Category Archives: Entrepreneurship

Entrepreneurs: Optimists or Realists?

There’s no doubt that you’ve heard that most businesses fail.  When you look at the statistics, it’s very easy to believe that entrepreneurs are dreamers that either ignore the statistics or are just plain naïve.  If you knew 96% of companies fail within ten years, would you still do it?  We know entrepreneurs are smart and willing to take calculated risks, despite these overwhelming odds.  Do they even consider the realities of the entrepreneurial journey?

The first thing to realize about the odds of failure is that they are directly related to the amount of cash in the company.  Bill Camody stated in his article “Why 96 Percent of Businesses Fail Within 10 Years” that “cash is a fact.”  Once you don’t have any more cash, you can’t pay your bills.  This is a reality and certainly hits home very hard.  Now consider that the most significant source of funding for all business startups is the founder’s personal savings, which is roughly four times greater than any other source, according to the Kaufman Institute.  Venture capitalists and angel investors don’t engage heavily in startups.  If you’ve seen ABC’s TV show, Shark Tank, you know the sharks don’t like to invest in an unknown.  They want to see a cash flow before risking their money.  So, if you’re going to get money from others, either do it very early in the launch or you’ll have to grow the business before you can get a cash injection.

Most startups fail.  Most founders use their own money.  What can they be thinking? Do entrepreneurs overlook the realities of startups?  In a survey by Kauffman, many founders shared their thoughts on the factors that prevent others from creating their own startup.  These factors just might be the realities that one needs to consider (and constantly measure) when engaging in their own startup.

  • Risk – over 98% of respondents ranked an inability or lack of willingness to take risk as an important barrier to entrepreneurship.
  • Time and effort – 93% feel that entrepreneurs often underestimate the time and effort requirement to get their startup off the ground.
  • Capital – 91% identify the difficulty in obtaining capital as a major inhibitor, which may explain why most use their own money to start their new company.
  • Management skills – 89% cite management skills and the ability to start a company as critical to success.
  • Family pressure – 83% believe that family pressures to get a steady job and paycheck are real and challenging.

Other challenges mentioned in the survey include stress, maintaining a work-life balance, developing products and services for changing markets, government regulations, taxes, and the costs of employee benefits.

While it’s very hard to identify the right combination of the aforementioned factors that will lead to business success, there are some factors that will certainly lead to failure.  In a study by the University College London, it was found that businesses with entrepreneurs who held no real business experience did not increase profits.  The premise here is that nascent entrepreneurs don’t apply the appropriate weight to opportunities and threats.  In other words, their alertness to identifying threats and use of cognitive skills to recognize opportunities are not in balance.

Optimism has been shown to have a positive impact on entrepreneurial success, in terms of both actual firm growth and financial performance.    Realism, which also affects financial performance positively, is defined as the consistency between growth expectations and actual growth.  As with most entrepreneurs, and as verified by this study, optimism dominates over the impact of realism.

With regards to a balance of both optimism and realism, a dose of realism has the effect of modifying the overconfident cognitive bias of optimism.  For example, watching more cash flow out of your company than in for a long period of time has a propensity to dampen high expectations of future success, forcing one to reevaluate the current situation and cognitive strategy.  A lack of business experience can lead to a late recognition of this imbalance, resulting in failure.

In my experience, most entrepreneurs do a fairly good job of identifying threats and opportunities.  The things they incorrectly assess about them are the magnitude and timing, such as running out of money.   An important thing to remember is that most businesses are not creating something that hasn’t been done before.  There is a lot of literature, experience and information in the world.  Entrepreneurs should always seek it out and ensure they are correctly and constantly assessing their expectations, measuring performance factors (for a dose of reality) and maintaining just enough optimism to keep striving for their aspirations.  Additionally, before you begin to establish any expectations for your business, ensure you have fully applied your cognitive abilities to the factors mentioned above; that is, risk taking, funding, time and effort, management skills and family.

Business Startup: What skills do you need?

When you are unemployed and begin searching jobs listed in Job banks, like LinkedIn, Indeed, Monster and so on, you seek out job descriptions that match your skills and experience.  But when you start your own business, the job description might look like a book full of blank pages.  The skills, knowledge and abilities needed will be many.  They will be hard to define in the beginning.  In fact, the requirements will reveal themselves every day.  If you want to get a sense of what you’ll need, take time to talk to entrepreneurs who’ve failed and who have succeeded.  You’ll want to know every lesson you can.  Here are some lessons I’ve picked up along my own journey.

