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Saturday, June 30, 2012

Penang-based entrepreneur take on the challenge of running a group buying site

Long: The risk of starting Ezivoucher was a big one, but his investment has paid off.

Friday June 29, 2012

Penang-based entrepreneur take on the challenge of running a group buying site

YOUNG ENTREPRENEUR

TWO years ago, Clarence Long left his job in England to return to his birthplace — Penang. As the story goes, he was sick of the usual nine-to-five life in the British capital and was also a little homesick.

He was determined not to return to a conventional job — Long wanted out from the rat race. He had only one option — to start his own business. Even though, he wasn't a business graduate, he made a decision to venture into the online group buying industry.

Group buying, also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase.

However, at that time, online purchasing wasn't a big thing in the country, and group buying was unheard of.

In the years that Long had been in England, he noticed that group buying is a very popular method of purchasing goods. Looking at the success of the group buying phenomenon in England, he picked this line of business as he believed that Malaysia would soon adopt this method of purchasing goods as well.

"Group buying is very popular in foreign countries. I remembered when I once came back for a holiday and realised that the group buying industry here has a lot of room for expansion and development and it was then I knew that this was an opportunity that I should not miss out on. When I went back to England, I immediately started collecting information about how to start up an online group buying business," said Long.

Soon after making the life-changing decision, Long resigned from his job and together with his wife, came back to Malaysia and started a local online group buying website, ezivoucher.com.

After a year-and-a-half, Long is still unsure about how he got the drive to do what he did. He said that when he told his family and friends about his plan to venture into this line of business, all of them were very much against it.

However, he persevered with the idea of ezivoucher.com and made it a reality. The word 'Ezi' was derived from the pronounciation of 'easy' from the phrase 'make everything easy'.

"Group buying has greatly influenced the way we buy our things because, with a two-star price, we can purchase five-star things like accomodation, spa treatments and food. Essentially, this is what makes this concept so tempting."

Long also revealed that up to 80% of sales from ezivoucher.com is from the sales of food and beverages.

"There was once when we sold 1,800 discount vouchers from one of our restaurants. Besides that, there was a 'buy-three-free-three' movie ticket bundle from one of the cinemas and we sold more than 6,000 of these tickets in just one week," said Long.

These days, most people spend most of their time on Facebook and so according to Long, it is one of the main platforms for sales.

When asked about why he chose Penang to be his base of operations, Long said that there is too much competition is Kuala Lumpur.

He also said that if he were to have opened his own individual business in the traditional sense, he would have probably been kicked out of the market. Eventhough this line of business he is doing now does not give him a very big profit, but at least the business can still generate a turnover.

Many businesses go through group buying websites to advertise special promotions (mostly up to 50%) to attract customers. Both the business and the group buying website benefits from this arrangement, but the one that benefits the most is, of course, the business.

"Once a business advertises a special promotion on a group buying website, it no longer needs to spend any money on spreading the word. Our profit comes from a commission from the sales of the vouchers. The more vouchers we sell, the more money we earn.

"The money saved from not requiring any advertising would be used by the business to compensate for the special promotion prices. It is a win-win situation," explained Long.

When Long first established ezivoucher.com, he met with his biggest obstacle yet. Most businesses and consumers were hard-pressed to trust him as most of them had never heard of group buying, and the thought of people paying their money to the website and obtaining a coupon was just a little too suspicious.

But now, many people are seeking him out to advertise their promotions. Not only that, with the presence of these special promotions, consumers no longer hold the suspicion they have had towards online purchasing, and they can also enjoy these benefits with their family and friends.

"Personally, I am a person who likes group buying.

"My staff and I also regularly buy many of the vouchers available on the website, so that we can see it from our customer's point of view," concluded Long.
_______________________________
http://thestar.com.my/metro/story.asp?file=/2012/6/29/metrobiz/11569079&sec=metrobiz

Tuesday, June 26, 2012

Tweet from @eugenechung - How CrowdSpring Made a Stellar Comeback

How CrowdSpring Made a Stellar Comeback - http://t.co/hiJM627n - and watch all the other videos of CrowdSpring too!

The 5 Smartest Things to Say to an Angry Customer

Mar 28, 2012
The 5 Smartest Things to Say to an Angry Customer
Forget trying to "win." Instead, make the customer feel you're working together to make things right.
iStock

 
For all the money you spend training your customer service staff, the essence of what you need them to do boils to five key phrases. Teach them these, and you'll find you'll win back most of your disgruntled customers.
Let's start with the most important phrase, which also happens to be the simplest:

"I'm sorry."

Oh yeah, your legal team is waving red flags. "We can't admit fault," they say. "We should never imply something is wrong." My response, "Ignore them." Read on.
Any time a customer is forced to call your support line, your company has likely failed in some way—either the product or service is actually flawed, the documentation wasn't clear, or the customer's expectations weren't well-managed by marketing or sales. 
You might be thinking, "What about those customers who mistreat products and then want their money back?" Toss that thought. I'm not saying that customers never mangle the merchandise. Of course they do. What I am saying is that no customer plans to become disgruntled. I've never heard of anyone purposely spending money on a product or service on the outside chance they might win an argument with a customer service rep three months down the road. Even if someone did, it would  be such a rare occurrence that you would never want to design your entire customer relations philosophy around it.
Besides, an apology isn't a confession of culpability. It's a statement of compassion. A sincere apology tells your customer that you regret his having to interrupt his day to make that call. An apology defuses the situation and can allow for a conversation in which you get an opportunity to diagnose what went wrong, with the possibility of preventing similar future problems. And, that brings me to the second  more important thing to say,

"We're going to solve this together."

When your customers decide to purchase your product or service, they commit to a financial relationship with you. When problems arise, they want to know that you're willing to listen and aren't going to run for the door. A positive statement that you are willing to work with them to find a solution, rather than being their adversary, begins a conversation that can be your best insurance against that customer going rogue and blasting you on the Internet.

"What would you consider a fair and reasonable solution?"

Why this isn't the first question out of every support person's mouth amazes me. Asking a customer what she would consider a decent deal creates a starting place for negotiation, sets the expectation level (fair and reasonable), and asks her to make the first offer for an amicable agreement. Besides, you might be pleasantly surprised by her answer. I cannot count the number of times I've heard from customers who initially would have been pleased with just an apology. (See above.)
Watch out for alternate phrasing such as "How can I make you happy?" or "How can I help you?" They can sound patronizing or appear to minimize the importance of a complaint. Besides, the obvious answer always is, "You need to convince me that I didn't make a mistake by spending my money with your company."

"Are you satisfied with our solution, and will you consider doing business with us in the future?"

This isn't the same as "Have I taken good care of you today?" or "Have all of your questions been answered?" The goal of every support call needs to be greater than just solving the immediate problem. The real measure of success will be whether you've managed to preserve the investment you've already made in a customer. If the answer to either side of the question is "No", you've still got work to do.

"Thank you."

