Frequently asked questions about business plans and raising venture capital

Questions/Answers about our services

J. J. Associates, Ltd. (JJALTD)

A: No. What we do guarantee is that your plan will be seen by J. J. & Associates, Ltd. Additionally, it will be profiled for selective distribution for submission to literally hundreds of qualified lenders and investors in our database. If your plan is good, you have a pretty good chance of being funded. However, if your plan is flawed, the investors likely will not show interest.

Q: I'm interested in starting a small business - where do I find venture capital?

A: Venture Capital is probably not the correct form of capital for your small business. You'll most likely be better served by debt financing, or "Angel" financing if your business can generate a significant return on investment.

A: Absolutely! We help the high-techs to the bricks-n-mortar crowd find the right kind of financing and capital. What's most important is a well thought out business plan that focuses on making profits.

A: First, it helps you by providing a "road map" for your business. Second, it is used to show potential sources of money how you will generate profits.

A: Simply put - our reputation is also on the line but we also want to make sure you see the "forest" among the "trees".

Q. Do I provide my business plan to all your investors with information on my project?

A. No. After analyzing your project, we only target our funding sources that specialize in your industry, size, stage, amount and other attributes.

A: They are strictly "start-up" and mezzanine level investment groups with the most prestigious track record in the investment community, having funded some of the most recognizable start-ups in the world today!

A: We will respond immediately by providing the additional level of service and documentation.

Q: What if the consulting and research time for my project runs over the allotted time I contracted for?

A: In most cases, the time allotted will be more than sufficient; however, should your project require more time to complete the level of service you contracted for we may consider deferring a portion of additional charges for equity in your project.

Q: What happens when an investment group requests a full business plan and I don't have one or my current plan needs work?

A: Our parent company, J. J. & Associates, Ltd. And the JJALTD EntrepreneurshipXChange, will prepare and/or enhance your current business plan for a nominal fee, or of course you are free to choose another business plan service or write the plan yourself.

A: Yes, full credit will be applied to any other services provided by the JJALTD EntrepreneurshipXChange.

A: A typical professionally written business plan will run $500-$12,000, depending on how much information and documentation you bring to the table.

A: The JJALTD EntrepreneurshipXChange will endeavor to offset some of the expense of writing the plan in return for a small percentage of equity in your company.

A: On average, we experience a 30-90 day window depending on what level of service you choose and investors committee review timetables, backlogs, and other mitigating circumstances.

A: It is impossible to absolutely predict whether any project will in fact get funded. However, there is strength in numbers and your opportunity for success is dramatically and greatly enhanced through our extensive investors of JJALTD EntrepreneurshipXChange and presentation abilities. Every year, thousands of companies are funded - why not yours?

Q: You indicate that investors are looking for a return of 30 times their investment in 2 years. Am I to understand that if one were to obtain $50,000 from an investor, they would be expecting to see $1,500,000 in two years (30 x 50,000)? Or, am I misinterpreting what you mean by 30 times their investment?

A: Great question - Yes, they really do want 20X to 30X returns, and yes, your math is correct. Reason? Simple. Yours and other similar investments are "high risk" and if they put money in this kind of high risk, they expect a very high return. But with stock equity, it can be done simply enough. Consider a $50K investment in your company for 5% of the company. That puts the valuation of your company in the $1,000,000 range ($50,000 X 20 or $50,000 divided by 5%). Now assume you grow your company to a revenue base of $5MM in 2 years with that $50K investment. Assuming a multiple of revenue of 2 as a valuation standard, your company is now worth about $10MM. The investor's original investment of $50K, or 5% is now worth $500,000 which is a 10X return (5% of $10MM). If you attract a competitor whose stock is traded publicly who wants to purchase you by leveraging his stock with yours, he purchases you for $40MM in his public stock. The investor's stock is now worth $2,000,000 (5% of $40MM) which translates to a 40X return. In real life, you will have raised additional capital, thereby diluting yourself and the original investor, but even then, the valuation continues to ratchet up as you bring value to your company by revenues and profits.

Q: I hear time and time again about my "management team". I don't HAVE a management team, so what do I put in my business plan?

