Spotted this great video on failing and risk on Brad’s excellent blog and every aspiring entrepreneur should take this video to heart – they will need a ton of courage and persistence to make their life a success.
In my book “So you want to be an entrepreneur” the no.1 trait for entrepreneurial success is persistence and this often comes through many failures – small one’s along the road on the current project or bigger one’s in your past. The key is to accept the risk of failure and to try your best and focus on your outcome – then triumph through adversity!
Sorry everyone, my feed has moved due to a problem when I upgraded to latest WordPress version – this damaged the database and that meant the feedburner cache was damaged too.
The only way I could fix it was to start over!
New feed = http://feeds.feedburner.com/EntrepreneurBook
So you thought all entrepreneurs were suit wearing ex consultants huh? Nope the best ones are cool surfer dudes..!
Sure the surfing ain’t water based but it’s the same idea – find the big wave, get on its back and ride it all the way.
If you are real lucky, you can catch a few waves in the same session, right.
OK, so being serious for a second – what I mean is you need to try and look for trends that will positively affect your business, while avoiding negative ones.
When either planning a new business or looking for the holy grail in the one you already have – try and get into a business that has multiple positive trends running behind it to push the business along.
A good example of a positive trend is a new market that is being sponsored by government, take the ‘war on terror’ – once the US government had decided that this was a priority a huge wave was created in a whole host of businesses that could take advantage of the massive amount of legislation and dollars that were going to be poured into the space. Literally 1000s of new businesses have been built in the last 5 years on this change alone.
There will be a wave to catch in your market, large or small, you should make sure you take advantage.
If you can try to put together several waves to push your business to success – how about a new technology, in an emerging market like the one above that is cheaper, faster or better. You then have the advantage of offering efficiency in a large and growing market - a double wave.
By the same token, it does not make sense to either enter a market too late, after the wave has lost it’s energy. Or where the wave is against you, such as trying to muscle in on the above market where all the contracts will only go to select players, locking you out.
Another classic opportunity is the bow wave of a large player in the market – ride the spin off opportunities that are created by bigger players. Or where they are moving out of a market like when Cable and Wireless changed strategy and left huge regional telephony markets up for grabs for those with a surfer attitude.
One of my investments illustrates this point very well, it has the benefit of several waves.
Firstly it is in a market with few competitors, with a new idea and first mover advantage. The market itself has the benefit of government funds in the $billions, plus it also has the benefit of positive parental trends and even better a ‘green/health’ spin. Also, the company has a track record in the space where others don’t and it’s been tieing up exclusive arrangements with government and other ‘legal bodies’ to give it a defensible advantage – in short 4/5 waves that will push it forward.
Without these advantages the business would be very ordinary but with them it could be very profitable and successful.
So get on those board shorts and start surfing my friends.
It can be very helpful to know what NOT to write as much as what to include in a plan, especially if you are new to the process. Experienced investors see 100′s plans and it helps to avoid things that would put them off when reading yours.
Gerry Lemberg, a very experienced entrepreneur, teacher and now fund raiser, has some great ideas:
1. There is no competition.
Perhaps no other company sells a product substantially similar to yours, but this does not imply a lack of competition. Any substitute product, process or service that satisfies the same need as your business is a competitive solution. Stating that no competition exists reveals either a lack of research or imagination on your part. If you are correct, investors interpret the lack of competition as evidence that the market is undesirable or having need of consumer education.
2. The existing competition is (lazy/stupid/pick an adjective).
Denigrating your competition will detract from your business plan more than it adds. The statement offers potential investors no insight into why your company will succeed against an entrenched company. For example, if the competition has failed to seize the initiative due to its organization as a not for- profit company, speak to the lack of incentives implied by this type of organization. Identify weaknesses in the competition that are difficult to change, as opposed to poor leadership, which is relatively easy to change? Offer potential investors information about the competitive landscape rather than invectives against existing companies.
3. Company founders have invested £X worth of their time in the company.
Investors like to see that the founders of an entrepreneurial company believe in their business enough to make investment and personal sacrifice to sustain its survival, but do not confuse the two. While foregone salary represents an economic cost of the venture to an entrepreneur, it is not an investment into the business. Investment translates to cash spent for costs related to starting and developing the business. If founders have spent a significant amount to do this, include the figure somewhere in the financial section of your business plan.
