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


'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:

 


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.


Growthink Launches Turnaround Consulting Service


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If you’ve glanced at newspaper headlines, turned on a television, or read any of our blog posts within the last several weeks, you know that this is a turbulent time for the global market. This brave new world has lead to widespread and palpable effects on small and middle market companies everywhere. The credit crunch, the volatility of the stock market, and the uncertainty of the new political landscape have left many entrepreneurs and small business owners experiencing emotions ranging from mild trepidation, to full-fledged panic.

As scary as the landscape can appear right now, we believe firmly that businesses that look for the opportunities provided by the current climate can position themselves to experience success.  In order to help companies achieve that success, Growthink has launched a new service: Turnaround Strategy Consulting

Simply put, there are numerous steps businesses can take right now to turn the corner. Our decade of experience working with a broad spectrum of firms, from start-ups to Fortune 500 companies, has allowed us to develop comprehensive, analytical methodologies that indentify the cause of financial failures as well as realistic solutions that can be quickly implemented to turn businesses around.

Since 1999, Growthink has provided strategic guidance to companies through rapidly changing markets and economic climates, including the wake of huge economic crises, such as the end of the dot-com bubble and the post 9/11 financial landscape. Even in light of the 2008 “Credit Crunch,” Growthink is able to find opportunities within the chaos and create solid strategies for our clients.

Even businesses that have not experienced dramatic shifts, but have felt a recent downward trend can benefit from Growthink’s consulting.  Improving margins, identifying the right customers, and implementing effective management are all areas that can make a significant difference for any firm in this economic environment.

Additionally, as a full-service firm, our turnaround strategy solutions can examine and assist with all aspects of business growth, from branding, public relations, business planning, web development, internet marketing, and investment banking.

If Turnaround Strategy Consulting can be of use to your business, please visit our service description page here or contact us by phone at 1-800-967-6419.


Starting Your Own Business: Protection from a Fragile Economy


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The Today Show recently featured a segment on entrepreneurship -- specifically, how many individuals are beginning to start businesses in response to a fragile economy and job market. As unemployment rises (currently up to 5.5%), many driven individuals find themselves without jobs and are forced to find creative solutions to their economic pressures.

Presented in the clip below is the story of Tracy Huges, founder of The Rum Cake Fairy Dessert Company. Tracy started the venture after being laid off from her marketing job.

The segment provides much highly useful information to new entrepreneurs, including the importance of having a good credit history, building trusting relationships with potential investors and creditors, and most importantly, carefully constructing a formal business plan. Business plans are a crucial step in the funding process, and are required documentation before pursuing capital from an SBA affiliate or micro lending institutions. While the segment places less focus on angel investors or venture capitalists, it’s important to note that such documentation is also a prerequisite for seeking equity funding as well.

Special attention is given to the personal loan management company Virgin Money (www.virginmoneyus.com). Such companies allow their users to formally structure loans between friends and family, which can be a fantastic way to manage early stage debt.

 


Business Exit Strategy: Preparing to Sell A Business


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As every entrepreneur knows, a great business plan is essential for effectively launching a business.  As the business grows, an effective strategic plan is required to successfully reach the business’s full potential.

But what about planning your exit strategy? 

Far too many business owners do not realize that careful strategic planning to sell your business is just as important as planning to launch and grow your business.

In addition to an independent lifestyle and personal fulfillment, a successful exit is the primary motivator for business ownership and entrepreneurship. 

(Not to mention that a successful exit tends to improve one’s lifestyle and personal fulfillment...)

Because acquisition is the most common exit for an entrepreneur / business owner, here are some tips to better prepare you to sell your business.


Don’t Wait Too Long To Sell

Many business owners wait until the last minute to try and sell their business. They wait until the business is stagnating, or they are exhausted with running the business. In fact, the best time to sell is when business is booming.


But Take Your Time – Don’t Be in Too Much of a Hurry

If you are in too much of a hurry to sell, you will probably leave a lot of money on the table. Buyers – especially sophisticated larger corporations – will likely sense your urgency and will take advantage of it in the negotiation period.


Start the Process Early

It’s a good idea to begin preparing 2-4 years BEFORE the sale. It’s much more expensive and time-consuming to rush and prepare all of the necessary financial and other information in a few months than it is to consistently record and compile records over a period of years. This record-keeping is also important for your business’s growth, since it provides more perspective on your company’s performance.