Before we look at skills, you need to understand a few other required characteristics of startup entrepreneurs.

  1. You need to be self-motivated. There’s no one around to push you to do things you need to do or tell you what you need to do.
  2. You need to very passionate about the business. Things will be difficult in the beginning but you need to keep pushing for success.
  3. You’ve got to be able to handle stress (and lots of it). It could take 2 years for your company to get off the ground. I’ve started companies with a family. When times are tough and no money is coming in, everyone will pressure you to fix it. (I’ve got a great post for this coming soon).
  4. You need to have a clear vision of your business, that is, a good business plan. My blog tells you how to do that (The Blitz Blog – The Source of Inspiration for High Achievers ).
  5. You need to know how to take a small success and create more success. This is the process for building your business.
  6. You need to be a quick learner. This includes learning from others because you won’t know everything you need to know.
  7. You must be customer friendly.   People will buy the service or product because of you.  If they like you, they’ll buy.
  8. You need to be the expert.  Whatever you sell, you need to be the expert on it.  You want people to seek you out.
  9. You need to be organized.  Startups need planning and focus.  You should have enough information to operate on autopilot (but drive it yourself).
  10. You need to be decisive.  Startups need money fast.  You can’t afford to overanalyze situations.  Make decisions and move on.

The typical skills needed for the startup entrepreneur are:

  1. Legal sense – you’ll have to create the business and operate within legal guidelines for your location and the industry.
  2. Accounting – how will you track your expenses and revenue? You will need a CPA but it helps to understand what they do because it could be you doing the accounting in the initial phase.
  3. Business development – You’ll have to decide what customers to market to and how they do business.
  4. Finance – How will you fund the initial phase of your business? You’ll have to establish the original budget and put the money in place.
  5. Marketing – You’ll need to create the social media and marketing materials for the business.
  6. Customer Relationship Management – You’ll need to be a salesman. People won’t buy products or services. They buy into YOU.
  7. Conflict resolution – Hopefully, you don’t make too many mistakes in the beginning but you need to fix them quickly.
  8. Collaboration – You might need to partner with other companies to sell your products or services. What kinds of arrangements can you have? You’ll have to figure that out too.
  9. Contracts – You’ll need to develop contracts, statements of work, proposals and other documents to support winning business for your company. Guess who gets to do that?
  10. Hiring – Once you bring people on board, there are a lot of government regulations that are required to hire people. You’ve got to know those too!
  11. Budgeting – You’ve got to be able to assess your costs to ensure you make a profit. Estimating labor and materials can be difficult, especially when your service is long term or customized.
  12. Writing – You’ll need to be able to create processes and policies that your company will use, such as privacy, nondiscrimination, quality, reporting, business plans, and so on. You’ll need documentation for your customer, the government and your company.
  13. Presentation skills – You need to be articulate as you’ll have to hold meetings and provide direction for your people. It must be clear and actionable. Otherwise, you waste time and money.
  14. Innovation – You have to keep your products growing and developing with the needs of your customer. Everyone usually talks about the APPLE model. It’s not a bad one to follow, if you can find out what they did in the beginning.
  15. Willing to learn – I can’t tell you how much I had to learn to get my business off the ground. Opportunities to learn are everywhere you turn.
  16. Adaptability – Very little will work the way you think it will. You’ve got to learn to adapt.
  17. Creativity – There will be many times where you will need something that doesn’t exist.  You’ll have to create it.
  18. Negotiation – Business is all about the deal and you must learn to master it to grow your business.
  19. Emotional Intelligence – You must be emotionally stable and able to handle the emotional swings of success and failure.  They are only bumps in the road to success and you have to hit some to get there.
  20. Focus – Businesses are built by defining a plan and implementing it.  Things change but you can’t let that happen so often that nothing gets done.

These are just a few of pieces to the puzzle of success.  Entrepreneurship is one of the greatest learning experiences you’ll ever have and it will also be one of the most challenging.  It isn’t for everyone.  When you’re in the middle of your startup, you’ll easily identify those who like the idea of entrepreneurship and those that don’t.  It’s a completely different mindset.  So, get out there and fill in the pages of your book with all the things it took for you to build your dream.

