Three Keys to Getting CASH for Your Project or Business

Money is tight these days. Whether you're an entrepreneur seeking capital to grow your business or you work at a major corporation and you're looking for capital to fund your project, you have a big challenge in front of you: how do you get someone to give you their money?

Yes, it's their money. For entrepreneurs, you're trying to pry it away from banks, angel investors, and venture capitalists. For corporate types, you're asking for it from shareholders, senior executives, and profit-generating business units (for the purposes of this post, I'll refer to all of these groups as "investors" for the balance of the article).

But gone are the days of easy money based on loosey goosey "business plans." In this environment it's much harder to get that check written.

So how can you pry open the pocketbook, get the capital you need, and grow your business or fund your project? You have to be sure to tell the people with the cash three key things before they'll even consider giving you a dime.

How Much?

The first thing on your investor's mind is how much you want and how much you'll make. They lend money or invest for a return. Mostly they don't care how cool your idea is. They simply want to know how much of a return you'll provide them on their capital.

And DON'T go into the meeting with a hockey stick. You know what I'm talking about... the long, flat financial projection that shoots ever-skyward in the out years in a shape resembling something Gretzky carried around. You lose all credibility when you go in with such projections.

Instead, go in with a reasonable, bottoms-up plan that shows exactly how you'll invest the money and how you'll make a solid return over time.

How Fast?

Investors want to make their returns as quickly as possible. They're looking to you to provide them a sense for how soon that will be. Again - resist the temptation to provide overly-optimistic projections as they'll immediately be discounted.

You'll need to show the timing of investments, major project or growth milestones, and the timing of financial returns (remember - a dollar ten years from now is worth much less than a dollar today).

Your investors want this information because they're looking to make subsequent investments with the gobs of money you're going to return to their coffers.

How Risky?

When you say stupid things like "we don't have any competitors" or "this project can't fail" your prospective investors will likely say "thanks but no thanks."

You need to candidly and directly address major risks to your business or project because those risks also put your future returns at risk. It might seem counter-intuitive to tell investors about risks to your plan because you think those risks will scare them off. News flash: they're even more scared of an entrepreneur or business leader who wears rose colored glasses and can't effectively spot problems before they happen.

Expound upon the risks ahead. Adjust your returns accordingly. Paint a spectrum of riskiness for your investors by providing a best case, expected case, and worst case set of scenarios. Either you can assess the risks and build their confidence in your vision or you can be silent on the matter and allow them to assign their own less informed assessment of risks upon your endeavor. Your call.

So when seeking funding, remember - tell them how much, how fast, and how risky. Doing so should dramatically improve your odds of getting money especially when compared to going in with a fast, riskless, hockey stick story...

- Mike Figliuolo at thoughtLEADERS, LLC

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Stop Isolating Your Business: Two Ways You're Ruining Opportunities

This post is dedicated to all the paranoid businesspeople out there who are terrified of their competitors. You know, the people who run businesses centered around "consulting" who view any other "consulting" firm as a competitor. You can insert whatever industry you like in the quotes and this perspective will apply.

Knock it off - you're limiting your business and isolating yourself from opportunities to grow. You're effectively placing yourself on a deserted island in the ocean of business opportunities.

Not only are you limiting opportunities, you're building a brand of naivete, immaturity and narrow thinking. The following also applies whether you're a one-person shop or a multimillion dollar firm. Unless you're Coke & Pepsi or some other similar truly competitive pairing of companies, you need to pay attention.

Those of you who know me know I network. A lot. That networking gets me in front of many other business owners and executives who play in a space similar to my firm.

I run a leadership development training firm. We have a specific business model. We focus on a few key knowledge areas where we have deep expertise. We deliver that knowledge through one-day training sessions with some focused coaching support afterward.

Networking gets "interesting" when I meet others who work in the leadership development coaching and training arena. During those meetings I've seen two destructive dynamics play out on occasion.

Unhealthy Behavior #1: Not having perspective

"You're a competitor because you do leadership and I do leadership therefore we shouldn't discuss our businesses with each other."

Um, okay.

Sometimes people lack perspective. They hear an industry and immediately go all paranoid and assume you're directly competitive. Last time I checked, "leadership" was a pretty big space...

Take a moment to gather perspective. How big is the market? How big are your companies? Are there specific niches you target that are different from one another? Do you have different delivery models?

