I strongly recommend building your revenue projections from the bottom up.
By this I mean estimating unit volumes and unit price to arrive at total sales by product/service line.
Forecasting at this grass roots level will enable you to perform rapid sanity checks on your assumptions against the market as a whole and against competitors.
Forecasting in this way also enables you to compute more accurately the resources and people required to deliver those sales so that you can make cost assumptions (operating expenses, capital expenditures, working capital needs, etc.).
If you are analyzing an investment opportunity, you should take the same approach. Analyze the company's projected units, unit prices and total sales and the trends relative to the history of the company and the market.
Cheers
Tom
Sunday, May 25, 2008
Saturday, May 17, 2008
Sustaining Competitive Advantage
A few key tips to build and sustain competitive advantage:
- Move early
- Build unique, protected IP
- Differentiate and support it with continual innovation
- Capture market share quickly
- Keep your costs low - the low cost producer can survive in down markets
- Invest in R&D to stay ahead of the curve
- Stay very close to your customers and their needs!
Cheers
Tom
Thursday, May 8, 2008
Should you get an NDA from prospective investors?
You should certainly try but many investors (particularly VC’s) won’t give them. It partly limits their ability to do business and there is a major administration burden - some VC’s see thousands of business plans per year. That is a lot of NDA’s to keep track of and takes thousands of hours of time to read them, sign them, file them, track them, etc.
To access investors with millions of dollars, you will have to take some risks and that NDA or no-NDA decision will probably be an early judgement call for you.
With big name investors, your ideas are generally safe. Its in the VC’s best interests not to abuse the info they get - if a firm got a reputation for stealing ideas, they probably wouldn’t have many entrepreneurs knocking on their door.
With private individuals and lesser known investors, I’d try hard to get the NDA.
One interesting point is that while many investors won’t sign, once they are invested in the company, they will want you to have a policy of obtaining an NDA from other outside parties!!
So you could try to turn that around on them - “if you invested in our business, surely you’d want confidence that our info has not been provided to large numbers of others without any protection? So its a double standard not to sign ours now.”
Hopefully this is some useful guidance for you and gives you some material to have an intelligent discussion with investors about NDA’s when you are trying to persuade them to sign!
Cheers
Tom
To access investors with millions of dollars, you will have to take some risks and that NDA or no-NDA decision will probably be an early judgement call for you.
With big name investors, your ideas are generally safe. Its in the VC’s best interests not to abuse the info they get - if a firm got a reputation for stealing ideas, they probably wouldn’t have many entrepreneurs knocking on their door.
With private individuals and lesser known investors, I’d try hard to get the NDA.
One interesting point is that while many investors won’t sign, once they are invested in the company, they will want you to have a policy of obtaining an NDA from other outside parties!!
So you could try to turn that around on them - “if you invested in our business, surely you’d want confidence that our info has not been provided to large numbers of others without any protection? So its a double standard not to sign ours now.”
Hopefully this is some useful guidance for you and gives you some material to have an intelligent discussion with investors about NDA’s when you are trying to persuade them to sign!
Cheers
Tom
Friday, May 2, 2008
Cell Phone Wrist-Watches
Dick Tracy has come to life.
These devices have been around for a while and they are pretty cool.
They range from very expensive (Tag Heuer) designer versions costing thousands of dollars to cheaper versions out of China (AUD200 or so).
You put your cell phone chip in the watch and off you go. They come with blue tooth so you can have a wireless ear piece.
I am a ‘less is more’ person and if I can carry one less device, its definitely of interest.
Definitely worth considering, even if you just use when you are out for a walk, run, bike ride or something where you just don’t want to lug around even the smallest lightest mobile phone.
What’s your experience or view on these devices?
PS. The number of makers producing these devices now just further shows how easy things are to copy and how hard it is to sustain a competitve advantage!
These devices have been around for a while and they are pretty cool.
They range from very expensive (Tag Heuer) designer versions costing thousands of dollars to cheaper versions out of China (AUD200 or so).
You put your cell phone chip in the watch and off you go. They come with blue tooth so you can have a wireless ear piece.
I am a ‘less is more’ person and if I can carry one less device, its definitely of interest.
Definitely worth considering, even if you just use when you are out for a walk, run, bike ride or something where you just don’t want to lug around even the smallest lightest mobile phone.
What’s your experience or view on these devices?
PS. The number of makers producing these devices now just further shows how easy things are to copy and how hard it is to sustain a competitve advantage!
How to sustain competive advantage
Move early
Build unique, protected IP
Differentiate and support it with continual innovation '
Capture market share quickly
Keep your costs low - the low cost producer can survive in down markets
Invest in R&D to stay ahead of the curve
Stay very close to your customers and their needs
Build unique, protected IP
Differentiate and support it with continual innovation '
Capture market share quickly
Keep your costs low - the low cost producer can survive in down markets
Invest in R&D to stay ahead of the curve
Stay very close to your customers and their needs
Turning your website in a selling machine
Its very worth while to undertake Seach Engine Optimization and some search engine marketing.
