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Surprise! It Helps to Know What You Are Doing

Entrepreneurs need to know what they are doingClients come to us frequently and tell us that they have a really good idea and they need a business plan so that they can get the idea funded and launch a successful enterprise. The idea is {state idea here}. In response, our first two questions are usually:

  • Do you have knowledge of this industry?
  • What is your background?

As any experienced business person will tell you, a number of good things have to happen for an entrepreneur to fund, launch, and operate a successful business. The number of moving parts that have to come together at just the right time are too numerous to list here. However, before even beginning to put together that list, one thing stands out above all the rest. You need to know something about the industry and you better know what you are doing. You will increase your chances of success by many multiples if you can answer each of the following questions affirmatively and decisively:

  • Do you know this space?
  • Have you actually worked in the space?
  • Do you have an extensive network of contacts in the space?
  • Who is the target customer of your proposed business?
  • What is the competitive landscape in this space?
  • Who are the important direct competitors in the space?
  • What will your competitive advantages be?
  • Will you be able to differentiate your business from your competitors?
  • What are you personally bringing to this business concept that makes the company special?

This post is inspired by the hundreds of thousands of immensely capable military vets who have served their country with distinction for the past decade or so and are now ready to write the next chapter in their lives. But it is directed not just to people coming home from active duty. It is directed at the hard working people the world over who have decided that they want to work for themselves, and that they have the skills and talent to succeed as an entrepreneur.

Here are two brief profiles to illustrate our point.

A 20-year veteran military officer is thinking about his retirement. Prior to his last overseas assignment in the Persian Gulf, he was traveling from Houston to Charlotte by car and discovered the travel centers along the Interstate Highways offered varying degrees of quality and services. He soon realized that the better, more corporate, branded travel centers were closer to the big metropolitan areas and that in the rural areas, the travel centers were not as large or well-maintained, and provided little more than fuel, dirty restrooms, and unappetizing food alternatives. He decided that after his retirement, he would build a world-class travel center that would include numerous restaurant options as well as a motel and other amenities. He has no experience in retail, food service, or hospitality so he and his business plan consultant (not us!) prepared a business plan that was so generic it could have written about any business concept imaginable. He came to us when he finally realized that the business plan really said nothing, and the financial forecast made no sense. In addition, he and the consultant had no idea how this venture would be funded. We totally changed the business model to one that he could manage and fixed the plan. Our client learned a painful, expensive lesson.

On a more positive note, we have a new client who has spent her entire career in the beauty products industry where she has worked in product management, sales, and distribution. She has a broad network of contacts in every aspect of the industry. She has developed a product that will compete in a niche category, and her product offers some unique features and customer benefits. She knows exactly where she is going with this product introduction and how she is going to get there. She is providing the permanent capital in the new business and she has asked us to prepare a business plan that will be used in applying for an SBA guaranteed commercial loan. There is little doubt that she will be successful with the loan and with the new product.

Look, we are not saying that you can’t fund and launch an idea that you know nothing about. What we are saying is that you will increase your chances of success if you stick to something in which you have some knowledge and background. Ask your business plan consultant to professionally communicate your roadmap for success. That is their job. Don’t ask them to invent a new business through a business plan and then send you on your way.

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Author(s) (other articles by )
Original Publication DateJanuary 30, 2014
Related categoriesNuts & Bolts

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