Could You Be Setting Your Business Plan Up For Failure?

David E. Gumpert, author of Burn Your Business Plan, often tells the story about how he and his partner failed to raise money after sending their business plan around to venture capitalists and meeting with several others to make presentations. Disappointed by the fruits of their labor, they considered giving up on their venture in 1995. Fortunately, on the advice of their board of advisors, they chose to divert their time from massaging the business plan to making sales. The financing, they were told, would come later.

Turns out, they sold enough to stay afloat through 1996. In 1997, sales failed to grow as quickly as they expected, so they decided to seek financing again. This time, they expected positive results would be easier to obtain, after all they were fairly well established now. The board, however, told them to get out there and promote their business and make more sales.

If At First You Don't Succeed?

Gumpert and his partner instead decided to dust off their old business plan, spend many hours rewriting and updating the plan, and to set out once again to seek financing. And, once again they were turned down. How could this be? In the late 90's, it seemed like every new Internet-related venture in the world was obtaining financing. In fact, according to the MoneyTree Survey, sponsored by Price Waterhouse Coopers, Venture Economics, and the National Venture Capital Association, the amount of venture capital - $7.7 billion in 1995 -- had grown to $16.4 billion by 1997.

Nonetheless, the failed financing left Gumpert and his partner with two stark choices at this stage: Find ways to grow the business without financing or call it quits. They took the first choice. They also engaged public-relations professionals, and succeeded in getting several of their most successful corporate clients written up in business and industry trade publications - with their agency mentioned as the key force behind their clients' success. This publicity got the agency's phones ringing with new prospects, several of which converted into additional sales.

As the business grew, they remained on guard about monitoring their expenses and aggressively collecting receivables. By 1999, they were operating profitably at $2 million in annual revenues, with nearly 20 employees. Also, the amount of venture capital being invested nationally had soared to an astounding $55.5 billion. But, Gumpert and his partner paid little attention to this; their interest in outside financing had dropped significantly. (By 2000, Venture capital availability peaked at $85.5 billion.)

The Power Of Publicity

As Gumpert and his partner carried their success into 1998 and 1999, their promotional efforts eventually attracted the attention of a publicly held company that was seeking the expertise they offered in developing and managing online content. In December 1999 this company acquired Gumpert's company, NetMarquee. To Gumpert's surprise, the acquirer never asked to see their business plan; it only wanted to see their financial projections under several different scenarios.

In recounting his financing experience, Gumpert makes two points: First, even during good times, the venture capital route is closed to the vast majority of businesses that seek it out. While it might have seemed back then that nearly every business that asked was receiving venture capital, the reality is most carefully crafted business plans are rejected out of hand by venture capitalists. Second, you'll be surprised what you can accomplish without the financing you think you so desperately need to stave off failure.

The truth is that it's unlikely a business plan by itself will bring funding in the door, unless it is part of an overall marketing strategy.

Four Tools To Help Market Your Business Plan To Investors

The famous motivational speaker Jim Rohn says there are three steps to successful communications: "Have something good to say, say it well, and say it often." These three steps form the foundation of the Business Plan Secrets Revealed manual. They are essential to marketing your business plan with the intent of attracting investors and selling your business plan to them. Here are four tools to help you "say it often" so you can attract investors and sell your business plan to them.

One, a concise, well written twenty-five page business memorandum or "business plan" that builds a case to separate your venture from your competition. You don't need a two-inch thick business plan. Plans this long often lack aim; instead of building a case that leads investors to decide whether the business is the right investment for them, they "fire away" in hopes that some of the shots will take effect.

Two, an effective elevator pitch?-a 60-second, to-the-point verbal pitch for your business-that communicates to your customers and investors what you do in an exciting and engaging way. The ability to separate your business from your competitors and get an investor's interest in the short time it takes to ride up an elevator is critical.

Three, an investor relation Web page to build credibility and help investors quickly get the information they need, when they need it. Of all the communications media available, the Web is particularly important. It's fast and available 24/7. With it, you can capture leads and automatically keep in touch with those who are interested in your business.

Finally, press releases to help you get your word out. A press release is the basic tool for gaining the attention of the media. The public's desire for interesting, relevant news remains strong, as does the importance of carefully selecting relevant target audiences. You are dealing with much more skepticism on the part of the public now than there has been in the past, which makes the evidence and objectivity in your press release paramount.

