Wednesday, August 31, 2011

Another funding alternative

Growth
A friend of mine who is an angel investor and previously (in the '90s) had two different companies on the Inc. 500 list told me that many of the Inc. 500 companies are cash flow negative. I hadn't thought about it until he brought it up. The Inc. 500 list is ranked on speed and quantity of growth, not on the speed and quantity of profitability. In addition, high growth companies almost always have cash flow issues. All that growth requires cash. I've written an article or two about how poor cash management in a rapidly growing company can lead to business failure.

Anyway, continuing on a more positive note, Tom Szaky of TerraCycle, an Inc. 500 company, addressed just this issue from a different perspective in a New York Times article I read. His whole discussion was on increasing revenues vs. increasing profits and why one made more sense than the other. I really liked his insights and wholly agreed with his premise: As a young company, your key to sustainability and viability is managed growth and to do this you need to plow your operational profits back into the company. Along those lines he also brought up an alternative funding source. I've shared his excerpt below.

"Recently, a Brazilian investment group bought a minority interest in our Brazilian subsidiary. The group not only brought capital, but through their resources has been able to fuel our Brazilian operation with faster growth. Better yet, we can use the proceeds of this sale to bring liquidity to our investors in the parent company. This approach, should we choose to roll it out more broadly, might be a way for a relatively small company to develop strong local partnerships to turbo charge activities in foreign operations, while also creating cash to let earlier investors in the parent company exit. That would allow the company to remain private, independent and focused on growth.

So far, it seems like both our short-term and long-term investors like this approach." (Excerpted from the New York Times article, Choosing Between Profits and Growth.)

Do you have any other funding alternatives you'd like to share? We'd like to hear.

Read More

Financial Boot Camp - Atlanta

Financial Boot Camp

This seminar brings finance and accounting together with face-to-face instruction on how to fund your path to success:

  • Discover what everyone but you knows about your financial statements

  • Learn where to find investors, lenders and alternative funding

  • Insights on how others evaluate your business to get funding approved

Register Now
Course Agenda Brochure

Small Business Finance Institute

2-Day Workshop $295 (incl. lunch)

NEXT DATE:
September 9 & 10
9:00 - 3:00

Workshop will be presented by
Charles H. Green at
HUB Atlanta
1375 Spring Street, Atlanta GA 30309.

Limited to 15 Par

Read More

Tuesday, August 30, 2011

PR Intern programs and more

I've blogged about using college interns. As a college engineering intern the experience I received was invaluable. I also recently blogged about using press releases and other public relations' activities to help you raise capital (See: Publicity Can Help Raise Capital). Many colleges and universities require their public relations' majors to intern. In exchange, these schools offer class credit for those internships. I won't provide the list here because it is really, really long but, if you live in an area with several colleges, at least one of those schools has such a program. The one drawback is you often have to make the request up to 6 months in advance - for example, before the end of the spring semester for the fall semester. Due to the classes many of the schools require as a prerequisite, the intern candidates are typically 2nd semester sophomores or juniors. Since the students get class credit, they are highly amenable to working for free.

If you live in Ohio or have an office in Ohio and want to utilize college interns that don't get class credits for their internships and thus, expect compensation, check out the Northeast Ohio Council on Education or NOCHE. If you don't think you have the budget to pay an intern, NOCHE has an Entrepreneurial Internship Program that reimburses employers up to 50% of the intern's wages. A similar program NOCHE administers, the Third Frontier Internship Program, provides the same benefits but is only available for high tech internships. Per their website, www.noche.org, contact Brenda Davis Smith for more information.

 

I know other programs exist in other states. Please send me the information so I can share it here. Or post a comment. Thanks!

Read More

Monday, August 29, 2011

Publicity Can Help Raise Capital

Publicity Can Help Raise Capital
Great article for anyone trying to raise capital. Gives suggestions on leveraging press releases and other PR to entice investors.
Read More

ESOP as a Means to Motivate

I've read arguments for and against providing employees with stock. Personally, I'm in favor. You don't have to give up much to have it go a long way. Those who are truly aspiring entrepreneurs will leave regardless. But you can keep people on board longer and tap their efforts and creativity better when they feel they have ownership, however small. That's my personal opinion. Here is a video from an Inc 500 company founder who feels the same way...and put action behind it by creating an employee stock ownership plan (ESOP).

 

Read More

Save Money, Generate Revenue Through Employee Ideas

Want to solicit free revenue generating or cost saving ideas? Ask your employees! They are an excellent resource that, for some reason (ego, inability to fully delegate, not thinking of employees as truly part of a team, just never thought about it...did I miss anything?) many business owners often ignore. Here's an excerpt from an Inc.com article on the subject:

----------------------"6. Make it Fun. "The old suggestion box just doesn’t do it anymore and you can wait a long time to get more than a few scattered ideas from a web site. Make it social: Ideas come from the interplay and free exchange between employees. Create opportunities for employees to get together and brainstorm. The Japanese have long done this informally with their after-work get togethers (though sometimes those involve excessive drinking). It doesn’t really matter how it’s done, as long as it's done together. New ideas come from playfulness and humor. If fun is not a dirty word at your business, you’ll hear a lot more ideas every day. Nothing shuts people up faster than knowing if they offer an idea the boss or company doesn’t like, they’ll pay for it. Really good ideas almost never sound "normal." Imagine how the idea for Post-it notes must have sounded when it was first described—'you stick these little pieces of paper everywhere, then...'"
—Steven Farmer, W. Frank Barton Distinguished Chair in Business, Department of Management, Wichita State University"-------------------

For more suggestions, read the entire Tapping Employee Ideas article.

