Up and Running:

Blogs are supposed to be personal, right? So allow me to personalize. Let’s consider the plight of one Megan Berry, 22 years old today, graduating from Stanford in two months with close to straight As.

Megan wants a job. More specifically, she wants a job related to social media and internet marketing in the Silicon Valley.

In any normal year, this would have been no problem. Google would have snapped her up. Yahoo would have. So would a couple of dozen other companies. She’s an opportunity: a “fuzzy” political science major who won web awards for programming Cold Fusion databases before she reached puberty, and did serious web programming work for darfurgenocide.org while still in high school. She’s kind of a bridge, a writer and marketing type who understands the depths of programming. She has her own blog, and she also blogs at Brazen Careerist and Huffington Post. She’s been on Facebook for four years. She’s on Twitter. She’s on LinkedIn.

But then came the downturn. And the worst year for graduating seniors since sometime in the 1930s. Megan’s got some possibilities; some things might still work out–one of which came directly from Twitter, by the way. But we’re passing mid-April now, and she’s still available.

Think of this strategically. She’s as young as most college graduates, but in her chosen world of social media and internet marketing, that whole world started about the same time she got into it. So maybe she has something special in the strengths and weaknesses category, something that might help even in this toughest of all years to get a job.

All her information, links to her various blog posts and all the rest are (right where they should be for a young social media marketing person) at meganberry.com.

Some of my presentations and webinars on business planning and growing a business are available free online.

• Develop Your Business Plan: the SBA Version.
• The not-so-big Business Plan: Webinar for the Young Inventors International organization, September-October 2007.
• My list of Top 10 Mistakes in Venture Contests: This one has been delivered several times in several variations for several graduate business programs.
• A simple review of Basic Business Numbers: A quick look at what you need to know, how the numbers come together, what are the standard formats.

These are slide presentations with my voice. Don’t worry, no talking heads.

So you want to start a business, but don’t know what kind? That reminds me of one day when a confirmed bachelor friend suddenly told me he’d decided to get married. “Who’s the bride?” I asked. He said he didn’t know, “but I’ve decided to step up the search.”

Searching for a business to start, like searching for a person to marry, is probably doing things backward, like deciding first that you want to marry and then going searching for a willing victim. Have the relationship first, then consider marriage. Similarly, don’t decide you want to start a business and then go searching for what type. Have the relationship first.

Most people who build their own business have a relationship with it first, then start it. They’ve worked in the industry. They know the field. That doesn’t mean only chefs start restaurants or only programmers start software companies. But it does mean people start by knowing, then see what’s going on, how that business works. Next they look for what people need that they aren’t getting, what can be done differently, and then start the business.

This goes back to my post from yesterday, relating to which business to start by looking in the mirror and figuring out who you are.

I believe in startups; I’ve done them, they’ve worked for me and my life. But it’s a lot of work. Find something you can stand doing a whole lot of. If you have no idea and are not excited, maybe you should keep your day job.

So you want to start a business, but don’t know what kind? Sure, you can get a list of franchises or ask the experts what are good businesses to start. That works for some people. Lists of businesses to start are easy to find. My advice, however, is don’t look for a list of good businesses. Don’t ask what the big opportunities are. Get a clue. Go look in the mirror. And as you look in that mirror, ask yourself these questions:

• What do I like to do? How am I different? What is there about me that sets me apart? What excites me? What am I good at?
• What do I like to do that other people (or companies) want to have done? What do I like to do that people will pay for? What do I like to do that I do better or differently from others who do it?
• What value can I add? What’s missing? How can I do something better than what’s now available? What can I see about the future that others can’t see?
• Where can I give value that isn’t there right now?

I’m down on lists because I don’t see the startup process as beginning with some idea that’s on a list, followed by research and putting together a team and developing a plan and starting a business. Instead, I see most good businesses starting with something that the founders believe in, something that they think ought to be done or ought to exist, something that excites them or intrigues them, all of that followed by planning and building a business to make it happen.

Here’s how it goes: you develop the original business plan to establish that your idea is an opportunity. Ideas are a dime a dozen, commonplace, and without any essential value. Opportunities are a subset of ideas. The planning process separates the opportunities from the ideas.

The heart of the business is that trio of identity, market, and focus. A lot of that is about you and what you want to do and what you can do better. And if building the business, I hope you fall in love with the business first. I hope you recognize the need and see how you can fill it. And, I hope you like the vision, know that you want to do it, and discover that you’re excited by it.