Upon getting some perspective you might learn you have complementary offerings. You might target dramatically different markets (geographies, demographics, customer company sizes, etc.).

I laugh when a sole proprietor says they compete with another sole proprietor. How big is the market? How big are you guys? I'm pretty sure there's plenty of pie to go around and feed everyone.

Making this ingoing assumption that you're directly competitive without assessing the market rings of immaturity and an inability to see the larger picture.

Instead, look for ways your businesses are complementary. How can you help one another enter new customers or markets? How can your offerings be synergistic? If you do classroom training and they offer online training, those businesses can be pretty powerful together, y'know? You can find these synergies by putting some precision around how you go to market and how you could grow the pie more together than you could on your own.

Unhealthy Behavior #2: Not trusting another party

"You're gonna steal my stuff!" Yeah, that's a conversation killer but I see that dynamic all the time.

People get paranoid and believe the other party will steal their customers, employees, or proprietary methodologies/technologies. They spend tons of money on legal agreements (non-competes, non-solicitations, NDA's, and any other document a lawyer foists upon them to prey on paranoia). Couldn't that money be better spent on marketing or new product development? Or maybe give your employees a bonus...

Business is based on trust. If I don't trust you, all the legal agreements in the world won't create trust. Try a mindset of doing business on a handshake and if you're referring to legal agreements, you're in a bad place.

Legal agreements are of last resort. I'm not saying not to have them - I'm simply advocating that you let your reputation and ethics govern the relationship rather than Subparagraph 27.A.2.ii.

Don't steal employees. Don't disclose confidential information. These are no-brainers. I expect these behaviors come with the handshake. When the first thing you do is shove a legal agreement in my face before we even talk about business, the conversation is pretty much over.

Instead, build a trust-based reputation. Uphold high ethics. Be forthright in your discussions. I had a great conversation the other day with someone who does compete with my firm in some very specific arenas but not in others. We were direct about not targeting specific clients of each other on one hand and referring business to each other in another area (and no, this isn't market carving monopolistic behavior because, again, your company isn't big enough to merit such scrutiny). Both of us win in that scenario.

Don't be so paranoid. It limits your business and eliminates opportunities that could come your way. Being myopic and small-minded is the fastest way to isolate yourself from the rest of the business community. Going it alone in this economic environment is one of the last things you should be doing.

What self-limiting behaviors have you seen your organization exhibit? Who are good examples in your mind of not being narrow minded as it relates to competition? Please share...

- Mike Figliuolo at thoughtLEADERS, LLC

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How "This Will Only Take a Minute" Destroys Your Projects

I'm sure you've said it as often as I have: "This will only take a minute..." Five hours later, you're starting to see the light at the end of the tunnel.

Humans are notoriously bad at estimating how long something will take. On top of that, we try to make our problem solving too complex when things go wrong. When these two dynamics combine, our projects go flying off the rails like the first ever run of the Jamaican bobsled team. The result is projects that are late, overbudget, and full of errors. The good news is there are a couple of simple rules to keep in mind that can prevent these issues.

By way of an example, I needed a new keg of beer for my kegerator. It had been a while since I replaced the empty. "This won't take long - I'll just go buy a new keg and lickety split I'll be sipping a cold one." You see where this is going, right?

My initial estimate was said "project" would cost me about $130 for a new keg plus gas. I figured it would take me about an hour all-in (drive time plus installation). In case you're wondering why today's blog post is about 12 hours late, you can blame my beer. Things didn't go exactly as planned...

First, I had a $20 negative variance to my financial plan because I hadn't factored in the age of the old keg and that they didn't carry that brand anymore. They could only give me $10 of my original $30 deposit back. Okay... no big. $20. I could live with that.

When I got home, things got screwy. First, when I went to tap the keg, a piece of the tap had fallen out which, when I connected said tap, caused beer to spray everywhere(at least my hair is silky smooth from my beer treatment). Once I cleaned up and found the part that had fallen (10 minutes), I reconnected everything but no cold refreshing beer came out of the tap.

I had to dismantle the system piece by piece to see where the issue was. After testing all the components (90 minutes) I learned I had a broken faucet. I had to go to the web, search for someone who sold replacements, and buy a new one ($120 and 20 minutes plus 2 days for delivery).

Net net my 1 hour, $130 project had turned into a 3 hour, $260 fiasco.

So what does my kegerator gone awry have to do with your projects? Everything.

