You’ve got a great business idea, so now all you need is a great pitch, right? No need to spend time on a business plan, just put together a few slides and a five to ten minute speech and investors will be throwing money at you.

Think again.

A great pitch is important, everyone agrees on that. But with the current trend of startup “experts” saying that business plans are obsolete, the following reminder is necessary:

A pitch without a plan is a bad idea.

Nobody is saying that you should write and print a 30 page business plan document detailing everything that ever might happen in your business. But the act of planning the business will not only better prepare you for actually running the business, it’ll better prepare you to pitch the business successfully.

Think about the content of the pitch and what potential investors are going to want to know. Even if you’re literally pitching your idea in an elevator, you’ll need to talk about your product or service, your team, your market, financial projections, how much investment you’re looking for and how the money will be used (and repayed), and more. If an investor is even remotely interested in your business, they’ll likely have questions, so you’ll need to be ready to back up your pitch with solid research and even more numbers.

Maybe it’s semantics, but if you don’t do any kind of business plan, where do you get all that information? In Pitching Your Business vs. Planning Your Business on Forbes.com, Sabrina Parsons says:

“How in the world can you pitch, and how in the world can you know what to pitch, if you don’t do all the research involved in a plan? Everything you need to include in a pitch deck comes from the research and financials you would do if you were writing a plan.”

Parsons goes on to discuss the ways planning supports the pitch, and uses specific cash flow examples to show how planning continues to pay dividends to companies who embrace it.

In the end, it’s clear the question isn’t really whether or not you need a business plan. If you haven’t been asked for a formal printed document, then maybe you don’t need to create one. But you do still need to spend the time planning your business, thinking through the scenarios and variables you may face, and arming yourself with as much knowledge about your business as possible. Your investors will be able tell that you actually know what you’re talking about, and ultimately the success of your business may depend on it.

Pitcher image courtesy of Shutterstock

Entrepreneurship continues to be a sexy topic for governments, with every country worth its salt trying to create its own tech hub, mimicking Silicon Valley. The appeal of promoting entrepreneurship is obvious. After all, entrepreneurs can do many good things, not least to create wealth and employment, pay taxes and help the balance of trade through exports.

From a young person’s perspective, with tight labour markets, decreasing barriers to entry, low capital-intensive business models and immediate free access to a global market, the appeal is also compelling. What is there not to like? Not much, it would appear, as evidenced by the growing numbers diving in and starting up, regardless of their skill sets and backgrounds.

There is one major problem with all of this, and it’s a dirty little secret that very few want to talk about: the odds of success remain spectacularly remote. Eric Ries, author of The Lean Start-up, puts it best: ‘The grim reality is that most start-ups fail. Most products are not successful. Most new ventures do not live up to their potential. Yet the story of perseverance, creative genius and hard work persists.”

Sean Seton-Rogers of PROfounders Capital recently claimed that of the more than 3,500 business plans they had received, his London, U.K. -based venture capital fund had just invested in 17 companies. This tiny percentage is pretty typical, and represents a lot of time wasted by all concerned. And besides, obtaining early-stage investment is no guarantee of success, either. Surely we can do better?

We’re all failing this generation of entrepreneurs by not being tough on them. We ought to curb their abundant enthusiasm when needed and force them to answer the hard questions. We should be completely ruthless in our assessment of them. We need to be brutally honest, and tell more people that they need to stop what they’re doing and do something more productive, rather than advise them to “try harder” when facing adversity.

Similarly, we need to stop encouraging entrepreneurship without acknowledging the extremely long odds of success, the numerous downsides and the fact that many of today’s entrepreneurs are tomorrow’s social welfare recipients. Otherwise, we’re just kicking the can down the road until the point when these “entrepreneurs” can no longer pay their bills, their enthusiasm is smashed to pieces and they become yet another business statistic.

I work with entrepreneurs and have a pretty good window into their world. What I am seeing is too many poorly-skilled young people lacking business acumen and trying their hand at starting their own business, when their time could be much better spent on other pursuits such as learning to code.

