Tag Archive: capital

Five Steps to Business Credit

 Operating without loans can have significant impacts on your cash flow and working capital and does nothing extra to build your business credit. Five Steps to Business Credit

Maintaining good business credit is essential, as a bad credit rating may severely hinder your business growth and expansion. Without good business credit, banks can be less likely to accept your loan applications. Operating without loans can have significant impacts on your cash flow and working capital and does nothing extra to build your business credit.

 

In addition, if you skirt your financial responsibilities, it’s unlikely that suppliers will extend your business a trade or credit account. That means that you may lose the ability to leverage the 30-, 60-, and 90-day terms of invoices as short-term loans. In addition, many businesses enjoy discounts provided by suppliers to encourage prompt payment; cash customers usually do not get such discounts.

 

If your business does not have good credit, you can take steps to repair it. The first step to building your business credit is to contact your creditors to set up payment schedules. Such schedules should be reasonable and fair to both your business and the creditor. If you have some history of paying bills promptly, you may find that creditors are willing to set up alternative payment schedules. In addition, successful completion of a payment schedule often leads to a continuing relationship between businesses and creditors.

 

Late payments or unpaid invoices can often be traced back to housekeeping or paperwork issues rather than cash flow problems. Even these types of mistakes can affect your business credit.

To determine the root cause of the problems ask yourself:

  • Are your creditors sending invoices to the correct address and person?
  • Are your payment checks being sent to and received by the correct department and person?
  • Are all parties clear on when payments must be made?

 

Additionally, listed below are steps you can take to improve your business’s creditworthiness:

  • Always pay on time. The ability to repay loans promptly has a great impact on business credit scores. You should endeavor to always pay within the terms you have with your suppliers. On-time payments are the most direct way to improve a business credit rating.
  • Pay your biggest bills first. Some business credit scores are dollar weighted, such as the PAYDEX ® Score. Therefore, if you are consistently paying all of your smaller bills but neglecting your largest, your Paydex score can suffer.
  • If timely payments to suppliers and lenders are not included in your business credit profile, your business may not get the credit it deserves for paying your bills on time. You should monitor your business credit profile at least twice per year to ensure that vendor payment relationships are included.
  • Stay on top of your business credit profile. You must ensure that your business credit profile information is complete and accurate. Address any inaccuracies immediately. Certain business credit companies offer customer services and online tools that can help you update and manage such details.
  • Contribute to your company’s credit profile. You can communicate to the credit bureaus as well. The more information you give to credit bureaus like D&B, the more robust your business credit profile will be. In addition, try to choose suppliers and vendors that report their experiences to credit bureaus, which can also boost your profile.

Many businesses are feeling the pressure of tightened credit requirements. However, by carefully planning and executing your plan, you can help fix and improve your business credit.

Understanding its advantages and disadvantages of Venture Capital Funding

Understanding its advantages and disadvantages of Venture Capital FundingUnderstanding its advantages and disadvantages of Venture Capital Funding

Understanding its advantages and disadvantages of Venture Capital Funding. Before taking on venture capital, entrepreneurs must ask themselves a fundamental question – “Do you want to be rich or be king?” As Harvard Business School Professor Noam Wasserman explains, it’s difficult for founders to maintain control over their businesses once they take on outside investors. However, without them, such businesses like Twitter and Facebook would likely have never have taken off. For those entrepreneurs who have developed a product with a large untapped market and a potential for rapid, high growth, venture capital (VC) funding makes sense if you’re willing to give up some control and most likely sell your business at the end of the investment period, or fund life-cycle (i.e. when the fund becomes due). However, if you would like to build a generational business, an angel investor may offer more favorable terms that will allow you to receive some equity while maintaining a degree of control.

 

Looking for that big return

“A VC firm does not invest in a business,” explains investment banker Jeff Koons of San Francisco-based Vista Point Advisors. Instead, it invests in a company that will sell for a lot more than it’s worth at the time of the initial investment. And such firms are looking for a big return (up to 20 times the initial investment) in a relatively short amount of time (3 to 10 years, depending on the fund life-cycle). “If your business is growing just 20 to 30 percent per year, VC funding is not for you,” notes Koons. Focusing primarily on the tech sector, Vista Point acts as a broker to bootstrapped entrepreneurs entering the VC world for the first time. “We help them think through the process from valuation to exit,” notes Koons.

 

Defending your interests 

Vista Point vets various VC firms for the best valuation and possible outcome for the entrepreneur. Unlike others in their field, Vista Point only works on the “sell side,” meaning their sole clients are entrepreneurs. They do not work with VC firms on other deals. “VC firms sometimes look for a break in the negotiations on these smaller deals for the promise of future work for the investment bank on more lucrative deals down the road,” cautions Koons. So a good rule of thumb is to ask any investment brokers if they work on the “buy side,” with VC firms, as well.

