Why
Does the Planning Process Have to Interfere with Everything?
Terry
Collison, Blue Rock Capital
When developing a Business Plan, many companies
make a critical mistake by assuming that the primary audience is their
intended funding source. While this assumption
is understandable, it often leads to a misdirected analytical and strategic
approach.
At best, a plan that is primarily oriented to
potential funding sources is useful only for raising money. But if the effort proves ineffective -- or
if it simply takes longer than planned -- then on a current basis, the
company may be caught without its required funding and without a clear way to
operate.
The most effective type of Business Plan is the
document that a company writes to itself. Included in this document would be the standard issues such as
the company's funding requirements, the intended use of funds
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and the results that the company expects. These are important in any Business Plan. Logically, this material is directed to all readers of the plan – insiders and outsiders alike. The critical difference is that a Business Plan
which is internally oriented is, at root, an operating plan. As such, it provides a step-by-step
description of the specific actions that the company will use to fulfill
opportunities it has identified in the marketplace. It also identifies human resources as requirements that must be
met to achieve the desired growth.
Often, it can reveal segments of the business that are extraordinarily
profitable or unexpectedly unprofitable. |
Writing vs. thinking. An often heard
“planning” question is “How long does it take to write a ‘typical’ business
plan?” The real issue, of course, is
not “How fast can one type?” but “How fast can one think through and
effectively express all the related issues?” The process outlined here is the first step in writing an
effective Business Plan. Investing
time to make the initial work as strong as possible will help streamline and
expedite the rest of the work. |
It is a happy paradox that such
internally-oriented Business Plans often prove to be inherently more realistic
in concept, more executable by the company, and more convincing
in terms of raising money.
Based on experience with a number of venture-based
companies, it is possible (1) to outline the elements that should be included
in an effective plan, (2) to describe
the planning process itself, and (3) to
illustrate, with examples, how creating the Business Plan and using it to
raise money can be synergistic with a company's on-going operations and not a
critical drain on those finite resources.
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Blue Rock Capital www.bluerockcapital.com |
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“Problem-solving” is not “planning.” “Planning” is not the same as “problem-solving.” Effective planning cannot be done without addressing the problems that
are critical. Not all problems
deserve attention. Some just go away. |
HOW TO WRITE AN EFFECTIVE BUSINESS PLAN
IN JUST 3 HOURS!
Planning is usually simpler than people try to make it. The three steps in planning are:
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Step 1 |
Description |
stating clearly what is |
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Step 2 |
Analysis |
interpreting the situation for its significance |
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Step 3 |
Prescription |
specifying what ought to be done next in order to achieve a desired end ... the company’s strategy and its action program |
The trick is to go through these three steps in this order,... to work carefully and thoughtfully,... and then actually to use the results in a consistently applied action program.
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DESCRIPTION The first step in planning is just to describe the company. |
The right way to take this important first step is to make a single... simple... grammatically correct... descriptive sentence... which completely describes the opportunity the company has identified,... the basis for the company’s belief that it can successfully “go after” this opportunity,... the approach that the company intends to use (including a listing of the basic operations that are planned),... the resources (both cash and non-financial resources such as specific “skill-sets”) that are required to carry out these operations,... an indication of which resources the company already has and which ones it needs to attract,... a description of what the successful achievement of the company’s objectives would look like, and... some indication (qualitative if not quantitative) of what the backers of such an undertaking might expect as a result of their participation.
The preceding sentence is an example of a long sentence which observes all the rules of grammar and which presents its ideas in a proper sequential relationship to one another. Remember, each piece of information in the sentence you will write is important.
Here is an example:
}Using material drawn from U.S.
government information depositories... and the combined skills of company
founders whose prior experience involves each of the critical functions – database
access, software programming, printing, desk-top publishing, and franchise
development – Fictional Technologies, Inc. is raising a total of $500,000
($225,000 of which has already been committed by the principals and their
associates)... to commercialize a new type of customized publishing
system,... a system which employs
proprietary patent-pending electronic methods... to distribute "public domain" and other "minimum
royalty" documents on specialized topics... for “instant” retail sale to individual customers... using “piggy-back” marketing... through local franchisees of established,
national "quick-copy" printing centers. ~
Your turn. Take a company that interests you. Using the space provided below, compose a sentence that fairly and accurately and completely describes this company.
