Plan It Like It’s Software | Up And To The Right | Episode 040

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UAR 40 | Business Planning

 

What does it take to run a small business? Don’t let the word “small” fool you – running a business, any business, regardless of product or service, needs a lot of business planning. If you are just starting, you may not be worrying yet about things such as the legal framework, accounting structure, finance, HR, and many more, but you will have to take these into account eventually. How can you attend to all the things you need to do for your business without getting swamped? Stephen Krausse introduces a method of planning your business like it’s software, using the same numbering system as you would in organizing different iterations in software development. Learn how this allows you to categorize the things you need to do, put them in their proper places within the business development timeline, and focus your energy on items that add the most value at any moment.

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Plan It Like It’s Software | Up And To The Right | Episode 040

What does it take to start and run a small business? How do you organize all of that work and all those tasks without falling into some mind-numbing detail that takes more work to manage than it would take to do the work in the first place? How do you know you’re even doing the right work that will move your business forward at this point in time?

This is episode 40, Plan it Like it’s Software. The principles that we’re going to talk about are planning and preparedness. It is something we’ve been talking about for a while as well as prioritization when it comes to what’s important in our business at this moment. That’s the basis of what we’re going to talk about. What does it take to start and run a business? It takes a lot. When you think about it, we say, “I have this great gardening product that I want to introduce to the marketplace.” We tend to get focused on the product and the application, but there’s a whole mountain of things that we need to do to support, grow and operate a business, no matter what product you’re talking about. We’re talking about the legal framework, accounting structure, capital and finance, banking, licensing, and registration, depending on where you live and what your product market is. We haven’t even talked about the product in terms of that structure yet.

You have product development, marketing, advertising, and material logistics. When we talk about material logistics, how do you get raw material in? How do you do production? How do you deliver that raw material or that finished product to your customer? What are your sales channels? It goes on and on depending on your business. As a business owner, we have to be familiar with all of those things. We don’t have to know exactly how manufacturing is done if that’s not the principal value that our business adds to the marketplace. If you’re a contract manufacturer, you probably ought to know the importance of manufacturing and how manufacturing fits into the whole scope of business for your customer and how to do it well. If it’s not, then you don’t have to know everything, but you do have to be able to figure out how to put it together.

How do you create an environment or a business a structure so that you know that those jobs are getting done? That does matter. As I was thinking about how we do all of this stuff, I thought what if we use the same revision and numbering scheme for our business that software companies use to identify one version of the software from another? I’m not talking about built-in obsolescence of prior technology or having to upgrade everything when you revise your business, but there’s a certain mechanical value or structural value to be able to put this stuff into buckets and categories that are more finely detailed without going crazy than the typical five-stage process.

UAR 40 | Business Planning
Business Planning: There’s a whole mountain of things that we need to do to support, grow, and operate a business no matter what the product is.

 

If you are not familiar with how businesses are typically looked at in terms of stages, you have the concept stage where you’re developing your initial product. This is the part where you did it in your basement or in your garage. You are getting the idea coalesce. There’s then the startup phase where you’re starting to introduce the product to customers and feel out whether or not you have the value that to be added to the marketplace. There’s then the growth phase where you’ve said, “We’ve got something that’s working, how do we build on that? How do we develop that into a bigger picture, a grander scheme?”

There’s then the expansion phase where we’ve grown to the point where maybe our current or our initial staff are no longer enough to deal with the volume of business that we’re getting. That’s great so we have to expand. What does that look like? Is it another building? Is it a bigger building? In the days of social distancing, maybe a building is not the right thing. Is it more satellite resources and people working remotely from different locations? All of those things can come into play, but they’re all part of the expansion process. We move on to what people call the maturity standpoint, which is where I think founders typically get bored.

The maturity where the business is stable, but maybe in its current form and iteration, it’s gone as far as it’ll go. In a business sense, by that point, you’re hoping that you’ve already begun developing or already have implemented other product lines that might be in an earlier stage so that the business itself has longevity, even though a specific product line might fall to the wayside. In order to make sure that we’re working on things that matter at the point that we’re in and at the point that is appropriate for where we are in our business, we drop them into the related group. For example, product development is going to be in the concept phase. By definition, early product development is in that conceptual part of the business plan.

