Let me go right out and tell you the secret to highly effective marketing: it is to focus on and improve your “conversion rates” in each area of your marketing.
In this article, I’ll discuss 4 key conversion points, how a 20% increase to each will give you exponential results, and specific tactics to achieve such results.
What 20% Improvements Do To Overall Results
Let me start with an example.
Let’s say your competitor runs an advertisement that reaches 10,000 target customers and gets these results.
- 1 percent response rate (response rate means that prospective customer visited competitor’s website, went into their store, called them, etc.)
- 35 percent conversion rate (conversion rate means the responding customer then purchases)
- $500 price per widget (widget being the item sold by your competitor)
- 1.5 widgets per buyer (average buyer purchases 1.5 widgets in initial order)
- 30 percent profit margin
- 10 percent repurchase rate (10% of customers buy from your competitor again)
Assuming the ad reached 10,000 target customers, your competitor’s gross profit from the ad would have been $8,662.50 (minus the cost of the ad).
Now let’s assume that your company did a 20 percent better job on each of these factors. Your results would be as follows:
- 1.2 percent response rate
- 42 percent conversion rate
- $500 price per widget
- 1.8 widgets per buyer
- 36 percent profit margin
- 12 percent repurchase rate
Now let’s look at the results.
If your ad reached the same 10,000 target customers, your gross profit would be $19,596.
That’s 2.3 times greater than your competitor’s.
Now, what would happen if you generated 2.3 times greater profits than your competitors every time you ran an ad?
The answer is that you would absolutely dominate them.
Now, the key marketing secret that I’m sharing with you here is that you don’t have to revolutionize your marketing system. Rather, small, 20% improvements in each part of your system lead to revolutionary results.
So, here are some ways in which you can improve each part of your marketing system.
The more you know about your customers’ wants and needs, the more easily you can design advertisements that appeal to them.
And the more you know about them, the better you could craft a unique selling proposition (USP) to attract them.
For example, if you are a local hardware company and you know your typical buyer is a busy male with a wife, kids, and dog, you could easily craft ads with a higher response rate.
You could also boost response rates by developing better offers that attract customers, such as an offer for a 90-day money-back guarantee.
Remember, conversion rates are the percentage of prospective customers that you converted into actual customers.
A few ways you could increase conversion rates include having a better process in place for training your staff and sales team, providing better employee incentives (e.g., commissions or bonuses for closing sales), or by developing and testing sales scripts that boost results.
Number of Widgets Per Buyer
To increase the number of units purchased per transaction (including purchasing more widgets or related items), you can rely on similar tactics to increasing conversion rates such as better hiring, training, sales scripts and so on.
McDonalds doubled its profits when it started asking “would you like fries with that?” and increased them again when it starting asking “would you like to supersize that?”
Better systematizing your business and implementing the right processes and procedures will allow you to generate higher profits per sale than your competitors.
For instance, documenting standard operating procedures so tasks are done the same way by all employees generally decreases costs and thus increases profit.s
Finally, to increase repurchase rates, do a better job of communicating with your clients and showing them how special they are. For example, send them emails, call them, or send them letters in the mail to educate them and remind them that you have products and services that can help them.
In most cases, to dramatically increase sales and profits, there’s no need to dramatically revamp your marketing efforts.
Rather, just getting 20% better in each core area will do the trick!
The Secret to Highly Effective Marketing Infographic
Below is an infographic of this article for quick reference.
While I strongly recommend the 20% improvement approach to increasing your marketing effectiveness, if you’re looking for inspiration to create a world-class marketing campaign, we put together the slide presentation below showing “The Greatest Marketing Campaigns of All Time.”
When seeking equity funding for your business, the two primary options are angel investors and venture capitalists.
This article will teach you the difference between these two types of investors and help you determine which one is right for you.
The Difference Between Angel Investors and Venture Capitalists
Angel investors are individuals who invest their own money in companies.
A venture capitalist, who typically works as part of a venture capital firm, invests the money of others hoping to get a handsome return.
The primary difference between angel investors and venture capitalists is that venture capitalists invest solely for return on investment (ROI). That is venture capitalists make investment decisions based on the ROI they expect or hope to receive from their investment.
While angel investors care about ROI too, they often have other motivations such as:
- Knowing or liking the entrepreneur and wanting to see them succeed
- Ego: feeling good about investing in specific firms and having others know they invested
- Perks: as an equity holder, they are sometimes entitled to perks (e.g., if investing in a restaurant, they can go there and receive free meals and special attention)
Venture Capital Criteria
There are several criteria venture capitalists (VCs) use when judging whether to invest in a company or not. These criteria will help you understand whether VCs or angel investors are most appropriate for you.
More and more VCs will only fund companies if they have revenues or, at least, beta customers or a prototype built. If you have not achieved any of these milestones, then angel investors are more appropriate.
Another key criterion is how much money you need to raise. If you need to raise less than $1 million, generally you should seek angel investors. Most venture capital firms don’t invest less than $1 million or $2 million dollars.
Most VCs have very specific sectors in which they focus. For instance, some VCs focus exclusively on the Healthcare sector. Others only invest in software. Nearly all focus on the technology sector since such ventures have the highest chance of growing quickly and getting to a large exit (sale of company or IPO).
Conversely, most retail or services business grow more slowly, and although they may be great investment opportunities, they are more suitable for angel investors.
