Saturday, April 12, 2014

How Much Money Does a Startup, Expanding Public Company or Venture Really Need?

"If I just had $1,000,000 this business would work, I would make so much money." When a client comes to me with this initial statement, I generally am assured that the amount of funding which is needed is a flawed projection.

Many entrepreneurs, as visionaries, see the picture but fail to realize how much the picture really cost. Publicly traded micro-cap companies as well as start-up ventures are both guilty. So how much money is really needed to fund your venture?

Well the exact dollar amount varies for each company or venture depending on various factors including what you are selling, the market for your product or service, or how much money you are looking to raise. But there are a few principles and common problem areas that I see time and time again either misconstrued or not acknowledged at all.

Only take what you need.....
What do you need the money for? If you can't answer this question then you probably should not be asking for a loan or an investment. Too many times I have had clients whom sought to take out additional capital on top of what they needed. I consistently advise against this practice. While having operating capital is necessary, an additional amount on top of anything you absolutely need, has an adverse effect on a company's or start-up venture's financials. I was retained by one entrepreneur who was looking to take out a 1 million dollar loan and use $100,000 for growing the business and the other $900,000 he wanted to keep in the bank so when he "ran into a deal" he could grab it. Taking out the additional $900,000 as a loan would not be cost-effective. The $900,000 he was seeking is better off as a line of credit so the interest accrues as he needs it as opposed to a loan where the interest accrues from day one, or an investment where the investor starts measuring his return from day one. If you are looking for financing today for an action that will happen 6 months to a year from now, make sure you take into account the interest the loan will accrue while the cash is sitting in your bank account doing nothing.

When you can, cover your operating expenses out for three quarters...
This principle is a common mistake overlooked by many entrepreneurs and it is the exact opposite of "taking what you need" as described above. If you take or ask for too little money then what you need to profit, you are setting up for failure. One common mistake I have seen over and over again in projecting what expenses will be pertains to salary projections. Most CEOs and entrepreneurs for some reason or another do not include what they will pay themselves when they project out finances in business proposals. This is especially true when they are in front of the person or entity from whom they are seeking an investment or loan. Generally the thought is 'I will pay myself with the money I make' or 'there is no money to pay myself yet".  If your business cannot pay you as a CEO or a manager, then you will look somewhere else for money and your attention will not be focused on the business plan. On the other side of the coin, if you are investing in a company or an entrepreneur and their business plan does not have a set way for them to get paid, then you can believe with almost 100% certainty that their focus will not be to turn over the capital invested, rather to make a living for themselves somewhere else.

Investing in the proven model and tip toeing into expansion.....
For publicly traded micro-cap and small cap companies as well a small privately owned businesses, investment into proven business models have an actual accountable return history. This allows for the investor and the company to measure projected returns based on prior performance instead of unreliable projected data. If the company has made money doing something before, as long as it is scalable, the investment will multiply the return/revenue. So if a company put $2 into a product or marketing a service and then sold the product or service for $100, this proven model should return $100 for every 2 dollars invested. Of course growing this business model, the numbers will not stay the same. As revenues grow, expenses grow, and it will generally cost more to make more in percentage value. In other words putting two billion dollars into a product or service will probably not return 100 billion dollars. There are only a certain amount of dollars in the world, get my drift....

If you are investing in what you do well, your investment will fare well. If you put the money your company seeks into something that has generated a positive cash flow, it will multiply this effect and your job will be to limit the expenses incurred additionally upon expansion.

If the loan or investment is sought for expansion into a business model that is unproven, in other words has not been done by the company before, it is well advised to tiptoe into the expansion. To be clear, if the company makes chocolates and decides to expand into t shirts, the expansion into t shirts should be taken with precaution and nominal amount of investment should be made until the business model is proven. The same goes for advertising. If one advertising outlet generates a positive return for a product or service and a company is looking to expand into an additional advertising platform, then that advertising platform should be invested at the beginning to test the effectiveness, not to post an enormous projected return not proven.

A note on investing in proven and un-proven business models:  If your company is seeking to expand into something they never have done before, but retain the right party or human resource or employee who has proven the new business model....then the proven business model is imputed to the company, and the company can be more aggressive in investing into that expansion.

