Start, Grow and Run Your Own Busines - Tips and advice - Tim Berry - Bplan.com

8/2/2019 Start, Grow and Run Your Own Busines - Tips and advice - Tim Berry - Bplan.com

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Start, Run, & GrowYour Business

Tips and advice

for entrepreneurs

from businessplanning expert

Tim Berry

Brought to you by:www.bplans.com


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Copyright Palo Alto Software, Inc., 2010 All rights reserved.

Requests for reprints, academic use, and other dissemination of this guide

should be emailed to the marketing department of Palo Alto Software at

[email protected].

For product information, visit our website:www.paloalto.com

or call: 1-800-229-7526


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1. Start Your Business

4 Questions to ask Before Starting a Business ............................................ 1.2

Can you Really Start a Business in 3 Weeks? ................................................ 1.7

Dont Underestimate Beachhead Strategy ................................................... 1.9

Three Steps to the Startup Sweet Spot ....................................................... 1.11

True Story: Business Plan Addict .............................................................. 1.15

Second Mover Advantage .......................................................................... 1.18

The Best Startup Funding is Initial Sales .................................................... 1.21

2. Run Your Business

Business Focus vs. Peripheral Vision vs. Growth ......................................... 2.2

No, 37signals, Planning is NOT What you Think ........................................... 2.4Plan-as-you-go Business Planning ............................................................... 2.6

Are you a Good Manager? How can you Tell? ............................................ 2.11

Proper Care and Feeding of People who cry Wolf ...................................... 2.14

Tell Business Truth Even When its Painful ................................................. 2.16

Three Simple but Powerful Rules for Negotiation ........................................ 2.18

3. Grow Your Business

Gather Your Team ....................................................................................... 3.2

Kick-start the Planning Process .................................................................. 3.4

For Great ROI, Remember Existing Customers ............................................ 3.6

The Free Prize and the Fishbowl .................................................................. 3.8

Growing a Business .................................................................................. 3.10

The Fresh Look ......................................................................................... 3.12

For more articles and advice on business planning, check outBplans.com

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1.1

Start Your Business

Starting a business is definitely one of my favorite subjects, not just on my blogs, but

in my last book (3 Weeks to Startup), for the start-a-business class Ive taught forthe last 11 Spring terms at the University of Oregon, and for building a life.

Every startup is different. To choose a startup, you look well into a hypothetical

mirror, figuring out who you are, what you do well, what you like to do, and what,

from that, you can do that people need, want, and will pay for.

Contrary to popular myth, it isnt as simple as just persistence, passion, and persever-

ance. You also have to give value. You have to offer something people need or want.Is this for you? Are you one of those who will end up building your own business?

Not everybody is. And not every startup survives. When it works, though, when you

create a business that lasts, well, it can be a great adventure.

Articles in Start Your Business:

4 Questions to ask Before Starting a Business

Can you Really Start a Business in 3 Weeks?

Dont Underestimate Beachhead Strategy

Three Steps to the Startup Sweet Spot

True Story: Business Plan Addict

Second Mover Advantage

The Best Startup Funding is Initial Sales
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1.2

Starting a Business4 Questions to ask Before

Suppose youve been wanting to start a business; or maybe youvelost a job and youre thinking that starting a new business might beeasier than finding a new job (its not that unrealistic, by the way;it does happen sometimes). Is now a good time? Or is now such ahorrible time that you should avoid it at all cost? Id like to suggestsome questions that might help you decide.

Ive done these lists before, but these are tough times, so I want tostart with the hard real-

ity of it:1. Do you have achoice?

This very down year isalready showing signsof a surge in the so-called pushed entre-

preneur. Youre out of ajob like millions of oth-ers, you look for a newjob, but you dont findone. In frustration, youstart your own business.It happens a lot.

And, if thats the case,plan carefully, go slowly,and communicate well with your loved ones.

flickr user mRk.Cool


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1.3

Dont risk relationships for business. Spouses, partners,and significant others need to know that what happensnext isnt you chasing dreams. Its hard reality.

2. Will people buy what I want to sell?

It might seem obvious, but just because you want to doit doesnt mean anybody else wants to pay you for it.

Business isnt really about doing what you love un-less, that is, people will pay you to do it, so you can meetcosts and make a living. People pursue hobbies, some-times, thinking that because they love it other peoplewill pay for it.

Being original helps, but its no guarantee. Sometimes,when you see theres no competition, whats really hap-

pening is there is no business, because there arentenough customers.

Being completely unoriginal doesnt necessarily hurt.Very few businesses actually start with a great new idea. Take restaurants, graphic artists, car repair shops, ormanagement consulting, just to name a few: there arelots of them around, they already exist, but you can still

make it if you do a good job, give your customers value,and keep showing up.

This question leads to a lot of very important busi-ness planning issues, like target marketing, and businessstrategy, and the month-by-month sales forecast. Butfirst, take a step back, and give yourself an honest an-swer. Will people buy it? Then fill in the details.

3. How much will it cost?

You cant get around this one, you have to be able tomake reasonable estimates on what its going to cost

Starting a Business

Business isntreally about

doing what you

love unless,

that is, people

will pay you to

do it, so you can

meet costs and

make a living.


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1.4

you to get started, and then, after youre started, whatits going to cost you to stay in business.

The math isnt hard by itself. Your starting costs are es-sentially two simple lists: a list of expenses and a list ofrequired assets. Expenses are checks you write beforestarting for tax-deductible items like fixing the place up,

establishing the legal entity, designing a website, and soon. Assets are checks you write for things you have toown to do business: chairs, tables, cars, and trucks. Andyes, there is a trick question hidden there among the as-sets how much money do you have to have stashedaway to cover your spending during the early lean periodof the business, before sales catches up.

So that last question, the one about the cash youll need,means more simple math andreasonable estimates. Here again,you might not like it (to be hon-est, I do; but thats just me), butthe math is simple. Make a listof 12 months and write out yourcash coming in, month by month,

and the cash flowing out, monthby month. And then add up howmuch cash you need to cover thedifference.

As you do this, working out your numbers, youre go-ing to discover that the only answer that works for youis your own answer. If youre lucky, youll have a lot of

good input from people around you who have had someexperience. Guides are nice. But no business is exactlylike yours, and you dont have to search the world to findthe right numbers. Youll never find them. You have to

Starting a Business

No businessis exactly like

yours, and you

dont have

to search the

world to find the

right numbers.

