The DREAM needs an Effective Business Plan

A business dream usually can't be executed solo. We often need to attract investors, secure lending relationships, and have a way to guide future business growth. Business plans have become the media we use at this point. Because of their importance, computer planning tools are available to assist the entrepreneur in their development.

A wonderful idea can be married with a fantastic technology to produce dismal results. For example, food is a wonderful idea. We all love food. Airplanes are a fantastic technology. The offspring of this marriage is airplane food. There is some wonderful food served in first class; however, the words "airplane food" bring to mind something uninspiring.

Business plans are a wonderful idea. Lay out in text and charts exactly what you intend to do and how you intend to get it done. Computer automation is a fantastic technology saving users untold hours of unnecessary work. But their offspring, the typical automated business plan, is as exciting as airplane food. Pity those that have to read them for a living.

How do we upgrade to first class? Our intention is not to just get by; it's to attract the best - funding, talent, clients, etc. Adequate simply will not suffice.

Business Model Generation, a technique described in the book by that name, offers an exciting and elegant place to start. A Business Model is an abstract version of the business broken down into 9 key elements. It represents the flow of people, products, ideas, information and values that drive the revenues and costs of a business. By taking time to first abstract the business dream on paper, we develop an appreciation of its inherent values and attractive features.

Now take that Business Model and apply it to a specific set of circumstances and we have the makings of something interesting. If the model is exciting, the specifics of a plan can be written (even with the assistance of computer software) so that the excitement flows through it. If the sizzle isn't there in the beginning, no computer application is going to add it. Our dreams are always exciting.

At Murphy Business, we use Business Model Generation in our Executive Advocate (sm) programs. These programs fit executive buyers to target business acquisitions that have the greatest likelihood of success for their future growth. We don't start with a business plan. There is too much unknown about our client. We start with the client's Business Model Canvas. This specific graphical representation of the Business Model becomes part of a highly profiled search criteria to find "unadvertised" potential business acquisition targets. Details of the business acquisition targets are merged with the Business Model Canvas of the client to produce a business plan with substance. Something to excite the seller, the buyer and the investors.

We have developed a Business Model Canvas for the Executive Advocate(sm) programs to illustrate the communication power of this approach. You invited to watch this 8 minute video introduction . What we discovered was the use of this tool internally has also been invaluable in helping us also communicate the value of the Executive Advocate (sm) programs to candidate clients.

Communicate the dream!


Photo credit: fsse8info

Franchise Rage: Keeping it too simple

I get to meet with Texas business owners trying to decide if they should grow or sell their business. The answer generally lies in knowing how to value the business and deciding if that's sufficient for future plans or not.

If growth through franchising appears to be attractive, we then get to work preparing the business for it. This involves defining and documenting their proven and successful business model. We also represent the most successful franchise operations, so in time we are able to bring qualified operators to the business and the operation grows territory by territory.

It would seem to be a simple thing, just follow the proven plan and success will be yours. This should be a KISS, Keep It Simple Stupid, approach to making money; however, life proves success is never that simple. The danger in a franchise strategy for growing a company is the potential for an adverse relationship to develop between the  franchisor and the franchisees. Here is how it can happen.

A franchisee's operation is struggling and the franchisor recognizes that they are trying to operate  outside the proven plan. Warnings about this issue are repeatedly given; however, the operating problems persist and eventually the new franchisee begins to attribute the problems to the franchisor's inability to help them. The two sides continue to blame each other creating a vicious cycle of further bad business. What we have is an example of a sound system being destroyed as a result of the fundamental attribute error.

This everyday error occurs whenever we think an action is being caused by the actor instead of the stage. In traffic a car suddenly cuts in front of us. Our reaction is to think that happened because there is a bad (or rude) driver in front, when in fact that driver could be skilled and polite and narrowly averted an accident by quickly changing lanes to clear a road hazard. As long as all the driving incidents are the cause of other bad drivers, better driving skills that anticipate road hazards are never developed. Instead, we develop road rage.

Blaming problems on fundamental personal attributes of either the franchisor or franchisee is not a simple answer, it's a simplistic answer. Oliver Wendell Holmes said "I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity." It is the difficult responsibility of both sides to go one step deeper into the situation and ask "Why is the proven method being altered?" What if the issue is not personal character but is the situation? It means a willingness to suspend judgment and get deeper into the complexities of the specific situation and how the model applies to it. Only after passing through this complexity it is reasonable to get back to keeping it simple.

