Capital Goals for 2015

If you intend to raise capital in 2015, your first step is to set your capital goals.

Most business people pick a dollar amount and consider the job of setting their capital goal to be complete.    For example, raise $100,000. Job done.

However, the gross amount of money raised fails to take into account the cost of raising the money.  For example $25,000: lawyers fees, broker/dealers commissions, finders fees, printed offering materials, multiple dinners and cocktails with investor prospects, and travel.  This leaves a net capital raise of $75,000. Only the bottom line counts.

If the goal was to raise a net of $100,000, then the goal has not been reached.

On the other hand, I have seen lots of businesses focus on the net capital raise, but ignore the price of the capital.  Price is the amount of interest paid on a loan or the amount of future profits given up in the form of equity.    

Attaining a capital goal cannot be attained at the cost of the future.  Investors should be paid no more than necessary to obtain their investment.  This includes not selling equity when debt financing is available – getting money at the lowest price.

So, setting a capital goal means also includes minimizing the money expended in raising capital and obtaining the capital at the lowest price.  This requires development of a capital campaign – a plan for raising capital that has budgets, timetables and responsibility allocations like any ordinary business plan.  It also requires an understanding of the capital industry to know all of the appropriate sources of capital and the types of available capital transactions from each source.

Yes, it is more work.  But a higher success rate and a lower cost of money today and tomorrow justify the greater work.

Set your goals.  Make them happen.