Written by Dave Lavinsky on Tuesday, October 16, 2012
Every business has a break-even point, which represents the minimum amount of cash to bring into the business on a given month in order to at least be able to cover your cash expenses for the month, or larger profit goals. The reason the media call the Friday after Thanksgiving Black Friday is that many businesses do not reach their break-even point for the whole year until that day, due to the tremendous volume of sales.
Determining your break-even point involves a similar process to thinking through your business plan, wherein you not only gain better understanding of your business but also learn which areas offer ways to cut expenses and boost profits.
In this article, I will share with you how to calculate your own break-even point, and share 3 tips for lowering it.
Calculating Your Personal Black Friday
The first step I recommend is to establish your own break-even point. You reach your personal Black Friday when your fixed costs plus variable costs equal your income.
After hitting this point, all further sales become profit, less any additional variable costs for manufacturing and sales expenses.
- Fixed costs include rent, salaries, maintenance, licenses, equipment, and other overhead expenses.
- Variable expenses include the cost of wholesale goods, manufacturing, sales commissions, advertising, utilities, and other expenses needed to produce the number of goods or services you sell.
- These expenses also apply to intangible products that require software developers, consultants, website managers, pay-per-click advertising, and other expenses associated with creating intangible products or services.
- Income includes the gross sales prices of the number of goods or services sold, whether wholesale or retail. The higher the number of goods, the higher the variable expenses will grow.
Consider all the expenses you might overlook in your specific line of business. Having more salaried employees or too expensive an office space are two examples that might lead to this. You might be paying too much in advertising to produce the same number of leads. There could be a number of expenses you could lower.
You can change your break-even point by cutting overhead expenses and other fixed costs, reducing variable expenses, increasing sales transactions, or charging higher prices.
Below are three proven ways to change your break-even point:
Cut Manufacturing Costs or Raise Prices
The price of your goods must be high enough to cover manufacturing (or service delivery) costs, fixed expenses, and returns on investment. If your analysis shows a high break-even point, you should consider raising prices. You can also try to find ways of cutting expenses by finding cheaper suppliers, buying in bulk to get discounts, lowering advertising costs by targeting customers more efficiently, or lowering the raw materials' quality that you use to make products.
- Niche-type companies can usually raise their prices 3 to 5 percent without causing too much backlash from customers.
- Increasing productivity will lower your costs of goods.
- Inventory control can often find sources of waste, theft, or inefficient production techniques.
- Telephones, energy costs, worker wages, and commissions also add to variable costs. You might convince salespeople to take greater risks for higher future commissions, reducing expenses until you reach your break-even point.
Lowering Fixed Costs
Fixed expenses prove difficult to change. You might have to move to a smaller office space, cut services, lower administrative salaries, or cut staff and outsource some services to more efficient organizations that can get the same results for less money.
Don't cut these expenses so much that your ability to function gets hampered, but do watch fixed costs like a hawk to keep them low and lean.
Make Sales More Efficient
You make your sales more efficient by cross-selling, upselling, and getting referrals and sales leads from customers.
- Offer service or product bundles to convince customers to spend more money.
- Create attractive accessory options to increase sales volume.
- Ask customers to recommend you to friends and associates. You might offer product discounts for referrals.
- Try to motivate your sales force by giving bonuses for meeting certain sales targets.
Your Break-Even Point Will Change with Evolving Market Conditions
I recommend that you periodically review your figures and adjust your break-even point to reflect changes in prices, the economy, competitors' responses, and other factors. Update your figures to stay on top of market changes and make adjustments as needed.
Knowing and managing your break-even point is an ongoing job you perform in your role as manager of your business. It goes hand-in-hand with budgeting and cash flow management. Handle it well and stay on top. Neglect it and you could end up underwater. Hopefully these tips and insights will help you grow your business through ever-changing times and markets.
Suggested Resource: Would you like to know more ways to maximize profits and the value of your business. And specifically to turn it into one that exceeds $10 million in revenues? Then check out Growthink's 8 Figure Formula. This video explains more.
Written by Jay Turo on Monday, October 15, 2012
Probably the worst way for an entrepreneur to begin his or her day is to read the newspaper.
Or watch the news.
