The Map is a quarterly newsletter of useful information in quick-read format for business people seeking ways to improve their bottom line.

This publication is produced by Gail Finger of Finger Consulting, Laurie Breitner of Breitner & Associates, and Jeanne Yocum of Tuscarora Communications, Ltd. Drawing on decades of professional experience, these business owners and their guest authors target their message to the needs of other business owners and leaders.

The goal of The Map is to provide information that will help you:

• Become more competitive and profitable
• Work more effectively and successfully
• Create harmony and energy in your organization
• Manage significant change

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The Map includes information appropriate for a general audience. However, use of these opinions is no substitute for legal, accounting, investment and other professional services tailored to your specific organizational needs.

COPYRIGHT © 2004

Options to Finance Business Growth by Laurie Breitner

To be prepared for the long-awaited improvement in the economy be aware of financing options that will enable you to take advantage of new business opportunities or respond to changes in your market. Chose funding sources – whether cash from operations, business alliances, equity or debt – that best match your needs. > read more...

To be prepared for the long-awaited improvement in the economy be aware of financing options that will enable you to take advantage of new business opportunities or respond to changes in your market. Chose funding sources – whether cash from operations, business alliances, equity or debt – that best match your needs.

Option # 1: Cash from Operations

This is best suited to established organizations with predictable cash flow and expenses or to fund small, predictable expenditures. This option allows you to maintain control of your company. It is generally the least expensive and does not impact your exit strategy directly.

Before you decide on this option, consider its implications. If your company is not cash-rich, using cash from operations generally implies slower growth. There is a real risk of running short if costs are not thoroughly understood, disaster strikes, or if assumptions for precisely how much and when revenue will result are too rosy.

Carefully examine revenue and expense projections. Commonly underestimated expenses are time needed for communication, testing new infrastructure or processes, training and adjusting to new methods, processes or markets. A detailed and realistic cash flow projection will help to highlight any shortfalls. Arrange a line of credit in advance as a backup.

Option # 2: Business Alliances

Forming a joint venture with another business that complements yours in terms of purpose, values and opportunity can be a great way to fuel business growth. For new entities or those with limited access to cash, this can be a springboard to rapid growth or change.

Successful alliances are built on clear expectations and trust. You and your company will share control with another entity, this may impact your exit strategy and there will be associated costs. Spend the time to:

Equity financing is best suited to organizations that want to raise substantial funds to fuel high growth. Savvy business owners seek the added benefit of investors with needed expertise, clout and connections.

Your investors will want to understand what their money will fund and how and when they will be repaid. You will need to have a clear and compelling explanation for potential investors and provide evidence that you have studied the opportunity and know the competition.

This option has the greatest impact on company control and exit strategy. Many investors will require that you cede at least some operational control. All parties must agree on timing and a means to “cash out” such as a management buyback, selling the company or going public. It is essential that you understand and can meet your investors’ expectations.

Borrowing can provide a predictable amount of money to start-ups and established businesses with good credit scores and cash flow. Commercial lenders offer an array of loan-types to fund different business needs such as purchasing capital equipment, financing  real estate or smoothing cash flow. With the “buying power” of an approved loan or line of credit, business owners can often negotiate preferred pricing and discounts.

Before visiting your banker, review your cash flow projections to ensure that they are realistic and take into account debt service. Does the rate of return you expect to receive exceed the cost of borrowing money including applications fees, interest and principal payments? Consider timing; borrow the right amount at the right time.

If you expect to grow the business you founded, the person in charge must have the skills necessary to manage and lead people through change. Your vision, willingness to roll up your sleeves, work long hours and be involved in every aspect of your business was necessary to get your enterprise up and running. However, transforming a successful start-up into a sustainable, growing business requires someone at the helm who can effectively select and motivate people. To avoid unintentionally putting your company at risk, conduct a brief assessment by honestly answering these questions:

If you answered “yes” to just two of these questions, your company may be suffering from Founder’s Syndrome. It occurs when the founder is so close to day-to-day operations that s/he doesn’t recognize success. The founder, with the best of intentions, is trying to hold it all together by keeping a tight rein on things, yet this is exactly what will cause everything to rapidly unravel.

Founder’s Syndrome is easily treated if you are willing to take an honest look at your own strengths and play a role in the business that is a good fit for those strengths. A growth phase is the ideal time to bring in people with capabilities that complement yours.

Delegating is a skill that comes naturally to a few people, but most of us need some training and coaching in order to do it well. Many businesses fail just when it seems that growth and success are around the corner because the founder is unable to delegate important management tasks. By controlling every aspect of your business, you may unintentionally alienate capable, talented employees. Employees who feel they can’t make a move without your permission are unlikely to take personal responsibility for deadlines, will be unable to satisfy customer requests in a timely manner and ultimately may leave the company.

Do these attributes describe you? If they don’t, you have a choice: You can get some coaching to develop those skills or you can bring someone on board who has a talent for it. Before making the decision, ask yourself whether you really enjoy managing people. If you don’t, then hire a skilled manager. The investment will pay you back many times over and might just save your company.

Ratcheting up your organization to pursue new business as the economy recovers is invigorating. The good news is that revenues finally may start growing again. The bad news is that bringing new business in the door may require writing proposals, a time-consuming activity that many business people would rather skip.

