Seven 2 – Salt Lake City

The current sample case is from Aaron Heaps, Seven2, a client we have worked with since start-up. Aaron is gifted in his marketing skills. Demand for his product, a unique kayak paddle, is beyond his capacity to fill. His understanding of the financial side of his business was lacking. He has worked hard to bring his business from its struggling start-up stages to one of profitability. And he has succeeded.

Much of our assistance has focused on the financial projections and helping him to understand the profitability of his product. He has raised several hundred thousand dollars through venture capital as a result of the above information and his own marketing talent. He also ran into unexpected problems that put horrendous strain on his business: One major problem was a supplier that produced a part that was inadequate, who kept charging thousands of dollars for ”upgrading” the product quality – but would never actually deliver after his payment. This significant supply problem almost brought the company to its knees.

Aaron contacted the Logan SBDC at the beginning of 2001 with major financial problems caused by the supplier and his inability to meet demand. He needed additional capital. He needed assistance in updating financials and pricing. The SBDC explained the supply/demand concept: As a result, he has increased prices at least 20%. This impacted on the bottom line significantly.

The SBDC adjusted the financials for the next three years. It showed that a significant positive cash flow would begin in 2001and increase each year, allowing the company to pursue an exit strategy for its investors. The SBDC also visited Aaron’s office to see his records, and, like most Quickbook accounts, found that problems in reporting of revenues and expenditures also existed. Though we ourselves could not correct the entries, we noted the types of corrections that needed to be made, such as the separation of 2001 and 2000 expenditures.

The combination of these consulting efforts gave Aaron a renewed vision of his business, Seven2, and its potential. With new determination, he approached new sources of capital to raise the additional funds needed to fill existing demand, create new molds to meet part/supply problems. The SBDC noted that Aaron was also selling his shares too cheaply, and suggested appropriate ways to determine who sold what in raising new capital. Since our work with Aaron, completed in May of 2001, he has raised an additional $550,000. This was a combination of a line of credit, two new investors, and a previous investor who was willing to convert his previous loan to an equity position. Without the SBDC, it is questionable whether Aaron’s business, Seven2, would still exist; but, like any business, it is the owner who made the business a success. The SBDC is just a tool. It always must be the owner who makes it happen.   » top