Read More

Thursday, August 25, 2011

Strategic Alliance: An Example

Strategic alliances and partnerships can and do save money. But most importantly, they can conserve cash and help you run your business more effectively. Here's an excerpt from another blog that provides a real-life example of the benefits partnering can provide.

"An IT firm, Harris and Associates, offers Web hosting, computer programming, network management and data back-up. The firm was looking for ways to expand its services without incurring additional expenses. They sought a strategic alliance with Creative Images.  Creative Images is a branding, creative services and new media company. The unique alliance allows each company to specialize in what they do best while expanding their customer base.  Each company can now approach their existing and future clients with a suite of new services. The firms both agree to work with each other on client services with a percentage of the revenue generated from the services provided being returned to each of the firms."

To read more about partnering, visit the the blog post: Strategic Alliances Help Businesses Save Money

Read More

Wednesday, August 24, 2011

Business Link North Carolina

I received this from someone by email. Thought I'd pass it on: 

“The N.C. Department of Commerce's Business Link North Carolina (BLNC) launched its updated website on Aug. 12. The site is designed to direct North Carolina businesses and service providers to the resources needed to start, grow and expand businesses. The site is also designed to direct clients to a cost-free consultation with a BLNC business counselor. This service of the state is to ensure businesses have the most up-to-date information to help their business succeed. Visit BLNC at www.blnc.gov and call (800) 228-8443 for a consultation.

Business Link North Carolina, a service of the State of North Carolina, is a comprehensive business support network. BLNC partners include: The N.C. Department of Commerce, N.C. Community College System, The Small Business and Technology Development Center, The Employment Security Commission, N.C. Department of Agriculture and Consumer Services, The N.C. Department of Revenue, The N.C. Secretary of State, The N.C. Community Development Initiative, The N.C. Institute of Minority Economic Development, The N.C. Rural Economic Development Center, N.C. State University’s Industrial Extension Service and the University of North Carolina System.”

 

S. Briles Johnson

Business Link North Carolina

NC Department of Commerce

FooterLogo.gif

o 919.807.4285

www.blnc.gov

 

Entrepreneurship_Summit_email_final

Read More

Tuesday, August 23, 2011

Search for America's Favorite Small Business

ROUND ROCK, Texas--(BUSINESS WIRE)-- Small businesses are the economic engine of the United States, driving growth, innovation and employment across the nation. To honor the entrepreneurial spirit of business owners and spotlight the success of these unsung American heroes, Dell, MasterCard and Microsoft are teaming together to search for “America’s Favorite Small Business.” This 13- week contest invites small businesses to submit a short video explaining why they should be America’s Favorite Small Business (AFSB) and claim the $75,000 prize package.

Regardless of industry or location, small businesses today look to technology both as a means for company growth and as a way to increase productivity. Recognizing that technology adoption is a key driver of small business success, the finalist with the most votes for their video will win $25,000 in Dell solutions and Microsoft software suited to thei

1251369_afsb_partnerlogo_0718111
r unique needs and a $50,000 MasterCard prepaid card to be applied toward business expenses and supplies. The winner will also be awarded the opportunity to promote their business through their own web reality show on Dell’s YouTube channel. The other nine of the 10 AFSB competition finalists will receive a $1,000 Dell gift card.

The competition will roll out in five phases, including:

  • Phase I: Launch & Submit - Aug. 15-Sept. 11 - Businesses with 25 or fewer employees can create a short video explaining why they should be America’s Favorite Small Business, and upload the video via YouTube (www.Dell.com/AFSB).
  • Phase II: Judging Process – Sept. 12-Sept. 18 - A select panel of Dell, MasterCard and Microsoft judges will filter all entries down to the best ten submissions.
  • Phase III: Finalists Voting - Sept. 19-Oct. 26 - People around the country are invited to begin voting for their favorite small business.
  • Phase IV: Announce Winner - Oct. 27
  • Phase V: Makeover Reality Show - Oct. 27-Nov. 13 - The winning company will appear in a professionally produced web-based reality show about their business.

The Dell prize package includes solutions specifically designed for small businesses. All of the PCs will come loaded with Windows 7 Professional Edition and Office 2010 Home and Business. The MasterCard prepaid card provides small business owners the ability to streamline and automate their payments processes; pay everyday bills, including rent, utilities and other suppliers; make investments in infrastructure; and take advantage of MasterCard features and benefits.

“We are pleased to work with Dell on this program to empower small businesses by providing Microsoft Windows and Office on these top of the line PCs,” said Nick Parker, vice president of Worldwide OEM Marketing of Microsoft. “This software gives small businesses the freedom to do it all - at work, at home, virtually anywhere work happens.”

“Dell was founded on the same entrepreneurial spirit that drives small business owners to pursue their passions, and we are proud of those roots,” said Mel Parker, Vice President and General Manager of Dell Consumer and Small Office, North America. “By delivering products and solutions specifically designed for small businesses, Dell helps entrepreneurs do and achieve more with technology.”

“At MasterCard, we celebrate the spirit of enabling small businesses to succeed and, in the process, spurring innovation, employment and economic growth,” said Eugene DeSilva, vice president, Product Management, U.S. Commercial Products, MasterCard Worldwide. “Our participation in this program reinforces an ongoing commitment to offer small businesses innovative payment solutions that help them efficiently manage and grow their business.”

About Dell

Dell Inc. (NASDAQ:DELL - News) listens to customers and delivers innovative technology and services that give them the power to do more. For more information, visit www.dell.com.

