Dream and Hustle

Business Model Patterns to Take Full Advantage of the JOBS Act

US President Barack Obama signed the best legislation of the 21st Century to give more entrepreneurs the ability to publicly launch mid-sized smarter companies in order to compete in the global economy and enable job creation and multi-channel opportunities. This is also new and unchartered landscape for African-Americans entrepreneurs and quite frankly, we cannot afford to sit at the back of the bus or even worse, sit at the bus stop thinking the bus is going to come and scoop us up.

No, I’m not going to do that to the future generation of brothas and sistas. When it comes to this JOBS Act we going to be about it while these other Black media and other phony Black leaders try to talk around it. Over and over again, we see brothas and sistas just sitting on the fence and then want to wait until the last minute to jump in and don’t realize by that time, the market is already saturated and profits are marginal. I want all the brothas and sistas 45 and under to be smart enough to learn from our mistakes and learn to be proactive and on top of things from the get go.

If you look at the current state of Black entrepreneurship, you see so much irrelevant pride, ego, propped up business operations, propaganda but in reality, they are all running stagnant style business that simply cannot grow without market capitalization. We like to talk about one or two people keep mentioning Tyler Perry or Oprah name all the time like fools not recognizing we need to be seeing everyday Black entrepreneurs climb up the ladder for all of our sakes.

We have to admit we are at a glass ceiling where running funereal homes, mega churches, cupcake stores, fast food franchises, throwing concerts and plays is not scalable to address the widespread unemployment of Blacks and the declining quality of life in the Black community. We need real enterprises that create jobs and sustain jobs and profitability as well as promote social responsibility and validate African-Americans as a globally competitive people. That is the challenge that is before us right here and right now.

So that means you brothas and sistas who are coming up have to do think different about new ways to launch businesses and empires and stack the money for yourself and for others. You got to do more than pretend you are some aspiring “mogul” or a “tycoon” reading these silly hustle bloggers – you have to think like a real CEO and you will be a real CEO in the type of business models that we can now focus on creating thanks to the JOBS Act proposed and signed by US President Barack Obama.

We are going to discuss the type of business models brothas and sistas have to keep in mind to create empires that create jobs and sustain economic value over time. We also have to think like real CEOs and stakeholders who will launch these operations. So let’s talk about what you want out of this, what investors want out of this, the type of business models and examples of business models we brothas and sistas have to start considering to do it big.

This is not lightweight work and like I said before, Dream and Hustle and the 30 Rotten Dissidents work on heavyweight and hard stuff every day and we don’t give up and always get it done. And I hope you learn to adopt that mentality because it’s up to us and only us to make this happen for us.

What You Want out of Your Emerging Growth Company

You are going to have to setup a C Corporation and issue shares for the public to invest in your venture. Before you can convince anybody to buy your shares, they have to be confident in your venture. That means you need talent and the setup to get up and running. You will want to leverage your shares to these people by offering them shares in exchanges for their services or becoming a vested partner. This is why you want to do a C Corporation.

See, there is no “can you be my partner?” kind of talk and you just bring anybody aboard. You sell them your business plan and if they want to get in, you sell them shares at a deep discount and they buy those shares and become a stakeholder in the hustle. You don’t have “partners” at this level of the game; you have stakeholders with a common interest to see the maximum value of their shares exploited. Don’t you ever forget this fact as long as you are a CEO or an executive of a corporation because you are legally obligated to exercise decisions that create maximum shareholder value.

So early on, you will be offering shares to executives who can buy outright and to employees, you will give them stock options with a strike price that they can purchase at that price in 6 months after IPO no matter what the current market rate of those shares are. Now once you get them on board, then your initial team goal it is to create the business and the presentation and work on customers and business and get interest established in the company.

Now keep in mind, you are looking at “ground floor” investors here, not the cats who want to wait until they see you rich before they jump aboard. These investors should understand you are in conceptual stage and prototype stage and you are looking for initial investment, not cats who expect you to be up and running and making money. Real talk, tell those people that they are not who you are looking for right now and dismiss them politely. Focus hard on the ground floor cats who know they going in with you at ground floor.

So you are going to have to present your business model and opportunity to the public and there will be some kind of funding operation where people join in to raise the money for shares in the company. What you are looking for as the CEO and founder and the rest of your staff who have shares is you want to offer about 20% of your shares to be purchased. So the example model is they buy 20% adding up to $1 million and that means the rest of your shares gives you a valuation of $5 million dollars.

