Creating a Business Plan - Perfect Planning Helps

You could poll a sample of a hundred different employees in a hundred different companies how to start a business, and you'd get ten thousand different business models. Most of the would-be entrepreneurs wouldn't include the words "business plan" in their response. And that's a problem.

Having a great idea is easy. Planning and creating a successful startup business from that idea is hard. Staying in business for long enough that the idea takes root, grows and starts to pay you back ... that's harder still.

Every year, tens of thousands of regular people with good ideas start their own business. They're usually pursuing something that they feel passionate about, addressing a gap in a particular market, or creating something nobody has ever seen before.

And every year, tens of thousands of regular people with good ideas, who've been working at making their business successful, close the doors and file bankruptcy paperwork.

I spoke with Joe Knight, author of Financial Intelligence, and he told me, "The reason small businesses fail is not because they're not profitable, it's because they've run out of cash." Wait, what?! Profitable businesses fail because they run out of cash? Take a second to think about that.

What you need to know before you invest a minute of your time or a dollar of anyone's money, including your own, is whether or not your business plan is a good idea. You can spend months putting together a business plan, but it’s just busy work. What you need is real world data. If small businesses are running out of cash, it’s because of that very same reason. Your business plan is all fiction until you get into the market and start selling.

If you're at the point of starting a company, here are some tips I suggest you follow:

1. Decide what you’re going to sell to generate revenue.
   
2. Form a corporation:
   register as an LLC
   register as a C Corporation or
   register as an S Corporation.
   
3.  Decide who will invest in your company, and how to find investors if you need more working capital later.
   
4. How much it will cost you to run your business every month, and how much it will cost you to repay any loans you take to start your business.
   
5. Who'll work for you, and what their role will be.
   
6. How much cash you have on hand right now, and what your credit score is.

Perfect planning prevents poor performance. It's more than just fun to say, it's actually the truth. So you should create a business plan.

Ready? Go!

Product Development: Rip It Up and Start Again

A bad idea is a bad idea, no matter how much money you throw at it.

And it's certainly possible to throw the proverbial good money after bad, but sometimes you really should cut bait and move on.

"I have not failed. I've just found 10,000 ways that won't work." -- Thomas A. Edison

When it comes to creating a great product, whether that's a Web site or a widget, your market is a square hole, your product the peg. If you don't pick up a square peg don't spend time re-shaping a round one to fit. Put it down and pick up a new one. Keep doing it until you pick up a square peg.

It sounds simple, but people get invested in ideas, especially their own. Then, when you talk about putting that (their) idea down and picking up a different one, they get offended and/or defensive. And that's fine. Unless they're the CEO, or the person whose job it is to make objective decisions.

Your product is doomed to failure unless you can clearly define what problem you want your Web site or widget to solve. Then, at every stage of development, ask if your solution actually meets those requirements. Don't be afraid to start-over if the answer is "no." Be afraid that if you're content with the answer "mostly," you're going to have to either re-engineer later, or put a whole lot of resources into marketing the imperfect solution you produced.

Understand that you're always in beta. Your final product, unless you're planning on never making another product, is just the beta version of the next thing. As with any beta release, you can expect feedback from users about what works, what doesn't, what features are useful, and which aren't. When you iterate, incorporate that feedback into the question of whether you are still solving the problem you set out to address, and which your product is intended to solve.

Continuous iterative improvement is the gray area where most product development is conducted, but when Coke introduced New Coke in 1986, they thought they were onto something that was game-changing.

And it was game-changing. Coke demonstrated that when a product is unpopular, it can be good business to pull it and roll back to the product it replaced. Even with the resources Coca-Cola have, there's no amount of advertising that can make an unpopular product popular, though that isn't to say that good marketing can't help a poor product enjoy a degree of success -- the right price and promotion can make any product sell like hot-cakes.

Remember though, great sales figures on the back of expensive promotion doesn't necessarily guarantee that the product will be profitable. And if your product isn't going to be profitable, why are you spending any money developing it?

Social Media Audience Engagement: Five Things You Need to Know

Last week I was reminded (by tweets from marketing expert @alansee) that if you're doing marketing, particularly when it comes to social media marketing, you have to stop thinking like your company, and start thinking like your customer.

With the advent of focused social media channels, the marketing pendulum may have swung back to the days before BBDO, where word of mouth in a community was the best and most effective way to get your product noticed.

