How to raise money

Most business owners understand their product but lack expertise in raising money through debt or equity. Obtaining proper capitalization is critical to growth and the long-term success of your company.
There are basically two ways of increasing your availability to funds—equity and debt. The advantage of raising money through equity is that you don’t have to pay it back. It is infusion of funds—most likely large amounts of funds—that immediately provides cash for your use. The obvious downside is that you give up some portion of your ownership. The first place to look for quick equity is to friends, family (and fools). The owner is the best salesman and representative of the company and they often develop a “deck” to assist them in this venture. A deck is merely a power point slide show that the owner can use in presentations that they are making. For this purpose they are often very good but don’t be fooled—these “investors” are not buying into your company because of your dog and pony show—they are actually “buying” you. They know you, they believe that you can be successful and are willing to invest because of that belief. It certainly helps if you can have other collateral materials to support your cause but chances are you are the reason for their investment. To move to capital markets to raise real money you need the use of a professional investment banking firm that can take your compelling story to another level and attract professional investment rather than emotional investment.
Debt is the second way to raise cash. There is good debt and there is bad debt. Good debt is matching long term needs with long term payments and vice versa. Good debt is a mortgage on your house—bad debt is mortgaging your house to pay off your credit cards. Debt can be raised from either commercial banks or a secondary market. If possible banks are by far the best option. Banks have the best interest rates and create advantageous long term relationships. Unfortunately banks are regulated by the federal reserve and if you do not meet their required ratios or are in an undesireable industry you simply will not be their customer. They may never say no. Instead they may just constantly ask for more information until you give up. Regardless, you are not going to get your money. Secondary markets are in many ways the wild, wild west. Many brokers lack the expertise to get your deal done. The litmus test should be in the information that they require and in how they use those materials in compiling the package that they use to present your compelling story to market. Lacking a professional package you will not receive serious consideration from credible lenders. As a minimum the package needs to include significant financial information; third-party validation of the business plan; market and competitor analysis; demonstrable evidence of management team and operational competency; financial projections; corporate regulatory compliance; and analysis of off-balance sheet assets. Thien this must be packaged in a professional format acceptable to the professional readers. Often times good deals are not financed simply because they didn’t make the investment do the work that is needed to properly present them to market so be wary of brokers who do not speak this language.

Cash, Debt and Equity

Proper capitalization is critical to a business’ success. Most small businesses were started with an idea, a commitment and a credit card. If they survived and prospered they created profit and cash flow but often lacked a capitalization strategy.
Capitalization is the combination of both equity and debt. Equity is acquired through either external or internal investment. Does your company have a strategy for the accumulation of equity? Probably not. The most obvious method of increasing equity is through cash retention. Some percentage of all cash intake needs to be retained—this is the purchase of an asset—the purchase of cash. Cash is just like any other asset—you have to buy it—and it is one of your most valuable assets. Despite its’ value many business owners fail to purchase (retain) cash. It won’t happen by itself. You need a strategy for cash retention if you expect to build a strong, secure business.
Credit is also an important component of capitalization. Banks will not lend you money when you need it—they lend you money when you don’t—therefore you need to actively seek credit when you don’t need it. You should also diversify your credit. Utilize multiple lenders. In today’s environment with institutions combine and your “personal relationship” with your banker is a thing of the past. Just like over-reliance upon a single customer or vendor is a red flag so is your over-reliance upon a lender. Don’t be held hostage.
How much and what combination of debt, cash and other assets should you have? Make this a topic of your on-going planning.

How to Handle Employee Attendance During Bad Weather

Snow and slippery conditions during the winter months may make it difficult for your employees to travel to work. Consider the following guidelines that can help your company be prepared when bad weather strikes.