What most people do is they get on the bandwagon or a bigger firm come and buy you out for $10 million based on your valuation by offering you cash or stock in their larger firm. So a large firm will come to you and say they want to buy you out for $10 million or $10/share and all of the shareholders will cash out at $10/share and make profit. This is the game that is being brought to your level and why I’m trying to get you cats to understand what Obama brought to the table. But you don’t have to sellout, you can keep adding up the shareholder value and keep splitting the stock and stacking more and more if you believe your firm will stay in for the long haul.

What the Investors Will Want out of the Emerging Growth Company

The most important thing investors want is value and profits from their shares. They want their shares to increase in value and one day, they can sell at a profit or hold onto as an activist shareholder or pass it down to their children as an asset. No matter what you want to believe, that is the only thing investors want and can truly careless about anything else and let’s be real about that.

So with that said, you have to convince investors that your business model has longevity and solid. But this is another point especially for emerging growth companies – they want excitement and interest. The public is not going to invest in some metal stamping plant because they find that boring, even though you are getting contracts with automotive firms and other manufacturers to create millions of gears and plates. Let me explain that if this is the type of business you want to do, you will need industry cats to invest in your company, not the general public. No, the general public is going to want something exciting like a hot startup or something like that.

So that means you will need to understand the type of investors you want to target with your emerging growth company. If you are going to do business to business, then you will need to focus on people in the industry or even other workers in the industry who understand what you are doing. If you are going to do mainstream stuff, then you have to market your business like an infomercial to their IQ level. But trust me, no one is stupid when they are investing in your company and will ask a million questions you have to be ready to show and tell.

So that means you have to create a strategy that always present news and stories to your investors because that is what they like to read. They want to read about your firm in write-ups and that’s what these fluff “industry” bloggers are for. You need to put out news that you are expanding and winning new clients and have opening day parties for these potential investors to see you have momentum so they can be ready to invest when you give the green light.

In the African-American community, we have to be honest that we are definitely going to have social responsibility if we are going to target them for buying shares and becoming stakeholders. This is where you have to demonstrate your commitment to the community by turning empty lots into playgrounds, planting trees and flowerbeds, supporting the kids trip to the museum, hiring from the community and showing your face at socialite settings. Stuff like that matters and that is the subtle things that get African-Americans to have confidence in you and know you are genuine and will invest in your efforts.

Type of Business Operation for an Emerging Growth Company

Because we are in unprecedented territory, the first instinct of most brothas and sistas who are adults is to pull that tired nonsense they are trying today. If you look at the state of Black business and Black entrepreneurship today, it’s one of those shake your head in disgust moments. We got brothas and sistas who want to talk jive with multi-level marketing network marketing crap about me and you can make $1000/month joining their down line or whatever. Then we got these entrepreneurs with egos and personalities bigger than their profit margins. Too much crazy fronting when it comes to Blacks and business that you want to run out of the business networking meeting and throw up in the restroom sink.

When you are running a public company, there are no fronting, no promises of getting rich and you are regulated to be open and honest. That is the new territory for brothas and sistas and why I’m personally excited because now we can deal with real entrepreneurs and CEO who have to be accountable for what they say and do and not just talk nonsense all the time. The books are open and stakeholders demand to know how to increase the value of their shares and the CEO has to answer. That’s how the next generation of Black business need to be instead of all this “call me to make $3,000/month” BS that is going rampant in the Black community.

Through the wisdom of the crowds, the public is going to demand that your company is solid and have a real viable business model. And you are going to have to show them and they going to publicly show you that your business model and venture interest them or not interest them. You are not going to be able to run game like these multi-level marketing cats – 99% of those MLM cats will be in federal prison if they pull any of that crap they get away saying at those MLM events they host.

You are going to have to show the public a real money making generator and business operation that will grow and you have to break it down so the investors will be confident. MLM cats like to talk about getting rich and materialism but as an emerging growth company CEO, you need to be like Steve Jobs and show your passion for the products and operation that you are launching. You want your investors and stakeholders to have that same passion as you.

So that means learning what type of business operations that works best for an emerging growth company. An emerging growth company should incorporate two key attributes for investors to be convinced this is something they want to put their money into. The first thing is a batching process and the second thing is parallel processing.

Batching is when you learn to break down processing a large number into smaller tasks. You cannot count a million dollars straightforward and that would be a tedious process. Instead you are going to batch the count into stacks of $20,000 bundles and have 50 bundles of $20,000. You going to assign 5 cats 10 batches of $20,000 stack bundles and they have to verify they have $200,000 apiece.

