• Innovative Strategies That Create More Profits

Author: harborcapitalgroupinc

How to turn negative problems into positive results

Posted on by harborcapitalgroupinc

How to turn negative problems into positive results

If you are in business, problem-solving is a constant part of your business life.

No problem is simple, or it wouldn’t be a problem.

Some problems are critical to the success of your company.

One way to make solving problems easier and more effective is to turn a negative problem into a positive result. 

Start With These Questions

Start the process by answering the question, “what is your goal?”

Is this problem important enough to spend time and energy on it? 

If yes, you need to state the problem in writing so it is clear and you can focus on it. For example:

1. How could we differentiate our product or service from competitors?

2. What new product should we be developing? 

3. How can we improve our service?

Next, turn the problem into a challenge statement.

Michael Michalko, in his excellent book, “Thinkertoys,” explains this creative process

and that the challenge statement has to be written as a positive challenge.

For example, “why have revenues slowed down?” focuses on finding the negative reasons.

But, if you restate the problem into a challenge

such as “In what ways might I get customers to buy more?” you focus on finding positive answers. 

For each problem or challenge, state your problem as a positive challenge or statement. For example, instead of: 

Old statement: “How can we reduce costs to improve cash flow?

New positive statement: “How could we boost margins on current offerings?’   

Why can’t we stay on plan?” vs. “What could we do to meet consistent deadlines? 

Why is onboarding so complicated?” vs. “What could we do to simplify onboarding?”  

Note: Mr. Michalko recommends your challenge statement use the phrase.

“In what ways might I …..? He also recommends spending time crafting your challenge statement.

The more time you spend refining your challenge statement, the closer you will be to the solution.

You should be able to generate many different answers or ideas from these questions.

Make a list of every idea, and select some that you think have promise. 

Then, substitute keywords to broaden your view. 

Identify keywords in your challenge statement and substitute other words for them.

For example: instead of reducing costs, use eliminate costs. Instead of boost margins use to raise prices.

Each word change should give you a broader view of the problem, a different viewpoint, and different ideas.

Keep making word changes until you run out of ideas.

Your success in creating new problem-solving ideas depends in part on how you define your problem. 

 You can also create broader perspectives by asking “Why? to each of your ideas or answers.

Ask Why

For each “answer”: Why do you want to improve your service?

Then, Why do you think improving service will add value?

Then, Why will this value enable us to increase prices? Etc.  

Now, break your Broadview down to specifics.

With all this information, you can now get down to specifics by breaking each answer into subcategories.

These subcategories will generate even more ideas.

For example, “When will this new product be ready?”

Who could design the new product?

These kinds of questions will give you more ideas and make it easier to solve the problem. 

 Conclusion

This thinking process enables you to restructure existing information into new patterns and ideas and turn these problems into opportunities.

You start with your goal, identified the problem, and then turn the problem into a challenge statement that you can analyze in depth.

This will enable you to see the problem through several lenses and get different perceptions of the problem. 

After reading this blog post. select a problem and go through the exercise for practice.

That is how you will learn to do it and it’s fun!

How to turn negative problems into positive results

Posted on by harborcapitalgroupinc

If you are in business, problem-solving is a constant part of your business life. No problem is simple, or it wouldn’t be a problem. Some problems are critical to the success of your company. One way to make solving problems easier and more effective is to turn a negative problem into a positive result. 

Start the process by answering the question, “what is your goal?” Is this problem important enough to spend time and energy on it? If yes, you need to state the problem in writing so it is clear and you can focus on it. For example:

  1. How could we differentiate our product or service from competitors?
  2. What new product should we be developing?  
  3. How can we improve our service?

Next, turn the problem into a challenge statement.  

Michael Michalko, in his excellent book, “Thinkertoys,” explains this creative process and that the challenge statement has to be written as a positive challenge. For example, “why have revenues slowed down?” focuses on finding the negative reasons. But, if you restate the problem into a challenge such as “In what ways might I get customers to buy more?” you focus on finding positive answers. 

For each problem or challenge, state your problem as a positive challenge or statement. For example, instead of: 

  1. Old statement: “How can we reduce costs to improve cash flow? New positive statement: “How could we boost margins on current offerings?’   
  2. Why can’t we stay on plan?” vs. “What could we do to meet consistent deadlines? 
  3. Why is onboarding so complicated?” vs. “What could we do to simplify onboarding?”  

Note: Mr. Michalko recommends your challenge statement use the phrase. “In what ways might I …..? He also recommends spending time on crafting your challenge statement. The more time you spend refining your challenge statement, the closer you will be to the solution.