Accounting and legal structures might be part of the late concept or early startup phase. When you’re first developing a product in your garage or your basement, accounting or legal framework may not be interesting to you. Maybe it is not important to the business because if you’ve developed a product or you are working on a product and either doesn’t work, you can have an idea that doesn’t work and that’s okay. It’s better to know them after you’ve spent a whole bunch of money trying to market it. Maybe you developed a product that we have to get to the point where it works and then we can start offering it to the marketplace. It will then make sense to start talking about a legal framework and an accounting structure and stuff like that.

Revisions Of Business

What does the late concept phase mean? What does the early startup phase mean? In the traditional model that we’ve talked about, and that’s common, there’s no breakdown after that. For some of us, initially we liked that because we don’t want so much detail that it takes longer to plan than it does to do the work. That’s not how entrepreneurs operate in my experience and it’s certainly not how I operate. I would much rather be hands-on doing something than trying to plan to the nth degree of how that thing is going to get done in the future. How do we balance that? That’s where this idea of revisioning a business as a function of a software development plan came into being in my head.

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I thought, “What if we associate the five concepts, the five phases of business development with five revisions of our business?” We can think of 0.0 to 0.9 as the concept phase, the beta release. What if the 1.0 to 1.9 ends up being the startup phase and 2.0 to 2.9 becomes the growth phase and so on? We don’t need to go through each one, but that leaves us a lot of room. In 0.0 to 0.9, we’re starting to put tasks that need to get done in that early phase. We need to do product development. We need to figure out, what do we even have to offer? Is it a service product? Is it a physical product? Is it a combination of physical products that are already developed? You want to kit something.

Let’s say you can kit three screwdrivers, a printed circuit board that is loaded that you buy off of Alibaba, an LED or Light-Emitting Diode and a buzzer. You can kit those and they have value to some marketplace. Maybe it’s an educational marketplace. Maybe you kit these and sell them to somebody else. Maybe it’s something where you develop it from the ground up. At this point, maybe you’re creating 3D print models of your product or you’re creating that prototype that you can use to get that first customer impression. Maybe you’re creating a service and you want to develop the boundaries around that service.

For any service providers out there, one of the problems that we have to deal with as service providers are the boundaries on our service because we get paid for our time. That means if their scope creeps, where we don’t ever finish because the customer keeps changing the game, then that makes it much more difficult to get paid. It also puts us in a position of constantly having to either negotiate a new billing option. What if somebody asks for something that we simply can’t do or are not good at? For example, Beyond 50 Percent operating consulting, I have partners that I work with for marketing, accounting, and legal, but I do not touch those things myself. I also don’t touch capital and finance at all. I don’t even have partners that I will refer to people in regards to funding and capital. I can provide ways of researching that for customers, but that’s simply a place that I have decided that I don’t want to go.

You have to put those boundaries around that in the concept phase. There’s a lot still that goes on in there. As an entrepreneur and in many cases as solopreneurs, where it’s just one of us doing the work, and it doesn’t matter what stage we’re in. Eventually, we get to this stage where we have to start delegating some work to someone, but there’s still a lot on our plates. We only have a certain amount of time. We have to be able to make sure that our time is being used in the best way possible to add value to the business and also to add the most value for that given time. For example, if you’re in the concept phase and you’re a computer nerd like myself.

UAR 40 | Business Planning
Business Planning: There are many things that you can’t ignore, but you can put them into the places where they matter to your business.

 

I’m not an educated computer nerd, I just like to nerd out on software stuff because I think it’s cool. I don’t want to provide the impression that I know anything about code. I do not, but in terms of in the concept phase of a business, I see an advertisement for a customer relationship management software. The nerd in me is going to want to look at that and has many times. That’s a rabbit hole that you can go down to adds no value to the concept phase of your business. Is it important in the late startup phase or the growth phase? Absolutely. I’m not saying there’s no value in that item for any business, but it’s not the most value that I can spend at this time to move my business forward, and that matters. It matters to us because of our finite resources.

If you do a Google search on things you need to do to start or to run a business, and you start looking at the hits, you’re going to get list after list of things you need to do. I haven’t looked at them all, but they’re likely to have things on them that you didn’t think about. If it’s your first business, have you thought about worker’s comp or some of these other legal frameworks that if you haven’t run a business yourself, you don’t think about it that much? It doesn’t come up for you, but it does need to get done. As a business owner, you have to look at that stuff, but where does it matter? In the case of a worker’s comp, it doesn’t matter to hire or pay somebody.

