Having a great new idea is not all you need to be Investor Ready. You need a lot more than that, and you need them in the right times and quantities. Let’s explore what it means to be Investor Ready.
It does start off with a good idea, but you also need Proof Of Concept. That just means that you need some kind of proof that lots of other people (Customers or at least potential customers) agree with you. The way you convince an Investor that you have a great idea is to point to real sales or to comprehensive Market Research that establishes that there is a market for what you’re talking about.
We’ve covered Market Research in this blog already, so we won’t spend a lot of time on it now. It doesn’t have to be expensive to be comprehensive, all it needs is some knowledge and a little effort.
The next thing you need is a Marketing Plan. How are you going to sell your product or service? The investor needs to know this because this is where they get the return for lending you the money to get started. If you can’t sell your idea then they can’t get a return either!
You also might need a Production Plan if you are offering a product. How can you make sure you have enough to sell? If you offer a service – how can you guarantee that you will be able to deliver when and where required?
You will need to demonstrate that you can or at least will control your finances. What income will the business have over what time frame, and what expenses will it incur? Does the income arrive in time to cover the expenses?
Do you need any assistance? Can you demonstrate that you have or that you can build the right team? Having the right people in place is vital to building a long term, solid, successful business.
You can download a Business Plan that will provide sections that will allow you to document all this and more. How you will handle competitors, your strengths, your weaknesses and how you will address them. What no Business Plan Template gives you is the next two items.
The first thing you need to make sure you have enough of is the excitement you feel about your idea. If you can’t make the potential investor excited about your idea then they never feel that they want to give you the requested funding.
The second thing you need is to demonstrate certainty. What you want is that they believe, with certainty, that your business is a sure-fired way to make money. That gives them the confidence to follow up the excitement with the actual money!
That doesn’t mean that your business plan should be a sales pitch from go to whoa, and in fact if it is too much of an overt sales pitch it can turn people off as much as anything. It just needs to convey the real feelings that you have, the real confidence that you have, to introduce them to the people you know, and for them to understand the idea as well as you do.
Until someone invents a real Vulcan Mind Meld from Star Trek the best we have for conveying your idea is a good Business Plan! Put one of those together and you’re on the way to being Investor Ready.
Do you have experience finding funding for a start up business and would you like to share your knowledge? Send us some comments by using the login tag at the top left of this window.
This week we will be presenting a series of tips to make your business more profitable.
Tip 1. So let’s start with the most obvious place of all – profitability! Many people measure some metrics in their business. That’s good, because if you’re not measuring your business you could be out of business and not know it. However there is one metric that you need to keep in mind at all times.
The single most important measure is: profit. Let’s look at it this way – there is no use having a huge turnover if you aren’t making a profit on that. You can turn your stock over 100 times a year and it will not help if you aren’t making a profit on the sales.
We both know that some businesses have what is called a ‘Loss Leader’ – an item that they sell at a loss, so that you will be motivated to shop with them and while you are there you buy something else at full profit. If you do this then that’s OK, as long as you do your maths AND the losing item is generating additional sales in other profitable lines.
The point is – overall, your business is making a profit out of all, or nearly all, customer visits.
If it doesn’t make a profit then how long can you continue to invest more money to support the business? And is it worthwhile to do so?
Tip 2. Your Business Plan was perfection, and then when you opened for business you discovered that things didn’t go the way you had planned. Maybe the plan didn’t mirror reality quite so perfectly after all.
Some people call that a failure – things not working out the way they were planned. I prefer to call them “Learning Opportunities”! Let me explain that.
When things go a little ‘pear shaped’ there are two general things you can do – what I call the Headless Chicken Impersonation, or you can look for reasons WHY it went awry, and then find solutions. In other words you can learn how to do it better next time.
Most people try to avoid failure, but unless the business is perfect then there will be times when you will be tempted to use that ‘f’ word (“Failure” I mean!). The best value for the business is to get the failures in and out in the shortest possible time frame.
When you start in business be prepared that you will most likely fail, and figure out a solution as quickly as possible.
Success is one step past the last failure. The problem that stops most people isn’t that something goes wrong, the real problem is that they use that as an excuse to give up, and they stop.
Tip 3. Match your requirements to your pay structure. I’ve consulted to many large companies that have a problem with their staff – they don’t so what the company wants them to do! I used to investigate, research, interview and in general build a case for what was causing the problem.
100% of the time the problem was that the Staff Bonus system rewarded behaviour that was not what Management wanted. I know, that sounds weird. It just happens to be true. Those of you who have worked for Corporates – I’d be interested in your comments – have you ever been rewarded for one behaviour when Management were promoting something else?
Some points to consider are: Should the reward be all Salary, part Salary part Commission, or all Commission? If it is a mix, then how big should each part be? And the most important one – does the behaviour that generates the commission overlap with behaviour that you want from your staff?
Tip 4: Get your pricing right. There is a perception that a higher price means higher quality. Your price must match your business image.
Let’s imagine for a second that Rolls Royce could produce cars for the same as Volkswagen. Would Rolls Royce have the same premier image of they sold cars at the same price as Volkswagen? For the record – Volkswagen are excellent vehicles, reliable and excellent value for money.
The real point is that your prices must match your market’s expectation. Let me explain that.
Years ago some pearls were bought at a very good price. They were purchased on a Pacific Island, direct from the people who found them, and the purchaser was making a fair profit by selling them at $5 each. This WAS a very long time ago, but $5 for a pearl was very cheap. He advertised in almost every magazine for about six months, and hardly sold one. Nobody believed that the deal could be true. He then increased the price to $25 each, improved the sales copy and sold out after just one more advert. His price now matched the market expectation.
Is your price too high, or too low? Either way that will discourage buyers.
That’s all for today, tomorrow there will be some more tips for a successful business. What do you think of the concepts described here so far? Have you experienced any of these situations? Let us know and the best entry will receive a Business Health Check valued at $197.