Raising Capital "22 Ways To Raise Noney Without uoing To The Bank 0i uoveinment"
8||| G|bson and S|ya Mapoko
Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com Introduction
This document contains 22 ideas that can help you raise capital or get funding from banks and funding agencies. Most of the strategies in this document were conceptualised by Mr Bill Gibson. In 2007 when I was raising capital for my first business he sent me a document with 17 ways to raise capital. This document was a major boost for my business because I applied the majority of the ideas he gave me. My team and I became so creative such that we ended up coming up with another 10 or so of our own strategies. Thanks to Bill. In this document Ill share all the ideas Bill gave me and a few of my own that Ive used and still use to build my business. Bill has been doing business here in South Africa since 1994. He has been an Entrepreneur for 40 years of the 66 years he has been on this planet. And he has borrowed and raised millions of rands for himself and for ventures of other business people. Believe it or not most of the time the money was raised initially without the bank or the government. Bill wrote the foreword for my book Conversations with JSE AltX entrepreneurs, and here is a short except: 18 months ago (October 2006) while touring the country speaking to small business owners sponsored by Nedbank Small Business Services I was approached by a young, sharp entrepreneur. He immediately purchased my Audio CD and Manual Program, Boosting Sales and Profits with Focus Selling. Within weeks he followed up with feedback to me on how he was implementing the information. A few weeks later he met me on a trip to Cape Town at 11:00pm. On another trip he came to see me at 7:00am. Before I knew it I was one of the main business mentors to this young, dynamic, sincere business owner Siyabonga Mapoko.
During our many telephonic conversations and face-to-face meetings I shared with Siya 17 Different Ways to Raise Money without going to the Bank or the Government. He has used virtually everyone of them. With tenacity, innovation, creativity, honesty, integrity and 80 to 90 hours per week of work, Siya has successfully launched iCaptive here in South Africa, while still writing this phenomenal book to help other business owners and entrepreneurs make their dreams come true.
Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com It is a bonus if the Bank or a Government Funder loans or grants you money for your business. As potential business owners and entrepreneurs we need to explore all of the avenues for raising capital and funding our growth and not totally rely on the Banks or Government if South Africa is truly going to be an entrepreneurial driven business society. Im going to quickly share 21 Proven Ways to Raise Money And Create Equity So Traditional Lenders Will Look Favourably On Your Financial Request. This may open up avenues you havent thought of before. 1. The Rule Of 10: Before embarking on a capital raising campaign, you must do a simple exercise that only requires a pen and a blank note pad. Write numbers 1 to 11. Next to number 11 write Approach Banks and Funding Institutions. From number 1 to number 10 think of 10 things you can do or 10 avenues you can explore to either reduce your capital requirements or to raise a portion of the required capital before you approach the bank. If or when you finally approach the bank, you can submit a document outlining what you did to raise the money you raised. That demonstrates your resourcefulness and your abilities as an entrepreneur. I have a 1 hour audio recording where I interview 2 Business Bank Managers where they reveal the details of what the banks look for when they evaluate your application. I offer this audio recording for FREE as a special Bonus when you buy download my book Conversations with JSE AltX entrepreneurs online (ebook). Get full details at the end of this document. The Ideas below should help you with some powerful strategies. 2. Someone Invest In A Specific Product or Project. Rather than give away equity in your business have an investor, friend, associate or business invest in a specific product or service you wish to launch and they own a percentage of the product / service and gain revenue from that. A South African Corporation put up the initial capital for Bill to build his 21 Module Program, The Complete Sales Action System. They jointly owned the product with Bill and got about 4 times their investment back before he bought them out. They financed the project. Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com 3. Build Your Concept / Product for a Client At A Reduced Price And Retain The Ownership. Bills Managing Complex Business Relationships System was initially built for a multi- national bank at a reduced rate. This covered his initial investment of time, energy, intellectual capital and money. The terms were that he would hold all rights and ownership and make the system generic and have the right to market it worldwide with no share of revenue to them because they saved on the initial price. 4. Initial Client Shares In Revenue of new Product, Process, System. Build your product or process for a client and have them contribute to that cost but with the understanding they share in a percentage of revenue when you sell it elsewhere. That funds your venture and you both win. Be sure to put a ceiling on how much they can earn. 5. Payment Upfront Discount. Short on capital. Offer a good discount for 50 to 100% of a project being paid in advance. This can take you through a cash flow crunch. Be sure the discount is attractive. They wont do it for a 2% discount. Remember, Financial Directors and Procurement Managers also want to look good in the eyes of the CEO and if they can show how they earned a large discount for the company they often will do it. 6. Short Term Strategic Partner Who Has The Resources That Off-sets The Investment Needed. You may want to build a CRM Software Solution and you dont have the expertise or money to do it. Engage a short-term Strategic Partner who has the expertise to build the program. The partner receives revenue up to a specific ceiling amount for the services. You could in addition engage another company who has the Marketing expertise and team who could sell or distribute the new software program. I know several entrepreneurs who have done this in South Africa. 