Written by Dave Lavinsky on Wednesday, March 21, 2012
The date was July 6, 2010. That's 623 days ago.
That's the day I first started publicly promoting Crowdfunding as a viable funding source for entrepreneurs.
At the time, entrepreneurs were raising approximately $1 million each month from Crowdfunding.
Since then, the market has absolutely exploded. I now estimate that $1 million is being raised from Crowdfunding each day!
When I first wrote about Crowdfunding two years ago, I predicted it would be huge. That prediction has clearly been proven true.
But what I also predicted was that some entrepreneur would shatter the million-dollar Crowdfunding barrier.
You see, at the time, tons of entrepreneurs were raising smaller amounts with Crowdfunding. But no one had raised over $1 million dollars.
And since then, many entrepreneurs have come close.
On December 6, 2010 Scott Wilson from Chicago raised $942,578 for his crowdfunded watch-kit product.
And on January 18, 2012, John Van Den Nieuwenhuizen from San Francisco, raised $938,771 for his Bluetooth speaker project.
But still no one could break the million-dollar barrier.
And then, just last month, it happened.
Casey Hopkins from Portland, OR broke the record with his iphone dock product. Casey breezed past the million-dollar mark, raising $1,464,706 for his product via Crowdfunding.
But here's the crazy thing....Casey Hopkins only had a few days to bask in the glory of raising the most money every from Crowdfunding.
Since, just last week, on March 13 to be exact, San Francisco's Tim Schafer completed a Crowdfunding raise for his new video game project.
And Tim raised a whopping $3,336,371.
That's right. 87,142 individuals from throughout the globe each chipped in an average of $38 each to give Tim $3.4 MILLION to launch his product.
I'd say at this point Crowdfunding has proven itself to be a huge success.
Over the past two years, I've not only helped tons of entrepreneurs launch their Crowdfunding projects, but I've scrutinized the ones which have successfully raised all the money they need.
And, from doing so, I've identified the common characteristics of those entrepreneurs who successfully raise Crowdfunding:
1. They start by having their close friends and family members Crowdfund them. You see, if I as a stranger go to a Crowdfunding project and see that no one else has funded it, I become skeptical. Conversely, if I see that 35 people have already funded it, I am more confident. This is called "social proof." Entrepreneurs who successfully raise Crowdfunding leverage social proof by getting their close friends and family members to fund them before they promote their raise to strangers.
2. They offer "tangible" rewards. Most strangers won't fund you out of the goodness of their hearts. Rather, they fund you to earn the rewards you have promised them. Such as you shipping them your $100 product later when they give you $65 in funding today. The more tangible your reward, and the more you can position it as something the customer wants, the more successful you will be.
3. They create a cool, personal video. Even if your product or service idea is great, most strangers won't want to fund you. But, if you create a video in which you are speaking about why you want to create the product/service, your success will skyrocket. In the video, you need to connect with people. You want to inspire strangers who watch it, so that they want to fund you and see you succeed, and they want to tell their friends about you.
4. They manage their Crowdfunding raises from start to finish (which usually lasts 60 or 90 days). Once you set up your Crowdfunding project, you're not quite done. You need to market it via social media and other channels (like PR which has worked really well for entrepreneurs raising Crowdfunding). You need to respond to questions that potential funders pose. And if the amount of funding you initially sought gets exceeded (which fortunately happens a lot), you need to post new videos and updates telling strangers that you will accept more money and what you will use it for.
I hope you found the 4 common characteristics of successfully crowdfunded entrepreneurs helpful.
Importantly, I've identified even more strategies and tips to ensure you succeed with your Crowdfunding raise. I put them all together in a simple-to-follow program called "Crowdfunding Formula."
Check it out now at http://www.crowdfundingformula.com/
Written by Dave Lavinsky on Sunday, March 18, 2012
I've been following the success of Crowdfunding since the very beginning. Since I knew it would become a very important source of funding for entrepreneurs.
And today I want to tell you just how big it has become.
To begin, "Crowdfunding" is getting a group of regular individuals (versus banks, venture capitalists or angel investors) to collectively fund your venture.
There are several "Crowdfunding platforms" or sites that facilitate the funding transactions between you and those who "back" or fund your company.
These platforms include Kickstarter, IndieGogo, RocketHub and PeerBackers among many others (the number of platforms seems to be growing monthly).
