During these economic times the need to raise capital for your MLM startup has never been more urgent.  Not only is it a great time to jump into business–if you do it right–but creativity and determination is rewarded more than ever.

Meanwhile, the availability for investment funding has nearly dried up from traditional resources.  Bank loans are rare, venture capital is in limbo, the public markets are slow to recover.  And, you want to start an MLM?  Yes!  Start an MLM business and raise the capital you need to get started.

LaunchSmart is now demonstrating a whole new approach in gathering funds by accessing, presenting and providing the right information to a new breed of investor groups that are funding right now.  And they are funding MLM startups.  We have taken on the online social network world, made changes for the real world, and then adapted it for the recession to finally have a working system that brings investment for your MLM startup and Party Plan startup.

Contact us, and we will show you how to learn and then apply the secrets:

• How to get cash without a business loan
• Get funded without losing control of your business
• Three things to NEVER ask an investor
• How to get investors you never new existed
• Making a “Recession-proof” plan
• What ever investor is demanding in a recession
• How to find funding for you MLM startup, in your area . . . FAST
• Business changes to raise capital in a recession
• How to get funding using your social network

We have persisted in our quest to find the first-ever, proven solution to raising capital for your MLM startup.  Our “no-bull” approach has a proven track record of successful business development, assembling executive teams for your startup, raising substantial startup capital, syndicating venture capital and merging & selling companies.

To learn more about what’s going on, and to take advantage of our system for raising startup capital for your MLM or Party Plan, contact us when you’re ready.

A client has been very active in raising capital for their MLM startup and they presented us with the following:  “Both investors have concerns that raising $1M to $1.5M will not be sufficient to execute our plans.  How much do you think will really be required?”

The primary concern with raising startup capital that we have seen in fast-growth MLM companies is that truly, when demand hits you must be ready for it.  It’s more than an axiom that fast-growth MLMs fail from lost momentum, often due to lack of advanced planning and funding.  For instance, nobody with the best predictive modeling could have anticipated the now-famous Quorum 12-month growth plan.  They had only been in business for 16 months when I arrived as VP Ops / COO in January 1993.  December 1992, they had achieved a record $2.8 million in sales.  I arrived on the last week of December, between the holiday break, and got ready for the New Year.

In January, we hit $4 million in revenues.  February produced $8 million in Results.  March, $12 million.  April, $16 million.  May, June and July, $18 million each month.  August, $19 million.  September, $22 million.  October, $24 million.  November, $23 million.  December, $21 million.  Into 1994 the company leveled out at $18 million monthly on average for the year.  Their product?  Personal alarms, the “PAL” which is a pager-sized alarm for bag, purse, belt.  Non-consumable, one-time purchase.  Eventually, the company tried adding consumable products into their distribution stream, but by then the momentum had subsided.  Though it was a meaningful product, it was a “one-hit wonder” and the company eventually changed directions completely and went into Chinese vitamins.  I haven’t checked lately whether they are even in business.  If they are, it’s insignificant.  This is simply an illustration of a real business case of a company with the right product at the right time; it came out during a period of growing national awareness around abductions and personal security worries, long before 9/11.  It also coincided with a mass exodus of distributors away from NSA.

Our client’s question involves an important and legitimate concern about ramp-up time for plant expansion.  The concern is vital, and it is the most valid reason behind the investors’ legitimate concerns about sufficient MLM startup capital.  The best scenario would be additional rounds of funding lined up to meet contingencies, building cash reserves as well as raw material reserves to build inventories that will support demand as the company hits momentum.  This is particularly useful if shelf life is not an issue, or if it is a manageable issue.

One strategy, and the one we recommend to the client, is to move to full production from the beginning of the agreement and begin building inventory reserves.  This is because the unique product has the chance to be a widely accepted product with global appeal, and manufacturing supply will possibly have challenges keeping up with aggressive growth scenarios.  Though the manufacturer can scale its capabilities, the client is safest to have a stockpile of the key ingredient.

