Growthink Blog

Alternative Business Financing: 40 Tactics to Employ


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Did you know that when I started Growthink ten years ago, I knew very little about raising capital?

Sure, I knew a lot about raising venture capital, but I didn’t know much about financing sources like angel capital or SBA loans. And I knew virtually nothing about creative and alternative financing sources. In fact, since starting Growthink, I have uncovered 40 tried-and-true ways that entrepreneurs can fund their businesses. Most of these ways I had never heard of before. But they work.

Now I’d like to share them with you.

In a few short weeks, I’ll be teaching a select group of entrepreneurs all about these 40 financing sources in a unique multi-part teleclass.

Why is it important to know all of these options for raising capital? You might be thinking “But I just need a loan right now,” or “I’m just looking for angel capital,” or “I know that venture capital is right for me.”  

Knowing these 40 options provides you with the flexibility you need to raise capital from multiple sources NOW. it also gives you the ability to raise various rounds of capital in the future.

The truth is, most successful businesses utilize at least 3 types of capital, and usually a combination of debt and equity, as well as “creative” or alternative financing.  If you’re only using 1 type of capital, but your competitors have access to several types of capital, you’re at an automatic disadvantage. 

More importantly, not knowing about these 40 financing sources, and going after the WRONG sources of capital, is the #1 reason why most entrepreneurs enter the “death spiral.”

What is the “death spiral”? Well, the death spiral is the unfortunate process that typically occurs when an entrepreneur has a great idea and needs money to execute on it.

The death spiral has four parts:

1. The entrepreneur learns a little bit about how to raise money.
2. The entrepreneur gives a whole or half-baked effort to raise money.
3. The entrepreneur fails to raise capital (in fact, they fall flat on their face) because they don’t fully know what they’re doing and/or go after the wrong funding sources.
4. The entrepreneur’s dreams die and they return to their 9 to 5 job.

If you want to avoid the death spiral, and raise funding for your business, I will teach you how to do it. As mentioned, later this month, I will be offering a unique multi-part teleclass that teaches entrepreneurs like you how to really raise capital.

ARC Stabilization Loans - 35,000 More Reasons the US Government Rocks


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The next time you get frustrated that the taxes you pay to the U.S. government are so high, realize that the government gives a lot of this money back to entrepreneurs. And one of these entrepreneurs can be you!

In fact, last year, the U.S. government provided funding to 69,434 companies through its Small Business Administration (SBA) lending program. And last month, the SBA stepped up its efforts even further to help entrepreneurs and small business owners.

Specifically, last month, the SBA created a new type of loan called the "America's Recovery Capital" loan, or "ARC."  This loan is specifically designed to help existing businesses who are currently experiencing distress due to the economy.

What's great about ARC loans is that they are deferred loans.  The funds are dispersed to you over a period of up to 6 months, but you are not required to make any payments until 12 months have elapsed since you were funded.  Payback terms are up to five years.

The maximum loan principal is $35,000.  And there are no fees to the borrower. And the government guarantees 100% of the loan to the SBA partner bank. Finally, the interest rates are extremely reasonably; only prime plus 2%.

To learn more about and how to get an ARC, SBA or other bank loan to fund your existing or startup business, instantly download our new report entitled "Growthink's Step-by-Step Guide to Raising Capital from Banks & SBA Lenders" here: http://www.growthink.com/products/loanguide


One Really Big Organization that Wants You to Succeed


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If you own an existing business, or are planning to start one, there is one organization who really wants you to succeed.

In fact, this organization is even willing to loan you money to start or expand your business. And they will give you this money with favorable interest rates and payback terms.

That organization is the United States government.

The U.S. government has learned over time that giving capital to entrepreneurs creates more jobs, improves the economy, and expands the tax base. All the things they really want to achieve.

Many years ago the U.S. government set up the Small Business Administration (SBA) specifically to make loans to entrepreneurs and small business owners. In fact, the SBA currently has $45 billion in loans outstanding to entrepreneurs.

And, in addition to SBA loans, there are several kinds of debt capital that may be available to start or grow your business such as business lines of credit and traditional bank loans.

Each of these types of capital are covered in detail, including a step by step plan for getting these loans for your business, in our new report entitled "Growthink's Step-by-Step Guide to Raising Capital from Banks & SBA Lenders."

