Growthink Blog

The 8 Things Angel Investors Want


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There are eight key things angel investors will look for when considering whether or not to fund your business. No, you don't have to satisfy all of these criteria. But the more of them you do, the better the chance they will say "yes" to your funding request.

#1: They Like You

Believe it or not, this is really important. No matter how good your venture is, if the investor doesn't like you, they generally won't fund you. So, build rapport with prospective investors and give them the respect they deserve.

#2: They Feel Good About the Venture's Genre

Even if the investors likes you and even if they think your company can be a huge success, they need to like what the venture is all about. For example, someone who hates politics will generally not fund the new political website you are launching. So, find investors who have an affinity for the type of venture you're launching/running.

#3 They Feel a Void


If an individual is an ultra-successful business person who is currently running multiple operations, they are generally not going to invest in more ventures. Since, they don't have a void; they have all the excitement in their daily life that they need. Conversely, a person who feels they might be "missing out on the action" will be more motivated to invest in you.

#4 They Feel There's Good ROI Potential

This is obviously important. Even if investors like you, the type of business, and they feel a void, they generally want to believe they will get a nice return on their investment if they fund you.

There are five sub-criteria to this, which get us to our sum of eight things angel investors want.

#4a: Scalability


Does your company have a strong potential to achieve significant annual revenues? In a truly scalable business, you can multiply your sales without having to greatly increase your resources. Scalable businesses grow more rapidly and can reach an exit (whereby the investor gets their return) faster.

#4b: High Barriers to Entry


Barriers to entry are those things that make it difficult for another firm to compete against you, such as patents or proprietary technology, a unique location, strategic partnerships, and long-term customer contracts.

The stronger and/or more barriers to entry you have, the more likely you are to succeed, and the higher expected ROI the investor has.

#4c: Worthy Management Team


Angels must believe in both the founders and the key operating personnel of your company. Because even the best idea will fail if the team isn't good enough.

#4d: Your Exit Strategy

Your "exit strategy" or method in which you will "exit" your business, is generally to sell it or go public, with the former being much more common. As such, it's good to think about your exit strategy early. Who might want to buy you in the future, and why?

Since angel investors can't realize their investment until you exit, be sure to prove to them that such an exit is viable.

#4e: The Right Price

Finally, angel investors will only invest when the price is right. If you price your equity too high, angels may not have the potential to reap significant enough returns and will not invest.

We see this on the show Shark Tank all the time. The entrepreneur says, for example, that for $400,000 they will give up 10% of their company. The sharks always laugh at percentages like this and say they will need at least 40% of the company or more for that dollar amount.

While the sharks are much more sophisticated, and shark-like, than your common angel investor, you need to price your equity fairly (give them a fair equity stake for their investment) if you want them to fund your venture.

Knowing these 8 things that angel investors want will help you identify and convince the right angels to fund your business!

For my complete game plan for raising funding from angel investors, check out our Angel Funding Formula.


Fed Easing: Three Winners


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The word from the Fed last week that it would continue with its quantitative easing - purchasing approximately $85 billion per month in U.S treasury bond and de facto continuing to expand the country’s money supply - signaled that that the era of extremely low interest rates will continue.

Predictably, stock markets worldwide cheered along with it being seen as a very positive signal for the well-recovering US housing market.

Now, as to what it means that the Fed has, since 2008, expanded the U.S. Money Supply almost 400% - from $800 billion in 2008 to over $3.5 trillion today?

Well, it doesn’t take a Nobel Prize in Economics to reliably predict the inevitable outcome…

Inflation.

Now, in spite of its strong negative connotations, an inflationary economy while extremely painful for very many, also offers opportunities to profit and win.

Here are three:

Winner Number One: Debtors. This is obvious, but easy to overlook. Those owing money at set interest rates - homeowners with 30 year fixed mortgages and companies issuing bonds - will benefit enormously as the inflation train rolls in.

