Announcement: First Webinar of the New Year

On Tuesday, January 5, 2010 at 1pm, YB Consulting will be hosting the webinar - Financial Planning for Your Small Business. This webinar is for those who do not understand business financial planning but want to learn how to create financial projections for their business.

This is sure to be a highly interactive webinar - the audience size is limited to ensure this!

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Video of the Week: Startup BootCamp - Venture Capitalist Hemant Tenaja

Venture Capital Funding Today

There can not be a discussion on business financing without talking about venture capital or angel investing. These forms of business financing are widely known but hardly achieved. It is very difficult to get but still possible according to VCs Change Their Tune, an article written earlier this month by the Wall Street Journal. American Express' Open Forum released a great article on the state of venture capital today. The strongest advice from the article was:

1. know where funding is hot and where it is not
2. know your audience (venture capital firms that you are pitching to)
3. make sure your pitch is on point (practice, practice, practice)

To understand what industries or ideas are getting funded, you must stay in the know. A few resources that can help you do that include:

• National Venture Capital Association: Trade organization for venture capitalists. Provides a ton of information regarding the industry and everything involved.
  
• New York Times - DealBook: Provides current stories on venture capital deals and other large investments taking place on the national stage. This active blog not only provides great stories, but also provides tools for you to remain in the know using any forum you need.
• Twitter: A search on venture capital provides a host of conversations about this funding source. You can create a list of those you deem as experts or follow the list of someone you trust.
• Venture Capital at Alltop.com - Summarized list of venture capital blogging resources across the internet

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Video of the Week: Ten9Eight: Shoot For The Moon

Highlighted is a trailer for Ten9Eight: Shoot For The Moon - a documentary that follows several at-risk youth from across the country as they compete in a business plan competition as part of the Network For Teaching Entrepreneurship Program. The film is not only about their opportunity to win $10,000 but also about their opportunity to be recognized for what they can contribute to the world.



I strongly believe entrepreneurship should be a part of our national high school curriculum. There is so much that having a foundation in entrepreneurship (as well as financial literacy) could do for American children.

The well-reviewed movie debuted this week and currently has limited showings. You can request a showing in your city or school via this webpage or purchase the DVD which will be available in January.

Let us know how you feel about the movie after you see it.

So you want a business grant?

Many new business owners look for grants to fund their businesses, especially because of a certain late night commercial or the National Grants Conference - a one day seminar they attended which told them about free grants they could pay $600 - $1,000 to get more information about.  Typically, grants are dedicated to non-profit firms that are touching a community of people. If you must look, great resources to find grants is through grants.gov and the Foundation Center. You can also do an online search on foundations and grants. Sorry to say, if you are a start-up business, you will likely be ineligible for a business grant. That said, there are plenty of resources for "free" money that businesses can work to pursue.

Business Plan/Venture Capital Competitions
Several business schools and organizations produce competitions throughout the year. Many are eligible for students only although student teams may have non-students on them. Entrepreneur.com and the New York Times each put together great summaries of many business plan competitions. Some listed do not require student status. There are others in which student status is not a requirement including:

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Make sure you are well funded

In the past, I had many clients that wanted to start or expand their businesses but struggled on the equity piece. Either they had little to no money or had too much debt to attract more money. Typically, bankers and investors want you to have at least 20% of what you say you need. This can be in the form of cash on hand, money already spent on the business, and assets you are personally contributing to the business.

On the rare occasion, I have seen business owners raise money without contributing personal cash. There are severe cautions when going that route including whether the owner will maintain control of the business. Usually I advise people with no financial contribution to hold on and save up. Or, if the need is great enough, consider pursuing venture capital financing where investors are more amenable to risk (although this type of equity financing is hard to come by).

When starting a new plan for your business, the greatest thing you can do is start off well funded. Equity financing is just another way to raise funds for this purpose. Equity investors come in different forms:

• yourself (always the best way)
  
• family and friends (can be murky - get everything in writing)
  
• local, regional, or national investment groups (easier to come by than you think)
  
  
  

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Video of the Week: Entrepreneurial Debt Panel Discussion

Although this video is a bit long, the information provided is quite extensive regarding various forms of debt that entrepreneurs can take on. This was a panel discussion that took place at Stanford Graduate School of Business on January 22, 2007 and included: Professor George Parker (Moderator, Dean Witter Distinguished Professor of Finance, GSB), Patrick Gordon (Leader Ventures), Jeanne Montague (Montague Partners), Greg Hittleman (CIT Small Business Lending Corporation).