Get Your House in Order

Make sure that you have been keeping accurate financial records and that your assets are ready for sale.  This includes both tangible assets such as equipment and inventory, as well as intangible assets such as contracts, leases, patents, trademarks, etc.  Make sure that everything is assignable to the buyer and be prepared for extensive due diligence.


Try to See It From the Buyer’s Point of View

A buyer’s motivations are often different than the typical business owner’s. While the entrepreneurial business owner may get excited about innovation and creative strategies, the buyer cares much more about the potential for stable revenue streams and growth potential.  Take time to understand your potential buyer’s point of view, interests, and motivations.


Make Yourself Less Central to the Business’s Success

The buyer wants to buy a business – not you or your job.  From the buyer’s perspective, it’s better if the current owner is not important to the success of the business.  Therefore, in planning for the sale of your business, you should begin training your management team to take over critical business functions.  If all of the key decisions revolve around you (the owner), then the value of the company will be limited without the owner – and therefore, the business is less attractive to a buyer.


Meanwhile, Keep Focused on Running (and Growing) Your Business

When starting the sales process, you must keep a laser-sharp focus on your business’s operations.  It’s important that you do not get too wrapped up in either the sales process or in the romance of any particular sale offer.  As difficult as this is, it’s best to act as if any deal can fall through, even if you are in the final negotiation period, because any deal can come unraveled at the last moment.  Keep your focus on growing your business until the check has cleared and is in the bank. 

In addition, you should do your best to keep the sales process confidential so that you do not endanger relationships with any key clients, employees, or partners whose departure could threaten a transaction or the operations of your business.


Get Professional Assistance

If you are a business owner seeking to sell your business, you can benefit from outside advice and assistance.  As the old saying goes, “The attorney who represents himself has a fool for a client.”  The same applies for a business owner selling without an advisor.  Your advisor will provide you with guidance regarding valuation, due diligence, and the marketing of your business opportunity.  Without a competent advisor, you decrease your chances of selling your business at its maximum price.


Even if a Deal Comes, Be Prepared to Say No

If you have invested a lot of time and energy into the search, negotiation, and due diligence phases, you may be reluctant to reject any deal that comes across the table. However, just because you have a deal in front of you, you do not have to take it.  If the price is not attractive or if the deal is not right for another reason – and it cannot be mended – you may be wise to walk away and consider the next opportunity.

Sometimes, during the process of preparing their business for sale, business owners will find themselves at the helm of a much more profitable, attractive business.  If you have a profitable business, keep in mind that you have other options at your disposable.  In addition to selling your business, you can continue to grow organically, raise growth capital, and/or explore strategic partnerships. 

It’s important to continually evaluate your options throughout all phases of business growth to ensure that you are making the best decisions for the long term.

 

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About Growthink

Founded in 1999, Growthink is a leading middle market investment bank.  Our professional investment bankers have assisted clients in raising more than $1 billion in growth financing, as well as advising on mergers and acquisitions transactions.

 

Need assistance with your business exit strategy? 

 

Looking to sell your business?

  • We have considerable experience advising middle market business owners on the sale of their businesses. Contact Growthink's investment bankers today.

 


The Marketing Plan: Documenting Your Growth Strategy


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The marketing plan describes your strategy for penetrating the market, delivering your product, and retaining your customers. This video explains how to create an effective marketing plan.

 

 

 

 


New Growthink Clients: iControl and Pop! Technology


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We are proud to highlight two exciting new clients at Growthink: iControl and Pop! Technology.

 

iControl

 

iControl is a periodical distribution and marketing company and division of The Current Companies.

iControl provides web-enabled newspaper billing consolidation services to newspaper vendors and retailers, including CVS and Barnes & Noble. With more than 8,000 active accounts, iControl is the largest provider of such services in North America by a ratio of more than 2-to-1.

Growthink will be consulting iControl on their strategic planning and business development initiatives.

For more information on our work with iControl, please view iControl's recent announcement here.

 

Pop! Technology

 

Pop! Technology is a Dallas-based creator of 'active' barcode information systems used by the food, beverage, pharmaceutical and health services sectors.

The company's technology transforms a standard barcode into an interactive barcode that provides real time information about the status and condition of their products at all points of the supply and distribution chain, from manufacture to end user.

Watch this video to learn more about how Pop's technology works.

This past May, Pop! Technology retained Growthink to assist with a $2M capital raise to expand their operations.

Here is a recent post on Pop! Technology from Texas Startup Blog.

 


 


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