Creating the Modern Business Plan
- Completion time About 1 hour
Mary: Good afternoon, everyone, and welcome to today's Fireside Chat, How to Create the Modern Business Plan for Your Startup. My name's Mary Mallard. I'm the Social Media and Community Specialist here at Grasshopper and I will be your host today. So we're talking about business plans today because most business owners know that they should have one but they don't really know where to start or how to build one. So today we'll discuss how to write a business plan, how to put your plan into action and more. Our two panelists will give you some solid takeaways to either modify a current business plan that you may have or write a new one.
So we'll take a few minutes to introduce our panelists. We have Jesse Lear, the CoFounder of V.I.P. Waste Services, and Allan Christensen, the COO of ToDoist. We did have Sabrina Parsons who is the CEO of Palo Alto Software, but she, unfortunately, has another commitment that came up so she will not be joining us. If you'd like to see any of the bios for the speakers, you can find them on grasshopper.com/firesidechat.
So just a few things before we start. We do have a social media correspondent who will be live-tweeting the chat. You can follow along with the hashtag #frsdchat on Twitter. We will be reserving 15 minutes at the end of the chat for questions. So if you have any questions, please feel free to submit them. You can use the question chat box on the right-hand side of the webinar or you can submit them by tweeting @grasshopper using the hashtag #frsdchat.
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Business Plan Basics
All right, let's jump right in. Jesse, how about you take the first question? Let's start with business plan basics. What are the main differences between a traditional business plan and a modern business plan?
Jesse: Thank you, Mary. That's a really good question. I think that from the business plans I've seen, and I'll give you a couple different examples; I have some friends that have created business plans that took them months if not years to put together, 15, 20, 30, 40 pages, graphs and charts, research, everything. That's, in my mind, more of a traditional business plan.
On the example of a modern business plan, I actually have a friend who was on Shark Tank recently who likes to jokingly tell people (but it's actually true) that when she started her company, her business plan was four words: Make money, have fun. That was her business plan. And so that's a big contrast and maybe a couple of extremes.
But generally speaking, I think the traditional mindset is more toward over preparing to make sure you've thought of every little thing, you've got every little detail planned out in advance. And the modern approach is more, "Hey, let's jump in and do this thing and figure it out as we go."
Mary: Great. So next question, which I think is the first on everyone's mind, what factors should be present in every business plan?
Allan: Yeah, perhaps I can add a little bit here. That's also likewise, a very, very good question, Mary. Here...I would actually say that I don't want to reinvent the wheel here because someone did the job for us. There's this guy that created the business model canvas and I think it's such a great tool and it just gets around all areas of a business plan. So if you need to put together a comprehensive business plan where you cover the most important aspects, definitely then the business model canvas is a good one. It covers areas like: your customer segments, your value proposition, the channels, how are you going to reach your customers, customer relationships, how will you engage with them, revenue stream, are you going to monetize? Also, core aspects, considering somebody has to pay the bill.
Then also the key resources: What does he really need? Like, do you need physical labor, do you need technical resources? Key activities is another area: What is it you have to be really good at? Is it innovative design, is it product development? Then partnerships. Do you have some shortcomings or are there certain areas where you need partners to join up and leverage your business?
Also, and the last building block is cost structure. And if you sort of analyze and use this model to shed light on all these areas, you'll also have a pretty good understanding of the construct. So I think it's just such a great tool and it will help people that don't necessarily have a comprehensive understanding of how to put together a business plan.
Jesse: I think one thing I would add is that when you're putting together your own business plan, you might need specific factors to be included in yours that another type of business might not need. So my rule of thumb is when you're creating a business plan, because I have a little bit of an untraditional approach to business plans in general, but my real question that I ask myself is if I were in the shoes of who I'm going to be giving the business plan to – whether that's a banker or an investor or whatever – what am I going to want to see in that plan in order to be convinced of whatever it is you're trying to convince them of? If that's...if there's something you identify of, "Okay, if I were this investor, I would want to know A, B, and C," then A, B, and C are pretty essential factors. So start by putting yourself in the other person's shoes and I think that's a huge...that's a big place to start.
Allan: Oh, absolutely.
Business Plan Don'ts
Mary: Yeah, great. So kind of moving on from that, what is the most common mistake that's made that you've seen when someone is writing a business plan?
Jesse: Good question. I guess I'll take a stab at that one, Allan. The biggest mistake I've seen is just spending way too much time on it. I've seen people spend a lot of time in planning and at the point of paralysis of analysis when there are really easier, faster, sometimes even cheaper ways that they could've done it.
