Thursday, December 27, 2012

Golden Ticket: Precious Metals Can Fund Your Small Business

You have the ideas, the ambition, and the moxie all in place to get your small business up and running. The one deterrent keeping you from being your own boss is funding. Some are lucky enough to have family and friends who willingly invest their own money, while others have convinced a few venture capitalists to fund their project. But saving the old-fashioned way is the road most will have to take. Bank accounts and CDs are no longer an effective way to store fund because of the perpetually low interest rates set by the Federal Reserve. Precious metals are not only an excellent hedge against inflation, but can yield excellent gains as a result of the those same inflationary policies the central banks continue to embrace.

ETFs vs. Physical Metal

Americans tend to prefer investing in gold and silver exchange-traded funds, or ETFs, as opposed to the physical metals. ETFs are stocks traded on the market that are backed and valuated by the price of its respective commodity. In other words, you will own a piece of paper saying you have x-number of gold shares and y-number of silver shares. Owning the actual gold and silver gives you physical possession of your investment, which can even be used as collateral on a low-interest loan to startup your business. Gold and silver dealers, such as US Money Reserve, sell bullion in the form of coins and bars at real-time prices based on market fluctuations. This gold can then be stored either in a safe-deposit box or a fire-proof safe tucked neatly away in your home.

Saving With Gold and Silver

In 2003, the price of gold was about $300 an ounce, while silver sold for less than $4. Today gold hovers around the $1,700 per ounce mark, while silver is traded at $32 per ounce. In other words, had you deposited $2,000 into a savings account in 2003 with a 3 percent compound interest rate (this is being generous), your yield today would be about $2,650. Had that same $2,000 been used to buy seven, one-ounce gold coins in 2003, today you could sell them for almost $12,000. Many experts in the gold industry, including Euro-Pacific Capital, Inc. CEO Peter Schiff, are anticipating another spike in gold prices similar to that of the past decade. Gold and silver are excellent insurance policies and are guaranteed to retain their value.

Selling Your Metals

Investors in gold frequently watch the daily fluctuations in its price and decide whether to buy or sell. When you're ready to turn your gold coins into the cash needed to start your business, find a reputable dealer who buys bullion. They should offer you 90 percent of the current price of gold. The places to avoid are corner stores with large "We Buy Gold" signs and the loud television commercials encouraging you to send your bullion to them. Pawn shops are also places to avoid when selling.


Authored By: Madeleine Berry Still a consultant for hedge-fund investors, Madeleine believes that there are many other business endeavors that one can invest in, outside of military spending. She tells her clients to follow their heart and the money will follow.

Wednesday, December 12, 2012

Funding your Business Sources of Equity



Dave Archer
Let’s look at possible investors for your business.  The first two are within the reach of most businesses, while the latter two are options for a very specific - and small - group of businesses.  

Friends and family  

Friends and family are the low-hanging fruit of investors.  It may be easy to talk Mom and Dad, your siblings, etc., into investing in your business, and to do so with minimal paperwork.  If your business does not perform to plan, however, it's also easy to imagine the awkward discussions at the holidays when they ask about how your business - and their investment - is doing.

Crowdfunding

Crowdfunding looks to a large number of people - often strangers found via the Internet - to provide funding for your business.  Still in its infancy, two models of crowdfunding are evolving.  The first is reward-based, where people give you money in exchange for a gift or a product of some sort.  This model may also provide a way to estimate your potential market and perhaps pre-sell a large number of a new product. 

With the second model, people give you money in exchange for an ownership interest in your company.  Two caveats:  First, the Security and Exchange Commission is still setting the rules by which you can offer this type of equity. Second, each "owner," no matter how little they own, may feel entitled to your time via the phone or email.  You can imagine a worst-case scenario where you have a thousand "owners" vying for your attention.  Crowdfunding sites include www.kickstarter.com and www.crowdfundinglive.com

Angel Financing  

 "Angels" are individual investors who form investment clubs and look for LOCAL high-growth investment opportunities.  Given the need for high returns needed to offset the high risk of their investments, angels seldom invest in low-growth businesses such as retail or restaurants, but instead look for businesses likely to grow exponentially.  And, unlike the early days when angels invested in ideas, angel groups now look for businesses that are already generating significant revenue. Angels typically invest in the $100,000 to $1 or $2 million range.  For example, two groups in Northern Nevada that provide angel financing are the Reno Angels (www.RenoAngels.org) and the Sierra Angels (www.SierraAngels.com).