At first glance, it may seem like your customer should be the one expressing gratitude. But think about it. In his mind, he paid for a product or service that didn't perform as expected, and was then required to spend professional or personal time to work out a remedy. On the other hand, you've likely gained important information about product performance and how customers perceive your company. In my mind, that's certainly worth a "thank you."
These phrases are not magic bullets that will solve all your customer service conflicts. They are simply a framework for collaborative problem solving and collectively present an attitude of "We're in this together" rather than "We're out to win." That kind of cooperative approach minimizes the number of combative customer interactions and more often results in satisfactory solutions.

What Your Brain Has to Do With Your Brand

Jun 25, 2012
What Your Brain Has to Do With Your Brand
Tell your employees and customers about how you think and behave, your innate genetic strengths and preferences, and you'll see your brand loyalty grow.


Business guru Tom Peters is credited with popularizing the idea of being your own brand 15 years ago. "We are CEOs of our own companies: Me Inc.," he wrote.  "To be in business today, our most important job is to be head marketer for the brand called you.... You're not defined by your job title and you're not confined by your job description. Starting today, you are a brand."
On a whim, I just Googled "personal branding" and got 7,300,000 results. On Amazon, I found 18,915 books listed under "Brand You." That's a lot of chatter. But I believe I have something new to add to the conversation.
Your brand is not your current job or title. It is not your skills and experiences, although of course these things matter. It is not, as many people suggest, one particular attribute with which you "differentiate yourself." It is not your reputation, which is fragile and depends on what others say about you.
"Brand you" is the sum of your innate strengths and preferences that are locked into your genes and etched into your brain. It is the way you think and the habits you have, the way your mind processes information and the manner in which you explain your ideas. In the language of my company, it is your "thinking and behavioral attributes," how you see and interact with the world. These attributes generally do not change over time, and always can be depended upon, by you and others.
As author Maureen Johnson describes in her blog: "A personal brand is a little package you make of yourself so you can put yourself on the shelf in the marketplace and people will know what to expect or look for when they come to buy you. For example, Coke is a brand. When you see Coke, you expect a dark brown effervescent sweet drink that is always going to taste like . . . Coke."
If you have a conceptual mind, you probably are now feeling disdain for "brand you". You like being different, and the idea of being categorized into a little box is anathema to you. However, take heart: the fact that you consistently have original and unpredictable ideas is your brand.
Here are more ways you might opt to "brand you":
  • If you are highly expressive, people know you will bring energy and enthusiasm to the task and happily share information.
  • If you are reserved, people realize that when you finally speak, you will say something succinct and well-considered.
  • If you are driving and assertive, you are likely very persuasive and can be depended upon to get things done in a timely manner.
  • If you are a peacekeeper, people know you will bring a calm presence and amiable attitude to the conversation.
  • If you favor being flexible, you are probably known for being open-minded and even-tempered. Changes, interruptions, and distractions do not rattle you.
  • If you are a focused person, others will expect you to have a strong personal agenda. You are either a formidable adversary or a terrific ally.
  • If you think analytically, you can be counted on to give a reasoned, logical response based on accurate research.
  • If you're a structural thinker, people know you will meet deadlines and offer ideas that are do-able and cover all the details.
  • If you're highly social, you will consistently look out for the welfare of others and give each person a fair shot.
  • If you're conceptual by nature, you typically have an original outlook and an innovative point to share. You can be depended upon to think about the big picture, global view, or long-term consequences.
I suggest no matter what your job that you let your employees and customers know which thinking and behavioral attributes best describe you so they understand what they can expect from you, and how to best use you as a resource. You can also demonstrate your innate "brand you" strengths via social media, and turn your self-knowledge into the ultimate marketing tool.

3 Great Things Starbucks Taught Me

Jun 25, 2012
3 Great Things Starbucks Taught Me
I used to hate dropping cash at the coffee giant. Now I love it. Here's what the retail star has taught my company.
Flickr photo courtesy of Marjorie Lipan


A few weeks ago, I was stranded in the airport in Atlanta, and found myself in search of one thing: a Starbucks.
It was a little surprising: I used to hate Starbucks, or at least what I thought it stood for. I grew up on Dunkin Donuts (I'm still a fan), and the thought the idea of saying 'venti' instead of 'large' was annoying on many levels. The idea of paying more than $2 for a cup of coffee to go was also outrageous.
So why am I addicted to Starbucks now?
Because of Starbucks' convenient locations, I've found myself using them more and more as I travel--and I have come to realize that the company sells much more than coffee. It also sells cleanliness, comfort, and consistency--a welcoming atmosphere and a standard list of drinks unique to Starbucks.

Inviting Atmosphere
Ten years ago, when I started Situation Interactive out of my apartment, Starbucks was my unofficial conference room. As the agency has grown--we've now had a total of seven different offices--Starbucks has remained an integral part of our company. I've hired people, conducted reviews, held conference calls, met vendors, closed major business deals, submitted my taxes and constructed the company business plan at Starbucks.
In the hundreds of Starbucks locations I've visited, not once can I name an experience where I didn't feel welcome--no matter how long I was working there. In fact, I walk into the location at Broadway and 38th Street, downstairs from our New York office, and the manager, Tara, always says, "Hey Damian, how's your son doing?"--regardless of how busy the store is.
This success does not happen by accident; it's not simply great marketing. It's a collective mindset throughout their organization that truly captures the brand greatness (and ultimately the differentiation) in everything Starbucks does. The company puts actions to words and is a brand model I aspire to.

Takeaways for My Business
As a business owner, I take three very specific tips away from the Starbucks experience.

Context of its offering: Starbucks understands how its products fit into the everyday lives of its customers. For example, the company recognizes that the quality of the experience--where and how you drink your coffee--is often as important as the quality of the coffee itself.

Lifetime value of customers: Starbucks appreciates that in order for its business to be successful, it must do everything in its power to create strong lifetime value with every customer that walks in the door. Among the techniques: welcoming customers by name and implementing the newest technologies in mobile payments, to make your trip faster. Starbucks knows how to make repeat purchasing both welcome and easy.

Sustainable culture: Starbucks has defined its culture and is consistent across all touchpoints, resulting in sustaining strong lifetime value with customers. If you closed your eyes and were transported to a coffee shop somewhere in the world, you would know within seconds of opening your eyes whether you were sitting in a Starbucks. That's powerful marketing.
It's no surprise Starbucks is listed among best companies to work for year after year on every major list.
So with that kind of customer care and commitment to a greater vision--not to mention the free business lessons--paying $2 or more for a coffee is OK by me.
In fact, I'm up to the $4 latte.

4 Reasons It Pays to Be Clueless

Jun 22, 2012
4 Reasons It Pays to Be Clueless
Forget an MBA. Or even business experience. Some of the best entrepreneurs never would have launched if they had known better.
Proof Wood founders
Courtesy of company
The Dame brothers Brooks, Tanner, and Taylor say their business naivete helped their eyewear company succeed.


