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Sam Fair
05-31-2015, 01:14 PM
I started my own est. more than 5 years ago. The business is in the field of IT hardware (trading and maintenance). It took only 3 months from the actual opening to start getting surplus or net profit, and ever since, the business is steadily generating an income.
However, the net profit has never been enough to cover my family expenses (schooling, college, house rent, ...etc). To make both ends meet, I had to borrow from friends, relatives and banks. But the debt actually increased my monthly commitments and made things worst. Furthermore, the debt eliminated the chances for the growth of the business in the past.
The only way which I can see now is to inject more funds into the working capital and to hire more staff and start an aggressive marketing strategy to develop the business and increase the sales and ultimately increase the income.
How to find the investor or partner who can provide the sufficient liquidity and participate in the development of the entity?
I have prepared a professional and realistic Business Plan with future financial projection and it is really promising, will it be enough to convince the potential partner??
Please let me have your thoughts on this.

Freelancier
05-31-2015, 03:09 PM
The only way which I can see now is to inject more funds into the working capital
And I look at your story and think: "time to end it and get a real job that provides a steady income so I can pay everyone back."

turboguy
05-31-2015, 04:15 PM
Along the lines of what Freelancer said, if you can't generate enough profit working by yourself to cover your expenses and keep going in the hole adding one more person won't cover his living expenses and will likely just drag you further into the hole.

Borrowing more money isn't the answer
Adding an employee isn't an answer.

The answer is more likely

A. Give up and get a real job as Freelancer suggested
B. Really take a hard look at what you are doing, your pricing, your expenses, your overhead, your client base. Find ways to operate more efficiently, more profitably, more effectively. Cut your personal expenses until you get people paid back. Work longer hours until they are paid back. Get a second job flipping burgers at McDonalds if you have to. Borrowing money is a death spiral in many cases.

My favorite TV program is Shark Tank. My second and close runner up is The Profit. Your comment reminds me of a recent episode of the Profit. The guy was operating a cup cake shop and losing money every day. His answer was to open a second shop which would also have lost money every day. If you hire someone you will just lose money faster.

No one can ever go on losing money forever (well maybe Amazon and a few other big tech firms). You have to operate in the black. You have to bring in more than goes out. There are two ways to do that. Increase your income or decrease your expenses. The best option is both. You have some hard choices ahead of you.

Harold Mansfield
05-31-2015, 05:21 PM
The only way which I can see now is to inject more funds into the working capital and to hire more staff and start an aggressive marketing strategy to develop the business and increase the sales and ultimately increase the income.

Getting a nice dump of cash would be nice and I'm sure you think it will solve all of your problems, but ultimately it won't. It's just temporary and now you'll have even more expenses, be in more debt and will now have to give up a percentage to a partner. I'd feel differently if you were expanding in some way. Maybe needed an investor to fund a new product line, or fulfill a large order.

But you're just looking for money to stay alive, or pay off debts in a business that already doesn't make enough to support you. Doesn't seem like the business is the drain because you said it makes a profit. The drain is your own personal expenses. Not exactly attractive to an investor.

I'd be willing to bet that there are areas where you can cut expenses, although that's easier when you are single than when you have a family. It could just be that this isn't the business that makes the kind of money that you need to make.

What kind of marketing have you been doing? How many projects or clients can you handle at one time and if you were operating at max capacity would that be enough to pay the bills? If not, I agree with everyone else. Get out now. Adding more people to the payroll won't help unless they are robots who can do more than a human.

If so, then getting aggressive with your marketing doesn't exactly require a big cash infusion, but that you learn more about marketing and start implementing a real plan on your own to start attracting more customers. You can do a lot on your own. Just writing a check and having someone else do it may sound attractive, but as a new business owner with limited funds...you really should learn how to market your business on your own so that by the time to do start spending money, you know what you are spending it on and why.

I understand that you're probably in a bind and need money now, but from what you've told us you don't have anything that is attractive to an investor.
It's time to start thinking about a Plan B.

Sam Fair
06-01-2015, 09:13 AM
And I look at your story and think: "time to end it and get a real job that provides a steady income so I can pay everyone back."Thank you for your honest opinion, I myself thought of that several times. But my options at this age (49) are really limited.