Do something you want to do and believe in. That restaurant you’ve always dreamed of, or skiing equipment, or a newsletter … success isn’t based on the idea, it is based on how hard you work at it, how much value you deliver. When somebody close to me wanted to start a graphic arts business, I didn’t say ‘no, don’t, there are a million of them.’ Instead, I said their success would depend on getting customers, providing value, and, in short, working hard.

In the Art of the Start, Guy Kawasaki offers a list of ways to generate new business ideas. If nothing else, read his first chapter. Just click, you can do that now; or later, if you want to keep reading me. Guy talks about getting going, about ideas being generated by impulses like “I want one” and “I can do this better” or “my employer wouldn’t (or couldn’t) do this.” There too, it doesn’t come out of the blue, it starts with you.

In Growing a Business, Paul Hawken shows how a business grows naturally out of the owners and founders doing something they want to do, filling a need they believe should be filled. I recommend it.

To be fair, there are exceptions. Franchise businesses, for example, when they work, are a business formula you pay for and implement, guided and taken by the hand every step of the way. Being a McDonald’s franchisee means you’re a millionaire, it doesn’t mean you like eating or preparing what McDonald’s restaurants serve. You buy a business to run. They tell you how to run it. If it isn’t a set formula and if they don’t give you all you need to know, then it’s a bad deal.
Thanks for asking.

It’s called The Trunk Club. It’s a great example of how market, identity, and focus come together to build new businesses that combine new ideas with old-fashioned serving the customer. It’s also a personal favorite because it’s the brainchild of one of my former students.

Three years ago Joanna Van Vleck was a student at the University of Oregon who wanted to build her own personal shopping business. Now she and partner Brie Chapman have built a successful business in Bend, Oregon and are looking to expand nationally.

I summarized the market-identity-focus trio as the Heart of a Business on Planning Startups Stories.

• The market is about what people want, or need, who they are, why they want or need it, and how to reach them.
• The identity is about who you are, your business, what you want, what you’re good at.
• The focus is how you bring these elements together, differentiating, positioning, combining your market focus with your business offering focus with your strengths.

The Trunk Club is a good example of how these three come together in a real business. You can’t really separate them.

Identity

Joanna arrived in my class a few years ago wanting to build a personal shopper business. She developed a business plan for that business. She had worked at Nordstrom while studying, she knew the market, she knew she liked style and wanted her own business. I don’t know Brie, but I do know Joanna is doing what she’s always been good at and always liked doing. I also know that she’s young, personable, very self confident, and very determined.

Market

Joanna and Brie discovered their target market was men, particularly men 35 and older who value service more than low prices. These men were far more likely to want the service of shopping instead of doing it themselves.

Then came an important “Aha! moment:” relatively few men identify with the phrases “personal shopping” or “personal shopper.” “But men join clubs,” Joanna told me on the phone this month. “they join golf clubs, athletic clubs, cigar clubs and hunting clubs.” So the Trunk Club was born.

Focus

Focus is magic. Once Joanna and Brie realized they were offering personal shopping services to a high-end older male target market, then the business offering and the marketing followed. The Trunk Club has members who pay annual dues. They get sized and customized with what they like. Then they call and ask for whatever — new suits, new casual, new khakis, new cargo pants, whatever — and the Trunk Club delivers.

The Rest of the Story

The business model is pure gold. The target customer doesn’t want to go shopping and is happy to get new things delivered, so The Trunk Club doesn’t need or want a retail location or — more important — the investment and working capital and fixed costs implications of a retail location. In the meantime, though, there’s enough business volume to land business relationships with several of the more stylish and desirable clothing brand names and major distributors, so the member gets what he wants, major brands and great styles, without the effort. And The Trunk Club can make the same margin as the retail boutiques, but without the overhead; and members get the same stuff for no more than they’d pay in the store.

Joanna and Brie started in Bend, which is also one of the fastest growing and most new-business-friendly cities in Oregon, with a view of Mt. Bachelor and the Three Sisters Wilderness; a great place to live. Their flagship Trunk Club has been operating for a while now and has 85 members. Having proven the model, they’re now looking for capital to expand quickly into a selection of major markets: Portland and Dallas now, others very soon.

Earlier today I had one of those light bulbs go off in my head. I’m referring to those times when you’re reminded of something you already knew, but had forgotten. In my case today it was this: planning your new business, the one you’re thinking of starting, ought to be fun. Planning isn’t about writing some ponderous homework assignment or dull business memo, it’s about that business that you want to create. It should be fascinating to you … what do people want, how are you going to give it to them, how are you different, what do you do better than anybody else …

Honestly, isn’t that related to the dreaming that makes some of us want to build our own businesses? It was for me, every time, including those that made it and those that failed. Dreaming about the next thing I wanted to do was always part of it. Dreaming is related to looking forward, anticipating, and — in this case — business planning.

