The value of an advisor

Lets face it, if finding capital for your venture was easy, then there would be no such thing as corporate advisers out there selling you the value of advice.

As I sat with another prospect today, who incidentally became a client at the end of the meeting, seeing what I see time and time again, I thought I would make a record of it formally and talk to you about it.

Lets assume that there is limited capital out there.

Lets also assume that not every capital provider is excited by your sector, you or your style – so matter how exciting this opportunity is to you or another person, there are just some investors who are not interested.

Lets also assume that some investors who might be interested, are busy on something else at the time you are looking, or are fully invested, or are overseas – just not contactable.

The long and short of it, as your pool of investors shrinks the more we think about it, it is no wonder that it is considered a difficult to find venture capital.

SO – if you pitch up to a potential investors office, or send them an email with a poorly laid out information memorandum, business plan, or your numbers don’t add up, or even if you under sold, god forbid, your idea or business as an investment, you will have reduced your chances of getting this investor on board, and your overall pool by 1. Who knows, they could have been the one. When you are dealing with such a scarce resource WHY would you take the chance.

Here’s the crux of it. If you have a great business, a great idea and you want to position yourself for a win every time, then you need to test out your idea, test our how you are presenting it, how it is likely to be perceived, what an investor will think about it, how they will react …. All BEFORE you actually communicate to one!

Someone said to me don’t pitch your services on your blog – people will run a mile – so I won’t then. I will do this for free. With this client above, I spoke with him for an hour on the phone, read through his IM and business plan, and gave feedback over several emails over the course of 2 days, and then had 2 hours in a meeting discussing what needed to be done to position his offer more effectively, …… all for free.

You cant lose!

The value of an advisor in your capital raising process is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Capital is the lifeblood of every investment. Without capital, there can be no product, no property, no sales, no cash flow. Check out Robert’s video about his experiences raising capital for his first entrepreneurial venture. In pitching his investment workshop, Robert Kiyosaki discusses: * Robert’s experiences raising capital * Why raising capital is the #1 skill of an entrepreneur * How you can develop this skill to benefit your business and real estate investing.

Whether your current or future investments involve business or real estate, raising capital is vital to keeping your investments alive and producing cash flow.

How to Raise Capital: The #1 Skill of an Entrepreneur (lessons from Robert Kiyosaki) is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Here are Five Points to Consider when selling a business, from an experienced business broker:

If you are considering selling your business then it might come as a bit of a shock that the majority of the businesses listed for sale, never sell!

There are a lot of factors that come into play in a business acquisition and you need to expose your business to the right potential buyers and have all of your business information available including details on risk management, your business plan and your business financials.

Business brokers are experts in marketing businesses for sale and can assist you in making sure your business is investor ready.

Tips on selling a business is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Pitching to a VC is all about YOU. An investor is investing in you, as much as your idea and business concept.

Thinking startup? David S. Rose’s rapid-fire TED U talk on pitching to a venture capitalist tells you the 10 things you need to know about yourself — and prove to a VC — before you fire up your slideshow.

David Rose is a serial investor and a serial entrepreneur. Here’s his list of what is important in convincing an investor that you are the right choice.

It’s about
* Integrity
* Passion
* Knowledge
* Skills
* Leadership
* Commitment
* Coachable

And of course, it needs to be presented with an infectious enthusiasm!

On presentation techniques, and powerpoint, David says:

“Without question I’ve seen many presentations (both with and without PowerPoint) that are Too Slick, and to me they are at least as much of a turnoff (perhaps even more) than is one that is Too Rough. HOWEVER, that’s not the only choice one has. The slickness is *not* just a function of the slides; it has much more to do with how over-rehearsed, or patronizing, or ‘un-real’ the presenter is. I see hundreds (perhaps even thousands) of presentations each year, including many dozens at conferences like TED, where presentation is often elevated to a high art. And while great presentations are far from common…they do happen.

