Thursday, October 21, 2010

Valuation, Dragons' Den & The Wealthy Barber Returns

Though I write a blog about money and do a children's You Tube show about money, and though I'm self-employed and entrepreneurial, what I really am is a writer, an artsy-fartsy writer. But as a writer who, these days, is equally passionate about money and manuscripts, I seem to be making some strange connections between the economic arts and the literary ones.

Like this one.

Is creating a company similar to creating a piece of writing? I think it might be and I write this with Dave Chilton, author of The Wealthy Barber, in mind. But more about Dave in a moment.

I taught four writing classes this week. And, whether I was working with adults or kids, teaching live or in my virtual classroom, I wanted my students to be super clear about one thing: the writing process and at what stage they should be asking for feedback.

When should a writer go begging for someone to read and evaluate his manuscript? The answer is: absolutely not until he has draft number one finished. As I said to my students over and over this week, "How can you possibly evaluate any part of a story, poem or article until you get to the end? You need to make your lump of clay before you can decide how to sculpt it!"

Could there be a connection between writing a manuscript and starting a company? How can you evaluate or assign value to a business that is not finished, that is not yet a lump of clay? It was last night's episode of Dragons' Den that helped me make this connection between evaluating a piece of writing and valuing a company.

Two pitchers from a company called Flu Goo (hand sanitizers for kids) came on the show asking for $113,000 in exchange for 40% of their company, which was strange because they had not sold one bottle of their product. Not one. The Dragons pointed out that there is huge difference between saying you need $113,000 to finish building your company and saying that your company is worth $282,500 ($113,000 x 2.5) even though it's not "finished" because it has no sales.

Without sales, a company is incomplete and of no value to anyone; the same is true of a manuscript that has no ending. You have to have all the parts of something before you can assign value to it. Which brings me back to Dave Chilton who is at this moment sequestered in his office and madly typing away at the long-awaited sequel to The Wealthy Barber, The Wealthy Barber Returns. I have some advice but it may be too late for him to take it: don't release any excerpts or early chapters until the first draft of your manuscript is done; make your lump of clay before you send it out into the world for evaluation.

But my advice may be too late. On the homepage of his website, Dave writes, "I'm hoping a number of published excerpts and the book's Introduction, below, will whet your appetite." I can only hope that unlike the Flu Goo people and their still-to-be-done sales, that Dave already has all of his chapters written, including the last one, which is always the hardest one to write, especially because you know that when it's done you are going to have to go back to the beginning and truly evaluate your creation...and get out the sharp tools. Sales are the same.

It's easier to do just about everything than get out there and make cold calls. But without sales, as the Flu Goo pitchers learned in the Den, you don't have a lump of clay that can be valued.  A start-up company with no sales is like a manuscript with no ending, assigning value is impossible. There is still a lot of hard work to be done.

By the way, the Flu Goo people don't even have a website. I know that I'm just an artsy-fartsy writer, but it seems like the stuff that shakes loose and the focusing that happens during the process of creating a website is an essential part of building a new company, right up there with sales and making your business "manuscript" complete and ready for e-valuation.

Copyright 2010. Laura Thomas. All Rights Reserved.
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  1. The company now has sales with major retailers and is scheduled for a full launch under the new name Sani Slime.