IOU Financial Inc. Releases Financial Results for the Year Ended December 31, 2017

  • Reached profitability during the year with positive adjusted net earnings of $0.1 million in Q4.
  • Surpassed the half-billion loan origination mark with loan originations of $91.3 million (US) for the year.
  • Increased interest revenue of 8.1% to $14.4 million for the year ended December 31, 2017 vs 2016.
  • Reduced operating costs (excluding non-recurring costs) by 20.3% to $9.0 million for the year ended 2017.
  • Raised $3.5 million via a private placement.

MONTREALApril 26, 2018 /CNW Telbec/ – IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), a leading online lender to small businesses (IOUFinancial.com), announced today its results for the year ended December 31, 2017.

“Our action plan in 2017 which consisted of rightsizing the organization, managing defaults and improved pricing has resulted in positive adjusted earnings in the fourth quarter and represents a significant milestone for the organization. We expect to grow adjusted earnings throughout 2018,” said Phil Marleau, CEO.

FINANCIAL HIGHLIGHTS

  • Loan originations for the year ended December 31, 2017 were US$91.3 million versus originations of US$107.6 millionfor the year ended December 31, 2016. Loan originations decreased due to changes made to the Company’s lending policies in response to increased delinquency levels. However, loan origination growth resumed in Q4 and increased 17.5% to $23.5 million compared to the same period last year.
  • As of December 31, 2017, IOU’s total loans under management amounted to approximately $61.7 million as compared to $70.3 million at the end of year 2016. On December 31, 2017, the principal balance of the loan portfolio amounted to $33.0 million compared to $42.1 million in 2016. The principal balance of IOU’s servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $28.6 million compared to $28.2 million in 2016.
  • IOU recorded gross revenue during the for the year ended December 31, 2017 of $17.4 million versus $17.4 million for the same period last year. Interest revenue increased 8.1% to 14.4 million for the year ended 2017 compared to the same period last year. The increase is attributable to an increase in the average commercial loan receivable balance and the Company’s pricing structure.
  • Interest expense for the year ended December 31, 2017 increased to $3.7 million, up from $3.2 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility partially offset by a reduction in the cost of funds borrowed versus the previous year.
  • Allowance for loan losses (net of recoveries) increased to $8.2 million for the year ended December 31, 2017, up from $7.3 million for the previous year. The increase is primarily attributable to an increase in defaults by borrowers and, as a result, IOU Financial made changes to its lending policies. In addition, the Company implemented certain process changes to improve its servicing and collections which includes an aggressive litigation process against businesses who intentionally default on their loan obligations. As a result of these changes, the allowance for loan losses decreased 53% to $1.5 million in the fourth quarter 2017 compared to the same period in 2016.
  • Excluding non-recurring costs, operating expenses decreased 20.3% to $9.0 million for the year ended December 31, 2017 as compared to $11.3 million for the previous year. During the quarter ended September 30, 2016, the Company adopted a plan to reduce operating expenses. The Company achieved its target of quarterly operating costs of $2.0 million to $2.2 million on a normalized basis in the third quarter. Operating costs, excluding non-recurring costs, were further reduced to $1.8 million in the fourth quarter of 2017, representing a decrease of 28.2% compared to the same period in 2016. The Company anticipates average quarterly operating expenses of approximately $1.6 million on a normalized basis in 2018.
  • IOU closed on the year ended December 31, 2017 with a net loss of $4.5 million, or $0.05 per share, compared to a net loss of $4.8 million, or $0.08 per share, for the year ended December 31, 2016.
  • IOU closed on the year ended December 31, 2017 with an adjusted net loss of $3.1 million, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $3.2 million during the same period in 2016. In the fourth quarter 2017, IOU attained $0.1 million of adjusted earnings compared to an adjusted net loss of $1.4 million during the same period in 2016.

OUTLOOK

IOU remains well placed at the forefront of the fintech revolution that is democratizing access to capital for small businesses. IOU expects to grow adjusted earnings throughout 2018.

  • The Company will continue to enhance its proprietary, next-generation technology and algorithms that evaluate and price credit risk. IOU will also continue to closely monitor the performance of its loan portfolio and capture operational efficiencies. The Company anticipates average quarterly operating expenses of approximately $1.6 millionon a normalized basis in 2018.
  • The Company intends to grow loan originations by:
    • Continuing to identify, recruit and partner with business loan brokers;
    • Forming new strategic partnerships with entities such as banks and small business suppliers and leveraging their relationships with small businesses to add new customers;
    • Expanding its product offering to allow it to serve small businesses whose needs are not met by its current products;
    • Investing in direct marketing and sales; and
    • Continuing its expansion into Canada.

