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Larry Robertson

Larry Robertson is the founder and a Principal of Lighthouse Consulting, a company providing "strategic guidance and advisory services to growth companies."  He has more than 15 years of experience as a strategic advisor, facilitator and management consultant helping companies chart their success.  Larry is also a frequent speaker to the entrepreneur and venture capital communities.

 

Building on a strong and diverse business background in both venture capital and strategic planning, Larry has developed a unique advisory service to business executives offering the rare perspective of viewing a company from both an investment and operations standpoint.  He is able to give his clients the balance and perspective necessary to make informed, intelligent decisions about how to make their business successful.  Lighthouse Consulting's client list includes companies as large and well known as Visa and The Nature Conservancy and as small and promising as AsclepiusNet, Heartstream and Sonix.

 

Prior to launching his own business, Larry's previous career history included roles with the Walt Disney Company in strategic planning and business development, Robertson, Stephens & Company in investment banking and venture capital, and J.P. Morgan in financial analysis and currency trading.

 

Mr. Robertson holds a BA with Distinction in Economics from Stanford University , where he was National Honor Society Scholar. In addition, Mr. Robertson holds a Masters of Management (MBA) from the Kellogg Graduate School of Management at Northwestern University , where he was a Dean's Honor Role member. He is also a trained facilitator and mediator.

in the loop with larry robertson

staying on track:

success in strategy and execution

 

In August 2002, Larry Robertson, founder of Lighthouse Consulting, was a special guest in Netpreneur’s The Loop email list. He took questions from subscribers on the topic “Staying On Track: Success In Strategy And Execution.” Following is a recap of that online conversation. Some posts have been edited for length, clarity, flow, and topicality. The complete, original posts can be found in The Loop archives, which is accessible to all subscribers.

 

 

The Loop: If business plans tend to focus on strategy issues (and maybe they shouldn't), where should an early stage company lay out its tactical plans?

 

Larry Robertson (LR): Business plans serve different purposes from fleshing out and documenting a path for the company to follow internally, to packaging a description of the business to circulate and sell externally (to investors, partners, employees, etc.). So the content and use of each plan will vary based on its intended application. Having said that, your question points out a larger issue of how strategy and tactics come together and how each - separately and together - should be managed. This is a critical issue and one that leads many companies astray, so I will try to address it in a little more detail.

         Strategy encompasses what the company sees as its opportunity in the market and how it plans to position itself to seize that opportunity. A company's strategy sits somewhere in the middle ground between the "vision" an entrepreneur has for their company (what you might strive to achieve in the lifetime of the company) and the tactics. To use the overused analogy of altitude, strategy can be viewed as the 30,000-foot level, tactics are determined and applied much more at sea level, and the "vision" thing sits at 100,000 feet or higher. When a company sets about trying to determine its strategy, it is operating at the level of understanding the "problem" (or opportunity) in the market, and determining and articulating its unique "solution" to that problem. Strategic planning is where you set your target for what you are going after and justifies the reasons for your existence (to the marketplace, your partners, investors, etc.). It is the context in which you make clear what your value is to the customer and your shareholders - your value proposition. The chosen strategy then becomes the guidelines by which you operate your business and make decisions. Strategy then is there to explain to others where you are going, why and to what end, and to remind the company of the same along the journey.

         Tactics on the other hand are the detailed operational steps you plan and take to deliver on the strategy. For example, my strategy may be to sell an electronic data retrieval and storage system to the healthcare industry to get doctors to retrieve and record patient information in real time as they diagnose and treat their patients. My strategy may also say something about planning to capture "x"% of the rapidly growing healthcare IT market, which my company estimates to be "x" billion dollars a year domestically. Fine. But my tactical approach will focus on whether or not I make that sale via a direct sales force, a partnered distribution channel, or some other method. In this example, my tactics should and would also address my ongoing evaluation of the potential market, which customers I plan to sell to first and why, how long I expect the sales cycle to be, as well as what revenue and margins I anticipate from each segment of customers. Tactical planning in essence takes a company out of the somewhat loftier strategic view and makes a business plan real. A company's tactics should provide a means of showing - with supporting data - how it plans to build up to and execute those market share and financial goals, sale-by-sale.

         So, in answer to your "full" question, good business plans speak to both strategy and tactics. However companies should keep in mind that a business plan is a living thing, not just a document as printed at any point in time. Because of the real time nature of tactics, tactical planning should be an ongoing exercise. As new information comes in about competitors, target customers, the response to your own product or service, etc., tactics should always be reevaluated. In reevaluating tactics, the strategy and the ability of the tactics to deliver on the strategy should be the guide in deciding whether or not to alter the approach. Strategy should also be periodically reevaluated, but over a much longer period of time.

 

The Loop: How do you balance the "strategists" and the "executers" on your team?

 

LR: In an early stage company, everybody has to do both. Sure, some people will be stronger in one area than another, but on a small team you can't afford to pay someone to sit around being smart. Everyone has to be able to contribute constructive, creative ideas, and then contribute to implementing them in a focused, professional way that gets things done. If you have team members who fit firmly into one category or the other, either find a way for them to be fully utilized and valuable all the time, or reconsider your team composition.

 

The Loop: Do most teams tend to count on one person as the "sparkplug" or disciplinarian when it comes to execution?

 

LR: Actually, the problem is that most teams never determine any means by which they will track themselves from an execution standpoint, except perhaps by their long-range market share and sales goals. By the time an accurate reading on those goals emerges, it is usually too late to either make a course correction when things are off track or take better advantage of what is being done well. Any good business plan has metrics associated with it, and those metrics should extend down to the tactical level in each and every area of the company. Sales, marketing, engineering, finance, and every other department should have a clear understanding of the role they play in helping the company to execute its strategy. Each area should be measurable in some way and then tracked to make sure that each part of the company is not only staying on track, but also that their activities remain relevant to where the company is trying to go.

