Asklorraine/23″/dt1st/mark2nd
Question: Our company specializes in Web-based entertainment products and has only been operating for about a year and a half. We weren’t planning on getting venture capital money until our second phase of operations, which won’t be for another year. But, like most Americans, we have seen our personal net worths drastically change with the stock market drop these last few weeks. We have made tremendous progress but are in a capital crunch. What should we do?
Answer: I hate when that happens! If only you had listened to my earlier column that talked about getting money when the money was ripe for the taking.
Need I state the obvious? You are in the worst situation a young, growing company can be in you are desperate for capital and the market is in a state of disarray.
But that doesn’t mean you should despair; you just need to get creative. Obviously, you should get equity capital if you can. And maybe you might be able to go to a strategic partner and not a venture capitalist. If you find a strategic partner with deep pockets, it could not only fund your business’ growth, it might also open doors to advertisers and other potential corporate clients that you may not be able to attract by yourself.
You can also remind the investment-banking community that even though the stock market has taken a hit, the market is still worth close to $7 trillion (that’s up about $4 trillion to $5 trillion since 1990), interest rates are at the lowest they’ve been since the 1960s, and there is still a tremendous amount of liquidity out in the marketplace.
We’ve seen much worse markets, that’s for sure, at least in my lifetime remember 1974, when both the stock market and the bond market were in the tank? Or 1980-82, when interest rates spiked to 21 percent? Or 1987 following the stock market crash, when IPO money dried up and interest-rate spreads were the widest they’d been in decades?
So let’s get real. If you have a viable business, you should be able to get capital to grow it. The problem is, how much will that capital cost you?
My suggestion is to take the money even if it’s expensive. Just try and get some flexibility in the terms. For instance, if you have to give up a big chunk of ownership, try to negotiate a deal whereby if the investor receives a certain rate of return over a given period of time say two years then the ownership level drops to a certain base percentage, or you get the option to buy it back at a certain price.
There are many different alternatives. You just need to get some money to keep yourself in business.
Q: The hardest part of running our marketing consulting business is finding employees with good skills. Young people today don’t seem to be getting the training they need to work in a small business. It’s almost impossible for us to afford whether it’s time or money training new employees. How do we deal with these issues?
A: It depends on what skills you believe are most needed in your business.
What I found interesting from a recent survey of small-business owners is that they ranked communications skills and assertiveness as the most desirable skill sets needed, way ahead of computer skills, leadership and sales abilities. But training employees to have good communications skills might vary from business to business and by industry.
What you, as a business owner, might have to do is spend time training your employees yourself. Of course, this is an extremely difficult thing to do because you need employees to help you do your work not vice versa!
There is another alternative: Send your employees to low-cost seminars in the evenings or on weekends. We have two great resources here in Southern California: UCLA Extension and the Learning Annex, both of which have some of the best speakers at very reasonable prices. (I know because I’ve been a speaker myself and it has been very rewarding for me and hopefully for my audience!) These programs also represent a great opportunity for your young turks to network with other professionals.
Q: As a conference and trade show planner, we are very skilled in handling local events, but recently we were asked to bid on a project in Europe. We’re confident our bid will be competitive, but we’re very anxious about taking on a project overseas. What do you think we should do?
A: When in Rome While your prices might be in line with Los Angeles events, you may want to think about the cost of doing a project in a foreign country. Did you research the cost of such an event in that territory? Have you factored in the additional research and travel expenses your business may have to incur? The exchange rates?
Most of all, I would strongly recommend that you look into the customs of that particular country, so as not to do something that would be offensive or that would not be suitable for that particular culture.
For instance, my company was recently involved in putting on a world music tour in Japan. We were even approached by a Japanese corporate sponsor that paid for the event. But it wasn’t until we got closer to the actual festival date that we found out that it was right in the middle of a Japanese holiday!
Fortunately, it wasn’t a complete disaster, but it would have been a thousand times better if we had scheduled the event for another time.
So you may want to hire a consultant in that country to work with you on planning the event, so that foolish mistakes are not made or protocol not violated. (Just make sure you’ve identified these extra costs, because if you’re not careful, you’ll win the job but lose a lot of money!)
Lorraine Spurge is a personal finance advisor, author of “Money Clips” and a business news commentator. She can be reached at (818) 705-3740 or by e-mail at [email protected].
