Performance Measurement is Vital to a Meaningful Business Plan

Hours and hours of time are invested in constructing business plans for start-ups all over the globe. Innumerable amounts of similar blogs and articles are written about the value of these business plans. And, yes there is value
in them. Especially if they include well-defined performance milestones across business functions.
 

A Common Planning Mistake

 
A huge error made by many entrepreneurs is seeing their business plan as a one-time use only document. This is simply not true and here is one reason why: The plan should include financial forecasts and a business life-cycle timeline of some sort. Investors and lenders want to see this in order to determine their own Return on Investment. This is one area where the business plan becomes much more than a one-time use only document. While you may see those numbers only being important to obtaining that needed capital from investors, the opposite is true. Quality forecasts and timelines can be your own internal performance measurement baseline.
 
This is how performance measurement works. First, a baseline must be created and then actual performance is measured against your “planned” performance. That creates the ability to have meaningful analysis and really flesh out why your start-up is on track, over-performing, or under-performing. A good baseline makes it easy to find focus areas later down the road. The more detail included in your own internal and original plan, the better.
 

Keys to a Good Baseline

 
First and foremost a good baseline requires specific milestones both financially and chronologically. These will be different for each business depending on your industry and business model. Milestones may include breaking even, staffing upgrades, product development, market expansion, conversion rates, capital investments, and many more. Most importantly, no matter your industry, is to create specific, measurable, and meaningful milestones. They should be driving factors in business development and success. Be careful not to get bogged down by performance indicators that have no meaning or are not driving your business. Such things may be variables in other, more important milestones.
 

Performance Milestones Help Us Make Informed Decisions

 
Strong performance milestones with a plan built around them will aid you in knowing how to allocate resources and budget to individual areas within your company. When things go good or bad this will help you make more informed decisions about how to reallocate resources and budget because of the framework in place that tells you what is important and where over-performance and under-performance are taking place.
 

The Extra Work is Worth It

 
Anyone who has created a business plan before understands that creating quality forecasts and timelines is difficult and time consuming. Often a rough forecast seems sufficient. And honestly, in the short-run, will probably get you what you are looking for. But in the long-run the extra effort is extremely worth it as your company matures and begins to grow. Time and money will be saved because a framework is already in place for recognizing progress and problem areas. Starting from scratch months or years down the road can be even more costly than doing it at inception.
 
As you begin your business plan, see it as a long-term investment and take the time to establish meaningful and measurable performance milestones. The milestones you create and the performance measurements taken from them are going to bring true value to your business plan and bring true ROI for the time and money spent on constructing your plan.

Is Growth Synonymous with Success?

Headlines are filled with fairly young, fast-growing, and high-selling start-ups. Stories of ridiculous and probably unsustainable paces of growth capture our ears and lead us to dream of great things to come. We hope we could have such an opportunity to see our business explode overnight. Come on, who hasn’t been there as we scour over the news on a daily basis? It truly is fascinating but is that what we should an exemplary model of success?
 
In the planning stages it is critical that we define our own standard of success. For some it may be light-year speed growth followed by an impressive and gaudy acquisition figure. For others it may be revenue or cost figures, life-span, or their impact on the world around them. Truly it is different for each of us.
 
It would be difficult to determine if one is absolutely better than the others. I know I have my preferences and you have yours. The question is almost philosophical and could be argued over and over again. But to answer the title question I would say; No, growth is not synonymous with success. Growth is a part of success and most likely a necessary step to obtaining success but it is not the one in the same.
 
Growth can be rapid and inconsistent or it may be slower and consistent. It depends on your planned strategies, campaigns, and business model. Frankly, it also depends on some factors that are outside of our control such product demand and economic conditions.
 

Control Your Growth in Order to Obtain Success

 
While growth may occur in several different ways one thing always remains constant for any start-up: Growth must be controlled. Out of control growth nearly almost always dooms any new start-up because of increased costs, inability to meet demand, and other structural/organizational demands. This requires planning and discipline as a company from the beginning. Controlling the speed of growth allows companies to excel at what they do best and in a long-term, sustainable manner. As you create your business plan, consider the pace at which you want to grow and what processes you will put in place to help manage this some-what unmanageable variable.
 

Be Successful

 
At the end of the day it is your business so make it what you want to it to be. Just because you are not one of the fast-paced, high-selling start-ups doesn’t mean that you are not experiencing success. Each industry and niche market is different and leads to different yields and returns. Find what works best for you. Some of the most exemplary businesses across the globe are small to medium-sized firms that no one has ever seemed to have heard. And they like it like that. That is their definition of success and we all could learn a thing or two out to their book. The key lesson here is not to base your own success on what is occurring around you, but to define success early on in your company’s life-span and work towards that. Have a game plan and be flexible as necessary. That will help you control your growth and earn yourself a sustainable and successful business.