Brooks Dame has an MBA from the Thunderbird School of Global Management. But when he and his brothers started Proof Wood Eyewear, which offers sunglasses, prescription glasses and accessories made from sustainable woods, they built a successful business by ignoring almost everything he learned there. "Sometimes being a bit naive pays off," he says now.
Here's how knowing too much could be a bad thing:

1. You might be too timid.
Proof Wood started, classically, with Dame in his garage, making glasses for family and friends. People kept telling Dame that he ought to be selling the glasses. Eventually he agreed, and he and his brothers Tanner and Taylor started a small business.
Fifteen days after launching, they arrived at the MAGIC accessories show in Las Vegas. "We walked in to set up our booth not knowing what to expect," Dame says. "The guy in the booth across from us was selling his T-shirts to Urban Outfitters and many other stores. He told us not to get discouraged if we didn't have a lot of visitors to our booth during the show. He said, 'You often don't get a lot of traffic at first--you have to establish your brand.'"
Dame went back to his hotel room that night wishing he hadn't spent the money to come to the show before the company was better known. But the more experienced vendor was wrong: The booth was mobbed for three days. The Dames were so clueless they hadn't even brought an order book with them--they didn't know what one was--but they bought one from a nearby Staples after the first day. By the end of the show, they had signed on 13 stores to carry their products.

2. You might think you know who your customers are.
The Dames created their wooden sunglasses for surfers and skateboarders such as themselves, and they assumed this would be their target market. Fortunately, going to MAGIC gave them the chance to find out they were wrong. "We found we had people interested in the product because it's eco-friendly, and we had hip-hop artists come into the booth and say, 'This reminds me of the wood on my dashboard--I have to have these!' Now we say we have a wide demographic that includes surfers and hip-hop people and housewives." Today, Proof Wood glasses are sold in 120 stores and chains, including Nordstrom, and the company moves up to 1,800 pairs a month.

3. You might make too many plans.
Dame attended an entrepreneurship course that explained how and why a new business needs a business plan. But he didn't write one. "We just did it," he says. "After the company launched, we finally wrote one for a business plan competition, in order to raise money. But the truth is, we've deviated from it so much, we never even refer to it."
Too much planning is dangerous, Dame believes. "I think you can overthink a product. You want to perfect it and make it right, and that stifles you, and by the time you get it out there your time has passed. I think if you believe in your product, you should go for it. That's probably the opposite of everything they teach you in grad school."

4. You might not do it at all.
Early on, Proof Wood naively approached Sunglass Hut, not realizing that the chain was owned by Luxottica, which owns Ray-Ban and many other brands. Proof Wood's only option was to start out selling to small, owner-operated stores and boutiques.
"If we'd realized that, honestly we probably wouldn't have launched at all," he says now. "We're a small group, and we didn't think we'd be able to manage a lot of small shops." Instead, he says, Proof Wood's relationships with smaller shops and boutiques has been a tremendous asset. "Our owner-operated shops are some of our best shops. They're continuous, they support us, and they're always sharing information about us on Facebook and Twitter."
In the end, he says, "We did everything a little backwards. And it seems to have paid off for us."

9 Beliefs of Remarkably Successful People

Jun 25, 2012
9 Beliefs of Remarkably Successful People
The most successful people in business approach their work differently than most. See how they think--and why it works.
man holding a picture of a blooming tree
Getty
 

I'm fortunate enough to know a number of remarkably successful people. Regardless of industry or profession, they all share the same perspectives and beliefs.
And they act on those beliefs:

1. Time doesn't fill me. I fill time.
Deadlines and time frames establish parameters, but typically not in a good way. The average person who is given two weeks to complete a task will instinctively adjust his effort so it actually takes two weeks.
Forget deadlines, at least as a way to manage your activity. Tasks should only take as long as they need to take. Do everything as quickly and effectively as you can. Then use your "free" time to get other things done just as quickly and effectively.
Average people allow time to impose its will on them; remarkable people impose their will on their time.

2. The people around me are the people I chose.
Some of your employees drive you nuts. Some of your customers are obnoxious. Some of your friends are selfish, all-about-me jerks.
You chose them. If the people around you make you unhappy it's not their fault. It's your fault. They're in your professional or personal life because you drew them to you--and you let them remain.
Think about the type of people you want to work with. Think about the types of customers you would enjoy serving. Think about the friends you want to have.
Then change what you do so you can start attracting those people. Hardworking people want to work with hardworking people. Kind people like to associate with kind people.
Successful people are naturally drawn to successful people.

3. I have never paid my dues.
Dues aren't paid, past tense. Dues get paid, each and every day. The only real measure of your value is the tangible contribution you make on a daily basis.
No matter what you've done or accomplished in the past, you're never too good to roll up your sleeves, get dirty, and do the grunt work.  No job is ever too menial, no task ever too unskilled or boring.
Remarkably successful people never feel entitled--except to the fruits of their labor.

4. Experience is irrelevant. Accomplishments are everything.
You have "10 years in the Web design business." Whoopee. I don't care how long you've been doing what you do. Years of service indicate nothing; you could be the worst 10-year programmer in the world.
I care about what you've done: how many sites you've created, how many back-end systems you've installed, how many customer-specific applications you've developed (and what kind)... all that matters is what you've done.
Successful people don't need to describe themselves using hyperbolic adjectives like passionate, innovative, driven, etc.
Remarkably successful people don't need to use any adjectives at all. They can just describe, hopefully in a humble way, what they've done.

5. Failure is something I accomplish; it doesn't just happen to me.
Ask people why they have been successful. Their answers will be filled with personal pronouns: I, me, and the sometimes too occasional we.
Ask them why they failed. Most will revert to childhood and instinctively distance themselves, like the kid who says, "My toy got broken..." instead of, "I broke my toy."
They'll say the economy tanked. They'll say the market wasn't ready. They'll say their suppliers couldn't keep up.
They'll say it was someone or something else.
And by distancing themselves, they don't learn from their failures.
Occasionally something completely outside your control will cause you to fail. Most of the time, though, it's you. And that's okay. Every successful person has failed. Numerous times. Most of them have failed a lot more often than you. That's why they're successful now.
Embrace every failure: Own it, learn from it, and take full responsibility for making sure that next time, things will turn out differently.

6. Volunteers always win.
Whenever you raise your hand you wind up being asked to do more.
That's great. Doing more is an opportunity: to learn, to impress, to gain skills, to build new relationships--to do something more than you would otherwise been able to do.
Success is based on action. The more you volunteer, the more you get to act. Successful people step forward to create opportunities.
Remarkably successful people sprint forward.

7. As long as I'm paid well, it's all good.
Specialization is good. Focus is good. Finding a niche is good.
Generating revenue is great.
Anything a customer will pay you a reasonable price to do--as long as it isn't unethical, immoral, or illegal--is something you should do. Your customers want you to deliver outside your normal territory? If they'll pay you for it, fine. They want you to add services you don't normally include? If they'll pay you for it, fine. The customer wants you to perform some relatively manual labor and you're a high-tech shop? Shut up, roll 'em up, do the work, and get paid.
Only do what you want to do and you might build an okay business. Be willing to do what customers want you to do and you can build a successful business.
Be willing to do even more and you can build a remarkable business.
And speaking of customers...

