Discussion Board Forum 3
Discussion Board Forum 3
Tiffany Smith
BUSI 530:B04
February 14, 2013
Introduction
As the CFO of a struggling company the main priority is to keep the company alive.
With an innovative product on the verge of being completed in the next two years but very little
cash on hand, it is imperative that another source of capital is located to keep the company in
business until the company sees returns from the product. The first suggestion would be to cut any
unnecessary costs to free up as much cash as possible then obtain more capital from an angel
investor.
Cut Costs
The first thing to look at would be employees. Employees are the backbone of the
business and are the reason the company has been successful thus far. They’re creative ideas and
innovative thoughts have helped produce this product so the last thing the company wants to
have to do is lay off the very ones who helped get us here. Instead, the company could reduce
costs in other ways such as reduce the number of hours worked in a week. This would create a
decrease in salary but this would only be temporary until the company sees a turnaround from
the product. Temporarily cutting things such as bonuses and unnecessary travel would also be a
way to save the company money. Another huge cost is facilities and overhead. While we need
buildings to house employees and developments we also need to closely watch overhead costs
such as electricity and heating and air to avoid waste. Orders for equipment and supplies that are
not desperately needed should also be halted. Now that some expenses are cut some capital is
freed up but nowhere near enough to keep the company going. For this we need investors.
Angel Investors
There are several ways to define angel investors. Some define them as “informal private
investors colorfully described as friends, family and fools while others define them as “wealthy
individuals who provide capital for start-up companies” (Ramon, P.D. 2010). But however they
are defined they are more important than some people may think. They invest billions of dollars
annually to mostly startup companies and without them many companies would have never
gotten off the ground. Angel investments back approximately 57,300 companies per year and
about $228.8 million total annually (Scott 2008). There are many variations of angel investors
but this company would benefit most from an active investor who wants to not only contribute
their funds but also their expertise and advice to make the company the best it can be. In return
the angel investor will receive a percentage in the company and share in any profits made. Since
the company does have such low capital and little collateral it would be difficult to acquire a
loan. However, since angel investments are informal and used to taking risks to back mostly
startup and early stage companies these would be the way to go.
Conclusion
An angel investment is the only solution that will save the company from going under or
being taken over by a larger company and will also benefit both parties if everything goes as
planned since the investor will get returns on all profit made. This will also save employees their
jobs and could eventually put them in an even better position.
References
Ramon, P. D. (2010). Angel investors: Who they are and what they do; can I be one, too? The
Journal of Wealth Management, 13(2), 55-60,6,8. Retrieved from
http://search.proquest.com/docview/744495255?accountid=12085
Scott, S. (2008, Sept). The importance of angel investing in financing the growth of
entrepreneurial ventures. Retrieved from
http://archive.sba.gov/advo/research/rs331tot.pdf