Timelines are ALWAYS too aggressive

All projects suffer from excessive optimism especially on timelines. We think things will go perfectly and fail to plan for hiccups along the way. That failure then gets compounded by all the tasks dependent on the one we're screwing up.

Plan for failure. Build in a substantial hedge for your timelines. Things will go wrong. By allowing for such expansion of timelines, you're going to keep dependent tasks lined up and increase your odds of finishing on schedule.

True NPV = (Initial NPV Estimate)/2*0.80

Cost estimates are always low and revenue estimates are always high. Over all the projects I've worked on I've adopted a rule of taking the initial NPV estimate, cutting it in half and then subtracting another 20% from that.

Doing so gets me much closer to a realistic number. It also leads to more rigorous project prioritization. If I'm still excited about it at this dramatically reduced NPV, there's a high likelihood I'll be pleased with the actual financial results. Build in a pessimistic case to ensure you underpromise and overdeliver.

Take A Systems Approach to Problem Solving

This was the one thing I did right in my little beer project. When the system failed, I avoided the human tendency to change a bunch of things and then retest. Such an approach guarantees you won't find the root problem very quickly. Complex problem solving often doesn't solve the problem - it simply complicates it more.

Take a systems approach - check one variable at a time to see if it's the root of the problem. I tested the tank, the hose, the tap, the next hose, and finally the faucet. Sure it was the last piece I tested but I was sure I had found my root problem. This approach helped me spend my $120 on the replacement correctly rather than buying multiple new system components that didn't need to be replaced.

Simplify the problem solving. Doing so will help you hone in on your issue much more quickly. This approach reduces costs and time to market.

I'm anxiously awaiting my replacement faucet. It should only take me 10 minutes to install it and have a beer (I hope...).

What common issues have you seen derail projects? What easy tips do you have for others to improve their odds of project success?

- Mike Figliuolo at thoughtLEADERS, LLC

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How The Wrong Pricing Approach Is Killing Your Business

Bob Barker used to point out when the price was right but what happens to your business when the price is wrong? Getting pricing wrong is one of the biggest and costliest mistakes you can make and that applies whether you're a sole proprietor or a Fortune 500 company.

First, a little pricing math. Let's say you sell a widget for $100 and your gross profit on said widget is $30. After taking out overhead, you're down to $10. Then the tax man comes along and takes $4 of that leaving you with a whopping $6 on your $100 sale.

Here's the critical part - imagine you want to win a new customer over with a teensy weensy little $1 discount. Sure it's a 1% discount to him but you just blew a 10% hole in your overall profitability (changing pricing doesn't change your cost of goods or your overhead and, after tax effects, the majority of that price decrease hits your bottom line like a sledge hammer).

Conversely, if you're in a position where you can increase pricing by $1, you've just increased your profits by 10% (and in this economy, that's huge). Pricing matters. Bigtime.

The mistake we often make is in thinking it's only a 1% price change. You have to look at it from a profitability standpoint. Knowing how hard it is to keep your pricing intact, here are two thoughts on how to get the pricing right regardless of the business you're in:

Sell Value, NOT Price

It's very tempting to use price as a selling point. "We're cheaper than they are" resonates with customers and prospects but, per the above example, you're probably doing more harm than good with this approach. Only someone like a Wal*Mart who has a truly differentiated competitive advantage due to their cost structure can pull off a strategy like this.

Instead, you should be selling on value. The price they pay for your product or service is an investment. Speak to them about the return they get on that investment. In my business, we charge for training. What we're selling though is more efficient people and business processes. If our training helps people reduce meetings, junk analyses, and other such tomfoolery and saves them 12 hours per year per person in productive time, the value we're creating for our clients is tremendous as compared to the investment they're making.

Take a moment and articulate the value you're creating for your customers. Try to quantify it. Show them how your solution makes them more profitable. If you can do that, the conversation isn't about price - it's about returns on investment. That conversation enables you to price appropriately and not blow holes in your profitability.

Maintain Pricing Integrity

It's very tempting to cut prices "just this one time" to win that new customer or keep that important account. The problem with this approach (beyond the financial destruction you've wrought as I've described above) is you've signaled the market you're willing to take less for your product or service.

What happens when another person at your customer hears you cut prices for a different group? They want the same discounted price, right? Or when they hear their competitor is getting a better deal? They want a discounted price. See where this is going?