As a test, keep in mind that this sentence should be meaningful both to the company itself (i.e., to “insiders”) and also meaningful to someone who would first be exposed to the company strictly through your written description of it.
In addition to factual information, can you write a sentence that conveys the company’s opportunity in the marketplace and how it will operate in order to fulfill this opportunity?
Try it.
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Neatness. These simple little sentences often turn out to be not-so-easy to write. Please feel free to make this written exercise as messy as it needs to be. Cross-outs, arrows, marginal insertions, etc. are wonderfully helpful and are encouraged. In terms of legibility and neatness, when you’ve got the words, the sequence, and the concept right, the only requirement is that you be able to read the sentence. It can always be made neater later.
HOW TO WRITE AN EFFECTIVE BUSINESS PLAN
IN JUST 3 HOURS!
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ANALYSIS The second step in planning is to interpret the situation for its significance. |
All companies have areas of relative strength and weakness. And all companies face opportunities and challenges in their chosen market environment.
One way to begin the analytical process is to use the descriptive sentence you have just written. You could use a red pen and simply circle each of the distinct factors that are contained within that sentence. Then make a list containing each of these items. Here’s a start:
Factor 1
Factor 2
Factor 3
Factor 4
Factor 5
Factor 6
Factor 7
Factor 8
Factor 9
Factor 10
Factor 11
Factor 12
Factor 13
Factor 14
Factor 15
Now think about the potential significance and the current relationship of the various factors. What should the company actually be thinking about these factors? What is the company thinking about these factors?
A straightforward approach to analyzing a company's situation is to identify what are termed its S-O-F-T factors. “SOFT” stands for
Strengths
Opportunities
Flaws, and
Threats
A company’s “Strengths” and its “Flaws” (its “weaknesses”) are obviously internal considerations. The “Opportunities” and the “Threats” in a company’s operating environment are clearly external considerations.
Equally obvious is the fact that “Strengths”and “Opportunities”are both positive considerations. “Flaws”and “Threats” are both negative considerations. To express these relationships, it can be helpful to think of these factors in a 2 x 2 matrix:
Here is a simple 2 x 2 matrix that can be used to analyze your company:
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Strengths: potentially positive internal factors • • • • • • • • • • • • |
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Opportunities potentially positive external factors • • • • • • • • • • • • |
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Flaws potentially negative internal factors • • • • • • • • • • • • |
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Threats potentially negative external
factors • • • • • • • • • • • • |
There are many different ways that this information can be used. In general, it is clear that a company should attempt to
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3 capitalize on its “Strengths” |
3 take full advantage of its “Opportunities” ... and |
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3 minimize or overcome its “Flaws |
3 protect itself from competitive and other “Threats” |
Working with its internal team and its outside professional advisors, each company must work out a strategy and an action program that reflects its own situation.
HOW TO WRITE AN EFFECTIVE BUSINESS PLAN
IN JUST 3 HOURS!
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PRESCRIPTION The third step is to specify an action program that is effective, practical, and affordable. |
The tricky part for most companies is that it often seems so difficult to address the entire problem – including all of its disparate elements – and to lay out a program that has some type of overall organizing concept.
Having a unifying structure certainly makes the process of writing the Business Plan easier. But the need for a unifying structure is not simply to make the writing process easier. The need for a unifying concept is also essential if the company hopes to have any chance of managing the process of actually monitoring, managing, and implementing its Business Plan.
Venture profile. Starting simple is the unifying theme of this presentation. So instead of jumping directly from the “analysis” part to an effort to write a full-blown Business Plan, let’s try something that is lot simpler.
A “Venture Profile” is a much briefer way of addressing all the categories in which critical issues appear. A Venture Profile is budgeted for a single typewritten page – or, at most, 2 sides of a single piece of paper. This very limited space is used to describe the company, to identify the issues that are critical for the company, and to specify what the company plans to do to grow its business. In short, the Venture Profile ...
encompasses the three steps of the planning process
(description, analysis, and prescription),
it almost magically generates its own unifying theme (the secret is
that all the issues are right there on a single sheet of paper), and
it provides all the core information around which the formal business plan can eventually be developed.
Here are some of the categories that are useful to consider when writing a Venture Profile:
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n The basic concept n Background of the venture n The company team n Achievements to date n Technology n Targeted Markets |
n Competition n The company’s product line n Commercialization strategy n Milestone Events n Financial requirements n Outside Advisors |
The particular set of issues that is selected for presentation will depend on the situation at each specific company. Similarly, the sequence in which the various issues are presented will also vary from one company to another. The “story” must be appropriate to the company you are presenting. There is no “official” set of issues and there is no “standard” sequence. You are responsible for presenting the information in the way that is most meaningful for your situation.
