Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

5 Steps to Assess a Business

“Strategy is not just a plan, not just an idea; it is a way of life for a company. Strategy doesn’t just position a firm in its external landscape; it defines what a firm will be.” Cynthia A. Montgomery

As a business owner one needs to continually assess one’s own company as well as those of the competition. It is essential to have the ability to look at the larger picture and see what is working, and what is not. If you are younger start-up company looking to raise money, or attract potential team members, you need to have well thought out answers to key questions which will be asked. Listed below are five key questions which I believe every business owner must be able to answer.

1. Why does your organization exist?: To answer this question, one needs to have clear understanding of the problem the organization is wanting to solve and how it plans to do that. The answer needs an opening sentence which has the ability to get the other person interested instantly, and wanting to know more about the business. To read more about answering this question please click here.

2. What is your competitive edge?: This question requires you to identify three main components, customer needs, competitor capabilities and your own organizational capabilities. This will help to clearly identify the space your organization is going to be operating in, and your customer value proposition. To read more about the answering this question please click here.

3. What is your business model?: In essence this question is asking how your business makes money. The answer to this question requires you to clearly pin point your target market, financial estimates, scalability and originality. All assumptions and forecasts used in the answer must be based on extensive research. Investors see far too many hockey stick projections, without substantial evidence of how and why demand will pick up to reach those estimates. To read more about answering this question please click here.

4. How do you acquire customers?: The answer to this question is all about your marketing strategy.  Clearly outline metrics used to measure performance, market positioning and price point strategies. These objectives and strategies need to be translated into executable tactics through your promotional campaigns. Avoid using generic answers when answering this question and focus on key metrics you  want to achieve, and how. To read more about answering this question please click here.

5. Who is on your team?: This question requires you to tell the assessor the business plans for execution. The answer to this question is I believe, by far the most important aspect of assessing a business. One needs to mention the teams past experience, achievements, leadership examples and responsibilities. Highlight strengths and how they will be used to help reach your target goals. To read more about answering this question please click here.

One needs to have the answers to these questions, always prepared. They require much initial hard work and research,  the benefits however, far outweigh the time spent on them. One needs to remember to be clear, concise and confident when answering these question. It is all about passion for the business and the industry one operates in. This passion must be conveyed when talking about one’s organization. In the end if the story makes sense, numbers are fairly correct and you have managed to assemble a talented team, success is closer than you think.

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Who is on your team?

“The way a team plays as a whole determines its success. You may have the greatest bunch of individual stars in the world, but if they don’t play together, the club won’t be worth a dime.” Babe Ruth

The success of any startup depends on the quality of the team executing the plans. It comes down to having a team who complements each others strengths and weaknesses, has the ability to work cohesively together and most importantly, has the same core beliefs and values. To communicate this to a potential investor or assessor of the business, requires a deep understanding of oneself and one’s team mates. A clear segmentation of the roles each person will be playing and why that particular person has been chosen for that role is essential.

The answer to this question should include reference to the following:

1. Experience: The first things which needs to be established is the team’s past experience and achievements. This will assist an understanding of where they are coming from and whether they have the required understanding of the market and skill set they will be responsible for. Wherever possible, support your answer with specific details including return on investments (ROI), market share growth, sales figure or any industry rewards and recognition achieved. Past tangible results need to be highlighted.

2. Leadership: This point needs to be stressed to showcase  possession of the necessary skills to lead and motivate a team. Highlight experience, responsibility and motivational skills from the past. Forward looking investors need to know whether an individual has the ability to motivate a team during hard times, and push them further when things are going well.

3. Roles & Responsibilities: From the very beginning there should be clear allocation of responsibilities. Even though at the beginning everyone has to wear multiple hats, it is important that they are responsible for the part of the business where their strongest skill set is used.

The points mentioned above highlight some key areas to develop answers around. Ultimately, investors invest in teams, not business ideas. Use this opportunity to promote your team as much as possible. Be clear, concise and focus on results and tangible evidence of the team’s great ability to work well together.

Related Articles:

Steps to create a winning team

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How do you acquire customers?

“Good business leaders create a vision, articulate the vision, passionately own the vision, and relentlessly drive it to completion.” Jack Welch

The reason I ask this question is to understand how the business plans to market itself to its target segment. As mentioned earlier in my blog posts, very often start-up companies fail to sufficiently develop a well thought out, go-to-market strategy. Relying solely on a website, brochures and short run publicity tactics is not advisable. The assessor needs to understand explicitly what the marketing objectives are and what strategies they will use to reach those targets. To correctly answer this question, develop a marketing plan for the business which will help create a concise answer summarizing your goals.

The following information needs to be included in your answer.

1. Metrics: The answer to this question must be supported by  key metrics which will benchmark marketing strategies. Potential investors are looking for specific details such as market share figures, customer acquisition costs, customer lifetime value, customers required to break-even, and quarterly targets. These metrics must be established early in the answer to give it greater credibility.

