Good planning = Asking the right questions (Bisvision Toolkit)

“A clever man gives the right answers” … “A wise man asks the right questions”

One of the big conundrums facing business leaders is what they don’t know, they don’t know.  Damian D’Cruz  has gone a long way to helping business people ask the right questions with his business planning tool kit called BisVision.

This great kit uses 5 decks of cards to ask probing questions around SWOT’s, Vision, Planning, and Execution.  You can use the kit to take you through a structured planning approach.

I have used the kit for a number of years and have found it great in its simplest use of – “what have I not considered in developing my business plan?”

Damian has produced two versions of the kit one for Businesses and one for the Not-For-Profit sector.

Asking the Right Questions

The opening quote, regarding asking the right questions, is so true. I have now come to the belief that any professional service provider can best be measured by the quality of those questions.  As a consultant myself, I have realised it is not the tools we use, but the way in which we use the tools that produces the best result. 

“I can give you the paint brush, but it will not make you an artist”. It’s on this basis I believe that by passing on as many tools and techniques I can, I will help people, but if they want true art give me a call 🙂 Happy reading.

For those who like DiY planning, this kit will be invaluable. Support this local company and  purchase it on the Bisvision Website

Advertisements

Better ways to finance your business than investment

So you are short of working capital (cash) for you business:
Is getting an Angel Investor the best option? Most probably not.
Should you get investment ready – definitely!

In most cases, the act of preparing for investment will eliminate the need to raise money.  Companies that get investment typically will receive the capital to accelerate growth, not initiate it. 

Apart from having a realistic valuation expectation, being “investment ready” is simple, get clarity and focus around:

  • Product or service value proposition
  • Business model, strategy, and plans
  • Having something unique and defendable in your product offering
  • Building and maximising the productivity of your team, including governance
  • Have customers that buy stuff

There is no rocket science around all this, but I consistently see companies going to the market to talk to investors that do not have their act sorted. Equally so, they are attempting to do too many things with mediocre results.

Now for the reality – raising capital is slow and arduous process.  Typically it will take you six to 24 months before the money appears in the bank account and will consume at least 200 hours of your time.

Many businesses seeking capital will go bust before they get there and the more fragile their current position, the more likely it is they will not attract the capital.

Without a clear strategy and go-to market model, you are unlikely to find an investor.

So if Angel Investment is not the magic answer what is?

One of the issues of technicians starting businesses, apart from those raised in my e-myth blog post, is their lack of experience in structuring deals of any type, too often playing with price as the only negotiating tool.

Other options for funding growth include:

  • Selling more
  • Charging more for your product – what effect would there be by increasing your sales price by 30, 50 or 100%? In many cases increasing sales price will increase sales.
  • Establishing better sales channel partners – preferably ones that already have your target market as customers
  • Using customers as promoters of your product
  • Sharing promotion costs with distributors
  • Licensing deals
  • Structuring payment options eg. 50% deposit with order
  • Debt finance
  • Invoice factoring
  • Government grants – yes there are still some available

For those who are looking to get smarter around strategy and structuring their business for growth, Debbie Humphrey and I run a four day workshop called Business Dominoes to tackle this very issue.

Foolproof: De-Risking New Ventures

Whether it’s a start-up or a product line extension, next to having the right team on board, validating your market prior to developing your product is the best way to increase the probability of your success.

Often I hear the cry “oh, this doesn’t apply to us”…. “We do disruptive technology like Steve Jobs… “our customers don’t know what they need till we show them”.

Truly successful disruptive technologists use research to back up and tune their visionary thoughts. They study their target audience’s behaviour to the point where they can create powerful product insights based on a combination of research and creativity to de-risk their investments. Without this behavioural research you are simply guessing.

It’s no wonder we have such a high failure rate with companies in this country when you hear facts like – “only 20% of companies approaching MOVAC for investment have completed market validation, which is a perquisite for us to invest” – Dion Mortensen

85% of those completing market validation will fundamentally change the functionality of their product, ultimately creating a product that will be more profitable and actually sell!

Jenny Douché has just released her latest book Fool Proof – How to find and test great business opportunities”.

“This easy to read book is full of great tips and guides, it should be compulsory reading for all new ventures and product managers”.

Jenny has included some insights from New Zealand entrepreneurs (Rode Drury’s Xero, Campbell Gower, Phil & Teds buggies, etc) and a few local investors who have experienced the fruitful outcome of performing market validation.

Foolproof is an easy light read, designed for entrepreneurs – 2 aeroplane trips should have it read with no bullshit or big theories. It will be one of those books that you will refer back to.

Unlike other books on this topic, Jenny actually gives you plenty of actionable content, rather than just theory, including lists of questions for all participants of market validation including: target end users, distributors, market influences and enablers. She covers both desk research and engaging with stakeholder groups, including how to talk when interviewing and surveying.