Cutting pricing is a slippery slope. Do everything you can to be consistent in your pricing across divisions at a customer and across multiple customers. If you have to make concessions, don't do so on the price per item - instead consider volume rebates or one-time "good customer" rebates rather than messing with the price per item. When you take that approach, your widget still costs $100 in the market and you've held the pricing line.

Pricing makes a huge difference. By focusing on value and doing what you can to maintain your pricing integrity, you'll likely have much healthier profitability than if you run around competing on price and having a sale every other week.

How are you thinking about pricing? How are you maintaining or increasing your profitability in today's environment?

Note: As part of our involvement with Forbes.com, we're now participating in a program where we answer forum questions from small businesses as part of the America's Most Promising Companies competition and program. Definitely check out the program here - there are some wonderful resources available on the site.

This week's question was "There’s a lot of confusion about whether we are in a deflationary or an inflationary environment. What sorts of pricing strategies should small business owners consider right now?"

- Mike Figliuolo at thoughtLEADERS, LLC

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Are You Slowly Destroying Your Network?

Web 2.0. Social networking. LinkedInPlaxoTwitterbarf. Blogaroni and cheese. Some people would have you believe we've entered a new era of business where the rules have fundamentally changed. I'd submit that the rules are the same and the way we're behaving is self-defeating.

One of the most valuable resources you have as a professional is your network. All the people you meet in your professional and personal life enter that interconnected web of relationships.

But your network is only worth what you put into maintaining it. And many of us are destroying that resource. All this interwebz garbage makes us lazy. It provides an easy out. It enables us to expand our reach beyond our ability to control or maintain meaningful relationships. Admission is the first step to remission - there are two behaviors you need to stop right now.

Stop Overextending

I heard someone the other day advocate an approach of "connect to EVERYONE possible on LinkedIn so more people can find you and have a relationship with you." Um, ok.

My perspective: stoooopid. Why? Any online community is only as good as the relationships you build. Having 9,000,000 LinkedIn connections isn't worth a damn if you can't actually have a relationship. And yes, you can go ahead and check my LinkedIn profile and I have over 500 connections - the thing is I actually KNOW all those people and have met 95% of them face to face. The other 5% I've had meaningful conversations with via phone on several occasions.

Do the math - even if you only spend 10 minutes a day connecting with people in your network and each connection takes 5 minutes (a quick call, an email, a note) that's only 700 or so people you can maintain a relationship with in a year. I think 5 minutes per person per year is well below an absolute minimum you need to invest to have a relationship with an individual.

Don't connect for the sake of the numbers, just to connect, or on the prayer that someone in the 14,000,000 LinkedIn users out there will find you and pay you gobs of money. Connect for the sake of a relationship.

My suggestion here is to simply say "no." If I haven't personally met you, I'm not going to connect to you. If you'd like to buy me coffee and get to know one another, I'd love to do that and then yes, we can connect. But just because you found me on the interwebz and want to have an ephemeral linkage in cyberspace doesn't mean it will actually be a valuable relationship for either of us.

I actually politely decline connection requests from folks I've never met. And I don't request to connect to folks unless I've met them and see some mutual benefit from being connected. Stop overextending. You're diluting the value of your network.

Stop Being Lazy

It's too easy to tweetIMblogfacebookmessage someone. It's lazy too. Sure there are some relationships that can be maintained that way (if the person happens to be a twitter addict for example). But many relationships need more than 140 characters or an emoticon to keep them fresh and relevant.

I'd like you to do an exercise - open your contact list and scroll through the names. Ask yourself when is the last time you actually SPOKE to the person. I'll bet for many of your contacts you probably can't remember the last time you heard their voice let alone saw their face. If that's the case, you're being lazy (oh that's right - I *totally* went there!).

Pick up the phone. Schedule coffee or lunch. There is no substitute for true interpersonal interactions. Texting, tweeting, and IMing are fine for filling the void between those real interactions but those real interactions do have to happen from time to time in order to maintain the strength of your relationships and the overall health of your network.

So there it is - two nasty behaviors I'd beg you to stop doing. Stop overextending. Stop being lazy. And if you're in my personal/professional network and haven't heard from me in a while, drop me a line. I'd love to reconnect. Odds are I probably called you last so you owe me a jingle.

What other behaviors do you see or experience that erode the value of a network? Please share.

- Mike Figliuolo at thoughtLEADERS, LLC

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