Entrepreneurship: A Game of First Impressions

Last month NPR published a story reporting on a recent experiment carried that showed people make split-second decisions on people’s personality based upon their voice. Quoting the article,
 

“From the first word you hear a person speak, you start to form this impression of the person’s personality, says Phil McAleer, a psychologist at the University of Glasgow, Scotland, who led the study.
 
In his experiment, McAleer recorded 64 people, men and women, from Glasgow, reading a paragraph that included the word “hello.” He then extracted all the hellos and got 320 participants to listen to the different voices and rate them on 10 different personality traits, such as trustworthiness, aggressiveness, confidence, dominance and warmth.”

 
Interestingly, it was found the most participants agreed on which voice matched which personality trait; concluding that people begin making snap judgments of others from the very first second they are speaking with them. This study exemplifies the power one word as simple as “hello” can have on perception.
 
Although it would be difficult to be in constant control of the pitch or tone of our voice, this study exemplifies the importance of a good first impression and how much of a lasting impact it can have on others.
 
When building your new start-up you face such situations every day. It is a constant game of branching out, looking for new partners, investors, suppliers, buyers, and customers. Their perception of you matters and ultimately factors in their decision concerning you. Trust is built from the very first contact you have with them whether it comes by email, phone, or in person.
 
Across the internet you can find loads of information about how to make the best first impression possible. Here are a few tips from us;
 

  • Present Yourself Appropriately: Appearance does matter, I once was told by a manager that one factor of why they strongly considered me for a position over others was simply because I was the only who showed up to the interview process in a suit. It shows that the meeting was important to you.
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  • Smile: A smile says a lot about attitude and your attitude is often what sells you more than any other characteristic.
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  • Take the Time to Small-talk: Get to know the person and find out what their interests are. It may seem absurd but small talk is a skill that can be learned. Practice it.
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  • Listen and Contribute Accordingly: Acknowledgement is crucial. Everyone wants to know that what they have to offer is important. Make sure they can feel that from you. Strive to offer something to the conversation but don’t dominate it. Nobody likes someone who talks the whole time.
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  • Remember Names: It is amazing how far it goes when you can recall names from a previous meeting. Whatever strategy helps you accomplish this, go for it.
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  • Be Informed: This can really fit into any of the above suggestions but it never hurts to know a little bit about everything. Use it wisely.
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  • Be Confident: Confidence is huge when meeting new people. Be yourself and be comfortable. People love genuine confidence.
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    These are only a few of many suggestions of how to make a strong first impression but will be helpful for anyone looking to branch out and build a strong network. As shown, first impressions are made within seconds of meeting Do your best to make the most of each one, because you never know which might lead to incredible future opportunities.

    One Skill Every Entrepreneur Needs

    The old saying “you can build a relationship for ten years and destroy it in a day” will always ring true, especially in business. Many even go as far to say that all business is simply managing relationships. And honestly, that is a tough one to argue against.
     
    If you are in the process of building your start-up the most important skills you can possibly develop are the ability to communicate and build relationships. The best business plan or business model is never enough to gain support, the best product is never enough to bring in customers, and the best marketing plan isn’t enough to build brand loyalty. People have to know you, like you, and most importantly, trust you.

    The ability to communicate and build relationships is indeed a skill we can develop and is not something you are simply born with. Anyone can be a master at communicating and building relationships. It just takes effort, time, and a willingness to put yourself out there.
     

    Create Situations Which Allow Strong Relationships to Build

     
    In order to start building great relationships, we first have to put ourselves in situations that allow us to do so. What do I mean? We need real face-to-face contact. In any Communications 101 course you’ll hear about information richness which describes how well our messages are received. Face-to-face communication creates the most richness because of all the different communication channels that exist: verbal and non-verbal.
     
    We are far more likely to be remembered if we speak to someone face-to-face. They have a face with a name and message which will leave a lasting imprint. Email, phone calls, and social media never achieve the same kind of connection that a face-to-face meeting will. In a qualitative way, something as small as a face-to-face conversation and a handshake create powerful switching costs and competitive advantages for your business.
     

    Manage Today’s Technology Wisely

     
    The amount of business now done solely online is astounding. It facilitates and creates new possibilities, but
    also creates its own barriers. These barriers present increased challenges for managing our communication channels. It also makes it easier for us to skip using face-to-face communication. New apps and programs help bridge this gap such as Google Hangouts, Skype, and other video streaming and calling technologies. We should use all technology to our advantage, be it text, email, instant messaging, etc. But we should always be able to recognize when a situation calls for an old-school approach. Recognizing such situations is as important of a skill as learning to communicate clearly.
     
    We must be careful not to sacrifice too much for speed and simplicity when it comes to building relationships, especially in the start-up stages. Take the time to develop the ability to communicate and build strong relationships early on in your company. Center those early relationships on activities high in information richness such as face-to-face communication. This will be the best investment you ever make.

    It Still Pays to Be Human in Today’s Start-up World


     

    Set Yourself Apart by Giving People What They Want: The People Behind the Product

     
    Every week more and more tech start-ups are launching all over the world. Supply chains have become global and businesses are pieced together with customers, partners, suppliers, and manufacturers based all over the planet. This even includes company employees being located all over the globe serving out their functions from separate locations miles and miles away.
     
    Today’s technology allows for business to thrive in such an interesting environment but can also complicate how business is carried out. As probably all of us have experienced, most business is carried out via email, text, etc. without any kind of face-to-face contact.
     
    On top of all of this, it can be costly and difficult to arrange physical meetings, conference calls, or even phone calls. In terms of cutting costs, all these alternatives are much cheaper.
     
    This recent trend has made it even more important for us to find new ways of humanizing ourselves with our contacts, customers, and partners. Attempts are made through blogs, social media, vibrant websites, and some innovative marketing strategies.
     
    In an unprecedented fashion, consumers have so much information at their disposal, making it vital that they get to know us. Easily-accessible information has suddenly put every business on a level playing field, making it harder and harder to gain competitive advantage. That battle can still be won by providing a personal touch to business and expanding beyond online selling and communication only.
     
    We just need get out there. Attend events, trade shows, and other gatherings where your individual consumers, suppliers, partners, and contacts may be. It is time to step out of the office and give them a face to put with a name.
     
    Even as times change people still love one thing more than the product itself: The people behind it.

    Getting to Know Your Business: It May Just Make or Break It

    Starting out we all have an idea of how we want our business to be, what it is, and what it is going to become. The funny thing is it never seems to turn out to be exactly what we imagined, which isn’t necessarily a bad thing. In fact, it can be the best thing that ever happens to you and your business. The truth is businesses, like people, have growing pains, changes, and evolve. In those initial months, or perhaps years, there is absolute need to get to know your business.
     

    Keep an Open Mind

     
    No market or business landscape is stagnant. Consumer wants change, opportunities come and go, and innovation occurs. Naturally your start-up is going to change with these external changes as well. At least it should. Really, we just never know what opportunities may arise. New product possibilities and potential partnerships can happen at any time. These discoveries can lead to fruitful success and are definitely a part of getting to know your business. The bottom line, don’t be afraid to adapt and pursue new opportunities that you may not have planned on originally.
     

    Finding Your Niche

     
    Within your industry there are several strategies to gaining market share. To name a few, you can pursue new technologies and have a first-mover advantage, you could simply do the same thing as others but cheaper, or you could create a specialized product that fills the need of a very specific submarket within your large scale market. All have their advantages and potentially lead to success. Your job is to pick one. This also is a process of simply getting to know your business. What do you do especially well? Are you more cost-efficient? Do you fill a special need somewhere? Or do you have the latest and greatest trend?
     
    Most business professionals will tell you to pick one and run with it. This is great advice whether you are just starting out or are an established business. Don’t try to wear too many hats. But sometimes as your business progresses your niche may not be what you thought it would. This is a process of getting to know your business over time. A few months or years in you will probably have to adjust your niche market in some way.
     

    Hold on Loosely

     
    Your business is your baby. Most entrepreneurs feel this way and have a tight grip on the reins. As cheesy as this may be, I think some great advice for entrepreneurs comes from some old song lyrics, “Hold on loosely, but don’t let go.” In sports you often hear coaches say, “Don’t force it.” This is true in the business world. Often we try to force plans or deals like a quarterback trying to squeeze a pass in a hole that isn’t there or a baseball player trying to hit every pitch out of the park. Every once in a while we need to take a risk but most often it’s best to take what the defense gives us. Sometimes we just need to take a step back, assess the situation for what it is, and then make some objective decisions about where we are and where we are going.
     
    The growing pains of a business can be hard, but if we make an effort to get to know our business as it evolves our chances of success will increase. As you keep an open mind to new opportunities you will be pleasantly surprised as to what you accomplish.

    Four Considerations for Monetizing Your Idea

    Everyone wants to create a business out of their interests, passions, or ideas but finding out how can be tricky. Monetizing your business idea can be a difficult process that every entrepreneur faces. So, you’ve reached that step where you have an idea and want to monetize it, what things should you think about? Let’s take a look at a four early considerations for monetizing your idea.
     

