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Get Cash Keep Control BLOG

Converting growth potential into profitable reality — with resources that keep YOU in control


Archive for November, 2007

By Stefania Aulicino

Ever seen a company that is perennially in the “fund raising mode”? Why is that?

Any business is naturally a profit making endeavor: you have a solution that is of value to a set of customers, you price it to cover your costs and end up with a profit. So that is the problem?

True, many business models are dependent upon a scale issue. Serving one customer is different than serving a market full of customers. Scale requires an investment in infrastructure including rent, marketing, on-going product development, product-delivery on a mass scale etc.

The challenge of building infrastructure is that you must invest in it before you are rewarded with the increased revenue that your infrastructure is designed to support. Scaling a business is made up of 2 elements: building the infrastructure and funding the timing gap.

The timing gap – before revenue synchronizes with expenses to yield the profit you designed into the model- is the place where many companies let themselves become equity addicts. It seems like its necessary to get outside funding, so they do, and then, it becomes an addiction.

Actually, most of your infrastructure (such as raw materials, production, even marketing) can be funded with non equity sources- for the asking- when it comes from sources who stand to benefit from your company’s success. And when you reach out to such non equity sources, your growth will be safer. The most valuable source of funding for any company is customers, and after that vendors. Involving customers and vendors also delivers a market discipline, which ensures that any growth is market-supported.

Customers, voting with their purchase dollars, will prevent you from adding features that are not valued, or otherwise going in directions that will not increase your revenue stream. And when you are delivering solutions to resolve the customer’s pain, customers will be happy to offer you more than revenue dollars. It’s not unusual to receive advance payments to fund production; or for customers to act as an extension of your sales force encouraging peers to buy, because your solution is so important to them. Even outright gifts- no strings attached are possible. Vendors can do the same thing plus offer you breathing room with deferred payments much in excess of traditional trade credit- even 270 days or more. Used properly, you can create a mosaic of different small pieces from different sources, which together make up your unique financing solution for all your know expenses.

Unfortunately, companies that use “OPM” (other people’s money) lose that powerful feedback mechanism. That’s why it’s so dangerous to get your business into the equity addiction.

Yes, you will need some equity, but sharing your future with participants who will benefit from your success will limit the amount of equity you really need. Equity should only be applied where nothing else will do.

Now you can limit your need of equity for just that timing gap-the unknown of how long will it take for the market at large to accept a new product or service. Just like the unknowns in your family life, the only way to deal with the unknowns is a safety net. Family’s have “emergency cash reserve” to address the unexpected. Your company deserves a safety net also- which, like your family cash reserve, must be liquid. That is the proper use of equity. Now you need never be an equity addict.

Stefania Aulicino
is founder president of CapitalLInkUSA. For 20 years Stefania has helped business builders uncover the right capital for their optimum growth strategy so you get cash and keep control to build the business you really want.

By Stefania Aulicino

To put your vision-driven growth into action, y you need a corporate resume. Just like a concise, personal curriculum vita, a corporate resume is typically just 2 pages, but instead of documenting only the past, your corporate resume builds upon your company’s strengths and distinctions- like so many economic building blocks, so the reader can see your future- written in the universal language of business- in dollars and cents.

A corporate resume includes a set of financial projection based on 2 important assumptions: unlimited resources and unlimited time. It shares your goal, out 10 years from now, assuming all the money needed to build your business were your own.

Why is this important? Because if you don’t communicate to the world where you want to go, no one will know and no one can help you get there.

Daniel Burnham, Chicago’s famous urban planner who gave us the legacy of a beautiful lakefront city said “Make no little plans; they have no magic to stir men’s blood. Make big plans…”

Based on your 10 year revenue goal, declare your profit margins. As a double check, your profit margins should be bigger than they are today- by a factor of 2 or 3. Enhanced profit margins are a mathematical confirmation that you are building only upon what you do best- your competitive economic distinction. When your projections capture all your most attractive profit-making opportunities, you gain benefits of:

Successfully penetrating new markets and preempting competition

Winning premium prices for your innovative solutions

Economic efficiency reflecting technology, optimized capacity and scale.

Together these elements contribute to a dramatically richer bottom line and stronger cash flow

Best of all, you just might notice this growth strategy, based on your company’s uniqueness, is much less risky than the strategy you might have pursued, constrained by the usual assumption of limed resources. I say this because I believe this optimum growth strategy is the one you would intuitively pursue if all the resources needed were your own. It’s the strategy with the highest return and the lowest risk, built upon your company’s uniqueness. That makes it the most exciting, safest and most profitable future possible.

True, to get there you might need some resources you don’t have. In fact you might not even know how to get there. That means you are limited in your ability to select others to help

Part of the magic of sharing your corporate resume is to attract resources that can help you address what you don’t know you don’t know. A corporate resume lets you reverse the process: share your vision and let resources “self select” themselves. This is how you attract resources that share your vision and want you in control.

