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New to Business Guide |
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Finding Help |
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In this Section
So you've got this great idea for a new business or you have just heard of a business for sale and it is exactly what you have been looking for. You've been dreaming of going into business for yourself for a long time and maybe this is the right time, but. . . . where are you going to get the money needed to start or purchase the business? Raising money for a business might not be as difficult as you think. Especially, if your idea is unique or you have the required knowledge or skills to make yourself (and perhaps your backers) a lot of money. It has been said that there is MORE venture money available than there are good business ideas. The first thing to do is to put together your business plan or prospectus for your new venture. Be sure to include all the personal information about you that might relate to the business. Include a resume of your background, including education, job training, experience and anything else that might be considered as an asset to a business of the type you are considering. Include any personal loans you have had in the past, what they were for (car, house, etc.) and your history in paying the loans. Explain in detail exactly how much money you now need and what it will be used for. If it is for a new business, your business plan should include a projected profit and loss balance sheet for the first year of operation. This would include all salaries, utilities, office expenses and loan payments as well as projected income. Anyone loaning you money will want to see how you intend to pay it back. If you are contemplating purchasing an existing business, your business plan should include a profit and loss balance sheet for the past six months as well as a projected future showing how the new money will produce additional income. Anytime you are projecting expenses and incomes for a business plan, it will be advantageous if you base your expenses on the highest averages and the income projections on minimal figures. In this way, a slow period or unexpectedly high expenses will not surprise you. You will be better prepared to handle those extreme "ups" and "downs" inherent in any new business. Now here's where the prospectus varies a little from a normal business plan. You will need to state exactly what you are offering a prospective investor in return for the use of his money? What is the going rate of interest for business loans at the time? What percentage of interest are you willing to pay? Perhaps a point (1%) or two above the going rate? Will you pay by monthly installments, quarterly or yearly? Are you offering a percentage of the gross or net profits? Are you offering a percentage of the business or perhaps a seat on the board of directors? Investors use their money to make more money. They know there are risks involved with investing in new business ventures or with a person purchasing an existing business who may not have much experience at running a business. In order to attract such investors or convince them to put up the money you need, you will have to be very persuasive by perhaps offering him an opportunity for larger than normal profits on his money. You must also be able to back up your claims with marketing research and other means laid out in your business plan. Although venture investors are normally familiar with "high risk" business ventures, they didn't get their money by being foolish and you will find that ALL investors will want to minimize any risk to their money. The investor should be able to read your prospectus and find a list of your personal as well as business assets. Include documents to substantiate your financial position, such as copies of your last three year's income tax returns. Just try to give the potential investor all the information he might need in order to be able to make a decision on whether to invest in your business venture or not. Don't ever try to "con" a prospective investor. Most of them are smart enough to pick up a phone and find out anything they want to know about you or your business and you never want to be caught in a lie or a half-truth. Be honest at all times. Simply lay out all the information in an honest, orderly manner so that the investor can make his decision based on the honest facts. If you have a truly good idea and you've done your homework, it is likely to interest a prospective investor. In fact, an interested investor may end up offering more help than you dared to hope for. Where do you look for prospective investors? Well, once you have the prospectus written and know exactly how much money you want and have explained, in your prospectus, how it will be spent and how it will be repaid; it is time to start looking for the right investors. As simple as it may seem, many investors have been found by simply advertising for them in a local or national newspaper. If you are in a larger metropolitan area, perhaps the local paper has a classified section for INVESTORS WANTED or VENTURE CAPITOL AVAILABLE ads. When you place your ad, be sure to state the amount of money you are looking to borrow (ask for a little more than needed so you have room to negotiate). Include the type of business venture you are contemplating and the kind of return on the investor's money you are proposing. With this information right in the ad, you will eliminate calls from the curious and narrow the responses to really interested investors. Another source of investment capitol might be your circle of friends and acquaintances. Take a lesson from party plan merchandisers and set up a party and invite everyone you know who might have money to invest in your business. Explain your business plan, the profit potentials for any investor and how much money you need. Give each person in attendance a copy of your prospectus. Ask each to pledge a certain amount to become non-participating, silent, partners in your business. Current tax regulations allow up to 25 partners in Sub Chapter S Corporations. This could open the door to you gathering a group of friends to help capitalize your new business venture; especially if you have something to offer the potential investor. Another source for capitol is the sale of stock in your corporation. You are allowed to sell up to $300,000 worth of stock without having to go through the Federal Trade Commission. Discuss this possibility with your attorney and tax accountant. In fact, your attorney and tax accountant (you know, the ones you consulted with as you wrote your prospectus) may be another source of investment capitol. Perhaps they already know of possible investors that may be interested in a business venture of the type you propose. Ask them to steer any possible investors your way. Perhaps you could even offer a "finder's fee" if you are directed to the right investor. Be sure to give a copy of your prospectus to your banker, also. Ask him for advice on improving it and to possibly steer any potential investors to you. Many bankers are aware of investors looking for investments that will make them more on their money than the bank can offer. Don't overlook your bank as a source for a loan. Even though their requirements are far more stringent than other sources of loans, you might still qualify. It won't hurt to make an application. Industrial banks are usually more prone to lend money for business purposes than a regular bank, so investigate these institutions as well. Insurance companies sometimes make long-term loans for business purposes and should be investigated as a loan source. Ask your insurance agent if they know whom you should contact. Professional people such as doctors and dentists are constantly looking for places to invest their surplus money, many times joining investment groups to pool their resources. Give a copy of your prospectus and explain your ideas to your own doctor and dentist. Perhaps you can convince them to invest on their own or you could ask for an appointment for you to explain your plan to the entire investment group, if they belong to one. Another possible source of venture capitol may be a Small Business Investment Company. These type companies exist for the sole purpose of lending money to businesses. Many of these investment companies trade their investment help for a percentage of the company they are helping, in effect becoming your partner. Look in the telephone book under the heading, "Investment Services". They are always on the lookout for businesses that they feel have a strong chance of making money. Many states have organized Business Development Commissions to assist in the development and growth of new business ventures. They not only provide advice to the budding entrepreneur, but some even offer money and other facilities as well. Many such commissions have volunteers available from the business community that will take the new businessperson under their wing and act as their business mentor. Check with your local Chamber of Commerce to see if such a commission exists in your state. Some commissions can even steer you to sources of venture capitol. Research your library Determine if there are any foundation grants available for a business of the type you are contemplating. If your business is considered to be related to the objectives of the foundation, it could be the answer to all your money needs. It may be possible to persuade the directors of another company to invest in your business. Look for a company that can, or will, directly benefit from your business. In other words, if your business makes money, the other company will also make money. Another possibility might be to merge with another company that is already established and that has facilities that are compatible or related to your business needs. Still another possibility, along this line, might be to get the people that will supply your production equipment to co-sign for a business start-up loan. Finally, there is the Loan Broker or money finder. For a fee (usually up-front) they will take your prospectus and circulate it among their known investors and lenders, talking up the benefits of investing in your particular business venture. Keep in mind that not all Money Brokers are successful and none will guarantee that you will get your loan. Just be sure to adequately investigate their success rate and talk to business people that have gotten loans through them before you put up any front money or retainer fees. In short, when looking for business start-up capitol, don't overlook any possibility. There are literally hundreds of ideas for finding business venture capitol. I have just scratched the surface with these few suggestions. This is the age of creative financing, and if you truly have a good business idea, you should be able to find the money you need. Disregard the stories of "tight money," and just start contacting people that might have money to invest. It is said that there is more money available for new business ventures, now, than ever before. You just have to get to the right person. The problem seems to be that most beginning entrepreneurs don't know what to believe or who to contact for help. Don't believe the stories of "tight money." Set your goals and go out and start making contacts. Now is the time to act! Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Finding A Good Patent Attorney We recommend that you begin the patent process by doing your own legwork on how to get a patent. Go to your local library and read David Pressman's "Patent It Yourself" book (McGraw-Hill) as well as any other books on the subject. This book is also available in our product section of this site. Although this research can be time consuming, if you familiarize yourself with the steps involved, you will have a good general understanding of the legal process involved, which will help you work better with your patent attorney, and ultimately help you cut your costs in the long run. But DO NOT Patent it yourself. Why? Well, doctors don't operate on themselves, do they? And attorneys don't represent themselves. Ever heard of the phrase "attorneys that represent themselves have a fool for a client?" And the inventor will not fare any better if there is infringement on his patent later. Are All Patent Attorneys the Same? If you've ever seen a "patent" document, the drawings and description appear to be purely technical, and the application process seems routine. Yet the job of a patent attorney is truly an art form, which involves skills most often gained through years of experience as well as innate talents and abilities. Utilizing a bit of intuition, a bit of left-brain analysis, a bit of creativity, and a bit of detective work, a good patent attorney has to be able to figure out what your invention is and how it works from what you have said as much as from what you have not said. Inventors are often so intimately familiar with their product that they may not actually verbalize some of its key aspects since they know the product inside and out, they may tend to feel that the key aspects are obvious to others too.
