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Internet Business Articles Internet business start up OPERATIONS
Work force: size, union /nonunion, Internet business start up rules, contract expiration, age and skill level, match with developing technology, altitude, manufacturing engineering staff competence
Manufacturing flow and scheduling: job shop/batch continuous, systems, flow, material handling, Multiplan strategy /logistics, cost accounting, work discipline, work-order tracking, % dead time
Capacity: % of total capacity, bottlenecks (current and projected)
Purchasing: opportunities for redesign, fewer parts, add/subtract vendors, larger discounts, incoming Internet business start up sampling, outsourcing policies
Quality control: attitude /priority, problem areas, methodology.
Capital equipment: age/maintenance, sophistication, general us. special purpose, level of automation, trends
R&D: as % of sales compared to industry, type, technical strengths/ weaknesses, organization, importance, trends
Information systems: importance, competitive advantage, level of sophistication, systems under development
Internet business start up TERMINAL VALUE
Another source of cash is the money the entrepreneur pulls out of the Internet business start up when the venture is harvested. Again, there are several elements lo this aspect of return.
Return of Capital Via Sale When the owner/manager sells ail or part of the Internet business start up, the cash received, up to the amount of the cost basis, is tax-free at both the corporate and personal levels. Because a sale of interest is involved, however, it is evident that, unlike a return of capital via debt repayment, the entrepreneur does not maintain a continuous equity interest in the concern. As in the case of a cash flow based on debt retirement, an original investment is necessary.
Capital Cain Via Sale When capital gains are realized in addition to the return of capital, no tax is imposed at the corporate level, and the tax rate at the personal level is less than that for regular income-
Internet business start up TAX BENEFITS
While not precisely cash flow, tax benefits can enhance cash flow from other sources. For example, if a start-up has operating losses for several years, and if these losses can be passed through to the individual, they create value by sheltering other income. Because entrepreneurs are often in a low-income phase when starting a Internet business start up, these tax benefits may be of limited value to them. However, if properly structured, they can provide substantial value to investors. In a situation where the structure and form of the organization (i.e., a corporation) does not permit losses to flow to individuals, they can be used lo offset corporate income in prior or future years.
NEGATIVE Internet business start up CASH FLOWS
Entrepreneurs must also take into account their negative Internet business start up cash flows, of which three types are particularly important: (1) cash portion of the purchase price, (2) deficient salary, and (3) additional equity capital.
Frequently the most critical aspect of the cash portion of the purchase price is that entrepreneurs must be able to pay it in the Internet business start up place. Often a seller finances the purchase of a company by taking part of the purchase price in the form of a note, receiving cash from later earnings or from company assets. Of course, the less cash the entrepreneur must put up the more is available for other uses and the greater the opportunities to produce high ROE. On the other hand, too much initial debt may hamstring a company from the start, thereby hurting the venture's subsequent financial performance and the entrepreneur's principal source of return—be it the income derived, from the Internet business start up or the funds received from its eventual sale.
The immediate significance to the entrepreneur of a negative cash flow based on a deficient salary is clear: a personal income lower than could be obtained elsewhere. In addition, early negative flows and the need for additional working capital or fixed assets may force the owner/manager to seek outside investors, thereby diluting his or her equity in the Internet business start up and introducing the possibility of divergent financial and operational goals.
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