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By Jeffrey Hollender
CEO, Seventh Generation
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Jeffrey Hollender |
That was my dad's reaction when I showed him my first business plan, when I was raising money for a startup that produced audio books. Alfred Hollender was president of a global advertising agency and later launched a successful venture-capital firm. His practiced eye quickly spied my plan's biggest blemish: The projected sales were wildly over-optimistic.
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Dad's advice has spared me much pain. "Calculate the amount of money you think you need based on a conservative sales forecast," he told me. "Then raise twice as much."
No entrepreneur can predict the future. But no matter what the business venture, we all can anticipate what will "grow" wrong. Almost inevitably, costs run higher and revenue materializes more slowly than expected. If you lack a cash reserve, you'll quickly learn that the worst time to raise more money is when you've missed your projections.
Since that first, eye-opening chat with my dad, I've written close to 50 business plans. And I've found that just as you should double the amount of money you need to raise, you also need to double the amount of time you put into the effort.
Time is a nonrenewable resource. Unfortunately, it takes time to raise money. When I dial for dollars, I typically devote three to four hours a day to the endeavor. If someone declines my proposal, I quickly ask for the names of people who might accept it. The goal is to turn every "no" into two to four new leads.
But occasionally, I must say "no" to someone else's "yes." Seventh Generation adheres to a model of deeper business purpose, where bottom-line growth is merged with the larger goal of trying to make a difference in the world. We believe that what we stand for is more important than what we sell. If an investor's values fail to align with Seventh Generation's mission, I'm not interested in the money.
And that leads to another invaluable bit of advice from my dad: Screen your investors the same way you screen your employees.
Employers always do reference checks and interviews when hiring someone, but they often fail to do them when "hiring" an investor. I want to know why potential investors are interested in a socially responsible business; how long they're willing to leave their money in the company; and whether they have direct experience in our industry.
"You can always fire a bad employee," my dad once said. "You can't fire a bad investor." As usual, he was right.
- Jeffrey
Reprinted with Permission
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