8. People who pay me always have the right to tell me what to do.
Get over your cocky, pretentious, I-must-be-free-to-express-my-individuality self. Be that way on your own time.
The people who pay you, whether customers or employers, earn the right to dictate what you do and how you do it--sometimes down to the last detail.
Instead of complaining, work to align what you like to do with what the people who pay you want you to do.
Then you turn issues like control and micro-management into non-issues.

9. The extra mile is a vast, unpopulated wasteland.
Everyone says they go the extra mile. Almost no actually one does. Most people who go there think, "Wait... no one else is here... why am I doing this?" and leave, never to return.
That's why the extra mile is such a lonely place.
That's also why the extra mile is a place filled with opportunities.
Be early. Stay late. Make the extra phone call. Send the extra email. Do the extra research. Help a customer unload or unpack a shipment. Don't wait to be asked; offer. Don't just tell employees what to do--show them what to do and work beside them.
Every time you do something, think of one extra thing you can do--especially if other people aren't doing that one thing. Sure, it's hard.
But that's what will make you different.
And over time, that's what will make you incredibly successful.

Saturday, June 23, 2012

Can’t drink, can’t vote - but this teenager is hot property in Silicon Valley

http://m.smh.com.au/small-business/entrepreneur/cant-drink-cant-vote--but-this-teenager-is-hot-property-in-silicon-valley-20120620-20mt9.html

Can't drink, can't vote - but this teenager is hot property in Silicon Valley
ENTREPRENEUR SECRETS June 21, 2012

"Australia has nothing like San Francisco, and Silicon Valley. The tech culture there is insane" ... Lachy Groom.

He's founded four online start-ups, sold three and helped create 15 jobs in the United States with an average salary of $79,000.

Not a bad resume for somebody who hasn't had their 18th birthday.
Lachy Groom, 17, has always had an inkling for business and entrepreneurship.

Businessman from the beginning
Groom was the kid who opened a lemonade stand, started a dog-walking business and by the age of 11 was working with HTML and CSS coding.

"My granddad actually taught me HTML, from there I learnt CSS and discovered these two languages were in high demand," says Groom.

It wasn't long before Groom, who is mostly self-taught, began building websites and in 2008, at the age of 13, he founded his first start-up, PSDtoWP.
Working for mostly US and European-based clients, Groom turned PhotoShop documents into web-friendly WordPress pages.

Nine months into the project a larger consulting firm bought the company.

Always on the hunt for the next great idea
It wasn't long until the Perth native set out on his next project. While on a holiday to Bali in 2011, Groom was reading the New York Times bestseller The 4-hour body.

The book outlines a set of supplements dubbed PAGG (Policosanol, alpha-lipoic acid, green-eat extract and garlic) and set off a spark in Groom's mind.

"I got in touch with a manufacturer, set this site up within hours of reading the book," he says. Within a month PAGGStack.com was produced and selling supplements to customers across the world.

When the site was sold five months later in May, it was earning thousands of dollars in revenue every month.

The serial entrepreneur's next venture was so simple, Groom found its success amusing.

"I'm a huge Apple fan, everything tech I own is Apple. I had a US friend ship in the latest iPad, took it to school, and pretty quickly a friend dropped it on concrete. Screen cracked. iPad destroyed," says Groom.  "I didn't have any projects on the go at this point in time, and my dad told me to set up a site to get some passive income going. So I did!"

Groom quickly set up iPadCaseFinder.com in May 2010.

It's as simple as it sounds. With the aid of a filtering plug-in users are able to search through an array of iPad cases from different sellers and are then directed where to buy them.

"All the outgoing links were affiliate links. Amazon pays generously. Within the first few weeks of launch we had 400,000 unique hits," says Groom.
Within a few months the business was yet again picked up and bought.

This allowed Groom move onto his next project, which he still owns, Cardnap.
Created in April 2011, Cardnap allows users to search for discounted gift cards as well as re-selling their own. The site is currently only available to the US.

"I saw an opportunity to become a market place [for gift cards]. It did very well opening week. I still own this site, but may be looking to sell it soon so I can concentrate on getting to the US."

Aside from obvious technology purchases, Groom's success has allowed him to indulge in trips to places such as London and San Francisco, where he is currently staying on a tourist visa, invest in shares, attend conferences and dine in some of the best restaurants San Francisco has to offer.

Managing school and business
One of Groom's biggest fans is his former headmaster at Wesley College in Perth, David Gee.

"I think he's a great example of someone who has followed his passion, hasn't let age be a barrier and hasn't said 'well I can't do this because I'm 17'," said Gee.

Groom looks back fondly on his time at Wesley College but Gee admits it took a bit of negotiating to get him to complete Year 12.

"Right from the beginning of Year 11 he had some clear pictures that school was something he had to do," says Gee. "His parents obviously wanted him to focus on Year 11 and 12 and Lachy wanted to focus a bit more on the business side and I managed to mediate a common ground."

While Groom was no average student and was devoting a lot of his time to his businesses, Gee says once he made his decision to stay he embraced and engaged in the school's community, becoming heavily involved in activities like the student council.

"I've been a head for nine years and he's one of those young men who will sit in my mind with a sense of admiration for the way that he did manage to do something that wasn't the norm and wasn't held back by others,'' says Gee.

"I'm pretty certain one day he'll be teaching me how I can use technology to be more efficient."

The next step Groom hopes to take his talents to the home of technology start-ups – Silicon Valley.

Unfortunately he faces an uphill battle to obtain a visa to work in the United States because of his age and lack of traditional qualifications.

Groom completed high school in December last year and despite having obvious talent in the field of technology, he does not qualify for the primary visa used by specialty field immigrants in the US because he does not have a degree.

A number of big companies have expressed an interest in Groom. He has been interviewed by big firms including Twitter and Zynga, as well as a number of other San Francisco start-ups.

While he continues to garner a lot of interest Groom says the interview process falters because he does not have a work visa.

"Various companies have said they'd love to have me - once I have legal work authorisation," he says.

Groom's best chance of obtaining a working visa will be one based on extraordinary ability in his field. To this end he requires national or international acclaim, usually gained through awards and prizes, which he has neither entered nor won.

Despite these challenges Groom remains optimistic about his cause and hopes to move permanently to the land of opportunity.

"Australia has nothing like San Francisco, and Silicon Valley. The tech culture there is insane. The demand for skilled workers is incredible. The creativity and innovation is incredible. It's infectious," he says.
Lachy Groom's business tips

Anticipatory vs. reactionary
- Start a business in reaction to a trend and you'll ride the tail end of the wave. Anticipate the wave and you'll ride it to the end.