IOU’s financial statements and management discussion & analysis for the year ended December 31, 2017 have been filed on SEDAR and are available at www.sedar.com.

CONFERENCE CALL

The Company will hold a conference call at 4:30 p.m. (EDT) on May 1, 2018, to discuss its financial results. The dial-in number to access the conference call from Canada and the United States is 1 (888) 231-8191 (toll-free), conference ID: 6167767.

About IOU Financial Inc.
IOU Financial Inc. provides small businesses throughout the U.S. and Canada access to the capital they need to seize growth opportunities quickly. Typical customers include medical and dental practices, grocery and retail stores, salons, gas stations, auto repair shops, and restaurants. In a unique approach to lending, IOU Financial’s advanced, automated application and approval system accurately assesses applicants’ financial realities, with an emphasis on day-to-day cash flow trends. IOU Financial allows these businesses to apply for six, nine, twelve, fifteen and eighteen-month term loans of up to US$300,000 to qualified U.S. applicants ($100,000 in Canada) within a few business days, with affordable charges favorable to cash-flow management. Its speed and transparency make IOU Financial a trusted alternative to banks. To learn more visit: IOUFinancial.com.

Forward Looking Statements
Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of IOU including, but not limited to, the impact of general economic conditions, industry conditions, dependence upon regulatory and shareholder approvals, the execution of definitive documentation and the uncertainty of obtaining additional financing. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. IOU does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE IOU Financial Inc.

For further information: Philippe Marleau, Chief Executive Officer, (514) 789-0694 ext. 225; David Kennedy, Chief Financial Officer, (514) 789-0694 ext. 278

3 Ways to be Smart about Business Expenses as a New Business Owner

New business owners become overwhelmed by expenses, taxes, and financial issues in a short time. With so much to do and manage, it is challenging to keep tabs on expenses. But, if you want to stay in business, you must keep your spending in check, stay on top of your tax responsibilities, and prioritize tasks and expenses. Our tips will show you how to do it all.

  1. Hire a Financial Advisor Specializing in Small Businesses

It seems strange to emphasize keeping expenses in check and then suggest hiring a financial advisor, but it is the best way for you to comply with tax laws, make smart purchases and investments, and protect your assets as your business grows. Your best move is to choose a financial advisor who has ample experience in assisting small businesses and who understands the ever-changing tax laws.

If you work from home, you especially need a financial advisor to help you determine whether claiming your home office is the best way to proceed with your taxes. It also is more challenging for small business owners who work from home to keep their personal and business expenses separate, and a financial advisor will ensure you do things by the book to avoid penalties or fees. Your financial advisor also will help you find areas to save costs and prevent you from using too much of your personal money to grow your business.

  1. Create a Budget… and Stick to It

Your financial advisor also will help you create a budget for your small business or your home office. It is critical that you stick to your budget because you don’t want to stretch your new business too thin in the early stages.

In fact, the Bureau of Labor Statistics reports that about 80% of businesses with employees survive their first year in business, 66% survive their second year, and about 50% will survive their fifth year. However, only about 30% survive their tenth year. Why do so many small businesses fail? For many of them, the answer is lack of sufficient capital and cash flow problems. One study shows that 82% of businesses fail due to cashflow problems.

The lessons new business owners must learn are that they need to manage their expenses wisely, and they need to have enough capital to grow. The solution to these common issues is to prioritize your needs by creating and sticking to a budget.

If working from home is the best way to start your business, do so to save overhead costs. You’d be surprised by how much you can accomplish with the perfect workspace in your home and the right technology. You’ll likely be able to get off the ground with reliable, high-speed internet, a laptop or tablet, and a reliable printer and phone. There are even online payment systems that allow remote business owners to receive one-time or recurringclient payments from the comforts of a home office. Reliability and convenience are much more important than spending too much for the latest technology, phones, or gadgets.

  1. Make Priorities

As a new business owner, the bulk of the work will fall to you. Because your time is money when you’re in charge, you need to be as productive as possible and make time for yourself and your family. That may be easier said than done if you work from home, so set your hours based on when you are most productive and make time for your family to strike a work-life balance. The perk of working from home is setting your schedule, so do so wisely.

You’ll also need to prioritize your workday tasks. While answering emails is an important part of your role as a new business owner, other tasks will suffer if you spend too much time checking your inbox and replying to emails that are not urgent.