This works extremely well with top notch talent: while it’s hard for you to know the right skills, it’s easy for talent with hindsight and experience to see where you want to go and offer what you don’t know to ask for.

Sharing your future also attracts your perfect customers who just might offer to underwrite financial costs to accelerate your ability to serve them. I’ve seen all kinds of resources offered, from 100% advance payment with order to outright gift –not equity, not debt- a gift- all because your product is important to your customer.

Vendors too respond to big goals. They get excited about the new market you are building, and would like to share in it. I’ve seen generous payments terms as long as 270 days, on top of excellent preferential pricing

As entrepreneurs we have a unique ability to create a future that does not exist until we make it-that is our pain unless we make it our asset. A corporate resume is the key to communicating your vision-driven growth and putting it into action. A corporate resume attracts others who can fuel your passion and keep you in control of the future you want.

Stefania Aulicino
is founder president of CapitalLInkUSA. For 20 years Stefania has helped business builders uncover the right capital for their optimum growth strategy so you get cash and keep control to build the business you really want.

By Stefania Aulicino

While setting the course for your company’s future is the responsibility of the CEO, no skipper would navigate his boat on the changing seas without input from his crew. Yet so often, the CEO is moving so rapidly that your team- charged with execution- is left to execute the last communicated course, not the CEO’s real time thinking. Worse the CEO doesn’t have input from the field to influence the course. The result is “Vision Gap”. When Vision Gap is eliminated, it makes room for powerful vision-driven growth to take place.

Fortunately, you are the leader of a company that employs a talented team committed to help you achieve the company’s potential through their assigned roles. Invite your top team members- perhaps 6-10 people to discover which future you really want. Be sure to include representatives from each discipline: operations, marketing, finance, product development, personal to uncover a composite picture. This is different from getting a story from a single person who by definition can only see the picture from their own perspective.

Yet a multidiscipline group can be hard to work with because each member comes to the table with a different set of experiences and responsibilities, like the old fable about the 6 blind men describing an elephant. Certainly the one holding the tail has a different experience of this huge animal than the one holding the elephant’s ear. Yet with careful coordination and communication, these blind men actually do come up with an accurate picture as each reveals a critical detail from his feel of things- a perspective not available to the others.

Similarly, you might be surprised what your operations person has to say about marketing, or your controller has to say about marketing. In this way, each manager contributes different economic building blocks of your company’s uniqueness that might otherwise be taken for granted. Taken together, these building blocks distinctly describe your company in a way that couldn’t describe any other company, and becomes your company’s competitive economic distinction.

If you were under the mistaken impression that this was a “normal business strategy session” you‘re in for a surprise. This creative process is more like a talented jazz ensemble of highly specialized and talented players who quickly begin to improvise together, letting each member take the opportunity for a solo before passing the spot light on to the next player. Ultimately this team unifies in a wonderful common harmony which ties all the individual themes together.

Vision-driven growth allows these motivated mangers to locate the intersection of where value drivers for their customer and the team’s own passion brilliantly point to what your company does best. Best of all, during the process, each manager gets very clear on how each can personally drive value in your company and everyone buys into the excitement of living this bold plan.

The result is your optimum growth strategy- the strategy that delivers the highest return for lowest risk built upon what you do best. Your unique business model which no one execute as well as you do.

Are you ready to liberate your optimum growth strategy? All entrepreneurs know that business strategy and finance strategy are related. Unfortunately, most link these strategies in the wrong way. Conventional wisdom declares that the availability of resources dictates business strategy. As entrepreneurs, our greatest skill is surviving on scarce resources as a start up. However, if you don‘t shift that thinking at the right time, it will stunt your possibilities forever- like a child that chooses to crawl, never developing the muscle power necessary to walk and run. Your optimum growth strategy requires a separation of business possibilities from financial assumptions. This works because there is currency in your passion, as you will discover. Are you ready to convert your growth potential into profitable reality?

Once you reveal your company’s uniqueness you have a safe foundation upon which to achieve your company’s growth—profitable growth, faster safer than you ever thought possible, sustainable in a competitive global marketplace.

Stefania Aulicino
is founder president of CapitalLInkUSA. For 20 years Stefania has helped business builders uncover the right capital for their optimum growth strategy so you get cash and keep control to build the business you really want.

By Stefania Aulicino

This is not a trick question; the longer you have been in business, the harder it is to answer this question.

When you started your company you had a specific idea. But along the way 3 things happened:

You needed cash, so you took on business that perhaps diverted your original focus

The markets changed and you responded

You learned more about your customers, their pain and how to contribute great value.

Any and all of these impacts ensure your business is constantly changing.

