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Funding your expanding ecommerce business case studies

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Raising funds is something most businesses don't like to do. Sometimes it's because the lending landscape has changed and it appears difficult – if not impossible – to raise capital and sometimes the …

Raising funds is something most businesses don't like to do. Sometimes it's because the lending landscape has changed and it appears difficult – if not impossible – to raise capital and sometimes the reason is that small businesses don't believe they should be raising funds at all.

Marc Gorlin, the co-founder and Chairman of Kabbage will present some case studies of growing businesses and how and why they raised the capital to fund the expansion of their businesses.

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  • Remind everyone to drop in their Business Card if they have not done so.
  • TELL US ABOUT YOURSELF
  • What we doFaster than you can cash a check at a bankUsing data beyond just a credit score- How long we’ve been aroundWhat channels we work withLead-in: people often ask at the end of a talk ‘ how we got the name kabbage’
  • Everyone always asks, “How did you come up with the name Kabbage?” Tell the story…
  • If you want to learn a bit more about us, we’ve been featured in all kinds of media, including being named one of the Most Innovative companies of the year by Fast Company Magazine.
  •  All businesses need working capital and can use Working Capital to help them grow.  - Whether you are a small online store or someone with a brick and mortar shop, there are many ways to use working capital.  I’m going to tell you some stories about how customers have used working capital from Kabbage in the past. Some are great, and some didn’t turn out so well.  For example…
  • Good example: Barbara Voron in Egg Harbor Township, NJ. Barbara sells wigs for Cancer patients /transsexuals/prostitutes.  Barbara is a cancer survivor herself, and loves using her business to help others. She has used working capital to increase her inventory, and her sales have grown!
  • Good example: Seth Brown: Recycle my laptop in Philadelphia, PA. Seth buys old laptops and refurbishes them or sells the parts WITH KABBAGE CASH.WHEN HE WAS A KID, HE WOULD TAKE COMPUTERS APART AND PUT THEM BACK TOGETHER.WHEN HE WAS A STUDENT AT UPENN, HE WOULD TAKE COMPUTERS FROM OLD LABS, REFURBISH THEM, AND DONATE TO COMMUNITY CENTERS IN WEST PHILLY.He helps keep laptops out of landfills! Not only does he have great sales from his business, but he is helping the environment with his business. SECURITY IS ALSO A MAJOR CONCERN FOR SETH’S BUSINESS.HE HAS ALSO USED WORKING CAPITAL TO OPEN A DROP-OFF FACILITY.
  • These are the top 5 reasons we hear that people use their working capital to grow their businesses.  Keep in mind, working capital should be used in ways that you can MAKE money. You should invest your working capital back into your business to help profits grow.  In the next few minutes we’ll discuss real world examples of how people have used working capital to grow their businesses – and also some ways they have found to use it that might make you laugh!
  • Buy inventory – sounds obvious, and it should be! Most of the businesses we work with use working capital for inventory Not just buying, but buying in bulk to get a better deal Getting better terms with vendors - Taking advantage of free shipping deals- Filling gaps between seasonal inventory periods
  • Here is an example of someone who used Working Capital to expand their inventory for his online flag store. John and Lori Chartier, owners of EHT flags in New Jersey.STARTED IN 2008. - SellS military, state, country flags  - SellS on eBay mostly- John is a Vietnam vet and his wife Lori deaf - A percentage of all sales goes to benefit the Wounded Warrior project (10%)
  • Bobby Abenschoen of Searchlight Comics in Bloomfield NJ  was in the comics business, and also began selling toys that went with the comics IN OCTOBER 2011.  He used his working capital to expand into another category to both increase sales of NEw inventory and complement sales of current inventory. “WITHOUT KABBAGE, THERE WOULD BE NO SEARCHLIGHT TOYS” He gets a bigger share of wallet of his current customers.  He bought $8,000 worth of DISCOUNTED LEGO TOYS and sold it for $90,000!
