In my previous post, I explained how getting an outside perspective improves your chances of raising capital.
There is a second, equally important, benefit of retaining a business planning consultant to develop your business plan: it improves your business strategy.
Let's start with some facts...
Fact #1: There are 24 million businesses in the United States alone.
Fact #2: History tends to repeat itself.
What I mean is, if you have an idea, whether it's a marketing idea, operations idea -- anything really -- chances are it's been tried before. Chances are also that if it failed the first time, it will most likely fail again.
That's not to be discouraging, because there's a decent chance that it wasn't executed properly the first time, or lacked the nuances you bring to the idea. Regardless -- if your idea has been tested before, I bet you want to know about it.
When you are aware of the earlier attempts of an idea, you can quickly learn from them and either 1) Determine that it won't work (and cut your losses) or 2) refine the strategy and make it work. But, if you never know about those other attempts, your chances of failure are increased.
A competent business plan advisor can provide a lot of value during this research and discovery phase. Reputable business plan consultants not only perform market research, they leverage their existing knowledge and experiences regarding their own businesses and the businesses of their colleagues. This positions them to point out those potential pitfalls and strategies which have failed in the past, as well as strategies that have been proven to work.
This is very important, because unrealistic assumptions can kill a business.
To explore this, let's take an example from a company I just spoke with yesterday. This firm is about to launch a new division offering BPO (business process outsourcing) services. When I asked about their expected sales cycle (the time it takes from when they contact a prospective customer to when they secure the client) they answered 3 to 6 months.
Well, 3 to 6 months is a reasonable sales cycle in this industry. But what if they told me 3 to 6 weeks? Worse yet, what if they went out and succeeded in raising financing -- expecting revenues to come in within a 3 to 6 week period?
Most likely, they would have raised too little money and gone bankrupt while anxiously waiting for prospects to become customers.
There's another piece to business strategy consulting, which involves taking interesting (or even seemingly mundane) ideas from other industries and finding creative ways to adapt them to your business. These types of insights are frequently offered by outside advisors and have been known to result in breakthroughs responsible for transforming entire industries.
Consider roll-on deodorant. The "roll-on" part was inspired by the ball-point pen. Before that, deodorant was packaged in cream form. Or, consider Fred Smith's Fedex. Smith applied the banking industry's method of clearing overnight checks to the overnight delivery of packages. Each of these cross-industry breakthroughs resulted in billion dollar industries.
I'll admit it... As a kid, I hated history class. I couldn't imagine information less relevant to my life than what happened in Europe 600 years ago. But you can't be ignorant about what has happened in the past or what is happening around you -- even half-way across the globe -- because it does affect you. Knowing what other companies are doing, what's working and what's failed -- that's the information that will prevent you from repeating failures and allow you to replicate success.
Who knows? A well-researched busines strategy might just result in a breakthrough that establishes your place in business history.
Related post: How Business Plan Writers Help You Raise Capital
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?"
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.
10) Keep Launching, Innovating and Growing
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?
Happy Holidays! In celebration of the season, and the entrepreneurial spirit, Growthink has created a video holiday card which you can view below:
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.
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:
The potential repercussions...
What others have to say
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.