Last month, author Brad Stone released an interesting book called, "The Everything Store: Jeff Bezos and the Age of Amazon."
The book chronicles the story behind Jeff Bezos and Amazon, but there's really only one paragraph from it that I'd like to focus on herein. That paragraph reads as follows:
So, let me break this down for you if it's not apparent. Rather than selling items like apparel and kitchen items itself, Amazon launched these categories through the Amazon Marketplace where other vendors sold them.
In doing so, Amazon was able to see what products sold well and how they were sold. And then, when a product sold well, what did Amazon do? Well, they started selling the item themselves in the main Amazon.com site.
So, what is this strategy called?
Market Research. That's right, Amazon.com went from an online bookseller to the WalMart of the internet by doing market research. Because with the right market research you can avoid the missteps that most companies and entrepreneurs make.
So, what kind of market research will help you grow your company? Below are the key research areas you need:
In assessing your industry or market, start by defining how big it is. Why? Because if it's too small, it's probably not worth entering. Define your market as clearly as possible. For example, if you manufacture prosthetics, look at the size of that market, not the entire healthcare market.
Next look at market trends. For example if the market is shrinking or consolidating, it's probably not a great market to enter; unless you have a revolutionary new product that could shake things up.
Understanding your target customers is absolutely critical to your business' success. In fact, one of Jeff Bezos' hallmark strategies is "We start with the customer and work backward."
In your research, you need to precisely identify and define who your customer is. Define their demographics such as what gender they are, how old they are, where they live, etc. If a business customer, also define their role in their company and the type of company for which they work.
Then move to the psychographic questions. What do your customers like to do in their free time? Who do the like on Facebook? Etc.
The more you know your customers and what make them tick, the better job you will do in creating the products and services they want, and effectively marketing to them.
Identify who you are top competitors are. Importantly, like Amazon did, determine what has worked well for them and what their customers are buying.
The old investor saying is very important here, which is as follows: "if you have no competitors; maybe you have no market." What this means is that if customers aren't currently buying a product or service that serves the need your company fulfills, then maybe that need and thus market doesn't exist.
The more you understand your competition, the better you will do in creating a winning strategy. Fortunately, with online tools, you can learn a lot about your competition. You can find out the demographics of their website visitors, what other sites those visitors frequent, what other companies they like on Facebook, and so on. Clearly this information will help improve your marketing and overall strategy.
The final category or research to conduct is financial research. Here the goal is to develop benchmarks. For example, what is the average Cost of Goods Sold in your industry? What percentage of your revenues should staffing costs comprise?
By understanding these benchmarks, you can do a better job in determining financing needs and also measuring and improving your performance over time.
We all know that knowledge is power. And when running a business, the knowledge you need is market research. With it you'll have a better strategy and your likelihood of success skyrockets. Without it, you're shooting in the dark. I prefer the former.
Suggested Resource: If your business plan and/or strategy is missing critical market research, you will fail. Or worse yet, if your plan or strategy is based on faulty research, you're doomed. Click here to learn how my team can quickly and affordably conduct your market research for you.
No great companies have just one employee. None. Which means that in order to grow your company, you need to build a great team.
In building your team, there are two equally important but distinct parts: recruiting great employees and expertly managing them so they perform at their best.
1. Recruiting Great Employees
Recruiting great employees requires you to: 1) determine who to hire, and 2) hire the right people.
Determining Who to Hire
In determining who to hire, you need to assess both what job functions you need now, and what functions you'll need in the future. This will help you find the right people.
Consider this example: you need someone right now to manage your marketing. So you hire a marketing manager. A year from now, your company is doing well and you hire four more people as part of your marketing team.
Now here's the question that arises: is the person you initially hired for the marketing position the right person to lead your marketing team? Sometimes they are, but often they aren't. Since performing in a role yourself is a very different job than managing a team.
So, the question you need to ask yourself when you initially hire the marketing person is this: should I hire someone simply to meet my short-term marketing goals, or should I hire someone that can fill my short-term goals and who could also manage and grow my marketing department. The latter hire will typically be more qualified, and more expensive, so making such a decision is important.
Another tip when determining who to hire is to conduct a return on investment (ROI) analysis on new positions. That is, what expected return, typically in terms of increased profits, will the business generate in return for hiring each new staff member. The less funding you have in your business, the more important this analysis becomes in choosing who to hire now.