Eventually, if you’re paying yourself, you probably have to look at that and talk to an HR professional and decide, “As a solopreneur, do I need to worry about worker’s comp?” Each of those things has to get dealt with. At some point, your business revision is going to involve HR. It’s going to involve paying someone, even if that someone is you. Every single one of those things that you look up and you should, you’ve got to start categorizing into where you’re going to do it. There are two important reasons. One is it has to get done, but two, it needs to get done in a reasonable way with the resources that you have. You can’t ignore them, but you can put them into the places where they matter to your business.

It’s easy to dig into the rabbit hole of your business name or your website, but if you don’t have a product yet, a website might be important. I’m not going to argue with the marketers and the brand professionals. We’re going to say, we may want to start creating a buzz or whatever around a product that might be important. It is the most important thing you can do for your product because as solopreneurs, we don’t have the luxury of spending however many thousand hours or dollars to create brand buzz when we don’t have something to sell and we don’t have revenue coming in. The idea is we break these things down into these five categories. We’ve got the five categories or stages of the business that we already worked on and that’s concept, startup, growth, expansion, and maturity.

Within each of those, there’s still going to be space where we’re still an army of one. That means we still have a limited amount of time and resources to deal with any specific thing. Even if you have a small team, you still have more work than you can ever do. We have to understand what work is the most important at this moment and that’s where we put everything into the concept phase that is pre-revenue. Let’s use that as the bar. Those definitions are widely variable and that’s okay, but you do have to make those definitions for yourself. You say, “My concept phase is everything before I sell my first product, what do I have in place or have to have in place in order to sell my first production product?” That is not the one you used a pocket knife to make in your garage and you sold it to your neighbor because he thought it was cool. That’s not what I’m talking about. I’m talking about the pre-revenue of a standardized product.

Every phase of the business is going to have additional things that need to get done. Click To Tweet

What happens in that startup phase? When will you call your startup phase closed and your growth phase started? You start to categorize things and say, “I need a way of working with customers on a regular basis and I need that to happen. Maybe I don’t need it initially when I launched my first product, but I’m going to need it before I get into the growth phase.” It’s got to be part of our DNA as a business before we focus on growing that customer base. Every phase, every stage of the business is going to have additional things that need to get done but because we have limited resources, we need to identify, “In business 0.1, I am creating my first prototype. In 0.3, I want to have also figured out what tools are going to be required to manufacture it. It’s not what vendors are going to be needed necessarily. Maybe not even what materials I need to use, but what tools are going to be needed? What’s the general expertise that’s going to be needed? Maybe I need to identify that in a piece of the startup phase, but it doesn’t matter until I know that I have a product that works or a product that has a high probability of working.”

For example, if you’re going to launch a Kickstarter campaign, as long as you have some working prototype, the concept phase might be a great time to put crowdfunding into your business plan. How do you do that? At that point, you’re not quite at revenue yet, but you need money to move the product forward. If crowdfunding is part of your business model or you’ve thought about it, maybe that’s a good place to put those things into place. If you want to pitch to investors, this is not the time to put together a pitch deck. That might need to be in 2.5, where you’re in growth and you have established some growth on your own. You know you’re headed toward the expansion phase. You know what the criteria are going to be. “I can produce 1,000 of these with the facility I have per month. When I get to 900, I need to be expanding. I don’t have the money to expand. I’m going to need capital.”

Being able to look at your plan and say, “I’m going to need to figure out, am I going to get a bank loan? Am I going to start looking for angel investors? Am I going to look for institutional investors? Have I got a product that’s going to have that classic hockey stick growth curve? Do I want a venture capital to move in and provide the leverage that I need to grow it, once I get into the expansion stage and move this product forward?” I’ve gone in and said, “In version 0.1 of the business, you would define the ideal customer.” That’s something that’s important to do early on. What is the nature of your product offering? In this case, I put in some basic accounting because, at this point, I felt like I am going to be generating expenses. I want to be able to put something together that will allow me to apply those expenses to the business instead of to my personal life. In this case, version 0.2 of the business, I said, “We’ll put the legal structure in place.” Look at sales registration, state registration, city registration, etc. Those things are falling into that early stage.