Lean start-up
- A start-up must find ways to get the most out of minimal capital.
Lachy runs his ventures by this advice;
"'Lean' is the most capital-efficient way to run a business. Lean is the never-ending process of eliminating waste: finding every activity that does not create value for the customer and eliminating it. The two greatest wastes are overproduction (making things the customer doesn't want) and inventory (making things that aren't used immediately)." - VentureHacks

Validate assumptions
- Don't start developing your product before you show it to customers. In the tech and start-up industry we have a term "Minimum Viable Prototype". Develop the bare minimum to get your product in front of your users, and then iterate around their feedback. This will allow you to validate or invalidate your customer hypotheses in the shortest period of time.

Sell an emotional experience, not a product
- People buy an iPad for the experience that Apple sells them. The revolutionary display, the memory capturing camera. They don't sell you on the specifications. Sell your customers an experience, not a product, not a feature. Tell them a story.

Lachy's favourite quote:
"Entrepreneurship is living a few years of your life like most people won't, so that you can spend the rest of your life like most people can't." - Unknown

True! True!

Data in One Minute - data never sleeps!

Friday, June 22, 2012

How to Brand Yourself?

How to find a Business Partner?

Can friends be business partners?



Bonobos co-founder Andy Dunn on building a business with a former roommate, and other lessons/adviceAndy Dunn, co-founded pants designer and retailer Bonobos in 2007 with his former Stanford Business School roommate Brian Spaly. So far, so good. The two are making a killing at their new venture.But it's not been all that easy."My co-founder and I have highly overlapping skill sets," said Andy, in this segment of "Lessons for Entrepreneurs." Working together has been an enormous challenge," he added. Andy's advice to former roommates or friends thinking about working together is this: Think about your relative contribution and the architecture of your business relationships. "It's critical." Fortunately, the two have been able to preserve the friendship, he said. Other lessons include hiring well. "Firstly, hire all-stars and delegate," he said. Bonobos coaches its employees ... [http://vator.tv/n/a9b read more]

What Makes a Good Business Partner - Mike Germano



In Chapter 1 of 16 in his 2011 Capture Your Flag interview with host Erik Michielsen, social media expert and Carrot Creative president Mike Germano shares what he feels makes a good business partner. Willingness to fully commit to the business tops Germano's list. This creates security through ups and downs of the entrepreneur roller coaster ride. He notes the difficulty involved starting a business and shares that if it were easy, everyone would do it. Germano is co-founder and president of DUMBO, Brooklyn based new media agency Carrot Creative. Before Carrot Creative, Germano ran for and was elected to public office in Connecticut. He is a graduate of Quinnipiac University.

What Makes a Good Business Partner - Jason Anello



n Chapter 11 of 15 in his 2010 Capture Your Flag interview with host Erik Michielsen, entrepreneur, creative director, and experience marketer Jason Anello shares why a good business partner is someone you can inherently trust. Trust creates a stable base that allows for more open conversation through good times and bad. By understanding partner strengths and weaknesses, Anello and his team can run the business more efficiently. Anello is the co-founder of non-traditional marketing agency Manifold Partners - www.wearemanifold.com . He is the co-founder of Brooklyn-based supper club Forking Tasty - www.forkingtasty.com . Previously he held creative leadership positions as an Ideologist at Yahoo's Buzz Marketing team and as an associate creative director at Ogilvy & Mather - www.ogilvy.com . Anello is an alumnus of the University at Albany - www.albany.edu

Tips for choosing a business partner

Tips for choosing a business partner

March 10 | Posted by admin |

Tips for choosing a business partner

One of the main reasons for seeking a business partner is the need for capital. However, besides the possibility to obtain more capital, there are other advantages that we can present to have a partner, such as more efficient management, the possibility of sharing responsibilities, risk sharing, greater resources, greater knowledge , more contacts, etc..
However, having a partner is not easy, it involves having someone to make decisions also important company like us, besides the possibility of disagreements that may arise, conflicts or disputes, which is very likely if the company is not getting the expected results, and we have a social conflict.
As before seeking a partner for our business, we must ask and analyze whether we really need one (if we want a partner just for lack of money, it is preferable to a bank), and once we have taken the decision to seek one, we take our time and choose well.
And for that, see below some tips that will help you choose the right partner:
Find a partner with skills, expertise and resources
The idea to find a partner is not duplicated, but look for a supplement, a person with skills, knowledge and resources different, yet complementary to ours.
For example, could be a partner to provide resources, such as financial, technological, sales or distribution channels, etc..
Or, for example, could be a partner who can bring skills, knowledge or experience that we do not own, for example, market knowledge, business contacts, knowledge or experience in a particular business issue, and so on.
Find a committed partner
We must seek a partner who is as committed as we move forward in the business, which has the same aspirations for growth, the same goals, the same motivation, the same commitment.
We must not look for a partner too ambitious to think that you will get high returns in the short term, but also a partner who is uncommitted in the business just to try their luck or to see what happens.
Having a partner who is as committed as we are, we sure have fewer disagreements, conflicts, or willing, but also assures us that at the first obstacle, unforeseen or inconvenience, maintain motivation and enthusiasm.
Search a reliable partner
Usually when seeking a partner is to find one in the family, friends, coworkers, fellow students. However, we can find a partner for people who just met, for example, people we met through our business, or other people who have given us.
However, be someone we know from long ago, or someone you've barely met, we must always strive to be a person who inspires confidence.
If a person we know for some time, analyze your past performance, past performance, experience. But if someone just know we should not only guide us in our instinct but we must evaluate its performance at the beginning of the relationship, for example, evaluate whether it meets its promises, if honest with us, if you constantly contradict, if change your mind often, and so on.
Background check
One way to know if a partner is reliable as well as to evaluate other characteristics, is a background check.
For example, we find out what has been your previous experience as a worker or employer, what your credit history, if you bankrupt companies, if after having broken one has been able to recover and pay off their debts and so on.
But above all, evaluate what you've done in other societies, for example, what was his relationship with his former partners.
If you have had a bad relationship with his former partners is likely to also have with us (although we must bear in mind that if you have had a troubled relationship with a former partner, perhaps the conflict has been the other partner).
We must avoid conflicting partners, but partners do not necessarily bad experience, because in the bad experiences is where the more you learn.

First Person: The Mistakes That Cost Me My Small Business

First Person: The Mistakes That Cost Me My Small Business

*Note: This was written by a Yahoo! contributor. Do you have a small business story that you'd like to share?
Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

Running a small business can be a rewarding and challenging experience. It can also be a very costly one as well. My first attempt at a small business was a failure to say the least, but my failure can be a beneficial learning experience for someone who is venturing into the small realm of small business ownership. His are a few of the bigger reasons that my first small business was an epic disaster.

Lack of a Business Plan
The first clue in the business disaster was a lack of planning. We had a great idea and thought that was all it took. We went into the business headfirst with wallets and credit lines firmly in our fist. We started spending and we never stopped until it was too late. We should have initiated cost controls and planned small. This would have prevented the purchase of unnecessary equipment and kept us looking at our expenditures and made sure that we didn't get ahead of ourselves.

