Back to green business, who’da thunk you could sell solar-panels to the poor? http://tinyurl.com/6zv37l Meredith did!

I love to backpack, but couldn’t find a light, thin wallet, so I invented my own: http://butterflywallet.com. What do you think?

Been light on blog posts as it’s backpacking season here in Idaho…

However, I did have the time to launch Green IPO News last week. It’s a monthly subscription news and info product to help you purchase stock in green companies before or immediately after they go public.

One of the challenges people face in early-stage investing is trying to determine just what a share of ownership in a an emerging green company is worth. If you read the free sample news report, you’ll see how I’m helping answer this important question.

A lot of the supposed financial risk of buying into early-stage green companies can be reduced by doing a conventional “value investing” review of the opportunity, and comparing the pricing of the target company with the pricing of a broad market indicator like the S&P 500.

Green IPO News is a first step in addressing the broad investor and entrepreneur needs regarding early-stage green investing I described n my recent post, Types of Green Investment Products. I hope you’ll check it out and, of course, subscribe today!!

Tony’s tacos are greener than the chiles! http://tinyurl.com/67q4zd

I really like reading new Public Profiles when they post at the EcoSector Portal.

Twitter’s 140 character limit inspired me to start writing little “elevator pitches” about these neat ecopreneurs so you can get the maximum cool factor in the minimum number of words.

You can share my fun via EcoSector’s Twitter site.

Also, thanks to a nifty integration by Alex King, these “tweets” will show up automatically at this blog - example.

Sorensen’s “bubble pump” flows your solar shower without electric power: http://tinyurl.com/62hgbu

Here’s a nit-picky issue that makes a huge difference for the potential success of a green start-up business.

A common mistake of first time green entrepreneurs is to price their goods and services based on “mark-up” instead of “profit-margin”. The fact is, a 50% “mark-up” is a lot less money than a 50% “profit margin”.

Let’s look at the difference…

Profit Margin is calculated as a percentage of the sale price. So, if you make a 50% profit margin on a $100 sale, your profit is $50 and your cost to produce the product or service is $50.

Mark-up is added to the cost to produce your product or service. If we were to price the same item mentioned above with a 50% mark-up, we’d add 50% of the production cost, or $25, to that cost to get the final price of $75.

In the mark-up example, the profit is only $25 on the total sale of $75, which is equal to a profit margin of only 33%.

Using mark-up to instead of profit margin can lead to chronic underpricing of goods and services which makes it much harder to succeed in business.

Also, investors consider profit margin, not mark-up, when judging the financial potential of a business, so it’s important to align your business processes to the interests of investors from the start. Even if you don’t plan to seek outside capital, you’re still the primary investor in your green company, so do right for yourself.

Here is how to calculate the price your product or service using the profit margin approach:

Take the cost to produce your product or service and divide it by the desired profit margin to get the sale price. Using our same example item, divide the production cost of $50 by 50% or 0.5 and you’ll get the sale price of $100 with a 50% profit magin.

this is cool - Zach turns sewer grease to fuel: http://tinyurl.com/63jqmm

When most people think of investment products, they think of stocks, bonds, and mutual funds they can buy from a stock broker. For people interested in the green economy, it is crucial to understand that these “retail” products represent only a small fragment of the range of investment types.

This chart shows the full range of equity type investment products that match the stage of development of a green business, or most any business for that matter:

More and more people are interested in green investing for its potential to shift today’s environmentally destructive paradigms, and to produce the kinds of enormous gains possible in a rapidly expanding new sector. However, as you can see, the earliest-stage investments most likely to create this paradigm shift and produce super-sized profits also hold the most financial risk. Or do they?

When financial risk is defined in conventional terms, early stage investing is indeed too risky for most people. Those of us who think environmentally, however, tend to consider a wider range of risks. To us, destruction of the biosphere is a risk that makes traditional financial risk seem small by comparison.

Yet, in our daily actions, we are also bound by today’s societal norms. Try as we may, we continue to adhere to “the system” in one way or another. Most of us can’t afford to risk our financial status in society to invest for a better future. This has left the field of funding green startups to a small group of super-rich venture capital investors (see article from Jul-Aug Fast Company). Unfortunately, as wealthy as they are, the combined assets of these new “green angels” are quite small compared to the billions and billions of investment dollars needed to address today’s most pressing challenges in a timely fashion.

What is the answer?

Fortunately, there are many ways to reduce the risk of early-stage green investing to make it more suitable for the vast numbers of potential green-minded investors in the general market. This opens the possibility of mobilizing far more money for early-stage environmental business strategies. U.S. green consumers alone control an estimated $2 trillion to $4 trillion of investment assets. A lot of that can be brought into play if the public can be presented with properly-designed, early-stage green investment products.

Unfortunately, thanks to financial laws designed to make markets safe for average investors, creating these mass-market early-stage green investment products is a complex and expensive process. Today, no such investment products exist in the marketplace. Earlier this year, Iron Leaf Capital canceled their initial public offering after spending nearly $1 million to develop what would have been the first green start-up fund for the general public.

This is not what you think.

You are the entrepreneurial genius. Yes, everyone thinks you’re a nut, but I’m talking about a different nut.

In entrepreneur-speak, your “nut” is what it costs to pay all your life expenses each month, including the cost of launching your start-up business.

Ask yourself, do you have a regular inflow that matches your monthly outflow without needing to raise investment capital?

Some charismatic people can raise capital to cover their nut. I’ve done that. There’s a lot of risk in that, I discovered. If your sales projections don’t pan out, you’ll run out of monthly cashflow for your basic life expenses. This is stressful, and can block you from realizing your big-picture goals.

A wise entrepreneur once advised me that a good business should generate positive cash flow from the very first day. If you heed this advice in designing your business strategy, you’ll cover your “nut”, and go on to build your genius business with the minimum amount of friction.

Ask Mark

Previously posted at GreenOptions.com