by: Geoff Ficke

Adopt a Pre-Sell Strategy to Drive Interest in Your Project Before Seeking to Attract Investment Funding

Recently I met with a prospective client who presented my Consumer Product Marketing and Branding Consulting firm with an overview of his project, its development status and needs. The opportunity seemed to have legs until we reached the point in the discussion where funding took center stage. I listened as this entrepreneur, with great passion and skill, pitched his reasoning and support data for a funding round that he felt necessary to move ahead.

I took the “devil’s advocate” approach that any project faces when seeking investment from angels, investors, venture capital or partners. My questions were the standard fare that I have heard professional investment groups pose time and time again. As the cross examination continued the passionate, confident entrepreneur began to wither.

The simplest question that I asked, and one that is always of paramount interest to investors: “Do you have Purchase Orders”, drew a telling lack of response. This very smart presenter had never considered the question and the possibilities that a positive response would have for his proposed enterprise.

Purchase Orders from target customers, stores, distributors and wholesalers indicate what we call a “Proof of Product Life”. Entrepreneurs are always excited about their product or service. They have reams of documentation that they   include in their Business Plan to attempt to impress investors with the promise they offer. Focus Groups results are nice. Orders and successful test markets, no matter how small are much more valuable.

How can an inventor, entrepreneur or small business generate sales orders before receiving an adequate funding round? The prospective client I was meeting for the first time asked exactly this question. I then described several Bootstrapping and Pre-Sell strategies that he had never considered.

We often utilize a Bootstrapping Pre-Sell plan for clients. This is done without going to the expense of an inventory build out. We have a host of vendors that work with us to create Production Quality product prototypes, CAD Art, Release Packets, Point-of-Purchase display, Sales Collateral, Web-Sites, Attorney’s, Social Media, Video Production and much more that we use to generate Purchase Orders from Trade Shows, EXPO’s, showrooms and on-line sales. These vendors know that once sales traction is achieved they will have a long term relationship with a happy new client. They are more than willing to hand craft a display or sign unit carton or brochure for minimal cost.

Recently we attended a large Trade Show in Hong Kong with a client to launch a new Skin Care regimen. We attended with four dozen Production Quality prototype samples fully dressed with graphic packaging. Our display vendor hand cut three Point-of-Purchase displays. The booth display visuals, video loop, Sales Collateral, Product Folios and Distributor Contracts were one-off produced just for the show. The product performance demonstration was spectacular and the stand was swamped with interested Asian distributors. We have concluded deals for exclusive territory sales of the line with nine firms. Pre-Selling works!

With these agreements and the initial Purchase Orders they have generated we are organizing International Bank Letters of Credit to fund the initial full inventory build and provide working capital. Investors are now keen to review the opportunity and, with this type of “Product Proof of Life” successfully achieved, they have less leverage in negotiations.

A successful Pre-Sell campaign in the American market can lead to securing investment, but also Partnering, Licensing, Receivable Finance or Factoring options for funding operations and growth. We have utilized Factoring for many years for our own businesses and clients. Sales orders open doors.

Next month we will attend a Jewelry trade show and a Men’s Fashion trade show with client products that will be launched utilizing a Bootstrap Pre-Sell campaign. More prospective entrepreneurs should utilize this strategy. The process involved in successfully winning a funding round is beyond the pale for most startups. Meeting an investor with a plump order book creates an entirely different leveling of the playing field. Take advantage of this inexpensive, simpler strategy to launch your product.

by: Geoff Ficke

10 Items That Will Insure Your Business Plan Is “Not” Considered or Seriously Read by Investors 

I read business plans as a major part of my Consumer Product and Marketing Consulting business. I act as project consultant for several Venture capital firms. I am a Fellow and lecture at the Miami University, Farmer Business School Center for Entrepreneurial Studies. I teach students to write Business Plans. My consulting duties include preparing Business Plans for clients as they seek funding opportunities. 

There is no definitive, 100% detailed methodology to construct these crucial documents. The internet, book stores and home study courses are full of turnkey templates that claim to lead to successful outcomes for projects. They do not.