 

Having sound advice makes all the difference when entering the complex world of equity financing. Joshua Mag, CEO of SquareHook, a content management system provider, consulted a former professor who is an operating partner at a large VC firm before taking on equity from an angel investor in June 2012. “Potential investors want to know what market you’re targeting and its size,” notes Mag. “They’re not going to invest in something that doesn’t produce a large return, so there needs to be a big potential market for your product.” The angel investment allowed Mag to quit his full-time job to focus exclusively on building his business, which included hiring a few employees and seeking development assistance. “My decision to take on capital was a choice of acceleration,” explains Mag. “Had I not taken on the capital, this would have been a slower task.”

 

Equity comes at a price

Mag gave up 20 percent of equity of his company in exchange for the angel investment; however, a VC investor typically wants at least 20 percent ownership in addition to a board seat and the ultimate sale or IPO of your company upon exit. Nevertheless, how much ownership an entrepreneur gives up, whether to a VC or angel investor, is largely determined by the amount of equity the entrepreneur needs, the valuation of the business, and whether it’s the first, second, or third round of investment.

 

Aaron Skonnard, CEO of Layton, Utah-based Pluralsight, grew his company’s online training platform for software developers organically for about a decade before taking $27.5 million in Series A funding in 2012. “We saw periodic interest over the years from investors,” notes Skonnard. “But we thought it was too risky to give up too much control in case we needed to change direction.” It was only when Skonnard and his partners felt they had a solid business model and were set to enter a high-growth mode that they decided to take on VC funding

Shop around

“It wasn’t so much about the money as forging those strategic relationships,” Skonnard points out. “Once we decided, then it became a financial exercise –– how much do we take, how much do we want to sell, and who’s the right partner to go with.” Skonnard and his partners met with five or six VC firms several times before they decided on one they believed would add the most value to their business. “It was our comfort level with the people and personalities that drove our decision more than the financial metrics,” explains Skonnard. “Make sure you’re happy with the people that will be on your board of directors.”

 

Investors provide more than just cash

While the cash infusion helps grow your company, partnering with a VC firms also gives you access to new players in your industry, which in turn helps attract the top talent and increase your market presence. Pluralsight’s traditional model had been to work directly with content producers to build its online training library. But with the funding, it was able to finance the purchase of two online training companies, which doubled its content library in a matter of months. “The Series A really unlocked our ability to make those acquisitions,” Skonnard points out. “We would have never been able to consider that without such funding.”

 

Beyond their connections in financial and sector-specific industries, some VC investors have an entrepreneurial background as well. Brendan Anderson bought his first business in 1995 and has helped manage and invest in many more since then. In 2006, he co-founded Cleveland, Ohio-based Evolution Capital, which invests in $5- to $6-million companies that have at least $500,000 in free cash flow. “We are point-in-time investors looking for entrepreneurs/founders with a vision creating something compelling in the market,” explains Anderson. He and his partners then work with these entrepreneurs to implement the steps needed for growth.

 

These include getting the entepreneurs’ financials in order to develop a plan for growth, which in turn enables these businesses to attract the best people. Next is transparency, making sure the entrepreneur communicates his vision and shares day-to-day operational data with employees. Finally, holding the entrepreneur and employees accountable for tasks that will move their company forward. “Once these best practices are implemented, they’re happy with the results,” Anderson points out. “But the process of doing it is usually painful.”

 

“The founder/entrepreneur still owns a major piece of the business even after we invest,” Anderson points out. However, Evolution Capital typically controls the majority interest (more than 50%) and maintains the right to change management and control their exit (with a typical investment ranging from 3-7 years). “We want to build businesses that continue to grow long after our ownership,” he says.

 

Understanding terms, conditions, and valuation

If you’re considering taking on equity, it’s critical to understand the terms and conditions of any investment agreement. Whether the entrepreneur maintains some control is largely determined by how the deal is structured. Mag decided to go with an angel investor, who was looking for a longer investment with annual dividends rather than a large payout at the end of a VC fund life-cycle. “Taking on VC means you need to have an exit strategy: IPO, sell, or dividends,” notes Mag. “Most VCs want a full exit to collect on their return within a period that is reasonable.”