Startup Advice: Who/What/Where/When/How

I take advice from everyone.  It doesn’t mean I’ll use it.  I listen because I’m always interested to hear other people’s perspective on starting and running a business.  You never know what ideas people will give you (for free).  But when it really comes to advice that I plan to use, I’m very critical of the source I use.  And you should be too.

whoWHO DO I LISTEN TO?  It depends on what I want to know.  I always read what many experts have written on the particular subject before I go talk to people.  Being informed on the topic will help me filter out the “BS” people have a tendency to share sometimes.  Plus, it communicates to the expert that I’m serious about the situation and have done my homework, so I won’t be wasting their time.  Most experts want to be consulted, so they are happy to cull out a bushel of advice to help demonstrate their comfort with the subject.

Remember, you need advice you can use. It must be tried and true.  It must be applicable to your situation and spit out in terms that can be easily translated into action.  As for the people I pursue, they must have a few credentials that I can validate before I consider contacting them to ask for advice.  Here are some from my general list of traits.

  • Shares their experience (not too many years in the past).
  • Provides references to resources and people.
  • Offers actionable advice.
  • Respected in their field or industry.
  • Proven successful.
  • Share in a few fundamental beliefs: Faith, Family and Friends.

Don’t be afraid to ask anyone for advice, no matter how successful.  Recently, I had lunch with an alumni from my MBA school, Indiana Wesleyan University.  Evan is a financial advisor who just moved to Georgia and into my neck of the woods.  It never hurts to have such a fine, upstanding advisor in my corner.  Will I use his expertise?  You bet I will.  As you branch out to connect with the rich and powerful, realize it might take time.  The highly successful will just take a lot longer to connect with.  But keep trying.  My record is 18 months of continuous nagging. I think they felt sorry for me and gave me an hour of a billionaire’s time.  Wonder what that was worth?

whatWHAT DO I ASK ABOUT?  For me, this could be anything from the legal obligations of ADA, OSHA and E-verify to building the best marketing strategy.  I seek support as I need it.   Unlike the many executives I’ve served under over the years, I think it is very important to seek advice and get answers on anything that you don’t know about.  I’ve watched executives tank their company because they failed to reach out to experts to understand a part of the business that they didn’t.  Maybe it was pride or ego or just plain laziness, but a company’s existence depends heavily on its leadership’s knowledge base….and you never know enough!

For example, maybe you want to know how to distinguish your business from all of your competition, especially since you all seem to do the same thing.  I would say to you, “read the “Blue Ocean Strategy” by Chan Kim and Renee Mauborgne.”   In fact, I’ll send a copy of this book to the first two people who send me an email showing me that you promoted this post.  Running a great business is about finding the right answers and you must chase them vigorously. Your future depends on it.

whereWHERE DO I GET THE ADVICE I NEED?  I’ve found that the best advice comes from other business owners.  If you’re a startup, you probably don’t have a lot of connections to business owners.  Well, maybe you do.  My kids have been playing sports for years and now that I’m engaging in my own startup, I’ve just finally begun talking shop with the other kids’ parents.  I’m amazed how many are running their own business.  I never asked before because I didn’t have a real interest in their experiences, but I do now.  Business owners are great advisors because they can share real experience, not theoretical notions that you have to figure out how to apply.  Even better, they can connect you with other professionals they have worked with in the past, saving you considerable time in finding the support you need, such as legal, accounting, marketing, branding, strategy and funding.  You’re support is likely all around you and you don’t even know.  Take time to let people know what you are doing and what kind of help you need.  Many will be happy to help you succeed.

whenWHEN SHOULD I ASK FOR ADVICE?  This question is easy.  You ask for advice before you need it.  It takes time to really understand your issue in enough detail to ask a question.  You also want to ensure you do a little research to generate some potential answers to your question before you propose the question to an expert.  Then, you’re not really asking a question, you’re seeking validation of your ideas.  Professionals are more likely to respond positively to this scenario than an “out of nowhere” question from a stranger.  It also takes time for experts to respond to the question.  So you need to give yourself sufficient time for a response.  To improve your success in getting that valuable advice, choose times of the day where professionals are more likely to share information.  This includes early morning, the end of the day or after exercise when we are tired, as these are times when our defenses are down and we’re more likely not to think you might be a risk or threat.  Additionally, shared times of relaxation and enjoyment, such as during a golf game or a networking event, are great times to secretly tap into the minds of the experts.

howHOW DO I ASK FOR ADVICE?  There are several ways to approach this.  First, you can use mutual connections to make the initial pitch for you and setup the question for you.  Start with people you already know to identify potential experts who experienced what you’re preparing for.  Second, you can reach out to experts directly but you may want to hone a simple elevator pitch about your business that ends with the question that you so desperately need an answer. Third, you can invest in the experts you seek guidance from.  Most experts get tons of requests for information from people who want it for free.  We are all in the business to make money.  Show your expert that you have invested in them by purchasing their book, going to their seminar or promoted their work in some way.  Then, they’ll feel somewhat compelled to invest in you.  I would suggest that investing in the experts first is by far the best way to get the answers you seek.  It provokes feelings of reciprocity and will likely build a much stronger relationship that you can tap into for years to come.

