by: Geoff Ficke

H. F. S. Morgan launched his eponymous car manufacturing company in England in 1909. For a century, through world wars and great economic turbulence, Morgan Motor Company has produced some of the most stylish, desirable automobiles ever produced. Unless you are a classic car enthusiast, you probably have never heard of Morgan and more unfortunately probably never seen one of these magnificent machines on the road. They are exceedingly rare and that has gone a great distance in cementing the desirability of the mark.

Morgan’s initially were 3-wheeled cycle cars. The Company focused on these “trikes” because at that time the conventional automobile was heavily taxed. As the taxes were lowered, and mass manufacturing drove down the price of autos, Morgan evolved to a two seat roadster model.

Morgan’s, from their introduction, to the present day, feature a distinctively British sports car look. The cars sit exceptionally low to the road, sport lush, flowing fender lines, a long bonnet (hood) that is held in place with a leather belt and a curvy grille that has not significantly changed in 100 years. Most unusually, each hand built car is constructed on a wooden (ash) frame.

The grandson of H. F. S. Morgan runs the Company today. The principles that the founder based the brands pedigree upon are still the foundation of the enterprise. Each car is a slowly crafted work of artisan perfection. The introduction of updated models of Morgan’s has continued unabated. However, the advances in the product are always found under the hood, in the gear box or transmission. When you see a Morgan you know it is a Morgan, whether a 1948 or 1995 model.
This continuity of a classic body profile has created a cult following for Morgan’s. Despite many opportunities to expand production and sales, Morgan has remained steadfast to the founder’s vision and remains a bastion of old world craftsmanship. In 2007 the Company delivered 640 cars to purchasers around the world who had waited up to two years to have their pre-paid order filled. 163 highly specialized employees build Morgan’s in the Company’s original Malvern, England factory.

In honor of Morgan Motor Company’s 100th anniversary, the company introduced the special edition Morgan Aero 8. This coupe is one of the most stunning automobiles ever to operate on a roadway, at anytime, anyplace. This breathtaking design was built in limited production of 100 vehicles. The price was $160,000. The Aero 8 is an instant classic. Though more aerodynamic than other Morgan’s, the Aero 8 still exhibits the lines and spirit so obvious in all Morgan vintage vehicles.

We live in a world of mass market consumer products. This is good. The opportunity for more people to enjoy the basic fruits of invention and enjoy more fulfilling lifestyles has never been greater. However, the world is a much more beautiful place because products like the Morgan automobile are still produced to fill a niche need.

Product marketers can easily utilize the strategy employed so successfully, for so long, by Morgan to penetrate difficult product categories. The iconic styling cues that identify a vehicle as a classic Morgan, the customized coach work, the exclusivity of product distribution all contribute to creating more demand for these stunning cars than there is supply. This model is used in numerous other sectors of the consumer product universe to create desirability and exclusivity. I am surprised that more new businesses do not pursue a similar strategy.

by: Geoff Ficke

There is an old adage in the funding community: “Investing $1,000,000 to fail is expensive, investing $5,000,000 to succeed is cheap. Investors will respond to funding needs based on real world assumptions. They will be very cautious when assessing a venture’s real funding requirements.

Think of investment capital as fertilizer. If a farmer applies too little he harvests a poor crop or worse. Too much fertilizer and the harvest will likewise be disappointing. Experienced, successful farmers know their fields, their climate, crop planting patterns and their equipment. They will apply every pound of fertilizer needed to maximize their harvest. Investors handle their capital in exactly the same way.

I review many business plan submissions each year. It is amazing how many entrepreneurs can not identify, quantify or justify the investment requirements they describe in their business plans. This is an absolute eliminator in terms of creating investor enthusiasm for funding a project. This is one of the largest reasons so many plans never receive a thorough reading.

Often, the entrepreneur woefully understates the obvious funding level a new enterprise will require. The justification, stated or not, is usually that they are attempting to keep the needed investment number very low in order to create interest. They do not understand that there is no too high or too low investment number if the need for capital can be demonstrated, qualified and narrated. Investors want a crystal clear look at the use of funds and how they will earn an appropriate return on their invested funds.

Seeking a number in excess of the amount needed to successfully launch a startup is equally disastrous. Investors are not seeking to build a Taj Mahal before the first dollar of revenue is generated. Here are a few tips for building expense assumptions that will withstand withering investor scrutiny.

Salaries
Investors do not want entrepreneurs to starve. They also do not want to fund the lease on a BMW 745. Salaries should be based on sustenance requirements. Most investors I have worked with want their management teams to make enough salary to pay their bills and not place untoward strain on personal finance and marriages. Comfortable is fine, but they will not fund luxuries. Be very realistic.

Staffing
I often see plans with a list of proposed employees that resembles the list of animals on Noah’s Arc. Keep this area very lean. Use outside contractors, consultants, and part-timers to fill every post possible. Employees add high fixed costs to the budget. Salaries, benefits, training and equipment can be too heavy a burden for startup projects to absorb. Another no/no is a squad of vice-presidents. These are red flags that scream excess and will all but eliminate any possibility of receiving funding for a new business opportunity.

Facilities
Plan on renting needed office space on a short-term basis. If growth happens as planned it is always easy to find bigger premises. You do not want to obtain a larger space than initially needed to run the business in the most efficient manner. You will be using too much of your precious capital for an underutilized asset.

This may seem obvious, but you should read the business plans I do. Many entrepreneurs try to replicate the surroundings they enjoyed when they were corporate employees. Recently, I reviewed a cash flow projection that included an office expense for a daily delivery of flowers, and this was not a floral business. Investors are totally put off by expenditures such as this. Unless the office environment will be crucial to closing sales and making deals keep the space as Spartan as possible.

Do not load up the staff with numerous family members unless they perform an absolutely essential function. Just because cousin Myrtle has been laid off for several years, the focus of your startup is not to give her employment, unless you can defend her abilities and unique skills. Your judgement will be questioned unless you can sell Myrtle’s benefits.

The cash flows you project in your business plan will be in the red (burning cash) for a number of months. Your ability to secure investment money will be largely effected by showing how quickly the burn rate stops and the business starts throwing off cash. This is a point that you must be able to defend aggressively. Investors will be very dubious about your cash flow projections, and thus the level of investment you really need, not what you may think you need. The better job you do of vetting assumptions and supporting them with historical industry specific data, the more likely you are to win investors and their money for commitment to your project.

A business plan that does not show cash burn slowing, then stopping and then turning to cash flow positive during the first 12 months of operations will likely not be funded. Investors want to see quick sales traction. A plan that does not show growth quickly enough will increase capital risk and sour investors.

Whether you require $1,000,000 or $21,000,000 the business plan should be written to justify the needed funding level being sought. Too low, or too high, and seasoned investors will walk away. Think like a farmer fertilizing his fields during spring planting. He has so much land and needs to make every square foot produce the greatest possible crop yield. The farmer does not waste seeds, fertilizer, water, labor or fuel. He makes sure that the crop is tended with all due diligence and given everything needed to reward his efforts. Farming is hard work.

So is finding and securing investment commitments. There are thousands of projects on the street every day seeking investment capital, partners or license. The number of projects greatly exceeds the supply of available resources. Do not injure your opportunity by loading up your offering with excess, fat and dreams. Your pay out comes after you achieve success, and the investor has begun to see a return on their investment.