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May 30, 2009
Seven Keys Every Entrepreneur Must Know About Business Angels When Seeking Private Investment
If you are looking for money to start or fund a business, one of the options open to you is finding angel investors. The difference between venture capitalists and angel investors is straight forward: a venture capitalist is a professional supplier of business capital, whereas an angel investor is much more likely to be a private individual interested in backing one or more specific business start-ups. Here are some tips to make sure you find yourself in the company of good angels:
Make sure they can afford it
You should never allow an angel investor to back your business if you aren't certain that they are rich enough to never get a penny back. This is for both moral and legal reasons. Moral, because so many new start-ups fail and you don't want the investor's losses on your conscience. Legal, because there are laws against persuading little old ladies to give you their savings.
Make sure they are sophisticated investors
What you really want is an angel investor who has knowledge and expertise in your industry. Yes, you want their money... but you also want their experience, contacts and expertise. Also, if you want to raise venture capital later on, it will be much harder if you show up with a long list of unsophisticated investors.
Don't think it will be any easier
Raising money from angel investors is no easier than raising it from venture capitalists. They care as much about liquidity as venture capitalists do – maybe even more because they are investing their personal, after-tax money.
Understand their motivation
Angel investors differ from venture capitalists because, typically, angel investors have a double bottom line. Usually, they are successful entrepreneurs who have made it and now want to pay back society by helping the next generation of business people. Thus, they are often willing to invest in less proven, riskier deals to help entrepreneurs get started.
Help them to live vicariously
One of the rewards of angel investing is the ability to live vicariously through an entrepreneur's efforts. Angels want to relive the thrills of entrepreneurship while avoiding the firing line. They enjoy helping you, so seek their guidance frequently.
Make your pitch is understandable to the angel's spouse
The usual membership of an angel's investment committee consists of one person: a spouse. So, if you've got a complicated product, make sure it's comprehensible to the angel's husband or wife.
Be nice
More often than venture capitalists, angel investors fall in love with entrepreneurs. The entrepreneurs may remind the investors of their sons or daughters, or even fill the position of the sons or daughters they never had. If you are seeking angel capital, then you're probably not a proven moneymaker, so you can't get away with acting like an idiot. Be nice until you're proven – although you should really be nice even when you are proven.
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Posted by David at 10:04 PM | Comments (0)
May 25, 2009
Why Small Businesses Could Be Due Compound Interest On VAT Refund?
Small businesses should be delighted at the news that the High Court has ruled that compound interest is payable in principle on overpaid VAT. In many cases this will mean that the interest receivable will far exceed the value of the overpaid VAT.
This decision, in the group litigation brought by motor dealers, clarifies that small businesses and taxpayers have six years from the date they discovered they had inccorrectly overpaid VAT to make a claim for a refund. at the High Court.
The Judge ruled that compound interest is appropriate restitution for loss of use of the funds rather than the remedy currently available under UK law.
However, this only applies where the overpayment of VAT arose because UK law or HM Revenue and Customs (HMRC) policy contravenes EU law. In all other circumstances, only basic interest is payable.
For more information on VAT, including how to check the validity of vat number visit the following resources:
Check VAT number to make sure it's valid:
How to handle a VAT investigation:
Posted by David at 8:49 AM | Comments (0)
May 17, 2009
Six Most Effective Solutions To Bootstrapping In A Down Economy
Bootstrapping is where you decide that, for one reason or another, you aren't going to raise venture capital but will fund your business yourself... possibly on a very tight budget. It rather went out of vogue during the boom years when angel investors, venture capitalists, banks and others were simply throwing money at every new venture that seemed to come along. But now, in these harder times, I think bootstrapping is back. Here are a few hot tips for the would-be bootstrapper.
1. Focus on your cash flow, not your profitability. Everyone assumes that profits are the key to survival. If you could pay the bills with theories, this would be fine. But the reality is that you pay your bills with cash; so focus on your cash flow.
