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Category Archives: Finance

How Should I Evaluate a Venture Capital Firm?

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup | No Comments
Evaluating a VC Firm

Q: I’m raising a seed round for a consumer web startup and I’m getting good interest from VCs. What questions do I need to ask of them to gain insight into how well we’d work together? A: I suggest that there are two stages of research/questions to determine fit with you and your company: Prior to Contact: Research prior to making contact to qualify them in terms of the broader fit and, Prior to Commitment: Questions you want to ask once you’ve made contact to further qualify them since you will be partnering with them for years Prior to Contact:…

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How to Change a Loan to Equity But Maintain Ownership

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup | No Comments
Debt vs. Equity

Q: I am the sole owner of an S-Corp that has received capital from a lender/investor in the form of a loan. Is there any way I can restructure the capital I’ve received to show up as equity instead of a liability to improve my balance sheet without having to sacrifice the ownership of my company? Basically, I want to keep the investors on a fixed annual return for their money, but classify their capital as a equity to meet certain net worth requirements for my industry. A: You can change the debt to non-convertible preferred equity with an annual dividend…

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Raising Capital for an Alpaca Farm

By | Business By The Book, Finance, Finance, Financing a Startup | No Comments
Raising Capital for an Alpaca Farm

Q: We are interested in starting an Alpaca farm. Do you think this is something investors might be interested in investing in? A: There are a whole host of dimensions that you should consider in terms of attempting to raise venture capital for any opportunity, let alone an Alpaca farm. See our other blog posts on raising capital to give you a sense for the difficulty and complexity of the process when you try to raise capital for any business. But let’s say that you decided to press on and you do raise some capital from an investor. In other…

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Need Advice on Interpreting Financial Results

By | Accounting, Business By The Book, Finance, Finance, Finance & Accouting, Financial Reporting, Increasing Profitability | No Comments
Declining Net Income

Q: Over past 10 years, our service company’s Revenue and Long-Term Liabilities have increased while Retained Earnings, Equity, and Net Income have decreased. Any observations and/or counsel? A: While it is somewhat difficult to answer the question without additional information, the most likely scenario is that your Expenses are rising faster than your Revenue and — as an owner — you continue to take out the same salary/distributions that is affecting most or all of the Net Income and the shortfall is being made up by taking on more Long-Term Liabilities. To illustrate the point, here is an example of…

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Just Say No to Venture Capital

By | Business By The Book, Finance, Finance, Finance & Accouting, Financing a Small Business, Financing a Startup, Organization & Strategy | No Comments

There is a constant stream of entrepreneurs that ask me to invest in their idea or ask me advice about how to raise venture capital for their business plan.  In many cases, they should just say no to venture capital. There are a lot of benefits to raising venture capital such as the ability to fund a big capital need in a company’s early stages, the ability to tap into the investor’s savvy business advice and mentoring, and the ability to tap into the investor’s deep relationship network. But there are also a lot of disadvantages to raising venture capital…

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How to Improve the Profitability of a Conference

By | Accounting, Business By The Book, Business Improvements, Cash Flow Management, Finance, Financial Reporting, Increasing Profitability, Organization & Strategy | No Comments

Q: My family has planned and managed a Christian family conference each year now for several years, but we end up losing quite a bit of money on each conference. We really feel it is of the Lord and that the conference is a blessing to many families, but it has turned into a painful financial experience for us. Do you have any advice you could offer us? A: There are two ways to improve the situation: to increase revenue and/or reduce expenses with the goal of never spending more than you are bringing in. Here are some specific suggestions…

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Venture Academy Video Excerpt: Fixed Asset Investment

By | Business By The Book, Finance, Finance, Financing a Small Business, Growth Strategy, Investing in Small Businesses, Office and Operations, Venture Academy | No Comments

This video provides insight into the impact of the level of Fixed Asset investment in your business planning:     This video is just 1 of nearly 200 videos available with a Venture Academy subscription and is excerpted from the Venture Analysis section.

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Stages of Company Growth and Capitalization

By | Business By The Book, Finance, Finance, Financing a Small Business, Financing a Startup, Investing in Small Businesses | No Comments

One of the most pressing concerns for entrepreneurs of early-stage and middle market companies is the question of the capital formation process and how to adequately finance their companies to support their growth plans. The types of financing available to entrepreneurs vary widely and are most dependent upon the stage of the company and the perceived risk/reward tradeoffs by investors and lenders.  The table below summarizes the typical business stages, their goals, and the generally available financing options: Company Stage and Type of Capitalization: The overall enterprise value and how it tends to change and grow over time from stage…

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