To spend less time on email, set up an automatic response and take advantage of canned responses. You’ll still respond to customers promptly, but you’ll also be more productive if you schedule time for email throughout your day. It’s also important to prioritize record keeping for tax purposes and to create a system for filing receipts and other documents that will support your business expense claims each quarter.

New business owners succeed when they make smart decisions about expenses. Make it easier on yourself by hiring a financial advisor specializing in small business, creating and sticking to a budget, and making priorities.

Guest post: About the Author

Ms. Fisher has spent more than 20 years as a CPA, and is currently working on a book about financial literacy (due out in 2018). She also runs Financiallywell.info.

Instagram Ads: The Basics

If you have explored advertising on any social media platform, you have likely focused your attention on Facebook. However, a rising star in this space is Instagram, which has grown from 90 to 800 million since 2013!

Although Instagram gives owners the potential to connect to a large group of users, cutting through the online clutter is difficult for small businesses that are trying to increase their brand recognition… Simply posting content and waiting to grow your following organically can take months, if not years.

A better strategy to reach a mass audience instantly may be to pay for Instagram Ads. The ads would be featured as “sponsored posts” that would come up on users’ feeds as they browse. The goals of utilizing Instagram ads would be to “grow brand exposure, website traffic, generate new leads, and move current leads down the funnel (and hopefully towards converting).”

Are Instagram Ads Effective?

Is investing in Instagram ads effective? The results speak for themselves. “In March 2017, over 120 million Instagrammers visited a website, got directions, called, emailed, or direct messaged to learn about a business based on an Instagram ad,” according to a source.

Why are Instagram Ads Effective?

Unlike advertising on a website or on television, where you can choose the channel, but not who sees your ads, Instagram allows you to target your audience base. This means that you have the ability for your ads to be shown to selected individuals, based on factors such as gender, age, location, interests, etc.

Plus, you can create groups for each ad, choosing between:

“Saved Audiences – interest-based targeting

Custom Audiences – retargeting audiences and customers

Lookalike Audiences – people similar to your other audiences”

How to Set up an Instagram Account to Create Ads

Using Instagram is very easy, and a business can set up an account within an hour to get started with the following steps.

  1. Because Facebook bought Instagram, you can use your Facebook account or create a personal Instagram account to get started.
  2. Sign up for a Business Manager account.
  3. Create a Business Page.
  4. Enter all the required information, such as your business name and details and your contact information.
  5. Create your ad.
  6. Choose an ad objective, which includes goals like brand recognition, engagement, reach, traffic, app installs, lead generation, etc.
  7. Choose who the ad will target, decide on your budget, create a schedule and narrow down on the creative aspect of your ad.
  8. Start advertising!

Examples of Inspiring Instagram Ads

If you are not extremely creative, there are a multitude of examples online of Instagram ads that can inspire you, such as:

55 Amazing Instagram Ads

84 Best Instagram Ad Examples in 2018

You do not require a large budget to get started with advertising on Instagram. AdEspresso’s research has found that the average price of a pay-per-click Instagram ad is around $0.80. Although, to reach a substantial amount of people, you may want to hit the ground running!

IOU Financial can help you to market and grow your business with a small business loan of up to $300,000. Call us at 1.866.217.8564 or visit us online at www.ioufinancial.com to learn more!

Should My Business be on Snapchat?

Facebook. Twitter. Pinterest. Snapchat. The list of social media platforms goes on and on. While business owners know the value that social media presence can bring to their company, many small and medium firms simply don’t have the resources to devote to all of the platforms. In this article, we will discuss one of the most popular social media sites, Snapchat, which has become a dominant player in today’s world.

Gary Vaynerchuk, an entrepreneur explains his view on the success of this platform: “Snapchat closely resembles how we communicate face-to-face than any other social network. When we talk to each other, passing in the halls or just living out our lives, those moments disappear. Snapchat emulates that behavior and psychology. Moments are temporary and that’s exactly the feeling and behavior that Snapchat matched to.”

Younger Target Audience

Snapchat is an ideal tool to reach a younger audience base. Out of a total 166 million users, the majority of Snapchat users are under 24 years old. More specifically, 71% of users are 18-34 years old.

As of September 2016, Snapchat had over 150 daily active users all over the world. What is the best way to reach these audiences? With a well thought out marketing strategy.

