Читать книгу Secrets to a Successful Startup - Trevor Blake - Страница 15
ОглавлениеBy failing to prepare, you are preparing to fail.
— often attributed to BENJAMIN FRANKLIN
Once you’ve incorporated your winning idea, the next step is to create a business plan. Most entrepreneurs want to avoid or skip this, particularly if they aren’t trying to attract investors. However, no matter what your business, I think creating a business plan is the best way to start. Not producing a business plan is like trying to build a car from scratch without any instructions. The process of drafting the plan is the way you figure out how to build and run your company. Further, it’s the way you test-drive that car to see whether it works before you risk taking it out into the real world.
I have gone through the business-plan process for each of my four companies. For two of them I went through the process again during their growth stages. In each case I produced a lengthy document that served as my bible when any vendors or investors asked me any questions, and I always sounded like a confident and knowledgeable entrepreneur on conference calls while my fingers did the walking through the pages. But no one has ever asked me for a copy of a completed business plan. This supports my theory that the primary purpose of the process is to benefit you, the entrepreneur.
Discussing the business-plan process means getting into the minutia of markets, business functions, and financials. Personally, I think reading about business plans can be a bit boring, but I can assure you that the process itself is not. Ultimately, success isn’t measured by the document you produce but by what you as a business owner learn about your market, the customers, and the competition.
Another reason for going through this process is to help attract investors and your preferred vendors. For investors, your plan needs to include an executive summary, from which you develop an elevator pitch, and we’ll look at those in detail. If you are self-funding, you don’t need those. For vendors, you need to focus on and share the specific sections relevant to their service, whether that’s manufacturing, financial forecasts, or marketing.
Invariably, during the process, you will discover unexpected problems and opportunities, and you may need to adjust and adapt your plan, product, or service accordingly. Basically, that is the main point of doing this in the first place. Even if no one else reads the plan, this ensures that your business will fix what you want to change and do so in a way that supports a successful business.
Finally, through this process of discovery and decision-making, you will continue to rewire your brain and build self-confidence and expertise. You will acquire deep insight into your prospective customers and the market, and you will continue building positive psychological momentum. By the time you finish the process, you will be itching to get started as your own boss.
Yet despite the evidence for the importance of completing a business plan, one study by Inc. magazine found that only 40 percent of the founders of companies on its top-500 list had bothered to write a formal business plan. Only 12 percent said that they had conducted formal market research before launching their enterprise. Is it any wonder that so many startups fail?
There are no shortcuts to success.
A Business Plan Is a Process That Cultivates Success
To me, what’s most important about a business plan isn’t the final document. It is the process. The process of investigating your business, your customers, and your market is another form of reacting forward. In the end, your winning idea, as originally conceived, may not make the ideal business, but through this process you will learn what does and will make a successful business and how to see it through.
Research and experience back me up. A producer of business-plan software conducted a survey that found that those who complete business plans are nearly twice as likely to successfully grow their businesses as those who don’t write a plan. Regardless of the type of company, the growth stage, or the person’s intention for the business plan, the study found that writing one correlates with increased success in every business goal the study identified. These included obtaining a loan, getting investment capital, making a major purchase, recruiting a new team member, thinking more strategically, and growing the company.
The authors concluded: “While our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.”
This raises an interesting question: Are the people who are most likely to succeed anyway the ones who usually create business plans, or does drafting a plan help teach and instill the behaviors of a successful entrepreneur? I think it’s both.
One way we learn is through imitation, and this is hardwired in the brain. In the early 1990s, a team of Italian researchers discovered individual neurons in the brains of macaque monkeys that fired both when monkeys grabbed an object and when monkeys watched another primate grab the same object. This led to the discovery of what are called mirror neurons, which allow animals to observe and mentally mimic the actions and feelings of others. This is how we learn from others without necessarily going through the same experience. For instance, if someone stubs a toe on a raised paving slab and winces in pain, we grimace with empathy, since we mentally re-create what they are going through. Later, this helps us remember to step over that stone so we do not suffer the same injury.