The signs to me are all too obvious from our conversations. Some entrepreneurs ask me whether we have a business plan for an “internet business”, as if there’s a secret recipe they could use. Others send me unsolicited emails looking for free advice on very specific issues, despite not having met me, nor knowing whether the industry context or country is one I’m familiar with.

In the business plans that I review, I often come across glaring gaps that are simply insurmountable; e.g. plans to launch new alcoholic beverages in the UK without understanding the capital costs or the power of distribution in that industry. The list goes on.

To be clear, I’m not anti-entrepreneurship. I am just a little jaded with the one-sided view that entrepreneurship is a panacea for all employment ills. It is not a victimless pursuit for all and sundry. This cheerleading often comes from those with vested interests, rather than from successful entrepreneurs who have successfully exited businesses and are looking to encourage the next generation. We need a much more balanced narrative.

Encouraging risk taking is to be lauded. After all, as George Bernard Shaw once proclaimed, “progress depends on the unreasonable man” and we, as a society, benefit from those willing to challenge the status quo. Of course, we need to encourage the “crazy ones, the misfits, rebels and troublemakers”. However, we also need to ensure that those who are not qualified to start a business are not encouraged to do so.

As a friend who works in a bank recently said to me, we should force entrepreneurs to take a test before they start. In practice, of course, his suggestion is not very practical. But he, too, was troubled by our collective failure to align entrepreneurship as a career choice for skilled and financially literate entrepreneurs who have some business acumen, rather than as a realistic option for everyone. Of course anyone could give me examples of successful entrepreneurs that left school at 12 and are now worth millions, but these represent such a tiny minority that they are simply statistical outliers.

Instead, we should be encouraging young people to learn the skills they need to build and sell the next generation of products and services that we will consume, rather than encouraging them to jump straight into starting their own business. We also need to revisit traditional university courses and recognise that, in many instances, we are training them for jobs that no longer exist. We should be teaching them more about entrepreneurship including a strong emphasis on cash-flow management and financial literacy.

Entrepreneurship is a phenomenal career choice, but we need to better equip our youth for its challenges rather than blindly encouraging them. Collectively, we need to do better.

For technology entrepreneurs, we need to encourage them to understand the lean startup methodology, as a means to help them validate their assumptions. We should remind them that, as Steve Blank said, “a startup is an organization formed to search for a repeatable and scalable business model.” They need to have a better understanding of the process rather than myopically focus on building something without any clear sense of the market size, the likely demand or their costs of customer acquisition.

At the same time, we need to push back on the growing belief that they can eschew writing a business plan when they are too busy “doing”. We need to insist that they set goals and milestones, create cash flow forecasts and devise ways to test their assumptions. 

We need to remind them of the role of survivor bias in the dominant narrative of entrepreneurship so they recognise that the typical journey is actually extremely challenging and that success stories like Instagram are mere anomalies. As Eric Ries states: “We all know stories of epic entrepreneurs who managed to pull off a victory when things seemed bleak. But we don’t hear stories about the countless others who persevered too long, leading their companies to failure.”

Some of our tech journalists also bear a responsibility, with nascent entrepreneurs receiving glowing appraisals without any rigour as to what evidence of demand they have for their product or service, or whether their claims as to customer numbers can be substantiated, or whether there is even a viable accessible market for their offerings?

These technology publications must do a better job of curating, so we as readers and consumers can learn about the start-up businesses with real potential, which are gaining real paying customers. At the moment, there is simply too much noise, and much of it is taken up by those who have little chance of success. I’d rather our tech journalists recalibrate their focus on those companies that are demonstrably gaining traction (as evidenced by revenue) rather than focus on the latest shiny social media offering with a dubious value proposition.

We need to remind would-be entrepreneurs that raising finance is one mere step on the journey rather than a cause for celebration. 

We should also be encouraging our young entrepreneurs to work in the industry they intend to set up in before they commence. Too many of those I meet have little – if any – experience in the business area they are looking to set up in, which lengthens the odds of survival even further. In short, we need to do a lot more to de-risk the choice for young entrepreneurs and ensure that they have a better sense of what they need to know before they take the plunge.