There’s a wonderful word, first used by Castiglione in 1528, that nails the concept. “Sprezzatura” is “a certain nonchalance, so as to conceal all art and make whatever one does or says appear to be without effort and almost without any thought about it.” That is to say, it is the ability of the courtier to display “an easy facility in accomplishing difficult actions which hides the conscious effort that went into them.”

If you watch the very best presenters at their very best, people like Larry Lessig and Rives and Steve Jobs and Seth Godin et al, there is absolutely NO feeling that they are Too Slick. But all of these guys spend absolutely enormous amounts of time preparing their slides, rehearsing their presentations and mastering the technology…so that the result comes off as “without effort…and thought”. ”

David S. Rose on pitching to Venture Capitalists is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

How big are your risks? What is the outcome? What can I do about it?

Simply treating all risks that you may be exposed to in your business “as equal” in your business plan doesn’t really help you manage them effectively, nor will it help an investor understand them. Further, whilst you probably know intuitively that some are more likely than others to occur, an investor who doesn’t really know you, will be left thinking you haven’t really thought them through.

I had a lot of exposure to risk in my investment banking career, and have subsequently carried this discipline to business. Of course, the risk metrics used in the investment banking world has been proven to be flawed post GFC, but the framework of assessing risk is a good one.

That is – for any given risk, a bank assesses what is the probability of it happening and what is the likely impact, and what are the mitigating actions to minimize the risk and or address the outcomes if it does happen. I don’t think Lehmans were very good at assessing risk to put it lightly but the framework was there I am sure.

It is pretty straightforward when all we are talking about is numbers – and when you have huge statistical ddatabases at your fingertips:

eg $100,000 invested in a company is a $100,000 at risk.

A) What’s the worst case scenario? $100,000 loss.

B) What is the probability of this happening? Using statistics, the bank would consider that, on average, it should be expected that a loss will occur x% of the time [averages proved to be a very expensive metric to rely upon in the run up to the GFC – as it was not an average event].

C) What can we do to reduce the impact of risk?

a. not take one [and not get a return] or

b.hedge.

Hedging is generally the preferred option.

I am not suggesting that it is necessary to develop the level of sophistication that a bank might have in their assessment of risk, but we can apply similar principals that will add enormous clarity on what the risks are in your business. It is not necessary to get too hung up on the exact score you give something your gut will tell you.

In business and ideally in your business plan, your assessment of risk can follow a similar framework as follows:

• State the risk – in wordss is fine
• Apply a score between 1-10 to show the probability of occurrence
• Apply a score between 1-10 to show the impact of such an occurrence
• Take the product of the probability and impact scores
• Rank them
• Add in a mitigating action to minimise the impact
• Are there any actions that can be taken to minimse the actual risk of it occurring?

Here are some examples of how risk in your business might be presented – you wouldn’t have all these entries in your assessment only one for the risk of death of the owner for example – the ones listed are only for illustration purposes:

Assessment of risk is A LOT more subjective in business in general than lending money. But attempting some sort of objective assessment like the above will go along way to demonstrate you have a handle on the overall risk of being in business.

Risk Model For Venture Capital Funds is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

In Part One I talked about how a business needs to go from zero to $1m in the eyes of Michael Masterton. This is infancy in the lifecycle of a business.

In infancy, the focus was developing your Optimal Selling Strategy by understanding your marketing, testing different things,  and creating a unique selling proposition. It was also about adding as many new clients as possible.

Many businesses stall in infancy and become victims of their own success. The owners may reach a point where they can make a good living from the business. The danger of this is that unless things change, they will stagnate. (95% of businesses stay smaller than $1m turnover per annum).

Here I talk about the next stage – childhood, in which a business goes from $1m to $10m.

“Childhood” is about changing gears and adding new products (even at the risk of cannibalising your existing products).

At this stage of the business, here are some points to note:

* Add new ‘front end’ products
* Innovate – look for improvements to existing products – not revolutionary new products (originality is overrated)
* Add many products and ‘let the market decide’ which will work
* Add backend products that you can sell to your existing clients.
* Aim for speed, not perfection
* Don’t jump categories – make changes to existing products that are one degree removed.
* Don’t try to make huge leaps or change the selling channel.