The best way is to get some help - hopefully one of your own personal contacts can recommend on that has had great results.
Here is one in Australia but with the web, it does not really matter where you are!
I am going to use Chris soon because he has done amazing work with a client of mine. Chris Thomas , Search Engine Optimisation / Search Engine Marketing reseo - we'll get you there. www.reseo.com Studio 2a, 108 Moor St p: +61 3 9415 2383 Fitzroy VIC, 3065 f: +61 3 9415 2399 Australia Ethical growth through ethical work. e: christ@reseo.com Reseo Blog: The light and dark side of SEO - a must read for the absolute cutting edge in online traffic building techniques, in easy to understand language http://blogs.reseo.com
The best way is to get some help - hopefully one of your own personal contacts can recommend on that has had great results.
Here is one in Australia but with the web, it does not really matter where you are!
I am going to use Chris soon because he has done amazing work with a client of mine. Chris Thomas , Search Engine Optimisation / Search Engine Marketing reseo - we'll get you there. www.reseo.com Studio 2a, 108 Moor St p: +61 3 9415 2383 Fitzroy VIC, 3065 f: +61 3 9415 2399 Australia Ethical growth through ethical work. e: christ@reseo.com Reseo Blog: The light and dark side of SEO - a must read for the absolute cutting edge in online traffic building techniques, in easy to understand language http://blogs.reseo.com
Best ways to fund your start up company
Start ups must have capital from the founder(s).
The amount varies but it needs to be a significant portion of the founder(s) personal networth.
That's called hurt money and if the founder doesn't believe in it enough to bet the farm, no one else will back it.
Angel Camps - probably worth while. Anywhere you can go to learn from other people who have done it before will help you.
Bootstrapping is a great way to make a start. I know an entrepreneur here in Australia who did consulting for many years to fund the development of his software product. He also utilized government grants very well.
Returns - VC's and angels that I know want 5 to 10 times there money back when the exit event takes place, usually 3 to 7 years after the initial investment.
That may sound like a lot but returns are all tied to risk levels and start ups have very high risk.
How much - take as much as you can get. It usually takes several times more money and several times longer than you think to build a business.
How big - VC's and angels want to back businesses that can generate $50m to $100m in turnover (or more). That means you need a very large addressable market.
Its rare to get more than 20% market share and its rare to grow share by more than a few percent per year.
Generally you need a market of $500m but many will tell you its got to be a potential market of $1Bn+.
See my blog - tomthemoneyman.wordpress.com - for more ideas on business and investment.
Read the book Enterprise and Venture Capital by Christopher Golis. I am currently co-authoring the 5th Edition of this book. Cheers Tom
The amount varies but it needs to be a significant portion of the founder(s) personal networth.
That's called hurt money and if the founder doesn't believe in it enough to bet the farm, no one else will back it.
Angel Camps - probably worth while. Anywhere you can go to learn from other people who have done it before will help you.
Bootstrapping is a great way to make a start. I know an entrepreneur here in Australia who did consulting for many years to fund the development of his software product. He also utilized government grants very well.
Returns - VC's and angels that I know want 5 to 10 times there money back when the exit event takes place, usually 3 to 7 years after the initial investment.
That may sound like a lot but returns are all tied to risk levels and start ups have very high risk.
How much - take as much as you can get. It usually takes several times more money and several times longer than you think to build a business.
How big - VC's and angels want to back businesses that can generate $50m to $100m in turnover (or more). That means you need a very large addressable market.
Its rare to get more than 20% market share and its rare to grow share by more than a few percent per year.
Generally you need a market of $500m but many will tell you its got to be a potential market of $1Bn+.
See my blog - tomthemoneyman.wordpress.com - for more ideas on business and investment.
Read the book Enterprise and Venture Capital by Christopher Golis. I am currently co-authoring the 5th Edition of this book. Cheers Tom
What it takes for a start up to survive
Its got to be customer/market need first, then product/technology. Make sure your product is highly differentiated and solves the customer/market need/pain.
Many start ups fail because they think there is a customer/market need, so they build the product only to find out they were wrong or the benefit is only incremental and not enough to make people switch.
Being adaptable and persevering are also key.
I know of a very successful entrepreneur who built a tool for scientists but found out scientists 1) didn't have a lot of money and 2) strangely didn't like to use software as much as she thought. So, they adapted and sold the product to the education sector, which is now 99% of sales. It got backed by a life sciences VC (it was related to brain function) so it was not easy to change the target customer market to education but they did and it worked!
So be adaptable (but it also proves you must really know your target market before building the product - they just didn't know scientists as well as they thought they did)
Watch the cash too.