But Kickstarter remains the biggest. And Kickstarter recently released statistics of what happened on its site in 2011. These included the following:
- Launched Projects: 27,086
- Successful Projects: 11,836
- Dollars Pledged: $99,344,382
- Total Visitors: 30,590,342
- Project Success Rate: 46%
Now, let's compare that to Kickstarter's 2010 stats:
- Launched Projects: Up 143.4%
- Successful Projects: Up 202.7%
- Dollars Pledged: Up 259.4%
- Total Visitors: Up 268.8%
- Project Success Rate: Up 7.0%
To me, the most exciting thing was the 259% increase in dollars pledged, which is the amount given to entrepreneurs by others to fund their ventures. This amount grew from $27.6 million in 2010 to $99.3 million in 2011.
My best assumption is that 40% of all Crowdfunding raises are done on Kickstarter. So, my estimate of total 2011 Crowdfunding raises is $248 million. Not bad.
Here are some lessons and key thoughts I'd like to share with you:
1) Kickstarter is one of the pioneers in the Crowdfunding market. As a first mover, it won't necessarily win, but if it continues to innovate it probably will.
2) There are now many different Crowdfunding platforms. The newer "me too" ones must innovate in order to compete.
3) The trend is clear. Crowdfunding is growing like crazy and is now a significant source of funding.
4) Crowdfunding has an incredibly high success right making it a no-brainer to use. As shown above, the "Project Success Rate" or percent of entrepreneurs who post projects and get funding is 46%. Compare that to angel funding, which has a success rate of just 15%. And compare it to venture capital which has a success rate of less than 1%.
5) It will get harder to raise Crowdfunding. Right now Crowdfunding is a bit like the California Gold Rush which started in 1848. Those that went to California first were MUCH more likely to find gold than those that came later. The same will be true of Crowdfunding. As more and more entrepreneurs seek this form of funding, the project success rate will go down. Right now, it's still a novelty and people will fund ideas that seem interesting. Those same funders will be a lot more stringent when they start receiving tons of Crowdfunding requests a year or two from now.
The bottom line is that the Crowdfunding business is doing great right now, which is great news for entrepreneurs like you.
Want Crowdfunding for your business? I recently developed a simple-to-follow program called "Crowdfunding Formula."
The program is a series of videos I recorded that walk you through each of the 14 steps to raising Crowdfunding. Many of you have already joined the program and raised money.
If you haven't, click here to get Crowdfunding for your business now!
Written by Dave Lavinsky on Tuesday, March 13, 2012
I've spent years starting and growing my own companies and helping thousands of entrepreneurs do the same.
And one thing that's helped me and others succeed is keeping track of key numbers. We refer to these number as KPIs or key performance indicators. KPIs allow us to better manage our businesses. Since they allow us to clearly see what figures correlate with success, and allow us to focus on improving them month after month.
Recently I was talking with a business owner who asked me a great question. "What is the most important number or KPI in a business?"
And without hesitation I gave him the answer.
And that answer is "Profit Per Impression."
Let me explain. Profit Per Impression (PPI) is the amount of profit you generate from everyone who hears about your company.
Here's an example...let's examine the PPI of one of your competitors (a fictional example of course).
Let's say they run an ad (radio, TV, print, it doesn't matter). And let's say that 1% of people responded to the ad.
Out of the 1% that responded to the ad and called them, they were able to convert 35% into customers.
Your competitor was selling a $500 widget, and the average purchaser bought 1.5 widgets. Your competitor's profit margin on each widget is 30%.
Your competitor has little customer follow-up, so only 10% of customers will repurchase from them.
Here's a summary of your competitors KPIs:
- 1% Response Rate
- 35% Conversion Rate
- $500 price per widget
- 1.5 widgets per buyer
- 30% profit margin
- 10% repurchase rate
Assuming the ad reached 10,000 target customers, your competitor's profit from the ad would have been $8,662.50 (minus the cost of the ad).
Now, let's assume your company ran a similar ad, but did a 20% better job on each KPI than your competitor. Except, let's assume that you still charged the same $500 per widget.
So, your KPIs would be:
- 1.2% Response Rate
- 42% Conversion Rate
- $500 price per widget
- 1.8 widgets per buyer
- 36% profit margin
- 12% repurchase rate
With these KPIs, if your ad reached the same 10,000 target customers, your profit would have been $19,596.
That's 2.3 TIMES greater than your competitor's profit.