Allan: Yeah, and also, of course focusing too much on things that don't really add value to the business. And like Jesse also touched on, the thing that I do, be short and concise, not too many details. You want to get around all the areas but still, you don't want to have too much description of everything. And, of course nowadays with the internet and the way things work, you can, in many cases, you can just start a business from home; and you might not really have to document all of it because you can comprehend all the areas and you already have a clear idea of how to get from product to market, how to find the product-market fit, etc.
So yeah, I think definitely too much focus on things that aren't really important because at the end of the day, I mean, time is your most valuable resource. So you definitely want to make sure whatever you add to it also adds value and makes you move forward.
Funding Your Business Plan
Mary: Great, yeah, definitely. So we've gone over what a business plan should include, what you shouldn't spend time on it. Some businesses or business owners, they start to look for funding. So when should you decide to send your business plan to investors if that's a route that you're going?
Allan: I would say ideally, you shouldn't have to. I mean, from my experience, often I've seen, from just moving around in the startup communities, that a lot of times there are many [entrepreneurs] that are very focused on "how I'm going to raise money?" as opposed to really building the business itself or coming up with a good, solid strategy for "how am I going to make the investment and grow?"
So I think a good time to send your plan is if you have a product and you've shown or you have a service, whatever, you've rolled it out and you actually can show that this has created traction; that's definitely a good time where you can say, "Okay, now it makes sense" if you feel you need money. I mean, we're still bootstrapped, and then there are some great companies out there. Basecamp also, a great example of how you can build a pretty big, solid business without necessarily getting money at the beginning.
Jesse: I think that's a great point. The relationships are key. And actually I didn't even think about it at first but it's totally true. If you have relationships that you've built with people who are in that community, you should end up in coffee meetings with them anyway to the point where they say, "Hey, this is really interesting what you're doing. Do you have a business plan written out yet?" And then it's a matter of just shooting it over to them. So you'll know.
But also again, going back to the putting yourself in their shoes thing, when you feel that your business plan is convincing enough that if you are an investor, you would be very, very interested then it might be time to send it.
Writing the Executive Summary
Mary: Cool. All right, so we've gone over a little bit about building the business plan. So let's segue into strategy and pieces. So the first part of a business plan is usually the scariest part, the executive summary. What's the story an executive summary should tell and why is it important?
Jesse: The executive summary...I forget who it was that said this quote but wrote in a letter. "Hey, I'm sorry the letter's so long. I didn't have time to write a short one." And I don't remember where that quote came from exactly but that's totally the reason, I believe, why executive summaries are so difficult because you have to convince what, in your mind, is this huge idea with so many different facets and moving pieces into what's increasingly, as time goes on, becoming a shorter and shorter and shorter section as attention spans are narrowing. So really it's just about communicating everything you need to communicate in something that a very busy person can fly through and be at least interested enough to read the rest.
Allan: Absolutely. And in terms of length, yeah. In an executive summary, you want to write one of these to...it's supposed to sell. It's not supposed to describe. And you have a relative short time to describe. You want to convey a picture of who are you, what are they going to invest in, what is it, what product will they or service will you actually deliver? Or how big is this opportunity?
And I think it's a big challenge. It definitely is because you only have a few sentences to describe what you're going to do, who are you, and at the same time you want to basically provide something that will make them want to write a check at the end. If you can get to them emotionally, I mean then you've definitely nailed it, but it's a challenge. And again, it depends on who you're writing to. Make sure that you do your homework there.
Mary: So kind of going along the lines of that, what elements should you make sure to include in an executive summary?
Allan: Yeah. I would say passion, you have to show passion. Make sure that you convey passion in it and your mission. Show that you know the field and the business you are going into. If you don't really have the knowledge in the area, it's not likely or don't have anyone on team [that does have knowledge], it's not likely that an investor would be interested in investing in you. And the same goes for the passion point. If you're not passionate about what you're doing, why should anyone else be? So if you can convey that somehow in that executive summary, you're well on your way.
At the same time also, of course, make sure you're realistic, show that you have some rough projections of what you're about to go out to work on or the project that you have there.
Jesse: I guess one of the things you have to think about is what's the motivation? What's the reason why your idea is going to work? And really, everything comes down to...I mean, we're entrepreneurs, right? We fix problems that exist in the world. And we do it...our job's to do it in a smart way that results in us being able to create jobs and make money and everything else that we're trying to do. So the thing that you really have to narrow it down to, whatever your business idea is, and if you already have a business this can actually even help you narrow it down how to promote it, but it all comes down to pain and pleasure, right? You're either trying to help people avoid or get rid of a payment they have or you're trying to help them reach a particular opportunity for pleasure that they think they have, that they want.
