Monday, April 30, 2007

Good Advice When Seeking Capital

Seeking seed capital? There's some good advice in today's Wall Street Journal story, Early Options, that can be used by any small business searching for equity or business loans.
  1. Research Investors - learn in advance what kind and size of deals the investors or lenders are looking for that you are pursuing.

  2. Refine the Pitch - be able to tell and sell your story in five minutes or less.

  3. Learn the Business - know your entire business inside and out, not just how big the market is for your product.

  4. Ask for Other Types of Help - if you get rejected, ask for advice, referrals to others or office space. Perhaps the investor would agree to incubate your business.

  5. Build credibility - The Wall Street Journal tip is to do as much as possible on your own, though I'm not sure I agree. I think you build credibility by finding strategic partners (vendors, suppliers, potential partners) or building a board of advisors from respected professionals who have knowledge of your industry and product.
Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

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Tuesday, April 24, 2007

Need Financing? Maximize Your Business Value

Whether you're thinking about selling your company or bringing in outside investors, whether debt providers or equity partners, a business should be run to maximize its value.

Just how does one maximize the value of a company? I thought I would share with you the contents of an email that I received from the investment banking firm of Green Manning & Bunch. The email was about the Ten Factors Impacting Business Value. Here it is...

The carpenters’ credo, “Measure twice, cut once,” is a prudent practice in just about any process, including selling one’s business. Before making a definitive decision to “sell” and investing valuable resources, it is imperative for a business owner to address the key factors that can have a significant impact on business value.

  1. Growth—buyers want growth. Be able to articulate where your business’ future growth opportunities will come from.

  2. Current Earnings—hit your numbers. Nothing pays off like meeting current earnings projections; and nothing distracts from value like a temporary downswing. A rule of thumb to remember: every $1 of earnings equals $5 or more of purchase price.

  3. Customer Concentration—buyers will pay a lower multiple for businesses that are dominated by one or two large customers. Diversify your customer base.

  4. Type of Incorporation—S-Corp, C-Corp, LLC? Know the tax implications specific to your company’s type of entity. It’s not how much you get that matters; it’s how much you keep.

  5. Audited Financial Statements—spend the money to get an audit (or at least a review with notes) from a reputable accounting firm. Your financial history will gain immediate credibility with buyers and your purchase price will increase by more than the cost of those services.

  6. Minimize Your “Add-backs”—buyers are skeptical of earnings based on substantial “add-backs.” They want clean financial statements. Consider limiting excess discretionary expenses.

  7. Depth of Management Team—invest in professional management. Buyers value businesses that have matured and are no longer run solely by the owner.

  8. Eliminate Baggage—do you have ongoing disputes with customers, suppliers, employees? Consider settling those matters and moving on. Buyers hate uncertainty and adjust value disproportionately to the amount of the dispute.

  9. Get your Legal Books in Order—a little organization goes a long way. Update your minute book, find stock certificates, and make sure your regulatory filings are current. Visit with your corporate counsel before the buyer sends its due diligence list.

  10. Qualified Advisors—hire a qualified team of professionals to assist you in the process. Don’t try to do it yourself, or you may leave money on the table.

Run your business to maximize value and you shouldn't have any problem attracting debt financing from the right lender. And if you need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call.

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Friday, April 20, 2007

First Ever Small Business Success Conference

Yes, I will be there as a panelist on the Access to Capital session at 10:30 a.m.!

Here's the scoop!

The first-ever California Small Business Success Conference and Trade Show takes place Wednesday, May 2, 2007 from 8:00 a.m. to 6:00 p.m. at the Pasadena Conference Center in Pasadena, CA. The multi-faceted educational conference and interactive trade show is expected to draw over 5,000 small business owners for the day-long event and will host a live broadcast on CBS affiliate KNX 1070, L.A.'s largest AM news station. The event is the first of its kind catering to small business owners with education, mentoring and networking. It is produced by California Small Business Success Conferences, Inc. (CSBSC).