Let’s look at a worst but not overly improbable case - a hyperinflation period where all prices rise 10X, resulting in a $500,000 home able to be credibly listed for $5 million.

It sounds crazy, but over the years in countries where hyperinflation has hit, this has not been an uncommon occurrence.

Now let’s say that home was financed (or refinanced) with a $400,000, 30-year mortgage at a fixed rate of 3.5%.

Well, with its price increasing from $500,000 to $5 million - while the amount owed on it remains fixed - all of a sudden the house’s equity to debt ratio skyrockets from 20% to 92%!

Winner Number Two: Companies with Pricing Power. Businesses with the ability to increase prices quickly without seeing sales plummet - think luxury goods and easily adjusted staples like gasoline at the pump - will hold significant advantages over businesses constrained by “stickier” prices.

Examples of the latter include services like mobile phones contracts and gym memberships, and the classic example of restaurants not increasing prices because of the cost of printing new menus.

Winner Number Three: Private Companies for Sale. My favorite, as there is no greater form of an entrepreneurial, economic success than a sale of a business at an attractive price.

In a world of rising prices, the acquisition appetites of larger companies increase as their cost of money - as driven by their valuation multiples - decrease.

This is most evident for public companies, now trading at a rich 18x earnings (S&P 500), who are able to buy smaller, usually private companies with the relatively cheap currency of high multiple public equity.

This frothiness also drives the financing environment, where buyers (investors) and sellers (entrepreneurs, companies seeking capital) more easily strike higher risk, higher valuation deals (see Fab.com, HootSuite, and scores of others) with an ease that isn’t there in a flat or deflationary environment.

So, if you're an entrepreneur, think about accelerating and intensifying both your financing and exit planning efforts.

And for investors, remember that the worst strategy in an era of rising prices is to be standing still and sliding away in fast depreciating cash.

P.S. Click here to complete our survey on investing and entrepreneurship and have a free cup of coffee on us!


Never Say This to a Child or Entrepreneur


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When my kids were younger, I recall one night when we were eating dinner. My kids were saying "I want this" and "I want that."

And then I said something that I immediately realized I should never tell my kids, or any entrepreneur for that matter.

What I said was this: "you know, money doesn't grow on trees."

Now, you may not think saying this is so bad. So, let me explain.

The reason why I said this was to show my kids the value of money. And that we have to work to make money to spend on the things we want.

But here's the negative: saying this paints the wrong picture. It paints the picture that we can't always get what we want. Which is the exact opposite of the attitude I want my kids, and all entrepreneurs, to have.

What my kids and all entrepreneurs MUST be thinking is YES, I CAN get whatever I want. Yes, it won't just come to me, but with hard work and ingenuity, I can and I will get what I want.

Fortunately, right after I said that to my kids, I caught myself.

One of the reasons I caught myself was from the interview I did a while back with Ken Lodi, the author of "The Bamboo Principle."

In the interview, Ken explained that timber bamboo shoots grow very little for four years while their extensive root system is growing and taking hold. But once the roots are firmly in place, the bamboo can grow a shocking 80 feet in just six weeks.

This story made me realize that money does in fact grow on trees. The key is to work on the tree's roots. To build such a strong foundation that generating money becomes easy.

Every great company has a strong foundation. They create a brand name, sales systems, delivery systems, etc. And then, they can generate cash and profits each and every day.

So, focus on building an extremely strong foundation. Think through your business model. Learn the best practices for each of the key business disciplines - marketing, HR, finance, sales, etc. And then, put your thinking into a strategic plan.

Your strategic plan is your roadmap to success. It is the tool that turns your ideas into reality. For example, the great marketing idea in your head isn't going to become reality unless it's documented in your plan and a team member(s) knows to execute on it. Likewise, your new products and services won't be built or fulfilled unless they are documented and your team knows what to do. Get your ideas in your strategic plan and then you build the tree from which money does grow.