SEVEN DEADLY SINS OF STARTUPS

When I was young, I always wondered why there was so much talk about leadership.  I tried to read as much of it as I could and then look for signs of it in organizations.  After many years of working inside other people’s organizations, the light was turned on in my brain as to why Leadership is such a hot topic.  When you look at companies that are in existence today, you don’t really think about how poorly they are run.  Mostly because it isn’t discussed and is hidden from the public to protect stock prices.  But you can see little signs that troubles exist.  For example, big companies play around with benefits all the time.  I once thought this was done to keep the costs low but it turns out that it is usually done to help boost the bottom line.  If you’ve got parents that retired from major corporations, they’ll tell you that their benefits are constantly declining.  Running a big business is difficult but they can adjust things to account for mistakes.  However, these little mistakes can grow and turn into major disasters that destroy the whole economy. When you’re in startup mode, failures come with a much higher cost since you don’t have much cash flow and you can’t afford to delay it any.

Combining all of the things I’ve seen from companies in the past, I’ve tried to outline the seven key failures that leadership engages in that results in either the destruction of the company or a massive decline in their earnings.  Here’s what I’ve seen.

MYOPIA.  This shortsightedness often results from a failure to plan your startup.  The most common example is running out of money because the startup took longer than you had expected.   When you’re engaging in business areas you have no experience with, it’s always best to find someone who can help you identify and plan for common risks.  A good planning template will go a long way to improve your vision.  See Robert Donnelly’s Plan-for-Planning Process.

SLOTH.  Laziness is a common characteristic for those entrepreneurs that try to startup their business while working a regular job.  Well, maybe they aren’t so lazy but they fail to put sufficient energy into the business to drive the startup.  It’s the same thing I hear from MBA graduates who can’t figure out why their career didn’t take off after they earned their MBA.  The MBA degree is a piece of paper (i.e. diploma), just like you’re FEIN is a piece of paper.  It guarantees nothing with regards to your success.

PRIDE.  No matter how smart you are or how great your business idea is, you will always need to be thinking about ways to transform your company to remain competitive and relevant.  I’ve seen way too many companies fail to adapt to changing customer demands. Every generation is different.  Only 71 of the original 1955 Fortune 500 companies are in existence today.  Here are some notable flops:  Blockbuster Video, Kodak, Borders Books, Sears, Pan-Am, US Postal Service, Hummer and Blackberry.  If the big guys can fail from this, so can you.  Jeff Stibel, cognitive scientist and serial entrepreneur, says that once the human mind sets out to do something, it will do it.  If you’ve ever worked for a company on the downslide, you probably noticed that leadership did very little to stop the disaster.  Maybe they thought they had all the answers.

MISANTHROPE.  When I started my first business, I wanted to do everything so I would understand all aspects of the business.  Hey, I went to college for 14 years.  I’m a smart boy.  Well, I learned the hard way that you have to bring people on board to help you achieve great things (which usually takes great effort).  Oh, my first business failed horribly.  What was I missing?  The customer’s perspective.  The customer holds the key to my success but I never took the time to listen deeply to what they needed.  In the book, The Cluetrain Manifesto, the authors share a key piece of wisdom; that is, markets are conversations.  If you want to be successful in your startup, you have to engage in conversation and trust what you hear.

GLUTTONY. This little terror wreaks havoc on you in multiple ways.  First, new entrepreneurs are often chock full of ideas.  All of them are brilliant and destined to be a huge success.  Trying to implement too many of them leads to a quick lesson; that is, they aren’t all brilliant and you’ve just wasted valuable time and resources.  When in startupville, keep your focus on the main idea behind the business.  Get it up and running before diving off into other ideas.  Second, once success begins to roll in, it’s tempting to build your own palace to work in every day.  Early success can lead to lavish spending and the creation of an unsustainable burn rate of income.

OPAGUENESS.  Those ideas that make us gluttons can also cause us to spin our wheels for years without developing our product or service.  My close friend, Mike, has been working on his startup for 7 years and has yet to develop a product for his international market.  While he has managed to capture some investments, he has isolated his own workforce because they can’t seem to understand what the company is trying to accomplish.  Once the money from investors came in, Mike seemed to lose focus of his original dream.  Corporate death is only a short time away, as the confusion is causing his workforce to seek employment elsewhere.  Your workforce needs clarity and focus.

AVARICE.  A new startup surely induces visions of extreme wealth, leisure and control over one’s life.  It’s fun to think about, I’ll admit.  However, allowing the desire for wealth to overcome you and drive you to engage in risk that is unhealthy for the business.  There are way too many examples of these types of failures, where are often brought upon by too much funding.  My favorite picture of this problem is Enron.  There level of greed was unprecedented and led to numerous convictions of fraud and conspiracy.  I know what you’re thinking….too much money is a bad thing?  I don’t think it is but allowing the desire for money to drive your actions in an unethical direction is not healthy.  As a entrepreneur, your business is who you are.  Don’t allow the business to change who you are.

If you’ve seen some other things that we all need to know, please share your story.  Starting a company is hard enough all by itself and we need every lesson we can get.

RISK VERSUS COMMITMENT

Starting your own business is fun and challenging in ways you never imagined.  I get a lot of questions about these challenges.  Most budding entrepreneurs are trying to estimate the barriers they’ll run into.  This assessment helps them understand the amount of risk they might face, which is a good thing to do.  But, I think they have the concept backwards.  In my experience, it’s your level of commitment that defines the amount risk you’ll encounter.  If you don’t invest much, you don’t have much at risk.

My kids love the TV show “Shark Tank.”  For me, it’s entertaining.  The Sharks have a lot of money, so the risk they take is small, considering it is only a fraction of the value they possess.  But for most of the small business owners on their show, the risk is much greater.  Well, most of them.  I do remember a recent episode when the Sharks asked the business owner how much she had invested in the company so far and she said not much because she was still working her day job.  I think Mark Cuban jumped out of his chair in shock and gave her the “I’m out” response after chastising her for her lack of commitment to the company.  Apparently, the Sharks believe you have to be “ALL in” to really achieve the success you desire.  Why? It shows everyone your level of commitment to your business and dream.  Sure, we can work in a job we don’t like but would someone really build a business that didn’t encompass their passions?

Napoleon Hill once said “Great achievement is usually born of great sacrifice, and is never the result of selfishness.”    For most entrepreneurs I work with, great success is their quest; more specifically, financial independence.  They seek the freedom such success affords.  After all, we only have so much energy to put into building dreams.  If we spend a lot of energy building someone else’s dream, we have little energy to build our own.  This is why Mark Cuban didn’t appreciate the young entrepreneur’s efforts in building her company.  This approach is attempted by so many professionals; that is, working for someone else while starting a company on the side.  We already know investors aren’t crazy about that idea, but what else could this approach be missing?

Just as an investor doesn’t think you can put all of your energy in a side business, an employer doesn’t think you can do your best in your job if you have a business on the side.  Employers will worry that each day you’ll be focusing on your company and not theirs.  It will threaten your job security, which might make your side business your only business.  If you have a business on the side, don’t share that with your employer.  Managers don’t have entrepreneurial mindsets and won’t understand that you can separate the two activities.

According to Forbes, 90% of startups fail.  Even when you start out under the best conditions, you’re likely to fail.  Yes, there are outliers that prove you can build a business on the side and then jump into it full time once it takes off.  But considering that 10% are successful, I would suspect that a small fraction of these started as sideline businesses.  While I’m not a big fan of side businesses, there is one reason you might try it.  Forbes identified the main reason startups fail.  Essentially, half of startups create a product no one wants.  However, starting your business on the side might give you sufficient time to assess the market for your product, especially if you don’t have the money to contract someone to do a market study for you and you have to do it yourself.  Taking the time to study the market will greatly improve your odds of success or help you keep from becoming another startup failure statistic.

Another challenge for part-time startups is the ability to truly focus your energies on figuring out how to reach your market and build a business.  Without employees, you’re forced to wear all hats of a business.  That can be overwhelming, especially when you realize that you are not an expert at many of them.  It takes time to learn about legal requirements, accounting, marketing, sales, and planning.  Now, consider that your day job may require travel and times of intense efforts requiring long work days, and you can begin to see how your startup could remain in startup mode for many years.  Eventually, it becomes easy to push off making decisions about your company because of other responsibilities.  Without sufficient consideration of issues, you run the risk of failing to consider everything you should consider which can result in poor decision-making.  For example, if your company began to grow to the point that you needed to contemplate going all in but were afraid to make that step because you didn’t have enough funding to pay your salary for a year or so, then you might not decide to get funding to grow the business.  So, you remain in your safe job and keep the business at a level of work that you can manage while you’re working your main job.  This is the risk versus reward scenario.  Little risk with earn you little reward.