2. Positioning: Next, establish positioning and the reason why that particular stance was chosen. Being specific about your target segment and clear on positioning is essential for any marketing plan to work effectively. Choosing a generic target segment like SME’s may appear appealing, however, most do not have the resources to tackle such a large target segment on their own.

3. Price Points: It is always good to know the rationale why a particular price point was used in the strategy. Setting correct price points requires a lot of data collection in the form of surveys, feedback and industry reports to establish credible and  optimal price points. Setting it above or below industry norms must be done with adequate reasons and supported by marketing tactics.

4. Promotional Tactics: After clearly establishing your objectives, positioning, and price points, it is essential to explain how they will be achieved. This relies on the promotional activities a business uses to reach its target segment.  Consistency in promotional tactics is a critical component to establish .

The ultimate objective when answering this question, is to come across as someone with deep knowledge about the industry they operate in, and a clear picture of how they are going to carve out a niche for themselves. The points listed above should serve as guiding points to help you formulate an answer which will help establish this.

Related Articles:

How to write a marketing plan

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What is your business model?

“Great companies first build a culture of discipline…and create a business model that fits squarely in the intersection of three circles: what they can be best in the world at, a deep understanding of their economic engine, and the core values they hold with deep passion.” Jim Collins

In essence what this question is asking is, how does your business make money? To answer this question you must explain comprehensively how the different functions of your business fit together to make a profit. A good business model must satisfy two very simple core criterions, it must be based on it’s target market demand and must make financial sense. As simple as these two criterions may seem, many businesses, specifically in the “internet” era fail to pay attention to them.

One example is that of Webvan. They wanted to take grocery shopping, online. Great idea, huge demand from customers, however, it failed the financial test. The numbers did not add up and after spending hundreds of millions of dollars, the company was forced to close down. Another example of where the story did not make sense, is a company called Flooz. It wanted to convert real money to virtual currency to be used for spending online. After $35m, they found out that customers did not really feel comfortable with the idea.

The litmus test to put to business models, must cover:

1. Does it meet customer needs?: Is there a large enough target market segment willing to buy or use the product/service that the business is wanting to sell? It is essential that business models make sense and that there is a large potential target market.

2. Do the numbers add up?: Firstly, are the forecasts and projection based on solid foundations? Many a time when assessing businesses, I come across assumptions that seem to have been pulled out of a hat and  projections that are quite unrealistic. Secondly, have they taken the costs of doing business into account realistically? In the end, if the numbers do not add up and the business does not have a good plan, the chances of success and making money are very slim.

3. Is the business model scalable?: Investors and potential partners are always more interested in a business which has the ability to scale. Look into the future to see how the business model can be expanded and what it will cost the organization. If IPO and becoming an attractive takeover target is your goal, the business model has got to be scalable.

4. Can the business model be easily replicated?: Almost all models can be replicated. However, how much does it cost, and how long before your competition catches up? Look at DELL, it developed a business model which was very difficult for its competition to replicate because of its existing distribution channel agreements. Hence, even though the model could be replicated, they chose not too because they could not match it.

Listed above are a few things to keep in mind when developing an answer to the above question. It is important to clearly communicate how the business will make money, what assumptions the forecasts are based on, and whether it has the ability to scale. Investors are looking for something unique yet simple. It is challenging to find this balance, however if you do, success is right around the corner.

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What is your competitive edge?

“The essential element of successful strategy is that it derives its success from the differences between competitors with a consequent difference in their behavior.” Bruce Henderson

The next logical question after hearing an initial elevator pitch is about the competitive advantage. What can you do that your competitors will have a hard time duplicating or catching up to? This is not the easiest question to answer, as most products and services can be replicated quite easily.

To provide a concise and clear answer to the question above, keep three segments in mind:

1. Customer Needs: Having a deep understanding of what the customer requires and wants from the product/service you are providing is critical. For such an understanding, the target segment of your business must be clearly demarcated, their expectations known, and their core needs clearly documented through research, feedback and surveys. It is only after such a thorough analysis can you develop a strong competitive advantage.

2. Competitor Capabilities: Never say your business does not have any competition! There will always be competitors, directly or indirectly. It is important that you understand how they are serving your target market. Gauge the benefits the target segment gets from their product/service. Research the areas they are unable to serve. What entry barriers have they created to the market? Where are they most vulnerable? What complaints do existing customers have with their service?  You need answers to all these questions to formulate a good answer.

3. Our Capabilities: After identifying the customer and the competition, a clearer understanding emerges for focusing and building competitive strengths . Efforts have to be made to operate in areas where your competition has difficulty in reaching the target customers. To help carve out such a segment you require a  strong team, patentable technology, strong alliances or any other factor to differentiate you from the rest.

