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.

Communication is the Key to Success

In our business consulting practice, we work with a diversity of types of businesses, as well as the extremes from new entrepreneurs to seasoned C-level executives. I strongly believe in entrepreneurship as well as have faith that the combination of entrepreneurship and technology break troughs will lead to a new and better economy, and a better world. Therefore, we offer all parties a free scheduled phone consultation to determine i) we can help raise capital to accomplish their goals and make those dreams come true and ii) in developing a business plan to make that happen if a quality transparent business plan doesn't exist. .

In today’s world, communication has most often been reduced to snippets of information where most of Generation X or Generation Y have moved away from email and are stuck in 140 characters for texting. The world is also more random like atoms colliding, with the fact that 90% of people are too busy to answer a phone...myself included. Hence, like I have for a generation, if something is worth doing, it is worth scheduling via email, including calls. Since texting and brevity in our busy lives has become the norm, good communication habits are slowly disappearing. Therefore, I am not fond of texting to say the least and save texting for family and friends when calls and emails are not an option.

I am aware I need more patience, and as a born again Christian, I have become even more aware as being patient in one on one relationships is the right thing to do. Nonetheless, I believe in my big picture and the Lord has plans for me in his big picture (with clients and four renewable/green companies I have a stake, as well as the mysterious unknown). I also believe that time is as at least as precious as money, and giving back is more important than both. Hence, my patience in communicating politely, in detail or in a sugar coated manor versus directly when responding to incommunicative emails is and will always be limited and inpatient. I have written about time and time management, and still feel that ineffective, incomplete and poor communication wastes more time than anything, and wasting my time takes away from helping others, the ability to achieve and therefore give back.

Sometimes I get dozens of inquiries in a day or week regarding a business plan and/or funding, and the overwhelming majority ask a one sentence question that doesn't position me to be able to help. Many times this is due to a lack of experience, but most of the time it is about poor communication skills that are often a result from a life that has become texts and snippets. Very often, when faced with so many email inquiries that do not allow me to help but rather ask what is in effect a virtually worthless question to accomplish what may be a worthy goal, I tend to lose my patience and my answers are answered without enough appropriate thought. That said, I apologize to those I might offend in reading this blog as well.

Below are questions that I receive all the time:

1. Can you send me a sample business plan?

There are a few large companies that you can Google and then purchase a template if you want to do a business plan yourself. Unfortunately, I have never seen a template that wasn't extremely flawed. Logically, would a company with a revolutionary technology breakthrough that would serve many market segments require a business plan that would look like one for a coffee shop and fit in the same template? Of course it wouldn't! Hence, we only do custom business plan that each are different in order to meet different goals and therefore contain somewhat similar but different information. Plus, we can't send clients’ business plans as examples since that would breach confidentiality with our client.

2. How much will it cost?

Again, all our business plans are custom and clients are not well served when anyone uses a template. There are plenty of people that claim they are experts yet put every business venture within the same box. They complete the same research and spend the same amount of time on each plan and, therefore, can charge the same price. However, they do their customers a great disservice and take advantage of so many entrepreneurs.

3. How can you help me?

I actually do get this question regularly and on my busier days in combination with patience issues, my answer is “I don't know because I'm not a psychic.” There are many circumstances that determine if we can help anyone, i.e. what has been invested in the business, the type of business, the background and so many others. The answers will help determine if a client should seek SBA, bank, angel investor or even strategic or venture capital partners.

Many suggest they need a "business plan writer," as in a lone wolf or individual. That thought process diminishes the value of the business plan itself, which is critically important to launching businesses from providing an operational road map to obtaining capital. We have a deep team with team members that have varied experience in different business segments, plus we always have different team members complete the market analysis/business plan than the CPA or MBA that complete our very detailed forecasts. The Super Bowl just ended yesterday, and how many players mentioned in the post game about it being about the team. Yes, there is no I in team, and there are not many success stories that do not involve a team either.

I understand if this information is not for everyone as seasoned executives know that you need to establish a scope of work in order to have a deep professional team complete a highly transparent business plan to achieve their goals.

Transparency, Trust and Confidentiality

There is no two syllable word, let alone one syllable with more or less that I dictate more to my assistant or write to clients and prospective clients in memos than transparency। I sign far more confidentiality agreements and non disclosure agreements (collectively, "NDA") than all other agreements combined. I sign 8-10 a week or more that are requested of me, and on principle, I request and get more signed when I disclose items from my business ventures. Certainly, there is protection in an NDA when someone breaches the agreement and you become aware and you choose to pursue legal remedies because the value of the non circumvention outweighs the time, effort and legal costs. On the other hand, as said, I get them signed on principle, as it is nearly impossible to value breach of a non circumvention and the time spent as such would take away from the time I pursue positive pursuits.

What is the purpose of a confidentiality agreement? As a business consultant, it is transparency in disclosing an open book of due diligence to be able to help a client but so many people do not trust regardless of an NDA and they are incapable of transparency or don't seem to comprehend the definition। Usually, clients and prospective clients are seeking to raise capital in a business plan yet they almost always withhold information that all investors would what to know like what they have invested in the business as just one of many examples. Their business plans skirt over details on competitors or their market analysis is very incomplete. Often, their business plan contains hyperbole versus facts on everything from their bios to their historical revenue.