So, never let anyone tell you that "money doesn't grow on trees" or that you can't have everything you want. Because money does grow on firmly-rooted trees and you CAN achieve and get everything you want out of life if you resolve to do so. They key is to build your plan -- your foundation -- and then grow systematically from there.


Private Equity and Your IRA: The Pathway to Tax-Advantaged Returns


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Individual Retirement Accounts, or IRAs, in all their forms - traditional, Roth, 401k, Defined Contribution, Simple, SEP, 403(b) and 457, have become increasingly popular vehicles for private equity investing.

For the individual investor, investing in private equity via a "Self-directed" IRA has a number of key advantages:

First and foremost are tax savings - both at the time of investment and as the investment appreciates.  In some circumstances - for pre-tax contributions via a SEP-IRA for example - up to $49,000 can be invested on a pre-tax (i.e. tax deductible) basis.

Secondly, the power of tax - free compounding of interest, dividends, and capital gains - via both traditional pre-tax IRAs as well as the increasingly popular (and increasingly tax-advantaged) post-tax Roth IRAs is enormous.

In high-return and payout scenarios, where there are larger cash dividends and/or capital gains paid on an annual basis, the value of tax free compounding can lead up to a doubling of total investment return when compared to taxed compounding.

And thirdly, investing in private equity via an IRA addresses "de facto" arguably the key negative of private equity investing - its illiquidity.  This is because, to encourage a long-term, retirement-focused time horizon, under the IRA umbrella there are significant, structured penalties for early withdrawl.

In short, IRAs are ideally designed to house long-term investment assets with high capital appreciation potential.  This is, of course, the core objective of almost all private equity investing.

 


7 Things You Must Know to Raise Money


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Raising funding is hard. This is actually a good thing. Because if it were easy, everyone would raise money and start a business, and competition would be ferocious. Better yet, since most entrepreneurs won't take the time to read this essay, you'll know this insider information and have a huge leg-up on them in raising capital.

So, here are 7 things you must know to raise money today.


1. Understand That Funding Doesn't Take Place All At Once

No matter how great your company or idea is, you are probably not going to get a $10 million check right away. Rather, you will typically raise several "rounds" of capital.

You start with a smaller round or amount of funding. Then, as your business grows, you are eligible for larger rounds of funding. This is because your business proves itself over time (eliminating some risk to investors) and your valuation rises as you grow (enabling you to raise larger sums of money).

2. Choose the Proper Source(s) of Funding

Choosing the right source of funding is the key to the Growthink Funding Pyramid™. Some forms of funding are much easier to raise than others. And based on your stage of development, different forms of funding are more relevant.

For example, the funding sources available to a pre-revenue startup are very different than the sources available to a 3-year old company generating $1 million in annual revenues. Case in point: Google initially failed when it tried to raise money from venture capitalists. The key is to go after the right sources of funding at the right time.

3. Build Relationships Early

According to Fred Wilson of Union Square Ventures, "The perfect entrepreneur/VC relationship is one where each has established respect and trust with the other well before an investment transaction is broached."

The key is to build these relationships early. So, even if you don't qualify for a $5 million round of venture capital today, start meeting with venture capitalists so they know you when you do qualify a year from now.

4. Keep Your Business Plan Current

One of the most important things to show in your business plan is what you've accomplished in your business to date. And ideally, every month you are accomplishing more. So, be sure to update your plan with this progress.

Importantly, when you meet a lender or investor, you want to be able to give them your business plan in a timely manner. So finish your plan now, and keep it up-to-date, so you can send it off at a moment's notice.

5. Always be a Marketer

In raising money, the best company doesn't always win. Rather, the best marketer wins. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money.

Marketing is the process of finding the right investor, convincing them to meet with you, and then convincing them to invest in your business. Yes, this is very similar to how you market a product or service. So make sure to use your marketing skills.

6. Have "Thick Skin"

When raising funding, be prepared for a lot of "no's." Going back to the Google example, even when Google was ready for venture capital, the majority of venture capitalist said "no."