Most venture capitalists only invest (or strongly prefer to invest) within a certain geographic range.
Most VC firms invest within 150 miles of their location. For angel investors, 70% of angel investments are made within 50 miles of the angel’s home or business location.
So, if you are located far away from VC firms, then angel investors are probably a better option.
A Common Scenario: Raising Angel Funding THEN Venture Capital Funding.
A very common scenario is for a company to start by raising angel funding and then VC funding later.
It generally works as follows. You raise your initial funding from the angel investors, which is usually a smaller amount, such as $50,000 to $500,000.
You use that funding to progress your business, to create a prototype, to get beta customers and/or to ideally generate revenues. Once you’ve achieved such milestones, you seek venture capital. In fact, you might raise multiple rounds of venture capital. You might start with a $3 million round of venture capital to get to the next level of success, and then you might raise a $10 million, or a $20 million, or even a $50 million round of venture capital later.
One of the most famous examples of pursuing this funding path is Google.
Google initially raised funding from friends and family, and from credit cards. It then received angel funding from Andy Bechtolsheim.
The funding from Bechtolsheim allowed Google to achieve milestones and grow. Google subsequently raised an initial amount of venture capital, then larger amounts of venture capital, and eventually Google went public.
While there are differences in funding deal terms (e.g., how much equity they take, whether they take a board seat, etc.) between angel investors and venture capitalists, the bigger and more important difference is which type is more relevant to fund your business in its current state.
Without funding your business can’t grow to its fullest, so make sure to go after the investor type that is best suited for you.
Venture Capital vs Angel Investors Infographic
Below is an infographic of this article for quick reference.
To further help you decide between venture capital and angel investors, we put together the slide presentation below to show you “The Key Differences Between Venture Capital & Angel Investment.”
The overarching question that you must answer when writing a business plan for investors is this: what’s “in it” for the investor?
To accomplish this, you need to put yourself in the investor’s shoes to think about what they care about.
What should be “in it” for them is the opportunity to invest in a business that has huge upside potential and low downside potential. With regards to low downside potential, I’m referring to a low risk of failure.
The specific 6 questions to answer in your business plan to accomplish these goals are below.
Size of the Business Opportunity
The first question is how big the business opportunity is, and is it growing? To answer this, you need to provide information on the size of the market in which you’re competing and trends affecting the market.
Financial Implications of Investing
The next question that you must answer for an investor has to do with the financial implications.
- How much money are you asking the investor for?
- What are you going to do with that money?
- What are the projected financial results? For example, what do you expect revenues will be in year one, in year three, in year five? What are expected net income in year one, year three, year five? Etc.
Your exit strategy is critical when writing a business plan for investors since the exit strategy dictates how the investor will ultimately receive payback for their investment and get their money out.
Consider this example. You start a company and you grow it to $5 billion in sales. If you keep that company private, then an equity investor may not have the ability to get their money out.
So the exit plan details how the investor will cash out or make money. Usually, the exit plan is going public or more likely is selling your company. There’s a much greater likelihood that a company is sold than that it will go public. So if the prospect is you eventually selling your company, you need to answer questions in your business plan such as:
- Who are the likely buyers of your company?
- Why would they buy you? More specifically, why would they buy you versus possibly building a competing business or strengthening or growing their own business?
The next critical question to answer when writing your business plan for investors is who is on your management team and who will you add to your management team later?
This is key because most investors, or, at least, the smartest investors, are betting on the management team as much as they’re betting on the market opportunity. You see, even if you have the greatest business idea in the world, if the management team can’t execute on it, then the business will fail.
One of the great examples of this is the story of PayPal. PayPal was formed by great entrepreneurs including Peter Thiel, Elon Musk, and Max Levchin. Clearly PayPal had a great management team. However, the original PayPal concept which was to allow one PDA (Personal Digital Assistant like a Palm Pilot) to pay another PDA failed. It just didn’t catch on.
But the management team was smart enough to recognize that they could use their technology to allow one person to pay another person or a company online and they basically launched a new service which is PayPal as we know it today. PayPal became a huge success that was sold to eBay for over $1 billion.
So that’s why you need to answer in your business plan this key question: what is it about your management team that makes you qualified to execute on the business opportunity. Importantly, if you’re currently missing people on your team, document the qualifications of people you plan to hire to fill such positions.
Every business has risk factors, and the earlier on in your business, the more risk factors. For example, if you currently have an idea for a new product, risk factors include:
- Whether or not you will be able to design the product
- Whether you could cost effectively manufacture the product
- Whether consumers/businesses want/will buy the product
- Whether you can cost effectively market the product
- Whether you could build a quality management team that can execute on the opportunity
The more risk factors that you’ve already overcome, the better. And importantly, be sure to document each of these accomplishments in your business plan.
Barriers to Entry
A final question to answer for investors is what are the barriers to entry. Specifically, once you start growing your company, what is there to prevent others individuals and companies from stealing your customers?
The more you can show barriers to entry, how once a customer comes to you they’re probably going to stay for a long time, the better job you’re going to do in convincing investors to fund you.
Remember: Answer What’s “In It” For the Investor?
In summary, when writing a business plan for investors, be sure to answer the questions that help prove to the investor that your business that has huge upside potential and low downside potential.
The 6 key questions to answer, once again, are:
- How big is the business opportunity and is it growing?
- What are the financial implications of investing in your company?