Earlier, remember that Fictional Technologies, Inc. was used as an example under the “description” section. To see how a company like Fictional Technologies might be presented in a Venture Profile, please see the attached example.
HOW TO WRITE AN EFFECTIVE BUSINESS PLAN
IN JUST 3 HOURS!
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THE BUSINESS PLAN The most effective type of Business Plan is the document that a company writes to itself. |
When developing a Business Plan, many companies make a critical mistake by assuming that the primary audience is their intended funding source. While this assumption is understandable, it often leads to a misdirected analytical and strategic approach.
“If you give me enough money, I know we can solve all our other problems.” At best, a plan that is primarily oriented to potential funding sources is useful only for raising money. But if the effort proves ineffective -- or if it simply takes longer than planned -- then on a current basis, the company may be caught without its required funding and without a clear way to operate.
The most effective type of Business Plan is the document that a company writes to itself. Included in this document would be the standard issues such as the company's funding requirements, the intended use of funds, and the results that the company expects. These are important in any Business Plan. Logically, this material is directed to all readers of the plan -- insiders and outsiders alike.
The critical difference is that a Business Plan which is internally oriented is, at root, an operating plan. As such, it provides a step-by-step description of the specific actions that the company will use to fulfill opportunities it has identified in the marketplace. It also identifies human resources as requirements that must be met to achieve the desired growth. Often, it can reveal segments of the business that are extraordinarily profitable or unexpectedly unprofitable.
It is a happy paradox that such internally-oriented Business Plans often prove to be inherently more realistic in concept, more executable by the company, and more convincing in terms of raising money.
How big should it be? Many companies make the mistake of measuring the worth of their business plan by the pound. After working through the issues involved in writing a good Venture Profile, some companies feel that a clear, concise, well-organized one or two-page document – when supplemented and supported by detailed information on marketing, intellectual property protection, financial data, and other specialized issues – actually works more effectively than a traditional business plan. There is much to be said for such a specialized, focussed approach.
But even if your company elects to develop a full-blown business plan, the final word of caution is that most plans are just too long to be useful. Ten pages of text is probably workable in many cases. Twenty pages of text would be entirely reasonable and 40 pages is probably approaching the outer limits in all but a handful of specialized cases. One very effective discipline is to make a list of all the issues that should be discussed and to agree in advance that no more than one page will be devoted to any single issue. And that everything about that particular issue will appear together on that one page. Pretty radical idea, huh?
Format makes the job easier... for both you and your targeted readers. Word processing software and desk-top publishing make it possible to establish a basic page format for the Business Plan and then to write everything to fit into that format. One format that has worked effectively is to divide the page into a top one-third and a bottom two-thirds. The top third can be used for main titles, headlines, authoritative quotes drawn from the text, charts, graphs, illustrations and the like. The bottom two-thirds is strictly reserved for the text itself.
This page-format allows a company to address the various issues separately. The material can even be drafted in almost any order (and by different authors). When the issues are ultimately “sorted” in order to come up with the final sequence, this format facilitates the creation of an overall “structure” for the presentation (and, thus, for the company’s underlying strategy as well).
Finally, this format can help the reader – especially professional investors, professional advisors, and institutional venture capitalists who must read a lot of business plans. An easily understandable format helps the reader become engaged with the information at whatever level seems best suited to his or her own requirements and interest-level. Initially the reader can “skim through” the whole plan by reading just the headlines. The “whole” picture will be evident because the sequence has been designed intentionally and because the material selected to go in the top one-third of each page has been put there because it is believed by the company to be the most critical information.
After intelligent skimming, the reader who is interested can look at the Business Plan in detail by reading through the complete text. But now the reading is done with an overall context and structure already fixed in the reader’s mind. He or she has a sense of “what’s coming” as well as “why.” As an important long-term dividend, this sort of structure – a single important topic per page – also allows company management to continue adjusting and using its Business Plan as a viable guide to continuing management and operating decisions.
“Milestone” issues. A company's passage through the various financing and operational phases is generally marked by its achievement of certain significant milestones. These milestone events, in turn, define the major "risks" as seen by observers outside the company.
