10) Keep Launching, Innovating and Growing

For more thoughts on launching a business during a recession, read entrepreneur and investor Andy Liu's excellent entry The Secret to Starting a Successful Company.



9) Maximize Your Time and Resources

Running and growing a successful business requires that numerous jobs be performed at once, and well.  The start of a new year provides an opportunity to take stock of your most precious commodity: your time. 

What are you best at?  Where do you add the most value? 

Learn how and when to delegate or outsource certain tasks and responsibilities.



8) Build and Improve Systems and Processes

Most successful businesses are successful because they have effective systems in place.  For example, if you walk into any McDonalds across the country, and order a Big Mac, you know exactly what to expect. 

As Michael Gerber points out in The E-Myth Revisited, it’s critical that entrepreneurs build businesses, rather building an ever-increasingly stressful and taxing J-O-B. 

Especially if you're interested in selling your business, you want to be able to walk away from the business and have it continue to run. 



7) Build and Nurture an In-House Email List

Whether you run a dental practice, a restaurant, a software company or a social networking website, chances are you could be getting more out of your website traffic. 

One way to improve the efficacy of your website is to offer an email newsletter via an online email submission form. 

Building and maintaining an email list could be one of the best ROI decisions you make in 2009.  Constant Contact and AWeber are two recommended resources for email communications. And, if you run a blog, you can set up blog-to-email newsletters using services like FeedBlitz.



6) Participate in Online Conversations

If you haven't already done so, start a blog, create an account at Twitter, sign up for Facebook, join LinkedIn... whatever your website or tactic of choice, get online and contribute to the conversations about your industry online. 

Issue press releases using PRWeb.  For an excellent tutorial in online marketing and PR, I recommend reading David Meerman Scott's The New Rules of Marketing and PR, as well as his blog Web Ink Now.



5) Meet More People (Out in the "Real" Offline World)

Join new networking groups to establish relationships and potential partnerships with people and firms in your area.  One great way to jumpstart your offline networking is to leverage MeetUp.com.  MeetUp.com has thousands of business networking groups.  If you don't see a group in your niche, you can even start your own.



4) Get a Life (Outside of Work)

It's critical that you take breaks from your business to enjoy life.  Make a resolution to enjoy physical as well as mental vacations from your business every once in a while.  This is not only good for your health and sanity and relationships, it's also good for business!  You'll gain relief the stresses of growing your business, and once you return, you'll be reinvigorated with a new perspective on your challenges and opportunities.



3) If It's Not Working, Ditch It

Let’s be honest.  Not every marketing strategy, fundraising strategy, partnership, or product line will be a winner.  If you tried something in 2008 and it wasn't working, you might want to admit that and move on.  Focus your energy and resources towards those priorities that will deliver the greatest return on investment (both in terms of time and money). 



2) Learn Something New, Again and Again

Make a commitment to continual education.  Stay updated on your industry while branching out into new areas of knowledge.  Read blogs, books, newspapers, and magazines. An easy way to incorporate learning into your every day routine is to listen to interviews, audiobooks and podcasts.  Summary.com is a great, convenient service for integrating business education into a busy schedule.



1) Continually Update Your Business Plan and “To Do” Lists

Update your business plan weekly, monthly and quarterly, depending on what’s changing in your industry and what you’ve accomplished in your business. 

Updating your plan can be a critical factor in both your ability to raise capital and your ability to properly execute on market opportunities.  The sections that typically require periodic updates include the milestones, competition, management team and financials sections.

To increase your personal and corporate productivity, take advantage of tools like Basecamp which allow you to track tasks and milestones online in a collaborative "wiki" environment. 

For a great read on productivity, we recommend The Ultimate Sales Machine by Chet Holmes.  As Chet recommends, focus on the daily tasks that are most critical to your growth, and keep the daily “to do” list brief (no more than 6 items). 

 

That's it!  I hope you found this list to be helpful for growing your business.  Here's wishing you a prosperous 2009! 

 

What is your New Year's resolution?

 

 

Happy Holidays!  In celebration of the season, and the entrepreneurial spirit, Growthink has created a video holiday card which you can view below:

 

There is an old expression, "The best way to not know what is happening in the world is to read the news."  

Never in my 20 years in the business and as a student of the financial markets has that statement been more true than right now.  To read most of the business and financial press these days is not only mostly an exercise in self-flagellation, but also gives the general public an incredibly distorted view of what is really happening in corporate America and in global finance.  