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1.5

estimate for yourself. Your estimate will depend on whoyou are, what you want your business to be, your strat-egy, your specific angle, and so on.

Take, for example, the restaurant business. You can bethe high-end restaurant that offers gourmet meals to aselect few, or the soup cart on the corner by the univer-

sity. It all depends on you and the choices you make.4. Do you have a plan?

What happens next depends on your answers to thesales and spending question above. Its about filter-ing the opportunities from the ideas. Ideas are a dimea dozen, worth nothing, common. Opportunities arewhen you have an idea that will work, plus the resources

to get it going.

If the numbers dont seem to work, thats discourag-ing. Can you scale down the idea to match your re-sources, and still have a go at it? Dont kid yourself onone important point: some businesses scale easily to a

Starting a Business

Finding inves-

tors is a tough

path to take,

but lots of good

businesses go

through it.

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1.6

reachable level. You focus on a part of it, and watch thespending, and, maybe, take it slowly. Other businessesdont work in parts or pieces.

If the numbers would work, but only on a scale largerthan your resources, dont just start the business regard-less. Find out how and where to look for investors. Do

it right, or not at all. Finding investors is a tough pathto take, but lots of good businesses go through it. Andthe good news is that if you need investors and noneare willing, then youve dodged a bullet. That wasnt abusiness you would have wanted to start.

And if the numbers do seem to work, and you think youdo have an opportunity, then youre well on the way to

having your business plan.Flesh out your understanding of the market, particu-larly who is and who isnt in your market, and why theybuy from you what they get out of it, not just whatthey buy, but the benefits. Just to give you an example,people who buy drills dont want drills; they want holes.Think about how your new business will spread, what

people will say about it, and to whom thats market-ing. You can also think of marketing as getting peopleto know, like, and trust you.

Dont worry about whether the plan exists as a docu-ment printed out somewhere. Youll want that if youneed outside investment or a bank loan. Keep it on yourcomputer. But do make sure you have a plan and, as

soon as you actually get started, make sure you reviewthat plan every month. Your plan will be wrong theyall are but it will become the first draft of the revisedplan that will be better.

Starting a Business

Make sure you

have a plan,

and, as soon as

you actually get

started, make

sure you review

that plan

every month.


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1.7

A Business in 3 Weeks?Can you Really Start

Yes, you can. Maybe not all businesses. Maybe not any business.Some businesses, though, can start in three weeks. My first busi-ness started the day a former client called and asked me to do amarket study in Venezuela. That changed things from one day tothe next.

Thats a true story. If youre curious, I posted it on my blog asThe First Day of a New Business. Its just one example. Thereare millions.

There are 21 million companies in the United States without em-ployees. I wonder how many of them started up in three weeksor less.

A 2006 study sponsored byWells Fargo and conductedby Gallup found that theaverage startup cost was

about $10,000. I wonderhow many of those startedin three weeks or less.

It would be easier to countthe businesses that cantstart in three weeks, be-cause there are a lot fewer

of them.
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1.8

You cant do it in three weeks if you have to raisesignificant money to start with. I have indicationsthat angel investors financed about 60,000 new busi-nesses in the United States last year, and venturecapital investors are doing about 2,500 deals peryear. Thats a very fine stratum at the top of the newbusiness picture, a small percentage of the 800,000

or so new businesses started in an average year.

You cant do it if you have to wait longer than threeweeks for a bank loan. Some bank loans can take lessthan three weeks. Thats more likely if youre bor-rowing off an established and solid asset, like yourhouse equity (if it is solid and established, and not avictim of the sub-prime mess).

You cant do it in three weeks if you have to estab-lish a location, build a team from scratch, manageprototypes, prove your viability.

Even in those cases, however, you can play with the defi-nitions. You can call it starting in three weeks if you getthe team together, the basic idea settled, the first legal

steps taken, and you start the search for the location andstart the search for funding.

Why do I care? My most recent book, written with Sa-brina Parsons, is called 3 Weeks to Startup.

It was the second book draft I sent to Entrepreneur in atwo month period, and the last for a long time. Of courseI/we didnt write them that fast, they were both a long

time coming. Thats what happens, I guess, when youname a new CEO for a company and task its long-timepresident with blogging, writing, teaching, and speaking.

A Business in 3 Weeks?

It would beeasier to count

the businesses

that cant start

in three weeks,

because there

are a lot fewer

of them.
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1.9

Ilike beachhead strategies. The term comes from military strat-

egy, meaning that as you invade enemy territory, you need to fo-cus your strength and concentrate on winning a small border area(the beachhead) that becomes the stronghold from which youlladvance into the rest of the territory.

Thats what the allies did, successfully, in the D-Day invasion ofNormandy in 1944. That military success was planned and led by

Dwight D. Eisenhower, author of my favorite business planningquote (The plan is useless, but planning is essential.) Its what yousee in the opening scenesofSaving Private Ryan. Itsalso something I learnedmostly by playing warstrategy games (althoughnot specifically the one

shown here; thats just agood illustration).

And its good business.In business, particularlystartups, the beachheadstrategy is about focus-ing your resources on

one key area, usually asmaller market segment

Beachhead StrategyDont Underestimate

screenshot from Stronghold Crusader Extreme,by Firefly Studios
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1.10

or product category, and winning that market first, evendominating that market, before moving into larger mar-kets.

Beachhead strategies are often critical for bootstrapping

new businesses. And franchisor businesses should thinkof the beachhead strategy as making sure the initial lo-cations are strong and successful and good models forfuture locations.

Sadly, people dont always communicate beachheadstrategies well. As an angel investor, and judge of busi-ness plan contests, I often see what should be beach-

head strategies looking instead like they are focusingtoo narrowly and missing the larger markets that thebeachhead will lead to.

Its ironic. In business pitches, for startups, the beach-head strategies tend to generate criticism from judges,experts, and other assorted experts for being too nar-row, too focused. They want the big picture. But, on the

other hand, the big picture, do-everything strategies willoften be criticized for being unrealistically ambitious,and unrealistic.

The answer to this seeming paradox is: If you are doinga beachhead strategy, make sure that you include thefollow-up idea of broadening your approach later on,after establishing yourself in that first core market.

