Friday, July 29, 2011

Why a Business Plan?

First let me unequivocally state that I think every business needs a business plan. I occasionally encounter people or articles that seem to state otherwise but when I delve into their thinking, we're on the same page. They agree with me. The hangup seems to be that when business owners think "business plan", they envision 30 pages of complicated written "stuff". A business plan doesn't have to be that complicated. But studies have shown that those who put their goals on paper have a one-two digit multiplier chance of success than those who don't. Why? Because hundreds of thoughts run through your head daily. Putting your goals and ideas to achieve those goals on paper provides FOCUS and CLARITY.

I've seen 8-year old companies that were floundering get back on track and soar by creating and committing to a business plan. (In one instance, there were three partners who couldn't seem to agree on anything. The process of drafting a business plan helped them sort out their roles and their differences. In the end, one partner left active participation in the company. This worked out for all involved, including the departed partner.)

With that said, here are a few excerpts from an article I read on that gives some of the reasons why you need a business plan.

"To avoid big mistakes: The last thing you want to do is work ...for a year, only to realize you were doomed to fail from the start. Many (owners) learn the hard way that they didn't set aside enough capital to reach their goals, took on partners with the wrong skills and resources, or don't have a viable way to make money (consistently). Developing and sharing a business plan can help ensure that you're sprinting down the right path."

"To make sure everyone's on the same page: Chances are, you are not building a company by yourself. Ideally, you'll have partners, so you can launch faster, smarter, and with less need to pay employees or suppliers. Even if you don't have partners, you'll have family, friends, and advisers involved. A business plan helps get everyone involved in your (business going) in the same direction."

To read more, go to 5 Reasons Why You Need a Business Plan.

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Another IPO: Teavana

Hah! Another IPO! This time by a primarily retail entity that sells loose-leaf tea and tea-related entities named Teavana. (Don't quote me but this name sounds like a mix of tea + nirvana. Hmm. Catchy.) This one caught my interest because it is an Atlanta-based company...and because they wanted to raise $100 million but actually 20% more ($121 million). According to the Atlanta Business Chronicle article, it operates 161 corporate-owned stores in the US in 35 states and oversees 19 franchised stores, mainly in Mexico. Teavana Holdings Inc. began publicly trading yesterday, Thursday, July 28.

Teavana, founded in 1997, received investment from a private equity firm, Parallel Investments, in 2004. According to website, Parallel Investment Partners is "focused exclusively on investing in North American lower middle-market growth companies.  Since 1992, our team has successfully invested over $600 million of equity capital in 35 owner-operated growth companies."

I'm not sure how much of Teavana the private equity firm still owns but the IPO created a liquidity event that now allows them to sell their shares at any time (assuming there are no contractual or other restrictions). That gives a 7-year exit, on the outer edge of the 3-7 year timeframe that equity investors typically like to have.

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Thursday, July 28, 2011

Pique a Peer Lender's Interest

Interested in peer-to-peer lending? If so, here's some advice on how to pique the interest of a peer lender once you decide to use a particular peer lending network. (For information on peer-to-peer lenders, view my previous blog post, Top Five Peer-to-Peer Lenders.) According to an article on, " Once you’re approved on a peer-to-peer site, it’s all about “putting yourself in the shoes of the lender,” Gass says. “The first thing I would look for if I were lending is anything that would lower my risk, and that comes down to things like the borrower’s experience—there has to be something that says you’re not just a dreamer." "

He's saying what I repeatedly state: You must understand the investor or lender mindset and what they're looking for in order to package your company and your "opportunity" accordingly. Remember, investors and lenders are not social entities. They do this to make money for themselves and/or their companies.

The article, "How to Attract a Peer Lender" goes on to say, “You have to create an ad that tells people why they want to invest in you”. The more specific you are, the better. I just had someone seeking assistance with finding investors for a start-up send me a 1-pager, then increase it to 2-pages. The entity was pre-revenue. There were so many vague comments and suggestions like, "This product is intended to be a standout in the xxx arena. It has no true competitors." That is an example of what NOT to put. EVERYONE has competitors, even if it's an in-house product or service. And who cares what it's intended to be. What IS it?

The article continues, provide "an overview of what you’re planning on using the money for and how your business is running." The former is called 'Sources and Uses of Funds'. The latter is simply a snapshot of your business and market.

More article excerpts: “The description of the business is going to be more of an influencer.”


' “Think of it as business plan: Write out what you’re trying to do, and show that you’ve done your research,” she says. “The way you present yourself comes across over the Internet. Be straightforward, none of this ‘my mom thinks I’m the best kind of stuff’—just be credible and honest.” '

I couldn't have said it better myself!

(Read the article, How to Attract a Peer Lender, in its entirety.)

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Wednesday, July 27, 2011

Dunkin Donuts IPO

In another sign that capital markets are improving - and it's not just tech companies that are benefiting - Dunkin' Donuts went public today. According to the Wall Street Journal article, Dunkin' Brands Group Inc., the parent company of Dunkin Donuts, priced its shares at $19 a share and raised $427.5 million. All of you who are Dunkin' Donut fans, or are fans of their coffee which apparently now contributes over half of their sales, can now expect to see more Dunkin' Donuts shops as the funds will be used to fuel expansion and pay down debt.