In its simplest form a Business Plan is a document that quantifies (numbers, costs, financials), qualifies (due diligence, research) and narrates (tells an exciting opportunity story) a series of assumptions about the project on offer. The plans submitted for my consideration invariably do not meet the level of professionalism required to be considered for funding. Even if the product or project possesses real utility and commercial value, if the document is faulty it will not be fully read or considered. 

There are many items that investors consider when reviewing a new Business Plan submission. Often the first read is handled by a junior partner whose only duty is to cull the herd, markup and forward only plans that meet firm standards. This means that about 98% of all newly presented Business Plans are never read or even touched by key decision makers. You do not want to be part of the culled herd. 

Here are 10 items that are among the most crucial elements to avoid in preparing a Business Plan that will merit a thorough read, markup and full consideration by your investing targets.

1. Do not prepare a plan by following a standard download template. When I am approached by an Entrepreneur with a Business Plan I always asked if they prepared the plan and if they have ever written a Business Plan before. If the answer is yes I prepared the document and no I have never done one before I can rest assured that a form template has been followed.

A quick scan of such a document always indicates a fill-in-the-blanks approach. This screams lack of due diligence, thus lack of commitment. If you want the proper consideration your work deserves customize the plan and present it in professional form.

2.  The Executive Summary MUST present a vivid, compelling, complete overview of the project. The first few pages of a John LaCarre or Vince Flynn novel grip the reader. The opening scenes in a Jerry Bruckheimer movie thriller absorb the viewer. Similarly, the Executive Summary is the window to the rest of the plan. If it excites the analyst it will prompt them to read on with relish.

3.  Do not guess at financial elements. For a Consumer Product plan, which is my area of expertise, the most important number to nail is the dead net Cost of Goods to produce and land a product. Every other income and expense line item in the Financial Statement, Balance Sheet and Cash Flow (3 year NOT 5year) projections will be false if the true cost basis is not fully vetted. 

4. If you cannot provide a management team, fully organized and committed, the project will go nowhere. We review too many plans that are presented by an entrepreneur who has no management experience in the space they are seeking to enter. No investor will commit funds to a project that is not staffed by experienced managers. People count as much as a product or concept.

5. What is the Unique Selling Proposition that your product or service will provide to retail stores, international distributors and consumers? In a cluttered, chaotic marketplace how will your offering cut through the maze and create demand? You must be able to detail and obvious point(s) of difference between your product and the raft of competitors you will face off against. You do not have to reinvent the wheel, but you must be able to improve or embellish the wheel.

6. Avoid bombastic pronouncements. This always results in a quick “deep 6”. Whenever we see outlandish claims we recoil. Whether in the financial projections, product performance claims or share of market detailed if the project is not supported with realistic due diligence it will go nowhere.

7. You are not fundable if your project does not provide a Return on Investment of a minimum of 30% per annum beginning between month 24 and 36 of full- operational activity.

8. You do not have a first mover advantage, but think you have a better mousetrap. Recently we reviewed a Skin Care and Cosmetic project. The owner claimed that his first mover advantage was a new ingredient story. He could not detail a product feature or benefit that was not already being addressed in the marketplace. The product will have to be the first to offer a niche application in its space.

9. Never confuse a large document with a thorough plan. A great Business Plan, unless there is a novel divergent technology or science involved, rarely exceeds 25 pages. Add as many supporting exhibits, competitive analysis, research documents, studies, etc. as possible. The main body of the document must be focused like a laser on providing answers to the many questions that investors always present. Keep it tight and moving.

10. If your Business Plan is built on false assumptions it will not withstand scrutiny. Remember you must be able to fully support every assumption you make about Cost of Goods, Marketing Strategy, Sales Models, Competition, Expenses, Financial projections, etc. This requires research and due diligence that will be apparent, or not, to the potential investor.

