How to grow a business organically
1. Excessive activities serving many types of customers/clients;
2. Thin gross profit margins;
3. Bloated overhead or operating expenses; and
4. Poor cash flow management causing financial crisis.
The entrepreneur who is willing to discover where his/her profit is coming from, or alternatively, what the root cause of financial losses is, has the opportunity to grow profit and ultimately increase business value. Learn how…
Growing a Business by Acquisition
When the entrepreneur has a stable, profitable business with a capable management team, growing a business through acquisition of competitors and/or synergistic businesses is worth consideration. Other businesses ripe for acquisition may lack management and/or capital or simply be owned by an entrepreneur ready to move on into retirement or a new business venture.
Building Multiple Business Entities
It’s common practice for entrepreneurs to start and operate multiple businesses. Sometimes such businesses are related to one another. In other cases, there is no apparent connection between the entities.
Using multiple business entities is one way entrepreneurs separate their assets for liability protection purposes. Almost any combination of entities, including C and S Corporations, Partnerships, LLC’s and LLP’s, may be used. Although establishing a certificate to Do Business As (DBA) in a State or jurisdiction is common practice, it does not establish the line of business as a separate legal entity and a separate Employer Identification Number (EIN) is not dedicated to a line of business with DBA certification.
Structuring multiple entities should be carefully considered with the assistance of a business Attorney licensed to practice in the state where the businesses have established operations.
As the entrepreneur grows a business, he/she will undoubtedly experience growing pains. Proactively addressing key important matters, before they become problematic to the business, is wise. Generally speaking, the following areas should be addressed:
1. Key Employees
2. Customer Concentration
3. Long Term Supplier Agreements
4. The Protection of Intellectual Property
Financial Key Performance Indicators
“That which is measured, improves.” is quoted often by performance coaches and business leaders for a good reason; it’s true and it works! Some believe the quote was authored by Peter Drucker. Many others have taken claim to it, or a variation of the quote, as well.
Regardless of its origin, successful entrepreneurs apply this quote to their journey by learning what they need to measure to reach their financial goals of profitability and business value. They do so by discovering and continuously measuring Financial Key Performance Indicators (KPI’s) for their business and its industry. By applying their own real time financial KPI’s to those achieved by their industry peers, the entrepreneur is able to see where they exceed or fall short of their benchmarks. Ultimately, this drives changes to the business and its financial performance improves.
Whether you’re growing a business organically or searching for ways to jump start business growth with a large cash infusion, don’t allow the vast options and capital sources for your business to become overwhelming. This post identifies several non-traditional (i.e. non-banking) sources of business capital for your business.
Debt and Equity Mezzanine Bridge Capital Bridge Capital is used by high growth middle market businesses in need of $5 Million or more for a period of three-to-seven years and who are capable of paying 20% plus for the use of the Investors capital. Debt Mezzanine is often used in conjunction with a bank debt facility and is considered quasi-equity. Accounts Receivable and Inventory may be used as collateral with Debt Mezzanine. Equity Mezzanine is best suited when there is a very large potential upside in the business valuation in the future. Whether using Debt or Equity Mezzanine for capital, it’s safe to assume the business is expected to grow significantly, become more profitable, and be sold to a third party in three-to-five years. When a business crosses the line and takes on Mezzanine Debt or Equity, it is considered a business that is ‘in play’.
Private Equity Group Private Equity Groups invest capital in the form of equity into private businesses and typically buyout part or the majority of the original founders/shareholders. This recapitalization offers the business owner an opportunity to sell twice: once to the PEG; and then again when the PEG sells to another investor and/or buyer. PEG’s invest in a business because they believe in its management team while recognizing the need for both capital and strategic management to take the business to the next level. Read More…
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