Would You Invest in this Company?


Many of my clients are searching for financing and/or investors to fund growth. There are several criteria that we use to judge whether or not a company can get funding and from what source the funding will be sought. Here is a company that is in need of additional funding. Based on the information below, would you invest in this company?

Here are the financial facts for the year 2010:

Revenue of $2.2 million
Expenses of $3.5 million
Operating loss of $1.3 million
Balance sheet debt as of 12/31/2010 of $14 million

Additional facts: From a profit and loss perspective, revenue has not kept up with expenses. The company has been spending more money than it takes in each year for the last several years. To fund the operating losses the company in 2008 borrowed $459k, in 2009 they borrowed $1.4 million, in 2010 they borrowed $1.3M and for projected out into 2011, they will need to borrow an additional $1.6M. Total borrowings are now about 6X annual revenue. Management: a new CEO was elected by the board 24 months ago and he is taking a “hands off” approach to this funding problem and leaving it the management team who are split, ½ of them want to cut expenses and the other ½ want to continue the historic expense trend because the company will loose creditability in the market if they cut expenses; so they want to increase expenditures.

Currently the company has the $14 million borrowed from the following sources:

$6 million – Current customers
$2.6 million – The company’s employees retirement fund
$1.6 million – various vendors
$1.1 million – largest competitor
$ 900 thousand – second largest competitor who just had a plant wiped out
$ 857 thousand – local police and fire department
$ 485 thousand – foreign sister company
$ 300 thousand – domestic security force
$ 228 thousand – vendors who supply fuel for company
$ 185 thousand – vendor who supplies raw product

You probably have already figured it out that no shareholders, board of directors, CEO or management team could be this irresponsible in today’s economic climate. Nearly everybody knows that an organization cannot continue to borrow money to fund on-going losses without going out of business. This story is not about a small business, it is the current financial state of the U.S. Government, all you need to do is change millions to trillions and change thousands to billions.

The key: current customers = U.S. individuals and institutions, employee retirement fund = social security administration, various vendors = foreign nations, largest competitor = China, 2nd largest competitor = Japan, local police & fire departments = U.S. Civil Servants, domestic security force = U.S. Military Retirement Fund, etc.

The U.S. Government has outstanding debt of $14 trillion dollars. Here is picture of what $14 trillion dollars looks like. $1 million is 100 packets of $10,000 (a packet is 100 – $100 bills). $100 million is one 4X4X4 pallet of stacked $100 bills. A billion dollars $1,000,000,000 (9 zeros) is equal to 10 pallets a $100 million each. A Trillion dollars is $1,000,000,000,000 (12 zeros) or equal to 10,000 pallets of $100 million each. The U.S. Government has outstanding debt of 140,000 pallets of $100 million on each one.


Our government is being ran by a CEO/President with no management experience, of his hand picked management team of 12 (the Cabinet) only 3 have had outside corporate business management experience. Our Congress is made up of 435 elected representatives of which 162 have some type of business experience coupled with a Senate of 100 which 26 list any type of business experience.

We are the primary lenders and suppliers of funds to the U.S. Government, 1) take up pen and paper and write a letter (or email) to your elected representatives and tell them that the spending spree of the U.S. Government is irresponsible and must change, 2) forward this email to as many people you know and ask them to read it and take action. The tax payers who are financially responsible in American have been too silent for too many years. Our government leaders need accountability – make it your goal to communicate with your elected (state and federal) representatives monthly – that is the best thing we can do to get this country back on track. It is up to the silent majority – we have to become the LOUD MAJORITY.

To Your business Success:

Dan Lacy
phone: 765-644-8887

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