The first rule of the business plan is that you do not talk about the business plan. Sharing your business plan with the public is like a magician revealing his tricks. Do. Not. Talk. About. Your. Plan.
This does not mean that you never talk about your business plan, but it does mean that when you do talk about the plan, you talk about it only with people you can trust or people who will be involved with the plan. Yes, you should trust the team that is going to be helping your business take off – but you should make sure that they deserve this trust, otherwise it is going to be a crash landing.
Remember that Thomas Edison ran off with Tesla’s inventions – and he was not the last to make a fortune off the creativity of others. Do not add your name to the long list and do not talk about your plan unless it will make the plan more likely to be realized rather than stolen.
Wednesday, June 18, 2008
Capital Part 2 | The Day Job
There is a tendency for those with “brilliant” ideas to immediately abandon everything they are doing and focus completely on the development of that idea. I see this as the equivalent of betting the farm, your house, your car, and your kids on lucky number 27 because you believe it is definitely the right time.
There are many reasons not to quit your day job while starting up your business. Some of them are boring reasons that are pretty much statements of the obvious. Others are less so. I am going to take a different approach to the topic than prey on the fear of failure. Beginning with failure in mind is not exactly productive. Instead, of “Don’t Quit Your Day Job” we’ll change it to this:
How can your day job support your startup and vice-versa?
1) Social Networking. While these days social networking seems to immediately conjure images of websites where you make “friends” with virtually anyone you know and quite a few people you do not, social networking is more than poking that person you think is really cute and waiting for a comment on your wall. Even LinkedIn is leaning towards a thinly veiled market for sales guys to make their pitch.
However, work will place you in a close network with many other individuals who know people who will be able to help you, or that can offer advice, or that you can learn from in other ways.
The temporary web developer that you keep talking to is definitely disillusioned with his current job. This is not the future he dreamed he would have. Odds are he would love to at least try a startup. You might not have to pay him.
Write this down.
His replacement will probably be the same way. Get to know that guy too. Start building the team.
Write this down too.
Keep your notes somewhere safe of course, but when you meet people who have the skills you need and unrealized dreams, these are the kind of people that you should remember and that you should include.More, you can use work to meet clients of all kinds, to get a feel for what’s out there. I do not recommend working for someone you will later compete with, but if you work in a field that is third or fourth degree connected to your field, you should also be keeping your eye open for who would be interested in whatever it is you have to offer.
Get their card. Write them down.
2) Skill Development. Virtually every job you perform at an office will allow you to acquire the needed skills to help some aspect of your startup.
Working in HR you can learn how to recruit people, how to deal with workplace conflict, how people should be paid, rules and regulations governing people, how to develop policies, etc. You will also learn how to look for candidates and how to evaluate whether they are qualified. Staffing is probably the most useful area of HR for a startup.
Marketing will offer the basics on promoting your business, trade shows, sponsorship agreements, and all kinds of venues of advertising.
Working in Accounting/Finance you can learn how to monitor the performance of your business and how to evaluate budgets, projections, etc. You can also learn control structures for money and systems that can be used to prevent embezzlement from the company. Depending on the size of the company you work for, you can learn a wide variety of skills. Generally, the smaller the company, the more you will learn.
Working in Legal you can learn about laws governing your area, about contracts, about how to deal with complaints, and how to properly retain your business records.The list goes on.
Regardless, the main point here is your career will give you the personal skills necessary to add value to company. Always remember how these skills can help. If your job is not giving you useful skills, it also is unlikely to offer advancement. If this is the case, get a new job, don’t quit your current one until you have it – start interviewing. Your time in life is too short to be stalled in one place and always be cognizant of when that is happening.
However, this is not just a one way street. Your experiences in a startup can be vital to building your resume.
In a startup you will get an opportunity to work with a title far above what your experience would allow in a normal company and you will get to do tasks that you would not get to do in a normal company. Regardless of the profitability of the startup you can confidently say that you have lead a project team, that you have managed an expensive marketing campaign, that you have hired a staff of twelve, that you have coordinated with distributors and handled logistics – there are many, many, many skills you can pickup in a startup.
For those less experienced in a field a startup can also add a year or years of experience to your resume. This will get you past the basic qualifier questions and will get you to the interview where you can keep going up. A startup also shows that you have ambition or the fire necessary, and that by definition, you are a self-starter. It will provide you with great answers to interview questions.
And if the startup is a success, you may not need to apply for another job again – the jobs will come to you.