You should be able to generate many different answers or ideas from these questions. Make a list of every idea, and select some that you think have promise. 

Then, substitute keywords to broaden your view. 

Identify keywords in your challenge statement and substitute other words for them. For example: instead of reducing costs, use eliminate costs. Instead of boost margins use to raise prices. Each word change should give you a broader view of the problem, a different viewpoint, and different ideas. Keep making word changes until you run out of ideas. Your success in creating new problem-solving ideas depends in part on how you define your problem. 

You can also create broader perspectives by asking “Why? to each of your ideas or answers. For each “answer”: Why do you want to improve your service? Then, Why do you think improving service will add value? Then, Why will this value enable us to increase prices? Etc.  

Now, break your Broadview down to specifics.

With all this information, you can now get down to specifics by breaking each answer into subcategories. These subcategories will generate even more ideas. For example, “When will this new product be ready?” Who could design the new product? These kinds of questions will give you more ideas and make it easier to solve the problem. 

Conclusion

This thinking process enables you to restructure existing information into new patterns and ideas and turn these problems into opportunities. You start with your goal, identified the problem, and then turn the problem into a challenge statement which you can analyze in several depths enabling you to create solutions.

 

How You Approach Problem-Solving Matters

Posted on by harborcapitalgroupinc

No matter who you are, a seasoned businessman or an entrepreneur, you continuously face different problems on that pathway to success. And you can add to that the challenge of not enough time to do everything. We want to change that by getting you off on the right foot with how you initially approach problem-solving. It’s important because the way you approach problem-solving matters.   

 Most problems need a timely solution. Some linger because we don’t know how to solve them. It often happens when you suddenly have to face somethings that you did not expect. So, choosing the best path to reach an effective solution matters.  

Following are several approaches to problem-solving. Understand them, and you will be able to see the changes in how fast and effective your problem-solving techniques will become.

 A Team Approach To Problem-Solving

If you are working with a team, everyone on the team must know and understand the problem from their own perspective. And every person on the team must be able to express their point of view and without criticism freely. 

Leadership means that you remove all the fear in people’s minds of any repercussions if their idea is ridiculed. The good news is it often happens that some off-the-wall comment is picked up by someone else and turned into a potential solution.   

If you find that you cannot find “the” solution after a reasonable amount of time, compile a list of all the suggested solutions. You can then analyze which one has the potential to solve your problem. A day or two later, when people are not intensely focused on the problem’s details, someone often comes up with an insightful solution.  

Having an open-minded, kind approach is needed to develop transparent communication. With an open mind, you can see things more clearly and see the bigger picture. Finding and assigning important tasks to all the open-minded people will help in reducing the problem-solving time. People with open minds can take you forward in your quest to find the best solution to any of your problems. Creating a team of people who know exactly where to look when a problem occurs is always an interesting approach towards problem-solving.

Mindsets Make A Difference In Approach And Outcomes   

Next, let’s take a look at different mindsets and how these mindsets approach problem-solving.  

Analytical thinking:

People who think analytically generally consider every aspect of the problem. From here, they can move forward in a calculated way. People with analytical thinking mindsets find it very easy to take on and solve any problem, so they proceed step by step. They make assumptions and considerations because they have expertise in discovering new things, and they are sure about it.

Logical thinking:

People who think logically and straightforwardly learn from their actions from past actions. Logical thinking can get you the solution you seek for any of your problems. Logical thinking is the basis of their solution. They approach the problem from what they think a normal person would view the problem. They try to see the long-term solution.  

Rational thinking:

It is a kind of thinker who would use its knowledge and assumptions. He would not look for any experience or any other factor. From his perspective, he may be like the problems, and he would solve them in this way that others may find questionable.

Absolute thinking:

The absolute thinker wants surety for everything. He has just two solutions, and one is right while the other is wrong. He only selects from two of them, and for that, he always seeks permission from higher authorities. He does not live with probabilities.

Creative thinkers:

Creative thinkers do not remain limited to one or two solutions based on their judgments or past experiences. They can create solutions from scratch. And they do not focus on one thing when there are so many potential solutions. They will also take tier time in coming up with these solutions.  

Conclusion:

Your approach to problems tells how you will solve your problem. Identifying and agreeing on the problem rather than working on a symptom is critical to your success. Learning how to solve problems creatively is a crucial talent and a toolbox for anyone who wants to succeed in business.  

 Solutions, no matter how difficult the problem or challenge, can be solved — some instantly and some like solving the theory of relativity took Einstein 10 years. Always choose your method or technique according to the complexity of the problem.