Among other things, the report covers:

* The differences between raising debt capital and equity capital that you need to understand (Page 2)

* The important elements of loans and what you need to know BEFORE you look for one (Page 7)

* Exactly what lenders are looking for when they consider whether or not to fund your business (Page 9)

* The biggest misconception about loans that keeps many entrepreneurs from getting funded (Page 11)

* One easy, but seldom used trick to maximize your chances of getting a loan on the best possible terms (Page 12)

* The key types of loans and what you need to know to make sure you get one that's right for your business (Page 13)

* The best way for startups to overcome a key SBA requirement and quickly get the perfect SBA loan (Page 19)

* Assessment of every type of SBA loan to allow you to quickly determine the optimum one for your business (Pages 19 to 24)

* The hands-down fastest way to get an SBA loan (Page 29)

* Growthink's proven 6-step formula for getting an SBA or bank loan (Pages 32 to 36)

* The 30 U.S. banks that are most likely to loan money to your business (Page 37)

 

To learn more, click here.


Why You Should DOUBLE Your Employees' Salaries


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In a world with a poor economy and uncertain economic outlook, the knee-jerk reaction of most entrepreneurs and business managers is to layoff employees and thus reduce labor costs.

While I agree that reducing labor costs is key, you can oftentimes do this by increasing the amount you pay your employees.

Take the case of The Container Store. This Texas-based company has a unique HR strategy. That is, they have just one employee for every three that their competitors have. But, they pay their employees double the industry average and spend 160 hours training them.

The result is that their employees are better trained and happier, and thus provide superior service at a 33% overall lower cost than competitors.

Interestingly, when The Container Store opened in New York City, it had 100 times more applications than available positions. With numbers like that, they are able to hire the best of the best each time.

Similarly, Harry Seifert, CEO of Winter Garden Salads gives employees bonuses just before Memorial Day, when demand for its products peak. The bonuses boost morale and cause the company's productivity to jump 50% during the busy period.

Paying employees more to improve performance and boost company-wide profits is a historically proven tactic. In fact, back in 1913, Henry Ford doubled employee wages from $2.50 to $5.00 per day. The move boosted employee morale and productivity and caused thousands of potential new workers to move to Detroit.

A final key point to note is that laying off employees is often a bad strategy. While it will save you money in the short-term, in the long-term, hiring new employees and training them is much more expensive than the cost of keeping the employees that you laid off.

Rather, a strategy that you should consider is to ask (or require) employees to take pay cuts and/or offer employees company stock in lieu of a portion of their cash compensation.

A Venture Capitalist, A Corporate Investor & Two Angels - Animoto is Listening


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When entrepreneurs ask me what sources of capital to tap to fund their businesses, my answer is generally "as many as you can."

I often point to companies like Google, who relied on credit cards, angels and venture capitalists in its early days.

Recently Animoto heeded my advice. In it's most recent round of funding, Animoto raised $4.4 million from a venture capitalist (Madrona Venture Group), a corporate/strategic investor (Amazon.com), and two angel investors: iStockphoto founder Bruce Livingstone and angel investor Jeff Clavier (Clavier is also the founder and managing partner of SoftTech VC, a seed-stage venture capital firm).

What's even more interesting is what Animoto is. Animoto is a website where you can quickly and easily turn photos into videos. Why is this interesting? Because you can use Animoto to create a video about your company to market it to investors.

So not only is Animoto teaching each of us about how to best raise capital to fund our growth, but is offering a tool to help us market ourselves to investors.

To see how it worked, I created an Animoto account (doesn't cost anything and is quick to do) and created a quick video. I was home at the time with my daughter, so we did it together and created one with a few of her recent horseback riding pictures.

The good news is that it was really simple to create the video. The negatives were that 1) rendering time was slow (plan to wait at least 5 minutes before the video is ready to be viewed for a 30-second clip), and 2) the non-paid version only allows your video to last 30 seconds. Fortunately for $3 per video, or $30 for a year, you can create full-length videos.

Overall, Animoto is a great lesson in capital raising and a great tool to use when raising capital for your business!

Investor Presentation: The Overlooked Key to Raising Capital & Succeeding In Business


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Over the past decade, I have written countless articles on how to raise capital. I have taught thousands of entrepreneurs how to create a great business plan, how to develop a strong financial model, and ways to devise a slide presentation that gets investors excited.

And then, I have written extensively about how to grow your company once you have raised capital. Discussing how to motivate your employees to maximize their effectiveness. And how to find partners that can take your business to the next level.

