Category Archives: Business Plan

Early stage business start up considerations

Business Plan , , , Leave a comment

Sidestep Start-up Screw-ups

by

Presented for your edification are the final five elements of the start-up advice recommended by John Osher,  former CEO of Dr. John’s Products, Ltd. and an entrepreneur extraordinaire who started three businesses from the ground up and sold each at huge profit.

13.   SEEKING CONFIRMATION OF YOUR ACTIONS, RATHER THAN SEEKING THE TRUTH

“This often happens: you want to do something, so you talk about it with people who work for you.  You talk to family and friends.  But you’re only looking for confirmation.  You’re not looking for the truth.  You’re looking for somebody to tell you you’re right.  You have to learn to give more value to the truth than to people saying what you’re doing is right”.

14.   LACKING SIMPLICITY IN YOUR VISION

“Rather than focusing on doing everything right to sell to your biggest markets,  you divide your attention …trying to be too many things at one time.  Then your main product isn’t done properly because you’re doing so many different things”.   I have been guilty of this and maybe you have,  too.  I was trying to hook as many customer groups as possible using every skill set that I owned.  As a result,  when I would tell someone what I do,  they would sometimes get this confused look on their face.  Eventually,  a networking group colleague told me that he was having trouble trying to categorize me,  couldn’t figure how to remember me for referrals.  A couple of years ago,  I finally found the courage to pare down my offerings,  to simplify and sharpen the focus of my suite of services.   Referrals eventually increased and business got better.   This is a business model issue.  Sometimes,  less is more.

15.    LACKING CLARITY IN THE BUSINESS PURPOSE AND GOALS

“You should have an idea of what your long-term aim is.  It doesn’t mean that won’t change,  but when you aim an arrow,   you aim it at a target.  What are you trying to do?  If you want to create a billion dollar company with a certain product,  you may not have a chance.  But if you’re trying to create a million dollar company,  then maybe with that product,  you’ll have a chance.  Clarity of your business purpose is very important”.

16.    LACKING FOCUS AND IDENTITY

“This list was written from the viewpoint of building a company as a valuable entity.  Remember that the company itself has an identity,  a brand.  Do not go after too many things at once and end up with a potpourri of products and services,  rather than a focused business entity.  When you go into business,   it’s important to maintain a focus and an identity.  You must be focused on who you are and what you do and you build power and credibility from that”.

17.    LACKING AN EXIT STRATEGY

“Have an exit plan and create your business to satisfy that plan.   You may build a business that you feel will start fast and make a good deal of money and for that reason will attract a lucrative buy-out.   Maybe you figure that you can make lots of money for about two years but after that,  competitors will enter and you won’t be able to protect yourself from them.   So after the first year,  you watch the marketplace very carefully and keep a close eye on inventory.  Another exit strategy can be to hand the company to your kids someday.  The most important thing to do is build a company with value and profits so you have all the options open to you;  keep the company,   sell the company,   go public,  raise private money and so on.   A business can be a product, too”.

Next week,  we can examine five things to get right as you build your business.

Thanks for reading,

Kim

Business Plan , , Leave a comment

Don’t Screw-up Your Start-up

by

John Osher has business in his blood.  During his 7 years as an undergraduate college student,  Osher started and sold a vintage clothing store and an earring outlet.  On his way to building ConServ,  his first major business venture,  he worked as a cab driver,  plumber and a carpenter.  Second venture Cap Toys,  where sales volume reached $125 million,  was sold to Hasbro in 1997.

When formulating the strategy for his third venture,  which became Dr. John’s Products,  Ltd.,  Osher wanted to start the perfect company and so decided to make a list of everything he had done wrong as he built the previous two.  In 1999,  he used this list when he started Dr. John’s SpinBrush,  an electric toothbrush that retailed for $5.00.  Maybe you had one?  The SpinBrush became wildly popular and in 2001,  Proctor & Gamble bought him out for $475 million.  Enough said!  Below are more pearls of wisdom from John Osher’s list of start-up screw-ups:

7.    FAILING TO HAVE A CONTINGENCY PLAN TO ADDRESS A SHORTFALL IN SALES PROJECTIONS

“Even if you’ve been realistic about your ability to enter and penetrate your market,  sales projections and start-up and operating expenses,  there are things that happen when you start a new business.  These aren’t a result of poor planning,  but they happen.  Bank rates could go up.  There could be a strike.  You need a Plan B to cover yourself should things not work out within the timing that you want.”

