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Posted by on Jun 2, 2006 in ACQUIRING NEW MONEY | 0 comments

The VCs have awakened: What to do about it

On the Money From the  June 2, 2006 print edition After a dreary and depressing period of timidity and retreat, venture capitalists seem to be awakening. They remained on a steady pace in the first quarter of 2006, investing $5.6 billion in 761 deals, according to PricewaterhouseCoopers. The quarter’s dollar value matches the investment level from fourth quarter 2005 and represents a 12 percent increase over the same period last year. According to Michael V. Copeland at “CNNMoney”: “There’s never been a better time to start your own company. New technologies are creating new business opportunities on the Internet, on mobile phones, in consumer products and in information services.” According to Copeland, in the late 1990s, a typical VC-funded startup needed roughly $10 million to amass the infrastructure and staff required to carry the company from its first business plan to its first product launch. Today, the cost has been reduced to just $4 million. The barriers to entry never have been lower. The combination of increased venture funding...

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Posted by on Jul 2, 2004 in ACQUIRING NEW MONEY | 0 comments

Leveraged deals can financially benefit companies

On the Money From the July 2, 2004 print edition The ancient Greek Archimedes said, “Give me a lever that is long enough, give me a fulcrum that is strong enough and give me a place to stand and single-handed I’ll move the world.” He was describing the physics of “leverage.” In finance, leverage is borrowed money. To the extent assets are controlled by borrowed money, that’s financial leverage. Several years ago the term Leveraged Buyout, (“LBO”), was frequently used in connection with acquisitions. Companies would buy control of another company (hopefully an asset), using borrowed funds. If the leverage was positive, the increase in value of the asset would be greater than the cost of the borrowed funds and the acquiring entity’s return would be amplified. For example, a manufacturing firm is considering purchasing a new machine for $250,000. The new machine will produce a new line of goods which the company believes will generate a profit of $75,000. If the firm has $250,000 of cash available, purchases the...

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Posted by on Feb 13, 2003 in ACQUIRING NEW MONEY | 0 comments

More businesses should make business plans priority

On the Money From the February 14, 2003 print edition The Wall Street Journal reports that 70% of the firms in America do not have a formalized business plan for the upcoming fiscal year. Many companies – in spite of having no plan in place – have high hopes for 2003. In order to achieve that increase, companies need a plan; specifically, a financial plan. A common reason for this financial roadmap void is the belief that the personal charisma and memory of the owner, coupled with enforced compliance of a hastily prepared line item budget will be enough. However, simply taking last year’s line items and adding 10 or 15 percent will not reveal the essential issues necessary to engineer authentic progress. The old term is “zero-based budgeting,” or tabula rasa- starting with a clean slate and building the plan with as much current objectiveness as possible. The Following are two critical elements in the construction of a budget for the New Year: activity based sales budgeting and breakeven analysis. Sales...

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Posted by on Oct 4, 2002 in ACQUIRING NEW MONEY | 0 comments

If there’s so much money available, where is it?

On the Money From the October 4, 2002 print edition According to Applied Reasoning, Inc. (an economic indicator research firm), there was $1.19 trillion in the U.S. money supply on September 8, 2002. If you’re like many businesses these days, you might ask “OK, so where is it?” In order to answer that question, we must examine two basic components of the economic system. They are money and velocity. Most of the time we talk about money in terms of simple amounts. Such as, “I have $10,000 in savings,” or “I need $35,000 to buy that car.” However, underneath those statements is the implied definition of “fiat” money: something that represents control over goods and services. The $10,000 in savings is meaningless unless it is connected to some item or service that we desire. It’s really not the $35,000 we want; it’s the car. Money has no value if it doesn’t move from one person to another. The rate at which the money moves is called velocity. What makes an economy thrive...

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Posted by on Mar 8, 2002 in ACQUIRING NEW MONEY | 0 comments

A good business plan should spell out the bottom line

On the Money From the  March 8, 2002 print edition Ralph Waldo Emerson said, “Build a better mousetrap and the world will beat a path to your door.” That tenet may still ring true, but will anyone pay for it? In financial circles, it’s not about the mouse or the trap; it’s about the money. When raising money, the basics “How much? What are you going to do with it? What do the investors get in return?” must be stated within the first 100 words of any business plan proposal for funding. Imagine attending a concert where the orchestra is seated and ready to play. The conductor walks onto the stage and launches into a soliloquy on the nature of compositional techniques, the relative worth of this piece as it applies to the vast human aesthetic experience, the subtleties of the acoustics in this particular hall, what everyone in the orchestra is wearing and planning to do after the concert, various alternative forms of transportation to get the audience home after the...

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