Funding growth september 2011

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Presentation showing sources of capital and how to fund your business growth plans.

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Funding growth september 2011

  1. 1. Funding Growth Craig West
  2. 2. AMEX Small Business Survey 2010: • 34 % of owners believed that a business “term loan” and a “line of credit” are the same thing. • 40 % believe it’s a good idea to approach as • many lenders as possible. • 67 % waited until they need cash • (within 7 days) to act.
  3. 3. 1. Reinvested profits are perfect. 2.Tap into trade credit. 3.Line up credit lines early ( before needed ). 4.Expand banking relationships. 5.Consider alternative loan sources. 6.Equity funding – capital raising. 7.Employee Share Plans Funding growth – 7 keys
  4. 4. Reinvested profits are perfect 46 % of owners said they planned to finance their growth by reinvesting profits. •“Patient” Capital •No Debt - No Dilution •Dividend Payout Ratio
  5. 5. Profits Gross profit + 5 % Reduce expenses - 5% Increase sales + 5%
  6. 6. The 5 x 5 x 5 Process Increasing Business Profit & Value How does it work? 5% improvement in three key areas of your business
  7. 7. Profit & Loss Statement 2011 Current % Improvements Planned 2014 (3 years later) Planned % Sales $ 3,000,000 100% 5% Increase $ 3,150,000 100% COGS $ 2,250,000 75% 5% decrease $ 2,205,000 70% Gross Profit $ 750,000 25% $ 945,000 30% Fixed Overheads $ 112,500 15% 5% decrease $ 94,500 10% NET PROFIT $ 637,500 21% $ 850,500 27% Here’s an example : NET PROFIT IMPROVEMENT $213,000 PERCENTAGE IMPROVEMENT 33.41%
  8. 8. Reinvested profits are perfect
  9. 9. Tap Into Trade Credit Cash flow cycle – debtors vs. creditors • Collection policy • Settlement discounts • Long term supply contracts
  10. 10. Line Up Credit Lines Early Umbrella before the rain ( not during the storm ) . • LOC vs. term loan. • Match loan term to purpose – long vs. short debt. • Interest rate ( cost ) vs. return.
  11. 11. Expand Banking Relationships • Regional or community bank. • Bi-annual review – “interview” your bank. • Broker to identify – “Which bank ?”
  12. 12. Alternative Lending Sources • Credit Unions? • Factoring • Peer to Peer Lending
  13. 13. Peer to Peer Lending • www.lendingclub.com • www.prosper.com • www.loanio.com • www.franklinpartners.com.au
  14. 14. Equity Funding – Capital Raising • Expensive – 25 % returns = 25 % cost of funds. • Release equity to release value. • Ongoing source of funding – gradual sell down. • Investment ready?
  15. 15. Equity Funding – Capital Raising
  16. 16. 10 Trends in Capital Raising No.1: The old rules will never change, strong businesses will continue to attract new capital no matter where and what industries you are in.
  17. 17. No.2: The power of Internet and Online media will play a pivotal role for any company seeking to raise capital 10 Trends in Capital Raising
  18. 18. No.3: No passive marketing or investor relations. The more marketing activities you engage in, the better the possibility. 10 Trends in Capital Raising
  19. 19. No.4: Social Media as Investor Relations Tool -Social Media will play a very significant role in the capital raising industry in the future, both from marketing, networking and the way deals are structured. 10 Trends in Capital Raising
  20. 20. No.5: Competition in deal flows: One interesting aspect because of the power of Internet is that you can approach investors anywhere in the world. From capital seekers' point of view, this is both a pro and con, as you could now see competitors from other nations also contacting the same VCs with their ideas, and vice versa. 10 Trends in Capital Raising
  21. 21. No.6: He who owns the database rules. If you own a database of clients, prospective investors, prospective shareholders, then you will be in a much better position to raise capital. SPREETS. 10 Trends in Capital Raising
  22. 22. No.7:Welcome to Global Village. Thanks to the rising emerging markets, capital seekers now have a much wider choice in terms of capital investments; you can now tap into the fast growing venture capital markets in Asia as well as other emerging economies. 10 Trends in Capital Raising
  23. 23. The total value of transactions that closed in CY2010 increased 35% over the previous year to US$736 billion. Europe and the Asia-Pacific region were the largest contributors to growth
  24. 24. No.8: Rising Middle Class Individual Investors from Emerging Economies '" In many instances, it is much easier to raise capital from individual investors instead of institutions. With the fast rising middle class in emerging economies such as the BRIC Economies, you should also consider them as a possible capital raising source. 10 Trends in Capital Raising
  25. 25. No.9:Do you really need to raise capital? Again, always ask yourself question, what is the purpose in raising a capital? If you are raising capital for expansion, you will have a much better chance. 10 Trends in Capital Raising
  26. 26. No.10:Contingent Plan: Ask yourself this question; if you cannot raise the capital, what are you going to do about it? Always remember this, less than 3% of businesses can raise capital from Venture Capital or Private Equity Firms. 10 Trends in Capital Raising
  27. 27. Employee Share Plans
  28. 28. What Next? Further information on our website: www.successionplus.com.au Complete feedback form to be added to our newsletter Arrange a free 90 minute review
  29. 29. Craig West 1300 665 473 cwest@successionplus.com.au Visit www.successionplus.com.au Follow us on:

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