Freelancier
06-01-2015, 09:39 AM
But my options at this age (49) are really limited.
Totally understand, as I'm slightly older and lots more years out of the "real world". The problem is that you've had 5 years to make this work and what you have to show for it is more debt than you can support on your current income. That's not something that screams "I'm a successful businessman!" to me. So you need to change the situation. Adding more capital to the situation won't change it, it'll just delay the inevitable.

You absolutely have to turn this around if you're going to stick with it. And by "turn it around", I don't mean increase your debt. I mean increase revenues, decrease expenses, reduce debt. If you can't figure out how to do that in a hurry, you need to find a successful business and merge with it, find a business partner willing to manage the money end of things while you run the technology end, cut your expenses to the bone in every area except marketing and sales... you need to find all the levers at your disposal and pull them now without adding more debt to your situation.

Harold Mansfield
06-01-2015, 09:39 AM
Thank you for your honest opinion, I myself thought of that several times. But my options at this age (49) are really limited.
No they aren't. Sure, you may have more expenses, and it may be a little harder but you can brush yourself off, regroup and go at it again with far more knowledge and experience. I'm 47 and my options aren't limited. If I needed to get a job I'd get a job..regroup, and start again. I actually did that a few years back. I also cut expenses tremendously when I had to. Everything from a more affordable place to live, to getting good with coupons at the grocery.

You're 49, not 79. The faster you realize that a savior with money is unlikely and start getting it in your head that something more realistic has to happen, the sooner you'll be able to start making that happen and get out of the hole.

Freelancier
06-01-2015, 09:47 AM
Workers over 50 are the new 'unemployables' - Feb. 26, 2013 (http://money.cnn.com/2013/02/26/news/economy/over-50-unemployables/)
My project manager was 57 when he voluntarily left his last position as CIO of a medium-sized organization, took about 9 months off, then tried to get back into it. Guy has 6-sigma black belt, lots of years of experience managing IT projects... couldn't get anyone to return his calls or respond to his CV. He got to the 2-year mark without work and I took him on because I'd worked with him before and knew his strengths and weaknesses and knew that it would be a good match for what my company needed. But he knew that he was getting to the point where he'd have to abandon getting back into the field he had all this experience in.

Ageism is definitely out there in a number of fields. When you're coming up on 55, people think of you as "short-time/high medical costs/set in his ways" and won't touch you.

Sam Fair
06-01-2015, 10:03 AM
Getting a nice dump of cash would be nice and I'm sure you think it will solve all of your problems, but ultimately it won't. It's just temporary and now you'll have even more expenses, be in more debt and will now have to give up a percentage to a partner. I'd feel differently if you were expanding in some way. Maybe needed an investor to fund a new product line, or fulfill a large order.

But you're just looking for money to stay alive, or pay off debts in a business that already doesn't make enough to support you. Doesn't seem like the business is the drain because you said it makes a profit. The drain is your own personal expenses. Not exactly attractive to an investor.

I'd be willing to bet that there are areas where you can cut expenses, although that's easier when you are single than when you have a family. It could just be that this isn't the business that makes the kind of money that you need to make.

What kind of marketing have you been doing? How many projects or clients can you handle at one time and if you were operating at max capacity would that be enough to pay the bills? If not, I agree with everyone else. Get out now. Adding more people to the payroll won't help unless they are robots who can do more than a human.

If so, then getting aggressive with your marketing doesn't exactly require a big cash infusion, but that you learn more about marketing and start implementing a real plan on your own to start attracting more customers. You can do a lot on your own. Just writing a check and having someone else do it may sound attractive, but as a new business owner with limited funds...you really should learn how to market your business on your own so that by the time to do start spending money, you know what you are spending it on and why.

I understand that you're probably in a bind and need money now, but from what you've told us you don't have anything that is attractive to an investor.
It's time to start thinking about a Plan B.

Thank you.
As I mentioned in my reply, my options are limited.
My point is - the business is generating an income, and I have to find a way to increase it.
In my opinion, there is a difference between borrowing from any source for the purpose of meeting certain obligations and injecting funds into the working capital for the development of the business.
The introduction of an active partner can enhance and develop the business in many ways.
In the previous years, I observed that any additional sales person (even the non experienced ones) will increase the sales.