In our process of guiding Active Investors into purchasing a new franchise, we have them contact other franchise owners to learn about their experiences. The alert Active Investor is going to ask how they handle difficulties that might make them question the plan. Is there any evidence of franchise rage?

If you are considering franchises, you want a successful system; but you also want a happy family.

Photo credit: star5112

Creating Products from Services

An objective of The Active Investor blog is to inspire the thinking of small business owners and professionals to create greater lasting value in their business. There is perhaps no better way to do this than to find ways to create products from services.

A product without services eventually becomes a commodity with business going to the lowest cost provider. Selling only services is a bit like selling air. You can't really sell time. You can only rent your expertise for some time. Expertise is intangible and difficult to either prove or differentiate and in the end the amount that can be sold is always capped by a time limitation. If you want to sell the enterprise, because it's your expertise and you're leaving, the residual value is relatively small. However, when the business offers a deliverable solution that can be named plus is easy to understand and refer, you have hit a "value-added" sweet spot. Here is a personal example.

Names are important. They give the offering tangibility. As a Texas business broker, I create marketing plans for my clients, as do many other business brokers. Since most small business buyers come from the internet, this plan includes multiple internet directory listings, which again, other brokers do. So far, we're still at the services level. I've then created a unique product offering on top of these services named Business Opportunities Bulletins (BOBs). With some creativity and technology, each client listing can appear on the first Goggle results page of significant search terms used by potential buyers. If a client wants to be found by potential business buyers, here is a product, a BOB, that does exactly that.

A BOB is easy to understand. The art of selling your business is to be presented to interested parties and still keep the sale confidential. Prospective clients can see how this is already working for existing clients. They "get it" immediately.

In this example, the product's name is a take-off of my own name. If a need for my business broker services gets touched upon by someone in my network, it's easy for them to explain and refer my product (my service).

Building BOBs takes time,  expertise, and technology but their existence adds critical value both to immediate marketability and to the ultimate value of the brokerage practice. A product has been created out of services common to the industry. How many products can be developed from your services? Something with a name that is easy to understand and refer. I can't image anyone who can't develop at least one more.

Image credit: EraPhernalia Vintage (catching up)

Shaping the future

In President Obama's address to Congress on Healthcare this month, he reminded them that they came to Washington not to fear the future but to shape it. What an inspirational remark and what a great definition for an Active Investor. Active Investors are more than just business owners and professionals; they are the individuals who have made a decision not to fear their future but to take responsibility to shape it.

Once we get beyond the inspirational feelings of that remark, we're left with the reality of exactly how does one go about shaping their own future? For Congress and Healthcare, it involves agreeing to passing enabling legislation. What's involved for us as individuals?

We cannot know the future; however we can understand it through System Dynamics. Our core principle is structure will determine behavior. The future will play-out according to the structures at that time. Our nation will have better Healthcare if a better Healthcare system is in place. An Active Investor will have a more successful business if better business structures are in place.

Each day is a new opportunity to:
1) Faithfully respond to the needs currently presented to us, and
2) Imagine how we can build structures to be even better in the future.

This is a big step beyond "making money." This is building lasting value. The profits earned at any given time will be consumed; but the structures are a lasting value. We see this in business brokerage all the time. Business owners who have created structures cash out handsomely. Those that have just made money get by.

Shaping our future is building our structures. What marketing, sales, management, HR, compliance, fulfillment, etc. resources need to be in place for our complete success? This question is never conclusively answered in our expanding universe. The mere passage of time is enough to continually create new opportunities for everyone. New structures will first form in our minds and later find their way into our reality - shaping our future.

As for politics, our President's speech did affect me. I've decided to believe there is a viable solution to the nation's Healthcare problem. Congress only has to imagine it.

Image credit: dmitryku

Powerful Symbols of Structure

Today's performance is the result of the strategic resources we had available when we woke-up this morning. Toyota will build many more cars today than I will because they have the resources and intent to do so and I don't. On the other hand, Toyota's contribution to this posting will be a mere mention of their name. My contribution will be its creation because I have access to these resources.

Structure determines behavior. In our past we have intended certain results which has caused the accumulation of necessary resources to accomplish them. These resources for an Active Investor might include things like cash, reputation, customer base, staff, inventory, equipment, technology, supplier relationships, and so forth. What happens in the present is the unfolding result of the levels and structures of our current resources. This is why accounting and business valuations work in the present. We can accurately know our resources as they exist now. Forecasting future performance is another matter.