NO PURCHASE NECESSARY. A PURCHASE WILL NOT INCREASE YOUR CHANCES OF WINNING. LEGAL RESIDENTS OF THE 50 UNITED STATES (D.C.), 18 YEARS AND OLDER WHO ARE A SMALL BUSINESS OWNER OR APPOINTED BY A SMALL BUSINESS OWNER AND WHO DID NOT PURCHASE ANY EQUIPMENT FOR PURPOSES OF ENTERING THE CONTEST. VOID WHERE PROHIBITED. Enter Contest by: 9/11/11. For Official Rules and prize description, visit www.Dell.com/AFSB. Sponsor: Dell Marketing U.S.A. L.P., One Dell Way, Round Rock, TX 78682. 

Read More

Small Business Sites (WSJ)

Yes, I was reading the Wall Street Journal yet again (I told you I read it every morning!), and came across an article regarding useful small business web sites. I've seen similar articles in Inc and on Mashable, and I have passed on to you the websites I believe are highly relevant, especially with respect to small business financing. Well, here I go again. Following is my paraphrasing of portions of the WSJ article, Useful Sites for Small Companies.

VentureHacks.com/articles/presentation-hacks - Very specific, eh? It doesn't just refer you to Venture Hacks but to a 20-minute financing presentation by an angel investor. The well known tech angel investor offers presentation tips to entrepreneurs and owners of small but growing businesses seeking equity investors. Those tips include the importance of thoroughly knowing your subject and good presentation skills. (A brief signup with Toastmasters anyone?)

 

 Kickstarter.com - If you are in a creative field (food, entertainment, etc.) and are producing a tangible product, you should check this site out. This site draws investors (or "backers" as the WSJ calls them, like the term used for investors in broadway musicals) who "pledge money to products of interest." Kickstarter helps the entrepreneur determine a funding goal (what do you need and how much money do you need to raise to get it?) AND helps you craft a pitch to get it. I think these are both great. I know many entrepreneurs who pull a number out of the air (I was going to use a bodypart, but "air" is much nicer!) and can give you absolutely no information as to where it came from or why they need that amount. And I know those who know what they want but either have no sales or persuasion skills or think interesting investors is exactly the same as selling their product. So kudos to Kickstarter for helping entrepreneurs overcome those obstacles.

 

 

Read More

Monday, August 22, 2011

FASTech

Img00059

Where innovation and opportunity connect. Sent via BlackBerry from T-Mobile

Read More

Friday, August 19, 2011

Hilarious Audio Rap Chronicle on Raising Money

I had a good laugh listening to this rap. Whether you are a fan of rap or not (and I am), you'll find this track a little offbeat and perhaps just what you need to release the tension around raising money. You have to check it out.

Takin' VC Money (Money Cash IPO's) by Smixx

Here's an excerpt from the Mashable article about the rap: "The rather hilarious track — posted to Soundcloud Thursday by Cardinal co-founder and techie rapper Cory Smith — has the stylings of a typical rap hit, but chronicles some of the highlights of the startup life: raising capital, attracting celebrity attention, 5-Hour Energy binges, getting launch coverage and concerns about pivoting." (That's pivoting in Excel spreadsheets!)

Here's the direct link to the rap soundtrack: Takin' VC Money (Money Cash IPO's) by Smixx. Let me know what you think.

Read More

Thursday, August 18, 2011

New Debit Fees Create Opportunities for Prepaid Debit Cards

Mc900440384
In case you are not aware, "Wells Fargo already sent letters to customers in Georgia, New Mexico, Nevada, Oregon and Washington that the fees will begin Oct. 14, according to MyBankTracker.com. That's just two weeks after Federal Reserve-mandated rules slash the amount banks can charge retailers for every debit card purchase. Regulators reduced the maximum bank take on each transaction from 44 cents to 24 cents." (courtesy of Daily Finance)

These fees are on par with what WalMart charges monthly for its prepaid debit card. So perhaps it's time to explore options. Anyone remember cash and the check book? Or what about all those prepaid debit cards that are coming out, following WalMart's lead? What a great way to manage and track your business expenses without going over. While I'm at it, prepaid debit cards could be an option for small business owners who would like to make a business credit card available to employees but are concerned about managing the process. Hmmm. Something to consider?

Read More

Wednesday, August 17, 2011

Main Benefits of Angel Investors

I thought this article excerpt said it best:

"So what are the main benefits of angel investors?

Cash. You need cash to grow your business and angel investors have it. It sounds obvious, but don’t take money from angels or investors unless you plan on giving it back.Control. The terms are less demanding. Angel investors are looking to have less control over your company than venture capitals or institutional investors regarding shareholder rights, governance, and decision making. They are around for the ride. Because Honest Tea raised funds from angels, our cofounder, Barry, and I were able to protect Honest Tea’s mission.Angels can offer advice, experience, and support.They have great networks, can serve as local cheerleaders for your product or service, and can help get you connected."

Excerpt provided courtesy of Inc.com's article: The Dos and Don'ts of Raising Money from Angels

Read More

Tuesday, August 16, 2011

IBM Global Entrepreneur Program

As part of the White House led Startup America program, IBM is participating via its IBM Global Entrepreneur Program. IBM has committed $150 million to promote entrepreneurs and entrepreneurship programs in 2011. If your company is accepted into the IBM Global Entrepreneur Program, your startup will receive the following:

  1. access to free software for up to 3 years
  2. a project resource manager
  3. online courses
  4. research
  5. SmartCamp events.

(Remember what I've said about asking what do you need startup funds or other capital for? As a software-based product or service provider, the above resources are likely what you'd spend a significant amount of your startup funds on.)

  1. To participate in IBM Global Entrepreneur, your company must be:
    • A member in good standing in the PartnerWorld program
    • Actively engaged in developing a software-based product or service
    • Privately held
    • In business for less than five years
  2. Companies which are authorized to resell IBM products or services are not eligible to participate in this initiative.

Go to the IBM Global Entrepreneur Program to obtain more information or to apply to participate.

