photo credit: B.O.G.D.A.N.Question:

I’m an entrepreneur and have finished my business plan. I’m getting ready to raise $2 million for my startup real estate company – but a friend of mine said I should only talk to accredited investors. I’m not exactly sure what an accredited investor is and I don’t understand why I can’t talk to anybody I want to about investing in my company?

Answer:

The term, accredited investors, has to do with securities laws – both federal and state – and making sure you comply with the very onerous restrictions that go with the fundraising for your start up company. I’ll give you both the short and long answer to what an accredited investor is in a minute. But the first thing you need to know is that if you raising capital from angel (AKA private) investors, you will almost certainly need more than just a business plan. You need what’s known as a Reg D Private Placement Memorandum – PPM – in order to comply with federal and state securities laws.

If you plan on pitching your deal JUST to traditional venture capital, you do not need a PPM. However, well over 95% of start up companies are too small, too embryonic, to hit the threshold funding levels, growth levels and potential market caps to attract VC funding. Hence, over 95% of start up companies will seek their funding from private investors. Hence, over 95% will need a Reg D PPM.

Reg D is a securities law exemption for private placements that allows companies to raise investor funds without all the costly and overwhelmingly onerous legal and accounting requirements of a public offering of stock. To qualify for the Reg D exemption, you have to follow very stringent rules. One is having the PPM. Another is not soliciting the general public (this is a biggie.) Another is only pitching the deal to those investors who can really afford to take the risk and lose their money. Hence, they need to be accredited. It actually gets more complicated in that you can usually offer your deal to up to 35 unaccredited investors with most offerings, depending on how they are structured – but trust me when I say that you are better off sticking with the more sophisticated accredited investors.

If you want more detail on it, check out my web site – there you can see why you want to do this, some of the onerous penalties for not doing this (e.g. possible but not probable jail time), and the full listing of Reg D I got from the SEC. Also, from that same page, you can jump to the definition of an accredited investor.

Bonus: For more on funding documents, business plans, articles, tips and tools for entrepreneurs and start up company CEOs, you’re invited to visit my blog and web sites…and ask your own questions. While there, I invite you to download both a sample comprehensive business plan and a complete Reg D private placement memorandum (PPM) for FREE…

http://www.ShouldYouStartACompanyToday.com <~~~ The Blog + Free Sample Business Plan / PPM / Audio / More…

http://www.Virtual-Exec.com <~~~ Virtual Executive Mentoring and Consulting Services

Robert Lee Goodman, MBA, Ceo & Chief Dragon Slayer.

Are you the one who seek to start a business in foreign country but have no ideas what to do first?

Before you kick off your new business in foreign country, you need to know the market. Your prospects in your target country are the main key of your business, and you need to cater to their needs according to their requirements. It is always wise to study the market first, and identify the existing need of your prospective customers.

Generally, doing business in foreign countries requires an understanding of the market environment, including factors influencing consumer lifestyle choices. Analyzing the market environment will be the first step to determine the likelihood of success for the new business.

But how are you going to get all the must-know facts that you need? Of course, there are a numerous free sources on the web and market research providers available. All of these may or may not be helpful, but some can help project the right image for your successful business. The only problem is, choosing a right firm requires you an extra hard effort to get the high quality services that satisfy your needs whereas free online sources are easy to get without any risks.

To get the best information for the least amount of money and time, start by looking up on the online directory of market research companies to find a one that suits you the best. Finding free online sources including articles on the web and at the library will also be a good start.

But if you are not satisfied with your first attempts in using the free online sources, try to look for fee-base sources but not expensive. It can be either online sources or market research providers. A lot of good and quality information are available for prices that range from inexpensive to thousands of dollars.

Be aware that some of the market research companies offering too low prices for individual reports may provide you unfocused and unclear market research reports that waste your budget and include useless information.

If you are the one who seek to start a new business in a foreign country and if you consider, for example, South Korea is your designated target country, your first step is to look for free web sources for better understanding of the market environment in South Korea. If the results are not enough for your needs, try to look for fee-based sources including market research firms offering individual fee-based reports providing your target market trends, market size and the must-know facts provided by local industry expertise at an affordable price.