    Keep Your Debt Low

     
    The early stages for introducing a new product or starting a new business are filled with a lot of trial and error.
    This can be in business processes or simply product development. Any way you shake it, starting a business is a learning process. It is vital for future success that you are not swimming in debt before your product even hits the market. Set a number for the amount of debt you are willing to take on in early product development, seek investors, or bootstrap the early stages of getting your idea of the ground.
     

    Determine and Understand Your Target Market

     
    This could be the most important question you’ll ask yourself as you start your business: Who is going to buy my product? Without clients and customers you don’t have a business. They are the foundation to monetizing your idea. Test your product, find the type of people it attracts, and further adapt it to meet their needs.
     
    A couple months ago I spoke with a college student trying to create a new product for women. He took it to a convention in order to introduce his idea for the first time with the hopes of getting sales off the ground. Over the weekend he sold a handful of the many products already produced but the number of sales were definitely discouraging. But from the event he received valuable information about his target market. He found that something as small as color affected sales in older demographics and that the current brighter colors were not selling. So he made two changes: Began to produce more traditional colors and began to market to much younger demographics.
    The event was very beneficial for him and really cost effective. Try something similar in order to test your product before getting too carried away. This will help you understand who your target market is.
     

    Find Distribution Channels

     
    After finding your target market it is important to consider how your product will be delivered in a cost-effective manner. Consider if you will open your own store, sell to already existing retailers, or do your business completely online. Finding efficient and cost-effective distribution channels can make or break your business.
     

    Price

     
    Last but not least is price. There is no way around it, price almost always matters. Once again, test your product and this includes pricing. Adopt one or several pricing strategies that work for you and your market. Example pricing strategies include but are not limited to; penetration, skimming, premium, cost-based, and competition. Before setting price before you consider your own costs, competition pricing, and your target market’s willingness to pay.
     
    These four considerations will help you find a way to monetize your new idea in a smart way. Where there is will there is always a way to make your ideas, interests, or passions into a monetized product/service.

    5 Reasons Why You Should Write a Business Plan

    Many people choose not to write a business plan before starting their business. Some believe that a business plan isn’t necessary for new business owners unless they are seeking outside funding while others think it is too time consuming. Each has their reason but truly they are missing out on a valuable resource going forward.
     
    Truthfully, the value of the business plan is as high as the creator chooses for it to be. It can either offer a huge upside or it can just be a means to an end. The choice is up to you. Here are five benefits a good business
    plan can offer.
     

    Easy to follow and measurable objectives.

    It is commonly accepted that goals lead to success. Use your business plan to clearly define key business measures and then objectively choose quantifiable measures. These will help you prioritize your work and gauge success in the future.
     

    You’ll be able to track your progress better.

    This is a continuation of the number one. After creating objective business measures, use them to your advantage. This is where the business plan really gains value. The more these goals are revisited, measured, reworked, and adapted the more your business will grow. Track your progress from the beginning through your business plan.
     

    More accurate forecasts.

    Admittedly, most forecasts are wrong. We know that, you know that, everyone knows that, but that doesn’t mean that they should be useless. There is a reason that nearly all corporations spend valuable time and money on creating forecasts yearly, monthly, and weekly in order to promote efficiency. They know it will help them in key business processes. By taking the time to create the most accurate forecasts possible you are only helping your business be more efficient in the future. Don’t bog yourself by overshooting your costs or by committing other financial mistakes simply because you didn’t want to spend the time on a better forecast.
     

    Increased ability to adapt strategy as your business grows.

    We already talked about tracking progress and setting measurable objectives and the importance of them. The truth is you’re business landscape could completely change from what you had originally envisioned. This is often attributed at being one of the greatest weaknesses of the business plan but, in fact, should be one of its greatest strengths. A good, workable business plan will help you recognize this change sooner, allowing you to make strategic adjustments as your business grows. Remember, a business plan isn’t necessarily set in stone.
     

    Better understanding of internal business processes and external factors.

    The business plan is a learning tool. Done correctly it will walk you through your business model and all the intricacies of doing business. At the end of the day, you should understand your business, your market, and yourself better than anyone out there. Your business plan will help you achieve this. You will come to understand your strengths and weaknesses, your competitor’s strength and weaknesses, and you will understand who benefits from your success. These are all powerful things to know when deciding how to market, innovate, and grow your business.

    A business plan will help you and your business going forward. As stated before, the choice is yours as to how much value or upside it will provide you as you seek to take your great idea and turn it into something special.