Read More

Raising money: 3 cases

I personally know 3 companies that are in the process of raising money. By this I mean equity capital. One is a clothing wholesaler that serves a niche market and has a US-based manufacturing, eco-friendly positioning. Another is a convenient health food product company that now has a presence in some Whole Food stores. Yet another is a much larger company that needs equity capital to expand its IT infrastructure without increasing its debt load and stressing its margins. In the latter case, they want to increase their capital expenditures and amortize the costs over several years instead of expensing the costs in the year incurred. (There is some tax accounting or law involved here but that has little impact on what the company wants to do.)

Buying_business
The first two companies are revenue generating startups so they are seeking angel capital. Actually, the first company I mentioned has raised $1.5 million from a large number of small angels and one larger investor. This company now seeks a large angel investor with strategic ties and contacts in its industry. Or it would like a strategic investment from one of the larger companies in its industry. Why? Whenever people tell me they need to raise capital, I ask them why. What do you need the money for? In this case, the company wants to increase its distribution channels, raise its industry profile, and eventually become the go-to wholesaler...before other eco-friendly competitors with a US manufacturing base enter the frey. Because this is what they want the money for, they know they are better off pursuing one large investor or company than the numerous small investors they previously sought.

The health drink product company is bootstrapping as much as possible. They have raised some equity capital and want to raise more but they have also relied on their strong banking relationship to obtain a lot more debt than the average startup would typically have access to. It doesn't hurt that one of the co-founders successly sold a company a few years ago. This company is looking for angel capital that is not greedy. The founders are quite willing to retain a huge portion of the financial risk but they do need some additional equity capital to shore up the balance sheet a bit so they are seeking a few angel investors willing to work a bit to ensure their investment is a success. They've also used a lot of creative financing, getting friends and business associates to provide services or products or introductions that enable them to save their cash. For example, they need a PR push to help them get noticed by the companies they are pursuing. I found a PR firm willing to barter and am helping them get college PR interns. (I'm joining their newly formed Board.)

I'll cover the 3rd case in my next post.

Read More

Monday, August 15, 2011

Business Impact: Shifting Consumer Preferences

Last weekend I went to Borders' Going Out of Business Sale and bought several books, which I started reading over the weekend. This, along with a couple of articles I've read in the Wall Street Journal, left me waxing whimsical about Borders. First I have to say: Borders, I'm sorry to see you go. You were my favorite! I love Amazon but I went to Borders for immediate gratification...and to talk to the knowledgable sales people who were often literary / cerebral types. Sometimes I need a mental boost and Borders delivered in more than one way.

Borders_logo
What happened to Borders? I'm no book industry expert but I am a huge consumer of books so I'll take a stab at it. It's relatively simple: Borders' business model didn't keep up with changing consumer tastes. It wasn't that people stopped reading. It's that people shifted to reading more books electronically. It's the same thing that happened to newspapers (and that industry I know much better, since I owned a trade newspaper), just at a later date. What made the transition to electronic book reading slower was that people don't mind reading news bites or the occasional full newstory online, but they generally don't want to read an entire book online. Then Amazon came out with the Kindle, Barnes and Noble with the Nook and...then Apple came out with the iPad...and that was all she wrote.

Whereas Barnes and Noble created a large online presence for its customers to buy its books online or pick up a book at a store, Borders partnered with Amazon for online services. Whoa Nelly! The idea may have seemed good at the time but YOU should cannabalize your own sales, NOT someone else. In other words, Borders should have cannabilized its own in-store sales with a concerted online efforts, not allowed Amazon to do so. (Okay, admittedly Amazon still would have cannabilized Borders' sales, just not as much.) B&N also created its own ebook reader. Borders didn't.

I'm not knocking Borders. These things happen. Look at Blockbuster. A similar thing happened. A change in consumer tastes. Consumers still watch movies, they just have their movies delivered differently - in little RedBox vending machines outside the supermarket or drugstore (or Walmart...), in little Netflix mailing packages, or streamed over the Internet by Netflix or someone else. Borders either didn't see or ignored the shift in consumer delivery preferences until their competitors were way ahead and neither did Blockbuster.

So the point here is to pay attention to what is happening in your market and industry. Too many business owners like to narrowly define their competition. Do so at your own risk!

Read More

Friday, August 12, 2011

Superb Angel Connecting Service

I saw a wonderful blog post on a blog that I regularly check out. Here's an excerpt and the link, "AngelList (AL) connects promising startups to a sterling network of early stage investors. AL has been getting a blizzard of well-deserved press of late after Venture Hacks released the networks 18 month statistics. But not a lot has been written for startups on how to best use the service. Here's our take in small, bite-sized pieces."

Raising Money on AngelList: 21 Tips from Two Active Angels

http://onstartups.com/tabid/3339/bid/63010/Raising-Money-On-AngelList-21-Tips-From-Two-Active-Angels.aspx

 I thought the article had some superb information and also thought that you may wish to consider using this service to raise more funds. Even if you have already raised some funds, this service, AngelList, can potentially connect you to some heavy hitters who may be more strategic to your business. I thought the article had some superb tips on maximizing the use of this service and getting the investors you want to fund you. The blogger has actually invested in companies through AngelList.
Read More

Atlanta - United Way V.I.P.

I am a graduate of this program. If you are interested in participating on nonprofit boards, this is an excellent training and exposure program. If you don't reside in the Atlanta metro area, check your local United Way to see if the Volunteer Involvement Program is offered in your area.

 

NOW ACCEPTING APPLICATIONS  
UNITED WAY V.I.P.