Freelancier
06-01-2015, 02:08 PM
the business is generating an income, and I have to find a way to increase it.
I observed that any additional sales person (even the non experienced ones) will increase the sales.
First, the obvious: increasing sales does not always increase income unless what you're doing can be scaled properly.

Second: you've been at this 5 years. You aren't making enough income still. The probability of sufficiently increasing your income is not high, just because you have no history of having done it so far.

As I've documented elsewhere on this site, I've increased my company size this year by adding two more people. Right now, the revenue is higher, but income is only slightly higher? Why? Because the added people and infrastructure currently require active management on my part and that takes time that could have been put to income-generating activities. Will this change in the future? It had better or the expansion will stop until I can eliminate many of the activities that are reducing my income-producing time. I'm not going to throw more money at the problem; I'm going to solve the problem so that if I throw more money at the business, the income will scale better.

Hate to crap on your business, but you really need to solve your margin issue. Either you're not making enough money for the amount of time you're spending on it (and one-man shops are almost always time-limited), you're not spending enough time on it (which means you should be spending more time selling), or your sales margins are too low to ever be really profitable (you likely have to solve this one anyway).

Harold Mansfield
06-02-2015, 10:51 AM
Thank you.
As I mentioned in my reply, my options are limited.
My point is - the business is generating an income, and I have to find a way to increase it.
In my opinion, there is a difference between borrowing from any source for the purpose of meeting certain obligations and injecting funds into the working capital for the development of the business.

True, but from what you've said the problem seems to be margins. As Freelancer pointed out, adding more people also increases expenses. Your new people will want to be paid too.
From what I'm hearing you're business model doesn't produce enough new profit to support your lifestyle. I've been through this before and my solution was to start offering new/complimenting services with higher margins.

I'm still not sure if your problem is that you aren't attracting enough business, or that your business doesn't make enough money when working at max capacity. Because these are two very different problems with very different solutions.

I need to ask again, if you were working the max amount of clients or projects that you can handle at one time, would that produce enough for the salary that you need to make?

I will repeat, if not then adding more people won't help you. I know you're thinking, "But I'll be paying them less than I pay myself". If your margins are high enough, that may work. But apparently your margins aren't that high, so how are you going to pull that off with more people to pay when you can't do it when it's only you?

If it's a matter of just not attracting enough business or leads, adding more people before you correct that problem is also just adding more expense.


The introduction of an active partner can enhance and develop the business in many ways.
Maybe. If it's the right partner who brings what's missing to the table. It can also be the beginning of the end with the wrong partner who just adds to your burden.


In the previous years, I observed that any additional sales person (even the non experienced ones) will increase the sales.
That is so not true. How can a sales person that doesn't even bring in enough to pay their own salary be a good thing for your business?


Look the bottom line is, you know your business better than we do. We don't even know what your business is so all we can do is comment on what little info you gave us. It could be that your business could be very profitable, you're just not realizing it's potential. We don't know.

turboguy
06-02-2015, 01:21 PM
If you ask anyone in business what their two biggest problems are you will almost universally get the same answer. Money and people will be the common answer. You only have one of those. Adding someone may let you have both like everyone else.

The right people are hard to find. That is my biggest struggle. The odds of finding the person you expect to find is pretty small. The odds the person will be more of a drain than an asset are pretty good.

I think Harrold asked the most important question. I too would love to hear the answer to that one and it could change my thinking.

Sam Fair
06-02-2015, 02:52 PM
True, but from what you've said the problem seems to be margins. As Freelancer pointed out, adding more people also increases expenses. Your new people will want to be paid too.
From what I'm hearing you're business model doesn't produce enough new profit to support your lifestyle. I've been through this before and my solution was to start offering new/complimenting services with higher margins.

I'm still not sure if your problem is that you aren't attracting enough business, or that your business doesn't make enough money when working at max capacity. Because these are two very different problems with very different solutions.

I need to ask again, if you were working the max amount of clients or projects that you can handle at one time, would that produce enough for the salary that you need to make?

I will repeat, if not then adding more people won't help you. I know you're thinking, "But I'll be paying them less than I pay myself". If your margins are high enough, that may work. But apparently your margins aren't that high, so how are you going to pull that off with more people to pay when you can't do it when it's only you?

If it's a matter of just not attracting enough business or leads, adding more people before you correct that problem is also just adding more expense.