So really, if the executive summary can include that, these...hopefully the people you're sending your business plan to are very smart people. And if they see a good opportunity, hopefully, a lot of them are going to recognize that. In my opinion, your job in the executive summary is to communicate what pain point you're actually going to be solving with what you're doing. And if that pain point is big enough, you don't need to describe every single method and tactic and technique that you have. Then it's about figuring out how to solve that problem and there are generally a lot of different ways to. The point is: can you do it?
What Not to Include
Mary: So on the flipside of that, what's the number one or maybe top two things that you should not include in your executive summary?
Jesse: What do you think, Allan?
Allan: I think we've already touched a bit on it. Like if there are too many details about the business plan. You have to grab the reader's attention. So...I mean, of course, you need to convey its essence and then the energy in the project but you have to be careful with the details as I said earlier on. To some extent, think of this as a sale's pitch. Also, you're not trying to describe, you're trying to sell this idea to investors. So that's certainly something you should have in mind when you start working on it. Take them on this emotional trip and writing some sort of a boring description of the business aspect might not be what you want to include in that case.
Jesse: One little analogy I sort of think of when you're talking about that, Allan, is just the analogy of the hole versus the drill. And I think a lot of us have probably heard that already but a lot of us, as entrepreneurs, we walk around and because we're fascinated by what we're doing, we assume everyone else is too. And so we talk about all the features and descriptions and all the technical elements of it (of the drill) when really what they want is just a hole of a certain shape that the drill makes.
So if you can skip past all of the techniques, all of the descriptions of how it does what it does, whatever your idea is, or how they're going to make money and you can show them here's what the result is going to look like and here's the pain point we're going to solve, here's essentially the hole and not the drill. Now that you've piqued their interest, you can prove to them that your idea is going to work by giving them all the specs of the drill.
Mary: No, go ahead.
Allan: I think it's Clayton Christensen that used this one. The job that people hire your product to do, what is that? And he has this story he tells about one of these food chains with the milkshake where even though they can buy all kinds of things, there's people coming in the morning, buying a milkshake, and driving off. And they're trying to understand. They always come early in the morning and they buy this milkshake. So they're trying to find out what job this milkshake is actually doing for these people there. And then he figures out that it's actually because they have a long drive. And what the milkshake does, it just sits there and you can suck at it for a long time while you're driving to work.
Allan: Yeah, entertainment, exactly.
Allan: And so he says, "So this is why the people hire the milkshake to do this job, to entertain them throughout this trip." So if you can think of it that way, it also makes it easier to find out how you're going to improve it. And he mentioned all kinds of [candy], like Snickers doesn't do it, a donut doesn't do it because it's gone in seconds and you've got things all over you. But the milkshake's really comfortable and just sits there and it's with you all the way.
Jesse: Wow. I like that.
Allan: So and it's interesting to look at your product and the job people actually hire your product or service to do for them. So I think that's a good one to look at.
Mary: Yeah, that's really interesting way to look at it. I like that.
Jesse: Very much.
Writing Your Marketing Strategy
Mary: So switching gears a little bit, let's talk about marketing for a few minutes. So a marketing strategy is something that typically people try to include in their business plan. What are the top three things that you should include in your marketing strategy?
Allan: One of them is brand value. We like to look at what is the personal trait of our brand and try to define that because once you do that it's also going to be reflected in everything you do. What is the persona then of your product, the service, whatever it is? And that way you can always go back and say, "Okay, does that sort of comply with the trait of the product, with what we do X, Y, Z or doesn't it?" So defining that would help people to understand, in the company, what is the right thing to do, what can we do, what can't we do.
And then also positioning strategy. Finding out how you're going to persistently solve in the market in comparison to competitors. How you're going to grab a share of the market? If you bring something new to the market, you have to have some sort of a niche or come up with something. You will have some kind of unique value proposition. So definitely also positioning.
I think it's also crucial that you know, "How I'm going to get from start to the beginning? How I'm going to get the product in front of the customer?" And that goes through many phases, including everything from beta testing, user interviews, talking, and surveys. Many aspects, but definitely getting that one in place too. I think it's important if you want to have a successful marketing strategy.