Lastly, remember that trying to approach and solve a problem as a team can be fragile because you have to give space and freedom without criticism to each member.  

We hope this information gives you some food for thought as you approach a specific problem. We would love to hear your comments on this approach and if it works for you.  

 

How You Approach Problem-Solving Matters

Posted on by harborcapitalgroupinc

How You Approach Problem-Solving Matters

No matter who you are, a seasoned businessman or an entrepreneur, you continuously face different problems on that pathway to success.

And you can add to that the challenge of not having enough time to do everything.

We want to change that by getting you off on the right foot with how you initially approach problem-solving.

It’s important because the way you approach problem-solving matters.   

 

Most problems need a timely solution. Some linger because we don’t know how to solve them.

It often happens when you suddenly have to face some things that you did not expect.

So, choosing the best path to reach an effective solution matters.  

Following are several approaches to problem-solving.

Understand them, and you will be able to see the changes in how fast and effective your problem-solving techniques will become.

 A Team Approach To Problem-Solving

If you are working with a team, everyone on the team must know and understand the problem from their own perspective.

And every person on the team must be able to freely express their point of view without criticism.

Leadership means that you remove all the fear in people’s minds of any repercussions if their idea is ridiculed.

The good news is it often happens that some off-the-wall comment is picked up by someone else and turned into a potential solution.   

 

If you find that you cannot find “the” solution after a reasonable amount of time, compile a list of all the suggested solutions.

You can then analyze which one has the potential to solve your problem.

A day or two later, when people are not intensely focused on the problem’s details, someone often comes up with an insightful solution.  

 

Having an open-minded approach is needed to develop transparent communication.

With an open mind, you can see things more clearly and see the bigger picture.

Finding and assigning important tasks to all the open-minded people will help in reducing the problem-solving time.

People with open minds can take you forward in your quest to find the best solution to any of your problems.

Creating a team of people who know exactly where to look when a problem occurs is always an interesting approach to problem-solving.

 

Mindsets Make A Difference In Approach And Outcomes

Next, let’s take a look at different mindsets and how these mindsets approach problem-solving.  

Analytical thinking:

People who think analytically generally consider every aspect of the problem.

From here, they can move forward in a calculated way.

People with analytical thinking mindsets find it very easy to take on and solve any problem, so they proceed step by step.

They make assumptions and considerations because they have expertise in discovering new things, and they are sure about it.

Logical thinking:

People who think logically and straightforwardly learn from their actions from past actions.

Logical thinking can get you the solution you seek for any of your problems.

Logical thinking is the basis of their solution.

They approach the problem from how they think a normal person would view the problem.

They try to see the long-term solution.  

Rational thinking:

It is a kind of thinker who would use their knowledge and assumptions.

They would not look for any experience or any other factor.

From their perspective, they may be like the problem,

and he would solve them in a way that others may find questionable.

Absolute thinking:

The absolute thinker wants surety for everything.

He has just two solutions, and one is right while the other is wrong.

He only selects from two of them, and for that, he always seeks permission from higher authorities.

He does not live with probabilities.

Creative thinkers:

Creative thinkers do not remain limited to one or two solutions based on their judgments or past experiences.

They can create solutions from scratch.

And they do not focus on one thing when there are so many potential solutions.

They will also take tier time in coming up with these solutions.  

Conclusion:

Your approach to problems tells how you will solve your problem.

Identifying and agreeing on the problem rather than working on a symptom is critical to your success.

Learning how to solve problems creatively is a crucial talent and a toolbox for anyone who wants to succeed in business.  

 Solutions, no matter how difficult the problem or challenge, can be solved — some instantly and some, like solving the theory of relativity, took Einstein 10 years.

Always choose your method or technique according to the complexity of the problem.

Lastly, remember that trying to approach and solve a problem as a team can be fragile because you have to give space and freedom without criticism to each member.  

We hope this information gives you some food for thought as you approach a specific problem.

I would love to hear your comments on using this approach. 

 

 

How To Turn Problems Into Opportunities

Posted on by harborcapitalgroupinc

How To Turn Problems Into Opportunities

Being a founder or CEO of a growing company means you are always stressed to do more.

There is too much to do, too many problems to solve, and too little time to do it all.

Yet, on top of all that stress, you have issues that crop up almost daily.

So, how can you turn problems into opportunities and move forward?

 

Anyone can turn problems into opportunities using problem-solving techniques, and you don’t have to be a genius to do it.

However, you have to learn a little about the different kinds of problem-solving strategies and techniques. 

 20+ Problem-Solving Techniques

We are working on creating a series of over 20 ways anyone can turn problems into opportunities.

