Most entrepreneurs focus on developing their financial projections at the same time they are trying to finalize their business plan.  This is done for many reasons, most likely of which is that they do not know much about financial statements and push off developing their financial projections until the last possible moment before they compete their business plan. Often in a rush to get in front of potential investors, these same entrepreneurs do not spend the necessary time to really understand and logically rationalize their financial projections.  Therefore, when they present to investors they may have a great technology, product or service offering that secures the initial attention of these same investors, but they have not spent the necessary time to properly rationalize their financial projections and as such will often immediately lose this same investor interest.  To keep your investors’ interest, you must rationalize your financial projections so that they are logically defendable in front of these same investors.  If you do not do so, this will eliminate any chance of receiving venture funding from seasoned angels or venture capitalists.

Rationalize Your Revenue Projections from the Bottom Up

Revenue projections need to reflect reality.  Often, entrepreneurs have very unrealistic revenue projections that cannot be rationalized by any logical means.  To develop revenue projections that are rational, it is important to start from the bottom up to build out these same revenue projections. This bottom up approach will allow you to logically estimate the necessary time it takes to engage customers and then secure revenue from these same customers. It will also allow you to build up reasonable product volume projections that are realistic and rational. In addition, as an entrepreneur you need to understand the basic fundamentals of your financial projections including, revenue sources, gross margins, operating costs, and net margins.  If you have not spent the time to understand the fundamentals of your start-up company’s business model and the rationalized your financial projections based on these fundamentals, your financial statements will not hold up to the scrutiny of seasoned investors.  Therefore, take the time to rationalize your revenue projections from the bottom up. By doing so, you have then developed a logical approach to building up your financial statements that will serve you well in front of your potential investors.

Rationalize Your Development Costs

Another step in developing defendable financial statements is to present development costs that also reflect reality.  Investors are always worried that it will take twice as long and cost twice as much money for an entrepreneur to develop and then introduce their technology, product or service offerings to the market.  As such, they are wary of overly optimistic development cost projections. Therefore, again, it is important to start from the bottom up and build out your development cost projections and staffing requirements.  Here, you need to take into consideration when your initial technology, product or service offering is to be introduced into the market and how many individuals will be required for this effort. You also need to take into consideration necessary ramp of staffing requirements. Too steep of a ramp, can delay development, and at the same time may leave many of these same individuals with nothing to do once their initial tasks are completed. Therefore, you need to add development staff at a rational and reasonable pace and level that not only reflects your near term development needs, but also reflects your long term staffing requirements as you introduce follow-on products into the market.   So, you need to be prudent and hire only the necessary development staff that fits your start-up company’s near term development needs and at the same time also reflects your long term product roadmap and its development staffing requirements.  Therefore, take the necessary time to rationalize you and development staff the costs associated with it.  Again, this will serve you well in front of your potential investors.

Identify and Delineate Significant Delivery Milestones

One of the biggest mistakes entrepreneurs make is to not identify their significant development and delivery milestones to potential investors.  That is, they do not delineate those significant milestones that will be delivered for the targeted amount of funding they are requesting.  Once you rationalize your revenue projections and development costs, as an entrepreneur, you need to identify and then delineate, in a rational manner, what the significant milestone deliverables are for this investment.  Accordingly, most start-up companies require multiple rounds of funding, so investors need to know what significant milestones will be delivered for each round of funding.  Do you have a beta product at the end of your first round of funding?  When can you begin to secure revenue from your customers?  In essence, you need to delineate to investors what you are delivering in terms of significant milestones to get your start-up company to the next level of funding or into the market.  Anything less is not acceptable.  Finally, by delineating your milestone deliverables, investors have something to measure you by to determine if you are performing according to your original pre-funding plan. So, as an entrepreneur take the time to properly identify and delineate the appropriate significant milestones as this will allow investors understand what they will be receiving for their investment. 

