What’s over the Horizon for Crowdfunding
Published December 20, 2011 | 
Crowdfunding Continues to Grow
If you’re not very familiar with crowdfunding, it’s okay because most people aren’t unless they’re searching for funding. Crowdfunding is a comparatively new method to obtain capital by receiving small amounts of money from a relatively large number of people. Crowdfunding typically can be found at online communities and websites including IndieGoGo, Kickstarter and SoKap just to name a few sites.
So if you have a startup or company ready to expand you can use the sites to pitch your business idea or cause for seeking the funding. The “crowd” is made up of members that have the chance to invest whatever they decide. So essentially, the “crowd” votes with their dollars, thereby funding the businesses and ideas that they deem as having the most potential.
There are several uses crowdfunding may have for your business, even if you’re not seeking financing. The reason being, these type sites serve as sort of a judging platform on viable ideas, they make it possible to view not only new business ideas in action, but just how the crowd actually responds to them.
By being able to check out both what investors think is, and isn’t fundable, you can acquire a pretty good idea of, and dial in on what products, services and active markets are exhibiting growth potential as hot future trends. Let’s look at the rapidly growing market for smartphone apps, as one you could have easily identified by closely examining crowdfunding trends just a few years ago.
If your business markets to other businesses (B2B), keeping a watchful eye on the crowdfunding sites is becoming a great way to find potential customers. Crowdfunding sites provide you an approach to contact to people who are, or are going to develop into entrepreneurs, and what better time for you to access them, than right at the moment when they’re beginning or experiencing growth. Of course, both circumstances are times when they’re most likely to need new products and services, and certainly be more open to making strategic changes to new vendors.
If your company is part of a high-tech industry or other field that specializes in working with and accommodating young entrepreneurs, crowdfunding sites can very well be of particular value to you. I should point out, that if you haven’t figured it out by now, the people seeking crowdfunding, by their very nature tend to be a younger demographic and definitely more tech-savvy. So, participation on crowdfunding sites should provide you insight into what this specific group of business owners are thinking, and what their business aspirations and dreams are. All of which is extremely valuable information that can help you market to them more effectively.
When Debt Might be Good for Business!
Published September 10, 2009 | 
There is an old saying that goes, “Out of debt, out of danger,” and while being debt-free is a noble goal, there are times when carrying some debt on the books is not a bad strategy for businesses owners, and in fact, most financial institutions expect it, and having no debt can negatively credit scores.
In today’s market, small businesses with a strong cash flow position, and well-controlled and managed business expenses might not see an immediate need for any financing, but small business owners should always have their future vision in mind and consider long-term changes in their respective businesses, such as possible purchases of buildings and equipment, additions to the staff and other expansions that current revenue capacities are unlikely to support.
An important point to remember is that debt is always cheaper than other forms of financing, such as the owner or investors putting more money into the company.
When comparing the cost of capital, debt risk to the business owner is lower and payments are tax deductible, plus ownership is not shared, while equity-based capital means that investors have to invest long term, and they’re looking for a return, as well as possible ownership.
Remember it is important to structuring the debt appropriately for the company’s size, productivity, and long-term plans.
How much debt is enough?
There are really no hard-and-fast rules about the amount of debt a business owner should take on, because so much depends on the specifics of each individual company, however, if a small business is seeking debt-based capital through banks or other short term lenders, a 2-to-1 ratio of assets to liabilities is regarded as a general rule of thumb
An extremely important point to always remember is that strategic planning is a key element that should never be overlooked or ignored, and although you can preserve wealth and the business value by using debt in many circumstances, debt without a strategic plan is very bad, and especially critical in today’s global economy.
Remember too that lenders want to see a very sound, well thought-out plan backed by business owners with experience and a successful history.
Should short term or long term debt be used?
Debt is taken for short terms to address working capital needs, and long-term arrangements are better suited for fixed assets such as additions to buildings or major equipment purchases, and most business owners are attracted to short-term loans because rates generally are lower than long-term financing.
The risk involved with using short-term debt is that generally, short-term financing is on an on-demand basis, and if a company falls a little short in working capital and cash flow, a lender could call the loans and the company wouldn’t have the funds available to meet the payment obligations.
The loan term should match the length of the life of the asset being purchased with that loan, and for short-term purposes, lines of credit from a bank are a good option, for example, a company might be able to negotiate price 
discounts with prime suppliers/vendors if payments are made early, and those early payments can be made with a line of credit. The advantage of these strategies is that the business saves more money paying a little less to regular suppliers/vendors than the cost of taking out the line of credit from a bank.
