A lot of entrepreneurs have mixed feelings about business plans. Some see them as useless. Others see them as vital. I was on the fence a few years ago but am now firmly positioned in the opinion that they are vital when talking about a true entrepreneur with a real business. It may be fine for an enthusiast with a small-time business concept to not create a detailed business plan in writing. However, if one regards themselves a professional entrepreneur, as I do, and is taking on a serious venture meant to grow big, then not producing a quality business plan is almost always a sin in my opinion.

Now, I know that creating a professional business plan can be a tough and grueling process for many people. I fall into this boat as well. For me, writing in general is a grueling process. I am easily able to strategically think about all of the details of a business venture. However, thinking about how to translate my thoughts into well sounding sentences is the part that I don’t like. But regardless of why one may find creating a quality business plan tough, it is necessary. Here is why…

A professional entrepreneur taking on a serious venture is going almost always be involving other people at some point who will have a meaningful stake in the venture’s performance. Unless one is so credible or so suave that a business plan doesn’t matter, then having a business plan to backup other people’s investment of resources in your company is going to help you seal the deal. This may be the case with all types of people & organizations that you are dealing with, including banks, investors, suppliers, customers, employees, partners, advisors, etc. If you go to these people and verbally tell them about what you want to do, especially if it is starting up a new business, then you probably won’t get too far without having something more concrete to back it up than your verbal words. If the business isn’t off the ground yet, then at least having a quality business plan in place that shows you have researched, fully understand, and committed to the venture is key.

Another reason for creating a quality business plan is to aid the operation of your business. You may create many other types of documents to describe & aid operation other than a business plan, as companies do as they mature. However, the business plan can be a good document for guiding a company too. If you have nothing else, then you should at least be using your business plan in this way. It doesn’t have to detail everything down to the microscopic level. It just has to cover the vital parts of how the business is supposed to run. Utilizing this creates a structured environment of execution. It is usually much easier to optimize an organization that has consistently followed a plan compared to flying by the seat of its pants. If something changes, then just update the business plan and adapt your business accordingly.

It is true that the more business plans you write, the easier they get the next time. Also, depending on who you are showing your business plan to and for what purpose, you may want to create different versions for each audience. Some information might not be relevant to some and therefore reduce the effectiveness of the document. One thing that I believe in is super long and in-depth business plans. Creating a business plan that is like 200+ pages long is something that I recommend for a serious venture. This really helps communicate to others that you truly know the business and are indeed committed to it. Well worth the pain of writing such an extensive business plan. Now, not everyone is going to want to read such a long business plan. Therefore, creating another short version outside or inside of the long document is a good idea. Make sure to highlight the fact that you created the entire document within your plan, otherwise some people will assume that you hired someone else to do it for you.

There are many suggested formats to business plans. Some follow a paragraph form. Some, a bullet point form … etc. I recommend using it all in a synergistic way. Long paragraphed copy, bullet points, lists, graphs, images, everything. Heck, even video could help. They can all add value to the business plan. So use them all in a way that works and maximizes the impact of the document. There are many ways to categorize different sections of a business plan. For example, the marketing section, the management section, etc. You want to think about your audience with this. You certainly want to cover everything important. However, some things can overlap and choosing how to categorize them is important and should be view through the eyes of your audience.

When creating a killer business plan aimed to convert potential into results, you really want to dig deep down and create something world class. Then once you have, be proud to let as many targeted people know about it as you can. I am currently creating a couple world class business plans like this for business ventures of mine. They do take a long time to create. It is well worth it in my opinion though. These are world class business ventures of mine and they are intended to produce world class results. Nothing less than world class will do at every step of the way.

Almost all businesses are primarily hierarchical. This means that almost every worker is governed by someone in an authoritative position above them. Picture a pyramid. The board of directors governs the executives, the executives govern the vice presidents, the vice presidents govern the managers, the managers govern the other workers. Is this the most effective way to structure a corporation? I don’t think so. So what is a good alternative and what should an entrepreneur in control do?