2. Forecast from the bottom up. Many people look at the total market for their product and then assume that they will win a certain percentage of it. For instance, the dog food market in the UK is worth £1 billion. Someone forecasting from the top down might say that they were going to go after 5% of that market. Someone forecasting from the bottom up would say, "I think I can sell my dog food into 100 outlets and that each one will sell £1,000 a month. I think we both know whose forecast is likely to be more accurate."
3. Start out as a service business. Say you want to build a software company. Provide consulting and services based on your work in progress software. This has two advantages. First you get immediate revenue and true customer testing Second, once the software is fiels tested, you can flick the switch and become a product company.
4. Focus on function, not form. Yes, it is wonderful if you can create a product like the Apple iPod or the Rolex. But as a bootstrapper it may be better to focus on a product that provides a very tightly defined function. A stapler that works, instead of one that just looks good, for instance.
5. Understaff. Many entrepreneurs staff up for what could happen, best case. Bootstrappers understaff, knowing that all hell may still break loose.
6. Go direst. The optimum number of mouths between a bootstrapper and his customer is zero. Of course, retailers provide great customer reach and wholesalers provide distribution. But e-commerce was invented so that you could sell direct and reap greater margins
David
Small Business Resource
Posted by David at 11:37 PM | Comments (0)
FiveTried And Tested Techniques on How To Deal With Cash Flow Management Problems
At the moment, cash isn't just king it's basically emperor. Why? Because, during a sales slump, if you don't have cash you are out of business. So, what should you do to ensure that you maintain a good cash flow management during these troubled times? Here are a few ideas.
1. Make a precise and well-thought-out cash-flow projection. Normally, one would do a cash-flow projection every six to twelve months. At the moment it is probably advisable to do it every month, even every week. You will find a software package like Microsoft Excel brilliant at helping you achieve this.
2. Keep in touch with the people who owe you money. Ideally, call them yourself. When the owner of a business rather than an administrative assistant calls to collect a debt, it almost always gives the matter greater urgency.
3. Pay your own bills on time. Putting off paying your own bills only delays problems. If you haven't got the cash to pay all your bills, then pay part of them to keep your suppliers happy.
4. Lease rather than buy equipment. Even consider selling your building and leasing it back. This could free up sizeable amounts of cash.
5. Factor your invoices. Factoring, in which financial institutions buy receivables for a discount and then take over the collection, is something large companies embrace more readily than small ones. It is just another form of financing. If cash is tight, factoring (sometimes called 'invoice discounting') can be an ideal way to solve the problem.
David
Small Business Resource
Posted by David at 11:16 PM | Comments (0)
May 3, 2009
Six Steps to Getting More Business If You Are Sick and Tired of Doing Complicated Business Quotes and Proposals for Business
You're about to discover a powerful and unique concept called the "Discovery Contract."
This morning I had a conversation with a new member who is a sales consultant. He described the all-too-familiar problem of spending a bunch of time giving someone a business proposal and then, being totally blown off by the person he did it for. The problem was he tried but failed to get access to the real decision maker. He simply wasn't being taken seriously. Plus he felt he was seen as "just another vendor".
So what's the solution?
The solution is a discovery contract: A paid quotation for a small percentage of the final price, in which you give the customer an in-depth investigation instead of just a quotation price. Yes, you can charge for business quotes. So long as the customer clearly understands that he or she is going to get a lot more than just a quote.
This is a normal and customary part of my own fee structure and I don't do business quotes for free anymore. You shouldn't either.
When you go from quotes to discovery contracts, you'll do fewer quotes and close more business.
Now this shouldn't be blindly applied to every possible situation, but anything that involves the delivery of complex services surely deserves consideration of a discovery contract. It's gutsy and you may feel nervous pulling it off the first time, but it's a fantastic tool.
Here's a special audio bonus in MP3, discussing discovery contracts. This mp3 is about 8 minutes long:
You can (and should!) download it here and listen to it. It tells you the following:
How to position it with the customer so it makes sense and doesn't sound like you're just whacking them for a quote;
How much to charge for it;
What to deliver in it and how to present it with respect to your competition.
And more
Perry M
Posted by David at 3:38 PM | Comments (0)
