August 1, 2017 – AMBLER, PA – Business loan adviser MultiFunding, announces its 2nd quarter report card in accordance with their commitment to personally provide transparency across the business loan broker industry. This report lays out the company’s second quarter loan data including APR range and lender type.
And why it matters.
Close your eyes for a minute, and ask yourself what is your top-line revenue and bottom-line EBITDA goal for your business three years from now. Then jot your numbers on a piece of paper, and compare them to your results over the past twelve months. What are your growth targets by percentage?
The most important thing about this question is that there is genuinely no “right” answer. How much risk you want to take, and how quickly you want to grow and expand is a deeply personal one. But if you can find your “comfort zone” and be content with it, you can plan accordingly and make the financing decisions that are right for you.
If your goal is exponential growth, (let’s say 100 percent or more per year) you should probably seriously consider equity or venture financing. In most instances, these are the financing mechanisms that work the best for hyper growth.
If you are very conservative, and are content with less than 5 percent growth per year, you may well be able to growth through cash flow and don’t have to worry about lenders or investors. Your conservative choices will avoid a myriad of headaches that you don’t need to concern yourself with.
Most entrepreneur’s I know fit somewhere in the middle. They want to move their business up the ladder steadily and with a good rhythm, without risking falling off along the way.
If you’re one of these entrepreneur’s you can likely use debt to grow your business, and you will need it along the way to preserve cash and keep moving forward.
For these companies, a debt plan is very important. You need to pick your capital investments you are going to make each year, and look at long term options to finance them. And you should make sure you have a line of credit in place or possibly an asset based line if you have accounts receivable and or inventory to give your business the fuel it needs to grow. You can also likely avoid investors and retain control of your company.
How quickly do you want to grow your business? If you decide now, you can make the right choices to push you forward. If you don’t decide, or keep changing your mind you might risk falling off the ladder as you go.
What is your growth dilemma ?
The classic stereotype of an entrepreneur is one who is always running, pushing the envelope and taking risks. This is the “sex appeal” of entrepreneurship that many dream about and aspire to. Yet it’s important to know that at every stage of their journey, entrepreneurs have quiet fears or dilemmas that are holding them back.
Some common dilemmas include:
· You’re just not sure what to do next. You would like to keep moving forward but you’re stuck because you’re not sure what the next best move is.
· You’re so busy in your daily grind and routine that you don’t have time to think about your next move. You’re working in your business instead of on your business.
· Growing requires an investment. You’re not sure if you have the stomach to take on more debt or put in the cash that is required to grow to the next level.
· There is tension between you and your partners about how to grow. You might be the “grower” and they are more conservative.
· You’re “happy with your lot”. Things are going well, and you simply want to enjoy them.
What is your dilemma? Being aware of it might help you overcome it.
And how to avoid with them.
It’s often been said that building growing and running a business is like running a marathon. And in the marathon, some miles will go faster than others, and some miles will be harder than others. No mile will be the same.
While I have never run a marathon, I suspect that you probably run the first few miles at a faster clip than the next dozen. At some point your body starts to slow down and you get into a rhythm.
I think the same is true for building a business. During the first few years, you’re building up your steam, and putting it all on the line. And then, hopefully, things start to stabilize and you get into a “new normal”. And while you’re happy that you’ve gotten through the first few miles, you don’t have the same urgency or type of energy you have right at the beginning.
At this point, your business will likely stop growing at the same rate as the first few years.
Are you at this point in the journey? Are you happy with how your business is growing? Do you feel like you are starting to slide a bit?
If so, take a pause from the marathon, pull out a piece of paper and ask yourself two questions.
On the one side of the paper answer this question: If the tooth fairy arrived with a million dollars under your pillow in the morning with the condition that you had to invest it in your business, what would you do with the money and what return would you expect from the investment. If you have a strong answer, why aren’t you doing it? And if you don’t have a good answer maybe you need to really invest the time to ask why not?
On the other side of the paper ask yourself the question: what is your stretch goal for your business in three years if all your dreams come true. Then think about what ingredients in your cake you are missing to get there. It might be equipment, sales, a management team, acquisition targets etc. What capital infusion, if any, do you think you need to get there?