But remember, its customer/market need first (and this must be confirmed through real knowledge of your customers).
Many start ups fail because they think there is a customer/market need, so they build the product only to find out they were wrong or the benefit is only incremental and not enough to make people switch.
Being adaptable and persevering are also key.
I know of a very successful entrepreneur who built a tool for scientists but found out scientists 1) didn't have a lot of money and 2) strangely didn't like to use software as much as she thought. So, they adapted and sold the product to the education sector, which is now 99% of sales. It got backed by a life sciences VC (it was related to brain function) so it was not easy to change the target customer market to education but they did and it worked!
So be adaptable (but it also proves you must really know your target market before building the product - they just didn't know scientists as well as they thought they did)
Watch the cash too.
But remember, its customer/market need first (and this must be confirmed through real knowledge of your customers).
Is business 99% luck or planning?
I believe preparation and planning are the key to success.
A lot of what looks like luck is actually the result of planning and persistence and rational risk taking.
You should not rule out your gut instincts nor should one be caught up in 'analysis paralysis'.
Following gut instinct is not luck - its actually finely tuned having absorbed all your life experiences.
So go out there and make your own luck!!
Cheers Tom
A lot of what looks like luck is actually the result of planning and persistence and rational risk taking.
You should not rule out your gut instincts nor should one be caught up in 'analysis paralysis'.
Following gut instinct is not luck - its actually finely tuned having absorbed all your life experiences.
So go out there and make your own luck!!
Cheers Tom
Bootstrapping vs. VC & Angel Funding
What should one do with their start up business?
You may be able to boot strap unless you need a large team of product developers. Boot strapping is a more likely prospect if your products are complete or near so or you can build the product yourself.
The attractiveness of the business to outside investors will depend on:
1) Size and growth rate of your target market
2) Your differentiation & competitive advantage
3) How big can the company become? Many angels & VC's will want a business that is worth $50m to $100m at exit
4) Can it deliver the returns required for the risk involved? Many VC's and Angels will seek 5x to 10x their money in 5 to 6 years. To deliver that you need a pretty large market and to grow pretty rapidly and to have a clear exit strategy.
If you have a strong track record, it will help you to attract investors.
If not, you'd benefit from having some advisors/directors or a CEO who has strong track record.
The best teams usually win! Good luck to all you entrepreneurs out there!
You may be able to boot strap unless you need a large team of product developers. Boot strapping is a more likely prospect if your products are complete or near so or you can build the product yourself.
The attractiveness of the business to outside investors will depend on:
1) Size and growth rate of your target market
2) Your differentiation & competitive advantage
3) How big can the company become? Many angels & VC's will want a business that is worth $50m to $100m at exit
4) Can it deliver the returns required for the risk involved? Many VC's and Angels will seek 5x to 10x their money in 5 to 6 years. To deliver that you need a pretty large market and to grow pretty rapidly and to have a clear exit strategy.
If you have a strong track record, it will help you to attract investors.
If not, you'd benefit from having some advisors/directors or a CEO who has strong track record.
The best teams usually win! Good luck to all you entrepreneurs out there!
Best Books on Investing
I have read many and highly recommend:
The Intelligent Investor, Benjamin Graham
A Random Walk Down Wall Street
Beating the Street
One Up on Wall Street
These will give you a good start!
The Intelligent Investor, Benjamin Graham
A Random Walk Down Wall Street
Beating the Street
One Up on Wall Street
These will give you a good start!
What to expect from your financial advisor!
Independence
Understanding of your profile, risk appetite and circumstances
A problem solver, not a product pusher.
Understanding of your profile, risk appetite and circumstances
A problem solver, not a product pusher.
When Will Renewable/Clean Energy be Viable?
Energy is simple.
When the technology enables production and delivery of renewable and clean fuels reliably at prices below fossil fuels, then consumption will tip, as rapidly as the technology & infrastructure allows.
I think its closer than most people realize.
Even if you don't believe in global warming, I think most people will rapidly gravite to the lowest cost reliable fuels and one day they will be clean and renewable.
Most people would gladly reduce their impact on the environment if they could do so with reasonable convenience and cost.
The ability to undo what's been done does exist to a large extent.
Extinctions obviously will be pretty hard to undo but nature does heal itself when given the chance.
When the technology enables production and delivery of renewable and clean fuels reliably at prices below fossil fuels, then consumption will tip, as rapidly as the technology & infrastructure allows.
I think its closer than most people realize.
Even if you don't believe in global warming, I think most people will rapidly gravite to the lowest cost reliable fuels and one day they will be clean and renewable.
Most people would gladly reduce their impact on the environment if they could do so with reasonable convenience and cost.
The ability to undo what's been done does exist to a large extent.
Extinctions obviously will be pretty hard to undo but nature does heal itself when given the chance.
Subscribe to:
Comments (Atom)