We will not complete business plans that lack transparency as they are not only poor business plans, but they are also not honest। What is honestly has been redefined by many, even good Christians. It isn't just being honest in what you write, state or claim, it is being truly honest when you do not avoid complete disclosure or you make general statements when specific statements are readily available. True honestly is full disclosure and full transparency.

Trust begets trust। When someone trusts you to be transparent and open with then, to share their business details completely as an example, then you trust them. You can then have faith and confidence in them. Conversely, if they hold back, it is easy to wonder what do that have to hide and that fosters mistrust. You want to have faith in others, but that should be faith based on trust developed from honest transparency. Blind faith should be saved for faith in the Lord or other Gods or deities if you are not Christian.

Lastly, but far from least, I want to work on projects and with people that can succeed, and opportunities for success are greatly impaired without trust and transparency. If you have a similar philosophy, contact me at tim@thebusinessplanconsultants.com to schedule a call.

Too Busy for Your Business or Marketing Plan?

We are all busy, some more than others because they are not as organized or their priorities are skewed. Many years ago, in a series of articles I wrote on communication, I wrote something called Busy, focusing on how being busy is a crutch or excuse more often than not. The reality is we are never too busy for things that are truly important to us, so ask yourself what is important. Is growing your business important to you and your family? Is raising capital to expand or launch your business important? If the answer is yes, then why can't you manage your schedule to prioritize a marketing or business plan?

Hopefully, we assess and reassess our priorities on a regular basis. When doing so, it is important to understand how organized and effective communication allows us to accomplish more, an area I have consulted or coached business owners from tech executives to an owner of holistic health centers. Almost all of us are busy, but are we organized so that we manage our time effectively to accomplish much more within a busy schedule...and therefore have move free time for family and loved ones? In my April 11th blog, Top Ten Time Management Principles in Business, I discuss how I manage my time. Part of that is that the overwhelming majority of my calls are scheduled calls that fit within the schedule of staff, partners, investors, clients and prospective clients. Another part of that is managing my schedule and tasks in my email inbox for 17 years now.

We offer very high quality, transparent business plans completed from the perspective of an investor, and we do so with at least three team members working on each plan based on their specific experience. We have a process, a series of scheduled calls to discuss and gather needed raw information from the client to reviewing drafts of plans and forecasts separately until they are final. We know clients are busy running businesses or in other ventures, so we try to minimize their time, usually 4-6 hours over 20-30 days to complete a business plan as we take the ultimate lead.

Again, ask yourself those questions about what is important to you, and if your business growth or launch is important and therefore you need a business plan, then why can't you find an hour or two per week over a period of several weeks to make the happen? If you can't find that time, then maybe you are fooling yourself on how important your business is, or just maybe, busy has become a crutch in business and otherwise.

SBA or Partners – Primary Business Funding Options

Over the last six months the economy has slipped in certain areas. We see consumers’ confidence down, much like in 2008 when AIG, Lehman and more led to a downturn. As a consultant in the healthcare sector to pension funds, these managers of many millions of dollars in investments echo similar thoughts. From the standpoint of completing business plans, although our Google rankings are much higher for many searches like “green business plans” as one example, we see fewer entrepreneurs and business owners Googling us to address their business plan needs in 2011 versus 2010. Why? Again, it goes to consumer confidence in their ability to raise capital for businesses and succeed in the current market place.

Throughout history, there has always been fluctuation in the markets and economy. This downturn has lasted longer than most, with certain impacts not yet fully felt, such as the real estate market. Nonetheless, the majority of businesses are recession proof, and even in a downturn in an area such as real estate, there are always opportunities. As an example, over the last few years, we have completed a couple of dozen business plans for real estate with different models and different requirements and have many clients that have been successful in raising capital to take advantage of the downturn.

Businesses need capital and without question capital is tight. To access funds, a custom business plan completed by a team of experts that is on the pulse of the current economic situation and funding opportunities is critically important. Typically when providing a free consult on a business plan we look at two primary options for funding: i) SBA or ii) equity investment through angels, private partners or sometimes venture capitalists. SBA does require a good credit rating - a minimum of 680 was quoted by a senior manager of an SBA program at a major bank this week - as well as some equity investment, typically 10-25% depending on various factors. In many cases even startups that have already invested into their business may qualify.

Finding private investors still requires a very similar and high quality business plan, and that is a custom basis, not the negatives in templates I have blogged about often, a plan that is suitable for SBA loans or equity investment. We receive many inquiries about obtaining VC funds, an area in which our SVP of Finance and his team is intimately familiar, including our own custom database of over 750 VC and equity investment companies. However, unless the client has a new breakthrough technology for first phase funding or maybe assured contracts for major sales, or it must have substantial trended sales and investment in the business for VC firms to want to invest in second stage funding. Startups are not the realm of a VC firm unless a technology with little to no competition is involved, but many plans are the types of plans that very often can attract angel or private investor monies.

