Secret to Finding the Best Small Business Programs

Small Business Programs

This may come as some surprise, but local, state, and federal governments offer great programs for small businesses. While programs for Women, Veteran, and Minority owned small businesses are the most well-known. There are several other programs available to you if you do not qualify for one of these programs. See how you might be able to benefit.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Women Owned Businesses

Let’s start with the most well-known programs, aimed at women owned businesses specifically. There are two types of certification: Women Owned Small Business (WOSB) and Women Business Enterprise (WBENC). WOSB is managed by the SBA and deals with government contract set-asides. WBENC covers all other set asides. If you are woman owned business, you may want to get certified by both, as each has its own set of benefits. These mainly deal with local, state, and government contracts, but there are also educational, networking, and loan eligibility benefits as well.

Minority Owned Businesses 

This applies to Black, East Asian, Indian, Native, and Latinx Americans. There are several minorities who are notably absent, namely Arab Americans, LGBTQ Americans, and others. To certify, you need to follow a similar process to WOSB. These businesses have the same advantages as WOSB, so it is worth the time to get certified. We’ve spoken a bit about how we can help with talent in minority-owned businesses, but programs like this are also incredibly helpful.

Economically & Socially Disadvantaged Owned Businesses 

The SBA has its section 8(a) program for individuals, who can claim and qualify as economically disadvantaged. To qualify, your total assets must be valued at $4 million or less. This is, in essence, living paycheck to paycheck. The individual’s net worth must be less than $250,000. This calculation excludes your home, IRA/retirement accounts, and equity in your business. Finally, your personal income must be $250,000 or less. While you might be thinking, well, that’s not too bad. The rub is that if you are not a member of a presumed group (see above), you need to demonstrate you have experienced bias of a chronic and substantial nature, which is very hard to do.

What to Do if You’re Not in the Above?

There are good reasons for the programs above. There are significant and compelling data showing the bias in financing for all the above groups. That said, it can feel a bit unfair. Don’t despair or get resentful. There are programs that might work for you.

SBICs

An SBIC is a privately owned company that’s licensed and regulated by the SBA. They invest their own funds, along with SBA-guaranteed funding, to invest in small businesses. These investments are either debt, equity, or a combination of both. According to the SBA, a typical SBIC loan ranges from $250,000 to $10 million, with an interest rate between 9% and 16%. SBICs will invest in your business in exchange for a share of ownership in your company. Typical investments range from $100,000 to $5 million. Financing includes loans and ownership shares. Loan interest rates are typically between 10% and 14%. Investments range from $250,000 to $10 million. SBICs can be a good way to gain financing even if you are not one of the classes listed above.

SBIR and STTR

If your small business is engaged in scientific research and development, you may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs. These programs encourage small firms to undertake scientific research that helps meet federal research and development objectives and have high potential for commercialization if successful.

Government Grants

The Small Business Administration works with different organizations to provide federal financial assistance (grants) community resources for certain small businesses.

State & Local Programs

It is worth exploring your local and state-based programs. For example, in New York, we have the NY Small Business Development Center. We also have NYC Small Business Development Center as well. The list is too numerous to mention. But it is definitely worth the time to explore your options. Many like the NYC Small Business Development Center have very useful guides that help you identify the programs for which you might qualify

Small Business Programs for All!

Running a small business is tough. That’s why we encourage you to explore every opportunity available to you. You never know unless you look and/or try.

Magic Happens When Local Business Engages with the Local Community

Local Business

When a community embraces a local small business, magical things can happen. They both grow together and a new market is formed. This simple but effective tactic helped our client Jake take his small business to whole new level. His business became a local destination where customers gathered to spend time, converse, andyes  spend money. This is what happened when Jake deployed this strategy. 

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

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Jake’s Story

Our client Jake owns a small restaurant in a gentrifying part of New York City. His neighborhood was going through some rapid changes, with an influx of 20 somethings looking for affordable housing in city. These new neighbors were educated, had sophisticated tastes, but were short on places to go that catered to them. The gentrifying formula in New York is well established. Once a community gets established, it becomes self-sustaining if it feels like a place that they can call home. Jake was part of the trend. He came early and saw an opportunity to cater to the needs of his generation. Just catering to the tastes of the newcomers wasn’t enough, so we worked with him to find a way to make his restaurant the go-to place for the community.