A great Executive Summary will contain referrals to almost all of the elements detailed in this article. It will be pithy, interesting, grounded and written with professional zeal, not bombast. If this two-page introduction is crafted properly your Business Plan will have a real opportunity to receive a serious read from your real target audience: Venture Capital, Investment Bankers, Strategic Alliance partners and Licensees.

by: Geoff Ficke

Unique Small Businesses Have Become Highly Desirable to Multi-National Companies 

For over 50 years Estee Lauder has been the pre-eminent luxury Cosmetic, Fragrance and Skin Care Company in the Beauty Product world. Since the founding of the firm by Mrs. Lauder in the early 1950’s, the Company has prospered by constantly developing line extensions and new categories that it Markets to specific demographic targets. Clinique (Skin Care), Clinique for Men and Aramis (Mens Skin Care), Prescriptives (Problem Skin Care) and Origins (Bath & Body Care), along with numerous Perfume Brands made this Marketing juggernaut the envy of competitors. 

Estee Lauder had developed, quite rightly, a reputation for having the magic touch. Then a funny thing happened. The Company hit a development wall. The men’s lines sales leveled. Prescriptives suffered the indignity of being sold on QVC. New brands stopped coming or experiencing startling growth as enjoyed in the past. The Company then had an epiphany: it was faster, more economical and easier to buy interesting, small entrepreneurial brands and integrate them into Estee Lauder’s vaunted Logistic and Marketing systems than to develop brands in-house. 

La Mer, Jane, Bobbi Brown, Mac, Smash Box, Aveda, and numerous Fragrance licenses have been added in recent years to the Estee Lauder stable of brands. Theses Brand purchases and strategic alliances have rapidly extended the Company’s reach into many new areas of distribution. 

La Mer is an interesting example of how a small brand can have a unique importance to a powerhouse like Estee Lauder. The La Mer Skin Care line enjoyed very limited distribution in a few exclusive department stores for many years. The sea algae-based product had a cult following. The sales of La Mer were much smaller than the reported price that Estee Lauder paid for the line. Why was such a small minnow of interest to such a mammoth multi-national Company and at such a steep purchase price multiple to actual sales?

Large Companies must feed the monster and the monster is an insatiable distribution chain. Estee Lauder is sold in over 120 countries around the globe and at about 50,000 outlets. The initial pipeline production order to fill distribution requirements covered the purchase price paid for a brand like La Mer several times over. This model is constantly being repeated. 

Proctor & Gamble, the Cincinnati-based Consumer Product giant has undergone a similar re-invention. For most of the 20^th century the Company was renowned for in-house creativity and the Brand Management system that the Company pioneered. In the 1990’s P&G hit a wall. Growth flattened. A number of competitors began to take market share in important categories. 

A new management team was brought in to P&G and this group decided that new direction was essential for kick starting growth. They announced that a target of 40% of new products that P&G would launch in the next decade would be discovered and purchased from outside sources. This was a shock to the hide-bound corporate culture of staid Proctor & Gamble. But it worked. Today over 50% of new product introductions have resulted from acquisitions. IAMS Pet Foods, Spin Brush Toothbrushes and numerous Cosmetic Brands such as Max Factor, Cover Girl, Hugo Boss Fragrances and Giorgio Perfumes have led the Company’s resurgence. 

Jones Apparel Group (Shoes, Clothing), Nestle (Food, Drinks) Unilever (Personal Care), Phillips (Small Electrics), Hasbro (Toys, Games), General Mills (Foods), Pepsi-Cola (Drinks, Snack Foods), Shiseido (Cosmetics), Electronic Arts (Video Games) and Rubbermaid (House Wares) are only a few of the multi-national Companies that are aggressively searching the marketplace for the next great addition to their line-up. 

What is required of a Small Business, Inventor or Entrepreneur to be a target for their attention? Your product must have an easily recognizable niche. It should have Features and Benefits that offer separation from the competition. It must be perfected. An idea or unproven technology is just a glimmer, it is not marketable unless wrapped in due diligence and supported with performance data.

The hardest hurdle to overcome is to get your product in front of decision makers from acquisition hungry companies. We do this in a number of ways for our clients. Attending industry specific trade shows are an excellent vehicle to receive exposure. Test markets and focus groups are invaluable for creating proof of product concept. Customize a Business Plan that is built on assumptions that are accompanied with hard data that is quantified, qualified and well narrated.

Remember, if it was easy everybody would be successfully doing it. Do not take shortcuts. Be passionate about your product or service. Make a great first impression. Estee Lauder started by making creams in her kitchen. Now the great Company that she founded and built is looking for products that offer a performance advantage to her Companies customers. So are many other multi-national enterprises. You must be in play in order to be discovered.

by: Geoff Ficke

by: Geoff Ficke

I am often asked if these are good times for new enterprise opportunities? Should I wait? Is the economy down? Is it a good funding market? Is competition too intense? These, and dozens more stated concerns are nothing more than self-imposed hurdles to movement.

Now is the best time in history to start a business, launch a product or offer a cutting edge new service. More people than ever before have jobs. More people than ever before own homes. More business incorporations are established each year than the previous year. Global prosperity is galloping along, with formerly poor countries like China, India and Malaysia, seeing spectacular growth (potential new customers for new products and services) in the middle class.

Much of what I just stated might seem at odds with the media presentation of a struggling economy. The mass media knows that bad news sells. It is in their interest to report the problems of General Motors, layoffs, health care benefit cuts and downsizing while ignoring the spectacular growth of jobs and small business more than making up for the fallen old lions of industry. Mass media has a goal of keeping readers on edge; uncertain about the future and discontented. Pay no heed, do your own research on current market conditions if this is a concern.

The opportunity to successfully start a small business, market an invention or new service is always dependent solely on the value, novelty and benefits of new offering. If there is an under-served market segment and you can identify a niche in a large market category, the time is always right to move ahead.

For many years I called on large national department store chains. Buyers always had a reason why now was not a good time to place an order. “Easter is coming”. “We have inventory next month”. “Let’s see how next weeks sale goes”. Always excuses. Meanwhile inventory on hot items was low and sales would be lost. It is the same with inventing excuses to delay an entrepreneurial opportunity.

My advice to students, clients and inventors is simply this: “Time is never an entrepreneurs friend”. I saw an entrepreneur lose a multi-million dollar contract purchase with Home Shopping Network by three days. Initial hesitation, self-imposed hurdles, lack of focus and mistakes in the development process caused needless and damning delays. HSN was fed up and placed the order with an inferior but better organized competitor. The loser of this race never recovered. The winner does over $20 million annual turnover with HSN and has built a strong international business. It is maddening to me how often delay equals opportunity lost.

Do not delay movement to commercialize an opportunity based on short- term business conditions, perceived or real. For example, interest rates have been historically low for the last several years. Recently they have begun to inch up. How high will they go? What effect might the rise have on ultimate success for my venture? No one really knows the exact answer. We only can state with certainty that rates go up, rates go down. Look at the historic averages and anticipate that these averages will hold true to form. Base your financial assumptions on the mean averages, but do not delay movement on a great idea because of uncertainty about one element. Remember; if rates go up, they rise for your competition as well.

Also, do not listen to negative nannies nit picking your project. If you have done an effective job of due-diligence, can identify your market niche as being under-served and can quantify an excellent financial proposition you probably have the makings of a successful business. You will certainly know more than the critics. It is easier for people to be negative than to encourage your interest in taking a risk. Risk equates to possible failure for most people. You will be changing your life and most people instinctively fear change.

I always encourage seeking advice from friends, family, valued experts and independent counselors. It is important to know as much about your projects strengths and weaknesses as possible before committing your energy and resources. I also know that successful entrepreneurs almost always have an inner compass which sorts through the mass of concerns, objections and negatives they receive. It is always easier to say no, not move forward, than to commit and push ahead.

America is teeming with dreamers and doer’s, all hoping to succeed in a cluttered, very aggressive marketplace. Delay is never a wise course of non-action if your project has real legs and commercial viability. Somebody else is potentially working on a directly competitive product. You can not afford to lose a first to market advantage because of dallying and uncertainty about entering the market at the optimum time. There is never a perfect time to start. There is only now, and now is plenty good enough.

by: Geoff Ficke

The American economic system of capitalism is unique in the industrialized world. Forms of capitalism exist in many countries, and the one general statement that applies to its usage is that capitalist countries are always more prosperous than non-capitalist states. That being stated, why is American capitalism so advanced, successful, admired and feared?

We all know that America offers the most dynamic advanced economy in the world. Brands such as Coca-Cola, McDonalds, Estee Lauder, IBM, MicroSoft, Kentucky Fried Chicken and hundreds more are badges of the amazing success of the American model in achieving worldwide prominence. Each of these enterprises were born of entrepreneurial roots, grown with care, and gracefully matured into powerful engines of profit. Other countries can proudly point to their own corporate successes (Finland and Nokia, France and Schlumberger, Chanel, Ireland and Waterford, etc.) No country, however, sports the depth and variety of colossal world brands as the United States.

So what accounts for the amazing growth and breadth of successful American enterprises in a very competitive global marketplace? And, what makes the American field of play so different and compelling as a job, profit and opportunity generator? There are many reasons that can explain parts of the template for success. However, an alpha element is that the United States system does not permanently cripple an entrepreneur who has experienced failure, even several failures.

Many successful entrepreneurs, while enjoying the fruits of their successful efforts, have also suffered the agony of failure. The American model does not insure the right to succeed, jut the right to try. This is not true in most other capitalist countries. Failure is not an option. Barriers to entry are high. Taxes, fees, regulations and restrictive covenants are almost universally more difficult than in America.

The opportunity to fail is not something that any entrepreneur initially considers as an asset. However, it must be considered that most new enterprises do not succeed. Business closings and bankruptcy is very high for new enterprises. Many entrepreneurs, having suffered the disappointment of failure, simply move on and look for a regular source of income. Real entrepreneurs will not give up. They have the genetic makeup necessary to succeed as an entrepreneur. They will keep trying.

I can attest to the difficulty of being an entrepreneur in other capitalist countries. I have started businesses in England, France, Sweden and Spain. When seeking to organize in these capitalist (to a varying degree) countries I was amazed at how difficult it was to satisfy the state. Upon reflection, exploring and experiencing the vagaries of these bureaucracies, I discovered a blunt answer for the very high real costs to enter a new business: these states use extreme barriers to minimize the chance for failure.

Fortunately it is just the opposite here in America. Small business incubators, regional business development centers, university entrepreneurial programs and mentoring organizations encourage the attempt to create opportunity for new enterprises. The result is a wildly vigorous stream of new product, invention, service and enterprise seeking to capitalize on the American economy’s vigor and need for constant sources of growth. All of this occurs while the risk of failure remains daunting for new start-ups.

The growth of the American economy can be attributed to the constant stream of small companies supplying ingenuity, new products and rapidly growing sales and income streams. Virtually no new jobs have been added in Europe over the past two decades. In 2005, America generated over two million new jobs alone.

Growth of the United States economy is not being driven by the mature multi-national companies associated with prosperity in the past. IBM, GE, General Motors, Delta, Delphi, and dozens of other formerly powerhouse firms are downsizing, firing employees and trying to re-invigorate their static business models. The growth of thousands of small businesses entering this vibrant marketplace is the real generator of growth, jobs and profits. The reality that many fail and a few succeed is the strength of the system.

The high barriers to entry applied by so many of our capitalist competitors minimizes their ability to be creative, innovate and take appropriate risk/reward decisions in this brutally competitive global market. This attempt to insure success is actually the death knell of real opportunity.

by: Geoff Ficke

The American economy is the growth engine of the industrial world and will continue to be so, as long a steady stream of innovative, divergent products is successfully created. The history of capitalism is replete with cycles of unique, needed product and technology advances that exponentially expand the economic base and evolve into completely new industry categories. No country comes close to America in dynamism, creativity and energy in pursuing cutting edge new growth opportunities.

