The other day on my drive to work I heard a song on Pandora. The song was called "Just the Girl." And it's by the band 'The Click Five.' I'd never heard of the band nor the song, but one of the lyrics caught my attention:
"She laughs at my dreams. But I dream about her laughter"
This line caught my attention because it reminded me of two extremely important mindset principles for entrepreneurs.
1. You must separate yourself from people who laugh at your dreams
"She laughs at my dreams." Imagine hanging out with someone who laughed at your dreams. Do you think that would help or hurt you? Clearly it would hurt you. And I think it would be near impossible to achieve your dreams when surrounded by such negativity.
In fact, motivational speaker Jim Rohn once said, "You are the average of the 5 people with whom you spend the most time." This is absolutely true. When you hang out with successful people, the conversation is generally optimistic. You hear what the others are achieving, how they are overcoming obstacles, etc. And you adapt their positive thinking and can-do attitude which prompts your success.
Alternatively, when surrounded by negative people, you hear how they primarily talk about their struggles, how they blame others for their problems, and so on. You get brought down, and you start thinking negatively too. The result: you never achieve your goals.
So, the first lesson here is to separate yourself from losers and hang out with winners. There are many ways to achieve this. One of the easiest is to find and attend local business and entrepreneurial events. Another is to find a mentor or assemble a Board of Advisors. In each of these cases, you'll soon be spending time with winners, and their success and mindset will rub off on you.
2. The Law of Attraction
The Law of Attraction is basically defined as this: you get what you think about most. So, if you're constantly thinking about what can go wrong in life and/or your business, things will go wrong. But, if you constantly stay positive and think about success, you'll achieve success.
"But I dream about her laughter." In this line, the singer is thinking positively. He's dreaming about her laughing; so that is what he'll attract/get.
In your business, you do this by setting goals for what you want to achieve. Then, think about achieving your goals and do it often. Visualize yourself achieving the goals too. Doing so is proven to dramatically improve your success.
Looking at the line as a whole -- "She laughs at my dreams. But I dream about her laughter" -- you can see how clever it is. Even though she's a negative influence in general, he turns it into a positive.
Even more clever is for you to surround yourself with successful entrepreneurs. Their mentality and success will rub off on you. And set your goals and dream about achieving them. When you do these things, you'll start achieving a lot more success. You'll achieve your goals and start creating even bigger and bolder ones.
Suggested Resource: As you just learned, the way you think as an entrepreneur is absolutely critical to your success. In fact, it's arguably the most important factor in your success. Check out our Millionaire Mindset program to learn how to improve the way you think so you achieve more entrepreneurial success.
In April 2012 the Jumpstart Our Business Startups Act (called the JOBS Act) was passed and signed by President Obama.
The JOBS Act Opens Up Equity-Based Crowdfunding
The key goal of the JOBS Act was to make it possible to raise funds from investors through certain crowdfunding sites in exchange for equity in your company.
To clarify, there are many sites online where you can raise Crowdfunding today. But on these sites, the money you raise is either in the form of donations or are in expectation of rewards; you were previously unable to raise equity via Crowdfunding.
The JOBS Act Today
While the JOBS was signed in April 2012, it did not allow for equity-based Crowdfunding...until the SEC approved certain regulations.
The first major regulations were approved last month, on September 23, 2013. Specifically, on this date, the JOBS Act removed the ban on general solicitation.
General solicitation is the act of telling people, with whom you do NOT have a pre-existing relationship, about the opportunity to invest in your private company. This had not been allowed for 80 years prior to September 23.
So now you can tell the world that you're raising equity funding. You can shout it from the rooftops, tell people about it who are leaving a library, post it on Facebook and Twitter, and so on.
The JOBS Act Tomorrow
However, there is still one BIG limitation the JOBS Act has not resolved. That issue is that, as of today, you can only raise equity Crowdfunding from accredited investors.
While the full definition of "accredited investor" is slightly more detailed, it generally means that the investor is sophisticated and has a net worth (excluding the value of their primary residence) exceeding $1 million and/or has annual income greater than $200,000 in each of the two most recent years or (or $300,000 if including their spouse).
As you can imagine, the vast amount of people who might want to invest even a small amount in your company are NOT accredited investors. That's where Title III of the JOBS act comes in; we hope that sometime in early 2014 the SEC finalizes Title III and legalizes equity-based Crowdfunding to non-accredited investors.
In the meantime, you CAN raise rewards-based Crowdfunding and equity-based Crowdfunding from accredited investors. And hopefully within a few months, the Crowdfunding opportunity will be even bigger.
