Phased Investment Needed to Grow Businesses

With top Google rankings for so many technology, green, solar, biomass and renewable terms in business planning and development, I have literally spoken with over a hundred inventors and patent holders that have discovered a solution to the world’s energy malaise. As a positive person by nature and a Christian that believes is solutions, I expect there are many collective solutions that will lead us away from carbon based economy and eventually distance us from oil and even natural gas. We have completed many renewable energy and new technology business plans.

The overwhelming majority of inventors have unreasonable (from an investor’s standpoint) expectations. Often, that means they have a patent on a concept without a prototype tested by major third party engineering firms yet they are looking or expecting funding for a utility grade and scope power plant. Inappropriate expectations of running before walking to a big picture and a related over the top capital raise expectation is typical of the majority of entrepreneurs and business owners in all types of businesses, just magnified with inventors and tech gurus.

Some examples of clients and phased paths to success include:

> We consulted with a client that has raised well over ten million in three phases of prototype development of a renewable energy client over many years and is now a year away after fourth raise to get to very large utility grade capital raise. This the approach expected in new technology. 

> We worked with another Company almost three years ago that utilized many patents to magnify power production with a fairly unique source. I saw the working prototype the inventor developed even though did not fully understand it. Importantly, an investor looked at it invested an initial 2M engineering analysis of substance to get to manufacturing ready prototypes. Two years later, there are still refining the prototypes to get to the market.

>Four plus years ago, we did a business plan and supported a capital raise for a truly break through small to mid-sized wind turbine. The Pentagon at high levels supported the ability to literally fold up a small prototype into a backpack. They got many grants including federal and university endorsed wind tunnel testing, and a couple tiers of investments of substance with angels. We again advised that would not be in position to fund a manufacturing plant despite these raises in the near future and that investors would prefer much further development of the prototype and sales of turbines should be from a third party manufacturer. They have not yet hit the market.

> We worked with a company that on their fourth capital raise (and a fifth during operations) proved in a large scale plant (many thousands of tons) that there is biomass energy source that can be profitable. After that, they partnered is major directions including a one of top ten world economies on partnerships of what may now be a 6th tier capital raises.

Sometimes technology can get to the "big picture" in a two to three raises. That said, there is no single energy answer, just many major answers and we always hope and pray yours or others we work with are one of those major answers. But what about a different kind of company, say one selling a single product with some competition with 200K in revenues? They have a great marketing plan and need operating capital and inventory to expand their marketing from just online to retail stores and expand their product offerings. They have a multimillion dollar annual revenue upside. Should they seek 1M in equity or a $350K SBA loan? They sought the latter and today this client offers hundreds of products into many markets and as they increased sales, they were turning down interest from capital sources.

Phased investment of the approach to attracting capital is unique to each venture. Flexibility in the approach helps, but a phased approach demonstrates to banks, angels and VC alike that you are prudent in your business.

The Psychology of Success in Business

Success first and foremost starts with the senior management, principals and visionaries that start or grow business ventures. Our clients typically range from startups to established small to mid-sized businesses. Hence, when assesses the psychology of success, I am speaking about the CEO or the lead principal in a business, the ultimate leader of that enterprise. The leader sets the tone and indirectly and/or directly in his or actions…or inactions. The leader should have confidence, but not an ego in excess that prevents him/her from accepting solid advice or in building effective teams.

There are varied classifications of behavior, including Type A to Type B personalities. From trustworthy (OK most of the time) Wikipedia, "The theory describes a Type A individual as ambitious, rigidly organized, highly status conscious, can be sensitive, care for other people, are truthful, impatient, always try to help others, take on more than they can handle, want other people to get to the point, proactive, and obsessed with time management. People with Type A personalities are often high-achieving "workaholics" who multi-task, push themselves with deadlines, and hate both delays and ambivalence." There is no doubt that describes me in ALL respects, but being rigidly organized, truthful, impatient and being obsessed with time management really stand out. 