This is analogous to what startup entrepreneurs do as they create their business plan. They are trying to identify and avoid the mistakes of others in the same industry while also identifying and mirroring the best practices of those successful companies that are doing it right.
Further, this process of discovery fosters the right attitude to achieve success. The more data we collect, the more we understand, and this reduces fear and anxiety and increases feelings of competence. This creates a sense of flow, which is a sense of happiness and achievement right now as we work toward future goals. This relates to a concept called the “paradox of intention,” which states that we must have goals, but our present happiness cannot depend on those goals. We must cultivate happiness right now, whatever our circumstances, and before attaining our goals, in order to successfully achieve those goals. This is the peak state of flow. This is what we seek by making a habit of meditation and reconnecting with nature, and it’s also cultivated through the process of creating a business plan because self-confidence rises, and that is innately linked to happiness.
The Importance of Self-Confidence
Dr. Lewis Terman, inventor of the Stanford-Binet IQ test, conducted a longitudinal investigation of 1,528 gifted children with IQs at the genius level. The objective was to understand better the relationship between human intelligence and human achievement. The study became famous for its discovery that intelligence was the lesser of several factors that determine achievement. Discipline and self-confidence were found to be more important than intelligence for achieving things.
As you do all the work necessary to turn your winning idea into a real company that fixes problems and improves the world, building and supporting your self-confidence is essential. As I say, this is one goal of building a business plan, but I want to emphasize how easy it can be to let negative information and potential problems derail the process and undermine a positive attitude.
Contrary to what many in the media say, there is never a wrong time to start a business, but there is never a right time, either. There will never be a perfect set of circumstances. The economy peaks and troughs like a roller coaster. Employment figures can fluctuate wildly. Loans can be easy to get one day and hard to get the next. However, half the companies that make up the Dow Jones Industrial Average were started in the midst of a recession. Don’t let pundits stop you from starting your business, but use the business-plan process to investigate existing circumstances and strategize how to meet them.
In other words, as you develop your business plan, expect that you will discover unforeseen problems you would otherwise have missed. That’s why the business-plan process is so important: It’s about gathering information, identifying obstacles, and figuring out how to overcome them before you start. This can take time, and some challenges will be more difficult to overcome than others. Some circumstances may inspire you to adjust your original business plan. That’s okay. . . it’s part of the process.
However, don’t let these issues or the steady diet of negative information from the media cause a cascade of equally negative thoughts that undermine your resolve. The media thrive on paralyzing us with fear so they can zap us with a dose of commercials, and pundits on TV and the radio can seem convinced that the world is about to end and everyone is out to kill everyone else. That’s not the reality I see when I travel, but it can be hard to remain focused on our winning idea when all we hear from the media is doom and gloom. So my suggestion is, if you feel your enthusiasm and self-confidence eroding, stop listening to the media.
Turn the dial, flick the switch, cancel the paper. Your RAS will benefit as you filter out the doomsday peddlers. Go cold turkey on the news if you have to, and listen only to positive, beneficial small-business advice on blogs, podcasts, and so on, ones that provide useful tips and support a positive frame of mind.
We can’t stop negative thoughts from arising, or control them when they do, but we have 100 percent control over our reactions to our thoughts. If we hear or see something that causes fear or hurts our self-confidence, we should deliberately choose a more positive reaction.
A Business Plan Focuses on Customers and the Market
What is a business plan? What does it do, and what is the goal?
Peter Cohan, a successful investor and author, once stated:
I started investing in startups in 1996 and have seen plenty of business plans. . . . I have invested in six startups and three of those were sold for a total of $2 billion. The other three went out of business. And even in that tiny sample, there is typically one connection between these successful business plans. Simply put, the successful business plans contained deep insights into the prospective customers. And the ones that failed did not.
