I'm trying to start a business. I have no equity I can call my own except for a financed car.

[Buddha_of_Wisdom]

I need at least $500,000 to $650,000 as a capital to raise. I want to start a self-serve frozen yogurt franchise. I need to find an investor or people that are willing to take a chance with me. Do I write a prospectus, with an introduction about myself and my explanation on why I am leaving the IT industry to jump in the retail frozen yogurt business? There is a great need for one near where I live, so I want to get started on this project.

I need input, so I'm going to write the best damn introduction letter as to why I'm doing this.

[leftstreet]

1. You have, uh, studied the need for this in your area?

[Buddha_of_Wisdom]

5. Yep. I have.

Interestingly enough, around the radius of about 3 miles, there is as follows:

A Dairy Queen
Boom Yogurt (self serve, but focused on health woo, Muscle Milk garbage, and limited to only 12 flavors)
Pinkberry (which is not self serve, and limited to 4 flavors)
An actual ice cream store called Bonnie Brae Ice Cream - been there 25 years, wonderful place to get good homemade ice cream
A self-serve overpriced (52 cents!) and poorly mixed frozen yogurt place in Cherry Creek Mall called Cherry on Top
A pretty good self-serve frozen yogurt store called Yogurt Guru, but parking is really REALLY bad.
Menchies - a chain of frozen yogurts that is often poorly mixed and tastes like crap. Probably two in my radius

There are a few local chain frozen yogurt stores but they are a little further out of my radius. One particular one we often go to is called Yogurtland. It's very good, and this is where we got the idea of setting up a new one in that location.

I have spent time and research on locating a franchise that'll work here in Denver, and I have found one, and have met with the CEO himself in New Jersey, and we felt the market and location I had in mind was just right for a new franchise. He said often the capital raising is the hardest part.

[SoCalDem]

2. Good luck with your plan

A less ambitious start up might be a better idea.. Franchises usually come from an established successful business with "legs".

[bemildred]

3. You need a convincing business plan. nt

[Buddha_of_Wisdom]

7. I have a solid business plan

and the toughest part is ALWAYS the capital raising.

I just might have to write the letter up.

[bemildred]

30. It doesn't sound as though the people you want to raise money from think so.

$500K requires a lot of belief. If you fail, they got nothing. I'm not saying the letter is not a good idea, but the letter is icing on the cake, the plan is what sells your business, if it sells. Explain why your business fills a long-term need, point to other similar businesses nearby (but not too nearby) that are doing well, that sort of thing.

[MineralMan]

4. If a car is your only equity source, it's very unlikely

that anyone is going to invest half a million dollars in your franchise idea. That's the bottom line on your idea. If you have no experience in the retail food service industry, that's another strike against you in trying to get someone to invest. It's a tough business, and self-serve frozen yogurt places come and go frequently, which would seem to militate against them being a viable business.

Spend some more time investigating that business model. I think that would be your best bet. Most small franchise operations are not great producers of income, sadly.

[Buddha_of_Wisdom]

12. Neither have the people who have started the frozen yogurt places..

I might have a strike for little retail experience, but I'm motivated and willing to put in the long, hard hours into this.

The CEO had retail experience - he was a fruit seller, but his 7 other owners didn't have the retail experience, many were engineers, architects, and mechanics. He said my experience would only build faster than being a franchise owner. I want to take the opportunity and do this to help create jobs, if it's not many, and give back to the community, of course.

[MineralMan]

15. OK. Create a strong business plan and see what happens.

It's your business, after all.

[valerief]

6. I think it was Mitt Romney who said, "Go to your parents for money." nt

[Buddha_of_Wisdom]

8. That is part of the reason I'm trying to do this.

I have worked with my father for 12 years, and our IT consultant business is dwindling down to next to nothing. We have other sources, but it makes it hard to support his wife and myself with the income we get from being an ISP for condos. What makes it hard is that he's going through a stem cell procedure for myledysplasia syndrome.

I want to relieve my father from the obligation that he has to take care of me. I want to be able to support my family on my own, and it makes it hard to do with disability and no equity.

[Paulie]

17. Might be easier to expand the ISP business

Go wireless ISP pointing radios down from the condos into the surrounding residential areas. 5-10 meg for $25 month with equipment costs around $100 per customer sounds pretty good to me.

