Most entrepreneurs greatly underestimate the difficultly and time required to succeed at this task. They also underestimate the opportunity cost to their business while they are “away” focusing on something else. You only want to raise outside capital, if you really NEED to have capital to grow. I am recommending to many CEOs I coach and mentor today that because it is so difficult to raise money today, and valuations are not great, it would be a far superior alternative to spend the same amount of time selling, or adding value to your business in other ways, than to spend six to twelve months chasing investors. In many cases spending the same amount of time and effort selling your products, or service, could generate just as much money and not dilute your ownership and subject you to the whims, regulations and covenants of bringing in outside capital. This does not, however, mean you should not develop a complete business plan. This process will greatly increase your chances of success whether you are raising outside capital or not.

1. I have not invested my own cash in the business, but have only put in lots of sweat equity. Experienced investors know that a start-up is a roller coaster ride of both highs and lows. They want founders to prove their commitment by investing their own money to the point where it will REALLY hurt if they walk away during tough times. Skin in the game is your vote of confidence, so don’t expect others to invest if you don’t. This does certainly not have to be all your personal net-worth, but it must be a significant portion. You can take out a home equity loan, borrow or withdraw from retirement funds, or just invest personal savings. In the end this will pay off, if you do it right, because it will make you more efficient with capital usage and allow you to bring in investors later, after you have created some value and increased your company valuation. Ultimately, if you are successful, you will likely own more of the company as a result.

2. This (or that) market research firm said this market will be a $2 billion market in five years, so all we need is 5% of that market to build a $100 million company. Counter institutively this is basically saying you have NOT done your homework, and do not really know who your customers will be. This is “top-down”, not “bottom-up” market research. Besides most of these analysts firm’s lost huge credibility when the bubble burst and people realized some projected numbers beyond what the population of the entire planet for Internet users. You need to describe, if not actually list, the exact customers where you can win in most cases and why. Research says that 32% of angels site weak market analysis and analysis of the competition as the most critical mistake entrepreneurs make in their business plan. You must design your launch strategy around a particular customer profile and offer something that that customer cannot get elsewhere. Smart investors would prefer an unfair advantage in a smaller focused market, because the marketing and selling costs will be lower (concentrated) and the sales close rate higher. This also shows you know what you are out to accomplish and are focused on a smaller market you understand well and can win.

3. My spouse (or any immediate family) will be our other senior officers. – Or we are going to use my brother’s company for distribution (or anything else). Investors do not like nepotism and also know that a divorce could destroy the company. They are taking enough risk already, so why should they add another layer of risk with the divorce rate at 50%? Why should they believe out of all the management in the world your brother is the best qualified? Also, there can be no conflict of interest issues with “deals” that could be perceived as favored or the result of nepotism. This allows for shifting of costs and revenue in ways that are totally legal, but at the same time unfair to the investor due to subjective factors. This is fine in a wholly owned private company owned by a single individual (a lifestyle company), but should not really ever happen with outside investors. Enron, Adelphia, Worldcom and Tyco are perfect examples, and these have made everyone more aware of how easy it is to abuse executive positions. It is even possible that in the future institutional investors who allowed this could be perceived as violating their fiduciary responsibilities and have liability. After the fact, if something went wrong and the company shut down, the perception could be that things were done improperly. The room for interpretation on the dissolution of assets could easily be perceived as improper, even when it is done right, due to the wide room for judgement on the value of the remaining assets of any company that is closing. Since this is effectively a fire sale prices will be well below “fair market value”. In short, avoid any and all conflicts of interest, whether real or perceived.

4. I am going to also be doing some consulting to cover my expenses because of my low salary. Or I have other businesses to run also. Or anything else I invent I will personally own the rights to. These are all variations of the same theme. You are not fully committed to the business you want them to put their money in. This might work for Donald Trump, but for anyone who has not made his or her first $25 million don’t expect that kind of latitude. Investors want and deserve your full-time attention as soon as they invest. This might be OK while you are pulling together your plan and don’t have outside investors yet, but investors are buying YOU lock, stock and barrel and want your full-time attention and focus. This not only means your time at the office, but as a CEO, or any senior executive really, it also means they want to own your thinking in the car and shower, and all your ideas that are a result of your work.