We explain how each one works. You can’t simply read one after another and understand that technique well enough.

You need to know if that technique works for you or if a different one would be better.

We encourage you to try each one. Some methods you can do quickly, and others take more time.

But, each one will teach you how to become a better problem-solver.

 Your Mind Is Pre-Wired To Solve Problems

According to Danial Kahneman’s book: “Thinking Fast And Slow,” Your mind is pre-wired to go problem-solving.

It can switch your thoughts from thinking fast (having an instant answer or a Eureka! Moment)

to thinking slow (digging deep into your knowledge base for breakthrough ideas).

For example, Einstein’s theory of relativity. Your mind switches back and forth between the two thought processes as it searches for the answer.

This process lets you see a bigger picture and more problem-solving options.

 In addition to fast and slow thinking, you need to have a positive attitude to solve problems.

You can’t focus on the negative (“why are sales slowing down”).

You have to reframe the negative problem into a positive (“how do we get customers to buy more”). That way, you are focusing on a positive solution. 

 Pretty easy so far, right?

Next, you can begin to look at the many problem-solving techniques that will help you solve your problems.

A good place to start is with Michael Michalko’s books, especially the “Thinkertoys” book with many problem-solving techniques. 

He divides the techniques into two groups.

One group focuses on a linear method using words and illustrations to probe your thoughts.

Some people are more comfortable working with word concepts.

The second group of techniques is more intuitive and relies on intuition and insight to arrive at the solution.

People generally prefer one group over the other just based on their individual preferences.

There is no right or wrong technique. 

You can use any of the techniques to solve your problem. You do want to become familiar with all of them.

Each has a unique way to structure and process information that leads to a solution.

Some techniques will seem easy, and you will like using them. Others may give you answers, but the process isn’t as comfortable as some others. 

Also, some techniques will give you the confidence you need to believe that you will solve the problem.

Never underestimate the power of confidence. You have to believe you can solve the problem.

So you pick the technique that works best for you or try several of them on your problem to see what results you get.

All Problem Solving Techniques Will Be Covered

We will be covering all of these problem-solving techniques on our advisor platform.

But, you can’t simply read about a method and quickly move on to the next one.

You need to go through a problem-solving example so you can get the idea and feel of how that technique works.

Working through an example is the only way you can judge how they work and if you are comfortable with that specific problem-solving technique.

Three Factors That Will Help You Turn Problems Into Opportunities

Brian Tracy, in his book “Creativity and Problem Solving,” offers three factors, among many good ideas. That helps you be creative:

1. How intensely you desire a goal (the more you want to achieve that goal the more ways you will find to achieve that goal).

2. How serious the problem is to your life or business. Once you have identified what is holding you back from an important goal,

your mind will start generating ideas to solve that problem. 

3. How do you focus on the question. (the more precise and focused you are on the question, the more rapidly your creative reflexes operate to generate workable answers

 Using these problem-solving techniques, you will be able to

1. Generate ideas at will

2. Create new business opportunities

3. Modify ideas until you come up with innovative and powerful ideas

4. Improve old products, services, and processes

5. Develop solutions to complex business problems

6. See problems as opportunities,And much, much more

Conclusion

As an entrepreneur or CEO, our hectic lives are continually being interrupted by challenges and problems that need creative solutions, short-term, and long-term solutions.

And everyone is capable of innovative solutions.

It’s a matter of learning the methods and techniques of creative problem-solving and practicing them.

Remember, the worth of the idea you create will depend to some degree on the way you define your problems.

For example, write down the problem. Translate it into a positive opportunity. It is impossible to be creative if you are focused on a negative.

You have to look at the problem broadly. This broad approach is true for problem-solving techniques as well.

Try all of them and select the ones that work best for you.

We would love to hear your comments about problem-solving, good or bad.

How To Find Out If Your New Idea Will Sell And For How Much

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How To Find Out If Your New Idea Will Sell And For How Much

Most entrepreneurs are confident their new product or service idea will be a big winner. But you would like to find out if your new idea will sell and for how much before you invest lots of time and money.  So, to be safe, you tell your Mom or wife about the idea and ask what she thinks. Guess what? She says it could be a great idea. She may not be sure, but she doesn’t want to hurt your feelings or dampen your enthusiasm.  

Still not sure, you decide to ask more people and get additional “facts.” Again you tell them your idea and ask if they think it’s a good idea? Do they think people will buy this product or service? Not surprisingly, almost everyone agrees with your Mom. Great. Now you have the facts to validate your hypothesis. 

