Growthink Blog

How Business Plan Writers Help You Raise Capital


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Yesterday I was looking at an online forum that deals with all aspects of entrepreneurship. I quickly found the capital-raising section and started reading a post from someone who was considering outsourcing the development of their business plan to an outside firm.

Shortly thereafter, I saw a comment from an entrepreneur named Joe, who said, "How could you even consider outsourcing your business plan? Only you know your business well enough to write it."

Well, I'm probably pretty biased on this topic, since Growthink has been developing business plans for clients for a decade. I want to put that bias aside for a minute, though, because I'd like to explain the value of letting nearly anyone outside your company help with the development of your business plan.

Here's my stance: Only outside viewpoints can ensure that your business plan includes both a solid Business Strategy and Communications Strategy.  Right now, I want to talk about Communications Strategy - I'll touch on Business Strategy in an upcoming blog post.

Before we go any further, however, I want to dispel the biggest myth about business plans.

Most people think that the goal of a business plan is to provide an in-depth analysis of your business. If you have any aspirations of presenting your plan to outside investors, then this thinking is incomplete.  But most entrepreneurs are looking for a business plan to raise capital  to market your company to investors.

Yes, your business plan is a marketing document.

Would you buy toothpaste whose packaging states, in huge letters, "Sodium Fluoride," "Tetra Potassium Pyrophosphate," and "Titanium Dioxide?"

NO.

We all purchase toothpaste whose packaging promotes the BENEFITS such as "freshens breath," "whitens teeth" and "prevents cavities."

The same is true with business plans.  You should never -- particularly at the beginning -- pile on information about the details of your business. Rather, you need to focus on the benefits that investors will care about: the size of the addressable market, the milestones you've achieved to-date, what you have that your competitors don't -- and, importantly, how you expect them to get a return on their dollars.

A great communications strategy, in business planning, or in anything else, starts with figuring out what your audience wants to, needs to, and/or is willing to hear. Then, of course, you have to give it to them.  You must put yourself in your audience's shoes and figure out the most compelling way to convey the benefits of your business to them.

Back to Joe's quote, "Only you know your business well enough..." Following his logic, there would be no advertising agencies or public relations firms.

Actually, imagine if all of your competitors decided to do all of their advertising and PR in-house, and you were the only one to seek outside, professional assistance.  Your marketing would likely dominate your competitors'.

In the same way, when your business plan brilliantly communicates the benefits of your business to investors, you give yourself an immeasurable competitive advantage over the thousands and thousands of other businesses out there competing for capital.

It's no wonder that only a very small percentage of companies seeking venture capital successfully raise it.  Yes, the majority of contenders may "know their business well enough," but sadly, not well enough to convince others to invest.

 

Related post: How a Business Plan Consultant Can Improve Your Business Strategy


Top 10 New Year's Resolutions for Entrepreneurs in 2009


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200910) Keep Launching, Innovating and Growing

2008 was a tumultuous year, and most observers agree that we're now in one of the worst recessions in decades.

While the economy may be in for a bumpy ride, make sure you keep it in perspective.  Don't let all the negative news stop you from moving forward with your entrepreneurial initiatives.

History has shown that a downturn can be a great time to start a new venture. General Electric traces its roots to the Panic of 1873.  William Hewlett and David Packard founded HP during the Great Depression.  Microsoft launched during the recession of the early 1980s.  Disney, Oracle, and Cisco, and countless others took the leap during difficult economic times, and reaped tremendous rewards for their efforts.

One reason that recessions provide opportunities for entrepreneurial companies is because established firms decide to cut back on innovation and growth plans.  Don't make that mistake!  The key is to be running and growing your business successfully before the market comes back -- so that when it does, you have gained market share and are poised for explosive growth.  As we've said before, persistence and optimism are critical for entrepreneurial success.

For more thoughts on launching a business during a recession, read entrepreneur and investor Andy Liu's excellent entry The Secret to Starting a Successful Company.



9) Maximize Your Time and Resources


Running and growing a successful business requires that numerous jobs be performed at once, and well.  The start of a new year provides an opportunity to take stock of your most precious commodity: your time. 

What are you best at?  Where do you add the most value? 

Learn how and when to delegate or outsource certain tasks and responsibilities.



8) Build and Improve Systems and Processes

Most successful businesses are successful because they have effective systems in place.  For example, if you walk into any McDonalds across the country, and order a Big Mac, you know exactly what to expect. 

As Michael Gerber points out in The E-Myth Revisited, it’s critical that entrepreneurs build businesses, rather building an ever-increasingly stressful and taxing J-O-B. 

Especially if you're interested in selling your business, you want to be able to walk away from the business and have it continue to run. 