         A metric doesn't have to be complicated. We're not talking about writing an algorithm of performance for each task in the company. Having development milestones and meeting them as planned and with the anticipated deliverable, actually making calls to potential partners or customers as planned and following up on those calls, staying within budgets - all of these are game as metrics. This isn't a rocket science exercise, nor does it need to be terribly time consuming. It should, however, be consistent. The biggest mistake companies make is not having a means for tracking execution at all. It's quite simply about a company keeping its eye on the ball and communicating who is doing what.

         Accomplishing this can be a role filled by one person or a team acting, as you put it, as the “sparkplug(s).” The key is to be clear about who is going to do it, how they are going to measure progress and success, and then holding them accountable. These sound like such basic, even textbook things — and in some ways they are — but they are exactly the simple things that don't happen in companies that lose their focus.  

 

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The Loop: When companies lose focus, what's typically the cause?

 

LR: A former client of mine began their brief history with a model for delivering a unique online service to customers in a market that had a clearly demonstrated need for such services and, at the time, no viable competitors (I am oversimplifying, but by most opinions the world was their oyster). The service was accessible through a series of software/hardware combinations allowing my client's customers to reach them through a number of device media.

         What was unique to this company and the opportunity they were pursuing was their business model, the data management and database assets that backed their service, and the wherewithal they had to make it all happen by leveraging the reputation, customers and delivery channels of their exclusive partners. As customers came along, they requested changes to make their use of the service more enjoyable. The changes they wanted, however, were in the hardware and software they were using to access the service - not the core business of my client, or something that needed to be changed in order to attract or retain the customers. But, devices and user software applications are often "sexier" than data management and data processing, so the company went into the device and software application business too. They also ultimately went under, and this shift in focus was largely to blame.

         One of the most common reasons for loss of focus is temptation. It comes in all forms, for instance pursuing a "hot" customer that is not a target customer and taking the company off its product/service focus; allowing the technical specs on a product under development to continuously remain open-ended to accommodate "just one more feature" and never delivering it; going after a different business opportunity in your market that "looks promising," but has nothing to do with your strengths or skills as a company, and for which you have no ability to deliver or compete; or taking a conscious but brief (I swear!) diversion from the company's strategy out of desperation to go after a quick hit revenue stream, diverting key resources from the intended path in the process. Clearly, lack of discipline or adherence to a strategy (as discussed in detail above) and other factors contribute, but temptation is most often the underlying culprit.

 

The Loop: What management tools can one use to help a team stay focused and effective?

 

LR: The right tool is whatever means allows you and your company to 1) communicate and 2) consider and measure every action in the context of the strategy. Company styles, resources and circumstances vary so much that there is no one best tool.

         That said, one of the best ways to keep teams focused is to ensure that everyone starts on the same path and with the same goals in mind for where the company is going and what they are trying to accomplish. Where you can reasonably get everyone involved in the strategic planning process, do it. Then everyone knows where the company is headed and will likely share a greater sense of buy-in and contribution, which will help to keep them motivated and on-track. (You would be amazed, even in companies that have just a few employees, how many different versions of the company and direction and strategy you'll hear when this information has not been consciously and formally shared!)

         When you can't get everyone involved from the start, make sure that you clearly share the strategy with the team and draw clear lines to how their roles fit in and support delivery of the strategy. When teams and individuals know where they're headed, understand the role they are expected to play, know how they will be measured and that they will be measured, and see signs that someone is actually following-up to ensure that all the pieces are hanging together, they tend to stray much less from the focus of the company and to deliver on time and within expectations.

 

Dan Voss: I recently joined a firm, bringing a large RFP in shortly after settling in to my role. I am a former Army NCO and have noticed that standard procedure is very democratic, which is fine to a point. There are quite a number of small refinements I would like to make based on my experience in the technology field. I believe in discovery and planning — it is mandatory — but I would like to strengthen the strategy, targeting, and implementation. Is it wrong to insert and develop a little discipline with a team I just joined?

 

LR: There are really two levels of this question that I think we should consider. The first level is whether or not to "insert and develop a little discipline" into a situation in which:

  1. you have brought in a potentially significant client,

  2. you have observed (as the fresh set of eyes on the scene) some irregularity in the process and procedures for how the company not only specs out a project (the discovery and planning stages) but also assesses the fit of a contract into the overall strategy and tactics of the company, as well as the pattern for tactical delivery and implementation across projects; and

  3. you have just anchored your livelihood with this company.

 On this first level, I would suggest that it is your responsibility to do the best you can for your clients, your company, and yourself and to be proactive in doing so (see “second level” below for mitigating circumstances).

         One way in which companies very easily get off focus is when the message that they are off focus never filters its way up high enough so that the company as a whole can address it. Sometimes it's the "that's somebody else's job" syndrome that keeps the message from getting through, other times it's a desire not to rock the boat. Whatever the reason, you and your co-workers at every level of your company each have a unique vantage point from which to observe how well the company is doing business and how effectively it is staying on target. Those insights are critical to keeping the company on target and successful, addressing shortcomings, and identifying and seizing opportunities. Smart companies hire each employee for exactly those reasons and expect each one of them to be observant, creative, and proactive in bettering the company. The alternative is an underutilized resource and a company that is exposed to great risk of getting lost. In any company and especially in this economy and funding market, to not demand this of your resources is a waste.

         This is even more true the smaller a company is and the less "cushion" it has to absorb the impacts of a delay in not taking action on an issue that is hurting the company. For example, the Walt Disney Company (a place in my past) had the luxury for years of riding their very strong brand name and many layers of corporate structure as a Band-Aid for hiding some deeper operational and strategic problems they had internally. It bought them some time before they had to face the truth, as they and their leader are now, and it buried some serious failures in judgment (EuroDisney as an example and perhaps the acquisition of Cap Cities with no plan for how to further that business), but ultimately the reality of what many internally knew and did little about for a long time caught up with them. Small companies have no such luxury, and it is not just the company that suffers, every employee does, too.

