CHAPTER 6

Cycles

Utilizing Business Life Cycles

Successful entrepreneurs know how to focus. Business leaders of growing businesses need focus in a world that provides plenty of distractions. Everything you do in your business moves your opportunity closer or further away from your end goal. The decisions you make about your opportunity impact every business decision you make.

Understanding Cycles

Organized cycles are best suited to exploring and implementing an opportunity supported by a growth plan or a project. A well-designed systemic approach integrates people, data, business systems, and processes so that each phase well timed and handled smoothly. An organized approach helps maintain focus. Your business is most likely to succeed when every opportunity fits into your vision and can be accomplished as a part of your mission as you step toward your end goal.

Additionally, cycles make change easier. It seems counter intuitive. However, the greatest inhibitor of innovation is risk. Cycles create a structure that reduces the risk of innovation by stopping bad ideas before money and time are wasted while perfecting promising ideas before costly rework is necessary.

Make your cycle(s) fit in your business strategy and not the other way around. The most elegant cycle does not take the place of a good business strategy. You may however find gaps in your strategy more obvious and easier to address as you work through cycles that rely on best practices for success.

These include:

PLC

Figure 6.1 Product Development Life Cycle

A PLC is sometimes referred to as Product Life Cycle Management to avoid being confused with a project cycle. The product cycle begins with the idea and ends with product retirement often call obsolesces. These cycles may be customized and often have five to seven phases. Manufacturing and implementation are often the longest phases and include business systems and processes, and data management as well.

Benefits include:

PDLC

Figure 6.2 Project Development Life Cycle

Projects are dedicated efforts designed to meet a specific goal with a predicted start and end date. Projects can be simple or very complex and elaborate. They may be short or take years to complete. The (PDLC) (Figure 6.2) follows a systemic approach that helps ensure success. One or more projects governed by a PDLC can be included in a PLC or an ODLC.

Projects are organized into four phases including initiation, planning, execution, and closure. Initiation encompasses defining goals, estimating costs, and determining the scope. The planning phase sets deadlines and priorities, considers risks, creates a timeline based on defined tasks, and identifies the resources required. The execution phase includes assigning resources to tasks, monitoring work, managing changes and risks, and reporting performance. Finally, the last stage, closure affirms that goals were reached in alignment with the agreed upon scope and captures lessons learned.

Benefits include:

Sometimes, people confuse the System Development Life Cycle (SDLC) (Figure 6.3) with the PDLC. Like other development cycles, the SDLC provides a systemic methodical process. However, the SDLC focuses very specifically on developing software as quickly as possible in an iterative way. An SDLC is sometimes part of a PDLC.

Figure 6.3 Software Development Life Cycle

Software development is typically organized in seven phases that include planning, analysis, design, development, integration and testing, implementation, and maintenance that may overlap. The SDLC begins with planning which identifies resources, estimates costs, builds a timeline, and identifies tasks necessary for success. The design phase identifies requirements, determines specifications, and documents features and functionality. The development phase is essentially the same as an execution phase in other cycles including assigning resources to tasks, monitoring work, managing changes and risks, and reporting performance. The integration and testing phase is unique in that software must be carefully tested before integrating it into a production environment to avoid unforeseen consequences. Integration allows users access to the software. The maintenance phase allows for iterative improvements that include fixing issues that have come up after implementation and making updates to improve the quality of the software.

Benefits include:

ODLC

The ODLC provides a systemic cycle supporting the growth of capacity by taking advantage of new business opportunities. The ODLC often improves the timing of each step from initiation to review in five phases. These phases include initiation, planning, execution, implementation, and review.

The ODLC moves from beginning to end in an orderly fashion reducing risks and costs. Like other cycles, this best practice model supports better decision making. Taking time up front to consider the full ramifications of development and implementation often reduces time to market and cut costs by giving your team time to work through any issues up front. Because opportunities involve developing or creating new products or services, the ODLC may include one or more of the other cycles as well.

Benefits include:

Cycle Phases

Cycle phases may last just days or go on for months depending on complexity. For the cycles to be of full benefit, you must go through all the phases. Repeat cycle phases if necessary, being sure that you are ready to move on before you go ahead. Customize the order slightly making sure the cycle meets your needs. For example, planning always comes before funding in an ODLC. Without a business or growth plan, no one should give you money and it is not wise to invest your own. That said planning and funding sometimes come before design when appropriate.

Go/No Go Decisions

A go/no go decision is just what it sounds like. It is a point where you and your leadership team consider whether the investment is worth the cost and risks associated. If an opportunity is not going to turn out as hoped, you want to abandon or modify it as quickly as possible so that you can focus your resources on products and/or services will. Stopping on paper is much less expensive than failing during development. Stopping during development is again less expensive than failing after implementation.

If you have to go back to the drawing board, you want to do it as quickly as possible. One iteration of an idea can lead to another making what you end up with more successful than it might otherwise have been. There are a lot of good business ideas not all of them should be done. Use Go/No Go moments to avoid disasters.

For example, a trucking company was about to make a large purchase of new vehicles to meet the needs of a new client when it found out that vehicle regulations were about to change. The company owner decided to lease vehicles to meet their client’s need at the start to test the new relationship and see how regulations might impact their purchase.

The client relationship worked out. Six months down the road, the regulations did change. When they were confident in making a purchase, the new vehicles met the new standards. If they had purchased the vehicles earlier, they would have been forced to make expensive modifications.

Using an ODLC

As important as all of the life cycles are, small businesses most often rely on opportunities when expanding capacity. Many entrepreneurs move forward without using a systemic approach, thus decreasing their chances of success. For this reason alone, walking through this particular cycle, phase by phase, makes sense (Figure 6.4).

Figure 6.4 Opportunity Development Life Cycle

Phase One—Initiation

Figure 6.5 Opportunity Development Life Cycle phase one

Every idea should be vetted—EVERY idea, whether you are considering starting a new business or adding a product or service to your existing business. It is NEVER too late to assess, align, and evaluate the viability of your opportunity(ies).

Opportunity

An opportunity statement (Figure 6.6) explains a need that is not met and how that need impacts your potential customer as discussed earlier. It also clarifies how your solution best meets that need. When you put a statement in writing, you gain clarity. Here are some examples:

Focus on what your opportunity promises to deliver and follow the steps to write your own opportunity statement.

Step One—Write Your Statement

Write one to three sentences that describe what the need is and how you can resolve the need. Keep the sentences so simple a seventh grader could understand. Do not worry about making your statement perfect yet. You may want to revise your statement later. Use the template for guidance (Figure 6.6).

Figure 6.6 Opportunity Statement template

Step Two—Evaluate Your Statement

Now evaluate your statement. Is your statement in alignment with your mission, your vision, and your values? If not, consider what changes need to be made and rewrite your statement.

Assess

Taking time to break down and assess the opportunity on which your business relies or will rely offers many insights that help drive your business strategy. What you learn may cause you to pivot or shift in ways you might never have considered. A sound opportunity evaluation of your ongoing business provides confirmation that your opportunity is a good match for your business.

Considering the Match

Carefully assessing your opportunity makes sense to be sure you are on the right path. Small business owners tend to have limited resources and therefore taking a moment to answer these questions for yourself or as a leadership team can save time, resources, and money.

Based on what you know, now consider these questions:

Go/No Go Decision

Based on your answers, consider now if the opportunity is a good match.

 

Yes. Yes is the easy answer. Once you know your business is a good match then you are ready to move forward and begin.

 

No. If it does not then ask yourself if you need to expand your vision and mission or if this opportunity is not a match after all. If not then it is a No Go. Move on quickly to something else.

 

Maybe. If the opportunity is not a perfect match but you have already invested time and money, you should not just quit. Instead consider whether you can make your opportunity a better fit. Can you expand your mission or vision? Can you modify the opportunity to be a better match?

Align

Once you determine the idea is worth further investigation, it is time to ask the harder questions. It is clear to see that moving forward with a new opportunity has some risk. Because there is risk involved, it makes sense to spend some time carefully considering what all is involved. You want to know the opportunity is a good fit for your business. You must validate that the product or service is legal and can meet local state, and federal regulations.

Contemplating the Fit

The next step is to consider if the opportunity fits in with the talents/ skills, resources, and interests of your business. Take a moment to answers these questions for yourself or as a leadership team.

Determining Legality

Consider whether your product/service can be sold where and how you want to offer it to your potential customers. Americans tend to view the United States as one big whole. When it comes to commerce, it is really more than 50 different parts. State regulations and laws may vary greatly. Sometimes state laws and regulations are not consistent with federal laws and regulations. Federal laws always trump state laws. However, if you are in a heavily regulated industry where the courts are in the process of making a decision, just know decisions can go back and forth. You may be in limbo while you wait to see who wins. If you have doubts, seek competent legal advice from an attorney with experience in your field.

Go/No Go Decision

Yes. Once you confirm you have no hurdles in your way you are ready to move forward.

 

No. If your opportunity has legal hurdles you cannot overcome then now is the time to move on to something better suited for your company.

 

Maybe. Perhaps there are barriers in your way that can be moved. You cannot afford to ignore them. If you have the time and budget to clear those hurdles, the opportunity may still be a go.

For example, Fred Smith had an idea about creating a point to point shipping company first documented in a college paper. He got a C. The idea was not a good fit for the industry in 1970 because there were regulatory and legal hurdles. Still Smith went forward with an opportunity that many thought would never succeed. The company took off in 1977 during airline deregulation. The journey from startup to success was expensive and time consuming, but today his company is a household name, Federal Express. (Murray 2019)

Determine if you can make changes or remove barriers that would make your opportunity a go. If not, move on quickly to something else.

Evaluate

Your opportunity must be able to capture enough market share to make moving forward a good idea. Even if you considered your market when picking your opportunity, a more thorough market evaluation is essential in confirming you have a viable opportunity now. The information you gather during your evaluation helps create a more successful market strategy.

The evaluation helps you better understand your buyer or target. Once you know your buyer, you are poised to evaluate your competitors to understand how they reach your target. Understanding your competitor’s strategies often helps you understand how you can reach your target customers more effectively.

Now it is time to take a closer look and evaluate your:

Market Evaluation. For every market, there is a set of customers. You need a big enough share of those customers to be successful. Determine the size of the share you need by looking at where your product or service belongs in your target market. If the market is large, you may need just a small percentage of buyers. If you have a smaller total market, you may need to capture a larger portion.

For example, if you are one of two plumbers in a small community then you may want to capture 50 percent or more of the market. If you provide software as a service (SaaS) with a target market of 10 million, you may only need 5 percent as your share. Often, entrepreneurs capture a small share of a large market providing goods and services as a part of a niche opportunity. Your evaluation may lead you to a market of more specialized customer needs too small for larger corporations to spend time and money building but just big enough for you to target.

Success is driven by knowing how big your market is and how to get your share. This is why understanding what makes your opportunity unique is so important. There are four categories of potential customers in any given market:

It is tempting to consider EVERYONE willing or interested as a part of your target market but doing so may cause you to make decisions based on false assumptions. Only customers willing and able to pay are your target market. Exclude potential customers who want your product and/or service but cannot or will not pay a fair price. Additionally, exclude customers who cannot buy your product and/or service because it violates local, state, or government regulations or laws. These customers are blocked.

Define Your Market Category. Goods or services are most often sold in three distinct groups often referred to by their three-letter acronyms:

Determine which category best fits your business to better understand your target.

Determine Market Saturation. Research the industry to determine how big the market is today. Use readily available data such as data provided by trade journals, U.S. Bureau of Labor and Statistics, U.S. Chamber of Commerce, and the U.S. Census Bureau to determine your industry outlook. Gauge whether the market has room for one more competitor sometimes referred to as market saturation.

 

Buyer Evaluation. Within each category, there are one or more buyers. Buyers’ need(s) tend to be similar. By identifying your buyer’s need(s), you start to identify your best target. The better you identify your buyer, the more likely you are to make a sell.

Understanding your buyer creates value. Investors are more likely to invest in companies that accurately define their market and describe their buyers. Loan officers prefer lending to entrepreneurs that are clear as well. Not only that, but large buyers trust companies who understand their market which in turn leads to larger contracts.

While there are a few businesses which just start and serve a need so perfectly they fall into a niche and never have to think about marketing, those are few and far between. Even if you do not need investors, a loan, or you do not need or want large contracts, it is clear to see that understanding your target buyers is valuable because better understanding brings greater success.

Objectively identifying your buyer and determining the value and consistency of the need helps you make better business decisions. Often, entrepreneurs think they have their target buyers figured out only to be surprised after a closer evaluation. The information gathered during your evaluation helps to create a more successful market strategy that more accurately targets the buyers who care about your product or service.

Learn everything possible about your buyer. It may seem that your buyer is obvious or that your service is so simple that understanding your buyer is not important. This is never true. Once you understand the obvious need, it pays to dig deeper to figure out what it is your buyer wants.

Making a profile of each potential buyer helps you define your market. Who wants what you have to offer and why? Answer these questions about each potential buyer:

Point of Pain/Inconvenience. There is some point of pain, absence of joy, or wish for convenience being experienced by your potential customer. The experience is enough for your target customer to consider spending money. Understanding what within reason means to your potential customer sometimes makes the difference between success and failure.

Match. A buyer is a match when the buyer has both the will AND the ability to make a purchase. Matches are essential to success. Make the extra effort to be clear. Better understanding what makes a match can be the key to success. Buyers in different demographic segments tend to make buying decisions in similar ways. It is clear to see how understanding that can be helpful when you develop your marketing strategy.