This came up this morning during my second day of video sessions for SBTV, which has been filming me on starting and managing a business, and business planning. I was answering Beth Haselhorst’s question
relating starting a business to getting out of the cubicle when I realized that I was in danger of forgetting that business planning is part of the dreaming and part of the fun.

I think what’s important is that none of us should be intimidated by business planning because of what I’ve called the not so big business plan, or the point I made in this blog last month about starting anywhere you like. The business plan is a way to lay out your thoughts and think it through — it shouldn’t be some dull ponderous task you have to get through.

If thinking through the core elements of your business, or for that matter the details of your business, isn’t interesting, then get a clue. You’re not really looking forward to it. Do you not want to do it?

Remember, you don’t have to do the whole plan all at once. One of the most common and damaging myths about planning is that you are supposed to work only on your business plan until you finish that plan. To the contrary, you should be enjoying thinking about the market, what you do well, how you want to focus, what sales might be, what costs might be, and so forth; and you should be writing some of that down, simple and without a lot of intimidation, just write it down and save it and then do something else. You start your plan wherever you want to, and you start using it the next day, and you don’t worry about exactly when it is formally done, because it never will be. Just get going, but enjoy the thinking and planning while you do.

If you dread the planning of your next vacation, stay home. If you dread the planning of your new startup, don’t start it.

I had coffee yesterday with a young man locked in a battle to the death with his startup. Lack of sleep, lack of exercise; it worried me. I’m sure I’ve been there a number of times myself during my years in business, and that’s precisely when I needed some advice, like the advice I offer today.

As you develop your startup take the time to define success, whether you explicitly state it in your business plan or not (and probably not, given what a plan is). What’s important to you? Is business the only thing, or is business a means to an end. Does having your own business mean you don’t have a family, or a vacation, or other things that are important to you?

Put some measurements of success somewhere so that you’ll be able to access them from time to time, as business grows, problems arise, and time goes on. Does having your own business mean you can coach the kids’ soccer team, and attend parent-teacher conferences? Does it mean a couple weeks skiing every winter?

I often talk about getting general agreements between partners and co-founders in writing. Usually people think that’s a matter of buy-sell agreements and dissolution of partnerships and such, but that’s not all. If you haven’t done this yet, do it. Define your success.

Sure, that definition might change at some point, lots of things change. At least you should have your definition of success available so you can review and mark the change. Reminders are good.

I like to talk about passion in startups. I do believe that your chances are much better if you work your startup around something you want to do. Better yet, work your startup around something you believe in. On that one, happily, it’s not only do as I say, it’s also do as I’ve done, because my startups have all been related to work I liked to do (business planning) and believed in (software).

Still, life is short. Your life is about life, not startups. Sure, we’ve all done the overnighters in crunch times, but don’t lose track of what’s really important. Business is what we do, not who we are. If you have a family, get home for dinner, and if you have to, you can work after dinner on your computer at home. Coach soccer. Work out.

Don’t let startup passion spoil the rest of your life.

Think of your start-up business plan as a matter of blocks; pieces. You don’t have to have the whole block structure done before you take any next steps. Start your blocks where you like. Some common blocks are the mantra, the mission statement, the keys to success, maybe a break-even analysis, or a SWOT, or how about the whole discussion of “who needs it” and “why” and “how badly?” Any of these things are blocks. A sales forecast is a block, and so is an employee/personnel plan, as in laying out month by month how many people are working here in your hypothetical company, and how much each of them get paid per month.

The key here is that you don’t get bogged down on having a finished business plan. You hear the stories of people who spent months developing their plan, but never get started. So instead of that, think of the blocks.

Start wherever you like

The blocks idea also saves you from the tyranny of sequence. You don’t have to start at the beginning and work thorugh to the end. You can jump in and start wherever you want.

