1(c)A Business Plan that Sells
Who are you making the businesss plan for ?
The first answer here should be ;for your business . Business Plans serve as guiding policy documents for your business . That is, the business will continue to depend on it even after the funding has come in . It should be open to amendment so that it remains relevent to a growing business and a changing enviroment.
The second answer should be ;for your funders. Who are these people ? Funders are the people who can finance your business idea . For the sake of simplicity, I have reduced them to 4 categories :-
- Individuals.
-Bank Loans officers.
-Angel Investors .
-Venture Capitalists.
Individuals -these can be friends or family members .They are closest to you ,trust your ability and believe in you.They always turn out to be a good first option for business idea funding.It would be ideal to make a business plan they understand aand can interpret.We are not ruling out yourself as funder .
Bank Loan Officers or Banks-these people see a lot of busines plans in their work and ,therefore it important that yours stands out from thr pile . Keep it simple and lean . It should not look like a bible. Remember, they will ask for collateral security. This means in the event your business fails to pay back the loan they can recover their money. If you have no collateral-get collateral or forget about banks and find other ways of raising capital . It helps to know who is looking into your business plan . If your application is unsuccessful; ask why it failed , learn and try again.
Angel Investors -these are wealthy individuals( some are entreprenuers who have succeeded )who have a lot of funds and are willing to take a risk by lending to an entreprenuer . I am told that about US$14 million worth of Angel investor funds circulates the globe daily seeking investment opportunities.In the First world countries these are widely accessible -there are directories for such people ( check google to confirm ) . This type of investor seeks to get to the entreprenuer before the Venture Capitalists arrive on the scene and secure a favourable position,say 60 % of your business idea . Most Angel investors prefer IT start-ups as these grow faster and offer a good return on investment.Some have specific preferences ,like some avoid gambling business ideas for moral reasons . Once again, tailor-make your Business plan to appeal and make sense to them and be especially realistic on the Financial forecasts ( hire an accounting person if necessary to ensure that the figures are realistic). Should your business fail they stand to lose their entire investment so bear in mind that they will do all in their power to prevent such a loss.
Venture Capitalists -are businesses which are in the business of investing in new business ideas and existing businesses . The often prefer businesses that will grow to the point of listing on Stock Exchanges . At this point ,they sell their stake (exit point ) and realise astronomical gains or continue well after shares have been floated and the company listed . For most entreprenuers these are the best people to go with but they will do all in their power to ensure that they gain the most from your business idea .However, a well negotiated deal with a venture capitalist(VC) is one that allows the entreprenuer to buy back all or most of the shares of the business at the point the VC(not meaning VietCong) intends to exit .As stated above ,VC also stand to lose their entire investment if the business idea doesn't succeed ,therefore they will place their people (considered experts ) to sit on the Board of Directors or occupy Senior Management positions . In reality, they will attempt to reduce your influence and run the show to ensure they make a profit on their investment. If an entreprenuer intends to involve venture capitalists it is recommended that the entrepenuer seeks the services( an loyalty) of a good accountant and a competent lawyer as preferred advisors .You will be required to fund at least 10% of your business start up as a show of your commitment to the success of the venture .
Tuesday, January 25, 2011
My Thoughts on Entreprenuership In Africa
Chapter 1 Developing Concepts that Sell
The Reality Is :The World rewards you when you provide solutions that solve problems !
The rewards come in form of money.This is the basic ,simple fact tha must motivate any entreprenuer .Solve small problems -earn small rewards .Solve Big problems -earn big rewards.
Any emtreprenuer who truly aspires to succeed must be on the ;lookout for problems.He must train his mind to spot these and estimate how many people they affect. The more people in need of the solution -the wider the sources of revenue.Bill Gates did that by providing an operating system for all computers ,world wide .Sometimes this requires looking into the future and recognising problems in advance- long before the problem is noticeable. Train yourself to see problems and picture yourself solving them . Interpret every problem,big or small,as a potential business idea .Seek to create solutions for daily problems you see. I know some problems can't be solved that easily , for example ,Global warming - but some affect us in many small ways everyday.These are the ones an entreprenuer must attempt to provide solutions for.
Africa has so many problems -big and small ones .In fact,it is also known as the continent of problems and hardship.This alone must motivate every entreprenuer make Africa their business laboratory.
Why Africa ?