I hope you can take some time to review this video if you are truly interested in taking on debt. Although CIT is currently declaring bankruptcy, the representative in the video provides a good breakdown of financing options offered by many traditional banks, particularly those that work with the Small Business Administration (SBA).

How has acquiring business debt supported your business?

Taking on Debt Can Be Good

As much as I advocate against being in debt, I have come to understand a such thing as "good debt" - a difficult term in today's economy but still necessary for some. You know, the debt that will help you get what you need to increase your value now and still help you maintain positive cash flow. For example - if you have $100,000 in the bank and need a new home, would you use the entire $100,000 to purchase a home outright (but have nothing left in savings)? OR, would you finance a portion of it at low interest rates, then use the rest of your cash to furnish the home and maintain some savings (remaining cash positive)?

In the same way, you should think about this when considering financing for your business. Why do you need financing and what will it do for your business over the long-term? Many owners use credit cards for financing as start-ups. As the linked article suggests, be very cautious in taking on this method of financing, especially now since credit card companies are preparing for new regulations and doing so by hurting consumers.

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Cash is King! - The Power of Positive Cash Flow

"Cash is king" is a common saying in the economic development sphere. When a business has cash available, it means the business is healthy and the owners/managers understand the importance of maintaining cash. If there is ever a bind, they can likely get out of it because there is cash on hand. Even if the business is not profitable, having cash indicates its healthy.

Positive cash flow is another factor in pursuing additional financing for your business. Having this will let a banker or investor know that they can put money into the deal and it will actually go towards building up the business instead of simply "paying off" old debts (even in the case of refinancing). Also shows that you know how to handle money and can be a good steward over it. Even when doing business projections, make sure you are cash flow positive!

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Video of the Week: Financial Statements Overview

While you get your personal finances in order, make sure your business finances (or projected finances) are in order. The best way to do this is to keep financial statements - profit and loss/income statement, balance sheet, and cash flow statement. Below is a great, short video on the basics of what these are and what they mean:




When pursuing financing, all of these statements are very important to have as they let others know how well you are doing financially and help make sense for why you need financing. If you are not already in business,

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First thing's first - what's in your wallet?

For a couple of years, I was responsible for counseling current and potential business owners on pursuing bank loans. The largest hurdle for many of them was not the business plan... it was personal finances. Many people came in with solid plans, great business ideas, but no way to acquire financing because of these top three issues:

1. They had no savings - a usual requirement of obtaining a bank loan or even an investment is that you have put money into the deal yourself (at least 20% of what you need).

2. Bad credit - since you are asking to borrow credit for your business, bankers have to consider your current personal credit standing to see how you can handle credit. Usually they will put more weight on the last 6 - 12 months with heavy consideration for how much credit you have, how much of that you are using, and how well you are handling it.

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Video of the Week: Shark Tank - Done

Financial matters can be one of the most brain bending aspects of business. Financial projections lead to financial analysis which may lead to the need for financing or investing. Love it or hate it, we have to deal with it as entrepreneurs. Throughout the month of November, you can look to Cardinal Rules as a resource to understand financial matters in business a little more. In the meantime, check out this clip - would you have gone back and forth on this negotiation?



Shark Tank was a recent addition to the ABC line-up of prime time shows and the talk of entrepreneurial circles far and wide. Although most full episodes are not online anymore (the last three episodes are available at ABC.com and Hulu.com), ABC has a pretty good episode guide that includes a summary of each pitch, the best part of the pitch, and the investors' reactions to the pitch for each episode. You can also check out audience comments and contribute your own.

What tips have you picked up from Shark Tank? Are there any other television shows, movies, or videos that you recommend for people interested in obtaining financing?

Financing Your Dream

Today I had a discussion about financing small business start-ups. As I'm developing my own business, I'm struggling with how I'm going to afford to get it started, without totally skimping on professionalism. There are multiple ways to finance a business - venture capital, angel investment, business loans (conventional and unconventional), yet most common for small businesses (especially in start-up mode) are personal financing (including credit card debt) and/or investments from friends and family. I'm taking the personal financing route - mostly called "bootstrapping" (article courtesy of Entrepreneur Magazine).

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