Batching is the same business operations. You cannot tell cats you going to sell a million t-shirts from the trunk of your car. You need to tell them realistically that you will sell a million t-shirts from your web site and multiple retail solutions and how you will batch an order of 20,000 upfront and how you plan to reinvest the money from the initial batch to help finance the second batch and cover expenses. That is the process investors want to hear that you understand how to batch process the big million to billion item hustle and not sound lightweight thinking you can hustle from one spot or in one process.

Parallel processing is the science of breaking down a task to complete something to run in sync with each other. For example, when building a car the motor plant can build the chassis on one line, build the engine on the other line and build and paint the out body on another line and put it all together at the end. There is no step-by-step build the chassis first, then build the interior, then build the body and paint like these plastic model car kits or IKEA instruction manual.

You are going to have to demonstrate to the investors that you have this kind of process to create your products or services because this shows you are scalable and can grow as the business grow and meet new demand. All you have to do is add more lines to the process to work in parallel to ramp up production. Look at Subway where they got one guy working the sandwich, meat, toppings and even the cashier for one person while at McDonald’s, they got someone working the fry station, the burger station, the wrapping station and the cash station and they moving cats through the drive through and indoors serving billions of burgers.

Whatever hustle you are working on, you have to understand these two methods of batch processing and parallel processing and explain this to the investors so they can understand you really are a scalable operation that can grow as needed and there is no limit to how high their share value can go.

Business Model Framework Patterns to Consider for an Emerging Growth Company

Now we getting to the good part and you brothas and sistas better recognize that everything I’m about to say, you already built for it. You ain’t going to see anything new, the only thing new is US President Obama create and signed the law so we can do this stuff on the next level, the real level. And as we cover this, you will begin to fully understand why the status quo and mainstream media are downplaying this law and scared to death of you understanding how to use it to your benefit.

The first thing you should to understand the type of companies that sell public shares is to simply look at the top stocks on markets and the type of companies they are. If you look at the Dow Jones or Nasdaq 100 you should see a trend there in their business models. These are the type of business models we are going to discuss as the emerging growth company business models.

The type of business model frameworks brothas and sistas should look into are the build once and sell copies pattern, branded consumer product pattern and the box retailing pattern. If you look at publicly traded companies, these are the type of frameworks that stands out and let’s discuss them.

Build Once and Sell Copies. This is the most lucrative and profitable of all business models. A recording artist master one album and sell millions of copies, one producer creates one movie and sells millions of movie tickets and DVDs and one publisher create one book and sell millions of copies. For emerging companies, brothas and sistas should definitely consider digital distribution of media where you upload a digital copy and sell multiple copies electronically. That is your ITunes and Amazon distribution channels. However, the biggest that tops them all is the software industry including mobile applications – that’s the biggest money maker and most lucrative.

Branded Consumer Products. This is creating a line of products under a brand to sell to Consumers. Think of Kraft Foods, Unilever or Johnson & Johnson or Proctor and Gamble. This is where someone can brand a whole line of food for dinner or snacking and sell through food stores. Or you can sell a high luxury line similar to the Italian fashion houses worldwide and they recognize your brand. Something as straightforward as putting a polo jockey on a horse playing polo on shirts and caps. Remember, I said line of products, not one or two products.

Box Retailing. This is creating franchise chains that are nationwide and become a staple in every community. Think of Starbucks, Home Depot, and Whole Foods where they put the same layout template in these communities and they are slotting products in their stores and selling to the consumer. This can be done on a smaller level and one good model is Footlocker and Dollar Tree. This is the type of stuff where it is very important we get this locations wiki up and running.

Example of Business Models We Can Setup Right Now

One of the most important things about setting up these business models is that it becomes open and transparent which is a good thing. The type of companies we brothas and sistas are going to launch will have best practices and full understanding how the money is made and how much is made and this is data for others to learn and compete. This has never been done before and why this will be a culture shock to Black entrepreneurship as we know it.

Using the framework patterns I mention above, these are the type of business models brothas and sistas should be considering creating the emerging growth companies to take it to the next level.

Media Companies

These are companies that publish and distribute books, music, software, videos using digital media. The goal is to create a product, offer it for sell and people download copies of the original and pay. This is the most lucrative and biggest profit margin of all business models. Even big budgeted projects tend to pay for themselves multiple folds. What make this business model good is this is the one where the public at large would be excited in investing in.