Now compare your answers on both sides of the paper.
My hope is that this exercise will get you out of your growth slump, and keep pushing onward.
There is no simple answer.
The simple rule in business is that you must be willing to invest and take risks to grow, expand, and make money. While the rule might be simple, how you choose to execute against it is a personal choice and there are no right answers.
Sometimes I meet successful entrepreneurs who have built strong and sustainable businesses without taking on any debt or equity along the way. Their rule is simple: you invest as you can afford it. They’re not concerned about competitive pressures or getting bigger faster. It’s one way to go and an admirable path.
On the other extreme are those who choose to ride the venture capital treadmill. In these cases, years or even decades of losses can be acceptable as the company focuses on growth and market share. These entrepreneurs are constantly in fundraising mode. While this path is not for me personally, some of the greatest icons and success stories of our time have chosen this path.
I would argue that 98% of entrepreneurs don’t fall into either of the bookends that I describe above. At different points in their journey, they will rely on equity or debt to spur their growth.
In the early stages of these ventures, I find that entrepreneurs are often stuck on thinking that they need a lot more money than they do to get going. Instead of struggling to try and raise a million dollars to accomplish A, B, and C, they might be much better off raising enough money to get A done, and start to prove their concept and get some cash flow moving.
On the other side of the coin, often later in the life cycle of the company, when ideas and concepts have been proven, there can be a real need and benefit for expansion capital. Yet the entrepreneur either has the no debt badge of honor (they don’t want to take on any more debt), or they’re used to their routine and can’t think out of their box to think about how to expand and grow.
Where do you fit in this paradigm? One way to answer it is to ask yourself the question, “If you were presented with a gift of $1,000,000 and had to invest in either your business or a mutual fund of your choice, how would you divide the gift and what return do you expect from each investment?”
This is the theme of the book I am working on entitled “Your Million Dollar Question”, that will come out later this summer. My hope is that it will help you think through these important issues.
Dump the fancy consultants and hire some interns this summer.
Building and evolving a business always requires new insights and new ideas about what’s happening inside and outside your organization. And one of the toughest things to do is to shake out of the daily grind and find new ideas about what we can or should be doing differently. Routines become monotonous, and we go about our business.
Organizations often bring in consultants for as “outsiders perspective”. Sometimes, the consultants have an area of expertise, and other times they simply come in to bring in a different perspective. As experts, they charge by the hour or the project, and bring their prior experiences and biases to the table.
How about trying something new this summer. Dump the consultants and bring in some young interns to bring those ideas to the table. Don’t send the interns on coffee runs or stick them in a cube sorting out papers. Give them hard and challenging projects to work on, and take the time to teach them.
Will the interns learn and benefit a lot? You bet. However, you will too. Often, the best way to learn is to teach. If you take the time to dig into the basics and explain concepts and listen to the questions that the interns ask, you will invariably get new ideas that you have not thought about before.
We have four interns at our small company this summer. They have four very different projects that have been well thought out. At the end of each of their assignments, they will have something tangible to add to their resume, and we will have something we benefit from. We seat them right smack in the middle of the office so they can listen and learn while they work on their projects. And they come to lunch with us every day and we try to take the time to answer their questions. And that is often where we learn.
Want some new insights this summer. Find a smart intern and make their brains hurt. If you do it right, your brain will hurt as well.
Listen to your audience.
My entrepreneurial journey has included a lot of public speaking over the past year. And as I have tested and tried different approaches I have learned one key rule to success: don’t assume you know what the audience wants to hear.
Have you ever sat through a PowerPoint presentation and dared to ask the speaker a question somewhere in the middle of their talk? The result is often an awkward pause, and then an answer to hold on 6 or 8 more slides when they will be coming to that. In this case the speaker is presuming that you want to learn in the way they have organized the information. That’s a mistake. As a listener and learner, I turn off every time.
My speaking this year has included a lot of work with Vistage Peer groups, which typically consist of 12 – 18 CEO’s of small and medium sized businesses. These small groups can be a particularly tough crowd. The members pay a lot of money to be there, their time is important to them, and they don’t want it squandered.
