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THE Finweek marketing manager has taken to calling me the unofficial PR agent for Allon Raiz and Raizcorp, so I promise this will be the last column that mentions either of these two entitities for a while.
For those who don't know, Allon has recently released a book called Lose The Business Plan which is a must-read for any existing or aspiring entrepreneur.
I am not going to bore you with all the details but as the name implies, the book suggests that way too much emphasis is put on a document called The Business Plan. Entrepreneurs find themselves unable to react to circumstances when things don't go according to the plan - which happens all too often.
This has of course been followed up by a number of blog posts from various experts, arguing that business plans are "meaningless" and don't have any value to add.
Many of these bloggers love the angle that business plans don't hold any value - right up until the time they need to bow and scrape for funding.
Don't get me wrong; I've seen the good and the bad of business plans.
Last year I was involved in judging a small and medium enterprise (SME) competition, which required entrepreneurs to submit business plans so they could pitch for funding.
A number of the entrepreneurs were so intimidated by the idea of a plan that they paid outside consultants thousands of rands to put together business plans, detailed cash flows and so on.
The moment the judges started poking at those plans and presentations the entrepreneurs were stuffed. In some presentations we saw the consultants had literally made up figures for the business to get it through the initial phase of the competition.
A plan is useless if it's too complicated for the entrepreneur it is supposed to represent. It certainly becomes meaningless when it over-promises what an entrepreneur can do, and is there essentially to mislead in the hope that somebody will be suckered into dishing out financing.
Remember, funders still back the entrepreneur - not a piece of paper.
Having said that, for all its faults don't knock the business plan.
Arm yourself with knowledge, not a machine gun approach
Earlier this week I sat through a presentation for an SME looking for a R1.2m deal. One of the aspects which really stood out for the organisation they had approached was how much legwork this SME had put into the proposal. It had investigated the market, mentioned competitors and talked about what skills they had.
Funny thing is that when somebody is looking to put R1.2m into the business, this can be a hugely reassuring asset.
One of the major complaints reported by the venture capital (VC) industry in South Africa is that the quality of presentations it receives from entrepreneurs seeking financing is so poor that many of the potential deals end up being rubbished in minutes.
I am reminded of the story one VC told me about a pitch he received from a South African who wanted to start a "new internet". It would be "like the internet but it would be managed out of South Africa" (true story).
When the VC asked how it was going to make money, he asked whether this entrepreneur would be open to pornography on his new internet. Considering that by 2007 the global porn industry was valued at $2.84bn in the US alone and revenue was estimated to be earned at $89 a second, this seemed like a viable question.
The would-be entrepreneur responded by saying that in his new internet, porn would not be allowed and the VC shouldn't be too caught up in the idea of generating revenue from it.
The VC was prepared to at least entertain the idea of a new internet, but when the entrepreneur couldn't show any evidence of work put into identifying revenue channels and what sectors were working, he drew the line.
The business plan is certainly not the be-all or end-all of the path to starting a new business. Heck, most entrepreneurs will tell you that their businesses don't look like what they initially envisioned. But many will tell you that if they had to unpack their businesses now, they'd be able to tell you what works and what doesn't.
I am pretty sure that no cash flow statement which claimed your start-up would be paying you by month three has ever really panned out.
I've said it before in this column and I will say it again. Too often entrepreneurs go in gung-ho, trying a machine gun approach to business which says that you should shoot as many bullets as possible and hope you succeed.
Rather go out there with an idea about where best to focus your attention and energy. If you are armed with this knowledge, better deals and more business will come your way.
- Fin24
For those who don't know, Allon has recently released a book called Lose The Business Plan which is a must-read for any existing or aspiring entrepreneur.
I am not going to bore you with all the details but as the name implies, the book suggests that way too much emphasis is put on a document called The Business Plan. Entrepreneurs find themselves unable to react to circumstances when things don't go according to the plan - which happens all too often.
This has of course been followed up by a number of blog posts from various experts, arguing that business plans are "meaningless" and don't have any value to add.
Many of these bloggers love the angle that business plans don't hold any value - right up until the time they need to bow and scrape for funding.
Don't get me wrong; I've seen the good and the bad of business plans.
Last year I was involved in judging a small and medium enterprise (SME) competition, which required entrepreneurs to submit business plans so they could pitch for funding.
A number of the entrepreneurs were so intimidated by the idea of a plan that they paid outside consultants thousands of rands to put together business plans, detailed cash flows and so on.
The moment the judges started poking at those plans and presentations the entrepreneurs were stuffed. In some presentations we saw the consultants had literally made up figures for the business to get it through the initial phase of the competition.
A plan is useless if it's too complicated for the entrepreneur it is supposed to represent. It certainly becomes meaningless when it over-promises what an entrepreneur can do, and is there essentially to mislead in the hope that somebody will be suckered into dishing out financing.
Remember, funders still back the entrepreneur - not a piece of paper.
Having said that, for all its faults don't knock the business plan.
Arm yourself with knowledge, not a machine gun approach
Earlier this week I sat through a presentation for an SME looking for a R1.2m deal. One of the aspects which really stood out for the organisation they had approached was how much legwork this SME had put into the proposal. It had investigated the market, mentioned competitors and talked about what skills they had.
Funny thing is that when somebody is looking to put R1.2m into the business, this can be a hugely reassuring asset.
One of the major complaints reported by the venture capital (VC) industry in South Africa is that the quality of presentations it receives from entrepreneurs seeking financing is so poor that many of the potential deals end up being rubbished in minutes.
I am reminded of the story one VC told me about a pitch he received from a South African who wanted to start a "new internet". It would be "like the internet but it would be managed out of South Africa" (true story).
When the VC asked how it was going to make money, he asked whether this entrepreneur would be open to pornography on his new internet. Considering that by 2007 the global porn industry was valued at $2.84bn in the US alone and revenue was estimated to be earned at $89 a second, this seemed like a viable question.
The would-be entrepreneur responded by saying that in his new internet, porn would not be allowed and the VC shouldn't be too caught up in the idea of generating revenue from it.
The VC was prepared to at least entertain the idea of a new internet, but when the entrepreneur couldn't show any evidence of work put into identifying revenue channels and what sectors were working, he drew the line.
The business plan is certainly not the be-all or end-all of the path to starting a new business. Heck, most entrepreneurs will tell you that their businesses don't look like what they initially envisioned. But many will tell you that if they had to unpack their businesses now, they'd be able to tell you what works and what doesn't.
I am pretty sure that no cash flow statement which claimed your start-up would be paying you by month three has ever really panned out.
I've said it before in this column and I will say it again. Too often entrepreneurs go in gung-ho, trying a machine gun approach to business which says that you should shoot as many bullets as possible and hope you succeed.
Rather go out there with an idea about where best to focus your attention and energy. If you are armed with this knowledge, better deals and more business will come your way.
- Fin24