Jesse: I don't know that I need to add anything to that. That's a pretty awesome answer. But I think one of the things that you want to show definitely in your marketing strategy is creativity. And there are a lot of (especially now that we have the internet and everything else there is) we can get things printed next day, same day even sometimes. It's very easy to say, "Oh, I'm going to have 20,000 fliers printed up, or I'm going to make a 100,000 postcards and do a mailing." But is that really what you should do? What's really going to happen when that postcard arrives and when is it going to arrive? Is it going to arrive in the hands of a gatekeeper who's going to throw it away rather than put it on the CEO's desk if that's your target client?
So really having creativity and showing creativity in your marketing strategy, I think is super important for a business plan if you're trying to get investors especially. Because one of the things they're looking for is when they give you their investment capital, are you going to use it wisely? And so if you've been creative with how you're going to market your product and you're showing them ways that you've really thought through how to maximize the return on the marketing dollars that you've put in, then that can be a huge positive effect I think in the marketing strategy you include.
Allan: Good answer.
Discovering Your Mission Statement
Mary: So switching gears a little bit again, let's talk about your mission and your value proposition. So this is kind of subjective but, in your opinion, what's the best way to create a mission statement and your value proposition?
Jesse: So the mission statement really should get at what it is you're trying to do, which sometimes is a lot bigger than the thing that most people would say you do. Geez, I don't know what to give as an example of this. Really, it's something that should inspire your team to act in a way that's much bigger than making a widget or delivering a service or whatever. It's something that's an overall purpose of why you're there and why you're together.
For instance, my main company, V.I.P. Waste, we pick up trash and recycling from apartment communities from every door multiple nights a week. And we sort of promote it; we help the communities promote it as an amenity. So instead of taking your trash 200 yards away to a dumpster you get it picked up at your door. It's all about trash and recycling, right? Helping produce convenience and green living in apartment communities. But our mission statement is to make the world a better place by delighting our clients, their residents, and each other.
So it's sort of like a deeper, more motivating purpose of why we're here and what is the focus of our every day is going to be that will naturally result in building our business in a healthy way?
Allan: Awesome answer. Yeah, I think this sums it up very well. I don't really have that much to add there. Jesse said it.
To Forecast or Not to Forecast?
Mary: Yeah, no worries. So let's move on a little bit to my favorite topic, analysis. So talking about income projection and forecasting, a lot of people think that's really important to include in a business plan. But how do you come up with an income projection or any type of forecasting before you even have made a sale?
Allan: I mean, you can do it the simple way. You can start asking yourself realistically, "How many units? How many subscriptions? Or whatever you offer or sell you're able to sell to the customer per day or per work day. And then you can try to gauge, "What kind of growth am I expecting?" Then it's basically only left to do the math. I mean, this will at least give you some sort of ballpark figure. I like sometimes to split it up and then you get down. Then it's easier to comprehend and overlook; not rocket science but yeah, it will get you to the figure.
Jesse: Yeah, that makes sense. I agree. I think one of the little words of caution I would throw in here (and this is extremely common in my experience, when people give you a business plan and you're looking through it); you see projections because people feel like they should be in it. But the projections are completely guesses and they're basing their entire pitch to you on those guesses. So that's one thing that can kind of discount your credibility a little bit.
So if you're going to make guesses, at least have reasons to back up why you think that they're going to be accurate. Don't just say, "Hey, I think we can do 500,000 in the first 2 and a half months because it just seems there's a big market and there's a lot of people who want to lose weight in the weight loss industry. So we think we can do a million in our first two months." You know what I mean? That's not good enough. You need to have some substantial evidence that you can back...to back up what your numbers are.
In my opinion, it's better not to even have forecasts. I know that's a little bit of a crazy thing to say but if you can't present them in a credible way that shows that you know what you're talking about, it's better just not to have them.
Mary: Yeah, that's a good point. I was actually going to ask that.
Allan: We did that a lot in the past. Like okay, what will we actually project some flow? As long as we have more money in our account balance at the end of the month, isn't that all that really matters? And then focus on product, product, product. And we did that for a long time. I mean, it worked for us.
And if you have to do anything, you could also set up a worst case scenario and a best case scenario. And if you're going to do any kind of projections, you probably, if you want to set a budget or anything, you can use the worst case scenario, if you want to be a bit more conservative in that sense too. You could also add the whys, I think.
But yeah, sometimes you might be able to leave it out. It depends if you have to bring it in front of an investor. They would want to see where is this going to go, what is your expectation? It might then be completely off and I expect that in many cases it probably is the actual case.