The process of raising money and attracting investors isn't easy. If it were, every business idea would get funded. You have to use all the tools that are available to you, and start looking at this process as a marketing process backed by hard, verifiable evidence. You just don't know when the plums-investors, on the tree will become ripe-ready to invest. But, you do know that if you do everything you can to take care of the tree-water it, fertilize it, and so on?-it will ultimately bear fruit-raise money for your business.

Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. For more information about business plans and raising capital for your business or to review his business plan manual, visit Business Plan Secrets Revealed.

---

Insurance Requirements in Franchised Companies

Franchised companies often require what some believe to be excessive... Read More

How To Get More Business During The Winter Months

Business seems to drop, slow or even stop during the... Read More

Invalid Excuses for Poor Business Results - The Economy

Note to Rite Aid and CVS: It's not about the... Read More

Are You Ready To Go International?

Although North Americans were the dominant population on the Internet,... Read More

How to Write a Business Plan in Five Steps

People often ask "What makes a good business plan? Or,... Read More

5 Strategies That Will Boost Your Business Productivity Today! - Part 1

Building a dynamic small business is a constantly evolving, increasingly... Read More

Six Key Principles of Corporate Accountability

The foundation of any business transaction is the promise of... Read More

Creating a Vision That Achieves Results

How important is a vision statement to your company or... Read More

Family and Friends Referrals Make the Best Franchisees

As a franchisor it is imperative that you seek, find... Read More

Call in the SWOT Team: Produce More Opportunities to Expand Your Business

Have you ever done a SWOT analysis? No, it's not... Read More

Succession Planning: Problems Getting Started

A survey released by the American Institute of Certified Public... Read More

College Students and Graduates to Run Company Outlets or Franchises

Does your overall business strategy include the recruitment of college... Read More

Strategic Acquisition Strategies for Small Businesses

Growth through acquisition should not be considered an option reserved... Read More

What is Your MSP?

For many consumers and producers, MSP is an acronym for... Read More

Microsoft Great Plains Implementation: Healthcare/Hospital example ? overview for consultant

Microsoft Great Plains fits multiple services market niche and healthcare... Read More

City of Cortez and South Western Colorado Market Survey

We have been spending many hours surveying the market for... Read More

Balanced Scorecard Strategy Map

With the help of balanced scorecard strategy map, it is... Read More

Content Management: Wise Investment for Business Prosperity

The time when a website was just a simple set... Read More

Clearing the Path: 4 Ways Fear Wreaks Havoc on Your Dream and What to Do About It

Please take a moment before you read any further and... Read More

Three Easy Ways To Know Thy Competitor

"Did you hear what your competitor is doing?" This question... Read More

Five Crucial Components of a Business Plan

The format of a Business Plan is something that has... Read More

Rules to Setting Business Goals and Objectives: Why and How to be SMART

We all know that nothing runs without a plan, and... Read More

Memo: Sustaining Growth in Your Business

What gets measured gets done.How do you keep your business... Read More

Three Steps to Give Your Strategic Plan Traction

We all agree Strategic Planning is a critical part of... Read More

The Best Entity to Hold Real Estate

Possibly THE most frequently asked question of me is "What... Read More

Microsoft Great Plains in Aerospace & Defense industries ? implementation & customization highlights

Microsoft Great Plains fits horizontal markets clientele and in case... Read More

Cost-cutting Essential to Maintaining Profits

Why cut costs now? Efforts are multiplying to cut costs... Read More

Why Do a Business Plan?

To Grow (Catapult) Your Business That's Why.When it's in your... Read More

Is Plan B Ready?

Business owners and entrepreneurs are, by nature, risk takers and... Read More

When Do I Need To Hire A Business Plan Consultant

Every new business owner knows that a business plan is... Read More

Do You Really Need a Business Plan?

"I don't need a business plan."Neither did Alice in Wonderland."Would... Read More

Online Promotion: 10 Ways To Use Focus Groups To Ignite Your Profits

A focus group is a group of employees or current... Read More

How To Kick Start Your Business And Double Your Profits

This will make some people angry as hell, but it's... Read More