FALL 2011 CLASS

 

Deadline:  Tuesday, Aug. 23, 2011   

What:

United Way V.I.P. Training 

Fall 2011 Call for Applications  

When:

The application process is open.  Deadline to apply is Tuesday, Aug. 23, 2011

Where:

Applications can be faxed to 404.614.1010; e-mailed (preferred) or mailed to: 

United Way of Metropolitan Atlanta

Attn:  United Way V.I.P.

100 Edgewood Avenue NE

Atlanta, GA 30303 

Details:

United Way of Metropolitan Atlanta announces a call for applications for its Volunteer Involvement Program (V.I.P.) 2011 fall training. United Way V.I.P. trains communtiy leaders to be effective board members.  Selected applicants will participate in a ten-week comprehensive nonprofit board governance curriculum. During the training, participants meet representatives from metro Atlanta's nonprofits to find an organization whose needs and mission complement their own skills and interests.

 

If selected, participants must commit to attending all training sessions. Candidates must also complete a full board-term when placed with a nonprofit agency. Each person is required to complete a $500 fundraising activity. 

  

How to Apply: Download the application from our website, www.unitedwayatlanta.org.

 

Questions:  404.614.1019

 

REMINDER:  The application deadline is Aug. 23, 2011.    

Read More

Thursday, August 11, 2011

More on Bonding and Finance

Are you a construction company who needs bonding to finalize a contract? Or does your construction firm need to obtain higher bonding levels? Check out this video, part 2 in a series, for answers on how to obtain higher bonding levels.

Read More

To Borrow or Not to Borrow

I'm taking issue with a quote from the Inc.com article: "7 Financial Mistakes to Avoid":
"Just because a bank is willing to lend you money does not mean you should accept it. The bank is in business to collect interest and not to optimize your financial performance. Sometimes these two goals meet somewhere near the middle, but it is not as often as you might think. It's not that bankers seek to take advantage of businesspeople; it's only that their objectives and yours are very different. In general, borrow as much as you need to grow your business. The problem with credit is not that there is too little available; it is that people get too much of it. Borrowing money adds a huge burden to your business, a stress that can often cascade into your personal life." (The bold is my emphasis.)

Manage_company_finances
Okay, I like this statement even though I disagree with a lot of it. It got me to thinking and inspired me to debate it. Admittedly, I wholeheartedly agree with "borrow as much as you need to grow your business".

When you are highly profitable (i.e., profit margins of 10% or more) and have an excellent personal credit history or a very strong business credit history, you have or can obtain access to a lot of bank credit. Sure, if you are venture-backed or backed by a deep-pocketed angel or strategic investor, you'll also have acess to a lot of bank credit. But the vast majority of small and medium business owners are NOT in this predicament. So go for the money while you can, if it makes business sense.

Remember how Ford weathered the automotive industry downturn? Sure, it had a stronger strategic and operational vision than GM and Chrysler but it also saw a credit tightening in its future. Consequently, Ford's financial team identified and utilized a few specific sources of debt financing to fill its coffers in cash in advance of the credit restrictive environment it foresaw. This gave Ford access to cash at a time when many of the large banks were in trouble themselves and so most certainly weren't lending and other sources of debt financing that large corporations typically have access to had nearly dried up. If Ford hadn't taken advantage of the access to credit when it did, it would have had to pursue less available debt capital at significantly higher interest rates which would have adversely impacted its financial statements.

So obtaining a bank loan when your company is highly profitable but intends to spend significantly on human capital, infrastructure, or other expenses in the future (next weveral months to few years) to support the growth of your business is good. Why? You can place the funds in a CD, treasury bonds, marketable securities or something else that will reduce the effective (net) interest rate on that capital, then only spend the money as the strategic plan and market suggests. The capital expenditures will somewhat depress your financial statements, making you less attractive to a bank, raising your interest rates. But since you, like Ford, accessed the money when you were healthiest (from a bank's perspective), you don't need to worry because you do not need to borrow any more money for a while. Put another way, getting a bank loan to support future growth is like pulling cash out of your house in 2007 to pay for your high school sophomore's college education or as additional capital for a business you've been building from home.

However, obtaining bank loans and using them unwisely is never good. You have to look beyond the current situation to the anticipated future situation...while factoring in best case and worst case scenarios. Otherwise, obtaining a business bank loan that you end up using unwisely is just like pulling cash out of your house in 2007 and using it to fund vacations, cars, etc. It seemed like a good idea at the time but you were thinking far too short term and the changes over the next two years slammed you.

If you are uncertain about what you should do if you have access to credit now but aren't sure if you should pursue that credit or not, another alternative is to obtain a line of credit from a bank. You only pay the fees on the bank line of credit. You do not have to make interest payments until you actually draw down on the credit line.

Read More

Wednesday, August 10, 2011

A New Incubator in Georgia

A new business incubator is coming online in Georgia in the Atlanta metro area, Alpharetta to be exact. This Alpharetta-based incubator, Alpharetta Accelerator, will focus on helping tech-oriented start-ups get the resources they need to be successful and grow. The perfect candidate will be a start-up from the software, medical device, medical services, or green technology realms.

This business incubator is a little different. It doesn't come cheap, as many do. Many incubators provide low cost rent and business advisory services. Not this one, at least not the low cost rent. The entire cost: a $5,000 entry fee - or $15,000 in company stock if you don't have the cash to pay the entry fee. Then, on a monthly basis, the fee is $2,500.  Unless your business is quite large, that's significantly more than the typical start-up would pay in rent in Atlanta's current real estate market.

So what do you get for these hefty fees?

  • Office space. (The business incubator has a total of 3,500 square feet. Each company will get a portion of this.)
  • Business advisory. Each company will have five business advisors. These individuals will mentor and coach them, provide access and introductions to prospective customers, and, assuming they like what they see, they may invest.