Knowing your target market helps in deciding on pricing and an effective marketing strategy for your business. Clearly understanding your potential customers in your target market is the most important part of market research.

EC21 (http://www.ec21.com), a global B2B e-Marketplace for traders, provides Market Research service for those who seek to start a business in Korea. The report will give data on market size, trends, import status of the designated market, a list of potential prospects and relevant trade fairs and exhibitions held in Korea at an affordable price. Visit Korea Market Research service today for more information at http://www.ec21.com/html/services/KoreaMarketResearch/KoreaMarketResearch.html

photo credit: World Economic Forum

Q: I’m interested in doing business internationally. I have done some reading on the subject, but there is an awful lot to digest. Have you had any experience in this matter and can you suggest the best way to get started?
– P. Granger.

A: Great question, Mr. Granger, though not one I’m personally qualified to answer since I have not had direct experience with international sales. So like any good columnist without a clue I can either make up something and hope it sounds semi-intelligent or I can consult someone who really is an expert on international sales and let him answer your question. Since my agreement with The Times prevents me from fabricating anything other than my true age (I’m 29), let’s go with the latter.

I called on Jose Rodriguez, President of RISMED Oncology Systems, a Huntsville company that provides high medical technology to radiotherapy professionals around the globe, to get his input on the subject. Jose is an old friend and client and if anyone can give pointers on doing business internationally, Jose is the man.

Jose believes that the decision to do business beyond your own backyard should be based on your success as a local, domestic business first. “Unless the business is intended to be one that sells to international customers only, one should not jump into international business until they have devoted the time to develop a good local and domestic business first,” Jose recommends.

Here are a few other points Jose recommends that you keep in mind when considering an entry into the international business arena.

Instill Confidence In Your Customer

Regardless of the type of product or service you sell internationally, you must be ready to provide your international customer with an even higher level of service that you offer your domestic customers. To instill confidence in your international customers you might have to offer such things as around the clock telephone support, extended warranties, and other services that help the customer have confidence in doing business with you.

Know The Rules

You must understand all of the rules and regulations that govern international business practices in this country as well as those in your customer’s country. Understanding the rules will allow you to provide service beyond the expectation of the buyer and operate within the boundaries of the law.

Understand The International Shipping Process

If goods are being shipped internationally you must have a thorough understanding of shipping modes and regulations. Any difficulties with shipping will always be viewed by the buyer as the seller’s responsibility, right or wrong. Understanding the entire shipping process and having policies in place will help avoid shipping problems and keep the customer happy.

Work With Experienced Companies

Always look for experienced companies to work with, especially when if comes to shipping, insurance, freight forwarders, etc. Such companies are great allies and will help keep everything in order and will also help in solving problems related to their end of the process.

Signed and Sealed

Never conduct business under verbal orders. Always put everything in writing with the required signatures. Doing international business is different than domestic business. Outside the United States signatures and seals are required to seal the deal. Don’t worry about offending your customer as this is just part of doing business internationally.

Include A Packing List

If shipping goods, always do a packing list and always number the packages (if 5 packages are being sent, label them 1/5 [1 of 5], 2/5, etc.). If anything is lost, they will know which package is missing and you will have sent a packing list detailing what was in every package, making it easy for the customer, the shipper and the insurance company to solve the problem. Also, always insure your goods for at least 110% of their value.

Have A Damage Policy

Always have a note in your paperwork requiring damage or losses to be reported within 24 hours. Damage reports should be made to the customer’s local delivery company as well as to the shipping company on your end.

Signing Off

If you are selling services abroad, always have the required paperwork so that as the work is finished or as deliveries are made, the customer signs off in agreement with what was delivered.

Ensure Payment

Depending on the amount of the sale, always require payment in advance in U.S. currency or payment through a letter of credit to be paid out in U.S. currency. You might also require that the letter of credit be irrevocable and transferable, that it allow for payments of partial shipments, etc. The more flexible the letter of credit, the better, and usually such clauses are yours just for the asking.

There are many other considerations you should investigate before starting your international business, but that’s a great list to get you started.

Thanks for the great advice, Jose. I couldn’t have said it better myself.