Not All “Facts” Are True

But, there is a big problem, you don’t have real facts. The “facts” you have are only “opinions” from people who don’t want to hurt your feelings or dampen your enthusiasm. Just like your Mom, people want to be nice. Besides, they are not committed to buying it, so there is no downside for them.  

If you start your business using these false facts, your chances of succeeding are slim. But, there is an answer. Rob Fitzpatrick, author, and entrepreneur, started several companies that failed using this traditional customer research. He finally realized what the problem was, and here is what he found. 

Talking to potential prospects is critical, but you have to speak to them in a way that they will give you real facts, not just opinions. So the first step to getting real facts is not to tell them what your product idea is.   

Don’t Talk, Listen

Set up a casual meeting or coffee, so they are comfortable. And remember, you are there to listen, not talk.

Ask them about themselves and their job. People love to talk about themselves.

During that conversation, find a way to bring up a question related to the problem you want to solve.

For example, here are some opening questions, “that part of your job sounds difficult.

Is that a big problem?” or “I’ve been told that X is a problem. Do you have that problem?”

Then based on their answer, keep probing about the problem and how they dealt with it.  

 

This explanation is experience talking about their problem and how they handled it — this is how you get factual information rather than just opinions.

They verify if the problem exists, how painful it is, and how they dealt with the problem.

Maybe it’s a minor problem, and they have a way to deal with it now. Perhaps it’s a significant problem that is costing the company time and money.

This approach will verify if there’s a problem and if the pain is severe.

You get facts, not opinions, which will give you actionable insights.

Here are some of the problems with the traditional approach:

1. We spend too much time collecting data that’s too unreliable for important decisions.

2. Sometimes we don’t realize the data we are collecting is worthless (even misleading)

3. Asking customers what they think of your idea almost always leads to bad data.

4. We assume customer feedback is scientific, and whatever they tell us is scientific and counts as learning. 

5. But, it’s easy to bias the people we are talking to. Once you tell them you have an idea, they are already biased beyond repair because they don’t want to crush your dreams,   

6. If people tell you your idea is terrible, that may not be useful data either. Why? People are bad at predicting both: which ideas are good and what they,

as customers are going to do, buy, use in the future,

7. Even Venture Capital firms credited with being the best predictors are wrong more often than right.

And If their judgment is worse than a coin toss, how seriously can you take anyone’s opinion? 

8. If you are going to get your “facts” faster (e.g., focus groups, surveys, etc.), it could be a big mistake.

The problem is this information is not robust enough to bet your company on it.  

Get them to talk about costs

During your questioning, you will ask how they solved the problem and how expensive it is to solve the problem.

Now, you have an idea of the cost parameters to determine if the product will be profitable. 

This approach does take some time as you will want to interview people until you begin to get repeated information.

However, it is less expensive than starting development and having to end the project later.   

 

Get facts, not opinions

You can get broad industry views and some facts and figures from Google information,

but the insights you need only come from face-to-face conversations with prospects.

It’s the insights into your customers’ worldview and decision-making that tell you to build it or not.

You need real insight into what customers want.

 

There is also a problem if you put together a small group of people to do these interviews.

You will end up with several opinions as to what they heard and what is essential.

These variations in view make defining the most critical problems difficult.

You do need to keep everyone informed of the information. 

Conclusion

You can get the real facts you need if you don’t bias the potential customer by telling them your idea.

Ask questions about a problem they might have and what they did to solve the problem.

Get them to say to you, based on their experience, the problem, and how they solve it or don’t solve it.

Also, what they currently pay to get it solved now.

At this point, you are only trying to verify that the problem you want to solve is a real problem, and the customer would be willing to pay to get it solved. 

 

Once you have your product concept designed, the second step is to follow up with customer interviews

with your product or service design to determine your solution’s validity.

You will also ask for some commitment, not necessarily money, maybe a referral to another user in the company

to determine if the person’s positive response is factual or just being friendly. 

 

We would love to hear your thoughts on this blog or this topic. Or a topic you would like us to discuss. You can reach us HERE.

Jim Zitek

P.S. If you know someone else that would like this information, pass it on. 

Avoidable Mistakes Made Preparing Business Plans For Investors: Part Three 

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Financial Model Mistakes

Only cash is cash  

Suppose you sell something this month for $100, and it cost you $60 to make it. But you have to pay your suppliers within 30 days. But the buyer probably won’t pay you for at least 60 days.

In this case, your revenue for the month was $100, your profit for the month was $40, and your cash flow for the month is zero. Next month your cash flow will be -$600 when you pay your suppliers.

Although this example may seem trivial, very slight changes in the timing difference between cash receipt and disbursement of just a couple of weeks can bankrupt your business.

