The most recent statistics indicate that LinkedIn has 100 million users. Are you one of them? LinkedIn offers incredible power to connect and grow your business, if you utilize it effectively.  This tool is used all over the world to connect business professionals at all levels in a multitude of industries – with high-tech, financing and manufacturing industries leading the pack in users. There are over 44 million users in the United States alone and executives from all Fortune 500 companies are on LinkedIn.  Needless to say, with such an impressive rate of adoption among U.S. business professionals, you could be missing out on valuable opportunities by not engaging clients, prospects and referral sources through LinkedIn. So, if you haven’t created a LinkedIn profile or you are not utilizing it to its fullest potential, here are a few tips to do so:
1. Complete your profile – This is the easiest step to execute. A complete profile will help your search engine results. See for yourself – if you have a complete LinkedIn profile, Google your own name and LinkedIn is likely to be one the top search results and most likely appears before your own company’s web page. This is the power of LinkedIn. LinkedIn even makes it easy for you by offering a status bar that indicates the percentage of your profile completion – your goal should be to get to 100 percent. To do so, you must have a photo, list your current position, past positions (at least two), education, profile summary, specialties and recommendations (at least three).

2. Solicit recommendations – As stated in the first tip, recommendations are one of the necessary elements to creating a complete profile. More importantly, recommendations lend credibility to you, your work and highlight personal characteristics that differentiate you as an individual. In essence, recommendations lend credence to your resume and accomplishments. To solicit recommendations, you can simply click the “ask for recommendations” link within your profile. If you are uncomfortable soliciting recommendations directly, make a point to provide a recommendation for someone else. The law of reciprocity suggests that person will want to do the same for you.

3. Add connections – This is the fun part! You can use LinkedIn to connect with people from your past and current professional world such as clients, referral sources, vendors, prospects, etc. A best practice to consider is dedicating 10 minutes on LinkedIn after attending a networking event to stay in touch with the new contacts you made at the event. LinkedIn makes connecting even easier by offering suggestions as to whom you may want to link up with in the “People You May Know” section. Adding connections not only creates value for you personally, but adds value to the rest of the individuals in your network. The larger your network, the more connections you can help others make as well. If you are new to LinkedIn, start by connecting with people you know, and then connect with people they know. Before you know it, you will have a network that reaches across a variety of industries and geographic areas. When you do send an invitation to connect via LinkedIn, make sure to personalize it. Simply adding the person’s name and a reference to how you know each other or why you want to connect will increase the likelihood of an accepted invitation.

4. Share an update – You can share an update by typing into the empty box next to your photo when you login in to LinkedIn that reads “share an update.” This is similar to a “status update” on Facebook. The idea is to share information with all of your connections. Appropriate update topics include information regarding a project you are working on, great news about your company or your client’s business and interesting links to relevant business or industry articles. If you use Twitter, you can also link your Twitter account to LinkedIn, and your Tweets will appear automatically as your status update on LinkedIn. Using the update feature on LinkedIn allows you to stay top of mind with your connections (when you share an update, it appears in the “update” field when your connections login to LinkedIn) but also offers the opportunity to position yourself as a thought leader in your respective industry. Regularly sharing interesting and compelling content via the “share an update” tool will reinforce your expertise and knowledge within your professional field.

5. Join Groups – There are thousands of groups on LinkedIn that range from non-profit and trade organizations to industry and geographically specific groups. Your competitors are most likely participating, so why aren’t you? As an example, there are 643 CPA-related groups alone. LinkedIn groups provide the opportunity for a deeper level of engagement, conversation and forum to share your expertise with the members of the group. Group participation will also help you stay abreast to industry trends and critical issues that may impact your business. Many groups also allow you to display the group on your profile, further enhancing your profile.

Once you have followed these tips and start to engage in LinkedIn, the important thing to do is keep it up. You don’t want all of your hard work to go to waste! Try to allocate 15 minutes a day to make connections, contribute to group discussions, update your profile with any new relevant education or expertise and respond to messages and connection requests. As with all social media tools, you will find that the more time and effort you put into cultivating your network, the more beneficial the tool will be come.

I have just returned from the Commercial Finance Association’s annual Entrepreneurial Finance and Factoring Conference.  This is an event where specialty lenders that serve the smaller part of the financing spectrum come together to share ideas, build new relationships and cultivate existing ones.  Each year I get more out of it.  This year I came back with a particularly strong sense that the relationships I forged and the ideas that we shared as a group will play a big role in the growth and strengthening of Hennessey Capital.

