Friday, October 28, 2011

When to Use Debt vs. Equity

In general, when you do not have a steady source of cash and you are a rapidly growing business, I strongly recommend you keep your debt to a minimum. Why? There is no consistent source of cash flow to make interest or principal and interest payments. Therefore, equity is better for start-ups and  for rapidly expanding companies. It is true, of course, that with equity you end up paying out more if you grow and paying out heaps more if you grow significantly. But what’s better? 100% of $2 million? or 30% of $20 million?

Debt_or_equity

(The answer: the latter. $6 million is definitely better than $2 million!)  The  overall objective for any business seeking startup or expansion capital is to bring in the most funds while retaining the greatest ownership percentage. Only dilute as it makes sense.

To help you better understand, let me provide you with an overview of debt and equity.

To read the rest of the article, go to Debt vs. Equity?

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Thursday, October 27, 2011

Intuit's Love a Local Small Business Contest

Win a Small Business Grant from Intuit

Are you looking for some small business funding and a means to additional PR? Well, Intuit is offering both through its "Love a Local Business" Contest. Only small / medium businesses need apply.

The 411 on this small business contest: Intuit is selecting one winner a month for a $25,000 small business grant. It's not equity. It's not debt. It's just yours! The contest ends on December 31, 2011.

Following are the details, directly from the Intuit site: http://lovealocalbusiness.intuit.com/sbo)

Intuit_love_a_local_business

1st step: vote for your business. (i.e., Nominate yourself.)
It's easy — just share a few brief thoughts about why you love serving your customers and your community.

2nd step: get out the vote.
Use the tools in the Winner's Playbook to increase your chances of winning. Each vote is like a raffle ticket (only one vote per fan): the more votes you get, the more chances you have to become one of nine Finalists who wins a $25,000 Intuit Hiring Grant. At the end of the contest, judges will review all the nine winners and select one Grand Prize winner for an additional $25,000 grant for a total of $50,000!

Your words could make the difference, so make sure your business is represented, and good luck!

NO PURCHASE NECESSARY. Legal residents of the 50 United States (D.C.), 18 years or older may submit a nomination. Submit nomination before 12/31/11. Void where prohibited. Official Rules

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Wednesday, October 26, 2011

Venture Capital Returns Continue Upward Trend

This excerpt from a press release issued by the National Venture Capital Association features a quote by the association's president that highlights some of the comments I've made in the past about IPOs and the trickle down effect on investing. Here is the quote: "In order to achieve the level of historical performance that (venture capital) limited partners have come to expect, we must have a thrivings IPO market and acquisitions, and the former essentially closed mid-August of this year. Many fine companies await the market'sstrengthening so that they can access the capital needed to continue their growth trajectories."

According the data compiled by the NVCA, returns were up significantly as of June 30, 2011 due to easier exits through IPOs and the resulting higher valuations of venture capital portfolio companies.

Want to read the press release in its entirety? Click here.

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Small Business Funding Programs for Urban Entrepreneurs

Here are a few corporate small business funding programs that you may be able to take advantage of:

MillerCoors’ Urban Entrepreneurs Series challenge. (I must disclose that I have been a regional screening judge for this program in the past.) The Urban Entrepreneur Series is a business plan competition and awards $150,000.

Starbucks has recently created a new campaign called Create Jobs for USA “to create and sustain jobs”. Starbucks has earmarked $5 million of its own money for this program.

Read the rest of the post describing the programs in their entirety at Corporate Small Business Funding Programs for Urban Entrepreneurs.

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Tuesday, October 25, 2011

Pitching a Venture Capitalist

Have you been invited to pitch to a venture capitalist? To a group of them? Well, if you have, congratulations! Here are some of the main points to keep in mind when making that presentation.