Suggested Resource: Do you want Crowdfunding? If so, don't try to raise it from scratch -- the 14-step blueprint already exists. Get the Crowdfunding blueprint here.
Negotiating is one of the most powerful skills you can use regardless of your business type.
Not only are there ample negotiating opportunities when buying, selling, or managing for growth; being able to negotiate well can mean the difference between reaching your desired outcome or not.
Make it a habit to negotiate all important items and it will add up in a major way. For example, think of what it would do to your bottom line to reduce expenses by 10% across the board!
Below are 7 "sneaky" negotiations tips. There not "sneaky" in that they're not deceitful or lying (which I do NOT recommend). Rather, they are techniques that you probably are not familiar with, don't do as much as you should, and which DO work.
Tip #1: Schedule the Negotiation Close to a Deadline
Ideally, you can schedule the negotiation close to the other party's deadline by which they need a completed agreement. This will put you in a more powerful position, because they are more motivated than you.
You would know their deadline by gathering research about them in advance. Scheduling the negotiations later also gives you more time to do further research and prepare for the meeting so you'll be even more effective when the time comes.
If you are the buyer, keep the end of the week, month, or year in mind. They might have internal goals and quotas in their company and will be willing to give away more in order to reach them.
Tip #2: Don't Get Emotionally Attached Inside
There are two main ways to get overly attached. The first is attachment to outcomes. The reality of negotiating is that any time you go into one, you may have to walk away, or only get part of what you wanted.
Be willing to do your best and then accept whatever outcome takes place. Fact: when you play the game you will lose some of the time. But when you cling to outcomes too much, you lose more of the time.
Be willing to walk away. This brings us to the second way to get too attached...by reacting to the other party, their attitude, and what they say (which may be designed to get you to react). Stay calm and patient, no matter what they do. Your calmness will help you think clearly and also make you appear more powerful.
Tip #3: Don't Look Too Attached on the Outside
If you're attached inside, it will probably show through your body language-so work on your inner game first. Then, pay attention to your physiology and what your posture is conveying.
Without even saying a word, you can give the impression that you're willing to walk away from the deal and that doing so wouldn't be a big deal for you. Think about how you would sit, stand, lean, listen, and the tone of your voice while speaking, and try to act the part.
You'll find that just paying attention to your body leads to it correcting itself and conveying the image you want. Try to get in the right state of mind before the negotiation starts, and check in with yourself throughout to make sure you're not slouching or appearing less confident.
In reality, you're sending messages through your body language that many salespeople or experienced negotiators are trained to read. The only question is whether to pay attention it to yourself or not. And the answer is "yes!" Try it and see.
Tip #4: Never Be the First Person to Name a Figure
For example, if someone asks you what your firm's hourly rate is, don't just react and answer it right away! You'll be tempted to blurt out something that is less than you wanted by the time the meeting is over.
You could respond by asking what their budget is for the project with which they need help. A low-anxiety way to turn it back on them is to respond with a clarifying question. Then, ask a second question like the one above to the other party that's aimed to find out what they can pay, or are willing to pay.
Tip #5: Always Ask for More than You Need
If you can't avoid naming the first figure, then make the best of it by asking for more than you need, to start the negotiations with plenty of room to come back down later if you must.
Sometimes the other party will accept this higher offer right away! These are the exceptions, but always do it anyway because you never know.
So if someone asks for your hourly rate, as mentioned above, you could answer with a higher hourly rate than you would typically bill. This also gives the impression that they are getting more value in the deal, as those who "typically" bill a higher rate more are usually seen as more competent professionals. (I would then suggest that if you get the deal, to work extra hard on it to make it worth the higher price.)
Tip #6: Never Take the First Offer
If you CAN get the other person to name the first figure, here's what to do-balk, then ask them to do better. I know a few guys who do this out of habit no matter how low the starting price is.
When they name their figure, try to look shocked or surprised. This does wonders to manage expectations for the same reason that starting with a lowball offer works. Then, even if it's a lot better than you expected, calmly and assertively (but not arrogantly) state "Is that the best you can do?" or "I think you'll have to do better than that."
Tip #7: Don't Get Suckered by the "Rules" Trick
Don't think for a minute that all contracts must be signed as-is. If the other party has a contract to sign, feel free to cross out anything you don't like in it. You can also add items you feel should be in there. Don't just sign away your chance to improve your outcome! It's all negotiable.