The Alpharetta Accelerator is beginning life with $10 million, the bulk of which will be invested in the incubating companies. According to the Atlanta Business Chronicle, from which most of the information from this article was obtained, "Investment rounds would range from $250,000 to $2 million. In return, investors would receive between a 10 percent and 25 percent stake in the companies, Bryant said."

So the cost seems high to me but if the business incubator invests in the companies and provides the level of business advisory it's implying it can, then the cost could actually be low in the grand scheme of things. Most small incubators don't provide more than cheap rent, some advisory, and an entrepreneur's community. That's valuable, but not worth $2,500 per month. Of course, most of the companies in those incubators don't expect to generate more than a few million in revenue. So perhaps it's all relative?

 

Read More

Tuesday, August 9, 2011

Atlanta Event: Atlanta Real Estate Market

ACKERMAN & CO.'S PRESIDENT, KRIS MILLER, ON

"THE ATLANTA REAL ESTATE MARKET: WHAT IN IT FOR YOU"

Have you been wondering what's going on in the Atlanta commercial real estate market? How is the Atlanta commercial real estate market faring compared to the residential market? What's in it for you? Should you renegotiate your office lease? Should you buy your building or invest in something else? Kris Miller will give us his analysis and perspective on the real estate market in general and what is happening in Atlanta in particular. Come hear him speak!

DATE:  Wednesday, August 17, 2011
TIME: 7:30-9:00AM
LOCATION: City Club of Atlanta (Buckhead)
3343 Peachtree Rd NE
Suite 1850
Atlanta, GA 30326
(In the Atlanta Financial Center)
(404) 442-2600
COST: $20 pre-registration, $25 after August 14th (Parking is included)

Click here to register


About Our Speaker : Kris Miller

Atlanta's Real Estate Market: What's In It for You?
Kris Miller, Ackerman & Co.

As President of Ackerman & Co., Kris directs all investment, management and leasing activities of the firm. Since joining Ackerman in 1997, Mr. Miller has positioned the company as one of the leading full-service commercial real estate firms in the southeast.

Under his leadership, Ackerman has quadrupled the square footage under management and is now one of the largest landlords in metro Atlanta. Gross commission volume has increased sevenfold. And more than $1 billion in house and client equity has been invested in a number of successful real estate ventures.

Ackerman’s investment focus covers a variety of disciplines. Ackerman Medical has developed over 1 million square feet of Class “A” medical space over the last five years in a unique joint venture structure with physician and other Atlanta-based healthcare systems.

Multiple investments in Atlanta area office, industrial, and retail projects have been made with a variety of institutional and individual partners. Ackerman was also a prolific and successful land speculator over the last cycle, primarily with house capital. While this activity has been quiet in 2008 and 2009, it will return again as Atlanta shifts back to growth.

Kris-miller

 Prior to joining Ackerman & Co., Mr. Miller was a Vice President at Citicorp, where he managed Citicorp’s Atlanta Real Estate Office and negotiated, structured, and closed over one hundred major transactions that included investments and joint ventures in multi-family, office, industrial, retail, and mixed-use properties and both public and private debt capitalization deals.

Education

  • Harvard University, magna cum laude with A.B. in Economics
  • Attended London School of Economics and Political Science

Affiliations

  • National Association of Industrial & Office Properties (NAIOP), Past President
  • Real Estate Group of Atlanta (REGA) - Past President
  • Financial Executives Institute (FEI) - Board Member
  • The Carter Center - Board of Councilors
  • Young Presidents Organization (YPO) – Forum Leader

This event is sponsored by Team Ivy Breakfast Networking, Inc.

Read More

Payroll Taxes

Please, please, please ALWAYS pay your payroll taxes. If you are having financial difficulties and having trouble doing so, PLEASE contact the state and federal tax authorities in advance and let them know. You will save yourself significant trouble. Here's a great excerpt from an Inc.com article by the founder of Sageworks: "I have known few businesspeople who have completely avoided this mistake (not paying payroll taxes on time), but it always creates unnecessary anxiety. When you pay employees, you collect a portion of their money on behalf of the government. Essentially, you are a collection agent. This is a tremendous liability and responsibility for employers that did not exist years ago when employees had to deduct their own taxes and pay them to the government. Alas, these days are over."

Brian Hamilton goes on to say, "Here is how this problem crops up. The employer cuts payroll checks but does not immediately set-aside the payroll liability in an operating account that is separate from the account they use to pay other operating expenses. The funds are mingled, and the person running the business has an inflated view of his or her cash balance. It is not that the employer is being dishonest or intentionally withholding the tax revenue; they lose track of the liability. Later, employers try to play catch-up, but because there is almost never as much cash available as you would like in a privately-held company, the taxes accrue and problems start severe penalties and interest. One solution is to keep two, separate accounts: one for regular operating expenses and the other for payroll taxes. Another solution is to simply use a payroll service that will give the liability its due attention."

Yet another solution is to use a PEO (personnel employment organization) to handle all your payroll issues in addition to all the HR issues. PEOs are also a means to provide more benefits at a reasonable cost. Why go through the stressful issue of underpaying payroll taxes? Hopefully hearing about others' issues and ways to avoid the problem will help you do just that.

Read More

Monday, August 8, 2011

States and Entrepreneurship

A study conducted by the Bureau of Business Research, a group of economists at the University of Nebraska - Lincoln, the 2010 State Entrepreneur Index, "evaluates a state's percentage growth and per capita growth in business establishments, its business formation rate, the number of patents per thousand residents, and the gross receipts of sole proprietorships and partnerships per capita. States are ranked based on their performance compared to the nationwide average." (quoted from the Inc.com article, How Does Your State Rank for Entrepreneurship?)

