What does the girl who rejected me at a dance when I was thirteen years old have to do with your ability to raise capital for your business? Well, it all has to do with psychology, human nature, and how you can leverage the two to attract capital. Watch the 4-minute video below to learn more:
Yesterday, I received an interesting package in the mail. I opened it up and inside was a shoebox. And inside the shoebox was "The Dogball." The Dogball, as I found out, is a new toy for dogs, and the founder, based in France, was trying to get me to distribute it here in the United States.
There are actually several important lessons from The Dogball as it relates to your business plan and raising capital. So, I documented them in a video since I had to make sure each of you could actually see exactly what the Dogball is:
I’m really good about working out. With few exceptions, I go to the gym every day after work and try to work out at least one day over the weekend.
Part of why I go is to stay in shape, but I think it helps me a lot business-wise as the exercise helps me release excess energy so I can really focus on the tasks at hand when needed.
Because there’s always too much to do each day and yet I insist on going to the gym, I’ve devised a laser-focused 25 minute workout that I follow. It’s nothing too fancy -- it’s mainly that I go from machine to machine to machine with no breaks in between (many people do a similar routine but it takes them twice as long since they take breaks in between each rep and/or machine).
Anyway, what this means for me is that every January is a nightmare. Why? Because every January, the gyms are full. And this means that I can’t quickly go from machine to machine to machine because I have to wait for others who are using the equipment.
This happens because every year, tons of people make New Year’s resolutions to go to the gym more. So, in early January, the gym is full of these “resolutionists.” Fortunately, by February, they’re usually gone and it’s back to normal.
The reason I tell you about this is that it’s incredible how much this mirrors raising capital.
To begin, raising capital, like weightlifting and exercising, only works if you do it EVERY DAY. You don’t get strong working out like crazy for one month and then relaxing the rest of the year. Rather you need to put in an hour a day or an hour every other day throughout the year to realize an impact.
When raising capital, you need to constantly be speaking with investors, finding new investors, and making presentations. You need to constantly tweak your business plan to make it better and better. This will not happen overnight. It takes months.
Also, in weightlifting, if you don’t know what you are doing, you will have poor form and you will most likely hurt yourself. In capital raising, if you don’t know what you are doing, you will also hurt yourself and your company by failing to raise the capital you need.
And, like in the gym example, all the “resolutionists” HURT YOUR CHANCES of success.
At the gym, the “resolutionists” hurt me be using my machines and thus slowing me down.
When raising capital, those who don’t know what they are doing also hurt your chances. They submit their business plans haphazardly to every investor who will accept them. While these investors will rarely if ever fund these plans, they waste the investors’ time. As a result, the investors have less time to review good plans and meet with good entrepreneurs, like you.
I wish I could tell you that raising capital was fun. But I can’t. I wish I could tell you that it was easy. But I can’t do that either. Like weightlifting, it’s neither fun nor easy, but once you learn how to do it, and you repeatedly do it right over a period of time, you can succeed and the rewards far outweigh the costs.
GrowthinkUniversity.com, our new membership website, was designed to teach you how to raise capital using the proven techniques that we have implemented over the past decade for our consulting clients.
What traits and skills really make Richard Branson, Bill Gates, Donald Trump, and countless other entrepreneurs so successful?
Over the past decade, we've identified key ingredients that lead to success, which we've observed both in celebrity entrepreneurs and in our most successful clients. When it's all said and done, they have all of the following critical skills, which are essential to entrepreneurial success:
Vision & Leadership: Entrepreneurs must have a vision of where the company will be in the future. In addition, you must be able to communicate you vision so as to motivate employees, investors, and partners to help you achieve that vision. You must be able to identify staffing needs, expertly fill them, and lead your team to success. Rarely do entrepreneurs build successful companies all by themselves.
Focus & Execution: Entrepreneurs must focus to make sure that goals are achieved, customers are satisfied, and employees are motivated. For most entrepreneurs, staying focused is harder than it sounds. Be careful not to be seduced by the next exciting opportunity without executing on the priorities at hand. And don't let perfectionism prevent you from taking action, either; at the end of the day, a product on the market is better than a product shelved due to lack of focus, execution, or perfectionism. Get to market and get feedback from your customers as soon as possible.
Persistence & Passion: As an entrepreneur, you must be passionate about what you are trying to accomplish. In addition, you must be willing to commit whatever is needed of them, whether it's time, energy, money, or other resources. You must persist through trying times (which will be frequent), and fight as much as needed to achieve the goals you have set for yourself and your team.
Technical skills: As the owner of your firm, you may not need to be the most skilled technicion on your team. But you need to have necessary foundational knowledge to be able to lead your technical team and make informed decisions.