I'm also mentioning this IPO because, according to the WSJ article, Dunkin' Brands is owned by private equity firms Bain Capital Partners LLC., Carlyle Group and Thomas H. Lee Partners, which bought it in 2006." The article goes on to say, "They will maintain a controlling interest; about 20% of the shares outstanding are being floated." This IPO gives the private equity firms who bought the company a liquidity event or an exit (or partial exit, in this case) in five years, well within the 5 - 7 year typical exit period. It is true that these particular private equity firms, as seems to be the case now and in the last several years with large private equity firms, took on large amounts of debt in order to obtain the cash to provide them with large dividend distributions in the early years after the acquisition finalized. So there has been one or more liquidity events already. However, to completely exit their equity ownership positions they'd either have to sell to another entity (another company or private equity firm) or take the company public. And private equity firms, like venture capitalists, always like having the option of an IPO, whether or not they use it, because it increases the options and raises the value.

Just another thought in my continuing focus on the increasing activity by equity investors.


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Tuesday, July 26, 2011

Inspiration Strikes Again

I continually state that inspiration comes in many forms. Typically, though, the best inspiration comes in figuring out how to solve a problem. The problem provides the solution. Here's another example of how inspiration grew into a viable business, excerpted from an article: "In 2007, roommates Brian Chesky and Joe Gebbia had trouble paying their rent. Today they announced that the business born of that need received funding that values their company about $1 billion." (Note: Whether or not this valuation holds up and grows over the next 5 years remains to be seen. However, this is obviously a great business that can be highly profitable...and thus have strong market value.)

"The backstory: To raise the cash to pay their landlord, Chesky and Gebbia decided to rent out their San Francisco apartment to conference-goers seeking an alternative to hotels in their area. They pocketed $800. Then they built a business, Airbnb, helping other people do the same. Of course it wasn't a straight line to success. They struggled to break even, attended Y Combinator's startup bootcamp, eventually landed funding which helped them expand and now have more than 100,000 listings in more than 16,000 cities and 186 countries."

The best businesses offer a service or product that provides a solution to pain that their customer is experiencing. That's why inspiration often comes out of solving problems. As a business owner (or aspiring business owner) when you solve a problem for yourself, sometimes you realize that others likely have the same issue and could benefit from your solution.

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Partnering? What About Funding?

There are a number of questions one should ask before partnering with someone to start or grow a business. I read an interesting article on about things to consider before partnering. One of those is financing. Here's an excerpt from that article, 8 Tips for Business Partnerships, that I thought was interesting and spot on.

------------------------------'Do You Have Sufficient Funding?

As in marriage, the financial aspects of a partnership can be stressful. The partners should develop a budget for both the business and for their personal needs, says Gerber. The budget should identify how much is needed to start the business and where that investment is coming from. It also needs to identify what is needed until the business starts generating profit to the owners. "Stress on personal finances is an issue for all entrepreneurs during startup," says Gerber. "Going in, the partners should be confident that they are both able to handle the loss of income for a similar duration. Otherwise, their financial needs won't be aligned and their interests may differ in how, or how long, to sustain or conduct the business."'--------------------------------


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Monday, July 25, 2011

One CFO's Focus on Personnel

CFOs, of course oversee all financial and accounting matters. (They are Chief Financial Officers.) In addition they often also oversee the human resources and IT functions/departments. However, according to one article on, A Man of the People, "For some CFOs, human-capital issues are like gnats: something to just swat out of the way in order to focus on the next financing deal or presentation to investors." Some SMB CFOs see HR as a necessary evil, something they manage because they have to or because they know the company needs them to do so.

However, some SMB CFOs do embrace the responsibility and see HR as one more means, in addition to financial, to help their company accomplish its strategic goals. One such person is Keith Taylor. "Taylor is the new finance chief of Lyris, a $40 million publicly held provider of e-mail marketing solutions. He was brought in to tackle people issues as much as financial ones. Of course, it's common for CFOs to wear the human-resources hat at small companies."

"Taylor's rationale for being personally involved on the people side is straightforward: "Throughout my career, I've tried to set companies apart by asking why we are successful and how we can be more successful. Well, if we've got high turnover, or the wrong people in the wrong roles at the wrong time, or with the wrong focus or cultural attributes, we're going to be less successful."" (The bolding is mine. To read more, go to A Man of the People.)

I liked this article because it emphasizes how crucial the right people are to building a viable, sustainable business. Business owners and their CFOs and other executive management team members understand that it is the people that help the company grow and accomplish its objectives. It doesn't matter how much you automate your business, your business will still involve people. To the extent that you empower everyone from the top down and bottom up, your company will reap the results. The best way to ensure that is to make sure that you as the business owner believe in the importance of your people...then make sure you hire accordingly.

(Note: SMBs=small and medium businesses)


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Business Credit How tos

How to build business credit? This is a question many business owners ask and if they don't, they should. I've written on this very subject and have a narrated presentation I posted on YouTube entitled, "Why and How to Build Business Credit". It's nice to know others are thinking of the same thing...and attempting to spread the word. Here's an excerpt from an article I read today on Mashable.


"Establish Business Credit History :

Check if your trade vendors are reporting your payment history to one of the major reporting companies, like D&B. Just like with your personal credit score, the more vendors that report a good payment history, the better your business credit will be. It’s common that small trade vendors won’t report your payment history to D&B. In this case, you should compile a trade reference sheet with at least three references (include their name, contact information and credit limits) to augment your official business credit report. In addition, you should open a business credit card (in the name of the business) and use it wisely — meaning keep your balance low and always pay on time.


