Always start a negotiation with offering minimal equity as it relates to working with angel investors or any other type of providing funding source. In this discussion, we are going to touch on a number of different subjects as it relates to raising capital as well as ensuring that the business venture that you are launching will remain profitable and cash flow positive in any economic climate. It is very important to take into account the state of the economy and the industry that you are entering as it relates to your business.
In your business plan, you should always provide a complete analysis of the economy in its current state as it is imperative to understand whether or not your business will thrive in any economic climate. There are a number of economic analysis firms that can assist you with providing an understanding of the economy and whether or not you should start your planned business.
Some entrepreneurs start businesses with the intention to sell them from the beginning of their operations. As such, if you fall into this category, then you must create a business plan that clearly showcases how you intend to start the business and sell it after a predetermined period of time. This is especially important if you intend to raise capital from a private source, such as an angel investor, as this will be extremely important to them when they are reviewing your business plan, private placement memorandum, or business prospectus.
Some angel investors specialize in real estate transactions which may allow you to acquire owner-occupied properties. However, if you are only seeking capital for this type of transactions then it may be in your best interest to find bank financing for a real estate acquisition. If you are actively involved with the buying and selling of real estate then it may be in your best interest to not work with a private investor as you will need to pay them a substantial return for a relatively simple business transaction.
Finally, when you are seeking private capital should create lists of prospective investors that would take a look at your business plan or your business prospectus. You should only seek outside capital if it is absolutely necessary in order to grow work spend your business as this is an extremely expensive but low risk form of financing. Debt capital almost always requires a guarantee, whereas investment capital does not in most instances depending on the funding source that you are working with as it relates to staring or expanding your business.
As someone who has connected a lot with people using the internet to get their businesses out there on a global scale, the one thing that has really stood out is morals.
There is a wonderful amount of people who are simply trying to better themselves in the business world who have high morals, while a sector of people without morals are hoping to make a fortune out of other people without delivering any kind of value to them.
However in saying that, the internet is a really small place, at the end of the day and these people get recognized after a while. No matter where or how you do business, the way you conduct yourself is of great importance. Not just in dealing with people but how you deliver your product or service, without morals you will take short cuts that are not useful for both your business and your clients.
What having morals will do for your business…
A healthy business that delivers value by either product or service is one that runs on a good solid moral foundation. If you can apply a foundation like that to your business you are going to be achieving much better long term results compared to the business that just slaps things together so they can make money.
Let’s face it morals are what really shines through in businesses by the way they treat clients, staff and society in general. Having good morals and ethics when it comes to business is what will keep your customers coming back again and again. Morals are the backbone of your business and no matter how many cheats have prospered it is only short term.
With lots of changes going on with the economy it is the perfect time for you as a business owner to evaluate how and why you are running your business the way you are. Without morals you are simply jeopardizing all the hard work and effort you have put into your business. The more passionate you are about what you do, the easier it is to have morals.
It really is true. When someone is passionate about what they do they strive more to deliver the best they can, when it is simply done for money then that’s when the morals go out the window. So if your a business owner, take the time to question yourself, your tactics and your morals.
It’s a tough economy out there, especially for lawyers. Law firm leaders are struggling to cope with recession, technological change and a pressing need for business development skills that often goes unmet. A recent survey by the Ohio State Bar Association found that nearly one in five attorneys are ready to quit their jobs and anticipate their practices will be less satisfying in the future. So what are law firms and attorneys to do? Well, while you can’t change the current economic situation, you can, and must, focus your attention on the following client-focused action steps:
- Stop Thinking and Acting Like a “Billable-Hour Zombie:” During tough economic times, and from this point forward, your clients will re-evaluate your hourly rate systems. They will focus on what you can produce and how quickly you can do so. They don’t care that you have built complicated tracking systems for measuring performance in 6-minute increments. All they care about is how quickly and accurately you can produce the results they are looking for. If you insist on billing per hour, the incentive for you is to take longer while your clients are looking for faster and more efficient results. Today’s clients are more business-savvy and will use these facts to question your value. If you are not careful, you and your firm will find yourselves walking around like zombies in empty halls while your efficient, proactive, and business-minded competitors are thriving.