Or, for that matter, to surf the net or even check in on the latest and greatest on Facebook, LinkedIn, Twitter, et al.
It is not to say that keeping up with events is necessarily a bad thing, and of course for many types of businesses and professions, it is part of the job description to do so.
But for the busy and ambitious entrepreneur, doing so first thing in the morning at best is highly distracting, and at its worst misdirects one's mind and energy in the absolute wrong direction.
Well, unfortunately the overwhelming majority for what passes as “news” these days is a downbeat recital of the things that either have, are, or are about to go bad the world over.
War. Economic crisis. National disasters. Scandal.
All usually presented in that oh-so depressing of "yes this is bad, but just wait because it's only going to get worse" tone.
Not the best “stimulus” with which to start one’s day to get out and conquer the world, now is it?
Yes we should be informed.
But really, it is not the “informed” that change the world for the better.
Rather, it is the men and women of action, purpose, and zest that do.
And these energized and effective souls don’t start their day with the “news.”
Rather, they feed their spirit, minds, and bodies wholesome fare.
They meditate. They read inspirational literature. They exercise vigorously.
They set their day's goals and get right after the most important ones first thing.
They recognize that the first hour is the rudder of the day and so they tack their daily ship in the best direction right from the day’s get go.
And once they are good and going…
…well, then they take a peek at a few tweets, they accept a few friends requests, and they indulge themselves in a little of the “news.”
But not too much.
This blog post is a reprint of an article written by Jay Turo in this month’s Vistaprint Small Business Blog.
Written by Dave Lavinsky on Sunday, October 14, 2012
I watched the movie The Avengers recently, and it got me thinking. There are many ways to put together a team, and not all of them last. Sometimes you have clashing personalities. Sometimes you end up with distractions that only serve to diffuse the effectiveness of the team as a whole. Sometimes you simply chose the wrong people and ended up with a sub-par team.
Samuel L. Jackson's character, Nick Fury, did a lot of research before putting his team together, and it shows when they to work together in the end for a common goal. Everyone plays to their strengths and the superheroes save the day. So how can you assemble your own business super-team?
Avengers Assemble: How to Find your Team Members
Nick Fury left no stone unturned when he searched for (or tracked down) his team. Unfortunately for us, we don't have the vast resources of a secret government organization at our disposal.
In most cases, our ideal team members aren't green giants either, so it takes a bit more digging around to find potential members from among the pool of candidates. Here are a few places to look for freelance team members (who could eventually become full-time too after they prove themselves):
- Scan general freelance job sites, like Elance, Guru, and Odesk
- Scan industry-specific job sites, like Scriptlance for programming, or Coroflot for design work
- Ask your social circle if they know any freelancers, especially business peers
- Write guest posts and invite people to contact you
- Join freelancer forums to meet potential team members from the discussion
Choosing your Superteam Roster
Once again, Nick Fury shows us the path to take when picking our initial team roster. Of course, with the magic of the silver screen, we didn't see if he had any team members who didn't quite work out. In the world of freelance workers, however, you most likely will have some turnover.
Be picky with your choices to reduce turnover later from hiring the wrong person. You can afford to wait for a better candidate to come along, but you can't afford to miss your Tony Stark because you hired an intern too soon.
You also need to trust your instincts. Nick Fury stuck to his guns in the face of his superiors' naysaying, and he knew his team would work out. If you meet a freelancer who just doesn't mesh well enough, trust your instincts and pass them over.
Finally, once you've put together a large enough list of potential team members, start inviting them to see if they're interested. You don't want to be talking to a crowd. It's better to approach them individually.
Set the Bar: Having Clear Expectations
The Avengers had a goal: form a team of heroes capable of defending the planet against attack. This was Nick Fury's expectation of his team. Your expectations for your team won't be as high and mighty, but that doesn't mean they're unimportant. As you build your team, bring each new member into the loop with your expectations for them.
Let them know what it means to be a part of your team. Each time you bring in a new member, you can take the opportunity to remind all of your current members of your expectations, so the group doesn't morph into something you don't want.
Structuring Your Meetings
Pulling your team together for regular meetings is important. In The Avengers, we don't see much of the daily grind of meetings, but what we do see displays a lot of what not to do. When Thor and Iron Man meet, there's a lot of butting heads. And The Hulk clashes with everyone when he's in his moods.
