Every day I get questions from friends and friends of friends who are starting businesses or trying to grow their existing businesses. This is the latest conversation that I had with a young lady who is starting her own business in the fashion industry. FYI, I have edited the following email string to protect her and her product.
I originally sent her a number of questions just to get a feel for where she was in the development of her business, this was her response:
Hi Jarel,
Thank you for the prompt response! Here are the answers to your questions.
1. Do you have a business plan with financial projections?
I do have a business plan, but the financial and marketing sections are still being tweaked. I’m still sorting out things with my manufacturers on quoting for a few items. I should have my plan complete, with financial projections by mid- August, or late July.
2. Do you have orders or at least some interest from big box stores or chain stores for your product?
I do have interest, and contacts with different buyers, including :
Pottery Barn Kids, Michaels, Barnes & Noble, Limited Too, Neiman Marcus, and a few others. When my catalog is completed, I will pitch them along to the Neiman Marcus buyers, and a few other dept stores as well.
3. How much are you looking to raise?
I should have my plan complete, with financial projections, by mid- August, or late July. I will have more definite numbers for you then, or earlier.
4. Who is on your team – management, creative and advisors?
I need a good A team. Right now, it is mostly just me, and my manufacturers. Finding reliable, hard- working people has been a challenge. I already have the creative mind set, so all I really need is a partner that’s an expert of business. Know anyone?
5. Do you have a website up? If so please send me the URL.
I do have a website, but it hasn’t been updated in a very long time. I will update it, when I’ve completed my product catalog, of all 3 collections.
6. Are you looking to raise money to complete the line or is that already funded?
I should have enough personally, to fund the completion of all prototypes (which I’m working on now), but I will need financial help with moving into mass production, and launching / running my own stores (for January 2010).
Thank You and I’m looking Forward To Hearing From You,
Jane,
In response to the letter above I wrote the following:
Jane,
Thanks for the response, seems like you are well on your way to building a great company. Now because VCs are not investing in your space you will need to work extra hard to attract capital and your primary target for now will be individual investors.
I would suggest a few points to remember, they are in no particular order and don’t take any of this the wrong way:
1. First off, it seems like you have a bit of a runway before you need committed capital so I would suggest that you start the process of raising capital immediately, most young and sometimes older CEOs don’t recognize that raising capital is one of the CEO’s primary responsibilities. Great CEOs are always raising cash, in one way or another.
2. RECOGNIZE THIS: Raising money takes a long time and you may have to talk to 100 people (or more) before you get one yes.
3. Start to identify people who have made money in your space or a complimentary industry and ask them for help in building your brand, get to know them as well as you can.
4. Reach out to these people, by email or by phone or in person, but don’t ask them for money right away, ask for advice but be respectful of their time – build a relationship first.
5. TWO POINTS TO RECOGNIZE WHEN YOU ARE INTERACTING WITH PROSPECTIVE INVESTORS
a. Investors like to see business owners who invest everything they have at the risk of losing it all.
b. The decisions you make about your business are critical and are a demonstration of your ability to run a growing business, that does not mean that every decision has to be right but you should be able to stand behind your decisions.
6. It is all about traction and to the extent that you can show that you have some presales and some real tangible interest from consumers, the better your chances will be of attracting capital and distributors.
7. Start your own marketing campaign now, start a blog talking about interior décor for tweens (make sure all of your buyers, advisors, and possible partners get the emails when you do posts), become an expert and tell the world about what you are doing.
8. Partner with sites that target the demographic that you want to sell to, create hype around your product.
9. The website needs to be redone – it takes too long to load and it may be hard to read for some.
10. You should write your own business plan and do your own financials, you should know your strategy as well as your costs and your margins on every product that you are trying to sell – I have no idea if you are actually writing your plan or not but a lot of people just outsource this function – bad move if you are not driving the the development of the plan.
11. You should also have a “deck” – a 15-20 page PowerPoint presentation that tells partners, prospective investors and advisors about the business, the market, the opportunity, the business model, the products and services, the marketing, the team and the strategy. A lot of individual investors don’t have time to read through a full business plan.
12. Know your customer: where they are, what other products they buy, how much money they have to spend on your product, how much it would cost to make a sale etc– know this cold.
13. Get a family member or friend to invest in you – if you have not done so already. The thinking here is if your own family / friends won’t give you any money then why should an investor who barely knows you?
There are a lot more points but I can’t write all of them in an email, let me know if you have any questions but I would start on points 3, 7 and 11 and let people (customers and prospective investors) know about your products – don’t giveaway the secret sauce though.
Let me know if this is helpful.
Photo Credit: jon_marshall
