Get Cash Keep Control BLOG

By Stefania Aulicino

Do you spend your time focused on growing your company’s best future? Or are you really relegated to just focusing on today’s immediate needs? Is there a tug of war between short term cash flow and long term big profits? Between survival today and quantum leap success tomorrow? It’s the business builders’ challenge.

What is your passion-driven growth? Consider your revenue today; what is your profit margin on your current level of sales? Now, project out 5 years capturing all your best profit making opportunities. What is your revenue out 5 years from now? What is your new profit margin? Is it 1.5x, 2x or more bigger than today? So, what’s holding you back?

3 Stages of growth. You are a successful business owner with a passion to make a difference in the world. You had a salaried job, but you saw a better way to serve your clients. Your commitment to excellence drove you to break out. You are a special breed- a business owner, ready and willing to build a future only you could see. Your reputation, integrity and laser focus is paying off. Your innovative products or services delivered better than you promised and word of mouth has resulted in raving fans who encourage others to buy, because your solution is that important to them; sales and profits followed. You remember with fondness stage 1 of the passionate entrepreneurs’ growth stage: Passion dictated every decision. The team culture was cohesive. Such a pure message and experience in the marketplace fueled the early years of the company’s growth. Instinctively, at stage 1 you pursued a passion-driven growth strategy.

Then came the terrible 2’s- the 2nd growth stage. continue reading…

By Stefania Aulicino

“I knew when I started my business it was to build a significant player in the market. Many entrepreneurs are small business people and their goals are modest. Not me: I started with a big end in mind: to be a valued partner to my clients, attract a team to help me grow to our full potential, be recognized for innovation and performance in our niche rewarded with premium prices for our unique solution, and to channel my passion to deliver solutions in an area where I am uniquely suited to contribute. In short: make a big difference in the world.That was and is my goal, but reality falls a bit short. When we began, everything was on track. We built upon our unique perspective and insights. We attracted our ideal clients and our proprietary solutions began to sell. Word of mouth and trade press followed and sales grow.
Early on we used our limited resources very carefully, balancing innovation and talent investments matched with internal resources. As we attracted more and bigger customers we had to bite the bullet. We started to seek financing to put infrastructure in place to support these larger customers. As an expert in my industry I am very comfortable with analyzing decisions related to product and service, but I was a new-be about finance.
The bank seemed like the conservative thing to do so we selected a relationship. But the bank has not been as I had hoped. The bank was willing to finance a building, or extend credit as a percentage against selected accounts receivable or inventory that met their criteria, but the bank offered no help with what I really needed—growth capital, to fuel tomorrow; the bank offered only working capital based on what I have today.
Now I am getting scared. If I want to grow and I can’t use debt from the bank that means I have to seek out investors who want equity ownership and control. I feel confronted with a terrible reality: stay small or take on equity partners who expect to have a say in the future I want to build and let others control my destiny. I’d have everything riding; my family’s security would be at risk of decisions I don’t control. What a terrible choice.”
If this is you, do you resonate with these growth stages of your company? continue reading…

By Stefania Aulicino

“I wanted to grow, but I was afraid to grow. Didn’t want to add more staff to manage.
My time is scacre as it is. Don’t know I can handle any more.
Sure I know there is opportunity out there, but financing is always a struggle and I just don’t have the energy to fight so many battles
Wonder if I would be better off with a corporate job again”.
On our worst days as Entrepreneurs, do you ever have secret fears like those shared by Bill, above?
When Bill shared this with me I offered him a solution, in the form of a question:
Are you pursing your OPTIMUM GROWTH STRATEGY?
“Growth?! Our growth is what I can finance.”

That is the beginning of the problem for too many Entrepreneurs.

What is at stake is your Optimum Growth Strategy: the one that delivers the highest return with the lowest risk.
As entrepreneurs, we all know that Growth does not occur without Finance to fuel it.
But too many entrepreneurs link these strategies in the wrong way.
The right way is to insist that GROWTH strategy dictate FINANCE strategy, never the reverse.
If you try to address FINANCE first, you end up reaching out to the wrong types of sources and you don’t get full value so you end up paying more than you should. continue reading…

By Stefania Aulicino

YouTube, Twitter, Groupon, and Zynga are members of a new club– “fastest from founding to $1B valuation” club, — Zynga, the social gaming pioneer, earned its membership in just 19 months.

Explosive growth is not confined to social media companies.
Costco (the membership warehouse retailer chain was the first company to grow from zero to $3 billion in sales in less than six years and today is $78 B in revenue.

Think of other fast growing companies you admire.
Disney, Four Seasons Hotel, Patagonia, South West Airlines, Harley Davidson, Green Mountain Coffee, Target, Legos

Why do all these companies grow so fast?
My interpretation is that successful fast growing companies leverage cheap customer acquisition models!
To be a sustainable growth company in the 21st century you need to build a cheap, scalable, automatic model to acquire customers

Please note: customer acquisition is NOT the same as sales acquisition.
• sales and marketing strategies are about how to get people to buy what you have to sell today
• customer acquisition is building a continuous pipeline of people who will buy
anything you can sell them today and in the future at, at higher prices, with accelerating frequency.
continue reading…

By Stefania Aulicino

What have you learned from social media?
You could answer a lot of things, but I think it boils down to this:
People like to connect with each other!

And no wonder.
Your mother thinks you walk on water.
The better people know you, the more valuable you are!

Where are you most valuable?
Most likely your family: that’s your blood and your in-laws. Beyond that smallest community, your value grows as you extend your community reach to include those who share hobbies, sports, and those who know you at church, community work, and your neighbors.
Your value continues to grow reaching out to your class mates, colleagues you know from business, trade associations.
When you reach out even further, perhaps you are viewed as a thought leader in your industry, even in the world at large.

That’s the business of social media: social media makes the case for a cheap client acquisition model for business.
• Friends are a source of wealth! The better people know you, the more they value you.
• When you understand your clients, the more those clients value you.
• Creating friends is free: Customers deserve to be friends
continue reading…

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. www.CapitalLinkUSA.com