Most importantly, acknowledge you need to grow personally to handle and lead the rapid growth of the company.

This is most likely to be the stage at which your business decides to seek capital. Having proven its business, it can use the capital to grow the business.

Critically, this is the stage at which your business is the most attractive to an investor.

Ready, Fire, Aim :Taking your business from $1m to $10m – lessons from Michael Masterton is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Often you hear people compare a new venture to the opportunity that has passed us by … just as if we had been offered an opportunity to invest in Google (or Microsoft, or eBay, or amazon.com), and passed it up. By not investing in Google, or eBay, or amazon.com …just imagine your loss. If you had that chance now, of course you’d take it. Or so the logic goes. (The recent marketing by Dubli heads down this path…)

But here’s the funny thing … the start of Google had Sergey Brin and Larry Page wearing out shoe leather around Silicon Valley trying to get capital … endlessly pitching … and with lots of smiles. But no cash.
(Source: The Search, John Batelle)

It wasn’t until 1998 that Andy Bechtolsheim put in some cash, and the real success story starts from there and other funds coming in after that – including Jeff Bezos of Amazon fame. At the door knocking stage it didn’t even have a revenue model or a company structure (it did have a name, having just changed from being BackRub)

So, what did all those venture capitalists not see, that in retrospect seems like such an amazing opportunity.

Whatever it was… here’s the lesson: venture capitalists miss opportunities daily. And they don’t mind.

And this also presents your challenge. Even when you (think that you) have a sure thing, that the market needs what you have and that anyone would be mad to not want it… remember that you are competing with so many other opportunities put before them, that the chance of them passing on your opportunity is high.

If smart people can pass on Google, then they can pass on you.

There are some valid reasons for this. In the early days, Google had fantastic technology but a poor revenue model. In fact, it is possible that if it were not for the hype around dot coms, a plan as skinny on detail as Google’s would not get off the ground even now.

Your job as an entrepreneur, is to make sure you have a strong business model and can convey to a potential investor how you will commercialise your technology, and what their risks are. And of course what the upside will be.

For a great read on the steps that lead Google to where it is now, check out The Search. . Or here.

Just a note – the Google founders had a real life “start in a garage story” – much as Microsoft did. Their frugality extended to their celebrations on receiving their first investment: Burger King.

“Imagine investing in Google at the start…” is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Michael Porter is a pioneer in the thinking around competitive strategy. In this interview he outlines his model for an analysis of an industry and the competition within it.

This is an essential part of your business plan.

As an entrepreneur, it is essential that you understand the environment in which you operate. More importantly, when seeking capital, that you are able to convey a summary of your industry and where you sit in it to an investor.

A pdf of the content is also available here.

Michael Porter : The Five Competitive Forces That Shape Strategy is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

Guy Kawasaki is the Managing Director of Garage Technology Ventures, and has two separate stints at Apple under his belt. He is highly regarded in the Venture Capital and entrepreneurial communities.

Here are his ten (and a bonus) points for creating a successful company. This is not (specifically) about how to raise capital. It IS about how to create a great company which is all part of the journey. No punches are pulled.

1. Make Meaning. Change people’s lives. Apparently it’s not all about money. Meaning makes money.
2. Make a mantra. Have a mission statement that people understand, not one that Dilbert would create.
3. Get into action. An average plan acted on outperforms a great plan on the shelf. Don’t put up with incremental improvements. Jump the curve. Don’t try to appeal to everyone. Polarise. Find people to help on your journey.
4. Define your business model. Be specific about where dollars come from. Keep it simple.
5. Know your milestones. Know your assumptions. Know your tasks.
6. Get niched.
7. 10/20/30. 10 slides in your pitch. 20 minutes. 30 point font. Keep it simple. Don’t read your slides. These stop Guy getting ringing in his ears from BS presentations.
8. Hire infected people. They must love your product. Ignore the other stuff. Hire people better than you.
9. Lower barriers to adoption. Make it easy to do business with you. Flatten the learning curve. Don’t ask customers to do more than you would do. Embrace the evangelists.
10. Take the money. If the wrong people buy your product, let them. Allow a test drive. Find influencers, even if this is the soccer mums.
11. Don’t let the bozos grind you down. Especially the smart ones because you might believe them.