In a word, the key to the value of the conference is collaboration.  Although many of us may compete, there is a feeling that we are on a common mission.  We fill various financing niches.  Each one of us meets a need, many of which are underserved.  In order to be successful, we all must understand and manage risk wisely, while creating prosperity for our clients and our firms.

I met a number of people whose firms complement what we do.  By partnering with other specialists, such as purchase order lenders, or export finance firms, we will be able to meet a much broader financing need than any of our individual firms could do.  In addition, I met numerous niche lenders that may not complement what we do, but who can meet financing needs that we cannot and thus become a valuable business resource.  We call the concept of building our network and using it to the benefit of clients and associates “network capital”.  This conference provides a great opportunity to expand our network capital.

The key to having this collaboration work is the attitude of being on a common mission.  There is a strong need for what we collectively do and there is enough business for all of us to prosper if we continue to improve as a group.  The pie is not finite.  If we grow the pie, we all eat more.

I look forward to continuing some of the initiatives that we started at the conference and building on the relationships formed.  Most of all, I look forward to coming together as a group again in November.  This is definitely a group where one plus one is more than two.

Traditional factoring companies and those that specialize in healthcare, construction, transportation and P.O. and M&E lenders were also represented at the conference. This group provides an excellent forum to network and discuss how we can work together to provide financing to small businesses that need access to capital to grow their businesses. I had the opportunity to meet with P.O. lenders that can provide financing to purchase material and fund the work in process until completion. This allows companies the opportunity to take on new orders without having the liquid capital many companies need. I also had the pleasure of meeting M&E lenders that fund clients with weak balance sheets and operating performance. Their focus is on the asset values and not necessarily on the operating performance of the client. By partnering with them, we can address all the client’s working capital needs.

I also met with a transportation factoring company that was seeking to rediscount its lending portfolio to fund growth in its factoring business. In some instances, they could not capitalize on new business opportunities because they did not have a lender to finance their growth. Hennessey Capital has experience in financing finance companies and sees this as a growing market segment of our business.

One of the break out sessions I  enjoyed immensely was “Negotiating Techniques” presented by Marianne Eby. She explained the importance of being prepared, mutual gain, listening until it hurts, keeping it positive, focusing on trust, relationships and interest, probing to explore, never say no or yes (use yes, if …). I have her presentation for those who would like it. E-mail me to request a copy. I plan on using her list of “crunches” as negotiating probes to help me better service my clients’ needs and make it a win-win for all parties.

Every business, no matter what size, should have a business plan to be used by management as a tool to guide the company in achieving its corporate goals. It should describe the company’s strength, weaknesses, opportunities and threats and be accompanied by supporting assumptions. Over time, however, internal and external factors influence operating results. The business plan must be flexible enough to be and revised often to meet ever changing market conditions.

Do you have new competition? Are existing competitors doing anything differently that requires you to revisit how you do business? What are the needs of your existing or potential customers? Is sales volume increasing or decreasing due to economic or industry conditions? By reviewing these factors, management can implement changes to address the need to add personnel, buy equipment, improve technology, expand or move to a new facility, and finance the expected growth or cut personnel or overhead expenses, reduce inventory levels, sell idle equipment. It may require negotiating price increases with customers or finding alternative suppliers to maintain margins necessary to operate profitably. An action plan must be in place to address revenue and expense concerns.

Many struggling companies react too slowly to their changing environment. Reviewing actual operating results versus planned performance provides management valuable feedback. Unfavorable variances must be reviewed and changes implemented. Ask yourself what occurred, what are you going to do, and how are you going to do it will help get the company back on track? It is important be share the information with top management and involve trusted advisors, i.e. CPA or business consultant? The changes must be clearly defined so that everybody in the organization knows their responsibilities to make the plan a reality.

The business plan is a living document which should be continuously revised as market conditions and behavior change. It should include revised goals that take the company to the next level of growth and measured against expected results.

In our world of lending money to small and midsized companies for working capital purposes, we get calls all the time about how to commercialize a concept or product.  Most of the time, these conversations are very difficult.  Entrepreneur’s are passionate about their product and know it inside and out.  The challenge comes in the form of addressing the following unknowns:

1) is there a market?
2) how is the initial launch funded?
3) how do you scale the business if the product takes off?
 

