3 Things You MUST Know To Grow Profitably in 2012

By , December 10, 2011 11:07 am

Who doesn’t want to be more productive in the coming year?  After pushing hard for the last several we all want a brighter 2012. But there’s no reason to wait on a turn of a calendar sheet, so let’s get cracking.

I have the great fortune of living by the head of Scotwork North America, a division of an international negotiating consultancy. Not only is he a great negotiator he also has proven his metal as a business leader by building out a sizable well regarded business that services the Fortune 500 market. Don’t let this fool you, for through and through he is a SMB entrepreneur. From time to time I have the opportunity to pick his brain about business development.

Here are three insights that can pay dividends for anyone looking to achieve sustainable top line (revenue) growth in 2012:

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What Nobody Tells You About Business Plans

By , November 12, 2011 12:38 pm

This is the sixth and last post in a series that focus on showing you how to improve the prospects of successfully launching a business.

Boardroom
Traditional wisdom dictates that a business financing sequence goes as follows:

  1. Identify a perceived market need/issue.
  2. Craft a plan on how you might address the void.
  3. Present the plan to stakeholders (investors, key partners, etc.) to secure anticipated resources.
  4. Consume resources as you seek to prove your theory right.

Ok, for storytelling purposes the wording above is not the most positive, yet this exact phenomenon occurs over and over again every day in every industry.

The problem is that in today’s environment, unless your concern has a proven track record or you’re launching a ‘business format franchise’ concern the riskiness associated with ‘lets give it a shot’ is to high. So what are we to do?

Present the Evidence

The vast majority of business plans are equivalent to a house of cards. The cards in this case are the assumptions around the need, cost, sales volume, and market receptiveness. Just think about it, you have the profit projections stacked on top of executional assumptions, stacked on market assumptions. With this perspective it isn’t hard to imagine how one well meaning but misguided thought can cause an implosion.

The smarter move is to quantify the validity of the assumptions by exposing them to the market – in essence turning them into ‘quasi’ knowns – before using them to construct a plan. The gathered insights dramatically increase the odds of finding and following the right path. But more importantly, arms you with evidence that can be presented to stakeholders demonstrating the soundness of your concept.

Sounds Good, but How?

The how is not hard but beyond the scope of this post. I encourage you to checkout the books listed below. They will provide you with a better appreciation for this inverted business development process and give guidance on how to justify your case.

  • The Lean Start-up, Eric Ries
  • Business Model Generation, Alexander Osterwalder & Yves Pigneur
  • Four Steps to the Epiphany, Steven G. Blank

Have any comments? Your feedback is valuable.

Donald McMichacel teaches BE 261 Starting a Small Business.

Don’t Make These Mistakes – The Secret of Starting Your Own Business

By , October 15, 2011 1:24 pm

This is the fifth in a series of six posts that focus on showing you how to improve the prospects of successfully launching a business. Click here to view previous posts.

Here it is:

Customer Development Model

What could be simpler?

In reality, doing the wrong thing. That’s because the right thing above requires a good level of dedication and focus to execute properly. Going into the specifics is well beyond the scope of this blog, that’s why the purpose of this post is to point you in the right direction of study and shine a light on the key concepts.

There are two books that you need to reference.

The first is ‘The Four Steps to the Epiphany’ by Steven Blank. Here is what I see as the key points:

  • Get out of the building. Qualify your hypotheses about what kind of product your customers (or potential customers) will ultimately buy.
  • Theory of market types. Different start-ups face wildly different challenges and time horizons; the key drives of which are if you are creating a new market, entering an existing market, or re-segmenting a market.
  • Find a market for the product as specified. Do everything possible to verify your belief. Don’t get caught up in a destructive (capital burning) cycle of including new features just because they were mentioned.
  • Phases of product and market growth. A four segment road-map that helps orient you as to what leadership should be doing as the company changes.
  • Iterate, return, or exit. Expose your guesses to the marketplace, refine based on feedback, and repeat. Don’t be afraid to pull the plug and asking if you’re in the right market.

The second book is ‘E-Myth’ by Michael Gerber. It is based on Gerber’s observation that most people launch their own business for the wrong reason. Being a skilled technician – they do a good job of what the business provides to the customer – they believe they can earn more by doing it in their own business. In short order they find that the role of the business owner is really quite different.

A business owner’s mission is to create an entity that works independently of himself or herself. And this is where Gerber’s work steps in. It focuses on helping you develop repeatable, teachable processes so that the concern isn’t as reliant on you being involved in every operational aspect.

Why heed this advice?

Recent research has indicated that some of the most successful start-ups did not follow the traditionally prescribed product-centric model. They intentionally, or not, utilized a game plan that was centered on institutionalizing customer learning and discovery.

Donald McMichacel teaches BE 261 Starting a Small Business.

How Can I Help You?

