by: Geoff Ficke

At the conclusion of every sales presentation the salesman will have achieved one of three results: a sale is made, a sale is lost or valuable information is gleaned that can result in building a relationship. The third result can be called identifying the “hot button”. Obviously, the purpose of every sales presentation is to close the sale, and this is the only acceptable outcome any good salesman expects. However, identifying the hot button that will motivate a prospect to purchase can lead to a successful closing in a subsequent meeting.

The great salesman identifies the customer’s hot button by asking questions, listening closely to the answers and ferreting out the prospects true objections, pain, or fear about dealing with your company or your product. This is accomplished during the first meeting. Sales people never want to risk having to wait for a follow-up meeting to secure a positive result. Too many things can happen between the initial and second presentation, all bad.

However, realistically not every salesman is great, and the opportunity to re-tool a presentation based on data learned at the initial meeting can enable ordinary sales people to successfully close. Learning the customers hot button issue allows a sales man to craft a presentation that specifically addresses these open points. Not identifying and keying in on the hot button issues that are so important to buyers is the equivalent of commercial self- immolation.

Entrepreneurs must be able to sell. Golf, tennis, the trombone, driving, sailing, carpentry, indeed every activity is honed by practice. The same is true of developing crucial sales skills. You must practice, learn from mistakes, practice more and perfect a set of selling skills.

When sales people call on me I am always keen to hear the presentation and grade the effort. To say that there is a dearth of sales skills today is an understatement. When I experience a weak presentation I will cut off the presenter and tell them why they have lost the opportunity to have my business. If I am sitting through a weak presentation, but the sales person is obviously trying, I will stop them and give them pointers as to areas they might improve upon.

Invariably, not seeking, or discovering my hot button is usually the deal killer. I want to know how a product will satisfy a need I wish to address. What does it do for me? What does the product do that my current widget does not do? Is there a saving for me of labor, energy or maintenance? Does the item feature a storage, portability or multi-use advantage? There are many more features that might be relevant to my making a decision. It is the sales person’s responsibility to discover my hot button need and directly overcome my hesitance with a soundly presented response to each objection.

Notice I did not include cost in my list of hot buttons issues. Price is never, repeat never, an acceptable reason to lose a sale. Raw materials of like quality are price sensitive. However, a commercial product, technology or service should never be sold on price alone. The seller who touts a cheaper price alone as a reason to buy will not last long. There is always someone willing or able to sell more cheaply.

There is one exception I allow to my mantra to close every sale on the first presentation. I call this the “Naked Salesman”. In specific situations, usually when I need more background on the prospect than I can find in the marketplace (and this happens rarely), I go to the meeting as the Naked Salesman.

The Naked Salesman goes into the meeting with no briefcase, no bag, no folio and no sales collateral. This tends to disarm the customer. Sales people always appear as if they are ready to negotiate the terms and conditions for building the pyramids. The buyer always expects to be sold something they do not want and tends to build a barrier that the sales person must overcome.

Here is how the Naked Salesman might handle the meeting. Consider the following talking points:
• I am not here to sell you a thing.
• I simply want to learn more about your firm, your needs and how I can customize a program that increases your profits.
• My product (service, technology, invention, etc.) is too important to both of our companies for me to present without more knowledge of your application requirements.
• Can I borrow a pen and pad to make some notes as we talk?
Why does this approach succeed? Simply because the Naked Salesman has expressed more interest in the clients needs than the client expects. This is called relationship selling. The Naked Salesman wishes to customize a program that enables the client to enjoy features and benefits their product will provide. The classic armor that sales people utilize (brief case, Mont Blanc fountain pen, power point presentation, etc.) is replaced by a conversation. And this conversation is solely about what you can do to address the customers needs, wants and problems.

The Naked Salesman will return (with a briefcase, folio, sales collateral, no longer the Naked Salesman) enjoying a different relationship with the client. The return meeting promises the deliverance of a plan to address the stated hot button issues learned by the Naked Salesman. The psychological barrier so often placed between seller and buyer is greatly minimized or eliminated. In my experience the receipt of the details contained in the customized presentation is appreciated and anticipated by the buyer. The close should be completed after the presentation is completely reviewed, all aspects discussed and each issue of concern at the initial meeting fully answered.

Do not let analysis paralysis ever become a part of your, or the customers, decision making process. The sales person has a product. The customer has a need that must be discovered and addressed. The sale should then be closed as soon as possible. All parties should leave feeling that they received a fair deal. Over analyzing the market, current business conditions, industry trends, or hundreds of other paralyzing excuses are not countenanced.

I often ask the following question of a difficult customer: “If I could give you my product for free, would accept a unit”? The answer is almost always, “yes, of course”. My next question, “How would you use my product”? The answer almost always leads to the REAL hot button you could not pull from the prospect during the meat of your presentation. Listen to the response, adjust the close to address the answers you are hearing and then reopen your effort to close the sale.

Ability to close sales is equivalent to the performance of a MRI for your business. Selling is job number one. Answering objections and differentiating between real and phony objections is crucial to sales success.
The hot button issue is the key to concluding a successful sales presentation. Find the real hot button, answer it directly and watch your business expand exponentially as selling becomes easier and even fun.

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.

by: Geoff Ficke

You are an entrepreneurial inventor with marvelous ideas in your area of expertise. The ability to create models, prototypes and concepts flows easily from your fertile brain. Nevertheless, all you have to show for your creative efforts is a garage full of dead end stuff, despite all of your efforts.

Many creative people have an area of knowledge in which they excel. They are in their comfort zone there and can appear to be a master of this precise universe. However, taken just a bit outside the protective lines of this tight little planet, they are lost souls. They can not communicate their brilliance, demonstrate their value and commercialize their creativity.

This is all too often a loss for the economy and society at large. A great invention that does not arrive in a timely fashion to the marketplace is a huge loss on many levels. Innovation is the juice of life for a vibrant economy. To be deprived of any source of ingenuity, no matter the reason, is to limit the range of possibility so vital for discovering big, new ideas.

A relatively little used option, for inventors and entrepreneurs, with limited ability to fund or license their product, is the Strategic Alliance. A Strategic Alliance enables a product, invention or service to become absorbed within the structure of a going business. The business handles all aspects of production, sales, marketing and finance as if the item was invented in house. In return, the inventor receives an income stream for a defined share of the profits generated by the product, a consulting agreement or employment working in his area of expertise on the project.

Many successful Strategic Alliances occur when an inventor, recognizing his areas of weakness, is knowledgeable about industry conditions, patterns and networks within this universe. Software writers, engineers, chemists and technicians often utilize this narrow gauge form of networking. It is a strategy available to any inventor having specific industry experience with application to their novel product.

The Strategic Alliance approach minimizes the need to approach strangers from outside your area of expertise. You know your field, you know the players (good and bad), you know the industry trends and you, better than anyone, know the innovations craved within this area of business. Familiarity with these factors gives the creative mind a leg up in pursuing an alliance that will enable a successful commercialization of their invention. Many people are immensely more confident when speaking the language of their trade than communicating in any other arena. Take advantage of this inside baseball edge!

