Group Brainstorming Tools and Exercises

Brainstorming is a tool that can maximize creative thinking by solving a design problem, naming a product, or developing a business idea...The process works like this:

1. Select a group of people of different types, experiences, and knowledge.
2. Bring them together in a relaxed setting where you will not be interrupted.
3. Engage in some fun exercises such as coming up with ideas to improve a business everyone knows. This will get their creative juices flowing.
4. Establish a rule that no one can express negative judgments about any one else's idea.
5. Give the group a question such as, "I want to start a seafood restaurant in town. What qualities would make it successful?"
6. Designate someone who can write quickly to list on easel pads all the ideas so everyone can refer back to them.
7. Have people work individually several times during the brainstorming session to write down their ideas and report them back to the group.
8. After the brainstorming session, go through the list and select the best and most realistic ideas.

Brainstorming can be used to develop an idea from scratch, to refine an idea, or generate a strategy to vie with a competitor.
A variation of brainstorming is "rolestorming" in which each member of the group is assigned an identity and asked to come up with ideas from that person's point of view. For example, the roles of customers, suppliers, or competitors can be used, or fictional characters, such as the superheros Batman, Wonder Woman, and Superman.

Edward Rogoff
Bankable Business Plans

Creating Financial Models

I have completed writing my ten steps to writing a bankable business plan and hope that they have been helpful in guiding some of you in your entrepreneurial endeavors. I wanted to post some helpful tools that I had put together when creating my textbook for Bankable Business Plans for Entrepreneurial Ventures.

Because your financial projections represent the heart of your business plan, it is critical that you have a superb financial model that combines all the financial aspects of your venture. Financial models are usually produced with a spreadsheet program to allow the numbers to be linked, so that a change in one automatically translates into related changes on all of the projected statements and analyses.

Creating a model from scratch is an excellent exercise because it forces you to consider all the financial assumptions in your business plan and it will teach you how the model works before you make changes in future versions. There are several readily available spreadsheet tools that can help you:

• www.bankablebusinessplans.com has many resources related to my textbook including sample spreadsheets that you can review and download.

• One of the best spreadsheet models is Active Money produced by the Columbus Enterprise Development Corporation. It is comprehensive, all the tables are links, and it is free. It is available at www.cedcorp.com

• One of the easiest financial projections model is available on the Missouri SBDC Web site: www.missouribusiness.net/library/finance.asp. Produced by Aldis Jakubovskis, this model is not overshelmingly detailed but it clearly shows which assumptions have to be entered, and produces completed projected statements based on the assumptions.

• Commerce Clearing House (CCH) has a very useful site for entrepreneurs at www.toolkit.cch.com. It has model spreadsheets, as well as useful and up-to-date tax planning tools.

• Find a plan with a financial model for a business in your industry. Many quality plans are available on Web sites for business plan competitions such as the MOOT Corp. competition at the University of Texas, at www.businessplan.org. Because of the large number of quality plans on such websites, you have a good chance of finding one for a business in your industry.

• Excel templates are available with the CD that accompanies the MBA’s Guide to Microsoft Excel 2002 by Stephen L. Nelson, published by Redmond Technology Press.

If you build your financial model from scratch or modify an existing one, there are several guidelines that you should follow:

• Examine your finished model in detail. It is not sufficient to review the model to see if it “looks” correct. You must test it by proofreading it carefully and checking all the spreadsheet cell references and formulas.

• Test the model by making changes to assumptions and checking to see if the changes flow through the rest of the model.

• Compare the model to others for similar companies to ensure that it uses standard industry categories.

• Have some of your advisors who are accountants, financial professionals, or people with industry experience, review the model.

Edward G. Rogoff
Bankable Business Plans

Action Step # 10: Present Yourself in the Best Light: What are your qualifications for bringing your plan to fruition?

Action Step # 10: Present Yourself in the Best Light: What are your qualifications for bringing your plan to fruition?

