Growing a Green Business

greenpower The other day I was meeting with Dave, Bob and Bill, (yes that is their real names) the owners of a fledgling "green power" company, brimming with potential.

The team had made great progress, going from an idea on a piece of paper and embarking toward earning real revenue.

Of course, as with any new venture it is fragile. While revenues are growing, the company hasn't yet hit breakeven. Its current projections suggest that will require a major sale, which is going to take at least six months to achieve. The company founders are funding their own expenses, but following disucussions recognise that external investment is required to enable the potential to be achieved.

Our discussion went something like this:

Me: "So, how important is it that you get external funding?"

Bill: "It's important, but not that critical because we have cash in the bank and we are funding our own involvement in the business."

Me: "How much?"

Dave: "A few thousand dollars"

Me: "What are your current spending projections?"
(I hear a shuffling of paper ... )

Bill: "20 to 50 thousand a month."

Me: "Well, that seems pretty urgent to me."

The 3 critical questions

A blindingly obvious point to begin with ... the only reason a business fails is that it runs out of cash. As such, the first question every entrepreneur should be able to answer in a second is, "How many days do I have to live?" That helps the entrepreneur think about how to manage their costs and their funding strategy.

The second question that requires an immediate response is, "Why are you doing this?" Starting up new businesses is incredibly hard. Most fail. The ones that succeed require hard work and constant attention. An entrepreneur who doesn't have a good answer to this question is unlikely to succeed — and is certainly unlikely to raise external capital.

Fortunately the team, of Dave Bill and Bob, could answer this question easily. They believed their concept, and simple technology, could fundamentally change the the way people looked at green power generation and dramatically improve the businesses of the users.

Finally, I always want an entrepreneur to be able to articulate to me the top three burning issues they currently face. Of course, any new business will have dozens of areas that need attention on a daily basis. But a good entrepreneur can step back and highlight the three burning issues. These aren't always the fires burning brightest.

Time will tell if the team I am working with will succeed.