That is the best and most concise definition for a business plan that I have ever read. A business plan describes prospective customers and the market potential, and it is written first and foremost as a blueprint for the business owner’s own benefit. So many entrepreneurs fall into the trap of thinking that a business plan is an MBA-type thesis designed to impress investors. Entrepreneurs treat the business plan as a way to explain their winning idea. It is the opposite. Instead, after a process of investigation, the plan summarizes, not how great the winning idea is, but who needs it, what problem it solves (that can’t be solved without it), how you will get the attention of customers (and convince them to buy), how your product or service fits in the current marketplace, and how the company will be structured to survive financially until your winning idea is the runaway success that you hope.
To get all this information, you need to talk to people. Writing a business plan requires interviewing or surveying potential customers, particularly those who have used similar products or services recently within the market you will be joining. You want to learn what they like and don’t like, what they value, and what improvements they’d like to see. Customers have given me some of the best ideas for product improvements and marketing campaigns. It also means investigating the competition and evaluating what others do well and do badly, along with figuring out how to distinguish yourself from what already exists.
Social networks and various web-based analytical tools can provide basic data for customer profiling, but by themselves, they rarely provide the deeper insights you need. Your prospective customer is not a set of digital fingerprints. Your customer is a real person with real feelings and opinions that often cannot be expressed appropriately online. When you research prospective customers, your goal is not just to understand the statistical profile of a group but to appreciate the subtle nuances of individual buyers and their thought processes.
What I find odd and disconcerting is that, given all the advice available about this topic, hardly anyone recommends getting away from your desk and actually speaking to people. Many times, I have listened to a business-plan presentation only to learn that the entrepreneur has not bothered to discuss anything with potential customers, distributors, or manufacturers. Many entrepreneurs think that they can understand their customers without actually meeting any in person, but those same entrepreneurs are often unable to answer even the simplest questions with confidence. It shouldn’t be a revolutionary idea, but it almost is: As you research prospective customers, meet and greet real, living-and-breathing human beings.
What people say may surprise you, and what you learn can provide crucial insight, shortcuts, strategies, and inspiration that allow you to adapt to and take advantage of the constantly changing conditions in the marketplace. Ultimately, this reflects one of the “secrets” to success: Successful entrepreneurs adapt to the state of the market and the needs of customers. Yet the ability to adapt and make effective decisions depends on the depth of your knowledge and understanding, which is what you improve through the business-plan process.
For instance, one time I was able to significantly raise the price of a product when I discovered that a larger company had recently increased its price of a product tenfold. I was interviewing a prospective customer who was hopping mad about the larger company’s decision and who vented his feelings throughout our conversation. My product was in the same regulatory field, but specifically targeting a different need. I decided to reprice my product significantly prior to launch with the knowledge that I would not draw the same negative attention, since my product would still be priced below the larger company’s product. Plus, no one would know I had changed the price.
Another time a prospective customer was assessing the product I intended to launch when she commented that she had seen something similar from a local manufacturer. She showed me a sample hidden away in a drawer. With a little detective work, I found a competitor had illegally entered the market despite the patent protection around my invention. Before that company could create too much market damage, I was able to use my strong patent position to get an injunction on their marketing. Eventually they withdrew from the market altogether. Without the business-plan process, I might not have discovered the competitor until much later.
How to Engage Your Stakeholders
Personally, I find the business-plan process the most exciting part of the startup phase because it requires face-to-face discussions about how to turn an idea into a company. To engage with potential customers, I usually go where I know they will be gathered in large numbers. Typically, that will be at a major exhibition running at a convention center, which is also where lots of my potential competition will be showcasing their products and services. I also go to shopping malls and markets where I can conduct surveys with prospective customers. Sometimes I have rented a small exhibit space at a relevant trade show and conducted a market research survey with attendees. People love to talk about themselves and answer survey questions, especially if I offer free coffee, bagels, or some other gift in return. What I learn in these events often takes my business idea in different directions than I would otherwise have envisaged. This sounds “old school,” but it is an essential. There simply is no substitute for a free-flowing conversation between an entrepreneur and a prospective customer.