Best to do a business you know and have experience with. More likely to have a bank lend that way.

[Hosnon]

24. Your father sounds successful. Trust his judgment. If he won't co-sign, rethink your model.

Unless he's a "never co-sign" type of parent. Then try the other one

[Buddha_of_Wisdom]

32. My dad has run several successful business....

But he is sick right now, in the hospital undergoing treatment for cancer - he just went through a stem cell transplant two days ago.

I am very hesitant to ask them for a loan.

If we do expand, I want to do it with the understanding that I want in some of the revenues...

[Left2Tackle]

54. It sounds like you and your father have many good relationships through your business.

Have you thought about looking into the myriad of network marketing/direct sales companies out there? They usually require little capital investment. They do require a strong will and drive. With your consultancy business you have developed many skills that would help you succeed.

And if frozen treats are your passion not necessarily a means to an end, then a business like this could help you raise the capital as well.

[Eleanors38]

9. When you make your pitch, bring plenty of your yogurt...

Sounds like all you've got going for you, and if it's good, you will need a lot.

[Buddha_of_Wisdom]

13. The product is from Oregon....

And believe me - it's very good, but I don't have the money to set up for samples. It's all about the mixture.

You'd have to fly to New York/New Jersey to sample their products.

If I set up base here in Colorado, the costs would be nearly 1/3 or 1/2 of what should cost to operate in New Jersey.

The prospectus says 500-800k capital.

[Katashi_itto]

10. Join SBA

Startup
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business

Finance:
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/prepare-your-business-f-0

Business plan:
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan

[Gormy Cuss]

25. +1 n/t

[Shankapotomus]

11. Great idea

Perhaps shrink it down to a more manageable one?:

http://www.ebay.com/itm/Frozen-Yogurt-Business-Sweet-Monkey-Mobile-Unit-/121201012289?pt=LH_DefaultDomain_0&hash=item1c3824ae41

Best wishes for your venture.

[Paulie]

14. You need to work and raise the capital

And be willing to lose it all.

Undercover Boss just did a show on menchies. Running a business is different than working one.

Then there is the viability of a frozen treat store in an area that has a short summer.

[MineralMan]

16. Yup. Here in the Twin Cities in MN, frozen yogurt places

have real problems in the winter. Nobody's in the mood for cold sweet stuff then. We have some, but not as many as you'd think in a place with this population base.

[Chan790]

28. I've noticed that several here in DC...

do one of two things.

1.) They close for the winter (right about now actually) and reopen in April.

2.) They clean and winterize half-to-three-quarters of the yogurt machines, pull them out and put them into storage. Put those mediocre automated espresso machines, European drinking chocolate, steamed milk dispensers in those slots and run themselves all winter as DIY coffeehouses while continuing to sell a limited froyo menu. The model is basically the same...instead of selling froyo by weight, they sell hot beverages by volume. I don't think they do a great business, but they do enough business to break even and put a paycheck in the pockets of the labor. (Which during these months is usually the owners.) Most of that is that the most-expensive beverage to produce (hot milk, syrup and toppings) is one people rarely make/order. The one that is cheapest to make, brewed coffee with a splash of milk, is the most popular by far making it the profit-driver--$0.30 to produce for a sale price of $3. (The price is by-volume and is the same regardless what you put in the large cup.) Coffee beans are cheap per serving.

[Buddha_of_Wisdom]

33. Here in Colorado, we have a pretty mild climate

with short snowstorms and occasional blizzard.

I am hoping to open the store in time for the spring, which will help bring in a lot of business.

The location is very important, and I have chosen a place where I think it will do maximum amount of traffic, lunch and dinner - there is a high school two blocks from the location I had in mind, and the anchor tenant there is a local Kroger store.

[LuvLoogie]

18. What you need is a job.

[greytdemocrat]

19. Hmmm

You want to start a bidness and need big $$$ and
you came here??? You're already dooooooooooooooomed.

[Buddha_of_Wisdom]

34. Brainstorming...

That's why I asked for input. Not criticism.

[greytdemocrat]

53. You need a reality dump. nt

[Quantess]

66. Some people just love to tear down other people's ideas.

Tune out the unconstructive criticism. They have no interest in anyone succeeding at anything, anyway, so they are a total waste of time to listen to.