Let’s teach our young entrepreneurs to walk before they can run; to serve an apprenticeship before making themselves “founder and chief executive officer”; and to learn the skills they need, rather than assuming everything can be learned “on the job”.

We need to reposition entrepreneurship so young people have a greater understanding of what it entails, “warts and all”. And finally, we need to remind the cheerleaders that starting a business is not to be taken lightly. For those that lack the skills, acumen and wherewithal it is simply not a viable career option.

This Article originally appeared in The Kernel Magazine.

Running image from Shutterstock

Every year, the team here at Palo Alto Software looks forward to judging business plans for several prestigious collegiate business plan competitions. We all read multiple entries and then gather and talk about what makes a great plan and choose a winner.

We also get to see the mistakes that ultimately cost people prizes in competitions… mistakes that get made in real-world business plans and end up costing would-be business owners the loans or investment they need.

Tim Berry has written extensively about common business plan mistakes,  and in fact he wrote an entire blog series detailing the Top 10 business planning mistakes to avoid. He now travels the country talking about this very topic. So click any of the links in this paragraph for his expert take on the red flags you definitely want to avoid.

For a different perspective, here are some things that our group of judges has seen in plans over the years. These might seem minor, compared to ridiculous projections or other major cash flow problems, but they’re still  issues that have prevented us from awarding countless entries our “best written business plan award.” When you submit your plan to the bank or investors, they might not be looking for the best written plan, but you can be sure that making the mistakes below is going to hurt your chances.

Typos. As one judge said “It seems a shame to spend countless hours on a sound idea that could result in solid business, only to have your idea overshadowed by misspelled words, inconsistent formatting, and poor grammar.” This should really go without saying, but whether you’re entering a competition, going to the bank for funding, or presenting to investors, please have somebody read over your plan to eliminate any of these avoidable, distracting mistakes. They’re unprofessional and signal a lack of attention to detail, and when an investor has a stack of plans to read, that could be all he or she needs to see to make the decision to pass your business over.

Iffy management team. The quality of the management team is always a key factor for judges. As one judge asked “Has anyone ever run an organization before? Does the team have good coverage (or a good plan to get coverage) of the major functional areas of their company?” It’s important to note that if the management team seems weak in some areas, including a plan to bolster it is better than simply glossing over the weakness.

Ignoring sales and marketing. Especially in business plans related to inventions or bio-tech, sales and marketing tend to not get the attention they deserve. “Too often the writers just wave their hands on sales and marketing, as if it will just happen because they have a good product idea. This is often reflected in the financials, where little or no money is allotted to sales and marketing activities,” says one of our judges. We see it in multiple plans every year, so we know it’s a common problem. Rest assured, anyone reading your business plan is going to want to know how you plan to market and sell your product, and that  you recognize the costs that will be associated with those efforts.

Not addressing the competition or other obvious hurdles. There’s no such thing as a business with no competition. So if you either don’t address the competition, say there isn’t any, or simply write the competition off, you’re showing investors you might not have a firm grip on the landscape in which you’re starting your business. Similarly, if you do address areas that may challenge your company, be sure to talk about how you’ll mitigate the risks. Acknowledging threats gets you half-way there. Saying what you’re going to do about them demonstrates that you’re prepared.

 Acronym and technical jargon overload. Regardless of how complex your product is, you need to be able to explain it. If you use acronyms, even common ones in your industry, be sure to spell out what they stand for at least once (early) in your plan. The same goes for very technical terms- don’t assume your reader understands them all. Consider your audience and make sure you plan speaks their language.

Along the same lines, diving too far into the technical details can cause your audience to lose interest or get overwhelmed. Give an overview of your technology and what makes it special, but save the complex diagrams about molecular design for your appendix. Says one judge “I need to be convinced that you can run a businesses, otherwise all you have is a really complicated hobby. I’m not investing in your hobby, even if it does cure cancer.”

When you put together a business plan there can be a lot riding on the result. Don’t let easy-to-avoid mistakes make the the difference between your plan rising to the top or getting tossed to the side. A little attention and time could be all it takes.