Buyers are always ultimately people. Even if your buyer is technically a business or a government entity, a real person or group of people makes the decision to buy or contract your goods and/or services. Even when your end buyer is a consumer, you may need a distributor to get your products on a shelf. Understanding the typical people who work in the buyer/contractor role helps make you more successful at providing a product they do not just need but they also want.

Think about a restaurant. The product is a delicious meal. The buyer is a hungry customer. It might seem on the surface that this is as much as a business owner needs to know. Yet, there is so much more to understand. If the restaurant caters corporate events, the path toward a attracting a customer is quite different from the path toward attracting a family of four. If the restaurant is expensive, the experience of luxury service may be the inspiration to purchase. The path to attracting those luxury dining customers is different than attracting a family of four to a casual dining restaurant.

Large restaurant chains know this. They invest hundreds of thousands of dollars in understanding their buyer. Chains know that when they invest in the opportunity to open a new restaurant, they must select the right location. Restaurant do better close to the clientele most likely to come. Restaurant chains know that where is as important as what if they are to attract their buyer. To answer the question of where, they carefully profile their customers so they can first understand who. This kind of research often yields surprises.

Consider Brinker International which started out with Chili’s, a nationally known upscale hamburger restaurant. What they learned when studying their most likely buyers was interesting. They understood their buyer was typically a middle-class or upper middle-class family with two income earners. These patrons would pay more for a hamburger served in an interesting environment. They also knew that these busy families were unlikely to drive very far for a week day meal. Competitors that were more than 10 miles away were not very competitive.

Researchers discovered these buyers liked variety. No matter how good the food, interesting the restaurant, and great the service, their buyers did not go to the same venue every time. They noticed new Chili’s outlets soon brought competitors who often took a portion of the market because Chili’s customers like variety.

The answer to this problem soon became clear. Brinker needed to provide the variety buyers wanted. Armed with this information, Brinker created a strategy of building a variety of Brinker restaurants near the same location. When their buyers went out, they would be far more likely to choose a Brinker restaurant. They asked their buyer what are you hungry for? Once they understood, they provided their buyer with what they wanted most, variety.

It does not matter if you sell SaaS, you are a plumber, a lawyer, or a brick layer. When you understand your buyer, you become better able to determine more exactly not just what the need is, but what your buyer wants. Understanding the need while fulfilling the want helps you develop a competitive edge.

Sometimes there is a very small and specific market. Your buyer can be easily profiled. Other times you may need to create several profiles to understand who each of your potential buyers are now.

Needs tend to be easier to understand than wants. A want has more to do with values. Wants motivate behavior. All people want their basic needs served such as connection, physical well-being, honesty, safety, pleasure/play, peace, and meaning according to Marshall Rosenburg PhD (Rosenberg 2003).

In a 2021 Korn Ferry, a global organizational consulting firm conducted a study in which buyers reported that two of the top three behaviors most important during the sales process were to understand the buyer’s business situation, respond to needs, and actively listening. Buyers want to be understood. They want to feel heard. Korn Ferry suggested that the most important question to ask is, “Are you actively showing up where your buyers are buying?” (Korn Ferry 2021) To know, you have to know who those buyers are and what they want and need. Consider who may need and want your product and begin to build a buyer profile by researching buyers who buy similar products.

In the marketplace, knowledge is power. Buyer profiles help provide that knowledge. Picture your customers as if you are describing each of them to someone else. Build a profile for each type to better understand who they are and why they would buy from your business. Once you understand your customer, you are ready to design marketing channels that will become the basis for your marketing strategy.

Learn the following things about your likely buyers to build a profile:

Age

No product or service meets the needs AND wants of every age group. Children have different needs than adults. Working adults have different needs than retired adults. There are generational differences in how purchasing decisions are likely to be made as well. When you understand that and use a market strategy on target with the age range of potential decision-making buyers, you often have an edge over those who do not.

Education

The importance of education varies based on the product and/or service. Still you may find that the wants of more educated consumers are different than those with less education even for the same product. For example, everyone at some time needs a plumber whether they have a PhD or they failed to graduate from high school. One may care more about pricing and the other may care more about security. Targeting marketing to each profile is more likely to be successful than a generic advertising piece sent to each potential buyer.

Gender

When a product and/or service attraction is gender specific, the difference is generally clear to see. When you market to both men and women, the needs and wants may vary. It pays to make sure you target the individual needs and wants of each gender in your strategy. Increase your market share by speaking to those differences.

Income

Understanding how much money the buyer/company has to budget and how much of that budget is available to purchase your product and/or service informs your market strategy right down to the best words to use to get a buyer’s attention. Luxury brands may focus on aesthetics while economy brands focus on durability and savings. As economic times change, so do successful marketing strategies. If you pay attention, you soon notice that in lean economic times marketing strategies shift toward value even for luxury items. This is true for B2C, B2G, and B2B products and services. Buyers of all kinds are impacted by their environment. When budgets are tight at home, B2B and B2G budgets tend to become tight as well.

Habits

Understanding the buying habits or repeatable patterns that surround the decision to purchase your product or service provides an edge. Some of those habits include company and government protocols. Even if your market is B2B or B2G, buyers have buying habits. Be aware that buyers who purchase on behalf of a company or a government agency have needs to fulfill that may be more career oriented.

Values

Understanding what your potential customer values helps you make decisions not just about how to market your product or service but how to produce it as well. Any buyer concerned about climate change may be drawn to more sustainable products and/or services. Ads that use words that reiterate your customers’ value-based needs tend to be most effective. Images and symbols that reflect those values may be important as well. For example, many products use patriotic symbols and images in packaging and promotions to attract attention. Remember buyers are, after all, people who buy things no matter whom they buy them for on any given day.

Priorities

Buyers tend to care more about discounts in harsh economic times even when they are spending the company’s money and not their own. All buyers are affected by the economic climate, competing priorities, and media too. Buyer priorities change. Buyers cannot help but be impacted by their overall environment. For example, during the Covid-19 pandemic, safety considerations became huge concerns even where safety had not been a priority before.

Wants

Do not confuse wants with needs. Needs make your buyer consider purchasing your product or service. Someone may need a handbag. Wants often are the deciding factor in determining which one to purchase. One buyer may want a designer name, another sparkles, and yet another a well-made bag at a good price.

The same is true of services. A company may need a consultant to handle a merger. One company may want local resources who understand the business community and culture. Another may want consultants who are experts in mergers and understand the marketplace and complexities of integrations. The want guides the final decision.

Location

Marketing to a global marketplace is very different than marketing to local customers. It is easy to see that it is important to know where your customer is and how to reach them. If you are offering trade services, you may wish to provide your services in only a 100 mile radius. Your marketing strategy must be very specific to your area. If you provide a product that can be shipped nationwide, you are going to have to catch the attention of buyers in a very different way. If you provide services remotely, then it is possible you could focus anywhere in the world. You may care more about time zones and Internet connections than where you physically do business.

 

Using the Demographics. Once you identify your buyers, it makes sense that you are more likely to build a market strategy that appeals more directly to them. When you understand not just their needs, but their wants, you connect with them better. Because you made the effort to get to know your target market, you can build a market strategy that is more effective.

Competitor Evaluation

Few markets are so small that entrepreneurs have no competition except for local products and services in very rural areas. Even so, no matter where you are or how broad your market small business, owners and leaders like you find understanding what your competitors have to offer helpful. A better understanding helps you prioritize your product or service features and helps you properly price.

Even if you have been in business for a long time, it pays to look at where your business fits in comparison with your competition. Understanding your competitors helps you ascertain their unique business advantages. This helps you ensure what you have to offer meets the needs and wants of your target market better than your competitors. Your business becomes more resilient because you know where you fit.

Consider doing a competitive analysis at least once a year so that you begin identifying trends over time. Some trends may indicate that changes are happening quickly and others may show buying shifts that happen slowly over multiple years. If you are paying attention, your team will be more likely to respond to changing trends. You may even come up with the next innovation that shakes the market.

Benefits. There are additional benefits to understanding who your competitors are such as:

Interest Investors. Even if you are not looking for outside investment and you are not planning to get a loan, taking a look at your competition through the eyes of investors provides valuable information. Understanding what characteristics your competitors have that make them worthy of investment helps you set your own priorities. Better understanding who investors think has a future also helps you define what makes your opportunity different, even better than your competition.

It is easy to see that if you are seeking investment, this research is even more powerful. When you see the types of investors who have already shown interest in your competitors, you better understand who might be interested in you. Investors know that if you understand your competitors, you are primed to compete.

Learn From Startup Data. Get valuable information from previous startups. A little research may show you what your initial investment should be at the beginning. You may get a better idea of how much capital you require. You may uncover where your best sources for raising capital are likely to be as well. Your competitors may even be willing to tell you how they became successful and give you good advice on how to be successful yourself, if they do not see you as a threat.

Define Your Competitive Edge. When you compare mission statements, products, services, integrations, and anything else that make your competitors stand out, you start to identify what makes you different and better. Make note of those differences.

Identify New Opportunities. Seeing that others have recognized the same needs that you recognized in your opportunity validates your assumption that a market exists. Understanding how your competitors meet those needs sometimes identifies areas of interest you might have missed.

Understand Market Changes. By using your first competitive analysis as a benchmark and then doing semiannual or annual reviews, you start to be able to predict market changes. Watching your competitors over time, you may soon find you and your team are less likely to be surprised and more likely to benefit from marketplace changes.

If you find yourself in a rapidly changing market, take a look at how your competitors are pivoting to give you more direction about how to successfully pivot yourself. You create an advantage when you look for opportunities to better serve your customers’ changing needs.

Learn From Competitor Mistakes. Mistakes are costly. Identifying competitor errors helps you avoid the same pitfalls. When you learn from your competitor’s mistakes, you save valuable time and money.

Understand Competitor Metrics. Metrics such as revenue and market share help identify where your competitor fits in your market. If someone has your share of the market now, it does not mean you are at an end. After all most of the teens in the United States were on My Space before they went to Facebook and then shifted to Twitter, tweeting their every movement prior to moving again to TikTok and Instagram. Things change.

Understanding how long it took for a competitor to grow and reach revenue and market goals helps you plan. Looking at competitor budgets and sales predictions provides data that assists you in making more reliable predictions yourself. Clearly understanding your competitors gives you an advantage over others entering your marketplace who do not.

Determine Your Digital Footprint. Additionally, competitor research may tell you how big your digital footprint should be based on the size and type of your business. All companies must have a website. EVEN if you do not sell online and your customers do not go there much, it is likely they will when considering buying from you the first time. Additionally, websites have become one of the first sources of legitimacy potential investors and bankers look at to be sure you are for real. Vendors may check your website as well before making large orders.

Knowing where your competitors are on social media is important too. Understanding how useful online marketing is in your business segment can be extremely helpful. Knowing where your customers buy determines whether or not you must consider ecommerce options. Many small businesses have found success by making remote ordering and purchasing available months or even years before larger competitors.

Check Pricing Assumptions. Understanding how your competitors price is important. Research your competitors to understand what customers really pay. If there are bulk purchase discounts or loyalty pricing, you want to know. Validating your pricing strategy helps ensure your company stays viable in the marketplace.

Identify Possible Gaps. Use competitors’ gaps to make your product and/or service better. Customer complaints often reveal missing features, functions, or services customers may be looking for now. These complaints uncover what is missing in the quest to satisfy potential customers. Understanding where others fail provides the opportunity to tweak your opportunity to fulfill unmet needs.

Prioritize Development. Once you have your best understanding of your customers’ unmet needs, you are better prepared to prioritize development according to what your customers care about most. You are better set to make good planning decisions when you have to make a choice between implementing all at once or a little at a time.

Acquire Disrupters. When you recognize an innovation that is likely to disrupt the marketplace, you benefit in a couple of ways. If you are the disrupter suddenly being noticed by your bigger competitors, you have the chance to be acquired at a very nice profit. If you are the larger competitor noticing a disruption starting, you may be the one to acquire the innovation by purchasing your competitor.

Evaluating Competitors. Complete the steps that follow to evaluate your competitors.

Step One—Select Competitors

Start with five competitors. Evaluate a variety of your competition and not just the competitors that mirror your organization. Consider competitors that are similar to you first of course. Then look for those that are smaller and larger. Consider those competitors who are both direct and indirect. Direct competitors meet the same need(s) in the same ways. Indirect competitors meet the same need(s) in a different way. You may know your industry well and finding five competitors may be no trouble at all. If not, a quick browser search should provide all you need.

Step Two—Answer the Questions Below

Here are ten questions you should ask yourself about your competitors (Table 6.1):

Step Three—Create a Spreadsheet

Table 6.1 Competitor Evaluation

Company Name	Category*	Number	Investors Customers	Revenue	Pricing	Differentiators	Complaints	Market Share

*(big, small, direct, indirect, different industry)
Note—If your opportunity includes more than one product or service, you may want to review each separately.

Step Four—Complete the Spreadsheet

Gather all the information you can find on each of your five or more competitors in your Competitor Evaluation spreadsheet (Table 6.1). Most of the time, this level of investigation can be done quickly. Publicly held companies publish the information in their annual reports. Private companies may provide answers on LinkedIn, online sites that publish hiring information, or even their own company websites. If you need additional help there are online tools available that are free, offer free trials, or are low cost. Find a list of those tools kept up-to-date on CapacitySquared.net (Table 6.2).

Table 6.2 Competitor Evaluation extended

Co Name	Cat*	# Cust	Rev	Pricing	Differentiators	Complaints	Market Share	Competitive Advantages	Insights

*(big, small, direct, indirect, different industry)

Step Five—Review Your Answers

Add two new columns now entitled Our/My Competitive Advantage and Insights. It may help to highlight these two new columns with a different background to easily tell your competitor’s product or service from your opportunity.