Beachhead Strategy

The beachheadstrategy is about

focusing your

resources on

one key area ...

and winning that

market first
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1.11

The Startup Sweet SpotThree Steps to

Every startup has its own natural level of startup costs. Its builtinto the circumstances, like strategy, location, and resources. Callit the natural startup level; or maybe the sweet spot.

1. The Plan

For example, Mabels Thai restau-rant in San Francisco is going toneed about $950,000, while Ralphsnew catering business needs only

about $50,000. The level is de-termined by factors like strategy,scope, founders objectives, loca-tion, and so forth. Lets call it itsnatural level. That natural startuplevel is built into the nature of thebusiness, something like DNA.

Startup cost estimates have threeparts: a list of expenses, a list ofassets needed, and an initial cashnumber calculated to cover thecompany through the early months when most startups are still tooyoung to generate sufficient rev-

enue to cover their monthly costs.Its not just a matter of industry type or best practices; strategy,resources, and location make huge differences. The fact that its


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1.12

a Vietnamese restaurant or a graphic arts business or aretail shoe store doesnt determine the natural startuplevel, by itself. A lot depends on where, by whom, withwhat strategy, and what resources.

While we dont know it for sure ever because evenafter we count the actual costs, we can always second-

guess our actual spending I do believe we can under-stand something like natural levels, somehow related tothe nature of the specific startup.

Marketing strategy, just as an example, might make ahuge difference. The company planning to buy Web traf-fic will naturally spend much more in its early months

than the company planning

to depend on viral word ofmouth. Its in the plan.

So too with location, productdevelopment strategy, man-agement team and compensa-tion, lots of different factors.Theyre all in the plan. They

result in our natural startuplevel.

2. Funding or Not Funding

Theres an obvious relationship between the amount ofmoney needed and whether or not theres funding, andwhere and how you seek that funding. Its not random,its related to the plan itself. Here again is the idea of a

natural level, of a fit between the nature of the businessstartup, and its funding strategy.

It seems that you start with your own resources, and

The Startup Sweet Spot


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1.13

if thats enough, you stop there too. You look at whatyou can borrow. And you deal with realities of friendsand family (limited for most people), angel investment(for more money, but also limited by realities of inves-tor needs, payoffs, etc.), and venture capital (availablefor only a few very high-end plans, with good teams,defensible markets, scalability, etc.).

3. Launch or Revise

Somewhere in this process is a sense of scale and re-ality. If the natural startup cost is $2 million but youdont have a proven team and a strong plan, then you

dont just raise less money, and you dont just make dowith less. No and this is important at that point,you have to revise your plan. You dont just go blindlyon spending money (and probably dumping it downthe drain) if the money raised, or the money raisable,doesnt match the amount the plan requires.

Revise the plan. Lower your sights. Narrow your mar-

ket. Slow your projected growth rate.

Bring in a stronger team. New partners? More experiencedpeople? Maybe a different ownership structure will help.



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1.14

Whats really important is you have to jump out of aflawed assumption set and revise the plan. Ive seenthis too often: you do the plan, set the amounts, failthe funding, and then just keep going, but without theneeded funding.

And thats just not likely to work. And, more important,

it is likely to cause you to fail, and lose money whileyoure doing it.

Repetition for emphasis: you revise the plan to give ita different natural need level. You dont just make dowith less. You also do less.

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1.15

Business Plan AddictTrue Story:

Recently I posted my slogging it out theory, how business issometimes a matter of doing the work, getting the store open,returning the phone calls. That post reminded me of someone Iworked with who did just the opposite.

I havent seen Ralph (not his real name) for several years now. Ru-mor has it that he finally did get a company going, sales of a fewmillion a year, and then fought with the programmer whose workgot them started, and fell from grace.

Ralph was a serial non-entrepreneur. We worked together off andon for about six years and during that time he was never not work-ing on a business plan. He was going to get financed. BusinessPlan to him wasnt just planning a business, it was a lottery ticket toa carpeted office and big BMW and somebody else answering thephone and mak-ing the coffee. He

spent years work-ing on one busi-ness plan afteranother, none ofwhich ever got fi-nanced. He was abusiness plan ad-dict, living on the

dream of hittingit big, always look-ing for the big iStock photo
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1.16

win, but never actually taking small steps in the right di-rection. Nothing could happen until he got financed.

Like the gambler that never leaves Las Vegas, Ralph wasalways hoping that the next one would be the big one.

That phenomenon is the main reason for this post. Myslogging it out post reminded me of Ralphs way of not

slogging it out, using the business plan as a reason tonot do anything. My wife always said he didnt do any-thing, he just talked about it, and dreamt about it.

On the other hand, Ralph was 10 years older and hadmore industry experience, so he did some mentoring.For example, at one point we worked up a business planfor assembling generic business computers in Mexico

City (that may sound random, but I had lived there for10 years and was returning to live there again). He wasto be my partner in the Silicon Valley, and I was goingto build the business in Mexico. As part of that plan,he taught me, step by step, how to build my own com-puter. Do you remember the S-100 bus and the CP/Moperating system? I built my own.

His best advice for me was extremely valuable: Sellboxes, not hours. Ralph liked pithy entrepreneur-folkwisdom like that.

Unfortunately, he also taught me a lot of what not to do.From what I heard later, Ralph finally did get somethinggoing after I had moved to Oregon, and his businesshad several million dollars of annual sales back when

that was a lot of money. We drifted apart so I dontknow for sure, but mutual friends tell me that the pro-pensity for luxury offices and big-company perks hurt alot, as his business turned into one of those Nova-star

Business Plan Addict

My wife alwayssaid he didnt

do anything, he

just talked about

it, and dreamt

about it.


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1.17

affairs that crashed and burned fairly quickly. There wasalso a rumor that the crashing had something to do withquestionable legal moves that were unfair to a partnerwho had done the programming to get them started.

This true story is in this blog mainly for several actualbusiness points:

If youre in the startup mode and working on businessplanning, dont suspend business life until the plan isdone (because it never is) or until youre financed. If itsa good idea, get going. Keep working the plan. If you

need to get financed,keep at it, but take smallsteps in the meantime.

If youre working on astartup, take my advice(not Ralphs) and thinkabout cinder block of-fices and such in themore economical loca-tions. If your business

isnt about receivingclients or customers,wait for the luxuries un-til after you have more

revenue than costs and expenses.