The amount of media coverage and prophesies of doom regarding the consequences of failure of the big three automakers would be comical if it wasn't so sad.  Manufacturing in America has been in decline for decades.  

I grew up in Central Massachusetts in the 1970's -- a few years after the closing of most of the major shoe factories in the area and their moving to Asia.  Like today, the tale was, "If we don't make shoes in America, what is going to happen to us?"   

Well, what happened to us and the area in the 1980s was the computer revolution, soon followed by the biotechnology and drug discovery revolutions, followed by another technology boom.  And all that time, the standard of living of the vast majority of the people in the area increased significantly (bigger homes, bigger cars, fancier vacations, etc.)

And the same will be true in Michigan no matter what happens to the automotive industry.  The industrious, hard-working people of the area will move on to new opportunities, new challenges, and new businesses.  Yes, the transition will be painful for some, but there won't be people starving in the streets.  And those with ambition and drive and work ethic will have, as they have always had in America, great opportunity to advance themselves and their families.

What is vastly and consistently under-reported is the massively net positive impact of technology and innovation on our standard of living, our quality of life, and the inter-connectedness of our world.  The productivity and quality of life improvements of the Information Age are so ubiquitous that they are taken for granted.  Word processing, email, and cellular phones have revolutionized the speed and efficiency of communications.  The Internet has created great fortunes for tens of thousands of entrepreneurs, employees, and investors that were lucky enough to be involved with these companies early, and to share in their growth.  

And what of the healthcare and drug discovery revolution?  Tens of thousands of families can share in my story here.  My mother was diagnosed with cancer more than 10 years ago.  If it wasn't for a wonder drug developed by Genentech just a few years previously, she would have had only months to live.  Instead, she is as healthy as ever and watching her grandchildren grow up.  So my family has won AND the shareholders of Genentech have done very, very well also.

Now, were some companies displaced by all of the technological and scientific advances described above?  Was the transition for some of the folks involved in those businesses difficult?  Yes it was, and we should be sensitive and empathetic to their challenges.  BUT -- and this is a big BUT -- the net of these advances has been indisputably a massive positive for America and the world.

A word to describe this system is capitalism.  A phrase to describe it is the entrepreneurial economy.   Never has capitalism and the entrepreneurial economy provided more opportunity for breakthroughs and wealth-building than they do right now.  Why?  Because NEVER in human history have there been as many scientists, as many engineers, and as many entrepreneurs, as there are right now.  Their stories should be featured on the front pages of the newspapers and talked about first on the evening news, because they are the ones that will be MAKING the kind of news and the kind of history that is worth writing about.

Growthink's Co-Founder Dave Lavinsky had the opportunity to speak with entrepreneurship guru Guy Kawasaki last week. Guy is the Managing Director of Garage Technology Ventures. His blog, "How To Change the World," is ranked among the world's top 100 blogs, and he is a successful author. In 2004, his book "The Art of the Start" was a BusinessWeek bestseller.

You can click here to listen to the entire interview or download the transcript: http://www.growthinkuniversity.com/public/226.cfm

In the interview, Guy spoke openly about the things to keep in mind when seeking venture capital, the words to avoid using in any conversation with a VC, and his new book, "Reality Check: The Irreverent Guide to Outsmarting, Outmanaging, and Outmarketing Your Competition." For those seeking capital, there’s also an interesting eHarmony.com vs. HotOrNot.com comparison to listen for.

Also, we encourage entrepreneurs to visit Guy's site Alltop.com, specifically these three sub-categories:

* Innovation
* Startups
* Venture Capital

To listen to the interview or view the transcript, visit this link:
http://www.growthinkuniversity.com/public/226.cfm

Far too many businesses fail to raise capital because they lack the proper documentation, or because their marketing and offering materials (business plans, private placement memorandum,  investor presentations) are unprofessional, unpersuasive, inadequate or incomplete.

If you are raising capital from multiple private ("angel") investors, a private placement memorandum (PPM) is a necessary part of your documentation.  Unfortunately, however, the vast majority of entrepreneurs and business owners are not familiar with details of preparing a private placement memorandum and marketing a private placement offering.  In too many instances, this lack of knowledge prevents them from raising necessary capital, or -- even worse -- it can create costly liability problems.

To assist entrepreneurs, we created this report - "The Top 10 Private Placement Memorandum Mistakes" - to help answer some of the most frequently asked questions. We hope the report will help prevent many of the common errors we see businesses make during the process of preparing a private placement memorandum, marketing it to investors, and raising (or failing to raise) capital from private investors.