Ultimately, the worst strategy Entrepreneurs can make is to start using credit cards the wrong way, and not paying the full balance due each month, creating a slippery slope to financial crisis.
Small businesses should not make the mistake of relying on credit cards as quick fixes, just because they are easily made available, and it should always be remembered that credit card debt can turn out to be the most expensive form of borrowing.
Another financial pit business owners can fall into, is borrowing from his or her retirement accounts during times of trouble, and when the bank has shut them off, they begin to borrow on their 401(k) or against their homes. Remember, 
the 401(k) retirement accounts are creditor-proof, should the business declare bankruptcy, but the money taken from it, is definitely not.
Bank relationships
An old adage says that “running into debt isn’t bad, it’s running into creditors,” but regardless of the financial situation, a business owner should never stop talking to their lenders.
Keep the communication channels open in good times, by voluntarily sending financial records to the banks, and picking up the phone as soon as things look bad, and always keep the strategic plan current, update it if needed, and include with it several years of financial information, and the identification of business needs and associate funds required for equipment, building additions, business growth and expansion, and sufficient operating capital.
Rising U.S. Debt is Getting Very Scary!
Published September 9, 2009 | 
When you ride any of the scariest rides at amusement parks across the U.S. and world, there is a “point of no return” where you suddenly realize there is “no way out” and the reality of the situation starts to sink in, well that is what has happened in the reality of the ride we are on called “America’s National Debt,” the exception being there is no amusement to it.
Congress continues to raise the national debt ceiling currently set at $12.1 trillion, and it will continue to increase on a regular basis, evidenced by President Obama requesting a higher debt ceiling as the U.S. continues to borrow money to fund its many programs.
Like the scary amusement park rides, the ceiling keeps rising and rising, and whether there is “no way out” is a matter of economic and policy debate, and political will. Either way, the prospect of runaway deficits and debt are a good bit scarier for the American people and their nation’s future.
A true statement attributed to a recent U.S. President and repeated over and over by concerned citizens across the country is that “Future generations shouldn’t be forced to pay back money that we have borrowed,” and continue to borrow.
Nice sentiment, but the reality is that on our current course of adding spending without cutting costs, if you add in deficits that will skyrocket as baby boomers continue to retire and the long-term unfunded commitments to entitlement programs such as Medicare and Social Security, every man, woman and child is saddled with debt approaching $200,000, and that is roughly four times the average American household’s net worth.
One can rail against the fiscal irresponsibility of an administration and Congress that have let federal spending grow by well over 5 to 10 percent a year in real terms, the fastest in 40 years, while raising taxes amid reduced revenues to 
levels that haven’t been seen since cars had hand cranks.
One can also rail about the hypocrisy of policymakers agonizing over budget cuts that amount to one-tenth of 1 percent of federal spending while designing and approving huge spending bills and new supplemental appropriations for the wars in Iraq and Afghanistan that dwarf the Lilliputian budget cuts.
But as some might say, it’s all mind-numbing numbers, and that we’ve worked our way out of deficits before, as we did as recently as the Clinton administration, or, as the really cynical, that might think — and not care — that the Chinese, Japanese and Saudis will bail us out by continue to lend us more money, as they have been doing at new unprecedented rates in the last few years.
However, deficits have a way of hitting home in much more personal terms.
As the deficits continue to march towards higher levels, they will crowd out investment, further slowing economic growth and reduce the average family’s annual income by several hundred dollars in just a few short years.
At some near future point, the U.S. Government Debt will likely drive up interest rates, making the typical $250,000 mortgage, plus the interest that Americans pay on other purchases, cost about several more thousand per year.
Moreover, if we keep our current promises to the elderly, without reforming and controlling the costs of entitlements, the average family would have to pay at least $7,000 a year more in taxes by 2030.
And, like the scariest of amusement park rides, deficits ultimately might spook the paying customers so much that they go running to the exits, and foreign investors who have been so willing to-date to finance our debt could decide to pull out, especially when the point is reach where they can get more in return for their investment somewhere else, throwing the financial markets and the economy into even greater turmoil.
Deficits are such a large and growing problem that we need to come up with additional tax revenues and well-targeted cuts in spending, and the big entitlement programs need to be fundamentally 
reformed, especially so that ever-rising health care costs, in particular, can be contained, before contemplating a new health-care plan.
