Business Plans are Always Wrong

Seth Godin includes venture competitions to his Pundits are (nearly) always wrong post yesterday.

I say take that a step further: business plans are always wrong. I have to say I like how well this ties into his post on Starbucks from a couple days earlier.

That’s because we’re human. Business plans predict the future. We humans suck at predicting the future.

Paradox: nonetheless, planning is vital. Planning means starting with the plan and then tracking, reviewing progress, watching plan vs. actual results, correcting the course without losing sight of the long-term destination.

Planning is a process, like walking or steering, that involves constant corrections.

• The plan sets a marker. Without it we can’t track how we were wrong, in what direction, and when, and with what assumptions.
• Use this marker to manage the constant conflict between short-term problems and long-term goals. You don’t just implement a plan, no matter what. You work that plan. Use it to maintain your vision of progress towards the horizon, while dealing with the everyday problems, putting out fires.
• So the plan may be wrong, but the planning process is vital.

The truth is that forecasting is hard. Nobody likes forecasting. But one thing harder than forecasting is trying to run a business without a forecast.

A business plan is normally full of holes, but you fill them, after the fact, with the management that follows. That’s what turns planning into management.

Good planning is nine parts implementation for every one part strategy.

– Tim

http://timberry.bplans.com/2007/05/business_plans_.html

Ideas vs. Opportunities

Ideas are a dime a dozen. Opportunities are much more important. An opportunity is an idea that’s passed the test of planning. It has potential. You can implement it. An opportunity has some of the following elements:

• Industry and market potential: look at market structure, industry structure, growth rate, margins, costs, etc.
• Economics: capital requirements, fixed costs, cash flow, return on investment, risk.
• Competitive advantage: degree of control, barriers to entry, availability of sufficient resources.
• Management team: people who know the industry, the market, the operations, the logistics, the road to market.

The business planning process is about filtering the opportunities — a precious few, requiring focus, and planning — from the ideas.

Whether you’re working on a new start-up business or growing an existing business, you need to encourage lots of ideas and then use your planning to filter them down into the real opportunities.

Remember displacement … recognize that you can’t do everything. You want your plan to help you focus in on the best opportunities among your longer list of ideas.

There is no external meter of good and bad opportunities. What you’re looking for is the right mix between business potential and your ability to reach that potential, given your position, core competence, strengths, weaknesses, and resources.

– Tim

http://timberry.bplans.com/2007/07/ideas-vs-opport.html

Where to Focus: Passion or Ability?

I just answered this question for the entrepreneur.com website, and I’m intrigued with the question itself, I wonder what you think is a good answer.

Here’s the question (and let me say that the IP here belongs to entrepreneur.com, not to me, and I thank them for allowing this here) …

"When starting a business should you focus more on what you love or what you are good at? I’ve started two moderately successful advertising companies with revenues of more than $250,000 in the past two years. However, I don’t necessarily "love" advertising sales, I’m just pretty good at it. In the articles I read month after month, the truly successful people are doing what they love and doing the thing they would do even if they didn’t need the money. That is where I feel my career track is off. If I ever made enough money, I would never, never sell another advertiser again! This makes me think that I should dig deep and find the thing that will get me out of bed at 5 a.m. every morning excited to start working. So my question is even though I’m good at sales and advertising, should I stick with it or find something that I’m passionate about? What’s more important–passion or ability?"

What do you think is the right answer? Focus on what you love or what you’re good at? I’d love to hear from you with this one. I think it’s a very interesting question. I was taken aback, because I’m afraid I’ve always assumed what you love is going to be what you’re good at, and this example seems to pose a different picture quite well.

For the record, here is my answer to that person:

Great question. I think I’ve always assumed a connection between what you like and what you’re good at, but you have a good example here too.

You don’t say what you do love to do. That matters in this case, doesn’t it? Is what you love a business possibility? If you love carpentry or business planning or cooking Mediterranean cuisine that’s one thing, and if you love long walks on the beach or playing golf that’s another. Although even there, people teach golf and start golf equipment shops, but you get what I mean.

