Business Planning is a Process (Not a Formula)

by | May 3, 2018 | Planning

Creating a business plan is a lot like forecasting the weather… those who are in charge of predicting a storm get blamed if they are not 100% accurate. The same logic applies to business planning in terms of timing, expediency, and execution. This can lead many business owners to abandon ship, rather than seeing it as an opportunity to change course.  Always remember, business planning is a process.

Carl Schram, former head of the Kauffman Foundation for Entrepreneurship, recently wrote Burn the Business Plan, which echoes a similar strategy for a streamlining the planning process. Reis and Schram are mostly right to criticize excessively lengthy business plans. At Startup Connection, we argue that business plans are necessary, but that they need to flexible and dynamic (and meant primarily for yourself, not others.) As the saying goes, “If you don’t know where you are going, any road will get you there.” Making plans for others (especially venture capital firms) and following specific rules almost guarantees the process will not be useful to you. In addition, venture capital firms account for a very small segment of business financing, especially in the beginning. A business plan is not just a document to be stored on a shelf; it should establish parameters and be developed, tested, and be continuously revised. Even with a “perfect” business plan, there will be failures along the way. In particular, failing and learning from failure are critical components of the ongoing planning process.  Business planning is a process.

Some Planning Suggestions

There is no cookie-cutter approach to writing a business plan. Get your ideas on paper before stressing about the organization of information. Don’t stifle yourself. Write it in your own words, as simply and concisely as possible.

Focus on your passion. A successful business plan should express why you think your business is a good idea and why you will succeed. If you need to dress it up in a suit and tie to show to investors, do that later. A business plan should be YOUR vision.

Common Parts of a Business Plan

Every business plan is different because every business is different. However, there are some common elements to consider, such as:

  • Mission statement
  • Goals
  • A description of products and services
  • Ideal customer
  • Analysis of the industry and your competitors
  • Marketing and sales tactics
  • Operational plans
  • Manufacturing and delivery logistics
  • Resources necessary (this includes labor, equipment, and facilities)
  • Financial budget

Also, focus on the components that are most important and challenging, rather than worrying about making every section perfect.

Some Further Tips

  • Don’t be too verbose: A formal business plan must focus on the needs of the audience and the entrepreneur. Business plans must be on point and clear. Typically, plans should be 15-30 pages. If additional details are required, put them in a short appendix.
  • Think it through: You might have a great idea, but have you carefully mapped out the steps you’ll need to make the business a reality? It’s worth investing your time in the planning phase to ensure you might make money in the long run.
  • Do your research: Investigate everything you can about your proposed business. Google and Amazon are great and easy tools to understand the market and your competition.
  • Be realistic about your competition: Is your product or service something people really want or need, or is it just “cool?” Why do you think people will buy your product or service?
  • Get feedback: Obtain as much feedback as you can from trusted friends, colleagues, nonprofit organizations, and potential investors or lenders. You’ll know when you’re done when you’ve heard the same questions and criticisms again and again. The goal is to have a good answer to almost everything that can be thrown at you.

Completing the business planning process can be challenging, but it should also be interesting, productive, and satisfying. The hardest part is developing a clear picture of the business that makes sense, is appealing to others, and provides a reasonable road map for the future. Another challenging aspect is integrating your products, services, customers, marketing, operations, management, and financial projections seamlessly together. However, these pieces should not dilute your enthusiasm to succeed.

Dr. Bert Shlensky, president of Startup Connection ( www.startupconection.net ) has an MBA and PhD from the Sloan School of Management at MIT.  He served as the president of West Point Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start-up companies and small businesses. Call today for a free consultation, so we can use our business plan templates to take your business to the next level.

Is Your Pricing Too Cheap?

by | Oct 26, 2017 | Marketing

How small businesses can get pricing right

Did you know that being dead cheap could be dead wrong for your business? Many small businesses try to be the cheapest, thinking that it’s a certain way to make more sales – but pricing does not work that way.

If your pricing strategy doesn’t go beyond being cheap, you’re at risk!

Consider how Uber prices its rides. Uber originally tried out just being the cheapest all the time. It didn’t work – drivers didn’t want to work for so little money at inconvenient times like late nights, Saturday nights, or holidays. Guess when demand for Uber cars is the greatest (you can read all about this on an Uber blog)? So, Uber created a dynamic pricing strategy linked to demand, as well as a lot of other factors, and it worked brilliantly.

Learn Dynamic Pricing!

Today, most companies use a dynamic pricing model. These can range from the ”early bird special” to sophisticated algorithms, like Amazon. Try being cheaper than them, and they’ll find a way to reduce their prices further than you can, at just the right times.

Because, it’s not all about price. Consumers look at price as one factor among many. The consumer thinks about quality, usability, overall value, look, and feel, along with a number of other aspects – each product has a different combination of consumer-appeal factors.