- What is your exit strategy?
- Who’s on your management team?
- What risk factors have you already overcome?
- What are the barriers to entry?
Answer these questions well, and funding will be yours.
Writing Business Plans for Investors Infographic
Below is an infographic of this article for quick reference.
Writing a great business plan is key to getting investors to fund you. So you understand other helpful tactics and strategies, we put together the slide presentation below to show you “Sure Fire Ways to Impress Investors.”
Launching a new business is an exciting time. You’re eager to move things forward and begin building your dream.
However, in developing the perfect startup business plan, there are four keys you must follow.
Below you’ll learn those 4 keys and the 10 elements you must include in a winning startup business plan.
BONUS Alert: at the bottom of this article, you will find a free business plan template you can download and complete.
1. Market Viability
The first key to successfully launching a new business is to make sure you have a viable market. A viable market means that the market size is big enough to support your company, and ideally is growing in size. Conversely, if your market is too small, then you can’t succeed.
Let’s use an example. Let’s say that I want to offer pet cleaning services in my town and research shows there are only 18 people in my town who own pets. In this case, even if I get 100% of the market to use my services, and the average person spends $100 a month, this business could never generate more than $1,800 a month in revenue, and doesn’t have much growth opportunity. As such, this is not a viable market (unless I’m satisfied with a business generating $1800/month in sales).
Because this is so important to the success of your business, be sure to thoroughly conduct market research to prove your market’s viability.
2. Action Plan
The second key to successfully launching a new business is to document your action plan. To do this, write down the precise accomplishments you hope to achieve:
- Monthly for the next six months
- Quarterly for the following two quarters, and then
- Annually for the following two years
For example, you may write that in the current month, you will create your website. Next month you conduct market research to determine underlying customer needs. The month after that you will hire your first employee. The following month you will start advertising your business. Then the following quarter you will make 100 phone calls per day to gain your first three customers.
By specifying precisely what you need to accomplish during each time period, you gain a better understanding of how your business should progress and the time and/or funding requirements of each activity. Equally, if not, more importantly, it forces you to set precise goals. The goals keep you focused and help you avoid being distracted by other opportunities and mundane tasks.
Most entrepreneurs severely underestimate the amount of time and number of steps required to launch a business. By creating a detailed action plan month-by-month, particularly for the first six months, that lays out your plan, you will gain a better understanding of what’s required of you, and ultimately be much more successful.
3. Customer Traction
The next key to successfully launching a new business is to gain customer traction quickly.
“Customer traction” is when customers test and/or buy your product or service. The earlier the traction you can get, the more successful you will be in launching your business.
Importantly, this involves getting your product or service into the hands of prospective customers as quickly as possible. A lot of times we refer to this initial product as the MVP or Minimum Viable Product. Your MVP is not the perfect, completed product that you ultimately envision, but it is a product that has enough functionality that customers can use it.
Importantly, by getting your MVP in the hands of customers, you can learn what they like about it, what they don’t like, and if they might eventually buy it. This customer feedback is critical to launching a successful business.
You will get feedback with regards to price ranges customers might pay. You’ll learn the features they want and don’t want. This feedback tells you if you have a viable opportunity, that is if customers buy your product or service from you.
Note that in certain cases, it’s hard to gain customer traction in the earliest stages of a business. For example, when launching a restaurant, it’s hard to gain full customer traction or feedback until you’ve built out your restaurant, staffed it, and so on.
But still, there are creative ways to gain customer traction and feedback. For instance, perhaps you could set up a booth at a local festival, offer food and speak to customers. Figure out a way that gets your offering to customers quickly, as the feedback is often priceless.
4. Business Plan
To reiterate, there are three keys to successfully launching a new business.
- Make sure you have a viable market
- Document your action plan
- Gain customer traction as quickly as possible
Once you’ve completed these steps, be sure to include them in your business plan. By detailing your market size and viability, your action plan, and the feedback and traction you’ve gain from customers, and combining this with other key information such as your marketing plan and financial model, you are on pace to create a business plan that investors and lenders will find irresistible.
Your startup business plan needs to include 10 sections as follows:
1. Executive Summary: This section sums up your entire plan and gives the reader a quick overview of what your company does and why it will be successful.
2. Company Analysis: provides an overview of your company’s status. Are you newly conceived? Have you been around for years? Are you incorporated? Where?
3. Industry Analysis: details your precise industry, its size, and trends that are shaping it.
4. Customer Analysis: discusses the key customer segment(s) you serve. Answer questions such as: What are their demographics (e.g., age, income, or industry and function if B2B)? What are their psychographics (e.g., what websites do they frequent)?
5. Competitive Analysis: shows your direct (similar offering to similar customers) and indirect competitors (similar offering to different customers OR different, but related offering to similar customers) and their strengths and weaknesses.
6. Marketing Plan: details your products/services you offer, your pricing strategy, your channel strategy (e.g., sell via a website, via partners, via wholesalers, etc.), and your promotions strategy.
7. Operations Plan: shows your short-term and long-term growth strategy and processes.
8. Management Team: includes your biography and biographies of other team members.
9. Financial Plan: provides an overview of your Income Statement, Balance Sheet and Cash Flow Statement, and discusses financing requirements.
10. Appendix: includes any supporting information such as your full financial projections (Income Statement, Balance Sheet and Cash Flow Statement) and other key information such as patents, lease agreements, etc.
