|Believe, it or not, most
of the giants of direct sales started with the dream of one
individual. And usually, that individual had little or no
money. You can just picture yesteryear's MLM moguls mixing
laundry detergent in their bathtub or a future cosmetics tycoon
selling bibles door-to-door with free giveaways of perfume.
And some were the lucky ones who could build a network marketing
empire without the financial assistance of others.
The Search for MLM Startup Funding
And then there are the rest of us... lucky enough
to have a dream, but short on capital to fund the MLM startup
business. Most of us mortals must turn to friends, relatives,
co-workers, other networkers and finally to angel investors
and private placement venture capitalists for much needed
seed money to fund this business. Investors hear the presentations,
although the potential businesses may use many names to
describe the same thing....mlm startup, direct sales startup,
network marketing startup, party plan startup, direct selling
startup and party plan startup. This rose by any other name
is a plea for the same thing..."we need capital to make
this dream a reality."
Hire a Qualified MLM Consultant
What is the first step in the process to secure
capital to fund the MLM startup dream? It is the business
plan. Before any sophisticated investor or angel financier
will consider funding your marketing program, they will
look for an organized presentation of your ideas, projections
and abilities. The business plan will ultimately be the
backbone for any private placement of capital and also for
bridge financing to take you to the next step. You can work
on it yourself, but you are best off finding an experienced
MLM consultant who has experience in management, marketing,
compensation plans and the MLM startup. And now, what is
expected to be in the MLM startup business plan? Actually,
it will follow a standard format of most business plans.
Here are the basics to cover.
How to Structure Your Business Plan
The structure and content of the business
plan will often vary depending upon such factors as the
company's stage of development, the nature of the business,
and the type of markets it will serve. However, the following
topics should be addressed in any business plan, and provide
a relatively easy format to follow:
- Executive Summary.
This section should provide the investor with a short
overview of the key elements of the business plan. Since
investors are turned away by exaggeration, the summary
must provide an accurate appraisal of the company while
distinguishing its product and organization from others
who are competing for the same funding. It should also
describe its management team emphasizing experience and
skills, but not ignoring management weaknesses or how
it expects to correct them. In addition, summarize key
financial projections, and the funding requirements it
will need to meet those projections. Above all, the summary
must be designed to catch the attention of the prospective
investor. Unless the summary inspires an investor to read
on, it has not served its purpose.
- Company History.
Investors want to know about a company's past performance
before they assess its future potential. Toward this end,
the business plan should provide a brief history of the
company, including: (1) when it was founded, (2) subsequent
development and growth, (3) how it has been organized,
(partnership, corporation, etc.), and (4) how well past
performance reflects future potential. If you have good
reason to believe that the company's past performance
is not indicative of future potential, be sure to cite
those reasons in this section.
- The Product.
This section describes in detail the company's products
or services, including a summary explanation of the engineering
and technology involved, and a statement about performance
and present status. Patented or patentable components
of the company's products should also be mentioned in
this section. Keep in mind, however, that investors are
generally not engineers. This section should be written
in language easily understandable by business people with
- The Market.
This section should contain a comprehensive description
of the market the company plans to serve. If the product
is generically new, independent market research may be
needed to define both the initial and future markets.
If the product is a refinement on presently available
merchandise, the market may already be defined. In that
case, you may rely on presently available data from industry,
trade association, or government sources. For purposes
of raising investment capital, the market section may
be the most important part of your business plan. To the
venture capitalist, a company without a strong understanding
of the targeted market is a bad risk, even if its product
is first rate. Consequently, the market description should
be longer and more detailed than the product description
indicating to potential investors that you understand
the priority of market over products.
- The Competition.
Identify your competitors, discuss their relative
strength and weaknesses, and indicate the market share
held by each. Include a forecast of the market shares
you expect to capture in the first three to five years,
and which competitors you expect to draw customers from.
Be sure to spell out your rationale for each projection
improved product performance, reliability, styling, price,
service or other factors. As with all projections in the
business plan, do not understate the strengths of your
competition while overestimating your own. Prospective
investors will not back a company that does not have a
realistic view of its competition.
Efficient production is the key to profit making.
This section should describe your manufacturing facilities
and discuss production capacity in relation to projected
sales over the first five years. Emphasis should be placed
not only on cost reduction, but on quality control as
well. Minimizing production costs will not make your company
more attractive to investors if the savings are offset
by increased warranty costs.
As a general rule, venture capitalists prefer to invest
in a mediocre product produced by first rate management
than a top notch product produced by mediocre management.
This priority should be reflected in your business plan.
In this section, emphasize the experience of each key
management executive. Include job descriptions and salaries,
and provide resumes detailing your executives' past business
experience, education, publications, and any other information
that indicates to potential investors that you have a
qualified management team. If your current management
has weak spots, define them and explain how they will
- Financial Data.
First class products and top flight management account
for nothing if your financial projections do not allow
for a substantial return on investment. Consequently,
this section is the bottom line of your business plan.
Begin by summarizing previous financial performance. If
your company is new, be sure that all financial projections
are realistic and justifiable. Remember that venture capitalists
are sophisticated investors, and will check out other
companies in the same field. If your projections deviate
widely from the industry norm, you will lose both the
credibility and the financing you seek. Furthermore, do
not inundate investors with yards of computer generated
spread sheets. Your financial data should be concise and
easy to understand.
Finally, your financial section should discuss
the investment itself. Indicate how much money the company
needs, the form of the investment sought, and how the money
is to be used. Most important, discuss the projected return
on investment within the first five years of operation.
As with all financial information, be realistic and support
your projections with solid data and sound rationale.
The MLM Startup Business Plan Team
The development of a well crafted business
plan is a considerable undertaking. It forces you to focus
your ideas, ferret out weak spots in your organization,
and turn abstract concepts into concrete plans. Experienced
professionals such as an MLM consultant, an MLM lawyer and
accountants can provide invaluable assistance in putting
together a sound and attractive business plan. Your MLM
lawyer can assure that your company has the proper patent,
trademark or trade secret protection that it needs, while
steering you away from the legal pitfalls that face all
new or expanding businesses, particularly in the area of
MLM law. Your CPA can assist you with the myriad financial
assessments you must make. A well known and respected firm
can lend credibility to your numbers and projections. Beyond
this, an experienced MLM consultant, MLM attorney and accountant
each have invaluable contacts within the venture capital
community. They can tell you who has the capital, where
it is being invested, and how you can best get a share.
By enlisting the help of experienced professionals and following
the prescribed format, you can develop a business plan that
will help you to attract the financing you need for your
new or expanding business.