So, what would happen if you generated 2.3 times greater profits per impression than your competitors?
Answer: You would absolutely dominate them!
You would advertise them out of the market. You'd be able to advertise in places where they couldn't. For example, if that ad space cost $10,000, they couldn't have purchased it (since they only generated $8,662 in profits from it). But you would pay for that ad all day long.
So, how do you get 20% higher Profit Per Impression KPIs than your competitors and absolutely dominate them?
Let me show you:
The first metric where you beat your competitor was response rate. This was the percentage of people who heard/read/saw your ad and contacted you. How do you improve this rate?
Well, there are a few answers. First, the more you really knew about whom your customers are and their wants and needs, the more you could design advertisements that really appeal to them.
Likewise, the more you know about them, the better you could craft a USP (unique selling proposition) that attracts them.
You could also boost response rates by developing better "offers" that attract customers (such as an offer giving them a 90-day guarantee).
The next metric on which you could have beaten your competitor is conversion rates, or the percentage of prospective customers that you converted into actual customers.
You could have done this by having a better process for training your staff and sales team, by providing a better culture and incentives for them to perform better, and/or by developing and testing sales scripts that boost results.
Number of Widgets Per Buyer
The next metric on which you could have outperformed competitors is the amount of their initial purchase. You could have gotten buyers to purchase more widgets. Or, you could have upsold them on related items they needed. In either case, customers would have paid you more money per sale. Like with conversion rates, you could have achieved this through better hiring, training, etc.
By better systematizing your business, and implementing the right operational processes and procedures, you could generate higher profits per sale than competitors.
The final metric where you beat competitors was "repurchase rate." This is more commonly referred to as "customer lifetime value."
By doing a better job of communicating with your clients, and showing them how special they are, you would get them to buy from you over and over again. This would give you a massive competitive advantage.
What I just showed you was a way to dominate your competitors. I mean really dominate them.
The bad news is that this takes real work, as the things I showed you (particularly improving profit margins) require you to go through and improve every aspect of your business.
However, there are seven things you can do very quickly to start dominating competitors. Mainly:
1. Clearly define who your customers are and what their biggest needs are that you can fill.
2. Based on this definition, develop a unique selling proposition (USP) that really appeals to them.
3. Develop an offer that makes prospective customers contact you (e.g., call you, visit your website/store, etc.).
4. Hire and train better so that your sales and other staff boosts conversions, that is, increases the percentage of prospective customers who become actual customers.
5. Develop an upsell strategy so that you increase the transaction price each time customers buy from you.
6. Improve your communications with your customers (e.g., customer newsletter, emails, telephone calls, etc.) so they stay loyal and buy from you more often.
7. Track each of these areas to ensure your performance in each area improves month after month.
You CAN do this; so get started today.
The resource below will walk you through achieving these seven steps so you can dramatically boost revenues and profits and crush your competition.
Suggested Resource: Growthink's Ultimate Marketing Plan Template allows you to expertly create your marketing plan. Importantly, it allows you to quickly and easily achieve the 7 steps above, and much, much more in order to dominate your market. Click here to learn more.
Written by Dave Lavinsky on Sunday, March 11, 2012
I recently attended a marketing conference. The conference was geared towards entrepreneurs and small business owners, rather than marketing professionals at large corporations.
As a result, I met lots of successful entrepreneurs.
Why does this matter?
It matters because having relationships with other successful entrepreneurs will dramatically improve your success.
These other entrepreneurs can provide funding to you as "angel investors." They can introduce you to other angel investors they know. They can partner with you or introduce you to other partners. They can help answer key business questions. And so on.
Importantly, I'm not a great networker. I mean, I'm not all that comfortable going up to people I don't know and introducing myself. Yet, I was successful in meeting a lot of great folks at the event.
How? I attended all the breakout sessions and the evening get-togethers they held. In these closer-knit spaces/events, it was much easier to meet people, speak with them and form relationships. I suggest you do the same.
One of the key points I want to stress here is the answer to the question I get all the time: where do I go to find angel investors?
On one hand, it's unfortunate that no one has a comprehensive "magic" list of angel investors. On the other hand, this is good. Since if such a list did exist, those angels would be bombarded with investment opportunities, making it too competitive for most entrepreneurs to use to raise funding.
So, one of the best answers to "where do I go to find angel investors" is to go hang out with these angel investors. And one of the key places they hang out is at events.