7) Build and Nurture an In-House Email List

Whether you run a dental practice, a restaurant, a software company or a social networking website, chances are you could be getting more out of your website traffic. 

One way to improve the efficacy of your website is to offer an email newsletter via an online email submission form. 

Building and maintaining an email list could be one of the best ROI decisions you make in 2009.  Constant Contact and AWeber are two recommended resources for email communications. And, if you run a blog, you can set up blog-to-email newsletters using services like FeedBlitz.



6) Participate in Online Conversations


If you haven't already done so, start a blog, create an account at Twitter, sign up for Facebook, join LinkedIn... whatever your website or tactic of choice, get online and contribute to the conversations about your industry online. 

Issue press releases using PRWeb.  For an excellent tutorial in online marketing and PR, I recommend reading David Meerman Scott's The New Rules of Marketing and PR, as well as his blog Web Ink Now.



5) Meet More People (Out in the "Real" Offline World)

Join new networking groups to establish relationships and potential partnerships with people and firms in your area.  One great way to jumpstart your offline networking is to leverage MeetUp.com.  MeetUp.com has thousands of business networking groups.  If you don't see a group in your niche, you can even start your own.



4) Get a Life (Outside of Work)

It's critical that you take breaks from your business to enjoy life.  Make a resolution to enjoy physical as well as mental vacations from your business every once in a while.  This is not only good for your health and sanity and relationships, it's also good for business!  You'll gain relief the stresses of growing your business, and once you return, you'll be reinvigorated with a new perspective on your challenges and opportunities.



3) If It's Not Working, Ditch It

Let’s be honest.  Not every marketing strategy, fundraising strategy, partnership, or product line will be a winner.  If you tried something in 2008 and it wasn't working, you might want to admit that and move on.  Focus your energy and resources towards those priorities that will deliver the greatest return on investment (both in terms of time and money). 



2) Learn Something New, Again and Again


Make a commitment to continual education.  Stay updated on your industry while branching out into new areas of knowledge.  Read blogs, books, newspapers, and magazines. An easy way to incorporate learning into your every day routine is to listen to interviews, audiobooks and podcasts.  Summary.com is a great, convenient service for integrating business education into a busy schedule.



1) Continually Update Your Business Plan and “To Do” Lists


Update your business plan weekly, monthly and quarterly, depending on what’s changing in your industry and what you’ve accomplished in your business. 

Updating your plan can be a critical factor in both your ability to raise capital and your ability to properly execute on market opportunities.  The sections that typically require periodic updates include the milestones, competition, management team and financials sections.

To increase your personal and corporate productivity, take advantage of tools like Basecamp which allow you to track tasks and milestones online in a collaborative "wiki" environment. 

For a great read on productivity, we recommend The Ultimate Sales Machine by Chet Holmes.  As Chet recommends, focus on the daily tasks that are most critical to your growth, and keep the daily “to do” list brief (no more than 6 items). 

 

That's it!  I hope you found this list to be helpful for growing your business.  Here's wishing you a prosperous 2009! 

 

What is your New Year's resolution?

 

 


'Twas the Night Before 2009...


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Happy Holidays!  In celebration of the season, and the entrepreneurial spirit, Growthink has created a video holiday card which you can view below:

 


Growthink on the Town: Rio, Moscow, and Old Berlin… In 36 Hours


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Sounds like a lot of territory to cover in such a short amount of time, doesn’t it? Surprisingly, it wasn’t. I managed to do it all… within one square mile or less.

The wonder of being in LA and having clients all over the world is that there’s one particular destination to which everyone is drawn.  In addition, it’s fairly central to travelers doing business in the western half of the U.S.

No, it’s not Fresno.

Las Vegas is a desert Mecca of entertainment, gambling, and business.  The latter is conducted everywhere from conference centers and meeting rooms, to poker tables, bars, restaurants, music halls, and nightclubs.  Low and behold, I found myself in precisely such a scenario last week, accompanied by two Growthink colleagues and a handful of Brazilian clients.  I knew, immediately, that this trip would be ripe for a sitcom episode.

My associate, Tristan, and I must have been dreaming when we thought we could fly in and out of Vegas for a day-long meeting.  “We’ll have a productive day,” we thought, “and then we’ll just have a cocktail or two and head to the airport.”

Cut to 8p.m., when the entire gang of us could be found at Red Square – the infamous Russian destination in Mandalay Bay that features a plethora of caviar and spirits.  Flights of sample wheat and potato, flavored and un-flavored vodkas were delivered to our table; and we relished in tasting each and every one, discussing the bouquet and the lingering effect of the smooth liquor on our palettes.  In the midst of an amplified discussion, Tristan and I announced our impending departure and were immediately harangued into calling Southwest to arrange morning flights.

How can one argue with a handful of handsome Latin American men? Well, that was my excuse, at least – I can’t speak for Tristan!