The successful Strategic Alliance usually occurs much quicker than funding or licensing. The parties to the alliance, typically coming from the same business category, communicate in terms that are direct, and short circuit the usual learning curve required when negotiating with outside, less than knowledgeable investors or bankers.

An added benefit to the partners is the minimization of investment funds required to ramp up a new project. The business side of the alliance usually has specific experience in the product category. Most, or all, of the infrastructure needed for successfully marketing the invention is already in-house. From secretarial help, to warehousing, to manufacture, to finance, this is a going business with a complete set of assets. The lead-time from agreement to actual shipment of the item is often greatly reduced.

Strategic Alliance can be a win/win for both parties, and in my experience is usually the result offering the best outcome for the acquirer of rights and the inventor when they come from the same business category. The shoe fits well here for both parties.

It is important for the creative, but inexperienced, inventor to seek professional assistance when negotiating terms and conditions of the Strategic Alliance Agreement. The excitement of making a deal, and working with people from within their specific industry, should not get in the way of prudence. Contracts are often complex, and it is important to circumvent disagreements later, so clearly define each parties full range of obligations and conveyance.

by: Geoff Ficke

Almost every person in the world takes a certain pride in being a reasonable person. They will make prudent choices based on their background and attitudes. The safe decision minimizes the chances of being wrong. No one likes to be wrong.

The safe decision, however, carries little upside reward benefits. You are expected to pay your bills. Pay your taxes. Drive responsibly. Not yell fire in a theatre. Doing these things nets you no special extras.

All of the great ideas or advances in history have evolved from unsafe, unconventional ideas. The non-conventional idea always offers the higher reward, as well as higher risk. It is not the norm to be unsafe. It takes vision and confidence in the face of the usual chorus of criticism, doubters and opponents.

George Bernard Shaw said:
“The reasonable man adapts to the world.
The unreasonable man adapts the world to him.
All progress depends on unreasonable man”.

I concur. We all know men that were unconventional thinkers before their time. Thomas Edison, Leonard Firestone, the Wright Brothers, Da Vinci, Machiavelli, Levi Strauss, William Wrigley, Colonel Sanders, Saint Augustine, Bill Gates and so many more: these are examples of visionary men that thought outside the box to the benefit of all humankind. Their products, philosophies and advances were considered of dubious value when created. They were considered small thinkers and creators of insignificance, until the world turned their little ideas into big ideas with great fame and/or riches to follow.

Think of the Baseball Hall of Fame. Tens of millions of little boys have played baseball since the game was invented in the mid-19th century. Only about 12,000 men have ever played in the Major Leagues. This is a great achievement. Nevertheless, only a few hundred of these 12,000 are enshrined in the Hall of Fame, the ultimate sign of success. This honor is reserved for greatness. These are the players that generations remember.

Unconventional, unsafe, unpopular ideas that lead to ultimate success are the concepts we remember. Christopher Columbus is a major figure in history for reasons we all know. The Royal Spanish court was inclined originally to have him interned for heresy for claiming the world was round. Ultimately he convinced Queen Isabella to let him prove his theory and bring riches to the court. His success against huge odds is an excellent example of unsafe thinking leading to great entrepreneurial success for him and Spain.

Amerigo Vespucci arrived in the new-world second and, even though America is a turn on his name, he is a footnote in history. Martin Luther is famous still for his organizing the Protestant Reformation in the 16th century. The Hugenots, another Protestant sect, followed later in France. Who founded the Hugenots? Who remembers? It does not pay to be a follower.

Throughout history there are examples such as these where a person went out on a limb and society ultimately enjoyed the benefits. Safe decisions and following the crowd do not create opportunity.

Abraham Lincoln was a leader willing to broach unsafe thought. The mere idea that the Union could be sundered by the idea of freeing men from bondage seems absurd today. That a civil war resulted was a terrible price to pay. But Lincoln knew that slavery was vile and unsustainable for a modern, moral growing country. He is revered ‘til this day for his honesty, courage and steadfastness.

Fred Smith founded FedEx, the overnight package delivery service, with a very unsafe, unconventional idea. He wanted to take on Big Brother, the Federal Government, the classic snail mail service subsidized and delivered by the United States Post Office. He faced unimaginable hurdles. Huge capital formation needs, access to commercial airports, hard fixed overheads, licensing, etc. were huge barriers to entry. The idea was panned. He started with one, very used plane.

Mr. Smith knew he had identified a niche that was completely under-served and corporations would stampede to utilize. The disruptive innovations FedEx created have severely smacked the USPO with a dose of reality. FedEx is so successful that it has emboldened competitors to enter the field (the highest form of flattery: copying). During the Katrina disaster in New Orleans the USPO was delivering mail after five weeks. FedEx was delivering needed medicines and supplies for the relief workers after three days.

Not many sports fans today remember the name Dick Fosbury. Entering the 1968 Olympic Games in Mexico City no one paid much attention to Mr. Fosbury’s chances. He was a high jumper that had never jumped very high. Nevertheless a competitive spirit brewed quietly inside him. He knew he could jump higher, be competitive and, maybe, win a medal. He was on nobody’s short list of favorites.

Mr. Fosbury decided to take an unusual approach. In a sport hidebound by ancient training techniques and approaches to performance enhancement, he went WAY OUT on a limb. Mr. Fosbury decided to approach and elevate toward the jump bar by gliding with his back to the ground. No one had ever seen such a flop as all prior jumpers approached and attempted to leap feet first. The Fosbury Flop was born.

People laughed, sportswriters had a field day and competitors snickered, for awhile. During practices, however, keen observers began to notice that Mr. Fosbury was jumping higher, much higher. It was too late for the competition to adjust and to everyone’s astonishment, the Fosbury Flop delivered the Gold Medal to Mr. Fosbury. To this day, this is the accepted jump style used to deliver the best results in the event. This is just another example of a person seizing an opportunity by thinking outside of the box.

There is no Hall of Fame for safe ideas or average people. We honor and reward people that advance civilization by implementing ideas and concepts that seemed unnecessary, even silly, at the time of invention. Bill Gate’s mother once said to him as she tried to convince him to return to Harvard, “but why would anyone need a computer in the home”? The risk takers become the reward makers when their weird, unfashionable ideas become the norm.

by: Geoff Ficke

The type of business structure you organize for your new enterprise is greatly determined by your personality, realities, needs and experience. Millions of people in the United States never enter into any type of formal business structure. This includes the bulk of the black or underground economy.

It is estimated that the underground economy consists of about 10% of all commercial activity in the United States. This includes legal and illegal activities. A kid cutting your grass for $20 is technically working black. The handyman that repairs your patio for cash might be working black. Drug dealers are definitely kingpins of the underground economy.