- Start Creating Systems that Make You More Efficient and Client-Focused: If you have practiced law for more than two years, you probably know how long most of your repetitive processes take. There are certainly exceptions, but most people can produce a general estimate for tasks that they have done more than twice. When meeting with a client or a prospect about an engagement, ask targeted questions to get as much information as possible to produce a general timeline. Tell clients that you have systems and processes for managing your time efficiently and give them a low and high price range for the project. The low end can be used if you have over-estimated the project and the high end is there to protect you against unforeseen changes and additions. The value of having a project range is that you have set up expectations with your clients in advance and they are less likely to get sticker shock if your project ends up being more than they expected. Your job is to effectively manage your time and to produce the results your clients desire. They should not have to pay for your inefficiencies or lack of skills. They are much happier and more likely to do repeat business with you if they believe that they are paying for your expertise and value.
- Stop Expecting Clients to Fall From the Rainmaker Sky: Before the most recent recession, attorneys could rely on their firm’s marketing strategies or firm-sponsored networking events to bring in business. Junior attorneys often received “spill-overs” from “rainmakers” and focused on producing high quality work instead of harnessing their business development skills. In today’s economy, senior attorneys are scrambling for their own business and tend to be protective of the clients they retain. The challenge for law firms is that junior attorneys weren’t taught how to bring in new business and now it’s too late to train them. Many fear being fired or hide in their offices hoping no one will notice them until times get better.
- Start Harnessing Your Client-Development Skills: If you are waiting for your firm to pick up the expenses of your professional development, you are going to be disappointed. In today’s economy, firms are unfortunately cutting professional development and marketing budgets and it’s up to you as an individual to continue developing your skills and talents. If you want to be seen as key talent or a future leader, you will need to learn how to attract and retain clients. Luckily, there are many low cost options that offer tactical and strategic advice that you can implement right away. Investigate what your local Bar Associations are offering and pick up some CLE credits while you’re at it. Research online programs where you can team up with other attorneys and split the cost. And for a free and powerful option, seek out a mentor in your firm and interview him or her about the techniques and strategies they use to make “rain.”
- Stop Assuming That Being a Great Attorney is Enough: While the field of law is one of our most revered learned professions, in today’s world it isn’t enough to be a content matter expert. Today, attorneys must also be able to think like business owners and know what it takes to run a firm to maintain their value. Clients expect attorneys to understand how their businesses work and be able to relate to their challenges.
- Start Thinking of Yourself as a Self-Employed Business Owner: Ask yourself “If I were self-employed (you may already be) what would I need to do to meet clients?” “If I ran my own firm or practice, what business-building skills would I need to learn to be successful?” “Who within my firm could I meet with to learn what it takes to run a law firm?” “Do I know how to read financial statements and make smart decisions about hiring, firing, cash management, etc. based on the numbers?” If you can show your management team and your clients that you get what it takes to run a business, you will never need to look for another job or worry about getting laid off. People who know how to bring in, keep, and grow revenue are always in demand.
Keeping up with the news has become a bit tedious lately because I get the distinct impression that I already know where this plot is going. We are living out the plot of Atlas Shrugged by Ayn Rand. For those of you that just read the Cliff’s Notes version, let me refresh your memory:
The government and our elected officials have over-regulated and over-taxed all of the major industrial markets limiting competition in the market place. As a result, large businesses and corporations begin to struggle. But never fear, the government knows how to fix it. More regulation. More taxes. Redistribution of wealth. And they all lived happily ever after…Right?
Does any of that sound familiar to you? The ultimate answer to the problem was to cut taxes. But how could we possibly be expected to do that in this day and age without causing a huge deficit? The truth is that we already have a huge deficit and the only way to correct it is to cut spending, cut programs, and cut everything non-essential. In other words, go back to the Constitution that has served us well for the last 200+ years and read it.
