This document discusses various strategies for funding business growth, including reinvesting profits, tapping into trade credit, lining up credit lines early, expanding banking relationships, alternative lending sources, equity funding, and employee share plans. It provides details on each strategy and emphasizes reinvesting profits as the perfect way to fund growth using patient capital without taking on debt or dilution. The document also discusses trends in capital raising, including the importance of online marketing and social media, the ability to approach global investors, and the rise of individual investors from emerging markets.

1. Funding Growth
Craig West

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.

4. 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

5. 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

6. Profits
Gross profit + 5 %
Reduce expenses - 5%
Increase sales + 5%

7. The 5 x 5 x 5 Process
Increasing Business Profit
& Value
How does it work?
5% improvement in
three key areas of your business

8. 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%

9. Reinvested profits are perfect

10. Tap Into Trade Credit
Cash flow cycle – debtors vs. creditors
• Collection policy
• Settlement discounts
• Long term supply contracts

11. 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.

12. Expand Banking Relationships
• Regional or community bank.
• Bi-annual review – “interview” your bank.
• Broker to identify – “Which bank ?”

13. Alternative Lending Sources
• Credit Unions?
• Factoring
• Peer to Peer Lending

14. Peer to Peer Lending
• www.lendingclub.com
• www.prosper.com
• www.loanio.com
• www.franklinpartners.com.au

15. 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?

16. Equity Funding – Capital Raising

17. 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.

18. 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

19. No.3: No passive marketing or investor
relations. The more marketing activities you
engage in, the better the possibility.
10 Trends in Capital Raising

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. Employee Share Plans

29. 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

30. Craig West
1300 665 473
cwest@successionplus.com.au
Visit www.successionplus.com.au
Follow us on: