Martin Zwilling of Forbes.com provides entrepreneurs with a ten-point guide to measuring the progress of their start-up, revealing the signs that are likely to impress financial backers.
He insists that the smarter investors will look for these ten signs of "tangible progress" which "will keep you going the extra miles until your new venture really gains traction".
The first sign to tick on the list is: a documented business plan. Zwilling says: "It's hard to build a business without a plan... If you don't have a plan, get to work – or risk not raising a cent."
Number two on the list is: realistic objectives and milestones. You need a "yardstick" to measure results. However, Zwilling warns: "If your objectives are off the chart, you'll look bad when you set them, and even worse when you miss them."
THE RIGHT PEOPLE
The third good sign is a well-rounded team. Make sure you have a good balance of people with proper experience; a "team of friends and family that work for free on weekends is not likely to impress investors" – but a qualified advisory board (the fourth sign) will.
A working prototype is the fifth sign. "Define the absolute minimum features you need to satisfy a customer's problem and move some product," says Zwilling.
Number six is an "honest-to-goodness" sale. Giving away your product will give you no idea of what the market is willing to pay, while proper customers give valuable feedback. The author adds: "Without revenue, your investors are largely limited to friends, family and fools."
Registered intellectual property (the seventh sign) forms a major part of many early-stage company valuations. Filing for a provisional patent, registering for a trademark or reserving Internet domains can help to convince investors you are making progress.
For those businesses too young for real customers, letters of intent or endorsement (number eight) can show that you "have the ability to make the connections you need".
The ninth sign of progress is: personal investment. Zwilling explains: "Investors like to see that you have committed personal funds as well as sweat equity. If you haven't risked your own stash, why should investors let you risk theirs?"
The tenth and final sign is: expert status. Investors will often be impressed by recognition of prowess in your field in visible domains such as the press, social networks or organisations related to the industry. The author suggests raising your profile by writing a blog, speaking at local groups and issuing press releases on the market rather than your own product.
Zwilling insists: "Tick off most of the items on this list, and you'll be able to prove that your wheels aren't just spinning, but that they're touching the ground."