It needs to be appropriate for what you’re going to do. For a product-based business, it might be much different because you need to do product development. How are you going to deliver that product? What’s it going to look like? Does it work in a sense? Creating a service product doesn’t have the same mechanical and structural challenges that may be a product-based business has. In version 1.0 to 1.9, I have broken these down. This was a brainstorm I did late. It isn’t as broken down for the wrong, but when I look at version 1.0 to 1.9 of the business, which is the startup phase, you say, “I need to be sure that I know what name I’m going to have. What the launch branding is going to look like. I probably want to start thinking about a CRM by the time I get to growth. How am I going to handle marketing and public relations and advertising?”

UAR 40 | Business Planning
Business Planning: Start looking at exit options during the growth phase. Earlier is better.

 

This gives you an idea of what I was talking about. It isn’t as comprehensive as it would need to be from the perspective of a fully fleshed out, “How I’m going to get things done that need to get done?” One thing that I did want to bring up and this is where this plan needs some more thinking as we go forward as business owners. You’ll notice that courses and workshops are listed and under the startup phase. Those are going to be new products. You might have this concept relate to the business in general and each product type have its own life cycle and separate that out. What I am going to do as I move through this a little bit more thoroughly is the courses and workshops, even the consulting services offering, that we’ll all move off to have its own product life cycle project. What I’ll incorporate into the business structure is the introduction of products at specific phases and not worry too much about the logistics of each product lifecycle within the framework that I’m talking about here of the business.

Planning Your Exit

As I was doing this, that came up for me and I had to say, “How are we going to do that so that it makes sense for business owners?” You could clutter this model up with detail if you incorporated all of your product life cycles into your business structure. I think in retrospect pulling the products out of the business structure and saying, “What does the business need in these various stages?” One thing I did want to bring up and I want to talk about in the future is, when do we look at exit strategies? Typically, my experience has been that founders look at exit way too late. They look at the exit when they’re ready to be done. We need to be looking at exit much earlier than that. In this case, you’ll notice that I started saying we’re going to develop a valuation model during the growth phase and then in the expansion phase be developing the exit options. That could shift for you.

I would probably be looking at exit options during the growth phase. There are a couple of reasons for that, earlier is better and when you are working on expansion. If you’re going the route of venture capital and eventually perhaps an IPO that is beyond the scope of what I do, but in terms of Beyond 50 Percent and in terms of my interest, if you’re going to go that route, understanding what point you want to be out is good. It’s good to understand that a publicly-traded company is much different than a privately held company. The bottom line, is when do you want to be done? When do you think it won’t be fun anymore? Honestly, mature businesses, if they’re genuinely mature and you have a product that people will use, screws and bolts, things that don’t change commodity products, to me, that kind of business environment is not interesting.

I like businesses that are in that flux of startup or growth, where we’re trying to figure out the challenge of moving this product forward. Where in maturity, you’re in the point of trying to eke out every last penny before someone else takes your spot. There are certainly challenges there and they could be rewarding this just not for me. There are a few examples in that graphic that can help illustrate the idea where we group tasks that need to get done in a specific stage of business development into groups that matter at specific times. You may have a number of things that need to get done in the concept phase, but they don’t all need to get done at the same time. If you don’t want to get into doing a Gantt chart, which to me, that’s where we get to the detail and the management that is beyond the scope of what I enjoy doing as an entrepreneur. If you don’t want to do that, but you still want to bundle things in groups that seem to make sense to you, this was an interesting framework to do it in.

Start identifying the things you need to do for your business, categorize them and focus your energy on items that add value at this moment. Click To Tweet

If we say, 0.0 to 0.9 is the concept phase, dump everything that’s a concept related to that bucket and then sort them up to 0.1 is a certain group of things, up to 0.5 is another group of things. Once we get to a product launch or 1.0, where we go to revenue, that has to be in place by the time we go to revenue and how do we structure that? It has the advantage of categorizing things for us and helping us focus on the things that we can do to move our business forward. It helps us have the discipline to say, “Finance is important to the late growth or to the expansion phase. That’s super awesome. I’m glad you gave me that contact. Thank you so much. I’m going to put that angel investor in my virtual Rolodex. I’m going to put a note maybe in my business plan to contact that person.”

I might talk to them initially and say, “We’re a couple of years out from expansion, but I was introduced to you by Joe and I like to stay in touch.” At that point, I set that aside because it’s not the most important thing I can do. We get the benefit of being able to categorize and prioritize the things that do matter and we get an aid to discipline in being able to say, “It doesn’t matter enough now to expend resources on it because it doesn’t add value now and I don’t have infinite resources.” What can we do to put this into real practice? I put it into the to-do list in the task manager that I use. I like it because it is simple.

