PTDA 2001 - ATLANTA1 Finding Money When You Need It What Does the Business Leader Need to Do?...

PTDA 2001 - ATLANTA 1

Finding Money When You Need It

What Does the Business Leader Need to Do?

Presented by: Tom Bohardt

Meier Transmission, Ltd.Cleveland, Ohio

www.MEIERTRANSMISSION.com

PTDA 2001 - ATLANTA

FINDING MONEY WHEN YOU NEED IT

Tom Bohardt – Meier Transmission 2

(Therefore, if you are the leader of your business, you need to figure out how to do this.)

“Business is the art (or science?)(or science?) of extracting money from another person’s pocket without

resorting to violence.” -Anonymous

PTDA 2001 - ATLANTA



EVERY BUSINESS NEEDS CAPITAL

“THE PERSON WHO BELIEVES THEY NEED HELP FROM NO ONE QUICKLY LEARNS THEY HAVE A FOOL FOR A PARTNER.”

Successful businesses are: Well planned Well capitalized

Ability to access capital when you need it First step towards being well capitalized is good planning

Cost conscious Cost of capital must be managed Lowest cost capital goes to the most successful companies with a

“DOABLE” “DOABLE” plan

“FAILING TO PLAN, IS PLANNING TO FAIL.”

PTDA 2001 - ATLANTA



PLAN FOR SUCCESS - It is a roadmap – Why are you going, where are you going and how are you going to get there?

Executive Summary (no more than 2 pages) Company Name, Desired Amount, Terms, Industry, Time in Business,

Owners, Use of Funds, and Collateral

Narrative Quickly and clearly define what your company does It should take less than 20 seconds to do it.

HistoryMission Statement

One sentence defining what the Company is all about – KISS principle.

Market Niche Where do you fit in the economic food chain

Market Research Third Party support to your opinion that there is a viable market

Financial Overview Gross Sales, Net Income, Net Worth for 3 years

PTDA 2001 - ATLANTA



CREDIBLE ANALYSIS

You must know and be able to defend your analysis of your business as it relates to:

Market position Competitive ranking Financials as compared to peers Strengths Weaknesses

Third Party references add credibility Use PTDA Performance Appraisal Report for financials Use Dun and Bradstreet to analyze your competition Use supplier data Trade Associations

NEMA, PTDA, AHTD, BSA, AGMA, etc., etc.

PTDA 2001 - ATLANTA



THE PLAYERS“IF YOU DO NOT BLOW YOUR OWN HORN SOMEONE WILL USE IT AS A

SPITTOON.”Personal experience

Do you have what it takes to be successful?

Character Honesty, integrity, tenacious, a winner?

Staying Power Are you going to be around to finish your plan

Management Team Who else helps you at your Company?

Survivorship What happens if you die?

Third Party Professionals Legal, Financial, Tax, Marketing, Investment Bankers, etc.

Advisory Council or Board of Directors

“BEING A GOOD ENTREPRENEUR IS NOT KNOWING EVERYTHING, IT’S KNOWING WHERE TO FIND EVERYTHING.”

PTDA 2001 - ATLANTA



WRITTEN STRATEGIESDefinition of Strategy:

A detailed plan for achieving success

Written, understandable, realistic and measurable Valuable byproduct is getting answers to questions about your business Properly communicated internally it will mobilize your people towards

your goals

Subjects: Marketing (How and what do you sell to whom?)

Sales Promotions, mailings, etc. Coop

Operations (How do you take orders and fill them?) Customer service Warehouse

Cash Management (What is required to support business and when do you get your money?)

Inventory Receivables Cash Flow

PTDA 2001 - ATLANTA



AMOUNT AND USE OF FUNDS

Capital acquired must be consistent with your strategyFunds must be included in your believable financial projectionsCash Flow Model must consider:

Immediate needs for cash Any asset purchases Inventory investments Other Working capital (payroll, payables, etc.) changes Historical DSO or improvement program

Be conservative You are using someone else’s money

Contingency plan required Do you understand the impact of a downturn in your business?

PTDA 2001 - ATLANTA



TERMSKnow what you want, what you can afford and what you are willing

to give up.LengthAmortized vs. Interest OnlyInterest RateOther costs of financingPersonal GuaranteesCovenants & Conditions

Be very careful. This is the best example of why you need professional help.

If done wrong, these can cripple you

If offering equity you must know what your company is worth.How much control are you willing to give up?Collateral

If you won’t risk it, neither will anyone else

PTDA 2001 - ATLANTA



REPAYMENT PLANS

How are you going to make money and how much money are you going to make?Tied directly to your successCurrent or Projected Debt Coverage Ratios

Banks Understand what ratios they expect you to maintain

Current or Projected Profitability Investors

Understand what keeps them happy

Amortization or Dividend Return on Investment – When and/or how much?

“GOOD ENTREPRENEURS HIRE OPTIMISTS AS SALESMEN AND PESSIMISTS TO RUN THE CREDIT DEPARTMENT.”

PTDA 2001 - ATLANTA



PRO FORMA FINANCIALSMust be clear, concise, logical and supportableMost important key to obtaining capitalIf you cannot do a financial forecast, hire someonePro Forma periods for P&L’s, Balance Sheet, Cash Flow:

First year monthly Second and Third year quarterly Fourth and Fifth year annually

Items:Sales Estimates Administrative Costs

Warehouse Costs Sales Costs

Capital Expenditures GM by Product Line

Sales growth by Product Interest rates on debts

Income Tax rates A/R collection plan

Inventory Turnover Depreciation Schedules

Usefulness of Assets A/P Schedule

PTDA 2001 - ATLANTA



TYPE OF CAPITAL DESIRED

Debt versus Equity Debt

Cheaper (prime plus 0-5 pts) Easier to find

Available to all eligible Monthly payments regardless of cash flow

THEY COME FIRST (before you and your employees) Equity

Investors expect high returns (greater than 20%) Harder to find

Restricted to businesses with fast and high growth Little or no return early, but, when and how much? More extensive reporting – are you headed in the promised

direction? Investors expect goals and milestones to be met

PTDA 2001 - ATLANTA



DEBT CONSIDERATIONS

What type do you qualify for?How much can you afford?Can you make payments if cash flow is off?What happens if interest rates go up?Are you willing to pledge company and personal assets?Are you willing to give a personal guarantee?More analytical than personal

Are your ratios correct? Are your assets properly valued? Are you credit worthy? Do you have solid financial help?

PTDA 2001 - ATLANTA



What type of investors do you target?Are you willing to share control and future profits?Do you really want investors as partners forever?How big a share are you willing to give up and what is that share worth? (Use PTDA website help. Fast, easy, good guide.)Will you be able to keep up with the required reports?Do you trust potential investors with company secrets?

Secret – LOOK FOR ANGELSANGELSPrivate investors who keep money close to homeLimit their dollars and number of companiesDifficult to locate – no associations

Friends Family Customers Third Party professionals Suppliers Brokers Competitors

PTDA 2001 - ATLANTA



FINAL WORDS OF ADVICE

Seek professional counsel before you sign anything. Lawyers and accountants may not help fund your deal, but they can help you spot the small details that may burden you down the road.

There is tons of “how to” assistance available on the internet, in magazines, in books and the Yellow Pages.

www.BUSINESSFINANCE.com, www.GROWCO.com Small Business News – (SBN Cleveland) “Raising

capital to raise capital” – What is takes to find funding in an ugly market

Growth Company Guide by Clinton Richardson Merrill-Lynch 1-800-XXX-XXXX can help you.

PTDA 2001 - ATLANTA1 Finding Money When You Need It What Does the Business Leader Need to Do?...

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