Again, from Wikiperdia, “People with Type B personality by definition generally live at a lower stress level and typically work steadily, enjoying achievement but not becoming stressed when they are not achieved. When faced with competition, they do not mind losing and either enjoy the game or back down. They may be creative and enjoy exploring ideas and concepts. They are often reflective, thinking about the outer and inner worlds." Clearly, Type A personalities are positioned to success more in that nature, but Type B personalities success as well.

I recently had extensive conversation with a prospective client, five times more than the norm for prospective as I approached by so many and have become adept at identifying negative or flawed behavior when it comes to the potential for business success. I have limited tolerance for a negative based thought process that is far more typical in a Type B personality. He had repeatedly emailed me and also expressed the same concerns in two calls focused on the growing competition in solar sales versus focusing on his strengths and the opportunity in a burgeoning market. Of course, that does not mean you ignore the competition but means you become informed on as much of the competition's varied sales efforts and offerings as much as possible, and aggressively pursue a well thought about marketing plan. Successful people seek ways to overcome a challenge and get things done, while those that fret about the challenges over and over are rarely successful. The glass needs to be way more than half full to succeed a consistent basis.

There are perhaps hundreds of books on positive thinking, with the Power of Positive Thinking written by Dr. Norman Vincent Peale one I read in my youth. I have written often on the positive thought process, including an analytic 20 question tool for Psychiatrists to Counselors that measured positive versus negative behavior. A 50 is an average score, with the ultimate Pollyanna a 100 and the ultimate in a depressed individual that has a literal gun to his head a 0. Me, I am a healthy 70 as to attitude. I am not suggesting being totally and always positive when a pragmatic and realistic approach to all is best, but I do suggesting that we will all be much happier is we are predominately positive...and more successful.

We get so many business plans completed by do-it-yourselfers or so called professionals, and so few have a Risk Factors or Risks and Challenges section in business plans we complete. One risk is always the extent of competition but there many others. It is later in the plan and a small section because it is not the focus, just added words of caution that investors expect. It is part of the open book reality that may be negative in other parts of the plan, but the plan is overly optimist, providing there are legitimate reasons to be positive. That is supported to reflect the behavior and beliefs of principals, but if they are not inherently positive and realistic in the balance of the opportunities and the risks, their success will be in great question.

Show Me Approach to Business

After 30+ years of being self-employed including building businesses with 150-300 employees to a consulting practice that has helped many hundreds of clients build their businesses, I continue to have to remind many entrepreneurs and seasoned business owners that transparencies and due diligence are the keys to success. A simple saying should suffice to approach raising capital or establishing strategic partnerships, namely “show me versus tell me.”

Phone calls, particularly when scheduled, are extremely valuable as is time itself. When there is a variety of opportunities to help clients in business plan development or capital access, in our senior living practice and roles in renewable energy ventures, the value of time is magnified. Scheduled calls are part of that and written transparency in emails and documents is both logical and best business practice.

When someone is lacking in transparency in seeking our help, we just cannot help. When someone seeks capital or partners without transparency in their business plan, they will not be successful.

It is critical to surround yourself with staff and strategic partners, such as those that might be working with you even on a contingency basis, that truly understand a "show me, not tell me" approach to business development. This means transparency equals black and white verification in documents such as resumes, references on closed transactions and confirmed access to sales contracts as just a couple examples. Again, a show me approach is a black and white written approach with verifiable statements or attachments, typically emailed in today’s world. The tell me or verbal approach has little value other than to get initial interest, not close a transaction such as a capital raise.

When faced with a choice of business opportunities or considering a plan to raise capital, always rely on and remember that a show me approach gets results dramatically more often than a tell me approach. Given the opportunity to surround yourself with only those that understand the value and appropriate definition of transparency, why would you try to grow a business with key partners that keep telling you versus showing you?

A Goal without a Plan is Just a Wish

In a recovering economy that was on the precipice of collapse after Lehman Brothers, AIG and the real estate crisis which won’t quite go away, investors have increased expectations in their considerations of business plans and ventures in all market sectors. The days of the dot.com boom and ventures raising capital using scratched up business outlines on napkins seems like a fantasy world in 2012.

