Business Funding

Pitch Deck for Angels and VCs

Posted on Tuesday at 7:40

The single most important thing that the VC is going to be investing in is YOU! Your pitch deck presentation is simply a visual tool to help you deliver your message. It is paramount that the audience is solely drawn to you, and that your deck merely contains short bullet points, headlines and images that evoke an emotional connection or act as a summary of your presentation. You will want to develop a separate pitch deck that you will provide as a handout that includes much more information about the pitch. However, during the presentation itself, the deck needs to be bare bones and the information needs to come from you.

Here are some tips to consider as you work through your presentation deck:

The first slide should contain the company logo. At this point, you’ll provide a brief (1-2 sentence) overview of what the company does , how it does it and why it is important.
Next, introduce the management team and key players. Explain how their experience and skill-sets align with the company and where it is going.
The very next slide needs to clearly introduce who the market is and what the size of the market is. First and foremost, you target market needs to be focused. Second, it is important that you use outside validators to convince the audience that what you are telling them is true. Outside validators can include successful beta runs, size of companies in the same or a similar space, credible research firms, etc.
Once your audience has an overview of the company and understand who the market is, present the product or service. A simple image on the slide will do. It is up to you to explain the product in simple and succinct terminology that does not confuse or patronize the investor.
The next slide is about the business model. Explain how the company makes money and why this model was chosen if necessary.
Follow the business model slide with an overview of the competition. Investors want to see who the competitors are, their strengths and weaknesses, how you are positioned among them, and most importantly, how are you special. Be sure to include outside validators here as well, such as strategic relationships.
Discuss any barriers to entry that exist in the industry and how your company has or will overcome them. You may also want to mention any barriers that your company has or will put in place to deter any new entrants or copy-cats.
Provide a simple P&L on the next slide and discuss the key financial takeaways in your projections. Be sure that when you present the upside potential that you are not too low in your assessment but that what you present is believable as well.
Dedicate the following slide(s) to the capital amount that you are requesting, the use of proceeds and lastly, your valuation.
Conclude with your logo on the screen and wrap up the key points made above as quickly as possible.

You want your presentation to be like a rocket, building speed and momentum throughout its trajectory until it reaches its destination and ends with a climactic explosion. So to your presentation needs to continually build momentum, getting stronger and stronger throughout the presentation and ending on an extremely high note.

David Rose, entrepreneur turned investor, outlines all of this and more in his TED Talk.

Tags: capital, entrepreneur, entrepreneurship, perfect pitch, pitch, raising capital, startup pitch deck, VC, Venture Capital

How to Choose a Business Plan Writer

Posted on Thursday at 4:27

Regardless of whether you are a first time entrepreneur starting a new business or a seasoned entrepreneur seeking capital to leverage your existing business, any investor will require a business plan. Writing a business plan is incredibly daunting for most business owners, whether because of difficulty, lack of time or lack of expertise. As a result, many entrepreneurs turn to professional business plan writers and/or consulting firms to write their business plan for them.

When searching for a business plan writer or consulting firm, you will find there is a large variety in the types of services offered, the approach taken and the price quoted. Below are a few tips to consider when evaluating your options:

Collaboration

First and foremost, be cautious of any company that promises to write a business plan for you in less than week and only requires a limited amount of information from you. You should enter this process knowing that you, as the client, are the expert in your business and that you will be required to work side-by-side with your business plan service provider to ensure that your plan reflects your business and your goals. The service provider should have a sense of what type of collaborative or consultative process works best, but nonetheless, your involvement in the process is paramount.

Writing Quality and Previous Success

Before hiring a writer, you should request samples of previous business plans. Upon reviewing the sample, ensure that the writing is succinct and to the point (as this is what investors prefer) and that the document is free of any typos or major mistakes. Be sure to critically evaluate the executive summary and financial model as this is where investors will spend the majority of their time.

Furthermore, you should try to gauge your service provider’s track record. While the service provider likely will not have an exact percentage of success, they may be able to provide the amount of funding they have helped their clients secure or the number of businesses successfully launched. At minimum, they should be able to point to a few success stories that you can verify later on. You should also ask if the service provider has any testimonials available and potentially even references.

Price is Not Everything

As is the case with most service based businesses, you often get what you pay for. Nonetheless, you should certainly shop around your business plan to gain an understanding of the pricing options available, do not make the mistake of evaluating a business plan writer simply on the price they give. While you can likely assume that the cheapest option available will result in a lower quality product and service, the inverse is not necessarily true in that the most expensive option will result in the best product and service.

In any case, no matter how cash-strapped your company is in its pre-funding stage, you should not cut any corners on your business plan. A proper business plan will greatly increase your chances of raising capital and operating a successful business. Similarly, an inadequate business plan will stop you dead in your tracks. As a result, spending money on a business plan should not be seen as an expense, but rather an investment that you are making in your company’s future success.