This is excerpted from an article entitled, "How to Establish Business Credit". (Click on the title to read more.) The initial points are basic but the article is about establishing, not building business credit.

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Friday, July 22, 2011

Vacant Land Problem Solved

I saw an interesting approach to vacant, overgrown land yesterday on the news. It was even more impressive in that the idea was put forth and then enacted by a local government. As most of us know, one side effect of the housing debacle is foreclosures resulting in vacant houses and vacant lots. More jurisdictions, especially in the north where some cities have declining populations, are taking over severely neglected foreclosed properties.  Well, this jurisdiction, Sandusky, Ohio (home to the absolutely awesome Cedar Point! rollercoasters, anyone?), has ratcheted this up a notch and added a homesteading provision.

It works like this: You own a house next to a vacant, neglected property that has been that way for a while. The city takes the property over due to unpaid taxes, or several other reasons. You notify the city that you will mow the lawn and maintain upkeep on the property. Then you follow through for the next two years. Fast forward two years...The property is now yours! This is a win-win for the city and the residents. Residents in nice neighborhoods often take turns mowing the lawn of a vacant property because they don't like the way it looks nor do they like the negative impact it has on their property values. Of course they complain the whole time. (I've been there. Mowing is a sweaty job and the owners never say thanks!) Now, residents can truly reap the benefits of their goodwill. And the city can put property back in play and begin receiving property tax revenue again much sooner.

Like I say, often the problem provides the solution. Here, there were issues on both sides of the vacant land problem. By looking at both sides, the city created a novel program that addresses both stakeholders' issues by offsetting their problems against the other. Problems can and often are the source for inspiration. I'm interested in hearing yours.

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Thursday, July 21, 2011

Interest on Business Checking Accounts - Now Available

Did you know your bank can now pay interest on your business checking account? Perhaps the better question is, did you know your bank could NOT pay interest on your business checking account, until today, July 21 that is. Or did you, like many, just assume your bank chose not to do so in order to entice you to have a business savings or money market account at their institution?

Well, here's the 411. I quote from the article on the subject, "Banks Can Pay Interest on Business Accounts" (creative title, eh?), "Starting today, your bank will be able to pay you interest on your corporate checking account for the first time since the Great Depression.

That’s thanks to a provision in Dodd-Frank that repealed Regulation Q. (Note: I am familiar with Dodd-Frank but admittedly didn't know anything about Regulation Q. Is that any relation to John Q? Probably not.)

Among the banks that say they’ll offer interest-bearing accounts: BBVA Compass, Wells Fargo, BB&T, and Regions, according to the Birmingham Business Journal."

Okay. Just because the banks CAN by law - I mean legally are able to - offer interest on business checking accounts, doesn't mean they will. But since some of the big boys will offer it, I highly recommend you ask your bank for it. Even if you can only get 0.25% interest, hey, that's better than nothing!

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Wednesday, July 20, 2011

Selling Your Value

Want to know why and how you should differentiate your company and its product and services on value, not on price? "Sell on Value, Not on Price" is a great article on about this very subject. It's long so I've only quoted a portion that I thought was very worthy of repeating. Here it is:

------------------------"In a famous video clip from Penn and Teller's Showtime hidden camera show, diners are lured to an upscale restaurant branded as the world's first boutique vendor of bottled water. A water steward presents each table with a menu discussing the finer qualities of water purportedly shipped in from mountains and streams all over the world, some of which cost as much as $8 a bottle.

Of course, the joke is on the customers because all the water actually came from the garden hose out back, but the message was clear: People are willing to pay more for a product if they think it gives them a truly special or significant value—and if you present it to them in just the right way. (My emphasis.)

Your company is probably selling a stuff that's a lot more valuable than fancied-up hose water. Selling on value, not price, involves a balance of confidence, personal rapport, and doing your homework".----------------------------

From my experience, selling on value is more about differentiating and promoting the product and/or service benefits to your customer (service, time saved, ease of use, quality, response time, etc.) and less (SIGNIFICANTLY less) about product features.

The article Sell on Value, Not on Price provides input from a number of different experts (consultants, business owners). If you have the time, I highly recommend you read the entire article.

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Pitch to Investors in London


Pitches, prizes & expert workshops to help you raise capital
24 & 25 October 2011
Business Design Centre, London, UK

Do you do business in Europe or have you considered doing business in Europe? If you answered "Yes" to either of these questions, you may wish to consider participating in the PitchLive event to be held October 24-25 of this year in London, England. See below for details.

+44(0) 207 2240110
PITCHES: Hear from the top security, energy & health startups and SMEs in our targeted pitching sessions.
PRIZES: Interact with finalist and judges as we award over $750,000 in prizes over just two days.
EXPERTS: Learn invaluable lessons for your business as investors & entrepreneurs share their experience to raise capital.

To see my post with ALL the information, go to

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Tuesday, July 19, 2011

Selling? Be Open to an Earnout

 Selling your business or considering it? Here's a great explanation about earnouts from a article entitled, "The Ins and Outs of Earnouts".

"The sellers ... may not want to sell... if the price is based on operating performance they believe is only temporarily depressed in the wake of the financial meltdown. Or they may be hesitant to sell based solely on historical performance when their businesses are in high-growth industries. 

Buyers, however, want to buy on proven performance and not speculative future performance.  This presents a classic situation: a buyer wanting to buy for less negotiating with a seller wanting to sell for more.  When buyers and sellers cannot agree on the valuation, a way to bridge this gap is through an earnout. 

