David E. Gumpert, author of Burn Your Business Plan, often tells the story of how he and his partner failed to raise money after submitting their business plan to venture capitalists and meeting with several others to make presentations. Disappointed with the fruits of their labor, they considered quitting their company in 1995. Fortunately, on the advice of their board of advisers, they chose to divert their time from massaging the business plan to making sales. The funding, they were told, would come later.
Turns out they sold enough to stay afloat until 1996. In 1997, sales didn’t grow as fast as they expected, so they decided to seek financing again. This time around, they hoped that positive results would be easier to get – after all, they were now pretty well established. However, the board told them to go out there and promote their business and make more sales.
If at first you are not successful …
Instead, Gumpert and his partner decided to dust off their old business plan, spend many hours rewriting and updating the plan, and once again embarking on the search for financing. And, once again, they were rejected. How could this be? In the late 1990s, it seemed like every internet-related startup in the world was getting funding. 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 risen to $ 16.4 billion. in 1997.
However, the failed financing left Gumpert and his partner with two difficult options at this stage: find ways to grow the business without funding, or stop. They took the first option. They also hired public relations professionals and had several of their most successful corporate clients featured in industry trade and trade publications, with their agency cited as the key force behind their clients’ success. This advertisement set the agency’s phones ringing with new prospects, several of whom turned into upsells.
As the business grew, they were on guard to monitor their expenses and aggressively collect accounts receivable. By 1999, they were operating profitably with $ 2 million in annual revenue, with nearly 20 employees. Additionally, the amount of venture capital invested domestically had skyrocketed to a staggering $ 55.5 billion. But, Gumpert and his partner paid little attention to this; their interest in external financing had decreased significantly. (By 2000, the availability of venture capital peaked at $ 85.5 billion.)
The power of advertising
As Gumpert and his partner carried their success to 1998 and 1999, their promotional efforts eventually attracted the attention of a public company 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 his business plan; I just wanted to see your financial projections in several different scenarios.
In recounting his financial experience, Gumpert makes two points: First, even in good times, the venture capital route is closed to the vast majority of companies who seek it. While it might have seemed back then that almost every company that applied for was receiving venture capital, the reality is that more carefully crafted business plans are flatly rejected by venture capitalists. Second, you will be amazed at what you can accomplish without the funding you think you so desperately need to avoid failure.
The truth is, a business plan alone is unlikely to attract funding unless it is part of an overall marketing strategy.
Four tools to help market your business plan to investors
Famous motivational speaker Jim Rohn says there are three steps to successful communication: “Have something good to say, say it well, and say it often.” These three steps form the basis of the Business Plan Secrets Revealed manual. They are essential to market your business plan with the intention 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 25-page business memo or “business plan” that builds a case for separating your company from the competition. You don’t need a two-inch thick business plan. Long-standing plans are often aimless; Instead of building a case that leads investors to decide whether the business is the right investment for them, they “fire” in the hope that some of the shots will work.
Two, an effective elevator pitch, a 60-second verbal speech, direct to 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 gain an investor’s interest in the short time it takes to ride an elevator is critical.
Three, an investor relations website to build credibility and help investors quickly get the information they need, when they need it. Of all the media available, the Web is especially important. It’s fast and available 24 hours a day, 7 days a week. 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 spread the word. A press release is the basic tool for getting media attention. The public’s desire for interesting and relevant news remains strong, as does the importance of carefully selecting relevant target audiences. You are dealing with much more skepticism from the public now than in the past, which makes the evidence and objectivity in your press release of the utmost importance.
The process of raising money and attracting investors is not easy. If it were, all business ideas would be funded. You should use all the tools that are available to you and begin to consider this process as a marketing process backed by solid and verifiable evidence. You just don’t know when the plums will ripen, investors, on the tree, ready to invest. But, you do know that if you do everything you can to care for the tree (water it, fertilize it, etc.), it will eventually bear fruit, raise money for your business.