Hiring the Right People
There is an old and important saying in management, "Hire slowly and fire quickly." You hire slowly since it's critical to get the right people in your organization. And you fire quickly, since bad employees can ruin the morale and productivity of your entire team.
The process of hiring the right employees starts with sourcing them. You can source or find employees from a wide range of places, from college job boards to posting classified ads. For each open position, think about the best places to find qualified prospects.
Once you find qualified prospects, the key is to weed through them to find the top performers. While interviewing prospective employees is key, remember that someone's interviewing skills are not as important as their on-the-job performance. That is, someone can be great during interviews, but not so great on the job.
To overcome this challenge, delve into the prospect's performance in their last jobs and, as much as possible, give them tests to see how they might perform in your company. With regards to tests you give them, treat their performance on them as their best possible work. While they can refine their skills with training, prospective employees generally give it their all on such a test. So, if they score mediocre, they are not a good prospect.
2. Expertly Managing Your Team
Your job as a manager doesn't stop once you've recruited a great team. Rather, you need to expertly manage them. We see this in sports all the time; one team has incredibly talented players, but they still don't win the championship.
Key to your company's performance is motivating and managing your employees so they work collectively as a team and are highly productive.
Among the many techniques for accomplishing this, here are two of my favorites:
1. Let Your Employees Set Goals for Themselves
Employees will perform much better when they've set their own goals, rather than goals being dictated for them. So, have each employee set goals. Then review those goals with them. As needed, persuade them to modify their goals to better align with company goals. Even when you do this, they will feel personally accountable for achieving their goals.
2. Conduct Performance Reviews
If you don't meet with employees and review their performance, they won't know whether they're doing a good job or not. So, meet with your employees periodically to discuss their performance versus their goals, detail what they are doing well at, and identifying areas for improvement and your suggestions to achieve such improvement.
Your Team Allows You to Win the Game
We all face competition in our businesses. And the difference between the winners and losers is often the quality of the teams. Clearly, if your marketing manager is better than your competitors', and so is your sales team, your production team, etc., you're going to win every time. So, focus on building your dream team so you emerge victorious.
Suggested Resource: Building Your Dream Team is a comprehensive video program that takes you through the four phases of building an outstanding team, which are: 1. Building a Founding Team, 2. Determining Who to Hire, 3. Hiring Superstars, and 4. Expertly Managing Your Team. Click here to learn more.
The acquisition market continues to be very strong. In the 12 months ending August 31, 2013, $881.7 Billion was paid to acquire 9,499 US companies. This represents an 8.1% increase over the $815.9 Billion paid to acquire companies in the previous year.
Importantly, during this time, the average EBITDA multiple paid for Middle Market firms (companies valued between $1 million and $500 million) was 9.1. This means that if your company's EBITDA (earnings before interest, taxes, depreciation and amortization) were $2 million, that your company would sell for 9.1 times that or $18.2 million.
I'm telling you this important information because selling your company is the ultimate goal for most entrepreneurs, because it's how you achieve significant wealth.
Importantly, not all of the $881.7 Billion paid to buy these companies went to the founders of these companies. Some of it went to investors, employees, and others. But the entrepreneurs who founded them received by far the biggest chunk.
That's why 80%, a full 4 out of 5, of individuals with a net worth of $5 million or more (called "pentamillionaires") are entrepreneurs who started and sold their businesses.
Here are some acquisitions that have taken place in just the last few days:
And the list keeps going.
Now importantly, I want you to understand why each of these companies was acquired for millions of dollars. Here's why: each of them developed the right value drivers.
You see, whenever a large company considers buying a smaller company, they make a "build or buy" decision. That is, they think, "how long and how much money will it take for us to build what that company has already built." And then, they compare that answer to the price at which they could buy the company.
And when the larger company realizes that buying the smaller company is less expensive (in terms of dollars and time savings), they buy it. And as you read above, they often buy it at a huge price.
Now, what value drivers do buyers want?
I have identified 21 different value drivers they want. Such as the following:
1. Customers: the more customers you have and the more valuable your customers are, the more acquirers will pay to buy your company.
2. Intellectual Property: the more intellectual property you have, such as patents, trademarks, copyrights, and trade secrets, the more your company is worth to acquirers.
