So You Want to Start a Business (Part 1)
You can find a multitude of reasons why small businesses fail. At the end of the day, all of those shortcomings boil down to one, simple, critical flaw: poor planning. Today we’re going to talk about how to succeed.
Having engaged in a number of entrepreneurial ventures and recently kickstarted a fintech, I’m well acquainted with how complex it is to bootstrap a business. That complexity exponentially increases if you’ve never had formal business management training and exposure. While I am fortunate to not only hold an MBA from Chicago Booth, I also have developed a strong general manager skill set. Over the years, I have accrued extensive experience in strategy, operations, marketing, and organizational design working across a wide array of industries—from financial services and CPG to real estate and mining. Even with those experiences, starting a business is full of challenges. What’s more, many who embark on the entrepreneurial path may not be able to pull from a diverse array of business management experiences. Without such exposure, they may lack the experience to know how to effectively plan for the businesses they hope to build. When I was approached to join the pilot run of People-conomy as a mentor to female, minority small-business owners, I thought it would be a phenomenal opportunity to help level what is often a very uneven playing field.
In this pilot run, my fellow co-mentors and I will take mentees through a comprehensive curriculum, touching upon Financial Literacy & Accounting, Grants & Government loans, Risk Management, and so much more . In particular, I will be focusing on Business Planning & Marketing Strategy. Read on for a bit of what I’ll be sharing. My goal is to help entrepreneurs gain a greater degree of confidence in defining the strategy for their business. If you have any thoughts or questions please feel free to send me a note too! Before we can get into the nitty gritty of business planning, we must first address The Fundamentals.
The Fundamentals
Every successful entrepreneur I have ever met will tell you that, there’s no way around it: luck is crucial. Now, you may want to call luck “good fortune”, “providence”, or “blessing”, but the point remains the same—there’s an element of needing to be in the right place at the right time. Even so, fortuitous positioning only gets you so far. You need grit; you need determination to realize value. But, beyond working hard, how do you transform your circumstance into value? Above grit, you need to be informed. At the end of the day, grit trumps luck, and being informed trumps grit.
At the end of the day, grit trumps luck, and being informed trumps grit.
To be informed, you need to practice the Triple-D Strategy. Not to be confused with the “deflect, deny, differ” strategy, when I say Triple-D Strategy, I’m talking about data driven decision-making. Just because you’re a small-business or startup doesn’t mean that you can’t leverage data to insure that you’re making informed choices. As you plan and launch your business, you should rely on evidence to dictate how you proceed.
When your business is up and running, it’s critical to not only define your goals and objectives but to also align those goals and objectives with KPIs and metrics. By KPI’s I mean key performance indicators. Think of these as the “sub-bullet-points” or “targets” under your main objective that help you know whether you’re working in the right direction. Metrics are how you measure your performance against those KPIs. Measurement allows you to understand whether you’re meeting your targets. All together, tracking KPIs and Metrics through Measurement should provide the foundation for discussions on how you may need to pivot and how you will evolve to reach the next level. Here’s a quick example.
Now that we’ve covered the fundamentals, we can move on to business planning!
Business Model Definition & Planning
A wise general (or two) once said that “In preparing for battle, I have always found that plans are useless, but planning is indispensable.” To make a plan, you have to define the destination—you’re ultimate objective. Moreover, you must define how you’ll get there. All plans will go awry, but the sheer act of planning compels you to consider the numerous factors at play. In so doing, planning prepares you to think critically and clearly when things do not go according to plan.
Just like there are different theaters of battle (e.g., land, air, water, maybe eventually space…), your target (i.e. type of consumer or customer) dictates the type of business you’ll build. Largely speaking, your business will fall into one of three categories: B2C, B2B, or B2B2C. If you’re unsure, B2C stands for Business-to.Consumer and targets end-users who typically aren’t looking to commercialize your product for their own business. A company like Sephora, for example, typically targets retail consumers looking to purchase products for their own personal use. B2B stands for Business-to-Business. These types of businesses target other businesses as their customers. WeWork is an example of a business that targets customers looking to transform their product (i.e., office space) into some form of commercial activity. Sometimes a companies business model is intrinsically B2B2C, meaning Business to Business to Consumer. Uber is a great example of this in that while Uber targets everyday consumers looking for a ride, they also have to target those who are willing to operate as mini-businesses (i.e. drivers) to provide those rides. Adding a bit more complexity, there are also companies, like Apple, who in various ways bring together different business types into a Hybrid model.
Whether B2C or B2B, Hybrid or B2B2C, the type of business you build has significant implications for how you’ll plan and run that business. Those implications include things such as your sales cycle, media choices, regulatory requirements, pricing strategy, and so much more.
Once you’ve determined (or now understand) the type of business you’re building, you can start fleshing out how your business model. A commonly used tool, the Business Model Canvas provides a framework for you to start sketching out a rough outline of how your business’s operations. Populating a business model canvas allows you to think through the various inputs, outputs and flows as well as relevant parties and significant relationships that impact your business. Let’s take a look at an example for a personal care company. Ultimately the business model canvas is a stepping stone to developing a full fledged business plan. There are 8 factors that I consider when developing a business plan, as illustrated below. If you’d like further detail on the types of questions I consider and seek to answer, feel free to send me a note!
To help mentees practicalize the materials, I pulled together a set of handouts and worksheets as “homework”, if you will. If you think those resources would be helpful for you, let me know. For now I will leave you with this: field of dreams is not a business strategy. Just because you can build it, doesn’t mean any one is coming. Here are some tactics you can use to gather data in order to practice that Triple – D strategy as you build out your own business plan. Stay tuned for Part 2: Marketing Strategy!
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