Why Get Local with the Locals?

Research has shown that 68 cents of every dollar spent at a local business stays within the community. The reverse is true for chains. Nearly 60 cents of every dollar spend flows OUT of the community. Gentrification has winners and losers, but by spending locally, you boost all businesses in the community, not just those catering to the newcomers. Not only are local shoppers supporting members of their own community, but they have access to unique products not found in big box retailers. Finally, small businesses donate way more than larger business. I mean 250% more. Since they are part of the community, they support local causes that have a true impact in the community.

How Jake’s Business Became a Local Hot Spot

Kept his Focus on His Target Market

Jake knew his market. He knew that he had to create an environment where people like him would want to spend time. Also, he knew that his customers had more time than money, so he kept the formula simple. He kept the menu and pricing affordable. Jake knew whatever he lost in margin he would need to make up for in volume. So, he created themed events per evening. They were free events, but he knew if he kept them fun, people would stay longer and spend more. He had a trivia night, a gaming night (competitive teams), a sports night, etc. 

Created a Positive Impact for the Whole Community

Jake, like the rest of his generation, was concerned about the impact of the influx of high-earning, upwardly mobile Millennials on the existing community. Being socially conscious, he wanted to make an impact. So, he had a charity night. Where proceeds from a special drink or menu item went to support a local charity or business. This was a big hit with his customers since they cared about the same things. He also partnered with other local business serving the same target to pull their efforts so they could have a great impact. This was all built around the idea that “we support each other because we live together”. It was genius idea. On his ‘charity night’, he also invited other long-time businesses and residents to share with this client what they had to offer. It was a great way for both communities to interact and create bonds. 

Hired locally – Creating Jobs for the Long-time Residents

Jake took advantage of the NY State’s Youth Jobs Programs, which provides funding for business who hire individuals with lower incomes and/or opportunities. By creating jobs for the long-time locals, his business was viewed positively by the whole community Also, local talent attracts local customersThis is a trend that has been noticed before: 

Small businesses also create employment opportunities and encourage innovation. Small businesses are the engines of job creation in this country and account for 64 percent of the net new private-sector jobs and over 49 percent of private-sector employment.  

Jake was aware of the PR and work-of-mouth impact of investing in jobs for the local community. Plus, as we’ve said many times before, it can only help to delegate!

Summary – Getting Local with the Locals is Good Business

By creating a local hot spot for the community drives people to your business. Getting involved in the community via job creation and charity involvement, provides positive PR and word-of-mouth, which tends to create a positive feedback loop. If you can find a way to integrate yourself within your community, we strongly encourage it. It can only help to expand your market

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

It’s 2020 and Healthcare Benefits are Still a Mess

2020 Healthcare

We’ve written several posts on the topic of healthcare, but the challenges of not being able to offer healthcare benefits to our employees in 2020 is a major problem for small businesses. And after 8 year of screaming to “Kill Obamacare” and 4 years of squawking and inaction, what do we have? A complete and total mess of a healthcare system as we head into the 2020 election, with a recycled previously ineffective solution – HRAs.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

What about HRAs?

In 2019, the Trump administration resuscitated a not-so-new solution: healthcare reimbursement plans, or HRAs. These new healthcare guidelines went into effect on January 1st, 2020.  

An HRA allows employers to contribute money to their employees’ accounts so that they can use the funds to purchase healthcare on their own in the individual marketplaces. The money contributed is not taxable to the employee and the employer can take a tax deduction for the contribution. Any unused portion of the account may be carried forward to subsequent years, just like a retirement account. 

HRAs were commonplace before the 2010 Affordable Care Act, which effectively neutralized them. 

The Pros

According to some, it could be a real boon to small businesses. 

“Many employers would love not to have to bear the administrative burdens of running a traditional health plan, and all are looking for ways to keep health costs down,” Michael Kolber a partner at Manatt Health, a healthcare advisory and compliance firm, wrote in the Hill. “If millions more people join the individual market through HRAs, these plan design features could change to look more like conventional employment-based coverage – or HRAs may further incentivize lower-premium plans, reinforcing the need for less comprehensive plans.” 