5. We have it all figured out. The fact of the matter is that the only guarantee you can make is the plan will evolve and change and the business plan is pretty much guaranteed NOT to happen. Only naive investors would think you are going to do everything that the plan says and not make changes as you go. If they really believe this, you probably do not want them as investors anyway. If you say this, you are basically saying you are wet behind the ears or unrealistic. Besides, if you really had it all figured out and proven, you probably would not even need their money, you would be “bankable” and pay prime rate instead of twenty to fifty percent per year to get equity dollars.

6. We have everyone we need on board in management to be successful. If this were true, you are either spending WAY too much money on staff, or you do not understand the skills you will need to bring on as the business grows and evolves. This is never true and saying it is like waving a flag saying I am an amateur. All investors assume you will need to hire other key players and set aside a stock option pool for that purpose.

7. We are going to sell this product to everyone (even in a single industry), because everyone can use it. This worked during the bubble for a while when $30 million was being dropped (foolishly) at a pop to fund some broad horizontal plays. Today, the smart money is mostly funding companies going after niches, and maybe some verticals (with top management teams, ideas and markets). Virtually every company today needs a market entry strategy that is narrow and focused to establish them as the “go to company” for a particular problem or solution. You NEED to be the big fish in a small pond first because small fish in the ocean get eaten alive more often than not. You can add niches, products or expand to an entire vertical later after proving every element of your business in a single niche. By the time you get there so much can change it is usually even a waste of time figuring out what that order will be in advance. Markets and technology are too dynamic today.

8. We have no competition. This is virtually never true, as people are doing something to deal with the problem you solve today. If you are a restaurant then the grocery store across the street is your competition. You can almost never view a market that narrowly, unless you just got the patent on nuclear fusion, even then coal, oil, hydroelectric and solar are still competition. Besides you really can’t know who else might be working on the problem and if it is an attractive market you will clearly have followers. So you need to articulate how you will stay ahead of competition either way.

9. Only our management team is qualified to develop and execute this business. This is about as false, naive and arrogant a statement as anyone can make, so don’t even come close. To say you are the only people in the world who can do this is not only terribly unlikely, it is in FACT something you can not possibly know for sure, because you don’t actually know everybody else do you? So it is always a false statement and shows overconfidence. It is better to err on the side of saying something like: “we know there will be competition and here is how we will be cheaper, different, better and/or faster.”

10. Our projections are very conservative. This is the most overused expression of the lot and I would guess it gets said in more than ninety-percent of investor presentations. The fact is that entrepreneurs are always optimistic; they wouldn’t be entrepreneurs if they were not, as they are certainly fighting the odds. Any good investor is going to make their own judgements on the ramp rate of sales and expenses anyway, so this is better left unsaid. The fact is you never know because you never know if there are fifty other companies working in stealth mode on the same idea. According to research 32% of angels site “unrealistic financial projections” as the number one mistake made by entrepreneurs.

11. We don’t know how much money we need, or we can do it on anything between $500K and $10MM. Investors want to know you have a solid plan. They also all have a certain amount they want to invest. Do your homework and understand exactly who you are talking to. You should know exactly what you are asking for before you go in and have a business plan with a financial plan that matches this. Asking for the wrong amount is as good as blowing the presentation entirely. Although you may be able to execute a business plan more slowly, yet successfully on less capital, and you may have a couple of scenarios figured out (you should), you can really only show one plan to any particular investor.

Level of Management Team Needed

Getting investors today requires a strong team, idea and market (not the same as idea). What level of team do you need to have a good likelihood of obtaining angel financing? Here is a chart of the level of management team you will likely need and you can interpolate between these levels. Currently, you will likely need to reach level five to bring in any angel investors and probably a level 8 to get any money from VCs. This also assumes you have an attractive, and large, potential market, some barriers to entry and a good head start or patent protection.