Karen Butler, COO and Ken Keller, CSBSC CEO, came up with the concept for the Success Conference and Trade Show after many years of working in the small business arena. Karen Butler states, "Ken and I realized that there is no 'one place' for small business owners to go to get all the answers they need to run a successful business. The Success Conference covers all the bases giving small business owners a comprehensive day of education with instant access to many of the resources they need.

It's a Bridge, Not a Pier

I've been receiving quite a few requests recently for bridge loans. Most of those requests are from people who are not always clear on what a bridge loan is.

A bridge loan is a short term financing that is used by a company until longer term, permanent financing can be arranged or some liquidity event is scheduled to occur. It's also called a swing loan, interim financing or gap financing.

A bridge loan either is secured by collateral or has some event that exists that will repay the loan at his maturity or expiration. The lender needs to know that some repayment scenario exists with a reasonable if not high level of probability.

A bridge loan is not an unsecured loan that will be repaid from proceeds of a future financing that is no more than a dream. In other words, mere plans to raise additional capital from other parties is not likely to be deemed an acceptable repayment scenario. Your expectations that you will land a big contract may not be deemed an acceptable repayment scenario.

If you need money for a short period of time and have no collateral or certainty of a future event that can result in repayment, then a bridge loan isn't your solution. Perhaps venture debt may work for you.

Bridge lenders want to know that there's dry land on the other side of the bridge. If not, all they've got is a pier. A bridge to nowhere.

Need help finding a bridge lender? Read "Matchmaking for Business Loans" and give me a call.

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Saturday, April 14, 2007

And the Winner Is...

On Friday, I served as one of four judges for the 2007 Kravis Business Plan Competition hosted by the Venture Finance Institute at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at Claremont University. It's the 17th annual competition that attracts business plans submissions from undergraduates, graduate students and alumni of the University. Some of the winners have actually gone on to enjoy success - one of the judges was a winning presenter in years past.

(For the curious, Henry R. Kravis of Kohlberg, Kravis, Roberts and Co. was an alumni of Claremont University. He remains involved with the school - among other things, he personally hosts a group of Claremont University students for a two hour visit to KKR during their annual school sponsored trip to Wall Street. )

The graduate school staff, led by Richard Smith from the school's Venture Finance Institute, had pre-screened the submissions and presented the "final four" to the judges for review about two weeks ago. On Friday, we heard ten minute presentations from each finalist followed by a question and answer session. We group of judges then convened to debate and decide on the top two presenters.

The decision to award first place was a relatively easy one. The first place trophy went to the group who not only had the most robust plan and best presentation, but whose business is actually up and running. Nothing like showing that the "dog eats the dog food". The judges believed this group has uncovered a very interesting opportunity, even if perhaps the business isn't addressing a "pain". If this business raises some money and catches fire, it could be a huge opportunity for an investor.

Oh yes, the name of the winner? Fantasy Congress.

Fantasy Congress offers students, political aficionados, lobbyists and regular joe's like you and me the opportunity to follow political news, monitor federal legislation in great depth and exchange opinions through the site's social network and online forums. The real attraction for many registered users will be the gaming aspect - the chance to draft your dream team of politicians just like you might draft Peyton Manning or Rex Grossman for your fantasy football team. Right now Barack Obama is the most frequently drafted politician. Hillary Clinton - no where on the top ten list!

With over 65 thousand registered users and growing daily, Fantasy Congress could be an unparalleled resource in the 2008 presidential election. It's already received some great publicity from Time Magazine, The New York Times, Fox News and ABC's Good Morning America to name a few not to mention a ringing endorsement from Senator Joe Lieberman.

Congratulations to Fantasy Congress! Now go out and make some money!

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Friday, April 13, 2007

Thanks for Visiting The Carnival of the Capitalists

It's been a fun week hosting The Carnival of the Capitalists. I'm sure that I'll volunteer to host again in the future.

Next week, The Carnival of the Capitalists moves to Steven Silvers' blog Scatterbox. He's a first time host and promises to make sure he presents you with the 15 or 20 best submissions that are thought-provoking, well-written and relevant. He is also planning to include worthy material from bloggers who didn't submit their work.

