Topics

Accounting Advertising Advisor Analysis Apps Balance Sheet Barriers to Entry Beachhead Benefits Better Books Bottom Up / Top Down Brainstorming Brainwriting Budget Business Flow Business Model Cash Flow Commercialization Communications Competition Competitive Advantage Consultant Corporate Entrepreneurship CQs Creativity Critical Success Factor Culture Customer Decisions Deploy Design Develop Differentiation DXpedition Earn EBITDA Education Effectiveness Elevator Pitch Entrepreneur Entrepreneurship Environment Evolution Executive Summary Exercise Expenses Expertise Failure Finance Financial Objectives Flags Flowchart Focus Funding Fuzzy-to-Firm GizmoGadget Glossary Goals Habits Healthy Venture Hiring HOTI Chart Hypothesis Ideas Ideation Income Statement Industry Industry Research Innovate-A-thon Innovation Innovator Intellectual Property Internet Intrapreneurship Invention Inventory Investor Iteration Knowledge Launch Leadership Lean Startup Learning Legal Luck Machines Management Manpower Market Research Marketing Marketing Brochure Material Media Media Relations Mentor Methods Mindset Mission Mistakes Money Motivation Myths Name News Release Niche Market Objectives Operating Agreement Operations Opportunity Passion Patents People Planning Positioning PR Presentations Price Problems Process Flow Product Development Productivity Profit Progress Promotion Prototype Publicity Questions Refine Research Resources Return on Investment Roadmap Sales SCAMPER SCORE Scorecard Skills Slides Solution Development Solutions Something SPLUCK Start-up Stimulation Strategies Strategy Structure Success SWOTT Tactics Tagline Target Market Team Teamwork Technology Readiness Levels Terminology Terms Thinking Tools Transformation TRL Validation Value Venture Venture Capital Venture Creation Venture Plan Vision Work Worth Writing

Ten Legal-Issue Mistakes That Entrepreneurs Make

  1. Failing to incorporate early enough.
  2. Issuing founder shares without vesting.
  3. Hiring a lawyer not experienced in dealing with entrepreneurs and venture capitalists.
  4. Failing to make a timely Section 83(b) election.
  5. Negotiating venture capital financing based solely on the valuation.
  6. Waiting to consider international intellectual property protection.
  7. Disclosing inventions without a nondisclosure agreement, or before the patent application is filed.
  8. Starting a business while employed by a potential competitor, or hiring employees without first checking their agreements with the current employer and their knowledge of trade secrets.
  9. Promising more in the business plan than can be delivered and failing to comply with state and federal securities laws.
  10. Thinking any legal problems can be solved later.
[Thank you, Connie Bagley]

[4.95]

Why Ventures Fail

Addressed stagnant or decaying markets ... bad idea ... bad location ... bad luck ... bad management ... devaluation of assets ... disaster ... dishonesty ... dishonesty with self or partners ... excessive bad-debt losses ... excessive overhead expenses ... excessive use of credit ... excessive waste ... fraud ...
high interest payments ... improper balance between major company functions ... improper control systems ... improper market segmentation ... improper market testing ... improper price setting ... inability of spouse to accept the entrepreneur's drives and values ... inadequate financial analysis ... inadequate marketing analysis ... incompetence ... incomplete homework of the venture capital avenues ... incorrect sales forecasting ... ineffective control procedures ... ineffective customer interface ... ineffective direction ... ineffective planning ... lack of experience in the business area ... lack of fiscal responsibilities ... lack of leadership ... lack of managerial experience ... lack of organization ... lack of realization of the necessity to turn cash immediately ... lack of understanding of venture capitalist's goals ... management weaknesses and gaps ... neglect ... operational over-complexity ... over-inflated organizational structures ... over-staffing ... personal and domestic problems ... personal specifications in conflict with start-up's goals and objectives ... poor communications ... poor financial projections ... poor market gap analysis ... poor psychological work environment ... poor retail locations ... poor self-discipline ... poor venture capital appetite-whetting techniques ... premature approach of venture capital avenues ... premature incorporation ... premature patents ... premature product releases ... security indiscretions ... speculative losses ... superior competition ... technical problems ... the lack of zest for life which sustains a start-up ... too many details ... too rapid expansion ... trading area changes ... unable to solve customer's problems ... unbalanced experience ... under-capitalization ... under-staffing ... unfavorable economic conditions ... weak business plans ... weak incentive systems ... weak key employees ... weak marketing tactics ... weak money-leveraging methods ... weak motivation ...

