Do you have a defined growth strategy?

Growth strategies fall into two categories:  Organic or on Steroids.   Organic is slow and methodical and typically, is self funded through profits and debt. Steroid growth is fast and furious and requires a lot of money for marketing and expansion and may include acquisition of competitors or complementary products.   Most funding for this comes from investors, with creative debt facilities intermixed.   Neither is better than the other, it just depends on what you want the outcome for your company to be. 

If you don't already have this established, Kugarand Holdings and our affiliates will work with you to lay out the strategy and explore the pluses and minuses for each approach.  It could be you want to grow organic to a certain level and then sell the business to a group that will take it along the steroid path.  McDonalds is an example of this.   The original founders were happy with their small business operation and sold to Ray Kroc because he had dreams for something much bigger and the wherewithal to grow the business to that level. 

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Do you know how much money is needed to fund it?

Whether the expansion is for a new division or facility and you need working capital to sustain you for 4 months until the revenues from the side of the business kicks in, or it is to build your own facility or bring manufacturing in house, all of which would be considered organic growth activities, there is a specific dollar amount that is needed to cover the actual expenses you will incur.   If you are pursuing a rapid growth model, then the cost to launch that product, to build up inventory, to create brand awareness, hire staff, and sustain you until you are profitable, are all factors that can be and need to be determined before you start asking for investment funds.   

We have found that often business owners have a general idea of how much money is needed, yet they haven't taken the time to generate the level of detail an investor or lender expects.  Their business requires their focus.   They can delegate it to a staff person, but that person also has responsibilities in the business.  The best bet is to contract with qualified people to work with the business management team to determine the financial and operational aspects of the expansion and then package it for the targeted funding source. 

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Do you know where you want your company to be in 5 years, or 10 years?

Do you want your business to be something to be willed or sold?  And do you want to work at if for another 5 years or 10?   Do you want it to be a $5M, $10M or $100M company in that time frame.  Do you want to have a national or regional presence?    Do you want to build a very large company that is acquired or goes public?   If you begin with the end in mind, you can chart a path to get there.  Kugarand Holdings will help you figure that out and then develop a funding strategy that maps to the operational strategy to achieve your business goals.

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Do you have a personal exit strategy?

A subjective, yet powerful part of a successful funding strategy is determined by the entrepreneur's personal exit strategy.   If the founder of the company wants to be the one to run the company and is not open to the idea of anybody but a hand picked successor replacing them, private equity is likely not an option for that company's funding strategy.  However, if the founder recognizes that they have specific strengths and weaknesses and to get the company to scale and be a very large profitable company it will take a different set of skills, and for that entrepreneur, being along for the ride and being a part of history in the making is sufficient, then private equity will be a potential source for that company.   Money from the private sector rarely comes without many strings attached.   This is something a good advisor will take into account when helping you create your funding strategy.

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Do you know why your customers buy your products?

Does your product meet a fundamental need in the market that is not being met now?  If it is a nice to have product, and the customer has many options to choose from, then you are a market participant.   Market participants differ significantly from market makers.   Market makers create a market with a new product that either has little to no competition or is a significant improvement on the competition or the old way of doing it, that they create their own market.   Each drives different operational strategies and different funding options. 

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Do you know what your gross margin and your net profit is?

Within each transaction, you have your raw cost of goods and cost to manufacture the product that will produce your gross margin.   This is an easy number to reach.   Your net profit factors in your soft dollar cost to sell and market and the hard dollar cost to pay the salaries of all the operations people and pay the rent and all the other expenses associated with running your business.  Net profit is much harder to reach.   Investors and lenders are most interested in the net profit number and sometimes no amount of revenue will get you to a point of profitability because operationally the company is broken.   You may not have flexibility in driving your gross margin up, but you have flexibility in driving your fixed and variable operational costs down.   Kugarand Holdings looks at this area of your business when we are contracted to prepare your business for the funding process.   Through our network of consultants and through our telecommunications subsidiary, RAN Networks, we look at costs that can be reduced or outsourced for less, to reduce those expenses and increase your profits as a result.   Ultimately, making your business more capital friendly.

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Do you know the cost of money from a lender or an investor?

Often times, business owners we meet with think attracting private equity is the least cost way to get the capital they need to grow their business.  In reality, private equity money can be the most expensive money.    Institutional lenders may charge 6% to 15% interest.  A private lender may charge 15% to 40% on the money they provide.  Compared to private equity, those lenders may be good, cost effective alternatives to money that requires as 200% to 400% pay back.   If your equity today goes for $1 a share based on current valuation of $1,000,000, so that the investor who put $200,000 in for 200,000 shares of 20% of the company, and when you sell it or there is a liquidity event 5 years from now that generates $5,000,000, that investor will collect $1,000,000, or 20% of that sum. 

Each business' circumstances are different, and therefore, the strategy for obtaining the desired capital is unique to each business.   Private equity investment capital may be the best source of funds and if the money helps to achieve outstanding results, then the cost of money was worth it.   Invested capital is riskier than lent capital because generally there is little to no recourse, and therefore justifies the greater return on the investment.  Kugarand Holdings understand these nuances and respects the power of each type of capital as an appropriate tool for a company to use to grow the business.   We work with our clients to  formulate a strategy that maximizes our client's access to capital and supports their operational strategy to reach their long term objectives.

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Do you know how to increase market awareness of your business?

Market awareness comes in subtle things like logo and branding and press relations.  Electronic media marketing with internet and emails strategies can create a national presence in a very cost effective way and set the stage for major national expansion.  The services provided by Kugarand Holdings' subsidiary, Kudzu International Marketing, can help you cost effectively grow your market awareness and market share.

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Do you know how to approach investors so that they will listen?

Investors, unless they are somebody you know personally, want to have a business opportunity referred to them through a trusted source.   They want that source to have reviewed the project to identify initial strengths and weaknesses.  There is a natural check and balance with that process.   Investors want to know some very basic things....is there demand for this product and service, how much, and does the management team know how to capture that demand and make a profit?   If your proposition answers those questions, and is in an industry the investor is familiar with, you will get your first meeting.  You say a meeting?   not the money?   As one VC explained it, it may take me 3-4 months to get to a yes and as little as 20 minutes to get to a no. 

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What kind of cash is available for my business?

Through our network we offer a broad array of financing products which include:

Fixed, interest-only, and floating rate permanent financing, Construction loans, Commercial Investment Protection Policies, bridge and interim debt, SBA (Small Business Administration) loans, credit enhancements, receivable financing, product leasing, cash-flow lending and on the equity side, institutional investment, mezzanine financing, joint ventures, and venture capital and angel investor networks.

If you are an established company seeking money to expand or an early stage company with a great product and satisfied customers, capital will help you scale more efficiently and effectively. Although the capital investment market is reported to be tight, millions of dollars are being invested everyday in the businesses that are thriving and have their message packaged and prepared properly.   Banks are reporting to us that they have more money to lend than qualified businesses to loan to.   You need people on your team that can prepare your funding request for the target capital source, and develop a strategy for getting that information in front of  the right capital sources.   Kugarand Holdings has the team to assist, guide, and represent you in your search for capital.

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What do I need to do to qualify for capital?

Securing the right resources to prepare your proposition and to introduce it to the right investors, will make all the difference in your success in attracting the capital you seek.   All to often, we see businesses suffer as the managing principals take time away from running and growing the business to pursue the growth capital.   There is something missing in their package and there effort goes no-where, and their business suffers in the process. 

After assessing your strategy and potential, Kugarand Holdings will engage the right resources for your type of business to provide the following types of skilled services as needed: