Crowd Sourced Funding Can Help Achieve Goals

Issue 022

What do you want your business to look like in two to three years’ time?

You might have developed a new technology or a product through to the prototype stage.

What is your goal for two to three years’ time?

Would it look something like this?

  • Turnover - $5 million
  • Net profit before tax - $1.5 million
  • External shareholders’ investment - $1 million
  • Current shareholders’ percentage - 65%
  • External investors’ percentage - 35%

Current Valuation

Based on the after-tax profit with a multiplier of six because my expectation is that you will be trying to operate this business as if it was a public company therefore you would probably be able to achieve a higher multiplier than the normal multiplier of 4.

On this basis the valuation would be $6.57 million

Current shareholders capital share $4.27 million

But back in the present, you are worried about the cost to commercialise your prototype!  You never thought it would be so expensive to bring a product to market and you have exhausted all of your funds.

You need to develop a commercialisation strategy in conjunction with a key advisor.  The overall process would be something like the following:

  • Develop a Business Plan
  • Identify what the cost of the commercialisation is going to be – I have assumed a total cost of $1 million
  • Undertake an investment readiness process to make presentations to investors to invest under section 708 of the Corporations Act (this section enables a private company to raise up to $2 million in a twelve months period from a maximum of twenty investors). Individual investors can invest substantially more than the $10,000 per retail investor limit that applies with Crowd Sourced Funding Equity Raising.  Your aim would be to raise $500,000 from the section 708 capital raise.
  • The company would then apply for an Accelerating Commercialisation Grant from the Australian government of $500,000 (a grant application of up to $1 million can be made for an Accelerating Commercialisation Grant on a 50% contribution basis).
  • The company would then have $1 million to proceed with the commercialisation process.
  • Whilst the commercialisation process is underway you can undertake an investment readiness process for a Crowd Sourced Funding Capital Raising $500,000. This would be to supply working capital to the company.  This will bring the total external shareholder investment in the company to $1 million.

This process journey will require expert input in a number of significant areas including:

  • Patent advice
  • Market research
  • Marketing Plan preparation
  • Business Plan preparation
  • Preparation of Budgets and Cash Flow Forecasts
  • Company valuation/share price determination
  • Directors’ skill development
  • Accounting advice relative to the structuring of the business/departments etc
  • Appointment of Chief Executive Officer
  • Input from a sales expert on the appointment of the sales manager
  • Input from an accountant on the appointment of a Chief Financial Officer for the company

The Corporate Governance Network can give company directors access to experts in all segments of this journey including:

  • Commercialisation strategies
  • Identifying and applying for appropriate government grants
  • Directors mentoring and planning of an “audacious” event – launching of the company’s products into the marketplace
  • Investment readiness relative to section 708 capital raising
  • Crowd sourced funding awareness and preparation
  • People management
  • Business planning
  • Budgets and Cash Flow Forecasts
  • Establishing’s the sales systems for the company
  • Taxation

The Corporate Governance Network gives you access to experts for a wide range of matters relative to small proprietary companies and organisations.

You are invited to log onto www.esssmallbusiness.com.au where you can obtain for free the recording for:

You are invited to subscribe for Webinar/Workshop Number 3 - Your investment $78 including GST or you could subscribe for the complete series of EIGHT webinar/workshops to be presented in 2018/2019 – your investment $499 including GST.

The next live webinar workshop (Number 3) is being presented on 24 October 2018 with the recording of that webinar/workshop being available around 3 November 2018.

If you have any questions on any aspect of this case study, Crowd Source Funding Equity Raising for Small Proprietary Companies or the Corporate Governance Network, please send me an email peter@essbiztools.com.au or telephone me on 1800 232 088.

Have a great day!

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Episode 022 - Crowd Sourced Funding Can Help Achieve Goals

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Crowd Sourced Funding Can Help Achieve Goals

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