But still, if you're just building for yourself, I'm much more like "Okay, just focus on what really adds value, what's high impact here." And so if it's a product, then focus on that as long as, of course, you can pay the salaries if you get employees or yourself so you can survive and I think you will be okay.
Jesse: Yeah, one thing I was just going to throw in here is that...just kind of backing up to the whole idea of a business plan to start with. You need to ask yourself why you want one. If you're going to make it just to check a box because somebody said you should have a business plan to start a business, then you need a reason probably deeper than that; or you should be working on something that has more to do with making money by selling your product or service.
But a lot of times the reason people put together business plans is because they need funding. In my experience in business, I've really loved the idea of learning how to bootstrap, which is figuring out ways to start inexpensively on your own without taking on any funding. My first company, we built it for the first two years before we took a penny in debt. And that was because we wanted to start really maximizing our ability to save money on large orders of supplies. So we wanted to make a $70,000 order of a certain supply. We didn't want to use up our cash so then it made sense.
But if, in my opinion, one of the most valuable reasons to have a business plan is because in the beginning stages of your business or before you start, it can help you really think through all the different facets of what you're trying to do and how likely it is to work out. In my experience, when we put together business plans for my businesses, we ended up having conversations, discovering factors about what we were trying to do that we were like, "Oh, wow. I didn't think about that before. Let's go back and kind of rework that plan a little bit because now we've actually really thought through every detail, it doesn't even make sense."
So in my opinion, that's the number one most valuable thing. It helps you clarify your own plan of action of what you're going to do to make this thing a reality because none of us want to invest all this time and energy and money to have something not work. So it's best to do the research up front. I just don't want to spend too much time on it.
Mary: That actually leads pretty well into our next question. Talking a little bit about surveying the landscape and the analysis, when you're doing industry analysis, what top three things should you include in that that are really important?
Allan: One is definitely: who are the players right now, who you're up against? I mean, that shouldn't always scare you away. Just looking at ourselves, I mean, we're up against Microsoft and Google and Apple in the To Do app industry. And so it's a good challenge. As a small company, we have many advantages and you can do something external for your customers, give them extra attention, etc. So that is definitely one of the competitors out there.
Then the barriers also: how difficult is it to get into your market? If it doesn't take much more than access to the internet, it will be easy to access; of course, you should bear that in mind. If it's something you will need a lot of capital to get in, then you have to consider that. And that also, again, means that you probably have to work in a more comprehensive in-depth business plan.
So that's definitely two of them [items to include]. Other ones are like what are you going to offer? Is it something where a lot of companies out there offer the same? Will everything be around the price and will this push you in a way? So also you have to bear that in mind and look into this area.
I think that was off the top of my head three things. You probably might have, Jesse, something there too.
Jesse: I don't know. That was good. That was good. I think one thought that just came to my mind is the conversation that a business partner of mine and I actually have pretty often. This is the lesson both of us have learned the hard way, at least once. A lot of people are in such a mode of trying to figure out how to succeed in whatever business they're in that they never really ask themselves what's it going to look like when they succeed and if they're going to like it when they get there?
And that can come in many different forms. I have friends who started businesses that are in industries that are extremely stressful. And they didn't think about that because they thought, "Oh, I like this type of industry. This is something I'm fascinated with." So they've built the business and now they're stressed all the time because that's just the way that industry is wired. It's a very emotionally up and down industry. Some people love that, some people don't. So it just depends if it's right for you.
But what we always talk about is are you going to like the view from the top of the building before you climb the ladder? So figuring out that whole thing. We're so busy climbing, climbing, climbing, looking in the next rung that we don't pay attention to what the view is going to look like. So just making sure, I think that for your own good, for you own good as you go through this process, making sure that you actually do want to get to where you're going. And making sure that that ladder and that building is actually tall enough because what a lot of people don't think about is that it's actually in some – in many cases – just as hard to build a small business as it is to build one that's maybe in a bigger industry with a lot more potential. You can work just as hard. So is the maximum potential of what you're trying to do maybe realistically a $500,000 a year business, is it a 20 million dollar a year business, is it a 2 billion dollar a year business? What's the – not likely because that's perhaps not the right word – but what's the potential opportunity of what you're trying to do?
If you're trying to sell underwater craft courses or something, you know what I mean? Probably not going to make hundreds of millions of dollars doing that. Can you make a comfortable living maybe? I don't know. But considering really what it is you're trying to do and when it works are you going to like where you are and is it going to be worth your time? That's a pretty valuable thing to think through in terms of the industry you're going into. And if you truly believe in it and you see that it's got the potential and it's big enough and it's a place where you want to be then likely the passion is going to come through.
