After years of researching the perfect idea for a business, Oren Bloostein had finally created a solid business plan for a specialty coffee shop on the Upper East Side of New York City called Oren's Daily Roast. But like most entrepreneurs, he was soon faced with the daunting challenge of financing it. So, in addition to $30,000 of his own savings, his parents gave him $50,000, and he got a bank loan for $25,000, which his parents also guaranteed.
From that point forward, his parents would play a significant role in the company's growth.
"I started the company in 1986, but it took almost a decade before I could borrow using assets from the business. The first eight years of expansion, which included six more stores and a factory, the loans were all guaranteed by my parents' assets," says Bloostein. "But the lines were clear. My parents weren't part owners, but my dad and I would have regular meetings, at which I would present him the numbers, projections, revenue, and everything."
His savvy approach helped his company become what it is today—a nearly $10 million business with nine locations in Manhattan. The moral of the story? Mom and Dad can be a great source of financing, but there's a right way (and a very wrong way) to approach that initial conversation about money.
"Almost 90 percent of the small businesses in this country are family-owned, so it's no surprise that the first place entrepreneurs turn for financing is the family," says Tom Deans, family business expert and author of Every Family's Business.
Of course, the personal dynamic between parent and child can pose rather unique obstacles when it comes to financial agreements for a small business venture. In Laymen's terms: Beware of drama.
Dig Deeper: How to Organize Your Business Using Google
"Families run on a value system of democracy and transparency," says Deans. "The value system of a business, however, is based on hierarchy and meritocracy. They naturally clash. But there are steps you can take beforehand that can make the merger work."
Here are a few things to consider to make that first sit down with Mom and Dad as drama-free as possible.
Avoid casual conversations. Keep quiet about your brilliant business idea until you have a fully developed business plan. Deans says this seems like common sense, but too often that carefree, casual relationship you have with your parents can cause confusion later on. Wayne Rivers, president of the Family Business Institute agrees. "It's the lack of formality in these informal conversations get people in trouble," he says. "You can end up making promises you won't want to—or can't—keep later on." For Bloostein, the financing sit-down didn't happen right away. "I had been working on a business plan for almost six years," he says. Though his parents knew of his small business ambition, it wasn't until he had a virtually "no-risk" plan that any money talk began.
Vet your business plan. Rivers says you should not only have a sound business plan, but a third party should vet it. "There's so many services online where you can have experts evaluate your plan," he says. "Give your parents, and yourself for that matter, the peace of mind that this business will be a sound investment, and not just another hobby." A good place to start is the U.S. Small Business Administration's list of local resources.
Write a promissory note. If you are asking for a loan from your parents, both experts suggest drafting a promissory note, or a simple document that outlines the terms of the loan. This will answer your parents knee-jerk questions: "How will you pay us back, what will the interest rate be, and how long will it take to repay in full?" It will also prevent any confusion later on. "Be as specific as possible in the note," adds Rivers. "You don't want to have a conversation about how you promised to pay back the money in two months and there's no written record of it."
The early inheritance option. If your parents are of means, you could also ask for early inheritance. "I am actually a big proponent of parents giving their kids wealth," says Deans. "The money is forwarded to the kid while they are still alive. There's an element of reward for the parents to see their legacy put to good use while they're alive." But Deans suggests that this arrangement should most definitely be written into a legal contract.
Dig Deeper: How to Create a Mobile Strategy
Consider your siblings. Whether a loan or gift, remember that you are tapping into the family reserve—and your siblings might not like it. "If the parents are going to loan one kid $20,000, do the other kids get the same bite of the apple?" asks Rivers. "Or if the parents are of modest means, and one child wipes out all the savings, what happens to everyone else? You can't have the black sheep brother wiping out the family farm on a failed business venture." Deans suggests bringing the siblings into the initial conversation. "It will show your parents that you are serious, and show your siblings it isn't a rivalry," he says.
Get a small traditional bank loan, too. This might sound a little strange, but Deans says that going to a traditional lender for just a small loan can go a long way if your parents will be the larger investor. "If you can secure a small loan first, your parents, who are more likely to extend money based on good will, immediately have a sense of comfort that your idea is sound investment," he says. "The traditional lender will have looked at the business plan, executed the due diligence, and given the business a thumbs up."