The talents, experience and enthusiasm you bring to your enterprise are unique. They provide some of the most compelling reasons for others to finance your concept. Keep in mind that investors invest in people more than ideas. Even if your potential business has many competitors or is not on the cutting edge of an industry, the qualifications and commitment you demonstrate in your plan can convince others to proffer their support.

Your resume will be included in the separate appendix of exhibits at the end of the plan, so this is not the place to list every job you’ve ever had or the fact that you were an art history major in college, especially if these experiences have no direct bearing on your ability to start your own business. But it is the place to emphasize qualifying skills that may not be readily apparent from your resume.

But don’t overlook the impact being some part of your background that might even seem unrelated to your new venture. For example, having been a pilot may demonstrate that you know how to supervise a crew of people working together to make a group experience if not comfortable, at least safe. You have undoubtedly handled dissatisfied or enraged customers. Even that BA degree in art history may enable you to make your products or store more appealing to the eye.

Your unique qualifications will separate you from all the other people who have sought venture capital for similar ideas. Boasting about these skills is not hubris; it indicates that you have a highly honed business savvy.

Edward G. Rogoff
Academic Director
Lawrence N. Field Center for Entrepreneurship
Baruch College
Bankable Business Plans

Action Step # 9 Explain Your Financial Data: How will you convince others to invest in your endeavor?

Action Step # 9: Explain Your Financial Data: How will you convince others to invest in your endeavor?

The accuracy of your financial figures and projections is absolutely critical in convincing investors, loan sources and partners that your business concept is worthy of support. The data must also be scrupulously honest and extremely clear. Since banks and many other funding sources will compare your projections to industry averages in the Risk Management Association (RMA) data, I’ve stressed throughout my book how you can use the RMA figures to test your projections before the bank does. Your numbers will be more credible if they compare reasonably to the industry averages.

The actual number crunching portion of your business plan is the place to discuss how and why you need certain equipment, time or talent, how much these items will cost, when you expect to turn a profit, and how much return and other benefits your investors will receive.

More new businesses fail because they simply run out of cash reserves than for any other reason. Investors lose confidence in the entrepreneur and the business and become reluctant to invest more when projections are not met. Had the projections been less optimistic and the investors asked to invest more in the beginning, they probably would have done so. In most cases, proper planning and more accurate projections could have avoided this problem completely.

Your business plan should clearly state the amount of funds you need, how soon you require them, and how long before you start repaying investors. You should also explain what type of financing you hope to acquire, either equity (such as through the sale of ownership shares in your company) or debt (such as loans to the company).

If you’re planning to buy an existing business or already own a business you would like to improve or expand, you will also need to provide a detailed historical financial summary of how well – or poorly – the business has done in the past. This analysis should also include a comparison of this venture’s financial performance compared to the industry standards.

Edward G. Rogoff
Academic Director
Lawrence N. Field Center for Entrepreneurship
Baruch College
Bankable Business Plans

Action Step # 8 Target Your Funding Sources: Where will you find your financing?

Action Step # 8: Target Your Funding Sources: Where will you find your financing?

As your business concept begins to take shape, you can begin to home in on the most likely financing sources. Issues such as the size of your business, the industry it is in, whether you are starting a new business or buying an existing one, and whether you can provide collateral to a lender are among the issues that must be considered in creating a target list of funding sources. Banks and other funding sources don’t lend money because people with interesting business ideas are nice. They follow specific guidelines, such as the RMA database, which are designed to insure that they will make money by investing in or lending to your business.

For the vast majority of entrepreneurs, the well-known, high profile means of raising money, such as through venture capital companies or by going public, are not viable options. Your own credit, credit rating, and business history are key factors in obtaining financing for your venture through Small Business Administration (SBA) guaranteed loans and other bank credit. Your ability to tap into your personal network of friends, family, and professional contacts is crucial to raising money beyond what your own personal funds or credit can provide. In all of these cases, there are important considerations such as the potential impact on relationships when family and friends become investors.

When you have completed this process of identifying the likely potential funding sources and writing a bankable business plan that addresses their needs and answers their questions (even before they ask them!), you will have greatly increased the likelihood of obtaining the financing you need.

