Business Start-up “Don’ts”:

– Don’t dive in head first

– Don’t invest in businesses that promise an immediate ROI

– Don’t overextend yourself financially and cognitively

– Don’t go into a business you know nothing about or you will spend all your time trying to learn the business instead of growing it.

– Don’t start a business from a panic standpoint

– Don’t start a business with the sole purpose of making money.

– Don’t start a business in which your strategy is to offer low prices and high volume.  The key is not what you make but what you keep.


Should I Approach Angels or VC’s for Funding?

I am often asked by entrepreneurs if they should seek funding from angel investors or venture capitalists.  Here are a few guidelines for determining whether you should approach angels or VC’s for your financing.

Amount of initial money to be raised: if it is less than $1M, angels are usually the best unless you specifically target VC’s that do seed rounds or you have a preexisting relationship.

Amount of money to be raise over the life of the company: if you will require $3M or less to get your company cash flow positive, stick with angels.

– Type of company you are building: VC’s love to fund businesses with potential to be enormous.  Angels will love this too but they are more willing to fund smaller companies with smaller capital requirements.  VC’s tend to invest in entities that have scale (like software development companies) rather than linear entities (like a service company).

– Your experience: successful entrepreneurs always find it easier to raise VC monies because of their previous success.  That does not mean as a first-time entrepreneur you can not approach a VC, it just means it is going to be harder.

– Your network: reach out to everyone you know and ask for references.  As always a personal reference works much better than an unsolicited application.

Tips for Getting Your Business Organized:

– Keep business and personal accounts separate by setting up a separate business checking account and separate credit cards.  This is also essential for liability purposes if you have a separate entity.

– Create a system for record keeping.  Keep records organized by filing receipts by expense type or vendor paid. 

– Keep records up to date by purchasing an accounting software system such as QuickBooks, Quicken or Microsoft Business or you can use the attached template if you do not have a lot of monthly transactions. 

By being organized you can track to see how your company is doing and make informed decisions.

5 Tips to Save Your Business Money:

– Review building depreciation by having a cost-segregation study performed.  This may allow a larger deduction due to shorter asset lives.

– Explore like-kind exchanges if you are considering replacing old equipment or building with newer ones.  Be careful as the Section 1031 rules are very strict.

– Review your business entity type for the most tax advantageous classification. 

– Compile a budget for next year by reviewing the current years’ income and expenses.  A budget will help your business attain its goals.

– Consult with your tax accountant or tax advisor to help maximize your bottom line.

The Alternative Bankers:

The so-called alternative loan industry has exploded to take advantage of a gap in small-business funding.  Please note that these options tend to be more automated, more convenient and more expensive.

– Cash advance/short-term online loan: a loan or advance against a company’s revenue or credit card transactions.  The money is repaid through incremental payments extracted automatically from a company’s account.

            Benefits: Fast turnaround and poor credit scores not a problem

            Drawbacks: Higher costs and shorter terms

            Examples: CAN Capital, Merchant Cash & Capital and OnDeck

            Typical cost: Fees can range from 30% to 200% APR

– Line of credit: unlike a term loan, a line of credit can be drawn against when the need arises.

            Benefits: Interest is paid only on the amount taken and cash is available quickly

            Drawbacks: The line can be revoked or changed at the lenders discretion

            Examples: OnDeck, Kabbage and Headway Capital

            Typical cost: 7% to 80% APR

– Term loan: similar to bank loans.

            Benefits: Longer terms and larger amounts are available

            Drawbacks: More expensive than bank loans

            Examples: Funding Circle, Lending Club and Fundation

            Typical cost: Fees can range from 6% to 30% APR plus fees

– Crowdfunding: a way to raise money from lots of small contributors.

            Benefits: When it works, it is straightforward

            Drawbacks: Can be as challenging as traditional channels

            Examples: Kickstarter and Indiegogo

            Typical cost: 4% to 5% plus processing fees

– Marketplaces: small-business lending marketplaces gather multiple options in one place.

            Benefits: Easy comparisons and ability to pitch multiple lenders at once

            Drawbacks: Process can take longer as marketplaces do not lend their own capital

            Examples: Lendio and Fundera

            Typical cost: Lenders pay finders fee