Part 13/20 - Twenty Questions You Will Be Asked By Venture Capitalists (If You Get That Far)

By Laurence K. Hayward

This is part thirteen of a twenty part series on this topic.

13. How do you plan to acquire and keep customers?

It surprises many people to learn that ‘marketing’ is commonly one of the weakest elements in most business plans (along w/ the financial projections). It’s almost as if the entrepreneur assumes that with the right business model, the products and services will sell themselves. There are many innovative and brilliant business concepts that never become real businesses, just as there are many so-so concepts that become the basis of major successes. I’m reminded of a successful entrepreneur who put a plaque on his wall that read, “nothing happens until somebody sells something.”

A well-developed business plan includes marketing strategies that demonstrate an understanding of market realities and customer behavior. For example, your revenue projections call for 100 units of X product to be sold next year. How will they be sold? Who will be selling them? Why is this projection realistic, do you have relevant industry, product or customer experience that guides this assumption? This is one reason VCs look for industry experience in their management teams. The appropriate experience should provide insight into the dynamics of the sales process and customer behavior, knowing for example the key decision factors (the sometimes harsh realities) of the customer group. Having a well constructed sales pipeline and a disciplined selling process will also help.

In the marketing section of your business plan and presentation, VCs will look for more than a list of your marketing initiatives. You can anticipate questions like: what are your company's customer acquisition costs? Have you calculated average and target revenue per customer? Do you know how many customers are required to break even? Do you know the product sales cycle? Think quantitatively as well as qualitatively.

In addition, the most successful companies know how they will retain customers -- even before they acquire them. It is said that it costs five times as much to generate business from new customers as it does from existing customers.

Customer retention is critical to the long-term success of most enterprises. How will you get customers to return?

Laurence K. Hayward is the Founder and CEO of TheVentureLab. To learn more about him follow the link here