         The second level of your question is a bit trickier and one I can't appropriately advise you on in a discussion like this. That is the culture and personalities involved (including yours) that may dictate how you take action. Having said that, there are probably many ways for you to inject some discipline and strategy into the situation. It may be best to start by exercising your influence over things you control and allowing the success of your efforts to serve as an example to others, as well as the basis for your future lobbying effort to change things company-wide. On the other extreme, some people and some environments function quite well with a very direct appraisal of what is working and not working, and with a head on suggestion of how to improve things. This area of your question is better addressed by the person who sits in the best position to call the situation: you.

 

Steve Goldenberg: Larry, thanks for taking the time to answer questions, it's very much appreciated by everyone.

         Anyone who has started a company knows how to sell an idea — we'd never get off the ground if we didn't. The challenge in the beginning is balancing optimism with reality. It gets much more challenging once you've cleared the first few hurdles: you have a product or service, some customers buying it, and day-to-day operational duties necessary for keeping the company alive and well. My question is: How do you balance the day-to-day, while simultaneously keeping the bigger vision alive? How much time should I spend each month: a) updating our current long-term plans, and b) working on new and different additions to our long-term plans? I realize this is a bit difficult to answer, but I'd love a general notion of what others do to be successful.  

 

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LR: Great questions Steve, and I am sure common challenges. Let me take them in reverse order.

         How much time should you spend each month updating your current long-term plans versus working on additions? The short answer is "just do it." I am not trying to be flip or facetious in saying that. Far too often, company's don't revisit their plans and update or augment them because the memories (usually bad ones) of the first planning process still linger in their mind. Re-evaluating your overall strategy and long-term plan can be a pain. Once you start to get on track with your business, it is easy to get overwhelmed with "tasks," However, reviewing and revising your strategy impacts everything else that keeps you busy all day long. You want to be sure that those things that are keeping you busy are the ones that matter and the most productive use of your resources. You have to make time for this.

         How do you balance the day-to-day with the bigger vision? Let me try to offer some general comments on the topic rather than try to fit a solution to your particular situation. There is no single solution and I do not know the full circumstances of your situation. When a business plan is done properly from the start, it has some elements that, while clearly interrelated, can be separated out for the purpose of managing and updating your plan going forward: vision, strategy, and tactics.

         There is your long-term vision for the company, which comprises a good portion of that initial sale you made to get the business off the ground and gain interest from investors and customers. As I mentioned earlier, that is the stuff that is way up there in the stratosphere. While not irrelevant to the business day-to-day, it is not something you are likely to change day-to-day either. Thus, the vision element, the five-year targets and beyond, would be one part of your plan that you would not be too concerned about finding time to manage day-in and day-out. This also speaks to the point that you don't have to rewrite an entire business plan each month in order to manage and/or update the elements of your plan regularly. (Phew!)

         The strategy portion of your plan, again assuming it is established properly, addresses broad market issues and opportunities, the core skills of your team, the competitive landscape, the company's positioning relative to those things, and the value proposition the company is seeking to deliver on. Unless the factors that drove those decision in the first place change, the strategy is unlikely to change over the course of a month, a quarter, and, in some cases, longer. So, as it relates to the strategy of the business plan, your attention on a monthly basis ought to be targeted at keeping abreast of information in those areas that drove your strategy choice in the first place. There ought to be a means in place by which you regularly gather current market, competitive, customer, and general industry information so that you can sanity-check your strategic conclusions as this data changes in any significant way. The task is a must-do if you are going to stay on top of your business. The burden of doing it, however, could take many forms and be spread much further than just you as the President.

         Let's take the example of trying to stay current on trends and changes in your market segment and industry (fairly obvious and logical, but, amazingly, something that many companies do not do after they make their first assessment and write the first version of their business plan). Depending on your resources, subscriptions to research publications and trade rags are great sources for changes in the industry. Conferences and seminars can be good sources too. Regular phone calls with customers, partners, industry gurus, or others you trust can add to and often make sense of some of the general trend information you pick up elsewhere. Fine. We all know that. So how do you make it manageable and relevant? Many team leaders I know do some level of that work themselves and parse the rest out to their team (from an administrative clipping person, to individual members of their management team) to review and report back to the entire team.

         A few important points here about what they are accomplishing in doing this. The key is to not overload any one person with too much of this type of work or to center too much knowledge in one person. By a) spreading it around, b) giving everyone a clear direction as to what they are to keep their eye out for, and c) creating a venue for sharing the key information with everyone (a monthly email summary, a monthly market update meeting, or whatever works for the individual company), they have found a simple and non-time consuming way to stay on top of their markets and keep their team members current. That means that the strategy has an opportunity to stay fresh while individual team members take knowledge back to their own projects and can incorporate real time data into what they are doing, as well as honing their lenses for identifying new opportunities for the business. The same can be done with customer data, competitive data, and other sources of information that might cause you to alter your strategy. Even investors and partners can be employed to help your company stay on top of things and reduce the task on your desk. With several of my clients, we went so far as to create a database of the information we collected as a reference for times when we did decide to consider altering the strategy.

         So, the vision we don't touch too often, the strategy needs to have a method for monitoring for periodic change, and then there are the tactical parts of your plan. As I said earlier, the tactical elements of your plan should filter down to every level/department of the organization so that every part of the organization knows and is playing a role in delivering on the strategy. I also advised earlier that those tactics should be measurable. If both of those criteria are met, then it is a lot easier to know when to alter your plan. If you are monitoring those metrics (and if they are appropriate metrics), you will know when things are on or off course.