3. Team/employees: the more talented and trained your team, the higher the price the acquirer will pay for you.
So, be sure to build your company with these value drivers in mind. When you figure out which of the 21 value drivers are most important to acquirers in your sector, and focus on building them, you'll soon get to a massive payday - a big acquisition of your company.
There are eight key things angel investors will look for when considering whether or not to fund your business. No, you don't have to satisfy all of these criteria. But the more of them you do, the better the chance they will say "yes" to your funding request.
#1: They Like You
Believe it or not, this is really important. No matter how good your venture is, if the investor doesn't like you, they generally won't fund you. So, build rapport with prospective investors and give them the respect they deserve.
#2: They Feel Good About the Venture's Genre
Even if the investors likes you and even if they think your company can be a huge success, they need to like what the venture is all about. For example, someone who hates politics will generally not fund the new political website you are launching. So, find investors who have an affinity for the type of venture you're launching/running.
#3 They Feel a Void
If an individual is an ultra-successful business person who is currently running multiple operations, they are generally not going to invest in more ventures. Since, they don't have a void; they have all the excitement in their daily life that they need. Conversely, a person who feels they might be "missing out on the action" will be more motivated to invest in you.
#4 They Feel There's Good ROI Potential
This is obviously important. Even if investors like you, the type of business, and they feel a void, they generally want to believe they will get a nice return on their investment if they fund you.
There are five sub-criteria to this, which get us to our sum of eight things angel investors want.
Does your company have a strong potential to achieve significant annual revenues? In a truly scalable business, you can multiply your sales without having to greatly increase your resources. Scalable businesses grow more rapidly and can reach an exit (whereby the investor gets their return) faster.
#4b: High Barriers to Entry
Barriers to entry are those things that make it difficult for another firm to compete against you, such as patents or proprietary technology, a unique location, strategic partnerships, and long-term customer contracts.
The stronger and/or more barriers to entry you have, the more likely you are to succeed, and the higher expected ROI the investor has.
#4c: Worthy Management Team
Angels must believe in both the founders and the key operating personnel of your company. Because even the best idea will fail if the team isn't good enough.
#4d: Your Exit Strategy
Your "exit strategy" or method in which you will "exit" your business, is generally to sell it or go public, with the former being much more common. As such, it's good to think about your exit strategy early. Who might want to buy you in the future, and why?
Since angel investors can't realize their investment until you exit, be sure to prove to them that such an exit is viable.
#4e: The Right Price
Finally, angel investors will only invest when the price is right. If you price your equity too high, angels may not have the potential to reap significant enough returns and will not invest.
We see this on the show Shark Tank all the time. The entrepreneur says, for example, that for $400,000 they will give up 10% of their company. The sharks always laugh at percentages like this and say they will need at least 40% of the company or more for that dollar amount.
While the sharks are much more sophisticated, and shark-like, than your common angel investor, you need to price your equity fairly (give them a fair equity stake for their investment) if you want them to fund your venture.
Knowing these 8 things that angel investors want will help you identify and convince the right angels to fund your business!
For my complete game plan for raising funding from angel investors, check out our Angel Funding Formula.
Raising funding is hard. This is actually a good thing. Because if it were easy, everyone would raise money and start a business, and competition would be ferocious. Better yet, since most entrepreneurs won't take the time to read this essay, you'll know this insider information and have a huge leg-up on them in raising capital.
So, here are 7 things you must know to raise money today.
1. Understand That Funding Doesn't Take Place All At Once
No matter how great your company or idea is, you are probably not going to get a $10 million check right away. Rather, you will typically raise several "rounds" of capital.
You start with a smaller round or amount of funding. Then, as your business grows, you are eligible for larger rounds of funding. This is because your business proves itself over time (eliminating some risk to investors) and your valuation rises as you grow (enabling you to raise larger sums of money).
2. Choose the Proper Source(s) of Funding
Choosing the right source of funding is the key to the Growthink Funding Pyramid™. Some forms of funding are much easier to raise than others. And based on your stage of development, different forms of funding are more relevant.
For example, the funding sources available to a pre-revenue startup are very different than the sources available to a 3-year old company generating $1 million in annual revenues. Case in point: Google initially failed when it tried to raise money from venture capitalists. The key is to go after the right sources of funding at the right time.
3. Build Relationships Early
According to Fred Wilson of Union Square Ventures, "The perfect entrepreneur/VC relationship is one where each has established respect and trust with the other well before an investment transaction is broached."