For many products, price isn’t at all the main aspect involved in consumer choice in evaluating the total value of a purchase. Here’s an example from the Harvard Business Review: “Some products have a much more immediate and dramatic response to price changes, usually because they’re considered nice-to-have, or non-essential, or because there are many substitutes available. Take, for example, beef. When the price dramatically increases, demand may go way down because people can easily substitute chicken or pork.”

More complicated products have more factors to consider; keep in mind that “price elasticity” – the technical term — isn’t just a factor of how well you’re marketing. It is also affected by the type of product you’re selling, the income of your target consumers, the health of the economy, and what your competitors are doing. “You can’t look at it in isolation; you have to look at it in context of the industry and its competitive structure and in the context of consumers’ lives,” as the HBR article explains.

Getting the Price Right

To get pricing right, it must be a part of integrated marketing programs that also consider product, service, quality, competition, price elasticity, and internet channels – each product calls for a selective strategy.

As part of your overall analysis, there are some pricing tactics you might consider:

  • FREEMIUM is one of the most powerful pricing strategies today. Promotions are incredibly effective and, contrary to popular belief, they don’t hurt your image or make you seem cheap. Google, Facebook, the cloud, public organizations, and open source programming all give things away to build their long-term success. What makes freemium so effective is that it builds trust with customers. You give away something of genuine worth, and then the customer believes that you deal in products with inherent value. Gaining customer trust is the most powerful form of marketing.
  • Drop High Maintenance Goods: You need to get customer reaction to your products, so that you can learn which ones the consumers say have high customer service and maintenance attached. Get rid of products that customers have had bad experiences with – this enables you to concentrate on popular ones for which you may be able to earn higher margins. Drop the unprofitable lines and find out what customers don’t want – this will help you to put together a clear pricing strategy.
  • Selling exclusive products and services is another tactic to keep prices and margins higher. You can’t be beaten down by the competition if they don’t really have the product you can offer. Exclusivity is not necessarily just the simple product. It can be quality, service, or just a simple understanding of your needs. Psychological Pricing: Base your prices on factors such as perception of product quality, popular price points, and what the consumer perceives to be a fair value. This pricing relies on a positive psychological impact on the customer.

The key factor in all of this is the value you offer your customers, and this is why building trust combined with pricing psychology are powerful tools. Your customers perceive a value in what you offer in terms of its intrinsic value, and the effects of the product on their lives – i.e. buying a takeaway meal provides good food, but also saves the consumer time in preparation.

Taking all of the pricing factors into account isn’t easy. That’s why we, at StartupConnection, can help you understand how to go about it.

Why don’t you contact us and let us help you to have an effective pricing strategy?

Dr. Bert Shlensky, president of StartupConnection ( www.startupconection.net ) is a graduate of Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start up and small businesses.

Beat The Nerds … Creatively!

by | Oct 10, 2017 | Operations

Technology vs. Human Instinct

Technological advances provide efficiency and analytics. The web, AI, cloud, CRM systems, etc. are taking over. Great improvements are being accomplished and organizations are making better decisions. Yet, how do we ensure that creativity and the human instinct continue to be cultivated without us getting too comfortable with our technological supports?  How do we beat the nerds ?

The purpose of this article is not to reduce these efforts, but rather ensure that creativity, innovation, and excellence are also preserved. Specifically, there are several indications that the analytical approach may have some unintended consequences:

  • The stock market is a great indicator of world’s dynamics, and innovative companies like Amazon, Apple, and Alphabet are thriving, while traditional companies like IBM and GE are struggling.
  • Authors, like Adam Grant in the “Originals,” and many others, point out that progress is dependent upon nonconformists and people who go against the grain.
  • Organizations preach objectivity, yet they follow the HiPPO decision process (Highest Paid Person’s Opinions).

How Do Creative and Innovative Individuals Thrive in the Growing Trend of Reliance of Analytics?  Beat the System!!!

This may sound impossible, but here are some easy tips:

  • Challenge Assumptions. Many analytical models contain numerous assumptions that are seldom challenged. In particular. the data can be highly biased, because it can ignore critical factors or be based on preordained goals. If factors are not appropriate, this can result in incomplete or wrongly determined data. Find the parameters the system has missed and provide appropriate information to complete, or redirect, the research data assessment process.
  • Ensure The Analysis Is Dynamic. Our lifestyles have increased in complexity with continual changes; many analytical models avoid difficult issues and, thus, can create incomplete data. Find the issues that have been avoided in your analytical model(s) and advocate for their inclusion and how it affects the outcome.
  • Consider Alternatives and the What-Ifs? Most analytical solutions involve a single outcome. The reality of life and business is the need for varied solutions and backup plans. Review the alternatives, and the different outcomes, which could affect the results and probabilities. For example, bringing diverse resources into a situation can greatly alter the excellence in execution.
  • Understand Risk. In general, we avoid taking risks. It is more comfortable to stay in the status quo than to uproot and change direction. But, we all know those that don’t risk, also don’t succeed. Taking healthy risks is important for growth of self and companies. We are more afraid of losses than the probability of gains. People are more likely to say “I could get fired,” than “I could get promoted,” regardless of the probabilities or impact. There is a balance between risk and caution.
  • Set Multiple Goals. Most analysis focuses on singular goals, like short-term profit. A company needs to consider measuring multiple parameters, such as developmental, personal, staff, and branding.