  • - Ed Harmon, owner of Boardstop in Austin, TX -saw that his customers were taking up longboarding when it was not warm enough to be out on the lake.  He used working capital to expand his inventory from just wakeboards and equipment to longboards as well. HE APPLIED IN OCTOBER BUT DIDN’T USE IT UNTIL DECEMBER.HE HAD THE KABBAGE CASH IN LESS THAN 10 MINUTES.  - He is now able to sell no matter the season, and the change has opened him up to a much larger customer base.  - He created the site “complete skateboard decks.com” and now his skateboarding businesses has grown bigger than his original wakeboarding business.
  • - Here is an example of a customer who didn’t use their working capital to their best advantage.  We had a customer who bought old VINTAGE cowboy boots and refinished them to sell. She had a great business, as she was able to get her product in bulk from various distributors AT AS LOW AS $ - $3 A POUND. SHE COULD THEN SELL FOR 50 – 500 A PAIR.BEFORE FINDING KABBAGE AND THE EXTRA WORKING CAPITAL, SHE WOULDN’T HAVE BEEN ABLE TO TAKE ADVANTAGE OF LARGE INVENTORY SALES. KABBAGE WAS LIKE A “SILENT PARTNER” - However, some of the bulk product wasn’t of good quality, and it hurt her in the end.  - She was not paying close enough attention to the quality of her inventory.  - There is inherit risk in business, but you need to mitigate your risk by being as involved in the process of your business as possible – especially when you are borrowing money.
  • -The second most popular usage of working capital is expanding equipment and materials.  -This can be buying new equipment to help your businesses run better, or buying raw materials with which you can make your product better and more cost-effective.
  • Jason SMITH: refurbing CDs: - Jason Smith from right here in Las Vegas! - Jason buys and sells vintage, collectible albums and records. - Jason had 100s of out of date, scratched, damaged CDs laying around that he didn’t know what to do with - He used working capital and bought a CD refinisher, refinished 100s of CDs and sold them for a huge profit! - Using working capital for equipment helped Jason increase his sales and put money back into his business
  • - We have a small business customer called Sam’s Naturals. - They make their own soaps and bath products from scratch and sell them under their name.- Some of you may have used it before – anyone familiar with the lumberjack hygiene pack??? Raise your hand?- They got a large order from West Elm and did not have enough materials to create and fulfill the order- They got working capital from Kabbage, which they used to produce and fulfill the large order- Their products are available in West Elm and westelm.com -Another example: Gary Turner- You can use working capital in more simple ways. - Gary Turner used wc to buy a laptop, and increased his sales 3000 to 6000 a month as he was able to list more quickly!
  • - When you are running a business, you have to run it 24/7, year-round.  - Sometimes unseen expenses arise – for instance a medical emergency or natural disaster – and you need cash flow to help get you through these times.  - Here are some examples:
  •  - Silvio of Long Island, NY - sold Vintage Nintendo video games, audio equipment and electronics.
  • HURRICANE SANDY DEVASTED THE NORTHEAST, AND THE HOMES AND BUSINESSES THAT RESIDE THERE…
  • Silvio of Long Island, NY sold Vintage Nintendo video games, audio equipment and electronics. - Hurricane Sandy hit and, as you can see, destroyed his business and warehouse. - He was able to use his Kabbage working capital to help bridge the gap until he could get on his feet again.
  • We know one customer who sold outdoor furniture. - Her sales were great in the spring and summer, but always dropped off in the winter - As her sales were down, she used her working capital to buy Christmas presents, rather than reinvesting that money into something for her business. - Her business failed as a result, leaving her not only with no personal funding, but no funding for her business. - Kabbage was also able to learn a lesson about seasonality from this experience and others like it…
  • - We’re a small business too! - As you can see in these graphs, we also have a very seasonal business, due to the ebb and flow of the retail season.  - We found that people take out more advances for more money in the months leading up to the holiday season, and this number drops down thereafter. - IT IS IMPORTANT FO SMALL BIZ TO LEARN THESE LESSONS…