In essence, a good patent attorney will make your patent a valuable intellectual property asset. This is why shopping for a good patent attorney is so important. Interview Attorneys At this point, we recommend that you look for a good patent attorney to work with. There are patent "attorneys" and patent "agents". Although both must pass the same exam, only a patent attorney will be able to represent you in court for any legal matters or in the case of infringement. Look in your local business pages under the heading "Patent Attorneys". Call several of them and let them know you're looking for assistance in filing your patent. Ask them if they provide some initial free consultation time. Some do, some don't. If they're busy at the time, make an appointment for an initial consultation about their services, fees, etc. There are a few areas you'll want to find out about:
Fees and Billing Terms Patent fees depend on the complexity of the product that is being patented. For example, a product in the biotechnology field or consumer electronics will take longer to patent due to the nature of the work involved. In some circumstances, a technological patent has taken as long as 20 years to be issued! Whereas, a novelty item like a new type of cup will be fairly easy and quick to patent. By giving the patent attorney a general idea of what your product is, you should be able to get a rough estimate of the costs involved. The main point is that you don't want to start a relationship with a patent attorney being blind to the costs, and find yourself paying thousands of dollars more than you didn't expect to pay. By asking the questions, you'll be able to make an informed decision and know what you're getting into.
We recommend you try to determine all of the possible costs upfront, so that you know what you're dealing with in terms of the total costs for your patent. Otherwise, you'll have an open-ended relationship, which can very easily add up over a short period of time. If you feel that the attorney doesn't answer your questions, isn't open with you, or won't give you satisfactory explanations, chances are that you may have difficulties or misunderstandings with this attorney once you begin a business relationship. We also recommend you take this initial interview into consideration in your selection of a patent attorney. However, it's also true that people can't always be judged on just one meeting (it may just have been a bad day the day you called.) So, you might be willing to call back and give the patent attorney another chance and see whether you get a difference interaction the second time. Since the cost of a patent attorney usually runs between $2,000 - 10,000, depending on the complexities of your product, selecting a good attorney that you feel comfortable with is crucial. Ask them about their experience level, and request a list of several satisfied clients that you can call and speak with to determine their competence. Then call the referrals and ask them questions about the attorney's service, quality and professionalism. Once you've gone to all of the attorney interviews and reviewed the results of your meetings and research, you'll be able to narrow down your selection to two or three attorneys. Call them to let them know you'll be making your final selection and would like to schedule another appointment. After you've met with them again, you should be ready to make your decision. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Patent Attorneys and Agents Registered to Practice before the PTO Click the link below to view listings by Geographic Region http://www.uspto.gov/web/offices/dcom/olia/oed/roster/region/index.html Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Each state has its own licensing and practice requirements, so you usually will want to start by consulting a lawyer within your own state. An excellent way to begin is to get recommendations from friends and relatives who have hired lawyers in the past. In addition to getting names and phone numbers, you should question your friends: What kinds of legal problems did they have? (If your problem has to do with your small business, you probably don't need a lawyer who specializes in divorce.)
A great place to find a lawyer is Lawyer Search, the online directory of over 25,000 lawyers brought to you by Martindale-Hubbell. You can also ask your state bar association for recommendations, since many maintain lawyer referral lists by area of practice. To get on these lists, lawyers usually have to show the bar association that they have adequate experience in that practice area. A lawyer who ill-served clients would not likely stay on the list for long. You might also try contacting any law schools in your area, since many have clinics that provide some legal services. What questions should you ask a lawyer before deciding whether to hire him or her? There are a number of questions you should ask, including:
Good lawyers will be willing to discuss their experience with you. They should also be willing to answer specific questions about structuring a working relationship with you, including:
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