Tuesday, June 15, 2010

The Four Cornerstones of Every Business Plan

cornerstones By Akira Hirai

The thought of preparing a business plan for the first time can be very intimidating. There are many "moving parts," and it’s easy to get lost in the details.

The task becomes much easier if you think of your plan in terms of four essential cornerstones that serve as the foundation of all business plans: Opportunity, Solution, Execution, and Outcomes.

Pretty much anything that goes into a business plan falls into one of these four categories:

  1. Opportunity: Every successful business exploits an opportunity. Opportunities arise from "problems" that customers are willing to spend money to solve: they want to stay in touch with friends (Facebook and Twitter); they want to eat a tasty Italian meal (Olive Garden); they want to better manage their enterprise data (Oracle); they want to commute to work in a fun but fuel-efficient vehicle (MINI Cooper); they want to get and stay fit and trim (LA Fitness). The Opportunity portion of your business plan delves into the nature of the problem: who experiences the pain; the severity of the pain; the trends affecting the source of pain; how people are currently addressing the pain (both substitutes and competitors); and how much people are willing to spend to alleviate the pain. Broadly speaking, the Opportunity is a description and analysis of your potential market.

  2. Solution: This is your brilliant idea. Exactly what are you introducing into the marketplace that takes advantage of the opportunity you've identified? How does it work, and how does it solve the problem? What are the features and benefits? How will you price it and position it in the market? Have you patented it? How does it stack up against competing solutions to the problem? A lot of first-time entrepreneurs think that a brilliant solution is the most important ingredient in building a successful business, but it's only one of many important elements.

  3. Execution: Execution - the hard task of turning ideas into products that people will buy - is what separates successful entrepreneurs from dreamers. What is your plan for completing the development of your product and getting it ready to market? How will you generate awareness and close sales? How do you manufacture and distribute it? What kind of facilities will you need? What kind of management team will your company require? What does the product cost to manufacture? How will you make money? How will you overcome the regulatory hurdles? What types of business partnerships will you need to forge? What could go wrong, and what can you do to mitigate the risks? How will you carve out a profitable niche and keep competitors at bay? What kinds of variable and fixed expenses will you incur to make this happen? How much investment capital will you need to pull this off?

  4. Outcomes: This is your vision of the future outcomes if things go according to plan. How much of your product will you sell each year over the next five years? How will the inevitable changes in markets, consumer behaviors, and competitive offerings affect outcomes? How much cash and profit will your company generate? What will your balance sheet look like in five years? Can you get there without running out of cash? If your company becomes successful, what are the viable ways for your investors to cash out?

Use these cornerstones to organize your thoughts.

When you sit down to start working on a business plan, grab four blank sheets of paper and write the words Opportunity, Solution, Execution, and Outcomes across the top.

Now, start brainstorming. Get as many ideas down as possible. Don't worry about structuring things into a business plan yet. If one of your sheets looks empty compared to the others, then you have more work to do.

When you're done, put these sheets of paper away for a few days. When you're ready, go back and look for a powerful, compelling story line that links the four sheets together. Next, go through each sheet and cross off the items that don't support the story line.

A business plan, regardless of your target audience, is essentially a narrative that ties these four cornerstones together. Thus, by going through this simple process, you’ve half way to having a well-conceived first draft of your business plan!

P.S. As you work your way through your plan, watch out for the common mistakes described in our article, Why Business Plans Don’t Get Funded.

Do you have comments or suggestions for improving on this methodology? Let us know and add your thoughts below!

Today's guest blog is by Akira Hirai, founder of Cayenne Consulting, a firm that helps entrepreneurs prepare for the fund raising process by developing strategies, business plans, financial forecasts, and presentation materials. His website is http://www.caycon.com.


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Monday, June 14, 2010

Increased Potential for Women Entrepreneurs

Women entrepreneurs are starting small businesses at approximately twice the national average for all startups. Despite some inaccurate stereotypes, the evidence is that these are in every industry, from small consulting firms to medical high technology. As a result, there have also been many new resources popping up specifically aimed at women.

