Start Me Up

Questions to Ask, Blunders to Avoid

Dan RuchmanRuchman & Associates

May 3, 2013

Objectives for Today

Get one man’s view of:

• Starting & funding a business• Avoiding the potholes• Succeeding in business

• Q&A on this or anything else

What We’ll Talk About

• Business Planning: What is it?

• What does an entrepreneur want?

• What do investors want?

What makes for Success?

• Mission• Vision and Values• Goals• People• Plans• Is that all?

Success – the Intangibles

• Desire… • Communication… • Analysis…• Focus…• Wisdom

Business Planning?

The rational analysis and understanding of your company’s place in the world, and the use of strategic and tactical techniques to ensure its survival, improve its position and attain a future vision of what the company can be.

Great Moments in Business Planning

This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.

-- Western Union internal memo 1876

Another Great Moment

We don't like their sound, and besides, guitar music is on the way out .

-- Decca Recording Company on rejecting the Beatles 1962

Types of Planning for Capital Raising

• Strategic Planning

• Operating Planning

BOTH are critical!

Strategic Planning: the essence of your Plan

• Long term• Vision, mission, values• Broad issues• Strategic imperatives• Long term goals• Broad metrics

Key Strategic Questions

• Is our technology a game-changer, or an execution play?

• What is the competitive landscape?

• Will we even need outside financing? If so, how much?

• Do we have the right mix of talent?

Strategic Planning Pitfalls

• Our technology is perfect.• Our technology is unique.• We have no competition.• The market tomorrow will be the

same as the market today.• Overly precise but insufficiently

accurate• We are recession-proof

Operating Planning

• Operationalizing the strategy• Shorter term – one year, by month• Ensure consistency with SP• Criticality of cash flow• Operational metrics• Tie the parts of org together

Key Op Planning Issues

• What sales volume can we reach? Can we reach it? Why not more?

• What is our ideal product mix?• What is our Go-to-Market strategy?• How best to spend limited resources?• Too aggressive/not aggressive enough:

The Goldilocks Balance• Coordinating across the organization

Operating Plan Pitfalls

• Product launch plans under-estimate tech complexity

• Market strategy underestimates market inertia

• Market strategy misunderstands who your buyers are or their motivations

• Misjudging the competition• Inadequate funding• Procedural/process snafus

Other Strategic and Operational Pitfalls

• Wrong metrics, or not acting• Small errors large impacts• Balancing of multiple priorities• Sudden changes in market• Understanding when accuracy &

precision are critical, when not• “For want of a nail…”

Key Elements of Plan

• Executive Summary• Market Pain and Your Solution• The Market• Your Product, Technology, Service• Your Management Team• Your Business Model• Go-to-Market Strategy• Your Pro Forma Financials

Failure to Plan . . .

. . . Is Planning to Fail.

Consequences . . .

And more consequences

And finally . . .

So To Avoid That…

• Plan your Business• Work your Plan• Think – in all ways, all venues• Be flexible• Be focused• Be passionate

In sum . . .

• Make your plan well thought-out• Make your plan reasonable• Infuse your plan with passion• Make your plan attainable• Make your plan make your

investors rabidly excited about investing in your company!

So you’ve thought long and hard about your business . . .

. . . What could go wrong?

Plenty could go wrong . . .

. . . at any point in the business’s life cycle.

Critical Mistakes

Skipping the business plan

Critical Mistakes

Insufficient Business Plan

• Weak• Insufficiently thought out• Mis-purposed plan

Critical Mistakes

If I build a better mousetrap, the world will beat a path to my door.

True… but…

Critical Mistakes

A startup is just a smaller version of a big company

Critical Mistakes

Not understanding or appreciating what marketing means.

Critical Mistakes

Not understanding your secret sauce

Critical Mistakes

Not clearly defining your business model

Critical Mistakes

Insufficient assessment of risk or planning to offset it

Critical Mistakes

Fundraising: doing it before you’re ready

Critical Mistakes

• Weak pitch to investors

• Too technical• Too verbose• Too long• Weak value prop• Poor Q&A prep or skills

No second chance!

Critical Mistakes

Too little capital

Critical Mistakes

Too much capital

Critical Mistakes

Not knowing when to seek advice

• Not getting it when needed• Getting it when not needed

Critical Mistakes

Putting too many eggs in one basket

• Fundraising• Customer base• IP• R&D

Critical Mistakes

Pennywise, pound foolish

Spending vs investing…Accounting vs planning…

Comic Relief…

The accountant . . .

The date . . .

The dinosaur . . .

Critical Mistakes

Overoptimism

• Fundraising timeline• R&D project completion• Time to launch• Sales cycle• Competition

Critical Mistakes

Metrics – none, insufficient or inappropriate

Critical Mistakes

Lack of focus

Critical Mistakes

Not listening to customers

Critical Mistakes

Compromising your ethics

Critical Mistakes

Imbalance between yin and yang

• Adversarial vs over-friendly• Sharpening the saw• Spend vs conserve

Critical Mistakes

Inability to pivot

• Personality• Ego• Inflexible org or plan

Plenty could go wrong . . .

. . . at any point in the business’s life cycle.

Avoiding the Potholes

Plan your business

Never stop thinking and planning

Avoid the Critical Mistakes

Stay flexible . . . Stay passionate

Do well

Start Me Up

Questions to Ask, Blunders to Avoid

Dan RuchmanRuchman & Associates Creative and Intelligent Solutions for Finance, Operations & Strategy. Lighting the Path to Profitability Office: 858.784.0104 Dan.Ruchman@RuchmanAndAssociates.com