Venture Capital   

Venture Capital (VC) is the top of the equity food-chain, and is usually an investment fund pooled from sources of money such as high-net worth individuals, foundations, pension funds, etc.  VCs typically invest at least $1 million and look for established companies ready to take the next large step.  Like angel investors, VCs are looking for high-growth companies offering very high potential returns.  

Dave Archer is President and CEO of NCET - Nevada's Center for Entrepreneurship and Technology. Learn more about NCET at www.NCET.org

Monday, December 3, 2012

Investment Banking Blog Series – Capital Raise Process (Article 1 of 4) Types of Capital – Senior Debt & Mezzanine Capital


By: RKJ Partners, LLC (Cyril Jones & Gregory Ficklin)

As investment bankers, RKJ Partners possesses a breadth of knowledge and experience in advising clients that seek growth capital.  In our latest blog installment, we define and outline the key elements involved in the process of raising capital. 


It is fairly common for business owners to believe there are only three sources of capital – their local bank, the Small Business Administration (SBA) or personal loan/savings.  However, if certain business criteria are met, there are other viable sources of capital available to fund growth opportunities.  Capital is generally grouped into three main classifications:  Senior Debt, Mezzanine Capital and Equity Capital.  

Most entrepreneurs are very familiar with senior debt offered by traditional banks.  Senior debt is first in seniority and is often secured by collateral in the form of a lien.  Senior debt is financing that has been loaned to a company for a pre-negotiated period of time with interest paid on the principal.  Senior debt is among the safest form of financing for the party providing the funds.  Due to its inherent low risk, it also provides the least amount of return.  However, in exchange for this low return, significant protection is provided to the lender even in the event of bankruptcy.  

In this blog issue, we attempt to demystify a not-so-common type of capital – Mezzanine Capital (also called Mezzanine Debt).  

Mezzanine Capital/Mezzanine Debt - Overview 
In practice, most mezzanine financing takes the form of subordinated, unsecured debt. Initial discussions often focus on whether the debt should be structured in the form of loans or debt securities, with the investors’ view of the likely resale market being the strongest determinant. Mezzanine financings in the form of debt are commonly characterized by the inclusion of an equity participation, usually in the form of warrants, options and/or conversion features or co-investment rights associated with the primary mezzanine investment.
Maturity
The maturity of mezzanine debt is typically five years or longer, but the maturity for a particular issuance often depends on the scheduled maturities of other debt in a company’s capital structure. For mezzanine debt that is incurred at the same time as traditional bank debt, senior lenders often insist that the mezzanine debt mature later than their bank facility. However, because mezzanine capital tends to have a higher rate of return relative to other debt in the capital structure, some issuers prefer shorter maturities. Conversely, some issuers agree to longer maturities on their mezzanine debt in exchange for more flexible optional redemption terms.
Interest Rates 
Mezzanine debt instruments generally feature a cash coupon with a fixed rate, which can be payable semi-annually or quarterly. Mezzanine investors usually target a higher internal rate of return (“IRR”) on their investment than high-yield or bank loan investors, and seek to achieve their target IRR by a combination of the interest rate, fees and the equity component.  Mezzanine preferred equity investments are typically structured with a high fixed-rate dividend, which may be paid in cash or in-kind, and may feature an optional or mandatory conversion into common equity. 
Ranking in the Capital Structure
A key consideration in structuring a mezzanine financing is determining the position (technically referred to as being “senior” or “junior”) of the mezzanine debt in the issuer’s capital structure. In some situations, mezzanine investors agree to invest in a preferred equity instrument that is junior to all debt in the capital structure. For mezzanine investments structured as debt, senior lenders generally expect that the mezzanine debt is subordinated to the credit facility and possibly other senior lenders, such as high-yield bondholders. Therefore, mezzanine debt holders typically agree to be contractually subordinated or “junior” to existing and certain future holders of senior debt of the issuer. 
Security 
One of the defining characteristics of mezzanine debt is that it is typically unsecured. In those instances where mezzanine debt is issued on a senior basis at the same level with other debt of the issuer, the remaining senior debt is secured, so the mezzanine debt will be effectively subordinated to any secured debt of the issuer to the extent of the value of the collateral securing that senior debt. 

