The age-old saying, “If you don’t intend to succeed, you’re planning to fail” is more than a grain of fact. Historically, businesses use the business plan: a structured written document detailing strategies and plans for achieving them.
Since the business plan is such a structured document, writing one could seem like a pointless hassle for a startup contending with a lot of unknowns. But it does actually have some advantages.
First and foremost: your stakeholders will be asking you for one, though they might not read it. Without a business strategy, don’t even dream to gain investment from potential investors. What’s more, the process of planning the business plan often brings some advantages.
For one, your team has to work together to write it. This can help them become a more cohesive unit, or, on the other hand, may make it clear that you don’t want to work with these people ever again – thus saving you a lot of pain later on.
What’s more, writing the plan can often highlight problems and future issues that would not come up without formalized planning. You may, for example, find that two people on your team are actually doing the same thing, or that no one has thought about how to deliver customer service.
So what’s the key to writing a good business plan? Just focus on the executive summary: a four-paragraph précis of the document. This is the first thing people will read, and if it’s not stellar, they won’t go any further.
“A good executive summary outlines clearly and concisely what issue you are addressing and how you plan to do it, as well as demonstrating your business model and your product or service” magic. Upon completion of your executive summary, conduct this easy test to gage its quality: print it and read it. If it makes you want to read on, then it’s in good shape.
Many start-ups owe their life in the early stages to investors who finance them. By bootstrapping, however, you can also create a start-up: run it without any external funding. You need to concentrate mainly on creating cash flow, or bringing money into your bank account, to succeed at bootstrapping. You need money, after all, to pay your taxes, rent, wages, and so on.
This means you should prioritize sales and projects according to how quickly you’ll get paid for them. For example, if a customer wants to commission a six-month website design project from you but your company is so strapped for cash it will be bankrupt in eight weeks, you need to either decline or demand part of the payment up front.
Trying to delay outflows is another way to boost the cash-flow condition. To do this, negotiate better payment terms with your suppliers so that you don’t have to pay them in full immediately. If you want to produce cash flow, you can not wait to perfect your product before you sell it. Otherwise you’re going to go bankrupt, waiting to patch all the bugs.
Don’t think, “Fix it, fix it, fix it, ship it,” but instead, “ship it, fix it, ship it, fix it, ship it.”
You’ll get immediate cash flow from sales and receive feedback on your product from real customers. The downside is that the quality of your product will inevitably be suboptimal, and this could damage your company’s image in the market. To negate this effect, try to first sell your product in a small, isolated geographical area or market. This way at least the damage to your reputation will be contained.
Remember, however, that the one thing you can’t fix after shipping is product safety. This needs to be top-notch before even the first tentative sale, because safety issues can cause irreparable damage to your reputation.
No matter what industry you’re in, you can’t run a successful company without a great team of people behind it. So how do you ensure that you build this team?
Next, never be afraid to recruit anyone better than you. For performance, this is important. Just imagine, the team would eventually fill up with mediocre performers if everyone in the organization is only willing to recruit someone less able than themselves. To paraphrase Steve Jobs, if B players recruit C players and C players recruit D players, you can find your business loaded with Z players in no time at all.
Instead, you have to be humble enough to admit that there are people more capable than you and you must have the self-confidence to hire them anyway.
Second, in your squad, you have to recognise individuals who are not working and get rid of them. That may sound cruel, but you really can’t afford to keep them around. Every employee comes at a cost in terms of resources such as wages, office space and management time, and all of these are wasted if you steer them to the wrong individual. Those conditions need to be remedied immediately.
So how can you identify low-performers? When you hire a new employee, set personal milestones for them and define a review period during which you’ll assess their performance in relation to these milestones.
For example, if you hire a new salesperson, her milestones could include successfully completing training, developing a client database and making the first ten sales calls.
The initial review period should be around 90 days so that both the employee and the company get to know each other well enough to decide whether or not to continue.
Every founder dreams of her start-up one day becoming an internationally recognized household name. So how can you brand your product so that it becomes a legend?
Your primary emphasis should be on making infectious goods. People should be infected with the excitement to try them. It is no easy feat to produce such products, but there are a few elements that appear to be spread by infectious products. Contagious goods, first of all, are cool. For instance, the iPod, partly because it was the first cool Mp3 player, was popular.
Second, contagious products are effective, or excellent at what they do. The TiVo, for example, became an iconic digital video recorder because it allowed you to record your favorite TV shows so effortlessly. If it had been a pain to use, no one would ever have even heard of it.
Third, contagious products are distinctive, or noticeably different from the competition. Consider the Hummer, for example – you wouldn’t confuse it with any other car.
But even if you build contagious products or services it won’t be enough to create a recognizable brand. You also need to build a community of users around them. These communities provide support to users and make the experience of using the product or service a more satisfying one.
For instance, loyal fans of Coca-Cola started a Facebook fan page which gained more than one million followers. If you’re not fortunate enough to have your users create a group naturally, you can accelerate the process by selecting your most enthusiastic clients and asking them to build the group for you. They’ll probably be happy to help, particularly if you give them a promotion and community activities budget, and also delegate your representative to someone from your organization.
You may never have heard of it, but once upon a time, the computer industry was driven by a firm called Univac. But the company made a critical misjudgment: it saw its computers as complex instruments that could only be used by scientists, and so only created devices suitable for complicated scientific calculations. Another group, however, realized at this time that corporations were also interested in the potential of computing, and so began designing machines aimed at this new consumer market. While the name Univac has been forgotten for a long time, this second company may have you heard of. They’re IBM.
So what’s the lesson? Always keep an open mind and look for non-obvious customers and uses for your products. When your product is used by customers you didn’t expect or in a way you didn’t think of, don’t panic, but instead take advantage of this new chance to grow. Don’t make the same mistake Univac made.
Another key asset is a willingness to shift focus if your “obvious” target customers are hard to reach. For example, one obvious target customer for any start-up is a prestigious, name-brand company that could then work as a reference for future sales. The trouble is that such companies tend to only buy from other established companies, and a start-up can wear itself out trying to convince them otherwise.
If your dream customer doesn’t see why your product is so great, just forget about them and instead target customers who are willing to try your product.
Companies should be started because the founders want to make meaning, not because they want to make money. Focus on generating cash flow and pursuing unexpected market opportunities, and you can thrive even without external funding.
So give it a try. Make your introductions draw interest. The executive summary is the most critical aspect of any business plan, since that’s what people read first. But in fact, for many documents and presentations the same holds true. If you’re trying to market your product or pitch to investors, make sure you’re coming out with your guns blazing from the beginning or you’re going to lose interest. This implies that at the get-go you can use the most surprising facts and convincing anecdotes-if no one is awake to read them, they are no use.
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