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Funding Your Business  Part 2- Venture Capital

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In this series of articles, we will examine the financial options and programs available to business owners to fund their business.

By Debbie Gregory.

In part 1 of this series, we have looked at the option of using your own money or assets to fund your business. Now we will look at using someone else’s.

If you are willing to take on investors, venture capital might be a good option. This can come from a single person, often referred to as an angel investor, or a venture capital firm. Angel investors are usually affluent individuals who provide capital for a business start-up, and more often than not are looking for convertible debt or ownership equity, as well as an active role in the company.

When you secure venture capital funds, you are not taking out a loan. You are offering a piece of the pie in exchange for funds to be used to drive your business venture down the road to success.

If you want to attract investors, do your homework in advance. Watch a few episodes of Shark Tank to understand how investors evaluate a potential investment. Although this is just a quick introduction, you’ll see how they value a company based on the amount of money requested and percentage of business offered, while inquiring about past performance, future projections, profit margins, the backgrounds of the principals, etc. You will see the importance of coming in with an appropriate valuation. Often times a deal is made based on the quality, passion, commitment, and integrity of the entrepreneurs.

Investors will want to review your business plan to make sure it meets their investing criteria. Most investment funds concentrate on an industry, geographic area, or stage of business development.

After determining the amount of the investment, you will need to settle on the terms and conditions. Venture funds are normally released in predetermined rounds. As the company meets milestones, further rounds of financing are made available, possibly with adjustments in price as the company executes its plan.

Veteran and Military Business Owners Association, VAMBOA,

 

Tips for Finding a Competitive Edge for your Small Business

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By Debbie Gregory.

As a small business owner, you want to take advantage of every opportunity that will help you start or maintain your business. One tip is to periodically check in with your audience, so that you don’t leave potential business or revenue on the table.

One of the ways to monitor your audience is with: Market Research.  This is a handy tool that blends consumer behavior and economic trends to give you a insight into your prospect’s and/or client’s thought processes.

Benefits of market research include:

  • Developing compelling marketing materials
  • Getting ideas for expanding your products and services
  • Identifying trends before they become widespread, giving you a jump on the competition
  • Reducing risks

Once you have identified the demographic information (age, wealth, interests, etc.) of your target customers, you will want to ask questions such as: where are my prospects located, how will they find my business, how much competition do I have, what do I have to offer that puts me above the competition, and how much of a need or demand is there for what I am offering?

One of the best and most cost effective ways to gather this information is via your social media following, such as with Facebook, Twitter, Google+, Instagram, and even LinkedIn. You can ask for feedback, with survey participation or questionnaires to be filled out. You can vastly increase the number of responses by offering something in return, such as a discount, free shipping, etc.

Just as important as market research is competitive analysis, this is where you identify your competition by product line or service and market segment. You will want to look at your competitor’s market share, strengths and weaknesses. Is this an advantageous time to go head-to-head with a company that has been doing what you’re doing? Are you doing it differently?

Remember, even if you’re selling widgets, there is more than one place selling widgets, you just have to do it better, have more value, or a more compelling offer or a superior widget or all of the above! What shape does your planning take in order to win a greater market share?

Veteran and Military Business Owners Association, VAMBOA,

 

Financials & Their Importance to Small Business Success

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By Debbie Gregory.

By Debbie Gregory.

One of the most important elements to a successful small business is strong financial health. Here are some metrics that every entrepreneur should make sure they consistently focus on:

The Break-Even Point – This is the the dollar amount you need to get to in a given period, generally monthly or quarterly. This amount needs to allow for the company to cover its own costs and sustain itself. Also, take into consideration even if it is not making a profit during a slow time, you will still have outgoing costs. This is sometimes called the margin of safety.

Operating Cash Flow – This lets you know how much cash your business brings in from its normal operations. It is common for businesses just starting out that they may operate at a loss in the beginning. Once established, this number should be positive.

Net Income Ratio/Profit Margin – Your profit, the money left over after operating expenses are subtracted from revenue.  This is a very important metric. You need to make sure your business still makes money overall after you pay your expenses. A business just starting out, or one experiencing a bit of a slowdown may have a bottom line in the red at some points, but you should always set your sights on growing your profit margins. If you are losing money, it’s time to look at ways you can trim expenses or reconfigure your operations.  

Working Capital – This number is determined by taking your current assets (cash, accounts receivables, short-term investments) and subtracting your current liabilities (liabilities due within the next 12 months).

Gross Margins – The gross margin is calculated as a company’s total sales revenue, minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. The higher the percentage, the more the company retains on each dollar of sales to service its other costs and then enjoy as profits. Tracking margins is important for growing companies, since increased volumes should improve efficiency and lower the cost per unit (increase the margin). 

Veteran and Military Business Owners Association, VAMBOA,

 

Turning Construction Contacts into Contracts

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Don’t Miss This – December 13, 2018

Over 60 exhibitors looking for business with small certified firms DVBE’s, DBE’s, WBE’s, and SBE’s.

How to Bring Your Business Online

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By Debbie Gregory.

Building an online presence from the ground up can be very intimidating for a small business owner. Gone are the days when just having a Facebook page and Twitter account was all you needed. Customers are choosing to shop online now more than ever.

Here are some tips as to the best way to bring your business online:

First of all, focus on getting your business off the ground and on the internet. Concentrate on your website. Make sure it is functional. If buttons aren’t working or your website is not responding, your potential customers will move on to your competitors’ websites. Because your website is a reflection of your business, it’s worth investing in making it up to date and easy to navigate. And don’t forget to offer a mobile app as well.

Depending on the type of business you run, think about setting up an e-commerce site that allows customers to purchase your products online.

Blogging is the best way to keep your customers in the loop on topics such as sales, deals, events, and much more. You don’t have to bombard your customers with posts every day, but don’t neglect fresh content.

Make sure your products and services have a price point that covers all of your costs and allows for a profit.

Keep in mind that there are many professional groups that you can join to find potential business contacts, as well as to stay on top of trends happening in your industry. LinkedIn is probably one of the best for accomplishing this.

Offer something to your visitors in exchange for their email addresses, like a percentage off or a free download.

Know before you start, building and running any business, online or brick and mortar, means you will be working long and hard in the beginning stages.

Hopefully, at some point, it will get easier and smoother.

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