Here is a list of some of the most successful utilizations of Snapchat:

  • Sour Patch Kids: The candy company made headlines on Snapchat when they posted snaps of harmless pranks they would conduct in public. Candy and pranks are perfect attention grabbers for the younger generation, which is how the brand connected with them.
  • Taco Bell: While Taco Bell has a variety of customers, it utilized Snapchat’s storytelling feature to share new products, and even give dating tips!
  • Amazon: This world-known giant posts exclusive deals just for Snapchat members, and made a killing on black Friday with this strategy!

Not Right for All Industries

While Snapchat is a valuable platform that can help businesses increase brand recognition, it is not right for all industries. Fields such as government, construction, logistics and banking may find more advantageous to focus on other platforms, such as LinkedIn.

The customers of these websites are typically older, married and not as prone to using Snapchat. They also are less likely to be driven to explore a business from a social media ad or post. Instead, they would probably be more swayed from reading an article or an opinion piece online!

Can’t Drive Traffic

There are ways to include a link to your website when you post content on platforms such as Instagram and Facebook. However, there is no way to do that currently on Snapchat. While it can be a valuable marketing platform for brand recognition, there is no way to track and analyze Snapchat’s value in bringing in leads or raising profits.

Business owners that are tight on funds may find it more valuable to utilize social media trends that can present clear data on conversion rates.

Although Snapchat is not right for all businesses, if you have interesting and unique content (videos and photos) to share with a younger age group, it can be a helpful tool in driving new business. IOU Financial can help you with the funds needed to explore all of the offerings Snapchat has to grow your company. Call us today to inquire about our small business loans, which can be approved in as little as 24-48 hours.

 

How Text Messaging Can Grow Your Business

You likely text your friends and family, but have you considered sending text messages to your customers? If you have, you are not alone as 1 in every 10 text messages is between a business and a client. With over 7 billion people around the world owning a mobile phone, there is no better time to consider the benefits of using SMS communication (text messages) to grow your business.

Benefits of Texting Your Customers

No Internet Connection Required

In a battle between email, social media and SMS marketing, only one can be used without an internet connection—SMS. Although it may seem access to internet is never a problem, consider that less than half of mobile phone owners have smartphones. This means that while they can receive text messages, they cannot check their email or browse the web without access to WiFi.

Plus, a phone connection is simply more reliable than the internet; think about how many times you couldn’t use the web but were able to text and make phone calls on your mobile device!

In Your Face

When a text is sent, it shows up right on the screen of the mobile phone, and unless the person is a heavy texter, is extremely noticeable. Compare this to the dozens, if not hundreds, of emails that we receive daily. Plus, phones do not filter text messages, and there is no Spam folder for texts as there is with emails. Given the fact that 82% of mobile phone owners read every single they text they receive, it comes as no surprise that texts are read 98% of the time rather than 15-22% with emails.

Gives Your Customers Power

Texting isn’t a one-directional tactic; it is a two-way strategy that can play a significant role in attracting new clients. Half of the time (50% to be exact) a sale is dependent on timing, as a study found that shoppers tend to choose the company that they can get in touch with first.

If you share your phone number online and encourage customers to text you, you can improve your communication and offer them an immediate response, thereby increasing your sales.

Examples of Uses of SMS Communication

There are a multitude of ways you can utilize SMS communication to grow your business, such as:

Making/ Confirming Appointments

Text messages are an advantageous strategy to make or confirm appointments for businesses, such as medical offices, spas, salons and body shops. As the messages comes straight to the recipient’s phone, you won’t hear the excuse that it went to spam or wasn’t seen at all. Texting is a quick and convenient way to keep your calendar updated to stay on top of late shows and cancellations.

Verifications

With the rising amount of credit card fraud, asking for customers’ phone numbers to send them a verification code to confirm a purchase is a smart solution for all businesses. Plus, this allows you to store phone numbers to later use them for marketing purposes.

Location-Based Texts

Business owners can use geofencing, a service that sends texts to customers based on their location. You have the ability to send notices and coupons to your subscribers when they are in close proximity to your retail location, thereby increasing the chance they will visit your business.

If you need help integrating SMS or any other type of marketing to grow your business, you can benefit from a small business loan. Find out more about what services IOU Financial offers, and how easy and quickly you can qualify for a small business loan of up to $300,000.

 

Retirement Planning for Small Business Owners

It’s not uncommon for business owners to consider their businesses as their retirement plans. At retirement age, the plan is to sell the business for cash, or to give the business to a family member in return for a share of future wealth. It might work out, but it’s risky, because if your business fails, your retirement plans end up in shreds. Short of bankruptcy, a troubled business would be hard to sell and bring in less money than anticipated. Many owners might face the prospect of delaying retirement until the business “picks up.”