By , September 10, 2011 11:43 am

This is the fourth in a series of six posts that focus on showing you how to improve the prospects of successfully launching a business. Click here to view previous posts.

Have you ever wondered how certain businesses all of a sudden pop-up on a market’s radar screen from seemingly nowhere? Well, with this post we’re going to expose one of the most powerful ways of making it happen. Quite simply strategic relationships are on deck.

The power in strategic relationships is that they allow each party to leverage the other brand’s perception, get the inside scoop on mistakes, and utilize seasoned distribution relationships. Sounds terrific, but why then do they often fall short of expectations? The most common reason is that they haven’t incorporated the two pillars of a thriving alliance:

  • the right framework
  • trust building

The FrameworkBegin with a strategy, not a partner.

As one of my favorite Yogi Berra quotes puts forward, you need to know where you want to be so you know how to get there. This means you have to have a game plan, correction not just a plan, a guidebook that outlines the alliance formation mechanics and offers a way to make clear decisions about managing it once established.

This is exactly what Steve Steinhilber, the former alliance guru at Cisco, outlines in his book ‘Strategic Alliances’. He encourages following a 6-step process:

  • Evaluation – define strategy / identify potential partners
  • Forming – examining the value proposition(s)
  • Incubating – build operating model
  • Operating – execute on plan
  • Transitioning – review for success and adjust
  • Retiring – mutually letting go gracefully

It’s All About TrustRelationships are solidified by trust. Institutions are built on it.

In business just like in life, it all comes down to relationships. Relationships are the heart of an alliance; nothing is a substitute for the hard work of getting to know people.

Unlike the framework above this relies on soft skills that take time and effort to master. Fortunately there are a lot of good books on business relationships and networking. Some of the best practical advice out there that can help accelerated your voyage up the mastery curve has been penned by Keith Ferrarzzi. According to Keith what it all comes down to embracing three mindsets.

  • Generosity – build trust right out of the gate, and never stop, by sharing your insights and ideas.
  • Intimacy – understand it is about creating a web of interwoven connections.
  • Candor & Accountability – embrace open honest dialog and follow through on your promises.

Bottom line: If you are serious about growing a solid business then it behooves you to study in more detail the advice above. Even if you are not interested in forging an alliance find a way to help, and find a way to care about both your customers and business advocates.

Donald McMichacel teaches BE 261 Starting a Small Business.

The Art of Finding Your Balance

By , August 9, 2011 11:03 am

This is the third in a series of six posts that focus on showing you how to improve the prospects of successfully launching a business. Click here to view previous posts.

In my last post, ‘Are You the Fool at The Door?‘, you tested your business assumptions by running it through a sieve of close connections. Now it is time to turn up the heat. Our goal this week is to truly leave the guesswork behind.

For those of you familiar with technology development the term ‘beta testing’ is an old friend. The principal behind this stage is similar. Work with a small group of outside customers, but instead of determining if the product/service works as specified we want to discover what the market values.

The entire formula is comprised of just two parts, examine & express.

Examine

Study and be able to explain the value proposition from the consumer point of view.

We want to determine whether the problem you believe you are solving is in fact important, or better yet what is significant. Successful businesses are rooted in their ability to exploit observable behaviors.

For this you need to take on the diagnostic approach followed by the Mentalist’s (CSB television show) lead character Patrick Jane – astute observation. Introduce your service to a limited market of early adaptors and map their reaction.

And, if the evidence proves your intended value proposition wrong admit it. This is perhaps the most difficult step on the path to epiphany. It takes a significant amount of humility, effort, and willingness to scrap every belief when the results dictate doing so. In a society that views going backwards as a failure few of us can easily do this. But it is critical that it be done with integrity and honesty.

So exactly how is this done? By instilling a mind-set that rewards controlled experiments. Provide yourself the freedom to honestly see the marketplace and put forward your observations.

Express

Get it in one sentence; X helps me Y by Z. You know that you’ve hit the core value when you can tell a first grader why people use your product or service and they get it. Here are a few examples:

  • Google helps me understand something by getting me correct information fast.
  • Wal-mart helps me spread my dollar farther by providing the best prices.
  • Nike helps me play better by having clothes that keep me comfortable in hot weather.

The Bottom Line

It’s OK to screw up… if you learn from it. You’re on a journey of discovery.

What have you learned from your most recent misstep?

P.S. Want a clue as to where to look for real value? Most often it comes from:

  • better processes (FedEx)
  • better people
  • better raw materials
  • scarcity (diamonds)

Donald McMichacel teaches BE 261 Starting a Small Business.

Are You the Fool at The Door?

By , July 9, 2011 1:02 pm

In my last post I reviewed the 5 steps that allow one to improve the prospects of successfully launching a business. In this post I want to spotlight the first component.


