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CHAPTER 1
Basics and Some Online Business Ideas
VisionāStrategyāTacticsāBusiness PlanāExecution
Figure 1.1 Vision
We first identify the business we are planning to pursue or already find ourselves in today. Each type of business has common attributes, goals, and objectives, and their own unique characteristics that require good understanding and a strategy to optimize those characteristics and pursue the goals and objectives that have been set for the business. The broadest of these are manufacturing versus service businesses, with the primary difference that a manufacturing business sells a physical product whereas a service business sells a service. For instance, a hand sanitizer company is a manufacturing business. In contrast, a service business could be an accounting or a legal firm, or a mobile service that provides hand sanitizers at checkout registers of stores.
What constitutes a comprehensive vision? It includes the kind or type of business, comprehending the size and scope initially, intermediate-term, and long term. The vision lends itself to goal setting and objective seeking. It cannot be too pie-in-sky or when the time comes to operationalize your vision, you just may find the entire dream was just thatāonly a dream. The vision sets the company direction and has enough heft to make the development of a cohesive strategy an obvious and logical next action item.
Donāt confuse your vision with a mission statement. They are different. A mission statement is a position you take for the stakeholders, for example, employees, stockholders, and customers to read in order to learn more about the nature of the business. A vision statement declares intentions of direction, where the company is headed, while a mission statement declares where the company is today.
We want to start a business and we already have the first step from which to take the sequence of steps needed to be successful. The first step is our vision. You foresee already what your business will be doing. You have thought about it, dreamed of it, and you now have in your mindās eye the mental picture of your very own business, up and running the way you would like to run it, and you are the boss. But have you asked yourself, what makes you and your vision uniquely qualified to take your product to market? Have you considered whether your business product line is too narrow or perhaps too broad? A Goldilocks approach to optimize the business offering could be stated in simple terms that what customers are expecting is what they will be getting. Too narrow and potential customers are going to find your competitor offering with more choices, variations and related accessories, and services. Too broad and you will find yourself competing with Amazon, a financial death wish.
Passion begets creativity and in turn innovation. Is your product truly innovative? If not, perhaps it is just a better, or cheaper, or faster, or functionally superior competing product. Not every business idea has to qualify for disruptive innovation that you might find at Apple or Tesla. Once you have settled the vision-related questions, it is time to move on to your strategy. Now, we turn to the next step in the development of our business plan.
VisionāStrategyāTacticsāBusiness PlanāExecution
Business strategy is the company plan aimed at achieving its vision. It goes further than the vision, prioritizing objectives, identifying the firmās competitive edge, and identifying how to optimize the financial results of the business.
The choice of the objectives is the centerpiece of the strategy, but a thoughtful and thorough approach also describes in concrete terms just how the company plans to meet each of these objectives. Practically speaking, the strategy illuminates how the business will differentiate itself from its competitors, how it will generate revenue, and what can be expected in gross margins and profitability from the revenue.
Strategies must honestly describe the companyās strengths and weaknesses, along with its opportunities and threats.
Strategy begins with a list of primary milestones to pursue. The milestones must be mapped, noting those that must be sequential, versus those that can be accomplished in parallel, all dependent upon time and resources available. A development of a short-term strategy will help you bootstrap your new venture, but a longer-term strategy must also accompany it in order to make sure business continuity, growth, and a smooth transition can be expected. How detailed you make your own strategy depends upon the sufficiency with which you identified expected costs, complexity, and other potential obstacles, or anything that might bring the entire business plan to a screeching halt.
Figure 1.2 SWOT
Since resources are limited and finite, you must establish priorities. What is the most crucial task or milestones to work on first and foremost? Where do the other milestones fall in the list of priorities? Compare and contrast your milestones with that of the competition. What will be your competitive edge that results in stealing customers away from your competitors? What strengths and opportunities can you capitalize on? Now that the strategy part of your business plan is complete, we need to slot in the tactics, the specific ways and means we will go about prosecuting and pursuing our strategic milestones.
VisionāStrategyāTacticsāBusiness PlanāExecution
Tactics are quick, actionable plans that take advantage of business opportunities as they arise. Tactics are the specifics in terms of the how to execute the strategyādetails supporting the strategy. Tactics take the form of: Who? What? How? When? Each tactic will have its own profile and requirements in terms of:
ā¢ Resource requirements
ā¢ Risk involved in execution
ā¢ Costs
ā¢ Alignment with strategies, best practices, principles, and ethics
An example of a tactic compared to a strategy is āI intend to compete on the basis of price since my product is heavily commoditized,ā and the tactics involved include, āI need to find the means to reduce costs in terms of product, fulfillment, service, and administrative costs.ā The specifics answering your cost reduction efforts are then listed.
Figure 1.3 Strategy
At this point, we are ready to prepare our business plan. This plan isnāt just for our own internal business planning. It will also be used to attract capital, to raise money. It will be the document that our sources of funds, such as banks or other financial institutions, use to judge the creditworthiness of our new business. Consequently, it must be good, it must be persuasive, it must be polished, it must be professional. Spend the time on it that it deserves because without the capital, there will be no business.
Some business plans are thick, highly detailed with technical appendices. The amount of information required will be a function of the product and market complexity and the amount of capital you seek to raise. For a small business, the plan should be relatively simple and easy to digest. Someone reading the document should be able to clearly understand all of the planās information and to do so in less than an hour. Only disruptive innovators seeking hundreds of millions in commitments from say hedge funds, will go into greater detail, and only because the product and market strategies are truly unique, novel, and disruptive to the alternatives available today from our competitors.
What will the business plan contain? The plan is a guide, a roadmap, answering the question, āhow will this business work?ā and should start with an executive summary. For the busy financial executive, they demand this so they can quickly determine whether reading ahead even makes sense. From the summary, you then fold in the vision, strategy, and tactics in bullet-form or some easy-to-read format. Tables are used to list products, pricing, and these generally go in the back (appendices) along with pro forma (projected) financials. The financials can be simple, but should include at least a budget, projected sales, costs of running the business, cash flow (meaning you need to list items causing money to go out and money to come in), and required capital funding to meet the cash needs of the firm.
A one-page summary business plan, or executive summary, also known as a āleanā business plan will work when those from whom you seek to invest in the company are people you know, small lenders, or small amounts that can even be raised through crowdfunding. We will cover crowdfunding in greater detail in Chapter 3, āRaising the Money.ā Besides the vision, strategy, tactics, and SWOT, the business plan must include market demographic information, competition analysis, management team and experience, and other business specifics such as company location, facilities, technology...