An earnout is a contingent pricing mechanism. In an earnout, a portion of the purchase price is calculated by using the performance of the selling company over a period of time after the closing of the sales transaction.  It rewards the seller only if the future performance actually matches the current projections of future performance.

Further, it allows a seller to exit its current investment without forfeiting the ability to share in its future growth.  It also protects the buyer from overpaying if a seller's projections are overly optimistic.  In many ways, the earnout aligns the financial incentives of both the buyer and the seller."

Read all of The Ins and Outs of Earnouts.

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What Distressed Debt Buyers Like

In Debt Collecting, Location Matters, so says the headline of a WSJ article. It didn't talk about business debt but for any business debt below the small claims threshold amount, the statement probably also applies. Want to know the states that distressed debt buyers (aka collection agencies!) prefer. Read this: "Brokers for distressed debt say investors like states such as Illinois, Maryland and New Jersey, where laws permit them to seize assets such as cars, pension payments and a portion of debtors' wages. Consequently they try to buy loan pools from those states." The article also references Indiana, Ohio, Virginia, and Minnesota as great states to pursue debt collection in. Hah! This is excellent information to have.

"Brokers say investors shy away from buying bad debt from some other states."

"Brokers say geography is the single biggest factor in how much debts fetch. Accommodating laws and judges often mean the difference between a profit and loss on debts pursued in court."

"In states where laws are more favorable to debt collectors, they pay more for such debt. Unpaid consumer debt sells for about seven cents on the dollar in Indiana, compared with two cents in Texas."

Just be aware. To read more of this full length article, In Debt Collecting, Location Matters, you'll have to grab Monday's copy of the WSJ or subscribe to WSJ online.

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Monday, July 18, 2011

Need More Cash? Extend Accounts Payable

Do you need to free up more cash in your operations? If so, you should take a deeper look at approaching your vendors to extend out payment terms on your accounts payables. Do you currently have 30 day terms on your A/Ps? Why not try for 45 or 60 days? According to an article on entitled, "Six Ways to Stretch Payables", "Often overlooked because of the relatively low status of accounts payable in finance departments, A/P thus provides an opportunity for...companies to hold on to their cash longer."

How do you go about this? "Rather than blanketing all (vendors and suppliers) with the same request for improved terms, ... divide vendors into different categories and then tailor the companies' approach accordingly." Not all suppliers will respond the same to a request to extend out your payment terms on your accounts payable. A large Fortune 500 supplier with whom you do a minimal amount of business won't be as motivated to extend your payment terms as a Mom and Pop business with whom you do a singificant amount of business.

According to the article, the vendor/supplier categories and their applicable approaches are as follows:

The "untouchables" - These vendors and suppliers have significantly more power than you as the buyer in your relationship, so you shouldn't even attempt to get them to change payment terms.

The "squeaky wheels" - These vendors "may complain vociferously about such requests, they will in the end come to" an agreement. Therefore, it's best to make the request to extend terms via a live, face-to-face meeting.

The "good soldiers" — These will "scream and yell and make lots of noise, but in the end they're going to do what you ask them to do."

The "wallflowers" - These vendors and suppliers need your "business so much that they're in no position to refuse to come to terms."

Click here to read the Six Ways to Stretch Payables article in its entirety.

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Friday, July 15, 2011

Keeping Millenial Employees Engaged

In an article in Monday's WSJ, PwC's CEO Dennis Nally, spoke about how to keep Millenial employees engaged. I thought it was interesting because his description of what the Millenials prefer was the description of what I liked and sought as an employee and I am a Generation Xer. (I know, this generation branding is interesting, to say the least.)

According to the interview and Mr. Nally, "(Millenials are) not just looking for salary and financial benefits, they're looking for skill development, they're looking for mobility, they're looking for opportunities to acquire different skills and to move quickly from one part of an organization to another."

Why is that? Is it because they've seen many of their parents' friends get laid off /be downsized? Is it because they've seen the tremendous rise in outsourcing brought on by the increase in bandwidth, bandwidth connectivity, and supporting technology? Is it because they grew up on MTV and have shorter attention spans? Is it because they've watched "The Secret" and believe in more personal empowerment? Just asking. Admittedly, some of these reasons apply to me.

Personally, I think this is a good thing. If you can build an organization that can keep the Millenials happy, you have built a flexible, nimble company with an entrepreneurial environment that inspires people to collaborate and challenge themselves...and rewards them for doing so.

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Small & Medium Business Contests

I ran across a great list of small business contests. All provide capital, business assistance, or technological devices as the prize.

Check out this list of Small & Medium Business Contests.


Here's a brief list of a few of the SMB contests:

Make Your Small Business Fly Contest (Virgin America)

 Recycle Your Business Cell Phone Apple iPad2 Giveaway (e-Cycle)

Supreme Studio Makeover Contest (MacMall)

Cleantech Open Idea Competition (Cleantech Open)

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Thursday, July 14, 2011

Small Businesses and Recession

According to all the news reports, corporate profits are up across the board but hiring is not, at least not at the same level. Many corporations went through such painful cost cutting measures in 2008 and 2009 that they are loathe to increase expenditures until they see a longer lasting upward trend, or in other words a stronger trend.

