FBN’s Charles Payne, Heritage Capital President Paul Schatz, Tea Party News Network News Director Scottie Nell Hughes, small business expert Susan Solovic, retail analyst Hitha Herzog and Penn Financial Group founder Matt McCall on Uber’s mounting PR woes.
Angels must have a great PR firm. Polls continually find that about 80 percent of all Americans believe in angels. Of course, that’s the diaphanous, winged variety. How about the money-investing angel? Should small business owners believe in them?
First, let’s set out what I mean by “angel.” Historically, an angel investor has been a high net wealth individual who puts up money at the very early stages of a business. Venture capitalists perform a similar function, but VCs are usually firms that manage a pool of money.
Because VCs are firms with a larger portfolio of investments, they are more structured in their relationships to the startups where they have money. Relationships between angel investors and startups will vary more and generally be more personal.
Meet your needs
You must be very honest with yourself about what you really need to make your venture a success when you start to consider an angel investor. Do you just need the cash, or do you need managerial guidance as well?
The amount of support an angel investor can give, or be willing to give, varies greatly. Further, while your angel may want to be involved to some degree, if he or she does not have the right experience or personality, it can be very problematic.
VCs, because they are bigger and more experienced, are better positioned to help steer the ship through the startup period. Also, backing by a VC firm brings name recognition to your startup which may be useful further down the line.
What’s step two?
Does your venture just require an infusion of cash at the beginning to get it underway? If there’s a likelihood that additional funding rounds will be required, don’t plan on knocking at the door of your angel. Angels very seldom sink more of their money into a venture beyond the initial investment. As a point of contrast, I’ve seen figures that suggest as much as 2/3 of all VC money goes to followup investments.
The control question
Generally, an angel investor will require a stake in your company, at least 10 percent, and it’s not uncommon for an angel to take controlling interest. Are you willing to cede control or enter into a relationship that could easily go south on you very quickly?
Taking money from a VC firm would be more like working with a bank. Working with an angel could turn out more like borrowing from your in-laws. I’ve rather unfairly contrasted angels with VCs here and many of the problems I’ve pointed out are the flip sides of their positive attributes. Often angels will jump in much sooner than a VC would; that means they are willing to take bigger risks. And if you don’t want very much direct involvement or oversight, it’s more likely to happen with an Angel than a VC. Finally, angels will make smaller investments than VCs.
Bob (not his real name) worked as a receptionist for an upscale hair salon. He ingratiated himself to the owner and seized every opportunity for additional responsibilities, including enhancing the company’s use of technology. The owner was impressed with Bob’s skills and began to trust him more and more so when his CPA noted there seemed to be a large number of product returns, it didn’t put the owner on notice that something might be awry.
Then one of the credit card companies alerted him to the fact that the majority of returns over several months were being credited to the same credit card amounting to nearly $5,000. Guess whose card it was? Bob!
The salon owner called the police and Bob was arrested at work and escorted out of the building. All Bob said was, “I’m sorry, but I needed the money and you have so much.”
Employee theft is ranked as one of the highest loss areas for small businesses. It’s estimated that up to 75% of employee theft goes unnoticed and unreported! Overall, employee theft in the U.S. costs businesses more than $13. 5 billion according to the National Security Survey.
To help reduce your risk of loss in this area, you must reduce an employee’s opportunity to steal. Your business needs a system of checks and balances. In the above example, the owner should have been more diligent about immediately checking into the increased level of returns. Key processes such as this should be routinely checked, particularly when something is out of the ordinary.
Security experts recommend you require employees responsible for important financial functions to take time off on a regular basis, so irregularities are easier to spot. Additionally, depending on the number of employees you have and the level of your risk, you may want to talk to an insurance agent about crime coverage for your business.
Here are some additional steps you can take to minimize the risk of theft.
* Hire the right employees. Always perform background and reference checks on candidates before hiring them.
* Educate Employees. Make sure all your employees are trained in the processes and checks and balances you have in place to prevent theft. Monitor transactions as often as possible and mark your business equipment. Be sure to keep serial numbers on file.
* Do Periodic Audits. Some business owners conduct surprise audits or make deliberate money errors to test how employees will respond. If you find a major problem at your company, contact the authorities. For the sake of your firm and your honest employees, a thief should be handled through official channels.
Employee theft can take many forms, there are the workers who take everything from pens to postage stamps and other office supplies home to the staffers who make off with thousands of dollars by putting fictitious names on the payroll. Taking the proper precautions will protect both your business and your honest employees.