Startup Business Plan Infographic
Below is an infographic of this article for quick reference.
In thinking about your startup business plan and successful launch, we put together the slide presentation below to give you inspiration from 2015’s Most Succesful Start-ups:
Finding investors who want to fund your company’s growth is great.
But if the terms they offer you aren’t good, then you have to pass. For instance, if they want to take 90% of the equity of your company, or control 100% of your Board Seats, then you lose too much control.
In this article, you’ll learn to two simple strategies for getting more favorable terms when negotiating with investors.
Strategy #1: Create a Bidding War
The best strategy for getting favorable terms is to get multiple investors interested in your business.
You’ve probably heard the phrase, “he who has the gold makes the rules.” This is particularly true in investing. The investor has the gold and thus makes the rules in terms of what type of deal terms they’ll give you.
The best way to get the terms you want is to get multiple investors interested in funding your company. Then, you can essentially create a bidding war. For instance, if one investor says they’re willing to give you $3 million for 40% of your company, you can ask the other investors if they’re willing to beat that deal (e.g., give you $3 million for only 30% of your company). Once they do, you can go back to the original investor, and so on.
The more interested investors you have, the easier it is to create a bidding war and to better negotiate because you have other options. When you have no other funding options, it’s very difficult to negotiate.
Strategy #2: Have a “Ringer” in Your Corner
The second key strategy for getting favorable deal terms is to make sure you have a “ringer,” that is someone on your side who has successfully negotiated investment terms in the past.
This person could be a lawyer, an investment banker, or other advisor who deeply understands each of the deal terms. For instance, if they don’t fully understand “equity dilution” or “stock options,” they can’t help you get the best terms.
Ultimately It’s the Raising of Funding That’s Key
To reiterate, you will receive the most favorable funding terms by 1) getting as many interested investors as possible, and 2) having someone on your side with a track record of successfully negotiating investment deal terms.
Ultimately, though, keep in mind that raising funding, and not deal terms, is your primary goal. Since, for many businesses, if you don’t raise funding, you’ll never launch or grow.
Always consider this question: would you rather own 50% of a company that’s worth $10 million or 100% of a company that’s worth nothing?
So, keep this ultimate goal in mind. But clearly, try for the optimum solution which is to raise the funding you need with the most favorable deal terms.
Negotiating with Investors Infographic
Below is an infographic of this article for quick reference.
To further help you negotiate with investors, we put together the slide presentation below to show you “The 10 Most Common Mistakes Entrepreneurs Make When Raising Venture Capital” so you can avoid them!
The right marketing plan template will allow you to quickly and easily complete your marketing plan.
The key is to know the questions to answer in each section of your plan.
Below is a great marketing plan template for you to use.
BONUS Alert: at the bottom of this article you will find a free marketing plan template to download.
1. Executive Summary
Complete your executive summary last, as the information will come from the other sections of your marketing plan.
The Executive Summary of your Marketing Plan should resemble the following (with your answers filled in of course).
[Company Name] is in the business of (provide a brief description of your company).
- Our target customers are:
- Our unique selling proposition is:
- Our distribution strategy includes:
- The key offers we will use to attract customers includes:
- The promotional methods we will use to attract customers include:
- Our online marketing strategy includes:
- The strategies we will use to increase our customer conversion rates include:
- We will maximize our transaction prices by:
- We will maximize the value of our customers by:
- Our key financial projections include:
The remainder of the marketing plan template is below. You will see how it mostly resembles the bullets in your Executive Summary. In each section, we detail the additional information on that topic.
2. Target Market/Target Customers
Your marketing plan must start with a detailed summary of who your target customers are and what their wants and needs.
Without this understanding, you can’t speak directly to your customers. And if you can’t do this, your marketing ROI (return on investment) will suffer.
For example, if you were selling a teeth whitening product and knew that your customers were men aged 30 to 40, making between $40,000 and $50,000 per year, living in Manhattan, and who owned dogs, you could effectively reach this market and speak to their exact needs.
The information to detail includes:
A. Demographic Profile of Our Target Customers
- Generation: (e.g., baby-boomers, Generation X):
B. Psychographic Profile of Our Target Customers
Describe the psychographic profile of your target customers. What do they do for fun? What TV shows do they watch? What do they believe in? What do they really care about?
C. Your Target Customers’ Key Problems, Desires, and Needs
Write down your target customers’ key problems, desires and needs below. Examples include price, location, exclusivity, results, safety, timeliness, convenience, and atmosphere.
3. Unique Selling Proposition (USP)
Having a strong Unique Selling Proposition (USP) is one of the most important elements of your marketing plan.
Your USP separates your product or service from your competitors. It makes your product or service a “unique, must have” item.
In fact, great USPs have been noted as the keys to success for companies in multiple industries such as these:
1. The Domino’s Pizza USP is “Fresh hot pizza delivered to your door in thirty minutes or less, guaranteed” (key USP elements are quality (hot/fresh) and timeliness (30 minutes or less))
2. The Federal Express USP is “When it absolutely, positively has to be there overnight.” (key USP elements are reliability and quick delivery)
Document your USP here.
4. Pricing & Positioning Strategy
Your Pricing strategy should reflect your branding strategy. For example, if you want to be known as the premium service provider, clearly your prices will be higher. Or, you could combine premium service with value and offer moderate prices. Or further, you could offer products or services at multiple price points.