You're always welcome to drop by here and if you need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!

Wednesday, April 11, 2007

Here Comes The Judge

It's an interesting week.

It started with hosting this week's edition of the Carnival of the Capitalists. It's quite the rush to see the visitor meter on my blog go into overdrive with guests from all over the world. The work to produce a nice environment for the Carnival is always rewarded with publicity from not only the Carnival of the Capitalists, but from other blogs such as Dane Carlson's Business Opportunities Weblog,, The Entrepreneurial Mind and Dean's World.

What's up next this week? Two things.

First, on Thursday I'm speaking to a group for the North Los Angeles Renaissance Executive Forum - the subject is "access to capital" and I'll be speaking about both debt and angel capital solutions for small business owners.

Second, I'm one of four judges for the 2007 Kravis Business Plan Competition hosted by the Venture Finance Institute at Claremont Graduate University on Friday the 13th. I don't know if I should have been a bit more superstitious and not agreed to be a first time judge of anything on Friday the 13th!

Hope your week proves to be as interesting!

Don't forget - if you need help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!

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Sunday, April 08, 2007

Small Business – Faster Cash, Lower Cost

Here’s a question for all the small businesses in the world.

If you only had limited (or expensive) access to working capital, how fast would you jump at a chance to improve your working capital, accelerate cash flow, speed up collection of accounts receivable and reduce your days sales outstanding all at a cost of less than 1% of sales?

No, it’s not a trick question but rather the solution of the future for small businesses who are tired of carrying the paper for their big customers or paying as much as 3% a month for factoring. It’s known as supply chain financing and PrimeRevenue is one of the first to offer this service. You can check out PrimeRevenue’s website for more on the mechanics of supply chain finance.

After seeing Financing the Chain in CFO Magazine’s February edition, I contacted Peter Lugli, the Vice President, Marketing and Corporate Development of PrimeRevenue and discussed how this product helps small businesses. Here are a couple things I learned from my chat with Peter…

The dog wags the tail – a small business can’t register to use the service unless it is a supplier to a large corporate buyer already using the service. PrimeRevenue is working directly and indirectly with approximately 20 Global 2000 companies such as Big Lots, Dupont and Sainsbury’s. These large corporations are able to put their small business suppliers on a more equal footing with larger suppliers by offering working capital financing tied to their own credit rating which is typically investment grade. That’s where the big savings for small business suppliers comes into play.

There is no charge for a supplier to register to use the system and view buyer invoicing and payment status information. A couple of click-through online agreements and bank account registrations followed by an hour of training and the small business supplier will be on its way to accelerated cash flow.

When a supplier opts to accelerate payment of a specific invoice, a third party lender issues an electronic payment using the protocol of the supplier’s choice. A supplier is only charged a fee if payment of an invoice is accelerated and the fee is tied to how much sooner they opt to receive payment and the buyer’s creditworthiness.

PrimeRevenue believes the greatest advantages will initially be enjoyed by the automotive industry, big box retailers, diversified manufacturing and high tech. The most likely companies to implement supply chain financing with their suppliers will likely generate a minimum of $500 million in annual revenues.

My thoughts?

This is a product that will be of great benefit to small business once two things happen.

First, there must be a critical mass of big companies willing to implement this system and make it widely available for its small business suppliers. I could see this financing technique work well in a variety of situations if early adoption is aggressive.

Second, the product must be easy to use in conjunction with the supplier’s existing lenders including banks and factors. If existing lenders cooperate over lien releases (no guarantees they will), then all the parties can peacefully co-exist. But if existing lenders see this as more of a reduction in the quantity and quality of their collateral rather than a chance to improve the overall financial stability of their borrower, adoption by small business will be protracted.

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Welcome to The Carnival of the Capitalists!

Welcome! This is my second time as host of The Carnival of the Capitalists offering some of the best the blogosphere has to offer on business, economics, entrepreneurism, finance and a variety of related subjects.

I have spent a lot of time reading and re-reading each of this week's 30+ submissions. I hope you enjoy the ones I have decided to include in this week's carnival as well as your visit to my blog, Show Me the Money.