As a speaker preparing for this audience, the natural reaction is to prepare for every minute and be well orchestrated. Maybe it’ a slide for every two minutes.
I tried that the first few times, and I fell on my face. And then I realized that I had to stretch into the way that I want to learn, by setting up exercises for the audience, and then discuss their situations, and digging deeply into what they want to learn.
No slides. A workshop with a few exercises on a handful of pages. And a discussion.
One time, I was scheduled to present for an hour, we worked for three and a half hours. Once, a three-hour presentation only went for two. But when the audience was done, and had gotten everything they needed. It worked.
As I learned this style, I have tried it in bigger crowds at conferences with an audience of 100 or so folks that don’t know each other. Here I might set the stage with a few warm up questions, and then the balance of the time is open to Q & A.
In a typical hour presentation, a presenter will talk for 50 minutes, and then leave ten minutes for questions. Recently I have been talking for ten, and leaving 50 for questions. Guess what – most people seem to love it. And everyone is learning from everyone else, not just me.
Getting ready to make your next presentation. Try to dump the PowerPoint. Listen to the crowds. The results might surprise you, and them.
Yet there is often a better way.
Last week I attended and participated in the Inc. GrowCo conference in New Orleans which is my favorite conference of the year. It is exhilarating and stimulating to be in a community of about 600 entrepreneurs who have come together to learn and grow. Everyone has an idea, and the energy is powerful.
Kevin O’Leary, aka “Mr. Wonderful” from Shark Tank was one of the main speakers at the event and many of the CEO’s of his portfolio companies were on site participating in panels.
His presence and the excitement around him reflects what I call the ongoing “Shark Tank Myth” which is the belief by many entrepreneurs that the key to their success and fortune is to get that one famous or great investor who has all the answers and will lead them to the golden land.
The reality is that there is often another way. And sadly, despite the dream, Kevin O’Leary and his counterparts would probably only consider 1 in 100 companies they meet potentially investable.
While entrepreneurs pursue the “Shark Tank Myth”, many of them are wasting a fortune of time pursuing a path that will likely not work for them.
I met with many CEO’s during the conference whose goal was to raise about a million dollars from an investor like O’Leary. And I would automatically challenge them to ask what they would do with a $350,000 SBA loan at a reasonable rate with a long amortization.
Invariably, most of them had not considered the debt to be an option. And based on the existing cash flow in many of their businesses they could likely get a loan.
They can likely get a lot further with a $350,000 thousand infusion in their business today, than the pipe dream of a $1,000,000 raise that may never come to fruition. In fact, many of them could not clearly articulate what they would do with the bigger sum of money.
My best advice is do not fall for “The Shark Tank Myth”. You can do more on your own than you think.
May 5, 2017 – AMBLER, PA – Business loan adviser MultiFunding, announces its 1st quarter report card in accordance with their commitment to personally provide transparency across the business loan broker industry. This report lays out the company’s first quarter loan data including APR range and lender type.
The SBA is not a lender.
Business owners and entrepreneurs often think that the SBA is a lender. If they walk into their local bank and are told they are not eligible for an SBA loan, they assume that the program will not work for them.
This is the furthest thing from the truth.
The SBA is not a lender. It is a government guarantee program that encourages banks (and a handful of non-bank lenders) to take on riskier loans then they otherwise would. There are over 2,200 lenders in the country that utilize the program.
While every lender follows the same SBA rules, there are vast differences between lenders to be considered.
Every lender has their own credit policy and criteria. A loan that is not interesting to one lender, could be a home run for another one.
Furthermore, there are many different loan programs within the SBA. The lender whose branch you walk into might not utilize the loan program that is perfect for your business.
And finally, the person you are talking to at your bank (particularly if it’s a bigger bank) might not know anything about SBA loans, even if the same bank has a department three floors up that specializes in them.
SBA loans can be an incredible tool to help you grow and expand your business at reasonable rates with a long amortization. Be sure you speak to an expert who understand them, before ruling them out.
As a side note, this week is Small Business Week and in honor of it we published a detailed research piece called “Demystifying the Small Business Administration” with our partners at Vistage. If you’re interested, you can download it here.