In most cases, the business questions asked and the answers given are essentially the same for all entrepreneurs, whether they be men or women. But according to a couple of articles I’ve seen recently by Peri Pakroo, J.D., who just published a book titled “The Women’s Small Business Start-Up Kit,” the road to success for women does involve its own unique set of hazards.

Surveys of women business owners show that women’s business concerns tend to skew towards issues such as finding work-life balance, startup financing, and marketing. Here are some tips and resources from both of us to address these concerns:

  1. Always start a business that fits with your personal life. There are no rules as to what a “real” business looks like. For most men and some women, success might mean a huge international operation with millions in revenues. For others a consulting or artisan business with a healthy return, and generous personal freedoms, would be the pinnacle of success.

  2. Keep the organization formalities simple. You can usually start a sole proprietorship or a partnership by registering with just one government office, for less the $100. There are many step-by-step guides available, like the one referenced above for women. The real challenge in all cases is a sound business idea, and some management acumen.

  3. Plan for funding requirements. Starting a business without enough money to ride out the early lean days is still the most common reason that businesses fail. Beyond self-funding and banks, two resources that women should definitely look into are Women’s Business Centers (WBCs) and community development financial institutions (CDFIs).

  4. Network like a social butterfly. This is one of the best ways to market your business and create profitable opportunities. It is always best to forge relationships with contacts before you need help from them. Networking does not require unsavory schmoozing or pandering to get to know potential partners, investors, and customers.

  5. Utilize online support sites. There are many good support sites springing up, like Ladies Who Launch, National Association of Women Business Owners (NAWBO), eWomen Network, and the Center for Women’s Business Research. These can also provide coaching, marketing, and other important resources.

  6. Women learn from women. Successful women entrepreneurs, even more than men, are usually anxious and willing to connect with, support and learn from other emerging and established female business owners. Find them by attending local business organization meetings, including the Chamber of Commerce.

  7. Dream bigger. The value of setting high goals for yourself and your business is not just a motivational myth. Many experts believe that this is the key reason that the average revenues of women-owned businesses are still only 27% of the average of men-owned businesses. Change your mindset to increase your focus on growth

In the past, women have often come to entrepreneurship with fewer resources available to them than men. With these tips and resources, women should be able to achieve a higher threshold for entrepreneurs, and will enjoy their full potential as business owners. We are all waiting to enjoy it.

Marty Zwilling


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Sunday, June 13, 2010

Entrepreneurs Must Take Control of Their Time

Every startup founder feels the pressure of the thousands of things that need to get done, all seemingly at the same time. There is just not enough time! The real solution is better time management to put you back in control of your life.

We all know someone who always professes to be stressed out and “so busy” that they never have time for anything – yet they never seem to get things done. The real reason is that these people don’t manage their time well. They waste too much on low-priority busywork, procrastinating on higher priority but tougher tasks, resulting in last minute crises, and failure to complete the critical work that people are really expecting of them.

A good book on this subject is one by Dr. Jan Yager, called “Creative Time Management for the New Millennium.” She preaches that “Managing your time well means managing your life well. People who handle their time well do it creatively.They practice creative time management by taking control of their time and therefore their life.” Here are ten of her key principles and mine:

  1. Set goals. In business, this means create a business plan before you start. I’m still amazed by the number of entrepreneurs I meet who have no business plan, or who haven’t updated their plan for years. If you have no goals and milestones, you can’t measure progress.

  2. Be proactive, not just reactive. Doing things before the deadline is looming reduces stress and gives you a sense of being ahead of the game. For a startup, this means starting your networking before you need money, or building the website before the business is ready to open.

  3. Prioritize actions. The secret is to identify what really needs to be done in each day. If you look closely at how you spend your days you will probably find that there are many things that aren’t really that important, but take a lot of time. Skip those.

  4. Keep your focus. Everyday interruptions in your new business can be a key barrier to managing your time effectively and, ultimately, a barrier to your success. Close the door to your home office, or turn off the phone when you have work which needs to get done.

  5. Create realistic deadlines. A realistic schedule takes several things into account. You need to spend time working, eating, sleeping, doing chores, running errands, and spending time with family. Unrealistic deadlines create stress, rework, and unhappiness.