There are several types of events you should attend to meet these entrepreneurs/potential angel investors. The first are local events such as those put on by local Chambers of Commerce. Such events feature a variety of local entrepreneurs and business owners running all types of businesses.
The second type is industry events such as events in the software business or real estate business. These feature lots of great people who know your business inside-out and can provide great strategic and financial value to you.
The third type are functional events that focus on a specific function or discipline like marketing. The marketing event I attended falls into this category, and featured entrepreneurs in a variety of businesses.
Finding these events is also pretty easy. Simply sign up for industry newsletters and you'll hear about industry events. Find local chambers of commerce or networking group, and they'll tell you about local events. Or simply subscribe to your local business newspaper and you'll hear about them. And functional/discipline events are well publicized in relevant magazines and e-zines.
Websites such as meetup.com also make it simple to find the right events to attend.
Here's a killer tip: host your own event.
A colleague of mine created his own listing on Meetup.com. He set up an event and invited "entrepreneurs generating $1 million or more in revenue" to attend. Over 20 entrepreneurs showed up, and as you might imagine, HE was the center of attention. How's that for a great way to gain awareness among other successful entrepreneurs who could fund or otherwise help your business!
Simply present your event as a local networking event for entrepreneurs; successful entrepreneurs love meeting other successful entrepreneurs. And the cost can be very little; if you don't have your own office space, you can simple find a local bar or restaurant willing to host it in return for the customers.
Angel investors and entrepreneurs who can help you are all over the place. But they're not going to knock on your door unprovoked. So, take action by attending events or putting on your own event so you can meet them right away.
Suggested Resource: In Angel Funding Formula, you'll learn exactly how to find and contact angel investors, exactly what information to convey to them and how, and how to secure your financing check. This video explains more.
Written by Dave Lavinsky on Tuesday, March 6, 2012
One of the challenges of running an organization is that you aren't directly accountable to anyone.
Of course, you're accountable to many people -- your clients and customers, your employees and stakeholders.
But you don't have one person to whom you report. With whom you set goals. And who forces you to make commitments and attain those goals.
Unless you have a Board of Directors or Advisors, of course, but even then, those encounters are often only quarterly or monthly at most.
Rather, as a business owner, you are most accountable to numbers; specifically the business numbers, metrics, or goals you want your business to achieve.
So, let me ask you a question:
Do you know what specific numbers, results and/or goals you absolutely must achieve in the next 12 months?
Clarifying these goals is a key part of the strategic planning process. And I'd be lying if I said this was always comfortable and fun. Because to do it right, you need to break down all of your big goals into parts (more on this below).
Accordingly, as business owners, we tend to put off developing our strategic plans since our employees and customers rarely if ever ask to see them.
It's one of those "Geez, I should probably get around to this" items that no one else knows about, so it's easy to keep on the perpetual back burner.
But what my students and I have found is that once you have a formal strategic plan in place, even if it's not perfect, the path in front of you becomes much clearer.
Specifically, when you set your goals, identify the Key Performance Indicators to monitor and improve and help you get there, and break down the big, ugly projects into smaller pieces, the future becomes much clearer and much more attainable.
In fact, the process of reaching your business goals can become a fun game to play--when you do this and truly know how to win!
Consider this...when you play tennis, or Scrabble, or some favorite game of yours, aren't your objectives usually the same (score the most, win the game), but the rules by which you score points and succeed along the way is different?
Tennis has its own unique scoring system (my wife was a competitive tennis player, so unfortunately I'm used to saying "Love-40" when I serve). And Scrabble has points and Triple Word Scores to shoot for along the way. Which leads to this key question: what are your business' key metrics that you must focus on in order to win?
Understanding and improving these key metrics, which we refer to as Key Performance Indicators or KPIs is the key to winning in business. So, what are some of the KPIs you should be monitoring?
First, there are some common KPIs that most businesses watch-the Revenues you generate from your products & services, your core expense groups, like Marketing Expenses, Operating/Fixed expenses, etc.
There's also your general Marketing indicators to watch, like the total number of new leads your ads generate within the time period you've chosen. You'll want to pay attention to what each new lead costs you, what percentage of them buy something, and what the average sale price per transaction is.
Some marketing indicators will be different for each kind of advertising you do. For example, if you're sending out direct mail, you'd want to know how many people you're sending mailers to and how many responded by phone (or online) to know your response % as well as your Cost per Lead for direct mail.