Entrepreneurs should not want to work black, but should seek to be totally transparent for many reasons. The reason a person typically seeks to become an entrepreneur is to maximize the opportunity our capitalist system offers each person willing to try. This means playing by the rules, competing and pursuing success utilizing every available legal tool. The opportunity to sell a successful entrepreneurial business is almost zero without complete books, records and tax returns, typically details that underground business works hard to avoid.

I recommend any new entrepreneur seek consultation with an attorney familiar with the laws and regulations of the state, county, city or township of your residence. Even if you are planning to run your enterprise as a sole proprietorship, there are local zoning laws, restrictions on business activity, public announcement requirements, DBA (Doing Business As), fictitious name ordinances, etc. Do not try to avoid the pesky forms and filings required in most localities. If compliance is a hurdle for you, then success prospects for you as an entrepreneur are probably slim.

Your investment in the attorney consultation will pay for itself. You can go online, or visit the business section of the local bookstore and find just enough information to get yourself in trouble in these areas. Occasionally, I meet an entrepreneur that did not consult professionals, and has everything in order. This is very rare. More often, I meet shortsighted dreamers trying to cut a corner and save a few dollars. Professional help will save you time, money and mistakes.

Here are the most common business structures that entrepreneurs have access to when formalizing their new venture.

Sole Proprietorship

This is the most commonly utilized structure for new, small, startup business ventures. Essentially, the proprietor, you, the entrepreneur, announces that you are working alone. The sole proprietor accounts for all income from sales as personal income and is responsible for all debts incurred by the enterprise. Personal and business funds are often commingled in this structure and need to be identifiable for tax purposes. There is no formal corporate entity, but you must adhere to all local laws and statutes. A Federal Identification Number is not needed (use Social Security Number) when filing taxes.

Partnership

When two or more people decide to enter a partnership, they basically agree to enter a form of marriage. We all know that marriages can get messy. Partners must minimize any possibility for a messy divorce by creating a partnership agreement that details what each partner brings to the opportunity (investment, sweat equity, intellectual property, etc.). Also, the partners responsibilities (silent, working, sales, marketing, production, etc.), and an agreed split of income, profits and harvest, as well as liabilities and losses.

I like, and often recommend, a partnership for young entrepreneurs with limited, narrow experience. Operations experience often does not translate to sales and marketing for instance. The only imperative is that there are no surprises after the enterprise succeeds, or fails. This when a cloudy division of liabilities or profits often becomes problematic.

Limited Liability Corporation (LLC)

Again, there are “do it yourself” methods of creating LLC’s. Use an attorney. I am no friend or fan of the legal profession. I am not a lawyer, either. I just know from experience that this is difficult: and often a contentious area of law that requires expertise.

An LLC limits the owner’s exposure to some losses. The LLC also enables the owner to treat income beneficially for tax purposes. Professional legal and accounting assistance is really important in establishing the LLC in a proper legal format.

Corporation

The Corporation offers the most comprehensive protection for the owners. Losses accrue to the Corporation, in most cases. The Corporation assumes the role of a person, even though abstract. A Corporation requires the filing of Articles of Incorporation in a state. Consult an attorney for advice on which state to file this document. Nevada offers secrecy. Delaware is most popular for large corporations. Each state has different fees and requirements. Get good help!

The Incorporation requires a fair amount of housekeeping. This includes appointing a board of directors, keeping meeting minutes, issuance of stock, etc. Many startups convert to corporate status after achieving some amount of success.

There are other intricate options, trusts and arcane structures available. However, for 99.9% of all entrepreneurs the four discussed here offer the best vehicles for properly structuring a new business. Approach each with the goal of maximizing your income and minimizing your time commitment to housekeeping the entity you choose. Remember: in order to be successful as an entrepreneur will require every scintilla of your thought, work and creativity to be concentrated on your project.

by: Geoff Ficke

Most inexperienced entrepreneurs are unaware of the many options and alternative strategies available to push a new idea or invention to market. The most common approach they seek to implement is a classic funding round. When this avenue fails, and with overwhelming frequency it does, the idea often is dropped.

Driven inventors attend invention trade fairs, venture capital conferences, small business incubators, and network at every possible opportunity in search of funding and working capital for their invention. It is commendable and a tribute to the pursuit of the American dream that such efforts are expended in this daunting effort. However, virtually all will come to a disappointing end with no funding and disappointment.

In 2005 over 500,000 new business incorporations were organized in the United States. This does not include the hundreds of thousands of sole proprietorships, partnerships, joint ventures and strategic alliances formed. From this sea on creative, new opportunities only about 1000 were funded by traditional venture capital sources. The odds are so long against a successful funding round: the wonder is that so many entrepreneurs, with so much creativity to offer, are chasing so few sources of funds.

There are other opportunities and strategies available for successfully getting a great idea to market. The bar for acquiring venture capital funding is so high, so difficult and so competitive, that it is unfortunate how many inventors quit the pursuit of their goal after receiving no traditional funding commitment. One of several alternatives to venture funding is a license campaign.

Licensing is the assignment of intellectual property or product rights to a licensee for consideration. The consideration may consist of a rights fee, royalty, options, personal service fees, minimum annual sales turnover and more. The licensee agrees to make good faith efforts to commercialize the product or intellectual property and the agreement is memorialized in a License Agreement.
There are many more companies interested in licensing a product or technology than there are conventional funding sources for startups. Having said this, there is really no difference in the requirements for success in either venue. You will just get more swings at the ball when seeking a license for your project.

Entrepreneurs read about Blackrock Capital, Harvard Capital Management or Kohlberb Kravis Roberts funding a new opportunity for $200 million dollars or more. This is exciting, motivating and for most, unrealistic. A fully fundable opportunity is a rare amalgam of huge upside, mitigated risk, unique, potentially disruptive product and REALLY strong, experienced management. Very few entrepreneurs can present such a comprehensive package.

In the world of licensing the product, upside, risk mitigation and disruption features are crucial. Management is irrelevant as the licensee presumably has the management in hand to drive the project to success. The same elements that excite venture capitalists also excite the licensee. They are keen on a strong Unique Selling Proposition detailing the niche the product will claim.
A powerful, well-structured sales model will quantify and support the sales universe available to the product or technology.

There are many successful approach strategies available when seeking to license an exciting new product. The following are some broad elements we have utilized in our consulting firm with success. Remember there is no linear, set in steel index to follow. Innovate, adapt and keep pushing and try everything necessary to get that appointment with the decision-maker.

Create a Working, Production Quality Prototype

Whether you have a new product, a service or a technology, you MUST be able to demonstrate the unique features and benefits of your offering. Some inventors have a facility to create, design and construct the necessary demonstration unit. The great majority of people do not. This is a simple hurdle to overcome.

In every city in America there are job shops, product design and development firms, engineers and software writers capable of providing professional guidance resulting in production of the prototype required.

