Tag Archives: Business plan

What Sort of Business Plan Do You Need ?

Business plan guru, Tim Berry, will be reading and evaluating 75 or so business plans in a single month so he should know something about how to create them and how to judget them.

As Berry says: “This is business plan season for me. I just finished reading half a dozen plans for Notre Dame’s annual business plan competition (we (Palo Alto Software) give a prize to the best one), and another half dozen plans for the Rice business plan competition (I’m a judge, and we have a best business plan prize for that one too). I still have to read five plans for the University of Oregon’s New Venture Competition next weekend (I’m a judge), and I’m supposed to produce a first-cut on 43 plans for the Willamette Angel Conference (I’m one of the angel investors) by the end of the workday today.:

Here’s his take on what sort of business plan you need:

The Business Plan Paradox

Should you or shouldn’t you write a business plan?

Yes and no.

The academic or theoretical wisdom is that a business plan provides you with a road map of where to go in your business. And, to the extent that it gives you an opportunity to think through all the multitude of challenges you will face, writing a business plan is certainly a good idea.

However, the cold, hard fact is it does not prepare you for all the challenges you will face because you are bound to encounter an infinite number of surprises, not all of them pleasant.

A road map would be more akin to a document you could pick up from AAA to direct you in your drive from Houston to Dallas or New York to Chicago. Fairly straightforward and based on known reality.

What you really need, as an entrepreneur, however, is a guide for how to hack your way through an unknown and previously unexplored jungle with a machete, not knowing when a baboon, swinging from a vine was going to whiz past your head or a water buffalo was going to charge you at a crossing. Which is to say that navigating your way through the entrepreneurial jungle can be a risky business, requiring quick wits, lots of ingenuity and occasionally, nerves of steel.

Thomas Frey’s “10 Rules for Bootstrapping Your Business” refers to:

“The Business Plan Fallacy – In Quest of Low Hanging Fruit. Contrary to what academicians teach, successful bootstrappers seldom write business plans. I’ve not met many that have. This is a luxury few can afford. But more importantly, bootstrappers have a constant need to keep their options open. Their relentless drive for revenues forces them to keep their peripheral vision intact as they view the opportunity landscape.In the early stages of a startup, bootstrappers have little accountability for their actions. Their primary need is to prove a viable concept in a viable market. And this means revenues come before anything else.”

I think, to put it another way, the need to survive comes before anything else. That’s why one has to watch so carefully for sinkholes. There’s also that need to focus like a laser, not get distracted and keep your eye on the goal. Having been through the entrepreneurial jungle many times myself I can’t overstate the importance of training yourself to be aware of all the factors that can impact your business, keep your options open and be ready to respond with lightening speed.

So should you write a business plan? Sure. But keep it short. And carry a big eraser.

Business Planning: An Exercise In Revisions

: Image by Cale Bruckner via Flickr

Here we are, caught in a recession, so what can we do about it? The first thing we should all do is sharpen our past business planning and take into account the facts on the ground. A “plan” exists in a vacuum until that little hatchling bursts out of its shell and steps into the barnyard which is miles and miles of vast, uncharted territory with many, sometimes scary, things happening at once, all of which have an impact on you in one way or another. We all have to remember that a business plan is never done, it’s always a work in progress and revisions are never needed more than in tough times.

Here’s what Tim Berry has to say in 7 Business Planning Fundamentals | Small Business Trends.

” Specifically, what do we as business owners, managers, and entrepreneurs, do about it? I see this question and good and bad answers everywhere, so for this post I’ll stick to my expertise, which is business planning.

Let’s review how we go back to the fundamentals of business planning. What exactly are the fundamentals?

It’s the planning, not just the plan. That’s critical and we all see it now as sudden unexpected changes — the black swan — blow our plans up. No worry, business plans are always wrong, so it’s always been the planning process that makes them worthwhile. Planning means plan and review, revise, and correct, and review and revise and correct again. Watch how the assumptions change. This is absolutely fundamental to planning.
Shorten the cycle. You’re using planning to steer your business now, and the road is curvy and bumpy and unpredictable, so you pay closer attention and concentrate more carefully. Review your numbers frequently. Watch for changes, surprises, and the unexpected. It’s about early warnings. Watch the short-term closely. Use your planning as an early warning system.
Sharpen the focus. Narrow it down. Make sure you’re close to your best customers. Sharpen the marketing message, and review where it’s going and how. Avoid wasted resources.
Watch the cash flow. As the kids would say, “no duh.” But even if it’s obvious, I can’t leave it out of the fundamentals. Please remember that profits aren’t cash, and watch for changes in the cash cycle, like your business customers waiting longer to pay their bills. A business-to-business company needs extra financing worth a month of sales for every 30 days longer that customers hold off their payments.
Watch the metrics. Remember, you’re looking for early warning systems. Obviously sales, costs, and expenses are metrics, but measure wherever you can, and watch for changes. Phone calls in and out? Time per call? Presentations? Inquiries? Metrics work for early warning.
Your business plan is always wrong, but vital. See point number 1.
Your business plan is never done. See point number 1.