Your Branding & Positioning strategy defines how you would like customers to think about your business? (e.g., as being the guaranteed lowest cost provider, as being the most reliable company, etc.).
Document your Pricing and Branding & Positioning strategies here.
5. Distribution Plan
Your distribution plan details how customers will buy from you.
For instance, will customers buy from your website? Will they order via telephone? Will they purchase from your partners? Will they buy from wholesalers or distributors? Will they buy from retailers? , etc.
And/or will they be able to purchase via several of these channels?
Detail your Distribution Plan here.
6. Your Offers
You will get better results from your marketing efforts if you craft powerful offers.
Offers are special deals that you promote to customers in order to make your product and/or service offerings more irresistible to them.
There are five basic types of offers as follows:
- Free Offers & Free Trials
- Guarantee Offers
- Packaged Offers
- Discount Offers
- Premium Offers
Detail your Offers strategy here.
7. Marketing Materials
Every business needs marketing materials.
From business cards to brochures to employee shirts, such materials can positively promote your company to your target market.
Detail the marketing materials you have or will develop here.
8. Promotions Strategy
Your promotions strategy details how customers will learn about your company and your products and/or services.
When developing your promotions strategy, consider how your target market acts and/or prefers to receive information.
For example, if you target customers in rural areas, billboards may not be as effective as they would be in congested urban areas.
Or, if your target customers don’t read newspapers, then remove newspaper advertising from your list.
There are numerous ways to promote your company from email marketing to direct marketing to newspaper ads, etc.
Detail all the promotions methods you will use for your company here.
9. Online Marketing Strategy
This section of your marketing plan details your online marketing strategy, mainly the ways you will promote your company online.
There are four key components to your online marketing strategy as follows:
- Keyword Strategy
- Search Engine Optimization Strategy
- Paid Online Advertising Strategy
- Social Media Strategy
Detail how you will utilize these 4 online marketing strategies.
10. Conversion Strategy
The Conversion Strategy section of your marketing plan is perhaps the most important part of your marketing plan. It specifies how you will increase your conversion rates, which are the percentage of prospective customer who you interact with who end up buying from you.
Small increases in conversion rates dramatically improve sales and profits, so it’s important to focus on this area.
Below are the 5 strategies to use to increase your conversion rates.
- Improve Your Offers
- Improve Your Sales Script(s)
- Increase Your Social Proof
- Improved Prospect Nurturing
- Improved Branding/Prospective Customers’ Perceptions of You
Detail here how you will leverage these five strategies.
11. Joint Ventures & Partnerships
Joint ventures and partnerships can be used to both 1) decrease your cost of getting new prospective customers, and 2) increase the revenues you generate from existing customers.
Detail if you will leverage Joint Ventures & Partnerships, and what partners you have and/or will try to secure this year.
12. Referral Strategy
Like Partnerships and Joint Ventures, a referral strategy uses leverage to inexpensively gain new customers. But while Partnerships and Joint Ventures leverage another company’s customers, a referral strategy leverages your customers.
Referrals, as you might expect, are simply asking existing customers to refer more customers (i.e., prospective customers that they know personally) to you.
Detail how you will use customer referrals to grow your sales.
13. Strategy for Increasing Transaction Prices
While your primary goal is usually to close the sale, your secondary goal is to maximize the price of the sale, or the transaction price.
Below are the 5 core ways to maximize your transaction price.
- Raise Prices
- Offer Product Packages
- Up-sell and Cross-Sell
- Sell Continuity Programs
- Increase the Order Size
Detail how you will use these 5 ways to maximize your transaction prices and thus revenues.
14. Retention Strategy
When you retain customers, you get them to buy from you again and again and again. There are three key ways to retain your customers and maximize lifetime value.
- Ongoing Communications
- Loyalty Programs
- Continuity Programs
Describe how you will leverage these retention strategies in your business here.
15. Financial Projections
The marketing plan that you’ve created with this template will allow you to improve each and every aspect of your company’s marketing.
In the financial projections section, you should project the potential results of executing on these strategies, and set goals.
For instance, your promotions strategy should increase your leads by X%. Your Conversion strategy should increase lead conversions to sales by Y%. And so on.
Creating a financial model allows you to see the financial impact of all the strategies you documented and keep you and your team accountable for realizing improvements.
Marketing Plan Template Infographic
Below is an infographic of this article for quick reference.
We put together the slide presentation below to reiterate the “15 Keys to a Successful Marketing Plan” for you.
Your marketing plan is a crucial to your success. It forces you to think through each core aspect of your marketing strategy and make improvements. The beauty is that when you make multiple improvements, the results are typically exponentially better since each improvement builds on the others.
Use the above marketing plan template, or download this free marketing plan template to type up your answers and create a winning marketing plan!
If you’ve never raised venture capital before, it’s a confusing process. Don’t worry, in this article, I’ll hand you the keys to finding the perfect venture capital firm.
You’ll learn the key factors that distinguish venture capital (VC) firms from one another, and important terms like “dumb money” and “smart money.”
Find VC Firms That Focus On Companies Like Yours
The key to finding the right venture capital firm is to find one that focuses on funding companies just like yours. This is because venture capital firms typically focus in a number of ways as detailed below.
One way in which venture capital firms focus is via geography.
Most venture capital firms prefer to invest in firms located within 150 miles of their office. This geographic proximity allows them to more easily meet with the companies with which they invest and offer advice.
