Perfecting Your Plan to Investor Satisfaction

I am starting a new retail business that I expect to one day take across the country. I have two questions. First, should I raise money to start several stores to have an edge in venture fundraising or should I start with just one store? Second, a number of big advertising firms have said they want to work for my company. They all agree that the concept is hot. Will these firms make us more viable to investors? Should I sign them up now?

You don't have to look back too far for examples of promising companies that sprinted to failure. During the dot.com era, too many entrepreneurs (with sign-off from their boards of directors) embarked on national roll outs before thoroughly testing the viability of their ideas. In their eagerness to launch fast and get ahead of the competition, they multiplied their losses, lost momentum and left the race in early defeat.

So what is 'first things first' for your organization? If you are planning to franchise your retail operation (like Domino's Pizza) or own all your stores (Starbucks), you first need to perfect your plan. A single store launch is a more manageable way for you to 'test and tweak' every aspect of your business strategy. You should determine what product mix works best, what promotions bring customers into the store, how to discount slow moving products; etc.

You also need to measure the profitability of your store against industry competitors. How do your profit margins compare to other successful retail chains? How fast will it take to get new stores to cash flow break even? Compare your numbers to publicly traded retail chains. If your numbers are equal to, or better than large chain results, then you are very well positioned to raise money for a national roll out.

Here are some other tortoise-mentality benefits:

• The amount of money you have to raise for one store is certainly less than the number for multiple stores. Presumably it will take you less time to raise the smaller number so you can get in business at an earlier date.
• The smaller funding sum allows you to keep a larger ownership share of your business.
• A smaller store count greatly reduces your personal liability if you agree to sign personal guarantees to obtain retail space. While I discourage all entrepreneurs from signing these documents, most first-time entrepreneurs get pressured into believing it is the only way to get their business started. Be patient. Once entrepreneurs receive venture funding, landlords lighten up on personal guarantees.

Now here are a few thoughts about hiring big-name advertising firms and marketing gurus. It is understandable that you enjoy the favorable feedback. Yet, let's qualify it a bit. What advertising firm is ever going to say to a potential client 'we don't like your idea?'

As CEO of your business, it's your job to buy results, not names. Start by selecting local promotion experts who know how to attract customers fast. Building store awareness is not enough. You need sales to generate cash flow and appeal to investors. You don't want to make the dot.com mistake of buying expensive, big concept marketing campaigns that were better suited to more established companies.

Simply stated, you can get ahead by not getting ahead of yourself. Hire advisors who can help you solve today's needs.

Come back next week for innovative tips on generating local sales through Internet search marketing.

TakeCommand Action Step

Pay attention to the branding of your store concept and your merchandize. Angel investors and the small but elite group of venture funds that back consumer-oriented retail deals set a high bar for branding sophistication. The message of your brand, often referred to as 'brand equity,' will be considered a key financial asset of your business endeavor. Give it the attention it deserves. You can do it!

Do you need time-saving tips to help fund and grow your business?Ask Susan How!

«  Back to Great Business Advice

Do you need great business advice?