Finance/Capital Access

As families gather for the holidays, entrepreneurs might consider approaching family members for money to help fund and grow their business.

But is family funding a good idea?

Maybe.

Considerations include the amount of money involved, how involved the family members will be in the business, and the personal relationships between the borrowers and lenders.

Advantages of Family Investors

– They are not likely to conduct background checks or review credit scores.
– Relatives will do you a favor, banks and other professional lenders will not.
– Loans are often made at no interest. (more…)

After a hurricane or other natural disaster, many businesses find themselves severely compromised or crippled in the wake of its destruction. The devastating events surrounding Hurricane Sandy are a reminder of the costly impact that such disasters can have on a business and its ultimate sustainability. While it is impossible to predict when a disaster will strike, having an emergency fund can be a critical safety net in keeping your business afloat and running both during and after a storm.

Should a natural disaster or other unexpected devastation force your business to shut or slow down, access to immediate cash can help you keep going without further delay. Availability of cash also hedges against risk of submerging into an endless cycle of debt that can often stem from using credit cards for tending to immediate repairs and recovery. While emergency fund goals vary depending on each business’s income and expenses, it is typically recommended that a business put aside enough funds to cover at least four to seven months’ worth of expenses. (more…)

Many U.S. businesses are still climbing out of the 2008 recession and there’s still the possibility that we could fall right back into one within the next couple of years. There’s significant uncertainty ahead of us as global economic growth remains subdued and the U.S. has yet to resolve key tax and financial matters related to the fiscal cliff. No matter what happens in the next couple of years, all entrepreneurs need to be prepared.

Review your financial model

You may not be a financial professional, but you still need to understand how changes to company sales and expenses will impact the bottom line. Work with your accountant or hire a financial consultant to help you understand what the impact will be from varying degrees of recession. Obviously, businesses with high fixed costs are at greatest risk during a recession, but each business model needs to be monitored for a five, 10, 15 and 20 percent decrease in sales.

By performing the analysis now, you’ll have a game plan for what needs to be done to maintain profitability and to sustain the business during a recession. It may be that a 10 percent loss of sales means that you need to lay off or demote X number of employees and close X number of locations. These decisions will need to be made swiftly and ahead of the storm, which is why you should create a plan now. (more…)

It’s a well known statistic that approximately two-thirds of acquired businesses fail. While these stats are based on publicly traded companies with failure measured by loss of equity value, there is no reason to believe that the failure experience is any different for private companies.

The statistics are daunting; however, companies continue to be acquired for a variety of good reasons and not all acquisitions fail. While the success or failure of an acquisition is often based on post-purchase issues (such as the melding of company cultures), there are five strategies that can help you beat the odds.

1. Strategic Acquisition Plan

First and foremost, understanding the motivation for acquiring a company is the first step to a successful acquisition. If the reasons for purchasing a company are clearly stated and supported, that laser-like focus will help: guide your purchase decisions; communicate your objectives to employees, service providers, and potential companies; and provide a benchmark to measure your success. To clearly define your motivation, ask yourself: (more…)

Raising money for any business in this tough economy isn’t easy. More owners are scrambling to attract new capital, and investors are holding tighter to their money, causing a major disconnect. Successful VCs and private equity funds are only investing in 1 out of every 500 or so deals they see. Banks have cut back lending. Angel investors hammered in the 2008 market meltdown, lost their appetite for new deals while focusing on salvaging existing investments.   However, you can raise the funds you need. You won’t get the very best terms and it will take you much longer than you thought. You may even have to retain an outside firm to help; but if it makes sense and you are fundable, you can get the deal done.

Get real

One of the benefits of raising capital from outside investors and lenders is they are a litmus test for your business model. Their decisions will help you get a better—and more objective—perspective on the prospects for your business. Many owners fall deeply in love with their business and continue to plow through their own capital hoping, wishing, and expecting it to be a home run. They do this up to the point where they have exhausted their own financial resources and taken on debt, but haven’t taken the business to the promised land. Be realistic. Don’t bleed yourself and your family, dry funding an idea that is not working. I see this all the time—entrepreneurs are optimists. To have a shot at raising serious capital to support growth, your company needs to have a business plan that makes sense. (more…)