Steve Wojcik, a vice-president of public policy for the National Business Group on Health, also believes that the new HRA ruling may be a good option for small employers, particularly those that can’t afford to offer group coverage. “It will allow them to help employees who go out and get coverage on their own and they can help out with premiums,” he told UPI. “That’s how it will be used in the short term.”

The Cons

This is NOT law. It is a ruling. There is a big difference. It actually conflicts with the ACA, and it is currently being litigated in court. So, two things can happen. First, the ruling can be canceled by the courts. Second, it could be overturned if Trump loses the next election. Meaning all of this could be for naught in less than 12 months. Not a reassuring thought for many small business owners thinking about healthcare for 2020 and beyond in the modern set-up. 

Therefore, many small business owners (including myself) aren’t likely to cancel existing healthcare plans immediately. Smart business owners will want to know the impact of these plans on themselves and their workers. To date, no real guidance has come from the administration so unless you want to hire an employment lawyer, you’re likely going to have to wait and see.  

Next, there is no guarantee that rates will be lower. In fact, “If employers were able to ‘dump’ their high-risk employees into the individual market through an HRA (with the goal of reducing their own group health plan costs), it could have significant consequences for the individual market risk pool,” writes Katie Keith on Health Affairs. “This could result in worse overall risk profiles and lead to higher premiums, higher federal outlays for premium tax credits, and a higher uninsured rate.”

Will HRAs Survive? How Should I Prepare My 2020 Healthcare?

On this, your guess is likely as good as mine. However, if HRAs do catch on with small business in 2020, then aside from a court order, it would be more difficult for the government to eliminate them. However, I’m not holding my breath.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Best Advice for Cooling Small Business Market

The change of the small business market, as evidenced by number of businesses sold. Our article provides advice to help

We will cut to the chase with this: If you are looking to sell your small business right now, don’t, unless you don’t have any choice. That’s the best advice when faced will this chilly small business market.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

2nd Quarter Trend Continues

The change of the small business market, as evidenced by number of businesses sold. Our article provides advice to help

As we mentioned back in July in our post How to Benefit if the Small Business Market is Coolingsmall business valuations started to cool in the 2nd Quarter of 2019. The market has continued to be chilly the 3rd and 4th quarters.  

Perhaps the 2Q marked the low point, but it’s too soon to tell.

What Should You Do if You Can Wait?

As we mentioned before, there are a couple of important steps you can take. Here’s our advice for surviving the cooling market.

Make the needed repairs while the small business market cools

To re-use the analogy to the housing market now is the time to invest in renovations that will make the house more valuable when the market eventually turns. What are those fixes you can make?

  1. Clean up your business model: Take the time to fine-tune and root out the inefficiencies 
  2. Strengthen your brand: Continue to delight your customers, and with their help, promote your business within their networks and with the broader market at large 
  3. Improve your profitability: By fine-tuning your business model this may be a natural outcome, but if not, look for ways you can pare back costs without sacrificing quality. 

Continue to invest to make those repairs and grow your business

In a previous post, “5 Proven Methods for Accelerating Small Business Growth”, we covered several hacks you can deploy to help keep your business moving forward. 

If you can make these investments, you are likely to be in a much better position when the market rebounds.

Our Advice as the Market Cools...

Sometimes you just can’t wait. What should you do if some life event made it impossible to continue? 

Manage your expectations

Know going in that it’s a buyers market. People are looking for deals. They are not paying premiums right now. According to Washington Post, “median sales price for a business edged up just 0.1% during the third quarter from a year earlier…[while] asking prices rose 3.3%”. So, obviously sellers had to drop the prices to make the deal. Unfortunately, this is price for a quick exit right now.

Put Your Best Foot Forward

Good companies will always be valued. “Although sales are down and prices have lost their momentum, companies can still be a good buy because they’re generally in good financial shape after years of economic growth” BizBuySell.com. Try to get you financial house in as much order as possible. Look at how you might be able to value intangibles like good will and customer base. You may not be able to use those to get a premium, but they could be bargaining chips to get closer to your asking price. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Struggle with 401(k)’s Benefits? You’re Not Alone.