Investor_presentation
Main points:

  1. Don't assume everyone knows what your company does.
    1. Just because you are highly familiar with your company's area of expertise doesn't mean others are. Be able to explain what you do in layman's terms. Don't assume all VCs are techies. Some aren't.
  2. Stay on track.
    1. If you are fortunate enough to get a presentation opportunity, know that VCs typically give you a specified amount of time. i.e., 30 mins or 1 hour. Be on time and remain on task. The VCs may inadvertently sidetrack you but gently bring them back.
  3. Go with the flow.
    1. When presenting to VCs, you'll often get questions throughout the presentation. There's no: "Wait until the presentation is over to ask questions." Know your presentation enough to jump around to answer the questions and be able to return to where you left off.
  4. Understand the entire presentation. You should be able to explain the numbers.
    1. Your CFO or someone else may need to answer the in-depth questions but if you can't answer basic questions about your financials, exit strategy, etc. you'll look like you don't have a good grasp of what drives your company.
  5. Show that there are risks.
    1. Sometimes people are afraid to show they're not teflon. Instead of looking like they're strong, they come across as being too cocky and not knowing their market.

The above is based on the Inc.com piece, How to Sell an Idea to a Venture Capitalist. Click on the link to go to the article.

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Seeking a CFO? Wall Street is Laying Off

Wall Street is laying off investment bankers. Although most of America isn't aware of this, Wall Street has been letting go of people on a fairly consistent basis since 2008. According to the Wall Street Journal, New York City has lost 22,000 securities-industry jobs since January 2008. If you live in Manhattan, especially lower Manhattan/Battery Park or the Upper east and west sides, you will have been aware of this for some time.

True. The turnover in investment banking is high. Not as high as in consulting but still high. (Many of my Wharton peers left consulting after 2-3 years but lasted significantly longer in the i-banking sector.) Many last 10-20 years then move into something new. All of this presents opportunities for those seeking CFOs.

I've noticed many small and medium businesses in the south and midwest seek CPA-holding CFOs. That's great if you want a controller and only pursue bank loans as a means of financing but if you want to ratchet your growth to the next level, a financing-focused CFO is a better bet. (You can always have a CPA-holding controller report to your CFO.) And if you aspire to join the ranks of the mid-sized companies being covered on Wall Street (albeit to a much lesser degree than their larger peers), a CFO with an investment banking background may be the answer to your prayers.

So if you have been considering pursuing a financing-focused CFO, take heart. Many investment bankers may be willing to make the leap to a smaller entity...and even move out of the northeast. Investment bankers want quality of life too. If you're interested and don't know where to find these i-bankers who may be considering change or have been laid off, check out some of the financial associations and see if they provide job postings. Also, check with the alumni groups and career offices - alumni services of the schools that supply many to Wall Street like New York University, Wharton, Columbia, Chicago, Harvard and others. Good luck!

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Friday, October 21, 2011

Market Volatility

The financial markets were more buoyant earlier this year, hence all the IPOs. But then a fair amount of uncertainty, with a negative tone, set in, causing the markets to increase in volatility and become a less attractive option for those seeking to go public via IPOs. Less attractive does not mean the option was eliminated.

When the markets are buoyant they are reflecting optimism and thus, financing is more plentiful. As I've stated before, private equity firms and venture capitalists, among others, can take their companies public, providing them with more options and beginning the trickle down effect. When equity markets are optimistic, debt financing is also easier with investors more open to financing options that don't require myriad covenants (aka safety nets or provisions). Debt financing during this time typically comes with lower interest rates for the same debt that, in a more volatile market would require more.

So Groupon has registered for an IPO and will likely move forward with sales of its shares at a $12 billion valuation. That's down from the $15-$20 billion that it could have gotten had it been ready in April, May or June. C'est la vie. Personally, given how some of the other IPO shares have performed post-IPO, and given the earnings expectations, I think Groupon's $12 billion valuation is much more fitting.

Any thoughts? I'd love to hear them.