Here’s to your success!

Tim Knox, Entrepreneur, Author, Speaker, Radio Host
Founder, The Insiders Club, Giving You The Power To Start Your Business Today

http://www.theinsidersclub.com

Bestselling Author of: “Everything I Know About Business I Learned From My Mama”

http://www.timknox.com

photo credit: apesphere

Acquisition/Investment in Indian Companies by Foreign & Domestic Investors – Six Steps Mantra

Joint ventures, strategic alliances and acquisitions are the flavor of the day that enable fast growth focused companies to have rapid inorganic growth and expansion in new sectors. However, prior to engaging in a joint venture relationship or acquisition of an operating Indian company (“Investee company”), either by way of private placement, or secondary market, or subscription of substantial equity share capital, it is advisable for the Investor to carefully and stringently undertake the following six step mantra to avoid future surprises and heartburns:

(i) Due Diligence/Operations Audit: Extensive legal and financial due diligence of the Investee company is advisable to assess Investee company’s track record in compliance with Indian laws, statutory obligations and regulations applicable to it. The due diligence exercise (which usually takes between three (3) to four (4) weeks depending on availability of documents) not only enables the Investor to assess potential liabilities, evaluate unknown and potential, disclosed or undisclosed liabilities but also enables the Investor to assess the feasibility and viability of the proposed acquisition and rationalize enterprise valuation. If required, Investor can demand creation of an escrow account for safe deposit of a part of the acquisition cost, parked for an agreed period to mitigate against any future liabilities of the Investee company.

(ii) Resolution of Preliminary Issues: Preliminary issues, if any, arising pursuant to the conduct of the Due Diligence exercise would need to be resolved and a decision taken whether or not to proceed with the acquisition. For example, whether a change of control would affect the ability of the Investee company to carry on its business operations under the current regulatory framework and the approvals and licenses required. Unresolved issues that are not fatal to the acquisition may be identified and negotiated.

(iii) Regulatory/Pricing/Tax Issues: Identification of regulatory and tax issues that may impact the transaction is critical. In case the Investor is a non-resident, foreign direct investment (“FDI”) guidelines will also need to be assessed.

FDI either by way of acquisition/transfer of issued equity capital or fresh subscription to the equity capital of Investee company in most sectors is presently unregulated and most sectors barring a few do not require the FDI approval from the Foreign Investment Promotion Board. However, the price at which the transfer takes place will need to conform to the pricing guidelines prescribed by the Reserve Bank of India (“RBI”), i.e., the fair valuation of shares have been done by a chartered accountant as per the prescribed guidelines; and the price per share arrived at has been certified by a chartered accountant. The share consideration in respect of the shares purchased by Investor will need to be remitted to India through the banks authorized to deal in foreign exchange.

In case of transfer of shares to the Investor the transaction would be subject to levy of stamp duty ranging from 0.25% to 0.75% of the value of the shares transferred and payable in accordance with the applicable rates prescribed by the respective State where is the Investee company is registered. The transferor usually bears the stamp duty for the transfer of shares in the absence of a contract to the contrary. Alternatively, Investor can consider to subscribe to the equity share capital of the Investee Company by way of preferential allotment and avoid the stamp duty payable on transfer of shares.

Capital gains arising from transfer of shares (in the event of an acquisition instead of an issue of fresh equity) would attract tax in the hands of the seller, i.e., the existing shareholder of the Investee Company.

(iv) Contract Documentation Preparation: Upon successful resolution of preliminary issues and an affirmative decision to proceed with the acquisition, parties would need to identify and prepare commercial documentation to record their understanding of the transaction and the manner in which such transactions would be closed.

(v) Closing: A reasonable time frame is agreed within which the share acquisition would be consummated. If Closing is delayed, parties may consider to put documents/consideration money in an escrow pending resolution and satisfaction of the closing conditions.

(vi) Post Acquisition Compliances: This would usually include corporate compliances such registration of the share transfer in the statutory books of Investee Company and intimation of change of control that may be required pursuant to any regulatory approvals and licenses already obtained. For instance, Investee Company will need to inform Registrar of Companies and the RBI about the change in the equity structure of the company.

