Ready, Set, Traction

For accounting this week we read an article called How Much Traction Is Enough for Investors.  It listed seven ways to show investors you have a business plan that has potential:

1. Start with real sales
2. Free and freemium products need a solid base.
3. Market penetration is a must.
4. Gauge average traction sizes and sales per customer.
5. Know your customer acquisition cost.
6. Show acceptance by major customers and key distributors.
7. Land public statements from industry experts and groups.

Our project team this term is developing a plan for an eco-lodge in Sierra Leone, West Africa.  Our mission is to narrow the disparity gab by bringing extreme economic worlds together through ecotourism and promoting community development through entrepreneurial training and idea sharing. I did a little more research to see what advice (industry specific) might be out there for such a venture.

GrowThink, a highly marketed company designed to help people write hotel business plans suggest that there are five keys to success in starting a hotel:

1. Location and Opportunity – Where competitors are not fulfilling all customer needs.
2. Strategy – Consider the combinations of amenities, atmosphere, location and services that will be right for your customers.  Answer the customer’s question “why is this my hotel?”
3. Planning – A simple, clear and persuasive outline of how you will take on the opportunity.
4. Fundraising – Will be needed… so have a solid business plan.
5. Hospitality Mindset – Customer service imbedded in the culture of the management and staff.

Keeping in mind they are trying to sell me a template for a hotel business plan . . .  I will take their advice in stride.  I do find keys one, two and five helpful though in considering this specific industry.

Entrepreneur, as you might guess, says the overall “want” of a lender or investor is “If I give you X dollars, then how much money will I get back?”  The article also give an example hotel pitch and lists four key factors to raising capital:

1. The Project – What is your proposed business?  Why is it unique? What advantages does it have? Why will it be successful?
2. The Partners – Who are the key partners? What is their track record?
3. The Financing – What are the realistic numbers? What problems or roadblocks are ahead?
4. The Management – Who is running the day to day operations? What experience do they have?  How does this team set the business up for success?

I would agree that all of these factors are important however given the nature of our triple bottom line approach, the type of investors we will likely be pursuing will also want to know:

The Environmental Impact – What is your sustainability plan? What is your CO2 footprint?  How will these goals be measured and accounted for?

The Social Benefit – What social values will your enterprise stand for? Will you be paying your staff a living wage? How do you plan to partner with the local community?

The Wall Street Journal published an article that indicates chain hotels are looking to expand into Africa. The Marriott for example has plans to open 23 hotels.

 “Overall, international chains are planning 208 new hotels across Africa, according to W Hospitality Group, a research company, up from 159 in development last year.”

Though no direct advice was giving on how to purse funding it did mention that these chain hotels are relying on local developers rather than investing their own funds in Africa.  An option we have not considered is finding a local developer in Sierra Leone that we could partner with.  And if nothing else the article provides evidence that the market in developing African countries with abundant natural resources is growing and the time is now to invest.  This article indicates the same thing.

Kyle Dunn, wrote this short book from his experience in raising institutional capital.  Though not industry specific, I did find his approach very practical down to earth.  It included the following:

Top 12 Things to Do to Source Capital

1. Build a budget.

2. Say something different and reverse control of the pitch.

This one particularly caught my eye – what does he mean by “reverse control”?  Here is a clip of his explanation:

“. . . remember that no one is saying no to these investors. Keep that in mind. People tend to want what they can’t have and sometimes saying no is the fastest way to getting a yes.”

3. Create a dynamic website and promote it.

4. Establish an electronic direct mail (EDM) campaign.

5. Execute a relationship-reliant direct mail (DM) campaign.

6. Put together a basic social media marketing campaign.

7. Design a quality brochure.

8. Create a brochure with a strong Call to Action (CTA).

9. Engage a public relations (PR) firm.

10. Plan for event marketing.

11. Don’t forget traditional print advertising.

12. Optimize a CRM system.  – Which means Client Relationship Management (CRM) system, incase Q2 is a little fuzzy. ;)

Dunn’s recommendations are in place though very weighted on the marketing side.  He is all about going after the big dogs in venture capital though so in the end if that is where we decide we need to invest our efforts, his advice will be appreciated.