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Receivables Exchange

There is an online marketplace targeted at small and medium businesses that enables these companies to auction their account receivables.  The entity that operates this exchange is The Receivables Exchange or TRE. You can view them at www.receivablesexchange.com. TRE was the 2010 Innovation Award winner in the e-commerce category.

TRE recently received an infusion of cash to help it expand its focus to selling corporate receivables when NYSE Euronext acquired a minority stake in the company.

Check out this online marketplace. It still serves smaller companies and may be just what you need to free up your business cash flow.

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Tuesday, October 18, 2011

Wharton Club Breakfast Series, Atlanta

The Wharton Club of Atlanta,
Kellogg Alumni Club of Atlanta
and the
London Business School Atlanta Alumni Club
are pleased to invite you to our next
breakfast series event

Real Estate Markets

  featuring

Matt Bronfman
Managing Director
Jamestown Properties


Thursday, October 27, 2011
7:30 AM - 9:00 AM

at
The Buckhead Club

3344 Peachtree Road NE, Suite 2600
Atlanta, GA  30326

Cost: 
$35 per person

To register, please visit http://wkloct2011-eorg.eventbrite.com/

For a complete listing of 2011-12 Breakfast Series events, please visit:
http://wklatlanta.eventbrite.com/

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7 Steps for Effective Business Cash Management

Another piece from the cash management cfo: The data for small business failure varies from country to country and from source to source, but the average statistical data of business failure in most western style economies is skyrocketing high!

Tight_money
When operations of new businesses are analysed, planning and management of cash flow is one of the critical areas that is quite often underestimated and therefore overlooked.

Read the rest of the post by a guest blogger at Seven Steps for Effective Cash Management for Your Business

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Monday, October 17, 2011

Atlanta Team Ivy Breakfast Networking Event

October Meeting
Homecoming

 

Ivy League Homecoming is the theme of our October breakfast.  Representatives of the area Ivy League Clubs will attend to fill us in on events and happenings amongst the alumni.  You'll see people you haven't seen in years.  You'll also see lots of new faces, too.

Best of all, we'll have a panel of some our past speakers discuss doing business in Atlanta in Q4 2011--

Confirmed: Larry Small III, Groupon
Fara Wilson, VP of Marketing, Ackerman & Co.
John Coffin, EVP of Corporate Banking, Atlantic Capital Bank

"What does it take to make money in today's environment?"


Click here to register (If on an i-phone, go directly to the registration URL: http://oct2011teamivybreakfast.eventbrite.com/

Event details:
When: October 19th, 7:30am - 9:00 am.
Where:  City Club of Atlanta (Buckhead)

3343 Peachtree Road
Suite 1850
Atlanta, GA 30326

(404) 442-2600
COST: $20 pre-registration, $25 after today, October 16th
(Parking is included).


Click here to register

October Event:
Ivy League Homecoming

We'll ask our panelists:

(1) What are the specific  “take aways”/top 3 items, that I can put into use right now for profitability in my business in the next 60 days or the holiday season?

(2) What advice would you have for my business stability, specific things to accomplish and/or put in place before year end?

(3) What are the most important things I’d want to do to position my business for success in 2012 and the future?

(4) What do you see on the regulatory horizon (i.e., local and state sales tax on internet sales) that will affect the way I do business?

This is our last breakfast event for 2011.  You don't want to miss it!

Click here to register

BIOGRAPHIES for October Panelists

 

Larry Small, Groupon

 

Larry Small focuses on growing the customer base for Groupon, serving national franchise and local business operators with rare combined experience in daily deal marketing, social media, search engine optimization and traditional media practices such as radio and tv.

 

Prior to joining Groupon, recognized by Forbes Magazine as the fastest growing company ever, Mr. Small’s award-winning marketing, sales and strategic planning work experience included serving as the Director of Marketing for CNN at Turner Broadcasting System.  Also, in the packaged-goods industry he worked as a Sales and Marketing BrandManager for Brown-Forman Beverages, makers of Jack Daniels.