Or, if you're using Search Engines to help people find your business online, at the least you'll want to know which keywords you are trying to rank for, what your current rank is for each, and how much traffic and leads your website generates.
Improve Your KPIs to Win the Game
By improving your KPIs, for example, by increasing the number of leads, sales, and order amounts, or the return on investment of an advertising campaign, you will increase your revenues and profits, and move closer to victory in your market. Conversely, the market losers are the ones who only focus on "topline" metrics like total revenues and profits. By focusing on these, you never fully focus on and improve all the drivers of those figures (the specific KPIs).
In summary, identifying and improving your KPIs is THE WAY to reach your business goals and win the "game" you've created. Identify them with a fine tooth comb. Pay attention to them. Find ways to improve them. Work hard until you see results. And don't forget to have fun and enjoy the game!
Suggested Resource: You just learned the importance of watching and improving your Key Performance Indicators...part of a good strategic plan to guide you in growing your business. What else should you include in your current growth plan? To have a great strategic plan, there are 13 crucial sections. For your reference, they're listed in this video I put together. Watch it now.
Written by Dave Lavinsky on Saturday, March 3, 2012
If you're like most people, you put some things off until the last minute. Picture a wife needing to take the kids to a ballgame, and the husband is in the middle of changing the oil on the car. Not very good planning on their part, and the result is less than desirable.
With a little planning, the husband could have accomplished the oil change earlier and everyone would be happy.
All too often in business, we fail to plan effectively for ourselves and our companies.
The first step to effective planning is to set the right goals. This is a two-step process as it is necessary to 1) set goals for the business in general, and 2) set goals for ourselves in order to reach the business goals.
Here are some key tips to setting exciting business goals that yield results:
- Be specific. Don't use generic terms like "a few" or "run ads." If you mean 3, state 3. If you have to guess between a range of numbers, be conservative.
Don't say "We really want to see our sales grow exponentially in the market." This does not express what you really want to accomplish. State something like, "With the implementation of our new marketing brochure, we expect to see a 25% increase in sales. We also expect to see a 42% increase in inquiries about our products."
These are measurable goals to which everyone in the organization can relate. You will also know if you're on track or falling short by comparing what actually happens with what you planned.
- Make your goals realistic. If you or the team looks at a goal and rolls their eyes, your proposed goal may be in trouble from the start. For example, setting out to be the #1 Realtor in an area is a good goal, but realistically, how are you going to accomplish that if you are currently a 1 or 2-person show? In this instance, an attainable goal might be to become a Top 10 Realtor during the first year and go forward from there.
- Ensure your goals have meaning for the team to which you are presenting. Letting the sales department know you want the trash cleaned out on a daily basis is not going to help them increase sales by 25 percent. This is a maintenance department's goal and doesn't mean a thing to sales team. Make sure the goals you develop are aimed at the appropriate audience. Make it something they have control over, or why should they care?
- Set deadlines and timeframes to meet milestones. Simply stating, "Our goal is to increase our sales to $1 million," for example, is specific, but doesn't provide a sense of urgency. There's an old saying, "A goal without a deadline is just a wish." Set a specific date for completion and it becomes REAL. Then work backwards from there to plan the steps needed to get you there, and the order they fall in.
Setting goals gives you and your team a target. This ensures all of your efforts are focused in the same direction enabling you to have a better chance at success. And, by developing specific goals, your team will have a sense of direction. They no longer just show up at work.
With this newfound direction, your team will begin to assume more responsibility and ownership of the projects that need to be completed. The goals you all commit to will give you measurable milestones to ensure projects stay on track and within time frames established. And make sure to celebrate along the way!
By implementing proper procedures for creating goals, you will have set the basis for creating a successful plan. After all, if something is worth doing, isn't it worth doing well? Considering the quality of your goals is the first step to getting what you want from your business and your life. So make sure you take goal-setting seriously and follow these steps.
Create your goals in the usual way, and they often get forgotten and fall to the wayside. Make them clear, specific, attainable, and involve your team, and you've got a powerful motivating force for positive change on your hands!
Suggested Resource: Goal setting is one key to improving your productivity and results. But there are many other keys. Keys that can double or even triple your results. Click here to learn how to triple your productivity.
