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Finding cash to kick start a business - Q & A

Harry calls to find out some financing options to get his business back into action.

Rich Sloan:  And we're going to Harry in Troy, Michigan.  You have a question for us, Harry. Go ahead.

Harry:  Yeah, hi.  Thanks for taking my call, Rich.

Rich Sloan:  Certainly.  And Jeff is, too. He's just over there transcribing little notes about brain storm ideas he's had.

Jeff Sloan:  Yeah, right.

Harry:  All right.  Well, thanks.  The reason I'm calling is I listen to your program and I'm in the process of --

Rich Sloan:  And you're still calling?  That's incredible.

Harry:  Yes, of course.  You guys got a great program.  A lot of really good information.  And what I'm sort of stuck with is I'm putting together a business plan to get financing for a small manufacturing company.  And what we're going to be building are trailers.  And we've already done this.  We did it in 2004.  We actually are missing sales right now because we need financing to actually sort of restart the operation.

Rich Sloan:  Let's make sure we understand that.  You're missing sales.  Do you have orders?

Harry:  We've just sort of backed off completely because we actually could make sales if we knew we had the financing to buy the raw materials.

Rich Sloan:  And are you selling to end-customers with your trailers or are you selling your trailers to someone else who is placing volume order?

Harry:  Actually, we're doing both.

Rich Sloan:  And is the entity, Jeff, I'm going down a path here.

Jeff Sloan:  That's all right.  Go ahead.

Rich Sloan:  Stick with me.  Is the entity that is making the volume orders from you, are they reselling the trailers?

Harry:   Yes, they'd be reselling them.

Rich Sloan:  And are they a substantial company?

Harry:  Yeah, they are.

Rich Sloan:  Okay.

Harry:  And they're not in our state; they're in another state.

Rich Sloan:  I have one other quick question for you.

Harry:  Yeah.

Rich Sloan:  Can you substantiate the orders that you've got and that you've not been able to fill?

Jeff Sloan:  What do you mean by substantiate?

Harry:  Well, no. 

Jeff Sloan:  Is there a paper trail?

Harry:  We have not been taking orders.  Most of it's just inquiries.

Rich Sloan:  Is there any way to prove or substantiate the unfulfilled demand?

Harry:  Yes.

Rich Sloan:  There is?  Okay.

Harry:  Yes.

Rich Sloan:   I bet you and I, Jeff, have two different recommendations here.

Jeff Sloan:  You go first.  I actually have a very specific one.

Rich Sloan:  I do, too.  Factoring.  I think it's a really interesting thing for you to consider.  You can find out about it at step number 6 in our ten steps to open for business.

Harry:  Yeah, I'm actually familiar with that.

Rich Sloan:  And what factorers do, for those who aren't familiar, is they finance purchase orders so that you, in that cash crunch that you will find yourself in, can get enough money to do the build of the trailers to fulfill the orders, and then you end up getting a relatively high percentage, but still low, still a minority percentage, to the factorer, in exchange for --

Harry:  Financing.

Rich Sloan:  -- financing that purchase order.  So that's something that I would absolutely consider if I were you.

Harry:  Okay.

Rich Sloan:  And Jeff, what do you have up your sleeve?

Jeff Sloan:  Well, I want to ask this.  The capital that you need, is it for cash flow issues, like being able to fill an order, or is it that you need to invest it in capital goods like a greater factory or greater capability?  Or, you know, what do you need the money for?

Harry:  Well, actually, we need the money for both.

Jeff Sloan:  For both.

Harry:  We could actually do the business out of a barn and kind of be able to operate.  And we do have land; real estate's not the problem.  It's the raw materials now to kind of just start building.

Rich Sloan:  And you promise you don't need the money for that trip to the Bahamas, right?

Harry:  We promise.

Rich Sloan:  Okay. 

Harry:  Absolutely.

Rich Sloan:  And you're based where?  Troy?

Harry:  In Troy, yeah.

Jeff Sloan:  Troy, Michigan.

Rich Sloan:  Troy, Michigan.  Well, I can go one step further.  I happen to know a source of financing for you if we talk offline.  How big a business could this be?  How big is the demand?  Do you have any way to quantify that?

Harry:  Well, in 2004, we sold 48 units in six months, and we know we could do much better than that.

Jeff Sloan:  What kind of revenue does that represent?

Harry:  The gross sales were almost 400,000 and the net on that was around, I think, 80.

Jeff Sloan:  Based on your experience, what would you indicate in your business plan as reasonable projections of revenue, assuming you got this capital?

Harry:  Well, that's funny.  That's what I was calling about because we're trying to put together our business plan so that we have everything, the entire package, to present to investors.  And I was looking for some way to expedite it for some companies, some consultants.  There's some people that you know.  You know, we have some of the materials for the trailers, but we have the information and we know how some of the market research and how the market's growing and where it's growing --

Jeff Sloan:  Well, that's really important.

Harry:  -- and how we can fulfill that.

Jeff Sloan:  Yep.  Obviously, that's critical.  You're going to have to make some assumptions that then you build projections based on, and you're going to need to be the expert in that.  You need to understand your market.  You need to understand your costs and delivering your goods to that market.  And then you need to understand what the opportunity is really all about in terms of a potential return on all that effort.

Harry:  What we actually thought, and we think it's conservative, we could probably do 40 to 50 units a month.

Jeff Sloan:  All right.  Now, we don't need to get into that many specifics.  And unfortunately, we got to run out to a break.  Here's what I would be willing to do.  If you get ahold of us offline, drop Rich and I an e-mail, we can probably get you pointed in the right direction to get all those projections put together.  And more than that, we've got an investor in mind we'd love to introduce you to.

Rich Sloan:  You're good, Jeff.  Man.

Harry:  All right.  That'd be great.

Rich Sloan:  That's pretty enticing right there.

Jeff Sloan:  Get ahold of us.  Seriously, it's a good opportunity.  Get ahold of us.