1. When an employee misses work due to bad weather conditions, whether the employee is entitled to be paid for the absence may depend on the employee’s exempt or non-exempt status.
Under the federal Fair Labor Standards Act (FLSA), employers are not required to pay non-exempt employees for hours they did not work, including when the office is closed due to bad weather.
Exempt employees generally must be paid their full salary amount if they perform any work during a workweek. However, an employer that remains open for business during a period of bad weather may generally make deductions, for full-day absences only, from the salary of an exempt employee who chooses not to report to work because of the weather. Deductions from salary for less than a full-day’s absence are not permitted.
If the business is closed for the day as a result of inclement weather, the employer may not deduct the day’s pay from the salary of an exempt employee. The general rule is that an employer who closes operations due to a weather-related emergency or other disaster for less than a full workweek must pay an exempt employee the full salary for that week, if the employee performs any work during the week. This is because deductions may not be made for time when work is not available.
2. Some states require employers to pay employees for showing up even if no work is available or there is an interruption of work and the employee is sent home.
Although payment for time not worked may not be required for non-exempt employees under federal law, some states do require that employees be paid for a minimum number of hours for reporting to work, even if there is no work that can be performed (such as when the office is closed) or the employee is sent home early, for instance, due to an impending storm.
Often called "reporting time pay," these laws may apply to specific industries (e.g., manufacturing) or certain employees only, so it is important to check with your state labor department for requirements that may apply to your company before implementing any policy.
3. Plan ahead to let your employees know what is expected of them and to help minimize disruption to your business.
Make it a priority to notify all of your employees, both exempt and non-exempt, of your company’s policy regarding employee attendance and pay during periods of inclement weather. Your policy should include information on how your employees can find out whether the office is open or closed, such as by email, radio broadcast, calling in to hear a recorded message, or other methods that all employees can access. Be sure to apply your policy consistently and fairly to all employees.
It’s also prudent to remind employees to use their best judgment and not to put their safety at risk when it comes to traveling to work during or after a storm. If possible, see if you can arrange for employees to work remotely from home on days when the weather makes travel dangerous.

Your company could be writing this letter next year!

Dirk,

Thank you for all your assistance with our business this year.   Your continued support and guidance has helped us identify areas to improve, what is working, and to plan ahead for future growth.  The tools you have shared with us have given us the ability to learn and execute our plan.   You always have a unique perspective when we have a challenge to overcome or a decision to make.   I have come to rely on your advice and humor to get me over the hump when thinks stack up.

That you for your genuine concern for our progress and personal care you put into each member of our group.   I would recommend The Fremont Group to anyone in business.   Your service has kept us on track!

Sincerely,

Dana Beck

Entropy Coating Solutions – ECS

A Division of Construction By Design Group, LLC.

CEO

12/15/15

Year-End Discount on Services

As year ends our non-profit has subsidy money to use.  Existing clients and new clients will all receive a 10% match on all payments received by December 15th!  Those of you with balances can take advantage of this discount and new clients have the opportunity to start at less than existing 2015 rates!  New clients should also be aware that there will be a price increase for new clients starting in 2016 that you can avoid–once you are a client your fees never change!

Act now and let us know if you are interested!

The Fremont Group

www.tfginfo.org
303 338 9300

What do Small Business Management Consultants Do?

Small business owners fall into three categories.  The first are owners who have successfully used consultants or mentors and continue to do so; the second are owners who used expensive, private consulting firms who flew in a couple of people, charged an arm and a leg and left nothing but a binder; and the last are owners who have never used management consultants.

Owners who have a solid relationship with a person who has on-going interaction with them and seem to care as much about their business as they do have found an invaluable resource.  These are generally the most successful of the three groups of owners.  Owners who have been burned discredit the value of the industry but then I once had an AMC Pacer and that didn’t mean that all cars are bad!  The last group generally doesn’t understand what a consultant can do for them.

The Fremont Group is a non-profit.  Our fees are significantly below the private firms such as Legacy Analytics, ABS, CBS, Global Resources, HMMC, and others.  A first rule is that you should never make a major investment in consulting until you have met the person with whom you will be working.  Use our “Search” function and find posts regarding how to hire a consultant.  Recent successful projects completed by our Success Partners include:

Management Committee Development,

Team Building, Forms and Procedures, Taking Your Business to the Next Level, Executive Development and Counseling, Financing Packages, Positioning for Value, Sales Focus, Gaining Financial Control, AR/AP and Inventory Controls, Transition to Family Member(s), Mergers and Acquisitions, Survival Plans, Controlled Sustainable Growth, Management Retreats, and Handling Divorce and Your Business.

Other topics also include:

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No one is perfect—turn your weakest area into your strength and transform your business.  Give us a call 303 338 9300

Time for your Annual Check Up!!!