And there are a lot of investors that have told me (they're friends of mine), they invest a lot in people more than plans. So if they like your passion, they believe in you, then a lot of your work is done for you already as long as you haven't screwed a lot of other stuff up.
Allan: Yeah. Also just to add to that. The key word there is definitely scalability. It's probably one of the most important things I realized when I joined this business compared to what I did in the past. I had an online shop that sold football (soccer) merchandise online for a few years. And I was always the bottleneck because to upload things to the website, etc, it wasn't scalable. So whatever you do, it's okay in the beginning to do things that don't scale to learn about your business and the market, etc. And then over time always have that sort of insight there that how can it scale and is it scalable? And if it's not scalable, is this what I really want to do? Do I want to go that direction or will I rather opt out now and then look to do something else? And I mean, the AirBNB guys, famous for this; they went and lived with their initial customers just to find out how does this actually work?
And so do things that don't scale at the beginning to really understand the business, the market, your customers, etc. And then, yeah, look for how you can scale it over time. And if you can't scale it you might be okay with that. Just have a comfortable life with a decent business this way and I will sort of be the bottleneck, or depending on how many I hire they will all be the bottleneck because one employee can deliver one service to one person. And then, fine.
But then if you want to build something much bigger or something big, you have to think in scalability all the time. How does this scale? And if it doesn't scale, perhaps it's a point where you have to close up and look for the alternatives to do the thing.
Jesse: Awesome point.
Creating Your Core Team
Mary: Yeah, great answer. Okay, so let's kind of move into a little bit more actionable questions. So first, you're an entrepreneur, you're starting your business. A lot of people start to think in the beginning hiring. They think they need a team or they want a team. So how can you determine key hires that you need in order to start your business?
Allan: Yeah, I mean the thing is the first few hires are so crucial for your business because those are the people that will shape your culture. The CEO will be the culture of the company usually. But the first few hires will be his or her ambassadors also to sort of spread the word. And the thing with culture is if you start getting off with the right track, it's acceptable we do this. If it wasn't really at the beginning, now it's acceptable, we're off on sort of the wrong path. It's so hard to change later, if not impossible.
So that's also why the whole hiring, firing fast is the topic you have to keep in mind once you onboard people. It's so easy to read and say but then once you're in it it's, okay, this obviously doesn't work out. Now I have to set up a meeting or meet with this person and look the person in the eyes that this is not going to work out. Things all of a sudden, it changes a little bit and it gets really tough.
But also I would say look for where are your weaknesses. Like what is it, what areas is it that you have shortcomings and where someone can complement you? What is the skill set they have that you don't possess? Make sure you look for people that have these skills and then also...yeah. No, I think that's it. Yeah.
When to Hire
Jesse: Yeah, I think one of the things that I see often is when entrepreneurs are starting off, they maybe don't have a business partner yet or something like that. Or maybe they're not going to have one at all, which is a lot of times the case. And they're trying to go at it alone and they get a little lonely and they start wanting a team. And so they start hiring people that they don't need and that is not good for anyone. It's not good for you, it's not good for the business, and it's not good for that person because if you hire somebody before you need them, you might need to let them go. Which is, I assume, not a good thing at all, right?
So what you really want to do, and this is how I look at it, boiled down to just simplest terms is have you maximized yourself yet? We run a trash and recycling company and my business partner and I basically picked up trash until three or four a.m. in the morning every day for almost a year before we hired our first employee because it wasn't getting to the point where we had enough business, we had enough clients, enough doors to pick up trash.
When Travis and I literally couldn't do it all, that's when we knew we needed to hire somebody. And so we hired our first team then, and of course had a bunch of kinks to work out. That's the way it always works. It never goes perfectly the first time or at least it hasn't for anybody I know. So you figure it out as you go but it's really just a process of maximizing yourself first.
And I've seen and experienced, especially with young entrepreneurs who haven't really discovered how to maximize themselves first. And they'll come to me and say, "Oh, I need to hire somebody." I go, okay. Well, let's...show me a day in the life. Let's go down through your schedule. What have you done in the past week? Let me see your calendar." And they go down through two or three days. And then there's like four; if I were to really boil it down there's four to five hours' worth of work getting done each day. And there are huge blocks of time that just disappeared into nowhere.