         Don't let my answers lead you to believe that everything can be planned. (A demonstration of my keen ability to state the obvious ;-) ). It is important to stay on top of your plan well beyond its conception or its sale to the audience. A good and useful business plan is one that serves as a guide for your decision-making and a roadmap for where your company is headed. It isn't much good if it isn't current, but it also doesn't do much good to have a current plan if it takes you so much time to update it that you aren't tending to your business.

 

Gene Gartner: One of things you should do is establish metrics that are meaningful to your business and relatively easy to track. For example, if you were a consulting company, tracking revenue per consultant per month would give you a good indicator of utilization and profitability. If you were in construction, you could track the earned value of your projects. The thing is that I have seen companies get in trouble because: a) they didn't know what to track and therefore only tracked the bottom line; or b) got so mired in the details that they couldn't see the whole picture. If you establish metrics, you can track them and only have to go looking at the dirty details if the metrics start going out of their desired ranges. At that point, you can investigate whether you have a process, management, or strategy problem.

 

LR: Stories of dealing with the remnants of the past strategy and transitioning your team towards a new strategy are prevalent these days as many companies redirect their course in the prevailing environment. With my clients, these shifts have caused great consternation and loss of focus. They have tried to determine where old customers and, in some cases, products fit in when the strategy and target market have moved away from them, as well as articulating and selling the new strategy to investors and employees.

         In the case of old customers who are no longer appropriate under the new strategy (versus new ones designated as the target going forward by the new strategy), the biggest struggle has come in letting a known source of revenue die off to focus resources on the new and more promising one. It is hard to let go of revenue you know in favor of the unknown, no matter how promising or right it looks. This has paralyzed several of my clients between two strategies. They never fully commit the limited resources they have to the new strategy because they keep making exceptions about which parts of the past they are going to maintain. Unfortunately, you're either in or you're out. If you are going to change your strategy, do it and move on and assume the risks that go with it. Straddling is certain death.

 

Gene Gartner: Larry, These are some great discussion points.

         Management needs to make the case to the people in the company on why there needs to be a strategy shift. I think the same approach you would use when explaining it to investors would be a pretty good one to use with employees. Lay out the issues, the strategy you are going to execute, the expected results and, most importantly, why this is a valuable proposition to the employee. After all, they have taken a risk in joining your young company and need to know what kind of payback they can expect.

         I think the companies that have problems with strategy changes are those that have the strategy du jour.

         If the message is muddled, then it means you are probably trying to spin it. People are smart. If you're honest and straightforward with them, they'll get it. I've been involved with companies where employees never believed what the management said or spent time trying to figure out what was being hidden.

         Whole books have been written about techniques for managing and adapting your business plan and strategy over time while trying to run your business, including those by Michael Porter and others. The issue points out the need to have some people on the management team who are more visionary regarding the markets and others who are more focused on implementing the strategy necessary to achieve the vision. Being more of the strategic guy, I've always looked to partner with the more visionary thinker. If you just have visionary people, you'll never get to the ultimate vision because you won't execute well. If you only have strategic people, you'll execute well, but where were you going in the first place? (This is a

 

LR: Great comments, and I agree, a very enjoyable discussion.

         I hate to even meddle with such good comments, but with that risk firmly in view, I would add one more comment to what Gene said. Once you communicate a change in strategy to your team, be sure to go further to make sure everyone (including you as the message-giver) understand how it should and will affect every member of that team and the work they are doing. If the new message is clear but never filters down to a change in actions, then the company is still carrying and delivering on the old strategy.

 

Anthony Strande: There really seems to be a bit of confusion in the discussion about what vision, strategy, and tactics are, notably that the term “strategy” seems to be used in terms of both strategy and tactics, and “vision” is something else, beyond strategy. It’s not unlike trying to figure out the difference between a goal and an objective. Try this:

  • A vision is a potential direction/goal that has not been resourced.

  • A strategy is a direction/goal that has been resourced.

  • A tactic is current term commitment of resources consistent with some (hopefully desired) strategy, e.g., meeting an objective.

Using this hierarchy, the discussion can be framed in terms of what the nature of the commitment and freedom of action really are.

 

LR: Thanks, Anthony. Hopefully Anthony's framework provides additional help to any who are still confused. Also, I refer everyone to the first question in this discussion where we also provided some definition of these terms.

         I think that, in part, when confusion arises, it is because these terms are often used interchangeably when they should not be. Also, there is more than one definition out there for each term, so different people use each term differently. I have spent a lot of irretrievable time in planning meetings where large parts of the discussion were dedicated to sorting out people's preconceived but differing views on the definition of these terms. Some people feel so strongly about what each term should mean and how it should be used that they are not even able to agree to at least adopt a common set of definitions and a hierarchy for the sake of progressing forward. The key, at least within a company, should be to make sure you are all speaking the same language and creating clear distinction about the levels at which you are operating when you use these terms.

         I think it is unlikely that we will resolve the terminology and definition debate here. Maybe in another LOOP discussion!?!  

 

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Dana Waldrop: I've been working for a startup nonprofit organization that has been in the planning stages for two years. Working for free, I might add. We are all working in our spare time until we can quit our "paying" jobs. Working on the plans for so long, I find myself overwhelmed. When I show the business plan to professionals, I get the same feedback: "too scattered, needs focus." I am not a writer, and, to me, the spreadsheets are as plain as the nose on my face. But, I also have to explain the numbers on paper and it's the wording that frustrates me. Can't the reader just look at the numbers and see what I see? Another is that the benefits seem so obvious. How do I separate myself from being overwhelmed? How do I teach myself to "think outside the box"?