When you build your financial model, make sure that your assumptions are realistic.  

Lack of detail

Your finances should be constructed from the bottom up and then validated from the top down. The bottom of the model starts with details such as when you expect to make specific sales or hire more employees.

Top-down validation means that you examine your overall market potential and compare that to the bottom of revenue projections.

Round numbers like 1 million in R&D expenses in your two, and 2 million in your three, are you sure sign that you do not have a bottom-up more. 

Unrealistic financials

Only a small handful of companies achieve 100 million or more in sales only five years after founding. Projecting much more than that will not be credible and will get your business plan canned faster than almost anything else. On the other hand, a business with only 25 million in revenues after five years will be too small to interest serious investors. Financial forecast or a litmus test of your understanding of how venture capitalists think.

If you have a realistic basis for projecting 50 to 100,000,000 in five years, you probably a good candidate for venture financing; otherwise, you should probably look elsewhere.

Insufficient financial projections

Basic financial projections consist of three fundamental elements: income statements, balance sheets, and cash flow statements. All of these must conform to generally excepted accounting principles or GAAP.

Investors generally expect to see five years of projections. Of course, nobody can see five years into the future. Investors primarily want to see the thought process you employ to create long-term projections.

A good financial model will also include sensitivity analysis, showing how your projected results will change if your assumptions turn out to be incorrect. This allows both you and the investor to identify the assumptions that can have a material effect on your future performance to focus your energies and validate those assumptions.

It should also include benchmark comparisons to other companies in your industry, things like revenues per employee, gross margin per employee, gross margin as a percent of revenues, and various expense ratios (general and administrative, sales and marketing, research and development, and operations as a percent of total operating expenses.

Conservative assumptions

Nobody ever believes that assumptions are conservative, even if they truly are. Develop realistic assumptions that you can support, refrain from using words “conservative “or aggressive “in your plan, and leave it at that.

Offering a valuation

Mini business plans here, stating that their company is worth a certain amount. How do you know? The value of a company is determined by the market, by what others are willing to pay. Unless you are in the business of buying, selling, or investing in companies, you probably don’t have an accurate sense of what the market will bear.

If you name a price, one of two things will happen to tell you that your price is too high, and investors will toss your plan, or thar5 your price is too low, and investors will take advantage of you. Both are bad. The purpose of the business plan is to tell your story in the most compelling manner possible so that investors will want to go to the next step. You can always negotiate the price later.

Stylistic mistakes

Poor spelling and grammar

If you make silly mistakes in your business plan, what does that say about how you run your business? Use your spelling and grammar checkers, get other people to edit the plan, do whatever it takes to purge embarrassing errors.

Too repetitive

All too often, a plan covers the same points over and over. A well-written plan should cover key points only twice, once briefly and then the executive summary, and again in greater detail, in the plan’s body.

Appearance matters

At any point in time, an investor has dozens, if not hundreds of plants waiting to be read. Get to the top of the pile and making sure that the cover is attractive, the binding is professional, the pages are well laid out, and the fonts are large enough to be easily read.

Execution mistakes

Waiting until too late. The capital formation process takes a long time. In general, count on six months to a year from when you start writing the plan until the money is in the bank. Don’t put off your management team should be prepared to invest about 500 hours into the plan. If you are too busy building your product, company, or customers (which is probably a better use of your time. Consider outsourcing the development of the business plan.

Failing to seek outside review

Make sure that you have at least a few people review your plan before you send it out. Preferably people who understand your market, sales, and distribution strategies, the DC market, etc.

Your plan may look perfect to you and your team, but that’s because you’ve been staring in for months. Good objective reviews from outsiders with fresh perspectives can save you from myopia.

Over tweaking

You could spend countless hours tweaking your plan in the pursuit of perfection. A lot of this time would be better spent working on your product, company, and customers. At some point, you need to pull the trigger and get the plan out in front of a few investors. If the reaction is positive, and they want to move forward, great.

If the reaction is adverse, assuming that the investor was a good fit to begin with, and you may have been heading down the wrong path. Get feedback from a couple of investors, and if a consensus emerges, go back and refine your plan.

Conclusion

It’s a tough investment climate, but good ideas backed by good teams and good business plans are still getting funded.  Give yourself the best chance by avoiding these simple mistakes.

Avoidable Mistakes Made Preparing Business Plans For Investors (part two)

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Do not be too technical. 

People with technical backgrounds or specialized products often fill the document with jargon and concepts with no meaning for the non-technical person. Investors are interested in how the product works, but only in reference to how it solves the problem. 