Uncommitted Business Partners
The second thing that went wrong was less with the business and firmly with the ownership. My original two partners were less than 100% committed to involving their time to the project. This combined with creative differences should have been discussed long before we began investing in the ideal. When entering a business with partners, you should always have a long written and planned discussion about the direction of the business and be sure that you all agree with your business objectives, time commitments and the needed investment from each partner.

My Own Arrogance
Finally, the biggest thing that killed this business venture was my own arrogance. I felt like I fully knew and understood the business and knew how to make it a success. Never be afraid to do some bench-marking and idea sharing with others small business owners. I wasn't aware of all the pitfalls that our inherent with running a small business and would have easily found these things out by just talking to other small business owners. In the end, my lack of experience, arrogance and uncommitted partners ended up costing me over $15,000 of unnecessary losses.

Why Startups Fail

Why Startups Fail

Reason 1: Market Problems

A major reason why companies fail, is that they run into the problem of their being little or no market for the product that they have built. Here are some common symptoms:
  • There is not a compelling enough value proposition, or compelling event, to cause the buyer to actually commit to purchasing. Good sales reps will tell you that to get an order in today's tough conditions, you have to find buyers that have their "hair on fire", or are "in extreme pain".   You also hear people talking about whether a product is a Vitamin (nice to have), or an Aspirin (must have).
  • The market timing is wrong. You could be ahead of your market by a few years, and they are not ready for your particular solution at this stage. For example when EqualLogic first launched their product, iSCSI was still very early, and it needed the arrival of VMWare which required a storage area network to do VMotion to really kick their market into gear. Fortunately they had the funding to last through the early years.
  • The market size of people that have pain, and have funds is simply not large enough

Reason 2: Business Model Failure

As outlined in the introduction to Business Models section, after spending time with hundreds of startups, I realized that one of the most common causes of failure in the startup world is that entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers, and in many cases the cost of acquiring the customer (CAC) is actually higher than the lifetime value of that customer (LTV).
The observation that you have to be able to acquire your customers for less money than they will generate in value of the lifetime of your relationship with them is stunningly obvious. Yet despite that, I see the vast majority of entrepreneurs failing to pay adequate attention to figuring out a realistic cost of customer acquisition. A very large number of the business plans that I see as a venture capitalist have no thought given to this critical number, and as I work through the topic with the entrepreneur, they often begin to realize that their business model may not work because CAC will be greater than LTV.

The Essence of a Business Model

As outlined in the Business Models introduction, a simple way to focus on what matters in your business model is look at these two questions:
  • Can you find a scalable way to acquire customers
  • Can you then monetize those customers at a significantly higher level than your cost of acquisition
Thinking about things in such simple terms can be very helpful. I have also developed two "rules" around the business model, which are less hard and fast "rules, but more guidelines. These are outlined below:

The CAC / LTV "Rule"

The rule is extremely simple:
  • CAC must be less than LTV
CAC = Cost of Acquiring a Customer
LTV = Lifetime Value of a Customer
To compute CAC, you should take the entire cost of your sales and marketing functions, (including salaries, marketing programs, lead generation, travel, etc.) and divide it by the number of customers that you closed during that period of time. So for example, if your total sales and marketing spend in Q1 was $1m, and you closed 1000 customers, then your average cost to acquire a customer (CAC) is $1,000.
To compute LTV, you will want to look at the gross margin associated with the customer (net of all installation, support, and operational expenses) over their lifetime. For businesses with one time fees, this is pretty simple. For businesses that have recurring subscription revenue, this is computed by taking the monthly recurring revenue, and dividing that by the monthly churn rate.
Because most businesses have a series of other functions such as G&A, and Product Development that are additional expenses beyond sales and marketing, and delivering the product, for a profitable business, you will want CAC to be less than LTV by some significant multiple. For SaaS businesses, it seems that to break even, that multiple is around three, and that to be really profitable and generate the cash needed to grow, the number may need to be closer to five. But here I am interested in getting feedback from the community on their experiences to test these numbers.

The Capital Efficiency "Rule"

If you would like to have a capital efficient business, I believe it is also important to recover the cost of acquiring your customers in under 12 months. Wireless carriers and banks break this rule, but they have the luxury of access to cheap capital. So stated simply, the "rule" is:
  • Recover CAC in less than 12 months

Reason 3: Poor Management Team

An incredibly common problem that causes startups to fail is a weak management team. A good management team will be smart enough to avoid Reasons 2, 4, and 5.  Weak management teams make mistakes in multiple areas:
  • They are often weak on strategy, building a product that no-one wants to buy as they failed to do enough work to validate the ideas before and during development. This can carry through to poorly thought through go-to-market strategies.
  • They are usually poor at execution, which leads to issues with the product not getting built correctly or on time, and the go-to market execution will be poorly implemented.
  • They will build weak teams below them. There is the well proven saying: A players hire A players, and B players only get to hire C players (because B players don't want to work for other B players). So the rest of the company will end up as weak, and poor execution will be rampant.
  • etc.

Reason 4: Running out of Cash

A second major reason that startups fail is because they ran out of cash. A key job of the CEO is to understand how much cash is left and whether that will carry the company to a milestone that can lead to a successful financing, or to cash flow positive.

Milestones for Raising Cash

The valuations of a startup don't change in a linear fashion over time. Simply because it was twelve months since you raised your Series A round, does not mean that you are now worth more money. To reach an increase in valuation, a company must achieve certain key milestones. For a software company, these might look something like the following (these are not hard and fast rules):
  • Progress from Seed round valuation: goal is to remove some major element of risk. That could be hiring a key team member, proving that some technical obstacle can be overcome, or building a prototype and getting some customer reaction.
  • Product in Beta test, and have customer validation. Note that if the product is finished, but there is not yet any customer validation, valuation will not likely increase much. The customer validation part is far more important.
  • Product is shipping, and some early customers have paid for it, and are using it in production, and reporting positive feedback.
  • Product/Market fit issues that are normal with a first release (some features are missing that prove to be required in most sales situations, etc.) have been mostly eliminated. There are early indications of the business starting to ramp.
  • Business model is proven. It is now known how to acquire customers, and it has been proven that this process can be scaled. The cost of acquiring customers is acceptably low, and it is clear that the business can be profitable, as monetization from each customer exceeds this cost.
  • Business has scaled well, but needs additional funding to further accelerate expansion. This capital might be to expand internationally, or to accelerate expansion in a land grab market situation, or could be to fund working capital needs as the business grows.

What goes wrong

What frequently goes wrong, and leads to a company running out of cash, and unable to raise more, is that management failed to achieve the next milestone before cash ran out. Many times it is still possible to raise cash, but the valuation will be significantly lower.