Perspectives on Corporate Entrepreneurship

  1. Companies must constantly innovate ... without innovation they tend to do what they've always done and run the risk of getting stale and becoming competitively disadvantaged.
  2. For a company to thrive, it must tap the individual initiative of its team members ... this must be a major area of focus.
  3. On any initiative being pursued, team-member buy-in is absolutely essential for success.
  4. If a company want its people to be intrapreneurial in their thinking, they must be kept well informed about the company's processes and visions, and the impact of these processes and visions on profit.
  5. Leaders must give team members everything they need to be self-motivated and take the initiative to succeed.
  6. Companies must reward the creativity of their people.
  7. If a team member owns an initiative, he or she should be accountable for all aspects of its success.
  8. Companies must encourage resourcefulness and out-of-the-box thinking.
  9. All thought leaders must be constantly focused on customer needs and now to satisfy and exceed them.
  10. Leaders and managers must work to maximize team-member involvement in all key initiatives to tap the collective intellect of the team.
[Thank you, The One Minute Entrepreneur]

Are We Shooting Down Good Ideas?

  1. You know whether or not an idea is good based who proposed it.
  2. You observe from a distance rather than being lead down a path to the idea. (a.k.a. The Sniper)
  3. You believe every idea is improved with your input.
  4. Listing the top 10 ideas from your organization this year, half or more are your own.
  5. Brainstorming means narrowing down to the best idea, instead of hearing all of them.
  6. All ideas must be proven.
  7. You only want BIG ideas.
  8. You have no effective mechanisms to foster, collect, review, and implement ideas.
  9. Your competition is your main source of ideas.
  10. No matter how much you've talked about ideas, collected them, praised them, in the end you don't use them. (Like a maimed duck, you let them wander off and die.)
[Thank you, Dustin Staiger]

Perspectives on the Nature of Entrepreneurship

  1. Creation of Wealth ... assume risks in exchange for profit
  2. Creation of Enterprise ... founding a new business where none existed before
  3. Creation of Innovation ... making existing products or methods obsolete
  4. Creation of Change ... adjusting, adapting, modifying to meet new opportunities
  5. Creation of Employment ... employing, managing, developing the factors of production
  6. Creation of Value ... creating value for customers by exploiting untapped opportunities
  7. Creation of Growth ... sales, income, assets, and employment
[Thank you, Michael H. Morris]

Highlights of an Effective Venture Plan

  1. Start with a clear, concise executive summary of your venture. Think of it like an elevator pitch. In no more than two pages, billboard all the important stuff. At the top, communicate your value proposition: what your venture does, how it will make money, and why customers will want to pay for your product or service. If you are sending your plan to investors, include the amount of money you need and how you plan to use it. You have to know the whole picture before you can boil things down, so tackle the summary after finishing the rest of your plan.
  2. Next, establish the market opportunity. Answer questions like: How large is your target market? How fast is it growing? Where are the opportunities and threats, and how will you deal with them? Again, highlight your value proposition. Most of this market information can be found through industry associations, chambers of commerce, census data or even from other business owners. (Be sure to source all of your information in case you are asked to back up your claims or need to update your business plan.)
  3. While you may have convinced yourself that your product or service is unique, don't fall into that trap. Instead, get real and size up the competition: Who are they? What do they sell? How much market share do they have? Why will customers choose your product or service instead of theirs? What are the barriers to entry? Remember to include indirect competitors--those with similar capabilities that currently cater to a different market but could choose to challenge you down the road.
  4. Now that you've established your idea, start addressing the execution ... specifically, your team. Include profiles of each of your business's founders, partners or officers and what kinds of skills, qualifications and accomplishments they bring to the table. (Include resumes in an appendix.)
  5. If potential investors have read this far, it's time to give them the nuts and bolts of your business model. This includes a detailed description of all revenue streams (product sales, advertising, services, licensing) and the company's cost structure (salaries, rent, inventory, maintenance). Be sure to list all assumptions and provide a justification for them. Also, include names of key suppliers or distribution partners.
  6. After all of that, one big question still remains: Exactly how much money will your venture earn? More important, when will the cash come in the door? That's why you need a section containing past financial performance (if your company is a going concern) and financial projections.
  7. Three-year forward-looking profit-and-loss, balance sheet and cash-flow statements are a must ... as is a break-even analysis that shows how much revenue you need to cover your initial investment.
  8. For early stage companies with only so much in the bank, the cash-flow statement comparing quarterly receivables to payables is most critical. "Everyone misunderstands cash flow," says Tim Berry, president of business-plan software company Palo Alto Software. "People think that if they plan for [accounting] profits, they'll have cash flow. But many companies that go under are profitable when they die, because profits aren't cash."
  9. After you've buffed your plan to a shine, don't file it away to gather dust. "A business plan is the beginning of a process," says Berry. "Planning is like steering, and steering means constantly correcting errors. The plan itself holds just a piece of the value; it's the going back and seeing where you were wrong and why that matters."
[Thank you, Mary Crane]