As a sideline business owner, your risks aren’t too bad.  You already know most knowledgeable business people, especially investors, may not take you seriously, much less invest in your business.  Your startup time is likely to be very long (e.g. multiple years).  If time to market is important, you’ll likely miss it.  Also, the longer it takes to start, the more risk you have in your day job.  It gets hard to hide your real passion from everyone at work and telling the wrong person could bring your employment to an abrupt end.

As an “all in” entrepreneur, the challenges are much greater.  When I started that business, I forfeited my job.  I sold my house.  Moved my family and rented a house.  As I began, I felt I could earn business and move out of the startup phase in less than a year.  This sounds easy, right?  Its okay for first few months but when it begins to take longer, around months 7 through 9, your family and friends begin to wonder if you’re going to make it.  I began to wonder too.  But you can’t lose faith. The slightest crack will set off those around you and spin your world into a huge panic. Relationships can be easily strained, mounding more pressure on top of you. With no customers, will I need to tap into my own personal funds if I pass the first year mark without success? If I do, then all future plans could be at risk; vacations, cars for the kids, college, retirement and all of those luxuries we all enjoy.  But….if it does work as planned, the reward is much more than I can get working for anyone else in any given year.  No more 1 to 3% annual increases each year or that tasty spiral cut ham for Christmas.  I’m working for myself, pushing a business I built. With significant income flowing in, I can start building my own Shark Tank and diversifying my investments.  It’s chasing financial independence and as an entrepreneur, I can get there much faster.  And when I’m tired, I let my kids run it.  Yes, the risk is much greater, but so is the reward.

I’ve tried starting businesses both ways; part-time and full-time.  Full-time certainly has considerably more risk than the “playing it safe” part-time approach.  I think the decisions you make and the effort you put into your business are considerably different between the methods…and the results typically reflect that.  It’s amazing the energy you’ll put into a business when your next meal or rent depends on it.  You will become bolder, especially in the face of any adversity.  There are many things to learn and procrastination has a price that as a full-time, “all in” entrepreneur, you can’t afford to pay.  Success becomes your only option.  You strive very hard to gain that first customer so that you can call yourself a legitimate business.  Then, you have to learn how to take that first success and create more success from it.  It’s a never ending learning process.  As a father of three, starting a business is much like raising a child.  It takes effort…constant effort.  It’s painful.  It’s risky.  It totally changes your life.  Sure, you can raise a child with little effort but we all know what those results look like.

So, what you think?  Are you ALL IN?

The Plan-for-Planning Process – Step 5

Step 5 – Asset Management

The fifth chapter/section in the business plan is the financial section. It should contain the projected Profit & Loss Statement, the Balance Sheet, Cash Flow projections, and key financial ratios for the business plan.

All of these financial statements should contain commentary where required to explain and clarify any specific numbers.

Additionally, any substantial capital expenditures over the business plan period should be noted and explained in the Asset Management section.

Summary level examples of these statements are:

                                                Projected Profit & Loss

                                                Operating Plan Period

                                                20XX     20XX    20XX

     Sales

     Cost of Sales

     Gross Profit

     Expenses

     Net Profit

                                                   Estimated Balance Sheets

                                                   As at:  20XX   20XX   20XX

        Assets

        Liabilities

        Equity/Net Worth

 

                                                    Estimated Cash Flows

       Opening Cash 1/01/20XX

       Incoming cash

       Outgoing cash

       Closing cash  12/31/20XX

 

                                                   Estimated Significant Financial Data/Ratios

                                                    20XX     20XX     20XX

      Working Capital

      Inventory Turns

      Receivables Collection Periods

      Debt to Equity

      Return on Assets

 

                                                    Projected Capital Expenditures

                                                    20XX     20XX     20XX

     Asset Replacements

     Expenditures on

          Strategy 1

          Strategy 2

          Strategy 3

Reviewing the Asset Management will give any reader a clear picture of the projected financial situation of the company over the business plan period.

Step Three – What are we going to do it with?