In addition, small businesses employ ~ 50% of the workers in the U.S. Small businesses haven't recovered at the same rate as their larger public peers. Whereas credit was restored to large public companies in early 2010, credit is still fairly tight for small businesses, especially those with under $10 million in revenue. Some of this credit tightness is due to higher regulatory oversight and thus higher required reserves for all. Some of the credit tightness for small businesses is also due to the significantly slowed yet continuing demise of small banks with a small business customer focus. (Can you tell I live in Georgia, which is one of the states with the highest incidence of small bank failures?)

Back to the news. In addition to not having access to the same credit as public corporations, small business owners do not keep the same type of cash reserves. Because of their increased need to reserve cash, small business owners tend to be even more cautious. Perhaps it is as according to one WSJ article, Too Early To Hire, Cautious CEO Says: "It's a corporate chicken-and-egg dilemma. The American economy needs more jobs in order for consumers to feel good about spending. But without more spending, employers...won't do much hiring." From another WSJ article, Small Firms Still in Slump, small businesses  are "putting hiring, system upgrades and product updates on hold to conserve cash in case of another downturn."

And they say MBAs are conservative! It's understandable though. The majority of a small business owner's net worth is tied up in his or her business. In addition, small business owners often feel personally responsible for any cutbacks they make which adversely impact their personnel and thus wish to avoid these at all costs.

Hmm. Food for thought. In the midst of any problem lies the answer. Do you see any answers in the statements above?

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Small Business Loan Approval Rates

60% of risk managers at banks expect "approval rates for small business credit and loan applications to stay flat or decline in the months ahead" according to a July 14 WSJ article citing the credit risk firm FICO's survey. Notice these were the banks' risk managers, not the business bankers. What this says to me is if you have submitted a loan application through regular, non-relationship based channels at your bank, your loan has a higher probability of being rejected. As I repeatedly state, BUILD a relationship with your BUSINESS BANKER. That relationship can mean the difference between approval and denial or between cancellation of a business line of credit or an extension of that same line.

From the same blurb in the Wall Street Journal, according to a Biz2Credit review of ~1,000 small business loan applications "approval ratings for small business loans by large banks dropped to 8.9% in June from 9.4% in May. Loans at smaller banks fell to 42.5% from 44%." According to the article, Biz2Credit cited weaker revenues and profits as the culprit. I want to know if every year there is a drop off between May and June. In many industries this is the case. People go on vacation - business owners and business bankers - extending the approval process. The statistics don't state if the other applications were denied, placed on hold, not yet competed,... Do you see my meaning here? It's important to look at statistics and see trends but you can create unnecessary problems for yourself if you read statistics without the full context. It's kind of like taking a quote out of context.

Another thing to note is the HUGE differential in approval rates for small business loans between the big national banks and the smaller regional and community banks. The latter often have a significant small business focus. Many community banks were founded by leaders from the small business community and/or have many small business owners on their board. It's like anything else. Go where you are liked and valued. If you have had problems getting or retaining a small business loan or a business line of credit in the past, consider a community bank or regional bank.


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Tuesday, July 12, 2011

CFO Cost Concern

According to Grant Thornton's most recent semi-annual medium-sized business survey, the percentage of U.S. CFOs who cite employee benefits as the business cost about which they are most concerned is 75%. I've written a few articles in the last month about how some companies are reducing their employee health benefits' costs and provided some creative ways to provide employee benefits on a budget. After seeing this statistic, I've decided to post several more over the next month or two. Anything I can do to alleviate someone's worries! (Or at least another CFO cost concern since I've been there myself.)

If you have any suggestions or ideas that have worked for you, please share them. Thanks!


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Business Equity & Friends

I wrote a blog which briefly discussed protecting minority shareholder rights. I said it may not seem fair, but owners can do whatever they want with distributions, etc. when they grant equity to someone...unless that someone has insisted on minority shareholder rights and insisted on having those codified in a Buy/Sell Agreement, Term Sheet, or other applicable documentation that would withstand a legal challenge.  Here is an excerpt from Norm Brodsky's monthly article in Inc. where he answers questions put to him by other entrepreneurs that I think illustrates what I've said: "I told Andre (the small business owner who wrote in) that, to begin with, he was confusing ownership with compensation. Unless there is a written agreement that states otherwise, the majority owner can do whatever he wants with the company's cash. His partner's 30 percent stake does not entitle him to 30 percent of the profits—or any other share, for that matter. It is strictly Andre's decision." (I added the bolding and italics.)

And here's another excerpt regarding an area I've discussed. I repeatedly state that someone MUST have the majority stake. No two people can ever ALWAYS agree about EVERYTHING ALL the time. (Hopefully with these caps you hear me!) Someone has to take the lead when you just can't come to a decision. You can check out earlier blogs where I discuss how to do this, especially when there are 2 or more co-founders. Here's Norm's weigh-in: "And though the two of them needed to talk through their differences and reach an understanding, I discouraged Andre from making his friend an equal partner. I don't believe you should ever give anyone more than 49 percent of the stock in your business unless it's absolutely necessary—say, to raise capital you need to grow. The majority owner controls the business. If partners each own 50 percent of the stock, the company has two heads, which seldom works well in my experience and often leads to disaster." (Again, I added the bolding and italics.)

To read more about business equity, minority shareholder rights, and majority owners, read Norm Brodsky's entire article on, Divvying up the Business.

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Monday, July 11, 2011

Small Business Compensation

Are you interested in knowing what your small business owner peers pay themselves and their executive management team? Well, Inc. surveyed small business owners with less than 250 employees. They published their results in Inc. magazine's 2011 Compensation Guide.