A: Investors don't expect you to have your management team in place when you're trying to raise money. They DO expect you to identify who you will hire, or that you are in need of certain key people. They also want to see that you recognize the importance of having a good "top dog" running the ship. In other words, if you've got no track record of running a company, it's unlikely an investor will invest in you with his or her money as long as you're positioned to run the company. In cases like that, we urge entrepreneurs to identify a "president" or "COO" from the outside world who will be the person who runs things operationally.

A: That goes beyond the scope of this web site, and would best be addressed by your local community's outreach programs. Look up the SBTDC in your area government listing and inquire about classes or instruction in business building. Also, check to see if you have classes such as the Kauffman Foundation's "Fast Trac" in your area.

Q: Is it hard to get capital on a business venture that started in South Carolina and is doing well enough to expand on a much larger scale to other states?`

A: Expansion can do great wonders for a business, but it can also sink it. Many companies have gone under trying to expand outside of their regional boundaries, and the culprit is usually management experience and/or capital. The first thing you need to do is create or update your business plan that looks at the cost of expansion versus the gross profit. Assuming your "honest" look tells you your expansion efforts are profitable, you next need to locate an individual who has done it successfully. Once you have those two entities, you'll be a good candidate for an investor who will gladly take a piece of the action for your hard work in expanding to these new areas.

Q: How can I get "angel" financing for an idea that solves the area code saturation problem in the telephone system?

A: Write a good and believable business plan that addresses your technology, why it's unique, why it's protected and how it will bring in millions of dollars of net income. If you believe your own business plan, show it to some trusted advisors. If you need help, contact the JJALTD EntrepreneurshipXChange.

Q: I am interested in starting a clothing boutique. I have excellent clientele. The clothing will sell like hot cakes but how do I obtain financing to purchase more stock and inventory?

A: First you need to understand that you are NOT an equity capital candidate. In other words, an angel investor will likely not invest in you because you will not be able to return 30 times the investor's money. You should focus your efforts on "debt" financing from the SBA or banks to obtain your working capital or line of credit. Second, you need to write a business plan to substantiate your profit targets, and then prove to your banker that you can make the first target. If you succeed, he or she will likely give you more so you can get more stock.

Q: We are greatly interested in information we found on your site. We would be obliged to you if you would answer this question: We are not Americans; we are from

Russia

. Is it possible for us to obtain a loan?

A: Assuming you have some really excellent technology, product or services, you would be a candidate for equity or debt financing from American investors. American banks, however, will generally not loan you money.

Q: My husband and I have had an electronic component manufacturing company for 12 years. We downsized at the end of 1998 and I changed the name of the business and put it in my name. The component industry has been slow in this area so I developed a product that I think will sell well and started another company to market the product through. We had been running a production job for the past year at our machine shop that slowed down the last couple of months but is due to start up again in June. This caused me to get behind on my lease payments. The bank that carries the lease has a lien on about everything we own including our house. I have $88,000 worth of product in production for the new company which with a little time and money I could get on the market. My trouble is I need to keep the company going and keep my house in order to finish the products and get them on the market. What I really need is turnaround money for the electronic component manufacturing company and start up money for the new company. I wondered what the possibility of finding financing would be.

A: First of all, run, don't walk, to your banker and sit down with him or her and tell him/her exactly what your situation is. If you do not communicate with your banker you will find that he/she has no choice but to foreclose. If you "talk" to your banker and present a sound plan for how you are going to get out of your jam, you stand a greater chance of keeping the loan intact and your house as well. Second, concentrate on making the electronic component manufacturing company profitable. If you are bleeding red ink because of that shop, you cannot concentrate on anything else. If it appears that you will not make it profitable, don't hang onto a dying swan. Sell it to a competitor and move on. Third, you need to realize that an investor will not invest any money in you in your current condition. I hate to break the news to you but you have no value to an investor in your current shape. Get the electronic component manufacturing companycleaned up and get your debt reduced and THEN look for investors.

Q: How can I find investors on the web for a good business already established or should I advertise?

A: Once again we say that investors will invest in a business if it has a clear exit strategy and a sound business model. If your already established business is a taco stand and you want to add curtains, chances are no investors will invest in that because they will never get their money back out of your company. If, however, you plan on growing and adding more taco stands in the future, you have a great chance of attracting investors - if you have a sound business plan.

