Page 16 - Business Plans that Work A Guide for Small Business

Entrepreneurs Create the Future • 7

You can’t buy your customers forever, nor expect undying customer loy-
alty just because you gave them a good deal. You need to have a product
or service that customers truly value; something that they will pay a pre-
mium for. In other words, your product and supporting service need to
be some combination of better, cheaper, or faster. We should pause for
a moment and explain what we mean by cheaper. Some readers might
misconstrue this to mean your product should be priced lower than the
competition’s. While this might be a sound strategy in some cases, most
new companies don’t have the economies to deliver a lower-priced prod-
uct effectively. Instead, “cheaper” usually means that you have a cost
advantage that adds value to your customer. In the spring of 2010, Ap-
ple launched its iPad starting at $499. The iPad was cheaper than most
laptops, but Apple optimized certain features and excluded others. For
instance, the iPad is an all-in-one supergadget that consolidates your
e-reader, gaming device, photo frame, and iPod all in one. On the other
hand, it doesn’t have the full functionality of a laptop. The iPad doesn’t
have any SD card slots or USB ports, it has limited multitasking capabil-
ity, and it doesn’t support Flash software. In essence, the iPad creates a
new class of computing combining features from existing devices such as
the smartphone and netbooks, while eliminating some features from the
laptop. While the iPad may be a cheaper device, it generates more traffic
to iTunes, where users download songs, apps, and e-books. Thus Apple is
creating value for its users throughout the Apple ecosystem. The “better,
faster, cheaper” mindset focuses an entrepreneur’s attention on delivering
the customer value proposition.
The business planning process is one of exploration and learning. It is
a disciplined approach where you ask questions, seek answers, and plan
for increasingly demanding market tests. Deep understanding and the
ability to adapt will improve your chances of success. The business plan-
ning process helps you move beyond the nascent entrepreneurial stage
and survive the new business ownership phase.

2. Too Much Money Is as Dangerous as Too Little Money
Failed entrepreneurs often cite a lack of capital as the primary reason
for their firm’s demise. The opposite was true in the Internet boom. Ven-
ture capitalists eager to invest large sums of money with the prospects
of quick liquidity via initial public offerings (IPOs), poured more money
into Internet companies than they could digest. At the peak in early 2000,
venture capitalists were pumping $8 million to $15 million per round