Risk & Business Magazine Capri Insurance Fall 2015 | Page 24

Financing Growth

Financing Early Stage Growth for Entrepreneurs
BY: GREG CRABTREE, PARTNER, CRABTREE, ROWE & BERGER, PC

T

he entrepreneurial conundrum:
you have a product or service that
the market really needs, but how will
you finance it? For many, this is the
hardest hurdle to pass. Here are my
recommended sources of funding,
ranked in order of best outcomes.
Profits
Surprised this tops the list? Don’t be!
If you can get the current activity level
of your business to a 10%-15% level of
profitability, your business funds its
own growth. It generally means slower
growth in the early stages, but it builds a
commitment to profitability which then
bankrolls future opportunities.
As we have focused our clients on
profitability first, their bank funding
needs have become minimal to nonexistent. Their challenge is now “what
do I do with my cash” instead of “where
did the cash go?” This approach requires
one simple rule: you leave all of the
after-tax profits in the business until the
business has more cash than it needs.
We call this your “Core Capital Target:”
when you have two months of operating
expenses in cash with nothing drawn on
a line of cr