But there's one thing I haven't written about. One thing that I've totally neglected. And this one thing can increase your effectiveness at ALL of these activities - from raising capital to performing all the tasks needed to grow your successful business.

For this I apologize.

So what is this one thing?

The answer is public speaking, and your ability to communicate ideas to investors, partners, employees and others.

I realized that public speaking was the missing key when I recently reviewed a unique book called "The Power Presenter" by Jerry Weissman.

And, I might not have read the book if it had not received so much praise from venture capitalists. These VCs have relied on Weissman to prepare them to not only raise money for their own funds, but to teach their portfolio company CEOs so they could raise future funding and better grow their companies.

So, why are Weissman's teachings so important? Because, your ability to present effectively and be a great public speaker is critical to your ability to raise money for your business, attract and formalize relationships with key partners, and build a highly motivated team among other things.

And importantly, Weissman's research proves that the content of your presentations is less important than your body language (most important factor) and your voice (next most important factor).

Allow that to sink in for a minute.

What this means is that when you meet with a venture capitalist, angel investor or bank loan officer, your presentation skills are more important than the content of your presentation!

This fact is a bit bothersome to me.

Why? Because it means that an entrepreneur who has great public speaking skills but a poor investor presentation and business model has a superior chance of raising capital than an entrepreneur with a great investor presentation and business but poor communications skills.

But, rather than me pouting about this seemingly unfair reality, let me tell you some of Weissman's keys to making you a better public speaker and presenter.

First of all, to reiterate, the most important thing influencing your audience is visual (i.e., your body language), then vocal (your voice and speaking rhythm) and then verbal (the story you tell).

Secondly, when you present in front of a group, your natural "fight or flight" instincts kick in. Your adrenaline starts pumping and you often get anxious and fidgety. The way that you act as a result of this poorly impacts your audience's perception of you.

To decrease your anxiety, use the following techniques:

1. Practice, practice and practice some more. The more you practice your presentation, the more comfortable you will be when you give it.

2. Concentrate. Just like an elite athlete, you need to clear your mind before the presentation so  you can fully concentrate on the task at hand.

Important side note: many years ago, I had the pleasure of introducing entrepreneur and author Harvey McKay at an event. Before he went on, I saw him with his head against the wall talking to himself. I thought it was absolutely bizarre. But he used that technique to focus his mind and pump himself up. The result - he had the audience in the palm of his hand the whole time. It was truly amazing.

3. Shift Your Focus from You to Them. If you give a presentation and your best friend happens to be in the room, chances are that after the presentation the first question you will ask your friend is "How did I do?"

It is this mentality of thinking about yourself that makes people nervous. Rather, focus on the audience. Look at them and think "how are they doing?"  This will allow you to present more effectively.

4. Focus on specific people in the audience. Whether there are three prospective investors or business partners in the room, or you are speaking to a room of 50 or 500, you need to visually focus on one person at a time. That is, pick one person to start and complete your first main point. Then you should shift to different people for each key point you make during the presentation. This helps you concentrate better and make sure you are focusing on the audience rather than on yourself.

5. Practice your hand gestures. Hand gestures often positively engage an audience. But, making hand gestures in front of an audience often feels awkward and uncomfortable. You must practice using them with "warmer" audiences (e.g., your friends, co-workers and/or employees) until they become second nature.


Like it or not, your public speaking ability and presentation skills are more important than the content of your presentations. As such, successful entrepreneurs need to master these skills. Use these tips to improve your skills, and remember to really practice all your presentations before the actual event. As you know, in most cases, you only get one shot at key presentations.


How to Make Your Ideas That Much Better


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Every day I hear pitches from entrepreneurs about the great new product or company they are launching (or want to launch).

But unfortunately, more often than not, their ideas aren't that exciting.

Now, if you have great access to capital and are absolutely amazing at execution, then a "regular" idea is fine. In those cases, you simply go out and raise capital, launch your company, and then out-perform your competitors.

But, entrepreneurs who can do this are few and far between.

For the rest of us, we need an edge. Something that's different. Better than what's out there.

What I'm talking about is the kind of business idea that you look at and say, "That's really cool."

Now, these types of ideas typically feed off the wants and needs of consumers. That is, the entrepreneurs who conceive them have considered the true needs of the customer and modified existing products to satisfy those needs.

