Ask a Question Wishlist

If you could ask an industry leader or respected business guru any question to help your business be more successful (in whichever way you define success), who would you ask and what would you ask them?

In my case, I would ask Steve Jobs in what proportions he thinks luck and hard work are required to make a business a success. As a follow-up, I’d ask what I could do to influence either or both the most.

Why Steve Jobs? He saw an idea, had an opportunity, had talent but little experience, worked hard, dealt with adversity (both business and personal)

Post your questions below, and you never know – we might get them answered!

Accounting and Budgeting Tools

Very good, comprehensive round-up of a variety of accounting and budgeting tools and software over at Mashable.

I’ve already signed up for trials of a few. It is very important to get this element of a start-up right, but in the quest for many of us to create ‘lifestyle’ business, where the objective is quality of life rather than wealth creation, it is easy to forget, or sweep under the carpet.

Remember: Cash is King! If you lose sight of your cash inflows and outflows, you’ll lose sight of your business.

If you have any good, bad or indifferent experiences with any of these tools, or life lessons to share with the community about small business accounting in general, please let us know.

Madness in detail!

Having put together a range of business plans, both for myself and others, I am continually struck by the strangeness that is financial projections.

In every case, I have been explicitly asked to include detailed financial projections for the next X years, where X is a number from three to seven.

In every case, I wonder what skill or piece of knowledge I must be missing to be unable to confidently predict accurate revenues, costs and profits expected several years hence.

I still don’t have the answer, but I most certainly have an opinion.

I believe that detailed (that is, month-by-month) income and cashflow projections are reasonable requests for the first year of a business’ life. After that, the inescapable variability of the underlying research and assumptions means that the confidence level must unavoidably be lowered.

The more useful approach is to start projecting numbers on a quarter-by-quarter basis for years two and three. This allows small bumps in the road ahead to be absorbed and a reaction formulated and implemented without the significant added stress of worrying about the impact on monthly figures.

For the same reasons, for projections further out than year three, I would recommend going half-yearly. The sheer scope of the variance of just the things you know about today is enormous. The number of things that may happen in four years’ time, not to mention the degree to which they will impact your business, that you haven’t thought about is almost by definition inifinite. Trying to predict today your starting-cash in August 2012 is at best folly and at worst, madness!

Having said all of that, there are two caveats to this – one small and the other large. The small caveat is that you must be diligent and honest about documenting your assumptions and calculations. Where a number is a ‘finger in the air’ guess, you should make that clear.

The larger caveat is that you must be able to convince your reader (probably a potential investor) that you and your team have the capabilities to react appropriately to changes in the road ahead to make those numbers.

By removing the minutiae of the projections, you are effectively asking your reader to sacrifice control. In return, you need to provide them with enough solid reasons to trust you.

That, I think, is the hardest part of all in business planning.

I’ll return to that thought in another blog post, but in the meantime let me know what you think. Are detailed projections over several years useful and an efficient use of time for the startup founder?

Commercial Models, pt 2

This is part 2 of a small series of posts on business models. In the first part, I discussed how the Sales-led model can lead to a loss of focus and therefore, compromised competitive advantage and profitability. We looked at a fictitious auto-parts maker, XYZ Ltd, that decided to expand into a new industry, with less than stellar results.

It is pretty clear that I am no fan of a sales-led model. I completely understand the pressure to which organisations find themselves subjected, in that they must show consistent and rapid growth rates. However, I do not believe that the long-term interests of the firm are best served by chasing revenue opportunities irrespective of the ‘fit’ with the organisation’s strategy and capabilities.

So the marketing-led model requires the organisation to maintain a pretty constant alignment with the overall strategy of the business. By extension, then, there are a few pre-requisites for this to happen.

Firstly, the organisation needs to have decided on its VMOST. VMOST is one of those irritating MBA-type acronyms, but is actually a very useful tool. It stands for Vision; Mission; Objectives; Strategy and Tactics. In essence it answers the what; why; and how questions of your business’ existence. I won’t go into a lengthy explanation of each element here. 12manage has an excellent description, if you need it.