Tags: Business, Business Pan Writer, Business Plan, Choosing a writer, evaluating business plan consultants, How to

Non-Profit Revenue Sources: Donations

Posted on Wednesday at 5:00

Target the Best Potential Donors

Know where to begin your donor search. It is more cost-effective to strategize who will be most likely to make a donation and target those potential donors rather than spend the time and effort to cast your net as far and wide as possible. Start with the board of directors and their contacts, since they already share a passion and drive for the pursuit of the mission.

Know Why People Donate

Maybe it’s because they share in your commitment to the non-profit’s vision. Maybe they want a tax write off if you have qualified as a 501(c)(3). Maybe they want the PR benefit of being able to call themselves a donor to your organization. No matter what the reason may be, it is important you are paying careful attention to why your donors choose to donate. It’s a great way to effectively target them for future donations.

Stay Organized

Putting prospective donor information into some sort of system will be incredibly helpful in streamlining your efforts to secure donations. This way you can have an effective system for knowing how much, when, and why a donor chose to help your organization.
If you plan on having a membership option for your donors, make sure you have a system in place that tracks their membership details.

How to Ask for a Donation

For in-person and phone requests, it is critical that you train your staff and volunteers on how to ask for a donation. You can identify who are your strongest donation solicitors. Make sure they are prepared to handle rejection and can interact with a potential donor in a conversation. Ask for a donation in a specific amount (or suggest several specific amounts) rather than just asking for any donation – it’s better to propose amounts as options rather than “yes” or “no” as options.
For e-mail and paper requests, bear in mind that these two forms of contact are usually numerous and easy to disregard amongst the rest of the “junk mail”. E-mails are inexpensive, but if not done carefully, can alienate your prospective donor. Make sure to include your organization in the subject line, include a link to your organization’s web page, and encourage the potential donor to forward the e-mail along. You should also provide options to unsubscribe as well as hide the e-mail address from the rest of the recipients on the list. You can save on postage if you obtain a non-profit discount on bulk mail. Your mailing should include a letter asking for a specific donation, a brochure about the organization and a response card for the donor to return.

Tags: finance, Funding

Non-Profit Revenue Sources: Grants

Posted on Monday at 5:00

Sources of Grants

Unlike donations from private individuals, grants come from foundations, government agencies, private businesses and other groups. As these groups have access to larger accounts, the grants they give out are usually much larger than individual donations.
Many grants are only available to 501(c)(3) tax-exempt organizations.
Grant givers are often looking for an organization that meets the giver’s criteria in terms of the activities and projects conducted by the recipient. It is important that you look for grants that specify criteria you can meet in order to have the best shot at winning the grant.

Writing Grant Proposals

Many grant givers have specific application procedures and deadlines, so make sure you are up to date. Many grant applications have two rounds to screen for appropriate recipients and save the non-profit the time necessary to prepare a full grant proposal. The full proposal, if you are invited to submit one, includes a cover letter, cover sheet, description of the organization, a needs assessment, program goals and objectives, financial information, a conclusion and any appendices or attachments as necessary.

Corporate Sponsorships

Approaching local businesses, banks or institutions for corporate sponsorship can also generate a large amount of revenue for the non-profit. Most corporate sponsors want some kind of recognition – such as their name and logo on a banner or t-shirt – for their contribution. However, you are only allowed to “acknowledge” your sponsor, not provide them with advertising. Providing them with advertising can count as unrelated business income (UBI) and be subject to tax or losing your 501(c)(3) exemption status. Consulting with an attorney may be helpful if you are not sure whether your form of recognition is acknowledgement or advertising. If you do provide recognition with a commercial value (advertising) than the donor can only deduct the difference in value between the donation and the item of commercial value provided the item exceeds $75 in value.

*The information contained in this post is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Tags: finance, Funding

Non-Profit Revenue Sources: Fundraising

Posted on Wednesday at 5:00

Importance of Relationships

No matter what the amount you are trying to raise, you must have a good connection with your donors. Especially if the donor is contributing for the first time – a thank you note can go a long way to ensuring continued donations in the future.

Convince Your Potential Donor

Be specific and build a compelling case for why you need this donation. Your potential donors have many options for where to donate – if they donate at all – and you must convince them that you are the best recipient of their financial support.

Don’t Forget the Bigger Picture

But keep the organization’s bigger picture in mind. You can’t always hide your expenses as a compassionate need – maybe you just need office supplies. A good fundraiser is also able to bring in funds for the overhead expenses of operating.

Make a Fundraising Budget

Unfortunately, some of the money you raise is turned around to spend on future fundraising efforts. Fundraising can add up quickly so make sure you set a budget that is realistic for the amount of money you are wishing to bring in. Look for ways to cut costs or to get time, space or materials donated to assist with the fundraising effort.

Consider Membership Opportunities

You can collect dues from members of your organization if you have a program that gives them something in return. It could be a token gift or the right to participate in an exclusive group such as a list serve or a planning committee. But you must somehow involve your members for them to feel connected to the organization and continue to provide membership dues, which are a source of revenue.

