“Andy, I don’t have any capital to get my group home started. What should I do? Can You help me with Grants?”
I get this question a lot….
Here is what I recommend:
The beauty of the GROUP HOME BUSINESS like I teach in MY FREE 10-PART COURSE is that it doesn’t cost much to get up and going…..literally $1,500 – $2,000. Anyone in the great united states of America can scrimp and save $2,000. Anyone. How do I know?
Because I know people from Communist Cuba that saved up $8,000 and were flown to Brasil and then WALKED all the way to the united states. Now they assemble beds for Mattress Firm at $50 per installation. Yes, they saved up $8,000 IN CUBA!!
So you can save $1,500 here in the US. You need the BELIEF SYSTEM like I teach in
MY FREE 10-PART COURSE.
But I digress. Let’s talk about some of your options…..
Once you’ve got a working model as I teach in MY FREE 10-PART COURSE where do you go for the money you need to turn your group home into a business?
In general, there are four sources of capital:
1. venture capital firms
2. government agencies (GRANTS)
3. commercial banks,
4. private investors or partners.
If you want to be in a business different from the GROUP HOME business – i.e. TECH
check out the National Venture Capital Association(nvca.org). But for the average entrepreneur- like MY FREE 10-PART COURSE students venture capital isn’t a possibility.
Yes, some venture capital firms will invest in new businesses, but such businesses are usually involved in technology or some other high-growth area. Frankly, for most small businesses, venture capital isn’t even an option. It’s rare for a small-business concept to have the kind of mammoth payoff venture capitalists look for.”
Plus, the cost of doing business with these companies is high. It’s basic economics. Their risk is high, so their reward must also be high. Even if you were to interest a venture capital company in your business, you’d be aghast at what they’d want in terms of their ownership position.
What about government grants?
I am all for grants…but they come with a BIG price.As Tim Berry, author of Hurdle: The Book on Business Planning, points out –
Government grants coming from agencies usually have “social” agendas. Grants and loans are available to a select type of person and or business. Personally, we have helped some of our MY FREE 10-PART COURSE students obtain grants for their group homes…but by and large, I don’t advise taking this route. Why?
Too much time, energy & artificiality
Too many requirements
Failure rate too high!Why? Because you never ever actually learn the BASICS of running a business!Often, it is based on social policy instead of being connected to profits – which is, after all, what fuels a business.
WHAT ABOUT A BANK LOAN?
As for getting money from a commercial bank, I can make this short: Forget about it unless you own the real estate or you utilize my BUSINESS PLAN like many of MY FREE 10-PART COURSE students have….
For most of you, The only way a bank will lend you money these days is if:
1. You have excellent credit2. You know how to pitch and talk to bankers (are you a member of MY FREE 10-PART COURSE??)
4. If you have good credit and tons of money, you don’t need a bank loan. You can loan yourself the money!
ANDY, HOW DO I FIND A PARTNER???
This brings us to the fourth and final option…
Finding a Private Investor or Partner
At first blush, private funding seems like the least likely way to go. You may not know anybody who has money. Or if you do, you may not be willing to risk damaging the relationship by mixing it with business.
Some folks say go to friends and family. I am not sure what I completely think of that, although I eventually did go to a great friend who was wealthy from investing in small (that turned big) business.
As one of my mentors has pointed out, 30% of something is better than 100% of nothing!
In my personal example, I had already been scrimping and saving my way to wealth and had built up a track record. I had gotten good at convincing bankers to loan me money…but man did it take forever! and I needed speed. You see, money follows SPEED.
I TEACH THIS IN MY FREE 10-PART COURSE. TAKE MASSIVE ACTION FAST. LIKE TODAY!
You see, even if I owned 100% of 12 Group Homes that would pale in comparison to putting a system together where I could own 50% of 30 and do that over and over again!That was the beauty of private money.
I recently heard a story from a man that had a small business which was up and going…
The investor took 75 percent of the deal and made the operator sign notes to repay him the 25 percent (about $10,000 or $15,000) that he was liable for. The operator of the small business was a bit unhappy with the arrangement at the time – but eventually he realized it was pretty generous.
This is how businesses get cut-up so to speak. It is all a negotiation.