When to hit Accelerator Pedal

One of a CEO's most important jobs is knowing how to regulate the accelerator pedal. In the early stages of a business, while the product is being developed, and the business model refined, the pedal needs to be set very lightly to conserve cash. There is no point hiring lots of sales and marketing people if the company is still in the process of  finishing the product to the point where it really meets the market need. This is a really common mistake, and will just result in a fast burn, and lots of frustration.
However, on the flip side of this coin, there comes a time when it finally becomes apparent that the business model has been proven, and that is the time when the accelerator pedal should be pressed down hard. As hard as the capital resources available to the company permit. By "business model has been proven", I mean that the data is available that conclusively shows the cost to acquire a customer, (and that this cost can be maintained as you scale), and that you are able to monetize those customers at a rate which is significantly higher than CAC (as a rough starting point, three times higher). And that CAC can be recovered in under 12 months.
For first time CEOs, knowing how to react when they reach this point can be tough. Up until now they have maniacally guarded every penny of the company's cash, and held back spending. Suddenly they need to throw a switch, and start investing aggressively ahead of revenue. This may involve hiring multiple sales people per month, or spending considerable sums on SEM. That switch can be very counter-intuitive.

Reason 5: Product Problems

Another reason that companies fail is because they fail to develop a product that meets the market need. This can either be due to simple execution. Or it can be a far more strategic problem, which is a failure to achieve Product/Market fit.
Most of the time the first product that a startup brings to market won't meet the market need. In the best cases, it will take a few revisions to get the product/market fit right. In the worst cases, the product will be way off base, and a complete re-think is required. If this happens it is a clear indication of a team that didn't do the work to get out and validate their ideas with customers before, and during, development.

Is Your Horse Business Model Broken?

Is Your Horse Business Model Broken?
Elisabeth McMillan

A lot of people confuse their business plan with their business model.  A business plan details how you will execute your business model. A business model is how your business is structured to make money.
If your business model is broken, no amount of planning or executing of plans will work. Moreover, no amount of marketing will work -  because either your marketing will fail to attract new customers or the customers you do attract won't make your business profitable.
You can't fix your business plan until you fix your business model.
Here are some signs that you have a problem with your business model -
1. You are not making enough money and can't work anymore hours than you already are putting in.
2. You usually don't take enough time off because when you do, everything falls apart.
3. You have trouble finding (or keeping) good help and feel like there is no one you can delegate tasks to. 
4. You keep difficult customers (or customers that are a poor fit for your business) because you can't afford to get rid of  them.
5. You need to borrow money (this includes credit card debt) for either of these two common reasons -
(a) every time you need to grow your business (to buy more horses, equipment, to implement a marketing plan, etc..) or (b) in order to sustain your business during tough times.
6. You are un-bankable –  when you need to borrow money, you can't because the bank doesn't view you as a good risk.
7. Your direct competitors seem to be making more money than you are.
8. You have little to nothing set aside for a "rainy day" and heaven forbid if something ever happens to you – your whole business (and life) would go down the tubes.
If you answered yes to many of these questions, you are not alone. The vast majority of horse business owners are struggling with a broken business model.

Why do so many horse professionals use broken business models?
One of the most common reasons is that instead of developing their own unique business model, most horse business owners simply model their own business after other horse businesses that they believe to be successful. There are two major problems with this strategy -
Problem one, is that you may be duplicating an unprofitable model.  Many horse businesses appear outwardly successful, while inwardly they have huge profitability issues.  It is important to remember that equestrian sports attract the financially elite, and some high profile horse businesses are operated by people who don't need to make a profit.  It is also common for talent and sports success to be mistaken for profitability. Even though many horse professionals (if they had to make a choice) would choose equestrian success over financial success -  it is best to have both a successful career and a profitable business!
Problem two,  if your model is too generic – it won't be specific enough to work.
If you "copy" someone else's business model, you may not properly leverage your own unique skills and resources.  Your competitive advantage will not be developed enough to attract the right type of  clients or to charge the prices you need to charge in order to be profitable.
Also, a "copied" model doesn't sufficiently address the specific needs or challenges that are unique to your location, business offerings, skill set, age, resources or goals – it simply won't be fine tuned enough to make your business profitable and secure.
This is not to say you should try to "re-invent the wheel." There are successful horse business people out there and it is fine to emulate them – just recognize that while your business may be similar, it is not the same!  Plus, since profitability can be so difficult to identify from the outside, it is time well spent to work out your own model.
Solutions
As an equestrian business coach and editor of Equestrian Professional.com, people often ask me for help with their business plans, when what they really need (and want) is help with their business model! Some businesses need a complete overhaul, but most horse business owners can markedly improve their profitability by making several small but very important adjustments to their current model.
So how do we fix it? There are several steps and tools we use to create or repair a business model. Most of these tools are available to our members on the Equestrian Professional site.

Next newsletter, we'll discuss some of the tools we use and give you some tips for improving your business model. 
In the meantime, we encourage you to get involved with our "Tell A Friend Contest" - you could win an entire year of private equestrian business consulting!

Why Business Plans Fail

Why Business Plans Fail

by Dave Lavinsky

The recent highs and lows of Internet business has created a whole new set of challenges for investors who want to select ventures that are moneymakers. What specifics are venture capitalists, corporate investors and angel investors looking for? 
The year 2000, with its record breaking highs and lows, has created unique challenges for new and existing ventures seeking to raise capital in 2001. Investors have become even shrewder and are far more discerning in selecting only ventures with attainable revenue models, real competitive barriers to entry, and strong management teams. Growthink surveyed venture capitalists, corporate investors and angel investors regarding what they are looking to fund and why in 2001. From these interviews, we identified the ten most common reasons why business plans fail to raise financing:

Pitfall #10: Excluding Successful Companies in the Competitive Analysis 
Too many business plans want to show how unique their venture is and, as such, list no or few competitors. However, this often has a negative connotation. If no or few companies are in a market space, it implies that there may not be a large enough customer need to support the venture's products and/or services. In fact, when positioned properly, including successful and/or public companies in a competitive space can be a positive sign since it implies that the market size is big. It also gives investors the assurance that if management executes well, the venture has substantial profit and liquidity potential.

Pitfall #9: Over Emphasizing Partnerships with Well-Known Companies 
Forging partnerships to improve market penetration and/or operations has become commonplace, particularly for "new economy" businesses. The fact is that, regardless of whom the partnership is with, partnerships by themselves have limited value. Rather, what are meaningful are the partnership terms. For instance, while it sounds great to have a partnership with Microsoft, Cisco or Yahoo, it is the details of these partnerships that investors find important. The business plan must explain the partnership's equitable terms, the extent to which each partner will improve operations and/or sales, and the structure of the partnership.

Pitfall #8: Focusing Too Much on the Future 
Investments and valuations for growth companies are based on a firm's projected future performance. However, the best indicator of future performance is past performance, or a venture's past track record. Business plans must show what milestones/accomplishments a venture has achieved. Past success in achieving goals gives investors the confidence that the team will execute in the future. 

Pitfall #7: Not Tailoring Management Team Biographies to the Venture's Development Phase 
The Management Team section should include biographies of key team members and detail their responsibilities. These biographies should be tailored to the venture's growth stage since different skill sets are needed to launch, grow and/or maintain a venture. A start-up venture should emphasize its management's success launching and growing ventures. On the other hand, a more mature venture should emphasize how team members have successfully operated within the framework of larger enterprises.