It need not be this way. An orderly approach to retirement planning will help you provide for your later years independent of the ups and downs of your business. Here are five steps to take to save money for retirement:

Do the math:

Figure out how much money you will need for your retirement lifestyle, especially if you don’t receive a lot of money from your business. This is frequently a wake-up call to get your retirement plan moving. Check out online retirement calculators from financial service companies such as Vanguard, TIAA and Fidelity and many others. Use these resources to help you nail down future spending.

Get help:

You are probably an expert on your business, but don’t assume that extends to retirement planning. If you don’t have a solid finance background, hire a financial adviser to organize your retirement planning. It’s a good idea to use one who charges a flat fee rather than one who takes commissions on your trading. The best ones usually have an accreditation, such as Certified Financial Planner.

Begin a diversified retirement plan:

You don’t need to spend a fortune on your retirement plan, but you should make a long-term commitment to it. It will cut your current taxes and allow your money to grow tax-deferred. Here are for options that make sense for small businesses, suitable for sole proprietorships, partnerships, limited liability companies and corporations:

  1. SEP-IRA: A good choice for one-employee companies, because you must fund the plan for all employees. Its works like a traditional IRA, but in 2018 you can contribute up to 25 percent of total compensation or $55,000, whichever is less.
  2. SIMPLE IRA: A plan for owners of companies with up to 100 employees. You and your employees make pre-tax contributions directly from your paycheck. The 2018 contribution limit is $12,500, or $15,500 if you’re 50 or older.
  3. Solo 401(k): Good for self-employed. You can contribute up to 25 percent of your compensation, plus up to $18,500 ($24,500 if 50 or older) in employee contributions, for a total maximum up to $54,000 in 2018.
  4. SIMPLE 401(k): For business with 100 or fewer employees. You and your employees can contribute up to $18,500 a year. You can borrow from your account and make no-penalty withdrawals under certain circumstancees.

Invest simply:

Index funds are simple and cheap, and you will always get average performance, year after year. If you know when you are going to retire, you can buy into a target-date fund that adjusts its investments based on your age. Consider also a REIT investment.

Pay yourself first:

When business gets slow, it’s tempting to cut back on your contributions, and that might occasionally make sense. But resist the temptation if you can, your retirement will thank you for it.

Reasons You Should Have a Business Credit Card

If you are self-employed or the owner of a business, you should seriously consider getting a business credit card and use it exclusively for your business-related purchases. Picking the right card can save you time and money – let’s see why.

Taxes:

Your business expenses are tax-deductible. The easiest way to keep track of these expenses is to charge them to your business credit card whenever feasible. Furthermore, you can deduct interest charges and/or annual fees on your card, as long as you use it exclusively for business. Those fees aren’t deductible on a personal credit card, even if you charge some business expenses on it. At tax time, you can look at your business credit card transactions for the tax year for a quick summary of your deductions, which will save you time (and money if you use a tax preparer). By the way, the IRS frowns on intermixing personal and business spending, and you might attract unwanted attention if you mix your spending on the same card. It might also help to show the IRS your business is a business, not a hobby.

Credit history:

Using a business credit card for your LLC or corporation will create a credit history for the business. That’s very important, especially if you pay your bills on time. Having a good credit history should result in a good credit score for your business and easier access to business loans.

Bonus points:

Most self-respecting credit cards, whether personal or business, reward you with bonus points or cash back on your purchases. The problem with personal cards is that they might not reward you for the kind of expenses your business incurs. For example, a personal card might reward grocery store purchases but not social media advertising. It’s smart to get a business credit card that offers rewards on purchases like search engine advertising, internet services, business travel, shipping costs and so forth. Some of these purchases might not earn you any rewards on your personal card. You might be able to pool your points from your business and personal credit cards if they come from the same issuer.

Bookkeeping:

If you make all your purchases on a personal credit card, you’ll have to waste time every month separating the business purchases from the non-business ones. Yes, you can still deduct business expenses charged on a personal card, but why do the extra work and risk overlooking several expenses? You can export your business card transactions directly into accounting programs like QuickBooks and save a lot of time. Business credit card statements are often more detailed, and this comes in handy if you have employees who get their own copies of your business credit card, which most issuers will provide you for free. By setting up your business card, you can quickly give one to each new hire. Don’t forget, you collect all the rewards on your employees’ purchases when they use your business card.