A logical alternative to a typical corporate hierarchy would be a heterarchy. A heterarchy is like a peer to peer structure where the people are on the same level. They can all make decisions for themselves. However it is clear that there does need to be some policy in place that governs these workers. The question is how detailed of policy?

Theoretically it is policy that ultimately rules above all job functions except the creation of policy. So why is it that people are separated out from each other in a pyramid structured fashion? Why not pool everyone together in one big heterarchical group and let policy dynamically create the right virtual separation of people needed to function as a bright, light, and tight system?

I really do think a peer to peer entrepreneurial setup is the better way to structure a corporate organizational system. However, this opinion is of an ideal world and in the real world it doesn’t work so easily. Why? I think it seems to work much better for small businesses rather than big businesses. Once you start stacking hundreds, thousands, and tens of thousands of people into corporation it gets overwhelming a lot of times to keep every step in sync, even for the leaders who know best how things should work together. Many imperfections constantly arise in the functioning of the corporation. These fundamentally include workers not following policy when they know it, workers not knowing or understanding policy, absence of policy in business situations, and poorly performing policy. When these occur what is needed to be present to straighten situations out? People with organizational authority. Hence a big reason why we are a primarily hierarchal society.

I think the two major things that limit corporations from being able to upgrade to an entrepreneurial heterarchy are the overall quality of its policy and its people. To give a computer analogy… Better policy is like creating better software and better people is like installing higher performance servers. Do you have to physically structure the computers in a hierarchy to achieve the system you need? No. You can just hook them all up to the same network and control process hierarchy through software. Then when you need to change things around you don’t have to physically move the computers (people) around. You just change the software (policy). Creating better policy is a technical logical thing. However, creating better performing people is a psychological thing. I think these days corporate policy is more advanced than the body of people working in most large corporations. If a sizeable company really wants to make a true entrepreneurial heterarchy happen for themselves and actually work then they will most likely have to master personal development within their organization.

If a company wants to extract benefits of an entrepreneurial heterarchy then it doesn’t have to fully convert to it on every level. It can become a hybrid and have both hierarchy and heterarchy. Maybe it would be something like having a board of directors, vital executives, and then a big pool of workers. It could look like whatever anyone pleases.

So should an entrepreneur take the plunge and build a peer to peer corporation? Not so fast cowboy! You got to really understand what you are getting into. You would be fighting the deeply engrained hierarchical mindset of society. You’ve got to consider the unique specifics of the business you are in. If you want to make your company bigger than a small business then how will your system perform at 100 employees, 1,000 employees, 10,000 employees? If you convert your business from a hierarchy to a heterarchy or visa-versa then how will that affect it?

I think an entrepreneurial heterarchy would be great for most self-employed type businesses with very few employees. I think my plans are going to be to go with a hybrid approach with my empire corporation looking more like a traditional corporate hierarchy in the beginning and moving more towards an entrepreneurial heterarchy as my leverage to do so goes up. With my subsidiary companies, I will probably primarily stick to a traditional corporate hierarchy structure until Watkins Corporation is extremely strong and dynamic.

What a well performing entrepreneurial heterarchy does is shift many resources of the corporation from the bloated process of managing flesh to efficiently managing logic.

I’m a pretty big believer in affiliate marketing. Why not? It just makes sense to me. I’m not talking about you being signed up with and selling for another company. I’m talking about the flipside. I’m talking about creating your own affiliate program for your own business where others sell for you and you only pay them for their sales.

A lot of people identify affiliate marketing with the internet. It seems like most affiliate marketing is tied to the internet but it certainly doesn’t have to be. Affiliate marketing may not work great for every scenario but usually if you are selling something then an affiliate program will most likely cash flow for you.