The risk of acquiring an existing operating company with its past baggage of liabilities versus setting up a new company is a critical question that most Investors face. Needless to say, the cumbersome process of setting up a new company, obtaining necessary authorizations from regulatory authorities for establishing an Indian company and growing a new business is always challenging. It is for this reason that mergers and acquisitions are not only common but the preferred way for expansion and growth in the today’s fast growing economies.

Areas of Practice:

Infrastructure, Telecommunications, Power, Mergers/Acquisition, Software/Information Technology, Business Process Outsourcing, Media & Entertainment, Private Equity and Venture Capital, General Corporate and Commercial, International Arbitration.

Professional Summary:

Seema Jhingan’s practice spans over fourteen years during which she has acquired substantial expertise in representing developers, sponsors/lenders, venture capital investors, international corporations, financial institutions, and other strategic investors involved in the establishment, development and financing of major infrastructure and IT projects in India.

Seema is a Partner with a Delhi Based Law Firm LexCounsel Law Offices and regularly contributes to journals and publications and often takes up speaking engagements. Seema can be reached at sjhingan@lexcounsel.in

photo credit: A. www.viajar24h.com

You’ll almost certainly need to raise money to start up your company, unless you already have sufficient capital yourself. The typical costs of starting up are in obtaining premises, manufacturing your product if you have one, buying materials, stock or equipment, marketing and fees for external consultancy such as legal help, accountancy etc. Then when you’re off the ground, you’ll need working capital to keep you afloat in the gaps between paying your own invoices and receiving payment from customer invoices.

Again, your business plan is essential at this stage of setting up your business. In it you will already have scoped out what your money needs are and how you plan to raise the capital, and you’ll be using it to persuade potential investors and lenders of the benefits of funding your company. Your financial calculations in your business plan therefore need to be thorough and accurate and presented with confidence.

Everyone expects that they’ll be able to stick to their plans and only need to borrow the absolute minimum, but more often than not something unexpected crops up to throw a spanner in the works. It therefore makes good business sense to include a contingency element in the amount you request. It’s better to do that now and have the extra cash as a safeguard than it is to have to return to your lender or investor not far down the line to ask for more money. If it wasn’t in the original plan they are likely to be concerned about your financial ability and your request may be rejected.

How much money should you request? This question worries all start-up business owners. You want to make sure you have enough to keep you going without struggling, but how much will your investors or lenders be prepared to give? Most experts would advise that you should pitch somewhere in the middle – don’t leave yourself short by requesting the minimum, but at the same time don’t be greedy (and lazy) in asking for too much. You want to keep costs to a minimum and invest your money wisely in your company, while still having the security of a little extra for backup if required. What you borrow should give you a realistic challenge for your business but should not be too risky. And back up your calculation with evidence in your business plan – it has to be credible.

People raise money for their company in many different ways, not always from professional business investors or high street banks. How you raise your capital will depend on your business needs and your own circumstances. Here’s some information on various different sources of funding.

Your own money – if you have enough cash to spare, putting up your own money for the business means you don’t have to be in debt to anyone. It will also give you full freedom over the running of your company as you won’t be responsible to any other interested parties. On the other hand, you’re risking a lot personally by investing your own cash and you could lose it all – and not just your business, but perhaps also your home if you obtained the money by taking out a secured loan or increased your mortgage, for example. You should also be aware that personal borrowing rates often have much higher interest repayment rates than business deals.

People you know – if they have anything to spare, family and friends are often more willing to give you cash than external lenders or investors. Again, though, there is a high level of personal risk, both for your family or friends who could lose money, and for you – it can cause relationship tensions. If you do take money from family or friends, treat it as a formal business arrangement as you would with external funding and agree clear terms and conditions. You want to protect both your interests and ensure that there are no misunderstandings.

The bank – high street lenders usually have a variety of different packages and there’s usually something to meet everyone’s requirements. You’ll have to do a sales pitch to get your money though, and depending on financial circumstances you might also be required to find a guarantor or provide some sort of security. Don’t just go to your own bank – look around for a good deal and do your pitch to various lenders. If nothing else, it will give you good practice! If you think you might have more of a chance of obtaining money from your own bank where you already have a strong relationship and good financial history, then don’t put it first on your list of visits – present your case to a few different lenders first to hone your presentation and persuasion skills to a tee!