With many websites that contain keywords that land at the top of Google for our many web sites, we receive many inquiries to assist companies in completing their business plan to access capital. Most entrepreneurs share similar traits like over-confidence. Successful entrepreneurs must have a high degree of confidence, yet maintain a delicate balance to not slip into overconfidence in preparing business plans that lack transparency and details in today’s economic environment.

Few have expectations of raising capital without a plan but most don’t have a clue what defines a quality business plan. Many use templates or hire lone wolf consultants that have fashioned themselves as experts after failed careers elsewhere. Most proceed with incomplete, non-transparent summary business plans, let alone forecasts or a market and competitive analysis which is almost missing altogether.

This is akin to fishing with a bamboo pole to catch a shark, i.e. capital. When you go fishing for a major prize like marlin or bass, you need the right equipment and bait, just as seeking funding requires a high quality, detailed and transparent business plan. As to transparency, it isn’t about saying something but it is about fully supporting a statement to the fullest extent possible. Basically, make believe you are from Missouri and show me, don’t tell me.

I admire and respect the entrepreneurial spirit with so many people contacting me with worthy goals to seek capital. Overconfidence sinks most with a lack of experience hurting the majority as well. An incomplete or poor quality plan is as worthless as no plan at all in today’s financing environment.

Hence, a goal without a plan is just a wish.

Sustainable Entrepreneurs Desperately Needed

The global economy is slowly improving from the malaise, debacles and narrowing avoided catastrophes that began in 2008 with Lehman and AIG as poster big boys among others. The bail out of GM and Chrysler proved to be wise and positive. It is unfortunate that the auto industry as a whole remains as slow as a one legged tortoise in moving away from gas powered vehicles. Why do US politicians and the masses let alone the world not understand such a basic premise that fossil fuels are finite?

We have to reinvent the way we do things as a society from a macro to micro basis that has a sustainable focus. Local businesses need to use local resources wherever possible, lessening the carbon footprint and reduce our dependence on foreign oil. Oil, let alone coal or natural gas are resources that have limits that have calculated by many great scientists if common senses isn’t enough. If we don’t create alternatives as well as develop literally millions of new businesses worldwide that are local, preserve resources, and deliver goods and services regionally, our planet is doomed. If we do shift the paradigm of fuel usage to renewables let alone natural gas, we are doomed.

Now is the time to seize the opportunities with a green business plan or a solar business plan, let alone look at various opportunities we have available to entrepreneurs that desire to get into a new business.

Contact us for more information at tim@green-businessplans.com

Business Plan Process and Procrastination

So many people tell us they are ready to move forward with their business plan to grow or launch their business. We always schedule a call to discuss a business plan with a potential client in detail, and then develop a scope of work as all great plans are custom. Each business has nuances and issues that have to be addressed in research and varied depths of content to be successful.

Thereafter, prices and terms are then discussed after a scope of work is and if agreed upon, I ask, "If you are 100% ready to move forward with the business plan and deposit discussed, then ask for a formal proposal.” Since so many people ask for a formal proposal that takes time for me and my assistant to complete, I typically ask if they are sure and often mention the time it takes. Nonetheless, for every 6 or so formal proposals that I send, one client moves forward with an engagement. Hence, with our high SEO rankings and other marketing, I schedule lots of calls to complete as many as 15 business plans in a month. Part of me understands that is part of the process, although it is somewhat inconsiderate to request a proposal and that time/expense when someone is not serious about moving forward, which is the case for so many procrastinating entrepreneurs.

After 1,000 plus business plans over many years, we make the process easy, getting existing information via email and additional information from the client on interactive scheduled calls with at least one member of my team working on the plan and myself. The majority of clients need guidance on many aspects of the business model and, therefore, their business plan. After follow up email memos and additional scheduled calls as needed for questions as they arise, we complete the market and competitive analysis first and often the marketing plan second before moving on to the business plans and forecasts. The forecasts are completed by either a CPA or an MBA member of my team, separate and distinct of the market analysis and business plan for added experience and checks and balances.

