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.
Increase your profit without any additional expense – starting tomorrow morning!
This means that you have the remainder of today and tonight to start using `The 5% Rule’ and increase your profit by up to 35% per year.
By simply focusing on 3 aspects of your business you can easily increase your profit and this includes putting your prices up!
I came across this method some years ago and can not remember who needs to receive credit for the idea. Having introduced The 5% Rule to many small businesses in the past, significant changes have returned extra profit for the owners or managers that have implemented this concept. At first they found it hard to believe that you can do this and to get away with putting their prices up but you will shortly find out that this is not as bad as it seems.
(To some degree this concept can also be adapted to service based businesses).
What you will need
You need a printout of your expense accounts relating to:
You will also need a clear and creative mind. Be prepared to talk to your staff for their ideas as well and especially if you are struggling to come up with some simple options by yourself.
How does it work?
What you will do is:
You may not be able to reduce the first 2 by 5%, you may initially only find 3 or 4% but that is better than not at all.
Some ideas to get you started…
Reducing Cost of Goods
Where else can you reduce your costs?
Do you use too many biros in a year? Do they all seem to disappear into a mysterious black hole?
Buy all your staff a nice but bottom of the range Parker pen and inform them that there will be no more plastic biros. If you lose this one, you buy the next one.
You will suddenly find that firstly they feel just that little bit more important and professional using a `nice’ Parker pen. They will not lose it and they will definitely ensure that customers do not suddenly walk out the door with `my’ pen.
Use printing paper that usually goes into the shredder and turn it into note pads, rather than buying pads.
Are you giving your employees free personal calls, on your phones?
Its a nice gesture but those calls are not increasing your sales and profit. It is actually unnecessarily adding to your expense and most people already have their own mobile phones now. If you have given employees a work mobile, do they use them for personal calls? This costs you even more.
Can you reduce your electricity costs?
Turn off unnecessary lights and computers overnight or at the least put your computers on the hard disc hibernation setting. Turn off the electronic cash register, appliances and anything that definitely does not need to be on after hours, including anything on standby power.
[Start some lateral thinking about your expenses. One business that I worked with complained that within the last 3 months their sales had quickly dropped off, for no apparent reason. They had filled their street-front windows with display boards to show their new clothing lines. Passing foot traffic started to slow for 2 reasons. The display boards showed clothing to a narrowed consumer taste, deterring shoppers from looking further into the shop. The display boards also meant that passing trade could not even see into the shop. The owner removed the display boards from the windows, allowing shoppers to see the entire range of clothing and accessories as they walked past. Sales increased but they also found that by removing the display boards from covering their front windows they only needed to use one third of their internal lights, as they had now let all the light back in through the front windows. They also unexpectedly found that their electricity cost had now reduced dramatically.]
Can you improve the effectiveness of your yearly advertising/promotional strategy so that you pay less for improved exposure or for better targeting of your market?
(See other articles on this site for new strategies)
Now go through your business and start looking at where you can reduce both your overheads and your cost of goods, each by 5%. If you can make it even more than this figure then all the better.
Increase your sales profit margin by 5%
Most people will immediately panic at the thought of just arbitrarily increasing their prices by 5% but what you are going to do is actually increase only the profit margin by 5%. If you do the maths on your products you will find that increasing the profit margin hardly increases the retail price by that much at all. In fact it is usually hardly noticeable to even the discerning regular customer unless your products are extremely price sensitive.
For example, this means that with an item retailed at $123, the price may only increase to $125 (inc GST).
But you have increased the profit margin on all items on every sale by 5%… get out the calculator and see how much additional income you have just created across 12 months.
Combining the savings from the Cost of Goods and from your overheads to this price increase and there are quite a few thousand dollars extra in your bank every year. The reduced costs have converted savings to your bottom line but also stopped eating into your profit margin and actually become additional profit.
Find the motivation for this exercise
To see how much extra profit you can have , use last year’s financials and start working that calculator. See how much more profit you will have by subtracting 5% from last year’s overheads expenses and subtracting 5% from last year’s Cost of Goods expense.
Now add 5% to last years gross profit.
What is your total extra profit and is it worth aiming for this over the next 12months? Some small businesses have reported back an additional $20-50,000 the next year and now they try to find additional cost savings every year.
If you have employees and you want to reduce your overheads, involve them with a push to be much more environmentally friendly and start reducing the wastage. Get their ideas on cost savings as well and then reward them with a bonus from the additional profits.
Nearly all experienced entrepreneurs have figured out that getting the right person for the job is of paramount importance, but – how do you do that?
Let’s start by accepting that having the right person doing the right job is important, and that it will make a difference. That difference is experienced by the customer as better, more knowledgeable and friendlier service, by the staff as a better work environment, and by the company as less complaints and higher profits.
Another point to make before starting is that this is not an HR treatise. The point is that you would use the skills of your HR people to achieve this end. In that sense, then, what follows is a strategy for selecting new staff.
That doesn’t just mean new to the organisation, it is any hiring or promoting of staff.
So – to get started: The first and most important attribute is that the candidate must have a passion for the role. Early in my managerial career i thought that “an interest” was close enough, now I believe that an absolute passion is required.
It isn’t even that someone who is “just here for the money” will leave when things get tough, or after a year or two. The real problem is that they will not be as effective while they ARE here.
At the birth of the Industrial Revolution the concept of “Man as part of the machine” was also born. That idea held that any person can perform the role, and that with enough ‘encouragement’ – mostly punishment for failing to reach targets – they would all perform to the required standard.
Would you perform best under duress? Neither does anyone else.
The second attribute that is required is that the candidate must have a skill, talent or ability that the organisation requires. This is where most HR has focussed, for most of the time.
It seems obvious, but if the team needs a Candlestick Maker then there is no point in hiring a Baker. This may be more true in smaller or family-run businesses. Hiring someone because they are your brother- or sister-in-law is not going to do the right thing by them or your business unless they genuinely also have a passion for the role and a skill needed by the team.
The third requirement is that they must have the right personal attributes for the role. These are often called a ‘profile’. There are many profiling systems – Myers-Briggs, DISC, Enneagram, Visual Profiling and so on.
What they all identify is that some people crave new experiences at work while some crave stability. Some work best at planning, and others are better at implementing, and so on. There are more articles on this site on this subject, or you can use the internet to research if you wish to know more about this topic.
The 3 rules for successful staff placement are:
1. Must have a passion for the role,
2. Must have a skill or talent that is useful to the organisation, and that pertains to the role.
3. Must have the appropriate ‘profile’ or temperament for their role.
If you use these as guidelines then you will create a far more solid and profitable business than if you ignore them.
What do you think? Do you agree that some people are better at certain tasks than others or do you disagree? Use our comments section and let us know what you think!