Lots of things. Mostly they put too much emphasis on the outcome and not enough on the process. I’m not a big fan. Yes, I know you need them if you’re going to ask for money. And yes planning is a good idea. But planning is a verb not a noun. You should engage in planning on a regular basis. And you should compare your thoughts when planning to what actually happens. Then you should learn how to plan better.

It will be helpful to have some documents to do this. But a typical business plan is not usually the right document. The right ones capture what you thought would happen, and more importantly, why you thought it would happen that way. Then they make it easy to compare what did happen and why to what you were thinking at the time.

Here’s an example. In the marketing section, most business plans cover who the market is, how fast it’s growing etc. They often get this information from generic research reports that talk about market segments. But market segments are irrelevant to a small company (and all start-ups begin as small companies). Then the business plan makes some guess at what percentage of that market they can capture. The guess seems to be based on what number will look like they can make a lot of money, while not make investors think they are smoking crack.

But this evades the more important questions about your market: how you’re going to find them, educate them about your product and ultimately sell to them. And how much time this will all take, and how much it will cost?

Here are some better things to document about your market:

Rank your market in order of the cheapest / easiest to sell to. For each group estimate the following:

• What it would cost to sell to a customer in that group?
• How long it would take?
• What’s the average size of a purchase?
• What’s the average life-time value of a customer in that group?
• How many people there are in this group?
• Give examples of what you base this information on?

Never forget that a customer is a person. It’s not a company, a family, a household, or a demographic. It’s the person (or people) in that organization who actually decides to pay the money. Say you want to open a family restaurant. Yes, you need to know how many families live within a certain distance from your place. But don’t stop there. The time and cost of marketing a meal to a kid (think Chuck E. Cheese or McDonald’s happy meal) is different from marketing a meal to an overworked Mom or to a grandparent. Who is going to decide to spend money at your place and what will it cost to get them to do so?

Document your thoughts on that. Then you can regularly compare what your actual sales are, and what it actually costs to make a sale to what you were thinking. If you’ve been open a month you have enough data to start the process. The actuals won’t match up (trust me on this) but the point is to get better at projecting so that by month 6 you’re doing a better job and by month 18 you’re doing a good enough job to know if you should stay in business, close the doors or raise more funds. And if you do need to raise funds, that kind of detail will convince investors yours is a business not just a product.

Takeaway:

• The purpose of planning is not the plan – it’s to get better at predicting what the future will bring and how to be in the best position when it happens.

[tags] small business, entrepreneur, business plan, planning , CEO Skills [/tags]

In most industries probably not. But music is different (like art and a few others where commitment and commerce are closely linked). SELLABAND has developed an interesting business model to exploit this combination of passion and partnership. Details HERE.

The idea is “believers” aka investors invest $10 in a share of a new band. When the band has raised $50,000 (5,000 investors) SellABand helps them produce and promote a CD – the investors get one copy of the CD for “free”. Money is split between the band, the investors and the company. Any time before the band raises 50K an investor can get their money back or switch it to another band.

Seems to me that $10 is a really cheap way to “own” part of a band for people who like to be early adopters of new music and a way for a band to raise money but more importantly get 5,000 folks promoting their music from the get go. For the investors, it’s like paying $10 to be a promoter of an idea virus. And you get a CD for the price.

UPDATE: Slice The Pie has a similar concept.

Takeaway:

• The real power of any technology is not to do the same old stuff quicker, better, or more accurately, but to allow you to do things that could not be done before. The web is no different in that it’s real power lies in the uncharted.

[tags] entrepreneur,record label, Music Business, business model [/tags]

This from Jessica Hagy who does all kinds of funny, insightful stuff on index cards.

But the bigger point is, many people think (no, it’s beneath thinking, they just KNOW) that to run (never mind start) a company you have to work a gazillion hours, and it has to take over your life. I don’t believe that.

I do believe there are times when that’s necessary – but they are temporary. And I do believe a business takes over your life in the sense that it’s a constant presence – like being married or being a parent. But if it doesn’t allow you time to live from the get-go something is wrong.