    How to Simplify Your Technical Business Plan

    When Less Can Become More

     
    A common mistake made by entrepreneurs creating a business plan is to make their plan too technical. What do we mean by too technical? Simply by including too much jargon and details about the specifics of the product or service being created.
     
    Now this may seem a little contradictory since essentially what you are pitching is your product/service and that is what makes you different from competitors in some sense. But as in all things, there is a time and a place for all things. These technical details and jargon can be shown later on in the process. Too correct this commonly made mistake entrepreneurs need to recognize their audience, acknowledge the purpose of their business plan, and change their focus.
     

    Audience and Purpose

     
    The business plan, especially for startups in manufacturing or other industrial startups where technical details are prevalent, is written to obtain capital and support. The readers are business professionals, investors, lenders, etc. who are focused on profitability and potential. These people do not want to see necessarily see how your technology works but instead want to see how it;
     

  • Solves a consumer pain
  • Exceeds competing products or processes
  • Is defendable in terms of patents, market entry, etc.
  • Can be produced in a timely and cost-effective manner
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    As you write your business plan, skip the technical details of how it works and focus on answering these questions. Record those technical details in other documents to show investors as the process is carried out.
     

    Change of Focus

     
    It is a general rule of thumb that a good business plan is anywhere from 20-30 pages long. That is not necessarily a ton of space to include all the competitive advantages and product descriptions of your business. Writing a business plan becomes an analysis of determining truly vital information and non-vital information. The more technical information included essentially means there will be less room for other strategies and plans that investors really want to see within the business plan. This includes
     

  • A Target Market Analysis
  • Marketing and Sales Strategies
  • Budget Planning
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    Investors want to know who is going to buy your product, how you plan on selling it to them, who is already buying this product, and even how you plan on delivering the product to the target market. For investors, answering these questions is just as important as explaining how the product works. Even if the product works and blows all the competition out of the water in terms of usability, if you can’t get anyone to buy it, then they won’t fund it.
     

    The Lean and Mean Plan

     
    Know your audience. Know why you’re writing the plan and focus on that. At the end of the day a few blanket statements can cover a solid business plan strategy. Focus on your competitive advantages that your audience wants to see by writing objectively, clearly, and concisely. This will produce a shorter document where truly less is more.

    Is My Business Plan Permanent?

    The Business Plan versus the Business Model Canvas

     
    The recent push for the Business Model Canvas has sparked a debate questioning the need for the business plan for today’s new start-ups. The argument lies in how a start-up is structured versus a large company and in the flexibility of the business plan versus the business model canvas.
     

  • A start-up is defined as an organization in search of a repeatable & scalable business model.
  • A large company is defined as an organization which executes a repeatable & scalable business model.
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    Taking these definitions into account and studying them lead to the business model canvas and the lean business model canvas which are centered on noting core organizational functions which build a minimum viable product. Once this minimum viable product is built a repeated process is followed of putting a product into the market, receiving feedback, rebuilding, and then repeating the process until a scalable and repeatable business model is found. This approach is heralded for its flexibility and promotion of innovation in the uncertain world of a start-up.
     
    Ultimately, the business model canvas is an effective tool for entrepreneurs searching for a successful business model and a way to monetize their ideas.
     
    So, where does that leave the business plan?
     
    The business plan is a document that has become standard for anyone searching to start a new business. It is most often is used as a document presented to lenders and investors as a way to gain needed funding. As well, the business plan is a thorough analysis of business processes including the business model, target market, cost structure, staffing decisions, future strategy, and of course deliverables such as products/services. No doubt a business plan can be a tedious process but indeed helps one to understand his or her potential business.
    Like a business model canvas, the business plan is a tool to help entrepreneurs get their business up and running.
     

    Is the Business Model Canvas a Replacement of the Business Plan?

     
    As stated, both are tools with similar purposes. Many see the business model canvas as a superior tool because of its flexibility in the search of a business model which ultimately is the goal of a start-up. But is the business plan permanent? No, and it should not be considered as such. The business plan is a workable document that should be revisited, corrected, and changed as deemed necessary throughout the life of the business.
     
    Anyone who has created a business plan and has thrown it out as soon as the business catches steam or begins to fail is not using it correctly. The business plan should be treated as flexible, workable, learning-tool just like the business model canvas. Those who have used it successfully have been the ones who reworked their plan and adapted as their business matured and grew over time.
     
    Both are valuable to entrepreneurs. The business model canvas will help find a business model around which to build a company. A business plan will help in the understanding of how to build a company around that business model. The business model is ultimately part of the business plan and cannot replace it.
     
    Successful entrepreneurs will let the market drive their products and will plan accordingly as their company grows and matures.