Before you get into social media audience engagement, you're going to have to accept that not everything can be monetized. Interactions with other human beings are one of those things, and the people who try are annoying and obnoxious. Just ask anyone.

1. Twitter is NOT a sales platform. It's not a route to market. Stop thinking it is. Twitter is a tool for engaging with experts and advisers. It's for taking the temperature of your audience, for figuring out what your potential customers are talking about.

2. So Twitter's a market research tool? In a way, but probably not how you're used to market research. Traditional market research is used for gathering information about your customers so you can slice them into demographics and figure out which customer types will respond best to specific types of marketing. Market research on Twitter is about discovering attitudes and interests in a way that no questionnaire ever could. If market research is about finding a specific stimulus for an audience to respond to, social media audience engagement is about finding out why they respond to that stimulus. It's the fishing net, not the fish.

3. You can't just be a Twitter consumer. In any community you have to be a  contributor. If you're not participating you'll be ignored; but if you participate in ways incongruous with community standards, you'll be ostracized. Time is precious, so if you're expecting people to visit your Web site, you need to give them a reason.

4. Follow Friday. If you have followers who give great advice and provide useful information, use Follow Friday hashtags (#FF or #FollowFriday) to let your network know they're worth following. Sure, you may get a mention, but social engagement is a pay-it-forward business, so shout out for the little guy. If you expect celebrity and investor Ashton Kutcher (@aplusk) to follow you and re-tweet your stuff to his almost 7 million followers, you're going to be disappointed. If you want to make a difference, help other Twitter users grow their networks.

5. You are who you follow. If you decide to follow the Knights of the Ku Klux Klan, people will see that. Who you follow is a reflection of whose opinions you value. If you follow the KKK, be prepared to lose a lot of followers. It's like real life. Be yourself, but understand that not everyone is going to like who you are, or what you stand for.

For businesses genuinely interested in getting ahead, the way forward doesn't lie in getting a customer. It can be found in creating advocates. In the social media world, customer service is about paying it forward. And that's where a lot of businesses will fail: they'll ask where the ROI can be found. And the truth is that goodwill and reputation don't show up in any obvious way in your company accounts.

But if you consistently under-deliver, disappoint customers, or spend all your time online talking about your great new MLM opportunity, you can be sure that your bottom line will reflect those engagement failings.

Follow me on Twitter, you know you want to.

Are You Being Served? The Difference Between Customer Service and Sales Assistants.

How often have you visited a store and found that the customer service assistant knows less about their products than you do? As a business owner, how much are you paying for "customer service" employees who add little or no value to the customer's experience in your store?

Let me begin with a couple of definitions, which you may agree or disagree with:

Customer service employees are knowledgeable, share information that's valuable to the customer, and provides a positive in-store experience. Employers pay more for that expertise.

Sales assistants help customers by letting them know which aisle the widgets they're looking for can be found in. They add little value to the company or the customer experience, and their cost reflects that value.

In the old days, if you needed something, you'd identify the type of thing you're looking for and get recommendations from your friends and family for which stores you should visit. The store assistants would give you advice to help you narrow down the number of products on your list, and help you figure out if the products in the store met your needs.

Then the world went crazy, with every company vying to be the biggest, the best, the most ubiquitous, the most one-stop, all-encompassing, needs-meeting place you could wish to imagine.

So answer this question: when you go to Wal-Mart to buy just about anything, or even Home Depot to buy hardware, how many people do you talk to who have less knowledge about how to resolve your problem than you do?

In this interaction, shouldn't the store employee be the expert? Shouldn't you be able to rely on their advice and recommendations? Instead, many of them simply read the packaging to you, or confirm the research you've already done, without actually adding any insight.

Customer service should mean something more than customer concierge -- more than a switchboard to shuffle you along to the next person who might know more than the last.

Retail stores have become homogenized. They fill their staffing needs, not with experts, but with sales assistants. Not people with experience and knowledge of the products they sell. Sales assistants: as though you need someone to hold your hand to the register.

Stores now sell such a diverse range of products that the sales assistants are jacks-of-all-trades, but masters of none. They're there to spoon-feed us the things we choose from their buffet of convenience, not help us make choices that will satisfy our hunger. And all to often the choice we make is to buy one of many imperfect options suggested to us by the sales assistant.