• Mission statement, maybe? Define for yourself what your company will do for its customers, for its employees, and for its owners. Mission statements are a bit last century, perhaps doomed forever to Dilbert-related derision, but that’s still where some people start.
• Maybe you’re a numbers person. That’s okay, don’t apologize, business planning needs that too. I was a lit major in college but I still like to start my business planning with a sales forecast. Then I’ll do some conceptual work, then back to maybe costs and expenses, classic budgeting work, then back to basics.
• Business plans have hearts like artichokes do. In both, their hearts are their core, the best of it. The heart of a business plan is its marketing plan, meaning its identity, positioning, its differentiation, the sense of what business you’re in and why people buy. I like to call this your identity. That’s a great place to start.
• Some plans start with a product or prototype product. Maybe your first block is a bill of materials for manufacturing the new thing. That’s okay too, that’s a block, you can jump in there.
• There are lots more blocks. The mantra. The vision. A break-even analysis. A market analysis. A market forecast. Personnel strategy. Financial strategy. Some people like to build an equity plan first, focusing on how many shares exist, how many the founders get, how many the investors get.

Don’t worry about finishing

A good business plan is never done. It’s the launch of a planning process, and you want to understand from the very beginning that if you ever think your plan is done, your business is probably finished. Understand from the very beginning that you’ll have to review and revise regularly. Assumptions will change, your forecasts will be wrong, and the art of management will be figuring out when to revise the plan to accommodate changing reality, and when to stick to the parts of the plan that will work if you’re consistent but need more work. That’s paradox, of course, and that’s why we do it — owners and managers — instead of computers.

– Tim

Talking about starting a business? Before you start the talking, identify yourself and your business on this scale. It makes a huge difference. Try to choose one of three possible choices, the one that most applies to you and your business.

1. Just get going: you don’t need anybody’s approval except possibly your first customer or client. You’re a consultant, artist, artesan, professional service, or something else that doesn’t require building a product, or packaging, or design. Nobody has to approve your plan except you. You have what you need to get going, or the money you need to acquire what you need to get going.
2. Building something: You’re looking to start a business that requires more start-up money than you have, maybe more knowledge than you have. This is like a restaurant, an auto body shop, a retail store, a serious website, anything that requires building serious products, or packaging, or significant market launch. For the restaurant, as an example, by the time you buy the expresso machine, the chairs and tables and stoves and ovens, hire the people, develop the identity, prepare the location, you’ve spent serious money. You need investors, or partners, or (gulp) a lot of debt.
3. Planning to fly: You have worked with a successful startup or two or three behind you, you’ve got a team ready, and you have an idea that seems to offer very high growth of sales (or maybe web traffic instead of sales, if you’re in that world) and reasonable prospects of defensibility.

All three of these are startups, but they have very different needs and wants and prospects. One of the things I want to do with this new blog is distinguish between these different kinds of startups. Much of the writing and thinking about startups applies to some but not all startups. Here are some examples:

1. What do you need to start a business? I’m a business planner, I have been for years, so you think I’m going to start talking about the business plan.
   • However, while I do think everybody benefits from planning, if you’re in that first group — the get going group — when what you really need, can’t start without, is at least one customer. I supported my family with planning and research consulting for more than a decade before Palo Alto Software took off, and that business started with a customer (Apple Computer) before there was a plan.
   • If you’re in the second group, the builder group, then yes, you need to develop a business plan. You can’t get customers until you have a location rented and fixed up, you have assets in place, you’ve launched the marketing, etc. You don’t have the resources on your own, so you’ve got to involve others, and that takes a lot of explaining, and making commitments, and, frankly, it’s just dumb to try to go that way without having a prepared plan.
   • If you’re in the third group, intending to fly, some of the more fashionable high-tech and highly-visible ventures of recent years were able to land at least verbal agreement on venture financing without actually completing a full traditional business plan document. They used pitch presentations and personal track records and personal commitments. Those, however, are the exceptions; most of the high flyers need a plan whether their investors read it in detail or not, because they can’t build a pitch without a plan and they can’t manage without a plan. Of course some of them avoid the plan because they confuse it with a brick wall, but that’s a different post.
2. The legal steps change. The “just get going” crowd doesn’t really need to sweat the difference between corporations and partnerships and LLCs and ficticious business names. I ran my consulting business for years using my real name and my social security number. I didn’t worry about corporate umbrellas or the extra expense of legal formation because — who was I kidding? — it was just me and my client. I was a lot more worried about how long they took to pay invoices than about them suing me. Those of you in the “planning to fly” group, in contrast, are going to have legal work coming out of your ears, lots of jockeying for position between your lawyers and their lawyers, with their lawyers having the final say because they’re writing the checks. You builders will need good attorneys to set you up right, with the details depending on what you’re doing, resource levels, which state, and other factors.

So those are just a couple of examples, but I assume you get my point. In this blog, talking about startups, let’s establish a better mode for talking about apples as apples and oranges as oranges; or something like that.

– Tim