And that’s largely determined by when a business becomes part of the fund. “You want to be invested as soon as possible in the life of the fund,” explains Koons. “If there’s only two years left before the VC firm needs to return capital to their limited partners (i.e. investment occurs in year five of a seven year fund), a company could be sold for a loss or spun out even if it’s achieving its growth projections.” Understanding its advantages and disadvantages of Venture Capital Funding

 

Typically, investors are looking for preferred terms that will position them better than other parties (e.g. paid first upon exit, right of first refusal, put option, liquidation preference). Pluralsight has a minority interest deal with their VC investment firm, which has allowed Skonnard and his partners to only give up two seats on their seven-seat board. “The founders still control the board and the ultimate direction of our strategy,” notes Skonnard. “While we have a very healthy relationship with our new board members, we didn’t want to give up too much control.” Understanding its advantages and disadvantages of Venture Capital Funding

 

It’s also important to understand valuation, as you need to know what your company is worth in order to negotiate the best terms. “One way to valuate your business is to look at your competitors to see what they sold for upon exit,” explains Mag. There are a number of public sources and tools that list industry comparables. This will also help figure out how much equity you’ll need to put into your business to achieve your growth plans. “That investment defines what your business will be valued at,” explains Mag. “By taking on more than you need, your business is likely losing equity unnecessarily.” Understanding its advantages and disadvantages of Venture Capital Funding

 

How Much To Ask When Applying For A Small Business Loan

How Much To Ask When Applying For A Small Business LoanHow Much To Ask When Applying For A Small Business Loan

It’s a question that besets many small business owners when applying for business loans: how much should I ask for? More so than deciding on which lender to approach, not having a sound estimate of how much capital you need to borrow could lead to cash flow problems—which could lead to your business shutting down. How Much To Ask When Applying For A Small Business Loan

How then can small business owners determine how much financing they need when approaching lenders? What factors should they take into account when calculating the ideal sum of their business loan?

Be clear on the reason for the loan

Are you launching a startup? Or do you need the loan as additional working capital to make improvements in your business? Answering yes to either question is critical when deciding on how much you need.

Denise Beeson, a small business-funding consultant who previously lent her services to a local SBA-administered Small Business Development Center, a provider of mostly free resources and training to small business entrepreneurs, in Santa Rosa, California, always asks her small business clients the previous questions whenever they come to her about wanting to apply for loans. For those with startups, she does issue a caveat: “If this is a start-up, I remind them that an SBA preferred lender does not fund startups,” says Beeson “We then discuss where they may find funding, such as peer-to-peer lending options, tapping into their personal resources, or asking family and friends.”

If the small business owner is seeking to buy a business from another, Beeson notes that the seller may fund the loan. How Much To Ask When Applying For A Small Business Loan

 

Also, if the small business owner is seeking working capital for myriad reasons, which might include increasing the marketing budget, making renovations, or paying off debt, Beeson says she will ask clients if they can produce documentation verifying that the debt was accrued as a result of the business.

 

Without providing the necessary paper trail needed to accompany a loan application, small business owners could hurt their chances of getting financing from a lender, insists Beeson. To prove her point, she offers the following anecdote:

 

“Recently a restaurant client was interested in an SBA loan to consolidate debt based on improvements to the premises,” she recalls. “They had almost $100,000 in debt including credit card debt that was claimed as accumulated to the business during the recession. However, when we looked at the statements, the entries were not clear when and what had been done. In addition they could not produce any paid invoices from contractors or suppliers linked to the credit card statements. Unfortunately, we could not move forward because the borrower could not provide the needed documentation to the preferred SBA lender.” How Much To Ask When Applying For A Small Business Loan

Consult trusted financial professionals

If you are unsure or confused about how much you should ask for when applying for a business loan, it might behoove you to visit a financial expert such as a reliable bookkeeper or a CPA that regularly deals with small business clients. By reviewing your financials, he or she can then approximate how much financing you will need, taking into account existing debt obligations and operating revenue. And a word of caution: don’t be lax or lazy when it comes to understanding your financials. Sloppy bookkeeping or a lack of knowledge about your books or tax returns will prevent you from acquiring a loan.

Take into account your other non-related business expenses

To determine how much you’ll be able to repay and the length of the loan’s duration, small business owners need to do a cash flow analysis of all their expenses, including mortgage payments or auto loan payments. By doing so, a business owner will be able to develop a more viable estimate of how much they’ll need to borrow from a lender.

 

Rohit Arora, CEO of the six-year-old Biz2Credit.com, feels this is an imperative step for all small business owners to take when deciding on how much of a loan they should apply for.

