Category Archives: Business Planning

3 Financial Statements and 3 Angel Investment questions

Angel investment, Business Financing, Business Planning,

I’ve been busy elsewhere this week, but managed to post two things I’d like to make available to you on this blog, because this is my main blog:

  1. My monthly column on entrepreneur.com came out today, summarizing the three financial guestimates every business plan needs. That one gives you a quick summary of the income (also called profit and loss), the balance sheet, and the cash flow. There are a lot of other tables a business plan might have, but these are the most useful, and the most important. These three put your projections into the same financial format analysts, investors, bankers, and managers are used to seeing.
  2. On Tuesday I posted the three essential questions you have to answer for angel investors, on the angel investment site, gust.com

I hope you find one or both of these useful, and have a great weekend. I’m in New York again this weekend, heading home to Oregon Tuesday, still enjoying a delightful taste of what makes Silicon Alley a high-tech startup hotbed.

Does the New York Tech Boom Have Clues for Everywhere Else?

Business Research, , , , ,

It was Wednesday night, a full auditorium at the 92nd St. Y in Manhattan’s upper East Side. We’d had a meeting in the late afternoon, got tied up, so we arrived late and took the only two seats left, against the wall. Even the balcony was full. The audience was a total mixup of suits, jeans, gray hair, long hair, slightly more young than old, more men than women, but a pretty diverse group.

On stage, the winners of a recent New York Hackathon. Hackathon? Yes, a 24-hour competition, producing some great results. One of them, locreep.com, includes a hilarious skit on modern singles scene. The audience loves it.

Soon after we’re looking at Bluefin Labs, a fascinating new venture doing social media analytics of mostly-television trends. This one wasn’t done overnight in a hackathon. It took several years.

All of this was at yesterday’s NY Tech Meetup. Once a month the group comes together for demos, sharing, pitches and presentations. It’s impressive. If you’re interested in watching business pitches, and tech enthusiasm, in action, they have videos of last night’s and previous meetings at http://nytm.org/monthly-meetup/livestream/

And that’s just a small glimpse of it, one evening. The hackathons, meetups, educational programs, city programs, investors, startups, and startup juice are bursting out all over. NYU professors getting together with Columbia professors, a city development committee, lots of sponsors, lots of events and opportunities.

You probably already knew about The Silicon Alley tech boom; it’s been covered in the media. But I’m a West Coast guy, with deep roots in the Silicon Valley, so I had this Silicon Valley bias that made it hard for me to see it. And now I do.

This is real. The most recent Business Insider 100 list of top 100 digital startups in the world includes 29 from New York, compared to about 45 or so from Silicon Valley, and just 2-3 each from Chicago, Washington DC, China, Seattle, France, Sweden, etc. And that’s all happened within the last few years. Silicon Valley took a couple of generations. This is time compressed.

All of which reminds me that just last week I received an email from a thoughtful woman bank president from Colorado, asking me for any advice I could offer about generating more startups in her community. That relates to this Silicon Alley phenomenon because here they’ve done it, like nowhere else; and they’ve done it fast. True, New York is a special place, with special advantages. But that was also true 10 and 20 years ago. So what happened here in the last 5-10 years, and how it happened, seems pretty interesting to me. Do you see how it relates to that question in email? And why a lot of people, not just in New York but everywhere else, might care?

Turn the Negative of Worry into the Positive of Planning

Advice, Business Planning

Worrying is a waste of time, stress, and effort. It ties knots in your soul. Forget the worry. Turn that energy into a positive: planning.

Seth's BlogI just read Seth Godin’s brilliant small post, from last weekend, asking

In When is it okay to start worrying? With apologies to Seth for quoting the whole thing (but it’s that short, and that good), here it is:

A friend was waiting to hear about the results of a job interview. He hadn’t heard in a while and he asked me, ‘how long before I should start worrying?

Of course, the answer is, ‘you should never start worrying.’

Worrying is not a useful output. Worrying doesn’t change outcomes. Worrying ruins your day. Worrying distracts you from the work at hand. You may have fooled yourself into thinking that it’s useful or unavoidable, but it’s not. Now you’ve got one more thing to worry about.”

While I agree completely with every word of that, even in the exact example Seth uses, there is a time when you start thinking about what comes next and what else to do in the aftermath of a job interview that has produced no word.

