Business Development Companies – Should They Be a Part of Retirement Planning?

VCs, Angels, BDCs, what are they? How are they different? How can an ordinary investor get involved? Do they offer an opportunity for high yield dividend payouts during retirement? These are all questions that anyone planning for retirement should know the answers to in order to have the opportunity to include one of the least understood, and highest dividend paying, categories into their portfolio as part of a diversified plan for retirement.

Venture Capitalists (VCs), Angels (accredited investors), and Business Development Companies (BDCs) essentially fulfill the same role: to help small and medium sized companies obtain financing when more traditional means of funding (bank loans) are unavailable. Bank financing almost always requires a certain amount of guarantees such as accounts receivable, inventory, buildings or equipment or other assets that can be held as collateral for a loan or line of credit. Smaller companies, start-ups, or even individuals with an idea for a business, or medium sized companies that don’t have sufficient funds to grow their business often don’t have the capital required, nor do they have the requisite assets or accounts receivable required by traditional banks to meet their strict loan requirements. This is where Angels, VCs, and BDCs come in. Angels are regulated by the SEC and must be “accredited investors” with a net worth of at least $1,000,000 in order to get involved with a private placement of stock which means that they provide funds for a smaller company and in return own a percentage of the business. VCs are generally partnerships of accredited investors that provide the same type of funding. In addition, they often offer other “incubator” type services to help their portfolio companies to prosper, frequently including the placement of their own management personnel on the board of directors or on the management team. In the case of both Angels and private VC firms these activities are, by regulation, the realm of wealthy investors and beyond the reach of most individuals.

As part of a broad base attempt to level the playing field and give smaller investors an opportunity to become involved in growing smaller businesses, congress passed The Investment Company Act of 1940 which, among other things, created a new class of business called Business Development Companies. While similar to VCs in function, unlike VCs, Shares of BDCs are traded on the major exchanges, and anyone can own them. Similar to Real Estate Investment Trusts, BDCs do not pay income tax on their profits as long as they pass along at least 90% of their profits to their shareholders who then pay tax at their individual tax rates. Since they are required to pay out nearly all of their profits to stock holders, BDCs often fund their growth by issuing additional shares. When this occurs, a stockholder, or potential stock holder, must determine whether or not dilution, caused by the sale of the new shares, will be more than made up by the new business that the incoming money will fund. Generally a BDC will announce, at least in broad terms, how the proceeds from the new offering of stock will be used. Additionally, it is important to evaluate how successful the company has been in the past, how leveraged they are, and how management has reacted to changing market conditions. In other words, like any other investment, doing the proper due diligence, and knowing and understanding the company prior to investing is critical in making the right investment choices.

Because of the pass through tax structure as well as the inherent risk in this type of venture, BDCs typically pay significantly higher dividends than the average company. For that reason it makes good sense to consider them as a part of a diversified retirement portfolio. If you are building up a nest egg for retirement, dollar cost averaging into quality BDCs is an excellent way of creating a high yield position as part of your overall mix. If you are in retirement already, quality BDCs can provide an excellent income stream that will continue to payout regardless of market fluctuations.

A word of caution, BDCs should not be bought and forgotten, like most investments, past performance is no guarantee of future results. By the very nature of the business, BDCs frequently change their portfolio of businesses, may change their risk tolerance levels, may change their leverage, may be impacted by changes in interest rates, etc. Fortunately all of this type of information is readily available in annual and quarterly reports, and BDCs are required to publish any material changes in their business. With the proper due diligence, and appropriate vigilance, BDCs make sense for anyone interested in boosting their retirement income through higher dividends. They are especially valuable in IRAs and other tax free venues where the higher yields can compound free of taxation.

E-Business Development – Crowdsourcing Business Strategy

E Business Development: Internet Rich Crowdsourcing

E business is constantly evolving. The crowdsourcing model with its internet rich community of volunteers and followers has proven to be a platform that will enhance e business development. As defined by wikipedia.org, “Crowdsourcing is the act of outsourcing tasks, traditionally performed by an employee or contractor, to a large group of people or community (a crowd), through an open call”.

An example of this; Wikipedia.org itself. Wikipedia.org is an online free encyclopedia where anyone and everyone is invited to participate. In doing so, the “crowd” has become the author of the largest encyclopedia to date. At the time of this writing, there exists 3,384,039 articles in English alone. This is just since 2001, when Wikipedia was first launched by its founders Jimmy Wales and Larry Sanger.