Some companies or salespeople will try to tell you that the contract can't be altered. Find out if this is truly the case by asking where it says that. Is it law? Is it company policy? Has an agreement ever been changed before? Who could approve it? Find this out and have them get permission from their manager if needed.
If the boilerplate language of the agreement really can't be altered, take this as a cue to go back and renegotiate one of the previous items by saying something like "Okay, well if I can't change this paragraph, lower the price by $X and you've got a deal."
There are dozens more negotiating and persuasion tips I discuss in "Getting What You Want." The key is for you to not only know these tips and tactics, but to use them in the daily course of running your business.
This article presents 14 times and ways when you can negotiate to get a better deal for your business.
After reading this, I want you to choose the ONE most significant thing in your business that you must negotiate in the near future.
I'm not talking about buying a used swivel chair on Craigslist. I'm referring to one of the various opportunities that you have as an entrepreneur to determine your own end results-possibly saving thousands or tens of thousands of dollars-on some significant expense or transaction coming up.
Since so many things in business are negotiable, keep negotiations top of mind. Generally you should always try to negotiate as you often have nothing to lose.
Here we go...
Negotiating with Suppliers
1. Cost of high-end purchases - Typically, items you buy in the hundreds or thousands of dollars have a more involved sales process, so the vendors offering them are more likely to adapt and negotiate in order to secure your business. They also have more leeway between their cost and what they charge than if they were selling commodities.
2. Payment terms - Oftentimes you might rely on customer payments to cover your purchases. IF so, you'll ideally want to pay your vendors after your customers pay you. So negotiate this preference
3. Quality/Scope of Offering - Maybe your budget is limited and you just can't pay more for something than you have. Don't stop negotiating! Just change what you ask for. Suppliers might be able to offer you better service, some freebies, or an upgraded package just by asking for it.
4. Volume discounts - If you're a startup and don't have volume yet, then share your vision with suppliers of how you will grow and what your company will become. Use this vision to negotiate a volume discount over time that starts immediately.
5. Office Space - It's funny how many people walk over dollars to get to the dimes. The same people who drive 2 extra miles to pump gas at a station that's $.02/gallon cheaper will not bother negotiating on major purchases and save thousands. Your working space is one of your highest expenses-so fight for the best price!
Negotiating with Employees
1. Salary - Obviously, when hiring a full-time employee there will be salary negotiations. This is the final part of the hiring process and it pays to prepare as it might save you thousands of dollars per year. And, with freelance service providers, they will often offer discounts off their regular hourly rate in order to get a first project started with you, or in exchange for consistent work.
2. Equity or Partnership - in the beginning, you might not have the cash to offer real players a full-time job, but you can attract them by offering a piece of the pie, if you can show that the opportunity is great enough. You can avoid paying market-level wages.
Negotiating with Investors and Lenders
1. Basically, everything you agree on with an investor or lender is negotiable, including:
Negotiating with Buyers
1. Price - Your customers generally want the lowest price, and you probably want the highest. So try to offer other concessions besides price to close sales when customers won't pay as is. For example, you can include an additional product or service to influence the customer to buy.
2. Special Discounts - These are made on a case-by-case basis, and should be used sparingly. These are different from sales, which is a pre-emptive concession to get people in the door. Only agree to lower your price in exchange for something else, or if they commit to buying now.
3. Offering bonuses - These are the extra add-on items you can offer the customer that add value but don't affect your cash flow as much. You might upgrade or further personalize the product or service you offer-anything to sweeten the deal.
4. Extending financing or payment plans - This is another way to keep your price high and still make more in the long run, if you don't mind waiting a little longer and also not being able to collect a certain percentage of the remaining payments (hopefully a small number).
5. Collecting accounts payable - If someone falls behind in making payments to you, the best thing to ask them is how much they are able to pay, and when. Let them tell you...and this will start the negotiation and give you a better idea of what's possible.
Which of these negotiating scenarios do you see coming up soon on your radar? Which could you make happen now? What would you stand to gain by having the courage to ask for more?
And what do you stand to lose by asking? The odds are, nothing. The worst they can say is "No." Don't worry...few deals have been lost because someone got offended by an attempt to negotiate. They may even respect you even more for having tried!
Now, since the first step of negotiating is to begin with the end in mind, and picturing a clear outcome in your mind, take the negotiating opportunity you choose and break it down in to specific objectives, like "Save 25% on our office's new security system" or "Work a deal with our new CFO to work for $2500/month in addition to 10% ownership" or something equally specific. The time to negotiate starts now.