When an investor says "no," it doesn't necessarily mean that your venture is not a good one. It simply means that the venture is not a good investment fit for them. You must have "thick skin" and be able to bounce back from lots of "no's" and persevere.

When failing over and over again to create the light bulb, Thomas Edison famously said, "I have not failed. I've just found 10,000 ways that won't work." Have the same mentality with investors. That is, think, "I have not failed. I've just found 100 investors that aren't a good fit."

7. Adapt as Needed

While you must have "thick skin," that doesn't mean to be foolishly stubborn. What I mean by this is that if you hear the same feedback from investors over and over again, you shouldn't ignore it. Rather, you should adapt.

For example, if several prospective investors tell you they want to see a sample of your product or service before considering funding you, create it for them. Don't just plow forward with contacting more and more investors in this case.

By adapting to the needs of investors, particularly when you hear the same feedback multiple times, you can make the requisite changes to raise the money you need.

Understanding these seven funding truths will help you raise the funding you need to grow your business. For additional assistance, this "truth about funding" presentation will prove quite helpful.


3 Business Growth Lessons from Madonna


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Modeling a business strategy after someone else's prior success is typically a great idea.

Interestingly, these models of success can come from rather unexpected sources.  While most people will turn to other businesses when looking for new ideas, the world of popular music can teach us quite a lot about business growth and sustainability. 

Madonna, for example, has long been the undisputed queen of popular music. Whether you love or hate her music (or her), Madonna has proven to be more than a singer and dancer.  She has a savvy business mind that's supported a successful career spanning more than 30 years and an empire of music sales and merchandizing valued at $500 Million.  You have to admit, the Material Girl has had a good run. 

Here are 3 powerful lessons we can learn from Madonna and use to create success in our own businesses:

1. Constant Reinvention

Madonna is well known for constantly reinventing herself and each album she releases has been different from the last.  Reinvention has actually been one of the greatest signatures of her career and has allowed her to stay relevant in a constantly changing market. 

As the industry matured, Madonna's music and image have also changed in an effort to constantly bring her fans what they want.

The lesson:
Staying relevant is extremely important for businesses of any size.  Markets are always changing and a business that allows itself to lose its relevancy has been left behind.  Stay in touch with your customers/audience and market evolutions. 

2. Pushing the Boundaries


If Madonna is known for one thing it is pushing boundaries.  She has been creating controversy throughout her career and much of this stems from her willingness to challenge commonly accepted notions.  She created sexier songs with racier lyrics and began challenging what society saw as acceptable entertainment. 

In fact, in 1990, when her music video Justify My Love was banned by MTV she packaged it as a single and sold it.  This had never been done with a music video before.  This innovative, bold, in-your-face move earned her millions in revenue when the video sold like hotcakes. 

The lesson:
Knowing how and when to push boundaries is an important skill for any business.  Challenging accepted notions is often what leads to innovation.  Those companies who have come to dominate their markets through innovation were always willing to push things a little further, to do what no other company had yet done. 

Pushing boundaries can be a worrisome concept because innovation is almost always met with resistance but without risk there can be no reward. 

3.  Leverage Platforms & Distribution


Madonna is an impressive businesswoman and she has always understood the importance of leveraging existing platforms and distribution channels. In fact, part of the reason she rose to prominence so quickly is because she made highly effective use of the very young MTV platform.  Here was a chance for her to access a vast consumer market in a unique and novel way.  Her focus on high quality videos, filled with great music and alluring imagery, set her apart from the other musicians of the time.

The lesson:
Madonna was far from being the first successful popular musician but she was one of the first to harness the new and highly effective market of music video television.  Think of the iPad.  While similar  tablet technology came years before it, Apple was the first to package it in a unique style with functionality that appealed to consumers.

Business owners need to be vigilant in looking for new and emerging markets and platforms and then be assertive in establishing themselves in each one.  As the market/platform grows in popularity, the prominence of the company also rises. 