Conclusion

You need to pull out all the stops today to obtain angel financing. This means getting further on less money than ever before. Which in turn means better focus and using virtual company techniques to get much further on your OWN personal resources, and/or friends and family money. It also means pulling together a team of people that address all the major risks in the business. This requires creative deals to bring people in and probably not be paying them, certainly not full-time, while you are creating real value in your business. Investors want to invest in something that already has value built in, not an idea or business plan with a “one-man show” today.

The most common mistake made today made by entrepreneurs is going out looking for money before they are ready. The competition is fierce out there, so don’t burn your best personal contacts by approaching them with an incomplete or undeveloped business plan or company. If you have not successfully raised money before, get help from someone who has. C-Level Enterprises offers a complete financing review and critique that is guaranteed to improve your chance of obtaining financing. Go to www.CLevelEnterprises.com for further information. Also see www.StartupPlanet.com for audio courses on raising investor capital.

Mr. Robert Norton, is an author of four books, speaker and President and CEO of C-Level Enterprises. He has over 15 years as full-time President and CEO of numerous successful companies. Two grew to over $100 million in annual sales while Mr. Norton was there and one grew from $0 to over $1 billion in revenue today. His experience spans all key disciplines needed to start, grow and exit businesses in several industries. He can provide a breath of experience and perspective across all disciplines that only experienced CEOs can.

He founded and run the exclusive CEO & Entrepreneur Boot Camp – The Art and Science of Business Design. See http://www.CLevelBootCamp.com

With 22 total years experience, including former positions as Senior Software Architect, VP Engineering and CTO, Mr. Norton can understand both deep technical issues and strategic management issues. So often operations, product development, sales and marketing issues are deeply interwoven, requiring multidisciplinary experience to effectively solve problems. Mr. Norton’s breath of experience allows for complete validation and/or improvement of entire business models for maximum growth and profit. He is also a specialist at designing long-term competitive advantage into businesses so profit margins can be maintained and stockholders build sustainable revenue and profits that can justify high multiples on exit.

He is also the author of The Startup Manual, the first roadmap to starting and growing any business to $100 million in sales, available at http://www.StartupManual.com.

A complete biography is available at http://www.CLevelEnterprises.com a resource for CEOs, entrepreneurs and C-Level executives at early-stage companies.

2) Read about the APR. The APR stands for “annual percentage rate”. Yes, the APR of a credit card is important no matter what people tell you. A low APR for a credit card is more critical than you think. When you sign up for your new card, you probably are thinking that “hey, all I never miss a payment so who cares what the APR is?” The fact of the matter is, expenses come up. Unexpected expenses that you have to pay for no matter what. If your credit card’s APR is low and when those expenses arise, you will be in a better financial position when you pay it off. You would rather pay off your a credit card’s 4% on $1000 than 15% on $1000. This can make a world of difference.

3) Compare offers. Not all credit card offers are made the same. All credit cards that you see will appear to be physically similar (made out of plastic), but these credit cards can often be worlds apart. Some offer reward points, sky miles, cash back, and bonus dividends, while most offer nothing at all. If you are going to pick a card, make sure you get the most out of it you can. Finding out later that you could have had 50,000 Sky miles when you actually got none can be quite a surprise. Compare offers, compare banks, and get the best credit card deal you can.

This article may be freely reproduced and distributed as long it is not altered and the link below is kept live.

Want to learn about credit cards? Visit http://www.thecreditcardlistings.com today.

Delaying the Sale

Selling one’s business is an extremely important decision for a business owner to make. The sale thereof is something which can either make or break the financial stability of an individual at times. A factor which tends to affect the overall value of a business is a delay with regard to deciding whether or not to sell the business. As there are times when the market would be most profitable for a business sales transaction, this time period can pass should an individual business owner wait too long to determine whether to sell or not.

Not only outside factors, such as the general market, will affect the sale of a business. Internal factors such as a decrease in sales, creditors and unrest amongst employees within the company may all affect the time period in which a business goes up for sale. With that said, it is important that individuals sell when the time is right for selling. Unreasonable delay in a sale of a business may have adverse effects on the overall value of the business.