There are lots of so-called business plan consultants and plenty of people that can write. But the old saying “garbage in, garbage out” applies to those consultants and their clients all too often, let alone flawed templates that are so easy for entrepreneurs to Google and mistakenly use. We are different as we provide in-depth consulting to a custom business plan to suit many funding options and in many cases we get involved in obtaining that funding.

Ask us (tim@thebusinessplanconsultants.com) for a free quote.

Green Business Planning Flaws

Our company (www.green-businessplans.com; www.solarbusinessplans.com) focuses on green and renewable energy business development, where we have assisted over 20 solar companies with business development as just one example। Over the last several years we have conducted extensive research on green and renewable trends, such as this White Paper
http://green-businessplans.com/wp-content/uploads/2010/03/The_Greening_of_the_American_Economy.pdf that was published at the Go Green Expo in the spring 2010. The great news is that there is a tremendous growth in the sale of green products and services, let alone a more extended growth in the sale of organic and natural foods and the use of renewable energy. Studies have shown a 38-62% growth in solar sales over the last three years. This support for renewable energy is clearly bipartisan as referenced in a Gallop Poll just months ago. As a society we clearly know we must recycle and utilize renewable energy.

This great news is not big news at all to the many green business owners and entrepreneurs that approach us to help with their business plan or seek capital to expand. Personally, in a prior career I owned and operated healthcare facilities and still provide selected consulting in that realm. Green entrepreneurs are very much like most healthcare providers in their attitude and approach, basically feeling that because they are giving back and doing good things that they are entitled to capitalization and success. In principle that does make sense, but in reality we still have a struggling economy and consumers that have daily purchasing decisions based on affordability first and sustainability second.

There is a growth in green consumerism but that growth is in two distinct areas. First, there are the “tree huggers” or those that purchase sustainable products virtually regardless of price, paying more for those products than they would for traditional ones. While they are a growing segment, it is still a small percentage of the population. The second opportunity for green entrepreneurs is consumers that will choose sustainable products over traditional products when prices are at least comparable. Studies have shown that well over 50% of consumers make these types of decisions.

The economy still drives the business, green or not. Over the last few years, investment bankers on our team have used a proprietary database of over 700 institutional and venture capital firms to access capital for our clients. Investment bankers are much more selective and have even higher expectations over the last few years. They prefer technology but will invest in other sectors, including retail/wholesale products. However, they are wary of competition. Unless a company is an industry leader, which means substantial sales, often seven figures rather than six, they will not invest. One VC CEO I spoke to recently advised that his company, not one of the larger VC firms by any standard, received at least 150 inquiries each month. Unless there is a great Business Plan available supporting an Executive Summary to get in the door, the only thing they will pursue further is intellectual property even though they invest in a wide spectrum.

Money is available, and we can access angel investors who are a bit more flexible, but in an economy that is competitive for that money, clearly it takes a transparent and thorough business plan that address factors that concern investors. There are no shortcuts to success and that includes even worthy sustainable missions.

Reach out tim@thebusinessplanconsultants.net if you would like a free consult on your business

Is Your Business (Plan) Important To You?

Your business plan should have many purposes, the first as a road map to your success from operations to marketing. Typically, we write plans with the purpose of raising capital and include that road map focused on areas like a market analysis and a marketing plan.

There are several old sayings, some not so old, that ring true, such as “walk the walk, don’t just talk the talk.” Everyone tells us their business plan is important to them or otherwise why would they seek us out on an ad or Internet search or engage us as a consultant? Then when it comes to completing the plan, they don’t act like it is important when they are not available for scheduled calls or don’t address our concerns - sometimes due to overconfidence or lack of experience.

There are dozens of examples of items we request and sometimes struggle to receive, like when stress the need to establish a deep team from the principal’s resume/bio to a marketing firm, or a lead distributor, or a development team of substance if a construction project.

We try to make it as easy as possible to complete a business plan, gathering information on scheduled calls with members of our team, then sending a follow up memos to clients about items only they can provide or questions only they can answer. We are hired to research and write the business plan, not to act as a recruiter when the team is incomplete. That doesn't mean we haven't recruited when paid to do so.

Sometimes certain contracts that are critical to the business plan are not in place. The plan can be delivered subject to the client adding that contract at a later date if requested. We have sometimes been asked to negotiate contracts, but that is beyond a business plan engagement.

We can provide additional services beyond writing the business plan that include business development, where we establish relationships and agreements that deliver products, services or market opportunities. Our SEO and web development team has achieved great results with Google searches to drive revenue affordably as well.

We can provide virtual CFO services, act as interim Corporate Secretary or Board Member in helping companies get organized as well assist in almost any aspect of operating a business, thus lessening risks to an investor when a client is seeking capital and lower costs for growing companies in hiring employees in certain departments until they achieve certain targeted revenues.

Structuring your business, developing critical strategic alliances, establishing the right team and various other factors go well beyond simply writing a business plan. If your business truly is important to you, reach out for a free consult at Tim@thebusinessplanconsultants.com on all aspects of developing your business plan and your business.