 

“A lot of business owners don’t take [their miscellaneous non-business expenses into account when deciding how much money they should borrow,” he says. “Everything boils down to your repayment capacity. So if you feel that you can borrow some money and there’s some good opportunity that will help you make money off it, that’s good. But that calculation is not a certainty.” How Much To Ask When Applying For A Small Business Loan

Carefully consider payment terms

After you analyze your financial situation, both on a personal and business level, you will also need to decide on how long you want to pay off your loan. By following this best practice, you will be able to produce a rational figure as opposed to an amount that you will never be able to discharge in light of your finances and debts.

Arora agrees, offering a hypothetical scenario: “Let’s say a business owner is borrowing $100,000 and they have to pay back everything in one year,” he explains. “Then the amount of repayment they have to make in terms of speed is pretty steep. Typically for small businesses, the cash flow is their bloodline.”

Similarly, Arora says small business owners need to exercise extreme caution, particularly if they’re planning on borrowing from alternative lenders. “A lot of times they want their money back pretty quickly,” he warns.

Know the lender

When figuring out how much money you need to borrow, it’s vital that you research your lending options. Which banks or lenders are amenable to small business owners in your sector? Just conjuring up a random number for a loan will not help you if the lender is not open to your industry, says Beeson, who advises business owners to also explore nontraditional lending options.

If you need to figure out how much of a business loan you should ask for, you will need to know offhand all of your business and non-business expenses. Not only is this information essential for maintaining good credit—a prerequisite for getting a loan—but it will help you come up with a realistic number that will allow you to comfortably fulfill repayment terms and not disrupt your cash flow. How Much To Ask When Applying For A Small Business Loan

5 Tips for Optimizing Your Cash Flow

5 Tips for Optimizing Your Cash Flow

Iris Dorbian.

5 Tips for Optimizing Your Cash Flow.  For a small business owner, managing your cash flow, (the movement of cash to and from your business as opposed to cash deposited in a bank) may be your most important responsibility. In fact, in a recent poll conducted by CPA2Biz, the marketing and technology services subsidiary of the American Institute of CPAs, 83 percent of the 500 small businesses surveyed reported that their prime concern is maintaining adequate cash flow.

And according to the Small Business Administration, the federal agency that provides support and resources to small business owners and entrepreneurs, the failure to manage cash flow is a significant reason why so many small businesses close their doors each year. Make no mistake about it: Even if it’s unintentional, just a mere oversight or misstep in your handling of the company coffers can cause untold damage to your reputation, brand, and credit rating. How then can you prevent such errors from happening while optimizing your cash flow? Here are five cash flow best practices that can steer you in the right direction. 5 Tips for Optimizing Your Cash Flow.

1. Negotiate with vendors

This takeaway can be a great method for pre-empting future financial headaches. If you’re experiencing a fiscal pinch, talk to your vendors about extending due dates. Or try re-negotiating payment terms. Remember, your vendors are also in business and they, like you, want to get paid on time.

John Burger, owner of the online toy company Playfully Ever After, has made this tip a key underpinning of managing his company’s cash flow. And based on his experience, most vendors are willing to be flexible if it guarantees payment. 5 Tips for Optimizing Your Cash Flow.

To bolster his point, Burger, whose company is based outside Dallas and has seven employees, recounts an experience where re-negotiating with a vendor garnered positive results.

“We hit a cash-flow crunch after spending quite a bit of money at the Toy Fair 2013 expanding into new toy lines,” he recalls. “There was no way we could place the large orders we needed to make to sustain our top-selling brand. I called and talked with our rep and they were more than willing to work with us. In fact, they even offered us special terms. From now on, we only have to spend $3,500 to get the same 10 percent discount or $1,500 to get a 5 percent discount. This meant we could reorder more frequently and keep items in stock, which increased sales for both of us.”

OptimizeCash_PQ.jpg2. Build yourself a cushion

Almost every business goes through an up-and-down cash cycle. Such fluctuations can often be dictated by myriad factors that range from seasonal trends to the overall health of the economy. During periods when your cash flow is booming, don’t get complacent and risk your business with extravagant or unnecessary expenses. Be prudent in your spending and start saving for those periods when money might not be flowing like champagne. 5 Tips for Optimizing Your Cash Flow.

Adrienne Polk, operations and strategy manager of the Washington, D.C-based Ross Business Management, a provider of financial and operational solutions to small businesses, agrees. “You want to create a buffer along the way, not just once in a while,” she says. “This will allow you flexibility and more breathing room in your business. When you are down to the wire all of the time, it can be completely paralyzing. Although you may need to spend money to make money, if you are paralyzed by fear or lack of funds, your business will suffer.” 5 Tips for Optimizing Your Cash Flow.

