21st Century entrepreneurs and business owners are writing smaller business plans but doing more business planning. Verbs are becoming more important than nouns.
The founder of a new company recently received $6 million venture capital without providing investors the traditional 40-page business plan document. She instead used a 12-slide PowerPoint to communicate the case for her venture followed by a Q&A where she very capably answered all of the investor’s questions to their satisfaction.
She had no plan (noun), but she had done the planning (verb).
Rhonda Abrams, who shared this story with me, has sold more than a million books on business planning. On September 7, 2011, she shared what has and has not changed in business planning.
What has changed?
Rhonda said, “Writing is no longer as important as the planning process and activities.” Very few people take time to read a 35-page business plan. Instead, they read the 1-page executive summary.
What has stayed the same?
What improvements have you implemented to your organization’s business planning process?
Does your company create daily price quotes for customers to make a sale? If yes, which one of these landscapers most closely resembles your quote process?
Assume you want to contract landscaping for your home. You’ve found three companies that can do the work. You ask each to quote your job.
Instead of accepting the low bid, a wise move is to ask each how they arrived at their pricing.
Which one do you give your business and why?
Here’s what I would do? I’d tell each vendor that I might not be able to do the entire project and ask each one to rebid my job on a line-by-line basis.
I would then ‘cherry pick’ and see if by doing so I can come up with a total cost of less than the third landscaper’s original $950 bid. If I can come up with a lower total price, the “material-doubler” landscaper will undoubtedly lose money on what he sells me, the more rational one will at least turn a profit on the items he does sell me, and the third may or may not turn a profit on its portion of the sale.
If you don’t have a system similar to landscaper #2, customers will cherry pick you. They’ll buy things from you that are under-priced, e.g. you are losing money on them but you don’t know it. And you won’t sell the things you’ve overpriced that would be profitable at a lower, more competitive price.
I’ve seen scores of manufacturers with invalid cost models win major contracts on which it was impossible to earn a profit this way – some of which won enough of these contracts to put the company out of business.
Which landscaper pricing method does your company most closely resemble?
Great things are NOT often achieved by the well-rounded.
A new or existing business that attempts to be everything to everyone will not be successful. A machine shop that advertises itself as a provider of close tolerance milling is no longer unique. A restaurant with a sign out front saying “Good Food” is not unique. As a result, they have to be “cheap”.
The most successful businesses in the 21st century define and implement a niche strategy. A niche is a need or want not currently provided in the marketplace. Southwest Airlines started as a geographical niche. Bag-less leaf removal is a green lifestyle niche. Wine for Lawyers is an example of an Age/Stage niche.
Good niches have seven characteristics:
Master inventor Doug Hall says “If you’re not unique, you’d better be cheap.” Cheap is not a niche.
Does your business have a niche?
Evergreen Solar recently announced they are firing 800 workers at their Massachusetts factory and moving all solar panel production to China. The February 6, 2011 issue of Bloomberg Business Week interview of Evergreen’s CEO exposes how they could have prevented the firings.
1. Management built too big of a factory. 75% too big! If the company had used Lean principles, they would not have overbuilt.
2. Management took on too much debt to start the company. See #1 for a reason for the big debt.
3. Management ran out of cash. Cash is the lifeblood of any company, even profitable ones. China offered management cash in exchange for moving the jobs to China.
Everyone makes mistakes. Learning from mistakes is a key trait of successful leaders. What mistake provided you or your organization its greatest lesson?
I’ve learned that most people are skeptical when they’re told to expect significant financial benefits from implementing Lean.
In teams of 3, I used TMAC’s Financial Fundamentals business simulation game to teach finance to non-financial people. During the 6-hour workshop, each team manufactures and sells a common product to a single customer … me. The winner of the workshop is the team with the most income in Retained Earnings.