Right now I’m writing this blog from a Starbucks location near my office. What business is Starbucks in? When Howard Schultz joined this sleepy coffee shop in Seattle, they had one store and great coffee. Is Starbucks a coffee house? Actually, Starbucks exploded into prominence and dominance when it created “The 3rd Place” — a casual location that isn’t home and isn’t the office. Many people conduct business or use that 3rd Place to meet and chat with friends, read, or do homework. I regularly use Starbucks for writing books and speeches.

Knowing what business Starbucks is really in helps its management prioritize opportunities to position themselves for profitable growth. Early on Starbucks added food offerings for customers enjoying the 3rd place at all hours of the day. With the addition of wireless Internet, many road warriors spend hours in Starbucks working on their laptops (and buying drinks and food). Recently I’ve noticed Starbucks adding music and books for sale, all the while expanding its accessories of mugs and toys as Starbucks sells its “brand”, just like Harley Davidson does.

A clear understanding of what business you are in ensures you capture your best opportunities, consistent with what you do best.

So what business would you say Amazon is in? Clearly Amazon began as a channel of distribution for physical products—initially books, magazines, DVD’s then expanded out to electronics, home, garden, sports and plenty more. But Amazon quickly laser focused on their expertise as “data collectors” of what people buy and Amazon quickly added recommendations of new purchases based on your pattern of historic purchases. That shift in business has meant billions of dollars for Amazon as it left its book-selling competition behind.

What business is Google in? Not sure I have an answer for that yet, but it will be fun to watch how this plays out. Google’s initial focus was to organize information on the net, provided for free. Google has been making a killing with its Adwords sale (helping users heighten their visibility with info seekers) suggesting an advertising revenue model. Based on recent acquisitions, Google is moving its role from “organizer” to “provider” on the net as it makes available applications to use the information it organized from any computer in the world, not just the computer where you’ve happened to have installed your personal software. Now you can use free Google processing applications and free gmail accounts as a complement to its free information flow. Now Google is committing to open source software platform for internet services on next generation cell phones.

In today’s fast changing global economy, the most important thing you as a business owner can do is focus – and refocus– on what business you really are in. And be prepared to be surprised! The best companies do not necessary start out with brilliant category killer ideas but they are supreme at noticing how the market wants them to behave and accommodating their loyal customers. A combination approach of suggesting a novel business model and then being willing to tweak it in real time seems best for today.

So what business are you in, really? The answer will determine how you will act day to day to sustain your profitable growth in a dynamic global marketplace.

Stefania Aulicino
is founder president of CapitalLInkUSA. For 20 years Stefania has helped business builders uncover the right capital for their optimum growth strategy so you get cash and keep control to build the business you really want.

By Stefania Aulicino

When you started your business, it was a twinkle in your eye. You could see the future but no one else could. Then you developed your product or service, got a few clients and you were in business.

However, because of your ambition, for a long time your business will be smaller than you intend to be.

How you label your company during this formative time will dictate your future because the choices of words we use are always important: that is the power of language.

Language is how we communicate our meaning to others. And language is a reflection of what others understand from us. Think of it in this simple example. As a native English speaker, you are asking for directions to the train station in China, but you are speaking to a person who studied English in school. The words used may not be received as you intend them.

Now think of a situation more close to home: How often have you described your company with terms like start up, early stage, small, emerging or the like. Did you ever stop to think what that language connotes to the listener? Unproven, risky, unsustainable, fragile, not trustworthy.

This language is also very imprecise. I’ve often heard companies with $25million in revenue use the same small business label as a company with $100,000 in sales.

Your choice of language is very powerful. Is language, in part, holding you back from the success you deserve with customers and investor?

What prevents you from speaking of the business you intend to be: innovator of x, or leader in the yxz niche- you get to define it, or specialist in xxx- you get to declare it..

Can you begin to hear the difference.? There is power in language and language can influence how customers and investors perceive the safety or risk in dealing with you.

How many customers want to be on the “bleeding edge” buying from a start up, an emerging or early stage company? Alternatively, how many more customers would be drawn to investigate a purchase from “the specialist in…”, or “the leader in..”? Perhaps even pay a premium for the early opportunity to buy! Simple shift in language can mean the difference in getting a customer to pay for a prototype or first production run vs having to give up equity to an investor for the same dollars.

And when you use language powerfully, you will make your company more attractive when investor capital is appropriate.

Language is your most powerful tool. It’s how you describe your vision and passion to make it real.

There is currency in your passion, all it takes is careful use of language to access it with those who want to buy.

Learn the proper use of entrepreneur-ese to make your future tangible enough for customers and investors to buy today.

Stefania Aulicino
is founder president of CapitalLInkUSA. For 20 years Stefania has helped business builders uncover the right capital for their optimum growth strategy so you get cash and keep control to build the business you really want.