A key by-product of this process will be the creation of 3-D, Computer Assisted Design art. This art is essential in the assembly of the product for production, in obtaining crucial and totally accurate cost of goods and filing patents.

Patent Filing – Intellectual Property Protection

Very few licensees are interested in investing significant monies in marketing a new product without the guarantee of some patent, copyright and/or trademark protection. See a Patent Attorney. Patent law is exceedingly specific and for this reason it is a legal specialty. A competent patent attorney will conduct a search and, using the results, advise the possibility of successfully receiving a utility patent (highly preferred), design patent (patent on art, easily overcome) or not being artful enough to receive any cover.

If an item has dicey patent prospects we like an alternative strategy. I have been a proponent for several of my clients of a strategy we call “patent pending forever”. Our goal is to keep a product in patent pending status for as long as possible by timing addendum to the application and art and filing these in order to keep having the filing reviewed again.

During patent pending a filing is essentially in limbo. The advantage for the inventor is that there is no publication of the details of the art, features and unique benefits of their product. Secrecy is an asset. Once a patent number is received two undesirable things happen: details of the patented product become public knowledge, and the clock starts ticking against the 20-year life of the patent.

For most entrepreneurs seeking a license, we do not push for international patent filing. International filing is very expensive and we let the licensee assume this expense.

Source of Production, Manufacturing

Depending on the product, service or technology offered for license, you MUST source production. The reason is simple: this will set you apart from the dreamer. It reflects your commitment to the opportunity. It reassures that the product can be built (we see a number of projects that are unrealistic from an assembly and economic standpoint).
Now, let’s discuss a touchy subject in the current economic climate. I love my country. America is the land of opportunity. However, I am a capitalist and the rules of capitalism are much bigger than any one individual: including you, the entrepreneur. If at all possible I prefer to assemble components, source, and manufacture here in the United States. However, it is becoming more and more difficult to be competitive here in America.

I have clients that are adamant they do not want their project assembled offshore. Do not be a Luddite. You really have two options: you can go with the flow, or you can be drowned by the overflow. In the past decade, we have not found a single project that could be produced in the United States as inexpensively as we could produce offshore, including the cost of freight, customs and duty. Not even close!

We search out four or five factories, or offshore resources, for submission of the 3-D CAD art and a Release Packet. The Release Packet contains all of the hard samples of components that will be parts of the finished product. After this is forwarded, we typically receive quotes in four to six weeks.

This quote should include all line item costs contained in the Bill of Materials for the product, plus outer packaging, costs of display (if any), shipping carton, inserts (directions for assembly, etc.), plus freight to United States port of arrival, customs, duty and inland freight to your warehousing/fulfillment point. This is a dead net cost of goods.

Use of Cost of Goods (COG)

Knowing the cost of goods is crucial! This number proves the viability of the products pricing model, confirms margin assumptions and the ability to construct an exciting sales model. If COG is too high, and there is no capacity to squeeze costs, the future license prospects for the product are not exciting. This number sets the parameters for the potential of your project and indicates to the potential licensee that they are dealing with a thoughtful, serious and skilled licensor.

Research

The licensee with an exciting opportunity on offer will want to know (not guess) everything possible about the market they are about to enter. This will include; customer demographics, size of market, growth of the category, competition, and potential licensors. Cite sources of research and assemble as a portion of the Opportunity to License document you will offer. This is the knowledge that will set you apart from run of the mill tire kickers hoping to make a deal.

Professional Endorsements

Nothing resonates with buyers more than professional endorsements. I am not necessarily talking about celebrity endorsement. They are great for certain products. A pediatrician endorsing a juvenile product, or a professional association giving a positive quote on a service, or an educator endorsing a toy, are simple examples of taking a product and brandishing it with the glow of an expert. This is invaluable and a technique we utilize regularly for our projects. Include these quotes in all collateral materials.

Test Market / Focus Group

If you only have one prototype it can be difficult to assemble a focus group or test market. What we recommend is to show the product to strangers sequentially in the field where the product would typically be used. Recently, with a single prototype of a baby stroller accessory, we spent an afternoon in Central Park in Manhattan, demonstrating the unit to mothers pushing strollers. We walked away with positive quotes for attribution from 26 of 29 mothers that used the prototype. These we included as an exhibit in our product folio.

Opportunity to License Document

With all of the above in hand, you have the data and resources to assemble an approach document. We all have heard stories about the inventor sidling up to a banker in a bar, uninvited, and successfully pitching his idea over a scotch and soda. Good Luck!

You get only one chance to make a great first impression. Do not shortcut on any aspect of the initial approach. With your patent, prototype, possible endorsement, research and costs well in hand, you are ready to assemble the written document that will detail the features and benefits of your project and quantify the opportunity.

As you are not seeking funding, and are not interested in self-marketing, a classic business plan is not required. However, you will need a written synopsis of your project, written along the lines of the business plan. We call this the Opportunity to License.

This document needs to be crisp, exciting and short, eight to 10 pages, plus exhibits. The exhibits should include; patent information, list of contributors to the project, CAD art, bill of materials, cost of goods, research data.

Selling the Opportunity

Successful completion of the above now places the opportunity in position to seriously, and professionally, approach licensee targets. Your research will have identified the obvious candidates. Networking, walking trade shows and scouring appropriate industry trade publications will increase familiarity with added possible homes for placement of the item.

The target list needs to be approached with care and diligence. Large, publicly traded Companies have different, but fairly stringent standards for accepting unsolicited submissions. I find this barrier crazy, as many great opportunities are never viewed for fear of litigation. Mid-size and small companies, the really fast growers, are more open to reviewing unsolicited submissions.

Prepare mailings with care. Be sure to know the exact name and title of the decision-maker at each targeted potential licensee. Personalize each letter and assemble the mailing in a folio. The cover letter should be on top in the right pocket with the Opportunity to License document directly behind. In the left pocket place any public relations, positive user endorsements, etc.

Follow up the mailing with a phone call in 7 to 10 business days. Now the ebb and flow of making a deal begins.

Negotiations

No two deals are alike. This not a cookie cutter, fill in the blanks process. Securing that face to face meeting with Mr. Decision-Maker is crucial, and the opportunity cannot be blown. We seek to maximize every potential income stream for our clients. These include:

Rights Fee

You must receive consideration in the form of a Rights Fee in exchange for turning over all aspects of your project to the licensee. This should be paid on signing the license documents and is not returnable. The licensee should perform all due diligence prior to signing. There are no make goods here. The size of the Rights Fee will be in direct proportion to the size of the opportunity you offer.

Royalty

This is the vast bulk of income any licensor receives from a successful product placement in a licensing deal. The variables in structuring percentages are never ending. Some royalties are built to sales growth and minimum sales promotion investment. Others are tied to achievement of tiered sales goals. Many contain buyout options that automatically kick in at certain trip points.

The term (length) of the license is crucial. The licensee will want a shorter term. The licensor will want as long as possible to maximize income.

