When the Growing Gets Tough
By Nelson Davis
"Fundamentals win it." -- Vince Lombardi
The legendary football coach of the Green Bay Packers had it right when it comes both to winning games and winning the financing necessary for touchdowns in business. The fundamentals of finding the money you need for your company don't change much. Raising money in hard times varies only slightly from raising money in easier times, but the small differences in technique can have major differences in the result.
For the past 13 years, I have had the good fortune, not only of being a small-business owner, but also of operating the type of enterprise that brings me into close contact with hundreds of entrepreneurs. You see, I'm in the TV-production business, and our "star" program is a weekly Emmy Award-winning small-business show, called Making It. On that show, more than 400 business owners who have been interviewed over the years have shared a myriad of techniques for funding both startups and growing enterprises.
Along the way, these entrepreneurs have provided hints for aspirants aiming to do the same. In this article, you'll see some of those suggestions, as well as a few of my own. Consider them as you seek to apply the Lombardi principle to today's endeavor of pursuing funding for your venture in a less-than-optimal environment.
A business startup is usually the hardest of times, no matter the decade or general economic conditions. Here's how I managed to push my own startup ship out of dry dock in 1989: I sold the product before making it. In my case, that meant using videotapes of a similar TV program being produced in Chicago to give advertising prospects some idea of what I was planning to do.
When two of those prospects, ARCO, an oil company, and AT&T said they would sponsor a "special" on the subject of small business, I made the commitment to produce it. I convinced my first two customers to pay 50% of the sponsorship cost in advance. They were excited about seeing Making It! on the air, and I told them their help was needed so that I could rent an office and hire an associate producer for six weeks. That money covered the basic production costs, but there was no profit until after the show aired. In other words, until the product was delivered. As soon as the first show was completed, I asked for a 26-week commitment to support weekly programming. ARCO agreed. Get a good contract, and take it to the bank to support a line of credit.
Since September 11, many business owners have voiced the thought that these times are somehow different, and that the general economy is slowing. While money isn't exactly running down the street to meet you, it is still looking for a good home! The major question is: "How do you place yourself squarely in its path?"
USE WHAT YOU'VE GOT.
One lesson from the stories on our TV show is: "Start where you are standing, and go with what you've got." You may already have an attorney and accountant who know your history and your dreams for the future. They are often the most direct connection to financial angels. Ask your professional resources if they know people who invest in business expansions. If customers owe you money, view those funds as uncaptured dollars. Simply being a bit more aggressive about collecting your accounts receivable can increase cash flow by 10% to 15%.
The best salespeople and marketers I've ever met have two traits that lift them above conventional hard-times thinking. One is that they are prepared to persistently give before expecting to receive, and the other is a clear recognition that they must always think first of the client or prospect's issues. Those principles can also support your money quest.
Does an existing client or prospect have a problem that you know about and can help solve? Those enterprises may fund your development work to create a new product or service they desperately need. They, of course, would be the first customers for something that may have wider applications or a long commercial future.
PURSUING HIDDEN DOLLARS.
In hard times, venture capital only gives the impression of having totally disappeared. It doesn't really go away, but simply becomes a bit more selective. One useful aspect of all this is that venture capitalists have more time to look at deals and a greater inclination to consider situations that in "easy picking" times would be considered marginal. Money is always seeking opportunities. Present your situation as a wonderful opportunity. You can create a password-protected section of your Web site that contains a full Power Point presentation for your business or new idea. It can contain audio and video along with pertinent spreadsheets and other sales information.
Your attitude is everything. When a person has a job, the unemployment rate is zero; when that same person doesn't, the rate is 100%. Don't let reports of tough times completely shape your attitude. You are looking for singular opportunities to serve the interests and needs of people who have money to lend or invest. On any day of the week, checks are being written to small-business owners like you all over the country. What you want to do is place yourself squarely in the path of someone who controls these funds. Money, like water, tends to gather in places we call pools! Your task is to create that place where it feels comfortable.
Don't ignore the usual suspects. There are many loan-guarantee programs around the country, beginning with those offered by the Small Business Administration. In addition, economic-development groups exist for businesses of all sizes -- there's even a growing trend of churches to have loan programs.
In fact, during hard times, your money hunt can benefit from yet another fundamental, namely Biblical advice: "Seek and you shall find. Knock and it shall be opened unto you. Ask and you shall receive."
Prior to launching his production company, Davis was a partner in several small businesses, including a submarine-sandwich shop, Fat Albert's, which became a 14-shop chain.
Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.