Secondly, you need to know your market. This means having solid research on who you are selling to; what they value; how much they are willing to pay for it; what level of service, quality and support they need. You will also need to have decided on your positioning – what emotion or characteristic will a prosepctive customer associate with your product or company? You can choose to be the premium player in a market; the budget player in a market; a niche player serving very specific needs or customers; or indeed any other position that fits with your own skills and capabilities. The important thing is to pick a position that you can defend from the competition. The seminal work on positioning is Ries and Trout’s book Positioning. Very well worth a read.

Thirdly, you need a well-crafted marketing message that addresses the customer’s problem; emphasises the solution your product or service provides; and establishes the position of your company (or brand).

So it’s easy to see, when you look at the list of activities and thought processes necessary for a marketing-led model, why some organisations see the sales-led model as the easiest path to take. The advantage of the marketing-led model is simple and incredibly powerful: long-term stability becomes significantly more attainable.

If your organisation has a well-thought out VMOST; a deep understanding of the marketplace; a clear position within the market and a resonant message to that marketplace (or compelling conversation in these days of the read/write web) your marketplace will understand what you stand for; what you offer and where they can benefit by purchasing from you. In a downturn customers will appreciate and respond to, this familiarity.

Are Ideas Location-based?

There’s an interesting post and discussion developing over at seldo about how the Bay Area in San Francisco is a hub of ideas and that is where (technology) startups should move to in order to be on the cutting edge.

I’m not so sure I agree entirely. I think inspiration can come from anywhere, and there is always the analytical approach – find a market leader in a market sector and figure out how to service the basic needs of the customer base faster, cheaper or more simply.

Having said that, the more conversations one can have about ideas and execution plans, the more feedback one will receive, and I don’t believe that could be a bad thing.

Do you think ideas depend on geography?

De-risking Your Business Model

Steve Barsh has a very useful post over at his blog on de-risking and testing your business model. Some very useful and interesting advice there.

Commercial Models, pt 1

In developing the FourThirds internal business plan, I’ve been thinking about how the commercial model will develop over time.

A company has essentially two commercial models it can adopt. There’s the sales-led model and then there’s the marketing-led model. In this post, I’m going to talk about the Sales-led model.

The Sales-led model dictates, quite simply, that the company sells to anyone willing to buy. Let’s suppose fictitious XYZ Ltd makes widgets for the auto-industry, but a smart engineer realises that with a small tweak here and there, the flagship widget could also be sold to the home heating industry. Fantastic news! A whole new marketplace to sell into. All of the product development costs have already been sunk so any money made is largely, less costs of sale, profit! Who wouldn’t do this? It’s free money!!

Of course, the euphoria soon wears off when XYZ Ltd realises that actually there are a lot of established players already in the market, and they don’t really understand what the market’s customers truly value. But they make a few sales and it’s a solid, if slightly slower than anticipated, start. So they keep going. Then the customers start asking for changes. “We really like the product, but do you think it could do this? And this? And if you could just tweak that. And we don’t want that bit. Oh and by the way – ABC Ltd are 10% cheaper”.

So they invest in new staff and marketing efforts. They make the changes and the customers are a bit happier. Now it’s a couple of years down the line and another bright spark at XYZ Ltd looks at the sales figures across all the product lines and an uncomfortable conclusion is drawn. Whilst they have been servicing the new market and their new customers with their tweaked widget, their core auto-indystry market has moved on. Competitors have innovated. Customer demands and industry drivers have changed. And all that time, XYZ Ltd has been in ‘maintenance mode’. The road to re-establish their previous market position now looks very steep. And costly.

With profits flat (or worse) in tenuous market position in both industries, XYZ Ltd is in trouble.

On the bright side, they have valuable IP in the widget. They have a reputation with some residual value and goodwill. They have good staff seeking to improve the company. But they are being sidelined in both industries.

What do you think they should do in this position?

Next post, I’ll talk about the Marketing-led model and what I think the best, albeit unlikely to be pain-free, solution is for XYZ Ltd.

New Name!

You may have noticed that what was once ‘Bzplnr’ is now ‘FourThirds’.

The Bzplnr name didn’t test too well amongst a sample audience, so the name has been changed to reflect the customers’ opinions.

What do you think? Which name do you prefer?