The details of each license are unique and specific to that particular deal.

Production

Another reason we are aggressive about controlling the production sources, and knowing our costs is because this often becomes another income stream for the inventor. For instance, assume a dead net cost of goods of $1.92 per unit. Assuming we can maintain production control in negotiations, and this happens often enough, we will quote the licensor $2.00 per unit COG. The difference of $.08 (4%) goes right to the licensor when peeled from the Letter of Credit that is organized to pay for the offshore inventory production. $.08 might not seem like a lot of income per unit. However, apply this number to potentially hundreds of thousands of units per year, for seven, 10 or 15 years. Do the math!

Several points to make here.

Do not be a hog. Hog’s get slaughtered. A good deal is a deal where every party feels fairly treated! This is an area where we see too many deals go south. Every party should profit handsomely, according to their level of participation.

Second, do not attempt to license a product without undertaking the steps detailed above (or some variant of the process). I have mentioned this before. This is just an outline. There are endless variables that apply to different industries, styles and categories of offerings. Do your homework and do not attempt to take shortcuts. You will be wasting your time and resources.

Finally, do not, EVER; utilize the services of an invention mill. These firms typically advertise on late night infomercials and they prey on the inexperienced, naïve and desperate. These firms are little more than boiler rooms with a goal of separating the weak from their cash. Check with your Better Business Bureau and State Attorney General for history on one of these houses. Even then proceed with caution.

Licensing is a real, viable option for inventors having opportunities that offer fresh, definable features and benefits. The Unique Selling Proposition contained in these inventions may have real value to licensees, while venture capital may not be able to overcome one or more shortcomings inherent in the project. Funding sources are often seeking a different deal parameter. Licensees are simply seeking the opportunity to bring in house a product, service or invention that compliments their array of assets. This makes licensing the best choice for entrepreneurs hobbled in one area or another: they simply have a great product to offer.

by: Geoff Ficke

What does the following list of companies have in common?

A&P
Hudson Motor Car Co.
Montgomery Ward
TWA
Horn and Hardart
Studebaker
Indian Motorcycle
Bonwit Teller
Woolworth
Bethlehem Steel
Polaroid
LTV

These Companies were successful, recognizable brands in their respective categories. They were publicly traded and a number were in the Nifty Fifty in the 1970’s and/or the Dow Jones Industrial Average. The element they all have in common (and with hundreds of other equally recognizable names) is that they did not innovate. They created a static business model and did not anticipate that there were newer, better ways to implement new technology and strategies.

Let’s look at two old, established retail categories and how the ability to innovate has determined contemporary success or failure.

Music Stores
Recorded music retail has always been a competitive market. Tower Records followed the national chain concept, offering a broad range of music styles and competitive pricing. Mass marketers such as Target and Best Buy offer music as well, typically only the more popular artists, narrow and deep. Every city had a local shop, sometimes specializing in a specific area of musical taste. The underlying similarity was that a customer came into the store, made a selection and then purchased the CD or album.

Then along came the internet. The ability to protect trademarks and copyrights was believed to trump this technology. Artists and record companies believed that legal protections would enable them to continue as always: selling an album, with one or two hits, for $20 to $30. Software was written enabling the music consumer to cheaply, or for free, download specific hit songs while avoiding the filler cuts. The Napster effect has revolutionized the music industry.

Napster is a disruptive technology. The world of music retail was stood on its head. Legal fights and challenges are still being fought. However, chains like Tower Records are gone. The marketplace did not allow for a rigid system to thrive in the face of innovation. Tower did not stay flexible, anticipating technology advances and changing tastes. Trying to sell albums with 15 cuts, when the consumer only wants to hear and pay for two hit songs, is an obvious loser.

Airlines
Until the late 1970’s the airline industry was protected by Federal Government regulation. This enabled the airlines to artificially inflate fare pricing. Hub and spoke systems were created. Each major carrier had a geographic area of strength (Delta the southeast, USAir the middle Atlantic, American the mid-west and Latin America, etc.) that they dominated. Unions were aggressive and the carriers were profitable so the need to squeeze costs was not urgent.

When de-regulation occurred in 1978 the major carriers did not anticipate the radical disruptive innovation that was just around the corner. An aviation pioneer in San Antonio named Herb Kelleher did. He watched as fares plummeted without government regulation protection. Competition for gates, destinations and expansion resulted in many regional carriers (Republic, Piedmont, etc.) being gobbled up by the majors. Out of the changing landscape for air travel Mr. Kelleher saw opportunity.

Mr. Kelleher created and launched Southwest Airlines to address a gaping need. Southwest utilized a business model that reflected the changing landscape in providing air service. The major carriers utilize complex pricing models that try to maximize seat yield revenues per mile flown. Southwest posted one low price for every seat on a flight. The major airlines were totally union shops. Southwest was non-union. The major carriers flew a mix of plane models. Southwest flew only the Boeing 737 (this streamlined service and parts expense).

Very quickly the flying public recognized that a Dallas to Phoenix flight that was $579 on American, and $149 on Southwest, was a no-brainer. Southwest remains ahead of the curve with standardized policies, simple restrictions, a feel good fun loving staff, hedging contracts for jet fuel purchases and the promise of value for money on each flight.

Southwest capitalized on the changes it recognized was coming in the air travel universe. Today, there are a number of airlines utilizing some or/all of the Southwest model and virtually all are successful. Easy Jet, Jet Blue and Ryan Air in Europe are booming while the old-line giants all over the world are in desperate straits.

Proctor and Gamble is a wonderful example of an old alpha enterprise that is constantly re-inventing itself to reflect changing market conditions. Dell Computer, MicroSoft, Intel, Research in Motion, Nokia and many more are examples of businesses (all little more than 20 years old) that innovate, change, anticipate and succeed. They were all small startups only a few years ago.

For entrepreneurs, the ability to innovate and keep ahead of the field is crucial. When analyzing the potential for a successful market placement the ability to create a cutting edge business model is so important. If your goal is to open a male clothing shop and one already exists in the area you have chosen, you have a problem, unless you can differentiate your unique selling proposition. Maybe this can be accomplished by offering a tailoring operation for hand cut suits, or specializing in formal wear.

Whatever your product or service, define a business model that separates you from your head to head competition. Do not play the price game. Lowest price is almost always a temporary benefit, someone will come along that can produce cheaper, faster, better. Your goal should be the offer of a benefit that the customer will value, desire and not find immediately available. Then back up the benefit with superior service and the promise of continued new cutting edge innovation. Innovate or die!

by: Geoff Ficke

Patent numbers are issued sequentially, beginning with the number one. Patent number one was issued to Samuel Hopkins on July 31, 1790. It took 75 years for the United States Patent and Trademark Office (USPTO) to issue patent number 1,000,000. Patent number 7,000,000 was issued February 14, 2006. It took only seven years for the USPTO to move from issuance of patent number 6,000,000 to 7,000,000.