The key is to build these relationships early. So, even if you don't qualify for a $5 million round of venture capital today, start meeting with venture capitalists so they know you when you do qualify a year from now.
4. Keep Your Business Plan Current
One of the most important things to show in your business plan is what you've accomplished in your business to date. And ideally, every month you are accomplishing more. So, be sure to update your plan with this progress.
Importantly, when you meet a lender or investor, you want to be able to give them your business plan in a timely manner. So finish your plan now, and keep it up-to-date, so you can send it off at a moment's notice.
5. Always be a Marketer
In raising money, the best company doesn't always win. Rather, the best marketer wins. That is, the entrepreneurs that are best able to market their companies to lenders and investors are the ones who raise the money.
Marketing is the process of finding the right investor, convincing them to meet with you, and then convincing them to invest in your business. Yes, this is very similar to how you market a product or service. So make sure to use your marketing skills.
6. Have "Thick Skin"
When raising funding, be prepared for a lot of "no's." Going back to the Google example, even when Google was ready for venture capital, the majority of venture capitalist said "no."
When an investor says "no," it doesn't necessarily mean that your venture is not a good one. It simply means that the venture is not a good investment fit for them. You must have "thick skin" and be able to bounce back from lots of "no's" and persevere.
When failing over and over again to create the light bulb, Thomas Edison famously said, "I have not failed. I've just found 10,000 ways that won't work." Have the same mentality with investors. That is, think, "I have not failed. I've just found 100 investors that aren't a good fit."
7. Adapt as Needed
While you must have "thick skin," that doesn't mean to be foolishly stubborn. What I mean by this is that if you hear the same feedback from investors over and over again, you shouldn't ignore it. Rather, you should adapt.
For example, if several prospective investors tell you they want to see a sample of your product or service before considering funding you, create it for them. Don't just plow forward with contacting more and more investors in this case.
By adapting to the needs of investors, particularly when you hear the same feedback multiple times, you can make the requisite changes to raise the money you need.
Understanding these seven funding truths will help you raise the funding you need to grow your business. For additional assistance, this "truth about funding" presentation will prove quite helpful.
Modeling a business strategy after someone else's prior success is typically a great idea.
Interestingly, these models of success can come from rather unexpected sources. While most people will turn to other businesses when looking for new ideas, the world of popular music can teach us quite a lot about business growth and sustainability.
Madonna, for example, has long been the undisputed queen of popular music. Whether you love or hate her music (or her), Madonna has proven to be more than a singer and dancer. She has a savvy business mind that's supported a successful career spanning more than 30 years and an empire of music sales and merchandizing valued at $500 Million. You have to admit, the Material Girl has had a good run.
Here are 3 powerful lessons we can learn from Madonna and use to create success in our own businesses:
1. Constant Reinvention
Madonna is well known for constantly reinventing herself and each album she releases has been different from the last. Reinvention has actually been one of the greatest signatures of her career and has allowed her to stay relevant in a constantly changing market.
As the industry matured, Madonna's music and image have also changed in an effort to constantly bring her fans what they want.
The lesson: Staying relevant is extremely important for businesses of any size. Markets are always changing and a business that allows itself to lose its relevancy has been left behind. Stay in touch with your customers/audience and market evolutions.
2. Pushing the Boundaries
If Madonna is known for one thing it is pushing boundaries. She has been creating controversy throughout her career and much of this stems from her willingness to challenge commonly accepted notions. She created sexier songs with racier lyrics and began challenging what society saw as acceptable entertainment.
In fact, in 1990, when her music video Justify My Love was banned by MTV she packaged it as a single and sold it. This had never been done with a music video before. This innovative, bold, in-your-face move earned her millions in revenue when the video sold like hotcakes.
The lesson: Knowing how and when to push boundaries is an important skill for any business. Challenging accepted notions is often what leads to innovation. Those companies who have come to dominate their markets through innovation were always willing to push things a little further, to do what no other company had yet done.
Pushing boundaries can be a worrisome concept because innovation is almost always met with resistance but without risk there can be no reward.
3. Leverage Platforms & Distribution
Madonna is an impressive businesswoman and she has always understood the importance of leveraging existing platforms and distribution channels. In fact, part of the reason she rose to prominence so quickly is because she made highly effective use of the very young MTV platform. Here was a chance for her to access a vast consumer market in a unique and novel way. Her focus on high quality videos, filled with great music and alluring imagery, set her apart from the other musicians of the time.