For example, when Steve Jobs introduced the iPod, it had 5 gigabits of storage. No one other than engineers knew what 5 gigabits were, so the way he explained it was to say with the iPod, you could put 1,000 songs in your pocket.

If investors are interested in your opportunity, they will have engineers look at the technology in depth. You can also detail the technology in a separate document. 

No risk analysis

Investors are in the business of balancing risks versus rewards. Some of the first things investors want to know are the risks inherent in your business and what has been done to mitigate the risks.

The key risks of entrepreneurial ventures

Market risks: Where people actually buy what you have to say, will you need to create a major change in consumer behavior?

Technology risks: Can you actually deliver what you say you can? On a budget and on time?

Operational risk: What can go wrong in the day-to-day operations of the company? What can go wrong with manufacturing and customer support?

Management risks: Can you attract and retain the right team? Can your team pull this off? Are you prepared to step aside and let somebody else take over if necessary?

Legal risks: Is your intellectual property truly protected? Are you infringing on another companies patterns? If your solution does not work, can you limit your liability?

These risks are, of course, just a partial list of risks.

Even though you may feel that the risks are negligible, potential investors will feel otherwise unless you demonstrate that you have given a lot of thought to what can go wrong and can take prudent steps to mitigate these risks.

Poorly organized

Your plan should flow in an excellent organized fashion. Each section should build logically on the previous section, without requiring the reader to know something presented later in the plan.

Although there is no single correct business plan structure, one successful design is as follows:

Cover page: This is the first thing the reader will see, so keep it simple and professional, and be sure to include your contact information so the reader can reach you easily.

Executive summary: This is a brief, 1 to 3 page summary of everything that follows in the plan. It should be a standalone document as many readers will make their initial decision based on the executive summary alone.

Background: If you are in a highly specialized field, you should provide some knowledge in layman terms since most investors will not have advanced degrees in your area.

Market opportunity: Describe how businesses and consumers are suffering and how much they are willing to pay for a solution.

Products or services: Describe what you do and how your solution fits into the marketing opportunity.

Market traction: Describe how you have succeeded in attracting customers, marketing and distribution partnerships, and other alliances that demonstrate that experts in your market are betting on your solution.

Competitive analysis: Identify your direct and indirect competitors, and describe how your solution is better.

Distribution and marketing strategy: Describe how you will get to market, how are you will price your products etc.

Risk analysis: Identify primary sources of risks, and describe how you are mitigating them.

Milestones: Showcase a strong past track record and describe key checkpoints for the future.

Company and management: Provide the basic facts about your company – where and when you, Inc., where are you are located, and give a brief biography of your core team.

Financials: Provide summaries of your P&L and cash flows and the assumptions used to come up with this. Also, describe your funding needs, how are you are using the proceeds and possible exit strategies for investors.

As stated earlier, there is no right structure; you will need to experiment to find the one that best suits your business.

This article completes part two. The third and final article deals with the financial aspect of the business plan.

 

 

Avoidable Mistakes Made Preparing Business Plans For Investors (part one)

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 Your business plan is often the first impression you make on investors, and it could also be the last impression the inverter gets if you make the kinds of mistakes illustrated here. If you don’t get a referral, your business plan is how the investor will judge whether or not to invite you to the office for an in-person meeting.

With the hundreds of “opportunities” investors get every month, they are looking for ways to say no. Therefore, you mustn’t make a lot of mistakes. Every mistake will hurt your chances.

 .The following list of examples is from Cayenne Consulting.

 Content mistakes

 

Failing to identify a real pain

Identifying and solving real pain that customers are willing to pay to get solved is not necessarily easy. Check out these posts: https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com/the-critical-first-step-toward-new-product-success/ and https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com/part-two-how-to-get-product-validation-and-commitment/

 On the other hand, pain is synonymous with market opportunity. And the more widespread the problem is, the greater your potential market. Businesses and consumers pay good money to make pains go away. Your business plan is how you tell this opportunity story.

Overstating the impact your company will have  

Phrases like unparalleled in the industry or unique and limited opportunity or superb returns with a limited capital investment are only hype. Investors will determine your company’s impact based on their specific criteria.

You should simply lay out the facts: the problem, your solution, the market size, how you will sell the product, and how you have a competitive advantage and will keep it.  

Stretching the potential uses of your product  

To impress investors, entrepreneurs often try to show that their product can be applied to multiple, very different markets or explain they can have a complex suite of products to bring to the market.

They don’t realize that most investors prefer to see a focused strategy, especially for a very early-stage company. Investors want a single, superior product that solves a big problem in a  large market sold through a proven distribution strategy.