Some common questions answered in the report include:
- When do you need a private placement memorandum to raise capital?
- What types of disclosures must be made in a PPM?
- How can you market a private offering, while retaining a Regulation D exemption?
- What types of intermediaries and "finders" can promote a private offering?
- What types of investors can participate in a private placement?
- What are your options for preparing a private placement memorandum?
- How often should you edit or update a PPM?

Click here to download the report: Private Placement Memorandum Mistakes

 

 

If you are seeking professional assistance with your PPM, Growthink offers professional private placement memorandum writing and consulting services.  

Recently, we at Growthink have received a flood of inquiries from entrepreneurs and business owners, asking for advice on how to proceed in these turbulent times.

The fact of the matter is that it is hard to reassure anyone, in light of recent economic circumstances, that there is an upside for business owners who are revising short/intermediate goals or looking for capital. Small, medium, and large companies alike are hesitant to put themselves out there in an unstable, cash-constrained environment.

Yet amidst the seeming cynicism, we at Growthink are still seeing extremely positive movement amongst funds – especially around our headquarters here in California – that have not only the moneys to invest, but also the eagerness for new, niche deals.

Historical patterns indicate that downturns, such as the one in which we presently find ourselves, result in some of the highest levels of new company formation.

What this proves is that entrepreneurs – no matter the ebb or flow of Wall Street and Main Street – are consistently creative people, who seize upon circumstances and leverage them to start and/or grow their businesses. They reflect the American Dream so often referred to in the latest Presidential campaign.

Growthink's mission and vision, as founded by such entrepreneurs, is to help aspiring peers build and set forth strategic plans to gain momentum in their marketplace; and to hopefully attract investment dollars from the right people at the right time.

With all of that said, it comes down to a few key characteristics of good deal-making: confidence, relationships, and perseverance. Just because the opportunities are out there, doesn't mean they are easy to find, qualify, negotiate, or transact.

Our expertise, in working with investors on a daily basis, renders us the ability to quickly identify an outreach strategy, to get to a "yes" or a "no"; and to conduct diligence with interested parties, speeding the time to a closed deal. What this enables our clients to do, rather than expending 100% of their efforts on raising capital, is to focus on the day-to-day operations of their businesses. Ultimately, this is where potential investors want to see busy executives utilizing their skills and capabilities.

At Growthink, we welcome the opportunity to speak with you about our investment banking and consulting services. Should you be interested in scheduling a call, please contact us with the best day, time, and way to reach you, and we will happily accommodate.

As a supplement to our consulting practice, we're pleased to announce the launch of Growthink University, our new membership club dedicated to teaching entrepreneurs and business owners how to raise capital for their businesses.

The club assembles 10 years of capital raising expertise and methodologies developed and refined by Growthink, and gives entrepreneurs an additional "Do-It-Yourself" option to perfect their business plans.

Growthink University covers topics including, but not limited to:

• The biggest mistakes that entrepreneurs make when trying to raise capital and how to avoid them.
• How to overcome the capital-raising challenges faced by first-time entrepreneurs.
• The difference between pre-and post-money valuations and making sure you don't get taken by investors.
• The ten biggest mistakes that companies make in their business plans.
• The winning ways to get meetings with investors -- and the most important things to know before sitting down at the table.
• What financial projections need to prove about your business

 

Go to Growthink University (http://www.growthinkuniversity.com) to learn more.

How many times have you heard someone say, "Don't put all your eggs in one basket"?

When it comes to any kind of investing, this is very good advice.

But, if this is the case, why don’t private equity investors diversify?

Unfortunately, most individual investors in private equity significantly under-diversify their portfolios -- investing in one or only a handful of companies.  By so doing, they both greatly increase their risk profile and greatly decrease their probabilities of seeing investment return.

Quite simply, investing in just one or a handful of private companies is way, way too risky for most investors and should be avoided at all costs.  

Rather, to leverage the dynamic returns in this sector - 20-year average returns of over 20.6% (Thomson Financial/DowJones) - the only prudent approach is via a portfolio of positions.  If done appropriately, this strategy is by far the best approach to leveraging the vast return potential of private equity without the principal risk normally endemic to this investment class.

