The late Walt Disney founded an entertainment dynasty worth billions of dollars and summed his business philosophy up in one sentence: “If you can dream it, you can do it.”
Making business dreams a reality is what gets entrepreneurs up in the morning, but it can be a long, hard road to convert that initial ‘Eureka’ moment into a stable and profitable enterprise. There are many failures along the way, but for those who succeed, the rewards for their business idea can be huge.
There are many inspirational examples of ideas that were converted into a global success story, including:
Bloomberg: The Wall Street trader Michael Bloomberg believed that companies would pay good money for reliable, high-quality and up to date business information. He quit his job to launch Bloomberg in 1981 and 37 years later it has annual revenues of $9.5 billion, leaving him with an estimated personal worth of $50 billion.
Google: When two Stanford University students came up with the idea of an internet search engine, they were warned that they were entering a crowded market. But Larry Page and Sergey Brin’s Google launched with analytics that blew the opposition away. Google now has a $700 billion market cap and owns businesses such as YouTube and the Android mobile phone platform.
Innocent Drinks: Three friends decided their careers were not satisfying them and brainstormed ideas for a business – the result was a new smoothie range, using fresh ingredients and extolling ethical values. Adam Balon, Jon Wright and Richard Reed started out with a stall and kept going after investors rejected them. Innocent now sells millions of smoothies a week and has a 75 per cent UK market share.
But when it comes to turning that brainwave into a successful business, most start-up entrepreneurs don’t have the luxury of being able to chase their dreams without funding support. Michael Bloomberg, for example, needed three partners and a 30 per cent stake from Merrill Lynch to get his brainchild off the ground. Like it or not, money really does make the world go around and adequate investment can mean the difference between success and failure.
The key is timing, So, if you’re sitting on the ‘next big thing’ or just a good idea for a small business, how do you know if and when to seek the funds that could support those ambitions?
No matter what sector or how big or small your plans, the starting point is to get your business up and running and the easiest way to do that is to use an expert company formation agent such as qualitycompanyformations.co.uk to get you set up.
Once that is done, there are some common questions you should ask yourself before seeking financial backing, be that from family and friends, crowd funders, angel investors or high street lenders.
Have you identified a genuine market need?
You know your idea is a winner – but do your would-be customers? Without them, it will remain a dream, not a reality. There is an important bridge to cross between the idea and the product or service in a marketplace.
It involves careful preparation, research and testing on your part. Have you
- Researched the competition and understood where you stand out?
- Identified your target demographic or market and their behaviour?
- Designed your product or service with them in mind?
- Got your pricing structure right?
- Decided on distribution and sales channels?
- Got a plan in place for when things go wrong (they often do)?
Have you market tested your product or service?
You are unlikely to secure finance for your business based on an idea alone, no matter how good it is. It is worth watching re-runs of the BBC’s Dragon’s Den to see the Dragons push and probe for hard evidence to back up the imaginative concepts before them. And that’s just the ones they like!
That could include:
- Sales figures, if the product has already been launched.
- Market data and research that supports your theories.
- Testimonials and reviews.
- The results of any consumer tests.
- Other potential or actual backers.
One more important point: even after doing all of the above, you may still be rejected. Don’t give up. Take all feedback on board, go back to base, dust yourself off and go again.
Do you have a sound financial plan?
Whatever source you go to for finance, if the sums don’t add up, the best ideas will fall by the wayside. From a financial point of view, you will need to lay all your cards on the table, explaining how you plan to get where you’re going. This will include:
- How much backing you want.
- How you plan to spend it.
- What the return is.
- What the timescales are.
- What your fixed and variable costs are.
- What contingency plans you have in place.
Have you got the right team?
No matter what your bright idea, it’s unlikely you will be able to deliver it to market alone. You will need to build a team with the right skills and experience to achieve your business goals. Investors will want to be satisfied that you have done this, so there is no point arriving cap in hand without having set this in motion. It’s not just about skills either. Do you want to employ staff directly, or as freelances? Could you make use of mentors and consultants? Think laterally to build a team that is not only skilled but also cost effective.
Do you have a business plan?
The devil is in the detail, as they say and it’s essential to spend time and effort on a business plan. It’s the road map that shows investors how you plan to get from the initial idea to a fully-functioning business.
They take different formats and there are lots of useful templates that you can use, but they typically include all or some of the following information:
The executive summary: This is where you concisely explain the who, what and why to potential investors. Tell them about your product or service, with brief details about revenue projections, anticipated costs, profit targets, staff and premises. This is your ‘shop window’ – make it compelling or they may not read on!
Your company: Tell them the story of your company and its culture – with profiles of your senior team, an explanation of your markets, your key strengths, success stories and customer service philosophy. Sell the company’s USPs.
Your service or product: You’ve had that flash of inspiration and this is where you expand on it. What is it you sell? What service do you offer? What makes it different from the competition? What benefits does it offer customers?
Your marketplace: It is vital to demonstrate that you know your market, your customers and your industry, or you will lose the confidence of potential backers, along with their cash! Provide detailed research on the market and your competitors and then interpret it, highlighting trends, opportunities, challenges and solutions.
Your management structure: You are only as good as the people around you and the structure they operate within. Help investors get to know them, along with their key skills, strengths and experience. Set out the company organisation and explain why it is structured that way and who is responsible for what.
Sales and marketing
In this section, outline how you will acquire and retain customers, along with your sales, customer service and communication processes and the people, platforms and technology you will use to achieve these goals.
Your finances: Existing businesses will have to supply detailed information on costs and revenue, cash flow, debts and capital assets. Start-ups should supply financial projections, along with other sources of funding. Funding bids should be clear, explaining how long it is required for, what it would be used for and the terms you seek.
The appendix: Make sure to include all relevant supporting information here, including legal documents, references and testimonials, credit history, pictures and statistical graphs.
Last but not least – sell yourself!
One important asset to sell to any investor is you, the bright spark who had the idea in the first place! Tell them about your career to date and your previous achievements. Make sure your credit history is spotless and demonstrate your experience, commitment and integrity. Try to strike a rapport with any investor. Be honest and don’t oversell yourself.
Make the dream come true
If the idea is good enough and you can tick off the ‘to do’ list above, you will have greatly improved your chances of securing that all-important funding.
And if at first you don’t succeed, remember the words of Thomas Edison, inventor of the light bulb: “Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.”