If a stranger walked in your office and said “I have 100 customers who want to purchase your product/service. If I give them to you will you pay me a 10% commission? I’m happy to receive my payment after the sales transaction has successfully been completed.” would you say no and send them away? What entrepreneur turns away business handed to them on a silver platter? One moonlighting as a McDonald’s manager, that’s who! Affiliates are a way to capture extra business like this.

Hiring a traditional sales force can be a good option for increasing profits but at the same time an affiliate program can do the same. You don’t have to usually choose between the two. A traditional sales force and an affiliate program can work together for your business. There are differences in the two that give them both their unique advantages and disadvantages. Usually the members of a traditional sales force are going to be more professional and skilled than affiliates. There is typically going to be more financial risk with a dedicated sales force. Even if you pay your sales people completely on commission, there is going to be ongoing management and other operations costs associated with a sales team that you have to invest before sales. With an affiliate program you may have minor costs like software, marketing materials, contracts, minor administration, etc, that you have to invest before each affiliate brings you sales. The cost and maintenance is a lot less for affiliates who are independent contractors without much obligation to you. You will have more control over sales people you employ but it typically comes with a higher price tag. Either one could outperform the other depending on the specifics of a scenario though.

Your affiliate program can be customized to your needs. There are a lot of variables to tweak. For example, just because a lot of affiliate programs accept anybody into the program doesn’t mean you have to. You may only want to accept attorneys, CPAs, and financial planners into your program. It could be anything, you get to write all of the conditions of your affiliate program. You may put some conditions in place to help fuel sales. You may put some conditions in place to help mitigate loss of brand equity. It’s your business and it’s your affiliate program. You control it!

Think about creating an affiliate program to boost your sales and profits.

I’m always building upon what my ideal company would look like. As I’ve said before in my Amplitude of Outlook post, I always look to the ideal then adjust down for the reality of the situation. I do this in everyday life as well as in business.

One of the largest assets I see wasted within companies is the knowledge contained within them. Knowledge is used for everything and having the best knowledge is worth a lot. Having the best knowledge means having the right information and understanding it in the right way.

The asset of company knowledge is one that is very hard to manage, protect, and leverage. My vision is to have the systems in place to efficiently gain knowledge, record it, disseminate it, and integrate it into the minds of other workers.

That is a lot easier said than done. It will take integrating that principle into the entirety of the business. It is not going to happen unless it is a big focus in everything the workers do. This will have to rely on sophisticated software systems in order to be achievable. If it wasn’t then the information couldn’t spread in a timely manner throughout a company of any decent size. Also, with software you can clearly see that company knowledge can be recorded and learned by people much more efficiently.

More and more tools are emerging to help achieve this. Microsoft Dynamics software looks like it could provide some leverage for this. It seems to focus on the data relevant to transactions and tying that in with the structure of business systems. I’m envisioning a system that encompasses all knowledge of all workers for leverage in all ways. Using tools such as blogs, wikis, rss, and forums could help. A total company knowledge system could never be standardized into a retail software package. To build this type of system would take large amounts of knowledge from many areas of business & life and adapting it to a specific company. Although, implement a system like this and watch your business turn into a monopoly within its industry!

I’ve been sort of aware of this tactic for building rapport for a while but really realized its power just recently. What I am talking about is copying another person’s body language, voice and other characteristics of their presence. For example, say you meet with another business owner to discuss a joint venture. When you walk into her office and sit in front of her desk, start mirroring her. If she is sitting up tall, copy that. If she talks fast, copy that. If she makes hand gestures when making a point, copy that.

That may sound dumb but it actually works. You shouldn’t make it obvious because you don’t want the other person to figure it out. Subtly use similar body language, words, character of voice, etc. The odds of you building rapport and her liking you will significantly increase.

I’ve found that this effect does regularly occur with people when I do this. More than 90% of communication between people is not the words that are said. People find themselves liking others for no other reason than their presence. Mirroring another’s presence is a short cut to getting them to like you and it is obvious that this can help build your business.