7. Someone Signs For You With A Major Supplier. Founders of a successful and popular entrepreneurship magazine in South Africa printed their first edition of the magazine by having a friend volunteer to personally sign at a large printing house to Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com guarantee the printer he would get paid. That was all they needed to get the first edition off the ground. 8. Suppliers Earns Extra On The Project. You need a specific supplier or manufacturer or consultant to produce something for you and you dont have the capital to pay. You agree to pay them, for example, 30% more than they normally charge if they will carry you for 6 months. You have just raised the necessary capital. 9. For 6 Months 90 to 120 Days Terms With Your Suppliers. In advance you convince the majority of your suppliers to allow you 90 to 120 days to pay your account. If on an average you are paying this group of suppliers R50 000 per month, youve actually picked up R150 000 that can be used as a cash injection that could take you through a projected tight period. You must commit to be loyal to them for this type of cooperation. 10. Employees And Key People Take A Minimal Amount For 6 Months For An Incentive To Come Later Or For Equity. Bill was once helping an entrepreneur open a Wax Museum Attraction in Vancouver, Canada. The entrepreneur ran out of money 3 months before opening and couldnt afford the contractor who was renovating the museum and building the props. At the time Bill lived in a house with a group of Aussies and Kiwis who worked in the Canadian North during summer months in Construction and Building. It was the winter months and they were not working. 6 of them agreed to finish the museum construction for a big bonus within the first 3 months of cash flow. They got paid handsomely and the Wax Museum got opened. 11. Corporate Citizenship / Social Responsibility, Sponsorship. One woman entrepreneur in South Africa was fed up with the number of paraplegic people in the community because of accidents underground in the local mines. She went underground and researched the problem. She decided to start a business to provide protective padding for the elbows and knees of the workers. She also decided to manufacture rain gear to keep them dry underground. Anglo Ashanti gave her a grant to get started. She now has over 100 people working for her and Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com the majority are black and many are paraplegic. She raised the initial capital through corporate sponsorship.
12. Special Terms For 2 Years For A Client. Assisting in the beginning. One magazine in South Africa launched the magazine by giving several major advertisers a specific rate for 2 years as a thank-you for signing a 2 year contract. These contracts acted as proof of the viability of the business and in turn that convinced the investors to move forward with the capital input. 13. Several Small Investors No One At A Major Risk. You need R200 000 to launch your business. Your idea is viable and you have the proven ability to make it work but you dont have capital to contribute or the collateral to borrow it from the bank. The banks will want to see your financial contribution and know what security you will offer for a loan. You cant provide either. Go to 20 people who know and trust you and borrow R10 000 from each of them. (No one is at a major risk.) Give them a good return on their investment. Be sure to under promise and over deliver on the payments. Give yourself ample time to pay them back. Liberty Life was funded in this way when it was founded in 1957. Mr Ackerman also used this method to acquire and grow Pick n Pay. 14. Part Of Another Successful Company For The First Two Years. Start your business as part of another company that is successful. That company owns a percentage of your company. They assist with financial controls, offices, equipment, branding, expertise, suppliers, etc. This indirectly could raise several hundred thousand rand to help launch your business. Make sure the agreement is clear and you have a buy-out option. I (Siya) did this in 2008 and was part of a big Outdoor Media company. That helped my start up company for months. 15. No Rent, No Lease Payments For The First 6 Months. Right now there is lots of commercial property for rent. If you see a building that has had a For Let sign on it for a long time there is a good chance you could negotiate the first 6 months as free Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com rent. 6 Months of the free rent at R10 000 per month is R60 000. Now do that on your computers, your photo copier and another few items youve just raised over R100 000 cash to help you get started. You could even agree to pay the money back by amortising it in the next 2 years payments that start in 6 months. I used this strategy with my former landlord and had a 3 year lease agreement worth over R350 000 turned into his investment to my company. 