After securing two seats on the 10:45a.m. flight to LA, we settled back in at the table and proceeded to talk about everything: politics, music, travel, the state of the economy… no subject was left untouched, and no better time was had.  A singer by training, I was urged to perform for the group – which I did, right in the middle of the restaurant!  Only in Vegas would no one give a second thought or a glance to a gal belting out an impromptu showtune.

Carrying on with the cabaret vibe, I suggested we continue the party at Forty Deuce – a burlesque club reminiscent of old Berlin: bawdy but glamorous; fishnets and feather boas; red leather seats and bottle service.  Having worked for the owner prior to joining Growthink (I led corporate development initiatives for the parent company), I was able to secure the best VIP seats adjacent to the stage.  The next two hours found us smiling, dancing, watching the show, and having an all-around amazing time that would not have happened if we weren’t in a place like Vegas.  It inspired a camaraderie, which already existed from prior meetings but was enhanced by an environment of slightly daring opportunity.  I mean, how many times does a one-day business trip turn into a 36-hour excursion?  

When we finally shut our eyes that night, able to find last-minute rooms thanks to the down-season hotel occupancy rates, we knew we had solidified a long-term client relationship.  More than that: we had developed friendships.

The next morning we gathered for coffee in the lobby before heading to board our plane.  Bleary-eyed and tired, but anxious to proceed with our combined business-planning project, we all laughed, shook hands, and bade each other farewell until the next meeting in 2009.

The best part?  That one’s in Brazil.

Stay tuned for a blog about Carnival!

An Interview with Guy Kawasaki


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Growthink's Co-Founder Dave Lavinsky had the opportunity to speak with entrepreneurship guru Guy Kawasaki last week. Guy is the Managing Director of Garage Technology Ventures. His blog, "How To Change the World," is ranked among the world's top 100 blogs, and he is a successful author. In 2004, his book "The Art of the Start" was a BusinessWeek bestseller.

You can click here to listen to the entire interview or download the transcript: http://www.growthinkuniversity.com/public/226.cfm

In the interview, Guy spoke openly about the things to keep in mind when seeking venture capital, the words to avoid using in any conversation with a VC, and his new book, "Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition." For those seeking capital, there’s also an interesting eHarmony.com vs. HotOrNot.com comparison to listen for.

Also, we encourage entrepreneurs to visit Guy's site Alltop.com, specifically these three sub-categories:

* Innovation
* Startups
* Venture Capital

To listen to the interview or view the transcript, visit this link:
http://www.growthinkuniversity.com/public/226.cfm

Private Placement Memorandum (PPM) Mistakes


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Far too many businesses fail to raise capital because they lack the proper documentation, or because their marketing and offering materials (business plans, private placement memorandum,  investor presentations) are unprofessional, unpersuasive, inadequate or incomplete.

If you are raising capital from multiple private ("angel") investors, a private placement memorandum (PPM) is a necessary part of your documentation.  Unfortunately, however, the vast majority of entrepreneurs and business owners are not familiar with details of preparing a private placement memorandum and marketing a private placement offering.  In too many instances, this lack of knowledge prevents them from raising necessary capital, or -- even worse -- it can create costly liability problems.

To assist entrepreneurs, we created this report - "The Top 10 Private Placement Memorandum Mistakes" - to help answer some of the most frequently asked questions. We hope the report will help prevent many of the common errors we see businesses make during the process of preparing a private placement memorandum, marketing it to investors, and raising (or failing to raise) capital from private investors.

Some common questions answered in the report include:
- When do you need a private placement memorandum to raise capital?
- What types of disclosures must be made in a PPM?
- How can you market a private offering, while retaining a Regulation D exemption?
- What types of intermediaries and "finders" can promote a private offering?
- What types of investors can participate in a private placement?
- What are your options for preparing a private placement memorandum?
- How often should you edit or update a PPM?

Click here to download the report: Private Placement Memorandum Mistakes

 

 

If you are seeking professional assistance with your PPM, Growthink offers professional private placement memorandum writing and consulting services.  

 

Or, if you're writing your PPM yourself, you can use our Sample Private Placement Memorandum Template to finish your PPM quickly and easily, so that you spend less time "preparing," and more time speaking with investors.


Poll: Do you think GM, Ford, and Chrysler should be bailed out?


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Just yesterday, America's 3 largest automakers -- Ford, GM, and Chrysler -- all submitted business plans to congress. 

Here are the original copies of the plans:


Key components of the business plans

 

  • Increased production of fuel-efficient vehicles and energy-saving technologies
  • Rationalization of brands, models and retail outlets
  • Reduced wage and benefit costs, including further reductions in executive compensation
  • Significant capital structure restructuring
  • Consolidation in manufacturing operations

 

Funds requested

  • Ford is requesting a standby letter of credit for up to $9 billion. 
  • GM is requesting loans of up to $12 billion. 
  • Chrysler is requesting loans of up to $7 billion.