Covenants
Covenant packages used in mezzanine debt financings are usually based on high-yield style covenants or bank facility covenant packages.  If the issuer has an existing senior bank facility, or is entering into a new bank facility in connection with the mezzanine debt investment, the mezzanine debt covenant package may be largely based on the covenants in the credit facility.  Key negative covenants in mezzanine debt may include limitations on: incurrence of additional debt; restricted payments; liens; change of control transactions; asset sales.  
Equity Participation 
Mezzanine investors regularly seek to enhance their returns by negotiating for equity participation alongside their debt investments (sometimes referred to as an “equity kicker”).  Mezzanine equity investments can take various forms, including: 
  • Warrants or options to purchase a specified percentage of equity (often 1% to 5%) in the issuer. 
  • A right to co-invest in the issuer alongside the controlling stockholder or a private equity sponsor. 
  • A conversion feature that allows mezzanine investors to convert all or a portion of their principal investment into common equity of the issuer. 
Equity Component of Mezzanine Investment
Because the overall return to the mezzanine investor includes the investor’s ability to realize the value of its equity participation, a viable exit strategy is critical to the decision to participate in a mezzanine funding. Potentially viable exit events include: sale of the company/issuer; recapitalization; refinancing; or an initial public offering.
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RKJ Partners, LLC (www.rkjpartners.com):  Cyril Jones and Gregory Ficklin are Managing Partners with RKJ Partners, LLC.  RKJ is a minority-owned, Atlanta, GA based investment banking firm formed to assist lower middle market growth companies in execute transactions between $2MM and $75MM.  Specifically, RKJ provides buy-side and sell side M&A advisory services, capital raising services and strategic advisory services.

Thursday, November 8, 2012

How to Create a World-Class Website for Your Business


What's involved in building the ultimate business website? If you ask five different people, you might get five different answers. If you're hoping to build the best possible website for your company, then you should seek out good advice, learn how to create searchable sites and utilize some up-to-the-minute trends and technology to your advantage.
Here’s a list of some fundamental tips to help you start building a business website.
Domain, Hosting and Content
That means making a solid domain name choice, choosing a hosting company that will keep your website up and online, and filling out a complete contact page. There are a variety of good, reliable, inexpensive webhosting companies out there like MyHosting VPS, so do your research. Your web host is a critical basic choice. If your website is down, it can’t be found.
Once your site is live, try to populate the pages with fresh content. Search engines seek out new and unique content; having good content on your site will increase its chances of being found more rapidly. Most site owners use a daily blog linked with social media (see below) to do this.
Optimize for Mobile
Increasingly, web users are getting their information and finding your business via mobile devices. According to eMarketer, nearly 116 million Americans will use a smartphone at least monthly by the end of 2012, up from 93.1 million in 2011. By 2013, they will represent over half of all mobile phone users, and by 2016, nearly three in five consumers will have a smartphone.
More users are doing local searches with mobile access, and smartphone users are growing faster than the businesses that have mobile capable websites… by far. In fact, mobile users are finding new ways to search your site with their devices, according to SearchEngineLand.
Use Images and Video
Millions of searches are conducted daily for photos and video clips on the Web. Because of this, you should consider using videos and images not only to make your website more interesting, but to help convert these to clicks. Including video and images should be among the top considerations for developing your website.
Search Engine Optimization
SEO is an art and a science that needs your full attention to understand how customers find you online. Mobile searches differ from desktop searches, and Google seems to change its parameters for best search practices more frequently than ever. Work with an expert for your SEO, and you'll be amazed how high your business website will appear in local and organic searches.
Social Media
Social media has become an integral part of marketing for every business. 94% of all businesses with a marketing department used social media as part of their marketing platform, according to Forbes. Pitch your business messages to the social media platforms preferred by your customers. If they're on Facebook more than Twitter, spend your time engaging with them on Facebook.
Designing and programming for the web continues to be a moving target. It starts with basics like solid hosting from companies like  to sophisticated SEO techniques with social media. Use the tips above to your create a top-notch website that will help grow your business. 