  6. Plan and delegate. Strive to understand the relevant capabilities of team members, and then deliberately schedule tasks, delegating to the right people to get tasks done within deadlines. Even an entrepreneur can’t do everything personally.

  7. Don’t procrastinate. Some entrepreneurs actually sabotage themselves by putting obstacles in their own path that take more of their precious time. They often choose paths that hurt their performance. This represents a profound problem of self-regulation.

  8. Be a pragmatist, not a perfectionist. A proven path to success in business is to get something out, and iteratively improve it. A new product or service will never be perfect in a rapidly changing world, so don’t delay.

  9. Balance your life. When life is busy, or all your energy is focused on a special project, it is all too easy to find yourself “off balance,” not paying enough attention to important areas of your life. This causes inefficiency and stress, and your work is not fun.

  10. Do it now. In my opinion, this is the most important element of time management. Too many people procrastinate, worry, and defer, rather than just do it. Divide and conquer what you have to do. Now, not tomorrow.

Take back control of your time and your life. We are not all endowed with brilliance, good looks, or lots of money, but we each get the same number of hours every day. Use them effectively to get your startup going, and have some fun in your life. Start with item #10.

Marty Zwilling


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Saturday, June 5, 2010

Eight Most Underrated Startup Opportunities

A few months ago, I was quoted by a Wall Street Journal reporter in an article, the inverse of this one, titled “The 7 Most Overrated Businesses” (I said no more traffic-driven social networks, please). Several people suggested that it might be more productive to list some positive opportunities, rather than problems, so it’s time for me to take another look into the crystal ball.

Generally, my picks lean toward “investor friendly” high technology ones, but since these are not so cheap and easy to start, I’ll add a few more, like Internet website and software products, that can be started on a shoestring these days:

  1. Smart-phone applications. People are buying iPhones and Droids in phenomenal numbers, and they want to see and do everything that they can do from their desktops, and more. Lots of existing applications are being “kludged” to work, but I see a great opportunity to offer innovative new solutions, and new applications.

  2. Social network marketing. Everyone tells me that the social networks have changed marketing and public relations drastically. I believe it will happen, but it hasn’t yet. I see the backlashes from early efforts, like Facebook’s “privacy trainwreck” which tells me the new norms haven’t been set yet, and there is still a big opportunity for innovation.

  3. Green. For those of you looking for startup ideas that are hot today and recession proof, consider anything to do with saving energy, sustaining the environment, or solutions to the global warming problem. True, there are many players already in this space, but there is room for many more, and room for some big winners.

  4. Biotech. In its most general sense, biotech is used to refer to any sort of technology that uses biology or other medical technology to accomplish its end. It includes the use of microbes, or life processes, to produce products that are useful to mankind. Even in tough times, people will spend big money preventing and treating illness.

  5. Sustainable energy. Renewable energy is a source that can be produced cleanly from natural sources. It will not disappear like fossil fuels (oil, coal, natural gas) and is less polluting. Leading examples are solar power, wind, ocean, biomass, hydro, and geothermal. I also see renewed interest in hydrogen and compressed natural gas.

  6. Health and wellness support. People are crying for more health and wellness information, and support groups. Something like 34 percent of U.S. adults aged 20 and over are obese, and the solution is probably not a magic pill, but a credible regimen that can be delivered and monitored via the Internet. All the spam probably means there is a real market.

  7. Finding jobs and recruiting. Finding a job with a creative resume and blasting it to all comers hasn’t changed in 40 years. I think it’s time for job sites with real matching algorithms, to proactively “txt message” you in real time about perfect company matches. It can’t be as hard as dating sites, and it’s at least as important to your future. Where are the video and interactive elements in Monster.com?

  8. Medical devices. Today’s aging boomer generation and new healthcare legislation guarantees an ongoing demand for innovative medical devices that are less invasive, reduce costs, and otherwise enhance the quality and economics of healthcare delivery. These products are also considered “recession proof,” since treatment problems have been shown to actually increase during high stress periods.

Despite all this, the best opportunity for you is still the one you know the best. Don’t try to implement someone else’s dream. If your startup dream is not on this list, think twice about it, but don’t give it up. The best opportunities are still the ones that no one else has even recognized as a possibility. Those possibilities are endless.

Marty Zwilling


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