The Avengers found unity, but for a team of freelancers it can quickly grow out of hand and tear a group apart.
So meet frequently but no more than needed. Keep your meetings on track and don't waste time with small talk. Don't structure everything too rigidly, or you miss the chance for inspiration and brainstorming. Encourage a variety of ideas and to withhold criticism of ideas until it's time. You built your team to work together, now let them work together!
Make Sure to Set Goals, not Tasks
The distinction here can be tricky. The Avengers had one major goal: stop the alien invasion. To do this, they had sub-goals, like cutting off the machine allowing them through, defeating Loki, and clearing out the remaining aliens. These are distinct from tasks.
No one was telling Hawkeye to shoot specific aliens; he simply did it as part of his goal. For your team, your goals are what you need to accomplish to build your business-not the immediate tasks necessary to keep it running. So talk about your goals often.
Plan for Growth
For this one, finally, The Avengers don't have advice to offer. The Avengers are established, they don't need to take on extra hands. After all, seven or eight people is about the most that one manager can handle without reducing results. Your team might not be so all encompassing.
However, before you start taking on new people, put it to a vote with current members. If they approve, take a new person on as a temporary member, to get a feel for how they will mesh with the team. Avoid bringing in people who compete with current members unless the task is larger than what one person can handle-overlapping roles lead to clashes.
And finally, don't grow too large. There's a limit to where your team stops being effective and starts being too bureaucratic. If you keep your team at the right size, and full of the right people, your business can do nothing but grow.
Suggested Resource: Would you like to know more ways to maximize the value of your business. And specifically to turn it into one that exceeds $10 million in revenues? Then check out Growthink's 8 Figure Formula. This video explains more.
Written by Dave Lavinsky on Tuesday, October 9, 2012
The influence of the crowd is a major factor in Crowdfunding, as psychology often plays a role in the failure or success of a Crowdfunding campaign.
Crowd psychology is a form of social psychology. Regular people are generally able to gain power by acting as a group. It has been shown through history that big groups of people have brought about sudden and dramatic social changes in a way that sidesteps traditional due process.
Social scientists have come up with a number of different theories to explain crowd psychology. In addition, scientists have also come up with several different theories regarding the way that crowd psychology is different from the psychology of the individual within that crowd.
Freud on Crowd Behavior
First, Sigmund Freud had a crowd behavior theory. He believed that people in a crowd act differently than individuals. His theory was that the minds of everyone in the group merged to form a new way of thinking. The enthusiasm of each member of the group would increase, and he or she would become less aware of the nature of their actions.
What this means for your Crowdfunding raise: Create a community around those who provide Crowdfunding to you. Use the community to make these people zealots. Encourage them to spread the word about your company so more and more people support you.
One amazing social phenomenon that happens within a crowd is communal reinforcement, in which an idea or concept is asserted repeatedly, even when there is limited evidence to support it.
As time goes by, the idea or concept becomes reinforced into becoming a stern belief in the minds of many people and can often be regarded as fact by members of the group. Imagine how persuasive you could be by actually showing them the evidence to support your promises (and you should)!
What this means for your Crowdfunding raise: When setting up your Crowdfunding platform and profile, choose a main message and repeat it over and over-in your headline, in the description, in your video, and in your comments. Repetition sells!
Online crowds come together virtually. They act and behave collectively, producing effects that would not otherwise be possible if they were approached by themselves.
But they need to see social proof. No one wants to be the first one to donate (except your mom), but if they see that others are doing it, they'll perceive it as more legitimate and will be more likely to fund you.
What this means for your Crowdfunding raise: Don't tell the masses about your Crowdfunding raise at first. Rather, start with your friends and family members. Then, when folks who don't know you come to your Crowdfunding page later, they'll already see a lot of others who've pledged their money to you.
Likewise show as much activity on your Crowdfunding page as possible. Let people see your comments as you answer questions and repeat your message. And make sure to publicly thank those who made donations and make sure people see the progress of your funding as you receive it.
When you raise money from sophisticated angel investors and venture capitalists, there is a lot of psychology involved. When raising Crowdfunding, it's even more so. So, keep this in mind and leverage it. And you will be able to raise Crowdfunding to start and/or grow your business.