[2.17]

Potential Sources of Venture Funding

  1. The "Fs" ... founders, family, friends, fanatics, fools ... the starting point for most independent ventures ... generally low to moderate sophistication, low to moderate investment ...
  2. Bootstrapping ...
  3. Customers ...
  4. Suppliers ...
  5. The "Strangers with Candy" ... angels, investment clubs ... wide range of investment interest and sophistication, generally low to moderate investment ...
  6. The "Vulture Capitalists" (VCs) ... venture capital firms ... usually focused on a specific industry ... moderate to high sophistication ... a mistaken target for many new ventures, very few new ventures are funded directly by VCs ...
  7. The "Big Ugly Monsters" (BUMs) ... corporate venture capital ... usually focused on specific industries and proven ventures ... may fund internally-developed ventures ... often part of a angel/VC network of investors ...
  8. Corporations ...
  9. Bank loans ...
[4.16]

How to Write an Executive Summary

The purpose of the executive summary of the business plan is to provide your readers with an overview of the business plan. Think of it as an introduction to your business. Therefore, your business plan's executive summary will include summaries of ...
  1. a description of your company, including your product and/or service solutions
  2. your management
  3. the market and your customers including basic quantitative information
  4. marketing and sales strategies
  5. your primary competition
  6. your competitive advantage
  7. your operational strategies
  8. financial projections and plans
  9. contact information
The executive summary will end with a summary statement, a "last kick at the can" sentence or two designed to persuade the readers of your business plan that your business is a winner.

To write the executive summary of the business plan, start by following the list above and writing one to three sentences about each topic. (No more!)

If you have trouble crafting these summary sentences from scratch, review your business plan to get you going. In fact, one approach to writing the executive summary of the business plan is to take a summary sentence or two from each of the business plan sections you've already written. (If you compare the list above to the sections outlined in the Business Plan Outline, you'll see that this could work very well.)

Then finish your business plan's executive summary with a clinching closing sentence or two that answers the reader's question "Why is this a winning business?"

Tips for Writing the Business Plan's Executive Summary
  1. Focus on providing a summary. The business plan itself will provide the details and whether bank managers or investors, the readers of your business plan don't want to have their time wasted.
  2. Keep your language strong and positive. Don't weaken the executive summary of your business plan with weak language. Instead of writing, "Dogstar Industries might be in an excellent position to win government contracts", write "Dogstar Industries will be in an excellent position..."
  3. The executive summary should be no more than two pages long ... one page is probably better. Resist the tempation to pad your business plan's executive summary with details (or pleas). The job of the executive summary is to present the facts and entice your reader to read the rest of the business plan, not tell him everything.
  4. Polish your executive summary. Read it aloud. Does it flow or does it sound choppy? Is it clear and succinct? Once it sounds good to you, have someone else who knows nothing about your business read it and make suggestions for improvement.
  5. Tailor the executive summary of your business plan to your audience. If the purpose of your business plan is to entice investors, for instance, your executive summary should focus on the opportunity your business provides investors and why the opportunity is special.
  6. Put yourself in your readers' place... and read your executive summary again. Does this executive summary generate interest or excitement in the reader? If not, why?
Remember, the executive summary of the business plan will be the first thing the readers of the business plan read. If your executive summary is poorly written, it will also be the last, as they will set the rest of your business plan aside unread!