Written by Dave Lavinsky on Tuesday, February 28, 2012
Two weeks ago, I kept a simple journal to track how I was using every minute of my time throughout the space of one workweek, and I was able to identify over five hours of time spent doing something I could be easily delegating to someone else!
This may not sound like a big deal, but consider this:
- Five hours is a lot of time-especially if you only have 10-15 hours per week to run your business part-time. Or if you're full-time, it adds up to 20 hours per month...and 260 hours per year!
- What would you give for an extra MONTH of productive, money-generating 8-hour days each year? Or, if you prefer, a month off each year to spend golfing, taking a vacation, time off with family, or whatever it is you love to do?
- I thought I was delegating everything I should be. But here, even the Master of Management has been caught red-handed. This goes to show that EVERYONE could stand to analyze their time every so often.
- What is your time per hour worth? If your time is worth $50 per hour, then it's hard to justify continuing to do something that someone else could do for $10/hr. Or, as many virtual assistants charge overseas, $4-5 per hour.
The things I caught myself doing were repetitive business items that have to be done every week-but those types of tasks don't move my business forward.
I kind of rationalized for a while, but then I realized I had a few projects on the shelf that I could knock out myself in about 10-20 hours that could start generating more income immediately.
Remember: Your time is best spent starting and managing new projects that will generate more cash. Hire people to help you carry those out and get there faster. And by all means hire an assistant or someone to carry out the Operations and repetitive tasks that must go on every week and month.
Let someone else hold down the fort while you're out pioneering. Your job is to discover and create new ways to advertise, make sales, and add products and services to your lineup.
So let's say you set out to find a virtual assistant abroad that you could outsource these tasks to every week and thereby free up 5 more hours of precious time.
Total cost: $20/week
Time Savings: $250 (saving you 5 hours of your time, valued at $50/hour)
This ROI would be several times what you invested, as long as you spend the new time you save doing something that generates $50 per hour or more, like your new projects (new sales team, creating a new product, testing new advertising methods-anything to create or increase revenue).
So take me up on this...Find out how you could "trim the fat" next week by cutting off 5 more hours of your work week and assigning it to someone else.
Then ask yourself what new project you could start, using your newly-saved time, and do the math. See for yourself how much more you could make by investing a little in others!
Suggested Resource: Now that you've freed up an extra MONTH of working time per year, you need to leverage this time. How? By doing exactly what the top 1% of entrepreneurs do (those who now have a net worth of $5,000,000 or more). Learn more by watching this Growthink's Insider Circle video.
Written by Dave Lavinsky on Friday, February 24, 2012
I just finished reading through the 2011 M&A reports (the reports usually come out a month or two after the end of the year). It's something I do each year. To see exactly which companies were acquired during the past year. To understand trends. And to understand precisely the kinds of smaller companies that bigger companies are buying.
Fortunately, with regards to the last factor, the characteristics of a sell-able company don't change much. I'll get back to that in a minute.
But for now, I'd like to hand out the award to the company that acquired the most companies in 2011 - Google.
Google made 25 acquisitions in 2011; buying companies including Clever Sense, RightsFlow, Apture, Katango, SocialGrapple and more. In doing so, Google made the 25 founders of those companies VERY wealthy.
And rightfully so; any entrepreneur who starts, builds and sells a successful company SHOULD be paid handsomely.
But Google's acquisitions weren't even a blip on the entire radar screen of acquisitions. According to research firm Berkery Noyes, in the "information industry" alone, there were 3,098 acquisitions last year (up 17% vs. 2010).
And in the Online & Mobile market, there were 161 acquisitions (up 39%). In the Software Industry there were 1,450 acquisitions (up 10%).
In the Media & Marketing Industry there were 1,435 acquisitions (up 17%). In the Financial Technology and Information Industry there were 1,450 acquisitions (up 10%). In the Education Industry there were 229 acquisitions (up 10%).
And transaction volumes were up in the healthcare and many other industries too.
I tell you this, because even though you may be years away from selling your company to a larger company, you need to start thinking and planning for your exit NOW.
Why? As Yogi Berra once said, "if you don't know where you're going, you're probably not going to get there."
Building a sellable business takes time. You need the right systems. The right products. The right customers. Etc. And building these things doesn't happen overnight.
And it's not just the result of having a good product or service that customers want.
Rather, you need to plan for it. You need to identify the skill sets to acquire and get them. You need to build a complete business from the ground up.
While it's impossible for me to tell you how to do all this in just one essay, or even 100 essays, I can give you an exercise that will really help you. And get you started on the right foot.
