA Loans Explained: A 101 for Small Business Owners

Posted on: February 24, 2015
Tags: Sba, Loan, Finances, Financing,
SBA Loans Explained – A 101 for Small Business Owners By Caron_Beesley, Contributor Published: December 9, 2014  Updated: December 9, 2014 It’s been a stellar year for SBA lending, which is good news for small read more …

2014 Ohio Business Filings Sets Record Pace

COLUMBUS – Ohio Secretary of State Jon Husted today announced that 2014 marks the fifth year in a row that the state has seen a record number of new entities filing to do business in Ohio. In 2014, 93,775 new businesses filed with the Secretary of State. These numbers surpassed 2013 figures, in which 89,735 filed.

“Ohio continues to be a place where companies want to be located because we are focused on providing quality customer service that understands the needs of business,” Secretary Husted said. “By working to roll out the red carpet and cut the red tape we are helping improve the state’s business climate, and that means a stronger economy and more jobs.”

The continued growth in new business filings is due in part to the expanded services Secretary Husted has implemented, most notably the launch of online services. In October 2013, Secretary Husted implemented Ohio Business Central, which enables businesses to file some of the most commonly-used forms online. This service has provided easier access, reducing processing times and streamlined the administrative process. To date, more than 35,000 filings have been submitted and half of all new companies are now started online in Ohio.

As part of the overall record number of filings for last year, December 2014 saw 7,441 new entities file to do business, which surpassed the 6,941 filings from December 2013.

The steady growth among new businesses is a boon to the economy and for Ohio families. “As more companies start up, they increase the potential for more, good-paying jobs. That means families all across the state will not only be able to put a roof over their head, clothes on their back and food on the table, but also have a sense of accomplishment and dignity that they are moving forward.”

Though the most visible role of the Secretary of State is that of chief elections officer, the office is also the first stop for individuals or companies who want to file and start a business in Ohio. While recognizing these numbers can’t provide a complete picture of Ohio’s jobs climate, they are an important indicator of economic activity that Secretary Husted hopes will add to the discussion of how to improve the state’s overall climate for business.

NOTE: New business filings are classified as forms filed with the Ohio Secretary of State that declare the formation of a business entity, including for-profit, non-profit and professional corporations, limited liability companies, partnerships, limited partnerships and limited liability partnerships. Filing as a business in Ohio does not guarantee the company will begin operations, be profitable or create jobs.


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Small Business Development Center Program of Ohio is funded in part through a cooperative agreement with the U.S. Small Business Administration. The SBDC program is also funded in part by the Ohio Development Services Agency. The Warren County Center is also grateful to our loyal Alliance Partners who provide financial assistance and resources. All opinions, conclusions, or Recommendations expressed are those of the author(s) and do not necessarily reflect the views of the SBA. Reasonable accommodations for persons with disabilities will be made if requested at least two weeks prior in advance. Contact the Warren County SBDC office at (513) 934-4793 regarding these arrangements.