Entrepreneurship is creation. We all want to create something from nothing. First, we create it in our mind, in a very private way. All entrepreneurs operate on vision and passion. It is important to let yourself create a huge vision for the future business.
For Gnossos, my vision was a mix of a few things, without a single focus. I wanted to work with 10 smart people rather than 30 average people. I wanted to have multiple vertical market software products but was unsure what markets or why I wanted to do that. I wanted to grow the company rapidly but was unsure why I wanted that. I liked the idea of being a product company rather than a service company because a product company was worth more, but I had no vision connected to that concept. In short, for a 26 year old without prior business experience and only one prior job, I did okay with some minimal vision for the business and that helped, but I lacked a BHAG. A BHAG is a big huge audacious goal, a phrase created by Jim Collins in his book, Good to Great.
If you read a lot of business books and magazines, it seems that some companies which are fairly new and doing quite well, had quite a clear vision behind them. Think a bit of Amazon and Jeff Bezos. Or Starbucks and Howard Schultz. Or Walmart and Sam Walton. One person got a vision in their mind of something simple and huge and created a business system which had a purpose to make that vision a reality. And it happened. If that doesnt get you excited, I am unsure what will!
I believe in serendipity. At various unusual moments, I am struck by new business ideas or enhancements to current business ideas in my head. I enjoy letting the visions fill my mind and I now realize that it is important to play out the vision to the complete end result of the business at maximum success. The bigger the vision you can imagine, the more your mind expands to create a business to achieve that vision.
I will have a business vision with a big huge audacious goal.
Many people start a business for a reason, such as to make a lot of money, or to financially survive, or for creative outlets. Sometimes the reason for the business is too small compared to a broader life purpose.
When I started my business, I was 26 years old and had just spent a year traveling around the world. Although I had been to over 70 countries, my life experience was too limited to realize aspects of life which I have learned since. Thus, my life purpose connection to my business was based on my life view at that age. For me, I was interested in doing work which was in sync with my personal values, working with interesting people, and helping to encourage entrepreneurial approaches. I was not motivated solely by making a lot of money, but I knew that if my business did well, I would become wealthy.
People who start businesses do so for different reasons. Sometimes the business is partially an accident. An effort at self-employment takes off and becomes a thriving business. Sometimes people start a business with a vision. For example, a parent whose child is diagnosed with a rare disease starts a business to find a cure for that disease. If you have a powerful connection to your life purpose, your business will have greater success.
At my current age of 45, I am older and wiser and able to see the forest from the trees. I am defining a clearer life purpose which will help infuse decisions I make about what businesses to start.
I will be clear about how my business helps me to achieve my life purpose.
Business is personal. If you are starting a business, you are doing so for various personal reasons. Whether you are seeking outside capital or not, it is important to be open with yourself of the personal purpose for the business.
At Gnossos, I did a good job of writing a business philosophy and some personal purpose before I ever started the company. In November 1985, I spent a few days at a café in Kathmandu, Nepal, thinking about whether to enter the foreign service for the State Department or whether to become a software entrepreneur. Once I decided on starting a business, I wrote down the reasons and the basic philosophy of the business. All of this I did before I had any clear ideas of the product or service we would offer.
Many people feel that business is business and personal desires should remain separate. Some people with this attitude have very financially successful businesses, but they may not always end up with successful lives. Now, there is more of an accepted view that business is personal, on all levels, and a business owner should connect their business pursuits with personal purpose. This approach reduces stress and increases happiness.
Going forward, I have a variety of personal interests which one or more businesses may address. Since I like the idea of integrating my work with the rest of my life, I will seek to enhance the connection of the business plan to my personal purpose on many levels. I believe that doing so will make me more productive and enhance the success of the business.
I will have a business plan which includes my personal purpose.
An elevator pitch is a description of your business which is short enough that you could provide it to a venture capitalist you meet in an elevator on the ride between floors. Another version would be how you would describe your business to someone new you met at a social gathering.