There are plenty of exceptions to the geography “rule,” but particularly for initial rounds of venture capital, odds favor finding a local VC firm.
Most venture capital firms only fund companies in certain sectors. Some focus on software companies. Other VC firms focus on healthcare and/or medical device companies. Some focus on nanotechnology. And still other focus on multiple (but rarely all) sectors.
It is important to target venture capital firms who are actively seeking companies in your sector. If not, the chances of them funding you are slim.
3. Stage of Development
The final way in which venture capital firms focus is on the stage of development. For instance, some VC firms will only fund companies that have revenues. Others might insist your company, at least, have a prototype. And still other VC firms only fund companies that have over $10 million, or even $100 million in revenues.
Paring Down Your List
To find the perfect venture capital firm, find a venture capital directory (there are many of these online) and then search by geography, sector and stage as specified above. This will give you a great initial list of firms that might be the perfect fit for you.
Next, you need to visit each VC firm’s website to pare down your list as follows:
A. Portfolio Companies
Virtually all VC firms list their portfolio companies (the companies they have funded). Look at these companies to make sure they don’t include any of your direct competitors. Clearly, if they have a vested interest in a direct competitor, you must remove them from your list because they won’t fund you.
Next, look at their portfolio companies to see if any could be good partners. For example, if your product or service could help one or more of their portfolio companies, this will make them more interested in your firm.
B. Team Members
Next, review the individual team members of the venture capital firms that remain.
Particularly look at the partners of the firms and what boards they currently sit on or have sat on. This will give you a sense of the types of businesses and areas in which they have great expertise.
If they sit or have sat on a board in your industry, they will most likely quickly understand your value proposition and be in a good position to fund you and provide value (advice, industry connections, etc.).
Always Look for “Smart Money”
This “value” is important since there are two types of money: smart money and dumb money. Dumb money is anyone that can provide you money. Clearly if someone will give you a $5 million check, it’s a good thing.
However, smart money is always better. Smart money is the $5 million check plus intelligence and help. If an investor can provide advice, introduce you to customers and partners and potential team members, that’s value that could help your company ultimately be successful.
In summary, to find the perfect venture capital firm, start by finding firms that fit your geography, sector and stage. Next, pare the list down by looking at who they’ve funded and their team members.
Then, reach out to these team members (email is best) with a compelling message as to why they should speak with you and learn more about your business.
Finding Venture Capital Infographic
Below is an infographic of this article for quick reference.
To further help you find venture capital, we put together the slide presentation below to show you “The 10 Most Common Mistakes Entrepreneurs Make When Raising Venture Capital” so you can avoid them!
Finding angel investors is a common need for entrepreneurs. With an angel investor, your company can be poised for great growth.
Without one, unfortunately, your great idea might remain in your head, for it doesn’t have the funding to flourish.
The 2 Types of Angel Investors
In discussing how to find angel investors, we need to start by identifying the two types of angel investors.
One type of angel investor I call public angel investors. The second is what I refer to as private angel investors. Each has their advantages and disadvantages, as you’ll learn below.
Public Angel Investors
Public angel investors are angel investment groups or individual angel investors that you can find online and/or specify themselves as angel investors. For instance, you can do an online search on angel investor groups in your area and will most likely find local angel groups. Such groups work together on finding companies to fund and vetting them. They also pool their money together to enable them to invest in multiple businesses in order to have a portfolio of angel investments, which is generally the best investment strategy. Because you can find these angel groups online, I refer to them “public” angels.
The second type of “public” angel is someone who publicly identifies himself or herself as an angel investor. By going to a site like LinkedIn and searching the keyword “angel investor,” you will find such individuals and then contact them.
The advantage of “public” angel investors is that they are easy to find. The disadvantage is that because they are easy to find, everyone finds them. That is, they are constantly being approached with investment opportunities and can only fund a tiny portion of those that they see.
Private Angel Investors
Understanding “private” angel investors is really exciting because there are many, many more private angels than public ones. Private angel investors are people who have either made just one or a small amount of angel investments or who have the financial ability to make an angel investment but have not.
Most “private” angel investors are what I call “latent” angel investors. They are “latent” because they have the means and interest in making an angel investment but they just don’t have any angel investments that they know about. They’re just not getting approached with businesses to fund.
These angels are my favorite because they are not receiving tons of business plans. Conversely, a public angel or a venture capital receives tons of investment opportunities, and as a result, they must be much more stringent in their funding criteria. And ultimately, the chance of them funding your business is much less because they have so much else to choose from. But with “private” angels, who have much less to choose from, there is a high likelihood that they’re going to choose you.
Finding Private or “Latent” Angel Investors
So how do you find these private or latent angel investors?
The way to do so is via networking. You network by asking who do you know and who do others know.
Ask your lawyer, “Who do you know that might be interested in funding my business?” Ask your uncle. Ask your accountant. Ask your current friends. Ask your friends from high school or college. Ask other members of your religious congregation. Ask everyone, “Who do you know that could fund this business?”
And importantly, ask other business owners. We all go into retail establishments often and many times you’re speaking with the owner of the business. Ask the owner, “Hey, is this something that you’d fund?” Or ask, “which other business owners do you know that you can introduce me to?” Most business owners know other business owners since often their members of local Chambers of Commerce together.
The name of the game here is networking. Networking allows you to find other business owners, executives and/or other people with money.