Here are tips for making sure your business proposals are winners:

•  Begin by demonstrating knowledge of your prospect. Establish from the get-go that you understand the prospect’s objectives and challenges as they relate to the product or service you wish to provide. This may seem like you’re telling them things they already know, but in reality prospects want to be certain you understand their situation and needs. Briefly state the problem before launching into your solution.

•  Clarity is essential. Simple, concise writing is a must. Avoid long-winded paragraphs and use bullet points wherever possible. Don’t be overly technical and steer away from jargon or catch phrases. You never know who might be on the decision-making team, so write for a general audience instead of assuming that only people with your level of technical expertise will read the proposal. Have someone else give your first draft a test read to make sure it is easily understood.

•  Beware of boilerplate. It’s tempting to keep recycling portions of previous proposals; the “copy and paste” functions are definitely time-savers! But be careful about relying too much on boilerplate material. The last impression you want to give a prospect is that your proposal is the same “off-the-shelf” response you give to everybody. Again, this is part of convincing the prospect that you understand his/her specific situation and are offering a tailored solution.

•  Avoid an 11th hour sprint. Many of us made it through college by finishing every term paper an hour before it was due. Carrying that habit over to your business proposal writing can be dangerous. Rarely does anyone do his/her best writing when the clock is ticking down the final minutes before a deadline. Start writing as soon as you can and plan to finish at least a day ahead of time. This gives you time to sleep on what you’ve written and to read it thoroughly with “fresh eyes” on a new day.  

•  Looks do matter. Great ideas and appropriate pricing are important but even those things won’t help your proposal rise to the top of the competitive pile if it looks sloppy. Choose a readable typeface, an appropriate page layout, and good quality paper. If you are submitting your document electronically, be sure to use formatting commands that will display well on different computers and screen sizes. If you’re unclear about what that means, check with someone who knows the ins and outs of word processing or use a PDF file. Check with the intended recipient to ensure software compatibility and whenever possible, follow up with a printed copy. Include graphics where feasible to break up the text and make the whole thing more readable. Your goal is a professional looking proposal that conveys your attention to detail. 

•  Proofread. And then proofread again. All other things being equal, who would you hire--the company whose proposal was error free or the one whose proposal had typos or grammatical errors? Relying on spellcheckers is perilous. Also, it’s hard to do a great job proofreading something you’ve slaved over for several days, so recruit some fresh eyes for the job. And then proofread it one more time. Pay special attention to headlines, a spot where typos are often overlooked.

Jeanne Yocum, president of Tuscarora Communications, Ltd., has over 20 years' experience in planning and implementing corporate communications and public relations programs. She has worked with clients in a wide variety of fields, including commercial and residential real estate, retailing, health care, financial and legal services, manufacturing, IT analysis, management consulting, architecture, and banking. She also writes book proposals and ghostwrites business books. www.yourghostwriter.com

Make Sure Your Joint Venture Deal Gets Off the Launch Pad.
by Robert L. Wallace

The final step in establishing a joint venture deal designed to grow your business is the completion of the legal structure. It is not uncommon for deals to fall apart at this stage and for the entrepreneurs to walk away disillusioned and disappointed. This usually occurs when the legal process is allowed to become so formalized and/or depersonalized that the potential partners lose the closeness and trust they spent so much energy building prior to this point.

To avoid this scenario, remember that attorneys and accountants, while competent in what they do, do not share your vision or have the commitment to the deal that you have. Moreover, even with all of their good intentions, they do not have to live with the results of the deal, but you do. So tread carefully—measure many times, but cut once.

•  Select knowledgeable, experienced, and well-trained professionals. The adage “a jack of all trades and a master of none” applies to many advisors. Find out who in the community has been putting together successful joint ventures and find out who their advisors are. Once you’ve narrowed your list to three good advisors, spend the time to really get to know them. There has to be good “chemistry” between your staff and theirs. When assessing their fit with your organization, don’t just consider the immediate fit but the medium and long-term fit as well. You want an advisor who not only is competent but who also has the capacity to grow with your business.

•  Be able to articulate your vision for the joint venture clearly and succinctly. If you are unable to communicate what you want out of the business relationship, how can you expect your professional advisors to understand the direction you are pushing the relationship?

•  Insist that your advisors communicate with you on your level. Too many contracts and other legal documents are written in language that a person without a legal education will not understand. Since you are paying for the information, make sure you understand it.

•  Be clear on who exactly you will be dealing with in your advisor’s firm. Will your primary interface be with the partners or with the more junior staff? If you are unhappy with the quality or quantity of support you’re getting, what will be your recourse for resolving the issue?

•  On weighty matters that may have a major impact on your deal, always be willing to seek a second opinion. Getting a second opinion does not mean you believe your counsel is incompetent or unqualified. The fact is that legal issues can often be interpreted in many different ways, and you may want or need the benefit of diverse thinking.

•  Realize that the value of most attorneys and accountants usually peaks during the early part of the engagement and near the end of closing the deal. It makes sense to involve the advisors early on in the process to “frame” the opportunity, but be careful not to let them formalize and structure the deal too early. Too much structure too soon in the deal usually smothers it before it has a chance to be birthed and nurtured.

Robert T. Wallace is an author, public speaker and the founder of three companies – BiTHGroup Technologies, Inc., EntreTeach Learning Systems, LLC, and Skelemetrics, LLC, a technology commercialization initiative. This article is adapted from his latest book, Strategic Partnerships: An Entrepreneur’s guide to Joint Ventures and Alliances, to be published in September 2004 by Dearborn Trade Publishing (can be pre-ordered at amazon.com).