The first thing you should do is come to grips with the fact that you need a business plan. In a study completed by the Small Business Administration entrepreneurs who had a written plan had a significantly lower failure rate than those who started without a written plan. But if our litmus test for characteristics is true for entrepreneurs then planning itself is counterintuitive. If entrepreneurs are mavrics, if they are risk takers and they follow their gut then why would then plan? And, to be honest there is a lot of wisdom to hitting the pavement and just getting going. We have to be careful that the plan does not become the business because planning is all that gets done. In the end we still need a plan because a well written, well researched business plan serves four main functions:
1. Raising Capital – Most people find themselves writing a business plan to borrow or raise capital. The simple fact is that if you had the money you may have started your business already…confident in the potential profitability of your venture. Big mistake. It makes very little sense not to plan even if you have the money. Lenders, Venture Capitalists, Angel Investors and Economic Developers all want to know the same basic thing – will this make money. Each looks for specific characteristics of a business that they are interest in, so be sure to consider who you are writing the plan for before you start writing it. A plan written to raise Angel Capital is different than one that is going in front of a local lender.
2. Strategic Plan – A good business plan also serves as a strategic plan. A well written strategic plan identifies the mission of an organization, internal/external driving forces, and identifies Strengths, Weaknesses, Opportunities and Threats (SWOT). While all of these may not be specifically present in the business plan, the reader should be able to identify these items from the different sections of the narrative. We need to determine how you are going to compete in the marketplace. What is your niche? Who is your target market? What does your customer value? Then once you are in business these strategies need to be reviewed and changed as the market changes or as new information is available.
3. Feasibility Test – The business plan serves as a feasibility test for your business. As you complete a plan for your business it will become clear whether or not your initial assumptions about the idea hold true. You need to justify your assumptions. It is easy to make an idea work in your head…every entrepreneur can imagine finding the best location, creating the best marketing campaign, you can even make your business as profitable as you wish…in your head. But, something magical happens when you put that idea down on paper in black and white and are forced to justify your assumptions in determining profitability.
Why we business plan – a short video explaination
Every section of your plan holds valuable information that will help frame your expectations for a reasonable range of sales, cost of sales and daily operating expenses (often called business overhead). Your marketing plan will help you in determining a reasonable range of sales and your operations plan will help you determine both startup expenses and ongoing expenses. Sales minus Expenses equals profitability…therefore feasibility. Your business plan feeds information into your financial projections and backs the numbers with realistic assumptions. The business plan and financial projections act in tandem creating a feasibility study as to weather this idea will be profitable or not.
4. Opportunity Discovery – So, what if you complete your plan and find that it is not feasible? Don’t give up! Take a hard honest look at your plan and determine if there are changes that could be made to your idea to make it profitable. Don’t get locked down thinking that things have to be a specific way. Some of your best ideas will come out of the discovery of new markets, new processes, new ways of distributing or producing and finding a niche to compete in.
Let the writing of your business plan guide your business model as opposed to reflecting what you think your business model should be. In addition, don’t be afraid to change your idea completely. Many people discover that there are better opportunities elsewhere, usually within the same industry somewhere up or down the supply chain.
Last but not least, don’t be afraid to ask for help. Contact your local Small Business Development Center or SCORE office for assistance in writing your business plan.
What does an entrepreneur look like? Can you spot one on the street? What do you think of when you picture an entrepreneur or a small business owner?
Perhaps they are the quintessential tech geek.
Or maybe they are the globetrotting Maverick.
You may think of the youthful (or perhaps not so youthful) visionary.
But the truth is these are the exceptions…not the rule. Most entrepreneurs look, well…just like you and me. Joe and Jane Average. They are not a certain age, sex, or race. They are typically not smarter, wealthier, luckier or holier than the rest. They just decided to take a leap of faith in to small business ownership.
However a quick Google search will bring up another image. Myriads of sites and blog posts propose a litmus test for characteristics of people who are entrepreneurial including:
Characteristics
◦ Risk Taker
◦ Follow Their Gut
◦ Independent
◦ Problem Solvers
◦ Big Picture Thinkers
◦ Competitive
◦ Dreamer
◦ Driven / Tenacious
In my experience the last one is the only one that counts. You have to be driven. I have meet with over 1,000 entrepreneurs in the last decade and I can tell within 15 minutes of meeting if a person is going to go into business. I can tell because they look me in the eye and say: “I don’t care what you say. I don’t care what you think. I don’t care if I have good credit or money or resources…I AM GOING TO START THIS BUSINESS!”
Now, I can’t claim to know who will be successful in business. Nobody can. If they could pick successful ideas on a lark why would they waste their time in anything bust picking single stocks in the lottery we can an efficient stock market.
You Have To Ask Yourself…Do You Like These Words?
We all like and aspire to the words above in black but rarely does an entrepreneur think about the words in red. That’s what makes entrepreneurs special. According to the SBA office of Advocacy about 1 in 12 adults in the United States are actively involved in either starting or owning a business. On the flip side that means that about 11 out of 12 people are probably not very entrepreneurial and therefore are probably pretty risk adverse. Herein lies the problem. When you go to tell people about your new business idea 90%+ are not going to have the mental capacity, risk acceptance or vision to see the opportunity…to see what you see.