The lesson: Madonna was far from being the first successful popular musician but she was one of the first to harness the new and highly effective market of music video television. Think of the iPad. While similar tablet technology came years before it, Apple was the first to package it in a unique style with functionality that appealed to consumers.
Business owners need to be vigilant in looking for new and emerging markets and platforms and then be assertive in establishing themselves in each one. As the market/platform grows in popularity, the prominence of the company also rises.
Like a Virgin
Madonna's career can be a great example from which to draw a number of useful concepts. Her unique voice and readily identifiable fashion sense helped to establish her as a brand early in her career but she was never afraid to reinvent herself to remain relevant. The great impact she has had on the world of popular music comes from her desire to continually push boundaries, to challenge accepted notions and create something new and desirable.
Businesses can never stagnate; they must remain dynamic and able to change to meet the demands of a growing market. Schedule an hour of quiet time this week. You can do this alone, with your advisor, or your core leadership team. Consider these questions:
The answers can be powerful and open doors to opportunities. Remember, brainstorming and documenting ideas is great, but profit and growth only come from action.
Just like Madonna, be willing to take proactive, out-of-box, bold action.
Mobile marketing is here, and it's here to stay.
Interestingly, I both hate and love mobile marketing.
Here's what I hate about it, and particularly, my frustrations with mobile phones:
1. I've seen families out to dinner together where 2 or more of the family members are on their mobile phones (come on, it's family time)
2. I've seen kids spending too much time texting and playing games on mobile phones, when they should be reading, playing sports, doing school work, etc.
3. Texting and driving has gotten out of control, and has made driving much more dangerous (According to AAA, 46% percent of all teenage drivers admit to text messaging while driving).
4. I've seen too many cases of mobile phones being used to entertain children so their parents can converse amongst themselves. It just concerns me that kids brought up with constant entertainment and less inter-personal communications are going to have issues later.
So, as you can see, my frustration with mobile phones is largely when they are abused. I clearly thing there's a time for them. But we (kids AND adults) need limits.
Ok, I'll get off my soapbox now, and talk about the positives of mobile phones, and specifically mobile marketing.
The fact is this: mobile marketing is highly effective and it's growing like crazy.
In fact, earlier this month, Facebook announced in its second-quarter earnings. In it, Facebook disclosed that a whopping 41 percent of its advertising revenue was generated by mobile users. This was up 11 percent from just one quarter earlier.
What this means to all marketers is that smartphones and tablets are becoming more and more prevalent over desktop computers as a means of accessing information (and time spent).
Here are some of the benefits I see of mobile marketing:
1. Mobile marketing is where your customers are. 80% of Americans have their mobile phones with them virtually all the time. Since your customers and prospective customers are on their mobile devices, you have a better chance reaching them there versus most other channels (e.g., telemarketing, print ads, etc.).
2. Mobile marketing incurs a very low cost. Mobile advertising is relatively inexpensive. And mobile marketing activities like sending text messages only costs pennies.
3. Some forms of mobile marketing are very intrusive and thus get seen. Text messages are highly effective. In fact, according to the CTIA Wireless Association, while it takes 90 minutes for the average person to respond to an email, it takes just 90 seconds for someone on average to respond to a text message. Likewise, most mobile ads are more intrusive, and thus more seen by customers, than ads in other media like print and web.
4. High response rates: Response rates to mobile marketing are nearly 5 times higher than response rates to print advertisements.
These benefits mean that mobile marketing should be part of every company's marketing plan. Mobile marketing allows you to reach customers quickly. Customers will get more and more used to paying you and other companies via their mobile device.
And mobile applications will continue to grow like wildfire, and are not only a way for you to stay in front of customers, but they could be a huge revenue source for your company. Note that in the first quarter of 2013 alone there was an 11 percent increase in mobile app downloads versus the entire year of 2012.
So, personally, I ask that you don't abuse mobile phones per my frustrations above. But do embrace mobile marketing as it's a must-have in your marketing plan.
There are many websites, such as ODesk, Guru, and Elance, on which you can find people and firms to which you can outsource projects. Regardless of the site you choose, the key is to get the largest pool of qualified providers to apply for your project. This way, you have more people from which to choose.
Even if you only hire one, you can go back and contact the same pool of talent for future projects later. Consider applicants as being in your "rolodex" of people to contact in the future.
