Here’s a new video that is part of the Connecting the Dots Series. Be sure to subscribe to my RSS feed or, join our email list to get notices when new videos are posted. The transcription from the video follows.
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In my 20 years of working with large enterprises and leading early-stage ventures, I’ve found one characteristic that all entrepreneurs have in common: a big idea. What separates the dreamers from the successful business leaders is their ability to execute on that idea and convince others that it’s an idea worth investing in. Entrepreneurs all face similar challenges when it comes to recruiting and retaining top talent, and acquiring customers and strategic suppliers. But before convincing others to invest in the venture with their time, services, or financial backing, there are some critical points that the entrepreneur must be prepared to address.
We call these the 7Ms of Entrepreneurial Success and they are the backbone of any successful new venture. They are what lends credibility to your idea and what will ultimately set you apart from all of the other “big ideas” competing for dollars and attention.
Market – What is your target market and, realistically, what slice of it can you expect to capture? How much homework have you done about the specific nuances, trends, and growth opportunities in your target market? What assumptions are you making about the problems the market faces and the opportunity for you to capture a realistic slice of that market growth?
Magic – What’s your secret sauce and barrier to entry by others? In other words, why you and why now? What are you doing better or differently and what keeps others with deeper pockets and broader experiences and resources from entering the marketplace? Intellectual capital is ideal, so what do you bring that’s scalable, predictable and repeatable?
Management – Who is “jockeying the horse” and what is their relevant experience in building and scaling a business like this? People (employees, suppliers, customers, investors) don’t invest in the horse (the idea) – they often invest in the jockeys (the seasoned managers) to lead an idea into a product, and a product into a viable company.
Money – How much do you have, how much do you need, and what kind of a return can we expect? What financial modeling have you done for top-line revenue, cost of goods sold, and expected margins? What assumptions are you making about the staff and resources you’ll need to drive those numbers? How quickly and realistically can you break even or get to a cash flow positive? Do you really understand that cash flow is king and what’s your plan B, C, D and E if some or all of your assumptions are wrong?
Milestones – What critical milestones have you hit so far and what company makers/breakers lay ahead? What have you done with the investment of time, effort, and resources you’ve had to date? What have been the touch points thus far with influential market leaders, prospective customers, manufacturers, distributors or investors? How many prototypes have there been, whom have you presented your research findings to, and what foundation of progress have you built?
Marketing – Even the best ideas need air cover. How will you create awareness to drive sales? What articles have you appeared in? What press releases have you distributed? Are you speaking in the marketplace about your products or services? Are you exhibiting at tradeshows or conferences? How is your conversion rate of awareness to trial to repeat?
Momentum – What are the “winds in your sails” to help you create both incremental progress and exponential leaps? Many market opportunities present themselves in a window – of time, place, and available resources – to provide a supply for a specific demand. You may have come up with an idea, but so have 50 others. There is seldom a shortage of great ideas. The challenge becomes execution – who can take that idea, cement it in reality, and attract the critical employees who will do a great job taking care of customers, producing revenue and attracting investors?
Importance of a Business Plan
Being able to answer the 7Ms if critical, but you also need a strong business plan that serves as a blueprint for how you will run your business, what critical milestones you are aiming for, what key metrics you will use to measure growth and prosperity, and what staff and resources you will need to produce revenues, customers, and profit margins.
- Start by doing your homework. Here, the more detailed the analysis, the better. Really dig into the validity of the problem you are trying to solve. Who else is already out there and what are they doing? Remember – if you start with a solution looking for a problem, you’re out of business before you start!
- Run the idea by prospective customers. A really cool idea that no one is willing to pay for is worthless. Run your idea by some prospects and see if they would be willing to write a check for it. Then, go about executing the idea, keeping those early prospects appraised of your progress, and aim to make them your first handful of paying customers.
- Learn from your early customers. With those first few customers, you’ll have no idea what you’re doing! Learn from them. Write down everything – every meeting, conversation, research, and industry association function you attend – and begin filling out the 7Ms.With paying customers, you’ll have some case studies to back up your initial assumptions and can more intelligently talk to the scale side of the business. You’ve also paid a premium for these early resources; so you can talk about less expensive customer acquisition costs, lower cost of goods sold, and more effective distribution channels. The bottom line is, in an early stage venture, there are two primary tasks: selling and delivering! That’s it. If you or others around aren’t doing one or the other, why does the business need you?
- Craft your plan. If you’re planning to raise $1 from outside investors – whether it’s your Uncle Joe, a local banker, angel investor, or more institutional sources such as venture capital or private equity firms – be assured that they will want to see your plan. By the way, very few people have the time (or the patience) to read a 40-page dissertation on this subject. Put together a six to eight page executive summary that is attractive, well written, and inspires, informs, and ignites a call to action. If they like what they read, they’ll ask for more. That’s when you can send them a more detailed operating plan.
Tips for Successful Business Planning
Every business plan should include the 7Ms – that’s the meat. Cut the fluff. Don’t exaggerate your market opportunity (very few ideas can produce a consistent hockey-stick growth curve), and above all, don’t over promise (especially if you know you can’t possibly keep them). You start with a certain level of credibility in the mind of the reader – you can choose to enhance that credibility with facts, well communicated language and solid research, or dilute it with emotions, guesses, and outlandish projections.
During the planning process, it will be very difficult not to become myopic in your efforts. Find three to five independent sources with a vested interest in your success and run your executive summary and operating plan by them. If possible, and if you respect the relevant background of external advisors, recruit them as your personal board of advisors and create an incentive for them to develop a vested interest in your success! These people have seen the movie before and they can save you hours of frustrations and a lot of money in chasing bad ideas, people, or deals.
Remember that a business plan is a living document. At our firm, I began planning shortly after we started the business with three clients. After the first 12-18 months, we learned that some of our assumptions about our target market were flawed, so we adapted our services and targeted larger clients. There are four pieces to our business (speaking, consulting, training and technology), two of which we didn’t anticipate a market need for. But as we began engaging prospective clients, we found specific market niches that we’ve since been able to monetize. I was also way off on my staffing projections – great people have been much more difficult to attract and retain as numerous market opportunities both domestically and internationally continue to reiterate the global war on talent!
Our team goes away for a weekend twice each year to review our plan and make the necessary modifications. This summer, we’re going away to completely scrap what we’ve developed over the past four years and rebuild it from scratch.
Remember: value creation comes from value-chain disruption and if you don’t disrupt your business model, someone else will!