Tuesday 6 December 2016

Entrepreneurial Kit: Who Needs The Business Plan First?

I need a simple trigger to write a blog. A simple remark like – Being an employee is better than, or just as good as entrepreneurship. That actually calls for a 4000 words blog. Keeping in view people have the attention span of a gold fish these days shuffling between a dozen gadgets, I will limit this one to 800 words to put the key points across.

A recent post in LinkedIn from an entrepreneur turned (returned) employee got me thinking. His role as an entrepreneur lasted for a brief stint (Not even three quarters). He jumps back to good old paycheck mode and had the following tips/ remarks for all those startups that seemed to be in a perfect state of limbo.

They are in denial mode
They need to listen to their innermost voice
They should be true to themselves

Let us go through the following two case studies:

Employee turned Entrepreneur 1

Employee turned Entrepreneur 2
Cost to company as an employee 
36 L
18 L
Nature of Business
(Entrepreneurial Journey)
Annual Business Projection
60 L
48 L
Revenue Model
Transaction Based
(Daily or Weekly Orders)
Retention Based
(Monthly Client Acquisition)
Start Up Expenses
12 L
3 L
Local to National
3rd Quarterly Review

Current Sales Graph – Low
Great pipeline
Current Sales Graph – Low
Great pipeline
What is the entrepreneur thinking?

After three quarters

Revenue so far: 14 L 
(Target 45 L)

Salary Loss: 9 X 3 = 27 L
Startup costs : 12 L
Running Cost:  10 L
Pipeline Potential - Unsure

Expense focused Mindset
Revenue so far: 7 L 
(Target 36 L)

Client Acquisition made: 10
Signups due in Q 4: 9 L
Pipeline potential: 27 L
Expansion in new FY: Increase service portfolio

Income focused Mindset
What is the entrepreneur thinking:
Next Option

Wind up and go back to Corporate

Shoot up to meet business projection      
Role earned revenue in PR, team size, research, expansion, sustenance
Entrepreneurship readiness 

Entrepreneur was not ready with a business plan or projection.

The monthly revenue he was expected was either wishful thinking or without adequate research and homework.

Shooting in the dark. You cannot say they are off track as there is no track set in the first place
Entrepreneur was adhering to a business plan

Break-even was expected to happen in the last quarter of second financial year, which means this team is doing okay as of now

They are on track

Business Plan

A business plan is not just a fancy, feel good jargon. It is mandatory to have a full-fledged plan in place even before you think of your first client.

The two case studies in the table above are just basic highlights; the details can be better imagined than described. Without a plan, ask yourself,

How can you ensure sustenance?
How can you measure success factors?
How can you call the shots?

After having supported startups/ entrepreneurs in different assignments and having prepared several business plans, the two fundamental issues that crop up while coaching first time entrepreneurs are:

Mental Shift

Even as entrepreneurs, many cannot let go of their habitual thinking pattern. They are often dominated by their old employee personality. 

Ready excuses/ scapegoats for delay, as if reporting to a manager 
    Defense mechanism for failure or lagging behind to justify current stand
        Pay check craving instead of revenue planning
        Social mirror consciousness to measure personal entrepreneurial success with other's corporate levels and labels

Escape Velocity

In physics, escape velocity is the minimum speed needed for an object to escape from the gravitational attraction of a massive body, without the aid of thrust, or suffering the resistance from friction (Source: Wiki)

In business, there is a similar minimum effort needed for a sale to happen to escape from the duck status or business to take off. 

Now these two are somewhat interconnected - If you do not have the right mental shift, you will not put in the minimum effort required for the business to take off.

Net result - We get to read another articles or status update in LinkedIn by a reluctant entrepreneur (who jumps back to a job at the first available opportunity) giving advice to those who are following their passion with conviction. 

The entrepreneurs with a plan are mentally prepared to fail, know what to expect, when to expect, how much to put in and how long to wait.

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