Succeed Magazine – www.succeed.co.za – April 2007
1. Negotiate no rent for the first six months
Plenty of commercial property sites, in almost every area, lie vacant. You can use this to your advantage. If you can find premises that have been vacant for a long time, there is a good chance you could negotiate your first six months as rent-free.
You do not have to stop at just your property. Computers, photocopiers, switchboards and a host of other equipment can be purchased under conditions that allow the first few months of purchase to be payment free. And the numbers do not lie. If monthly rent for your premises is R20 000, six months rent-free means you have raised R120 000. Add in the capital raised by not having to pay off equipment immediately, and you could raise R200 000 or more.
2. Pay a minimal amount in exchange for a future incentive
If you are sure that your business will be raking in handsome profits in months to come, use this as an asset. Instead of struggling to pay key employees or contractors their full rates while they are working, convince them to take less pay in exchange for greater revenue later. This could be in the form of a substantial bonus or even equity in the company.
3. Take advantage of corporate sponsorships
Many large companies allocate a portion of their budgets to socially responsible initiatives. Corporate sponsorships usually form part of this and are a useful source of finance.
There are many examples where this funding has allowed companies to take off. A few years ago, a rural businesswoman was able to get a grant from Anglo Ashanti because her business was empowering paraplegics. Today her company employs over 100 people. Similar luck fell on a packaging manufacturer in Mpumalanga during October last year. She was able to secure sponsorship funding from a consortium of South African food companies because her business promised to empower local women in her area. She had her starting costs completely paid for and all she had to do was write a few letters.
Do not assume that this kind of finance will always come easily. The time and effort required to organise a sponsorship is seldom small. It is most likely to be a long process of negotiation. It is also important to consider that most companies support businesses that are aimed at people they are trying to reach. This is why you should think carefully about what you can offer them. It is likely they will want some form of credit or attribution for their socially responsible donations. If you can guarantee this, you will go a long way in being allocated their funds.
4. Promise clients special terms for two years
Allowing a customer an extended special rate for two years, on condition that they sign a two-year contract, can be a great option for getting your company out of its start-up phase. While you are struggling to get initial customers, special rates can rope clients into going into long-term business with you. From an investor’s point of view, it makes perfect sense.
Once you have secured a list of long-term clients you are, for argument’s sake, a viable business. This makes you a more compelling recipient for investment capital.
5. Borrow against your bond
This option has many advantages, but will only work if you have a rock solid business plan. You need to know exactly where your business is going and how you intend to take it there.
The risks should give you some perspective. When you borrow against the equity in your bond, you are not borrowing from the bank. You are borrowing from yourself.
If you do not make the payments you have a lot to lose. The bank will have the right to force you to sell your property – which will most probably be your home. This means you have to be particularly careful.
6. Offer discounts for upfront payment
It is the task of financial directors and procurement managers to save company costs. That is where they get their job satisfaction. This situation can create a compelling answer to your cash flow problems. By promising customers a reduced rate for paying 50% to 100% of your costs up front, you can both benefit. They minimise costs while you get working capital. The trick is to make sure this discount is attractive. Two percent off is not going to get anyone excited
Bill Gibson has spoken to over one million people around the world and is the chairperson of and a partner in Knowledge Brokers International SA(Pty) Ltd (KBI), along with Marius Liebenberg. Bill Gibson is the author/ developer of the 25-module sales system titled The Complete Sales Action System and the eight-module Managing Complex Business Relationships system. For more information about Bill Gibson as a speaker and the KBI products, contact 011 784 1720 or firstname.lastname@example.org.