In the context of developing an effective Business Plan, it is important to recognize and understand these major hurdles.
Development risk:
Can we actually develop the product?
Manufacturing risk:
If we develop it successfully, can we produce it?
Marketing risk:
If we can make it, can we sell it?
Financial risk?
If we can sell it effectively, will the resulting company be profitable?
Growth risk:
If we can operate profitability at one level, can we maintain it as the company evolves?
Various "kinds" of Business Plans. Many companies mistakenly believe that
there is one type of Business Plan that is "ideal." As a practical matter, however, a given plan
should reflect the characteristics and the specific situation of the individual
company. There are, for example, a wide
variety of Business Plans from which to choose:
The Technology Roll-out Business Plan
The Market Positioning Business Plan
The Sales Oriented Business Plan
The Manufacturing Based Business Plan
The Acquisition Oriented Business Plan
The "Issue" and "Problem-Solving" Business Plan
The Financial Business Plan
Because the situation surrounding the company changes over time ... and because the fundamental nature of the company itself also changes over time ... the company must be prepared to develop successive Business Plans.
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Venture Profile FICTIONAL TECHNOLOGIES, INC. Troy, NY Phone 518 276-6658 |
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Venture Concept |
Fictional Technologies, Inc. (FTI) seeks to commercialize a new type of customized publishing system which uses electronic methods to instantly distribute "public domain" and other "minimum royalty" documents on specialized topics. The material would be drawn from U.S. government information depositories and would be made available for retail sale to individual customers through local franchisees of established, national "quick-copy" printing centers. |
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Background |
There is a vast inventory of existing information on specialized subjects that has been collected over the years through U.S. government-sponsored research and other funded projects. Subjects include technical information that is relevant for commercial and industrial users as well as consumer-oriented and how-to-do-it information. To date, government efforts to make this information available for re-use have been predicated on large printing runs, "public-service" media advertising at off-hours, and physical distribution from centralized warehouses by mail. There have also been limited over-the-counter retail sales at Government Printing Offices in a handful of cities. In 1990, Michael Brignola recognized that much of this information also exists in electronic format. Using high-speed optical transmission and advanced laser printers, Brignola believed he could create a private-sector distribution system that would increase the utilization of this existing body of information at no net cost to taxpayers. Brignola visualized a customized "book" business that would represent net additional revenue potential for the 3,000 franchised "quick-print" shops in the U.S. (5,000 are forecast to be in operation by 1996). |
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Company Team |
FTI was formed in November 1995 as a Sub-Chapter S Delaware corporation by Michael Brignola (9 years as Vice President of Mars Publishing) and William Byrne (founder of Caldonia Ink-Jet Corp.). The technology for the project is being developed under contract by Dr. Jerome Donahue, Professor of Electronic Optics at the University of Colorado. |
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Achievements to date |
FTI has a functional prototype of the high-speed printing and binding device that is required to make the project feasible. In addition, FTI has met with the directors of both the Clearinghouse for Federal Scientific Information and the federal Center for Consumer Information and has obtained written expressions of their interest in the proposed program. FTI has submitted a Phase I SBIR application to the Department of Commerce to demonstrate the feasibility of the proposed system. |
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Technology |
FTI's opportunity depends on acquiring full text and graphics via high-speed optical modem, printing out the document at very high speeds, and binding the "book" automatically. Conceptually, the process is the equivalent of the self-contained film developing and printing machines that have spawned the "automated" photo stores now found in malls. FTI has developed a device which, when coupled to a standard Canon laser printing engine, allows a modified Hewlett-Packard Series 7 unit to print at roughly 100 times the standard rate. The device will be the subject of U.S. and international patent filings. |
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© COPYRIGHT 1995 BY TERRY COLLISON. ALL RIGHTS RESERVED. MAY BE CITED WITH PROPER ATTRIBUTION. |
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Targeted Markets |
Based on internally generated market analysis and published sources, FTI calculates that the 5,000 U.S. quick-copy shops sell $3.7 billion in products and services annually (1994). "Specialty" publications that are most similar to the government source material targeted by FTI currently equal 2.1% of the overall $32.3 billion book market (1995). In 1989 (the most recent year for which federal figures are available), the Clearinghouse and the Consumer Information Center had combined "retail" sales of $157.5 million. At WaldenBooks, the books that are classified broadly in the "technology" category represented roughly 9% of the company's $432 million in sales (1995). |
