Today’s Wall Street Journal Report is on Entrepreneurship with the lead article on “Why Business Plans Fail” by John Mullins. Along with his description of five common flaws, he also provides six telltale terms that should be avoided and why. A good read for any entrepreneur who is either in the process of, or getting ready to, put together a new business plan. It’s not so much that Mr. Mullins provides any of the “Ahaa Insight” topics that come up every so often. On the contrary, these are things that we see over and over again. He does have a way of describing them in a fresh way.
He also gives some common sense suggestions like don’t start out developing your business plan. Instead get out from behind your computer and talk to prospective customers about your idea and find out, first hand, what they like or don’t like, how they want to get it, and how much they are willing to pay. This gives you the ability to add primary research to your plan versus speculative and secondary research to support your supposition. Great advice!
I really enjoyed his listing of the six telltale terms. Two of them are especially interesting to me. The first is “no competition”. I am not sure who suggested or where the entrepreneur read that it is best to say that the have “No Competition”. I realize that the entrepreneur thinks that this will make their opportunity more compelling. In fact, it has the opposite effect. We assume that no competition means that there may not be a market or that the entrepreneur just didn’t do their homework. There is probably indirect competition someplace, and, as the article states, “competition may be a good sign, as it suggests that there’s a problem that someone besides you thinks is worth solving”.
The other negative term is “Conservative”. I really dislike hearing an entrepreneur’s rationale for weak financials is based on their using conservative data! If you think about the overall process of starting a business, especially if you will need other peoples money, there is nothing conservative about it. A large number of startups fail. Investors have very few successes in their portfolios. So, why wouldn’t you want to show what you believe you can reasonably do in three to five years? You don’t get to the next meeting by being conservative.
A couple of other things, there is a podcast listed where Mullins provides some additional insight. He also mentions that he has a book coming out and one of the subjects is that business success might come from the second or subsequent versions of your plan.
There is also an interesting video by Jerry Engel of UC Berkeley Lester Center for Entrepreneurship on pitching your opportunity. Engel describes in about 2.5 minutes why you have about a minute to get investors attention if you want them to listen to the rest of your presentation.
Between the article and the additional media, this is a valuable use of about 20 minutes of your time especially if you pay attention and incorporate these ideas into your plan and presentation.