Forums: Discussions for entrepreneurs and small business.

I am in the process of writing a business plan in hopes of opening a used bookstore which would be located in a part of town (Naples, FL) that is being "redeveloped" and am thinking of ways I can raise working capital to get me thru the 1st year as I have the seed money to get it up and running. This part of town will be up and coming within the next 3 years as they are building an arts and culture venue as well as there is a Botanical Garden already there that will be expanding tremendously within the next 3 years as well.

My thought is to have community members who live in this part of town myself included "invest" in the NJFP as a community corporation; a social enterprise capitalized through stock shares sold to local residents.  Much of the investors return would be in the form of community benefits rather than financial gain. Is this type of offering feasible?  Would it be considered an IPO?  I am looking for people to invest $1,000 each and was looking for at least 35 investors who share in the company`s values; to care about people, the community and the environment. 

Any thoughts and suggestions are appreciated.  Thank you

booktrader,

The sale of securities (shares of stock, etc) is regulated by both the Feds (SEC) and each State. Generally speaking, The "public" sale requires that the security be registered. There are some exemptions to this requirement, but you should consult with an attorney that specializes in securities law for specifics related to your exact situation.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
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A shareholder is mostly going to ask, "what`s in it for me," and think profit and returns.

A stakeholder more likely is going to come to you and say, "this is really important to me, and I care about it." They`re more interested in having their ideas implemented in the situation.

My advice is just get STARTED and every other thing will fall in place.

SPEED

 

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An International Speaker, Consultant, Coach, writer and Security Expert.
He is the President/ Chief Operating Officer, I-CREATE Ltd, a human resource development company based in Lagos, Nigeria. He is the National Coordinator of National Youth Business Summit,

I guess you are basically talking about doing a Private Placement or Regulation D Offering.

While the process is very similar to that of an IPO, private placements under Regulation D of the United States Securities Act are usually exempt from most registration and reporting requirements.

The exemption from these reporting requirements, however, entails, among other items, that you: a) comply with various information and disclosure requirements, both on a state and federal level, b) can’t advertise to market your offering and
c) can’t sell any of your securities to general public.

Under this exemption, people that you are allowed to approach with the idea of participating in your offering either have to qualify as:
i) accredited investors (aka. “The Million Dollar Crowd” with a net worth of at least $1 million),
ii) sophisticated investors (those that are pretty experienced in handling personal finance and investment matters, and
iii) up to 35 of those that don’t have to qualify at all.

I know, the latter pretty much contradicts my statement that you can’t sell any of your securities to the general public; well, you can, but only if you adopt Rule 505 for your offering.

Sounds complex, well it is and it’s certainly no playing ground for the inexperienced. Any violation of federal and state securities laws can entail severe civil and criminal penalties, so you would be well advised to work with a seasoned professional or attorney if you decide to adopt this method of raising capital. There is some good information available on our website at http://www.FastVenturesUSA.com/en/solutions/ppm.html and you can even download a tentative document outline for the required prospectus/private placement memorandum.

Also, since you mentioned that this neighborhood is still emerging, I really can’t imagine that most of your neighbors would qualify as accredited or sophisticated investors, or that they would be able to spare a $1,000 for a community-based investment.

There are other financing options available to you that might be better suited to help you realize your dream. Being located in Miami Dade County ourselves, I know that there are still funds available to rebuild neighborhoods and spur commercial development after Hurricane Wilma, Rita and Katrina. Interestingly enough some areas of Naples still qualify as so-called rural or underdeveloped areas and thus qualify for state-backed financing if you decide to build your business there. Also, have you thought about adopting a not-for-profit structure for your bookstore?

Finally, I respectfully disagreed with fellow poster “Speed”; it’s always a good idea to think everything through before you make your move.

If you are interested in discussing your plans in greater detail, please feel free to contact me and let’s talk.





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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com

Thank you all for your replies.  In regards to Fast Ventures response, yes I have thought of going the nonprofit route as I work for a nonprofit and have experience in fundraising, special events planning and coordination (my forte`) and am also the buyer/manager as well for our gift shop; a jill of all trades- a master of none.

Call me crazy, but I would be starting this business not necessarily for fame and fortune, I would be more than happy to be doing something I love and in the process make a decent salary comparable to what I make now.  As long as I could pay the bills... that`s all I am looking for at this point and once up and running... then grow at a steady pace.  I have thought of going the SBA route as well? 

In your opinion(s) what would be the advantage or disadvantage of going the nonprofit route? 

There are a couple of advantages if you decide to pursue the not-for-profit route. In general, it is much easier to raise money, because investments are not made to generate financial returns but rather because they benefit a good cause.

Since you are already actively involved in not-for-profit organizations, you probably know that “charity always pays”. Many individuals and companies fund charitable organizations because of the exposure and the image bolstering effects that such philanthropy can have for the sponsor. I really don’t want to reduce it to that, but basically it’s a PR gig that yields solid returns.

To give you an example, BMW sponsors the Susan Komen Fight Against Breast Cancer Foundation and has held so-called “Ultimate Drive” events where people get to test-drive an array of BMWs and BMW donated $1 for every mile that people test-drove their cars. Just think of the exposure in the media and how many people ultimately decided to buy a BMW as a result of that. In addition, their donations were tax-deductible, so essentially it’s free advertising.

Another advantage is that you have wider access to grant financing and other types of financial support that could make your vision a reality much faster than if you would be pursuing the traditional for-profit route. In your case, I would try to schedule an appointment with the major’s office to pitch the idea and see if there is a way that they can support it.

Finally, nobody will keep you from having a for-profit outlet besides your non-profit organization. Hypothetically speaking, if your brick & mortar community bookstore is the not-for-profit arm of your business, you could, for instance, have a virtual bookstore that could well be a traditional business designed to generate profits. A word of caution though, this would need to be set up properly in order to prevent the potential loss of your not-for-profit status.

The downside is that running a not-for-profit organization usually requires higher administrative resources, meticulous accounting and record keeping in order to maintain your not-for-profit status.

Since you are located in Naples, FL, I can tell you that the local government has been very supportive when it comes to commercial development. We did a couple of real estate transactions in Naples a few years ago and it was great working with them.

Also, Naples is one of the richest cities in the United States, which makes it prime real estate for any charitable organization. Just think this trough properly and develop a sound business plan that you can use to pitch your idea to the local government, potential sponsors, and strategic partners.

If you have any questions, please feel free to contact me and let’s talk.
 
 

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Jackson Steiner
http://www.JacksonSteiner.com

Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.
http://www.Publications.FastVentures.com