Go/No Go Decision

Now that you know what, to whom, and at what price you have hit another Go/No Go moment, consider these questions:

Yes. If yes, then you are ready to move ahead and consider what strategies work best for your market.

No. If no, then it is time to move on to a new opportunity.

Maybe. Work back through your opportunity starting with what and determine if changes or revisions to your opportunity make it viable.

Phase Two—Plan

Figure 6.7 Opportunity Development Life Cycle phase two

Plan

Plan a path to success. Once you know that your opportunity is viable build a five year plan to guide you to success (Figure 6.7). Operating any business is an intense process. A good plan is an excellent investment. A study entitled, The Multiple Effects of Business Planning on New Venture Performance reported in the Journal of Management Studies found that “companies that plan grow 30 percent faster than those that don’t plan.” This study found that though businesses found success without planning, businesses with a plan grew faster and were more successful than those that did not. (Burke, Fraser, and Greene 2010)

For this reason, it is clear to see a plan benefits you. The two most common plans are a business plan and a growth plan. Most entrepreneurs and business leaders have heard of a business plan. Not as many have heard of a growth plan. Both are useful in the right circumstances. Find an outline for each type of plan in the Appendix or start with a template for each at CapacitySquared.net.

Business Plan

A business plan remains the most commonly used plan for startups. Use a business plan as a blueprint to move forward for 3, 5, or 10 years. Five years is the most common timeframe. Ten years is a long time in today’s rapidly changing world. Three years may not provide enough time in your timeline to meet goals.

These plans set specific business and revenue goals. Business plans include high-level strategies, analysis of opportunities, and identification of risks. A business plan also includes a timeline for goals that becomes the beginning of a roadmap for success. Most importantly, revenue projections offer the opportunity to track financial progress.

Growth Plan

A business plan and a growth plan cover many of the same things. A growth plan also includes details about the implementation of your opportunity and if necessary, expansion of your existing business. Growth plans focus on marketing, sales, operations, and production not often covered in depth in business plans. These details are important to investors and bankers when based on reliable information and clear metrics, which often presents more of a challenge for startups.

Growth plans are best when focused on a single opportunity or two if the two are closely related. If you have multiple lines of business, you may find you need multiple growth plans. This is true even if some of the sections in each plan are exactly the same.

Characteristics of a Good Plan

Make sure your plan covers all of your bases. A good plan considers:

Business Story. Often, the motivation behind success, enticing investors, and intriguing loan officers is the story behind your business and your business opportunity. A good plan does not start at what you do. It begins with who the business is and why it exists. A good business story connects the reader on an emotional level.

Your business story includes your mission, vision, and values. Well-written plans have the reader cheering for your success. Make sure each stage of the plan tells a little more of your story.

High-Level Strategies. Plans document the key strategies important to building your business opportunity which must include your timeline, marketing, sales, and pricing. Growth plans tend to go into much more detail about strategies than business plans.

Cost of Success. New expenses in terms of staffing, planning, equipment, and space necessary to create a stable foundation often closely follow success. An adequate investment in equipment and maintenance helps prevent breakdowns and costly repairs. An appropriate investment in resources avoids overworking team members. Proper supervision and support of your team members needed to succeed may require growing your management team. Include the cost of success in your plan from the very beginning to ensure you have the budget to grow.

Business Baseline. No plan is a plan without a starting point. Your starting point is a baseline. Set a baseline so that when course corrections are necessary each change can be carefully thought through. Use performance metrics against the baseline to provide more accurate measurements of success.

Key Metrics. Metrics in a plan set up checks and balances that help make sure that the plan is realistic. Achievable timelines, realistic financial ratios, predictable growth rate numbers, and so on help you make important business decisions. Businesses that have been around for a while have history to help make these types of predictions. Startups often must do more research to find the data necessary.

Startups can often use data from existing competitors. Take time to find useful predictive data. Taking time to be accurate reduces risk. The more transparent your data is to everyone taking a risk, the better.

 

Timelines. Understanding how long it takes to begin to make money is important. Without a timeline, you cannot know for sure. Every opportunity creates expenses that require investment. The investment may be coming from inside your company, your personal funds, or from outside through loans, grants, or money from investors.

For example, if your opportunity means that you must increase staff and add new managers and supervisors you want to plan for that. If you must purchase new equipment to deliver your goods or services to new customers that comes at a price as well. The investment may be coming from inside your company, your personal funds, or from outside through loans, grants, or money from investors.

Outside investors want to make money on their investments. Before accepting money, make sure that your investor(s) understand the amount of time you predict it will take for the investment to net a positive return. The best policy is to under promise and over deliver.

Avoid borrowing too quickly, making sure to time debt so the weight of the payments is not too large for the business to manage until new income covers the cost. Remember your pricing must cover your new costs before you deplete your investment dollars. Timing debt helps provide the infrastructure you need for success while still meeting your predicted profit margins when done right.

 

Risks. Pointing out risks in your plan may seem counterintuitive However, investors want to know that you understand what you are up against. A short list of your 5 to 10 biggest risks is often enough to prove you understand your business.

Strategies for Success

Align your key strategies centered around your opportunity with your mission, vision, and values. A strategy is essentially a long-term plan that provides the direction necessary to achieve a goal or set of goals over a period of time. Multiple focused strategic plans often strive toward the same outcome.

Planning is similar at all levels of business. Many of the steps are the same whether you are creating a business plan, a growth plan, a strategic plan, or a project plan. The skills you develop writing your first plan help you build any other plans you need to support the success of your business. If you begin planning early, you will likely soon discover strategic plans provide the information you need to make even the most important business decisions.

Often, you may be tempted to dive in with little or no planning at all. Many entrepreneurs do. German philosopher Arthur Schopenhauer proposed that “talent achieves what others cannot achieve, whereas genius achieves what others cannot imagine” in his book, The Word as Will and Representation. (Schopenhauer 2010) Many entrepreneurs agree. However, a good plan takes the talents necessary to implement a genius idea and turns it into a reality which is the cornerstone of success.

Lots of brilliant entrepreneurs start businesses that are born of great, even genius ideas. Only some of them succeed. A study in the Journal of Business Venturing found that planning does indeed improve small business performance for both startups and ongoing ventures that use a process for writing plans. It suggests that as businesses gain experience and skill in planning the benefit increases. The study advocates for continued planning no matter how long your business has been around, reporting that robust organized planning for growth increases success.

However, this same study cautions against an informal approach. “Since business planning in new and established small firms is oftentimes informal, iterative, incremental, unstructured, and irregular leading to no written outcome, the development of these firms might suffer. Our findings caution practitioners to avoid these frequent shortcomings of business planning and apply both formal and more sophisticated planning approaches.”

Source (Brinckmann 2017)

Strategic Goals

Goals set the direction and momentum of any business and are key to expanding capacity. Businesses without goals tend to lack direction. The most successful businesses meet goals. Make your goals part of your everyday operations. Do not let your goals become a list you never look at once written. Act in an organized manner to do the steps necessary for success such as those laid out for you in the Roadmap for Success.

While your goals may be listed in your business or growth plan for three, five, or ten years, you may need to break them down further. This is where the Roadmap to Success single-year plan becomes important. Use the one-year plan to break down your larger goals into achievable segments that can be clearly measured.

Strategic plans centered around your goals are essential to making sure your opportunity becomes a success. Well-written plans built around an opportunity often include details about each.

Types of Strategic Plans

Strategies may include:

Time Strategy. Your time strategy is a piece of the overall strategic plan that focuses on when. Timelines such as roadmaps, project plans, development plans, and delivery schedules make up your time strategy. Your time strategy may be your MOST crucial element of success because it sets timelines and deadlines.

Timelines are not just estimates of the time it takes to do tasks. Timelines set goals measured by milestones that move your efforts forward. Deadlines create accountability by helping you and your team focus the energy and efforts necessary to achieve a goal. Your timeline creates an urgency to move forward.

Take time now to build the timelines important to your success. Begin with your building a roadmap for your opportunity. Add any other timelines crucial to your success.

Marketing Strategy. Your marketing strategy is best described as your overall game plan for reaching prospective consumers and leading them down the path to becoming buyers. This path is often called a channel. Deciding if a market exists is not the same as creating a market strategy. Clearly, the market must be big enough to allow you to attract your share of the right customers who are your potential buyers. That share of potential buyers must be big enough for you to make a profit. Your market strategy connects you to those buyers in a channel.

Develop your marketing strategy by gathering the information you need. Building a strategy requires you to define your:

Channels

Channels build connections or paths from the provider of goods and/or services to the purchaser. Most businesses have more than one path to a customer. However, channels are not necessarily equally profitable. You may soon discover you do not have the budget to follow each path. You must prioritize. The more you understand about each channel, the easier prioritizing your path becomes.

What you have to offer becomes viable only when you understand how to reach your potential buyer. All channel paths eventually lead to a decision-making buyer. However, there may twists and turns along the way. Corporate decisions may come through procurement but then have to be approved by the ultimate user, their management, and in some cases the company’s legal counsel. Sometimes the ultimate user goes through management to make a procurement request. Children may ask parents. Parents may decide for their children who are never asked before being given your product or taking advantage of your service.

The most complicated path is when a service is contracted by a decision-making buyer, but the customer makes the final purchasing choice. Sometimes the needs and wants of the decision maker do not align with the needs and wants of the customer. Being clear which needs and wants must be met can be key to success. When you take a moment to consider the path to a willing and able decision-making buyer, you are better at making decisions about any proposed opportunity.

For example, businesses that produce products often compete for shelf space in brick and mortar stores. Entrepreneurs often cannot reach the person who actually uses the product until a corporate store buyer gives them shelf space. Businesses that market to children know that parents make the final buying decision. Adult children may make decisions for elderly parents.

For instance, a phone and video calling service provider for the incarcerated has channels that are complex. Initial contracts come from B2G and B2C agreements. Actual purchases come from a very targeted B2C market. To make matters more difficult, the needs and wants of the B2G and B2C markets are often diametrically opposed to those of the B2C purchasers. There is no way to reach the B2C purchasers without a B2G or B2C agreement.

As it turns out, those who run jail and prison facilities do not want those they house to have access to uncontrolled calls, videos, and chats. These leaders know uncontrolled communications increase violence and crime. Still inmates have the need and the right to communicate with their lawyers, family, colleagues, and friends. Jails and prisons must make those conversations possible to be compliant with regulations and laws. The needs are clear.

The wants are however very different. Facility leaders want to avoid violence and crime while supporting law enforcement in getting and maintaining convictions. They want the heavy costs of security features to be covered by the company that provides these services. Consumers want clear private connections with the outside world reducing the risk of conviction and sometimes increasing the probability of success on appeal. Their wants could not be more different.

To make things more complicated often, the consumer who pays for the call is a friend or family member who has a set of wants of their own. They want the calls to be inexpensive. In addition, they want the minutes to be easy to buy, calls and video connections easy to make, and the connections to be clear. They may have other wants as well. Even the user and the purchaser can have different wants.

At each stage of the path, a different marketing channel is necessary. Your path is likely much simpler. Your path may include only one or many buyer profiles. Keep in mind, each buyer profile may follow more than one channel path. Understanding the path(s) is important.

Understanding your channels requires understanding the following:

Decisions

After looking at who the decision-making buyer is, it becomes clear to see the purchaser is not always the user of your goods or services. While B2C customers may make personal decisions with little or no input, B2B and B2G buyers may need a great deal of input. Your initial contact may not even be the decision maker. Understanding how to determine who the decision maker(s) are and how to get to them is key to defining a marketing path.

Barriers

Consider your paths to willing and able decision-making buyers and determine if there are barriers in your way. If the paths are clear then you may find a decision to move forward is easy. If barriers exist, you may want to do more research. Do any necessary research to determine how difficult, costly, or complex removing each barrier might be.

Barriers add risks, cost money, and increase the time it takes to be successful. Do not move forward if you have not found a path over, under, around, or through your barrier. It is far less costly to decide not to pursue a blocked path at this stage than it is after you have spent more time and money on your opportunity.

Discovering a barrier is not necessarily the end. Assess every barrier separately. Consider the cost to remove the block in both dollars and time. Be sure that everyone appropriate on your team gets a chance to give feedback. Make sure everyone impacted is aware.

Loyalty

A lot gets said about brand loyalty and that can be confusing. Loyalty comes in many forms. For some, it means that buyers do purchase multiple products or services in your brand because they admire and/ or trust that your brand delivers. For others, loyalty means repeat purchases of a single product or service. For still others, loyalty means that satisfied customers recommend your goods or services to other potential customers.

Understanding what makes your potential customer turn into a willing and able repeat buyer or a brand ambassador offering regular recommendations builds repeatable revenue. Loyalty creates the credibility necessary for sustained growth. Often, businesses see a bump in loyalty returns at predictable intervals. Businesses that have done well for 3, 5, and 10 years years regularly frequently report seeing an increase in referrals and repeat revenue from regular customers.

Patterns

Purchasing patterns are more than just the habits of your buyer. They are the predictable repeatable actions you identified in channels and buyer profiles. Understanding these patterns allows you to identify your most efficient and effective marketing channels and the actions necessary to entice your buyers.

These patterns are often influenced by many of these factors:

Priorities

Customers have budgets. When budgets get tight customers must often decide between competing needs. Understanding where your goods and/ or services fall in priority for your customers prepares you for shifts in the market. You may want to set aside a bigger reserve of earnings when you know that your business is rated higher as a wanted product and/or service and lower as a needed product and/or service.

For example, when the economy gets tight, many start to consider the difference between a need and a want more carefully. Companies frequently put off training, incentive purchases, and motivational activities in favor of making payroll when times are tougher. Consumers often forego big ticket purchases of luxury items during lean times as well. Even government purchases and payments often become delayed or may be put on hold as legislators deal with budget shortfalls.

