Category: Business Planning

Sometimes it is Just Time to Pull the Trigger

There are many really good business opportunities that never make it past paper. Would-be entrepreneurs agonize over every detail of their plan to the point that it never gets off the ground, or they miss their window of opportunity.
One of the virtues that Mike Naughton and I are writing about in our new book The Good Entrepreneur is prudence, which entails being good stewards of the resources we have at our disposal. Entrepreneurs who agonize over getting started are often concerned with being good stewards of their own resources they plan to put into their business and of the resources they will get from friends, family, other investors, and creditors.
But there are two critical errors that one can make when looking at how the entrepreneur manages their resources. One error is being careless, reckless and wasteful with resources. In this case the entrepreneur spends money without thought often on things that will do little to create sales and grow the business. For example, they lease expensive space or build huge and opulent buildings, they pay themselves huge salaries, or they hire more staff all that the business cannot support. They burn the investment on things that will not create a sustainable business within the time that their seed resources will carry them.
However, another error is to not ever put those resources to use. It is like the parable in the Bible of the man who buried the money that was entrusted to him, never putting it to use.
StartupJournal has a case study of Gary Doan and his innovative design for a network router that illustrates this error.

He proudly showed it off at trade shows and to industry reps. Amid the late 1990s tech craze, he raised some $19 million from investors over a couple of years. “We got feedback from all sorts of places, what it should look like and how it should be different,” he recalls. His 70 engineers on staff continued to refine it with every new review. “It most definitely took too long to get out the door.”

I tell entrepreneurs that they often have to be comfortable with a plan that is 80-90% ready. The time it takes to perfect the plan is often time that will keep them from ever getting their business started. Here are some things to keep in mind if you are having trouble “pulling the trigger” to launch your business:
– Your business will most likely not look anything like your plan within six to twelve months. Your plan is a living document, not a blueprint that prescribes every step in detail for the entire life of your new venture. You will learn with each step along the way and that learning should inform and shape your planning as you go.
– You are most likely entering a dynamic market. That is usually what creates the opportunity you are pursuing in the first place. Be ready for what Peter Vaill call the permanent whitewater that you are about to enter. The assumptions you make today in your plan will likely look very different in a few months as your market evolves.
– You can never eliminate all risk and uncertainty, no matter how long you plan. That is part of the game. There will be surprises around every turn. Your success will be determined in how flexible and nimble you are in adjusting to all of these surprises. You cannot plan it all away no matter how hard you try. Entrepreneurship will always have some risk. Plan for as much as you can, and then forge ahead.

Good Source of Industry Trends

Bill Hobbs passed along this great site that provides links to 117 blogs by industry analysts. It tends to be more tech-oriented, but offers a very rich source of information from a variety of sources. The search engine at this site is also useful.
Not only is industry data like this is critical for effective start-up planning, but also for managing the growth of a business. Business planning should be a process, not an event.
Too often entrepreneurs believe that the business plan that they developed prior to opening should be treated like a detailed blue print. It should be followed step-by-step. Once completed, the business will be like a well built house that will last for decades.
The problem is that the market you are entering is probably under going dynamic change. This change is what in most cases creates the opportunity you are pursuing. You are entering what Peter Vaill calls permanent white water.
Your plan is full of assumptions, not just facts. Assumptions need to be tested and refined. Sometimes they need to be abandoned if proven wrong. The plan is more like a general map of a river. It shows where you will be headed, but the key to your success in navigating this river is in your ability to adjust to all of the things that you could never have planned for. The large rocks in your way that do not show up on any map. The sudden rising of the water due to an unexpected deluge of rain. A tree that has fallen across the river.
All of these require dynamic, real-time adjustments in your planning. Managing with assumptions means knowing those things that you are unsure of, and knowing those things you don’t really know, none of which you can absolutely plan for. It is also knowing those things that will likely be changing, and keeping a watchful eye each step of the way.
Your industry is likely to be a volatile and sometimes unfriendly place to operate within. You best tool for this is to keep informed about what is happening so you can integrate these changes into your ongoing business planning.