Below are tips to keep in mind when posting your project. In a nutshell, you want to include all of the information that an applicant needs to know, but do so succinctly.
If anything is left out, you'll have to go back and answer their questions about it later. It's always easier to clarify everything up front.
Create a Clear Project Title
Here, include the work to be performed, on what, and in what industry. For example, "Help Developing Ebook" could mean anything from research to writing to editing to cover design. Compare that to "Writing 10,000 Word Real Estate Ebook." The latter will be more likely to catch the eye of writers with real estate knowledge.
Create a Clear Project Description
This sounds simple enough, but you should try to answer as many possible questions as you can, which means addressing certain areas, like:
Upload samples of what you need
You can write 5 paragraphs trying to explain the final product, or you can show them something similar you have had done before (or someone else's to model yours after). The latter is typically more effective.
Most sites will allow you to upload files to show the contractor what they'll be working with or making. You can also insert links in the project description to websites, files, audios, or videos showing or explaining things more vividly.
Particularly if you are asking the person to develop a website, you must show them examples of other websites you like. If you don't, I can nearly guarantee you'll be disappointed with the results.
Choose the time period for bidding
On outsourcing websites, you are typically given options like 3 days, 5 days, 7 days, 15 days, or 30 days to accept bids. I lean towards giving a longer time period, unless the urgency of your project means that you don't have as much time to wait.
In general, the more time that providers have to find and respond to your project, the more qualified applicants from which you'll have to choose.
Also, some of the best providers are also the busiest, so by giving a longer time frame to respond you are more likely to catch them when they're available.
Follow these tips and my other key outsourcing strategies to get a qualified pool of outsourced applicants to complete your projects. These outsourcers will give you the manpower and expertise you need to grow your business at a very economical price.
The term "outsourcing" describes contracting out of a business process to a third-party, that is, someone or some firm outside of your core organization.
Outsourcing generally refers to ongoing processes versus one-time processes. For example, the development of your website is generally a one-time process. Conversely, the maintenance of your website is an ongoing process. However, some people consider both one-time and ongoing processes to be outsourcing when you select someone outside of your organization to complete them.
Regardless of your definition, outsourcing has many benefits, my favorite of which are these four:
1. Focus: Outsourcing allows you to focus on your core competencies and activities. For example, if you own a chain of restaurants, you generally don't have (nor should you) the skills to develop a cutting-edge website in-house.
2. Cost Savings: You can often outsource to individuals and firms in areas with lower costs of living and thus lower prices than you can attain in-house.
3. Expertise: When outsourcing to individuals and firms who specialize in a certain area, they will have expertise that you simply don't have.
4. Flexibility: Outsourcing allows you ramp up and/or ramp down more quickly than maintaining a full-time staff for all functions.
Unfortunately, when they start outsourcing, most entrepreneurs and small business owners make several mistakes. Below are the 5 most common ones to avoid.
Mistake #1: Failing to define tasks/projects clearly
If you don't clearly and comprehensively define the task or project you need fulfilled from the start, your project will inevitably fail. You might choose the wrong person for the job and/or they won't perform to your expectations if you haven't completed this crucial step.
Mistake #2: Failing to hire someone without enough experience
Nothing is worse than the blind leading the blind. When I hire someone to do something that I do not know how to do personally, they need to know how to do it. They need to educate you on their chosen skill set, not the other way around.
Your role is to describe the end result you want, ask for and listen to their suggestions, and rely on their expertise and talent to achieve it according to your description. Make sure you check their past work and references to ensure they have a track record of getting similar work completed on-time and to the satisfaction of those who've hired them.
Mistake #3: Failing to establish and abide by the timeframe
If you've ever provided services for a client in a rush, you know how stressful it can be to drop everything at the last minute and make their emergency yours. The people you outsource to are no different, and it will benefit you to plan and begin things in advance and not at the last minute.
So, map out by when you need to hire someone, when the work needs to commence, and when it must be completed. Create milestones within each of these processes, such as by when you will complete your project description, and when the contractor must complete the first draft, etc.
Mistake #4: Failing to adequately communicate
Just because you hired a great person, it doesn't mean the project will go smoothly. The key here is to effectively communicate with them.
Make sure you check-in with them and get status updates. Get them to send you drafts of their work, and then provide detailed comments regarding what you like and don't like.