The health of your business is as important as your personal health.  The Fremont Group offers annual business physicals—an independent check-up of your systems, procedures and controls and the results might be the most important thing that you have ever done.  Head off future problems; address current problems; and get solid recommendations from an independent third party.  Nominal cost of travel is well worth the investment.  Give us a call at 303 338 9300.

Scam or The Answer? Management Consulting Firms who call

There is a controversial industry of small business management consulting.  Many have found it to be an expensive scam yet others have found it as “the answer” that they have sought.  Very few small businesses are yet to receive a phone call from such a firm offering a 2-day “business survey” for a nominal cost that will identify savings for you company.  This results in a salesperson arriving attempting to sell you management consulting for $300 per hour per person, travel and other expenses—over $25,000 per week.  Owners who report this as a scam signed the contract before they really understood the cost; owners who are happy had businesses capable of shouldering the cost and had immediate needs.  The quality of these firms varies tremendously and some simple rules will help you make a better decision.

  1. What are your needs?  Do you have an emergency need that must be addressed immediately or are your issues more structural and require a long-term fix?  Can your issues be solved through an intensive couple of weeks work with professionals or are you better off with a long-term relationship?  Do not sign a contract which provides a fix that doesn’t match your issues.
  2. Who is going to do your work?  Does it really make sense to commit to thousands of dollars of fees to a person that you have never met?  If they try to tell you that it does—run the other way!
  3. Did you get references?  Have you checked the internet?  Have you called the references?  (Remember that some companies actually have “shill” references!)  Do your research but most of all, follow your “gut feel.”  Does it seem like this person can help you?

Consulting firms are divided into two groups: those that generate short-term consulting clients and those who develop long-term relationships with their clients. Effective management consulting for small business owners is the development of a long-term relationship between themselves and a competent professional who is able to counsel them in the management of their business. The Institute of Management Consultants recommends that when making the determination as to whether or not to hire a management consultant use common sense—meet the person before committing and make sure that the consultant is in it with you for the long-term.

Are you an Entrepreneur or a Neopreneur?

By Dirk Dieters, Executive Director of The Fremont Group

The term “entrepreneur” has been hijacked!  It has been stolen and unfortunately it is so far gone that it won’t come back.  Over my 20 years working with small business owners there is a disturbing trend among the younger owners—they have never learned how to make a profit.  The merger mania of the 80’s followed by the high tech boom made millionaires out of people who never made money.  Today the term “entrepreneur” is associated with people who had an idea, found a backer with a lot of money, created a level of sales volume and hype, and then made their money by being bought out.  Compare that to 100 years ago.  In 1912 President Theodore Roosevelt gave a speech in Columbus, Ohio. 

The great mass of  business is of course done by men whose business is either small or of moderate size.”  These people he called entrepreneurs.  He went on to say that this man is “in no sense dangerous to his community, just because he is an integral part of his community, bone of its’ bone and flesh of its’ flesh.  His life fibers are intertwined with the life fibers of his fellow citizens.”  These businessmen are “satisfied with a legitimate profit.”

These businessmen were the builders of our communities.  Generally their objective was to made a good living and pass the business opportunity on to their children.  A business run with the objective is run very differently from a person who is focused upon an “exit strategy” that involves a big pile of cash regardless of the profitability of their venture.  This shift in focus has destroyed the fabric of our communities and is resulting in less successful small businesses.  For the first time, 2014 saw more businesses close than businesses being created.  Fact is—if by today’s definition you are an “entrepreneur” who is planning to make their money by selling out, The Fremont Group is not for you.  And since the new definition isn’t going away we need a new word.  We have created the word—neopreneur.  Whatever is old is new again.

The neopreneur supports his or her family from the profit of their business.  They understand that their chances of being bought out with a big payday are about the same as winning the lottery.  They may not be passing the business on to their children and they have an exit strategy but their focus is to make money now.  The Fremont Group wants to work with neopreneurs.  The fundamentals of profitability have never changed but the tools have improved them.  We create systems, procedures and controls that make your life better.  We believe that there is only one reason for your business to exist—to make your life better.  If you spend your day looking to raise millions of dollars you aren’t spending your days trying to make money.

Give us a call.  As a non-profit you will be amazed at the results that can be obtained from a very reasonable investment.  303 338 9300