Like a Virgin

Madonna's career can be a great example from which to draw a number of useful concepts.  Her unique voice and readily identifiable fashion sense helped to establish her as a brand early in her career but she was never afraid to reinvent herself to remain relevant.  The great impact she has had on the world of popular music comes from her desire to continually push boundaries, to challenge accepted notions and create something new and desirable. 

Businesses can never stagnate; they must remain dynamic and able to change to meet the demands of a growing market.  Schedule an hour of quiet time this week.  You can do this alone, with your advisor, or your core leadership team.  Consider these questions:

  • What have I been afraid to do in my business for fear or "rocking the boat" or being "too edgy?"

  • What new technologies, markets, product innovations, or unique services can I offer?  How can I go beyond what currently is and create an appetite for a new product or solution?

  • Where can my company get head of others?  What ideas do I have that I can validate and get to market before my competitors?  What client needs can I solve before anyone else?

  • What established platforms or distribution channels are my target customers already using or buying from? How can I leverage them to get my product or service in front of these customers?


The answers can be powerful and open doors to opportunities.  Remember, brainstorming and documenting ideas is great, but profit and growth only come from action.

Just like Madonna, be willing to take proactive, out-of-box, bold action.


Why I Hate & Love Mobile Marketing


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Mobile marketing is here, and it's here to stay.

Interestingly, I both hate and love mobile marketing.

Here's what I hate about it, and particularly, my frustrations with mobile phones:

1. I've seen families out to dinner together where 2 or more of the family members are on their mobile phones (come on, it's family time)

2. I've seen kids spending too much time texting and playing games on mobile phones, when they should be reading, playing sports, doing school work, etc.

3. Texting and driving has gotten out of control, and has made driving much more dangerous (According to AAA, 46% percent of all teenage drivers admit to text messaging while driving).

4. I've seen too many cases of mobile phones being used to entertain children so their parents can converse amongst themselves. It just concerns me that kids brought up with constant entertainment and less inter-personal communications are going to have issues later.

So, as you can see, my frustration with mobile phones is largely when they are abused. I clearly thing there's a time for them. But we (kids AND adults) need limits.

Ok, I'll get off my soapbox now, and talk about the positives of mobile phones, and specifically mobile marketing.

The fact is this: mobile marketing is highly effective and it's growing like crazy.

In fact, earlier this month, Facebook announced in its second-quarter earnings. In it, Facebook disclosed that a whopping 41 percent of its advertising revenue was generated by mobile users. This was up 11 percent from just one quarter earlier.
 
What this means to all marketers is that smartphones and tablets are becoming more and more prevalent over desktop computers as a means of accessing information (and time spent).

Here are some of the benefits I see of mobile marketing:

1. Mobile marketing is where your customers are. 80% of Americans have their mobile phones with them virtually all the time. Since your customers and prospective customers are on their mobile devices, you have a better chance reaching them there versus most other channels (e.g., telemarketing, print ads, etc.).

2. Mobile marketing incurs a very low cost. Mobile advertising is relatively inexpensive. And mobile marketing activities like sending text messages only costs pennies.

3. Some forms of mobile marketing are very intrusive and thus get seen. Text messages are highly effective. In fact, according to the CTIA Wireless Association, while it takes 90 minutes for the average person to respond to an email, it takes just 90 seconds for someone on average to respond to a text message. Likewise, most mobile ads are more intrusive, and thus more seen by customers, than ads in other media like print and web.

4. High response rates: Response rates to mobile marketing are nearly 5 times higher than response rates to print advertisements.

These benefits mean that mobile marketing should be part of every company's marketing plan. Mobile marketing allows you to reach customers quickly. Customers will get more and more used to paying you and other companies via their mobile device.

And mobile applications will continue to grow like wildfire, and are not only a way for you to stay in front of customers, but they could be a huge revenue source for your company. Note that in the first quarter of 2013 alone there was an 11 percent increase in mobile app downloads versus the entire year of 2012.

