Monday, May 14, 2012

Black Enterprise Small Business University Week 2 Review



This week personal finance expert and founder of Ask the Money coach.com , Lynnette Khalfani-Cox is teaching a course on Financing and Investing.

Lesson 1: HOW TO RAISE CAPITAL FOR YOUR BUSINESS (LOANS VS. INVESTMENTS)

Raising capital for your business is tough, but just because it’s tough doesn't mean you can’t do it. First thing to remember is financing starts with you not someone one else. Start financing your business with your own personal money, look into second car that you can sell, whole life insurance policy that's been building cash value, furniture , assets that you own  that you can sell and electronics . Be prepared to show that you've put up money of your own for your venture and have some sweat equity invested.

Secondly, get in touch with your local small business administration office for financing options. They maintain a data base of loans and funding initiatives for different types of business owners. There are loans for startup companies, women owned, minorities, home based businesses owners and other types of entrepreneurs.  A great resource to find based on certain criteria is business.gov.  Bank loans and financing from investors are another option but first you will need to build up your personal credit rating. You’re personal credit rating is what really matters most when attempting to secure government loan, commercial business loan, or a business credit card.  Many lenders require you to offer a personal guarantee on a business loan. So anything that you can do to improve your credit score will greatly improve your chances of a getting a yes from a lender.

If your personal credit history makes getting a traditional business loan impossible, consider non tradition resources for funding such as asking friends or family members for help. Be sure to frame your request as a business loan not a gift and be prepared to put everything in writing. Have a plan b in place; be sure to explain to family members what would happen just in case everything doesn’t go according to plan. There are also other loan options to think about, small business owners are leaning on peer- to-peer lending. They are a number of online lending networks such as prosper.comlendingclub.com, and kickstart.com.  You can also use online tools such as Go Big Network to find venture capital and angel investors. This site has a network with more than 20,000 investors who can review your funding request and provide you with the funds you need.

Finally, creativity can sometimes trump cash, not everything requires upfront money to finance your operations. Consider bartering, renting or leasing equipment instead of purchasing, or what low cost ways can you creatively come up with in order to meet your company goals.  Remember sometimes success in business isn’t just about dollars, it’s about the heart and passion you have for your business too. And when funds are little tight, a little creativity goes a long way.


Lesson 2: PERFECTING YOUR ELEVATOR PITCH

An elevator pitch is a short statement about your business that tells others what you do and how you help clients. The key to the best elevator pitch is to convey just enough information to peak someone’s interest. When you’re trying to raise capital for your company, having a killer elevator pitch is crucial, you only have a few moments to grab someone’s attention and make your business memorable and interesting. The strongest elevator pitch doesn’t sound like a sales pitch, that’s a turnoff for anyone listening to you. Let your passion shine through!

Three essentials ingredients to perfecting your elevator pitch:

  1.  Keep it short and sweet - Your elevator pitch needs to be concise but it needs to contain some of the key information that will make people perk up and listen. It should take no longer than 20 seconds to spit out. If you’re elevator pitch is any longer than that, you need to go back to the drawing board and rework it.

  1. Describe how big a problem you’re solving - Be sure to describe the scope of the problem that you’re solving in specific terms. For example:  If you have a business that is a transportation service that offers delivery of meals and medical supplies to home bound senior citizens and others. A good elevator pitch should sound like this: 12 million Americans are home bound due to age, illness, or medical disabilities. My company delivery service helps people who can’t leave their homes get the food and medical supplies they desperately need.

  1. Position your company as a solution - When you describe your company be sure to state specifically how you will help the market place, particularly your target clients.  Avoid abstractions and metaphors, and stick to one main tangible benefit that you offer. If your elevator pitch is done right you will have another opportunity to tell an investor or a potential customer more about your business.

As your delivering your pitch, pass along your business card to the person and expect a phone call or an email later. That’s the benefit of developing a well-crafted elevator pitch; it makes you and your company irresistible.


Lesson 3 - WHAT TO SPEND, WHAT TO SAVE – MANAGING YOUR BUDGET

When deciding how to manage your business budget, start with the basics; get into the habit of doing proper budget and tracking every time. Especially keeping an eye on your spending in different categories, like your marketing expenses, distribution and production costs, and of course your payroll costs. Having 3-6 months’ worth of saving set aside is good initial target. If you’re funding most of the business with your own money, having a 2 year savings and spending plan, will give you insights as to what you can expect from this new venture.

 Make realistic projections, look at the numbers, and make sure that launching this business makes financial sense.  If making future projections about income and expenses fall outside of your comfort zone get professional help, get an accountant, or use online budgeting software for small business owners.  

To keep business expenses low don’t buy everything new or all at once, you made need basic equipment to get things going.  One of the smartest money moves you can make is to wait before making certain purchases. And when you do buy, consider purchasing certain things used.  Search local classified ads to see what former business owners are selling that you can use, that should cut down on your startup costs.

Here are 3 pointers that can help you manage your business budget:


1. Create a savings and spending plan – Create this plan before you get started. If you’re already launched your business, it not too late to, create a plan that shows you exactly what you expect to spend, save, and earn over the next year or two.


2. Get professional help – If managing your business budget is too difficult for you or too time consuming, considering hiring a part time accountant to help out with bookkeeping and related tasks.

3.  Question every purchase – Don’t make the mistake of buying a laundry list of things that can mess with your cash flow, be smart about the purchases you make and when you make them, that will help keep money issues to a minimum.

Making smart money decisions and managing your business budget wisely, will free up your time to focus on what matters most. Running your dream business and doing it well!


Student – Lashana Thomas

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