|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
- 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 nontechnical backgrounds.
- 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 be corrected.
- 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
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.