3) Business Processes. Beyond skills businesses have many common situations that they all have to deal with and many basic tasks which must be performed in order for them to be successful. Working at a business will allow you to observe the processes it has in place for managing common situations. These processes are often similar at many businesses due to consultants roaming about and delivering sermons on them. However, while the processes are around you may was well learn from them. If you see something clever your company is doing…Write it down.
The exception to this is if it is a trade secret, confidential knowledge, or if you intend to compete with your current company (not recommended, lawsuits do not just happen on TV).
4) Capital. Boring, boring, boring argument. But also a true argument. If you want to take the bootstrapping route you will need to continuously infuse your own capital into the company. This involves having a continuous stream of income. Jobs provide that.
5) Productive Use of TimeDuring certain phases of a startup you will be waiting on people, planning meetings, waiting on projects, on developments, etc, etc, and quite frankly there will not be work to be done. So, you can maximize your effective time by developing your own personal revenue stream. Remember, whether in your personal or financial life you should always be making effective use of time and work is very likely the most effective use of time when creating a startup.
I am sure there are other great reasons. But these are the main ones.
There are many reasons not to quit your day job while starting up your business. Some of them are boring reasons that are pretty much statements of the obvious. Others are less so. I am going to take a different approach to the topic than prey on the fear of failure. Beginning with failure in mind is not exactly productive. Instead, of “Don’t Quit Your Day Job” we’ll change it to this:
How can your day job support your startup and vice-versa?
1) Social Networking. While these days social networking seems to immediately conjure images of websites where you make “friends” with virtually anyone you know and quite a few people you do not, social networking is more than poking that person you think is really cute and waiting for a comment on your wall. Even LinkedIn is leaning towards a thinly veiled market for sales guys to make their pitch.
However, work will place you in a close network with many other individuals who know people who will be able to help you, or that can offer advice, or that you can learn from in other ways.
The temporary web developer that you keep talking to is definitely disillusioned with his current job. This is not the future he dreamed he would have. Odds are he would love to at least try a startup. You might not have to pay him.
Write this down.
His replacement will probably be the same way. Get to know that guy too. Start building the team.
Write this down too.
Keep your notes somewhere safe of course, but when you meet people who have the skills you need and unrealized dreams, these are the kind of people that you should remember and that you should include.More, you can use work to meet clients of all kinds, to get a feel for what’s out there. I do not recommend working for someone you will later compete with, but if you work in a field that is third or fourth degree connected to your field, you should also be keeping your eye open for who would be interested in whatever it is you have to offer.
Get their card. Write them down.
2) Skill Development. Virtually every job you perform at an office will allow you to acquire the needed skills to help some aspect of your startup.
Working in HR you can learn how to recruit people, how to deal with workplace conflict, how people should be paid, rules and regulations governing people, how to develop policies, etc. You will also learn how to look for candidates and how to evaluate whether they are qualified. Staffing is probably the most useful area of HR for a startup.
Marketing will offer the basics on promoting your business, trade shows, sponsorship agreements, and all kinds of venues of advertising.
Working in Accounting/Finance you can learn how to monitor the performance of your business and how to evaluate budgets, projections, etc. You can also learn control structures for money and systems that can be used to prevent embezzlement from the company. Depending on the size of the company you work for, you can learn a wide variety of skills. Generally, the smaller the company, the more you will learn.
Working in Legal you can learn about laws governing your area, about contracts, about how to deal with complaints, and how to properly retain your business records.The list goes on.
Regardless, the main point here is your career will give you the personal skills necessary to add value to company. Always remember how these skills can help. If your job is not giving you useful skills, it also is unlikely to offer advancement. If this is the case, get a new job, don’t quit your current one until you have it – start interviewing. Your time in life is too short to be stalled in one place and always be cognizant of when that is happening.
However, this is not just a one way street. Your experiences in a startup can be vital to building your resume.
In a startup you will get an opportunity to work with a title far above what your experience would allow in a normal company and you will get to do tasks that you would not get to do in a normal company. Regardless of the profitability of the startup you can confidently say that you have lead a project team, that you have managed an expensive marketing campaign, that you have hired a staff of twelve, that you have coordinated with distributors and handled logistics – there are many, many, many skills you can pickup in a startup.
For those less experienced in a field a startup can also add a year or years of experience to your resume. This will get you past the basic qualifier questions and will get you to the interview where you can keep going up. A startup also shows that you have ambition or the fire necessary, and that by definition, you are a self-starter. It will provide you with great answers to interview questions.
And if the startup is a success, you may not need to apply for another job again – the jobs will come to you.