How To Build a Portfolio - Problems With Current Solutions

Admittedly, a portfolio approach to private equity is much easier said than done for the individual investor.   The 3 traditional methods of so doing have drawbacks:

• Build a Portfolio One Company At A Time.   It is certainly possible to build a portfolio one company at a time.  Famed technology investors like Vinod Khosla and Ron Conway have taken this approach, with personal investment positions in literally dozens (if not more) of companies.  They, however, are both professional investors and techologists, and deeply networked into the core U.S. angel investor deal community - namely Silicon Valley.  And as they and other both admit in interviews, there are strong "hobbyist" and "philanthropic" aspects to their deal interests.  Vinod Khosla, in particular, has stated that he is motivated in his current investing as much by his desire to contribute to the development of eco-friendly technologies as he is to making money.

 

• Join an Angel Group.  Increasingly in recent years, there have sprung up angel investor networking groups around the country.  Most are centered in the main entrepreneurial hubs - Silicon Valley, Los Angeles, Boston, New York, Austin, Phoenix, Salt Lake - among other locales, and generally involve groups of individual investors coming together to review and diligence deals in a group review format.   These groups have a lot of benefits - including networking and providing a forum for both less sophisticated investors and entrepreneurs to learn the basic process of private company investing.  Like Mr. Conway and Mr. Khosla, many of the angels in these groups are retired (or semi-retired) executives and businesspeople who participate in them as much from a hobbyist perspective as from a money-making one.   Not surprisingly, their general investment track records are mediocre at best, and there is a high likelihoof of "negative selection bias," whereby the better companies and entrepreneurs are often loathe to approach them because of the inefficiencies of their investment processes and the somewhat "off" messaging and perspectives of many of their members.

 

• Become a Limited Partner Investor in a Venture Capital or Private Equity Fund.   While the biggest private equity and VC funds - the Blackstones and the Sequoias of the world - are, because of their size, off limits to all but the largest of individual investors ($50 million+), there are literally thousands of smaller venture capital and private equity funds that accept capital in smaller increments from individual investors.   Some of them have good track records of success (though relatively few in the current market), but as "portfolio plays" they have some core limitations:
  • All but the largest funds themselves only invest in a handful of deals.   It is unusual for the typical VC or private equity fund to do more than a few deals/year, and also have a tendency to concentrate their holdings in a single industry or stage of business.
  • Far more problematically, because of their traditional 2.5% (on average) management fee model, there has been a great propensity in recent years for the better funds to grow quite large.  It is unusual for a fund with quality managers with a track record of success to have less than $150 million under management.   This larger fund size, in turn, greatly defines the kinds of deals in which the fund can, for logistical purposes, invest.   It is unusual for a fund of this size to make an investment of less than $10 million into a single deal, thereby requiring them to invest mainly in later-stage technology and/or higher cash flowing middle market companies.   While there is nothing inherently wrong with these strategies, the problem is that in recent years there are have been literally more venture capital and private equity funds out there than actual operating companies in which to invest!   This reality has a) greatly driven down the number of deals that a typical fund has/can do in a particular year and is b) leading to a "dead man walking" fund phenomenon where funds sometimes go years without actually making investments.

 

 

So What To Do?

At Growthink, we are extremely passionate advocates for private equity investing - both because of its uniquely powerful return potential and because of the incredible social value of providing capital to fuel the entrepreneurial engine of both the American society and the global economy.  We strongly recommend, however, that anyone evaluating earlier-stage, private company deal opportunities do so only in the context of significant advisory and diligence assistance from accounting, legal, investment banking, IT services, and management consulting firms that specialize in working with startups, emerging companies, and small and medium-sized enterprises.  And while it is obvious to almost all that the big Wall Street banks know nothing about this sector (and in light of their recent travails, whether they know anything about anything at all related to investing), what is less obvious is how little - in their current construct - that private equity and venture capital firms both know and care about the space.

Quite simply, as a wise old horseman once quipped - bet on the jockeys not the horses.  And the jockeys in this brave new world of ours are those that every day advise and support the future superstar operating companies of the next private equity bull market.

As the investing month of October mercifully draws to a close, there is now a palpable sense of calm in the financial markets.  While the horrific damage – in both value and psychological terms – is very, very real, and may take years from which to recover, there has been a healthy mindset transition to a “what is to be done” thinking, feeling and acting.

Let there be no illusions, however, that things will ever again be as they once were.  To succeed, investors must let go of beliefs and strategies that are no longer serving them nor are applicable in these restructured markets.  

Foremost among these are:

1. That the Federal Reserve Can and Will Save Us

The glory days of the stock market responding puppet-like to monetary easing are gone, gone, gone.  With the federal fund rates now at an incredible 1%, the Fed no longer has any place lower to go.  Far more fundamentally, the last few weeks have been filled with “the emperor has no clothes” watershed moments for Mr. Bernanke and his fellow string-pullers.  Quite simply, both the equity and the debt markets no longer trust the Fed to save them like they once did.  The markets have spoken loudly that “trying to pay the left hand with the right hand” does not address in any manner the fundamental value challenges of the underlying assets.

