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  • Hello, my name is Ian Casterton

  • and welcome to StartMeUp videos

  • today we're joined by doctor Steven Gedeon

  • to discuss the proper techniques to business plan writing. Thanks for joining us Steve

  • My pleasure

  • Steve you have started over a dozen companies venture capital firms

  • and nonprofits

  • Can you tell us about your most recent company

  • i haven't started over a dozen i've been the CEO, turnaround or started over a dozen

  • My most recent company um... probably would've been 3DNA we raised

  • five rounds of financing

  • five or six rounds of financing

  • and it's the number one download in our product category for the last year and we grew the

  • company to over a million in revenues and over twenty employees before

  • declaring victory and moving. Ian: Congratulation on your success. Steve: Thanks

  • and you have also started a number of venture capital firms correct ?

  • yes of the largest would've been are hundred billion million dollars US VS program

  • based out of san diego

  • I was also involved with starting a couple of smaller seed venture capital firms as well

  • so you had both perspectives, You have asked for money as an entrepreneur

  • and you have spent someone else's money as a venture capitalist. Can you tell us about the different perspectives ?

  • It really doees give you different perspectives

  • When it's your baby and you are passionat about it. You don't understand why don't these idiots get it

  • and then suddenly the next week on the other side of the table going wow why don't these entrepreneurs get it

  • All I want is a simple answer to this, this and this

  • and the entrepreneurs just don't get it

  • so yes it has given me a really intresting perspective on the both buy and sell side of the transactions

  • and now you teach business plan writing correct ?

  • that has given me an even bigger

  • perspective. I thinnk Confucius said something like; to really understand something

  • you know if you hear something you learn a little bit if you do something

  • you learn more

  • but to learn the best you have to teach somebody else something

  • so it sounds like a business plan is a useful tool for just the entrepreneur

  • just to get their ideas on paper ? Steve: business plans play a variety of roles. Certainly

  • a number of business I have started up, we never had a business plan.I have seen a lot of

  • well written documents saying don't waste of time writing a business plan

  • certainly for some businesses you shouldn't waste your time just get out there just do it

  • do it,do it,do it and

  • why bother write it down on a piece of paper

  • but business plan certainly play a very key role for certain reasons

  • so certainly if you're trying to raise financing

  • and you want to

  • promote yourself as a credible intelligent entrepreneur or with the well-thought-out

  • business plan

  • you know what the money is going to look like, how much you need and why

  • then people want to see at least something

  • you should keep it short

  • i would say very few people will read more than twenty, twenty five pages. That would be

  • it

  • a lot of people won't go beyond the executive summary before they make a decision on it

  • so there is a lot of different reasons to write a business plan

  • so i'm an entrepreneur and I just decided, I want to write a business plan

  • Steve: Good for you Ian: Thank you

  • What are some strategies that I can get what is in my head right on the paper ?

  • do I have to think about an outline for everything or should I start right away ?

  • Good Question

  • i think that the

  • writing the business plan itself is not nearly as important as the process by which you think

  • through what is a successful business

  • that if you leave if you think through and write through what makes a successful business

  • and figure out all those things then the business plan will write itself

  • so

  • so when I teach the course for example What I start with is saying

  • just write down

  • week two or week three

  • Just tell me what your idea is

  • clearly and succinctly what is your idea

  • and surprisingly that's that's hard for a lot of people that's, they talk around it's

  • they

  • it seems clear in enough in their own mind when they try to put down on a piece of paper

  • the idea get's burried under too many words

  • you've got to be able to convey what your idea is in a sentance

  • maybe two

  • if you're selling to your mom who loves you maybe three sentances because she will pay attention long enough

  • but if it's not if you can't clearly articulated

  • at a paragraph then it's not clear in your own mind

  • that's that's the first phase of just what is it

  • and then

  • second phase i usually go through is i say

  • tell me in detail who your customer is

  • and why they care

  • and very often what'll happen is

  • as people think about who their customer is

  • and why they care then they have to go back and change what the original idea was

  • and so

  • the idea of being able to really focus on who that customer is

  • is so important and and and most entrepreners don't get this. What they do is to say

  • I'm seeling to women

  • well the problem is you can't sell to women

  • The thing I like to say to students sometimes is

  • imagine you started a company

  • there's a telephone

  • start making phone calls

  • you are selling to women

  • what are you going to do

  • just pick up the phone call the first person

  • Hi, are you a woman ?

  • let me sell at you

  • You stand on the street corner in a chicken outfit, hey women buy my thing ?!

  • you have to have in mind a particular woman

  • doing a particular thing

  • what is it about that particular individual that makes them

  • pay attention to your idea, love your idea and buy from you

  • and and the more you can't focus on and it's segmentation niche marketing kind of

  • business lingo associate with this

  • the better you can articulate who that target demographic is

  • their psychographics what they read where they hang out better you can place your

  • message in a place where they'll see it

  • Steve: Does make sense ? Ian: It does, and it sounds like you are detailing a lot about 0:06:15.669,0:06:19.039 the exectuive summary and how that is the more important element of a business plan.

  • Steve:We haven't written the executive summary yet.

