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    4 Replies Latest reply on Feb 3, 2009 3:01 PM by financeunow

    Need sweet money for big dough

    Cheesecakeman Newbie

      First of all, let me set the record. I have been an Electrical Contractor for the past 20+ years here in Sunny Southern California. Some contractors are very successful, as we were maybe 10-15 years ago. But with the economy fluctuating up and down, it has been very difficult for many... I being one of those recently. Due to this, my credit has really taken it in the shorts. So standard financing to fund our new business is out of the question.

      As a fun sideline business for me and my wife, I started a dessert business 6 years ago. This is our 7th year as of October. I develop all our recipes and products. We started with one cheesecake, and now produce 20+ different desserts for the restaurant industry.

      We make our product in our home, and it is very small bakery. We produce desserts all day long everyday. Plus we deliver our desserts 2 days a week. I do all the marketing and sales. My marketing plan works wonders for our customers, as we increase their dessert sales by 400% easy when the switch to our products and let me take over their dessert program.

      We supply full-color tabletop menus with pictures and descriptions of our desserts for our customers for free. I do all the art work in-house and we do the color laser printing in-house and laminating, so costs are low. Once we get our menus on their table, we have that landscape to advertise our desserts. We are in fact using the customers table to sell our desserts directly to their customer. We are not selling desserts to the restaurant and leaving the marketing up to them, which is the typical way of doing business. This way we can switch out slow moving lines and upgrade the menus as we please, since we do them in-house.

      Now comes the financing part. We are in need of funds to pay off existing private investors (a handful of friends) plus monies for a location to produce full scale baking with employees. We produce 100+ desserts each week in our home, and that is maxed out. It is very easy to get customers, as I target a specific type of restaurant, and when i demo the product and out marketing plan, I always get the sale. I have never shown our desserts to a customer and not get them to start right away. Our desserts are very impressive, and in most cases, we are a little more expensive. But we offer pastry chef style desserts at the same price as the big-box suppliers offer their cardboard tasting desserts.

      I don't want partners, and don't want to lose control of my company. I would like to get an investor or angel to see the great potential of this business, and make us a business loan to make the expansion. But here is where I fall short. I have always boot-strapped it until now. But this isn't going to work to get to the next stage.

      My biggest competitor in San Diego just went out of business because the children that inherited the business ran it into the ground. This just happened about 45-days ago. They left 1000's of customers scrambling to find desserts. Most have not landed, but are left to buying junk desserts from their suppliers. We have turned down some as we cannot take on the new expansion until we get a bigger place.

      There is big money in the dessert business. A cake sales wholesale for $27, it is easy to net $15 a cake, and we produce 100 cakes a week for 20 stores. So that is $1500 a week net. It would be extremely easy to get 100 stores which would be around 500 desserts a week or $7500 net a week for net profits at $300,000+. There are 1,000's of restaurants in our area that are buying dessert from somebody, it may as well be me.

      I need advice on how to get the financing without going through a bank, and without giving up the farm.

      Long topic, and I apologize, but it saves a lot of questions you might have, and gets us more to the point.

        • Re: Need sweet money for big dough
          NoBullFunding Scout
          Great info. Your post is a wonderful example of the type of info that needs to be provided if SBOC members hope to get some real feedback.

          The first thing that I'll throw out is that in 9 years of banking/lending, I'm yet to see one of these elusive angel investors come in and finance a small business. Maybe it's because it all takes place somewhere else or maybe I'm just not looking hard enough, but I cannot name a single company that found an unaffiliated third party to invest in their small business. I've seen private equity buy into middle market companies who have shown some real success (cash flow in the hundreds of thousands or millions) because they've demonstrated that on a larger scale, the business works. I've also seen friend and family invest, but again thats different than an unaffiliated third party. I throw that out as a warning just in case somone claims they know investors...either it will turn out that you don't fit the criteria, or they will just be looking to fleece you with upfront fees.

          You don't mention how much you'll need, but if the business is going very well, perhaps your existing friends/investors will want to parlay the existing investment into a larger venture. I know you said that you don't want to give up ownership, but if your credit prohibits a bank loan, then you need to recognize that people who invest in your operation are taking substanial risk and should expect substantial return. In other words, you can't have your cheesecake, and eat it too! Nobody likes to give up ownership, but think about it this way: 50% of a huge business is liekly to be more valuable than 100% of a tiny business.
          • Re: Need sweet money for big dough
            bmt2008 Adventurer
            Kind of confused here. An angel investor or angel group will want an equity stake (percentage of your company). They take so much risk with their hard earned money that they want some upside potential should your business take off. If you are just seeking money and not investors, then look to lenders not investors. Now, some angels will lend the money in convertable debt - but, should your business take off, they will convert that debt into an ownership stake in the company.

            If you don't want to go through a bank (I assume your credit is bad) and you don't want to give up a portion of your company - what value do you offer to an investor or lender? I too would like to get all I want for nothing!

            If you credit is bad - having a credit worthy partner might be your only option.

            Keep this in mind: What you rather have - a 100% ownership in a $1,000 per month business or 50% ownership in a $10,000 per month business.

            Good Luck - please keep us posted.
            • Re: Need sweet money for big dough
              financeunow Wayfarer
              Please call me; I may have an investor who is interested in your project.




              Dawn Bergeron


              Commercial Finance Consultant


              Mortgage Management Solutions LLC