Pitfall #6: Asking Investors to Sign an NDA 
Most investors will not sign NDAs (Nondisclosure Agreements). This is because a business' strategy and/or concept are typically not confidential. It is possible that a key partnership is confidential, for example, but for the most part the execution of the strategy and concept is what will make the company successful. If the concept and/or strategy must remain confidential, this often implies that there are no barriers to competitive entry. If a competitor or host of competitors can quickly copy the concept, then the business model is probably not sustainable. On the other hand, proprietary technology is confidential. The business plan should not discuss the confidential aspects of the technology but should discuss the benefits of the technology and how these benefits fulfill a large customer need. A serious investor will review the actual technology during the due diligence process. A discussion regarding signing an NDA would be appropriate at this point.

Pitfall #5: Indiscriminately Incorporating Investor Feedback into the Business Plan 
Investors, like the rest of us, have different tastes. One investor may love a concept and/or business plan while the next may hate both. It is important to understand this as business plans are working documents and are always undergoing iterations. Management teams must not rush to incorporate each potential investor's comments. Instead, have several investors, partners and other business colleagues review the plan and provide feedback. Incorporate common concerns and probe other comments to determine if they are valid.

Pitfall #4: Stressing First Mover Advantage
A business plan must include strategies that demonstrate the venture can and will build long-term barriers around its customers. Simply claiming a first mover advantage is not compelling in today's funding environment. The methods through which the venture will retain customers should be detailed in the business plan. Such methods could include implementing customer relationship management (CRM) tools, building network externalities (e.g., the more people that use the product or service the harder it is for a competitor to penetrate the market), ongoing value-added services, etc.

Pitfall #3: Focusing Too Much on the Venture's Proprietary Technology 
While proprietary technology is a significant factor in investment decisions, it is much more important to show how this technology satisfies a large, unfulfilled customer need. Many unsuccessful ventures fail because they do not understand the needs of their customers. Understanding true customer wants and needs, identifying which target markets most exemplify these needs, and outlining a plan to penetrate these markets are critical to funding and execution success.

Pitfall #2: Presenting Large, Generic Market Sizes
Defining the market size for a venture too broadly provides little to no value for the investor. For example, mentioning the trillion dollar U.S. healthcare or B2B markets are generally extraneous since no venture could reap $1 trillion in sales in either market. Rather, a more meaningful metric is the relevant market size, which equals the venture's sales if it were to capture 100% of its specific niche of the market. Defining and communicating a credible relevant market size, and a plan to capture a significant share within this market is far more powerful and believable to investors.

Pitfall #1: Making Financial Projections Too Aggressive
Many investors skip straight to the financial section of the business plan. It is critical that the assumptions and projections in this section be realistic. Plans that show penetration, operating margin and revenues per employee figures that are poorly reasoned, internally inconsistent or simply unrealistic greatly damage the credibility of the entire business plan. In contrast, sober, well-reasoned financial assumptions and projections communicate operational maturity and credibility. By accessing and basing projections on the financial performance of public companies in their marketplace, ventures can prove that their assumptions and projections are attainable.

The preceding has been taken from Growthink's 2001 Business Plan Guide, which can be accessed by visiting www.growthink.com
About the author: Dave Lavinsky is the President of Growthink. Growthink is the leader in assisting high-growth companies with the capital-raising process. Growthink has offices in Los Angeles and Palo Alto. For additional information on Growthink or the services it offers, visit http://www.growthink.com or call 310-823-6505.

Business Plans Don’t Work

Business Plans Don't Work
 
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Business Plans Don't WorkNine out of ten business start-ups, and one in six business transformations will confirm it. Learning from the failures of the past, it becomes clear that we have been missing a key step in the execution of our business plans. That key step is the discovery of what works. In this three part series, I'll look at the way in which business plans lead to failure, the way in which business model innovation can help, and the mindset that is needed to succeed in discovering a new path towards business success.
What's Wrong with a Business Plan?
The business plan is widely accepted as the starting point for most major business initiatives, whether they are launching a new start-up, creating a new product line, or transforming existing operations. Here's how it works, illustrated for a start-up:
Our first problem is with the business plan itself. Without a dedicated period of validation, most business plans remain firmly in the realms of fantasy. They contain guesses about who the customers will be, guesses about what product features customers will demand, guesses about how much revenue will be generated, and guesses about expected production costs. It doesn't matter how good the analysis is, until you have tried it out…it's still a guess.
As an execution document, it is hardly surprising that 9 out of 10 new businesses will fail. As Steve Blank says, executing a business plan in this way is not a strategy, it is a prayer. Let's take a look at some of the activities which are not being done:
  • The business is not validating who its customers are, what problems the product is solving, or how well the product is meeting customer needs
  • The business is not finding out which customers will actually buy the product, which distribution channels and pricing strategies work best, or whether the sales model will scale
  • The business is not revisiting the business plan in any way, or making any corrections as it discovers new information about its customers, its suppliers or the operational activity needed to generate revenue
  • The business is not controlling cash burn, or waiting to find out whether the business model actually works before committing itself to a series of execution milestones and sales targets
What are the Risks of Getting it Wrong?
It's not just start-ups that seem to suffer from blind faith in their business plan. A quick look at the history of failed business transformations makes for sobering reading:
  • London Stock Exchange abandon moves to paperless share settlements, loss $400m (1993)
  • Denver Airport abandon automation of thir baggage handling, loss $250m (1994)
  • Levi Straus lose access to three US distribution centres for a week following the failure of its supply chain automation program, loss $192m (2003)
  • Sainsbury's abandon a supply chain automation program, loss $564m (2004)
  • Ford Motors abandon an upgrade of their purchasing system, loss $400m (2005)
  • Federal Bureau of Investigation abandon electronic case management, loss $170m (2006)
Note that Levi Strauss and the London Stock Exchange had original project budgets of $5m and $6m respectively (yes, that is a 13,200% cost overrun for the LSE)! Far from being the exception, a recent study by Oxford University's SAID Business School suggests that these apparent outliers are actually far more frequent than we might think. With one in six large IT projects expected to suffer a cost blow out of at least 200%, executives should brace themselves for spectacular failure on the road ahead.
The reasons for these extreme failures are varied, but typically include (i) poorly defined and evolving user requirements, (ii) un-validated delivery schedules, (iii) a lack of user involvement, and (iv)  a level of customisation which overstretches both management and technical resources alike.
In part two, Business model innovation, I'll look at how the business model canvas can be used in a discovery based approach to business planning to help turn business planning fantasy into business planning reality.
image credit: freelanceswitch.com

Tools for Idea SelectionBrendan Coram is a Management Consultant at The Birchman Group where he specializes in ITSM, ITIL v3, organizational change, business process improvement, workshop facilitation, asset management, project management, and innovation. He leads performance improvement initiatives for organisations in government, transportation, telecommunications, and professional services across Australia.