Fri Jan 18/ 2008 – 6:05 pm MST
Step back. Close your eyes. Can you see the world? How big is the world in your mind? Do you see it as land masses … do you see it as a set of economic forces . . . do you see it as clusters of people? Do you see patterns of exchange that connect all of these aspects? Can you put names to any of the pieces of your jigsaw? Can you tell me how big, strong, old, reliable, stable any of these elements are? Amazing thing, the human brain. Read More »
Thu Jan 17/ 2008 – 11:36 pm MST
Lets start at the beginning, shall we? A business starts with an idea. Simple really. Now, there was a time when the most common form of idea had to do with a production process or facility or material – a kind of ‘build it and they will come’ approach. This was prominent when the range of consumer choice, availability and price point made the delivery of value, a function of production. For many years, that has not been the case. Why? Well, because of innovation and global trade.
(Ahh, come on – its not that simple . . .)
Well perhaps not, but that is my argument. The innovation arose in large part because of cross-pollination of manufacturing techniques across sectors – internal technology transfers. The global trade impact arose because of the confluence of 3 things :
- multi-nationals technology transfers to foreign subsidiaries
- global trade policy
- under-utilised (and cheap) labour
One can no longer readily build sustainable competitive advantage through manufacturing processes – such advantages now require significant ongoing R&D budgets. The outcome of technology transfer and global trade is that buyers have a range of choice, price point and availability that puts them in the driver’s seat. Read More »
Sun Jan 13/ 2008 – 5:48 pm MST
I’m a lazy guy. Now, sometimes people who know me consider this a ludicrous thing for me to say, but is true in a very real sense. What I mean is that I am completely unmotivated to do many things, unless I see some purpose to it. I do not go into a field and start digging a hole to the water table, just to get some exercise. Before I start doing something, I want some sense of what the outcome is hoped to be, and how it fits into the overall picture. By extension, I also want to make sure that every ounce of my effort is going to be productive - no waste. Not all people are like that. The insanely industrious will go out to do something, just to justify their existence. Now that is bizarre.
So, I am starting this post off by identifying the why of stretching your comfort zone. The answer is – because I said so, OK. Alright, the why for stretching your comfort zone in business planning – dealing with numbers and modelling is because you only have so much time and money to get the job of entrepreneuring done. Modelling is a way to multiply your efficiency. Simulating lets you focus on the high impact areas of your business, and ignore the small stuff.
Oh, and we already contributed the modelling skill, all you probably need is a little bit of informed effort!
Relationships - Time
I have mentioned this several times before – feedback has indicated that people do not really grasp this in the sense that I mean it. Here is the easy one. Remember the cliché ‘ Time is Money’? Yeah, that one. Suppose you are a cook. Suppose you go out on Tuesday, and buy some lettuce for a salad for a dinner party. Now unless you have that dinner party by Saturday, you will fail, because the lettuce is perishable. So unless your purpose is to feed your composter, you better manage time. Read More »
Sun Jan 13/ 2008 – 3:59 pm MST
I was part of a discussion with someone on a public board recently, the focus of which was executive summaries for business plans. An entrepreneur was meeting with a SCORE advisor, who had asked for the ‘exec’. The drafted exec was 3 pages long! The SCORE advisor responded by saying that that 3 pages was almost what he would consider a business plan (of 5 pages max)! The entrepreneur had drafted a business plan that was 30 pages long. Now, SCORE, for those who are unfamiliar with the service, makes available volunteer retired business people to assist new venturers.
So – why the confusion and disagreement?
Read More »
Sat Jan 12/ 2008 – 1:04 am MST
There is an Australian entrepreneur who writes a blog called the Entrepreneur’s Journey. Yaro has distilled some of the lessons he learned, starting from his pre-university days. One of those lessons was the critical importance of conserving cash and reinvesting. He points out that the two primary resources can be interchanged – money can buy you time that you lack, and time can be substituted for money that you lack.