3. Trim unnecessary expenses

If you want to attain a strong grasp of your cash flow, then it behooves you to make a thorough and detailed assessment of the items that can be cut from your balance sheet and what can stay in. Scrutinize your expenses. Figure out what is essential and what can be excised.

“You
don’t have to buy the employees lunch, take a client golfing, or spend money on a birthday cake,” Burger explains. “Those types of things can wait. It’s more important that your employees get paid and you have money to buy product.”

4. Request prompt payment of services

This might sound like a no-brainer solution to cash flow problems, but it bears repeating when dealing with vendors and/or clients. 5 Tips for Optimizing Your Cash Flow.

Andrew Schrage, co-owner of Money Crashers, a personal finance website, agrees, but notes that debtors might need to gain an incentive to ensure prompt payment. “To motivate debtors to pay quickly, offer a small discount for prompt payment,” he says. “So even though you may take a bit of a hit on profits, it’s ultimately worthwhile.”

5. Tighten up employee hours during slow times

To better optimize your cash flow, you might consider reducing hours for employees during the slow periods. This tip has worked wonders for Burger’s Playfully Ever After staff. When his business was experiencing the doldrums, Burger had his hourly staff start work one hour later. And on days that were especially slow, staffers were told to go home earlier than expected.

“This saved an extra $600 a month in payroll,” he explains. “Every bit helps.”

Along the same lines, if your cash flow problems are growing increasingly dire, short of terminating your staff, you might also want to change employees’ salary status to an hourly basis. “Most employees hate this and it can be a tough sell,” admits Burger. “But it allows you to save money on slow
times when employees may not be working as much. If your business is in jeopardy, this is an option you should think about.”

Other ways to solve your cash flow problems courtesy of Burger are as follows:

Offer one free vacation day instead of pay raises. “To improve cash flow for the next year, give everyone in the company an extra day off each month in lieu of pay raises,” he says. “I had an employer do this once, and at first people were upset, but then we learned to love having the first Friday off of every month.”
Establish a line of credit. “Talk with your banker,” advises Burger. “Most banks are more than willing to help you establish a line of credit for your business. You don’t have to use it all the time, but this can help when cash gets
tight.” 5 Tips for Optimizing Your Cash Flow.

To maintain the longevity of your business operations, it’s imperative to manage your cash flow as wisely as possible. In this area, there’s no room for carelessness or irresponsibility, especially if you want your business to survive the long haul. 5 Tips for Optimizing Your Cash Flow.

Hatching Success: A look inside America’s innovation incubators

Hatching Success: A look inside America’s innovation incubatorsHatching Success: A look inside America’s innovation incubators.

by Erin McDermott.

Hatching Success: A look inside America’s innovation incubators. Something is blossoming for entrepreneurs out in the deserts of Arizona.

In a 60,000-square-foot building formerly occupied by Intel, the city of Chandler spent around $6 million to transform the microchip giant’s fully equipped but abandoned facility, into an incubator for tech, biotech, and other nascent businesses. As of this winter, the Phoenix suburb has drawn 22 companies to its unique real estate—which features state-of-the-art wet and dry labs, a “clean room,” industrial deep freezers. The University of Arizona is also on site, actively looking to join forces with entrepreneurs.

Startups apply with business plans that go before scientific and financial panels, with a turnaround time of 48 hours or less on approval. One entrepreneur relocated from Rhode Island to take advantage of the affordable rent and rare habitat; another has gone from two employees to 35 since the site opened in 2010. Local institutions from hospitals to academics to prototype makers are teaming up with incubator inhabitants to help them scale up. Two resident firms are set to spin out on their own later in 2013—right on schedule, says Christine Mackay, Chandler’s director of economic development. Hatching Success: A look inside America’s innovation incubators

“I can’t even begin to put a value on what it’s doing for Chandler’s economy,” Mackay says. “Everybody’s working to help these companies succeed. The city’s only one small component of it.”

Leigh Dow moved her technical-marketing business, Dow Media Group, into the Innovations Incubator in 2012. She says it’s a great fit, and it allows her to collaborate with other startups in the building. “For me, it’s more about being around other likeminded people—we exchange ideas about not just marketing,” Dow says. “I’ve learned so much about operations, product development, product management, product introductions. It’s just so nice to be surrounded by other people who are in the entrepreneurial space when you’re trying to do that, too.”

Accelerators, science parks, seeders, incubators: these settings come in many names, but with the common ideal—to build a center where entrepreneurs and their fledging businesses can get a boost.

This business-incubation movement got a long look during the dot-com heyday, then found renewed emphasis since the 2008–09 recession, as governments, academia, and industries push to create more skilled workers and more well-paying jobs to place them into. There are thousands of these incubators around the world, with more than 1,200 just in the U.S., according to the National Business Incubation Association. (And here’s a good website to follow for events, competitions, and launches around the world.)