Flexibility: Successful entrepreneurs understand that the world and the environment in which they operate are constantly changing. While you must focus on the end game, you also must adapt your strategies and offerings to meet changing market conditions.
There has often been debate regarding whether entrepreneurship can be taught. Can you really teach persistence or passion? Perhaps you can't. But if you understand the importance of these entrepreneurial traits, you can focus on them and make the necessary adjustments to succeed in your entrepreneurial endeavors.
What about you -- what skills or traits do you think make entrepreneurs successful?
In my previous post, I explained how getting an outside perspective improves your chances of raising capital.
There is a second, equally important, benefit of retaining a business planning consultant to develop your business plan: it improves your business strategy.
Let's start with some facts...
Fact #1: There are 24 million businesses in the United States alone.
Fact #2: History tends to repeat itself.
What I mean is, if you have an idea, whether it's a marketing idea, operations idea -- anything really -- chances are it's been tried before. Chances are also that if it failed the first time, it will most likely fail again.
That's not to be discouraging, because there's a decent chance that it wasn't executed properly the first time, or lacked the nuances you bring to the idea. Regardless -- if your idea has been tested before, I bet you want to know about it.
When you are aware of the earlier attempts of an idea, you can quickly learn from them and either 1) Determine that it won't work (and cut your losses) or 2) refine the strategy and make it work. But, if you never know about those other attempts, your chances of failure are increased.
A competent business plan advisor can provide a lot of value during this research and discovery phase. Reputable business plan consultants not only perform market research, they leverage their existing knowledge and experiences regarding their own businesses and the businesses of their colleagues. This positions them to point out those potential pitfalls and strategies which have failed in the past, as well as strategies that have been proven to work.
This is very important, because unrealistic assumptions can kill a business.
To explore this, let's take an example from a company I just spoke with yesterday. This firm is about to launch a new division offering BPO (business process outsourcing) services. When I asked about their expected sales cycle (the time it takes from when they contact a prospective customer to when they secure the client) they answered 3 to 6 months.
Well, 3 to 6 months is a reasonable sales cycle in this industry. But what if they told me 3 to 6 weeks? Worse yet, what if they went out and succeeded in raising financing -- expecting revenues to come in within a 3 to 6 week period?
Most likely, they would have raised too little money and gone bankrupt while anxiously waiting for prospects to become customers.
There's another piece to business strategy consulting, which involves taking interesting (or even seemingly mundane) ideas from other industries and finding creative ways to adapt them to your business. These types of insights are frequently offered by outside advisors and have been known to result in breakthroughs responsible for transforming entire industries.
Consider roll-on deodorant. The "roll-on" part was inspired by the ball-point pen. Before that, deodorant was packaged in cream form. Or, consider Fred Smith's Fedex. Smith applied the banking industry's method of clearing overnight checks to the overnight delivery of packages. Each of these cross-industry breakthroughs resulted in billion dollar industries.
I'll admit it... As a kid, I hated history class. I couldn't imagine information less relevant to my life than what happened in Europe 600 years ago. But you can't be ignorant about what has happened in the past or what is happening around you -- even half-way across the globe -- because it does affect you. Knowing what other companies are doing, what's working and what's failed -- that's the information that will prevent you from repeating failures and allow you to replicate success.
Who knows? A well-researched busines strategy might just result in a breakthrough that establishes your place in business history.
Related post: How Business Plan Writers Help You Raise Capital
Yesterday I was looking at an online forum that deals with all aspects of entrepreneurship. I quickly found the capital-raising section and started reading a post from someone who was considering outsourcing the development of their business plan to an outside firm.
Shortly thereafter, I saw a comment from an entrepreneur named Joe, who said, "How could you even consider outsourcing your business plan? Only you know your business well enough to write it."
Well, I'm probably pretty biased on this topic, since Growthink has been developing business plans for clients for a decade. I want to put that bias aside for a minute, though, because I'd like to explain the value of letting nearly anyone outside your company help with the development of your business plan.
Here's my stance: Only outside viewpoints can ensure that your business plan includes both a solid Business Strategy and Communications Strategy. Right now, I want to talk about Communications Strategy - I'll touch on Business Strategy in an upcoming blog post.
Before we go any further, however, I want to dispel the biggest myth about business plans.
Most people think that the goal of a business plan is to provide an in-depth analysis of your business. If you have any aspirations of presenting your plan to outside investors, then this thinking is incomplete. But most entrepreneurs are looking for a business plan to raise capital to market your company to investors.
Yes, your business plan is a marketing document.
Would you buy toothpaste whose packaging states, in huge letters, "Sodium Fluoride," "Tetra Potassium Pyrophosphate," and "Titanium Dioxide?"
