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Most of the entrepreneurs we interview in our consulting business have a very unrealistic conception of what excites and disappoints investors. The dream of many inexperienced inventors seeking to fund their opportunity is to build a substantial infrastructure. Their business plan identifies the need for factory space Gustav Forsling Hurricanes Jersey , equipment, staff, and many other fixed costs.


Investors want to see a plan that maximizes return on investment. High fixed costs are the enemy of a great profit margin. When business turns down, and it always does at some point, fixed cost assets become liabilities and must be continually fed Ryan Dzingel Hurricanes Jersey , even as income declines.


Always present decision-makers with the most streamlined operations plan possible. Do not confuse grandiose staffing and equipment wants with actual needs. In today's business climate, almost every possible service can be rented, leased, farmed out or performed by contract manufacture. A 25,000 square foot factory that is not running at 100% capacity is an under-performing fixed cost asset Brian Gibbons Hurricanes Jersey , especially if a private label manufacturer will provide the service at a competitive price. The cost to rent, power, insure maintain and staff the facility is ongoing and will be a drain on the bottom-line.


Investors want to see a lean operation with no fat or excess. They will always be open to adding costs as growth and sales traction begin to kick in. Initially, the entrepreneur needs to display that he or she will be a prudent shepherd of the investment required to startup the enterprise. Here are a few areas where fixed costs can be avoided and potential investors greatly impressed.


Facilities


An opportunity killer is a funding request that includes money to buy a facility, office or plant. No startup can accurately pinpoint the growth (or failure) rate of a brand new business. Investors will want to see a plan reflecting realistic goals and space requirements. This almost always means renting facilities until need demands a purchase of facilities.


Manufacturing


There are almost no good reasons for a startup to manufacture their own product. Possibly James Reimer Hurricanes Jersey , if there is a very valuable trade secret involved, but not often even in that case. All contract manufacturing should include a Non-Disclosure Agreement (NDA) as part of negotiations. Contract manufacturing is available and utilized in almost every industry today. Estee Lauder manufactures almost none of the many cosmetic or fragrance products they market. Liz Claiborne and Calvin Klein make none of their apparel. Ikea sells only furniture made in third world facilities.


All of these companies, and many more, realized long ago that manufacturing was better left to factories located where labor, raw materials and government rules were not stifling. These companies concentrate their assets on research and development Teuvo Teravainen Hurricanes Jersey , design, sales and marketing. So should every entrepreneur seeking to succeed in obtaining investment.


Sale


Every entrepreneur should be able to aggressively market and sell their product. However, no single person, or small partnership, can be in front of every customer that will potentially be interested in purchasing the product on offer. The investor will want to know that there is a sales strategy that offers an excellent chance for success.


In the area of sales Jaccob Slavin Hurricanes Jersey , there are industry specific sales representatives: manufacturer's representatives and agencies available to sell an interesting, market ready product, on commission, within their industry. Commissions are typically standardized within each industry. The gift industry is 15%. Food products are 3% and up, depending on the volume a product can reasonably be projected to achieve. Industrial products are 2% to 5%. Historic profit margins dictate commission rates.


When using sales agents Brock McGinn Hurricanes Jersey , the entrepreneur should manage the sales force as if they were salaried employees. Weekly calls to review goals, promotions and upcoming meetings. Write letters and e-mails pointing out other agent's successful achievements. I have used commission sales agents for many years, and recommend them to most of my clients.


I make as many key- account sales calls as possible with my sales agents. If it is my product, I want to control big presentations, even though I will pay a commission on the sale I have principally generated. I attend as many sales meetings as possible. The more I can meet Gustav Forsling Jersey , learn and know about my sales teams activities the better I will be able to motivate, train and energize them.


When commission sales agents do not sell a product they are not paid. This obviously minimizes fixed costs. However, you will want to pay the largest amount of commission as possible. Healthy commission checks mean a very healthy sales base.


As a very young National Sales Manager for Vidal Sassoon Hair Care Products I was confronted with a problem. Our sales had exploded. Growth was so rapid and market acceptance of the Vidal Sassoon brand so overwhelming that our commission payments likewise accelerated to the point that my top management became upset when commissions exceeded their own salaries. ?Don't those guys work for us, why do they make more than the owners?, they asked?


I faced a difficult situation. I offered two options: cut commissions or fire the commission agents and hire a company employed sales force. I reckoned that if I could get sales coverage for 8% cost of sales (including salaries Ryan Dzingel Jersey , benefits, travel,
Very surreptitiously and quietly I interviewed and hired a team of key regional sales managers and we quickly executed a plan of conversion that top management had signed off on. Vidal Sassoon was at the point in their business development that a company owned direct sales force