Has anybody ever handed you a losing business plan? Unfortunately, the headstrong conviction that a particular new idea will be a big winner is intimately entwined with the process of inspiration, where an idea that gestates and evolves into a new initiative is inevitably invested with all the promise of a newborn child.
When someone is excited about their next big thing, money is at the forefront of their thinking. How can I get money to make this happen? How rich I will be once this is completed? It is this mindset that leads the entrepreneur to write the winning business plan and develop the fabulous spread sheet projection of profi ts that fi ll its closing pages. People who write these incredulous documents are not so much deceitful as driven by a fervour that is rarely shared by their audience.
What does the writer do if the spreadsheets are not suitably impressive when completed? Fiddle with the market penetrations, of course; the scope of the market and maybe even the sales margins. Whatever the mechanism, the outcome is usually the same: outstanding investment returns.
what to consider
There are a few useful things that need to be considered when assessing a new venture.
- Firstly, realise that most new ventures fail, so be a wise investor and ensure you can manage any fi nancial losses that may be incurred
- Secondly, most failures are for market reasons. That is, you do not sell anywhere near as many widgets as you had forecast, or the margins are far less than you expected
- Finally, know when to stop. You have to be prepared to let go and have a crack at another opportunity. Taking manageable fi nancial risks is just common sense and not too much time should be spent preaching the gospel. Market risk is another matter.
are you delivering value?
It is important to understand that people only buy things that they believe will deliver value, and value can sometimes be hard to understand, much less communicate to the market. Products that are aimed at industrial/commercial markets and are purchased by people because of the enhanced business efficiency they offer are by far the least risky. The value that this type of product delivers is usually easily measured and understood. As a consequence, making reasonably accurate market forecasts is sometimes possible.
Finally, always be prepared to move on to the next venture if all of the warning signs suggest that what you are doing is not working.
I am often distressed when I hear a successful entrepreneur standing on stage lecturing that success was due to persistence – persistence against all the odds. Unfortunately, this is not the full story. Remember that for every successful entrepreneur standing at the lectern, there may be a thousand who have tried and now don’t even own a house.
Persistence is an important element of success.
Persistence is an essential element of failure.
In other words, you need to know when to stop. Persistence will not turn a ‘dog’ into a ‘star’ or a ‘frog into a prince’.
Roger La Salle is an engineer, successful business entrepreneur and author of several books on La Salle Matrix Thinking. He, holds the Chair of Innovation at Queens University, Belfast, and is the director of a number of companies, both locally and internationally. In 2004, he was also a panellist on the ABC TV show, “The New Inventors”.
