Starting a Business?

I was recently contacted to advise someone who wanted to develop a business plan for a new business.  The individual was very confident in their qualifications to successfully organize and start this business.  I decided to meet with them to determine if there was the right chemistry for this to be a successful engagement.

In first meeting with them it was clear that they were very enthusiastic, demonstrated high energy and the entrepreneurial confidence needed to start a business.  However, I soon detected a number of signals that concerned me so I continued and questioned further to see if they would begin to see what concerned me.  After an hour I had the following unresolved or improperly answered issues that said this person was definitely on the wrong track and needed to reconsider their current plan to start a business.

  • Previous Experience
    • Had served in the target market as only an office worker handling paperwork.
    • Despite their desire to take on a principle role in the new business negotiating and closing business transactions, they had not sought this experience during their employment.
    • No experience supervising, recruiting, selecting and hiring key employees.
  • Market Knowledge
    • Unable to define the market but new they could be successful in it.
    • After much discussion they did define the target market as helping women owned businesses to go public.
  • Customer Experience
    • After help defining the market they were unable to describe any examples where they had discussed this new offering with any women owners (or any owners for that matter).
  • Business Model
    • They did not have a firm explanation of how the business would work.
    • They said they would hire the best people but did not have a clear answer as to why these “best people” would want to join the new business.
    • There was no financial plan as to how this business, employing the best people, would survive until a flow of business was established.
  • Funding Sources
    • This person was confident that others would invest in the business despite the shortcomings in key areas noted above.
    • Claimed to be able to attract investors but could provide no details as to how this would be done, previous experience getting funding, or established reputation in the marketplace successfully running business that provided a return to investors.

I closed the meeting by wishing them luck but that I did not feel that I was the best person to provide them further assistance until they could solve the glaring gaps in their story above.  I even declined to be compensated for my time, as I did not feel I had provided this person any value.  I suggested they engage someone to advise them on how to shore up the gaps but they said they already had one who advised they get someone to help with their business plan.

Summary

Despite the evidence above this person demonstrated a reasonable level of intelligence, had completed college and was prepared to get an advanced business degree (ready to do it while starting the business?).  However, they did not have a good understanding of reality and what it took to successfully start a business.

What lessons can be gleaned from this story?

  • Be honest with yourself.
    • No matter what business vision you have, find a way to clearly demonstrate that you know what it takes to be successful.
    • Take inventory of your skills, likes/dislikes, abilities, comfort zones, experience and how others view you in determining your fit for a particular business.
  • Know your customer.
    • Test your idea with the customers that meet your targeted profile.
    • Understand what it takes for them to see value in what you are offering.
  • Test your business idea with others who your trust and have a successful business background.
    • Be open to things you have not thought of.
    • Give good consideration to their advice to improve your ability to be successful.
    • Determine if your business idea/plan is believable to others who know you and understand what it takes to pay back an investment.
    • Balance your emotion and energy with mundane analysis to see if it all adds up.

Going into business is a serious decision that will impact you, others who invest in you and your idea, and others you employ and . . . most importantly . . . those who become your customers.

Do your homework, exercise your plan to understand where weak points exist, and focus on the quality of your execution!

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