Setting the stage to address the above questions was a recent dinner conversation with a budding entrepreneur.  She developed a clothing product for both kids and adults to use in the winter months.  Even though there are similar products in the market, hers has a few twists which makes it very unique.  I proceed to ask the questions stated above and hear the following. 

1) Of course there is a market, I gave it to friends and family to try out and they loved it. I think it could be a big hit in the retail market.

2) I hear commercials all the time from banks that they will lend money to small businesses so I will ask my bank for the money.

3)  I have no idea.

Interesting answers.  We proceed with dinner and I put on my coaching hat and do my best.

A market test with family and friends is a good start but if you truly want to build a business and not just a hobby, don’t think small.  First, have you determined if the product can be patented in order to protect your idea before you begin approaching specialty retailers and distributors?  As for financing the initial launch, I am sure sweat equity was poured into making the first few hundred products.  Since the business has been no sales outside of friends and family, the first round of financing will come from the entrepreneur’s savings account, possibly from family members or friends of friends who believe in the idea enough to take the risk.  Banks like to lend money to companies with a track record, typically 2 years or more and a history of some earnings.  Lenders who specialize in purchase order financing and receivable financing may be able to help but they will require the business to have sales or a purchase order from a reputable buyer. 

What happens if the product does take off?  Has the business owner considered which suppliers to approach for raw material as well as manufacturing, packaging and distribution sources? 

The process of moving from prototype to production can be a daunting task.  A task that an entrepreneur should not take on alone.  Remember the business plan that was written a few years back when you thought it was not needed.  Time to dust it off and use it as a framework to tackle the next stage in your business.  Your CPA, attorney, friends and fellow business owners should be leveraged to help you think through the details of moving from prototype to production.  This is an exciting time in an entrepreneur’s life but it can also be one of the most stressful.     

In today’s tough economic times, your customers are managing their cash closely and looking for the most value for their money. Being the lowest cost provider is not the only reason your customer keeps coming back. Providing a quality product with extraordinary customer service becomes even more important. There must be a culture within your organization of providing good customer service. Employees must be trained, have the tools, and be committed to address the customer’s needs and solve their problems in a timely manner. By doing so, you develop a relationship with your customer and build trust and loyalty over time. It begins with listening and communicating with your customer to meet their needs to provide a desired result. Understanding their business and the problems they face can result in ideas and solutions which will help you retain their business and could lead to new sales. This should be a continuous process that must be nurtured.

Things to keep in mind include:

1. The message you deliver must be consistent
2. Always do what you say you are going to do
3. End each by asking, “is there anything else I can do for you?”
4. Stay connected using phone calls, e-mails, and mailings
5. Share your resources to help solve problems

While salespeople are always looking to add new customers it is just as important to focus on maintaining your existing customers if you are going to grow your business and stay competitive. A satisfied customer may lead to referrals to other companies who may need your products or services. The time and effort in building loyalty does not cost much but could have huge benefits.

How often have you heard the statement “If you don’t have goals, how will you know if you are succeeding?”  So each year, we create a list of goals that we feel will satisfy our boss, our shareholders, or some other outside entity, or perhaps, even ourselves.  Often, these goals do not drive us.  We put them in a drawer; do our best to move our business forward with little thought to them, until our performance appraisal approaches when we dust them off.

Often, whether or not we achieve our goals has little bearing on our career satisfaction.  If we meet them and receive a reward, the joy tends to be fleeting.  If we miss them, we are quite adept at rationalizing the miss.  Does this remind you of your New Year’s resolution?  Gyms are already starting to see the annual fall off, and by mid February, they will be back to their core of dedicated regulars.  The uncommitted New Year’s resolvers will be back on the couch.

For a goal to have real meaning, it must stem from your dreams.  While this sounds fanciful, it is actually very fundamental.  Webster’s defines a dream as “a strongly desired goal or purpose.”  When your dream is in alignment with the objective of your business, it creates a powerful opportunity.  If your goal stems from your dream, you will stick with it and see it through.  One of my dreams is to see Hennessey Capital expand its strong regional reputation to one of national prominence.  To bring that dream to life requires that my goals include activities, such as participating in prominent national organizations, forging relationships with industry leaders that have national credibility, and pursuing opportunities to gain national exposure.