Enjoy the video and let it inspire you to create an incredible business.

If you enjoyed this, check out his VC Aptitude Test for a slightly tongue in cheek look at what makes you successful in business.

And more wisdom here…

Guy Kawasaki – The Art of the Start is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read

From ” Ready, Fire, Aim. $0 to $100 million in no time flat”.

Summary : Part One of Four+

Michael Masterton is a serial entrepreuner and advisor to many business owners.

His philosophy is one of choosing action over perfection. He breaks the life cycle of a business into 4 stages – Infancy, Childhood, Adolescence, Adulthood.

In Infancy, Masterton’s advice is highly practical. Focus on sales, sales and sales.

Your business is a train, sitting on the tracks. ” You want to get it going, not spend time polishing it. You should put coal in the furnace and get the boiler hot. Steam runs the pistons, polish doesn’t”.

Why it matters: This is a book for entrepreneurs. Hopefully that is you.

Here are his observations on businesses in their infancy.

* Don’t waste your time on corporate marketing.
Don’t do marketing that is based on building a brand. Do marketing that is focused on sales, getting leads, and growing a customer base.

* Don’t waste money on invisible business extras like office space, furniture, equipment and the like.

* Don’t be misled by phony business experts.
Be careful who you listen to. Have they succeeded in the field they are advising in?

* Be proud of your business acumen, but don’t be arrogant about your business ideas.
Have the confidence to back yourself, but don’t let your ego get in the way if your ideas are wrong.

* Ask for advice from smart people.
However successful you become, reach out to others for advice.

* Don’t ever believe you know more than your market.
You may know a lot about your product or service, but don’t commit yourself to a major idea until you have tested the market.

* Make sales your company’s top priority.
Don’t delegate responsibility for this role. Hire and manage well, but you need to be in the driver’s seat of this process.

* Learn everything you can about sales and marketing.
Read and listen to everything, and everyone you can. This will help you with your business, and allow you to start a 2nd and 3rd business.

* Discover your optimum selling strategy  (OSS)- the combination of media, pricing and positioning that brings you the most qualified leads.
Working out the best channel and message for your company is your main job. Once you have that, you can leverage your activities.

* Understand pricing. Learn the balance between winning orders, and making profit. All other things being equal, go for more customers and growing your client base.

* Understand Allowable Acquisition Cost (AAC).
Understand two sides of marketing – allowable acuisition cost and lifetime value. Know what you can afford to spend to win a customer.

* Make your marketing goal to bring in a number of qualified customers.

* If possible use direct mail or email to discover your optimum selling strategy.
This gives you a low cost mechanism with fast feedback.

* Don’t invest a lot in inventory until you have figured out your OSS.
There’s cheap ways to test such as selling, then making or fulfilling the orders.

Check out the book…

Three Great Ideas You Can Use:

1. Developing a sales strategy is absolutely essential to any business venture. Developing an “Optimum Selling Strategy” can be the difference between success and failure.

2. Understanding the difference between marketing and sales is also critical. Learning this and putting it to work can be the difference between success and failure. Development of the Unique Selling Proposition for our business is crucial as well.

3. Every start up business needs four personality types to make it work: a seller, an improver, an organizer and a pusher. Identifying those business types in your business will make success much more likely.

+ Still to come: Childhood, Adolescence, Adulthood.

Ready, Fire, Aim : Stage One (of Four): Infancy is a post from: Venture Capital Centre. Click Here To Download Our Free E-Book Explaining Exactly How To Create A Business Plan That Investors Will Read