How to Get Started
The easiest way to get started with raising funding from angel investors is to target “public” angels. As discussed above, you can go on any search engine or LinkedIn to quickly and easily find these investors.
Reach out to them via emails and try to attain a meeting. Remember that the odds of any of these investors funding you are low since they review so many other investment opportunities. But, if you speak with enough, one may fund you. And many may refer you to others and/or provide valuable feedback.
While you’re reaching out to the “public” angels, start your networking process to find “private” angels. While these angels are much harder to find, remember that when you do find them, they have a much higher likelihood of funding you.
How to Find Angel Investors Infographic
Below is an infographic of this article for quick reference.
To further help you learn about and find angel investors, we put together the slide presentation below to show you the key differences between angel investors and venture capitalists.
If you’re looking for equity funding, the exit strategy section of your business plan is very important.
This section details how you plan to eventually “exit” the business (usually via the sale of your company or an IPO) so that investors can get a return on their investment.
This article details the importance of your exit strategy and the two keys to include in this section of your business plan.
Exiting A Business
“Exiting” is also known as cashing out of your business. While many people think of an IPO (initial public offering) as an exit (which it is), the most likely successful exit for a business by far is selling the company.
It’s called an “exit” when you sell the company because that is how you exit the business. That is how you end your ownership and the equity owners’ (i.e., investors) ownership of the business, and that’s how they “cash out” (get their money back plus their return).
Let’s use an example. An investor gives you $1 million for 50% of your business. You grow the business and sell it for $100 million. You will receive a check for approximately $50 million, and the investors will get a check for approximately $50 million.
That’s how the investor cashes out. Barring other provisions in your funding agreement, if you never sold this business, the investor who gave you $1 million would never get a return on their investment no matter how successful your company became. This is why the exit strategy section of your business plan is so important.
1. Detail Your Most Likely Exit Strategy
There are two main components to include in the exit strategy section of your plan.
The first is to detail your most likely exit strategy. Is it go public? Is it to sell the company to an acquirer? Is it to sell it to your employees?
Take a moment to think about your most likely exit and then document it.
2. Prove Your Exit Strategy
The second component is most important, and it is to prove the likelihood of your exit strategy to the best of your ability.
For example, if your exit strategy is to go public, then show other companies in similar markets or positions that have gone public in the last three to five years.
Provide research including the names of those companies, the dates they went public and the returns their investors received.
Conversely, if your most likely exit strategy is to sell your company, list potential buyers. Discuss not only who they are and their current financial positions (e.g., estimated total revenues if a private company), but the reasons they’d want to purchase a company like yours. Ideally, show other companies these firms have acquired in the past and at what price points.
Finally, as much as possible, show other companies that were similar to yours that were recently acquired. As much as possible, determine the sale price of these companies and the returns their investors might have received upon the acquisitions.
Making Your Exit Strategy Section Shine
In summary, your exit strategy section should discuss your most likely exit or preferred exit, and then prove the potential likelihood of that exit. This gives investors the confidence they will ultimately get a nice return on their investment in your company.
In general, the more research you do here the better; as this will improve your case as to the potential of eventually realizing a large exit. Likewise, this research might help you identify strategies to increase the likelihood of any exit. For instance, you might find that acquirers in your market tend to first become customers or partners of the firms they acquire. In such a case, you might decide to adopt this same strategy.
How to Create the Exit Strategy Section Infographic
Below is an infographic of this article for quick reference.
For inspiration when creating the exit strategy section of your business plan, we put together the slide presentation below to show you some Killer Company Exits (companies how have exited for BIG dollars).
Your business plan is an absolutely critical document in determining the success of your business. That said, it’s probably not something you should rush. However, there are certainly times when you need to create a business plan quickly since you are so busy with other tasks. This article explains how to do just that.
You’ll first learn 3 key organizational tips and then 2 tools that will allow you to more efficiently create your business plan. You’ll then see what research to assemble before starting your plan. Finally, you’ll learn what to put in each of the 10 sections of your business plan.
The 2 Keys to Your Success
The key to successfully creating your business plan in just one day is to:
- Be highly organized
- Have the tools you need
With regards to organization, it’s very similar to having a written shopping list when going to the supermarket. Better yet, a written list organized by aisle. Since we all know that when you go to the supermarket without a list, you either waste time going to the same aisle twice or forget something (and need to go back or live without it).
With regards to having the right tools, an analogy probably isn’t needed. But remember Abraham Lincoln’s famous quote, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Now imagine chopping down the tree if you didn’t even have the right tool; that is, you didn’t even have an axe!
With regards to organization, I suggest the following:
- Block out time to complete your plan. If you budget 8 hours for the total plan completion, I suggest four 2-hour blocks. During those blocks, you must remain 100% focused. That means no answering the phone, no checking email, no looking at social media, etc. Every time you lose focus, your productivity will suffer sorely.
- Get the input you need from others before sitting down to write your plan. For example, if you have a marketing manager and she has the key details about your marketing plan, consult her prior to writing your plan. At a minimum, you should have a consensus about the key marketing elements such as how you will promote your company.
- Assemble any business documents (e.g., incorporation papers) you have accumulated since your organization’s inception.
With regards to tools, have these handy:
- A business plan template or a business plan outline: these will ensure speed since if you already have a document with section headers and/or questions to answer, it will be much faster than starting with and completing a blank document.
