When it comes to technology, sometimes justifying the expense is difficult--especially when an effective return on investment is desired. However, there are many times when opportunity far outpaces cost and necessary funding must be had or else we will be like those William Arthur Ward referred to when he said, "opportunity is often difficult to recognize; we usually expect it to beckon us with beepers and billboards." But for those wishing to seize digital opportunities by the horns, we have some great opportunities in the path before us. We've partnered with several very key companies in working with potential digital signage networks, both small and large for getting funding for growth. While this post may be somewhat of an advertisement, I promise it will be informative and well worth the read.
Traditional Funding Sources
Generally SMB owners utilize traditional sources for funding their business. This could include SBA loans, private equity, venture capital, or a loaded relative. Generally getting funding from any number of these sources requires differing tactics and a know-how of the proper approach to get needed clams from whatever source you choose to pursue. For most, the best option is chasing the funding source that will give the smallest rate of interest, thus giving the money you borrow that much more kick.
For nearly all applications to obtain funding in the business realm you need a specific and strategic business plan for implementation and project growth. This funding is generally necessary when you look to purchase an existing business, finance business expansion, or need funds to purchase owner-occupied real estate and/or durable equipment. This could include any number of things in the digital realm.
Once a business plan is drawn up and the business is officially "planned," the next step in the process is finding a network of SBA lenders, private equity and/or VC partners to take you to the next level of operations. But there are other methods as well--depending on your appetite for risk. Just be sure you're not crazy about it like the guy featured on ABC's Shark Tank. He mortgaged his and his family's entire future on the idea of a digital sign network--not a very bright idea.
Alternative Funding Sources
When the economy gets tough and people lose their jobs, things get tight in the funding realm. To add to this problem, people start looking for alternative routes to put their money--they want to invest in something other than the general market. In most instances, peoples' money is housed in two places: either their house (real estate) or their retirement account (401K). Real estate is good only if it's rented or sold for a higher price than it was purchased--that's the simple equation there. But, when it comes to 401K's there is a lot of untapped potential for investing in business other than what the "custodian" tells you can invest in.
Our partners have worked with hundreds of people who, when the market goes south, immediately remove their money from their 401K to take the cash and invest in things other than the general market. This is foolish. The government taxes and fees associated with such a removal can greatly null any money made from removing the funds prior to their date of maturity. It is simply foolish. In consequence of this, we have partnered with several companies who work with personal investors to transfer 401K plans to become self-directed. This gives the beneficiary of the funds the ability to invest retirement savings into business of his/her choosing without incurring tax penalties. It even gives you the right to invest in your own business using your very own 401K funds.
While this may seem more risky, I feel it a great benefit to those who have confidence in themselves and wish to take their future into their own hands. The ability to obtain traditional lending to fund your business has become much more difficult in today's tight lending economy. Entrepreneurs can now open up additional business funding capital by taking control of their retirment funds and investing in something that they know and believe in with the 401k business funding plan.
Benefits of a Self-Directed 401K/IRA
There are many advantages of utilizing a self-directed retirement program for financing business plans and business growth and development. I have listed a few of the benefits below:
Debt Free – Cash Rich. Personal retirement funds can be structured as an investment into a business. This means no debts have to be incurred to increase business overhead. Instead of spending money on interest payments, this money can be freed up to spend on equipment, marketing materials, and/or any traditional business expense--helping the company grow more quickly.
Invest In Yourself. Why do we attend college and spend all that money to put information into our heads? It's because we're making an investment in ourselves. Alternative methods allow you to us your retirement funds to invest in a business--nearly any business--where you determine the rewards. You are the one who determines the success or failure of your investment, not the volatility of the market (of course, that can have an effect on what happens to your business investment).
Lower Your Overhead. Often when starting a business or looking for funds to expand, people will tap into home equity or take out a bank loan. Using retirement funds to invest in a business of your choosing takes away some of the business overhead and expense. Rather than paying down debt, monies can be spent to help further the develop the business for future growth.
Tax-Deferred Savings. The self-directed 401K method avoids taxes and penalties that could be had from utilizing other funding sources for investing. In this way, individuals are actually able to save more for their retirement while keeping their funds safely in their retirement account(s).
Leverage Additional Funding. Utilizing a self-directed 401K plan can decrease the amount of money needed from external sources. Moreover, when additional funds are needed, the 401K funds may still be used to leverage added funding for the purchase of a larger or multi-unit businesses or franchises. Many clients use the 401K to fund the down payment necessary to qualify for an SBA loan or to purchase a specific digital media business plan to obtain SBA or other additional funding.
Some More Reasons I'm a Fan
The three companies we have partnered with to offer this service have been providing solutions like this for years. Because most financial advisors and stock brokers are motivated by commission and profits, they are not motivated to show individuals the true power in tapping retirement accounts for self-directed use. Custodial account managers are not motivated in the slightest to give clients the ability to move their funds outside of their specific portfolio(s) because they would no longer be taking a portion of the invested income. Much like the 401K plans of large enterprises, the self directed 401K for small business investing program was built to enable small, private companies to utilize retirement funds as a source of business capital.
Our generation has been pigeonholed into finding investment alternatives that would give meaningful ROI. Because the stock market's volatility makes business investments seem less secure the past 10 years have there has been a substantial increase in the number of self directed 401(k) business investing that has occurred as individuals take their retirement accounts into their own hands. In addition, I like the idea of a self-directed IRA. With it you not only can take a salary from the return on the funds, but you are required to as part of the business. With the investment funds coming from your IRA, you are also able to purchase any legal business or franchise which is of course not limited to digital signage. You can also invest the funds into multiple enterprises, giving you a diversified portfolio in the small to medium business market.
There are many more aspects of alternative funding sources we are working on to benefit our partners and potential customers. When an organization is seeking to invest in digital signage technology, one of the biggest struggles is "do you have investors?" or "where is the money coming from?" When they say, "the advertisements," I'm always a bit skeptical and wonder, "have they already sold them or are they waiting for the chicken to come before the egg?" These alternative sources can help alleviate the issue to some extent.
We have been working with a team of financial geniuses over the past several months in developing and honing business plans for digital signage and business investment strategies for every network type the digital sign market can bear. From what we can see thus far, our clients are liking it as well.
Until next time.