What else to do? What are the contingencies? Next steps? Is there an action point? Have you gained any new information? Are your assumptions still correct?

Don’t worry: Plan.

How Much Should You Worry About Your Competition?

Business Research, Business Stories, Marketing, , , , ,

I’m intrigued with Steve Thoeny’s comment earlier this week to my post about market research. Steve quoted Joel Spolsky, Co-founder Stack Exchange, and one of my favorite writers, with this suggestion:

Talk to your customers. Find out what they need. Don’t pay any attention to the competition. They’re not relevant to you.

I love Joel’s (and Steve’s) advice about talking to customers. I couldn’t agree more. That’s right on point and good advice. bait

And I’m intrigued with his take on competition. It reminds me of what Emmett Ramey, founder of Oasis Press, said years ago when we had competing offerings:

The way I see it, we’re standing on a pier, side by side, fishing. I don’t care about the fish sniffing your bait. I’m worried about the ones near mine. And there are plenty of fish for both of us.

That made sense then. We were selling two competing offerings into the same market.

On the other hand, watching for competition is like watching what the fish like. If the fish like salmon eggs and you’re fishing with cheese, get the hint. Sometimes looking at competition is like taking a fresh look at your own business.

What do you think?

(Image: istockphoto.com)

Not All Business Plans Need Rigorous Market Research

Business Planning, Business Research,

I hate it when people think a business plan requires market research. Especially when they’re talking about expensive professional Market Research.

Yes, you need to know your market. You do. You can’t plan your business without understanding who buys, what those buyers are like, who also might buy, why they would or wouldn’t buy, how many of them are there, what motivates them, what they like about your business, what they don’t, and what other choices they have.

But planning a business doesn’t necessarily require expensive rigorous market research. You have to know the market, not prove that you know it. Not even prove that the market exists.

Sure, there are a small subset of business plans, associated with raising investment, that have to prove potential market to convince investors that the opportunity exists. But most business plans are about running the business, not proving the opportunity to outsiders.

Yes, you have to know your market. Knowing your market enough to make good decisions is different from proving your market to outsiders. Lots of entrepreneurs trust their market knowledge, take risks, and move forward. If you’re one of those, plan, and don’t let anyone tell you you’re not planning unless you have market research.

Creativity Contest: Fun Way to Say Business Planning. With Prizes.

Business Planning, , ,

Here’s a challenge: Donna Maria of INDIEBusiness asked: what’s a fun way to say business planning? That’s the tweet you see here, which I saw a few minutes ago as I sat down looking at the Willamette River drinking my coffee and starting my day. tweet

I think I know exactly what she means. Business planning should be vibrant, creative, flexible, rapidly changing, as fun as writing a story and then figuring the steps to make that story come true. But when you say “business plan” way too many people shudder, thinking of a long boring task leading to a long useless document. Dry and boring, like she says.

But then think of some time in your life when you were dreaming about something you wanted to make happen. “Gee, maybe we could … ” is a fun way to think. “And what about if we …” That’s brainstorming, problem solving, inventing new things. “And then we could …” And it’s strategy as focus, finding your identity, building a new life, controlling your destiny.

There are many different meanings for the phrase “business plan.” That’s too bad, because a lot of people think of that dry boring thing and miss the fun thing.

I answered her tweet with one of my own, keying on the idea of dreaming, but Donna Maria has a deeper point: the phrase is worn out. We need a new one. What’s a better way to say “business planning” that doesn’t sound like the dumb old fashioned business plan?

So let’s call it a contest, and give it a prize: I’ve got a free copy of Business Plan Pro Premier edition, or a year of http://www.liveplan.com, or a year of emailcenterpro use (your choice) for anybody who can come up with a fun way to say “business planning.” I mean a new, interesting, better phrase. I titled my last book The Plan As You Go Business Plan, but honestly, I want something better than that. One, two or three words.

Send me your suggestions on twitter with @timberry, or use this form.

Use Business Lines to Read Warnings in Numbers

Back to Fundamentals, Business Financing, , , , , ,

Are you minding your business? I’ve found through the years of minding my business that most of the important insight in the numbers comes in lines, not dots. I mean that tracking the change in key indicators over time, with lines, is much more valuable than looking at them at any specific point, as a dot.