Even if you can’t find a lender to give you money, there is a government programme that may be able to help. The Department of Trade and Industry offers a Small Firms Loan Guarantee, in which it offers three quarters of the borrowing amount to the lender as a security guarantee. In return, you must pay an annual fee (which will be a small percentage of the remaining loan amount) to the Department of Trade and Industry. Up to quarter of a million pounds can be borrowed over a maximum 10-year period.

Outside investors – often referred to as ‘business angels’, private investors are rich professionals, often successful entrepreneurs themselves, who are able to offer a great deal of capital in return for an expected large profit and dividends when the company starts to make money. The advantage of obtaining finance from an investor rather than a lender is that they will not expect any financial returns until your business is turning a profit. Also, as successful business owners themselves, they can be a valuable source of advice to guide you in the right direction with your company. A combination of investment and lending might be a good option. Your business will seem a much more attractive and secure prospect to lenders if you already have a sum of capital to back it up. Investors will no doubt have a level of influence and decision-making power in your company, though. Most will want to be kept informed of what is going on – they will want to protect and develop their investment, of course, so you will have a responsibility to them. Also, when you start to turn a profit, it will be divided among everyone who has invested so you won’t get the full whack. Finally, you’ll need to put forward a very good business case to attract an investor – these are very wise, shrewd and experienced entrepreneurs.

Government schemes – there’s a whole raft of options available to small business owners from the government and local authorities in the form of low-cost loans and grants – in fact far too many to mention here. Your local business enterprise centre, chamber of commerce or local council will be able to advise on what options are available for your type of business. The loans are usually offered at very reasonable rates and grants are of course non-repayable (although competition can be tough). Such incentives are often given to certain types of businesses in certain industries located in certain areas, particularly in areas that are being regenerated and in fields such as science, research or engineering.

In conclusion, the key message is that however you get the money you need for your business, you’ll need a very strong business plan – and you’ll need to practise your skills of presenting to ensure you make a good impression and a convincing case.

The presentation of the document itself is also important. Keep it clean, crisp and sharp. Use a business-like typeface, use colours sparingly and use spreadsheets to create neat graphics. Have someone else look over it for you when it’s done to check for mistakes. Print it on good paper and hold it together in a presentation folder or comb binding.

Don’t just plan to read out your business plan – people can do that for themselves. Turn it into a slick presentation with a strong argument for your case. Write down what you want to say and rehearse it several times – in front of a mirror at first and then to family or friends. Confidence is key and this will come with practice. Ensure that you know the details of your plan inside out, including the figures. You don’t want the facts to trip you up. It’s also a good idea to consider what questions investors or lenders might ask and how you can answer them confidently and convincingly.

Author: Benedict Rohan
Website: http://www.mortgagenation.co.uk
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages

photo credit: A. www.viajar24h.comThe number one issue on the plate for nearly everyone is the economic meltdown that occurred in 2008 and is carrying through to 2009. Although we here bad news in the media, most don’t describe the really ugly things occurring.

The Banks

2008 was a bad year for banks. Given what you hear on the news, most of us would think things were calming down. They are not. If anything, they are worse. For instance, are you area that regional banks are failing at a rate of more than one a week? How about the fact the federal government cranked $165 billion dollars into the 8 biggest American banks, but they still lost $418 billion in value? The latest estimates place the total capitalization of all banks in the US at 1.8 trillion dollars. That’s not bad until you realize the latest estimate of bad debt in the industry is 3.6 trillion dollars.

The facts spell out a fairly predictable path for banks in the coming months. The entire system appears to be insolvent. The federal government is the only entity with any money. It can’t let the banking system fail. The obvious choice is to nationalize the banks, close those that can’t be saved, recapitalize those that can and then launch the banks again as private entities traded on the stock markets. Taxpayers will take a bath, but there appears to be no other choice at this point.