Don't forget fool, you have to pay that back....
My final advice may seem obvious but too many entrepreneurs, especially in the publicly traded Microcap and Small cap markets were the life of the company after the current CEO leaves generally continues and the going concern of the company is minimal, seem to forget they have to pay back the loan or investment..somehow.

First figure out what you need to grow your business. Second, price those needs. Ask for an investment the size of what you need. Make sure you will be able to pay yourself to execute your business plan until profitability. And always ask yourself, how will I pay back this loan while making myself money?

The MicroCapCompany.com Team
Author: Nicholas Coriano

"Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones."

-Benjamin Franklin

Wednesday, March 26, 2014

Private Charter Airlines Can Benefit from OTC, Small Cap and Micro Cap trading Airline Companies

Before presenting A List of Small Cap, Micro Cap and OTC Trading Airline Companies, let us review and know what the terms stand for and how do they affect the stock market drastically and how much impact these trading options can have over the airline companies.

The stock market and investing in stocks have always been really exciting and interesting, especially for those who have interest, know the essentials and have something to invest. Stocks based upon Cap are usually differentiated in two Micro Cap, Small Cap, Mid Cap and Big Cap. Each of these trading options offers slightly different perspective of trading in stocks. While knowing about the airline companies; what they are spending there money on and how much they are making.....These Micro Cap and Small Cap Companies can that are publicly traded can also help the small charter airline Go Big!

A List of Small Cap, Micro Cap and OTC Trading Airline Companies Includes,
  • AFLYY Air France 
  • AFLYY Air China
  • AFLYY Air Canada 
This is a small list (others known are encouraged to comment below so we can add them to the list) but sufficient to know where to start.  Small Cap and OTC traded stocks like the ones listed can be a perfect partner to the start-up private air charter service looking for funding or investors.  The attributes of these few major airlines make them perfect as an investor/partner when trying to enter a highly regulated market such as aviation.  And because the company is public, we understand the financial standing of the company, which means we know if they are prone to invest, and how much money they would have to invest in any given quarter according to their balance sheet.

Represented by the ticker AFLYY, Air France, is a corporate share holding company that has ownership in Air France and KLM. It is primarily the provider of air transportation for international and domestic location for passengers and cargo. The completed and detailed share structure of the company is visible over the site http://www.otcmarkets.com/stock/AFLYY/company-info (this link will help the investors or potential partners to understand their financial standing)

Whether you have ambitions of starting your own airline or are looking for a small cap airline stock to invest in, these Micro, Small Cap and OTC companies are a great starting point. The low market capitalization of these airline companies allows private venture capital (those with enough funds) to consider takeover options.

Because each of these airlines are publicly traded airlines, meaning that public also can invest and enjoy profits, they are subject to S.E.C. rules. OTC stocks are basically the stocks that are generally traded through broker dealers and not through the typically centralized stock exchanges, such as major stock exchange markets like NASDAQ and NYSE. There is a rumor that NASDAQ may not completely comply to the requirements of a broker dealers system, but in actuality it does. The most popular and major OTC stock trading markets include OTC Bulletin Board and Pink Sheet (OTC Markets Inc).

Because these companies are still guided by the S.E.C., certain requirements for filing and shareholder rights pertain.  The companies trading with OTC are not just small cap or micro cap companies, big giants also trade OTC to avoid high fees associated with the major stock markets.  Trading OTC (over-the-counter) means that there are minimum disclosure requirement and in some cases no requirements for reporting to the public at all.

The most up to date information, if any is available, is available on the OTC Markets website for AirFrance, AirChina and AirCanada. If you wish to take the advantage of these airlines trading patterns be sure to be diligent in your research.  If you are looking for a company that has high upside potential, they may be worth a look.

