Forums: Discussions for entrepreneurs and small business.

Hello,
I own a small company (3 people working from home part-time). We have been in business for 2 years and have developed a consumer product. We have sold 500 units worldwide so far with out any major marketing. And all of these 500 units per pre-paid by the customers in order to allow us to finance the fabrication.

Recently we have been approached by a few major publications looking to showcase our product in their printed format.
These publications total about 16M viewers worldwide. With that amount of coverage we would be expecting about 1600 units if we could expect a 1:10k response. However in order for us to produce even 1000 units we would need to gather $175,000 in investment. This would cover our costs for producing the product and having it ready for February of next year.

We have currently about $20k invested in equipment and none of us have much more to offer in terms of personal or family investment. However these major publication are due to publish in February of 2008.

All of this publicity has come as a surprise to us and we are trying to find a way to make this happen.

We do not know what may be practical for our situation. We have thought about Angel or Venture investment and we do not think we can get much from a bank line of credit because we do not have a lot to show in terms of capital of past business. Also in order to pay our vendors in time we would need the money within 120 days.

I am not sure where to go from here but in our eyes this is a slam dunk. We just need to find the money in order to fund it.

Any thoughts would be greatly appreciated!

Regards

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

robertj,
Thanks for you reply. the $175k would be the amount needed to fabricate 1000 units. We expect that that would yield about $375k in revenue.

The 1000 units we feel is a conservative estimate based on the marketing audience we will see in these publications. We expect much more than that but we don’t think we can build more than 1000 in this short time period.

I guess the main question I have to figure out is where is the best place to seek this funding? What is the most probable avenue to follow?

Thanks

Based upon your input, you need to sell 467 units to "break even" or be able to repay the $175,000 -if it were a loan.  You might want to add in any other expenses to determine your true break even point.

The least expensive capital would be a loan, while the most expensive would be selling equity - with a number of alternatives in between.

If you borrow $175K to produce the 1000 units and use the revenue to repay the loan - you will likely still need additional capital to build your business. So I would suggest developing your overall capital strategy before you seek the short term capital.

-------------------------

Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Do you have to get 175K in one shot?

How about get a 50K loan, make 300 units, sell them (for 120K), then use the 120K to make 700 units?

It depends on how quick you can get the payments from your customers. If they pay first or pay on delivery, you have a rolling capital for the productions. If they pay after 30 or 60 days, you may still have some rolling capital, but it involves some calculations.