A business credit card is a no-brainer for sole proprietorships, partnerships, and limited liability companies. There are a few cautions to be aware of when choosing a corporate business credit card:

Fees:

Many personal and small-business credit cards have no annual fees. However, many corporate cards have fees, some of them on the high side. Also, many of these credit cards charge a higher interest rate compared to personal cards.

Grumbling:

Your suppliers and vendors might grumble if you pay them with a corporate credit card, because the transaction fees they have to pay on these cards are much higher.

Abuse:

If you have employees sharing a corporate card, be on the lookout for any personal purchases they make with it. First, they are stealing from you if they do this. Secondly, even if you don’t catch it, the IRS might, especially if you deducted personal expenses as business ones.

Financial Questions Every Business Owner Should Ask Themselves

The most significant strength of a small to medium business is its size. A small-to-medium enterprise has a reasonable overhead cost. The infrastructure is confined to one location in most cases. There are fewer employees (or perhaps none). The company can tweak its policies to suit its customers or clients, scaling up or down a bit is not a major challenge. And lastly, there is substantial scope to grow because one is starting small.

However, these advantages are countered by one significant disadvantage. Most small-to-medium businesses have limited capital or available cash. A majority of small businesses fail due to a financial crisis. Lack of sales or revenue is the obvious cause of failure in theory and in practice. However, that problem can always be tackled for a longer period of time if there is enough financial backup. Every business needs time to mature and grow, to solidify its clientele or consumer base, and to become a self-sustained enterprise.

Business owners must ask themselves hard financial questions and only rely on actual numbers, not estimates, speculations, expectations, or assumptions. As a business owner, be sure to ask:

How much does it cost to run my business?

A business owner should know every cost or financial liability like the back of their hand. Many people focus on rent, utility bills, wages, personal income, and cost of inventory. These are indeed the quintessential recurring expenses, but there are more. A business will need funds to advertise its products and services or promote itself as a brand. There are costs to maintain and upgrade the infrastructure, even in the short term. Very few businesses launch with an infrastructure that can sustain its short term growth. Using the last penny from the revenue generated to finance minor upgrades or to procure more inventory can risk the sustenance of the business, as the working capital will dry up.

How much profit does my business actually make?

Every business owner should know the fundamental difference between gross profit and net profit. Gross profit is not the difference between the selling price and cost price of a product or service. It is the amount you are left with after paying for every recurring expense and after putting aside whatever amount of money you wish to infuse in your backup fund. Net profit is calculated after business and individual taxes. The difference between revenue and gross profit and subsequently with net profit is substantial in most industries. A wrong calculation of profit can wreck a business.

What is my business credit score?

Most business owners worry about their credit score only when they have to apply for a loan. This is fine if your business credit score is healthy and acceptable to the lenders. If not,  there are many ways you can improve your credit score over a period of time so when you have to look for some financing, your rating doesn’t prevent you from getting a loan. Keep a tab on your business credit score and work on improving it. This will save your business when the going gets tough or even when you wish to expand and grow, which requires fresh funding.

What are the financial highs and lows in my business?

Every business owner should have a budget. It is an integral part of any business plan, not just at the inception of an enterprise, but every year and every month for some companies. No business has a uniform or entirely predictable revenue stream throughout the year. What you do with the surplus revenue when “the going is great” and how you manage the revenue deficit when “the tough gets going” will determine the long term fate of your enterprise.

What is the cost and income per unit for my business?

This is a difficult calculation. Even successful companies struggle to boil all its income and expenditure down to a unit. A unit can be a piece of inventory you have or every dollar you spend. The objective is to find out how much your business earns for every penny you spend. This is one of the surest ways to know if your business is financially viable. There will always be some inventory stocked up and some receivables pending. There will be credits granted to you and owed to you. Some incomes and expenses will always be in limbo because of the ongoing cycle of purchases and sales. There will be the need to expand. And lastly, a compulsion to change your products or services.

All such mathematical calculations can become subjective and circumstantial unless you focus on the cost and income per unit. If this correlation is in the green, then your business is financially viable and stable. Else, you need to review the financials of your business.

Guest post: About the Author

Steven Millstein is a professional personal finance writer and contributor to many leading financial publications. His work has been mentioned in and linked to from The Bustle, The Huffington Post, Benzinga, Yahoo Finance and many other publications. He also has his own personal finance blog, Credit Zeal, where you can follow him.