Continuing with your business plan – the story about your business:

Step Three – What are we going to do it with?

Typically called – “The Marketing Summary” – this section/chapter identifies the products/services that the company offers, and their plans for each during this business plan period.

The format for this section is:

  • A description of the product/service, and the market(s) that it competes in.
  • Where the product is in its product life cycle (E,G,M,A).
  • How much it contributes to the profitability of the company.
  • The specific marketing strategies for this product/service.
  • Any plans for modifying this product/service to meet changing customer requirements, and by when.
  • Any concerns about competitive threats.

When completed this section should present a clear picture of where the company is in its life cycle and the individual products/services positions in their life cycles that support and contribute to the overall company life cycle position.

Ideally, this should be summarized in a table-like presentation:

Product  Life cycle position  Projected sales  Profit contribution

A                G                                    Yr 1 Yr 2 Yr 3         Yr 1 Yr 2 Yr 3

B                M

C                 A

D                E

Company        G

As you can see this simple presentation gives the reader a complete picture of how each product/service contributes to the total projected sales and profits of the company for each year of the business plan period, as well as where each is in their product life cycles, and the company as a whole.

In combination with the narrative for each product/service you have a complete presentation of “what we are going to do it with”.

Stay tuned for Step 4!

As always, send us your questions for Dr. Business to info@blitzteamconsulting.com.

How to Win Support for Your Entrepreneurial Dream

Your business should begin with a business plan and financial projections.  Dr. Business mentioned this in his posts some time ago.  These are valuable tools because they help us capture our dream and put it down on paper.  Without this clarity, most people will think you’re still in the creation process, molding your idea into something actionable, and will be reluctant to lend a hand.  Here are two things you need to create to turn the excitement you create in others into support for your dream.

Clarity of Vision.    Before you do anything with your entrepreneurial dream, you first need to paint it with enough clarity that you can describe it in detail beyond the normal person’s level of patience.   In a recent business venture, my partner brought me an idea of the business he wanted to start.  Initially, the idea was fairly simple and would be realized within a year.  Thinking this idea had merit, I decided to take a good look at it.  For me, it took about two months to fully vet the idea.  I looked at everything.  When I was done, I created a new vision for the company that was considerably different from the original idea.  The service offering was the same but the customer base was much broader and had a growth plan that spanned geographically and across different markets.  Another modification to the plan was the elimination of competition from other service providers by the new choice of the customer base.  Lastly, I created a technology plan to that was aimed at optimizing the processes through the use of technology that would eventually make it a hands-free process.  After my review, there was little I didn’t know about this plan.  I could easily talk for 3 hours on the new plan.  This is well beyond what anyone would want to hear in any one sitting. Granted you may not have put this much time into your idea, you need to be able to visualize and verbalize two main ideas; that is, what you are doing now and what you’ll do later.

What are you doing right now?  This is an extremely important question.  Imagine someone hears your idea and wants to invest in it (not a VC or angel investor).  You need to be able to tell them what you’ll do from day 1 through the first year.  Interested parties will want to know what actions you’ll take.  If you can explain those, then they will assume you’ve made a fairly good analysis of your idea.

Where do you see this going in the future?  This answer communicates the amount of time you’ve put into your plan.  If your answer is “I don’t know,” then most people will have serious concerns about the potential for this idea.  But if you can provide an answer that outlines the actions in year 2, year 3 and beyond, your audience will take further interest in your dream.

Market it to them.  One thing you know is that accomplishing your dreams all by yourself is almost impossible.  You need others to take a real interest in what you are doing.  Most startups fail.  This is a known fact.  Why?  Vision and support.  Without a vision, you won’t win support.   Without support, you’re on your own (and that’s really difficult).  Gaining support isn’t that hard.  It all starts with expressing your dream in a way that inspires others to want to be a part of your dream.   In fact, sharing your dream to inspire others must be one of your goals.  The key to soliciting support for your endeavors is to articulate your dream in a way that is clearly visible, tangible and palpable.  You can sell your dream without anyone ever even knowing it.  Here’s what you need to show them.

Vision. If you don’t have a clear picture of the future you want to create, no one else will either.  This means they can’t figure out how to help you get there.  The picture doesn’t have to be in extremely high resolution, but the more definition you can provide the easier it is to see.  Henry Ford, John Rockefeller, Thomas Edison, Andrew Carnegie, Sam Walton, Oprah, Bill Gates and many others have built an empire from nothing.  It all started with a vision.