Analytics and current technological advances provide us tools to make better decisions. The key to success is to not solely rely on them, but to integrate them. Our natural human intuitive forces continue to lead with the support of the new technologies. Freeing yourself from restrictive thought processes, especially in bigger corporations, like “We have always done it this way,” is dead. New paradigms: speed, expertise, flexibility, innovation, and collaboration, produce more dramatic change for organizations. Incorporating new technologies, while cultivating innovation and creativity in the business, will allow new approaches to problem resolution.

Creativity Is Allowing Yourself to Make Mistakes. Art Is Knowing Which Ones To Keep.

Dr. Bert Shlensky, President of StartupConnection.net,  is a graduate of the Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business, and President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select startup and small businesses.

Is Your Business Structure Getting in The Way of Your Success?

by | Oct 3, 2017 | Driving Profit - Main, Finance Articles

If you want to be successful in your new venture, you should pay attention to the modern examples of achievement like Apple, Google, and Amazon and their business structure .

What are these companies doing differently? They have broken down the traditional norms of operation and flattened their business structure into a streamlined, distributed model. This type of system allows them to be faster, more flexible, and to evolve elegantly with changes to the market and their customer base.

Too Many Layers of Business Structure

What is stagnating many of the large, older, organizations is their tunnel vision. Within these companies, there still exists a lot of red tape, which kills innovation and expediency. This inefficient organization model creates a bottleneck for making decisions, requiring too many layers of sign-off before anything can happen.

In contrast, these modern, successful companies have done away with the hierarchy of too many levels of management, and have instead adopted a system of collaboration between departments, and even other organizations. The use of open-systems benefits everyone without the hassle of having to go through so many layers, just to get a quick answer or approval.

Such collaboration breeds diversity and allows for truly innovative options and solutions, which can make or break your success.

The Dinosaurs Have to Go

The big corporations like G.E., General Motors, IBM, and Procter & Gamble, are ancient dinosaurs, with outdated and inefficient decision-making business structure s that will most likely lead to their demise.

Whereas Apple, Google, and Amazon are thriving, due to their trust and reliance on open-systems, and a rejection of bureaucracy, authority, hierarchy, and closed decision-making processes of the past.

These young, vibrant companies are embracing new models of decision-making, and encouraging participation, diversity, new rules, and, to some extent, chaos.

Sometimes, Smaller is Better

Another way these companies are successful is that they operate much like a small business, instead of a large corporation. Real people handle customer service interactions, so that the customer walks away feeling valued and appreciated.

Small companies have to be more flexible, and, sometimes, staff wears multiple hats and are cross-trained for a variety of different tasks. This versatility benefits the entire organization, because there is less delineation between departments and management groups. No more waiting to move forward, because only one person or department can handle the issue; it can easily be re-routed and quickly solved by someone else.

Stop Talking & Listen

Large, outdated companies rarely pursue or put to use constructive criticism. The sad part is, being plugged into channels for feedback allows a company to respond much more quickly to adversity, media fuss, product support, delays or other operational issues. A direct connection to your customer base is key to staying on top of things and managing your brand reputation.

Apple, Google, and Amazon all actively encourage customer feedback, and they immediately put it to good use. Many of their ongoing upgrades, changes, and improvements come directly from customers.

They are using their customers as a huge pool of barnstormers and innovators. Just by listening, instead of dictating, they are benefiting in droves.

The Bottom Line

The bottom line is old, outdated organizational structures and hierarchies are past their expiration date. If you want to be successful and make the most of your new company, model your organization after these high-tech firms that have figured out the formula for big-time success.

By operating as a small company, you allow yourself to be flexible, more innovative, speedy, and collaborative, and this will result in a very positive bottom line for you!

Bert Shlensky Ph.D. is the President of StartupConnection.net.  Bert has over 30 years of experience as a results-driven executive leader. A graduate of Sloan School of Management at M.I.T. He served as the President of West Point-Pepperell’s apparel fabrics for 10 years & President and CEO of Sure Fit Products for 14 years. Having provided counseling to over 2,0000 startup clients- he now focuses on working with select start up and small businesses.