Over the years, I have attempted to demonstrate this to executives – both peers and superiors - who seemed unwilling to grasp this. Management’s fundamental task is to use the resources available to meet the needs presented (management’s, not the entrepreneur’s – sometimes we wear several hats!). This came up most pointedly in mining, where middle management – blessed with a wealth of man-hours and talent – would not grasp the value of adding a small investment in equipment as a substitute for very expensive external contractors. There are always alternatives involving these substitutions.
For entrepreneurs, however, the discipline of a lack of capital resources really sharpens the mind! Read More »
Tue Jan 8/ 2008 – 7:08 pm MST
One of the blogs that I regularly stop off at is Jeff Cornwall’s The Entrepreneurial Mind. Professor Cornwall is the holder of the Jack C. Massey Chair in Entrepreneurship at Belmont University, and has both a family history and personal experience in the field. His interests cover the spectrum of entrepreneurship, although he says his present research and teaching focus is on ethics and finance for entrepreneurs.
I remember my courses on entrepreneurship as amongst the most disappointing, to me, in my program. In part, that was because the curriculum was ideological, and the students, indifferent. Pity, because it had the potential to be the most electric of all the offerings. Jeff Cornwall has a very different approach than that of my professor. If you are not familiar already with his work, I strongly urge you to stop by, and read some of his archives. His site is on the blogroll at the left.
Jeff criticises those entrepreneurs who are “consumed with raising as much money as they can, as fast as they can.” He calls this entrepreneurs on steroids. To my mind this is apt – not as delicate as Jeff, I’d call this the ‘roid rage of entrepreneurs because of the damage it can do. I have also encountered this syndrome. The fixation on establishing a vehicle as an equity play seems to be a form of delusional “get rich quick” thinking. Two cases. Read More »
Sun Jan 6/ 2008 – 3:27 pm MST
Reject business plans! Well, no, not exactly. The practice tends to be to write wide ranging, comprehensive books. These cover every possible aspect of the business, are neatly bound, have lovely graphics, moving pictures of the charismatic leader, and snazzy graphics. Cool. Ignored. Useless. Expensive. Time-burners. Let’s step back and see what actually happens, by dropping in on big brother. Read More »
Sat Jan 5/ 2008 – 2:57 pm MST
In small and medium business planning, there is much more chaos (in the mathematical sense – unpredictable within certain boundaries) than many realize. This is driven by the enormous range of possible influences on the environment, and their cross-linkages. This is truer today than ever before, and the business operator’s response demands flexibility, constant monitoring and plan adaptation. This cannot be done without a model to wargame – a simulation tool.
Shawn Hessinger at bootstrapme.com put up a post a while ago, as part of an ongoing discussion with some others, like Sean Murphy. Read More »
Sat Jan 5/ 2008 – 10:27 am MST
A long time ago, in a place far away, was a coffee house. And that coffee house was located in a harbour town, nestled close below some arching hills, and soothed by the lapping waters of the protected berths of ships that were safe home from the sea. And life was good.
Until, one day, a ship arrived from foreign climes, and a pestilence, in the form of starving rodents scuttled down a hawser and first set foot in that harbour, to forevermore disturb the peace and tranquillity of the genteel sailors and ship masters that rested in the safety of the harbour’ s shelter. And that rodent was a rat, and that rat had an M.B.A degree, Read More »
Fri Jan 4/ 2008 – 1:01 am MST
Business plan models deal with relationships in time. Many entrepreneurs and independent business owner/operators understand their operations in terms of units – so many sheets of plywood, so many tons of steel, so many pounds of flour, so much work in hours, this many machines, that much floor space, this customer, and that customer, the other chain store, and that foreign distributor. The problem arise for many when they try to equate all those real life units into their proxies – dollars, and then analyse the dollars.
For this reason, it is often best (and most accurate) to model the business plan on the basis of units, and then assign costs and prices to those units. This results in dollars, but also provides the units for a sanity cross-check .
A second problem is that owner/operators do not work in fiscal years, or in quarters. Many work in months, and some work in weeks. The financial statements that they receive tend to be annuals. Frankly, by the time many small businesses get their annual financials back from the accountant, they are ancient history. Read More »
