Raising Capital for Your Small Business
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Message #1804
Thursday, August 10, 2006
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WEALTHY:
The hype about SIPE (Paul Lawrence)
HEALTHY:
How long will you live? (Dr.
Al Sears)
WISE:
Norman Augustine on getting loans
ALSO
IN THIS ISSUE:
Who's
watching? (Michael
Masterson)
4
ways to beat the heat
Add "puissant" to
your vocabulary
He'd
Have Called Them Crazy – Or Worse!
With
the Internet, it's now possible to spend no more than a few
dollars, write a couple of very basic ads, and have instant
access to millions of potential customers all in a matter
of minutes.
If
anyone had told Jim Sheridan he could bank thousands in just
24 hours… without any product of his own. . . without spending
a penny on getting it or promoting it, he'd have justifiably
said they were nuts.
But
Jim made a decision that he would overcome his skeptical
nature and give it a go. Boy, is he glad he did! That one
deal alone banked him $187,296 in one day.
The
great news is – you can copy Jim's plan exactly. The program
is called Instant Internet Income and I guarantee it does
exactly what it says it does.
Take
a look at how Jim brought in over $175,000 in a single
day!
-
Patrick Coffey
"It's
easy to get a loan unless you need it."
-
Norman R. Augustine
Raising
Capital for Your Small Business
By
Paul Lawrence
The
28-year-old man was in a difficult financial predicament. He
had an idea for a business … but he had no money in the bank,
no job, and a general track record of failure.
The
odds of getting the tens of thousands of dollars in capital
that he needed would've seemed "slim to none." Yet
within 10 days of his formulating his concept for the business,
an investor had put in the money. And he was earning a healthy
profit in less than 30 days.
As
you might've guessed, the man I'm talking about was me.
Armed
with a new plan to reverse my dismal position in life, I decided
to start a snack-vending business. Not surprisingly, people
weren't banging down my door to give me a loan.
Fact
is, if you have a great business idea but don't have your own
capital … or excellent credit … or collateral to secure
a bank loan … your choices are limited.
Yes,
some venture capital firms will invest in new businesses, but
such businesses are usually involved in technology or some
other high-growth area. Frankly, for most small businesses,
venture capital isn't even an option. It's rare for a small-business
concept to have the kind of mammoth payoff venture capitalists
look for.
Plus,
the cost of doing business with these companies is high. It's
basic economics. Their risk is high, so their reward must also
be high. Even if you were to interest a venture capital company
in your business, you'd be aghast at what they'd want in terms
of their ownership position.
So
if you forget about commercial bank loans and venture capitalists,
you're left with only a few ways to fund your small business.
One of the best is to find a business partner.
Now,
when I say "find a business partner," I'm not talking
about pleading with your parents to get a second mortgage on
their home or twisting the arm of a lifelong friend who always
said he'd do "anything" for you. (Although, if you
do have affluent family members or friends who might want to
invest in your business, you should certainly pursue that possibility.)
I'm talking about hooking up with someone who is willing and
able to invest in your business in return for a share of the
profits.
Seeking a small-business partner is not much different than seeking
a small-business loan.
"To
be successful in obtaining a loan," the U.S. Small Business
Administration tells us, "you must be prepared and organized
when making your request. You must know exactly how much money
you need, why you need it, and how you will pay it back. You
must be able to convince your lender that you are a good credit
risk. All the same holds true in seeking out a small-business
partner to invest in your business."
As
most everyone knows, small businesses have an abysmal failure
rate. According to Business Week Online, "64.2 percent
of businesses fail in a 10-year period." No wonder potential
investors tend to be so skeptical of a new business's chances
for success!
When
I wanted to enter the snack-vending business, I needed capital
to purchase the machines. To overcome the understandable reluctance
an investor/partner might have, I used some strategies that
I have since developed into a technique I call "SIPE" -
which stands for Solicit, Interest, Persuade, Execute.
With
the SIPE strategies, I quickly and easily found a former co-worker
who was eager to be my partner.
Here's
how you can use SIPE to find and solidify your partnership:
1.
Solicit: Present the hypothetical possibility of a future business
opportunity.
Casually
ask your prospective partner, "If I happened to come across
an interesting business opportunity, would you be interested
in hearing about it?"
It's
important to note that you're not asking her if she would invest
in a business, but if she'd like to hear about potential opportunities.
Since she won't feel that she's being pressured, it's more
likely that she will give you a positive response.
You
also immediately rule out people who have no interest in any
business proposals … without putting them (or you) in an
uncomfortable position regarding your project. In my case,
I mentioned to my former co-worker that I was planning to start
a small business, and asked if he wanted to be kept in the
loop during the process. He readily agreed.
