December 22, 2010 | Comments | Uncategorized

I often talk to business owners about the need to constantly update strategic plans, financial models, and business plans. These are all “living documents” and need periodic updates.

Here are some guidelines:

  • Action Items: Daily (typically every morning or every evening)
  • Goals: Weekly, Monthly, Quarterly, and Annually
  • Strategic Plans: Quarterly and Annually
  • Business Plans: Quarterly
  • Investor Offering Documents: Quarterly (with changes in the business plan) and otherwise as required.

Here’s a key point: documents you hand to potential investors have to accurately reflect the status of your company. If something great happens, such as landing a big contract or having a person of great credibility join the team, most business owners are delighted to update the plans.

But when a setback occurs, such as having someone leave the team, inventory being lost, or a partnership falling through, many owners hesitate to update the business plan and other investor documents, and that is a mistake. You are legally required to present an accurate picture of the company – otherwise you are committing securities fraud.

If you have any question as to whether a change is “material” (meaning significant), please ask your securities attorney.

You have one, right?

Questions: When was the last time you updated your business plan and offering documents? Are they still accurately depicting the investment opportunity?

Raising Capital can be a very stressful time for business owners. They often find themselves short on cash, short on credit, and short on patience. It seems that many things take longer and cost more than they should.

One of the biggest challenges can be in working with service providers who do not meet their expectations. It costs a lot of money to engage with an attorney, a strategist, a branding expert, a marketing consultant, and so on. Having a favorable / excellent outcome is very important. More than one or two missteps can really hurt investor confidence. I have seen cases where the inability to work successfully with outside experts cost an owner their business.

Additionally, new business owners often don’t have experience working with outside experts, so that makes engaging with those experts all the more challenging.

So if you are working with outside experts, I suggest you do four things:

  • First, check references. Find others who have worked with your service provider. And be sure to check references who are not suggested by the provider; no one provides the names of those who were dissatisfied.
  • Second, do everything you can to make sure your written agreement matches your expectations for deliverables, timing, and pricing. You may want to have penalty clauses in case of delays and termination clauses for cause and for convenience. You may also want to have bonus clauses or clauses in the agreement that hold back part of the total contract amount for final acceptance of quality. And always have your attorney review the agreement for completeness and fairness.
  • Third, have a conversation with your service provider and stress the importance of them providing a quality service in the expected time frame, and the challenges you may face if they are late or deliver a poor quality service. Let them know that you are depending on them.
  • Fourth, do your part. Working with a service provider is often a collaborative effort. When they need your input, provide it promptly. When they request a meeting with you, have it as soon as you can. Be honest and direct about what you like and don’t like, so there are no surprises down the road.

Then, you will be doing all you can to make sure your expectations are being met.

Questions: Do you consistently seem to engage with service providers who fail to live up to your expectations? Are you doing all you can to minimize the possibility of failed expectations?

Top of the Mind

November 16, 2010 | Comments | Uncategorized

One of the most important things you can do when raising capital for your small business is keeping your company visible to both current and prospective investors.

You went to them with a great deal of enthusiasm and determination and they listened. Some chose to write you a check, others did not.

But regardless of whether or not they wrote you a check, one thing is for sure: they are watching you, and every once in a while, they think of you. They want you to succeed and they want to be kept informed of your progress. They are curious.

They want you to be honest about your challenges and opportunities and they want to see how you manage both of them. When you write them an occasional email or newsletter, they get to “watch the game”. When you call them and check-in once a month, they can get more details. Their curiosity is momentarily satisfied, and they look forward to the next chapter in the saga of your business.

Along the way, they also learn that you value the relationship and are still confident enough to follow-up on your original pitch.

Every sales professional knows the importance of Top of the Mind Awareness. It is critical to be the first person someone thinks of whenever they decide to take action. If they feel comfortable with the value of working with the first person who pops into their head, they may not look any further.

So when you are on their minds and they are thinking about their investments, they might just warm up to the idea of investing with you.

And the next time you call, you may find that their “not now” has turned to a “send me the paperwork”.

Questions: Do you have contact information for all of your current and prospective investors? Are you calling them regularly and sending them periodic updates? Are you at the top of their mind?

Good Vibrations

November 4, 2010 | Comments | Uncategorized

The Beach Boys released their hit single Good Vibrations in 1966, and it became a part of my everyday language. “I’m getting good vibes from her” or “I’m getting some bad vibes from him” were common expressions in my high school and college.

Today, I talk about “energy” instead of “vibrations”, and whether the energetic field of someone is positive or negative, and whether it is supportive or challenging. When someone is joyful, playful, focused, and productive, the energy is almost always complementary and inspiring; when someone is boastful or bullying, being in their presence can be quite a challenge.

Don’t get me wrong: I think there are times when being very assertive, even aggressive, can be quite beneficial (such as when a person is sitting on their backside, not meeting their commitments, playing the victim, and other tactics aren’t working), but I find that attitude counter-productive in all but very small quantities.

As a leader, it is your responsibility to build your team focusing on many factors, including whether the “vibrations” of the proposed teammate will contribute to the overall health and performance of the team. If someone detracts from the productivity of the people around him/her, then the collateral damage must be factored into the equation. Arrogance, antagonism, constant complaining, worrying, and despair are just not that healthy for anyone.

So when you are thinking about adding someone to your team, consider not only their competence and their ability to get the job done in a reasonable time frame and at a reasonable cost, but also consider the impact of their emotional states and attitudes.

Because it is the performance of the team, not the performance of any one individual, that matters most.

Questions: Think about some talented but challenging people you have worked with. Do you need or want someone like that on your team?