New_york

Who ranked the highest? No, it wasn't California. (Oh! Gasp!) New York. Repeat. New York state. According to the published study results, "New York continued to hold the top rank thanks to its strong performance in gross receipts per capita and substantial improvement in two other components, growth in employee establishments and establishments per capita." (The bolding is mine.)

Here's the list of the top 10 States for Entrepreneurship:

  1. New York
  2. Washington (perhaps all the Microsoft-affiliated entities has something to do with this one? Just a thought. Absolutely NO research behind this.)
  3. Massachusetts (MIT graduates are significant innovators. Others innovate in Massachusetts -i.e., Zuckerberg founded Facebook while at Harvard- but MIT has a very high per capita percentage.)
  4. New Jersey (Is this related to the Jersey Shore? All that paraphernalia and branding? Just kidding!)
  5. Oregon
  6. Louisiana (An oil and gas & processing bastion. But wow, they're ahead of Texas!)
  7. Illinois
  8. Oklahoma
  9. Texas
  10. New Hampshire

Wow! Where's California and Silicon Valley? Perhaps the slammed real estate market depressed the numbers? California was #4 in 2008's study but dropped to #13 in the 2010 study.

Comments anyone?

Read More

Friday, August 5, 2011

Operational Business Plan

Strategic business plans are essential to help you chart the course of your business over the next few to several years. They should be flexible. They're not meant to be voluminous with pages and pages of data that could be obsolete in several months. A strategic business plan is there to help you address the "what ifs" and get you thinking about your options, your market, your competitors, the way you go to business. If you write a strategic plan and review it a minimum of quarterly, you'll be better at keeping your finger on the pulse of your business and industry and able to make changes, rapid or otherwise, accordingly.

Plan
In tandem with a strategic business plan, for those whose businesses are either growing rapidly or have grown so much that the infrastructure is either non-existent or in extreme disarray, is the operational business plan. The operational business plan is typically much longer than a strategic business plan because it covers all the operational areas of your business - from finance to production to sales to customer service. It documents the "how we do what we do".

I briefly skimmed (see, I admit when I don't fully read something!) an article on Inc.com on operational business plans. What I liked most was that they included a link to an operational business plan template used by the subject of the article. If you've never seen such a plan, this gives you an introduction to what one looks like. Here's the link: .

Read More

A Business Bankruptcy

The General Motors (GM) bankruptcy has been well chronicled. Through the intervention of the US government and the presence of a plan before going in, GM went through bankruptcy in record time. Most Fortune 500 companies that enter bankruptcy stay there for two years, but definitely over a year. Not so here. You should have seen me rejoicing. I literally jumped up and down. I had been stating for nearly 20 years to anyone who would listen that GM needed to seriously restructure, and that the GM management was not capable of doing it themselves. They were too vested in the status quo. This came from my days as a college intern at GM for four summers at two different plant locations and the observations I made at that time. But that's a discussion for another time.

According to a superb Wall Street Journal article, "The Secrets of the GM Diet", business bankruptcy has greatly benefited GM. Here's a table copied directly from the article, comparing GM's performance 3 years ago with the performance this past quarter. The highlighting is my emphasis.

2Q  2008        2Q 2011

Global Production (in millions of units)
2.2                   2.4
Global employment (in thousands)
263                  208
Cost of sales (in billions)
$42.3               $33.8
Revenue (in billions)
$38.2               $39.4
Profit/loss (in billions)
-$15.5              $2.5

Look at how positive the 2nd quarter 2011 numbers are compared to 2008. Why am I sharing this? Because some small and medium companies are seriously underwater with the debt they have on their balance sheets and the thought of a bankruptcy makes the owner(s) ill. I do believe that there are other options to bankruptcy that may be better but the only way to determine them is to face the financial and operational challenges head on, stare the bankruptcy in the face and say, "Ok, what should I do?" The worst thing you can do is bury your head in the sand...unless you are exiting the business and passing the headache on to someone else to handle. Like GM's performance, when your company's financial performance and balance sheet are in such a mess, bankruptcy or one of its alternatives can be the answer to your prayers to return your company to a profitable, growing enterprise.

Read More

Thursday, August 4, 2011

Sharing Company Financials with Employees

I'm a HUGE advocate of sharing company financials with employees. I've had some pushback from clients initially but they usually (although not always) come around. My role is to help business owners think bigger and sharing company financials is a way to make sure that everyone in the company does just that. It's hard to tell people to "pay attention to the bottom line" or "help drive more sales" or "your bonuses are smaller because we didn't meet our numbers" when they have no idea what the numbers you are referring to are...or where those numbers should be. According to an Inc.com article, putting and keeping employees in the financial know increases the company's cohesion.

Here's an excerpt from the article:

----------“Its consistent with business planning—sharing 1-, 3-, and 5-year goals,” he believes. “It's a big part of making a participative culture vs. a patriarchal culture.” Communicate to your employees the relationship between the current finances and the company's future success.“You should never give raw financials because they wouldn't make sense,” says Rivers. “Its just gobbledygook unless they are accountants. You should present information in digest or summary format.”Use percentages, bar graphs and pie charts,” Rivers advises if not to help get the message across, then perhaps away to avoid sharing exact digits.------------

If you want to optimally manage your company finances and truly grow your business, you have to understand your financials and so do your employees. You don't have to - nor should you - share detailed information about all the items that go into the numbers. But if your sales team is rewarded based on gross margins or gross profits, then you should share those numbers with them...and some of the numbers that go into that calculation. If your company needs to reduce expenses and focus on improving net profit, you should share the net profit number and some of the major expenses that reduce the net profit number. Or you could share numbers on a per customer basis (if you have a smaller number of customers who contribute a large portion of sales), or a per project basis, or whatever applies to your company and situation. "Knowledge is power" is the saying. I modify it to say, "Knowledge can be power, if you put that knowledge into action."