Trade Protection Wars

The United States is the great consumer nation. By consuming like mad, we drive the world economy. Well, there is one problem. We are no longer consuming. Americans are worried and holding on to every penny they have. The cut back in spending is killing companies in the United States and causing massive job losses. The same is occurring overseas for China and other countries that import to the United States.

When a cycle like this starts occurring – reduced spending, job losses, more spending reductions – one thing always happens – protectionism. “We need jobs! Why should we be shipping jobs to India? China?” If you thought the immigration debate got people riled up, wait till this movement gets moving. If politicians fall in line with this way of thinking, then we can expect trade wars to break out.

The Good News

Unfortunately, there is a dearth of good news at the moment. Still, there are some hints that things are beginning to bottom out. Housing sales were up in December 2008. Financial gurus were surprised by this, but should not be. It was inevitable. The increase in sales signified a collective view that the bottom of the market has either been hit or is getting very close. How do we know this? Most of the buyers are investors. They are in the business of making money on property. When they start moving into the market, it is a signal that demand is going to increase. Is it a sign of a massive turn around? No, but it is a sign things may be stabilizing.

As predicted by many, 2009 is shaping up to be a rough year. If you are in financial straights or worried, it is a time to live frugally. 2010 should see a rebound, so getting there in as good a shape as possible should be your goal.

Stephen Teak writes about economic news for FactoringCompanyInformation.com – find a factoring company that will solve your small business cash flow problems with small business factoring.

photo credit: Berd Whitlock

International business plans require additional study compared to domestic ones. These require additional expense and time to resolve. Here we will discuss four critical ones for a business plan.

First, we must decide on the business structure. Countries have favorite structures that evolve slowly. When considering international companies, different structures might be required. Typically, the type of business structure must be discussed with a business consultant in the country itself. This will most often be a lawyer from that country. It’s possible that a lawyer in your home country would know the laws of another, but it’s not very common. This information is critical for the correct filing of papers, company organization and other important details. As we are deciding which structure to use for a foreign country, the decision on how to control it is also important. Will the foreign company be a stand-alone? Will it be a subsidiary of another company? These questions can only be answered after much consultation. The research answers will heavily influence the resulting business plan and the resulting company.

Next, we must evaluate the government and legal environment in our home country and the new country. Our business plan must account for and demonstrate an understanding of challenges. It is common for countries to place severe restrictions on how foreign companies are organized, operated and owned. Some require a resident citizen to be involved in a company, while others require varying amounts of capital and social spending to operate. Too, the tax structure of the country may place restrictions on how capital flows into and out of the company and country. Also, taxes must be levied, collected and remitted according to laws of all the countries involved.

Some countries allow capital to flow in freely but don’t allow capital to flow out. Another concern is the stability and freedom that the country enjoys. Many countries have whimsical or tyrannical dictators that change policy at their leisure. This can create an atmosphere where investment is encouraged and then after all the hard work is done, they nationalize or repatriate the company. This is very common place in third world countries and should be factored into any decision for the business plan. Too, there are many other financial facets in operating internationally, such as: currency valuation and devaluation; import and export taxes; inflation and deflation; and world economic changes.

Third, we have the movement of funds. Earlier we touched on it in relation to putting capital into the company or moving it out. All countries have laws related to the movement of funds. Most also track fund movements and force financial institutions to collect and supply information concerning funds moving across international borders. Some of this has happened because of the fight against world terror, but most as evolved over time with the terror struggle being an excuse to collect information. These laws may restrict the amount, form and the timeliness of funds transfers. It is proper to discuss fund acquisition in the business plan; but for an international company, fund transfers and currency concerns must also be covered items.

Finally, extended control of an alien company must be determined and discussed in the business plan. It costs time, money and other resources to control a company far from the normal environment. People must often travel there to evaluate and monitor progress. Personnel must do accounting and reporting within the guidelines of the country where the business is located. This control and monitoring function is daunting for international companies because it brings together differing ideals, cultures, laws and experiences plus often there is a language barrier to be traversed. This leads to a challenging business environment. It’s not one that is impossible, but it is one to be scrutinized and considered carefully during the business plan development and feasibility reviews.

Michael Russell
Your Independent Business Plan guide.