Greg's Right FIT #433

Quick notes to help you grow your business in less time with less effort. . . sometime next week. 

In this issue: 

- Thoughts on Cost
- Being Human
- Random Stuff

Thoughts on Cost

• Chunking it down is a great questioning technique. "Re-work is costing us a fortune!" sounds worth solving, but it's too vague. Nod your head and chunk it down, ". . .when you say a fortune, what do you mean. . .millions? thousands?" 
• Naming means claiming. When your prospect labels a problem, check where the finger is pointing. Naming it a "cost overrun" says the budget is right. "Underfunded" says the work is right. Check other "names" before jumping to fix.
• Objections to cost or time hint at priorities. If it's important, buyers find the money, or make the time. Keep looking for the most important things to them. (Hint: it's not always their corporate priority.)
• Proposals are supposed to help determine ROI. If the only numbers in the proposal are the Investment, that's a problem. An investment without a return is a cost, and the cost is always too high. Include the expected return.

Being Human - Investment hunter to investor’s prey

"All I need is an investor, and I’m ready to go,"

an article I wrote for a startup advisor magazine

From Investment Hunter to Investor’s Prey

"All I need is an investor, and I’m ready to go," she says. I'm sitting in front of a passionate entrepreneur who knows I've successfully raised millions of dollars for various businesses. After hearing her story, what I'm about to say won't be what she wants to hear, but it's true. Funding isn't her problem. There's more money out looking for a home than there are good ideas to fund. The problem, I tell her, is she hasn't decided if she wants to build a company or master the seed and startup capital environment. 

Lessons from the past
I was in her seat in the late 1990s shopping my big idea from investor to investor. Eventually unsuccessful, I was forced to abandon my startup and find a job. I took two big lessons from that experience. One is that if I wanted to get a company off the ground, I needed to get much better at selling a vision to investors. Second, based on the questions the investors were asking, I needed far more evidence from customers that my idea was the right one before they’d invest. Years later, I applied those lessons and started another company. My pitch and evidence raised money, but also taught me a new, third lesson. Investors want an exit on their investment, and a pitch with evidence of multiple exits makes it easier to raise funds. This third lesson comes with a side effect which I understood intellectually but didn't understand emotionally until we were deep into building the company. When you take investor capital, your investor's focus becomes your priority. 

Since that time, I've come to a fourth conclusion. One I was trying to communicate with my young companion. 

If you turn your focus from raising money to focusing on the customer, you will transform from a seeker of investment to someone investors seek. At a high level, we know the best source of funding is from customers. That's easy to understand. Think of an unknown artist on YouTube getting millions of views, which leads to a record contract. When you're attracting customers, you attract professional investors too. The funny thing is, I learned this in my first job. I worked side-by-side with a guy who eventually started a chain of exercise equipment stores. We worked at a bicycle shop, and he was convinced he could make his fortune in a used fitness equipment business. He talked about this idea every day, saying, "All I need is an investor." One weekend, in a fit of desperation, he placed a classified ad offering used equipment for sale. The ad hit Saturday morning and his answering machine filled up with nearly 100 messages before 9am. Armed with this evidence, he spent the day contacting his list of investors, had capital for his store by nightfall, and quit the bike shop on Monday. I used to tell his story as an inspirational persistence tale, but now I use it as a guide for fundraising. 

Choose wisely
My entrepreneur has a choice. She can either get great at selling investors, or great at selling customers. She can stay up late learning about LOIs, convertible debt, and cap tables, or put in the hours learning to convince clients they need her help. The challenge with my friend's startup isn’t the idea or her conviction that it's going to work. Her problem is she hasn't convinced any customers to invest in the idea, and now she is asking me to help her sell the idea to investors. My advice is to get in front of the institutions she wants as customers, get confirmation her instincts are correct about the solution, get a commitment to do business once the product launches, then ask them to fund her idea today. 

It's not exactly what she wants to hear, but since it's just as hard to sell an investor on a pre-revenue idea as it is to get a client to fund a startup, she should focus on the latter. The reason is that once the product launches, a customer funded startup will get direct input from a customer with both a financial and business incentive to make it work. Successfully raising investor funds, on the other hand, will focus on providing an ROI to the investor. In that marathon, my bet is on the customer-funded startup because she’ll have a constant reminder of who she’s really working for.

Random Stuff

Being cheap has a cost.

As a practitioner of sales and marketing, I spend a lot of time checking out what other marketers and sellers are doing. Whether it's making sure to only buy what is sold to me, like famed retailer Stanley Marcus of Nieman Marcus advised ("Make Them Sell It To You"), or making note of what seems to work, I take it all in.

Sometimes this leads to new things. Like toilet paper. 

While out and about, I end up in a stranger's toilet. I come to the end of a roll of toilet paper and when I hunt around for the replacement roll, I notice the empty cardboard tube has a brand name, funny saying, and QR code. It seems that this toilet paper roll I am replacing is 100% recycled, good for the sewer system, and some profits are donated to build toilets in Africa where diarrhea is a problem. 

Sold. I hate buying toilet paper, so having this purchase be better for the environment while doing some good convinces me to give it a try. Getting it delivered is another bonus. 

I go ahead and pick up a 4-month supply because it's the best price and why not? There are multiple versions to choose from, but I go with the standard selection. A week later, a big box arrives. Big fun! Each roll is individually wrapped in colorful paper and some even have those clever sayings I saw. 

You might guess where this is going. In my enthusiasm, I ordered the wrong version. The standard 100% recycled toilet paper wasn't the same as what I used. Contemplating the sandpaper in my hand, I conclude that I must have experienced the "premium" toilet paper. It was a little rough, but what I am holding is rough. I mean, really rough. But it's better for the planet, right?

Only 47 more rolls to go.

I contemplate a small stack of brightly colored rolls and think about the next four months. My mind goes back to a lovely movie we just watched highlighting these amazing toilets in Tokyo, "Perfect Days". 

That's it. Decision made. It's time for a bidet. I don't need one of the $10,000 toilets featured in the movie, just one of those Toto bidets that will fit on my standard potty. Before I pull the trigger though, I need to get an electrician in here. The winters are chilly, and the version with a heated seat will be nice.