What does this mean? Simply, there is more creativity now that at any time in history. The old saw that “there is nothing new” is completely wrong. There has never been so many people and entities creating novel, unique products, technology and services, and so driven to commercialize these inventions. More patents and entrepreneurs attempting to market their products is indicative that there is more competition for successful placement.

It is essential that entrepreneurs protect their inventions. This is a form of insurance. To attempt to market an invention without covering the work with the shield of patent, trademark, copyright or trade secret protection indicates a frivolous approach that will not succeed. Investors, licensees, and investors demand the protection that these intellectual property products afford. Even if the entrepreneur is going to self-market the invention, protection is essential in order to fend off competition.

A pharmacist in Atlanta, at the beginning of the 20th century, created a formula for syrup that he sold at the soda fountain in his pharmacy. John Pemberton mixed the syrup with soda water and sold drinks of the concoction as a wellness beverage to cure aches and pains. Mr. Pemberton had created Coca-Cola. He never anticipated that Coke would become an international comfort product, the soft drink. The smartest thing John Pemberton ever did, besides inventing Coca-Cola, was to handle the secret formula for the syrup as a Trade Secret. To this day, the Coca-Cola Bottling Company zealously protects the ingredients and chemistry involved in producing the base syrup that is the essence of classic Coca-Cola.

Big Boy Restaurants protects the recipe for the tartar sauce that goes on their sandwiches, and that many customers buy by the bottle and take home. McDonalds doggedly protects the process their restaurants utilize to cut, cook and season their French-fries. William Wrigley was just as manic in keeping secret his technique for delivering powerfully flavored, long lasting, chewing gum.

Trade Secrets typically are not able to secure patent protections. The novelty of the Trade Secret is in the blending, chemistry or chronology utilized to deliver the finished product. If you have such a recipe you will want to keep this knowledge very near, as it can become very dear. If the public knew the formula for Coca-Cola, quite possibly there would be a lot of consumers keen to blend their own drink at home. Coke would not like that!

If your product has the potential and necessity to become a Trade Secret you will want to follow several very basic steps. First, write down every event related to the development of the formula. Keep a logbook with the data, dates and details of your work. As you finalize your development work memorialize all of the steps essential to delivering the finished product you wish to keep secret in a recipe or summary document. Then store in a very secure place (a safety deposit box, or safe) all of the work product and the recipe or formula.

The Trade Secret gains incredible asset value when your product becomes a market success. Selling a business built around a fully protected Trade Secret exponentially increases the value of the company. Coca-Cola, Betty Crocker, Duncan Hines, Oil of Olay, Schlitz, Dom Perignon, Ben and Jerry’s and Estee Lauder’s Youth Dew are only a few examples of famous brands built around a Trade Secret.

A Trademark is important in developing brand awareness for a product. Use a Patent Attorney when approaching the highly specialized area of seeking Trademark protection. I have never seen an entrepreneur successfully navigate the very complex workings of the USPTO. I HAVE seen many attempts to handle the process, all resulting in complete failure.

The content of a Trademark can include a customized, identifying icon, stylized brand name and a branding statement. Nike uses the famous slash (icon) the Company’s name (recognizable stylized font) and “Just Do It!” (branding statement). Include all of the elements that the public will recognize in your Trademark application.

Look around at local, regional, national and international companies and brands that you see every day. Pat’s Cheese Steaks in Philadelphia is a local business that has gained great fame and brand recognition and protects their brand with a trademark. It is a destination for visitors to Philly. Chanel, the French haute couture brand, is internationally revered and the classic “C” that adorns every unit of Chanel product is one of the most recognized brand icons in the world. Truly Nolen, the national pest removal service, trademarks the mouse ears seen on every piece of sales collateral, advertisement and service vehicle the Company uses.

Owning a Trademark confers an obligation to police and protect the assigned mark. The inclusion of ™ on every unit of product is essential. Again, consult an attorney. Trademarks can inadvertently become vacated and lost.

Copyrights are utilized to protect intellectual property. Movie content, poetry, music, books and plays are copyrighted. We have worked with clients on a number of video and board games. We always copyright the rules and/or the play features of the game.

Recently, Dan Brown, the writer of the wildly successful book the “The Da Vinci Code”, was suited for plagiarism by the British authors of a book about the search for the Holy Grail. The search for the Holy Grail is central to the plot of the “The Da Vinci Code”. There are full library shelves devoted to the search for the mystical Holy Grail. And yet, during the run-up to the movie release of “The Da Vinci Code” a legal action involving this intellectual property was commenced. Brown and his publisher vigorously defended their rights under their Copyright protection. They won full vindication from the court.

Producers of intellectual content properties (movie studios, record labels, book publishers) are very hesitant to accept unsolicited proposals for review. “The Da Vinci Code” saga is the reason. Legal action is rife in the area of intellectual property. We all remember things that we saw, heard or experienced from the distant, but dim past. Regurgitating a variation of that experience may find its way to the written page. Voila, was this material plagiarized?

Mattel and Hasbro will not review ANY outside toy submissions. Is it not coincidental that there has not been a breakthrough toy introduction in years from Hasbro or Mattel? This is one of the unfortunate byproducts of a litigious society, the limits placed on needed innovations. Protect your intellectual property with a Copyright.

I recommend to my clients, before spending a dime on a patent attorney, that they perform a cursory search at the USPTO.Gov web-site by providing all obvious key words applicable to their invention. If a number of patented products come up, and they are spot-on their idea, the item might not be a candidate for a filing. If the field seems open and clean, then I advise hiring the patent attorney to conduct a professional, thorough search. The in-depth search will confirm the potential for successfully obtaining patent protection.

Patents are the preferred style of protection for most inventors and entrepreneurs. Patents (utility) are very powerful agents of defense against predators, thieves and knock off artists. Not to be a boor, but, again, utilize the services of a patent attorney. I am always amazed and amused at how many people think they can successfully write, provide highly specific 3-D CAD art, file, handle USPTO objections and move the patent through the labyrinth of a Federal Government bureaucracy. Go Figure! They waste time and money, and usually negate any opportunity to have a re-filed patent successfully obtain a patent number.

The Provisional Patent filing is basically a letter that is placed on file with the USPTO. The Provisional filing advises the USPTO of the description of the product you are attempting to develop. The letter has a one-year life cycle and must be extended with a formal patent filing (Utility or Design) or the product is vacated forever.

We utilize the Provisional Patent as a fully legal way to state that a product in early stage development is Patent Pending. This filing is also very inexpensive relative to a design or utility patent. A Provisional Patent filing also enables the entrepreneur to have a one year time window to test and gauge market response to the invention. If reaction is positive, then it reinforces the necessity of continuing to devote assets to further development of the opportunity.

