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.
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