Think about the average computer-buying customer. Their research consists of walking into a Best Buy and asking a disaffected and snarky sales assistant to help them decide what computer they need. But the assistant at Best Buy is not there to solve the customer's problem, they're there to sell Best Buy's product range. And so they address the customer's problem with the Best Buy product they judge to be the most likely to address it. Which is not always the same thing as solving the problem.

If you own a restaurant and a customer comes in looking for a gas station, you wouldn't try to sell them a case of liquor because that might work in place of gasoline. No, you'd direct them to the nearest gas station, and the customer would remember your kindness and probably come back, or at least pass along this story of your helpfulness.

Recognizing that there's a difference between customer service and sales assistance is the first step to assessing which you're delivering, which you want to deliver, and whether your choice represents who you want to be. It will help you determine whether what you’re doing represents good value to your company's stakeholders, and whether these interactions provide enough value to the customer to sustain your business in the long-term.

Why Your Twitter Marketing is Failing

I wish every question was as simple to address as this one, but let me spell it out as clearly as I can:

Your social media strategy on Twitter is failing because you don't understand how social networks behave. Unless you take some steps in another direction, and learn how to use Twitter effectively, you're going to invest more marketing dollars in something that never gives you the ROI you're looking for.

You've probably read this quote before, but it's appropriate to apply it to social media marketing:
   

“You can't do today's job with yesterday's methods and be in business tomorrow.”

If your Twitter social media marketing campaign isn't working, it's because you're probably using old marketing techniques and shoe-horning them into a social media plan.

Change isn't difficult, but you have to go back to the beginning and go through the question you ask yourself with any product or campaign development.

Who is my customer? 

And this is where you may not have been used to segmenting in this way: for this part of my marketing, who is my customer?

If you're using Twitter, chances are your customer is:

• technologically aware;
• an early adopter or influencer;
• highly engaged in their online community.

And the next question is -- do I need to reach this customer? Because it you're just adding Twitter to your marketing because everyone else is, that's going to cost you time and energy for very little return. If your product isn't innovative, and can't be easily shared online, you might think about not using Twitter for your marketing. If it can't be shared online, it won't be shared online, and more traditional marketing might be the best thing for that product.

The Twitter-defined user is a significantly different customer to the guy who flips past your ad in Golf Digest or the woman who passes your billboard on her way to work. That isn't to say that those people can't be avid Twitterati, but the way you're reaching them is designed for a less subtle attention-getting strategy.

Which is the first thing you have to change. Sure, we all would like a million followers in Twitter, but social media is a pay-it-forward model, it isn't about how much attention you can get for yourself. If you want someone to follow you, you have to add value to what they're doing, not ask them to buy what you're selling.

And that's a huge difference.

You have to be part of multiple, possibly very different, conversations at the same time. In most marketing, you offer a call to action with a goal, ultimately, of asking for a sale. Not so in Twitter.

Twitter followers won't convert into sales, not in the same way sales can turn into Twitter followers. So add a button on your Web site, put your Twitter name on your business card, on your invoices, and in every communication you send to everyone. Start building your network from people who already trust you, and are invested in the success of your business.

Twitter is about engaging your followers and adding value to their endeavors. It's about personal reputation. Would you recommend a MLM scheme to your family and friends if you didn't know anything about it? Would you refer them to a mechanic you met in line at a grocery store? When you follow a Twitter user, you're giving them credibility to your followers, just as they are giving you credibility with theirs. The cost of that? Be credible. Be authentic. Be informative.

Try a social media engagement plan instead of a marketing plan. Twitter isn't for getting people to buy your product -- it's for getting people to buy into you and, by extension, your product.

Click here to follow me on Twitter.

See, it's not so hard.

The Art of Listening

There are two kinds of companies: ones who've mastered the art of talking, and ones who've mastered the art of listening.

I've worked with both kinds, and know that there are only a few companies with really big ideas -- even fewer that can change the world, or the way we think or interact with our environment and each other. They tend to be the ones who know how to listen.

But you know those companies. The ones who create a legion of copycats all claiming to be the latest whatever-killer. For technology companies, those "whatevers" are Google, Apple, Microsoft, and Facebook. For the rest of the business world you can add companies like Starbucks, McDonalds, Coca-Cola, Dyson, Netflix, and a few others.

They don't have any kind of magic formula for success; they just work hard and, most importantly, listen. They listen intently to what their customers want. They ask questions and then go find answers. Nothing is ever developed or launched unless there's a market for it, and that, as much as all the whistles and bells, is what guarantees success.