Sorry, this one is so obvious, but as your business risesin the world, make sure you bring along the people who

got you there.

Business Plan Addict

As yourbusiness rises

in the world,

make sure you

bring along the

people who

got you there.

flickr user Joe Gatling
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1.18


Seth Godin recently posted The Netflix of..., on the value ofbeing an original instead of an imitator. We have the general as-sumption of first mover advantage and first to market, and no-body wants to be a copy. However, sometimes its better to be thesecond or third to market instead of the first.

Does that sound crazy? Back in my consulting days I had a clientfrom Quarterdeck Office Systems who was very disappointed theweek after VisiCorp had introduced VisiOn at COMDEX. Quar-

terdeck wanted to befirst with a graphicaluser interface work-ing over the oper-ating systems ofthe day (rememberDOS?) but VisiCorpbeat them to it.

VisiCorp died lessthan two years later.Quarterdeck OfficeSystems went publicnine years later, val-ued at $182 million(not so much these

days, but in 1991 thatwas a lot of money). And my point, with
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1.19

that entrepreneur back then, is that sometimes secondor third is better, because investors understand whatyoure talking about.

I followed up afterwards with a Palo Alto venture capi-talist David Gold, over lunch. Often its better to fol-low somebody into the market, he said, because its

so much easier to explain what youre doing. Were justlike so-and-so except that we do it this way, or that way,obviously some better way. That of course is a muchbetter story than just plain were just like Netflix. Sethmakes the point that Netflix model tracks back easily tothe nature of the DVD business, where being the Net-flix of purses or watches doesnt generate immediatelyobvious images.

However, there is some-thing to coming into theinflection point of themarkets, when peopleunderstand what it is. Amazon.com was notthe first website selling

books, Google wasntthe first searcher (noteven Yahoo). NeitherToyota nor Honda had

the first hybrid auto. Youve never heard of the firstsupermarket, but Safeway and Krogers followed alonga little later. McDonalds came along after Automat,

White Castle, and many others.In the world of high tech and venture capital, MicrosoftExcel wasnt the first spreadsheet integrated with graph-ics, nor was Lotus 1-2-3. Does anybody else remember



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1.20

Context MBA (theres a blast from the past do youthink the MBA in its name hurt it?). The Macintoshwasnt the first graphical interface operating system ei-ther (does anybody remember Xerox Parc and the Xe-

rox Star?). The first personal computers were Altair andMIPS, not Apple, Radio Shack, or Commodore.

Just like so-and-so, but better is a nice pitch. SearchGoogle for just like, but better and youll come upwith 415,000 pages.

So yes, being an original is much more satisfying, andif you can seize that advantage and keep it, its great

business. But being second or third works well too. Itssometimes easier to explain.



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1.21

Is Initial Sales

The Best Startup Funding

We all forget too easily: the best startup funding is sales. Sure,angel investment, friends and family, SBA loans, all of those op-tions are necessary for most startups. But sales is better.

If you can, find the earlycustomers. Give them adeal, make them impor-tant, work with them tooptimize their needs;

but make a sale.Even if you need to goout and find investment and I speak now asan actual angel inves-tor theres almostnothing as convincing

as actual sales. Peopleare spending money.It makes a new busi-ness proposal far morecredible.

True, not all businessescan do that. But a lot of them can. And, as we write about busi-

ness plans and seeking investment and all, we forget the real sweetspot: finance growth by making the sales.

flickr user 177


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2.1

Run Your Business

Are you a good manager? How do you run a business well?

Is it about leadership, maybe, or teaching by example? Is it a matter of buildinga great team and letting the team go? Do you hire people to fit the job, or hire the

people first and rebuild the jobs--and the company--around them?

You have to find your own right answers to these questions. While the world is full

of experts offering methods and slogans and a lot of generalizations, in the real

world its still a matter of working things case by case, taking into account your

business situation, and your strengths and weaknesses. And doing your best.I can make one generalization in this area: good management is about good plan-

ning processes. Its not just the plan, but the plan as it changes steadily over time.

Steering is a matter of constant small corrections. So is running a business.

Articles in Run Your Business:

Business Focus vs. Peripheral Vision vs. Growth

No, 37signals, Planning is NOT What You Think

Plan-as-you-go Business Planning

Are you a Good Manager? How can you Tell?

Proper Care and Feeding of People who cry Wolf

Tell Business Truth Even When its Painful

Three Simple but Powerful Rules for Negotiation


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2.2

Peripheral Vision vs. GrowthBusiness Focus vs.

Its all paradoxical.

Bill Cosby once said:

I dont know the secret to success, but I do know that the secret to failure is

trying to please everybody.

While driving to the office a few minutes ago, I saw an unusual Fed-ex truck, like a stunted-growth moving van, with the signage: FedEx

White Glove Service. I dont know what that is and I dont care par-ticularly but it made me think how Fedex has expanded past its initialvision of it absolutely positively has to be there overnight.

Do you think its true that businesses have to stay focused when theyresmall but develop peripheral vision as the grow?

What I know about FedEx is what I see on television mostly, but itseems like an example of peripheral vision. From that first absolutely

pos i t i v e l yfocus onovernight totwo-day, thent h r e e - d a y ,then bulk,then Kinkos,

internationalsomewhere inthe mix, now white glove

from Expediters Online


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2.3

service (whatever that is, its about moving, I can tellby the truck).

So that seems like the opposite of focus: peripheral vi-sion, perhaps? Moving from where you are into nearbymarkets. Seems like a good thing when it works, but dowe hear about it when it doesnt? When businesses lose

focus? When Starbucks tries to offer cheap coffee, orMcDonalds offers fancy lattes?

Theres a lot to be said for understanding who isnt yourcustomer. And, on the other hand, not arguing withsuccess.

The displacement principle: everything you do rules outsomething else that you dont do. It seems to belong

inside this paradox.

Peripheral Vision vs. Growth


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2.4

NOT What you ThinkNo, 37signals, Planning is

Rich irony: 37signals, publisher of Basecamp, the leading webapp for project management, ought to know better than anybodythat real business planning is a process, not a plan. After all, theydo the kind of nuts and bolts management that makes that hap-pen. Instead, however, Matt of 37signals posted the planning fal-lacy last week:

If you believe 100% in some big upfront advance plan, youre just lying

to yourself.

