The opening scene of many Western movies features a scruffy-faced, toothless gold miner who turns to a sidekick and proclaims, as he mystically gazes yonder to majestic mountains, “There is gold in them there hills.” This is the sidekick’s cue to grunt, thus acknowledging that this utterance is, indeed, fact. In turn, the miner’s nonverbal shrug suggests, “But where?” Change the setting and this scene could be two businesspeople staring out of an office window, but standing in for the toothless miner is the eager entrepreneur or CEO, and the man of few words is, no doubt, the accountant.
Reality is it takes money to make money, no matter if a business is just starting out, trying to keep running or growing, the entity needs to find the gold in the hills to move forward. The conundrum is where in the hill is it?
Every month, I receive many comments from both faithful and new readers alike. The No. 1 question I’m asked is, “Show me the money,” or, more aptly stated, “Where does one find money?” Anyone running an enterprise can relate to that queasy feeling when the company is bumping up against its credit line, can’t get credit at all or is desperately searching for new investors.
After the market meltdown of 2008, we’re operating in uncharted waters. Although banks claim they are lending, that’s only partially true. For the most part, they are willing to lend money to businesses provided they don’t need it, but banks are reluctant to do so for a company whose lifeblood is working capital.
This new lender’s modus operandi requires borrowers to employ creativity, perseverance and a healthy dose of chutzpah. Make no mistake, there is money to be had, it just may no longer be available from the traditional sources.
For a newer business without a boatload of hard assets to secure a loan, the task is a bit more challenging. What I have advised readers to think about when they are trying to raise money is to ask themselves one important question, which can be expressed as a type of algebraic expression: “My success will = success for ____?” Fill in this blank and the operator will have taken the first step in finding new money. It could be from key suppliers or vendors with which a company creates a new channel of distribution. It might be another business that would be complemented by the establishment of a new business. Rudimentary examples would be a parking lot operator who is located next door to a new restaurant, or a gym that could lease space to a sporting goods store within its walls.
If you’re trying to find gold from suppliers, you will have to think of it from their perspective. The win portion of the question could be that the company in search of capital gives warrants or option to the benefactor/lender that entitles it to buy equity into the company either at a prescribed price or under other advantageous terms at a specific point in time.
A midsize or larger company might use similar creativity by refinancing a package of company assets, which have been paid down or owned outright. In addition to paying interest, the borrower might include a “kicker” or something extra that would be provided when the loan matures. In this time of survival of the fittest, there is always the possibility of a merger when going it alone is no longer practical.
Most lenders/investors will need to know: What is the borrower’s skin in the game? This means how much of the owner’s own money has been contributed to fund the business or has the CEO pledged his or her first-born or other less valuable assets? Also required is a thoughtful plan that demonstrates how one is going to get from Point A to Point B, travailing any landmines along the way.
To go for the gold takes unique thinking, logic and tenacity. Another tip: Just because you’re told no the first time doesn’t necessarily mean you’ll be turned down the second time if you provide additional information, a twist to the plan and improved incentives.
Don’t just gaze off into those majestic hills, merely fantasizing about finding the mother lode. Instead, gather up your pick and shovel and start prospecting for your future.
Michael Feuer co-founded OfficeMax in 1988. Starting with one store and $20,000 of his own money, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind wellness chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. Reach him with comments at [email protected].