Test the concept. Get out and talk to your confidants about what you’re thinking. Absorb all the feedback. You’ll find that there are literally hundreds of reasons that it might not work. This thought alone stops the vast majority of projects. Be different.


Every book, web site, and pdf focused on entrepreneurship advises spending time analyzing the market, competitors, potential competitors (which may come from outside of the industry), and customers’ (or potential customers’) needs (e.g., jobs to be done). What is not said is that how you go about doing so makes a significant difference.

This week’s step goes right to the heart of both the metric and method. What we’re really seeking to do is gain honest market feedback about each of the core business planning assumptions individually. Feedback that’s used to enrich one’s understanding of actual customer concerns (read fears) and how the proposed business model needs to pivot such that it is spot-on relevant.

  • to pivot – to change your vision for the customer, problem and/or solution based on the feedback gained from engaging the targeted marketplace
  • relevant – possessing significance for the targeted market

The best test methodology is to prove one key hypothesis at a time to a representative sample of the niche. One approach is to create a presentation about a hypothesized problem and check it in an ongoing dialog with customers. Because possible testing methods are so vast even a summary of them is beyond the scope of this post. If you’re interested in learning more about the customer discovery processes checkout Steven G. Blank’s blog or text “The Four Steps to the Epiphany”.

A word of warning, two of the most common mistakes I have witnessed is that the basis of the business (What value do we offer to them?) and delivery mechanism (How do we do this?) are never verified. Want a classic example of the cost that this oversight can elicit lookup the story of Webvan.

Don’t take the findings personally. Learn the lessons and apply the tools of business model innovation to leverage new insights, enter unforeseen markets and create new value propositions.

Next up, identifying and communicating the core value proposition.

Donald McMichacel teaches BE 261 Starting a Small Business.

5 Keys to Starting A Successful Venture

By , June 20, 2011 9:22 am

The other day I was asked the following question: How did you develop a for profit initiative within the heart of a traditional non-profit? What was it that allowed you to do it successfully?

The question took me aback. I really didn’t have a good answer. It just felt like the organization was presented with an opportunity and ran through the door.

An explanation like that, however, is vague and uninspiring. More importantly, most stabs at building out a social enterprise (application of capitalistic strategies to achieve philanthropic goals), or any business for that matter, suffer a horrible fait. Yet entities do introduce new products/services, expand into new markets, and acquire proven assets everyday. Once a certain level of momentum is obtained the right steps tend to standout from the crowd. But, how does one start?

The answer is to pick a idea (it just has to be good not perfect) and work it. I would describe the process as follows:

  • Test the concept. Get out and talk to your confidants about what you’re thinking. Absorb all the feedback. You’ll find that there are literally hundreds of reasons that it might not work. This though alone stops the vast majority of projects. Be different.
  • Study and be able to explain the value proposition from the customer/consumer point of view. Get it to one sentence;  X helps me  Y by  Z .
  • Find strategic alliances that allow you to bootstrap market entry. For example, leverage someone else’s under utilized space or link with a complimentary product to create a bundle.
  • Get real world feedback, adjust the value proposition and refine internal processes.
  • Present the evidence to stakeholders who can provide the resources to expend the initiative.

Ok, so its not as easy as learning how to ride a bike, but it is skills based. And, skills can be learned so over my next five posts we’ll explore each step in more detail.

Q: Where are you getting stuck in the process?

 

5 Steps to Finding the Ideal Solution

By , May 16, 2011 12:24 pm

May 16th through the 20th is National Small Business Week.
It’s an opportunity to honor the spirit of the entrepreneur and thank them for the benefits growing businesses bestow upon our economy and community – job creation and poverty reduction. This year I thought it would be nice to not only thank them but also provide a helpful business best practice.

Reap What You Sow Know
Business owners, and for those aspiring to become entrepreneurs, your ability to achieve the ultimate reward – doing good while doing well – hinges on how well you solve problems for your customers.

The following 5 step problem-solving methodology produces substantial benefits:

  • Identifying the correct problem. This is the linchpin to everything else. Unfortunately, it’s not as simple as one might think. Ask the right people a lot of questions about what the problem really is, instead of guessing and making a snap decision.
  • Get creative. Brainstorm possible solutions, the best ideas are generated when you have the opportunity to bounce them off others.
  • Evaluate. The pecking order of choice is 1) the impact on the goal, 2) the level of complexity (time & money), and 3) measurability.
  • Execute. Take action. One would be surprised at how often this step is skipped. This is why Nike’s slogan of ‘Just Do It’ is so strong.
  • Validate. Did the assumptions hold true.

Bonus: Learn how to and when to pivot (deciding what to change and then take action to reconfigure some part(s) of the solution)

Is it worth the effort? Absolutely, the payoff for executing is a profitable, successful, and focused entity with satisfied customers. And that is your goal isn’t it?

Donald McMichael teaches BE 261: Starting a Small Business.

 

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