I object. Who ever said planning was believing 100% in somebig upfront plan?Good business plan-ning is always a pro-cess involving met-rics, following up,setting steps, review-

ing results, and coursecorrection.

He goes on:

But its not just huge

organizations and the government that mess up planning. Everyone

does. Its the planning fallacy. We think we can plan, but we cant.

Studies show it doesnt matter whether you ask people for their realistic

best guess or a hoped-for best case scenario. Either way, they give you thebest case scenario.

OK thats a dream, not a plan. Matt seems to confuse the two, but good

flickr user DHDesign


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2.5

business planners dont. Any decent business planningprocess considers the worst case, risks, and contingen-cies; and then tracks results and follows up to makecourse corrections.

Which leads to this, another quote:

Its true on a big scale and its true on a small scale too.

We just arent good at being realistic. We envision everything going exactly as planned. We never factor in unexpected

illnesses, hard drive failures, or other Murphys Law-type

stuff.

No, but you do allow extra time for the unexpected,and then you follow up, carefully (maybe even using37signals software) to check for plan versus actual re-

sults, changes in schedule, new assumptions, and theconstant course correction. Murphy was a planner. Heunderstood planning process and plan review.

Matt concludes:

That messy planning stage that delays things and prevents

you from getting real is, in large part, a waste of time. So

skip it. If you really want to know how much time/re-sources a project will take, start doing it.

Really bad advice there, based on a bad premise. Sure, ifyou define planning as messy and preventing you fromgetting real, then it would be a waste of time. But is thatplanning?

I wonder if Matt takes his own advice. When he travels,

does he book flights and hotels? Or does he skip that,and just start walking?

Not What You Think

Sure, if you

define planningas messy and

preventing you

from getting real,

then it would be

a waste of time.


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2.6

Business PlanningPlan-as-you-go

As we finish up 2007 and roll into 2008 I am certain it is time toadapt a new kind of business planning, which I want to call plan-as-you-go business planning. This is intended to bring the ideaof the business plan up to date with the kind of flexibility andpower we have in the tools we use in business everywhere, whilefocusing on the real power of planning, meaning managementand tracking and accountability, and easing up on the form tomake sure that form follows function. For convenience, lets call itPAYG. The plan-as-you-go business plan is PAYG planning.

And Im very happyto share, with this col-umn, that Ive startedon a book called ThePlan-As-You-Go Business

Plan,due out later thisyear, to be published

by Entrepreneur Press.Thats an early cover de-sign shown here.

Whats Different?

How is the PAYG plandifferent from the stan-

dard business plan?Good question. Letsget into some specifics:


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2.7

1. Its a process, not just a plan.

Every PAYG plan has a review schedule built in, fromthe beginning. It sets the dates and participants in thefuture review meetings, taking 60-90 minutes once amonth and two to three hours once per quarter. AndPAYG planning is about process: not just the plan, but

the regular review and management of the plan.2. Form follows function.

The PAYG plan is not necessarily the same kind of for-mal business plan document you did in business schoolor read about all over. It doesnt necessarily follow arecipe. Every PAYG plan is unique. It might generate aformal document at some point, or over and over again

actually at different points in company history, but untilyou need the formal plan document to show somebody,it lives on your computer. You pull from the plan tomake a pitch presentation or elevator speech or sum-mary memo or full detailed business plan document, asrequired for the business purpose. Its the source of allof these, the key thinking including strategy and met-

rics and dates and deadlines, without having a specifi-cally defined form.

3. It assumes andmanages change.

The PAYG plan isabout navigation,not just a static

map. It assumesthat assumptionswill change. Thats why it builds the

PAYG Business Planning

photobucket user rnavarette

The PAYGplan is about

navigation,

not just a

static map.


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2.8

review schedule into it, and in keeping with that idea,assumptions must always be visible, on top, where theycan be reviewed. Unlike the misunderstood formal busi-ness plan, the PAYG plan is a way to keep your view ofthe long-term goals and directions while also managingthe short-term surprises.

Now I recognize that you could read this list and say,but thats the same as good planning has been for years,its not so new and different. And Id say, thats right,youre getting it. Whats most important about PAYGplanning is that people in the real world, startups andgrowing companiesalike, can actually useit. It gets people out

of the silly talk abouthow a business planisnt useful becausethey misunderstandhow a business plan issupposed to be used.

4. Accountability.

Plan-as-you-go planning develops accountability in theprocess, as a matter of metrics, and tracking. It is impor-tant that accountability be a matter of collaboration, andnot the crystal ball and chain.

Whats Essential

1. Start with the review schedule.

If you dont have a plan review schedule, you donthave PAYG planning. You might have a plan, but itsnot PAYG planning. Set the dates from the very be-ginning. As you develop the plan, you keep the people


photobucket user s566


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2.9

involved aware of the touch points, when and how andwho youre going to track.

2. Develop useful metrics.

PAYG planning is about actually managing, not justplanning into thin air. The main metrics are money, andthe most important is cash flow, but look for metrics

that involve the team. Calls, presentations, visitors, in-quiries, average time of calls, downloads, whatever. Ide-ally, everybody on the team deserves metrics.

3. Identify the assumptions.

Effective PAYG planning keeps the assumptions ontop, where you can revisit them with every review meet-

ing. We assume things change and the planning is aboutnavigation, not just a static map. This is how you keepyour plan alive and active.

4. Every plan has a heart and flesh and bones.

The heart is strategy, market need, differentiation, andfocus. This is as true with PAYG planning as with tradi-tional plans. The flesh and bones are just as important,

and in PAYG planning thats metrics, milestones, tasks,dates, deadlines, and responsibility assignments, and,most important, cash flow planning.

Important Principles of PAYG Planning

1. Start anywhere. Get going.

The plan is a matter of interlocking blocks, so some

people start with a numbers task, like a sales forecast,and others start conceptually, with a vision or a strategyor focus. Just get started. Dont wait until your plan is fin-ished, get going. Start today and start using it tomorrow.


Just get

started. Dont

wait until your

plan is finished,

get going. Start

today and

start using it

tomorrow.


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2.10

2. All business plans are wrong but still vital.

Its a matter of humanity, you are predicting the future,youll be wrong, but you set down tracks so you can fol-low up and revise without losing sight of the long-termgoals and directions.