Private Business Owners Lack the Resources

Another factor which affects the overall value of a business with regard to the sale thereof has a lot to do with the lack of resources that many business owners experience. Unlike their corporate counterparts, smaller business owners do not have attorneys, accountants and financial advisors at their beck and call who can aid them in the sale of their business. Due to the lack of these professionals, business owners tend to take longer selling their business and finding the best buyers which will affect the overall value of the business.

Lack of Appropriate Business Sale Knowledge

Much of the information which an individual can gain from outside media sources such as television, magazines and websites deals with selling larger companies. For those individuals who are looking to sell a smaller, privately owned business, they may find difficulty gaining valuable insight into how to sell their business so that it brings in the most profitable price. Not having the requisite business knowledge can hinder the overall value of one’s business, as they do not know how to sell the business in a way which brings in the best price.

Future Profitability

A buyer in a business purchase transaction wants to know that the business which they are purchasing is one that will see future profits. It is not only important for the business to be seen as doing well at that particular moment in time, but it is also vital that the business will continue to do well in the future. Therefore, future profitability is something which will drive up the value of a business. After all, who really wants to purchase a business that will go downhill soon thereafter. The answer to that question is probably no one. If a current business owner can show factors which relate to future profitability of the business, then their business may be one that is portrayed as having good value.

Position the Company for Sale

A business that is going to achieve the best price and be seen as having the best overall value is one which is properly positioned for sale. There are many aspects which can adequately position a business for sale such as showing unique qualities that the company maintains, the value of its employees and the profitability of the company as a whole. The company must be prepared in a nice, attractive package in order to have the best positive value. A company which is under great management, sees good profits on the market and is a good purchase opportunity overall will yield the best selling price. Positioning the company for sale is best left up to professionals who are in the market of handling situations such as these.

Summary

To conclude, the previously mentioned items are certain factors which can affect the overall value of a business that is being sold. In order to ensure that a current business owner receives the best value for their company it is important to take certain steps to avoid sale delays, obtain the necessary resources to help the sales process along and retain the help of knowledgeable professionals in areas where they are needed. By taking the aforementioned steps, the current owner of the business will be better able to get the best possible selling price for their business.

Aaron Muller is a partner of KRBrokers. Visit our website for Seattle business opportunities. Established in 1984 and located in Seattle, Bellevue and Redmond. KR Business Brokers has helped thousands of business buyers and sellers achieve and realize their financial independence and business ownership dreams.

Test for a Direct Public Offering

Drew Field, on his web site (http://www.dfdpo.com/screen.htm) suggests the following test as to whether your venture is a candidate for a DPO:

1. The business would excite prospective investors, making them want to share its future.

Soon millions of Americans will become “securities analysts,” using computer-based tools for screening and selecting among thousands of companies to invest their retirement funds and savings. Until then, companies will have to attract us with a story close to our personal interests. We’re not ready for the “dull but good” businesses yet.

2. There is a history of profitable operations under the Company’s present management.

DPOs are sold when the prospectus is read, by cautious individuals spending their own money. With some exceptions, they want proof that management can turn a profit.

3. Company and management meet standards of honesty and social responsibility.

When people invest directly in share ownership of a company, after making their own decision and using their own money, they feel a sense of identity with that company. Polls consistently show that an overwhelming percentage of consumers prefer products from companies that aren’t causing harm. That carries over to buying shares as well.

4. The business can be understood by people who may have no experience investing.

Shares are sold in a DPO when someone reads the prospectus, and sales are lost when this prospectus is difficult to understand. Try describing your business in ten words or so. Also, try telling your whole story–what your business is, what you’re going to do with the public’s money and the particular risks of investing in your shares–in a one-page memo.

5. The Company has natural affinity groups, with cash to risk for long-term gain.

Affinity groups may be easier to explain your business to, but also need to be large enough to buy your entire offering. For instance, people in the same area of town may be likely investors, even if they aren’t also customers. Other groups may be interested in the particular technology or corporate mission of a business. Along with the number of potential investors, consider strength of the affinity (how loyal do they feel toward your company).