If you have equity built up in your home then one way you could capitalize your business is by extracting some or all of your home’s equity out in the form of cash.

This happens to be one of my favorite ways to self-finance a business venture. Using a refinance loan, home equity loan (HEL), home equity line of credit (HELOC), etc, you are able to pull equity out of your home at an interest rate that is a lot lower than what good businesses can make. You are able to pay off the loan over a long time, like 15 to 30 years, which helps keep the payments low on the loan. I think it is a great debt financing tool.

But Brian, by gambling my home’s equity in my business idea I face the possibility of being foreclosed on and losing my family’s home if things go bad and I can’t make the higher monthly payments.

Yeah, so what!

First, if you consider it a gamble then you probably shouldn’t be using this technique right now. You’d probably be better off bootstrapping with what you’ve got. Get the word gamble out of your mind! Business is not about gambling. It is about making calculated investments of resources. There is whole a lot more leverage available in real life business than your favorite casino game. That means that you can have a predictable amount of control over your business success. If you have built-up enough leverage towards succeeding then the choice to use your home’s equity, for your business, shifts from being a gamble to a smart decision.

Nothing is guaranteed, no matter how sure you are, so you could be foreclosed on and lose your home if your business doesn’t pan out. Your credit will be hurt badly and you & your family will have to downgrade your lifestyle. It all comes down to what your goals and priorities are. I am the type who will significantly sacrifice my lifestyle for my financial goals if I need to. If I had a solid place for extra capital to work then I’d have no problem risking my home, credit and lifestyle. If I don’t add available leverage, I know I am instantly giving up on opportunity to help realize my goals & dreams. That thought causes me pain.

Not only is it wise to use bookkeeping software because it will save you time and energy but it can also help make your business more money. I know a fair amount of entrepreneurs out there are using systems such as Excel spreadsheets or if you are from the Business Stone Age, pen and paper. However, if you want to operate a serious business here in the new millennium and you probably do if you are reading this blog, then you should invest the effort to learn how to run your business procedures through bookkeeping software.

I personally use Intuit QuickBooks. A software package like this allows you to employ a double entry accounting system and link all documents such as estimates, sales orders, invoices, purchase orders, etc, to their respective transactions. If you are intimidated by accounting, don’t be. You’ve already gone through a lot tougher things in life than learning basic double entry accounting.

Managing your accounting and transaction & business information with bookkeeping software can help you profit more because you will be able to easily generate reports that will let you stay on top of the financial performance of your business. By consistently reviewing your business’ reports, you will most likely be able to spot opportunities to make a change in your business that will increase your bottom line. It may be something as simple as finding out that you only need to keep 100 units of an item in stock rather than 200. This would improve your cash flow and allow you to use that money to profit in other places.

Once you get into the habit of using bookkeeping software it becomes second nature. Trust me, it is really worth getting into that habit!

For every business there are costs and benefits for the entrepreneur to personally manage and control each different factor. A lot of entrepreneurs and people in general “have to always be in control.” This mindset is why a lot of businesses stay very small and do not grow. At some point if an owner wants his business to realize large profits then he/she has to give up a lot of control in the business.

Look at all of the bigger businesses out there. You will not find “Verify the secretary’s time card” on the owner’s to do list. You are probably okay with having someone else take care of that one right now but how about totally cutting yourself out of approving the creative materials for all of your advertising? That would really shake some entrepreneurs up to give control of that up. Though, at some point it is not worth the time spent on that for you.

As a business grows and changes, so do the costs and benefits for the owner to personally control many things. You need to continuously be analyzing this and be looking for more leveraged actions to invest your efforts into. It is probably never the smartest thing to have complete control over everything. If someone does then they probably list their occupation as “Self Employed” on applications and aren’t realizing the growth that they are capable of. That type of entrepreneur is usually an extreme micromanager and in business alone trying to compete against smart cooperative teams.