Accounting and Finance
Yours truly, Marshall Lebovits, discusses how small businesses can lower their costs and accelerate their cash flow when dealing with big business in Small Business - Faster Cash, Lower Cost.

Bootstrap business: Building a Debt Free Company is a perfect example of why Wayne Hurlbert’s Blog Business World is one of my favorite blogs. Always on message, concise and thought provoking.

Can management theory help win a boat race? Rob May of Business Pundit provides his answer in Row Row Your Boat... With A Little Management Theory

Sometimes small business leaders make mistakes of which they are often unaware. From IQI Strategic Management, here are six Leadership Mistakes Made by Small Business Owners.

Read about The Freestyle Entrepreneur’s call for action in Extending Paid Leave for Workers - Bad News for SBOs.

How to Get the Promotion You Deserve is the offering from Money $mart Life.

Personal Finance
Keep your friends close and your enemies closer. Worldwide Success presents Compounding – Friend or Foe?

Getting Green explains Everything you Need to Know About Life Insurance (and More).

Would you believe the spin? That’s the question The Digerati Life asks in Getting Rich the Easy Way, When Your Company Cheats.

Praveen presents Constant Value Investing With Virtual Shares.

Free Money Finance tells us about highway robbery in Social Security is Robbing Me of $1 Million; You Too?

Stocks and Bonds
Biohealth Investor raves about Dr. Frost in his posting eXegenics: Dr.Frost Continues His Hot Hand.

Interested in the Mexican Stock Market? Visit Trader’s Narrative to read A Trend Follower’s Dream: Mexican Stock Exchange.

Walking the Berkshires describes a new form of legal tender in Berkshares: Local Currency Strengthens Community and the Bottom Line.

Econbrowser takes a look at claims that the world's biggest and most important oil field has entered a phase of declining production in More Speculation about Saudi Arabia

Breaking the Shackles opines on whose heads should roll in Subprime Mortgage Problem Contained? Give Me a Break!

Marketing & Public Relations
Scatterbox shares with us The Good, Bad and Ugly of Creating Research to Get Publicity.

One Man Band discusses its own blogging experiences in Ad Networks Disasters, Publishers Divison.

Sophistpundit explains the economics of blogging in New Media Economics.

Time for Blogging tells us How to Gain User Trust With a Privacy Policy on Your Website.

Sales and Marketing
Not every referral is a qualified one. Read Stoopid Client Tricks #928 at InsureBlog.

David St. Lawrence explains the three skills needed for Finding Work at Any Age on his blog, Ripples.

Sox First and Leon Gettler blows the whistle on More BAe Shenanigans.

Show Me the Money hopes you enjoyed your visit to this week's Carnival of the Capitalists!

Wednesday, April 04, 2007

No Formal Training? Ask for Help!

Just finished reading a story in The LA Times entitled, Filling a Natural Niche. This small business report describes a small, but fast growing business that has run into financial challenges which include working capital deficits and operating losses. In the company's most recent financial statements, the accountants "raise substantial doubt about the company's ability to continue as a going concern."

It's easy to find stories about small businesses that encounter problems of a variety of types when they grow too fast. What is interesting about this story is the author, Ashley Surdin, made a point to say that the owner also serves as the company's chief financial officer, but has no formal financial training.

When small companies grow into bigger companies they need to ensure that someone in the organization knows how to establish financial controls, implement accurate and reliable reporting systems, forecast cash flows, create credit and collections policies and develop tools to ensure the company prices its products and services correctly.

Small business often thinks they can get by for now or that adding this type of financial expertise is too expensive. In reality, they can only get by until outside capital is needed and not adding the financial expertise is more expensive in the long run.

If you have visions of profitable growth but no formal financial training, ask for help. Speak to your accounting firm - many offer CFO services on a part time basis for an hourly fee. Speak to a firm like my alliance partner, CFO 911 Solutions - they can quickly fix immediate problems, upgrade your financial skill set and help you determine if you need a part time CFO or controller.

Don't be afraid - the cure is often much less painful than the illness!

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

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