Last month, author Brad Stone released an interesting book called, "The Everything Store: Jeff Bezos and the Age of Amazon."
The book chronicles the story behind Jeff Bezos and Amazon, but there's really only one paragraph from it that I'd like to focus on herein. That paragraph reads as follows:
So, let me break this down for you if it's not apparent. Rather than selling items like apparel and kitchen items itself, Amazon launched these categories through the Amazon Marketplace where other vendors sold them.
In doing so, Amazon was able to see what products sold well and how they were sold. And then, when a product sold well, what did Amazon do? Well, they started selling the item themselves in the main Amazon.com site.
So, what is this strategy called?
Market Research. That's right, Amazon.com went from an online bookseller to the WalMart of the internet by doing market research. Because with the right market research you can avoid the missteps that most companies and entrepreneurs make.
So, what kind of market research will help you grow your company? Below are the key research areas you need:
In assessing your industry or market, start by defining how big it is. Why? Because if it's too small, it's probably not worth entering. Define your market as clearly as possible. For example, if you manufacture prosthetics, look at the size of that market, not the entire healthcare market.
Next look at market trends. For example if the market is shrinking or consolidating, it's probably not a great market to enter; unless you have a revolutionary new product that could shake things up.
Understanding your target customers is absolutely critical to your business' success. In fact, one of Jeff Bezos' hallmark strategies is "We start with the customer and work backward."
In your research, you need to precisely identify and define who your customer is. Define their demographics such as what gender they are, how old they are, where they live, etc. If a business customer, also define their role in their company and the type of company for which they work.
Then move to the psychographic questions. What do your customers like to do in their free time? Who do the like on Facebook? Etc.
The more you know your customers and what make them tick, the better job you will do in creating the products and services they want, and effectively marketing to them.
Identify who you are top competitors are. Importantly, like Amazon did, determine what has worked well for them and what their customers are buying.
The old investor saying is very important here, which is as follows: "if you have no competitors; maybe you have no market." What this means is that if customers aren't currently buying a product or service that serves the need your company fulfills, then maybe that need and thus market doesn't exist.
The more you understand your competition, the better you will do in creating a winning strategy. Fortunately, with online tools, you can learn a lot about your competition. You can find out the demographics of their website visitors, what other sites those visitors frequent, what other companies they like on Facebook, and so on. Clearly this information will help improve your marketing and overall strategy.
The final category or research to conduct is financial research. Here the goal is to develop benchmarks. For example, what is the average Cost of Goods Sold in your industry? What percentage of your revenues should staffing costs comprise?
By understanding these benchmarks, you can do a better job in determining financing needs and also measuring and improving your performance over time.
We all know that knowledge is power. And when running a business, the knowledge you need is market research. With it you'll have a better strategy and your likelihood of success skyrockets. Without it, you're shooting in the dark. I prefer the former.
Suggested Resource: If your business plan and/or strategy is missing critical market research, you will fail. Or worse yet, if your plan or strategy is based on faulty research, you're doomed. Click here to learn how my team can quickly and affordably conduct your market research for you.
No great companies have just one employee. None. Which means that in order to grow your company, you need to build a great team.
In building your team, there are two equally important but distinct parts: recruiting great employees and expertly managing them so they perform at their best.
1. Recruiting Great Employees
Recruiting great employees requires you to: 1) determine who to hire, and 2) hire the right people.
Determining Who to Hire
In determining who to hire, you need to assess both what job functions you need now, and what functions you'll need in the future. This will help you find the right people.
Consider this example: you need someone right now to manage your marketing. So you hire a marketing manager. A year from now, your company is doing well and you hire four more people as part of your marketing team.
Now here's the question that arises: is the person you initially hired for the marketing position the right person to lead your marketing team? Sometimes they are, but often they aren't. Since performing in a role yourself is a very different job than managing a team.
So, the question you need to ask yourself when you initially hire the marketing person is this: should I hire someone simply to meet my short-term marketing goals, or should I hire someone that can fill my short-term goals and who could also manage and grow my marketing department. The latter hire will typically be more qualified, and more expensive, so making such a decision is important.
Another tip when determining who to hire is to conduct a return on investment (ROI) analysis on new positions. That is, what expected return, typically in terms of increased profits, will the business generate in return for hiring each new staff member. The less funding you have in your business, the more important this analysis becomes in choosing who to hire now.