Here is a look at a few of America’s promising innovation incubators and what they’re doing for entrepreneurs.

EvoNexus (San Diego)

This incubator, a nonprofit with backing from the city government and hometown wireless giant Qualcomm among others, is unabashedly aiming to boost the region’s high-tech presence to compete with Northern California’s luminaries. With two locations and 20 companies under its roof, firms they’ve nurtured have pulled in some $95 million in venture capital. There’s no rent, no contracts for the amount of time a company will stay, and mentors are provided.

Interesting feature: Its rare “no strings attached” policy. Startups don’t pay a dime to participate coming or going, not even in the form of an equity stake to EvoNexus.

StartUp Kitchen (Washington, D.C.)

It’s a big step from a delicious recipe and an entrepreneurial itch to successfully operating an actual restaurant. StartUp Kitchen tries to close that gap by taking winners of their business-plan competition and pairing them up with expert restaurateurs who’ve been through the perilous early days and know the pitfalls. (The venture is sponsored by two DC-area nonprofits.) The reward: a recurring pop-up restaurant in the mentor’s existing dining spot, under the guidance of on-hand chef-owners who give advice on how to smooth out service, kitchen, and logistical aspects of the business.

Interesting feature:  Follow StartUp Kitchen on Facebook to get a reservation and see it firsthand (and get a great dinner).

SURF Incubator (Seattle)

More than 45 tech startups are working out of this downtown incubator overlooking Puget Sound. Founded in 2009 by serial entrepreneur Seaton Gras, SURF charges $400 per month for full-fledged members, which provides them access to conference-room time, mentoring, 24/7 dedicated seating, Internet service—and to other potential collaborators in this innovation hotbed right in Microsoft’s back yard.

Interesting feature: This is Seattle: For $50 a month, get a designated seat in SURF’s in-house self-serve Cafe SURF, with unlimited coffee and WiFi.

Women Innovate Mobile (New York)

It’s still disproportionately male in most of the tech sector, but this accelerator aimed at mobile-tech startups founded by females is trying to change that. Successful applicants to WIM’s three-month program get free office space, product development assistance, design support, and $18,000 in funding—in return for a six-percent equity stake in the venture.

Interesting feature: Their deep roster of mentors.

MuckerLab (Los Angeles)

Hooray for Hollywood? Los Angeles recently moved to No. 3 in the world (behind Silicon Valley and Tel Aviv) when it comes to conditions for startups, according to a StartupCompass survey. MuckerLab is part of that booming scene, taking on entrepreneurs even at their earliest stages. They offer participants in their three- to six-month accelerator as much as $21,000 in funding, office space, marketing and legal support, access to top-tier investors—in exchange for a six- to eight-percent equity stake.

Interesting feature: Laugh along with their recent grad Laffster, which aims to be the Pandora Internet radio of comedy apps.

Fringe Union (Somerville, Mass.)

It’s not just tech startups that are flocking to this incubator close to the Harvard, Tufts, and MIT campuses. This coworking space for creative businesses has also found success with some thought-provoking participants, like an artisanal florist, an inventor who’s turning Mason jars into travel mugs, and a firm recycling fleece into new items.

Interesting feature: When the weather is nice outside, the industrial-scale garage doors on this old warehouse are opened, letting incubators work al fresco. Hatching Success: A look inside America’s innovation incubators.

The Silent Partner: Boon or Bane?

The Silent Partner: Boon or Bane?
by Erin McDermott.

Psst. Is that silent partner you’re seeking really the best move for your small business?

When it comes to finding additional funding these days, it’s sometimes a tough road. As a result, people are looking at other avenues of capital, taking on all types of new partnerships, and even tapping into money through crowd-funding sites such as Kickstarter, Indiegogo, and AngelList.

Traditionally, silent partners have been the go-to investors, often family and sometimes friends, who pump in funding but also agree to stay out of day-to-day operations. They get a share of the profits and—unless there is a limited partnership agreement that rules out liabilities—risk taking a hit if an enterprise runs into trouble. Their presence is no secret to people familiar with a company, and often they are prized for their industry contacts or standing in a community.

So why choose to remain silent? There can be several reasons. For some investors, it’s a way to avoid the unwanted entreaties of others who also are seeking capital. Others might use a silent partnership to keep quiet about the extent of their business portfolios or to stay one step removed from a venture that they don’t want to be publicly identified as backing.

So, is this silence really golden for a small-business owner?