Inc.com article referenced and excerpted from: How to Share Company Financials With Your Employees

Read More

Legal Fee Pricing Changes

For the last few years, legal firms' pricing has been under review by many large corporations. I remember hearing about the appearance of ala carte service requests and competitive pricing a few years ago. On Tuesday, I read an article in the Wall Street Journal about the use of reverse auctions to increase competition and lower prices for legal work. I thought it appropriate to share this here because pricing is a financial concern. Appropriate pricing is necessary to ensure your firm has the margins it wants. Also, competitive bidding takes place in many other areas, why not legal work?

Value
Here's an excerpt from the Wall Street Journal article, "Pricing Tactic Spooks Lawyers": "Several big companies - including GlaxoSmithKline plc, eBay Inc., Toyota Motor Corp. and Sun Microsystems - have used the tactic, known as reverse auctions or competitive bidding, to pressure law firms to lower prices, especially on high-volume work such as tax filings and intellectual-property transactions." The article continues, "Reverse auctions pit multiple law firms against each other in an online chat room where they anonymously submit quotes for a particular job. Firms then race against the clock to tender incremental discounts agains competing bids." (Aside: Was someone a dedicated aol chat room user who wondered how they could apply that technology to their job? Law firms in an online chat room! What a hoot!)

"Legal expenses for Fortune 500 companies range from about $20 million to $200 million a year, according to Courtney Sappire, chief marketing officer for RFx Legal, a consulting group that works with companies to reduce their legal spending. Reverse auctions can help cut 15% to 40% off those costs, she says."

Now, with those kind of savings, wouldn't you come up with similar strategies to reduce your costs? I know I may catch heck for saying this, but a downturn often sparks creativity. There's nothing like having your back against the wall to make you start questioning assumptions that you may have taken as fact. And that's another reason why I am referencing this article. The way to creatively resolving any "problem" is to question your assumptions and open your mind.

Want to read more of this article? Subscribe to WSJ or WSJ online. Sorry, no links available!

Read More

Tuesday, August 2, 2011

Master's Track

Okay, this post has absolutely nothing to do with small business finance. I am just so brimming with pride I had to share this. My sister, Toccata Wright Murphy, had an outstanding showing this past weekend at the USA Masters National Track and Field Championships in Berea, Ohio at Baldwin Wallace College. If I must say so myself (and I must, otherwise what kind of sister would I be?) she was simply outstanding. And this is less than two weeks after her great performance at the World Masters Track and Field Championships in Sacramento, California. (I know. The US is a little cuckoo. We hosted World's before having our Nationals because the tracks are located at colleges with football teams and those stadiums are no longer free after football training begins in August.)


(My sister, Toccata Murphy, is the one in front - far left - holding the baton.)

In the Master's, you are divided into age categories. My sister ran in the 40-44 age category. Here's a rundown of my sister's performance at Nationals:


100m - 1st place
200m - 1st place
4x100m relay - 1st place
4x400m relay - 1st place

My sister, Toccata Murphy, anchored (ran last) both relays. She had NEVER run a 400m in competition in her life and hadn't run one in practice since she was a teenager until 2 weeks ago . So kudos to her and her teammates on that 1600m relay.

While I'm here, I'll share her performance at World's:


100m - 3rd place
200m - 4th place
4x100m relay - 1st place

I ran in the Master's World Championships in Italy in 2007 but haven't run since. I will run again...in a few years. Until then, my sis will be my inspiration and make me very proud. My parents taught my siblings and I to pursue excellence in all areas of our lives with passion - mental, spiritual, and physical - in order to achieve and maintain true balance and happiness. Different areas of one's life ebb and flow at different times but this broad focus has helped me to maintain perspective all my life.

Enough personal. Back to the finance next post!

Read More

Buy a Business to Grow or Get Started

I'm a huge advocate of buying companies to get started or to rapidly or strategically grow your business. Of course, I'm biased. I started my career as an Industrial & Systems Engineer. Like BASF, we take things and make them better. Products, services...why not companies? And while still in college I was awed by Reginald Lewis. I read about him in the Wall Street Journal and was very upset when he died in his 50s. I figured he could be a mentor when I finally got on his path. C'est la vie!

Here's an excerpt from a Wall Street Journal article on the subject that piqued my interest:

"If you're interested in entrepreneurship, but lack ideas or time to create a new business, buying an established company may be a wise alternative. You'll inherit a working infrastructure complete with resources you'd otherwise have to secure on your own, such as equipment and employees. You'll also ideally be taking over a known brand built on a positive reputation over many years' time.


Buying a business typically does require more capital upfront than if you were to build one anew. But asking prices have been on the decline in recent years due to the weak economy. And sellers are increasingly offering to finance a portion of the price for buyers who are unable to obtain bank loans."

 

I agree with what the WSJ writer says but I differ somewhat on the premise. It is so much easier to obtain financing for a proven entity. So if you have great management experience and can find a company in an area that you want to expand into, whether it's to start or to grow, it's relatively easy to obtain the financing to buy that entity. Of course, if you have a strategic investor, venture capital firm, or other large investor backing you, financing isn't a concern. But acquisitions can still be a great idea when you are looking to get into a market or market niche but don't have the personnel or expertise in-house. You can acquire it. (Strategic partnering or joint venturing is another option but that's another discussion.)

 

Anyway, if you haven't considered acquisitions as a strategy, I recommend you do. It may not be right for you, but I don't suggest ruling it out by default (i.e., ignoring it).

Read More

About Me

Popular Posts

Designed By Seo Blogger Templates