We all purchase toothpaste whose packaging promotes the BENEFITS such as "freshens breath," "whitens teeth" and "prevents cavities."
The same is true with business plans. You should never -- particularly at the beginning -- pile on information about the details of your business. Rather, you need to focus on the benefits that investors will care about: the size of the addressable market, the milestones you've achieved to-date, what you have that your competitors don't -- and, importantly, how you expect them to get a return on their dollars.
A great communications strategy, in business planning, or in anything else, starts with figuring out what your audience wants to, needs to, and/or is willing to hear. Then, of course, you have to give it to them. You must put yourself in your audience's shoes and figure out the most compelling way to convey the benefits of your business to them.
Back to Joe's quote, "Only you know your business well enough..." Following his logic, there would be no advertising agencies or public relations firms.
Actually, imagine if all of your competitors decided to do all of their advertising and PR in-house, and you were the only one to seek outside, professional assistance. Your marketing would likely dominate your competitors'.
In the same way, when your business plan brilliantly communicates the benefits of your business to investors, you give yourself an immeasurable competitive advantage over the thousands and thousands of other businesses out there competing for capital.
It's no wonder that only a very small percentage of companies seeking venture capital successfully raise it. Yes, the majority of contenders may "know their business well enough," but sadly, not well enough to convince others to invest.
Are you looking to enter new markets or better serve your existing markets? If so, here's a technique that will allow you to gain insightful market research and learn best practices REALLY QUICKLY.
And for no cost, thanks to Google.
The other day, my son told me he wanted to take up lacrosse, so let's use lacrosse as our example. So, let's say I want to get into the lacrosse business, selling equipment through stores and/or online.
To start my market research I went to Google's new keyword search volume tool here: https://adwords.google.com/select/KeywordToolExternal
I typed in "lacrosse" and Google then shows me all the related keywords and how many times people searched on them last month. It immediately showed me the following:
Keywords_________ Approx Monthly Search Volume
lacrosse equipment........ 110,000
women's lacrosse........... 74,000
girls lacrosse.................. 60,500
high school lacrosse...... 49,500
lacrosse sticks................ 49,500
lacrosse wisconsin......... 49,500
lacrosse camp................ 40,500
From this, I see that lacrosse is a pretty popular sport; in fact, when I download Google's list of the top 150 lacrosse-related searches, I see that the sport gets 4.9 million searches per month.
To put this in perspective, and to see if the market is growing or expanding, I go to Google Trends at http://www.google.com/trends and type in "lacrosse."
Not only does Google Trends show the number of searches that people have done on lacrosse monthly beginning in 2003, but when I type in additional sports like football and basketball, I can see the relative size of lacrosse. Also, from the Google Trends graph, I quickly saw that lacrosse is a seasonal sport with peaks and valleys in search volume.
My next area of research is to determine the level of competition for selling lacrosse equipment. For this, I simply type in terms like "lacrosse," "lacrosse equipment," and "high school lacrosse." I find that general terms like "lacrosse" and "high school lacrosse" have very little competition (based on the few Sponsored Links I see on the top and to the left of the search results), thus providing a significant opportunity if I can figure out products and/or services to fulfill the needs of those who search these terms.
For the term "lacrosse equipment," which is a term that shows more buying intent (i.e., someone who searches this term has more intent to purchase a product than someone who simply searches "lacrosse"), I see several more competitors. Finally, when I search the term "lacrosse sticks," I see even more ads, since someone who types in this phrase has even more buying intent.
The next tool I use is Google's Traffic Estimator, located at https://adwords.google.com/select/TrafficEstimatorSandbox, which shows both the estimated clicks per day I would receive if I advertised on the term, but more importantly, the average estimated price that I would pay each time someone clicked on my ad.
Why is this important? Well, it gives me an estimate of how much my competitors are spending each time someone clicks on their ads.
For "lacrosse sticks," Google estimates that the top 3 advertisers pay between $0.99 and $1.26 per click.
The final stage of my research is to return to Google.com, do a search on "lacrosse sticks," and conduct competitive research. I click on the ads of the companies advertising on the keyword, and figure out how they are generating more than $1.26 per click.
I assess things like:
1. How their web pages are organized
2. Whether they are trying to generate profits from merely a one-time sale or whether they have long-term revenue generation systems (e.g., a paid membership club)
3. Whether they have a newsletter or other mechanisms to collect the email addresses of their prospects so they can market to them on an ongoing basis, etc.
This process provides me with significant competitive intelligence on current practices in the industry.
So, maybe this takes a little more than 10 minutes to thoroughly assess a new or existing market, but this technique and the tools listed above will quickly give you great information and insight really quickly.