16. Stokvel. More than 9 000 stokvels, burial societies and savings clubs have spread across South Africa in the last 50 years. They collectively account for R12 Billion in annual savings. Dennis Dibakwane, Director of the Stokvel Tourism Company is providing the Stokvel and Burial Savings Market in South Africa the opportunity to buy into existing tourism assets that are well managed and profitable with cash flow. Money can be raised through Stokvels. Explore the possibilities with Stokvels in raising capital. 17. Borrow Against The Equity In Your Bond. Make sure you have a rock solid business plan that you are positive you can implement before you do this. In essence by borrowing against the equity in your bond you are not borrowing from the bank you are borrowing from yourself. You are borrowing against your equity. If you dont pay the payments then they have the right to force you to sell your home or take the home from you to get their money back. Thats the downside. 18. Cash In Your Equity In Long Term Insurance. You may have been paying on several insurance policies or annuities for several years. You could have tens of thousands of rands in equity that you can borrow against. That is another way of raising cash. 19. Borrow From Relatives And Friends. This is a common approach because these people often loan the money based on their confidence in you and your idea. The word of caution here is that if you dont keep your commitments you could lose a best friend or relative. Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com 20. Trade Equity For Expertise / Services. If your accountant, lawyer, architect, builder, distributor and personal assistant takes equity in your business in exchange for not charging you for their services you in actuality have raised capital. A word of caution is not to give too much equity away for services in the beginning. Later on you may need that equity for other valuable contributors and to raise capital. 21. Partner With Expo/ Trade Show/ Event Organisers And Offer Your Services To The Event. In 2007 there was a small business Expo in Cape Town. We approached the organisers and offered to install portable plasma screens at the venue to broadcast messages about the event and advertise the exhibitors and sponsors to all the visitors. In exchange we requested a booth (worth R15 000) and a list of all the exhibitors so we can sell them advertising. We contacted all the exhibitors and sold them advertising; we collected all the money and then we hired the equipment we needed (since we didnt have the equipment of our own dont laugh). From that event we got to promote our business fro free and we walked away with close to R100 000 in profit. 22. List Your Company In The Stock Exchange. Most medium sized businesses that generate revenues of between R2million and R5million a year can start thinking about listing on the Stock Exchange to raise capital in the public market. You can look at the JSE AltX or look oversees especially the Frankfurt Stock Exchange (FSE), because it is easier to list at, it is quicker and has a bigger market of investors. Contact me if you need more details on either of the 2 exchanges. My email is siya@siyamapoko.com
As a final note Id like to point something out you might not have thought of when reading the article. If you went to a traditional lender or investor to borrow R700 000 without ample security they most likely would turn you down. What if you showed the traditional lender or investor the following? Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com You raised R60 000 by negotiating 6 months free rent. You raised R150 000 by discounting the price on the building of the program to a major client. Now you dont need R150 000 for that purpose. You cashed in R25 000 equity of a Life Insurance Policy. An individual invested R50 000 in the development of a product that they will earn from Three major suppliers are giving you 90 days to pay which represents R90 000 in capital you would of needed in the first 4 months. Partners and Key Employees have reduced their total monthly pay by R30 000 per month for the first 6 months saving R180 000. You then explain to them that you need R700 000 for the first 6 months but youve injected R555 000 by doing the above. All you need now is R145 000 to launch the business with its new products. I believe someone would loan you the money because of the initiatives you implemented that in essence were a cash injection of R555 000 in real terms. Folks, this is thinking like an entrepreneur. Good luck and I hope you enjoyed thinking outside of the box.
To get my downloadable book (Conversations with JSE AltX entrepreneurs) you can email me on siya@siyamapoko.com its only R99 (you get over R400 worth of FREE Bonuses). Siya Mapoko is the author of Conversations with JSE AltX entrepreneurs; a highly-acclaimed speaker; seminar leader; scientific and business researcher; business development coach and an extraordinary entrepreneur. Siya spent most of the last 10 years doing scientific and business research in a career that has cut across Need more ideas? Visit www.siyamapoko.co.za or email siya@siyamapoko.com various fields such as Chemistry, Biochemistry, MRI drug research (contrast agents), Investment Analysis, Equity Trading, and Entrepreneurship. For over 4 years Siya has been having conversations with some of the most remarkable self-made millionaire and billionaire entrepreneurs, and top executives, seeking to understand the psychological make-up and deep-rooted principles and beliefs that set these individuals apart from the majority of humanity in terms of getting results. For enquiries or to hire Siya as a speaker or as a Business Coach email siya@siyamapoko.com or call him on 072 644 5156.
Bill Gibson is Chairperson of Knowledge Brokers International S.A. (Pty) Ltd. He is the author of several Sales, Marketing and Entrepreneur Development Systems. To hire Bill Gibson as a speaker or to gain more information about his seminars and products and systems phone 011-784-1720 or contact: bill@kbitraining.com.