Listening includes admitting that when you make a mis-step. Coke flip-flopped on "New Coke," just as Facebook did when it altered its terms of service in 2010. Your customers know when you screw up, and don't think they won't talk about it. Pretending like it didn't happen makes you look like you don't know what's going on with your own business.

Listening is an art, and it's the thing that's necessary to keep a company agile in its market place. If you're creating a Web site, you better have the technical development skills to build it, to adapt it, to make it better -- but it's only by listening to what your users tell you that you know what "better" looks like.

Listen to your customers and develop the thing they tell you they want. Don't think that you can develop something and make them want it, that's ass-backwards. Don't tell your users how to use it, ask them what problem they will use it to overcome. In fact, get active in social media, and monitor what customers are saying about you. If they're saying bad things about your product, that's an opportunity to show that you listen to your users. If they're not talking about you, that's a problem.

Iterate. Get v1.0 out of production, and iterate fast, because good today is better than perfect tomorrow. The important thing is to get something out in front of your customers so that you can solicit feedback and get working on v1.1.

Early adopters complained that Apple was releasing new iPhones too often, but many of them dropped another $400 on the 3G model, or re-upped their cellular plan to get the new phone. What matters here is that Apple was already working on the next iteration as they were releasing the current version. That helped them to stay ahead of the curve (no pun intended, BlackBerry owners) and establish dominance in the touchscreen mobile device market. Once users were hooked on iPhone apps, the iTouch and phenomenally successful iPad were natural progressions.

Create products to support your product. In the case of a Web site, an API is essential -- let your users create apps. Give them a way to share, link, and embed the things they do with your product, or they'll find one of your competitors that meets their need.

Samuel Beckett said of failure: "Try again. Fail again. Fail better." That should be your testing mantra. Do your user testing with idiots with a little knowledge. Have them break your product, so you can fix it, make it better, more robust. Then have the idiots break it again. The fact of the matter is that it doesn't make a difference if you think your product should be used for something in particular, users will find a way to use it for something else.

When Philip Strauss invented the car-tire in 1911, he probably didn't envision it being used on assault-courses, hung from trees, or made into plant pots. But they are. You should celebrate if your product accidentally turns out to be more versatile than you thought.

Success is not an accident, and you can't let it be -- you can't reliably recreate accidental results.  So get active with Facebook, Twitter, AdSense, podcasts, white papers, guest blogging...and find out which activities are generating the best feedback for you to improve your product. If you make a place where people can comment on your product, that's what people will do.

Listening is a learned skill. You might not get it right first time, and you probably won't get it right every time. But customers will see that you're trying, and that will earn you some latitude when you screw up.

I Know an Old Woman Who Swallowed an Investment Strategy

Businesses are lot like nursery rhymes. For every over-worked, shoe-dwelling old woman, there's another who's prepared to eat cats, dogs, and horses (whole, presumably) in order to catch a fly. Apparently this second old lady didn't hear that honey is the thing you need to catch flies.

Strange as it may sound, there's a business lesson to be learned from the old woman who swallowed a fly, though. Namely, if your solutions to a problem (any problem, from customer acquisition to which hand dryer to install in the rest rooms) are purely reactive, you'll end up like the old woman: Dead, of course.

Once upon a time in Redmond...

When I read that Microsoft had narrowly beaten Google and Facebook to Skype, for the bargain price of $8.5 billion, my first instinct was that neither Google nor Facebook need Skype, and that they were just in the bidding to push up the price Microsoft were going to end up paying.

It sounded to me like Microsoft thought they were going to be left behind, that the opportunity cost of not buying Skype would be tens of billions of dollars...and so they swallowed the spider to catch the fly. I don't know why. I'm sure that Gates and Ballmer will let us know in time.

If Microsoft's motivation in buying Skype was an expensive game of keep-away with Facebook and Google, it may be one of the costliest errors in the computing era.

But to say that only large businesses make this kind of mistake would be a grave insult to the thousands of small business owners make this same mistake every year.

Whether it's  a poorly researched software solution, or short-sighted mis-investment in company vehicle maintenance, or remodeling the conference room months before the company decides to move premises, small businesses definitely know how to keep up with the Joneses. And sure, these are all easy to spot in hindsight, but if you think about it, they're not too much harder to spot in the moment.

