Execution is vital for small business

Frustrated entrepreneurs often ask why potential investors or prospective employees are not interested in funding or joining their company. The business idea sounds so good, why would anyone turn down an opportunity to be involved?

It may not be an investor's lack of belief in the idea, but a fundamental concern about the ability of the company and its team to execute the plan. In the world of retailing, many professionals believe that it's all about "location, location and location." Likewise, when starting a business it often comes down to "execution, execution and execution."

The plan to execute successfully depends upon a balance among several important components of your business model. Many feel that the most important variable in executing the business idea is the team, followed by the marketing, operating and financing plans.

-- The team: Investors often tell me that they would rather invest in an "A team with a B idea," as opposed to a "B team with an A idea." In other words, the team may ultimately play a larger role in the success of the enterprise than having the world's best idea on Day One. Research indicates that many successful startup businesses evolve the original idea within the first six months after starting the company, thereby supporting the investor assumption that people are the most important variable.

A team will include individuals with industry knowledge, marketing talent, operating experience and financial skills. The term "been there, done that" is often used to test the depth of the talent on the team. Do you have a team member who has had relevant experience growing a company, working in the industry or developing and implementing a marketing plan? The answer should be a solid "yes," not "kind of" or "no, but let me explain."

In sports, we like to play on teams with talent, with people who have demonstrated their ability to play hard and win. We need to understand that the same principle operates in the business world. Talented employment candidates and investors want to work with winners, people who have a track record of success, who have "been there and done that."

-- The marketing plan: It is difficult for a team to execute if the plan is not in place. A good marketing plan should include a definition of the market and customer segment(s) that will be targeted, how the product/service will be configured to deliver the greatest benefit to the customer, the channels that will be developed to reach the customers, the pricing strategy, the promotional plan, and an idea of how the company will differentiate itself from the competition.

If you do not have all the talent needed to penetrate the market in the early stages of development, consider strategic partnering. Find a firm that has developed a successful channel strategy and moves product through its distribution system. Outsource your promotional needs to others who can help with public relations, design and placement of media. If the barriers to entry in your market by other competitors are of concern, adopt a "first mover" strategy and outsource to accelerate your growth.

-- The operating plan: The plan for making the product or providing the service will be important to not only serving your customers, but also in building a loyal client base. If manufacturing requires too much capital in the early stages of building the company, consider a plan to outsource production. The plan should include a discussion of how you will scale operations over time.

-- Financing the business: With the above components in place you need to develop a financial package that includes a pro-forma income statement, balance sheet and cash flow statements that tie together and that are based upon a solid set of assumptions.

You are now better prepared to execute the business opportunity by attracting the talent and capital needed to be successful.

Gary Williams is affiliated with the BYU Center for Entrepreneurship. He can be reached via e-mail at cfe@byu.edu.

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