Go/No Go Decision

Consider these questions after defining your market:

Determine if you should move forward.

 

Yes. If yes, then you are ready to move ahead and consider what channels best serve your market.

No. If no, then this is not the right time to move forward.

Maybe. Consider what changes and revisions you could make to your product or service that would overcome these obstacles. Measure the cost, effort, and time it would take to change the regulations or laws that block your success to determine if moving forward is still a possibility.

Identifying Channels

No path is wrong when the path is accurate. It may look like:

Here are some examples of channels often used:

Blogs	Publicity	PR (conventional)
Offline Ads	Content	E-mail
Word of Mouth (Viral)	Engineered Tools	Business Development
Sales	Affiliate Marketing	Partner Platforms
Tradeshows	Networking Events	Speaking Engagements
Community Building	Advice	Organic Growth

Few small businesses use every channel available. Success depends upon picking a channel that is not only the best for your product or service, but is also something your team is likely to do without procrastination. These become your priorities. Most small businesses do best if they select no more than three channels.

Step One—Select Channels

Select channels by following the steps below:

Step Two—Prioritize Channels

Select one to three effective channels that are also highest on your list of channels that contain things you or your team are most likely to be willing to do.

Note that some experts say that in the early stage of the business you should select just one and only add to your list as you become successful and effective at using your first choice. This may be true if you have little time for marketing. If you do not have anyone on your team to actively market without procrastination, then it will not matter how effective the channel is for you. Marketing will not work if the effort never happens because no one does it. It pays to focus on the strategies that are both effective and likely. Likely strategies are those that your team is most likely to do continuously without procrastination.

Step Three—Define Marketing Channel Options

Consider each of the channels you selected. Create a chart with a column for each channel. List the various marketing options for each channel in the appropriate column (Table 6.3). The lists do not have to be long. They should be complete. If the list gets so long it begins to look like too much, then prioritize the list so that you can build a plan to get it all done over time.

It will look something like this (Table 6.4):

Table 6.3 Channels

Channel 1	Channel 2	Channel 3

Table 6.4 Channel Tasks

Online	National Networking	Publications
Set up Facebook Group Create LinkedIn Page Start Instagram Account Set up Twitter account Build Website Create Short YouTube Videos and place on all social media Publish articles on popular websites Add content to each social media account weekly	Speaking Engagements Speak on Panels Offer on topic trainings to groups of potential customers	Write a book Publish the book Make the book available to college students

Step Four—Define Channel Paths

Drawing each path often helps identify twists and turns. It may even help you discover new paths you have not previously considered. Understanding your channel paths provides the information necessary to build successful marketing campaigns.

Testing Your Channels

You want to make sure the assumptions you made about your channels are correct before you spend your budget and your time. It pays to be sure your path actually reaches your target market of willing and able buyers. The theory behind testing is that if you can reach a few targeted buyers with a little effort, then you can increase your effort and reach even more. Use what you learn about your buyers real wants and needs in testing to tweak your campaigns and improve your ability to connect.

Here are some tests to consider:

Customer/User Experience

If buying or using your product or service is difficult, you can be assured that there is a hidden opportunity. Grow your market by solving the problem or improving the customer experience or let your competitor benefit at your expense. Customer/user experience testing uncovers what buying and/or using your product or benefiting from your service is like for your customers. This testing allows you to make improvements regarding how you market, deliver, or produce your product and/or service to increase your customer’s satisfaction. Clearly, to do that, you must know what is important to your customer.

A good example of growing market share through improving the customer experience starts with WordPerfect. Unless you are over 50, it is unlikely you even recognized the name. WordPerfect went on the market as one of the first computerized word processing tools available to the general public. It was the first time a user could correct work without retyping or using messy correction fluid. It was wildly popular and soon made typewriters that had been an office staple for 100 years obsolete. The secret of WordPerfect’s success was improving the user experience of typists.

However, to use WordPerfect, the user had to learn a long series of computer commands that took some time to master. Just when WordPerfect was celebrating a decade of dominance in the market along came Apple. Their Macintosh software was easy to use and took almost no time to learn. They thought the secret of their success was better computers. It was actually improving the user experience for those who were willing to pay more for ease of use. Apple quickly stole 30 percent of the word processing market; however, the less-expensive WordPerfect was still dominant.

Then along came Microsoft Office signaling the end of WordPerfect. It would run on far-less expensive computers. Word soon became the preferred word processing tool capturing 80 percent of the market. Microsoft understood that they were selling was a better user experience and not better computers.

Focus Groups

It pays to ask your customers what they need and how they want to get it. Even if your business is doing well, understanding your customers is a good idea. Sometimes business owners fall into a growing market where they think they are providing one thing, but they are actually meeting the need for something else. Truly understanding what about your product or service meets your needs will help protect you from market changes.

Ernest Dichter PhD pioneered the idea of reaching out to groups of users who best represent a profile of buyers to ask what they wanted and why. He used carefully planned questions to uncover what group members really wanted. The purpose was to better focus a business on customers’ real motivations. (Schwarzkopf 2010)

To understand why focus groups are so useful, look back at the very beginning to the boxed cake industry. According to Bon Appetite writer Michael Y. Park, 1940s flour mills jumped into the cake market after World War II soldiers returned home. Supplies that had been in short supply because of the war were suddenly widely available again along with the workforce to create them and more people to buy them.

Cake sales plummeted in the 1950s. Box cake manufacturers were confused. Along came Ernest Dichter with a plan to find out why. Clearly, what customers wanted had mysteriously changed. They were still delivering convenience and savings with a tasty treat in a box, but it was not enough.

Ernest Dichter returned from his focus groups with the news that bakers wanted to be more involved in the process. He asking bakers to add a few ingredients. He theorized that bakers would feel more a part of their creation if they contributed to the mix themselves. However, while he was right about the motivation, he may have been wrong about the answer.

According to Park, he was right but for the wrong reason. Buyers wanted creativity. Can frosting was the answer, “Box covers, recipes, and home-making magazines showcased elaborate cake constructions that looked like miniature football fields, or European castles, or three-ring circuses. A partner product saved the industry.” (Park 2013)

Park’s story shows that focus group information must be carefully digested and tested to be sure that the interpretation of the information best serves the needs of your business. You can see from the history of box cakes that the market shifted. Yet, what looked like a looming disaster became another opportunity. Boxed cake companies began to create canned frosting as a partner product to make creative masterpieces even easier for home bakers and generated even more revenue.

Create a Focus Group

Follow the steps below to create a focus group:

Step One—Make Preparations

Step Two—Prepare for the Day

Step Three—Host the Focus Group

Step Four—Use Your Results

Experimentation

Use marketing channel experiments to validate theories before making big investments. Proper testing requires skills in test procedures, data science, and data analytics and may be best left to the experts. The only exception may be simple digital traffic experiments.

Most browsers such as Google, Firefox, or Bing provide digital analytics that have been validated by other users and tend to produce reliable results. Make sure you are comfortable relying on the data before investing your time and money. Additionally, there are a wide range of free and low-cost tools available on the Internet to test digital marketing channels that provide a greater level of detail.

Events

Use networking gatherings, conferences, annual association meetings, workshops, and so on to gain exposure to your target market. Events may be in person, virtual, or a combination of both. Your presence at in person events may require serving as a guest speaker, hosting a booth, sponsoring WIFI, providing exhibits, or as a sponsor. Events can be the key to taking off. According to business writer Nick Douglas, “Twitter put TVs in the lobbies and hallways of the SXSW (South by Southwest) conference in 2007, showing live feeds of tweets from the event. Of course everyone wanted to see their own tweet on screen, and as a result, their traffic ballooned from 20,000 to 60,000 tweets per day during the event.” (Douglas 2007)

Marketing Campaigns

Once you know what your end goal is and which one to three channels are most likely to work for you, begin building your market strategy. For example, if local networking is the best channel for you, join your chamber of commerce and/or a networking group. Your money is better spent than it would be to buy social media ads. However, if your best channel is online marketing, social media ads become an important part of your strategy. Your strategy must incorporate the best way to meet your potential customers for your channel.

Many people confuse marketing campaigns with sales pitches. Recognizing the difference increases the effectiveness of your campaign. If you think of a channel as a path, then a marketing campaign is the vehicle that moves your sales pitch in front of a potential buyer. Your channel path must be correct and your campaign vehicle successful BEFORE your customer ever gets to see or hear your sales pitch. Matching the right campaign to the most effective channel is essential.

There are many campaigns that move buyers through the channels you selected. Here are a few often-used campaigns to consider:

Always start with putting a well-thought-out campaign plan in writing. Writing your plan provide clarity. Consider the time and resources necessary to carry out your campaign. Determine your goals and set metrics to measure your success.

Direct Mail	Conference Follow-up	Referral Follow-up
E-mail	Trade Show Booths	Social Media Engagement
Networking	Sales Calls	Business Community Engagement
In person presentations	Advice Response	Conventional Public Relations
Web Contact Follow-up	Advertising	Search Engine Optimization (SEO)

Some campaigns are short and easily monitored. Others are long and need a plan with metric milestones reviewed regularly in a spreadsheet or better yet in your Customer Relationship Management (CRM) application to stay on track. Use metrics to help you understand your sales cycle. Review your predictions against what actually happens so you plan better next time. These efforts lead to better sales forecasts. Not only that, but your accumulated data provides the stats that help you determine what campaigns work best for each of your channels.

Customer Base

Calculate your customer base by determining the number of willing and able buyers that make up your market share per channel. Your share determines the size of your market. Your market size is determined by buyer profiles, targeted by prioritized channels to reach buyers by campaigns.

Size matters in both number of customers that make up your customer base in your channel and the market share they represent. It is easy to understand that once you identify the subset of buyers who are willing and able to buy, the market must be big enough to accommodate both you and your competitors. It is rare that someone dominates any given market. It happens when a patented product is so innovative competitors cannot figure out a way into the market. Use realistic numbers when determining your likely portion of the market.

Statistics to determine the size of your market are often easy to find if you know where and how to look. Here are some options:

Buyer Research. Buyers you cannot or will not reach are not part of your target. When researching your market to build a cohesive market strategy for your channel, consider:

Geographical Region

Make sure to measure your share of the market only against your real customers. A local business addresses only local customers’ needs, only considers the local market and not every customer in the United States. An online merchant must consider everyone online. A national service must consider the market for the entire country.

Familiarity

The more familiar your product or services is, the more you must work to stand out in the crowd to gain market share. Everyone knows what services are offered by a plumber, doctor, attorney, and so on, making it important to determine what makes your product/service different than your competitors. Think about your opportunity statement and about what makes your product and/or service better, unique, and/or more valuable. Determine how best to use that to get your potential customers’ attention.

Very innovative products and services, on the other hand, may require some education for the consumer. It may take some time and effort to convince your customers they have a need. Cars were called horseless carriages to help consumers relate the auto to their current needs. Home computers did not catch on until enough of the public was familiar with desktops at work 185 years after the first computer was marketed.

The first computer was a punch card loom that revolutionized the textile industry in 1801. Later, Thomas Watson Jr. of IBM led the effort to build the computer as we know it today. It could calculate 26 complex equations at one time using the first computer language developed by Grace Hopper in the early 1950s. IBM determined their market to be very large governments and priced their computing machine to make a profit if they sold three. Clearly, they underestimated this life-changing innovation. (Mann 2015)

Trend products, on the other hand, can take market share overnight and be gone a year later such as iPods. Others become part of the culture like water bottles, but competition soon causes many competitors that steal market share. If you are investing in a trendy idea as your next opportunity, plan for a short profitable market life cycle.

It is important to know which category your product and/or service belongs. Accurate predictions help you create a viable strategy. If you are changing the world, it may take some time. Plan for that.

Penetration

Determine market penetration by how much of your target market you have or you will need to capture. Your penetration is the percentage of business you capture compared against the entire market in your channel. For example, in the early days IBM captured 100 percent of the super computing market. It was the innovator. Since then, competitors have greatly reduced IBMs dominance and penetration. Today IBM struggles to stay in the top 10. You need enough market share to stay competitive. Competitive resilience comes from being able to capture enough of the market so that your competitors do not overwhelm you. (Shankand 2004)

Stability

Stability comes from having enough customers so that the loss of one does not create a risk of failure. Small businesses owners and leaders that rely heavily on too few customers find their business in peril if just one relationship ends. A group of researchers reported that companies with a broad customer base who do not rely too heavily on one or two key customers are more likely to succeed. In a study called A knowledge-based view of managing dependence on a key customer, “The study found a significant negative impact of key customer dependence on firm survival.” (Yli-Renko, Deno, and Janakiraman 2020)

What this means is that winning that one big customer may get you started but wise entrepreneurs do not stop there. Every business needs a stability percentage. Your stability percentage indicates the highest percentage of business that can be provided by one buyer relationship. Determine your stability percentage by considering how much business you can lose and still survive.

Typically, avoid having any one customer provide more than 30 percent of your business. Buyers in this case also include distributors. For example, if you sell through one big box chain only, you may have a popular product with 1,000s of customers, but you have only one buyer relationship. If that goes away then reaching your customers becomes problematic overnight.

Volume

The volume of your market is defined as the number of products or services you sell divided by the number available for purchase in the market at any price. Many people assume that high volume equals high profits. This is not necessarily true. If you discount your products or services to capture volume, sometimes that means your profit margin suffers. Avoid getting work that creates negative revenue.

Value

Once you understand your market volume, you can use your volume and price to determine the value of your market. Determine the monetary value of your market share to decide if there is a profit margin worth pursuing. Knowing your market value is key to determining if an opportunity is worth the investment and effort it takes to make it successful. If you find that you would not make a profit even if you captured 90 percent of the market volume, then you know your opportunity cannot support your business. However, if just 2 percent meets your financial goals then the market value suggests a promising opportunity exists.