My conclusion? Now, as 13 months ago. This is from that economic dark clouds post (sorry to quote myself, but hey, at least I’m consistent), but I think it holds up now more than ever. Stick to fundamentals, and get back to work:

Thoughtful economic analysis is readily available, fascinating, and scary. I don’t know about you, but for me some measure of future fear is a good thing. As president of a small company, being fearful is part of my job. Then I finish my coffee, go to my email, and get back to work.”

* * * * *

Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and co-founder of Borland International. He is also the author of books and software on business planning including Business Plan Pro and The Plan-as-You-Go Business Plan; and a Stanford MBA. His blog hub is at timberry.com.
The Cold, Hard Facts About Business Plans, Elevator Pitches And VC Presentations

Best Way For A Startup To Earn Revenue? – Entrepreneur Poll Results

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AdvancingWomen.com believes the top responses in the following poll capture the basics of how to make it through tough times.

First, tough times are the worst possible time to think of cutting your marketing/ad budget. Don’t do it. That’s where your prospects come from. Second, remember most prospects don’t convert into buyers on their first or even their second visit. You have to keep in touch with them and keeping chipping away at that wall of reserve or objections or whatever is holding them back from buying your product or service. A series of auto-responder messages can help expand your marketing reach and free up more of your time to speak or meet personally with serious buyers.

Evan Carmichael, Blog Manager for YoungEntrepreneur.com shares the results from their latest Entrepreneur Poll, Best Way For A Startup To Earn Revenue? – Entrepreneur Poll Results.: What Is The Best Way For A Startup To Earn Revenue? The number one answer that came in was:

Focus On The Sale

- The number one thing to focus on is your first sale. A lot of businesses fail because they spend their time on letter head, furniture, office space, etc. What really matters is getting in front of your customer, finding out what they need, and providing that service/product. It really is that simple but is by no means easy. Sales is hard work and is a required skill for every entrepreneur. If you have no sales or marketing experience I recommend you get a sales job before going out on your own.

- Hi there, The best way to earn revenue for a start-up is at some point stop setting things up and just start SELLING. Sales is a life blood of any business and the sooner you start the sales the sooner the money comes in.

- This is the only logical answer… The only way to generate revenue is to sell your product or service. There is no need for a poll or a survey… just sell.. thats all you need to know!

- Easy…Start selling a good product as soon as possible. Receiving revenues right away begin to offset the cost of a startup. There are those who want to read, research, plan, etc. all day, but it’s those who take action that succeed in this society.

- Earn revenue by having great sales tactics–selling while not getting caught up in the backoffice work and creating sales methods. Finding a smart way to have sale prices often, showcasing your products or services through sales, or adding some extra incentive or package pricing for the client. Also teaming up with a business that targets your audience. The key is also making sure keep expenses level while selling–so gross margins and profitability ratios don’t get messed up.

The second most popular answer was: Create A Marketing Plan

- No one will know that the business exists if it doesn’t launch a marketing effort soon after the ink is dry on the business plan. Create a clear and concise message and repeat it at every exposure avenue visited by your targeted audience.

- To create a marketing system that can attract customers easily. First, you need a way to make sure customers will come back again for your products. Subscription based works well. 2nd, you need to come up with a reason for them to buy. Maybe a one month free etc.

- Put together a marketing plan based on your projected cash-flow needs. How much money does your business need each month to cover costs and stay afloat? How much will it need to begin making a consistent profit? Now look at what you sell. How much business do you need to do each month to bring in that required revenue? Then build a marketing plan based on bringing in that amount of business for the lowest possible investment. And create incentives for customers to act now. There are two big mistakes small business owners make when starting out. One: not paying themselves, which forces many to give up too soon. And two: taking on all the work themselves instead of running the business. A healthy business can pay you a salary, and is scalable enough for you to bring in workers when needed, while you concentrate on running (and growing) the business.

The third most popular answer was: Advertise

- You have to spend money to make money as a new business. Advertise!