So, personally, I ask that you don't abuse mobile phones per my frustrations above. But do embrace mobile marketing as it's a must-have in your marketing plan.


How to Find the Most Qualified People When Outsourcing


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There are many websites, such as ODesk, Guru, and Elance, on which you can find people and firms to which you can outsource projects. Regardless of the site you choose, the key is to get the largest pool of qualified providers to apply for your project. This way, you have more people from which to choose.

Even if you only hire one, you can go back and contact the same pool of talent for future projects later. Consider applicants as being in your "rolodex" of people to contact in the future.

Below are tips to keep in mind when posting your project. In a nutshell, you want to include all of the information that an applicant needs to know, but do so succinctly.

If anything is left out, you'll have to go back and answer their questions about it later. It's always easier to clarify everything up front.

Create a Clear Project Title

Here, include the work to be performed, on what, and in what industry. For example, "Help Developing Ebook" could mean anything from research to writing to editing to cover design. Compare that to "Writing 10,000 Word Real Estate Ebook."  The latter will be more likely to catch the eye of writers with real estate knowledge.

Create a Clear Project Description

This sounds simple enough, but you should try to answer as many possible questions as you can, which means addressing certain areas, like:
 

  • The scope of the project. In the above example, wanting a 10,000-word Ebook written vs. 20,000 words would be helpful information for applicants to know. This helps them estimate the time it will take them and therefore their bid for the project. If you are paying hourly, it will help prevent misunderstandings later.

  • Software needed. Make sure they at least have Microsoft Word and Excel, if that's what you use. Other software is industry-specific, like Adobe Photoshop among graphic designers.

    You may or may not know what software is needed for things you don't specialize in, but you will soon enough. All other things equal, choose the person who already has the best software for the job, as you'll get better results.

  • Programming languages. Some website projects require that the provider knows certain programming languages besides standard html, such as PHP, AJAX, etc. In these cases, it's better to post "PHP Programmer Needed to..." than just "Programmer." You'll get fewer, but more qualified responses. If you don't know what languages are needed, either ask a friend or do a Google search beforehand, or you could post in the project that you don't know what language is needed, and ask them to make suggestions.

    Ideally, you will want to hire people who can educate you, so this sets the tone right from the beginning. I know some people who post $10 projects for 30 minutes of a programmer's time just to have their questions answered.

  • Payment amount. First, decide if you want to pay them by the hour, or for the whole project. There are pros and cons to both. If you estimate that something will take 5-8 hours, going hourly is fine. For work that will take longer than that or that has a higher likelihood of uncertainty, I would try a project-basis.

    Sometimes you can't estimate how long something will take, in this case, hire them on an hourly basis for a little while to get started and figure things out. Sometimes applicants will claim that they can't estimate how long it will take, while others can. I would go with people who are able to give you specific information as it shows they're more organized and have done something enough times to know how long it should take.

  • Payment terms. I would never pay more than 50% up front. In this case, I would pay the remaining 50% when the work is done, or have a milestone payment of 25% and 25% upon completion.

    Also, never pay someone the final payment if there is still work left to be done; you may never see your project finished.

  • Payment methods. When you outsource through third party websites, they will typically handle the payment method.  If or once you start outsourcing directly, you will have to figure out the best method for paying your contractor. In the latter, there are multiple options such as PayPal and Dwolla.


Upload samples of what you need

You can write 5 paragraphs trying to explain the final product, or you can show them something similar you have had done before (or someone else's to model yours after). The latter is typically more effective.

Most sites will allow you to upload files to show the contractor what they'll be working with or making. You can also insert links in the project description to websites, files, audios, or videos showing or explaining things more vividly.

Particularly if you are asking the person to develop a website, you must show them examples of other websites you like. If you don't, I can nearly guarantee you'll be disappointed with the results.

Choose the time period for bidding

On outsourcing websites, you are typically given options like 3 days, 5 days, 7 days, 15 days, or 30 days to accept bids. I lean towards giving a longer time period, unless the urgency of your project means that you don't have as much time to wait.