Additional products, applications, markets, and distribution channels don’t have to be left out;  they can be used to enhance and support a highly focused core-strategy. Tell your core-story and let everything else play a minor role.  

No, go to market strategy. 

Business plans that fail to explain the sales, marketing, and distribution strategy are doomed. Be sure to answer these questions: Who will buy it, why, and most importantly, how will you get it to them?

Also,  explain how you have already generated customer interest, obtained pre-orders, or better yet, need actual sales. And describe how you will leverage this experience through a cost-effective go to market strategy.

We have no competition.

No matter what you think, you have competitors. Maybe not a direct competitor who offers an identical solution but at least a substitute. First-class mail is a substitute for email.  

Competitors, simply stated, consist of everybody pursuing the same customer dollars.

To say that you have no competition is one of the fastest ways you can get your plan tossed. Investors will conclude that you do not have a full understanding of your market. The competition section of your business plan is also your opportunity to showcase your relative strength against direct competitors, indirect competitors, and substitutes. Besides, having competitors is a good thing; it shows investors that a real market exists.

Your business plan is too long.

Investors are very busy and did not have the time to read long business plans. They also favor entrepreneurs who demonstrate the ability to convey a complex idea’s critical elements with an economy of words. 

An excellent executive summary is no more than 1 to 3 pages. An ideal business plan is 20 to 30 pages, and most investors prefer the lower end of this range. Remember, the primary purpose of a fundraising business plan is to motivate the investor to pick up the phone and invite you to an in-person meeting. It’s not intended to describe every last detail.

Document the details elsewhere in your operating plan, R&D plan, marketing plan, white papers, etc. 

The end of part one. This information is a lot to contemplate. That’s why we divided this vital block of data into three parts. Be sure to read part two, which covers more things to avoid doing, and part three covering financial information.

 

How To Get Product Validation And Commitment

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If you haven’t read Part One, you need to do that before reading Part two. Part one is about how you interview people to determine if the problem you believe you are solving is really a problem people want and are willing to pay you to solve it.

So, now that you have nailed down the problem, spent time diagnosing the problem, and have an insightful product solution, it’s time to see what your potential customers think of your solution.

This second phase of questing is to validate your solution or product. It’s time to talk to people again (the same or others) to see if they agree with your solution and are willing to give you some commitment.

You will also have taken a preliminary look at your business model as part of your overall vision. You should layout the business model canvas to visually see the entire business and make changes and decisions as you develop more knowledge.

Introduce product

Now you are going to show them your product. So you are fighting the same problem as before of getting false information or compliments rather than facts. But the good news is you now have a product idea, and you can and must ask for some commitment.

At this point, your product or service can be a drawing, a slide show, a prototype, an animated whiteboard, or anything that will illustrate the product. You do not need a full-blown minimally viable product (MVP) at this time.

You will talk to people, and if they are a serious prospect — meaning you are getting real facts, not just opinions — you can go home and modify your product. Then talk to the next prospect. When your information starts to repeat, you can make that MVP.

Remember, if you are not embarrassed with your first product, you waited too long. This process should not have a firm milestone date as you will be modifying the product and your business model basically after each interview until the information repeats.

You need a commitment if you want real facts

By commitment, we mean are they showing they’re serious by giving up something they value — their time, money, or reputation.

  • time (maybe a longer meeting with everyone to explain the product in-depth),

  • reputation (referring you to someone else you should talk or

  • money (some step that gest them closer to purchasing)

 Note; if the person remains friendly, but you realize they are not going to buy, they can give you lots of wrong signals. That’s why getting some commitment is necessary, so you have facts, not opinions.

Meetings either succeed or fail.

There is no such thing as a meeting that went well. At this point, meetings either succeed or fail. You have lost when you leave the meeting with a compliment or stalling tactic (e.g., let’s talk again after the holidays)

A meeting succeeds when it ends with a commitment to advance to the next step.  Rejection is also real information. One opinion is not going to derail the company. You have to look at it as good news. Maybe your product won’t sell. If so, you have saved a lot of time and money. Not asking is a real failure. Commitment shows they care. The more they are willing to give up, the more seriously you can take what they’re saying.

Following  are some examples of good and bad meetings:

“Looks great. Let me know when it launches”. (bad meeting)

“There are a couple of people I can introduce you to when you are ready” (so so meeting)

“What are the next steps” (good meeting)

“I would definitely buy that” (bad meeting)

Conclusion

Remember, You will not know if your product or service could be a winner until you’ve given them a chance to reject you. Then you will know you have real facts on which to build your business. Also, keep having meetings until you stop hearing new stuff.