The economy has surely improved and many clients are achieving their goals with business plans we complete, whether for improving their revenues, establishing new market segments, or obtaining SBA or private equity funding. We see so many great ideas and business models. Unfortunately, most never get implemented as procrastination rules the day with potential clients. 

It is frustrating to see great opportunities go by the wayside when great business plans are not developed for funding due to the procrastination of a principal. So many advise they are busy, which is 98% of the time an excuse, as we always find time for things that are important to us, plus our process and team approach limited the time. On a complicated business plan, if you can’t find six hours in month to work with us until final, are you really serious when you say your business is important to you?

If you are ready to move ahead with your business plan to seize the day, please contact me at tim@thebusinessplanconsultants.com.

Raising Capital - Assessing the Options

Over the last several years, raising capital has become somewhat more difficult, yet not much so for viable ventures with a high quality and transparent business plan। The expectations of investors and lenders from Venture Capitalists (VC) to Angel Investors to Banks to SBA has not changed substantially, but they are all more selective. When money flowed in the go go 90's or the dot.com boom, there were plenty of success stories from business ideas that were funded from a scratch pad or napkin. Do plans get funded from an elevator pitch, let alone a summary today? Sure they do...when the principal(s) have great track records (such as built and profitably sold a few companies) and/or a clearly new technology or application is involved.

VC have hundreds of projects presented to them monthly। We have a our own proprietary data base of 750 or so VC firms, researched and sorted by the type of projects funded and what stage। There are some common themes with VC, including a preference for technology centered business plans in unique markets with very limited competition। During the dot.com boom, if you had competition but developed a better mouse trap, you may well be funded. That is very rarely true today.

So many entrepreneurs get excited when a VC firm expresses interest, but that is part of the process in their looking at so many ventures to fund a select few। As an example or how competition is viewed and a VC process may work, we gained interest from a dozen VC for a client with an online advertising application, a better mouse trap in a competitive space. They took an angel investor's money and developed the application (VC will almost always not do this) 2-3 years ago, and then trended revenues up about 2M last year although several competitors far surpassed that amount and their trend would surely continue based on many new clients. While a dozen VC expressed interest, with many follow up conference calls, the competitors in an ever evolving market place did not result in a VC commitment. The silver lining is they did except a Phase II raise for another angel.

There are perhaps over a thousand angel networks nationwide, some local or regional like a couple large groups in southern California, or many national, some where we have premium access। Angels think much like a VC, usually see less projects, invest in earlier stages, take greater risks and are less competitor wary। Angels do come in many forms from those that have invested in many projects and join many networks to be found to those that invest locally that you have to seek out. Angels are almost always the best equity option when compared to VC, particularly in their interest in a diversity of investments and the willingness to invest in early stage companies.

What is an early stage company? It is not a start up or a company that is launching without revenues, but a company that has revenues and has proven its business model yet has only scratched the surface of earned revenues and primarily needs operating and marketing dollars to get the next level, perhaps from low to mid six level income to seven figures। Start ups can attract angel capital as well, but expectations must be adjusted, almost always a phased investment tied to revenue benchmarks।

Of course VC and angels involved mean you are giving up an equity stake in your company। You do get the benefit of sage advice and you do typically not incur debt। On the flip side, in the long term, most entrepreneurs are better off with obtaining solid marketing and business development input within and separate of a custom high quality business plan and obtaining debt if qualified. SBA and SBAExpress are options we always suggest for consideration for early stage companies. When completing a business plan, and to a degree beforehand, we conduct due diligence like a VC, angel or SBA lender all rolled into one to assess the options and develop a plan that has varied capital options to the extent a business at its stake of development can qualify. Armed with a quality business plan, we can help raise the needed capital to expand businesses in a myriad of markets.