- Hi Evan! Good to see you on this forum. I believe that to get a business up and running successfully, you have to do a combination of the things several of you are saying: advertising and selling. Your advertising has to be very smart at first, being sure not to waste a dime. Many things can be done for free now, even if you’re a brick and mortar business. Get involved right away in the Chamber of Commerce in your area. Be evident at fundraisers and work your elevator speech into conversations somehow. Use your kids to pass out flyer’s. Do co-op advertising with local businesses. Just be a positive role model in the community and you’ll earn respect; which goes a long way in business. I think when your business is just getting going is the time you really have to be frugal with any money that you can get your hands on.

7 ways I’ve Almost Killed My Business

Image via CrunchBase

7 ways I’ve almost killed FreshBooks.
Mike McDerment is CEO and Co-Founder of FreshBooks , an online invoicing and time tracking service that helps professionals in over 100 countries save time, get paid faster, look professional and focus on what they love to do — their work.

Mike McDerment

As AdvancingWomen.com‘s President/CEO, and a serial entrepreneur with a long string of businesses behind me, I’ve had the opportunity to kill a whole list of businesses and, believe me, it’s not as hard as you might think. Here are a couple of points that Mike makes that reverberated most with me:

Thinking we had to spend more than we did. It is always tempting to think there are “silver bullets” that will create instant success, but that is totally discredited by reality. If there is any kind of very slow motion “silver bullet” , it is the opposite: it’ hanging on to your money so you can keep slowly and painstaking building your business based on the value you provide. ( And I speak as one who survived the dot com crash and a whole host of others in various industries, each thought to be a catastrophic devastation and they were, for those who had no cash left as the dust settled.)

You may find it hard to believe but there are individuals with $100,000 a month income who find, at the end of each month, they’re spent more than that. There are businesses in the same position. No matter how much cash comes in, it’s always possible to spend more. Master your cash flow if you want to survive in business, because without cash, no one cares if you’re worth a million dollars on paper or in widgets, the doors will shut and you will be out of the game. If you get a handle on the dynamics of your cash flow, that act alone will both improve your business and improve you as a manager, the beginning of a very positive and powerful cycle.

Here’s an excerpt from a list of ways that Mike McDerment says he almost killed FreshBooks over the years:

1. Thinking we had to move faster than we did
I remember back in 2005 feeling that if we did not blow our lights out and spend every penny we had on marketing “right now!” someone would obliterate us. … Turns out I was wrong.

2. Placing my faith in a spreadsheet
Rocking a spreadsheet is important in my books – it gets you thinking about your business. But trust me, whatever numbers come out of your Excel jockeying, they’re wrong. If you saw our business plan from 5 years ago you’d see what I mean…

It’s really easy to stare at a spreadsheet and say, “that’s it! I totally get this business…I understand how it all works and look at that year 5 revenue!”, when the reality is it will take 10 years to get there, cost you twice as much as you thought, and you’ll probably be running a totally different business by the time you get there. All of that is okay in my books, just so long as you don’t actually delude yourself into believing what the spreadsheet tells you.

3. Thinking we had to spend more than we did
There is something about the act of spending money that breeds confidence – don’t ask me why. Just because you are spending money does not mean things will work out like you modeled them…There are no silver bullets, so don’t kid yourself into thinking there are.

4. Placing my faith in consultants
Nobody cares about your business as much as you do, and frankly people who are smart – consultant/MBA smart – don’t know your business as well as you do despite the fancy words and references to past success. Don’t kid yourself into thinking a consultant knows your business better than you.

5. Underestimating word of mouth
This one is sort of tied to number one. It takes *years* to generate word of mouth – it’s a slow build, but slow burning fires burn the hottest. So be patient and do your best to take care of your customers/users even if you can’t find a way to measure the ROI.

6. Believing we could not get this far without doing “x”
I remember talking with people back in 2004. Many believed we could not get anywhere without signing a “deal” with a “partner” or taking “VC money” or “whatever”. Here’s my advice: sign the right deals with the right partners at the right time for the right reasons. You can build a business without being forced to work with the wrong people at the wrong time for the wrong reasons. The choice is yours – don’t forget it. Opportunities will present themselves if you keep your feet moving and you string together a series of small successes…

7. Doubting ourselves too much
Over the years I’ve met a lot of smart people and I’ve invited them to tell me what they think. For years people did not “see it” and that exacted a toll on my confidence. Doubt is born out of fatigue and loneliness, and there is a lot of both when you are running a start up. Hang in there and keep your feet moving – there’s still a lot of time for you to change the world. “

AdvancingWomen.com seconds that motion about not doubting and keeping the faith. Building a business is a long haul, sometimes exhausting but also exhilarating. If you had the drive and determination to start your own business, and you’re showing any traction at all, just hang in; be vigilant about the downside and the upside will take care of itself; do all the little things right and the big success will come.

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