The key strategy is to keep putting out titles and making profits per release. Many rappers realize it doesn’t make sense to pay to produce a whole album win only one or two hits will come from it. A more optimized model is creating singles that produce profits and stagger those profits over a short period of time. Release titles in batches and in parallel and watch the money stack and stack and stack. That is the kind of business model investors will buy into.

But before you jump in, you have to get a portfolio and it better be good enough to impress your investors to put their funding in. If your investors want to buy 20% of the shares, they will also be your strongest advocate and marketing tool and that’s a win-win. They will also be very honest with you about your product line and your business model and company direction – some of the stuff that going to crush a lot of egos and force the real cats to swallow their pride and do better. That’s how it should be.

Your metrics will be the number of digital copies sold, the amount of buzz you are receiving and the quality of the talent you bring to the portfolio that can sell copies and copies for a very long time. With that said, I would seriously look at digital media like software that can sell digital copies for years versus a rap album that will be a passing short-term fad.

Branded Products

These are products that you manufacture or outsource and brand under your own label and sell through retail channels. The more retail channels you can sell your product, the more scalable your business model and the bigger the opportunity. For an emerging growth company, you want to create the most practical line of products that can be sold in as many outlets as possible.

It doesn’t matter if you are launching lip balm, luxury tailor made handbags, carbonated apple juice to investors – they are going to be highly concern how many stores and channels can you move this product and increase their shareholder value if they invest and this is what you have to articulate to them.

So that means your metrics will be the number of stores and outlets that are interesting in picking up your product to sell. Now if you are ground floor, you definitely want your investors to try out the product and have a show for them to know what they are investing in and funding. Keep in mind that the manufacturing process has to involve batching and parallel processing and has to be explained in any presentation that you give.

Box Retailing

Box retailing is bigger than I thought and did not realize how lucrative box retailing is and the profits they make. In your mind, what you want to do is bring the Wal-Mart/Kroger/Safeway/Jewels/Albertson down to a smaller level similar to the Dollar Tree level and setup shops in communities. Create the store, let the manufacturer put their products on display and you sell those products or return to the manufacturer if the customer returns it.

Many of you may have opened up a product and it said “Do not return to store – call the manufacturer!” and the reason why is something I did not know before about retailing. The manufacturer, not the store is on the hook when it comes to returns because they are leasing the shelves in that store. So this whole myth of Black people always refunding and asking for their money back should not be a barrier to start retailing in our communities.

Retailing is extremely important because these are the channels that product manufacturers will push their products. It is also the quickest job creator for the people at large without advance degrees to start earning wages for a living. This is why Dream and Hustle is heavily invested and serious about establishing retailing in our hoods because that is the channel that drives jobs more than any other opportunity and get our economy back in our communities.

Now for metrics, you are going to have to focus on store openings and closing stores that are not profitable. Then you have to focus on same store sales and also look at what products are moving and what products are not moving. For example, you see Radio Shack spending more effort on activating mobile phones from selling scientific calculators, police scanners and circuit boards back in the days. That is the stuff as a retailer you have to relay to your investors and also have store opening parties.

Summary

African-Americans are now in a new paradigm of entrepreneurship that is unprecedented and great opportunity for us to do for self and become self-empowered. The task is by no means easy and will be daunting but the key thing is that it is available for us to now go out and try. That is what is most important and revolutionary about the JOBS Act.

We are in the big leagues now and Dream and Hustle is already dressed and on the court ready to start training camp. We got to learn how to run these emerging growth companies and think and operate like a real CEO because we will be under real regulations and under intense scrutiny and our books have to be open and transparent and compliant. But that’s a good thing, because that helps others understand how business is done and will compete and promote a healthy economic environment for all.

It’s time to start studying how to create corporations that others can invest in, create business models that can scale and grow and we can explain in clear and simple language to everyday people how it makes money. We have to learn the funding process and all the people involve and document it down as much as possible so everybody can read and repeat. And most important, we are going to support these businesses and help get them off the ground.

Economic empowerment and development of our communities to create a quality of life that we brothas and sistas define for ourselves is the next Civil Rights agenda. We get the money, we get the power and we get the respect to be competitors and contributors to the global economy. We rebuild our cities up and turn them back into major economic hubs and expand out to other hubs throughout the Diaspora. It has to start with us to do the work so we can create the environment where we are doing for self, our people, our communities and our future.