Too many entrepreneurs  fail to look at the wider macroeconomic factors that will influence their business both now and in the future. It’s amazing what insights you can gain from mapping and studying your market place’s value and supply chains along with current trends. (Note: value chain mapping is one of the key activities we do in Business Dominoes – strategy programme). By performing this type of research, you can save yourself the embarrassment of being blind sided down the track, or worst still investing in the world’s best mouse trap that no one will ever buy.

Just because what we have created is faster or better than the existing market alternative, it is not a right of passage to easy sales. As creators of new products, we easily forget the life of a consumer; where we are faced with better and newer products and services, yet we choose to ignore them and use what we consider easy, safe and predictable.

Clearly getting there is a balance between “no market validation” and “doing so much research you never do anything”. Either extreme is going to be a recipe for failure.

Some takeaways on Market Validation:

  1. Market validation before undertaking any major investment is an essential risk mitigation tactic
  2. If you are seeking investment, doing market research will put you ahead of the pack
  3. Do both desk and personal research – yes, talk to potential customers
  4. Map out your market place (value chain and trends), make sure you are not missing any opportunity or trend merging – a lot of this can be done by desk research and validated by contacting key industry commentators
  5. Engaging key stakeholders in the industry in market validation often builds loyal evangelists for you and your new business
  6. A quick prototype or sketch can help discussions
  7. Market validation is not a one-off exercise, it is a crucial part of improving your business and product over its life
  8. If you are developing disruptive technology then you need to be doubly sure of your target audience’s “pain” and more importantly motivation to change behaviour to adopt your new product. Do some behavioural research.
  9. Be warned if you have been in the industry or are a target user – you do not know enough.
  10. Doing market validation will often open your eyes to a better product than the one you have conceived by yourself.
  11. Buy Jenny’s book

I have already purchased 10 copies of the book and are handing them out to clients as compulsory reading.

Test your BHAG

What is the uniting force in your business? Running and working in high growth companies is hard work and we are often losing sight of what we are all about.

Daniel Pink in his book Drive he outlined three core drivers for people: Autonomy, Mastery, and Purpose.  (Note:  For those who have not read this great book watch the 10 minute animated summary)

Nothing binds a business like a clear and succinct BHAG (Big Hairy Audacious Goal) and a clear purpose.  I am not talking about the traditional boring mission statements that lime the walls of corporate offices, full of: Corporate blah blah… typically lots of words taken from a corporate speak bingo competition.

What I am talking about is a mantra or Big Hairy Audacious Goal (BHAG) that is worth waking up for in the morning and going the extra mile.

Ingredients of BHAGs that work are:

  • Compelling and gripping: people understand straight away
  • Action orientated
  • Bold: bordering on arrogant and unattainable
  • Clear: who, what, where, by when
  • Types: target, common foe, role model, internal transformation
  • SUCCINCT: The power of message is inversely proportional to its length

Have a look at some of the founding BHAGs for some of industries great companies noting this is what they started with…

  • Microsoft: “A computer on every desk and in every home”
  • Amazon: “Every book, ever printed, in any language, all available in less than 60 seconds. Also: Earth’s most customer centric company”
  • Ford: “Democratize the automobile”  (1900’s)
  • Twitter:  “To become “the pulse” of the planet”
  • Giro Sport Design: “Become the Nike of the cycling industry”
  • Nike: “Crush Adidas” (1960’s)

Brian Gaynor spoke at Springboard this month citing “New Zealand  business owners, in comparison to Australian counterparts, lacked ambition”.  Check your BHAG against the above list. Do not fall into the trap of being another conservative Kiwi company without big ambition.

Here are a few ideas from local examples (note: not their actual BHAG)

  • Biomatters:  “Tools on every biologist’s desktop”
  • E-spatial : “THE location intelligence behind all major New Zealand enterprise solutions”
  • Sale finder: “New Zealand’s ultimate consumer research tool”

When it comes to purpose statements – these are just clear concise versions of your value proposition in the language of your clients. More on this later – a topic for another blog post.  In the meantime, you can read value propositions revisited, creating succinct messages, No value proposition = No business from old posts.

Example Purpose: Spike mail: “Building qualified and engaged buyers versus creating lists”  – note no reference to their core craft of email marketing.

Product Marketing – the missing discipline…

An effective Product Marketing team is most probably the best insurance policy for any new venture.   For a trading company the Sales team and CEO’s all have tunnel vision on next quarter’s revenue.  The role of product marketing is to build next year’s revenue and ensure that any investment in product development produces a measurable return. 

The finite definition of product marketing’s function is variable, but it unanimously does include the full range of marketing activities, rather than just promotion activities. Noting that for too many business people, marketing is just a promotion activity.

