Young entrepreneurs are passionate about their technology and/or concept. They are evangelical and tireless. What they often lack, however, is the discipline and the experience to model their business appropriately and create a credible business plan. Some venture capitalists may feel this is something that they can do to help bright new ideas. However, many good concepts are not presented well enough to get the attention of serious investors in the first place.
Writing a compelling business plan is a lot of work and quite difficult for most. So, as an entrepreneur, you must assess if you have the time and ability to create one. I’ve seen a lot of young entrepreneurs lose focus on their business execution points while trying to draft up a professional document. If a business has momentum, losing an entrepreneur’s focus away from the daily management to write a business plan for potential investors may be too costly in the end.
That’s why I advise young entrepreneurs to solicit professional help when possible. If cash flow is tight, find someone who will work for some equity, or will take payment only from a successful raise. The dilution is usually a low cost for the ability to create real value to your business plan. Too often, inexperienced business owners get fixated on the percentage of ownership. A hundred percent ownership of a business with no market value does not amount to much (or anything at all). As a startup business owner, your goal is to create value, and that could mean sharing some equity for services.
So, if you are looking for someone to help you, here are some tips:
- Make sure the business consultant had previous success raising money for companies
- Clearly understand what the consultant’s role was in the previous success, and then validate his/her claims
- Evaluate how quickly the consultant understands your business KPIs
- Make sure that the consultant asks some critical questions about your business model. He/she should make you feel uncomfortable at times with the line of questioning. You’re not looking for a cheerleader.
- Evaluate his/her network within the investment community
- If something sounds too good to be true, it is.