 

LR: There are a lot of questions in your email, Dana. I will try to sort out and summarize. First, two comments. Number one, Congratulations! A non-profit that is actually sitting down to write a business plan is an accomplishment. I have worked with many nonprofits, large and small, and I can tell you that this is not common practice. Usually what a non-profit does is create just enough information and planning to satisfy a particular donor. That information and plan material (which they sometimes try to pass off as a business plan) is all too often abandoned after the money is received (i.e. not used to measure or manage the organization or the return to the donor). Please note that these patterns among nonprofits are somewhat historical in context. Times are changing for nonprofits, even if many nonprofits are not. Organizations are now competing more actively for donor dollars, and donors are becoming more like the investors they really are, demanding explanations of how resources will be used and what return they are getting from those dollars. Donors also have more options for investing their dollars than ever before, emboldening them to be selective. The upshot is that nonprofit organizations that want to get started and become and remain successful need to think and act more like for-profit businesses. One of the key ways they can do that is to establish a clear business plan and adhere to it.

       Second, when I worked in venture capital, almost without exception, I took a pass on companies that said they were working on their project "part time until the money came in." While I am fully aware of and appreciate the reality that most people cannot afford to quit their day jobs and run off to start their dream organization, my own experience shows that there is a big difference in both the likelihood of success and the level of commitment to a startup organization (especially in rough times) between those who are fully dedicated to their startup effort and those who are doing it part time. The nature of an entrepreneur's level of commitment to their business translates directly into the business story (or business plan) they present. When everything is on the line and you are spending all of your time trying to make the business happen, you find that those walls in communicating your vision and your strategy start to come down. The story you tell and its ability to hold water strengthens and becomes more focused. You get very honest, realistic and clear about what will work tactically to deliver your strategy and what will not. You find yourself looking critically at your idea and your business from the outside (how others view it) and either seeing why it doesn't make sense to them or where you are not explaining it well. It is very difficult to make a new venture work "part-time."

         My first answer is really a question back to you: Why are you writing a plan in the first place and who is the audience? Some organizations write a plan because someone told them to. That is not a good enough reason. You should ask yourself: How do we plan to use this plan (e.g. Is it a marketing document? Is it meant as a grant application? Is it supposed to serve as an operating plan internally? Are we doing it because we are still trying to clarify and make our case amongst ourselves as a team?). Every application potentially has a different audience. Like any good document, yours should speak to your main audience.

         Once you've identified your audience, put yourself in their shoes. Think about what interests them, more than what interests you. Think about the way they see things and what's in it for them. The plan should be less a statement of what you know written in terms that speak to you, and more about what it means to your audience.

         Any audience is looking for the value proposition in a plan and they will judge the value from their own vantage point. As an example, many startup technology companies come to the point of becoming a business and writing a plan based on some neat technology they have developed or want to develop. Then they venture out to find investors to fund their neat ideas. The biggest mistake they make in communicating their idea to others, and asking for something in return, is that they speak from their own vantage point and not that of the audience. They talk about "writing code" and "systems architecture" and the "cool servers" they're employing and forget to talk about why customers are going to buy it, how it will change the customers' lives, and how it will produce an ongoing and exceptional return for the investor (their audience). Then they wonder why they never get funded.

         If even once you are seeing and presenting things from their perspective they aren't buying it, or you are struggling to say things from their perspective, try some other approaches:

  • Build your argument on a case study example. Tell them a story, take them through the steps of the story, show them the results, and, in the meantime, show them what you are going to do with the organization.

  • Collect and provide some statistics that show proof of the theory behind your business (beyond just a single case study). You indicated that they don't see what you see in the spreadsheets. Maybe they don't care about the same things?! Give them numbers that speak to what matters to them and give them numbers that prove rather than postulate whenever you can.

  • Ask the people in your audience who have seen your plan what they don't understand, where they would focus and why, etc. What can it hurt, and what a great opportunity to get feedback from the people you hope to convince.

  • Stop trying to write a plan. Perhaps you are being too structured and formal. Tell it from your own voice and with passion about what you are doing.

Just some ideas to jump start you.

 

Dana Waldrop: Is there software that is specially tailored for a nonprofit? Is there a place where I can see other business plans for a profit or nonprofit business that's similar to ours? (Please don't advise me to ask for pro-bono help from professionals. I've heard that a million times and it's not as easy as you think. I have gotten help, which was to tell me that the business plan is too scattered, not focused, but no one helps me to "unscatter" it or to pull it together with focus.

 

LR: Is there software? Yes, but no. It does exist, although more in the form of general business planning software, but this is unlikely to get you out of your current frustration loop.

         As to sources of sample plans for nonprofits, the best source is to ask existing nonprofits that are similar in focus or structure to what you are planning if they have a plan and if you can get a copy. You'd be amazed at how willing and proud the ones that actually have one are to share it. You can also look online to get at least parts of some organizations plans to help you along. The Nature Conservancy, as an example, is very proud of their mission and their strategy and displays a lot of information and content about both online. You can also see examples of how they are putting their strategy to work in some of the tactical projects they are undertaking. A word of caution however: Don't go to other organizations or their websites looking for "the" answer. It is not there and there is no substitute for going through the planning process yourself. However, you can look to other resources to see who they are addressing as their audience, how they make their case, and to judge their success. It might give you a frame of reference for your own undertaking.

         As far as looking for pro bono service providers." (Not a question, but one of your comments) OK, I won't. BUT, I would suggest that where you have used them and where you consider doing it in the future, you should push them harder for how they would solve the problems that they identify for you. If it's focus that they see as the problem, ask them where they think you should focus first, why, and how. Push them to help you solve the problems! Also, consider forming an advisory board. They are pro bono in nature, but, depending on how you recruit and manage them, they can be much more active on your behalf and help you with some of your issues. One organization I know of locally (a nonprofit) even got a member of their advisory board with some business plan writing experience to volunteer to help write the plan!

 

Tripp Eldredge: Larry, thanks to you and the folks at Netpreneur for this series. As we say in the broadcasting business, "I'll ask my question and then hang up and listen for the answer."

