1.11.2006

VCs & IBOs

Good evening. I'm Anon Ibo, and this is UE.

In reading the advice of Venture Capitalist (VC) David Cowen on writing a business plan, a few insights occurred to us in the UE newsroom:

First, it's interesting-- but not surprising-- that the World Wide DreamBuilders "Private Franchise" Review (PFR) sheet, along with the FTC reviewed financial sheet WSA4400, contains the important elements Mr. Cowen has advised, and mostly in similar sequence. . . It's almost like they know what they are doing!

Second, the act of presenting your business plan to a prospective partner is not unlike presenting to a VC-- after all, a VC is going to shoulder a great deal of the risk and essentially become a partner. For a prospective partner in a private franchise, what you're really presenting is their potential future business, based on your own and the track record of your upline mentoring team. As such, they will be shouldering a great deal of the time and effort capital, as well as the modest upstart capital that will be required to build their business.

Thirdly, however, most prospective partners do not think like a VC, or even a business owner (they think how they've been trained to think: a dutiful employee/consumer.)
While a VC has learned to instinctively look for the best long-term Return On Investment (ROI) and can be convinced to go out on a limb if the potential looks good enough, the average employee/consumer has learned to pay the cheapest price and get the quickest, most consistent (read: secure) paycheck.

Independent Business Owners (IBOs) are often criticized for doing what's often called "dream building" with a prospective partner. The inferrence is that, since the potential income has not been created, it does not exist, therefore they selling an nonexistent result, i.e. running a scam. Heck, even the act of pitching a business is considered by many critics as a negative.

For this display of blatant ignorance of business, IBOs must forgive their critics-- Pitching a business plan is a common activity for business owners, and projecting a future ROI is done in any good business plan.

The distinction an IBO must make with an untrained prospective partner is to help them translate how that ROI would impact their lives. Frankly, the employee/consumer mentality of most prospective partners has trained them to not expect much from their lives at all. A VC has no problem visualizing how the ROI of a good upstart will impact their lifestyle... they already live a sampling of it, know they want more of it, and associate regularly with the jet-set crowd living it. The average employee/consumer, on the other hand, doesn't have the budget for the economy fare of a commercial flight without significant advanced notice. So the dream-building doesn't function to immediately benefit the IBO who is "selling the dream"... it's to help overcome the self-image barriers of the prospective partner.

On the flip-side, the IBO does have a sponsoring role towards the prospective partner, so s/he must also think like a VC:
Specifically, you as an IBO may also be investing time and effort and potentially some money into this prospective partner's business, so you need to ensure that they are a fit.

Anyone you have to "talk into" participation will likely need a refill on their "talk into" every time activity is needed. If their self-esteem is too low, even if you can get them to comprehend and accept the potential of your business model, you may end up constantly propping up their self-esteem to get them to undertake any activity on their own behalf.

One of the real reasons for the criticism a private franchise model receives is actually due to the self image of the former-IBO-turned-critic who got him/her self "talked into" participation despite their own self-esteem issues, who then proceeded to find other non-threatening self-esteem-deficient individuals to "talk into" participation and then didn't have enough morale props to go around to their team because they needed all the props for themselves.

Since you must help partners generate an income before you receive your own ROI, both of you may be getting a much better ROI if you sponsor low self-esteem prospects as a Pro-Sumer rather than a business builder-- chances are they will settle into a Pro-Sumer or below level of activity anyway.

In summary, with the WWDB PFR and WSA4400, you have a business plan worth pitching to any competent VC. Keep in mind that your prospective partner is like a VC-- they'll need to know what the potential ROI is and why they should invest in it. But since they won't likely think like a VC, you'll need to translate that ROI into lifestyle so they can visualize it strongly enough to put down the clicker and get off the couch for something more significant than their next "cold one". Finally, you must think like a VC in ensuring a good ROI for you and them, by positioning prospective partners/clients in an activity level and role that their self-esteem will support.

That's all our time for tonight. For UE, this is Anon Ibo, signing out.

Until next time, make it practical and profitable, and most of all, make it real.

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