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Competition |
FTI is positioning itself to create a new type of market or a net addition to existing markets and not a displacement or direct threat to any of the established players. FTI is not aware of any other technology which can provide the same type of enhanced throughput speed for the basic laser printing engine on which FTI is basing its system. From discussions with two national printing chains, FTI believes that no other group is com-peting to implement the general concept of turning quick-copy centers into local retail sources for printed reports on specialized subjects. |
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Product Line |
FTI's product line will include three models of printing "system." At an individual franchisee, the available catalog of "publications" would be accessed through a terminal that would be attached to an automated dial-up and modem unit built into each FTI system. The terminal would be placed on the counter for use by walk-in customers (thereby reducing labor). Ordering would be activated by the customer's inserting his or her credit card into the FTI machine. The three different units will be sized for small (single-terminal), medium (up to three terminals), and heavy volume (multiple terminals including remote-site access). |
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Commercialization
Strategy |
FTI intends to enter into a series of license agreements with national "quick-copy" chains (such as Curtis 1000®, PIP®, etc.). Through these "master" licenses, local franchisees would be able to purchase or lease complete FTI printing units. FTI would have these units manufactured on contract by Canon, HP, and/or other outside vendors (except for the proprietary IC which FTI would manufacture in-house). Through the master franchisor, each franchisee would pay FTI monthly "connect" and "support" fees as well as paying a "wholesale" charge for each book purchased by a customer. The national franchisor would retain a portion of this revenue stream for itself. FTI would pay the federal government a single annual fee for each "repository" from which it has the right to redistribute information. |
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Forecast Results |
Year 1 Year 2 Year 3 Year 4 Year 5 Revenues $ 350,000 $ 875,000 $2,300,000 $12,500,000 $27,000,000 Expenses 975,000 1,250,000 1,400,000 2,400,000 3,100,000 ($625,000) ($ 375,000) $ 900,000 $10,100,000 $23,900,000 |
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Financial
Requirements |
FTI's founders and four outsiders have invested $175,00 to fund technical development and start-up. FTI now seeks two rounds of investment of $750,000 (for Year 1) and $450,000 (for Year 2). Proceeds will be used for product development, staff-up, operations, and market introduction. |
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Outside Advisors |
JEROME PELOQUIN, Business
Consultant, Baltimore, MD Dr. JEROME G. DONAHUE, Technology Consultant (Univ. of Colorado) PEPPER HAMILTON LLC, General Counsel (Wm. A. Scari, Jr., Esq.) STEVENS & ALLEN, Patent Counsel (David Allen, Esq.) PRICEWATERHOUSE COOPERS (James G. Kaiser, Partner) |
The 12 key reasons why companies
fail
from
“How to Write an Effective Business
Plan in Just Three Hours”
1 Inadequate planning of the business
2 Inadequate planning of the business
3 Inadequate planning of the business
4 Insufficient initial capital for
start-up period and development stages due to inadequate planning
5 Mistaken estimate of market demand for
product or service
6 Lack of management ability
7 Failure to select and use appropriate
outside professional advisors
8 Inability to market product or
services effectively
9 Over dependence on a single individual
or on a predicted specific event
10 Failure to understand capital requirements
of a growing business
11 Poor timing of expenditures due to
poor
planning
12 Expedient rather than reasoned decision-making
Venture Funding Stages
Initial Funding
Pre-Seed
Stage. A relatively small amount of capital is provided
to an investor or entrepreneur to prove a specific concept. The funded work may involve product
development (as opposed to "pure" research), but it rarely
involves initial marketing.
Seed-Stage.
Financing is provided to companies for use in product development and in
initial marketing. These
companies may be in the process of being organized or may have been in business
a short time. In either case, products
have yet to be sold commercially.
Generally, such businesses have assembled key management, have prepared
their initial Business Plan, and have conducted at least initial market
studies.
Early-Stage.
Financing is provided to companies that have expended their initial
capital and now require funds to initiate commercial-scale manufacturing and
sales.
Expansion Funding
Second
Stage. Working capital is provided for the expansion of a company
which is producing and shipping products and which needs to support growing
accounts receivable and inventories.
Although the company clearly has made progress, it may not yet be
showing a profit at this stage.
Third
Stage. Funds are provided for the major expansion of a company which
has increasing sales volume and which is breaking even or which has achieved
initial profitability. Funds are utilized
for further plant expansion, marketing, and working capital or for development
of an improved product, a new technology, or an expanded
product line.