Because economies in that continent are forcasted to grow and will be growing at above 5% on average . 7 out 10 of the fastest growing economies are from African countries the world over. Africa's economy is made up of a few big corporations (Multi- nationals /Conglomerates) and a lot of small scale /medium entreprises making the the bigger bulk of players in commerce .Compare this with the rest of the economies elsewhere on the globe.I am not ignorant to the challenges of doing business in Africa .They are many . Consider the differences in business perspectives, culture and language;not forgeting corruption,bureacracy-the list of negatives goes on . Thats not our focus( and shouldn't be for the entreprenuer)because they will always be hurdles -like people who will tell you it can't be done . That shouldn't matter -what matters is what you're seeing with your mind's eye-Your vision. Thats what should drive an entreprenuer and the passion to provide a solution -at a profit, of course.
1(a) Creating Concepts/Ideas Around Existing Business
We live in a time where technological advancements and the consequential transformation in consumer preferences is making old solutions irrelevent to the current problems.
The advent of the internet is one such example. The Postal service offered by Post Offices has been replaced by electronic mail . This has affected the postman . In some countries the postman no longer exists . This development has also impacted the production and sales of stamps ,envelopes and post cards.
The arrival of Amazon .com means books have become electronic .How do you thnik this will affect writers,publishers,paper milling and manufacturing companies ,and the forestry companies that were reliant on fast selling paper backs ( I'm not saying paper sales have declined ).
Similar changes have affected airline travel agents who used to physically sell airline tickets to commuters and now the same commuter can purchase their tickets and secure a booking on any airline from the comfort of their home or office .
All these changes mean old solutions are no longer relevent and this presents an oopportunity for the budding entreprenuer to innovate around these existing businesses.Once again, it requires the entreprenuer searches for the problems,first.Todays entreprenuers must see themselves as modern day inventors . This is why Thomas Edison ,Alexander Graham Bell and Henry Ford made fortunes ( it appears they made a lot more than Bill Gates has today if you factor in inflation )-they simply invented solutions for everyday problems . Problems which affected everyone .
Alexander Graham Bell figured out that long distance communication by telephone would revolutionalise the world . I find the same concept at work at Facebook today. The only difference is Mark Zuckerman found out that people love to see pictures of themselves -just like they love their images on a mirror and would spend hours in front of it . Communication is still at the heart of both concepts .
Zuckerman innovated and created around several existing businesses.So can you !
I wll explore what Facebook's core business is in one of my next Chapters . Ineed you to tinkabout it and take a guess. If you have the answer -make a contribution and join our debate here or on my facebook wall
http://www.facebook.com/LovemoreMhindu
1(b) Turning your Solution into a Business
Why build a business around your solution ?
Businesses are built for two reasons
(1) To provide a financial return on Capital upon selling it.
(2) To provide regular cashflow or revenue
You can build your business with the aim of selling it .Sabeer Bhatia ,an Indian Software engineer ,designed ,built and ran Hotmail before selling it to Microsoft.As an entreprenuer,you may also build a business which you will keep and grow,earning revenue from it as it grows and expands .For the sake of simplicity,lets say the first reason is-build to sell and the second reason is - build to keep and earn (most family owned business have this characteristic).
As an entreprenuer you need to be clear on which path you will take . It is also significantly important to remove all emotions from business and view your business purely as a business not your baby.
Building a business starts with a plan . No one I know of ever tried to build a house without a plan . Even in the poorest African villages ,the builder has some sought of mental picture of where he will build a hut ,what material he will use and how much . Who he will build it with and for how long( perhaps it must be completed before the rains start-kind of time frame .Think of it ,its crazy to start a constuction project with out a comnstruction plan or to attempt to build a house using just any other building plan designed for another site elsewhere.
I've lost count of how many business plans I've seen that look alike .I agree that some form of uniformity must exist when making a business plan however,I feel a business plan for a website development company must not be the same as that of a private medial centre.The two businesses are not the same but its amazing how the same format is used for both.
My opinion is ,the entreprenuer is the inventor of the solution only he/she knows best how the solution must change the lives of those its intended for. your business plan must be made in the same unqueness as your solution . It cannot be a copy of another business at all.
The Reality Is :The World rewards you when you provide solutions that solve problems !
The rewards come in form of money.This is the basic ,simple fact tha must motivate any entreprenuer .Solve small problems -earn small rewards .Solve Big problems -earn big rewards.
Any emtreprenuer who truly aspires to succeed must be on the ;lookout for problems.He must train his mind to spot these and estimate how many people they affect. The more people in need of the solution -the wider the sources of revenue.Bill Gates did that by providing an operating system for all computers ,world wide .Sometimes this requires looking into the future and recognising problems in advance- long before the problem is noticeable. Train yourself to see problems and picture yourself solving them . Interpret every problem,big or small,as a potential business idea .Seek to create solutions for daily problems you see. I know some problems can't be solved that easily , for example ,Global warming - but some affect us in many small ways everyday.These are the ones an entreprenuer must attempt to provide solutions for.