Have a plan for future meetings. Both experts agree that managing transparency is key in keeping the peace between family and the business. Like Bloostein, work out a meeting schedule that works for you, your parents, and your business. And have this meeting schedule in place from the beginning, telling them how often they will get updates on how the business is doing and—more importantly—how their money is doing. Laying out the terms for the professional interactions in the first conversation will provide a less stressful framework from which you can go forward. "It doesn't have to be a daily conversation," says Rivers. "Set up quarterly, or semi-annual meetings where you will share the status of your business. Just something to give everyone a structure."
Finally, remember the other relationship at play. That is, the relationship between your parents and their money. Are they likely to finance this type of thing? Have they done it before? Can they handle the financial demands? "Remember, just because they are your parents, doesn't mean they have to say yes," says Rivers.
Is the recession over? I keep hearing that it is, but I don’t believe it (that’s my issue). But what matters to our businesses is how our customers feel. In and out of recession, they still have needs and wants, and if we meet those desires, then we are still in business.
The Product
In “Are Consumers Ready to Start Spending?,” Anita Campbell says, “While it is possible that consumer spending attitudes will loosen up as the recovery strengthens, it’s also possible this may not happen for some time.” So what’s the small business solution to encouraging customer spending?
Anita gives three suggests to help us do this, including the recommendation that you “position your products and services as good value.” She explains that value “mean(s) your products or services are high quality and lasting, making them a good value for the money. With consumers spending less often, they are being more critical and cautious when they do buy and looking for things that are worth spending on.”
Sometimes, it’s easy to hear advice and move past it without applying it effectively. But take a minute and think about your own spending—especially if you are your target market. Note your behavior, then pay attention to your clients’ behavior. What type of product combination does your client need—what type of product combination do you need—to make spending worth it? Now put a strategy in place to create that combination In your niche, hopefully, your customers feel like they can’t live without you and your targeted solutions.
The Marketing
Keep this in mind, not everyone has been in a recession. It’s our responsibility to know our clients and adjust accordingly. But understanding your client base is just the beginning. You still have to market to them in a way that appeals to that particular group because it’s your marketing that will get them to your doors (off and online).
In the article “Attention Small Businesses: You’re ALL in the Marketing Business,” Ivana Taylor says, “You’re in business to make money (and, preferably, you keep more than you make).” In order to make that money, Ivana believes you need to employ an “attractor strategy.” She adds, “Throwing salespeople out there WITHOUT a marketing strategy and marketing support is what we do when we think we’re in the widget business.”
It’s our job
- to know our business and our clients
- to speak a language that connects with our (potential) clients
- to understand the strategy behind the business, which includes the marketing that keeps us connected to our clients
Put in the time to learn how the marketing piece of your business works. Then establish a system and team to support that strategy. After all, it’s hard to stay in business when very few know how great you are or that they need and want what you have. It’s your marketing that lets them know.
The USP
When you finally decide to put on your marketer’s hat (and keep it on), Susan L. Reid, in “5 Steps to Determine Your Unique Selling Point,” has a few tips for you. Your Unique Selling Point (USP) is the thing that makes you stand out. Without it, your potential clients cannot understand the difference between you and everyone else who does what you do. Without it, they can’t understand why they should choose you over anyone else. Without it, they can’t justify the ongoing spending to themselves nor the others on their team.
Susan urges you to find your USP and:
- “Stop putting your business at risk.”
- “Put an end to getting lost in the crowd.”
Plus she gives you five clear ways to get it done.
In the end, your business is about the people you serve, and it’s your marketing that connects you to them.
From Small Business TrendsCan Your Customers Live Without You?
Read more posts on Small Business Trends »
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World Scandal<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>
The company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Nikon has announced an inexpensive macro lens aimed at entry-level DSLR users. The AF-S DX Micro Nikkor 40mm f/2.8G offers true 1:1 macro in a compact, ...
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>newborn bobby ferguson
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World Scandal<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>
The company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Nikon has announced an inexpensive macro lens aimed at entry-level DSLR users. The AF-S DX Micro Nikkor 40mm f/2.8G offers true 1:1 macro in a compact, ...
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>After years of researching the perfect idea for a business, Oren Bloostein had finally created a solid business plan for a specialty coffee shop on the Upper East Side of New York City called Oren's Daily Roast. But like most entrepreneurs, he was soon faced with the daunting challenge of financing it. So, in addition to $30,000 of his own savings, his parents gave him $50,000, and he got a bank loan for $25,000, which his parents also guaranteed.