You will see, as expected, that compensation increases as company size grows. Unless you have stratopheric, escalating infrastructure costs, as they grow small businesses enjoy greater cash flow as their revenues and operations grow, thus allowing small business owners to draw a greate salary...and to hire and compensate their executive teams accordingly. Also, as companies grow, the depth of responsibilites grow.

So if you want to know what the official owner compensation is for small business owners, check out the 2011 Compensation Guide. It's a lot different than the typical salary survey which includes all the Fortune 1000 and mid-sized companies.  Note: The survey does not include all the perks many owners take nor does it include distributions. The survey strictly covers small business owner salary and executive management team salaries.


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Samuel Adams Has Microloan Program

I read an article in the Akron Beacon Journal about how the founder of Samuel Adams wishes to help entrepreneurs. Here's the details on the microloan program the brewer of Samuel Adams' is offering.

Name: Samuel Adams Brewing an American Dream

Sponsor: Boston Beer Company, brewer of Samuel Adams beers

Partners (thus far): Accion USA and Bad Girl Ventures

For: Small businesses seeking microloans and business advice

Microloan size: $500 to $25,000

Business advice: given through financial and business coaching seminars and speed coaching events

Want to apply? Go to the the Samuel Adams Brewing an American Dream - How it Works page .

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Friday, July 8, 2011

A Weigh-In on Investor Presentations

You want your investor presentation to reel the angel investors (or other investors) in.
I've talked about investor presentations to angel investors and venture capitalists before. I saw an article on where the author delineated what each slide should contain, give or take (i.e., There is no right or wrong.) Before I share some of those topics, here are his comments,"Demo your product whenever possible. Have a conversation, not a lecture. Never let your deck or presentation be the main focus of your pitch. You always need to sell the jockey before the horse. Remember, investors buy into amazing people first and amazing ideas third-- second is always about how much money they'll earn and how fast the ROI will be." (My bolding)

As I state repeatedly, investors want a strong management team. That does NOT always mean extensive experience in the area your company is in, or extensive experience growing or running a company. These are investors, not headhunters. They want knowledge, vision, strategy, and passion. The same passion the management team uses to attact investors is the same passion you use to recruit high performing employees, draw in customers, or get suppliers to extend terms. The next thing they want is to know what they are getting out of the deal., i.e., how much money will they make and when. Wouldn't you?

Here are 4 slides listed for inclusion in an investor presentation that I wholeheartedly agree with:
"Competition & Industry Analysis. Include a general overview of your competitors, why you’re better, and how the market share and overall industry revenues look.

Game Plan. This should be a series of points about your strategy and action plan to attain your goals.

Use of Proceeds, ROI and Terms. Layout how you intend to use the money by breaking it down into big-ticket, top-level line items (e.g. Marketing, Salaries, etc.). In addition, include your anticipated break-even point and a series of financial projections that show your best, moderate, and worst cases.

Management Team. List your core team members and 2 or 3 bullet points about their relevant expertise."

To read more about what content should be on the slides of your investor presentation, go to "How to Create an Investor Presentation".
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Thursday, July 7, 2011

A CEO's Somewhat High Financial Projections

I read an article in the NY Times about why one CEO, the article's author, tends to aim too high on his financial projections. I thought it applicable to share here.

Here are some excerpts from the article, Why I Tend to Project a Little High, that I particularly like and agree with:


"Investors — especially venture-capital investors — demand aggressive “hockey stick” growth curves for revenue and profit. They want big multiples, and they want them in short time frames. They want to know what’s being targeted and what the chief executive believes is achievable. If they don’t see optimism, if they aren’t buying into a dream, they are reluctant to invest."

"We typically prepare our financials, or budgets, for the following year a few months before the current year ends.This is extremely difficult for a fast growing business."

"Aiming high is a major motivator and can create growth — perhaps not as much as you projected but still substantial."


To read the entire article and view additional thoughts on high financial projections by Tom Szaky, CEO of TerraCycle, go to Why I Tend to Project a Little High.


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Peer-to-peer lending update

A few months ago I published a blog article entitled "Top 5 Peer-to-Peer Lending Sites". (Click on the link if you'd like to view it.) I recently re-wrote the article and posted it on Upublish. Subsequently, I was contacted by LendingClub's PR firm! Yes, they were doing their job. Impressive! Here's the update:

LendingClub is now the market leader among peer-to-peer lending sites. LendingClub, which had been the leader by volume of people/entities served, is now also the leader in terms of loans provided. It surpassed in late February/early March 2011. As of the end of June 2011, LendingClub had provided ~$300 million in loans and had provided ~$243 million in loans.

If you are looking for a loan of $25,000 or less, check out LendingClub or Prosper. They are both reputable entities with somewhat different approaches.

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Wednesday, July 6, 2011

A CEO's Somewhat High Financial Projections

I read an article in the NY Times about why one CEO, the article's author, tends to aim too high on his financial projections. I thought it applicable to share here.

Here are some excerpts from the article, Why I Tend to Project a Little High, that I particularly like and agree with:


"Investors — especially venture-capital investors — demand aggressive “hockey stick” growth curves for revenue and profit. They want big multiples, and they want them in short time frames. They want to know what’s being targeted and what the chief executive believes is achievable. If they don’t see optimism, if they aren’t buying into a dream, they are reluctant to invest."

"We typically prepare our financials, or budgets, for the following year a few months before the current year ends.This is extremely difficult for a fast growing business."