Bridge
Financing. Financing is provided for a company expected
to "go public" within six months to a year. Often bridge financing is structured so that
it can be repaid from the proceeds of a public offering. Bridge financing also can involve
restructuring of major stockholder positions through secondary transactions.
This is done if there are early investors who want to reduce or liquidate their
positions. This also might be done
following a management change so that the ownership of former management (and
relatives or associates) can be purchased prior to the company's going public.
Source: Based, in part, on definitions from Venture
Economics, Wellesley, MA.
The five key "risks"
Development risk:
Can the
product or service actually be created?
Manufacturing risk:
If the
product can be developed, can it
actually be
produced in appropriate volume?
Marketing risk:
If the
product can be made,
can it be
sold effectively?
Financial risk?
If the
product can be sold effectively, will the resulting
company be
profitable and can the profits actually be
realized in
a form that allows investors to receive cash?
Growth risk:
If the
company can achieve operating profitability
at one level, can profitability be maintained
as the company evolves?
What Changes as a Company Grows
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Phase
I The
Start-Up |
Phase
II The
Growing Venture |
Phase
III The
Mature Company |
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Cash
position Limited financial resources ... need to address basic capital and cash-flow issues |
Cash position
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Cash position
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Organization No specific organizational structure |
Organization
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Organization
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Communications Direct communication ... "one-on-one" style |
Communications
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Communications
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Definition
of the business Few, if any, stated policies |
Definition of the
business
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Definition
of the business
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Strategic focus Emphasis on reaching the market and generating revenue |
Strategic
focus
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Strategic
focus
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Compensation
program Compensation based on need (and availability) |
Compensation
program
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Compensation
program
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“How
things are around here” Organizational culture mirrors the founder's style and values |
“How things are
around here”
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“How things are
around here”
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“Roles
& holes...” Duties and responsibilities are loosely defined -- everybody wears multiple hats
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“Roles &
holes...”
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“Roles &
holes...”
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“Center” Clear sense of organizational purpose
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“Center”
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“Center”
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Operating Characteristics:
what changes as companies grow
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Phase
I The
Start-Up |
Phase
II The
Growing Venture |
Phase
III The
Mature Company |
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Cash
position Limited financial resources ... need to address basic capital and cash-flow issues |
Cash position Increased cash-flow and requirements... some borrowing capability ... need to generate additional capital |
Cash position
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Organization No specific organizational structure |
Organization Organizational structure forms around individual personalities |
Organization
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Communications Direct communication ... "one-on-one" style |
Communications Increased demand for lateral communication (geometric growth in need for information) |
Communications
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Definition
of the business Few, if any, stated policies |
Definition of the
business Policies evolve from practices (and are often conflicting) |
Definition
of the business
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Strategic focus Emphasis on reaching the market and generating revenue |
Strategic
focus Emphasis on growth and raising capital to create and sustain growth |
Strategic
focus
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Compensation
program Compensation based on need (and availability) |
Compensation
program Compensation based on need but often administered accord-ing to personal or subjective factors |
Compensation
program
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“How
things are around here” Organizational culture mirrors the founder's style and values |
“How things are
around here” Organizational culture becomes ill-defined as new people join the company |
“How things are
around here”
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“Roles
& holes...” Duties and responsibilities are loosely defined -- everybody wears multiple hats |
“Roles &
holes...” Duties and responsibilities are defined by the incumbents ac-cording to current priorities as they are perceived |
“Roles &
holes...”