8.     BRINGING IN THE WRONG OR UNNECESSARY PARTNERS

“There are certain partners you need.  If you need money,  you’ll need money partners.  But too many times the guy with the idea takes on his friends as partners.  Many people don’t provide strategic advantages.  Before people are made partners, they have to earn it”.

9.      HIRING EMPLOYEES FOR CONVENIENCE RATHER THAN SKILL

“In my first business or two,  I hired relatives,  but in many cases they were wrong for the job.  It’s hard to fire relatives and friends.  Spend time to handpick people based on skill requirements.  It bogs you down when you hire people who can’ t do the job”.

10.    NEGLECTING TO MANAGE THE ENTIRE COMPANY AS A WHOLE

“You see this happen all the time.  They’ll spend 50% of their time on something that represents 5% of the business.  Too often, the business owner doesn’t have a view of the whole company.  They get involved in part,  but don’t manage the whole.  Whether I handle this aspect or another,  whether I hire someone to do what I can’t,  I consider how it all fits into the long-term and short-term big picture.  Constantly try to see your big picture.

11.     ACCEPTING THAT “IT’S NOT POSSIBLE” TOO EASILY, RATHER THAN FINDING ANOTHER SOLUTION

“I had an engineer who was very good,  but with every product we developed,  he would say  ‘You can’t do it that way’.  I had to be careful not to accept this too easily.  I had to look further.  If you’re going to be an entrepreneur,  you’re going to break new ground.  A good entrepreneur is going to find a way”.

12.    FOCUSING ON SALES VOLUME OVER BOTTOM LINE PROFIT

“Too much of your management is often based on sales volume and market size.  There’s too much emphasis on how fast and big you can grow the business,  rather than on how much profit you can make”.

I’ll conclude with the final five elements next week. Thanks for reading,

Kim

Business Plan , , Leave a comment

17 Start-up Screw-ups

by

Serial entrepreneur John Osher has developed numerous consumer products,  including an electric toothbrush that became America’s best-selling toothbrush in just 15 months.  He also started several businesses,  most notably Cap Toys,  where he built sales to $125 million a year and then sold to Hasbro, Inc. in 1997.

Osher’s most important contribution to American business may not be the companies he’s started and profited handsomely from,  but rather the business advice that he’s willing to share. His list  “17 Mistakes Start-ups Make”  became a Harvard Business School case study.  See what you can learn from his entrepreneurial experiences and use it to create your version of the perfect Freelance consulting business.

  1. FAILING TO ADEQUATELY RESEARCH THE IDEA TO ENSURE IT IS VIABLE

“The most important mistake of all.  I say nine out of ten businesses fail because the original concept is not viable.  You want to be in business so much that you don’t slow down and take the time to do the up-front research,  so the business is doomed before the doors open.  You can be very talented,  but your business will fail because the concept is flawed.”  Go to the library and do your research.  Read blogs,  journals and newsletters that pertain to the industry you plan to enter,  so that you’ll know what’s going on.  Develop a credible business model.

  1. MISCALCULATING MARKET SIZE, TIMING, EASE OF ENTRY AND YOUR POTENTIAL MARKET SHARE

“Most new entrepreneurs get very excited about their concept and don’t look for the truth about how many people will want to buy what they they’re selling.”  Take the time to research and understand targeted customers and get to know why they will want to buy from you or hire you.  Calculate your potential to penetrate the target market and grow a client list you can live on.

  1. UNDERESTIMATING FINANCIAL REQUIREMENTS AND TIMING

“Based on inadequate research noted in Mistakes #1 & #2,  fledgling entrepreneurs operate from the premise of over-stated market size and their ability to enter it.  They then start spending more money than they should on start-up costs,  creating costs that require those inflated sales projections to be met,  so they run out of money”.

