This article was taken from a presentation given by Bill Brown of Utah Business Advocates at the Park City ELP Meeting, August 24, 2011. Bill volunteers his help for entrepreneurs and small business for both Entrepreneur Launch Pad as an interim site leader and Board member, and the Small Business Development Center in Sandy as a counselor. You can reach him at email@example.com
Venture Strategic Planning is both personal and business planning as a whole entity. One cannot be considered separate from the other, especially with entrepreneurs. Putting your business together and funding it definitely impacts your personal life and the lives of your family members, especially in those first critical months and years of the business. The reality for most entrepreneurial ventures is that they fail in the first five years. Only 2-3% are sustainable. As entrepreneurs, we have the opportunity to succeed with our business product or service, not the guarantee. Does your perception equal the reality of the business you, as an entrepreneur, are in?
Many entrepreneurs go into business thinking they will be freer working for themselves, than working for someone else. But this is not so. They are not only accountable to family and friends; they are also accountable to their suppliers and service providers, customers or clients, mentors and counselors, the community, and to their employees. A start up business often takes up to 60 hours of time each week. Too often, the entrepreneur has given no thought to this reality. This is often because they have not defined what they want to achieve with their business and can’t show others what their vision is. In most of these cases, the entrepreneur has dutifully written a business plan as counseled, but without vision and without values.
Successful Entrepreneurs – A Clear Vision
Successful entrepreneurs have a clear vision—a business and personal vision—of where they are going at the beginning of the process. And they know how they are going to end up. They know the end game. They know that in between the beginning vision and the end game they must develop a process that’s understood and implement a discipline system to get it done. Currently, most entrepreneurs and mentor organizations are “too soft.” They don’t have the personal discipline or the mentoring toughness to require completion of the steps it takes to bring a business to success from an idea. That’s why the success rate is so low, and the failure rate is so high.
Define Your Exit Strategy
To establish that clear vision, you must define your business early on, or others will define it for you. For instance, defining your exit strategy will tell you who to apply to for funding. You may have a product idea that needs development, which you “bootstrap.” It’s now a viable product and the market looks good. So you pitch it to an angel investor. Why an angel investor instead of the bank? Because the angel, like you, wants to sell the business when the product has a proven market, and both of you can make a good profit on the investment. However, if you want to continue to build the business in the local market until it is ready for a public offering, a bank would be the better choice, since they are in it for the long haul. Knowing your vision—your exit strategy allows you to determine your financial choices instead of your financial choice telling you what to do down the road.
Set Your Goals
However, before you get to the funding, all entrepreneurs need to start with a vision of the business and set the goals for the first year, and a vision of the business and its goals five years down the road. It means you make a careful assessment of where you and your business are today. What is your reality?
- What are your resources? Is your assessment accurate?
- How much time do you have to put into the business each week?
- Can you get help from family and friends?
- What are your competencies? Your partner’s or family member’s competencies?
- Are you a qualified… relations person? …financial person? …management person?
- How will you attract and retain your ideal staff?
- How will you effectively manage staff transitions and replacements?
- Do you understand how and where and to whom to market?
- Do you know which suppliers are best and how to make that judgment?
- Do you have a clear picture of how to produce your product in a timely manner for you clients?
As you answer these questions, you’ll begin to define your vision. And defining your vision will help you determine the processes you must put into place to make that vision happen.
Vision for Family Goals
This vision must include the vision for family and family goals. “Bootstrapping a business” affects the ability to fund family goals and accomplish them. Entrepreneurs must recognize this and not leave major parts of their life on the sidelines when they are envisioning their business. Bill gave the example of a young couple: He was a 26 year old entrepreneur with a great product and business idea. She was a 24 year old professional with a good job and all the family income. Her income was “bootstrapping the business.” They had not considered the personal conflicts that would occur when the business demands for money made it necessary to continue to postpone having children for many years. So Bill’s question, “What happens when you start having children?” initially drew the response that that had nothing to do with the business and was personal. When he pointed out that the business could take that decision away from them since her income was funding it, they decided to consider the question. This is both a vision and a value question. What do you value?