I’ve helped hundreds of business owners create financial projections for their business plans. It is always a most interesting process.

When we build the model, we always start by projecting individual products and product lines, asking simple questions like “How many units can you commit to selling in the next three years?” and “What do
you expect the price to be?” Most of my clients can answer those questions quickly; some have to think them through.

After we forecast all of the products and roll them up to create the sales projections, we have some idea of how big of a business the owner thinks they can create.

Sometimes the numbers are lower than expected, and the business owners have to increase their projections to have a business that is attractive to investors. This is dangerous, and I try to encourage them not to be too aggressive. After all, it is better to predict $2 million in sales and hit $2.5 million than it is to predict $3 million in sales and achieve $2.5 million.

Sometimes the numbers are incredibly large, even in the $billions. Do you how many companies achieve a $billion in revenue in the first three years? None. Zero. Never happened. Google started in 1996, and hit $85 million in 2001, five years later. Apple was the fastest to $1 billion in revenues, achieving that number in 5 years.

Hitting $20 million in three years and $50 million in five years is a grand slam! Creating a company that makes it to $5 million in revenues in 3 years can be the business accomplishment of a lifetime.

So before you look an investor in the eye and tell him / her that you can hit those big revenue goals, ask yourself “Can I really do this?”

Your investors will certainly expect you to.

Questions: What is the most revenue you have ever been responsible for? Do you know what it takes to sell $20 million of anything? Are you suggesting that you will be the next Google or Apple?

Are You Ready?

September 23, 2010 | Comments | Uncategorized

I talked to the chairman and president of an angel group the other day about his organization, a relatively small angel investment club east of Oakland California.

Like many investment groups, they have a defined process for submitting a business opportunity to members. Business plans are reviewed, and those owners whose plans are selected are offered the opportunity to present to the screening committee. Those who are successful with the initial presentation are invited to present the entire membership – no more than 20 minutes with Q&A to follow.

They evaluate investment opportunities by looking at the management team, the market opportunity, the use of proceeds, the growth potential, the competitive advantage(s), the fit with the groups strategic objectives (they prefer local investments that bring jobs to their community), the products and services, and the exit strategy.

What isn’t described on the website is what generally happens after the presentation to the larger group. While investment decisions are made individually, members interested in one of the opportunities get together to discuss the pros and cons, and the strengths and weaknesses of the investment.

They collaborate.

Here’s what that means to you: you need to be ready to address several investors who will combine their experience and intelligence to ask very probing questions. It is much tougher than talking to just one potential investor at a time. And the leader of the group has a PhD from MIT. When he has a question about technology, he turns to his colleagues and fellow professors. He undoubtedly has connections throughout the MIT alumni organization and up and down Silicon Valley to draw on when he needs them.

In addition to having a great business concept and a great team, it takes great confidence and poise to stand up to that level of sophisticated review.

Are you ready?

Questions: Are you preparing to submit your plan to angel investors? Are you ready to talk to some of the sharpest minds in the world about your business?

A Day of Rest

September 15, 2010 | Comments | Uncategorized

I talked to a client today about his progress and plans for raising capital. He replied that his enthusiasm had been renewed and he was eager to take the next steps. He was ready to send out the investor newsletter and make calls to his investor prospects. He was pumped and excited!


Just a couple of days earlier he had been moving slowly. Family issues and lots of work had left him depleted and fatigued. He was not eager to write or call or take the next steps in raising capital.

So he took a day off. Slept in. Took several naps.

Darn near slept the whole day.

And it worked for him.

Every once in a while, it seems, taking a day off can be a very good thing. It sure beats the heck out of going at half-speed for weeks.

Investors notice.

Questions: Is your enthusiasm lagging? Do you think a day off would be helpful? Are you putting your best foot forward with every call?

I talked to a client today about his encounter with a potential investor; The prospect wanted to know more information on how people had built similar businesses, how much of the company his money would buy, and when he could expect a return.

This was troublesome, because the client was at the seed capital stage (raising money via a promissory note) and could not answer the questions. He didn’t have a business plan or a formal equity offering. He was raising money so he could pay professionals to help him create them.

I reminded him that 19 out of 20 investor prospects will not be interested in you, no matter where you are in the evolution of your business.  They will ask questions you can’t answer and point out that your team, plan, market, progress, IP protection, sophistication, lack of market traction, etc. concerns them.

Don’t let it concern you. Keep knocking on doors and making calls until you find people who are comfortable with the progress you have already made.

And ask permission of everyone who isn’t prepared to write you a check today to call them back in a few months when you can share additional progress in making the venture one that is attractive to them.

Questions: Are you ready for the tough questions? Are you ready for someone to say “no”? Are you ready to move on, cheerfully?

I was talking to a client this morning about where she was in her capital raising program, and she replied that she felt a little “ill-equipped”.

She is in the early stages, with a one-pager and a convertible promissory note, but without a business plan or a completed equity offering. She felt like she needed to have a completed business plan to be successful and asked if that was true.

I told her “it is true if you think it is true!”

If you really believe that people can and should invest in you right where you are, in your stage development, then you will find them. If you believe you need to have a completed business plan and equity offering, or any one of a dozen other things (patent, packaging, branding, additional team members, etc.) to be successful, then that is likely to be true, too.

Up to a point.

At some point in time, you have to be able to look an investor in the eye and tell him or her that you have made progress with the money you have raised. You will need to demonstrate to today’s investors that you made good use of the money you raised yesterday.

And that’s the most important thing of all: the confidence that comes from being able to demonstrate progress.

Questions: What is holding you back? Do you really need to have those things, or are you just lacking in self-confidence? Are you making progress with the money you have raised?

Copyright 2010 | Capital Coaching Program