  1. OVER-PROJECTING SALES VOLUME AND TIMING

“You have already miscalculated the size of the market.  Now you over-project your portion of it”.  Always another way to run out of money, no?

  1. UNDER-PROJECTING EXPENSES

“Cost projections are often far too low.  Part of the problem is that you’ve projected market share and sales volume that are too high.  There are always unknown reasons that come up to make expenses higher than planned”.

  1. OVER-SPENDING ON AN OFFICE, OFFICE EQUIPMENT AND EMPLOYEES

“Now you’ve got lower sales,  higher start-up costs and then you layer on too-high operating costs.”  I have seen colleagues maintain fancy offices when they have the ability to run the business from the kitchen table at home.  If you can take clients out to a restaurant for meetings,  then why pay for office space?  You can get a telephone answering service to personally take messages,  so it looks like you have a secretary.  I’ve done it for a dozen years.  Besides,  no one answers the telephone these days,  especially not in major corporations. When you need another pair of hands to take on a big project,  hire in another Freelancer and spread the wealth.

More next week.  Thanks for reading,

Kim

Business Plan , Leave a comment

Business Planning for Nonprofit Organizations

by

A successful nonprofit organization requires not only a vision and mission that resonate,  but also a good business model and well thought out operational,  marketing and financial plans.  There must be a sufficient number of constituents in need of programs and services that the organization would provide.  Planning to ensure growth and sustainability into the future must be carried out.

Over the last 5 years or so,  foundations that make major grants to nonprofit organizations have begun to require that aspiring recipients submit a business plan in the application materials.  Apparently,  a proliferation of grant requests has prompted many deep-pocket foundations to demand evidence of viability and responsible leadership and management in nonprofits they agree to fund.

The goal of nonprofit organization leaders is to ensure that all programs and services offered by the organization reflect its mission and are expertly delivered.  The organization must attract a desirable number of constituents,  be fully staffed and operate at optimum capacity.  Good relationships with donors must exist and sources of reliable funding must be in place.  The leadership team should have reason to be optimistic about the organization’s ongoing viability and relevance within target constituent groups.  A business plan (and strategic plan) will see to it that nonprofits put those building blocks in place.

Business plans differ from strategic plans in that the focus is on finance.  A start-up nonprofit organization in search of initial funding,  or an existing nonprofit that has plans to expand or upgrade programs,  services,  capital equipment or office facilities will find that developing a business plan will better demonstrate the organization’s viability to potential major donors and strengthen the case for financial support.

When preparing to write the business plan,  the leadership team will take a big-picture 360-degree view of all aspects of the organization,   including the social and economic environment in which it operates,   target constituents groups,  the business model as it relates to the mission,  the financial health of the organization,  specifics of the proposed expansion or upgrades,  the funding request and details of how funds received will be utilized.  The business planning process will also encourage leaders to:

  • Connect the dots between the mission and programs and services delivered
  • Acknowledge operational efficiencies and strengths
  • Establish performance metrics for programs and services offered
  • Clarify the profile of the constituents and identify emerging needs for services and programs
  • Update and refine marketing and communication strategies and channels
  • Identify short and long-term funding needs and identify where funds will be designated

In small organizations,  the Board of Directors,  along with the Executive Director,  will write the business plan.  In larger organizations,  the Development Director,  Operations Director,  Finance Director and other senior staff share the responsibility.

The business plan for your nonprofit will compel the leadership team to acknowledge and address critical questions that face the organization and demonstrate to potential major donors that plans are underway to overcome challenges,  exploit opportunities,  improve constituent services and more fully express the organization’s vision and mission.

For more information on business plan writing tailored to nonprofit organizations,  please tune in to Writing Wednesdays on Wednesday December 4 at 3:00 PM EST  (2:00 PM Central, 1:00 PM Mountain, 12:00 PM Pacific)  http://www.writingtomakeadifference.com/archives/4007

Thanks for reading,

Kim

Business Plan, Business Strategy , , 3 Comments

A Profitable Partnership

by

Whether you are making a plan to start a business or expand one that exists,  inviting partners to join you may be the best way to achieve business goals.  Ideally,  partners bring some combination of complementary skills,  capital resources and strategic relationships that will make the business grow and prosper faster.

