Archive: November 2007

Entrepreneurs say: "We’re doing a deal with Microsoft (AOL, SUN, Oracle, etc.)" Investors think: With a big company and a large deal, marketing and development resources can dither away your very limited resources even when they’re attempting to be your ally. Successful version: "We may have an agreement with the world’s largest player in this arena. It’s important, but it’s not the destiny of this company. Our idea will succeed regardless of whether we […]

In addition to a business plan, be prepared with a business summary focusing on the management team, profit projections, market position and exit strategy. Also put together marketing materials and due diligence analyses on the company, management and industry. Take these materials along with your product, if you have one to your meeting to help the venture capitalist fully understand your product or service. Focus on your business plan. No "blue sky" plans or dreams, no mention […]

For many businesses, however, thin margins are just part of the territory. Where they can undermine a small business is when projected operating margins are thin because of a low-cost pricing strategy. If the underlying assumption is that profits come with volume the question becomes, does the organization have the skill to generate the required volume? More important, what kind of cash is going to get eaten in inventory purchases (if there are any) and in carrying a large balance of accounts […]

While the former deviation is a tough sell, the latter is possible to overcome with a plausible explanation. In fact, with a really good explanation, it’s a selling point. After all, breakthroughs in technology, manufacturing techniques, or management styles can change the economics of doing business and create exciting investment opportunities. So if you’ve got it, flaunt it. But be prepared to offer lots of evidence that illustrates why your operation breaks the mold. Another important […]

Naturally, the first question would-be investors ask is "What do your financial projections look like?" The reason investors ask this question is simple: Companies are valued in relationship to their earnings. Hence the future value of the investment depends on how the company performs down the road. As a result, access to growth capital depends in large measure on the entrepreneur’s ability to paint a credible and compelling picture of his or her company’s financial prospects through […]

The five most common sources of short-term working capital financing: Investors will look very closely at how effectively you use these. Equity: If your business is in its first year of operation and has not yet become profitable, then you might have to rely on equity funds for short-term working capital needs. These funds might be injected from your own personal resources or from a family member, friend or third-party investor. Trade Creditors: If you have a particularly good relationship established […]

Want to know what investors are looking for in the numbers of your financial statements? Most investors usually look at the income statement first to see whether gross, operating and net income margins are in line with industry averages. If not, it’s a negative. Then again, it doesn’t have to be the kiss of death. Many companies have not reached the critical mass on sales that will reduce the effects of fixed costs, or may be experiencing high costs because they’re growing. Next most equity […]

Most venture capitalists say that plans over 50 pages tend to end up in the round file, but remember it is the introduction to the VC that counts and if you have their attention before you present your plan, then if you need 100 pages to convey the "Big Picture" it won’t be the kiss of death. It will depend on the nature of your business. If you have a simple concept, you may be able to express it in very few words. if you’re proposing a new kind of business or even a new industry, […]

Why is a business plan so vital to the health of your business? A business plan is a written description of your business’s future. That’s all there is to it. It is a document that describes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the seed of a plan. Business plans can help perform a number of tasks for those who write and read them. They’re used by investment […]

  Explore organizations dedicated to business networking. Chambers of commerce, tenant associations and networking clubs offer opportunities for you to meet and greet. Look for partners. Specifically, look for other businesses that complement what you do and might be a good source of referrals. Align with non-competitors that call on the same prospects and share your business relationships. Don’t look at networking as a sales opportunity. Instead, look at it as a reconnaissance mission–a […]