Written by Dave Lavinsky on Sunday, October 7, 2012
Like any funding method, Crowdfunding has its pros and cons; and I want you to be fully informed with a plan for addressing each of them.
One of the key benefits of Crowdfunding is that it's a very simple method of getting funding.
Written by Jay Turo on Monday, October 1, 2012
Holding constant for socioeconomic factors, the typical entrepreneur makes less money, work more hours and suffers more work-related stress than their employed counterparts.
And when we combine these statistics with those that show a very incredibly low percentage of startups and small businesses ever attaining meaningful profitability, it is remarkable that people ever even dream to be entrepreneurs and start businesses at all.
But start them they do!
Quite possibly the most amazing and inspiring number in all of American business is 550,000.
That is the approximate number of new businesses that are started in American each and every month, or more than 6 million per year.
Now these opposing statistics beg the question, “Why?”
Why would 550,000 people - who statistically are far better educated and wealthier than the population as a whole - engage in behavior that on the surface clearly seems contrary to their self-interest and dare I say, delusional?
Well, on the cynical side, many of these brave folks probably think the odds of economic success are greater than they really are.
And even if they know the odds, they think that they don’t apply to them.
On the slightly less cynical but still not totally inspiring side, one could argue that businesses are started out of boredom - out of the need for that “action rush” that in the realm of business often only an entrepreneurial endeavor can truly provide.
Inspirationally, many believe like I do that entrepreneurship is the greatest force for positive change in the world today, and they start and grow businesses to be positive change agents, on levels big and small.
They start restaurants to create and share beautiful food, service, and atmosphere.
They open day care facilities to provide quality, spirited child care for working families.
They start creative agencies - graphic design, public relation, web development firms, and the like to leverage their business and creative talent to its most effective end.
And they start drug development and medical device companies to help people live longer, healthier lives.
And thousands of types and forms and sizes of business in between, led by entrepreneurs with aspirations big and small, driven by motivations both pedestrian and soaring.
But at the heart of all of their reasons for starting businesses, at least of the ones that survive, is that often begrudged but really most inspiring motivation of them all.
They start businesses to make a lot of money.
Now the key word in that sentence is make - as in bringing into existence through creativity, effort, and as often as not more than a little serendipity and luck, something that did not exist beforehand.
Making money is the difference between Mo Ibrahim becoming a billionaire through bringing inexpensive mobile telecommunications to millions in Africa and Mo Gaddafi stealing billions of his people’s money at the point of a gun.
It is the difference between Steve Jobs and Apple creating $630 billion in market capitalization - and untold additional hundreds of billions in economic and multiplier effect.
Now often, for the entrepreneur and those that back them, the touching of this money often takes many years, even decades, of under-paid, hard, and often thankless work, before a cash windfall in the form of a business sale or a public offering.
But that is a story for another day.
For now, find those entrepreneurs that can truly make money, encourage and back them, and you and the world will get to a better place.
Written by Dave Lavinsky on Sunday, September 30, 2012
After working hard to grow your business into a successful company, most likely you'll want to sell it and reap the benefits of all those years of hard work. There are many questions involved with selling a business, but the most important is: How do you find qualified buyers?
Some people say the quantity of buyers that are interested in buying your business is most important. Others say it's the quality of buyers, regardless of quantity. But the correct answer is...both are very important. Here's why...
If you have 50 buyers interested in your business, then you have plenty of quantity. But if you are selling a $1,000,000 manufacturing business and these buyers can only afford a business that costs less than $300,000, or if they all prefer a service business, then this "quantity" of buyers is a waste of time. You will spend hours talking to unqualified buyers about your business when they have no interest in actually buying it.
Conversely, say you only have 2 buyers interested in your business and they are looking to spend at least $1,000,000 on a manufacturing business. You have good buyer "quality" but not enough quantity.
On average, you need at least 10 or more qualified buyers to look at your business before you can reasonably expect to sell it. And the more qualified buyers you have considering your business, the higher the sales price will be.
In a nutshell, the more qualified buyers you have looking at your business, 1) the faster you will sell your business and 2) the more money you will make on the sale.