Don’t you like anything related to the advertising business? If you started these two businesses, do you have to be the one to do the selling? What about maybe doing the creative or the accounting or some other part of an advertising business, some part that you do love?

Everybody should be able to do what they love and get paid, but it doesn’t seem to work out that way. There are only so many writers, artists, dancers, actors, and athletes with jobs. Then there are the teachers of writing, dancing, and acting, the coaches, and others who build businesses around what they love. And there are websites around what people like to do, and some of them make money.

So I apologize for not having a more definite answer. Thanks, you made me think about these things.

So that’s what I answered, and I’m anxious to broaden this discussion. What do you think? Passion or ability? I hope you’ll add a comment here.

– Tim

http://timberry.bplans.com/2007/08/where-to-focus-.html

But Can We Trust the Trust Agents?

I was just getting back to the office yesterday, a Monday morning after a week away – 4 days of business, and 3 relaxing and invigorating days in Yosemite, which is really away — when Dan Levine (@schoolmarketer on Twitter) suggested I read The social media country club on Mark Shaeffer’s businessgrow blog.

Yes, I’m a sucker for contrary points of view. Get a group going, approach consensus, and I want to read the one who’s out in left field. If everybody else is right and this one’s all wrong, so what, I can work that out. But then how often is left field the right place to be?

Mark starts out objecting to rave reviews of Trust Agents, the book by Chris Brogan and Julien Smith. It’s subtitle is “Using the Web to Build Influence, Improve Reputation, and Earn Trust.” I haven’t read it, but I’ve read a lot of favorable comments. Mark, however, says those favorable comments are the result of group think and myth making:

The “thought leaders” of social media marketing are a country club fearful of saying anything negative or controversial about another club member. The real commerce of social media is trading favors and a negative comment breaks the favor chain.

He paints a picture a lot like the fable of the emperor’s new clothes. You can see with this quote, under the general heading of credibility, that at the very least he’s making his position clear:

Take a close look at the credentials (if you can find any) of nearly any leading social media marketing “expert.” How many have ever had a real sales job or have been actually accountable for delivering new value in a marketplace by creating, testing and distributing a product on a meaningful scale? Very few. Yet these are our marketing “gurus?” In a communication channel already dominated by porn-peddling, get-rich-quick nimrods, it simply doesn’t help our collective credibility to have our most visible advocates spouting incredibly naive statements about marketing fundamentals they know little about.

I don’t know that I agree; it seems too harsh to me. I don’t think expertise is measured only by job history, or sales history, or middle management in a big company history, which seems to be laying just under the surface of the blogger bashing. And I wish Mark had said which statements in the book are naive. But it’s certainly a very contrarian point of view. And worth considering. So I’m sharing it here.

(Photo credit: STILLFX/Shutterstock)

http://timberry.bplans.com/2009/09/can-we-trust-the-trust-agents.html

10 Traits of Successful Entrepreneurs

It started as a comment at the bottom of my 10 signs you're probably an entrepreneur post on this blog, a few days ago. What are the traits of successful entrepreneurs?

I was quoting a Twitter friend, Andrew Patricio. I hope you saw that list. I identified easily. But I can't help thinking about that comment left by Robert Hacker:

Next post should be a list of the characteristics of successful entrepreneurs If you do not write it I will.

That's quite a challenge. What, besides the obvious, do successful entrepreneurs have in common? I know I'm not sure. But at least I can get the idea started. Maybe you can help. What am I missing?