 

Mr. Small’s education background includes an MBA in International Business from Mercer University and BA in Mass Media Communication.  In addition he has earned special certifications with MIT/Harvard, The Media Buying Academy and Google

 

Fara Wilson, Vice President of Marketing, Ackerman & Co.

 

As Vice President of Marketing at Ackerman & Co., Fara is responsible for developing and executing the company’s marketing and communication strategy. In this position, she leads all marketing initiatives and oversees the implementation of Ackerman’s branding, advertising, proposals, web-based and digital activities. Ackerman & Co. is a leader in commercial real estate brokerage, development, management and investment

 

Prior to joining Ackerman & Co., Fara spent the last 13 years with Industrial Developments International, Inc., where she managed the company’s marketing and rebranding standards, the redesign of its print collateral materials and the launching and design of its Website and Content Management System as well as several e-marketing initiatives.    

 

She holds a bachelor’s degree in Business Communications from Oglethorpe University. Fara is also the chairman of the Next Generation Marketing Technology Group for the Atlanta Chapter of the American Marketing Association.

 

John Coffin, EVP, Atlantic Capital Bank

Mr. Coffin is the Executive Vice President and Banking Group Executive of Atlantic Capital Bank.  He oversees the Bank’s corporate and business banking division.  Mr. Coffin’s background includes commercial, capital markets and corporate banking experience.  Before co-founding and becoming an officer of Atlantic Capital, he spent ten years at Wachovia Bank, most recently in the position of Senior Vice President and Atlanta Commercial Banking Team Leader. Prior to this role, he was the Head of the Business Services Corporate Banking Group following Wachovia’s merger with First Union.


Prior to joining Wachovia in 1996, Mr. Coffin worked in New York in the Media and Telecommunications Group at Manufacturers Hanover Trust Company, Chemical Bank and Chase Manhattan Bank (through these two mergers).

Mr. Coffin earned a Bachelor of Arts degree in English from Dartmouth College.  He received a Master of Business Administration from Columbia University Graduate School of Business, with a Finance and International Business concentration.  He is active in various civic activities and resides with his wife and three children in Buckhead.

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Sunday, October 16, 2011

Financial Boot Camp - Atlanta - 10/21-22/2011

Financial Boot Camp

How do experienced business owners respond to
FINANCIAL B%T CAMP?

 Highly recommend this 2-day course. Charles has a wealth of insight on finance to break down complex concepts into understandable chunks…and reassemble the pieces so it still works.
— Joel Quinn, serial enterpreneur

Are you ready to go the next level for your business?

Register Now
Course Agenda Brochure

Small Business Finance Institute

2-Day Workshop $295 (incl. lunch)

NEXT DATE:
October 21 & 22
9:00 - 3:00

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

Limited to 15 Participants


W W W .
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Thursday, October 13, 2011

Raising Money Is Stressful

Last night I spoke to a friend who is raising money. She said, "It's hard." Raising money is hard. It's tiring. You are trying to run a business while also trying to raise funds. Most founders are not money people. They are sales or operations or technology oriented people. And when you are growing like crazy and trying to craft distribution partnerships, manufacture more of the existing products, conduct product development to create additional products to satisfy more customers...raising money can be a beast. You can end up exhausted - mentally and physically.

Raise_capital
Being an entrepreneur is not for the faint of heart. Having the vision of where the company is going and holding that can help in times like my friend is having when things just wear on you. Sometimes it may seem like you go forward and find an investor, then you have production problems which slam your sales. This is what happens with a rapidly growing company. When cash flow is tight, every shock reverberates for quite some time.

My friend meditates and runs. This helps keep her focused. Soon she's headed to her mountain retreat to hang out with friends who support what she does. This will help her renew her commitment and lift some of the exhaustion.