This exercise is for you to imagine what your business will look like on the day you sell your company to a larger entity.
1. What will be the date of that acquisition?
2. What will your revenues be on that date?
3. How many and what type of customers will you be serving?
4. Who will your key employees be and what roles will they perform?
5. Who will your key partners/joint ventures be with?
6. How many locations will your business have?
After you answer these questions, you need to start reverse engineering this vision. For example, how will you acquire the customers you will eventually have when you exit?
You need to start figuring this out, and planning this now. Since all great things take time and planning to achieve. Don't wait. At a minimum complete the exercise and write down your answers right now. And then tomorrow you can start building your action plan.
Suggested Resource: Building a sellable business is hard. And it's not something that happens overnight. That's why we've built a program that holds your hand month-after-month...so that with our support you can and will build a thriving business. That you can keep running or sell for millions. Check out Growthink's Insider Circle to learn more.
Written by Dave Lavinsky on Tuesday, February 21, 2012
Many of my newsletters and blog posts are on the topic of raising capital. I talk about how to raise angel funding. And venture capital, etc.
And don't get me wrong, I think, actually I know, that raising funding is critical. Because the #1 reason (by far) why entrepreneurs fail, is that they don't have or run out of cash.
But one thing I'd like to clarify is that you CAN start and grow a business without funding. Or with little funding.
In fact, many great businesses have been started this way. A survey of Inc 500 companies found that 48% started with $20K in financing or less, and 73% started with less than $100K in financing.
And, if you are looking for BIG funding sources, like venture capital, they will often want to see that you have bootstrapped or already raised other, smaller funding sources before they fund you.
So, if I misspoke or implied that you absolutely must raise lots of funding from the get-go forgive me. Rather, you must start by bootstrapping or raising enough funding to get you going, and then later on, many more funding sources will become available to you to help you grow your company.
Let me give you some examples of entrepreneurs who have done this. In fact, most of these entrepreneurs have started with these small amounts and then raised huge amounts of funding when they were ready for rapid growth:
- Under Armour's Kevin Plank funded his company's launch with credit cards.
- Brian Scudamore founded 1-800-GOT-JUNK, which now has over 200 franchised locations in the US alone, with just $700 of funding.
- Michael Dell launched Dell Computers with only $1,000.
- Jill Blashack Strahan launched Tastefully Simple, which offers easy-to-prepare foods and gifts with just $6,000 in savings. Her company now generates over $115 Million in annual revenues.
- Ben & Jerry launched with $8,000 in savings and a $4,000 loan.
- Pamela Skaist-Levy and Gela Nash-Taylor launched Juicy Couture Clothing with just $200 and a revolving line of credit. Juicy Couture was later sold for $53 million to Liz Claiborne.
- Google's Sergey Brin and Larry Page launched the company with credit cards (and later raised angel then VC funding among others).
And, in addition to these and other entrepreneurs who launched their companies with little funding, there are tons of entrepreneurs who have launched their companies with non-traditional sources of funding.
Such as Kenneth Cole, who raised hundreds of thousands of dollars in funding from a shoe manufacturer (vendor funding). Or Blowfly Beer, who raised tens of thousands of dollars in funding from customers (customer financing).
The key point I want to stress here is that the vast majority of entrepreneurs have the mindset that if they can't raise money from banks, angels or VCs, that they can't launch or grow their companies. This is simply NOT true. So don't fall into this thinking. As there are 38 other sources of funding, or bootstrapping, to turn to.
Suggested Resource: As you just learned, most entrepreneurs fail to get funded because they chase after the WRONG sources of funding. Do you want avoid this failure? And successfully raise funding to grow your business? Then check out our Truth About Funding program to learn how you can access the 41 sources of funding available to entrepreneurs like you. Click here to learn more.
Written by Dave Lavinsky on Saturday, February 18, 2012
I hate to admit it, but I'm a bit of a dork.
You see, I did really well in school, so I guess I could have been considered a dork back then. But I was also a really good athlete, so that made me "cooler" and so I never got a dork label.
But I did something many years ago that clearly classifies me as a dork. What did I do? I had one of my articles published in Quirk's Market Research Review. Quirk's is a trade journal for market research professionals that mostly talks about new market research techniques and ways to tabulate data. Pretty exciting stuff, I know :-)
I think many of the other authors at Quirk's are like the guys from Revenge of the Nerds, complete with pocket protectors. But, when I submitted my article, I didn't care, because I had something important to share.