Edward G. Rogoff
Academic Director
Lawrence N. Field Center for Entrepreneurship
Baruch College
Bankable Business Plans

Action Step # 7 Design Your Company: How will you hire and organize your workforce?

Action Step # 7: Design Your Company: How will you hire and organize your workforce?

By the time you’ve reached this stage of thinking about your potential business concept, you’ll probably have a good idea of the number of people you’ll need and the skills they’ll require to get your enterprise up and running. Keep in mind that your initial plans will undoubtedly change as your business grows. You may need to hire more managers to supervise your expanding staff or to set up new departments to meet new customer demands. Projected growth and expansion for your company should be mentioned in your business plan, but it’s not the primary focus. For now you want to secure help in getting started and convince your funding sources that you will become profitable.

Investors will want to know if you’re capable of running the business. Do you need to bring in experienced managers right away? Will you keep some of the existing employees or hire all new people? And where do you find these potential employees?
Funding sources will also want to know if any of your partners expect to work along side of you or if their obligations are only financial.

Your plan will need to specify the key management jobs and roles. Positions such as president, vice presidents, chief financial officer, and managers of departments will need to be defined along with stating who reports to whom. You may hope to run your company as one big happy family – and it may work out that way – but organizations require formal structure and investors will expect to see these issues addressed in your plan.

And as soon as you have employees, you need to consider how you will handle their salaries and wages, their insurance and retirement benefits, as well as analyzing the extent of your knowledge of tax related issues. As you think about hiring personnel and organizing your workforce, you must also confront your desire and ability to be a good boss. If you haven’t contemplated this aspect of your commitment to owning your own business, now is the time to give it serious consideration.

Edward G. Rogoff
Academic Director
Lawrence N. Field Center for Entrepreneurship
Baruch College
Bankable Business Plans

Action Step # 6 Build A Dynamic Sales Effort: How will you attract customers?

Action Step # 6: Build A Dynamic Sales Effort: How will you attract customers?

The word “sales” covers all the issues related to making contact with your actual customers once you’ve established how to reach them through your marketing campaign. How will you train your sales staff to approach potential customers? Will you divide up your sales staff so some become experts in selling your bubble gum scented bubble bath to small, independent retail toy stores? Will other salespeople concentrate on developing relationships with major manufacturers so your product could be sold in tandem through their national distribution outlets? Will you have a sales force expert in buying television slots on Saturday morning cartoon shows or placing ads on the backs of kid-oriented cereal boxes?

What advertising and promotional efforts will you employ – two for the price of one specials or free coupons inside those same kid-oriented cereal boxes? Where can you locate lists of the greatest concentrations of children under the age of eight or whatever group constitutes your market?

In planning your sales activities, you will also need to answer questions such as: Is it ethical to contact your colleagues and clients from your former job as a door-to-door soap salesperson to tell them about your new business. Will you be the only salesperson in the beginning stages of your company? When will you know it’s time to hire more sales staff? How do you convince your clients that your sales staff will take care of them as well as you did? What will your basic sales philosophy be – building long-term relationships with a few major clients or developing a clientele of many short-term customers?

You will also need to consider how you will compensate your sales staff – with a base salary plus a commission? Will you hire full time staff with full benefits, or part time staff without benefits. How will you motivate your staff to do the best sales job possible?

Knowledge of your competitive advantage is just as important in designing a dynamic sales effort as it is in developing an effective marketing campaign. You’ll need to think about what product or service qualities will be the most compelling to your prospective customers. Then you’ll have to devise convincing language that clearly communicates this competitive advantage to your sales staff who will in turn use it when talking to your customers. In my experience, the most important element of an effective sales effort is having a sales staff that thoroughly understands your business and the needs or your potential customers. Therefore, your sales plan must address the issue of how you will create a sales staff that is as knowledgeable about your business as it is about your potential customers.

Edward G. Rogoff
Academic Director
Lawrence N. Field Center for Entrepreneurship
Baruch College
Bankable Business Plans