Importantly, in most cases, the customer hasn't even recognized the unmet need. But when they see the product or service, they realize its advantages and buy it.

I came across a couple examples of such "cool" products recently. The first was a pair of Reef brand sandals which has a bottle opener nestled in its sole making it "a mandatory accessory for a night out with the boys."

The second is Panasonic's BF-104 flashlight which operates with any combination of D-cell, AA OR AAA batteries. How cool is that...as long as you have 3 batteries, regardless of the type of each, it works (rather than all the time we've all spent searching for that last D-cell battery).

Neither of these innovations required years in the lab. Rather, they were both the result of the entrepreneurial mind coming up with creative solutions to the needs of their customers. (Note that the fact that these two innovations came out of corporations, rather than individual entrepreneurs, is even more impressive to me).

So, how can you maximize your creativity to come up with better ideas for your business?

Recently I created this video (http://www.growthink.com/content/breakthrough-business-idea-generator) that discusses one of my favorite brainstorming techniques called Assumption Reversal.

We have been using Assumption Reversal much more internally and coming up with some really neat ideas. I encourage you to watch the video and use Assumption Reversal for your business.

Finally, not long ago, I had the honor of interviewing Michael Michalko. Michael is the author of the book Thinkertoys which is known as one of the best books on creativity of all time. In fact, I learned about Assumption Reversal from this book.

I will be releasing more of Michalko's best creativity techniques in the coming months. In the meantime, try out the Assumption Reversal technique and keep brainstorming to come up with even better ideas.


Exclusive Interview: Mark DiPaola, President of D3 Ventures


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Recently, I had the great fortune of interviewing Mark DiPaola, an extremely accomplished entrepreneur.

As the founder of Vantage Media Corp., Mark raised a $70 million Series A financing, which is still on record as one of the largest Series A raises in history. And in 2007, his company generated $68 million in revenues.

As president of D3 Ventures, Mark also functions as an investor.

As a person with such success on both sides of the table - investing in growing businesses, and actually founding and growing businesses himself, I couldn't wait to interview him about entrepreneurship and raising capital.

During the interview, Mark went into great detail as he recounted his own experiences on raising capital for Vantage Media. One thing he emphasized was how important it is to know your business inside and out, and how this knowledge impacts not only your ability to grow your business, but also to achieve sales breakthroughs and get the attention of investors.

Mark revealed one website for job postings which helped him assemble a 35 -person team that brought in $40 million/year in revenue -- and it's not the website you might think!  We discussed hiring strategies, the number one factor to look for in job candidates, and when it's time to bring in a highly-experienced management team.

Regarding his role as an angel investor, Mark shared the qualities he looks for in a company before making an angel investment, and why it's important that entrepreneurs are referred to investors.

Growthink University members can listen to the interview here:

http://www.growthinkuniversity.com/members/291.cfm

For those who have not yet joined, you can listen to the first five minutes by clicking the blue triangle below:

 


What Investors Really Mean When They Say They Don’t Need a Business Plan


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It is common knowledge that companies need business plans.

Business plans are critical for setting goals and mapping out your plan to achieve those goals. They are also critical in order to raise capital. Whether you are seeking a bank loan, or capital from angel investors, venture capitalists or corporate investors, a formal business plan is simply a requirement.

However, there are some investors that say they don’t need a business plan. Rather, they just want to see a company slide presentation and/or a 1-3 page Executive Summary.

So, at this point you are probably asking yourself, “So, do I, or do I not, need a business plan?”

The answer is a resounding “YES.” Let me explain.

To begin, the types of investors that typically do not want to see a formal business plan are an extremely unique bunch. They are typically the top 1% of angel investors or venture capitalists. These are the investors that see so many deals that they don’t have the time to read through business plans.

Perhaps more importantly, these are the investors that focus on investments that could be worth billions of dollars within a few short years.

They invest in companies like Facebook or Twitter; companies that have massive potential but which may not even have a real revenue model in place yet. For companies like these, that are potential “game-changers,” creating financial projections or analyzing the current marketplace are much less important than for other businesses. As such, formal business plans with this information is less important.

Another key reason for creating a formal business plan is the knowledge that comes out of it. Specifically, the business plan process forces you to make a lot of key decisions about your business. For instance, writing down your marketing plan forces you to determine the marketing tactics you will employ.