         Thanks to opportunistic market conditions, a great team of employees and clients, and a strong management and advisory team, our firm has excelled during the past four years. We have amassed a sizeable reserve of working capital. While we believe that there is still growth in our primary market, we want to balance that investment with a potential for new markets. Should we continue to invest the working capital into our primary market or look to invest it in a new opportunity or in the stock market? I realize this is not a question you can answer specifically, but I'm interested in how we should go about answering that question and whether we should look to invest some funds in non-direct ways.

   

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LR: Congratulations on your success and on being in the enviable position of figuring out what to do with the good results you have amassed over the last few years. In answer to your question, first, here are a few questions for you to think about:

  • What are your long-term goals for the business?

  • How much of your primary market do you hold? H ow firmly do you hold it? How much of your primary market is left available to you? How much of that available market is really accessible?

  • What is the nature of the markets you have the opportunity to go into? By that I mean, is your current model/products/services directly transferable to those markets? Are the key success factors in your new markets the same as in the current market?. Is the competitive atmosphere and environment the same?

  • Are other players in your current market as strongly positioned as you are, or are they vulnerable in a way that creates opportunity for you to strengthen your position?

         Those questions are a flavor of what you should be thinking about as you make your decisions. If it is not apparent, I have an obvious bias towards the concept of “making sure things at home are in order first, before you stray too far to other opportunities." Without making any assumptions about your particular situation, it is quite easy and quite common for young, fast-growing companies to eye the next mountain they're going to climb before they have even established base camp on the first. Venturing too quickly into other markets to seize perceived opportunities, they sometimes forget that each new market needs to be evaluated like the first one was — almost as if it were the start of a new business. The same market conditions, and, therefore, business model, does not always apply in the new market. This can lead to a situation where efforts in the new market lead to more and more consumption of resources to deal with the "unanticipated" requirements of breaking into the new market. Pretty soon, your worry is where to borrow dollars rather than how to invest the ones you have. If the home front is not secure, all those assets you've built up can disappear quickly.

         I would encourage you to be sure that your main business is sound and secure and poised for growth too. Sometimes (almost always!) infrastructure needs to change to support new markets and a larger business. This can be an excellent place to invest some of your working capital before you expand to new markets.

         Remember, too, that dominating your current market is a great goal for any company. It sounds like you have been very successful in your market to date, but that there is also room for growth. Chances are that if there is both success and room for growth in your market, others have seen it, too. If there are profit and growth opportunities left on your current table, don't allow someone else to seize them. Also, make sure that you don't leave the door open in your current market for competitors or would-be competitors to chip away at your market share while you turn your resources to take advantage of new markets.

         Some of this may be restating what is obvious to you or what you have thought about before. but it is easy to get fixated on that new mountain on the horizon and forget the fundamentals. When it comes to your future investment of your hard earned assets, go for the greatest but also most sustainable return. I would look to make sure your current house is in order first, that your current market is truly "yours" next, and then turn to new markets with the attitude of starting a new business, assessing them in as much detail as you did your current market before jumping in.

 

Barbara Halpern: Great questions and answers, Larry. Thank you. Here’s another question for you. First, in this economy, everyone is retrenching, putting projects on hold, trimming marketing, advertising, sales, PR, and trade show budgets to bare bones and trying to “do it in-house.” We marketing people know that this down cycle is when we should be spending, just to keep the funnel filled. What can we do, and how can we cleverly get companies large and small to understand what is really happening, and why they should be increasing spending, not withholding it? I need something interesting, some hook, a way to penetrate and get people to commit to a project. In reality, they are building for the future.

 

LR: Hi Barbara and thanks for the question. In some ways I wish you could answer this one for me and for some of my clients! Let me tell you what some of my clients have done as well as share a few general thoughts.

         Clearly, when a company is retrenching, something needs to go. Companies have to look at what is most crucial to their survival and be sure that enough resources are available to cover those key success factors. I think marketing often has an image of "moving forward" associated with it, and, right now, many companies are focused on just "staying alive." The uncertainty of when life might turn around doesn't help either, making it difficult to know how long to remain in survival mode versus turning resources towards the future and growth. Having said that, companies can't stand still forever, either. If you don't market in some way at some level, you can't generate the sales that help to ease your company out of the squeeze of survival mode.

         Marketing dollars always — but especially in tight budget times — have to deliver measurable value. I think that three big parts of the problem in justifying marketing are:

  • enough marketing dollars have been spent frivolously over time and received public attention as being wasteful that marketing dollars in general get a bad wrap;

  • some marketing dollars have a longer return cycle and often need to be part of a continuing program of marketing efforts and a marketing plan to really show any end value; and

  • because marketing has a bad wrap, it is often viewed as expendable and therefore is sometimes executed inconsistently, thereby producing mixed results. When the marketing department, a marketing consultant, or even a company seeking marketing dollars from an investor goes to sell the idea of spending more for marketing, they often start out with an uphill climb.

         To be of any value, marketing needs to be part of an ongoing plan and effort, and there must be continuity between marketing programs and expenditures. But marketing, and those who direct it, also have an obligation to prove the value of the marketing to the company. Many marketing consultants and other marketing professionals that I have worked with "know" that marketing is important, but they assume that this is universally shared knowledge. Therefore, they rarely make the effort to "prove" the value of their goods in hard numbers or facts. For example, in a marketing effort target at increasing sales, how many leads did a marketing project or campaign generate?; How many of those leads turned into actual sales? Were the sales to the right customers and profitable? If the goal was to increase brand awareness, who was actually reached? What impression do they have of the brand? Are they actually buying customers?. Did it cost us more to attract them then we gained from them through sales?