Wikipedia.org paved the way for many other peer to peer sites and opening the ebusiness world up to a multitude of possibilities. Crowdsourcing has developed a new opportunity for ebusiness owners who want to showcase their expertise.WikiHow for example, a How-to encyclopedia created for and by the crowd allows you to learn about different techniques and articles. The site ranges from, How to win big in Vegas to how to knit your baby’s first sweater. eBay created ebaywiki where it educates its members on “buying and selling photography” (find another example)

What is fascinating about this particular business model is the drive so many have to contribute. Volunteerism is driven my a sense of purpose and community involvement. Wikipedia and many others, which use crowdsourcing as their model for growth have grown exponentially in the last few years and many believe the trend is here to stay.

Crowdsourcing, sustains itself on trust and purpose, making this a true paradigm shift for the economic belief that people are driven by monetary compensation. The community “trusts” its members because they know those who contribute (for the most part) are driven by passion and not monetary gain. BitTorrent, for example is a social site which helps people share music from one another. Music unites people and having the ability to tap into music experts in order to discover new artists and music genres is a luxury even the most deaf tone person can appreciate because through the wisdom of crowds comes the increased wisdom of each individual community member.

Epinions consists solely of reviews and ratings. This allows for people to search reviews they trust and who share similar interests. Therefore, introducing them to new products or experiences. Epinions now goes a step further…You can even review the Reviewer!

Forums and reviews have become popular because of two main reasons: people seek experts for advice, and people want to be seen as experts themselves.

No longer must you feel like you do not have an area of expertise because you can turn your hobby into your Niche specialty and allow others to seek your advice.

Consumers shop differently now. They no longer shop at a bricks and mortar, they shop online. Not just online, but from one another. Non-affiliated private consumers as in the case of ebay.com.

We now live in the age of Transparency. Buyers are more educated because their knowledge base has increased through the interaction of online communities writing reviews, answering questions for one another. Consumers are now more apt to research forums to get the inside “scoop” on products and their developments. Companies have become more savvy to this trend and have now begun interacting with their customers online. Developers are beginning to interact with their “fans” online and involving them in the production process.

This is genius! Can you imagine being part of the process of creating your favorite music video? This is where the trend is going….it is you who decides…the crowd. And when the crowd feels heard acknowledged and looked after… the lines start forming. Buyers are literally waiting in line or should I say “on-line” for products to come out of production. Production they have been in the trenches with, with products they have helped develop. Along the way building loyalty for the companies’ brand and product line. Crowdsourcing is the perfect integration of online and offline merging together in the development of e business.

Build Your Business With The Help Of Business Development Consultants

The goal of every business is to grow and expand. Expansion can lead to higher profits, more employees and a greater valuation which means more wealth and better financial security for the owner. While the business owner or manager commonly is the most knowledgeable about the business’s operation and the markets it works in, an outside consultant can bring a new perspective to the situation and see opportunities and threats the owner does not. There are a few simple tips to getting the most benefit from business development consultants.

Choose Carefully

There are many consultants out there but few are probably right for your business. The most obvious suggestion is to choose someone who works in your particular industry. The restaurant, retail, medical and manufacturing industries, for example, all have consultants specializing in those fields. Look for someone not only familiar with your industry, but who is also knowledgeable about the scale at which your business operates. For example, a consultant who specializes in one-location retail outlets, may not be as able to provide assistance to an owner of a small chain of outlets. Most business development consultants will provide references and a complete background of their education and experience in the field as part of the application process.

Work with the Consultant

The business owner will need to spend whatever time the consultant deems necessary explaining the business and any goals the owner hopes to attain. The consultant will also want to review financial records, possibly watch staff in action, explore the business climate in the area and analyze the physical assets of the operation. This is not the time to be shy or withhold information. The consultant needs to know the good, the bad and the ugly about the operation. The consultant commonly presents a list of the information required and what facilities he or she will need to see as part of the preparation for the consultation.

Follow Through

Following the suggestions of the business development consultant may be difficult. This is especially true if the consultation suggests a major change in the operation of the business. It is natural for owners to resist a change to the business plan they have developed. While following the consultant’s suggestions is optional, it should always be seriously considered. Depending on the situation, the business development plan may require the participation of employees within the business. Working with the entire staff of the business may be necessary if the consultant’s plan requires a major change in operations.

