Veterans, get clear on the size of your business, as well as the means to execute your plan.
Last week we left this process with a promise to continue into rightsizing your venture, as well as covering the acronym MECE and the process of benchmarking. To begin, it’s imperative to understand that starting a business is capital intensive (meaning you’ll spend a substantial amount of money in a short time period).
It’s also important to understand that, without access to capital contributions (cash), it’s highly unlikely that a bank will lend money to fund your venture. Therefore, rightsizing your business is critical. Last week, we covered this idea by looking at the target money objective and the required sales volume needed to support your objective.
As you begin to think through the various structures/strategies that you might develop into a business, it’s important to follow a simple rule. Within the constraints of working and start-up capital, human resources, and other support available to you, you must develop a list of business concepts and means of execution that are Mutually Exclusive & Completely Exhaustive. Specifically, you must consider within your parameters all the unique ways you could structure your new business.
For instance, you might want to run a mobile snow cone truck and specialize in tropical or hard to find (even customized) flavors – but any other version of this idea (multiple trucks, flavors, etc.) should be consolidated into this one idea. Later in the process, you can become detailed in the execution of your business. So, the next idea (using MECE) might be to have a small push cart with snow cones and ice cream, and the next might be to open store front with self serve snow cones, and on and on. This process will continue to help you envision the possibilities, develop cost projections, and ultimately right size your business.
Once you’ve landed on a business concept that clearly outlines your ideas about: (1) product/service, (2) rough price point (and rough profit margin), (3) place of business, (4) packaging, and (5) promotion strategy, you’ll need to decide how to best execute your business concept. Do this by considering what your value proposition should be to maximize your business success. If you decide that offering snow cones from a storefront is your best option, think about how this option will appeal to customers (list the benefits), then articulate those benefits around a sentence that will serve as your value proposition. For instance, “affordable cold treats with customized flavors and self serve formats to speed you on your way.”
It’s also worth your time to benchmark – that is, to look at businesses with key processes (or key success factors) that show world class execution. In benchmarking, we study the way the successful companies achieve their success in key areas and adapt (not adopt) the concepts for our own business. One famous case study in benchmarking is the story of Southwest Airlines. Essentially, Southwest wanted to serve the business traveler from Dallas to Houston with as many flights per day as possible. Once this key aspect of the value proposition was identified, Southwest decided to benchmark Indy car pit crews to better understand how to land, de-plane, and re-plane passengers as quickly as possible – allowing for more flights per day from Dallas to Houston and back. The rest is history.
In the end, you’ll need a compelling value proposition and a world class means of delivering on that ideal (benchmarking), so thoroughly think through and study these issues. Plan to work, work the plan.