Monday, November 5, 2012

Investment Banking Blog Series – Buy Side M&A Process (Article 4 of 4) Financing an acquisition


By: RKJ Partners, LLC (Cyril Jones & Gregory Ficklin)

As investment bankers, RKJ Partners possesses a breadth of knowledge and experience in advising buyers on business acquisitions.  In our latest blog installment, we define and outline the key elements involved in financing a business acquisition. 


Once a buyer selects and decides to pursue an acquisition target, reaching a level of comfort that the critical transaction elements are in place (or are at least in motion) to facilitate a successful execution becomes very important. At this stage in buy-side M&A process, the ability to finance the acquisition climbs to the top of the priority list and becomes the single most important focal point for both the buyer and the seller.  For the buyer, one of the worst things that can happen is to find an attractive acquisition target for which the buyer is unable to secure the capital necessary to close the transaction. Nothing will kill a deal faster. For the seller, feeling comfortable that the buyer has the capital or access to the capital to successfully close the transaction goes a long way, especially in a competitive situation in which the seller has multiple interested buyers from which to choose. From the seller’s perspective, a buyer that can provide transparency through proof of financing maintains an advantage over a buyer that is still seeking to find the money to finance the acquisition.

So, where does the buyer get the money to finance an acquisition?  There are four great sources for financing a business acquisition:

  1. Existing Investors/Shareholders: Surprisingly, most existing investors and shareholders love the idea of buying another business. For them, a business acquisition appears a lot less risky than writing a check to develop a product or idea that may work somewhere down the line and may sell at the price and volume forecasted. An established business, on the other hand, has a track record and can potentially achieve better results through the implementation of an experienced management team or entrepreneur.  The hope is that new management will play a major role in the successful development, installation, and execution of systems and processes that provide the potential for future growth and prosperity.
  2. Banks: Banks were created to fund the expansion of businesses. In today’s market, a predominance of lenders are open to supporting buyers pursuing strategic acquisitions that offer opportunities to create synergies, diversify their customer base, broaden their range of products and services, expand geographic territories, and other benefits. It is vital that the buyer retains experienced professionals on the deal team to assist in securing banking and lending relationships.  For example, a trusted, experienced investment banker will be able to efficiently and effectively facilitate introductions to banks that offer products and services that specifically fit the buyer’s deal parameters (size, structure, terms, timing, etc.) as well with a track record of funding deals in the buyer’s industry/market sector.  This guidance saves the buyer time and energy while helping to avoid mistakes that could disrupt or delay the buy-side process.  
  3. Outside Investors: If a buyer’s own investors/shareholders or banks are unwilling to provide the capital or at the terms that are acceptable, there are investors in the marketplace who focus exclusively on funding acquisitions and providing growth capital.  Again, it is recommended that the buyer retain the services of an experienced investment banker that can assist the buyer in thoroughly understanding the process for sourcing outside investors and how these outside investors get paid for the growth capital they are providing. 
  4. Seller Financing: Seller financing (also called owner financing) as a part of the deal structure has become more common in recent years. According to industry data, seller financing is involved in up to 90 percent of small business sales and more than half of mid-size sales.  Seller financing can accomplish several goals from a buyer's perspective. First, a buyer always faces the risk that the success of the business for sale is tied to the involvement of the current shareholders. By having the seller finance a part of the purchase price, it can give the buyer additional confidence in the fact that the seller believes that the business can thrive without them. Additionally, seller financing can oftentimes help a buyer pay a premium for the business which might not be offered if the deal were financed only through traditional financing sources, such as a bank.