When Twitter fist came out I thought it was the bane of our social existence. After all, what can you possibly say with 140 characters. Until the river in my city filled it’s banks and Twitter became an invaluable communication tool to know where to go to sandbag to save our town, not to mention a tool to topple governments by connecting the people. Talk about short sighted. And, this was with years of experience talking to thousands of entrepreneurs about new ideas for infinite markets.
So who knows if you are an capital “E” Entrepreneur…the truth is only you know. The truth is that most entrepreneurs are made not born. While you may not be a risk taker you can become one by taking a small risk, realizing that it’s not so bad and then taking ever bigger risks on ever better business opportunities. So go out there are live your dreams of starting your company and getting your piece of the small business pie.
Bonus Material
Starting a business isn’t a decision to make overnight. You need to take a few weeks to think about whether or not you really want to start a business. Here are questions to ask yourself before starting a business.
1. What are you passionate about?
2. What tasks do you not like to do?
3. What do you do on your day off?
4. How well do you plan and organize?
5. What skills do other people compliment you on?
6. Do you have the physical & emotional stamina to run a business?
7. What have you always wanted to try but never had the time?
8. Are you determined to be successful in business?
9. Can you afford to advertise your business all year?
10. How good are you at making decisions under pressure?
11. How well do you get along with different personalities?
12. Are you able to hire an employee or get a helper every once in a while?
13. Are you willing to spend hours working late and early in the morning each day?
14. Can you save enough money in advance to pay for six months of business expenses?
15. Are you ready to be the receptionist, salesperson, bookkeeper and the product guru?
16. Do you and your loved ones understand how business ownership will affect your family life?
Still one of my favorite startup videos all these years later.
A summary one of my students put together:
Guy presents on the top 10 pieces of advice when starting a business – The Art of the Start.
#1 – If you want to be successful the best reason to start a business is to make meaning, not make money. If you make meaning you will make money. If you just want to make money you’ll attract the wrong type of employees.
- Increase quality of life – be creative and productive
- Right a wrong – find something wrong and fix it so it is right
- Prevent the end of something good
2 – Make a mantra for your organization – mission statement.
- Mission statements should be something employees can repeat and understand.
- As an entrepreneur, create a mantra – three or four words describing what we stand for, why we work here, and why we exist.
3 – Get going – Most people first want to prove there is a market. Just get going!
- Think different – do things 10 times better than everyone else.
- Don’t be afraid of polarizing people. Great products polarize people.
- Find a few soul mates. The concept of a solo entrepreneur is overrated. You need people to balance you off – need marketing, operations, accounting, etc.
4 – Define a business model
- Be specific. Questions to ask yourself: who is my customer and how do I get my money out of her purse?
- Keep it simple. Do not innovate on business models.
- Ask women about your business model. Men want to kill things. They always say yes it’s a great idea!
5 – Weave a MAT (milestones, assumptions, tasks)
- A new company is a fresh start – pure, clear, a start from scratch. This makes it hard to prioritize.
- Come up with a handful of milestones such as finish the design, decide on the software, etc.
- Write down the assumptions of your company – customer ROI, cost to install software or product, etc. These change the business model. Important: write down and test.
- Do tasks.
6 – Niche thyself – need to know this about marketing
- Great value to customer but not doing something unique allows you to compete on price.
- No value, only person doing it (unique) makes you stupid
- No value, many other companies are doing this (not unique) makes you even more stupid.
- High value, unique product – want to be here!
7 – You must follow the 10/20/30 rule:
- You should have 10 slides in your powerpoint pitch – title, problem, solution, business model, underlying magic, marketing and sales, competition, team, projections, and status and timeline.
- These 10 slides should be able to be presented in 20 minutes.
- Smallest font you should use is 30. This forces you to actually know your presentation and just put the core of your presentation on the slide. Do not read your material! Find out who the oldest person is in the audience and divide his/her age by two and that is your optimal font size… unless you are pitching to young people!
8 – Hire infected people. Hire people who not only have work experience and an education, but also love your product. Most people only consider these two factors. You should look at if they love your product.
- Ignore the irrelevant. You can be successful just because you love the product.
- Hire better than yourself – need A players.
- Apply the shopping center test. Go to Stanford shopping center. You see the job candidate but he/she has not seen you. If you don’t have the first reaction of seeing the person and wanting to go meet him/her then do not hire the person!
9 – Lower the barriers to adoption:
- Flatten the learning curve
- Don’t ask people to do something that you yourself would not do
- Embrace your evangelists – people that carry the battle forward for you. Evangelist is based on the Greek word “bringing the good news .”
10 – Seed the clouds.
- Let a hundred flowers blossom. Let people use your products in different ways. Just take the money! Don’t let this bother you.
- Enable test drives to make sales. Let people take your product home to test it. You are telling them that they are smart for taking it home and testing it.
- Find the true influencers. The higher you go, the thinner the air. Focus on the people that do the work!
11 – Don’t let the bozos grind you down. You may be tempted to believe them but don’t!
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