Platt Perspective on Business and Technology

Planning for and building the right business model 101 – 33: goals and benchmarks and effective development and communication of them 13

Posted in startups, strategy and planning by Timothy Platt on November 22, 2017

This is my 33rd posting to a series that addresses the issues of planning for and developing the right business model, and both for initial small business needs and for scalability and capacity to evolve from there (see Business Strategy and Operations – 3 and its Page 4 continuation, postings 499 and loosely following for Parts 1-32.) I also include this series in my Startups and Early Stage Businesses directory and its Page 2 continuation.

I offered three somewhat stereotypic if commonly occurring exit strategies in Part 32, that a startup can consider and pursue as it reaches a point in its development where it has begun to be consistently profitable: and when it is now entering its first real growth phase:

1. A new venture that has at least preliminarily proven itself as viable and as a source of profitability can go public and with all of the organizational change and all of the transparency and reporting requirements that this entails as they begin offering stock shares.
2. A new venture can transition from pursuing an organic growth and development model (as in exit strategy 1, above) but to one in which they seek out and acquire larger individually sourced outside capital investment resources, and particularly from venture capitalists as briefly touched upon in Part 28, Part 29 and Part 30 of this series.
3. A new venture, and certainly one that is built around a growth-oriented business model, might build its first bricks and mortar site, in effect as a prototype effort that it would refine with a goal of replication through, for example a franchise system.

And I then focused in that installment on a set of general issues and business analysis and development approaches that would be applicable to essentially any such business transition decision making process. And at the end of that posting, I stated that I would continue its narrative here, by delving:

• “More into the specifics … where I will consider exit strategy 1 from my above list of three in detail: the fundamental change scenario of a business going public with all that that entails.”

And I added that after that, I will more specifically consider each of the other two exit strategy scenarios under consideration here, as also noted in that anticipatory note. I will do all of that in this series, delving in more detail into these three specific scenarios. But I have decided, on further reflection to expand upon the general principles foundation for my Part 32 discussion before considering the specifics. And I begin doing so by acknowledging a point of detail that I have been reminded of by at least a few readers: some very successful startups and online ones in particular, have successfully pursued exit strategies 1, 2, and/or 3 as touched upon above, before showing anything like established consistent profits of the type I indicate as necessary there. And a select few have done so, and have ultimately succeeded as business ventures too, even when they had not fully developed their still just-potential source of defining value into an explicitly monetizable and marketable product or service first, too. But those are in a fundamental sense the exceptions that prove the rule, that prompted me to set up my three scenarios the way I did. Failure to successfully build a foundation for taking one of these three exit strategies, or any comparable-for-stage alternatives to them, are why so many businesses that were started with innovation in mind, disappear when they are still very young and still forming. I find myself thinking of my startup consulting experience with new young online companies, leading up to the original dot com bubble burst as I write this. I know how the dynamics of what I write of here play out, from personal hands-on experience from having served as an outside consultant then, and to businesses that succeeded and to way too many that did not and often in spite of my best efforts to bring more due diligence based prudence into their decision making and spending.

I have written about this in earlier postings and series, so I will only repeat here in this regard that no, it does not make any sense for a new dot com online business to blow essentially all of their cash reserves in a single Hail Mary pass attempt by purchasing on-air advertising time during the ad breaks in a Super Bowl game. Returning this discussion from that line of thought to this posting and its context, I repeat that I chose three exit strategies for discussion here that are grounded in their planning and execution in solid due diligence and risk management planning and preparation, and in building in the resource base needed to support flexibility in the face of the unexpected – which is sure to arise somewhere, no matter what path forward is actually selected and pursued.

I said at the end of Part 32 that I would more specifically turn to consider the first of the three exit strategies that I repeated listing at the top of this installment. And I will do that. But this has turned out to be more of a general principles, background and foundation building posting. So before turning to exit strategy 1, I would continue my more general background discussion for that, by outlining some specific principles that would go into selecting and specifically pursuing any given, at least initially more generically framed exit strategy. And my goal here is to offer points that would apply to any such exit strategy scenario contemplated or pursued.

• If the first general issues half of this posting is about building a foundation in what has already been done at a business, for it to succeed, my goal in what follows here is in building a foundation that is explicitly designed to support the business for what is to come, and particularly where that means entering into the new and unknown.

And with that point in place, I explicitly turn to consider exit strategies as transitions, and as such as representing moves into the unknown. And I do so by posing a basic checklist of issues and questions that should enter into any due diligence exercise there, and at least as a starting point for more focused analysis to come.

• Know where your business is now,
• And for its strengths and the positive potential that is being developed toward, in accordance with its basic business model and its strategic goals in place,
• And for its weaknesses and its resource and operational systems gaps that would affect its being able to realize that potential.
• Inventory these positives and negatives and prioritize them: all of the realistically potential negatives included, and both in terms of need to address them and in terms of capability to do so, if and as they arise. What, among other things would be needed in order to check off and successfully remediate the high priority items on the negatives list, and what would be the costs faced from attempting to do this from assets and resources currently held, and/or ones that would reasonably be expected to become available if the business were to proceed as-is, along its current growth and develop path and without entering into a more fundamental transitional change of any type?
• If it is found that at least a critical threshold of need for addressing already realized gaps or impending ones, cannot be addressed as-is and with the business simply following a “business as usual” path forward, then it is going to be necessary to at least consider more disruptively changing that path forward, and here through pursuing an exit strategy of some sort as a business transition.
• And this brings me at least generically to the issues of what a possible change of that sort might offer and both in its potential positives and in its potential negatives. And that includes understanding any restrictions and limitations that buying into them would bring. And how does this mesh with the business itself and for how it is developing?

I am going to expand upon the narrative that I began in this brief set of business analysis-oriented bullet points, in my next series installment and with particular attention paid to the last of those points. And I will do so in terms of the three specific exit strategies under consideration here, as repeated at the top of this posting, beginning with the first of them as promised above.

Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory. And you can find this and related material at my Startups and Early Stage Businesses directory too and at its Page 2 continuation.

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