My partners business has expanded very quickly in terms of demand, however current situation is that she is unable to take on new business due to lack of resources and limited cashflow (due to size of current operation). Chicken and egg, big contracts being offered but cant accept due to lack of current resource and infrastructure. Any suggestions other than bank loan (business is to new and no security/assets to back it) to get access to expansion capital or investment? Assuming most investors are not interested in service businesses even if there are USD quarter million dollar marketing contracts on the table. She has a forecast six figure turnover within the next 12 months (these are contract offers) with the right resources, already turned away 30 percent of potential business this year due to insufficient resourcing! Welcome all suggestions, thanks for the advice.
Why not looking for similar agencies, working under your partners name and control (for example invoicing, quality control)?
Just wanted to provide an update. Firstly, thanks for all the helpful feedback from all of you, some great ideas and suggestion that I have passed on to her already.
Some key take away's that came up frequently from the feedback was, partnering to leverage resources, I think the two concerns on doing this is keeping control of the client and disclosure - sensitivity to revealing clients to 3rd parties. The other big one I see here is eating into the net revenue/profit as currently the business is bootstrapped.
However, they may be ways to consider the viability of both options. Other ideas mentioned were managed payment terms, which she is evaluating, the good news is her invoices are monthly and clients fall into a rolling annual 12-month contract after a fixed 3-month service. Great scope to scale this business if she gets resources lined up.
Angel investment option could be of interest to her, but I think she would at least need US$ 250 - 300k for the next 12 months to really expand the business and take on some of the brands that approached.
Most of this would go to qualified staff to execute the work for the clients (currently being turned away.) One of the prospects under discussion is a well know US financial institution looking to expand in APAC, again – chicken and egg, need resource and funding to take this on.
Any other suggestions welcome, any investors interested in helping a talented woman entrepreneur to expand from growing bootstrap to thriving business can ping me on linkeidIn I welcome all connections and I would be glad to refer you over to her.
Oh the joys of startup :)
Hi Richard, you cannot turn away businesses even though you are lacking resources. These potential businesses may be businesses that stick with you for long periods of time. You are getting work at the moment; find the resources for it even though you might lose out on some money or break even. I remember reading a story once about Mark Zuckerberg and he was in a similar scenario to you. He was turning so many opportunities down because of the lack of resources till he realised that Facebook is growing and has to hire.
Invoice factoring is a financial transaction whereby a business sells its accounts receivable to a factoring company to free up their cash; usually to secure working capital to meet expenses, cover payroll or expand their sales. Invoice factoring lets youturn current, unpaid invoices, into cash.“Invoice financing”, “accounts receivable financing” and “receivables financing” are all interchangeable terms used for factoring.The generous terms requested by your clients means that invoices can be outstanding for 30, 60, or90 days before payment arrives. Meanwhile, without the cash, you’re passing on opportunities to expand your business or falling behind on important expenses, like payroll. The good news is that much of this frustration can be reduced or eliminated with factoring.There are usually three parties involved in a receivable financingtransaction: the company that issued the invoice, their customer who owes payment on the invoice (also known as the account debtor), and the financing company who can supply the cash (often referred to as the factor).
Since loans are off the table...
You say she's taking 70% of available business of 6 figures of potential contracts. At the very least, she'll bring in maybe $75,000 this year. As long as she's not living in NY, LA, or SF, she'll have money to invest her money back into the business.
She'll need to live simply for awhile. Hopefully, her family backs her decision to put all available resources into the business.
That's bootstrapping and there's no shame in doing that. It's often a great strategy to build a business.
How about joining hands and resources with other similar ventures? Any extra work that she can't handle in-house, can be given to a trusted partner who acts like a safety net. This trusted partner-agency can do the work for her (your partner) and she can deliver it under her banner to the end clients. Of course, she will need to test a few agencies to find a perfect match (one or more), but she can grow along with the other agencies she ties up with. It will be like an extended office (whenever needed), without her having to raise the capital for it. However, since it will be a remote office, she will just need to keep the expectations and communication crystal clear, and such a model would work wonders!
If she needs to raise $250K or less this sounds like it would be a good fit for an angel investor or a group of Angel Investors. They are sometimes willing to invest in businesses that can produce positive cash flow and provide repayment of investment plus dividends. There are a lot of groups that are very interested in investing in women founders and some that focus specifically on that, such as Astia in SF and Golden Seeds in NY. I'd check out those resources for her to get started. It might be easier to answer the question if you also described what the business does.
Some investors are interested in service businesses. (There are many different kinds of investors.) The question always comes down to terms. For example, is your friend willing to sell a significant piece of her company for basically a one-time cash infusion? How about a fraction of all billings going forward?
I suspect that her real problem is that she doesn't charge enough.
What about managing payment terms? Can she take on new business contracts with favorable payment terms and hire resources with later payments terms or milestone-driven.