But how do you get both quantity and quality of buyers interested in your company?
The answer depends upon the amount which you expect to sell your company. If the amount is less than $2 million, you are generally looking to sell to an individual. At an amount over $2 million, you are typically seeking a corporate buyer.
Depending on the amount and thus the buyer type, there are different ways to find buyers as follows.
Selling For Under $2 Million
For sub-$2 million sales, the two best methods of finding a buyer are as follows.
1. Business Brokers
Business brokers are typically very professional and knowledgeable in the art of buying and selling a business. Plus they are skilled at helping sellers sell their business. They will prepare your business for sale and handle all discussions with buyers on your behalf.
In addition, brokers will help generate interest in your business from buyers through their relationships with other brokers, as well as listing your business for sale on their website.
However, to get maximum quality and quantity of buyers interested in your business it is best to complement a broker's services with additional advertising efforts. You can do this either in conjunction with the broker's efforts, or on your own.
2. Online Marketplaces
Currently the most effective method of getting both the highest quantity and quality of buyers interested in your business is by advertising on an online business-for-sale marketplace. These marketplaces are searched by hundreds of thousands of buyers each month, and can generate a staggering amount of interest in your business.
There are many online marketplaces to choose from, such as BizBuySell.com, BusinessSmart.com, and BizSale.com-but they are far from equal.
Some have inadequate search functions, which mean your quality of buyers will decrease. The better the search functions the site offers, the more precisely buyers can search for what they want. And when a buyer finds your business, you know they are highly qualified.
Other business-for-sale marketplaces are just interested in collecting listing fees from you, regardless of whether or not they help you find a buyer. These sites charge a monthly listing fee that is not tied to performance of any kind. As a result, they may or may not bring you any qualified buyers, and they really don't have any incentive to do so.
Different websites have more or less traffic than others, and I would generally go with whichever can boast of the most visitors. However, if there's no cost to add your listing on a site, it doesn't take more than a few minutes to copy and paste the listing details from one site to another.
The most effective business-for-sale marketplaces put their money where their mouth is and only charge sellers on a pay-for-performance basis. With these sites, you list your business for sale and it appears in buyers' search results when they search for a business like yours. But you are only charged a small fee if the buyer actually clicks on your listing and views its details. And you can set your own budget to determine the quantity of buyers you want.
Performance-based marketplaces are very efficient and highly effective because you get exposure to the maximum number of highest quality buyers, but you don't pay if you don't have any qualified buyers view your listing.
Selling For More Than $2 Million
If you seek to sell your business for more than $2 million, as stated above, most likely you are seeking a corporate buyer -- who has the ability to pay big dollars for your company.
When seeking such a buyer, your best bet is to use the services of a qualified investment banker. While the banker will charge you fixed cash and success fees (a percentage of the amount for which your company is sold), most are well worth the cost.
Why? Because they can help you sell for a higher price (making their fees insignificant) and they can help you negotiate the best terms of the sale (e.g., the timing of your payout, etc.).
Good investment bankers will know how to position your company for sale and get as many qualified buyers as possible interested, and get them to bid against each other so you can get the best deal terms and price.
To build a sellable company, whether or not you plan to sell it for less or more than $2 million, you will need to get as many qualified buyers as possible to ensure the highest price. In the meantime, focus on building a company that tons of buyers will WANT to buy. Generally, that means a company with strong profit margins, recurring customer revenue, a diversified customer portfolio (versus having few customers comprising the majority of sales), and systems and personnel that allow the business to run without you.
When you build such a business, finding lots of qualified buyers will be much easier.
Written by Dave Lavinsky on Tuesday, September 25, 2012
This is arguably the worst small business financing strategy:
The entrepreneur develops what they believe to be a sure-fire business plan that can't fail. Then, unable to locate any form of startup capital (because they haven't invested in learning how to find capital), they start their business with credit cards as the only source of financing, and an expectation of sustainable business results within 3 to 6 months.
If everything goes well, the credit card debt will be retired within a year and funds will start building in the bank account. Sounds good, right?
But, have you ever spoken to someone who runs a successful small business; perhaps one that's been around for 5 or 10 years? If you take the time to ask one of these entrepreneurs about their startup period, what you learn may shock you.
