Starting up evaluating the potential of a business by mahesh krishnamurti jul 2011
A BUSINESS PLAN – WHY BOTHER?? JULY 30, 2011
JARGON!! Mission Statements That ―Vision Thing‖Statements of ―Intent‖ ―BHAGs‖
A Real Mission Statement!!!―To help our clients achieve their financial objectives by serving as their tax and financialpartner. As the world’s largest tax services company, H & R Block has one-to-onerelationships with millions of clients, helping them benefit from all of the deductions andcredits available to them and build a better financial future. It is the only major companythat offers a full range of software, online and in-office tax solutions, combined with financialinformation and suggestions that enable clients to consider how they could achieve theirfinancial objectives. This advice — the H &R Block Advantage — includes suggestionsabout retirement savings, home ownership, saving for their children’s college education,eligibility for government programs and other alternatives. When clients request in-depthfinancial plans and investment advice, their H &R Block tax professional refers them to H &R Block Financial Advisors Inc., which can assist them with a detailed investment plan andinvestment services. H &R Block Financial Advisors, member NYSE, SIPC, employs morethan 1,000 financial advisors serving clients in more than 150 offices in the U.S. H & RBlock Inc. is not a registered broker-dealer. Clients who request information about homemortgages are referred to H &R Block Mortgage Corp., which offers a full range of retailmortgage products. Our research shows that our H &R Block Advantage advice packagealong with related financial services increased client satisfaction with H & R Block’s taxservices. H & R Block has long been a trusted tax partner to millions of taxpayers. Now weare enhancing the value of our tax services by helping clients as their tax and financialpartner.‖
More Examples ―It is our job to continually foster world-class infrastructures as well as to quickly create principle- centered sources to meet our customers needs.‖―Our challenge is to assertively network economically sound methods of empowerment so that we may continually negotiate performance-based infrastructures.‖ ―To improve lives by mobilizing the caring power of communities.‖―Respect, integrity, communication, and excellence.‖
Another Example “We work side-by-side with our clients in 27countries, as members of their internal teams, to help solve their most pressing business challenges; We do so by deploying our 2,600 Consultants only according to when clients need them, how they need them, and what they need them for.” -- RGP Mission Statement
What’s Required in a Strong Mission Statement?• Quantification• Direction• Motivation (Inspiration)• Challenge (Human beings don’t like boundaries!)• Clarity (Not lengthy/Focused/Specific)• Action• Guidance
A Few Well-Known BHAGs "A computer on every desk and in every home, all running Microsoft software." "Every book ever printed, in any language, all available in less than 60 seconds.――We will put a man on the moon and bring him back before the end of this decade‖
BUSINESS PLANSIF YOU WANT TO MAKE GOD LAUGH, SHOW HIM YOUR BUSINESS PLAN!
WHAT YOU SAY…. WHAT THEY THINK…..―The project is 98% complete‖ To complete the last 2% will take as long as it took to complete the first 98%―Our business model is proven….‖ If you take the very best evidence from the very first week of prototyping and extrapolate it out for the next 5 years―Customers are desperate for our product‖ We haven’t asked them to pay for it yet, and oh by the way, all of our customers up to this point are relatives―If you invest per our terms, you’ll get a If everything that could ever conceivably 50% IRR‖ go right does go right, you might get your money back
STRATEGIC CHOICES High CRAZY NO BRAINERSAttractiveness Low WASTE OF TIME TACTICS -- ONLY SHORT TERM BENEFITS Low High Achievable
WHAT INFORMATION DOES A GOOD BUSINESS PLAN CONTAIN?• PEOPLE (THE TEAM)• OPPORTUNITY• CONTEXT• RISK AND REWARD
THE TEAM• What do you know?• How will you respond to adversity?• How well are you known?• Who do you know?• Are you realistic?• How committed are you?• What’s driving you? === EXECUTION SKILLS
THE OPPORTUNITY• Is the total market for the product/service large, rapidly-growing, or both? Scalability?• Is the industry structurally attractive (or does it have the potential to become structurally attractive)?===Rigorously describe why this is the case
THE OPPORTUNITY=== Describe in detail how you will build and launch into the marketplace• Who is/are the customer(s)• Compelling for the customer?• Pricing?• How will you reach targeted customers?• Cost to produce and deliver?• Cost to acquire a customer?• Cost to support customers?• Ease/difficulty of retaining your customers?• Cash flows/Timing?• Competition?=== Economically viable access to customers
THE CONTEXT• All opportunities exist in a context -- Macro environment (economic, inflation, interest rates, etc..) -- Government rules & regulations• You should show heightened awareness of context.• Demonstrate that you know the context will inevitably change and how it might affect your venture.• Spell out what your team can and will do if the context turns unfavorable (context from multiple angles).• Can you affect context in a positive way?
THE RISK & REWARD• Discuss People/Team, Opportunity, and Context as a moving target.• Provide a sense of the type and class of risk your venture represents.• It is ultimately your responsibility to improve the chances of success and mitigate problems.• Greatest myth: ―Entrepreneurs are risk seekers‖. Actually, all sane people want to avoid risk!!• Your business plan must confront the risks ahead.• Your Exit Strategy –are you ―IPO’able‖? Get acquired?
FAIL, FORWARD, FAST!!=> THINK BIG, START SMALL, SCALE IT UP.=> LESS TO BE GAINED BY PERFECTING THE ―KNOWN‖, THAN BY IMPERFECTLY SEIZING THE UNKNOWN.=> PROTOTYPE, PROTOTYPE, PROTOTYPE!!!!
IT’S ALL ABOUT PEOPLE HARD IS SOFT (PLANS, #s,)SOFT IS HARD (PEOPLE, CUSTOMERS, RELATIONSHIPS, VALUES) (Tom Peters)
WE ARE THE COMPANY WE KEEP!YOU WILL BECOME LIKE THE 5 PEOPLEYOU ASSOCIATE WITH THE MOST – THIS COULD BE GOOD OR BAD. (Tom Peters)
BE INTERESTEDEVERYONE WANTS TO BE INTERESTING, BUT IT’S MUCH MORE ENERGIZING TO BE INTERESTED. KEEP YOUR CURIOSITY. DISCOVER NEW THINGS. CARE, RISK, REACH OUT.