- Appropriate word and spreadsheet processing software. While Microsoft Word and Excel are the standards, more and more options like Google documents are available. Use whatever word and spreadsheet processing software you are most comfortable with. Just make sure you have both as completing your plan without them will take much longer.
Finally, ideally, you can complete the key market research for your business plan before sitting down to write your business plan.
This research includes:
- Industry Research: which answers key questions such as how large your industry is and what trends, if any, are shaping it.
- Customer Research: which answers questions about your target market such as how many people comprise it, what their demographic make-up is (e.g., age, gender, socioeconomic status), etc.
- Competitive Research: which details not only who your key direct and indirect competitors are, but their strengths and weaknesses.
Let’s Get Started
Now that you’re organized and have the tools and market research you need, it’s time to get started on your plan.
Below are the 10 key elements of your business plan and how to complete them most effectively.
Section 1: Executive Summary
Your Executive Summary is the most important part of your business plan, since if it doesn’t excite readers, they’ll never get beyond it to the rest of your plan.
Complete your Executive Summary last, and have it include a brief synopsis of all the other sections of your plan. Of critical importance, you Executive Summary MUST answer why your business is unique. That is, what is it about you, your products/services, your market, your marketing plan and/or anything else that makes you extremely likely to succeed? Answering this is the cornerstone of not only a successful business plan but a successful business, so spend time on this one.
Section 2: Company Analysis
Your Company Analysis gives a snapshot of the current state of your company. If you’ve incorporated, you’ll state your type of business (e.g, C-Corp) and the date of your incorporation (remember, you pulled out this documentation in the Organization phase above).
Even if you’re just starting out, you can provide background information such as when and why your idea for the business was conceived.
Section 3: Industry Analysis
Here is where you’ll include the industry research you conducted above.
Importantly, don’t just copy/paste a research report into your business plan. Rather, the ideal research helps prove the viability of your business. For example try to show how industry trends favor your success.
Section 4: Customer Analysis
Above you identified your target customers, and conducted research into their demographic profiles. When targeting consumers, these profiles include factors such as their age, gender, and socioeconomic status as mentioned above. If targeting businesses, detail the types of businesses (e.g., size, location, industry) and the target contacts (e.g., title, function) within those businesses.
Section 5: Competitive Analysis
This is the final “research” section of your business plan, where you will detail your direct (similar offering to similar customers) and indirect competitors (similar offering to different customers OR different, but related offering to similar customers).
For your top 3-5 direct competitors, document each of their strengths and weaknesses. Then document the strengths and weaknesses of your indirect competitors as a whole.
Section 6: Marketing Plan
There are four sub-parts to your marketing plan:
1. The products and services you offer: document them
2. Your pricing strategy: tell what it is; are you the low-cost provider? The premium cost?
3. Your channel strategy: how will customers buy your products/services (e.g., sell via your website, via retailers, etc.).
4. Your promotions strategy: how will customers hear about you: pay-per-click advertising, social media, etc.
Section 7: Operations Plan
Here you will document your growth plan.
To do this, write down the next 6 months, the following 2 quarters and the following 2 years and detail the key accomplishments you plan to attain during those time periods.
For example, if today were January 1, 2020, your operations plan would look as follows:
- January 2020
- February 2020
- March 2020
- April 2020
- May 2020
- June 2020
- 3rd Quarter 2020
- 4th Quarter 2020
- Annual 2021
- Annual 2022
Once again, for each of these time periods, you would detail your key goals.
Note that the reason we start monthly and then move to quarterly and annually is that it’s much easier to determine market conditions in the short term. Longer-term there is much more uncertainty and it’s thus harder to predict what will happen.
Section 8: Management Team
In your Management Team section, write the key facts about yourself and other key members of your team. This is often written the same way as the “Management Team” or “About Us” sections of most websites.
Tell the past accomplishments of team members here. If you are planning to add key team members in the future, document the roles you will fill and the key criteria you will use to fill the roles.
Section 9: Financial Plan
The Financial Plan includes two elements.
The first element is completing, in a spreadsheet, your Income Statement, Balance Sheet and Cash Flow Statement. These three financial documents detail key information such as the profitability of your business and how much funding, if applicable, is needed to grow the business. Your full financial statements will appear in your Appendix.
The second element is completing the section of your word document. In this section, you will show summary/top-level figures from your financial statements such as your Revenue and Profit projections for the next five years.
You will also provide written commentary supporting your financials, such as how you will generate the sales you expect and any key assumptions you’ve made.
Section 10: Appendix
Your Appendix will include any supporting information. As mentioned above, your full financial statements will go here. But also include any other information that supports your potential future success such as references from customers, signed contracts or purchase orders, etc.
The Time is Now
You now have all the information you need to complete your business plan in just one day.
Remember, start by organizing your efforts and making sure you have the right tools. This seemingly simple first step makes a huge difference.
Then methodically make your way through the 10 business plan sections. Don’t allow yourself to be stumped in any one section. Rather, if you get stuck, move on and come back to it. This way, you’ll make lots of progress quickly, and most likely when you come back to the issue that stumped you earlier, you’ll already have conceived an answer.
How to Create a Business Plan in 1 Day Infographic
Below is an infographic of this article for quick reference.
To further help you expertly create a business plan in one day, we put together the slide presentation below to walk you through the “10 Key Elements of a Business Plan.”