Before you get in front of any investors, you need to properly rationalize your financial projections.  To do this, you need to delineate your revenue projections, determine your development costs, and identify significant milestones.  By doing so, you will be developing a logical representation of your business model and its financial projections.  In addition, you will be determining the necessary staffing requirements that reflect your start-up company’s near term and long term development requirements. Finally, you will be delineating to your investors the necessary delivery milestones that will not only add value to your start-up company, but provide measureable tasks in which investors can determine your performance.  So, take the time to rationalize your financial projections as it will serve you well in front of your potential investors.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at http://www.amazon.com/.  For more information on the book go to http://www.carlsbadpublishing.com/.

Multi Level Marketing bugs me.

Before you go off and flame me for saying this let me explain…  I understand that SOME people can make money on MLM and I understand that some companies actually sell products (and some decent at that).  But, for all of these companies you make more money by signing up other people then you do selling products.  And some are just straight up pyramid schemes like Cash Gifting. 

My problem is that they prey on the down trodden, the struggling, the poor with empty promises of wealth and riches.  The other day I got a youtube connection from this guy:

This is the kind of message that drives me nuts.  Wake up drive your 100,000 car to the Barnes and Nobel, post some stuff on the internet and watch it roll in.  That’s a pretty typical day for an Internet Marketer, MLM Sales Person, Business in a Box…yea right.

On the other hand, I received another invitation the week before from Matt at Cash At Hand.  With my usual skepticism I clicked through and was surprised.  While Matt does talk about some Internet Marketing schemes a lot of his messages are spot on for entrepreneurs.

What I like about Matt is his core message does not play to our natural want to take the easy path to riches but rather the high road of exploring your passions, working hard on your self and your business, and harvesting fruits from the seeds you plant…long term.

Plus his presention style is hilarious.

Info on extension of the AARA:

Key Points:

• President Obama signed an extension of $125 million to continue the increased guarantee and reduced fees made possible under the Recovery Act through Feb. 28, 2010.

• This Administration and Congress recognize that these key programs were successful in helping jump-start the economic recovery for America’s small businesses. The increased guarantee and reduced fees on SBA loans were a powerful combination that put more than $16.5 billion in the hands of small business owners and brought more than 1,200 lenders back to SBA loan programs. 

• The additional funding will support $4.5 billion in small business lending.

• SBA will most likely restart Recovery loan approvals by December 28, 2009.

Implementation of Recovery Act Extension:

• New approvals of loans with the higher guarantee and reduced fees made possible by the Recovery Act will begin most likely by December 28.

• Loan applications from borrowers who chose to be placed in the SBA’s Recovery Loan Queue will be funded first, followed by new loan approvals beginning on or before December 28.

• The extension authorizes the higher guarantee levels through Feb. 28, 2010.  The fee relief is authorized until this additional funding is exhausted or the end of the fiscal year, whichever comes first.  As was the case in November, SBA will transition into a queue system as the funds start to wind down in order to ensure the maximum simulative effect of the programs and disbursement of funds.

• For non-Recovery Act 7(a) or 504 loans funded during the transition period, this extension does not provide a retroactive guarantee or waived fees.  Loans that were funded under non-Recovery Act terms cannot be canceled and resubmitted to take advantage of the Recovery Act extension provisions.

Background on the Recovery Act and Recovery Loan Queue:

• As part of the Recovery Act, SBA received $730 million, which included $375 million of that went to increase the SBA guarantee on most 7(a) loans to 90% and to waive borrower fees on most 7(a) and 504 loans. The funds for these programs were exhausted on Nov. 23, 2009.

• Because previously approved loans are sometimes cancelled or never disbursed for a variety of reasons, SBA created the Recovery Loan Queue as part of its transition back to pre-ARRA lending on Nov. 23. Eligible small businesses, in consultation with their lender, could choose to be placed in the queue for possible approval of an ARRA loan if funding became available. 