4. Our channel partners will sell our product.
Making the sale of your product somebody else’s problem is not the solution to the marketing section of your plan in 9 out of 10 cases. Your product is competing with alternatives in your industry and others for your channel partners’ time, so the incentives in terms of volume, margin and strategic benefit (ability to sell corollary services) must justify their commitment. If your marketing plan is dependent on this strategy, provide compelling evidence that it is viable.
5. We will sell into the £X Trillion global (name any) market.
Incorrectly sizing the market may give investors the perception that management lacks either the knowledge to assess who would buy the product or the integrity to delimit this statistic accurately. Here’s a simple statement that may be of assistance: “If my company had 100% Market share for the product we sell, company revenues would be X.” Given that your customer is defined accurately; this is your total addressable market.
6. Absence of information regarding how funding will be used.
This is a critical piece of information, but one that is often left out. Investors would like to know why you are raising capital, so provide a breakdown of where the dollars go. Expenses amounting to less than 10% of the capital being raised need not be detailed in your Executive Summary.
By Gerry Lemberg, Silver Fox Venture Partners.
Well done you have managed to get a VC presentation or to stand up to pitch to a group of investors, now what?
The investor(s) will probably pour over your business plan in advance, looking for chinks in the proposal. There may be three or four people on their side of the table if it’s a VC/VCT or up to 50 if its an investor meeting peppering you with questions.
But no matter, you’ll be ready right?
Listed below are some of the most common questions to expect. Also examine your business plan with the critical eye of a financier. What other questions would an astute lender or investor ask?
Prepare and rehearse answers to all questions. Then ask someone in your office to grill you until you are familiar enough with the answers to deliver them smoothly and confidently. (This is no different from an employment interview. Anyone who does not have solid answers to predictable questions like “Why did you leave your last job?” won’t get the job.)
During the meeting:
- Stick to the facts. Sophisticated buyers are not impressed by puffery. Only assert what you can quantify and back up.
- Exude confidence and enthusiasm.
- Be prepared for unexpected questions.
- Stay flexible.
Questions investor(s) may ask:
- How large is the specific market for your product?
- What growth is expected in this market?
- What, specifically, are the company’s products/Services?
- How are they better than other products or alternative solutions?
- Are there patents? What, specifically, do they protect?
- Overcoming Inertia – What will it take to get customers to change what they are using/doing today?
- Where will you fit into the industry?
- What work remains?
- Identify major development risks or challenges.
Marketing and Sales
- Briefly explain the selling cycle.
- How will you raise customers’ awareness of your product and stimulate buying?
- What channels of distribution will you use to deliver your products?
- What is your background and previous experience?
- Where did the idea for the company come from?
- How did you get involved with the company?
- Who is presently managing the company? What are their credentials especially regarding Ã¢ÂÂ¦.
- Financial management
- Product development and production
- Identify the steps needed to reach positive cash flow.
- How has the company been funded to date?
- What is the business model? (i.e. how will the company make money?)
- Do you have any corporate partnerships in place?
- What kind of revenues can the business produce over the next five years? Profits?
- How will the investor get his money back? Through an IPO? Acquisition? When?
- How much capital is required to carry the company to the next stage?
- What is your current “burn-rate.”
- How much hard-money (cash) have the founders put in?
- What are your startup or development costs?
- What is your projected three-year revenue stream?
- How much are you planning on investing?
- What do your projected expenses look like for three years?
- What are your three-year sales forecasts?
If you anticipate being acquired
- Identify the two or three most likely buyers
- Explain why they would be interested
Now assuming investors like what they see so far, can you convincingly answer the following questions they might ask.
- Can you provide us with evidence of customer acceptance?
- Do you understand our needs such as Return on Investment or our need to be taken out?
- Can you prove you are focused on this business?
- What position will your business take in the industry or with competition?
- What are your leadership qualities and what proof do you have?
- If your business will be dependent on the competition to expand the market, what are your plans to take advantage of their leadership?
- Lack of experience in running a business like the one you propose.
- Is special or custom technology constantly required?
- Over optimistic growth projections.
- Unrealistic financial projections and use of funds.
- Your personal infatuation instead of objective evaluation of your product or service.
- You are not willing to make personal financial sacrifices.