         Clearly, these are not the only purposes of marketing, but they give some examples of how marketing should look to prove itself and "win" the respect and budget you seek. I think that the ability to prove the value of marketing to a company (by looking at the historical impact of marketing within the company in question, or by comparison to other companies, or other means) is critical to making the case for continued marketing expenditures.

         Let me add examples from my recent experience that might give you more specific insights.

         One of my current clients is a direct marketing firm. They sell direct marketing programs and services to the radio industry which, by most opinions, relies heavily on marketing to survive. When budgets get tight at the stations they serve, marketing is usually the first sacrificial offering. This has been even more true in the last 12 months. As my client has forged ahead in these tough times for selling marketing, they started out by making the obvious arguments to their clients of "how can you not market" and "you have to plan for the future now" and so on. No takers. Then they took a different approach. With several of their long-term clients, they pulled together historical data showing how much each had spent in marketing over the past five or more years. (Within each year there are two periods of intensive marketing in radio before ratings books come out, so we are really talking about double the number of periods of marketing expenditures.) They also tracked the impact on the stations ratings when marketing dollars went up or down. They further showed how different types of marketing expenditures (direct marketing and other media, such as TV) had impacted awareness, ratings, and so on. Placed in front of their clients, this information was not only eye-opening, it was compelling enough to win business. It spurred marketing expenditures because it proved what value the marketing was returning and what type of marketing worked.

         Another client of mine kept the justification for marketing alive and a priority by reclassifying the purpose of the marketing itself. This company was marketing initially to spur awareness and sales among customers. When that began to be perceived as a luxury, we changed the focus and the nature of that marketing effort to create contacts with customers that were centered more around getting product input and feedback to help hone the development efforts, build future partnerships, and beta customer relationships. This feedback and the seeds for future partnerships were things the company needed very badly, and they dovetailed right into increasing the value of their development dollars. It still raised awareness of the product and allowed the company to at least tap into future sales (the initial marketing goal), but the marketing expenditures suddenly had a greater value and justification by focusing the marketing efforts on what was most important to the company at the time.

 

Barbara Halpern: Thanks for the great answers. In your examples, you are talking about clients who have a track record with you. Most of my clients are small, timid, and boot-strapping, so we don't have history to fall back on. More importantly, I don't think that most organizations clearly track the results of marketing efforts, even phone calls, and how they are generated. There could be an immediate response, or an inquiry months or years later when the prospect actually has a need. You can't scale back the integrity of a marketing plan and expect it to work optimally. There are always trade-offs. Bottom line, all of the elements have to be right or the offer will fall dead—the pricing, the prospect, the quality, follow-up customer service, differentiating your product/company, and delivering on the promise. As it is said, you reap what you sow and, if you cut the marketing spigot, there will be a drop in sales. Perhaps not immediately, but the funnel will be empty.

         All I can think of is that companies have to be careful about how they spend their marketing dollars. Direct mail and telemarketing may be the best approach, but narrowcast too much and you may miss potential clients who have immediate need. That is why I believe that a well thought-out and executed PR public relations campaign can be invaluable in generating inquires from pre-qualified prospects.

         On a related point, lots of times small clients are their own worse enemies. They second

guess our well-advised and well-executed marketing and sales tools and tactics. Sometimes it compromises execution. Conversely, they would never question or second-guess their lawyer or accountant's integrity or credibility, nor would they interfere.  

 

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LR: Great comments back, Barbara. My specific company examples were meant to stimulate thought, even though they may not fit your particular situation. Second, it would obviously be hard to know all the particulars of your situation enough to solve the challenges you posed. Having said that, let's kick it around some more!

         First, some other points on the examples I gave. Those examples went further for my client than just the scenario I described. The client who collected all of the historical data on their customers to show the value of continuing to market, also took that same data to "new prospects" and showed them what could happen if they did or did not market (both good and bad). So, the analogy can sometimes be used to make the case where you don't have the history on a particular client. Even if you do not have enough data on clients of your own (as is often the case if you are a fairly new company), think about using other companies that your client aspire to be like someday as the guide for how to get there.

         On another of your points, most organizations don’t track the results of their marketing efforts, but, in part, that is because many marketing professionals don't build it in as part of the marketing plan. There is often so much focus on the sizzle of the ad campaign component of marketing execution, for example, that little emphasis is placed on the metrics. To change this requires as much of a change in the attitudes and approaches of the marketing professionals as it does a change in the attitudes of their clients/employers.

         Maybe one way in which you could push your small company prospects over the line to make a commitment to marketing is to sell them a package where offering them a means of tracking the impact of the marketing and measuring the success is one component. Perhaps that means that even though you have a larger (and likely more appropriate) vision for them of a long-term marketing plan and PR effort, you have to parse out a key piece as a starting point that allows you to show them what the marketing can do for them and gives you an opportunity to provide proof. Then build from there. Often, with my clients, most of which are smaller growth companies, I do exactly the same thing. When I can see that there is a many-armed monster facing them that may ultimately require a much broader plan for killing it (meaning also more time and expense), I break out a smaller project that let's me prove not only the value of my larger vision for them, but also that of my services.

 

Jennifer Murphy: Thank you all for a most provocative discussion. I would like to weigh in on Barbara's question.

         I believe the reason that companies and their CEOs find it easier to cut marketing and why marketing professionals do not carry the "automatic" respect that lawyers and accountants do is the lack of obvious consequences associated with reducing marketing expense. Lawyers and accountants are very successful in using the fear of non-compliance as the club for ensuring their continued services. It seems to me, however, that marketers rarely paint the downside picture. Rather, their natures are to be forward thinking and up beat and, as a consequence, they tend to talk about the rosier future which will result from the marketing expenditure. Perhaps marketers ought to pay some heed to the lawyer/accountant strategy and start to provide the "downside" metrics in addition to the upside.