From that point forward, his parents would play a significant role in the company's growth.
"I started the company in 1986, but it took almost a decade before I could borrow using assets from the business. The first eight years of expansion, which included six more stores and a factory, the loans were all guaranteed by my parents' assets," says Bloostein. "But the lines were clear. My parents weren't part owners, but my dad and I would have regular meetings, at which I would present him the numbers, projections, revenue, and everything."
His savvy approach helped his company become what it is today—a nearly $10 million business with nine locations in Manhattan. The moral of the story? Mom and Dad can be a great source of financing, but there's a right way (and a very wrong way) to approach that initial conversation about money.
"Almost 90 percent of the small businesses in this country are family-owned, so it's no surprise that the first place entrepreneurs turn for financing is the family," says Tom Deans, family business expert and author of Every Family's Business.
Of course, the personal dynamic between parent and child can pose rather unique obstacles when it comes to financial agreements for a small business venture. In Laymen's terms: Beware of drama.
Dig Deeper: How to Organize Your Business Using Google
"Families run on a value system of democracy and transparency," says Deans. "The value system of a business, however, is based on hierarchy and meritocracy. They naturally clash. But there are steps you can take beforehand that can make the merger work."
Here are a few things to consider to make that first sit down with Mom and Dad as drama-free as possible.
Avoid casual conversations. Keep quiet about your brilliant business idea until you have a fully developed business plan. Deans says this seems like common sense, but too often that carefree, casual relationship you have with your parents can cause confusion later on. Wayne Rivers, president of the Family Business Institute agrees. "It's the lack of formality in these informal conversations get people in trouble," he says. "You can end up making promises you won't want to—or can't—keep later on." For Bloostein, the financing sit-down didn't happen right away. "I had been working on a business plan for almost six years," he says. Though his parents knew of his small business ambition, it wasn't until he had a virtually "no-risk" plan that any money talk began.
Vet your business plan. Rivers says you should not only have a sound business plan, but a third party should vet it. "There's so many services online where you can have experts evaluate your plan," he says. "Give your parents, and yourself for that matter, the peace of mind that this business will be a sound investment, and not just another hobby." A good place to start is the U.S. Small Business Administration's list of local resources.
Write a promissory note. If you are asking for a loan from your parents, both experts suggest drafting a promissory note, or a simple document that outlines the terms of the loan. This will answer your parents knee-jerk questions: "How will you pay us back, what will the interest rate be, and how long will it take to repay in full?" It will also prevent any confusion later on. "Be as specific as possible in the note," adds Rivers. "You don't want to have a conversation about how you promised to pay back the money in two months and there's no written record of it."
The early inheritance option. If your parents are of means, you could also ask for early inheritance. "I am actually a big proponent of parents giving their kids wealth," says Deans. "The money is forwarded to the kid while they are still alive. There's an element of reward for the parents to see their legacy put to good use while they're alive." But Deans suggests that this arrangement should most definitely be written into a legal contract.
Dig Deeper: How to Create a Mobile Strategy
Consider your siblings. Whether a loan or gift, remember that you are tapping into the family reserve—and your siblings might not like it. "If the parents are going to loan one kid $20,000, do the other kids get the same bite of the apple?" asks Rivers. "Or if the parents are of modest means, and one child wipes out all the savings, what happens to everyone else? You can't have the black sheep brother wiping out the family farm on a failed business venture." Deans suggests bringing the siblings into the initial conversation. "It will show your parents that you are serious, and show your siblings it isn't a rivalry," he says.
Get a small traditional bank loan, too. This might sound a little strange, but Deans says that going to a traditional lender for just a small loan can go a long way if your parents will be the larger investor. "If you can secure a small loan first, your parents, who are more likely to extend money based on good will, immediately have a sense of comfort that your idea is sound investment," he says. "The traditional lender will have looked at the business plan, executed the due diligence, and given the business a thumbs up."
Have a plan for future meetings. Both experts agree that managing transparency is key in keeping the peace between family and the business. Like Bloostein, work out a meeting schedule that works for you, your parents, and your business. And have this meeting schedule in place from the beginning, telling them how often they will get updates on how the business is doing and—more importantly—how their money is doing. Laying out the terms for the professional interactions in the first conversation will provide a less stressful framework from which you can go forward. "It doesn't have to be a daily conversation," says Rivers. "Set up quarterly, or semi-annual meetings where you will share the status of your business. Just something to give everyone a structure."