Pricing Strategy

The price you want to set for your goods and services cannot be more than a willing buyer is both able and willing to pay. Able is as important as willing. Many B2B and B2G entities have made the mistake of creating products or developing services their customers wanted but were prevented from buying because of budgetary restraints, regulations, or other contract agreements that make the price their customers could pay less than the price that was acceptable. The customers might have been willing. They just were not able to complete the deal.

Common pricing strategies include:

Competitive. Competitive pricing considers what others in the marketplace charge for like goods or services. Your Competitor Evaluation provides insights into competitor pricing that sets a maximum and a minimum for the goods or services in your channel. Keep in mind that different channels may pay different prices for the same goods or services.

For example, luxury buyers pay more when convinced they are getting something exclusive, special, or better than the average buyer can afford. This is the reason a car buyer pays more for a Mercedes than for a Ford. Both are cars, but the channels are different. Mercedes asks higher prices for their vehicles because they built a reputation of using only the best parts. Their 21st century slogan “the best or nothing” reminds their buyers of why they should want to pay more.

It is clear to see that it pays to understand the customers in each channel so that you price appropriately. If you price too low, your customers may not trust that your goods or services are as good as your competitors. If you price too high, your customers may think you do not understand your market or your competitor’s product or service is a better value.

Consider using discount pricing to get the attention of your customers. Done right, you can continue to increase your prices as your goods or services become more in demand. Take care though because if done wrong you end up with buyers who are not able or are not willing to pay a fair price and so turn to you only as a last resort.

Cost Plus. Cost plus pricing sets a margin over cost used to ensure profitability. You see this pricing frequently in retail where goods are bought from manufacturers or distributors and sold to consumers at a marked-up price. Cost plus is often used in industries such as commodities where costs change rapidly as well. Additionally, cost plus may be used successfully for services in high demand that have few competitors. Service firms often use cost plus to charge for services provided to be sure they make a profit above overhead on the services their resources provide too.

Demand-Based. Demand-based pricing works for goods or services in short supply when your customer is willing to pay a premium. Customers may be collectors or early adopters. They might also need services that are in high demand when there are few resources with the desire or skills to deliver.

Consider the Great Resignation of 2021 when companies reached out to reclaim resources who had been released during the Covid-19 pandemic only to find many did not want to return. Wages and contract payments went up as jobs became harder to fill. Companies began paying signing bonuses, improving benefits, and negotiating working conditions to attract the labor they needed to be successful.

Prices went up across all industries in 2021 according to the U.S. Bureau of Labor Statistics as well because supply chains bogged down making getting products and the pieces and parts to make products across borders difficult. Car prices rose 35 percent. Gas went up to a 10 year high. Companies across the board began raising pricing to accommodate increased costs for labor and materials. (U.S. Bureau of Labor Statistics 2021)

Demand-based pricing is not fixed. When demand is high, so is the price. When demand wanes, prices go down as well. Entrepreneurs who depend on early adopters must understand when that market has been saturated in time to make the discounts necessary to stay viable. Even the most intriguing innovations do not stay new forever.

 

Mixed. Oftentimes, the best pricing strategy is built based on a combination of the three most common strategies that works for you. Demand always has an impact. As markets shift and customers change, the best pricing strategies are determined by what works in the moment.

Go/No Go Decision

Once you have all the information, meet with your team and decide whether to go forward or vote No Go and look for another opportunity. Determine if there is a market with a target share big enough to meet your end goal. Determining if what you have to offer is exactly what your customers want is a part of that. If your first opportunity is a No Go that does not mean you are done. It just means you have not found the right opportunity.

 

Yes. If yes. then move forward with confidence.

No. If no, this is not the time to move forward.

Maybe. Consider whether there are ways to expand your market. There are only a few options:

Sales Strategy

Once you understand your market position craft a strategic sales plan that is in alignment with your company’s mission, vision, and values. Use the clarity gained from researching your market to create a plan that more accurately targets the right industries, audiences, and customers. For every channel worth pursuing, there is a way to get the attention of your customers. Your market strategy gets the attention. Use your sales strategy to close the deal. Your plan becomes the hub around which you build the path to sales success.

 

Sales Plan. Many people get confused by the difference between a marketing plan and a sales plan. Many think they are the same thing. They are not. Marketing makes your potential customers aware of your services or product. Sales coverts those potential customers into buyers.

All businesses no matter how small, have a pathway to a sale. Some are shorter than others. The length of time it takes to convert a potential customer to a buyer is called lead time. Lead time can be minutes or months. A restaurant turns a customer into a buyer in minutes. An engineering company may bid for a job and not know if they have been selected for months. The important thing is to understand your funnel and be able to plan to cover your costs until that sale is made.

The steps to build your sales funnel and then move forward are different than the steps to market in your market channel.

A good sales plan includes at the minimum:

Sales Goals

Your sales goals are the KPIs you set for your sales efforts. Setting clear achievable goals is a process. No company can succeed without eventually earning a profit. Sales goals are about numbers. Start by determining how much money your company must make to cover the expenses your opportunity creates and then turn the desired profit. Your profit goal must be clear even if you know you will not reach it in your first year.

Many new opportunities require a period of investment that means operating at a loss in the beginning. It took Amazon founder Jeff Bezos seven years to become profitable. Without a clear and realistic strategic sales plan with realistic goals, he would not have ever become the richest man in the United States multiple years running. Goals set his plan in motion.

Use your desired revenue to determine the volume of sales necessary to achieve your goals and meet your KPIs, then work backward. Use these goals to quantify the work that has to be done at each stage of your funnel to reach success. Break your goals down into increments and measure them monthly, quarterly, and annually to make sure you are on target.

For example, if you want to a make $100,000 profit over a year on your opportunity and the expense to produce your goods and/or services are 50 percent then you must make $2000,000 to meet your revenue goals. You may plan to do that by making $35,000 in the first quarter, $45,000 in the second quarter, $50,000 in the third quarter, and $70,000 in the last quarter. Your monthly revenue goals are determined by what you expect to earn each quarter.

Sales Funnels

Few people become customers spontaneously. Most customers follow a path regardless of whether they are consumers, corporate buyers, or government procurement specialists. The path can take minutes or years depending on your product or service. It begins with interest and ends with a decision to buy. This path is called by many a sales funnel because the number of interested parties tends to drop off at each stage (Figure 6.8). You may have more than one funnel in your strategic sales plan when different funnels are necessary to reach your potential customers in each channel. Every funnel stage has a name. These names vary. The important thing is that everyone on your team knows what they mean.

Figure 6.8 Sales Funnel

Here are examples:

Figure 6.9 Example sales funnel

The winnowing down of a customer pool is important. Done well, the sales funnel helps you decide where and with whom to spend your valuable time, budget, and resources (Figure 6.9). Knowing when to move on from a potential customer unlikely to buy is just as important as targeting those who will become your customers. Even if your sales cycle is very short and your price is nonnegotiable knowing what stage your potential customer is on in the buying journey helps your sales team focus on the right customers and communicate more effectively.

For example, you may know that it takes three customers to enter your store to end up with one who makes a purchase. You know browsing customers typically want less attention than someone ready to buy. You may want your sales team to quickly move from “can I help you,” to “I am happy to help you with that” as soon as they recognize a decision to purchase. Regardless of your industry or how you reach your customer—in person, online, or over the phone—it is important to recognize the right moment to ask your potential customer to buy.

Funnels built on history tend to be the most accurate. If your business opportunity is new, you may want to rely on industry statistics or competitor information. Funnels let you know how many nos it takes to get one yes. Multiply those numbers by how many it takes to meet your revenue goals (Figure 6.10).

One Sale

Figure 6.10 Example sales funnel one sale

Meet Revenue Goal Formula

Sales × Price = Revenue

10,000 × $100 = $1,000,000

Multiple Sales

 

Resources. Resources include both people necessary to carry out your plan and the tools required to be successful. The money necessary for your resource plan to work must be included in your sales plan budget. Justify the costs by the expected results. A good strategic plan ensures satisfied customers from first interest to the decision to buy again or refer you to another potential customer.

Even the best salespeople require support including salaries, bonuses, commissions, training, team-building activities, and expense accounts. Your strategic sales plan must also consider the tools available to automate sales functions and report sales progress. Many companies invest in CRM software that facilitates and automates some sales processes. Costs vary from free to as much as you want to pay. When the tools make your sales team more productive and successful, the investment is worth the cost.

 

Action Plan. Use an action plan to assign tasks necessary to meet your sales goals to individuals. Make sure each task has start and end dates. Tasks without deadlines tend to remain undone. An action plan is useful even if you do not have a sales staff. These plans help break down goals into achievable steps.

Reports may come from your CRM tool or from a standardized template. There are a variety of templates readily available online. You can also find one at CapacitySquared.net. Useful reports include a basic set of information such as that shown in the example below (Table 6.5):

Table 6.5 Action Plan

Channel	Task	Assigned	When	Status	Metric

Sales Processes

Regardless of the size of your team, an organized approach reinforces your strategy. Good communication and clear roles and responsibilities dictated by documented processes help make sure action plans are followed. After all, the best plan is of no use if it is never executed.

Processes must include the documented steps to success that you expect your sales team to follow. According to Debbie Mrazek, Founder of The Sales Company and Sales and Marketing Adjunct Faculty for the 10,000 Small Business, “Working with sales organizations for 25-years one thing I can tell you one of the most powerful things they can learn is how sales is a process too. Having a true sales process that can be duplicated again and again allows for success and profits from all the sales team members.” (Mrazek 2021)

This does not mean that your sales processes should be carved in stone. Carefully test new processes to add to your strategy. Adding new processes over time may provide innovative ways to open new markets.

 

Budget. Your sales effort deserves a budget if for tracking purposes only. Small businesses often have limited resources. Budgeting and planning for what you need to meet your strategic sales plan goals only makes sense. You may track your sales budget in your overall budget or create a more detailed budget report managed by the leader of your sales department.

 

Getting Exposure. Consider how attendance and presence at key events may improve your bottom line. Viewing events as a sales resource in your strategic plan ensures the investment in tickets, travel, booths, and other costs are tracked as a part of your strategic plan.

Increase local exposure and credibility necessary to expand market access to your team with meaningful organization memberships. Trade and local service companies often benefit from an active chamber of commerce membership. Industry, association, mentoring, sales, and business associations and networking groups may improve sales as well when viewed as a sales resource and used strategically to boost the bottom line.

 

Tracking. Every plan you make to prepare your business for success must be tracked. Tracking is the only way you and your leadership team can be sure the time and money spent gets you the results you hoped for from the start. Nowhere is this more important to any entrepreneur than in sales. Make your key strategic sales plan metrics part of your company dashboard so that you are always aware of where you stand.

 

Making Refinements. Refining is different than inconsistently shifting from one plan to another. Refining determines how to more efficiently and effectively hit your KPIs and reach your goals. KPIs provide insights into which efforts bring the most reward because the numbers support what works and what does not. It is clear to see that you want to invest in what works and divest or make changes in those tactics that are less successful. Constant refinement is a key feature for continuous process improvement.

 

Holding Sales Meetings. Hold your team accountable to carrying out your sales plan. Host regular meetings even if only one person is responsible for sales. Plans may get very complicated depending on the marketing channel and the size of your business. Taking time to consider whether the plan is being carried out as expected, and how effective it is, makes sense no matter how large or small your sales force may be.

Remember marketing makes potential customers aware, but buyers are what fill your bank accounts. The time and money you spend making sure your sales plan is followed is worth the investment. Keep meetings short and to the point to encourage enthusiastic attendance. How often you have the meeting is best determined by how much work needs to be coordinated. Some businesses need meetings once a week and others only once a month. If your team is missing deadlines or team members have trouble coordinating, that is a signal suggesting you need to have meetings more often. If you have meetings and no one has anything new to report except efforts are going well then it is likely you can have meetings less often.

Sales Meeting Agenda

The agenda provides a review of efforts by each participant not to exceed three minutes asking them to answer these questions:

If a report takes more than three minutes, it has caused a discussion you may want to take offline to keep the meeting on track.

 

Sales Pitch. Sometimes entrepreneurs confuse sales pitches with sales plans. The sales pitch is an element of your overall plan. While your strategy gets you to your buyer, your pitch closes the deal. For every strategy worth pursuing, there are one or more sales pitches that turn potential customers into buyers.

There are many types of pitches. Here are few of the most effective:

Elevator Pitch Tease

You want others to remember you and your business because they may be, or they may know the next person you want to be introduced to right now. More than that, you want those who care to ask to hear more. Good salespeople and seasoned networkers utilize a one-minute pitch often called the Elevator Pitch. Practice your pitch until it is your automatic reaction.

Elisha Otis, who invented the elevator braking system in 1852, is widely credited with the creation of the Elevator Pitch. The elevator was an innovative invention in the 1800s. Otis decided to introduce his invention to the general public at the Chicago World’s Fair in 1893 by creating an open elevator platform and riding from the bottom to the top giving his elevator safety sales pitch to spectators. The idea that you could introduce yourself on the bottom floor of an elevator and say just enough to get someone’s interest before the elevator arrived on the top floor was born.

People are busy. They have short attention spans made even shorter by social media. It is easy to see that getting to the point quickly in a way that encourages interest is a skill worth developing. Anyone can create an elevator pitch.

Tell people:

What you want sometimes referred to as your ask which changes depending on who you are speaking to obviously. Use the following template to come up with your own pitch (Figure 6.11). Practice using the pitch with a timer until you can repeat it from start to finish in one minute without looking at any notes.