The Design Patent simply covers art features noted in the application. This is the weakest form of patent protection. A competitor only needs to change a design element, cosmetic feature or add an artisan variant to overcome a Design Patent. However, for products that have real commercial potential, but cannot overcome prior, existing product art to obtain a Utility Patent, the Design Patent offers one potentially important benefit: the option to keep a product suspended in ongoing Patent Pending status.

We have done this on a number of occasions. A simple amendment to the initial filing means that a bureaucrat at the USPTO must find the file, pick it up, insert the amended filing detail and re-log the filing. As a result the filing goes to the back of the line and we gain months more Patent Pending protection.

Why go through all of this? When a product is in Patent pending mode it has ultimate protection. When a patent number is issued the clock starts ticking on the effective life of protection and details of the novelty of the patented product become public knowledge. Your product is obviated. It can be amazingly simple for the less than scrupulous knock off artist to engineer around your inventions unique features and benefits.

By keeping a product in Patent pending limbo we keep the features shrouded from any public awareness. This often leads to a first to market advantage and competition is only aware that there is a Patent pending. The added time that the product obtains, to build and extend sales traction, and begin the branding process is exponentially more valuable than the legal fees required to keep adding elementary addenda to the Design filing. You want to be first to market, and have as much time as possible to stand-alone in a market.

The Utility Patent is exceedingly valuable, both as a protective shield against competition and as a business asset. The invention that receives a Utility Patent number from the USPTO is potentially of interest to licensees, partners, investors and venture capital. Most patented products (Utility), however, never make it to market. We often see inventions that are novel, and thus patent possible, but not commercial, or needed, or beneficial. We all know a mad scientist or two, with endless designs, inventions and patents, none of which are ever going to be a market success.

The Utility Patent protects the novel features and benefits that the application describes in great detail. The patent attorney will narrate the unique aspects of your invention. They will also mention other patents near your space but painstakingly note the differences inherent to your invention. In addition, a great deal of effort will be devoted to creating 3-D Computer Assisted Design art that portrays your product from every possible angle and graphically depicts the uniqueness of your product.

Utility Patent filings rarely sail though the USPTO without being challenged. A competent patent attorney often anticipates the weakness in a filing and has a sheath of retorts ready to address the examiners concerns and questions. This re-directs the file back into the bureaucracy at USPTO. I tell my clients that they can expect up to an 18-month wait before receiving notice of the USPTO decision. However, on several complex filings, I have seen the process take up to six years.

Believe me, it is worth the work, the wait and the investment if a successful outcome from the USPTO is achieved. A Utility Patent conveys gravitas. The invention has stood up to the most stringent scrutiny and been accorded the most highly desired verdict: this invention has import.

by: Geoff Ficke

There are hundreds of thousands of business plans floating around and attempting to find a funding home. I receive hundreds of business plans annually myself, and can definitely state that 99% of these documents are laughable as presentations of an exciting investment opportunity. I am not referring to the value of the product being described, rather the presentation that purports to describe an exciting investment situation.

One of the reasons that so many plans are so poorly written, and there are many, many additional reasons, is that the writers do not understand how plans are read. Investment banks, venture capital firms, family offices, angel firms, banks and blind investment pools receive a stack of plans for consideration every day. Typically a junior reader, often a recent MBA, is assigned to read and screen the plans editing out all of the obvious losers. The remaining business plans are then marked up after sections are read in the following order: Executive Summary, Financials, Management, and Exit Strategy.

Why is the order in which a business plan is read important to recognize? Because, these are the areas that must be powerfully and compellingly addressed in order to have the business plan placed in front of decision- makers. The writing and construction of these sections dictate the level of interest that the original screening reader will express in the synopsis they will attach to the business plan copy as it begins it’s route through the project analysis process.

The Executive Summary is read first. This should be a two page vivid snap shot of the enterprise, and touch on each aspect of the opportunity. The Executive Summary needs to paint an exciting word picture that leaves the reader wanting to know more. Unfortunately, most plans are not read beyond the first paragraph or two.

Why? I have discussed this with investors on many occasions. I have asked the question, “aren’t you worried that you might be missing out on a great product opportunity just because the document has a weakly written Executive Summary”? The universal answer, “if there is no more passion or ability to excite us than we see in a poor Executive Summary, we have never had to look back at a missed opportunity. If you can’t make a great first impression for us, you won’t for anybody else either”?

You only get one chance to make a great first impression. The business plan is your projects first impression. It is the superstructure of your opportunity, the skeleton, and a foundation. If a house has a weak foundation it will not stand up for long. Why entrepreneurs submit documents that do not properly reflect the excitement they believe inherent in their invention is a sad mystery. A poorly executed Executive Summary negates all of the time, energy, investment and innovation built into a new offering.

Assuming the newly submitted Business Plan has an exemplary Executive Summary, and passes the initial screening read, Financials are read next.

Why Financials? Well, the Executive Summary is the skeleton of a project, while the Financials are the muscle.

Financials are based on a set of assumptions that are key to presenting a realistic, justifiable cash flow, balance sheet and income statement. Investors have certain Return on Investment parameters that they must seek to achieve before they can consider any investment commitment. The assumptions upon which the Financials are based must be from thorough research, current market conditions and historical means.

The principal reason Financials lead to project death is that the assumptions are based on dreams, hope and pie in the sky. A rule of thumb for successfully leaping the Financials section hurdle is this: investors need to realistically see that they will receive a mid-30’s per cent return on investment commencing between month 24 and 36 (year 3) after an investment is made. This rate and speed of return must be able to stand aggressive scrutiny. Believe me, investors are manic about analyzing, poking, prodding and tearing apart the assumptions upon which the Financials are constructed.

Good News! Your Business Plan has successfully passed through the Executive Summary and Financials doors. Next up, Management!

The Management section represents the brains of the new enterprise being considered for investment. An experienced (industry specific) management team must be either on hand, or readily available for successful placement.
The downfall in this area for so many prospective entrepreneurs is a complete lack of direct management experience. I recently reviewed a terrific safety product that had immense appeal. An exciting product, great margins, consumer need and obvious benefits, however, the group seeking funding had no executive management experience in any area the project required. They are candidates for a sale or license, but no funding round ever occurs without strong management. Remember: the investment is being made in people, people capable of driving an exciting opportunity to success.

Do not dream about running your own company, with someone else’s money, if you are a warehouse manager by trade but need production and marketing experience to succeed at the new business. It just will not happen, unless the investment comes from Aunt Hazel.

However, if you have strong and direct management experience and the Management section indicates a rounded team, the plan will move on through door three and to the last initial barrier to be overcome. What is your Harvest Goal (exit strategy)?

The Exit Strategy is crucial for investors and the effective management of their money pools. The Exit Strategy is the brain, intellect and emotional component of the deal. Venture capital is a high risk/high reward game. Investors know that the successful investment must pay out large, and relatively quickly, in order for them to cover the losers that greatly outnumber the home runs they hit.