Tags: finance, Funding

Selling Franchises

Posted on Tuesday at 11:30

While franchising is often thought of as a means of building your brand with limited capital outlay, franchising can also provide an additional revenue stream for your business through franchising fees and royalties. Typically, entrepreneurs charge an initial fee for the purchase of the franchise as well as continuing fees on total revenue. Ongoing management fees are charged as a percentage of total turn-over in exchange for sales, marketing and additional support. In some cases, the entrepreneur also acts as a vendor to the franchisee providing supplies, in which case additional revenue is generated based on the mark up of these items.

Franchising typically is done by companies with a well established business and the ability to provide significant marketing support or well-established systems for franchisees to get started. Franchisees pay money in return for using the brand name and relying on the proven business structure already in place. Returns from franchising your business may take longer to realize, so it is not as advisable a funding option for short-term cash flow needs, but can provide consistent, longer term revenue streams for companies in need of cash.

Equipment Financing

Posted on Monday at 2:03

Equipment financing provides funding for companies looking to purchase equipment, but lack traditional funding sources to pay for the purchase. Typically with equipment financing loans, the cost of the equipment is spread out over the course of a payment plan which extends over a number of years. For these loans, the equipment is used as collateral to help secure the position of the lender and lower the interest rate on the loan.

Equipment financing is often used by growing companies to purchase necessary equipment, but may also be used by established companies to replace tired equipment or upgrade equipment to remain competitive. Some equipment financing companies require a business history of at least 3-years and rates may vary based on how long the company has been in operation.

Inventory Loans

Posted on Friday at 3:03

Inventory loans, sometimes referred to as “flooring”, uses current inventory on hand as collateral to secure funding. These loans often have better interest rates than other funding options because they are collateralized and provide the lending agency a more secure position. These types of loans are useful for distributors and retailers that need inventory on hand for immediate sales and need more than 30 day terms to pay for the product. Inventory loans allow businesses to increase their inventory, or take out a loan based on current inventory numbers.

Inventory loans are a good short-term funding source for growing businesses that maintain ready to sell inventory and aren’t able to secure traditional funding from their bank. Term lengths are typically one year or less, so a business must have regular turn-over of inventory in order to repay the loan on time. This type of loan is not recommended for companies expecting to hold inventory for longer durations.

Purchase Order (PO) Financing

Posted on Friday at 11:34

Purchase Order Financing provides entrepreneurs a means of paying a supplier upfront when cash-reserves are not available to fulfill an order. This type of funding is useful for growing companies who may secure a sale but lack sufficient funds to purchase the necessary supplies to fill the order. In this case, a purchase order financing company will supply funds directly to the supplier, typically using a letter of credit. When the end buyers of the product pay the company, the company then re-pays the purchase order financing company for the cost of the material, plus additional fees. Purchase order financing is sometimes thought of as a twist on factoring that has arose over the last few decades

Purchase order financing is particularly useful for wholesale companies that move product directly from supplier to buyer. The duration of the loan is typically 30 days and companies typically charge interest on the loaned money at rates as high as 3.5%/month (annual rate equivalent of more than 40%). Historically, banks have offered some type of purchase order financing to their longstanding clients, though following the 2008 financial crisis they have become harder for business owners to secure through traditional bank lenders.

Accounts Receivable Financing (Factoring)

Posted on Thursday at 1:30

Accounts Receivable Financing (also known as factoring) involves selling a company’s outstanding receivables to a third party factoring company for cash. With this type of financing, the third party owns the accounts receivable current asset and the right to collect on the invoices but also takes over the risk associated with customer non-payment. Unlike other financing options where invoices are used as collateral for a loan, factoring is not considered a loan but a selling of an asset. Factoring can be a good source of funding when there are short-term cash flow needs and a large amount of product which has been sold, but the money has not been collected. In many cases this includes “turnaround” firms or rapid growth firms. An added advantage of this type of financing is that the financing decisions rely on the creditworthiness of the debtors, rather than the person credit of the company owner. This makes factoring a good alternative for companies which lack the credit needed to secure other types of financing.

The resulting cost of financing in this case can be expensive as third party companies typically ask for a percentage of the value of the outstanding invoiced based on total amount and average due date.

Fees charged by factoring companies often amount to paying a much higher rate than other more standard forms of financing, but can be good option if a company has exhausted other potential funding avenues and needs cash quickly or has significant variation in cash flow throughout the year. Factoring is also often used by companies in which cash on hand to invest in the growth of their company significantly outweighs the cost associated with fees and discounts from factoring. In some cases, the invoices are paid on an advance of 70-85% of the original purchase price paid out immediately. The remainder, after the deduction of the factor company’s negotiated fee, is paid at the time the company successfully collects on the invoice.

Factoring in Exporting

Factoring is also often seen in the export market, where companies shipping products overseas look to sell their receivable to a factoring company who in turn mitigates the risk associated with non-payment, helps assess creditworthiness of the international buyer, and establishes lines of credit. This also eliminates the need for letters of credit for international transactions.

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