Learn how to put the right people in the right positions with the right responsibilities and build in systems to audit performance. Smart dependency on others allows growth to happen.

Just about every entrepreneur could use a nice chunk of capital to start or expand their business right now. But it usually comes with a steep price on it. The two main term classes of OPM (other people’s money) are debt financing and equity financing.

Simple definitions…

Debt financing is when you take capital and agree to pay back the investor the original amount plus interest.

Equity financing is when you take capital and give the investor stock or ownership in your business or asset.

Now, as an entrepreneur with a business, how do you chose which type of financing to pursue? It depends on your risk tolerance and unique deal but I will tell you about my own situation.

First, when it comes to entrepreneurship, I am all about building big businesses. I have several plans for businesses that have the potential to be truly revolutionary enterprise companies. I’ve always cringed when I think of giving away a large percent of a company that I see being very profitable. So when I have a company or business plan that has a lot of real potential in my mind then I will not take equity financing unless I’m receiving an unreal deal.

I will take equity financing for smaller business plans of mine or non-unique investments like real estate and some businesses.

I prefer debt financing over equity financing. Using debt financing does entail more risk for your business’ survival but the reason why I go for it is because I believe it offers better odds for making multiple billions of dollars in net worth over the long run when combined with a very smart multi-business hands-off management system.

I’ve also pondered a few hybrid debt/equity financing options. These have just been purely theoretical ideas from me that look great on paper along with a good asset but I have no idea how they would be accepted in the real world.

So the actual action I am taking right now in my life is to focus on creative investing to buildup my own first $1 Million within one year. I will then be able to fund some of my plans more freely and be able to attract a lot more capital on the terms I want to start companies.

The day that an entrepreneur stops learning is the day that their company’s growth will start slowing down.

From that statement you can already tell that I am big on education. I think if you want a decent shot at being successful as an entrepreneur then you have to consistently make wise choices. This starts with being knowledgeable and capable in several aspects of business.

But what is the knowledge and what are the skills an entrepreneur should really learn & focus on the most?

The answer to that question is going to depend on the system of the business that the entrepreneur owns. I’d guess that most thoroughbred entrepreneurs are involved with multiple ventures in their life or one of their business systems goes through a major change at some point. If that is true then I think a general answer will fit most entrepreneurs.

I would definitely say that a few areas standout for providing the greatest amount of results for entrepreneurs in their companies. My answer does differ for entrepreneurs who own and operate small businesses compared to those with mid-size or big businesses.

Small Business Entrepreneurs

The ones that stick out for me as being the most important are marketing and management.

Smaller companies can’t afford lapses in sales or too many bad performing employees. Having one or the other alone could put a major dent in the business. An owner who is marketing savvy will be better able to keep customers buying and coming back. Marketing is the main driver of this. Also, an owner who is good at managing employees goes a long way. If an entrepreneur wants to get anywhere meaningful in business then they are going to have to hire and trust in employees. You might say that, on average, an employee has more power to influence the company in a small business than a bigger business. If this is true then a few bad apples can potentially poison the entire tree. On the flipside having the employees in sync can produce handsome growth and profitability. The way to swing this in the positive direction is through effective management of people.

Bigger Business Entrepreneurs

In bigger businesses I would say that leadership skills and investing knowledge have the greatest impact.

Once you’re a bigger business you are most likely going to have the resources to hire the good people you need and implement a powerful business system. At this point the entrepreneur should focus his/her efforts on even more macro issues surrounding the company. The biggies for me are large decisions for capital & resources, as well keeping the company focused and moving in the right overall direction. Those with sound investing knowledge and leadership skills are going to be better fit to handle their mid-size to enterprise company.

Most entrepreneurs start out in small business before owning a larger business. This means that one may have to get good at all of these if they plan to one day own a bigger company. Regardless of where an entrepreneur wants to end up, he/she should be very well rounded in business knowledge and skills.