RKJ Partners, LLC (www.rkjpartners.com):  Cyril Jones (cyril@rkjparnters.com) and Gregory Ficklin (greg@rkjpartners.com) are Managing Partners with RKJ Partners, LLC.  RKJ is a minority-owned, Atlanta, GA based investment banking firm formed to assist lower middle market growth companies in execute transactions between $2MM and $75MM.  Specifically, RKJ provides buy-side and sell side M&A advisory services, capital raising services and strategic advisory services

Wednesday, October 31, 2012

Nestlé Promotes eLearning at the 2012 NMSDC Conference


By Nadine Bartholomew

This week, over 7,000 top corporate representatives, minority businesses, civic leaders and members of the media converged at the Colorado Convention Center to participate in the four-day National Minority Supplier Development Council (NMSDC) Conference and Business Opportunity Fair.

The theme of this conference was “Minority Businesses and Corporate America: Advancing Minority Suppliers in the Global Supply Chain” and in keeping with this theme, Karen Blackwell, Manger of Supplier Diversity and Development for Nestlé Business Services, facilitated an eLearning session for suppliers from the show floor of the Business Opportunity Fair, and co-hosted the annual networking reception of NMSDC’s Food and Beverage Industry Group (the Group).

As the chairperson of the Group, Blackwell exemplifies her company’s commitment to having a diverse supplier base and to utilizing minority, woman and veteran-owned suppliers across every aspect of its business. During the eLearning session, Blackwell shared information about the online tool Nestlé uses to educate potential suppliers about its supplier diversity program and highlighted how this interactive feature allows registered users to explore where their products and/or services may fit best within the different operating companies of Nestlé USA.

The Good Foodie caught up with Blackwell after the Group’s networking reception at the History Colorado Center in Denver, and asked her to comment on how Nestlé is working with minority- and women-owned business enterprises (M/WBEs) to help them embrace and maximize the potential of new technologies.

To learn more click on the video below or visit their website at suppliers.nestleusa.com


Nadine Bartholomew is a freelance writer for MBE magazine. Visit her website at www.thegoodfoodie.org

Monday, October 22, 2012

Statement on Fisher v. University of Texas

Dr. Gail C. Christopher
Vice President for Program Strategy
W.K. Kellogg Foundation

The U.S. Supreme Court heard oral arguments [last] week on why the University of Texas should be allowed to continue applying an admissions policy that helps create a diverse student body, one that is representative of the state’s growing multi-racial communities. At the private, independent W. K. Kellogg Foundation (WKKF), our work calls for healing the profound gaps and inequities that exist in our country, and places the health, education and well-being of children at the center of all we do. Thus, we steadfastly support college admission policies that identify qualified students of all races and also consider their academic achievements, leadership, racial and ethnic backgrounds, socioeconomic status and athletic or artistic talent among other qualities.  

Often this process is called affirmative action, a term that has become far too ambiguous and divisive in American society. It’s critical for our Supreme Court justices to look beyond the loaded wording to consider the immense value in providing educational opportunities for young people from diverse communities.  In many ways, America’s future is at stake.
The population of the United States is swiftly moving towards majority minority.  For America to stay strong, we must be competitive in the world. And that competitiveness begins with education.  We must continue to nurture the best and the brightest at our colleges and universities. But the nation must recognize there may be a brilliant future physicist living in a Baltimore row house, a skilled mathematician being raised by parents who pick grapes in Napa Valley or a Native American child on a reservation in New Mexico who has what it takes to be a savvy military leader. 

There is a shared national interest in providing educational opportunities. We are building a stronger America when young people from different backgrounds and perspectives interact and learn from each other in an educational setting. This better prepares our future leaders to represent America’s interests around the globe, where the ability to relate to different cultures is vital to achieving success in a global economy as well as in national security and keeping our communities safe.

