Growthink Blog

What's Your Competitive Advantage?


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Your business plan must not only define your competition, but demonstrate your venture's distinct competitive advantage. This video explains how to create an effective Competitive Analysis section for your business plan.


Are You CEO Material?


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Jack Welch

There is an age-old dilemma out there, which all entrepreneurs will come across at some point in their career: To be, or not to be... the CEO, that is the question!


When envisioning the ideal CEO, undoubtedly many images come to mind: A charismatic persuader, a visionary, a multi-tasker, a passionate leader. The real world expectations of a CEO can be so varied and so all-encompassing, that it can be a daunting hat to consider.


Some entrepreneurs tackle this issue with the notion that they are obligated to lead their company from the CEO chair, while others will avoid the title at any cost. These stances are seldom the result of any actual measure of their own abilities, but rather from pre-conceived notions of what is expected of a Chief Executive Officer, and what skills they assume are needed to effectively assume the role.


To add a dose of empirical data to the conversation, venture capitalist Seth Levine has released a rubric that he and his colleagues use when evaluating a CEO. Now that we know what the VCs use when sizing up leaders, it might not be such a bad idea to go through this rubric yourself and see how you'd stack up.

 

CEO Scorecard

(rate performance on a 1-5 scale, 1 being least favorable and 5 being most favorable; provide support for your rating in the space provided):


Vision: Creates vision and strategy. Communicates vision and strategy both internally and externally.

Leadership: Ensures the support and execution of the vision and strategy by:

1. Establishment and communication of priorities;
2. Driving change for improvement throughout the organization;
3. Team-building; and
4. Creation of high performance environment.

Operating Management: Develops and executes sound long-term and annual business plans in support of approved strategy. Manages operations and resources efficiently and effectively.

Values and Integrity: Maintains consistent values and exemplary conduct. Promotes positive corporate culture to reflect corporate mission statement.

Shareholder/Investor/Financial Community: Serves as chief spokesperson, communicating effectively with shareholders and stakeholders. Is well regarded and respected by investment and financial community.

Strategic Partners: Maintains personal rapport with strategic partners through open, ongoing communications

Human Resources
: Ensures the development of effective employee recruitment, training, and plans and programs to provide and motivate the human resources necessary to achieve objectives.

Public Relations: Ensures that the company and its operating units contribute appropriately to the well being of their communities and industries. Represents the company in community and industry affairs.

Board Relations: Works effectively with the Board of Directors to keep them fully informed on all important aspects of the status and development of the Company. Facilitates the Board's governance, compositions, and committee structure. Implements Board policies and recommends policies for Board consideration. Supports a relationship characterized by trust, mutual respect, open communication and responsiveness to feedback. Uses Board meetings effectively.

Financial Results: Financial Results – Establishes appropriate annual and long-term financial objectives and manages to consistently achieve these goals; ensures that appropriate systems are maintained to protect assets and maintain effective control of operations.

 

As you can see, the criteria for a great CEO (at least in the eyes of these Venture Capitalists) aren't as elusive as many people think. If you've got these skills, you're in good shape. If not, it might be time to start the CEO hiring process.

What do you think about these criteria? Which of these factors are truly the most important? Are there other factors you think are missing?


Increasing the Consumption of Your Product or Service


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Last night I went to the art fair at my kids’ elementary school. My son, Max, who’s in 2nd grade had created a picture of his ideal city (see below). 

 

 

I was thrilled to see that the Growthink office made the picture. :)  (It’s also funny to see that the city just had to have a video store in it).

Interestingly, there was something in the picture that I noticed, that I bet no other parent noticed. Can you see it? What I’m referring to is the fact that the Growthink office is the only one with double-doors. Clearly, my son has been schooled in Consumption Theory, which states that the more frequently your clients consume your products or services, the wealthier you become. So, by having double doors, Growthink can let in and serve more clients and create greater wealth (so I can buy my son more video games of course).

My favorite examples of consumption theory in action are Prell Shampoo’s use of the word “REPEAT” in it’s directions to get customers to wash their hair twice (and thus consume twice as much shampoo) each time they bathe. Adding the words “Use Daily” to the directions may have doubled Prell’s consumption again. My other favorite example is Colgate toothpaste, which dramatically increased consumption in an even easier way; it simply increased the size of the opening from which the toothpaste comes out.

How can you get clients to consume more of your products and services?


Analyzing Customers in Your Business Plan


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The Customer Analysis section must convey the needs of your customers, and demonstrate how your company satisfies those needs. This video teaches how to analyze your company's customers for the purpose of gaining credibility with investors.


Web 2.0... Still? Trends in Early Stage Financing


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It's almost mid-way through 2008 and the investment ideas that VCs are excited about sound awfully reminiscent of those that were hot two, three years ago: digital media, social networking, Web 2.0 companies. In fact, when asking most VCs what sectors they are actively pursuing, the only one that sounds vaguely zeitgeisty is clean/green technology.

While the sectors that VCs are looking at may have remained the same over the past several years, their approach to them has changed. Very little "traditional" VC investing actually takes place anymore, so VCs need to be guaranteed returns of 200% or 300% of their investments in order to make a play. If your company can only offer 20% or 30% returns to an investor, it is better suited for an earlier stage investment from an angel investor or friends and family.