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“Center” Clear sense of organizational purpose |
“Center” Duties and responsibilities are defined by the incumbents ac-cording to current priorities as they are perceived |
“Center”
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Operating Characteristics:
what changes as companies grow
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Phase
I The
Start-Up |
Phase
II The
Growing Venture |
Phase
III The
Mature Company |
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Cash
position Limited financial resources ... need to address basic capital and cash-flow issues |
Cash position Increased cash-flow and requirements... some borrowing capability ... need to generate additional capital |
Cash position Financial stability, slower growth, bankable
Sellable? |
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Organization No specific organizational structure |
Organization Organizational structure forms around individual personalities |
Organization Formal organizational structure defined by functional needs |
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Communications Direct communication ... "one-on-one" style |
Communications Increased demand for lateral communication (geometric growth in need for information) |
Communications Increasingly formal communications -- various methods |
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Definition
of the business Few, if any, stated policies |
Definition of the
business Policies evolve from practices (and are often conflicting) |
Definition
of the business Policies get documented for consistency and fairness |
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Strategic focus Emphasis on reaching the market and generating revenue |
Strategic
focus Emphasis on growth and raising capital to create and sustain growth |
Strategic
focus Emphasis on spending and cost control, less emphasis on R&D and growth strategies |
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Compensation
program Compensation based on need (and availability) |
Compensation
program Compensation based on need but often administered accord-ing to personal or subjective factors |
Compensation
program Structured compensation based on internal and external equity considerations |
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“How
things are around here” Organizational culture mirrors the founder's style and values |
“How things are
around here” Organizational culture becomes ill-defined as new people join the company |
“How things are
around here” Organizational culture gets redefined and is set as foundation for strategic planning |
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“Roles
& holes...” Duties and responsibilities are loosely defined -- everybody wears multiple hats |
“Roles &
holes...” Duties and responsibilities are defined by the incumbents ac-cording to current priorities as they are perceived |
“Roles &
holes...” Duties and responsibilities are officially defined according to current and future organizational needs |
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“Center” Clear sense of organizational purpose |
“Center” Duties and responsibilities are defined by the incumbents ac-cording to current priorities as they are perceived |
“Center” Organizational purpose is formally redefined through strategic planning |
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Milestone-based operations (and funding)
As
your company’s founder, if you think in terms of milestone events, it can help
you organize your activities and your available resources into a logical
sequence of steps or stages. In your
role as a manager, milestone-based thinking helps you understand the priorities
at each stage of your company’s development, operations, and growth. Externally, milestone-based thinking helps
you communicate to potential funders what you are attempting to do, why it is
important, and how each activity relates to the required level of funding and
to the likely payoff.
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Milestone events |
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Milestone 1 Proof-of-concept demonstration |
Brief description of a major event that has already occurred |
Brief description of the impact or significance of achieving this Milestone |
Resources (or other kinds of input or collaboration) associated with achieving this Milestone |
Month 199X
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Milestone 2 Competitive analysis; assessment of proprietary rights |
Brief description of a major event that has already occurred |
Brief description of the impact or significance of achieving this Milestone |
Resources (or other kinds of input or collaboration) associated with achieving this Milestone |
Month 199X |
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Milestone 3 Planning for commercial development and applications |
Brief description of a specific activity that is currently underway |
Brief description of the impact or significance of achieving this Milestone |
Resources (or other kinds of input or collaboration) associated with achieving this Milestone |
Month 199X to Month 199X (OR “ongoing” or “current”) |
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Milestone 4 Key words only |
Brief description of specific activities required for Milestone |
Describe the significance of achieving this Milestone |
Resources associated with achieving this Milestone |
Month 199X |
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Milestone 5 Key words only |
Brief description of specific activities required for Milestone |
Describe the significance of achieving this Milestone |
Resources associated with achieving this Milestone |
00 months following funding |
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Milestone X Key words only |
Brief description of specific activities required for Milestone |
Describe the significance of achieving this Milestone |
Resources associated with achieving this Milestone |
00 months following funding |
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Do
It Yourself. You will see that this side is filled out
illustratively. The other side is blank
and ready for you to break down your own venture into significant phases, each
of which is consummated by the achievement of an important milestone event.
On
the other side, start by going to the third line (the line which is captioned
"Milestone 3").
Describe your current situation, i.e., what you are now working
to achieve, how you are doing it, its likely significance to the overall
success of the venture, the resources you are using, and the beginning date
(which is known) and the ending date (your best educated guess) which are
associated with the ultimate achievement of this particular milestone. Next, go up above this "current"
line of activity and describe the two "most major" prior milestone
events that you have already achieved.
Finally, using the same format, please fill in the lines for Milestones
4, 5, 6, and 7 and their respective activities, significance to the value
and/or ultimate success of the venture, your resource requirements, and the
likely timing. That's it. Simple, huh?
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Milestone events |
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Milestone 1
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Significance
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Req’d resources
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199
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Milestone 2
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Milestone 3 Current focus: |
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199 to 199
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Milestone 4
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months after funding
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Milestone 5
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months after funding
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Milestone 6
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months after funding
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Milestone 7 Cashflow break-even operations |
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months after funding
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