2.
Interest: Give your prospective partner a one-sentence description
of your business.
A
long-winded explanation can sound like you don't have confidence
in your business idea or that you don't really know what you're
talking about. So keep it short and to the point.
You
then follow up with a couple of supporting statements that
provide strong reasons to believe your business idea is viable.
In the case of my vending-machine business, I used the example
of a friend of mine who, with no experience in the business,
was able to start a profitable 10-machine route.
3.
Persuade: Use statistics and estimates to convince your prospective
partner that your business is a good investment.
Your
persuasion efforts will have two goals:
First,
to prove the substantial profit potential.
While
you don't necessarily need a fully detailed business plan,
you should be able to offer some basic numbers. For example,
you could estimate your gross revenues for the first year
and provide some reasonable basis for the estimate. Then
offer a reasonable estimate of your expenses. If it adds
up to a healthy estimated net profit, you're off to a good
start.
Second,
to demonstrate the low-risk factor.
Although
you can't ethically or legally guarantee that an investor
won't lose her money, you can explain why there is a good
chance she won't lose it. Your evidence could include industry
growth statistics, a sound marketing plan that will allow
you to swiftly capture market share, and examples of similar
successful businesses.
In
my case, I created a profit projection sheet that broke down
the revenues and the costs of the business. I then cited specific
suppliers who sold the products we'd need and provided several
examples of local entrepreneurs who were successful in the
snack-vending business.
4.
Execute: Turn a discussion into an actual business deal.
Once
my co-worker indicated that he was interested in investing
in my business, I suggested we have another meeting to formulate
a deal. I arrived at that meeting prepared with a "deal
memo" – a basic outline of our understanding. The main
reason to have a deal memo is so that, in the future, there
will be no debate as to what was originally agreed to. If your
deal is large or complicated, you may want to have a formal
partnership contract. But in many cases, a deal memo clarifies
the terms of the agreement and is strong enough to be legally
enforceable.
In
my 15 years of being successfully self-employed, the great
majority of my partners have profited from our ventures. There
are certainly risks involved in investing in any small business.
But if you have a solid business opportunity to offer, you'll
likely be able to structure a "win-win" situation
for both you and your partner.
[Ed.
Note: Paul Lawrence is a produced screenwriter, direct-mail
copywriter, and business author. He is also the creator of
the Quick
and Easy Microbusiness System ETR's program for starting
a business for under $100.
Paul's
SIPE technique is just one of many ideas you'll find - explained
in detail - in his Raise
Money for Your Business.]
How
to Turn $5,000 into a $1.5 Million Real Estate Fortune
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Imagine…
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way. Click
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-
Kam Weiler
Notes
from Rome: Keeping People Honest
By
Michael Masterson
We
met TN at the American Academy, which crowns one of Rome's
seven hills. It's an impressive campus, with several large
buildings and gardens. TN, a Rome Prize winner, is spending
two years there as a fellow, working on an archeological project
in Sicily. She showed us around, including the room she sleeps
in. It has a small bathroom, a bed, a table, and a window overlooking
a courtyard. Her office is in another wing of the building.
There, she has a desk, another table, and shelves overflowing
with books on art and archeology.
It
all seems very romantic – being off on your own like that,
surrounded by intellectuals and artists in a beautiful setting
in one of the world's greatest cities. Of course, there are
problems. No air conditioning, for one. But TN is used to that.
And
then there's the matter of the disappearing food …
"We
– the fellows – share a common kitchen," she told us. "And
a few months ago, people started complaining that things were
going missing." Sometimes it was a container of yogurt.
Once it was a half-eaten sandwich. Then TN realized her coffee
beans were disappearing at an alarming rate. Though they've
put up signs, the food keeps disappearing … and they don't
know what to do about it.
TN's
predicament reminds me of a study about honesty I read recently.
People
are more honest, it seems, when they feel like they are being
watched. Studies have shown that people are more likely to
lie when on the telephone than during face-to-face conversations.
And they are even more honest when the observer isn't human.
Researchers
at Newcastle University in the United Kingdom conducted the
study in a school cafeteria. Drinks were freely available on
a table. Beside the drinks was an "honesty box." Behind
the box was a sign asking students to deposit a certain amount
of money for each drink they took.
The
sign displayed a photo. On alternate weeks, the photo changed.
One week, it was flowers. The next week, a pair of eyes. After
several weeks in several locations, the calculations were made
– and the poster with the eyes on it had driven in almost three
times as much money as the one with flowers.