It’s so easy to get stuck, isn’t it? We go about our lives, doing our work, pretty much on auto-pilot, and before we know it we’re stuck. Nothing is growing or changing or progressing; we’ve just been doing the same things day in and day out for weeks, months, and even years hoping that miraculously things will change and all our dreams will come true.

Well, the sad truth is nothing is going to change unless we do something to make it change. So take a look at these top 7 signs that your business is in a rut and decide if it’s time to do some things differently. 

1. Nothing is working. Newspaper ads, yellow pages, direct mail, social media,  and networking. You’re doing it all, yet you still don’t have all the business you want or need and your pipeline is empty.
2. You have no accountability. You’ve read all the marketing books, attended seminars, and maybe even hired someone to help. You know the basics of marketing, you just haven’t committed the time and energy to creating a cohesive system to make it work, and you don’t have anyone to hold you accountable or to make sure you to do the things you know need to be done to take your business to the next level.
3. You’re not getting objective feedback. Your friends and colleagues have been great for stroking your ego. But you know all your ideas aren’t as great as they say. If they were, you’d be a millionaire. You need objective opinions from somebody who can constructively lead you in the right direction and offer a fresh perspective to your ideas.
4. You don’t have time to do all the marketing research on your own. You are an expert in your industry. You can’t possibly be a marketing expert too; you don’t have time to master the things you need to take your business to the next level. You value your time and know it’s better spent on other aspects of your business where you can reap a higher return. So your marketing efforts are suffering.
5. You don’t have a marketing plan. You’ve been doing your marketing kind of haphazardly –  a little here and there with no cohesive plan or strategy in place. It’s not working. You know that in order to make it work there has to be some consistency and process behind it. But you just don’t have the time.
6. You aren’t ready to hire a full time marketing staff.  Yes, it would be nice to have an entire department devoted to growing your business, but that’s an expense and a responsibility you aren’t quite ready for…yet!
7. Waiting is costing your money. How much time, money, and resources do you waste on all the wrong marketing tactics? Really – this isn’t a rhetorical question, sit down and figure it out.  How many more months are you going to pay for those ads that may or may not be bringing you business????

If any of these sound familiar, you might be in a rut, and it could be time to get some help.  For more info on how to hire a marketing consultant, check out this article.

I don’t know what it is about Marketing, but everyone on earth seems to think they can do it. And yet I see so many people NOT doing it or wasting thousands of dollars and not getting results.  I see business owners try the same things over and over,  wasting more money, more time, and more energy. If I had 1/10^th of what business owners waste on stuff that doesn’t work, I’d be the most successful marketing consultant on the planet.  And yet, so many business owners would rather go it alone and try and fail and try again and fail again rather than reach out and get professional help. I don’t get it.

I know there are those out there who will always try to do it themselves so, so in the spirit of not getting it, here are the top 21 reasons why most small business owners fail at marketing:

1. Guessing – Great marketing isn’t an accident. It takes research, educated decisions, testing, tracking and measuring. Guesswork will leave you customer-less and broke.
2. Doing what everyone else is doing- Every business is different and your marketing mix should be too.  Following the crowd isn’t going to help you stand out from the competition!
3. Listening to sales people Marketing is a long term strategy, not a special advertisement, publication, or website; but every sales rep you come in contact with will try to convince you otherwise. Marketing is a process – a long term strategy, there is no magic pill and don’t let a slick sales person try to tell you otherwise.
4. Not asking questions –Question EVERYTHING about your business and ask everyone you come into contact with as many questions as possible to learn, grow, and constantly improve.
5. Doing nothing – It’s simple, if you don’t Market your business, you will fail.
6. Putting all your eggs in one basket – Marketing is like investing, the more diversified your strategy, the better off you will be. Don’t invest all your time and resources in one medium or on one marketing tool – mix it up.
7. Not tracking results – How the heck are you going to know what works and what doesn’t if you don’t track the results? If you’re not tracking you’re guessing, and we covered that in #1!
8. Assuming you have all the answers – Yes, I know: you know your business better than anyone. But do you know marketing?  I mean do you REALLY know how and where to reach potential customers and convince them to buy from you?
9. Not talking to your customers – No one knows your value – or faults – better than the people who actually buy from you. Talk to your customers – often. It’ll provide valuable insight and ideas.
10. Ignoring your competition- If you don’t know how you’re different from your competition how are potential customers supposed to? Knowing your competition’s strengths and weaknesses will help you differentiate.
11. Not setting goals –Goals keep us on track; they give us direction. Without them you’re wandering aimlessly and most likely wasting a lot of time and money.
12. Not building an email list – I don’t understand how anyone can market a business in today’s world without an email list! Email is the easiest and most inexpensive way to stay in touch with customers and prospects.  If you aren’t building a list you’re missing out on huge opportunities.
13. Not having  an opt in form – Emailing current and past customers is a great start, but what about the people who visit your website, Facebook, Twitter, or LinkedIn pages and then go away never to be heard from again? Wouldn’t’ it be nice to engage the serious window shoppers in some way? An opt-in form is the way to do it!
14. Selling all the time.  We’ve all met the slick schmoozy salesy types, right? And how long does it take you to high-tail it in the opposite direction? Don’t be one of those. An effective marketing strategy eliminates the need to sell all the time… really!
15. Assuming because you have a great product or service you don’t need a marketing strategy – Sure, some products and services might market themselves, but that’s rare. Real marketing success takes strategy, planning, and work.
16. Assuming that just because you have a good product or service you don’t need a referral system- Again, there are some products and services that people just love to talk about, but building a successful business solely on organic referrals and “buzz” is rare.  Getting solid referrals, consistently takes planning and solid execution. .
17. Assuming anyone with a pulse is your client- Repeat after me:  “NOT everyone is a potential client for me”. Now look in the mirror and repeat that every day! Find your niche – that segment of the population you are born to serve and you will uncover a gold mine!
18. Not building relationships – I can’t stress enough how important this is. Hiding behind your computer screen, desk, or counter isn’t going to get you the level of success you want. You have to get out there – mingle, be helpful, connect people, and build relationships with the right people!
19. Spending all your time networking in the wrong places –Not every networking group is right for you. Find the ones that will help you get where you want to go and avoid the ones that won’t.
20. Ignoring the internet – Facebook and Twitter may not be right for your business, but chances are your target market is going somewhere on line for information about your product or service.  Your job is to find out where they’re going and be there!
21. Not hiring a professional- If you want to build an addition onto your home would you do it yourself or hire a professional?  I mean, you know your home better than anyone, right? So why not do it yourself? Ridiculous, right? So then why would you try to “add on” – or grow – your business yourself?  Hire a professional who has the right tools and knows the ins and outs of growing a business.

So what do you think? I’d love to hear your thoughts!
 Want to share?? Please do! Leave your comments here.

By the way, if you liked this post, I’d really appreciate your Retweet!!! Thank you.

Many of my clients are business owners and entrepreneurs, and we often discuss succession planning. If you don’t have a family member who is the obvious heir apparent, what do you do?

I think the question of succession planning isn’t just for entrepreneurs, though. It’s certainly a topic of discussion in board rooms and at meetings. Yet I don’t often see companies of any size with a real focus and plan in place.

It’s more than simply finding the next president or CEO. It’s more than just finding someone to take over your business or buy you out. Succession planning should be considered for every key position within your organization. It’s about how you develop and build managers and leaders. It’s about how you cross-train, develop new skills in your current staff and build bench strength within departments.

Whether you are a company of 20 people, 200 people or 2,000 or more, you cannot build a long-term successful organization if you continually have to replace your people. So what if, as part of your planning process, you included a plan for building new skills in your current staff? Imagine how much less time you would have to spend interviewing and hiring, training and handling performance problems, and determining how you get the workload covered if a person resigns. Of course, as your company grows you will need to bring on additional talent, and as part of the interview process you should consider what their potential is, both short- and long-term.

If you wait to consider succession planning when you are ready to retire, take on a new role, or when key people leave your company, it’s already too late.

Your business idea is brilliant. Nobody else is doing it. You’ve got no competition. It’s sure to be a gold mine, right?

Maybe.