Key activities of pure product marketing that are often absent in businesses include:

  • Assessment and validation of marketsWill someone actually buy this product once it is created?
  • Access to channels to marketsmart go-to market strategies and distribution agreements that are workable and will not conflict with potential company exit strategies.
  • Return on Investmentworking out if this is the best use of the company’s capital and when and how will it get a return.
  • Development of effective sales collateral and messaging – that communicates what is relevant to customers, rather than a feature or technology list.

Check your company’s marketing activities against this great list from www.pragmaticmarketing.com

This is one area we have a lot to learn from American technology companies. New Zealand technology companies often make the first move of appointing product managers, to manage product road maps, product requirements definitions, and act as the referee between sales and development teams.

My suggestion following on from my recent  Rule of 10’s post is, at the very least, budget an equivalent amount of money in the complete list of marketing activities as you do in product development. Likewise, balance your marketing spend between strategic and tactical activities.

I would encourage CEO’s of companies, Crown Research Institutes and universities to explore this missing discipline. I would also welcome the Ministry of Science and Innovation to begin to invest in this crucial area of commercialisation, rather than just the science part.

Don’t spend all your money on development

The process of selling costs and it takes time…
A company without sales and a go-to market plan is a science project, not a business.

It blows me away every time I come across yet another business that has a product all finished, patents applied for, accounts done, but no go-to market strategy or any sales to speak of – AND NO CASH LEFT.

Worst still, licensing deals that have not taken into consideration cash flow and go-to market issues – AND STILL NO CASH LEFT.

It disgusts me that all the lawyers and accounts that the business spent money with never encouraged the business to save some money for sales and market.

Whether it’s science, technology, or products, too many businesses are running at Death’s door, because they have failed to budget for and spend appropriately on marketing of their products.

 

Rule of 10’s

One of the most basic rules any new product based venture should take into consideration is the Rule of 10’s.  If it takes $1 to create a business concept, it will take $10 to build a product, $100 to market it, $1000 to build a brand, and $10,000 for an international brand.

Please make sure you have some time, energy, and money left for taking your product to market.

As an ex-engineer I get it guys, you want it finished and perfect before you go sell it – but get over yourselves, go sell vaporware. Trust me, the sales cycle will take 10 times as long as you think and cost you 10 times as much.

STOP spending on technology and products. START spending on marketing and sales NOW.  It appears that most professional out their patent attorneys, accountants and the like have no knowledge of product commercialisation – otherwise they would be advising businesses to save some cash for this crucial activity.

At very least, consider how you are going to sell and market your product and budget for it now.

9 Traits to Excite an Investor and Prosper…

Will your company get investor interest and, more importantly, will it prosper?

Too many companies I see pitching for investment pitch a product or a technology, not a company.  Fixing the product pitch is a relatively easy task in comparison to fixing the business pitch, mainly because most businesses don’t have a strategy or even a plan. Sorry, “build it and they will come” doesn’t count. 

Test your company against this list to see if you are investment ready:

  1. A product that we understand –  the problem and the solutionno matter how complex the science is behind your company, it must have a simple explanationof the problem you solve for customers and the value you give your customers and end users.
  2. Validated market demand for the productif it’s a new venture what third party proof do you have (eg. market research, etc) that people will buy your product at a price, you can make money from it. If it’s in the market already, excite us about your sales growth story.
  3. A trend driving increased demand – creating the “perfect storm” – what is going on in your target market that says this demand will continue and ideally increase?
  4. A sustainable competitive advantage how are you going to defend yourself against the competition when it wakes up?
  5. Clear, quantified metrics as to how the business makes moneyhow well defined is you business – finance model? Can you model your sales process (eg. x dollars spent on Google ad words = y dollars sales)? At least understand the financial model and your capacity constraints.
  6. A clear and easily communicated business plan/strategy – including go-to market –  a clear and concisestrategy and plan is a long way towards achieving greatness. Give us confidence you have a tangible way to reach customers and meet demand.
  7. An experienced teamNothing happens without a committed and well-equipped team. What relevant experience does your team have? Remember always employ people smarter than you.
  8. Clear return for investoris your valuation set at a point where the investor can actually make a return? Remember no exit plan = no investment.
  9. Fun people working on cool stufffun and cool mean different things to different people – but like pornography it is obvious when it is, or isn’t. 

I consistently see in the New Zealand market place, time and time again, businesses get caught up with the product, technology or science and are wasting their efforts because they failed to stop and look at the bigger picture of a full go-to market plan and strategy.

Debbie Humphrey and I have launched a new investment ready programme called Business Dominoes to help business owners both recognise this strategy gap and fill it. All of our clients from the first intake are raving about the transformation their business stimulated from this programme. Debbie and I believe you are expert at driving your company, you just need a hand as to where to drive to and who you should take with you.