Maybe. If it's the right partner who brings what's missing to the table. It can also be the beginning of the end with the wrong partner who just adds to your burden.


That is so not true. How can a sales person that doesn't even bring in enough to pay their own salary be a good thing for your business?


Look the bottom line is, you know your business better than we do. We don't even know what your business is so all we can do is comment on what little info you gave us. It could be that your business could be very profitable, you're just not realizing it's potential. We don't know.

In fact, I didn't mention the full details in my post, but now I think I should give more details about some facts,
* From the second half of 2010 until the end of 2013, the business has been constantly taking an upward trend in both volume & net income.
* During that period, the financial gap was manageable and became narrower.
* In January,2014 one experienced technician resigned to join Xerox Company and another experienced Marketing & Development Officer resigned and established his own company in the same field. In fact he became a competitor with the advantage of knowing all the sources, suppliers, prices and major clients and he made the most of that knowledge for his benefit.
*The two staff were replaced by another two inexperienced and low profile staff who negatively effected the business in a hard way.
*The monthly obligations substantially increased due to : 1- My elder son joined the university in 2014,2- The school fees for the younger son increased, 3- General inflation took place during 2014 and the cost of living increased, 4- New business loan granted in March 2014 with a very high monthly installment. 5- The Loan did not help in developing the business due to the weakness of the "new" team.6- Some other issues related to the general economy of the country, mainly liquidity issue.
The corrective action which have been taken 1-Staff restructuring, 2- Reschedule of loan repayment. 3- New agreements with the suppliers for better credit terms.4- More focus on cash generating transactions.
**More details about the business, Its based on the idea of providing one-stop shop for all the IT hardware requirements of the corporate clients. That will include 1-Supplies and sales of IT Equipment, Devices, Consumables 2- Maintenance, Upgrades and Repairs 3-Preventive Maintenance and Service Contracts.
The corporate clients welcomed the idea and they found it convenient and practical.
To carry out this business in a proper way, we have to maintain a high level of Customer Service and that will require a well trained and professional team of staff.
Based on the previous years data and observations, the more you inject into this business, the more you will get.

Harold Mansfield
06-02-2015, 05:50 PM
Seems like your problem is plain as day to me. You lost your best sales and marketing guys who went on to become competitors, and replaced them with 2 inexperienced people who aren't pulling their weight. Your problem isn't money...I mean you may be in a financial hole, but that's not the real issue. The real issue is/was management. You took a big hit and you didn't adjust well. Now you're falling behind...

Maybe you have a plan and more money will help you implement it. Definitely possible. But it seems to me your real problem is you're carrying too much dead weight and you didn't lead, train or have a plan when your top guys left. I'm still not confident that more money will solve your problem, but if you are..then you need to start making better management decisions right now (like getting rid of dead weight), and have a real plan to show someone to alleviate their concerns about the debt you're already carrying.

It could work. It's really all about you. Sorry I can't tell how you how to find that special investor, but if you find them be ready to answer the tough questions in a way that someone who wants their money back wants to hear. They'll want to know what's in it for them and that you can pull it off, not how much it will help you out.

I still think you should have a Plan B ready. All your eggs in one basket of hope usually doesn't turn out well. Be ready to pivot into another, realistic plan.

Sam Fair
06-03-2015, 12:50 PM
Seems like your problem is plain as day to me. You lost your best sales and marketing guys who went on to become competitors, and replaced them with 2 inexperienced people who aren't pulling their weight. Your problem isn't money...I mean you may be in a financial hole, but that's not the real issue. The real issue is/was management.
You took a big hit and you didn't adjust well. Now you're falling behind...

Maybe you have a plan and more money will help you implement it. Definitely possible. But it seems to me your real problem is you're carrying too much dead weight and
you didn't lead, train or have a plan when your top guys left. I'm still not confident that more money will solve your problem, but if you are..then you need to start making better management decisions right now (like getting rid of dead weight), and have a real plan to show someone to alleviate their concerns about the debt you're already carrying.

It could work. It's really all about you. Sorry I can't tell how you how to find that special investor, but if you find them be ready to answer the tough questions in a way that someone who wants their money back wants to hear. They'll want to know what's in it for them and that you can pull it off, not how much it will help you out.