In general, the more time that providers have to find and respond to your project, the more qualified applicants from which you'll have to choose.

Also, some of the best providers are also the busiest, so by giving a longer time frame to respond you are more likely to catch them when they're available.

Follow these tips and my other key outsourcing strategies to get a qualified pool of outsourced applicants to complete your projects. These outsourcers will give  you the manpower and expertise you need to grow your business at a very economical price.


The 5 Biggest Outsourcing Blunders


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The term "outsourcing" describes contracting out of a business process to a third-party, that is, someone or some firm outside of your core organization.

Outsourcing generally refers to ongoing processes versus one-time processes. For example, the development of your website is generally a one-time process. Conversely, the maintenance of your website is an ongoing process. However, some people consider both one-time and ongoing processes to be outsourcing when you select someone outside of your organization to complete them.

Regardless of your definition, outsourcing has many benefits, my favorite of which are these four:

1. Focus: Outsourcing allows you to focus on your core competencies and activities. For example, if you own a chain of restaurants, you generally don't have (nor should you) the skills to develop a cutting-edge website in-house.

2. Cost Savings: You can often outsource to individuals and firms in areas with lower costs of living and thus lower prices than you can attain in-house.

3. Expertise: When outsourcing to individuals and firms who specialize in a certain area, they will have expertise that you simply don't have.

4. Flexibility: Outsourcing allows you ramp up and/or ramp down more quickly than maintaining a full-time staff for all functions.

Unfortunately, when they start outsourcing, most entrepreneurs and small business owners make several mistakes. Below are the 5 most common ones to avoid.

Mistake #1: Failing to define tasks/projects clearly


If you don't clearly and comprehensively define the task or project you need fulfilled from the start, your project will inevitably fail. You might choose the wrong person for the job and/or they won't perform to your expectations if you haven't completed this crucial step.

Mistake #2: Failing to hire someone without enough experience


Nothing is worse than the blind leading the blind. When I hire someone to do something that I do not know how to do personally, they need to know how to do it. They need to educate you on their chosen skill set, not the other way around.

Your role is to describe the end result you want, ask for and listen to their suggestions, and rely on their expertise and talent to achieve it according to your description. Make sure you check their past work and references to ensure they have a track record of getting similar work completed on-time and to the satisfaction of those who've hired them.

Mistake #3: Failing to establish and abide by the timeframe

If you've ever provided services for a client in a rush, you know how stressful it can be to drop everything at the last minute and make their emergency yours. The people you outsource to are no different, and it will benefit you to plan and begin things in advance and not at the last minute.

So, map out by when you need to hire someone, when the work needs to commence, and when it must be completed. Create milestones within each of these processes, such as by when you will complete your project description, and when the contractor must complete the first draft, etc.

Mistake #4: Failing to adequately communicate

Just because you hired a great person, it doesn't mean the project will go smoothly. The key here is to effectively communicate with them.

Make sure you check-in with them and get status updates. Get them to send you drafts of their work, and then provide detailed comments regarding what you like and don't like.

The fact is that the more and more thoroughly you communicate with them, the better they will perform. This is true up to an extent of course; because if you micro-manage (or manage too aggressively) it will take up too much of your time and often aggravate the contractor.

Mistake #5: Failing to leverage talented outsourcers


Once in a while, when you outsource, you will find gems. Gems are those outsourcers who do a phenomenal job.

The key is this: once you find these gems, keep them. Give them additional projects. And if you don't have any, refer them to others you know. And keep in touch. At a minimum, email them every month or two to say hi.

In fact, I've had amazing success with just this. I hired an outsourced tech person on August 16, 2005. He did a phenomenal job. I've often kept in touch since then, and he's helped me with several projects. And even though he now has a full-time job (he's in India), he still helps me on the side a lot. And he still does a great job each time!