I
think I'll suggest to TN that they make that little change
to their signs … and see what happens.
Is
Your Lifestyle Killing You?
By
Al Sears, MD
The
average life expectancy in the U.S. today is 76 years. Depending
on your lifestyle, you may go well beyond that. Here's a little
test to give you an estimate of your expected lifespan. You
start with the number 76, and add or subtract from that average.
Exercise:
Do you exercise vigorously at least three times a week? If
you do, add 3 years to 76. If not, subtract 3 years.
Diet:
Do you avoid bad fats and processed foods and, instead, choose
lots of omega-3-rich fish and grass-fed beef? If so, add 2
years.
Weight:
Are you at a healthy weight? If you're overweight by 50 pounds
or more, subtract 8 years. Thirty to 40 pounds, subtract 4.
Ten to 29 pounds, subtract 2.
Blood
Pressure: If you know your blood pressure, add 1 year.
Drinking:
Do you have more than two alcoholic drinks (cocktails, beer,
or wine) a day? If you do, subtract 1 year. And for each additional
daily drink, subtract 2 more. (Remember what I said yesterday:
One to seven drinks a week is healthy – no more.)
Smoking:
If you smoke more than two packs of cigarettes a day, subtract
8 years. One to two packs a day, subtract 6. One-half to one
pack, subtract 3.
Driving:
Have you received a traffic ticket or been involved in a traffic
accident in the past year? If so, subtract 4 years. Other violations,
subtract 1. If you always wear your seatbelt, add one.
Working
vs. Retiring: If you are 65 or older and are still working,
add 3 years.
Relaxation:
If you take a relaxed approach to life, add 3 years. If you're
aggressive, driven, or anxious, subtract 3. And if you consider
yourself "unhappy," subtract another year.
Gender:
Since women tend to live longer than men, add 3 years if you're
a woman. If you're a man, subtract 3.
Age:
How long you've already lived matters. If you're between the
ages of 30 and 39, add 2 years. Forty to 49, add 3. Fifty to
69, add 4. Seventy or older, add 5.
Family
History: If any grandparent reached age 85, add 2 years. If
all your grandparents reached age 80, add 6. If one of your
parents died of a stroke or heart attack before the age of
50, subtract 4.
Based
on the above categories, determine what you need to work on.
Do you need to exercise more? Eat better? Lose weight? Just
because your father died from a heart attack doesn't mean that
is your destiny. You have information he may not have had.
Look at the diseases that run in your family and work to lower
your risk factors. You can start – today – to improve your
longevity by making positive changes.
(Resource:
The Longevity Game, by Northwestern Mutual Life Insurance Company)
[Ed.
Note: Dr. Sears, a practicing physician and the author of The
Doctor's Heart Cure and 12 Secrets to Virility, is a leading
authority on longevity, physical fitness, and heart health.
For more advice on how to stay active and mobile - far into
old age - pick up your free copy of Youth
Secrets.]
It's
Good to Know: What to Do When Temperatures Rise
By
Suzanne Richardson
The
U.S. isn't the only place feeling the burn this summer – the
Czech Republic, England, Poland, and France have all seen record-breaking
temperatures. And such hot weather is not only uncomfortable
– it can be deadly.
So
what can you do to keep yourself and your family safe from
the heat? Here are a few ideas from the Red Cross website:
When
temperatures reach 90 degrees, stay inside.
Wear
light-colored clothing when outdoors.
Drink
plenty of water and avoid alcohol and caffeine, which can
dehydrate you.
Try
to limit outdoor activities to the coolest part of the day
– between 4:00 and 7:00 a.m. (which shouldn't be hard for a
seasoned Early-to-Riser like you!).
Your
Opportunity to Become a Millionaire… In 3 Minutes a Week!
Imagine
a risk-averse investment that could help your money grow by
5% PER MONTH. Imagine if this strategy were effortless…requiring
only 10 to 15 minutes of your time each month. This strategy
does exist… and here is how you can take a RISK-FREE test
drive.
"Puissant" (PWISS-unt)
– from the French – means powerful, as a puissant prince or
empire.
Example
(as used by Richard Lingeman in The New York Times): "As
an upcoming young corporate lawyer in San Francisco in the
1930's, [Bartley] Crum tended the interests of some of California's
most puissant businesses, starting with William Randolph Hearst's
newspaper empire."
Michael
Masterson
Copyright ETR, LLC, 2006
Have
a Question for Michael Masterson?
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to know the secrets to his success? Have a perplexing
business problem? ETR welcomes your thoughts. Post
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send questions directly to Support@EarlyToRise.Com
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