[Thank you, Susan Ward]

Tips for Picking the Right Opportunity

  1. You and your team are passionate and persistent ...
  2. Your team has or can learn the skills needed ...
  3. Your team can collaborate and cooperate ...
  4. The problem is clear ...
  5. The customers are readily identified ...
  6. The market is significant ...
  7. You have a feasible solution ...
  8. The competition is identifiable ...
  9. Your solution has better and sustainable benefits ...
  10. Your solution can generate a sustainable profit ...
  11. Your venture is timely, important, legal ...
  12. Your venture can build barriers to entry ...
  13. Your concept is scalable ...
  14. You'll invest less time, money, and effort in the venture than it will be worth in a couple of years ...
  15. If the opportunity turns out to be less than favorable, you can exit with minor losses ...
  16. Risks can be mitigated ...
  17. The upside potential is significant and timely ...
  18. Your team has a clear plan for success ...
  19. Your team can find the resources needed ...
  20. You and your team are committed to success ...
  21. The opportunity has a potential for long-term success ...

Tips for Writing

  1. Be ruthless when proofreading ... look for what you can cut.
  2. Remember stories have a beginning, a middle, and an end.
  3. Use "talking headings" to convey meaning.
  4. When in doubt, check for rules of grammar and usage with a handbook.
  5. Place the subject and main verb near each other and use strong verb.
  6. Avoid the "to be" verb when a stronger verb carriers a more specific meaning.
  7. Use the passive voice sparingly (It was decided to change the Company name for the sake of enhancing the effect.) vs. (We changed the company name to make it more powerful.)
  8. Make sure the "ing" form is necessary: (We were working on a prototype) vs. (We developed ... ) Note: often a question of verb tense.
  9. Make sure words ending in "'ion" are necessary; are they verbs masquerading as nouns? (The decision to acknowledge receipt of the letter was made.) vs. (We acknowledge receipt of the letter.)
  10. Make certain the prepositional phrase is helpful ... cut wasted prepositional phrases
  11. To tighten: circle the "to be" verbs, the "ing" words, the "ion' words, and prepositions. Then read out loud, and check to see what else you can cut.
  12. Put old information first, new information second (OLD >> NEW)
  13. Put easy-to-understand information first, complicated material second
  14. When building transitions, use repetition of key terms, synonyms for key terms, appropriate pronoun reference, and the appropriate collocation chain
  15. Make sure your pronoun usage is clear to the reader
  16. Choose the best word, but avoid using thoughtless thesaurus words
  17. When quoting, introduce the author, the text, and the concept; then provide the quotation with proper citation format; then provide the reader with your interpretation.
  18. Keep your writing simple ... cut to the chase.
  19. Avoid cliches and trite phrases.
  20. Use strong verbs.
  21. Use consistent verb tenses, and find the single most correct word.
  22. Always look for what you can throwaway and always make it easier on your audience.
[Thank you, Randy Accetta]

Google Design Principles

  1. Focus on people - their lives, their work, their dreams.
  2. Every millisecond counts.
  3. Simplicity is powerful.
  4. Engage beginners and attract experts.
  5. Dare to innovate.
  6. Design for the world.
  7. Plan for today's and tomorrow's business.
  8. Delight the eye without distracting the mind.
  9. Be worthy of people's trust.
  10. Add a human touch.
[Attribution: Sue Factor, User Experience Group, Google]

Tips for Finding Your True Passion

  1. What puts a smile on your face?
  2. What do you find easy?
  3. What sparks your creativity?
  4. What would you do for free?
  5. What do you like to talk about?
  6. What makes you unafraid of failure?
  7. What would you regret not having tried?
[Thank you, Frederick Pemji]

Waterfall Veture Planning

  1. Vision ... "We will change the way someone does something!" [Be specific, 100 words or less: Who is someone? What is the something? Why are you going to change the way it is being done now? How?]
  2. Mission ... "We will earn a profit solving customer problems better than the competition!" [Be specific, 100 words or less: Who are the target customers? What are their problems? How will you solve them? What is the competition? How are you better? What will you do to earn the business? How will you make a profit? How much?]
  3. Goals ... "In five years, we will ..." [What are your three most important goals?]
  4. Objectives ... "To reach our goals, we must accomplish these objectives ..." [What are the three most important objectives for each goal that must be accomplished in the next six months?]
  5. Strategies ... "To accomplish our objectives, we will do this better than our competition ..." [What methods will you use to reach your objectives?]
  6. Tactics ... "To implement our strategies, we will do these things ..." [What three procedures will you use to carry out your strategies?]
  7. Tasks ... "To execute our tactics, we will ... " [What three things must be done to realize your tactics?]
  8. Assignments ... "Here's who is going to do what and when ... " [Who are the best people for each task?]
[6.17]

