It’s not a huge mystery. If you know how to communicate your ideas and you feel you have a sound concept and have researched, then you have all the information you need to make a sale and communicate with people.
—JB, P’Kolino, Miami
Idea Modification and Prototyping
As discussed earlier, the number of meetings you will have with any given prospect will range from one to several. It is a process, and the goal is to keep it moving to the best of your abilities. This means securing the next meeting before leaving the current one and not letting the absence of a prototype stop you from engaging potential prospects.
The idea of walking into a meeting without a prototype can be awkward, depending, of course, on what kind of idea you have. Remember, though, that you are not just going into that initial meeting to present your idea, but to gather information. The value of getting answers to those important questions cannot be underestimated. They will save you resources (money and the time) involved in chasing a phantom idea if early interactions with prospects show that the idea is not viable); these meetings can also yield feedback that leads to the development or improvement of prototypes. When armed with this information, entrepreneurs do not have to build prototypes in a vacuum, but can instead act with a clearer understanding and appreciation of prospects’ circumstances and needs.
Before making improvements to or building prototypes, be sure to collect feedback from six to a dozen potential prospects (depending on the nature and size of the intended target market). The feedback/suggestions should be assessed for common themes and importance relative to the idea’s potential for delivering value. That said, not all suggestions made by prospects should be implemented. The value equation—Perceived Value = Perceived Benefits - Perceived Costs—should guide the assessment and selection of suggestions around enhancing an idea’s appeal. The goal here is to ensure that the incremental impact on the right side of the value equation is positive. In other words, changes introduced should not reduce the perceived value that elicited prospects’ interest in the first place. This process might involve some experimentation and iterations that include feedbacks from the pool of “this idea is interesting” prospects. The features of the improved idea should then inform the development of a prototype, which again can be used for demos during subsequent calls on potential prospects.
Time to Write the Business Plan … maybe
Another belief commonly held by entrepreneurs is that they need a business plan before moving on with their idea. Take a look at the curriculum of any business program and you will find classes or seminars on how to write a business plan. This is a comprehensive document that lays out the structure and purpose of a business venture. Contrary to popular belief, a business plan is not necessary for successful entrepreneurship. In fact, there have been many ventures that did not have a business plan until they had been in business for years.
Most business plans seek to answer the following questions:
What customer issue/challenge/frustration does the entrepreneurial idea address?
Does the new idea address this issue, challenge, or frustration in a way that is significantly better than alternative solutions known or unknown to target customers?
Does the idea make thinkable something that was hitherto unthinkable?
Does it make possible something that was hitherto impossible?
What is in it for the target customers? Why should the target customers care about the idea?
We contend, however, that business plans written before the selling activities discussed in this book do not answer these questions and are therefore unrealistic. They encourage excessive thinking at the expense of doing and often result in something that looks great on paper but is not feasible because it has not been put to the reality test. For example, one never sees a business plan that reports a financial loss, because many of the assumptions that form the basis of the quantitative analysis (production, marketing, and finance) were made, hopefully, without candid feedback from prospects or other stakeholders such as suppliers and channels.
David of ENTEX Inc. shared this interesting perspective on business plans:
We never made any of our business plans, ever. We never had a business plan with a schedule. I spent my business career working in startup computer companies. I think I worked for nine. I don’t think any of those companies made their business plans either … It almost forces you to put together an unrealistic plan, which after you get your money, don’t can’t do. It took longer than you expected to get the product done, to write the software, and it took longer to get the first sale and the first sale was a very soft sale.
A similar sentiment was expressed by Mayra Ortega of Lucas 5, a resource consulting and head-hunting company in Mexico City.
Before throwing oneself into the water, one should first be strong in sales, in the selling part. Second, enterprises should take care of cash flow. Businesses do die for lack of solvency, they die for lack of cash flow. Third, just get started … when people plan and keep on planning, planning and planning … When you have an enterprise, there should be a moment when you pass to the execution part.
Another major drawback to business plans is the notable lack of discourse on selling. Such plans often neglect to consider the value of early selling to stakeholders (especially potential prospects) and how the feedback received can shape the entrepreneurial idea; they also fail to include the selling strategy for the hypothetical product, with an outline of a specific selling process and management (e.g., salesperson profile, number of salespeople, salesperson recruitment and development, compensation design, territory demarcation, and key performance indicators).
We therefore advise entrepreneurs who want to write a business plan to do so after engaging in preliminary selling. Then, armed with the insights of potential prospects, relevant stakeholders, and partners, they can create business plans that answer the aforementioned questions and present a more accurate picture of the venture at hand.