To Market, to Market
After selling his handmade leather goods out of his shop for a year, Paul Mardikian wants to work out a retailing deal with a chain of specialty stores. How should he structure the deal (Leather Case, April 1991, [Article link])?
We recently worked with two clients with situations similar to Mardikian's. Neither went the route he's contemplating. One started off selling at fairs to build name recognition and to test the market. He re-invested his earnings until he could afford to open his own shop. The other tried to crack a market dominated by two large manufacturers with exclusive distribution rights to almost all the major outlets. So she sought out alternative retail outlets, including independent specialty stores, and has assembled a distribution network of 15 retailers and a mail-order department.
Andrew M. Spell
George Mason University
Fairfax, Va.* * *
Since he founded it, in 1983, Lon B. Williams's contracting and cabinetry business has grown steadily, and he thinks it could grow more, but banks have been uncooperative. He wondered why (The Cupboard Is Bare, March 1991, [Article link]).
I also own a small woodworking-manufacturing company, and a number of years ago I faced the same problem. Contracting has a high failure rate, so I found it hard to win a bank's trust. After taking my portfolio and financial information to numerous banks and walking away with nothing, I ended up going to the bank with my rabbi, who happens to know the bank president. I was able to get the line of credit I needed to build the business, and since then we've grown substantially. Williams should also look for city, state, or federal financing. But finally, it's who you know.
Woodworking by Degree
Los Angeles* * *
David E. Salisbury wants information on taking his own company public (Do It Yourself, April 1991, [Article link]). Readers replied with resource suggestions and some firsthand experience.
Ellyn E. Spragins chronicled one company's experience managing its own initial public offering in her October 1990 Capital column, "Who Needs Wall Street?" ([Article link]). About 20 states have recently made available a simplified procedure for public offerings of less than $1 million; information is available from state securities administrators. Also, my book, Take Your Company Public! has just been published by the New York Institute of Finance.
Capital Formation Ltd.
San Francisco* * *
Our company handled its own IPO several years ago. In 1966 my partners and I hired a CPA firm to set up a suggested stock plan, and a legal firm to prepare the necessary documents. We rented a meeting room at the local inn and sent out invitations to prospective investors. About 50 showed up, and 8 invested. We made oral presentations, and I fielded technical questions. Our offering comprised 90% preferred stock redeemable at 10% interest within four years. The total cost of our initial offering: $3,250.
Silver Spring, Md.* * *
Patricia Galea started teaching English in Europe as a way to pay for her trips there, and she struck a gold mine. She wants to expand her services, and she wants to go legit but wonders if the French government will let her (Going Legit Overseas, April 1991, [Article link])
Almost two years ago I quit a high-paying Silicon Valley job and packed my bags for Germany, and I can offer Galea three suggestions. First, she could find a company willing to hire her and to sponsor her application for a work permit. Once she has that, getting a residence permit should be a piece of cake. Second, she could become self-employed. She will need connections, references, and promised contracts, and she'll have to prove her expertise in the field she's entering. The industry and trade commission in the area where she plans to settle can be a valuable resource. Third, she could incorporate in France. This is similar to self-employment, but the corporation takes over liabilities, and setup costs are higher. Taxes are higher, too, and incorporation requires a capital investment that remains in the bank to cover liabilities. Unless Galea plans to hire several employees, I see no need for her to incorporate.
Munich, Germany* * *