Over the years, my pitch for Gnossos changed. Also, my pitch changed depending on what type of person I was talking to. After about 5-10 years into the business, I was never happy with my pitch. I realize now because I was never excited by the industry I ended up working with. Early, when software was a newer concept in the 1980s, I used to say Gnossos is a software company involved in database applications. Later, it became, Gnossos does software for government relations lobbying. Most people then thought we sold to the government, which we did not. So I got tired of that word and said Gnossos sells software for political action committees and lobbying by corporations and associations. As that mush came out of my mouth it just hammered home the point that I did not like the subject matter of the industry.
More entrepreneurs than I thought seem to have an elevator pitch. I usually do not like it when I hear it. It often seems too vague with a vast target market, or a vision too distant in the future. I tend to like to hear an elevator pitch which has some hook which sounds interesting and different some differentiation. Or something which is such a specific market that it is crystal clear. For example, My company does software testing using outsourced staff in Ireland for smaller software firms with projects averaging $100,000. Compared to We do outsourced software testing. Or, We provide home grocery delivery to seniors in the Washington, DC area who are capable of ordering over the phone, cannot use a computer, and are physically unable to get groceries themselves.
For my future businesses, I will make sure that my pitch has a hook which is interesting. I will make sure that I use the exact same consistent wording with everyone I meet. In addition, as a follow-up for the pitch, I will have a few more sentences which I can add based on the type of person, such as a recruit, prospect, customer, potential investor, fellow entrepreneur.
I will have an interesting consistent pitch for my business.
If you do not set goals for your business, you will achieve far less than what is possible.
At Gnossos, I was wishy-washy about goal setting. Sometimes I would set goals and it would work great. Other times I was not engaged and did not set clear goals. I usually had a revenue goal for the new year, but lacked a detailed budget to support that revenue goal. My revenue goal often was based on some simple percentage of growth. When sales were down, I sometimes would set a save the day sales goal for myself for a 30 or 60 day period and would quite often make it happen. For operations, I would set process improvement goals and we would achieve them. But, I never really had 3, 5, and 10 year goals. Lesson learned.
A business colleague set a very ambitious 5 year goal. A true vision and business BHAG. My reactions were mixed. On one level, I thought how on earth will that business ever get to that size? On another level my thought was one of pride and admiration that my colleague had the guts to have such a BHAG and to state it to the staff and to close business friends. During a challenging time in the business, I believe that it was the vision of the future which helped pull through the tough times to set sail for the BHAG in the future.
I think that multi-year goals should be for a few different aspects of the business. I am thinking of measures for revenue, profits, value of business, owner's compensation, number of customers, and perhaps some non-quantitative narrative of the place of the company in impact and brand image.
I will have goals for my business for 1, 3, 5 and 10 years.
Too many people start a business with the beginning in mind and no clue about the end. An exit strategy is the goal or plan for how you will exit the business and cease or phase-out involvement. In some cases, if you die while still working in the business, that is a default exit strategy. Other options include ending the business, selling the business or parts of the business, and turning it into a family business for your children,
I did not have an exit plan for Gnossos. I liked the idea of simply starting a business which met my personal values and intellectual needs, grew quickly, and perhaps I would still be working at the company 50 years later. Best case scenario, Gnossos would become a global icon like Panasonic or Sony. Ah, dreams of grandeur in the early days! In the last few years of the business, I realized that my heart was not into the subject matter and industry politics and lobbying and I successfully exited the business by selling it for a good price to a competitor. The exit was clean. I was incredibly lucky because I was not needed for much of a transition beyond a few months. The acquiring company was already involved in my industry, well-established, and had resources to take over the business quite readily.
Some people start a business with an exit strategy based upon a certain number of years and a price to sell the company or value of company. Those with a pure money focus often seem to be more successful on the money side of things. Whatever you focus on you get in life. After being through the process of selling the business and paying deal costs, stock options, taxes, and the phase-out period, I understand things are a bit more complex.
For an exit strategy idea in the future, I will be sure to define the financial component in terms of the net, after-tax, proceeds to myself, separate from the overall selling price or value. Also, I will be clear about the ongoing involvement in any future business as part of a merger.
I will have an exit strategy for my business.
If you read other business plans, you will get ideas to incorporate into your business plan. If you absorb the lessons of successful business stories, you will be enthused to achieve similar success.
I am a voracious reader and constantly read almost all business magazines published. I tend to read non-fiction in various areas and take notes on the books that I read. The reading and learning that I did was critical to many of the good things I did in the business. It also made me more confident in making certain decisions.