Hiring the Right People
There is an old and important saying in management, "Hire slowly and fire quickly." You hire slowly since it's critical to get the right people in your organization. And you fire quickly, since bad employees can ruin the morale and productivity of your entire team.
The process of hiring the right employees starts with sourcing them. You can source or find employees from a wide range of places, from college job boards to posting classified ads. For each open position, think about the best places to find qualified prospects.
Once you find qualified prospects, the key is to weed through them to find the top performers. While interviewing prospective employees is key, remember that someone's interviewing skills are not as important as their on-the-job performance. That is, someone can be great during interviews, but not so great on the job.
To overcome this challenge, delve into the prospect's performance in their last jobs and, as much as possible, give them tests to see how they might perform in your company. With regards to tests you give them, treat their performance on them as their best possible work. While they can refine their skills with training, prospective employees generally give it their all on such a test. So, if they score mediocre, they are not a good prospect.
2. Expertly Managing Your Team
Your job as a manager doesn't stop once you've recruited a great team. Rather, you need to expertly manage them. We see this in sports all the time; one team has incredibly talented players, but they still don't win the championship.
Key to your company's performance is motivating and managing your employees so they work collectively as a team and are highly productive.
Among the many techniques for accomplishing this, here are two of my favorites:
1. Let Your Employees Set Goals for Themselves
Employees will perform much better when they've set their own goals, rather than goals being dictated for them. So, have each employee set goals. Then review those goals with them. As needed, persuade them to modify their goals to better align with company goals. Even when you do this, they will feel personally accountable for achieving their goals.
2. Conduct Performance Reviews
If you don't meet with employees and review their performance, they won't know whether they're doing a good job or not. So, meet with your employees periodically to discuss their performance versus their goals, detail what they are doing well at, and identifying areas for improvement and your suggestions to achieve such improvement.
Your Team Allows You to Win the Game
We all face competition in our businesses. And the difference between the winners and losers is often the quality of the teams. Clearly, if your marketing manager is better than your competitors', and so is your sales team, your production team, etc., you're going to win every time. So, focus on building your dream team so you emerge victorious.
Suggested Resource: Building Your Dream Team is a comprehensive video program that takes you through the four phases of building an outstanding team, which are: 1. Building a Founding Team, 2. Determining Who to Hire, 3. Hiring Superstars, and 4. Expertly Managing Your Team. Click here to learn more.
The acquisition market continues to be very strong. In the 12 months ending August 31, 2013, $881.7 Billion was paid to acquire 9,499 US companies. This represents an 8.1% increase over the $815.9 Billion paid to acquire companies in the previous year.
Importantly, during this time, the average EBITDA multiple paid for Middle Market firms (companies valued between $1 million and $500 million) was 9.1. This means that if your company's EBITDA (earnings before interest, taxes, depreciation and amortization) were $2 million, that your company would sell for 9.1 times that or $18.2 million.
I'm telling you this important information because selling your company is the ultimate goal for most entrepreneurs, because it's how you achieve significant wealth.
Importantly, not all of the $881.7 Billion paid to buy these companies went to the founders of these companies. Some of it went to investors, employees, and others. But the entrepreneurs who founded them received by far the biggest chunk.
That's why 80%, a full 4 out of 5, of individuals with a net worth of $5 million or more (called "pentamillionaires") are entrepreneurs who started and sold their businesses.
Here are some acquisitions that have taken place in just the last few days:
And the list keeps going.
Now importantly, I want you to understand why each of these companies was acquired for millions of dollars. Here's why: each of them developed the right value drivers.
You see, whenever a large company considers buying a smaller company, they make a "build or buy" decision. That is, they think, "how long and how much money will it take for us to build what that company has already built." And then, they compare that answer to the price at which they could buy the company.
And when the larger company realizes that buying the smaller company is less expensive (in terms of dollars and time savings), they buy it. And as you read above, they often buy it at a huge price.
Now, what value drivers do buyers want?
I have identified 21 different value drivers they want. Such as the following:
1. Customers: the more customers you have and the more valuable your customers are, the more acquirers will pay to buy your company.
2. Intellectual Property: the more intellectual property you have, such as patents, trademarks, copyrights, and trade secrets, the more your company is worth to acquirers.
3. Team/employees: the more talented and trained your team, the higher the price the acquirer will pay for you.
So, be sure to build your company with these value drivers in mind. When you figure out which of the 21 value drivers are most important to acquirers in your sector, and focus on building them, you'll soon get to a massive payday - a big acquisition of your company.
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.
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.
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.
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:
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.