3. Good business plans are never done.

My companys business plan started in the late 1980sand its still a work in progress. If your plan is finished,your company is finished. Instead, you revise as needed,as in steering, navigation, and walking. The core of theplan is the collection of heart and flesh and bones, itscontent, thinking, and specifics; from that you spin outa document or presentation or elevator speech as need-

ed, and when needed.

4. Form follows function.

Do only as much as you need to run your company, tomanage, to build strategy and follow-up and long-termgoals and directions. If you dont need to create a for-mal plan, dont; keep it on your computer.

5. Keep it alive, always, and spin the output as needed.

Dont ever let your plan go static. Keep it on top ofthings, active, and alive, not forgotten in a drawer.

6. Planning is worth the implementation it causes.

You measure a plan by results. Its as good as the deci-sions it guides.


You measure aplan by results.

Its as good as

the decisions

it guides.


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2.11

How can you Tell?

Are you a Good Manager?

What makes a good manager? Is it something youre bornwith, or something you learn? Is there management instinct? Idont know for sure. Ive been in business for more than 30 yearsnow, and I still dont know.

A few years ago I was trappedon a plane with nothing toread but The One-Minute Man-ager, by Kenneth Blanchard

and Spencer Johnson. It waswritten in 1982, and still sellsvery well today, according to Amazon.com ranking, even26 years later. Its in the top2,000 books.

It was a short plane trip,

and an easy book to read. Itseemed about like this:

Make expectations specific.

Tell people whats expected.

Follow up. Track results. Tell

people afterwards how they

did.


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2.12

Several things struck me about that:

1. Completely obvious, but...

2. still very valuable.

3. Some things that seem completely obvious, oncesaid (or written) still needed to be said (or written).

4. Authors deserve special credit for keeping a simplebook short. This one was easy to read in a one-hourflight.

Ive never been much of a manager myself. Thats nobig deal, of course; lots of people arent managers. Inmy case, though, people expected me to be, becauseIve had a lifetime of successful entrepreneurship. But

entrepreneurship and management are different things.

I dont think Im alone. Ive just been browsing the Am-azon.com site. Small and simple books like that one selllots of copies to lots of people. Who Moved My Cheese?,another that fits that description, sells phenomenallywell. Its in the top 300 at Amazon.com

What makes a good manager? Is it confidence, relativecertainty, good communications skills, comfort withauthority? I just read How to Be a Great Bosson a blogironically named Dumb Little Man. And its a goodlist, too, but not surprising. Standard stuff: listen, com-municate, say Thank You. And this one: bring foodand arrange treats. What is this, kids soccer?

Entrepreneurshipand management

are different

things.

Are You a Good Manager?


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2.13

Thinking about it, I want to ask the experts some ques-tions back: what makes a good manager?

1. Is it getting things done?

2. Getting other people to get things done?

3. Is it doing the companys bidding?

4. Being well liked?

5. Advancing your own career?

6. Inspiring people, or leading them?

7. Coordinating a team?

8. Is a good manager able to do the work instead?

9. Do you have to know how to code to manage pro-grammers?

And some really fundamental questions: is a good man-ager liked, hated, respected, feared, or all or none ofthese? Is it possible to lead people to higher productiv-ity and the greater good of the business while beingdisliked? Is it possible to do that while being universally

liked? Does a good manager have friends, allies, ene-mies, bosses, underlings, followers, or minions?

Is it about carrots or sticks, or both?

Are You a Good Manager?


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2.14

People who cry WolfProper Care and Feeding of

Remember the kids story, the boy who cried wolf? He did ittwo times, no wolf, so the townspeople ignored him the thirdtime, gulp?

Take a look at myprevious post, Are You a Good Man-ager? How Can YouTell? I think I know

one element ofgood management:taking care of thepeople who cry wolf.In fairy tales, crying wolf is a bad thing.In management,dealing with employ-

ees in a company, itsa good thing.

Crying wolf meanssounding false alarms.Saying somethingisnt working. Themessaging is wrong,

production is faulty,customers are gettingthe wrong idea, the

(image credit: wikipedia. An illustration from a 1919anthology, by Milo Winter)


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2.15

parking lot is icy, or whatever. And Ive learned, in some30 years managing people, that you should treasure theemployees who care enough to sound the alarms. Andin business, not fairy tales, a false alarm isnt such a badthing because it wakes you up, makes you think, keepsyou alert. It takes just an extra touch of reaction tocheck, find the alarm false, or not. And checking isnt

a bad thing. And people who sound alarms are stickingtheir necks out, risking the comfort of saying nothing,to suggest somethings wrong.

Consider this: whats the harm of a false alarm in abusiness setting? How many false alarms are worth it ifjust one of them turns out to be real? False alarms arepart of a good process in business.

So, do you want to be a good manager? When some-body in your business cries wolf, note it, make surethat person knows youre glad they did, especially whentheres no wolf. Because you want them to cry wolf,again, the next time. And if you say nothing, theyre go-ing to feel foolish, and not do it again.

And if you want to know youre a bad manager, consid-er this: are there people in your organization not tellingyou when they think something is wrong? Why wouldntthey tell you? What happened the last time they did?

People Who Cry Wolf

People whosound alarms

are sticking their

necks out, risk-

ing the comfort

of saying noth-

ing, to suggest

somethings

wrong.


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2.16

Even When its Painful

Tell Business Truth

No joke: sometimes its really hard to just tell the truth. Ivebeen there many times before.For example, youre a professional, whether thats accountant,attorney, or management consultant, and your client wants thewrong thing. Customers might always be right, but clients arent.And when clients are wrong, you have a tough problem, becauseits no fun to contradict a client, but if you dont respect your pro-fessional expertise then youre essentially worthless. Few people

actually pay for bad advice on purpose.Or, as another example, youre on a job as a functional expert, andyour boss wants to do something related to your area against yourbetter judgment. Do you say so? Yes, you almost have to, becauseotherwise, like theprofessional ex-pert, youre long-

term useless. Theres no doubtthat these can behard moments. And you know ithappens some-times. Maybe more

than wed like toadmit. I had theexperience oftenas a consultant. I Stephen Aaron Rees/Shutterstock


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2.18

Rules for NegotiationThree Simple but Powerful

Seems like negotiation week for me. I published one postabout Seth Godins take on business development, and thenanother on how win-win is the only win in business negotia-tions. That leaves me thinking about negotiations Ive beeninvolved in, things that have worked, and things that haventworked. And I end up wanting to post the three rules here,because it seems like they always work.

