Protecting Ownership of your Company through your Business Plan
Shuki Lehavi is the founder & CEO of Gumiyo (www.gumiyo.com). In this video he discusses how to protect ownership of your company through your business plan.
- Be realistic with your business plan
- Allow flexibility in the model
- Cash is king
Ownership and your business plan actually tie together specifically around involving external investors. VC, Angel Investors or others and what we’re going to talk about or my take on it is really to plan your business plan in a realistic way. In a true way in which you want to run your business as an owner rather than just as someone else’s employee.
So let’s start with the first rule. The first rule is don’t “BS” on your business plan. Do not create a plan that you and your team members don’t believe in. Take a plan, build a realistic plan even if it’s a very conservative plan and run the plan by certain people that you feel comfortable that will give you a very good and honest feedback on the plan. These are experienced professionals or anyone else you know.
Rule number two, allow flexibility in the model. Allow flexibility for the market to go up and down, for payment terms. So often do we see a customer just slow down on payment, 30, 45 and 60 days and most business models at least the ones that I see don’t account for that. This will delay your entire revenue stream. In the case of growth you will be spending a lot of money, hiring a lot of people but on the other hand not getting paid and your revenue will slow down. That delta must be represented in the plan.
The third rule cash is king. Your goal is to never run out of money and in order to never run out of money you have to carefully plan cash. Cash can come in from revenue. It come can come in from investment. It can come in from several sources. There’s ways to plan your cash. There’s ways to even plan your deals such as they have an up or a bigger portion of the cash coming upfront. There’s ways to plan your product licensing such that you ask your customers to pay a year in advance but cash is king. With cash you have the ability to drive your company to invest in your company. Without cash you’re running out of money and someone’s going to take your company away.
The last point is, do not drag the Excel over. So may times do I see business plans and even ones that I wrote in which you just put some assumption and start dragging the columns to the right and you get the beautiful curve. The problem with that is that you do not know what drives your business. You’re not accounting for what it would take to drive your business up or down for the factors in cost, for where you would need to make an investment, for how long it will take you to make the investment, establish the sales team and build the infrastructure that will then take your company forward.
I think if you keep to these four simple rules you’ll find yourself building a very successful and honest business plan and that will help you not run out of money and that will help you protect and retain the ownership in your company.