The MicroCapCompany Team

Monday, March 17, 2014

Micro Cap Company Conference List 2014

In 2011 we wrote an article "3 Micro Cap Conferences You Don't Want To Miss!" followed in 2012 by "Two Micro Cap Conferences for Investors and OTC Traded Company Executives" .....No, we won't be listing only 1 Micro Cap Investor/CEO Conference to attend, rather we are going to list them all.  The list will be updated every-time we find a new conference, so be sure to bookmark this page as a favorite for a go-to reference guide of OTC and Micro Cap get-togethers. If you know of a micro cap conference that will be held in 2014 and is not on the list, please email us the conference by clicking here and we will be sure to add it promptly.  Thank you

GROWTH CAPITAL EXPO 2014
April 29-May 1, 2014
Caesars Palace
Las Vegas, NV
http://www.growthcapitalexpo.com/

Semi-Annual Microcap Conference
May 9, 2014
Sidoti & Company, LLC
http://microcap.sidoti.com/

SeeThruEquity 3rd Annual Microcap Investor Conference
May 28, 2014
8AM - 6PM
Convene Grand Central
New York City
http://www.seethruequity.com/#!upcomingconference/cc6n

Marcum MicroCap Conference
Thursday, May 29, 2014
Grand Hyatt
109 E 42nd Street
New York, NY 10017
http://www.marcumllp.com/microcap#sthash.EpdhBriO.dpuf

LD Micro
June 4th, 2014
Los Angeles, CA
http://www.ldmicro.com/

-The Micro Cap Company Team
@MicroCapCompany

Monday, March 10, 2014

Promoting Your Micro Cap Company or Private Venture in 2014

Traditional means of attracting the investment public are dead!  Now you better have an image to go along with the business or idea you are selling.  This article is not geared so much to the successful profitable venture (although you will learn something about how to gain a larger audience of investors) but to the start-up or those looking to raise capital particularly.  

The Entrepreneur will have an onslaught of options when it comes to marketing, but if you are trying to simultaneously gain investors, partners or loans... you may soon realize that your budget could be totally depleted on marketing efforts alone...with No guarantees.  There's Investor Relations agencies, Search Engine Optimization Companies (SEO), Social Media Firms, Television-Print-Radio Sources, Newspapers and Advertising Agencies all telling you how much you need them.  And for the most part, it's true.  Promotion of your private equity deals or OTC company is not easy.  It should entail all of these to some degree...but to what degree??

The first step to effectively promote a private venture looking to go public, an OTC company, and/or a private equity deal is to focus on what you are selling.  Your business model!  How does the company or venture make money??  Answer this and you are ready to go to step 2...

The second step is to revolve all aspects (SEO, SEM, IR etc..) of your promotional campaign around what the venture is selling.  That's it.  As long as you stay within budget (which is a totally separate post), this will accomplish ten times what "Professionals" outline or plan out.  

For example...Let's say you have a company that sells online advertising space.  Let's call it MicroCapCompany LLC for example purposes only.  Everything in your campaign should revolve around selling your product, not selling the investor.  Wait, I thought we are trying to attract capital???  We are...wait for it.....
  • Your SEO efforts should try to rank you Page 1 on search engines for terms like "advertising space" or if you are a blog "blogs with advertising space"...your SEO research and team should be able to go into Google Adwords for free and check the most searched words in your niche.  
  • Your Social Media Marketing should tweet, facebook post, share and like everything related to "advertising online".
  • If you are paying for a "blog mention" it should be on a website related to your niche.  For example, it would do no good for a company about tree-houses, that wants to showcase its photo collection in North Dakota, to advertise on MicroCapCompany.com
  • Investor Relations should always try to sell the company's products or services first and then the company.  And targeting funds within your niche will go along way.  
.....Now that you have tailored your campaign to sell your products and/or services, investors are easier to attract.  The first thing an investor asks is what do you do??  The Promotional Campaign answered that question.  Not only does a targeted promotional campaign with a focus on sales revenue cut out small talk, but it assures potential investors.  If you are looking for a lucrative investment, you want to see their focus.  Well vetted entrepreneurs and business people looking to invest can see through the company looking to find money and the company in it to win it.

The backdoor payoff is that while you look for investors, you company gains revenues.  And when you run into the investor, which you will because you just ran a promotional campaign, your sales pitch will be short because your marketing efforts turned a profit before the investor even showed up at the door.


Don't agree with me??  Think the same?? Ask questions, comment or begin conversation below.....