Developing such policies that produce meaningful reductions in the deficit requires both political will and bipartisan compromise, something that does not exist today, but at some point the people should and will demand such noble bravery from their government, a true “look at yourself in the mirror” moment.
Unlike the scary amusement park rides though, our country cannot just “get off” the scary ride, but instead, our children and grandchildren, and generations to come will face the horrors wrought by deficits every day.
Power in Understanding Investors
Published September 2, 2009 | 
Each day we are asked by Entrepreneurs about investors that might be interested in their business projects, that are poor candidates for lender or bank funding for reasons from collateral issues, to equity injection issues, to new market issues, all of which can greatly increase the amount of risk exposure to the point where banks are not in the fundamental position to approve even limited funding, if any at all, and many Entrepreneurs have a limited understanding and knowledge of just what investors are all about.
An investor is someone who places money into a business usually receiving an ownership or partnership stake in the business, and they are looking for high growth industries and markets and experienced management teams, and investors also undertake a great deal of risk since most of the money they provide is unsecured, therefore in many cases they seek very aggressive rates of return on their money.
It must be remembered and considered by Entrepreneurs that an investor is undertaking a lot of risk, therefore they may want a substantial share of ownership in your company, but just as important, investors typically don’t want in forever, usually after three, five, or seven years they want to exit the business, and if you have a problem with giving up ownership in your business then you’re going to have a very big problem in securing outside investment.
It’s important to understand the kind of money investors provide your business, which is typically not a loan and therefore not debt-based capital. In other words, since they are not providing your business with a loan, equity-based capital is placed in your business, and equity is money provided to your business in exchange for an ownership stake in the project.
Clearly, some advantages of equity are that equity capital can be much more flexible than debt, since there are no collateral requirements for equity capital, and repayment terms and conditions can be tailored to the needs of the business. Usually, payments to investors can be put off until the business exceeds break-even or reaches a certain level 
of profitability, so needless to say, this can really help the cash flow of an emerging business, and also equity capital can be a great way of raising large amounts of money for your business.
Advantages of having investors, are investors contribute to the credibility of a startup or growing business through their scrutiny, certification, and investment, and investors can also draw upon their own reputations and contacts to help the startup secure customers, employees, suppliers, and so on. Indeed, most Entrepreneurs that are recipients of venture capital indicate that the advice and mentoring they received from their investors was worth more than the money itself.
It is just as important for Entrepreneurs to know the disadvantages of equity which can come at a very steep price, while a debt-based bank loan might run you say 6% to 10%, an investor or venture capitalist seeks much higher rates of return around 20% to 
40%. Also, as stated earlier, equity investors generally want to share the business so you’ll have to give up some ownership (difficult for many Entrepreneurs to come to terms with), and while these investors don’t want be involved in running the day to day operations of your business, they usually want a seat on the board of directors where they can influence the decisions of the management team.
When determining when equity-based capital should be used, it is important know equity capital is well suited for startup and later stage growth businesses that require large amounts of working capital, or involve a new product launch, and banks are most assuredly not fond of lending working capital to a business, especially if they are in the startup phase. The reasoning is simple, that when a dollar is spent on payroll or advertising, it is gone forever and cannot be liquidated by the bank should the borrower default on the loan, so instead, this is the domain of the equity investor, and the investor is willing to take on more risk, for more reward of course.
When defining the types of investors in general, outside investors fall into three broad groups, Seed Capital from friends and family, Angel Investors, and Venture Capitalists, and these three groups differ with respect to the type of deal they are looking for, the size of the deal they want to do, and their specific motivations behind the investment, and Entrepreneurs need to understand and become familiar with each group, the deals they look for, and motivations specific to each investment.
California Businesses Fight for Cash and Lives: Who’s Next?
Published July 12, 2009 | 
Team Altman Interesting News:
Entrepreneurs that own small businesses in California are now faced with the daunting task of getting IOUs paid that were issued by the state of California in some sort of timely manner, and they not only have to stand in line with other business owners, but taxpayers due refunds from the state as well, and although there are options available to IOU holders, waiting for all of them are high fees charged by check-cashing storefronts and online marketplaces that do nothing but eat into already slim profit margins and cash flow.
The big questions now is will other states on the edge of the “financial no-mans land” go down the IOU path, and will Entrepreneurs that can afford to move their businesses stick around?
The Rest of the Story: http://money.cnn.com/2009/07/12/smallbusiness/california_small_vendors_ious.smb/index.htm?postversion=2009071210