Disclosure: Ive never taken a negotiation course; not the

ones they advertise in magazines, and not one in businessschool 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 throughmy eyes. Theres no substitute for understanding the otherside of the negotia-

tion. What are theythinking? And, by farthe 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 win-ners or two losers, Dmitriy Shironosov/Shutterstock


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2.19

never just one winner and one loser. Sure, you might beable to get that kind of a victory (we win, you lose) in anegotiation sometimes, if you make that a goal butthat wont last. Businesses wise up. Relationships thatarent good for both sides dont last.

So look for that in every negotiation. How can they get

what they want, and you get what you want? Maybe bothsides get slightly less, but both win. Thats the goal.

3. Negotiate before the contract, not with the contract

The most common mistake in negotiation is dealingwith the legal contract. First, you have to realize thatonly a tiny minority of legal contracts ever determineanything. 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 dis-putes are dealt with by discussion, revision, and, for thereally hard ones, mediation.

Im not an attorney, so dont take this as legal advice. Inpractical experience, though, what Ive seen that worksis that you get all your terms straight first in simple

memos (yes, definitely, written; just not legalese) andthen do the contract. The contract is the last step.

Rules for Negotiation


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3.1

Grow Your Business

What makes a business grow? Is it planning, maybe? Or focusing on the criticalelements, the most profitable lines of business, and the best customers? Or is it

expanding into new areas?

Its hard to generalize. Sometimes the best and healthiest growth is achieved by sell-

ing more of the same to the same people, more dollars per customer. Sometimes the

best growth comes from lighting out into new areas, new markets, and new business

offerings. It all depends on the specifics of your organization, your strategy, and

your resources.

There are also a lot of clichs, so much we take for granted, and way too many false

myths. You have to do it your way. Every company, every situation, is different.

Articles in Grow Your Business:

Gather Your Team

Kick-start the Planning Process

For Great ROI, Remember Existing Customers

The Free Prize and the Fishbowl

Growing a Business

The Fresh Look


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3.2

Gather Your Team

I received an email this morning from Mike Anderson of Partn-erup.com, a relatively new venture from Minnesota thats intend-ing to match up entrepreneurs with potential employees, boardmembers, advisers, and team members. Its a nice-looking site anda good idea. Id like to see it reach critical mass.

Starting a business isnt necessarily a team sport. Of the 26 millionor so businesses in the United States, something like 20 millionhave no employees. So lots of people are running their one-person

bands and home officebusinesses by themselves.There is potentially a lotof satisfaction in that, nodoubt. I speak from expe-rience. My business was aone-person home-officeconsulting business for

almost a decade before itbecame the software busi-ness that it is now (PaloAlto Software).

Still, the importance ofteams is often misunder-stood.If starting a busi-

ness isnt always a teamsport, growing a business is. Even the one-person business be-comes a team when it grows. I was on the radio recently with JimBlasingame, who (you probably already know) is a very

flickr user popofatticus


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3.3

successful one-person business called the Small BusinessAdvocate. Ive been doing radio with Jim for 10 yearsnow and Ive watched him grow what was originally aone-man business to a team of three or four employees,and more recently contractors doing Web development,and create an alliance with IBM at askjim.biz. This isone good example which comes to mind. Jim is growing

a team.

Teams are so often the answer to the entrepreneursquestions. You dont have to know everything and beeverything and do everything to own your own busi-ness. You have to understand how to gather a team.You dont have to live the numbers if you have some-body on the team who does. You dont have to sell well

if you have somebody on the team who does. You donthave to know the industry inside out if you have some-body on the team who does.

Ive written often about how a business has to developits identity, focusing on what it does well. The entrepre-neur should to that too. If you cant do everything (andwho can?) then you should be building a team.

Understand which are the key elements for your busi-ness. Every business is different, but most businessesneed somebody to run the numbers, somebody to mar-ket, to sell, and to deliver or produce what youre selling.And in the real world of business in the United Statestoday, between the litigious nature of our culture andthe intricacies of taxation, you almost always need to

have an attorney and an accountant you can trust.

Can you be all of these things? Hats off and congratu-lations. If not, think about gathering a team.

Gather Your Team

You dont haveto sell well if you

have somebody

on the team who

does. You dont

have to know the

industry inside

out if you have

somebody on the

team who does.
http://www.bplans.com/http://feedburner.google.com/fb/a/mailverify?uri=timberryhttp://feedburner.google.com/fb/a/mailverify?uri=timberryhttp://www.bplans.com/


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3.4


Last week I met with two smart people looking to kick-starta better planning process for an existing organization. Thequestion at hand was what to do first. My answer was:

First, start by scheduling plan reviews and course corrections.Figure out whos participating, how, and when. Assume thismeans a 90-minute monthly meeting for the key managementteam, and a two tothree hour thrice

yearly meeting forupper managementand board of direc-tors. Modify that asneeded to accommo-date the unique char-acteristics of yourorganization. Put themeetings on the cal-endar.

Second, developmetrics. The plan-ning needs metrics todrive it, so people cantrack how theyre do-

ing and refer back to

iStock photo


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3.5

the plan as the performance guideline.

Notice that my two key points are not about the plan:not about its content, its format, its framework, or facili-tation, or how long it is or isnt.

These are actually the planning equivalent to the gar-dening concept of preparing the soil before you plant.

Dont waste seeds if they arent going to grow. And, re-gardless of what will be the content of the plan, eventu-ally, with these two points you work first to make sure,at least as much as you can, that there will be followingup so the plan will make a difference.

Its a reminder to me how much of the success ofplanning is about the people rather than the plan.

People love to work with metrics to show their perfor-mance. And people care more about following up onplans when they know that somebody will be review-ing the results.



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3.6

Existing CustomersFor Great ROI, Remember

That the title to this post might seem obvious, but we for-get so easily, as we struggle to grow the business, and especially aswe contemplate an economic downturn (free-fall?). The best ROIis selling more per customer to existing customers.