How do you conduct effective face-to-face research? Do you conduct formal surveys or simply chat to people? How many contacts is enough? There are no rules. I think the right approach really depends on your idea and its related market. I have done all of these things. I find that a generic-style survey with multiple-choice answers results in generic responses. Alternatively, I find that having a casual, friendly chat with a prospective customer using the art of conversation eventually reveals exceptionally deep information about their true feelings. These might not be the feelings I imagined they would have, and I might or might not have thought to include them as an option on a multiple-choice questionnaire, but they are genuine emotionally driven opinions.
People enjoy surveys and quizzes, and the anonymity of the internet can get you more realistic responses through a website or social media group chat than a bland paper survey. That helps, but I feel that to really understand a customer’s perspective requires actual human interaction. In all cases, I believe authenticity wins the day. Typically, I’m up-front with people and explain that I’m planning a company to fix a certain problem, and that I don’t yet know the answers to all the questions. This gains support and fosters camaraderie. People open up more; as humans, most of us have a natural inclination to want to help the underdog succeed.
I can’t say how much information is enough, but I know when my intuition is kicking in and pulling me in a certain direction. When that happens, I have enough data to form a strategy. This is why deepening your intuition is so valuable.
Even if you have started a business already but have avoided going through this process, I recommend you go through it now. It is never too late, and you will never regret making the effort. These conversations teach you so much about how others see you and your business, which is information that gives you the opportunity to mirror, adapt, and improve.
Psychologists say there are three perspectives on ourselves: There is the way we see ourselves, there is the way we think others see us, and then there is the way others actually see us. Only by getting away from our desk and talking face-to-face with our stakeholders can we grasp all three views.
Creating a Business Plan
As I say, the process of researching a business plan is more important than the shape or size of the final document. How you organize and write your plan is less critical than the information you gather through the process.
Many entrepreneurs get bogged down by the idea of the written document. That is not the goal of this whole process. No investor cares if your final document is ten pages or a hundred pages. An investor wants insight. That’s the goal. What makes your winning idea different? What need does it serve? What is the market size? How is the investment going to be used? What are the barriers for competitor entry? Why is it exciting?
A potential manufacturing vendor needs to know about your forecasts for growth. A commercial partner wants to know what benefits your product provides to customers and what they in turn think about your prototype. When vendors ask you for the information they need, you typically pull that data from your plan and give them just what they ask for and no more. The information is important, not the document’s style, format, size, or even structure. No one cares about the document.
Here’s the hard truth: No one but you will ever read the entire business plan. And you will probably only ever read it all through once, on the day it is finished. That’s my experience. Investors will read the executive summary. Vendors might read the sections that apply to their role. Later, after you start your company, you’ll find that much of your plan will become irrelevant as things surprise you and you adapt to survive. Eventually, the business-plan document you spent so many months writing and stressing over will simply collect dust until one day it gets tossed in the trash to be replaced with an update.
Personally, as an investor, I read the executive summary, and I pretty much make up my mind by the end of that. If I am intrigued, I’ll look for what marketing and customer research has been done. If none, it goes in the trash can. That sounds harsh, but it is the real world. Investors receive hundreds if not thousands of business plans every year, and the majority that I receive read like they came straight out of an MBA course. Guaranteed trash-can toss. These days I charge people to submit their plan, and I have to say, that does separate the wheat from the chaff.
Knowing this to be true, many would-be entrepreneurs spend weeks trying to produce a killer executive summary — but without actually performing the business-plan process. I repeat, the business plan is not a document. It is a summary of the insight you gain through your interactions with customers and vendors. You cannot imagine that information or replace that process, and those executive summaries that try betray themselves within the first few paragraphs.
A successful executive summary only results when an entrepreneur has gone through the full process of researching the business plan. The resulting information is of course collected and organized into a document, but it’s the knowledge gained in the process that arms the business owner with the ability to write, present, and pitch that killer executive summary.