Before initiating a partnership,  evaluate the resources you need to launch your venture.  If you anticipate that start-up or expansion capital may not be available,  then taking on a partner or two may be the only way to take your business from the drawing board to reality.  But if skill sets beyond what you possess are the issue,  you may be better off hiring  a few key employees.  Speak with a business attorney to devise a way to attract key employees for your management team by offering equity in the business,  but not so much that you risk losing control.  Remember to include the option of your being able to buy back shares if you like.

Similar business goals and priorities

Business partners must share a vision of the long-term goals and priorities for the venture.  How big do you want the business to be? How much of your life are you willing to devote to building the business?  Have conversations and brainstorm different scenarios that might happen during the life of the business and how each of you thinks it would make sense to respond.  Partners must be able to agree on a course of action to move the company forward if success is to be realized.  Serious discussions about each partner’s preferred vision of the future will give valuable insight into how to handle challenges and opportunities that might present themselves down the road.  Write a business plan together and as you do,  almost everything will come out in the wash.

Similar approach to customer service

Customer service is an important aspect of the business brand.  Customers must know what to expect when doing business with you.  It will only confuse and frustrate clients if one of you is willing to burn the midnight oil and move heaven and earth to exceed expectations every time and the other is willing to let whatever it is wait until 9:00 AM the next morning.  Whatever approach you take,  devise standardized,  written customer service protocols that all partners can accept and agree to abide by.

Mutually agreeable exit strategy

Is this a one-off project based partnership,  or is everybody in it for the long-term?  Do you envision building the company rapidly and attracting a buy-out offer,  or is this a business you would like to pass to your children? Guided by a business attorney,  discuss the circumstances by which a partner can quit the partnership and how the transition will take place.  Who can buy out a partner? What is the protocol if a partner becomes medically incapacitated and can no longer work in the business? In a divorce,  can you wind up being in business with a business partner’s ex?

Partnership agreement

Your state may not require a written agreement to form a General Partnership,  but you are strongly advised to do so anyway.  A written agreement will clarify the parameters of the partnership.  Specify the share of the business owned by each,  the division of net income (or losses) and the duties and responsibilities of each partner.  Commit to writing everyone’s shared understanding of the partnership business arrangement.

Forming a partnership and going into business with one or more people can be an enjoyable and profitable experience,  but it doesn’t work for everyone.  When partnerships go wrong,  they ruin relationships and bank accounts.  Choose partners wisely,  be realistic and transparent and put everything in writing.

Thanks for reading,

Kim

Business Plan , , , , 2 Comments

Business Model Tune-up

by

You’ve written a business plan—now what?  Kim is the midwife who helps you take your business from the drawing board to reality in  “Business Plans:  The Next Steps”.   Bring your completed business plan and join Kim and a group of hopeful entrepreneurs in round robin discussions where you’ll get a critique of your business model;  smart marketing/PR/social media advice;  insights into sales channels that make sense for you and your customers;  and advice on financing options in today’s economy.  Wednesdays March 13,  20  &  27  5:30 PM – 7:30 PM at Boston Center for Adult Education  122 Arlington Street  Boston.  Register at  http://bit.ly/Zd9dqR  or call 617.267.4430 class ID 9074.

A cloud of worry and paranoia envelopes business leaders and other decision-makers and in their role as B2B clients,  they become more fickle and gun-shy every day.  They brag about postponing projects and declining to spend money.

To survive and thrive,  it is therefore  essential for Freelance consultants and other business owners  to make an annual assessment of the company’s business model and evaluate how the organization can deliver the right services in the right way and demonstrate to clients that the value you bring improves the bottom line and makes clients look smart to the higher-ups.

The business model is the blueprint for the process your organization follows to connect with clients,  deliver services and make and sustain a profit.  The business model reflects what you believe about what clients need and value,  the way in which those needs ought be addressed and solutions delivered and what clients will pay to obtain those solutions.   Additionally,  the business model shows the business leader how to make his/her organization function efficiently for leader and clients. Perfecting it is the cornerstone to success  (along with a healthy dose of good fortune!).