• As of December 21, 2009, there were 1,069 loans totaling almost $530 million in the Recovery Loan Queue.

• This extension does not affect other SBA Recovery Act programs, such as ARC and microloans, which still have funding.

President’s Extension Request:

• Recently, President Obama laid out key aspects of his jobs plan, including significant continued support for small businesses.  

• The SBA will continue to work with Congress on moving those proposals forward, including extending these loan enhancements as the President has requested, to ensure that small business owners have the tools they need to continue to drive economic growth and create jobs in communities all across the country.

As I wake to the sounds of the FM dial my mind starts to focus on life’s great trials.

“Time to get up kids & brush your teeth and please for once don’t fall back to sleep.”

“Hurry now get out of the shower the bus has gone and it’s tardy hour.”

In a rush as we fly in our car but the road is slick and traffic is at war.

Now it’s up to the office where bosses await with sullen faces at my tardy state.

In these times and on this day it’s more work, less pay, and a vanishing 401K.

As I bring my work day to a close, the calendar tells me what it knows.

Black Friday and Cyber Monday have already past and online shipping is not that fast.

Now it’s off to shop and play ”bumper carts” at the twenty four hour big box mart.

Clean the house and keep the kids in line, the threat of Saint Nick will be gone in short time.

Like a tornado on this shopping spree, I lust after MP3s, DVDs, and HD-TVs.

Back at home my vision wont lie the whole family is coming and the house is a pigsty.

Now it’s mission impossible to wrap in a bow, while sneaking presents past those who can’t know.

The day is over and as I drift to sleep I think of bounced checks instead of counting sheep.

Now as I wake on this eve of the big day, the sounds of Christmas music began to play.

I hear the house groan from the bitter cold night, but my heart is warmed by glowing lights.

Feeling relaxed now, my head is clear, I start to remember why I love this time of year.

The TV takes us to another time where Ralphie has only one thing on his mind.

Fun games, good company and holiday cheer, fill my heart and mind as night draws near.

Warm up the car and empty your glass, dress the kids in their best for Midnight Mass.

On this night nothing feels quite as right as singing Silent Night by candle light.

Happy Holidays!
Donovan Wadholm

The typical way most entrepreneurs start a business is the following:

1. Choose a product to sell or service to offer (based on the industry or hobby they know best)
2. Choose a name for the company and create a logo
3. File  Incorporation or a LLC paperwork
4. Write a business plan
5. Get funding
6. Build a website, business cards, find office space, etc.
7. Launch the company – i.e. flip on the open sign.
8. Wait for the money to roll in… in other words hope for the best

And, this is the way Smart Start-ups do it:

1. Find a hungry market
2. Figure out why they are hungry and what kind of food they’re looking for
3. Study the players in the market (to copy the good things and avoid the bad things they’re doing)
4. Test the waters. This is the most visible difference between smart and dumb start-ups. Smart marketers know that it’s all about testing the market fast and invest as little as possible.
5. If the offering doesn’t convert sales, the Smart Start-up gos on to test the next market. The second most important difference between them, the Smart ones find the audience first and then they create the product they want.
6. If the offer converts, this is when the Smart Start-up starts thinking of it as a business. And that is because he has a real business, he knows it’s time to improve the product offering or processes. 
7. Finally, this is when the Smart Marketer get his fancy website and business cards. Because he knows he’s investing in a business, not in an idea.

Biggest Takeaways

Don’t fall in love with a product or service. You want to become a successful business owner; the product that gets you there is irrelevant (that is, unless you’re very passionate about something and don’t care about money as much as you care about doing something you love [which I completely believe in, BTW]).
 
* Find the market first and develop a product or service for them. Listen to them and give them what they want.
 
* Fail fast, fail cheep.  Test the market as fast as you can with as little money as possible. Don’t create what you think is a perfect company and then launch it; launch it first and if it works, perfect it.

Zeke Camusio
http://www.TheOutsourcingCompany.com/blog