Even some of the most successful small and medium sized businesses out there today had some questionable moments making a go of it in the beginning - which can sometimes last for several years.
The point here is simply this:
The process of getting a business operating and successful can take many unexpected twists and turns, no matter how diligent you are in creating a thorough business plan and business financing strategy.
Therefore, to increase your probability for success you need to allow for the unknown, the unplanned, and the unfair.
A business financing strategy that cannot accommodate unforeseen events is not much of a strategy. Furthermore, a business financing strategy that is based on high interest credit cards that can destroy both your cash flow and your personal credit is also not much of a strategy.
To improve your odds of small business success, here are some tips for developing a solid business financing strategy.
Invest Your Own Cash
If you have some of your own cash included in your business financing strategy, it will immediately increase your likelihood of getting other kinds of startup funding.
The more "skin" you have in the game, the more interested a lender will be in approving your loan request. Plus, most angel investors will be more impressed and eager to fund knowing you have some of your personal savings invested.
There is also something to be said about the psychological incentive of losing your own money and the motivation it creates for you to work harder to keep it.
Create Contingencies in Your Cash Flow
Whatever you estimate your working capital requirement to be, double it. Things can and will go wrong. So make sure you don't run out of funding when they do.
Use Credit Cards Wisely
Used properly, credit cards can be the cheapest form of working capital you have at your disposal. They can cover gaps in cash flow, or they can be used to fund endeavors that should result in a fast payback. But carry a large balance for a long time and the interest and payments will be way too much.
Some business credit cards provide 30-90 days of interest-free financing. If you pay off the entire balance every month, you have an extremely low cost of working capital financing.
But if you start carrying large balances without paying them down monthly, you will go from the cheapest source of working capital to one of the most expensive, and you will likely also hurt your credit rating in the process (lenders like to see your balance being less than half of your available limit).
Watch Spending Closely At Startup
One of the things you can control early on is how much you spend and what you spend it on.
This will change in time, but if you can spend wisely in the beginning you may be able to avoid a cost cutting exercise further down the line. For example, if you spend too much for an office lease early on, you may have to make the painful and expensive decision to downsize your space later.
While it's normally true that you have to spend money to make money, you can still be smart about the spending process. Be most cautious about your purchases in the beginning when funds are the scarcest. Always negotiate a better deal with vendors and delay anything expensive until you can justify it later on.
With these financing tips in mind, get out there and make those sales. Build a track record of success that you can show an investor while maintaining a positive cash flow throughout.
Suggested Resource: Want funding for your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.
Written by Jay Turo on Monday, September 24, 2012
Modern businesses, massively reliant on information technology, are faced with a fundamental question - should they organize “traditionally” via single locations where salaried “W-2” employees work, or should they exist primarily in “the cloud” - with far flung networks of “1099” contractors, vendors, affiliates and the like?
Let’s label the two approaches “old school” and “new school” and explore their pros and cons:
W-2 Old School Positives. You can spin virtuality anyway you like, but human beings are fundamentally designed to work together in 3 dimensions, in-person.
Among many other, an incredibly KEY benefit of the old school way - training and professional development.
While e-learning holds great promise, almost all of us have had the vast majority of our educational, development and collaboration experiences in the “real world.”
And unless and until there is some radical re-ordering of parenting and elementary school norms, this will always remain so.
As for reaching “hearts and minds,” working out of one’s spare bedroom, or from the kitchen table is convenient and all, there are few experiences of “true aliveness” like working in-person with colleagues you respect, toward accomplishing missions and objectives of value and high ideals.
Old School Negatives. It is 2012, folks, and markets and competitive conditions in our brave new world move far faster than the traditional, “one roof”, employer - employee organization dynamic.
Combine this with the fact that it is getting increasingly difficult to attract and retain the best and most creative self-starters to traditional corporate environments, and it is easy for organizations to devolve to both personnel mediocrity and a mismatch between what the market dictates and what the employee rolls reflect.
New School Positives. Sites like LinkedIn, Rent-a-Coder, Craigslist, and dozens of other have made it cheap and easy to find and transact with talent with the skill sets an organization needs as it needs it.