What I shared with Quirk's readers (this was way back in 1994 so they don't even have an archive of the article on their website), was what I call "The Improvement Matrix." I originally created these matrices for bigger businesses who paid big bucks for them.
But over the years, I realized they could be created much less expensively, and have HUGE value to entrepreneurs like you.
So what is the "The Improvement Matrix?"
It's simply a way of looking at your products and services and figuring out what you should improve and in what order.
Let me walk you through it. As an example, let's assume that I'm Sal. Sal's my landscaper. He frustrates me to no end since he's such a bad marketer [in fact he makes me think about getting into the landscaping business since I know I'd clean up....but I'll stop digressing].
OK. The first step is to identify what it is that your customers find most important.
So, as a landscaping customer, Sal should survey me and his other customers on the 8-12 attributes of his business that I find most important.
Maybe Sal would have chosen these attributes to survey:
1. Quality of lawn mowing
2. Quality of plant trimming
3. Offers to do additional work (e.g., clean leaves from gutters)
5. Value (fairness of price based on quality of service)
6. Ease of billing
7. Ease of communications with company
8. Professionalism of workers
For each attribute, he should ask customers, "How important are these attributes to you in your landscaping company?"
He could have used a 4 point scale as follows:
1 - Not important
2 - Somewhat Important
3 - Very Important
4 - Extremely important
The results may have looked as follows:
As you can see, Sal's customers considered "quality of lawn mowing" and "ease of billing" to be the most important attributes. Conversely, the least important attributes were "professionalism of workers" and "offers to do additional work."
The next question on Sal's survey should have been: "How do you rate my performance on these attributes?"
He could have used a 4 point scale again as follows:
1 - Poor
2 - Fair
3 - Very Good
4 - Excellent
Importantly, Sal should judge responses to this performance question against how important the attributes are. The results may have looked as follows:
As you can see from the chart, on attributes like "value," Sal's performance is in line with importance. But, on the key attribute of "ease of billing," Sal is vastly underperforming. And, on the non- or less-important attribute of "professionalism of workers" (maybe Sal has his workers dress in formal uniforms), he is over-performing.
So, what should Sal do? Well he should clearly focus on improving his "ease of billing" since this will improve customer satisfaction. Also, if he is investing too much money and time in "professionalism of workers," he should consider re-allocating those resources to improving "ease of billing."
As you can see, the beauty of the chart, based on simply 2 sets of questions asked to customers, is that it identifies the most important areas of your product or service to fix to better satisfy customers and gain competitive advantage.
Now, a final way to look at the performance chart is as a matrix, which I call the "Improvement Matrix." You can see the matrix below.
The Improvement Matrix is simply a different way of looking at importance vs. performance data. It plots the data and classifies each attribute into 4 quadrants:
1. Underperforming (but OK): you are underperforming in this area, but customers don't care much about it, so that's ok.
2. Overperforming: you are doing well in this area; but customers don't value it. Keep doing what you're doing, or consider allocating resources away from this area into a more important area.
3. Keep it up: these are areas that your customers care about and that you are doing well in. Keep it up.
4. Improvement Quadrant: this quadrant is the key. It shows those areas that customers find important, but for which your performance is not up to speed. You MUST get better in these areas ASAP.
As you can see, the Improvement Matrix will alert you to the key areas of your product and service that you must improve. All it requires is a simple customer survey and plotting of the data. And the results can revolutionize your business. So do it!
Suggested Resource: Would you like to know more ways to improve your business; and turn it into one worth $10 million or more? Then check out Growthink's 8 Figure Formula. This video explains more.
If you want to raise capital,
then you need a professional
business plan. This video
shows you how to finish your
business plan in 1 day.
to watch the video.
"The TRUTH About
Most entrepreneurs fail to raise
venture capital because they
make a really BIG mistake when
approaching investors. And on
the other hand, the entrepreneurs
who get funding all have one thing
in common. What makes the difference?
to watch the video.
The Internet has created great
opportunities for entrepreneurs.
Most recently, a new online funding
phenomenon allows you to quickly
raise money to start your business.
to watch the video.
"Barking orders" and other forms of
intimidating followers to get things
done just doesn't work any more.
So how do you lead your company
to success in the 21st century?
to watch the video.