PQ_SilentPartners.jpgWhat you don’t get for your money

Mitchell D. Weiss doesn’t see much value in the proposition. He’s a longtime financial-services executive and entrepreneur who now teaches finance at the University of Hartford and is the author of Life Happens: A Practical Guide to Personal Finance from College to Career. To him, owners who recruit the strong, silent type of partners are missing a critical opportunity to gain knowledge from others who know the stakes and have years of experience and connections that are priceless for an entrepreneur.

“I wouldn’t want money from people who aren’t going to help me. I want someone who isn’t just a checkbook, but someone who’s in a position to mentor me and offer advice,” Weiss explains. “What’s more important for entrepreneurs is to seek out people who can give you good feedback. Not someone who hasn’t made a payroll, or can’t relate because they’ve never faced the pressure of running a business.”

Weiss himself has been there with business relationships both silent and not so silent. He recalls dealing with a principal at one of his early ventures who declared that he “likes his partners limited” and made clear that he wanted little advice from others, even while seeking investors. “That’s also known as ‘Give me the money and shut up,’” Weiss says now, laughing. “In the end, I learned a lot of good things and a lot of lessons about what not to do.”

Jaine Lucas also sees many entrepreneurs missing the boat.

“One of the issues with crowd-funding is you get the money, but not the advice, coaching, and mentoring you’d receive from angels, VCs, or others who might financially back your company,” says Lucas, an entrepreneur, former Fortune 50 marketing executive and now executive director of the Innovation & Entrepreneurship Institute at Temple University’s Fox School of Business in Philadelphia. “Most entrepreneurs will tell you that access to coaching and other people’s networks are just as important, if not more so, than the money.”

There’s always an exception

But Lucas does see the value of silence with one often-tapped group of investors: friends and family.

“They are often too involved emotionally and cannot see things objectively,” she says. “I see these things all of the time with our younger entrepreneurs who have very little access to capital other than credit cards and friends and family, so they take money from Mom and Dad. The problem is, to Mom and Dad, this promising entrepreneur is still their baby—and they don’t know anything! I see so many family relationships really impaired by money—and money has a way of blowing things up.”

One way to avoid that conflict Lucas says, is to make sure terms are clearly outlined well before any funds are invested, including whether the friend or family member will have any right to input in the venture. “Sadly, it isn’t treated as seriously as it should, and agreements need to be put in place before any money exchanges hands,” she says.

Today, most investments come with an extra two cents

“I see [silent partners] as something that’s becoming a thing of the past,” says David Luk, the 33-year-old chief executive of Quewey, a startup online network of experts that facilitates business expertise via free question-and-answer platforms and paid phone-consulting sessions. As people become more sophisticated about investing, Luk says they should feel the urge to provide advice so they can contribute added value to their investment.

“If you asked me to go out and search, in this early funding round, for investors who want to be silent, I think it would be hard to find that. And frankly, I don’t want that,” Luk says. “If I have a choice between an investor who has a willingness and ability to help versus someone who prefers to stay silent and on the sidelines, I’d rather have the person who can add value and not just the capital. We’re a startup and it seems like a waste of a potential resource.”

Often, it’s elusive resources like experience that are most important for growing small companies—and sorely needed at crucial turning points—such as getting down to the business of suing that new capital wisely and making money for all of your investors, silent or not.

Weiss says he’s seen entrepreneurs get an overzealous sense of “We’ve got it!” when funding does arrive. “Investors want that money back, and want their investment to grow—you’re just renting it,” Weiss points out. “It doesn’t just come with a lipstick kiss on the bottom of a Hallmark card.”

How To Start A Non Profit Organization

How To Start A Non Profit Organization

Non Profit Organization how to – Sounds impossible? No Way! Yes it can be bureaucratic for a non profit organization and there’s some red tape you’ll have to wade though, but if you are a qualifying type of organization, getting  nonprofit status is definitely the way to go, especially if you want to get grants from funding groups. Attaining non profit organization status for yourself as a group or organization may be critical in order to receive those grants that you are hoping will fund you, and it will only cost you a couple hundred dollars! Many grants are only available to nonprofits, so don’t wince at the mention of what may sound like an overwhelming and daunting task. Drive in! It may be easier than you think. If starting a non profit organization, here are the steps!