What Competition?

Those who read business plans on a regular basis begin to see certain patterns that immediately send up red flags. One of the most common that I see is a when the entrepreneur downplays, or even dismisses their competition. Sometimes it is due to lack of careful research, sometimes it is due to tunnel vision, sometimes it is arrogance, and sometimes it is due to denial. But whatever the cause, ignoring the competition is most often deadly for a new business.
Jack Trout offers some good tips on how to look at your competitive environment at Forbes.com.
1. Avoid a Competitor’s Strength and Exploit His Weakness
This reminds me of the classic entrepreneurial strategy from Peter Drucker: “Hit ’em where they ain’t.” If you notice weaknesses in your competitors your customers will likely see the same things. And if it is something that really matters to the customer, go after it and use it to your advantage.
2. Always Be a Little Bit Paranoid About Competition
If it feels like the competition is watching you, they probably are! They will adjust their strategy to counter moves you make. The start-up of a business is just that: the start. Competition is not a race to the starting line.
3. Competitors Will Usually Get Better, If Pushed
Just like in sports, competition will make your opponent better. That means you will also need to work at getting better at what you do and what you offer to the customer.
4. When Business Is Threatened, Competitors Aren’t Rational
Remember that the two responses of a threatened animal are fight or flight. In business, competitors rarely fly, so get ready for them to fight. The fighting response is not always well planned. It is usually instinctive and impulsive.
I recommend that business owners use a tool called a competitive matrix. It is really quite simple. Along the top of the matrix list the 3-6 primary criteria that customers use to choose either your product/service or your competitors. Think like your customer.
Then along the side of the matrix list each of the main competitors seeking the same customers as you. Again, keep the list to about 3-6 of the toughest competitors you will face.
Then inside each of the squares of the matrix describe how well each of the competitors addresses each of the needs of the customer. Be objective and be descriptive.
This should not be a one time exercise. It should become the way you continually monitor what each competitor is doing in the market and how your customers’ tastes and preferences are changing.
Never take your eye off the competition and never underestimate what they can accomplish.

Good Advice on Business Planning

One of my students, Erin A., passed along a great article from Entrepreneur.com that really summarizes effective business planning. If you are in the process of developing a plan I strongly recommend you take a look.
Some of the highlights include:
– “Don’t confuse cash with profits”
– Remember that it is not the idea that is crticial, but your execution of the idea.
– Don’t confuse a plan with business planning
– Be honest and be realistic

Write Your Own Plan

One consulting job I will never take, no matter what the fee, is writing a business plan for someone else. John at new dog old trick offers his take on outsourcing business plan writing.
“Even more importantly, the entrepreneur must own the process of planning. The plan document is an artifact – an output of the planning process. Nobody can own the content, the substance behind the planning process, except the entrepreneur. That’s where all the time and energy need to be focused. On the process of planning, not on the document itself. Yes, the document is important, but confusing the plan with the planning process is a triumph of form over substance that too many entrepreneurs fall victim to.”
Well said!

Small Company Finds Strategic Partner for Pet Food

Strategic partnerships can seem overwhelming to many small businesses. But, Fortune Small Business offers a great example of how even a very small business can partner successfully with a large company.
“When the Discovery Channel’s television show Animal Planet unveiled its line of pet food products at a Chicago trade show in October 2004, the real surprise was that all 35 of the tasty consumables on display were made by tiny Castor & Pollux Pet Works from Portland, Ore.”

Entrepreneurs Look Back on Their Forecasts for 2004

The Nashville Business Journal (our local version of the American City Business Journals) ran an interesting look back on how well ten local entrepreneurs actually did in meeting their 2004 forecasts.
There are several interesting lessons on the challenges entrepreneurs face when looking into their crystal balls each year. For many they got to where they had hoped, but not the way they had planned. Business planning is such a fluid process, even for established entrepreneurs. The same creativity that launched the business becomes even more important as you navigate what my friend Peter Vaill describes as the permanent white water that is business today.