If anyone were so inclined to read a document written over two hundred years ago they may be surprised to find that there is no mention of the Department of Education, or the Department of Energy, or the Department of Anything, for that matter. In fact, Article I, Section 8 clearly defines the scope of our government’s laws. Our federal government was intended to protect its citizens from foreign nations, represent all of the states as a unit to foreign governments, keep free and open borders between the several united states, and provide specific services to the states. Our government has greatly overstepped its mandate and it is time to trim the fat.
Reading Article I, Section 8 tells us precisely what government programs and departments we need from our Legislature in order to fulfill the Constitutional requirements:
- We need a Department of Defense to include an Army and a Navy and all of the things that go along with them. It is reasonable to include the National Intelligence Program (CIA, NSA, DIA, etc.) and the Department of Homeland Security as defensive agencies as well.
- We need the Treasury Department to print currency, regulate its value, and protect against counterfeiting.
- We need the United States Patent Office to protect our inventors, authors, and other owners of intellectual property. This encourages scientific discovery and the vital arts and is specifically provided for in Section 8.
- We need the Department of Justice and the Judicial Branch of government to interpret and adjudicate our laws.
- In an effort to compare apples to apples I will not attack our tax system at this time. Instead I will save that for another article and, against my better judgment, I will simply say that we need the Internal Revenue Service in order to collect and regulate taxes.
Article II, Section 2 details the powers of the President. It is a little more ambiguous in its language, but still clear in its intent:
- We need the State Department to govern our ambassadors to other nations.
The rest of the President’s requirements are comingled with the Legislature’s and have already been covered. This is obviously a very simplified plan for government. But a simplified plan is exactly what Thomas Jefferson, Benjamin Franklin, and James Madison had in mind. We have gradually grown complacent and have, over the years, traded our liberties and freedoms for conveniences and promises.
The real question is how would America’s economy look if this were the system in which we lived? I would argue that it would look very good. Our currency would be very strong and inflation would be relatively negligible due to the fact that currency would not have been printed with reckless abandon in attempts to stave off recessions. We would have a statistically irrelevant unemployment rate because entrepreneurs and businesses would not be taxed at an alarming rate. This would make for higher profits, thus causing expansion of business and industry inevitably creating more jobs. Consumer markets would be thriving because the reduced budget would mean that Americans’ had more discretionary cash to spend. The stock market and securities market would also be thriving for the same reasons.
Don’t believe me? You don’t have to. The numbers don’t lie. The proposed budget for the coming fiscal year projects a total of $2.2 trillion in revenue. It projects $3.9 trillion in expenditures. That is a projected deficit of $1.7 trillion, nearly double the projected revenue. That means we are being taxed to death and still have nothing to show for it. For each $1.00 our government takes from us, they spend $1.77. That doesn’t sound too bad until you realize that it is us, the citizens that are on the hook for this debt. In order to spend into a deficit we have to borrow the money from other countries. The lender of choice at the moment is China. So when China calls and says it’s time to pay the piper they own us and all of our resources.
Under my plan of funding only the required programs at the federal level, we would only require approximately $800 billion, about one fifth of our current proposed budget. More importantly a number that is far less than the $2.2 trillion in projected revenue. That means that even if you double my proposed budget, significant reductions in taxes can be made and powers that were delegated to the states under the Constitution can be performed by the states and functions that should be left to the private sector can be performed there. This is all possible through cutting federal spending and would go a long way toward correcting the downturn in the national and global economies.
At the end of the day, we know how to spend our money better than the clowns we send to Washington. Some of the savings from the stripped budget would necessarily go to our state and local governments where it can be used in a more targeted way. The rest will go directly into our pockets, our retirement accounts, our health savings accounts, our favorite charities, or wherever we choose. I’m going to spend mine on alcohol and guns. What will you do with yours?