401k Plan

We’ve spoken before about how 401(k) benefits are becoming easier to access, but we wanted to share the struggles of a client of ours named Bradley. Bradley wanted to institute 401(k) benefits to his employees, but it all sounded like Greek to him. He was completely confused. He wasn’t sure what he should get. In addition, he had no idea of how he was going to explain it to his employees. Sound familiar? 

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Bradley’s Story

Bradley runs a successful ecofriendlycleaning business. The company has several locations and roughly 30 employees. He, like 90% of all business owners, felt the benefits outweighed the hassles of running a retirement plan. Bradley knew it was important when it came to attracting and retaining talent. But he was overwhelmed by the complexity. He wasn’t sure which to choose, nor how best to communicate whichever plan he chose to his employees.

Bradley Wasn't Alone with 401(k) Struggles

According to a recent Nationwide study that touched on this and other business issues of 2019 wrote: 

[…]business owners viewed 401(k) plans as beneficial to both their individual businesses and their workforces. Most cited the importance of the plans in attracting top talent (88%) and improving employee retention (86%) and agreed that workers see 401(k) plans as a necessary benefit (84%). An overwhelming majority (88%) cited the tax advantages of the plans, which benefit small businesses and workers alike. 

And yet, nearly ½ of those surveyed mentioned that the cost and complexity of the plans were stumbling blocks. In addition, about the same percentage struggled with how best to communicate those plans to their employees. 

How We Helped Bradley

The first step was to sit down with Bradley and outline exactly what he wanted out of his plan. We went through the different options. Why? Many business owners say they want a 401(k), when they really mean they want a retirement plan. There are number of option available to small employers, and sometimes those other options are better. Here is a sample from Fidelity.

In fact, once we went through the options, Bradley realized that a Simple IRA was what he really wanted vs. a traditional 401(k). It was less paperwork and administrative burden. So, that was a key win. Once we knew what plan he wanted, we were able to work with our network to provide three providers, who we thought would be good fits. The reason we selected who we did was we wanted those who had employee education materials, which he could easily adapt and send out.

What to Do if You’re Facing 401(k) Struggles

If you want a retirement plan for your employees for all the reasons stated above, the first step you should take is to decide which plan is right for you. Do not automatically assume a 401(k) is the best and only option. If you do, you may saddle yourself with significant complexity and administrative costs.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

How to Build a Pitch for Your Small Business: A Webinar

From our Webinar, "How to Build a Pitch"

We’ve shared some of our Small Business Bootcamp webinars before, and today we wanted to give you all access to the fourth video in this series! Learning how to build a pitch for your small business is a skill that many people overlook, but we have found it to be key. Watch How to Build a Pitch now!

The Small Business Bootcamp is a LinkedIn group and weekly newsletter that provides information on how to provide for your small business. We discuss everything from marketing to employment to getting loans and more. Once a month we provide a webinar that outlines a content stream that we then talk about for the rest of the month.

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

This video from December was the start of a series of posts about pitching. If you want to learn more, check out some of our other articles about pitching that we’ve shared before, including “3 Avoidable Mistakes that Can Blow Your Pitch” and “How to Write a Kick-ass Pitch Deck

If you want to know more, join our LinkedIn group. It might help you learn more. This group includes small business owners across the New York area who are in similar positions. We want to help small business owners, and how better to do that than communicating. 

Join us, won’t you?

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

4 Amazing Ways to Cope with Small Business Stress

cope-small-business-stress

You aren’t likely to stay in business long if you don’t prioritize your health – that’s physical, mental, and emotional health. In fact, we’d argue the reason that 50% of small businesses fail within 5 years is due in large part to failing to manage their health. Not enough business owners think of this before starting their small businesses. The stress of owning a small business can take its toll, but don’t let it ruin your company. 

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Don't Believe Us? Here Are Some Key Stats

We often believe in the Amazon or Edison myth. Working 20 hours a day with only 3 hours of sleep is the way to win. It’s a heroic image, but it is also false. It’s no wonder that 39% of small business owners claim to work over 60 hours a week — now that’s stress! No one can keep that up forever.