The fact is that the more and more thoroughly you communicate with them, the better they will perform. This is true up to an extent of course; because if you micro-manage (or manage too aggressively) it will take up too much of your time and often aggravate the contractor.
Mistake #5: Failing to leverage talented outsourcers
Once in a while, when you outsource, you will find gems. Gems are those outsourcers who do a phenomenal job.
The key is this: once you find these gems, keep them. Give them additional projects. And if you don't have any, refer them to others you know. And keep in touch. At a minimum, email them every month or two to say hi.
In fact, I've had amazing success with just this. I hired an outsourced tech person on August 16, 2005. He did a phenomenal job. I've often kept in touch since then, and he's helped me with several projects. And even though he now has a full-time job (he's in India), he still helps me on the side a lot. And he still does a great job each time!
Knowing how to effectively outsource is a critical skill all entrepreneurs must have. It allows you to accomplish more, accomplish it with more expertise, accomplish it faster, and accomplish it with less money. These are key benefits you can't do without.
Suggested Resource: In today's competitive business environment, you must outsource to stay competitive. Outsource the right way using Growthink's Outsourcing Formula.
Over the past 15 years, I've helped over 500,000 entrepreneurs and business owners to develop their business and strategic plans.
And, as you might imagine, I've spent a lot of time discussing business plans and strategic plans internally. Enough so that among other things, I use the acronym "BP" for business plans and "SP" for strategic plans.
Now, because these terms are often used synonymously, let me explain the key difference as I see them. Business plans or BPs are plans created for the primary goal of convincing an investor or lender to fund you. Conversely, strategic plans or SPs are developed to determine and document your strategy so your company understands and can attain its objectives.
As you can see, both plans serve very different and very important purposes.
Below are the 5 key sections that a strategic plan must have that need not be included, or require much less focus, in a business plan.
1. Elevator Pitch
An elevator pitch is a brief description of your business.
It is included in your strategic plan since your elevator pitch is both important to your business' success, and should often be updated annually.
An elevator pitch got it's name because you need to be able to describe your business succinctly and within the time it takes to travel from the ground to the top floor in an elevator.
A quality elevator pitch:
In a business plan, you do include your elevator pitch in the Executive Summary section to concisely explain your company to investors and lenders. In your strategic plan, it is used to ensure consensus within your organization.
2. Company Mission Statement
A mission statement explains what your business is trying to achieve.
For internal decision-making, it helps as key decisions should be made with regards to how well they help the company progress in achieving its mission.
Also, for internal (e.g., employees) audiences, the mission can inspire and get them excited to be part of what the company is doing.
While your mission statement is often also included in your business plan, investors and lenders are generally more concerned with your ability to earn them a return on investment. As such, it's not as heavily emphasized in your business plan.
Some great examples of mission statements include the following:
3. Goal Specificity
Because your strategic plan focuses on setting your company's vision and getting your team to execute on that vision, your strategic plan must include a greater focus on your goals than your business plan.
While your business plan focuses more on your long-term goals, your strategic plan is more granular. Specifically, your strategic plan should lay out your company's 5 year goals, 1 year goals, and your upcoming quarterly and monthly goals.
4. Key Performance Indicators (KPIs)
As the name indicates, your "KPIs" or Key Performance Indicators are the metrics that judge your business' performance based on the success you'd like to succeed.
Identifying and measuring your KPIs is absolutely critical to ensuring you are effectively executing on your vision and plans. Conversely, if you don't measure your KPIs, you have no idea whether you are achieving the success you desire.
In your strategic plan, unlike in your business plan, you must identify the KPIs your business must track in order to achieve your goals.
5. Identification of Required Strengths
In your business plan, you should stress your existing strengths that make your business uniquely qualified to succeed. This helps convince investors and lenders to fund you.
Conversely, in your strategic plan, you must identify the strengths you need to develop. For example, how could you gain competitive advantage by modifying your products or services? Or by hiring and training certain personnel? Or by creating new operational systems? Etc.
By asking and answering these questions in your strategic plan, you can create a strategy for building a rock solid company that's the envy of your industry.
To summarize, the right business plan allows you to raise money to fund your business' growth. The right strategic plan gives you and your team the vision, goals and game plan to achieve this growth. Finally, using the right strategic plan template helps you create your strategic plan quickly and easily so you can start growing immediately.