One mistake many new businesses make is thinking that just because nobody else is doing exactly what they’re doing, their business is a sure thing.

The smart thing to do is ask yourself  ”why isn’t anyone else doing it?” It’s possible that nobody’s selling cod-liver frozen yogurt in your area because there’s simply no market for it. Ask around, talk to people, do your market research. If you determine that you’ve got customers out there, you’re in good shape.

But that still doesn’t mean there’s no competition.

There may not be another cod-liver frozen yogurt shop within 500 miles. But maybe an online distributor sells cod-liver oil to do-it-yourselfers who make their own fro-yo at home. Or maybe your potential customers are eating frozen salmon pops right now.

Don’t think of competition as only other businesses who do exactly what you do. Think about what currently exists on the market that your product would displace. When Henry Ford started successfully mass producing automobiles in the U.S., he didn’t have other auto makers to compete with. His competition was horse-and-buggy makers, bicycles, and railroads.

Sometimes you have to think outside of the box when planning your business. Chances are, if you’ve got a product or service that appears to have no competition, you’ve already got a talent for thinking differently. Be sure to put that talent to use.

photo by flickr user TheCulinaryGeek

Companies face many change-management issues: technology, people, customers, company focus,  and benefits, to name just a few. Yet I don’t often hear people talk about thinking differently as a change-management issue.

Yes, we discuss corporate culture changes, but what I’m referring to here is changing people’s thinking that planning isn’t possible. Even leadership starts with the construct that planning isn’t possible: “There are too many unknowns and things that could change to plan. And besides, I’d never be able to get people to do it anyhow.”

To me, one the biggest change-management issues is first getting leaders to consider that planning is possible and then to infuse this belief throughout the organization.

How do you do this? Planning isn’t the written document. It’s the process and visioning that you go through to create it. Thus the first step is to shift our thinking about planning from a document to the process. Without this process we never stretch beyond our comfort zone. When we don’t stretch, we miss the breakthrough possibilities.

Secondly, even the document you create should be considered a living document. It’s meant as a guide for you to assess where you are, every month and quarter, and to help you determine what changes you need to make. You’ll never be able to forecast everything, let alone plan around it. That’s why you return your plan and revise as needed.

Finally, let go of the belief that others won’t embrace planning. If you believe they will embrace it, and encourage them to, they will eventually. Just remember, change-management issues mean shifting how people think, believe, and react. You play a role in this, and it starts with you and how you think, believe, and act.

]]> http://upandrunning.bplans.com/2011/11/08/change-management-issue-thinking-planning-isnt-possible/feed/ 1 http://upandrunning.bplans.com/2011/10/14/the-process-of-planning/ http://upandrunning.bplans.com/2011/10/14/the-process-of-planning/#comments Fri, 14 Oct 2011 16:00:41 +0000 Chelle Parmele http://upandrunning.bplans.com/?p=7142

When is a plan not a plan? When it’s a tool.

Perhaps the most important factor in achieving your desired result and turning your plan into a management tool is regularly reviewing the plan.

In the final two videos of Tim Berry’s video series on how to write a successful business plan, he talks about the actual heart and soul of business planning.

It’s not in the number of pages you have, or in how the finished product looks, or even if everything is spelled right. It’s in its ongoing success. Were you able to take your thoughts, ideas, forecasts and plans and make them work? Did your work on the original plan give you the proper base from which to continue your business by making adjustments, setting goals and milestones and achieving them as close as possible to what you’d planned?

This is the key.

A business plan is never done.

(If you can’t see the videos above, you can view them on our how to write a business plan video page)

Tim has taken us through what a business plan is, how to just jump in and get started, how to hone your strategy and focus… now it’s time for the reason why you started a business in the first place. Money!

Knowing how much money you have and how much you need are two important parts of a successful plan and a successful business. But just as important is forecasting out your sales.  According to Tim Berry, good forecasts are created by forming well organized, educated guesses based on research and past results. In other words -  it’s okay to be wrong in your forecasting! But make sure you pay attention to where you were off and why. That will help you make better guesses in the future!

(If you can’t see the videos above, you can view them on our how to write a business plan video page)