Structure of Your Non Profit Organization Step by Step

For Not for Profit Organization

  1. Information about Non Profit Organization Corporation under Texas http://www.sos.state.tx.us/corp/nonprofit_org.shtml
  2. Texas – Application for Registration for a Non profit Corporation http://www.sos.state.tx.us/corp/forms/202_boc.pdf
  3. IRS – EIN Employer Identification Number – http://www.irs.gov/businesses/small/article/0,,id=97860,00.html
  4. IRS Exemption Application for Non Profit Organization 501 (c) 3
    http://www.irs.gov/pub/irs-pdf/f1023.pdf or

a)        Phone: Land Line (sometimes discounts are offer for Non Profit Organization ask discounts

b)        Bank Account: Any with Free Checking for Non Profit Organization

c)        Domain (Go Daddy, Blue Host) etc. with a WordPress account or blog understand a sub domain. Make sure you have at least 5 pages to good content. Submit your company to internet directories. Make you apply for .org extension for your non profit organization.

d)        Business Cards and letter Head ( YOU WILL NEED TO HAVE THIS. IF MAKE YOU LOOK MORE PROFESSIONAL AND CREDITABLE)

e)        Create an Non Profit Organization Development Business Plan and Capability Statement – your local SCORE OFFICE can help.

f)         Apply for DUNS# as a government suppliers for your non profit organization under small business tab – http://fedgov.dnb.com/webform/displayHomePage.do;jsessionid=81407B1F03F2BDB123DD47D19158B75F

g)        Register with a CCR.gov  if Central Contractor Registration for your small business https://www.bpn.gov/ccr/

h)         Apply for a Merchant Credit Account with a credit card processor along with google and paypal payments. A Merchant account for a business no more than $10. Check to see if there is a non profit organization program so you can pay less.

PAYPAL https://www.paypal.com/webapps/mpp/merchant

GOOGLE – https://accounts.google.com/ServiceLogin?service=sierra&continue=https://checkout.google.com/main?upgrade%3Dtrue&hl=en_US&nui=1&ltmpl=default&sacu=1&gsessionid=GzWKqcSGuE-bfj0VWFPCLw

i)         Register a Facebook, LinkedIn, YouTube, Google + and Twitter account for social marketing for your non profit organization. Also, there is a list of the top 100 social media site, try to get listed on all of them – it will only benefit you more.

j)         Register with State of Texas Comptroller of Public Accounts for Reseller Certificate or Tax Exemption register. or Your LOCAL STATE TAX OFFICE for Non Profit Organizations.

  1. http://www.window.state.tx.us/taxinfo/sales/ GO INTO THE OFFICE
  2. http://www.window.state.tx.us/taxinfo/taxforms/01-3392.pdf NON PROFIT FORMS

k)        Go to Yourbuzz.com to register all your social links and watch to edit local directories listing

l)         Make videos for your tube, take picture for website and write a blog on your site

m)      SBA SCORE

n)        FOR NON PROFIT KIT

There are the type of people you should have on your board of directors. Board members with licensed credentials give the non profit more creditability.

  • CPA
  • Attorney
  • Another Non-profit
  • Religious Leader
  • Teacher, Doctor, Engineer, etc.
  • Business Leader

Building Business Credit-  Starter Accounts (30 to 60 days)

  • Reliable Office
  • Quail Office
  • Gremplers
  • Grainger

Again as a non profit organization, you should have a complete description of your purpose and activities of your non profit organization. You need to have financial information, and if you have not yet begun operation, a proposed budget, along with a statement of assets and liabilities and information on how to you intended to finance your activities, through fundraisers and grants, etc.

Critical when filing for tax-exempt status for your non profit organization, obviously, is to have an organization that has a darned good reason for asking for exemption. The IRS has separated the classification of acceptable organizations into the groups within which your potential organization may fall, thus possibly qualifying for exemption.

Charitable Non Profit Organization (s) – charitable, religious, educational, scientific, literary, testing you public safety fostering national or international amateur sports competition, Prevention of cruelty to children or animals.

Social Welfare Non Profit Organization (s) – civic leagues and community organizations.

Labor and Agricultural Non Profit Organization – labor unions, councils or committees, farm bureaus, agriculture, and horticultural organization.

Social Clubs Non Profit Organization (s) – hobby clubs and country clubs.

Business Leagues Non Profit Organization (s) – Trade Association,s Chamber of Commerce, Real Estate Board, and Professional Associations.

Fraternal Societies – lodges and similar orders and associations.

Veteran’s Non Profit Organization (s) – post or organizations of past and present embers of the Armed forces of the United States

Employee’s Associations Non Profit Organization (s) – voluntary employees benefit associations and local associations of employees.

Political Non Profit Organization (s) – campaign committees political parties, and political action committees.

Other Tax-Exempt Non profit Organization (s) – miscellaneous qualifying organizations.

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Tim Jacquet, Senior VP
Apple Capital Group, Inc.
214-224-0995