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