Venture Capitalists Beware?

This continues our series on funding or financing your business

The term venture capitalist (or VC) refers to people who provide capital (money) to business ventures. Whereas, angel investors invest without wanting to assume a strong ownership or day-to-day operational responsibility, venture capitalists will quickly step in to correct a  struggling business.

Differing Perceptions of Venture Capital Investors
Many people possess bad ideas about venture capitalists. Most heard stories of VCs forcing founding business owners out of office. People hear that VC's look for businesses they can take over. Many know stories of venture capitalists that changed the direction of the business, expanded for global markets, or spending money the business owner never envisioned budgeting.

A closer reality exists. Venture capital investors look for businesses they perceive can give a good return on their investment. In other words, they put their money into companies that will give them back a lot, and I mean a lot, more money than they invested. They do whatever they need to do to get the business showing significant profits. Sometimes, that means changing management that will not, or cannot, make the changes needed.

In addition, venture capital firms focus on firms that can generate a large return. Therefore, they look for businesses looking for $1+ million investments, rather than smaller investments.

How to Find a Venture Capital Investor
The good news: you can find venture capital investors easier than you can find an angel investor. Like many small business resources, you can start with the Small Business Administration (SBA), your local Small Business Development Center (SBDC) and SCORE. The SBA also offers their  New Markets Venture Capital Companies. The SBA also maintains a list of Small Business Investment Companies (SBIC). You can also use business magazines like Entrepreneur or Inc. They frequently publish articles analyzing venture firms. Your local economic development agencies also provide information about Venture Capital firms. In addition, even Wikipedia lists major capital firms.

I suggest that you talk to former clients of any venture capital firm to explore their experiences both bad and good. Also, talk to the SBA, SBDC, and SCORE to identify any concerns.

The Venture Capital Process
The Small Business Administration summarizes the venture capital process into the following steps (follow the link to read the details):

• Submit Business Plan: the venture fund reviews an entrepreneur’s business plan and talks to the business if it meets the fund’s investment criteria.
  
• Due Diligence: If the venture fund is interested in the prospective investment, it performs due diligence on the small business
  
• Investment: If at the completion of due diligence the venture fund remains interested, an investment is made in the company in exchange for some of its equity and/or debt.
  
• Execution with VC Support: Once a venture fund has invested, it becomes actively involved in the company.
  
• Exit: While venture funds have longer investment horizons than traditional financing sources, they clearly expect to “exit” the company.

Read Saturday’s posting about bank loans guaranteed by SBA or other loans.

Have you had an experience with a venture capitalist? Please share!

Virtual Assistants Save Time & Money

Enrich the discussion. Share your stories about working for, or as, a virtual assistant

Frequently, business owners need to focus on delivering the product or service their 1-person company offers. The billing, correspondence, updating a web site interfere. Many plan on doing those tasks during their “free time”, or having a family member do them on the side. As the business grows, however, neither the family member, nor the free time prove adequate. The business usually cannot support hiring even a part-time assistant to help at this time.

Virtual assistants provide a wonderful and less expensive bridge allowing you to focus on the business, not the paperwork.

Robin’s Story

Robin started an interior design business 9 years ago. In the beginning, she could easily balance meeting with potential clients, designing the spaces, buying the materials, and all the paperwork to keep it running. As the business grew, she found herself spending more and more hours “after work” doing the paperwork. It wasn’t enough to hire someone, but enough to irritate.

Robin met Donna at a community business organization they both attended. Donna, a single mother, with 2 young children ran her own virtual assistant business. She wanted more clients to serve. Her BA qualified her to do accounting work and all other administrative tasks. It took a couple of months to commit, but Robin eventually contracted with Donna.

For three years Donna would stop by Robins place once a week. She would deliver hard copies of the items that Robin wanted: contracts, proposals, etc.. She emailed most items during the week to a special email only Robin saw, because Donna screened and answered 90% of Robins emails. She would file everything for Robin. She highlighted the items Robin needed to act on. She did all the other things that had to be done in the office. After, an hour or two Donna would pick up all the things she needed and took them home to work on them. The only administrative task Donna did not perform for Robin’s company; she did not answer Robin’s phone.

Robin’s business thrived now that she could focus on the service delivery. Donna kept her appraised, but did not interfere. Robin’s business grew. After 3 years she tried to hire Donna full-time, but Donna loved her life as a virtual assistant. So, Robin hired a full-time administrative assistant. Donna accepted a new client that another client referred to her.