The most direct way to check up on your business model is to take a good client to a restaurant for some combination of libation and/or meal at the conclusion of a project,  when the client’s trust in you is high because you’ve delivered the goods and exceeded expectations.  You will likely be able to persuade your client to open up and tell you what’s going on in the organization as regards challenges and opportunities,  plans for the future,  services that are valued and the preferred method of delivery for those services.

You are certain to learn all sorts of useful information that will tell you how you might refine,  adjust,  package or price your services.  Knowledge of your client’s priorities and concerns is the first step to winning the project that does the work to address them,  says Alexander Osterwalder,  co-author of  “Business Model Generation” (2010)  and founder of The Business Model Foundry  http://www.businessmodelgeneration.com

Knowing how your clients can get the job done without you is also useful (although painful!).  As I mentioned at the beginning,  your real competition may not be another Freelance consultant but the client,  who decides to table the project indefinitely or do it in-house.  That’s not easy to counteract.  Your only defense is a solid business model that helps you position and promote your solution as preferable in some vital way.

Flexibility in your business model is a necessary feature if you expect your business to make a profit.  The need to adapt to shifting client preferences may require you to selectively experiment and reconfigure the services you offer,  or how you package and promote them.

Updating the keywords you use in marketing campaigns and online and print collateral will help clients and prospects to visualize where your services might have a place within their organization,  so stay up-to-date with industry concerns and buzzwords.  Keeping abreast of client needs allows you to successfully adapt your business model and promotional message,  keeping your organization competitive and able to stay profitable.

Thanks for reading,

KIm

Business Plan , , , 1 Comment

Business Model Guideposts

by

I will teach “Become Your Own Boss:  Effective Business Plan Writing” , a three part workshop (total 6 hours) held at Boston Center for Adult Education 122 Arlington Street Boston MA on three consecutive Thursdays 5:30 PM – 7:30 PM February 17 – March 3.  Register at http://bcae.org, course #420174 or use the direct link:

http://bcae.org/index.cfm?method=ClassInfo.ClassInformation_class_id=4967&int_category_id=48&int_sub_category_id=13&int_catalog_id=0

The business model defines the method by which an organization creates and delivers value through products and services offered and the way in which it persuades customers to pay for that value.  The business model encompasses the manufacture and marketplace delivery of products/services,  how best to access prospective customers,  where and how business transactions take place and customer service.  The business model is the blueprint for how the venture operates in real time and makes a profit.

The business model reflects what the business owner/management team believe about what customers value,  the way in which customers want that value delivered and what they will pay to obtain it.  The business model can also function as an analytical tool. 

 Its examination can help the business owner effectively address challenges such as client retention problems,  insufficient new business development,  or persistent customer service snafus.  It can urge the management team to find a way to lower the cost of goods sold,  add or delete services, or  rethink sales distribution channels.

How’s your business engine running these days?  Might a tune-up be in order? Here are some questions to ask yourself and guideposts to follow as you build or refresh your business model:

  • Who are the target customers?
  • How can your organization best attract,  acquire and retain the target customers?
  • What need does your product/service fulfill or what problem does it solve?
  • What perceived value does your product/service provide?
  • How can you differentiate your product/service in ways that resonate with the target customers?
  • How will you generate revenue?
  • Where will business take place,  how and when will customers pay?
  • Identify and locate customers with sufficient money and motive to do business with you,  preferably on a regular basis.
  • Verify that there will be enough paying customers to allow the business to make a profit.
  • Identify which product/service features and benefits that target customers value most highly.
  • Identify the least costly source location and manufacturing process for your products/services.
  • Use the most cost-effective product/service delivery system that customers will accept.
  • Identify product/service add-ons and upgrades that are easy and inexpensive to provide and for which customers will pay a premium to obtain.

Thanks for reading,

Kim

Business Plan , , , 7 Comments

Business Model Nitty-Gritty

by

Business experts view the development of a strong business model as an essential component of business planning and I would agree.  The business model ranks near the top of the list of business planning responsibilities.  I teach business plan writing for an SBA affiliated organization and I’ll place the business model fourth in line,  after one gauges demand for the product/service,  defines the primary customer and evaluates the competitive landscape.