[JVS]

20. You're going to have to start smaller. Look for one of these.

[Fumesucker]

47. Bicyle Ice Cream sales seem to be surprisingly big

[Raven]

21. MIT and Boston College School of Business have websites

that will help you formulate a business plan.

[Hosnon]

22. For the most part, ignore any advice from DUers (and the internet).

Contact the closest branch of the Small Business Administration. They are really good.

[graywarrior]

23. +1

[Buddha_of_Wisdom]

35. I have contacted the person I need to talk to at Small Business Development Council

and still waiting to hear back from *SOMEBODY* to answer my inquiry on getting funding.

I'll sell 49% of my ownership for 600k.

[Yo_Mama]

42. If somebody is going to put up all the capital they'll want a hell of a lot more than that

I'm not saying you shouldn't do it. I'm not saying that it won't work. I am trying to gently say that you don't have a good business plan because you don't really have anything of value to offer an investor.

How much in annual sales/gross profit do you expect to clear annually? Deduct whatever you were planning to use to live on.

Also, be aware that you are buying a 12-14 hour a day job seven days a week.

Also, if you and your dad have a business venture together, wouldn't you just be leaving him flat? Don't think you can hire someone to do what needs to be done for the franchise. You can't.

The way these things work is that you take {investment + (net investment return)}/expected loss ratio. So in two years, if 50%-60% of such ventures fail (and they do fail at about that rate), and the expected return the investor can get on his money is 10-15%, it's a bad deal for anyone who would put up the money. The investor is taking all the risks and you are getting 50% of the rewards? Why would ANYONE do that?

Also, the house flipping biz is currently a competitor, and the expected loss ratios are a lot lower for that, plus the expected returns are either better or similar.

I agree with those who suggest you start small. That is more realistic.

[loli phabay]

45. for 600k i would want more than 49%, i would be taking all the risk

What exactly would you be risking to earn 51%.

[lumberjack_jeff]

48. ... and SCORE.

http://www.score.org/

[dem in texas]

26. Get a part-time job in a yogurt store first

Retail of any kind is hard work, not just physical. Learning to deal with customers, with food, cleanliness issues, inventory levels, employee turnover and training, all kinds of things. Also, as DUer's have pointed out, you would be selling in an area with cold winters. By working in a shop, you can see how they get through the cold winter months and how they handle their operation.

[Th1onein]

27. Why do you have to start so BIG?

You know what I'd do, in your position? I'd research the codes, to find out if I can have a little cart, near businesses where I'd expect my customers to come from. Then, I would research how to keep the yogurt frozen, and I would get the permits, buy the cart and stock up. Lots less capital required, and you can always branch out to other parts of the city, AND you can gather the capital for a larger venture that way.

[grasswire]

29. Food carts are the rage. Many businesses begin from them.

Can set up at farmers markets, universities, downtown, events, etc.

Low overhead. Small investment.

[grantcart]

31. Having raised that kind of capital to start a business I can tell you that

no one will talk to you unless you have an iron clad record of sales in the market that you are looking compete in.

To justify that level of capital investment you would need to show $ 2-3 million sales IN Hand.

Then there is the question why you?

If an investor can put up less than that and get his own franchise, hire a manager for next to nothing, and keep all of the profit why should he/she hand you 500 large, bear all the risk and split the profit.

If you want to succeed in raising capital you basically have to see it from their point of view, if you had that kind of money would you hand it to someone you didn't know, who had zero experience in the business?

All of the advice to start small is the best advice.

[Demo_Chris]

37. Exactly. nt

[Yo_Mama]

46. Entirely true

Unfortunately. But realism is the key to ultimate success, so realism is important.

[mahina]

51. +100

Exactly.

500K can buy a nice commercial building with good tenants and a steady stream of profit.

Unless the OP is proposing to buy his own building to put the yogurt franchise in, nothing about the proposal makes any sense.

OP, good luck to your Dad and to you. There's a lot of good advice in response here. Best.

[Demo_Chris]

36. You need a detailed business plan. DETAILED....

If, for no other reason, than for yourself. But no one will lend you a dime if you don't have this.