The suppliers and manufacturers want the company to be successful and to reach its sales goals so that they can get to the revenues that they also desire to achieve.  They have the same agenda as the company has.  I watched Melaleuca build a significant supply of barrels of Melaleuca oil in anticipation of big growth.  They had an additional challenge of seasonal harvests, so they reinvested available profits back into a stockpile of Melaleuca oil.

Thus, useful questions for estimating required capital that will be used to fund inventory would include the following:

• What will be the lead time on manufacturing?  If short lead time and highly available ingredients, then you should feel more confident in funding inventories through growth.  Careful, don’t get overly confident, but it’s a good strategy if properly managed.
• Are there unique, seasonal, or rare ingredients that must be stockpiled?  Obviously, if you rely on a seasonal harvest of an ingredient, or if lead time demands more careful advanced planning, then your plan will of necessity require enough capital to purchase ahead

When funding your MLM startup or new party plan business, there are two basic types of financing that you can pursue:  debt financing and equity financing.

Debt financing is an interest-bearing loan, the cost of which has no direct relationship to your business’ sales, profits, or future growth.  Instead, the cost of money is determined by the terms of the loan – interest rate and term of the loan.

Equity financing offers investors an ownership position in your business’s future and the right to share on some pro rata basis the profits and/or final disposition of the assets.  Those taking an equity position will generally require some level of control over the day-to-day operating decisions of the business.

Debt financing and equity financing are not mutually exclusive, and often a combination of the two provides an option.

Here are some of the most common sources of capital you can pursue that are often a good match for a network marketing or party plan company:

Internal financing.  In your business planning and in running your business, don’t overlook four important sources of internally generated capital.  First, make sure you collect your accounts receivable (your income) as quickly as you can.  Second, optimize trade credit by seeking out vendors and suppliers who will give you the longest possible payment periods.  Third, improve your inventory turnover.  Simply stated, inventory that sits in the warehouse is not earning anything and is tying up cash.  Inventory that turns over more rapidly ties up less money and generates income more quickly.  Fourth, consider leasing versus buying and subcontracting tasks versus doing things in-house.

Private investors.  You can approach people you know very well, and even those you might know as well, to invest money in your business.  Investors may be passive or active.  Passive investors desire less involvement in the day-to-day operations of the business, whereas active investors desire more involvement in the day-to-day operations of the business.  Private investors are almost always equity financers, although sometimes your arrangement with them will also include debt financing.

State and Local Development Agencies.  Your state government, local community, and universities may have economic development or business development organizations.  These organizations can be an excellent source of information for locally available low-interest loans and even business grants.  Sometimes these organizations actually manage their own investment funds.

Commercial Bank Loans.  Commercial banks offer several types of loans:

• Lines of Credit – The bank makes available a certain amount of money.  You draw out funds as you need them.  Interest is generally charged only on the funds drawn.  Sometimes the bank requires the line of credit to be periodically paid down or even paid off (for example, once a year), after which the line of credit can be used again.

• Straight Commercial Loans – The bank loans money for a period of less than 90 days, after which the complete loan plus interest, is repaid.

• Character Loans – The bank loans money for a short-term, and the loan is unsecured.  These loans are generally made only to individuals or companies of high credit standing.

• Collateral Loans – These loans are made to individuals or companies who give security in the form of real estate, inventory, or other assets.

• Bank Credit Cards – Although not thought of as such, the bank credit card is a source of funds.  Credit cards generally carry relatively high interest rates and should be used only for small amounts of money to be repaid quickly.

• Term Loans – A term loan is a business loan with a maturity of not less than one year and usually no more than ten years.  Interest rates can be fixed (set for the life of the loan) or variable (vary tied to some index like Treasury Bills) and payments are made monthly.  Sometimes lower monthly payments can be negotiated with a “balloon payment” (paying off a lump some) at the end of the loan.

When pursuing any of these sources of funding, a professionally prepared business plan is a vital tool to convince the lender or investor of your credit worthiness.  Most will want to thoroughly review your business plan prior to making a lending or investing decision.  If possible, try to arrange for an oral presentation to accompany the presentation of your business plan so you can communicate your passion and vision for the business.   It is important to realize that many investors and lenders will be initially skeptical of network marketing or party plan concepts, and must be educated as to the viability of your business model.