The business model is the roadmap within the roadmap that is your business plan.  It is the blueprint for the process by which a company will make and sustain a profit.  It is therefore necessary to do thorough market research and put the pieces together carefully.  If you expect to make any real money,  you had better get your business model right.  Unfortunately,  too many aspiring entrepreneurs do not roll up their sleeves and hash out the gory details that are the building blocks of a viable business model.

The business model shows you how to make your business work efficiently.  The first big question the business model asks you to examine is,  how will you and the clients connect?  Will they find you via your website?  If so,  how will they know that your website exists?  What should you do to drive them to your site and what do you want them to find and do when they get there?  The type of website that you design and your call to action are business model issues.

Or maybe you will connect with clients and prospects via referral.  Who, then, will refer to you and what will motivate that behavior?  Do you have,  or can you create,  referral relationships that will feed you a steady supply of prospective clients? 

For example,  if you are a florist,  do you have relationships with wedding and other event planners? Perhaps you worked in a busy floral shop and know a few people who will send brides and others to you.  Or do you think you can depend on networking to connect you with enough prospects to get the ball rolling on sales?  Who knows,  maybe you are that lucky.

Where business will actually be conducted is another business model issue.  Will customers visit you at your floral shop,  or will you operate as a Freelancer and go to them, toting a binder or iPad that shows examples of arrangements you can create?

For those who sell other types of products,  will you sell from a physical location,  will you place items into the  stores of others on consignment,  or will all be sold via your website?

Providers of intangible services must first know how clients expect to engage in the type of transaction offered and whether you should open an office  (accounting or law),  or go to the client’s location  (PR services or business consulting).  Your business model will explain it all and tell the reader (and you) why it makes good business sense to sell in the way you’ve chosen.  As your business grows,  the business model will change accordingly,  to accomodate increased demands on resources and client expectations.

Remember also to address customer service issues,  like your return/replacement policy,  in the event that a few customers are not satisfied with a product,  or if something breaks while being shipped.  If you will sell from your website,  the shipping process will be addressed in your business model.

So the business model impacts many facets of your business plan and its fine points deserve careful consideration before you take the plunge and start spending time and money on a concept that you cannot make work.  Next week,  we’ll take a look at questions to ask yourself and some guideposts to assist you as you develop a business model for a new enterprise,  or revamp the one you’re in now.

Thanks for reading,

Kim

Business Plan , , Leave a comment

The Best Business Plan for Your Business

by

A well-conceived business plan does much more than merely describe what will become your business.  Your business plan must sell you first and foremost,  along with the products or services you’ll offer,  the business model you will follow,  the marketplace in which you’ll compete,  plus reasonable estimates of start-up and monthly operating expenses.  If outside funding is required,  then the plan must convince lenders or investors that you are prepared and qualified to build a significantly profitable enterprise.  A good business plan will do the following:

  • Define the business mission
  • Describe the products and services
  • Identify target customers
  • Identify and evaluate major competitors
  • Describe the business environment
  • Detail the business model
  • Describe the business strategy
  • Detail the marketing plan
  • Demonstrate how a profit will be made
  • Provide an exit strategy

Here are business plan options for three scenarios:

The Executive Summary

An Executive Summary is a condensed version of a full-dress business plan and often runs to about 5-10 pages in length.  When written well,  the Executive Summary nevertheless functions as effectively as a traditional business plan.

It is a useful tool for Freelancers who will open a consultancy and will have relatively modest start-up costs and monthly operating expenses and are savvy enough to appreciate the value of a road map to launch their venture.  It is not a business plan option for those who will approach lending institutions or investors.

The Executive Summary states the business mission,  describes the products/services,  describes the primary clients and competitors and details the business strategy,  business model,  marketing plan and relevant financial data.  To be useful,  the document must fully integrate that information and demonstrate how the business will become profitable.

The Operational Business Plan

An Operational Business Plan is produced by an existing business with several years’ performance history,  usually with a goal to either apply for business expansion capital or prepare for the sale of the company.  Operational Business Plans may also be used to upgrade and streamline how a business runs,  functioning as a guide for the management team.