6. Those affinity groups will recognize the Company’s name and consider its offering.

DPOs for companies with consumer branded products should carry the logo, slogans and color identifications through into the share offering materials. Companies with names that are entirely different from their product names must transfer the feelings about the known name over to the new one. The greatest challenge is to create recognition for a company with no current identification among affinity groups.

7. Names, addresses, phone numbers and demographics are in the Company’s database.

There are ways to “profile” those customers and figure out how to reach them through selected media.

8. A Company employee is able to spend time as project manager, directed by the CEO.

There needs to be one person for whom the DPO is the top business priority. Experience has shown that anything less than that will lead to slippages in the schedule and a decline in enthusiasm for getting the job done. The ideal is someone earlier in their career who works directly under, and speaks with the authority of the CEO or CFO.

9. The Company has, or can obtain, audited financial statements for at least the last two fiscal years.

This is the requirement for the new securities law filing forms made available to small businesses (under $25 million annual revenue) by the federal Securities and Exchange Commission. Unless the company has been in business less than two years, we suggest that you not try to save accountants’ fees by using unaudited (even “reviewed”) numbers. In cases where prior years would be difficult or impossible to audit, or where accounting records need to be put in auditable shape, it may be best for the company to arrange some private financing until it is ready for public scrutiny.

John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.

Your first task is to create a business plan, sometimes known as a “business proposal” or “prospectus.” Your business plan needs to be very detailed and concise. You should include information about your educational background, experience and training in the area of business you are contemplating. Just like a resume for a job, include references and any other favorable personal qualities that you feel reinforce the reasons why an investor should trust in your ideas.

It can’t hurt to include any information you feel comfortable sharing with regard to your positive credit history. If you have records of various satisfied loans along with the payment history, that information could be helpful to prove your stability with regard to financial obligations.

If you are requesting financing for an existing business the rules are a bit different than a new business startup. The current owner should be able to provide you with profit and loss statements. If you are purchasing an online business, statistical information pertaining to traffic, number of units sold and paid advertising are definitely necessary. The purchase price of the business needs to be included along with detailed information about how you intend to service the debt as well as how the potential investor will benefit from your request.

If you are seeking investors for a new business, the information required increases. In addition to the information outlined above, you will need to include market research, projected costs and a detailed summary of how you intend to generate income. This information needs to be projected for a period of three to five years. It’s a good idea to project your expenses on the high side.

Have some idea of what you expect to pay your investor. The only reason someone is going to lend you money is if they can see decent profits in exchange for lending it to you. Your market research had best substantiate that your plan is viable and will provide them with sufficient return on investment to justify their involvement.

Before you begin your search for investors, it’s a good idea to have an attorney and/or accountant take a look at your plan. A good professional may suggest specific points that you may have overlooked.

Once your paperwork is in order, it’s time to start looking for investors. One place to begin your search might be friends or family. You might approach them singularly or in a group. Whatever method, you need to have a complete copy of your proposal carefully outlining your research and what they can expect in return for their assistance.

Read the classified pages of your local newspaper. Venture capitalists often advertise this way. Their rates are usually pretty high because they have a tendency to take on “risky” investments. A twist on this method might be to run your own ad either locally or nationally. If you select this method, explain the particulars and emphasize how much they can expect to receive for the load of their funds.

Use local business directories to find companies that specialize in “investment services.” You can approach a local bank, but try and find a bank that specializes in industrial or business type loans.

You might consider incorporating and selling stock in the company.

Another option might be a “money broker.” This can be risky. There are some legitimate brokers and others who operate on the shady side.

Be creative. If you believe in your idea, don’t be afraid to do what ever it takes to launch. There are plenty of ways to come up with the capital you need. Think outside the box. Whether you are looking for $300 or $300,000 the money is there you just need to dig for it.

Brad Eden is a Entrepreneurial Sciences expert with 14 years of industry experience in real estate, marketing and technical communication. Brad owns & operates a free traffic resource for entrepreneurs. http://www.americanfreetraffic.com/home.html