One obstacle to advancing our goals is the way we use our time.  Contrary to the fallacy we embrace, time is plentiful.  There are 168 hours in every week at our disposal.  What we choose to do with them will determine whether we achieve our goals and realize our dreams.  What throws us off are distractions; Things that seem important or valuable, but which don’t move us toward our goal. 

My personal trap is information.  I am inundated with newsletters and articles that I feel compelled to read and digest so that I can be as well informed as possible.  It seems innocent enough at the time; however this habit has a huge cost.  If I spend an hour a day sifting through this material (I’m embarrassed to admit it’s probably more), that is 5 hours during a work week that I have not been working toward my goals.  This doesn’t count the time that I have lost focus and have had to re-gain my focus/momentum.  Think about how much you accomplish when you work on a weekend or come in before the “noise” of the day begins.
Another obstacle we face is fear of failure.  Our culture places great value on winning and a huge stigma on losing.  “What a loser!” is not a term of endearment.  Yet, history books are filled with heroes who suffered numerous setbacks before they realized their dreams.  If Henry Ford had let his early failures dissuade him, we would not be the nation we are today.

I would venture that well reasoned perseverance is a much greater virtue than being successful.  We often imagine the consequences of failing to be much worse than they actually are.  I am not advocating that you pursue your goals with reckless abandon, but rather that you persevere in the pursuit of them.  Obstacles will occur, and to succeed, you will need to go over them, around them, or bust through them. 

One of my favorite quotes is from Teddy Roosevelt, who stated, “It is not the critic who counts, not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.  The credit belongs to the man in the arena, whose face is marred by dust and sweat and blood, who strives valiantly…who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who have never known neither victory nor defeat.”

Make 2011 the year that you declare your true goals and pursue them
courageously.

For most small to mid sized businesses, when they think of financing, they think of a bank loan.  Frequently, however, a bank loan is not available or is not sufficient to meet the financing needs of these companies.  What, then, are the options for a company that finds itself in this situation?

As you would expect, the answer depends on a number of factors.  The first, is the stage in the life cycle of the business. 

A company that has not yet launched its product or service into the marketplace is in need of seed capital. Sources of seed capital financing include:  Owner equity, family and friends, seed investment funds, grants (which is very specialized), and micro loans, or a combination of these sources.

The next life cycle stage is “post revenue but pre bankable.”  Companies in this category have not yet developed a favorable enough financial history to qualify for a bank loan, but have sales.  The sources of financing that fit this stage include:  Asset based loans including factoring, revolving lines of credit, equipment leases, venture capital (a very selective capital source), merchant cash flow lends and government guaranteed bank loans through programs such as the SBA.

The next life cycle stage is those companies that are bankable but need more capital than a bank loan will provide.  These companies usually have a good financial track record but their rapid rate of growth and limited financial strength require additional funding beyond the bank.  Some sources for this additional funding include factoring, equipment leasing, mezzanine debt, and private equity investment.

The final life cycle stage is where bank funding is sufficient to meet all of the financial needs of the business.  These businesses have matured to the point where they have built up enough financial strength where a bank loan provides all of the capital that they require.

The second factor is the nature of the business.  This will determine which options are available to the company throughout its life cycle.  Those businesses that are asset intensive will want to pursue asset-based financing and work with lenders that have an appetite for the various assets they require.  Some companies are working capital intensive and will benefit from a revolving form of asset-based lending.  Other companies are equipment or real estate intensive and will benefit from equipment leasing/lending, and/or mortgage loans.  Companies that are do not have assets but have stable cash flow may be able to utilize a merchant cash flow lender or contract finance company.  Some companies have a strong base of intellectual property assets that can be used to attract various forms of financing.

A third factor that will weigh in is the financial strength of the business owners and support they provide through personal guaranty or other secondary sources of repayment, such as outside collateral.

As you can see, there are a variety of forms of finance that exist for businesses and many of these may be available to assist you with the growth and success of your company.

At Hennessey Capital, we maintain contact with many providers of these sources of funding and we welcome the chance to review your financing needs and identify an appropriate source for your business.  We always welcome the chance to share our financing expertise, and we would love to hear from you.

This past Saturday, I held my breath, along with hundreds of thousands of other Michigan State football fans, as Penn State went for an onside kick with just over a minute left in the game.  The ball took a favorable bounce for the Spartans and found itself in the arms of a Michigan State lineman.  The outcome of the game was now certain….and Michigan State was assured of a share of the Big Ten Championship.