My advice is: Don’t try to produce a perfect document, since you are the only one who will ever read it. Don’t be anxious about following some standard format you find online, and never pay for an online business plan. Research each area I outline below by actually leaving your office and talking to real people in some way, and do so until you feel confident you understand the issues involved and have adequately answered the major questions in your head. Then summarize and explain your findings as succinctly as you can for yourself in the document. That formal action of writing it all down cements the concepts and knowledge in your brain. It is not a step that can be skipped. In general, worthwhile business plans tend to be lengthy documents because you uncover so much useful information. Some so-called experts suggest succinct documents. It doesn’t matter. What will sell the plan is the executive summary, and the quality of that cannot be forged with clever writing or MBA-speak.
As for how to begin, one of the best pieces of writing advice I have ever received was that — rather than start at the beginning, write through a middle, and go to the end — it’s easier to start writing about whatever you find fun or interesting, and then expand outward from there. Start with a story or an anecdote to get the creative juices flowing and then expand around that core story, filling in the blanks in whatever order that comes to you.
That is how I write business plans (and how I began writing this book): I jump into the middle and start with whatever interests me the most. Since marketing interests me, I usually start there. That leads to thoughts about packaging and manufacturing, and off I go on another voyage of discovery. You can do the same. Start wherever you feel most comfortable, or with whatever inspires you the most, and keep going until you’ve covered every topic.
Researching Industries, Companies, and Markets
Below, I describe the nine sections or topics that typically appear in most business plans. In addition, plenty of example business plans can be found online to help you get started. However, rather than follow some generic template (even the one in this book), I recommend first researching your industry and market and then organizing the business plan so that it reflects what industry stakeholders care about the most.
How do you do that? Read the annual reports of public companies. Most public companies must disclose corporate information to their shareholders, and they usually do so in a state-of-the-company report. These usually include an opening letter from the CEO, financial data, results of operations, market segment information, new product plans, subsidiary activities, and research-and-development activities on future programs. Reporting companies must send annual reports to their shareholders when they hold annual meetings to elect directors. Under the proxy rules, reporting companies are required to post their proxy materials, including their annual reports, on their company websites.
On company websites, these reports are usually under the shareholder, investor, or financial tabs. Annual reports are really very detailed business plans, and they can be an excellent guide as to the type of content that people care about. It doesn’t matter that the company is a multimillion-dollar enterprise. The only difference between you and them is the size of the numbers. Additionally, the data on markets can be relevant to your business, and you get it all for free.
Plus, you may come across additional threats and opportunities. For instance, three years into my first company, I was seeking new acquisitions in the form of abandoned product lines. The only way to find them was by combing through public company annual reports to find ones that stated unequivocally that they had abandoned products for strategic reasons. Although it was a somewhat mind-numbing activity, I read through dozens of reports, and eventually I came across one that warned its shareholders of serious cash-flow issues. Deep into the annual report, it mentioned cost-cutting exercises, such as dismantling its sales team and no longer marketing three of its lower-revenue products. So I seized the opportunity and approached them with an offer to purchase the product rights. I had to raise an additional $28 million, which happened quickly. Ultimately, the deal provided the struggling company with enough cash to survive, and I went on to triple the value of the purchased products.
Another good source of information for overall market statistics, competition, product sales, demographics, and coming innovations are the market research reports that are produced for just about every industry. They can cost hundreds and even thousands of dollars, mainly because lazy middle managers buy them in bulk and plagiarize the contents to impress their sales and marketing bosses with their market-analysis presentations. I know because that is what I used to do.
Fortunately, most senior management don’t know that they exist. It is possible, however, with a little online search creativity, to find whole market sections available for free as well as some of those impressive management presentations that summarize the markets, demographics, and current and anticipated competition.
Section by Section: The Nine Parts of a Business Plan
Most business plans contain nine or so sections that reflect all the major topics or issues that inform the entrepreneur’s business strategy. Use this list as a way to organize your investigative research, and then merge topics, retitle sections, and reorder them in whatever way is appropriate for your business. Keep in mind that this is not about completing a section for the sake of it. The goal of the process is to understand the real-world circumstances that impact your winning idea and your company. How you write the plan is up to you, but use the lists of questions below as a guide for what to address. Successful entrepreneurs should be able to answer all of these questions fully if asked by a potential investor in a fund-raising meeting, while supporting those answers with actual stakeholder feedback.