3) Business Processes. Beyond skills businesses have many common situations that they all have to deal with and many basic tasks which must be performed in order for them to be successful. Working at a business will allow you to observe the processes it has in place for managing common situations. These processes are often similar at many businesses due to consultants roaming about and delivering sermons on them. However, while the processes are around you may was well learn from them. If you see something clever your company is doing…Write it down.
The exception to this is if it is a trade secret, confidential knowledge, or if you intend to compete with your current company (not recommended, lawsuits do not just happen on TV).
4) Capital. Boring, boring, boring argument. But also a true argument. If you want to take the bootstrapping route you will need to continuously infuse your own capital into the company. This involves having a continuous stream of income. Jobs provide that.
5) Productive Use of TimeDuring certain phases of a startup you will be waiting on people, planning meetings, waiting on projects, on developments, etc, etc, and quite frankly there will not be work to be done. So, you can maximize your effective time by developing your own personal revenue stream. Remember, whether in your personal or financial life you should always be making effective use of time and work is very likely the most effective use of time when creating a startup.
I am sure there are other great reasons. But these are the main ones.
Tuesday, June 17, 2008
Capital \ Part 1
And our first post on the actual substance of business begins with exploring capital options.
While I am sure there is a myriad of strange financial instruments that seasoned entrepreneurs use, I'll cover the basics that I am currently considering. (Note: Not talking about incorporation just yet).
Bootstrapping: The good old fashioned do it yourself approach to fund raising. You earn income through a traditional (or untraditional) job and then throw it into your business.
Pros:
-You will not have to forfeit any ownership of the business. You do not have to persuade investors to throw their capital on the line. You are beholden to no-one but yourself at the onset. And all the profits are yours!
-No interest. You're doing this all out of pocket so you do not have interest expenses piling up on you.
Cons:
-And so are the failures. Most businesses do not succeed. Most business ideas have already been done or can be done better than whatever model you chose to adapt. The risk is yours and you do have everything to lose.
- No need to persuade others also means you will be lacking the input of many others and many others will not have a chance to rail and tear apart your business plan. Challenges to your business plan make it stronger and missing critique misses this notion.
-- To overcome that, go over your business plan with someone you can trust.
Debt Financing: Get a loan from the bank and pay it off.
Pros: Debt Financing can greatly extend your reach and your upfront capital.
Cons: Odds are if you are new to the game (which I am) you are not going to get an attractive deal from the banks in the midst of a credit crunch, and that you will be personally liable and credit limited in what exactly you can acquire from a bank. You will also have to go through mountains of paperwork and possibly persuade people to give you that loan. The bank can also take away your home. That is a big con.
Equity Financing (Venture Capital): This involves persuading others to give you funds/financing/etc based on giving them a share of ownership in the business.
Pros: Extends your reach and upfront capital. In addition it connects you with investors who have a good amount of experience with business, business plans, and management. They can advise you and guide you.
Cons: They can also sell you out and steal your idea and make the money themselves. They may be difficult to reach. The may not like your plan. They may tear apart a valid business plan and make you doubt yourself.
They can also make unreasonable demands, take the controlling interest, and turn your idea into theirs.
---
After assessing the above options I am currently leaning towards bootstrapping. I have $5,000 capital to work with right now and will continue to raise to 10k, which will cover over a year and a half of my expenses, which should be long enough to get a return or know when to quit and take away the lessons learned and get back on the horse after recouping.
The reason I am choosing this also involves my particular situation. I am a 22 year old male with a fairly steady job and very low overhead. If I do not bring home the bacon my non-existent children will not be tightening the belt. I do not yet have a trophy wife that demands a certain standard of living. I do not have nagging parents and relatives to discourage me. I also can afford the loss. If I lose ten thousand now, I will look back and say, Lesson Learned. Keep Working For The Man. I Love Big Brother.
Were I in a different situation, I would likely go for venture capital over debt financing and just suck it up.
Next Action:
Complete the Business Plan
I'll write about the steps in formulating my business plan over the next week.
While I am sure there is a myriad of strange financial instruments that seasoned entrepreneurs use, I'll cover the basics that I am currently considering. (Note: Not talking about incorporation just yet).
Bootstrapping: The good old fashioned do it yourself approach to fund raising. You earn income through a traditional (or untraditional) job and then throw it into your business.
Pros:
-You will not have to forfeit any ownership of the business. You do not have to persuade investors to throw their capital on the line. You are beholden to no-one but yourself at the onset. And all the profits are yours!
-No interest. You're doing this all out of pocket so you do not have interest expenses piling up on you.