Q: I own a Bed and Breakfast and am seeking a private investor to help expand my business. The particulars are some what complicated, but I was wondering if you deal with investors who deal with sums of 300 thousand plus? I would not waste your time if I was not confident in my ability to be successful with this venture. When I started in '95 I was $60,000 in debt. Last year I brought in $125,000.

A: Yes, investors deal in sums from $25,000 to $5,000,000. But will they invest in a bed and breakfast? Why should they invest in your business? Are you promising them a quick exit strategy? Will they get 30 times their investment in less than 2 years? If the answer is NO, you need to consider a lending source, such as a bank.

Q: I am seeking information on how to find a capable investor who will fund a challenging project for a new company with an exceptional new idea in a consumer product. After contacting hundreds of consultant brokers I've been turned away with little or no explanations. I have submitted all business and personal documentations requested by these company which left me broke, exhausted and without any funding or referrals. I was told my executive summary business/projection plan was in order. But their final decision was naught with any explanation as to their sudden withdrawal. They have my main ideas about my product and the strategy to promote them. Now I feel isolated and left with a great product and no money to launch one of the newest game activities to be introduced for the new millennium.

A: Hopefully, you have a signed confidentiality agreement with all the people to whom you showed your business plan? It sounds like you have a good concept, but without seeing your business plan; we have no way of knowing if it is sell-able. Too often, an entrepreneur gets an idea, crafts a half-baked business plan, and gets disappointed when no investors knock on their doors. To attract investment capital in this world, you need (1) sound management team with experience, (2) exit strategy for the investor, (3) a sound business plan, (4) unique and proprietary idea that cannot be easily copied, and (5) believable proformas. If you think you have these, contact JJALTD EntrepreneurshipXChange and we'll help you curing the deficiencies and find funding.

Q: Do you look for investment money for film projects? Would US investors work with Canadian business opportunities?

A: Yes. But you still need a viable business plan for the film project. How will you distribute it, how much is the talent costing, what are your contingencies, etc?

Q: I own 1/3 interest in a motel and land. I would like to find an investor to buy me out. I also own property in the mountains of North Carolina , and would like to start a bed and breakfast. Can I find an investor interested in it also?

A: Unlikely. Your best bet is to sell your motel to a competitor who is successful in your area and wants to expand. As for the bed and breakfast idea, typically they are not equity investor deals, but are more suited for bank financing.

Q: I came up with an idea that involves an invention I made. How do I get it to market?

A: Your best bet is to sell your idea or product outright rather than try to start a company to market it. Depending on your business skills and experience, you may be better off selling your idea to a manufacturer or company.

Q: Recently, I've been told that I'm an "inventor-prenuer", based on my invention/concept. I am new to all this invention process and I'm trying to find a private equity investor for my needs and to properly develop the prototype and components. I was told that funding could be found providing I had the working prototype to show and demonstrate to potentials ( Ben Franklin Technology Center , Philadelphia , PA ). So, I thought I go about it another way and form the business of business. I'm doing this all myself and learning as I go. My questions are: 1) Would I be better off as an L.L.C.? As opposed to a "company" 2) What is "risk" capital? (it's not really to much of a risk.) 3) Is 22.2% of all sales for a three period, (post product launch) unreasonable as my terms for said investment funds of $100,000.? *Based on a worst case scenario of 45-55 million units sold @ $2,200.00 per unit in that time frame? 4)I haven't a business plan nor executive summary, rather a 9 page outline regarding my invention concept, what I've done and have at hand, feasibility and worst-case scenario. Who could I send this to for starters?

A: Again, focus on selling your inventions rather than starting a company around your product. Unless you're a very strong business person, you stand a much greater chance of success and fast capital return doing it this way. But, to answer your exact questions: 1) An LLC is a company - it's just a more protected corporation set up like a partnership instead of a traditional corporation. 2) Risk capital is the amount of money an investor puts up to show proof of concept - that is the point where your invention is proven to be marketable and your business model proven to be correct. 3) 22.2% is high if you're measuring it as a percentage of retail sales. It's better to make it a percentage of gross profit (retail sales less costs of goods sold). 4) You can send the 9-page summary to us for review, but once again it is stressed that you have a prepared business plan to show to investors.