Create Company Values
Having a vision is followed by creating values early on. The company culture needs to reflect these core values—which should be your values. One value to consider is do you design your product to have it manufactured in your local market, somewhere in the US, or overseas in China or Southeast Asia? An example of this is the U of U. They are strong in developing technological products with the thinking that they will be wanted by industry. There was no end game, no program to help commercialize these products. In addition, there is no program to design them up front to build them in the USA. They are, instead, designed to get the maximum dollar value for the least cost by having them produced in China. They are not designed and programed to be produced in Utah. There is no values consideration here, just products chasing the most money. Giving back to the community is a values choice. Building your business to support and build your community is a values choice. Outsourcing your work overseas is a values choice. These are choices that need to be made before you assemble your business plan, not after. In fact they are integral pieces of a good business plan.
Entrepreneurs need to take action to convert their dreams into reality. They need to be able to lead their people in the direction they should go to help them achieve the dream. They also need to manage tasks. Most people vastly over-estimate their own competence in being able to do these things. As a result, when they go to lending sources to solicit money for their business they are not even close to being ready to meet the requirements of these lending sources. They don’t have the answers that show they understand the processes that will make their company successful.
Processes and Company Culture
All companies have processes that implement the vision and values of the company. These processes create the company culture. Since you don’t yet have a company, you need to observe the processes of other companies and determine what works and what doesn’t. What is their code of conduct, their general business practice, their operation procedures? Most will have documented these processes in manuals. As you observe, you’ll want to do the same—document the cultural processes that work and would be a good fit for your company. You might be able to talk to an HR director and get access by complimenting them on a process you’ve seen or heard about and ask them if they’ve written it down in their manual. Perhaps they’ll let you copy that practice. Knowing the right process could help you identify your “ideal” employee, consultant, or service provider, because you’ll know the skill set of each based on your values and vision. With this understanding, you’ll confidently interview everyone initially brought to your team and choose the ones that “catch” and “reflect” your vision and values. This should help you and your company be prepared for the ups and downs that all business encounters. There never has been and never will be a direct upward course to success.
Document all the processes that define your company culture. Everyone you bring on board should be able to learn, from your documents, how to perform their roles as defined by your vision and values. This includes management, financials, risk management and mitigation, marketing and sales, quality and regulation (contract people), customer service, and any other area that needs defined processes. Make sure your employees, your investors and your public relations distributors know what you want. Clearly convey to them your vision, values, the market opportunity your product fills, and your commitment and drive to make this company successful by providing the best product and service to your customers.
Be Ready For Funding
It is critical for entrepreneurs to be ready for funding—be “bank ready.” In order to do this they must have “skin in the game.” Whether it’s bootstrapping their start-up efforts or soliciting funds from family and friends, they must demonstrate that they are serious by putting in money they are responsible for. In today’s marketplace, banks face stronger regulatory requirements than before the 2007 recession. This puts pressure on SBA loan requirements—the traditional source for start-up businesses. They are now more stringent, reflecting the bank’s situation. So, now, most SBA loans are going to new businesses that are already “sustainable” and can show that they are clearly a sound business. They know what they want and can show where their business is going.
Often in strategic planning, and in your effort to get “bank ready,” you’re told to prepare a business plan. But as we have already pointed out, Vision, Values, Structure, and Organization are first, not the business plan. All the above will eventually be part of the business plan, but they should be developed first. This goes along with the reality that funders talk to you first—they don’t look at your business plan. They want to know your passion, your vision, your understanding of your product and market, and your business history, including “skin in the game”—your time and money.
Get Help from Other Entrepreneurs
To achieve the Vision, Values, Structure, and Organization, other entrepreneurs are critical. They provide valuable feedback and counsel based on their experience. Find a non-profit organization where you have access to the business experience of its entrepreneurial members, where there is a willingness to freely assist you through the “business pitfalls” on your road to success. Entrepreneur Launch Pad is one of those non-profit organizations run by entrepreneurs for entrepreneurs.
Too often entrepreneurs get with helping organizations that take them to that “business plan done” position and drop them. Others take them a step further by helping them prepare a presentation, but they still are not ready, because they don’t have the vision, values, structure and organization set up and they don’t have a one to five year plan. There are no secrets to success. But there are methods and processes, built on visions and values, which form company cultures seen in successful ventures that dramatically improve your odds of being a successful entrepreneur and business person.