  • Eating well: If you eat healthy, you are 25% more likely to have improved job performance

  • Exercise: Improves cognitive function and health

  • Sleep: According to WebMD, “not getting enough sleep slows down your thought processes, impairs memory, makes it harder to concentrate, and can put you in a bad mood”

4 Amazingly Simple Ways to Reduce Stress

These may seem simple, but they are, in fact, quite powerful tools to keep your health in check. Follow these four steps and you can minimize the stress brought on by your small business drastically.

1. Delegation

If you’ve read any of our posts, you know that we are a huge fan of delegation. Burnout is very real. It’s a cause of a number of the problems that most of our clients face. When you start a business, you expect to have complete control but that is a myth. These posts will provide you with the tools to delegate effectively: 

2. Plan B's

All businesses have some degree of risk. Having contingency plans in place will help reduce the fear and the worry when something inevitably goes wrong. You don’t need a plan B for everything, just the critical steps of your operations. Here are the three most common: 

  • Talent – make sure you identify the key talent in your organization. Who’s key? The easy answer is if that person left tomorrow, how much pain would you be in? It’s a good idea to have job descriptions, recruitment specs, and succession plans in place to deal with the inevitable.  
  • Cash – While profit is like food, cash is like air. All businesses should strongly consider a cash contingency plan to deal with any major short falls. Lines of credit, reserves, etc. are all good ways to hold approximately 2 months of operating expenses in some liquid format. 
  • Equipment – Key equipment, be it hard drives, servers, or industrial equipment, need back-ups. Insurance is a good way to manage the financial risk. Identifying what you would do in case of a major failure is a great way to manage the physical risk.  

3. Take a Break

We all have felt that taking a step away from the business would be impossible. But, if you’ve taken steps 1 and 2, this one should be easier than it would be otherwise.  

A study released last year by the American Psychological Association concluded that vacations work to reduce stress by removing people from the activities and environments that they associate with stress and anxiety. 

In fact, taking vacations also reduce the risk of heart disease and heart attacks in people with elevated risk factors. 

4. Find a Trusted Advisor

trusted advisor, who has been down this path before with a small business, can help you manage stress by putting things into perspective. Everything looks bigger the first time you see it. But, once you’ve dealt with it, you can see it more clearly. Having a trusted advisor can also improve your emotional support network. Look, everyone has messed up at least once. Having someone who overcame the screw-up can help you realize that you can, too. 

Minimize Small Business Stress

Look, starting and owning a business is never easy. So much rides on you. But, knowing how to put up boundaries and manage stress within your small business can help you worry less and enjoy doing what you love. If you want to grow and succeed, you will need to treat yourself well, too.

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Who Were the Winners of Small Business Saturday?

The end of the year – and Small Business Saturday in particular – is one of the most important seasonal events for small businesses of the year. And thankfully for small businesses closing out the decade, sales were up by about 10% in 2019 compared to 2018. That’s according to a survey from American Express and the National Federation of Independent Business (NFIB). But that was a survey, NOT real sales. We waited a month to see if other data became available, and there were a few key insights. Let’s take a look at the winners and losers, shall we?

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Who Were Small Business Saturday’s Winners?

The data is pretty clear. If you have an ecommerce platform, then you likely did better. If you had a mobile-friendly e-commerce platform, you were an even bigger winner.

Smartphone Savvy Retailers

According to Adobe Analytics, which tracks online sales, $3.6 billion of Small Business Saturday purchases were made with smart phones. That’s 18% of the total sales on Small Business Saturday. In fact, that’s up 22% vs. prior year according to the same report. 

E-Commerce Retailers

41.2% of all purchases on Small Business Saturday were made via e-commerce. That’s nearly 4 times the national average. According to the US Census, approximately 12% of all retail purchases are made via e-commerce. So, small businesses with a smartphone optimized e-commerce platform were the clear winners.

What Were the Losers of Small Business Saturday?

Well let’s cut to the chase: pure brick-and-mortar retailers appeared not to have benefited as muchThe internet and main street fight continues.