Many of us follow sports passionately, and experience the thrill of victory, or the agony of defeat with our beloved teams.  Although the spotlight is usually reserved for the players, as businesspeople, we share a lot in common with our heroes when it comes to the competition that we face in our respective businesses.

I want to focus on 5 commonalities between sports and business:

First, goals are imperative.  In the four seasons that Mark Dantonio has led the Spartan football team, they have had their eyes on one goal, winning the Big Ten Championship, which they achieved this past Saturday.  This was their long term goal, however they needed to set and achieve many short term goals to get there.  In sports, it is relatively easy to stay focused on these critical short term goals due to the assistance of the scoreboard as well as the reaction of the fans.  Having goals is equally important in the business world, although there is usually far less clarity and urgency in achieving them.  In order to be successful, all businesses must have clearly defined goals and frequently measure their progress in meeting them.  Frequent communication will ensure that everyone is focused on the goals and will enhance the urgency to achieve them.

Second, it is critical to have talented players in all positions.  In sports, opponents constantly look for weaknesses that they can exploit.  In the same way, businesses must seek to build a talented and balanced team.  It is important to understand the culture of the business and to evaluate potential hires in the context of that culture.  Will they add to the camaraderie of the team or create dissention?  It is also important to balance offense (sales and marketing) with defense (operations).  Being weak or unbalanced in either area creates a vulnerability that will be exploited by competitors.

The third commonality is teamwork.  Teamwork is the enabler that ultimately determines success or failure.  Why did Jim McMahon spend thousands of dollars on steak dinners for his offensive linemen?  It’s because he recognized that his success (and survival) depended on how well they blocked.  In our companies, it is critical that the desire to achieve our goals is shared throughout the organization.  The key to success is instilling a sense of belonging to everyone in the company.  If I feel that the job I perform is important and is valued by my co-workers (teammates), my effort will be much stronger than if I feel that I am toiling without purpose or anonymously.

Fourth is training.  In order to be great, we must constantly strive to improve.  Football teams pour over film of their games in an effort to improve in each game.  They also work vigorously in practice to make their strategy come alive through skill and execution.  In the same way, we must continuously evaluate both our individual and organizational performance and seek improvement.  Instead of game film, the tools of business are performance metrics such as sales growth, efficiency, productivity, customer satisfaction, as well as less tangible but equally important measurement of company culture and reputation.  If we are not focused on improving our performance, we will quickly find that we back slide and lose ground to our competitors.

Lastly, planning brings the above four aspects together.  Michigan State was able to pull off “come from behind’ victories over Notre Dame and Northwestern University using trick plays, due to their planning.  They knew the tendencies of their opponents would leave them susceptible to these trick plays, and also knew that they had people that could execute them under pressure.  Knowing your strengths and competitive advantage in your marketplace will enable you to exploit the tendencies or weaknesses of your competition and gain market share which, in business, is winning the game.

While at first glance it may not appear that we have much in common with the highly skilled and trained athletes that we cheer, there is much that we can take away from sports that will help us to win in the business world.

As business owners find it more difficult to obtain access to capital, market conditions have led them to consider mezzanine financing as means of financing their growth needs. Mezzanine investors fill the gap in capital needed but not provided by other sources. Mezzanine financing is basically debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time or in full. It is meant to be subordinated debt, preferred equity or some combination of the two. It typically is unsecured and sits on the balance sheet between senior debt and equity.

Because mezzanine investors are more equity oriented than senior lenders, they tend to structure the notes to fit the companies financial, operating, and cash flow needs. Terms are typically five to seven years and require no amortization (principal paid at maturity). This flexibility allows the management to use the proceeds to invest in working capital assets, research and development, market expansion, acquisitions, or just hold the capital to take advantage of future opportunities.

Since mezzanine financing is junior to bank financing, banks view it as equity and may be more willing to lend knowing the investors have some skin in the game and will likely step up to the table if there is an event of default in the bank loan by using its resources to invest additional dollars into the company or refinance and pay the bank off. 

Since the investor is usually unsecured it does involve a considerable amount of risk. Repayment of the loan must come from the company’s future cash flow. Unless the company generates sufficient cash flow, their investment may not get repaid within its expected terms and possibly at all if the company can not perform profitably. As a result, the returns they expect can range from 20%-30% which can be expensive money. This source of financing, however, can be a bridge until management can refinance with cheaper financing. Investors are looking for opportunities with companies that have demonstrated operating performance, strong business plans and strong management teams.