The University of Texas, like other colleges and universities, seems to recognize that some of our brilliant young people are filled with boundless potential, but these students and their families are facing daily obstacles ranging from poverty to unconscious and implicit bias evident in education, health, housing, employment and other aspects of society.  Admissions policies, such as those at the University of Texas, provide opportunities for young people to overcome these challenges.         

WKKF applauds the University of Texas for striving to create a diverse student body, for helping ensure that there are opportunities for qualified students of all races and ethnicities to excel and make contributions to their communities and this nation.  We urge the Supreme Court to uphold their right to do so.

Monday, October 15, 2012

Women Entrepreneurs: Despite Fear and Doubt, It’s Time to Get Started



By Tom Cleveland

In the world of entrepreneurs, if a “glass ceiling” ever existed for women, it was shattered long ago, together with any other demeaning cliches that suggested that other activities were more worthy of your focus.  Despite the many challenges that women face, studies continue to show that women are better at multitasking and getting things done at a quality level that most men would consider unnecessary or unattainable.  

Learn from Mentors that Have Gone Before You

It is no wonder then that many women, given half a chance, are excelling in the business world right and left.  Fortune Magazine is not surprised by this trend in women entrepreneurship and has chosen to acknowledge it annually by publishing their list of the “Top Ten” standouts for the year.  In 2012, their “winners” were selected from over 133 contestants, chosen not only for their individual performances, but also because these female entrepreneurs were “outstanding game changers, ground breakers, and innovators.” 

Did these top performers agonize over fear and doubt in the early going?  Were they conflicted by the demands from family and by the desire to please everyone?  Were they afraid that they would never be taken seriously?  Of course they were, but in each of their stories, there are “pearls of wisdom” that every female “business warrior wannabe” should take to heart from these worthy examples of success in today’s marketplace.  There are no shortcuts for experience, but accepting the guidance from “mentors” is the best way to make up for shortcomings in this area.

Lesson One: You Must Have Passion According to Jessica Alba

Although known more for her acting career, Jessica Alba has worked tirelessly on the side co-founding her own eco-friendly products company, The Honest Co.  Her focus has been on selling chemical-free diapers, wipes, cleaning products, and more.  She seems to have found her passion in this industry by joining a cause and leveraging her many contacts, including Healthy World author Christopher Gavigan, LegalZoom.com, ShoeDazzle.com founder Brian Lee, and former PriceGrabber.com VP Sean Kane.

Investors have also been impressed, too, contributing $27 million to fund her “passion”.  “It was important to me to that The Honest Company have a cause component as part of its DNA, engage in environmentally sound practices, and actively communicate with our customer base to deliver the eco-friendly products they most desire all under one roof,” adds Ms. Alba.  Choose a mission statement that moves you and stirs your emotions.

Lesson Two: Learn to be Flexible from Christiane Lemieux’s Example

One key factor for success in the business world is flexibility.  One must be forever willing to accept what the market gives and be willing to adapt to take advantage of new circumstances.  Changing your direction or product definition is to be expected and embraced.  Christiane Lemieux graduated from Parson's School of Design and spent the last twelve years building trend-setting surface designs for home goods in the fashion of a modern Pottery Barn.  She recently opened her own store in Manhattan's SoHo neighborhood.  “I made the mistake very early on of saying yes to everything and I lost some good years of growth." Lemieux advises, "Say yes to the opportunities that grow the business and no to the ones that are clearly a distraction."

Lesson Three: Learn Persistence from Rashimi Sinha’s Example

While adapting to market forces is one worthy trait, persistence is required to see the process all the way to conclusion.  In the case of Rashimi Sinha, she actually migrated from her degree in psychology to work in the software development industry.  After many other attempts, her newest venture, SlideShare, allows users to share presentations on the Internet.  "Being an entrepreneur is hard. So many nights you go to sleep thinking about a problem that seems intractable, but you get up the next day, refreshed, and attack the problem with renewed vigor," says Ms. Sinha. Her persistence was rewarded when her firm was recently acquired for a reputed $119 million.

Conclusion

No one ever said that becoming an entrepreneur is easy, but learn from the examples of those that have gone before you.  It’s now time to get started!  Good Luck!