Financial methodologies are scalable to almost any level of detail complexity; however, they are often not well suited to deal with dynamic complexity. As we move out of the known present and into an unknowable future, resource levels will be dynamically affected. Things will generally not happen in a linear fashion like we tend to imagine. Understanding the dynamics of how we arrived at the present is far more valuable in forecasting than understanding the details. Unfortunately, the study of system dynamics is somewhat challenging (although if it's possible, an Active Investor will greatly benefit from taking a formal system dynamics course).

The rest of us take an intuitive shortcut. We look for symbols that indicate the underlying structure and use that to get clues about dynamics.

Experience in audit and business brokering have helped me develop a sense of symbols. Walking into a business the cars in the parking lot may be symbols that the owner (and therefore the business) is doing well. The maintenance is a symbol of their attention to detail. The decor may become symbolic of their perceived customer preferences.

For all the time and effort spent on marketing assets, it's often our symbols that communicate the most about us to others. They are most powerful communicators that indicate our structure and will be used by others to predict our future behaviors.

Our symbols are both advantageous and dangerous because they communicate instantly. And yet, we frequently are not even aware of what symbols we currently display. The Active Investor benefits from paying attention to them. It takes an examination of our structures to best see our symbols. By being alert to symbols in our markets, we learn both about others and how to better present ourselves.

Image credit: avixyz

Getting to "what's next"

There's always a "next thing' in life. Change is so persistent we sometimes just ignore it or allow ourselves to become overwhelmed by it. Change is also where we find a great need for outside help. It's wonderful to find a mentor we can trust who has been through the change we're facing many times before.

Many professionals fit into this mentor category. As business brokers, we mentor individuals whose "next thing" is to have their own business, or a different business, or perhaps a long sought retirement. In working with our clients, the real objective is to get them to their "next thing". It's not the purchase transaction.

The process of getting safely to the "next thing" is the same, regardless of what area of life is involved. We first need to determine objectively where we are. Objectively probably means a second, third, or even higher opinion. This shows us our "as is" state, which is sometimes hard to see without the outside help.

Now the problem is not an unknown change. It's having to navigate a Gap between the "as is" and our "what's next." A Plan, or Gap Analysis, should make intuitive sense to us, even if it involves new and novel activities.

This is being written on Easter Sunday. The Resurrection , a plan to navigate the Gap separating God and man, is now celebrated by over 2 billion Christians around the world. I have to believe that closing Gaps and moving forward to "what's next" is the inherent pattern of all creation.

Mapping Successful Habits

Steven Covey's 7 Habit's of Highly Successful People made the connection between business success and individual habits. This week Mary White of WTC Performance Group introduced me to the simple map on the left. It's an approach to looking at how those successful habits are formed.

We sometimes find business owners who are personally ready to sell their business; however, the business isn't ready to be put on the market. It's current value isn't as much as the owner knows it could be worth. Consultants, like Mary, work with these Active Investors to close this gap.

A common mistake made by consultants and coaches is to jump in with their expertise. On the map that's moving from Step 2 to Step 3. Often, the real need is to start at Step 1. The most immediate contribution a business value consultant brings is the ability to see an issue outside of the owner's awareness. This takes daring on both the part of the consultant and the part of the owner to allow it. That's what the #1 box in the map is all about, our Unconscious Incompetence.

Once aware, it's a process to move to the Conscious Incompetence awareness in Step 2 and then the Conscious Competence of skill in Step 3. The new skills are ultimately "ours" when we finally move into Unconscious Competence, Step 4, which is Habit. 

It's all very systematic once past that first step. Having the insight and courage to know when to take that step is the hardest part.

Identity

Believing having your own business is the best way to have fun and make money misses the most important point. Those are the two excellent reasons to become employed and/or to learn about passive investments (read Rich Dad, Poor Dad). Successful owners are about those - and much more. 

Talk to them about their business. It's all about being able to help people, not just what happens on their financial statements. If owners didn't truly believe they were doing something significant for others, they would be content as employees or investors. 

This makes being a business broker so interesting. Selling a business is not a round peg, round hole kind of transaction. There's more than cash flow and asset worth. A Seller has to believe that a Buyer can offer society the same, or better, service with the business being sold. Without that, it's a poor deal. I feel I'm more part of an adoption agency than a financial services organization. It's very personal and very rewarding.

The very best sales people are often the business owners who communicate their belief in the importance of what they're doing along with the message about their business. It's not polish; but rather a self-knowledge of exactly who they are and why they're here. Communicating identity sells.

There's a saying in Texas that there's no better fertilizer than the farmer's footprint. There's also no better marketing program than the owner's voice.