Entrepreneurs Learn about the Brutal Truths of Financing from Larry Gardner

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Feb, 6 2013

Know your product before borrowing money, finance expert tells entrepreneurs

Entrepreneurs should not count on lenders for a frank or thorough assessment of their product’s commercial viability, a banking expert recently warned a Wayne State audience of aspiring business owners, adding that profitable ventures require careful research into marketability and consumer demand.

Larry Gardner, founder of the Troy, Mich.-based managerial and financial consulting firm Lawrence Gardner Associates, delivered a Jan. 22 workshop in the School of Business Administration’s Prentis Building on the stark realities of successful venture funding. The event, dubbed “Real Capital, Brutal Truth: Venture Capital and Angel Investors,” was hosted by the WSU entrepreneur lab Blackstone LaunchPad, which is funded out of New York City by The Blackstone Group’s Blackstone Charitable Foundation.

Gardner – a former bank executive and bank president who specializes in loan structuring and workouts, cash management applications, private debt placement, company valuations and strategic planning – admonished business innovators to investigate markets and competitors before borrowing money.

“Understand your product,” he said, “and don’t become so infatuated with it that you aren’t going to do your own due diligence.”

Workshop attendants included bright-eyed beginners and sadder-but-wiser business owners who had lost money on poorly planned ventures and come, as one participant said, “to learn from past mistakes.” Gardner, who gave attendees individual feedback on their business plans, said rigidity is fatal to these strategic documents, which should go through several iterations based on varied input. Gardner said he gauges the potential of entrepreneurs by the “flexibility” they demonstrate.

“How coachable are you?” Gardner asked the audience. “Are you listening to constructive criticism? Are you listening to other people’s opinions? They may have learned a thing or two from the school of hard knocks that you should be listening to.”

A strong marketing plan is critical to the success of a venture, said Gardner, who used the Pet Rock craze of the 1970s to illustrate. Mere rocks in straw-stuffed cardboard boxes, Pet Rocks were a commercial craze due to clever packaging employing “air holes” and a humorous “training manual.” But smart marketing won’t work when there is no market, Gardner added. Failing to assess the market can be disastrous, he said, adding that many entrepreneurs are “misled by professionals and their own enthusiasm.” Unfortunately, entrepreneurs are frequently urged to diversify beyond their expertise and with little market research, Gardner said, pointing to a case in which a team of successful auto industry manufacturers developed and marketed a heavy, high-priced metal golf ball dispenser for golf bags without knowing that a light, inexpensive canvas one already existed.

Gardner also stressed the importance of conducting SWOT analyses, which examine a venture’s strengths, weakness, opportunities and threats. A tried-and-true model for assessing venture potential, a SWOT analysis aids entrepreneurs in identifying internal and external factors that may determine success and can therefore guide financing decisions.

Brian Royster, a Wayne State student who is refining the model for a business, Green Device Technologies, LLC, with help from Blackstone Launchpad, came away from the workshop with valuable advice.

 

“I had the privilege of having my business plan looked over with brutal force,” he said of the feedback he got from Gardner. “Knowing our strengths, weaknesses, opportunities and threats will make us a more vision-driven company. We’ve done that, but I definitely did not put it in my business plan.”