And while cynical, it is also true that it is easier to downsize a virtual workforce than one where folks are eating, laughing, and co-habiting together daily.
New School Negatives. This new school advantage is of course also its biggest weakness – the detachment of virtual workers makes it almost impossible to create that inspired workplace which visionary leaders like Tony Hsieh, Richard Branson and Sam Walton hold as the ONLY sustainable competitive advantage in modern business.
So what to do? There are of course no hard and fast rules, but a good shortcut is to deeply ask – “What is absolutely critical, absolutely core to my business and what is merely tactical?
That which is core, go old school.
Everything else, go new school and outsource it to that always-on, increasingly omniscient big data cloud of global talent and run your business to modern daylight!
Written by Dave Lavinsky on Sunday, September 23, 2012
I know a lot of business owners, and their businesses are very diverse. Some are profitable, some aren't. Some involve single, store-based locations, while others are Internet-based or even spread across an international network. Some have large staffs, others only have a few people. Some specialize in technology, some in produce, some in commerce.
The variations are endless, but all these companies share one thing. They all required a lot of money to get started and/or grow.
When raising funding, you always have several options - from securing a loan from a bank, receiving a secured line of credit, crowdfunding, or seeking investors. When looking for investors, most people think of venture capitalists, firms who manage pools of money and invest it in startup projects.
Angel Investors are a Realistic Option
Another option for the shrewd businessman or businesswoman, though, is to find angel investors. Angel investors are individuals who invest their own money in a company or business, usually in exchange for equity ownership.
The angels will then wait for your company to grow (and usually sell to a larger company), at which time they will sell their shares for a big gain.
Sometimes, angels will band together into angel funding groups which pool their capital in order to invest in larger projects and to diversify their risk of investing in just one company.
So, where can you find these angel investors and let them know about your company? There are a few options.
Your Current Customers
If you already have a small business and are looking for angel investors to help it expand, you may be able to find angels among your current customers - someone who knows and trusts you already, who has already experienced the value of your product or service, and who could more easily envision how successful your company could become.
Internet Search for Angels
One of my favorite types of angel investors are retired industry executives. For example, if you are in the aerospace industry do a Google search on "retired Boeing executive." You will find numerous former Boeing executives from this search. Then you can start contacting them via phone or email. These former executives generally will have the money to fund you and the connections to help you grow your business faster.
Local Entrepreneurial Groups
I have met several angels myself by attending local entrepreneurial groups. Do an internet search for "your city/state" plus "business networking group" or "entrepreneurs" group, club, or forum. They're pretty much everywhere and all have different names, but check around.
Depending on the size and legitimacy of the group, you can find some very experienced businesspeople - who are good to know for many reasons, such as mentoring or connections or funding.
Importantly, most potential angel investors don't refer to themselves as such, but if they have funds available and would be interested, then don't be afraid to bring up the opportunity to fund your business once you've established a relationship with them.
Friends of Friends
It's also true that the more business contacts you know, the more your odds of finding an angel will increase just by calling them all and asking if they know anyone who might be interested in your opportunity.
Ask Your Accountant
Banks and personal accountants often have contacts, as well. If you're unable or unwilling to find angels through other means, you can check in with your bank or with your accountant.
They may know some angel investors personally and be willing to recommend one to you.
Angels are Individuals
Remember, angel investors are not venture capitalists. Rather, they're spending their own money on things in which they believe.
This means that your odds of convincing them will go up if you can sense their other motivations besides pure growth potential and profitability, such as the social/ethical value of your company or falling in love with you or your product.
Angels invest for all kinds of reasons. Find theirs out and use it to your advantage.
Come up with a good pitch and business plan with evidence that you have a great opportunity to succeed, and you'll go far every time.
Suggested Resource: In our Angel Funding Formula program, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This presentation explains more.
If you want to raise capital,
then you need a professional
business plan. This video
shows you how to finish your
business plan in 1 day.
to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?
to watch the video.
The Internet has created great
opportunities for entrepreneurs.
Most recently, a new online funding
phenomenon allows you to quickly
raise money to start your business.
to watch the video.
"Barking orders" and other forms of
intimidating followers to get things
done just doesn't work any more.
So how do you lead your company
to success in the 21st century?
to watch the video.