Template

Figure 6.11 Elevator Pitch template

Example (Figure 6.11)

What You Want

Figure 6.11 Elevator Pitch example

If you think about it, everyone must be able to answer these simple questions no matter what. It is even more important for you, because you are a small business owner, a potential small business founder, or a business leader. Most often, the pitch starts out too long. Getting everything you need to say down to one minute forces you to determine what is most important about your message. Many people report that just doing the exercise of creating an Elevator Pitch brings them new clarity about their opportunity.

Fund

The ability to predict the cost of growth is essential if your small business is going to grow successfully. Rapid growth often comes with a predictable price tag. Small businesses must invest to cover the costs of startup, opportunity development, and implementation. Entrepreneurs must be able to meet the requirements of large contracts or many small contracts coming in quickly. These expenses are often upfront costs you must bare before seeing the profit that comes with the sale of goods and/or services. You must support the infrastructure that it takes to support growth. An infrastructure that is too small is like a business with a foundation that is tiny. It cannot support building and, at some point, it topples over.

There are many ways to handle the upfront costs. According to the 2021 Small Business Trends study, 59 percent of entrepreneurs funded startup and growth themselves. The study reported, “Cash is the most popular form of financing” used 39 percent of the time. The study noted another 20 percent of owners utilized 401(k) business financing often called Rollovers for Business Startups (ROBS). (SBA 2021)

Outside Funding

This means that according to the Small Business Trends study, 41 percent of entrepreneurs needed outside funding. Outside funding comes from a variety of sources. The more bankable you are, the more likely you are to be able to finance healthy growth. If after you have predicted your costs with a reliable budget you see that you need money, it is time to consider outside funding sources.

There are a number of possibilities available:

Crowd Funding. Crowd Funding creates a buzz for a good idea while earning money from micro investors in exchange for something of lesser value. For example, an entrepreneur might engage potential customers in funding a new solar technology to power homes by offering a smaller, less complex prototype that powers a campsite. Create or capture the interest of enthusiastic customers who spend money upfront for a variety of reasons such as:

Grants

The U.S. Chamber of Commerce reports that at any given time there are more than 30 grant programs available to small business owners. (U.S. Chamber of Commerce 2021) Consider seeking a grant if you are up for competition and do not mind a labor-intensive process to be completed with the inherent risk of getting nothing. Every year the government, nonprofits, and corporations give out billions of dollars to small companies. Compete for grants anywhere from $5,000 up to $1,000,000 offered to deserving companies designed to benefit a specific population of businesses. Grants may be based on geography, demographics, or in most cases types of businesses.

Grant winners are often required to do detailed reporting. Grantors get their money from others. It might be donors, funds, institutions, or the government. In order to continue to offer grants programs, grant managers have to show the dollars they allocated were well spent. Most grant programs want to know they have invested well so THEY will be approved for additional funding.

Government Grants

The U.S. Chamber of Commerce has a website specifically for business grants. Per the website, grants.gov provides a database of “Federal funding opportunities published for organizations and entities supporting the development and management of government funded programs and projects.” Most businesses can participate. Some opportunities require certifications. Make sure to read each grant opportunity carefully before applying. Each year, the chamber posts a list at https://buff.ly/34GYU4b. (U.S. Chamber of Commerce 2021)

Private Grants

Corporations offer grants as well. Corporation seeking to diversify their supply chain, respond to pressure from customers, or support suppliers through a time of crisis sometimes offer grants. Consider researching corporate grants when you have a relationship with the funder or when you are a match for some special program or association the corporation supports.

Nonprofit

Consider a wide variety of nonprofits when seeking grant financial support. Accelerator programs sometimes come with a cash benefit to those accepted in their programs but not always. Many foundations routinely run grant competitions annually as well. Some state—and university-supported entrepreneurial programs offer grants too.

CapacitySquared.com provides a list of recognized grant programs for your consideration. Keep in mind though that most programs choose a brief period during the year to accept applications. Others stop taking applications after the available funds are awarded without notice to the public.

Investors

Investor funding comes in many forms. Unlike grants, investors expect more than a report in return. Seek investor funding when you are willing to give up a percentage of equity in return for a round of funding. The type of round that interested investors participate in depends on the stage of your business or opportunity. You may reach out for funding in more than one round, but keep in mind that each time you do the investors expect some percentage in return.

Before seeking investor funding, be sure you know which investment round is appropriate for your business. Typical funding rounds include:

Pre-seed

Investors are interested in startups with a great idea. Often, these investors are family or friends who believe in your opportunity. However, sometimes professional investors who see a great concept may step in and provide support.

Seed

Investors in this round look for opportunities with a solid market and strong potential earnings in the very early stage of an opportunity. They may choose prospects based on growth plans or market attention. They are often called Angel Investors. These investors tend to be high net worth investors interested in startups or entrepreneurs with new opportunities. They may make a one-time investment or a series of investments over time if you meet your promised KPIs.

Series A

Investigate support from venture capitalists (VCs). These investors develop interest when you prove your concept. They may use their own money or money from an equity fund to invest in startups and entrepreneurs with great opportunities that are most often ready to launch. They especially like serial entrepreneurs with a history of success building and selling small companies. They respond to growth plans that showcase previous successes and high investor return rates.

Series B

Go after private equity firms and VCs funding small business expansion only after your proving your business model. This round is not for startups. You are suited for this round only after you have generated sales though you may not have made a profit yet. These investors may pay a higher share price than those in earlier rounds.

Series C

Consider these investors when you want to go public with an Initial Public Offering (IPO), hope to be acquired by a Special Purpose Acquisition Company (SPAC), or hope to exit by selling your successful business or business just on the verge of being successful. Use money from this round to support your new opportunity, expand market share for an existing opportunity, develop related products and/or services, or grow through acquisition.

Many times, investors target small businesses struggling in sales, financials, or operations. They target businesses without documented processes and procedures as well. They understand that while a business may be doing well now, if it does not shore up its weakest area it cannot expand capacity. An investor with success improving the weakest area may step in to buy the business at a discount to benefit from improvements that make the business more valuable.

Equipment Leases

When your new opportunity requires new hardware and equipment leasing and rent to own provides another way to cover your upfront investment. Consider leasing equipment only when you need it from short-term rental companies while work is inconsistent. Use long-term leasing when you need equipment available consistently or when short-term rentals are not an option.

Some leases require no down payment essentially funding 100 percent of the cost of the equipment. Qualifications for a lease are often much less stringent than traditional loans. Be aware however the actual cost of purchase may be much higher in a rent to own agreement than an outright purchase. Some equipment manufacturers offer lease options. Third-party leasing companies may work for you as well. These companies agree to purchase the equipment for you and then lease it back to you over time.

Loans

Debt-based financing gives you the ability to maintain full ownership of your business. There are a number of ways to finance the debt needed to expand. What you need to qualify for a loan will be different based on the organization that you turn to in order to find financing.

You must have good business and personal credit. Dunn and Bradstreet does for businesses what the personal credit reporting agencies do for people. They offer credit reports that help potential lenders and investors determine how creditworthy your organization is right now.

Bankers know large potential customers may check your Dunn and Bradstreet record before giving you that first big order for goods or services as well. Large customers want to be sure they are going to get what they ordered. If you appear to be on the verge of failure, they may choose a vendor that is more stable instead. Use a good report as a key differentiator when you go after new financing whenever possible.

Small business loans carry a higher risk than loans made to larger companies. Lenders often want to know that you as the business owner are creditworthy as well. Some may even ask for a lien against your personal collateral if your business collateral is not strong enough. Know your personal credit score from all three of the major credit reporting agencies TransUnion, Experian, and Equifax, and how that impacts your business.

Consider all types of loans available to you before deciding which is right:

Being Bankable

Being Bankable means being creditworthy. If you are not bankable now, then now is the time to take steps to change your credit standing. According to Deb Purvin, Senior Vice President at a national bank and Founder of the Business Owner’s MBA (BOMBA), businesses that get credit tend to grow faster than those who do not. (Purvin 2021)

Bankers care about building their account portfolios. They want the bank to have plenty of account holders who want to do other business with them. Bankers want account holders who qualify for and use credit wisely. In order to meet their goals, bankers need customers who are bankable.

Watching the Five Cs of Credit

The one question a banker wants to answer is, if you are extended credit can you pay it back in the period of time you promised.

Lenders determine whether they will give you credit most often based on five factors:

Capacity

This is where your opportunity-centered growth plan comes in handy. Bankers like knowing you plan for the future. They also like knowing you understand how to use debt to grow a business. If you have a line of credit, bankers like to see that you use it well.

Bankers consider how much debt you have in relation to how much credit you have today. Most lenders like to see that you are not tempted to borrow every penny possible. Make it a habit to use just about 50 percent of the credit you have available. Bankers want to know you have money you can get if something goes wrong. For this reason, it may be smart to ask for more money than you need.

Many entrepreneurs get a line of credit so that they only have to pay interest when they use the money. If you use most or even your entire line of credit to fund a new project or pay your expenses but then immediately pay the money back, bankers often believe you understand how to use debt. For this reason, it is often wise to get a line of credit before you actually need it.

Collateral

Loans are often secured by assets such as equipment, buildings, or land and are referred to as collateral. If you secure a loan with assets and default on payments, the assets may be seized to pay the debt. The value of the asset may not be determined just by its market value. Bankers often consider its liquidity and location. Assets that are easier to see and to move have more value than those that are not.

For example, a truck has less risk than a new foundation with extra support for heavy equipment. A bank may not want to but still can repossess a truck if payments are missed. It is hard to seize a foundation.

The assets do not have to belong to the business. Personal assets may be used to secure business loans as well. Many entrepreneurs use their homes, cars, and other assets as collateral. You should remember though; the bank takes back ANY asset that secured a loan no matter how personal.

Capital

Capital is defined as the overall value of all assets including physical assets such as collateral and financial assets such as cash, receivables inventory, and prepaids. Capital reduces risk. Anything that reduces the risk of default improves your chances of getting a loan. Be sure your lender knows if you can sell or collect capital to pay back debt if necessary.

Character

A good reputation begins with treating your customers, partners, and employees well. Businesses with a good reputation are more likely to succeed. Your reputation matters. Your credit history tells the story of your financial reputation. Other parts of your reputation matter as well.

If you have a history of being sued or suing others, bankers may see that as a red flag. Frequent lawsuits may indicate you have trouble living up to your obligations, contracting without conflict, or just getting along with suppliers and partners. The cost of litigation and the possibility of judgments increases risks.

As an entrepreneur, you must rely not only on the reputation of the business, but also on your personal reputation. The reputation of your team members matters as well. What others think about you may determine who does business with you. This is even more true when you have a local business in a small community. Bankers want relationships with people they would want to mingle with in other settings just like everyone else. Public intoxication, arguments, or rants on social media your banker hears about or can see do not end up on your loan application but they may impact decision making.

Conditions

The conditions of credit are the terms you agree to that include the type of loan, time to pay, and interest rate. Conditions are often dependent on credit worthiness based on the other four Cs of credit worthiness capacity, collateral, capital, character, and likelihood of success. This is why the 5Cs matter.

Bankers consider the level of risk associated with the likelihood of implementing a successful opportunity as well. It is clear to see why this would be important. However, be aware they may also consider external factors that increase risk such as the state of the economy. Periods of recession or unrest may cause bankers to assess a higher level of risk to all loans, not just yours. On the other hand, times of economic crisis may inspire government leaders to step in. During these periods of crisis, legislators often make available government-sponsored loans with generous conditions that are better than entrepreneurs might get in the best of times.

Financials Reports Bankers Love

Financial reports tell a story about your business. While this seems straight forward, sometimes it is not. Being able to show you can pay on time is what being bankable is about.

These documents are important to potential lenders:

Cash Flow or Cash on Hand. There is a saying among small business owners and leaders, “Cash is king.” Without cash on hand, you cannot pay your bills. Cash flow is about how much money you have on hand on any given day to meet all your financial obligations and to cover the promises you made. It includes more than cash. Liquid assets such as income, electronic funds, reserves, and sometimes credit immediately available to cover expenses count.

Collected Revenue – Cash Costs = Cash Flow

Sometimes entrepreneurs use only Cash Flow to determine financial health. Cash flow is important because forecasted profits from your opportunity are a theory to a banker. Cash on hand is a fact. Still it is only part of what you need when making a case to a banker that you are bankable.

Reserves. Reserves are to business finances what a savings account is to your personal finances. It is money set aside for promises made and to create a safety net to cover emergencies. You may not be able to maintain high cash reserves the first year of a new opportunity. In fact, you may be pulling cash from reserves instead.

Cash on Hand. Bankers know funding a new opportunity is a reasonable use of reserves. However, keep in mind that draining your reserves increases your risk. Three months is the minimum required by most banks to consider you stable. Six months to a year is even better.

Your banker may want to know the number of days you can honor your expenses with the cash that is available. This is known as Days Cash on Hand. Cash on hand may be low as a startup or while investing in your opportunity. This is no surprise. Report cash on hand using a Cash Flow Statement.

Balance Sheet. Your balance sheet is the financial history that depicts your net worth (Table 6.6). It provides a list of your current assets next to a list of your current liabilities. Bankers divide your current assets against your current liabilities to get your Current Ratio. Your current ratio represents your company’s ability to make all your working capital payments (including debt payments) and so bankers want the answer to be positive.