Focus on these three factors will enable you to come up with the ‘where’ and ‘how’ to provide to your target segment. When you look at companies such as Amazon with their one click ordering system, Google with their patentable technology and algorithms or Toyota with its production system, notice how these great companies have been able to develop great competitive advantages in the face of excessive competition.

The answer to this question will hold the key to whether your business is going to be a long term success or not. Without an initial competitive edge, a company has slimmer chances of making it very far. They will have difficulty in getting investors to infuse money and a harder time getting customers to develop a level of trust in what they have to offer. What is your competitive edge?

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Competitive Analysis

“The person who figures out how to harness the collective genius of his or her organization is going to blow the competition away.” Walter Wriston

Competition, this is a word that excites me rather than conjure up images of losing a deal. It wasn’t always like that. You begin to appreciate this a lot more when you repeatedly get into the David vs Goliath scenarios. From the very beginning of my forays into business,  I have learnt that the one thing which keeps you on your toes even more than your customers, is your competition. Complacency is a word which should not be in an entrepreneurs dictionary. If you want to win, then you have to do everything you can to go out there and fairly, ethically and passionately convince the customer why they should choose you. Jack Welch had the same philosophy at GE, it was either striving to be 1st or 2nd in the industry or quitting the business if you didn’t have the necessary competitive advantages.

Your proposals must reflect this attitude. I have received proposals where the competition has blatantly bad mouthed or down played competitors. Others have conveniently and completely forgotten to mention them. Unfortunately, your client may share a very different perspective on the competition. The proposal has to include counters to your competitor in a clear and precise manner. You have to highlight your strengths in relation to your competitors.

If your firm is much smaller than the competitors use your agility, speed and client focus as advantages. If you are large, then leverage on your size and resources. Play to your strengths with both your customers objectives and achieving those in relation to your competition. In one of my earlier print media based business there was tremendous pressure from larger players who were bidding for the same university contract. However we had an office based in the university campus and had the ability to designate resources to work closely with the client. Even though we weren’t the cheapest alternative, we won. If there is one thing I learnt from that business was NEVER get into a price war. It is not in your clients or your interest in the long run. Focus on developing value and your client will pay.

Use the competitive analysis section of your proposal to help draw lines on how your offering differs from your competitors. If it doesn’t, then that, is something you need to build upon; focus on customer support, the internet, human resources or your supply chain to help you develop that competitive edge. There is no room for complacency, do whatever it takes to win.

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Are you different?

“Price is what you pay. Value is what you get.” Warren Buffet

Coming to stage 2 you have identified and quantified  customer and market need. Now is when things begin to get interesting. For any new venture to succeed it requires a value proposition. Without it you will find yourself lost. This has happened to me in the past and it still does sometimes. The typical situation is you identify and quantify a need,  then you assemble a team as fast as possible and execute the plan based solely on gut feelings. Further down the line, if you have not constructed a valid value proposition, you and your partners  have to restructure the business to make it work. So the key is “create greater customer value in comparison to the value being created by your competitors” and document it extensively before starting the venture.

Being able to quantify this value and bring it from being an abstract thought in your head to reality is not the easiest of things to do. I list down the following four factors when breaking an idea down.

Need: “What is the important customer and market Need?

Approach: “What is your unique Approach for addressing this need?”

Benefits: “What are the specific Benefits per cost that result from this approach?”

Competition: “How are these benefits per cost superior to the Competition?”

I realize that initially creating a value proposition based on these four factors is difficult. Sometimes you can’t identify a direct competitor, calculating benefit vs cost gets complicated or a host of other issues. The important aspect is that you have to start thinking about these factors and over the passage of time you will incorporate many permutations to come up with a winning value proposition. To go about this effectively here are a couple of helpful tips:

1. Talk with your prospective customers and clients about your new concept and get feedback. Remember your customers are out there in the real world and not your office. Get out there and get to know them a lot better.

2. If possible create a prototype for your service which will help your target audience to visualize what it is that you are selling or providing. Also let your customers take it for a spin and see how they interact with it.

3. Do a thorough competitor analysis to document what are the alternatives out there. This will also help you to understand where it is, that you have to create value for your target customer.

4. Study the market or the industry that you are wanting to operate in. Deep market knowledge and understanding the dynamics between the players, government and competitors is critical. There are a lot of great market research reports on the web. Get as much information as you can to make an educated decision on the future growth and scalability prospects for your business.

Your first draft for the value proposition will be far from perfect. However, remember that the journey to success is usually not a straight line. IDEO a leading design firm states, “Fail often to succeed early.” I think that should be the motto for all entrepreneurs. I have started businesses which were headed in one direction when we started and are operating in a completely different space now. The most important things needed to help make this journey worthwhile is a great team, get your NABC proposition pat down, be passionate and proactive and then……enjoy the ride!


p.s Stage 2 requires a lot of time and dedication to so make sure you do this step properly. Don’t be in a rush now because it will cost you dearly in the future.

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