Since raising money for smaller companies is typically an additional task (a huge, time consuming task) on top of what the founders / owners already do, it's important to build a form of stress relief into your life. I have an aunt who does shiatsu and she says when you expend significant mental energy you need to also expend significant physical energy so that mental energy doesn't take residence in your body and wreak havoc on your health. Whether or not you agree with the energy assessment, we all agree balance is crucial. Your business is your baby and when it's growing rapidly or when you're trying to get to rapid growth you need to give it lots of attention. Take care of yourself to ensure you'll be around to reap the benefits of all this stress. Please.

I'd love to hear what you've done to ease the stress of raising money in the early stages while rapidly expanding your business.

 

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Tuesday, October 11, 2011

Finance Call: Q&A, 10/12/11

Monthly Finance Call

Join us for our next monthly conference call. This call will be a one hour Q&A session where you can ask any business finance or related questions you can think of. Can't think of any? Join in and listen to others' questions ...and the answers. It just may give you the information you need for your own business financing or cash management needs.

 Conference Call Details        
  When: Wednesday, October 11, 2011

                7:00 pm - 8:00 pm

  Where: Dial-in Number: (209) 647-1000
                  Participant Access Code: 318632#

 

The call is free except for any toll/long distance charges from your phone company. (Suggestion: Use your cell!)

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Friday, October 7, 2011

Public University Tuition Increases Nearly 3x Inflation

"Take a look at We Are the 99 Percent -- a website on which protest sympathizers share their tales of economic hardship. Very few of them mention banks, or even bank bailouts. The vast majority of them, however, do cite college debt.

According to The College Board, average annual in-state tuition and fees at four-year public universities increased by 72% over the past decade. Four-year private college tuition is up by more than 34% over the same time period, during which inflation rose only around 25%." (The bolding and italics are mine.)

This is an excerpt from Dan Primack' Term Sheet. Term Sheet is a daily posting of insights and musings on Wall St. and related activities by Dan Primack, a Fortune magazine writer.

I graduated from Wharton over a decade ago...and that was graduate school. I won't mention when I graduated from Ohio State. I knew that tuition and fees were rising faster than inflation, but I didn't realize public university tuition was rising at a rate nearly 3x that of inflation. Wow!

What are your thoughts

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Wednesday, October 5, 2011

How a Cash Management CFO Handles Customer Price Increases

As a cash management CFO (one focused on managing cash as tightly as possible), I found the article written by Norm Brodsky in response to a question from an entrepreneur intriguing. I've heard similar issues. I once had a prospective client who ran a medical transportation company and had an 8-figure contract with the Veteran's Administration. However, he had not included any cost increases in his contract and his firm was hemorraghing cash. He was using another profitable company to fund all the losses in this profitable one.

Increasing_chart
We told him he had to immediately renegotiate the contract. Any self respecting cash management CFO would have said the same thing. The government wanted a reliable entity. If he suddenly went belly up after servicing the government 2.5 years into the 5 year contract (and apparently, doing an excellent job), the VA would be in the unenviable position of having to find an alternate with no notice. For him, the situation would be worse. He would have lost millions over the years and now be unable to get another government contract as a significant shareholder of any entity doing business with the government. The same thing Norm stated in his advice applies here. Per Mr. Brodsky, "he could avoid such problems by inserting a simple clause in his customer contracts that would allow him to increase the price if his material costs rose."

If you have a contract that's underwater (losing money), re-negotiate ASAP! If you are considering entering into a contract that has a fixed price based on variable material costs, including gasoline if you are a transportation or related entity, then, as above, PLEASE insert the clause about increasing prices when material costs rise. Just some friendly advice from a cash management cfo.

Read Norm Brodsky's Inc. article.

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Tuesday, October 4, 2011

A Bad Economy: How to Improve Employee Morale

"According to a recent Time magazine study, approximately 80% of people feel disrespected at work. In today’s economy, it’s increasingly difficult to find jobs – but it’s also very important to maintain

Employee

Employee recognition is key to morale.

employee happiness in order to maximize the efficiency of the company in preparation for long-term success."

Read the rest of the story.

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