Table 6.6 Balance Sheet

Balance Sheet
Assets		Liabilities
Cash	25,600	Accounts Payable	9,400
Accounts Receivable	18,125	Accrued Liabilities	12,775
Inventory	14,625	Line of Credit	25,000
Prepaids	28,200	CMLTD*	0
Current Assets	86,550	Current Liabilities	47,175

CMLTD—Current Maturities of Long-Term Debt

Current Assets/Current Liabilities = Current Ratio
86,550/47,175 = 1.83

Bankers like to see current ratio greater than 1 and in keeping with others in your same industry. Some Balance Sheets do not show a line of credit if no money has been drawn or do not break out Current Maturities of Long-Term Debt. However, these should be included as Current Liabilities when calculating the ratio. According to Deb Purvin, a banker will calculate those numbers among others any time you ask for a loan. Better to calculate them now so that you know what your banker sees. (Purvin 2021)

 

Income Statement. An income statement is sometimes referred to as a Profit and Loss (P and L). Many think of an income statement as a P and L because it reveals the ability of your business to generate a profit most often over a 30-day period. Use your Income Statement to provide you with the numbers necessary to calculate:

EBT

The profit or loss is determined by taking all revenues and subtracting all expenses from both operating and nonoperating activities to get Earning Before Tax (EBT). EBT is sometimes referred to as Pre tax Income.

Gross Profits – Total Expenses = EBT

EBITDA

Some bankers and most investors are most interested in EBITDA or Earnings Before Interest, Tax, Depreciation, and Amortization. EBITDA deducts interest, depreciation, and amortization from your earnings before tax. This is seen by many as a better reflection of Cash on Hand available to support your operations.

Net Earnings + Tax + Interest + Depreciation + Amortization = EBITDA

Net Earnings

Earnings after tax can be calculated as well to get Net Earnings after tax.

Earning Before Tax – Tax = Net Earnings

Year End Income

Year End Income statements show your income for the business year. Multiple columns can be used on one report to show multiple years. Use these reports for comparison and for making future predictions. Most often, three to five years are compared whenever possible.

 

Budget. Bankers and investors want to know that you understand your costs. Make a budget to estimate the total cost of your opportunity from inception to implementation. Include a detailed estimate of all costs that are likely to be incurred such as debt service, procurement, operating and labor costs, and so on.

Most financial software applications and many bank applications include a budgeting tool. Spreadsheets can be used to create a budget as well. A wide variety of budget templates are available online.

 

Forecast. Forecasts are created from Income Statements based on operating expense and profit projections. Forecasts are best when they reflect predictable trends supported by your industry and historical past performance. Startups do not have historical data and so must rely on realistic predictions. Make forecast predictions for each year of your business or growth plan.

Churn. A churn rate is the rate at which customers leave your business. It can be the gold standard of business health for those businesses that rely on customer loyalty for continued income. It is most important for businesses that rely on monthly fees such as insurance, SaaS, or memberships. Retail businesses such as drive-through restaurants and grocery stores often offer loyalty rewards to help better understand how often or even if customers return to better understand churn rate.

ARPU. Annual Revenue Per User (ARPU) is a key indicator of future profits or losses. Subtract renewals from churn to get ARPU.

Churn—Renewals = ARPU

SaaS Monthly Recurring Revenue. The last thing your banker may want to know if you are a SaaS provider is your Monthly Recurring Revenue (MRR). Your payment software will often figure your MRR for you. Your MRR includes your predictable monthly revenue based on contracted payments, expected subscriptions, and annual payments recognized and posted each month. In order to calculate the MRR, you must first know your Churn rate to determine your ARPU.

 

MRR. Calculate MRR by multiplying the ARPU for the month by the total number of users in a given month.

ARPU × Number of Users for the Month = MRR

Credit Readiness Review

Business Advisors at SBA, SBDC, SBO regional offices, or accelerators often offer entrepreneurs credit readiness reviews. Reach out to get help as you work to understand your financials so that you become more bankable. Many are happy to do a credit review before you go before a banker. Reviews validate you are ready and that your documents are error free. The review points out gaps you may have in time to make long-term changes that improve your chances of success.

Moving From Red to Black. Your business value can only be proven by numbers. The popularity of your goods or services alone is not enough to prove the future success of your business. This does not mean that you must be making a profit right now. Many businesses go through an investment period when the business is “in the red.” Bankers and investors both know that. It does mean that it must be clear that you have a plan to turn a profit.

Understanding where you are helps you know how to get where you want to be much more quickly. Consider Jeff Bezos who operated Amazon for six long years before reporting a profit in 2003. He was for a while considered to be the poster child for the dot com bubble.

However, he knew where he was headed and did not let that stop him. He would not have gotten there without a plan that included understanding his numbers. Now he is one of the richest men in the world.

Alternatives to Funding

When funding is low, give some thought to other options. Reconsider your plans looking for cost cutting measures. Consider the options below:

Adjust Three Key Constraints. There are three key constraints (Figure 6.12) to any business project or plan. These constraints are cost, time, and resources. If costs are a problem, consider adjusting one or both of the other two constraints. You cannot change one constraint without impacting the other two.

Figure 6.12 Three Key Constraints

If you want to spend less money immediately, decide where to invest because there must be a change to time or resources. There may be a change to both. It is possible that you could bring on added resources more slowly knowing that may mean it takes longer to finish. You may need to spread out major purchases such as new equipment or put off the costs of upfront marketing. Everything is a choice.

Remember resources not humans. Resources can be any number of things including technology. In the 21st century, understanding and appropriately utilizing automation may help you be successful. For this reason, there may be times when an upfront investment in automation maybe the answer to controlling time and costs in the long run.

Better understanding the parameters that control the constraints that impact decision making supports you in making better decisions. Using your budget to understand how different choices impact your plan gives you flexibility.

Build, Lease, and Buy. Use your budget and timeline when considering how choosing to build, buy, or lease changes your projected bottom line. Make a copy of your budget and your timeline and then play with your numbers. Playing is not time consuming or expensive. You may discover options you may not have considered by looking at the how the budget changes based on all your possible choices.

Consider these questions:

Partner. Inviting the right partner may free up some of your budget if the partner brings equipment, tools, skill, and/or resources that you would otherwise have to budget to afford. Partners sometimes bring cash investments as well. The cost for taking on the risks and providing those resources is of course a share in the revenue in the future.

Barter. Consider what you could do for someone who could in turn help you. Bartering has been a time-honored tradition for hundreds of years though entrepreneurs often do not consider the option. Bartering for access to equipment, tools, merchandise, and/or resources available when you most need them offers a great way to stretch your budget. If you do not know other business owners that would be a good match as a barter partner, consider joining one of the many barter clubs that have sprung up since the 2008 Great Recession.

Phase Three—Execution

Figure 6.13 Opportunity Development Life Cycle phase three

Design and Prep

This is the time to clarify what it takes to go from idea to reality. Make sure your design includes all the requirements necessary to deliver your product and/or service successfully. You must consider the operational system required to support your opportunity as well.

Avoid systemic issues. Part of design is making sure you have the infrastructure to support success as well. This phase (Phase 3, see Figure 6.13) works best when supported by the documentation required to think through the steps necessary for successful delivery.

Execution may take just hours or you may spend months depending on the complexity of your opportunity. However, this is the phase that best prepares your organization for success. Make sure your business is ready when you are ready to deliver.

Design. The design phase of your opportunity is where you decide how to make your opportunity meet the needs and wants of your potential customer. It is clear to see that when you are developing a new product or new use for a product you save time and money by designing it first. However, the same is true for a new service. This is the moment to decide what is a part of the service and what is not. When you are done you must know what your service entails, how you plan to deliver your service, and what a successful delivery looks like. This is the stage where you work out the kinks. Begin by creating a Requirements Checklist and a Design Document.

Requirements Checklist

Decide what success looks like. What features, functions, and services must exist and what do they have to do before you can deliver. Documenting and/or clarifying requirements necessary for success provides a safety net that helps avoid costly service gaps and design flaws. A requirements list may be as short as one page or as big as a book depending on the complexity of your opportunity.

Delivering on a new opportunity always requires something new even for the simplest opportunity. Take adding a menu item in an existing restaurant. What would that require to be successful? The recipe would have to be developed. Your requirements might be that the new recipe be tasty, look good, cooked within food cost allowances, and easy to prepare. It may need to be plated on current dishes or you may need a new dish for a stylized delivery. The name and description may need to fit in existing menu categories and so on.

New services too have new requirements. Resource may need new skills. Equipment necessary to deliver the services such as servers or laptops may need to be upgraded. Software tools may need to be purchased, tested, and even customized to ensure success. Standard contracts and templates may need to be agreed upon and developed. Branding may need to be considered and so on.

Products from software to toys must meet certain requirements as well. Some requirements may include that the product meets specifications, is user friendly, and so on. The detailed requirements of a successful product are unique to each product.

Making a checklist to be sure nothing is forgotten is a good best practice. Many times, the requirement checklist can be customized and used over and over again for similar opportunities. There are many templates available on the Internet on sites such as CapacitySquared.net

Designing. Your design phase may be simple or complicated. New products need specifications. Services may need parameters. One or more designs may be necessary before your design meets your requirements. You may need sketches, diagrams, images, and/or flowcharts to make your design clear. Engineering services, hardware products, and software offerings require design documents that meet industry standards.

Your service design sets the parameters for consistent high-quality delivery every time. It may include how customers are addressed, meetings are held, services are rendered, invoices are delivered, and so on. Your product design may be as simple as how to create a new web page on a client’s website. It may be as complex as how to build a bridge that withstands 70 mile per hour winds and torrential rainfall in heavy traffic. Whatever your opportunity, a well-executed design phase saves time and avoids issues when you are ready implement your opportunity.

Preparation. Many entrepreneurs only consider the design of their product and/or service in the design phase. However, the most successful businesses consider what it takes to offer the product or service as well. They know that if they get an order for 100,000 new widgets, they must be able to make them and ship them on time. Service companies benefit from taking a moment to consider what a successful delivery looks like as well. In both cases, you must set quality standards, determine what resources must be involved, and work out any issues that might delay successful delivery to a happy client or customer.

Consider the following:

Business Structure

Make sure the right business structure is in place to support your success. Startups need to make sure that founding documents are in place. Ongoing businesses must look at the business to determine if the current structure works for the new opportunity.

Very young businesses with few people tend to operate without the structure and processes that supports good work and avoids chaos. All businesses experience growing pains. Understanding where those pains come from is the part of designing the infrastructure you need to support your opportunity. Often, when you think you have people problems, you really have process problems. In a paper published in the Journal of Applied Behavior Analysis by Donald Hantula, an associate professor specializing in organizational behavior research, revealed that optimizing a system as a whole led to better problem solving. What that means is most of the time when you think you have a bad employee or you just cannot find the right people, you actually have a disconnect in the processes that create your business structure. (Hantula 1995)

Designing your business structure takes time. However, if as you add people, you set organized expectations and add the processes to support success right away you get less resistance. It just becomes the way the business is done. No one likes change. There is a natural resistance to change even when it is clear to see the change is necessary and good. Ask more of your team when you are small so that they fall in line more quickly as you build your business.

Businesses with a solid business structure often incorporate the following:

Equipment

Determine what equipment you need to build your product or create your service. You may need manufacturing equipment, new computers, or even workstations for new staff. Consider everything. Lease or purchase equipment necessary to build or test your prototype. Time the arrival of the equipment so that you have what you need just in time.

Do the same thing for any additional equipment necessary to deliver your product and/or service. Plan the timing of any equipment you need once you determine the prototype is successful. If you have a tight budget you may be considering leasing equipment, using a portion of a third-party warehouse to handle logistics (3PL), or a copacker for order fulfillment to reduce your upfront costs. Make those arrangements now so you know you can manufacture store, and ship your goods if you get a big order.

Documentation

You are about to take on something new. Understanding and communicating how that happens prevents costly mistakes and saves time. Many small business owners and leaders find that proper documentation is the secret of their success. Entrepreneurs who take the time to design their processes and procedures upfront are more likely to be successful. For many, this requires learning new skills.

Build Processes and Procedures That Work

Make your processes and procedures elegantly simple and easily repeatable so that anyone with the right skills and experience can be successful. It does not matter if you are making products or providing services, there is a process for everything you and your team do. Processes happen informally when no formal process exists.

Organic informal processes that are not documented and tested are more likely to be inconsistent, incomplete, and/or wrong. Document each process with workflows often called process maps and step-by-step instructions often called procedures. Test each one to be sure the processes you use are consistent, efficient, accurate, and complete. Doing so helps prevent mistakes and missteps that cost time and money.

When a business is well documented, each process map connects to one or more other process maps because no business action should stand alone. For example, you or your bookkeeper may need to pay bills documented in one process and accept payments documented in another. At the end of the month, you or your bookkeeper balances the books. These tasks are connected.

Choosing the Right Workflow Process Map

A workflow process map is basically an outline providing a picture of how things happen. The picture does not have to be complicated. Most business processes can be mapped by very simple process maps using a pen and paper or free or low-cost software. More complicated options exist to meet technical, regulatory, or complex requirements. Use the simplest map available that meets your needs.

Consider the process map options below:

Simple Map

Use these maps to show day-to-day procedures that keep a business operating in a more or less linear fashion. Very few symbols are necessary (Figure 6.14). Anyone can do them. These maps have these characteristics in common:

Figure 6.14 Process maps simple

Cross-Functional (Swim Lanes)

Figure 6.15 Process maps cross-functional (Swim Lanes)

Cross-functional maps (Figure 6.15) ae called Swim Lanes because of the horizontal lines used to separate functional areas that resemble the swim lanes in a pool. Use these maps to show processes that require more than one person to compete so that you can see how each process transitions from one functional area to another.

For example, sales may place an order, manufacturing builds the product, and shipping sends it to the customer. Many people representing more than one department may be involved. Swim Lane process maps make those transitions easier to see. Use these maps as you grow to help uncover process issues such as bottlenecks, repetitive processes, and missing processes.