The Operational Business Plan delves into great detail about production,  customers,  competitors,  the marketplace and business environment,  sales distribution channels,  management and staffing.  Historical data are available and five years of financial statements are typically included,  along with financial projections that forecast the company’s expected performance over the next three years.

The business plan to attract investors

When outside investment is sought,  it goes without saying that the potential for strong profits must be demonstrated.  The more money that is requested,  the bigger the promised profits must be and the more quickly realized.  The break-even statement,  which shows at what point in time the business will go into the black,  along with credible financial assumptions and projections,  are critical in this scenario.

If the business is an existing one,  the financial projections must appear to be attainable,  based on the five year financial history given.  Make sure that your business and personal credit scores are 700+,  or you won’t see a dime from a bank.

Venture capitalists and angel investors may be somewhat more forgiving of a less than perfect credit rating if your business concept and model are extraordinary.  Beta test the product/service and business model with target customers to verify demand for what you intend to sell and your ability to efficiently deliver the goods to the marketplace.

For VCs, the potential for big profits is king.  They are in it for the pot of gold that comes when the company goes public and stock is offered.  Angels are not totally dissimilar to VCs,  but they are drawn to an entrepreneur’s vision and passion in addition to the pay-off.  That’s why they’re called angels!

Thanks for reading,

Kim

Business Plan , , Leave a comment

Starting A Business? Consider Your Exit Strategy Part II

by

SUCCESSION

The sentimental favorite!  So many entrepreneurs dream, perhaps secretly, of passing their business on to the next generation.  If you can make this stardust covered dream come true, it’s a lovely option.  Unfortunately, more often than not succession does not pan out.  I’ve read that 70% of family businesses do not survive the transition from the founder to the second generation.

Family rivalries and other dysfunction often intrude to tank the business.  Sometimes the owner refuses to cede control (like Queen Elizabeth II, whose ego prevents her from stepping aside so that Prince Charles can do the job for which he’s trained his entire life). Other times, the youngsters get a little power mad and want to take over before they know what they don’t know.

As with a business sale,  get the financial records in order, maintain business property and equipment, call in your accountant, attorney and appraiser and share information. Family members deserve to know what they’re getting into.

It will be very important to distinguish between the company managers (perhaps one child or two) and the company owners (all the children) and make sure that no one feels devalued.  Remember that you’ll want Christmas dinner to be a happy occasion!

I strongly recommend that you consult a family business specialist if you’d like to pass the business along to family members.  Being able to groom your hand picked successor is a wonderful thing.  Recruit a specialist to help you choose the candidate who is best qualified to assume the reins.

INITIAL PUBLIC OFFERING

If your business has grown substantially and is poised for still more significant growth, provided that a major  infusion of cash can be raised, then offering publicly traded stock in the company may be the best strategy.   I’ve included IPO in this  section, although the entrepreneur may remain within the company after it  has gone public (or not).

Preparing your company for an IPO is an intense piece of business.  A couple of years ago, an acquaintance of mine took his biotech company public and damn near found Jesus in the process!

You’ll need an investment bank to underwrite the offering;  a magnificent business plan that portrays your company and its growth potential in an excellent light (but does not oversell);  and a first rate IPO attorney.   The Securities and Exchange Commission governs the proceedings.

If you’ve done everything right and have fortune on your side,  your stock might even sell and bring in the growth capital that your company needs. You might even get rich:  the value of the stock sale may far exceed your original investment in the business.   However, you may not be able to jet over to Dubai and buy an island just yet.

Major investors may dictate that nearly all cash raised through the IPO must be reinvested in the business.  Moreover, a portion of the owner’s share may be held in escrow for a period of years.  If that’s not enough, the owner’s role in the business may be greatly diminished.   That may suit you just fine—or not.  Are you ready to give up control to a bunch of outsiders who may not share your vision or priorities?

So there you have it,  a business plan guide that I hope will give you the inspiration to get started on a business  venture for yourself.  I’ve left out a couple of elements,  such as Operations and Executive Summary,  but I feel that you have the tools to build a plan that will  launch a successful business.  Good luck!

I’ll be back next week with a new topic.  I hope you’ve enjoyed the series!

Kim