Both benefited quite well from the new arrangement.

Benefits of a Virtual Assistant

• Virtual assistants reduce the amount of time you need to spend on clerical, bookkeeping, and administrative tasks
• They allow you to hire someone—as needed—without making a commitment for a specified number of hours
• They work as you need them to work. You only pay for what you ask
• You share the costs of a workstation, computer, or other office equipment and supplies with the other clients

Virtual assistants provide a variety of services. I copied the following from Donna’s web site Busy Bee Virtual Assistance:

“A partial list of what we offer:

• Database maintenance
• Invoicing and collections
• Translation services
• Creating Power Point presentations
• Bookkeeping and bank statement reconciliation
• Transcription (charge is by audio hour)
• Proofreading services. Never send out another mailing with embarrassing misspellings again!
• Website maintenance. We can keep your website up to date and your content fresh.
• Newsletters and e-zine campaigns.
• Grow your business
• Keep in touch with your clients on a regular basis!
• Correspondence handling. We can manage both your snail mail and email correspondence, respond to routine requests, and forward items to you that need your personal attention. You save time and money!
• Creating and sending out bulk mailings.
• Assisting with special projects and seasonal/periodic work overflows.”

How to Find Virtual Assistance

You can find virtual assistants many ways:

• Google the words Virtual Assistants or Virtual Assistance: your response will show mostly virtual assistants working outside the United States for as low as $6.00 an hour. While this provides the lowest costs, you must balance the pros and cons with an off-shore assistant.
• VANetworking.com impressed me. They bill themselves as “Social Networking for Virtual Assistants and their clients”.
• They provide good informational information about what Virtual Assistants can do for your company.
• They also offer an easy to use search engine to find a virtual assistant near you.
• They provide training and tools if you want to start a Virtual Assistant Business
• Entrepreneur magazine published an article in 2004 about the phenomenon. While some of the links at the bottom are dated, they still provide access to virtual assistants throughout the world. (The article is also informative for those interested in become a virtual assistant.

Join me next week when we explore the importance and value of an accounting firm

Enrich the discussion. Share your stories about working for, or as, a virtual assistant

Your Prime Business Goal

I address thousands of business owners each year. They own businesses in the United States, Brazil, Peru, Africa, and other nations. They may gather in Chambers of Commerce, business associations, international conventions, and other groups. I ask each group the same question "What is the number one goal you have set for your business?"

Sadly, too many small-business owners respond that they have not set a goal. The chaos of running the business, the extinguishing of business brush fires, prevent them from analyzing their business, setting an annual goal, or implementing a plan to achieve the goal. Their plight resonates with many of us, doesn't it? As a result, too many of us frantically rush wherever that day's crisis drives us. We respond to our business storms like a ship without a rudder, then wonder how we arrived at unplanned destination.

Other business owners respond "introduce a new product", "refine our service", "increase traffic to our shop (or site)", "lower overhead"and "stay in business". While I commend those who took the time to plan a goal, I grieve that they missed the prime goal. The goals they set represent means to an end. They cannot survive if they consider these the prime goals of their business.

Let me share the story of Annette who ran a home-based craft business. She set her goal to "triple my sales", a worthy goal. Plus, she accomplished her goal and tripled sales in one year. Unfortunately, Annette failed to do an effective cost analysis of her product. Unknown to her, she lost $1.45 on every $5.00 she sold. So, tripling her sales also tripled her losses and ran her business into $78,000 debt in one year. She not only lost her business. She lost the home that they had mortgaged to finance the business.

The prime goal of any business is to make $XX profit.

Business owners must focus on that prime goal, or lose their business. All other goals or objectives (subsets or small goals that lead to the prime goal) remain subservient to the prime goal "make money". "Making money", however, cannot remain unqualified. You will notice that I qualified my statement with "$XX". Successful business owners not only focus on "making money". They set a goal of how much profit they will earn.

Large businesses calls this weekly, monthly, or quarterly earnings projections. Sam Walton created a worldwide brand by establishing and evaluating daily earning projections. He built systems that gave him the information he wanted every evening. He established 10 rules for business and shared them with every person in the company. Stephen Covey calls this habit of effective leaders "Beginning with the End in Mind".

So, ask yourself "How much profit do I want (plan, need, or desire) to make this year?". If the answer eludes you for even four seconds, to set an amount. Then, post it on your bathroom mirror, tape it to your desk, make it your screen saver, and ensure that you and everyone in your business see it constantly.

After all, that is the prime goal of your business.