As I have been explaining growth to a number of business owners lately, it occurred to me that the Catapult way of accelerating business growth could be summarised into a really simple 4-step model:
- Revenue growth. While profit is important, you have to start with revenue growth. Without revenue nothing else can grow.
- Securing funding. Whether you are gunning for a big capital raise, money from the bank or cash flow funding from an alternate lender, now is the time to strike.
- Establishing a board of directors or an advisory board. This step should take place much earlier than most think in order to build trust and credibility for later stages.
- Creating/adjusting the financial model and the business plan. For most businesses a rough sketch is far more powerful than a detailed plan when it comes to building revenue. Where most founders originally thought the gold would be, rarely turns out to be correct. After getting revenue under control, there is a new appreciation of the business leading to an adjustment of targets, markets, methods and more.
I do not need to tell you that revenue is key. It pays the bills, yourself, your future business plan, your advisers and your long-suffering partner. More importantly, you can rapidly learn if the business works or not from revenue growth, which I suspect is why many do not embrace it-it reveals the cold truth!
And that is exactly why you need to start here!
While most clients have the definition of their customer roughly right, we often need to start with:
- Change of messaging
- Change of conversion tactics
- Setting up new joint venture relationships
However, once revenue growth gets under way, things can start going really fast.
This could be in the form of equity, bank loan, crowdfunding or a government grant – whatever floats – as long as it fills your coffers. The aim of the game is to fill up on cash, build a war chest so that as you roll out your marketing machine, you have lots of juice available to run that machine for as long as is required to win the battle.
If you are going to the bank, you can expect it to be all done in two weeks. If you are raising equity capital, you have to consider 6 – 10 weeks. None of this will work unless you have your homework ready. Your best bet is to first understand what type of funding is right for you.
Establishing a Board
A board is important. They are certainly not just for raising capital or making your business look good. They generally come in three variations:
- Sounding Board (aka Bouncing Board as they are great to bounce ideas off)
- Advisory Board
- Board of Directors
Within a week after starting Business Connector, I put together a sounding board. Many of those people are still around and part of the sounding board two years later. Do not expect formal advice, but do ask for unfiltered opinions and insights. Nobody gains anything from being ‘nice’.
Whether you choose to establish an advisory board or a formal board of directors depends on a series of factors. The more formal you make it, the more you will get out of it. It can be compared to getting a family member to help in the business versus hiring a full time staff member.
Financial Model/Business Plan
All the great cash flow and revenue models I have seen over time start with the basics: How is every single dollar made at the level of the individual transaction. From there it builds up, aggregates, takes in expenses and shows the staff growth. You have to start with the basics and look into how every sales dollar is transacted.
When you write your business plan, you should focus on proving just two things:
- Why every potential core customer will absolutely love what you sell and therefore wants to transact with you
- Why investor money is safer with you and has a higher potential payback than anywhere else
Do not worry too much about mission, vision and fluff. Do not pain over whether your illustrations are perfect. There will be no illustration more beautiful than the one showing your revenue growth over the last three months next to the list of great advisors or board members you have supporting and believing in your business.