Cons:
-And so are the failures. Most businesses do not succeed. Most business ideas have already been done or can be done better than whatever model you chose to adapt. The risk is yours and you do have everything to lose.
- No need to persuade others also means you will be lacking the input of many others and many others will not have a chance to rail and tear apart your business plan. Challenges to your business plan make it stronger and missing critique misses this notion.
-- To overcome that, go over your business plan with someone you can trust.
Debt Financing: Get a loan from the bank and pay it off.
Pros: Debt Financing can greatly extend your reach and your upfront capital.
Cons: Odds are if you are new to the game (which I am) you are not going to get an attractive deal from the banks in the midst of a credit crunch, and that you will be personally liable and credit limited in what exactly you can acquire from a bank. You will also have to go through mountains of paperwork and possibly persuade people to give you that loan. The bank can also take away your home. That is a big con.
Equity Financing (Venture Capital): This involves persuading others to give you funds/financing/etc based on giving them a share of ownership in the business.
Pros: Extends your reach and upfront capital. In addition it connects you with investors who have a good amount of experience with business, business plans, and management. They can advise you and guide you.
Cons: They can also sell you out and steal your idea and make the money themselves. They may be difficult to reach. The may not like your plan. They may tear apart a valid business plan and make you doubt yourself.
They can also make unreasonable demands, take the controlling interest, and turn your idea into theirs.
---
After assessing the above options I am currently leaning towards bootstrapping. I have $5,000 capital to work with right now and will continue to raise to 10k, which will cover over a year and a half of my expenses, which should be long enough to get a return or know when to quit and take away the lessons learned and get back on the horse after recouping.
The reason I am choosing this also involves my particular situation. I am a 22 year old male with a fairly steady job and very low overhead. If I do not bring home the bacon my non-existent children will not be tightening the belt. I do not yet have a trophy wife that demands a certain standard of living. I do not have nagging parents and relatives to discourage me. I also can afford the loss. If I lose ten thousand now, I will look back and say, Lesson Learned. Keep Working For The Man. I Love Big Brother.
Were I in a different situation, I would likely go for venture capital over debt financing and just suck it up.
Next Action:
Complete the Business Plan
I'll write about the steps in formulating my business plan over the next week.
The Start | Write It Down
When you have a Eureka moment, the first thing you should do is write it down. There are many reasons for this, they are as follows:
First, on writing something down you get to see whether it is blatantly stupid. A discussion with friends about e-cat-sweaters.com can be full of laughter but could still offer the promise of some potential. A written down business plan involving modeling and knitting for cats -- not so much.
Second, writing preserves an idea that can later be lost. There is a special graveyard for unwritten ideas. Keep yours from going there. Write them. This may involve carrying an HPDA or a Moleskine with you wherever you go, it may involve grabbing cocktail napkins and writing on them immediately -- if looking eccentric is a concern, your ideas are probably not worth writing down.
Third, writing is the first step to actualization. The written word is more formalized and more ready to be analyzed, to be cut, to be pasted, to be changed and modified selectively until you end up with what you want. Writing serves a function of sharpening vague ideas, and more, turning ideas into plans.
There are more reasons. But the general point is: Write down your ideas.
First, on writing something down you get to see whether it is blatantly stupid. A discussion with friends about e-cat-sweaters.com can be full of laughter but could still offer the promise of some potential. A written down business plan involving modeling and knitting for cats -- not so much.
Second, writing preserves an idea that can later be lost. There is a special graveyard for unwritten ideas. Keep yours from going there. Write them. This may involve carrying an HPDA or a Moleskine with you wherever you go, it may involve grabbing cocktail napkins and writing on them immediately -- if looking eccentric is a concern, your ideas are probably not worth writing down.
Third, writing is the first step to actualization. The written word is more formalized and more ready to be analyzed, to be cut, to be pasted, to be changed and modified selectively until you end up with what you want. Writing serves a function of sharpening vague ideas, and more, turning ideas into plans.
There are more reasons. But the general point is: Write down your ideas.
Part-Time Entrepreneur. Full Time Rockstar.
Always begin with the end in mind -- this is the rule to accomplishing anything in life. Whether winning a game of chess or waging war, always, always, always begin with the end in mind.
A sense of destiny is necessary to create anything greater than what is already imaginable.
And this is where we will begin, with the end in mind.
The end of this: to have created a business which adds value to the world and transforms the very nature of work itself to make it something better, something brighter -- to allow people to work with and for each other rather than against each other.
That is the most I will ever talk about my business plan until it is actualized. For now, we have the end in mind, and with that we can focus on the beginning.
Subscribe to:
Posts (Atom)
