Wednesday, May 6, 2009

Building A Business Plan, Worksheet 5

Here it is, folks, the last worksheet in this initial series of posts designed to get you thinking about your idea as it translates into a business. Of course, after viewing posts on the product or service, the customer, the market, and the business, what else could be left. Oh, right: money.

Money serves many purposes for a business. It's how we "keep score", if you will, regarding how the business is achieving its financial goals (money in excess of costs being profits). It's one piece of how we reward our workers (and ourselves) for hard work and achievement. It provides the raw material for products, services, infrastructure, and human capital. At times, it's manna from heaven. At other times, it's a necessary evil.


At the end of the day, folks, money is merely a representation; a shorthand or proxy for value. We can swap goods, services, even body parts for things we want or need (see barter for an elaboration on this). Money, or currency, merely provides us with a benchmark or a common unit upon which to determine the relative value of land, labor and materials (or the syntheses thereof) within The Market.

Here's the point I want to make: many of you may have ideas that have tremendous value to you. That value may be tangible (trading collectibles, especially if you're also a collector) or intangible (providing some type of service or subsidy for a population whose ability to provide for themselves or protect themselves is limited by comparison to others). Those ideas have merit that extends beyond the concept of financial profit (a term often used within social entrepreneurship circles is double bottom-line investing; the UN actually uses the term triple bottom line investing to refer to the benefits of a project to people, the planet and in terms of financial profit). Understand, though, that not all investors view more than one type of return (financial) as beneficial, or even equal in weight or priority. I have my own personal views on this (which I'll share some other time). The point is to recognize that, within entrepreneurship circles, you must be aware of how outside investors (angel investors, venture capitalists, bankers, financial partners, suppliers extending credit terms, etc.) view returns. To most, the most important return/measure of success or viability is financial. Period. That's the rules under which this game is being played.


So, understanding that money runs through entrepreneurship in a fundamental way, examine your idea's position by asking yourself:
  • When will the company reach break even (in other words, have as much money coming in the door in sales/revenues as is going out the door in costs/expenses)?
  • What is the planned “use of funds” from any proposed investment?
  • What are the exit scenarios for the founders and investors?
Once you've finished this worksheet (found here) and the other four (see links at the beginning of this post), you've provided yourself with the skeletal outline for a business plan and a pitch. Next time, we'll set up the pitch. After that, the real work begins.

Building A Business Plan, Worksheet 4

I looked up from work yesterday, and yesterday was gone! It's amazing how we can allow ourselves to get so wrapped in our day to day operating that we lose sight of what on it's face is a crucial deliverable. Plans are great, but execution is key.

Luckily, out of errors come learning (and teaching) moments. Out of those moments can come great teams and great businesses. So, not surprisingly (especially for those of you who know me and how I love a dramatic moment and/or turn of phrase), today's worksheet focuses on the business itself. Lots of things make up a business per se, but the focus for our purpose in this exercise rests on these three questions:
  • What is it about your management team that makes it uniquely capable of executing on this business plan?
  • What are the primary risks facing your business opportunity?
  • What proprietary intellectual property does your company use, and what rights do you have to use that IP?
You can find the worksheet with these questions here, and I'm available for comments, feedback and assistance at the email address found here. To review the first three posts in the series, look here, here, and here.

Monday, May 4, 2009

Building A Business Plan, Worksheet 3

Hope everyone had a great weekend living the entrepreneurial dream. The third post in our series deals with an often-mishandled part of the business plan: the market analysis. Understanding what the marketplace looks like is crucial to the success of any venture, but all too often entrepreneurs fail to do the necessary homework to support their arguments that a market entry makes sense. The three leader questions we ask ourselves are:
  • What is the market potential for your company’s product or service?
  • Who are your competitors?
  • What gives your company a competitive advantage?
As always, you can find the worksheet with these questions here, and I'm available for comments, feedback and assistance at the email address found here. If you're just tuning in, you can find Worksheet 1's post here, and Worksheet 2's post here.

Friday, May 1, 2009

Building A Business Plan, Worksheet 2

Those of you who started following this process yesterday with my first post in the series may be saying, "There's got to be more to it than this!" Well, yes and no. Yes from the standpoint that these questions alone will probably not spur sufficient analysis and insight from which to cull a business plan.

However, one of the major stumbling blocks to writing a business plan lies in the actual writing of the plan. That's the reason I've configured the questions I'm asking into printable documents. The physical act of writing down your answers (or typing them in a soft copy; whatever works for you) breaks down the barrier of not getting anything down. There's no guarantee that you will like what you write, or that it will make sense, or that it will make money. I do guarantee, though, that if you write something down, you will have progressed past Square One. That in itself means something.

So let's assume that you've answered the questions from Worksheet #1 about your product or service. No business is viable unless money is changing hands. That means someone must buy your product or service: the Customer. So the next set of questions deals with the most important person in your business, the customer. Ask yourself:
  • Who is the target user of your product or service?
  • Why would someone purchase your product or service?
  • How do you plan to acquire and keep customers?
The worksheet for these questions can be found here. As always, if you'd like some feedback or help once you've answered the questions, feel free to send me your responses at the email address found here.