Why is this so? Many other countries have a much longer historical pedigree with features of freedom and capitalism as significant foundations of their heritage. Old Europe has been trading, exploring and investing for centuries before Jamestown and Plymouth were settled. The Dutch, British, Venice, Swiss and Spanish have wondrous commercial histories. The Japanese and Chinese were commercial powerhouses before the Europeans. And yet, none has left a commercial footprint like the United States in just over two centuries of enterprise.

Why? The answer is the constant curiosity, drive and ingenuity inherent in America’s unique form of capitalism. This is most clearly reflected in the risk/reward benefits gleaned from an almost endless stream of product inventions. Hugely significant new industries are in existence solely because of the divergent nature of the product, technology or service created.

A divergent product or service is one that did not exist before its invention. The wheel was a divergent product. The radio was a divergent product, as was the airplane. Computers, lasers, McDonalds franchises and hearing aids are examples of products that were divergent and first to market movers.

Today we take the radio for granted. However, when invented it was an amazing device, truly divergent, revolutionary, a breakthrough. Many refinements, improvements, and new features have been added to the original radio apparatus. Radios have been enhanced with clocks, alarms, lights, FM, placed in cars, portable and satellite delivery. These new benefits and performance embellishments are dependent on the original ground breaking radio product platform and are convergent products. All add to the usability of the radio and generate income, but, without the original invention, they would be of little consequence. The radio was, and is, the home run divergent product.

The result of the continual creation of divergent products and technologies is to continually fertilize and grow these industry segments with ancillary convergent business opportunities. The computer begets the software. The software attracts bugs and security services are required. New retail categories are required to sell the computers, software, security and accessories. Service companies evolve. A whole new industry has been developed on the shoulders of the original divergent invention.

Critics of the American capitalist model rarely consider the huge benefits modern society enjoys from the creation of these divergent technologies. One elemental example: the light bulb. Light bulbs provide safety and the opportunity for people everywhere to more productively utilize evening hours. Light bulbs are manufactured in dozens of countries, providing jobs and sustenance. Bulbs are made for innumerable uses. They must be transported, warehoused, marketed and sold. The result is a complete supply chain benefiting every human utilizing this simple, but amazing divergent product. This is a fantastic benefit provided by capitalism and divergent technologies.

When Thomas Edison invented the light bulb he had no real knowledge of the potential universality of the product at that time. There was as yet no power grid system available to deliver the electricity required to light the bulb. He was seeking to solve a problem, answer a need and make a profit. He could have failed, and he did so many times. However, he kept trying and his effort was rewarded.

American capitalism rewards effort, drive and, of course, success. Uniquely, in America, failure is allowed. Failure is not regarded as finality. Americans are encouraged to try, and if they fall down, get up and try again. Almost every other society punishes failure with a different outcome, a very negative outcome. The result is a lack of creative risk taking, a lack of dynamism.

Virtually no net job growth has been created in Europe in the last 20 years. European states place huge barriers in the way of starting a business, commercializing a product or organizing capital. The successful Japanese model of the 1970’s and 1980’s has declined precipitously, and was largely based on manufacturing clones of convergent products created in America.

Korea, India and China are currently under political and media scrutiny for the imbalances they enjoy in trading with the United States. However, name a single divergent technology, product or service proprietary to any of these countries. There are none. They are formidable competitors for resources, but they are not inventors and will not, at least yet, be competitive in creativity. Low cost, low margin production, product duplication and industrial theft are not long term strategies the United States should fear.

Rigid socialist, centrally planned economies by their very nature can not be creative. The free flowing nature of American capitalism is a blessing for this country, and the few other countries (Hong Kong, Canada, Singapore) willing to let humans do what humans do best: enjoy freedom and seek personal opportunity. Much like the food chain, where the ox-pecker lives off the ox, we need divergent product advances to feed the desire of convergent enterprises for fresh growth opportunities. No country yet approaches America in industry pioneering, nurturing and growth.