What is it that successful entrepreneurs do? They typically start with an apprenticeship where they acquire experience. This insures they will approach the building of their business with thoughtful preparation and planning. They use good role models. In many cases, those starting a new business have parents who owned businesses. There are also common attitudes and behaviors that can be found among entrepreneurs. They:
- Work hard.
- Persevere.
- Are optimistic.
- Model integrity.
- Are competitive in their desire to excel and win.
- Look for ways and opportunities to improve almost any situation.
- Learn from their failures.
- Believe they can personally make a difference in the outcome of their business.
- Have solid management skills.
- Have sufficient contacts.
They Begin with a Robust Plan
They start the business building process with a sound plan. The amount of time they devote to putting together a business plan will vary depending on which parts of the business need more attention. If they hope to attract venture capital they spend a great deal of time and effort in developing very detailed and comprehensive financial plans.
It is important to remember the audience. Entrepreneurs are generally very proud of their business idea but an idea alone is not a plan. The idea has to be filled out using fundamental business principles. It has to be to the point so it can be explained to those not interested in a great deal of detail. Sensitivity to the fact that the audience may not share the entrepreneur’s high level of interest is required.
Steps to Creating the Plan
A good plan will be to the point and pique interest to the extent that an audience will start asking follow-up questions regarding the details. Consider the following to accomplish this:
- Develop a persuasive plan and presentation.
- Summarize the plan with a credible synopsis.
- Create a Web site that succinctly describes the business model.
Questions to Consider
Prior to formulating the plan, consider carefully these four important questions.
- What service or product does the business provide and what needs does it fill?
- Who are the potential customers for the product or service and why should they buy from this business?
- How will the business reach its potential customers?
- Where will the business get the financial resources to start?
The Financial Plan
The financial parts of the plan will probably generate the most interest and skepticism so there are four considerations that, done properly, will add up to a solid plan. They are:
- Include at last three years of pro forma income statements, balance sheets, and cash flow statements in the plan.
- Follow a J shaped curve in the revenue projections showing a slow start up with a pick up in activity beginning at about 18 months.
- Use the “law of large numbers” to help make the plan accurate. For example, instead of just estimating one sales figure, estimate the sales from each customer or group of customers. Total this larger number if inputs up and chances are the high and low errors will cancel themselves out and the result will be a more accurate sales figure. Do the same thing for expenses.
- Make your estimates and assumptions very conservative. If you have any errors, have them so the sales figures will likely be understated and the expense figures overstated.
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