2. That Wall Street Will Rise Again

For better or worse, the prestige, respect, and trust of Wall Street as the capital of the world’s financial markets has been shattered, probably beyond repair.  This has been a true perfect storm.  The most gilt-edge names on the Street have been forced to ask the government to bail them out (at great hypocrisy to core capitalistic, free enterprise principles), fail spectacularly, or seeing such precipitous drops in their securities’ values, call into question the basic viability of their business models.  

On some level October simply brought to a rushing head the technology, globalization, and regulatory trends that have been percolating for many years, and drove the “center” of the action out to the “edges.”   The amalgamation of those edges is the brave new financial world – hedge, sovereign wealth, and private equity funds, and China and the petro-dictatorships increasingly being the lenders of last resort.  Phew!

3. That Real Estate is (was or will be) The Answer

Like in all bubbles, once they are over it is quite easy to look back and say “How could we have been so foolish?”  While real estate is sometimes value-creating – as when it supports business-building objectives like research and development, better corporate productivity, and general efficiency gains via providing space to combine enterprise/business units – at its essence it is either a flat or naturally depreciating asset class. The fantasy that “the box” in which one resides, without capital improvement, will increase in value any real terms, on a sustained basis beyond population growth, has been by far the biggest cause of the current financial mess.  It will be years, if not decades (and maybe not in our lifetimes) that we will see meaningful, non-capital improvement-based investment return on the real estate asset class.



“We will either find a way, or make one.” - Hannibal

Really the only good thing about markets like these is that they force us to look inward, to distrust the hype, and to try to understand what the core drivers of capital appreciation really are.   

And since time immemorial, they can be summarized in one word:  Fundamentals.

• Before value can be traded, distributed, or re-distributed, first it needs to be created.
• Creating value can only be done via the fundamentals – namely designing and executing upon systems and technologies that allow more (and better) products and services to be created and consumed.
• NOTHING that has happened in this last two months alters this principle.  In fact, the credit and stock markets correction was in essence a mass realization that the fundamentals underlying the securities we were all holding were by no means what they were claimed to be.

At Growthink, our business is to two-fold:

1) To advise companies that are building fundamental value, and

2) To provide high-quality, pre-screened deal flow for investors and strategic buyers seeking to invest in fundamental value. 

Each year, we review hundreds of private company investment and acquisition opportunities and share those with the best management teams, market opportunities, and financial prospects to our network of investors.

To discuss current opportunities from within our network, please don't hesitate to contact us directly at (800) 260-6630.

In times of economic crisis, far too many business owners revert to “safe mode” as panic spreads. A "responsible" course of action typically includes one (or more) of the following:

• Tightening purse strings
• Laying off key employees
• Putting growth plans on the backburner

Doing anything different may be seen as “risky”.

But this conventional wisdom couldn't be more wrong.

An old adage states, "Only dead fish swim with the current," and that philosophy applies to your growing business as well.

Here we highlight the three biggest business mistakes made in tough economic times, and the implications of each:


Mistake #1: Shrinking your marketing budget

When there is less money to go around, budgets get cut. But it's a bad idea to take too many of those dollars away from marketing initiatives.  Actually, if you have the resources, now is the appropriate time to continue (or  expand) your marketing.  Why? Most of your competitors will cut their budgets, out of a “knee-jerk” reaction to the economic downturn -- leaving you a greater window of opportunity to get your message across to your market.  Business owners who “stick it out” during tough times will likely enjoy increased market share once the economy rebounds.


Mistake #2: Laying off key employees

Another, often more challenging decision, is whether to cut staff.  Whatever you do, don’t lay off your top talent. Great people are your most valuable resource -- hold onto them.   In fact, if you’re in a position to hire, now is a great time to hire, because so many other businesses will be shedding their top talent.  


Mistake #3: Putting growth plans on the backburner

Possibly the most damaging long-term effect of a troubled economic climate is when a business chooses to put its growth strategy on hold to "weather the storm."  If you cut back on new product development and innovation today, you will have fewer product offerings when the market bounces back.


Warren Buffet’s recent advice to investors is also great advice for entrepreneurs:

“Be fearful when others are greedy, and be greedy when others are fearful.”


At Growthink, we advise our clients to pursue their growth initiatives despite the downturn. There is no better time to grow than today.