Ten Entrepreneurship Myths

  1. It takes a lot of money to finance a new business. Not true. The typical start-up only requires about $25,000 to get going. The successful entrepreneurs who don’t believe the myth design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries.
  2. Venture capitalists are a good place to go for start-up money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication, and biotechnology account for 81 percent of all venture capital dollars, and seventy-two percent of the companies that got VC money over the past fifteen or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a start-up company will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower.
  3. Most business angels are rich. If rich means being an accredited investor –a person with a net worth of more than $1 million or an annual income of $200,000 per year if single and $300,000 if married – then the answer is “no.” Almost three quarters of the people who provide capital to fund the start-ups of other people who are not friends, neighbors, co-workers, or family don’t meet SEC accreditation requirements. In fact, thirty-two percent have a household income of $40,000 per year or less and seventeen percent have a negative net worth.
  4. Start-ups can’t be financed with debt. Actually, debt is more common than equity. According to the Federal Reserve’s Survey of Small Business Finances, fifty-three percent of the financing of companies that are two years old or younger comes from debt and only forty-seven percent comes from equity. So a lot of entrepreneurs out there are using debt rather than equity to fund their companies.
  5. Banks don’t lend money to start-ups. This is another myth. Again, the Federal Reserve data shows that banks account for sixteen percent of all the financing provided to companies that are two years old or younger. While sixteen percent might not seem that high, it is three percent higher than the amount of money provided by the next highest source – trade creditors – and is higher than a bunch of other sources that everyone talks about going to: friends and family, business angels, venture capitalists, strategic investors, and government agencies.
  6. Most entrepreneurs start businesses in attractive industries. Sadly, the opposite is true. Most entrepreneurs head right for the worst industries for start-ups. The correlation between the number of entrepreneurs starting businesses in an industry and the number of companies failing in the industry is 0.77. That means that most entrepreneurs are picking industries in which they are most likely to fail.
  7. The growth of a start-up depends more on an entrepreneur’s talent than on the business he chooses. Sorry to deflate some egos here, but the industry you choose to start your company has a huge effect on the odds that it will grow. Over the past twenty years or so, about 4.2 percent of all start-ups in the computer and office equipment industry made the Inc 500 list of the fastest growing private companies in the U.S. 0.005 percent of start-ups in the hotel and motel industry and 0.007 percent of start-up eating and drinking establishments made the Inc. 500. That means the odds that you will make the Inc 500 are 840 times higher if you start a computer company than if you start a hotel or motel. There is nothing anyone has discovered about the effects of entrepreneurial talent that has a similar magnitude effect on the growth of new businesses.
  8. Most entrepreneurs are successful financially. Sorry, this is another myth. Entrepreneurship creates a lot of wealth, but it is very unevenly distributed. The typical profit of an owner-managed business is $39,000 per year. Only the top ten percent of entrepreneurs earn more money than employees. And the typical entrepreneur earns less money than he otherwise would have earned working for someone else.
  9. Many start-ups achieve the sales growth projections that equity investors are looking for. Not even close. Of the 590,000 or so new businesses with at least one employee founded in this country every year, data from the U.S. Census shows that less than 200 reach the $100 million in sales in six years that venture capitalists talk about looking for. About 500 firms reach the $50 million in sales that the sophisticated angels, like the ones at Tech Coast Angels and the Band of Angels talk about. In fact, only about 9,500 companies reach $5 million in sales in that amount of time.
  10. Starting a business is easy. Actually it isn’t, and most people who begin the process of starting a company fail to get one up and running. Seven years after beginning the process of starting a business, only one-third of people have a new company with positive cash flow greater than the salary and expenses of the owner for more than three consecutive months.
[Thank you, Scott Shane]

Critical Path

Ultimately, the function of a business venture is to satisify customer needs, wants, and desires by transforming their problems into solutions (and capturing a bit of profit reward along the way).