Do you know what your business owns and owes? Do you know what your business makes and spends? More importantly – do you know what the equity is in your business or what it might be worth? It’s typical for an entrepreneur or for someone running a business to say “yes I know what we make and spend” but unlikely that they know what they own/owe and what the equity in their business is or what the value might be. Small and medium sized businesses can be so focused on surviving that they often don’t take time to see if the needle is moving in the right direction with respect to the equity or value of their business. This is unfortunate because one of the very reason businesses are started is to build value and one day be able to cash in or have that value recognized.
So where is the best place to start if you can relate to this?
I have a friend who is pursuing a new direction with his business and was looking for some advice. His existing business has been operating for many years and he has been boot-strapping his new venture. It looks like he was able to get validation for the idea and even has a few paying customers. He has used the cash from his operating business to bootstrap this new venture and it looks like he really has a shot at bringing a very innovative (and disruptive) solution to market. His challenge is to figure out when he should seek financing to support the opportunity. He could probably continue to nurture the business along and do well however to really capitalize on the opportunity he needs to pre-pay the expenses that come along with capturing a market.
“Capital support” is a term I use to figure out how a business can access the capital they need to support their activities. Many businesses owners wouldn’t consider “capital support” an item that they would specifically and intentionally address as they manage their cash flow the best they know how as capital is needed. Taking some time to consider the sources of capital that your business has access to can help you plan your cash flow and reduce the amount of time and effort spent trying to scramble at the last moment.
I sat with an investor last week that was looking for some input on a deal that was presented to him through a friend who was seeking short term financing for his company. On occasion this individual will fund opportunities for clients of mine and we have gotten to know each other pretty well so he asked for my help. Prior to our meeting the CFO of the company seeking his investment completed our Business Health Check (www.businessmoney.ca) and we used the results to speak about the opportunities and challenges involved with making a decision to fund this request. Reviewing the Business Health Check results not only provided some insight into this company but also highlighted several other items that immediately came forward which most businesses Continue reading “3 lessons from a 30 minute meeting with an investor”→
I spent some time on the phone yesterday with an individual that has put together a transaction involving a parcel of land that he thinks would be a good spot for a mini storage. The town he lives in is currently experiencing growth and he sees an under served market – storage. He has managed to find the land, get some drawings done and has arranged for the contractors required to do the work. He has about 10% of the total cost in cash and is looking for financing for the balance. He called several banks and was not able to get a loan for many different reasons the least of which include loan size (too small) and lack of interest from a banker. Continue reading “But I have a great business plan”→