I still think you should have a Plan B ready. All your eggs in one basket of hope usually doesn't turn out well. Be ready to pivot into another, realistic plan.

You hit the point directly. I agree with all what you have posted here. However, the corrective action is being done and the business will be on the right track soon. It is very important to learn the lessons from the crisis. In my opinion Its a part of the maturity process

Sam Fair
06-04-2015, 02:08 AM
Thanks to all who reviewed the post and shared their opinion. Special thanks to Harold Mansfield and Freelancier

turboguy
09-29-2015, 08:50 AM
I think you need to take a three pronged approach.

#1. Raise prices. Keep in mind that a 5% price increase will not add 5% to the bottom line. Many companies end up with a net profit of 5% of sales so it could in theory double profits. Most likely it won't double your profits but it could raise them enough to make a difference.

# 2 Cut expenses. Take a close look at everything. A number of small expenses can add up to big bucks. Look both at business expenses and personal expenses. A cup of coffee at Starbucks is several bucks. A cup of coffee from your coffee pot is ten cents.

3. Grow your sales. Look at your web site, Can it be improved. Look at how you get the word out about your business. Are there cost effective ways to drive more business.

Here is a little of my story. Right before the housing crash we were doing 3 Million in sales and making a profit, not a big profit but we were ok. When the housing crash happened our sales dropped from 3 M to 1.3M and we had a loss of $ 180,000.00. We had run our line of credit to the hilt, our phone was ringing off the hook with people we owed money to and we could usually only send part. So, we looked at all our expenses. We found lots of little things and some big ones where we could cut expenses. We cut little things that added up for example we sent our postage meter back, started making sure we turned down the heat at night. We made big cuts in our print advertising (we cut $ 100,000.00 off print and relied more on the internet.) We had been paying late fees and penalties. We worked hard on that. We floated some cash from 0 interest rate credit cards and started paying those suppliers who would take credit cards with cash back credit cards. We got 8 grand back in cash back in one year. Taking cash discounts vs paying late fees saved us about 40 grand a year. We used the extra cash to take every discount that was available and payed no late fees at all. We cut our expenses from 52% of sales to 39% of sales. We had also got rid of the gal who was managing our payments and my wife took that part over. She was totally a Scrooge. To show the extent of how much we watched our cash I can recall her having me call the credit card company when they had given us a 50 cent charge she felt we didn't owe. Yes, they did issue credit for the 50 cents. We went back into the black with a small profit on sales that didn't budge an inch. We then went to work on sales. Mostly adding and revamping a few products but also paying more attention to generating business online and staying with the reduced print and trade show expenses. We looked at our pricing. We worried that if we moved prices up too much we would do more harm than good but we did take prices up a little and looked hard at prices that were not sensitive. For example we sell a lot of replacement hose for our units and had a $ 199.00 price for 15 years. That was easy to move up and now we are at $ 269.00. Considering we sell 2-3 a day that alone added a few hundred bucks to daily profits. Sales and profits started to move up and expenses stayed down. We are back up to 2.5M in sales and profits are the best they have ever been. I will just say they are 4 times what they were in typical years before the housing crash.

Most every problem can be solved if you are willing to make the effort. Good luck with getting your business to where you want it to be.

Cashbrain
02-24-2016, 11:52 AM
I don't believe you have to quit your business. You just have to determine a better business development model. Alot of the times and the investors I deal with, want an established base before injecting funds into a business. Even if you are just making enough, if you have a solid foundation but lack a good marketing strategy or something else. That could be fixed. This is can help you with my business development team. Your passion is what will drive you for success.

I have not read all of the other comments yet so my comment might already state the same thing.

Business Consultant
03-25-2016, 04:32 PM
Hi,

Look for any bigger company in the same industry, which could be interested on your product or service. There are various medium and large companies looking for new products and/or services to diversify and increase their portfolio. If you find one of them, try to sell part of your company or operations. (Sell shares of your company).

Other solution is outsourcing some of your company. Therefore, you can reduce operation cost and increase profit.

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Youltorbed
04-08-2016, 10:57 AM
Go to local meetings and events, network as much as you could. Also beware because 90% of attendance are vultures, your goal is find the precious few who may contribute to your business. Justa thought

Margaret
06-15-2016, 03:38 AM
May be you should try to look at web platforms, kind of crowdfunding or something like this