Make a Plan, Work the Plan

Consultants don’t commonly write a completely new business plan aimed at developing or expanding the business. The owners and managers need to select the best components from the consultant’s plan and integrate them within the business’s operational plans. Some of the consultant’s suggestions may fix immediate issues while others might be long-term solutions. Integrating both into the business plan offers the best chance of success. In addition, changing financial conditions commonly require updates to business plans. In some cases, this may require another visit from the consultant. Long-term relationships with a business development consultant may save costs as the necessity for background research is reduced with each visit.

7 Business Development Marketing Tips For Social Media

You would have heard so many marketing experts telling everyone to use social media as part of their promotional marketing mix. The Internet is flooded with information on using Facebook, Twitter and other social sites. Numerous articles have been written on how using social media can help promote your brand image and how it can generate web traffic for your main business website.

Keep in mind that that social networking is a marketing tool and it is only effective when used properly to promote your business.

The key question for a business is “How is social media harnessed to generate real revenue and customers?” In today’s digitally connected society your customers regardless of their age, gender or economic status will be active on social networking sites.

Here are some of the latest usage statistics on social media use that will make a business take notice:

  • 68% of small businesses will increase their social networking marketing efforts in the next year
  • 56% of Twitter users say they use the micro blogging site for business or work related purposes
  • Over 40% of people have become ‘friends’ with or ‘like’ a brand/company on Facebook or MySpace
  • 20% of tweets are about business products
  • 46% of Facebook users say they would talk about or recommend a product on Facebook
  • 44% of Twitter users have recommended a product
  • Social media played a major role in holiday shopping – 28% of shoppers say social media has influenced their purchases

On the Facebook site alone:

  • More than 400 million active users
  • 50% of active users log on to Facebook in any given day
  • Average user has 130 friends
  • People spend over 500 billion minutes per month on Facebook
  • There are over 160 million pages, groups and events that people interact with
  • Average user is connected to 60 pages, groups and events
  • Average user creates 70 pieces of content each month
  • Males and females almost equally use social sites (47% vs. 53%)
  • 61% of Facebook users are middle aged or older, with the average age being 37
  • 18- to 24-year-olds don’t dominate any particular social networking site; they’re spread out all over
  • More than 25 billion pieces of content (web links, news stories, blog posts, notes, photo albums, etc.) shared each month

The participation of your business in social networking should be self-evident, however, many businesses will go on to set-up social media sites and make no effort to participate and engage in the groups that their potential customers use.

To be successful in using social networking your business must find out where your potential customers spend time on these sites so that you can engage with them where they prefer and not where you prefer or are comfortable with. Participation and engagement with their social networks will form a platform from which to build relationships with communities of interest. This in turn will provide a new customer acquisition channel using the share and like capabilities of the social networking world. This “sharing” is the equivalent of word of mouth in traditional marketing.

Here are the 7 Business Development Marketing Tips for using Social Media:

1. Go where your customers are and not where you are comfortable

To find your customers on social networking sites consider the following:

  • Conduct a survey among your customers or potential customers.
  • Analyse and monitor traffic on social sites to discover how and where customers are sharing information about your business and your competitors.
  • Review marketing research or statistical information on the usage and demographics of the different social media sites.

2. Engage and interact

Social-media engagement is a conversation and your participation in the social network groups and communities is core to building relationships. Your value as a participant is judged by the value that you provide to the community as a whole. You can achieve this by freely sharing relevant, interesting and useful information

3. Research your competitors’ activities

You need to gather competitive information that can help your efforts. Conduct a competitive analysis of your top five competitors’ use of social media for the following:

  • The social networking sites that they actively participate
  • The type of content they publish
  • The number and type of followers, fans and views
  • The products, programs or events promoted

4. Release offers and programs that are exclusive to your social networking channels

You must give importance to your social media with exclusive offers for these promotional channels. This will entice potential customers to share with their networks the offer that is not available from other marketing channels.

As an example, provide offer an exclusive offer for your social media channel, such as discount coupon or voucher.

5. Social media participation requires authenticity and transparency

The words “authenticity” and “transparency” are a bit overused today, however, these are cornerstones to be successful with social networking. Be a real human being in your interactions. This is the foundation to build trust and connections with real people on social media groups and networks.

6. Look for value opportunities in selling through social networking

Take the opportunity to leverage social media in selling your products and/or services by offering relevant items that are of value to your followers. Make it easy for them to make the purchase from these social media channels.

7. Always test and refine based on results generated

Social media programs as a marketing channel are not exempt from testing and refining your messages and offers. You must make the effort to test, gather results and analyse how it can be improved before launching the program to the entire channel.

Apply these 7 Marketing Tips for using Social Media to give you the foundation for success building and growing your business using these communication channels.