I think I learned this first back 15-20 years ago when I was work-ing a lot with U.S. computer dealers, before the Internet took off, when many of the smaller home-grown resellers were gettingsqueezed by the growth of the office superstores.

It turned out, as we studied the situation, that they were leavinglots of money onthe table, not takingcare of existing cus-tomers. For exam-ple, one of the bestpromotions I ever

saw was a smallerstore getting backto all of its cus-tomers and offer-ing them memoryupgrades and harddisk upgrades as aspecial sale. It was

an instant bottomline boost. flickr user fauxto_digit


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3.7

I was reminded of this last week by a post on Seth Go-dins blog about the magic of low-hanging fruit. Heresa quote:

Simple example: Its way more profitable to encourage each

of your existing customers to spend $3 than it is to get a

stranger to spend $300. Its also more effective to get the

80% of your customer service people that are average to bea little better than it is to get the amazing ones to be better

still.

Yes. And, particularly in a recession, its really goodbusiness.

Existing Customers


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3.8

The first time I took our company to exhibit in a trade showwe brought along a big plastic fish bowl with a sign that said:Free Drawing! Drop your business card in the bowl for afree copy of Business Plan Toolkit.

Three days later we had four fishbowls full of business cards.Business cards, business cards, and not a lead among them.Fortunately we typed in only a few hundred names and sam-pled the marketing results before we spent the resources to

input thousands. The list was useless. None of the peoplesampled wanted our product.

The following year we took the same product to the sametrade show, and brought the same fish bowl too. That secondyear, however, we put a sign by the bowl that said: For moreinformation about Business Plan Toolkit, drop your businesscard here.

After that trade show we endedup with a few hundred good leads.We input the data and followed upand made some sales.

Ive used this story often in teach-ing and seminars and managingmy own company because to me

it illustrates the importance of tar-get marketing and focus. In thisexample, quality of leads is muchmore important than quantity.

The Fishbowl

photobucket userrockchick_360

The Free Prize and


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3.9

Thousands of bad leads are worth nothing, while a fewhundred good leads have real value.

This is about selling business plan software. Not ev-erybody wants business planning, and those who dontarent good prospects. Its hard, or expensive, or both,to sift through a lot of leads to find those who have real

interest.A few years later the fishbowl story helped our market-ing team recognize that we didnt want mysterious ban-ner ads or free prize offers that generated lots of clicksand few prospects. We wanted to attract the few inter-ested people, not huge numbers of people who couldntcare less.

What distinguishes the good leads from the bad leads istheir interest. People walking the aisles at a trade showwill drop their business cards in any fish bowl offeringsomething free. We didnt want a lot of cards. We want-ed cards from people interested in our specific product,business planning software, and not cards from anybody.The marketing follow-up was expensive, whether it was

inputting data from business cards or mailing informa-tion, and the marketing yield was good with well-target-ed prospects and bad with generalized prospects.

Some businesses depend more on targeting than oth-ers. Think about that for your business. Do you sell toeverybody? Or do you sell to a specialized group? Whatkind of fishbowl do you want?

For the record, since I like the idea of true stories, thisactually happened in 1988 and 1989 at the MacWorldexpos in San Francisco, and the product was BusinessPlan Toolkit, ancestor of Business Plan Pro.

Do you sell toeverybody? Or

do you sell to

a specialized

group? What

kind of fishbowl

do you want?

The Fishbowl


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3.10

I realize its a bit out of date, a 1987 book, but Paul HawkensGrowing a Businessis still my favorite business book. Its thefirst one I recommend.

Hawken tells real stories of real businesses wrapped aroundpeople doing what they like because they like doing it, theythink it should be done, and the doing of it flows simply intothe logic of filling needs and offering value. Two guys in Ver-mont get involved with their ice cream. They start selling it. It

ends up being Ben and Jerrys Ice Cream. Its a great story.They arent all beardedex-hippies. The storiesinclude a bank in Palo Alto, Patagonia (out-door clothes), AppleComputer, etc. What

they have in commonis a sense of organic,natural growth fromthe foundations of do-ing what you want todo, when thats some-thing that other peoplewant to have done.

It helped for me that Iwas a customer of thebank in Palo Alto, and

Growing a Business


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3.11

of Ben and Jerrys, Patagonia, and Apple, and my wife

loved buying at Smith and Hawken. I believe in the un-

derlying idea that businesses depend on value value

to the customer and values the people in the busi-

ness have to believe in it.

The business in this book isnt what you learn in busi-

ness school. Its what you want to do. It isnt aboutbuilding a business to make money, but rather building

a business because it should be built and you want to do

it. With that kind of foundation, it seems and Ive

seen for years now, with hundreds of different business

it grows.

P.S. I shared the podium with Paul Hawken in the late

1980s, at Apple, when I was speaking on business plan-ning and he was speaking about the ideas behind this

book. He seemed a man whose persona was based on

ideas, on the underlying values. Im not surprised at the

way his career has gone since.

Growing a Business


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Back in the 1970s when I was a foreign correspondent liv-ing in Mexico City, I dealt frequently with an American dip-lomat who provided information about Mexicos increasingoil exports, which were a big story back then. We had lunchabout once a month. He became a friend.

Then one day he told me he was being transferred to anotherpost because he had been in Mexico too long. What? butyouve only been here for three years, I said. I was disap-

pointed for two reasons. Youve barely learned the goodrestaurants! He explained to me that the U.S. foreign servicemoved people about every three years on purpose. Other-wise we think we know everything and we stop questioningassumptions, he said, thats dangerous.

I remember that day still because Ive seen the same phe-nomenon so many times in the years since, in business. We

business ownersand operators areso obviously likelyto fall into the sametrap. Our businesslandscape is con-stantly changing, nomatter what business

were in, but we keepforgetting the freshlook. We tried thatand it didnt work is

The Fresh Look

flickr user Dante Busquet


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a terrible answer to a suggestion when a few years havegone by. What didnt work in 2000 might be just whatyour business needs right now. But you think you donthave to try again what didnt work five years ago.

This is why I advocate the fresh look at the marketat least once a year. Existing businesses that want to

grow too often skip the part of business planning thatrequires looking well at your market, why people buy, who competes against you, what else you might do,what your customers think about you.

Think of the art-ist squinting to geta better view of

t

Documents

Start, Grow and Run Your Own Busines - Tips and advice - Tim Berry - Bplan.com