Traditional Mom & Pops

A 10% increase in spending is not that much, especially if nearly ½ of it is accounted for by e-commerce. The growing share of e-commerce sales is likely negatively impacting the traditional mom and pop retailers, who tend to lag in technology adoption. 

Key Take-aways for 2020

Consumer awareness is very high

According to the AMEX survey, 70% of all Americans are aware of Small Business Saturday. That’s huge. That’s a higher percentage than the number of American, who are aware of who is playing in the World Series. As a small business, you don’t need to educate them about the event. You just need to remind them that you are a part of it.

Consumers want to buy local

In fact, 3 out of 4 shoppers want to buy locally. The vast majority believe it has a positive impact. According to the aforementioned American Express survey:  

respondents who shopped on Small Business Saturday (96%) agree that shopping at small, independently-owned businesses supports their commitment to making purchases that have a positive social, economic and environmental impact. 

The key is to keep them engaged year-round. If you were one of the tech-savvy winners, you have their e-mail. E-mail reminder campaigns are a great way to keep them engaged long after Small Business Saturday has come and gone. 

Close the tech-gap

If you haven’t built some e-commerce capabilities, this data should scare you. Today, there are a number of low-cost, easy-to-use, mobile-friendly applications on the market. The trend towards digital is growing. In addition, the ability to reach these consumers after the sale is also a great way to keep them. You will miss out on both if you aren’t in the game.

Digital promotions are likely to be more effective

Given the dramatic shift to e-commerce, especially smartphone purchases, digital, geo-fenced ads and promotions are likely to be more effective in driving and awareness and purchase. Anyone participating in Small Business Saturday in 2020 should definitely include these in their marketing mix. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

Secrets of Small Business Funding Unveiled (Part 2 of 3)

small business funding

Once you’ve run your hurdle race, it’s time to decide where to go to seek funding. Sometimes, it takes more than once source if some of the hurdles from the first step are too high. Many clients use more than one source for loans. And that’s the secret to funding we want to share with you. 

Unsure of how to take your business from good to great? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Secret Sources of Funding for Jackie

Since Jackie was looking to build a business that she wanted to keep for the long-term, we wanted to ensure she kept as much control as possible. Once we cleaned up the financials and the business plan, we then had to choose how best to get her the capital she needed. Before we get what we did, we need to take a bit of a detour through the different funding options available.

Main Funding Options for Small Business

These are of the most common and most successful funding options:

Bootstrapping 

No matter whatever source you use, all will be looking for some degree of bootstrapping. All investors or capital sources will want to ensure that you have some ‘skin in the game’. Having your own capital at risk increases the likelihood that you will follow through. Funds can come from personal savings, loans, avoiding wasting moneyetc. However, BEFORE you do ANY self-funding, make sure that you set up a legal structure for your business first. You can invest your money in the business. However, you need to separate your personal assets from the business. It protects your personal assets from creditors. 

Friends & Family

This is a typical step for many. These are typically micro-loans of $5 – $15,000. It can also be a difficult step for many as well. Unless your family member or friend has a specific skill set that will help the business succeed, you probably better off to set up any investment as a short-term loan than selling equity. This is for two reasons. First, it avoids entanglements when it comes to decision making. Second, if things go south, creditors are in a preferred position to equity holders in case of a liquidation of assets.

Grants & Governmental Funding

These funding sources aren’t a secret, but they are often overlooked. The SBA provides special treatment for Women & Minority-Owned Businesses. Under the Obama administration, LGBTQ owned organizations were covered as well, but this seems to have all but disappeared in the Trump era. Hopefully, this will be rectified in 2021. There are also community grants and development zones. You should check with your local and state governmental agencies to see if you qualify.

Lenders

Lenders come in multiple varieties. We covered the whole lending ecosystem in a prior post, so we won’t go into it in detail here. We will just share this rule of thumb. Unless your personal credit score is over 700, avoid commercial banks. If your score is between 620 and 700, alternative lenders are an option. If your score is below 600, you may be better off fixing your score first before seeking funding.

Angel Investors

Angel investors are dedicated to investing in start-ups and small businesses for financial gain. They will look for investments that will return a certain percentage over a fixed period of time, usually between 3 and 5 years. These investments will be made in exchange for a share of ownership in the company. Therefore, it is important to make sure they have a similar vision for the business as you do. Of the equity groups, Angel investors tend to be more open to conversation and persuasion as they are generally individuals or a small group of individuals. They may be more willing to support businesses where they have a personal passion.