"Aiming high is a major motivator and can create growth — perhaps not as much as you projected but still substantial."


To read the entire article and view additional thoughts on high financial projections by Tom Szaky, CEO of TerraCycle, go to Why I Tend to Project a Little High.


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Small Company Employee Perks

I read an article in the Wall Street Journal today about small and medium business employee perks. Specifically, the article discussed perks given by Silicon Valley startups to recruit and retain employees amidst a rising tech market. I know most of you are not tech companies but the article got me thinking. Aren't there perks that small businesses can provide that are relatively low cost but could help keep employees happy? People quoted in the article spoke of competition but also of wanting to keep hard-working employees at the office so they can innovate with one another. In addition, the companies want to encourage innovation by making the work atmosphere fun. They reason that people do their best and come up with the most creative ideas when they are relaxed or having fun. Go figure!

I say that sarcastically. I know we can all think of when we had an "Aha!" moment while walking or running, or after finishing some fun activity, or in the midst of reading a good book. Notice the pattern? We were either relaxed or having fun. Yes, it's true that we can also innovate when under pressure but that has much more to do with getting the mind to focus than with anything else.

Anyway, there are employee perks besides the usual employee benefits. You can offer a free lunch once a week. Or, if your budget is limited, you can offer lunch to those that came up with the best money-saving, sales-boosting, productivity-enhancing (you get the picture) ideas that week. Or you can have a potluck lunch or provide continental breakfast a few times a month to encourage general office mingling. You can allow employees to work from home once a week or a couple of days a month. Employees who often work out in the field like IT technicians and engineers or sales representatives really like it when they are allowed to have a home office as their base.

You can have a game day at a nearby Dave & Busters or similar entity. Dave & Busters offers group discounts as do many other amusement facilities. Cooking classes? The local culinary arts school can help. What do many of your employees like to do? Poll them and get ideas. The options for employee perks are essentially unlimited even if your budget is. Try it. Your employees will like it and happy employees make a stronger business.

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Private Company GAAP

According to an article on,Turf War over Private-Company GAAP, The Financial Accounting Standards Board (FASB) set up a new section on its website dedicated to the issues most relevant to private companies. The most important of these issues is this: The Financial Accounting Foundation (FAF), FASB's overseer, is considering recommendations put forth by a panel from the American Institute of Certified Public Accountants (AICPA). According to the article, "the AICPA wants the FAF to set up a separate board ... to handle GAAP modifications for private companies. FASB, however, maintains it should have the rulemaking responsibility." (I know it's hard to follow all these acronyms!)

A "recent survey by Grant Thornton indicates that more than 50% of private-company CFOs don't mind having FASB regulate the accounting standards. Only 22% support a separate body".

Apparently there's some jockeying between FASB and AICPA over who will govern GAAP rules for private companies, should those come into being. (And that looks like a certainty. It's just a matter of time...a few years, perhaps?) If you want to contribute your input, as a business owner or CFO of a small or medium enterprise, you can visit the FASB website and contact one of the eight members assigned to take comments and feedback from and on non-public entities. Go to the Nonpublic Entities Stakeholders page and click on one of the links you deem most applicable.

For those who are confused by all the acronyms:

FASB - Financial Accounting Standards Board - establishes financial and accounting standards in the U.S.

GAAP - Generally Accepted Accounting Principles - "common set of accounting principles, standards and procedures that companies use to compile their financial statements" (definition courtesy of Investopedia)

FAF - Financial Accounting Foundation - the private sector entity that operates/runs/oversees FASB

AICPA - American Institute of Certified Public Accountants - professional association of CPAs in the U.S.


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Tuesday, July 5, 2011

JA Fellows and Entrepreneurship

I've blogged before on how effective the Junior Achievement (JA) Fellows program is at introducing high school students to business ownership and management and fostering entrepreneurship from an early age. It really is a great hands-on entrepreneurship training program. I've even written how the JA Fellows program can also be advantageous for volunteers who are just starting out as entrepreneurs or who work for large companies and are considering entrepreneurship. The JA Fellows program walks you through the entire process from raising capital through selling stock to unwinding and liquidating the business. It's a superb program and I'm happy to call myself a volunteer.

This past year I volunteered with a group that came up with a product, ReZold, after several weeks of trying to do another product. The initial product took more time and effort than initially anticipated and had way too many variables. I thought this was an excellent real-life learning situation for them. Due to my travel schedule, although I had been with the group since October and had many returnees from the previous year, for which I was also a volunteer, I had to resign in late January. I didn't think it was fair for people to count on me when I couldn't say definitively whether I'd be there or not. C'est la vie.

The great news is that my former group, ReZold, went on to win the "innovative" category in the city wide JA Fellows competition. And they were ranked in the top 3 submissions so my group (former group) is headed to Washington, DC for the North American championship. There's a wonderful article about them in the Atlanta Journal Constitution, Young Entrepeneurs Tout Summer Vocation.

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Angel Investments Up in 2010

Check out the results of a study published by the University of New Hampshire Center for Venture Research. It shows that while the U.S. was emerging from the recession, angel investors were apparently becoming more optimistic as a whole about potential investments and target company prospects. According to this study (Jeffrey Sohl, "The Angel Investor Market in 2010: A Market on the Rebound", Center for Venture Research, April 12, 2011), a total of 61,900 companies received angel investments in 2010, an 8.2% increase over the 57,200 entrepreneurial ventures that received angel funds in 2009. Angels investments in the U.S. totaled $20.1 billion in 2010, a 14% increase over 2009. Comparing the two stats, one can see that angel investors were channeling more funds into more companies. That funding helped those companies create an average of six additional jobs per venture in 2010.