I recently learned that many successful businesspeople do not read as much as they would like to. You can get audiotapes from the library or buy them. You can get summaries of books through both free and paid services. People who lead growing companies often consume enormous amounts of information and knowledge from various sources.
I tend to read widely and scattered. Since reading is an enjoyable hobby for me, I was not apt to be selective about my reading. Since my reading time, like everyone, is limited, I will pre-select and screen my reading to match my business goals.
I will learn from the stories of other entrepreneurs.
You either have a business plan or you do not. Small Mom and Pop businesses rarely have a business plan. Larger and faster growing companies usually do.
I failed to ever write a formal business plan for Gnossos and my business suffered because of it. I probably wasted a few million dollars of expenses and many years of the business by not writing a business plan. I started at various times but never finished. I wrote reasonable marketing plans or sections of a business plan.
Do most people write a business plan? I am unsure of the statistics. If you are seeking outside capital from someone like a bank or a venture capital fund, you write a business plan. Think of the basics. If you an angel investor, you probably want to see a business plan. If you are a venture capitalist, you want to see a business plan. A business plan is a minimum starting requirement to have discussions with investors. The logic sounds like it a good idea that is not often done because it is hard.
I need to write a business plan to control my excessive ideas. I am a good starter and a good finisher, but not so good at the block and tackle middle stages of management. It is an exercise in self-control and focus to detail the middle section of a business.
I will write a business plan and update quarterly.
Most businesses are in business to make a profit. If you want to make a profit, it would be a good idea to decide what type of profit you want.
I feel like I was close to a total failure at Gnossos regarding profits. And because of that, I suffered through a few cash crises and was less profitable than possible. Gnossos was started with $1,000 in July 1986. Since the company started as a consulting company, with myself as the only employee for the first 1.5 years, there were very little startup costs. After the first month, I was making a profit and made a profit for the first 8 years until I decided to focus on revenue growth and not profits. But, I had no financial accounting understanding of profit margin, contribution margin, gross margin, net margin, industry averages, etc. etc. To me, the profit of the company was simply the bottom-line pre-tax number. I gradually raised my salary and always took out less in salary from company than total profits. So, I was loaning money back to the company which became a shareholder loan. Because of the switch to focus on revenue growth, I just made sure cash stayed above zero and did not focus on profits. The result was a host of errors and mistakes.
Funny, but as I say elsewhere, businesspeople that are in business to make a lot of money tend to focus on this concept of profits. All of this depends on the mix of your goals of generating profits and cash flow to the owner versus building up long-term value. In the funny business of software for the past 20 years, many companies are valued more for their revenue than for profits. So, in 1994, I realized that a $10,000,000 software company with no profits was actually worth more than a $5,000,000 software company with $500,000 in profits. In the internet bubble, and still ongoing, many new business model or internet ideas are still having tremendous value placed on them without profits, let alone significant revenue streams.
I want to start at least one business which is designed to generate cash flow profits. To me, this is a challenge. And since revenue growth in a startup is difficult to predict, it is important to have profit margin targets for the business.
I will have profit and profit margin goals for my business.
What is the added value portion of your business and business model? More and more of the world operates with outsourcing of various parts of business. If you outsourced almost everything, what would you keep with the business?
Gnossos was built to be an integrated software company, at some level similar to an Oracle or Peoplesoft. Marketing would determine business needs of the industry, product development would design, develop, test, and maintain the software. Sales would sell the software license. Professional services would implement the systems. And administration would do the internal management.
For entrepreneurs, many of us feel like to run a real business, we need to have all the aspects of a real business, such as office space, a phone system, an accounting firm, a lawyer, full-time employees, marketing staff, sales staff, a receptionist, etc. Every single chunk which is managed internally becomes a dilution of focus for the entrepreneur. If you could outsource the function, consider outsourcing the function.
I understand that the first core capability is the incredible
entrepreneurial vision I have in my mind.
My mind is bursting with that vision.
Sometimes I think of myself as a Richard Branson of Virgin wanna-be
lots and lots of projects. I am a
visionary leader, not a people or project manager. I also feel strong with detailed operational
analysis and kaizen process improvement.
I like the idea of having something which may have enough numbers to be
able to analyze and improve on the process.