[vinny9698]

38. Follow the business plan of sriracha sauce success story

Find a need that is not being satisfied and satisfy that need.
David Tran came as an immigrant, could not find his favorite hot sauce in the local markets. He then started making his own sriracha sauce at home, then he sold it to local Asian food stores. The rest is history.
My plan is to grow aji peppers and sell them fresh in the local farmer's market. Aji is a spicy pepper very popular in Peru, Columbia, Bolivia, and other South American countries. Similar to the jalapeno demand in Mexican cooking.
You can not get aji fresh in the local markets but bottled. It is easy to grow.
Foodies, ethnic restaurants, and South American immigrants will readily buy it fresh, it is in demand.
Try that. There will be no competition and even though it is a seasonal product, I think you can make enough money during the season to survive the whole year. You can then get a green house and grow year around.
Good luck.

[Demo_Chris]

39. I comes down to this...

No one wants to risk their money on your dream and success. In fact, they are not in business to RISK their money at all.

Right now, as it stands, you are bringing nothing to the table but an idea and whatever experience you have. If the required funding isn't that great, and the return large enough, that might be enough. But a half a mil is a huge investment. Asking that much, and offering a 50% stake, you are valuing your business at a million dollars. So the question you MUST be able to answer is what is it that you are offering that's worth a million dollars -- how did you arrive at that valuation?

If you don't have a fantastic answer you need to start a whole lot smaller. And be realistic. About everything. Your business plan needs to be DETAILED. Mine, when I submitted it, was TWENTY-SEVEN pages long. Currently, as I update it regularly, it is longer than that. It is my roadmap.

Your business plan should contain most of the following sections.

Executive Summary This section should include a brief description of your business as well as touching briefly on all points of the plan. Here you will lay out who you are, what you intend to do, and how you intend to do it. You will want to cover every section of the plan, both to focus your mind and to provide a summary for anyone who does not care to read the details provided in the individual sections.

Company History Hopefully this is self-explanatory. For a new business, this history section is a good place to sell yourself and provide the background that led you to starting this business.

Company Description Who you are, what you offer, and why. You want to be as precise as possible here. Who is your target customer demographic? Why? What exactly are you doing to win them over?

Company Objectives - long and short term Be as specific as you possibly can and update this frequently. Use this section to track your progress. This is your roadmap to growth and eventual success.


Competitive Advantages Who is your competition (think carefully here) and how do you plan to win business from them. In order to answer this correctly you will first need to understand the nature of the business, and what your customers want. From this foundation, you will want to get specific. What are the DISCTICT advantages you intend to offer? List them here and be aware that anyone interested in investing in your business will read this section both early and very carefully. If you do not have good answers you are not only a bad investment, your business is likely to fail.

Pricing How much are you charging and how did you arrive at this figure.

Market Research Include here your entry strategy, growth strategy, and your plan for targeting new markets. In truth, this section is there largely to educate potential investors and to assure them that a market exists for your product or service.

Design In this section, you should include details about the physical aspects of your business. If possible, include pictures and any plans you have for improvement.

Financial Components How much money is this all going to cost and how are you going to pay it back. For an investor this section is key, but even if you are not borrowing money it aught to matter to you as well. If you cannot make the numbers add up here, on paper, they are not going to add up when real life starts throwing curve balls.

[skippy66]

41. Don't listen to them my friend.

I am a wealthy Nigerian prince who will happily give you 800k. Please just send me 10 thousand dollars to pay for the transfer fee. You can have it by Tuesday for your venture if you wire me the money today.

[mrsadm]

44. ROFLOL!

[tammywammy]

43. My advice - start smaller.

No one is going to give an IT person with no history of retail or sales $600k.

[panader0]

49. Hey, I need $500,000 too....

Although there is no "great need" for self serve frozen yogurt around here.
I don't get the great need part. Then again, I don't eat yogurt (Yucchh)

[Fumesucker]

50. Go with something you already know, even more importantly something you already have contacts in

Luck to some extent is opportunity met by preparation, fortune does favor the prepared but only if they get the opportunity.

The opportunity is very often going to come from someone you know, that's just the nature of human relationships, we prefer to do do business with people we already know and tend to offer those we know an opportunity we might have or be aware of before we will do it for a stranger.