However, angel investors should always expect to get diluted in a valuation or further investment of the company. Some guidelines follow:

  • 20%-30% of a bridge loan should be expected to be given up as a discount to angels

  • With strategic capital, anywhere from 10%-50%, with an average of 20%-30% can be given up

Also, VCs anticipate company valuations to come down in line with the recent credit crunch, with an expectation that deal valuations will drop as credit markets tighten. Based on the current market environment, cash is king.

We Just Made $94 Billion Dollars... Now What?


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Q: We just made $94 billion dollars this year. What should we do next?


A:
Create a new business plan.



It's never too late to update your business plan.

Car manufacturer Nissan (NASDAQ: NSANY) demonstrated that fact this morning when they announced a new five-year business plan. With a projected mix of market expansion, cutting-edge technologies, and growing product lines, Nissan will strive to significantly increase per-share dividend, and achieve five percent revenue growth on average over the next five years.

The new strategy plan is called Nissan GT 2012, with "G" representing growth and "T" for trust. In addition to their product development goals, Nissan is also shining a light in-house, and will put effort into improving management, brand and service quality.

Typically, business plan creation is associated with up and coming ventures, or existing companies eager to expand into uncharted waters. Why then would Nissan, a company with clear expertise in the automobile arena, and which raked in over $94 billion last year, commit to such an intense overhaul?

Well, for starters, a business plan is a static document. There is no doubt that business plans are integral to the proper conceptualization of your business, the mapping of your desired financial trajectory, and the fabrication of the strategies you will implement and execute upon day in and day out. Much like your favorite jeans from high school, however, it is possible to outgrow your current business plan. In fact, it might be time for you to re-evaluate your current business strategy today.

While especially crucial for technology companies in industries like automotives or computer hardware, where revolutionary progress is made at a break-neck pace, even companies in more traditional areas might be in need of a refresher. For instance, a bank that did not create a strategy to institute secure online banking as an option for their customers may be in danger of losing customers to more tech-savvy competitors.

A new business plan can be just what's needed to refresh your approach and effectively restructure your business to gain competitive edge.


Business Plan Video: How to Write the Industry Analysis Section


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This video teaches you how to create a convincing Industry Analysis section for your business plan that demonstrates a real need for your new product or service.

 

 

 


The Importance of Educational Marketing


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There are many companies that can thrive following the tried and true methods of traditional marketing initiatives. If you are one of those companies, it makes sense to place yourself in the most familiar arenas, where potential customers expect to see you. That is, if your intention is to compete with Coca-Cola for mindshare, it is probably in your best interest to utilize bold advertisements in print and television media.


But many other companies are learning that traditional approaches are no longer sufficient to convey their message and effectively convert the casual shopper into a paying customer or even better, a brand evangelist. It used to be that you could distinguish your company through lowest prices or a sparkling slogan. Now, however, these old silver bullets will barely leave a dent in the mind of the modern consumer. What can your company do today to stand out above the noise and clutter?


Enter: Educational Marketing

Education-Based marketing is the act of creating marketing materials and executing on strategies that distinguish your company as a knowledgeable authority and resource in your area of expertise. Notice the inclusion of "resource", as it is uncharacteristic to antiquated marketing approaches. It follows the revised premise that to be an active and valuable participant in the information age, one must become an information center.

With multiple, seemingly identical solutions popping up everyday in various industries, those that will shine are those that can lend a hand to their audience, rather than using that same hand to bludgeon their audience with an exhausted sales pitch.

Author David Frey has outlined not only how the average customer has become numb to the sales pitch, but also the underlying goals and burgeoning techniques of Educational Marketing. Your mission, should you choose to accept it, is to flip the script, and focus on the questions of customers rather than the sensational hype associated with a typical sales pitch.

Say you were the owner of an oil change store. A standard approach to market your business would be to place ads that say:

Get Your Oil Changed Here for Just $14.95!

By integrating educational marketing into your marketing arsenal, you might instead try:

“A new study finds that changing your oil every three months adds $1,437.81 to the resale value of your automobile. Come in to find out the effect of oil changes on the resale value of YOUR automobile.”

The information and help you can provide your customer is the new hype. The emphasis of such techniques revolves around the establishment of trust. By assisting in the open sharing of information, you become an ally to your consumer, rather than the oft-avoided vacuum cleaner salesman.

One main concern that can come with Educational Marketing initiatives is "How do I monetize these new informed shoppers?" Frey goes on to map out the packaging of one's educational message through multimedia options such as video tapes, email courses, and seminars which can extend the dialogue and thus your marketing window of opportunity. Such long-term, or “drip” campaigns can have a tremendous impact on the duration of your trust-based relationship and the lifetime value of your prospective customers.

What is your educational message?


Writing the Company Analysis Section of Your Business Plan


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This video teaches you how to create an effective company analysis section that will educate investors about your company’s history, past accomplishments, and unique qualifications.

 

 


Video: How to Write an Executive Summary


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Watch the first installation of our new Business Plan Video series.

This video, "How to Write an Executive Summary," provides advice on how to create a compelling executive summary for your business plan.

 

 



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