Shoot First…. Ask Questions Later?


by | Sep 28, 2017 | Marketing

There is value in proper planning and execution, especially related to “Marketing & Sales.”

Yet, how many times have we heard successful business entrepreneur share their success (after many failed attempts) when they didn’t plan on it?

In this post, I will explore how “Not Overthinking and Just Doing” can also be a useful strategy for growing business.  This technique can be employed by all businesses, yet it is the small business owner who holds the advantage of this strategy, as resources are more flexible. In addition, the absence of tiered staff and bureaucracy allows for more inspired and engaging strategies to be implemented faster and adopted as needed.

I will share two examples of how “SHOOT FIRST… ASK QUESTIONS LATER” has served my clients with great success.

SURPRISE SALES” CAN LEAD TO “SURPRISING RESULTS”

DROP PRICES TO INCREASE LEADS
(15% versus the usual 25-30%)

My client “Jane,” a small business owner, has found her sales success to be based on regularly introducing new products.   With each new product, she would carefully plan the new rollout, developing marketing, pricing, and communication strategies for few months at a time.  During her last product launch,  she got antsy, and just posted an introduction on her web site with a very modest sale.

The result was the best single email and ad in a few years.

GO WITH YOUR GUT

Her usual product launches involved strategy, analysis, and tiered introduction of the products.  With this GUT INSTINCT, to just post a modest sale to her new product, the timing and response was just perfect in her category, giving her more exposure, in addition, with Amazon and other retailers (as timing was perfect).

RIGHT PLACE – RIGHT TIME

Had she waited few more weeks or months for all marketing research and strategy to be concluded, she would have missed the “RIGHT TIME.”

This new success has found her a new strategy that she employs regularly now with success. Online business and internet sales now allow us to “test” and “analyze” strategies faster and adapt to the changing market trends.

SPENDING MONEY ON MARKETING & NOT GETTING RESULTS?

Our second client case review is about a service-based business that has failed repeatedly, even though the offered services were very useful to the target audience.  Where did they fall short? Having hired numerous marketing experts to conduct testing, analysis, and creating “ads” and other related marketing tools to drive “traffic,” each marketing project tapped into their budget with no results.

TO DO …OR NOT TO DO?

Market research requires an allocated budget, and implementation time can take months (which small business usually don’t have, as they need sales to keep there doors open). The down side of “Expert Market Research & Planning” for small businesses is that, if the result of all the research and planning was unsuccessful, their budget can be exhausted, and repeated action of the same approach will delay immediate actions that could be taken.

DON’T JUDGE THE MESSENGER

Small business have an advantage, as they can easily test the techniques that work best faster than larger corporations.  After many failed attempts, and many marketing experts later, the company programmer had an idea. With the ease available now to make websites, and all the templates available, he suggested, “Lets create a few mini test websites,” and drive traffic via cost efficient ways.  Use “Google Adwords,” and test which style will resonate, and best convert the traffic into leads.

In the company’s prior approach, each website change involved a lot of research and planning.  This new strategy allowed them, in real time, to test multiple styles. They could focus on the successful ones, and adapt the others based on what they learned. Best of all, this can be done quickly and inexpensively.

MULTIPLY YOUR TESTING

This technique of utilizing your resources to create test sites and other “POP UP-like” sites for your business will allow you to get immediate feedback on what works and what doesn’t, without months of planning each strategy, and waiting for results, only to adjust again later.  In a few days, you can get preliminary feedback on almost anything and develop further tests. You can also do simple AB testing, to make the tests even more valuable. Google Adwords can be tested and quickly modified, based on results.

SUGGESTIONS HOW TO “SHOOT FIRST & ASK LATER”

  • Develop, test, measure, and adapt.  Think outside the box – create pilot test programs you can utilize with your business NOW – without over-planning. This will allow for the gathering of more data faster, and help you find what works best.
  • Focus on winners.  Find your winners, and expand on those techniques.
  • Less talking, more action.  Understand what you know, what you learn, and what you don’t know.  In particular, reduce endless conversation about alternatives, where there is little empirical evidence, but lots of opinions. At the same time, learn from your test results, and execute for your success quickly.
  • Details matter.  Examine the integration of variables and success. Presentation, details, marketing, and pricing can all affect the success of a program. “What did you do that made it work?”

IN SHORT…

We frequently spend too much time analyzing what we don’t know. Allow for some uncertainty and for more testing, especially on the Internet. Make it fast and inexpensive. Most importantly, test to identify real winners, and then, reconfirm, and expand as fast as possible.

Dr. Bert Shlensky, president of www.startupconnection.net, is a graduate of Sloan School of Management at M.I.T. He served as the president of WestPoint Pepperell’s apparel fabrics business and President and CEO of Sure Fit Products. Having provided counseling to over 2,000 clients, he focuses on working with select start up and small businesses.