Why is this? The study doesn't give any reasons so here are my thoughts and observations. Ten years ago the angel investor market had hit $30 billion in total angel investment (down from 2000, which was the true height of the tech investment bubble). That number plummeted by nearly 50% to $15.7 billion in 2002. Then the angel investment market began a steady rise until the real estate bubble burst in late 2007. The angel investor market then dropped in 2008 and 2009. It began to rise again in 2010. See the correlation?

It appears that angel investors are a fairly resilient bunch and believe in the continued, long-term growth of small businesses in the U.S. The types of small businesses may change (from manufacturing to technology to energy and so on), but the innovation continues. Remember, most angel investors are wealthy individuals. When the stock market and/or real estate take a dive, so does the investment portfolio of many angel investors. They have to regroup. Also, when bubble bursts and a recession follows, more companies file for bankruptcy or otherwise "go under". So some angel investors may exit the angel investment market for a period of time to concentrate on rebuilding their portfolio after a company he/she invested in went belly up.

I see a continuing rise in angel investments over the next few years. What do you think?


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Saturday, July 2, 2011

Loan Options

I saw an interesting article on discussing some of the small business loan options available. The list was by no means exhaustive, nor was it meant to be. It contained sufficient options and enough data about those options to get you to thinking creatively and help you to realize that there are other options besides bank financing if your company just doesn't qualify for any bank's business loan yet. In other words, it was my type of article. Here's an excerpt:

"The good news: Recently, government initiatives, such as the Small Business Jobs Act, have bolstered small businesses and freed up lending lines—and the proof is in the numbers. In Capital One Bank’s 2011 survey, 85% of U.S. small business owners said they were able to get the financing they needed."

Go to the article, The New Rules of Getting a Loan, to read more. (One comment. This title is a misnomer. The rules are not new. They may be stricter but otherwise they've been this way for years. And the article mentions a staggering drop in small business lending. If a 10% drop is a staggering drop especially in a recession, then what would the author call a 20% drop, 'earth shattering'? Remember when you read the article that journalists use inflammatory language to engage you and get you to read the article.)

Hope you are enjoying your 4th of the July weekend! (assuming, of course, you reside in the US)

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Friday, July 1, 2011

Loan Options

I saw an interesting article on discussing some of the small business loan options available. The list was by no means exhaustive, nor was it meant to be. It contained sufficient options and enough data about those options to get you to thinking creatively and help you to realize that there are other options besides bank financing if your company just doesn't qualify for any bank's business loan yet. In other words, it was my type of article. Here's an excerpt:

"The good news: Recently, government initiatives, such as the Small Business Jobs Act, have bolstered small businesses and freed up lending lines—and the proof is in the numbers. In Capital One Bank’s 2011 survey, 85% of U.S. small business owners said they were able to get the financing they needed."

Go to the article, The New Rules of Getting a Loan, to read more. (One comment. This title is a misnomer. The rules are not new. They may be stricter but otherwise they've been this way for years. And the article mentions a staggering drop in small business lending. If a 10% drop is a staggering drop especially in a recession, then what would the author call a 20% drop, 'earth shattering'? Remember when you read the article that journalists use inflammatory language to engage you and get you to read the article.)

Hope you are enjoying your 4th of the July weekend! (assuming, of course, you reside in the US)

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More on Small Business Lending

Here's more information on small business lending, this time from the Wall Street Journal:

"Another lending analysis, by the Federal Reserve Bank of Kansas City, shows that big banks' outstanding loans to small businesses dropped 14% between March 2010 and March 2011, while loans by smaller lenders fell 3%."

From the same WSJ article, "March data from the FDIC shows that commercial and industrial loans of less than $1 million, which are generally issued to small firms, dropped 10% from a year earlier."

How is that? Earlier today I posted excerpts from an article stating that small business lending is improving. This one said it's not. My experience says it is. Perhaps this quote from the article helps to shed some light on the dichotomy: "Commercial and industrial lending, an indicator of business-loan demand, totaled $1.26 trillion in May, up 3% from a year ago, according to the Federal Reserve."

What's happening is that larger small businesses - those with revenues of $5 -$10 million and more now have access to more loans and financing institutions than in 2010 and thus, more of these are obtaining more loans. (Do you like my overuse of the word "more" to make a point?) These entities typically have good financial tracking systems in place, a strong customer base, and a strong business history that support the loan request. Businesses with smaller revenues typically don't have the same viability and therefore aren't as attractive as loan candidates. As banks comply with regulatory demands to retain higher capital reserves and justify its loans, the lack of viability continues to be an issue.

But all is not lost. This article states that banks ARE lending - to those who fit a certain profile. You just have to shore up your operational and financial infrastructure so you fit that profile.

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Small Business Lending on the Rise

Good news from your small business CFO resource! Small and medium business lending is up! Check out this excerpt from the article, Small Business Lending on the Rise:

"Borrowing by U.S. small businesses is at its highest since July of 2008, two months before the collapse of Lehman Brothers, says the Thomson Reuters/PayNet Small Business Lending Index, which measures the volume of small business financing. (PayNet provides risk management tools to the commercial lending industry, and the loans it tracks typically are used to buy or update plants and equipment.)

The index was up 26 percent in May compared to the year before."

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