Some entrepreneurs are unrealistic about harvesting gains from their business. This scares investment and venture money. An agreed plan to depart, take profits, sell or exercise myriad other harvest mechanisms at maximized points in the business cycle will be demanded before investment will be considered. It is best for the entrepreneur to be highly flexible when negotiating the harvest. The Exit Strategy is best summarized as an area where the entrepreneur is open, flexible, wishing to maximize profits and make a deal fair to all parties.

Inflexibility is a mortal sin for those seeking investment. I can not overstate how many deals never happen, products linger and die, opportunities are lost because an owner is unrealistic in framing his requirements for his enrichment when potential success is achieved. Leave something on the plate for all parties in a deal.

The other sections of a customized business plan are now important, but only after the pre-eminent Executive Summary, Financials, Management and Exit Strategy areas have passed muster. If your business plan has all four in good order you will be in rare company. Too many entrepreneurs dream about securing investment. This is anything but a dreamy exercise. It is tough, competitive, demanding, hard work. If you put the necessary effort into your project you will greatly enhance your chance for success!

Do not take shortcuts! Do not guess at details and assumptions! Do not fill in the blanks on a store bought template! Do not offer your opportunity for review until you have a professional, exciting presentation! Your Business Plan represents you, your family and your partner’s future!

by: Geoff Ficke

Have you ever noticed how successful people always seem to have a very wide net of friends and acquaintances? Howard Hughes became an infamous recluse only after he was fabulously wealthy. His network of business associations enabled him to excel in aviation, manufacturing, heavy industry, oil, movie making and hotel/casino ownership. He tapped into the best managers, engineers and executives available within each industry he tackled to manage his properties and provide essential expertise.

Most people are very lucky if they have two or three truly close personal friends in a lifetime. Do not confuse personal friends, friends and acquaintances. An acquaintance is a person we see from time to time, know in passing and have some basic knowledge of their background. A friend is more likely someone we socialize with, invite into the home and make an effort to schedule onto our social calendar. The rare personal friend is that person to whom we will divulge innermost secrets, trauma, joys and fears.

You will never have a personal friend, social friend or acquaintance unless you perform some type of networking. Remember the first day at a new school. You want to be accepted, avoid rejection at all costs and meet someone with your values and interests. At first this is an intimidating circumstance, confronting new surroundings and lack of any familiarity can be daunting.

After a few classes, or a few lunch periods, you enjoy that ground breaking first conversation with a fellow student. The chat is almost always a series of exploratory questions. What is your name? Where are you from? Why did you transfer? Are you trying out for cheerleader today? In addition to breaking the ice, the foundation questions establish the base line for constructing a minimum platform from which to begin a potential friendship at some level.

An entrepreneur faces the same networking issues faced by the new student. Typically, everyone involved in the field he is trying to enter is a stranger. He probably does not know a patent attorney, investment bankers, product designers, sales agents, marketing strategists and so many more specialists he might need to successfully bring the invention to a successful fruition.

Successful entrepreneurs are constantly networking. They view every human contact as an opportunity to meet someone that might represent a potential friendly acquaintance and mutually beneficial business contact. Today’s casual acquaintance often evolves into a business contact. Maybe, today, there is nothing more than an exchange of names and handshakes. But, tomorrow, a situation that includes opportunity may arise.

I recently was looking at a house to buy. I had never met the real estate agent attempting to sell the house to me before the tour. I gave the lady agent my business card and told her what I do. I already knew that she was a real estate agent. She began asking questions about my business, services, contacts in the pet toy area, and more. I did not buy the house, but I did engage a new client. She loves cats and had an idea for a terrific cat exercise toy that she needed help in commercializing. This is Networking 101!

I am always amazed at how many times I ask someone for a business card and they do not have one. This is a lost opportunity. I never go anywhere, ever, without business cards. Remove a credit card from your wallet, cut it up and replace with some business cards. This is a far more productive use of wallet space.

Networking is possible in almost every public situation. I recently saw a fellow with a funny hat in the mall. I had never seen such a hat: it was novel, clever and had a winning design. I introduced myself to the gentleman wearing the hat. He took off the hat, proudly pointed out all of the features built into the hat, and then advised me that he wore the hat in public to gauge responses he receives on the style. He looked at my card and in disbelief said, “I have been looking for somebody with your background to help me sell this cap for two years”.

I encourage new entrepreneurs to immerse themselves in the industry they are attempting to enter. If there are industry specific conferences, attend as many as possible. Ask questions. Stay afterwards and introduce yourself and give everyone you meet a business card. Do not drink alcohol. Make sure the business card contains a clear and obvious reference to your project (i.e. do not list Mike’s Inventions, instead, Patented, Ergonomic New Paint Applicator).

Attend trade shows, walk showrooms, introduce yourself to potential mentors, join the Lions Club, Rotary Club and local Chamber of Commerce. Enter competitions for new inventions and product submission. Talk to people, ask questions and listen closely to the answers. The more you network, the easier it becomes. The fatter your Rolodex the more access you will have to the answers: guidance, contacts and the expertise you will need to conquer every task a fledgling entrepreneur will face. Additionally you will expand your base of acquaintances and friends, a nice bonus.

In 1993 I met Jane, who had a project that targeted children’s obesity. She was a very nice person but she recognized that she was not passionate enough to succeed as an entrepreneur. We casually stayed in touch. In 2005 I received a contact from another lady with an exciting opportunity in the jewelry category. She called me based on a reference she received from a neighborhood acquaintance, Jane. The meeting I had taken with Jane in 1993 had seemed futile after there was no positive result. And yet, I had left enough of an impression on her that she brought to me a new opportunity with a terrific upside.

Networking can take many forms. If you are truly passionate about your new business opportunity you will want to share the details with as many people as possible. Be careful! Learn to describe your novel product without providing details. Never provide details unless you receive a signed and dated Non-Disclosure Agreement (secrecy). Nevertheless, you have to paint a picture for your new network generated contacts that excites and creates a thirst to know more. Speak in broad terms, with enthusiasm but not sophistry, about the opportunity. Discuss the benefits society and consumers will derive from your product without giving away your inventions specific workings.

You can not network successfully without a positive outlook and demeanor. Sadly, many inventors feel abused by the process of launching a new business opportunity or product. They are convinced that they have the next really big thing. And, in actuality, they might have the next really big thing. However, the free flow of ideas thrashing about in the modern marketplace is not always perfectly efficient in choosing the winners and losers that we might deem appropriate in a perfect world.

Some good products never get to market, while lesser quality offerings often succeed. My experience over many years of working with inventors and entrepreneurs is that ideas and inventions are crucial, but their novelty can be trumped negatively by personal deficiencies. It can be hard to keep going when the trail seems to always end at a stop (NO!) sign. Keep networking! Keep pushing, positively! The next stranger you meet in a networking situation might be the missing link that will take you to success. If you do not keep trying to find, and get to know that key person, you will be short- changing your invention and your potential to realize success. And, you are missing the chance to make a new friend.