|** The Capital Minute **
brought to you every Wednesday by Mike Elia
Financial & Marketing Consultant, Author
"Business Plan Secrets Revealed!”
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Vol. 1 Issue #2
"Ten Things Not to Say When Talking to Your Investors..."
I though we'd end the year on a slightly humorous note with
the Ten Things Not to Say from David Gladstone's "Venture
Capital Handbook." I say slightly because even though each of
these items may sound humorous, people have said them in one
form or another.
- My wife and I have decided to move to Florida where the weather
is warm so that we can both enjoy the outdoors more. Even
though the business is located in Massachusetts, I will be
able to run it from Florida.
- Some friends and I got together and we purchased the franchise
to a doughnut operation. I am putting $25,000 of my money
into the deal through a second mortgage on my house, and my
wife and I are going to help operate the doughnut shop.
- We have been negotiating with another small business and have
now entered into a final agreement to acquire it. We're
going to give up about 30 percent of the stock in our company
in a stock swap for their company. I didn't talk to you about
it because it's such a good deal I knew you would like it.
- We came up with a new product. It is unrelated to our
business but it's in the solar energy field. I have been
meaning to tell you about it. We have spent about $200,000
developing the product and we are now producing it at the
rate of about two hundred a week. We have a warehouse full.
- We now have seven new regional offices that cost us about
$80,000 each to set up. We wanted to set them all up at once
in order to penetrate the market quickly. I didn't call you
because I knew you would think it was a good idea to make a
- I sold 200,000 shares of the company's stock at $1.00 each
to some friends of mine. I know this represents 20 percent
of the company, but I just couldn't pass up the opportunity
for a quick $200,000. After all, you and I only paid $.25 a
share and we have been able to sell the stock now for $1.00
per share. That makes the company worth more.
- Two of our accounts receivable customers who owed us a total
of $20,000 declared bankruptcy on the same day, and it would
seem that our claim in the bankruptcy court is probably
worthless. This will lower our profits by $20,000 and, as
you know, make the company a break-even operation for the
first six months.
- I am out of money and can't meet Friday's payroll. I know
the cash flow projections showed that we had enough money to
last another year, but in checking through my cash flow
projections I found a $70,000-per-month mathematical error.
I thought we were using cash awfully fast three months ago,
but I thought it would turn around soon. I am sorry. What
can I do?
- We just finished the prototype of our initial product. I
immediately turned the engineers loose on four other products
we should be developing. It won't take much time or money
to sell our prototype and to get the manufacturing process
going. Then we'll really be rolling in the money. Meanwhile
I know there are other products that we can develop for the
- This recession is killing us. Industry sales are off 35
percent. I don't want to cut anymore overhead because I am
sure sales will turn around. I put on a television blitz for
the last two months. However, it didn't work and now we are
completely out of working capital. Can you invest some
You can get all the details about why statements like these
will undermine your credibility in David's Venture Capital Handbook.
Wishing you a very happy and prosperous new year,
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