  • - Hiring an extra helping hand can be real gift to your business.  - This extra help can help you increase productivity and sales.  - This concept can also be very tricky, as you must be able to judge when the time is right for your business to take on an extra person.  - It can either make or break your business.  - Here are some examples:
  • Sheryl VanDyck of Greenville Tenn makes and sells jewelry OUT OF HER HOME WORKSHOP. She has a store called Lavender Cottage on Etsy – STARTED SELLING FULL TIME IN 2008.SHE WAS A COMPUTER PROGRAMMER, BUT HER PASSION WAS FOR JEWELRY. SHE STARTED TAKING CLASSES AND LEARNED HOW TO FUSE SILVER WITH A BUTANE TORCH, SO THAT SHE COULD MANIPULATE THE METALS.SHE DESCRIBES HER PIECES AS ORGANIC, AS THEY HAVE FLOWERS AND OTHER DESIGNS WHICH SHE MAKES USING HAMMERS. Sheryl used working capital to hire an apprentice for her jewelry making business. “NOW I HAVE SOMEONE WHO CAN HELP ME GET THE MAIN PARTS OF MY PIECES CUT AND READY TO GO. I HAVE ALMOST REACHED MY LIMIT ON HOW MUCH JEWELRY I COULD MAKE MYSELF!”SHE DIDN’T EVEN BOTHER WITH BANKS, AS SHE KNEW THEY WOULDN’T HELP ONLINE SELLERS. - Having the extra help enabled Sheryl to increase production, list more inventory, and generate more sales.
  • [LONG PAUSE]YES I AM TALKING TO YOU.
  • The fifth use we hear people having for their working capital is for marketing purposes.  A little money towards marketing can go a long way if you know how to use it, and many are unfamiliar with both traditional and digital marketing methodology.  Once again, you have to make sure whatever you choose to do is right for your business.
  • Chris Byrne of the Gear Geeks in Huntington Beach, CA - Chris sells music instruments and equipment. - He travels to concerts to purchase inventory which he cleans up and sells – he even has equipment from the band the Black Eyed Peas! - While he uses his Kabbage cash for inventory, he also used it to wrap his van. This way, when he goes to concerts to purchase inventory, his name is being associated with large music groups and suppliers, thus increasing his visibility and exposure in the music industry. - Chris has increased his sales just from people seeing his van around the Southern California area and checking out his sites.
  • While Chris has done a great job in spending on marketing, it is not always so easy!  - Take the time to research the cost/benefits of your marketing efforts. For instance, buying time on a television station might cost a lot and provide little exposure for your business, depending on the nature of that business.  - How many of you drive by people on the side of the road dressed up in costumes trying to sell something? How many of you actually stop? See my point?
  •  1. DO WHAT WORKS 2. COPY OTHERS 3. TEST IT FIRST
  • Don’t feel like you can only use your working capital for just one area.  You can use it in multiple areas or even for all usages as your business grows!  Here’s an example of someone who did just that:
  • - Francisco is based outside of Atlanta and has been with us since we started! We have grown together! - Francisco sells latin food and products via his online store, The Latin Products, and also via other online channels such as ebay, Amazon, and buy.com - Francisco has used Kabbage to buy inventory, expand his supplies and space, hire more help, and improve his branding.  - It also helped him grow his business slowly over time with readily available cash flow.
  • - Francisco is based outside of Atlanta and has been with us since we started! We have grown together! - Francisco sells latin food and products via his online store, The Latin Products, and also via other online channels such as ebay, Amazon, and buy.com - Francisco has used Kabbage to buy inventory, expand his supplies and space, hire more help, and improve his branding.  - It also helped him grow his business slowly over time with readily available cash flow.
  • Here are some statistics about his growth that will astound you!
  • So, on that note, we purchased one of Francisco’s mortle and pestles, or molcajetes, and want to give it to one of you for listening to this little talk!
  • THANK YOU!
  • Transcript

    • 1. Marc J. Gorlin Chairman | Co-Founder