Advice You - Business

The Global Entrepreneurship Monitor suggests that 20% of new businesses in the United States fail in the first year (Barringer and Ireland, 2006). The most common reas

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

on for business failure is insufficient operating cash. New businesses are often more expensive than anticipated. The initial cash flow sometimes cannot support the bu

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

siness overhead, draining cash reserves over a period of time until an owner is forced to close it down. SBA loans and Home Equity Lines of Credit (HELOC) are the most

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

common forms of business financing. Both of these types of loans are tremendous solutions in rate-driven markets. However, when interest rates are on the rise, as in r

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ecent years, business owners find their variable SBA loan and HELOC payments (company overhead) rising as well. Since July 2003, the Federal Reserve has raised the Pri

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

me Rate nine times to the latest rate of 8.25 the same place we found it in 1996. Because of this, HELOC and SBA loans are commonly being offered at between 10 and 13

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ercent.

Rising interest rates are a significant reason why companies like Guidant Financial Group are experiencing such tremendous growth. Guidant helps individuals b

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

uy a business or franchise using their retirement funds without taking a taxable distribution. Since 2004, Guidant has experienced an increase of more than 400% in the

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ir business funding services. David Nilssen, CEO and co-founder of Guidant, attributed the company significant growth to greater awareness of this strategy in the gene

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

al business community. CPAs and attorneys are beginning to embrace and understand the benefits their clients can receive by utilizing this form of financing. Guidant c

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

an help individuals establish plans that allow their retirement funds to invest in their new business. It is very similar to buying stock in Microsoft inside a 401(k),

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

Nilssen said. In this case,we are talking about a privately held company as opposed to a publicly traded entity.

Entrepreneurs who feel their new business opportunit

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

would be a worthwhile investment for their retirement plan may have a great chance of business success. It is possible to use a HELOC or SBA loan in addition to retir

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ement financing. Nilssen suggested that it is preferable to buy the business entirely with retirement cash. A tremendous benefit is that our clients are buying a busin

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ess with equity, not debt. They are not obtaining a loan. They are using cash from their retirement plan. This means the initial revenue the business generates can be

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

einvested in the business rather than sent to a bank in the form of interest payments.

For a small business or franchise owner, using retirement money could significa

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ntly improve the longevity and ultimate success of that business. For instance, a $150,000 SBA loan obtained today at an 11% interest rate for 10 years would require a

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

lmost $100,000 in interest payments. Using equity rather than debt to buy the business would not only save nearly $100,000 in interest, it would free up more than $200

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

each month for reinvestment back into the growth of the business. Nilssen explained that using retirement funds to purchase a business offers additional benefits, suc

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

h as allowing the owner to contribute more money into their retirement plan and if the business is successful the profits generated will increase the value of the plan

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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Many Fortune 100 companies have found it beneficial to provide their top executives with free Financial Planning Services.

It would seem that the topic of customer service has been beaten to death. I mean, everyone has great customer service, don’t they. You’d think so with all that advertisements asking to choose a business because they have better customer service. The problem is that I don’t think most companies, businesses, organizations or people in general really understand what good if not great customer service means.

One of the biggest challenges in running a business is continuously finding the balance between short-term profits and monthly cash flow needs, and the business' long term future. This can be a delicate tightrope walk indeed. However, you can use this balancing act to your advantage.

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Advice You - Funding A Business With Equity – Not Debt

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