So there are a lot of resources out there that can teach you how to become more efficient and effective with your time including, somebody I know who has some To Do List software that could probably help you out. And basically, what you want to do is really figure out how to maximize yourself first. Get as efficient and productive as you can. And when the time comes that your time to focus on the things that you're really the best at, which may be bringing on new clients, is being affected negatively by the other work you're doing. Those are things that can affect the decision of when to hire and when to bring on your first few people.
Mary: So next question. This is actually pretty common in the Boston startup scene. Getting a board of advisors or a board of directors. What determines if you should have a board that you report to or that you get advice from?
Allan: If you no longer feel that you can really hire the knowledge that you need to push your business in the right direction, and also at the pace you want then you might want to consider getting a board of advisors.
I would say we still don't have a board of advisors; I don't say that we couldn't benefit from it. We might also be closer to getting one than ever. But the thing with a board of advisors also, it's crucial that you get the right people on this board. You have to be very picky there. It has to be someone that also adds something that you don't already have and can have some experience or the right network or can make the right connections. You don't want to end up like too many chefs in the kitchen trying to pull you in different directions or whatever.
So I would say that you do your homework and make sure you get the right one if you feel that it's the need. But I think to a fine extent, you can live without. But once you reach a certain amount of employees, I mean, you're also responsible for the payrolls of these people. And it might be time to take in some professional advice there in that sense or a board of advisors that can help you so you don't get into trouble.
Jesse: Yeah. Definitely consider too if you're not ready for a formal board of advisors, one of the things that we've done early on is just put together an informal board of advisors, which in our mind, is really just a variety of mentors who are really, really good at what they do at different areas of business or whatever else that it is that we will need advice on. And so I've got probably eight or nine different people who are far, far more successful than I am at different parts of running my company that I'll send an email or a text every two or three months maybe.
Sometimes more often, sometimes less depending on the person and say, "Hey, can we meet for coffee or do you have time to work me in for a phone call in the next few weeks?" And get on the phone with that person. If I'm having an issue with figuring out how to manage the financial side of my business maybe I'll ask somebody I know who is a really successful CFO. Or if I'm having trouble figuring out strategy, I'll call somebody I know who is brilliant with strategy for a tech company that I'm familiar with. You know what I mean? A lot of times you can have the benefits of a board of advisors without paying sometimes the travel cost and sometimes it's stipend that is expected and things like that of having a formal board of advisors that come and sit around a conference room table with you.
Mary: Great. So you did mention a little bit of finance there, Jesse. When should you involve a financial consultant in your business? Is it ever too early?
Jesse: That depends on your strengths. Mine were not in finance. We hired financial consultants, just with a monthly fee, who helped us look over our books and figure out a strategy and all that kind of stuff, really early on honestly. I mean, we started the business barely knowing how to even read a profit and loss statement or not even knowing how to sign up for QuickBooks, let alone use it.
And so it depends where you're at. If you've just graduated from an Ivy League business school with a degree at finance, you probably don't need one right off. So it depends where you're at. What do you think Allan?
Allan: Yeah. No, I agree. That's related to what you said earlier on how do you maximize your resources internally? At a startup, you will wear many different hats. We didn't hire one or we didn't really involve one before we were 15, 20 people because I started out doing business development, and doing everything from SEO, marketing, PR, finance. You do the bookkeeping, you do everything. And then once it gets to a certain extent it's, okay. Now it's time. It's too much now. Now it's time to find someone that can take over and that you can pass this on. And I think that's the process we have a lot.
Also, when you hire the first one, make sure you get someone that's very cross functional. I think the business can benefit from that. But obviously, if you don't have any background in it and it might be good to get one in earlier but often, again, if the business isn't too complex and you have a fairly good picture of everything, you should be able to handle it yourself.
If you have someone in your network, also use them or else you've got to find a consultant; if you can't, you have to acquaint yourself with some software, etc.
Jesse: One thing I'll add to this is just that if there are parts about your finances that just don't seem to match up, that are really confusing, that might be a sign that it's about time. Because we went through a time where we were making really good money, our revenue was great. We knew what our margins should've been and they weren't. We were barely making any money and sometimes losing money, month over month. And it didn't make any sense at all because, again, our margins were great and we had great revenue. So where's the money going? And so what we realized is that hey, we haven't organized everything the way that it really should be organized. There have got to be methods that we haven't learned yet of doing it.
So that was at a point later in our business growth actually. That was not even too far in the past. And that was when we brought in even a different kind of financial consultant at that point. He did more than coach us and actually came in and just ran through everything with a fine-tooth comb and said, "This is what you're doing right, this is what you're doing wrong. Here's how I can or you can make it easier. Here's where you're losing money."