Detailed

Figure 6.16 Process map detailed

Like simpler process maps, the detailed process map uses symbols (Figure 6.16). More symbols are used to demonstrate more complicated processes in greater detail. These maps use multiple symbols to visually separate processes, sub processes, documentation, data, and so on.

Legends are often used to help the reader better follow this map. Use these flows to document more intricate manufacturing, distribution, engineering, technical, and business processes. These maps are excellent for ISO 9000 manufacturing quality standards when you are seeking certifications.

Top-Down Map

Figure 6.17 Process map top down

Top-down maps (Figure 6.17) use only one symbol to document a process and the steps that support it. Decision points are not included. The work is broken down in a picture that is easier to see. Processes best documented with this flow are quite simple and move only in one direction. The power of these flows is the ability to connect the corresponding steps to each process.

Use these flows to identify ways to create efficiencies in standard work processes by reviewing maps to make sure most efficient task order is followed or to look for duplicated efforts and unnecessary steps.

Many entrepreneurs use post it notes on a white board to build these maps so the processes can be moved around until everyone involved agrees the map is correct. Often, this map is used for brainstorming and design sessions because of the ease of making changes.

Workflow With Pictures

Workflow diagrams that forego standard map symbols for friendlier images may increase adoption (Figure 6.18). Use these maps to demonstrate processes for an audience who is unfamiliar with process flow techniques. These maps are frequently used in training sessions, investor sessions, and when working with an advisory board.

Figure 6.18 Process map workflow with pictures

System Level Process Map

System level maps (Figure 6.19) show the highest level of business processes in an organization. These maps are used to demonstrate business cycles such as cash flow, order to fulfillment, production, system development, and so on. Systems that are important to your opportunity can be reviewed using this type of map. Management teams use these maps to better understand the organization and interaction of a division or an entire company. Strategic partners may use these maps to separate partner responsibilities. Additionally, system maps are also often required to get ISO 9000 certification.

Power of Review

Documented processes often uncover issues. The power of the workflow process map is the ability to make changes on paper before mistakes happen. Review maps with anyone impacted to uncover bottlenecks, redundancies, or barriers to success. Consider efficiencies too especially in points of communication and handoffs. Oftentimes, just notifying a team member earlier eliminates surprises and reduces mistakes.

Figure 6.19 Process Map system level

Effective Process Checklist

Whenever you or your team creates processes use this checklist (Table 6.7) to review the final version.

Table 6.7 Effective Process Checklist

	Processes are accurate.
	Arrows are easy to follow.
	Wording is clear.
	Process is effective with no missing processes, or repeated processes.
	Process has no bottlenecks or barriers to success.
	Procedure is efficient. There are no changes that would make it better.

Procedures People Follow

While workflow process maps provide an outline of the tasks that must be accomplished, day-to-day work still must be done at a more detailed level. Procedures are just step-by-step instructions necessary to successfully complete a task. These instructions become your Standard Operating Procedures (SOPs). These instructions have a variety of uses. Use your SOPs to enforce accountability, set standards, and train.

Regardless of the use make sure your SOPs are easily understood. The way adults learn has evolved over time. There has been a lot of research over the last three decades on how adults learn. Out of that has come some very consistent ways to be successful in writing good instructions.

Good instructions have certain characteristics in common:

Simple

The main thing to remember is that good instructions are always simple. Anyone can make something complicated. It often takes a bit more effort to make instructions simple. Choose the simplest wording possible. As a rule, write at a seventh-grade level when writing to adults regardless of their education level. Even readers with graduate degrees appreciate simple easy-to-read instructions.

Purpose Driven

Tell people why they should care. Answer the four w’s: who, what, when, and why in a short introductory paragraph. The how will come later in your step-by-step instructions.

Audience Focused

Every audience is a little different. You should always know your audience before you start. Write to the broader audience making sure that you write at a level the reader with the least experience and education can understand. Answer the following questions before you begin:

Visual

Remember the old adage a picture is worth 1000 words. It is still true even in the 21st century. Whenever a picture adds clarity, use one. The only time you should skip illustrations is when the instructions are meant for an audience that is ALL expert. Experts consider pictures demeaning. The rest of your readers will be grateful for a picture (Figure 6.20). Videos are even better. This is why YouTube is so popular. Optional videos help beginners tremendously. However, expert readers often skip the visual instruction. Everyone wins.

Figure 6.20 Picture by Eileen Pan provided by Unslash

Brief

Simply said seven steps are best. Most every instruction you write can be broken down into five to nine steps. Memory works a lot like RAM on a computer. Just like a computer, readers access a small chuck of memory at a time. The rest of their knowledge is safely stored in the background in their brains. By breaking instructions into small groups of steps, you ask your reader to store the steps separated by headlines in memory the same way your reader will need to access them later, in small chunks.

For example, if a task has 27 steps that is hard for anyone to remember. Breaking the task into five to seven steps at a time improves the likelihood of success. If the task is to fix broken equipment, understanding the process task in small junks such as—Remove the cover, followed by Inspect the equipment, Identify and remove the broken piece, and Replace the cover—is easier to remember. If a reader knew everything but how to remove the broken piece, (s)he would only need to read that part of the procedure. Without headlines, the reader would have to read through all 27 steps wasting precious time.

Brief

Remember less is more. Like Twitter, sentences in instructions should be as short as possible. Click Save is better than Click the Save button to store the data. More words do not make the sentence clearer. In fact, more words may make the instruction more confusing. As a rule, make sentences no more than 23 words long. If you cannot say what needs to be said in 23 words, you have probably combined two steps into one. Separate the steps into two shorter sentences.

Safe

Make notes but give warnings. Put helpful information in Notes or Caution statements. If you think the reader needs extra information to be successful, be sure to add it. If there are no safety issues involved, add the additional information as a note. If, however, there is any danger of something harmful happening from losing important data to possible death, create a Caution or Warning message. Caution and Warnings should be the most prominent text on the page or screen.

Numbered

Steps should always be numbered. The purpose of the numbers is to indicate that order matters. Steps are linear. The instructions will not work if you do three first and five second. You must follow each direction in the order listed. On the other hand, if you have a list of criteria to be considered and none is more important than the other, then use a bullet list.

Clear

Avoid abbreviations and conjunctions such as BTW or can’t that are not industry specific. Using abbreviations that only the inner circle understands invites errors. Use industry jargon only when it is appropriate for your audience. Write for experienced and inexperienced readers by spelling out words the first time used such as Small Business Administration (SBA). Use the abbreviation after the first introduction.

Avoid conjunctions as well. Many languages do not have conjunctions. Two words are never strung together like won’t or can’t. You should always assume you have a multicultural audience. Avoiding conjunctions avoids confusion.

Efficient and Effective

Once written and reviewed by those impacted, documented procedures often uncover issues that might not have been so easily found. Reviewers often see missing steps, bottlenecks, repeated steps, or barriers to success that can be corrected. They sometimes see efficiencies too. When everyone impacted has a chance to comment, it is not uncommon for teams to suggest changes that reduce the time it takes to compete tasks successfully.

Effective Procedure Checklist

Whenever you or your team writes procedures use this checklist (Table 6.8) to review the final version.

Prototype

Many people think of products when they think about prototypes. Traditionally, a prototype is the first product manufactured or produced ready to be tested to be sure your product works as well in reality as you planned. However, prototyping is good for services as well. This is where you walk through delivering your service for a test subject to make sure your service meets the needs of your potential customers. If there are gaps in your delivery strategy, you want to know it before you try to deliver in front of a paying customer. Often, it takes more than one round to get it exactly right.

Table 6.8 Effective Procedure Checklist

	Procedures are accurate.
	Procedures can be completed in five to nine steps. Most are completed in seven.
	Steps that must be followed in order are numbered.
	Lists that do not require the reader to perform tasks in order use bullets.
	Sentences are short and to the point with no more than 23 words per sentence.
	Steps are easy to read and do not contain conjunctions such as can’t or don’t.
	Technical language and acronyms are not included except where needed for clarity.
	Punctuation is correct.
	Instructions are appropriate for the audience.
	Procedure is effective with no missing steps, bottlenecks, repeated steps, or barriers to success.
	Procedure is efficient. There are no changes that would make it better.

Go/No Go Decision

Yes. Congratulations your prototype suggests that your opportunity is solid. You are ready to move ahead.

No. Your prototype has proven that your opportunity is too risky to move forward.

Maybe. Your prototype has issues that can be fixed. Consider the time and expense of making changes to determine if you should move forward.

Develop

Whether you are developing software, producing a new product, or preparing to offer a new service the development phase prepares you for implementation. Everything that must be done to be ready for implementation must be finished in this phase. Development is more than the production of a product or service proven by a successful prototype. It is the process of preparing to fulfil contracts and orders for goods and/ or services. Fully developing your opportunity looks different based on whether you are creating a product, delivering a new service, or both.

Technical, engineering, construction, and complex projects and products require their own development schedule with time estimates, task assignments, milestones, delivery dates, and status reports. You may need project planning software to successfully monitor this part of your development process. This is the time to put everything you need to be successful in place.

Determine what you need by answering these questions:

Depending on your answers you may need a simple checklist or a detailed plan of action. Your answers may bring up even more questions for consideration. Taking time to do what you need to be prepared for success often makes the difference between success and failure.

Phase Four—Implementation

Figure 6.21 Opportunity Development Life Cycle phase four

Quality Assurance

Regardless of whether you are delivering goods and/or services you want to be sure your team delivers the very best quality possible. Define what quality looks like. Test to ensure you are delivering what your potential customer wants. While some products and technology may need very detailed and sometimes complex test plans, most goods and services can ensure quality more simply (Figure 6.21).

The best way to test is to predict scenarios that are likely to occur sometimes called use cases. Ask yourself what is likely to happen if someone orders your product or contracts for your service? Ask yourself what happens when things go predictably well and when things do not go perfectly. Project and quality management software application often include a feature to capture use cases. Spreadsheets like the example below (Table 6.9) may be used as well. A template is available at CapacitySquared.net.

Table 6.9 Testing Report

No.	Use Case	Tester Name	Test Date	Result	Notes

A use case may be as simple as my new menu items arrives hot to a customer up to 20 minutes away in the packaging selected. You may want to know that a customer is created with 10 seconds of walking in the door. On the other hand, your test may be complex such as data uploads into the right database tables without error taking no more than one minute for every 20,000 records. You may need test participants that are on and off site. You may test that your client can compete and sign contracts for your services online using the tools you selected. You may want to know that a client can pay for your new services by credit cards or ACH payments.

Consider all of the normal business procedures that contribute to the functions that support the success of your opportunity. Start with sales and end with payments. Consider the following to determine whether your new product or service meets your quality standards:

Go/No Go Decision

Now is the time to consider if you are ready for implementation.

 

Yes. Congratulations you are almost at the end of your ODLC journey. Get your team(s) excited. If you have not already kicked off your marketing and sales campaigns, now is the time to start.

 

No. Sometimes it happens that you get this far before determining your opportunity will not work. It is good to know now before you move forward in a more public way.

 

Maybe. If you are running behind schedule or you found issues during quality assurance, you may want to address those issues before you move ahead. Other you may find that you must make modifications to your product and/or service before moving forward. You may even have to take a few steps back to ensure your opportunity is a success. Take the time to do it right.

Train and Support

Training may be necessary for your team members and/or your customers to be successful. Those who support your opportunity must be ready as well. Sometimes that requires internal training that must be developed and presented in training classes. Training may take days or weeks to prepare and deliver. Other team members need to improve their skills through external training when they are taking on new roles. This training must be budgeted, scheduled, and completed before implementation so that you are ready for success.

Distributors and customers may need to be trained as well in some circumstances. You must decide if that training happens in person or remotely.

Consider:

In order to answer these questions:

Assign the appropriate resources and create a timeline to develop and deliver the training necessary for success. Reach out to professionals if training development is not in your business skill set. The investment in training pays dividends in the end.

Implement

An implementation plan is a checklist of everything that must be done to successfully to deliver your product and/or service after your first sale. Once the day has finally come, you want to be ready. Implementation plans may be simple or very complex depending on your product and/ or service.

After reviewing the processes and procedures necessary for the success of your implementation plan, answer these questions:

For simple implementations, just answering the questions may be enough to ensure your team is ready to go. Complex implementations require a plan. If once you answer these questions, you realize a plan is required, make one now. Include the task, the resource assigned, the estimated start date, and end date and a status. The key to staying on track is to be sure the task is clear, there is a resource assigned, and a deadline to avoid miscommunications. If starting one task is contingent on another being finished note that as well. Implementation plans (Table 6.10) can be created using most project management software application or any spreadsheet as shown.

Table 6.10 Implementation Plan

Task No.	Contingent Task No.	Task	Assigned	Start Date	End Date	Status	Notes

Make sure assigned resources report their status and raise any issues that might prevent success. Issues may be tracked on your plan or as part of a separate Issues Report.

Go/No Go Decision

Yes. You are ready to go and headed for success. Celebrate and move forward.

No. Despite your high hopes, you are not ready to implement because something has gone wrong you cannot fix.

Maybe. Consider what you can do to save your investment. Perhaps changes to your opportunity or more time to prepare will make your opportunity a success. Plan to get back on track if possible.

Phase Five—Review

Figure 6.22 Opportunity Development Life Cycle phase five

Once you complete the ODLC cycle take a step back and consider all you learned (Figure 6.22). Reflect upon what you would do if you had it to do all over again. Bring your team together to document your lessons learned.

Consider these questions:

Assign team members to update the processes and procedures you identified in a specified time period. Follow up to make sure the work gets done as expected.