Knowing how to effectively outsource is a critical skill all entrepreneurs must have. It allows you to accomplish more, accomplish it with more expertise, accomplish it faster, and accomplish it with less money. These are key benefits you can't do without.

 

Suggested Resource: In today's competitive business environment, you must outsource to stay competitive. Outsource the right way using Growthink's Outsourcing Formula.


Strategic Plans And Business Plans: 5 Key Differences


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Over the past 15 years, I've helped over 500,000 entrepreneurs and business owners to develop their business and strategic plans.

And, as you might imagine, I've spent a lot of time discussing business plans and strategic plans internally. Enough so that among other things, I use the acronym "BP" for business plans and "SP" for strategic plans.

Now, because these terms are often used synonymously, let me explain the key difference as I see them. Business plans or BPs are plans created for the primary goal of convincing an investor or lender to fund you. Conversely, strategic plans or SPs are developed to determine and document your strategy so your company understands and can attain its objectives.

As you can see, both plans serve very different and very important purposes.

Below are the 5 key sections that a strategic plan must have that need not be included, or require much less focus, in a business plan.

1. Elevator Pitch

An elevator pitch is a brief description of your business.

It is included in your strategic plan since your elevator pitch is both important to your business' success, and should often be updated annually.

An elevator pitch got it's name because you need to be able to describe your business succinctly and within the time it takes to travel from the ground to the top floor in an elevator.

A quality elevator pitch:

  • Gets everyone in your company on the same page regarding what your business is and what the key objectives are.

  • Allows everyone in your company to give a concise and consistent explanation of your business which leads to more customers.


In a business plan, you do include your elevator pitch in the Executive Summary section to concisely explain your company to investors and lenders. In your strategic plan, it is used to ensure consensus within your organization.


2. Company Mission Statement


A mission statement explains what your business is trying to achieve.

For internal decision-making, it helps as key decisions should be made with regards to how well they help the company progress in achieving its mission.

Also, for internal (e.g., employees) audiences, the mission can inspire and get them excited to be part of what the company is doing.

While your mission statement is often also included in your business plan, investors and lenders are generally more concerned with your ability to earn them a return on investment. As such, it's not as heavily emphasized in your business plan.

Some great examples of mission statements include the following:

  • Google's mission is to organize the world's information and make it universally accessible and useful.

  • Kiva's mission is to connect people, through lending, for the sake of alleviating poverty.


3. Goal Specificity

Because your strategic plan focuses on setting your company's vision and getting your team to execute on that vision, your strategic plan must include a greater focus on your goals than your business plan.

While your business plan focuses more on your long-term goals, your strategic plan is more granular. Specifically, your strategic plan should lay out your company's 5 year goals, 1 year goals, and your upcoming quarterly and monthly goals.


4. Key Performance Indicators (KPIs)

As the name indicates, your "KPIs" or Key Performance Indicators are the metrics that judge your business' performance based on the success you'd like to succeed.

Identifying and measuring your KPIs is absolutely critical to ensuring you are effectively executing on your vision and plans. Conversely, if you don't measure your KPIs, you have no idea whether you are achieving the success you desire.

In your strategic plan, unlike in your business plan, you must identify the KPIs your business must track in order to achieve your goals.


5. Identification of Required Strengths


In your business plan, you should stress your existing strengths that make your business uniquely qualified to succeed. This helps convince investors and lenders to fund you.

Conversely, in your strategic plan, you must identify the strengths you need to develop. For example, how could you gain competitive advantage by modifying your products or services? Or by hiring and training certain personnel? Or by creating new operational systems? Etc.

By asking and answering these questions in your strategic plan, you can create a strategy for building a rock solid company that's the envy of your industry.

To summarize, the right business plan allows you to raise money to fund your business' growth. The right strategic plan gives you and your team the vision, goals and game plan to achieve this growth. Finally, using the right strategic plan template helps you create your strategic plan quickly and easily so you can start growing immediately.


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Blog Authors

Jay Turo

Dave Lavinsky