For example, if your business sells to other businesses, you probably deliver the goods or services along with an invoice that establishes what your customer or client owes you. We call that money your customer owes you Accounts Receivable. The sales you make like that, delivering an invoice instead of getting paid immediately, are called sales on credit.

For business that deal with sales on credit the Accounts Receivable balance can be critical to a healthy cash flow. Every dollar in that balance is a dollar that’s already in sales, but not in the bank. You are waiting to get paid. The higher the Accounts Receivable, the more the danger.

You can’t measure Accounts Receivable with a single number. $32,812 in Accounts Receivable might be way too much or way too little, depending on how long it’s been there, how it’s trending, how that compares to other balance items, and the original sales amounts.

I like to watch the number as a line chart so I can see how it’s trending. Your accounting or bookkeeping software might be able to do this, and if not then any of the leading spreadsheet software applications can. I recommend you generate a line chart showing sales on credit on one line and Accounts Receivable on the other. If sales go up quicker than Accounts Receivable, that’s good. That’s the case in the second line chart here. If Accounts Receivable go up quicker than sales, that’s bad. That’s the case in the second line chart here.

The sales in both line charts are identical, but the behavior of the Accounts Receivable balance is different. In one, there might be reason to worry. You start with the line chart, which is like an alert. Then you go into the details, like who owes your business how much, and how long have they owed it to you. You call, you ask, you investigate, you deal with a problem. In the second case, seeing how Accounts Receivable is behaving, you probably look at the chart and go on to deal with something else.

With most of your business numbers the trends — the line — tell you much more than the specific numbers — the dot — at any one point. If you manage inventory in your business, draw the line of inventory turnover. Every business should watch the lines of the trade payments you have to make (called Accounts Payabe), and of course sales vs. costs, sales vs. expenses, sales vs. profits, sales vs, employees, and so on.

It’s not the numbers you watch as much as the change in numbers. Draw your line charts. Every month.

What About Startups, Investment, and Planning?

Business Planning, Self Promotion, , ,

Honestly, this was fun; it was a stream of interesting questions that I enjoyed answering. This one-hour video is courtesy of  Dun and Bradstreet Credibility Corp, as part of its credibilitylive.com series.

If  you don’t see this video here, you can click this link to get the original on the credibilitylive.com site.

The moderator there is Karen E. Klein, columnist with Business Week and the Los Angeles Times. She’s a pro, she helped me a lot with great questions and she managed the stream of online questions too, so it was an easy session for me to do.

I’m Loving the New Version of Business Plan Pro

Business Planning, Personal Productivity, Plan-as-you-go Planning, Planning Process, Self Promotion, Software, , ,

If you’re a regular reader you know I don’t normally do sales pitches here on this blog, but this is special. Last week Palo Alto Software introduced a brand new version of Business Plan Pro incorporating (finally) my Plan-as-You-Go Business Planning ideas into the mainstream of the software.

With this new version, when you start a new plan, Plan as You Go is the first choice for setting up a simple, practical, management-oriented business plan. Not the whole big formal document plan, but just what you need to run a business with. That’s the key screen above (with my annotations in red):

Now the new built-in option is exactly what I suggested in the book: a streamlined, practical outline, shown here on the right. Of course you can add more later and eventually make a larger business plan, but you do that as the business plan events happen, not before. So you add the embellishment, like description of management team, or exit strategy, only when you need it. Which is great, because a lot of people really don’t need it.

I wrote the book in 2008, but because we’ve been busy with liveplan, the new online web business planning, our mainstream software had to wait. So now I’m celebrating that it’s finally here.

We’ve also added a lot of video at many different points, so that – if you’re online – you get me talking about what you’re looking at, in very short snippets. That’s hard for me to watch, frankly, because I’m as self-conscious as anybody else … but as an author, I love the opportunity to talk to you while you’re working with what I wrote.

This is the 12th version of Business Plan Pro since the first one was published late in 1994, and actually hit the shelves in 1995. We’ve come a long way since the first one – it’s still my business planning advice, but I wrote a third of the code in the original, and now there’s a team of a dozen programmers – which makes it way better.

And, by the way, if you prefer an online version, or you’re a Mac user, there’s also a lot of my methodology and my instructions in the new online planning web app at www.liveplan.com.

For more information click here for the website or call them toll-free at 1 (800) 229-7526.