3 Ingredients To Build A Successful Business And Attract Investors

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In my opinion, having a business and building a successful business are mutually exclusive as one has absolutely nothing to do with the other. Anyone can say they own a business, but very few can actually show they have a business that is successful… or even one that has the ingredients necessary to have a chance at achieving any level of success.

It seems as if everyone I know seems to have a business these days. Normally I would say that this is a great thing as I am a huge believer in startups and expanding the culture of entrepreneurship.

The truth is, however, that many of the people who have a business don’t really have a business. Don’t get me wrong, it’s not so much that they’re lying (though I’m sure many do), it’s that they think they have a business and are lying to themselves… and that could be damaging. It can also be very damaging when they get in front of prospective investors and realize they have nothing to offer.

The way I typically look at business is very cut and dry. You are either pre-revenue or post-revenue. You either have sales or you do not have sales. There is no in between.

The Blurry Line Of User vs. Customer

Now, in the digital age, the line has been blurred a bit as most online businesses monetize after they build their platform, not before. Because of this, in the online world, the word customer (or consumer) is often interchanged with user. The truth is, however, the user is only the customer if they pay for the platform (subscription revenue). If not, the users simply act as the catalysts in generating the income, which normally comes through advertising revenue.

To make things even trickier, it is hard to tell what people really like, as providing no barrier of entrance doesn’t really give a great indication of whether your user actually wants your product or is just using it because it is a free service.

I will go much deeper into this subject in my next post, however, for the purposes of this post, let’s focus on the brass tacks every entrepreneur needs give themselves a chance to build a successful business and to be attractive in the eyes of the investor.

The Recipe

The following are the 3 missing ingredients that every company needs to build a successful business and attract investors:

1) Customers/Sales

A customer is someone who actually pays a price for your product or service. The first question every investor will invariably ask is if you have any customers and what your revenue is.

The more customers you have and the larger your revenue, the greater the value of your equity will be in the eyes of the investor. 99% of the time, an investor will not invest in an idea with no customers and/or sales to speak of.

{Again, as mentioned above, the online monetization model is a bit different and will be addressed at a later time.}

If you are looking for an investor or strategic partner, the first thing I recommend you do is get some customers to show there is a need for what you are selling.

2) Sell Thru’s/Turnover

Customers and revenue alone cannot convince an investor that you have a sustainable business. It is one thing to get your product or service in the door, it is another thing altogether to have your product or service perform well enough in the eyes of the customer to come back to you time and time again.

If you are selling a product to a store, this is normally measured in terms of sell-thrus (also called product turnover). Sell thru’s are quite simply, how much of the product you sell gets purchased by the end user (the customer that buys the product from the retailer).

In my first business, Gary and I landed our first national account. The product sold extremely well in the 10-store test and the sell thru’s were through the roof, so the retailer suddenly re-ordered for 200 stores. The result? Horrible sell thru’s and a complete failure. They never did business with us again. Why? … Too big. Too quick.

Quite often, the best way to make sure your product or service will perform is to start slow and local. This will enable you to stay close to your customers, spend more time with them and their customers, and greatly increase your chances to create strong sell-thrus and create a sustainable business.

3) Scalability

The best way to generate a big business is to succeed on a small level (as mentioned above). Starting small allows you to tweak and fine tune and create a profitable business model. Creating a successful business model on a small scale, lays the groundwork to build out your business on a larger platform.

You must, however, due your due diligence to make sure the market size is big enough to have a scalable business. This is why research on market size is so important. Once you have determined that the business is big enough to grow to the level you want, you can set yourself up to scale your business model.

Scaling a business often times requires the help of an investor or the alignment with a strategic partner. The good news is, once you have succeeded on a small level, this is typically the perfect time to align yourself with such an investor or strategic partner.

So, as you are out there running a business today or have an interest starting a business sometime in the near future, keep these 3 ingredients in mind to make sure you have what it takes to succeed, flourish and grow!

P.S.  

If you have a question or comment for this Author, just Leave A Comment Below. If you need a little more help, then take a look at our >> Brainy Certified Online Marketing Courses Page.


 

John Paul Aguiar

Blogging Entrepreneur that Helps Bloggers and Small Business Owners with Blog Marketing, Twitter Marketing and Social Media. I'm also a Kidney Transplant Recipient 2002

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