Q: Where would be some good avenues to pursue for some investment capital for a franchise restaurant? I have great credit, a house with about $15,000 in equity, and about $40,000 in accessible cash. Looking for $200,000-$300,000.

A: Forget putting your house up as ransom for your plan to make millions. Your family will sleep better and if it all goes in the tank (and many do) you won't lose your house. Restaurants are tough to finance with equity capital because they don't provide an investor with an easy exit strategy. Instead, try to find an angel investor in your town who has funded other restaurants. A local investor is a must for restaurant financing, as he/she will be able to monitor your business with you, which is so important for the restaurant business. Q: I am a broker in Philadelphia , PA and I have a few of deals. How would I go about getting on your JJALTD EntrepreneurshipXChange? A: Call Jessie Williams at (912) 447-5670

Q. Our company required funding in the amount of US $250,000. Our product is new, patent has been lodged and all legal aspects adhered to. Where do we find an investor for our product?

Q. Do you have a company or companies that give grants to individuals designing new and better products that need money to have prototypes made?

A. Yes. That kind of thing is best done by the federal government's SBIC organizations, or local groups. However, investors don't give "grants" - they are capitalists and necessarily want to maximize return on investment.

Q: Do you have any non-disclosure agreements with the investors to protect the confidentiality of our business plan?

A: Great question. The way to handle it is to send each investor a generic summary of the business without listing the business name or any other confidential data. If they have an interest they will contact you and the confidentiality agreement is then submitted. Thanks for your interest!

Q: Where can I find cash to get my business off the ground floor with low interest or % rates. Need ASAP?

A: Call us. Most investors are "equity" investors, meaning they put their money in your business and take back stock. However, you are looking for more of a loan arrangement. We can help you file for a Bank/SBA Loan.

Q. I desperately need funds to keep my business going. My partner ran off with money and I'm facing foreclosure of some of my assets. What can you do to help me?

A. We have some bad news for you. Desperate entrepreneurs tend not to get funding, because they usually are distracted as a result of what is going on in their lives or business. Our best advice: Weather this storm out, hunker down and focus on your business, get the plan built and approach it like a business and not an emotion.

Q: I've been in the Lawn Care for many years, working for others. I've always done "side-work" and realize the type of money that's out there for someone willing to work hard, which I am. My question is this; is it possible to find someone willing to finance the necessary equipment in order to start up a new company? As far as investments go, this is probably a minimal investment for someone with a substantial amount of money....but for someone like myself, the sums are unreachable. Also, I have absolutely NO experience in coming up with reports and such to show how the business would operate, but from my experience in doing side work, I CAN tell you that this workable project. Is there someone available to help me with this?

A: Step # 1: It's VERY unlikely that you will ever start a company that grows to such size that an investor of ours will make a very large return on investment in a short period of time. Therefore, you must find another source, other than equity capital, for your business idea. The first thing you MUST do is PLAN your business - for yourself if for no one else. We can help you with your business plan or you can do one yourself and THEN you'll be ready for step # 2.Step # 2: We can help you take your newly completed business plan to your local banks for a "term loan" that will enable you to buy tools, trucks, etc., using your tools and trucks as collateral, and you will pay 2% over prime. It may take 20 banks, but you have a fundable opportunity, by the banks - NOT by investors.

Q: If I use your services, how do entrepreneurs, like myself, get in touch with investors?

A: The short answer: You need to submit your plan to us. Once your plan has been approved by us, we will provide you with a profile database of qualified investors for email and hardcopy submission. If the investors like what you have they will contact you directly.

Q: Our company markets about 40% online, and 60% through a growing commission sale force. We are 3.5 years old, revenues have increased. and we have proven break even levels with solid margins. We've had one seed VC investment and are currently doing an angel round. How is the best way to market, and what exits are preferred?

A: We can't answer your question about the best way to market, as we don't know your business or industry. Sounds like you have things under control if you're growing that quickly. However, regarding the preferred exit strategy, VCs and Angel investors prefer a simple acquisition that nets them a good and healthy return on their investment, typically 30X to 40X in a few years. Look to a competitor to buy you after you establish your valuation. How do you establish valuation? See our learning center.

Send mail to jjassociates@e-business-plan.net with questions or comments about this web site. Last modified: March 01, 2004