 

The potential repercussions...

 

  • The automakers - especially GM and Chrysler - predict catastrophe if they do not receive the loans.
  • In its business plan, GM claims that without "such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain ... The cost of failure in this instance would be enormous for everyone."
  • Chrylser argues that the $7 billion is "necessary to prevent further economic decline, if not outright economic depression."

 

What others have to say

  • Recent polls have shown varying degrees of support for the bailout among the public.  
  • According to a USA TODAY/Gallup Poll, 47% of adults believe "providing loans and other help" to auto companies is "not very important."
  • A poll conducted on Nov. 11-12 by Peter D. Hart Research Associates, found that 55% of Americans believe that the government should provide loans to American automakers, while 30% oppose.
  • A CNN/Opinion Research Corp. poll, conducted by telephone on Dec. 1-2 with nearly 1,100 people, showed that 61% of those surveyed oppose government assistance for the major U.S. automakers.



Entrepreneurs: what do you think?


Here at Growthink, we're curious to hear what entrepreneurs -- who are used to shopping their business plans around to lenders and investors -- have to say about the automakers' business plans and potential bailout. 

 

 


Growthink Services in a Down Economy


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Recently, we at Growthink have received a flood of inquiries from entrepreneurs and business owners, asking for advice on how to proceed in these turbulent times.

The fact of the matter is that it is hard to reassure anyone, in light of recent economic circumstances, that there is an upside for business owners who are revising short/intermediate goals or looking for capital. Small, medium, and large companies alike are hesitant to put themselves out there in an unstable, cash-constrained environment.

Yet amidst the seeming cynicism, we at Growthink are still seeing extremely positive movement amongst funds – especially around our headquarters here in California – that have not only the moneys to invest, but also the eagerness for new, niche deals.

Historical patterns indicate that downturns, such as the one in which we presently find ourselves, result in some of the highest levels of new company formation.

What this proves is that entrepreneurs – no matter the ebb or flow of Wall Street and Main Street – are consistently creative people, who seize upon circumstances and leverage them to start and/or grow their businesses. They reflect the American Dream so often referred to in the latest Presidential campaign.

Growthink's mission and vision, as founded by such entrepreneurs, is to help aspiring peers build and set forth strategic plans to gain momentum in their marketplace; and to hopefully attract investment dollars from the right people at the right time.

With all of that said, it comes down to a few key characteristics of good deal-making: confidence, relationships, and perseverance. Just because the opportunities are out there, doesn't mean they are easy to find, qualify, negotiate, or transact.

Our expertise, in working with investors on a daily basis, renders us the ability to quickly identify an outreach strategy, to get to a "yes" or a "no"; and to conduct diligence with interested parties, speeding the time to a closed deal. What this enables our clients to do, rather than expending 100% of their efforts on raising capital, is to focus on the day-to-day operations of their businesses. Ultimately, this is where potential investors want to see busy executives utilizing their skills and capabilities.

At Growthink, we welcome the opportunity to speak with you about our investment banking and consulting services. Should you be interested in scheduling a call, please contact us with the best day, time, and way to reach you, and we will happily accommodate.

Growthink Announces Launch of Growthink University


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As a supplement to our consulting practice, we're pleased to announce the launch of Growthink University, our new membership club dedicated to teaching entrepreneurs and business owners how to raise capital for their businesses.

The club assembles 10 years of capital raising expertise and methodologies developed and refined by Growthink, and gives entrepreneurs an additional "Do-It-Yourself" option to perfect their business plans.

Growthink University covers topics including, but not limited to:

  • The biggest mistakes that entrepreneurs make when trying to raise capital and how to avoid them.
  • How to overcome the capital-raising challenges faced by first-time entrepreneurs.
  • The difference between pre-and post-money valuations and making sure you don't get taken by investors.
  • The ten biggest mistakes that companies make in their business plans.
  • The winning ways to get meetings with investors -- and the most important things to know before sitting down at the table.
  • What financial projections need to prove about your business

 

Go to Growthink University (http://www.growthinkuniversity.com) to learn more.


Windfalls and Pitfalls: Private Equity and the Individual Investor


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How many times have you heard someone say, "Don't put all your eggs in one basket"?

When it comes to any kind of investing, this is very good advice.

But, if this is the case, why don’t private equity investors diversify?

Unfortunately, most individual investors in private equity significantly under-diversify their portfolios -- investing in one or only a handful of companies.  By so doing, they both greatly increase their risk profile and greatly decrease their probabilities of seeing investment return.


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