I don’t like Gantt charts. There are other software packages that are coming out for small business productivity and small business project management that I have toyed with many of them. I don’t like any of them either because they make the system too complex. It becomes an issue of managing the system versus getting the work done that the system is supposed to be describing. That doesn’t help me. I find that the simple task managers are the easiest way for me to have a balance between that project level, that project management style, versus I’m hoping I wrote it down on a Post-it Note. I put it on my desk somewhere, which is the other side that doesn’t help me either because I want it all in some specific place.

I do use the combination of paper lists in my daily planner and then to do it for things that I’m not going to do that specific day, but practically speaking, how do we put this into practice? How are you doing it? Do you have your business organized by the five stages that businesses go through? That’s a good framework. It helps us identify what matters when. If your businesses are not complex, you might not need to break it down any further, like I have. If you start looking at what it takes to run a successful business over a long period of time, you’re going to find that there’s a lot that needs to get done, especially if you want to move it past a specific stage. We don’t want to stay in the concept stage any longer than we have to because that’s pre-revenue.

We don’t want to stay in the startup phase any longer than we have to because that is a struggle every single day to get revenue. We want to get to that growth stage where we’re growing the revenue. We have a certain amount of profitability that we can count on and that gives us room to breathe a little bit and move into these other stages. The idea then is to break it down to the level that you need it and this was a way that I thought. This is a method that we could use that we can steal from the software industry to say, that first digit 1.0 or 2.0 identifies the stage of the business that we’re in and the 0.25, whatever is for our purposes. The patches and the updates to those revisions, a patch being something that fixes something that’s broken.

UAR 40 | Business Planning
Business Planning: A lot needs to get done to run a successful business over a long period of time, especially if you want to move it past a specific stage.

 

If you say, “I’m in the growth phase.” All of a sudden, I realized that my CRM is not going to meet my needs. I need to patch that. What does that project entail? That might be a 2.51 and that might be a patch because we have to fix a problem or we have the next layer that we want to add. Let’s say that in 2.6, during our growth phase, we’ve identified having a help desk that will serve our customers on the internet so that they can help themselves as much as possible before they have to take time to access our staff personally to find a solution. We need to build that out so that becomes an update. This is a way that I thought was familiar to me having used computers for a long time. I thought maybe it’s something that’s familiar to other people, where you can wrap your head around creating structure around your business path, your business growth without creating so much detailed work that the detailed management becomes more work than its worth.

It is important to get all of this stuff taken care of because if we don’t, it leaves gaps in our business. It puts us at risk. Also, it can put us at risk of not being compliant because we didn’t know enough. We didn’t put these things in place. There’s a lot of frameworks that businesses have to go into and you have to understand that for your specific industry. The idea is, what are you doing now to create that framework? Is this helpful to you? Is this something that you can identify with and you can say, “I can apply that to this and then I can have a relatively simple way of grouping these sub-tasks together?” Can you do that in the structure that you’re using? If you’re using a Gantt chart, you can certainly do that. If you’re using a to-do list like the software that I use to-do list or something else, if you’re using Monday, or a pen and paper, can you integrate that into it? Will it be helpful?

It’s about starting, go through your business, start identifying the things you need to do, categorize them, and then use that to focus your energy on items that add value at this moment and work on it. The next episode is 41. I thought about what I should do. I was reading my notes and I realized that I constantly talk about the principles of business. It then occurred to me that I’ve never articulated what that means to me and what I feel like it should mean to small business owners. Next episode, I am going to start talking about the principles of business. This may have to be a series because I don’t want to sit here and list what I think the principles of business are. I want to talk about them in enough depth so that we can apply them and that it’s useful actionable information.

At Beyond 50 Percent, we consult with business owners to develop solutions and fix specific problems or implement new business processes or features. If we want to stick with the software revision analysis, that enables you to continue or grow the value that you add, according to your passion. If this has been helpful to you, please subscribe and hit that little bell, so that you’ll be notified. Feel free to comment or ask questions. I do monitor those comments and respond, so subscribe, share it with your friends and other business owners, maybe not your competitors. I’ll understand if you don’t want to share our business advice with your competitors, but with your complementary products and unrelated friends who are entrepreneurs or aspiring business owners or own startups, please share the content. Let me help me share the message. In the meantime, thank you for reading. It’s time for me to get back to work.

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