Issue link: http://cp.revolio.com/i/15024
Manage Financial Health CHAPTER THREE Finance Your Vision small, working out of the home or on-site with few frills and little advertising. Unfortunately, the start-up costs for a cutting- W edge skin care practice can be daunting. One of the biggest financial challenges for most practitioners is surviving month to month while the practice grows. Some practices can be opened with some combination of personal resources (personal savings, plus any cash available from “angel investors”— individuals who financially back entrepreneurial ventures) plus existing personal credit (bank lines of credit or credit cards, for instance). BORROW MONEY Sometimes there are legitimate, practical reasons for borrowing money for your practice. The principal reason for seeking a business loan is to increase your income by enhancing your services. This might mean moving to a better location, buying the “goodwill” of an existing practice, or upgrading your practice in ways that will either attract more customers, increase the fees you can charge, or both. Few practitioners can begin with all the particular amenities they wish they could offer to clients. Improvements in equipment, atmosphere, and location not only enhance the esthetics experience for clients, they also add value, for which clients will often gladly pay. Assuming you run an increasingly busy and profitable practice over time, your attractiveness as a loan candidate will grow, and, if you have clearly defined goals, borrowing money to achieve those goals can sometimes make good financial sense. www.ascpskincare.com ill you need to borrow money to begin a practice? Many practitioners don’t, choosing instead to begin For small businesses, there are essentially two modes of financing—equity financing, in which an investor takes a stake in your practice, and debt financing, in which you borrow money for an agreed- upon term and rate of interest. Don’t be tempted to borrow heavily on your credit cards. This is the most expensive and financially dangerous way to access cash. Business partners who bring cash to the table, family members who agree to become “silent” partners, and angel investors all fall into the category of equity investors. According to Smallbusinessnotes. com, the term “angel investor” comes from the early 1900s when some small business owners invested in large Broadway productions. “Today, ‘angels’ typically offer expertise, experience, and contacts in addition to money,” Smallbusinessnotes.com editor Judith Kautz writes. “Less is known about angel investing than venture capital because of the individuality and privacy of the investments, but the U.S. Small Business Administration (SBA) estimates there are at least 250,000 angels active in the country, funding about 30,000 small companies a year.” However, for many skin care entrepreneurs, the most likely source of funding will be a traditional lender, such as a bank. BEFORE THE BANK In advance of setting a time to visit your banker, outline your financial needs in as great a detail as possible. Don’t go to lenders (or equity investors, for that matter) with a “how-much-can-I-borrow” attitude. Draw up a precise plan detailing how much you will need, what you will spend it on, and how much you will be able to set aside each month to repay the loan. Keep in mind lenders will expect you to successful business handbook 29