Fear of Feedback

I recently submitted bzplnr to Hacker News – a well-known online community of start-up founders and hackers. The idea was to solicit their opinion on the design, usability and general purpose of the site and business idea.

I knew these people were tough and exacting in their standards, but previously I had been on the reviewer’s side of the fence. This was my first time as a reviewee. Needless to say, I was pretty nervous about the possible feedback. Luckily, I had a fairly good idea what some of the comments would focus on (name, colour scheme, layout) and I also knew the content needed to be punchier and more focused on the value proposition.

At this point, I bet you’re expecting something along the lines of “but I never expected the torrent of bile that spewed forth…” Sorry to disappoint. The comments were all constructive, albeit some more direct than others. They were in the main helpful. Some were really detailed (and therefore time-consuming to construct).

Even though the basic idea of bzplnr was validated and the implementation viewed as being, shall we say, a prime candidate for urgent re-modelling (!) , I am really, really glad the participants took the time out to provide that feedback. My business will be all the stronger because of it. The hardest thing for me was to not focus on the responses that validated my idea or implementation decisions, but to really think hard about the less positive criticism and whether I agreed with it and would act upon it.

So what lessons can be learnt from this? A few, I think:

1. People are basically decent and willing to help a sincere request for feedback and/or assistance
2. Sometimes a risk is worth taking (in this case, risk to my delicate ego)
3. When you listen to the answers to the question you asked, you can learn an awful lot

All three points are important, for sure, but the the third point is critical. I really thought the name and other aspects were brilliant products of my genius mind! A (mostly) harmless pricking of that particular part of my ego has done wonders. I am so much clearer now about what my audience likes; prefers; demands; hates. I am also much more focused on what needs to be done (and how to do it) than before.

Do you listen to people’s criticism? Or do you prefer to scan for affirmation of a preconceived notion?

Do you know what you are missing?

Are Ideas Worthless?

There is a theory that says ideas are worthless. That the only currency in the entrepreneur?s world is execution.

Is there something to this? Are ideas actually free? In a sense, I think they are.

The fact that you are reading this blog (and hopefully had a look at the bzplnr website) suggests that you have had at least one idea for a new business venture.

How much did that idea cost you? Did you have to pay money for it? Did it consume a significant amount of time that would have otherwise been spent doing other things, i.e. did it have an opportunity cost? Did you have to expend energy having that ideas? To all of these, the answer is almost certainly ‘no’.

So ideas are free in the sense of ‘free beer’. But are they free in the sense of ‘free speech’? I think less so.

As a rule, first time entrepreneurs tend to hold on so tight to their idea for fear that someone else will steal it, implement it and profit from it, and by extension, at our expense!

But where’s the evidence for that? Would you do that? I wouldn’t. I have a very general arc plotted out for my business ambitions – bzplnr and several other extensions and complementary services in addition. I’ve invested too much time in my own ideas to deviate from them now.

If someone told me of a great idea to create a fantastic new pencil sharpener that would sell millions, I still wouldn’t copy it. Why not? Well, I know nothing about: pencil sharpeners; the stationery industry; the players within that industry; the customers of that industry; manufacturing; marketing of stationery and so on.

Almost all of the business ideas I have are only likely to have a shot at success if it is an industry and product and market that I know and understand.

In my opinion, then, the best thing you can do with ideas is to share them as freely as possible. Get feedback from others. Ask for their opinions – would they use it? What is it missing? What would they do if they were in your shoes? How much would they pay to use it? All very useful market research.

Just to put some skin in the game, here’s an idea that I have been toying with for a while. A series of sensors, LED tracks and panels in parking garages that read your car license plate and leads you, via messages on LED panels and floor-based running lights (as they have on an aeroplane), directly to a vacant parking spot. It saves you time and stress in looking for a parking space and increases the occupancy rates of each individual parking space for the parking garage owner.

But are ideas worthless? No, I do not believe they are.

Even if an idea is deemed unworthy of investment or time to implement, it may still have value as being a starting point for other, better ideas that follow. It may still inspire you to believe that you can be an entrepreneur; that you can run your own business; that you can be creative and think beyond that realms of your day to day existence.

To be inspired is a wonderful thing. Surely that could never be worthless.

Do you share your ideas? If not, why not? If you do, have you gotten any value from doing so?