When you take your GROUP HOME BUSINESS MODEL like I teach in MY FREE 10-PART COURSE to any good businessperson and show him or her the numbers, the sales, cashflow and revenue will do the talking. Cash flow can persuade in a way that market research and computer charts can’t.
The Difference Between Getting a Loan and Taking On a Partner
Let’s say you have followed MY FREE 10-PART COURSE and proven your idea in the marketplace with a working model….. just one little group home.
The next step is to figure out whether you want an investor or a partner for your group home.
The advantage of taking on debt (getting a loan from an investor) is that you do not give up equity in your business. It can still be 100 percent yours. The disadvantage is that you will owe the money even if the business fails.
The advantage of accepting investment capital (taking on a partner) is that you don’t have to pay the investor if your model doesn’t work out in the bigger world. A second, often overlooked, advantage is that you will have someone to bounce ideas off. (The best investors are successful people in the industry you are entering.)
Between getting a loan and taking on a partner, there’s room to play or cut it up like I mentioned previously.
What I mean by this is that you might be able to structure a deal that has the best of both worlds – a loan that gives the lender a limited (though significant) upside if the business takes off. To get that, you would have to make some concessions. You may have to pay back some of the loan if the business fails, for example. Or you might take, say, 50 percent of the salary the business intends to pay you and use that to pay down the loan over time.
Ultimately, the guy with the money decides what the deal is.But guess what? If your business has CASH-FLOW which it will if you follow MY FREE 10-PART COURSE – you hold the cards.
WHY YOUR SALES PITCH IS THE MOST IMPORTANT THING
Before you get out and go on your “road show” you need to determine how much dough you actually need. Again, the beauty of the FREE 10-PART COURSE is that you really don’t need more than $2,000 to get your group home up and going…..
But assuming that you do want to raise money your pitch should contain the following:Three scenarios:
– Ideal (don’t use hockey-stick projections)
– Less ideal
– MinimumWhen you pitch it, be realistic. Remember, these are business people. They are risk averse by nature even if you presume otherwise. They DO NOT lose money.Here is the formula as outlined by Paul Lawrence:SOLICIT
INTEREST
PERSUADE
EXECUTE
1. Solicit
Begin informally. Casually ask the prospect what line of business they are in. Then say the following:
“I actually thought about doing that to about X years ago….but I decided to go a different route.”
THEN SHUT UP. THEY WILL ASK YOU WHAT YOU DO.
I provide housing and related services for people in the community and pay my partners a very high rate of return secured by valuable collateral.
THEN BE QUIET AGAIN. LET THEM ASK MORE QUESTIONS
Then ask him or her if they would like to hear about any future opportunities. Since he won’t feel that he’s being pressured, it’s more likely that he will give you a positive response.
You also immediately rule out people who have no interest in any business proposals… without putting them (or you) in an uncomfortable position.
2. Interest
After giving your prospect a one-sentence description of your business (don’t give long-winded explanations) You then follow up with an estimate of the business’s profit potential and a couple of supporting statements like I provide in MY FREE 10-PART COURSE via email or in person that provide strong reasons to believe it is viable.
3. Persuade
If the person you are pitching seems interested, set up another meeting to present him with a written proposal.
Make it short and to the point, no more than eight pages. If you are presenting it to the right person – someone already successful in the industry – he will not need more than that.
The proposal should have two goals:
- First, to prove the substantial profit potential of the business. Rely heavily on actual numbers. (If possible, have the numbers prepared by a neutral accountant.) Based on your working model, estimate your gross revenues, expenses, and profits over a three- to five-year period. If it adds up to a healthy estimated net profit, you’re off to a good start.
- Second, to demonstrate the low-risk nature of the investment. Although you can’t ethically or legally guarantee that an investor won’t lose his money, you can explain why there is a good chance he won’t lose it. Since much of your evidence is coming from a working model, this should be easy to do.
4. Execute
Once your deal partner agrees to the high-level terms, sit down and sign off on a deal memo, essentially just an outline of the business. Basically, terms of the partnership. You won’t need this if things go as planned, you will only need it if things go south
Would you like to learn a PROVEN-STEP-BY-STEP MODEL FOR OPERATING GROUP HOMES?
REMEMBER ACTION AND SPEED OF DECISION ARE WHAT SEPARATE THE WHEAT FROM THE CHAFF
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5 Reasons to start this creative Real Estate Biz RIGHT NOWMarch 15, 2023