Venture Capitalists

VC firms are more formal than Angel investors, and they tend to be more discriminating in their investment choices. Here, you will need to have all the ‘I’s dotted and ‘t’s crossed in order to have a shot. While they may be tougher, they do come with a degree of business savvy and knowhow that can be very helpful if applied correctly to the business. As with Angels, you are giving up some control of the business, and therefore, you need to make sure there is a good fit between your vision and theirs. 

Crowdfunding

Lastly, there’s crowdfunding. Crowdfunding is where you make your concept available to the public. You can ask for donations, or you can provide some fractional share of the company for a certain amount. Success in crowdfunding rests on your shoulders. If you have a compelling story, and you are willing to push it via social media channels, this can be somewhat effective. It’s a slower process, as you are raising money in small increments, and you are competing for people’s attention constantly. 

Now, Back to Jackie

Ok, if you stuck with me this long, thank you! Since Jackie wanted to retain control, we could eliminate Angels, VCs, and Equity Crowdfunding. Jackie was funding women-owned business, so she did qualify for some not-so-secret governmental assistance. She also had a good credit score, but not enough to go to the commercial banks. Therefore, we crafted the following strategy for her. 

First, Jackie had a few family members, who were interested in investing in her venture. We were able to set these up as low-interest short-term loans. Second, we were able to secure some local government funding for her business, and she was able to secure some local government contracts as her first customers. We sourced the remaining capital needs from two lenders. The first lender was Kiva. It’s a zero-interest crowd-sourced loan geared mainly to underserved groups. The other was through an alternative lending source that provided preferential rates to women-owned businesses.  

By leveraging all these sources, we were able to achieve her fundraising needs, while allowing her to retain 100% control of her business. Plus, she had the added bonus of a guaranteed first sale through the local government contract.  

With all of these funding secrets, come back next time for even more information. 

Secrets of Small Business Funding Unveiled: Part 3 of 3

small business funding unveiled

Getting business funding is something that you need to prepare for. In our first and second parts of this series, we talked about our friend Jackie, and her attempts to fund her own business. Luckily for Jackie, she was able to get her funding and out of stress 

But what if you are? There are plenty of businesses that do everything we’ve already mentioned and still struggle to get the small business funding they need. If that’s you, there are still optionsSo, let’s talk through them now. 

Thinking about making changes to your business? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

Start with Your Business Plan for Funding

If you’ve been faced with a lot of rejection, it’s time to revisit your business plan. People aren’t supporting you for a reason. That reason likely starts with your business model. Where are people struggling with your company? What do you need to prove/demonstrate to get them to believe in you 

A good place to start is revenue projections. The second is expenses. The third is the marketing funnel. Lastly, have a re-look at how you are pitching your idea.

Has Your Field Been Too Narrow?

Have you only been considered one type of funding and excluded others for your business? Like we said in our previous post, ideally, fundraising should match your long-term goals for the company. But sometimes, things aren’t ideal. If you want to have a company, you may need to rethink your goals. A broader search for business funding is warranted if the focused on has become a dead-end.

Can You Lower Your Ask?

If you can’t get the business funding you need, it’s also time to ask yourself: how can I get to the next level with what I have? For example, you’re ask was $150,000, but the best you could reasonably achieve was $75,000. Now is the time to revisit your cost projection to see how you could manage with less cash. Can you delay a phase? Could you do a 1.0 launch? Is easier to get funding once you have a proven revenue stream for your business. 

Get Help with Business Funding

Help isn’t cheap, but if you’ve gone as far as you can on your own, perhaps it’s time to find a partner, mentor, or consultant, who has been there before. They may be able to give you the guidance you need to improve your model, pitch, plan, and/or, whatever else is holding you back. 

Rarely, does any business get all the funding they need at the start. If you are willing to use some of the tools in this series, hopefully, you will be able to navigate the challenges better and get more of what you need. Remember, this is an iterative process. Try. Learn. Adjust. Repeat.