Mean What You Say; Say What You Mean

Mean what you say; say what you mean.

The sentiment expressed in the title may seem a bit overly obvious, but it strikes home on a point that is absolutely critical to the success of a start-up — credibility.  Credibility is a cornerstone of success that one simply can’t underestimate the value of.  It is as critical to the success of a business as having talented employees, capital and all of the other attributes of a successful enterprise. Funny thing about credibility, you only lose it once. Once lost, it can be nearly impossible to restore.

One aspect of business where your credibility is almost always under a spotlight is when dealing with investors.  When deciding whether to invest in an opportunity or not, often times many investors will place more value on the senior management team of an organization than in the market opportunity or the particular product offering in question.

And why is that?

Usually it has to do with the level of credibility the management team brings to the table. Often times they have done it before, they have built a successful company from the ground up, they have raised capital and have spent it wisely and they have consistently delivered upon promises and commitments.

That is all fine and good for those entrepreneurs who have been down a successful path, but what about the entrepreneurs who are new to the game and just starting out on this grand voyage?  Well for this group, credibility is every bit as important and there are a few things one can do to put their best foot forward. Let’s take a look at just a few.

One really good habit to get into early on is to live out the adage “promise less, deliver more.”

Many entrepreneurs, in their zeal and genuine enthusiasm for their idea, allow their imaginations to get the best of them and will promise tremendous growth.  Often times they may truly feel they are in fact simply painting the picture of what the market can and will deliver once they reach the tipping point and sales start to kick in.  When sales start to lag far behind projections, the credibility of the company is not the only thing to drop like a rock.

Investors have the experience and wisdom to question and challenge numbers and projections that are presented, and they will play a role in helping to assure the numbers are realistic. Once agreed upon, it is the entrepreneur’s responsibility to deliver.

In preparing for such meetings, be sure to consider and discuss all possible scenarios that could potentially impact the plan. Factor these “what if” scenarios into your plans and look at them again.  I am not at all suggesting in any way that you take a doom-and-gloom approach — but look for ways to ensure your plan will pass the test of reasonableness.  When all things are considered, does your plan pass a basic common-sense analysis?  If yes, then great! Move forward with it. If your instincts or that of one your partners or advisers feels it doesn’t, review and rewrite until you feel you’ve got it right.

Over-promising can lead to a whole slew of problems down the road. Let’s consider just one possible scenario.

You and your management team make a presentation to a group of possible investors and you wow them. They love what you have to say and they pony up the money you ask for.  Halfway through the year, you start to realize your projections weren’t quite in sync with what is actually happening in the marketplace. Sales aren’t coming in as quickly as you had projected, which means you are spending money faster than you are replacing it due to anemic revenues.

Now what?

Normally, the next step is you find yourself having to go back to your investors to ask for more money to deliver the plan they have already paid for.  Usually one of a number of things may happen: They may come up with more cash, but it will likely cost you significantly more equity in your company. They may offer more cash with the stipulation that they place a director-level person within your company to oversee things to ensure the company gets to the promised land, or they may say thanks but no thanks and keep their losses to a minimum.

One rule of thumb that many start-up organizations use in the development stage: It will often take you three times as long as you think it will and it will cost three times as much.

The message here is to test, retest and test your assumptions again and again in trying to determine what level is most attainable with the resources you are asking for. The game here is to get the required capital you feel will allow you and your team to over-perform on promises made. Being honest, realistic and forthright in these discussions will go a long way to building a very solid level of professional credibility for you and your company.

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