Finally, remember the other relationship at play. That is, the relationship between your parents and their money. Are they likely to finance this type of thing? Have they done it before? Can they handle the financial demands? "Remember, just because they are your parents, doesn't mean they have to say yes," says Rivers.
Is the recession over? I keep hearing that it is, but I don’t believe it (that’s my issue). But what matters to our businesses is how our customers feel. In and out of recession, they still have needs and wants, and if we meet those desires, then we are still in business.
The Product
In “Are Consumers Ready to Start Spending?,” Anita Campbell says, “While it is possible that consumer spending attitudes will loosen up as the recovery strengthens, it’s also possible this may not happen for some time.” So what’s the small business solution to encouraging customer spending?
Anita gives three suggests to help us do this, including the recommendation that you “position your products and services as good value.” She explains that value “mean(s) your products or services are high quality and lasting, making them a good value for the money. With consumers spending less often, they are being more critical and cautious when they do buy and looking for things that are worth spending on.”
Sometimes, it’s easy to hear advice and move past it without applying it effectively. But take a minute and think about your own spending—especially if you are your target market. Note your behavior, then pay attention to your clients’ behavior. What type of product combination does your client need—what type of product combination do you need—to make spending worth it? Now put a strategy in place to create that combination In your niche, hopefully, your customers feel like they can’t live without you and your targeted solutions.
The Marketing
Keep this in mind, not everyone has been in a recession. It’s our responsibility to know our clients and adjust accordingly. But understanding your client base is just the beginning. You still have to market to them in a way that appeals to that particular group because it’s your marketing that will get them to your doors (off and online).
In the article “Attention Small Businesses: You’re ALL in the Marketing Business,” Ivana Taylor says, “You’re in business to make money (and, preferably, you keep more than you make).” In order to make that money, Ivana believes you need to employ an “attractor strategy.” She adds, “Throwing salespeople out there WITHOUT a marketing strategy and marketing support is what we do when we think we’re in the widget business.”
It’s our job
- to know our business and our clients
- to speak a language that connects with our (potential) clients
- to understand the strategy behind the business, which includes the marketing that keeps us connected to our clients
Put in the time to learn how the marketing piece of your business works. Then establish a system and team to support that strategy. After all, it’s hard to stay in business when very few know how great you are or that they need and want what you have. It’s your marketing that lets them know.
The USP
When you finally decide to put on your marketer’s hat (and keep it on), Susan L. Reid, in “5 Steps to Determine Your Unique Selling Point,” has a few tips for you. Your Unique Selling Point (USP) is the thing that makes you stand out. Without it, your potential clients cannot understand the difference between you and everyone else who does what you do. Without it, they can’t understand why they should choose you over anyone else. Without it, they can’t justify the ongoing spending to themselves nor the others on their team.
Susan urges you to find your USP and:
- “Stop putting your business at risk.”
- “Put an end to getting lost in the crowd.”
Plus she gives you five clear ways to get it done.
In the end, your business is about the people you serve, and it’s your marketing that connects you to them.
From Small Business TrendsCan Your Customers Live Without You?
Read more posts on Small Business Trends »
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World Scandal<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>
The company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Nikon has announced an inexpensive macro lens aimed at entry-level DSLR users. The AF-S DX Micro Nikkor 40mm f/2.8G offers true 1:1 macro in a compact, ...
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>florida bobby ferguson
Jon Stewart Tackles the <b>News</b> of the World Scandal
But before Stewart could expound on his point, correspondent John Oliver presented him with a recap of Rupert Murdoch's News of the World scandal--a friendly reminder that the British will always find a way to out-shame ...
Jon Stewart Tackles the <b>News</b> of the World Scandal<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>
The company's stock price has dropped since the revelations of a wider phone hacking scandal at News of the World.
<b>News</b> Corporation Looks to Bolster Stock With Buyback Plan <b>...</b>Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Nikon has announced an inexpensive macro lens aimed at entry-level DSLR users. The AF-S DX Micro Nikkor 40mm f/2.8G offers true 1:1 macro in a compact, ...
Nikon launches AF-S DX Micro Nikkor 40mm F2.8 macro lens: Digital <b>...</b>bobby ferguson travel
No comments:
Post a Comment