Africa has so many problems -big and small ones .In fact,it is also known as the continent of problems and hardship.This alone must motivate every entreprenuer make Africa their business laboratory.
Why Africa ?
Because economies in that continent are forcasted to grow and will be growing at above 5% on average . 7 out 10 of the fastest growing economies are from African countries the world over. Africa's economy is made up of a few big corporations (Multi- nationals /Conglomerates) and a lot of small scale /medium entreprises making the the bigger bulk of players in commerce .Compare this with the rest of the economies elsewhere on the globe.I am not ignorant to the challenges of doing business in Africa .They are many . Consider the differences in business perspectives, culture and language;not forgeting corruption,bureacracy-the list of negatives goes on . Thats not our focus( and shouldn't be for the entreprenuer)because they will always be hurdles -like people who will tell you it can't be done . That shouldn't matter -what matters is what you're seeing with your mind's eye-Your vision. Thats what should drive an entreprenuer and the passion to provide a solution -at a profit, of course.
1(a) Creating Concepts/Ideas Around Existing Business
We live in a time where technological advancements and the consequential transformation in consumer preferences is making old solutions irrelevent to the current problems.
The advent of the internet is one such example. The Postal service offered by Post Offices has been replaced by electronic mail . This has affected the postman . In some countries the postman no longer exists . This development has also impacted the production and sales of stamps ,envelopes and post cards.
The arrival of Amazon .com means books have become electronic .How do you thnik this will affect writers,publishers,paper milling and manufacturing companies ,and the forestry companies that were reliant on fast selling paper backs ( I'm not saying paper sales have declined ).
Similar changes have affected airline travel agents who used to physically sell airline tickets to commuters and now the same commuter can purchase their tickets and secure a booking on any airline from the comfort of their home or office .
All these changes mean old solutions are no longer relevent and this presents an oopportunity for the budding entreprenuer to innovate around these existing businesses.Once again, it requires the entreprenuer searches for the problems,first.Todays entreprenuers must see themselves as modern day inventors . This is why Thomas Edison ,Alexander Graham Bell and Henry Ford made fortunes ( it appears they made a lot more than Bill Gates has today if you factor in inflation )-they simply invented solutions for everyday problems . Problems which affected everyone .
Alexander Graham Bell figured out that long distance communication by telephone would revolutionalise the world . I find the same concept at work at Facebook today. The only difference is Mark Zuckerman found out that people love to see pictures of themselves -just like they love their images on a mirror and would spend hours in front of it . Communication is still at the heart of both concepts .
Zuckerman innovated and created around several existing businesses.So can you !
I wll explore what Facebook's core business is in one of my next Chapters . Ineed you to tinkabout it and take a guess. If you have the answer -make a contribution and join our debate here or on my facebook wall
http://www.facebook.com/LovemoreMhindu
1(b) Turning your Solution into a Business
Why build a business around your solution ?
Businesses are built for two reasons
(1) To provide a financial return on Capital upon selling it.
(2) To provide regular cashflow or revenue
You can build your business with the aim of selling it .Sabeer Bhatia ,an Indian Software engineer ,designed ,built and ran Hotmail before selling it to Microsoft.As an entreprenuer,you may also build a business which you will keep and grow,earning revenue from it as it grows and expands .For the sake of simplicity,lets say the first reason is-build to sell and the second reason is - build to keep and earn (most family owned business have this characteristic).
As an entreprenuer you need to be clear on which path you will take . It is also significantly important to remove all emotions from business and view your business purely as a business not your baby.
Building a business starts with a plan . No one I know of ever tried to build a house without a plan . Even in the poorest African villages ,the builder has some sought of mental picture of where he will build a hut ,what material he will use and how much . Who he will build it with and for how long( perhaps it must be completed before the rains start-kind of time frame .Think of it ,its crazy to start a constuction project with out a comnstruction plan or to attempt to build a house using just any other building plan designed for another site elsewhere.
I've lost count of how many business plans I've seen that look alike .I agree that some form of uniformity must exist when making a business plan however,I feel a business plan for a website development company must not be the same as that of a private medial centre.The two businesses are not the same but its amazing how the same format is used for both.
My opinion is ,the entreprenuer is the inventor of the solution only he/she knows best how the solution must change the lives of those its intended for. your business plan must be made in the same unqueness as your solution . It cannot be a copy of another business at all.
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