Here are the usual things that are wrong.

1. You know (believe) that you have to work a gazillion hours and your business will take over your life. If you believe that you won’t see any other way to do it – even though other ways may be all around you.
2. You want to work a gazillion hours and have your business take over your life. OK in some cases this isn’t wrong. It’s a choice. But if you didn’t make the choice consciously there’s probably a problem.
3. You are an adrenaline addict, love to be the center of attention, love to be the rescuer.
4. Your business is not the right size for you not to have to work a gazillion hours.
5. You haven’t figured out how to teach others to do what you do.

The last two are problems that aren’t psychological so I’ll elaborate on them below.
Problem #4 – Let’s say you’re the owner and chief cook and bottle washer (literally) of a small diner type restaurant. One of that kind that are affectionately referred to as a “greasy spoon”. You probably can’t hire someone to do your job without losing money. Your business is not the right size. But there are other restaurants where the owner doesn’t cook. What size, or how profitable does yours have to be for that to work? It may not be possible in your current space, or with only one store or whatever. But those are all choices. You can decide to grow it / shrink it / serve a more profitable menu or not. Or you can stay the way you are.

Problem #5 – Let’s say you’ve upgraded the menu, added a few tables, changed the hours, whatever and it’s now profitable enough to pay someone to cook and let you have a bit more time off. But you can’t find anyone who can do it like you do. This is a very common problem with super-stars. It’s common in sports that great players make worse managers or coaches than more mediocre players. People who do things really well, are often not conscious of how they do them. So they can’t train others. But maybe someone else can help you do that.

My friend Nick, runs a deli. It took him a long time to realize that every time he walked by a refrigerated case, he stuck his hand into it just to make sure it was cool. That way if a compressor went bad, he knew before all the food was ruined. His employees didn’t do that automatically – why would they? But when he realized it, he didn’t make them stick their hands in the cases. He instituted a policy where twice a day it was someone’s job to take and record a temperature reading for each case. That took him out of the loop and actually gave a better indication of the health of the equipment than he had before. It’s lots of little things like that, that make you replaceable.

Takeaway:

“Has anyone given you the law of the offices? No? It is this: nobody does anything if he can get anybody else to do it. … As soon as you can, get some one whom you can rely on, train him in the work, sit down, cock up your heels and think out some way for the Standard Oil to make some money.”

- John D. Rockefeller

Rockefeller often came home for lunch, took frequent naps, spent summers away from the office and retired in his 50′s. Oh, and he was the wealthiest man in the world at the time (an maybe ever).
[tags] small business, entrepreneur, work life balance, CEO Skills [/tags]

1. Does it fit into the big picture?
This is the 80/20 rule. Should eliminate 80% of stuff. Of course you have to know what the big picture is. I think many people are afraid to eliminate stuff because it MIGHT turn into something useful.
2. Is it important or just urgent?
Some stuff is both! But in general, the more you do important stuff – the less stuff there is that is urgent but not important.
3. Am I the only person who can do this?
If the answer is YES in your business then you’re not doing well in building a company – just a job.
4. Do I have to be there in person?
I’m ambivalent about this one. Technology is good for transmittal of information without you being there in person. But lousy for the nuance of non-information, emotions, possibility, serendipity etc. Since you don’t know what you don’t know it’s hard to tell in advance.

[Digression about the phrase "You don't know what you don't know"

• There are things you know you know. This means you know the question and you know the answer.
• There are things you know you don't know. This means you know the question but you don't know the answer.
• Then there are things you don't know you don't know. This means you don't even know what the question is. Or that you have a world view that frames the question in a way that's not useful. Face to face meetings can teach you a lot about whether you and the other person share the same world view but only if you assume you might not.

- end of digression]
5. Will it cost me if I don’t go?
And what will it cost me (in opportunity cost) if I DO go? As the original article (see below) says the COST might be “who will I piss off if I don’t go?”

Questions from http://cashbulge.com/2007/08/14/a-few-tips-on-how-to-shrink-and-prioritze-your-to-do-list/
[The Comments are mine]