1. There's a lot of talk about P-words: passion, perseverance, and persistence. I mistrust all three. A lot of unsuccessful entrepreneurs have them just as much. You have to have some variation on these traits, but you can have all three and still fail. You and I both know people who never made it and never stopped trying. My favorite P-word in entrepreneurship is planning, but that's just me. Stubbornness is good too, even without starting with P.
2. I like empathy, as in understanding how other people think and feel about things. Empathy leads to understanding what the people you sell to want, what they need, how they think, and how to best reach them. It's hard to imagine somebody building a company without being able to put themselves in the buyer's state of mind.
3. A sense of fairness. For dealing with vendors, customers, and employees.
4. Transferable values. This is closely related to the sense of fairness. I just don't see people building businesses without believing in what they're doing.
5. Willingness to work hard, shoulder to shoulder with other people. Cliche, but true: the harder I work, the luckier I get.
6. Knowing what they don't know. To me that's much more important than what you do know.
7. Listening carefully. Shutting up.
8. Vision for what they can build. Imagining a happy future. Dreaming.
9. Making mistakes. You have to deal with failure. Keep pitching.
10. Jumping viewpoints, like from short- to long-term in an instant, mixing those viewpoints together. That's like dribbling, keeping your eyes up while managing the ball at your feet.

So there's 10. Everybody likes lists of 10. Go ahead. Add some more. Make my day.

http://timberry.bplans.com/2009/01/10-traits-of-successful-entrepreneurs.html

Planning is Stories

There can be great truth in stories. People have communicated in stories from the very beginning. We use stories to tell about God, family, each other, and business. Stories can be true or false by the message they carry, not just what happens in the story. Fables, parables, short stories … think about how much you learn, and teach, with stories.

Can a story tell truth without being technically factual? I think we all know it can. Is the lesson of sour grapes less true because there was no original fox? Or is the story of the gingerbread man not true?

Marketing is all about stories. (Aside — great book in this area, All Marketers are Liars, by Seth Godin). There’s the story of how it started, the invention of whatever it is you’re selling, or the invention of your business itself, the story of the brand, the packaging, the formula, or whatever. There’s the story of how the customer finds the solution. There’s the story of how the customer problem is solved.

A good business plan is a collection of stories. Your vision is a story about the future. Even financial projections are stories, told in numbers. If we sell this many units at that price, we have this much in sales; but we also have to spend this much in rent, and so on.

As a frequent reader of business plans, I look for the stories. The most important is the story of the customer, the solution to a problem, the path to find it, and the decision to buy. I also look for the story of the startup, and the story of the growth in the future. I want them to be convincing.

(Photo credit: Pixelbliss/Shutterstock)

http://timberry.bplans.com/2009/09/planning-is-stories.html

Three Simple but Powerful Rules for Negotiation

Seems like negotiation week for me. I published this post about Seth Godin’s take on business development, and then another on how win-win is the only win in business negotiations. That leaves me thinking about negotiations I’ve been involved in, things that have worked, and things that haven’t worked. And I end up wanting to post the three rules here, because it seems like they always work.

Disclosure: I’ve never taken a negotiation course; not the ones they advertise in magazines, and not one in business school either. These rules are things I learned the hard way.

1. How does it feel to be them?

Call it empathy. “Walk a mile in their shoes” is a good old-fashioned saying. I know a lady who would say “see it through my eyes.” There’s no substitute for understanding the other side of the negotiation. What are they thinking? And, by far the most important, what do they want?

2. Find the win-win

There are no zero-sum games in long-term business deals. You have two winners or two losers, never just one winner and one loser. Sure, you might be able to get that kind of a victory (we win, you lose) in a negotiation sometimes, if you make that a goal … but that won’t last. Businesses wise up. Relationships that aren’t good for both sides don’t last.

So look for that in every negotiation. How can they get what they want, and you get what you want? Maybe both sides get slightly less, but both win. That’s the goal.

3. Negotiate before the contract, not with the contract

The most common mistake in negotiation is dealing with the legal contract. First, you have to realize that only a tiny minority of legal contracts ever determine anything. You have to sue for breach of contract to make a contract really matter, and if it comes to that, you already have a disaster. The vast majority of disputes are dealt with by discussion, revision, and, for the really hard ones, mediation.

I’m not an attorney, so don’t take this as legal advice. In practical experience, though, what I’ve seen that works is that you get all your terms straight first in simple memos (yes, definitely, written; just not legalese) and then do the contract. The contract is the last step.

(Photo credit: Dmitriy Shironosov/Shutterstock)

http://timberry.bplans.com/2009/09/three-simple-but-powerful-rules-for-negotiation.html