Wednesday, April 23, 2008

Ways to raise cash for your business.


You can franchise your business to raise capital. You are selling the rights to use your business, name, practices, and methods. You basically are selling a clone of your business and the method to reproduce your success. In exchange, you receive a cash payment up front which can range from a few thousand dollars to substantial amounts of money. You may receive an on-going percentage of the franchisee's revenues.

Every kind and type of business has been franchised. If you want to see a wide variety of examples, Entrepreneur Magazine has an annual issue devoted to the top 1000 franchises.

You can retain control of how the franchisee operates, how and what they advertise, and their product quality. You can even mandate what suppliers the franchisees must purchase from.

Franchisees get a proven method of doing business.

Franchising must be done with the advice of an attorney experienced in franchise law.


Licensing is less complicated than franchising. It is primarily selling the rights of either a product or a business name. Fashion designers often license their name to a company that has a product that doesn’t compete but would benefit by the association with the designer. The company sells more product, the designer receives a percentage of those sales. The major sports leagues generate billions of dollars annually from sales of licensed products with their logos.

You can also license an individual product. You can sell exclusive rights to a geographic area or industry or the rights can be nonexclusive. You can demand a minimum level of sales to maintain the licensing agreement. Your payment can be in a lump sum, a sum of money now and a percentage of sales throughout the time period of the agreement, or just a percentage of sales.

There are attorneys and agents who provide licensing arrangements with companies for your product. You can also contact companies directly yourself. Be leery of scams that focus on inventors and promise that they will market your product for you if you pay them a hefty
upfront fee.

Asset Sales

Selling off company assets, even a division of your company, is a tried and true method of raising capital. You might have equipment that's not being used, or a building and land that has a higher value to someone else than it does to you. You can sell off an entire product line that doesn’t fit well with your company's focus. You can sell intellectual property such as patents, formulas, customer lists, or trade secrets.


If you have a retail shop and need inventory, you can approach potential vendors or suppliers to consign their products to you. You sign an agreement that you will sell the items at the price the vendor specifies. You do not own the items. You don't pay the vendor until the customer buys the item. The offset is instead of the normal keystone or 100% markup (you buy the item for $5.00 wholesale and sell it for $10.00 retail) you only receive a commission of between 10% to 25%. But you don't have to use precious cash to get merchandise for your store.

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