 

Gene Gartner: Jennifer makes some very good points. Marketing has a hard cost but a soft result. Many CEOs think that marketing/sales are one and the same. They expect that each marketing event, piece, etc. will yield a specific sales result. I think that what you need to show them is marketing effectiveness in hard terms, as Jennifer suggests. Look at the metrics that would be available in any company (e.g., leads generated from marketing) and ask the question: If marketing is not there, what happens?

         It should be relatively straightforward to show a reduction in marketing leads to a reduction in sales opportunities, which leads to a reduction in sales, etc. You should be prepared to show how many customer "contacts" you need to make before a sale closes, and how those "contacts" will drop off without marketing. The bottom line is, you really need to understand how marketing fits into you sales cycle so that you can show the negative impacts of cutting the marketing function.

 

Feras Qumseya: Larry, interesting comments and useful insights. Thanks! To follow up on the marketing issue, what kind of marketing materials are needed when a startup is approaching investors and potential customers?

 

LR: Great Questions Feras, and thank you. Briefly, before I jump into the answers, let me say that the answers to each of your questions could all start with "it depends." Not very useful, I know, but honest and true. Every company situation is different. Every investor's investment criteria and requirements are unique. Therefore, there isn't a silver bullet answer. Please view the answers to your questions below in that context - as a frame of reference rather than "the" solution.

         When you approach anyone to "sell" your concept (and you are selling to both investors and customers), you have to provide them with the information and materials that speak to them. Let's start with investors, and, specifically, let's use venture capitalists as an example. (I realize that VCs are not the only source of investment dollars, but their expectations serve as a great high watermark for how you should ideally be prepared for "any" investor!).

         Every VC has a lens through which they view prospective portfolio companies. Firms vary slightly in their categorizations, but all share a similar perspective on how firms evolve. In general, when VCs assess a company, they are assessing its maturity and they do so on four levels: the product, the management team, the market, and financial maturity.

         This perspective describes the investment audience in general, but your goal should be to go further to understand as much as you can about the individual audience you are addressing, not only for the purposes of knowing what marketing message and materials to take to them, but also to make sure you are talking to the right audience. More specifically, VC investors typically invest in one particular stage of company maturity. Anything outside that space is unlikely to get their attention. Know your particular stage of evolution as a company and their stage of interest, find the firms that fit your level of maturity and your industry focus, and forget the rest. As with marketing to customers, you only want the ones that are going to buy, and you only have so much time to spend on leads. Pick the ones that fit the profile you want to sell to and then market to their interests.

         Marketing to their interests means speaking their language and presenting your case in ways that are familiar to them. This gets right to your questions of what materials you need to take to investors. Investors are used to seeing and reviewing common media that companies use to make their case: business plans, executive summaries, investor presentations, and the like. (BTW, the Netpreneur site is full of great examples, and the Entrepreneur's Guide to Raising Private Equity, which I created and is on the Netpreneur site, provides more detail about what each of these tools should look like, as well as some real examples of each in the appendices. Check them out!).

         These are the kinds of "marketing materials" that you need to take to them, and they should be prepared in a format that the investor will be used to. Don't get so glitzy and creative that the important information you are trying to convey is lost. The materials should focus on what the investor is looking to uncover about your business, i.e. they should communicate what the investor needs to know about your stage of evolution on all four of the previously mentioned company parameters; the facts that back up your claims; the details about where you want to go next; what it will cost you and why; and what return it will offer. Perhaps most importantly, you also need to convey the value proposition of your company: Why this is a unique value to investors and why it is a unique and “must-have” value to your customers (such that it will compel them to buy and be loyal). Those are the messages you should look to package when approaching investors. It helps if the packages arrive in formats that they are used to and don't have to struggle with to understand.

 

Feras Qumseya: Our company is building an enterprise software application that requires the participation of its potential customers. Would a prototype of this software as a demonstration of our product be sufficient to attract initial talks with investors, or do they generally require a final product as a prerequisite? How much marketing efforts and dollars (in relative terms) should be spent when a startup is at the stage of talking to investors and potential customers?

 

LR: It depends. (Sorry, the temptation was too great not to say it!). If your investor is interested in and invests in early stage companies, a prototype may be just fine. Don't forget the larger goals that a prototype or any other material that makes your case serves, however. At the early stage, you want to prove as much as you can that: a) your concept is or can quickly be a reality; b) there is a market for it; c) customers actually need it and will buy it, that it is unique and distinct,; and d) it has a solid value proposition to both customers and investors. To the extent your prototype starts to do that, you are beginning to meet the goals you should have if you want to be successful with prospective investors. To the extent you can go further to show some customer feedback or actual use, you will have bettered your case. Don't try to stand on a prototype alone. You also need to show your strength and maturity as a team, of the market you are trying to address, and so on to convince an investor to invest. The more validation you can offer at each level and the more promise you can prove about continued trends in each area, the more attractive you become to potential investors.

         Why do those things make you more attractive? Because they have the greatest bearing on your likelihood of success as a business (and therefore return as an investment). You should care abut and be focused on all of these things regardless of whether or not your business is trying to attract capital. Your success depends on it. BTW, the stronger you are on each of those fronts, the more strength you may have at the negotiating table if and when your conversations with investors turn toward actually consummating a deal.

         As to how much marketing efforts and dollars should be spent, I think I would refer you to the above answers to at least give you the context to be able to answer this question yourself. (At least I didn't say "it depends!")

 

Ben Martin: Please join me in thanking our friend Larry Robertson for joining us in The Loop. From the level of time, effort and consideration that Larry put forth in answering each question, it's clear that he has a true passion for guiding entrepreneurs to success. Thanks again, Larry!

 

LR:  Thanks to everyone who participated in our discussion. I hope the answers and comments were helpful. Thanks also to Netpreneur for both establishing this valuable community forum for exchange and for inviting me to be a guest in this discussion. I certainly enjoyed participating.

 

 

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