Drive.  If you want to motivate people to action, they have to feel a sense of purpose.  In this case, it’s your purpose which must ooze out of every pore in your body, fall on the floor and splatter onto to others, infecting them with a strong sense of purpose.  There are plenty of examples.  Steve Jobs helped create Apple, then he was kicked out of the company he helped start.  He then created Pixar, which led to his return to one of the greatest companies in the world.  Steve wouldn’t be held down.  Now, that’s drive.

Passion.  Have you ever been around someone who without a doubt believed in what they were doing?  You could sense the excitement in their tone and body language.  After a few minutes of listening to them, you felt excited.  The love you have for your dream is what fuels your efforts and people should be able to sense that.  They should be able to see it, hear it, feel it,  and most importantly, adopt it.

Who are you marketing to?  Anyone who can help you move your goals forward.  I sell my dream to my mentors, friends, neighbors and anyone who takes an interest in it.  When I start talking about one of my businesses, I act like a kid in the candy store.  I’m full of excitement and energy and have the ability to ramble for days about the plans I have for them.  I share my dream constantly so my speech is well practiced and rolls of my tongue effortlessly.  Most people respond with a “slow down” comment somewhere in our conversation.

Here’s how I gauge my success in selling my dream.  In a recent startup of mine, almost everyone I spoke with wanted to become a part of the business.  I would ask someone for help and they would turn it into a job interview.  That’s how you know you’re on the right track and that your dream is so deeply embedded that it shines brightly in all you do.  In a phone conversation with a friend, he wanted to know what I was doing.  It had been a while since we last spoke.  After a few minutes, he asked me to call him on another day to understand my latest endeavor in detail.  He wanted to be a part of it.  He stated that “anything you do is surely well thought out and likely to be a big winner.  I’m in.”  I wasn’t really asking him for help.  I was just talking about my dream.  Now imagine you get an offer of support from everyone you talk to.  You’re almost guaranteed to be a success.

Remember, your success hinges on your vision and your ability to sell it.  Once you define and believe in it, things will begin to fall into place.  The world loves dreamers.  We want someone to follow.  Dreamers provide inspiration for us to follow our own dreams or become a part of theirs.

That’s it for now.  The burden is yours.  What will you do?  Wish it or build it?

A GUIDE BOOK TO PLANNING

Starting a business is never easy.  If it was, everyone would be doing it.  The challenge for most is the unknown.  When you haven’t started and run a business before, you really don’t know what to look out for.  This is where many turn to the Internet for answers.  We will spend hours searching from site to site to find the best advice.  I know.  I’ve done it many times myself and I’ve started a few businesses that way.  In fact, I started a new one this summer and am still in startup mode.  There are two ways to start a business: planned and unplanned.

My first business I thought I was very smart and could figure out everything I needed to know when I came to it.  Unfortunately, I didn’t know as much as I thought I did.  There were many legal, insurance and finance questions I couldn’t answer.  I had to stop the business to understand what these issues meant.  It really became a nuisance when I would have to stop selling my services to go figure something out.  It took me a couple of businesses to figure out that you really want to plan out your steps as much as possible before you start the business.  There’s nothing worse than having to hold a customer off while you go obtain some certification or license so you can offer them your service.  Planning early allows you to focus on selling the business when you start.  After all, that’s where the money comes from.

In my most recent business, something outside of my expertise, I decided to do the right amount of planning prior to kickoff.  I’m actually selling services to the government so I can’t afford to be unprepared.  So, I chose a detailed planning process to prepare the business.  Since this business was outside my expertise, I needed a guide to help me keep from wasting so much time figuring things out.  I’ve worked with Robert Donnelly for years and chose the guidebook he released some years ago, entitled “Guidebook to Planning.” It is a great start, complete with examples, illustrations and even forms.  Donnelly has a lot of experience in entrepreneurship.  In fact, some of the information from this book has been utilized in training classes he developed for BUSINESSWEEK and INC magazine.  This guidebook is a compilation of a lot of experience and will save you considerable time developing that invaluable plan for your startup.

While my latest business is still in startup mode, I haven’t had to spend any time going back to setup something I missed in the beginning.  Right now, I spend my time selling the services to potential customers. It’s exactly what I want to be and need to be doing.

Check out Donnelly’s Guidebook at Amazon.  Get the book.  Use the process.  Then, contact him to answer questions that still plague you.  It doesn’t get any easier than that.  Remember, you can always do things the hard way.  Why not take the time to give yourself a great start?

guidebook to planning