And I'll give you a quick example. One of the things that we discovered was that we were spending way, way more than we thought we were on travel. And that's because some of the travel expenses were getting shoved into other categories in QuickBooks.
And so we didn't even realize that we were doing things like we would text our assistants and say, "Hey, we need to go to Nashville on this day for a tradeshow. Can you please book the flights and hotel?" And we would just go and we never really thought to look back and see, okay, what...how much did this hotel really cost? Or did we really book flights with the right process or whatever? And we figured out that we hadn't...we realized we hadn't given our assistants any kind of parameters for what price range for our hotel. And they assumed that we were the big bosses so we would want to stay in a $500 a night hotel. So we had $16,000 in expenses from travel that we should not have had. And so you can discover a lot of that stuff sometimes with the help of a financial consultant that maybe you would've overlooked on your own in the busy hustle and bustle of running your company.
Mary: Yeah, that's a lot of expenses for travels.
Jesse: Unnecessary ones too, yeah. I don't need a $500 a night hotel. They're nice but I don't need them.
Mary: All right. We have time for one more question and then we'll go to audience questions. Just a reminder to our audience, you can ask questions by tweeting us @grasshopper using hashtag #frsdchat or you can use the question panel that's in your GoToWebinar bar that's on the right-hand side.
So crowdfunding has been a hot topic over the past I'd say couple of years. Do you think that success or failure on a crowdfunding site truly predicts the success or failure of a business?
Allan: No, I personally don't have that much experience with crowdfunding. I follow what's going on and obviously, I like the idea. It's a creative way of trying to raise money. But also I think it depends on the whole structure.
If all these people have too much of a say in everything we go back to the whole thing with too many chefs in the kitchen. And they're definitely not going to be on the same page as you. There will always be someone that will want to go in different directions. And once you do that, there will also be an extra task to report back to them. I mean, you have to document or at least keep them in the loop about what's going on and what are you doing. But if that's the only way to get your business off the ground, definitely it's a good idea.
And I said I don't know in depth how it looks in terms of structure and you might just get the money and then you give a status update on things; but you don't really have to report or you don't. I don't know if you have to set up session with them to discuss what do you want to do with the business, where you want to go. I'm not sure but yeah. So there's pros and cons in it. And I'm sure it will work for some. I can't give the example of a really good one. But I'm sure that they're out there.
Jesse: I think one of the things that you want to think about too is that with crowdfunding it's not all about your idea. That's not the only variable. The other variable is your pitch. So you can have an idea that's really, really good. But your pitch could suck and that could be why your crowd, that could be why your campaign didn't work. Or your pitch could've been really good but your idea was just not that great. You know what I mean? You've got to nail both of them.
I guess it could mean bad things for your business and its potential but I wouldn't take it as an end all like, okay, my campaign failed. So I really should just drop this whole idea. I would be very cautious before doing that because it could've just been your pitch. You might've just not have connected with people in the right way.
Questions from the Audience
Mary: Great, great. So let's go to some audience questions. So first is from Mary. She said, "Allan mentioned a brand value. Would he recommend to register a product or service as a trademark or a service as a service mark? And if so, at what point in time is it recommended to register?
Allan: As soon as you know you're set on the brand name then I would move the needle and apply. Because it's not really an expensive experience with filing for trademark or securing them (I think it's around $1,000); but the process is still long. I think it easily takes six to eight months. In some cases, even longer.
Also, if you have a logo, do that as well. And then file them because there is this period where anyone that has any kind of objections to your trademark, there's this period [to say something]. So I would do it and fairly quickly. But we also filed for some that we never used. So be sure you're set on what you want.
Mary: All right. So that actually is...looks to be...let me just double check here, the only audience question that we've had so far. So it's about time for us to wrap up. So Allan and Jesse, thank you so much for participating in the chat today. And thank you to all of our attendees for coming and checking this out. Just a reminder to all the attendees. We will be sending out a survey in a few minutes. If you can just take two minutes to take that survey and give us your feedback, it will help us improve these fireside chats in the future. And also we will be sending out a summary of the chat and any questions that we didn't get to today...there were a few with some answers. So look for that in your email box. If you RSVP'd, you will be receiving that. So thank you guys again. It was great talking to you and have a great afternoon.
Jesse: Thank you.
Allan: Thank you. Likewise.
Mary: Bye guys.