Learning the traps and pitfalls of a new occupation while trying to run a business with a big overhead and a significant public exposure (storefront retail) is a recipe for disaster. Think of all the things you know *not* to do with your current business and how painful some of those lessons were.

[sarisataka]

52. Contact your local chapter of SCORE

http://www.score.org/

Most of the people in the organization are retired business executives. One of the counselors I regularly talk to is the original marketing executive for Yoplait. They have tremendous knowledge of business, what works, what doesn't and are willing to provide a good reality check for your plans.

They offer many services and resources for free but the seminars are well worth the money you pay.

[whistler162]

55. First do you have any experience in the retail business

if not get a part time job in retail and find out if you can handle the stresses. Talk to small business owners to learn what problems you might need to avoid. If you don't have the knowledge and experience 500,000+ could be a expensive cost of learning.

[Spider Jerusalem]

56. That's not equity, that's a depreciating asset that's probably not worth what you owe on it.

[JI7]

57. i would suggest working at a few of the places which are similar to what you want to open

this might teach you something that could be useful when you are trying to get loans, investors etc.

people may be more likely to invest if they think you know the business . also have an idea of where the money you want to raise is going towards. how much for remodel, rent, supplies, etc

how much is your car worth ? people might also be more willing to give if they see you are putting your own money.

but i'm no expert . i agree with going to the sba .

[taught_me_patience]

58. If this is a serious post, I can give you advice

I've left the corporate world and opened a coffee shop just over a year ago, so I have experience in small business. I also have an MBA, so I can give you general business advice. reply to this post if you're interested.

[Buddha_of_Wisdom]

59. I am interested.

I have a business plan ready to go for those who are willing to evaluate and see if it is sound.

[taught_me_patience]

60. If you'd like me to read it, PM me and I'll give you my email

Otherwise, I'll need:

Your projected gross margin
Size and nature of the location

and I can give you a rough evaluation.

[Pretzel_Warrior]

63. Out of curiosity, how's the coffee shop going?

I had toyed with the idea and decided it was too much work for very little return. I'm also working on my MBA right now!

I have a few business ideas I'm working up right now.

[taught_me_patience]

70. Honestly, it hasn't been the best financial decision of my life

Sales have ramped up slower than I thought and costs have been higher than I thought. There are some major issues that make the coffee shop business a tough one. One is high product cost and wastage. My overall gross margins have hovered around 55 to 60% and coffee margins have been around 65% (coffee 75% of sales). I figured coffee margins would be closer to 70%. Another problem is that labor cost is extremely high. Figure that two workers become stressed at gross sales of $100-$120/hr... those two workers cost $30/hr after tax and workers comp... then labor will be a minimum of 30% of gross and can run much higher than that. Figure in rent and other costs, and it doesn't leave much net profit margin. Very high volume is required to make any money. on top of that, I'm constantly running around and putting out fires. My head barista couldn't come in today, so I had to work behind the bar for 12 hours. Before work, I had to run to Ralphs to pick up half and half because our distributor didn't deliver last week. Little things like that are pretty annoying.

[Pretzel_Warrior]

61. Sounds like a hard sell. A saturated market for sure

Most people in your situation must rely on FAF funding (friends and family).

http://www.thenextwomen.com/2013/10/08/funding-101-part-7-friends-family

[Buddha_of_Wisdom]

62. I just might have to head that direction

One of my father's clients owns several high-end properties and is quite wealthy. I might just need to send him the business plan and see if he's willing to chance it.

[Nine]

64. Better check with your father first.

He might not want you hitting up his clients for money.

To be honest, your plan sounds so unrealistic that I have to wonder if you're yanking our chains. If you are sincere... well, I guess I'll be called mean and discouraging, but sometimes people need a reality check. No one is going to give you half a million dollars when you have nothing to invest yourself, especially when your idea is not super original. What do they need you for?

[Egalitarian Thug]

68. Exactly. I can't decide if it's youthful exuberance and ignorance,

or another "let's fuck with DU" thread.

[Egalitarian Thug]

65. People interested in investing that much in a franchise business, invest in a franchise.

That is a pretty steep buy-in, what makes it worth that much? What makes going in with you better that just going into it themselves?

[JI7]

67. that amount seems kind of high for a yogurt place

[Monk06]

69. Here's how to start a business with little money.

http://www.japadog.com/history_En.html