  • I'm still working through, think through the right business. You can do this on a piece of paper, hand written

  • and so

  • let me go through a little bit more some of the kind of a big conceptual blocks that you

  • need to

  • fit all together

  • maybe i'll back up a little bit

  • the business planning process self

  • most business planning books seem to say you start beginning and you write through the end

  • but that's not what you think through business. The way you think through a businesses is you start

  • you start thinking through a little bit then you realize you got to go back to beginning and start

  • over again

  • then you think you little bit more

  • go back to the beginnig

  • so you've got the slate clean process to go through before you fine

  • you've figured out how to make it all came together

  • now you can start writing a business plan

  • so the first thing you do is to say you in general terms safely what's the business

  • and then say cooled by selling to

  • but in detail not just you know women or you know

  • people between the ages of twenty five and thirty five

  • you people of different you got out

  • honor that's when you're trying to sell your product to them

  • and so we figured we hear from you

  • customers

  • and uh...

  • figured out how quickly with the price point needs to be as an example

  • then obviously need lookit career

  • competitors are

  • uh... then comes

  • kind of a quarter business

  • concept of strategy

  • how it different

  • from your competitors

  • that way that's important your customer

  • which means you don't know who the competitors are getting the customers are

  • and yet a hundred different

  • now the figure that out and put it to go back to rewrite business is all about at any time

  • we have to go back to rewrite the customers are again sorry at any time in this process

  • should you be taking breaks to talk to any potential customers the market will tell you

  • anything you need

  • basket

  • but so many people rate these business plans that are castles in the sky dreams

  • based on

  • you know it's a billion dollar market side is gonna get a fraction of a percent of the

  • billion dollar market may act like that means anything

  • that's not what business is the bill

  • businesses are built one customer a time

  • once sale at the time

  • okay uh... just uh... dual curve ball

  • uh... as a venture capitalist country with them

  • hundreds of business plan meanwhile was the most important component or what did you

  • first look at tearing me if you should keep on reading or

  • his electrical reports

  • um i can speak with the story on this matter everybody agrees on this point

  • person you look at forces the executive summary

  • of the first thing you look at is really uh...

  • but

  • people bet on the jockey before the fed of course people

  • that honor eighteen with the big plan over and any plan with the people

  • so they look at the entrance

  • uh... they look at the overall business idea

  • and that damn

  • right to the financials and that seems like it's the most challenging part of the business

  • plan ras pickens struggle with the financial thing all the time shannon adaptive

  • and so many of the business plan but six release declined

  • step one is estimate the overall size of the market

  • you know some big crazy large number step to estimate your percentage of it

  • all i need is one percent

  • step three

  • make a random crazy yes

  • at how to go from zero to that one percents over

  • specs for your time

  • and that becomes your top-line revenue number

  • but but that's that's such fantasy

  • and again it doesn't honor the reality

  • of hollow on thurs build a business make once it with time

  • so as a superficial example you would say

  • month one popping a put in my financial protectionism i'm gonna make

  • five hundred cold calls

  • of those five hundred cold calls a hundred people above the election speak with

  • of those hundred people tend to go into

  • be interested

  • alarming face-to-face with five of them

  • of those five i'm not gonna close any sales

  • month too

  • i'm going to make

  • three hundred phone calls you know meet with that's number of people and then i'm calling

  • to make a sale

  • and also part of those

  • revenue drivers are why do you make a sale

  • who wanted to make that sale to there's a big company little company like what part

  • of my target demographic

  • how much is that still than before

  • so no

  • as a b c when i look at that time thousands eilers instruction arbitrate ten thousand

  • dollars i can see it hard to come up with that ten thousand

  • all i see you can make a bunch of phone calls you to meet with people

  • you can't see why the san francisco open a cd expense that we are very good

  • on and uh... all i see you not

  • and you get a filmmaker silverstone

  • i've been there you're gonna feel glad to be you know that you want to

  • you can see all the steps of the author is going through

  • to get to that sale

  • now that number has some credibility

  • it's not

  • you know you throw darted a dart board and month one of my have ten thousand dollars

  • mean

  • or even worse you say something stupid like that this is conservative

  • everybody knows that the numbers that you're putting your business plan are long before

  • you put

  • and you'll be believes your numbers

  • and chances are you getting your numbers right are astronomically zero

  • but the question is

  • once you've got my millions of dollars

  • your six months it

  • and now the numbers are wrong we all know to be wrong

  • the question is has the projections giving you a died management action

  • so that's the real purpose of the financial numbers is does it give you a guide to action

  • but let's say for example that you say uh... okay

  • uh...

  • on my spreadsheet first able to do them as they are going to give away

  • ten thousand brochures

  • of those ten thousand brochures

  • arm

  • we're gonna get a two percent response rate

  • people go to our website

  • uh... as result we have a certain number of hits on our website

  • fall from the number of people come to our website we're gonna conversant percentage

  • of those two cells

  • uh... at a certain dollar value

  • and now what you know

  • finally revenue number it was is you know

  • all those numbers add up basically

  • what comes and goes

  • your numbers are wrong

  • question is why what did you feel depicted you give away the right number brochures