How to Not Have to Eat a Horse

Document the ROI and cost/benefit analysis of every purchase you make. Not kidding about that. You should also explore multiple alternative solutions, not just competing versions of the same solution. Even if the documentation is on the back of a napkin, the simple act of examining how this expenditure will help you improve customer experience, or make your company more efficient, will make you a more informed buyer.

If your business is moving too fast for you to step back and take a look at how to fix a problem, that's your problem. If the issue you're trying to solve is out of your area of expertise, ask an expert. Paying $400 for an hour of IT consulting and $200 for a new network storage device is a better investment than the $200 upgrade you think will take care of your server problem. You're not an expert, and when your fix doesn't work and snowballs into $1000 of hardware and software changes and three days of lost productivity from two of your employees, the cost runs to five figures.

And it's not just purchases, it's investments of time and resources, too. Before you assign resources to develop video podcasts for your Website, ask if you need podcasts. Just because your main competitor is doing it doesn't mean they're doing it well, or even that it's having a noticeable effect on their revenue.

Living Happily Ever After...

If you feel like you should invest in something, invest in patience. It's unlikely that one of your competitors is going to be an early adopter of some ground-breaking technology that takes away all your customers. Be patient, look at your business, and if you need to reinvent it from the ground up, do that. You wouldn't hope to build a race car by bolting together the best parts of exciting looking vehicles over a three year period. In the same way, tacking the latest must-have project or application to your business will make your product cumbersome, and unintuitive.

And then you'll be left wondering if those magic beans would have actually been a good trade for the family cow after all.

If You Build It They Will Come

Ralph Waldo Emerson is often quoted (though incorrectly) as saying "Build a better mousetrap, and the world will beat a path to your door." It speaks to the dreamer, the entrepreneur, the artist in all of us.

Four such dreamers in the technology world are: Google, Facebook, Microsoft, and Apple. This week, Google, Facebook, and Microsoft faced each other down to compete for the acquisition of Skype, an online communications company, for $8.5 billion. Because sometimes when you haven't built the better mousetrap, it's just as effective to buy the company that did.

Facebook are building a new campus in Menlo Park, with space for 9,000 employees, and every online application seems to be linked to an imminent sale to the social networking giant. You have to think that Mark Zuckerberg is hatching a plot for the next big thing in the social media space.

Google and Apple are competing in the mobile and tablet arenas, trying to out-do each other on hardware, operating systems, and user experience. YouTube, part of the Google empire since 2006, have just rolled out their live streaming service, and the smart money might be best placed on when the service will develop capabilities to be used in user-to-user direct communications.

Which prompts me to wonder: were Google and Facebook really interested in Skype, or were they just pushing the price up to see if, or when, Microsoft would blink?


A New Arms Race

From the Cold War to the Space Race, we've been thrilled by watching fast iterations of technology, striving to produce better and better military equipment than the other guy just developed. Welcome to technology in the new milennium.

When the dust settled after the IT bubble burst around the turn of the century, Gates, Jobs, and Brin held on, and then began to pull the world with them. When a punk-kid programmer from Harvard joined them in 2004 the gears of a second Internet bubble began moving.

Or maybe it's not a bubble. Maybe it's something bigger, something more important. Perhaps we're on the verge of the Communications Race. The Face Race. That's why the acquisition of Skype was so important to Microsoft. It's why Google and Apple are building better mousetraps in the mobile sector, and why Facebook is constantly reworking the ways its users can communicate with each other.

Red Queen Effect

There's a passage from Lewis Carroll's "Through the Looking-Glass," where the Red Queen tells Alice "...it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!" It's the drive to run faster that lives in the minds of Steve Jobs and Bill Gates, Mark Zuckerberg and Sergey Brin. Those guys are busy thinking right now of how to make their mousetraps better.

But when the price-tag is $8.5 billion, what's the pay-off? Where's the return on investment?

Well, it's likely that Google's AdSense, and Facebook Ads, along with Apple's iStore, will be the main revenue generators. They're certainly the most ubiquitous means of building revenue.

And that's what makes Microsoft's retail therapy all the more intriguing. Microsoft don't have access to the easy revenues enjoyed by Google, Facebook, and Apple. Not in the back-yards of those competitors. Instead, by adding Skype to the Windows Mobile platform, by adding it to their XBox so video-gamers can video chat as well as voice chat, Microsoft aren't challenging the other players in their own spaces -- they're challenging Sony and Nintendo for the next innovation in gaming, and may turn the next XBox into the home theater and communications device that no home should be without.