As I have been explaining growth to a number of business owners lately it’s occurred to me that our way of accelerated business could be collapsed into a really simple 4-step model:
1. Revenue growth. We have to start with revenue growth because while profits are important, without revenue nothing much else can grow.
2. Securing funding. Whether you’re gunning for a big capital raise, money from the bank or cash flow funding from an alternate lender, now is the time to strike.
3. Establishing a board of directors or an advisory board. This step should take place much earlier than most think in order to build trust and credibility for later stages.
4. Creating/adjusting the financial model and the business plan. For most businesses a rough sketch is far more powerful than a detailed plan when it comes to building revenue. What most founders find is where they originally thought the gold would be, rarely turns out to be correct. So after getting revenue under control, there is a new appreciation of the business leading to an adjustment of targets, markets, methods and more.
I don’t need to tell you that revenue is key. You can pay the bills, yourself, your future business plan, your advisers and your long-suffering partner. Importantly, you can rapidly learn if the business works or not from revenue growth – which I suspect is why many don’t embrace it, it reveals the cold hard truth!
And that’s why you need to start here.
What I find with most clients is that whilst the definition of the customer is roughly right, we often need to start with:
• Change of messaging
• Change of conversion tactics
• Setting up new joint venture relationships
And more… However, once revenue growth gets under way things can start going really fast.
This could be in the form of equity, bank loan, crowd funding or a government grant – whatever floats, as long as it fills your coffers. The aim of the game is to fill up on cash, to build a war chest so that as you roll out your marketing machine you have lots of juice available to run that machine for as long as is required to win the battle.
If you’re going to the bank, expect it to be all done in two weeks. If you’re raising equity capital expect 6 – 10 weeks. But don’t expect anything to work if you don’t have it all prepared. Your best bet is to first understand what type of funding is right for you.
Establishing a Board
A board is important. They’re certainly not just for raising capital or making your business look good. They generally come in three variations:
• Sounding Board (aka Bouncing Board as they’re great to bounce ideas off)
• Advisory Board
• Board of Directors
Within a week after starting Business Connector I started putting together a sounding board. Many of those people are still around and a part of that sounding board two years later. Don’t expect formal advice, but do ask for unfiltered opinion and insight. Nobody gains anything from being ‘nice’.
Whether you choose to establish an advisory board or a formal board of directors is dependent on a series of factors. The more formal you make it, the more you’ll get out of it. It’s the same difference as getting a family member to help in the business versus hiring a full time staff member.
Financial Model/Business Plan
All the great cash flow and revenue models I have seen start with the basics: How every dollar is made at the level of the individual transaction. From there it builds up, aggregates, takes in expenses and shows the staff growth. But you have to start with the basics and really look at how every sales dollar transacted.
When you write the business plan focus on proving just two things:
• Why everybody who is a potential core customer will absolutely love what you sell and therefore want to transact with you
• Why the investor money is safer with you and has a higher potential payback than anywhere else
Don’t worry nearly as much about mission, vision and fluff. Don’t pain over whether your illustrations are perfect. There will be no illustration more beautiful than the one showing your revenue growth over the last three months next to the list of great advisors or board members you have supporting and believing in the business.