When you feel you’re finished, the litmus test for determining the effectiveness of your business plan is to share it with others, such as stakeholders you’ve interviewed or other knowledgeable people in the industry. Ask for opinions on your proposed marketing plans. Ask potential customers if you have accurately identified their needs and matched them to the real benefits of your product. Then revise the plan as necessary to clarify, improve, and finalize it.
Here are the nine sections:
1.Executive summary: This is a short synopsis of the entire plan that answers the question “Why should I care?”
2.Business description: This presents the winning idea, the need it fills, and the market potential for the business.
3.Marketing: This describes potential customers, competition, pricing strategies, packaging, sales, and marketing.
4.Manufacturing and distribution: This describes the infrastructure for actually producing and distributing what you will sell, including backup vendors and budgets against growth forecasts for three years.
5.Organization: This briefly describes the company organization, including employees, management, vendors, consultants, and advisors, along with your own background.
6.Critical risks: This describes any significant challenges or obstacles and how they will be met, typically using a SWOT analysis (see pages 64–65).
7.Financial: This estimates expenses, revenues, and profits, with particular attention to cash-flow challenges.
8.Milestone schedule: This describes the planned schedule and any significant deadlines for a three-year growth period.
9.Appendix: This provides any supporting documents as necessary.
1. Executive Summary
When your goal is to attract business partners — such as investors — you need to create two succinct descriptions of your business. One is a single-page executive summary of your business plan, which gets sent to potential investors; the other is the “elevator pitch,” a shorter, verbal version of the written summary that you use when someone says, “I heard you have a great idea for a business. What is it?”
First, let’s discuss the executive summary. Budding entrepreneurs sometimes make the same mistake of many job seekers when they send me unsolicited résumés that are pages long. I’m busy, and without a compelling reason to consider someone, I’m not going to spend the time to review their entire work history. Further, the more detailed information I read, the more opportunity I have to make unchallenged judgments and find reasons to disqualify the person as a candidate. A good résumé highlights the most relevant qualifications, providing just enough information to intrigue me and make me want to call the candidate to learn more.
That is what a good executive summary does. In one page, it overviews the key data you discovered by going through the lengthy business-plan process that makes you excited and confident about your winning idea. If you do the process well, the one-page summary will all but write itself. However, there are lots of examples online; just do an internet search for “brilliant executive summaries.” There is no perfect style. What will make or break yours is how well you know your market. In addition, everything you include in the summary should be explained or supported in more detail elsewhere in the plan. Here are the main topics to address and questions to answer:
•What is the overall size of the market in dollars? (Which you can research using market reports.)
•What is your niche? What customer need will you satisfy?
•What is the market potential? (For investors, use only big numbers.)
•Who are the customers, and why will they be delighted?
•How is your company different from other similar companies?
•How much capital will be required, and how will it be used?
•What phases of growth and milestones do you anticipate?
•What is the anticipated return on the investment?
•Why is the venture a good risk?
The Elevator Pitch
While your business plan’s executive summary overviews all the key points of the plan, you also want to distill this even further into a one-minute verbal pitch with a catchy tagline intended to “hook” the person you’re talking to. The concept for an elevator pitch is to imagine stepping into an elevator at the same time as a woman with a million dollars in her pocket, but she doesn’t know where to invest it. To sell her your idea, all you get is the time it takes for the elevator to reach her destination. In vivid, passionate terms, you want to encapsulate your winning idea, why it’s sure to succeed, and what the investor will get out of it (or the return on her investment).
This is no easy thing to do. It requires much practice to distill the essence of your winning idea and business concept in this way. In reality, you do not even get a minute. It’s more like thirty seconds.
For example, on my website you’ll find the catchy tagline “Where transformation and financial independence meet.” If anyone asks me about my concept for courses and books, that is it in a nutshell. In that mythical elevator, I’d say: “It’s about where transformation and financial independence meet; if you’d like more details, I’d be happy to send you the course summaries. What is your best email address to use?”
Done. Next floor, please.
2. Business Description