Likewise, the business plan development process forces you to assess your market, identify customer segments and customer needs, and determine the strengths and weaknesses of your competitors. This is all critical information that you need to successfully operate your business.

The U.S. Small Business Administration, in a study called “The Small Business Economy,” found a direct correlation between a business’ success and its creation of a formal business plan. That’s because the business plan development process forces you to really think through the business and make informed decisions.

Likewise, the business plan development process gives you the information that you need to include in your investor slide presentation and Executive Summary. For example, one slide needs to include your financial projections and uses of funding. Another slide must talk about your marketing plan. All of this information comes directly from your business plan.

And what about information that is in your business plan, but which you omit from your slide presentation -- is that wasted information? NO. Before they invest, investors will bombard you with questions about your business, your market, your customers, your competition and so on.

Having completed, read and re-read your business plan, you will be able to quickly and correctly answer all of these questions.

So, when investors say they don’t need a business plan, they are NOT saying that they don’t want you to create a formal business plan. Rather, they are saying that the way they want you to communicate your vision and concept to them is not through a long written document, but via another format, mainly a slide presentation and/or 1-3 page Executive Summary.

So, learn the format of business plan and complete your formal business plan. It will give you the information you need to create a winning business strategy and attract investors. And, in addition to your full business plan, create an Executive Summary (which should be the first section of your full business plan anyway) and a slide presentation, since these documents will be required in the capital-raising process.


How Dare You Susan Boyle!


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I hope you're not a Susan Boyle fan. Because I have a major bone to pick with her. If you don't know who Susan Boyle is, she's the 48-year old British woman who gained international fame upon singing on the reality TV show "Britain's Got Talent" in April 2009.

So why am I so mad at her?

Because for 48 years she kept her talent to herself. She was too afraid to take a shot. To use her natural abilities and training to achieve real success.

I say "how dare she do this!" Is this fair to the millions, if not billions, of other people in the world who don't have this talent? Or who live in places where they have no ability to use their talent? And is this fair to the billions of others worldwide who have missed out on hearing her beautiful voice for the past four decades?

NO.

Now what really gets under my skin is when I compare Susan Boyle to an entrepreneur, which she essentially is.  How many natural entrepreneurs are out there who are letting their talent waste away? Who have tons of ideas and abilities, but are working in their same, boring jobs and not using them?

Why do I care?

Because they are failing to create wealth for themselves and their families. And worse, they are killing our economy. Because entrepreneurs like them are supposed to be creating great companies- companies which provide jobs, great products and services for the rest of us, and a tax base that feeds our government. Yes, they are failing themselves and their countries.

So why is this happening? I think it's because they are too afraid. Like Susan Boyle was for many, many years.  And unfortunately, in many cases, these entrepreneurs simply haven't gotten the kick in the pants that they needed.

Like entrepreneur Mark DiPaola who I spoke with the other day. Mark graduated from college and got a cushy job at a consulting firm. He worked there for a couple of years, and may have worked there for decades if he kept getting promoted.

But thank goodness, Mark got laid off. And then he went to work at a startup. And thank goodness, the startup failed. Because it was those two experiences which prompted Mark to start his own company.

Which he did. And which was a massive success. The company, Vantage Media, generated $68 million in revenue in 2007. In March of that year, venture capitalists and private equity firms put $70 million into the company and Mark was able to cash out and leave the company at the age of 30. And retire. And start a foundation to give back. Now that's what I call success.

Are you the next Susan Boyle? Do you have entrepreneurial talent, but are keeping it to  yourself? Have you not started your own company yet? Or failed to really grow your company? Well, I'm willing to bet that you have more talent than you let on and that you could be more successful than you currently are.

And, I also know what's probably holding you back.

MONEY.

That's right. Most entrepreneurs start their companies or grow them properly because of money. Which is odd, since successful entrepreneurs make tons of money. But, to become a successful entrepreneur, you often have to leave your current job and current income.

To solve this problem, many entrepreneurs, like Google AdSense founder Eytan Elbaz who I spoke with the other day, raise capital BEFORE formally launching their companies. They continue to work at their current jobs and develop their business plan and raise money. And then, once the money is in their bank account, they leave their current job and dive into their ventures full time.

And you can do this too! IF you know how to raise money for your business.

So, in addition to all the information that you buy and read on marketing, operations and other business disciplines, start investing in learning how to raise money for your business. Since that is the most essential skill for a successful entrepreneur.

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